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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(b)
OR 12(g) OF THE SECURITIES ACT OF 1934
ONLINE INTERNATIONAL CORPORATION
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(Exact name of Small Business Issuers in Its Charter)
NEVADA 11-3360057
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
150 Laser Court, Hauppauge, New York 11788
- --------------------------------------------- --------------------
(Address of principal executive offices) (Zip code)
(516)-231-7575
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(Issuer's Telephone Number)
Securities registered under Section 12(b) of the Exchange Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
------------------- --------------------------------
n/a n/a
Securities registered under Section 12(g) of the Exchange Act:
Common Equity, Par Value $.001
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(Title of Class)
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TABLE OF CONTENTS
Item 1. Description of business . . . . . . . . . . . . . . . . . . . . . . .3
Item 2. Management's discussion and analysis or plan of operations. . . . . .4
Item 3. Description of property . . . . . . . . . . . . . . . . . . . . . . .6
Item 4. Security ownership of certain beneficial owners and management. . . .6
Item 5. Directors, executive officers, promoters and control persons;
Compliance with Section 16(a) of the Exchange Act. . . . . . . .7
Item 6. Executive compensation. . . . . . . . . . . . . . . . . . . . . . . .8
Item 7. Certain relationships and related transactions. . . . . . . . . . . .9
Item 8. Legal proceedings . . . . . . . . . . . . . . . . . . . . . . . . . .9
Item 9. Market for common equity and related stockholder matters. . . . . . 10
Item 10. Recent sales of unregistered securities . . . . . . . . . . . . . . 10
Item 11. Description of securities . . . . . . . . . . . . . . . . . . . . . 11
Item 12. Indemnification of directors and officers . . . . . . . . . . . . . 12
Item 13. Financial statements. . . . . . . . . . . . . . . . . . . . . . . . 13
Item 14. Changes in and disagreements with accountants on accounting and
financial disclosure. . . . . . . . . . . . . . . . . . . . . . . . 13
Item 15. Financial statements and exhibits . . . . . . . . . . . . . . . . . 13
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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ITEM 1. DESCRIPTION OF BUSINESS.
Online International Corporation (Online) was incorporated on May 7, 1996,
under and by virtue of the laws of the State of Nevada, with the intent to
acquire an operating company engaged in the manufacture and supply of online
consumables for both the gaming and hospitality industries. On January 31,
1997, Online issued 250 shares of Series A convertible preferred stock in
exchange for all issued and outstanding shares of Printing Associates, Inc. (the
"Company"). Since Online is a newly formed company with no substantive
operations and because a change in control of the Company to Online shareholders
did not occur (as defined in EITF 88-16) due to the terms of the convertible
preferred stock issued to the former shareholder of the Company, this
transaction is being accounted for as a recapitalization of the Company.
Accordingly, the transaction is being treated as equivalent to the issuance of
common stock by the Company for the net monetary assets of Online, which
amounted to approximately $1,320,000, at January 31, 1997. The historical
financial statements presented are those of the Company. The rights,
preferences, privileges and restrictions of the preferred shares are fully
described in Item 11 of this document entitled "Description of Securities." The
principle offices and production facilities of the Company are located in
Hauppauge, New York. The Company has also issued a number of its common shares
via a Private Placement to raise capital for its operating requirements.
Printing Associates, Incorporated was established on December 6, 1983. The
Company is a leading manufacturer of printed products (i.e. selection slips and
ticket rolls) for the gaming and lottery industry. The product is considered an
instrument and must be extremely accurate. Selection slip must be accurate
within .005 of an inch tolerance in order for the lottery terminal to correctly
read the data (customer selected numbers), transmit the data to a centralized
data base, and, in turn, output a receipt (lottery ticket) to the purchaser.
Printing Associates is a pioneer in diverse printing capabilities--mixing
offset, flexographic and letter-press printing technologies in a single process.
This makes our tickets virtually impossible to duplicate. Features vital to
product security are incorporated into the Company's manufacturing process, in
addition to the capability of individually identifying each ticket with a unique
serial number. The Company has the technology to track these serial numbers,
which is a component of the overall validation process performed by a state
lottery.
The Company's success over the last 14 years has been its state-of-the-art
manufacturing capabilities. The lottery industry experiences unpredictable,
increasing lottery jackpots, which result in an increased consumer demand. The
Company has a
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competitive edge in that it has the capability to satisfy spontaneous increases
in product demand with minimal lead times.
The Company has a reputation of producing a superior quality, secure
product with timely delivery. The Company manufactures in excess of 2.5 billion
lottery tickets, 4 billion parimutuel (on and off track betting) tickets and 200
million selection slips annually. The lottery and parimutuel products industry
is controlled by a limited number of contractors. These contractors, in turn,
subcontract to the Company to manufacture ticket rolls and selection slips.
The executive management of Online International consists of Mr. James
Russell, President and Chief Executive Officer.
The executive management team of the Company consists of James White,
President and Chief Executive Officer; Victoria S. Danseglio, Vice President of
Finance and James Emminger, General Manager. Present plant staff is comprised
of 49 employees. The tasks are varied but highly technical in each area.
Special emphasis is placed on quality assurance. The Company maintains a
state-of-the-art Pre-press Department, staffed by technicians who work to insure
that the product presented to manufacturing is perfect.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash position at January 31, 1997 was $1,593,696, an increase
of $1,518,527 from the January 31, 1996. The increase was primarily
attributable to $1,300,000 received in the private Placement of 2,486,950 shares
of common stock of Online.
Accounts receivable at January 31, 1997 was $1,085,253. The lottery and
parimutuel products industry is controlled by a limited number of contractors.
During the year ended January 31, 1997, approximately seventy-one percent (71%)
of the Company's sales were to two contractors. In addition, approximately
sixty-seven percent (67%) of the accounts receivable balance at January 31, 1997
is due from these contractors. The Company has not experienced any collection
difficulties.
Working capital at January 31, 1997 was $2,086,034, an increase of
$3,199,697 from the working capital of ($1,113,663) at January 31, 1996. This
increase is primarily attributable to the private placement of $1,300,000 and
the conversion of debt to equity of $1,400,000. Proceeds from the sale of
excess manufacturing equipment were $236,000. The remaining increases in
working capital are attributable to the income of the current year.
Additionally, these increases are offset by an approximately $100,000 decrease
in working capital as a result of not consolidating a sixty percent (60%) owned
subsidiary corporation, as described below.
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The Company is currently unable to exercise it management rights due to a
dispute and litigation with a shareholder and officer of a 60% owned subsidiary.
Accordingly, the Company has stated its investment in this subsidiary at cost
for the year ended January 31, 1997, while the subsidiary was consolidated at
January 31, 1996. See Legal Proceeding (Item 8) for more detailed information
about this legal action.
RESULTS OF OPERATIONS
YEAR ENDED JANUARY 31, 1995 TO JANUARY 31, 1996
During fiscal year ending January 31, 1996, the gross profit percentage was
thirteen percent (13%) which is consistent with the results for the period ended
January 31, 1995. Selling, General and Administrative costs in 1996 were eleven
percent (11%) of sales, which is consistent with the period ending January 31,
1995. In 1996, included in net income before taxes and minority interest of
$372,000, is a gain on sale of equipment of $90,000. No further analysis of the
changes in the income statement between January 31, 1995 and January 31, 1996 is
being provided because there was a change in ownership during fiscal year 1995
resulting in a four month (4) fiscal period ended January 31, 1995.
Paper is the major raw material used in production. The Company has
provisions within its customer contracts which protect the Company during
periods of increasing paper prices. During fiscal year ending January 31, 1996,
the Company exercised such escalation provisions, allowing consistent gross
profit percentages between January 31, 1995 and January 31, 1996.
During fiscal year 1996, all sales contracts are continuing with the
exception of the Florida lottery, which expired in November 1995 and was not
renewed. The contract to produce Florida lottery tickets accounted for a
revenue of $900,000 during fiscal 1996.
YEAR ENDED JANUARY 31, 1996 TO JANUARY 31, 1997
As stated previously, the results of operations for January 31, 1996
include the consolidated numbers of the Company's sixty percent (60%) owned
subsidiary, and are not consolidated at January 31, 1997.
Sales decreased by $5.4 million in 1997. $3.5 million in reduced sales is
attributable to not consolidating a sixty percent (60%) owned subsidiary.
Approximately $900,000 of decreased sales is attributable to the non renewal of
the contract to produce Florida lottery tickets. The decrease in revenues from
the remaining business for 1997 was approximately $1,000,000. This is primarily
attributable to changes in product specifications by customers which resulted in
reduced sales.
The gross profit percentage decreased in total two percent (2%) in 1997 to
eleven percent (11%) from thirteen percent (13%) in 1996. However, if the 1996
results of the
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sixty percent (60%) owned subsidiary and the Florida contract are removed, the
gross profit percentage of the Company's remaining business was eight percent
(8%) for 1996. In 1997, this previously defined remaining business had a gross
profit of eleven percent (11%), a three percent (3%) increase when compared to
1996.
In 1997, included in the net income before tax and minority interest of
$368,000, is a gain on sale of equipment of $104,000. During fiscal year 1997,
all sales contracts are continuing.
For the period February 1, 1996 through August 7, 1996 and for the year
ended January 31, 1996, the Company filed a consolidated Federal tax return with
the Company's former parent. The Federal tax expense for the year ended January
31, 1997 differs from that which would be obtained by applying the thirty-four
percent (34%) corporate tax rate to the income before income taxes. During the
period of February 1, 1996 through August 7, 1996, the former parent had
substantial losses that were utilized by the Company to offset the tax liability
it otherwise would have incurred. There was no requirement to compensate the
former parent for this benefit.
The Company plans to diversify its operations into the gaming, lottery
management, and distribution management sectors. This will be accomplished
through the acquisition of existing businesses and the development of new
opportunities on an international level. The Company plans to develop a full
service lottery portfolio encompassing printing, online technology,
communication and subscription services.
ITEM 3. DESCRIPTION OF PROPERTY.
The Company leases its 21,000 square foot principle plant which is located
at 150 Laser Court, Hauppauge, New York. This lease is effective through
December 2000. The facilities maintain a high level of security and have been
inspected and approved by all of PAI's customers.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Amount and
Title of Name and Address of Nature of Percent of
Class Beneficial Owner Beneficial Owner Class
- --------- -------------------------- ---------------- ----------
Preferred Gaming Lottery Corporation 250 100.0%
Common Norla Rutledge 1,250,000 50.7%
Common Mari Kuitko 200,000 8.1%
Common Leon Bensimon 200,000 8.1%
Common Prastol Inc. 240,000 9.7%
Common Samuel S. Edery 190,000 7.6%
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ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Name Age Position / Office Term Served Since
- ---- --- ------------------- ---- ------------
James D. Russell 42 Director, President 1 yr 5/96
S. James White 52 Director 1 yr 1/97
George T. Koutris 56 Director 1 yr 1/97
Ian Nielsen-Jones 46 Director 1 yr 1/97
MR. JAMES RUSSELL
Mr. Russell brings over 20 years of combined experience in finance,
marketing, strategic planning and corporate management to the Company. Mr.
Russell has held positions as a Vice President for a marketing research firm, as
a Director of a lottery and as a Senior Manager for a telecommunications
company. He was graduated with honors from Queens University in Kingston,
Ontario, Canada. He is committed to expanding market share, reducing costs and
improving business quality. His vision is for the Company to become the
recognized worldwide leader for the production of online consumables for both
the gaming and hospitality industries.
MR. S. JAMES WHITE
Mr. White brings over 30 years of combined experience in law enforcement,
marketing, sales and corporate management to the Company. He is currently
President and Chief Executive Officer of Printing Associates Incorporated. Mr.
White has also held elected positions with the NYC Transit Police Patrolman's
Benevolent Association. He holds a degree from Empire State College.
MR. GEORGE T. KOUTRIS
Mr. Koutris comes to the Company with over 25 years of combined experience
in finance, marketing, sales, planning, and corporate management. He has held
international executive positions with RJR MacDonald (Canada), RJ Reynolds
(USA), and RJ Reynolds (UK). He was also Vice President - Sales & Distribution
for a lottery. Mr. Koutris received his post secondary college degree from
Capalano College located in Vancouver, British Columbia. He is committed to
expanding the lottery management and distribution management components of the
business.
MR. IAN NIELSEN-JONES
Mr. Nielsen-Jones has combined experience in marketing, planning,
regulatory management, and corporate management exceeding 24 years. He has held
international executive positions in the lottery, recreation, communications,
and public sectors. He has
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held the position of President with CUE Network Corporation, Rank Plc, and a
lottery. Mr. Neilsen-Jones was also Director of the Bureau of Competition
Policy for the Canadian federal government. He graduated from Loyola College
(Montreal, Canada) with an honors degree and from McMaster University (Hamilton)
with a Masters degree. He is committed to expanding the lottery management
component of the business.
None of the above listed Officers and/or Directors have been involved with
any businesses which have had any bankruptcy petitions filed by or against them
nor have they been convicted in a criminal proceeding or been subject to a
pending criminal proceeding nor been subject to any order, judgment, or decree
which would permanently or temporarily enjoin, bar, suspend or otherwise limit
their involvement in any type of business, securities or banking activities, nor
been found to have violated any Federal or State securities or commodities law.
ITEM 6. EXECUTIVE COMPENSATION.
(a) Summary Compensation
Online International Corporation
Mr. James Russell - Annual Salary $150,000 with no contract in place.
He is also entitled to the normal benefits of insurance, sick leave, vacation,
etc.
Printing Associates Inc.
Ms. Victoria S. Danseglio is under contract with PAI for $70,000
annual salary plus the same benefit package as Mr. Russell. Her contract with
PAI is expires in September, 1999.
Mr. S. James White is under contract with PAI at the annual rate of
$130,000 plus the benefit package equal to that of Mr. Russell. His contract
expires in October, 2001.
(b) Options/Stock Appreciation Rights - There are no stock options or stock
appreciation rights currently effective.
(c) Aggregated Option/SAR Exercises Fiscal Year End Option/SAR - There are no
SAR's.
(d) Long Term Incentive Plan ("LTIP") Awards - There are no long term incentive
plans in place.
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(e) Compensation of Directors - There is no compensation for directors other
than expenses directly associated with Director Meetings.
(f) Employment Contracts - See Exhibits 10.1 and 10.2.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
There were no transactions during the last two years, or proposed
transaction, to which the small business issuer was or is to be a party, in
which any director, executive officer, nominee for directorship, security-holder
or immediate family member had a direct or indirect material interest as defined
by Rule 404 of Regulation S-B.
ITEM 8. LEGAL PROCEEDINGS.
PAI is the subject of litigation instituted in the state of Texas.
The details of this litigation is as follows:
On January 21, 1997, PAI's Original Petition and Request for
Declaratory Judgment was filed against Gilberto S. Ocanas, ("Ocanas")
as Cause No. 97-00718 in the 201st Judicial District Court of Travis
County, Texas. In that action, PAI has alleged that, among other
things, that Ocanas breached his obligations under a stock option to
purchase certain shares of the common stock of Win-Tex International,
Inc. The Ocanas counsel indicated his intention to answer the lawsuit
and include in his answer one or more counterclaims against PAI.
Management of PAI intends to vigorously defend any counterclaims of
Ocanas. Ocanas, subject to PAI's filing, filed a Petition for Temporary
Restraining Order ("TRO"). The Court did hear oral argument on the
Petition for the TRO.
On January 22, 1997, an Agreed Temporary Injunction Order was filed
with the Court in which PAI and Ocanas essentially agreed that Win-Tex
International, Inc. would continue the operation of the GTECH
contract, but would not engage in any new business without the consent
of both parties.
Ocanas did file his Original Answer with Original Counterclaims on
February 28, 1997, wherein he claimed that PAI breached the underlying
Shareholder's Agreement between the parties.
Discovery is ongoing at this time and no final date has been scheduled.
Mediation as a means of resolving the litigation is a realistic
expectation.
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ITEM 9. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(a) MARKET INFORMATION. There is currently no market for the common
or preferred shares of the Company's stock. It is anticipated that a market
will exist upon the completion of this filing and due to the nature of the
issuer's business and the anticipated increase in the volume of the products of
the Company.
(b) POSSIBLE CLASSIFICATION OF COMPANY'S SECURITIES AS A "PENNY
STOCK". By virtue of Rule 3a51-1 of the Securities Act of 1934, (the Act), if
the Company's common stock has a price of less than $5.00 per share it will be
considered a "penny stock." The perquisites required of broker-dealers engaging
in transactions involving "penny stocks" have discouraged, or even barred, may
brokerage firms from soliciting orders for certain low priced stocks.
However, regardless of the price of the Company's stock, in the event
the Company has net tangible assets in excess of $2,000,000 and if the Company
has been in continuous operation for a least three (3) years, or $5,000,000, if
the Company has been in continuous operation for less than three (3) years, Rule
3a51-1(g) of the Act will preclude the Company's common stock for being
classified as a "penny stock."
(c) There are no common equity shares subject to outstanding options
or warrants, or securities convertible into common equity that are subject to
outstanding options or warrants to purchase. The shares of the Series A
Preferred have a conversion clause in which each share of Preferred may be
redeemed for 16,667 shares of common equity stock. The details of this
conversion is detailed in Item 11, "Description of Securities."
The are no Rule 144 shares that could be sold or that the issuer has
agreed to register for sale under the Securities Act.
There are no shares that are being registered or proposed to be
publicly offered.
(d) There are currently 18 shareholders of record holding common
shares and 1 shareholder of record holding preferred shares.
(e) DIVIDENDS. The Company has paid no dividends in its common stock for
the past year.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
The Company entered into an agreement effective January 31, 1997,
wherein the Company issued 250 shares of its Series A Preferred stock with a
liquidating
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preference of $25,000,000 US in exchange for 100% of the issued and outstanding
shares of PAI. The details of the Series A Preferred stock are addressed in
Item 11 below entitled "Description of Securities."
On August 6, 1996, the Company sold 1,250,000 shares of its common
stock to Norla Rutledge at a price of $.10 per share for a total of $125,000.
On January 31, 1997, the Company completed the sale of 1,236,950
shares of its common unregistered stock at a price of $1.00 per share for a
total of $1,236,950. The Company acted as its own underwriter and there were no
commissions paid.
Title Share Amount Name
----- ------------ ----
Common 1,250,000 Norla Rutledge
Common 20,000 Amram Assayag
Common 50,000 Lynn Barrett
Common 10,000 Bat Sheva Cohen
Common 10,000 Moses Cohen
Common 50,000 Robert Davis
Common 10,000 Robert Jolly
Common 10,000 Jimmy Kadoch
Common 7,500 Jacob Kadoch
Common 23,300 Lily Kadoch
Common 34,150 Mike Shriqui
Common 17,000 Debbie Tate
Common 50,000 Roy Whiston
Common 100,000 RNB & Co.
Common 15,000 Andrew Hrynak
Common 200,000 Mari Kuitko
Common 200,000 Leon Bensimon
Common 240,000 Prastol Inc.
Common 190,000 Samuel S. Edery
Title Share Amount Name
----- ------------ ----
Series A Preferred 250 Gaming
Lottery Corporation
ITEM 11. DESCRIPTION OF SECURITIES.
(a) COMMON STOCK. At February 1, 1997, the Company had 2,486,950
shares of the common stock outstanding.
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Online's Articles of Incorporation, filed May 7, 1996, authorized the
issuance of up to 100,000,000 of Online's common equity shares with a par value
of $0.001. Holders of shares of the common stock are entitled to one vote for
each share on all matters to be voted on by the stockholders. Holders of common
stock have no cumulative voting rights. Holders of shares of common stock are
entitled to share ratably in dividends, if any, as may be declared from time to
time by the Board of Directors in its discretion, from funds legally available
therefor.
In the event of a liquidation, dissolution or winding up of the
Company, the holders of shares of common stock are entitled to share pro rata
all assets remaining after payments in full of all liabilities. Holders of
common stock have no preemptive rights to purchase the Company's common stock.
All of the outstanding shares of common stock are fully paid and non-assessable.
(b) PREFERRED STOCK. At February 1, 1997 there were 250 shares of
the Company's Series A Preferred stock outstanding. The Series A Preferred
stock (the "Shares") shall pay a fixed, preferential non-cumulative cash
dividend rate of five percent (5%) (of the liquidating preference of
$25,000,000) payable semi-annually to commence 30 months from the date issued;
the Shares carry a preferential right to participate in any distribution or
liquidation or dissolution of the corporation; the Shares shall not have the
right to vote in the same manner and on the same corporate matters as the
holders of common stock except as specifically set forth in Paragraph 11 of the
Share Certificate; the right to convert the Shares into shares of common stock
at a conversion rate of one (1) preferred share for 16,667 common shares with
the conversion date commencing thirty (30) days for the date of issue of the
Shares; the Holder of these Shares shall only be permitted to convert that
amount of its Shares which would result after such conversion with the Holder
then owning a maximum of twenty percent (20%) of the then issued and outstanding
common shares of the corporation. The holder of these Shares shall have the
absolute right to transfer or assign all or any portion thereof of the Shares.
The transferee or assignee of the Shares shall have all of the rights,
preferences and privileges of the Shares and shall be subject to the same
restrictions of said Shares.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Articles of Incorporation and Bylaws of the Company provide for
indemnification of the Company's officers and directors for liabilities arising
due to certain acts performed on behalf of the Company that are not a result of
any act or omission on any such director or officer; provided, however, that the
foregoing provision shall not eliminate or limit the liability of a director or
officer (i) for acts or omissions which involve intentional misconduct, fraud or
a knowing violation of law, or (ii) the payment of dividends in violation of
Section 78.300 of the Nevada Revised Statues. Although the state statues allow
for indemnification of officers and directors, the Federal Securities and
Exchange rules prohibit indemnification of officers and directors of publicly
held companies.
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ITEM 13. FINANCIAL STATEMENTS.
(a) ANNUAL FINANCIAL STATEMENTS
See Item 15(a)
(b) INTERIM FINANCIAL STATEMENTS
None
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
The accountant has not resigned, declined to stand for re-election nor
were they dismissed. The principal accountant's report on the financial
statements for the past two years contains no adverse opinion or disclaimer of
opinion, nor were they modified as to uncertainty, audit scope, or accounting
principles. There have been no disagreements with any former accountants on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS. The following financial statements are
included herein:
1. Online International Corporation Audited
Financial Statement for Year Ended
January 31, 1997.
(b) EXHIBITS. The following exhibits required by Item 601 of
Regulation S-B are included herein:
Exhibit No. Document Description
----------- --------------------
2. Stock Purchase Agreement Between
Online International Corporation and
Gaming Lottery
3. Articles of Incorporation and Bylaws
3.1 Articles of Incorporation - Online
3.2 Certificate of Amendment of Articles of
Incorporation - Online
3.3 Bylaws - Online
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3.4 Certificate of Incorporation - Printing
Associates of New York, Inc.
3.5 Certificate of Merger - Printing
Associates of New York, Inc.
3.6 Bylaws - Printing Associates, Inc.
4. Series A Preferred Share Certificate-Online
10. Material Contracts
10.1 Employment Contract - Stanley White
10.2 Employment Contract - Victoria Danseglio
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SIGNATURES
In accordance with Section 12 the Securities and Exchange Act of 1934 the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
ONLINE INTERNATIONAL CORPORATION
DATED: May 2, 1997 BY: /s/ JAMES D. RUSSELL
---------------------- -----------------------------------------
JAMES D. RUSSELL
President
<PAGE>
EXHIBIT NO. 1
ONLINE INTERNATIONAL CORPORATION
AUDITED FINANCIAL STATEMENT FOR YEAR
ENDED JANUARY 31, 1997
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Online International Corporation
We have audited the accompanying consolidated balance sheet of Online
International Corporation and Subsidiaries, as of January 31, 1997, and the
related consolidated statements of income, stockholders' equity and cash flows
for the years ended January 31, 1997 and 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Online
International Corporation and Subsidiaries as of January 31, 1997, and the
consolidated results of their operations and cash flows for the years ended
January 31, 1997 and 1996, in conformity with generally accepted accounting
principles.
/s/ Paneth, Haber & Zimmerman LLP
New York, NY
February 12, 1997, (except for note 14, as to which the date is March 3, 1997)
<PAGE>
ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JANUARY 31, 1997
ASSETS
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<S> <C>
CURRENT ASSETS
Cash $1,593,696
Accounts receivable, less allowance for doubtful
accounts of $-0- 1,085,253
Inventories 778,731
Note receivable 38,750
Prepaid expenses and other current assets 55,092
Due from unconsolidated subsidiary 63,517
Deferred income taxes 1,067
----------
Total Current Assets 3,616,106
----------
PROPERTY AND EQUIPMENT, at cost, less accumulated depreciation
and amortization 963,314
----------
OTHER ASSETS
Investment in unconsolidated subsidiaries 443,124
Deferred income taxes 14,400
Deposits 41,897
----------
Total Other Assets 499,421
----------
$ 5,078,841
----------
----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 22,686
Current portion of obligations under capital leases 95,520
Accounts payable 1,360,789
Accrued expenses and other current liabilities 51,077
----------
Total Current Liabilities 1,530,072
OBLIGATIONS UNDER CAPITAL LEASES, less current portion 196,190
DEFERRED INCOME TAXES 69,108
----------
Total Liabilities 1,795,370
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
5% preferred stock, no par value; 250 shares authorized;
issued and outstanding ($25,000,000 liquidation preference) $ 1,693,223
Common stock, $.001 par value; 100,000,000 shares authorized,
2,486,950 shares issued and outstanding 2,487
Additional paid-in-capital 1,331,522
Retained earnings 256,239
----------
Total Stockholders' Equity 3,283,471
---------
$ 5,078,841
---------
---------
</TABLE>
See notes to consolidated financial statements.
