<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-KSB
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED JUNE 30, 1998
or
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 333-28861
MIRAGE HOLDINGS, INC.
(Name of small business issuer as specified in its charter)
NEVADA 95-4627685
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3000 W. OLYMPIC BLVD., SUITE 2235, SANTA MONICA, CA 90404
(Address of principal executive offices) (Zip code)
(310) 264-3939 / (310) 264-3942
(Issuer's telephone/facsimile numbers, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
(None)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
(None)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [x] No [ ]
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B, is not contained in this form and no disclosure will be continued, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
the Form 10-KSB. [ ]
The issuer's revenues for its most recent fiscal year were $170,934.
As of October 6, 1998, Registrant had 2,515,065 shares of its $.001 par value
Common Stock issued and outstanding. As of October 6, 1998 the aggregate market
value of the common stock held by non-affiliates was $2,556,334. This
calculation is based upon the closing sales price of $4 9/32 per share on
October 8, 1998.
<PAGE>
TABLE OF CONTENTS AND CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
PAGE
PART I
<S> <C>
Item 1 Description of Business 1
Item 2 Description of Property 3
Item 3 Legal Proceedings 3
Item 4 Submission of Matters to a Vote of Security Holders 4
PART II
Item 5 Market for Common Equity and Related Stockholder
Matters 4
Item 6 Management's Discussion and Analysis 4
Item 7 Financial Statements 7
Item 8 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 7
PART III
Item 9 Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act 7
Item 10 Executive Compensation 8
Item 11 Security Ownership of Certain Beneficial Owners and Management 10
Item 12 Certain Relationships and Related Transactions 11
PART IV
Item 13 Exhibits and Reports on Form 8-K 11
</TABLE>
<PAGE>
PART I
ITEM 1 - BUSINESS
GENERAL
Mirage Holdings, Inc. ("Company") was incorporated under the laws of
the state of Nevada on March 18, 1997. The Company's address is 3000 West
Olympic Boulevard, Suite 2335, Santa Monica, California 90404 and its telephone
number is (310) 264-3939. Mirage Collection, Inc. ("Mirage Collection"), a
wholly owned subsidiary of Mirage Holdings, Inc., began business as a
partnership in July, 1995, and was reorganized into a corporation in the State
of Nevada pursuant to Internal Revenue Code Section 351 on April 1, 1997. The
Company was formed to market and sell fashions targeted towards the segment
where discriminating customers are always looking for unique and innovative
products. The origin of these designs is mainly from India and Pakistan but not
limited to these countries.
The idea was to fill this niche in the apparel market by importing
these fashions. The economic feasibility of this idea was studied by conducting
market research over a period of one year. The results were very encouraging.
The study identified two main areas of profitability: the existing affluent
market segment of Indian and Pakistani people who are always thirsty of new
fashions from their countries, as well as the growing demand in the mainstream
American market of designs that are different than the usual.
The Company is also pursuing other business opportunities in the
United States and Canada which arise out of its relationships with the Indian
and Pakistan communities. India ranks as one of the ten largest emerging markets
in the world, according to the U.S. Department of Commerce. India has been
called the "Silicon Valley of the East" and houses many high-tech corporations,
including Motorola and Hewlett Packard. (National Geographic, May 1997.) The
Company anticipates that such opportunities may arise in the software and
entertainment industries.
On March 30, 1997, the Company purchased 10% of the outstanding
capital stock of Network Solutions (PVT) Limited, a software development firm in
Lahore, Pakistan ("NetSol"), in exchange for the payment of $275,000. NetSol was
incorporated in Pakistan on August 22, 1996, under the Companies Ordinance,
1984, as a private Company limited by shares. The principal business of NetSol
is the development and export of software. Through its affiliation with NetSol,
the Company can assist NetSol in marketing its software development services to
North American and European clients. Effective September 15, 1998, the Company
increased its ownership of NetSol to 51% of NetSol's outstanding capital stock
and also purchased 43% of the outstanding capital stock of NetSol (U.K.)
Limited, a corporation organized under the laws of the United Kingdom ("NetSol
UK"), which is a sister company to NetSol. The Company paid a purchase price for
the increased interest in NetSol and the interest in NetSol UK of $500,000 plus
490,000 shares of common stock of the Company.
Network Solutions Pvt., Ltd. ("NetSol") was launched as a software
development Company in late 1995. The Company was incorporated in Lahore,
Pakistan with limited capital and three founders behind it. The principal
officer, Mr. Salim Ghauri, returned from Australia after over 18 years of
experience in the IT industry. He established NetSol with three employees in
1995. Today, the Company has over 60 employees and consultants worldwide.
1
<PAGE>
NetSol Business:
NetSol has three divisions which are separate profit and costs
centers.
1. Software Development. NetSol has developed several leasing
finance products creating a market within the finance industry. Currently,
NetSol has developed a fully integrated leasing finance package, which is a
series of seven products that can be marketed as a fully integrated system.
2. Resource and Consulting Group. Highly qualified skilled IT
professionals from all over the world consult blue-chip clients. NetSol created
a database for all IT professionals such as Visual basis programmers, Oracle
based developers, Lotus certified Personnel and Internet developers and
designers.
3. Project Management Group. Currently, NetSol is working on several
projects of which some are in final development stage to manage several projects
at once.
Customers:
Some of NetSol's customers include the following:
Mercedes Benz Finance - Singapore
Tung-Yang Leasing Company - Taiwan
Mercedes Benz Leasing - Thailand
Mercedes Benz Finance, Ltd. - United Kingdom
Mercedes Benz Finance - Australia
Mercedes Benz accounts for a substantial majority of NetSol's
revenues.
The Company recently underwent an Initial Public Offering ("IPO")
and to date raised the minimum of $1,287,500 (the "Minimum Offering"). The net
proceeds of the Minimum Offering to the Company were approximately $1,037,625.
The Company believes that the funds generated by the IPO, together with its
current resources will be sufficient to fund working capital and capital
requests for at least 12 months from the date of the Prospectus used for the IPO
which was May 1, 1998. The IPO continues until the maximum offering of
$2,800,000 is raised or until terminated by the Company, whichever occurs first.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" for the Company's use of proceeds from the Minimum Offering.
INDUSTRY BACKGROUND
The United States is India's largest single trading partner. Between
1987 and 1993, United States exports rose 11% annually, slightly faster than
United States import growth, which measured 10% a year. India's exports to the
United States increased 15% in 1994 and management of the Company expects that
India's exports will probably remain strong in subsequent years. In 1994,
India's exports totaled $24 billion, of which $5.3 billion in goods was exported
to the United States. Annual growth rates of 5% to 10% are expected between 1995
and 2000. (U.S. GLOBAL TRADE OUTLOOK: 1995 - 2000, U.S. Dept. of Commerce.)
Pakistan's single largest trading partner is also the United States.
Pakistan's total exports in 1993 were $6.7 billion. (1997 INFORMATION PLEASE
ALMANAC, ATLAS, AND YEARBOOK, Houghton Mifflin Company, Boston and New York,
1997.)
2
<PAGE>
[CHART]
OPERATIONS
The Company currently operates in Los Angeles County, California.
However, the Company hopes to expand its sales and operation to other cities in
the United States.
ADMINISTRATION
OFFICE FACILITIES - The Company currently leases an approximately
2,000 square feet office facility in Santa Monica, California. The
month-to-month lease requires monthly payments of approximately $2,250. The
Company has closed its facility in Artesia, California due to low inventory and
transition in to the software business. The Diamond Bar store is currently being
subleased, again due to low inventory and transition into the software industry.
EMPLOYEES - The Company currently employs two full time employees
and one consultant on an "as needed" basis. In the near future, the Company
plans on hiring additional employees as needed based on the Company's growth
rate.
COMPETITION
In the software industry, NetSol's competition are EdWhite
Associates, a British based Company, Data Scan and Decision Systems, both
American companies.
ITEM 2 - PROPERTIES
The Company currently leases approximately 2,000 square feet office
facility in Santa Monica, California. The month-to-month lease requires monthly
payments of approximately $2,250. The Company has closed its facility in
Artesia, California due to low inventory and transition in to the software
business. The Diamond Bar store is currently being subleased, again due to low
inventory and transition into the software industry.
ITEM 3 - LEGAL PROCEEDINGS
To the knowledge of management, there is no material litigation pending or
threatened against the Company.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
3
<PAGE>
No matter was submitted to a vote of the Company's Security holders
during the fourth quarter ending June 30, 1998.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) MARKET INFORMATION - The Company's Common Stock has been quoted
on the over-the-counter bulletin board ("OTC/BB"), under the symbol MGHI, since
September 24, 1998 at prices ranging from 2 1/2 to 6. The Company's Warrants
have been quoted on the OTC/BB under the symbol MIRGW, since September 24, 1998
at prices ranging from 23/32 to 31/32.
(b) STOCKHOLDERS - As of October 6, 1998, the Company had 74 holders
of record of the Company's Common Stock and 48 holders of record of the
Company's Warrants. This does not include the holders that have their shares
held in a depository trust in "street" name. As of October 6, 1998, 2,515,065
shares have been issued and outstanding.
(c) DIVIDENDS - The Company has not paid cash dividends on its
Common Stock in the past and does not anticipate doing so in the foreseeable
future. The Company currently intends to retain future earnings, if any, to fund
the development and growth of its business.
ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS
USE OF PROCEEDS
The Company conducted a public offering ("Offering") filed with the
Securities and Exchange Commission ("SEC") on June 9, 1997. The Offering was
declared effective as of April 27, 1998. The Company closed the Minimum Offering
on September 16, 1998.
Due to the extreme delay in going effective (10 months from the date
of effectiveness) and the closing of the Minimum Offering (5 months from the
date of effectiveness), the use of proceeds from the Offering has significantly
changed.
<TABLE>
<CAPTION>
<S> <C>
Gross Proceeds $1,385,647
Less:
OFFERING EXPENSES
Underwriting Fees and Expenses $ 180,133
Attorneys Fees and Expenses $ 47,736
Accountants Fees and Expenses $ 75,000
----------
Total Offering Expenses $ 302,869
NOTES PAYABLE $ 320,000
GENERAL AND ADMINISTRATIVE EXPENSES $ 208,765
NETSOL ACQUISITION $ 500,000
Total Proceeds Used $1,331,634
Amount of Proceeds Remaining $ 53,400
</TABLE>
4
<PAGE>
Management of the Company anticipates that the remaining $53,400 in
proceeds will be spent on accounts payable of the Company.
RESULTS OF OPERATIONS
Because of the soft retail market, low inventory and dropped sales, the
management of the Company began to investigate other avenues the Company
could pursue. The Management of the Company was provided with an opportunity
to invest in Network Solutions (PVT) Limited and NetSol (U.K.) Ltd., related
computer software companies. This acquisition will provide the Company with
the opportunity to increase revenues and earnings.
OVERVIEW
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1998 June 30, 1997
<S> <C> <C>
Net sales $ 168,835 $ 212,972
Cost of goods sold 133,860 149,501
Gross profit 34,975 63,471
Selling, general & administrative expenses 620,454 389,723
Other Income -0- 36,361
Net Loss (585,479) (289,891)
</TABLE>
YEAR ENDED JUNE 30, 1998 COMPARED TO YEAR ENDED JUNE 30, 1997
Net Sales. Net sales from continued operations deceased by $44,137 from
the fiscal year end June 30, 1997 ("fiscal 1997") to fiscal year ended June
30, 1998 ("fiscal 1998"). Total sales of the Company's apparel business
decreased to $133,860 in fiscal 1998 from $149,501 in fiscal 1997.The
decrease in sales and revenues in primarily due to prolonged public offering
process, closing down one store and dropping inventory. The Company
anticipates continuing fiscal 1998 showing increase in both sales and
revenues with its recent acquisition of NetSol.
Cost of Goods Sold. The cost of sales decreased in fiscal 1998 to
$133,860 from $149,501. This drop was primarily due to the Company's closing of
one store, low inventory and supplies as a result of the store's closure.
Expenses. Expenses in fiscal 1998 increased to $620,454 from
$389,723 in fiscal 1997. The increase was primarily due to the cost of the
public offering and the legal, accounting and filing fees associated with that.
Other Income. The Company did not have other income in fiscal 1998 as
opposed to the income received in fiscal 1997 of $36,361.
5
<PAGE>
NET LOSS PER COMMON SHARE
Net loss per common share is computed by dividing the net loss
applicable to common stockholders by the weighted average number of common
shares outstanding during the year. All common stock equivalents have been
excluded from the computations because their effect would be anti-dilutive.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In October 1995, the Financial Accounting Standards Board issued a
new statement titled "Accounting for Stock-Based Compensation" (SFAS 123). The
new statement is effective for fiscal years beginning after December 15, 1995.
SFAS 123 encourages, but does not require, companies to recognize compensation
expense for grants of stock, stock options, and other equity instruments to
employees based on fair value. Companies that do not adopt the fair value
accounting rules must disclose the impact of adopting the new method in the
notes to the financial statements. Transactions in equity instruments with
non-employees for goods or services must be accounted for on the fair value
method. For transactions with employees, the Company currently does not intend
to adopt the fair value accounting under SFAS 123, and will be subject only to
the related disclosure requirements.
YEAR 2000. The Company has begun to address possible remedial
efforts in connection with its computer software that could be affected by the
year 2000 problem. The year 2000 problem is the result of computer programs
being written using two digits rather than four to define the applicable year.
Any programs that have time-sensitive software may recognize a date using "00"
as the year 1900 rather than the year 2000. This could result in a major system
failure or miscalculations. The Company has been informed by the suppliers of
substantially all of the Company's software that all of those suppliers'
software that is used by the Company is Year 2000 compliant. The Company has no
internally generated software. After reasonable investigation, the Company has
not yet identified any Year 2000 problems but will continue to monitor the
issue. However, there can be no assurances that Year 2000 problems will not
occur with respect to the Company's computer systems. The Year 2000 problem may
impact other entities with which the Company transacts business, and the Company
cannot predict the effect of the year 2000 problem on such entities.
LIQUIDITY, CAPITAL RESOURCES AND CAPITAL EXPENDITURES
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has funded its capital
requirements through partners' contributions of cash in the cumulative amount
of $165,738 since April 17, 1995 (inception) to December 31, 1996.
On February 26, 1997, the Company issued an unsecured note to
Manhattan West, Inc. in exchange for loans in the principal amount of
$46,997. The note is due quarterly starting on May 26, 1997 and bears
interest at the rate of 10% per annum. The note contains a conversion feature
whereby Manhattan West, Inc. may, at any time, convert the balance due and
owing to it into share of Common Stock of the Company at the rate of $0.45
per share. As of the date of this Memorandum, the balance due on the note is
$46,997 plus accrued interest.
At December 31, 1996, the Company had outstanding current
liabilities of $109,503. The Company anticipates satisfying its current
liabilities in the ordinary course of business from revenues and notes
receivable.
Capital expenditures during the period from inception through
December 31, 1996 were $54,516. Over the next 12 months, the Company plans to
upgrade its management information system, telecommunications system, and office
equipment to accommodate anticipated growth plans. The Company
6
<PAGE>
anticipates these upgrades and acquisitions may require estimated
expenditures in excess of $100,000 over the next 12 months.
The Company does not believe that inflation has had a significant
impact on its operations since inception of the Company.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general, and administrative expenses for the year ended June
30, 1998 were $620,454 (average of $51,704.50 per month) as compared to
$389,723 for the fiscal year ended June 30, 1997 (average of $32,476 per
month). The increase is, in part, due to opening of a new store in Diamond
Bar.
PART II - OTHER INFORMATION
ITEM 7. FINANCIAL STATEMENTS
The Consolidated Financial Statements that constitute Item 7 are
included at the end of this report beginning on Page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names and ages of the current
directors and executive officers of the Company, the principal offices and
positions with the Company held by each person and the date such person
became a director or executive officer of the Company. The executive officers
of the Company are elected annually by the Board of Directors. Each year the
stockholders elect the board of directors. The executive officers serve terms
of one year or until their death, resignation or removal by the Board of
Directors. In addition, there was no arrangement or understanding between any
executive officer and any other person pursuant to which any person was
selected as an executive officer.
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Najeeb U. Ghauri 43 President, Secretary, and Director
Gill Champion 55 Vice President, Chief Financial Officer, and Director
Irfan Mustafa 46 Director
</TABLE>
NAJEEB U. GHAURI is the President, Secretary, and Director of the
Company since 1997. Mr. Ghauri is responsible for the Company's corporate
finance, managing the day-to-day operations of the Company and is principally
responsible for the Company's development of production. Prior to joining the
Company, Mr. Ghauri was Territory Management for Arco Petroleum Products
Company since 1987. Mr. Ghauri received his B.S. degree in
Management/Economics from Eastern Illinois University in 1980, and his M.B.A.
in
7
<PAGE>
Marketing Management from Claremont Graduate School in 1983. As of October,
1998, Mr. Ghauri became the Chief Financial Officer for Network Solutions
(Pvt) Limited.
GILL CHAMPION is the Vice President, Chief Financial Officer, and Director
of the Company since 1997. Mr. Champion is primarily responsible for the
marketing and distribution strategies of the Company as well as raising capital.
Prior to joining Mirage, Mr. Champion was the Chief Executive Officer of
American Cinema Stores, Inc., a public Company. from 1990 through 1996 where he
established domestic and international sales and marketing channels for licensed
entertainment products. Mr. Champion received his B.A. degree from New York
University.
IRFAN MUSTAFA is a Director of the Company since 1997. Mr. Mustafa is
currently a leader in the Executive Designate Program with Pepsi-Cola Company.
Mr. Mustafa has been with Pepsi-Cola since 1990. Mr. Mustafa received his M.B.A.
from IMD in Lousanne, Switzerland; also an another M.B.A. from Institute of
Business Administration in Karachi, Pakistan and a B.S.C. in Economics from
Pinajab University in Lahore, Pakistan.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of
the Company's Common Stock, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission ("SEC"). Officers,
directors and greater than ten percent stockholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
The following disclosure is based solely upon a review of the Forms
3 and 5 and any amendments thereto furnished to the Company during the Company's
fiscal year ended June 30, 1998. Based on this review, the following persons who
were directors, officers and beneficial owners of more than 10% of the Company's
outstanding Common Stock during such fiscal year filed late reports on Forms 3
and 5.
Najeeb U. Ghauri filed one late report on Form 3 and has not filed
form 5 as of the date of this filing. Irfan Mustafa, Gill Champion, Clearwater
Investments, and Whittington Investments, Ltd. have not filed their Form 3's or
Form 5's as of the date of this report.
