-----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, AzxF2BNQErX1R4J8eTGaYJJWg852T0Co9JAyJVfwyTUKwwb28DU00Nyfw636IgKz ArstNo7vERCGjObzQoPpyQ== /in/edgar/work/20000526/0000050471-00-000010/0000050471-00-000010.txt : 20000919 0000050471-00-000010.hdr.sgml : 20000919 ACCESSION NUMBER: 0000050471-00-000010 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000511 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000526 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERINET GROUP COM INC CENTRAL INDEX KEY: 0000050471 STANDARD INDUSTRIAL CLASSIFICATION: [7374 ] IRS NUMBER: 112050317 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-03718 FILM NUMBER: 645204 BUSINESS ADDRESS: STREET 1: 2500 NORTH MILITARY TRAIL STREET 2: SUITE 225-C CITY: BOCA RATON STATE: FL ZIP: 33431 BUSINESS PHONE: 5619983435 MAIL ADDRESS: STREET 1: 2500 NORTH MILITARY TRAIL STREET 2: SUITE 225-C CITY: BOCA RATON STATE: FL ZIP: 33421 FORMER COMPANY: FORMER CONFORMED NAME: EQUITY GROWTH SYSTEMS INC /DE/ DATE OF NAME CHANGE: 19951214 FORMER COMPANY: FORMER CONFORMED NAME: INFOTEC INC DATE OF NAME CHANGE: 19930506 8-K 1 8-K SEC 873 (5/99) Potential persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number. OMB APPROVAL OMB Number 3235-0060; expires: May 31, 2000. Estimated average burden 5 hours per response. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934 May 11, 2000 Date of Report (Date of earliest reported event) AMERINET GROUP.COM, INC. (Exact name of registrant as specified in its chapter) Delaware (State or other jurisdiction of incorporation 000-03718 (Commission File Number) 11-2050317 (IRS Employer Identification No.) Crystal Corporate Center; 2500 North Military Trail, Suite 225-C; Boca Raton, Florida 33431 (Address of principal executive offices) (Zip Code) (561) 998-3435 Registrant's telephone number, including area code (Not Applicable) (Former name or former address, if changed since last report) Page 1 INFORMATION INCLUDED IN THE REPORT ITEM 1. ACQUISITION OR DISPOSITION OF ASSETS. On May 11, 2000, the Registrant completed the acquisition of all of the capital stock (being 111 shares of common stock, $0.01 par value) of Lorilei Communications, Inc., a Florida corporation engaged in the advertising and television news production business). Lorilei was acquired by the Registrant in a reorganization designed to comply with Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended (the "Code"), in exchange for: * 572,519 shares of the Registrant's common stock, $0.01 par value per share (the "Registrant's common stock"), issued in reliance on the exemption from registration under the Securities Act of 1933, as amended (the "Securities Act") provided by Section 4(2) thereof; and * Up to 572,518 additional shares of the Registrant's common stock to be issued to the former stockholders of Lorilei during the period ending on June 30, 2003, based on the following performance thresholds: (1) If Lorilei attains earnings before interest, taxes, depreciation and amortization, determined in accordance with generally accepted accounting principles, consistently applied ("GAAP"), of at least $500,000 during the period starting on July 1, 2000 and ending on June 30, 2001, then Lorilei's former stockholders will be issued an aggregate of 114,504 additional shares of the Registrant's common stock; (2) If Lorilei attains earnings before interest, taxes, depreciation and amortization, determined in accordance with GAAP, of at least $1,400,000 during the period starting on July 1, 2001 and ending on June 30, 2002, then Lorilei's former stockholders will be issued an aggregate 305,343 additional shares of the Registrant's common stock (including the 114,504 that either were or could have been earned as of June 30, 2001); (3) If Lorilei attains earnings before interest, taxes, depreciation and amortization, determined in accordance with GAAP, of at least $2,900,000 during the period starting on July 1, 2000 and ending on June 30, 2003, then Lorilei's former stockholders will be issued all 572,518 of the additional shares of the Registrant's common stock (including the 305,343 that either were or could have been earned as of June 30, 2002); however, all rights to any of the Registrant's common stock not earned as of such date will thereupon expire. (4) The additional shares of the Registrant's common stock were reserved for future issuance immediately following the closing and will be issued within 30 days after AmeriNet's audit for the subject fiscal year confirming the calculations called for. In addition to consideration provided to the former Lorilei stockholders for their Lorilei capital stock, the Registrant also agreed to: * Invest up to $500,000 in Lorilei within 300 days after completion of the reorganization and the filing of required reports with the United States Securities and Exchange Commission (the "Commission"), and, * To reserve an additional 335,378 shares of the Registrant's common stock for future issuance through incentive stock options (as defined in Section 422 of the Code) to be granted to Lorilei employees, provided, however, that rights to such shares will vest on an annual basis, subject to attainment of the following net, pre-tax profit projections determined in accordance with GAAP: (1) If Lorilei attains earnings before interest, taxes, depreciation and amortization, determined in accordance with GAAP, of at least $500,000 during the period starting on July 1, 2000 and ending on June 30, 2001, then the first 67,976 shares of the Registrant's common stock reserved for issuance in the event of exercise of the subject incentive stock options will vest; Page 2 (2) If Lorilei attains earnings before interest, taxes, depreciation and amortization, determined in accordance with GAAP, of at least $1,400,000 during the period starting on July 1, 2000 and ending on June 30, 2002, then all rights to 179,770 (including the 67,976 shares vested, if any, on June 30, 2001) of the shares of the Registrant's common stock reserved for issuance in the event of exercise of the subject incentive stock options will vest; and (3) If Lorilei attains earnings before interest, taxes, depreciation and amortization, determined in accordance with GAAP, of at least $2,900,000 during the period starting on July 1, 2000 and ending on June 30, 2003, then all rights to all of the shares (including the shares vested, if any, on June 30, 2001 and June 30, 2002) of the Registrant's common stock reserved for issuance in the event of exercise of the subject incentive stock options will vest. (4) All rights to the incentive stock options in the subject employment agreements that have not vested as of July 1, 2003 will expire on such date, and no further rights of any kind thereto or to the underlying shares of the Registrant's common stock reserved for such purpose will exist thereafter, the reservation therefor terminating on such date. (5) The vested incentive stock options will be exercisable during the three fiscal year period after they vest at a price of $1.3125 per share, provided that, as required by Code Section 422, all rights to or under the incentive stock options will expire 90 days after termination of employment with Lorilei. The exchange ratio for Lorilei's capital stock was determined by arms length negotiation by the parties based on the approximate market price of the Registrant's common stock during the period preceding May 11, 2000, the value that Lorilei's management felt was reflective of its operating performance since its inception, and the anticipated future value of Lorilei. The Registrant used a formula of approximately eight times Lorilei's earnings during the year ended on December 31, 1999, as the basis for its valuation. The use of contingent consideration seeks to make the component of the valuation based on future performance more objectively ascertainable. The names of the former Lorilei stockholders are Gerald R. Cunningham, who serves as Lorilei's president, chief executive officer, treasurer, chief financial officer and a member of Lorilei's board of directors; and, Leigh A. Cunningham, Mr. Cunningham's spouse, who serves as Lorilei's vice president, secretary and as the other member of Lorilei's board of directors.. To the best of the Registrant's knowledge, no material relationship existed between any such person and the Registrant or any of its affiliates, any director or officer of the Registrant, or any associate of any such director or officer. No funds were used directly to acquire Lorilei, however, the Registrant obtained the funds it used to provide Lorilei with the $100,000 in funding due at closing through a loan from its strategic consultant, the Yankee Companies, Inc., a Florida corporation ("Yankees"). Lorilei's assets include improved real estate held in fee simple, television productio equipment, computers and other office equipment, leased facilities and equipment and other physical property currently used in conjunction with its business. Such use will be continued and Lorilei will continue to be operated by its current management, unless it fails to meet at least 70% of its operating projections. Copies of the reorganization agreement, the employment agreements with Lorilei employees and the related schedules and exhibits are filed as exhibits to this current report (see "Item 7(c), exhibit Index"). See Item 5 for a more complete description of Lorilei's business ITEM 5. OTHER EVENTS. MATERIAL INFORMATION CONCERNING LORILEI The following information pertaining to Lorilei is provided under the item numbers and captions of Commission Regulation SB: Page 3 ITEM 503. SUMMARY INFORMATION AND RISK FACTORS Summary Information Lorilei Communications, Inc. operates under two trade names, The Firm Multimedia, a full-service advertising agency, and Ocala News Tonight, a nightly half-hour newscast. It was founded in 1993 as a Florida partnership doing business under the fictitious name, "The Firm," and was incorporated as a Florida corporation in July of 1994. Gross sales in 1999 surpassed $1.5 million, with 1999 billings of approximately $1.1 million and EBITDA of approximately $162,000. Lorilei projects substantial sales increases, with a June 30, 2001 fiscal year billing target of $2.5 million and an EBITDA target of $500,000. Lorilei projects billings to exceed $5 million with EBITDA of $1.5 million in the fiscal year ending June 30, 2003. The Firm Multimedia is a division of Lorilei which operates as an advertising agency offering full advertising agency services, including consulting on marketing and advertising issues; graphic layout, design, and printing; video and audio production; media planning and placement; internet website design and website promotion; interactive CD-rom design; long and short-form direct response television production; long and short-form direct response placement; and, placement of long-form television programming under commercial leased access FCC rules. Lorilei's management intends to expand Lorilei's marketing and advertising efforts and to expand its sales organization with regional sales offices in major Florida and Southeastern United States cities, through development of its commercial leased access abilities, and through acquisitions of synergistic companies. Commercial leased access to cable systems is a segment of communications law mandated by Congress in cable television deregulation. Enforced through FCC rules, commercial leased access to cable systems affords programmers not affiliated with the cable operator the opportunity of purchasing minimum half-hour time increments in substantially better time periods than offered through traditional commercial venues. The amount paid by the programmer is regulated by the FCC. Lorilei intends to continue and expand its proprietary database of cable systems nationwide, enabling Lorilei to offer commercial leased access to cable systems as alternatives for direct response television marketers, as well as other types of programers. An example of other types of television programming that can be established under commercial leased access to cable systems is Lorilei's prototype local evening news program, Ocala News Tonight. Ocala News Tonight debuted in January of 2000 and is produced by The Firm Multimedia. Ocala News Tonight is a traditional news, weather and sports half-hour newscast available to approximately 73,000 television households in Marion County, Florida. This advertiser-supported program fills a local news niche left open by Orlando and Gainesville, Florida broadcasters that cover a very wide geographic area and are unable to devote either airtime or personnel to adequately cover all market segments within their service area . Viewers of Ocala News Tonight receive information not available elsewhere. Lorilei expects to use Ocala News Tonight as a prototype for additional news operations in additional markets. Address and Telephone Number Lorilei's principal offices are located at 7325 Southwest 32nd Street; Ocala, Florida 34474; however, its mailing address is Post Office Box 770787; Ocala, Florida 34477. Its main telephone number is (352) 861-1350 and its general fax number is fax (352) 861-1339. Lorilei's general e-mail address is thefirm@callthefirm.com, but e-mail to Lorilei's officers can be sent directly to gerry@callthefirm.com. Websites for Lorilei's two divisions are located at http://www.callthefirm.com (The Firm Multimedia) and http://www.ocalanewstonight.com (Ocala News tonight). Risk Factors The statements contained in this report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including without limitation statements regarding Lorilei's expectations, beliefs, intentions or strategies regarding the future. All forward-looking statements included in this document are based on information available to Lorilei on the date hereof. The forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, experience and the performance or achievements of Lorilei to be materially different from those Page 4 anticipated, expressed or implied by the forward-looking statements. In evaluating Lorilei's business, the following factors, in addition to the risk factors set forth below and other information set forth herein, should be carefully considered: successful deployment and integration of systems; factors affecting internal growth and management of growth; success of marketing, integration and operational initiatives, including Internet marketing initiatives; dependence on technology; labor and technology costs; cost and availability of advertising and promotional efforts; success of the acquisition strategy and availability of acquisition financing; success in entering new segments of the advertising industry and new geographic areas; dependence on commercial leased access rules; risks associated with the advertising industry generally; seasonal and quarterly fluctuations; competition; and general economic conditions. In addition, Lorilei's operating strategy and growth strategy involve a number of risks and challenges, and there can be no assurance that these risks and other factors will not have a material adverse effect on Lorilei. Management of Growth; Factors Affecting Internal Growth. Lorilei expects to grow internally through increase in number of sales offices, news operations, and national sales. Lorilei expects to spend significant time and effort implementing these endeavors. There can be no assurance that Lorilei's systems; procedures or controls will be adequate to support Lorilei's operations as they expand. Any future growth will add significant responsibilities on members of senior management, including the need to identify, recruit and integrate new senior level managers and executives. There can be no assurance that such additional management will be identified or retained by Lorilei. To the extent that Lorilei is unable to manage its growth efficiently and effectively, or is unable to attract and retain qualified management, Lorilei's business, financial condition and results of operations could be materially adversely affected. While Lorilei has experienced revenue and earnings growth thus far in its history, there can be no assurance that Lorilei will continue to experience internal growth comparable to historic levels, if at all. Factors affecting the ability of Lorilei to continue to experience internal growth include, but are not limited to, business acceptance of Lorilei's services, the ability to sell advertising time to support its news operations, the ability to recruit and retain qualified sales personnel and continued access to capital. Risks Related to Lorilei's Acquisition Strategy. Acquisitions involve a number of special risks, including possible adverse effects on Lorilei's operating results, diversion of management's attention, loss of key personnel, risks associated with unanticipated events or liabilities and amortization of acquired intangible assets, some or all of which could have a material adverse effect on Lorilei's business, financial condition, and results of operations. Customer dissatisfaction or performance problems at a single acquired company could have an adverse effect on the reputation of Lorilei. Further, there can be no assurance that businesses acquired will achieve anticipated revenues and earnings. To the extent that Lorilei intends to increase its revenues, expand the markets it serves and increase its service offerings through the acquisition of additional companies, there can be no assurance that Lorilei will be able to identify, acquire, or profitably manage additional businesses or successfully integrate acquired businesses into Lorilei without substantial costs, delays or other operational or financial problems. Increased competition for acquisition candidates may also develop, in which event there may be fewer acquisition opportunities available to Lorilei, as well as higher acquisition costs. As of the date of this report, Lorilei is not party to any binding agreements with respect to any acquisition. Risks Related to Acquisition Financing and Possible Need for Additional Capital Lorilei plans to finance future acquisitions by using shares of AmeriNet's common stock ("AmeriNet Stock") for all of the consideration to be paid. In some cases, however it is probable that Lorilei could be required to make cash investments in the acquired businesses, as AmeriNet is making in Lorilei. Lorilei would be charged against earnings for any AmeriNet Stock used to effect acquisitions, consequently, it must take care to assure that the benefits of the acquisitions exceed the costs of the AmeriNet Stock used as consideration and the cash investment required, if any. In the event that the AmeriNet Stock does not maintain a sufficient market value, or potential acquisition candidates are otherwise unwilling to accept AmeriNet Stock as consideration for the sale of their businesses, Lorilei may be required to use more of its cash resources, if available, in order to maintain its acquisition program. If Lorilei has insufficient cash resources, its growth could be limited unless it is able to obtain additional capital through debt or equity financing. There can be no assurance that AmeriNet will make required capital available or that other financing will be available on terms Lorilei deems acceptable. If Lorilei is unable to obtain financing sufficient for all of its desired acquisitions, it may be Page 5 unable to fully implement its acquisition strategy. In addition, to maintain historical levels of growth, Lorilei may need to seek additional funding. Adequate funds for these purposes may not be available when needed or may not be available on terms acceptable to Lorilei. If funding is insufficient, Lorilei may be required to delay, reduce the scope of or eliminate some or all of its expansion programs. Dependence Upon Technology Lorilei's business is currently dependent upon computer-based technology in order to produce the majority of its services. Because technological change has been extremely dynamic, technological obsolescence has become an increasingly important factor when making capital expenditures. No assurances can be provided that the state of the arts systems used by Lorilei will remain state of the art for a period sufficient to amortize their expenditure. Lorilei's strategy is to incrementally add equipment piece by piece to its operations as prices for new technology decrease and as production demand increases, so as to consistently add new, better, faster computers, cameras, scanners, etc. to its available equipment inventory. There can be no assurance, however, that new advances in technology will not hasten the obsolescence of Lorilei's equipment, resulting in additional necessary capital expense which could be substantial. In this event Lorilei's management envisions the utilization of leases, financing, or an additional capital investment in order to satisfy these requirements. Equipment required to establish anticipated news operations in each additional market will cost approximately $200,000. Risks Associated with the Advertising Industry; General Economic Conditions Lorilei's results of operations are dependent upon factors generally affecting the advertising industry. Lorilei's revenues and earnings are especially sensitive to events that affects businesses' plans to expand into new markets, develop marketing plans for new products or services, or seek new streams or revenue. A number of factors could result in the overall decline in demand for advertising including a decline in general economic conditions, extreme weather conditions, armed hostilities, or excessive inflation. These type of events could have a material adverse effect on Lorilei's business, financial condition and results of operations. Reliance on Key Personnel Lorilei's operations are dependent on the efforts, experience and relationships of Gerald R. Cunningham, Leigh A. Cunningham and Lorilei's other essential staff. Furthermore, Lorilei may become dependent on the senior management of businesses acquired in the future. If any of these individuals are unable to continue in their roles, Lorilei's business or prospects could be adversely affected. Although Lorilei has entered into an employment agreement with each of its executive officers, there can be no assurance that such individuals will continue in their present capacity for any particular period of time. Reliance on Existing FCC Rules Lorilei relies on FCC rules mandated by Section 612 of the 92 Cable Act in order to gain access to cable systems. If that statute is repealed or modified by Congress, or in the event the FCC alters its rules on leased access, Lorilei's business, financial condition and results of operations could be adversely effected. Control by Existing Management Pursuant to the terms of the reorganization agreement between Lorilei and AmeriNet, Lorilei's current management will have the right to elect a majority of the members of its board of directors for the foreseeable future unless Lorilei fails to attain at least 70% of its EBITDA projections. Such requirement may prevent or delay AmeriNet from taking actions to correct problems with Lorilei's management and such inability may materially impair Lorilei's operations. Page 6 ITEM 101. DESCRIPTION OF BUSINESS Overview Lorilei Communications, Inc., a Florida corporation ("Lorilei"), was organized in July of 1994 by Gerald R. Cunningham, its current president, and Leigh A. Cunningham, its current secretary and treasurer. Lorilei is the successor to a Florida general partnership doing business as "The Firm." Lorilei is a full-service advertising and marketing company doing business under the fictitious name "The Firm Multimedia" which is registered with the Florida Department of State. As the term "multimedia" (a combination of text, data, sound, graphics, photography, animation, motion pictures, computer software and additional newly evolving elements) infers, Lorilei offers an array of advertising and marketing services including in-house production of video, audio, internet authoring, interactive CD-Rom, graphics, and pre-press. Lorilei believes that its principal target clientele is comprised of companies wishing to enter the direct response and e-commerce markets, although it also targets traditional "image" advertisers. Lorilei was formed to provide incremental advertising services to regional and local advertisers and marketers based on Lorilei's competitive advantages in speed, quality and price. Such advantages are made possible by Lorilei's use of new, lower cost technology, to provide competitively priced production services in-house, unlike larger advertising agencies and marketing companies which subcontract most of their production. Lorilei has become a national leader in providing its clients with commercial leased access to cable systems and has been instrumental in the formulation of Federal Communications Commission ("FCC") rules regulating that aspect of the cable industry. Under the applicable FCC rules, the cost of commercial leased access to cable systems is determined by the FCC's "implicit fee" formula plus actual costs of tape playback or satellite reception (rates significantly lower than those charged by broadcast television). Through a proprietary database developed by Lorilei over a four-year period, it has the ability to place its client's television programs on virtually any cable television system in the United States at reduced rates for periods ranging from half an hour to full time station access. During January, 2000, Lorilei started a venture under the trade name "Ocala News Tonight." Ocala News Tonight is a half-hour advertiser-supported television news program featuring local news, weather and sports, cablecast six days per week at 6:30 PM and again at 10:30 PM to approximately 73,000 cable households in the Marion County, Florida area. Using efficiencies in desktop video, and new technological innovations in "prosumer" cameras, this concept allows television news to be produced at a much lower cost than was previously possible, allowing for profitability on a community basis. Like numerous other geographically distinct local consumer markets throughout the United States, although part of a regional television area of dominant influence (an FCC concept generally referred to as an "ADI"), Marion County receives very little local television news coverage from broadcast television outlets within the ADI (the Orlando, Florida television ADI ). Ocala News Tonight is the prototype of a concept Lorilei intends to replicate as a solution to "under-coverage" for market areas with similar characteristics across the nation. Lorilei maintains websites under each of its trade names. The Firm Multimedia website features video and audio clips illustrating Lorilei's work as well as examples of graphic design and links to authored websites. Lorilei's website is a major source of client lead generation. Ocala News Tonight also has a website used primarily as an interactive focal point for the viewing audience. It includes content updated on a daily basis with highlights from the newscast as well as viewer opinion polls. Advertising is accepted and actively solicited for the Ocala News Tonight website. Industry Domestic advertising expenditures were estimated at $308.9 Billion in 1999. Of this sum, 57.1% or $176.5 Billion was devoted to some form of direct marketing, up 7.2% over 1998. The market for direct marketing overall is highly fragmented across direct mail and telephone marketing which account for about half of the total, however direct response television (DRTV), a $20.4 Billion market, is a much less fragmented segment and is growing at a faster pace Page 7 than direct marketing overall. DRTV expenditures increased by 58% in the period 1994-1999 versus overall direct marketing which increased by 46%. According to Bear Stearns E-volve report, $1.5 trillion in goods and services are expected to be sold over the Internet by 2003. The same Bear Stearns report estimates that spending on Internet infrastructure tools will expand from $600 million in 1999 to over $4 billion by 2003. DRTV predates the Internet in enabling consumers to purchase goods and services directly from the manufacturers and providers and Lorilei's management believes that it is a natural means of converting television viewers into effective website browsers by introducing the website and demonstrating its operative features and abilities. Lorilei's management believes that as pressure by consumers for increased bandwidth to access the Internet is met, video in DRTV format via the Internet using interactive application software already available, will provide Lorilei with materially increased opportunities to expand its operations in that genre. Business Geographic Coverage Lorilei offers its general advertising services throughout the United States, however, at present, advertising clients on its local news programs are local to the cablecast area. Clients of its "The Firm Multimedia" division outside the Central Florida production area are easily communicated with by Internet, fax, courier, in-person sales calls and in some cases, non-local client visits to Lorilei's offices. As described above, Lorilei intends to materially expand its physical geographic presence by adding additional sales offices, first in Florida, then regionally and nationally. Ocala News Tonight clients are primarily located in Marion County, Florida. As additional news markets are added the clients for each news operation will also primarily be located in the community of service. However, it is not unlikely that national clients may also become interested in the efficient advertising options available through local cablecasts. Sales facilities for The Firm Multimedia will be co-located with each news facility, including field content acquisition support personnel where practical. Raw content will be shipped or transmitted from all commercial field production operations to the Ocala production facility for post-production. E-Commerce Lorilei provides clients with a turn-key e-commerce approach by both authoring websites and providing marketing and advertising services to drive traffic. Lorilei also provides clients with consultative advice covering a wide range of issues including domain names and registration, input on competitive content items such as pricing, placement, inventory, target marketing, and demographic, qualitative and perceptual customer research. Lorilei uses state of the art software including "Flash" "Shockwave" and Quicktime video to author client websites with rich content. Each website is custom-authored according to the client's specifications and may include specialized applications, including database access. Lorilei believes rich content websites, including sites featuring video and audio, will become a critical component in commercial website development as competition on the Internet continues to drive more complex websites. Lorilei does not currently host its clients' websites, however, it intends to either refer hosting to other AmeriNet subsidiaries or to form a joint venture with other AmeriNet subsidiaries to develop state of the art hosting capabilities with geographically dispersed sites, permitting additional safety in the event of local power problems or emergencies. Lorilei will also seek to develop joint ventures with other AmeriNet subsidiaries for development of Internet access services, initially to specialized groups but depending on the level of acceptance, technological developments, perceived demand and cross-marketing opportunities, may determine that expansion of such services to the general public may be appropriate. Channel Leasing Lorilei pioneered the use of channel leasing options mandated by federal cable deregulation legislation through petitions filed with the FCC and has played a major role in shaping the rules under which channel leasing is available Page 8 (see "Lorilei" at www.fcc.gov). Lorilei developed and operates a proprietary database of cable systems that features the ability to accurately quote rates, household counts, and in some cases channel position in individual systems' programming. No other company that Lorilei is aware of currently operates a comparable system. Lorilei intends to continue development of the database by increasing the quantity, quality and timeliness of available information and to market such capabilities aggressively in order to establish a public identification of related services with Lorilei's "The Firm Multimedia" division. Channel leasing is available on a part-time and full-time basis (up to the set-aside capacity of the cable system involved). Under current FCC rules, a cable operator must make an unused channel available for use by a programmer committing to at least eight hours of daily programming for a one-year period. While Lorilei has focused on part-time channel leasing, its management believes that sufficient demand currently exists in many areas for full-time channel leasing services to larger advertisers and marketers and intends to aggressively explore such opportunities. With the advent of the Internet, large companies are altering customer prospecting strategies to take advantage of its interactive 24 hours a day, seven days a week ("24/7") capabilities as a portal to connect with prospects and customers. A principal limiting factor at present is the absence of adequate bandwidth to service demand. Bandwidth limitations are expected to continue hampering commercial use of the Internet for the foreseeable future as growth in Internet users, program sizes and transmission rates continues to exceed transmission capacity. Because business attention has been directed by the Internet to non-traditional means of communication, Lorilei believes that significant opportunities are developing for alternative methods of broad-scale, low-cost communication with consumers and that channel leasing is a viable alternative. Consequently, Lorilei intends to increase awareness of channel leasing in general and of Lorilei's special channel leasing capabilities and experience in particular. If successful, Lorilei believes that channel leasing activities could have a substantial impact on its profitability and that even one full-time channel leasing client in a moderate number of markets could materially increase current projections for both gross revenues and net profit. DRTV Lorilei offers a comprehensive solution for direct response television marketers including concept, scripting, infomercial and spot production, media planning and placement, and an array of direct response-related graphics services. The fact that Lorilei offers a wide array of services through in-house facilities and staff sets it apart in the DRTV industry and is a significant competitive advantage for those clients seeking turn-key solutions Consequently, most of Lorilei's clientele has been direct, rather than agency business. While most half-hour infomercial time is limited to overnights, early mornings and other time slots that are deemed non-productive for revenue purposes by broadcasters and cablecasters due to the low number of viewers; Lorilei has developed contacts at major cable networks and broadcast stations, and has the ability to buy airtime competitively on a supply and demand basis. Lorilei's purchase of half-hour airtime in prime-time viewing hours through channel leasing on a market-targetable basis gives it a primary niche in the DRTV business. Lorilei's management believes that channel leasing is highly profitable because FCC regulations mandate prices fixed according to an FCC formula rather than permitting them to float with supply and demand. Lorilei intends to continue to expand the DRTV, channel leasing segment of its business by increasing: * Advertising agency and buying-service awareness of Lorilei's capabilities * Business with the DRTV trade; and * Direct to client business. B2B Business Opportunities Lorilei's management believes that a wealth of potential business exists in the business to business (commonly referred to as B2B) Internet website promotion and operation area. Lorilei personnel are encountering a surprising number of relatively large companies with websites but without an Internet strategy. Those companies that intend to Page 9 compete effectively in the business to business sales environment will eventually be compelled to develop effective Internet strategies, either through costly internal development and maintenance of in house staffs or through reliance on the more cost effective, less capital intensive and less technologically obsolescent alternative of firms such as The Firm Multimedia for ongoing outsourced assistance. Lorilei believes that it offers clients in the B2B arena comprehensive advantages by having the centralized, in house capacity to develop required strategies, develop required materials and articulate required messages in multiple media. Thus, while not having the internal centralized responsiveness of a captive, in house, full service department, Lorilei's clients will not be subject to the diffusion of responsibility that is inherent in use of multiple, one dimensional outside sources (e.g., absence of coordination and ease in shifting responsibility to unrelated partes). Because of the price advantages inherent in business through cyberspace (materially reduced facilities, personnel costs, utility and inventory costs), traditional facility oriented businesses (now commonly referred to as brick and mortar retailers) will be forced to seek non-traditional revenue streams in order to maintain their existing clientele as well as to compete with new business opportunities generated by e-retailers. Based on Lorilei's experience, one of the best ways to establish a productive B2B presence is through development of a versatile, user friendly, interactive e-commerce website supported with DRTV resulting in telephone sales as well as sales through the Internet website. Local News Programming Lorilei's experience in channel leasing and its existing studio facilities, equipment and technology (including desktop video and high quality prosumer cameras available through The Firm Multimedia division) provided Lorilei with the opportunity to produce a prototype, nightly advertiser-supported news program dedicated to a targeted geographic area, similar to the familiar news, weather and sports format used by most local broadcast television stations, without a large capital investment. The prototype program, Ocala News Tonight, is a network of four cable systems produced six days per week and airing twice nightly, at 6:30 PM and 10:30 PM to over 73,000 households in the Marion County, Florida area. The criteria that Lorilei expects to use to determine whether additional areas are viable includes market composition, market geography, market identity, presence of local television news coverage, available advertising revenues (estimated as a percentage of total retail sales), and cable television penetration. Lorilei chose Marion County, Florida as the prototype for the concept because the Marion County area met such guidelines (i.e., it had a local identity apart from either Orlando or Gainesville, sufficient retail sales to provide a local advertiser base, and adequate cable television penetration) and because production operations were already in place. While the area is part of the Orlando television market it receives very little local news coverage from the Orlando stations, and minimal coverage from Gainesville stations located 35 miles away. Due to its distance from Orlando and Gainesville, and with the Gainesville market's strong identity with the University of Florida, it appeared unlikely that any television station from either area would make a concerted effort to compete with the program. Management has identified two expansion markets for the concept and expects to launch the first additional operation in July, 2001, with the second additional operation coming online in July, 2002. Beginning in July, 2003, Lorilei intends to launch two additional operations per year for the next three years. Sales and Marketing Lorilei uses a mix of marketing tools, including an infomercial produced to generate business to business leads, direct mail, telemarketing, trade and business publication print, Internet advertising, trade show displays and participation in competitive, award granting events. It has used a combination of inside and outside sales representatives in the past for The Firm Multimedia and intends to expand the use of inside sales representatives in two areas (1) to support outside sales with appointment setting, and (2) to sell DRTV to dot com and e-commerce companies and the DRTV trade. In the past, The Firm Multimedia employed generalist-type sales professionals, expending considerable time in training the person to represent Lorilei's many services. Management now feels that its sales require sales professionals proficient in four major specialty areas: Print graphics, DRTV and Video, Internet and e-commerce, and Agency services. Under its current marketing plan, Lorilei will generate specific leads in one of its specialty areas and, using a consultative selling approach, will identify other specialty areas where it might be of service. It will then allocate leads among its sales Page 10 personnel based on their compatibility with the potential client and its requirements at the appropriate time. Management believes this approach will result in less training time and higher sales revenues. Ocala News Tonight uses outside sales representatives who call on local business. Direct mail and on-air advertising solicitation, as well as telemarketing by the outside representatives is used to generate leads. Lorilei intends to expand its field sales offices to include locations in South Florida, Tampa Bay, and Atlanta in the near term. Field sales offices will also be co-located with additional Ocala News Tonight-type news operations. Competition The advertising industry is highly fragmented with low entry barriers to establishment of an advertising agency. Advertising production is also competitive, however capital costs for equipment and facilities are a significant barrier to entry. Lorilei competes with other advertising agencies, television and radio stations, other direct response television companies, cable television providers and television broadcasters. Lorilei competes for customers based on service, price, quality, specialized in-depth knowledge, and creativity. Most DRTV competitors are located in Western states, making West coast-based business a more difficult competitive challenging. Many potential competitors have access to substantial capital, physical and personnel resources and established reputations (e.g., national television networks, cable companies, advertising agencies and public relations firms) with which Lorilei can compete only by providing innovative services at reduced prices. Governmental Regulation General Lorilei will be subject to applicable provisions of federal and state securities laws, especially with reference to periodic reporting requirements and, the operations of Lorilei are subject to regulation normally incident to business operations (e.g., occupational safety and health acts, workmen's compensation statutes, unemployment insurance legislation and income tax and social security related regulations). Because Lorilei is subject to regulation in every state and country in which it transacts business and because government regulation tends to be extremely dynamic, Lorilei will have to carefully monitor current and proposed legislation in order to continuously comply therewith. There can be no assurance that Lorilei's operations will always be in compliance with applicable governmental regulation and in the event that it fails to comply with applicable regulatory requirements, its activities may be curtailed and it may be exposed to fines and adverse publicity. In any such event, Lorilei's business could be detrimentally affected. Required Government Approvals for Products or Services Advertising Based on First Amendment protections, most of Lorilei's advertising activities are not subject to pre-approval by government agencies; however, its activities are subject to government imposed repercussions in the event that its materials are materially inaccurate, libelous or violate government policies. Such after the fact regulation is provided federally through the FCC, the Federal Trade Commission (the "FTC"), the United States Department of Justice and the United States Securities and Exchange Commission (the "SEC"). Similar agencies regulate Lorilei's activities on a state level. In addition to governmental agencies, Lorilei is a voluntary member of numerous industry and trade associations on a national, state and local basis, many of which have codes or standards of conduct to which members are expected to adhere. Cable Lorilei's success is dependent in part on the existence of federal regulations which require cable operations to lease cable access at low rates pursuant to FCC rules promulgated under the Cable Television Consumer Protection Page 11 Act of 1992 (the "1992 Cable Act"). A change in the 1992 Cable Act or the regulations promulgated thereunder could significantly impair Lorilei's ability to successfully compete against larger advertising companies. The statutory framework for commercial leased cable access was established by the Cable Communications Policy Act of 1984 (the "1984 Cable Act") and amended by the 1992 Cable Act. The 1984 Cable Act established leased access to unused channel capacity of cable systems by parties unaffiliated with the cable operator that wanted to distribute video programming free from editorial control by the cable operator. Channel set-aside requirements were established in proportion to a system's total activated channel capacity in order to assure that the widest possible diversity of information sources were made available to the public by cable systems in a manner consistent with the growth and development of cable systems. A cable system operator was permitted to use any unused leased access channel capacity for its own purposes until such time as a written agreement for a leased channel use was obtained. Each system operator subject to such requirements was to establish the "price, terms, and conditions of such use which were to be at least sufficient to assure that such use would not adversely affect the operation, financial condition, or market development of the cable system. The only exception to the leased commercial access channel set-aside under the 1984 Cable Act was that up to 33% of a system's designated leased commercial access channel capacity could be used for qualified minority or educational programming from sources affiliated with the operator. The 1992 Cable Act amendments broadened the statutory purpose to include "the promotion of competition in the delivery of diverse sources of video programming" and the FCC was provided with expanded authority: (1) to determine the maximum reasonable rates that a cable operator could establish for leased access use, including the rate charged for the billing of subscribers and for the collection of revenue from subscribers by the cable operator for such use; (2) to establish reasonable terms and conditions for leased access, including those for billing and collection; and (3), to establish procedures for the expedited resolution of leased access disputes. The legislative history of the 1992 amendments expressed concern that some cable operators may have established unreasonable terms or may have had financial incentives to refuse to lease channel capacity to potential leased access users based on anti-competitive motives, especially if the operator had a financial interest in the programming services it carried. Any person aggrieved by the failure or the refusal of a cable operator to make commercial channel capacity available or to charge rates as required by FCC rules may file a petition for relief with the FCC within 60 days of the alleged violation. In order to enforce its rights under the 1992 Act, Lorilei has filed a number of such petitions with varied results. In order to merit relief, the petition must show by clear and convincing evidence that the operator violated the leased access statutory or regulatory provisions or otherwise acted unreasonably or in bad faith. Relief may be in the form of refunds, injunctive relief or forfeitures. The FCC encourages parties to use alternative dispute resolution procedures such as settlement negotiation, conciliation, facilitation, mediation, fact finding, mini-trials and arbitration. The 1992 Cable Act provides for both judicial and FCC review of leased commercial access disputes. Effect of Existing or Probable Governmental Regulations on the Business Lorilei is subject to regulation by the FCC, the Federal Communications Commission, the Justice Department, the SEC, and by comparable state agencies. The costs of monitoring and complying with existing regulations is expensive and time consuming. Lorilei's management is required to expend significant resources to obtain required regulatory clearance and the delays incident thereto have and are expected to continue to deprive Lorilei of significant opportunities. However, because such regulations also apply to Lorilei's competitors, they merely tend to make all participants in the industry less effective, rather than to affect Lorilei's competitive business posture. More importantly, FCC regulations are actually a benefit to Lorilei's operations since access requirements and pricing controls make Lorilei competitive with vastly larger organizations. The absence of such regulations would have a materially adverse impact on Lorilei's business. Page 12 Estimate of the Amount Spent During Each of the Last Two Fiscal Years on Research and Development Activities, and if Applicable the Extent to Which the Cost of Such Activities are Borne Directly by Customers During the last two years, Lorilei has expended approximately $8,200 in research and development activities. Such expenses are passed along to the public indirectly in the form of components of Lorilei's pricing decisions. The bulk of the research and development activities involved production of local news programs and activities with the FCC designed to assure access to unused cable system channel capacity. Costs and Effects of Compliance with Environmental Laws(Federal,State and Local) To the best of management's knowledge, Lorilei will not be required to directly incur material expenses in conjunction with federal, state or local environmental regulations, however, like all other companies, there are many but incalculable indirect expenses associated with compliance by other entities that affect the prices paid by Lorilei for goods and services. Employees As of April 1, 2000, Lorilei had 20 full time employees and 3 part-time employees. Lorilei requires that all full-time employees sign a non-competition and confidentiality agreement as a condition of employment. No employee contracts currently exist (except for agreements with Lorilei's executive officers) and all employment is at will. No employees are currently represented by an labor unions. Lorilei believes its relations with employees to be good, however additional employees will need to be recruited to meet its growth projections. Management believes that required personnel can be recruited on acceptable terms from the large, technically and professional pool in the Marion and Alachua county regions of Florida, at very favorable rates. Lorilei anticipates adding up to ten additional staff members in the near future, primarily in sales, marketing and support functions. ITEM 102. PROPERTIES Operations Facilities Lorilei's principle place of business is located at 7325 Southwest 32nd Street, Ocala, Florida, 34474. This is an industrial park type setting where the other businesses are warehouse or light manufacturing businesses. The building is approximately 5,000 square feet in total space, with 3,500 square feet devoted to office and production space and 1,500 square feet devoted to studio space. All space is air-conditioned and heated. The property is encumbered by a first mortgage in the original principal amount of $194,000 in favor of Small Business Loan Source. The loan bears interest at the rate of 11.75% per annum and is payable over a term of 25 years. The property is in the opinion of Lorilei's management adequately covered by insurance. Management believes the current facility to be adequate for anticipated growth through the 2003 fiscal year. Management cannot, however, guarantee that the square footage will be sufficient for all production operations. Additional construction or additional leased space could be required, either of which could result in additional unanticipated expense. Sales Offices Lorilei leases field sales offices in Jacksonville and Orlando, Florida, and intends to open additional offices in the Tampa Bay and Boca Raton, Florida areas within the year 2000. As part of such expansion, additional sales offices in targeted major cities are contemplated. Rental costs for such additional space is expected to be minimized through use of "office suite" type space that can be expanded if justified by sales volume. If sales volume becomes substantial in a given metropolitan area it could require considerably more square footage in leased office space than has been projected. Page 13 Foreign Locations Lorilei does not have any material portion of its assets, operations or customers located outside of the United States. Substantially all of Lorilei's revenues are from customers within the United States, where all of Lorilei's services are provided. ITEM 103. LEGAL PROCEEDINGS Lorilei is not a party to any pending legal proceedings. However, Lorilei presently owes real estate taxes to Marion County, Florida and personal property taxes to the State of Florida in the approximate, aggregate amount of $10,272.20. Lorilei has also declined to pay $21,420 to Home and Garden Television ("HGTV") pending confirmation of sums due based on Lorilei's belief that advertising time slots purchased were not provided. ITEM 201. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS No market exists for Lorilei's common stock. Lorilei has never had more than three stockholders, with AmeriNet being its sole current stockholder. Despite having been taxed as an S corporation for federal income tax purposes until it was acquired by AmeriNet, Lorilei did not pay dividends during 1998, 1999 or 2000. Lorilei has never had any outstanding options, warrants or convertible securities; its securities have never had a public market; and, it has never agreed to register its securities with the SEC or any comparable state agencies. ITEM 202. DESCRIPTION OF SECURITIES Lorilei's Articles of Incorporation, as amended, authorize it to issue 2,000 shares of common stock, $0.01 par value per share. As of the date of its acquisition by AmeriNet, 111 shares of common stock were outstanding. This description of the capital stock of Lorilei is qualified by and subject to the Florida Business Corporation Act and Lorilei's Articles of Incorporation and By-laws, copies of which are filed with the SEC as exhibits to AmeriNet periodic reports. The holders of common stock are entitled to one vote per share on all matters to be voted upon by the shareholders and have no cumulative voting rights. Holders of common stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the board of directors out of funds legally available therefor. In the event of liquidation, dissolution, or winding up of Lorilei, the holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities. The common stock has no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of common stock are fully paid and nonassessable, and the shares of common stock offered hereby will also be fully paid and nonassessable. The Articles also recognize the obligation of Lorilei's stockholder, AmeriNet Group.com, Inc. to elect members to Lorilei's board of directors in the manner reflected in the reorganization agreement between Lorilei and AmeriNet. Lorilei has issued one promissory note for $46,143 to John B. LaTorraca which bears interest at the rate of 8.5% per annum on which a total of $51,084.16 is presently owed. ITEM 303. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Management's Discussion and Analysis Lorilei provides client businesses with advertising and marketing services. Lorilei's services include creative production and placement in both new and old media. Lorilei believes that its ability to place half-hour infomercials on cable television in prime-time through commercial leased access will enable it to offer direct response television services to a majority of companies striving to drive e-commerce business. In 1998, Direct Response Magazine reported that $844 million ($844M) was spent on television infomercials which contributed to generating over $759 billion ($759B) in consumer spending. By way of comparison, industry authority International Data Corporation (IDC) estimates that consumers will purchase only $16 billion ($16B) in goods from the Internet in 2000. The e-commerce market is projected to hit $3.2 Trillion ($3.2T) by 2004 in North America (Forrester Research). Page 14 Revenues Lorilei classifies classify revenues into the following major categories: commission and retainer, Video production, Graphics, Web, and Commercial Leased Access and Spot Airtime. The following discussion does not include revenues for a new 2000 category, News. The principal factors that propel Lorilei's revenues are detailed below. Commission and retainer revenue: Income from traditional commissioned advertising agency time and space business as well as advertising agency monthly retainers, promotions and public relations. Video production revenue: Includes income from both video and audio projects, including brokered duplication. Graphics revenue: Income from all graphics projects including traditional layout and design, brokered printing, pre-press as well as new media-related projects such as animation. Website revenue: Includes income from website design, maintenance, hosting, and interactive projects. Commercial Leased Access and Spot and program airtime revenue: Income from brokered time sales (as contrasted with traditional advertising agency 15% commission on time and space purchases). Lorilei news programming will generate revenues from advertising sales beginning in 2000. They are expected to increase materially as new market operations are incrementally rolled out. The initial operation is based at Lorilei's Ocala, Florida headquarters. Lorilei expects commission and retainer income to decrease throughout the advertising industry as businesses seek broader solutions to advertising and marketing challenges. Lorilei intends to anticipate this trend and to replace the related income with project income in the other revenue driver categories. Lorilei expects video production income to increase due to Lorilei's expanding direct response television business and increased demand fueled by web-based video applications. Graphics income will vary in relation to Lorilei's client mix during given fiscal periods, with printing income expected to be the major variable. Print-intensive clients can have a large impact on this revenue driver. Lorilei's goal is to seek these types of clients and to complement their use of print with electronic media opportunities, while servicing their core advertising media requirements. Web-based revenue is expected to increase dramatically as Lorilei's Internet hosting capacity increases and it implements new Internet related business plans, including development of: * The 15C2-11 websites (originally allocated by AmeriNet to WRI); * A joint venture with other AmeriNet subsidiaries for website hosting services; * A joint venture with other AmeriNet subsidiaries for Internet access ("ISP") services; and * "Webcasting" capacity. Commercial leased access and spot and program airtime revenues are expected to dramatically increase in the coming years as more businesses discover direct response television and as the trend toward tightening of infomercial availabilities directly through cable networks increases (e.g., Turner Broadcasting's recent decision to stop making half-hour time slots available). Page 15 Cost of Goods and Services Costs are classified with their related revenue stream. The major factors (exclusive of labor) associated with Lorilei's costs are listed below: Printing Costs Associated with Graphic Print Jobs: Costs associated with graphic print jobs are film output, film and chemical supplies, actual third party printing charges based on size, quantity, paper quality, number of colors used, folding and bindery. Printing costs for 1998 were $124,517 and $70,415 for 1999. A portion of the decrease from 1998 to 1999 was attributable to Lorilei's purchase of a pre-press machine which permitted it to process the film in- house before sending it to printers. Capitalized Media: There were no capitalized media costs for 1998. Costs for capitalized media in 1999 were $27,548. The capitalized media costs for 1999 were associated with a group of six technical schools that booked a full year of media to promote each school. Commercial Leased Access and Brokered Spot Airtime: Commercial leased access cost for 1998 were $49,387 and $48,743 for 1999. Commercial leased access refers to cable programs running for a half hour or longer which give the public information on a specific product or service. There were no costs incurred for spot airtime and program airtime for 1998. In 1999 the spot airtime costs were $15,129. Spot airtime consists of direct response television spots of 30 to 60 seconds in length. Program airtime costs for 1999 were $3,655. Program airtime spots are half hour television programs. Videotape and Videotape Duplication: Videotape costs for 1998 were $5,000. These costs involve videotape inventories required for use on behalf of clients. Videotape duplication costs for 1998 were $10,685. Videotape duplication is a service offered to clients that require multiple copies of videotapes for promotional or informational reasons. Videotape costs for 1999 were $4,696. Videotape duplication costs for 1999 were $32,501. The increase in videotape duplication costs from 1998 to 1999 was attributable to development of client relationships requiring promoted products and services. Shipping Costs: Shipping costs for 1998 graphics and video production were $16,616. These costs are incurred on behalf of clients for transport services provided. Shipping costs for graphics in 1999 were $4,673. These costs were incurred for print jobs for clients. Shipping costs for video production in 1999 were $13,696. These costs were for shipping video duplications in bulk to clients. Results of Operations Revenues from Lorilei's business categories for the year ended December 31, 1999 compared to the year ended December 31, 1998, were as follows: Page 16 Revenue Total revenues increased $109,468, or 11% to $1,102,329 for the year ended December 31, 1999 from $992,861 for the year ended December 31, 1998. This increase was attributable to the growth of commercial leased access and spot and program airtime sales. Commission and retainer revenue decreased by $185,794 or 67.1% to $90,897 for the year ended December 31, 1999 from $276,691 for the year ended December 31, 1998. This was due mainly to client turnover. Management believes this is a trend throughout the advertising industry with middle market companies abandoning traditional advertising agencies in favor of project-based companies such as Lorilei. Video production revenue increased by $29,616 or 11.3% to $291,156 for the year ended December 31, 1999 from $261,540 for the year ended December 31, 1998. This increase was due in part to an on-going agreement with Advent Product Development for spot production. Graphics revenue decreased by $105,599 or 31.7% for the year ended December 31, 1999 from $332,903 for the year ended December 31, 1998. This decrease was partially due to client turnover and partially due to a decrease in brokered printing projects. This is a revenue category that is especially sensitive to Lorilei's client mix and will vary accordingly. Website revenues increased by $10,055 or 60% for the year ended December 31, 1999 from $16,743 for the year ended December 31, 1998. This was due to increased demand for website design, hosting, maintenance and interactive services. Management expects this trend to continue into the foreseeable future. Commercial leased access and spot and program airtime increased by $404,614 or 879% to $450,610 in the year ended December 31, 1999 from $45,996 in the year ended December 31, 1998. This increase is due to increased demand for prime-time infomercial airings and in part due to capitalized television and radio spot media. Management expects this category to continue to increase substantially in 2000. Cost of Goods and Services Costs of goods and services increased by $77,574 or 32% to $320,029 for the year ended December 31, 1999, from $242,455 for the year ended December 31, 1998. As a percentage of revenues, cost of goods and services for the year ended December 31, 1999 was 29%, compared with 24% for the year ended December 31, 1998. The increase was due to an increase in capitalized agency billings resulting from a shift in Lorilei's agency client mix. Payroll Expense Payroll expense, including officer's salaries, increased by $28,136 or 6.8% to $439,938 for the year ended December 31, 1999 from $411,802 for the year ended December 31, 1998. As a percentage of revenues, payroll expense declined from 41% in the year ended December 31, 1998 to 39.9% for the year ended December 31, 1999. While overall payroll expense is expected to increase in 2000 due to the addition of sales staff and news operation personnel, management believes payroll will remain close to 1999 levels as a percentage of revenues. Depreciation Expense Depreciation expense increased by $14,979 or 21% to $86,319 for the year ended December 31, 1999 from $71,340 for the year ended December 31, 1998. This was due to new equipment placed in service in 1999. Page 17 Plan of Operation Strategic Goals Lorilei's goals pertaining to The Firm Multimedia division's clients is to: * Provide high-quality content that creates demand for their products and services; * Offer candid, constructive consultative advice that results in increased sales; * Generate effective exposure (such as commercial leased access to cable systems) that is not easily duplicated by potential competitors; * Anticipate and implement opportunities made possible by emerging technologies; and * Meet their personalized requirements in a creative, effective, timely and reliable manner. Lorilei's goal for its local under-served television area programming (e.g., Ocala News Tonight) is to present content that is focused on local news, weather, and sports in a style which both appeals to and reflects the community, making it a staple choice in the local viewing area and providing results and value for Lorilei's advertisers. In the event that such concept proves viable and generates sufficient, demand, Lorilei may consider expansion of programming hours and content. Expansion of Personnel and Facilities Lorilei's plan for growth is multifaceted. Lorilei intends to grow through recruiting additional professional salespeople in the specialized market segments Lorilei intends to service, and to open additional sales offices in geographically targeted areas. Lorilei also intends to establish additional news operations similar in structure to Ocala News Tonight, in areas of the United States which demonstrate an abundant advertiser base and community identity, and that are either under-served by broadcast television news. Factors that Lorilei will look for in selecting appropriate areas will include: * The size of the television area of dominant influence; * Geographic boundaries or terrain which segment the market, or in some cases; and * The existence of markets with a substantial foreign-language-speaking population not served by compatible, foreign language television programming. Lorilei also intends to grow by acquisition of companies it feels are synergistic with its operations. In order to increase its own client generation capabilities, Lorilei has developed a multi-pronged, coordinated marketing campaign. First, it intends to aggressively recruit professional sales personnel to operate from Lorilei's operations center in Ocala Florida (including lead generation specialists, sales supervisors, problem resolution expediters and telemarketers). Concurrently with such recruitment drive, Lorilei intends to: * Launch an intensive and geographically evolving advertising and marketing campaign under both trade names in areas where it has or is about to open offices; and * Progressively open and expand small and efficient sales offices staffed by account executives. Lorilei's regional sales offices will initially be in the Central Florida area and in areas where it can use facilities and personnel shared with other AmeriNet subsidiaries in South Florida. Then, based on marketing and personnel recruitment opportunities presented, additional sales offices will be established: * In all major state regions (e.g., the Florida "panhandle," Tallahassee, Jacksonville, Daytona, Orlando, Tampa- St. Petersburg-Clearwater, Sarasota, Melbourne-Jupiter-Stuart, Palm Beach-Boca Raton, Fort Lauderdale- Hollywood, Dade County and the Florida Keys); Page 18 * In the United States Southeast (Atlanta, Charleston-Savannah, Charlotte, Nashville-Memphis, Richmond- Washington D.C.-Baltimore), and * In major United States metropolitan areas (New York City, Chicago, Dallas, Phoenix, Los Angeles, San Francisco). Based on available marketing and personnel opportunities, Lorilei intends to staff its sales offices with account executives and problem resolution expediters. Because of the extremely cost effective business operational and personal living costs, and, the abundance of technical and professional personnel found in the Ocala-Gainesville area, Lorilei intends to maintain and expand its production facilities in Central Florida, from which it will service its regional offices. However, more active regional offices that require non-sales personnel in order to service local requirements will be expanded based on an analysis of the existing client opportunities, potential for client growth, and risks presented by such expansion. Only the initial expansion goals are covered by Lorilei's current capital budget which it anticipates AmeriNet to fund. Thereafter, subject to AmeriNet's approval, expansion may be funded from operating income, loans from commercial sources or equity investors. Lorilei's management believes that increased sales volume from expansion of its client base will generate material economies of scale that will enhance Lorilei's price competitiveness while enabling it to maintain technological and service superiority, increasing the profitability of all of its divisions. Investment in Technology Lorilei has always invested carefully in emerging technologies. In addition to having the largest and best equipped television facilities in its operating area (which compare favorably with the closest on air commercial television stations), it has already made the transition to digital, non- linear video editing (versus the older tape-based linear tape editing) and intends to invest in high definition video equipment as distribution facilities and high definition television ("HDTV" sets-in-use increase to a critical mass. Nonetheless, Lorilei recognizes that in the field of computer hardware, capital investments should be carefully made in order to stay technologically competitive while not expending unreasonable sums to modernize equipment based on fads or improvements that are themselves about to be exceeded. Lorilei's computer inventory includes both Microsoft Windows(R) and Apple (R) equipment inter-networked to permit regular cross-connectivity and extremely high resolution scanning and internal printing capabilities. Because of the low cost, extremely competitive available printing resources, client printing is outsourced based on best available prices at the time. Lorilei intends to position itself as a company offering advanced solutions to the latest Internet applications, including Internet website design and hosting as well as Internet portal and broadcasting. It is also considering providing specialized Internet access services to its clients through a joint venture with other AmeriNet subsidiaries and intends to produce content materials which may be offered to other Internet broadcasters for a fee. Economies of Scale and Best Practices Lorilei's location provides major operational benefits as a result of the lower cost of living, beneficial quality of life, and resultant moderate salaries that prevail in the Marion County, Florida area. In addition, Lorilei's management believes that it will be able to avail itself of quality personnel available through its close proximity to the University of Florida. Management intends to keep its personnel satisfied and motivated through use of incentive stock options available from AmeriNet and through benchmarking employee compensation to productivity and profits (encouraging them to both increase income and reduce expenses). Lorilei's management believes that it will achieve significant economies of scale as gross sales levels increase. Lorilei's management and staff will continue to participate actively in industry seminars and local community affairs and will elicit, evaluate and act on feedback from clients, their customers and the local community. By extending projects through multiple content platforms (e.g., graphics clients become video clients, etc.) and through productivity gains made possible through incentives to employees, revenue management processes and increased vertical integration, Lorilei expects to reduce client costs while maximizing customer revenues, increasing its own profitability. Lorilei believes by continuous attention to its own results, to industry and technical innovations and to the performance of its competitors, it will be able to continuously evaluate and improve its operations. Page 19 Expansion Through Acquisitions Beginning in 2001, Lorilei anticipates that it will seek to acquire other marketing and advertising firms as a method of: * Increasing market share and overall sales volume; * Acquiring targeted clients; * Recruiting experienced personnel; * Expanding its geographic presence; * Adding complimentary services (e.g., direct response fulfillment). Acquisitions may also be undertaken in order to acquire specific products or services which management believes could have considerable profit potential compatible with Lorilei's marketing methods and capabilities. Acquisitions may be undertaken in a manner that does not conform to AmeriNet's current policies (acquisitions solely for stock, with funds provided only to fund expansion related activities) because, unlike the situation with AmeriNet, where management of the acquired companies is expected to remain, it is likely that management could be superfluous in acquisitions for the purposes described. In such case, Lorilei, either through AmeriNet or through other sources, would have to provide cash as a material component and such cash would be unavailable for other corporate purposes. A poor acquisition decision could have materially negative affects on Lorilei's business. Comprehensive Brand Strategy Lorilei's management believes that goodwill associated with "brand equity" (a good name built from honest products and services, sold by honest people telling an honest story) is as important to Lorilei's products and services as it is to those of its clients. Consequently, it intends to actively develop and protect the brand equity of its two current divisions, as well as such other proprietary brand names as it may develop, acquire or use in the future. Lorilei's goal is to develop an association among its current and potential customers, between Lorilei's brand names and the values and goals that Lorilei has established for its business operations, and to avail itself of such brand equity to increase its client base, for personnel recruitment purposes and, potentially, for licensing purposes, strategic alliances and acquisitions. Lorilei intents to launch a multi-pronged advertising and marketing campaign for its brand names (currently, "The Firm Multimedia" and "Ocala News Tonight"), using: * Participation in industry award generating activities; * Participation in national, regional, state and local community affairs; * Co-participation with educational institutions, clients and targeted potential clients in charitable, educational and civic affairs; * National DRTV print and directory ads; * Regional business publication print ads; Page 20 * Keyword-driven Internet banner ads; * Business to business ("B2B") direct mail; and * B2B telemarketing In addition to the foregoing, Lorilei intends to promote its local news program brand equity through an advertising and marketing campaign consisting of: * Outdoor advertising; * High frequency cable spot advertising on different channels in the cable systems Lorilei services; * Exchange of marketing time with other media (e.g., bartered radio spots campaigns); * Signs on news vehicles; * Direct mail revenue-generating promotion campaigns with a four-color prize mailer; * B2B direct mailers announcing the campaign as a lead generation source for Lorilei's outside salespeople; * On-going revenue-generating co-promotions featuring local program personalities (e.g., Ocala News Tonight personalities) on-location at client locations. ITEM 304. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE During Lorilei's two most recent fiscal years and during the year 2000, no principal independent accountant or accountant for a significant subsidiary of Lorilei on whom the principal accountant expressed reliance in its report has resigned , declined to stand for reelection, or was dismissed. Lorilei's financial statements have never been audited. ITEM 306. AUDIT COMMITTEE REPORT Lorilei has never had an audit committee, consequently, no audit report has been received. In the future, Lorilei's financial statements are expected to be consolidated with those of AmeriNet and Lorilei will rely on the audit committee of AmeriNet's board of directors for all required reports, charters, etc. ITEM 310. FINANCIAL STATEMENTS Lorilei has never prepared financial statements complying with generally accepted accounting principals consistently applied ("GAAP"), rather, it has maintained internally generated financial information based on the Quick Books(R) bookkeeping programs from which James Moore & Company, P.A., certified public accountants ("James Moore & Company"), have prepared annual tax returns and provided tax related advice. As a condition to Lorilei's acquisition by AmeriNet, it has agreed to an audit of its financial statements which will be performed by James Moore & Company if an independent audit is required under applicable SEC rules, or by AmeriNet's chief financial officer if it is not. If SEC rules require an independent audit, it is to be prepared and filed with the SEC on or before the earlier of the 75th day following Lorilei's acquisition by AmeriNet or the 60th day following the filing of a report of current event on Commission Form 8-K with the SEC by AmeriNet, disclosing its acquisition of Lorilei. See Item 7(a) "Financial Statements of Businesses Acquired" for a discussion of the availability of Lorilei financial statements in this report. Page 21 ITEM 401. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS Nominees to AmeriNet's Board of Directors Gerald R. Cunningham and Leigh A. Cunningham will be nominated by AmeriNet's management and are expected to be elected as members of AmeriNet's board of directors at the annual meeting of stockholders currently expected to be held during June of 2000. Lorilei's Executive Officers and Directors The following table sets forth information concerning Lorilei's directors and executive officers. All executive officers and directors have held their positions since Lorilei's inception during Jule of 1994. Name Age Position Gerald R. Cunningham 48 Chief executive officer, president, treasurer, chief financial officer and director Leigh A. Cunningham 32 Vice president, chief operating officer and secretary All officers and directors are parties to employment agreements on a revolving one year basis which call for them to be elected to their current positions. In addition, pursuant to the terms of the reorganization agreement between Lorilei and AmeriNet, Lorilei's current management will have the right to elect a majority of the members of its board of directors for the foreseeable future, unless Lorilei fails to attain at least 70% of its earnings before interest, taxes, depreciation and amortization ("EBITDA") projections Biographies of Executive Officers and Directors Gerald R. Cunningham, age 48, has served as president, chief executive officer and as a member of the board of directors of Lorilei since its incorporation in July of 1994, and as a partner in its predecessor, a Florida general partnership operating under the fictitious name "The Firm," organized by Mr. Cunningham and his wife during 1993. In 1991 Mr. Cunningham obtained a bachelor of science degree in business administration from Pacific Western University located in Los Angeles, California. In 1968 he received a third class radiotelephone operator's permit from the FCC and began an on-air radio broadcasting career with major market stations through 1982, when he entered radio advertising sales and sales management, specializing in improving sales at newly established stations or stations whose sales had declined. Mr. Cunningham is not currently a director in any other company. Leigh A. Cunningham, age 32, has served as vice president, secretary and as a member of the board of directors of Lorilei since its incorporation in July of 1994, and was a partner in its predecessor, a Florida general partnership operating under the fictitious name "The Firm," organized by Ms. Cunningham and her husband during 1993. Ms. Cunningham attended San Diego State University, San Diego, California during 1986 and became a marketing coordinator for Pacific Southwest Airlines' Executive Flyer Club in 1987. In 1988 Ms. Cunningham began a career in radio broadcasting as a traffic manager, later moving into sales and sales management. Ms. Cunningham is not currently a director in any other company. Significant Employees Mary Lee, age 32, has served as business manager of Lorilei since October , 1998. From April, 1994 to September 1998 she was Office Manager with Simmons, Hart and Sheehe, an Ocala, Florida law firm. Brian Trahan, age 37, has served as Lorilei's production manager since December, 1998. From July, 1998 to December 1998 he was employed by Zebra Publishing in Gainesville, Florida, as production manager. From June 1995 to July 1997 Mr. Strahan served as creative director for the Belk's Florida and South Georgia group offices, and from March 1994 to June 1995 Mr. Strahan was graphics coordinator at Bear Archery. Page 22 Family Relationships Gerald R. Cunningham and Leigh A. Cunningham are husband and wife. Involvement in Certain Proceedings None of the following events have occurred with regard to the directors, executive officers, promoters or control persons of Lorilei during the last five years: Any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or Being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated. ITEM 402. EXECUTIVE COMPENSATION Prior to May 11, 2000, none of the officers , directors or key employees of Lorilei worked pursuant to written employment agreements. During the previous three fiscal years, the officers and directors of Lorilei have received the compensation disclosed in the summary compensation table below. No dividends have been paid to any shareholder since inception. Since December 31, 1999, Gerald R. Cunningham has received total cash compensation of $13,383.72 and Leigh A. Cunningham has received total cash compensation of $10,764.18. No long term compensation was awarded to either during the period prior to Lorilei's acquisition by AmeriNet. Since the inception of Lorilei a total of $57,677.72 has been repaid to Mr. and Ms. Cunningham for loans advanced to, or on behalf of Lorilei. Lorilei provides child care for the children of Mr. and Ms. Cunningham. The following table sets forth the aggregate compensation paid to Lorilei's Chief Executive Officer and Lorilei's only other executive officer ( "Named Executive Officers") with respect to the years ended December 31, 1999, 1998 and 1997: Page 23 Summary Compensation Table Annual Compensation Long Term Compensation Awards Payouts Restric- Securities Name and ted Underlying Long Term All Principal Stock Options & Stock Incentive Other Position Year Salary Bonus Other Awards Appreciation Rights Payouts Compensation - -------- ---- ------ ----- ----- ------ ------------------- ------- ------------ (1) 1999 33,375 * 15,000 (3) * * * * (2) 1999 31,146 * 15,000 (3) * * * * (1) 1998 38,625 * 12,000 (3) * * * * (2) 1998 32,188 * 12,000 (3) * * * * (1) 1997 38,475 * 8,000 (3) * * * * (2) 1997 30,663 * 8,000 (3) * * * * - ------