-2-
<PAGE>
ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Year Ended
January 31,
-------------------
1997 1996
---- ----
NET SALES $10,420,341 $15,863,610
COST OF GOODS SOLD 9,263,348 13,849,780
---------- -----------
GROSS PROFIT 1,156,993 2,013,830
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 856,302 1,820,403
---------- ----------
INCOME FROM OPERATIONS 300,691 193,427
OTHER INCOME (EXPENSE)
Miscellaneous income 4,279 5,449
Gain on sale of assets 103,803 90,330
Income from unconsolidated subsidiary 16,404 194,844
Interest expense (57,157) (112,332)
---------- ----------
Total Other Income 67,329 178,291
---------- ----------
INCOME BEFORE INCOME TAXES AND MINORITY
INTEREST IN INCOME OF SUBSIDIARY 368,020 371,718
INCOME TAXES 72,353 164,728
---------- ----------
INCOME BEFORE MINORITY INTEREST IN INCOME
OF SUBSIDIARY 295,667 206,990
MINORITY INTEREST IN INCOME OF SUBSIDIARY - (31,420)
---------- ----------
NET INCOME $ 295,667 $ 175,570
---------- ----------
---------- ----------
EARNINGS PER SHARE $ .07 $ .04
---------- ----------
---------- ----------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING $ 4,137,115 $ 4,125,083
---------- ----------
---------- ----------
See notes to consolidated financial statements.
-3-
<PAGE>
ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Preferred Stock
------------------- --------------------- Additional
Number of Par Number of Paid-in Retained
Shares Value Shares Value Capital Earnings Total
--------- ----- --------- ----- ------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 31, 1995 100 $ 193,750 - $ - $ 125,545 $(214,998) $ 104,297
Cancellation of shares due to
recapitalization (100) (193,750) - - (125,545) - (319,295)
Issuance of shares due to
recapitalization - - 247.5 319,295 - - 319,295
--------- -------- -------- --------- --------- ------- ---------
Restated balance at January 31, 1995 - - 247.5 319,295 - (214,998) 104,297
Net Income for Year ended January 31, 1996 - - - - - 175,570 175,570
--------- -------- -------- --------- --------- ------- ---------
Balance at January 31, 1996 - - 247.5 319,295 - (39,428) 279,867
Contribution to capital of loan payable to
former parent - - 2.5 1,373,928 - - 1,373,928
Issuance of $.001 par value common stock 2,486,950 2,487 - - 1,331,522 - 1,334,009
Net Income for year ended January 31, 1997 - - - - - 295,667 295,667
--------- -------- -------- --------- --------- ------- ---------
Total Stockholders Equity at January 31, 1997 2,486,950 $ 2,487 250 $1,693,223 $1,331,522 $256,239 $3,283,471
--------- -------- -------- --------- --------- ------- ---------
--------- -------- -------- --------- --------- ------- ---------
See notes to consolidated financial statements.
</TABLE>
-4-
<PAGE>
ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended
January 31,
-------------------
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 295,667 $175,570
Adjustments to reconcile net income to net cash
provided by operating activities:
Bad debts - 28,000
Gain on disposal of property and equipment (103,803) (90,330)
Depreciation and amortization 281,931 411,785
Minority interest in income of subsidiary - 31,420
Equity in loss from unconsolidated subsidiary 22,390 14,399
Deferred taxes 47,999 53,342
Change in:
Accounts receivable 363,090 (498,877)
Inventory 114,428 (20,842)
Prepaid expenses and other current assets 27,736 (41,600)
Due from unconsolidated subsidiary 67,343 204,628
Intangible asset--pension - 84,098
Accounts payable (715,442) (132,089)
Accrued expenses and other current liabilities (11,205) (153,157)
Accrued pension obligation - (53,683)
Deposits 4,144 (2,471)
--------- ---------
Net Cash Provided by Operating Activities 394,278 10,193
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Collection of equipment note - 75,000
Collection of notes receivable 34,905 30,294
Acquisitions of property of equipment (90,786) (320,916)
Proceeds from sale of property and equipment 236,250 217,000
Proceeds from sale of securities - 5,055
Investment is unconsolidated subsidiary (56,826) -
--------- ---------
Net Cash Provided by Investing Activities 123,543 6,433
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from (payments) to affiliate (65,999) 362,891
Payment of long-term debt (22,685) (22,684)
Payments of obligations under capital leases (235,219) (377,775)
Proceeds from issuance of common stock 1,319,609 -
--------- ---------
Net Cash Provided by (Used in) Financing Activities 995,706 (37,568)
--------- ---------
NET INCREASE (DECREASE) IN CASH 1,513,527 (20,942)
CASH
Beginning of year 80,169 101,111
--------- ---------
End of year $1,593,696 $ 80,169
--------- ---------
--------- ---------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Income taxes $ - $ 85,000
--------- ---------
--------- ---------
Interest 57,157 38,021
--------- ---------
--------- ---------
</TABLE>
See notes to consolidated financial statements.
-5-
<PAGE>
ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
RECAPITALIZATION
On January 31, 1997, Online International, Inc. (Online) issued 250
shares of series A convertible preferred stock in exchange for all issued
and outstanding shares of Printing Associates, Inc. (PAI). Since Online is
a newly formed company with no substantive operations and because a change
in control of PAI to Online shareholders did not occur (as defined in EITF
88-16) due to the terms of the convertible preferred stock issued to the
former shareholder of PAI, this transaction is being accounted for as a
recapitalization of PAI. Accordingly, the transaction is being treated as
equivalent to the issuance of common stock by PAI for the net monetary
assets of Online, which amounted to approximately $1,320,000, at January
31, 1997. The historical financial statements presented are those of PAI.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Online
International Corporation, its wholly-owned subsidiaries, Printing
Associates, Inc. and Printing Associates of Florida, Inc. for the years
ended January 31, 1997 and 1996, and its 60%--owned subsidiary, Wintex
International, Inc. (Wintex), for the year ended January 31, 1996,
collectively referred to as "The Company". As explained in Notes 8 and 14,
with respect to its investment in Wintex, the Company is currently unable
to exercise its management rights due to a dispute and litigation with a
shareholder and officer of Wintex. Accordingly, the Company has stated its
investment in Wintex at cost for the year ended January 31, 1997. All
material intercompany transactions and balances have been eliminated in
consolidation.
DESCRIPTION OF BUSINESS AND REVENUE RECOGNITION
The Company's operations consist of the design and manufacture of
lottery tickets and play slips for automated on-line contractors and
parimutuels (on track and off track betting).
Sales are recorded on the date of shipment of the merchandise.
UNCONSOLIDATED SUBSIDIARIES
The Company owns 49% of PAP Security Printing, Inc. (PAP) which is
located in Pennsylvania and 60% Wintex International, Inc. which is located
in Texas. Both companies print lottery tickets which they sell to either
automated lottery contractors or directly to individual states. The
financial statements include the operations of PAP Security Printing, Inc.
for its year ended November 30, 1996 and the ten months ended November 30,
1995.
As explained in Notes 8 and 14, the operations of Wintex for the year
ended January 31, 1997 are not included in the financial statements and the
investment is recorded at cost.
-6-
<PAGE>
ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
JANUARY 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
INVESTMENT IN UNCONSOLIDATED SUBSIDIARIES
The Company's investment in unconsolidated subsidiaries at January 31,
1997 consists of:
Investment in PAP $189,670
Investment in Wintex 253,454
-------
$443,124
-------
-------
The Company's investment in PAP is recorded under the equity method of
accounting, wherein the investment account is adjusted for the Company's
share of net income or loss of PAP.
A summary of PAP Security Printing, Inc.'s activity at November 30,
1996 is as follows:
Condensed Balance Sheet
Current assets $ 966,277
Property and equipment, net 403,331
Other assets 3,357
---------
Total Assets $ 1,372,965
---------
---------
Current liabilities $ 860,297
Long-term debt 103,985
Obligations under capital leases -
Deferred income tax 21,600
---------
Total Liabilities 985,882
Stockholders' equity 387,083
---------
$ 1,372,965
---------
---------
Condensed Statement of Operations is as follows:
Year Ended Ten Months Ended
November 30, November 30,
------------ ----------------
1996 1995
---- ----
Sales $4,927,593 $3,234,946
Cost of goods sold 3,512,654 2,577,774
--------- ---------
Gross profit 1,414,939 657,172
General and administrative 1,336,403 702,686
--------- ---------
Operating income (loss) 78,536 (45,514)
Other income (expenses) 30,677 (2,494)
--------- ---------
Income (loss) before income tax benefit 109,213 (48,008)
Income tax (expense) benefit (157,555) 18,622
--------- ---------
Net (loss) $ (48,342) $(29,386)
--------- ---------
--------- ---------
-7-
<PAGE>
ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
JANUARY 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Included in income from unconsolidated subsidiary is commissions
earned by the Company of $38,794 and $209,243 in 1997 and 1996. Of this
amount, $47,543 was earned during December 1995 and January 1996.
As explained in Notes 8 and 14, the investment in Wintex, is recorded
at cost in the 1997 financial statements.
INVENTORIES
Inventories are stated at the lower of cost or market with cost
determined by the first-in, first-out method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, less accumulated
depreciation. Depreciation is computed by both the straight-line and
declining balance methods over the estimated useful lives of the assets
indicated in Note 5. Leasehold improvements are amortized on a
straight-line basis over the life of the lease.
Maintenance and repairs are charged to income as incurred. Renewals
and replacements of a routine nature are charged to income, while those
which significantly improve or extend the life of existing property are
capitalized.
Upon sale or retirement of property and equipment, the cost and
related accumulated depreciation are eliminated from the respective
accounts and the related gain or loss is included in current income.
PENSION PLAN
The Company had a noncontributory defined benefit employee retirement
plan covering all eligible employees. The Company had been making annual
contributions to the plan equal to the amounts determined by the plan's
actuary. Effective July 8, 1995, the plan was terminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
2. MAJOR CUSTOMERS
The lottery and parimutuel products industry is controlled by a
limited number of contractors. During the years ended January 31, 1997 and
1996, approximately 71% of the Company's sales were to two contractors. In
addition, approximately 67% of the accounts receivable balance at January
31, 1997 is due from these contractors.
-8-
<PAGE>
ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
JANUARY 31, 1997
3. CASH
Included in cash are funds on deposit at a bank in New York totaling
$452,565 (including outstanding checks of $85,664 against such funds) and
in an attorney's escrow account in California totaling $1,236,888 at
January 31, 1997. Of these funds, $291,500 is insured by the FDIC.
The funds held in the escrow account were released and received by the
Company on February 2, 1997.
4. INVENTORIES
Inventories at January 31, 1997 consist of the following:
Raw materials $ 576,912
Work-in-process 88,743
Finished goods 113,076
--------
$ 778,731
--------
--------
5. PROPERTY AND EQUIPMENT
Property and equipment at January 31, 1997 consists of the following:
Estimated Useful
Life In Years
-----------------
Machinery and equipment $ 2,259,497 7
Furniture and office equipment 235,512 5-7
Leasehold improvements 199,767 7-13
----------
2,694,776
Less: Accumulated depreciation and
amortization 1,731,462
----------
$ 963,314
----------
----------
6. RELATED PARTIES
For the year ended January 31, 1997 consulting fees, amounting to
$207,656 were paid to a company whose sole shareholder is a holder of 50%
of the outstanding common stock of the Company. During the year, PAI's
former parent corporation contributed its remaining loan of $1,373,928 to
the Company's capital in exchange for 2.5 shares of preferred stock.
For the year ended January 31, 1996, management fees amounting to
$240,000 are payable to the former parent. Consulting fees amounting to
$160,000 were paid to a corporation wholly-owned by the minority
shareholder of the Company's 60% owned subsidiary. There were no management
fees incurred during the year ended January 31, 1997.
-9-
<PAGE>
ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
JANUARY 31, 1997
7. PREFERRED STOCK
The 5% non-cumulative preferred stock is convertible into 16,667
shares of common stock for each share of preferred. Dividends, when
declared, are payable semi-annually and commence July 31, 1999. Upon
conversion, the holder of these shares is limited to retaining a maximum of
twenty percent of the then issued and outstanding common stock. The
preferred shareholders are entitled to a liquidation preference, upon which
the 5% non-cumulative preferred dividend is calculated, of $100,000 per
preferred share.
8. NON-CASH INVESTING AND FINANCING TRANSACTIONS
Capital lease obligation were incurred for the acquisition of
equipment in the amount of $107,275 in 1997 and $353,768 in 1996.
Deposits for the acquisition of property and equipment were
reclassified to equipment during 1996 in the amount of $63,792.
During 1996, a dividend was declared by an unconsolidated subsidiary
in the amount of $9,800.
The amount of $1,373,928, Due to former parent was converted to 2.5
shares of preferred stock during 1997.
A note receivable of $38,750 was received on the sale of equipment
during 1997.
A deferred tax asset of $14,400 was contributed to the Company during
1997 as part of the business combination.
As further described in Note 14, the Company's investment in Wintex is
stated at cost in 1997, while the subsidiary was consolidated in the 1996
financial statements.
Assets and liabilities appearing on the January 31, 1996 Consolidated
Balance Sheet that were reclassified as investment in Wintex consisted of
$56,826 of cash and the following noncash assets and liabilities:
Accounts receivable $ 394,501
Inventories 299,394
Prepaid expenses and other current assets 86,847
Property and equipment 590,725
Deposits 10,153
Due from unconsolidated subsidiary (73,517)
Accounts payable (281,701)
Advances from affiliates (386,891)
Accrued expenses (9,977)
Obligations under capital leases (263,937)
Minority interest in equity of subsidiary (168,969)
---------
Noncash increase to investment in unconsolidated
subsidiary $ 196,628
---------
---------
-10-
<PAGE>
ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
JANUARY 31, 1997
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards NO. 107, DISCLOSURES ABOUT
FAIR VALUE OF FINANCIAL INSTRUMENTS ("SFAS 107") requires entities to
disclose the fair values of financial instruments except when it is not
practicable to do so. Under SFAS 107, it is not practicable to make this
disclosure when the costs of formulating the estimated values exceed the
benefit when considering how meaningful the information would be to
financial statement users.
The amounts included on the balance sheet for the Company's financial
instruments requiring disclosure of fair value at January 31, 1997 are as
follows:
Assets:
------
Cash $ 274,087 (A)
Note receivable 38,750 (A)
Due from unconsolidated subsidiary 63,517 (B)
Investment in unconsolidated subsidiaries 443,124 (B)
Liabilities:
-----------
Long-term debt 22,686 (A)
None of the above are derivative financial instruments and none are
held for trading purposes.
(A) The fair value approximates carrying amount.
(B) Because of the expenses necessary in conducting an appraisal of the
investments in PAP Security Printing, Inc. and Wintex International,
Inc. as well as management's inability to obtain current verifiable
information from Wintex International, Inc., management believes that
it is not practicable to estimate the fair values of the investments.
Information about PAP Security Printing, Inc. can be found at Note 1.
Wintex International, Inc. information is not available.
(C) Because of the related party nature of these advances, it is not
practicable to estimate their fair values.
10. PENSION PLAN
The Company had a qualified noncontributory pension plan covering
substantially all of its employees. The plan was terminated as of July 8,
1995. At such time all accrued benefits to plan participants had been fully
funded. All the plan assets were distributed to the participants during the
year ended January 31, 1997.
11. LEASES
The Company is the lessee of certain equipment under operating and
capital leases as well as lessee of office and warehouse space in New York.
-11-
<PAGE>
ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
JANUARY 31, 1997
11. LEASES (Continued)
At January 31, 1997, the future minimum lease payments for all leases
are as follows:
Operating Obligations under
Leases Capital Leases
--------- -----------------
1998 $ 198,000 $ 122,520
1999 198,000 109,790
2000 181,500 75,775
2001 - 28,153
2002 - 9,384
Remaining years - -
------- -------
$ 577,500 345,622
-------
-------
Less amount representing interest 53,912
-------
Present value of minimum lease payments 291,710
Less current portion 95,520
-------
Long-term portion $196,190
-------
-------
Rent expense for the year ended January 31, 1997 and 1996 amounted to
$231,106 and $409,485.
Equipment held under capitalized leases at January 31, 1997 consists
of the following:
Machinery and equipment $ 666,247
Less: Accumulated amortization 219,044
-------
$ 447,203
-------
-------
12. INCOME TAXES
The provision for income taxes consists of the following components:
January 31,
----------------------
1997 1996
---- ----
Current
Federal $10,897 $102,022
State 13,457 9,364
------ -------
24,354 111,386
------ -------
Deferred
Federal $31,159 $ (10,058)
State 16,840 63,400
------ -------
47,999 53,342
------ -------
$72,353 $164,728
------ -------
------ -------
-12-
<PAGE>
ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
JANUARY 31, 1997
12. INCOME TAXES (Continued)
Deferred income taxes at January 31, 1997 consists of the following:
Gross deferred tax assets $ 15,467
-------
-------
Gross deferred tax liabilities $ 69,108
-------
-------
The deferred tax asset balances are primarily a New York State
investment tax credit. The deferred tax liability balances are primarily
the result of temporary differences between the investments in PAP Security
Printing, Inc. and Wintex International, Inc. for financial statement
purposes and their tax bases. No income or loss from the unconsolidated
subsidiaries is recorded for tax purposes.
For the period February 1, 1996 through August 7, 1996 and for the
year ended January 31, 1996 Printing Associates, Inc. and Printing
Associates of Florida, Inc. filed a consolidated Federal tax return with
the Company's former parent. The Federal tax expense for the year ended
January 31, 1997 differs from that which would be obtained by applying the
34% corporate tax rate to the income before income taxes primarily because
of the period February 1, 1996 through August 7, 1996, the former parent
had substantial losses that were utilized by the Company to offset the tax
liability it otherwise would have incurred. There was no requirement to
compensate the former parent for this benefit.
The reconciliation between the actual and expected Federal tax is as
follows:
Year Ended
January 31,
----------------
1997 1996
---- ----
Income tax provision at 34% $125,127 $ 126,384
State and local income taxes net of
Federal income tax effect 20,300 48,024
Benefit of former parent company losses (72,075) -
Change in estimate of prior year Federal
income tax 1,894 (13,108)
Effect of nondeductible expenses 2,860 6,925
Effect of dividend exclusion (5,753) (3,497)
------- -------
Actual income tax provision $72,353 $164,728
------- -------
------- -------
-13-
<PAGE>
ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
JANUARY 31, 1997
13. COMMITMENTS
The Company has entered into employment contracts with the president
and other key employees which expire at various dates ranging from
September 22, 1997 through October 22, 2001. The Company has also entered
into a consulting agreement expiring on September 22, 1997. Future minimum
payments relating to these agreements are as follows:
1998 $251,333
1999 190,000
2000 190,000
2001 170,000
2002 97,500
-------
$898,833
-------
-------
14. CONTINGENCIES
The Company has instituted an action against a shareholder and officer
of its 60% owned subsidiary Wintex. The Company maintains that the
shareholder has breached his obligations under a stock option agreement
dated July 29, 1994, for 11% of the outstanding common stock of Wintex.
The shareholder has taken control of the subsidiary and has not allowed the
Company to exercise its management rights. The Company has initiated legal
proceedings to regain control of the subsidiary. At January 31, 1997, the
investment is recorded at cost since the Company is unable to exercise
control.
The shareholder has counterclaimed, stating that under the shareholder
agreement, Printing Associates, Inc. is obligated to purchase his holdings
in Wintex for approximately $2,000,000. Management does not believe that
the shareholder's claim has merit and has not provided for any loss from
the litigation. However, due to the uncertainties inherent in litigation,
it is at least reasonably possible that this estimate of the probable
outcome will change in the near term.
-14-
<PAGE>
EXHIBIT NO. 2
STOCK PURCHASE AGREEMENT BETWEEN
ONLINE INTERNATIONAL CORPORATION AND
GAMING LOTTERY
<PAGE>
STOCK PURCHASE AGREEMENT
BETWEEN
ONLINE INTERNATIONAL CORPORATION
- and -
GAMING LOTTERY CORPORATION
<PAGE>
THIS AGREEMENT is made effective as of the 31st day of January, 1997.
A M O N G:
ONLINE INTERNATIONAL CORPORATION,
a corporation incorporated pursuant to the laws of the State of Nevada (the
"Purchaser")
OF THE FIRST PART
- and -
GAMING LOTTERY CORPORATION
a corporation duly existing under the laws of British Virgin Islands (the
"Vendor")
OF THE SECOND PART
IN TORTOLA, BRITISH VIRGIN ISLANDS
WHEREAS the Vendor shall transfer free and clear of all and any liens and
any other encumbrances on the Closing Date (as hereinafter defined) at the Place
of Closing (as hereinafter defined) all of its shares in the capital of the
Corporation (as hereinable defined) in exchange for the Series A Preferred
Shares (as hereinafter defined) to be issued by the Purchaser in an amount equal
to the Purchase Price (as hereinafter defined);
AND WHEREAS the parties hereto are desirous of entering into this
Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the mutual
covenants, agreements and premises herein contained and other good and valuable
consideration (the receipt and sufficiency whereof being hereby acknowledged by
each party), the parties hereto do hereby covenant and agree as follows:
-1-
<PAGE>
1. DEFINITIONS AND SCHEDULES
1.1 DEFINITIONS. In this Agreement:
"Accounts Receivable" means all accounts receivable and other book debts due or
accruing to the Corporation and the full benefit of all security, if any, for
such accounts or debts as of the Closing.
"Agreement", "this Agreement", "hereto" and "herein" means this Stock Purchase
Agreement and all schedules and exhibits attached hereto, as may be amended from
time to time.
"Agreement Date", means the effective date of January 31, 1997.
"Associated Companies" means collectively, PAP and WinTex.
"Associates Shares" means collectively the 49 common shares of PAP and the 49
common shares of WinTex, each representing 49% of the issues shares.
"Best Knowledge" means such knowledge as the Vendor would have after reasonable
inquiry of the matter in question.
"Business Day" means a day other than a Saturday or a Sunday or any other day
which is a statutory holiday in the State of New York.
"Closing Date" means the date of execution of this agreement.
"Closing" means the consummation of the transaction as herein counterplated.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Financial Statements" has the meaning attributed thereto in subsection
3.1(m).
"Company Year End" is January 31.
"Contract" means any agreement, indenture, contract, bond, debenture, security
agreement, lease, deed of trust, license, option, instrument or other legally
binding commitment, whether written or oral.
"Corporation" means Printing Associates Incorporated.
"Encumbrances" means any and all claims, liens, security interests, mortgages,
pledges, charges, options, equity interests, encumbrances, proxies, voting
agreements, voting trusts, leases, tenancies, easements or other interests of
any nature or kind whatsoever, howsoever created.
-2-
<PAGE>
"Hazardous Materials" means and includes any hazardous, toxic or dangerous
waste, substance or material for the purposes of any federal, state or local
statute, law, ordinance, code, rule, regulation, order or decree regulating,
relating to or imposing liability or standards of conduct concerning any
hazardous, toxic or dangerous waste, substance or material.
"Intellectual Property" means all patents, copyrights, trademarks and trade
names, service marks and all software, data bases, trade secrets, know how and
other proprietary rights.
"IRS" means the Internal Revenue Service.
"Leased Premises" means the lands and building owned by Suffolk County
Industrial Revenue Authority, leased to Cavalry Partners, subleased by the
Corporation and located at 150 Laser Court, Hauppauge, New York.
"Losses" means any and all claims, demands, debts, suits, actions, obligations,
proceedings, losses, damages, liabilities, decencies, costs and expenses
(including without limitation, all reasonable legal and other professional fees
and disbursements, interest, penalties and amounts paid in settlement).
"Option" means the option granted by Gilberto S. Ocanas to the Corporation
pursuant to a stock option agreement dated July 29, 1994 to acquire for a
consideration of $36,000 up to an additional 11% of the issued and outstanding
shares of Wintex.
"Other Shareholders' Shares" means the shares in PAP and WinTex which are not
held by the Corporation, as the case may be, as listed on Schedule 5.
"PAF" means Printing Associates of Florida, Inc.
"PAP" means PAP Security Printing, Inc.
"Pension Plan and Trust" means the corporation's Defined Benefit Plan which was
terminated in October 1995.
"Person" means any individual, partnership, company, corporation, unincorporated
association, joint venture, trust, the Crown or any other agency or
instrumentality thereof or any other judicial entity or person, government or
governmental agency, authority or entity howsoever designated or constituted.
"Place of Closing" means the offices of the Vendor at 30 DeCastro Street, Road
Town, Tortola, British Virgin Islands.
"Purchase Price" means the consideration described in section 2.1.
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"Series A Preferred Shares" means the 250 Series A Preferred Shares issued by
the Purchaser in favour of the Vendor in the total amount of $25,000,000 as
consideration of the Purchase Price under the terms and conditions set out in
Exhibit A to this Agreement.
"Survival Period" has the meaning ascribed thereto in subsection 5.1.
"Subsidiary Corporation" means a corporation in which the Corporation owns more
than 50% of the outstanding voting stock.
"Target Shares" means the 101 common shares in the capital of the Corporation
representing 100% of the issued shares of the Corporation.