ITEM 10-EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The Summary Compensation Table shows certain compensation
information for services rendered in all capacities during each of the last two
fiscal years by the Officers of the Company. No executive officer's salary and
bonus exceeded $100,000 in Fiscal 1998. The following information for the
Officers and Directors include the dollar value of base salaries, bonus awards,
the number of stock options granted and certain other compensation, if any,
whether paid or deferred.
8
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Name and Principal Position Year Annual Awards(2)
Compensation(1) ---------------------------
Restricted Securities
Stock Underlying
Awards(3) Options(4)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Najeeb U. Ghauri, President and
Secretary of Mirage Holdings, Inc. 1998 $91,150 200,000 50,000
- ----------------------------------------------------------------------------------------------------------
Gill Champion, Vice President and
Chief Financial Officer of Mirage
Holdings, Inc. 1998 $91,149 50,000 50,000
- ----------------------------------------------------------------------------------------------------------
All Officers as a Group (2 persons) 1998 $182,299 250,000 100,000
- ----------------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------------
(1) No officers received or will receive any bonus or other annual
compensation other than salaries during fiscal 1997. The table does
not include any amounts for personal benefits extended to officers
of the Company, such as the cost of automobiles, life insurance and
supplemental medical insurance, because the specific dollar amounts
of such personal benefits cannot be ascertained. Management believes
that the value of non-cash benefits and compensation distributed to
executive officers of the Company individually or as a group during
fiscal year 1996 did not exceed the lesser of $50,000 or ten percent
of such officers' individual cash compensation or, with respect to
the group, $50,000 times the number of persons in the group or ten
percent of the group's aggregate cash compensation.
(2) No officers received or will receive any long term incentive plan
(LTIP) payouts or other payouts during fiscal 1998.
(3) All stock awards are shares of Common Stock of the Company.
(4) All securities underlying options are shares of Common Stock of the
Company.
EMPLOYMENT AGREEMENTS
OPTION GRANTS IN THE LAST FISCAL YEAR
Set forth below is information relating to grants of stock options
to the Officers of the Company pursuant to the Company's Stock Option Plans
during the fiscal year ended June 30, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Name Number of Percent of total Exercise price Expiration
securities options granted to ($/Sh) date
underlying options employees in fiscal
granted year
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Najeeb U. Ghauri 50,000 42% $0.01 May 12,
per share 2002
- ------------------------------------------------------------------------------------------------------------------------
Gill Champion 50,000 42% $0.01 May 12,
per share 2002
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
COMPENSATION OF DIRECTORS
Directors of the Company do not receive any cash compensation, but
are entitled to reimbursement of their reasonable expenses incurred in
attending Directors' Meetings. In addition, the Company has granted to its
three directors 20,000 options to purchase common stock of the Company under
the Company's Incentive and Nonstatutory Stock Option Plan each.
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock, its only class of
outstanding voting securities as of September 21, 1998, by (i) each person
who is known to the Company to own beneficially more than 10% of the
outstanding Common Stock with the address of each such person, (ii) each of
the Company's directors and officers, and (iii) all officers and directors as
a group:
<TABLE>
<CAPTION>
- ---------------------------------------------------------- -------------------- ------------------------------
PERCENTAGE
NAME NUMBER OF SHARES(1) BENEFICIALLY OWNED
- ---------------------------------------------------------- -------------------- ------------------------------
<S> <C> <C>
Whittington Investments, Ltd.
Suite M2 Charlotte House
P.O. Box N4825
Nassau, Bahamas 993,400(2) 39.1%
- ---------------------------------------------------------- -------------------- ------------------------------
Clearweather Investments 387,565(3) 14.0%
- ---------------------------------------------------------- -------------------- ------------------------------
Najeeb U. Ghauri 250,000(4) 9.7%
- ---------------------------------------------------------- -------------------- ------------------------------
Irfan Mustafa 120,000(5) 4.7%
- ---------------------------------------------------------- -------------------- ------------------------------
Gill Champion 100,000(6) 3.9%
- ---------------------------------------------------------- -------------------- ------------------------------
All officers and directors as a group (3 persons) 470,000 17.8%
- ---------------------------------------------------------- -------------------- ------------------------------
</TABLE>
- ------------
* Less than one percent
(1) Except as otherwise indicated, the Company believes that the
beneficial owners of Common Stock listed below, based on information
furnished by such owners, have sole investment and voting power with
respect to such shares, subject to community property laws where
applicable. Beneficial ownership is determined in accordance with
the rules of the Securities and Exchange Commission and generally
includes voting or investment power with respect to securities.
Shares of Common Stock subject to options or warrants currently
exercisable, or exercisable within 60 days, are deemed outstanding
for purposes of computing the percentage of the person holding such
options or warrants, but are not deemed outstanding for purposes of
computing the percentage of any other person.
(2) Includes 23,000 Warrants for shares of Common Stock of the
Company at an exercise price of $.75 for a term of five years from
the date of purchase of April 10, 1997.
(3) Includes 259,500 Warrants for shares of Common Stock of
the Company at an exercise price of $.75 for a term of five years
from the date of purchase of April 10, 1997.
(4) Includes 50,000 options issued under the Company's stock
option plan exercisable at $0.01 for five years from May 12, 1997.
(5) Includes 20,000 options issued under the Company's stock
option plan exercisable at $0.01 for five years from May 12, 1997.
10
<PAGE>
(6) Includes 50,000 options issued under the Company's stock option plan
exercisable at $0.01 for five years from May 12, 1997.
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On March 30, 1997, the Company purchased 10% of the outstanding
capital stock of Network Solutions (PVT) Limited, a software development firm
in Lahore, Pakistan ("NetSol"), and on September 15, 1998, the Company
increased its ownership interest in NetSol to 51% of the outstanding capital
stock. See "Business of the Company" for a full description of this
transaction. The Company also acquired 43% in NetSol U.K. The Chief Executive
Officer, President, and Director of NetSol is Salim Ghauri; a Director of
NetSol is Shahab Ghauri; and another Director of NetSol is Naeem Ghauri; all
brothers of Najeeb U. Ghauri, President, Secretary, and a Director of the
Company. The Company believes that its investment with NetSol was on terms at
least as favorable to the Company as would be obtainable in arm's length
dealings with unrelated third persons. It is further the Company's intention
that all future transactions between the Company and NetSol will be on terms
at least as favorable to the Company as would be obtainable in arm's-length
dealings with unrelated third persons. However, the ongoing familial
relationship between management of the Company and management of NetSol could
result in conflicts of interest between the Company and NetSol, which could
result in actions taken by the Company that do not fully reflect the
interests of all shareholders of the Company. In order to minimize any
conflict of interest, the fairness and reasonableness of any material
transaction between the Company and NetSol in the future will be subject to
approval by a majority of the independent members of the Board of Directors
of the Company or by an independent firm selected by such members.
The Company's management believes that the terms of these
transactions are no less favorable to the Company than would have been
obtained from an unaffiliated third party in similar transactions. All future
transactions with affiliates will be on terms no less favorable than could be
obtained from unaffiliated third parties, and will be approved by a majority
of the disinterested directors.
PART IV
ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
Exhibits
<S> <C>
1 Underwriting Agreement(1)
3 Articles of Incorporation of Mirage Holdings, Inc., a Nevada
corporation, dated March 18, 1997(1)
3.2 Bylaws of Mirage Holdings, Inc., dated March 18, 1997(1)
4 Lock-Up Agreement (form)(1)
10.1 Lease Agreement, dated August 1, 1995(1)
10.2 Lease Agreement, dated September 19, 1996(1)
10.3 Lease Agreement, dated March 12, 1997(1)
10.4 Company Stock Option Plan, dated April 1, 1997(1)
10.5 Employment Agreement, dated May 15, 1997 between Mirage
Holdings, Inc. and Najeeb U. Ghauri(1)
10.6 Employment Agreement, dated May 15, 1997 between Mirage
Holdings, Inc. and Gill Champion(1)
</TABLE>
- ------------
(1) Incorporated by reference to Registration Statement No. 333-28861 on
Form SB-2.
11
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
10.7 Lease Agreement, dated September 7, 1998 for Santa Monica,
California executive offices (as incorporated herein)
10.8 Acquisition Agreement, dated September 15, 1998 by and between
Company and NetSol (as incorporated herein
21 A list of all subsidiaries of the Company (as incorporated herein)
24.1 Consent of Stonefield Josephson & Company
</TABLE>
12
<PAGE>
SIGNATURES
In accordance with Section 13 or 15 (d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
MIRAGE HOLDINGS, INC.
<TABLE>
<CAPTION>
<S> <C>
Date: October 12 , 1998 By:/s/ Najeeb U. Ghauri
----------------------- -----------------------
Najeeb U. Ghauri
President and Secretary
Date: October 12 , 1998 By:/s/ Gill Champion
----------------------- --------------------
Gill Champion
Chief Financial Officer and
Vice President
</TABLE>
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
<S> <C>
Date: October 12 , 1998 By:/s/ Najeeb U. Ghauri
----------------------- -----------------------
Najeeb U. Ghauri
President and Secretary
Date: October 12 , 1998 By:/s/ Gill Champion
---------------------- --------------------
Gill Champion
Chief Financial Officer and
Vice President
Date: October 12 , 1998 By:/s/ Irfan Mustafa
---------------------- --------------------
Irfan Mustafa
Director
</TABLE>
13
<PAGE>
MIRAGE HOLDINGS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 1998
CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INDEPENDENT AUDITORS' REPORT F-1
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheet F-2
Consolidated Statements of Operations F-3
Consolidated Statement of Stockholders' Deficiency F-4
Consolidated Statements of Cash Flows F-5 - F-6
Notes to Consolidated Financial Statements F-7 - F-13
</TABLE>
<PAGE>
Board of Directors
Mirage Holdings, Inc.
Santa Monica, California
We have audited the accompanying consolidated balance sheet of Mirage
Holdings, Inc. as of June 30, 1998, and the related consolidated statements
of operations, stockholders' deficiency and cash flows for the years ended
June 30, 1998 and 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audit.
We conducted our audit 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 consolidated 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 audit provides
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 Mirage
Holdings, Inc. as of June 30, 1998, and the results of its consolidated
operations and its cash flows for the years ended June 30, 1998 and 1997 in
conformity with generally accepted accounting principles.
CERTIFIED PUBLIC ACCOUNTANTS
Santa Monica, California
October 9, 1998
F-1
<PAGE>
MIRAGE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET - JUNE 30, 1998
<TABLE>
<S> <C> <C>
ASSETS
OTHER ASSETS:
Investment $ 275,000
Deferred offering costs 203,813
---------
$ 478,813
---------
---------
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 352,738
Notes payable 338,700
Loan payable, related party 118,910
---------
Total current liabilities $ 810,348
STOCKHOLDERS' DEFICIENCY:
Common stock; $.001 par value, 25,000,000 shares
authorized, 1,774,065 shares issued and outstanding 1,774
Additional paid-in capital 542,061
Accumulated deficiency (875,370)
---------
Total stockholders' deficiency (331,535)
---------
$ 478,813
---------
---------
</TABLE>
See accompanying independent auditors' report and notes to financial statements.
F-2
<PAGE>
MIRAGE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended Year ended
June 30, 1998 June 30, 1997
------------- -------------
<S> <C> <C>
NET SALES $ 168,835 $ 212,972
COST OF SALES 133,860 149,501
----------- -----------
GROSS PROFIT 34,975 63,471
OPERATING EXPENSES 620,454 389,723
----------- -----------
LOSS FROM OPERATIONS (585,479) (326,252)
OTHER INCOME -- 36,361
NET LOSS $ (585,479) $ (289,891)
----------- -----------
----------- -----------
NET LOSS PER SHARE:
Basic $ (0.33) $ (0.22)
----------- -----------
----------- -----------
Diluted $ (0.26) $ (0.21)
----------- -----------
----------- -----------
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 1,774,065 1,297,005
----------- -----------
----------- -----------
Diluted 2,291,065 1,385,605
----------- -----------
----------- -----------
</TABLE>
See accompanying independent auditors' report and notes to financial statements.
F-3
<PAGE>
MIRAGE HOLDINGS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
YEAR ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Total
Common stock Additional stockholders'
------------ paid-in equity/
Shares Amount capital Deficiency (deficiency)
------- --------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Balance at July 1, 1996 895,000 $ 895 $ 9,266 $ -- $ 10,161
Capital contributions 86,400 86,400
Issuance of common stock for cash 564,065 564 244,760 -- 245,324
Issuance of common stock for
services 355,000 355 177,145 177,500
Issuance of warrants for cash
(convertible to common stock) 44,450 44,450
Net loss for the year ended
June 30, 1997 (289,891) (289,891)
---------- --------- --------- --------- ---------
Balance at June 30, 1997 1,814,065 1,814 562,021 (289,891) 273,944
Redemption of common stock
issued through private offering (40,000) (40) (19,960) -- (20,000)
Net loss for the year ended
June 30, 1998 (585,479) (585,479)
---------- --------- --------- --------- ---------
Balance at June 30, 1998 1,774,065 $ 1,774 $ 542,061 $(875,370) $(331,535)
---------- --------- --------- --------- ---------
---------- --------- --------- --------- ---------
</TABLE>
See accompanying independent auditors' report and notes to financial statements.
F-4
<PAGE>
MIRAGE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
<TABLE>
<CAPTION>
Year ended Year ended
June 30, 1998 June 30, 1997
------------- -------------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Net loss $ (585,479) $ (289,891)
----------- -----------
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Depreciation and amortization 1,814 7,254
Gain (loss) on sale of marketable securities 13,587 (36,219)
Non-cash compensation expense -- 177,500
Bad debts 46,051 --
Loss on impairment of property and equipment 43,867 --
CHANGES IN ASSETS AND LIABILITIES:
(INCREASE) DECREASE IN ASSETS:
Accounts receivable 4,009 4,040
Inventory 46,891 15,724
INCREASE (DECREASE) IN LIABILITIES--
accounts payable and accrued expenses 316,058 27,254
----------- -----------
Total adjustments 472,277 195,553
----------- -----------
Net cash used for operating activities (113,202) (94,338)
----------- -----------
CASH FLOWS PROVIDED BY (USED FOR) INVESTING ACTIVITIES:
Proceeds from note receivable 113,104 --
Purchase of investments (75,000) (334,455)
Purchase of property, plant and equipment (3,736) (9,570)
----------- -----------
Net cash provided by (used for) investing activities 34,368 (344,025)
----------- -----------
CASH FLOWS PROVIDED BY (USED FOR) FINANCING ACTIVITIES:
Issuance of common stock and warrants, net -- 289,774
Redemption of common stock (20,000) --
Proceeds from notes payable, net 224,050 135,183
Deferred offering costs (163,813) (40,000)
Capital contributions -- 86,400
----------- -----------
Net cash provided by financing activities 40,237 471,357
----------- -----------
NET INCREASE (DECREASE) IN CASH (38,597) 32,994
CASH AND CASH EQUIVALENTS, beginning of period 33,079 85
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ (5,518) $ 33,079
----------- -----------
----------- -----------
</TABLE>
See accompanying independent auditors' report and notes to financial statements.
F-5
<PAGE>
MIRAGE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
<TABLE>
<CAPTION>
Year ended Year ended
June 30, 1998 June 30, 1997
------------- -------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
interest expense $ 33,918 $ 5,202
----------- -----------
----------- -----------
</TABLE>
NON-CASH FINANCING ACTIVITY:
During the year ended June 30, 1997, the Company issued 355,000
shares of common stock at a value of $177,500 for services rendered.
See accompanying independent auditors' report and notes to financial statements.
F-6
<PAGE>
MIRAGE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1998 AND 1997
(1) GENERAL:
Mirage Holdings, Inc. was incorporated under the laws of the State of
Nevada on March 18, 1997. Mirage Collection, Inc., a wholly-owned
subsidiary of Mirage Holdings, Inc., began business as a partnership
July 1, 1995, and was reorganized into a corporation in the State of
Nevada pursuant to Internal Revenue Code Section 351 on April 1, 1997.
Accordingly, the accompanying consolidated financial statements have
been presented as though the acquisition of Mirage Collection, Inc.
occurred at the beginning of the period (July 1, 1996).
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BUSINESS ACTIVITY:
The operating subsidiary of the Company was formed for the
purpose of marketing unique fashions. The subsidiary Company
specializes in the marketing of fashions targeted toward the
segment where discriminating customers are always looking
for unique and innovative products.
PRINCIPLES OF CONSOLIDATION:
The accompanying financial statements include the accounts
of the Company and its wholly-owned subsidiary, Mirage
Collection, Inc. All material intercompany accounts have
been eliminated in consolidation.
USE OF ESTIMATES:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
FAIR VALUE:
Unless otherwise indicated, the fair values of all reported
assets and liabilities which represent financial
instruments, none of which are held for trading purposes,
approximate carrying values of such amounts.
See accompanying independent auditors' report.
F-7
<PAGE>
MIRAGE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1998 AND 1997
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
CASH EQUIVALENTS:
For purposes of the statement of cash flows, cash
equivalents include all highly liquid debt instruments with
original maturities of three months or less which are not
securing any corporate obligations.
NET INCOME (LOSS) PER SHARE:
The Company has adopted Statement of Financial Accounting
Standard No. 128, Earnings per Share ("SFAS No. 128"), which
is effective for annual and interim financial statements
issued for periods ending after December 15, 1997. SFAS No.
128 was issued to simplify the standards for calculating
earnings per share ("EPS") previously in APB No. 15,
Earnings Per Share. SFAS No. 128 replaces the presentation
of primary EPS with a presentation of basic EPS. The new
rules also require dual presentation of basic and diluted
EPS on the face of the statement of operations.
For the years ended June 30, 1998 and 1997, the per share
data is based on the weighted average number of common and
common equivalent shares outstanding, and are calculated in
accordance with Staff Accounting Bulletin of the Securities
and Exchange Commission (SAB) No. 98 whereby common stock,
options or warrants to purchase common stock or other
potentially dilutive instruments issued for nominal
consideration must be reflected in basic and diluted per
share calculations for all periods in a manner similar to a
stock split, even if anti-dilutive. Accordingly, in
computing basic earnings per share, nominal issuances of
common stock are reflected in a manner similar to a stock
split or dividend. In computing diluted earnings per share,
nominal issuances of common stock and potential common stock
are reflected in a manner similar to a stock split or
dividend.
ACCOUNTING FOR STOCK-BASED COMPENSATION:
During October 1995, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No.
123, Accounting for Stock-Based Compensation, which applies
the fair-value method of accounting for stock-based
compensation plans. In accordance with this recently issued
standard, the Company expects to continue to account for
stock-based compensation in accordance with Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued
to Employees. Proforma information regarding net income and
earnings per share under the fair-value method has not been
presented as the amounts are immaterial.
See accompanying independent auditors' report.
