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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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, 1999
or
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 333-28861
NETSOL INTERNATIONAL, 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)
233 WILSHIRE BLVD., SUITE 510,
SANTA MONICA, CA 90401
(Address of principal executive offices) (Zip code)
(310) 395-4073 / (310) 395-0891
(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. [ ]
As of September 17, 1999, Registrant had 7,632,065 shares of its $.001 par value
Common Stock issued and outstanding with an aggregate market value of the common
stock held by non-affiliates of $17,530,335. This calculation is based upon the
closing sales price of $5 per share on September 17, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated herein by reference: (1) Form
10-KSB for the fiscal year ended June 30, 1998, filed with the SEC on October
13, 1998 (File No. 000-28861), is incorporated in Part III, Item 13(A); and (2)
Registration Statement on Form SB-2, effective with the SEC on April 27, 1998,
(Registration No. 333-28861), is incorporated in Part III, Item 13(A).
<PAGE>
TABLE OF CONTENTS AND CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
PART I PAGE
- ------ ----
<S> <C> <C>
Item 1 Description of Business 1
Item 2 Description of Property 2
Item 3 Legal Proceedings 2
Item 4 Submission of Matters to a Vote of Security Holders 2
PART II
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Item 5 Market for Common Equity and Related Stockholder
Matters 3
Item 6 Management's Discussion and Analysis 3
Item 7 Financial Statements 6
Item 8 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 6
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
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Item 13 Exhibits and Reports on Form 8-K 12
</TABLE>
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PART I
ITEM 1 - BUSINESS
GENERAL
Mirage Holdings, Inc. ("Company") was incorporated under the laws of
the state of Nevada on March 18, 1997.
Effective September 15, 1998, the Company acquired 51% of Network PVT
Solutions Limited ("NetSol PVT"), a software development company in Lahore,
Pakistan, outstanding capital stock. In addition, the Company 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 PVT. 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.
On April 17, 1999, the Company entered into an agreement with NetSol
PVT and NetSol UK to acquire the remaining 49% of NetSol PVT and 57% of NetSol
UK in exchange for 4.2 million shares of restricted common stock of the Company.
Mirage Holdings, Inc., changed its name to NetSol International, Inc., ("NetSol"
or the "Company"), after completing this acquisition. Unless the context
requires otherwise, references to NetSol are intended to include NetSol
International, Inc., and all of its consolidated subsidiaries.
The Company's principal executive and administrative facility is
currently located at 233 Wilshire Blvd., Suite 510, Santa Monica, California
90401 and its telephone number is (310) 395-4073.
NetSol PVT was incorporated in Pakistan on August 22, 1996, under the
companies ordinance of 1984, as a private company limited by shares. NetSol
PVT's principle business is the design and development of software. NetSol PVT
also conducts research and development on new software applications and designs.
NetSol PVT has developed several leasing and finance products creating
a market within the finance industry. Currently, NetSol PVT has developed a
fully integrated leasing and finance package which is a series of seven products
that can be marketed in an integrated system. Mercedes Benz Finance - Singapore,
Mercedes Benz Leasing - Thailand, Mercedes Benz Finance Ltd. - United Kingdom
and Mercedes Benz Finance - Australia are some of NetSol PVT's customers which
account for a majority of its revenues. In addition, NetSol provides off shore
development and customized Information Technology ("IT") solutions and has blue
chip customers like ICI of UK, Fuzzy Informatik of Germany and 1st net
Technologies, Inc., USA. NetSol PVT has 85 employees, 75 of which specialize in
IT.
NetSol PVT is the first company in Pakistan to achieve the ISO9001
accreditation.
NetSol UK was incorporated in December 1997 under the laws of the
United Kingdom. NetSol UK was established for service and support of customers
in the European markets. In addition, NetSol UK was established to function as a
marketing arm of the Company in Europe.
The Internet
The Company is committed to regaining and extending the advantages of
its direct model approach by moving even greater volumes of product sales,
service and support to the Internet. The Internet, perhaps the purest and most
efficient form of direct model, provides greater convenience and efficiency to
customers
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and, in turn, to the Company. As of March 31, 1999, the Company was receiving in
excess of 10,000 visits per month to www.netsol-Intl.com.
Through its Web site, customers, potential customers and investors can
access a wide range of information about the Company's product offerings, can
configure and purchase systems on-line and can access volumes of support and
technical information about the Company.