(1) Gerald R. Cunningham, president, treasurer and chief executive officer. (2) Leigh A. Cunningham, vice president and secretary (3) These sums represent expense allowances for automobiles, health insurance and child care services. * None. Executive Compensation; Employment Agreements; Covenants-not-to-compete Lorilei's two executive officers have materially identical employment agreements with Lorilei. Each of the agreements provides that the employee will not enter the employ of or serve as a consultant to, or in any way perform any services with or without compensation to, any other persons, business or organization without the prior consent of Lorilei's board of directors. They also contain non-competition, non-circumvention and confidentiality covenants during the term of the agreement, all renewals thereof and for a period of two years after their termination. Each agreement expires on June 30, 2001 but is automatically renewed unless specifically canceled by Lorilei. Each agreement has an annual base salary of $60,000, plus an annual bonus in a sum equal to 2.5% of Lorilei's pre-tax, net profits and an aggregate of up to $12,000 per year in benefits comprised of car allowance, health insurance and child care. In addition to the compensation described, each of the two officers is entitled to incentive stock options, as described under "Long Term Incentive Plans" below. Indemnification Agreements The employment agreements with Lorilei's executive officers each contain indemnification provisions. The provisions require, among other things, that Lorilei indemnify its directors and executive officers to the fullest extent permitted by law, and advance to the directors and executive officers all related expenses, subject to reimbursement if it is subsequently determined that indemnification is not permitted. Although the indemnification provisions offer substantially the same scope of coverage afforded by provisions in Lorilei's charter and bylaws, it provides greater assurance to directors and executive officers that indemnification will be available, because, as a contract, it cannot be modified unilaterally in the future by the board of directors or by AmeriNet as Lorilei's stockholder, to eliminate the rights it provides. In addition, Lorilei's articles of incorporation provide that it shall indemnify its officers, directors, advisory directors and employees to the fullest extent permitted by law. Lorilei has authority under Section 607.0850 of the Florida Business Corporation Act to indemnify its directors and officers to the extent provided in such statute. In general, Florida law permits a Florida corporation to indemnify its directors, officers, employees and agents, and persons serving at Lorilei's request in such capacities for another enterprise, against liabilities arising from conduct that such persons reasonably believed to be in, or not opposed to, the best interests of Lorilei and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. Page 24 The provisions of the Florida Business Corporation Act that authorize indemnification do not eliminate the duty of care of a director, and in appropriate circumstances equitable remedies such as injunctive or other forms of non- monetary relief will remain available under Florida law. In addition, each director will continue to be subject to liability for (a) violations of the criminal law, unless the director had reasonable cause to believe his conduct was lawful or had no reasonable cause to believe his conduct was unlawful; (b) deriving an improper personal benefit from a transaction; (c) voting for or assenting to an unlawful distribution; and (d) willful misconduct or a conscious disregard for the best interests of Lorilei in a proceeding by or in the right of Lorilei to procure a judgment in its favor or in a proceeding by or in the right of a shareholder. The statute does not affect a director's responsibilities under any other law, such as the federal securities laws or state or federal environmental laws. Long-term Incentive Plan Pursuant to the terms of the reorganization agreement, AmeriNet has reserved 335,378 shares of AmeriNet Stock for future issuance through incentive stock options (as defined in Section 422 of the Code) granted in Lorilei's executive officers' employment agreements, provided, however, that rights to such shares will vest on an annual basis, subject to attainment of the following EBITDA projections determined in accordance with GAAP: (a) If Lorilei attains EBITDA of at least $500,000 during the period starting on July 1, 2000 and ending on June 30, 2001, then the first 67,976 shares of AmeriNet's common stock reserved for issuance in the event of exercise of the subject incentive stock options will vest; (b) If Lorilei attains EBITDA of at least $1,400,000 during the period starting on July 1, 2000 and ending on June 30, 2002, then all rights to 179,769 (including the 67,976 shares vested, if any, on June 30, 2001) of the shares of AmeriNet's common stock reserved for issuance in the event of exercise of the subject incentive stock options will vest; and (c) If Lorilei attains EBITDA of at least $2,900,000 during the period starting on July 1, 2000 and ending on June 30, 2003, then all rights to all of the 335,378 shares (including the shares vested, if any, on June 30, 2001 and June 30, 2002) of AmeriNet's common stock reserved for issuance in the event of exercise of the subject incentive stock options will vest. (2) All rights to the incentive stock options in the subject employment agreements that have not vested as of July 1, 2003 will expire on such date, and no further rights of any kind thereto or to the underlying shares of AmeriNet's common stock reserved for such purpose will exist thereafter, the reservation therefor terminating on such date. (3) The vested incentive stock options will be exercisable during the three fiscal year period after they vest at a price of $1.3125 per share, provided that as required by Code Section 422, all rights to or under the incentive stock options will expire within 90 days after termination of employment with Lorilei. ITEM 403. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Common Stock Owned by Principal Shareholders, Officers and Directors of Lorilei The following Table discloses the common stock in Lorilei and AmeriNet (the only outstanding class of equity securities for either company), beneficially owned by all Lorilei executive officers, directors and Lorilei nominees to AmeriNet's board of directors, naming them each; each of the named Lorilei executive officers as defined in Item 402(a) of Commission Regulation S-B; and, all Lorilei directors and executive officers as a group, without naming them. The table shows in columns 2 and 4 the total number of shares beneficially owned and in columns 3 and 5 the percent owned. Of the number of shares shown in column 4, the associated footnotes indicate the amount of shares, if any, with respect Page 25 to which such persons have the right to acquire beneficial ownership as specified in Commission Rule 13(d)(1), within 60 days following the date of this report. For purposes of this Table, 11,722,410 shares of AmeriNet's common stock are assumed to be outstanding because none of the persons listed have any options to acquire shares of AmeriNet's common stock exercisable within the next 60 days. Lorilei Shares AmeriNet Shares Shareholder Name, Beneficially Owned Beneficially Owned Corporate Office, Prior to Reorganization After Reorganization and Address Number Percent Number Percent Gerald R. Cunningham 111(1) 100% 572,519 4.88% Director, chairman of the board, president and chief executive officer 7325 Southwest 32nd Street Ocala, Florida 34474 Leigh A. Cunningham 111(1) 100% 572,519 4.88% Director, vice president and secretary 7325 Southwest 32nd Street Ocala, Florida 34474 All Lorilei executive officers and directors as a group 111(1) 100% 572,519 4.88%
(1) All of Lorilei's common stock was held by Mr. and Mrs. Cunningham as tenants by the entirety and all of the AmeriNet common stock acquired in exchange for the Lorilei common stock is held by Mr. and Mrs. Cunningham as tenants by the entirety. (2) 367,176 of the 572,519 shares of AmeriNet's common stock issued to Mr. and Mrs. Cunningham were issued in the name of Bruce Brashear, Esquire, who serves as legal counsel to Mr. and Mrs. Cunningham but is acting as escrow agent for Mr. and Mrs. Cunningham and AmeriNet. Such shares are to be released from escrow, on the following terms: (A) As soon after June 30, 2001, as Lorilei's EBITDA can be definitively determined based on the annual audit of AmeriNet's financial statements, 286,260 of the shares will be transferred to: 1. Mr. and Mrs. Cunningham, as tenants by the entirety, if Lorilei's EBITDA for the fiscal year ended June 30, 2001 is at least $250,000; or 2. To AmeriNet if Lorilei's EBITDA for the fiscal year ended June 30, 2001 is less than $250,000; and (B) At such time as a final, legally binding determination is made as to the amount, if any, payable to HGTV based on the liability currently being challenged by Lorilei, then a pro rata portion of the remaining 80,916 shares being held in escrow by Mr. Brashear shall be transferred to Mr. and Mrs. Cunningham, as tenants by the entirety, representing the portion of such liability that was not payable (e.g., if only 50% of the liability was payable, then 40,458 shares would be transferred to Mr. and Mrs. Cunningham), with the balance, if any, transferred to AmeriNet. (3) 114,504 of the 572,519 shares of AmeriNet's common stock issued to Mr. and Mrs. Cunningham were issued to The Yankee Companies, Inc. (a Florida corporation that serves as AmeriNet's strategic consultant) as escrow agent for AmeriNet and Mr. and Ms. Cunningham, to be used from time to time to discharge undisclosed liabilities of Lorilei or other violations of its obligations under the reorganization agreement with AmeriNet, as described in Article Seven thereof, with the balance, if any, transferred to Mr. and Mrs. Cunningham, as tenants by the entirety, at such time as AmeriNet's audited financial statements for the year ended June 30, 2001 are filed with the SEC. Page 26 (4) Does not include an additional 572,518 shares of AmeriNet's common stock (because they cannot be obtained within the next 60 days, the "Performance Shares") that have been reserved for possible issuance to Mr. and Mrs. Cunningham, on the following terms and subject to the following requirements: (A) If Lorilei attains EBITDA of at least $500,000 during the period starting on July 1, 2000 and ending on June 30, 2001, then Mr. and Mrs. Cunningham will be issued an aggregate of 114,504 of the Performance Shares; (B) If Lorilei attains EBITDA of at least $1,400,000 during the period starting on July 1, 2001 and ending on June 30, 2002, then Mr. and Mrs. Cunningham will be issued an aggregate of 305,343 of the Performance Shares (including the 114,504 that either were or could have been earned as of June 30, 2001); (C) If Lorilei attains EBITDA of at least $2,900,000 during the period starting on July 1, 2002 and ending on June 30, 2003, then Mr. and Mrs. Cunningham will be issued all 572,518 of the Performance Shares (including the 305,343 that either were or could have been earned as of June 30, 2002); however, all rights to any of the Performance Shares not earned as of such date will thereupon expire. (5) Does not include up to an additional 335,378 shares of AmeriNet's common stock that may be issued to Mr. and Mrs. Cunningham pursuant to the incentive stock options described in response to Item 402 of SEC Regulation SB, "Executive Compensation - Long Term Incentive Plan" because such incentive stock options are not exercisable within the next 60 days. ITEM 404. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Since Lorilei's inception, it was a party to the following transactions in which a director or executive officer of Lorilei; a nominee for election as a director; a beneficial owner of ten percent or more of Lorilei's common stock, or, any member of the immediate family of any of the foregoing; had or will have a direct or indirect interest, and did not involve: rates or charges determined by competitive bids; services at rates or charges fixed by law or governmental authority; services as a bank depository of funds, transfer agent, registrar, trustee under a trust indenture; or, similar services: Relationship Nature of Interest Amount of Name To Lorilei In the Transaction Such Interest - ---- ---------- ------------------ ------------- Gerald R. Cunningham (1) (3) (3) Leigh Cunningham (2) (3) (3) - -------
(1) President, treasurer, director and former 100% stockholder. (2) Vice president, secretary, director and former 100% stockholder. (3) (A) Lorilei pays for child care for Mr. and Ms. Cunningham's son. (B) For amounts allocated to benefits paid to Mr. and Mrs. Cunningham, please see Item 402 of SEC Regulation SB, "Executive Compensation- Summary Compensation Table." (C) Since its inception, a total of $57,677.72 been repaid to Mr. and Ms. Cunningham for funds advanced to Lorilei. Page 27 (D) Pursuant to the terms of the reorganization agreement between Lorilei and AmeriNet, approximately $340,079.14 in funds owed by Lorilei that have been guaranteed by Mr. and Mrs. Cunningham are to either be refinanced in a manner removing the personal guarantees, or, Lorilei is to agree to indemnify and hold the guarantors' harmless for any consequences of a default in the payment of such debts, and to secure such indemnity with a lien on Lorilei's real estate assets. Lorilei and AmeriNet (based on information provided by Mr. and Mrs. Cunningham) believe that each of the foregoing transactions was undertaken for the benefit of Lorilei, on terms more favorable than would have been available in arms length transactions. ITEM 405. COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT Lorilei does not have a class of equity securities registered pursuant to the Exchange Act. However, Mr. and Mrs. Cunningham have filed or have agreed to file before their respective due dates, all reports pertaining to stock ownership in AmeriNet required under the Exchange Act, including reports on SEC Form 3 and SEC Schedule 13D. ITEM 504. USE OF PROCEEDS AmeriNet has provided Lorilei with $100,000 in funding since its acquisition and based on Lorilei's compliance with its obligations under the reorganization agreement and attainment of its economic projections, expects to provide Lorilei with an additional $400,000 in funding. After deducting approximately $12,500 in costs incurred by Lorilei in conjunction with its acquisition by AmeriNet, Lorilei would receive up to $487,500 in net proceeds from AmeriNet which, it is anticipated, would be used to pay existing accounts receivable, personal property and real estate taxes; repair existing equipment and purchase new equipment; employ additional support staff; pay advertising and marketing costs, and provide working capital. The amounts and timing of expenditures is subject to the reasonable discretion of Lorilei's management which will be exercised based on factors such as the amount of net proceeds available to Lorilei, the effects of favorable opportunities and competition, as well as many unforeseeable factors that are beyond Lorilei's control. As currently contemplated, the net proceeds would be allocated among the following general categories: Item Amount Percentage - ---- ------ ---------- Accounts Payable and Taxes $198,854 40.8% Equipment repairs and upgrades $18,000 04.0% New equipment * $12,000 02.5% New personnel salaries $60,646 12.4% Advertising and marketing $100,000 20.5% Additional sales offices $20,000 04.1% Cable channel leasing costs $10,000 02.0% Relocation expenses and travel $6,000 01.2% Insurance $7,000 01.4% Anticipated startup costs for internet activities $5,000 01.0% Working Capital $50,000 10.3% - --------------- ------- ----- Total $487,500 100% - ------ * The total cost of new equipment, especially in conjunction with additional local news programs would be significantly greater, however, a substantial portion of such cost may be financed. The initial $100,000 provided by AmeriNet to Lorilei has been used to pay Lorilei's expenses associated directly with the reorganization (approximately $12,500) and will be used to pay approximately $42,000 of the accounts payable and taxes, with the balance used to pay for equipment repairs and upgrades, new equipment, salaries for additional sales personnel and working capital. ITEM 505. DETERMINATION OF OFFERING PRICE The reorganization price for Lorilei's common shares was established through arms-length negotiations between AmeriNet and Lorilei, taking into account the market value of similar publicly held companies and the effect of the increased resources available to Lorilei following the reorganization, based on approximately eight times Lorilei's earnings for the year ended December 31, 1999, with substantial additional exchange value if Lorilei meets its EBITDA projections for the period ending on June 30, 2003. Page 28 Immediately prior to closing, Mr. and Mrs. Cunningham agreed to place a substantial portion of the AmeriNet shares they were to receive at closing in escrow with their attorney based on concerns expressed by Yankees, AmeriNet's strategic consultant, about the write off of a very large receivable, and a potential $20,000 claim by HGTV (see note (2) to table responding to Regulation SB Item 403, "Security Ownership of Certain Beneficial Owners and Management - Common Stock Owned by Principal Shareholders, Officers and Directors of Lorilei." ITEM 507. SELLING SECURITY SHAREHOLDERS This information is combined with disclosure in response to Item 403. ITEM 508. PLAN OF DISTRIBUTION No securities were offered except to AmeriNet and the two existing shareholders of Lorilei in connection with the Reorganization. Each of the parties has represented and warranted that the securities are being acquired for investment purposes only and not with a view to further distribution, and have agreed that the securities will bear legends restricting their transfer except in compliance with applicable laws. ITEM 509. INTEREST OF NAMED EXPERTS AND COUNSEL No experts or counsel involved in the acquisition of Lorilei were hired on a contingent basis, will receive a direct or indirect interest in Lorilei or was a promoter, underwriter, voting trustee, director, officer or employee of Lorilei or AmeriNet. ITEM 511. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION Lorilei advised AmeriNet that its estimated legal, accounting and filing fees associated with the reorganization were approximately $12,500. ITEM 701. RECENT SALES OF UNREGISTERED SECURITIES; USE OF PROCEEDS FROM REGISTERED SECURITIES Eleven shares of its common stock were sold on May 16, 1998 by Lorilei to John B. LaTorraca, the father of Lorilei founder, officer and director Leigh A. Cunningham, and the father-in-law of Lorilei founder, officer and director Gerald R. Cunningham, for $25,000. The proceeds were used by Lorilei for working capital and the issuance of the shares was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933. All of the shares were legended restricting transfer except in compliance with applicable securities laws. Such shares were purchased by Mr. and Mrs. Cunningham from Mr. LaTorraca on December 31, 1999. ITEM 702. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The right of the shareholders to sue any director for misconduct in conducting the affairs of Lorilei is limited by its Articles of Incorporation which limit Director's liability to the extent allowed by law. Section 607.0850 Florida Statutes, (1999), permits indemnification against expenses actually and reasonably incurred by a director, officer, employee or agent to the extent that such person has been successful in the defense of a matter eligible for indemnification under the statute. Under certain circumstances, expenses may be paid by Lorilei in advance, subject to repayment, unless the defendant ultimately is determined to be ineligible for indemnification. In addition, the statute permits Lorilei to indemnify directors and officers against certain liabilities and to purchase and maintain director and officer liability and reimbursement insurance against liabilities, whether or not Lorilei would have the power of indemnification against such liabilities. Page 29 ITEM 510. DISCLOSURE OF SEC POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES Insofar as indemnification for liabilities arising under the Securities Act of 1933, may be permitted to directors, officers or persons controlling Lorilei pursuant to the foregoing provisions, Lorilei has been informed that in the opinion of the SEC such indemnification is against public policy as expressed in such act and is therefore unenforceable. ITEM 601. EXHIBITS See Item 7(c) of this Report. RESIGNATION OF MICHAEL JORDAN AS PRESIDENT OF THE REGISTRANT, ELECTION OF LAWRENCE R. VAN ETTEN AS THE REGISTRANT'S CHIEF OPERATING OFFICER, INTERIM PRESIDENT AND AS A MEMBER OF THE REGISTRANT'S BOARD OF DIRECTORS Michael Jordan (also known as Michael Harris Jordan), resigned as the Registrant's president at a meeting of the Registrant's board of directors held on Monday, May 22, 2000. At that time the board of directors accepted Mr. Jordan's resignation and elected Lawrence R. Van Etten as the Registrant's chief operating officer, as its interim president and as a member of the Registrant's board of directors. Mr. Jordan is expected to remain as a member of the Registrant's board of directors and in conjunction with such continuing services, will be allowed to retain all of the compensation called for under his employment agreement with the Registrant. Mr. Jordan has not provided the Registrant with a written resignation letter; however, he provided the following quote for use in the press release announcing his resignation and Mr. Van Etten's election: "As AmeriNet completes the acquisition phase of its strategic plan, it now requires the addition of senior level executives with substantial experience in personnel management, business operations, emerging technologies and integration of diverse businesses and personalities into a top notch corporate team. Because of the challenges and opportunities presented by AmeriNet's current subsidiaries and the anticipated acquisitions of Custom Software Systems, Inc., of Houston, Texas, and iDVDBox.com, Inc., of Boca Raton, Florida, AmeriNet has determined that the functions heretofore performed by its president should be allocated to: * A chief executive officer who will provide long term strategic leadership and access to required business, political and investment banking relationships; and * A separate chief operating officer with a substantial background in personnel management and operation of companies in the computer, software and Internet industries. While AmeriNet anticipated that such leadership would be generated from the executive officers of its subsidiaries, it has been presented with the opportunity to recruit an individual who ideally meets its operational requirements. Mr. Van Etten has been working on AmeriNet projects since April and I am fully confident that he will perform extraordinarily in his new, formalized role." Yankees had previously recommended that Mr. Van Etten be elected as the Registrant's chief operating officer, executive vice president and as a member of its board of directors based on Yankees' belief that integration and supervision of the Registrant's subsidiaries required someone with substantial experience in managing personnel and operating companies. At such time as the Registrant elects a permanent president and chief executive officer, Mr. Van Etten will assume the role of the Registrant's executive vice president. Mr. Van Etten will assist Yankees to identify and recruit candidates for the position of the Registrant's president and chief executive officer, which will be presented to the Registrant's board of directors for consideration. Mr. Van Etten will sign an employment agreement with the Registrant on terms materially similar to those in Mr. Jordan's agreement with the Registrant, except that his outside activities will be limited to those involving his pre- existing association as an independent contract consultant to Yankees (to which he owes fiduciary duties). A copy of Mr. Van Etten's agreement with the Registrant is filed as an exhibit to this report (see "Item 7(c), Exhibits") Page 30 As compensation for Mr. Van Etten's services to the Registrant, he will be permitted to immediately purchase 50,000 unregistered shares of the Registrant's common stock, $0.01 par value per share, at a price of $0.60 per share; and, he will be granted an option pursuant to Section 422 et. seq. of the Internal Revenue Code of 1986, as amended (the "Code") to purchase up to 100,000 shares of the Registrant's common stock during the 36 month period commencing at the end of the 365th day following commencement of the initial term of his agreement, at an exercise price of $0.56 provided that he remains in the employ of the Registrant for a period of not less than 365 consecutive days; he has not been discharged by the Registrant for cause; and, he fully complies with the provisions of his agreement, including, without limitation, the confidentiality and non-competition sections thereof. In addition , in the event that Mr. Van Etten arranges or provides funding for the Registrant on terms more beneficial than those reflected in the Registrant's current principal financing agreements, copies of which are included among the Registrant's records available through the SEC's EDGAR web site, Mr. Van Etten will be entitled, at its election, to either a fee equal to 5% of such savings, on a continuing basis; or, if equity funding is provided through Mr. Van Etten or any of his affiliates, a discount of 5% from the bid price for the subject equity securities, if they are issuable as free trading securities, or, a discount of 25% from the bid price for the subject equity securities, if they are issuable as restricted securities (as the term restricted is used for purposes of SEC Rule 144); and, if equity funding is arranged for the Registrant by Mr. Van Etten and the Registrant is not obligated to pay any other source compensation in conjunction therewith, other than the normal commissions charged by broker dealers in securities in compliance with the compensation guidelines of the NASD, Mr. Van Etten will be entitled to a bonus in a sum equal to 5% of the net proceeds of such funding. In the event that Mr. Van Etten generates business for the Registrant, then, on any sales resulting therefrom, Mr. Van Etten will be entitled to a commission equal to 5% of the net income derived by the Registrant therefrom, on a continuing basis. Mr. Van Etten will be entitled to any benefits generally made available to all other employees (rather than to a specified employee or group of employees) and will be entitled to a $500 per month, non-accountable, non-refundable expense allowance. He will also be entitled to indemnification, from all liabilities, suits, judgments, fines, penalties or disabilities, including expenses associated directly, therewith (e.g. legal fees, court costs, investigative costs, witness fees, etc.) resulting from any reasonable actions taken by him in good faith on behalf of the Registrant, its affiliates or for other persons or entities at the request of the board of directors of the Registrant, to the fullest extent legally permitted, with all required expenditures made in a manner making it unnecessary for Mr. Van Etten to incur any out of pocket expenses; provided, however, that Mr. Van Etten permits the Registrant to select and supervise all personnel involved in such defense and that Mr. Van Etten waives any conflicts of interest that such personnel may have as a result of also representing the Registrant, its stockholders or other personnel and agrees to hold them harmless from any matters involving such representation, except such as involve fraud or bad faith. Mr. Van Etten adds strong organizational skills to the Registrant. He has a thirty-year background with IBM (NYSE: IBM) where he held several senior management positions including Corporate Control Operations Manager, Corporate Scheduling Manager and Director of Logistics Special Processes. Since leaving IBM, Mr. Van Etten has served as vice president with several companies in the United States and Canada and owned and managed his own consulting company. Much of his recent work experience has dealt with business management systems, personal computer application software and the Internet. His focus will be on due diligence and on coordination and supervision of the Registrant's subsidiaries by assisting them to streamline their operations and enhance their bottom-line profitability. AGREEMENT TO CANCEL XCEL WARRANTS Due to the continuously changing disclosure required by the Registrant's acquisition program, it has not been able to prepare and disseminate the current information required for it to file a registration statement on Commission Form S-3 registering the shares of the Registrant's common stock underlying the warrant held by Xcel Associates, Inc., a New Jersey corporation ("Xcel"). The registration statement was originally to have been filed prior to December 31, 1999 and the Registrant intended to use the $750,000 in proceeds from such exercise to meet funding commitments to its subsidiaries. Due to the delay, the Registrant has made alternative funding arrangements through Yankees (see discussion of Yankees' loan agreement disclosed in the quarterly report on Form 10-QSB filed by the Registrant with the Commission for the quarter ended March 31, 2000). Page 31 Xcel has requested that the Registrant issue it 200,000 unregistered shares of its common stock in reliance on Section 4(6) of the Securities Act, in lieu of the warrant. While the Registrant believes that such consideration is more than it should have to provide in exchange for cancellation of the Xcel Warrant, it recognizes that Xcel has been of great help to AmeriNet in assisting its former principal stockholders to liquidate shares of their AmeriNet common stock in cases where proceeds from such sales have been re-invested in AmeriNet. Consequently, in the interests of continuing a beneficial relationship and avoiding the expenses in capital and time that could result from non resolution of the Xcel request on amicable terms, the Registrant has agreed to Xcel's request, and has entered into a superseder and settlement agreement with Xcel, a copy of which is filed as an exhibit to this report (see "Item 7(c), Exhibits") ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. List below the financial statements, pro forma financial information and exhibits, if any, filed as a part of this report. As a condition to Lorilei's acquisition by AmeriNet, it has agreed to an audit of its financial statements which will be performed by James Moore & Company if an independent audit is required under applicable SEC rules, or by AmeriNet's chief financial officer if it is not. If SEC rules require an independent audit, it is to be prepared and filed with the SEC on or before the earlier of the 75th day following Lorilei's acquisition by AmeriNet or the 60th day following the filing of a report of current event on Commission Form 8-K with the SEC by AmeriNet, disclosing its acquisition of Lorilei. See Item 7(a) "Financial Statements of Businesses Acquired" for a discussion of the availability of Lorilei financial statements in this report. (a) Financial statements of businesses acquired. As permitted by subsection (a)(4) of this Item, the Registrant will file the financial statements required by this item (if any) by amendment not later than 60 days after the date that this report on Form 8-K is being filed. The Registrant is including a minimal unaudited balance sheet and operating statement provided by Lorilei as an exhibit to the reorganization agreement as a component of such agreement, filed as an exhibit to this current report. (b) Pro forma financial information. As permitted by subsection (a)(4) of this Item, the Registrant will file the pro forma financial information required by this item (if any) by amendment not later than 60 days after the date that this report on Form 8-K is being filed. (c) Exhibits. Schedules 2.10, 2.12, 2.14, 2.15, 2.21, and 5.7 to the Reorganization Agrement have been filed with the Commission in paper rather than electronic format because Bruce Brashear, Esquire, legal counsel to Lorilei, who was to have provided them in Edgar format to the Registrant on or before May 21,2000, had not done so by the time this report was required to be filed. The Registrant will file them electronically as soon as they are made available by Mr. Brashear. Designation Page of Exhibit Number as Set Forth or Source of in Item 601 of Incorporation Regulation S-B By Reference Description (2) Plan of acquisition, reorganization, arrangement liquidation or succession: .18 35 Reorganization Agreement dated May 11, 2000 between the Registrant and Lorilei. (3) (i) Certificate or Articles of Incorporation: 3.5 ___ Current articles of incorporation for Lorilei, as amended to date. (ii) Bylaws: 3.6 ___ Current bylaws for Lorilei, as amended to date. Page 32 Designation Page of Exhibit Number as Set Forth or Source of in Item 601 of Incorporation Regulation S-B By Reference Description (5) Opinion re: legality 5.1 * Opinion of Brashear & Associates, P.L. dated May 11, 2000. 5.2 * Opinion of George Franjola, AmeriNet General Counsel, dated May 11, 2000. (10) Material Contracts (i) Material agreements pertaining to the Registrant 10.50 ** Proposed Employment agreement between the Registrant and Lawrence R. Van Etten. 10.51 ** Proposed Superseder & settlement agreement between the Registrant and Xcel. (ii) Material agreements to which Lorilei is a party or by which it is bound: 10.lc * Mortgage and promissory note dated September 18, 1996 to Small Business Loan Source. 10.lc * Employment Agreement with Gerald R. Cunningham dated May 11, 2000. 10.lc * Employment Agreement with Leigh A. Cunningham dated May 11, 2000. 10.lc * Affiliate Agreement with Gerald and Leigh Cunningham (99) Additional Exhibits: 99.52 ** Resignation letter from Michael Jordan - ------- * Included as exhibits to or in the schedules to the Reorganization Agreement dated May 11, 2000 between the Registrant and Lorilei filed herewith as exhibit 2.18. ** To be provided by amendment. Page 33 Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. AmeriNet Group.com, Inc Dated: May 25, 2000 /s/ Lawrence R. Van Etten --------------------------------- Lawrence R. Van Etten President Page 34 EX-2.18 2 REORGANIZATION AGREEMENT Reorganization Agreement By & Among AmeriNet Group.com, Inc., a Delaware corporation, and Lorilei Communications, Inc., a Florida corporation Table of Contents Article I: Plan of Reorganization 1.1 Definitions 1.2 Reorganization 1.3 Effect of the Reorganization 1.4 Articles of Incorporation & Bylaws 1.5 Directors and Officers 1.6 Maximum Shares to Be Issued & Effect on Capital Stock 1.7 Exchange of Certificates 1.8 No Further Ownership Rights in Lorilei's Securities 1.9 Lost, Stolen or Destroyed Certificates 1.10 Tax Consequences and Accounting Treatment 1.11 Taking of Necessary Action & Further Action Article II: Lorilei's Representations and Warranties 2.1 Organization of Lorilei 2.2 Lorilei's Capital Structure 2.3 Subsidiaries 2.4 Authority 2.5 Lorilei's Financial Statements 2.6 No Undisclosed Liabilities 2.7 No Changes 2.8 Tax and Other Returns and Reports 2.9 Restrictions on Business Activities 2.10 Title of Properties, Absence of Liens and Encumbrances & Condition of Equipment 2.11 Intellectual Property 2.12 Agreements, Contracts and Commitments 2.13 Interested Party Transactions 2.14 Governmental Authorization 2.15 Litigation 2.16 Accounts Receivable 2.17 Minute Books 2.18 Environmental and OSHA 2.19 Brokers' and Finders' Fees 2.20 Labor Matters 2.21 Insurance 2.22 Compliance with Laws 2.23 Complete Copies of Materials 2.24 Binding Agreements & No Default 2.25 Regulation SB Disclosure Document 2.26 FIRPTA 2.27 Employee Benefit Plans 2.28 Distribution Agreements 2.29 Disclosure to Lorilei's Stockholders 2.30 Representations Complete Article III: AmeriNet's Representations and Warranties 3.1 Organization, Standing and Power 3.2 Capital Structure 3.3 Authority 3.4 Exchange Act Reports & AmeriNet's Financial Statements 3.5 Broker's and Finders' Fees 3.6 Ownership of Lorilei's Common Stock 3.7 Litigation 3.8 Limited Activities 3.9 No Undisclosed Liabilities 3.10 No Changes 3.11 Tax and Other Returns and Reports 3.12 Environmental and OSHA 3.13 Representations Complete Article IV: Conduct Prior to the Closing 4.1 Conduct of Business of Lorilei 4.2 No Solicitation 4.3 Conduct of Business of AmeriNet Article V: Additional Agreements 5.1 Report on Form 8-K 5.2 Consent of Lorilei's Stockholders 5.3 Access to Information 5.4 Confidentiality 5.5 Expenses Page 35 5.6 Public Disclosure 5.7 Consents 5.8 Affiliate Agreements 5.9 Legal Requirements 5.10 Blue Sky Laws 5.11 Best Efforts, Additional Documents and Further Assurances 5.12 Employment Agreements 5.13 Investment by AmeriNet in Lorilei 5.14 Board of Directors 5.15 Additional Covenants by Lorilei Article VI: Conditions to The Reorganization 6.1 Conditions to Obligations of Each Party to Effect the Reorganization 6.2 Additional Conditions to Obligations of Lorilei 6.3 Additional Conditions to the Obligations of AmeriNet Article VII: Survival of Condition Subsequent, Representations and Warranties, Covenants and Undisclosed Liabilities Escrow 7.1 Survival of Condition Subsequent, Representations and Warranties & Covenants 7.2 Escrow Arrangements Article VIII: Termination, Amendment and Waiver 8.1 Termination 8.2 Effect of Termination 8.3 Amendment 8.4 Extension & Waiver Article IX: General Provisions 9.1 Interpretation 9.2 Notice 9.3 Merger of All Prior Agreements Herein 9.4 Survival 9.5 Severability 9.6 Governing Law 9.7 Indemnification 9.8 Dispute Resolution 9.9 Benefit of Agreement 9.10 Further Assurances 9.11 Counterparts 9.12 License Schedules Schedule 1.4 Lorilei's Constituent Documents Schedule 1.7(C) Lorilei's Final Stockholder Data Schedule 2 Exceptions to Lorilei's Representations & Warranties Schedule 2.5(A) Lorilei's Financial Statements Schedule 2.10(A)(1) Real Property Schedule 2.10(C) Equipment Schedule 2.11 Intellectual Property Schedule 2.12 Contracts, Agreements & Commitments Schedule 2.14 Governmental Authorization Schedule 2.15 Litigation Schedule 2.20 List of Employees Schedule 2.21 Insurance Schedule 2.27 Employee Benefit Plans Schedule 2.28 Distribution Agreements Schedule 4.1 Exceptions to Prohibited Pre- Closing Actions Schedule 5.7 Consents Schedule 5.8 Affiliates Schedule 5.12 List and Summary of Employment Agreements Schedule 5.13-1 Detailed Three Year Projections Schedule 5.13-2 Use of Proceeds Exhibits Exhibit 2.25 Regulation SB Disclosure Document Exhibit 3.4 AmeriNet Draft Annual Report Exhibit 5.8 Affiliate Agreements Exhibit 5.12 Copies of Contracts, Agreements & Commitments Exhibit 6.2(D) AmeriNet Legal Opinion Exhibit 6.3(E) Lorilei Legal Opinion Exhibit 6.3(K) Confidentiality Agreements Exhibit 7.2 Escrow Allocation Information Page 36 Reorganization Agreement This Reorganization Agreement (the "Agreement") is made and entered into by and among AmeriNet Group.com, Inc., a publicly held Delaware corporation with a class of securities registered under Section 12(g) of the Securities Exchange Act of 1934, as amended ("AmeriNet" and the "Exchange Act," respectively); Lorilei Communications, Inc., a Florida corporation ("Lorilei"); Gerald R. Cunningham, a Florida resident ("Mr. Cunningham"); and, Leigh A. Cunningham, a Florida resident and Mr. Cunningham's spouse ("Mrs. Cunningham;" Mrs. Cunningham being hereinafter collectively referred to with Mr. Cunningham as either "Mr. & Mrs. Cunningham or as the "Former Lorilei Stockholders" and generically as a "Former Lorilei Stockholder");" AmeriNet, Lorilei and the Former Lorilei Stockholders being sometimes hereinafter collectively referred to as the "Parties" or generically as a "Party"). Preamble: WHEREAS, the boards of directors of AmeriNet and Lorilei believe it is in the best interests of each corporation and their respective stockholders that Lorilei become a wholly owned subsidiary of AmeriNet and, in furtherance thereof, have approved the Reorganization; and WHEREAS, pursuant to the terms of the Reorganization, as hereinafter set forth, among other things, all of the outstanding and reserved securities of Lorilei (the "Lorilei's Securities") will be exchanged for between 90,839 and 1,145,037 shares of AmeriNet's common stock, $0.01 par value ("AmeriNet's common stock"), depending on Lorilei's EBITDA during the fiscal period starting on July 1, 2000 and ending on June 30, 2003 and certain contingencies involving disputed Lorilei accounts payable, as hereinafter described; and WHEREAS, the Parties intend that AmeriNet invest up to $500,000 within 180 days after completion of the Reorganization and the filing of required reports with the United States Securities and Exchange Commission (the "Commission"); and WHEREAS, Lorilei, AmeriNet and the Former Lorilei Stockholders desire to make certain representations and warranties and other agreements in connection with the Reorganization and their subsequent operating and business relationships; and WHEREAS, the Parties intend, by executing this Agreement, to adopt a plan of reorganization within the meaning of Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended (the "Code"): NOW, THEREFORE, in consideration of the covenants, promises and representations set forth herein, and for other good and valuable consideration, the Parties, intending to be legally bound, hereby agree as follows: Witnesseth: Article I Plan of Reorganization 1.1 Definitions The following terms, whether or not initially capitalized, will have the meanings set forth below: Page 37 (A) 1999 10-KSB: AmeriNet's report on Commission Form 10-KSB for the fiscal year ended June 30, 1999. (B) Accredited Investor: A person or entity that meets the asset or income requirements for treatment as an accredited investor specified in Rule 501 of Commission Regulation D promulgated under the Securities Act (C) Affiliate: An entity or person that controls, is controlled by or is under common control with another person. (D) AmeriNet Financial Statements: Financial statements, including all related schedules and the notes thereto, of AmeriNet included in the report on Commission Form 10-KSB for the period ended June 30, 1999, as amended; the reports on Commission Form 10-QSB filed subsequent to June 30, 1999 and the financial statements for subsidiaries subsequently acquired by AmeriNet included in current reports on Commission Form 8-K filed since the dates of the Subsequent Quarterly Reports (the "Subsequent Current Reports"); all such financial statements being hereinafter collectively and generically referred to as the "AmeriNet Financial Statements," (E) AmeriNet Schedules: The schedules referenced by the Section designations of this Agreement as to which they apply, annexed at the direction of AmeriNet to this Agreement and constituting a material component of this Agreement. (F) (1) Brashear Escrow: The special escrow arrangement established using the Brashear Escrow Shares. (2) Brashear Escrow Agent: Mr. Brashear and any successors in interest as the escrow agent for the Brashear Escrow Shares. (3) Brashear Escrow Shares: 376,176 of the initial 572,519 shares of AmeriNet's common stock issuable to Lorilei's Stockholders at the Closing Bruce Brashear, Esquire, as escrow agent for the Parties pending determination of certain contingencies involving Lorilei following the Closing, as provided for in this Agreement. (4) Mr. Brashear: Bruce Brashear, Esquire, a Florida attorney who serves as legal counsel to the Lorilei Declarants but who will be acting as escrow agent for the Parties with reference to the Brashear Escrow. (G) Capital Stock: The generic term used for equity securities, whether common, preferred or otherwise. (H) Closing: The event at which the exchange of all of the Lorilei securities will be exchanged for the initial 572,519 shares of AmeriNet's common stock. (I) Closing Date: The date that the Closing takes place. (J) Commission: The United States Securities and Exchange Commission. Page 38 (K) Code: The Internal Revenue Code of 1986, as amended. (L) Commercial Software Rights: Packaged commercially available software programs generally available to the public through retail dealers in computer software which have been licensed to end-user licenses and which are used in the licensee's business but are in no way a component of or incorporated in any of its products and related trademarks, technology and know-how. (M) EBITDA: Earnings before interest, taxes, depreciation and amortization, determined in accordance with GAAP. (N) (1) Escrow Agents: The persons or entities acting as escrow agents pursuant to the terms of this Agreement, including Yankees and Mr. Brashear. (2) Escrow Funds: The accounts maintained by the Escrow Agents for the Escrow Shares and related distributions. (O) (1) Escrow Shares: The collective term for all shares of AmeriNet common stock held by the Escrow Agents in the Escrow Funds. (2) Escrow Terms: The periods of time during which the Escrow Agents hold the Escrow Shares. (P) Exchange Act: The Securities Exchange Act of 1934, as amended. (Q) Exchange Act Reports: All reports filed by AmeriNet with the Commission pursuant to the Exchange Act, including all exhibits filed therewith, and the Draft Annual Report included as Exhibit 3.4. (R) Exchange Agent: The person or entity responsible following the Closing, for issuing and delivering the initial 572,519 shares of AmeriNet's common stock to Lorilei's Stockholders and the Escrow Agents. (S) Exchange Ratio: The quotient obtained by dividing the initial 572,519 shares of AmeriNet's common stock by the 111 shares of Lorilei's common stock. (T) GAAP: Generally accepted accounting principles, consistently applied. (U) Initial Funding Installment: The sum of $100,000 payable to the order of Lorilei in satisfaction of AmeriNet's commitment under Section 5.13(A) (i) of this Agreement but to be expended solely as provided for in Schedule 5.13-2. (V) IRS: The United States Internal Revenue Service. (W) Knowledge: When used to qualify a representation or warranty, the word "knowledge" or any derivations or variations thereof, whether in the form of a word or phrase, will mean knowledge after reasonable inquiry by a senior executive officer of the legal entity on whose behalf the assertion is made and will include information that such legal entity should have had in the exercise of reasonable diligence. Page 39 (X) Lorilei Declarants: Lorilei, Mr. Cunningham and Mrs. Cunningham, acting severally. (Y) Lorilei's Financial Statements: Lorilei's unaudited financial statements (balance sheets, income statements and related schedules and footnotes) as of and for the fiscal year ending December 31, 1999, the calendar quarter ended March 31, 2000 and Lorilei's balance sheet as of the day preceding the date of this Agreement, all prepared in conformity with GAAP. (Z) Lorilei Schedules: The schedules referenced by the Section designations of this Agreement as to which they apply, annexed at the direction of Lorilei to this Agreement and constituting a material component of this Agreement. (AA) Material: When used to qualify a representation or warranty, the word "material" or any derivations or variations thereof, whether in the form of a word or phrase, will mean a variance that could have negatively affected a decision by a reasonably prudent person to engage in the transactions contemplated by this Agreement, and will be measured both on the occasion in which such term is referenced as well as on an aggregate basis with other similar matters. (BB) NASD: The National Association of Securities Dealers, Inc., a Delaware corporation and self regulatory organization registered with the Commission. (CC) OTC Bulletin Board: The over the counter electronic securities market operated by the NASD. (DD) Performance Shares: Up to 572,518 shares of AmeriNet's common stock to be issued to Lorilei's Stockholders in the future, based on the performance of Lorilei during the period starting on July 1, 2000 and ending on June 30, 2003. (EE) Projections: The detailed projections of Lorilei's income and expenses during the fiscal period starting on July 1, 2000 and ending on June 30, 2003 included as Schedule 5.13-1 to this Agreement. (FF) Securities Act: The Securities Act of 1933, as amended. (GG) Subsequent Current Reports: AmeriNet's reports on Commission Form 8-K filed after the Subsequent Quarterly Reports but prior to the date of this Agreement. (HH) Subsequent Exchange Act Reports: AmeriNet's reports filed with the Commission pursuant to requirements of the Exchange Act prior to the date of Closing on this Agreement. (II) Subsequent Quarterly Reports: AmeriNet's reports on Commission Form 10-QSB for the quarterly periods following the 1999 10-KSB filed prior to the date of this Agreement. (JJ) Substantial Compliance: Compliance which the Party for whose benefit or at whose request an act is performed, or for whose benefit or at whose request an act is refrained from could under the circumstances be reasonably expected to accept as full compliance. Page 40 (KK) Tax: For the purposes of this Agreement, a "Tax" or, collectively, "Taxes," means any and all federal, state, local and foreign taxes, assessments and other governmental charges, duties, impositions and liabilities, including taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and value added, ad valorem, transfer, franchise, withholding, payroll, recapture, employment, excise and property taxes, together with all interest, penalties and additions imposed with respect to such amounts and any obligations under any agreements or arrangements with any other person with respect to such amounts. (LL) Ten-Day Average: Price: The average closing transaction price of a share of AmeriNet's publicly traded common stock for the ten most recent days that AmeriNet's common stock has traded ending on the trading day prior to the date in question, as reported on the OTC Bulletin Board. (MM) Undisclosed Liabilities Escrow Number: The 114,504 shares of AmeriNet's common stock held in escrow as a means of generating funds that may be required to pay for undisclosed liabilities of Lorilei or to rectify other violations of Lorilei's obligations under this Agreement. (NN) Undisclosed Liabilities Escrow Agent: The Yankee Companies, Inc., a Florida corporation, or such other person designated for such role by AmeriNet (also sometimes referred to in roles other than as an escrow agent, as "Yankees"). (OO) Additional defined terms are specified in certain sections and subsections below and are characterized by the use of initial letter capitalization. 1.2 Reorganization (A) The Reorganization. (1) At the Closing on this Agreement all of the Lorilei's Stockholders will exchange all of their Lorilei securities, being an aggregate of 111 shares of common stock, $0.01 par value (the remaining 1,889 shares being unreserved treasury or authorized but heretofore unissued shares of common stock), for up to 1,145,037 shares of AmeriNet's common stock, as called for by this Agreement. (2) The initial 572,519 shares of AmeriNet's common stock will be issued by the Exchange Agent following the Closing and will be distributed as follows: (a) 376,176 shares will be issued to Bruce Brashear, Esquire (who serves as legal counsel to the Lorilei Declarants but who will be acting as escrow agent for the Parties as to this matter), to be released as follows: 1. As soon after June 30, 2001, as Lorilei's EBITDA can be definitively determined based on the annual audit of AmeriNet, 286,260 of the shares will be transferred to: A. Mr. & Mrs. Cunningham, as tenants by the entirety, if Lorilei's EBITDA for the fiscal year ended June 30, 2001 is at least $250,000; or Page 41 B. To AmeriNet if Lorilei's EBITDA for the fiscal year ended June 30, 2001 is less than $250,000. 2. At such time as a final, legally binding determination is made as to the amount, if any, payable to HGTV based on the liability currently being challenged by Lorilei, then a pro rata portion of the remaining 80,916 shares being held in escrow by Mr. Brashear shall be transferred to Mr. & Mrs. Cunningham, as tenants by the entirety, representing the portion of such liability that was not payable (e.g., if only 50% of the liability was payable, then 40,458 shares would be transferred to Mr. & Mrs. Cunningham), with the balance, if any, transferred to AmeriNet. (b) 114,504 of the shares will be issued to The Yankee Companies, Inc. (a Florida corporation that serves as AmeriNet's strategic consultant and which, unless replaced by AmeriNet, is expected to serve as the Undisclosed Liabilities Escrow Agent), to be used from time to time to discharge undisclosed liabilities of Lorilei or other violations of its obligations under this Agreement, as described in Article Seven, with the balance, if any, transferred to Mr. & Mrs. Cunningham, as tenants by the entirety, at such time as AmeriNet's audited financial statements for the year ended June 30, 2001 are filed with the Commission. (c) 90,839 of the shares will be issued to Mr. & Mrs. Cunningham, as tenants by the entirety (Lorilei's Stockholders, in proportion to their holdings of Lorilei common stock immediately prior to the Closing). (3) (a) In addition to the initial 572,519 shares of AmeriNet's common stock, 572,518 shares of AmeriNet's common stock, $0.01 par value (the "Performance Shares") will be reserved by the Exchange Agent following the Closing, to be issued to the Former Lorilei Stockholders, on the following terms and subject to the following requirements: (i) If Lorilei attains EBITDA of at least $500,000 during the period starting on July 1, 2000 and ending on June 30, 2001, then Lorilei's Stockholders will be issued an aggregate of 114,504 of the Performance Shares; (ii) If Lorilei attains EBITDA of at least $1,400,000 during the period starting on July 1, 2001 and ending on June 30, 2002, then Lorilei's Stockholders will be issued an aggregate of 305,343 of the Performance Shares (including the 114,504 that either were or could have been earned as of June 30, 2001); (iii) If Lorilei attains EBITDA of at least $2,900,000 during the period starting on July 1, 2002 and ending on June 30, 2003, then Lorilei's Stockholders will be issued all 572,518 of the Performance Shares (including the 305,343 that either were or could have been earned as of June 30, 2002); however, all rights to any of the Performance Shares not earned as of such date will thereupon expire. (b) The Performance Shares will be allocated among the Lorilei's Stockholder's, pro rata, based on their ownership of Lorilei's common stock immediately preceding the Closing, will be reserved for future issuance immediately following the Closing and will be issued within 30 days after completion and filing of AmeriNet's audit for the subject fiscal year confirming the calculations called for, with the Commission. Page 42 (B) As promptly as practicable after the satisfaction or waiver of the conditions set forth in Article VI, the Parties will cause the Reorganization to be consummated by effecting the exchange all of Lorilei's common stock for the initial 572,519 shares of AmeriNet's common stock. (C) The Closing Date and time of the Reorganization will be the date and time on which the Closing of this Reorganization Agreement is consummated. (D) (1) At the Closing the Parties will exchange all closing documentation, certificates, resolutions, exhibits, schedules and opinions called for by this Agreement, and (a) All stockholders of Lorilei will have repaid Lorilei all debts theretofore owed by them to Lorilei (either in the form of loans to stockholders or advances to employees, consultants or independent contractors); (b) All of Lorilei's outstanding securities (being solely 111 shares of its common stock) will be exchanged with AmeriNet for 572,519 shares of AmeriNet's common stock; provided that delivery of the certificates for the initial 572,519 shares of AmeriNet's common stock will be made directly to Lorilei's Stockholders and the Escrow Agents by AmeriNet's stock transfer agent after the Closing; and (c) AmeriNet will arrange to wire the Initial Funding Installment to Lorilei's account at AmSouth Bank in Ocala, Florida; provided that, if Closing takes place after normal banking hours, the wire will be arranged at the opening of business on the following business day. 1.3 Effect of the Reorganization. At the Closing, the effect of the Reorganization will be that Lorilei's will become a wholly owned subsidiary of AmeriNet and that the stockholders of Lorilei immediately prior to the Closing will become stockholders of AmeriNet at the Closing, with no further rights, title or interest in Lorilei, other than indirectly as stockholders of AmeriNet. 1.4 Articles of Incorporation & Bylaws. Unless otherwise determined by AmeriNet prior to the Closing Date, the articles of incorporation and bylaws of Lorilei will be amended to conform with those included in Schedule 1.4. 1.5 Directors and Officers. Subject to the requirements of Section 5.14(A), the directors of Lorilei will continue in office following the Closing until their respective successors are duly elected or appointed and qualified, in accordance with the requirements of this Agreement. 1.6 Maximum Shares to Be Issued & Effect on Capital Stock. (A) The number of shares of AmeriNet's common stock to be issued in exchange for all of the Lorilei Capital Stock (the only Lorilei securities to be outstanding or reserved at the Closing) will be up to 1,145,037, 572,519 of which will be issued by the Exchange Agent following the Closing, and up to 572,518 additional shares may be issued subject to Lorilei's EBITDA during the period starting on July 1, 2000 and ending on June 30, 2003 (as hereinbefore established). Page 43 (B) Adjustments to Exchange Ratio. The Exchange Ratio (as provided in the foregoing paragraph) will be adjusted to reflect fully the effect of any stock split, reverse split, stock dividend (including any dividend or distribution of securities convertible into AmeriNet's common stock or Lorilei's common stock), reorganization, recapitalization or other like change with respect to AmeriNet's common stock or Lorilei's common stock occurring after the date hereof and prior to the Closing. (C) Fractional Shares. No fraction of a share of AmeriNet's common stock will be issued, but in lieu thereof each holder of shares of Lorilei's common stock who will otherwise be entitled to a fraction of a share of AmeriNet's common stock (after aggregating all fractional shares of AmeriNet's common stock to be received by such holder) will be entitled to receive from AmeriNet a whole share of AmeriNet's common stock. 1.7 Exchange of Certificates. (A) Exchange Agent. Unless modified by AmeriNet prior to the Closing Date, Liberty Transfer Co., Inc., of Huntington, New York, AmeriNet's current transfer agent, will serve as the Exchange Agent. (B) AmeriNet to Provide Common Stock. Promptly after the Closing, AmeriNet will make available to the Exchange Agent for exchange in accordance with this Article I the shares of AmeriNet's common stock issuable pursuant to Section 1.6 in exchange for all of the outstanding shares of Lorilei's common stock. (C) Exchange Procedures. (1) All certificates for shares of Lorilei's outstanding common stock will be tendered to AmeriNet at the Closing, with medallion signature guarantees or otherwise in proper form for immediate transfer to the order of AmeriNet, whereupon AmeriNet will issue instructions to the Exchange Agent to issue shares of AmeriNet's common stock, in the quantities and names set forth in Schedule 1.7(C), subject to Brashear Escrow and the Undisclosed Liabilities Escrow requirements of Article VII. (2) (a) As soon as practicable after the Closing, and subject to and in accordance with the provisions of Article VII hereof, AmeriNet will cause to be distributed to the Undisclosed Liabilities Escrow Agent a certificate or certificates representing that number of shares of AmeriNet's common stock equal to the Undisclosed Liabilities Escrow Number which will be registered in the name of the Undisclosed Liabilities Escrow Agent. (b) The shares registered in the name of the Undisclosed Liabilities Escrow Agent will be beneficially owned by the holders on whose behalf such shares were deposited in the Undisclosed Liabilities Escrow Fund but will be available to compensate AmeriNet for certain damages as provided in Article VII. (3) (a) As soon as practicable after the Closing, and subject to and in accordance with the provisions of Section 1.2(A)(2)(a) hereof, AmeriNet will cause to be distributed to the Brashear Escrow Agent a certificate or certificates representing that number of shares of AmeriNet's common stock equal to the Brashear Escrow Number which will be registered in the name of the Brashear Escrow Agent. Page 44 (b) The shares registered in the name of the Brashear Escrow Agent will be beneficially owned by the holders on whose behalf such shares were deposited in the Brashear Escrow but will be available for the purposes described in Section 1.2(A)(2)(a). (D) Transfers of Ownership. If any certificate for shares of AmeriNet's common stock is to be issued in a name other than that in which the certificate surrendered in exchange therefor is registered, it will be a condition of the issuance thereof that the certificate so surrendered will be properly endorsed and otherwise in proper form for transfer and that the person requesting such exchange will have paid to AmeriNet or any agent designated by it any transfer or other Taxes required by reason of the issuance of a certificate for shares of AmeriNet's common stock in any name other than that of the registered holder of the certificate surrendered, or established to the satisfaction of AmeriNet, or any agent designated by it, that such Tax has been paid or is not payable. (E) No Liability. Notwithstanding anything to the contrary in this Section 1.7, neither the Escrow Agents, the Exchange Agent, AmeriNet, Lorilei or any other person will be liable to a holder of shares of AmeriNet's common stock or Lorilei's Capital Stock for any amount properly paid to a public official pursuant to any applicable abandoned property, escheat or similar law. 1.8 No Further Ownership Rights in Lorilei's Securities. (A) All shares of AmeriNet's common stock issued upon the surrender for exchange of shares of Lorilei's common stock in accordance with the terms hereof will be deemed to have been issued in full satisfaction of all rights pertaining to such shares of Lorilei's common stock, and there will be no further registration of transfers on the records of Lorilei, of shares of Lorilei's Capital Stock which were outstanding immediately prior to the Closing. (B) If, after the Closing, Certificates are presented to Lorilei, for any reason, they will be canceled and exchanged as provided in this Article I. 1.9 Lost, Stolen or Destroyed Certificates. In the event any certificates evidencing shares of Lorilei's common stock will have been lost, stolen or destroyed, Lorilei's transfer agent or share registrar will, prior to the Closing, have issued in exchange for such lost, stolen or destroyed certificates, upon the making of an affidavit of that fact by the holder thereof, such shares of its common stock as may have been required pursuant to Section 1.6; provided, however, that AmeriNet may, in its discretion and as a condition precedent to the issuance of the shares of AmeriNet's common stock to be exchanged therefor, require the owner of such lost, stolen or destroyed certificates to deliver a bond in such sum as it may reasonably direct as indemnity against any claim that may be made against AmeriNet or the Exchange Agent with respect to the certificates alleged to have been lost, stolen or destroyed. 1.10 Tax Consequences and Accounting Treatment. (A) It is intended by the Parties that the Reorganization will constitute a reorganization within the meaning of Section 368(a)(1)(B) of the Code and the Parties agree that if modification of the terms of this Agreement in a non-material manner to attain such qualification is necessary, they will negotiate in good faith to make such required modifications. Page 45 (B) The Parties understand that because of the inclusion of contingencies in determining the quantity of AmeriNet's common stock being exchanged for Lorilei's common stock, the reorganization may not qualify for accounting as a pooling of interests but rather, may be accounted for under the purchase method. 1.11 Taking of Necessary Action: Further Action. If, at any time after the Closing, any further action is necessary or desirable to carry out the purposes of this Agreement including, without limitation the vesting in AmeriNet of full right, title and possession to all of Lorilei's Capital Stock or compliance with the requirements of Code Section 368(a)(1)(B); the officers and directors of AmeriNet and Lorilei are fully authorized in the name of their respective corporations or otherwise to take, and will take, all lawful and necessary action. Article II Representations and Warranties of Lorilei The Lorilei Declarants hereby represent and warrant to AmeriNet, as a material inducement to its entry into this Agreement, subject only to the exceptions specifically disclosed in Schedule 2, as follows: 2.1 Organization of Lorilei. (A) Lorilei is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida. (B) Lorilei has the corporate power to own its property and to carry on its business as now being conducted and as proposed to be conducted by Lorilei. (C) Lorilei is duly qualified to do business and in good standing as a foreign corporation in each jurisdiction in which the failure to be so qualified would have a material adverse effect on the business, assets (including intangible assets), financial condition, or results of operations of Lorilei. (D) Lorilei has delivered a true and correct copy of its articles of incorporation and bylaws (or similar governing instruments), each as amended to date, to counsel for AmeriNet. 2.2 Lorilei's Capital Structure. (A) The authorized Capital Stock of Lorilei consists of 2,000 shares of common stock, $0.01 par value; (B) There are 111 shares of Lorilei common stock issued and outstanding, held by the persons, and in the amounts, set forth on Schedule 1.7(C). (C) All outstanding shares of Lorilei common stock are duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights created by statute, the articles of incorporation or bylaws of Lorilei or any agreement to which Lorilei is a party or is bound. (D) Lorilei has no other outstanding or securities reserved for issuance for any purpose, there being no other obligations directly or indirectly obligating Lorilei to issue any of its securities to any person for any purpose, there are no other options, warrants, calls, rights, commitments or agreements of any character to which Lorilei is a party or by which it is bound obligating Lorilei to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the Lorilei Capital Stock or obligating Lorilei to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. Page 46 2.3 Subsidiaries. Lorilei has no subsidiaries or affiliated companies and does not otherwise own any shares of stock or any interest in, or control, directly or indirectly, any other corporation, partnership, association, joint venture or business entity. 2.4 Authority. (A) Lorilei has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. (B) The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Lorilei. (C) This Agreement has been duly executed and delivered by Lorilei and, subject to the proper authorization of this Agreement by AmeriNet's board of directors and its due execution and delivery by AmeriNet to Lorilei, constitutes the valid and binding obligation of Lorilei. (D) The execution and delivery of this Agreement by Lorilei does not, and the consummation of the transactions contemplated hereby will not, conflict with, or result in any violation of, or default under (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation or acceleration of any obligation or loss of a material benefit under (i) any provision of the articles of incorporation or bylaws of Lorilei or (ii) any material mortgage, indenture, lease, contract or other agreement or instrument, permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Lorilei or its properties or assets. (E) No consent, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or other governmental authority or instrumentality ("Governmental Entity"), is required by or with respect to Lorilei in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, except for such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable state and federal securities laws (e.g., notification on Form D) and the laws of any foreign country. 2.5 Lorilei's Financial Statements. (A) Schedule 2.5(A) includes Lorilei's Financial Statements. (B) Lorilei's Financial Statements are complete and correct in all material respects and have been prepared in accordance GAAP throughout the periods indicated. (C) Lorilei's Financial Statements present fairly the financial condition and operating results of Lorilei as of the dates and during the periods indicated therein, subject to normal year-end audit adjustments, which will not be material in the aggregate. (D) The unaudited balance sheet of Lorilei as of the day prior to the date of this Agreement is hereinafter referred to as "Lorilei's Balance Sheet." (E) Lorilei's financial statements can and will be audited, at Lorilei's expense, as required to comply with the requirements for material acquisitions under Commission Regulation S-B and in a manner permitting AmeriNet to comply with its obligation under the Securities Act and the Exchange Act in conjunction therewith. Page 47 2.6 No Undisclosed Liabilities. Lorilei does not have any material liabilities or obligations, either accrued or contingent (whether or not required to be reflected in financial statements in accordance with generally accepted accounting principles), and whether due or to become due, which individually or in the aggregate, (i) have not been reflected in the Lorilei Balance Sheet (including the notes thereto) or (ii) have not been specifically described in this Agreement or in the Lorilei Schedules. 2.7 No Changes. Since the date of Lorilei's Financial Statements there has not been, occurred or arisen any: (A) Transaction by Lorilei except in the ordinary course of business as conducted on that date; (B) Capital expenditure by Lorilei, either individually or in the aggregate exceeding $5,000; (C) Destruction, damage to, or loss of any assets (including without limitation intangible assets) of Lorilei (whether or not covered by insurance), either individually or in the aggregate, exceeding $5,000; (D) Labor trouble or claim of wrongful discharge, sexual harassment or other unlawful labor practice or action; (E) Change in accounting methods or practices (including any change in depreciation or amortization policies or rates, any change in policies in making or reversing accruals, or any change in capitalization of software development costs) by Lorilei; (F) Declaration, setting aside, or payment of a dividend or other distribution in respect to the shares of Lorilei, or any direct or indirect redemption, purchase or other acquisition by Lorilei of any of its shares; (G) Increase in the salary or other compensation payable or to become payable by Lorilei to any of its officers, directors or employees, or the declaration, payment, or commitment or obligation of any kind for the payment, by Lorilei, of a bonus or other additional salary or compensation to any such person; (H) Acquisition, sale or transfer of any asset of Lorilei except in the ordinary course of business; (I) Formation, amendment or termination of any distribution agreement or any material contract, agreement or license to which Lorilei is a party, other than termination by Lorilei pursuant to the terms thereof; (J) Loan by Lorilei to any person or entity, or guaranty by Lorilei of any loan except for expense advances in the ordinary course of business consistent with past practice; (K) Waiver or release of any material right or claim of Lorilei, including any write-off or other compromise of any material account receivable of Lorilei; (L) The notice or, to Lorilei's Knowledge, commencement or threat of commencement of any governmental proceeding against or investigation of Lorilei or its affairs; (M) Other event or condition of any character that has or would, in Lorilei's reasonable judgment, be expected to have a Material Adverse Effect on Lorilei; (N) Issuance, sale or redemption by Lorilei of any of its shares or of any other of its securities other than issuances of shares of common stock pursuant to outstanding Options and Warrants; Page 48 (O) Change in pricing or royalties set or charged by Lorilei except for discounts extended in the ordinary course of business consistent with past practice; (P) Any event that if occurring or undertaken during the interim between the execution of this Agreement and its Closing or earlier termination, would have required disclosure to AmeriNet pursuant to Section 4.1; or (Q) Negotiation or agreement by Lorilei to do any of the things described in the preceding clauses (A) through (Q) (other than negotiations with AmeriNet and its representatives regarding the transactions contemplated by this Agreement). 2.8 Tax and Other Returns and Reports. (A) Tax Returns and Audits. (1) Lorilei has accurately prepared and timely filed all required federal, state, local and foreign returns, estimates, information statements and reports ("Returns") relating to any and all Taxes relating or attributable to Lorilei or its operations. (2) The Returns are true and correct in all material respects and have been completed in accordance with applicable law in all material respects. (3) Lorilei has timely paid all Taxes required to be paid with respect to such Returns and has withheld with respect to its employees all federal and state income Taxes, FICA, FUTA and other Taxes it is required to withhold. (4) The accruals for Taxes on the books and records of Lorilei are sufficient to discharge the Taxes for all periods (or the portion of any period) ending on or prior to the Closing Date. (5) Lorilei has not been delinquent in the payment of any Tax nor is there any Tax deficiency outstanding, proposed or assessed against Lorilei, nor has Lorilei executed any waiver of any statute of limitations on or extending the period for the assessment or collection of any Tax. (6) (a) No audit or other examination of any Return of Lorilei is presently in progress. (b) Lorilei does not have any liabilities for unpaid federal, state, local and foreign Taxes, whether asserted or unasserted, known or unknown, contingent or otherwise and Lorilei has no Knowledge of any basis for the assertion of any such liability attributable to Lorilei, or their respective assets or operations. (c) Lorilei is not (nor has it ever been) required to join with any other entity in the filing of a consolidated Tax return for federal Tax purposes or a consolidated or combined return or report for state Tax purposes. (7) Lorilei is not a party to or bound by any Tax indemnity, Tax sharing or Tax allocation agreement. (8) Lorilei has provided, or made available, to AmeriNet or its legal counsel copies of all federal, provincial and state income and all sales and use Tax Returns of Lorilei for all periods since its date incorporation. (9) There are (and as of immediately following the Closing Date there will be) no liens on the assets of Lorilei relating to or attributable to Taxes. Page 49 (10) Lorilei has no Knowledge of any basis for the assertion of any Tax claim which, if adversely determined, would result in liens on the assets of Lorilei. (11) Lorilei has no property which is being sold, conveyed or transferred pursuant to this Agreement which in the hands of AmeriNet would be treated as being owned by persons other than AmeriNet pursuant to Section 168(f)(8) of the Internal Revenue Code of 1954 as in effect immediately prior to the enactment of the Tax Reform Act of 1986, or any analogous provisions of any state law. (12) None of the assets of Lorilei are treated as "Tax-exempt use property" within the meaning of Section 168(h) of the Code. (13) There is no contract, agreement, plan or arrangement, including but not limited to the provisions of this Agreement, covering any employee or former employee of Lorilei that, individually or collectively, could give rise to the payment of any amount that would not be deductible pursuant to Sections 280G, 162 or 404 of the Code. (B) No Penalty. Lorilei is not subject to any penalty by reason of a violation of any order, rule or regulation of, or a default with respect to any return, report or declaration required to be filed with, any Governmental Entity to which it is subject, which violations or defaults, individually or in the aggregate, would have a material adverse effect on Lorilei. 2.9 Restrictions on Business Activities. There is no agreement, judgment, injunction, order or decree binding upon Lorilei which has or could reasonably be expected to have the effect of materially prohibiting or materially impairing any business practice of Lorilei, any acquisition of property by Lorilei or the conduct of business by Lorilei as currently conducted or as currently proposed to be conducted. 2.10 Title of Properties, Absence of Liens and Encumbrances & Condition of Equipment. (A) (1) Schedule 2.10(A)(1) sets forth a true and complete list of all real property owned and leased by Lorilei and the aggregate annual mortgage, rental or other fee payable therefor or under any such lease. (2) All real property owned by Lorilei is held in fee simple absolute, and is subject to no liens, encumbrances, assessments, obligations running with the land, charges, pledges, security interests or other impediments to transfer of title by full warrant deed without exceptions of any kind or nature whatsoever. (3) All deeds, titles, leases and mortgages are in good standing, valid and effective in accordance with their respective terms, and there is not with respect to Lorilei under any of such deeds, titles, leases or mortgages, any existing default or event of default (or event which with notice or lapse of time, or both, would constitute a default and in respect of which Lorilei has not taken adequate steps to prevent such default from occurring), except where the lack of such good standing, validity and effectiveness or the existence of such default or event of default would not have a material adverse effect on Lorilei. (B) Lorilei holds good and valid title to, or, in the case of leased properties and assets, valid leasehold interests in, all of its tangible properties and assets, real, personal and mixed, used in its business, free and clear of any liens, charges, pledges, security interests or other encumbrances, except as reflected in Lorilei's Financial Statements and except for such imperfections of title and encumbrances, if any, which are not substantial in character, Page 50 amount or extent, and which do not materially detract from the value, or interfere with the present use, of the property subject thereto or affected thereby. (C) (1) The equipment owned or leased by Lorilei is listed in Schedule 2.10(C) (the "Equipment"), except individual pieces of equipment owned by Lorilei with an individual value of less than $100. (2) The Equipment is, taken as a whole: (a) Adequate for the conduct of the business of Lorilei consistent with its past practice; (b) Suitable for the uses to which it is currently employed; (c) In good operating condition; (d) Regularly and properly maintained, reasonable wear and tear excepted; and (e) Not obsolete, dangerous or in need of renewal or replacement, except for renewal or replacement in the ordinary course of business. 2.11 Intellectual Property. (A) (1) Lorilei owns, or is licensed to use, all patents, trademarks, trade names, service marks, copyrights, and any applications therefor, maskworks, net lists, schematics, technology, know- how, computer software programs or applications and tangible or intangible proprietary information or material (excluding Commercial Software Rights as defined in paragraph [B] below) that are used or currently proposed to be used in the business of Lorilei as currently conducted or as currently proposed to be conducted ("Lorilei's Intellectual Property Rights"). (2) Schedule 2.11 sets forth a complete list of all patents, trademarks, registered and material unregistered copyrights, trade names and service marks, and any applications therefor, included in Lorilei Intellectual Property Rights, and specifies the jurisdictions in which each such Lorilei's Intellectual Property Right has been issued or registered or in which an application for such issuance and registration has been filed, including the respective registration or application numbers and the names of all registered owners, together with a list of all of Lorilei's currently marketed software products and an indication as to which, if any, of such software products have been registered for patent or copyright protection with the United States Office of Patents and Trademarks or the United States Copyright Office and any foreign offices and by whom such items have been registered. (3) (a) Schedule 2.11 also sets forth a complete list of (i) any requests Lorilei has received to make any such registration, including the identity of the requestor and the item requested to be so registered, and the jurisdiction for which such request has been made and (ii) all licenses, sublicenses and other agreements as to which Lorilei is a party and pursuant to which Lorilei or any other person is authorized to use any Lorilei's Intellectual Property Right or other trade secret material to Lorilei, and includes the identity of all parties thereto, a description of the nature and subject matter thereof, the applicable royalty and the term thereof. (b) Lorilei is not, nor will it be as a result of the execution and delivery of this Agreement or the performance of its obligations hereunder, in violation of any license, sublicense or agreement described on such list. Page 51 (4) Lorilei is the sole and exclusive owner or licensee of, with all right, title and interest in and to (free and clear of any liens or encumbrances), Lorilei Intellectual Property Rights, and has sole and exclusive rights (and is not contractually obligated to pay any compensation to any third party in respect thereof) to the use thereof or the material covered thereby in connection with the services or products in respect of which Lorilei Intellectual Property Rights are being used. (5) To the Knowledge of Lorilei, no claims with respect to Lorilei Intellectual Property Rights have been asserted or are threatened by any person, nor, to the Knowledge of Lorilei, is there any valid grounds for any bona fide claims (i) to the effect that the manufacture, sale, licensing or use of any product as now used, sold or licensed or proposed for use, sale or license by Lorilei infringes on any copyright, patent, trade mark, service mark or trade secret, (ii) against the use by Lorilei of any trademarks, trade names, trade secrets, copyrights, patents, technology, know-how or computer software programs and applications used in Lorilei's business as currently conducted or as proposed to be conducted, or (iii) challenging the ownership, validity or effectiveness of any of Lorilei Intellectual Property Rights. (6) All trademarks, service marks and copyrights held by Lorilei are valid and subsisting. (7) To the Knowledge of Lorilei, there is no material unauthorized use, infringement or misappropriation of any of Lorilei Intellectual Property Rights by any third party, including any employee or former employee of Lorilei. (8) Lorilei has not been sued or charged as a defendant in any claim, suit, action or proceeding which involves a claim of infringement of any patents, trademarks, service marks, copyrights or violation of any trade secret or other proprietary right of any third party and which has not been finally terminated prior to the date hereof nor does it have any Knowledge of any such charge or claim, and there is not any infringement liability with respect to, or infringement or violation by, Lorilei of any patent, trademark, service mark, copyright, trade secret or other proprietary right of another. (9) To Lorilei's Knowledge, none of Lorilei's Intellectual Property Rights or products is subject to any outstanding order, judgment, decree, stipulation or agreement restricting in any manner the licensing thereof by Lorilei. (10) There is no outstanding order, judgment, decree or stipulation on Lorilei, and Lorilei is not party to any agreement, restricting in any manner the licensing of Lorilei's products by Lorilei. (11) Lorilei has not entered into any agreement to indemnify any other person against any charge of infringement of any Lorilei's Intellectual Property Right. (12) Each current and former employee of and consultant to Lorilei has signed a confidentiality agreement substantially in Lorilei's standard form as certified by Lorilei, delivered to AmeriNet and included in Schedule 5.8. (B) (1) To Lorilei's Knowledge, Lorilei has not breached or violated the terms of its license, sublicense or other agreement relating to any Commercial Software Rights and has a valid right to use such Commercial Software Rights and has a valid right to use such Commercial Rights under such license and agreements. (2) Lorilei is not, nor will it be as a result of the execution and delivery of this Agreement or the performance of its obligations hereunder, in violation of any license, sublicense or agreement relating to Commercial Software Rights. Page 52 (3) No claims with respect to the Commercial Software Rights have been asserted or, to the Knowledge of Lorilei, are threatened by any person against Lorilei, nor to the Knowledge of Lorilei is there any valid grounds for any bona fide claims (i) to the effect that the manufacture, sale, licensing or use of any product as now used, sold or licensed or proposed for use, sale or license by Lorilei infringes on any copyright, patent, trade mark, service mark or trade secret, (ii) against the use by Lorilei of any trademarks, trade names, trade secrets, copyrights, patents, technology, know-how or computer software programs and applications used in Lorilei's business as currently conducted or as proposed to be conducted, or (iii) challenging the validity or effectiveness of any of Lorilei's rights to use Commercial Software Rights. (4) To the Knowledge of Lorilei, there is no material unauthorized use, infringement or misappropriation of any of the Commercial Software Rights by Lorilei or any employee or former employee of Lorilei during the period of their employment. (5) To the Knowledge of Lorilei, no Commercial Software Right is subject to any outstanding order, judgment, decree, stipulation or agreement restricting in any manner the use thereof by Lorilei. 