F-8
<PAGE>
MIRAGE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1998 AND 1997
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
INCOME TAXES:
Deferred income taxes are reported using the liability
method. Deferred tax assets are recognized for deductible
temporary differences and deferred tax liabilities are
recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts
of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some
portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted
for the effects of changes in tax laws and rates on the date
of enactment.
As of June 30, 1998, the Company had net federal and state
operating loss carryforwards totaling approximately $876,000
expiring in various years through 2018. Deferred tax assets
resulting for the net operating losses are reduced in full
by a valuation allowance.
IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED
OF:
On April 1, 1997, the Company adopted the provision of FASB
No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of. This statement
requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying
amount of an asset to future net cash flows expected to be
generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the
amount by which the carrying amounts of the assets exceed the
fair values of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value
less costs to sell. Adoption of this statement did not have a
material impact on the Company's financial position, results
of operations or liquidity.
(3) BASIS OF PRESENTATION:
On April 1, 1997, the Company entered into an acquisition agreement
whereby the Company acquired 100% of the outstanding capital stock of
Mirage Collection, Inc. ("Collection"), a Nevada Corporation. In full
consideration and exchange for the Collection stock, the Company
issued and delivered 895,000 shares of its restricted common stock.
Accordingly, the accompanying financial statements present the
combined operating results of both entities for the entire year
accounted for as a reorganization of businesses under common control
in a manner similar to pooling of interest accounting.
Upon completion of the merger and acquisition agreement, Collections'
stockholder became a director and stockholder of the Company.
See accompanying independent auditors' report.
F-9
<PAGE>
MIRAGE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1998 AND 1997
(4) ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
A summary is as follows:
<TABLE>
<CAPTION>
<S> <C>
Fees relating to initial public offering $ 152,431
Accrued expenses 87,909
Accrued consulting fees 55,000
Accrued interest 43,811
Other 13,587
--------------------
$ 352,738
--------------------
--------------------
</TABLE>
Included in accounts payable and accrued expenses is a book overdraft
of $5,518.
(5) NOTES PAYABLE:
A summary is as follows:
<TABLE>
<CAPTION>
<S> <C>
Note payable, stockholder, unsecured, payable on demand,
with interest at approximate Prime Base Rate (8.50%)
plus 2%. $ 37,500
Note payable, unsecured, payable on demand, with interest
at approximate Prime Base Rate (8.50%) to a party
related to a stockholder of Mirage Holdings, Inc. 21,200
Note payable, unsecured, payable on demand, with interest
at approximate Prime Base Rate (8.50%) plus 2%. 60,000
Note payable, unsecured, payable on demand, with interest
at approximate Prime Base Rate (8.50%) plus 2%. 50,000
Note payable, stockholder, unsecured, payable on demand,
with interest at approximate Prime Base Rate (8.50%)
plus 2%. 50,000
Note payable, unsecured, payable on demand, with interest
at approximate Prime Base Rate (8.50%) plus 2%. 20,000
Note payable, unsecured, payable on demand, with interest
at approximate Prime Base Rate (8.50%) plus 2%. 40,000
Note payable, unsecured, payable on demand, with interest
at approximate Prime Base Rate (8.50%) plus 2%. 40,000
Note payable, unsecured, payable on demand, with interest
at approximate Prime Base Rate (8.50%) plus 2%. 20,000
--------------------
338,700
Less current maturities 338,700
--------------------
$ -
--------------------
--------------------
</TABLE>
Interest expense amounted to $33,918 and $5,202 for the years ended
June 30, 1998 and 1997, respectively.
See accompanying independent auditors' report.
F-10
<PAGE>
MIRAGE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1998 AND 1997
(6) LOAN PAYABLE, RELATED PARTY:
The loan payable, related party bears interest at 10% per annum.
Knightrider Investments, Ltd., a related party through a common
stockholder, is the holder of the loan.
(7) INCENTIVE AND NONSTATUTORY STOCK OPTION PLAN:
On April 1, 1997, the Company adopted an Incentive and Nonstatutory
Stock Option Plan (the "Plan") for its employees and consultants under
which a maximum of 500,000 options may be granted to purchase common
stock of the Company. Two types of options may be granted under the
Plan: (1) Incentive Stock Options (also know as Qualified Stock
Options) which may only be issued to employees of the Company and
whereby the exercise price of the option is not less than the fair
market value of the common stock on the date it was reserved for
issuance under the Plan; and (2) Nonstatutory Stock Options which may
be issued to either employees or consultants of the Company and
whereby the exercise price of the option is less than the fair market
value of the common stock on the date it was reserved for issuance
under the plan. Grants of options may be made to employees and
consultants without regard to any performance measures. All options
listed in the summary compensation table ("Securities Underlying
Options") were issued pursuant to the Plan. An additional 20,000
Incentive Stock Options were issued to a non-officer-stockholder of
the Company. All options issued pursuant to the Plan vest over an 18
month period from the date of the grant per the following schedule:
33% of the options vest on the date which is six months from the date
of the grant; 33% of the options vest on the date which is 12 months
from the date of the grant; and 34% of the options vest on the date
which is 18 months from the date of the grant. All options issued
pursuant to the Plan are nontransferable and subject to forfeiture. As
of June 30, 1998, the Company has issued 120,000 Incentive Stock
Options with an exercise price of $0.01 per share, of which all have
vested but have not been exercised.
Proforma net income and earnings per share, as if the fair value
method of accounting were used, has not been presented because the
amounts are immaterial for the periods presented.
(8) PRIVATE PLACEMENT:
On April 10, 1997, the Company commenced a private placement (the
"Private Placement") of 564,065 shares of the Company's common stock
at a purchase price of $0.50 per share (the "Private Placement Stock")
and 444,500 warrants, each warrant to purchase one share of the
Company's common stock at an exercise price of $0.75 for a term of
five years at a purchase price of $0.10 per warrant (the "Private
Placement Warrants"). The Private Placement was exempt from the
registration provisions of the Act by virtue of Section 4(2) of the
Act, as transactions by an issuer not involving any public offering.
The securities issued pursuant to the Private Placement were
restricted securities as defined in Rule 144. The offering generated
gross proceeds of approximately $326,500.
See accompanying independent auditors' report.
F-11
<PAGE>
MIRAGE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1998 AND 1997
(9) INVESTMENT:
On March 30, 1997, the Company purchased 10% of the outstanding
capital stock of Network Solutions (PVT) Limited, a software
development firm in Lahore, Pakistan ("NetSol PVT"), in exchange for
the payment of $200,000. The cash consideration of $200,000 was paid
by the Company from the net proceeds of the Private Placement. NetSol
was incorporated in Pakistan on August 22, 1996, under the Companies
Ordinance 1984, as a private company limited by shares. The principal
business of NetSol is the development and export of software. A
stockholder of the Company is a related party to the officers of
NetSol. The Company has given additional cash consideration of $75,000
pursuant to a stock purchase agreement dated September 15, 1998 (see
note 12). Management believes that the fair value exceeds its recorded
amount, although such amount is not practically determinable.
(10) COMMITMENTS:
The Company leases a 1,150 square feet showroom in Diamond Bar,
California. The lease expires on September 30, 2001 and requires
monthly payments of approximately $1,150. Prior to its termination,
the Company has an option to renew the lease for an additional
five-year term at the then fair market value of the property.
The following is a schedule by years of future minimum rental payments
required under this operating lease that has a noncancellable lease
term in excess of one year as of June 30, 1998:
<TABLE>
<CAPTION>
<S> <C>
Year ending June 30,
1999 $ 13,800
2000 13,800
2001 10,350
--------------------
$ 37,950
--------------------
--------------------
</TABLE>
Rent expense amounted to $65,916 and $46,759 for the years ended June
30, 1998 and 1997, respectively.
(11) DEFERRED ACQUISITION COSTS:
The Company is in the registration process of a proposed public
offering. Deferred stock offering costs of $203,813 will be charged
against the proceeds of the proposed public offering when it becomes
effective (see note 12).
See accompanying independent auditors' report.
F-12
<PAGE>
MIRAGE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1998 AND 1997
(12) SUBSEQUENT EVENTS:
During September 1998, the Company entered into a stock purchase
agreement with NetSol PVT, (see note 9) and NetSol (U.K.) Limited
("NetSol UK"), a United Kingdom Corporation. As consideration, the
Company will pay an aggregate purchase price of $775,000 plus 490,000
common shares of the Company in exchange for 51% of the issued and
outstanding stock of NetSol PVT and 43% of the issued and outstanding
stock of NetSol UK.
The Company completed the sale of its minimum offering of shares in
its initial public offering on September 16,1998. The minimum offering
generated gross proceeds of $1,385,647.
See accompanying independent auditors' report.
F-13
<PAGE>
EXHIBIT 10.7
LEASE AGREEMENT, DATED SEPTEMBER 7, 1998
FOR SANTA MONICA, CALIFORNIA EXECUTIVE OFFICES
<PAGE>
[Lantana Center Letterhead]
TO: MIRAGE HOLDINGS, INC.
FROM: CATHY MARLOWE
DATE: AUGUST 25, 1998
RE: RENTAL AGREEMENT
This letter will constitute an agreement between LANTANA CENTER and MIRAGE
HOLDINGS, INC.
This company will be taking 2 offices on a month to month basis beginning
September 7, 1998. The rental will be prorated to the days that the company
occupies the room CONTINGENT UPON A ONE WEEK WRITTEN MOVE-OUT NOTICE. The
room numbers are Room 2235 ($1,245.00), and Room 2237 ($1,020.00). If any
additional rooms are rented they will also be under this agreement. Any
partial month rental will be prorated as used based on the monthly billing
rate divided by 30 days and multiplied by the number of days the rooms are
occupied. All billing months are based on a thirty day month.
One random parking space/parking card will be supplied, per office, at no
charge EXCEPT for a $25.00 REFUNDABLE deposit on each parking card.
Messengers who stay under twenty minutes will park at no charge, and parking
validation stickers may be purchased at a cost of $1.00 per 20 minutes-$8.00
maximum per day. Additional random parking spaces are $60.00 each per month.
Reserved parking spaces may be purchased at the rate of $120.00 each per
month. There is a $20.00 charge for each parking sign that is printed and
applied to the reserved space. These spaces will be located at close to the
entrance of your offices as possible.
Phone charges will be at rate card. (see attached Tenant Information Sheet).
The furniture that will be supplied at no charge includes DESKS, DESK CHAIRS,
CREDENZAS, TYPING STANDS, GUEST CHAIRS, FILING CABINETS (4 DRAWER LEGAL), AND
CHAIR MATS. Additional furniture includes couches, coffee tables, lamps, etc.
and will be rented to you at our standard rental rate or me be rented by your
company directly from outside vendors.
If a Sparkletts water cooler or refrigerator is required you will be charged
rate card. (see attached Tenant Information Sheet).
A $2,265.00 security deposit is required for move-in. The security deposit is
refundable 60 days AFTER move-out so that we can cover any bills that come in
after your production has moved out.
All charges are billed during the first three days of each month and are due
and payable by the twentieth day of that month or a 10% late charge is
automatically applied. If there is going to be a problem with this you MUST
notify Lantana Center in advance so that we can try to make special payment
arrangements that are acceptable to us.
Also included free of charge with the offices are janitorial services, and
all utilities (electricity, water, etc.). Room keys will be given out at no
charge EXCEPT for a REFUNDABLE $25.00 deposit per key. 4x4 cellutex bulletin
board is supplied at $10.00 per sheet. Mailing of letters is at no charge as
long as they are stamped by your company. If you require stamping by us there
is a 15% surcharge on the cost of the postage. If you use ANY other services
that we supply to you (such as Federal Express, or U.P.S.) You will be
charged rate card. (see attached Tenant Information Sheet).
X /s/ Najeeb U. Ghauri
--------------------
<PAGE>
If you request to use the fax service located in the Operations office, the
cost of each page is $.35, incoming or outgoing and the price of the
telephone call. (see attached Tenant Information Sheet).
If you wish to install your own copy machine or editing equipment and require
additional electrical to do so you will be charged $200.00 to install any
dedicated electrical lines.
Any requests made of the Operations office (telephones, furniture, keys,
parking cards, etc.) Will be handled in the order in which they come into the
office. We have a 24 hour turnaround on in- house services (Sparkletts or
additional furniture may take up to 72 hours). Usually the work in- house is
done within a couple of hours, if not sooner, but we do have a 24 hour
turnaround policy.
If there are any differences between this agreement and the Tenant
Information Sheet, this agreement controls.
The Tenant Information Sheet and this agreement constitute the entire
agreement between the parties and supersede any previous agreements or
understandings. In any litigation arising herefrom between the parties, the
prevailing party shall be entitled to recover reasonable attorney's fees and
costs incurred.
Please SIGN BELOW and INITIAL THE FIRST PAGE of this letter AND the enclosed
Tenant Information Sheet.
Thank you for your interest in Lantana Center and I hope we can be of service
to you and to your production.
/s/ Cathy Marlowe X /s/ Najeeb U. Ghauri
- -------------------- --------------------
CATHY MARLOWE NAJEEB U. GHAURI
<PAGE>
TENANT INFORMATION SHEET 07/01/98
BUILDING ACCESS - the building is unlocked Monday - Friday at 6am and remains
unlocked until 8pm. The building is locked 24 hours a day on Saturday and
Sunday. During the hours the building is locked you may gain access by using
your parking card key (see PARKING CARD below) in the card readers which are
located to the right of each front door and to the left of the back door of
Lobby 3.
OPERATIONS OFFICE - opens at 8am and closes at 6pm. After hours you may beep
the guard (see EVENING PERSONNEL below) and he/she will let you into the
office to use the fax machine or copier. Please call Operations with any
questions you have. Anyone who answers the telephone in Operations can
probably help you - you do not need to wait for a particular person.
TENANT SPACE INCLUDES - 5 day a week maintenance (Sunday-Thursday)
Furniture- desks, chairs, credenzas, filing
cabinets, typing stands, chair mats
(ADDITIONAL COSTS - COUCHES, COFFEE
TABLES, LAMPS, BOOKCASES, SPARKLETTS
WATER AND/OR COFFEE, ETC.)
1 RANDOM parking space - each additional space is
$60.00 per month (plus 10% city tax).
RENTAL FURNITURE - Any furniture that your production may want in addition to
the furniture that is included, may be rented by you directly from a rental
company or we will rent it to you. Please call the Operations office for
price information. The rental price is a monthly rate and is NOT prorated.
MOVE-IN CHARGE - a security deposit in the amount of one month's rent is
required prior to move-in. This deposit may be brought in on the date of the
move-in and will be refunded 60 days after move-out.
MOVE-OUT NOTICE - a one-week WRITTEN notice is required prior to the vacating
of any office. IF LESS THAN ONCE WEEK IS GIVEN, ONE WEEK WILL BE CHARGED
REGARDLESS. Lantana Center shall have the right to move tenant at any time on
24 hour notice. Lantana Center will handle the moving of all furniture,
equipment, etc.
TELEPHONE CHARGES - MONTHLY
$ 60.00 installation for multi-line sets (one time)
$ 30.00 installation for single-line sets (one time)
$ 35.00 monthly charge for each telephone number
$ 20.00 monthly charge for each additional line
$ 25.00 monthly charge for each 28-button set
$ 15.00 monthly charge for each 14-button set
$ 20.00 monthly charge for each 14-button display set
$ 10.00 monthly charge for each single line set
$ 5.00 extension voicemail
$ 30.00 move/change charge of phone after installation
$ 25.00 move/change charge of fax/modem after install
$200.00 installation for standard ISDN line
$ 5.00 monthly charge for ISDN line
Telephone monthly charges are NOT pro-rated.
TELEPHONE CALL CHARGES - there is a five percent (5%) surcharge on all
telephone calls (long distance AND local).
RESERVED PARKING - $120.00 per month per space (plus 10% city tax). There is
a $20.00 one-time charge for each parking sign.
X /s/ Najeeb U. Ghauri
--------------------
<PAGE>
PARKING CARDS - Each card key allows access to the building and/or the
parking lot. This allows each tenant to have 24 hour access to the building
if their key has been activated. When issued the 1st through the 24th of the
month the $60.00 monthly charge ($120.00 for reserved) will apply. If issued
the 25th through the last day of the month there will be no charge until the
1st of the following month. There is a $25.00 refundable deposit on each card
key. This will be billed on the monthly invoice.
PARKING VALIDATIONS - can be purchased in the Operations Office and any you
do not use may be returned for a full refund.
$1.00 per 20 minutes / $100.00 per book
$3.00 per hour / $360.00 per book
$8.00 maximum per day / $160.00 per book
This price includes the 10% city tax.
EVENING AND WEEKEND PERSONNEL - The team starts at 6pm and leaves at 8am
Monday through Friday, and is on duty 24 hours a day Saturday and Sunday.
They have access to keys for all the offices and will be available to let you
into your room as long as you have proper identification. If you are in the
building (weekends or after hours) and need to reach the guard - dial 6000
and, when the line connects, dial your telephone number and hit the # sign.
This is the code to a beeped and the guard will call you. If you would liked
to get into the Operations office on the weekend dial 6000 and, when the line
connects, dial 333 #. This will beep the guard to go to Lobby 3. If you
forget your key or have someone coming to visit you there are telephone
located at the left of the front door of every lobby. If you dial 6000 from
that telephone and dial the Lobby number into the telephone, followed bu the
# sign - the guard will come to that lobby and let you in.
If you should need to reach the guard from ab outside number (i.e. your
house) dial 310.786.5161 and, when the line connects, enter your phone
number. If you should forget this beeper number - call the Operations Office
0 it is on our recording. PLEASE DO NOT PROP OPEN THE DOORS FOR YOUR VISITORS -
IF YOU DO THIS YOU ARE ALLOWING ANYONE TO ENTER THE BUILDING. PLEASE TELL
YOUR GUESTS TO USE THE OUTSIDE TELEPHONE TO CALL YOUR TELEPHONE NUMBER OR TO
CALL THE GUARD.
AIR-CONDITIONING - the air-conditioning comes on automatically Monday through
Friday at 9am and shuts off at 6pm. If you want the air-conditioning on
during the nights or weekend - please see the directions on the back of your
office door. Also, if you want your air-conditioning adjusted during working
hours you need to call Operations and someone will come and adjust it for
you. Since we have a large turnover in our tenant population it may take
several days to get the air adjusted to your liking - please bear with us.
KEYS - We will supply all keys to your productions offices. There is a $25.00
REFUNDABLE deposit for each key. Please do not have keys made on the outside
of the building. If your production does not return all keys within one week
of move-out your production will be charged $25.00 per lock fee to change the
locks on each door where the keys have not been returned.