OPERATIONS
The Company's headquarters are in Santa Monica, California. Nearly all
of the production and manufacturing is conducted at NetSol PVT in Lahore,
Pakistan. The majority of the marketing is conducted through NetSol UK. NetSol
UK services and supports the clients in Europe, while NetSol PVT services and
supports the customers in the Asia Pacific and North American regions.
ADMINISTRATION
OFFICE FACILITIES - The Company currently leases approximately 1,200
square feet office facility in Santa Monica, California.
EMPLOYEES - The Company currently employs four 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. The
Company's subsidiaries have the following number of employees: NetSol PVT - 85;
NetSol UK - 25; and NetSol USA - 2.
COMPETITION
The computer software industry is highly competitive. Some of the
competitors of the Company are Research Machines, Ltd.; Viglen Computers, Ltd.;
and Akhtar, Ltd.; all based in the United Kingdom. The Company does not believe
it has any competition in Pakistan as it only caters and bids for the offshore
or overseas customers.
ITEM 2 - PROPERTIES
The Company currently leases approximately 1,200 square feet office
facility in Santa Monica, California. The month-to-month lease requires monthly
payments of approximately $1,500.
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
On April 17, 1999 the Company's securityholders via proxy elected
additional members to the Board of Directors and approved the acquisition of
NetSol UK Ltd. and Network Solutions Pvt. Ltd. by the Company. Naeem Ghauri,
Shahab Ghauri and Salim Ghauri were elected to the Board of Directors until the
next annual meeting of the Shareholders. The acquisition and the additional
Board of Directors members were elected with the approval of over 51% of the
shareholders. The Company's securityholders approved a change in the name of the
Company form Mirage Holdings, Inc. to NetSol International, Inc. Accordingly,
the Company changed its symbol from MGHI for its common shares to NTWK and MGHIW
for its warrants to NTWKW.
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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 NTWK, with
prices ranging from $5 to $5 1/2 in September 1, 1999 to September 17, 1999. The
Company's Warrants have been quoted on the OTC/BB under the symbol NTWKW, since
September 24, 1999 at prices ranging from $1 to $1 1/8. Prior to May 15, 1999,
the Company's common stock traded under the symbol "MGHI" and the Company's
warrants traded under the symbol "MGHIW."
(b) STOCKHOLDERS - As of September 22, 1999, the Company had 91 holders
of record of the Company's Common Stock and two 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 September 22, 1999, 7,632,065
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
The Company's objective is to maximize stockholder value by executing a
strategy that focuses on a balance of three priorities: growth, profitability
and liquidity. The following discussion highlights the Company's performance in
the context of these priorities. This discussion should be read in conjunction
with the Consolidated Financial Statements, including the related notes.
RESULTS OF OPERATIONS
The following table summarizes the results of the Company's operations
for each of the past two fiscal years.
OVERVIEW
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1999 June 30, 1998
<S> <C> <C>
Net sales $ 3,002,107 $ 168,835
Cost of goods sold 1,662,259 133,860
Gross profit 1,339,848 34,975
Selling, general & administrative expenses 2,872,953 620,454
Other Income/(expense) 82,487 -0-
Net Loss $(1,626,734) $ (585,479)
</TABLE>
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YEAR ENDED JUNE 30, 1999 COMPARED TO YEAR ENDED JUNE 30, 1998
Net Sales. Net sales include service and maintenance revenues. Net
sales increased by $2,833,272 (1678%) in fiscal year end June 30, 1999
("fiscal 1999") compared to fiscal year end June 30, 1998 ("fiscal 1998").
This increase is due to the 100% acquisition of NetSol UK and NetSol Pvt. The
sales from NetSol UK for fiscal 1999 were $2,899,688. Similarly, sales from
NetSol Pvt. were at $765,988 in fiscal 1999. The international operating
revenues are the sole factor in the increase in sales for fiscal 1999.
Cost of Goods Sold. Costs of goods consists primarily of research and
development, consultants and network operating costs. In fiscal 1999, cost of
goods increased by $1,528,399 (1142%) as sales and revenues increased.
Selling, General and Administrative Expenses. The increase in
selling, general and administrative expenses for fiscal 1999 over fiscal 1998
consisted of increase in staffing and infrastructure expenses, including
information systems, to support the Company's continued growth. In fiscal
1999, the selling, general and administration expenses increased by
$2,252,499 (363%) from fiscal 1998. Although majority of the cost of goods is
controlled in the cheaper overseas production facilities in Pakistan, the
increase in fiscal year 1999 encompasses increases in sales, marketing, cost
of production, as well as research and development and costs of acquisition
and related expenses. The Company had a one time, non-cash event of over
$450,000 upon the termination of one of its Directors and Chief Financial
Officer in the second quarter. This is a non-recurring expense. Additionally,
there was an increase in administrative expenses at each subsidiary and
parent company relating to due-diligence.