"Taxes" means all taxes and related governmental charges (including assessments,
charges, duties, fees, imposts, levies or other governmental charges) and
interest, penalties or additions associated therewith including without
limitation, income, capital, real property, personal property, withholding,
payroll, unemployment compensation, disability, sales, use, excise and all other
taxes and charges of any kind for which the applicable Person may have any
liability, whether disputed or not, imposed by the U.S. or any state,
municipality, country or foreign government or subdivision or agency thereof.
"Threshold" has the meaning ascribed thereto in subsection 6.3.
"Time of Closing" means 2:00 p.m. (New York time) on the Closing Date or if the
Transaction is not completed at such time, then such other time of the Closing
Date on which the Transaction is completed.
"Union Agreement" means the agreement between Local 1 Amalgamated Lithographers
of America and PA, between November 1, 1993 to October 1, 1996.
"U.S." means the United States of America.
"WinTex" means WinTex International, Inc.
1.2 DISCLOSURE. Any fact or circumstance or combination of facts and/or
circumstances disclosed in this Agreement or in any schedules hereto shall be
deemed to be disclosed for all purposes of this Agreement.
1.3 ACT. Any reference in this Agreement to any act, by-law, rule or regulation
or to a provision thereof shall be deemed to include a reference to any act,
by-law, rule or regulation or provision enacted in substitution or amendment
thereof.
1.4 TIME. Except where otherwise expressly provided in this Agreement any
reference to time shall be deemed to be a reference to Eastern Standard Time.
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1.5 GENDER AND EXTENDED MEANINGS. In this Agreement words and personal pronouns
relating thereto shall be read and construed as the number and gender of the
party or parties referred to in each case require and the verb shall be
construed as agreeing with the required work and pronoun. For greater certainty
and without limitation, in this Agreement the word "shall", has the same meaning
as the word will".
1.6 PAYMENT. Any amount to be paid by one Party to the other hereunder shall be
paid in cash, by bank or trust company draft or by certified cheque payable at
par in New York.
1.7 CURRENCY. All dollar amounts referred to in this Agreement are in U.S.
funds.
1.8 SECTION HEADINGS. The division of this Agreement into sections is for
convenience of reference only and shall not effect the interpretation or
construction of this Agreement.
1.9 BUSINESS DAY. In the event that the date for the taking of any action under
this Agreement falls on a day which is not a Business Day, then such action
shall be taken on the next following Business Day.
1.10 SCHEDULES. All Schedules and Exhibits attached hereto form an integral part
of this Agreement.
2. THE TRANSACTION
2.1 PURCHASE PRICE. Subject to the terms and conditions hereof, on the Closing
Date, at the Time of Closing, in consideration for the transfer of the Target
Shares to the Purchaser, the Purchaser shall pay the Purchase Price as to an
amount equal to $25,000,000 by way of the issuance of the Series A Preferred
Shares in the amount of $25,000,000 to the Vendor.
2.2 CLOSING. Closing shall occur at the Time of Closing on the Closing Date at
the offices of the Vendor in Tortola, British Virgin Islands at the Place of
Closing.
2.3 AGREEMENT DATE. This agreement shall be effective as of the 31st day of
January, 1997.
3. COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE VENDOR
3.l COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE VENDOR. The Vendor
covenants, represents and warrants to the Purchaser as follows and acknowledges
and confirms that the Purchaser is relying upon such covenants, representations
and warranties in connection with the Transaction:
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(a) ORGANIZATION OF THE COMPANIES. The Vendor and the Corporation are duly
incorporated and validly subsisting under the laws of their jurisdictions of
incorporation. The Vendor has the corporate power and authority to own or lease
its property and to carry on its business as it is now being conducted. The
Corporation has the corporate power and authority to execute, deliver and
perform its obligations under this Agreement. Schedule 1 contains a true and
complete list of the directors and officers of the Corporation.
(b) ISSUED SHARES. All of the issued and outstanding shares of the Corporation
(the Target Shares"), are validly created, allotted and issued as fully paid and
non-assessable shares and are as set out in Schedule 2. There are outstanding no
other shares, warrants, options, rights or securities convertible into shares or
any other evidence whatsoever of an interest in the Corporation.
(c) OWNER OF TARGET SHARES. The Vendor owns beneficially and of record the
number of Target Shares shown opposite its name on Schedule 2 and has good and
marketable title thereto, free and clear of any Encumbrances. The Vendor has the
exclusive right and full power to transfer the Target Shares as herein
contemplated, free and clear of any Encumbrances.
(d) OWNER OF ASSOCIATES SHARES. The Corporation is the owner beneficially and
of record of the Associates Shares and the Option and has good and marketable
title thereto, free and clear of any Encumbrances.
(e) SUBSIDIARIES. Other than PAF which is a wholly owned Subsidiary Corporation
of the Corporation and other than the Associated Companies and the Option, the
Corporation does not own shares of any other corporation or entity nor any
rights, warrants or other securities convertible into shares of any other
corporation or entity.
(f) PRIVATE COMPANY. Each of the Corporation, PAF and the Associated Companies
is a closed corporation.
(g) CORPORATE AUTHORITY. All requisite corporate actions have been taken by the
Vendor to authorize the valid execution and delivery of this Agreement. The
Vendor has the requisite power and capacity to execute and deliver this
Agreement. This Agreement constitutes a valid and legally binding obligation of
the Vendor.
(h) NO VIOLATIONS. The execution and delivery of this Agreement and the
observance and performance of the terms and provisions of this Agreement does
not and will not require the Vendor or the Corporation to obtain or make any
consent, authorization, approval, filing or registration under any law, by-law,
rule, regulation, judgement, order, writ, injunction or decree are which binding
upon the Vendor or the Corporation.
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(i) LITIGATION. Other than as set out on Schedule 3 there is not pending, or,
to the Best Knowledge of the Vendor, threatened or contemplated any suit,
action, legal proceeding, litigation or governmental investigation of any sort
relating to the Corporation nor is there any present state of facts or
circumstances which can be reasonably anticipated to be a basis of any such
suit, action, legal proceeding, litigation or governmental investigation nor is
there presently outstanding against the Corporation any judgement, decree,
injunction, rule or order of any court, governmental department, commission,
agency, instrumentality or arbitrator.
(j) MINUTE BOOKS. The minute books of the Corporation contain accurate and
complete copies of its constating documents together with minutes of all
meetings of directors, committees and shareholders of the Corporation. There are
outstanding no applications or filings which would alter in any way the
constating documents or corporate status of the corporation. No resolutions or
by-laws have been passed, enacted, consented to or adopted by the directors or
shareholders of the Corporation except as are contained in the minute books of
the Corporation.
(k) BOOKS OF ACCOUNT. To the Best Knowledge the books of account and financial
records of the Corporation fairly set out and disclose, in all material
respects, the current financial position of the Corporation as at the Closing
Date. All transactions involving the Corporation have been recorded in such
books and records.
(1) PERMITS AND LICENSES. To the Best Knowledge the Corporation has all
necessary permits, certificates, licenses, approvals, consents and other
authorizations required to carry on and conduct business and to own, lease or
operate its assets at the places and in the manner in which such business is
conducted.
(m) FINANCIAL STATEMENTS. The Vendor has delivered to the Purchaser a true copy
of the audited consolidated financial statements of the Corporation for the
fiscal year ended January 31, 1996 (the Company Financial Statements) and to the
Best Knowledge the same:
(1) Have been prepared in accordance with U.S. generally accepted
accounting principles applied on a basis consistent with those of the
preceding fiscal period.
(2) Present fairly the assets, liabilities and financial positions of the
Corporation and the results of operations for the year then ended.
(3) Are in accordance with the books and records of the Corporation.
(n) TAXES. To the Best Knowledge except as reserved for in the Company
Financial Statements:
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(1) All returns, including reports of every kind with respect to Taxes,
which are due to have been filed by the Corporation in accordance with
applicable law, have been duly filed by the date prescribed by law and are
complete and accurate.
(2) All Taxes, deposits or other payments for which the Corporation may
have any liability arising prior to Closing have been paid in full or
accrued as liabilities for Taxes on the books of the Corporation, as
applicable.
(o) FIXED ASSETS. Save and except for equipment leases, the Corporation has
good and marketable title to all of its fixed assets free and clear of all
Encumbrances other than as reflected on the Company Financial Statements. All of
such fixed assets are used or useful in or necessary for the conduct of business
of the Corporation. To the Best Knowledge such assets are in good working order
and condition and are in a good state of repair and maintenance, reasonable wear
and tear only excepted. The assets reflected in the balance sheet contained in
the Company Financial Statements constitute all of the property and assets,
real, personal and mixed, tangible and intangible, including without
limitation, contract rights, as are used or useful in or are necessary for the
conduct of the business in accordance with present practices.
(p) EMPLOYEE PLANS AND ARRANGEMENTS. To the Best Knowledge, all employee
contracts, plans and arrangements of the Corporation are in good standing and
the Corporation has made all payments required to be made by it in connection
therewith; all employee plans requiring funding on the part of the Corporation
are fully funded; no notice has been received by the Corporation of any
complaints filed by any employees against the Corporation claiming that the
Corporation has violated any applicable employee or human rights or similar
legislation in any jurisdiction in which the Corporation or the carries on
business or of any complaints or proceedings of any kind involving the
Corporation or any of the employees of the Corporation or before any labor
relations board; there are no outstanding orders or charges against the
Corporation and under applicable heath and safety legislation in any other
jurisdiction in which the Corporation pursuant to any applicable workers'
compensation legislation in any jurisdiction in which the Corporation carries on
business; other than the Union Agreement, the Corporation has made no agreements
with any labor union or employee association or made commitments to or conducted
negotiations with any labor union or employee association with respect to any
future agreements; except for the Pension Plan and Trust, and management
agreements with Stanley James White, Victoria Danseglio, Alfred Banderieni and
Reugg Quibell there is no agreement or practice with respect to the Corporation,
relating to the payment of any management, or any bonus, pension, share of
profits or retirement allowance or any insurance, health or other employee
benefit.
(q) PENSION PLAN AND TRUST AND UNION AGREEMENT. To the Best Knowledge there are
no existing liabilities under the Union Agreement, and the Corporation's Pension
Plan and Trust was terminated in October 1995. The Corporation may be called
upon to make contributions beyond the vested liability.
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(r) DEFAULT OF CONTRACTS. To the Best Knowledge, the Corporation has performed
all obligations required to be performed by it to the extent performance is due
and is entitled to all benefits under and the Corporation is not in default or
alleged to be in default in respect of any Contract relating to its business to
which it is a party or by which it is bound.
(s) COMPLIANCE WITH LAWS. To the Best Knowledge the Corporation has conducted
and is now conducting its business in compliance with all statutes, regulations,
by-laws, orders, covenants, restrictions or plans of all federal, state or
municipal authorities, agencies or boards applicable to such business.
(t) ENVIRONMENTAL MATTERS. To the Best Knowledge, the Corporation is not in
material violation of any applicable federal, state, local or other law,
regulation or order or any requirement of any governmental authority relating
to, without limitation, its operations, products, manufacturing processes,
advertising, sales or employment practices, wages and hours, safety, health or
welfare, product safety or civil rights. Without limiting the generality of the
foregoing to the Best Knowledge:
(1) the Corporation has at all times conducted its business in compliance
with all environmental laws and all regulations, orders and permits issued
by any governmental authority with jurisdiction business.
(2) No event has occurred which, with the passage of time or the giving of
notice or both, would constitute non-compliance by the Corporation with
such environmental laws.
(3) No Hazardous Material has been placed, held, located, used or disposed
of, on, under or at the Leased Premises and no part of the Leased Premises
has been used by the Corporation as a dumpsite with environmental laws.
(4) The Corporation has not caused or permitted the discharge of any
Hazardous Wastes or substances or toxic wastes or substances into the
natural environment or into any workplace operated by the Corporation.
(5) The Corporation has not generated, stored, labelled, transported,
disposed of or released dangerous goods, hazardous wastes or substances,
toxic wastes or substances, toxic wastes or substances, on the Leased
Premises except in compliance with all applicable federal, state and local
laws, rules, regulations or ordinances and the Leased Premises have not
been used by the Corporation to the Best Knowledge of the Vendor, in such a
manner as to cause a violation of or to give rise to a removal or
restoration obligation under any statute, ordinance, order, decree or under
the law of any federal, state, municipal or other governmental body or
agency have jurisdiction.
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(u) FINDERS FEE. All negotiations relating to this Agreement and the
Transaction have been carried on by the Vendor directly with the Purchaser
without the intervention of any other Person on behalf of the Vendor in
such a manner as to give rise to any valid claim against the Corporation
and/or the Purchaser for a brokerage commission, finder's fee or other like
payment.
4. COVENANTS, REPRESENTATIONS AND WARRANTIES OF PURCHASER
4.1 COVENANTS, REPRESENTATIONS AND WARRANTIES. Purchaser hereby covenants,
represents and warrants to the Vendor as follows and acknowledges and confirms
that the Vendor is relying upon such covenants, representations and warranties
in connection with the Transaction:
(a) ORGANIZATION. Purchaser is a corporation duly incorporated and validly
subsisting under the laws of the State of Nevada, has the corporate power
and authority to carry on its business as it is now being conducted and to
execute, deliver and perform its OBLIGATIONS under this Agreement.
(b) CONSENTS TO BE OBTAINED. Purchaser has obtained all consents, approvals
or authorizations and has effected or will have effected all filings with
regulatory authorities that are required in connection with the
Transaction.
(c) CORPORATE AUTHORITY. All requisite corporate actions have been TAKEN BY
THE Purchaser to authorize the valid execution and delivery of this
Agreement and the consummation of the Transaction including without
limitation, the issue of the Convertible Note Payable.
(d) AGREEMENT ENFORCEABLE. This Agreement constitute a valid and legally
binding obligation of the Purchaser enforceable against the Purchaser in
accordance with its terms.
(e) ACTIONS - PURCHASER. There is not pending or, to the Best Knowledge of
the Purchaser, threatened or contemplated, any suit, action, legal
proceeding, litigation or governmental investigation of any sort against
the Purchaser.
(f) FINDERS FEES. All negotiations relating to this Agreement and the
Transaction have been carried on by the Purchaser directly with the Vendor
without the intervention of any other Person on behalf of the Purchaser in
such a manner as to give rise to any valid claim against the Vendor for a
brokerage commission, finder's fee or other like payment.
(g) FULL DISCLOSURE. The Purchaser has been provided with full disclosure
as to the business affairs of the Corporation, that it has had full
opportunity to examine the books, records and contracts of the Corporation
and that it has had the benefit of independent legal advise in the
negotiations and completion of the within transaction.
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(h) REGULATION S. In the event the Purchaser or any successor entity or any
of its subsidiaries independently, directly or indirectly, becomes or
enters into any reorganization, reincorporation, transaction, merger or
acquisition wherein it becomes a US publicly traded company ("the Company")
then and in that event the Vendor or its assignees shall have the right to
convert its Series A Preferred Shares into common shares of the Company to
be issued pursuant to SEC Regulation S and pursuant to the conversion terms
and conditions of the Preferred Shares.
5. SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES
5.1 SURVIVAL. No investigations made by or on behalf of any Party at any time
shall have the effect of waiving, diminishing the scope of or otherwise
affecting any covenant, representation or warranty made by any Party. No waiver
by any Party of any condition, in whole or in part, shall operate as a waiver of
any other condition. The covenants, representations and warranties contained in
Articles 3 and 4 respectively or in any certificate or other document delivered
in connection with the Closing shall survive the making of this Agreement and
the Closing for a period of 1 year following the Closing Date, except for
subsection 3. l(n) which shall survive until the expiration of the applicable
legislation, together with waivers thereof, (the "Survival Period"); provided,
however, that if a claim for a breach of any such covenant, representation or
warranty is brought prior to the expiration of the applicable Survival Period
such covenant, representation or warranty shall, for the purposes of such claim,
survive the applicable Survival Period until such claim it is finally resolved
and all obligations with respect thereto have been fully satisfied.
6. INDEMNITY
6.1 INDEMNITY BY THE VENDOR. The Vendor agrees to indemnify and save harmless
the Purchaser from all Losses actually incurred by the Purchaser as a result of
any breach by the Vendor or any inaccuracy of any covenant, representation or
warranty contained in this Agreement.
6.2 INDEMNITY OF PURCHASER. Purchaser agrees to indemnify and save harmless the
Vendor from all Losses actually incurred by the Vendor as a result of any breach
by the Purchaser or any inaccuracy of any covenant, representation or warranty
contained in this Agreement.
6.3 MINIMUN INDEMNIFICATION CLAIM. Notwithstanding the provisions of subsection
6.1 and 6.2, as applicable, the obligation of the Vendor, as the case may be, to
indemnify in respect of any of the matters described in subsection 6.1, as the
case may be, shall become applicable only when the Losses actually incurred by
the Purchaser in the aggregate exceed $500,000 (the threshold.). Once the
Threshold has been exceeded, the obligations of indemnification with respect to
such matters shall apply to any and all Losses to the extent that the Losses
exceed the Threshold up to a maximum of $2,000,000.
6.4 SUPPLEMENTAL RIGHTS. The rights and benefits provided in this Article are
supplemental to and are without prejudice to any other rights, actions or causes
of action which may arise pursuant to any other section of this Agreement or
pursuant to applicable law.
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7. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS AT CLOSING
7.1 CONDITIONS PRECEDENT. All the obligations of the Purchaser to acquire the
Target Shares at the Closing under this Agreement are subject to the fulfilment
(or waiver in writing by Purchaser) prior to or at the Closing of each of the
following conditions:
(a) ACTIONS, ETC. All actions, proceeding, instruments and documents
required to carry out the Transaction including with out limitation the
purchase of the Target Shares at the Closing shall have been approved by
Purchaser and its counsel acting reasonably and Purchaser shall have been
furnished with such certified copies of actions and proceedings and other
such instruments and documents as Purchaser and its counsel shall have
requested.
(b) TITLE. The title of the Vendor to the Target Shares, the legality of
the incorporation and organization of the Corporation, the due creation and
issuance as fully paid of the Target Shares and all corporate proceeding of
and all other matters which in the opinion of counsel to Purchaser are
material in connection with the Transaction shall be subject to the
favourable opinion of such counsel.
(c) CORPORATE AUTHORIZATIONS. The Vendor shall have delivered to Purchaser
evidence reasonably satisfactory to counsel to Purchaser that all necessary
corporate authorizations authorizing and approving the Transaction have
been obtained.
(d) NO ORDERS. No order of any court or administrative agency shall be in
effect which restrains or prohibits the Transaction and no suit, action,
inquiry, investigation or proceeding in which it will be or it is sought to
restrain, prohibit or change the terms of or obtain damages or other relief
in connection with the Transaction and which in the judgement of Laser
makes it inadvisable to proceed with the consummation of the Transaction
shall have been made, instituted or threatened by any Person.
In case any of the foregoing conditions cannot be fulfilled at or before
the Time of Closing to the satisfaction of Purchaser, Purchaser may rescind this
Agreement by notice to the Vendor and in such event each of the Parties shall be
released from all obligations hereunder. Provided however that any such
conditions may be waived in whole or in part by Purchaser without prejudice to
Purchaser's rights of rescission in the event of the non-fulfilment of any other
condition or conditions, and such waiver to be binding on Purchaser only if the
same is in writing.
8. CONDITIONS PRECEDENT TO THE VENDOR OBLIGATION AT CLOSING
8.1 CONDITIONS PRECEDENT. All obligations of the Vendor to transfer the Target
Shares at the Closing under this Agreement are subject to the fulfilment (or
waiver in writing by the Vendor) prior to or at the Closing of each of the
following conditions:
(a) ACTIONS, ETC. All actions, proceedings, instruments and documents
required to carry out the Transaction including without limitation, the
issue of the Series A Preferred Shares and all other related legal matters
shall have been approved by the Vendor and its counsel shall have been
furnished with such certified copies of actions and proceedings and other
such instruments and documents that the Vendor and its counsel shall have
requested.
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(b) CORPORATE AUTHORIZATIONS. Purchaser shall deliver to the Vendor
evidence satisfactory to the Vendor's counsel that all necessary corporate
authorizations by the Purchaser approving the Transaction have been
obtained.
(c) NO ORDERS. No order of any court or administrative agency shall be in
effect which restrains or prohibits the Transaction and no suit, action,
inquiry, investigation or proceeding in which it will be or it is sought to
restrain, prohibit or change the terms of or obtain damages or other relief
in connection with the Transaction and which in the judgment of Vendor
makes it inadvisable to proceed with the consummation of the Transaction
shall have been made, instituted or threatened by any Person.
In case any of the foregoing conditions cannot be fulfilled at or before
the Time of Closing to the satisfaction of the Vendor, the Vendor may rescind
this Agreement by notice to Purchaser and in such event each of the Parties
shall be released from all obligations hereunder. Provided however that any such
conditions may be waived in whole or in part by the Vendor without prejudice to
the Vendor's rights of rescission in the event of the non-fulfilment of any
other condition or conditions, any such waiver to be binding on the Vendors only
if the same is in writing.
9. MISCELLANEOUS
9.1 TENDER. Any tender of documents or money hereunder may be made upon the
Parties or upon their respective solicitors as set forth herein.
9.2 NOTICE. All notices, requests, demands or other communications by the
Parties required or permitted to be given by one Party to another shall be given
in writing by personal delivery, by facsimile or by registered or-certified
mail, delivered to such other Party as follows:
(a) Vendor at:
30 DeCastro Street
Road Town, Tortola
British Virgin Island
Attention: Larry Weltman, Executive Vice President
Facsimile Number: (809) 494-6583
(b) to the Purchaser at:
Online International Corporation
150 Laser Court
Hauppauge, New York 1 1788
Attention: James D. Russell, President
Facsimile Number: (516) 231-7601
or at such other address or telecopier number as may be given by any of them to
the others in writing from time to time and such notices, requests, demands or
other communications shall be deemed to have been received when delivered, if
personally delivered, on the date telecopied (with receipt confirmed) if
telecopied and received at or prior to 5:00 p.m. Iocal time and, if not, on the
next Business Day and if mailed, on the date received as certified.
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9.3 FURTHER ASSURANCES. The Parties shall sign such other papers, cause such
meetings to be held, resolutions passed and by-laws enacted and exercise their
vote and influence, do and perform and cause to be done and performed such
further and other acts and things as may be necessary or desirable in order to
give full effect to this Agreement and every part hereof.
9.4 GOVERNING LAW. The validity, interpretation, performance and enforcement of
this Agreement and the rights of the parties hereunder shall be construed and
enforced in accordance with the laws of the State of New York, without regard to
choice of law rules, and the parties irrevocably attorn to the jurisdiction of
British Virgin Islands.
Any controversy or claim arising out of or relating to this Agreement, or breach
thereof, shall be settled by arbitration in British Virgin Islands. Such
arbitration shall be in accordance with the rules of the American Arbitration
Association. Judgment upon the award rendered by the arbitrator(s) may be
entered in any court of competent jurisdiction. The Prevailing party in a claim
or controversy arising out of or relating to this Agreement shall be entitled to
recover all reasonable attorney's fees, costs of arbitration, and court costs,
from the Losing Party.
9.5 CONFIDENTIALITY. The Parties agree that the terms of this Agreement and all
of the documents to be delivered on Closing shall be retained in the strictest
confidence and not be disclosed to any third party other than for the purposes
of filing income tax returns, or for complying with an Order of a court of
competent jurisdiction; provided the Vendor shall be at liberty to comply with
the requirements of regulatory authorities including but not limited to The
Toronto Stock Exchange, the Ontario Securities Commission; and the Securities
and Exchange Commission of the United States; provided the Purchaser shall be at
liberty to comply with any Governmental Agency with regulatory authority over
the operations or affairs of the Corporation in response to a request for the
production of records, provided however that the Purchaser gives the Vendor
notice of such request prior to the production of records of the terms of this
Agreement and cooperates with the Vendor in any proceedings as may be undertaken
by the Vendor to set aside such request.
9.6 EXPENSES. All out-of-pocket expenses incurred by the Vendor in connection
with the Transaction shall be borne by the Vendor and all out-of-pocket expenses
incurred by Purchaser and Corporation in connection with the Transaction shall
be borne by Purchaser and Corporation respectively.
9.7 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement among the
Parties with respect to all of the matters herein. This Agreement supersedes any
and all agreements, understandings and representations made among the Parties
prior to the date hereof with respect to all of the matters herein. This
Agreement shall not be amended except by a memorandum in writing signed by all
of the Parties and any amendment hereof shall be null and void and shall not be
binding upon any Party which has not given its consent as aforesaid.
9.8 ASSIGNMENT. No Party may assign this Agreement or any part hereof without
the prior written consent of the other Party which consent may not be
unreasonably withheld. Subject to the foregoing, this Agreement shall enure to
the benefit of and be binding upon the Parties and their respective heirs,
executors, administrators, legal representatives, successors and assign, but no
other Person. Notwithstanding the foregoing the Vendor shall be entitled to
assign the Series A Preferred Shares in accordance with the terms thereof.
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9.9 INVALIDITY. In the event that any of the covenants, representations and
warranties or any portion of them contained in this Agreement are unenforceable
or are declared invalid for any reason whatsoever, such unenforceability or
invalidity shall not affect the enforceability or invalid, covenant,
representation and warranty or covenant or portion thereof shall be severable
from the remainder of this Agreement.
9.10 COUNTERPART. This Agreement may be executed in several counterparts, each
of which so executed shall be deemed to be an original and such counterparts
when taken together shall constitute one and the same original agreement which
shall be binding on the Parties hereto.