BULLETIN BOARDS - We will supply white 4' x 4' bulletin boards in each office
at a $10.00 per board charge. Please allow us to hang any bulletin boards or
pictures that you may bring in yourself.
CONFERENCE ROOM AND VIDEO ROOM RENTAL - The conference rooms are located
upstairs in Lobby 2 and Lobby 4 and rent for $10.00 per hour (or any part of
an hour). The rental must be booked through the Operations Office and the
tenant is responsible for informing Operations when they have vacated the
room. The video room may also been booked through Operations Office and rents
for $10.00 per hour for any booking longer than one hour.
XEROX - located in the Operations Office off lobby 3, the charge is $.10 per
copy.
FAX - Also located in the Operations Office, the cost of each fax is $.35 per
page, incoming or outgoing, and the price of the telephone call for all
outgoing.
X /s/ Najeeb U. Ghauri
--------------------
<PAGE>
U.P.S., Federal Express, and Messenger Service are all supplied by us at a
10% surcharge, Postage is supplies at a 15% surcharge. Remember that wed
receive volume discounts (we pass on to you) from most companies. If you wish
to use our Federal Express account - the pre-printed forms are available in
the Operations Office and the other supplies are in the Mail Room located off
of Lobby 3. U.P.S. packages need to be in Operations by 4pm. Please label the
packages with your production name for our billing purposes and let us know
what type of service you require (i.e. Next Day Air, Ground, etc.) All
Federal Express and U.P.S. deliveries are made to Operations Office. Someone
from Operations staff will call and let you know when a package has arrived.
MAIL - Incoming mail is sorted and distributed to the mail boxes in the Mail
Room by 2pm every day. PLEASE DO NOT CHECK YOUR MAILBOX PRIOR TO 2PM. All
mail goes our twice a day five times a week. If must be in the Operations
Office no later than 10:30am and 5:30pm in order to be taken out that day. If
you wish, if can be stamped in the Operations Office as long as your
production company name is on it. NO MAIL WILL GO OUT THAT CANNOT BE
IDENTIFIED. There is a 15% surcharge on any mail that we stamp and mail for
your production.
INSURANCE - Lantana Center DOES NOT carry any insurance on anything brought
into the offices. Due to the fact that we have many messengers, visitors,
strangers, etc. in the building please do not leave your office door open OR
unlocked when you leave your office for ANY reason. Your company must carry
insurance on anything in your offices. Lantana Center is NOT responsible for
any of your belongings/equipment.
RETURNED CHECK CHARGE - A $25.00 charge will be assessed on all returned
checks, regardless of the reason the item is being returned (bank error,
funds on hold, etc.). In addition, if a check is returned after the 20th of
the month, we will consider the account delinquent and the standard 10% late
charge will apply.
EDITORIAL EQUIPMENT AND SUPPLIES - contract Hope Chambers in Operations or at
315-4740 regarding rental of editorial equipment and the purchasing of all
editing supplies. If she is not available, ask whomever answers the phone.
All of our equipment rentals and supplies are competitively priced.
If you have any other questions - please ask us. We have a large file in the
Operations Office with local restaurant menus - take-out and sit-down. We
also have many other resources that may be helpful to you: office equipment
rental companies, video transfer services, screening facilities, etc. And if
we don't have it now - we will try to find it for you.
PLEASE ALLOW 48 - 72 HOURS FOR ALL SPARKLETTS AND EXTRA FURNITURE DELIVERY.
WE HAVE A 24 HOUR TURN AROUND FOR ANY OTHER REQUESTS THAT YOU MAY MAKE OF US.
PLEASE KEEP IN MIND THAT WE WILL TRY TO TAKE CARE OF EVERYTHING IMMEDIATELY
BUT WE MAY NEED THE 24 HOURS. THANKS . . . .
X /s/ Najeeb U. Ghauri
--------------------
<PAGE>
EXHIBIT 10.8
ACQUISITION AGREEMENT, DATED SEPTEMBER 15, 1998
BY AND BETWEEN COMPANY AND NETSOL
<PAGE>
ACQUISITION AGREEMENT
BY AND AMONG
MIRAGE HOLDINGS, INC.,
ON THE ONE HAND
AND
SALIM GHAURI AND OTHERS,
NETWORK SOLUTIONS (PVT) LIMITED, AND
NETSOL (U.K.) LIMITED,
ON THE OTHER
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE 1
SALE AND ISSUANCE OF SHARES AND OTHER TERMS......................................... 1
1.1 Issuance of the Shares...................................................... 1
1.2 Consideration and Payment for the Shares.................................... 1
ARTICLE 2
REPRESENTATIONS AND WARRANTIES...................................................... 2
2.1 Representations and Warranties of SGO, NetSol Pvt, and NetSol UK............ 2
2.1.1 Organization, Standing, Power........................................ 2
2.1.2 Authority............................................................ 2
2.1.3 Capitalization of NetSol Pvt and NetSol UK........................... 2
2.1.4 Subsidiaries......................................................... 3
2.1.5 No Defaults.......................................................... 3
2.1.6 Governmental Consents................................................ 3
2.1.7 Financial Statements................................................. 4
2.1.8 Liabilities.......................................................... 4
2.1.9 Absence of Undisclosed Liabilities................................... 4
2.1.10 Absence of Changes................................................... 4
2.1.11 Patents and Trademarks............................................... 5
2.1.12 Certain Agreements................................................... 5
2.1.13 Compliance with Other Instruments.................................... 5
2.1.14 Employee Benefit Plans............................................... 5
2.1.15 Other Personal Property.............................................. 6
2.1.16 Properties and Liens................................................. 6
2.1.17 Inventory............................................................ 6
2.1.18 Major Contracts...................................................... 6
2.1.19 Questionable Payments................................................ 7
2.1.20 Recent Transactions.................................................. 7
2.1.21 Leases in Effect..................................................... 7
2.1.22 Environmental........................................................ 8
2.1.23 Taxes................................................................ 8
2.1.24 Disputes and Litigation.............................................. 9
2.1.25 Compliance with Laws................................................. 9
2.1.26 Related Party Transactions........................................... 9
2.1.27 Insurance............................................................ 9
2.1.28 Minute Books......................................................... 9
2.1.29 Disclosure........................................................... 9
2.1.30 Reliance............................................................. 10
2.2 Representations and Warranties of Mirage.................................... 10
2.2.1 Organization, Standing, Power........................................ 10
2.2.2 Authority............................................................ 10
2.2.3 No Defaults.......................................................... 10
2.2.4 Disclosure........................................................... 10
2.25 Independent Investigation............................................ 11
2.2.6 Reliance............................................................. 11
ARTICLE 3
CONDITIONS PRECEDENT................................................................ 11
3.1 Conditions to Each Party's Obligations...................................... 11
3.2 Conditions to Mirage's Obligations.......................................... 11
3.3 Conditions to SGO, NetSol Pvt, and NetSol UK's Obligations.................. 12
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE 4
COVENANTS........................................................................... 13
4.1 Corporate Structure of NetSol Pvt and NetSol UK............................. 13
4.2 Composition of the Board of Directors of NetSol Pvt......................... 13
4.3 Board Seat on the Board of Mirage........................................... 13
ARTICLE
CLOSING AND DELIVERY OF DOCUMENTS................................................... 13
5.1 Time and Place.............................................................. 13
5.2 Deliveries by SGO, NetSol Pvt, and NetSol UK ............................... 13
5.3 Deliveries by Mirage........................................................ 14
ARTICLE 6
INDEMNIFICATION..................................................................... 14
6.1 SGO, NetSol Pvt, and NetSol UK's Indemnity.................................. 14
6.2 Mirage's Indemnity.......................................................... 14
ARTICLE 7
DEFAULT, AMENDMENT AND WAIVER....................................................... 15
7.1 Default..................................................................... 15
7.2 Waiver and Amendment........................................................ 15
ARTICLE 8
MISCELLANEOUS....................................................................... 15
8.1 Expenses.................................................................... 15
8.2 Notices..................................................................... 16
8.3 Entire Agreement............................................................ 16
8.4 Survival of Representations................................................. 17
8.5 Incorporated by Reference................................................... 17
8.6 Remedies Cumulative......................................................... 17
8.7 Execution of Additional Documents........................................... 17
8.8 Finders' and Related Fees................................................... 17
8.9 Governing Law............................................................... 17
8.10 Forum....................................................................... 17
8.11 Professional Fees........................................................... 17
8.12 Binding Effect and Assignment............................................... 18
8.13 Counterparts; Facsimile Signatures.......................................... 18
</TABLE>
ii
<PAGE>
TABLE OF SCHEDULES AND EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
Exhibit A List of Shareholders Entering Into This Agreement
Exhibit B Opinion Letter
Exhibit C SGO, NetSol PVT, and NetSol UK Disclosure Schedule
Exhibit D Mirage Disclosure Schedule
</TABLE>
iii
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement"), dated as of September 15,
1998, is by and between MIRAGE HOLDINGS, INC., a Nevada corporation
("Mirage"), on the one hand and SALIM GHAURI AND OTHERS as listed on Exhibit
A ("SGO") who are shareholders of NETWORK SOLUTIONS (PVT) LIMITED, a Pakistan
corporation ("NetSol Pvt") and who are also shareholders of NETSOL (U.K.)
LIMITED, a corporation organized under the laws of the United Kingdom
("NetSol UK"), on the other (collectively, the "Parties").
R E C I T A L S
A. The capital stock of NetSol Pvt consists of 20,000 authorized shares
of Common Stock, par value Rs. 100 (the "NetSol Pvt Shares"), of which 400
are currently issued and outstanding. SGO currently owns 400 NetSol Pvt
Shares.
B. The capital stock of NetSol UK consists of 1,000 authorized shares
of Common Stock, par value L1 (the "NetSol UK Shares"), of which 100 are
currently issued and outstanding. SGO currently owns 100 NetSol UK Shares.
C. Upon the terms and conditions set forth below, SGO desires to issue
that certain number of NetSol Pvt Shares to Mirage to constitute 51% of the
issued and outstanding common stock of NetSol Pvt, such that, following such
transaction, NetSol Pvt will be a majority owned subsidiary of Mirage.
D. Upon the terms and conditions set forth below, SGO desires to issue
that certain number of NetSol UK Shares to Mirage to constitute 51% of the
85% of the issued and outstanding common stock of NetSol UK owned by SGO,
such that, following such transaction, NetSol UK will be a 43% owned
subsidiary of Mirage. The NetSol Pvt Shares and the NetSol UK Shares which
are the subject of this Agreement, may be referred to collectively as the
"Shares" herein.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, the Parties
hereto agree as follows:
ARTICLE 1
SALE AND PURCHASE OF THE SHARES
1.1 ISSUANCE OF THE SHARES. Subject to the terms and conditions
herein set forth, and on the basis of the representations, warranties and
agreements herein contained, SGO shall sell and transfer to Mirage that
certain number of NetSol Pvt Shares that will constitute 51% of the issued
and outstanding common stock of NetSol Pvt and shall sell and transfer to
Mirage that certain number of NetSol UK Shares that will constitute 43% of
the issued and outstanding common stock of NetSol UK. Mirage shall have
antidilution protection on its 51% ownership of NetSol Pvt and on its 43%
ownership of NetSol UK, such that Mirage shall retain its respective
ownership percentages regardless of any future stock issuance(s) of NetSol
Pvt and/or NetSol UK, until such time as the Parties may agree otherwise in
writing. If, for any reason whatsoever, NetSol Pvt and/or NetSol UK issues
shares of their capital stock which have the effect of reducing Mirage's
percentage of ownership, NetSol Pvt and/or NetSol UK shall concurrently issue
additional shares of capital stock to Mirage in an amount which will restore
Mirage's percentage of ownership.
1.2 CONSIDERATION AND PAYMENT FOR THE SHARES. In consideration for the
Shares, Mirage shall pay a purchase price of a total of Seven Hundred
Seventy-Five Thousand and no/100 Dollars ($775,000.00) plus 490,000 of the
current outstanding shares of common stock of Mirage (the "Purchase Price"),
payable as follows:
(a) SGO hereby acknowledges receipt of $275,000 already paid by
Mirage.
1
<PAGE>
(b) The balance of the cash Purchase Price of $500,000 shall be
paid at the Closing (hereinafter defined) to be wired to SGO as per their
wiring instructions.
(c) Mirage shall issue to SGO, in whatever designation SGO
requests, a stock certificate(s) equal to 490,000 shares of the current
outstanding common stock of Mirage as of the date hereof.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF SGO, NETSOL PVT, AND NETSOL UK.
Except as disclosed in a document referring specifically to the
representations and warranties in this Agreement that identifies by section
number the section and subsection to which such disclosure relates and is
delivered by SGO, NetSol Pvt, and NetSol UK to Mirage prior to the execution
of this Agreement (the "SGO, NetSol Pvt, and NetSol UK Disclosure Schedule"),
SGO, NetSol Pvt, and NetSol UK represent and warrant to Mirage, as of the
date hereof and as of the Closing, as follows:
2.1.1 ORGANIZATION, STANDING, POWER.
(a) NETSOL PVT. NetSol is a corporation duly organized,
validly existing, and in good standing under the laws of the country of
Pakistan. It has all requisite corporate power, franchises, licenses,
permits, and authority to own its properties and assets and to carry on its
business as it has been and is being conducted. NetSol is duly qualified and
in good standing to do business in each jurisdiction in which a failure to so
qualify would have a Material Adverse Effect (as defined below) on NetSol
Pvt. For purposes of this Agreement, the term "Material Adverse Effect" means
any change or effect that, individually or when taken together with all other
such changes or effects which have occurred prior to the date of
determination of the occurrence of the Material Adverse Effect, is or is
reasonably likely to be materially adverse to the business, assets (including
intangible assets), financial condition, or results of operations of the
entity.
(b) NETSOL UK. NetSol UK is a corporation duly organized,
validly existing, and in good standing under the laws of the United Kingdom.
It has all requisite corporate power, franchises, licenses, permits, and
authority to own its properties and assets and to carry on its business as it
has been and is being conducted. NetSol UK is duly qualified and in good
standing to do business in each jurisdiction in which a failure to so qualify
would have a Material Adverse Effect (as defined below) on NetSol UK. For
purposes of this Agreement, the term "Material Adverse Effect" means any
change or effect that, individually or when taken together with all other
such changes or effects which have occurred prior to the date of
determination of the occurrence of the Material Adverse Effect, is or is
reasonably likely to be materially adverse to the business, assets (including
intangible assets), financial condition, or results of operations of the
entity.
2.1.2 AUTHORITY. SGO, NetSol Pvt, and NetSol UK have all
requisite power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery by SGO,
NetSol Pvt, and NetSol UK of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
action on the parts of SGO, NetSol Pvt, and NetSol UK, including the approval
of the Board of Directors of NetSol Pvt and NetSol UK. This Agreement has
been duly executed and delivered by SGO, NetSol Pvt, and NetSol UK and
constitutes a valid and binding obligation of SGO, NetSol Pvt, and NetSol UK
enforceable in accordance with its terms, except that such enforceability may
be subject to: (i) bankruptcy, insolvency, reorganization, or other similar
laws relating to enforcement of creditors' rights generally; and (ii) general
equitable principles. Subject to the satisfaction of the conditions set forth
in Article 3 below, the execution and delivery of this Agreement do not, and
the consummation of the transactions contemplated hereby will not, conflict
with or result in any violation of, or default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
cancellation, or acceleration of any obligation, or to loss of a material
benefit under, or the creation of a lien, pledge, security interest, charge,
or other encumbrance on any assets of SGO, NetSol Pvt, or NetSol UK (any
2
<PAGE>
such conflict, violation, default, right, loss, or creation being referred to
herein as a "Violation") pursuant to: (i) any provision of the organization
documents of NetSol Pvt and NetSol UK; or (ii) any loan or credit agreement,
note, bond, mortgage, indenture, contract, lease, or other agreement, or
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule, or regulation applicable to SGO, NetSol Pvt,
and NetSol UK's respective properties or assets, other than, in the case of
(ii), any such Violation which individually or in the aggregate would not
have a Material Adverse Effect on SGO, NetSol Pvt, and/or NetSol UK.
2.1.3 CAPITALIZATION OF NETSOL PVT AND NETSOL UK.
(a) NETSOL PVT. The authorized equity securities of
NetSol Pvt consist of 20,000 shares of NetSol Pvt Common Stock, Rs. 100 par
value, of which 400 shares are currently issued or outstanding. SGO currently
owns 400 NetSol Pvt Shares.
(b) NETSOL UK. The capital stock of NetSol UK consists of
1,000 authorized shares of Common Stock, par value (pound)1 (the "NetSol UK
Shares"), of which 100 are currently issued and outstanding. SGO currently
owns 100 NetSol UK Shares.
(b) Upon issuance pursuant to the terms of this
Agreement, the Shares will be duly and validly issued, fully paid and
nonassessable, and issued in accordance with the registration or
qualification provisions of the Securities Act of 1933, as amended (the
"Securities Act"), and any relevant state securities laws or pursuant to
valid exemptions therefrom. The Shares are free of restrictions on transfer
other than restrictions on transfer as set forth in the SGO, NetSol Pvt, and
NetSol UK Disclosure Schedule and under applicable state and federal
securities laws. The Shares shall be issued in a private transaction and
consequently will be deemed to be "Restricted Securities" as set forth in
Rule 144 promulgated under the Securities Act of 1933, as amended.
(c) Except as set forth on the SGO, NetSol Pvt, and
NetSol UK Disclosure Schedule, there are no options, warrants, rights, calls,
commitments, plans, contracts, or other agreements of any character granted
or issued by SGO, NetSol Pvt, or NetSol UK which provide for the purchase,
issuance, or transfer of any additional shares of the capital stock of NetSol
Pvt or NetSol UK nor are there any outstanding securities granted or issued
by NetSol Pvt or NetSol UK that are convertible into any shares of the equity
securities of NetSol Pvt or NetSol UK, and none is authorized. Neither NetSol
Pvt nor NetSol UK has outstanding any bonds, debentures, notes, or other
indebtedness the holders of which have the right to vote (or convertible or
exercisable into securities having the right to vote) with holders of NetSol
Pvt or NetSol UK capital stock on any matter.
(d) Except as set forth on the SGO, NetSol Pvt, and
NetSol UK Disclosure Schedule, neither SGO nor NetSol Pvt nor NetSol UK is a
party or subject to any agreement or understanding, and, to the best of SGO,
NetSol Pvt, and NetSol UK's knowledge, there is no agreement or understanding
between any persons and/or entities, which affects or relates to the voting
or giving of written consents with respect to any security or by a
shareholder or director of NetSol Pvt or NetSol UK.