2.12 Agreements, Contracts and Commitments. (A) All of Lorilei's currently effective agreements, contracts and commitments are listed in Schedule 2.12, including the name of the contracting part, date of execution and termination, and copies of all such agreements, contracts and commitments are annexed as exhibits to schedule 12. (B) Lorilei does not have, is not a party to nor is it bound by: (1) Any collective bargaining agreements; (2) Any agreements that contain any unpaid severance liabilities or obligations; (3) Any bonus, deferred compensation, incentive compensation, pension, profit-sharing or retirement plans, or any other employee benefit plans or arrangements; (4) Any employment or consulting agreement, contract or commitment with an employee or individual consultant or salesperson or consulting or sales agreement, contract or commitment with a firm or other organization, not terminable by Lorilei on thirty days notice without liability, except to the extent general principles of wrongful termination law may limit Lorilei's ability to terminate employees at will; (5) Any agreement or plan, including, without limitation, any stock option plan, stock appreciation right plan or stock purchase plan, any of the benefits of which will be increased, or the vesting of benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement; (6) Any fidelity or surety bond or completion bond; (7) Any lease of personal property having a value individually in excess of $2,000; (8) Any agreement of indemnification or guaranty not entered into in the ordinary course of business; Page 53 (9) Any agreement, contract or commitment containing any covenant limiting the freedom of Lorilei to engage in any line of business or compete with any person; (10) Any agreement, contract or commitment relating to capital expenditures and involving future obligations in excess of $2,000 in any single instance or $10,000 in the aggregate; (11) Any agreement, contract or commitment relating to the disposition or acquisition of assets not in the ordinary course of business or any ownership interest in any corporation, partnership, joint venture or other business enterprise; (12) Any mortgages, indentures, loans or credit agreements, security agreements or other agreements or instruments relating to the borrowing of money, extension of credit or guaranties; (13) Any purchase order or contract for the purchase of raw materials or acquisition of assets involving $1,000 or more in any single instance or $10,000 or more in the aggregate; (14) Any construction contracts; (15) Any distribution, joint marketing or development agreement; (16) Any other agreement, contract or commitment which involves $1,000 or more in any single instance or more than $10,000 in the aggregate and is not cancelable without penalty within thirty (30) days other than standard end-user licenses of Lorilei's products and services in the ordinary course of business consistent with past practice, or (17) Any agreement which is otherwise material to Lorilei's business. (C) (1) Lorilei has not breached, or received any claim or threat that it has breached, any of the terms or conditions of any agreement, contract or commitment to which it is bound (including those set forth in any of Lorilei Schedules) in such manner as would permit any other party to cancel or terminate the same. (2) Each agreement, contract or commitment required to be set forth in any of Lorilei Schedules is in full force and effect (assuming such agreement, contract or commitment has been duly authorized, executed and delivered by the other party or parties thereto) and, except as otherwise disclosed or defaults fully remedied or resolved, is not subject to any material default thereunder of which Lorilei has Knowledge by any party obligated to Lorilei pursuant thereto. 2.13 Interested Party Transactions. No officer, director or stockholder of Lorilei (nor any parent, sibling, descendant or spouse of any of such persons, or any trust, partnership, corporation or other entity (provided, that ownership of no more than one percent of the outstanding voting stock of a publicly traded corporation will not be deemed an "interest in any entity" for purposes of this Section 2.13) in which any of such persons has or has had an interest), has or has had, directly or indirectly: (A) An interest in any entity which furnished or sold, or furnishes or sells, services or products which Lorilei furnishes or sells, or proposes to furnish or sell; (B) Any interest in any entity which purchases from or sells or furnishes to, Lorilei, any goods or services; or (C) A beneficial interest in any contract or agreement required to be set forth in Schedule 2.12. Page 54 2.14 Governmental Authorization. (A) Schedule 2.14 accurately lists each material federal, state, county, local or foreign governmental consent, license, permit, grant, or other authorization issued to Lorilei: (1) Pursuant to which Lorilei currently operates or holds any interest in any of its properties; or (2) Which is required for the operation of its business or the holding of any such interest (hereinafter collectively referred to as the "Lorilei Authorizations"). (B) Lorilei Authorizations are in full force and effect and constitute all the material authorizations required to permit Lorilei to operate or conduct its business or hold any interest in its properties. 2.15 Litigation. (A) Schedule 2.15 annexed hereto accurately lists all suits, actions and legal, administrative, arbitration or other proceedings and governmental investigations and all other claims, pending or, to Lorilei's Knowledge, threatened or which Lorilei expects will ultimately be threatened or commenced. (B) None of such suits, actions, proceedings, investigations or claims seek to prevent the consummation of the Reorganization. (C) There is no judgment, decree or order enjoining Lorilei in respect of, or the effect of which is to prohibit, any business practice or the acquisition of any property or the conduct of business of Lorilei. (D) Schedule 2.15 also lists all suits and legal actions initiated by Lorilei. 2.16 Accounts Receivable. (A) All receivables of Lorilei arose in the ordinary course of business and the aggregate amounts thereof are the best of Lorilei's Knowledge collectible (except to the extent reserved against as reflected in Lorilei's Financial Statements) and are carried at values determined in accordance with generally accepted accounting principles consistently applied. (B) To Lorilei's Knowledge, none of the receivables of Lorilei is subject to any claim of offset, recoupment, setoff or counterclaim and there are no facts or circumstances (whether asserted or unasserted) that would give rise to any such claim. (C) No receivables are contingent upon the performance by Lorilei of any obligation or contract except for Lorilei's maintenance obligations under its maintenance agreements (although no customer has claimed that Lorilei has failed to perform its maintenance obligations). (D) No person has any lien, charge, pledge, security interest or other encumbrance on any of such receivables and no agreement for deduction or discount has been made with respect to any of such receivables. 2.17 Minute Books. The minute books of Lorilei made available to counsel for AmeriNet contain a complete and accurate summary of all meetings of directors and stockholders since the time of incorporation of Lorilei, and reflect all transactions referred to in such minutes accurately in all material respects. Page 55 2.18 Environmental and OSHA. (A) Hazardous Material. (1) As of the Closing Date, no material amount of any substance that is regulated by any Governmental Entity or that has been designated by any Governmental Entity to be radioactive, toxic, hazardous or otherwise a danger to health or the environment, including, without limitation, PCBs, asbestos, urea-formaldehyde and all substances listed pursuant to the United States Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended from time to time, and the United States Resource Recovery and Conservation Act of 1976, as amended from time to time, and the regulations and publications promulgated pursuant to said laws (a "Hazardous Material"), is present, as a result of the actions of Lorilei (excluding failure of Lorilei to remedy the presence of a Hazardous Material resulting from the actions of any previous owner or occupier of Lorilei's Property of which presence Lorilei does not have Knowledge) in violation of any law in effect on or before the Closing Date, in, on or under any property, including the land and the improvements, ground water and surface water thereof, that Lorilei or any of its past or present subsidiaries has at any time owned, operated, occupied or leased (collectively, "Lorilei's Property"). (2) In any event, Lorilei does not know of the presence of any Hazardous Material in, on, under, adjacent to or in any way effecting any Lorilei's Property. (B) Hazardous Materials Activities. At no time prior to the Closing Date has Lorilei transported, stored, used, manufactured, released or exposed its employees or others to Hazardous Materials in violation of any law in effect on or before the Closing Date, nor has Lorilei disposed of, transferred, sold, or manufactured any product containing a Hazardous Material (collectively "Hazardous Materials Activities") in violation of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Resource Conservation and Recovery Act of 1976, the Toxic Substances Control Act of 1976 and any other applicable state or federal acts (including the rules and regulations thereunder) as in effect on or before the Closing Date. (C) Permits. Lorilei currently holds no environmental approvals, permits, licenses, clearances and consents and none are necessary for the conduct of Lorilei's Hazardous Material Activities and other businesses of Lorilei as such activities and businesses are currently being conducted. 2.19 Brokers' and Finders' Fees. Lorilei has not incurred, nor will it incur, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement or any transaction contemplated hereby. 2.20 Labor Matters. (A) Lorilei is in compliance in all material respects with all currently applicable laws and regulations respecting employment, discrimination in employment, terms and conditions of employment and wages and hours and occupational safety and health and employment practices, and is not engaged in any unfair labor practice. (B) Lorilei has not received any notice from any Governmental Entity, and to the Knowledge of Lorilei, there has not been asserted before any Governmental Entity, any claim, action or proceeding to which Lorilei is a party or involving Lorilei, and there is neither pending nor, to the Knowledge of Lorilei, threatened, any investigation or hearing concerning Lorilei arising out of or based upon any such laws, regulations or practices. Page 56 (C) Lorilei has not received notice of and to the best of its Knowledge, there are no pending claims against Lorilei under any workers compensation plan or policy or for long term disability. (D) To Lorilei's Knowledge, it has complied in all material respects with all applicable provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 and has no obligations with respect to any former employees or qualifying beneficiaries thereunder. (E) Schedule 2.20 lists all current employees of Lorilei and their current salary and vacation accruals. 2.21 Insurance. (A) Schedule 2.21 lists all insurance policies and fidelity bonds covering the assets, business, equipment, properties, operations, software errors and omissions, employees, officers and directors of Lorilei as well as all claims made under any insurance policy by Lorilei since its incorporation. (B) There is no claim by Lorilei pending under any of such policies or bonds as to which coverage has been questioned, denied or disputed by the underwriters of such policies or bonds. (C) All premiums payable under all such policies and bonds have been paid and Lorilei is otherwise in compliance in all material respects with the terms of such policies and bonds (or other policies and bonds providing substantially similar insurance coverage). (D) Such policies of insurance and bonds are of the type and in amounts customarily carried by persons conducting businesses similar to those of Lorilei. (E) Lorilei does not know of any threatened termination of or material premium increase with respect to any of such policies. (F) Lorilei has never been denied insurance coverage nor has any insurance policy of Lorilei ever been canceled for any reason. 2.22 Compliance with Laws. Lorilei has not received any notices of violation with respect to and to the best of its Knowledge has complied in all material respects with and is not in violation in any material respect of any federal, state or local statute, law or regulation with respect to the conduct of its business, or the ownership or operation of its business, assets or properties. 2.23 Complete Copies of Materials. Lorilei has delivered or made available true and complete copies of each document (or summaries of same) which has been requested by AmeriNet or its counsel. 2.24 Binding Agreements: No Default. Each of the contracts, agreements and other instruments shown on the Exhibits and Schedules referred to in this Agreement to which Lorilei is a party is a legal, binding and enforceable obligation in favor of or against Lorilei (assuming that such contracts, agreements and instruments are binding on all other parties thereto, Lorilei having no reason to believe that they are not), in accordance with its terms, and no party with whom Lorilei has an agreement or contract is, to Lorilei's Knowledge, in default thereunder or has breached any material terms or provisions thereof (subject to all applicable bankruptcy, insolvency, reorganization and other laws applicable to creditors' rights and remedies and to the exercise of judicial discretion in accordance with general principles of equity). Page 57 2.25 Regulation SB Disclosure Document (A) The information supplied by Lorilei responding to each Item in Commission Regulation S-B (other than Items 201, 501, 502, 506, 512 and, to the extent of audit requirements, Item 310) annexed hereto as Exhibit 2.25 (the "Regulation S-B Disclosure Documents"), part of which must be included in a current report on Commission Form 8-K to be filed by AmeriNet within 15 days after the Closing Date, as well as in all other reports which AmeriNet files thereafter pursuant to the Exchange Act, will not contain any statement which, at such time and in light of the circumstances under which it is made, is false or misleading with respect to any material fact, or will omit to state any material fact necessary in order to make the statements made therein not false or misleading or omit to state any material fact necessary to correct any statement which has become false or misleading. (B) If at any time prior to the Closing Date any event relating to Lorilei or any of its affiliates, officers or directors should be discovered by Lorilei which should be set forth in the Regulation S-B Disclosure Document, Lorilei will promptly provide such information to AmeriNet, in writing. 2.26 FIRPTA. Lorilei is not, and has not been at any time, a "United States real property holding corporation" within the meaning of Section 897(c)(2) of the Code. 2.27 Employee Benefit Plans. (A) Schedule 2.27 lists all employee benefit plans [as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, "ERISA"] and all bonus, stock option, stock purchase, incentive, deferred compensation, supplemental retirement, severance and other similar fringe or employee benefit plans, programs or arrangements, and any current or former employment or executive compensation or severance agreements, written or otherwise, for the benefit of, or relating to, any employee of Lorilei, any trade or business (whether or not incorporated) which is a member or which is under common control with Lorilei (an "ERISA Affiliate") within the meaning of Section 414 of the Code, or any subsidiary of Lorilei (together, the "Employee Plans"). (B) (1) None of the Employee Plans promises or provides retiree medical or other retiree welfare benefits to any person except as required by applicable law, including but not limited to COBRA; (2) (a) To Lorilei's Knowledge: all Employee Plans are in compliance in all material respects with the requirements prescribed by any and all applicable statutes (including ERISA and the Code), orders, or governmental rules and regulations currently in effect with respect thereto (including all applicable requirements for notification to participants or beneficiaries or the Department of Labor, the IRS or Secretary of the Treasury), and Lorilei has performed in all material respects all obligations required to be performed by it under, is not in default under or violation of, and has no Knowledge of any default or violation by any other party to, any of the Employee Plans; (b) Each Employee Plan intended to qualify under Section 401(a) of the Code and each trust intended to qualify under Section 501(a) of the Code either has received a favorable determination letter with respect to each such Employee Plan from the IRS or still has a remaining period of time under applicable Treasury Regulations or IRS pronouncements in which to apply for such a determination letter and to make any amendments necessary to obtain a favorable determination; Page 58 (c) No Employee Plan is or within the prior six years has been subject to, and Lorilei has not incurred and does not expect to incur any liability under, Title IV of ERISA or Section 412 of the Code; and (d) To Lorilei's Knowledge, nothing in any Employee Plan precludes or interferes with AmeriNet's ability to cause Lorilei to terminate (or consolidate, at AmeriNet's option) any Employee Plan after the Closing Date; provided that: (i) the Employee Plans may be terminated prospectively only, subject to rights accrued by Lorilei's employees at the time of such termination and (ii) not more than sixty days notice may be required to terminate certain Employee Plans. (3) None of the following now exists or has existed within the six-year period ending on the date hereof with respect to any Employee Plan: (a) Any act or omission by Lorilei constituting a violation of Section 402, 403, 404 or 405 of ERISA; (b) Any act or omission by Lorilei which constitutes a violation of Sections 406 and 407 of ERISA and is not exempted by Section 408 of ERISA or which constitutes a violation of Section 4975(c) of the Code and is not exempted by Section 4975(d) of the Code; (c) Any act or omission by Lorilei constituting a violation of Section 503, 510 or 511 of ERISA; or (IV) any act or omission by Lorilei which could give rise to liability under Section 502 of ERISA or under Sections 4972 or 4975 through 4980 of the Code. (4) (a) Each Employee Plan has been maintained in substantial compliance with its terms, and all contributions, premiums or other payments due from Lorilei or any of its subsidiaries to (or under) any such Employee Plan have been fully paid or adequately provided for on the audited Lorilei's Financial Statements for the most recently-ended fiscal year. (b) To Lorilei's Knowledge, all accruals thereon (including, where appropriate proportional accruals for partial periods) have been made in accordance with generally accepted accounting principles consistently applied on a reasonable basis. (c) There has been no amendment, written interpretation or announcement (whether or not written) by Lorilei with respect to, or change in employee participation or coverage under, any Employee Plan that would increase materially the expense of maintaining such plans or arrangements, individually or in the aggregate, above the level of expense incurred with respect thereto for the most recently-ended fiscal year. (5) Lorilei has provided to AmeriNet complete, accurate and current copies of all Employee Plans and all amendments, documents, correspondence and filings relating thereto, including but not limited to any statements, filings, reports or returns filed with any governmental agency with respect to the Employee Plans at any time within the three-year period ending on the date hereof. Page 59 2.28 Distribution Agreements. Schedule 2.28 discloses the names, addresses, telephone numbers, fax numbers, e-mail addresses and federal Tax identification numbers of each third party or parties who have the right to distribute Lorilei's products or to market its services, together with a summary of the agreements pursuant to which Lorilei's products are distributed or its services are marketed. 2.29 Disclosure to Lorilei's Stockholders Each of Lorilei's Stockholders hereby represents and warrants that he, she or it: (A) Has had access through the Commission's Internet web site at www.sec.gov, in the EDGAR Archives sub-cite, to all of AmeriNet's reports filed with the Commission during the past two fiscal years, has reviewed all such reports and has, either directly or through a representative, been granted access to all of AmeriNet's officers and directors, and to all officers and directors of AmeriNet's operating subsidiaries, for purposes of providing all disclosure required under applicable federal and state securities laws in conjunction with the exchange contemplated by this Agreement; (B) Has been advised that: (1) The securities to be issued to them by AmeriNet in exchange for their shares of Lorilei's common stock have not been registered under the Securities Act, the Exchange Act or any comparable state securities laws, but rather, are being issued in reliance on the exemption from registration under the Securities Act provided by Section 4(2) thereof; (2) All certificates for their shares of AmeriNet's common stock will bear legends restricting any transactions therein, directly or indirectly, unless they are first registered under applicable federal and state securities laws or the proposed transaction is exempt from such registration requirements, and such facts are demonstrated to the satisfaction of AmeriNet and its legal counsel, based on such third party legal opinions, affidavits and transfer agency procedures as AmeriNet will reasonably require or have in place generally; (3) AmeriNet's transfer agent has been instructed to decline transfers of certificates for their shares of AmeriNet's common stock, unless the foregoing requirements have been met and have been confirmed as having been met by a duly authorized officer of AmeriNet. (C) Has independently determined through his, her or its own legal counsel, that all requirements of their states of domicile for the issuance of the shares of AmeriNet's common stock called for by this Agreement have been met, or will have been met, prior to Closing, by such legal counsel acting on behalf of the Parties to this Agreement. 2.30 Representations Complete. None of the representations or warranties made by Lorilei or its stockholders, nor any statement made in any Schedule, Exhibit or certificate furnished by Lorilei pursuant to this Agreement, when read in its entirety, contains or will contain any untrue statement of a material fact at the time the Closing takes place, or omits or will omit to state any material fact necessary in order to make the statements contained herein or therein, in the light of the circumstances under which made, not misleading. Page 60 Article III Representations and Warranties of AmeriNet AmeriNet represents and warrants to Lorilei as a material inducement to its entry into this Agreement, subject to the exceptions specifically disclosed in the AmeriNet Schedules or in AmeriNet's Exchange Act Reports, as follows: 3.1 Organization, Standing and Power. (A) AmeriNet is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. (B) AmeriNet has the corporate power to own its properties and to carry on its business as now being conducted and is duly qualified to do business and is in good standing in each jurisdiction in which the failure to be so qualified would have a material adverse effect on AmeriNet taken as a whole. (C) A true and correct copy of its articles of incorporation and bylaws, as amended to date, are available at the Commission's web site in the EDGAR archives, filed as exhibit's to the report on Form 10-KSB for the year ended June 30, 1999 and any future modifications thereof will be filed with the Commission and will also be available at such site. 3.2 Capital Structure. (A) (1) The authorized stock of AmeriNet consists of 20,000,000 shares of common stock, par value $0.01 per share, and 5,000,000 shares of Preferred Stock, $0.01 par value per share, the attributes of which are to be determined on a case by case basis by AmeriNet's board of directors. (2) AmeriNet had approximately 11,722,410 shares of common stock issued and outstanding as of March 31, 2000 and no shares of Preferred Stock have ever been issued. (3) As of March 31, 2000, AmeriNet had reserved 7,273,815 shares of common stock (excluding those issuable pursuant to the terms of this Agreement) for issuance as described in AmeriNet's annual report on Form 10-KSB for the year ended June 30, 1999 and the quarterly reports on Form 10-QSB for the calendar quarters ended September 30, 1999 and December 31, 1999 and any Subsequent Current Reports or Subsequent Exchange Act Reports. (4) There are no other options, warrants, calls, rights, commitments or agreements of any character to which AmeriNet is a party or by which it is bound obligating AmeriNet to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the Capital Stock of AmeriNet or obligating AmeriNet to grant, extend or enter into any such option, warrant, call, right, commitment or agreement, other than as may be required in conjunction with other acquisitions under negotiation, rights granted to investors under common stock purchase warrants since December 31, 1999 and as disclosed in the Exchange Act Reports. (5) AmeriNet's articles of incorporation permit their amendment by action of AmeriNet's board of directors without stockholder approval to increase the amount of authorized Capital Stock. (B) All of AmeriNet's shares of common and preferred stock have been duly authorized, and all of their issued and outstanding shares of common stock have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Page 61 (C) Subject to the Lorilei Declarants' compliance with their obligations under this Agreement, the shares of AmeriNet's common stock to be issued pursuant to the Reorganization will be duly authorized, validly issued, fully paid, and nonassessable. 3.3 Authority. (A) AmeriNet has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. (B) The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of AmeriNet. (C) This Agreement has been duly executed and delivered by AmeriNet and, subject to having also been approved by Lorilei's board of directors and properly executed and delivered by Lorilei, constitutes a valid and binding obligation of AmeriNet. (D) The execution and delivery of this Agreement do not, and the consummation of the transactions contemplated hereby will not, conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a material benefit under: (1) Any provision of the articles of incorporation or bylaws of AmeriNet; or (2) Any mortgage, indenture, lease, contract or other agreement or instrument, permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to AmeriNet or its properties or assets, other than any such conflicts, violations, defaults, terminations, cancellations or accelerations which individually or in the aggregate would not have a material adverse effect on the ability of AmeriNet to consummate the transactions contemplated hereby. (E) No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity, is required by or with respect to AmeriNet in connection with the execution and delivery of this Agreement by AmeriNet or the consummation by AmeriNet of the transactions contemplated hereby, except for: (1) Such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable state and federal securities laws (a Form D Notification Statement) and the laws of any foreign country; and (2) Such other consents, authorizations, filings, approvals and registrations which if not obtained or made would not have a material adverse effect on the ability of AmeriNet to consummate the transactions contemplated hereby. 3.4 Exchange Act Reports; AmeriNet Financial Statements. (A) All materials required to be filed by AmeriNet with the Commission pursuant to Sections 13 or 15(d) of the Exchange Act since current management took office starting in November of 1998, have been filed and are available on the Commission's Internet web site at www.sec.gov in its EDGAR Archives sub-site. (B) To the best of AmeriNet's Knowledge, the Exchange Act Reports comply in all material respects with the requirements of the Exchange Act and do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they Page 62 were made, not misleading, except to the extent corrected by a subsequently filed document with the Commission or by information provided by AmeriNet to Lorilei. (C) The AmeriNet Financial Statements comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the Commission with respect thereto, have been prepared in accordance with generally accepted accounting principles consistently applied and fairly present the consolidated financial position of AmeriNet at the date thereof and of its operations and cash flows for the period then ended, subject to normal year end audit adjustments. (D) There has been no change in AmeriNet accounting policies or estimates except as described in the notes to AmeriNet's Financial Statements or in subsequently filed Exchange Act Reports. (E) AmeriNet has no material obligations, other than: (1) Those set forth in AmeriNet's Financial Statements (obligations not required to be set forth in AmeriNet's Financial Statements under generally accepted accounting principles being deemed not material); (2) Those resulting from ongoing acquisition activities which developed after the date of AmeriNet's Financial Statements but are not yet definite enough to require filing in the Exchange Act Reports; (3) Those pertaining to confidential letters of intent; or (4) Those disclosed by AmeriNet to Lorilei in writing. (F) The information provided by AmeriNet in the Current Report on Form 8-K pertaining to this Reorganization (excluding information provided by or on behalf of Lorilei, as to which AmeriNet makes no representation) will not contain any statement which, at such time and in light of the circumstances under which it will be made, is false or misleading with respect to any material fact, or will omit to state any material fact necessary in order to make the statements therein not false or misleading. (G) If at any time prior to the Closing Date any event relating to AmeriNet or any of its affiliates, officers or directors should be discovered by AmeriNet which should be set forth in a current report on Form 8-K, AmeriNet will promptly inform Lorilei. (H) AmeriNet makes no representation or warranty with respect to any information supplied by Lorilei which is contained in any of the foregoing documents. 3.5 Broker's and Finders' Fees. Except as disclosed in the Exchange Act Reports, AmeriNet has not incurred, and will not incur, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement, the Reorganization or any transaction contemplated hereby. 3.6 Ownership of Lorilei's Capital Stock. As of the date of execution of this Agreement, AmeriNet does not own any shares of Lorilei's Capital Stock. Page 63 3.7 Litigation. There are no suits, actions or legal, administrative, arbitration or other proceedings or governmental investigations against AmeriNet pending or, to AmeriNet's Knowledge, threatened, which (i) if determined adversely to AmeriNet, could be expected to result in a material adverse effect on the financial condition or results of operations of AmeriNet, or (ii) seek to prevent the consummation of the Reorganization. 3.8 Limited Activities (A) AmeriNet is a holding company with no material operations or assets other than the shares of its subsidiaries common stock and operations pertaining to supervision and coordination of the activities of its subsidiaries, provision of support services for its subsidiaries, acquisition related activities and compliance with applicable laws, including federal securities and internal revenue laws. (B) AmeriNet currently has three operating subsidiaries, Wriwebs.com, Inc., Trilogy International, Inc., and Vista Vacations International, Inc., all Florida corporations, and is a party to letters of intent to acquire Custom Software Systems, Inc., a Virginia corporation currently headquartered in Houston, Texas, and iDVDBox.com, Inc., a Florida corporation being organized (collectively referred to for purposes of this Section 3.8 as the "AmeriNet Subsidiaries and Acquisition Candidates"). (C) Lorilei, through its officers, has become familiar with the operations and prospects of AmeriNet and the AmeriNet Subsidiaries and Acquisition Candidates, to the extent that information concerning them is available to AmeriNet or has been filed by AmeriNet with the Commission. 3.9 No Undisclosed Liabilities. AmeriNet does not have any material liabilities or obligations, either accrued or contingent (whether or not required to be reflected in financial statements in accordance with generally accepted accounting principles), and whether due or to become due, which individually or in the aggregate, (i) have not been reflected in the AmeriNet Financial Statements (including the notes thereto) or (ii) have not been specifically described in this Agreement or in the Exchange Act Reports. 3.10 No Changes. Since the date of its latest Exchange Act Report there has not been, occurred or arisen any: (A) Destruction, damage to, or loss of any assets (including without limitation intangible assets) of AmeriNet or its subsidiaries (whether or not covered by insurance), either individually or in the aggregate, exceeding $30,000, other than losses by subsidiaries in the ordinary course of business. (B) Labor trouble or claim of wrongful discharge, sexual harassment or other unlawful labor practice or action; (C) Change in accounting methods or practices (including any change in depreciation or amortization policies or rates, any change in policies in making or reversing accruals, or any change in capitalization of software development costs) by AmeriNet or its subsidiaries; (D) Declaration, setting aside, or payment of a dividend or other distribution in respect to the shares of AmeriNet or its subsidiaries, or any direct or indirect redemption, purchase or other acquisition by AmeriNet or its subsidiaries of any of their shares; (E) Other event or condition of any character that has or would, in AmeriNet or its subsidiaries' reasonable judgment, be expected to have a material adverse effect on AmeriNet or its subsidiaries; Page 64 (F) Negotiation or agreement by AmeriNet or its subsidiaries to do any of the things described in the preceding clauses (A) through (F) other than negotiations with AmeriNet or its subsidiaries and their representatives regarding the transactions contemplated by this Agreement or other acquisitions. 3.11 Tax and Other Returns and Reports. (A) Tax Returns and Audits. (1) AmeriNet and its subsidiaries have accurately prepared and filed all required federal, state, local and foreign returns, estimates, information statements and reports ("Returns") relating to any and all Taxes relating or attributable to AmeriNet or its subsidiaries or their operations and such Returns are true and correct in all material respects and have been completed in accordance with applicable law in all material respects. (2) AmeriNet and its subsidiaries have timely paid all Taxes required to be paid with respect to such Returns and have withheld with respect to its employees all federal and state income taxes, FICA, FUTA and other Taxes they are required to withhold. (3) The accruals for Taxes on the books and records of AmeriNet and its subsidiaries are sufficient to discharge the Taxes for all periods (or the portion of any period) ending on or prior to the Closing Date. (4) AmeriNet and its subsidiaries have not been delinquent in the payment of any Tax nor, except as disclosed in the Exchange Act Reports, is there any Tax deficiency outstanding, proposed or assessed against AmeriNet or its subsidiaries, nor has AmeriNet or its subsidiaries executed any waiver of any statute of limitations on or extending the period for the assessment or collection of any Tax. (5) Except as disclosed in the Exchange Act Reports: (a) No audit or other examination of any Return of AmeriNet or its subsidiaries is presently in progress (b) AmeriNet and its subsidiaries do not have any liabilities for unpaid federal, state, local and foreign Taxes, whether asserted or unasserted, known or unknown, contingent or otherwise and AmeriNet and its subsidiaries have no Knowledge of any basis for the assertion of any such liability attributable to AmeriNet or its subsidiaries, or their respective assets or operations. (6) AmeriNet and its subsidiaries are not parties to or bound by any tax indemnity, tax sharing or tax allocation agreement. (7) AmeriNet and its subsidiaries have provided, or made available to Lorilei or its legal counsel copies of all federal, provincial and state income and all sales and use Tax Returns of AmeriNet or its subsidiaries for all periods since January 1, 1999. (8) There are (and as of immediately following the Closing Date there will be) no liens on the assets of AmeriNet or its subsidiaries relating to or attributable to Taxes. (9) AmeriNet and its subsidiaries have no Knowledge of any basis for the assertion of any Tax claim which, if adversely determined, would result in liens on the assets of AmeriNet or its subsidiaries. Page 65 (10) There is no contract, agreement, plan or arrangement, including but not limited to the provisions of this Agreement, covering any employee or former employee of AmeriNet or its subsidiaries that, individually or collectively, could give rise to the payment of any amount that would not be deductible pursuant to Sections 280G, 162 or 404 of the Code. (B) No Penalty. Neither AmeriNet nor its subsidiaries are subject to any penalty by reason of a violation of any order, rule or regulation of, or a default with respect to any return, report or declaration required to be filed with, any Governmental Entity to which it is subject, which violations or defaults, individually or in the aggregate, would have a material adverse effect on AmeriNet or its subsidiaries. 3.12 Environmental and OSHA. (A) Hazardous Material. (1) As of the Closing Date, no material amount of any substance that is regulated by any Governmental Entity or that has been designated by any Governmental Entity to be radioactive, toxic, hazardous or otherwise a danger to health or the environment, including, without limitation, PCBs, asbestos, urea-formaldehyde and all substances listed pursuant to the United States Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended from time to time, and the United States Resource Recovery and Conservation Act of 1976, as amended from time to time, and the regulations and publications promulgated pursuant to said laws (a "Hazardous Material"), is present, as a result of the actions of AmeriNet or its subsidiaries (excluding failure of AmeriNet or its subsidiaries to remedy the presence of a Hazardous Material resulting from the actions of any previous owner or occupier of AmeriNet or its subsidiaries' property of which presence AmeriNet or its subsidiaries do not have Knowledge) in violation of any law in effect on or before the Closing Date, in, on or under any property, including the land and the improvements, ground water and surface water thereof, that AmeriNet or its subsidiaries own, operate, occupy or lease. (2) In any event, AmeriNet and its subsidiaries do not know of the presence of any Hazardous Material in, on or under any of their property. (B) Hazardous Materials Activities. At no time prior to the Closing Date has AmeriNet or its subsidiaries transported, stored, used, manufactured, released or exposed its employees or others to Hazardous Materials in violation of any law in effect on or before the Closing Date, nor has AmeriNet or its subsidiaries disposed of, transferred, sold, or manufactured any product containing a Hazardous Material (collectively "Hazardous Materials Activities") in violation of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Resource Conservation and Recovery Act of 1976, the Toxic Substances Control Act of 1976 and any other applicable state or federal acts (including the rules and regulations thereunder) as in effect on or before the Closing Date. (C) Permits. AmeriNet or its subsidiaries currently holds no environmental approvals, permits, licenses, clearances and consents and none are necessary for the conduct of AmeriNet or its subsidiaries' Hazardous Material Activities and other businesses of AmeriNet or its subsidiaries as such activities and businesses are currently being conducted. Page 66 3.13 Representations Complete. None of the representations or warranties made by AmeriNet or its subsidiaries, nor any statement made in any Schedule, Exhibit or certificate furnished by AmeriNet or its subsidiaries pursuant to this Agreement, when read in its entirety, contains or will contain any untrue statement of a material fact at the Closing Date, or omits or will omit to state any material fact necessary in order to make the statements contained herein or therein, in the light of the circumstances under which made, not misleading. Article IV Conduct Prior to the Closing 4.1 Conduct of Business of Lorilei. During the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Closing, Lorilei agrees (except to the extent that AmeriNet will otherwise consent in writing): (A) To carry on its business in the usual, regular and ordinary course in substantially the same manner as heretofore conducted and, to the extent consistent with such business, use all reasonable efforts consistent with past practice and policies to preserve intact Lorilei's present business organizations, keep available the services of its present officers and key employees and preserve their relationships with customers, suppliers, distributors, licensors, licensees, and others having business dealings with it, to the end that Lorilei's goodwill and ongoing businesses will be unimpaired at the Time of Closing; and (B) Not to: (1) Enter into any commitment or transaction not in the ordinary course of business (i) to be performed over a period longer than six (6) months in duration, or (ii) to purchase fixed assets for a purchase price in excess of $1,000; (2) Grant any severance or termination pay to any director, officer or employee except (i) payments made pursuant to standard written agreements outstanding on the date hereof or (ii) in the case of employees who are not officers, grants which are made in the ordinary course of business in accordance with Lorilei's standard past practices; (3) Except for licenses granted to end-users pursuant to Lorilei's standard license agreements, transfer to any person or entity any rights to Lorilei's Intellectual Property; (4) Enter into or amend any agreements pursuant to which any other party is granted exclusive marketing or other rights of any type or scope with respect to any products of Lorilei; (5) Violate, amend or otherwise modify the terms of any of the contracts or agreements required to be set forth in Lorilei Schedules; (6) Commence any litigation; (7) Declare or pay any dividends on or make any other distributions (whether in cash, stock or property) in respect of any of its Capital Stock, or split, combine or reclassify any of its Capital Stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of Capital Stock of Lorilei, or repurchase or otherwise acquire, directly or indirectly, any shares of its Capital Stock except from former employees, directors and consultants in accordance with agreements providing for the repurchase of shares at cost in connection with any termination of service to Lorilei; Page 67 (8) Issue, deliver or sell or authorize or propose the issuance, delivery or sale of, or purchase or propose the purchase of, any shares of its Capital Stock or securities convertible into, or subscriptions, rights, warrants or options to acquire, or other agreements or commitments of any character obligating it to issue any such shares or other convertible securities; (9) Cause or permit any amendments to its articles of incorporation or bylaws; (10) Acquire or agree to acquire by merging or consolidating with, or by purchasing a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, or otherwise acquire or agree to acquire any assets which are material, individually or in the aggregate, to the business of Lorilei; (11) Sell, lease, license or otherwise dispose of any of its properties or assets which are material, individually or in the aggregate, to the business of Lorilei, except in the ordinary course of business; (12) Incur any indebtedness for borrowed money or guarantee any such indebtedness or issue or sell any debt securities of Lorilei or guarantee any debt securities of others; (13) Adopt or amend any employee benefit plan, or enter into any employment contract, pay any special bonus or special remuneration to any director or employee, or increase the salaries or wage rates of its employees; (14) Revalue any of its assets, including without limitation writing down the value of inventory or writing off notes or accounts receivable other than in the ordinary course of business; (15) Pay, discharge or satisfy in an amount in excess of $1,000 in any one case any claim, liability or obligation (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction in the ordinary course of business of liabilities reflected or reserved against in Lorilei's Financial Statements (or the notes thereto); (16) Make or change any material election in respect of Taxes, adopt or change any accounting method in respect of Taxes, file any material Return or any amendment to a material Return, enter into any closing agreement, settle any claim or assessment in respect of Taxes, or consent to any extension or waiver of the limitation period applicable to any claim or assessment in respect of Taxes; or (17) Take, or agree in writing or otherwise to take, any of the actions described in Sections 4.1(C)(1) through 4.1(C)(16) above, or any action which would make any of the representations or warranties or covenants of Lorilei contained in this Agreement materially untrue or incorrect. (C) To promptly notify AmeriNet of any event: (1) Or occurrence or emergency which, in the reasonable judgment of Lorilei, is not in the ordinary course of business of Lorilei; and (2) Which could, in the reasonable judgment of Lorilei, have a material adverse effect on Lorilei. 4.2 No Solicitation. (A) Prior to the Closing Lorilei will not (nor will Lorilei permit any of Lorilei's officers, directors, stockholders affiliated with any officer or director or Lorilei's agents, representatives or affiliates to) directly or indirectly, take any of the following actions with any party other than AmeriNet and its designees: Page 68 (1) Solicit, encourage, initiate or participate in any negotiations or discussions with respect to, any offer or proposal to acquire all or substantially all of Lorilei's business and properties or Capital Stock whether by merger, purchase of assets, tender offer or otherwise; (2) Except as required by law and except for disclosures made to financial institutions and others in the ordinary course of business, disclose any information not customarily disclosed to any person other than its attorneys or financial advisors concerning Lorilei's business and properties or afford to any person or entity access to its properties, books or records; or (3) Assist or cooperate with any person to make any proposal to purchase all or any part of Lorilei's Capital Stock or of its assets (other in the ordinary course of business). (B) In the event Lorilei receives any offer or proposal, directly or indirectly, of the type referred to in Section 4.2(A)(1) and (3) above, or any request for disclosure or access pursuant to clause 4.2(A)(2) above, Lorilei will immediately inform AmeriNet thereof and will cooperate with AmeriNet by furnishing any information it may reasonably request. 4.3 Conduct of Business of AmeriNet. During the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Closing, as the case may be, AmeriNet agrees (except to the extent that Lorilei will otherwise consent in writing), that AmeriNet will promptly notify Lorilei of any event or occurrence or emergency which is not in the ordinary course of business of AmeriNet and which is material and adverse to the business of AmeriNet and its subsidiaries taken as a whole. Article V Additional Agreements 5.1 Report on Form 8-K. (A) Within fifteen days following the Closing Date, AmeriNet, with the assistance and cooperation of Lorilei's current officers, auditors, employees and legal counsel, will prepare and file with the Commission a current report on Commission Form 8-K (the "8-K Report") disclosing the Reorganization and containing information concerning Lorilei required by Commission Regulation S-B, except for audited financial statements that may be filed within 75 days after the Closing Date. (B) Within sixty days following the Closing Date Lorilei, at its own expense, will provide AmeriNet with audited financial statements prepared in accordance with GAAP and meeting all requirements of the Commission for reports of material acquisitions under the Securities Act and the Exchange Act, including the requirements imposed by Commission Regulation S-B. (C) AmeriNet and Lorilei will use their best efforts to secure the Commission's acceptance of Lorilei's audited financial statements, as complying with the requirements of Regulation S-B, and Lorilei will make any modification's to its financial statements suggested by the Commission; and, if required, will use best efforts to secure required extensions from the Commission of time in which to provide materials complying with Commission Regulation S-B. Page 69 5.2 Consent of Lorilei's Stockholders. Because each Lorilei Stockholder has independently made the decision to exchange all of his, her or its Lorilei Securities for shares of AmeriNet's common stock, no formal stockholder action by Lorilei will be required in conjunction with authorization of this Agreement or the Closing; however, each Lorilei Stockholder must have become a party to this Agreement. 5.3 Access to Information. (A) Lorilei will afford AmeriNet and its accountants, counsel and other representatives, reasonable access during normal business hours during the period prior to the Closing to all: (1) Of its properties, books, contracts, commitments and records; and (2) Other information concerning the business, properties and personnel of Lorilei as AmeriNet may reasonably request. (B) Lorilei agrees to provide to AmeriNet and its accountants, counsel and other representatives copies of internal financial statements promptly upon request. (C) No information or Knowledge obtained in any investigation pursuant to this Section 5.3 will affect or be deemed to modify any representation or warranty contained herein or the conditions to the obligations of the Parties to consummate the Reorganization. 5.4 Confidentiality. (A) From the date hereof to and including the Closing Date, the Parties will maintain, and cause their directors, employees, agents and advisors to maintain, in confidence and not disclose or use for any purpose, except the evaluation of the transactions contemplated hereby and the accuracy of the respective representations and warranties of the Parties contained herein, information concerning the other Parties and obtained directly or indirectly from such Parties, or their directors, employees, agents or advisors, or as was in the possession of such Party prior to obtaining such information from such other Party as to which the fact of prior possession such possessing Party will have the burden of proof and such information as is or becomes: (1) Available to the non-disclosing Party from third parties not subject to an undertaking of confidentiality or secrecy; (2) Generally available to the public other than as a result of a breach by the non-disclosing party hereunder; or (3) Required to be disclosed under applicable law. (B) In the event that the transactions contemplated hereby will not be consummated, all such information which will be in writing will be returned to the party furnishing the same, including to the extent reasonably practicable, copies or reproductions thereof which may have been prepared. 5.5 Expenses. Whether or not the Reorganization is consummated, all expenses incurred in connection with the Reorganization and this Agreement will be the obligation of the Party incurring such expenses. Page 70 5.6 Public Disclosure. Unless otherwise required by law, prior to the Closing Date no disclosure (whether or not in response to an inquiry) of the subject matter of this Agreement will be made by any Party unless approved by AmeriNet and Lorilei prior to release, provided that such approval will not be unnecessarily withheld, subject, in the case of AmeriNet, to AmeriNet's obligation to comply with applicable securities laws. 5.7 Consents. AmeriNet and Lorilei will promptly apply for or otherwise seek, and use their best efforts to obtain, all consents and approvals required to be obtained by them for the consummation of the Reorganization, and Lorilei will use its best efforts to obtain all consents, waivers and approvals under any of Lorilei's agreements, contracts, licenses, leases or mortgages in order to preserve the benefits thereunder for Lorilei and otherwise in connection with the Reorganization; all of such consents and approvals being set forth in Schedule 5.7. 5.8 Affiliate Agreements. (A) Schedule 5.8 sets forth those persons who are, in Lorilei's reasonable judgment, Affiliates of Lorilei. (B) Lorilei will provide AmeriNet such information and documents as AmeriNet will reasonably request for purposes of reviewing such list. (C) Lorilei will use its best efforts to deliver or cause to be delivered to AmeriNet, concurrently with the execution of this Agreement (and in any case prior to the Closing Date) from each of the Affiliates of Lorilei, an executed Affiliate Agreement in the form annexed hereto as Exhibit 5.8. (D) AmeriNet will be entitled to place appropriate legends on the certificates evidencing any AmeriNet's common stock to be received by such Affiliates pursuant to the terms of this Agreement, and to issue appropriate stop transfer instructions to the transfer agent for AmeriNet's common stock, consistent with the terms of such Affiliate Agreements, in addition to the legends and stop transfer instructions placed and issues on all certificates to be issued to Lorilei's stockholders in conjunction with the Reorganization based on the Parties reliance on Section 4(2) of the Securities Act 5.9 Legal Requirements. AmeriNet and Lorilei will take all reasonable actions necessary to comply promptly with all legal requirements which may be imposed on them with respect to the consummation of the transactions contemplated by this Agreement and will promptly cooperate with and furnish information to any Party in connection with any such requirements imposed upon such other Party in connection with the consummation of the transactions contemplated by this Agreement and will take all reasonable actions necessary to obtain (and will cooperate with the other Parties in obtaining) any consent, approval, order or authorization of, or any registration, declaration or filing with, any Governmental Entity or other person, required to be obtained or made in connection with the taking of any action contemplated by this Agreement. 5.10 Blue Sky Laws. Legal counsel to Lorilei has taken such steps as may be necessary to comply with the securities and blue sky laws of all jurisdictions which are applicable to the issuance of AmeriNet's common stock to the Former Lorilei Stockholders. Page 71 5.11 Best Efforts: Additional Documents and Further Assurances. (A) Each of the Parties to this Agreement will use its best efforts to effectuate the transactions contemplated hereby and to fulfill and cause to be fulfilled the conditions to the Reorganization and the condition subsequent under this Agreement. (B) Each Party, at the request of another Party, will execute and deliver such other instruments and do and perform such other acts and things as may be reasonably necessary or desirable for effecting completely the consummation of this Agreement and the transactions contemplated hereby. (C) The Parties acknowledge that allocation of AmeriNet overhead to its subsidiaries will constitute a material aspect of AmeriNet's subsidiaries ability to meet applicable Projections, and consequently, the management of AmeriNet, Mr. Cunningham and Mrs. Cunningham will use their best efforts as soon following closing as possible to persuade AmeriNet's board of directors to pass a resolution defining the method for allocation of AmeriNet's overhead among its subsidiaries. 5.12 Employment Agreements. (A) The individuals set forth on Schedule 5.12 will as of the Closing Date be parties to the employment agreements included in composite Exhibit 5.12 hereto (the "Employment Agreements"), which will supersede all prior employment agreements or arrangements with any such persons, and which will conform to the forms of employment agreements established by AmeriNet for use by all material employees of AmeriNet and its subsidiaries. (B) (1) AmeriNet will, immediately following the Closing, reserve 335,378 shares of its common stock for future issuance through incentive stock options (as defined in Section 422 of the Code) granted in certain of the Employment Agreements, provided, however, that rights to such shares will vest on an annual basis, subject to Lorilei's having complied with its obligations under this Agreement, the subject employees having complied with their obligations under their employment agreements with Lorilei and Lorilei's having attained the following EBITDA: (a) If Lorilei attains EBITDA of at least $500,000 during the period starting on July 1, 2000 and ending on June 30, 2001, then the first 67,976 shares of AmeriNet's Common stock reserved for issuance in the event of exercise of the subject incentive stock options will vest; (b) If Lorilei attains EBITDA of at least $1,400,000 during the period starting on July 1, 2000 and ending on June 30, 2002, then all rights to 179,769 (including the 67,976 shares vested, if any, on June 30, 2001) of the shares of AmeriNet's Common stock reserved for issuance in the event of exercise of the subject incentive stock options will vest; and (c) If Lorilei attains EBITDA of at least $2,900,000 during the period starting on July 1, 2000 and ending on June 30, 2003, then all rights to all of the 335,378 shares (including the shares vested, if any, on June 30, 2001 and June 30, 2002) of AmeriNet's Common stock reserved for issuance in the event of exercise of the subject incentive stock options will vest. (2) All rights to the incentive stock options in the subject employment agreements that have not vested as of July 1, 2003 will expire on such date, and no further rights of any kind thereto or to the underlying shares of AmeriNet's common stock reserved for such purpose will exist thereafter, the reservation therefor terminating on such date. Page 72 (3) The vested Options will be exercisable during the three fiscal year period after they vest at a price of $1.3125 per share, provided that as required by Code Section 422, all rights to or under the Options will expire within 90 days after termination of the Employees' employment by Lorilei. (C) AmeriNet acknowledges that pursuant to the terms of the Employment Agreements, Mr. & Mrs. Cunningham are each entitled to the following: (1) Annual salaries of $60,0000; (2) Annual cash bonuses in an amount equal to 2.5% of Lorilei's net, pre-tax profits; (3) Benefits not to exceed $12,000 per fiscal year; and (4) Election to Lorilei's board of directors. (D) The Parties acknowledge that Lorilei provides its employees, including Mr. & Mrs. Cunningham, with paid vacations based on the length of their employment with Lorilei, as follows: (1) One week paid vacation at normal weekly salaries after completion of one full year of employment; and (2) Two weeks paid vacation at normal weekly salaries after completion of three full years of employment. (E) The Parties acknowledge that notwithstanding the foregoing, none of the expenses referred to in this Section are to be paid using proceeds obtained from AmeriNet's investment in Lorilei but rather, will be paid solely from operating income generated by Lorilei. 5.13 Investment by AmeriNet in Lorilei. (A) Based on Lorilei's attainment of the Projections and subject to Lorilei's substantial compliance with its material obligations under this Agreement, including, without limitation, those involving provision of audited financial statements for its operations for the time period and in the form required by Commission Regulation S-B for purposes of material acquisitions, AmeriNet hereby covenants and agrees (1) To provide the following funds, to be expended solely for the purposes set forth in Schedule 5.13-2, to Lorilei: (a) The Initial Funding Installment ($100,000); (b) Within 60 days after the audited financial statements for Lorilei required pursuant to Commission Regulation S-B for material acquisitions have been provided to AmeriNet, filed with the Commission and not found deficient by the Commission (the "Funding Trigger Date"), the sum of $100,000; (c) Within 120 days after the Funding Trigger Date, the sum of $100,000; (d) Within 150 days after the Funding Trigger Date, the sum of $100,000; and (e) Within 180 days after the Funding Trigger Date, the sum of $100,000. Page 73 (2) To use diligent efforts to assist Lorilei and Mr. & Mrs. Cunningham to refinance current liabilities guaranteed by its principals and their affiliates in a manner removing such personal guarantees, provided that, if such efforts have not been successful prior to December 31, 2000, Lorilei will be permitted by AmeriNet to enter into an agreement with such guarantors guaranteeing direct payment of such obligations and to secure such guarantee with an additional mortgage on the real estate owned by Lorilei. (B) The Parties hereby acknowledge that Code Section 368(a)(1)(B) does not permit stockholders of the corporation whose stock is being acquired to receive any consideration therefor other than voting equity securities of the corporation acquiring their common stock; consequently, the Lorilei Declarants hereby covenant and agree that no part of the proceeds to be invested by AmeriNet in Lorilei will be used, directly or indirectly, to make any payments to the persons who were Lorilei's stockholders immediately prior to the Closing, including any of the payments required under Employment or other agreements with Lorilei, all such obligations to be funded solely from Lorilei's operating income. 5.14 Board of Directors. Subject to Lorilei's substantial compliance with its material obligations under this Agreement, including, without limitation, those involving provision of audited financial statements for its operations for the time period and in the form required by Commission Regulation S-B for purposes of material acquisitions; and, subject to continuing compliance by Mr. & Mrs. Cunningham with their obligations under their employment agreements with Lorilei and with their fiduciary obligations to AmeriNet: (A) (1) AmeriNet hereby covenants and agrees that it will maintain membership on the board of directors of Lorilei in the following ratio: two thirds of the members will be nominees of Mr. & Mrs Cunningham and one third will be nominees of AmeriNet, provided that: (a) Lorilei cumulatively attains EBITDA during the following fiscal periods equal to the following amounts: 1. During each quarter in the fiscal period starting on July 1, 2000 and ending on June 30, 2001, EBITDA of at least at least 70% of $125,000; 2. During each quarter in the fiscal period starting on July 1, 2001 and ending on June 30, 2002, EBITDA of at least at least 70% of $225,000; and 3. During each quarter in the fiscal period starting on July 1, 2002 and ending on June 30, 2003, EBITDA of at least 70% of $375,000; and (b) Lorilei and the Former Lorilei Stockholders must comply with all of their obligations under this Agreement, including, without limitation, those involving provision of audited financial statements for Lorilei's operations for the time period and in the form required by Commission Regulation S-B for purposes of the Reorganization. (2) Notwithstanding the provisions in Section 5.14(A)(1): (a) The initial determination by AmeriNet as to the attainment of the minimum acceptable EBITDA will not be made until two complete fiscal quarters have passed since the Closing Date; Page 74 (b) After the first year following the Closing Date, the minimum acceptable EBITDA may be modified periodically by unanimous action (including the affirmative votes of all AmeriNet nominees) of the board of directors of Lorilei; provided that after the third year, unless new minimum acceptable EBITDA are agreed to, the minimum acceptable EBITDA will increase annually to 150% of the EBITDA projected for the immediately preceding year; (c) In the event that the right of Mr. & Mrs. Cunningham to designate two thirds of the membership on Lorilei's board of directors is suspended due to failure to meet the minimum acceptable EBITDA, such right will be reinstated at such time as the deficiency in meeting the minimum acceptable EBITDA, on a cumulative basis, has been cured. (d) As a continuing condition to the right of Mr. & Mrs. Cunningham's designees on Lorilei's board of directors to take any corporate actions, such action may not violate any of the following restrictions or requirements and any action not in conformity with such continuing conditions shall be void: 1. The members of Lorilei's board of directors serving as nominees of Mr. & Mrs. Cunningham must fully comply with their fiduciary obligations to AmeriNet and Lorilei's Stockholders and with applicable laws; 2. A quorum for meetings of the board of directors of Lorilei and action by such board of directors will require the participation of AmeriNet's nominees; provided that, if a meeting deemed to involve material issues is adjourned due to the inability to attain a quorum as a result of the absence of the AmeriNet nominees, then, upon receipt of written notice from Lorilei's board of directors, AmeriNet must assure that its nominees (or their successors if AmeriNet elects to replace them) attend the reconvened meeting, which will be held by telephone conference at a time during a business day designated by AmeriNet within three days after AmeriNet is provided with the written notice of the adjourned meeting; and 3. The board of directors of Lorilei will not for so long as Lorilei remains a subsidiary of AmeriNet, without AmeriNet's prior written consent specifying the action authorized, be authorized to: A. Engage in any material change in Lorilei's business not contemplated by the Projections; B. Sell a material portion of Lorilei's assets outside the normal course of business; C. Issue any securities; D. Authorize the borrowing of any funds or pledge of any assets; or E. Confess any judgment or settle any material claim of liability. (B) Subject to Lorilei's attainment of at least 70% of its EBITDA targets set forth in the preceding subsection, AmeriNet will nominate Mr. & Mrs. Cunningham for election to AmeriNet's board of directors on a continuing basis for a period of not less than three years and shall use its best efforts to secure their election by AmeriNet's stockholders. Page 75 5.15 Additional Covenants by Lorilei As of Closing all accrued obligations by Lorilei to its employees, consultants and independent contractors involving payments due for services rendered, whether in the form of salaries, bonuses, benefits, benefit plans, or other fees or consideration of any kind, will be fully and irrevocably discharged, except for approximately $25,000 in accrued salary involving obligations for the most recent pay period and accrued vacation costs. Article VI Conditions to the Reorganization 6.1 Conditions to Obligations of Each Party to Effect the Reorganization. The respective obligations of each party to this Agreement to effect the Reorganization will be subject to the satisfaction at or prior to the Closing Date of the following conditions: (A) No Injunctions or Restraints: Illegality. No temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Reorganization will be in effect, nor will any proceeding brought by an administrative agency or commission or other governmental authority or instrumentality, domestic or foreign, seeking any of the foregoing be pending; nor will there be any action taken, or any statute, rule, regulation or order enacted, entered, enforced or deemed applicable to the Reorganization, which makes the consummation of the Reorganization illegal. (B) Lorilei Information Required by Commission Regulation S-B The provision by Lorilei on a timely basis in full compliance with the requirements of Commission Regulation S-B for material acquisitions, of all information concerning its past operations, including audited financial statements, will constitute a condition subsequent to the obligations of AmeriNet under this Agreement and in the event of the failure of such condition subsequent, then, at AmeriNet's sole option: (1) The Reorganization may be rescinded, and all funds advanced by AmeriNet to Lorilei will be repaid, with interest at the annual rate of 8%, to AmeriNet within 30 days after such rescission; or (2) The Undisclosed Liabilities Escrow Shares will be deemed defaulted to AmeriNet and the Reorganization will be restructured in a manner complying with AmeriNet's reporting and other obligations under the Exchange Act, including the sale by AmeriNet of Lorilei. 6.2 Additional Conditions to Obligations of Lorilei. The obligations of Lorilei to consummate and effect this Agreement and the transactions contemplated hereby will be subject to the satisfaction at or prior to the Closing Date of each of the following conditions, any of which may be waived, in writing, exclusively by Lorilei: (A) Representations, Warranties and Covenants. The representations and warranties of AmeriNet in this Agreement will be true and correct in all material respects on and as of the Closing Date as though such representations and warranties were made on and as of such time and AmeriNet will have performed and complied in all material respects with all covenants, obligations and conditions of this Agreement required to be performed and complied with by it as of the Closing Date. Page 76 (B) Certificate of AmeriNet. Lorilei will have been provided with a certificate executed on behalf of AmeriNet by its President and its Chief Financial Officer, Treasurer or officer exercising such functions to the effect that, as of the Closing Date: (1) All representations and warranties made by AmeriNet under this Agreement are true and complete in all material respects; and (2) All covenants, obligations and conditions of this Agreement to be performed by AmeriNet on or before such date have been so performed in all material respects. (C) Satisfactory Form of Legal Matters. The form, scope and substance of all legal and accounting matters contemplated hereby and all documents and other papers delivered hereunder prior to and on the Closing Date will be reasonably acceptable to counsel to Lorilei. (D) Legal Opinion. Lorilei will have received a legal opinion from legal counsel to AmeriNet, substantially in the form of Exhibit 6.2(D) hereto. (E) No Material Adverse Changes. There will not have occurred any event, fact or condition that has had or reasonably would be expected to have a material adverse effect on AmeriNet. (F) Tax Opinion. (1) The Lorilei Declarants will have received a written opinion from their legal counsel or tax advisors to the effect that the Reorganization will constitute a reorganization within the meaning of Section 368(a)(1)(B) of the Code. (2) In rendering such opinion such legal counsel or tax advisor may rely on (and to the extent reasonably required, the Parties and Lorilei's stockholders will make) reasonable representations related thereto. 6.3 Additional Conditions to the Obligations of AmeriNet. The obligations of AmeriNet to consummate and effect this Agreement and the transactions contemplated hereby will be subject to the satisfaction at or prior to the Closing Date of each of the following conditions, any of which may be waived, in writing, exclusively by AmeriNet: (A) Representations, Warranties and Covenants. (1) The representations and warranties of Lorilei in this Agreement will be true and correct in all material respects on and as of the Closing Date as though such representations and warranties were made on and as of such time and Lorilei will have performed and complied in all material respects with all Page 77 covenants, obligations and conditions of this Agreement required to be performed and complied with by it as of the Closing Date. (2) AmeriNet will have no remedy against the Undisclosed Liabilities Escrow Fund in respect of an untrue representation or warranty if prior to the Closing Date Lorilei delivers to AmeriNet in accordance with Section 9.2 a written statement: (a) Advising AmeriNet that an event (a "Post-Execution Event") has occurred (specifying in reasonable detail such event) subsequent to the date of execution of this Agreement that would render any representation or warranty made by Lorilei in this Agreement untrue if such representation or warranty were made as of the Closing; and (b) Confirming that such representation or warranty was true as of the date of execution of this Agreement, and (c) AmeriNet subsequently waives the failure to satisfy the condition set forth in Section 6.3(A) with respect to such representation or warranty, in writing. (B) Certificate of Lorilei. AmeriNet will have been provided with a certificate executed on behalf of Lorilei by its President and Chief Financial Officer to the effect that, as of the Closing Date, all: (1) Representations and warranties made by Lorilei under this Agreement are true and complete in all material respects; and (2) Covenants, obligations and conditions of this Agreement to be performed by Lorilei on or before such date have been so performed in all material respects. (C) Third Party Consents. Any and all consents, waivers and approvals required from third Parties relating to the contracts and agreements of Lorilei so that the Reorganization and other transactions contemplated hereby do not adversely affect the rights of, and benefits to, Lorilei thereunder will have been obtained. (D) Satisfactory Form of Legal and Accounting Matters. The form, scope and substance of all legal and accounting matters contemplated hereby and all documents and other papers delivered hereunder prior to and on the Closing Date will be reasonably acceptable to AmeriNet's counsel (provided that the condition subsequent concerning the compliance of information provided by Lorilei with the requirements of Commission Regulation S-B, on a timely basis, will survive the Closing). (E) Legal Opinion. AmeriNet will have received a legal opinion from legal counsel to Lorilei, in substantially the form of Exhibit 6.3(E) hereto. (F) No Material Adverse Changes. There will not have occurred any event, fact or condition which has had or reasonably would be expected to have a material adverse effect on Lorilei. Page 78 (G) Affiliate Agreements. AmeriNet will have received from each of the Affiliates of Lorilei an executed Affiliate Agreement which will be in full force and effect. (H) Employment Agreements. The Employment Agreements will have been duly executed and delivered and will be in full force and effect. (I) Minimum Net Worth. Lorilei will on the Closing Date have net tangible assets (tangible assets in excess of liabilities) based on replacement cost valuation of not less than $300,000; no net current payables (excess of current payables over current receivables), a total of not more than $280,000 in long term payables; at least $162,000 EBITDA for calendar year 1999 based on revenues of at least $1,100,000, with a pre-tax net profit of approximately $20,000; and, projected EBITDA for the fiscal years ending June 30, 2001, 2002 and 2003 of $500,000, $900,000 and $1,500,000, respectively. (J) Tax Opinion. (1) AmeriNet will have received a written opinion from its general counsel to the effect that the Reorganization will constitute a reorganization within the meaning of Section 368(a)(1)(B) of the Code. (2) In rendering such opinion, counsel may rely on (and to the extent reasonably required, the Parties and Lorilei's stockholders will make) reasonable representations related thereto. (K) Confidentiality Agreements. Each current employee, consultant or other person having access to Lorilei's confidential information will have executed a confidentiality agreement in the form annexed hereto as Exhibit 6.3(K). (L) Non-accredited Investors. Except as disclosed in the Lorilei Warranty Exceptions listed in Schedule 2, there will be no stockholders of Lorilei who are not Accredited Investors. (M) Obligations to Lorilei Personnel All obligations by Lorilei to its employees, consultants and independent contractors involving payments due for services rendered will have been fully discharged, as of the Closing date. Page 79 Article VII Survival of Condition Subsequent, Representations and Warranties, Covenants & Undisclosed Liabilities Escrow 7.1 Survival of Condition Subsequent, Representations and Warranties & Covenant. All conditions subsequent to the Reorganization and covenants to be performed after the Closing, and all representations and warranties in this Agreement or in any instrument delivered pursuant to this Agreement will survive the Closing and continue until the date the audit of AmeriNet's financial statements for the year ending June 30, 2001 has been completed and AmeriNet has received a signed opinion from its independent auditors certifying such financial statements (the "2001 Audit Date"). 