IN WITNESS WHEREOF the Parties have duly executed this Agreement as of the
30 day of Janaury, 1997.
WITNESS ONLINE INTERNATIONAL CORPORATION
Per: /s/ Lance Hylton Per: /s/ James D. Russell
------------------------------ ---------------------------
Name: LANCE HYLTON B.V.I Name: JAMES D. RUSSELL
------------------------------ ---------------------------
Title: PRESIDENT
--------------------------
GAMING LOTTERY CORPORATION
Per: /s/Larry Weltman
---------------------------
Name: LARRY WELTMAN
---------------------------
Title: EXECUTIVE VP
--------------------------
[SEAL]
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EXHIBIT A
SERIES A PREFERRED SHARES
<PAGE>
ONLINE INTERNATIONAL CORPORATION
(A Nevada Corporation)
SERIES A PREFERRED SHARE CERTIFICATE
CERTIFICATE NO: 1 NO. SHARES: 250
THIS CERTIFIES that GAMING LOTTERY CORPORATION is the owner of TWO HUNDRED
FIFTY (250) fully paid and nonassessable shares of the Series A Preferred Stock
of ONLINE INTERNATIONAL CORPORATION, a corporation organized under the laws of
the State of Nevada, transferable on the books of the corporation by the holder
hereof, in person or by duly authorized attorney, or surrender of this
certificate properly endorsed.
RIGHTS, PREFERENCES, PRIVILEGES AND RESTRICTIONS
The rights, preferences, privileges and restrictions of these shares Series
"A" Preferred Shares (the "Shares") are as follows:
1. DIVIDENDS: A fixed, preferential non-cumulative cash dividend rate of
five percent (5%) payable semi-annually and to commence thirty (30) months from
the date hereof. This dividend rate to be adjusted to reflect any reorganization
of the present capitalization structure of the corporation.
2. LIQUIDATION PREFERENCE: The preferential right to participate in any
distribution or liquidation or dissolution of the corporation.
3. LIMITED VOTING RIGHTS: Except as specifically set forth here in
Paragraph 11, these Shares shall not have the right to vote in the same manner
and on the same corporate matters as the holders of common stock of the
corporation.
4. CONVERSION RIGHTS: The right to convert all or any portion thereof of
the Shares into shares of common stock at a conversion rate of one 11) preferred
share for 16,667 common shares utilizing a $6.00 per share conversion rate as
the capitalization of the corporation as of the date hereof with said rate to be
adjusted to reflect any reorganization of the capitalization structure of the
corporation. This right to convert all or any portion thereof of the Shares
shall remain with the Holder or its transferees or assignees in perpetuity.
Page 1 of 4
<PAGE>
5. CONVERSION DATE: The Conversion Date for this Shares shall commence
thirty (30) days after the date hereof.
6. MANNER OF EXERCISE OF CONVERSION RIGHTS: In order to exercise the
conversion rights of these Shares, the Holder of said Shares must give written
notice to the corporation no earlier than ten (10) days after the Conversion
Date of its intention to exercise its conversion rights.
7. RESERVATION OF COMMON STOCK: The corporation shall, at all times during
the period which the Holder of the Shares has the right to convert the Shares to
common shares of the corporation, reserve and keep available out of its
authorized but unissued common shares, such amount of its duly authorized shares
of common stock as shall be necessary to effect the conversion of these Shares.
8. CONVERSION LIMITATIONS: The Holder of these Shares shall only be
permitted to convert that amount of its Shares which would result after such
conversion with the Holder then owning a maximum of twenty percent (20%) of the
then issued and outstanding common shares of the corporation. The Holder may
cumulatively convert a total amount of its Shares which will result in the
Holder having cumulatively owned common shares in excess of this twenty percent
(20%) limitation. However, upon the completion of any single conversion
transaction, the Holder will be limited to a then present ownership of a maximum
of twenty percent (20%) of the issued and outstanding common shares of the
corporation. However, in the event the corporation is in breach of any of its
obligations as set forth herein in Paragraph 10, the conversion rights of the
Holder shall not be subject to the conversion limitations set forth in this
Paragraph 6.
9. ISSUANCE OF SHARES PURSUANT TO REGULATION S: The shares of common stock
that are to be issued to the Holder of the Shares resulting from the exercise of
its conversion rights, shall be issued pursuant to SEC Regulation S if the
converting Holder is a "non-U.S. person" and further satisfies all of the other
conditions of SEC Regulation S.
10. CONDITIONS, OBLIGATIONS AND REQUIRED APPROVALS: The corporation shall
be required to provide the Holder of the Shares the documents set forth below
and to refrain from certain corporate actions unless the corporation obtains the
prior written approval of no less than fifty-one percent (51% of the issued and
outstanding Series A Preferred Shares:
Page 2 of 4
<PAGE>
1. FINANCIAL STATEMENTS: To provide the Holder with copies of all
regularly prepared quarterly and annual financial statements of the
corporation.
2. ACCESS TO BOOKS AND RECORDS: To provide the Holder with reasonable
access for review, inspection and copying of the corporation's books
and records.
3. APPOINTMENT AND COMPENSATION OF OFFICERS: To obtain the written
approval of the Holder for the appointment and compensation of all
officers and management and supervisory personnel of the corporation,
including but not limited to its executive officers.
4. CAPITAL EXPENDITURES: To make no capital expenditures in excess of
$100,000 without the prior written approval of the Holder.
5. ACQUISITIONS AND MERGERS: To make no acquisitions and/or mergers
with other entities without the prior written approval of the Holder.
6. ISSUANCE OF SECURITIES AND ADJUSTMENT TO CAPITAL STRUCTURE: To
issue any shares of common stock or other securities, incur any debt
other than ordinary trade creditors, declare any type of stock or
cash dividend or make any adjustment to the capitalization of the
corporation without the prior written approval of the Holder.
7. POSITIVE SHAREHOLDER EQUITY: To maintain at all times both a
positive shareholder equity and positive working capital.
11. BREACH OF CONDITIONS AND OBLIGATIONS: In the event of a breach of any
of the conditions set forth above in Paragraph 10 on the part of the corporation
and/or the corporation fails to obtain the required approvals of the Holders as
further set forth above in Paragraph 10, the corporation shall be deemed to be
in "default" and the Holder hereof shall be entitled to exercise the following
rights with respect to its Shares:
Page 3 of 4
<PAGE>
1. VOTING RIGHTS: The Shares shall have the same voting rights as the
common shares of the corporation and shall not be subject to the
provisions of Paragraph 3 herein.
2. CONVERSION RIGHTS: The Holder hereof shall be entitled to convert
any portion up to the entire amount of its Shares and shall not be
subject to the conversion limitations set forth in Paragraph 8
herein.
12. TRANSFERABILITY OF SHARES: The Holder of these Shares shall have the
absolute right to transfer or assign all or any portion thereof of the Shares.
The transferee or assignee of the Shares shall have all of the rights,
preferences and privileges of the Shares and shall be subject to the same
restrictions of said Shares.
IN WITNESS WHEREOF, the said corporation has caused this certificate to be
signed by its duly authorized officers and its corporation seal to be hereunder
affixed this 23 day of January, 1997.
/s/ J. Russell /s/ Victoria Danseglio
- ------------------------------ ------------------------------
PRESIDENT SECRETARY
Receive in Tortola, BVI
January 30/97
[SEAL]
Page 4 of 4
<PAGE>
SCHEDULE 1
DIRECTORS AND OFFICERS
DIRECTOR
Stanley James White
OFFICERS
President and CEO Stanley James White
Treasurer/Secretary
Vice President Finance Victoria Danseglio
<PAGE>
SCHEDULE 2
ISSUED AND OUTSTANDING SHARES OF THE CORPORATION
ISSUES AND OUTSTANDING
101 COMMON SHARES ---- GAMING LOTTERY CORPORATION
AUTHORIZED
200 COMMON SHARES
<PAGE>
[LOGO]
NUMBER SHARES
| | | |
------ -------
INCORPORATED UNDER THE LAWS OF THE STATE OF NEW YORK
PRINTING ASSOCIATES INCORPORATED
The Corporation is Authorized to Issue 200 Shares
THIS CERTIFIES THAT: GAMING LOTTERY CORPORATION IS THE OWNER OF
ONE HUNDRED --------------------------------- FULLY PAID AND NON-ASSESSABLE
SHARES OF THE ABOVE CORPORATION TRANSFERABLE ONLY ON THE BOOKS OF THE
CORPORATION BY THE HOLDER HEREOF IN PERSON OR BY A DULY AUTHORIZED ATTORNEY
UPON SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED.
IN WITNESS WHEREOF, THE SAID CORPORATION HAS CAUSED THIS CERTIFICATE TO BE
SIGNED BY ITS DULY AUTHORIZED OFFICERS AND TO BE SEALED WITH THE SEAL OF THE
CORPORATION.
DATED OCTOBER 23, 1996
----------------
/s/ Jim White /s/ [ILLEGIBLE]
- ------------------------------ ------------------------------
PRESIDENT SECRETARY
- ------------------------------ ------------------------------
[SEAL]
SEE TRANSFER RESTRICTIONS ON REVERSE
<PAGE>
NOTICE: RESTRICTIONS ON TRANSFER
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE
OFFERED, SOLD, TRANSFERRED, ENCUMBERED, OR OTHERWISE DISPOSED OF EXCEPT UPON
SATISFACTION OF CERTAIN CONDITIONS. INFORMATION CONCERNING THESE RESTRICTIONS
MAY BE OBTAINED FROM THE CORPORATION OR ITS LEGAL COUNSEL. ANY OFFER OR
DISPOSITION OF THESE SECURITIES WITHOUT SATISFACTION OF SAID CONDITIONS WILL BE
WRONGFUL AND WILL NOT ENTITLE THE TRANSFEREE TO REGISTER OWNERSHIP OF THE
SECURITIES WITH THE CORPORATION.
<TABLE>
<CAPTION>
<S><C>
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or regulations. Additional abbreviations may also be used though not in the
list.
TEN COM -- as tenants in common UNIF GIFT MIN ACT Custodian (Minor)
------------------- --------------------
TEN ENT -- as tenants by the entireties under Uniform Gifts to Minors Act (State)
----------------------------
JT TEN -- as joint tenants with right of survivorship
and not as tenants in common PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
-------------------------------------
FOR VALUE RECEIVED, THE UNDERSIGNED HEREBY SELLS, ASSIGNS AND TRANSFERS UNTO | |
| |
- ---------------------------------------------------------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
- ---------------------------------------------------------------------------------------------------------------------------------
SHARES
- ---------------------------------------------------------------------------------------------------------------------------
REPRESENTED BY THE WITHIN CERIFICATE, AND HEREBY IRREVOCABLY CONSTITUTES AND APPOINTS
-------------------------------------------
ATTORNEY TO TRANSFER THE SAID
- ----------------------------------------------------------------------------------------------------
SHARES ON THE BOOKS OF THE WITHIN-NAMED CORPORATION WITH FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED
-------------------------
IN PRESENCE OF ------------------------------------
/s/ [ILLEGIBLE]
- ----------------------------------
</TABLE>
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the certificate in every particular without alteration
or enlargement, or any change whatever.
<PAGE>
[LOGO]
NUMBER SHARES
| | | |
------ -------
INCORPORATED UNDER THE LAWS OF THE STATE OF NEW YORK
PRINTING ASSOCIATES INCORPORATED
The Corporation is Authorized to Issue 200 Shares
THIS CERTIFIES THAT: GAMING LOTTERY CORPORATION IS THE OWNER OF
ONE ----------------------------------------- FULLY PAID AND NON-ASSESSABLE
SHARES OF THE ABOVE CORPORATION TRANSFERABLE ONLY ON THE BOOKS OF THE
CORPORATION BY THE HOLDER HEREOF IN PERSON OR BY A DULY AUTHORIZED ATTORNEY
UPON SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED.
IN WITNESS WHEREOF, THE SAID CORPORATION HAS CAUSED THIS CERTIFICATE TO BE
SIGNED BY ITS DULY AUTHORIZED OFFICERS AND TO BE SEALED WITH THE SEAL OF THE
CORPORATION.
DATED December 16, 1996
-----------------
/s/ Jim White /s/ Victoria S. Danseglio
- ------------------------------ ------------------------------
PRESIDENT SECRETARY
- ------------------------------ ------------------------------
[SEAL]
SEE TRANSFER RESTRICTIONS ON REVERSE
<PAGE>
SCHEDULE 3
LITIGATION AND PENDING LITIGATION
The Corporation has been in dispute with Hilbert Ocanas, the President and Chief
Executive Officer, of Wintex, who together with his spouse owns 60% of the
outstanding common shares of Wintex, over the management of Wintex. To date the
Corporation has not been successful in negotiating an amicable ownership and
management arrangement of Wintex. Furthermore Hilbert Ocanas has threatened the
Corporation that it has violated a stockholders' agreement and may be binding to
him under certain buy/sell clauses. The Purchaser acknowledges that it, has been
provided with all documentation and correspondence relating to this matter, and
has been involved in recent attempts to negotiate a settlement with Hilbert
Ocanas, and as such has full knowledge of all the issues, threats and problems
pertaining to this matter.
-19-
<PAGE>
[LETTERHEAD]
Graham & James LLP
January 24, 1997
Online International Corporation
c/o Printing Associates Incorporated
150 Laser Court
Hauppauge, New York 11788
Attention: James Russell
RE: PRINTING ASSOCIATES INCORPORATED
Ladies and Gentlemen:
We have served as counsel to Gaming Lottery Corporation, an Ontario, Canada
corporation ("GLC"), which owns the stock of Printing Associates Incorporated, a
New York corporation (the "Company"), as of the date hereof. This opinion is
delivered to you at the request of the Company in connection with that certain
Stock Purchase Agreement to be entered into between GLC and you.
For purposes of this opinion, we have examined originals or copies of only the
following documents, records and instruments:
(a) The Certificate of Incorporation of the Company filed on September 20,
1994, as amended by the Certificate of Merger of Printing Associates
Incorporated and Printing Associates of New York, Inc. filed
on September 22, 1994 (the "Certificate of Incorporation"), certified
to us by an officer of the Company as being complete and in full force
and effect as of the date hereof;
(b) The Bylaws of the Company (the "Bylaws") adopted on April 27, 1995,
certified to us by an officer of the Company as being complete and in
full force and effect as of the date hereof;
<PAGE>
Online International Corporation
January 24, 1997
Page 2
(c) Records of proceedings of the Board of Directors and shareholders
of the Company, together with the stock book and transfer ledger of
the Company, all as certified by an officer of the Company;
(d) A certificate dated as of the date of this opinion from an
officer of the Company (the "Certificate"), with respect to certain
matters, including the matters referred to in (a), (b) and (c) above,
a copy of which is attached hereto; and
(e) A Good Standing Certificate dated January 22, 1997, issued by the
Secretary of State of the State of New York with respect to the
Company.
We have not reviewed any documents for the purposes of this opinion other than
items (a) through (e) above.
ASSUMPTIONS
For purposes of rendering this opinion, we have assumed the following:
A. AUTHENTICITY AND RECORDING. All signatures are genuine and all
documents submitted to us as originals are complete and authentic. All
documents submitted to us as copies conform to the executed originals.
B. ACCURATE INFORMATION. The information contained in the Certificate,
and in certificates of public officials, including, without limitation, that
described in item (e) above, is true and complete.
C. FACTUAL MATTERS. The Board of Directors of the Company has not
appointed any bank or trust company as transfer agent and/or registrar since
the Company's incorporation. Printing Associates Incorporated (the
"Constituent Corporation"), one of the constituent corporations in the merger
(the "Merger") between the Constituent Corporation and the Company (formerly
known as "Printing Associates of New York, Inc.") effective as of September
22, 1994, did not own
<PAGE>
Online International Corporation
January 24, 1997
Page 3
any real property in the State of New York immediately prior to the effective
date of the Merger.
OPINION
Based solely upon the foregoing and on our examination of such questions of law
we have deemed necessary or appropriate for the purpose of this opinion, and
subject to the assumptions, qualifications and limitations set forth herein, it
is our opinion that:
1. The Company is a corporation validly existing under the laws of the
State of New York.
2. The authorized capital stock of the Company consists of 200 shares, of
which 101 shares are issued and outstanding.
3. Gaming Lottery Corporation is the record holder of all of the issued
and outstanding shares of capital stock of the Company (the "Shares"). The
Shares have been duly authorized, validly issued and are fully paid and
nonassessable (subject to Section 630 of the New York Business Corporation Law).
QUALIFICATIONS AND LIMITATIONS
The opinions rendered herein are subject to and qualified in all respects by the
following qualifications and limitations:
a. We are members of the Bar of the State of New York and our opinion is
limited to the laws of the State of New York presently in force and we express
no opinion as to the applicability or effect of the laws of any other
jurisdiction.
b. The foregoing opinions, to the extent they relate to the organization
and existence of the Company, including without limitation the opinion set forth
in Paragraph 1 above, are based solely upon our review of the Certificate of
Incorporation and the Bylaws, the Certificate, the certificate identified in
item (e) above, and the records identified in item (c) above.
<PAGE>
Online International Corporation
January 24, 1997
Page 4
c. Our opinion expressed in Paragraph 3 above as to the fully paid and
nonassessable status of the outstanding shares of capital stock of the Company
is based solely upon the statement set forth in the Certificate to the effect
that the Company received full and adequate consideration for all outstanding
shares of its capital stock.
This opinion is rendered to you in connection with the sale to you of the Shares
pursuant to the Purchase Agreement and is for your exclusive benefit. This
opinion may not be relied upon by you for any other purpose and, without our
prior written consent, may not be relied upon by or furnished or quoted to any
other person, firm or corporation for any purpose. Neither you nor any other
person to whom we may grant our consent to rely upon this opinion may rely upon
any portion of this opinion which such person knows to be false or has
information which would make reliance upon such portion of the opinion
unreasonable in the circumstances. This opinion speaks only as of its date. We
have no obligation to advise you (or any other person) of any changes of law or
fact that may occur after the date hereof, notwithstanding that such changes may
affect the legal analysis, a legal conclusion or an informational confirmation
contained herein.
Very truly yours,
/s/ Graham & James LLP
<PAGE>
RECEIPT
THE UNDERSIGNED hereby acknowledges receipt of Stock Certificate No. 4 issued in
the name of Gaming Lottery Corporation for One (1) share of the common stock of
Printing Associates Incorporated duly endorsed for transfer.
Dated: JANUARY 30, 1997.
----------
ONLINE INTERNATIONAL CORPORATION
By: /s/ James D. Russell
-------------------------------------
Its: PRESIDENT
------------------------------------
[SEAL]
<PAGE>
RECEIPT
THE UNDERSIGNED hereby acknowledges receipt of Stock Certificate No. 4 issued in
the name of Gaming Lottery Corporation for One Hundred (100) shares of the
common stock of Printing Associates Incorporated duly endorsed for transfer.
Dated: JANUARY 30, 1997.
----------
ONLINE INTERNATIONAL CORPORATION
By: /s/ James D. Russell
-------------------------------------
Its: PRESIDENT
------------------------------------
[SEAL]
<PAGE>
[LOGO]
NUMBER SHARES
| | | 100 |
------ -------
INCORPORATED UNDER THE LAWS OF THE STATE OF NEW YORK
PRINTING ASSOCIATES INCORPORATED
THE CORPORATION IS AUTHORIZED TO ISSUE 200 SHARES
THIS CERTIFIES THAT: GAMING LOTTERY CORPORATION IS THE OWNER OF
ONE HUNDRED ------------------------------- FULLY PAID AND NON-ASSESSABLE
SHARES OF THE ABOVE CORPORATION TRANSFERABLE ONLY ON THE BOOKS OF THE
CORPORATION BY THE HOLDER HEREOF IN PERSON OR BY A DULY AUTHORIZED ATTORNEY
UPON SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED.
IN WITNESS WHEREOF, THE SAID CORPORATION HAS CAUSED THIS CERTIFICATE TO BE
SIGNED BY ITS DULY AUTHORIZED OFFICERS AND TO BE SEALED WITH THE SEAL OF
THE CORPORATION.
DATED October 23, 1996
/s/ J.M. WHITE /s/ [ILLEGIBLE]
- ------------------------------ ------------------------------
PRESIDENT SECRETARY
- ------------------------------ ------------------------------
[SEAL]
SEE TRANSFER RESTRICTIONS ON REVERSE
<PAGE>
NOTICE: RESTRICTIONS ON TRANSFER
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE
OFFERED, SOLD, TRANSFERRED, ENCUMBERED, OR OTHERWISE DISPOSED OF EXCEPT UPON
SATISFACTION OF CERTAIN CONDITIONS. INFORMATION CONCERNING THESE RESTRICTIONS
MAY BE OBTAINED FROM THE CORPORATION OR ITS LEGAL COUNSEL. ANY OFFER OR
DISPOSITION OF THESE SECURITIES WITHOUT SATISFACTION OF SAID CONDITIONS WILL BE
WRONGFUL AND WILL NOT ENTITLE THE TRANSFEREE TO REGISTER OWNERSHIP OF THE
SECURITIES WITH THE CORPORATION.
[SEAL]
<TABLE>
<CAPTION>
<S><C>
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or regulations. Additional abbreviations may also be used though not in the
list.
TEN COM --as tenants in common UNIF GIFT MIN ACT-- Custodian (Minor)
------------------- --------------------
TEN ENT --as tenants by the entireties under Uniform Gifts to Minors Act (State)
----------------------------
JT TEN --as joint tenants with right of survivorship
and not as tenants in common PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
FOR VALUE RECEIVED, THE UNDERSIGNED HEREBY SELLS, ASSIGNS AND TRANSFERS UNTO ---------------------------------------
| |
ONLINE INTERNATIONAL CORPORATION | |
- ---------------------------------------------------------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADRESS OF ASSIGNEE
- ---------------------------------------------------------------------------------------------------------------------------------
100 Shares
- ---------------------------------------------------------------------------------------------------------------------------
REPRESENTED BY THE WITHIN CERTIFICATE, AND HEREBY IRREVOCABLY CONSTITUTES AND APPOINTS
-------------------------------------------
ATTORNEY TO TRANSFER THE SAID
- ----------------------------------------------------------------------------------------------------
SHARES ON THE BOOKS OF THE WITHIN-NAMED CORPORATION WITH FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED January 30, 1997
---------------------------- /s/ [ILLEGIBLE]
IN PRESENCE OF ---------------------------------
TORTOLA B.V.I.
/s/ [ILLEGIBLE] B.V.I.
- -----------------------------------
</TABLE>
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the certificate in every particular without alteration
or enlargement or any change whatever.
<PAGE>
[LOGO]
NUMBER SHARES
| | | 100 |
------ -------
INCORPORATED UNDER THE LAWS OF THE STATE OF NEW YORK
PRINTING ASSOCIATES INCORPORATED
THE CORPORATION IS AUTHORIZED TO ISSUE 200 SHARES
THIS CERTIFIES THAT: GAMING LOTTERY CORPORATION IS THE OWNER OF
ONE ----------------------------------------- FULLY PAID AND NON-ASSESSABLE
SHARES OF THE ABOVE CORPORATION TRANSFERABLE ONLY ON THE BOOKS OF THE
CORPORATION BY THE HOLDER HEREOF IN PERSON OR BY A DULY AUTHORIZED ATTORNEY
UPON SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED.
IN WITNESS WHEREOF, THE SAID CORPORATION HAS CAUSED THIS CERTIFICATE TO BE
SIGNED BY ITS DULY AUTHORIZED OFFICERS AND TO BE SEALED WITH THE SEAL OF THE
CORPORATION.
DATED December 16, 1996
/s/ J. White /s/ Victoria Danseglio
- ------------------------------ ------------------------------
PRESIDENT SECRETARY
- ------------------------------ ------------------------------
[SEAL]
SEE TRANSFER RESTRICTIONS ON REVERSE
<PAGE>
NOTICE: RESTRICTIONS ON TRANSFER
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE
OFFERED, SOLD, TRANSFERRED, ENCUMBERED, OR OTHERWISE DISPOSED OF EXCEPT UPON
SATISFACTION OF CERTAIN CONDITIONS. INFORMATION CONCERNING THESE RESTRICTIONS
MAY BE OBTAINED FROM THE CORPORATION OR ITS LEGAL COUNSEL. ANY OFFER OR
DISPOSITION OF THESE SECURITIES WITHOUT SATISFACTION OF SAID CONDITIONS WILL BE
WRONGFUL AND WILL NOT ENTITLE THE TRANSFEREE TO REGISTER OWNERSHIP OF THE
SECURITIES WITH THE CORPORATION.
[SEAL]
<TABLE>
<CAPTION>
<S><C>
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or regulations. Additional abbreviations may also be used though not in the
list.
TEN COM --as tenants in common UNIF GIFT MIN ACT-- Custodian (Minor)
------------------- --------------------
TEN ENT --as tenants by the entireties under Uniform Gifts to Minors Act (State)
----------------------------
JT TEN --as joint tenants with right of survivorship
and not as tenants in common PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
FOR VALUE RECEIVED, THE UNDERSIGNED HEREBY SELLS, ASSIGNS AND TRANSFERS UNTO -------------------------------------
| |
ONLINE INTERNATIONAL CORPORATION | |
- ----------------------------------------------------------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
- ---------------------------------------------------------------------------------------------------------------------------------
SHARES
- ---------------------------------------------------------------------------------------------------------------------------
REPRESENTED BY THE WITHIN CERTIFICATE, AND HEREBY IRREVOCABLY CONSTITUTES AND APPOINTS
-----------------------------------------
ATTORNEY TO TRANSFER THE SAID
- ----------------------------------------------------------------------------------------------------
SHARES ON THE BOOKS OF THE WITHIN-NAMED CORPORATION WITH FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED January 30, 1997
------------------------------ /s/ [ILLEGIBLE]
IN PRESENCE OF ---------------------------------
TORTOLA B.V.I.