(e) Except as set forth on the SGO, NetSol Pvt, and
NetSol UK Disclosure Schedule, neither NetSol Pvt nor NetSol UK has granted
or agreed to grant any registration rights, including piggyback rights, to
any person or entity.
2.1.4 SUBSIDIARIES. "Subsidiary" or "Subsidiaries" means all
corporations, trusts, partnerships, associations, joint ventures, or other
Persons, as defined below, of which NetSol Pvt or NetSol UK or any other
Subsidiary of NetSol Pvt or NetSol UK owns not less than twenty percent (20%)
of the voting securities or other equity or of which NetSol Pvt or NetSol UK
or any other Subsidiary of NetSol Pvt or NetSol UK possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies, whether through ownership of voting shares, management contracts,
or otherwise. "Person" means any individual, corporation, trust, association,
partnership, proprietorship, joint venture, or other entity. There are no
Subsidiaries of NetSol Pvt nor or NetSol UK.
3
<PAGE>
2.1.5 NO DEFAULTS. Neither SGO nor NetSol Pvt nor NetSol UK has
received notice that they would be with the passage of time, in default or
violation of any term, condition, or provision of: (i) the Articles of
Incorporation or Bylaws of NetSol Pvt or NetSol UK; (ii) any judgment,
decree, or order applicable to SGO, NetSol Pvt, or NetSol UK; or (iii) any
loan or credit agreement, note, bond, mortgage, indenture, contract,
agreement, lease, license, or other instrument to which SGO, NetSol Pvt, or
NetSol UK is now a party or by which it or any of its properties or assets
may be bound, except for defaults and violations which, individually or in
the aggregate, would not have a Material Adverse Effect on SGO, NetSol Pvt,
or NetSol UK.
2.1.6 GOVERNMENTAL CONSENTS. Any consents, approvals, orders, or
authorizations of or registrations, qualifications, designations,
declarations, or filings with or exemptions by (collectively "Consents"), any
court, administrative agency, or commission, or other federal, state, or
local governmental authority or instrumentality, whether domestic or foreign
(each a "Governmental Entity"), which may be required by or with respect to
NetSol Pvt and/or NetSol UK in connection with the execution and delivery of
this Agreement or the consummation by the Parties of the transactions
contemplated hereby, except for such Consents which if not obtained or made
would not have a Material Adverse Effect on NetSol Pvt or NetSol UK for the
transactions contemplated by this Agreement, are the responsibility of NetSol
Pvt and NetSol UK. NetSol Pvt and NetSol UK hereby represent and warrant that
such Consents have been obtained by them.
2.1.7 FINANCIAL STATEMENTS. NetSol Pvt and NetSol UK have
furnished Mirage with a true and complete copy of their financial statements
for the period ending June 30, 1998 (the "Financial Statements"), which
comply as to form in all material respects with all applicable accounting
requirements with respect thereto and have been prepared internally and
fairly present the financial positions of NetSol Pvt and NetSol UK as at the
dates thereof and the results of its operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal,
recurring audit adjustments not material in scope or amount). There has been
no change in NetSol Pvt's nor NetSol UK's accounting policies or the methods
of making accounting estimates or changes in estimates that are material to
the Financial Statements, except as described in the notes thereto.
2.1.8 LIABILITIES. As of the Closing, the Liabilities (as defined
below) of NetSol Pvt shall not be greater than Rs. 848,484 and the
Liabilities (as defined below) of NetSol UK shall not be greater than
$______. "Liabilities" as used herein shall mean all debt, liabilities, or
obligations of any nature, whether absolute, accrued, or contingent,
including, without limitation, accounts payable, accrued employee benefits,
accrued taxes payable, and debt instruments.
2.1.9 ABSENCE OF UNDISCLOSED LIABILITIES. Neither NetSol Pvt nor
NetSol UK has any liabilities or obligations (whether absolute, accrued, or
contingent) except: (i) Liabilities that are accrued or reserved against in
the Financial Statements as of June 30, 1998 or reflected in the notes
thereto; or (ii) additional Liabilities reserved against since June 30, 1998
that (x) have arisen in the ordinary course of business; (y) are accrued or
reserved against on the books and records of NetSol Pvt or NetSol UK; and (z)
amount in the aggregate to less than $25,000.
2.1.10 ABSENCE OF CHANGES. Since June 30, 1998, NetSol Pvt and
NetSol UK have conducted their businesses in the ordinary course and there
has not been: (i) any Material Adverse Effect on the business, financial
condition, liabilities, or assets of NetSol Pvt or NetSol UK or any
development or combination of developments of which management of NetSol Pvt
or NetSol UK has knowledge which is reasonably likely to result in such an
effect; (ii) any damage, destruction, or loss, whether or not covered by
insurance, having a Material Adverse Effect on NetSol Pvt or NetSol UK; (iii)
any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock, or property) with respect to the
capital stock of NetSol Pvt or NetSol UK; (iv) any increase or change in the
compensation or benefits payable or to become payable by NetSol Pvt or NetSol
UK to any of its employees, except in the ordinary course of business
consistent with past practice; (v) any sale, lease, assignment, disposition,
or abandonment of a material amount of property of NetSol Pvt or NetSol UK,
except in the ordinary course of business; (vi) any increase or modification
in any bonus, pension, insurance, or other employee benefit plan, payment, or
arrangement made to, for, or with any of its employees; (vii) the granting of
stock options, restricted stock awards, stock bonuses, stock appreciation
rights, and similar equity based awards; (viii) any resignation or
4
<PAGE>
termination of employment of any office of NetSol Pvt or NetSol UK; and
NetSol Pvt and NetSol UK, to the best of their knowledge, do not know of the
impending resignation or termination of employment of any such office; (ix)
any merger or consolidation with another entity, or acquisition of assets
from another entity except in the ordinary course of business; (x) any loan
or advance by NetSol Pvt or NetSol UK to any person or entity, or guaranty by
NetSol Pvt or NetSol UK of any loan or advance; (xi) any amendment or
termination of any contract, agreement, or license to which NetSol Pvt or
NetSol UK is a party, except in the ordinary course of business; (xii) any
mortgage, pledge, or other encumbrance of any asset of NetSol Pvt or NetSol
UK; (xiii) any waiver or release of any right or claim of NetSol Pvt or
NetSol UK, except in the ordinary course of business; (xiv) any write off as
uncollectible any note or account receivable or portion thereof; or (xv) any
agreement by NetSol Pvt or NetSol UK to do any of the things described in
this Section 2.1.10.
2.1.11 PATENTS AND TRADEMARKS. NetSol Pvt and NetSol UK have
sufficient title and ownership of all patents, trademarks, service marks,
trade names, copyrights, trade secrets, information, proprietary rights, and
processes (collectively, "Intellectual Property") necessary for their
businesses as now conducted without any conflict with or infringement of the
rights of others. The Intellectual Property owned by NetSol Pvt and NetSol UK
is listed in the SGO, NetSol Pvt, and NetSol UK Disclosure Schedule. There
are no outstanding options, licenses, or agreements of any kind relating to
the Intellectual Property, nor is NetSol Pvt or NetSol UK bound by or a party
to any options, licenses, or agreements of any kind with respect to the
Intellectual Property of any other person or entity. Neither NetSol Pvt nor
NetSol UK has received any communications alleging that they have violated
or, by conducting their businesses as proposed, would violate any of the
Intellectual Property of any other person or entity. Neither NetSol Pvt nor
NetSol UK is aware that any of their employees is obligated under any
contract (including licenses, covenants, or commitments of any nature) or
other agreement, or subject to any judgment, decree, or order of any court or
administrative agency, that would interfere with the use of his or her best
efforts to promote the interests of NetSol Pvt or NetSol UK or that would
conflict with NetSol Pvt or NetSol UK's business as proposed to be conducted.
Neither the execution or delivery of this Agreement, nor the carrying on of
NetSol Pvt or NetSol UK's business by their respective employees, nor the
conduct of NetSol Pvt or NetSol UK's business as proposed, will, to the best
of NetSol Pvt and NetSol UK's knowledge, conflict with or result in a breach
of the terms, conditions or provisions of, or constitute a default under, any
contract, covenant, or instrument under which any of such employees is now
obligated. Neither NetSol Pvt nor NetSol UK believes it is or will be
necessary to utilize any inventions of any of its employees (or people it
currently intends to hire) made prior to their employment by NetSol Pvt or
NetSol UK, as the case may be.
2.1.12 CERTAIN AGREEMENTS. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby
will: (i) result in any payment (including, without limitation, severance,
unemployment compensation, parachute payment, bonus, or otherwise), becoming
due to any director, employee, or independent contractor of NetSol Pvt or
NetSol UK , from NetSol Pvt or NetSol UK under any agreement or otherwise;
(ii) materially increase any benefits otherwise payable under any agreement;
or (iii) result in the acceleration of the time of payment or vesting of any
such benefits.
2.1.13 COMPLIANCE WITH OTHER INSTRUMENTS. Neither SGO nor NetSol
Pvt nor NetSol UK is in violation or default of any provision of their
respective articles of incorporation or bylaws, or of any instrument,
judgment, order, writ, decree, or contract to which they are a party or by
which they are bound, or, to the best of their knowledge, of any provision of
any federal or state statute, rule, or regulation which may be applicable to
them. The execution, delivery, and performance of this Agreement and the
consummation of the transactions contemplated hereby will not result in any
such violation or be in conflict with or constitute, with or without the
passage of time and giving of notice, either a default under any such
provision, instrument, judgment, order, writ, decree, or contract, or an
event that results in the creation of any lien, charge, or encumbrance upon
any assets of SGO, NetSol Pvt, or NetSol UK or the suspension, revocation,
impairment, forfeiture, or nonrenewal of any material permit, license,
authorization, or approval applicable to NetSol Pvt or NetSol UK, their
businesses, or operations, or any of their assets or properties.
2.1.14 EMPLOYEE BENEFIT PLANS. All employee benefit plans
(including without limitation all plans which authorize the granting of stock
options, restricted stock, stock bonuses, or other equity based
5
<PAGE>
awards) covering active, former, or returned employees of NetSol Pvt and
NetSol UK are listed in the SGO, NetSol Pvt, or NetSol UK Disclosure Schedule.
2.1.15 OTHER PERSONAL PROPERTY. The books and records of NetSol
Pvt and NetSol UK contain a complete and accurate description, and specify
the location, of all trucks, automobiles, machinery, equipment, furniture,
supplies, and other tangible personal property owned by, in the possession
of, or used by NetSol Pvt and NetSol UK in connection with their businesses.
Except as set forth in the SGO, NetSol Pvt, or NetSol UK Disclosure Schedule,
no personal property used by NetSol Pvt or NetSol UK in connection with their
businesses is held under any lease, security agreement, conditional sales
contract, or other title retention or security arrangement.
2.1.16 PROPERTIES AND LIENS. Except as reflected in the Financial
Statements or as set forth in the SGO, NetSol Pvt, or NetSol UK Disclosure
Schedule, and except for statutory mechanics' and materialmen's liens, liens
for current taxes not yet delinquent, NetSol Pvt and NetSol UK own, free and
clear of any liens, claims, charges, options, or other encumbrances, all of
their tangible and intangible property, real and personal, whether or not
reflected in the Financial Statements (except that sold or disposed of in the
ordinary course of business since the date of such statements) and all such
property acquired since the date of such statements. All real property and
tangible personal property of NetSol Pvt and NetSol UK is in good operating
condition and repair, ordinary wear and tear excepted.
2.1.17 INVENTORY. The inventories of NetSol Pvt and NetSol UK
shown on the Financial Statements and inventories acquired by them subsequent
to the date of the Financial Statements consist solely of items of a quality
and quantity usable and salable in the normal course of business, with the
exception of obsolete materials and materials below standard quality, all of
which have been written down in the books of NetSol Pvt and NetSol UK to net
realizable market value or have been provided for by adequate reserves.
Except for sales made in the ordinary course of business, all inventory is
the property of NetSol Pvt and NetSol UK. No items are subject to security
interests, except as set forth in the SGO, NetSol Pvt, or NetSol UK
Disclosure Schedule. The value of the inventories has been determined on a
first-in, first-out basis consistent with prior years.
2.1.18 MAJOR CONTRACTS. Except as otherwise disclosed in the SGO,
NetSol Pvt, or NetSol UK Disclosure Schedule, neither NetSol Pvt nor NetSol
UK is a party or subject to:
(a) Any union contract, or any employment contract or
arrangement providing for future compensation, written or oral, with any
officer, consultant, director, or employee which is not terminable by NetSol
Pvt or NetSol UK on 30 days' notice or less without penalty or obligations to
make payments related to such termination;
(b) Any joint venture contract, partnership agreement
or arrangement or any other agreement which has involved or is expected to
involve a sharing of revenues with other persons or a joint development of
products with other persons;
(c) Any manufacture, production, distribution, sales,
franchise, marketing, or license agreement, or arrangement by which products
or services of NetSol Pvt or NetSol UK are developed, sold, or distributed;
(d) Any material agreement, license, franchise,
permit, indenture, or authorization which has not been terminated or
performed in its entirety and not renewed which may be, by its terms,
accelerated, terminated, impaired, or adversely affected by reason of the
execution of this Agreement, or the consummation of the transactions
contemplated hereby or thereby;
(e) Any material agreement, contract, or commitment
that requires the consent of another person for NetSol Pvt or NetSol UK to
enter into or consummate the transactions contemplated by this Agreement;
6
<PAGE>
(f) Except for object code license agreements for
NetSol Pvt and NetSol UK's products executed in the ordinary course of
business, any indemnification by NetSol Pvt or NetSol UK with respect to
infringements of proprietary rights; or
(g) Any contract containing covenants purporting
to materially limit NetSol Pvt or NetSol UK's freedom to compete in any line
of business in any geographic area.
All contracts, plans, arrangements, agreements, licenses, franchises,
permits, indentures, authorizations, instruments, and other commitments
listed in the SGO, NetSol Pvt, or NetSol UK Disclosure Schedule are valid and
in full force and effect and neither NetSol Pvt nor NetSol UK has, nor to the
knowledge of NetSol Pvt nor NetSol UK has any other party thereto, breached
any material provisions of, or is in default in any material respect under
the terms thereof.
2.1.19 QUESTIONABLE PAYMENTS. Neither NetSol Pvt nor NetSol UK
nor to its knowledge any director, officer, employee, or agent of NetSol Pvt
or NetSol UK, has: (i) made any payment or provided services or other favors
in the United States or any foreign country in order to obtain preferential
treatment or consideration by any Governmental Entity with respect to any
aspect of the business of NetSol Pvt or NetSol UK; or (ii) made any political
contributions that would not be lawful under the laws of the United States,
any foreign country or any jurisdiction within the United States or any
foreign country. Neither NetSol Pvt nor NetSol UK, nor, to the knowledge of
NetSol Pvt or NetSol UK, any director, officer, employee, or agent of NetSol
Pvt or NetSol UK, has been or is the subject of any investigation by any
Governmental Entity in connection with any such payment, provision of
services, or contribution.
2.1.20 RECENT TRANSACTIONS. Neither NetSol Pvt nor NetSol UK,
nor to their knowledge any director, officer, employee, or agent of NetSol
Pvt nor NetSol UK, is participating in any discussions and do not intend to
engage in any discussion: (i) with any representative of any corporation or
corporations regarding the consolidation or merger of NetSol Pvt or NetSol UK
with or into any such corporation or corporations; (ii) with any corporation,
partnership, association, or other business entity or any individual
regarding the sale, conveyance, or disposition of all or substantially all of
the assets of NetSol Pvt or NetSol UK or a transaction or series of related
transactions in which more than fifty percent (50%) of the voting power of
NetSol Pvt or NetSol UK is disposed of; or (iii) regarding any other form of
acquisition, liquidation, dissolution, or winding up of NetSol Pvt and UK.
2.1.21 LEASES IN EFFECT. All real property leases and subleases
as to which NetSol Pvt or NetSol UK is a party and any amendments or
modifications thereof (each a "Lease" and, collectively, the "Leases") are
listed in the SGO, NetSol Pvt, or NetSol UK Disclosure Schedule and are
valid, in full force and effect and enforceable, and there are no existing
defaults on the part of NetSol Pvt or NetSol UK, and neither NetSol Pvt nor
NetSol UK has received nor given notice of default or claimed default with
respect to any Lease, nor is there any event that with notice or lapse of
time, or both, would constitute a default thereunder. Except as set forth on
the SGO, NetSol Pvt, or NetSol UK Disclosure Schedule, no consent is required
from any party under any Lease in connection with the completion of the
transactions contemplated by this Agreement, and neither NetSol Pvt nor
NetSol UK has received notice that any party to any Lease intends to cancel,
terminate, or refuse to renew the same or to exercise any option or other
right thereunder, except where the failure to receive such consent, or where
such cancellation, termination, or refusal would not have a Material Adverse
Effect on NetSol Pvt and/or NetSol UK.
2.1.22 ENVIRONMENTAL.
(a) To the best knowledge of NetSol Pvt and
NetSol UK: (i) the business as presently or formerly engaged in by them is
and has been conducted in compliance with all applicable Environmental Laws
(as defined in subparagraph (b) below), including without limitation, having
all permits, licenses, and other approvals and authorizations, during the
time they engaged in such businesses; (ii) there are no civil, criminal, or
administrative actions, suits, demands, claims, hearings, investigations, or
proceedings pending or threatened against them relating to any violation, or
alleged violation, of any Environmental Law; and (iii) they have not
incurred, and none of their properties presently or formerly owned
7
<PAGE>
or operated by them are presently subject to, any material liabilities (fixed
or contingent) relating to any suit, settlement, court order, administrative
order, judgment, or claim asserted or arising under any Environmental Law.
(b) "Environmental Law" means any federal,
state, foreign, and local law, statute, ordinance, rule, regulation, code,
license, permit, authorization, approval, consent, legal doctrine, order,
judgment, decree, injunction, requirement, or agreement with any governmental
entity relating to: (i) the protection, preservation, or restoration of the
environment (including, without limitation, air, water, vapor, surface water,
groundwater, drinking water supply, surface land, subsurface land, plant and
animal life, or any other natural resource), to human health or safety; or
(ii) the exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release, or
disposal of hazardous substances, in each case as amended and as now or
hereafter in effect.