The Company continues to invest in research, development and software
engineering activities to support its continued goal of improving and developing
efficient procurement, production and distribution processes, and to develop and
introduce new products and services. As a result, the Company's acquisition of
NetSol Pvt., as the center for research, development and engineering, expenses
increased the staffing levels and product development costs. The Company expects
to continue to increase its research, development and software engineering
spending to support its growth, profitability and liquidity. The Company has
invested in training developers and programmers that are certified as Microsoft
Certified Service Providers (MCSP). These MCSP certified developers and
programmers assist the Company in its growth and development into new markets.
Other Income. The Company has no other material income in fiscal
1999 similar to fiscal 1998.
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. In fiscal 1999 net loss per share was at
$0.44 per share.
LIQUIDITY, CAPITAL RESOURCES AND CAPITAL EXPENDITURES
LIQUIDITY AND CAPITAL RESOURCES
The Company had a net increase in cash of $37,231 for fiscal 1999 as
opposed to a loss of $38,597 for fiscal 1998. The Company does not believe that
inflation has had a significant impact on its operations since inception of the
Company.
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FACTORS AFFECTING THE COMPANY'S BUSINESS AND PROSPECTS
There are numerous factors that affect the Company's business and the
results of its operations. These factors include general economic and business
conditions; the level of demand for personal computers and software; lease and
finance industry; schools' software program interests; the level and intensity
of competition in the computer software industry and the pricing pressures that
may result; the ability of the Company to timely and effectively manage periodic
product transitions as well as component availability; the availability of the
Company to develop upgrades to its current products; the ability of the Company
to develop new products; the ability of the Company to continue to improve its
infrastructure (including personnel and systems) to keep pace with the growth in
its overall business facilities; and the Company's ability to ensure its
products and internal systems and devices will be Year 2000 ready and to assess
the Year 2000 readiness and risk to Company of its third party providers, and
implement effective contingency plans where needed. Finally, the Company is
cognizant that it needs to continually and systematically provide well trained,
qualified consultants and developers to manage and service projects at all of
its customers' sites.
YEAR 2000
As is the case with most other businesses using computers in their
operations, NetSol is in the final process of evaluating and addressing Year
2000 readiness of its own computer systems as well as those of the companies it
has acquired. 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. Such Year 2000 readiness efforts are designed to
identify, address and resolve issues that may be created by computer programs
begin written using two digits rather than four to define the applicable year.
1. STATE OF READINESS. NetSol has had a program in place since
August 1, 1998 to address Year 2000 readiness issues in its critical business
areas related to products, networks, information management systems,
non-information systems with embedded technology, suppliers and customers.
NetSol has taken and will continue to take actions designed to advance its
progress toward becoming Year 2000 ready by the end of November 30, 1999.
NetSol's Year 2000 readiness goal focuses on the ability of NetSol to perform
its business functions and to process information in an unambiguous manner under
various date conditions.
2. THE COSTS TO ADDRESS NETSOL'S YEAR 2000 READINESS CHALLENGES.
Based on information developed to date, as result of NetSol's assessment
efforts, NetSol believes that the costs of modifying, upgrading or replacing its
systems and equipment will not have material effect on NetSol's liquidity, its
financial condition or results of operations. To date NetSol has expended
approximately $100,000 relating to year 2000 readiness.
3. THE RISKS OF NETSOL'S YEAR 2000 READINESS CHALLENGES. In light
of the progress made to date, NetSol does not anticipate delays or postponements
in finalizing and implementing Year 2000 readiness solutions by the end of the
first quarter September 30, 1999. Until NetSol's renovations and validation
phases are substantially complete, however, NetSol cannot fully and accurately
estimate any uncertainty in timely resolving its Year 2000 readiness challenges
or in finalizing and implementing related Year 2000 readiness resolutions.