/s/ [ILLEGIBLE] B.V.I.
- -----------------------------------
</TABLE>
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the certificate in every particular without alteration
or enlargement or any change whatever.
<PAGE>
LAW OFFICES OF
SUITE 333
CARMINE J. BUA 3238 CAMINO DEL RIO NORTH
SAN DIEGO, CALIFORNIA 92108-1789
TELEPHONE (619) 280-8000
FACSIMILE (619) 280-8001
January 21, 1996 REPLY TO FILE NO. 3223CD
Mr. Larry Weltman
Executive Vice-President
Gaming Lottery Corporation
Simmons Building
Wickham's Cay 1
P.O. Box 961, Road Town
Tortola, BVI
Re: LEGAL OPINION REGARDING STOCK PURCHASE AGREEMENT BETWEEN ONLINE
INTERNATIONAL CORPORATION AND GAMING LOTTERY CORPORATION
Dear Mr. Weltman:
We have acted as counsel for Online International Corporation, a Nevada
corporation ("OIC" or the "Company") in connection with the Stock Purchase
Agreement dated January ____, 1997 (the "Agreement") between OIC and Gaming
Lottery Corporation, a British Virgin Islands corporation ("GLC"). Pursuant to
the Agreement, OIC will be acquiring all of the issued and outstanding shares of
common stock of Printing Associates, Inc. ("PAI"), and wherein PAI will become a
wholly owned subsidiary of OIC.
In giving this opinion, we have examined such documents and made such other
investigations as we have deemed appropriate and relevant in order to furnish
this opinion, including the review of certain OIC corporate records.
In our examination, we have assumed the genuineness of all signatures
(other than the signatures of OIC), the authenticity of all documents submitted
to us as original documents, the conformity to original documents of all
documents submitted to us as original documents, the conformity to original
documents of all documents submitted to us as certified, conformed or
photostatic copies, and the authenticity of the originals of such documents.
<PAGE>
Mr. Larry Weltman
January 21, 1997
Page 2
We express no opinion as to matters under or involving the laws of any
jurisdiction other than the laws of the State of Nevada and the laws of the
United States of America as currently in effect.
1. BASIS FOR OPINION: The documentary basis and other basis for this
opinion is my review and analysis of the following:
1. The Company's Articles of Incorporation, Certificate of Amendment,
By-Laws, Minutes of Board of Directors Meeting, Minutes of Shareholder
meetings and Shareholder Lists (collectively the "Company Records").
2. My review and analysis of the Agreement.
3. Action by Written Consent of the Shareholders of Online
International Corporation (the "Consent").
4. My review and analysis of the resolutions of the Boards of
Directors of OIC authorizing the Agreement, the issuance of the Series
A Preferred Shares and amending the Articles of Incorporation to
establish a class of Preferred Shares (collectively the
"Resolutions").
5. My review and analysis of the OIC Series A Preferred Share
Certificate for 250 shares R/N/O GLC.
6. My review and analysis of the U.S. Securities Act of 1933 (the
"Act"), SEC Regulation S ("Regulation S") and Nevada Revised Statutes
Sections 78.211, 78.215, 78.3784, 78.3785, 78.379.1 and 90.530.11
(collectively the "Nevada Statutes") as they apply to the Agreement.
2. LEGAL OPINION: Based upon my review of the Company Records, the
Agreement, the Consent, the Resolutions, the Act, Regulation S, and the Nevada
Statutes, it is our opinion that:
<PAGE>
Mr. Larry Weltman
January 21, 1997
Page 3
1. The Company is a corporation, dully incorporated, validly existing
and in good standing under the laws of Nevada, is current in all of
its regulatory filings, with the requisite corporate power and
authority to own and use its properties and assets and to carry on its
business as currently conducted.
2. The execution and delivery of the Agreement by the Company and the
consummation by it of the transactions contemplated thereby having
been duly authorized by all necessary action on the part of the
Company. The Agreement has been duly executed and delivered by the
Company and constitutes the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms.
3. The authorized capital of the Company consists of 100,000,000
shares with a par value of $.001 and of which 1,250,000 common shares
have been validly authorized and issued by the Company, are
outstanding as fully paid and non-assessable shares and were issued in
full compliance with the Act and reliance upon the private placement
exemption or exempt transaction pursuant to Nevada Revised Statutes
Section 90.530.11.
4. The Company is further authorized to issue a series of Preferred
Stock pursuant to terms and conditions as determined by the Board of
Directors of the Company.
5. The Series A Preferred Shares (as defined in the Agreement)
delivered pursuant to the Agreement have been legally and validly
issued, are fully paid and non-assessable and have been issued in
compliance with the all federal and state securities laws including
but not limited to the Act, Regulation S and the Nevada Statutes.
6. The holder of all the outstanding and issued shares of OIC pursuant
to the Consent has approved the Agreement, the
<PAGE>
Mr. Larry Weltman
January 21, 1997
Page 4
amending of the Company's Articles of Incorporation to establish a
class of Preferred Shares and the issuance of 250 Series A Preferred
Shares pursuant to the terms and conditions as established by the
Company's Board of Directors.
7. The voting rights resulting from the conversion of the Series A
Preferred Shares may result in certain Shareholders obtaining "control
shares" and a "controlling interest" in OIC as the terms are defined
in Nevada Revised Statutes Sections 78.3784 and 78.3785. The voting
rights of these control shares have been approved by the Shareholders
of GLC pursuant to Nevada Revised Statute Section 78.379.1.
3. USE OF LEGAL OPINION: This opinion is being furnished only to yourself,
and the other parties to the contemplated transaction, and shall not be
distributed to and may not be relied upon by any other party.
I trust this opinion will be of assistance to you.
Very truly yours,
/s/ Carmine J. Bua, III
CARMINE J. BUA, III
CJB:dic
cc: Online International Corporation
<PAGE>
3223CD
MINUTES OF SPECIAL MEETING OF BOARD OF DIRECTORS
OF
ONLINE INTERNATIONAL CORPORATION
Pursuant to duly provided notice to all of the directors of ONLINE
INTERNATIONAL CORPORATION, a Special Meeting of the Board of Directors of said
corporation was held via telephone conference call on January 2, 1997, at the
hour of 11:00 a.m. with said telephone conference call originating from 3838
Camino Del Rio North, Suite 333, San Diego, California 92108.
Directors present on the line were:
1. JAMES D. RUSSELL
Directors absent were:
1. None
Also on the line were:
1. CARMINE J. BUA, III, ESQ.
The meeting was called to order for the purpose of discussing the current
status of the corporation and discussing and evaluating various other matters
concerning the reorganization of the corporation. MR. JAMES D. RUSSELL acted
as the Chairman for the meeting and appointed CARMINE J. BUA, III to act as
Secretary for this meeting.
MR. JAMES D. RUSSELL discussed the following matters:
1. ACQUISITION OF PRINTING ASSOCIATES, INC.: That pursuant to the earlier
authorized negotiations, that the corporation has entered into a
definitive Stock Purchase Agreement with Gaming Lottery Corporation, a
British Virgin Islands corporation ("GLC") for the acquisition of all
of 101 issued and
Page 1 of 4
<PAGE>
outstanding shares of Printing Associates, Inc. ("PAI"). PAI is a wholly
owned subsidiary of GLC.
2. PAI ACQUISITION TERMS AND CONDITIONS: The PAI shares are to be
exchanged for 250 "Series A Preferred Shares" in the total amount of
$25,000,000 as the consideration for the Preferred Shares. The terms
and conditions will be as set forth in the attached Exhibit "A" to
these minutes. The acquisition will include all of the present assets
and liabilities of PAI.
3. AMENDMENT TO ARTICLES OF INCORPORATION TO ESTABLISH CLASS OF PREFERRED
SHARES: It will therefore be necessary in order to implement the
acquisition of PAI, for the corporation to amend its Articles of
Incorporation to provide for and to authorize Preferred Stock.
Upon motions duly made, seconded and unanimously carried, the following
resolutions were passed:
APPROVAL OF ACQUISITION OF
PRINTING ASSOCIATES, INC.
RESOLVED, that the corporation, subject to shareholder approval, hereby
authorizes and approves the acquisition of PRINTING ASSOCIATES, INC. for the
issuance of 250 Series A Preferred Shares for a total consideration of
$25,000,000.
DESIGNATION OF RIGHTS, PREFERENCES,
PRIVILEGES AND RESTRICTIONS OF
SERIES A PREFERRED SHARES
RESOLVED FURTHER, that the rights, preferences, privileges and restrictions
of the Series A Preferred Shares are hereby established as set forth in the
attached Exhibit "A" to these minutes.
Page 2 of 4
<PAGE>
AMENDMENT OF ARTICLES OF INCORPORATION
TO AUTHORIZE PREFERRED STOCK
RESOLVED FURTHER, that subject to shareholder approval, the ARTICLE FOURTH
is hereby amended to read as follows:
FOURTH. That the total number of common stock authorized that may be issued
by the Corporation is ONE HUNDRED MILLION (100,000,000) shares of stock @ $.001
par value. Said common shares may be issued by the corporation from time to time
for such considerations as may be fixed by the Board of Directors.
Preferred Stock may also be issued by the Corporation from time to time in
one or more series and in such amounts as may be determined by the Board of
Directors. The designations, voting rights, amounts of preference upon
distribution of assets, rates of dividends, premiums of redemption, conversion
rights and other variations, if any, the qualifications, limitations or
restrictions thereof, if any, of the Preferred Stock, and of each series
thereof, shall be such as are fixed by the Board of Directors, authority so to
do being hereby expressly granted, and as are stated and expressed in a
resolution or resolutions adopted by the Board of Directors providing for the
issue of such series of Preferred Stock.
AUTHORITY TO ACT ON BEHALF OF THE
CORPORATION WITH RESPECT TO THE
ACQUISITION OF PRINTING ASSOCIATES, INC.
RESOLVED FURTHER, that the President of the corporation, JAMES D. RUSSELL
is hereby authorized to act on behalf of the corporation with respect to the
acquisition of PRINTING ASSOCIATES, INC. and is further specifically authorized
to execute the Stock Purchase Agreement and all other required documents on
behalf of the corporation and to represent the corporation at the closing of the
transaction in Tortola, British Virgin Islands scheduled for on or before
January 31, 1997.
Page 3 of 4
<PAGE>
ADJOURNMENT
There being no further business to come before the Board, upon motion duly
made, seconded and unanimously carried, the meeting was adjourned at 11:32 a.m.
/s/ Carmine J. Bua, III
--------------------------------------
CARMINE J. BUA, III
Acting Secretary
Page 4 of 4
<PAGE>
EXHIBIT "A"
RIGHTS, PREFERENCES, PRIVILEGES AND RESTRICTIONS
OF SERIES A PREFERRED SHARES
The rights, preferences, privileges and restrictions of these shares Series
"A" Preferred Shares (the "Shares") are as follows:
1. DIVIDENDS: A fixed, preferential non-cumulative cash dividend rate of
five percent (5%) payable semi-annually and to commence thirty (30) months from
the date hereof. This dividend rate to be adjusted to reflect any reorganization
of the present capitalization structure of the corporation.
2. LIQUIDATION PREFERENCE: The preferential right to participate in any
distribution or liquidation or dissolution of the corporation.
3. LIMITED VOTING RIGHTS: Except as specifically set forth here in
Paragraph 11, these Shares shall not have the right to vote in the same manner
and on the same corporate matters as the holders of common stock of the
corporation.
4. CONVERSION RIGHTS: The right to convert all or any portion thereof of
the Shares into shares of common stock at a conversion rate of one (1) preferred
share for 16,667 common shares utilizing a $6.00 per share conversion rate as
the capitalization of the corporation as of the date hereof with said rate to be
adjusted to reflect any reorganization of the capitalization structure of the
corporation. This right to convert all or any portion thereof of the Shares
shall remain with the Holder or its transferees or assignees in perpetuity.
5. CONVERSION DATE: The Conversion Date for this Shares shall commence
thirty (30) days after the date hereof.
6. MANNER OF EXERCISE OF CONVERSION RIGHTS: In order to exercise the
conversion rights of these Shares, the Holder of said Shares must give written
notice to the corporation no earlier than ten (10) days after the Conversion
Date of its intention to exercise its conversion rights.
7. RESERVATION OF COMMON STOCK: The corporation shall, at all times during
the period which the Holder of the Shares has the right to convert the Shares to
common shares of the corporation, reserve and keep available out of its
authorized but unissued common shares, such amount of its duly authorized shares
of common stock as shall be necessary to effect the conversion of these Shares.
Page 1 of 3
<PAGE>
8. CONVERSION LIMITATIONS: The Holder of these Shares shall only be
permitted to convert that amount of its Shares which would result after such
conversion with the Holder then owning a maximum of twenty percent (20%) of the
then issued and outstanding common shares of the corporation. The Holder may
cumulatively convert a total amount of its Shares which will result in the
Holder having cumulatively owned common shares in excess of this twenty percent
(20%) limitation. However, upon the completion of any single conversion
transaction, the Holder will be limited to a then present ownership of a maximum
of twenty percent (20%) of the issued and outstanding common shares of the
corporation. However, in the event the corporation is in breach of any of its
obligations as set forth herein in Paragraph 10, the conversion rights of the
Holder shall not be subject to the conversion limitations set forth in this
Paragraph 6.
9. ISSUANCE OF SHARES PURSUANT TO REGULATION S: The shares of common stock
that are to be issued to the Holder of the Shares resulting from the exercise of
its conversion rights, shall be issued pursuant to SEC Regulation S if the
converting Holder is a "non-U.S. person" and further satisfies all of the other
conditions of SEC Regulation S.
10. CONDITIONS, OBLIGATIONS AND REQUIRED APPROVALS: The corporation shall
be required to provide the Holder of the Shares the documents set forth below
and to refrain from certain corporate actions unless the corporation obtains the
prior written approval of no less than fifty-one percent (51% of the issued and
outstanding Series A Preferred Shares:
1. FINANCIAL STATEMENTS: To provide the Holder with copies of all
regularly prepared quarterly and annual financial statements of the
corporation.
2. ACCESS TO BOOKS AND RECORDS: To provide the Holder with reasonable
access for review, inspection and copying of the corporation's books
and records.
3. APPOINTMENT AND COMPENSATION OF OFFICERS: To obtain the written
approval of the Holder for the appointment and compensation of all
officers and management and supervisory personnel of the corporation,
including but not limited to its executive officers.
Page 2 of 3
<PAGE>
4. CAPITAL EXPENDITURES: To make no capital expenditures in excess of
$100,000 without the prior written approval of the Holder.
5. ACQUISITIONS AND MERGERS: To make no acquisitions and/or mergers
with other entities without the prior written approval of the Holder.
6. ISSUANCE OF SECURITIES AND ADJUSTMENT TO CAPITAL STRUCTURE: To
issue any shares of common stock or other securities, incur any debt
other than ordinary trade creditors, declare any type of stock or
cash dividend or make any adjustment to the capitalization of the
corporation without the prior written approval of the Holder.
7. POSITIVE SHAREHOLDER EQUITY: To maintain at all times both a
positive shareholder equity and positive working capital.
11. BREACH OF CONDITIONS AND OBLIGATIONS: In the event of a breach of any
of the conditions set forth above in Paragraph 10 on the part of the corporation
and/or the corporation fails to obtain the required approvals of the Holders as
further set forth above in Paragraph 10, the corporation shall be deemed to be
in "default" and the Holder hereof shall be entitled to exercise the following
rights with respect to its Shares:
1. VOTING RIGHTS: The Shares shall have the same voting rights as the
common shares of the corporation and shall not be subject to the
provisions of Paragraph 3 herein.
2. CONVERSION RIGHTS: The Holder hereof shall be entitled to convert
any portion up to the entire amount of its Shares and shall not be
subject to the conversion limitations set forth in Paragraph 8
herein.
12. TRANSFERABILITY OF SHARES: The Holder of these Shares shall have the
absolute right to transfer or assign all or any portion thereof of the Shares.
The transferee or assignee of the Shares shall have all of the rights,
preferences and privileges of the Shares and shall be subject to the same
restrictions of said Shares.
Page 3 of 3
<PAGE>
ACTION BY WRITTEN CONSENT
OF THE SHAREHOLDERS OF
ONLINE INTERNATIONAL, INC.
(a Nevada corporation)
The undersigned shareholder, pursuant to Nevada Revised Statutes Section
78.320.2, as the beneficial owner of all of the issued and outstanding shares of
ONLINE INTERNATIONAL, INC., a Nevada corporation, does hereby consent to and
adopt the following:
1. Approval of the acquisition of PRINTING ASSOCIATES, INC. for the
issuance of 250 Series A Preferred Shares for a total consideration of
$25,000,000.
2. Approval to amend ARTICLE FOURTH of the Articles of Incorporation
to read as follows:
FOURTH. That the total number of common stock authorized that may be
issued by the Corporation is ONE HUNDRED MILLION (100,000,000) shares of
stock @ $.001 par value. Said common shares may be issued by the
corporation from time to time for such considerations as may be fixed by
the Board of Directors.
Preferred Stock may also be issued by the Corporation from time to
time in one or more series and in such amounts as may be determined by
the Board of Directors. The designations, voting rights, amounts of
preference upon distribution of assets, rates of dividends, premiums of
redemption, conversion rights and other variations, if any, the
qualifications, limitations or restrictions thereof, if any, of the
Preferred Stock, and of each series thereof, shall be such as are fixed
by the Board of Directors, authority so to do being hereby expressly
granted, and as are stated and expressed in a resolution or resolutions
adopted by the Board of Directors providing for the issue of such series
of Preferred Stock.
3. Approval of the voting rights resulting from the conversion of the
Series A Preferred Shares in the event said resulting shares become
control shares pursuant to Nevada Revised Statutes Section 78.379.1
<PAGE>
A facsimile transmission of my signature shall be sufficient to serve as my
consent, adoption and approval of the above-described matters.
DATED: JANUARY 22, 1997 /s/ Norla Rutledge
----------------------------- ------------------------------
Signature of Shareholder
NORLA RUTLEDGE
------------------------------
Printed Name of Shareholder
1,250,000
------------------------------
<PAGE>
EXHIBIT NO. 3
ARTICLES OF INCORPORATI0N
AND
BYLAWS
<PAGE>
3.1
ARTICLES OF INCORPORATION - ONLINE
<PAGE>
ARTICLES OF INCORPORATION
[STAMP] OF
ONLINE INTERNATIONAL CORPORATION
FIRST. The name of the corporation is:
ONLINE INTERNATIONAL CORPORATION
SECOND. Its registered office in the State of Nevada is located at 2533
North Carson Street, Carson City, Nevada 89706 that this Corporation may
maintain an office, or offices, in such other place within or without the State
of Nevada as may be from time to time designated by the Board of Directors, or
by the By-Laws of said Corporation, and that this Corporation may conduct all
Corporation business of every kind and nature, including the holding of all
meetings of Directors and Stockholders, outside the State of Nevada as well as
within the State of Nevada
THIRD. The objects for which this Corporation is formed are: To engage
in any lawful activity, including, but not limited to the following:
(A) Shall have such rights, privileges and powers as may be conferred upon
corporations by any existing law.
(B) May at any time exercise such rights, privileges and powers, when not
inconsistent with the purposes and objects for which this corporation is
organized.
1
<PAGE>
(C) Shall have power to have succession by its corporate name for the period
limited in its certificate or articles of incorporation, and when no period is
limited, perpetually, or until dissolved and its affairs wound up according to
law.
(D) Shall have power to sue and be sued in any court of law or equity.
(E) Shall have power to make contracts.
(F) Shall have power to hold, purchase and convey real and personal estate
and to mortgage or lease any such real and personal estate with its franchises.
The power to hold real and personal estate shall include the power to take the
same by devise or bequest in the State of Nevada, or in any other state,
territory or country.
(G) Shall have power to appoint such officers and agents as the affairs of
the corporation shall require, and to allow them suitable compensation.
(H) Shall have power to make By-Laws not inconsistent with the constitution
or laws of the United States, or of the State of Nevada, for the management,
regulation and government of its affairs and property, the transfer of its
stock, the transaction of its business, and the calling and holding of meetings
of its stockholders.
(I) Shall have power to wind up and dissolve itself, or be wound up or
dissolved.
(J) Shall have power to adopt and use a common seal or stamp, and alter the
same at pleasure. The use of a seal or stamp by the corporation on any corporate
documents is not necessary. The corporation may use a seal or stamp, if it
desires, but such use or nonuse shall not in any way affect the legality of the
document.
(K) Shall have power to borrow money and contract debts when necessary for
the transaction of its business, or for the exercise of its corporate rights,
privileges or franchises,
2
<PAGE>
or for any other lawful purpose of its incorporation; to issue bonds, promissory
notes, bills of exchange, debentures, and other obligations and evidences of
indebtedness, payable at a specified time or times, or payable upon the
happening of a specified event or events, whether secured by mortgage, pledge or
otherwise, or unsecured, for money borrowed, or in payment for property
purchased, or acquired, or for any other lawful object.
(L) Shall have power to guarantee, purchase, hold, sell, assign, transfer,
mortgage, pledge or otherwise dispose of the shares of the capital stock of, or
any bonds, securities or evidences of the indebtedness created by, any other
corporation or corporations of the State of Nevada, or any other state or
government, and, while owners of such stock, bonds, securities or evidences of
indebtedness, to exercise all the rights, powers and privileges of ownership,
including the right to vote, if any.
(M) Shall have power to purchase, hold, sell and transfer shares of its own
capital stock, and use therefor its capital, capital surplus, surplus, or other
property or fund.
(N) Shall have power to conduct business, have one or more offices, and
hold, purchase, mortgage and convey real and personal property in the State of
Nevada, and in any of the several states, territories, possessions and
dependencies of the United States, the District of Columbia, and any foreign
countries.
(O) Shall have power to do all and everything necessary and proper for the
accomplishment of the objects enumerated in its certificate or articles of
incorporation, or any amendment thereof, or necessary or incidental to the
protection and benefit of the corporation, and, in general, to carry on any
lawful business necessary or incidental to the attainment of the
3
<PAGE>
objects of the corporation, whether or not such business is similar in nature to
the objects set forth in the certificate or articles of incorporation of the
corporation, or any amendment thereof.
(P) Shall have power to make donations for the public welfare or for
charitable, scientific or educational purposes.
(Q) Shall have power to enter into partnerships, general or limited, or
joint ventures, in connection with any lawful activities, as may be allowed by
law.
FOURTH. That the total number of common stock authorized that may be
issued by the Corporation is ONE HUNDRED MILLION (100,000,000) shares of stock @
$.001 par value and no other class of stock shall be authorized. Said shares may
be issued by the corporation from time to time for such considerations as may be
fixed by the Board of Directors.
FIFTH. The governing board of this corporation shall be known as
directors, and the number of directors may from time to time be increased or
decreased in such manner as shall be provided by the By-Laws of this
Corporation, providing that the number of directors shall not be reduced to
fewer than one (1).
The name and post office address of the first board of Directors shall be
one (1) in number and listed as follows:
NAME POST OFFICE ADDRESS
---- -------------------
Patrick McMullen 2533 North Carson Street
Carson City, Nevada 89706
SIXTH. The capital stock, after the amount of the subscription price,
or par value, has been paid in, shall not be subject to assessment to pay the
debts of the corporation.
4
<PAGE>
SEVENTH. The name and post office address of the Incorporator signing the
Articles of Incorporation is as follows:
NAME POST OFFICE ADDRESS
---- -------------------
Patrick McMullen 2533 North Carson Street
Carson City, Nevada 89706
EIGHTH. The resident agent for this corporation shall be:
LAUGHLIN ASSOCIATES, INC.
The address of said agent, and, the registered or statutory address of this
corporation in the state of Nevada, shall be:
2533 North Carson Street
Carson City, Nevada 89706
NINTH. The corporation is to have perpetual existence.
TENTH. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
Subject to the By-Laws, if any, adopted by the Stockholders, to make,
alter or amend the By-Laws of the Corporation.
To fix the amount to be reserved as working capital over and above its
capital stock paid in; to authorize and cause to be executed, mortgages and
liens upon the real and personal property of this Corporation.
By resolution passed by a majority of the whole Board, to designate
one (1) or more committees, each committee to consist of one or more of the
Directors of the Corporation, which, to the extent provided in the resolution,
or in the By-Laws of the Corporation, shall have
5
<PAGE>
and may exercise the powers of the Board of Directors in the management of the
business and affairs of the Corporation. Such committee, or committees, shall
have such name, or names, as may be stated in the By-Laws of the Corporation, or
as may be determined from time to time by resolution adopted by the Board of
Directors.
When and as authorized by the affirmative vote of the Stockholders
holding stock entitling them to exercise at least a majority of the voting power
given at a Stockholders meeting called for that purpose, or when authorized by
the written consent of the holders of at least a majority of the voting stock
issued and outstanding, the Board of Directors shall have power and authority at
any meeting to sell, lease or exchange all of the property and assets of the
Corporation, including its good will and its corporate franchises, upon such
terms and conditions as its board of Directors deems expedient and for the best
interests of the Corporation.