2.1.23 TAXES. Except as set forth elsewhere in this Agreement
or in the SGO, NetSol Pvt, or NetSol UK Disclosure Schedule:
(a) All taxes, assessments, fees, penalties,
interest, and other governmental charges with respect to NetSol Pvt and
NetSol UK which have become due and payable by June 30, 1998 have been paid
in full or adequately reserved against by NetSol Pvt or NetSol UK, and all
taxes, assessments, fees, penalties, interest, and other governmental charges
which have become due and payable subsequent to June 30, 1998 have been paid
in full or adequately reserved against on their books of account and such
books are sufficient for the payment of all unpaid federal, state, local,
foreign, and other taxes, fees, and assessments (including without
limitation, income, property, sales, use, franchise, capital stock, excise,
added value, employees' income withholding, social security, and unemployment
taxes), and all interest and penalties thereon with respect to the periods
then ended and for all periods prior thereto;
(b) There are no agreements, waivers, or other
arrangements providing for an extension of time with respect to the
assessment of any tax or deficiency against NetSol Pvt or NetSol UK, nor are
there any actions, suits, proceedings, investigations, or claims now pending
against NetSol Pvt or NetSol UK in respect of any tax or assessment, or any
matters under discussion with any federal, state, local, or foreign authority
relating to any taxes or assessments, or any claims for additional taxes or
assessments asserted by any such authority; and
(c) There are no liens for taxes upon the assets
of NetSol Pvt or NetSol UK except for taxes that are not yet payable. NetSol
Pvt and NetSol UK has withheld all taxes required to be withheld in respect
of wages, salaries, and other payments to all employees, officers, and
directors and timely paid all such amounts withheld to the proper taxing
authority.
2.1.24 DISPUTES AND LITIGATION. Except as disclosed in the
SGO, NetSol Pvt, or NetSol UK Disclosure Schedule, there is no suit, claim,
action, litigation, or proceeding pending or, to the knowledge of SGO, NetSol
Pvt, or NetSol UK, threatened against or affecting SGO, NetSol Pvt, or NetSol
UK or any of their properties, assets, or business or to which SGO, NetSol
Pvt, or NetSol UK is a party, in any court or before any arbitrator of any
kind or before or by any Governmental Entity, which would, if adversely
determined, individually or in the aggregate, have a Material Adverse Effect
on SGO, NetSol Pvt, or NetSol UK, nor is there any judgment, decree,
injunction, rule, or order of any Governmental Entity or arbitrator
outstanding against SGO, NetSol Pvt, or NetSol UK and having, or which,
insofar as reasonably can be foreseen, in the future could have, any such
effect. To the knowledge of SGO, NetSol Pvt, and NetSol UK, there is no
investigation pending or threatened against SGO, NetSol Pvt, or NetSol UK
before any foreign, federal, state, municipal, or other governmental
department, commission, board, bureau, agency, instrumentality, or other
Governmental Entity.
2.1.25 COMPLIANCE WITH LAWS. Except as set forth in the SGO,
NetSol Pvt, or NetSol UK Disclosure Schedule, neither NetSol Pvt's nor NetSol
UK's business is being conducted in violation of, or in a manner which could
cause liability under any applicable law, rule, or regulation, judgment,
decree, or order of any Governmental Entity, except for any violations or
practices, which, individually or in the aggregate, have
8
<PAGE>
not had and will not have a Material Adverse Effect on NetSol Pvt or NetSol
UK. NetSol Pvt and NetSol UK have all franchises, permits, licenses, and any
similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects, or financial condition of NetSol, and
believes it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as it is planned to be conducted.
NetSol is not in default in any material respect under any of such
franchises, permits, licenses, or other similar authority. A true and
complete list of all such franchises, permits, and licenses held by NetSol
Pvt and NetSol UK is set forth in the SGO, NetSol Pvt, or NetSol UK
Disclosure Schedule.
2.1.26 RELATED PARTY TRANSACTIONS. No employee, officer, or
director of NetSol Pvt or NetSol UK or member of his or her immediate family
is indebted to NetSol Pvt or NetSol UK , nor is SGO, NetSol Pvt, or NetSol UK
indebted (or committed to make loans or extend or guarantee credit) to any of
them. To the best of SGO, NetSol Pvt, and NetSol UK's knowledge, none of such
persons has any direct or indirect ownership interest in any firm or
corporation with which NetSol Pvt or NetSol UK is affiliated or with which
NetSol Pvt or NetSol UK has a business relationship, or any firm or
corporation that competes with NetSol Pvt or NetSol UK, except that
employees, officers, or directors of NetSol Pvt and NetSol UK and members of
their immediate families may own stock in publicly traded companies that may
compete with NetSol Pvt and NetSol UK. To SGO, NetSol Pvt, and NetSol UK's
knowledge, no member of the immediate family of any officer or director of
NetSol Pvt or NetSol UK is directly or indirectly interested in any material
contract with NetSol Pvt or NetSol UK.
2.1.27 INSURANCE. NetSol Pvt and NetSol UK shall obtain fire
and casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its
properties that might be damaged or destroyed within 45 days of the execution
of this Agreement.
2.1.28 MINUTE BOOKS. The minute books of NetSol Pvt and NetSol
UK provided to Mirage contain a complete summary of all meetings of directors
and shareholders since the time of incorporation and reflect all transactions
referred to in such minutes accurately in all material respects.
2.1.29 DISCLOSURE. No representation or warranty made by SGO,
NetSol Pvt, or NetSol UK in this Agreement, nor any document, written
information, statement, financial statement, certificate, or exhibit prepared
and furnished or to be prepared and furnished by SGO, NetSol Pvt, or NetSol
UK or their representatives pursuant hereto or in connection with the
transactions contemplated hereby, when taken together, contains any untrue
statement of a material fact, or omits to state a material fact necessary to
make the statements or facts contained herein or therein not misleading in
light of the circumstances under which they were furnished.
2.1.30 RELIANCE. The foregoing representations and warranties
are made by SGO, NetSol Pvt, and NetSol UK with the knowledge and expectation
that Mirage is placing reliance thereon.
2.2 REPRESENTATIONS AND WARRANTIES OF MIRAGE. Except as disclosed in
a document referring specifically to the representations and warranties in
this Agreement that identifies by section number the section and subsection
to which such disclosure relates and is delivered by Mirage to SGO, NetSol
Pvt, and NetSol UK prior to the execution of this Agreement (the "Mirage
Disclosure Schedule"), Mirage represents and warrants, as of the date hereof
and as of the Closing, as follows:
2.2.1 ORGANIZATION, STANDING, POWER. Mirage is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Nevada. It has all requisite corporate power, franchises, licenses,
permits, and authority to own its properties and assets and to carry on its
business as it has been and is being conducted. Mirage is duly qualified and
in good standing to do business in each jurisdiction in which a failure to so
qualify would have a Material Adverse Effect on Mirage.
2.2.2 AUTHORITY. Mirage has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery by Mirage of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized
9
<PAGE>
by all necessary corporate action on the part of Mirage, including the
approval of the Board of Directors and the stockholders of Mirage. This
Agreement has been duly executed and delivered by Mirage and constitutes a
valid and binding obligation of Mirage enforceable in accordance with its
terms, except that such enforceability may be subject to: (i) bankruptcy,
insolvency, reorganization, or other similar laws relating to enforcement of
creditors' rights generally; and (ii) general equitable principles. Subject
to the satisfaction of the conditions set forth in Article 3, the execution
and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby will not, conflict with or result in any
Violation pursuant to: (i) any provision of the Articles of Incorporation or
Bylaws of Mirage; or (ii) any loan or credit agreement, note, bond, mortgage,
indenture, contract, lease, or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule, or regulation applicable to Mirage or its properties or
assets, other than, in the case of (ii), any such Violation which
individually or in the aggregate would not have a Material Adverse Effect on
Mirage.
2.2.3 NO DEFAULTS. Mirage is not, and has not received notice
that it would be with the passage of time, in default or violation of any
term, condition, or provision of: (i) the Articles of Incorporation or Bylaws
of Mirage, as amended; (ii) any judgment, decree, or order applicable to
Mirage; or (iii) any loan or credit agreement, note, bond, mortgage,
indenture, contract, agreement, lease, license, or other instrument to which
Mirage is now a party or by which it or any of its properties or assets may
be bound, except for defaults and violations which, individually or in the
aggregate, would not have a Material Adverse Effect on Mirage.
2.2.4 DISCLOSURE. No representation or warranty made by Mirage
in this Agreement, nor any document, written information, statement,
financial statement, certificate, or exhibit prepared and furnished or to be
prepared and furnished by Mirage or their representatives pursuant hereto or
in connection with the transactions contemplated hereby, when taken together,
contains any untrue statement of a material fact, or omits to state a
material fact necessary to make the statements or facts contained herein or
therein not misleading in light of the circumstances under which they were
furnished.
2.2.5 INDEPENDENT INVESTIGATION. Mirage acknowledges and agrees
that, except as expressly provided herein, neither SGO, NetSol Pvt, nor
NetSol UK nor any of their agents, representatives, or employees have made
any representations or warranties, direct or indirect, oral or written,
express or implied, to Mirage, or any agents, representatives, or employees
of Mirage, with respect to the Shares, SGO, NetSol Pvt, or NetSol UK, or the
transactions contemplated herein, and Mirage acknowledges and agrees that it
is not aware of and does not rely upon any such representation or warranty.
Mirage acknowledges and agrees that it has had a full opportunity to inspect
the books, records, and assets of NetSol Pvt and NetSol UK and to make any
and all inquiries of the officers and directors regarding SGO, NetSol Pvt,
and NetSol UK, the Shares, and the transactions contemplated herein, as
Mirage has deemed appropriate. Mirage further acknowledges that it is
entering into this Agreement based solely (except for the express
representations and warranties of SGO, NetSol Pvt, and NetSol UK contained
herein) on Mirage's own independent investigations and findings and not in
reliance on any information provided by SGO, NetSol Pvt, or NetSol UK, or
their respective agents, representatives, or employees.
2.2.6 RELIANCE. The foregoing representations and warranties
are made by Mirage with the knowledge and expectation that SGO, NetSol Pvt,
and NetSol UK NetSol are placing reliance thereon.
ARTICLE 3
CONDITIONS PRECEDENT
3.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective
obligations of each party hereunder shall be subject to the satisfaction
prior to or at the Closing of the following conditions:
(a) NO RESTRAINTS. No statute, rule, regulation, order, decree,
or injunction shall have been enacted, entered, promulgated, or enforced by
any court or Governmental Entity of competent jurisdiction which enjoins or
prohibits the consummation of this Agreement and shall be in effect.
10
<PAGE>
(b) LEGAL ACTION. There shall not be pending or threatened in
writing any action, proceeding, or other application before any court or
Governmental Entity challenging or seeking to restrain or prohibit the
consummation of the transactions contemplated by this Agreement, or seeking
to obtain any material damages.
3.2 CONDITIONS TO MIRAGE'S OBLIGATIONS. The obligations of Mirage
shall be subject to the satisfaction prior to or at the Closing of the
following conditions unless waived by SGO, NetSol Pvt, and NetSol UK:
(a) REPRESENTATIONS AND WARRANTIES OF MIRAGE. The
representations and warranties of Mirage set forth in this Agreement shall
be true and correct as of the date of this Agreement and as of the Closing as
though made on and as of the Closing, except: (i) as otherwise contemplated
by this Agreement; or (ii) in respects that do not have a Material Adverse
Effect on Mirage or on the benefits of the transactions provided for in this
Agreement. SGO, NetSol Pvt, and NetSol UK shall have received a certificate
signed on behalf of Mirage by the Vice President, Chief Financial Officer,
and Secretary of Mirage to such effect on the Closing.
(b) PERFORMANCE OF OBLIGATIONS OF MIRAGE. Mirage shall have
performed all agreements and covenants required to be performed by it under
this Agreement prior to the Closing, except for breaches that do not have a
Material Adverse Effect on Mirage or on the benefits of the transactions
provided for in this Agreement. SGO, NetSol Pvt, and NetSol UK shall have
received a certificate signed on behalf of Mirage by the Vice President,
Chief Financial Officer, and Secretary of Mirage to such effect on the
Closing.
3.3 CONDITIONS TO NETSOL'S OBLIGATIONS. The obligations of SGO,
NetSol Pvt, and NetSol UK shall be subject to the satisfaction prior to or at
the Closing of the following conditions unless waived by Mirage:
(a) REPRESENTATIONS AND WARRANTIES OF SGO, NETSOL PVT, AND
NETSOL UK. The representations and warranties of SGO, NetSol Pvt, and NetSol
UK set forth in this Agreement shall be true and correct as of the date of
this Agreement and as of the Closing as though made on and as of the Closing,
except: (i) as otherwise contemplated by this Agreement; or (ii) in respects
that do not have a Material Adverse Effect on SGO, NetSol Pvt, and NetSol UK
or on the benefits of the transactions provided for in this Agreement. Mirage
shall have received a certificate signed on behalf of SGO by SGO and of
NetSol Pvt by the Chief Executive Officer and the Chief Financial Officer of
NetSol Pvt and of NetSol UK by the Chief Executive Officer and the Chief
Financial Officer of NetSol UK to such effect on the Closing.
(b) PERFORMANCE OF OBLIGATIONS OF SGO, NETSOL PVT, AND NETSOL
UK. SGO, NetSol Pvt, and NetSol UK shall have performed all agreements and
covenants required to be performed by it under this Agreement prior to the
Closing, except for breaches that do not have a Material Adverse Effect on
SGO, NetSol Pvt, and NetSol UK or on the benefits of the transactions
provided for in this Agreement. Mirage shall have received a certificate
signed on behalf of SGO by SGO and of NetSol Pvt by the Chief Executive
Officer and the Chief Financial Officer of NetSol Pvt and of NetSol UK by the
Chief Executive Officer and the Chief Financial Officer of NetSol UK to such
effect on the Closing.
(c) GOVERNMENTAL APPROVALS. All Consents of Governmental
Entities legally required by SGO, NetSol Pvt, and NetSol UK for the
transactions contemplated by this Agreement shall have been filed, occurred,
or been obtained, other than such Consents, the failure of which to obtain
would not have a Material Adverse Effect on the consummation of the
transactions contemplated by this Agreement.
(d) CONSENTS OF OTHER THIRD PARTIES. SGO, NetSol Pvt, and
NetSol UK shall have received and delivered to Mirage all requisite consents
and approvals of all lenders, lessors, and other third parties whose consent
or approval is required in order for SGO, NetSol Pvt, and NetSol UK to
consummate the transactions contemplated by this Agreement, or in order to
permit the continuation after the Closing of the business activities of
NetSol Pvt and NetSol UK in the manner such business is presently carried on
by them. Mirage shall have received copies of any necessary written
consent(s) to this Agreement and the transactions contemplated herein.
11
<PAGE>
(e) MATERIAL ADVERSE CHANGE. Since the date hereof and through
Closing, there shall not have occurred any change, occurrence, or
circumstance in SGO, NetSol Pvt, and NetSol UK having or reasonably likely to
have, individually or in the aggregate, in the reasonable judgment of Mirage,
a Material Adverse Effect on SGO, NetSol Pvt, and NetSol UK.
(f) OPINION OF COUNSEL. Mirage shall have received an opinion,
dated as of Closing, from counsel to SGO, NetSol Pvt, and NetSol UK, in form
and substance substantially in the form of Exhibit "B" hereto.
ARTICLE 4
COVENANTS
4.1 COMPOSITION OF THE BOARD OF DIRECTORS OF NETSOL PVT. Subject to
shareholder approval, the Board of Directors of NetSol Pvt shall consist of
five directors as follows until the next annual election of directors:
(a) Shahab Ghauri, Chairman;
(b) Salim Ghauri;
(c) Irfan Mustafa;
(d) Tariq Khan; and
(e) Fasih Ghauri
4.2 BOARD SEAT ON THE BOARD OF MIRAGE. Mirage has granted SGO,
NetSol Pvt, and NetSol UK the opportunity to collectively nominate, subject
to shareholder approval, one person to sit on the Mirage Board of Directors.
SGO, NetSol Pvt, and NetSol UK hereby acknowledges that they have nominated
Naeem Ghauri as their nominee to the Mirage Board of Directors (the "NetSol
nominee.") The NetSol nominee may sit on the Mirage Board of Directors until
the next annual election of directors.
ARTICLE 5
CLOSING AND DELIVERY OF DOCUMENTS
5.1 TIME AND PLACE. The closing of the transactions contemplated by
this Agreement shall take place at the offices of HORWITZ & BEAM, Two Venture
Plaza, Suite 350, Irvine, California 92618, five business days after the
execution of this Agreement, or at such other time and place as the Parties
mutually agree upon in writing (which time and place are hereinafter referred
to as the "Closing").
5.2 DELIVERIES BY SGO, NETSOL PVT, AND NETSOL UK. At Closing, SGO,
NetSol Pvt, and NetSol UK shall make the following deliveries to Mirage:
(a) A certificate representing the NetSol Pvt Shares that Mirage
is acquiring as set forth in Section 1.1 above;
(b) A certificate representing the NetSol UK Shares that Mirage
is acquiring as set forth in Section 1.1 above;
(c) A certificate of good standing for NetSol Pvt;
(d) A certificate of good standing for NetSol UK;
(e) A certificate executed by SGO, NetSol Pvt, and NetSol UK
certifying that all SGO, NetSol Pvt, and NetSol UK's representations and
warranties under this Agreement are true as of the Closing, as though each of
those representations and warranties had been made on that date;
(f) Certified resolutions of the Board of Directors of NetSol
Pvt and NetSol UK, in form satisfactory to counsel for Mirage, authorizing
the execution and performance of this Agreement; and
12
<PAGE>
(g) An opinion of counsel to SGO, NetSol Pvt, and NetSol UK,
dated as of Closing, as set forth in Section 3.3(f).
5.3 DELIVERIES BY MIRAGE. At Closing, Mirage shall make
the following deliveries to SGO, NetSol Pvt, and NetSol UK:
(a) The payment of the remaining cash purchase price
as set forth in Section 1.2(b);
(b) A certificate representing the Mirage Shares that SGO is
acquiring as set forth in Section 1.2(c);
(c) A certificate executed by Mirage certifying that Mirage's
respective representations and warranties under this Agreement are true as of
the Closing, as though each of those representations and warranties had been
made on that date;
(d) A certificate of good standing for Mirage from the office
of the Nevada Secretary of State;
(e) Certified resolutions of the Board of Directors of Mirage
signed by at least one of the two directors of Mirage, in form satisfactory to
counsel for SGO, NetSol Pvt, and NetSol UK, authorizing the execution and
performance of this Agreement; and
(e) A Consent Action in Writing by the Majority Shareholders
in lieu of meeting authorizing the execution and performance of this Agreement.