7.2 Escrow Arrangements. (A) Undisclosed Liabilities Escrow Fund. (1) As soon as practicable after the Closing Date, a portion of the shares of AmeriNet's common stock to be issued in the Reorganization equal to the Undisclosed Liabilities Escrow Number plus any additional New Shares (as defined below) as may be issued in respect thereof after the Closing Date) (collectively, the "Undisclosed Liabilities Escrow Shares"), without any act of any stockholder, will be registered in the name of Yankees, AmeriNet's strategic planning consultant, or such other person or legal entity as may otherwise be selected by AmeriNet prior to the Closing, as escrow agent (the "Undisclosed Liabilities Escrow Agent"), and will be deposited with a financial institution acceptable to AmeriNet and the Agent [as defined in Section 7.2(H) below)], such deposit to constitute an escrow fund (the "Undisclosed Liabilities Escrow Fund") to be governed by the terms set forth herein and at AmeriNet's sole cost and expense. (2) (a) The portion of AmeriNet's common stock in the Undisclosed Liabilities Escrow Fund contributed on behalf of each stockholder of Lorilei is listed opposite such stockholders' name on Exhibit 7.2. (b) The Undisclosed Liabilities Escrow Fund will be available to compensate AmeriNet and its affiliates for any claim, loss, expense, liability or other damage, including reasonable attorneys' fees, that such person has incurred or reasonably anticipates incurring by reason of the successful assertion by a third party of any claims for liabilities of the Lorilei Declarants that were not disclosed as required pursuant to this Agreement ("Undisclosed Liabilities"), but only to the extent that such Undisclosed Liabilities exceed $20,000. (c) AmeriNet and Lorilei each acknowledge that such Undisclosed Liabilities, if any, would relate to unresolved contingencies existing at the Time of Closing which if resolved at the Closing would have led to a reduction in the total number of shares of AmeriNet's common stock AmeriNet would have agreed to issue in connection with the Reorganization or to AmeriNet's decision not to acquire Lorilei. (3) Nothing herein will limit the liability of the Lorilei Declarants for any misrepresentation or breach of warranty except that resort to the Undisclosed Liabilities Escrow Fund will be the exclusive contractual remedy of AmeriNet for recovery of monetary damages resulting from any such undisclosed liability; provided, however, that nothing herein will limit any noncontractual remedy for fraud or relief in the form of remedies other than recovery of monetary damages. Page 80 (4) (a) Subject to the following requirements, the Undisclosed Liabilities Escrow Fund will remain in existence until the 2001 Audit Date (the "Undisclosed Liabilities Escrow Period"). (b) Upon the expiration of such Undisclosed Liabilities Escrow Period, the Undisclosed Liabilities Escrow Fund will terminate with respect to all Undisclosed Liabilities Escrow Shares; provided, however, that the number of Undisclosed Liabilities Escrow Shares which, in the reasonable judgment of AmeriNet, subject to the objection of the Agent and the subsequent arbitration of the matter in the manner provided in Section 7.2(G) hereof, are necessary to satisfy any unsatisfied claims specified in any Officer's Certificate delivered to the Undisclosed Liabilities Escrow Agent prior to the expiration of the Undisclosed Liabilities Escrow Period with respect to facts and circumstances existing on or prior to the 2001 Audit Date will remain in the Undisclosed Liabilities Escrow Fund (and the Undisclosed Liabilities Escrow Fund will remain in existence) until such claims have been resolved. (c) As soon as all such claims have been resolved, the Undisclosed Liabilities Escrow Agent will deliver to the Former Lorilei Stockholders all AmeriNet's common stock and other property remaining in the Undisclosed Liabilities Escrow Fund and not required to satisfy such claims. (d) Deliveries of AmeriNet's common stock and other property to the Former Lorilei Stockholders pursuant to this Section 7.2(A) will be made in proportion to their respective original contributions to the Undisclosed Liabilities Escrow Fund. (B) Brashear Escrow Fund. (1) As soon as practicable after the Closing Date, a portion of the shares of AmeriNet's common stock to be issued in the Reorganization equal to the Brashear Escrow Number plus any additional New Shares (as defined below) as may be issued in respect thereof after the Closing Date) (collectively, the "Brashear Escrow Shares"), without any act of any stockholder, will be registered in the name of Bruce Brashear, Esquire, the Lorilei Declarants' legal counsel, or such other person or legal entity as may otherwise be selected by the Parties prior to the Closing as escrow agent (the "Brashear Escrow Agent"), and will be deposited with a financial institution acceptable to AmeriNet and the Agent [as defined in Section 7.2(H) below)], such deposit to constitute an escrow fund (the "Brashear Escrow Fund") to be governed by the terms set forth herein and at AmeriNet's sole cost and expense. (2) (a) The portion of AmeriNet's common stock in the Brashear Escrow Fund contributed on behalf of each stockholder of Lorilei is listed opposite such stockholders' name on Exhibit 7.2. (b) The Brashear Escrow Fund will be held and distributed in the manner and for the purposes set forth in Section 1.2(A)(2)(a). (3) The Brashear Escrow Shares will constitute AmeriNet's exclusive monetary remedy for damages resulting as a result of the contingencies involved; provided, however, that nothing herein will limit any noncontractual remedy for fraud or relief in the form of remedies other than recovery of monetary damages. (C) Protection of Escrow Shares. The Escrow Agents will hold and safeguard the Escrow Shares during the Escrow Terms, will treat the Escrow Shares as a trust fund in accordance with the terms of this Agreement and not as the property of the Parties and will hold and dispose of the Escrow Shares only in accordance with the terms hereof. Page 81 (D) Distributions; Voting. (1) (a) Any shares of AmeriNet's common stock or other equity securities issued or distributed by AmeriNet, including shares issued upon a stock split or any stock dividend or distribution ("New Shares") in respect of AmeriNet's common stock in the Escrow Funds which have not been released from the Escrow Funds will be added to the Escrow Funds and become a part thereof. (b) New Shares issued in respect of AmeriNet's common stock which have been released from the Escrow Funds will not be added to the Escrow Funds, but will be distributed to the holders thereof. (c) When and if cash dividends on AmeriNet's common stock in the Escrow Funds will be declared and paid, they will be added to the Escrow Funds and become a part thereof. (2) Each stockholder of Lorilei will have voting rights with respect to the shares of AmeriNet's common stock contributed to the Escrow Funds on behalf of such stockholder (and on any voting securities added to the Escrow Funds in respect of such shares of AmeriNet's common stock) so long as such shares of AmeriNet's common stock or other voting securities are held in the Escrow Funds. (E) Claims Upon Escrow Funds. (1) Subject to the objection procedure established below, the Undisclosed Liabilities Escrow Agent will deliver to AmeriNet out of the Undisclosed Liabilities Escrow Fund, as promptly as practicable, shares of AmeriNet's common stock or other assets held in the Undisclosed Liabilities Escrow Fund in an amount equal to the funds required to recover the monetary damages resulting from such Undisclosed Liabilities, provided that (a) A written claim of loss has been provided by AmeriNet to the Undisclosed Liabilities Escrow Agent at any time on or before the last day of the Undisclosed Liabilities Escrow Period in the form of a certificate signed by any officer of AmeriNet (an "Officer's Certificate"), with a copy to Lorilei: 1. Stating that AmeriNet has paid or properly accrued or reasonably anticipates that it will have to pay or accrue as a result of such Undisclosed Liabilities, and 2. Specifying in reasonable detail the individual items of included in the amount so stated, the date each such item was paid or properly accrued, or the basis for such anticipated liability, and the nature of the misrepresentation, breach of warranty or claim to which such item is related. (b) For the purposes of determining the number of shares of AmeriNet's common stock to be delivered to AmeriNet out of the Undisclosed Liabilities Escrow Fund pursuant to Section 7.2(E)(1), the shares of AmeriNet's common stock will be valued at the average closing transaction price therefor during the preceding ten trading days, as reported on the highest rated securities market or securities exchange on which AmeriNet's common stock is actually traded. (2) (a) Shares will be delivered from the Brashear Escrow in the manner and at the times specified in Section 1.2(A)(2)(a), subject to the provisions set forth in Section 7.2(E)(2)(c), within thirty days after presentation to the Brashear Escrow Agent of written evidence that the event requiring distribution has Page 82 occurred and indicating the number of shares or cash to be distributed and the basis for such calculation (the "Delivery Date" and the "Brashear Distribution Notice," respectively). (b) Within three business days after a Brashear Distribution Notice is received by the Brashear Escrow Agent, the Brashear Escrow Agent shall forward a copy thereof to the other potential claimant with a written notice advising such other claimant that unless written objections to such distribution specifying the basis for such objections are provided to the Brashear Escrow Agent on or before the Delivery Date (the "Notice of Objections"), distribution as requested will be made. (c) In the event a Notice of Objection is provided, the Brashear Escrow Agent will refrain from making the requested distribution and will provide the Parties with written notice that unless the Parties mutually agree to a distribution or initiate action pursuant to the g eneral dispute resolution procedures of this Agreement within ten business days, the Brashear Escrow Agent will initiate an action in the nature of an interpleader in the Circuit Court sitting in and for Alachua County, Florida and will deposit the shares or funds in controversy in the registry of such court, whereupon the Parties will be required to determine ownership thereof, with all expenses of litigation for the Parties and the Brashear Escrow Agent to be charged and awarded by such court to against the non-prevailing Party or Parties. (d) If an action pursuant to the general dispute resolution procedures of this Agreement is initiated within ten business days, the Brashear Escrow Agent will continue to hold the shares or funds in controversy during the pendency of such proceeding and will thereafter distribute them in accordance with the final award therein. (F) Objections to Undisclosed Liabilities Escrow Claims. (1) At the time of delivery of any Officer's Certificate to the Undisclosed Liabilities Escrow Agent, a duplicate copy of such certificate will be delivered to the Agent [as defined in Section 7.2(H)] and for a period of thirty (30) days after such delivery, the Undisclosed Liabilities Escrow Agent will make no delivery to AmeriNet of shares of AmeriNet's common stock, pursuant to Section 7.2(E)(1) hereof unless the Undisclosed Liabilities Escrow Agent will have received written authorization from the Agent to make such delivery. (2) After the expiration of such thirty (30) day period, the Undisclosed Liabilities Escrow Agent will make delivery of the shares of AmeriNet's common stock or other property in the Undisclosed Liabilities Escrow Fund in accordance with Section 7.2(F) hereof, provided that no such payment or delivery may be made if the Agent will object in a written statement to the claim made in the Officer's Certificate, and such statement will have been delivered to the Undisclosed Liabilities Escrow Agent prior to the expiration of such thirty day period. (G) Resolution of Undisclosed Liabilities Escrow Conflicts; Arbitration. (1) (a) In case the Agent will so object in writing to any claim or claims made in any Officer's Certificate, the Agent and AmeriNet will attempt in good faith to agree upon the rights of the respective Parties with respect to each of such claims. (b) If the Agent and AmeriNet should so agree, a memorandum setting forth such agreement will be prepared and signed by both Parties and will be furnished to the Undisclosed Liabilities Escrow Agent. Page 83 (c) The Undisclosed Liabilities Escrow Agent will be entitled to rely on any such memorandum and distribute shares of AmeriNet's common stock or other property from the Undisclosed Liabilities Escrow Fund in accordance with the terms thereof. (2) (a) If no such agreement can be reached after good faith negotiation, either AmeriNet or the Agent may demand arbitration of the matter unless the amount of the damage or loss is at issue in pending litigation with a third party, in which event arbitration will not be commenced until such amount is ascertained or both Parties agree to arbitration; and in either such event the matter will be settled by arbitration conducted by three arbitrators. (b) AmeriNet and the Agent will each select one arbitrator, and the two arbitrators so selected will select a third arbitrator. (c) The arbitrators will set a limited time period and establish procedures designed to reduce the cost and time for discovery while allowing the Parties an opportunity, adequate in the sole judgment of the arbitrators, to discover relevant information from the opposing Parties about the subject matter of the dispute. (d) The arbitrators will rule upon motions to compel or limit discovery and will have the authority to impose sanctions, including attorneys fees and costs, to the extent as a court of competent law or equity, should the arbitrators determine that discovery was sought without substantial justification or that discovery was refused or objected to without substantial justification. (e) The decision of a majority of the three arbitrators as to the validity and amount of any claim in such Officer's Certificate will be binding and conclusive upon the Parties to this Agreement, and notwithstanding anything in Section 7.2(E)(1) hereof, the Undisclosed Liabilities Escrow Agent will be entitled to act in accordance with such decision and make or withhold payments out of the Undisclosed Liabilities Escrow Fund in accordance therewith. (f) Such decision will be written and will be supported by written findings of fact and conclusions which will set forth the award, judgment, decree or order awarded by the arbitrators. (3) (a) (i) Judgment upon any award rendered by the arbitrators may be entered in any court having jurisdiction. (ii) Any such arbitration will be held in Broward County, Florida, under the rules then in effect of the American Arbitration Association to the extent such rules are not inconsistent with this Section 7.2(G). (b) For purposes of this Section 7.2(G), in any arbitration hereunder in which any claim or the amount thereof stated in the Officer's Certificate is at issue, AmeriNet will be deemed to be the Non-Prevailing Party in the event that the arbitrators award AmeriNet less than the sum of 50% of the disputed amount plus any amounts not in dispute; otherwise, the Former Lorilei Stockholders as represented by the Agent will be deemed to be the Non-Prevailing Party. (c) The Non-Prevailing Party to an arbitration will pay its own expenses, the fees of each arbitrator, the administrative fee of the American Arbitration Association, and the expenses, including without limitation, reasonable attorneys' fees and costs, incurred by the other party to the arbitration. Page 84 (H) Agent of the Stockholders: Power of Attorney. (1) (a) (i) Gerald R. Cunningham is hereby irrevocably appointed as the agent and attorney-in-fact (the "Agent") for each stockholder of Lorilei, for and on behalf of the Former Lorilei Stockholders, to give and receive notices and communications, to authorize delivery to AmeriNet of AmeriNet's common stock or other property from the Escrow Funds in satisfaction of claims by AmeriNet, to object to such deliveries, to agree to, negotiate, enter into settlements and compromises of, and demand arbitration and comply with orders of courts and awards of arbitrators with respect to such claims, and to take all actions necessary or appropriate in the judgment of Agent for the accomplishment of the foregoing. (ii) Such agency may be changed by the Former Lorilei Stockholders from time to time upon not less than thirty (30) days prior written notice to AmeriNet; provided that the Agent may not be removed unless holders of a two-thirds interest of the common stock comprising the subject Escrow Fund agree to such removal and to the identity of the substituted agent. (iii) No bond will be required of the Agent, and the Agent will not receive compensation for his or her services. (iv) Notices or communications to or from the Agent will constitute notice to or from each of the Former Lorilei Stockholders. (b) The Agent will be entitled to submit a claim and receive reimbursement from the Escrow Funds for all reasonable, documented out-of-pocket expenses incurred by the Agent as a result of his acting as the Agent; provided, however, that such right to reimbursement will be subordinate to AmeriNet's claims on the Escrow Funds, if any, and will be paid only after all such claims have been satisfied. (c) Any such reimbursement will be paid in shares of AmeriNet's common stock out of the Escrow Fund. (d) For purposes of such reimbursement of the Agent only, such shares will be valued at the average of the closing prices of AmeriNet's common stock for the ten trading days ending on the day prior to the date the Undisclosed Liabilities Escrow Agent pays such reimbursement amount. (2) (a) The Agent will not be liable for any act done or omitted hereunder as Agent while acting in good faith and in the exercise of reasonable judgment. (b) The Former Lorilei Stockholders on whose behalf shares of AmeriNet's common stock were contributed to the subject Escrow Fund will severally indemnify the Agent and hold the Agent harmless against any loss, liability or expense incurred without negligence or bad faith on the part of the Agent and arising out of or in connection with the acceptance or administration of the Agent's duties hereunder, including the reasonable fees and expenses of any legal counsel retained by the Agent. Page 85 (I) Actions of the Agent. (1) A decision, act, consent or instruction of the Agent will constitute a decision of all the stockholders for whom shares of AmeriNet's common stock otherwise issuable to them are deposited in the Escrow Funds and will be final, binding and conclusive upon each of such stockholders, and the Escrow Agents and AmeriNet may rely upon any such decision, act, consent or instruction of the Agent as being the decision, act, consent or instruction of every such stockholder. (2) The Escrow Agents and AmeriNet are hereby relieved from any liability to any person for any acts done by them in accordance with such decision, act, consent or instruction of the Agent. (J) Third-Party Claims. (1) In the event AmeriNet becomes aware of a third-party claim which AmeriNet believes may result in a demand against the Undisclosed Liabilities Escrow Fund, AmeriNet will notify the Agent of such claim, and the Agent and the Former Lorilei Stockholders will be entitled, at their expense, to participate in any defense of such claim. (2) AmeriNet will have the right in its sole discretion to settle any such claim; provided, however, that except with the consent of the Agent, no settlement of any such claim with third-party claimants will alone be determinative of the validity of any claim against the Undisclosed Liabilities Escrow Fund. (3) In the event that the Agent has consented to any such settlement, the Agent will have no power or authority to object under any provision of this Article VII to the amount of any claim by AmeriNet against the Undisclosed Liabilities Escrow Fund with respect to such settlement. (K) Escrow Agents' Duties. (1) (a) The Escrow Agents will be obligated only for the performance of such duties as are specifically set forth herein, and as set forth in any additional written escrow instructions which the Escrow Agents may receive after the date of this Agreement which are signed by an officer of AmeriNet and the Agent, and may rely and will be protected in relying or refraining from acting on any instrument reasonably believed to be genuine and to have been signed or presented by the proper party or Parties. (b) The Escrow Agents will not be liable for any act done or omitted hereunder as Escrow Agents while acting in good faith and in the exercise of reasonable judgment, and any act done or omitted pursuant to the advice of counsel will be conclusive evidence of such good faith. (2) (a) The Escrow Agents are hereby expressly authorized to disregard any and all warnings given by any of the Parties or by any other person, excepting only orders or process of courts of law, and is hereby expressly authorized to comply with and obey orders, judgments or decrees of any court. (b) In case the Escrow Agents obey or comply with any order, judgment or decree of any court, the Escrow Agents will not be liable to any of the Parties or to any other person by reason of such compliance, notwithstanding any such order, judgment or decree being subsequently reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction. Page 86 (3) The Escrow Agents will not be liable in any respect on account of the identity, authority or rights of the Parties executing or delivering or purporting to execute or deliver this Agreement or any documents or papers deposited or called for hereunder. (4) The Escrow Agents will not be liable for the expiration of any rights under any statute of limitations with respect to this Agreement or any documents deposited with the Escrow Agents. (5) The Escrow Agents may resign at any time upon giving at least thirty (30) days written notice to AmeriNet and the Agent to this Agreement; provided, however, that no such resignation will become effective until the appointment of a successor escrow agent which will be accomplished as follows: (a) AmeriNet and the Agent will use their best efforts to mutually agree upon a successor agent within thirty (30) days after receiving such notice. (b) If the Parties fail to agree upon a successor escrow agent within such time, AmeriNet will have the right to appoint a successor escrow agent authorized to do business in Florida. (c) The successor escrow agent selected in the preceding manner will execute and deliver an instrument accepting such appointment and it will thereupon be deemed the subject Escrow Agent hereunder and it will without further acts be vested with all the estates, properties, rights, powers, and duties of the predecessor Escrow Agent as if originally named as Escrow Agent. (d) Thereafter, the predecessor Escrow Agent will be discharged for any further duties and liabilities under this Agreement. Article VIII Termination, Amendment And Waiver 8.1 Termination. This Agreement may be terminated and the Reorganization abandoned at any time prior to the Closing Date, as follows: (A) By mutual consent of Lorilei and AmeriNet. (B) By AmeriNet if it is not in material breach of its obligations under this Agreement and there has been a material breach of any representation, warranty, covenant or agreement contained in this Agreement on the part of Lorilei and such breach has not been cured within fifteen days after notice to Lorilei. (C) By Lorilei if it is not in material breach of its respective obligations under this Agreement and there has been a material breach of any representation, warranty, covenant or agreement contained in this Agreement on the part of AmeriNet and such breach has not been cured within 15 days after notice to AmeriNet; (D) By any Party if: (1) The Reorganization has not occurred by May 31, 2000; (2) There will be a final nonappealable order of a federal or state court in effect preventing consummation of the Reorganization; Page 87 (3) There will be any action taken, or any statute, rule, regulation or order enacted, promulgated or issued or deemed applicable to the Reorganization by any Governmental Entity which would make consummation of the Reorganization illegal; or (4) There will be any action taken, or any statute, rule, regulation or order enacted, promulgated or issued or deemed applicable to the Reorganization by any Governmental Entity, which would: (a) Prohibit AmeriNet's or Lorilei's ownership or operation of all or a material portion of the business of Lorilei, or compel AmeriNet or Lorilei to dispose of or hold separate all or a material portion of the business or assets of Lorilei or AmeriNet as a result of the Reorganization; or (b) Render AmeriNet or Lorilei unable to consummate the Reorganization, except for any waiting period provisions. (E) Where action is taken to terminate this Agreement pursuant to this Section 8.1, it will be sufficient for such action to be authorized by the board of directors (as applicable) of the Party taking such action. 8.2 Effect of Termination. In the event of termination of this Agreement as provided in Section 8.1, this Agreement will forthwith become void and there will be no liability or obligation on the part of AmeriNet or Lorilei or their respective officers, directors or stockholders, except if such termination results from the breach by a Party of any of its representations, warranties, covenants or agreements set forth in this Agreement (it being understood that termination of this Agreement because of failure of Lorilei to satisfy the condition set forth in Section 6.3(A) as a result of the occurrence of a Post-Execution Event will not be deemed to be a termination resulting from such a breach of representation or warranty.) 8.3 Amendment. (A) This Agreement may be amended by the Parties at any time before or after approval of matters presented in connection with the Closing by the stockholders of those Parties required by applicable law to so approve but, after any such stockholder approval, no amendment will be made which by law requires the further approval of stockholders of a party without obtaining such further approval. (B) This Agreement may not be amended except by an instrument in writing signed on behalf of each of the Parties. 8.4 Extension & Waiver. (A) At any time prior to the Closing any Party may, to the extent legally allowed: (1) Extend the time for the performance of any of the obligations or other acts of the other Parties; (2) Waive any inaccuracies in the representations and warranties made to such party contained herein or in any document delivered pursuant hereto; or (3) Waive compliance with any of the agreements or conditions for the benefit of such Party contained herein. (B) Any agreement on the part of a Party to any such extension or waiver will be valid only if set forth in an instrument in writing signed on behalf of such Party. Page 88 Article IX General Provisions 9.1 Interpretation. (A) When a reference is made in this Agreement to Schedules or Exhibits, such reference will be to a Schedule or Exhibit to this Agreement unless otherwise indicated. (B) The words "include," "includes" and "including" when used herein will be deemed in each case to be followed by the words "without limitation." (C) The table of contents and headings contained in this Agreement are for reference purposes only and will not affect in any way the meaning or interpretation of this Agreement. (D) The captions in this Agreement are for convenience and reference only and in no way define, describe, extend or limit the scope of this Agreement or the intent of any provisions hereof. (E) All pronouns and any variations thereof will be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the Party or Parties, or their personal representatives, successors and assigns may require. (F) The Parties agree that they have been represented by counsel during the negotiation and execution of this Agreement and, therefore, waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document. 9.2 Notice. (A) All notices, demands or other communications given hereunder will be in writing and will be deemed to have been duly given on the first business day after mailing by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows: (1) To AmeriNet: AmeriNet Group.com, Inc. Crystal Corporate Center; 2500 North Military Trail, Suite 225-C; Boca Raton, Florida 33431 Attention: Michael Jordan, President Telephone (561) 998-3435, Fax (561) 998-4635; and, e-mail michael@amerinetgroup.com; with a copy to George Franjola, Esquire; General Counsel AmeriNet Group.com, Inc. 1941 Southeast 51st Terrace; Ocala, Florida 34471 Telephone (352) 694-9182, Fax (352) 694-1325; and, e-mail, tyclegal@atlantic.net. (2) To Lorilei: Lorilei Communications, Inc. Post Office Box 770787; Ocala, Florida 34477 7325 Southwest 32nd Street; Ocala, Florida 34474 Attention: Gerald R. Cunningham, President Telephone (352) 861-1350; Fax (352) 861-1339; e-mail thefirm@callthefirm.com; with a copy to Page 89 Bruce Brashear, Esquire Brashear & Associates 920 Northwest 8th Avenue, Suite A; Gainesville, Florida 32601 Telephone (352) 336-0800; Fax (352) 336-0505; and, e-mail bbrashear@nflalaw.com; (3) To Mr. Cunningham: Gerald R. Cunningham 18498 Northwest 24th Avenue; Citra, Florida 32113 Telephone (352) 595-3834; Fax (352) 595-0807; e-mail leighc@callthefirm.com; (4) To Mrs. Cunningham Leigh A. Cunningham 18498 Northwest 24th Avenue; Citra, Florida 32113 Telephone (352) 595-3834; Fax (352) 595-0807; e-mail leighc@callthefirm.com; (5) To the Undisclosed Liabilities Escrow Agent: The Yankee Companies, Inc. Crystal Corporate Center; 2500 North Military Trail, Suite 225; Boca Raton, Florida 33431 Attention: Leonard Miles Tucker, President Telephone (561) 998-2025, Fax (561) 998-3425; and, e-mail carrington@flinet.com; (6) To the Brashear Escrow Agent: Bruce Brashear, Esquire Brashear & Associates 920 Northwest 8th Avenue, Suite A; Gainesville, Florida 32601 Telephone (352) 336-0800; Fax (352) 336-0505; and, e-mail bbrashear@nflalaw.com or such other address or to such other person as any Party will designate to the other for such purpose in the manner hereinafter set forth. (B) At the request of any Party, notice will also be provided by overnight delivery, facsimile transmission or e-mail, provided that a transmission receipt is retained. (C) (1) The Parties acknowledge that Yankees serves as a strategic consultant to AmeriNet and has acted as scrivener for the Parties in this transaction but that Yankees is neither a law firm nor an agency subject to any professional regulation or oversight. (2) Because of the inherent conflict of interests involved, Yankees has advised all of the Parties to retain independent legal and accounting counsel to review this Agreement and its exhibits and incorporated materials on their behalf. (3) The decision by any Party not to use the services of legal counsel in conjunction with this transaction will be solely at their own risk, each Part acknowledging that applicable rules of the Florida Bar prevent AmeriNet's general counsel, who has reviewed, approved and caused modifications on behalf of AmeriNet, from representing anyone other than AmeriNet in this transaction. Page 90 9.3 Merger of All Prior Agreements Herein. (A) This instrument, together with the instruments referred to herein, contains all of the understandings and agreements of the Parties with respect to the subject matter discussed herein. (B) All prior agreements whether written or oral are merged herein and will be of no force or effect. 9.4 Survival. The several representations, warranties and covenants of the Parties contained herein will survive the execution hereof and the Closing and will be effective regardless of any investigation that may have been made or may be made by or on behalf of any Party. 9.5 Severability. If any provision or any portion of any provision of this Agreement, other than one of the conditions precedent or subsequent, or the application of such provision or any portion thereof to any person or circumstance will be held invalid or unenforceable, the remaining portions of such provision and the remaining provisions of this Agreement or the application of such provision or portion of such provision as is held invalid or unenforceable to persons or circumstances other than those to which it is held invalid or unenforceable, will not be affected thereby. 9.6 Governing Law. This Agreement will be construed in accordance with the substantive and procedural laws of the State of Delaware (other than those regulating Taxation and choice of law). 9.7 Indemnification. (A) Each Party hereby irrevocably agrees to indemnify and hold the other Parties harmless from any and all liabilities and damages (including legal or other expenses incidental thereto), contingent, current, or inchoate to which they or any one of them may become subject as a direct, indirect or incidental consequence of any action by the indemnifying Party or as a consequence of the failure of the indemnifying Party to act, whether pursuant to requirements of this Agreement or otherwise. (B) In the event it becomes necessary to enforce this indemnity through an attorney, with or without litigation, the successful Party will be entitled to recover from the indemnifying Party, all costs incurred including reasonable attorneys' fees throughout any negotiations, trials or appeals, whether or not any suit is instituted. 9.8 Dispute Resolution. (A) In any action between the Parties to enforce any of the terms of this Agreement or any other matter arising from this Agreement any proceedings pertaining directly or indirectly to the rights or obligations of the Parties hereunder will, to the extent legally permitted, be held in Broward County, Florida, and the prevailing Party will be entitled to recover its costs and expenses, including reasonable attorneys' fees up to and including all negotiations, alternative dispute resolution proceedings, trials and appeals, whether or not any formal proceedings are initiated. (B) Except for the arbitration procedures outlined in paragraphs 7.2(G)(2) and 7.2(G)(3) which will govern any arbitration proceeding described therein, in the event of any dispute arising under this Agreement, or the negotiation thereof or inducements to enter into the Agreement, the dispute will, at the request of any Party, be exclusively resolved through the following procedures: Page 91 (1) (a) First, the issue will be submitted to mediation before a mediation service in Broward County, Florida to be selected by lot from six alternatives to be provided, three by AmeriNet and three by Lorilei. (b) The mediation efforts will be concluded within ten business days after their initiation unless the Parties unanimously agree to an extended mediation period; (2) In the event that mediation does not lead to a resolution of the dispute then at the request of any Party, the Parties will submit the dispute to binding arbitration before an arbitration service located in Broward County, Florida to be selected by lot, from six alternatives to be provided, three by AmeriNet and Three by Lorilei. (3) (a) Expenses of mediation will be borne equally by the Parties, if successful. (b) Expenses, including reasonable attorneys' fees, of mediation, if unsuccessful, and of arbitration, will be borne by the Party or Parties against whom the arbitration decision is rendered. (c) If the terms of the arbitral award do not establish a prevailing Party, then the expenses of unsuccessful mediation and arbitration will be borne equally by the Parties involved. 9.9 Benefit of Agreement. The terms and provisions of this Agreement will be binding upon and inure to the benefit of the Parties, their successors, assigns, personal representatives, estate, heirs and legatees but are not intended to confer upon any other person any rights or remedies hereunder. 9.10 Further Assurances. The Parties agree to do, execute, acknowledge and deliver or cause to be done, executed, acknowledged or delivered and to perform all such acts and deliver all such deeds, assignments, transfers, conveyances, powers of attorney, assurances, stock certificates and other documents, as may, from time to time, be required herein to effect the intent and purpose of this Agreement. 9.11 Counterparts. (A) This Agreement may be executed in any number of counterparts. (B) All executed counterparts will constitute one Agreement notwithstanding that all signatories are not signatories to the original or the same counterpart. (C) Execution by exchange of facsimile transmission will be deemed legally sufficient to bind the signatory; however, the Parties will, for aesthetic purposes, prepare a fully executed original version of this Agreement which will be the document filed with the Commission. 9.12 License. (A) This form of agreement is the property of Yankees and has been customized for this transaction with the consent of Yankees by George Franjola, Esquire, AmeriNet's general counsel. (B) The use of this form of agreement by the Parties is authorized hereby solely for purposes of this transaction. Page 92 (C) The use of this form of agreement or of any derivation thereof without Yankees' prior written permission is prohibited. In Witness Whereof, AmeriNet, Lorilei, the Former Lorilei Stockholders and the Escrow Agents (with respect to the Escrow Agents, as to matters set forth in Section 1.2(A)(2)(a) and Article VII only) have caused this Agreement to be executed by themselves or their duly authorized respective officers, all as of the last date set forth below: Signed, sealed and delivered In Our Presence: AmeriNet Group.com, Inc. _________________________________ (A Delaware corporation) _________________________________ By: /s/ Michael H. Jordan _____________________________ Michael H. Jordan, President Dated: May 11, 2000 Attest: /s/ Vanessa H. Lindsey _____________________________ Vanessa H. Lindsey, Secretary State of Florida } County of Marion } ss.: (Corporate Seal) On this 11th day of May, 2000, before me, a notary public in and for the county and state aforesaid, personally appeared Michael H. Jordan and Vanessa H. Lindsey, to me known, and known to me to be the president and secretary of AmeriNet Group.com, Inc., the above-described corporation, and to me known to be the persons who executed the foregoing instrument, and acknowledged the execution thereof to be their free act and deed, and the free act and deed of AmeriNet Group.com, Inc., for the uses and purposes therein mentioned. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial seal the day and year in this certificate first above written. My commission expires the ___day of ______________, ____. {Seal} /s/ Leslie Quinn ----------------------------- Notary Public Lorilei Communications, Inc. _________________________________ (a Florida corporation) _________________________________ By: /s/ Gerald R. Cunningham _____________________________ Gerald R. Cunningham, President Dated: May 11, 2000 Attest: /s/ Leigh A. Cunningham _____________________________ Leigh A. Cunningham, Secretary State of Florida } County of Marion } ss.: (Corporate Seal) On this 11th day of May, 2000, before me, a notary public in and for the county and state aforesaid, personally appeared Gerald R. Cunningham and Leigh A. Cunningham, to me known, and known to me to be the president and secretary of Lorilei Communications, Inc., the above-described corporation, and to me known to be the persons who executed the foregoing instrument, and acknowledged the execution thereof to be their free act and deed, and the free act and deed of Lorilei Communications, Inc., for the uses and purposes therein mentioned. Page 93 IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial seal the day and year in this certificate first above written. My commission expires the ___day of _______________, ____. (Seal) /s/ Leslie Quinn ----------------------------- Notary Public Former Lorilei Stockholders - --------------------------------- /s/ Gerald R. Cunningham - --------------------------------- ----------------------------- Gerald R. Cunningham Dated: May 11, 2000 - --------------------------------- /s/ Leigh A. Cunningham - --------------------------------- ----------------------------- Leigh A. Cunningham Dated: May 11, 2000 State of Florida } County of Marion } ss.: On this 11th day of May, 2000, before me, a notary public in and for the county and state aforesaid, personally appeared Gerald R. Cunningham and Leigh A. Cunningham, to me known, and known to me to be the former stockholders of Lorilei Communications, Inc., the above-described corporation, and to me known to be the persons who executed the foregoing instrument, and acknowledged the execution thereof to be their free act and deed, for the uses and purposes therein mentioned. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial seal the day and year in this certificate first above written. My commission expires the ___day of _______________, ____. (Seal) /s/ Leslie Quinn ----------------------------- Notary Public Page 94 The Escrow Agents Executing this Agreement solely with reference to the provisions specifically pertaining to the performance of their duties as Escrow Agents: The Yankee Companies, Inc. _________________________________ (a Florida corporation) _________________________________ By: /s/ William A. Calvo, III ____________________________ William A. Calvo, III, Vice President Dated: May 11, 2000 Attest: Vanessa H. Lindsey ____________________________ Vanessa H. Lindsey, Secretary State of Florida } County of Marion } ss.: (Corporate Seal) On this 11th day of May, 2000, before me, a notary public in and for the county and state aforesaid, personally appeared William A. Calvo, III and Vanessa H. Lindsey, to me known, and known to me to be the vice president and secretary of the Yankee Companies, Inc., the above-described corporation, and to me known to be the persons who executed the foregoing instrument and acknowledged the execution thereof to be their free act and deed, and the free act and deed of the Yankee Companies, Inc., as the Undisclosed Liabilities Escrow Agent, the uses and purposes therein mentioned. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial seal the day and year in this certificate first above written. My commission expires the ___day of _______________, ____. (Seal) /s/ Leslie Quinn ----------------------------- Notary Public Brashear & Associates - --------------------------------- _________________________________ By: /s/ Bruce Brashear ____________________________ Bruce Brashear, Esquire, Principal Dated: May 11, 2000 State of Florida } County of Marion } ss.: On this 11th day of May, 2000, before me, a notary public in and for the county and state aforesaid, personally appeared Bruce Brashear, Esquire, the duly authorized principal of Brashear & Associates, a Florida law firm, to me known, and known to me to be person described as the Brashear Escrow Agent in the foregoing instrument and to me known to be the person who executed the foregoing instrument, and acknowledged the execution thereof to be the free act and deed of Brashear & Associates, for the uses and purposes therein mentioned. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial seal the day and year in this certificate first above written. My commission expires the ___day of _______________, ____. (Seal) /s/ Leslie Quinn ------------------------ Notary Public Page 95 Schedule 1.4 can be found as Exhibit 3.5 and 3.6 to this 8-K. Schedules to Reorganization Agreement by and among Amerinet Group.com, Inc., a Delaware Corporation and Lorilei Communications, Inc., a Florida Corporation SCHEDULE 1.4 CONSTITUENT DOCUMENTS 1. Amended Articles of Incorporation 2. Amended Bylaws I attest the information contained herein is true and accurate to the best of my knowledge /s/ Gerald R. Cunningham __________________________________ Gerald R. Cunningham, President Lorilei Communications, Inc. /s/ Leigh A. Cunningham __________________________________ Leigh A. Cunningham, Vice President Sales Lorilei Communications, Inc. Schedule to Reorganization Agreement by and among Amerinet Group.com, Inc., a Delaware Corporation and Lorilei Communications, Inc., a Florida Corporation SCHEDULE 1.7(C) FINAL STOCKHOLDER DATA No. Date Name No. Shares 01 7/1/94 Gerald Cunningham and 100 Leigh Cunningham, Ten. by Ent. 02 Void 03 5/16/98 John B. La Torraca Trans. to Cert. 04, 05 04 12/29/99 Arlene Butters Trans. from Cert. 03, Trans. to Cert. 06 05 12/29/99 Gerald Cunningham and Leigh 5.5 Cunningham, Ten. by Ent. Trans. from Cert. 03 06 12/29/99 Gerald Cunningham and Leigh 5.5 Cunningham, Ten. by Ent. Trans. from Cert. 04 Total Shares Outstanding to date: 111 In accordance with Article IV of the Articles of Incorporation, Lorilei Communications, Inc. is authorized to issue 7,500 shares of ONE DOLLAR ($1.00) par value common stock, which shall be designated "Common Shares". I attest the information contained herein is true and accurate to the best of my knowledge /s/ Gerald R. Cunningham __________________________________ Gerald R. Cunningham, President Lorilei Communications, Inc. /s/ Leigh A. Cunningham __________________________________ Leigh A. Cunningham, Vice President Sales Lorilei Communications, Inc. Page 96 Schedules to Reorganization Agreement by and among Amerinet Group.com, Inc., a Delaware Corporation and Lorilei Communications, Inc., a Florida Corporation SCHEDULE 2 - EXCEPTIONS TO LORILEI'S REPRESENTATION & WARRANTS The consent letter from Small Business Loan Source that is attached to Schedule 5.7 is hereby disclosed as an exception. To the knowledge of Lorilei's officers, there is no destruction, damage, or loss to any assets in accordance with paragraph 2.7(C). The past due account receivable for CareerTV.com in the amount of $132,543.30 is a not collectible debt. This amount will be written off to bad debt prior to the closing of this transaction. The past due account receivable for Citrus Hills Marketing in the amount of $1,388.60 is not collectible debt. This amount will be written off to bad debt prior to the closing of this transaction. Currently, not on the books of Lorilei is a debt in the amount of $21,420.00 to HGTV. The reason why this debt is not on the books is because we are disputing the validity of the spots aired on behalf of our client. Trade industry reports made allegations that HGTV covered network spots on the local system level. In other words, HGTV apparently inserted national spots in the local break slots that they say our client's spot ran. To date, they have not provided us any proof that our client's spots were run properly. I attest the information contained herein is true and accurate to the best of my knowledge /s/ Gerald R. Cunningham __________________________________ Gerald R. Cunningham, President Lorilei Communications, Inc. /s/ Leigh A. Cunningham __________________________________ Leigh A. Cunningham, Vice President Sales Lorilei Communications, Inc. Page 97 March 16, 2000 Ms. Bonnie L. Krabbenhoft Credit Manager HGTV P O Box 50970 Knoxville, TN 37950 Re: Quiltingly Yours Dear Ms. Krabbenhoft: I am in receipt of your letter dated February 25, 2000. Army Court-faxed this letter to me on 3/15/00. Your break down of the aired information does not satisfy our needs. We still have no proof from HGTV or the cable systems that they did not insert a national spot in the local break slot that you say Quiltingly Yours ran. We have no affidavit supporting this information and that is the proof that we need before any type of payment is made. Keep in mind that this issue would of never been brought up if no allegations were made against HGTV for inserting national spots in local breaks. I look forward to hearing from you in the near future. Sincerely, /s/ Mary A. Lee Business Manager Home & Garden Television Network P O. Box 80970 Knoxville, Tennessee 37950 February 25, 2000 Mary A. Lee, Business Manager Firm Multimedia P, 0. Box 770787 Ocala, FL 34477-0%87 re: Quiltingly Yours Dear Ms. Lee: Attached you will find a breakdown of all spots aired by your company compared to actual times that local inserts were placed. As you will note, all times from your three invoices fell outside of the local insert breaks and were never in question. If you have any questions regarding this analysis, please call me at 423-470-3946. Sincerely Bonnie L. Krabbenho Credit Manager attachment cc- Steve Gigliotti, Sr. VP, Ad Sales Elaine McCall, Director of Revenue Page 98 November 16, 1999 Mr. Steve Newman Senior Vice President, Ad Sales HG TV P U Box X0970 Knoxville, TN 379>0 Dear Mr. Newman: Thank you for your response to our correspondence regarding discrepancies in scheduling our client's spots on HGTV. While we appreciate your review of the times our spots aired, the information supplied in and of itself is no proof that the spots actually aired on all your affiliate cable systems. In order to resolve this matter you need to furnish us with a breakdown of when the network takes national breaks, and when it takes affiliate breaks. With this information sue can then at lest make some determination of whether or not an adjustment to our invoice is warranted. Sincerely, /s/ Mary A. Lee Business Manager HGTV HOME BURDEN TELEVISION November 3, 1999 Ms. Mary A. Lee Business Manager The Firm Multimedia P. 0. Box 770787 Ocala, FL 34477 Dear Ms. Lee: Thank you for your letter of October 26. Although many of the allegations in the article were unfounded, the audit firrn of Deloitte & Touche has reviewed our accounting procedure. In some cases, it has been ascertained that national spots ran in local breaks and, in all cases, we are contacting those clients and offering makegoods to reconcile the discrepancies. While I can certainly appreciate your concern; I have reviewed your account and find that no part of your advertising schedule fell into the local avails. I have enclosed a spot placement report to verify your commercial placement. I trust the enclosed is proof of the validity of your advertising schedule, Please don't hesitate to call if you have questions. Warm regards, Steve Newman Senior Vice President, Ad Sales SN:ht Enc. Mail: PO Box 50970 o Knoxville TN 17950 o Ship: 9701 Madison Avenue, Knoxville TN 37932 o (423) 691.2700 o Fax (423) 690-6595 Page 99 October 26, 1999 Home & Garden Television Network P O. Box 80970 Knoxville, Tennessee 37950 Attention: Accounts Receivable Manager CERTIFIED MAIL Re: Account 100654 Dear HGTV We are deeply concerned regarding recent trade industry reports with allegations that your network covered network spots on the local system level. The most recent report in Electronic Media verifies that your company is readying itself for make-goods or refunds. As our buy was for the full network, we are concerned that ours is one of the accounts affected by policy. We cannot in good conscience process your invoices further until this dispute is resolved. Please provide us with a proposal to adjust our outstanding balance, or with clear and convincing proof that our spots cleared at the local cable system level. Sincerely, /s/ Mary A. Lee Business Manager Schedule to Reorganization Agreement by and among Amerinet Group.com, Inc., a Delaware Corporation and Lorilei Communications, Inc., a Florida Corporation SCHEDULE 2.5(A) FINANCIAL STATEMENTS 1. Balance Sheet and Profit and Loss as of May 10, 2000 2. Balance Sheet and Profit and Loss quarter ending March 31, 2000 3. Balance Sheet and Profit and Loss year ending December 31, 1999 I attest the information contained herein is true and accurate to the best of my knowledge /s/ Gerald R. Cunningham - ---------------------------------- Gerald R. Cunningham, President Lorilei Communications, Inc. /s/ Leigh A. Cunningham - ---------------------------------- Leigh A. Cunningham, Vice President Sales Lorilei Communications, Inc. Page 100 5/12/00 The Firm Multimedia Profit and Loss January 1 through May 10, 2000 Jan 1 - May 10, '00 Ordinary Income/Expense Inc Income 4500 - Fee Income 4500-02 - Retainer 20,000.00 4500-03 - Video Production 68,517.41 4500-04 - Graphics 4500-20 - Printing 7,223.41 4500-21 - Layout & Design 13,346.00 4500-23 - General Graphics 10,302.00 Total 4500-04 - Graphics 30,871.41 4500-09 - CD-Rom Authoring 12,995.00 4500-10 - Web Design 2,260.00 4500-12 - Still Photography 800.00 4500-13 - Audio Production 436.00 4500-14 - Pre-Press 629.00 4500-16 - Website Maintenance 5,100.00 4500-17 - Website Hosting 455.00 4500-18 - Client Promotions 5,590.00 4500-19 - Shipping Revenue 6,719.03 4500-05 - Commercial Leased Access 228,226.00 4500-25 - Spot Airtime 146,226.90 4500 - Fee Income - Other 38,796.50 Total 4500 - Fee Income 567,622.25 4530 - Reimbursed Expenses 15.86 Total Income 567,638.11 Cost of Goods Sold 6230 - Commercial Leased Access 6230-31 - Rockford Press 19,265.56 6230-30 - Harry Browne CLA 5,818.96 6230-29 - Snappy Lock 2,858.54 6230-27 - Ocala News Tonight 16,119.05 6230-26 - CareerTV.Com 16,275.95 6230-23 - Fairbanks Construction 433.73 6230-14 - Pennbrooke Fariways (618.72) 6230-19 - Class 1 772.90 6230 - Commercial Leased Access - Other (120.21) Total 6230 - Commercial Leased Access 60,805.76 6231 - Spot Airtime 60,633.37 6237 - Airtime-Program 1,870.00 6232 - Client Promotions 16,598.37 6233 - Internet Fees 656.16 6234 - Outdoor Advertising 22,414.50 6260 - Graphics 6260-03 - Printing 19,355.02 6260-05 - Supplies 56.92 6260-06 - Service Bureau 6260.07 - Film Output 180.00 Total 6260-06 - Service Bureau 180.00 6260-07 - Shipping Costs 1,443.04 6260-08 - Pre-Press Supplies 1,169.01 Total 6260 - Graphics 22,203.99 6265 - Production 6265-01 - Tapes 2,502.76 6265-02 - Production Equipment 1,271.72 6265-04 - Talent Fees 275.00 6265-05 - Staging & Props 2.96 6265-07 - Shipping Costs 3,057.80 6265-08 - VHS Sleeves 1,522.50 6265-09 - Tape Duplication 19,667.06 6265 - Production - Other 21.19 Total 6265 - Production 28,320.99 Page 101 05/12/00 The Firm Multimedia Profit and Loss January 1 through May 10, 2000 Jan 1 - May 10,2000 Total COGS 213,503.14 Gross Profit 354,134.97 Expense 4540 - Sales Tax 358.14 6105 - Advertising 6105-02 - Personnel Advertising 2,981.67 6105-03 - Telephone Book Advertising 337.50 6105-04 - Press Release (50.00) 6105-06 - Print Advertising 938.00 Total 6105 - Advertising 4,207.17 6115 - Automobile Expense 6115-01 - Fuel 6,327.40 6115-02 - Auto Maintanence 279.64 6115-05 - Auto -Volvo Lease 1,268.82 Total 6115 - Automobile Expense 7,875.86 6125 - Bank Service Charges 120.87 6140 - Communications 6140-01 - Internet fees 2,446.31 Total 6140 - Communications 2,446.31 6150 - Company Fees 6150-01 - Non Compete Fees 90.00 6150-04 - Other Fees 692.75 6150-05 - NDC Payment System Fees 366.84 Total 6150 - Company Fees 1,149.59 6165 - Dues and Subscriptions 892.72 6170 - Employee Moving Expenses 500.00 6175 - Equipment Rental 503.50 6185 - Insurance 6185-01 - Auto Insurance 2,991.70 6185-02 - Building/Property Insurance 1,703.50 6185-04 - Work Comp 950.40 6185-05 - Life Insurance 446.60 Total 6185 - Insurance 6,092.20 6205 - Interest Expense 6205-01 - Finance Charge Late charges 3,991.38 6205-01 - Finance Charge - Other 2,228.69 Total 6205-01 - Finance Charge 6,220.07 6205-02 - Loan Int.-Capital Leases 7,454.40 6205-03 - Mortgage - Interest 8,994.06 6205 - Interest Expense - Other 3,697.81 Total 6205 - Interest Expense 26,366.34 6220 - Janitorial / Maintenance 6220-02 - Supplies 57.06 6220-03 - Sanitation 556.80 6220-04 - Pest Control 106.00 Total 6220 - Janitorial / Maintenance 719.86 6235 - Licenses and Permits 45.10 6306 - Office Rent 6306-01 - Jacksonville Rent 418.00 Total 6306 - Office Rent 418.00 6255 - Postage and Delivery 6255-01 - Postage (USPS) 713.81 6255-02 - Shipping (Unishippers) 2,567.74 6255-03 - Shipping (UPS) 976.84 6255-04 - Shipping (Airborne) 114.00 Total 6255 - Postage and Delivery 4,372.39 Page 102 The Firm Multimedia 5/12/00 Profit and Loss January 1 through May 10, 2000 Jan 1 - May 10, '00 6275 - Professional Fees 6275-01 - Accounting 1,987.00 6275-03 - Legal Fees 1,291.39 6275-05 - Personnel 337.61 Total 6275 - Professional Fees 3,616.00 6305 - Repairs and Maintenance 6305-01 - Building Repairs 114.55 6305-02 - Computer Repairs 256.00 6305-03 - Equipment Repairs 1,044.11 6305 - Repairs and Maintenance - Other 60.26 Total 6305 - Repairs and Maintenance 1,474.92 6345 - Telephone 6345-02 - Cellular Telephones 1,505.33 6345-03 - Local Telephone Service 2,545.39 6345-04 - Long Distance 3,048.86 6345-05 - Paging 457.43 Total 6345 - Telephone 7,557.01 6355 - Travel 6355-05 - Meals 177.83 6355-06 - Tolls & Parking 92.35 6355 - Travel - Other 428.65 Total 6355 - Travel 698.83 6395 - Utilities 6395-01 - Electric 1,660.27 Total 6395 - Utilities 1,660.27 6540 - Miscellaneous 675.34 6550 - Office Supplies 6550-01 - Printing 1,213.13 6550-02 - Grocery 562.33 6550-04 - Video Production Supplies 354.08 6550-05 - Graphic Supplies 423.55 6550-06 - Film Processing 58.14 6550-07 - Audio Production Supplies 14.82 6550 - Office Supplies - Other 2,198.41 Total 6550 - Office Supplies 4,824.46 6560 - Payroll Expenses 6560-01 - Medical Insurance 7,468.66 6560-02 - FUTA 949.76 6560-03 - SUTA 784.93 6560-04 - Officer's Salaries 23,833.36 6560-05 - Salaries & Wages 128,850.90 6560-06 - Commission Wages 14,345.60 6560-07 - Federal Payroll Taxes-Company 12,837.68 6560 - Payroll Expenses - Other 782.85 Total 6560 - Payroll Expenses 189,853.74 6610 - Sales Expenses 6610-01 - Misc. Expenses 3.00 6610-03 - Sales Incentives 486.04 6610-04 - Direct Mail 661.98 Total 6610 - Sales Expenses 1,151.02 6640 - Taxes 6640-01 - Federal 112.00 6640-02 - Intangible / Tangible 229.00 6640-03 - Leases - Personal Property 917.42 6640-04 - Real Estate Taxes 4,640.46 6640-06 - State 455.29 6640-06 - Personal Property 5,631.74 Total 6640 - Taxes 11,985.91 7006 - Bad Debt 7006-01 - Adjust Client Acct. 1,942.79 7006 - Bad Debt - Other 134,409.77 Total 7006 - Bad Debt 136,352.56 Total Expense 415,918.11 Net Ordinary Income (61,783.14) Net Income (61,783.14) Page 103 The Firm Multimedia 05/12/00 Balance Sheet As of May 10, 2000 May 10, '00 ASSETS Current Assets Checking/Savings 1015 - Amsouth - Operating Account 2,767.36 1030 - Petty Cash 49.11 Total Checking/Savings 2,816.47 Accounts Receivable 1200 - Accounts Receivable 211,663.27 Total Accounts Receivable 211,663.27 Other Current Assets 1475 - Electric Deposit 400.00 Total Other Current Assets 400.00 Total Current Assets 214,879.74 Fixed Assets 1575 - A/A - Organizational Cost (585.00) 1570 - Organizational Costs 585.00 1590 - Building - 7325 SW 32nd St 1590-01 - Sign 1,560.00 1590-02 - Studio Drape 2,989.20 1590-03 - Canopies 2,400.00 1590-04 - Land 25,000.00 1590 - Building - 7325 SW 32nd St - Other 214,964.60 Total 1590 - Building - 7325 SW 32nd St 246,913.80 1600 - Office Furniture 1600-01 - Cost 30,324.10 1600-02 - Office Furniture -Staples 7,874.46 1600 - Office Furniture - Other 890.44 Total 1600 - Office Furniture 39,089.00 1700 - Equipment 1700-01 - Computer Equipment 78,054.79 1700-02 - Production Equipment 254,159.85 1700-03 - Office Equipment 24,084.20 1700-04 - Trade Show Booth 5,011.65 1700 - Equipment - Other 2,352.60 Total 1700 - Equipment 363,663.09 1710 - Automobiles 65,611.63 1800 - LESS -Accumulated Depreciation (324,616.00) Total Fixed Assets 390,661.52 TOTAL ASSETS 605,541.26 LIABILITIES & EQUITY Liabilities Current Liabilities Accounts Payable 2000 - Accounts Payable 204,489.03 Total Accounts Payable 204,489.03 Other Current Liabilities 2100 - Payroll Liabilities 5,003.31 2200 - Sales Tax Payable (1,535.25) 2250 - Working Capital Loan -Amsouth 30,975.77 2251 - Mountaineer Loan 19,795.08 2252 - Volvo Loan 24,852.13 2275 - Loan from Shareholders 45,301.28 2280 - Loan from Shareholder- JLT 49,785.01 Total Other Current Liabilities 174,177.33 Total Current Liabilities 378,666.36 Page 104 The Firm Multimedia 05/12/00 Balance Sheet As of May 10, 2000 May 10, '00 Long Term Liabilities Leases 2486 - Preferred Capital Corporation 14,265.53 2450 - Freedom Capital 4,961.35 2300 - Associates Leasing Inc. 1,720.02 2320 - Colonial Pacific Leasing #2 11,816.65 2380 - Credential Leasing Corporation 7,122.46 2385 - The Manifest Group-Interactive 1,782.40 2419 - FINOVA - Imagesetter 14,319.17 2420 - ORIX - Scanner 6,384.94 2421 - ORIX - Voice M/Comp. 5,765.68 2422 - Colonial Pacific-Production Equ 5,939.16 2423 - Colonial Pacific, Inc./Off. Equ 3,440.14 2440 - Colonial Pacific/Harbour Capita 1,257.76 Total Leases 78,775.26 2395 - Chrysler Financial - Caravan 11,605.93 2400 - Small Business Loan Source 189,115.52 Total Long Term Liabilities 279,496.71 Total Liabilities 658,163.07 Equity 3100 - Common Stock 111.00 3900 - Retained Earnings 9,050.33 Net Income (61,783.14) Total Equity (52,621.81) TOTAL LIABILITIES & EQUITY 605,541.26 Page 105 The Firm Multimedia 05/12/00 Profit and Loss January through March 2000 Jan - Mar '00 Ordinary Income/Expense Income 4500 - Fee Income 4600-02 - Retainer 11,100.00 4500-03 - Video Production 51,378.00 4600-04 - Graphics 4500-20 - Printing 6,028.41 4500-21- Layout & Design 10,366.00 4500-23 - General Graphics 10,190.00 Total 4600-04 - Graphics 26,584.41 4500-09 - CD-Rom Authoring 12,995.00 4600-10 - Web Design 2,260.00 4600-13 - Audio Production 436.00 4600-16 - Website Maintenance 4,620.00 4500-17 - Website Hosting 120.00 4500-18 - Client Promotions 5,590.00 4600-19 - Shipping Revenue 5,562.82 4600-06 - Commercial Leased Access 167,444.00 4600-26 - Spot Airtime 96,202.75 4500 - Fee Income - Other 34,649.29 Total 4600 - Fee Income 418,942.27 4530 - Reimbursed Expenses 3.32 Total Income 418,945.59 Cost of Goods Sold 6230 - Commercial Leased Access 6230-31 - Rockford Press 19,265.56 6230-30 - Harry Browne CLA 2,583.20 6230-29 - Snappy Lock 2,858.54 6230-27 - Ocala News Tonight 10,446.50 6230-26 - CareerTV.Com 16,275.95 6230-23 - Fairbanks Construction 433.73 6230-14 - Pennbrooke Fariways (618.72) 6230-19 - Class 1 772.90 6230 - Commercial Leased Access -Other (120.21) Total 6230 - Commercial Leased Access 51,897.45 6231 - Spot Airtime 33,111.54 6237 - Airtime-Program 1,870.00 6232 - Client Promotions 16,598.37 6233 - Internet Fees 376.16 6234 - Outdoor Advertising 19,800.75 6260 - Graphics 6260-03 - Printing 10,120.02 6260-06 - Supplies 56.92 6260-06 - Service Bureau 6260.07 - Film Output 180.00 Total 6260-06 - Service Bureau 180.00 6260-07 - Shipping Costs 276.72 Total 6260 - Graphics 10,633.66 6266 - Production 6266-01 - Tapes 1,729.96 6266-02 - Production Equipment 1,059.95 6266-04 - Talent Fees 150.00 6266-06 - Staging & Props 2.96 6265-07 - Shipping Costs 2,541.68 6265-08 - VHS Sleeves 1,522.50 6266-09 - Tape Duplication 8,747.44 6266 - Production - Other 21.19 Total 6265 - Production 15,775.68 Total COGS 150,063.61 Page 106 The Firm Multimedia 05/12/00 Profit and Loss January through March 2000 Jan - Mar '00 Gross Profit 268,881.98 Expense 4540 - Sales Tax 648.24 6105 - Advertising 6105-02 - Personnel Advertising 354.31 6105-03 - Telephone Book Advertising 234.75 6105-04 - Press Release (50.00) 6106-06 - Print Advertising 688.00 Total 6105 - Advertising 1,227.06 6115 - Automobile Expense 6115-01 - Fuel 4,486.51 6115-02 - Auto Maintanence 244.64 6115-05 - Auto - Volvo Lease 1,268.82 Total 6115 - Automobile Expense 5,999.97 6125 - Bank Service Charges 110.87 6140 - Communications 6140-01 - Internet fees 1,397.95 Total 6140 - Communications 1,397.95 6150 - Company Fees 6150-01 - Non Compete Fees 60.00 6150-04 - Other Fees 534.00 6150-05 - NDC Payment System Fees 286.84 Total 6150 - Company Fees 880.84 6165 - Dues and Subscriptions 455.17 6170 - Employee Moving Expenses 500.00 6175 - Equipment Rental 302.10 6185-Insurance 6185-01 - Auto Insurance 1,080.50 6185-02 - Building/Property Insurance 1,210.50 6185-04 - Work Comp 692.80 6185-05 - Life Insurance 338.10 Total 6185 - Insurance 3,321.90 6205 - Interest Expense 6205-01 - Finance Charge Late charges 3,041.22 6205-01 - Finance Charge - Other 1,229.27 Total 6205-01 - Finance Charge 4,270.49 6205-02 - Loan Int.-Capital Leases 6,099.22 6205-03 - Mortgage - Interest 7,131.19 6205 - Interest Expense - Other 2,564.44 Total 6205 - Interest Expense 20,065.34 6220 - Janitorial / Maintenance 6220-02 - Supplies 41.72 6220-03 - Sanitation 281.00 6220-04 - Pest Control 106.00 Total 6220 - Janitorial / Maintenance 428.72 6235 - Licenses and Permits 45.10 6306 - Office Rent 6306-01 - Jacksonville Rent 418.00 Total 6306 - Office Rent 418.00 6255 - Postage and Delivery 6255-01 - Postage (USPS) 516.82 6255-02 - Shipping (Unishippers) 2,459.83 6255-03 - Shipping (UPS) 284.04 6255-04 - Shipping (Airborne) 114.00 Total 6255 - Postage and Delivery 3,374.69 Page 107 The Firm Multimedia 05/12/00 Profit and Loss January through March 2000 Jan - Mar '00 6275 - Professional Fees 6275-01 - Accounting 137.00 6275-03 - Legal Fees 869.50 Total 6275 - Professional Fees 1,006.50 6305 - Repairs and Maintenance 6305-01 - Building Repairs 114.55 6305-02 - Computer Repairs 256.00 6305-03 - Equipment Repairs 916.91 6305 o Repairs and Maintenance - Other 60.26 Total 6305 - Repairs and Maintenance 1,347.72 6345 - Telephone 6345-02 - Cellular Telephones 980.78 6345-03 - Local Telephone Service 1,646.00 6345-04 - Long Distance 1,792.83 6345-05 - Paging 350.09 Total 6345 - Telephone 4,769.70 6355 - Travel 6355-05 - Meals 163.14 6355-06 - Tolls & Parking 92.35 Total 6355 - Travel 255.49 6395 - Utilities 6395-01 - Electric 1,198.86 Total 6395 - Utilities 1,198.86 6540 . Miscellaneous 664.90 6550 - Office Supplies 6550-01 - Printing 693.17 6550-02 - Grocery 363.18 6550-04 - Video Production Supplies 302.49 6550-05 - Graphic Supplies 361.42 6550-06 - Film Processing 58.14 6550-07 - Audio Production Supplies 14.82 6550 - Office Supplies - Other 1,739.88 Total 6550 - Office Supplies 3,533.10 6560 . Payroll Expenses 6560-01 - Medical Insurance 4,358.56 6560-02 - FUTA 691.16 6560-03 - SUTA 591.11 6560-04 - Officer's Salaries 14,895.85 6560-05 - Salaries & Wages 80,808.51 6560-06 - Commission Wages 7,628.78 6560-07 - Federal Payroll Taxes-Company 7,941.57 6560 - Payroll Expenses - Other 477.85 Total 6560 - Payroll Expenses 117,393.39 6610 - Sales Expenses 6610-01 - Misc. Expenses 3.00 6610-03 - Sales Incentives 477.03 6610-04 - Direct Mail 661.98 Total 6610 - Sales Expenses 1,142.01 6640 - Taxes 6640-01 - Federal 112.00 6640-02 - Intangible / Tangible 229.00 6640-03 - Leases - Personal Property 854.53 6640-04 - Real Estate Taxes 4,640.46 6640-05 - State 284.35 6640-06 - Personal Property 5,631.74 Total 6640 - Taxes 11,752.08 7005 - Bad Debt 7005-01 - Adjust Client Acct. 779.20 7005 - Bad Debt - Other 477.87 Total 7005 - Bad Debt 1,257.07 Total Expense 183,496.77 Net Ordinary Income 85,385.21 Net Income 85,385.21 Page 108 The Firm Multimedia 05/12/00 Balance Sheet As of March 31, 2000 Mar 31, '00 ASSETS Current Assets Checking/Savings 1015 - Amsouth - Operating Account 13,657.99 1030 - Petty Cash 2.35 Total Checking/Savings 13,660.34 Accounts Receivable 1200 - Accounts Receivable 307,530.88 Total Accounts Receivable 307,530.88 Other Current Assets 1475 - Electric Deposit 400.00 Total Other Current Assets 400.00 Total Current Assets 321,591.22 Fixed Assets 1575 - A/A - Organizational Cost (585.00) 1570 - Organizational Costs 585.00 1590 - Building - 7325 SW 32nd St 1590-01 - Sign 1,560.00 1590-02 - Studio Drape 2,989.20 1590-03 - Canopies 2,400.00 1590-04 - Land 25,000.00 1590 - Building - 7325 SW 32nd St - Other 214,964.60 Total 1590 - Building - 7325 SW 32nd St 246,913.80 1600 - Office Furniture 1600-01 - Cost 30,324.10 1600-02 - Office Furniture -Staples 7,874.46 1600 - Office Furniture - Other 890.44 Total 1600 - Office Furniture 39,089.00 1700 - Equipment 1700-01 - Computer Equipment 78,054.79 1700-02 - Production Equipment 254,159.85 1700-03 - Office Equipment 24,084.20 1700-04 - Trade Show Booth 5,011.65 1700 - Equipment - Other 2,352.60 Total 1700 - Equipment 363,663.09 1710 - Automobiles 65,611.63 1800 - LESS - Accumulated Depreciation (324,616.00) Total Fixed Assets 390,661.52 TOTAL ASSETS 712,252.74 LIABILITIES & EQUITY Liabilities Current Liabilities Accounts Payable 2000 - Accounts Payable 153,621.61 Total Accounts Payable 153,621.61 Other Current Liabilities 2100 - Payroll Liabilities 5,789.76 2200 - Sales Tax Payable (1,340.27) 2250 - Working Capital Loan -Amsouth 32,654.85 2251 - Mountaineer Loan 20,091.20 2252 - Volvo Loan 25,213.67 2275 - Loan from Shareholders 45,301.28 2280 - Loan from Shareholder- JLT 49,785.01 Total Other Current Liabilities 177,495.50 Total Current Liabilities 331,117.11 Page 109 The Firm Multimedia 05/12/00 Balance Sheet As of March 31, 2000 Mar 31, '00 Long Term Liabilities Leases 2486 - Preferred Capital Corporation 14,492.80 2450 - Freedom Capital 5,213.78 2300 - Associates Leasing Inc. 2,377.54 2320 - Colonial Pacific Leasing #2 12,346.41 2380 - Credential Leasing Corporation 7,370.18 2385 - The Manifest Group-Interactive 1,959.87 2419 - FINOVA - Imagesetter 14,644.85 2420 - ORIX - Scanner 6,801.54 2421 - ORIX - Voice M/Comp. 5,894.23 2422 - Colonial Pacific-Production Equ 6,507.39 2423 - Colonial Pacific, Inc./Off. Equ 3,586.48 2440 - Colonial Pacific/Harbour Capita 1,370.39 Total Leases 82,565.46 2395 - Chrysler Financial -Caravan 12,141.98 2400 - Small Business Loan Source 189,277.65 Total Long Term Liabilities 283,985.09 Total Liabilities 615,102.20 Equity 3100 - Common Stock 111.00 3900 - Retained Earnings 11,654.33 Net Income 85,385.21 Total Equity 97,150.54 TOTAL LIABILITIES & EQUITY 712,252.74 Page 110 The Firm Multimedia 05/21/00 Profit and Loss January through December 1999 Jan - Dec '99 Ordinary Income/Expense Income 4500 - Fee Income 4500-01 - Commission Income 5,341.63 4500-02 - Retainer 34,580.00 4500-03 - Video Production 267,212.12 4500-04 - Graphics 4500-15 - CD Laser Art 350.00 4500-20 - Printing 84,166.59 4500-21 - Layout 8 Design 123,831.32 4500-22 - 3D Animation 11,461.68 4500-23 - General Graphics 5,873.25 Total 4500-04 - Graphics 225,682.84 4500-06 - Fee Income - Other (54.11) 4500-07 - Public Relations 4,910.00 4500-09 - CD-Rom Authoring 4,999.00 4500-10 - Web Design 11,735.00 4500-13 - Audio Production 23,943.64 4500-14 - Pre-Press 1,621.00 4500-16 - Website Maintenance 4,971.00 4500-17 - Website Hosting 5,093.00 4500-18 - Client Promotions 10,850.00 4500-19 - Shipping Revenue 15,029.06 4500-05 - Commercial Leased Access 276,334.00 4500-25 - Spot Airtime 165,787.00 4600 - Fee Income - Other 35,216.04 Total 4600 - Fee Income 1,093,251.22 5010 - Program Airtime 8,489.00 4530 - Reimbursed Expenses 588.89 Total Income 1,102,329.11 Cost of Goods Sold 6230 - Commercial Leased Access 6230-26 - CareerTV.Com 152.50 6230-25 - WSA Marketing 575.65 6230-23 - Fairbanks Construction 1,035.10 6230-01 - The Firm Multimedia 307.00 6230-14 - Pennbrooke Fariways 24,047.45 6230-15 - Strawn Chevrolet 982.40 6230-16 - Leary Management 3,708.86 6230-18 - Quiltingly Yours 13,179.28 6230-19 - Class 1 1,820.28 6230-21 - Citrus Hills Marketing 2,971.50 6230 - Commercial Leased Access - Other (37.50) Total 6230 - Commercial Leased Access 48,742.52 6231 - Spot Airtime 42,676.08 6237 - Airtime-Program 3,655.00 6232 - Client Promotions 29,204.84 6233 - Internet Fees 1,712.23 6234 - Outdoor Advertising 61,000.25 6260 - Graphics 6260-01 - Graphics Equipment 313.99 6260-02 - Photos 275.59 6260-03 - Printing 69,972.48 6260-05 - Supplies 441.36 6260-06 - Service Bureau 0.00 6260-07 - Shipping Costs 4,672.35 Total 6260 - Graphics 75,675.77 6265 - Production 6265-01 - Tapes 4,695.44 6265-02 - Production Equipment 616.28 6265-04 - Talent Fees 4,320.00 6265-05 - Staging & Props 968.54 Page 111 The Firm Multimedia 05/21/00 Profit and Loss January through December 1999 Jan - Dec '99 6266-07 - Shipping Costs 13,695.54 6265-08 - VHS Sleeves 503.44 6265-09 - Tape Duplication 32,500.58 6265 - Production - Other 62.54 Total 6265 - Production 57,362.36 Total COGS 320,029.05 Gross Profit 782,300.06 Expense 6156 - Amortization Expense 58.00 4640 - Sales Tax 169.38 6106 - Advertising 6105-02 - Personnel Advertising 4,166.80 6105-03 - Telephone Book Advertising 3,250.09 6105-04 - Press Release 50.00 6105-06 - Promotion Advertising 5,970.02 6106-06 - Print Advertising 2,408.00 6106-09 - Firm Misc. Advertising 428.06 6106 - Advertising - Other 296.00 Total 6105 - Advertising 16,568.97 6115 - Automobile Expense 6116-01 - Fuel 12,027.35 6115-02 - Auto Maintanence 3,171.09 6115-03 - Vehicle Registration 78.20 6115-04 - Mercury Mountaineer Lease 1,347.52 6116-05 - Auto -Volvo Lease 2,834.76 6115 - Automobile Expense - Other 170.66 Total 6115 o Automobile Expense 19,629.58 6126 - Bank Service Charges 378.11 6140 - Communications 6140-01 - Internet fees 4,203.38 Total 6140 - Communications 4,203.38 6160 - Company Fees 6150-01 - Non Compete Fees 160.00 6150-02 - Documentation Fees 553.65 6160-04 - Other Fees 1,150.25 6150-06 - NDC Payment System Fees 513.77 6150 - Company Fees - Other 180.00 Total 6150 - Company Fees 2,557.67 6160 - Education 81.05 6161 - Conventions 750.00 6166 - Dues and Subscriptions 949.50 6170 - Employee Moving Expenses 6170-01 - Moving Van Rental 1,531.00 6170-02 - Fuel 407.27 6170-03 - Lodging 135.57 Total 6170 - Employee Moving Expenses 2,073.84 6176 - Equipment Rental 3,502.77 6185-Insurance 6186-01 - Auto Insurance 2,184.92 6186-02 - Building/Property Insurane 1,383.94 6185-03 - Media Liability Ins. 5,605.13 6185-04 - Work Comp 3,460.60 6185-05 - Life Insurance 2,009.09 6185 - Insurance - Other (7,910.93) Total 6185 - Insurance 6,732.75 6205 - Interest Expense 6205-01 - Finance Charge Late charges 4,778.62 Page 112 The Firm Multimedia 05/21/00 Profit and Loss January through December 1999 Jan - Dec '99 6205-01 - Finance Charge - Other 5,550.72 Total 6205-01 - Finance Charge 10,329.34 6205-02 - Loan Int.-Capital Leases 14,054.89 6205-03 - Mortgage - Interest 18,713.31 6205-04 - Loan Interest-John B. LaTorraca 200.00 6205 - Interest Expense - Other 5,171.75 Total 6205 - Interest Expense 48,469.29 6220 - Janitorial / Maintenance 6220-02 - Supplies 494.71 6220-03 - Sanitation 818.00 6220-04 - Pest Control 421.90 6220 - Janitorial I Maintenance - Other 25.39 Total 6220 - Janitorial / Maintenance 1,760.00 6235 - Licenses and Permits 481.05 6306 - Office Rent 6306-01 - Jacksonville Rent 1,063.88 Total 6306 - Office Rent 1,063.88 6255 - Postage and Delivery 6255-01 - Postage (USPS) 3,072.43 6255-02 - Shipping (Unishippers) 4,652.07 6255-04 - Shipping (Airborne) 52.00 6255-06 - Shipping - FedEx 89.07 6255 - Postage and Delivery - Other 25.00 Total 6255 - Postage and Delivery 7,890.57 6275 - Professional Fees 6275-01 - Accounting 6,992.16 6275-03 - Legal Fees 2,966.23 6275-04 - Talent 109.50 6275-05 - Personnel 3,427.78 6275-06 - Collection Agent Fees 299.71 Total 6275 - Professional Fees 13,795.38 6305 - Repairs and Maintenance 6305-01 - Building Repairs 1,916.33 6305-02 - Computer Repairs 5,426.15 6305-03 - Equipment Repairs 3,819.70 6305 - Repairs and Maintenance - Other 266.04 Total 6305 - Repairs and Maintenance 11,428.22 6345 - Telephone 6345-02 - Cellular Telephones 2,338.29 6345-03 - Local Telephone Service 5,349.09 6345-04 - Long Distance 8,655.76 6345-05 - Paging 791.59 6345 - Telephone - Other 374.78 Total 6345 - Telephone 17,509.51 6355 - Travel 6355-01 - Airline Travel 2,557.50 6355-02 - Car Rental 69.32 6355-03 - Entertainment 840.25 6355-04 - Lodging 2,951.99 6355-05 - Meals 4,445.18 6355-06 - Tolls & Parking 621.16 6355 - Travel - Other 206.50 Total 6355 - Travel 11,691.90 6395 - Utilities 6395-01 - Electric 4,586.91 Total 6395 - Utilities 4,586.91 6540 - Miscellaneous 2,689.75 Page 113 The Firm Multimedia 5/12/00 Profit and Loss January through December 1999 Jan - Dec '99 6660 - Office Supplies 6550-01 - Printing 3,529.71 6550-02 - Grocery (9.73) 6660-03 - Refrigerator 0.00 6650-06 - Film Processing 111.68 6650-07 - Audio Production Supplies 538.55 6650-08 - Graphics Equipment 223.83 6650-09 - Interactive Supplies 396.94 6650 - Office Supplies - Other 5,820.82 Total 6660 - Office Supplies 10,611.80 6660-06 - Graphic Supplies 6660.01 - Pre-Press Supplies 4,365.59 6550-06 - Graphic Supplies - Other 3,553.04 Total 6660-06 - Graphic Supplies 7,918.63 6660-04 - Video Production Supplies 6660.02 - Tapes 2,143.04 6660-04 - Video Production Supplies - Other 1,814.53 Total 6660-04 - Video Production Supplies 3,957.57 6660 - Payroll Expenses 6660-01 - Medical Insurance 8,261.91 6660-02 - FUTA 1,206.85 6660-03 - SUTA 660.14 6660-04 - Officer's Salaries 68,520.91 6660-06 - Salaries & Wages 294,521.19 6660-06 - Commission Wages 34,075.96 6660-07 - Federal Payroll Taxes-Company 30,543.82 6660 - Payroll Expenses - Other 2,147.17 Total 6660 - Payroll Expenses 439,937.95 6680 - Refunds -Client 2,945.33 6610 - Sales Expenses 6610-01 - Misc. Expenses 528.59 6610-02 - Trade Shows 3,013.63 6610-03 - Sales Incentives 968.56 6610-06 - Lead Referral Source 1,290.16 Total 6610 - Sales Expenses 5,800.94 6640 - Taxes 6640-01 - Federal (2,413.76) 6640-02 - Intangible / Tangible 377.48 6640-03 - Leases - Personal Property 1,564.85 6640-06 - State 1,651.86 Total 6640 - Taxes 1,180.43 7006 - Bad Debt 7006-01 - Adjust Client Acct. 8,827.93 7006 - Bad Debt - Other 11,364.27 Total 7006 - Bad Debt 20,192.20 Total Expense 671,566.31 Net Ordinary Income 110,733.75 Other Income/Expense Other Income 7016 - Interest Income 11.67 Total Other Income 11.67 Other Expense 6166 - Depreciation Expense 86,319.00 Total Other Expense 86,319.00 Net Other Income (86,307.33) Net Income 24,426.42 The Firm Multimedia 05/21/00 Balance Sheet As of December 31, 1999 Dec 31, '99 ASSETS Current Assets Checking/Savings 1015 - Amsouth - Operating Account 989.63 1030 - Petty Cash 27.59 Total Checking/Savings 1,017.22 Accounts Receivable 1200 - Accounts Receivable 187,932.67 Total Accounts Receivable 187,932.67 Other Current Assets 1475 - Electric Deposit 400.00 Total Other Current Assets 400.00 Total Current Assets 189,349.89 Fixed Assets 1575 - A/A - Organizational Cost (585.00) 1570 - Organizational Costs 585.00 1590 - Building - 7325 SW 32nd St 1590-01 - Sign 1,560.00 1590-02 - Studio Drape 2,989.20 1590-03 - Canopies 2,400.00 1590-04 - Land 25,000.00 1590 - Building - 7325 SW 32nd St - Other 214,964.60 Total 1590 - Building - 7325 SW 32nd St 246,913.80 1600 - Office Furniture 1600-01 - Cost 30,324.10 1600-02 - Office Furniture - Staples 4,949.46 1600 - Office Furniture - Other 890.44 Total 1600 - Office Furniture 36,164.00 1700 - Equipment 1700-01 - Computer Equipment 78,054.79 1700-02 - Production Equipment 246,931.90 1700-03 - Office Equipment 24,084.20 1700-04 - Trade Show Booth 5,011.65 1700 - Equipment - Other 332.60 Total 1700 - Equipment 354,415.14 1710 - Automobiles 40,038.44 1800 - LESS - Accumulated Depreciation (324,616.00) Total Fixed Assets 352,915.38 TOTAL ASSETS 542,265.27 LIABILITIES 8 EQUITY Liabilities Current Liabilities Accounts Payable 2000 - Accounts Payable 91,263.61 Total Accounts Payable 91,263.61 Other Current Liabilities 2100 - Payroll Liabilities 4,494.78 2200 - Sales Tax Payable (1,454.06) 2250 - Working Capital Loan - Amsouth 33,704.66 2251 - Mountaineer Loan 20,964.97 2275 - Loan from Shareholders 33,062.28 2280 - Loan from Shareholder- JLT 49,785.01 Total Other Current Liabilities 140,557.64 Total Current Liabilities 231,821.25 Long Term Liabilities Page 115 The Firm Multimedia 05/21/00 Balance Sheet As of December 31, 1999 Dec 31, '99 Leases 2486 - Preferred Capital Corporation 15,069.55 2450 - Freedom Capital 6,166.03 2300 - Associates Leasing Inc. 3,332.54 2320 - Colonial Pacific Leasing #2 14,384.28 2350 - The Manifest Group 1,626.37 2380 - Credential Leasing Corporation 8,097.50 2385 - The Manifest Group-Interactive 2,471.06 2419 - FINOVA - Imagesetter 16,230.73 2420 - ORIX - Scanner 7,995.37 2421 - ORIX - Voice M/Comp. 6,273.56 2422 - Colonial Pacific-Production Equ 8,115.40 2423 - Colonial Pacific, Inc./Off. Equ 4,419.75 2440 - Colonial Pacific/Harbour Capita 2,099.45 Total Leases 96,281.59 2395 - Chrysler Financial - Caravan 12,669.64 2400 - Small Business Loan Source 189,727.46 Total Long Term Liabilities 298,678.69 Total Liabilities 530,499.94 Equity 3100 - Common Stock 111.00 3150 - Add'I Paid in Capital 60,400.00 3900 - Retained Earnings (73,172.09) Net Income 24,426.42 Total Equity 11,765.33 TOTAL LIABILITIES & EQUITY 542,265.27 Page 116 Schedule to Reorganization Agreement by and among Amerinet Group.com, Inc., a Delaware Corporation and Lorilei Communications, Inc., a Florida Corporation SCHEDULE 2.10(A)(1) REAL PROPERTY 1. Commercial lease dated September 1, 1999 between Corporate Investment International, Inc. and The Firm. Property located at 1999 West Colonial Drive, Suite 205, Orlando, Florida. Lease term is for one year expiring August 31, 2000. Rent is $371.00 per month and is a trade-out for production. 2. Mortgage with Small Business Loan Source for property at 7325 SW 32nd Street, Ocala, Florida 34474. Loan amount $194,000.00. Fluctuating interest rate, currently at 11.75%. Mortgage payment is $2,025.00 per month. The current balance is $189,277.65. Supporting documents to follow are: a. Settlement Statement b. Notice of Commencement c. Note with Exhibit A d. Agreement Regarding Closing of Loan with Exhibit A e. Financing Statement with Schedule f. Security Agreement - Commercial g. Affidavit of No Adverse Change h. Borrowing Affidavit i. Guaranty j. Acknowledgements k. Certificate of the Secretary of Lorilei l. Notice of Entire Agreement m. Authorization and Loan Agreement n. Compensation Agreement o. Environment Certificate p. Borrowing Certificate q. Letter to Publicize r. Acknowledgement Insurance and Financials s. Certification as to Child Support t. Affidavit Regarding Business Permits u. Financial Agreement v. Assignment of Life Insurance Policy w. Curington Contracting, Inc. Construction Agreement I attest the information contained herein is true and accurate to the best of my knowledge /s/ Gerald R. Cunningham - ---------------------------------- Gerald R. Cunningham, President Lorilei Communications, Inc. /s/ Leigh A. Cunningham - ---------------------------------- Leigh A. Cunningham, Vice President Sales Lorilei Communications, Inc. Page 117 Schedule to Reorganization Agreement by and among Amerinet Group.com, Inc., a Delaware Corporation and Lorilei Communications, Inc., a Florida Corporation SCHEDULE 2.10(C) EQUIPMENT Attached to this schedule is a complete equipment inventory list. Any item without a * is owned outright by Lorilei Communications, Inc. Equipment Inventory Reception Office Computer AST Adventure 686 16mb Ram Monitor AstVision 4 Keyboard Ast Typewriter Display 900 Dictionary Postage Meter Neopost Model 9512 Scale Pelouze PS2R1-P Facsimile Canon CFX-L4000 Plain Paper Reception Desk 4 Guest Chairs w/ 2 Tables Kitchen Refrigerator Table w/ 4 Chairs Framed Art Work Coke Machine Microwave Coffee Pot Business Office Computer 24X Max Pentium 32mb Ram Monitor AstVision 7L Keyboard Windows Printer Cannon LBP 460 Shredder Fellowes Powershred P540 Calculator Casio HR 150LB 2 Guest Chairs 1 Corner Plant Sales Department Computer Packard Bell Legend Supreme Monitor Samsung Keyboard Packard Bell Scanner Microtek Scanmaker 11SP Misc. Polaroid Sprint Scan 35 Lap Top 3 Toshiba SAT 2515CDS P266MMX 4.3G 32MB Computer Networkcard for all notebooks Projector Panasonic LCD Projector* Model PT-L5 Serial Number 7-91871-11035-5 Value $2,695.00 Leasing Co. Freedom Capital 11 Merrill Drive Hampton, NH 03842 Framed Art Work Page 118 Project Coordinator's Office Computer Authentic AMD 32mb Ram Monitor Max Tech Keyboard Windows Facsimile Canon B640 Plain Paper Fax Sharp UX-1000 Plain Paper Fax Media Buyer Office Computer Pentium 32mb Monitor Max Tech Keyboard Windows Conference Room Television Magnavox VCR Sharp Conference Table 6 Chairs Framed Art Work Leigh's Office Computer Ast Advantage Adventure 824 Pentium 16mb Monitor Samsung Keyboard Ast Printer HP DeskJet 600 Printer HP DeskJet 612C Lap Top Vaio PCG-F340 Sony Lap Top* Leasing Co. *Preferred Lease P.O. Box 41598 Philadelphia, PA 19101-1598 Lease #716-0388449-001 2 Guest Chairs 1 Corner Plant JVC Radio/CD Framed Art Work Gerry's Office Computer Compaq Pentium 64mb Monitor Compaq Presairo Keyboard Compaq Printer Canon BJC-4300 Color BubbleJet Shredder Fellowes Powershred P540 File Cabinet 4 Drawer Vertical File Cabinet 2 Drawer Vertical File Cabinet Globe Hutch 2 Guest Chairs 1 Corner Plant JVC Radio/CD Page 119 Graphics Department Computer Mac G3* Power PC 8100 Power Computing 132 PowerMac G3 350MT*** PowerMac G3 400 MT*** Keyboard Power Computing Apple * Apple 2 Power Mac Keyboards*** Monitor OptiQuest V773* Maglnnovatinos (2) .26MM 66HZ Monitor*** Printer Lexmark Optra R Epson Stylus 600 Color** Drives External Zip Drive (3) LaCie HD Smart Storage Solutions External HD External Jaz Drive AVA 2906-SCSI Card*** CD-Rewritable Drive*** Misc. Dynatek CE Burner Scanner Astra Color Scanner Leasing Co. *Bank Vest Capital Corp. AKA ORIX and FINOVA 200 Nickerson Road Marlboror, MA 01752 (800)532-7317 Lease #047011-001 Lease #047011-002 Lease #047011-003 **Colonial Pacific Leasing P.O. Box 2090 Portland, Oregon 97208-2090 (800)444-1738 Lease #108025002 Lease #108025003 Lease #108025004 ***Freedom Capital 30423 Canwood Street, Suite 207 Agoura Hills, CA 91301 (818)735-0439 PP Tax Paid over 12 months Clipper CD Photo Library Medium Format Still Camera w/ lenses Still Photo Lights and Stands Light Box Page 120 Pre Press Office Computer Mac G3* Keyboard Apple* Monitor Spectrum 7GLR* Printer 3M Rainbow* Agfa 9800* Misc. Agfa Rapidline 43 Film Developer* Leasing Co. *Bank Vest Capital Corp. AKA ORIX and FINOVA 200 Nickerson Road Marlboror, MA 01752 (800)532-7317 Lease #047011-001 Lease #047011-002 Lease #047011-003 PP Tax Paid over 12 months General Office Area Printer HP LaserJet 4 Copier Minolta EP 4233 Binder GBC Image Maker 1000 Animation/Website Artist's Office Computer Power Mac 6500* Power Mac G3 Hard Drive 6-GIG External* Monitor Nokia 17"* Optiquest 17" Keyboard Apple* Apple Scanner UMAX Astra 610 S Flatbed* Screen DT-S101S Drum CD Writer Yamaha CRV4260* Camera Olympus D-500L Digital Leasing Co. *The Manifest Group 100 East Saratoga Marshall, MN 56258-1714 Lease #556150 Lease #624826 PP Tax Paid over 12 months Page 121 Production - Master Control Office 1. IBM PC 386 2. Sony Monitor 3. Generic Keyboard 4. HP DeskJet 500C 5. Compuvideo/Wave Form Monitor 6. Panasonic 13" Monitors (5) 7. Panasonic 21" Monitors (2) 8. Sony Speakers (2) 9. Amiga 4000 Computer with Video Toaster System 10. Amiga Keyboard 11. Mackie CR1604-VLZ Audio Mixing Board 12. Sony FXE-100 Video Editing/Switcher System 13. Intercom System 14. Radio Shack Amplifier 15. LabTech LCS-150 Computer Speakers (2) 16. UVW 1800 Sony Beta Cam Deck (2)** 17. Sony VO-9800 3 1/4 Umatic SP 18. Video Patch Bay 19. Tascam Patch Audio Bay 20. Alesis 3630 Compressor 21. Pioneer PD103 CD Player 22. Tascam DA-20 Digital Audio Tape Players 23. JVC RX 212 AM-FM Receiver 24. Sony EVO-9850 HI 8 Video Deck*** 25. Panasonic RCUWV-RC36 Remote Control Unit 26. NADY Receiver - 4 Channel 27. Video Tek VDA-16 Black Burst Generator*** 28. Zip Drive 100 29. Kinyo Beta Tape Rewinder 30. Horita CSG-50 Bars/Tone Generator 31. Serial Port Switch Box 32. Sony EVO-9850 3/4 Tape Deck **** 33. Sony CMA**** 34. Quasar VHQ 830 VCR 35. Production Desk with Shelves Leasing Co. **Colonial Pacific Leasing P.O. Box 2090 Portland, Oregon 97208-2090 (800)444-1738 Lease #108025002 Lease #108025003 Lease #108025004 ***Associates Leasing Inc. P.O. Box 6229 Carol Stream, IL 60197-6229 Page 122 (800)525-3054 Lease #0006581-000 ****The Manifiest Group 100 East Saratoga Marshall, MN 56258-1714 (507)532-9558 Lease #556150 Lease #624826 PP Tax Paid over 12 months Production - Back Office in Master Control 1. Power Mac 7200/75 2. Apple Keyboard 3. NEC Multi Scan Monitor 4. Microtech Scan Maker 2 HR 5. Sony CDP-XE 500 CD Player 6. Power Mac 7200/75 7. Interex Keyboard 8. Portrait Pivet 1700 Monitor 9. 2 Workstation Desks Production - Edit Room - Station 1 1. Sony 21" TV 2. Media 100 System - Power Mac 8100/80 with Apple Keyboard and Supermatch 17" Monitor* 3. Seagate 2047M Drive (1)* 4. Seagate 8669M Drive (2)* 5. Micropolis 8681M Drive (1) 6. Media 100 Digital Video Editor** Leasing Co. *Bank Vest Capital Corp. AKA ORIX and FINOVA 200 Nickerson Road Marlboror, MA 01752 (800)532-7317 Lease #047011-001 Lease #047011-002 Lease #047011-003 **Colonial Pacific Leasing P.O. Box 2090 Portland, Oregon 97208-2090 (800)444-1738 Lease #108025002 Lease #108025003 Lease #108025004 PP Tax Paid over 12 months Page 123 Production - Edit Room - Station 2 1. *PCI System Media 100 Nubus $8999.95 *Purchased by Media 100 *Power Mac G3/G4 DIMM PC $379.00 *Remus Lite Disk Array Software $129.00 *Adobe After Effects Production Bundle $1,399.00 *18.2 GB Barracuda $505.00 *Adobe Photoshop Software $589.00 *Data Silo DS 100 $429.00 *Data Silo Cable Kit $149.00 *Tech Tools Pro Software $89.00 *Power Domain SCSI $349.00 *17" E773 Monitor $299.01 Leasing Co. Preferred Capital Corporation P.O. Box 41598 Philadelphia, PA 19101-1598 Lease #716-0388449-001 2. Micro Tek 2 HR Scanner 3. Sony Speakers (2) 4. Samsung TV/VCR 13" Combo 5. Panasonic 13" Monitor 6. LabTech CS-900 Computer Speakers (2) 7. APC-UPS 450 Battery Back Up 8. Panasonic PV-S 4480 Super VHS Deck 9. GE VG4056 VCRS (2) 10. GE SV4053 VCRS (2) 11. Symphonic 6480 VCRS (2) 12. 16 Port Video Patch Bay (2) 13. Neutrik Audio Patch Bay 14. Technics SLPG350 CD Player 15. Tascam DA20 Digital Audio Tape 16. JVC RX - 212 FM/AM Receiver 17. Sony UVW 1800 Beta SP Deck 18. Mackie 1202-VLZ Mixing Board 19. Panasonic WVF 300 Camera* Leasing Co. *Colonial Pacific Leasing P.O. Box 2090 Portland, Oregon 97208-2090 (800)444-1738 Lease #108025002 Lease #108025003 Lease #108025004 PP Tax Paid over 12 months Page 124 Studio 1. Sears TV 2. Rid Lowcost Teleprompter System (2) 1* 3. Panasonic 300 CLE WFV 300 Video Cameras (2) 4. ITE Pedastals (2) 1 5. HI 8 Video Camera (2) 6. Bogen Tripod (3) 1 *** 7. Anton Battery Charger*** 8. Sony UVW 100 w/ Lens *** 9. Sony PVM 8020 AC/DC Monitor $712.00*** 10. Sony PVM 8042 Color Monitor*** 11. Sony UVW 100 Camera w/ Lens **** 12. Sony BC 1WD Charger w/ Batteries 13. K-3 Camera 16MM 14. Sony 8800 3/4 VTR 15. Metal Desk 16. 2 Lowell Lighting Kits 17. 10 Wireless Mikes 18. 1 Studio Light Grid 19. Studio Lights and Stands 20. Metal Storage Reels 21. Sets, Background and Bluescreen 22. Misc. Set and Building Tools Leasing Co. *Bank Vest Capital Corp. AKA ORIX and FINOVA 200 Nickerson Road Marlboror, MA 01752 (800)532-7317 Lease #047011-001 Lease #047011-002 Lease #047011-003 ***Colonial Pacific Leasing P.O. Box 2090 Portland, Oregon 97208-2090 (800)444-1738 Lease #108025002 Lease #108025003 Lease #108025004 **** The Manifiest Group 100 East Saratoga Marshall, MN 56258-1714 (507)532-9558 Lease #556150 Lease #624826 PP Tax Paid over 12 months Page 125 Office Furniture 1. 8 Leather Chairs 2. 3 Desks 3. 2 Returns 4. 3 Hutch 5. 1 Storage Unit 6. 8 Steno Chairs 7. 1 Work Center 8. 7 4 PC Work Centers 9. 2 2 Drawer File Cabinet Audio Studio 1. Roland DM-800 Workstation 2. Roland 6-800 Synthesizser 3. Samsung 13" TV 4. Technics CD Player SL-P1200 5. Tascam 32 Reel to Reel Tape Deck 6. Sony A-6 Digitial Tape Deck 7. Neutek Patch Bay 8. 2 Rolls Mike Compressor Leg HRIIC 9. Behringer Composer Compressor MDX 2100 10. ART Dual Compressor 11. JVC R-K22 Tuner/Amplifier 12. Fischer CRW683 Dual Cassette Deck 13. TM Century Music Library 14. Realistic Eraser 15. 2 AK6 D3800 Mikes 16. CD Stand 17. Copy Holder 18. 2 Rolls Headphone Amps 19. Koss Pro 4 AA Headphones 20. Roland Boss U7-1 - Voice Transformer* 21. Music Software Systems 22. Music Bakery Discs 23. Midiator Leasing Co. *Bank Vest Capital Corp. AKA ORIX and FINOVA 200 Nickerson Road Marlboror, MA 01752 (800)532-7317 Lease #047011-001 Lease #047011-002 Lease #047011-003 PP Tax Paid over 12 months Page 126 Phone System 1. Samsung Digital Telephone System* Leasing Co. *Creditial Leasing Corp. 1501 Corporate Drive Suite 280 Boynton Beach, FL 33426-6654 (800)688-3088 Lease #0354401 PP Tax Paid over 12 months Voice Mail System 1. Minitel 128 Voice Mail System* Leasing Co. *Bank Vest Capital Corp. AKA ORIX 200 Nickerson Road Marlboror, MA 01752 (800)532-7317 Lease #047011-001 Lease #047011-002 Lease #047011-003 PP Tax Paid over 12 months Ocala News Tonight 1. (3) Leightronics Event Controller/Switcher $2,833.40 Purchased from Markertek and by Credit Card 2. 4 Sony VP 9000 S/N 2 Sony 7600 Umatic S/N Purchased from Hi-Tech Enterprises $3,845.58 3. 4 Secretarial Chairs & One Lap Top Table $200.00 Purchased from Staples 5. Media 100 System Nubus Component Suite Deal w/ Mac 8100/80 AV 6. Sony VO 5800 VCR $600.00 Audio Visual Consultants - Paid MC 7. Police Scanner $300. 8. 31 avalier mikes $350.00 9. 3 corded mikes $225.00 10. Assorted cables and wires $200.00 I attest the information contained herein is true and accurate to the best of my knowledge /s/ Gerald R. Cunningham - ---------------------------------- Gerald R. Cunningham, President Lorilei Communications, Inc. /s/ Leigh A. Cunningham - ---------------------------------- Leigh A. Cunningham, Vice President Sales Lorilei Communications, Inc. Page 127 Schedule to Reorganization Agreement by and among Amerinet Group.com, Inc., a Delaware Corporation and Lorilei Communications, Inc., a Florida Corporation SCHEDULE 2.11 INTELLECTUAL PROPERTY 1. Attached is a schedule of Trademarks and Copyrights. Lorilei Communications, Inc. Trademarks and Copyrights Mark Serial # Date In Force Abandoned - ---- -------- ---- ------------- --------- THE FIRM MULTIMEDIA 75/335702 8/13/98 X WE CREATE DEMAND 75/335756 9/1/98 X CREDIT NOW 75/364030 7/1/98 X CREDIT NOW 75/364030 3/2/99 X SELL-O-VISION 75/109714 5/24/96 X Copyrights - ------------ CREDIT NOW PA 860-881 7/15/97 COOL IDEAS PA 860-887 7/15/97 * The owner of each trademark and copyright is Lorilei Communications, Inc. with and address at 7325 SW 32nd Street, Ocala, Florida 34474 I attest the information contained herein is true and accurate to the best of my knowledge /s/ Gerald R. Cunningham - ---------------------------------- Gerald R. Cunningham, President Lorilei Communications, Inc. /s/ Leigh A. Cunningham - ---------------------------------- Leigh A. Cunningham, Vice President Sales Lorilei Communications, Inc. Page 128 Schedule to Reorganization Agreement by and among Amerinet Group.com, Inc., a Delaware Corporation and Lorilei Communications, Inc., a Florida Corporation SCHEDULE 2.12 CONTRACTS, AGREEMENTS & COMMITMENTS 2.12 (A) 1. Amsouth Bank - Line of Credit. Balance is around $32,650.00. Monthly payments are around $1,000.00 per month. Account opened 12/97. This account is a line of credit therefore, there is no termination. Copies of the application have been requested to Amsouth. 2. Amsouth Bank - Auto Loan on Ford Mountaineer. Balance is $20,091.20. Monthly payments are $463.55. Execution of this loan is 9/30/99 and the end of the loan is 9/30/04. 3. Bank of America - Auto Loan on Volvo. Balance is $25,213.67. Monthly payments are $503.37. Execution of this loan is 3/10/00 and the end of the loan is 3/10/05. 4. Chrysler Financial Group - Auto Loan on Dodge Caravan. Balance is $12,141.98. Monthly payments are $363.08. Execution of this loan is 5/29/98 and the end of the loan is 6/13/03. 5. Promissory Note to John and Marcia LaTorraca Trust for $46,143.00. Principal balance is $46,143.00 with interest accruing at 8.5% per annum since 12/31/98. In 1999, two interest payments of $200.00 ($400.00 total) were made. As of 4/26/00 the balance of note, principal plus interest is $50,922.91. The principal amount was used for working capital. Execution of this Promissory Note is 12/31/98 and there is not termination date. 6. Leigh and Gerry Cunningham, the officers/shareholders, have loaned the company $45,301.28. This money has been loaned over the course of years in business. This money was used for working capital. The beginning date of the officers/shareholders loaning money to the company was 10/29/98. The termination date is unknown. Attached are supporting documents for the above referenced. The following is a list of equipment leases. These leases are attached to this schedule. Each lease provides term, amount per month and equipment description. 1. The Associates - Monthly Payment $357.52, Balance $3,018.31 2. Colonial Pacific Leasing #108025002 - Monthly Payment $768.35, Balance $12,867.92 3. Colonial Pacific Leasing #108025003 - Monthly Payment $378.20, Balance $6,507.39 4. Colonial Pacific Leasing #108025004 - Monthly Payment $200.67, Balance $3,730.63 5. Colonial Pacific Leasing #108025005 - Monthly Payment $148.40, Balance $1,589.09 6. Credential Leasing - Monthly Payment $347.43, Balance $7,615.24 7. FINOVA Financial - Monthly Payment $483.15, Balance $16,230.73 8. Freedom Capital - Monthly Payment $442.03, Balance $5,460.33 9 The Manifest Group AKA Flex Lease #556150 - Monthly Payment $595.95, Balance $1,626.37 10. The Manifest Group AKA Flex Lease #624826 - Monthly Payment $212.80, Balance $1,782.40 11. ORIX Credit Alliance #02324-7 - Monthly Payment $574.78, Balance $6,801.54 12. ORIX Credit Alliance #02325-4 - Monthly Payment $188.27, Balance $5,894.23 13. Preferred Lease - Monthly Payment $506.36, Balance $15,149.17 2.12 (B) Under this section only the following items apply: #4 - Refer to Exhibit 5.12 for a copy of New Position Offer for Sheryl Wolf. #12 - Refer to Schedule 2.10(A)(1) for mortgage information I attest the information contained herein is true and accurate to the best of my knowledge /s/ Gerald R. Cunningham - ---------------------------------- Gerald R. Cunningham, President Lorilei Communications, Inc. /s/ Leigh A. Cunningham - ---------------------------------- Leigh A. Cunningham, Vice President Sales Lorilei Communications, Inc. Page 129 Schedule to Reorganization Agreement by and among Amerinet Group.com, Inc., a Delaware Corporation and Lorilei Communications, Inc., a Florida Corporation SCHEDULE 2.14 GOVERNMENTAL AUTHORIZATION 1. Fictitious Name Registration - Ocala News Tonight, Ocala, Marion County, FL 2. Fictitious Name Registration - The Firm Multimedia, Ocala, Marion County, FL 3. State of Florida, Marion County Drinking Water System Operating Permit 4. Marion County Occupational License 1999-2000 5. Florida Department of Revenue Certificate of Registration to Collect Sales and Use Taxes for State of Florida Attached are supporting documents to the above referenced. Note: The fictitious name registration for "THE FIRM" has expired and Lorilei will not be renewing. I attest the information contained herein is true and accurate to the best of my knowledge /s/ Gerald R. Cunningham - ---------------------------------- Gerald R. Cunningham, President Lorilei Communications, Inc. /s/ Leigh A. Cunningham - ---------------------------------- Leigh A. Cunningham, Vice President Sales Lorilei Communications, Inc. Schedule to Reorganization Agreement by and among Amerinet Group.com, Inc., a Delaware Corporation and Lorilei Communications, Inc., a Florida Corporation SCHEDULE 2.15 LITIGATION We agree to all statements as detailed in Schedule 2.15, in the above mentioned document entitled "Litigation," with the following exceptions: 2.15 (D): Lorilei may file a collection suit against CareerTV.com in the amount of $132,543.30 plus interest and late fees for failure to fulfill it's contractual obligation. Attached is a copy of the contract with CareerTV.com and a copy of a standard channel lease agreement with one of the cable systems. I attest the information contained herein is true and accurate to the best of my knowledge /s/ Gerald R. Cunningham - ---------------------------------- Gerald R. Cunningham, President Lorilei Communications, Inc. /s/ Leigh A. Cunningham - ---------------------------------- Leigh A. Cunningham, Vice President Sales Lorilei Communications, Inc. Page 130 Schedule to Reorganization Agreement by and among Amerinet Group.com, Inc., a Delaware Corporation and Lorilei Communications, Inc., a Florida Corporation SCHEDULE 2.20 LIST OF EMPLOYEES Attached to this schedule is a list of all employees, current salaries, vacation, personal time, and comp time accruals. Prior to the date of closing this transaction, comp time accruals will no longer be allowed. Comp time that has been previously accrued has to be used within 6 months from the date of accrual. Otherwise, comp time is forfeited. Lorilei Communications, Inc. d/b/a The Firm Multimedia d/b/a Ocala News Tonight Employee Information May 15, 2000 Employee Salary Vacation Personal Comp Time Time Hours Time Hours Hours 1. Bryan Allen $13,800.00 0 0 0 2. Richard Andrews $17,400.00 0 40 0 3. Kim Avery $21,900.00 40 37 4. Melissa Barfield $12.50/hour 0 0 0 5. Bountham Chanthalansy $22,400.00 0 31 0 6. Gerry Cunningham $60,000.00 0 0 0 7. Leigh Cunningham $60,000.00 0 0 0 8. Stacey Dolezal $30,000.00 0 40 0 9. William Fraker $9.00/hour 0 0 0 10. Patricia Gale $24,000.00 0 40 0 11. Jeanne Harding $6.50/hour 0 0 0 12. Leslie Kinney $22,800.00 40 31.50 17 13. Mary Lee $31,200.00 6.50 0 0 14. Dustin McCollum $25,200.00 0 24 15. Nadyne McDonald $14,400.00 0 40 0 16. John Miller $10,800.00 0 0 0 17. Debbie Tilton $7.33/hour 0 0 0 18. Penny Tomberlin $18,180.00 32 45.50 0 19. Brian Trahan $35,100.00 0 13.75 0 20. Lawrence Uelmen $25,000.00 0 0 0 21. Kim Ullery $17,520.00 0 40 0 22. Sheryl Wolf $21,000.00 13 0 0