ELEVENTH. No shareholder shall be entitled as a matter of right to
subscribe for or receive additional shares of any class of stock of the
Corporation, whether now or hereafter authorized, or any bonds, debentures or
securities convertible into stock, but such additional shares of stock or other
securities convertible into stock may be issued or disposed of by the Board of
Directors to such persons and on such terms as in its discretion it shall deem
advisable.
TWELFTH. No director or officer of the Corporation shall be personally
liable to the Corporation or any of its stockholders for damages for breach of
fiduciary duty as a director or officer involving any act or omission of any
such director or officer; provided, however, that the foregoing provision shall
not eliminate or limit the liability of a director or officer (i) for acts or
omissions which involve intentional misconduct, fraud or a knowing
6
<PAGE>
violation of law, or (ii) the payment of dividends in violation of Section
78.300 of the Nevada Revised Statutes. Any repeal or modification of this
Article by the stockholders of the Corporation shall be prospective only, and
shall not adversely affect any limitation on the personal liability of a
director or officer of the Corporation for acts or omissions prior to such
repeal or modification.
THIRTEENTH. This Corporation reserves the right to amend, alter,
change or repeal any provision contained in the Articles of Incorporation, in
the manner now or hereafter prescribed by statute, or by the Articles of
Incorporation, and all rights conferred upon Stockholders herein are granted
subject to this reservation.
7
<PAGE>
I, THE UNDERSIGNED, being the Incorporator hereinbefore named for the
purpose of forming a Corporation pursuant to the General Corporation Law of the
State of Nevada, do make and file these Articles of Incorporation, hereby
declaring and certifying that the facts herein stated are true, and accordingly
have hereunto set my hand this 6th day of May, 1996.
/s/ Patrick McMullen
-------------------- [STAMP]
Patrick McMullen
STATE OF NEVADA )
) SS:
CARSON CITY )
On this 6th day of May, 1996, in Carson City, Nevada,
before me, the undersigned, a Notary Public in and for Carson City, State of
Nevada, personally appeared:
Patrick McMullen
Known to me to be the person whose name is subscribed to the foregoing
document and acknowledged to me that he executed the same.
[SEAL] /s/ Mark Shatas
----------------------
Notary Public
I, Laughlin Associates, Inc. hereby accept as Resident Agent for the previously
named Corporation.
5/6/96 /s/ Patrick McMullen
- ---------------------------------------
Date Service Coordinator
8
<PAGE>
SECRETARY OF STATE
[SEAL]
STATE OF NEVADA
CORPORATE CHARTER
I, DEAN HELLER, the duly elected and qualified Nevada Secretary of State, do
hereby certify that ONLINE INTERNATIONAL CORPORATION did on MAY 7, 1996
file in this office the original Articles of Incorporation; that said
Articles are now on file and of record in the office of the Secretary of
State of the State of Nevada, and further, that said Articles contain all the
provisions required by the law of said State of Nevada.
IN WITNESS WHEREOF, I have hereunto set my
hand and affixed the Great Seal of State, at
my office, in Carson City, Nevada, on May
8, 1996.
/s/ Dean Heller
Secretary of State
[SEAL]
By /s/ [ILLEGIBLE]
Certification Clerk
<PAGE>
3.2
CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION - ONLINE
<PAGE>
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
[STAMP] OF
ONLINE INTERNATIONAL CORPORATION
We, the undersigned President and Assistant Secretary of ONLINE
INTERNATIONAL CORPORATION do hereby certify as follows:
That the Board of Directors of said corporation at a meeting duly convened,
held on January 2, 1997, adopted a resolution to amend the original Articles of
Incorporation filed on May 7, 1996 as follows:
ARTICLE FOURTH is hereby amended to read as follows:
FOURTH. That the total number of common stock authorized that may be
issued by the Corporation is ONE HUNDRED MILLION (100,000,000) shares of
stock @ $.001 par value. Said common shares may be issued by the corporation
from time to time for such considerations as may be fixed by the Board of
Directors.
Preferred Stock may also be issued by the Corporation from time to time
in one or more series and in such amounts as may be determined by the Board
of Directors. The designations, voting rights, amounts of preference upon
distribution of assets, rates of dividends, premiums of redemption,
conversion rights and other variations, if any, the qualifications,
limitations or restrictions thereof, if any, of the Preferred Stock, and
of each series thereof, shall be such as are fixed by the Board of
Directors, authority so to do being hereby expressly granted, and as are
stated and expressed in a resolution or resolutions adopted by the Board
of Directors providing for the issue of such series of Preferred Stock.
The number of shares of the corporation outstanding and entitled to vote on
an amendment to the Articles of Incorporation is 1,250,000, that said amendment
has been consented to and approved by a majority vote of the stockholders
holding at least a majority of each class of stock outstanding and entitled to
vote thereon pursuant to an Action by Written Consent of Shareholders of Online
International, Inc.
Page 1 of 2
<PAGE>
/s/ James D. Russell /s/ Victoria S. Danseglio
- -------------------- -------------------------
JAMES D. RUSSELL VICTORIA S. DANSEGLI0
President Secretary
STATE OF NEW YORK )
)ss.
COUNTY OF SUFFOLK )
On January 23, 1997, personally appeared before me, a Notary Public, JAMES
D. RUSSELL, known to me to be the person whose name is subscribed to the
foregoing Certificate of Articles of Incorporation and acknowledged that he
executed the same:
(Notary Stamp or Seal) /s/ Hubert G. Plummer
---------------------
Notary Public
STATE OF NEW YORK )
)ss.
COUNTY OF SUFFOLK )
On January 23, 1997, personally appeared before me, a Notary Public,
VICTORIA S. DANSEGLI0, known to me to be the person whose name is subscribed
to the foregoing Certificate of Articles of Incorporation and acknowledged
that she executed the same:
(Notary Stamp or Seal) /s/ Hubert G. Plummer
---------------------
Notary Public
Page 2 of 2
<PAGE>
3.3
BYLAWS - ONLINE
<PAGE>
ONLINE INTERNATIONAL CORPORATION
BY-LAWS
ARTICLE I MEETINGS OF SHAREHOLDERS
1. Shareholders' Meetings shall be held in the office of the corporation,
at Carson City, NV, or at such other place or places as the Directors shall,
from time to time, determine.
2. The annual meeting of the shareholders of this corporation shall be
held at 11:00 a.m., on the 7th day of May of each year beginning in 1997, at
which time there shall be elected by the shareholders of the corporation a Board
of Directors for the ensuing year, and the shareholders shall transact such
other business as shall properly come before them. If the day fixed for the
annual meeting shall be a legal holiday such meeting shall be held on the next
succeeding business day.
3. A notice signed by any Officer of the corporation or by any person
designated by the Board of Directors, which sets forth the place of the annual
meeting, shall be personally delivered to each of the shareholders of record, or
mailed postage prepaid, at the address as appears on the stock book of the
corporation, or if no such address appears in the stock book of the corporation,
to his last known address, at least ten (10) days prior to the annual meeting.
Whenever any notice whatever is required to be given under any article of
these By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to the notice, whether before or after the time of the meeting of the
shareholders, shall be deemed equivalent to proper notice.
4-1
<PAGE>
4. A majority of the shares issued and outstanding, either in person or
by proxy, shall constitute a quorum for the transaction of business at any
meeting of the shareholders.
5. If a quorum is not present at the annual meeting, the shareholders
present, in person or by proxy, may adjourn to such future time as shall be
agreed upon by them, and notice of such adjournment shall be mailed, postage
prepaid, to each shareholder of record at least ten (10) days before such date
to which the meeting was adjourned; but if a quorum is present, they may adjourn
from day to day as they see fit, and no notice of such adjournment need be
given.
6. Special meetings of the shareholders may be called at anytime by the
President; by all of the Directors provided there are no more than three, or if
more than three, by any three Directors; or by the holder of a majority share of
the capital stock of the corporation. The Secretary shall send a notice of such
called meeting to each shareholder of record at least ten (10) days before such
meeting, and such notice shall state the time and place of the meeting, and the
object thereof. No business shall be transacted at a special meeting except as
stated in the notice to the shareholders, unless by unanimous consent of all
shareholders present, either in person or by proxy, all such shares being
represented at the meeting.
7. Each shareholder shall be entitled to one vote for each share of stock
in his own name on the books of the corporation, whether represented in person
or by proxy.
8. At all meetings of shareholders, a shareholder may vote by proxy
executed in writing by the shareholder or by his duly authorized
attorney-in-fact. Such proxy shall be filed with the Secretary of the
corporation before or at the time of the meeting.
9. The following order of business shall be observed at all meetings of
the
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<PAGE>
shareholders so far as is practicable:
a. Call the roll;
b. Reading, correcting, and approving
of the minutes of the previous
meeting;
c. Reports of Officers;
d. Reports of Committees;
e. Election of Directors;
f. Unfinished business; and
g. New business.
10. Unless otherwise provided by law, any action required to be taken at a
meeting of the shareholders, or any other action which may be taken at a meeting
of the shareholders, may be taken without a meeting if a consent in writing,
setting forth the action to be taken, shall be signed by all of the shareholders
entitled to vote with respect to the subject matter thereof.
ARTICLE II STOCK
1. Certificates of stock shall be in a form adopted by the Board of
Directors and shall be signed by the President and Secretary of the corporation.
2. All certificates shall be consecutively numbered; the name of the
person owning the shares represented thereby, with the number of such shares and
the date of issue shall be entered on the company's books.
3. All certificates of stock transferred by endorsement thereon shall be
surrendered by cancellation and new certificates issued to the purchaser or
assignee.
4. Upon surrender to the corporation or the transfer agent of the
corporation of a
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<PAGE>
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, and
cancel the old certificate; every such transfer shall be entered on the transfer
book of the corporation.
5. The corporation shall be entitled to treat the holder of record of any
share as the holder in fact thereof, and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such share on the part
of any other person whether or not it shall have express or other notice
thereof, except as expressly provided by the laws of this state.
ARTICLE III DIRECTORS
1. A Board of Directors, consisting of at least one (1) person shall be
chosen annually by the shareholders at their meeting to manage the affairs of
the corporation. The Directors' term of office shall be one (1) year, and
Directors may be re-elected for successive annual terms.
2. Vacancies on the Board of Directors by reason of death, resignation or
other causes shall be filled by the remaining Director or Directors choosing a
Director or Directors to fill the unexpired term.
3. Regular meetings of the Board of Directors shall be held at 1:00
p.m., on the 7th day of May of each year beginning in ______ at the office of
the company at Carson City, NV, or at such other time or place as the Board
of Directors shall by resolution appoint; special meetings may be called by
the President or any Director giving ten (10) days notice to each Director.
Special meetings may also be called by execution of the appropriate waiver of
notice and called when executed by a majority of the Directors of the
company. A majority of the
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<PAGE>
Directors shall constitute a quorum.
4. The Directors shall have the general management and control of the
business and affairs of the corporation and shall exercise all the powers that
may be exercised or performed by the corporation, under the statutes, the
Articles of Incorporation, and the By-Laws. Such management will be by equal
vote of each member of the Board of Directors with each Board member having an
equal vote.
5. The act of the majority of the Directors present at a meeting at which
a quorum is present shall be the act of the Directors.
6. A resolution, in writing, signed by all or a majority of the members
of the Board of Directors, shall constitute action by the Board of Directors
to effect therein expressed, with the same force and effect as though such
resolution had been passed at a duly convened meeting; and it shall be the
duty of the Secretary to record every such resolution in the Minute Book of
the corporation under its proper date.
7. Any or all of the Directors may be removed for cause by vote of the
shareholders or by action of the Board. Directors may be removed without cause
only by vote of the shareholders.
8. A Director may resign at any time by giving written notice to the
Board, the President or the Secretary of the corporation. Unless otherwise
specified in the notice, the resignation shall take effect upon receipt thereof
by the Board or such Officer, and the acceptance of the resignation shall not be
necessary to make it effective.
9. A Director of the corporation who is present at a meeting of the
Directors at which action on any corporate matter is taken shall be presumed to
have assented to the action
4-5
<PAGE>
taken unless his dissent shall be entered in the minutes of the meeting or
unless he shall file his written dissent to such action with the person acting
as the Secretary of the meeting before the adjournment thereof or shall forward
such dissent by registered mail to the Secretary of the corporation immediately
after the adjournment of the meeting. Such right to dissent shall not apply to a
Director who voted in favor of such action.
ARTICLE IV OFFICERS
1. The Officers of this company shall consist of: a President, one or
more Vice Presidents, Secretary, Treasurer, and such other officers as shall,
from time to time, be elected or appointed by the Board of Directors.
2. The PRESIDENT shall preside at all meetings of the Directors and the
shareholders and shall have general charge and control over the affairs of the
corporation subject to the Board of Directors. He shall sign or countersign all
certificates, contracts and other instruments of the corporation as authorized
by the Board of Directors and shall perform all such other duties as are
incident to his office or are required by him by the Board of Directors.
3. The VICE PRESIDENT shall exercise the functions of the President
during the absence or disability of the President and shall have such powers and
such duties as may be assigned to him, from time to time, by the Board of
Directors.
4. The SECRETARY shall issue notices for all meetings as required by the
By-Laws, shall keep a record of the minutes of the proceedings of the meetings
of the shareholders and Directors, shall have charge of the corporate books, and
shall make such reports and perform such other duties as are incident to his
office, or properly required of him by the Board of Directors. He shall be
responsible that the corporation complies with Section 78.105 of the
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<PAGE>
Nevada Revised Statutes and supplies to the Nevada Resident Agent or Registered
Office in Nevada, any and all amendments to the corporation's Articles of
Incorporation and any and all amendments or changes to the By-Laws of the
corporation. In compliance with Section 78.105, he will also supply to the
Nevada Resident Agent or Registered Office in Nevada, and maintain, a current
statement setting out the name of the custodian of the stock ledger or duplicate
stock ledger, and the present and complete Post Office address, including street
and number, if any, where such stock ledger or duplicate stock ledger is kept.
5. The TREASURER shall have the custody of all monies and securities of
the corporation and shall keep regular books of account. He shall disburse the
funds of the corporation in payment of the just demands against the
corporation, or as may be ordered by the Board of Directors, making proper
vouchers for such disbursements and shall render to the Board of Directors, from
time to time, as may be required of him, an account of all his transactions as
Treasurer and of the financial condition of the corporation. He shall perform
all duties incident to his office or which are properly required of him by the
Board of Directors.
6. The RESIDENT AGENT shall be in charge of the corporation's registered
office in the State of Nevada, upon whom process against the corporation may be
served and shall perform all duties required of him by statute.
7. The salaries of all Officers shall be fixed by the Board of Directors
and may be changed, from time to time, by a majority vote of the Board.
8. Each of such Officers shall serve for a term of one (1) year or until
their successors are chosen and qualified. Officers may be re-elected or
appointed for successive annual terms.
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<PAGE>
9. The Board of Directors may appoint such other Officers and Agents, as
it shall deem necessary or expedient, who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined, from time to time, by the Board of Directors.
10. Any Officer or Agent elected or appointed by the Directors may be
removed by the Directors whenever in their judgment the best interests of the
corporation would be served thereby, but such removal shall be without prejudice
to the contract rights, if any, of the person so removed.
11. A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the Directors for the unexpired
portion of the term.
ARTICLE V INDEMNIFICATION OF OFFICERS AND DIRECTORS
- ---------------------------------------------------
The corporation shall indemnify any and all of its Directors and Officers,
and its former Directors and Officers, or any person who may have served at the
corporation's request as a Director or Officer of another corporation in which
it owns shares of capital stock or of which it is a creditor, against expenses
actually and necessarily incurred by them in connection with the defense of any
action, suit or proceeding in which they, or any of them, are made parties, or a
party, by reason of being or having been Director(s) or Officer(s) of the
corporation, or of such other corporation, except, in relation to matters as to
which any such Director or Officer or former Director or Officer or person shall
be adjudged in such action, suit or proceeding to be liable for negligence or
misconduct in the performance of duty. Such indemnification shall not be deemed
exclusive of any other rights to which those indemnified may be entitled, under
By-Law, agreement, vote of shareholders or otherwise.
4-8
<PAGE>
ARTICLE VI DIVIDENDS
- --------------------
The Directors may, from time to time, declare, and the corporation may pay,
dividends on its outstanding shares in the manner and upon the terms and
conditions provided by law.
ARTICLE VII WAIVER OF NOTICE
- ----------------------------
Unless otherwise provided by law, whenever any notice is required to be
given to any shareholder or Director of the corporation under the provisions of
these By-Laws or under the provisions of the Articles of Incorporation, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
ARTICLE VIII AMENDMENTS
- -----------------------
1. Any of these By-Laws may be amended by a majority vote of the
shareholders at any annual meeting or at any special meeting called for that
purpose.
2. The Board of Directors may amend the By-Laws or adopt additional
By-Laws, but shall not alter or repeal any By-Laws adopted by the shareholders
of the company.
CERTIFIED TO BE THE BY-LAWS OF:
ONLINE INTERNATIONAL CORPORATION
BY: /s/ Carmine Bua
-------------------------------------
Assistant Secretary
CARMINE BUA
4-9
<PAGE>
3.4
CERTIFICATE OF INCORPORATION -
PRINTING ASSOCIATES OF NEW YORK, INC.
<PAGE>
CERTIFICATE OF INCORPORATION
OF
Printing Associates of New York Inc.
UNDER SECTION 402 OF THE BUSINESS CORPORATION LAW
* * * * *
WE, THE UNDERSIGNED, all of the age of eighteen years or over, for the
purpose of forming a corporation pursuant to Section 402 of the Business
Corporation Law of New York, do hereby certify:
FIRST: The name of the corporation is: Printing Associates of New York,
Inc.
SECOND: The purposes for which it is formed are:
To engage in any lawful act or activity for which corporations
may be organized under the Business Corporation Law provided that
the corporation is not formed to engage in any act or activity
which requires the content or approval of any state official,
department, board, agency or other body, without such consent
or approval first being obtained.
THIRD: The office of the corporation is to be located in the County of
New York, State of New York.
FOURTH: The aggregate number of shares which the corporation shall have
authority to issue is two hundred without par value.
<PAGE>
FIFTH: The Secretary of State is designated as the agent of the
corporation upon whom process against the corporation may be
served. The post office address to which the Secretary of State
shall mail a copy of any process against the corporation served
upon him is: c/o C T Corporation System, 1633 Broadway,
New York, New York 10019.
SIXTH: The name and address of the registered agent which is to be the
agent of the corporation upon whom process against it may be
served, are C T CORPORATION SYSTEM, 1633 BROADWAY, NEW YORK,
NEW YORK 10019.
IN WITNESS WHEREOF, we have made and signed this certificate this 19th day
of September, A.D. 1994 and we affirm the statements contained therein as truth
under penalties of perjury.
/s/ Michael R. Dalida
-----------------------------
Michael R. Dalida
30600 Telegraph Rd.
Bingham Farms, MI. 48025
<PAGE>
3.5
CERTIFICATE OF MERGER -
PRINTING ASSOCIATES OF NEW YORK, INC.
<PAGE>
CERTIFICATE OF MERGER
OF
PRINTING ASSOCIATES INCORPORATED
AND
PRINTING ASSOCIATES OF NEW YORK, INC.
INTO
PRINTING ASSOCIATES OF NEW YORK, INC.
----------------------------
Under Section 904 of the
Business Corporation Law
----------------------------
Pursuant to the provisions of Section 904 of the Business Corporation
Law, the undersigned, being the President and Secretary of Printing Associates
Incorporated and the President and Secretary of Printing Associates of New York,
Inc. hereby certify:
The Plan of Merger was adopted by the Board of Directors of each
constituent corporation.
FIRST: That the name of each of the constituent corporations proposing
to merge is Printing Associates Incorporated, a New York corporation, and
Printing Associates of New York, Inc., a New York corporation. The name of the
surviving corporation Printing Associates of New York, Inc.
SECOND: That the designation and number of shares outstanding whether
entitled to vote or not, are as follows:
<PAGE>
Number of Designation
Name Shares of Class Entitled
Corporation Outstanding or Series to Vote
- ----------- ----------- ------------ -----------
Printing Associates 100 shares common stock, 100 shares
Incorporated without par
value
Printing Associates 100 shares common stock, 100 shares
of New York, Inc. without par
value
THIRD: That the date when the Certificate of Incorporation of
Printing Associates Incorporated was filed in the Office of the Department of
State of New York was the 6th day of December, 1983. That the date when the
Certificate of Incorporation of Printing Associates of New York, Inc. was
filed in the Office of the Department of State of New York was on the 20th
day of September, 1994.
FOURTH: The Certificate of Incorporation of Printing Associates of
New York, Inc. is amended by the merger to change the name of the surviving
corporation to Printing Associates Incorporated. To effectuate such change of
name, Article FIRST of said Certificate of Incorporation is amended to read
as follows:
FIRST: The name of the corporation is: Printing Associates
Incorporated."
FIFTH: The effective date of the merger was September 22, 1994.
SIXTH: That the merger was authorized by the shareholders of each
constituent corporation by written consent.
-2-
<PAGE>
of the holders of all outstanding shares of each such constituent corporation
entitled to vote thereon.
IN WITNESS WHEREOF, we hereunto sign our names and affirm that the
statements made herein are true under the penalties of perjury as of this 21st
day of September, 1994.
PRINTING ASSOCIATES INCORPORATED
By: /s/ Ruegg V. Quibell
-----------------------------
Ruegg V. Quibell, President
By: /s/ Pasquale Bagnato
-----------------------------
Pasquale Bagnato, Secretary
PRINTING ASSOCIATES OF NEW YORK, INC.
By: /s/ Ruegg V. Quibell
----------------------------
Ruegg V. Quibell, President
By: /s/ Pasquale Bagnato
----------------------------
Pasquale Bagnato, Secretary
-3-
<PAGE>
3.6
BYLAWS - PRINTING ASSOCIATES, INC.
<PAGE>
---------------------
BY-LAWS
---------------------
ARTICLE I
The Corporation
Section 1. NAME. The legal name of this corporation (hereinafter
called the "Corporation") is Printing Associates Incorporated
Section 2. OFFICES. The Corporation shall have its principal office in
the State of New York. The Corporation may also have offices at such other
places within and without the United States as the Board of Directors may from
time to time appoint or the business of the Corporation may require.
Section 3. SEAL. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its organization and the words "Corporate
Seal, New York". One or more duplicate dies for impressing such seal may be kept
and used.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. PLACE OF MEETINGS. All meetings of the shareholders shall
be held at the principal office of the Corporation in the State of New York or
at such other place, within or without the State of New York, as is fixed in the
notice of the meeting.
Section 2. ANNUAL MEETING. An annual meeting of the shareholders of
the Corporation for the election of directors and the transaction of such
other business as may properly come before the meeting shall be held on the
first Monday of month succeedinq month of Inc. in each year if not a legal
holiday, and if a legal holiday, then on the next secular day following, at
ten o'clock A.M., Eastern Standard Time, or at such other time as is fixed in
the notice of the meeting. If for any reason any annual meeting shall not be
held at the time herein specified, the same may be held at any time thereafter
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<PAGE>
upon notice, as herein provided, or the business thereof may be transacted at
any special meeting called for the purpose.
Section 3. SPECIAL MEETINGS. Special meetings of shareholders may be
called by the President whenever he deems it necessary or advisable. A special
meeting of the shareholders shall be called by the President whenever so
directed in writing by a majority of the entire Board of Directors or whenever
the holders of one-third (1/3) of the number of shares of the capital stock of
the Corporation entitled to vote at such meeting shall, in writing, request the
same.
Section 4. NOTICE OF MEETINGS. Notice of the time and place of the
annual and of each special meeting of the shareholders shall be given to each of
the shareholders entitled to vote at such meeting by mailing the same in a
postage prepaid wrapper addressed to each such shareholders at his address as it
appears on the books of the Corporation, or by delivering the same personally to
any such shareholder in lieu of such mailing, at least ten (10) and not more
than fifty (50) days prior to each meeting. Meetings may be held without notice
if all of the shareholders entitled to vote thereat are present in person or by
proxy, or if notice thereof is waived by all such shareholders not present in
person or by proxy, before or after the meeting. Notice by mail shall be deemed
to be given when deposited, with postage thereon prepaid, in the United States
mail. If a meeting is adjourned to another time, not more than thirty (30) days
hence, or to another place, and if an announcement of the adjourned time or
place is made at the meeting, it shall not be necessary to give notice of the
adjourned meeting unless the Board of Directors, after adjournment fix a new
record date for the adjourned meeting. Notice of the annual and each special
meeting of the shareholders shall indicate that it is being issued by or at the
direction of the person or persons calling the meeting, and shall state the name
and capacity of each such person. Notice of each special meeting shall also
state the purpose or purposes for which it has been called. Neither the business
to be transacted at nor the purpose of the annual or any special meeting of the
shareholders need be specified in any written waiver of notice.