ARTICLE 6
INDEMNIFICATION
6.1 SGO, NETSOL PVT, AND NETSOL UK'S INDEMNITY.
(a) Upon receipt of notice thereof, SGO, NetSol Pvt, and
NetSol UK shall, jointly and severally, indemnify, defend, and hold harmless
Mirage from any and all claims, demands, liabilities, damages, deficiencies,
losses, obligations, costs and expenses, including attorney fees and any costs
of investigation that Mirage shall incur or suffer, that arise, result from or
relate to: (i) any breach of, or failure by SGO, NetSol Pvt, and/or NetSol UK to
perform, any of their representations, warranties, covenants, or agreements in
this Agreement or in any schedule, certificate, exhibit, or other instrument
furnished or to be furnished by SGO, NetSol Pvt, and/or NetSol UK under this
Agreement; and (ii) the employment of any of NetSol Pvt or NetSol UK's employees
which is in violation of any law, regulation, or ordinance of any Governmental
Entity.
(b) Mirage shall notify promptly SGO, NetSol Pvt, and NetSol
UK of the existence of any claim, demand, or other matter to which SGO, NetSol
Pvt, and NetSol UK's indemnification obligations would apply, and shall give
them a reasonable opportunity to defend the same at their own expense and with
counsel of their own selection, provided that Mirage shall at all times also
have the right to fully participate in the defense. If SGO, NetSol Pvt, and
NetSol UK, within a reasonable time after this notice, fails to defend, Mirage
shall have the right, but not the obligation, to undertake the defense of, and,
with the written consent of SGO, NetSol Pvt, and NetSol UK, to compromise or
settle the claim or other matter on behalf, for the account, and at the risk, of
SGO, NetSol Pvt, and NetSol UK.
6.2 MIRAGE'S INDEMNITY.
(a) Upon receipt of notice thereof, Mirage shall indemnify,
defend, and hold harmless SGO, NetSol Pvt, and/or NetSol UK from any and all
claims, demands, liabilities, damages, deficiencies, losses, obligations, costs,
and expenses, including attorney fees and any costs of investigation that SGO,
NetSol Pvt, and/or NetSol UK shall incur or suffer, that arise, result from or
relate to any breach of, or failure by Mirage to perform any of its
representations, warranties, covenants, or agreements in this Agreement or
13
<PAGE>
in any schedule, certificate, exhibit, or other instrument furnished or to be
furnished by Mirage under this Agreement.
(b) SGO, NetSol Pvt, and/or NetSol UK shall notify promptly
Mirage of the existence of any claim, demand or other matter to which Mirage's
indemnification obligations would apply, and shall give it a reasonable
opportunity to defend the same at its own expense and with counsel of its own
selection, provided that SGO, NetSol Pvt, and NetSol UK shall at all times also
have the right to fully participate in the defense. If Mirage, within a
reasonable time after this notice, fails to defend, SGO, NetSol Pvt, and NetSol
UK shall have the right, but not the obligation, to undertake the defense of,
and, with the written consent of Mirage, to compromise or settle the claim or
other matter on behalf, for the account, and at the risk, of Mirage.
ARTICLE 7
DEFAULT, AMENDMENT AND WAIVER
7.1 DEFAULT. Upon a breach or default under this Agreement by any
of the Parties (following the cure period provided herein), the non-defaulting
party shall have all rights and remedies given hereunder or now or hereafter
existing at law or in equity or by statute or otherwise. Notwithstanding the
foregoing, in the event of a breach or default by any party hereto in the
observance or in the timely performance of any of its obligations hereunder
which is not waived by the non-defaulting party, such defaulting party shall
have the right to cure such default within 15 days after receipt of notice in
writing of such breach or default.
7.2 WAIVER AND AMENDMENT. Any term, provision, covenant,
representation, warranty, or condition of this Agreement may be waived, but only
by a written instrument signed by the party entitled to the benefits thereof.
The failure or delay of any party at any time or times to require performance of
any provision hereof or to exercise its rights with respect to any provision
hereof shall in no manner operate as a waiver of or affect such party's right at
a later time to enforce the same. No waiver by any party of any condition, or of
the breach of any term, provision, covenant, representation, or warranty
contained in this Agreement, in any one or more instances, shall be deemed to be
or construed as a further or continuing waiver of any such condition or breach
or waiver of any other condition or of the breach of any other term, provision,
covenant, representation, or warranty. No modification or amendment of this
Agreement shall be valid and binding unless it be in writing and signed by all
Parties hereto.
ARTICLE 8
MISCELLANEOUS
8.1 EXPENSES. Whether or not the transactions contemplated hereby
are consummated, each of the Parties hereto shall bear all taxes of any nature
(including, without limitation, income, franchise, transfer, and sales taxes)
and all fees and expenses relating to or arising from its compliance with the
various provisions of this Agreement and such party's covenants to be performed
hereunder, and except as otherwise specifically provided for herein, each of the
Parties hereto agrees to pay all of its own expenses (including, without
limitation, attorneys and accountants' fees, and printing expenses) incurred in
connection with this Agreement, the transactions contemplated hereby, the
negotiations leading to the same and the preparations made for carrying the same
into effect, and all such taxes, fees, and expenses of the Parties hereto shall
be paid prior to Closing.
8.2 NOTICES. Any notice, request, instruction, or other document
required by the terms of this Agreement, or deemed by any of the Parties hereto
to be desirable, to be given to any other party hereto shall be in writing and
shall be given by facsimile, personal delivery, overnight delivery, or mailed by
registered or certified mail, postage prepaid, with return receipt requested, to
the following addresses:
TO SGO: Mr. Salim Ghauri and Others
Attn: Mr. Salim Ullah Ghauri
14
<PAGE>
1st Floor, C-35, LCCHS
Lahore, Cantt.
Fax: 92425726740
TO NETSOL PVT: Network Solutions (Pvt) Limited
Attn: Mr. Salim Ullah Ghauri
1st Floor, C-35, LCCHS
Lahore, Cantt.
Fax: 92425726740
TO NETSOL UK: NetSol (UK) Limited
21, Sherby Pavilion, Chalkdel Drive
Sherylwod, Milton Keynes MRS GLB U.K.
Fax: +44 1908 504047
TO MIRAGE: Mirage Holdings, Inc.
Attn: Najeeb U. Ghauri, President
3000 West Olympic Boulevard, Suite 2235
Santa Monica, CA 90404
Fax: (310) 264-3942
With a copy to: Horwitz & Beam
Attn: Lynne Bolduc
Two Venture Plaza, Suite 350
Irvine, CA 92618
Fax: (949) 453-9416
The persons and addresses set forth above may be changed from time to time by a
notice sent as aforesaid. If notice is given by facsimile, personal delivery, or
overnight delivery in accordance with the provisions of this Section, said
notice shall be conclusively deemed given at the time of such delivery. If
notice is given by mail in accordance with the provisions of this Section, such
notice shall be conclusively deemed given seven days after deposit thereof in
the United States mail.
8.3 ENTIRE AGREEMENT. This Agreement, together with the Schedule
and Exhibits hereto, sets forth the entire agreement and understanding of the
Parties hereto with respect to the transactions contemplated hereby, and
supersedes all prior agreements, arrangements and understandings related to the
subject matter hereof. No understanding, promise, inducement, statement of
intention, representation, warranty, covenant, or condition, written or oral,
express or implied, whether by statute or otherwise, has been made by any party
hereto which is not embodied in this Agreement, or in the schedules or exhibits
hereto or the written statements, certificates, or other documents delivered
pursuant hereto or in connection with the transactions contemplated hereby, and
no party hereto shall be bound by or liable for any alleged understanding,
promise, inducement, statement, representation, warranty, covenant, or condition
not so set forth.
8.4 SURVIVAL OF REPRESENTATIONS. All statements of fact (including
financial statements) contained in the Schedule, the exhibits, the certificates,
or any other instrument delivered by or on behalf of the Parties hereto, or in
connection with the transactions contemplated hereby, shall be deemed
representations and warranties by the respective party hereunder. All
representations, warranties, agreements, and covenants hereunder shall survive
the Closing and remain effective regardless of any investigation or audit at any
time made by or on behalf of the Parties or of any information a party may have
in respect hereto. Consummation of the transactions contemplated hereby shall
not be deemed or construed to be a waiver of any right or remedy possessed by
any party hereto, notwithstanding that such party knew or should have known at
the time of Closing that such right or remedy existed.
15
<PAGE>
8.5 INCORPORATED BY REFERENCE. The schedules, exhibits, and all
documents (including, without limitation, all financial statements) delivered as
part hereof or incident hereto are incorporated as a part of this Agreement by
reference.
8.6 REMEDIES CUMULATIVE. No remedy herein conferred upon the
Parties is intended to be exclusive of any other remedy and each and every such
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
8.7 EXECUTION OF ADDITIONAL DOCUMENTS. Each party hereto shall
make, execute, acknowledge, and deliver such other instruments and documents,
and take all such other actions as may be reasonably required in order to
effectuate the purposes of this Agreement and to consummate the transactions
contemplated hereby.
8.8 FINDERS' AND RELATED FEES. Each of the Parties hereto is
responsible for, and shall indemnify the other against, any claim by any third
party to a fee, commission, bonus, or other remuneration arising by reason of
any services alleged to have been rendered to or at the instance of said party
to this Agreement with respect to this Agreement or to any of the transactions
contemplated hereby.
8.9 GOVERNING LAW. This Agreement has been negotiated and
executed in the State of California and shall be construed and
enforced in accordance with the laws of such state.
8.10 FORUM. Each of the Parties hereto agrees that any action or
suit which may be brought by any party hereto against any other party hereto in
connection with this Agreement or the transactions contemplated hereby may be
brought only in a federal or state court in Orange County, California.
8.11 PROFESSIONAL FEES. In the event either party hereto shall
commence legal proceedings against the other to enforce the terms hereof, or to
declare rights hereunder, as the result of a breach of any covenant or condition
of this Agreement, the prevailing party in any such proceeding shall be entitled
to recover from the losing party its costs of suit, including reasonable
attorneys' fees, accountants' fees, and experts' fees.
8.12 BINDING EFFECT AND ASSIGNMENT. This Agreement shall inure to
the benefit of and be binding upon the Parties hereto and their respective
heirs, executors, administrators, legal representatives, and assigns.
8.13 COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be
executed simultaneously in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the
same instrument. The Parties agree that facsimile signatures of this
Agreement shall be deemed a valid and binding execution of this Agreement.
[SIGNATURE PAGE FOLLOWS]
16
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement, as of the date first written hereinabove.
MIRAGE:
MIRAGE HOLDINGS, INC.,
a Nevada corporation
/s/ Najeeb U. Ghauri
-----------------------------------
By: Najeeb U. Ghauri
Its: President
NETSOL PVT:
NETWORK SOLUTIONS (PVT) LIMITED,
a Pakistan corporation
/s/ Mr. Salim Ullah Ghauri
-----------------------------------
By: Mr. Salim Ullah Ghauri
Its: Chief Executive Officer, Director
NETSOL UK:
NETSOL (UK) LIMITED,
a United Kingdom corporation
/s/ Mr. Salim Ullah Ghauri
-----------------------------------
By: Mr. Salim Ullah Ghauri
Its: Chief Executive Officer, Director
SGO:
/s/ Salim Ghauri
-----------------------------------
Salim Ghauri
Print name here: Mr. Salim Ullah Ghauri
/s/ Mrs. Nasreen Ghauri
-----------------------------------
Print name here: Mrs. Nasreen Ghauri
/s/ Mrs. Aamran Shahab
-----------------------------------
Print name here: Mrs. Aamran Shahab
17
<PAGE>
EXHIBIT "A"
LIST OF SHAREHOLDERS ENTERING INTO THIS AGREEMENT
<TABLE>
<CAPTION>
Shareholder Name Entity in which Shares Held Number of Shares Held
- ---------------- --------------------------- ----------------------
<S> <C> <C>
Mr. Salim Ullah Ghauri Network Solutions (Pvt) Ltd. 100
NetSol (U.K.) Limited 25
Mr. Shahab Uo Din Ghauri Network Solutions (Pvt) Ltd. 100
NetSol (U.K.) Limited 25
Mrs. Aamrah Shahab Network Solutions (Pvt) Ltd. 100
NetSol (U.K.) Limited 25
Mrs. Nasreen Ghauri Network Solutions (Pvt) Ltd. 100
NetSol (U.K.) Limited 25
TOTALS (Network Solutions [Pvt] Ltd.) 400
(NetSol [U.K.] Limited) 100
</TABLE>
<PAGE>
EXHIBIT "B"
OPINION LETTERS
<PAGE>
[DFK INTERNATIONAL WORLDWIDE LETTERHEAD]
[SEPTEMBER 18, 1998]
Najeeb U. Ghauri
President
Mirage Holdings, Inc.
OPINION LETTER
SALEEM GHAURI & OTHERS AND NETWORK SOLUTIONS (PVT) LIMITED
Sir,
We have acted as counsel for SALEEM GHAURI & OTHERS ("SGO") and NETWORK
SOLUTIONS (PVT) LIMITED, a Pakistan corporation ("NetSol Pvt."), in
connection with the acquisition by MIRAGE HOLDINGS, INC., a Nevada
corporation, of certain shares of NetSol Pvt and NetSol UK from SGO
(collectively, the "Shares"). This opinion is delivered to you pursuant to
section 3.3(f) of that certain Acquisition Agreement dated September 15,
1998 by and between SGO, NetSol Pvt, and NetSol UK, on the one hand and
Mirage, on the other hand (the "Acquisition Agreement").
In connection with this Opinion, we have reviewed: (i) the Agreement; and
(ii) the corporate books and records of NetSol Pvt.
Based on the foregoing, we are of the opinion that:
1. NetSol Pvt has been duly incorporated and is a validly
existing corporation in good standing under the laws of Pakistan
with full power and authority to own, operate and lease its
properties and assets and to carry on its business as currently
contemplated. NetSol Pvt is qualified to do business in THE WHOLE
OF PAKISTAN, PARTICULARLY PUNJAB NetSol Pvt's Articles of
Incorporation were filed with CORPORATE LAW AUTHORITY, GOVERNMENT
OF PAKISTAN on AUGUST 22, 1996.
2. Each of the Agreements has been duly authorized, executed,
and delivered by NetSol and is a legal, valid, and binding agreement
of SGO and NetSol Pvt, enforceable in accordance with its terms,
except as rights to indemnity and contribution thereunder may be
limited by Federal and except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, or similar laws affecting
creditors' rights generally and subject to general principles of
equity.
3. NetSol Pvt has authorized capital of 20,000 shares of common stock,
RS. 100/- par value, of which 1,000 shares have been issued
(collectively, the "Capital Stock"). All shares of the Capital Stock
will be, upon issuance pursuant to the Acquisition Agreement, duly
authorized, validly issued, fully paid and nonassessable. SGO currently
owns 1,000 NetSol Pvt Shares.
4. To the best of our knowledge, other than as set forth in the
Acquisition Agreement, there are no outstanding or authorized
subscriptions, options, warrants, calls, rights, commitments, or other
agreements of any character that obligate NetSol Pvt to issue any
additional shares of any capital stock or any securities convertible
into or evidencing the right to subscribe for any shares of NetSol Pvt
capital stock. UNDER SECTION 86(2) OF THE COMPANIES ORDINANCE, 1984
(PAKISTANI LAW) "THE OFFER OF NEW SHARES SHALL BE STRICTLY IN
PROPORTION TO THE NUMBER OF EXISTING SHARES HELD, AND IF THE OFFER WAS
NOT ACCEPTED, THE DIRECTORS MAY ALLOT AND ISSUE SUCH SHARES IN SUCH
MANNER AS THEY MAY DEEM FIT." THEREFORE, MIRAGE HOLDINGS, INC. HAS A
RIGHT TO OPT 51% OF NEW SHARES OFFERED TO MAINTAIN 51% HOLDING.
<PAGE>
Page 2
5. The execution, delivery and performance of the Agreement and the
consummation of the transactions contemplated by an Agreement).
a) Constitute a violation (with or without the giving of
notice or lapse of time, or both) of any provision of any law,
regulation or rule or any judgment, decree, or order known to
you of any court, agency, or other governmental authority
applicable to SGO and NetSol Pvt;
b) Require any consent, approval or authorization
of any government authority;
c) Result in a default under, acceleration or termination
of, or the creation by any party of the right to accelerate,
terminate, modify or cancel, any material agreement to with
SGO and NetSol Pvt is a party or by which it is bound or to
which any assets of SGO and NetSol Pvt are subject;
d) Result in the creation of any lien or
encumbrance upon the assets of SGO and NetSol Pvt
pursuant to any material agreement; and
e) Conflict with or result in a breach of, or constitute
default under any provision of NetSol Pvt Articles of
Incorporation.
6. To the best of our knowledge, there are no claims, actions, suits,
arbitrations, criminal or civil investigations or overly threatened in
writing against SGO and NetSol Pvt before or by a Court or Federal
Governmental, Department, Commission, Board, Bureau, or Agency or
Instrumentality, except that certain formalities of the State Bank of
Pakistan have to be contemplated by NetSol Pvt.
The foregoing opinions are subject to the following exceptions: we express no
opinion as to the validity, binding effect, or enforceability of any
provision of the Agreement purporting: (a) to prohibit oral amendment or
waiver of the Agreement or limit the effect of a course of dealing between
the parties thereto; (b) to establish the forum and jurisdiction of any
Federal or Courts in connection with any legal action or proceeding arising
out of or in connection with the Agreements; (c) to indemnify any person
against any liabilities to the extent the enforceability of such indemnity
violates public policy; (d) to indemnify any person for his or her own acts
of gross negligence.
This opinion and the matters addressed herein are as of the date hereof, and
we undertake no, and hereby disclaim any obligation to advise you of any
change in any matter set forth herein occurring after the date hereof. This
opinion is solely for your benefit and no other persons shall be entitled to
rely upon the opinions herein expressed. This letter is limited to the
matters expressly stated herein and no opinion is implied or may be inferred
beyond the matters expressly stated. Without our prior written consent, this
opinion may not be quoted in whole or in part or otherwise referred to in any
document any may not be furnished to any other person or entity.
Yours sincerely,
/s/ Saeed Kamran Patel & Company
CHARTERED ACCOUNTANTS
<PAGE>
EXHIBIT C
SGO, NETSOL PVT, AND NETSOL UK DISCLOSURE SCHEDULE
The items set forth below are exceptions to the representations and
warranties of SGO, NetSol Pvt, and NetSol UK set forth in Section 2.1 of the
Agreement. Any matter set forth herein as an exception to a section of the
Agreement shall be deemed to constitute an exception to all other applicable
sections of the Agreement. Capitalized terms not otherwise defined herein
shall have the meaning ascribed to them in the Agreement.
<TABLE>
<CAPTION>
Section Exception
- ------- ----------
<S> <C>
FOR SGO
Nil
FOR NETWORK SOLUTIONS (PVT) LTD.