Additionally, any failure by third parties which have a material relationship
with NetSol to achieve full Year 2000 readiness may be a potential risk if such
failure were to adversely impact the ability of such third parties to provide
any products or services that are critical to NetSol's operations. Finally,
where NetSol cannot validate or certify that technology provided by material
third parties is fully Year 2000 ready, NetSol is seeking to obtain assurances
from these material third parties that their systems are or will be Year 2000
ready no later than the end of the first quarter, September 30, 1999. If these
material third parties fail to
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appropriately address their own Year 2000 readiness challenges , there could be
a materially adverse effect on NetSol's financial condition and results of
operations. These risks include, but are not limited to:
- implementing commercial launches in new markets or introducing
new services in existing markets;
- pursuing acquisitions, alliances and joint ventures that
provide synergy and business fit;
- pursuing additional business opportunities; and
- obtaining equity or debt financing.
4. CONTINGENCY PLANS. NetSol is at the final stages of testing
the systems and software testing in its critical systems by third party
providers of its critical products and services. As a result, NetSol will
assess the development of appropriate alternative solutions presented by any
relevant third party to determine its effectiveness and likely impact on
NetSol's Year 2000 readiness risk profile.
INFLATION AND FOREIGN CURRENCY EXCHANGE
Inflation is not a material factor affecting NetSol's business.
General operating expenses such as salaries, employee benefits and lease
costs are, however, subject to normal inflationary pressures. From time to
time NetSol may experience price changes in connection with the purchase of
certain system infrastructure and equipment, but the Company does not
currently believe that any of such price changes will be material to its
business.
The net assets of the foreign operations of the Company's subsidiaries
are subject to foreign currency exchange risks since they are primarily
maintained in local currency. Additionally, the long-term debt of the Company
and its subsidiaries is almost in US dollar denominated form, which also exposes
such entities to local foreign exchange risks. Certain subsidiaries conduct
business in countries in which the rate of inflation is significantly higher
than that of the United States. NetSol will attempt to protect its earnings from
inflation and possible currency devaluation by striving to consummate all of its
transactions in U.S. dollars.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
Statement of Position 98-1 "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." This statement does not have a
significant effect on the Company's financial position or results of operations.
Statement of Position 98-5 "Reporting on the Costs of Start-Up
Activities." - The American Institute of Certified Public Accountants issued a
Statement of Position 98-5 which will be effective in 1999 and will require
costs of start-up activities and organization costs to be expensed as incurred.
This statement does not have a significant effect on the Company's financial
position or results of operations.
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.
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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 44 President, Chief Financial Officer, Secretary, and Director
Salim Ghauri 42 Chief Executive Officer, and Director
Naeem Ghauri 41 Chief Operations Officer, and Director
Earl Shannon 32 Director
Irfan Mustafa 48 Director
Shahab Ghauri 48 Director
</TABLE>
NAJEEB U. GHAURI is the President, Secretary, and Director of the
Company since 1997 and Chief Financial Officer since 1998. Mr. Ghauri is
responsible for the Company's corporate finance, managing the day-to-day
operations of the Company, as well as the Company's overall growth and expansion
plan. Prior to joining the Company, Mr. Ghauri was part of the marketing team of
Atlantic Richfield Company ("ARCO"), a Fortune 500 company, from 1987-1997. Mr.
Ghauri received his Bachelor of Science degree in Management/Economics from
Eastern Illinois University in 1979, and his M.B.A. in Marketing Management from
Claremont Graduate School in California in 1983.
SALIM GHAURI is the Chief Executive Officer and Director of the Company
since 1998. Mr. Ghauri is also the CEO of Network Solutions (Pvt.) Ltd. a wholly
owned subsidiary of the Company located in Lahore, Pakistan. Before starting
that Company, Mr. Ghauri was employed with BHP in Sydney, Australia from
1987-1995 where he commenced his employment as a consultant and was promoted to
senior project manager. Mr. Ghauri received his Bachelor of Science degree in
computer science from University of Punjab in Lahore, Pakistan, in 1980.
NAEEM GHAURI is the Chief Operations Officer and Director of the
Company since 1999. Mr. Ghauri is also the managing Director of NetSol UK Ltd.,
a wholly owned subsidiary of the Company located in Milton Keyes, England. Prior
to joining the NetSol team, Mr. Ghauri was Project Director for Mercedes-Benz
Finance Ltd., a subsidiary of Daimler-Chrysler, Germany from 1994-1999. Mr.
Ghauri supervised over 200 project managers, developers analysts and users in
nine European countries. Mr. Ghauri has his B.S. in computer
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science from Brighton University, United Kingdom, and a diploma in programming
and maintenance from Computer Learning Center in Los Angeles, California.
EARL SHANNON is a Director of the Company. Mr. Shannon is currently the
President and Director of Winthrop Venture Management, Inc., an investment
management company based in Fort Lauderdale, Florida. The company manages the
portfolios of select private individuals and is the General Partner of The
Winthrop Venture Fund, Ltd., a private, invitation only investment fund. Mr.