Section 5. RECORD DATE FOR SHAREHOLDERS. For the purpose of
determining the shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or for the purpose of determining
shareholders entitled to receive payment of any
5
<PAGE>
dividend or other distribution or the allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion, or exchange of stock
or for the purpose of any other lawful action, the Board of Directors may fix,
in advance, a record date, which shall not be more than fifty (50) days nor less
than ten (10) days before the date of such meeting, nor more than fifty (50)
days prior to any other action. If no record date is fixed, the record date for
determining shareholders entitled to notice of or to vote at a meeting of
shareholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if no notice is given, the day on which the
meeting is held; the record date for determining shareholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the Board of Directors is necessary, shall be the day on which the
first written consent is expressed; and the record date for determining
shareholders for any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto. A
determination of shareholders of record entitled to notice of or to vote at any
meeting of shareholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
Section 6. PROXY REPRESENTATION. Every shareholder may
authorize another person or persons to act for him by proxy in all matters
in which a shareholder is entitled to participate, whether by waiving
notice of any meeting, voting or participating at a meeting, or expressing
consent or dissent without a meeting. Every proxy must be signed by the
shareholder or by his attorney-in-fact. No proxy shall be voted or acted
upon after eleven months from its date unless such proxy provides for a
longer period. Every proxy shall be revocable at the pleasure of the
shareholder executing it, except as otherwise provided in Section 608 of
the New York Business Corporation Law.
Section 7. VOTING AT SHAREHOLDERS' MEETINGS. Each share of stock shall
entitle the holder thereof to one vote. In the election of directors, a
plurality of the votes cast shall elect. Any other action shall be authorized by
a majority of the votes cast except where the New York Business Corporation Law
prescribes a different percentage of votes or a different exercise of voting
power. In the election of directors, and for any other action, voting need not
be by ballot.
Section 8. QUORUM AND ADJOURNMENT. Except for a special election of
directors pursuant to Section 603 of the New York Business Corporation Law, the
presence, in person or by proxy, of the holders of
6
<PAGE>
a majority of the shares of the stock of the Corporation outstanding and
entitled to vote thereat shall be requisite and shall constitute a quorum at any
meeting of the shareholders. When a quorum is once present to organize a
meeting, it shall not be broken by the subsequent withdrawal of any
shareholders. If at any meeting of shareholders there shall be less than a
quorum so present, the shareholders present in person or by proxy and entitled
to vote thereat, may adjourn the meeting from time to time until a quorum shall
be present, but no business shall be transacted at any such adjourned meeting
except such as might have been lawfully transacted had the meeting not
adjourned.
Section 9. LIST OF SHAREHOLDERS. The officer who has charge of the
stock ledger of the Corporation shall prepare, make and certify, at least ten
(10) days before every meeting of shareholders, a complete list of the
shareholders, as of the record date fixed for such meeting, arranged in
alphabetical order, and showing the address of each shareholder and the
number of shares registered in the name of each shareholder. Such list shall
be open to the examination of any shareholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten (10)
day prior to the meeting, either at a place within the city or other
municipality or community where the meeting is to be held. The list shall
also be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any shareholder who is present.
If the right to vote at any meeting is challenged, the inspectors of
election, if any, or the person presiding thereat, shall require such list of
shareholders to be produced as evidence of the right of the persons
challenged to vote at such meeting, and all persons who appear from such list
to be shareholders entitled to vote thereat may vote at such meeting.
Section 10. INSPECTORS OF ELECTION. The Board of Directors, in advance
of any meeting, may, but need not, appoint one or more inspectors of election to
act at the meeting or any adjournment thereof. If an inspector or inspectors are
not appointed, the person presiding at the meeting may, and at the request of
any shareholder entitled to vote thereat shall, appoint one or more inspectors.
In case any person who may be appointed as an inspector fails to appear or act,
the vacancy may be filled by appointment made by the Board of Directors in
advance of the meeting or at the meeting by the person presiding thereat. Each
inspector, if any, before entering upon the discharge of his duties, shall take
and sign an oath faithfully to execute the duties of inspector at such meeting
with strict impartiality and according to the best of his ability. The
inspectors, if any, shall determine the number of shares of stock outstanding
and the voting power of each, the shares of stock
7
<PAGE>
represented at the meeting, the existence of a quorum, the validity and effect
of proxies, and shall receive votes, ballots or consents, hear and determine all
challenges and questions arising in connection with the right to vote, count and
tabulate all votes, ballots or consents, determine the result, and do such acts
as are proper to conduct the election or vote with fairness to all shareholders.
On request of the person presiding at the meeting or any shareholder entitled to
vote thereat, the inspector or inspectors, if any, shall make a report in
writing of any challenge, question or matter determined by him or them and
execute a certificate of any fact found by him or them. Any report or
certificate made by the inspector or inspectors shall be prima facie evidence of
the facts stated and of the vote as certified by them.
Section 11. ACTION OF THE SHAREHOLDERS WITHOUT MEETINGS. Any action
which may be taken at any annual or special meeting of the shareholders may be
taken without a meeting on written consent, setting forth the action so taken,
signed by the holders of all outstanding shares entitled to vote thereon.
Written consent thus given by the holders of all outstanding shares entitled to
vote shall have the same effect as a unanimous vote of the shareholders.
ARTICLE III
DIRECTORS
Section 1. NUMBER OF DIRECTORS. The number of directors which shall
constitute the entire Board of Directors shall be at least three, except that
where all outstanding shares of the stock of the Corporation are owned
beneficially and of record but less than three shareholders, the number of
directors may be less than three by not less than the number of shareholders.
Subject to the foregoing limitation, such number may be fixed from time to time
by action of a majority of the entire Board of Directors or of the shareholders
at an annual or special meeting, or, if the number of directors is not so fixed,
the number shall be three or shall be equal to the number of shareholders
(determined as aforesaid), whichever is less. Until such time as the corporation
shall issue shares of its stock, the Board of Directors shall consist of two
persons. No decrease in the number of directors shall shorten the term of any
incumbent director.
Section 2. ELECTION AND TERM. The initial Board of Directors shall be
elected by the incorporator and each initial director so elected shall hold
office until the first annual meeting of shareholders and until
8
<PAGE>
his successor has been elected and qualified. Thereafter, each director who is
elected at an annual meeting of shareholders, and each director who is elected
in the interim to fill a vacancy or a newly created directorship, shall hold
office until the next annual meeting of shareholders and until his successor has
been elected and qualified.
Section 3. FILLING VACANCIES, RESIGNATION AND REMOVAL. Any director
may tender his resignation at any time. Any director or the entire Board of
Directors may be removed, with or without cause, by vote of the shareholders. In
the interim between annual meetings of shareholders or special meetings of
shareholders called for the election of directors or for the removal of one or
more directors and for the filling of any vacancy in that connection, newly
created directorships and any vacancies in the Board of Directors, including
unfilled vacancies resulting from the resignation or removal of directors for
cause or without cause, may be filled by the vote of a majority of the remaining
directors then in office, although less than a quorum, or by the sole remaining
director.
Section 4. QUALIFICATIONS AND POWERS. Each director shall be at least
eighteen years of age. A director need not be a shareholder, a citizen of the
United States or a resident of the State of New York. The business of the
Corporation shall be managed by the Board of Directors, subject to the
provisions of the Certificate of Incorporation. In addition to the powers and
authorities by these By-Laws expressly conferred upon it, the Board may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statute or by the Certificate of Incorporation or by these By-Laws
directed or required to be exercised or done exclusively by the shareholders.
Section 5. REGULAR AND SPECIAL MEETINGS OF THE BOARD. The Board of
Directors may hold its meetings, whether regular or special, either within or
without the State of New York. The newly elected Board may meet at such place
and time as shall be fixed by the vote of the shareholders at the annual
meeting, for the purpose of organization or otherwise, and no notice of such
meeting shall be necessary to the newly elected directors in order legally to
constitute the meeting, provided a majority of the entire Board shall be
present; or they may meet at such place and time as shall be fixed by the
consent in writing of all directors. Regular meetings of the Board may be held
with or without notice at such time and place as shall from time to time be
determined by resolution of the Board. Whenever the time or place of regular
meetings of the Board shall have been determined by resolution of the Board, no
regular meetings shall be held pursuant to any resolution of the Board
9
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altering or modifying its previous resolution relating to the time or place of
the holding of regular meetings, without first giving at least three days
written notice to each director, either personally or by telegram, or at least
five days written notice to each director by mail, of the substance and effect
of such new resolution relating to the time and place at which regular meetings
of the Board may thereafter be held without notice. Special meetings of the
Board shall be held whenever called by the President, Vice-President, the
Secretary or any director in writing. Notice of each special meeting of the
Board shall be delivered personally to each director or sent by telegraph to his
residence or usual place of business at least three days before the meeting, or
mailed to him to his residence or usual place of business at least five days
before the meeting. Meetings of the Board, whether regular or special, may be
held at any time and place, and for any purpose, without notice, when all the
directors are present or when all directors not present shall, in writing, waive
notice of and consent to the holding of such meeting, which waiver and consent
may be given after the holding of such meeting. All or any of the directors may
waive notice of any meeting and the presence of a director at any meeting of the
Board shall be deemed a waiver of notice thereof by him. A notice, or waiver of
notice, need not specify the purpose or purposes of any regular or special
meeting of the Board.
Section 6. QUORUM AND ACTION. A majority of the entire Board of
Directors shall constitute a quorum except that when the entire Board consists
of one director, then one director shall constitute a quorum, and except that
when a vacancy or vacancies prevents such majority, a majority of the directors
in office shall constitute a quorum, provided that such majority shall
constitute at lease one-third of the entire Board. A majority of the directors
present, whether or not they constitute a quorum, may adjourn a meeting to
another time and place. Except as herein otherwise provided, and except as
otherwise provided by the New York Business Corporation Law, the vote of the
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board.
Section 7. TELEPHONIC MEETINGS. Any member or members of the Board of
Directors, or of any committee designated by the Board, may participate in a
meeting of the Board, or any such committee, as the case may be, by means of
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time, and
participation in a meeting by such means shall constitute presence in person at
such meeting.
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Section 8. ACTION WITHOUT A MEETING. Any action required or permitted
to be taken at any meeting of the Board of Directors, or of any committee
thereof, may be taken without a meeting if all members of the Board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board or committee.
Section 9. COMPENSATION OF DIRECTORS. By resolution of the Board of
Directors, the directors may be paid their expenses, if any, for attendance at
each regular or special meeting of the Board or of any committee designated by
the Board and may be paid a fixed sum for attendance at such meeting, or a
stated salary as director, or both. Nothing herein contained shall be construed
to preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor; provided however that directors who are also
salaried officers shall not receive fees or salaries as directors.
ARTICLE IV
COMMITTEES
Section 1. IN GENERAL. The Board of Directors may, by resolution or
resolutions passed by the affirmative vote therefore of a majority of the entire
Board, designate an Executive Committee and such other committees as the Board
may from time to time determine, each to consist of three or more directors, and
each of which, to the extent provided in the resolution or in the certificate of
incorporation or in the By-Laws, shall have all the powers of the Board, except
that no such Committee shall have power to fill vacancies in the Board, or to
change the membership of or to fill vacancies in any Committee, or to make,
amend, repeal or adopt By-Laws of the Corporation, or to submit to the
shareholders any action that needs shareholder approval under these By-Laws or
the New York Business Corporation Law, or to fix the compensation of the
directors for serving on the Board or any committee thereof, or to amend or
repeal any resolution of the Board which by its terms shall not be so amendable
or repealable. Each committee shall serve at the pleasure of the Board. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.
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Section 2. EXECUTIVE COMMITTEE. Except as otherwise limited by the
Board of Directors or by these By-Laws, the Executive Committee, if so
designated by the Board of Directors, shall have and may exercise, when the
Board is not in session, all the powers of the Board of Directors in the
management of the business and affairs of the Corporation, and shall have power
to authorize the seal of the Corporation to be affixed to all papers which may
require it. The Board shall have the power at any time to change the membership
of the Executive Committee, to fill vacancies in it, or to dissolve it. The
Executive Committee may make rules for the conduct of its business and may
appoint such assistance as it shall from time to time deem necessary. A majority
of the members of the Executive Committee, if more than a single member, shall
constitute a quorum.
ARTICLE V
OFFICERS
Section 1. DESIGNATION, TERM AND VACANCIES. The officers of the
Corporation shall be a President, one or more Vice-Presidents, a Secretary, a
Treasurer, and such other officers as the Board of Directors may from time to
time deem necessary. Such officers may have and perform the powers and duties
usually pertaining to their respective offices, the powers and duties
respectively prescribed by law and by these By-Laws, and such additional powers
and duties as may from time to time be prescribed by the Board. The same person
may hold any two or more offices, except that the offices of President and
Secretary may not be held by the same person unless all the issued and
outstanding stock of the Corporation is owned by one person, in which instance
such person may hold all or any combination of offices.
The initial officers of the Corporation shall be appointed by the
initial Board of Directors, each to hold office until the meeting of the Board
of Directors following the first annual meeting of shareholders and until his
successor has been appointed and qualified. Thereafter, the officers of the
Corporation shall be appointed by the Board as soon as practicable after the
election of the Board at the annual meeting of shareholders, and each officer so
appointed shall hold office until the first meeting of the Board of Directors
following the next annual meeting of shareholders and until his successor has
been appointed and qualified. Any officer may be removed at any time, with or
without cause, by the affirmative note therefor of a majority of the entire
Board of Directors. All other agents and employees of the Corporation shall hold
office during the pleasure of the Board of Directors. Vacancies occurring
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among the officers of the Corporation shall be filled by the Board of Directors.
The salaries of all officers of the Corporation shall be fixed by the Board of
Directors.
Section 2. PRESIDENT. The President shall preside at all meetings of
the shareholders and at all meetings of the Board of Directors at which he may
be present. Subject to the direction of the Board of Directors, he shall be the
chief executive officer of the Corporation, and shall have general charge of the
entire business of the Corporation. He may sign certificates of stock and sign
and seal bonds, debentures, contracts or other obligations authorized by the
Board, and may, without previous authority of the Board, make such contracts as
the ordinary conduct of the Corporation's business requires. He shall have the
usual powers and duties vested in the President of a corporation. He shall have
power to select and appoint all necessary officers and employees of the
Corporation, except those selected by the Board of Directors, and to remove all
such officers and employees except those selected by the Board of Directors, and
make new appointments to fill vacancies. He may delegate any of his powers to a
Vice-President of the Corporation.
Section 3. VICE-PRESIDENT. A Vice-President shall have such of the
President's powers and duties as the President may from time to time delegate to
him, and shall have such other powers and perform such other duties as may be
assigned to him by the Board of Directors. During the absence or incapacity of
the President, the Vice-President, or, if there be more than one, the
Vice-President having the greatest seniority in office, shall perform the duties
of the President, and when so acting shall have all the powers and be subject to
all the responsibilities of the office of President.
Section 4. TREASURER. The Treasurer shall have custody of such funds
and securities of the Corporation as may come to his hands or be committed to
his care by the Board of Directors. Whenever necessary or proper, he shall
endorse on behalf of the Corporation, for collection, checks, notes, or other
obligations, and shall deposit the same to the credit of the Corporation in such
bank or banks or depositaries, approved by the Board of Directors as the Board
of Directors or President may designate. He may sign receipts or vouchers for
payments made to the Corporation, and the Board of Directors may require that
such receipts or vouchers shall also be signed by some other officer to be
designated by them. Whenever required by the Board of Directors, he shall render
a statement of his cash accounts and such other statements respecting the
affairs of the Corporation as may be required. He shall keep proper and accurate
books of account. He shall perform all
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acts incident to the office of Treasurer, subject to the control of the Board.
Section 5. SECRETARY. The Secretary shall have custody of the seal of
the Corporation and when required by the Board of Directors, or when any
instrument shall have been signed by the President duly authorized to sign the
same, or when necessary to attest any proceedings of the shareholders or
directors, shall affix it to any instrument requiring the same and shall attest
the same with his signature, provided that the seal may be affixed by the
President or Vice-President or other officer of the Corporation to any document
executed by either of them respectively on behalf of the Corporation which does
not require the attestation of the Secretary. He shall attend to the giving and
serving of notices of meetings. He shall have charge of such books and papers as
properly belong to his office or as may be committed to his care by the Board of
Directors. He shall perform such other duties as appertain to his office or as
may be required by the Board of Directors.
Section 6. DELEGATION. In case of the absence of any officer of the
Corporation, or for any other reason that the Board of Directors may deem
sufficient, the Board may temporarily delegate the powers or duties, or any of
them, of such officer to any other officer or to any director.
ARTICLE VI
STOCK
Section I. CERTIFICATES REPRESENTING SHARES. All certificates
representing shares of the capital stock of the Corporation shall be in such
form not inconsistent with the Certificate of Incorporation, these By-Laws or
the laws of the State of New York and shall set forth thereon the statements
prescribed by Section 508, and where applicable, by Sections 505, 616, 620, 709
and 1002 of the Business Corporation Law. Such shares shall be approved by the
Board of Directors, and shall be signed by the President or a Vice-President and
by the Secretary or the Treasurer and shall bear the seal of the Corporation and
shall not be valid unless so signed and sealed. Certificates countersigned by a
duly appointed transfer agent and/or registered by a duly appointed registrar
shall be deemed to be so signed and sealed whether the signatures be manual or
facsimile signatures and whether the seal be a facsimile seal or any other form
of seal. All certificates shall be consecutively numbered and the name of the
person owning the shares represented thereby, his
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<PAGE>
residence, with the number of such shares and the date of issue, shall be
entered on the Corporation's books. All certificates surrendered shall be
cancelled and no new certificates issued until the former certificates for the
same number of shares shall have been surrendered and cancelled, except as
provided for herein.
In case any officer or officers who shall have signed or whose facsimile
signature or signatures shall have been affixed to any such certificate or
certificates, shall cease to be such officer or officers of the Corporation
before such certificate or certificates shall have been delivered by the
Corporation, such certificate or certificates may nevertheless be adopted by the
Corporation, and may be issued and delivered as though the person or persons who
signed such certificates, or whose facsimile signature or signatures shall have
been affixed thereto, had not ceased to be such officer or officers of the
Corporation.
Any restriction on the transfer or registration of transfer of any shares
of stock of any class or series shall be noted conspicuously on the certificate
representing such shares.
Section 2. FRACTIONAL SHARE INTERESTS. The Corporation, may, but shall
not be required to, issue certificates for fractions of a share. If the
Corporation does not issue fractions of a share, it shall (1) arrange for the
disposition of fractional interests by those entitled thereto, (2) pay in cash
the fair value of fractions of a share as of the time when those entitled to
receive such fractions are determined, or (3) issue scrip or warrants in
registered or bearer form which shall entitle the holder to receive a
certificate for a full share upon the surrender of such scrip or warrants
aggregating a full share. A certificate for a fractional share shall, but scrip
or warrants shall not unless otherwise provided therein, entitle the holder to
exercise voting rights, to receive dividends thereon, and to participate in any
distribution of the assets of the Corporation in the event of liquidation. The
Board of Directors may cause scrip or warrants to be issued subject to the
conditions that they shall become void if not exchanged for certificates
representing full shares before a specified date, or subject to the condition
that the shares for which scrip or warrants are exchangeable may be sold by the
Corporation and the proceeds thereof distributed to the holders of scrip or
warrants, or subject to any other conditions which the Board of Directors may
impose.
Section 3. ADDRESSES OF SHAREHOLDERS. Every shareholder shall furnish
the Corporation with an address to which notices of meetings and all other
notices may be served upon or mailed to him, and in
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default thereof notices may be addressed to him at his last known post office
address.
Section 4. STOLEN, LOST OR DESTROYED CERTIFICATES. The Board of
Directors may in its sole discretion direct that a new certificate or
certificates of stock be issued in place of any certificate or certificates of
stock theretofore issued by the Corporation, alleged to have been stolen, lost
or destroyed, and the Board of Directors when authorizing the issuance of such
new certificate or certificates, may, in its discretion, and as a condition
precedent thereto, require the owner of such stolen, lost or destroyed
certificate or certificates or his legal representatives to give to the
Corporation and to such registrar or registrars and/or transfer agent or
transfer agents as may be authorized or required to countersign such new
certificate or certificates, a bond in such sum as the Corporation may direct
not exceeding double the value of the stock represented by the certificate
alleged to have been stolen, lost or destroyed, as indemnity against any claim
that may be made against them or any of them for or in respect of the shares of
stock represented by the certificate alleged to have been stolen, lost or
destroyed.
Section 5. TRANSFERS OF SHARES. Upon compliance with all provisions
restricting the transferability of shares, if any, transfers of stock shall
be made only upon the books of the Corporation by the holder in person or by
his attorney thereunto authorized by power of attorney duly filed with the
Secretary of the Corporation or with a transfer agent or registrar, if any,
upon the surrender and cancellation of the certificate or certificates for
such shares properly endorsed and the payment of all taxes due thereon. The
Board of Directors may appoint one or more suitable banks and/or trust
companies as transfer agents and/or registrars of transfers, for facilitating
transfers of any class or series of stock of the Corporation by the holders
thereof under such regulations as the Board of Directors may from time to
time prescribe. Upon such appointment being made all certificates of stock of
such class or series thereafter issued shall be countersigned by one of such
transfer agents and/or one of such registrars of transfers, and shall not be
valid unless so countersigned.
ARTICLE VII
DIVIDENDS AND FINANCE
Section 1. DIVIDENDS. The Board of Directors shall have power to fix
and determine and to vary, from time to time, the amount
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of the working capital of the Corporation before declaring any dividends among
it shareholders, and to direct and determine the use and disposition of any net
profits or surplus, and to determine the date or dates for the declaration and
payment of dividends and to determine the amount of any dividend, and the amount
of any reserves necessary in their judgment before declaring any dividends among
its shareholder, and to determine the amount of the net profits of the
Corporation from time to time available for dividends.
Section 2. FISCAL YEAR. The fiscal year of the Corporation shall end
on the last day of in each year and shall begin on the next
succeeding day, or shall be for such other period as the Board of Directors
may from time to time designate with the consent of the Department of
Taxation and Finance, where applicable.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 1. STOCK OF OTHER CORPORATIONS. The Board of Directors shall
have the right to authorize any director, officer or other person on behalf of
the Corporation to attend, act and vote at meetings of the Shareholders of any
corporation in which the Corporation shall hold stock, and to exercise thereat
any and all rights and powers incident to the ownership of such stock, and to
execute waivers of notice of such meetings and calls therefor; and authority may
be given to exercise the same either on one or more designated occasions, or
generally on all occasions until revoked by the Board. In the event that the
Board shall fail to give such authority, such authority may be exercised by the
President in person or by proxy appointed by him on behalf of the Corporation.
Any stocks or securities owned by this Corporation may, if so determined by
the Board of Directors, be registered either in the name of this Corporation or
in the name of any nominee or nominees appointed for that purpose by the Board
of Directors.
Section 2. BOOKS AND RECORDS. Subject to the New York Business
Corporation Law, the Corporation may keep its books and accounts outside the
State of New York.
Section 3. NOTICES. Whenever any notice is required by these By-Laws
to be given, personal notice is not meant unless expressly so
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stated, and any notice so required shall be deemed to be sufficient if given by
depositing the same in a post office box in a sealed postpaid wrapper, addressed
to the person entitled thereto at his last known post office address, and such
notice shall be deemed to have been given on the day of such mailing.
Whenever any notice whatsoever is required to be given under the
provisions of any law, or under the provisions of the Certificate of
Incorporation or these By-Laws a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
Section 4. AMENDMENTS. Except as otherwise provided herein, these
By-Laws may be altered, amended or repealed and By-Laws may be made at any
annual meeting of the shareholders or at any special meeting thereof if notice
of the proposed alteration, amendment or repeal, or By-Law or By-Laws to be made
be contained in the notice of such special meeting, by the holders of a majority
of the shares of stock of the Corporation outstanding and entitled to vote
thereat; or by a majority of the Board of Directors at any regular meeting of
the Board of Directors, or at any special meeting of the Board of Directors, if
notice of the proposed alteration, amendment or repeal, or By-Law or By-Laws to
be made, be contained in the Notice of such Special Meeting.
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EXHIBIT NO. 4
SERIES A PREFERRED SHARE CERTIFICATE - ONLINE
<PAGE>
ONLINE INTERNATIONAL CORPORATION
(A Nevada Corporation)
SERIES A PREFERRED SHARE CERTIFICATE
CERTIFICATE NO: 1 NO. SHARES: 250
THIS CERTIFIES that GAMING LOTTERY CORPORATION is the owner of TWO HUNDRED
FIFTY (250) fully paid and nonassessable shares of the Series A Preferred Stock
of ONLINE INTERNATIONAL CORPORATION, a corporation organized under the laws of
the State of Nevada, transferable on the books of the corporation by the holder
hereof, in person or by duly authorized attorney, or surrender of this
certificate properly endorsed.
RIGHTS, PREFERENCES, PRIVILEGES AND RESTRICTIONS
The rights, preferences, privileges and restrictions of these shares Series
"A" Preferred Shares (the "Shares") are as follows:
1. DIVIDENDS: A fixed, preferential non-cumulative cash dividend rate of
five percent (5%) payable semi-annually and to commence thirty (30) months from
the date hereof. This dividend rate to be adjusted to reflect any reorganization
of the present capitalization structure of the corporation.
2. LIQUIDATION PREFERENCE: The preferential right to participate in any
distribution or liquidation or dissolution of the corporation.
3. LIMITED VOTING RIGHTS: Except as specifically set forth here in
Paragraph 11, these Shares shall not have the right to vote in the same manner
and on the same corporate matters as the holders of common stock of the
corporation.
4. CONVERSION RIGHTS: The right to convert all or any portion thereof of
the Shares into shares of common stock at a conversion rate of one (1)
preferred share for 16,667 common shares utilizing a $6.00 per share conversion
rate as the capitalization of the corporation as of the date hereof with said
rate to be adjusted to reflect any reorganization of the capitalization
structure of the corporation. This right to convert all or any portion thereof
of the Shares shall remain with the Holder or its transferees or assignees in
perpetuity.