Nil
FOR NETSOL (U.K.) LIMITED
Nil
</TABLE>
<PAGE>
EXHIBIT D
MIRAGE DISCLOSURE SCHEDULE
The items set forth below are exceptions to the representations and
warranties of Mirage set forth in Section 2.2 of the Agreement. Any matter
set forth herein as an exception to a section of the Agreement shall be
deemed to constitute an exception to all other applicable sections of the
Agreement. Capitalized terms not otherwise defined herein shall have the
meaning ascribed to them in the Agreement.
<TABLE>
<CAPTION>
Section Exception
- ------- ---------
<S> <C>
</TABLE>
<PAGE>
CERTIFICATE OF THE SECRETARY
OF
MIRAGE HOLDINGS, INC.
I, NAJEEB U. GHAURI, hereby certify that I am the duly elected,
qualified and acting Secretary of MIRAGE HOLDINGS, INC., a Nevada corporation
(the "Company"), and I further certify as follows:
Attached hereto as Exhibit A is a true, correct and complete
copy of resolutions duly adopted by the Board of Directors of the Company by
written consent in accordance with applicable law and the Bylaws authorizing
the execution and performance of that certain Acquisition Agreement dated
September 15, 1998 (the "Agreement"), by and between the Company, on the one
hand, and Salim Ghauri and Other ("SGO"), Network Solutions (Pvt) Limited, a
Pakistan corporation ("NetSol PVT), and NetSol (UK) Limited, a United Kingdom
corporation ("NetSol UK"), on the other hand. Such resolutions have not been
modified, rescinded or otherwise changed or amended and remain in full force
and effect as of the date hereof.
IN WITNESS WHEREOF, I have executed this certificate as of this
15th day of September, 1998.
/s/ Najeeb U. Ghauri
--------------------------
NAJEEB U. GHAURI, Secretary
<PAGE>
MIRAGE HOLDINGS, INC.
A NEVADA CORPORATION
WRITTEN CONSENT OF THE BOARD OF DIRECTORS
WITHOUT MEETING
Pursuant to the authority granted to the board of directors by the
Nevada Revised Statutes, all members of the board of directors of MIRAGE
HOLDINGS, INC., a Nevada corporation (this "Company"), do hereby consent to,
adopt, ratify, confirm, and approve, as of the date indicated below, the
following resolutions, as evidenced by their signatures hereunder:
ACQUISITION
WHEREAS, the undersigned deem it in the best interests of the Company to
effectuate a purchase of 51% of the outstanding shares of capital stock of
Network Solutions (Pvt) Limited, a Pakistan corporation ("NetSol Pvt) and 43%
of the outstanding shares of capital stock of NetSol (UK) Limited, a United
Kingdom corporation ("NetSol UK"), from Salim Ghauri and others ("SGO"), in
exchange for the payment of $775,000 and 490,000 of this Company's
outstanding common stock;
WHEREAS, the terms and conditions of the acquisition are set forth in
that certain Acquisition Agreement attached hereto and incorporated herein by
this reference as Exhibit "A" (the "Acquisition Agreement");
NOW, THEREFORE, IT IS HEREBY, RESOLVED, that either the Chief Executive
Officer, President, Chief Financial Officer, Vice President, and/or Secretary
of the Company, acting alone or together, each are hereby authorized to
execute and deliver, for and on behalf of the Company, the Acquisition
Agreement in substantially the form attached as Exhibit "A", with such
changes as the officers authorized to execute the documents may approve,
together with and including, without limitation, any and all agreements,
instruments, and documents, and amendments thereto (collectively, the
"Documents") as they may deem necessary or appropriate to consummate the
transactions contemplated therein.
RESOLVED FURTHER, that the Company is authorized to perform the
Documents executed and delivered in accordance with these resolutions.
FURTHER ACTION
RESOLVED, that the officers of the Company specified above are
authorized to take such further action as they may deem necessary or
appropriate to carry out the purpose and intent of the foregoing resolution.
RATIFICATION
RESOLVED, that the authority given hereunder shall be deemed retroactive
and any and all agreements, instruments and documents, and all amendments
thereto, and acts authorized hereunder executed, delivered or performed prior
to the passage of these resolutions are hereby confirmed, ratified and
approved.
RESOLVED FURTHER, that the Secretary of the Company is authorized to
certify a copy of these resolutions and deliver the same as evidence of the
foregoing authorization to act on behalf of the Company.
The undersigned hereby consent to this action and the resolutions set
forth above and direct and authorize that a copy of this Written Consent of
Board of Directors be placed by the Company 's secretary with the minutes of
the proceedings of the Board of Directors in the official records of the
Company.
1
<PAGE>
Dated: September 15, 1998
DIRECTORS:
/s/ Najeeb U. Ghauri
- --------------------
Najeeb U. Ghauri
/s/ Gill Champion
- --------------------
Gill Champion
/s/ Irfan Mustafa
- --------------------
Irfan Mustafa
2
<PAGE>
CERTIFICATE OF THE
VICE PRESIDENT, CHIEF FINANCIAL OFFICER,
AND SECRETARY OF
MIRAGE HOLDINGS, INC.
The undersigned hereby certifies that he is the duly elected, qualified
and acting Vice President and Chief Financial Officer of MIRAGE HOLDINGS, INC.,
a Nevada corporation (the "Company"), and, as such, is authorized to execute
this certificate on behalf of the Company and does further certify as follows:
1. This certificate is being delivered pursuant to Article 3.2(a) and
Article 3.2(b) of that certain Acquisition Agreement dated September 15, 1998
(the "Agreement"), by and among the Company, on the one hand, and Salim
Ghauri and Other ("SGO"), Network Solutions (Pvt) Limited, a Pakistan
corporation ("NetSol PVT), and NetSol (UK) Limited, a United Kingdom
corporation ("NetSol UK"), on the other hand. All capitalized terms not
otherwise defined herein shall have the respective meanings assigned to them
in the Agreement.
2. All representations and warranties of the Company set forth in the
Agreement are true and correct as of the date of the Agreement and as of the
Closing as though made on and as of the Closing, except: (i) as otherwise
contemplated by the Agreement; or (ii) in respects that do not have a
Material Adverse Effect on the Company or on the benefits of the transactions
provided for in the Agreement.
3. The Company has performed all agreements and covenants required to
be performed by it under the Agreement prior to the Closing, except for
breaches that do not have a Material Adverse Effect on the Company or on the
benefits of the transactions provided for in the Agreement.
IN WITNESS WHEREOF, the undersigned have executed this certificate as of
the 15th day of September, 1998.
MIRAGE HOLDINGS, INC., a Nevada corporation
/s/ Gill Champion
-----------------------------------------------
By: Gill Champion
Its: Vice President and Chief Financial Officer
<PAGE>
CERTIFICATE OF THE OFFICERS
OF
NETWORK SOLUTIONS (PVT) LIMITED
The undersigned hereby certify that they are, respectively, the duly
elected, qualified and acting President and Chief Financial Officer of
NETWORK SOLUTIONS (PVT) LIMITED, a Pakistan corporation (the "Company"), and,
as such, are authorized to execute this certificate on behalf of the Company
and do further certify as follows:
1. This certificate is being delivered pursuant to Article 3.3(a) and
Article 3.3(b) of that certain Acquisition Agreement dated September 15, 1998
(the "Agreement"), by and among Salim Ghauri and Others ("SGO"), NetSol (UK)
Limited, a United Kingdom corporation ("NetSol UK"), and the Company, on the
one hand, and Mirage Holdings, Inc., a Nevada corporation, on the other hand.
All capitalized terms not otherwise defined herein shall have the respective
meanings assigned to them in the Agreement.
2. All representations and warranties of the Company set forth in the
Agreement are true and correct as of the date of the Agreement and as of the
Closing as though made on and as of the Closing, except: (i) as otherwise
contemplated by the Agreement; or (ii) in respects that do not have a
Material Adverse Effect on the Company or on the benefits of the transactions
provided for in the Agreement.
3. The Company has performed all agreements and covenants required to
be performed by it under the Agreement prior to the Closing, except for
breaches that do not have a Material Adverse Effect on the Company or on the
benefits of the transactions provided for in the Agreement.
IN WITNESS WHEREOF, the undersigned have executed this certificate as of
the 15th day of September, 1998.
NETWORK SOLUTIONS (PVT) LIMITED,
a Pakistan corporation
/s/ Saleem Ullah Ghauri
--------------------------------
By: Saleem Ullah Ghauri
Its: President
/s/ Mahamood Khan
--------------------------------
By: Mahamood Khan
Its: Chief Financial Officer
<PAGE>
CERTIFICATE OF THE OFFICERS
OF
NETSOL (UK) LIMITED
The undersigned hereby certify that they are, respectively, the duly
elected, qualified and acting President and Chief Financial Officer of NETSOL
(UK) LIMITED, a United Kingdom corporation (the "Company"), and, as such, are
authorized to execute this certificate on behalf of the Company and do
further certify as follows:
1. This certificate is being delivered pursuant to Article 3.3(a) and
Article 3.3(b) of that certain Acquisition Agreement dated September 15, 1998
(the "Agreement"), by and among Salim Ghauri and Others ("SGO"), Network
Solutions (Pvt) Limited, a Pakistan corporation, and the Company, on the one
hand, and Mirage Holdings, Inc., a Nevada corporation, on the other hand. All
capitalized terms not otherwise defined herein shall have the respective
meanings assigned to them in the Agreement.
2. All representations and warranties of the Company set forth in the
Agreement are true and correct as of the date of the Agreement and as of the
Closing as though made on and as of the Closing, except: (i) as otherwise
contemplated by the Agreement; or (ii) in respects that do not have a
Material Adverse Effect on the Company or on the benefits of the transactions
provided for in the Agreement.
3. The Company has performed all agreements and covenants required to
be performed by it under the Agreement prior to the Closing, except for
breaches that do not have a Material Adverse Effect on the Company or on the
benefits of the transactions provided for in the Agreement.
IN WITNESS WHEREOF, the undersigned have executed this certificate as of
the 15th day of September, 1998.
NETSOL (UK) LIMITED,
a United Kingdom corporation
/s/ Saleem Ullah Ghauri
----------------------------
By: Saleem Ullah Ghauri
Its: President
/s/ Mrs. Aamrah Ghauri
----------------------------
By: Mrs. Aamrah Ghauri
Its: Chief Financial Officer
<PAGE>
CERTIFICATE OF
SALIM GHAURI AND OTHERS
The undersigned hereby certify that they are Salim Ghauri and Others,
acting in their individual capacities and as shareholders of Network
Solutions (Pvt) Limited, a Pakistan corporation and NetSol (UK) Limited, a
United Kingdom corporation, and, as such, are authorized to execute this
certificate on behalf of the Company and do further certify as follows:
1. This certificate is being delivered pursuant to Article 3.3(a) and
Article 3.3(b) of that certain Acquisition Agreement dated September 15, 1998
(the "Agreement"), by and among Salim Ghauri and Other ("SGO"), Network
Solutions (Pvt) Limited, a Pakistan corporation, and NetSol (UK) Limited, a
United Kingdom corporation ("NetSol UK"), on the one hand, and Mirage
Holdings, Inc., a Nevada corporation, on the other hand. All capitalized
terms not otherwise defined herein shall have the respective meanings
assigned to them in the Agreement.
2. All representations and warranties of SGO set forth in the Agreement
are true and correct as of the date of the Agreement and as of the Closing as
though made on and as of the Closing, except: (i) as otherwise contemplated
by the Agreement; or (ii) in respects that do not have a Material Adverse
Effect on SGO or on the benefits of the transactions provided for in the
Agreement.
3. SGO have performed all agreements and covenants required to be
performed by it under the Agreement prior to the Closing, except for breaches
that do not have a Material Adverse Effect on SGO or on the benefits of the
transactions provided for in the Agreement.
IN WITNESS WHEREOF, the undersigned have executed this certificate as of
the 15th day of September, 1998.
SGO:
/s/ Salim Ghauri
-----------------------------------------
Salim Ghauri
/s/ Mr. Shahab UO-Din Ghauri
-----------------------------------------
Print name here: Mr. Shahab UO-Din Ghauri
/s/ Mrs. Nasreen Ghauri
-----------------------------------------
Print name here: Mrs. Nasreen Ghauri
/s/ Mrs. Aamrah Ghauri
-----------------------------------------
Print name here: Mrs. Aamrah Ghauri
<PAGE>
[LETTERHEAD]
September 15, 1998
MIRAGE HOLDINGS, INC. ACQUISITION AGREEMENT WITH SALIM GHAURI AND OTHERS,
NETWORK SOLUTIONS (PVT) LIMITED, AND NETSOL (UK) LIMITED
CLOSING MEMORANDUM
This Memorandum outlines the action taken in connection with the sale by
Salim Ghauri and Others (SGO") of 51% of the issued and outstanding capital
stock of Network Solutions (Pvt) Limited, a Pakistan corporation ("NetSol
Pvt") and of 43% of the issued and outstanding capital stock of NetSol (UK)
Limited, a United Kingdom corporation (NetSol UK"), (collectively, the
"Shares") to Mirage Holdings, Inc., a Nevada corporation ("Mirage") in
exchange for the payment of $775,000 and 490,000 shares of common stock of
Mirage, such sale being made pursuant to an Acquisition Agreement (the
"Agreement"), dated as of the date of the Closing as defined in the
Agreement, among the Parties. All capitalized terms used herein have that
meaning as defined in the Agreement.
1. ACTIONS TAKEN PRIOR TO THE CLOSING.
A. ACTIONS TAKEN BY MIRAGE, SGO, NETSOL PVT, AND NETSOL UK. At a
meetings of the respective Board of Directors of each party, the respective
Boards of Directors took all corporate action necessary to: (i) authorize the
purchase and sale of the capital stock; (ii) authorize the execution and
delivery of the Agreement; and (iii) fulfill the conditions precedent of each
party as set forth in the Agreement.
B. TIMING. The parties agreed that the transaction would be
completed in two separate steps:
i. THE SIGNING. The signing of the Agreement and all other
documents related thereto would be held on September 15, 1998 (the "Signing
Date"), at the offices of the Horwitz & Beam, Two Venture Plaza, Suite 350,
Irvine, California, 92618.
ii. THE CLOSING. The closing of the Agreement (i.e., the
exchange of the capital stock for the cash payment as set forth in the
Agreement) will be held as soon as practicable after the execution of the
Agreement (the "Closing Date").
2. THE SIGNING.
The Signing was held on September 15, 1998 (the "Signing Date"), at
the offices of the Horwitz & Beam, Two Venture Plaza, Suite 350, Irvine,
California, 92618.
At the Signing, each party delivered to the other all required corporate
documents and consents as set forth in the Agreement.
<PAGE>
September 14, 1998
Page 2
Also at the signing, the parties executed and delivered each to the other,
unless waived, the following documents:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
DOCUMENT SIGNATORIES DELIVERY TO
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Acquisition Agreement Mirage Mirage
SGO SGO
NetSol Pvt NetSol Pvt
NetSol UK NetSol UK
- -------------------------------------------------------------------------------------------------------------------
List of Shareholders - Exhibit A SGO Mirage
- -------------------------------------------------------------------------------------------------------------------
Legal Opinion - Exhibit B Counsel for SGO, NetSol Mirage
Pvt, and NetSol UK
- -------------------------------------------------------------------------------------------------------------------
Certificate of Secretary of Mirage Najeeb U. Ghauri Mirage Corporate Records
SGO
NetSol Pvt
NetSol UK
- -------------------------------------------------------------------------------------------------------------------
Consent of Mirage Directors Najeeb U. Ghauri Mirage Corporate Records
Gill Champion SGO
Irfan Mustafa NetSol Pvt
NetSol UK
- -------------------------------------------------------------------------------------------------------------------
Certificate of Vice President and Chief Gill Champion Mirage Corporate Records
Financial Officer of Mirage SGO
NetSol Pvt
NetSol UK
- -------------------------------------------------------------------------------------------------------------------
Certificate of Officers of NetSol Pvt Officers of NetSol Pvt NetSol Pvt Corporate
Records
Mirage
- -------------------------------------------------------------------------------------------------------------------
Certificate of Officers of NetSol UK Officers of NetSol UK NetSol UK Corporate
Records
Mirage
- -------------------------------------------------------------------------------------------------------------------
Certificate of SGO SGO SGO Records
Mirage
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The Signing was then declared completed.
3. THE CLOSING.
At the Closing, Mirage delivered to SGO a check in the amount of
$500,000 as the Purchase Price under the Agreement.
At the Closing, SGO delivered to Mirage certificates representing the
Shares as designated in Section 1.1 of the Agreement.
At the Closing, Mirage delivered to SGO the Shares as designated in
Section 1.2 of the Agreement.
The Closing was then declared completed.
<PAGE>
September 14, 1998
Page 3
4. ACTION SUBSEQUENT TO THE CLOSING.
Not later than 15 days after the Closing Date, Mirage, pursuant to any
and all requirements of the Securities Act of 1933, as amended, and the
Securities and Exchange Act of 1934, as amended, shall file any and all
required documents with the United States Securities and Exchange Commission.
<PAGE>
EXHIBIT 21
A LIST OF ALL SUBSIDIARIES OF THE COMPANY
<PAGE>
Listing of All Subsidiaries of the Company
<TABLE>
<CAPTION>
<S> <C>
1. Mirage Collection, Inc.
2. NetSol (U.K.) Limited
3. Network Solutions (Pvt) Ltd.
</TABLE>
<PAGE>
EXHIBIT 24.1
CONSENT OF
STONEFIELD JOSEPHSON, INC., CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
CONSENT OF
STONEFIELD JOSEPHSON, INC., CERTIFIED PUBLIC ACCOUNTANTS
The undersigned independent certified public accounting firm hereby
consents to the inclusion of its report on the financial statements of Mirage
Holdings, Inc. for the year ending June 30, 1998, in the Annual Report on
Form 10-KSB for Mirage Holdings, Inc.
/s/ Stonefield Josephson, Inc.
- ------------------------------
STONEFIELD JOSEPHSON, INC.
Certified Public Accountants
Santa Monica, California
Dated: October 9, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 478,813
<CURRENT-LIABILITIES> 810,348
<BONDS> 0
0
0
<COMMON> 1,774
<OTHER-SE> (333,309)
<TOTAL-LIABILITY-AND-EQUITY> 478,813
<SALES> 168,835
<TOTAL-REVENUES> 168,835
<CGS> 133,860
<TOTAL-COSTS> 133,860
<OTHER-EXPENSES> 586,536
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,918
<INCOME-PRETAX> (585,479)
<INCOME-TAX> 0
<INCOME-CONTINUING> (585,479)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (585,479)
<EPS-PRIMARY> (.33)
<EPS-DILUTED> (.26)
</TABLE>