I attest the information contained herein is true and accurate to the best of my knowledge /s/ Gerald R. Cunningham - ---------------------------------- Gerald R. Cunningham, President Lorilei Communications, Inc. /s/ Leigh A. Cunningham - ---------------------------------- Leigh A. Cunningham, Vice President Sales Lorilei Communications, Inc. Page 131 Schedule to Reorganization Agreement by and among Amerinet Group.com, Inc., a Delaware Corporation and Lorilei Communications, Inc., a Florida Corporation SCHEDULE 2.21 INSURANCE 1. Workers Comp Insurance - Hanover Insurance 2. Auto Insurance - Hanover Insurance 3. Commercial General Liability Insurance - Hanover Insurance 4. Professional Liability Insurance - Scottsdale Insurance Company 5. Health Insurance - HealthPlan Southeast 6. Schedule of Life Insurance for Officers 7. Westfield Life Insurance - For Officers Only 8. Lincoln Benefit Life Insurance - For Officers Only 9. Midland National Life Insurance - For Officers Only 10. First Penn Pacific Life Insurance - For Officers Only 11. Copies of letters to First Penn Pacific, Midland National, Westfield Life, requesting additional policy information. Note: We are in the process of formulating an errors and omissions policy on Ocala News Tonight. Attached are supporting documents to the above referenced. I attest the information contained herein is true and accurate to the best of my knowledge /s/ Gerald R. Cunningham - ---------------------------------- Gerald R. Cunningham, President Lorilei Communications, Inc. /s/ Leigh A. Cunningham - ---------------------------------- Leigh A. Cunningham, Vice President Sales Lorilei Communications, Inc. Schedule to Reorganization Agreement by and among Amerinet Group.com, Inc., a Delaware Corporation and Lorilei Communications, Inc., a Florida Corporation SCHEDULE 2.27 EMPLOYEE BENEFIT PLANS 1. Currently, there are no employee benefit plans in place. 2. Lorilei Communications, Inc. pays $85.00 per month towards the employee's health insurance premium. Lorilei pays entire premium for officers of the company. I attest the information contained herein is true and accurate to the best of my knowledge /s/ Gerald R. Cunningham - ---------------------------------- Gerald R. Cunningham, President Lorilei Communications, Inc. /s/ Leigh A. Cunningham - ---------------------------------- Leigh A. Cunningham, Vice President Sales Lorilei Communications, Inc. Page 132 Schedule to Reorganization Agreement by and among Amerinet Group.com, Inc., a Delaware Corporation and Lorilei Communications, Inc., a Florida Corporation SCHEDULE 2.28 DISTRIBUTION AGREEMENTS We agree to all statements as detailed in Schedule 2.28, in the above mentioned document entitled "Distribution Agreements," with the following exception: 2.28A We have posted blocks of commercial leased access airtime for sale through Ad Outlet.com, a broker in the advertising space, time and banner sales business. Ad Outlet marks up our gross sale price to compensate itself with a sales commission. Potential sales generated by Ad Outlet are subject to Lorilei's final approval. No sales have been generated under this plan thus far. There is no contract between Lorilei Communications, Inc. and AdOutlet.com. I attest the information contained herein is true and accurate to the best of my knowledge /s/ Gerald R. Cunningham - ---------------------------------- Gerald R. Cunningham, President Lorilei Communications, Inc. /s/ Leigh A. Cunningham - ---------------------------------- Leigh A. Cunningham, Vice President Sales Lorilei Communications, Inc. Schedule to Reorganization Agreement by and among Amerinet Group.com, Inc., a Delaware Corporation and Lorilei Communications, Inc., a Florida Corporation SCHEDULE 4.1 EXCEPTIONS TO PROHIBITED PRE CLOSING ACTIONS We agree to all statements as detailed in Schedule 4.1, in the above mentioned document entitled "Conduct of Business of Lorilei," without exception. I attest the information contained herein is true and accurate to the best of my knowledge /s/ Gerald R. Cunningham - ---------------------------------- Gerald R. Cunningham, President Lorilei Communications, Inc. /s/ Leigh A. Cunningham - ---------------------------------- Leigh A. Cunningham, Vice President Sales Lorilei Communications, Inc. Page 133 Schedule to Reorganization Agreement by and among Amerinet Group.com, Inc., a Delaware Corporation and Lorilei Communications, Inc., a Florida Corporation SCHEDULE 5.7 CONSENTS The current mortgage holder on the building and real estate at 7325 Southwest 32nd Street, Ocala, Florida 34774 is Small Business Loan Source (SBLS) located at 5333 Westheimer, Suite 840, Houston, Texas 77056. This is an SBA guaranteed type 7a loan. Exhibit A of the mortgage stipulates that if the property or a beneficial interest in the property is transfered without Mortgagee's prior written consent, the mortgage may then be accelerated. A copy of the Mortgagee's written consent is attached. Other Notices The mortgage specifies that 3 weeks prior notice of prepayment is required, otherwise Mortgagor will be required to pay 3 weeks interest on the unpaid prinicpal as of the date of prepayment. A commercial security agreement exists as part of the mortgage and is attached. Under part F "other provisions" of the SBA Authorization and Loan agreement, item #7 limits annual expenditures for acquisition of fixed assets to $10,000, however part 6 of the borrowing certificate sets this amount at $25,000 without Lender's prior approval, approval of which will not be unreasonably withheld. Although the deed restrictions (attached) Airport Industrial Park call for underground utilities, the developer has given us a verbal "no action" inasmuch as the general contractor neglected to run underground electrical service from the street to the building. The Airport Industrial Park is in the process of being annexed into the City of Ocala from Marion County and will soon have city water service. Lorilei has received notice (attached) that an assessment of approximately $536.00 impact fee and a meter installation charge based on the meter size for connecting to the service, plus construction costs of running the line for the connection at $8.50 per front foot on the road. Some of this cost may be mitigated by lower fire insurance premiums due to the proximity of a working fire hydrant. I attest the information contained herein is true and accurate to the best of my knowledge /s/ Gerald R. Cunningham - ---------------------------------- Gerald R. Cunningham, President Lorilei Communications, Inc. /s/ Leigh A. Cunningham - ---------------------------------- Leigh A. Cunningham, Vice President Sales Lorilei Communications, Inc. Schedule to Reorganization Agreement by and among Amerinet Group.com, Inc., a Delaware Corporation and Lorilei Communications, Inc., a Florida Corporation SCHEDULE 5.8 AFFILIATES Gerald R. Cunningham Leigh A. Cunningham I attest the information contained herein is true and accurate to the best of my knowledge /s/ Gerald R. Cunningham - ---------------------------------- Gerald R. Cunningham, President Lorilei Communications, Inc. /s/ Leigh A. Cunningham - ---------------------------------- Leigh A. Cunningham, Vice President Sales Lorilei Communications, Inc. Page 134 Schedule to Reorganization Agreement by and among Amerinet Group.com, Inc., a Delaware Corporation and Lorilei Communications, Inc., a Florida Corporation SCHEDULE 5.12 LIST AND SUMMARY OF EMPLOYEE AGREEMENTS 1. List of Employees can be found in Schedule 2.20 2. Non Compete Agreements 3. Talent Releases 4. New Position Offer for Sheryl Wolf 5. Employment Agreement for Gerald R. Cunningham 6. Employment Agreement for Leigh A. Cunningham I attest the information contained herein is true and accurate to the best of my knowledge /s/ Gerald R. Cunningham - ---------------------------------- Gerald R. Cunningham, President Lorilei Communications, Inc. /s/ Leigh A. Cunningham - ---------------------------------- Leigh A. Cunningham, Vice President Sales Lorilei Communications, Inc. Schedule to Reorganization Agreement by and among Amerinet Group.com, Inc., a Delaware Corporation and Lorilei Communications, Inc., a Florida Corporation SCHEDULE 5.13-1 PROJECTIONS 1. Attached to this schedule is the projection for years ending 2000 to 2001. Lorilei Communications, Inc FY ending 6/30/2001 July Aug Sep Oct Nov Dec Jan Feb Mar Apr May June Total Income Commission 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 24,000 ONT Ad sales 18,000 18,000 22,000 24,000 30,000 27,000 24,000 24,000 28,000 30,000 33,000 30,000 308,000 Retainer 5,000 5,000 5,000 5,000 5,000 5,000 6,000 6,000 6,000 6,500 6,500 6,500 67,500 Video Production 35,000 35,000 30,000 34,000 32,000 60,000 32,000 30,000 40,000 40,000 45,000 40,000 453,000 Graphics 30,000 30,000 30,000 30,000 35,000 35,000 35,000 30,000 30,000 30,000 40,000 40,000 395,000 Pre-press 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000 Airtime 75,000 75,000 75,000 50,000 50,000 50,000 40,000 40,000 60,000 65,000 75,000 65,000 720,000 Brokered Spot airtime 10,000 20,000 20,000 10,000 7,000 20,000 7,500 5,000 12,000 40,000 40,000 50,000 241,500 Fees-Misc 2,500 2,500 2,500 6,000 6,000 6,000 10,000 6,000 6,000 8,000 6,000 22,000 83,500 Web Design 3,000 3,500 4,000 4,000 4,000 4,000 6,000 4,000 4,000 4,000 4,000 5,000 49,500 Still Photography 800 800 800 800 800 800 800 800 800 800 800 800 9,600 CD-Rom 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 10,000 65,000 Audio Production 1,000 1,000 1,000 7,500 4,000 6,500 10,000 6,000 5,000 5,000 5,000 5,000 57,000 Public Relations 2,000 2,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 34,000 Client Promotions 5,000 5,000 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 35,000 Web Maintenance 1,300 1,300 1,500 1,500 1,500 1,500 1,500 2,000 2,000 2,500 2,500 3,450 22,550 Shipping Revenue 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 24,000 Total Income 198,600 209,100 207,300188,300 190,800231,300 188,300169,300 209,300247,300 273,300288,250 2,601,150 Cost of Goods Sold Spot Airtime 6,600 13,200 13,200 6,600 4,620 13,200 4,950 3,300 7,920 26,400 26,400 33,000 159,390 CLA 33,750 33,750 33,750 22,500 22,500 22,500 18,000 18,000 27,000 29,250 33,750 29,250 324,000 Program Airtime 1,500 1,500 1,500 1,000 1,000 1,000 800 800 1,200 1,300 1,500 1,300 14,400 ONT CLA 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 54,000 Total 46,350 52,950 52,950 34,600 32,620 41,200 28,250 26,600 40,620 61,450 66,150 68,050 551,790 Page 135 Client Promotions 1,750 1,750 875 875 875 875 875 875 875 875 875 875 12,250 Internet Fees 429 429 495 495 495 495 495 660 660 825 825 1,139 7,442 Total 2,179 2,179 1,370 1,370 1,370 1,370 1,370 1,535 1,535 1,700 1,700 2,014 19,692 Graphics Photos 150 150 150 150 150 150 150 150 150 150 150 150 1,800 Printing 15,000 15,000 15,000 15,000 17,500 17,500 17,500 15,000 15,000 15,000 20,000 20,000 197,500 Pre-press supplies 250 250 250 250 250 250 250 250 250 250 250 250 3,000 Misc Supplies 0 0 225 0 0 225 0 0 225 0 0 225 900 Total 15,400 15,400 15,625 15,400 17,900 18,125 17,900 15,400 15,625 15,400 20,400 20,625 203,200 Video Production Tapes 1,000 1,750 1,500 1,700 1,600 3,000 1,600 1,500 2,000 2,000 2,250 2,000 21,900 Software/equipment 500 500 0 0 0 0 0 0 0 140 0 427 1,567 Printing 3,000 0 0 0 0 0 0 0 0 0 0 0 3,000 Talent Fees 700 700 600 680 640 1,200 640 600 800 800 900 800 9,060 Staging & Props 350 350 300 340 320 600 320 300 400 400 450 400 4,530 Rentals 350 350 300 340 320 600 320 300 400 400 450 400 4,530 Shipping 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 21,600 Tape Duplication 3,850 3,850 3,300 3,740 3,520 6,600 3,520 3,300 4,400 4,400 4,950 4,400 49,830 Total 11,550 9,300 7,800 8,600 8,200 13,800 8,200 7,800 9,800 9,940 10,800 10,227 116,017 Total COGS 75,479 79,829 77,745 59,970 60,090 74,495 55,720 51,335 67,580 88,490 99,050 100,916 890,699 Gross Profit 123,121 129,271 129,555128,330 130,710156,805 132,580117,965 141,720158,810 174,250187,335 1,710,452 Firm Expenses Advertising Prod/Office personnel 750 750 750 750 750 750 750 750 750 750 750 750 9,000 CD Dup/Printing 0 2,400 0 0 2,500 0 0 0 2,000 0 0 0 6,900 Yellow Pages 300 300 300 300 300 300 300 300 300 300 300 300 3,600 Print 600 600 600 600 600 600 600 600 600 600 600 600 7,200 Misc. Firm Advertising 300 300 300 300 300 300 300 300 300 300 300 300 3,600 Total Advertising 1,950 4,350 1,950 1,950 4,450 1,950 1,950 1,950 3,950 1,950 1,950 1,950 30,300 Automobile Maintenance 450 450 450 450 450 450 450 450 450 450 450 450 5,400 Caravan payment 364 364 364 364 364 364 364 364 364 364 364 363 4,367 New ONT vehicles 400 400 400 400 400 400 400 400 400 400 400 400 4,800 Mercury 464 464 464 464 464 464 464 464 464 464 464 464 5,568 Volvo 504 504 504 504 504 504 504 504 504 504 504 504 6,048 Fuel 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 18,000 Vehicle Registration 0 0 200 0 79 0 0 0 0 0 0 0 279 Total Automobile 3,682 3,682 3,882 3,682 3,761 3,682 3,682 3,682 3,682 3,682 3,682 3,681 44,462 Bank Charges 35 35 35 35 35 35 35 35 35 35 35 35 420 Contributions 0 1,000 0 0 0 0 0 0 0 0 0 0 1,000 Company Fees Copyright/Trademark 245 0 0 0 0 0 0 0 0 0 0 0 245 Internet Fees 375 375 425 425 425 425 550 550 550 550 550 550 5,750 Dues and Subscriptions 366 365 252 153 45 63 110 0 0 95 0 0 1,449 Education 183 0 0 0 0 82 0 0 0 0 100 0 365 Equipment Rental 101 101 1,200 101 757 1,695 575 101 0 101 101 101 4,934 NDC Payment Systems 150 308 458 Misc. Fees 0 0 544 0 963 0 0 85 215 167 599 0 2,573 Total Company Fees 1,420 841 2,421 679 2,190 2,265 1,235 736 765 913 1,350 959 15,774 Insurance Auto 450 450 450 450 450 450 450 450 450 450 450 450 5,400 Building/Property 275 275 275 275 275 275 275 275 275 275 275 275 3,300 Health 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000 Media Liability 300 300 300 300 300 300 300 300 300 300 300 300 3,600 Addlt Liability 200 200 200 200 200 200 200 200 200 200 200 200 2,400 Life Insurance 175 175 175 175 175 175 175 175 175 175 175 175 2,100 Worker's Comp 300 300 300 300 300 300 300 300 300 300 300 300 3,600 Total Insurance 2,700 2,700 2,700 2,700 2,700 2,700 2,700 2,700 2,700 2,700 2,700 2,700 32,400 Page 136 Interest Late charges 300 300 150 150 150 150 150 150 150 150 150 150 2,100 Finance Charges 450 450 450 450 450 450 450 450 450 450 450 450 5,400 Loan Int-Capital leases 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 24,162 Mortgage Interest 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 21,600 Other interest 200 122 0 121 235 115 0 113 111 182 107 564 1,870 Lines of credit 200 0 266 0 0 253 265 437 0 309 300 250 2,280 Total Interest 4,950 4,672 4,666 4,521 4,635 4,768 4,665 4,950 4,511 4,891 4,807 5,214 57,250 Janitorial/Maintenance Pest Control 50 0 50 0 50 0 50 0 50 0 172 0 422 Cleaning/Supplies 156 109 227 114 179 62 256 194 67 21 238 150 1,773 Sanitation 0 0 0 0 189 44 44 44 44 44 44 44 497 Total Janitorial/Maintenance 206 109 277 114 418 106 350 238 161 65 454 194 2,692 Licenses and Permits 0 0 0 0 150 0 0 11 0 191 0 60 412 Leases Audio Visual 379 450 277 280 284 288 291 295 299 303 307 311 3,764 Computer Equip 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 14,400 Phone System 328 328 328 328 328 328 328 328 328 328 328 328 3,936 Production Equip 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 42,000 Total Leases 5,407 5,478 5,305 5,308 5,312 5,316 5,319 5,323 5,327 5,331 5,335 5,339 64,100 Lines of Credit AmSouth 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 13,200 Total-Lines of credit 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 13,200 Office Space Mortgage principal 200 200 200 200 200 200 200 200 200 200 200 200 2,400 Jax Office rent 209 209 209 209 209 209 209 209 209 209 209 209 2,508 Orl Office rent 400 400 400 400 400 400 400 400 400 400 400 400 4,800 Total Office Mort/Rent 809 809 809 809 809 809 809 809 809 809 809 809 9,708 Non-COGS Supplies Office Supplies 695 800 400 700 650 350 400 300 600 800 650 550 6,895 Graphics software/equipment 700 200 200 200 200 200 200 200 200 200 200 200 2,900 Video software/equipment 1,250 1,250 500 500 500 500 500 500 500 500 500 500 7,500 Interactive software/equipment 200 200 200 200 200 200 200 200 200 200 200 200 2,400 Printing 942 0 86 628 34 46 34 95 754 218 201 532 3,570 Grocery 25 25 25 25 25 25 25 25 25 25 25 25 300 Video Production Supplies 300 300 400 400 500 400 400 400 400 400 400 400 4,700 Graphic Supplies 595 0 400 72 392 100 373 0 130 0 0 30 2,092 Film Processing 58 0 0 0 0 0 0 0 0 28 15 0 101 Pre-Press Supplies 100 100 100 100 100 100 100 100 100 100 100 100 1,200 Audio Supplies 0 0 108 352 0 0 83 0 0 0 0 543 Total Office supplies 4,865 2,875 2,419 3,177 2,601 1,921 2,232 1,903 2,909 2,471 2,291 2,537 32,201 Payroll Officers 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 120,000 Staff 32,000 32,000 34,000 35,000 35,000 36,000 38,000 38,000 38,000 38,000 38,000 38,000 432,000 FUTA/SUTA 320 320 340 350 350 360 380 380 380 380 380 380 4,320 Commissions 9,930 10,455 10,365 9,415 9,540 11,565 9,415 8,465 10,465 12,365 13,665 14,413 130,058 Federal/Fica Tax 7,980 7,980 8,360 8,550 8,550 8,740 9,120 9,120 9,120 9,120 9,120 9,120 104,880 Staff incentives 100 100 100 100 100 100 100 100 100 100 100 100 1,200 Total Payroll 60,330 60,855 63,165 63,415 63,540 66,765 67,015 66,065 68,065 69,965 71,265 72,013 792,458 Page 137 Postage and Delivery USPS 325 325 325 325 325 325 325 325 325 325 325 325 3,900 Unishippers 470 470 470 470 470 470 470 470 470 470 470 470 5,640 Other 25 25 25 25 25 25 25 25 25 25 25 25 300 Total Postage & Delivery 820 820 820 820 820 820 820 820 820 820 820 820 9,840 Professional Fees Accountant 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000 Consulting 150 150 150 150 150 150 150 150 150 150 150 150 1,800 Legal 400 400 400 400 400 400 400 400 400 400 400 400 4,800 Collection Agent 993 1,046 1,037 942 954 1,157 942 847 1,047 1,237 1,367 1,441 13,006 Personnel 0 0 0 1,000 0 0 1,000 0 0 1,000 0 0 3,000 Total Professional Fees 2,543 2,596 2,587 3,492 2,504 2,707 3,492 2,397 2,597 3,787 2,917 2,991 34,606 Repairs and Maintenance Computer repairs 250 500 250 500 250 500 250 500 250 500 250 500 4,500 Equipment repairs 450 450 1,500 450 450 450 450 450 450 450 450 450 6,450 Building repairs 150 150 150 150 150 150 150 150 150 150 150 150 1,800 Total Repairs & Maintenance 850 1,100 1,900 1,100 850 1,100 850 1,100 850 1,100 850 1,100 12,750 Sales Expenses Sales Recruitment 500 500 500 500 500 500 500 500 500 500 500 500 6,000 Direct Mailers 400 400 400 400 400 400 400 400 400 400 400 400 4,800 Sales contest/bonus 100 100 100 100 100 100 100 100 100 100 100 100 1,200 Misc. Sales Expenses 100 100 100 100 100 100 100 100 100 100 100 100 1,200 Total Sales Expenses 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 13,200 Taxes Personal property Firm 0 0 0 0 0 0 0 0 5,000 0 0 0 5,000 Real Estate 0 0 0 0 0 0 0 5,000 0 0 0 0 5,000 Sales Tax - Firm 205 286 465 493 366 314 333 200 0 1,190 438 200 4,490 Intangible/Tangible 0 0 98 280 0 0 0 0 0 0 0 0 378 Personal property Leases 41 351 41 233 41 41 312 41 41 41 292 184 1,659 State 0 0 0 0 0 110 0 106 138 126 0 90 570 Total tax 246 637 604 1,006 407 465 645 5,347 5,179 1,357 730 474 17,097 Telephone Cellular 400 400 400 400 400 400 400 400 400 400 400 400 4,800 Local service 350 350 350 350 350 350 350 350 350 350 350 350 4,200 Long Distance 650 650 650 650 650 650 650 650 650 650 650 650 7,800 Paging 75 75 75 75 75 75 75 75 75 75 75 75 900 Other 25 25 25 25 25 25 25 25 25 25 25 25 300 Total Telephone 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 18,000 Travel Car Rental 55 55 55 55 55 55 55 55 55 55 55 55 660 Airfare 250 250 250 250 250 250 250 250 250 250 250 250 3,000 Entertainment 120 120 120 120 120 120 120 120 120 120 120 120 1,440 Travel other 120 120 120 120 120 120 120 120 120 120 120 120 1,440 Lodging 225 225 225 225 225 225 225 225 225 225 225 225 2,700 Meals 225 225 225 225 225 225 225 225 225 225 225 225 2,700 Tolls/Parking 50 50 50 50 50 50 50 50 50 50 50 50 600 Total Travel 1,045 1,045 1,045 1,045 1,045 1,045 1,045 1,045 1,045 1,045 1,045 1,045 12,540 Utilities Electric 500 500 500 475 475 400 400 350 350 375 375 400 5,100 Total Utilities 500 500 500 475 475 400 400 350 350 375 375 400 5,100 Miscellaneous Non compete fees 40 10 20 10 0 10 0 30 10 10 10 30 180 Misc. Expenses 0 0 0 79 329 368 127 150 0 60 0 0 1,113 Total Miscellaneous 40 10 20 89 329 378 127 180 10 70 10 30 1,293 Bad Debt 3,575 3,764 3,731 3,389 3,434 4,163 3,389 3,047 3,767 4,451 4,919 5,189 46,821 Gross Profit 123,121 129,271 129,555128,330 130,710156,805 132,580117,965 141,720158,810 174,250187,335 1,710,452 Total Expenses 99,673 101,577 102,536101,506 104,165105,095 104,460106,388 111,232109,708 110,044111,239 1,267,623 Pre-tax Profit* 23,448 27,694 27,019 26,824 26,545 51,710 28,120 11,577 30,488 49,102 64,206 76,095 442,829 EBITDA 500,277 GPM 66%
*Does not include depreciation Certain expense items covered under use of investment proceeds are not included Page 138 Lorilei Communications, Inc. FY ending June 30, 2002 July Aug Sep Oct Nov Dec Jan Feb Mar April May June Total Income Commission 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 72,000 ONT Ad sales 25,000 25,000 30,000 32,000 36,000 34,000 34,000 34,000 38,000 38,000 40,000 40,000 406,000 North County Ad sales 15,000 25,000 25,000 30,000 30,000 35,000 30,000 28,000 35,000 40,000 45,000 45,000 383,000 Retainer 5,000 5,500 5,500 6,000 6,000 6,000 6,500 6,500 7,500 7,500 7,500 7,500 77,000 Video Production 40,000 40,000 45,000 50,000 55,000 60,000 45,000 50,000 55,000 50,000 65,000 60,000 615,000 Graphics 40,000 40,000 40,000 40,000 40,000 45,000 45,000 45,000 45,000 40,000 45,000 50,000 515,000 Pre-press 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 18,000 Airtime 60,000 60,000 65,000 65,000 70,000 60,000 65,000 55,000 70,000 70,000 75,000 70,000 785,000 Brokered Spot airtime 25,000 25,000 30,000 25,000 30,000 30,000 25,000 20,000 30,000 35,000 40,000 40,000 355,000 Fees-Misc 2,250 2,250 2,250 3,000 3,000 8,500 10,000 8,500 9,000 10,000 10,000 10,000 78,750 Web Design 6,500 6,500 6,500 6,500 10,000 6,500 6,500 7,000 10,000 7,000 7,000 8,000 88,000 Still Photography 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 14,400 CD-Rom 12,000 12,000 6,500 8,000 10,000 8,000 7,000 7,000 8,000 10,000 10,000 10,000 108,500 Audio Production 2,000 2,000 2,000 4,000 6,000 7,000 6,000 7,000 7,000 7,500 8,000 8,000 66,500 Public Relations 3,500 3,500 3,500 3,500 4,500 3,500 3,500 3,500 4,000 4,000 4,000 5,000 46,000 Client Promotions 2,500 5,000 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 42,500 Web Maintenance 3,800 3,500 3,500 3,500 4,500 4,500 4,500 5,000 5,000 5,000 5,000 5,500 53,300 Shipping Revenue 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 36,000 Interest Income 150 150 150 150 150 150 150 150 150 150 150 150 1,800 Total Income 254,400 267,100 280,100291,850 320,350323,350 303,350291,850 338,850339,350 376,850374,350 3,761,750 Cost of Goods Sold Spot Airtime 16,500 16,500 19,800 16,500 19,800 19,800 16,500 13,200 19,800 23,100 26,400 26,400 234,300 CLA 27,000 27,000 29,250 29,250 31,500 27,000 29,250 24,750 31,500 31,500 33,750 31,500 353,250 Program Airtime 1,200 1,200 1,300 1,300 1,400 1,200 1,300 1,100 1,400 1,400 1,500 1,400 15,700 ONT CLA 5,200 5,200 5,200 5,200 5,200 5,200 5,200 5,200 5,200 5,200 5,200 5,200 62,400 North County CLA 6,500 6,500 6,500 6,500 6,500 6,500 6,500 6,500 6,500 6,500 6,500 6,500 78,000 Total 56,400 56,400 62,050 58,750 64,400 59,700 58,750 50,750 64,400 67,700 73,350 71,000 743,650 Client Promotions 875 1,750 1,225 1,225 1,225 1,225 1,225 1,225 1,225 1,225 1,225 1,225 14,875 Internet Fees 1,254 1,155 1,155 1,155 1,485 1,485 1,485 1,650 1,650 1,650 1,650 1,815 17,589 Total 2,129 2,905 2,380 2,380 2,710 2,710 2,710 2,875 2,875 2,875 2,875 3,040 32,464 Graphics Photos 150 150 150 150 150 150 150 150 150 150 150 150 1,800 Printing 20,000 20,000 20,000 20,000 20,000 22,500 22,500 22,500 22,500 20,000 22,500 25,000 257,500 Pre-press supplies 375 375 375 375 375 375 375 375 375 375 375 375 4,500 Misc Supplies 0 0 355 0 0 355 0 0 355 0 0 355 1,420 Misc. Shipping 500 500 500 500 500 500 500 500 500 500 500 500 6,000 Total 21,025 21,025 21,380 21,025 21,025 23,880 23,525 23,525 23,880 21,025 23,525 26,380 271,220 Video Production Tapes 2,500 2,500 3,000 3,500 3,000 3,500 2,250 2,500 3,000 3,000 3,250 3,000 35,000 Software/equipment 1,000 500 1,000 500 0 0 0 0 0 140 0 500 3,640 Printing 3,000 0 0 0 0 0 0 0 0 0 0 0 3,000 Talent Fees 750 1,000 1,200 1,200 1,200 1,200 1,200 1,800 1,200 1,200 1,800 1,200 14,950 Staging & Props 500 600 800 1,000 800 1,200 900 1,200 1,000 1,000 1,500 1,200 11,700 Rentals 400 400 450 500 550 600 450 500 550 500 650 600 6,150 Shipping 2,700 2,700 2,700 2,700 2,700 2,700 2,700 2,700 2,700 2,700 2,700 2,700 32,400 Tape Duplication 4,400 4,400 4,950 5,500 6,050 6,600 4,950 5,500 6,050 5,500 7,150 6,600 67,650 Total 15,250 12,100 14,100 14,900 14,300 15,800 12,450 14,200 14,500 14,040 17,050 15,800 174,490 Total COGS 94,804 92,430 99,910 97,055 102,435102,090 97,435 91,350 105,655105,640 116,800116,220 1,221,824 Gross Profit 159,596 174,670 180,190194,795 217,915221,260 205,915200,500 233,195233,710 260,050258,130 2,539,926 Firm Expenses Advertising Page 139 Ocala News Tonight 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 30,000 Prod/Office personnel 750 750 750 750 750 750 750 750 750 750 750 750 9,000 CD Dup/Printing 0 3,000 0 0 3,000 0 0 3,000 0 0 3,000 0 12,000 Yellow Pages 450 450 450 450 450 450 450 450 450 450 450 450 5,400 Promotions 300 300 300 300 300 300 300 300 300 300 300 300 3,600 Print 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 24,000 Direct - Infomercials 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 36,000 Misc. Firm Advertising 500 500 500 500 500 500 500 500 500 500 500 500 6,000 Total Advertising 9,500 12,500 9,500 9,500 12,500 9,500 9,500 12,500 9,500 9,500 12,500 9,500 126,000 Automobile Maintenance 600 600 600 600 600 600 600 600 600 600 600 600 7,200 Caravan payment 364 364 364 364 364 364 364 364 364 364 364 364 4,368 New ONT vehicles 400 400 400 400 400 400 400 400 400 400 400 400 4,800 Mercury 464 464 464 464 464 464 464 464 464 464 464 464 5,568 Volvo 504 504 504 504 504 504 504 504 504 504 504 504 6,048 Fuel 1,750 1,750 1,750 1,750 1,750 1,750 1,750 1,750 1,750 1,750 1,750 1,750 21,000 Vehicle Registration 0 0 200 0 79 0 0 0 0 0 0 0 279 Total Automobile 4,082 4,082 4,282 4,082 4,161 4,082 4,082 4,082 4,082 4,082 4,082 4,082 49,263 Bank Charges 40 40 40 40 40 40 40 40 40 40 40 40 480 Contributions 0 0 0 0 0 0 0 0 0 0 0 0 0 Company Fees Copyright/Trademark 245 0 0 0 0 0 0 0 0 0 0 0 245 Internet Fees 900 900 900 900 900 900 900 900 900 900 900 900 10,800 Dues and Subscriptions 366 365 252 153 45 63 110 0 0 95 0 0 1,449 Education 200 0 0 300 0 300 0 300 0 300 100 300 1,800 Equipment Rental 101 101 1,200 101 757 1,695 575 101 0 101 101 101 4,934 Employee Moving Expenses 500 500 0 500 0 500 0 0 500 0 500 500 3,500 NDC Payment Systems 150 100 100 100 100 100 308 958 Misc. Fees 300 300 300 300 300 300 300 300 300 300 300 300 3,600 Total Company Fees 2,762 2,166 2,752 2,254 2,102 3,758 1,985 1,601 1,800 1,696 2,001 2,409 27,286 Insurance Auto 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000 Building/Property 425 425 425 425 425 425 425 425 425 425 425 425 5,100 Health 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 24,000 Media Liability 700 700 700 700 700 700 700 700 700 700 700 700 8,400 Addlt Liability 300 300 300 300 300 300 300 300 300 300 300 300 3,600 Life Insurance 300 300 300 300 300 300 300 300 300 300 300 300 3,600 Worker's Comp 400 400 400 400 400 400 400 400 400 400 400 400 4,800 Total Insurance 5,125 5,125 5,125 5,125 5,125 5,125 5,125 5,125 5,125 5,125 5,125 5,125 61,500 Interest Late charges 50 50 50 50 50 50 50 50 50 50 50 50 600 Finance Charges 450 450 450 450 450 450 450 450 450 450 450 450 5,400 Loan Int-Capital leases 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 24,162 Mortgage Interest 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 21,600 Other interest 200 200 200 200 200 200 200 200 200 200 200 200 2,400 Lines of credit 200 200 200 200 200 200 200 200 200 200 200 200 2,400 Total Interest 4,900 4,900 4,900 4,900 4,900 4,900 4,900 4,900 4,900 4,900 4,900 4,900 58,800 Janitorial/Maintenance Pest Control 50 0 50 0 50 0 50 0 50 0 172 0 422 Cleaning/Supplies 156 109 227 114 179 62 256 194 67 21 238 150 1,773 Sanatation 44 44 44 44 44 44 44 44 44 44 44 44 528 Total Janitorial/Maintenance 250 153 321 158 273 106 350 238 161 65 454 194 2,723 Licenses and Permits 150 0 0 0 150 0 0 11 0 191 0 60 562 Page 140 Leases Audio Visual 379 450 277 280 284 288 291 295 299 303 307 311 3,764 Computer Equip 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 14,400 Phone System 328 328 328 328 328 328 1,500 0 0 0 0 0 3,468 Production Equip 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 60,000 Total Leases 6,907 6,978 6,805 6,808 6,812 6,816 7,991 6,495 6,499 6,503 6,507 6,511 81,632 Lines of Credit AmSouth 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 13,200 Total-Lines of credit 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 13,200 Office Space Mortgage principal 200 200 200 200 200 200 200 200 200 200 200 200 2,400 Jax Office rent 209 209 209 209 209 209 209 209 209 209 209 209 2,508 Orl Office rent 400 400 400 400 400 400 400 400 400 400 400 400 4,800 Tampa Office rent 400 400 400 400 400 400 400 400 400 400 400 400 4,800 S. Florida Office rent 500 500 500 500 500 500 500 500 500 500 500 500 6,000 Total Office Mort/Rent 1,709 1,709 1,709 1,709 1,709 1,709 1,709 1,709 1,709 1,709 1,709 1,709 20,508 Non-COGS Supplies Office Supplies 695 800 400 700 650 350 400 300 600 800 650 550 6,895 Graphics software/equipment 700 200 200 200 200 200 200 200 200 200 200 200 2,900 Video software/equipment 1,250 1,250 500 500 500 500 500 500 500 500 500 500 7,500 Interactive software/equipment 200 200 200 200 200 200 200 200 200 200 200 200 2,400 Printing 942 0 86 628 34 46 34 95 754 218 201 532 3,570 LAN Equip 100 100 100 100 100 100 100 100 100 100 100 100 1,200 Acct Software 0 0 1,000 0 0 0 0 0 0 0 0 0 1,000 Grocery 25 25 25 25 25 25 25 25 25 25 25 25 300 Video Production Supplies 500 500 500 500 500 400 500 400 500 400 500 500 5,700 Graphic Supplies 600 0 650 72 600 100 600 0 600 0 600 600 4,422 Film Processing 95 95 0 95 0 95 0 0 95 0 95 570 Pre-Press Supplies 300 300 300 300 300 300 300 300 300 300 300 300 3,600 Audio Supplies 50 50 50 50 50 50 50 50 50 50 50 50 600 Total Office supplies 5,457 3,425 4,106 3,275 3,254 2,271 3,004 2,170 3,829 2,888 3,326 3,652 40,657 Payroll Officers 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 120,000 Staff 42,000 42,000 42,000 42,000 42,000 42,000 44,000 44,000 44,000 44,000 44,000 46,000 518,000 FUTA/SUTA 420 420 420 420 420 420 440 440 440 440 440 460 5,180 Commissions 15,264 16,026 16,806 17,511 19,221 19,401 18,201 17,511 20,331 20,361 22,611 22,461 225,705 Federal/Fica Tax 9,880 9,880 9,880 9,880 9,880 9,880 10,260 10,260 10,260 10,260 10,260 10,640 121,220 Staff incentives 500 500 500 500 500 500 500 500 500 500 500 500 6,000 Total Payroll 78,064 78,826 79,606 80,311 82,021 82,201 83,401 82,711 85,531 85,561 87,811 90,061 996,105 Postage and Delivery USPS 350 350 350 350 350 350 350 350 350 350 350 350 4,200 Unishippers 550 550 550 550 550 550 550 550 550 550 550 550 6,600 Other 50 50 50 50 50 50 50 50 50 50 50 50 600 Total Postage & Delivery 950 950 950 950 950 950 950 950 950 950 950 950 11,400 Professional Fees Accountant 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000 Consulting 400 400 400 400 400 400 400 400 400 400 400 400 4,800 Legal 550 550 550 550 550 550 550 550 550 550 550 550 6,600 Collection Agent 1,272 1,336 1,401 1,459 1,602 1,617 1,517 1,459 1,694 1,697 1,884 1,872 18,809 Personnel 0 0 0 1,000 0 0 1,000 0 0 1,000 0 0 3,000 Total Professional Fees 3,222 3,286 3,351 4,409 3,552 3,567 4,467 3,409 3,644 4,647 3,834 3,822 45,209 Repairs and Maintenance Computer repairs 250 500 250 500 250 500 250 500 250 500 250 500 4,500 Equipment repairs 450 450 1,500 450 450 450 450 450 450 450 450 450 6,450 Building repairs 200 150 200 150 200 150 300 150 300 150 300 150 2,400 Total Repairs & Maintenance 900 1,100 1,950 1,100 900 1,100 1,000 1,100 1,000 1,100 1,000 1,100 13,350 Sales Expenses Sales Recruitment 600 600 600 600 600 600 600 600 600 600 600 600 7,200 Direct Mailers 650 650 650 650 650 650 650 650 650 650 650 650 7,800 Sales contest/bonus 200 200 200 200 200 200 200 200 200 200 200 200 2,400 Misc. Sales Expenses 200 200 200 200 200 200 200 200 200 200 200 200 2,400 Total Sales Expenses 1,650 1,650 1,650 1,650 1,650 1,650 1,650 1,650 1,650 1,650 1,650 1,650 19,800 Page 141 Taxes Personal property Firm 0 0 0 0 0 0 0 0 6,000 0 0 0 6,000 Real Estate 0 0 0 0 0 0 0 0 0 6,000 0 0 6,000 Sales Tax - Firm 530 530 530 530 530 530 530 530 530 530 530 530 6,360 Intangible/Tangible 0 0 98 280 0 0 0 0 0 0 0 0 378 Personal property Leases 41 351 41 233 41 41 312 41 41 41 292 184 1,659 State 0 500 0 0 0 110 0 106 138 126 0 90 1,070 Total tax 571 1,381 669 1,043 571 681 842 677 6,709 6,697 822 804 21,467 Telephone Cellular 550 550 550 550 550 550 550 550 550 550 550 550 6,600 Local service 500 500 500 500 500 500 500 500 500 500 500 500 6,000 Long Distance 800 800 800 800 800 800 800 800 800 800 800 800 9,600 Paging 85 85 85 85 85 85 85 85 85 85 85 85 1,020 Other 50 50 50 50 50 50 50 50 50 50 50 50 600 Total Telephone 1,985 1,985 1,985 1,985 1,985 1,985 1,985 1,985 1,985 1,985 1,985 1,985 23,820 Travel Car Rental 300 300 300 300 300 300 300 300 300 300 300 300 3,600 Airfare 500 500 700 700 700 500 500 500 500 500 500 500 6,600 Entertainment 300 300 300 300 300 300 300 300 300 300 300 300 3,600 Travel other 300 300 300 300 300 300 300 300 300 300 300 300 3,600 Lodging 500 500 500 500 500 500 500 500 500 500 500 500 6,000 Meals 350 350 350 350 350 350 350 350 350 350 350 350 4,200 Tolls/Parking 100 100 100 100 100 100 100 100 100 100 100 100 1,200 Total Travel 2,350 2,350 2,550 2,550 2,550 2,350 2,350 2,350 2,350 2,350 2,350 2,350 28,800 Utilities Electric 600 600 600 600 600 600 600 600 600 600 600 600 7,200 Total Utilities 600 600 600 600 600 600 600 600 600 600 600 600 7,200 Miscellaneous Non compete fees 30 30 30 30 30 30 30 30 30 30 30 30 360 Misc. Expenses 150 150 150 150 400 400 150 150 150 150 150 150 2,300 Total Miscellaneous 180 180 180 180 430 430 180 180 180 180 180 180 2,660 Bad Debt 4,579 4,808 5,042 5,253 5,766 5,820 5,460 5,253 6,099 6,108 6,783 6,738 67,712 Gross Profit 159,596 174,670 180,190194,795 217,915221,260 205,915200,500 233,195233,710 260,050258,130 2,539,926 Total Expenses 137,033 139,293 139,172138,983 143,101140,741 142,671140,837 149,444149,627 149,710149,522 1,720,133 Pre-tax Profit* 22,563 35,377 41,018 55,812 74,814 80,519 63,244 59,663 83,751 84,083 110,340108,608 819,793 EBITDA 900,060 *Does not include depreciation GPM 68% Certain expense items covered under use of investment proceeds are not included NPM 22%
Page 142 Lorilei Communications, Inc. FY ending June 30, 2003 July Aug Sep Oct Nov Dec Jan Feb Mar April May June Total Income Commission 7,000 7,000 7,000 7,000 7,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 91,000 ONT Ad sales 40,000 40,000 45,000 40,000 50,000 45,000 45,000 40,000 45,000 50,000 55,000 50,000 545,000 North County Ad sales 40,000 40,000 45,000 40,000 50,000 45,000 45,000 40,000 45,000 50,000 60,000 50,000 550,000 Inland Empire Ad sales 10,000 15,000 20,000 20,000 25,000 25,000 30,000 30,000 35,000 40,000 45,000 45,000 340,000 Retainer 8,000 8,000 8,000 8,000 8,000 8,000 10,000 10,000 10,000 10,000 10,000 10,000 108,000 Video Production 60,000 60,000 70,000 70,000 65,000 60,000 65,000 55,000 65,000 65,000 80,000 65,000 780,000 Graphics 45,000 45,000 45,000 45,000 50,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 545,000 Pre-press 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 18,000 Airtime 75,000 75,000 80,000 85,000 85,000 80,000 80,000 70,000 90,000 85,000 95,000 95,000 995,000 Brokered Spot airtime 40,000 40,000 40,000 45,000 50,000 50,000 50,000 40,000 45,000 45,000 45,000 40,000 530,000 Fees-Misc 10,000 10,000 15,000 10,000 10,000 10,000 10,000 8,000 9,000 10,000 12,000 10,000 124,000 Web Design 8,000 8,000 10,000 8,000 10,000 8,000 8,000 7,000 10,000 8,000 12,000 8,000 105,000 Still Photography 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 14,400 CD-Rom 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 120,000 Audio Production 4,000 4,000 7,000 5,000 8,000 5,000 6,000 4,000 5,000 5,000 8,000 6,000 67,000 Public Relations 5,000 5,000 6,000 5,000 5,000 4,500 5,000 4,500 5,000 5,000 6,000 5,000 61,000 Client Promotions 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 48,000 Web Maintenance 5,500 5,500 5,500 5,500 5,500 5,500 5,500 5,500 5,500 5,500 5,500 5,500 66,000 Shipping Revenue 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 48,000 Interest Income 300 300 300 300 300 300 300 300 300 300 300 300 3,600 Total Income 378,500 383,500 424,500414,500 449,500420,000 433,500388,000 443,500452,500 507,500463,500 5,159,000 Cost of Goods Sold Spot Airtime 26,400 26,400 26,400 29,700 33,000 33,000 33,000 26,400 29,700 29,700 29,700 26,400 349,800 CLA 33,750 33,750 36,000 38,250 38,250 36,000 36,000 31,500 40,500 38,250 42,750 42,750 447,750 Program Airtime 1,500 1,500 1,600 1,700 1,700 1,600 1,600 1,400 1,800 1,700 1,900 1,900 19,900 ONT CLA 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 54,000 North County CLA 6,500 6,500 6,500 6,500 6,500 6,500 6,500 6,500 6,500 6,500 6,500 6,500 78,000 Inland Empire CLA 6,500 6,500 6,500 6,500 6,500 6,500 6,500 6,500 6,500 6,500 6,500 6,500 78,000 Total 79,150 79,150 81,500 87,150 90,450 88,100 88,100 76,800 89,500 87,150 91,850 88,550 1,027,450 Client Promotions 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 16,800 Internet Fees 1,815 1,815 1,815 1,815 1,815 1,815 1,815 1,815 1,815 1,815 1,815 1,815 21,780 Total 3,215 3,215 3,215 3,215 3,215 3,215 3,215 3,215 3,215 3,215 3,215 3,215 38,580 Graphics Photos 200 200 200 200 200 200 200 200 200 200 200 200 2,400 Printing 22,500 22,500 22,500 22,500 25,000 22,500 22,500 22,500 22,500 22,500 22,500 22,500 272,500 Pre-press supplies 425 425 425 425 425 425 425 425 425 425 425 425 5,100 Misc Supplies 0 0 500 0 0 500 0 0 500 0 0 500 2,000 Misc. Shipping 600 600 600 600 600 600 600 600 600 600 600 600 7,200 Total 23,725 23,725 24,225 23,725 26,225 24,225 23,725 23,725 24,225 23,725 23,725 24,225 289,200 Video Production Tapes 2,500 2,500 3,000 3,500 3,000 3,500 3,250 2,750 3,000 3,000 4,000 3,250 37,250 Software/equipment 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000 Printing 3,000 0 0 0 0 0 3,000 0 0 0 0 0 6,000 Talent Fees 750 1,000 1,200 1,200 1,200 1,200 1,200 1,800 1,200 1,200 1,800 1,300 15,050 Staging & Props 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 18,000 Rentals 750 750 750 750 750 750 750 750 750 750 750 750 9,000 Shipping 3,600 3,600 3,600 3,600 3,600 3,600 3,600 3,600 3,600 3,600 3,600 3,600 43,200 Tape Duplication 6,600 6,600 7,700 7,700 7,150 6,600 7,150 6,050 7,150 7,150 8,800 7,150 85,800 Total 19,700 16,950 18,750 19,250 18,200 18,150 21,450 17,450 18,200 18,200 21,450 18,550 226,300 Total COGS 125,790 123,040 127,690133,340 138,090133,690 136,490121,190 135,140132,290 140,240134,540 1,581,530 Gross Profit 252,710 260,460 296,810281,160 311,410286,310 297,010266,810 308,360320,210 367,260328,960 3,577,470 Firm Expenses Advertising Ocala News Tonight 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 30,000 North County News Tonight 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 42,000 Prod/Office personnel 750 750 750 750 750 750 750 750 750 750 750 750 9,000 CD Dup/Printing 0 3,000 0 0 3,000 0 0 3,000 0 0 3,000 0 12,000 Yellow Pages 650 650 650 650 650 650 650 650 650 650 650 650 7,800 Promotions 300 300 300 300 300 300 300 300 300 300 300 300 3,600 Print 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 48,000 Direct - Infomercials 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 60,000 Misc. Firm Advertising 750 750 750 750 750 750 750 750 750 750 750 750 9,000 Total Advertising 17,450 20,450 17,450 17,450 20,450 17,450 17,450 20,450 17,450 17,450 20,450 17,450 221,400 Page 143 Automobile Maintenance 600 600 600 600 600 600 600 600 600 600 600 600 7,200 Caravan payment 364 364 364 364 364 364 364 364 364 364 364 364 4,368 ONT vehicles 400 400 400 400 400 400 400 400 400 400 400 400 4,800 North County news vehicles 400 400 400 400 400 400 400 400 400 400 400 400 4,800 Mercury 464 464 464 464 464 464 464 464 464 464 464 464 5,568 Volvo 504 504 504 504 504 504 504 504 504 504 504 504 6,048 Fuel 2,600 2,600 2,600 2,600 2,600 2,600 2,600 2,600 2,600 2,600 2,600 2,600 31,200 Vehicle Registration 300 0 300 0 300 0 0 0 0 0 0 0 900 Total Automobile 5,632 5,332 5,632 5,332 5,632 5,332 5,332 5,332 5,332 5,332 5,332 5,332 64,884 Bank Charges 60 60 60 60 60 60 60 60 60 60 60 40 700 Contributions 0 0 0 1,000 0 0 0 0 0 0 0 0 1,000 Company Fees Copyright/Trademark 245 0 0 0 0 245 0 0 0 0 0 0 490 Internet Fees 950 950 950 950 950 950 950 950 950 950 950 950 11,400 Dues and Subscriptions 200 200 200 200 200 200 200 200 200 200 200 200 2,400 Education 300 300 300 300 300 300 300 300 300 300 300 300 3,600 Equipment Rental 101 101 1,200 101 757 1,695 575 101 101 101 101 101 5,035 Employee Moving Expenses 500 500 0 500 0 500 0 0 500 0 500 500 3,500 NDC Payment Systems 150 100 100 100 100 100 308 958 Misc. Fees 300 300 300 300 300 300 300 300 300 300 300 300 3,600 Total Company Fees 2,746 2,351 3,050 2,351 2,607 4,190 2,425 1,851 2,451 1,851 2,451 2,659 30,983 Insurance Auto 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 19,200 Building/Property 600 600 600 600 600 600 600 600 600 600 600 600 7,200 Health 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 36,000 Media Liability 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000 Addlt Liability 500 500 500 500 500 500 500 500 500 500 500 500 6,000 Life Insurance 300 300 300 300 300 300 300 300 300 300 300 300 3,600 Worker's Comp 700 700 700 700 700 700 700 700 700 700 700 700 8,400 Total Insurance 7,700 7,700 7,700 7,700 7,700 7,700 7,700 7,700 7,700 7,700 7,700 7,700 92,400 Interest Late charges 50 50 50 50 50 50 50 50 50 50 50 50 600 Finance Charges 450 450 450 450 450 450 450 450 450 450 450 450 5,400 Loan Int-Capital leases 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 24,162 Mortgage Interest 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 21,600 Other interest 200 200 200 200 200 200 200 200 200 200 200 200 2,400 Lines of credit 200 200 200 200 200 200 200 200 200 200 200 200 2,400 Total Interest 5,100 5,100 5,100 5,100 5,100 5,100 5,100 5,100 5,100 5,100 5,100 5,100 61,200 Janitorial/Maintenance Pest Control 50 0 50 0 50 0 50 0 50 0 172 0 422 Cleaning/Supplies 200 200 200 200 200 200 200 200 200 200 200 200 2,400 Sanatation 88 88 88 88 88 88 88 88 88 88 88 88 1,056 Total Janitorial/Maintenance 338 288 338 288 338 288 338 288 338 288 460 288 3,878 Licenses and Permits 150 0 0 0 150 0 0 11 0 191 0 60 562 Leases Audio Visual 500 500 500 500 500 500 500 500 500 500 500 500 6,000 Computer Equip 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 21,600 Phone System 300 300 300 300 300 300 300 300 300 300 300 300 3,600 Production Equip 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 72,000 Total Leases 8,600 8,600 8,600 8,600 8,600 8,600 8,600 8,600 8,600 8,600 8,600 8,600 103,200 Lines of Credit AmSouth 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 13,200 Total-Lines of credit 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 13,200 Office Space Mortgage principal 200 200 200 200 200 200 200 200 200 200 200 200 2,400 Jax Office rent 400 400 400 400 400 400 400 400 400 400 400 400 4,800 Orl Office rent 600 600 600 600 600 600 600 600 600 600 600 600 7,200 Tampa Office rent 400 400 400 400 400 400 400 400 400 400 400 400 4,800 S. Florida Office rent 750 750 750 750 750 750 750 750 750 750 750 750 9,000 North County Studio/office 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 36,000 Total Office Mort/Rent 5,350 2,350 2,350 2,350 2,350 2,350 2,350 2,350 2,350 2,350 2,350 2,350 64,200 Page 145 Non-COGS Supplies Office Supplies 695 800 400 700 650 350 400 300 600 800 650 550 6,895 Graphics software/equipment 700 200 200 200 200 200 200 200 200 200 200 200 2,900 Video software/equipment 1,250 1,250 500 500 500 500 500 500 500 500 500 500 7,500 Interactive software/equipment 200 200 200 200 200 200 200 200 200 200 200 200 2,400 Printing 942 0 86 628 34 46 34 95 754 218 201 532 3,570 LAN Equip 100 100 100 100 100 100 100 100 100 100 100 100 1,200 Acct Software 0 0 1,000 0 0 0 0 0 0 0 0 0 1,000 Grocery 25 25 25 25 25 25 25 25 25 25 25 25 300 Video Production Supplies 500 500 500 500 500 500 500 500 500 500 500 500 6,000 Graphic Supplies 600 0 650 72 600 100 600 0 600 0 600 600 4,422 Film Processing 95 95 0 95 0 95 0 0 95 0 95 570 Pre-Press Supplies 300 300 300 300 300 300 300 300 300 300 300 300 3,600 Audio Supplies 50 50 50 50 50 50 50 50 50 50 50 50 600 Total Office supplies 5,457 3,425 4,106 3,275 3,254 2,371 3,004 2,270 3,829 2,988 3,326 3,652 40,957 Payroll Officers 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 120,000 Staff 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 624,000 FUTA/SUTA 520 520 520 520 520 520 520 520 520 520 520 520 6,240 Commissions 22,710 23,010 25,470 24,870 26,970 25,200 26,010 23,280 26,610 27,150 30,450 27,810 309,540 Federal/Fica Tax 11,780 11,780 11,780 11,780 11,780 11,780 11,780 11,780 11,780 11,780 11,780 11,780 141,360 Staff incentives 500 500 500 500 500 500 500 500 500 500 500 500 6,000 Total Payroll 97,510 97,810 100,270 99,670 101,770100,000 100,810 98,080 101,410101,950 105,250102,610 1,207,140 Postage and Delivery USPS 350 350 350 350 350 350 350 350 350 350 350 350 4,200 Unishippers 550 550 550 550 550 550 550 550 550 550 550 550 6,600 Other 50 50 50 50 50 50 50 50 50 50 50 50 600 Total Postage & Delivery 950 950 950 950 950 950 950 950 950 950 950 950 11,400 Professional Fees Accountant 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000 Consulting 400 400 400 400 400 400 400 400 400 400 400 400 4,800 Legal 550 550 550 550 550 550 550 550 550 550 550 550 6,600 Collection Agent 1,893 1,918 2,123 2,073 2,248 2,100 2,168 1,940 2,218 2,263 2,538 2,318 25,795 Personnel 0 0 0 1,000 0 0 1,000 0 0 1,000 0 0 3,000 Total Professional Fees 3,843 3,868 4,073 5,023 4,198 4,050 5,118 3,890 4,168 5,213 4,488 4,268 52,195 Repairs and Maintenance Computer repairs 250 500 250 500 250 500 250 500 250 500 250 500 4,500 Equipment repairs 450 450 1,500 450 450 450 450 450 450 450 450 450 6,450 Building repairs 200 150 200 150 200 150 300 150 300 150 300 150 2,400 Total Repairs & Maintenance 900 1,100 1,950 1,100 900 1,100 1,000 1,100 1,000 1,100 1,000 1,100 13,350 Sales Expenses Sales Recruitment 600 600 600 600 600 600 600 600 600 600 600 600 7,200 Direct Mailers 650 650 650 650 650 650 650 650 650 650 650 650 7,800 Sales contest/bonus 200 200 200 200 200 200 200 200 200 200 200 200 2,400 Misc. Sales Expenses 200 200 200 200 200 200 200 200 200 200 200 200 2,400 Total Sales Expenses 1,650 1,650 1,650 1,650 1,650 1,650 1,650 1,650 1,650 1,650 1,650 1,650 19,800 Taxes Personal property Firm 0 0 0 0 0 0 0 0 6,000 0 0 0 6,000 Real Estate 0 0 0 0 0 0 0 0 0 6,000 0 0 6,000 Sales Tax - Firm 600 600 600 600 600 600 600 600 600 600 600 600 7,200 Intangible/Tangible 0 0 98 280 0 0 0 0 0 0 0 0 378 Personal property Leases 200 200 200 200 200 200 200 200 200 200 200 200 2,400 State 0 500 0 0 0 110 0 106 138 126 0 90 1,070 Total tax 800 1,300 898 1,080 800 910 800 906 6,938 6,926 800 890 23,048 Page 146 Telephone Cellular 550 550 550 550 550 550 550 550 550 550 550 550 6,600 Local service 750 750 750 750 750 750 750 750 750 750 750 750 9,000 Long Distance 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000 Paging 125 125 125 125 125 125 125 125 125 125 125 125 1,500 Other 50 50 50 50 50 50 50 50 50 50 50 50 600 Total Telephone 2,475 2,475 2,475 2,475 2,475 2,475 2,475 2,475 2,475 2,475 2,475 2,475 29,700 Travel Car Rental 300 300 300 300 300 300 300 300 300 300 300 300 3,600 Airfare 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000 Entertainment 300 300 300 300 300 300 300 300 300 300 300 300 3,600 Travel other 300 300 300 300 300 300 300 300 300 300 300 300 3,600 Lodging 500 500 500 500 500 500 500 500 500 500 500 500 6,000 Meals 350 350 350 350 350 350 350 350 350 350 350 350 4,200 Tolls/Parking 100 100 100 100 100 100 100 100 100 100 100 100 1,200 Total Travel 2,850 2,850 2,850 2,850 2,850 2,850 2,850 2,850 2,850 2,850 2,850 2,850 34,200 Utilities Electric 600 800 800 800 800 800 800 800 800 800 800 800 9,400 Total Utilities 600 800 800 800 800 800 800 800 800 800 800 800 9,400 Miscellaneous Non compete fees 30 30 30 30 30 30 30 30 30 30 30 30 360 Misc. Expenses 150 150 150 150 400 400 150 150 150 150 150 150 2,300 Total Miscellaneous 180 180 180 180 430 430 180 180 180 180 180 180 2,660 Bad Debt 6,813 6,903 7,641 7,461 8,091 7,560 7,803 6,984 7,983 8,145 9,135 8,343 92,862 Gross Profit 252,710 260,460 296,810281,160 311,410286,310 297,010266,810 308,360320,210 367,260328,960 3,577,470 Total Expenses 178,254 176,642 179,223177,845 182,255177,316 177,895174,977 184,714185,249 186,507180,447 2,161,319 Pre-tax Profit* 74,457 83,819 117,588103,316 129,156108,994 119,116 91,833 123,647134,962 180,754148,514 1,416,151 EBITDA 1,500,399 *Does not include depreciation GPM 69% Certain expense items covered under use of investment proceeds are not included NPM 27%
I attest the information contained herein is true and accurate to the best of my knowledge /s/ Gerald R. Cunningham - ---------------------------------- Gerald R. Cunningham, President Lorilei Communications, Inc. /s/ Leigh A. Cunningham - ---------------------------------- Leigh A. Cunningham, Vice President Sales Lorilei Communications, Inc. Page 147 Schedule to Reorganization Agreement by and among Amerinet Group.com, Inc., a Delaware Corporation and Lorilei Communications, Inc., a Florida Corporation SCHEDULE 5.13-2 USE OF PROCEEDS Attached are the Use of Proceeds Use of Proceeds Set forth below is Lorilei's anticipated use of the cash available to Lorilei after deduction of estimated remaining offering expenses of $12,500. Pursuant to the Reorganization Agreement. Lorilei would receive $487,500 of net proceeds from this reorganization after deduction of the expenses of the reorganization. The net proceeds of this offering will be used: To pay existing accounts receivable and personal property and real estate taxes.; To repair existing equipment and purchase new equipment To employ additional support staff To pay advertising and marketing costs, and to provide working capital. The amounts and timing of expenditures for each purpose is subject to the broad discretion of the management and will depend on factors such as the amount of net proceeds available to Lorilei and the effects of competition, many of which are beyond Lonlei's control. Accounts Payable and Taxes $198,854.00 Equipment 8,000.00 Salaries 30,646.00 Advertising/Marketing 100,000.00 Working Capital 150.000.00 Total $487,500.00 The initial $100,000 payment made to Lorilei will be used to pay approximately $42,000 of the accounts payable and taxes with the balance being use to pay equipment, salaries and working capital. The remaining four (4) payments of $100,000 w-ill be applied pro rata among the balance of the accounts receivable, advertising/marketing and working capital. I attest the information contained herein is true and accurate to the best of my knowledge /s/ Gerald R. Cunningham - ---------------------------------- Gerald R. Cunningham, President Lorilei Communications, Inc. /s/ Leigh A. Cunningham - ---------------------------------- Leigh A. Cunningham, Vice President Sales Lorilei Communications, Inc. Page 148 Exhibit to Reorganization Agreement by and among AmeriNet Group.com, Inc., a Delaware Corporation and Lorilei Communications, Inc., a Florida Corporation EXHIBIT 2.25 REGULATION SB DISCLOSURE DOCUMENT Attached to this exhibit is the supporting document for the above referenced. Exhibit 2.25 Regulation SB Disclosure Documents Item 101. Description of Business Lorilei Communications, Inc., a Florida corporation ("Lorilei"), was organized in July of 1994 by Gerald R. Cunningham, its current president, and Leigh A. Cunningham, its current secretary/treasurer. Lorilei is the successor to a Florida general partnership doing business as "The Firm." Lorilei is a full-service advertising/marketing company under the trade name "The Firm Multimedia". Lorilei offers an array of advertising and marketing services including in-house production of video, audio, internet authoring, interactive CD-Rom, graphics, and pre-press. We believe our pricing market is companies wishing to enter the direct response and e-commerce markets, rather than traditional "image" advertisers. Lorilei was formed to provide advertising services to regional and local advertisers, as well as marketers who needed an incremental program. We believe that Lorilei's ability to provide production services in-house as a result of new lower cost technology provides it with competitive advantages in speed, quality and price over larger advertising agencies and marketing companies which subcontract most of their production. As a result of seeking solutions for direct response clients and in order to further enhance its capabilities, Lorilei has used commercial leased access (CLA) to cable systems and has been instrumental in the formulation of FCC rules regulating CLA. Through CLA, Lorilei has the capacity to offer clients cable access for 1/2 hour or longer television programming on a full-time or part-time basis, including cable access in prime-time. Through a proprietary database developed over a four-year period, Lorilei has the ability to place television programs on virtually any cable television system in the United States. Under FCC rules, the cost of CLA access is only the minimal fees determined by the FCC's "implicit fee" formula, plus any actual costs of tape playback or satellite reception. Therefore, Lorilei believes it is positioned as a resource for direct response airtime placement as rates which are regulated by the Federal government, and as a result, are significantly lower than the rates charged by broadcast television. In January, 2000 Lorilei started a venture under the trade name "Ocala News Tonight" (ONT). ONT is a half-hour advertiser-supported television news program featuring local news, weather and sports cablecast at 6:30 PM and again at 10:30 PM to approximately 73,000 cable households in the Marion County, Florida area. This geographic area is part of the Orlando, FL television ADI, however the area receives very little local television news coverage from the distant Orlando television outlets. ONT is the prototype of a concept Lorilei intends to replicate in other market areas with similar characteristics across the nation. Utilizing efficiencies in desktop video, and new technological innovations in "prosumer" cameras, this concept allows television news to be produced at a much lower cost than was previously possible, allowing for profitability on a community basis. Lorilei maintains web sites under each of its trade names. The Firm Multimedia web site features video/audio clips demonstrating our work, as well as examples of graphic design and links to authored web sites. Our web site is a major source of client lead generation for the company. Ocala news tonight also has a website used primarily as an interactive focal point for the viewing audience. It includes content updated on a daily basis with highlights from the newscast, as well as viewer opinion polls. Advertising is accepted at the ONT website. Lorilei currently employs approximately 22 persons and anticipates adding up to ten additional staff in the near term, primarily in sales, marketing and support functions. Lorilei leases field sales offices in Jacksonville and Orlando, Florida, and intends to open additional offices in the Tampa Bay and Boca Raton, Florida areas within the year 2000. Currently Lorilei does not have any material portion of its assets, operations or customers located outside of the United States. Substantially all of Lorilei's revenues are from customers within the United States, where all of Lorilei's services are provided. Page 149 Industry Overview Domestic advertising expenditures were estimated at $308.9 Billion in 1999. Of this sum, 57.1% or $176.5 Billion is devoted to some form of direct marketing, up 7.2% over 1998. The market for direct marketing overall is highly fragmented across direct mail and telephone marketing which account for about half of the total, however direct response television (DRTV), a $20.4 Billion market, is a much less fragmented segment and is growing at a faster pace than directmarketing overall. DRTV expenditures increased by 58% in the period 1994-1999 versus overall direct marketing which increased by 46%. DRTV predates the Internet in empowering the consumer with the ability to purchase direct. With $1.5 trillion in goods and services expected to be sold over the Internet by 2003 (Bear Stearns E-volve report) DRTV is a natural means of not only converting television viewers into website browsers, but adding the capacity to demonstrate features and abilities of the website. The same Bear Stearns report estimates spending on Internet infrastructure tools to expand to over $4 billion by 2003, up from $600 million in 1999. One of the key issues is the pressure from companies and consumers for increased bandwidth. As general bandwidth to access the Internet expands, video via Internet, with utilization of interactive application software already available, becomes more and more viable. Strategic Plans Operating Strategy Lorilei's mission for The Firm Multimedia is to provide high-quality content that creates demand for client's products and services; to offer candid, solid consultative advice that results in increase sales; to provide avenues of exposure such as CLA that are effective and that are not easily duplicated by potential competitors; to embrace and anticipate opportunities made possible byemerging technology and to rapidly focus on ways and means for our clients to benefit. Lorilei's mission for Ocala news tonight is to present content that is focused on local news, weather, and sports in a style which both appeals to and reflects the community, thus making ONT a staple choice in our viewing area and providing results and value for our advertisers. By accomplishing these goals with ONT we will be able to replicate our format and business approach in our planned expansion markets. Lorilei has formulated a strategy to meet these goals with the businesses we have built under both of the above trade names, resulting in profitability and dividends for our shareholders. Lorilei's management believes that: Increased sales volume will result in economies of scale which will enhance The Firm Multimedia and Ocala news tonight's profitability. We intend to aggressively recruit professional inside and outside salespeople and launch an intensive advertising and marketing campaign for both trade names. A wealth of potential business exists in B2B website promotion. We're finding many relatively large companies with websites but without an Internet strategy. These companies will eventually be compelled to rely on companies such as The Firm Multimedia for assistance or go out of business. Our advantage is we can develop the strategy, the message, and provide the media. Brick and mortar retailers will be forced to seek non-traditional revenue streams in order to compete with e-retailers. One of the best ways to accomplish this is through establishing a strong e-commerce website and supporting it with DRTV; resulting in telephone orders as well as orders from the website. Comprehensive Brand Strategy For The Firm Multimedia, we will launch a multi-pronged advertising/marketing campaign utilizing: - -National DRTV print and directory ads - -Regional business publication print ads - -Keyword-driven Internet banner ads - -Business to business ("B2B") direct mail - -B2B telemarketing Our goal is to develop top of mind awareness for The Firm Multimedia as a company and to develop a lead generation system for our inside and outside salespeople. For Ocala news tonight, (and as a prototype for expansion markets) we will launch an advertising/marketing campaign consisting of: - -100 showing of metro area poster outdoor over a 3 month period - -High frequency cable spot on the systems we service - -New creative for our existing bartered radio campaign - -Vinyl signs on ONT vehicles - -Direct mail revenue-generating promotion campaign with a four-color prize mailer (we intend to include Vista and Trilogy in this promotion) - -B2B direct mailer announcing the campaign as a lead generation source for our outside salespeople. - -On-going revenue-generating co-promotions featuring ONT personalities on-location at client locations. Page 150 Growth Strategy Lorilei's plan for growth is multifaceted. The company intends to grow through recruiting additional professional salespeople in the specialized market segments the company intends to service, and to open additional sales offices in geographically targeted areas. The company also intends to establish additional news operations similar in structure to Ocala News Tonight, in areas of the U.S. which demonstrate an abundant advertiser base, community identity, and that are either under-served by broadcast television news due to the large size of the television ADI, due to geographic boundaries or terrain which segment the market, or in some cases, markets with a substantial Spanish-speaking population which is not served by Spanish Language television news. Lorilei also intends to grow by acquisition of companies we feel are synergistic with its operations. Investment in Technology Lorilei has made an investment in emerging technology through its history as a company and has, as an example, made the transition to digital, non linear video editing versus the older tape-based linear tape editing. We expect to invest in high definition video equipment as distribution facilities and HDTV sets-in-use increases to critical mass. We intend to position ourselves as the company offering advanced solutions to the latest Internet applications, including Internet broadcasting. We also intend to produce content for the Internet which may be offered to other Internet broadcasters for a fee. Economies of Scale and Best Practices Lorilei's management believes that it will achieve significant economies of scale as gross sales levels increase. This is possible through performing most of the work at the Ocala headquarters due to lower cost of living, beneficial quality of life, and resultant moderate salaries, plus productivity gains made possible through benchmarking employee compensation to productivity, revenue management processes, increased vertical integration resulting maximizing customer revenues by extending projects through multiple content platforms (i.e. graphics clients become video clients), etc. Expansion Through Acquisitions Beginning in 2001, Lorilei will seek to acquire marketing and advertising companies in order to gain market share, increase overall sales volume, geographic reach and add complimentary services (i.e. direct response fulfillment). These acquisitions could also include companies which have developed a specific product or service which management feels has considerable profit potential utilizing our marketing methods and capabilities. Company Services Lorilei currently offers its services primarily in the United States. The Firm Multimedia clients may be located in any geographic area with the transaction facilitated by Internet, fax, courier, or in some cases in-person sales calls to the client location. In some cases the client travels to Lorilei's offices. Our plan is to continue to extend our physical presence by adding additional sales offices, first in Florida, then regionally and nationally. Ocala news tonight clients are primarily located in Marion County, Florida. As additional news markets are added the clients for each news operation will also primarily be located in the community of service. Sales facilities for The Firm Multimedia will be co-located with each news facility, including field content acquisition support personnel where practical. Raw content will be shipped or transmitted to the Ocala production facility for post-production. E-Commerce Lorilei provides clients with a turn-key e-commerce approach by both authoring the website and providing marketing and advertising services to drive traffic. The company provides clients with consultative advice across a wide range of issues including domain names and registration, input on competitive content items such as pricing, placement, inventory, target marketing, and demographic, qualitative and perceptual customer research. The company utilizes the latest state of the art software including "Flash" "Shockwave" and Quicktime video to author client websites with rich content. Each website is custom-authored according to the client's specifications and may include specialized applications such as database access. Lorilei believes rich content websites, including sites featuring video and audio, will become a critical component in commercial website development as competition on the Internet continues to drive more complex websites. The company envisions becoming a leader in the e-commerce web development business. DRTV The company offers a comprehensive solution for direct response television marketers including concept, scripting, infomercial and spot production, media planning and placement, as well as an array of direct response-related graphics services. The fact that Lorilei offers a wide breadth of services, with in-house facilities and staff, sets it apart in the DRTV industry and is a significant competitive advantage for those clients seeking a turn-key solution. Most of the company's past and current clientele is direct, rather than agency business. The company intends to continue on this course. 151 Lorilei has contacts at major cable networks and broadcast stations, and has the ability to buy airtime competitively on a supply and demand basis. Most half-hour infomercial time is limited to non-productive spot revenue time for the broadcaster or cablecaster. Typically these blocks of time are not productive for spot revenue due to a low level of households using television (i.e. overnights, early mornings). Lorilei's ability to purchase half-hour airtime in prime-time viewing hours through channel leasing, on a market-targetable basis gives it a primary niche in the DRTV business. This is a highly profitable business due to government regulation keeping the price fixed according to an FCC formula, rather than floating with supply and demand. Our goal is to increase awareness of our offerings in this segment at the agency and buying-service level and to increase business with the DRTV trade, as well as from direct to client business. Channel Leasing Lorilei has pioneered the use of channel leasing options mandated by cable deregulation and through petitions filed with the Federal Communications Commission has played a major role in shaping the rules under which this capacity is available (see "Lorilei" at fcc.gov). The company has developed a proprietary database of cable systems, enabling it to make channel leasing a viable option for its clients with the ability to accurately quote rates, household counts, and in some cases channel position in the individual system lineup, all in a format which meets the criteria of the client. No other company that we are aware of has the ability at this time. Lorilei intends to continue development of the database to increase both the quantity and quality of the available information. Channel leasing is available on both part-time and full-time levels up to the set-aside capacity of the cable system. Up to the present time Lorilei has focused on part-time channel leasing, however management feels the timing is right to begin marketing a full-time channel leasing service to larger advertisers and marketers. Under the rules, a cable operator must open a channel for use with as little as an eight-hour daily commitment for a one-year period. With the advent of the Internet, large companies are beginning to alter their strategies as they relate to reaching prospects and converting them into customers. The Internet offers an interactive 24/7 portal to connect the prospect or customer directly to the company, however it is somewhat limited in content due to bandwidth limitations. Lorilei management feels there are companies that are searching for a competitive edge in reaching the consumer on a long-form basis in persuasive ways the Internet cannot yet offer. Channel leasing is an option most large companies are not aware of, therefore Lorilei intends to focus a portion of its marketing effort to increase awareness and market channel leasing as a tool for these companies. This effort could have a substantial impact on the projected revenues for the company as landing even one full-time channel leasing client in a moderate number of markets would easily quadruple or quintuple current projections for both gross revenue and net profit. Governmental Regulation Lorilei's success is dependent in part on the existence of federal regulations which require cable operations to lease cable access at low rates pursuant to FCC rules promulgated under the 1992 Cable Act. A change in the Cable Act or the regulations promulgated thereunder could significantly impair our ability to successfully compete against larger advertising companies. The statutory framework for commercial leased access was established by the 1984 Act and amended by the 1992 Cable Act. The 1984 Cable Act established leased access to assure access to the channel capacity of cable systems by parties unaffiliated with the cable operator who want to distribute video programming free of the editorial control of the cable operator. Channel set-aside requirements were established in proportion to a system's total activated channel capacity, in order to "assure that the widest possible diversity of information sources are made available to the public from cable systems in a manner consistent with the growth and development of cable systems." A cable system operator was permitted to use any unused leased access channel capacity for its own purposes, until such time as a written agreement for a leased channel use was obtained. Each system operator subject to this requirement was to establish the "price, terms, and conditions of such use which are at least sufficient to assure that such use will not adversely affect the operation, financial condition, or market development of the cable system." The only exception to the leased commercial access channel set-aside under the 1984 Cable Act that up to 33 percent of a system's designated leased commercial access channel capacity may be used for qualified minority or educational programming from sources that may or may not be affiliated with the cable operator. The qualified minority or educational source may be affiliated with the operator. The 1992 Cable Act amendments broadened the statutory purpose to include "the promotion of competition in the delivery of diverse sources of video programming," and the Commission was provided with expanded authority: (1) to determine the maximum reasonable rates that a cable operator may establish for leased access use, including the rate charged for the billing of subscribers and for the collection of revenue from subscribers by the cable operator for such use; (2) to establish reasonable terms and conditions for leased access, including those for billing and collection; and (3) to establish procedures for the expedited resolution of leased access disputes. The legislative history of the 1992 amendments expresses concern that some cable operators may have established unreasonable terms or may have had financial incentives to refuse to lease channel capacity to potential leased access users based on anti-competitive motives, especially if the operator had a financial interest in the programming services it carried. 152 Any person aggrieved by the failure or the refusal of a cable operator to make commercial channel capacity available or to charge rates as required by Commission rules may file a petition for relief with the Commission within 60 days of the alleged violation. In order to enforce its rights under the 1992 Act, we have filed a number of such petitions with varied results. In order to merit relief, the petition must show by clear and convincing evidence that the operator violated the leased access statutory or regulatory provisions or otherwise acted unreasonably or in bad faith. Relief may be in the form of refunds, injunctive relief or forfeitures. The Commission encourages parties to use alternative dispute resolution procedures such as settlement negotiation, conciliation, facilitation, mediation, fact finding, mini-trials and arbitration. The 1992 Cable Act provides for both judicial and Commission review of leased commercial access disputes Ocala News Tonight This trade name is a program concept whereby the company produces a nightly advertiser-supported news program dedicated to a targeted geographic area, similar to the familiar news/weather/sports format utilized by most local broadcast television stations. The prototype program is produced six days per week and airs twice nightly, at 6:30 PM and 10:30 PM seven days per week. The company chose Ocala/Marion County, Florida as the prototype for the concept due to the fact that the area met certain criteria and that production operations were already established at The Firm Multimedia. The criteria utilized to determine whether an area is viable includes but is not limited to, market composition, market geography, market identity, presence of local television news coverage, available advertising revenues (estimated as a percentage of total retail sales), and cable television penetration. In Ocala news tonight's case, the Ocala/Marion County area met the guidelines management has developed. While the area is part of the Orlando television market it receives very little local news coverage from the Orlando stations, and minimal coverage from Gainesville stations located 35 miles away. Due to its distance from Orlando and Gainesville, and with the Gainesville market's strong identity with the University of Florida, it is highly unlikely any television station from either area would make a concentrated effort to compete with the program. The area has a local identity apart from either Orlando or Gainesville, sufficient retail sales exists to provide a local advertiser base, and cable television penetration meets the company's minimums. Economies realized through new technology including desktop video and high quality prosumer cameras have lowered the cost of production to a level making the concept feasible. Fewer crew members are required for production, and inexpensive prosumer cameras offer acceptable quality for news gathering. Lorilei's experience in channel leasing is utilized in order to acquire prime airing times on cable television. In ONT's situation, a network of four cable systems are utilized to reach over 73,000 households in the area. Management has identified two expansion markets for the concept and expects to launch the first additional operation in July, 2001, with the second additional operation coming online in July, 2002. These cost of launching these additional operations may be funded from Lorilei cash flow or from additional capital investment. Beginning in July, 2003, Lorilei intends to launch two additional operations per year for the next three years. Sales and Marketing Lorilei has used a combination of inside and outside sales representatives in the past for The Firm Multimedia and intends to expand the use of inside sales representatives in two areas (1) to support outside sales with appointment setting, and (2) to sell DRTV to dot com and e-commerce companies and the DRTV trade.The company also intends to expand its field sales offices to include locations in South Florida, Tampa Bay, and Atlanta in the near term. Field sales offices will also be co-located with additional ONT-type news operations. In the past, The Firm Multimedia has employed generalist-type sales professionals, expending considerable time in training the person to represent the company across its many services. Management feels this approach needs specificity, therefore it anticipates altering the approach to employ sales professionals proficient in four major specialty areas: Print graphics, DRTV/Video, Internet/e-commerce, Agency services. Under this plan, the company will generate specific leads in under one of its specialty areas and utilizing a consultative selling approach will identify other specialty areas where it might be of service, bringing in that particular salesperson at the appropriate time. Management believes the result will be less time in training and higher sales revenues. The company utilizes a mix of marketing tools, including an infomercial produced to generate business to business leads, as well as direct mail, telemarketing, trade and business publication print, Internet advertising, as well as trade show displays. Ocala news tonight utilizes outside sales representatives who call on local business. Direct mail and on-air ad solicitation, as well as telemarketing by the outside reps is utilized to generate leads. 153 Competition The advertising industry is highly fragmented with low barriers to entry to establish an advertising agency. Advertising production is also competitive, however capital investment is still a barrier to entry. Lorilei competes with other advertising agencies, television and radio stations, other direct response television companies, and directly with cable television providers and television broadcast in advertising sales for Ocala news tonight. Lorilei competes for customers based on service, price, quality, specialized in-depth knowledge, and creativity. Most DRTV competitors are located in Western U.S. states, making West coast-based business a challenging. Employees As of April 1, 2000, Lorilei had 20 full time employees and 3 part-time employees. Lorilei requires that all full-time employees sign a non-competition and confidentiality agreement as a condition of employment. No employee contracts currently exist and all employment is at will. No employees are currently represented by an labor unions. Lorilei believes its relations with employees to be good, however additional employees will need to be recruited to meet its growth projections. Management believes that required personnel can be recruited on acceptable terms. Item 102. Properties Lorilei's principle place of business is located at 7325 Southwest 32nd Street, Ocala, Florida, 34474. This is an industrial park type setting where the other businesses are warehouse or light manufacturing businesses. The building is approximately 5,000 square feet in total space, with 3,500 square feet devoted to office/production space and 1,500 square feet devoted to studio space. All space is air-conditioned and heated. The property is encumbered by a first mortgage in the original principal amount of $194,000.00 in favor of Small Business Loan Source. The loan bears interest at the rate of 11.75% per annum and is payable over a term of 25 years. The property is in the opinion of Lorilei's management adequately covered by insurance. Management believes the current facility to be adequate for anticipated growth through the 2003 fiscal year. Management cannot, however, guarantee that the square footage will be sufficient for all production operations. Additional construction or additional leased space could be required, either of which could result in additional unanticipated expense. As part of expansion, additional sales offices in targeted major cities are contemplated. Rental costs of this additional space are expected to be minimal "office suite" type space and will expand with sales volume. However, if sales volume becomes substantial in a given metropolitan area it could result in the requirement of considerably more square footage in leased office space than has been projected. Item 103. Legal Proceedings Lorilei is not a party to any pending legal proceedings. However, Lorilei presently owes real and personal property taxes to the state of Florida in the amount of $10,272.20. Lorilei has also declined to pay $21,420.00 to Home and Garden Television (HGTV) pending confirmation of sums due. Item 201. Market for Common Equity and Related Stockholder Matters No market exists for Lorilei's common stock. There are two holders of the common stock. Lorilei has not paid dividends during 1998, 1999 or 2000. Item 202. Description of Securities Lorilei's Articles of Incorporation, as amended, authorize it to issue 2,000 shares of common stock, $0.01 par value per share and 1,000,000 shares of preferred stock, par value $.01. As of the date of this reorganization agreement, 111 shares of the common stock were outstanding and no Preferred Shares were outstanding. This description of the capital stock of Lorilei is qualified by and subject to the Florida Business Corporation Act and Lorilei's Articles of Incorporation and By-laws, copies of which Articles and By-laws have been provided as exhibits hereto and to which reference is made for the provisions thereof which are summarized below. Common Stock The holders of common stock are entitled to one vote per share on all matters to be voted upon by the shareholders and have no cumulative voting rights. Holders of common stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the Board of Directors out of funds legally available therefor. In the event of liquidation, dissolution, or winding up of Lorilei, the holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities. The common stock has no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of common stock are fully paid and nonassessable, and the shares of common stock offered hereby will also be fully paid and nonassessable. The Articles also recognize the obligation of the Corporation's stockholder AmeriNet Group.com, Inc. to elect members to the Corporation's Board of Directors in the manner reflected in the Reorganization Agreement between Lorilei and AmeriNet. 