Page 1 of 4
<PAGE>
5. CONVERSION DATE: The Conversion Date for this Shares shall commence
thirty (30) days after the date hereof.
6. MANNER OF EXERCISE OF CONVERSION RIGHTS: In order to exercise the
conversion rights of these Shares, the Holder of said Shares must give written
notice to the corporation no earlier than ten (10) days after the Conversion
Date of its intention to exercise its conversion rights.
7. RESERVATION OF COMMON STOCK: The corporation shall, at all times during
the period which the Holder of the Shares has the right to convert the Shares to
common shares of the corporation, reserve and keep available out of its
authorized but unissued common shares, such amount of its duly authorized shares
of common stock as shall be necessary to effect the conversion of these Shares.
8. CONVERSION LIMITATIONS: The Holder of these Shares shall only be
permitted to convert that amount of its Shares which would result after such
conversion with the Holder then owning a maximum of twenty percent (20%) of the
then issued and outstanding common shares of the corporation. The Holder may
cumulatively convert a total amount of its Shares which will result in the
Holder having cumulatively owned common shares in excess of this twenty percent
(20%) limitation. However, upon the completion of any single conversion
transaction, the Holder will be limited to a then present ownership of a maximum
of twenty percent (20%) of the issued and outstanding common shares of the
corporation. However, in the event the corporation is in breach of any of its
obligations as set forth herein in Paragraph 10, the conversion rights of the
Holder shall not be subject to the conversion limitations set forth in this
Paragraph 6.
9. ISSUANCE OF SHARES PURSUANT TO REGULATION S: The shares of common stock
that are to be issued to the Holder of the Shares resulting from the exercise of
its conversion rights, shall be issued pursuant to SEC Regulation S if the
converting Holder is a "non-U.S. person" and further satisfies all of the other
conditions of SEC Regulation S.
10. CONDITIONS, OBLIGATIONS AND REOUIRED APPROVALS: The corporation shall
be required to provide the Holder of the Shares the documents set forth below
and to refrain from certain corporate actions unless the corporation obtains the
prior written approval of no less than fifty-one percent (51% of the issued and
outstanding Series A Preferred Shares:
Page 2 of 4
<PAGE>
1. FINANCIAL STATEMENTS: To provide the Holder with copies of all
regularly prepared quarterly and annual financial statements of
the corporation.
2. ACCESS TO BOOKS AND RECORDS: To provide the Holder with
reasonable access for review, inspection and copying of the
corporation's books and records.
3. APPOINTMENT AND COMPENSATION OF OFFICERS: To obtain the written
approval of the Holder for the appointment and compensation of
all officers and management and supervisory personnel of the
corporation, including but not limited to its executive officers.
4. CAPITAL EXPENDITURES: To make no capital expenditures in excess
of $100,000 without the prior written approval of the Holder.
5. ACQUISITIONS AND MERGERS: To make no acquisitions and/or mergers
with other entities without the prior written approval of the
Holder.
6. ISSUANCE OF SECURITIES AND ADJUSTMENT TO CAPITAL STRUCTURE: To
issue any shares of common stock or other securities, incur any
debt other than ordinary trade creditors, declare any type of
stock or cash dividend or make any adjustment to the
capitalization of the corporation without the prior written
approval of the Holder.
7. POSITIVE SHAREHOLDER EQUITY: To maintain at all times both a
positive shareholder equity and positive working capital.
11. BREACH OF CONDITIONS AND OBLIGATIONS: In the event of a breach of any
of the conditions set forth above in Paragraph 10 on the part of the corporation
and/or the corporation fails to obtain the required approvals of the Holders as
further set forth above in Paragraph 10, the corporation shall be deemed to be
in "default" and the Holder hereof shall be entitled to exercise the following
rights with respect to its Shares:
Page 3 of 4
<PAGE>
1. VOTING RIGHTS: The Shares shall have the same voting rights as
the common shares of the corporation and shall not be subject to
the provisions of Paragraph 3 herein.
2. CONVERSION RIGHTS: The Holder hereof shall be entitled to convert
any portion up to the entire amount of its Shares and shall not
be subject to the conversion limitations set forth in Paragraph 8
herein.
12. TRANSFERABILITY OF SHARES: The Holder of these Shares shall have the
absolute right to transfer or assign all or any portion thereof of the Shares.
The transferee or assignee of the Shares shall have all of the rights,
preferences and privileges of the Shares and shall be subject to the same
restrictions of said Shares.
IN WITNESS WHEREOF, the said corporation has caused this certificate to be
signed by its duly authorized officers and its corporation seal to be hereunder
affixed this 23 day of January, 1997.
/s/ James Russell /s/ Victoria S. Danseglio
- ------------------------------ ------------------------------
PRESIDENT SECRETARY
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<PAGE>
EXHIBIT NO. 10
MATERIAL CONTRACTS
<PAGE>
10.1
EMPLOYMENT CONTRACT - STANLEY WHITE
<PAGE>
THIS EMPLOYMENT AGREEMENT made as of the 22nd day of September, 1994.
B E T W E E N:
PRINTING ASSOCIATES OF NEW YORK, INC., a corporation incorporated
pursuant to the laws of the State of New York
(the "Corporation")
OF THE FIRST PART
- and -
STANLEY JAMES WHITE, a resident of the State of New York
(the "Employee")
OF THE SECOND PART
WHEREAS the Corporation wishes to employ the Employee and the Employee
wishes to be employed by the Corporation on a full-time basis, on the terms and
conditions hereinafter set forth;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the
mutual premises and conditions herein contained, the sum of U.S. TEN DOLLARS
(U.S.$10.00) now paid by each party hereto to the other and for other good and
valuable consideration (the receipt and sufficiency whereof being hereby
acknowledged), the parties hereto do hereby covenant and agree with each other
as follows:
1. SERVICES PROVIDED BY EMPLOYEE.
(a) The Corporation hereby agrees to employ the Employee and the Employee
hereby agrees to be employed by the Corporation upon and subject to
the terms and conditions hereinafter set forth. The Employee's
position shall be that of Vice-President of Sales and Marketing of the
Corporation subject to the instructions, directions and control of the
board of directors of the Corporation. The Employee shall perform such
duties which are commensurate with the Employee's aforesaid office in
connection with the Corporation and Printing Associates of Florida,
Inc. ("PAF").
(b) The character of the Employee's duties may be changed from time to
time by mutual consent without causing a termination of this Agreement
and notwithstanding such change the Employee's employment with the
<PAGE>
-2-
Corporation shall be construed as continuing under this Agreement as
modified.
2. TERMS OF AGREEMENT. The term of this Agreement shall be for a period
of three years commencing on the date hereof and terminating on September 22,
1997 (the "Term"). At the end of the Term, the Corporation and the Employee may
jointly negotiate the terms and conditions of a new employment agreement with
respect to the Corporation.
3. COMPENSATION. In consideration of the Employee's undertaking and
performance of the obligations contained herein, the Corporation shall pay to
the Employee a commission equal to 1% of the combined annual gross revenues of
PA and PAF up to U.S. $11,000,000 provided that when such combined gross
revenues exceed U.S. $11,000,000 the commission on such overage shall equal
1.5%. PA shall pay to the Employee a weekly draw against such commission based
on U.S. $120,000 per annum divided by 52, together with the use of a company car
not to exceed U.S. $11,000 per annum, health insurance and life insurance, such
life insurance not to exceed $U.S. $1,000 per annum. At six month intervals,
appropriate adjustments will be made to deal with commission draw surpluses
and/or shortfalls.
4. EXCLUSIVE AGREEMENT. During the Term the Employee shall not be
employed or engaged in any capacity in promoting, undertaking or carrying on any
other business which will interfere with his obligations under this Agreement.
The Employee shall devote such of his working time and attention to the business
of the Corporation and PAF as is necessary, as determined by the Corporation and
PAF acting reasonably, to fully carry out his duties hereunder. The Employee
shall faithfully serve the Corporation and PAF and shall perform his duties to
the best of his ability with due diligence and honesty.
5. TERMINATION OF EMPLOYMENT
(a) "Cause" when used in this Agreement shall mean the following:
(1) conduct amounting to a criminal offence;
(2) habitual drunkenness or drug use of the Employee;
(3) breach by the Employee of the provisions of this Agreement; or
(4) gross misconduct on the part of the Employee.
The employment of the Employee may be terminated forthwith by the
Corporation prior to the end of the Term upon the occurrence of any of the
following events:
(5) Cause;
(6) the death of the Employee;
<PAGE>
-3-
(7) the Employee is declared bankrupt;
(8) the Employee is adjudged unable to manage his own affairs by a
court of competent jurisdiction;
(9) the Employee makes an assignment for the benefit of creditors;
(10) the Employee becomes by reason of illness, disease, mental or
physical disability or otherwise, unable for a period of three
consecutive months to actively participate in the affairs of the
Corporation; or
(11) there is a material event of default giving rise to an
indemnification of Laser Friendly Inc. ("Laser") pursuant to
section 6.1 of the acquisition and plan of merger agreement dated
as of even date among the Employee, Laser, the Corporation, PA
(as hereinafter defined), Pasquale Bagnato, and Ruegg V. Quibell
(the "Acquisition Agreement") and rights of setoff by Laser
pursuant to section 6.5 of the Acquisition Agreement. In the
event of any inconsistency between this Agreement and the
Acquisition Agreement, the Acquisition Agreement shall govern.
(b) Any termination of this Agreement pursuant to subsection 5(a) shall be
accompanied by written notice (the "Termination Notice") sent by
registered mail to the Employee or his personal representatives, as
the case may be, in the manner and at the address set forth in section
9.
(c) In the event of termination of this Agreement pursuant to any of the
provisions of subsection 6(a), the Employee or his personal
representatives, as the case may be, shall be entitled to receive any
accrued but unpaid remuneration payable pursuant to section 3, pro
rated on a daily basis to the date of termination.
6. CONFIDENTIALITY. The Employee acknowledges that in the course of
carrying out, performing and fulfilling his duties hereunder he will have access
to detailed, confidential and sensitive information and trade secrets relating
to the business carried on by the Corporation and PAF and their associated
companies and disclosure of any of such detailed, confidential and sensitive
information and trade secrets to competitors of the Corporation and/or PAF or to
the general public would be highly detrimental to the interests of the
Corporation and/or PAF. The Employee further acknowledges that the right to
maintain confidential such detailed, confidential and sensitive information and
trade secrets constitutes a proprietary right which the Corporation and PAF are
entitled to protect. Accordingly, the Employee covenants and agrees with the
Corporation that both during the Term and after termination hereof the Employee
shall not disclose any of such detailed, confidential and sensitive information,
trade secrets and other private affairs of the Corporation and PAF to any
person, firm, corporation or other entity howsoever designated or constituted
nor shall he use the same for any purpose other than that of furthering the
interests of the Corporation and/or PAF in the course of the Employee's
employment.
<PAGE>
-4-
7. NON-COMPETITION AND NON-SOLICITATION. During the Term and for a period
of three years thereafter, the Employee shall not; (i) either individually or in
partnership or jointly or in conjunction with any person or persons, or
corporations as principal, agent, shareholder, employee, consultant, adviser or
in any manner whatsoever, directly or indirectly, carry on the business of the
Corporation and/or PAF except for any equity share investment in a public
company whose shares are listed on a recognized stock exchange where such share
investment does not in the aggregate exceed 5% of the issued equity shares of
such company; or (ii) solicit any current or former clients or employees of the
Corporation and PAF. The Employee hereby agrees that the restrictions in this
section 7 are reasonable and valid and that all defences to the strict
enforcement thereof by the Corporation are hereby waived by the Employee. The
Employee further acknowledges that it is essential to the effective enforcement
of this Agreement that the Corporation shall be entitled to a remedy of
injunction and the Employee agrees that the Corporation shall be entitled
thereto solely for the enforcement of the provisions hereof.
8. INVALIDITY OR UNENFORCEABILITY. If any term or provision of this
Agreement or any portion of a term or provision hereof or the application
thereof to any person or circumstance to any extent shall be held invalid or
unenforceable by a court of competent jurisdiction the remainder of this
Agreement or the application of such terms or provisions or portion thereof to
persons or circumstances other than those as to which it is held invalid or
unenforceable shall not be affected thereby and each term and provision of this
Agreement and each portion thereof shall be valid and enforced to the fullest
extent permitted by law.
9. NOTICE. All notices which may or are required to be given pursuant
to any provision of this Agreement shall be given or made in writing and shall
be served personally or mailed by prepaid registered mail in the case of:
(a) the Corporation at:
150 Laser Court
Hauppauge, New York
11788
Attention: Victoria Danseglio
Fax No. (516) 231-7601
with a copy to:
Laser Friendly Inc.
160 Nashdene Road
Scarborough, Ontario
M1V 4C4
Attention: Eleesha A. Swartz
Fax No.: (415) 754-8441
<PAGE>
-5-
(b) the Employee at:
201 Centre Street
Pearl River, New York
10965
with a copy to:
Aguinick & Gogel
291 Broadway
New York, New York
1007
Attention: Bill Gogel
The date of receipt of any such notice shall be deemed to be the date
of delivery of such notice if served personally or if mailed as aforesaid, the
third business day following the date of such mailing.
10. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties relating to the subject matter contained herein and no
change or modification of any of its terms and provisions shall be effective
unless made in writing.
11. NO WAIVER. The waiver by any party or any breach of any term of this
Agreement shall not prevent the subsequent enforcement of that term and shall
not be deemed a waiver or any subsequent breach.
12. NON-ASSIGNMENT OF AGREEMENT. This Agreement shall not be assignable
by either party hereto without the consent in writing of the other party hereto.
13. GOVERNING LAW. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of New York.
14. BINDING EFFECT. This Agreement shall enure to the benefit of and
be binding upon the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors and permitted assigns. For
greater certainty and without limitation, it is understood and agreed that
Printing Associates of New York, Inc. may merge to form Printing Associates
Incorporated.
15. COUNTERPARTS. This Agreement may be executed in several
counterparts each of which so executed shall be deemed to be an original and
such counter parts when taken together shall constitute one and the same
original agreement and shall be binding on the parties hereto.
<PAGE>
-6-
16. INDEPENDENT LEGAL ADVICE. The Employee represents and warrants
that he has received independent legal advice with respect to his entering
into this Agreement.
IN WITNESS WHEREOF the parties hereto have executed this Agreement.
SIGNED, SEALED AND DELIVERED ) PRINTING ASSOCIATES OF
in the presence of ) NEW YORK, INC.
)
)
) Per: /s/ [illegible]
) ---------------------
)
/s/ [illegible] ) /s/ Stanley James White
- ---------------------------------------) -------------------------
Witness ) STANLEY JAMES WHITE
)
Employment Agr - White
<PAGE>
10.2
EMPLOYMENT CONTRACT - VICTORIA DANSEGLIO
<PAGE>
[LETTERHEAD]
PERSONAL AND CONFIDENTIAL
February 12, 1997
Victoria S. Danseglio
27 Rocket Drive
Islip Terrace, NY 11752
Dear Vicki,
RE: Printing Associates Incorporated
Reference is made to the Employment Agreement (the "Agreement") dated the 22nd
day of September, 1994 between Printing Associates Incorporated (formerly
Printing Associates of New York Inc.) ("PANY") and Victoria Danseglio (the
"Employee")
We hereby agree to amend the Agreement as follows:
1. Section 3 of the Agreement is deleted in its entirety and is replaced with
the following:
2. COMPENSATION. In consideration of the Employee's undertaking and
performance of the obligations contained herein, the Corporation shall
pay to the Employee a salary of U.S. $70,000 per annum during the Term
payable weekly in arrears and the use of a company car not to exceed
U.S. $10,000 per annum and daycare costs in lieu of healthcare
coverage not to exceed U.S. $6,000 per annum.
All other terms and conditions of the Agreement shall remain the same, in full
force and effect, unamended.
If you are in agreement with the foregoing please sign two original copies of
this letter an return one fully executed copy hereof to the writer's attention.
Yours truly,
PRINTING ASSOCIATES INCORPORATED
/s/ S J White
--------------------------------
Stanley James White
President and Chief Executive Officer
Agreed to and accepted the
---------
day of February ,1997.
------------
/s/ Victoria Danseglio
- -----------------------------
Victoria Danseglio
<PAGE>
THIS EMPLOYMENT AGREEMENT made as of the 22nd day of September, 1994.
B E T W E E N:
PRINTING ASSOCIATES OF NEW YORK, INC., a corporation incorporated
pursuant to the laws of the State of New York
(the "Corporation")
OF THE FIRST PART
- and -
VICTORIA DANSEGLIO, a resident of the State of New York
(the "Employee")
OF THE SECOND PART
WHEREAS the Corporation wishes to employ the Employee and the Employee
wishes to be employed by the Corporation (as hereinafter defined) on a full-time
basis, on the terms and conditions hereinafter set forth;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the
mutual premises and conditions herein contained, the sum of U.S. TEN DOLLARS
(U.S.$10.00) now paid by each party hereto to the other and for other good and
valuable consideration (the receipt and sufficiency whereof being hereby
acknowledged), the parties hereto do hereby covenant and agree with each other
as follows:
1. SERVICES PROVIDED BY EMPLOYEE.
(a) The Corporation hereby agrees to employ the Employee and the Employee
hereby agrees to be employed by the Corporation upon and subject to
the terms and conditions hereinafter set forth. The Employee's
position shall be that of Vice-President of Finance of the Corporation
subject to the instructions, directions and control of the board of
directors of the Corporation. The Employee shall perform such duties
which are commensurate with the Employee's aforesaid office in
connection with the Corporation and the Corporation's affiliates,
associates and subsidiaries from time to time, including without
limitation, Printing Associates of Florida, Inc., Printing Associates
of Pennsylvania, Inc. and Wintex International Inc. (collectively the
"Associated Companies").
<PAGE>
-2-
(b) The character of the Employee's duties may be changed from time to
time by mutual consent without causing a termination of this Agreement
and notwithstanding such change the Employee's employment with the
Corporation shall be construed as continuing under this Agreement as
modified.
2. TERMS OF AGREEMENT. The term of this Agreement shall be for a period
of five years commencing on the date hereof and terminating on September 22,
1999 (the "Term"). At the end of the Term, the Corporation and the Employee may
jointly negotiate the terms and conditions of a new employment agreement with
respect to the Corporation.
3. COMPENSATION. In consideration of the Employee's undertaking and
performance of the obligations contained herein, the Corporation shall pay to
the Employee a salary of U.S. $60,000.00 per annum during the Term payable
weekly in arrears and the use of a company car not to exceed U.S. $10,000 per
annum and daycare costs in lieu of healthcare coverage not to exceed $6,000.
4. EXCLUSIVE AGREEMENT. During the Term the Employee shall not be
employed or engaged in any capacity in promoting, undertaking or carrying on any
other business which will interfere with her obligations under this Agreement.
The Employee shall devote such of her working time and attention to the business
of the Corporation and the Associated Companies as is necessary, as determined
by the Corporation acting reasonably, to fully carry out her duties hereunder.
The Employee shall faithfully serve the Corporation and the Associated Companies
and shall perform her duties to the best of her ability with due diligence and
honesty.
5. TERMINATION OF EMPLOYMENT
(a) "Cause" when used in this Agreement shall mean the following:
(1) conduct amounting to a criminal offence;
(2) habitual drunkenness or drug use of the Employee;
(3) breach by the Employee of the provisions of this Agreement; or
(4) gross misconduct on the part of the Employee.
The employment of the Employee may be terminated forthwith by the
Corporation prior to the end of the Term upon the occurrence of any of the
following events:
(5) Cause;
(6) the death of the Employee;
(7) the Employee is declared bankrupt;
<PAGE>
-3-
(8) the Employee is adjudged unable to manage her own affairs by a
court of competent jurisdiction;
(9) the Employee makes an assignment for the benefit of creditors; or
(10) the Employee becomes by reason of illness, disease, mental or
physical disability or otherwise, unable for a period of three
consecutive months to actively participate in the affairs of the
Corporation.
(b) Any termination of this Agreement pursuant to subsection 5(a) shall be
accompanied by written notice (the "Termination Notice") sent by
registered mail to the Employee or her personal representatives, as
the case may be, in the manner and at the address set forth in section
9.
(c) In the event of termination of this Agreement pursuant to any of the
provisions of subsection 5(a), the Employee or her personal
representatives, as the case may be, shall be entitled to receive any
accrued but unpaid remuneration payable pursuant to section 3, pro
rated on a daily basis to the date of termination.
6. CONFIDENTIALITY. The Employee acknowledges that in the course of
carrying out, performing and fulfilling her duties hereunder she will have
access to detailed, confidential and sensitive information and trade secrets
relating to the business carried on by the Corporation and the Associated
Companies and disclosure of any of such detailed, confidential and sensitive
information and trade secrets to competitors of the Corporation and the
Associated Companies or to the general public would be highly detrimental to the
interests of the Corporation and the Associated Companies. The Employee further
acknowledges that the right to maintain confidential such detailed, confidential
and sensitive information and trade secrets constitutes a proprietary right
which the Corporation and the Associated Companies are entitled to protect.
Accordingly, the Employee covenants and agrees with the Corporation that both
during the Term and after termination hereof the Employee shall not disclose any
of such detailed, confidential and sensitive information, trade secrets and
other private affairs of the Corporation and the Associated Companies to any
person, firm, corporation or other entity howsoever designated or constituted
nor shall she use the same for any purpose other than that of furthering the
interests of the Corporation and/or the Associated Companies in the course of
the Employee's employment.
7. NON-COMPETITION AND NON-SOLICITATION. During the Term and for a period
of five years thereafter, the Employee shall not; (i) either individually or in
partnership or jointly or in conjunction with any person or persons, or
corporations as principal, agent, shareholder, employee, consultant, adviser or
in any manner whatsoever, directly or indirectly, carry on the business of the
Corporation and the Associated Companies or their associated companies except
for any equity share investment in a public company whose shares are listed on a
recognized stock exchange where such share investment does not in the aggregate
exceed 5% of the issued equity shares of such company; or (ii) solicit any
current or former clients or
<PAGE>
-4-
employees of the Corporation and the Associated Companies. The Employee hereby
agrees that the restrictions in this section 7 are reasonable and valid and that
all defences to the strict enforcement thereof by the Corporation are hereby
waived by the Employee. The Employee further acknowledges that it is essential
to the effective enforcement of this Agreement that the Corporation shall be
entitled to a remedy of injunction and the Employee agrees that the Corporation
shall be entitled thereto solely for the enforcement of the provisions hereof.
8. INVALIDITY OR UNENFORCEABILITY. If any term or provision of this
Agreement or any portion of a term or provision hereof or the application
thereof to any person or circumstance to any extent shall be held invalid or
unenforceable by a court of competent jurisdiction the remainder of this
Agreement or the application of such terms or provisions or portion thereof to
persons or circumstances other than those as to which it is held invalid or
unenforceable shall not be affected thereby and each term and provision of this
Agreement and each portion thereof shall be valid and enforced to the fullest
extent permitted by law.
9. NOTICE. All notices which may or are required to be given pursuant
to any provision of this Agreement shall be given or made in writing and shall
be served personally or mailed by prepaid registered mail in the case of:
(a) the Corporation at:
150 Laser Court
Hauppauge, New York
11788
Attention: Ruegg V. Quibell
Fax No.: (516) 231-7601
with a copy to:
Laser Friendly Inc.
160 Nashdene Road
Scarborough, Ontario
M1V 4C4
Attention: Eleesha A. Swartz
Fax No.: (416) 754-8441
(b) the Employee at:
27 Rocket Drive
---------------
Islip Terrace
---------------
NY 11752
---------------
<PAGE>
-5-
The date of receipt of any such notice shall be deemed to be the date
of delivery of such notice if served personally or if mailed as aforesaid, the
third business day following the date of such mailing.
10. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties relating to the subject matter contained herein and no
change or modification of any of its terms and provisions shall be effective
unless made in writing.
11. NO WAIVER. The waiver by any party or any breach of any term of
this Agreement shall not prevent the subsequent enforcement of that term and
shall not be deemed a waiver or any subsequent breach.
12. NON-ASSIGNMENT OF AGREEMENT. This Agreement shall not be assignable
by either party hereto without the consent in writing of the other party
hereto.
13. GOVERNING LAW. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of New York.
14. BINDING EFFECT. This Agreement shall enure to the benefit of and be
binding upon the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors and permitted assigns. For
greater certainty without limitation, it is understood and agreed that
Printing Associates of New York, Inc. and Printing Associates Incorporated
may merge to form Printing Associates Incorporated.
15. COUNTERPARTS. This Agreement may be executed in several
counterparts each of which so executed shall be deemed to be an original and
such counter parts when taken together shall constitute one and the same
original agreement and shall be binding on the parties hereto.
16. INDEPENDENT LEGAL ADVICE. The Employee represents and warrants that
she has received independent legal advice with respect to her entering into
this Agreement.
<PAGE>
-6-
IN WITNESS WHEREOF the parties hereto have executed this Agreement.
SIGNED, SEALED AND DELIVERED ) PRINTING ASSOCIATES OF
In the presence of ) NEW YORK, INC.
)
)
) Per: /s/ [illegible]
) ---------------------
/s/ Ruegg Quibell ) /s/ Victoria Danseglio
- ---------------------------------------) -------------------------
Witness ) VICTORIA DANSEGLIO
)
Employment Agr - Danseglio