Shannon is also the sole consultant to The Silas Offshore Funds, Ltd., a
Bahamian based private mutual fund.
IRFAN MUSTAFA is a Director of the Company since 1997. Mr. Mustafa is
currently a senior executive with TRICON International, Inc., based in Dubi.
Prior to TRICON, Mr. Mustafa was an Executive Designate Program with Pepsi-Cola
Company from 1990 to 1997. Mr. Mustafa received his M.B.A. from IMD in Lousanne,
Switzerland in 1975; his second M.B.A. from Institute of Business Administration
in Karachi, Pakistan and a B.S.C. in Economics from Pinajab University in
Lahore, Pakistan in 1975.
SHAHAB GHAURI is a Director of the Company since 1999. Mr. Ghauri is
currently the Managing Director of SG Sports Ltd., in London, England. Mr.
Ghauri received his Bachelor of Arts from the University of Punjab in economics
in 1971.
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, no individuals 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.
ITEM 10-EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE AND OPTIONS
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. 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.
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
------------------------- ---------- ------------------- ------------ --------------------------------------
Name and Principal Year Annual Awards(2)
Position Ended Compensation(1) ----------------- ----------------
June Bonus Restricted Securities
30 Stock Awards(3) Underlying
Options(4)
------------------------- ---------- ------------------- ------------ ----------------- ----------------------
<S> <C> <C> <C> <C> <C>
Najeeb U. Ghauri, 1999 $100,000 -0- 490,000 220,000(5)
President and 1998 91,150 250,000 25,000(6)
Secretary,
Chief Financial
Officer,
Director
------------------------- ---------- ------------------- ------------- ------------------ --------------------
Naeem Ghauri, Chief 1999 150,000 30,000(11) 1,157,666 150,000(7)
Operations Officer, 1998 N/A N/A N/A N/A
Director
------------------------- ---------- ------------------- ------------- ------------------ --------------------
Irfan Mustafa, Director 1999 -0- -0- -0- 20,000(8)
1998 -0- -0- 100,000 45,000(9)
------------------------- ---------- ------------------- ------------- ------------------ --------------------
Earl Shannon, Director 1999 -0- -0- -0- 20,000(10)
1998 N/A -0- N/A N/A
------------------------- ---------- ------------------- ------------- ------------------ --------------------
Salim Ghauri, Chief 1999 100,000 -0- 1,320,666 150,000(7)
Executive Officer, 1998 N/A N/A N/A N/A
Director
------------------------- ---------- ------------------- ------------- ------------------ ---------------------
Shahab Ghauri, Director 1999 -0- -0- 1,157,666 -0-
1998 N/A N/A N/A N/A
------------------------- ---------- ------------------- ------------- ------------------ ---------------------
All Officers and 1999 $350,000 $30,000 4,125,998 560,000
Directors, as a Group 1998 182,300 -0- 350,000 70,000
(6 persons)
------------------------- ---------- ------------------- ------------- ------------------ ---------------------
</TABLE>
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(1) No officers received or will receive any bonus or other annual compensation
other than salaries during fiscal 1998-1999. 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, if any,
cannot be ascertained.
(2) No officers received or will receive any long term incentive plan (LTIP)
payouts or other payouts during fiscal 1999.
(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.
(5) Includes 150,000 options granted under Employment Contract between the
Company and Employee at an exercise price of $1.58; includes 20,000
options granted to each Director at an exercise price of $1.44 for five
years from May 18, 1999; includes 50,000 options granted under 1997
Incentive and Non-Statutory Stock Option Plan issued in May 1999 at an
exercise price of $1.44 for five years from May 18, 1999.
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(6) Includes 25,000 options issued under the Company's 1997 Incentive and
Non-Statutory Stock Option Plan for five years from May 12, 1997.
(7) Includes 150,000 options granted under the Employment Contract between the
Company and Employee at an exercise price of $1.58.
(8) Includes 20,000 options granted to each Director for the term 1997-1998
at an exercise price of $.01 for five years from May 12, 1997;
(9) Includes 20,000 options granted to each Director for the term 1998-1999
at an exercise price of $1.44 for five years from May 18, 1999; includes
25,000 options granted as Chairman of the Board at an exercise price of
$1.44 for five years from May 18, 1999;
(10) Includes 20,000 options granted to each Director for the term 1998-1999 at
an exercise price of $1.44 for five years from May 18, 1999.