154 Undesignated Preferred Stock The authorized but unissued preferred stock (1,000,000 shares) may be issued in series, and shares of each series will have such rights and preferences as are fixed by the Board of Directors in the resolutions authorizing the issuance of that particular series. In designating any series of preferred stock, the Board of Directors may, without further action by the holders of common stock: - -fix the number of shares constituting that series, and -fix the dividend - -rights, dividend rates, conversion rights, voting rights (which may be greater or lesser than the voting rights of the common stock), and -fix the rights and terms of redemption (including any sinking fund provisions), and the liquidation preferences of the series of Undesignated Preferred Stock. The holders of any series of preferred stock, when and if issued, are expected to have priority claims to dividends and to any distribution upon liquidation of Lorilei, and they may have other preferences over the holders of the common stock. The Board of Directors may issue series of preferred stock without action by the shareholders of Lorilei. Accordingly, the issuance of preferred stock may adversely affect the rights of the holders of the common stock. In addition, the issuance of preferred stock may be used as an anti-takeover device without further action on the part of the shareholders. Issuance of preferred stock may dilute the voting power of holders of common stock One example of this dilution would be the issuance of preferred stock with super-voting rights. The issuance of preferred stock may render more difficult the removal of current management, even if such removal may be in the shareholders' best interest. Lorilei has no current plans to issue any additional preferred stock. Lorilei has issued one promissory note for $46,143.00 to John B. LaTorraca which bears interest at the rate of 8.5% per annum for which a total of $51,084.16 is presently owed. Item 303. Management's Discussion and Analysis or Plan of Operation General We provide businesses with advertising and marketing services. Our services include creative production and placement in both new and old media. We believe that our ability to place half-hour infomercials on cable television in prime-time through commercial leased access will enable us to offer direct response television services to a majority of companies striving to drive e-commerce business. In 1998, Direct Response Magazine reported that $844 million ($844M) was spent on television infomercials which contributed to generating over $759 billion ($759B) in consumer spending. By way of comparison, industry authority International Data Corporation (IDC) estimates that consumers will purchase only $16 billion ($16B) in goods from the Internet in 2000. The e-commerce market is projected to hit $3.2 Trillion ($3.2T) by 2004 in North America (Forrester Research). Revenues We classify revenues into the following major categories: Commission/retainer, Video production, Graphics, Web, and Commercial Leased Access/Spot Airtime. The following discussion does not include revenues for a new 2000 category, News. Revenue Drivers The principal factors that propel our revenues are detailed below. Commission/retainer: Income from traditional commissioned ad agency time and space business as well as ad agency monthly retainers, promotions and public relations. Video production: Includes income from both video and audio projects, including brokered duplication. Graphics: Income from all graphics projects including traditional layout and design, brokered printing, pre-press as well as new media-related projects such as animation. Web: Includes income from web design, maintenance, hosting, and interactive projects. Commercial Leased Access/Spot and program airtime: Income from brokered time sales (as contrasted with traditional ad agency 15% commission on time/space purchases). News will generate revenues from advertising sales beginning in 2000 and will increase as new market operations are incrementally rolled out. The initial operation is based at our Ocala, Florida headquarters. We expect Commission/retainer income to decrease as business looks for a broader solution to advertising and marketing challenges. Our goal is to replace this income with project income in the other revenue driver categories. Video production will increase due to our expanding direct response television business and increased demand fueled by web-based video applications. Graphics income will vary by the client mix of the company during a given fiscal period with printing as the major variable.Print-intensive clients can have a large impact on this revenue driver. Our goal is to seek this type of client and enhance their usage of print with electronic media opportunities while servicing their core advertising media. 155 Web-based revenue will increase dramatically as we increase our Internet hosting capacity and implement new business plans for the Internet, including development of a 15C2-11 website, as well as webcasting capacity. Commercial Leased Access/spot and program airtime revenues will dramatically increase in the coming years as more business discovers direct response television and as the trend toward tightening of Infomercial availabilities increases. For example, Turner Broadcasting recently ceased making half-hour timeslots available. Cost of Goods and Services Costs are classified with the revenue stream to which they are related. The major factors (exclusive of labor) associated with our costs are listed below: - -Printing costs associated with graphic print jobs - -Capitalized media - -Commercial Leased access and brokered spot airtime - -Videotape and videotape duplication - -Shipping costs Results of Operations Revenues from our business categories are as follows: Year Ended December 31, 1999 Compared to Year Ended December 31, 1998 Revenue Total revenues increased $109,468, or 11% to $1,102,329 for the year ended December 31, 1999 from $992,861 for the year ended December 31, 1998. This increase was attributable to the growth of Commercial leased access and spot/program airtime sales. Commission/retainer revenue decreased by $185,794 or 67.1% to $90,897 for the year ended December 31, 1999 from $276,691 for the year ended December 31, 1998. This is due mainly to client churn, however management believes this follows the trend in the advertising industry. Middle market companies are now turning away from traditional ad agencies toward project-based companies such as ours. Video production revenue increased by $29,616 or 11.3% to $291,156 for the year ended December 31, 1999 from $261,540 for the year ended December 31, 1998. This increase is due in part to an on-going agreement with Advent Product development for spot production. Graphics revenue decreased by $105,599 or 31.7% for the year ended December 31, 1999 from $332,903 for the year ended December 31, 1998. This decrease is partially due to client churn and partially due to a decrease in brokered printing projects. This is a revenue category that is especially sensitive to our client mix and will vary accordingly. Web revenues increased by $10,055 or 60% for the year ended December 31, 1999 from $16,743 for the year ended December 31, 1998. This is due to increase demand for web design, hosting, maintenance and interactive services. Management expects this trend to continue into the foresable future. Commercial leased access/spot and program airtime increased by $404,614 or 879% to $450,610 in the year ended December 31, 1999 from $45,996 in the year ended December 31, 1998. This increase is due to increased demand for prime-time infomercial airings and in part due to capitalized Television and Radio spot media. Management expects this category to continue to increase substantially in 2000. Cost of Goods and Services Costs of goods and services increased by $77,574 or 32% to $320,029 for the year ended December 31, 1999, from $242,455 for the year ended December 31, 1998. As a percentage of revenues, cost of goods and services for the year ended December 31, 1999 was 29%, compared with 24% for the year ended December 31, 1998. The increase was due to an increase in capitalized agency billings resulting from a shift in our agency client mix. Payroll Expense Payroll expense, including officer's salaries, increased by $28,136 or 6.8% to $439,938 for the year ended December 31, 1999 from $411,802 for the year ended December 31, 1998. As a percentage of revenues, payroll expense declined from 41% in the year ended December 31, 1998 to 39.9% for the year ended December 31, 1999. While overall payroll expense is expected to increase in 2000 due to new hires in sales and for the news operation, management believes payroll will remain close to 1999 levels as a percentage of revenues. Depreciation Expense Depreciation expense increased by $14,979 or 21% to $86,319 for the year ended December 31, 1999 from $71,340 for the year ended December 31, 1998. This is due to new equipment going into service in 1999. 156 Item 304. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure During Lorilei's two most recent fiscal years and during the year 2000, no principal independent accountant or accountant for a significant subsidiary of Lorilei on whom the principal accountant expressed reliance in its report has resigned , declined to stand for reelection, or was dismissed. Lorilei's financial statements during this period were not audited. Item 306. Audit Committee Report This item is not applicable inasmuch as no audit report has been received and an audit committee has not been appointed. Item 310. Financial Statements Financial statements will be supplied following closing as required by Form 8-K. Item 401. Directors, Executive Officers, Promoters and Control Persons (a) Officers Gerald R. Cunningham, age 48, has served as president, chief executive officer and a member of the board of directors of Lorilei since its incorporation in July of 1994, and as a partner in its predecessor, a Florida general partnership operating under the fictitious name "The Firm," organized by Mr. Cunningham and his wife during 1993. In 1991 Mr. Cunningham obtained a bachelor of science degree in business administration from Pacific Western University located in Los Angeles, California. In 1968 he received a third class radiotelephone operator's permit from the United States Federal Communications Commission and began an on-air radio broadcasting career with major market stations through 1982, when he entered radio advertising sales and sales management, specializing in improving sales at newly established stations or stations whose sales had declined. Mr. Cunningham is not currently a director in any other company. Leigh A. Cunningham, age 32, is Vice president, Secretary, and has been a member of the board of directors of Lorilei since its incorporation in July of 1994, and was a partner in its predecessor, a Florida general partnership operating under the fictitious name "The Firm," organized by Ms. Cunningham and her husband during 1993. Ms. Cunningham attended San Diego State University, San Diego, California during 1986 and became a marketing coordinator for Pacific Southwest Airlines' Executive Flyer Club in 1987. In 1988 Ms. Cunningham began a career in radio broadcasting as a traffic manager, later moving into sales and sales management. She was first elected Vice president, Secretary/Treasurer on July 1, 1994. Mr. Cunningham is not currently a director in any other company. (b) Significant Employees Mary Lee, age 32, has served as business manager of Lorilei since October , 1998. From April, 1994 to September 1998 she was Office Manager with Simmons, Hart and Sheehe, an Ocala, Florida law firm. Brian Trahan, age 37, has served as production manager since December, 1998. From July, 1998 to December 1998 he was employed by Zebra Publishing, Gainesville, Florida, as Production manager. From June 1995 to July 1997 Brian was Creative Director for Belk's Florida and the South Georgia group office, and from March 1994 to June 1995 Brian was Graphics coordinator at Bear Archery. (c) Family relationships Gerald and Leigh Cunningham are husband and wife. (d) Not applicable. None of the following events have occurred with regard to the directors, executive officers, promoters or control persons of Lorilei during the last five years: 1. Any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; 2. Any conviction in a criminal proceeding or being subject to a pendingcriminal proceeding (excluding traffic violations and other minor offenses); 3. Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and 4. Being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated. 157 Item 402 Executive Compensation Lorilei's Articles of Incorporation, as amended, authorize it to issue 2,000 shares of common stock, $0.01 par value per share and 1,000,000 shares of preferred stock, par value $.01. As of the date of this prospectus, 111 shares of the common stock were outstanding and no Preferred Shares were outstanding. This description of the capital stock of Lorilei is qualified by and subject to the Florida Business Corporation Act and Lorilei's Articles of Incorporation and By-laws, copies of which Articles and By-laws have been provided as exhibits hereto and to which reference is made for the provisions thereof which are summarized below. Common Stock The holders of common stock are entitled to one vote per share on all matters to be voted upon by the shareholders and have no cumulative voting rights. Holders of common stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the Board of Directors out of funds legally available therefor. In the event of liquidation, dissolution, or winding up of Lorilei, the holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities. The common stock has no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of common stock are fully paid and nonassessable, and the shares of common stock offered hereby will also be fully paid and nonassessable. The Articles also recognize the obligation of the Corporation's stockholder AmeriNet Group.com, Inc. to elect members to the Corporation's Board of Directors in the manner reflected in the Reorganization Agreement between Lorilei and AmeriNet. Undesignated Preferred Stock The authorized but unissued preferred stock (1,000,000 shares) may be issued in series, and shares of each series will have such rights and preferences as are fixed by the Board of Directors in the resolutions authorizing the issuance of that particular series. In designating any series of preferred stock, the Board of Directors may, without further action by the holders of common stock: - -fix the number of shares constituting that series, and -fix the dividend rights, dividend rates, conversion rights, voting rights (which may be greater or lesser than the voting rights of the common stock), and -fix the rights and terms of redemption (including any sinking fund provisions), and the liquidation preferences of the series of Undesignated Preferred Stock. The holders of any series of preferred stock, when and if issued, are expected to have priority claims to dividends and to any distribution upon liquidation of Lorilei, and they may have other preferences over the holders of the common stock. The Board of Directors may issue series of preferred stock without action by the shareholders of Lorilei. Accordingly, the issuance of preferred stock may adversely affect the rights of the holders of the common stock. In addition, the issuance of preferred stock may be used as an anti-takeover device without further action on the part of the shareholders. Issuance of preferred stock may dilute the voting power of holders of common stock One example of this dilution would be the issuance of preferred stock with super-voting rights. The issuance of preferred stock may render more difficult the removal of current management, even if such removal may be in the shareholders' best interest. Lorilei has no current plans to issue any additional preferred stock. Item 403 Security Ownership of Certain Beneficial Owners and Management Prior to May 11, 2000, none of the officers , directors or key employees of Lorilei worked purusant to written employment agreements. During the previous three fiscal years, the officers and directors of Lorilei have received the following compensation: 158 SUMMARY COMPENSATION TABLE ========================================================================================================== Name and principal Year position (a) (b) Annual compensation Long-term compensation ========================================================================================================== ========================================================================================================== All other ther annual compen- Salary Bonus ompensation sation ($) ($) O ($) ($) c (c) (d) (e) Awards Payouts (i) ========================================================================================================== ========================================================================================================== Securities under- Restricted lying stock options/ LTIP award(s) SARs payouts ($) (#) ($) ========================================================================================================== ========================================================================================================== G. Cunningham 1999 37375 15000 NA NA NA NA ========================================================================================================== ========================================================================================================== L. Cunningham 1999 31146 15000 NA NA NA NA ========================================================================================================== ========================================================================================================== G. Cunningham 1998 38625 12000 ========================================================================================================== ========================================================================================================== L. Cunningham 1998 32188 12000 ========================================================================================================== ========================================================================================================== G. Cunningham 1997 38475 8000 ========================================================================================================== ========================================================================================================== L. Cunningham 1997 30663 8000 ==========================================================================================================
No dividends have been paid to any shareholder since inception. Since December 31, 1999, Gerald Cunningham has received total cash compensation or $13,383.72 and Leigh Cunningham has received total cash compensation of $10,764.18. No long term compensation was awarded to either during that period. Since the inception of Lorilei a total of $57,677.72 loans has been repaid to Mr. And Ms. Cunningham. Lorilei provides child care for the children of Mr. And Ms. Cunningham. Item 403 Security Ownership of Certain Beneficial Owners and Management The following tables set forth certain information regarding the beneficial ownership of Lorilei's common stock as of May 3, 2000, for each person (or group or affiliated persons) known to Lorilei to be the - -beneficial owners of more than 5% of its common stock, - -each director of Lorilei, - -each of Lorilei's executive officers, and - -all of the directors and officers as a group. 159 Common Stock Owned by Principal Shareholders, Officers and Directors of Lorilei Common Shares Common Shares Beneficially Owned Prior Beneficially Owned After to Reorganization Reorganization Shareholder Name, Corporate Office, and Address Number Percent Percent ============================================================================================= Gerald Cunningham. 111* 100% 0% Director, Chairman of the Board, President, Chief Executive Officer 7325 S.W. 32nd Street Ocala, Florida 34474 Leigh Cunningham . 111** 100% 0% Director, Vice-President Secretary 7325 S.W. 32nd Street Ocala, Florida 34474 All Directors as a Group. 111 100% 0% 1) Owned as tenants by the entireties with Leigh Cunningham 2) Owned as tenants by the entireties with Gerald Cunningham
Item 404. Certain Relationships and Related Transactions Lorilei provides child care for Mr. and Ms. Cunningham. Item 405. Compliance with Section 16(a) of the Exchange Act Lorilei does not have a class of equity securities registered pursuant to the Exchange Act.. Item 503. Summary Information and Risk Factors (a) Summary Lorilei Communications, Inc. operates under two trade names, The Firm Multimedia, a full-service advertising agency, and Ocala News Tonight, a nightly half-hour newscast. Lorilei was founded in 1993 and incorporated as a Florida subchapter S corporation in July, 1994. Gross sales in 1999 surpassed $1.5 million, with 1999 billings of approximately $1.1 million and EBITDA of approximately $162,000. The company projects substantial sales increases, with an adjusted to AmeriNet fiscal year billing target of $2.5 million and an EBITDA target of $500,000 for the fiscal year ending June 30, 2001. The company projects billings to exceed $5 million with EBITDA of $1.5 million in the fiscal year ending June 30, 2003. The Firm Multimedia is an advertising agency, which offers business services including: - -full advertising agency services including consulting on marketing and advertising issues - -graphic layout, design, and printing - -video and audio production - -media planning and placement - -internet web design and web site promotion - -interactive CD-rom design - -long and short-form direct response television production - -long and short-form direct response placement - -placement of long-form television programming under commercial leased access FCC rules Lorilei management believes it can accomplish its goals through expanding its marketing and advertising efforts, establishing a solid sales organization with regional sales offices in major Florida and Southeastern U.S. cities, through development of its commercial leased access abilities, and through acquisitions of synergistic companies. Commercial leased access (CLA) is a segment of communications law mandated by Congress in cable television deregulation. Enforced by the Federal Communications Commission (FCC) rules, CLA affords programmers not affiliated with the cable operator the opportunity of purchasing minimum half-hour time increments in substantially better time periods than offered through traditional commercial venues. The amount paid by the programmer is also regulated by the FCC, making CLA a unique entity. Lorilei intends to continue and expand its proprietary database of cable systems nationwide, enabling the company to easily offer CLA as a alternate for direct response television (DRTV) marketers, as well as other types of programming. 160 One example of other types of television programming that can be established under CLA is Ocala News Tonight (ONT). ONT debuted in January 2000 and is produced by The Firm Multimedia with its own news staff and producers. ONT is a traditional news, weather, and sports half-hour newscast available to approximately 73,000 television households targeting Marion County, Florida. This advertiser-supported program fills a local news niche left open by Orlando, Florida broadcasters. These broadcasters cover a very wide geographic area and are unable to devote either airtime or personnel to cover their service area market by market. Viewers of ONT receive information not available elsewhere, including the local newspaper. The company expects to use ONT as a prototype for additional news operations in additional markets. The Firm Multimedia will co-locate a sales office with the ONT-type operation in each market. (b) Address and telephone number Lorilei Communications, Inc. (352) 861-1350 P.O. Box 770787 fax (352) 861-1339 Ocala, Florida 34477 General email: thefirm@callthefirm.com Officer email: gerry@callthefirm.com (Courier only) 7325 S.W. 32nd St. Ocala, Florida 34474 http://www.callthefirm.com http://www.ocalanewstonight.com (c) Risk Factors The statements contained in this Report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including without limitation statements regarding Lorilei's expectations, beliefs, intentions or strategies regarding the future. All forward-looking statements included in this document are based on information available to Lorilei on the date hereof, and Lorilei assumes no obligation to update any such forward-looking statements. The forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, experience and the performance or achievements of Lorilei to be materially different from those anticipated, expressed or implied by the forward-looking statements. In evaluating Lorilei's business, the following factors, in addition to the Risk Factors set forth below and other information set forth herein, should be carefully considered: successful deployment and integration of systems; factors affecting internal growth and management of growth; success of marketing, integration and operational initiatives, including Internet marketing initiatives; dependence on technology; labor and technology costs; cost and availability of advertising and promotional efforts; success of the acquisition strategy and availability of acquisition financing; success in entering new segments of the advertising industry and new geographic areas; dependence on commercial leased access rules; risks associated with the advertising industry generally; seasonal and quarterly fluctuations; competition; and general economic conditions. In addition, Lorilei's operating strategy and growth strategy involve a number of risks and challenges, and there can be no assurance that these risks and other factors will not have a material adverse effect on Lorilei. Management of Growth; Factors Affecting Internal Growth. Lorilei expects to grow internally, through increase in number of sales offices, news operations, and national sales. Lorilei expects to spend significant time and effort exploring this endeavor. There can be no assurance that Lorilei's systems; procedures or controls will be adequate to support Lorilei's operations as they expand. Any future growth also will impose significant added responsibilities on members of senior management, including the need to identify, recruit and integrate new senior level managers and executives. There can be no assurance that such additional management will be identified or retained by Lorilei. To the extent that Lorilei is unable to manage its growth efficiently and effectively, or is unable to attract and retain qualified management, Lorilei's business, financial condition and results of operations could be materially adversely affected. While Lorilei has experienced revenue and earnings growth thus far in its' history, there can be no assurance that Lorilei will continue to experience internal growth comparable to these levels, if at all. Factors affecting the ability of Lorilei to continue to experience internal growth included, but are not limited to, business acceptance of Lorilei's services, the ability to sell advertising time to support its' news operations, the ability to recruit and retain qualified sales personnel and continued access to capital. Risks related to Lorilei's acquisition strategy. Acquisitions involve a number of special risks, including possible adverse effects on Lorilei's operating results, diversion of management's attention, failure to retain key personnel, risks associated with unanticipated events or liabilities and amortization of acquired intangible assets, some or all of which could have a material adverse effect on Lorilei's business, financial condition, and results of operations. Customer dissatisfaction or performance problems at a single acquired company could also have an adverse effect on the reputation of Lorilei. Further, there can be no assurance that businesses acquired will achieve anticipated revenues and earnings. In addition, to the extent that Lorilei intends to increase its revenues, expand the markets it serves and increase its service offerings through the acquisition of additional companies, there can be no assurance that Lorilei will be able to identify, acquire, or profitably manage additional businesses or successfully integrate acquired businesses into Lorilei without substantial costs, delays or other operational or financial problems. Increased competition for acquisition candidates may also develop, in which event there may be fewer acquisition opportunities available to Lorilei, as well as higher acquisition prices. As of the date of this report, Lorilei is not party to a binding agreement with respect to any acquisition. Risks Related to Acquisition Financing and Possible Need for Additional Capital Lorilei plans to finance future acquisitions by using shares of the Registrant's common stock ("AmeriNet Stock") for all of the consideration to be paid. In some cases, however it is probable that Lorilei would be required to make cash investments in the acquired businesses, as AmeriNet is making in Lorilei. Lorilei would be charged against earnings for any AmeriNet Stock used to effect acquisitions, consequently, it must take care to assure that the benefits of the acquisitions exceed the costs of the AmeriNet Stock used as consideration and the cash investment required, if any. In the event that the AmeriNet Stock does not maintain a sufficient market value, or potential acquisition candidates are otherwise unwilling to accept AmeriNet Stock as consideration for the sale of their businesses, Lorilei may be required to utilize more of its cash resources, if available, in order to maintain its acquisition program. If Lorilei has insufficient cash resources, its growth could be limited unless it is able to obtain additional capital through debt or equity financing. There can be no assurance that AmeriNet will make required capital available or that other financing will be available on terms Lorilei deems acceptable. If Lorilei is unable to obtain financing sufficient for all of its desired acquisitions, it may be unable to fully implement its acquisition strategy. In addition, to maintain historical levels of growth, Lorilei may need to seek additional funding. Adequate funds for these purposes may not be available when needed or may not be available on terms acceptable to Lorilei. If funding is insufficient, Lorilei may be required to delay, reduce the scope of or eliminate some or all of its expansion programs. Dependence Upon Technology Lorilei's business is currently dependent upon computer-based technology in order to produce the majority of its services. Because technological change has 161 been extremely dynamic, technological obsolescence has become an increasingly important decision when making capital expenditures. No assurances can be provided that the state of the arts systems utilized by Lorilei will remain state of the art for a period sufficient to amortize their expenditure. Lorilei's strategy is to incrementally add equipment piece by piece to its operations as prices for new technology decrease and as production demand increases, so as to consistently add new, better, faster computers, cameras, scanners, etc. to its available equipment inventory. There can be no assurance, however, that new advances in technology will not hasten the obsolescence of Lorilei's equipment, resulting in additional necessary capital expense which could be substantial. In this event Lorilei's management envisions the utilization of leases, financing, or an additional capital investment in order to satisfy these requirements. Additional equipment expense of approximately $200,000 will also be necessary to establish anticipated news operations in each additional market. Risks Associated with the Advertising Industry; General Economic Conditions Lorilei's results of operations are dependent upon factors generally affecting the advertising industry. Lorilei's revenues and earnings are especially sensitive to events that affects businesses plans to expand into new markets, develop marketing plans for new products or services, or seek new streams or revenue. A number of factors could result in the overall decline in demand for advertising including a decline in general economic conditions, extreme weather conditions, armed hostilities, or excessive inflation. These type of events could have a material adverse effect on Lorilei's business, financial condition and results of operations. Reliance on Key Personnel. Lorilei's operations are dependent on the efforts, experience and relationships of Gerald R. Cunningham, Leigh A. Cunningham and Lorilei's other essential staff. Furthermore, Lorilei will likely be dependent on the senior management of any businesses acquired in the future. If any of these individuals become unable to continue in their role Lorilei's business or prospects could be adversely affected. Although Lorilei has entered into an employment agreement with each of Lorilei's executive officers, there can be no assurance that such individuals will continue in their present capacity for any particular period of time. Reliance on FCC Rules. Lorilei utilizes FCC rules mandated by Section 612 of the Communications Act in order to gain access to cable systems. If these rules are repealed or modified by Congress, or in the event the FCC drastically alters its rules on leased access, these events could have a material adverse effect on Lorilei's business, financial condition and results of operations. Control of Existing Management Pursuant to the terms of the reorganization agreement between Lorilei and the Registrant, Lorilei's current management will have the right to elect a majority of the members of its board of directors for the foreseeable future, unless Lorilei fails to attain at least 70% of its EBITDA projections. Such requirement may prevent or delay AmeriNet from taking actions to correct problems with Lorilei's management and such inability may materially impair Lorilei's operations. Item 504. Use of Proceeds Set forth below is Lorilei's anticipated use of the cash available to Lorilei after deduction of estimated remaining offering expenses of $12,500. Pursuant to the Reorganization Agreement, Lorilei would receive $487,500 of net proceeds from this reorganization after deduction of the expenses of the reorganization. The net proceeds of this offering will be used: To pay existing accounts receivable and personal property and real estate taxes.; To repair existing equipment and purchase new equipment To employ additional support staff To pay advertising and marketing costs, and To provide working capital. The amounts and timing of expenditures for each purpose is subject to the broad discretion of the management and will depend on factors such as the amount of net proceeds available to Lorilei and the effects of competition, many of which are beyond Lorilei's control. Accounts Payable and Taxes $198,854.00 Equipment 8,000.00 Salaries 30,646.00 Advertising/Marketing 100,000.00 Working Capital 150,000.00 Total $487,500.00 The initial $100,000 payment made to Lorilei will be used to pay approximately $42,000 of the accounts payable and taxes with the balance being use to pay equipment, salaries and working capital. The remaining four (4) payments of $100,000 will be applied pro rata among the balance of the accounts receivable, advertising/marketing and working capital. 162 Item 505. Determination of Offering Price The reorganization price for Lorilei's common shares was established through arms-length negotiations between AmeriNet and Lorilei, taking into account the market value of similar publicly held companies and the effect of the increased resources available to Lorilei following the reorganization. Item 507. Selling Security Shareholders This information is combined with disclosure in response to Item 403. Item 508. Plan of Distribution No securities are being offered (except to the two existing shareholders of Lorilei) in connection with the Reorganization. Item 509. Interest of Named Experts and Counsel No experts or counsel have been hired on a contingent basis or will receive a direct or indirect interest in Lorilei or was a promoter, underwriter, voting trustee, director, officer or employee of Lorilei. Item 510. Disclosure of Commission Position on Indemnification for Securities Act Liabilities The right of the shareholders to sue any director for misconduct in conducting the affairs of Lorilei is limited by its Articles of Incorporation which limit Director's liability to the extent allowed by law.d Section 607.0850 FLA. STAT. (1999), permits indemnification against expenses actually and reasonably incurred by a director, officer, employee or agent to the extent that such person has been successful in the defense of a matter eligible for indemnification under the statute. Under certain circumstances, expenses may be paid by a corporation in advance, subject to repayment, unless the defendant ultimately is determined to be ineligible for indemnification. In addition, the statute permits a corporation to indemnify directors and officers against certain liabilities and to purchase and maintain director and officer liability and reimbursement insurance against liabilities, whether or not the corporation would have the power of indemnification against such liabilities. Insofar as indemnification for liabilities arising under the Securities Act of 1933, may be permitted to directors, officers or persons controlling Lorilei pursuant to the foregoing provisions, Lorilei has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in such Act and is therefore unenforceable. Item 511. Other Expenses of Issuance and Distribution Lorilei has estimated the legal, accounting and filing fees associated with the Reorganization to be approximately $12,500. Item 601. Exhibits (1) Underwriting agreement (2) Plan of acquisition, reorganization, arrangement, liquidation, or succession (3) (i)Articles of Incorporation 3.1 Articles of Incorporation 3.2 Articles of Amendment Dated May 11, 2000 and Restated Articles. (ii) By-laws 3.3 By-Laws (4) Instruments defining the rights of holders, incl. Indentures (5) Opinion re: legality 5.1 Opinion of Brashear & Associates, P.L. dated May 11, 2000. 5.2 Opinion of George Franjola dated May 11, 2000. (8) Opinion re: tax matters (9) Voting trust agreement (10) Material contracts 10.1 Mortgage and Promissory Note dated September 18, 1996 to Small Business Loan Source. 10.2 Employment Agreement with Gerald Cunningham dated May 11, 2000. 10.3 Employment Agreement with Leigh Cunningham dated May 11, 2000. (11) Statement re: computation of per share earnings (13) Annual or quarterly reports, Form 10-Q (15) Letter on unaudited interim financial information (16) Letter on changes in certifying accountant (18) Letter on change in accounting principles (21) Subsidiaries of the registrant (22) Published report regarding matters submitted to vote (23) Consents of experts and counsel (24) Power of attorney (25) Statement of eligibility of trustee (26) Invitations for competitive bids (27) Financial Data Schedule (99) Additional Exhibits Item 701. Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities Eleven shares were sold On May 16, 1998 Lorilei sold 11 shares to John B. LaTorraca for $25,000. The issuance of the shares was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933. 163 Item 702. Indemnification of Directors and Officers. The right of the shareholders to sue any director for misconduct in conducting the affairs of Lorilei is limited by its Articles of Incorporation which limit Director's liability to the extent allowed by law. Section 607.0850 FLA. STAT. (1999), permits indemnification against expenses actually and reasonably incurred by a director, officer, employee or agent to the extent that such person has been successful in the defense of a matter eligible for indemnification under the statute. Under certain circumstances, expenses may be paid by a corporation in advance, subject to repayment, unless the defendant ultimately is determined to beineligible for indemnification. In addition, the statute permits a corporation to indemnify directors and officers against certain liabilities and to purchase and maintain director and officer liability and reimbursement insurance against liabilities, whether or not the corporation would have the power of indemnification against such liabilities. I attest the information contained herein is true and accurate to the best of my knowledge /s/ Gerald R. Cunningham - ---------------------------------- Gerald R. Cunningham, President Lorilei Communications, Inc. /s/ Leigh A. Cunningham - ---------------------------------- Leigh A. Cunningham, Vice President Sales Lorilei Communications, Inc. Page 164 Exhibit to Reorganization Agreement by and among AmeriNet Group.com, Inc., a Delaware Corporation and Lorilei Communications, Inc., a Florida Corporation EXHIBIT 3.4 AMERINET DRAFT ANNUAL REPORT Attached to this exhibit is the supporting document for the above referenced. The AmeriNet Annual Report will be filed with the Commission as soon as it is completed. I attest the information contained herein is true and accurate to the best of my knowledge /s/ Gerald R. Cunningham - ---------------------------------- Gerald R. Cunningham, President Lorilei Communications, Inc. /s/ Leigh A. Cunningham - ---------------------------------- Leigh A. Cunningham, Vice President Sales Lorilei Communications, Inc. Exhibit to Reorganization Agreement by and among AmeriNet Group.com, Inc., a Delaware Corporation and Lorilei Communications, Inc., a Florida Corporation EXHIBIT 5.8 AFFILIATE AGREEMENTS Attached to this exhibit is the supporting document for the above referenced for: 1. Gerald R. Cunningham 2. Leigh A. Cunningham I attest the information contained herein is true and accurate to the best of my knowledge /s/ Gerald R. Cunningham - ---------------------------------- Gerald R. Cunningham, President Lorilei Communications, Inc. /s/ Leigh A. Cunningham - ---------------------------------- Leigh A. Cunningham, Vice President Sales Lorilei Communications, Inc. Page 165 Affiliate Agreement This Affiliate Agreement (this "Agreement") is made and entered into by and between Lorilei Communications, Inc., Inc., a Florida corporation ("Lorilei"), AmeriNet Group.com, Inc., a publicly held Delaware corporation with a class of securities registered under Section 12(g) of the Securities Act of 1934, as amended ("AmeriNet" and the "Exchange Act," respectively), and person identified in the signature page of this Agreement as the Affiliate (the "Affiliate"). Preamble: WHEREAS, concurrently with the execution of this Agreement, Lorilei and AmeriNet have entered into a Reorganization Agreement dated May 11, 2000, (the "Reorganization Agreement") which contemplates that Lorilei will become a wholly owned subsidiary of AmeriNet and all outstanding capital stock of Lorilei will be converted into AmeriNet common stock (the "Merger"); and WHEREAS, the Affiliate is either an officer or director of Lorilei or is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of such quantity of common stock in Lorieli as requires that the Affiliate to be deemed an "affiliate" of Lorilei (within the meaning of Rule 405 promulgated by the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Securities Act"), as a result of which the Affiliate will be subject to restrictions on disposition of the shares of AmeriNet's common stock received as a result of the Reorganization; and WHEREAS, the determination of the accounting and tax treatment of the Reorganization will depend, in part, upon the accuracy of certain of the representations and warranties made by the Affiliate in this Agreement, as well as upon the Affiliate's compliance with certain of the agreements set forth herein; and WHEREAS, Affiliate and AmeriNet further desire to provide for an arrangement under which Affiliate will grant to AmeriNet an irrevocable proxy to vote all of the Affiliate's shares of Lorilei's common stock in favor of the Reorganization at a special meeting of the stockholders of Lorilei to be held for the purpose of voting on the Reorganization. NOW, THEREFORE, the Parties agree as follows: Page 166 Article I Agreement to Retain Shares. 1.1 Transfer and Encumbrance. (A) As used herein, the term "Determination Date" shall mean the earlier of: (1) The date AmeriNet shall have publicly released a report including the combined financial results of AmeriNet and Lorilei for a period of at least thirty (30) days of combined operations of AmeriNet and Lorilei; or (2) The date the Reorganization Agreement shall be terminated pursuant to Article VIII thereof. (B) The Affiliate agrees not to transfer, sell, exchange, pledge or otherwise dispose of or encumber the Affiliates Lorilei common stock or the shares of AmeriNet common stock received in exchange therefor as a result of the Reorganization (collectively or generically hereinafter referred to as the "Shares") or any New Shares (as defined in Section 1.2) acquired or to make any offer or agreement relating thereto: (1) At any time prior to the Determination Date; (2) Except in full compliance with the requirements of Rule 144 promulgated by the Commission under authority granted by the Securities Act; (3) Except in full compliance with the requirements of Sections 13 and 16 of the Exchange Act, including requirements pertaining to timely filing of Commission Forms 3, 4 and 5 or Schedule 13-D; and (4) In full compliance with the procedures established by AmeriNet (including requirements imposed upon its transfer agent) to assure compliance with the foregoing. 1.2 New Shares. The Affiliate agrees that any shares of capital stock of Lorilei or AmeriNet that Affiliate purchases or with respect to which Affiliate otherwise acquires beneficial ownership after the date of this Agreement ("New Shares") shall be subject to the terms and conditions of this Agreement to the same extent as if they constituted Shares. Page 167 Article II Agreement to Vote Shares. 2.1 Voting At every meeting of the stockholders of Lorilei called with respect to any of the following, and at every adjournment thereof, and on every action or approval by written consent of the stockholders of Lorilei with respect to any of the following, the Affiliate shall vote the Shares and any New Shares, including, with respect to stock options held by Affiliate, only those stock options immediately exercisable: (A) In favor of approval of the Reorganization Agreement and any matter that could reasonably be expected to facilitate the Reorganization; and (B) Against approval of any proposal made in opposition to or competition with consummation of the Reorganization and against any merger, consolidation, sale of assets, reorganization or recapitalization, with any party other than AmeriNet and its affiliates and against any liquidation or winding up of Lorilei (each of the foregoing is hereinafter referred to as an "Opposing Proposal"). 2.2 Actions In amplification of the obligations assumed by this Agreement, the Affiliate agrees not to take any actions contrary to Lorilei's obligations under the Reorganization Agreement or the Affiliate's obligations under this Agreement. Article III Irrevocable Proxy. Concurrently with the execution of this Agreement, the Affiliate agrees to deliver to AmeriNet a proxy in the form attached hereto as Exhibit A (the "Proxy"), which shall be irrevocable to the extent permissible under Florida law, with the total number of Shares beneficially owned (as such term is defined in Rule 13d-3 under the Exchange Act) by the Affiliate set forth therein. Article IV Tax Treatment. The Affiliate understands and agrees that it is intended that the Reorganization will be treated as a "reorganization" within the meaning of Code Section 368(a)(1)(B) for federal income tax purposes. Page 168 Article V Reliance Upon Representations, Warranties and Covenants. (A) The Affiliate has been informed that the treatment of the Reorganization for federal income tax purposes requires that a sufficient number of former stockholders of Lorilei maintain a meaningful continuing equity ownership interest in AmeriNet after the Reorganization. (B) The Affiliate understands that the representations, warranties and covenants of the Affiliate set forth herein will be relied upon by AmeriNet, Lorilei and their respective legal counsel and accounting firms. Article VI Representations, Warranties and Covenants of Affiliate. The Affiliate represents, warrants and covenants to AmeriNet as follows: 6.1 Power and Authority. The Affiliate has full power and authority to execute this Agreement, to make the representations, warranties and covenants herein contained and to perform Affiliate's obligations hereunder. 6.2 Shares Owned. Set forth following the Affiliate's signature below is the number of Shares owned by the Affiliate, including all Shares as to which the Affiliate has sole or shared voting or investment power and all rights, options and warrants to acquire Shares owned or held by the Affiliate. 6.3 Restrictions on Transfer. The Affiliate will not sell, transfer, exchange, pledge or otherwise dispose of, or make any offer or agreement relating to any of the foregoing with respect to, any shares of common stock of AmeriNet (the "AmeriNet Common Stock") that the Affiliate may acquire in connection with the Merger, or any securities that may be paid as a dividend or otherwise distributed thereon or with respect thereto or issued or delivered in exchange or substitution therefor (all such shares and other securities of AmeriNet are sometimes collectively referred to as "Restricted Securities"), or any option, right or other interest with respect to any Restricted Securities, unless: (A) Such transaction is permitted pursuant to Rule 145(c) and 145(d) under the Securities Act; (B) (1) Legal counsel representing the Affiliate (which legal counsel is reasonably satisfactory to AmeriNet), shall have advised AmeriNet in a written opinion letter satisfactory to AmeriNet and AmeriNet's legal counsel, and upon which AmeriNet and its legal counsel may rely, that no registration under the Securities Act would be required in connection with the proposed sale, transfer or other disposition and that all requirements under the Exchange Act, including Sections 13 and 16 thereof have been complied with; or Page 169 (2) A registration statement under the Securities Act covering AmeriNet's Stock proposed to be sold, transferred or otherwise disposed of, describing the manner and terms of the proposed sale, transfer or other disposition, and containing a current prospectus, shall have been filed with the Securities and Exchange Commission (the "Commission") and made effective under the Securities Act; or (3) An authorized representative of the Commission shall have rendered Lorilei written advice to the Affiliate (sought by Affiliate or Affiliate's legal counsel, with a copy thereof and all other related communications delivered to AmeriNet) to the effect that the Commission would take no action, or that the staff of the Commission would not recommend that the Commission take any action, with respect to the proposed disposition if consummated. 6.4 No Present Plan of Disposition. (A) The Affiliate has, and as of the Effective Time (as defined in the Reorganization Agreement) will have, no present plan or intention (a "Plan") to sell, transfer, exchange, pledge or otherwise dispose of, including by means of a distribution by a partnership to its partners, or a corporation to its stockholders, or any other transaction which results in a reduction in the risk of ownership (any of the foregoing being hereinafter referred to generically as a "Sale") of any of the shares of AmeriNet common stock that the Affiliate may acquire in connection with the Merger, or any securities that may be paid as a dividend or otherwise distributed thereon with respect thereto or issued or delivered in exchange or substitution therefor, which, when taking into account those Lorilei stockholders who dissent from the Merger, will reduce the Lorilei stockholders' ownership of AmeriNet Stock, in the aggregate, to less than fifty (50%) of the number of shares of AmeriNet Common Stock issued in the Merger. (B) (1) The Affiliate is not aware of, or participating in, any Plan on the part of Lorilei stockholders to engage in Sales of the shares of AmeriNet Stock to be issued in the Reorganization. (2) For purposes Section 6.4(B)(1), Shares with respect to which a pre-Reorganization Sale occurs in a Related Transaction (as defined below), shall be considered to be Shares that are exchanged for AmeriNet Stock in the Merger and then disposed of pursuant to a Plan. (3) A Sale of AmeriNet Stock shall be considered to have occurred pursuant to a Plan if, among other things, such Sale occurs in a Related Transaction. (4) For purposes of this Section 6.4, a "Related Transaction" shall mean a transaction that is in contemplation of, or related or pursuant to, the reorganization or the Reorganization Agreements. Page 170 (C) If any of the Affiliate's representations in this Section 6.4 cease to be true at any time prior to the Effective Time, the Affiliate will deliver to each of Lorilei and AmeriNet, prior to the Effective Time, a written statement to that effect, signed by the Affiliate. 6.5 Consultation with Counsel. (A) The Affiliate has carefully read this Agreement and discussed its requirements and other applicable limitations upon the sale, transfer or other disposition of AmeriNet Shares to be acquired by Affiliate in the Reorganization, to the extent the Affiliate felt necessary, with legal counsel for the Affiliate. (B) The Affiliate has carefully read the Reorganization Agreement and discussed its requirements and its impacts upon Affiliate's ability to sell, transfer, encumber, pledge or otherwise dispose of the AmeriNet Shares to be acquired by Affiliate in the Reorganization, to the extent Affiliate felt necessary, with legal counsel for Affiliate. 6.6 Ownership of Shares. The Affiliate is the record owner of the Shares shown on the signature page hereto, which at the date hereof and at all times up until the Determination Date will be free and clear of any liens, claims, options, charges or other encumbrances; does not beneficially own any shares of capital stock of Lorilei other than such Shares; and, has full power and authority to make, enter into and carry out the terms of this Agreement and the Proxy. 6.7 No Proxy Solicitations. The Affiliate will not, and will not permit any entity under Affiliate's control to: (A) Solicit proxies or become a "participant" in a "solicitation" (as such terms are defined in Regulation 14A under the Exchange Act) with respect to an Opposing Proposal or otherwise encourage or assist any party in taking or planning any action that would compete with, restrain or otherwise serve to interfere with or inhibit the timely consummation of the Merger in accordance with the terms of the Merger Agreement; (B) Initiate a stockholders' vote or action by consent of Lorilei stockholders with respect to an Opposing Proposal; or (C) Become a member of a "group" [as such term is used in Section 13(d) of the Exchange Act] with respect to any voting securities of Lorilei with respect to an Opposing Proposal. Page 171 Article VII No Limitation on Discretion as Director. This Agreement is intended solely to apply to the exercise by the Affiliate in his individual capacity of rights attaching to ownership of the Shares, and nothing herein shall be deemed to apply to, or to limit in any manner the discretion of the Affiliate with respect to, any action which may be taken or omitted by him acting in his fiduciary capacity as a director of Lorilei. Article VIII Rules 144 and 145. From and after the Effective Time and for so long as is necessary in order to permit the Affiliate to sell AmeriNet's Stock held by Affiliate pursuant to Rule 145 and, to the extent applicable, Rule 144 under the Securities Act, AmeriNet will use its reasonable efforts to file on a timely basis all reports required to be filed by it pursuant to Sections 13 or 15(d) of the Exchange Act referred to in paragraph (c)(1) of Rule 144 under the Securities Act, in order to permit the Affiliate to sell AmeriNet's Stock held by it pursuant to the terms and conditions of Rule 145 and the applicable provisions of Rule 144. Article IX Limited Resales. The Affiliate understands that, in addition to the restrictions imposed under Section 6 of this Agreement, the provisions of Rule 145 limit Affiliate's public resales of Restricted Securities, in the manner set forth in subsections (a), (b) and (c) below: 9.1 Rule 145(d)(1). (A) Unless and until the restriction "Cut-off" provisions of Rule 145(d)(2) or Rule 145(d)(3) set forth below become available, public resales of Restricted Securities may only be made by the Affiliate in compliance with the requirements of Rule 145(d)(1). (B) Rule 145(d)(1) permits such resales only: (1) While AmeriNet meets the public information requirements of Rule 144(c); (iii) in brokers' transactions or in transactions with a market maker; and (2) Where the aggregate number of Restricted Securities sold at any time together with all sales of restricted AmeriNet Stock sold for Affiliate's account during the preceding three-month period does not exceed the greater of (a) One percent (1%) of AmeriNet's Common Stock outstanding; or (b) The average weekly volume of trading in AmeriNet Common Stock on all national securities exchanges, or reported through the automated quotation system of a registered securities association, during the four calendar weeks preceding the date of receipt of the order to execute the sale. Page 172 9.2 Rule 145(d)(2). The Affiliate may make unrestricted sales of Restricted Securities pursuant to Rule 145(d)(2) if: (A) The Affiliate has beneficially owned (within the meaning of Rule 144(d) under the Securities Act) the Restricted Securities for at least one year after the Effective Time of the Merger; (B) The Affiliate is not an affiliate of AmeriNet; and (C) AmeriNet meets the public information requirements of Rule 144(c). 9.3 Rule 145(d)(3). The Affiliate may make unrestricted sales of Restricted Securities pursuant to Rule 145(d)(3) if the Affiliate has beneficially owned (within the meaning of Rule 144(d) under the Securities Act) the Restricted Securities for at least two years and is not, and has not been for the three months preceding the date of sale, an affiliate of AmeriNet. 9.4 Acknowledgment. AmeriNet acknowledges that the provisions of Section 6.3 of this Agreement will be satisfied as to any sale by the holder of the Restricted Securities pursuant to Rule 145(d), by a broker's letter and a letter from the undersigned with respect to that sale stating that each of the above-described requirements of Rule 145(d)(1) has been met or is inapplicable by virtue of Rule 145(d)(2) or Rule 145(d)(3); provided, however, that AmeriNet has no reasonable basis to believe that such sales were not made in compliance with such provisions of Rule 145(d). Article X Legends. (A) The Affiliate also understands and agrees that stop transfer instructions will be given to AmeriNet's transfer agent with respect to certificates evidencing the Restricted Securities and that there will be placed on the certificates evidencing the Restricted Securities legends stating in substance: Page 173 "The shares represented by this certificate were issued pursuant to a business combination which was structured to comply with the tax free reorganization provisions of Section 368(a) of the Internal revenue Code of 1986, as amended (the "Code") and was not registered under the Securities Act of 1933, as amended (the "Securities Act") in reliance on applicable exemptions therefrom and from comparable provisions of the securities laws of the recipients state of domicile, and may not be sold, nor may the owner thereof reduce his or her risks relative thereto in any way, until such time as AmeriNet Group.com, Inc. ("AmeriNet"), has published the financial results covering at least thirty (30) days of combined operations after the effective date of the merger through which the business combination was effected. In addition, the shares represented by this certificate may not be sold, transferred or otherwise disposed of except or unless (1) covered by an effective registration statement under the Securities Act, (2) in accordance with Commission Rule 145(d) (in the case of shares issued to an individual who is not an affiliate of AmeriNet) or Commission Rule 144 (in the case of shares issued to an individual who is an affiliate of AmeriNet) of the rules and regulations of such act, or (3) in accordance with a legal opinion satisfactory to counsel for AmeriNet that such sale or transfer is otherwise exempt from the registration requirements of such act." (B) (1) Upon the request of the Affiliate, AmeriNet shall cause the certificates resenting the Restricted Securities to be reissued free of any legend relating to restrictions on transfer by virtue of ASR 130 and 135 as soon as practicable after the requirements of ASR 130 and 135 have been met. (2) In addition, if the provisions of Rules 144 and 145 are amended to eliminate restrictions applicable to the Restricted Securities received by Affiliate pursuant to the Merger, or at the expiration of the restrictive period set forth in Rule 145(d), or upon registration of my such shares, AmeriNet, upon the request of Affiliate, will cause the certificates representing the Restricted Securities to be reissued free of any legend relating to the restrictions set forth in Rules 144 and 145(d). Article XI Miscellaneous Provisions. 11.1 Further Assurances. The Parties agree to do, execute, acknowledge and deliver or cause to be done, executed, acknowledged or delivered and to perform all such acts and deliver all such deeds, assignments, transfers, conveyances, powers of attorney, assurances, stock certificates and other documents, as may, from time to time, be required herein to effect the intent and purpose of this Agreement. 11.2 Consent and Waiver. The Affiliate hereby gives any consents or waivers that are reasonably required for the consummation of the Merger under the terms of any agreements to which Affiliate is a party or pursuant to any rights Affiliate may have. Page 174 11.3 Binding Agreement. This Agreement will inure to the benefit of and be binding upon and enforceable against the Parties and their successors and assigns, including administrators, executors, representatives, heirs, legatees and devisees of the Affiliate and any pledgee holding Restricted Securities as collateral. 11.4 Waiver. No waiver by any party hereto of any condition or of any breach of any provision of this Agreement shall be effective unless in writing and signed by each party hereto. 11.5 Governing Law. This Agreement shall be governed by and construed, interpreted and enforced in accordance with the laws of the State of Delaware, except for any choice of law provisions that would result in the application of the law of another jurisdiction, and except for laws involving the fiduciary obligations of Lorilei's officers and directors, which shall be governed under Florida law. 11.6 Third Party Reliance. Legal counsel to and accountants for the Parties shall be entitled to rely upon this Agreement. 11.7 Amendments and Modification. This Agreement may not be modified, amended, altered or supplemented except upon the execution and delivery of a written agreement executed by the Parties. 11.8 Specific Performance: Injunctive Relief. The Parties acknowledge that AmeriNet will be irreparably harmed and that there will be no adequate remedy at law for a violation of any of the covenants or agreement of Affiliate set forth herein; therefore, it is agreed that, in addition to any other remedies that may be available to AmeriNet upon any such violation, AmeriNet shall have the right to enforce such covenants and agreements by specific performance, injunctive relief or by any other means available to AmeriNet at law or in equity. 11.9 Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and sufficient if delivered in person, by cable, telegram or telex, or sent by mail (registered or certified mail, postage prepaid, return receipt requested) or overnight courier (prepaid) to the respective Parties as follows: Page 175 (1) To the Affiliate: At the contact information provided to the registrar of Lorilei's shares of common stock and, after the Reorganization, at the contact information provided to and maintained by AmeriNet's transfer agent. (2) To AmeriNet: AmeriNet Group.com, Inc. 2500 North Military Trail, Suite 225; Boca Raton, Florida 33487 Attention: Michael Harris Jordan, President Telephone (561) 998-3435, Fax (561) 998-3425; and, e-mail webmaster@amerinetgroup.com; with a copy to George Franjola, General Counsel AmeriNet Group.com, Inc. 1941 Southeast 51st Terrace; Ocala, Florida 34471 Telephone (352) 694-9182, Fax (352) 694-1325; and, e-mail, tyclegal@atlantic.net (3) To Lorilei: Lorilei Communications, Inc. 7325 Southwest 32nd Street, Ocala, Fl 34474 Attention: Gerald R. Cunningham, President Telephone (352) 861-1350, Fax (352) 861-1339; and, e-mail, thefirm@callthe firm.com; with copy to Bruce Brashear, Esquire 920 Northwest 8th Avenue, Suite A; Gainesville, FL 32601 Telephone (352) 336-0800, Fax (352) 336-0505; and, e-mail, bbrashear@nflalaw.com (4) To Yankees: The Yankee Companies, Inc. 2500 North Military Trail, Suite 225; Boca Raton, Florida 33487 Attention: Leonard Miles Tucker, President Telephone (561) 998-2025, Fax (561) 998-3425; and, e-mail carrington@flinet.com; or such other address or to such other person as any Party shall designate to the other for such purpose in the manner hereinafter set forth, except that notices of change of address shall only be effective upon receipt. 11.10 Interpretation. (A) When a reference is made in this Agreement to Schedules or Exhibits, such reference shall be to a Schedule or Exhibit to this Agreement unless otherwise indicated. Page 176 (B) The words "include," "includes" and "including" when used herein shall be deemed in each case to be followed by the words "without limitation." (C) The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. (D) The captions in this Agreement are for convenience and reference only and in no way define, describe, extend or limit the scope of this Agreement or the intent of any provisions hereof. (E) All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the Party or Parties, or their personal representatives, successors and assigns may require. (F) The Parties agree that they have been represented by counsel during the negotiation and execution of this Agreement and, therefore, waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document. 11.11 Merger of All Prior Agreements Herein. (A) This instrument, together with the instruments referred to herein, contains all of the understandings and agreements of the Parties with respect to the subject matter discussed herein. (B) All prior agreements whether written or oral are merged herein and shall be of no force or effect. 11.12 Survival. The several representations, warranties and covenants of the Parties contained herein shall survive the execution hereof and the Closing hereon and shall be effective regardless of any investigation that may have been made or may be made by or on behalf of any Party. 11.13 Severability. If any provision or any portion of any provision of this Agreement, other than one of the conditions precedent or subsequent, or the application of such provision or any portion thereof to any person or circumstance shall be held invalid or unenforceable, the remaining portions of such provision and the remaining provisions of this Agreement or the application of such provision or portion of such provision as is held invalid or unenforceable to persons or circumstances other than those to which it is held invalid or unenforceable, shall not be affected thereby. Page 177 11.14 Indemnification. (A) Each Party hereby irrevocably agrees to indemnify and hold the other Parties harmless from any and all liabilities and damages (including legal or other expenses incidental thereto), contingent, current, or inchoate to which they or any one of them may become subject as a direct, indirect or incidental consequence of any action by the indemnifying Party or as a consequence of the failure of the indemnifying Party to act, whether pursuant to requirements of this Agreement or otherwise. (B) In the event it becomes necessary to enforce this indemnity through an attorney, with or without litigation, the successful Party shall be entitled to recover from the indemnifying Party, all costs incurred including reasonable attorneys' fees throughout any negotiations, trials or appeals, whether or not any suit is instituted. 11.15 Dispute Resolution. (A) In any action between the Parties to enforce any of the terms of this Agreement or any other matter arising from this Agreement any proceedings pertaining directly or indirectly to the rights or obligations of the Parties hereunder shall, to the extent legally permitted, be held in Broward County, Florida, and the prevailing Party shall be entitled to recover its costs and expenses, including reasonable attorneys' fees up to and including all negotiations, trials and appeals, whether or not any formal proceedings are initiated. (B) Except for the arbitration procedures outlined in paragraphs 7.2(G)(2) and 7.2(G)(3) which shall govern any arbitration proceeding described therein, in the event of any dispute arising under this Agreement, or the negotiation thereof or inducements to enter into the Agreement, the dispute shall, at the request of any Party, be exclusively resolved through the following procedures: (1) (a) First, the issue shall be submitted to mediation before a mediation service in Broward County, Florida to be selected by lot from six alternatives to be provided, two by the Affiliate, two by AmeriNet and two by Lorilei. (b) The mediation efforts shall be concluded within ten business days after their initiation unless the Parties unanimously agree to an extended mediation period; (2) In the event that mediation does not lead to a resolution of the dispute then at the request of any Party, the Parties shall submit the dispute to binding arbitration before an arbitration service located in Broward County, Florida to be selected by lot, from six alternatives to be provided, two by the Affiliate, two by AmeriNet and two by Lorilei. (3) (a) Expenses of mediation shall be borne equally by the Parties, if successful. (b) Expenses of mediation, if unsuccessful and of arbitration shall be borne by the Party or Parties against whom the arbitration decision is rendered. Page 178 (c) If the terms of the arbitral award do not establish a prevailing Party, then the expenses of unsuccessful mediation and arbitration shall be borne equally by the Parties involved. 11.16 Benefit of Agreement. The terms and provisions of this Agreement shall be binding upon and inure to the benefit of the Parties, their successors, assigns, personal representatives, estate, heirs and legatees but are not intended to confer upon any other person any rights or remedies hereunder. 11.17 Counterparts. (A) This Agreement may be executed in any number of counterparts. (B) All executed counterparts shall constitute one Agreement notwithstanding that all signatories are not signatories to the original or the same counterpart. (C) Execution by exchange of facsimile transmission shall be deemed legally sufficient to bind the signatory; however, the Parties shall, for aesthetic purposes, prepare a fully executed original version of this Agreement which shall be the document filed with the Commission. 11.18 License. (A) This form of agreement is the property of Yankees and has been customized for this transaction with the consent of Yankees by George Franjola, Esquire. (B) The use of this form of agreement by the Parties is authorized hereby solely for purposes of this transaction. (C) The use of this form of agreement or of any derivation thereof without Yankees' prior written permission is prohibited. 11.19 Information Concerning the Affiliate's Share Ownership. (A) Shares beneficially owned: (1) 111 shares of Lorilei Common Stock; and (2) 0 shares of Lorilei Common Stock subject to options, warrants or other rights. Page 179 Execution Pages In Witness Whereof, the Affiliate, AmeriNet, and Lorilei have caused this Agreement to be executed by themselves or their duly authorized respective officers, all as of the last date set forth below: Signed, sealed and delivered In Our Presence: The Affiliate - ---------------------------- /s/ Gerald R. Cunningham /s/ Leigh A. Cunningham - ---------------------------- ------------------------ Signature Dated: May 11, 2000 ------------------------ Print name AmeriNet Group.com, Inc. - ---------------------------- ____________________________ By: /s/ Michael H. Jordan ________________________ Michael H. Jordan, President (Corporate Seal) Attest: /s/ Vanessa H. Lindsey ________________________ Vanessa H. Lindsey, Secretary Dated: May 11, 2000 Lorilei Communications, Inc. - ---------------------------- ____________________________ By: /s/ Gerald R. Cunningham ______________________________ Gerald R. Cunningham, President (Corporate Seal) Attest: /s/ Leigh A. Cunningham ______________________________ Leigh A. Cunningham, Secretary Dated: May 11, 2000 Page 180 Exhibit "A" Irrevocable Proxy The undersigned stockholder of Lorilei International, Inc., a Florida corporation ("Lorilei"), hereby irrevocably to the extent provided by Florida law) appoints the directors on the Board of Directors of AmeriNet, Group.com, Inc., a Delaware corporation ("AmeriNet"), and each of them, as the sole and exclusive attorneys and proxies of the undersigned, with full power of substitution and resubstitution, to the full extent of the undersigned's rights with respect to the shares of capital stock of Lorilei beneficially owned by the undersigned, which shares are listed on the final page of this Proxy (the "Shares"), and any and all other shares or securities issued or issuable in respect thereof on or after the date hereof, until such time as that certain Reorganization dated February 28, 2000"), among AmeriNet, and Lorilei, shall be terminated in accordance with its terms or the Reorganization Agreement is effective. Terms: 1. Upon the execution hereof, all prior proxies given by the undersigned with respect to the Shares and any and all other shares or securities issued or issuable in respect thereof on or after the date hereof are hereby revoked and no subsequent proxies will be given. 2. This proxy is irrevocable (to the extent provided by Florida law), is granted pursuant to the Affiliate Agreement dated as of May 11, 2000, between AmeriNet, Lorilei, and the undersigned stockholder, (the "Affiliate Agreement"), and is granted in consideration of AmeriNet entering into the Reorganization Agreement. 3. The attorneys and proxies named above will be empowered at any time prior to termination of the Reorganization Agreement in accordance with Article VIII thereof to exercise all voting and other rights (including, without limitation, the power to execute and deliver written consents with respect to the Shares) of the undersigned at every annual, special or adjourned meeting of Lorilei's stockholders, and in every written consent in lieu of such a meeting, or otherwise, in favor of approval of the Reorganization Agreement and any matter that could reasonably be expected to facilitate the Reorganization, and against any proposal made in opposition to or competition with the consummation of the Reorganization and against any merger, consolidation, sale of assets, reorganization or recapitalization of Lorilei with any party other than AmeriNet and its affiliates and against any liquidation or winding up of Lorilei. 4. The attorneys and proxies named above may only exercise this proxy to vote the Shares subject hereto at any time prior to termination of the Reorganization Agreement in accordance with Article VIII thereof at every annual, special or adjourned meeting of the stockholders of Lorilei and in every written consent in lieu of such meeting, in favor of approval of the Reorganization Agreement and any matter that could reasonably be expected to facilitate the Reorganization, and against any merger, consolidation, sale of assets, reorganization or recapitalization of Lorilei with any party other than AmeriNet and its affiliates, and against any liquidation or winding up of Lorilei, and may not exercise this proxy on any other matter. Page 181 5. The undersigned stockholder may vote the Shares on all other matters. 6. Any obligation of the undersigned hereunder shall be binding upon the successors and assigns of the undersigned. 7. This proxy is irrevocable and coupled with an interest. 8. Stockholder Data: A. Full name: Gerald R. Cunningham Leigh A. Cunningham _________________ _______________ _____________ First Middle Last B. Tax identification number: Social Security number is not listed due to privacy issues. C. Domicile Address: 18498 NW 24th Ave. Citra, FL 32113 D. Telephone, fax and e-mail: (352) 595-3834 (352) 595-0807 gerry@callthefirm.com E. Shares Information: (1) Number of Lorilei Shares owned or controlled as to voting matters: 11 Signed, sealed and delivered In Our Presence: Stockholder: - ---------------------------- /s/ Gerald R. Cunningham /s/ Leigh A. Cunningham ____________________________ By: _________________________ Dated: May 11, 2000 Page 182 Exhibit to Reorganization Agreement by and among AmeriNet Group.com, Inc., a Delaware Corporation and Lorilei Communications, Inc., a Florida Corporation EXHIBIT 5.12 COPIES OF CONTRACTS, AGREEMENTS & COMMITMENTS Attached to this exhibit are the supporting document for the above referenced for. 1. Non Compete Agreements 2. Talent Releases 3. New Position Offer for Sheryl Wolf 4. Employment Agreement for Gerald R. Cunningham 5. Employment Agreement for Leigh A. Cunningham I attest the information contained herein is true and accurate to the best of my knowledge /s/ Gerald R. Cunningham - ---------------------------------- Gerald R. Cunningham, President Lorilei Communications, Inc. /s/ Leigh A. Cunningham - ---------------------------------- Leigh A. Cunningham, Vice President Sales Lorilei Communications, Inc. Page 183 NON-COMPETITION COVENANT THIS AGREEMENT, dated this day of day of , 2000 by and between Lorilei Communications, Inc. d/b/a THE FIRM MULTIMEDIA d/b/a OCALA NEWS TONIGHT (hereinafter referred to as "Employer") and (hereinafter referred to as "Employee"). WITNESSETH: WHEREAS, Employer desires to employ Employee; and WHEREAS, Employee has agreed to be employed by Employer. NOW, THEREFORE, in consideration of the employment by the Employer, and the sum of $10, the Employee agrees to the following conditions: 1. DURING TERM OF AGREEMENT. Employee shall not conduct or operate, directly or indirectly, or be employed by or be associated in any way with any advertising, marketing, public relations, video production, or business other than that of the Employer, furnish any information as to Employer's methods of operation, trade practices, procedures, training, advertising, publicity or promotional ideas, or any other information relative to the Employer's business. Employee shall comply with the terms, conditions and procedures of employment as determined by the Employer, and shall abide by all governmental laws or regulations governing the Employer's business. 2. UPON TERMINATION. Employee consents and agrees that his employment is terminable with or without cause and notice by Employer. Employee agrees that upon termination Employee shall return to Employer all customer advertising lists, equipment, tapes, manuals, materials and property belonging to Employer which is in the Employee's possession. Employee also agrees not to divulge any information regarding the Employer's use and trade practices, methods of procedure, training, advertising, publicity or promotional ideas, or any other information relative to the Employer's business. 3. AFTER TERMINATION OF AGREEMENT. The employee acknowledges the name "THE FIRM MULTIMEDIA", the business reputation associated with it, the methods and technique employed by employer, the training instruction to be provided under the agreement, the knowledge of the services and methods of employer, and the opportunities, associations, and experiences established and acquired by the employee under the agreement and as an employee of the employer are of considerable value. For a period of six (6) months following the termination of this agreement, employee shall not perform in any capacity the same or similar function or job which was performed for employer in a 75 mile radius of employer's business location in Ocala, Florida, nor shall employee engage in work on any project or contract for the purpose of business solicitation any client in any market currently doing business with THE FIRM Multimedia. This covenant not to compete is limited to the advertising, marketing, video production (including television and cable broadcasting) and public relations industries. MISCELLANEOUS PROVISIONS. A. The parties hereto recognize there is no adequate remedy at law if the employee accepts other employment in violation of this agreement. The employee, therefore, consents the employer shall be entitled to injunctive relief in any court of competent jurisdiction if the employee violates the non-compete or non-disclosure covenants in this agreement. B. All the terms, conditions, and provisions of this agreement, including the restrictive covenant, have been fully explained to employee, who fully understands and agrees to them as evidenced by the execution of his signature below. C. The venue for any litigation to enforce the terms of employment of this agreement, shall be Marion County, Florida. D. In the event of litigation to enforce this agreement, the prevailing party shall be entitled to an award of attorneys fees and costs from the non-prevailing party. E. This agreement may only be modified by writing signed by both parties. No oral representations have been made by either party which would conflict with this agreement. EMPLOYER: GERALD CUNNINGHAM, PRESIDENT Lorilei Communications, Inc. d/b/a THE FIRM MULTIMEDIA d/b/a OCALA NEWS TONIGHT WITNESS: EMPLOYEE: Page 184 Talent Release Date: _____________________ Production: ________________________________________________ I do hereby give, grant, assign, transfer, release and set over, forever, to you, your successors and assigns. a) All rights of every kind and character whatsoever in and to all work and results thereof I have created and done for you in the production of the above subjects, including all literary, dramatic, dramatic-musical and motion picture creations, ideas, compositions, arrangements, drawings, paintings and devices (whether copyrightable or otherwise); b) All works, acts, plays, poses, translations, gags, continuities, synopses, scenarios or appearances I have heretofore done or given to you concerning the above production; c) The right to use all or any part of the foregoing as, if and in the manner you desire, as well as all copies, versions, reproductions, duplications, recordings, interpretations and prints of the same, including (but not limited to) the right to reproduce in any manner whatsoever any recordings made by you of my voice and any musical, instrumental or other sound or sound effects produced by me. d) Without limiting the foregoing and in addition thereto, I hereby further grant to you, your successors and assigns, the right to use my name and/or photograph, still or moving, in any manner you desire and/or the right to reproduce and record my voice and other sound effects made by me and I hereby consent to the use of my name and/or said photographs, likeness and reproduction thereof and/or the recordations and reproductions of my voice and other sound effects in portraits, pictures, photographs, motion pictures, on television and by any other means, method and device now or hereafter known, discovered or invented and without limiting the generality of the foregoing, to record, amplify and reproduce my voice and/or musical, instrumental or other sound effects made by me, completely or in part, for any advertising, publication, promotion or any commercial or informative purpose whatsoever. I further grant to you the right to substitute a double in my place to simulate my voice. I hereby represent that I am over the age of twenty-one years and attest that all statements made by me are true and correct. Signed:__________________________________________________________ Print Name and Address:_________________________________________________________ _____________________________________________________________ _____________________________________________________________ Witness:_________________________________________________________ Print Name:___________________________________________________________ Lorilei Communications, Inc. d/b/a The Firm Multimedia d/b/a Ocala News Tonight Employee Executed Agreements Employee Non-Compete Talent Release 1. Bryan Allen X X 2. Richard Andrews X X 3. Kim Avery X 4. Melissa Barfield X X 5. Bountham Chanthalansy X 6. ***Gerry Cunningham 7. ***Leigh Cunningham 8. Stacey Dolezal X X 9. William Fraker X X 10. Patricia Gale X X 11. **Jeanne Harding 12. Leslie Kinney X X 13. Mary Lee X X 14. Dustin McCollum X 15. Nadyne McDonald X X 16. John Miller X X 17. *Debbie Tilton 18. Penny Tomberlin X X 19. Brian Trahan X X 20. Lawrence Uelmen X 21. Kim Ullery X X 22. Sheryl Wolf X X Note: An X indicates that the agreement is executed by the employee. * Debbie Tilton is a child care provider to the son of officers. She works from her home. ** Jeanne Harding is a child care provider to son of officers. She works from her home. She also cleans the office on Sundays. *** Leigh and Gerry Cunningham are officers and shareholders of the company. 185 February 16, 2000 To: Sheryl Wolf Fr: Leigh Cunningham Re: New position offer Position: General Sales Manager--Ocala News Tonight Sheryl: We are pleased you have chosen to accept the position of General Sales Manager for Ocala News Tonight, effective February 16, 2000. Below is an outline of what the position entails and your compensation plan. Market Trading Area: Central Florida to include Marion County, Citrus County, Lake County, Sumter County, Hernando County, Pasco County, etc. Position/Duties: General Sales Manager Responsible for recruiting, hiring, training and managing all sales reps as well as personal sales. Responsible for achieving station sales goals and personal sales goals as outlined in Projected Sales, Y2K. As part of this agreement, you will be required to sign and honor a 6 month "non-compete" agreement. Office Goals by aver: 1 st quarter, 2000 (January-March): $ 80,000 2nd quarter, 2000 (April-June): $ 90,000 3rd quarter, 2000 (July-September): $ 90,000 4th quarter, 2000 (October-December: $ 120,000 Total sales goal, Year 2000: $380,000 Sales Duties Prospecting for new business, including telemarketing and appointment setting, need analysis, creating and presenting proposals, negotiating deals, closing sales, servicing accounts, and communicating with project coordinator and production staff in Ocala. Attending sales meeting in Ocala office. Assisting with collections for all accounts. 186 Management duties: Recruit, hire, train, and manage sales people. Includes reporting progress to corporate on a weekly basis, reaching sales goals, creating packages, negotiating promotional and trade relationships, assisting sales people on four legged calls, setting individual goals and monitoring sales process. We will provide you an office in Ocala and all required support staff. The way I would like to structure additional sales people is as follows: Once you are covering your monthly draw (which would require a monthly base of $12,000 in sales). I would like you to add a sales person. When they cover their draw, add another, and so on until you feel you have a good team to cover the market. Each rep you hire would work directly for you. Compensation Plan $21,000 annual base draw against commission 15% commission on gross profit of personal collected sales (above draw amount) 2% override on all monthly collections up to $30,000 for Ocala News Tonight sales reps based on gross profit (excluding your personal account collections). 4% override on all monthly collections over $30,000 for Ocala News Tonight based on gross profit (excluding your personal account collections). Bonus program: 1 st quarter, 2000: Collected quarterly sales exceeding $ 96,000: $1000 bonus Collected quarterly sales exceeding $108,000: $1500 bonus 2nd quarter, 2000: Collected quarterly sales exceeding $108,000: $1000 bonus Collected quarterly sales exceeding $120,000: $1500 bonus 3rd quarter, 2000: Collected quarterly sales exceeding $108,000: $1000 bonus Collected quarterly sales exceeding $120,000: $1500 bonus 4th quarter, 2000: Collected quarterly sales exceeding $144,000: $1000 bonus Collected quarterly sales exceeding $156,000: $1500 bonus Incentive Program If you achieve your office's quarterly goal for two quarters in a row, you will be provided a company car (not to exceed a monthly payment of $400.). However, if you fail to reach your quarterly goal two quarters in a row, the monthly payment amount of the car (not to exceed $400. per month) will be deducted from your compensation until such time as you achieve quarterly goals for two consecutive quarters. 187 Gas card ($200.00 per month allowance) Cell phone ($75.00 monthly allowance) Notebook computer for presentations Reasonable reimbursed expenses (receipt must be provided to business office) Up to $85.00 per month paid toward health insurance One week paid vacation after one year Two weeks paid vacation after three years (and each year thereafter) Five paid personal/sick days per year /s/ Sheryl Wolf /s/ Leigh Cunningham: Date: 2/18/00 Page 188 Executive's Employment Agreement THIS EXECUTIVE'S EMPLOYMENT AGREEMENT (the "Agreement") is entered into by and among Gerald R. Cunningham, an individual residing in the State of Florida (the "Executive"); Lorilei Communications, Inc., a Florida corporation ("Lorilei"; Lorilei and the Executive being sometimes hereinafter collectively to as the "Parties" or generically as a "Party". Preamble: WHEREAS, Lorilei's board of directors is of the opinion that in conjunction with effectuation of Lorilei's future plans it must memorialize, confirm and assure itself of the continuing the services of the Executive, who currently serves as a member of Lorilei's board of directors and as its president and chief executive officer; and WHEREAS, the Executive is thoroughly knowledgeable with all aspects of Lorilei's operations and plans; and WHEREAS, the Executive is agreeable to serving as a member of Lorilei's board of directors and as its president and chief executive officer, on the terms and conditions hereinafter set forth: NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements hereby exchanged, as well as of the sum of Ten ($10.00) Dollars and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows: Witnesseth: Article One Term, Renewals, Earlier Termination 1.1 Term. Subject to the provisions set forth herein, the term of the Executive's employment hereunder shall be deemed to commence on the date of this Agreement's execution by all of the Parties and shall continue until June 30, 2001. 1.2 Renewals. (a) This Agreement shall be renewed automatically, after expiration of the original term, on a continuing annual basis, unless the Party wishing not to renew this Agreement provides the other Party with written notice of its election not to renew ("Termination Election Notice") on or before the 30th day prior to termination of the then current term. (b) Notwithstanding the foregoing, the Executive may not elect not to renew this Agreement until after June 30, 2005, unless Lorilei has defaulted in its obligations under this Agreement or termination is called for pursuant to other specific provisions hereof. Page 189 1.3 Earlier Termination. (a) For Cause: Lorilei shall have the right to terminate this Agreement prior to the expiration of its Term or of any renewals thereof, subject to the provisions of Sections 1.4 and 1.5, for the following reasons: (1) Lorilei may terminate the Executive's employment under this Agreement at any time for cause. (2) Such termination shall be evidenced by written notice thereof to the Executive, which notice shall specify the cause for termination. (3) For purposes hereof, the term "cause" shall mean: (A) The inability of the Executive, through sickness or other incapacity, to discharge his duties under this Agreement for 30 or more consecutive days or for a total of 60 or more days in a period of twelve consecutive months; (B) The failure of the Executive to follow the directions of Lorilei's board of directors; (C) Dishonesty; theft; or conviction of a crime involving moral turpitude; (D) Material default in the performance of the Executive's obligations, services or duties required under this Agreement (other than due to illness) or material breach of any provision of this Agreement, which default or breach has continued for ten days after written notice of such default or breach. (b) Deterioration or Discontinuance of Business: (1) In the event that Lorilei experiences material business reversals or fails to meet the operational criteria reflected in its projections or business plans, then, subject to the provisions of Section 1.4, at the option of Lorilei, this Agreement shall terminate as of a date selected by Lorilei with the same force and effect as if such date was the date originally set as the termination date hereof. (2) In the event that Lorilei discontinues operating its business, this Agreement shall terminate as of the last day of the month on which it ceases operation with the same force and effect as if such last day of the month were originally set as the termination date hereof; provided, however, that a reorganization of Lorilei shall not be deemed a termination of its business. (c) Death: This Agreement shall terminate immediately on the death of the Executive; however, all accrued compensation at such time shall be promptly paid to the Executive's estate. (d) Material Default by Lorilei: In the event of a material default by Lorilei in its obligations to the Executive pursuant to this Agreement that is not attributable to the actions or inaction of the Executive, then, the Executive shall provide Lorilei and its principal stockholder of such default, in writing, specifying the nature of the default and the curative action required, and if such default is not cured within thirty days afer Lorilei's principal stockholder receives the subject notice, then, during the ensuing ten day period, the Executive may terminate this Agreement; provided, however, that if the Executive does not terminate this Agreement, the default will be deemed waived. Page 190 1.4 Severance Payments and Alternatives to Termination In the event this Agreement is terminated by Lorilei for reasons other than for cause as described in Section 1.3(b) above, the Executive shall be entitled to either thirty days prior written notice or to a severance payment in a sum equal to the salary that would have been paid had 30 days prior written notice been provided; provided, however, that in lieu of termination, Lorilei may offer to continue this Agreement under modified compensation arrangements, if such arrangements are reflected in the written notice and accepted by the Executive prior to the end of the 30 day notice period. 1.5 Final Settlement. Upon termination of this Agreement and payment of all amounts due to the Executive hereunder, the Executive or his representative shall execute and deliver to the terminating entity on a form prepared by Lorilei, a receipt for such sums and a release of all claims, except such claims as may have been submitted pursuant to the terms of this Agreement and which remain unpaid, and, shall forthwith tender to Lorilei all records, manuals and written procedures, as may be desired by it for the continued conduct of its business. Article Two Scope of Employment 2.1 Retention. Lorilei hereby hires the Executive and the Executive hereby accepts such employment, in accordance with the terms, provisions and conditions of this Agreement. 2.2 General Description of Duties. (a) The Executive shall be employed as the president and chief executive officer of Lorilei and perform the duties generally associated with the position of president and chief executive officer thereof. (b) Without limiting the generality of the foregoing, the Executive shall have exclusive control of all aspects of Lorilei's day to day operations, subject only to compliance with the directions of Lorilei's stockholder, its board of directors, applicable laws and fiduciary obligations. (c) The Executive covenants to perform the employment duties called for hereby in good faith, devoting substantially all business time, energies and abilities to the proper and efficient management of the business of Lorilei. 2.3 Status. (a) Throughout the term of this Agreement, the Executive shall serve as a member of the board of directors of Lorilei and as its president and chief executive officer. (b) In the event that the Executive is not elected to such positions, then, at the option of the Executive, this Agreement may be deemed terminated effective as of the earliest time that it can be reasonably determined that such election will not take place, provided that written notice of such election is provided to Lorilei within 30 days after it failed to elect the Executive to the required office. Page 191 2.4 Exclusivity. All of the Executive's business time shall be devoted exclusively to the affairs of Lorilei. Article Three Compensation 3.1 Compensation. As consideration for the Executive's services to Lorilei the Executive shall be entitled to: (a) (1) An annual salary in the aggregate gross sum of $60,000 (the "Base Salary"); plus (2) An annual bonus equal to 2.5 of Lorilei's net pre tax profits, payable within 30 days after an annual audit of Lorilei (or of Lorilei's parent corporation) is completed, permitting determination thereof (the "Annual Bonus"). (b) Incentive stock options complying with the requirements of Section 422 of the Internal Revenue Code of 1986, as amended, or successor provisions thereto (the "Options"), permitting the Executive to purchase up to 167,689 of the 335,378 shares of the common stock of AmeriNet Group.com, Inc., a publicly held Delaware corporation with a class of securities registered under Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which holds of all of Lorilei's capital stock and other securities ("AmeriNet"), that AmeriNet reserved for issuance to Lorilei employees in conjunction with the Reorganization Agreement pursuant to which AmeriNet acquired all of Lorilei's securities (the "Executive's Option Shares"), on the following terms and subject to the following conditions: (1) The Executive's rights to the Options will vest on an annual basis, subject to Lorilei's having complied with its obligations under the Reorganization Agreement, the Executive having complied with his obligations under this Agreements and Lorilei's having attained the following EBITDA: (a) If Lorilei attains EBITDA of at least $500,000 during the period starting on July 1, 2000 and ending on June 30, 2001, then the first 33,988 shares of AmeriNet's common stock reserved for issuance in the event of exercise of the subject incentive stock options will vest; (b) If Lorilei attains EBITDA of at least $1,400,000 during the period starting on July 1, 2000 and ending on June 30, 2002, then all rights to 89,885 (including the 33,988 shares vested, if any, on June 30, 2001) of the shares of AmeriNet's Common stock reserved for issuance in the event of exercise of the subject incentive stock options will vest; and (c) If Lorilei attains EBITDA of at least $2,900,000 during the period starting on July 1, 2000 and ending on June 30, 2003, then all rights to all of the 167,689 shares (including the shares vested, if any, on June 30, 2001 and June 30, 2002) of AmeriNet's Common stock reserved for issuance in the event of exercise of the subject incentive stock options will vest. Page 192 (2) All rights to the incentive stock options that have not vested as of July 1, 2003 will expire on such date, and no further rights of any kind thereto or to the underlying shares of AmeriNet's common stock reserved for such purpose will exist thereafter, the reservation therefor terminating on such date. (3) The vested Options will be exercisable during the three fiscal year period after they vest at a price of $1.3125 per share, provided that as required by Code Section 422, all rights to or under the Options will expire within 90 days after termination of the Executive's employment by Lorilei. (4) All other terms pertaining to the Options are hereby incorporated by reference from those contained in AmeriNet's Non-Qualified Stock Option & Stock Incentive Plan, Effective as of January 1 , 2000 filed by AmeriNet with the United States Securities and Exchange Commission (the "Commission"), a copy of which is annexed hereto and made a part hereof as exhibit 3.1(B)(2), except to the extent that they would be inconsistent with the specific terms in this Section 3.1 unless such inconsistency is required by the provisions of Code Section 422. 3.2 Benefits. During the term of this Agreement, the Executive shall also be entitled to the following benefits: (a) Two weeks paid vacation per year. (b) Automobile, insurance and child care benefits not to exceed $12,000 per fiscal year; and (c) All other benefits of employment generally available to all of Lorilei's employees, provided that such benefits have been approved by Lorilei's stockholders and are not duplicative of those otherwise reflected in this Agreement. 3.3 Indemnification. Lorilei will defend, indemnify and hold the Executive harmless from all liabilities, suits, judgments, fines, penalties or disabilities, including expenses associated directly, therewith (e.g. legal fees, court costs, investigative costs, witness fees, etc.) resulting from any reasonable actions taken by him in good faith on behalf of Lorilei, its affiliates or for other persons or entities at the request of the board of directors of Lorilei, to the fullest extent legally permitted, and in conjunction therewith, shall assure that all required expenditures are made in a manner making it unnecessary for the Executive to incur any out of pocket expenses; provided, however, that the Executive permits the majority stockholders of Lorilei to select and supervise all personnel involved in such defense and that the Executive waive any conflicts of interest that such personnel may have as a result of also representing Lorilei, its stockholders or other personnel and agrees to hold them harmless from any matters involving such representation, except such as involve fraud or bad faith. Page 193 Article Four Special Covenants 4.1 Confidentiality, Non-Circumvention and Non-Competition. During the term of this Agreement, all renewals thereof and for a period of two years after its termination, the Executive hereby irrevocably agrees to be bound by the following restrictions, which constitute a material inducement for Lorilei's entry into this Agreement and for AmeriNet's agreement to provide shares of its common stock as the securities underlying the Options: (a) Because the Executive will be developing for Lorilei, making use of, acquiring and/or adding to, confidential information of special and unique nature and value relating to such matters as Lorilei's trade secrets, systems, procedures, manuals, confidential reports, personnel resources, strategic and tactical plans, advisors, clients, investors and funders; as material inducement to the entry into this Agreement by Lorilei, the Executive hereby covenants and agrees not to personally use, divulge or disclose, for any purpose whatsoever, directly or indirectly, any of such confidential information during the term of this Agreement, any renewals thereof, and for a period of two years after its termination. (b) The Executive hereby covenants and agrees to be bound as a fiduciary of Lorilei, as if the Executive were a partner in a partnership bound by the partnership opportunities doctrine, as such concept has been judicially and legislatively developed in the State of Florida, and consequently, without the prior written consent of Lorilei, on a specific, case by case basis, the Executive shall not, among other things, directly or indirectly: (1) Engage in any activities, whether or not for profit, competitive with Lorilei's business. (2) Solicit or accept any person providing services to Lorilei, whether as an employee, consultant or independent contractor, for employment or provision of services. (3) Induce any client or customer of Lorilei to cease doing business with Lorilei or to engage in business with any person engaged in business activities that compete with Lorilei's business. (4) Divert any business opportunity within the general scope of Lorilei's business and business capacity, to any other person or entity. 4.2 Special Remedies. In view of the irreparable harm and damage which would undoubtedly occur to Lorilei as a result of a breach by the Executive of the covenants or agreements contained in this Article Four, and in view of the lack of an adequate remedy at law to protect Lorilei's interests, the Executive hereby covenants and agrees that Lorilei shall have the following additional rights and remedies in the event of a breach hereof: (a) In addition to and not in limitation of any other rights, remedies or damages available to Lorilei, whether at law or in equity, it shall be entitled to a permanent injunction in order to prevent or to restrain any such breach by the Executive, or by the Executive's partners, agents, representatives, servants, employers, employees, affiliates and/or any and all persons directly or indirectly acting for or with him and the Executive hereby consents to the issuance of such a permanent injunction; and Page 194 (b) Because it is impossible to ascertain or estimate the entire or exact cost, damage or injury which Lorilei may sustain prior to the effective enforcement of such injunction, the Executive hereby covenants and agrees to pay over to Lorilei, in the event he violates the covenants and agreements contained in Section 4.2 hereof, the greater of: (1) Any payment or compensation of any kind received by the Executive or by persons affiliated with or acting for or with the Executive, because of such violation before the issuance of such injunction, or (2) The sum of One Thousand ($1,000.00) Dollars per violation, which sum shall be liquidated damages, and not a penalty, for the injuries suffered by Lorilei as a result of such violation, the Parties hereto agreeing that such liquidated damages are not intended as the exclusive remedy available to Lorilei for any breach of the covenants and agreements contained in this Article Four, prior to the issuance of such injunction, the Parties recognizing that the only adequate remedy to protect Lorilei from the injury caused by such breaches would be injunctive relief. 4.3 Cumulative Remedies. The Executive hereby irrevocably agrees that the remedies described in Section 4.2 shall be in addition to, and not in limitation of, any of the rights or remedies to which Lorilei is or may be entitled to, whether at law or in equity, under or pursuant to this Agreement. 4.4 Acknowledgment of Reasonableness. (a) The Executive hereby represents, warrants and acknowledges that having carefully read and considered the provisions of this Article Four, the restrictions set forth herein are fair and reasonable and are reasonably required for the protection of the interests of Lorilei, its officers, directors and other employees; consequently, in the event that any of the above-described restrictions shall be held unenforceable by any court of competent jurisdiction, the Executive hereby covenants, agrees and directs such court to substitute a reasonable judicially enforceable limitation in place of any limitation deemed unenforceable and, the Executive hereby covenants and agrees that if so modified, the covenants contained in this Article Four shall be as fully enforceable as if they had been set forth herein directly by the Parties. (b) In determining the nature of this limitation, the Executive hereby acknowledges, covenants and agrees that it is the intent of the Parties that a court adjudicating a dispute arising hereunder recognize that the Parties desire that these covenants not to circumvent, disclose or compete be imposed and maintained to the greatest extent possible. 4.5 Unauthorized Acts. The Executive hereby covenants and agrees not do any act or incur any obligation on behalf of Lorilei except as authorized by its board of directors or by its stockholders pursuant to duly adopted stockholder action or reasonably inferred therefrom. Page 195 Article Five Miscellaneous 5.1 Notices. (a) (1) All notices, demands or other communications hereunder shall be in writing, and unless otherwise provided, shall be deemed to have been duly given on the first business day after mailing by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: To the Executive: Gerald R. Cunningham 18498 Northwest 24th Avenue; Citra, Florida 32113 Telephone (352) 595-3834; Fax (352) 595-0807; e-mail leighc@callthefirm.com; To Lorilei: Lorilei Communications, Inc. Post Office Box 77078; Ocala, Florida 34477 Attention: Gerald R. Cunningham, President Telephone (352) 861-1350; Fax (352) 861-1339; e-mail thefirm@callthefirm.com; with a copy to Bruce Brashear, Esquire 920 Northwest 8th Avenue, Suite A; Gainesville, Florida 32601 Telephone (352) 336-0800; Fax (352) 336-0505; and,e-mail bbrashear@nflalaw.com; In each case with copies to AmeriNet Group.com, Inc. Crystal Corporate Center; 2500 North Military Trail, Suite 225-C; Boca Raton, Florida 33431 Attention: Michael Jordan, President Telephone (561) 998-3435, Fax (561) 998-4635; and, e-mail www.michael@amerinetgroup.com; and George Franjola, Esquire; General Counsel AmeriNet Group.com, Inc. 1941 Southeast 51st Terrace; Ocala, Florida 34471 Telephone (352) 694-9182, Fax (352) 694-1325; and, e-mail, tyclegal@atlantic.net. (2) Copies of notices will also be provided to such other address or to such other person as any Party shall designate to the other for such purpose in the manner hereinafter set forth. (b) (1) The Parties acknowledge that The Yankee Companies, Inc., a Florida corporation ("Yankees") has acted as scrivener for the Parties in this transaction and that Yankees is neither a law firm nor an agency subject to any professional regulation or oversight. (2) Yankees has advised all of the Parties to retain independent legal and accounting counsel to review this Agreement on their behalf since it cannot provide any Party with legal advice. (3) This Agreement shall not be interpreted more or less strictly against any Party based on its authorship. Page 196 5.2 Amendment. (a) No modification, waiver, amendment, discharge or change of this Agreement shall be valid unless the same is in writing and signed by the Party against which the enforcement of said modification, waiver, amendment, discharge or change is sought. (b) This Agreement may not be modified without the consent of a majority in interest of Lorilei's AmeriNet's stockholders. 5.3 Merger. (a) This instrument contains all of the understandings and agreements of the Parties with respect to the subject matter discussed herein. (b) All prior agreements whether written or oral, are merged herein and shall be of no force or effect. 5.4 Survival. The several representations, warranties and covenants of the Parties contained herein shall survive the execution hereof and shall be effective regardless of any investigation that may have been made or may be made by or on behalf of any Party. 5.5 Severability. If any provision or any portion of any provision of this Agreement, or the application of such provision or any portion thereof to any person or circumstance shall be held invalid or unenforceable, the remaining portions of such provision and the remaining provisions of this Agreement or the application of such provision or portion of such provision as is held invalid or unenforceable to persons or circumstances other than those to which it is held invalid or unenforceable, shall not be effected thereby. 5.6 Governing Law and Venue. This Agreement shall be construed in accordance with the laws of the State of Florida but any proceeding arising between the Parties in any matter pertaining or related to this Agreement shall, to the extent permitted by law, be held in Broward County, Florida. 5.7 Litigation. (a) In any action between the Parties to enforce any of the terms of this Agreement or any other matter arising from this Agreement, the prevailing Party shall be entitled to recover its costs and expenses, including reasonable attorneys' fees up to and including all negotiations, trials and appeals, whether or not litigation is initiated. (b) In the event of any dispute arising under this Agreement, or the negotiation thereof or inducements to enter into the Agreement, the dispute shall, at the request of any Party, be exclusively resolved through the following procedures: (1) (A) First, the issue shall be submitted to mediation before a mediation service in Broward County, Florida, to be selected by lot from six alternatives to be provided, two by Lorilei's majority stockholder, two by Lorilei and two by the Executive. Page 197 (B) The mediation efforts shall be concluded within ten business days after their in itiation unless the Parties unanimously agree to an extended mediation period; (2) In the event that mediation does not lead to a resolution of the dispute then at the request of any Party, the Parties shall submit the dispute to binding arbitration before an arbitration service located in Broward County, Florida to be selected by lot, from six alternatives to be provided,, two by Lorilei's majority stockholder, two by Lorilei and two by the Executive. (3) (A) Expenses of mediation shall be borne by Lorilei, if successful. (B) Expenses of mediation, if unsuccessful and of arbitration shall be borne by the Party or Parties against whom the arbitration decision is rendered. (C) If the terms of the arbitral award do not establish a prevailing Party, then the expenses of unsuccessful mediation and arbitration shall be borne equally by the Parties. 5.8 Benefit of Agreement. (a) This Agreement may not be assigned by the Executive without the prior written consent of Lorilei. (b) Subject to the restrictions on transferability and assignment contained herein, the terms and provisions of this Agreement shall be binding upon and inure to the benefit of the Parties, their successors, assigns, personal representative, estate, heirs and legatees. 5.9 Captions. The captions in this Agreement are for convenience and reference only and in no way define, describe, extend or limit the scope of this Agreement or the intent of any provisions hereof. 5.10 Number and Gender. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the Party or Parties, or their personal representatives, successors and assigns may require. 5.11 Further Assurances. The Parties hereby agree to do, execute, acknowledge and deliver or cause to be done, executed or acknowledged or delivered and to perform all such acts and deliver all such deeds, assignments, transfers, conveyances, powers of attorney, assurances, recipes, records and other documents, as may, from time to time, be required herein to effect the intent and purposes of this Agreement. 5.12 Status. Nothing in this Agreement shall be construed or shall constitute a partnership, joint venture, agency, or lessor-lessee relationship; but, rather, the relationship established hereby is that of employer-employee in Lorilei. Page 198 5.13 Counterparts. (a) This Agreement may be executed in any number of counterparts. (b) Execution by exchange of facsimile transmission shall be deemed legally sufficient to bind the signatory; however, the Parties shall, for aesthetic purposes, prepare a fully executed original version of this Agreement, which shall be the document filed with the Securities and Exchange Commission. 5.14 License. (a) This Agreement is the property of Yankees and the use hereof by the Parties is authorized hereby solely for purposes of this transaction. (b) The use of this form of agreement or of any derivation thereof without Yankees' prior written permission is prohibited. In Witness Whereof, the Parties have executed this Agreement, effective as of the last date set forth below. Signed, Sealed & Delivered In Our Presence The Executive - -------------------------- /s/ Gerald R. Cunningham - -------------------------- -------------------------- Gerald R. Cunningham Dated: May 11, 2000 Lorilei Communications, Inc. a Florida corporation. - -------------------------- __________________________ By: /s/ Gerald R. Cunningham ___________________________ Gerald R. Cunningham, President (CORPORATE SEAL) Attest: /s/ Leigh A. Cunningham __________________________ Leigh A. Cunningham, Vice President & Secretary Dated: May 11, 2000 Page 199 Executive's Employment Agreement THIS EXECUTIVE'S EMPLOYMENT AGREEMENT (the "Agreement") is entered into by and among Leigh A. Cunningham, an individual residing in the State of Florida (the "Executive"); Lorilei Communications, Inc., a Florida corporation ("Lorilei"; Lorilei and the Executive being sometimes hereinafter collectively to as the "Parties" or generically as a "Party". Preamble: WHEREAS, Lorilei's board of directors is of the opinion that in conjunction with effectuation of Lorilei's future plans it must memorialize, confirm and assure itself of the continuing the services of the Executive, who currently serves as a member of Lorilei's board of directors and as its president and chief executive officer; and WHEREAS, the Executive is thoroughly knowledgeable with all aspects of Lorilei's operations and plans; and WHEREAS, the Executive is agreeable to serving as a member of Lorilei's board of directors and as its president and chief executive officer, on the terms and conditions hereinafter set forth: NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements hereby exchanged, as well as of the sum of Ten ($10.00) Dollars and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows: Witnesseth: Article One Term, Renewals, Earlier Termination 1.1 Term. Subject to the provisions set forth herein, the term of the Executive's employment hereunder shall be deemed to commence on the date of this Agreement's execution by all of the Parties and shall continue until June 30, 2001. 1.2 Renewals. (a) This Agreement shall be renewed automatically, after expiration of the original term, on a continuing annual basis, unless the Party wishing not to renew this Agreement provides the other Party with written notice of its election not to renew ("Termination Election Notice") on or before the 30th day prior to termination of the then current term. (b) Notwithstanding the foregoing, the Executive may not elect not to renew this Agreement until after June 30, 2005, unless Lorilei has defaulted in its obligations under this Agreement or termination is called for pursuant to other specific provisions hereof. Page 200 1.3 Earlier Termination. (a) For Cause: Lorilei shall have the right to terminate this Agreement prior to the expiration of its Term or of any renewals thereof, subject to the provisions of Sections 1.4 and 1.5, for the following reasons: (1) Lorilei may terminate the Executive's employment under this Agreement at any time for cause. (2) Such termination shall be evidenced by written notice thereof to the Executive, which notice shall specify the cause for termination. (3) For purposes hereof, the term "cause" shall mean: (A) The inability of the Executive, through sickness or other incapacity, to discharge his duties under this Agreement for 30 or more consecutive days or for a total of 60 or more days in a period of twelve consecutive months; (B) The failure of the Executive to follow the directions of Lorilei's board of directors; (C) Dishonesty; theft; or conviction of a crime involving moral turpitude; (D) Material default in the performance of the Executive's obligations, services or duties required under this Agreement (other than due to illness) or material breach of any provision of this Agreement, which default or breach has continued for ten days after written notice of such default or breach. (b) Deterioration or Discontinuance of Business: (1) In the event that Lorilei experiences material business reversals or fails to meet the operational criteria reflected in its projections or business plans, then, subject to the provisions of Section 1.4, at the option of Lorilei, this Agreement shall terminate as of a date selected by Lorilei with the same force and effect as if such date was the date originally set as the termination date hereof. (2) In the event that Lorilei discontinues operating its business, this Agreement shall terminate as of the last day of the month on which it ceases operation with the same force and effect as if such last day of the month were originally set as the termination date hereof; provided, however, that a reorganization of Lorilei shall not be deemed a termination of its business. (c) Death: This Agreement shall terminate immediately on the death of the Executive; however, all accrued compensation at such time shall be promptly paid to the Executive's estate. (d) Material Default by Lorilei: In the event of a material default by Lorilei in its obligations to the Executive pursuant to this Agreement that is not attributable to the actions or inaction of the Executive, then, the Executive shall provide Lorilei and its principal stockholder of such default, in writing, specifying the nature of the default and the curative action required, and if such default is not cured within thirty days afer Lorilei's principal stockholder receives the subject notice, then, during the ensuing ten day period, the Executive may terminate this Agreement; provided, however, that if the Executive does not terminate this Agreement, the default will be deemed waived. Page 201 1.4 Severance Payments and Alternatives to Termination In the event this Agreement is terminated by Lorilei for reasons other than for cause as described in Section 1.3(b) above, the Executive shall be entitled to either thirty days prior written notice or to a severance payment in a sum equal to the salary that would have been paid had 30 days prior written notice been provided; provided, however, that in lieu of termination, Lorilei may offer to continue this Agreement under modified compensation arrangements, if such arrangements are reflected in the written notice and accepted by the Executive prior to the end of the 30 day notice period. 1.5 Final Settlement. Upon termination of this Agreement and payment of all amounts due to the Executive hereunder, the Executive or his representative shall execute and deliver to the terminating entity on a form prepared by Lorilei, a receipt for such sums and a release of all claims, except such claims as may have been submitted pursuant to the terms of this Agreement and which remain unpaid, and, shall forthwith tender to Lorilei all records, manuals and written procedures, as may be desired by it for the continued conduct of its business. Article Two Scope of Employment 2.1 Retention. Lorilei hereby hires the Executive and the Executive hereby accepts such employment, in accordance with the terms, provisions and conditions of this Agreement. 2.2 General Description of Duties. (a) The Executive shall be employed as the president and chief executive officer of Lorilei and perform the duties generally associated with the position of president and chief executive officer thereof. (b) Without limiting the generality of the foregoing, the Executive shall have exclusive control of all aspects of Lorilei's day to day operations, subject only to compliance with the directions of Lorilei's stockholder, its board of directors, applicable laws and fiduciary obligations. (c) The Executive covenants to perform the employment duties called for hereby in good faith, devoting substantially all business time, energies and abilities to the proper and efficient management of the business of Lorilei. 2.3 Status. (a) Throughout the term of this Agreement, the Executive shall serve as a member of the board of directors of Lorilei and as its president and chief executive officer. (b) In the event that the Executive is not elected to such positions, then, at the option of the Executive, this Agreement may be deemed terminated effective as of the earliest time that it can be reasonably determined that such election will not take place, provided that written notice of such election is provided to Lorilei within 30 days after it failed to elect the Executive to the required office. Page 202 2.4 Exclusivity. All of the Executive's business time shall be devoted exclusively to the affairs of Lorilei. Article Three Compensation 3.1 Compensation. As consideration for the Executive's services to Lorilei the Executive shall be entitled to: (a) (1) An annual salary in the aggregate gross sum of $60,000 (the "Base Salary"); plus (2) An annual bonus equal to 2.5 of Lorilei's net pre tax profits, payable within 30 days after an annual audit of Lorilei (or of Lorilei's parent corporation) is completed, permitting determination thereof (the "Annual Bonus"). (b) Incentive stock options complying with the requirements of Section 422 of the Internal Revenue Code of 1986, as amended, or successor provisions thereto (the "Options"), permitting the Executive to purchase up to 167,689 of the 335,378 shares of the common stock of AmeriNet Group.com, Inc., a publicly held Delaware corporation with a class of securities registered under Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which holds of all of Lorilei's capital stock and other securities ("AmeriNet"), that AmeriNet reserved for issuance to Lorilei employees in conjunction with the Reorganization Agreement pursuant to which AmeriNet acquired all of Lorilei's securities (the "Executive's Option Shares"), on the following terms and subject to the following conditions: (1) The Executive's rights to the Options will vest on an annual basis, subject to Lorilei's having complied with its obligations under the Reorganization Agreement, the Executive having complied with his obligations under this Agreements and Lorilei's having attained the following EBITDA: (a) If Lorilei attains EBITDA of at least $500,000 during the period starting on July 1, 2000 and ending on June 30, 2001, then the first 33,988 shares of AmeriNet's common stock reserved for issuance in the event of exercise of the subject incentive stock options will vest; (b) If Lorilei attains EBITDA of at least $1,400,000 during the period starting on July 1, 2000 and ending on June 30, 2002, then all rights to 89,885 (including the 33,988 shares vested, if any, on June 30, 2001) of the shares of AmeriNet's Common stock reserved for issuance in the event of exercise of the subject incentive stock options will vest; and (c) If Lorilei attains EBITDA of at least $2,900,000 during the period starting on July 1, 2000 and ending on June 30, 2003, then all rights to all of the 167,689 shares (including the shares vested, if any, on June 30, 2001 and June 30, 2002) of AmeriNet's Common stock reserved for issuance in the event of exercise of the subject incentive stock options will vest. Page 203 (2) All rights to the incentive stock options that have not vested as of July 1, 2003 will expire on such date, and no further rights of any kind thereto or to the underlying shares of AmeriNet's common stock reserved for such purpose will exist thereafter, the reservation therefor terminating on such date. (3) The vested Options will be exercisable during the three fiscal year period after they vest at a price of $1.3125 per share, provided that as required by Code Section 422, all rights to or under the Options will expire within 90 days after termination of the Executive's employment by Lorilei. (4) All other terms pertaining to the Options are hereby incorporated by reference from those contained in AmeriNet's Non-Qualified Stock Option & Stock Incentive Plan, Effective as of January 1 , 2000 filed by AmeriNet with the United States Securities and Exchange Commission (the "Commission"), a copy of which is annexed hereto and made a part hereof as exhibit 3.1(B)(2), except to the extent that they would be inconsistent with the specific terms in this Section 3.1 unless such inconsistency is required by the provisions of Code Section 422. 3.2 Benefits. During the term of this Agreement, the Executive shall also be entitled to the following benefits: (a) Two weeks paid vacation per year. (b) Automobile, insurance and child care benefits not to exceed $12,000 per fiscal year; and (c) All other benefits of employment generally available to all of Lorilei's employees, provided that such benefits have been approved by Lorilei's stockholders and are not duplicative of those otherwise reflected in this Agreement. 3.3 Indemnification. Lorilei will defend, indemnify and hold the Executive harmless from all liabilities, suits, judgments, fines, penalties or disabilities, including expenses associated directly, therewith (e.g. legal fees, court costs, investigative costs, witness fees, etc.) resulting from any reasonable actions taken by him in good faith on behalf of Lorilei, its affiliates or for other persons or entities at the request of the board of directors of Lorilei, to the fullest extent legally permitted, and in conjunction therewith, shall assure that all required expenditures are made in a manner making it unnecessary for the Executive to incur any out of pocket expenses; provided, however, that the Executive permits the majority stockholders of Lorilei to select and supervise all personnel involved in such defense and that the Executive waive any conflicts of interest that such personnel may have as a result of also representing Lorilei, its stockholders or other personnel and agrees to hold them harmless from any matters involving such representation, except such as involve fraud or bad faith. Page 204 Article Four Special Covenants 4.1 Confidentiality, Non-Circumvention and Non-Competition. During the term of this Agreement, all renewals thereof and for a period of two years after its termination, the Executive hereby irrevocably agrees to be bound by the following restrictions, which constitute a material inducement for Lorilei's entry into this Agreement and for AmeriNet's agreement to provide shares of its common stock as the securities underlying the Options: (a) Because the Executive will be developing for Lorilei, making use of, acquiring and/or adding to, confidential information of special and unique nature and value relating to such matters as Lorilei's trade secrets, systems, procedures, manuals, confidential reports, personnel resources, strategic and tactical plans, advisors, clients, investors and funders; as material inducement to the entry into this Agreement by Lorilei, the Executive hereby covenants and agrees not to personally use, divulge or disclose, for any purpose whatsoever, directly or indirectly, any of such confidential information during the term of this Agreement, any renewals thereof, and for a period of two years after its termination. (b) The Executive hereby covenants and agrees to be bound as a fiduciary of Lorilei, as if the Executive were a partner in a partnership bound by the partnership opportunities doctrine, as such concept has been judicially and legislatively developed in the State of Florida, and consequently, without the prior written consent of Lorilei, on a specific, case by case basis, the Executive shall not, among other things, directly or indirectly: (1) Engage in any activities, whether or not for profit, competitive with Lorilei's business. (2) Solicit or accept any person providing services to Lorilei, whether as an employee, consultant or independent contractor, for employment or provision of services. (3) Induce any client or customer of Lorilei to cease doing business with Lorilei or to engage in business with any person engaged in business activities that compete with Lorilei's business. (4) Divert any business opportunity within the general scope of Lorilei's business and business capacity, to any other person or entity. 4.2 Special Remedies. In view of the irreparable harm and damage which would undoubtedly occur to Lorilei as a result of a breach by the Executive of the covenants or agreements contained in this Article Four, and in view of the lack of an adequate remedy at law to protect Lorilei's interests, the Executive hereby covenants and agrees that Lorilei shall have the following additional rights and remedies in the event of a breach hereof: (a) In addition to and not in limitation of any other rights, remedies or damages available to Lorilei, whether at law or in equity, it shall be entitled to a permanent injunction in order to prevent or to restrain any such breach by the Executive, or by the Executive's partners, agents, representatives, servants, employers, employees, affiliates and/or any and all persons directly or indirectly acting for or with him and the Executive hereby consents to the issuance of such a permanent injunction; and Page 205 (b) Because it is impossible to ascertain or estimate the entire or exact cost, damage or injury which Lorilei may sustain prior to the effective enforcement of such injunction, the Executive hereby covenants and agrees to pay over to Lorilei, in the event he violates the covenants and agreements contained in Section 4.2 hereof, the greater of: (1) Any payment or compensation of any kind received by the Executive or by persons affiliated with or acting for or with the Executive, because of such violation before the issuance of such injunction, or (2) The sum of One Thousand ($1,000.00) Dollars per violation, which sum shall be liquidated damages, and not a penalty, for the injuries suffered by Lorilei as a result of such violation, the Parties hereto agreeing that such liquidated damages are not intended as the exclusive remedy available to Lorilei for any breach of the covenants and agreements contained in this Article Four, prior to the issuance of such injunction, the Parties recognizing that the only adequate remedy to protect Lorilei from the injury caused by such breaches would be injunctive relief. 4.3 Cumulative Remedies. The Executive hereby irrevocably agrees that the remedies described in Section 4.2 shall be in addition to, and not in limitation of, any of the rights or remedies to which Lorilei is or may be entitled to, whether at law or in equity, under or pursuant to this Agreement. 4.4 Acknowledgment of Reasonableness. (a) The Executive hereby represents, warrants and acknowledges that having carefully read and considered the provisions of this Article Four, the restrictions set forth herein are fair and reasonable and are reasonably required for the protection of the interests of Lorilei, its officers, directors and other employees; consequently, in the event that any of the above-described restrictions shall be held unenforceable by any court of competent jurisdiction, the Executive hereby covenants, agrees and directs such court to substitute a reasonable judicially enforceable limitation in place of any limitation deemed unenforceable and, the Executive hereby covenants and agrees that if so modified, the covenants contained in this Article Four shall be as fully enforceable as if they had been set forth herein directly by the Parties. (b) In determining the nature of this limitation, the Executive hereby acknowledges, covenants and agrees that it is the intent of the Parties that a court adjudicating a dispute arising hereunder recognize that the Parties desire that these covenants not to circumvent, disclose or compete be imposed and maintained to the greatest extent possible. 4.5 Unauthorized Acts. The Executive hereby covenants and agrees not do any act or incur any obligation on behalf of Lorilei except as authorized by its board of directors or by its stockholders pursuant to duly adopted stockholder action or reasonably inferred therefrom. Page 206 Article Five Miscellaneous 5.1 Notices. (a) (1) All notices, demands or other communications hereunder shall be in writing, and unless otherwise provided, shall be deemed to have been duly given on the first business day after mailing by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: To the Executive: Leigh A.Cunningham 18498 Northwest 24th Avenue; Citra, Florida 32113 Telephone (352) 595-3834; Fax (352) 595-0807; e-mail leighc@callthefirm.com; To Lorilei: Lorilei Communications, Inc. Post Office Box 77078; Ocala, Florida 34477 Attention: Gerald R. Cunningham, President Telephone (352) 861-1350; Fax (352) 861-1339; e-mail thefirm@callthefirm.com; with a copy to Bruce Brashear, Esquire 920 Northwest 8th Avenue, Suite A; Gainesville, Florida 32601 Telephone (352) 336-0800; Fax (352) 336-0505; and,e-mail bbrashear@nflalaw.com; In each case with copies to AmeriNet Group.com, Inc. Crystal Corporate Center; 2500 North Military Trail, Suite 225-C; Boca Raton, Florida 33431 Attention: Michael Jordan, President Telephone (561) 998-3435, Fax (561) 998-4635; and, e-mail www.michael@amerinetgroup.com; and George Franjola, Esquire; General Counsel AmeriNet Group.com, Inc. 1941 Southeast 51st Terrace; Ocala, Florida 34471 Telephone (352) 694-9182, Fax (352) 694-1325; and, e-mail, tyclegal@atlantic.net. (2) Copies of notices will also be provided to such other address or to such other person as any Party shall designate to the other for such purpose in the manner hereinafter set forth. (b) (1) The Parties acknowledge that The Yankee Companies, Inc., a Florida corporation ("Yankees") has acted as scrivener for the Parties in this transaction and that Yankees is neither a law firm nor an agency subject to any professional regulation or oversight. (2) Yankees has advised all of the Parties to retain independent legal and accounting counsel to review this Agreement on their behalf since it cannot provide any Party with legal advice. (3) This Agreement shall not be interpreted more or less strictly against any Party based on its authorship. Page 207 5.2 Amendment. (a) No modification, waiver, amendment, discharge or change of this Agreement shall be valid unless the same is in writing and signed by the Party against which the enforcement of said modification, waiver, amendment, discharge or change is sought. (b) This Agreement may not be modified without the consent of a majority in interest of Lorilei's AmeriNet's stockholders. 5.3 Merger. (a) This instrument contains all of the understandings and agreements of the Parties with respect to the subject matter discussed herein. (b) All prior agreements whether written or oral, are merged herein and shall be of no force or effect. 5.4 Survival. The several representations, warranties and covenants of the Parties contained herein shall survive the execution hereof and shall be effective regardless of any investigation that may have been made or may be made by or on behalf of any Party. 5.5 Severability. If any provision or any portion of any provision of this Agreement, or the application of such provision or any portion thereof to any person or circumstance shall be held invalid or unenforceable, the remaining portions of such provision and the remaining provisions of this Agreement or the application of such provision or portion of such provision as is held invalid or unenforceable to persons or circumstances other than those to which it is held invalid or unenforceable, shall not be effected thereby. 5.6 Governing Law and Venue. This Agreement shall be construed in accordance with the laws of the State of Florida but any proceeding arising between the Parties in any matter pertaining or related to this Agreement shall, to the extent permitted by law, be held in Broward County, Florida. 5.7 Litigation. (a) In any action between the Parties to enforce any of the terms of this Agreement or any other matter arising from this Agreement, the prevailing Party shall be entitled to recover its costs and expenses, including reasonable attorneys' fees up to and including all negotiations, trials and appeals, whether or not litigation is initiated. (b) In the event of any dispute arising under this Agreement, or the negotiation thereof or inducements to enter into the Agreement, the dispute shall, at the request of any Party, be exclusively resolved through the following procedures: (1) (A) First, the issue shall be submitted to mediation before a mediation service in Broward County, Florida, to be selected by lot from six alternatives to be provided, two by Lorilei's majority stockholder, two by Lorilei and two by the Executive. Page 208 (B) The mediation efforts shall be concluded within ten business days after their in itiation unless the Parties unanimously agree to an extended mediation period; (2) In the event that mediation does not lead to a resolution of the dispute then at the request of any Party, the Parties shall submit the dispute to binding arbitration before an arbitration service located in Broward County, Florida to be selected by lot, from six alternatives to be provided,, two by Lorilei's majority stockholder, two by Lorilei and two by the Executive. (3) (A) Expenses of mediation shall be borne by Lorilei, if successful. (B) Expenses of mediation, if unsuccessful and of arbitration shall be borne by the Party or Parties against whom the arbitration decision is rendered. (C) If the terms of the arbitral award do not establish a prevailing Party, then the expenses of unsuccessful mediation and arbitration shall be borne equally by the Parties. 5.8 Benefit of Agreement. (a) This Agreement may not be assigned by the Executive without the prior written consent of Lorilei. (b) Subject to the restrictions on transferability and assignment contained herein, the terms and provisions of this Agreement shall be binding upon and inure to the benefit of the Parties, their successors, assigns, personal representative, estate, heirs and legatees. 5.9 Captions. The captions in this Agreement are for convenience and reference only and in no way define, describe, extend or limit the scope of this Agreement or the intent of any provisions hereof. 5.10 Number and Gender. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the Party or Parties, or their personal representatives, successors and assigns may require. 5.11 Further Assurances. The Parties hereby agree to do, execute, acknowledge and deliver or cause to be done, executed or acknowledged or delivered and to perform all such acts and deliver all such deeds, assignments, transfers, conveyances, powers of attorney, assurances, recipes, records and other documents, as may, from time to time, be required herein to effect the intent and purposes of this Agreement. 5.12 Status. Nothing in this Agreement shall be construed or shall constitute a partnership, joint venture, agency, or lessor-lessee relationship; but, rather, the relationship established hereby is that of employer-employee in Lorilei. Page 209 5.13 Counterparts. (a) This Agreement may be executed in any number of counterparts. (b) Execution by exchange of facsimile transmission shall be deemed legally sufficient to bind the signatory; however, the Parties shall, for aesthetic purposes, prepare a fully executed original version of this Agreement, which shall be the document filed with the Securities and Exchange Commission. 5.14 License. (a) This Agreement is the property of Yankees and the use hereof by the Parties is authorized hereby solely for purposes of this transaction. (b) The use of this form of agreement or of any derivation thereof without Yankees' prior written permission is prohibited. In Witness Whereof, the Parties have executed this Agreement, effective as of the last date set forth below. Signed, Sealed & Delivered In Our Presence The Executive - -------------------------- /s/ Leigh A.Cunningham - -------------------------- -------------------------- Leigh A. Cunningham Dated: May 11, 2000 Lorilei Communications, Inc. a Florida corporation. - -------------------------- __________________________ By: /s/ Gerald R. Cunningham ___________________________ Gerald R. Cunningham, President (CORPORATE SEAL) Attest: /s/ Leigh A. Cunningham __________________________ Leigh A. Cunningham, Vice President & Secretary Dated: May 11, 2000 Page 210 Exhibit to Reorganization Agreement by and among AmeriNet Group.com, Inc., a Delaware Corporation and Lorilei Communications, Inc., a Florida Corporation EXHIBIT 6.2(D) AMERINET'S LEGAL OPINION AmeriNet Group.com, Inc. A publicly held Delaware corporation Michael Harris Jordan 1941 Southeast 51st Terrace President & Chief Executive Officer Ocala, Florida 34471 Telephone (352) 694-6714 David K. Cantley Fax (352) 694-9178 Vice President, Treasurer e-mail, grichard@atlantic.net & Chief Financial Officer Crystal Corporate Center Vanessa H. Lindsey 2500 North Military Trail, Suite 225-C Secretary Boca Raton, Florida 33431 Telephone (561) 998-3435 George Franjola, Esquire Fax (561) 998-4635 General Counsel e-mail info@amerinetgroup.com Respond to Boca Raton address Michael Harris Jordan G. Richard Chamberlin Anthony Q. Joffe Saul B. Lipson Edward C. Dmytryk Teri Nadler J. Bruce Gleason Michael A. Caputa Carol A. Berardi Dennis A. Berardi Vanessa H. Lindsey Scott B. Ugell ------ Board of Directors Wriwebs.com, Inc. 245 North Ocean Boulevard, Suite 201; Deerfield Beach, Florida 33441 Telephone (954) 360-0636; Fax (954) 943-4046 Web site and e-mail www.wriwebs.com --------------- Trilogy International, Inc. 526 Southeast Dixie Highway; Stuart, Florida 34494 Telephone (561) 781-7278; Fax (561) 781-7282 Web site and e-mail www.trilogyonline.com; ---------------------- Vista Vacations International, Inc. 5653 Northwest 29th Street; Margate, Florida 33063 Telephone (954) 975-0898; Fax (954) 975-8447 Web site and e-mail www.vista_vacations.com ----------------------- Operating Subsidiaries May 11, 2000 Mr. Gerald R. Cunningham, President Lorilei Communications, Inc. 7325 S.W. 32nd Street Ocala, Fl. 34474 Re: Legal Opinion of Counsel Regarding Proposed Reorganization Between AmeriNet Group, Inc,, a publicly held Delaware corporation with a class of securities registered under Section 12(g) of the Securities ("AmeriNet") and Lorilei Communications, Inc., a privately held Florida corporation ("Lorilei") Dear Mr. Cunningham: This opinion is given pursuant to Section 6.2(D) of the Reorganization Agreement between AmeriNet and Lorilei. The proposed reorganization, as reflected in the terms of the Agreement, contemplates that Lorilei will exchange all its common stock, its only authorized securities, for shares of AmeriNet common stock, its only class of voting stock. This opinion will address the stock being issued to Lorilei and the applicability of federal and state securities laws to the issuance of such stock. It will not address the tax consequences, under either federal or state law arising from the proposed reorganization. This opinion has been prepared and is to be construed in accordance with the Report on Standards for Florida Opinions dated April 8, 1991, as amended and supplemented, issued by the Business Law Section of the Florida Bar, 46 The Business Lawyer, No. 4, hereby incorporated by reference into this opinion; and, is predicated on: 1. The actual information contained in the Reorganization Agreement, including its exhibits and schedules, in which a draft form of this opinion is included as an exhibit. Page 211 2. My examination of the originals and copies of corporate instruments, certificates, resolutions of the board of directors and other documents of AmeriNet. 3. My communications with Michael Jordan, President of AmeriNet. 4. My communications with Bruce Brashear, Esquire, attorney for Lorilei. 5. My current legal understanding of the Delaware General Corporations Law the Florida Securities and Investor Protection Act, and the Securities Act of 1933, as amended (the "1933 Act"). The undefined terms of art used in this opinion which are characterized by consistent use of initial capitals are defined in the Reorganization Agreement and such definitions are incorporated by reference herein. Factual premises In forming my opinions, I have relied on all factual information contained in the Reorganization Agreement and the Exhibits and Schedules attached to it, and I have assumed the genuineness and accuracy of the information contained and summarized therein. Likewise, I have relied on the following facts as conveyed to me by Michael Jordan: 1. The AmeriNet shares being issued to the Lorilei shareholders have not been registered. 2. There have been sales of AmeriNet stock to less than 10 non-accredited investors during the last year. 3. AmeriNet did not advertise or engage in any form of solicitation concerning the subject transaction. 4. This transaction is not a scheme or device to avoid registration of the stock. 5. A standard restrictive legend will be placed upon the shares issued to the Lorilei shareholders and the transfer agent will be given stop transfer instructions. In addition to the foregoing, I have relied on a representation by Bruce Brashear, Esquire, the attorney for Lorilei, that you and your wife, Leigh, the sole Lorilei shareholders, are not "accredited investors" within the meaning of federal securities laws and regulations. Discussion The capital stock The Delaware General Corporations Law addresses the issuance of capital stock in Section 152, Issuance of stock, lawful consideration; fully paid stock, which states, in relevant part, as follows: The consideration ..... for subscriptions to, or the purchase of, the capital stock to be issued by a corporation shall be paid in such form and in such manner as the board of directors shall determine.In the absence of fraud in the transaction, the judgment of the directors as to the value of such consideration shall be conclusive. The capital stock so issued shall be deemed to be fully paid and nonassessable stock, if (1) The entire amount of such consideration has been received by the corporation in the form of cash, services rendered, personal property, real property, leases of real property or a combination thereof........... The consideration supporting this transaction is stated in Section 1.2 of the Reorganization Agreement: Page 212 ...[A]ll of the Lorilei Shareholders will exchange all of their Lorilei securities being an aggregate of 111 shares of common stock, $0.01 par value (the remaining 1,889 shares being unreserved treasury shares or unauthorized but heretofore unissued shares of common stock), for up to 1,145,037 shares of AmeriNet's common stock, as called for by this Agreement. The resolution adopted by the AmeriNet board of directors approved the terms of the Reorganization Agreement, including the foregoing Section 1.2. Furthermore, Section 3.2 (C) of the Reorganization Agreement provides that: Subject to the Lorilei Declarants' compliance with their obligations under this Agreement, the shares of AmeriNet's common stock to be issued pursuant to the Reorganization will be duly authorized, validly issued , fully paid and nonassessable. As such, the shares of stock to be issued to the Lorilei shareholdersif issued in compliance with the requirements of the Reorganization Agreement, will be fully paid and nonassessable capital stock of AmeriNet. The securities laws: The 1933 Act Section 4(2) of the Securities Act provides as follows: .... The provisions of section 5 shall not apply to .... transactions by an issuer not involving any public offering. Section 4(2) provides a private offering exemption from registration and prospectus requirements, applying to transactions by an issuer that do not involve any public offering. The exemption was enacted to permit an issuer to make a specific or isolated sale of its securities to particular persons without incurring the expense of registration, and is used in a wide variety of transactions, including here, the acquisition of a closely held corporation where all of the consideration is securities of the acquiring corporation . Whether the transaction is one not involving any public offering is essentially a question of fact and necessitates a consideration of all the surrounding circumstances, including such factors as the relationship between the offerees and the issuer, as well as the nature, scope, size, type and manner of the offering. An important factor to be considered is whether the securities offered have come to rest in the hands of the initially informed group or whether the purchasers are merely conduits for a wider distribution. It is essential that the issuer of the securities take precautions to assure that the purchasers do not acquire the securities with a view to distribution. In this transaction, the share certificates being issued to the Lorilei shareholders will bear a restrictive legend indicating that the shares have not been registered under the 1933 Act and may be offered and sold only if registered pursuant to the provisions of that Act or if an exemption from registration is available. Furthermore, AmeriNet will issue stop- transfer instructions to prevent the transfer of the securities unless registered or unless an exemption exists. Except to the extent that objective standards for claiming the private offering exemption are now provided under current Regulation D, Section 4(2) of the 1933 Act has been delineated through administrative and judicial interpretations. Factors considered in determining whether a transaction involved a "public offering" were first discussed in detail in Release No. 33-285 (1935), which held that all surrounding circumstances had to be considered. Noting that an offering of securities to an "insubstantial number" of persons had previously been described as not involving a public offering, and that though under ordinary circumstances, an offering to not more than 25 persons presumably did not involve a public offering, the question was never determined exclusively by the Page 213 number of offerees. Factors discussed in Release No. 33-285 included the number of offerees and their relationship to each other and to the issuer, the number of units offered, the size of the offering and the manner of the offering. In addition to the four factors above, subsequent intrepretations emphasized the importance of information available to make informed decisions, even where the investors were financially sophisticated. Cases have held that the private offering exemption afforded by Section 4(2) only applies if the offerees are given access to the kind of information that registration would disclose. In this transaction, the Lorilei shareholders have represented that they have had access to all of AmeriNet's periodic filings with the SEC, as well as other information made available directly byofficers of AmeriNet and its current subsidiaries. Florida Law A safe harbor for compliance with the requirements of Section 517.061(11)(a)3, Florida Statutes, is established by Florida Rule 3E-500.005. Among other things, it provides the following guidelines: The determination as to whether sales of securities are part of a larger offering [(i.e., are deemed to be integrated)] depends on the particular facts and circumstances. In determining whether sales should be regarded as part of a larger offering and thus should be integrated, the facts described in Rule 3E-500.01 should be considered. The requirements of Sections 517.061(11)(a)3, Florida Statutes, that each purchaser or his representative be provided with or given reasonable access to full and fair disclosure of all material information is deemed to be satisfied if, a) all material books and records of the issuer; b) all material contracts and documents relating to the proposed transaction; and c) an opportunity to question the appropriate executive officers or partners are provided to each investor. In addition, in the case of an issuer that is subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the provisions of paragraph (5)(b) of the rule are deemed satisfied by providing the following: (a) The information contained in the annual report required to be... any reports or documents required to be filed by the issuer pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, since the filing of such annual report or registration statement; and, (b) A brief description of the securities being offered, the use of the proceeds from the offering, and any material changes in the issuer's affairs which are not disclosed in the documents furnished. Opinion On the basis of the foregoing discussion, I am of the opinion that the shares of stock being issued to the Lorilei shareholders are fully paid and non-assessable. This opinion is limited by the facts cited above, and is for use by the Parties solely in conjunction with closing contemplated by the Reorganization Agreement. No other person is entitled to rely upon this opinion. Very Truly Yours, AmeriNet Group.com, Inc. /s/ George Franjola George Franjola, Esquire General Counsel Page 214 EXHIBIT 6.3(E) LORILEI LEGAL OPINION Brashear & Associates, P.L. 926 N.W. 13th Street Gainesville, Florida 32601 May 11, 2000 Board of Directors AmeriNet Group, Inc. Crystal Corporate Center; 2500 North Military Trail, Suite 225 Boca Raton, Florida 33431 Dear Ladies and Gentlemen: We have acted as special counsel to Lorilei Communications, Inc., a Florida corporation (the "Company"), in connection with reorganization contemplated by that certain Reorganization Agreement, between AmeriNet Group, Inc. (AmeriNet) and the Company dated May 11, 2000 (the "Agreement") pursuant to which the outstanding shares of the Company have been transferred to AmeriNet in exchange for ), for up to 1,145,037 Aminet common shares.. All capitalized terms used herein and not otherwise defined shall have the respective meanings given to those terms in the Reorganization Agreement. This opinion is being furnished to you pursuant to Section 6.2(E) of the Reorganization Agreement. In connection with this opinion, we have examined a copy of the Reorganization Agreement, the Company's Certificate of Incorporation, as amended to date, its By-laws, as amended to date, and such other certificates, agreements and other documents as we have deemed necessary as a basis for the opinions hereinafter expressed. As to certain matters of fact, we have relied upon a certificate of officers of the Company. In our examination of the aforesaid documents, we have assumed, without independent investigation, the genuineness of all signatures, the legal capacity of all individuals who have executed any documents, the authenticity of all documents submitted to us as originals, the conformity to the original documents of all documents submitted to us as certified, photostatic, reproduced or conformed copies of validly existing agreements or other documents and the authenticity of all such documents. In rendering the opinions expressed below, we have assumed that: (i) the parties to each document related to or necessary to the transaction ("Transaction Documents") other than the Company have the power, corporate or other, to enter into and perform all actions thereunder; (ii) that each such party other than the Company has duly authorized by all requisite action, corporate or other, the execution and delivery of such Transaction Document; (iii) that such Transaction Document has been duly executed and delivered by such party; (iv) and that each Transaction Document constitutes the legal, valid and binding agreement of each of the parties to such Transaction Document other than the Company, enforceable against such parties in accordance with its terms; (v) the representations and warranties made in the Reorganization Agreement by you are true and correct; (vi) any wire transfers, drafts or checks tendered by you will be honored; (vii) there are no facts or circumstances relating to you that might prevent you from enforcing any of the rights to which our opinion relates; and (viii) there are no extrinsic agreements or understandings among the parties to the Transaction Documents that would modify or interpret the terms of the Transaction Documents or the respective rights or obligations of the parties thereunder. The qualification of a statement or opinion herein by the phrase "known to us," or "to our knowledge," or any similar phrase means the actual knowledge of the attorneys of this Firm with primary responsibility for the preparation, review and negotiation of the Transaction Documents. We have not undertaken or conducted any independent factual investigation to determine the accuracy of statements or opinions herein qualified as described in the preceding sentence, and any limited inquiry undertaken by us during the preparation of this opinion letter should not be regarded as such an investigation; no inference as to our knowledge of any matters bearing on the accuracy of any such statement or opinion should be drawn from the fact of our representation of the Company. This opinion relates solely to the laws of the State of Florida, the General Corporation Law of the State of Florida and the federal securities laws, and we express no opinion with respect to the effect or application of any other laws. We express no opinion whatsoever as to the compliance or noncompliance by the Company or any person involved in the subject transactions with the antifraud or information delivery provisions of state and federal laws, rules and regulations concerning the offer, sale or issuance of securities. Based upon our examination of and reliance upon the foregoing and subject to the limitations, exceptions, qualifications and assumptions set forth herein, we are of the opinion that as of the date hereof: 1. The Company is a corporation validly existing and in good standing under the laws of the State of Florida, with the requisite corporate power and authority to own its properties and to conduct its business as presently conducted. 2. The Company has the requisite corporate power and authority to execute, deliver and perform its obligations under the Transactions Documents. The execution, delivery and performance of the Transaction Documents have been duly authorized by all necessary corporate action of the Company and the Transaction Documents have been duly executed and delivered by the Company. Each Transaction Document constitutes a legally valid and binding obligation of the Company, enforceable against the Company according to its terms, except as (i) such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors' rights and remedies, (ii) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability and (iii) rights to indemnification and contribution under the Investor's Rights Agreement may be limited by public policy. The Certificate of Designation has been duly executed and filed with the Florida Secretary of State. 3. The 111 shares of the Company"s common stock have been validly issued, fully paid and are nonassessable. 4. The Company's Board of Directors has adopted a resolution adopting the Reorganization Agreement. 5. Based in part upon the representations made by you in the Reorganization Agreement, the exchange of shares contemplated by the Reorganization Agreement is exempt from the registration requirements under Section 5 of the Securities Act of 1933, as amended and the registration requirements of Chapter 517, Florida Statutes. 6. The execution and delivery of the Transaction Documents does not (i) violate any provision of any law, rule or regulation believed by us to be generally applicable to transactions of the type contemplated by the Transaction Documents or (ii) violate any provision of the Company's Certificate of Incorporation or Bylaws. 7. The execution, delivery and performance of the obligations of the Company under the Transaction Documents do not require any consent, approval, permit, order or authorization of, or any qualification, registration, designation, declaration or filing with, any federal or state governmental authority on the part of the Company. 8. To our knowledge, there is no action, suit, proceeding or investigation pending or threatened against the Company before any court or governmental agency (i) that questions the validity of the Transaction Documents or the right of the Company to enter into the Transaction Documents or (ii) that, if determined adversely, would be likely to result in a material adverse change in the financial condition or business of the Company. The opinions expressed herein have been rendered solely for your benefit in connection with the transactions contemplated by the Reorganization Agreement and may not be relied upon by you in any other manner or by any other person or entity in any manner or for any purpose, and may not be communicated or published by you to any other person or entity for any purpose without our prior written approval in each instance. We do not assume any continuing obligation or responsibility to advise you of any changes in law, or any change of circumstances of which we become aware, which may affect any of the opinions contained herein or to update, revise or supplement any such opinion herein for any reason whatsoever. Very truly yours, Brashear & Associates, P.L. /s/ Bruce Brashear --------------------- Bruce Brashear Page 215 Exhibit to Reorganization Agreement by and among AmeriNet Group.com, Inc., a Delaware Corporation and Lorilei Communications, Inc., a Florida Corporation EXHIBIT 6.3(K) CONFIDENTIALITY AGREEMENTS Copies of Non Compete Agreements are attached to Exhibit 5.12 I attest the information contained herein is true and accurate to the best of my knowledge /s/ Gerald R. Cunningham - ---------------------------------- Gerald R. Cunningham, President Lorilei Communications, Inc. /s/ Leigh A. Cunningham - ---------------------------------- Leigh A. Cunningham, Vice President Sales Lorilei Communications, Inc. Exhibit to Reorganization Agreement by and among AmeriNet Group.com, Inc., a Delaware Corporation and Lorilei Communications, Inc., a Florida Corporation EXHIBIT 7.2 ESCROW ALLOCATION The portion of AmeriNet's common stock in the Undisclosed Liabilities Escrow Fund contributed on behalf of each stockholder of Lorilei is listed opposite such stockholders name below: Undisclosed Liabilities Stock Escrow Stockholder Allocation Gerald R. Cunningham 57,252 Shares Leigh A. Cunningham 57,252 Shares I attest the information contained herein is true and accurate to the best of my knowledge /s/ Gerald R. Cunningham - ---------------------------------- Gerald R. Cunningham, President Lorilei Communications, Inc. /s/ Leigh A. Cunningham - ---------------------------------- Leigh A. Cunningham, Vice President Sales Lorilei Communications, Inc. Page 216 EX-3.5 3 ARTICLES OF INCORPORATION OF LORILEI Articles of Amendment to Articles of Incorporation of Lorilei Communications, Inc. Pursuant to the provisions of Section 607.1006, Florida Statutes, Lorilei Communications, Inc., a Florida corporation for profit (the "Corporation") does hereby adopt the following articles of amendment and restatement to its articles of incorporation, certifying as follows: Witnesseth: First: Amendments adopted: (A) The following articles are hereby repealed: Articles III, IV, V and VI (B) Article 1 is hereby renumbered as Article I. (C) The following new articles are hereby adopted: ARTICLE II DURATION This Corporation shall have perpetual existence commencing on the date of the filing of these Articles of Incorporation with the Department of State of Florida. ARTICLE III PURPOSES This Corporation is organized for the purpose of transacting any and all lawful business; provided, however, that it shall not: (A) Engage in any activities that would subject it to regulation as an investment company under the Federal Investment Company Act of 1940 (the "Investment Company Act"), as amended, unless it shall have first qualified and elected to be regulated as a small business development company pursuant to Sections 54 et. seq., thereof, and limits its investment company activities to those permitted thereby; or (B) Engage in any activities which would subject the Corporation to regulation as a broker dealer in securities subject to regulation under the Securities Exchange Act of 1934, as amended (the "Exchange Act") or as an investment advisor subject to regulation under the Investment Advisors Act of 1940, as amended (the "Investment Advisor's Act"); or Page 217 (C) Engage in any other activities requiring the Corporation to comply with governmental registration and supervision, unless it has completed such registration and conducts itself in full compliance with such supervisory requirements. ARTICLE IV CAPITAL STOCK This Corporation is authorized to issue 2,000 shares of $.01 par value common stock. Each holder of Common Stock shall be entitled to one (1) vote for each share of such stock standing in his name on the books of the Corporation. ARTICLE V QUORUM FOR MEETINGS (A) A simple majority of the shares entitled to vote, represented in person or by proxy, shall be required to constitute a quorum at a meeting of stockholders. (B) A simple majority of the persons then comprising the entire membership of the board of directors, but including all persons elected as members of the board of directors by the stockholders who were not required to be nominated and elected as directors pursuant to contractual obligations, shall constitute at quorum at a meeting of the board of directors. ARTICLE VI REGISTERED OFFICE, REGISTERED AGENT & PRINCIPAL 6.1 Registered Office & Registered Agent, The street address of the registered office of this Corporation is 1941 Southeast 51st Terrace; Ocala, Florida 34471, and the name of the initial registered agent of this corporation at such address is Vanessa H. Lindsey. 6.2 Principal Office & Mailing Address (A) The Corporation's principal office is 7325 Southwest 32nd Street, Ocala, Florida 34474 and its principal mailing address is Post Office Box 770787; Ocala, Florida 34477. (B) The Corporation's telephone number is (352)861-13508, its fax number is (352) 861-1339 and its e-mail address is thefirm@callthefirm.com. Page 218 ARTICLE VII BOARD OF DIRECTORS 7.1 Initial Board of Directors (A) This Corporation shall have two Directors initially. (B) The number of Directors may be either increased or diminished from time to time in the manner provided in the Bylaws, but, after May 11, 2000, shall be at least three, two of whom shall be nominees of Lorilei's stockholders as of the close of business on May 10, 2000, and at least one of which shall be elected by AmeriNet Group.com, Inc., a publicly held Delaware corporation, Lorilei's stockholders as of the opening of business on May 12, 2000 ("AmeriNet"), for so long as and to the extent that AmeriNet is obligated to follow such procedure by the following provisions of its reorganization agreement with the Corporation and its stockholders dated May 11, 2000 (the "Reorganization Agreement"): "Subject to Lorilei's substantial compliance with its material obligations under this Agreement, including, without limitation, those involving provision of audited financial statements for its operations for the time period and in the form required by Commission Regulation S-B for purposes of material acquisitions; and, subject to continuing compliance by Mr. & Mrs. Cunningham with their obligations under their employment agreements with Lorilei and with their fiduciary obligations to AmeriNet: (A) (1) AmeriNet hereby covenants and agrees that it will maintain membership on the board of directors of Lorilei in the following ratio: two thirds of the members will be nominees of Mr. & Mrs Cunningham and one third will be nominees of AmeriNet, provided that: (a) Lorilei cumulatively attains EBITDA during the following fiscal periods equal to the following amounts: 1. During each quarter in the fiscal period starting on July 1, 2000 and ending on June 30, 2001, EBITDA of at least 70% of $125,000; 2. During each quarter in the fiscal period starting o July 1, 2001 and ending on June 30, 2002, EBITDA of at least 70% of $225,000; and 3. During each quarter in the fiscal period starting on July 1, 2002 and ending on June 30, 2003, EBITDA of at least 70% of $375,000; and Page 219 (b) Lorilei and the Former Lorilei Stockholders must comply with all of their obligations under this Agreement, including, without limitation, those involving provision of audited financial statements for Lorilei's operations for the time period and in the form required by Commission Regulation S-B for purposes of the Reorganization. (2) Notwithstanding the provisions in Section 5.14(A)(1): (a) The initial determination by AmeriNet as to the attainment of the minimum acceptable EBITDA will not be made until two complete fiscal quarters have passed since the Closing Date; (b) After the first year following the Closing Date, the minimum acceptable EBITDA may be modified periodically by unanimous action (including the affirmative votes of all AmeriNet nominees) of the board of directors of Lorilei; provided that after the third year, unless new minimum acceptable EBITDA are agreed to, the minimum acceptable EBITDA will increase annually to 150% of the EBITDA projected for the immediately preceding year; (c) In the event that the right of Mr. & Mrs. Cunningham to designate two thirds of the membership on Lorilei's board of directors is suspended due to failure to meet the minimum acceptable EBITDA, such right will be reinstated at such time as the deficiency in meeting the minimum acceptable EBITDA, on a cumulative basis, has been cured. (d) As a continuing condition to the right of Mr. & Mrs. Cunningham's designees on Lorilei's board of directors to take any corporate actions, such action may not violate any of the following restrictions or requirements and any action not in conformity with such continuing conditions shall be void: 1. The members of Lorilei's board of directors serving as nominees of Mr. & Mrs. Cunningham must fully comply with their fiduciary obligations to AmeriNet and Lorilei's Stockholders and with applicable laws; 2. A quorum for meetings of the board of directors of Lorilei and action by such board of directors will require the participation of AmeriNet's nominees; provided that, if a meeting deemed to involve material issues is adjourned due to the inability to attain a quorum as a result of the absence of the AmeriNet nominees, then, upon receipt of Page 220 written notice from Lorilei's board of directors, AmeriNet must assure that its nominees (or their successors if AmeriNet elects to replace them) attend the reconvened meeting, which will be held by telephone conference at a time during a business day designated by AmeriNet within three days after AmeriNet is provided with the written notice of the adjourned meeting; and 3. The board of directors of Lorilei will not for so long as Lorilei remains a subsidiary of AmeriNet, without AmeriNet's prior written consent specifying the action authorized, be authorized to: A. Engage in any material change in Lorilei's business not contemplated by the Projections; B. Sell a material portion of Lorilei's assets outside the normal course of business; C. Issue any securities; D. Authorize the borrowing of any funds or pledge of any assets; or E. Confess any judgment or settle any material claim of liability." (C) The name and address of the initial Directors of this Corporation is as follows: Gerald R. Cunningham: 7325 Southwest 32nd Street; Ocala, Florida 34474; Leigh A. Cunningham: 7325 Southwest 32nd Street; Ocala, Florida 34474. 7.2 Contractual Obligation to Elect Directors: The obligations of AmeriNet to elect members to the Corporation's Board of Directors in the manner reflected in the Reorganized Agreement shall be complied with in conjunction with all elections of members to the Corporation's Board of Directors during the term of such obligations and no election in contravention of such terms shall be valid. Page 221 ARTICLE VIII INCORPORATOR The name and street address of the incorporator of this Corporation was Gerald R. Cunningham: 7325 Southwest 32nd Street; Ocala, Florida 34474. ARTICLE IX AFFILIATED TRANSACTIONS This Corporation shall not be subject to the restrictions or requirements for affiliated transactions imposed by Sections 607.0901, Florida Statutes, as permitted by the waiver provisions of Section 607.0901(5)(b) thereof. Second: The Date Each Amendment Was Adopted Was May 9, 2000. Fourth: Adoption of Amendments: (A) The number of shares of the corporation outstanding at the time of such adoption was 111 shares of common stock. The number of shares entitled to vote thereon was 111 shares of common stock. (B) The designation and number of outstanding shares of each class entitled to vote thereon as a class were as follows: Class Number of Shares ----- ---------------- Common 111 (C) The number of shares voted for the amendment was 111; the number of shares voted against such amendments was 0; the number of shares abstaining was 0; and the number of shares not represented at the meeting in person or by proxy was 0. (D) The number of votes cast by a majority of the holders of common stock in favor of the amendment was sufficient for approval by the common stock shareholders. In Witness Whereof, the Corporation, through its duly elected, serving and authorized president, has subscribed its name this 9th day of May, 2000. Lorilei Communications, Inc. By: /s/ Gerald R. Cunningham ________________________ Gerald R. Cunningham President Page 222 EX-3.6(II) 4 BYLAWS OF LORILEI Restated Bylaws of Lorilei Communications, Inc. ARTICLE I STOCKHOLDERS SECTION 1. Annual Meetings (a) (1) The annual meeting of the stockholders of the Corporation shall be held at the principal office of the Corporation in the State of Florida or at such other place within or without the State of Florida as may be determined by the Board of Directors and as may be designated in the notice of such meeting; provided that, whenever this Corporation is the subsidiary of another corporation that holds a majority of this Corporation's common stock (a "Parent Corporation"), then the annual meeting shall be held at the place where the Parent Corporation holds its annual meeting. (2) The meeting shall be held on the 15th day of July of each year or on such other day as the Board of Directors may specify; provided that, whenever this Corporation is the subsidiary of a Parent Corporation, then the annual meeting shall be held immediately after the organizational meeting of the Parent Corporation's Board of Directors immediately following the Parent Corporation's annual meeting. (3) If said day is a legal holiday, the meeting shall be held on the next succeeding business day not a legal holiday. (b) Business to be transacted at such meeting shall be the election of members of the Corporation's Board of Directors to succeed those whose terms are expiring and such other business as may be properly brought before the meeting. (c) In the event that the annual meeting, by mistake or otherwise, shall not be called and held as herein provided, a special meeting may be called as provided for in Section 2 of this Article I in lieu of and for the purposes of and with the same effect as the annual meeting. (d) In the event that the Corporation becomes subject to compliance with requirements imposed under Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), proposals by stockholders for action at an annual meeting must be submitted to the Corporation's principal executive offices so that they are received thereat on or before the 120th day prior to the annual anniversary of the last preceding annual meeting, unless such proposal relates to the nomination of members of the Corporation's Board of Directors, in which case it must be submitted to the Corporation's principal executive offices so that the name, address, telephone number and if available, fax number and e-mail address of the nominee, together with biographical data covering the nominees activities during the preceding five years satisfying the disclosure requirements of Regulation SB are received thereat on or before the 60th day prior to the time that the Corporation first files materials with the Commission pertaining to such meeting on either Schedule 14A or 14C promulgated under authority of the Exchange Act. Page 223 SECTION 2. Special Meetings (a) A special meeting of the stockholders of the Corporation may be called for any purpose or purposes at any time by the Chairman or President of the Corporation, by the Board of Directors or by the holders of not less than 10% of the outstanding capital stock of the Corporation entitled to vote at such meeting. (b) (1) At any time, upon the written direction of any person or persons entitled to call a special meeting of the stockholders, it shall be the duty of the Secretary to send notice of such meeting pursuant to Section 4 of this Article I. (2) It shall be the responsibility of the person or persons directing the Secretary to send notice of any special meeting of stockholders to deliver such direction and a proposed form of notice to the Secretary not less than 15 days prior to the proposed date of said meeting. (c) Special meetings of the stockholders of the Corporation shall be held at such place, within or without the State of Florida, on such dates, and at such time as shall be specified in the notice of such special meeting. SECTION 3. Adjournment (a) When the annual meeting is convened, or when any special meeting is convened, the presiding officer may adjourn it for such period of time as may be reasonably necessary to reconvene the meeting at another place and time. (b) The presiding officer shall have the power to adjourn any meeting of the stockholders for any proper purpose, including, but not limited to, lack of a quorum, securing a more adequate meeting place, electing officials to count and tabulate votes, reviewing any stockholder proposals or passing upon any challenge which may properly come before the meetings. (c) (1) When a meeting is adjourned to another time or place, it shall not be necessary to give any notice of the adjourned meeting if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken, and any business may be transacted at the adjourned meeting that might have been transacted on the original date of the meeting. (2) If, however, after the adjournment the Board fixes a new record date for the adjourned meeting, a notice of the adjourned meeting shall be given in compliance with Section 4(a) of this Article I to each stockholder of record on the new record date entitled to vote at such meeting. SECTION 4. Notice of Meetings; Purpose of Meeting; Waiver (a) (1) Each stockholder of record entitled to vote at any meeting shall be given in person, or by first class mail, postage prepaid, written notice of such meeting which, in the case of a special meeting, shall set forth the purpose(s) for which the meeting is called, not less than 20 or more than 60 days before the date of such meeting. Page 224 (2) If mailed, such notice is to be sent to the stockholder's address as it appears on the stock transfer books of the Corporation, unless the stockholder shall be requested of the Secretary in writing at least 15 days prior to the distribution of any required notice that any notice intended for him or her be sent to some other address, in which case the notice may be sent to the address so designated. (3) Notwithstanding any such request by a stockholder, notice sent to a stockholder's address as it appears on the stock transfer books of this Corporation as of the record date shall be deemed properly given. (4) Any notice of a meeting sent by United States mail shall be deemed delivered when deposited with proper postage thereon with the United States Postal Service or in any mail receptacle under its control. (b) (1) A stockholder waives notice of any meeting by attendance, either in person or by proxy, at such meeting or by waiving notice in writing either before, during or after such meeting. (2) Attendance at a meeting for the express purpose of objecting that the meeting was not lawfully called or convened, however, will not constitute a waiver of notice by a stockholder who states at the beginning of the meeting, his or her objection that the meeting is not lawfully called or convened. (c) A waiver of notice signed by all stockholders entitled to vote at a meeting of stockholders may also be used for any other proper purpose including, but not limited to, designating any place within or without the State of Florida as the place for holding such a meeting. (d) Neither the business to be transacted at, nor the purpose of, any regular or special meeting of stockholders need be specified in any written waiver of notice. SECTION 5. Closing of Transfer Books; Record Date; Stockholders' List (a) In order to determine the holders of record of the capital stock of the Corporation who are entitled to notice of meetings, to vote a meeting or adjournment thereof, or to receive payment of any dividend, or for any other purpose, the Board of Directors may fix a date not more than 60 days prior to the date set for any of the above-mentioned activities for such determination of stockholders. (b) If the stock transfer books shall be closed for the purpose of determining stockholders entitled to notice of or to vote at a meeting of stockholders, such books shall be closed for at least 25 days immediately preceding such meeting, as required in order to permit the Corporation to obtain the names of all stockholders entitled to notice in time to provide such notice. Page 225 (c) In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the date for any such determination of stockholders, such date in any case to be not less than 25 nor more than 60 days prior to the date on which the particular action, requiring such determination of stockholders, is to be taken. (d) If the stock transfer books are not closed and no record date is fixed for the determination of stockholders entitled to notice or to vote at a meeting of stockholders, or to receive payment of a dividend, the fifth date prior to 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 stockholders. (e) When a determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this Section, such determination shall apply to any adjournment thereof, unless the Board of Directors fixes a new record date under this Section for the adjourned meeting. (f) (1) The officer or agent having charge of the stock transfer books of the Corporation shall make, as of a date at least 10 days before each meeting of stockholders, a complete list of the stockholders entitled to vote at such meeting or any adjournment thereof, with the address of each stockholder and the number and class and series, if any, of shares held by each stockholder. (2) Such list shall be kept on file at the registered office of the Corporation, at the principal place of business of the Corporation or at the office of the transfer agent or registrar of the Corporation for a period of 10 days prior to such meeting and shall be available for inspection by any stockholder at any time during usual business hours. (3) Such list shall also be produced and kept open at the time and place of any meeting of stockholders and shall be subject to inspection by any stockholder at any time during the meeting. (g) The original stock transfer books shall be prima facie evidence as to the stockholders entitled to examine such list or stock transfer books or to vote any meeting of stockholders. (h) If the requirements of Section 5(f) of this Article I have not been substantially complied with, then, on the demand of any stockholder in person or by proxy, the meeting shall be adjourned until such requirements are complied with. (i) If no demand pursuant to Section 5(h) of this Article I is made, failure to comply with the requirements of this Section shall not affect the validity of any action taken at such meeting. (j) Section 5(g) of this Article I shall be operative only at such time(s) as the Corporation shall have 6 or more stockholders. SECTION 6. Quorum (a) At any meeting of the stockholders of the Corporation, the presence, in person or by proxy, of stockholders holding a majority of the issued and outstanding shares of the capital stock of the Corporation entitled to vote thereat shall be necessary to constitute a quorum for the transaction of any business. Page 226 (b) If a quorum is present, the vote of a majority of the shares represented at such meeting and entitled to vote on the subject matter shall be the act of the stockholders. (c) If there shall not be a quorum at any meeting of the stockholders of the Corporation, then the holders of a majority of the shares of the capital stock of the Corporation who shall be present at such meeting, in person or by proxy, may adjourn such meeting from time to time until holders of a quorum of the shares of the capital stock shall attend. (d) At any such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally scheduled. SECTION 7. Presiding Officer; Order of Business (a) (1) Meetings of the stockholders shall be presided over by the Chairman of the Board, or, if he or she is not present or there is no Chairman of the Board, by the President or, if he or she is not present, by the senior Vice President present or, if neither the Chairman of the Board, the President, nor a Vice President is present, the meeting shall be presided over by a chairman to be chosen by a plurality of the stockholders entitled to vote at the meeting who are present, in person or by proxy. (2) The presiding officer of any meeting of the stockholders may delegate his or her duties and obligations as the presiding officer as he or she sees fit. (b) The Secretary of the Corporation, or, in his or her absence, an Assistant Secretary shall act as Secretary of every meeting of stockholders, but if neither the Secretary nor an Assistant Secretary is present, the presiding officer of the meeting shall choose any person present to act as secretary of the meeting. (c) The order of business shall be as follows: Call of meeting to order. Proof of notice of meeting. Reading minutes of last previous stockholders' meeting or a waiver thereof. Reports of Officers. Reports of committees. Mandatory nominations for election to the Board of Directors based on contractual obligations. Election of members of the Corporation's Board of Directors. Regular and miscellaneous business. Special matters. Adjournment. Page 227 (d) (1) Notwithstanding the provisions of Section 7(c) of this Article I, the order and topics of business to be transacted at any meeting shall be determined by the presiding officer of the meeting in his or her sole discretion. (2) In no event shall any variation in the order of business or additions and deletions from the order of business as specified in Section 7(c) of this Article I invalidate any actions properly taken at any meeting. SECTION 8. Voting (a) Unless otherwise provided for in the Certificate of Incorporation, each stockholder shall be entitled, at each meeting and upon each proposal to be voted upon, to one vote for each share of voting stock recorded in his name on the books of the Corporation on the record date fixed as provided for in Section 5 of this Article I. (b) (1) The presiding officer at any meeting of the stockholders shall have the power to determine the method and means of voting when any matter is to be voted upon. (2) The method and means of voting may include, but shall not be limited to, vote by ballot, vote by hand or vote by voice. (3) No method of voting may be adopted, however, which fails to take account of any stockholder's right to vote by proxy as provided for in Section 10 of this Article I. (4) In no event may any method of voting be adopted which would prejudice the outcome of the vote. SECTION 9. Action Without Meeting (a) (1) Any action required to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of a majority of the Corporation's outstanding voting stock; provided that, if the Corporation is then subject to compliance with Section 14 of the Exchange Act, it must prior to such action have filed with the Commission and delivered to the stockholders an information statement and annual report in the form required thereby. (2) Such instrument may be executed in counterparts or as a unitary document. (b) In the event that the action to which the stockholders consent is such as would have required the filing of a certificate under the Florida Business Corporation Act, the effect of such consent shall be as if such action had been voted on by stockholders at a meeting thereof, however, the certificate filed under such other section shall state that written consent has been given in accordance with the provisions of Section 9 of this Article I. Page 228 (c) If the Corporation no longer has a class of securities registered under Section 12 of the Exchange Act and stockholder action is taken by written consent in lieu of meeting without prior notice, signed by less than all of the Corporation's stockholders, then all non participating stockholders shall be provided with written notice of the action taken within 10 days after the effective date of the written instrument taking such action. (d) No action by written consent in lieu of meeting shall be valid if it is in contravention of applicable proxy or informational rules adopted pursuant to the Exchange Act including, without limitation, the requirements of Section 14 thereof. SECTION 10. Proxies (a) Every stockholder entitled to vote at a meeting of stockholders or to express consent or dissent without a meeting, or his or her duly authorized attorney-in-fact, may authorize -another person or persons to act for him or her by proxy. (b) (1) Every proxy must be signed by the stockholder or his or her attorney-in-fact. (2) No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. (3) Every proxy shall be revocable at the pleasure of the stockholder executing it, except as otherwise provided in this Section 10. (c) The authority of the holder of a proxy to act shall not be revoked by the incompetence or death of the stockholder who executed the proxy unless, before the authority is exercised, written notice of any adjudication of such incompetence or of such death is received by the corporate officer responsible for maintaining the list of stockholders. (d) Except when other provisions shall have been made by written agreement between the parties, the record holder of shares held as pledges or otherwise as security or which belong to another, shall issue to the pledgor or to such owner of such shares, upon demand therefor and payment of necessary expenses thereof, a proxy to vote or take other action thereon. (e) A proxy which states that it is irrevocable is irrevocable when it is held by any of the following or a nominee of any of the following: (i) a pledgee; (ii) a person who has purchased or agreed to purchase the shares: (iii) a creditor or creditors of the Corporation who extend or continue to extend credit to the Corporation in consideration of the proxy, if the proxy states that it was given in consideration of such extension or continuation of credit, the amount thereof, and the name of the person extending or continuing credit; (iv) a person who has contracted to perform services as an officer of the Corporation, if a proxy is required by the contract of employment, if the proxy states that it was given in consideration of such contract of employment and states the name of the employee and the period of employment contracted for; and (v) a person designated by or under an agreement as provided in Article XI hereof. Page 229 (f) (1) Notwithstanding a provision in a proxy stating that it is irrevocable, the proxy becomes revocable after the pledge is redeemed, the debt of the Corporation is paid, the period of employment provided for in the contract of employment has terminated, or the agreement under Article XI hereof has terminated and, in a case provided for in Section 10(e) (iii) or Section 10(e) (iv) of this Article I, becomes revocable three years after the date of the proxy or at the end of the period, if any, specified therein, whichever period is less, unless the period of irrevocability of the proxy as provided in this Section 10. (2) This Section 10(f) does not affect the duration of a proxy under Section 10(b) of this Article I. (g) A proxy may be revoked, notwithstanding a provision making it irrevocable, by a purchaser of shares without knowledge of the existence of the provisions unless the existence of the proxy and its irrevocability is noted conspicuously on the face or back of the certificate representing such shares. (h) (1) If a proxy for the same shares confers authority upon two or more persons and does not otherwise provide, a majority of such persons present at the meeting, or if only one is present then that one, may exercise all the powers conferred by the proxy. (2) If the proxy holders present at the meeting are equally divided as to the right and manner of voting in any particular case, the voting of such shares shall be prorated. (i) If a proxy expressly so provides, any proxy holder may appoint in writing a substitute to act in his or her place. (j) Notwithstanding anything in the Bylaws to the contrary, no proxy shall be valid if it was obtained in violation of any applicable requirements of Section 14 of the Exchange Act or the Rules and Regulations promulgated thereunder. SECTION 11. Voting of Shares by Stockholders (a) (1) Shares standing in the name of another corporation, domestic or foreign, may be voted by the officer, agent, or proxy designated by the bylaws of the corporate stockholder; or, in the absence of any applicable bylaw, by such person as the Board of Directors of the corporate stockholder may designate. (2) Proof of such designation may be made by presentation of a certified copy of the bylaws or other instrument of the corporate stockholder. (3) In the absence of any such designation, or in case of conflicting designation by the corporate stockholder, the chairman of the board, president, any vice president, secretary and treasurer of the corporate stockholder, in that order, shall be presumed to possess authority to vote such shares. Page 230 (b) (1) Shares held by an administrator, executor, guardian or conservator may be voted by him or her, either in person or by proxy, without a transfer of such shares into his or her name. (2) Shares standing in the name of a trustee may be voted as shares held by him or her without a transfer of such shares into his name. (c) (1) Shares standing in the name of a receiver may be voted by such receiver. (2) Shares held by or under the control of a receiver but not standing in the name of such receiver, may be voted by such receiver without the transfer thereof into his name if authority to do so is contained in an appropriate order of the court by which such receiver was appointed. (d) A stockholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee. (e) Shares of the capital stock of the Corporation belonging to the Corporation or held by it in a fiduciary capacity shall not be voted, directly or indirectly, at any meeting, and shall not be counted in determining the total number of outstanding shares. (f) In the event that a stockholder is party to an agreement to which the Corporation is also a party that requires such stockholder to vote his, her or its shares in a specified manner, then, absent an order by a court of competent jurisdiction directing the Corporation to act otherwise, the stockholder may only vote his, her or its common stock in full compliance with such obligations. ARTICLE II DIRECTORS SECTION 1. Board of Directors; Exercise of Corporate Powers (a) (1) All corporate powers shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be managed under the direction of, the Board of Directors except as may be otherwise provided in the Certificate of Incorporation or in a stockholders' agreement. (2) If any such provision is made in the Certificate of Incorporation or in a stockholders' agreement, the powers and duties conferred or imposed upon the Board of Directors shall be exercised or performed to such extent and by such person or persons as shall be provided in the Certificate of Incorporation or stockholders' agreement. (b) Directors need not be residents of this state or stockholders of the Corporation unless the Certificate of Incorporation so requires. (c) The Board of Directors shall have authority to fix the compensation of members of the Corporation's Board of Directors unless otherwise provided in the Certificate of Incorporation. Page 231 (d) A Director shall perform his or her duties as a Director, including his or her duties as a member of any committee of the Board upon which he may serve, in good faith, in a manner he or she reasonably believes to be in the best interests of the Corporation, and with such care as an ordinarily prudent person in a like position would use under similar circumstances. (e) In performing his or her duties, a Director shall be entitled to rely on information, opinions, reports or statements, including without limitation, financial statements and other financial data, in each case prepared or presented by: (i) one or more officers or employees of the Corporation whom the Director reasonably believes to be reliable and competent in the matters presented; (ii) legal counsel, public accountants or other persons as to matters which the Director reasonably believes to be within such persons' professional or expert competence; or (iii) a committee of the Board upon which he or she does not serve, duly designated in accordance with a provision of the Certificate of Incorporation or these Bylaws, as to matters within its designated authority, which committee the Director reasonably believes to merit confidence. (f) A Director shall not be considered to be acting in good faith if he or she has knowledge concerning the matter in question that would cause such reliance described in Section 1(e) of this Article II to be unwarranted. (g) A person who performs his or her duties in compliance with Section 1 of this Article II shall have no liability by reason of being or having been a Director of the Corporation. (h) 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 presumed to have assented to the action taken unless he or she votes against such action or abstains from voting in respect thereto because of an asserted conflict of interest. SECTION 2. Number; Election; Classification of members of the Corporation's Board of Directors; Vacancies (a) (1) The Board of Directors of this Corporation shall consist of not less than one Director. (2) The Board shall have authority, from time to time, to increase the number of members of the Corporation's Board of Directors or to decrease it to not less than one member, provided that no decrease in the number of members of the Corporation's Board of Directors shall deprive a serving Director of the right to serve throughout the term of his or her election. (3) In the event that the Corporation is party to an agreement to which a majority of its stockholders are also parties and which requires that one or more persons or their designees be elected as members of the Corporation's board of directors, then, absent an order by a court of competent jurisdiction directing the Corporation to act otherwise, such persons shall serve as members of the Corporation's Board of Directors, in full compliance with such obligations. Page 232 (b) Each person named in the Certificate of Incorporation as a member of the initial Board of Directors shall serve until his or her successor shall have been elected and qualified or until his or her earlier resignation, removal from office, or death. (c) (1) At the first annual meeting of stockholders and at each annual meeting thereafter, the stockholders shall elect Directors to hold office until the next succeeding annual meeting, except in case of the classification of members of the Corporation's Board of Directors as permitted by the Florida Business Corporation Act. (2) Each Director shall hold office for the term for which he or she is elected and until his or her successor shall have been elected and qualified or until his or her earlier resignation, removal from office, or death. (d) (1) The stockholders, by amendment to these Bylaws, may provide that the Directors be divided into not more than four classes, as nearly equal in number as possible, whose terms of office shall respectively expire at different times, but no such term shall continue longer than four years, and at least one fourth of the Directors shall be elected annually. (2) If members of the Corporation's Board of Directors are classified and the number of members of the Corporation's Board of Directors is thereafter changed, any increase or decrease in Directorship shall be so apportioned among the classes as to make all classes as nearly equal in number as possible. (e) (1) Any vacancy occurring in the Board of Directors, including any vacancy created by reason of an increase in the number of members of the Corporation's Board of Directors, may be filled only by the Board of Directors. (2) A Director elected to fill a vacancy shall hold office only until the next election of Directors by the stockholders. SECTION 3. Removal of Directors (a) At a meeting of stockholders called expressly for that purpose, any Director or the entire Board of Directors may be removed, with or without cause, by the vote of the holders of 60% of the shares then entitled to vote at an election of members of the Corporation's Board of Directors; provided that at least one Director remains in office or one Director is elected as a replacement Director concurrently with such removal and provided further that such removal does not contravene contractual obligations binding on the Corporation and the holders of more than 40% of the Corporation's common stock. (b) In the event that the number of members of the Corporation's Board of Directors is reduced below that number mandated in the Certificate of Incorporation as a result of the removal of one or more Directors by the stockholders, then the remaining Directors or the contemporaneously elected replacement Director will promptly elect replacement Directors, to serve until the next meeting of the Corporation's stockholders, and until their replacements have been elected, qualified and assume their office. Page 233 SECTION 4. Director Quorum and Voting (a) A majority of the Directors fixed in the manner provided in these Bylaws shall constitute a quorum for the transaction of business; provided that, in the event that the Corporation is a party to an agreement that requires the presence and participation of specified directors, either generally or as to specific matters, then a quorum will require the participation of such person or persons, in the manner called for by such agreement. (b) A majority of the members of an Executive Committee or other committee shall constitute a quorum for the transaction of business at any meeting of such Executive Committee or other committee; provided that, in the event that the Corporation is a party to an agreement that requires the presence and participation of specified directors, either generally or as to specific matters, then a quorum will require the participation of such person or persons, in the manner called for by such agreement. (c) The act of a majority of the members of the Corporations Board of Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors; provided that, in the event that the Corporation is a party to an agreement that requires the affirmative vote of specified members, either generally or as to specific matters, then action by the Board of Directors will require the affirmative vote of such member or members, in the manner called for by such agreement. (d) The act of a majority of the members of an Executive Committee present at an Executive Committee meeting at which a quorum is present shall be the act of the Executive Committee; provided that, in the event that the Corporation is a party to an agreement that requires the affirmative vote of specified members, either generally or as to specific matters, then action by the Executive Committee of the Board of Directors will require the affirmative vote of such member or members, in the manner called for by such agreement. (e) The act of a majority of the members of any other committee present at a committee meeting at which a quorum is present shall be the act of the committee; provided that, in the event that the Corporation is a party to an agreement that requires the affirmative vote of specified members, either generally or as to specific matters, then action by any such committee of the Board of Directors will require the affirmative vote of such member or members, in the manner called for by such agreement. (f) Directors may, if not contrary to applicable law, vote either in person or by proxy, provided that the proxy holder must be either another Director, an officer or a stockholder of the Corporation; provided that any Director who elects to vote by proxy more than three times during any single fiscal year shall, unless otherwise determined by the Board of Directors, be automatically removed as a Director and provided further, that, in the event that the Corporation is a party to an agreement that requires the affirmative vote of specified members, either generally or as to specific matters,then action by the Board of Directors will require the affirmative vote of such member or members, in the manner called for by such agreement. Page 234 SECTION 5. Director Conflicts of Interest (a) No contract or other transaction between this Corporation and one or more of its Directors or any other corporation, firm, association or entity in which one or more of its Directors are Directors or officers or are financially interested shall be either void or voidable because of such relationship or interest or because such Director or Directors are present at the meeting of the Board of Directors or a committee thereof which authorizes, approves or ratifies such contract or transaction or because their votes are counted for such purpose, if: (i) The fact of such relationship or interest is disclosed or known to the Board of Directors or committee which authorizes, approves or ratifies the contract or transaction by a vote or consent sufficient for the purpose without counting the votes or consents of such interested Directors; or (ii) The fact of such relationship or interest is disclosed or known to the stockholders entitled to vote and they authorize, approve or ratify such contract or transaction by vote or written consent; or (iii) The contract or transaction is fair and reasonable as to the Corporation at the time it is authorized by the Board, a committee, or the stockholders. (b) Interested Directors, whether or not voting, may be counted in determining the presence of a quorum at a meeting of the Board of Directors or a committee thereof which authorizes, approves or ratifies such contract or transaction. SECTION 6. Executive and Other Committees; Designation; Authority (a) The Board of Directors, by resolution adopted by the full Board of Directors, may designate from among its Directors an Executive Committee and one or more other committees each of which, to the extent provided in such resolution or in the Certificate of Incorporation or these Bylaws, shall have and may exercise all the authority of the Board of Directors, except that no such committee shall have the authority to : (i) approve or recommend to stockholders actions or proposals required by the Florida Business Corporation Act to be approved by stockholders; (ii) designate candidates for the office of Director for purposes of proxy solicitation or otherwise; (iii) fill vacancies on the Board of Directors or any committee thereof; (iv) amend these Bylaws; (v) authorize or approve the re-acquisition of shares unless pursuant to a general formula or method specified by the Board of Directors; or (vi) authorize or approve the issuance or sale of, or any contract to issue or sell, shares or designate the terms of a series of a class of shares, unless the Board of Directors, having acted regarding general authorization for the issuance or sale of shares, or any contract therefor, and, in the case of a series, the designation thereof has specified a general formula or method by resolution or by adoption of a stock option or other plan, authorized a committee to fix the terms upon which such shares may be issued or sold, including, without limitation, the price, the rate or manner of payment of dividends, provisions for redemption, sinking fund, conversion, and voting or preferential rights, and provisions for other features of a class of shares, or a series of a class of shares, with full power in such committee to adopt any final resolution setting forth all the terms of a series for filing with the Department of State under the Florida Business Corporation Act. Page 235 (b) The Board of Directors, by resolution adopted in accordance with Section 6(a) of this Article II, may designate one or more members of the Board of Directors as alternate members of any such committee, who may act in the place and stead of any absent member or members at any meeting of such committee. (c) Neither the designation of any such committee, the delegation thereto of authority, nor action by such committee pursuant to such authority shall alone constitute compliance by a member of the Board of Directors, not a member of the committee in question, with his responsibility to act in good faith, in manner he reasonably believes to be in the best interests of the Corporation, and with such care as an ordinarily prudent person in a like position would use under similar circumstances. SECTION 7. Place, Time, Notice and Call of Board of Directors' Meeting. (a) Meetings of the Board of Directors, regular or special, may be held either within or without the State of Florida. (b) (i) A regular meeting of the Board of Directors of the Corporation shall be held for the election of officers of the Corporation and for the transaction of such other business as may come before such meeting as promptly as practicable after the annual meeting of the stockholders of this Corporation without the necessity of notice other than this Bylaw. (ii) Other regular meetings of the Board of Directors of the Corporation may be held at such places as the Board of Directors of the Corporation may from time to time resolve without notice other than such resolution. (iii) Special meetings of the Board of Directors may be held at any time upon call of the Chairman of the Board of Directors or a majority of the Directors of the Corporation, at such time and at such place as shall be specified in the call thereof. (iv) (A) Notice of any special meeting of the Board of Directors must be given at least two days prior thereto, if by written notice delivered personally; or at least five days prior thereto, if mailed; or at least two days prior thereto, if by telegram; or at least two days prior thereto, if by telephone or E-mail, receipt confirmed. (B) If such notice is given by mail, such notice shall be deemed to have been delivered when deposited with the United States Postal Service addressed to the business address of such Director with postage thereon prepaid. Page 236 (C) If notice be given by telegram, such notice shall be deemed delivered when the telegram is delivered to the telegraph company. (D) If notice is given by telephone (including facsimile transmission), such notice shall be deemed delivered when the call is completed. (E) If notice is given by E-mail, such notice shall be deemed delivered when confirmation of receipt is obtained. (c) (1) Notice of a meeting of the Board of Directors need not be given to any Director who signs a waiver of notice either before or after the meeting. (2) Attendance of a Director at a meeting shall constitute a waiver of notice of such meeting and waiver of any and all objections to the place of the meeting, the time of the meeting, or the manner in which it has been called or convened, except when a Director states, at the beginning of the meeting, any objection to the transaction of business because the meeting is not lawfully called or convened. (d) 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. (e) (1) A majority of the Directors present, whether or not a quorum exists, may adjourn any meeting of the Board of Directors to another time and place. (2) Notice of any such adjourned meeting shall be given to the Directors who were not present at the time of the adjournment and, unless the time and place of the adjourned meeting are announced at the time of the adjournment, to the other Directors. (f) (1) Members of the Board of Directors may participate in a meeting of such Board by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can communicate with each other at the same time. (2) Participation by such means shall constitute presence in person at a meeting. SECTION 8. Action by Directors Without a Meeting (a) (1) Any action required by the Florida Business Corporation Act to be taken at a meeting of the Directors of the Corporation, or any action which may be taken at a meeting of the Directors or a committee thereof, may be taken without a meeting if a consent in writing, setting forth the action so to be taken, signed by all of the Directors, or all of the members of the committee, as the case may be, and is filed in the minutes of the proceedings of the Board or of the committee. (2) Such consent shall have the same effect as a unanimous vote. Page 237 (b) If not contrary to applicable law, of members of the Corporation's Board of Directors may take action as the Board of Directors or committees thereof through a written consent to action signed by a number of members of the Corporation's Board of Directors sufficient to have carried a vote of the Board of Directors or committee thereof with all members present and voting; provided, that all Directors not joining in such written instrument shall be deemed for all purposes to have cast dissenting votes, and that all Directors not parties to such instrument shall receive written notice of all action taken through such instrument within three days after such instrument shall have been subscribed by the requisite number of members of the Corporation's Board of Directors required for such action, provided that, in the event that the Corporation is a party to an agreement that requires the affirmative vote of specified members, either generally or as to specific matters, then action by the Board of Directors will require the affirmative vote of such member or members, in the manner called for by such agreement. SECTION 9. Compensation (a) The members of the Corporation's Board of Directors and members of the Executive and any other committee of the Board of Directors shall be entitled to such reasonable compensation for their services and on such basis as shall be fixed from time to time by resolution of the Corporation's stockholders. (b) The members of the Board of Directors and members of any committee of that Board of Directors shall be entitled to reimbursement for any reasonable expenses incurred in attending any Board or committee meeting. (c) Any member of the Corporation's Board of Directors receiving compensation under this Section shall not be prevented from serving the Corporation in any other capacity and shall not be prohibited from receiving reasonable compensation for such other services. SECTION 10. Resignation (a) Unless he is the sole serving Director, any Director of the Corporation may resign at any time by providing the Board of Directors with written notice indicating the Director's intention to resign and the effective date thereof. (b) A sole serving Director of the Corporation must, at least concurrently with his or her resignation, elect one or more successor Director(s) at least one of whom must assume his or her office concurrently with the subject resignation, and the resignation shall be effected by providing the successor Director(s) with written notice indicating the Director's intention to resign and the effective date thereof. Page 238 ARTICLE III OFFICERS SECTION 1. Election; Number; Terms of Office (a) (1) The officers of the Corporation shall consist of a Chairman of the Board of Directors whose title may be designated as "Chairman," a Chief Executive officer, a President, a Chief Operating Officer, a Chief Financial Officer, one or more Vice-Presidents, a Secretary and a Treasurer, each of whom shall be elected by the Board of Directors at such time and in such manner as may be prescribed by these Bylaws. (2) Such other officers and assistant officers and agents as may be deemed necessary may be elected or appointed by the Board of Directors. (3) The officers of the Corporation shall be hereinafter collectively referred to as the "Officers." (b) All Officers and agents, as between themselves and the Corporation, shall have such authority and perform such duties in the management of the Corporation as are provided in these Bylaws, or as may be determined by resolution of the Board of Directors not inconsistent with these Bylaws. (c) Any two or more offices may be held by the same person, except for the offices of President and Secretary. (d) A failure to elect a Chairman of the Board, Chief Executive Officer, President, Chief Operating Officer, Chief Financial Officer, a Vice President, a Secretary or a Treasurer shall not affect the existence of the Corporation. SECTION 2. Removal (a) An Officer of the Corporation shall hold office until the election and qualification of his successor; however, any Officer of the Corporation may be removed from office by the Board of Directors whenever in its judgment the best interests of the Corporation will be served thereby, provided that, in the event that the Corporation is a party to an agreement that requires the affirmative vote of specified members, either generally or as to specific matters, then action by the Board of Directors will require the affirmative vote of such member or members, in the manner called for by such agreement. (b) Such removal shall be without prejudice to the contract rights, if any, of the person so removed. (c) Election or appointment of an officer shall not of itself create any contract right to employment or compensation or create an employer - employee relationship. SECTION 3. Vacancies Any vacancy in any office from any cause may be filled for the unexpired portion of the term of such office by the Board of Directors. Page 239 SECTION 4. Powers and duties (a) (1) The Chairman of the Board of Directors shall preside over meetings of the Board of Directors and the stockholders. (2) Unless a separate Chief Executive Officer is elected, the Chairman shall exercise the powers hereafter granted to that office. (3) Unless a Chairman of the Board is specifically elected, the President shall be deemed to be the Chairman of the Board. (b) (1) The Chief Executive Officer shall be the principal Officer of the Corporation to whom all other Officers shall be subordinate. (2) In the event no Chief Executive Officer is separately elected, such office shall be assumed by the Chairman of the Board, and if no such office has been filled, by the President. (3) Except where by law the signature of the President is required or unless the Board of Directors shall rule otherwise, the Chief Executive Officer shall possess the same power as the President to sign all certificates, contracts and other instruments of the Corporation which may be authorized by the Board of Directors. (c) (1) The Chief Operating Officer of the Corporation shall be responsible for management of the day to day affairs of the Corporation, subject to compliance with the directions of the Board of Directors and of the Chief Executive Officer. (2) He shall be responsible for the general day-to-day supervision of the business and affairs of the Corporation. (3) He shall sign or countersign all certificates, contracts or other instruments of the Corporation, as authorized by the Board of Directors or as assigned by the Chief Executive Officer. (4) He may, but need not, be a member of the Board of Directors. (5) Unless otherwise provided by specific resolution of the Board of Directors, the President shall be the Chief Operating Officer of the Corporation. (d) (1) In the absence of a separately elected or available Chief Executive Officer or Chairman of the Board, the President shall be the Chief Executive Officer of the Corporation and shall preside at all meetings of the stockholders and the Board of Directors. (2) The Board of Directors will at all times retain the power to expressly delegate the duties of the President to any other Officer of the Corporation. Page 240 (e) (1) The Chief Financial Officer shall be responsible for coordinating all financial aspects of the Corporation's operations, including strategic financial planning, supervision of the Corporation's Treasurer, Comptroller and outside auditors. (2) In the event an Audit Committee of the Board of Directors is designated and serving, he shall be responsible for keeping such committee fully and timely informed of all matters under its jurisdiction. (3) The Chief Financial Officer shall, unless otherwise specifically provided by the Board of Directors, serve as the Corporation's principal compliance officer and shall be responsible for overseeing preparation and filing of all reports of the Corporation's activities required to be filed, either periodically or on a special basis with the United States Internal Revenue Service, the Securities and Exchange Commission and with other federal, state or local governmental agencies. (f) (1) The Vice President(s), if any, in the order designated by the Board of Directors, shall exercise the functions of the President in the event of the absence, disability, death, or refusal to act of the President. (2) During the time that any Vice President is properly exercising the functions of the President, such Vice President shall have all the powers of and be subject to all restrictions upon the President. (3) Each Vice President shall have such other duties as are assigned to him from time to time by the Board of Directors or by the President of the Corporation and shall be subject to such specializing designations (e.g., "senior," executive," etc.) as the Board of Directors may select. (g) (1) The Secretary of the Corporation shall keep the minutes of the meetings of the stockholders of the Corporation, and, unless provided otherwise by the Chairman at any meeting of the Board of Directors, the Secretary shall keep the minutes of the meetings of the Board of Directors of the Corporation. (2) The Secretary shall be the custodian of the minute books of the Corporation and such other books and records of the Corporation as the Board of Directors of the Corporation may direct. (3) The Secretary of the Corporation shall have the general responsibility for maintaining the stock transfer books of the Corporation, or of supervising the maintenance of the stock transfer books of the Corporation by the transfer agent, if any, of the Corporation. (4) The Secretary shall be the custodian of the corporate seal of the Corporation and shall affix the corporate seal of the Corporation on contracts and other instruments as the Board of Directors may direct. Page 241 (5) The Secretary shall perform such other duties as are assigned from time by the Board of Directors, the Chief Executive Officer, the Chairman, the Chief Operating Officer or the President of the Corporation. (h) (1) The Treasurer of the Corporation shall be directly subordinate to the Chief Financial Officer. (2) In the absence of a Chief Financial Officer, such office shall be filled by the Treasurer. (3) Unless otherwise specified by the Board of Directors, the Treasurer shall have custody of all funds and securities owned by the Corporation. (4) The Treasurer shall cause to be entered regularly in the proper books of account of the Corporation full and accurate accounts of the receipts and disbursements of the Corporation (5) The Treasurer of the Corporation shall render a statement of the cash, financial and other accounts of the Corporation whenever he is directed to render such a statement by the Board of Directors or by the President of the Corporation. (6) The Treasurer shall at all reasonable times make available the Corporation's books and financial accounts to any Director of the Corporation during normal business hours. (7) The Treasurer shall perform all other acts incident to the Office of Treasurer of the Corporation, and he shall have such other duties as are assigned to him from time to time by the Board of Directors, the Chief Executive Officer, the Chairman, the Chief Operating Officer or the President of the Corporation. (i) (1) The Corporation's Board of Directors shall designate a person licensed to practice law in one of the states comprising the United States as the Corporation's General Counsel and Chief Legal Officer; (2) The Corporation's General Counsel and Chief Legal Officer shall coordinate the Corporation's legal affairs under the directions of the Board of Directors and in coordination with the Chief Executive Officer, to whom he or she shall report; (3) The Board of Directors may appoint such subordinate legal officers and assign them such functions as it may deem appropriate. (j) Other subordinate or assistant Officers appointed by the Board of Directors or by the Chief Executive Officer, the Chairman, the Chief Operating Officer or the President, if such authority is delegated to them by the Board of Directors, shall exercise such powers and perform such duties as may be delegated to them by the Board of Directors, the Chief Executive Officer, the Chief Operating Officer or by the President, as the case may be. Page 242 (k) In case of the absence or disability of any Officer of the Corporation and of any person authorized to act in his place during such period of absence or disability, the Board of Directors may from time to time delegate the powers and duties of such Officer or any Director or any other person whom it may select. SECTION 5. Salaries (a) The salaries of all Officers of the Corporation shall, except as otherwise determined or required by an agreement entered into among all the stockholders of the Corporation, be fixed by the Board of Directors. (b) No Officer shall be ineligible to receive such salary by reason of the fact that he is also a Director of the Corporation and receiving compensation therefor. ARTICLE IV LOANS TO EMPLOYEES AND OFFICERS; GUARANTEE OF OBLIGATIONS OF EMPLOYEES AND OFFICERS (a) This Corporation may not lend money to, guarantee any obligation of, or otherwise assist any Officer or other employee of the Corporation or of a subsidiary, including any Officer or employee who is a Director of the Corporation or of a subsidiary, unless, in the judgment of the Directors, such loan, guarantee or assistance may reasonably be expected to benefit the Corporation and such decision has been ratified by the Corporation's stockholders. (b) The loan, guarantee or other assistance may be with or without interest, and may be unsecured, or secured in such manner as the Board of Directors shall approve and the Corporation's stockholders shall ratify, including, without limitation, a pledge of shares of stock of the Corporation. ARTICLE V STOCK CERTIFICATES; VOTING TRUSTS; TRANSFERS SECTION 1. Certificates Representing Shares No certificates representing shares of this Corporation need be issued if the Corporation elects to maintain stock ownership records on a book entry basis, if such method is permitted under applicable law; however, in the event that such method is not permitted under applicable law, then (a) (1) Every holder of shares of this Corporation shall be entitled to one or more certificates, representing all shares to which he is entitled and such certificates shall be signed by the Chairman, Chief Executive Officer, Chief Operating Officer, the President or a Vice President and the Secretary or an Assistant Secretary of the Corporation and may be sealed with the seal of the Corporation or a facsimile thereof. Page 243 (2) The signatures of the Chairman, the Chief Executive Officer, the Chief Operating Officer, the President or Vice President and the Secretary or Assistant Secretary may be facsimiles if the certificate is manually signed on behalf of a transfer agent or a registrar other than the Corporation itself or an employee of the Corporation. (3) In case any Officer who signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such Officer before such certificate is issued, it may be issued by the Corporation with the same effect as if it were executed by the appropriate Officer at the date of its issuance. (b) Every certificate representing shares issued by this Corporation shall, if shares are divided into one or more classes or series with differing rights, state that the Corporation will furnish to any stockholder upon request and without charge a full statement of: (i) the designations, preferences, limitations, and relative rights of the shares of each class or series authorized to be issued, and (ii) the variations in the relative rights and preferences between the shares of each such series, if the Corporation is authorized to issue any preferred or special class in series and so far as the same have been fixed and determined, and the authority of the Board of Directors to fix and determine, the relative rights and preferences of subsequent series. (c) Every certificate representing shares which are restricted as to sale, disposition or other transfer (including restrictions based on federal or state securities and other laws) shall state that such shares are restricted as to transfer and shall set forth or fairly summarize upon the certificate, or shall state that the Corporation will furnish to any stockholder upon request and without charge a full statement of, such restrictions. (d) Each certificate representing shares shall state upon the face thereof: (i) the name of the Corporation; (ii) that the Corporation is organized under the laws of the State of Florida; (iii) the name of the person or persons to whom issued; (iv) the number and class of shares, and the designation of the series, if any, which such certificate represents; and (v) the par value of each share represented by such certificate, or a statement that the shares are without par value. (e) No certificate shall be issued for any shares until they are fully paid for and in the event that a certificate is erroneously issued or compensation paid is subsequently discovered to be other than as represented (e.g., dishonored checks, securities of a corporation acquired in a reorganization where the representations and warranties provided prove to be materially false, etc.), then the Board of Directors shall promulgate a certified resolution detailing the nature of the misrepresented consideration, and shall submit such certified resolution to the person responsible for recording and effecting transactions in the Corporation's securities; whereupon such securities will be restricted from transfer and treated as no longer outstanding for all purposes unless the Corporation becomes subject to a judgment of a court of competent jurisdiction providing otherwise. Page 244 SECTION 2. Transfer Books (a) The Corporation shall keep at its registered office or principal place of business or in the office of its transfer agent or registrar, a book (or books where more than one kind, class, or series of stock is outstanding) to be known as the Stock Book, containing the names, alphabetically arranged, addresses and Social Security numbers of every stockholder and the number of shares each kind, class or series of stock held of record. (b) Where the Stock Book is kept in the office of the transfer agent, the Corporation shall keep at its principal office copies of the stock lists prepared from said Stock Book and sent to it from time to time (but not less frequently than every month) by said transfer agent. (c) The Stock Book or stock lists shall show the current status of the ownership of shares of the Corporation provided that, if the transfer agent of the Corporation be located elsewhere, a reasonable time shall be allowed for transit or mail. SECTION 3. Transfer of Shares (a) The name(s) and address(es) of the person(s) to whom shares of stock of this Corporation are issued, shall be entered on the Stock Transfer Books of the Corporation, with the number of shares and date of issue. (b) (1) Transfer of shares of the Corporation shall be made on the Stock Transfer Books of the Corporation by the Secretary or the transfer agent, subject to compliance with any restrictions specified on such certificate, only when the holder of record thereof or the legal representative of such holder of record or the attorney-in-fact of such holder of record, authorized by power of attorney duly executed and filed with the Secretary or transfer agent of the Corporation, shall surrender the Certificate representing such shares for cancellation. (2) Lost, destroyed or stolen Stock Certificates shall be replaced pursuant to Section 5 of this Article V. (c) The person or persons in whose names shares stand on the books of the Corporation shall be deemed by the Corporation to be the owner of such shares for all purposes, except as otherwise provided pursuant to Sections 10 and 11 of Article I, or Section 4 of Article V. Page 245 (d) Shares of the Corporation's capital stock shall be freely transferable without required Board of Directors' consent, unless such shares are subject to transfer restrictions under Securities and Exchange Commission Rule 144 or a consent requirement has been imposed pursuant to a binding written contract subscribed to by the holder or his or her predecessor in interest. (e) (1) All transactions in securities subject to any restrictions imposed under Securities and Exchange Commission Rule 144 ("restricted securities" and "Rule 144," respectively) shall, as a condition to transfer, require the following documentation, to be reviewed and approved by legal counsel to the Corporation: (A) An affidavit from the holder (the "Holder") providing details concerning acquisition of the subject shares; providing evidence of the date when consideration for the shares was paid in full; detailing all transactions in the Corporation's securities during the immediately preceding 90 days; affirming a present intent to dispose of the subject securities; affirming that a Form 144 has been filed with the Securities and Exchange Commission covering the proposed transaction (and providing a copy thereof); affirming compliance with any reporting obligations under Sections 13(d), 13(g) or 16(b) of the Exchange Act and providing such other facts or representations as legal counsel to the Corporation may reasonably require; (B) A written confirmation by the Corporation's transfer agent based on records available thereto of all transactions in the Corporation's securities by the Holder and anyone with whom the holder is required to aggregate sales or securities holdings for purposes of Rule 144, as well as confirmation of the percentage of outstanding securities of the Corporation held of record by the Holder and anyone with whom the holder is required to aggregate sales or securities holdings for purposes of Rule 144; (C) Except as provided below, a written confirmation from the broker through whom the Holder is effecting the proposed transaction verifying that the transaction will be effected in full compliance with Rule 144; and (D) A legal opinion from counsel to the Holder (who may not also be the counsel to the Corporation) specifically addressing all aspects of Rule 144 and detailing the manner in which they are being complied with or the reasons that they are not applicable. (2) Transactions in restricted securities that are not being effected in reliance on Rule 144 shall require, as a condition to transfer, the following documentation, to be reviewed and approved by legal counsel to the Corporation: (A) An affidavit from the holder (the "Holder") providing details concerning acquisition of the subject shares; providing evidence of the date when consideration for the shares was paid in full; the identity and qualifications of the person to whom the securities are being transferred; the manner in which such person has been provided with required information concerning the Corporation; affirming compliance with any reporting obligations under Sections 13(d), 13(g) or 16(b) of the Exchange Act and providing such other facts or representations as legal counsel to the Corporation may reasonably require; Page 246 (B) A legal opinion from counsel to the Holder (who may not also be the counsel to the Corporation) addressed to the Corporation in a manner creating enforceable privity between such legal counsel and the Corporation, specifically addressing all aspects of the exemptions relied on to effect the proposed transaction without registration under applicable federal and state securities laws and regulations, and detailing the manner in which they are being complied with or the reasons that they are not applicable. (3) No transactions in the Corporation's restricted securities failing to materially comply with the foregoing requirements will be honored, nor will any holding period required under Rule 144 be deemed to commence until all such requirements are materially complied with (material compliance to be determined in the sole discretion of the Corporation's Board of Directors). SECTION 4. Voting Trusts (a) (1) Any number of stockholders of the Corporation 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 ten years, by: (i) entering into a written voting trust agreement specifying the terms and conditions of the voting trust; (ii) depositing a counterpart of the agreement with the Corporation at its registered office; and (iii) transferring their shares to such trustee or trustees for the purposes of this Agreement. (2) Prior to the recording of the agreement, the stockholder concerned shall render the stock certificate(s) described therein to the Corporate Secretary who shall note on each certificate: "This Certificate is subject to the provisions of a voting trust agreement dated ..........., recorded in Minute Book ............, of the Corporation. (b) (1) Upon the transfer of such shares, voting trust certificates shall be issued by the trustee or trustees to the stockholders who transfer their shares in trust. (2) Such trustee or trustees shall keep a record of the holders of voting trust certificates evidencing a beneficial interest in the voting trust, giving the names and addresses of all such holders and the number and class or the shares in respect of which the voting trust certificates held by each are issued, and shall deposit a copy of such record with the Corporation at its registered office. (c) The counterpart of the voting trust agreement and the copy of such record so deposited with the Corporation shall be subject to the same right of examination by a stockholder of the Corporation, in person or by agent or attorney, as are the books and records of the Corporation, and such counterpart and such copy of such record shall be subject to examination by any holder of record of voting trust certificates either in person or by agent or attorney, at any reasonable time for any proper purpose. Page 247 (d) (1) At any time before the expiration of a voting trust agreement as originally fixed or as extended one or more times under this Section 4(d), one or more holders of voting trust certificates may, by agreement in writing, extend the duration of such voting trust agreement, nominating the same or substitute trustees, for an additional period not exceeding 10 years. (2) Such extension agreement shall not affect the rights or obligations or persons not parties to the agreement, and such persons shall be entitled to remove their shares from the trust and promptly to have their stock certificates reissued upon the expiration of the original term of the voting trust agreement. (3) The extension agreement shall in every respect comply with and be subject to all the provisions of this Section 4, applicable to the original voting trust agreement except that the 10 year maximum period of duration shall commence on the date of adoption of the extension agreement. (e) The trustees under the terms of the agreements entered into under the provisions of this Section 4, shall not acquire the legal title to the shares but shall be vested only with the legal right and title to the voting power which is incident to the ownership of the shares. (f) Notwithstanding generally applicable prohibitions against a corporation's voting of treasury stock, if the Corporation is the trustee under a voting trust, it shall have full authority to vote such shares in accordance with the terms of the voting trust agreement, even if such agreement vests absolute and unfettered voting discretion in the trustee and notwithstanding that the voting trust was created at the prompting or direction of the Corporation, its officers or Directors. SECTION 5. Lost, Destroyed, or Stolen Certificates No Certificate representing shares of stock in the Corporation shall be issued in place of any Certificate alleged to have been lost, destroyed, or stolen except on production of evidence, satisfactory to the Board of Directors, of such loss, destruction or theft, and, if the Board of Directors so requires, upon the furnishing of an indemnity bond in such amount (but not to exceed twice the fair market value of the shares represented by the Certificate) and with such terms and with such surety as the Board of Directors may, in its discretion, require. ARTICLE VI BOOKS AND RECORDS (a) The Corporation shall keep correct and complete books and records of account and shall keep minutes of the proceedings of its stockholders, Board of Directors and committees of the Board of Directors. (b) Any books, records and minutes may be in written form or in any other form capable of being converted into written form within a reasonable time. Page 248 (c) Any person who shall have been a holder of record of shares, or the holder of record of voting trust certificates for, at least five percent of the outstanding shares of any class or series of the Corporation, upon written demand stating the purpose thereof, shall; subject to the qualifications contained in subsection (d) hereof, have the right to examine, in person or by agent or attorney, at any reasonable time or times, for any purpose, its relevant books and records of account, minutes and records of stockholders and to make extracts therefrom. (d) (1) No stockholder who within two years has sold or offered for sale any list of stockholders or of holders of voting trust certificates for shares of this Corporation or any other corporation; has aided or abetted any person in procuring any list of stockholders or of holders of voting trust certificates for any such purpose; or has improperly used any information secured through any prior examination of the books and records of account, minutes, or record of stockholders or of holders of voting trust certificates for shares of the Corporation of any other corporation; shall be entitled to examine the documents and records of the Corporation as provided in Section (c) of this Article VI. (2) No stockholder who does not act in good faith or for a proper purpose in making his demand shall be entitled to examine the documents and records of the Corporation as provided in Section (c) of this Article VI. (e) Unless modified by resolution of the stockholders and not otherwise required by applicable laws, this Corporation shall prepare not later than 90 days after the close of each fiscal year, audited financial statements, including all required schedules, prepared in accordance with Generally Accepted Accounting Principals ("GAAP") consistently applied; and shall prepare not later than 45 days after the close of each fiscal quarter (other than the fourth quarter), quarterly unaudited financial statements, including all required schedules, prepared in accordance with Generally Accepted Accounting Principals ("GAAP"). (f) Upon the written request of any stockholder or holder of voting trust certificates for shares of the Corporation, the Corporation shall mail to such stockholder or holder of voting trust certificates a copy of its most recent balance sheet and profit and loss statement. (g) Such financial statements shall be filed and kept for at least five years in the registered office of the Corporation in the State of Florida and shall be subject to inspection during business hours by any stockholder or holder of voting trust certificates, in person or by agent. ARTICLE VII DIVIDENDS The stockholders of the Corporation may, from time to time, declare, and the Corporation may pay dividends on its own shares, except when the Corporation is insolvent or when the payment thereof would render the Corporation insolvent, subject to the following provisions: Page 249 (a) Dividends in cash or property may be declared and paid, except as otherwise provided in this Article VII, only out of the unreserved and unrestricted earned surplus of the Corporation or out of capital surplus, however arising, but each dividend paid out of capital surplus shall be identified as a distribution of capital surplus, and the amount per share paid from such capital surplus shall be disclosed to the stockholders receiving the same concurrently with the distribution. (b) If the Corporation shall engage in the business of exploiting natural resources or other wasting assets and if the Certificate so provides, dividends may be declared and paid in cash out of depletion or similar reserves, but each such dividend shall be identified as distribution of such reserves and the amount per share paid from such reserves shall be disclosed to the stockholders receiving the same concurrently with the distribution thereof. (c) Dividends may be declared and paid in the Corporation's treasury shares. (d) Dividends may be declared and paid in the Corporation's authorized but unissued shares, out of any unreserved and unrestricted surplus of the Corporation, upon the following conditions: (i) If a dividend is payable in the Corporations' own shares having a par value, such shares shall be issued at not less than the par value thereof and there shall be transferred to stated capital at the time such dividend is paid an amount of surplus equal to the aggregate par value of the shares to be issued as a dividend. (ii) If a dividend is payable in the Corporations' own shares without par value, such shares shall be issued at a stated value fixed by resolution of the stockholders adopted at the time such dividend is declared, and there shall be transferred to stated capital at the time such dividend is paid an amount of surplus equal to the aggregate stated value so fixed and the amount per share so transferred to stated capital shall be disclosed to the stockholders receiving such dividend concurrently with the payment thereof. (e) No dividend payable in shares of any class shall be paid to the holders of shares of any other class unless the Certificate of Incorporation so provides or such payment is authorized by the affirmative vote or the written consent of the holders of at least a majority of the outstanding shares of the class to which the payment is to be made. (f) A split or division of the issued shares of any class into a greater number of shares of the same class without increasing the stated capital of the Corporation shall not be construed to be a stock dividend within the meaning of this Article VII. ARTICLE VIII SEAL The Board of Directors shall adopt a Corporate Seal which shall be circular in form and shall have inscribed thereon the name of the Corporation, the state of incorporation and the year of incorporation. Page 250 ARTICLE IX AMENDMENT OF BYLAWS The stockholders shall have the exclusive power to amend, alter, or repeal these Bylaws, and to adopt new Bylaws. ARTICLE X FISCAL YEAR The fiscal year of this Corporation shall be determined by the Board of Directors, unless this Corporation is a subsidiary of another Corporation which holds more that 50% of the Corporation's common stock, in which case the Corporation's fiscal year shall coincide with that of its Parent Corporation. ARTICLE XI MEDICAL REIMBURSEMENT SECTION 1. Benefits (a) The Corporation may, subject to approval of the Board of Directors and, if it is a subsidiary of another Corporation which holds more that 50% of the Corporation's common stock, subject to approval by its Parent Corporation, reimburse all employees for expenses incurred by themselves and their dependents, as defined in Section 152 of the Internal Revenue Code of 1986, as amended (the "IRC"), for medical care, as defined in IRC Section 213(e) or any successor section thereto, subject to the conditions and limitations hereinafter set forth. (b) It is the intention of the Corporation that the benefits payable to employees hereunder will be excluded from their gross income pursuant IRC Section 105 or any successor section thereto. (c) Notwithstanding anything in this Article to the contrary, if this Corporation is a subsidiary of another Corporation which holds more that 50% of the Corporation's common stock, then all actions called for hereby requiring determination or approval by this Corporation, its Board of Directors or officers shall be subject to such conditions or restrictions as may be imposed by its Parent Corporation. SECTION 2. Employees Defined The term "employees" as used in this medical expense plan is hereby defined to include all individuals employed by the corporation except the following: Page 251 (a) Employees who have not completed three months of service as is provided in IRC Section 105(h)(3) (b)(i), or any successor section thereto; (b) Employees who have not attained the age of 25 years; (c) Employees who are part-time or seasonal as is defined in IRC Section 105(h)(3)(B)(iii) or any successor section thereto; (d) Employees who are included in a unit of employees covered by an agreement between employee representatives and one or more employers found to be a collective bargaining agreement; where accident and health benefits were the subject of good faith bargaining between such employee representatives and such employer(s) as is defined in IRC Section 105(h)(3)(B)(iv) or any successor section thereto; (e) Employees who are nonresident aliens and who receive no earned income from the employer which constitutes income from sources within the United States as is further defined in IRC Section 105(h)(5)(B)(v) or any successor section thereto. SECTION 3. Limitations (a) The Corporation will reimburse any employee no more than $5,000.00 in any fiscal year for medical care expenses; (b) Reimbursement or payment provided under this plan will be made by the Corporation only in the event and to the extent that such reimbursement or payment is not provided under any insurance policy(ies), whether owned by the Corporation or the employee, or under any other health and accident or wage continuation plan; (c) In the event that there is such an insurance policy or plan in effect providing for reimbursement in whole or in part, then to the extent of the coverage under such policy or plan, the Corporation will be relieved of any and all liability hereunder. SECTION 4. Submission of Proof (a) Any employee applying for reimbursement under this plan will submit to the Corporation, at least quarterly, all bills for medical care, including premium notices for accident or health insurance, for verification by the Corporation prior to payment. (b) Failure to comply herewith, may at the discretion of the Board of Directors, terminate such employee's right to said reimbursement. Page 252 SECTION 5. Discontinuation This plan will be subject to termination at any time by vote of the Board of Directors or at the direction of the Parent Corporation; provided, however, that medical care expenses incurred prior to such termination will be reimbursed or paid in accordance with the terms of this plan. SECTION 6. Determination (a) The Chief Executive Officer will determine all questions arising from the administration and interpretation of the Plan except where reimbursement is claimed by the Chief Executive Officer. (b) Where reimbursement is claimed by the Chief Executive Officer determination will be made by the Board of Directors. The Undersigned, being the duly elected and acting Secretary of the Corporation, hereby certifies that the foregoing constitute the validly adopted and true Bylaws of the Corporation, as of the date set forth below. Dated: May 11, 2000 /s/ Leigh A. Cunningham ------------------------ Secretary (Corporate Seal) Page 253 -----END PRIVACY-ENHANCED MESSAGE-----