(11) Naeem Ghauri received a signing bonus upon the execution of his employment
agreement dated April, 17, 1999.
EMPLOYMENT AGREEMENTS
On April 17, 1999, Messrs. Najeeb Ghauri, Salim Ghauri and Naeem Ghauri
each executed employment agreements with the Company for a term of three (3)
years.
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 each
of its three directors 20,000 options to purchase common stock of the Company
under the Company's Incentive and Nonstatutory Stock Option Plan. The
three directors appointed subsequent to the acquisition of NetSol Pvt and
NetSol UK, were not entitled to the 20,000 options granted to each director
of the Company as they did not serve an entire year on the board.
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 August 28, 1999, 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
Number of Beneficially
Name Shares(1) owned
- ---------------------------- ------------- ------------------------
<S> <C> <C>
Najeeb Ghauri 985,000(2) 12.9%
- ---------------------------- --------------- ------------------------
Naeem Ghauri 1,307,666(3) 17%
- ---------------------------- --------------- ------------------------
Irfan Mustafa 165,000(4) 2.2%
- ---------------------------- --------------- ------------------------
Salim Ghauri 1,470,666(3) 19.3%
- ---------------------------- --------------- ------------------------
Shahab Ghauri 1,157,666 17%
- ---------------------------- --------------- ------------------------
Earl Shannon 20,000(5) *
- ---------------------------- --------------- ------------------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------- --------------- ------------------------
<S> <C> <C>
Percentage
Number of Beneficially
Name Shares(1) Owned
- ---------------------------- --------------- ------------------------
All officers and directors
as a group (6 persons) 5,105,998 68.4%
- ---------------------------- --------------- ------------------------
</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 150,000 options granted under Employment Contract between the
Company and Employee at an exercise price of $1.58; includes 20,000
options granted to each Director at an exercise price of $1.44 for five
years from May 18, 1999; includes 50,000 options granted under 1997
Incentive and Non-Statutory Stock Option Plan issued in May 1999 at an
exercise price of $1.44 for five years from May 18, 1999. Includes 25,000
options issued under the Company's 1997 Incentive and Non-Statutory Stock
Option Plan for five years from May 12, 1997.
(3) Includes 150,000 options granted under the Employment Contract between the
Company and Employee at an exercise price of $1.58.
(4) Includes 20,000 options granted to each Director for the term 1997-1998 at
an exercise price of $.01 for five years from May 12, 1997; Includes
20,000 options granted to each Director for the term 1998- 1999 at an
exercise price of $1.44 for five years from May 18, 1999; includes 25,000
options granted as Chairman of the Board at an exercise price of $1.44
for five years from May 18, 1999.
(5) Includes 20,000 options granted to each Director for the term 1998-1999
at an exercise price of $1.44 for five years from May 18, 1999.
ITEM 12-CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On April 17, 1999, the Company increased its ownership interest in
NetSol Pvt and NetSol UK to 100% of the outstanding capital stock. See
"Business of the Company" for a full description of this transaction. The
Chief Executive Officer, President, and Director of NetSol Pvt is Salim
Ghauri; a Director of NetSol Pvt is Shahab Ghauri; and another Director of
NetSol UK is Naeem Ghauri; all brothers of Najeeb U. Ghauri, President,
Secretary, Chief Financial Officer and a Director of the Company. The Company
believes that its acquisition of NetSol Pvt and NetSol Uk 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 could result in conflicts of
interest, which could result in actions taken by the Company that do not
fully reflect the interests of all shareholders of the Company.
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.
11
<PAGE>
PART IV
ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
3.1 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)
3.3 Amendment to Articles of Incorporation dated May 21, 1999
10.1 Lease Agreement, dated September 7, 1998 for Santa Monica
executive offices(2)
10.2 Company Stock Option Plan dated May 18, 1999
10.3 Employment Agreement, dated April 17, 1999 by and between Mirage
Holdings, Inc. and Najeeb U. Ghauri
10.4 Employment Agreement, dated April 17, 1999 by and between Mirage
Holdings, Inc. and Salim Ghauri
10.5 Employment Agreement, dated April 17, 1999 by and between
Mirage Holdings, Inc. and Naeem Ghauri
10.6 Acquisition Agreement, dated April 3, 1999 by and between NetSol
PVT and NetSol UK and SGO
21.1 A list of all subsidiaries of the Company
24.1 Consent of Stonefield Josephson & Company
- ---------------------
(1) Incorporated by reference to Registration Statement No. 333-28861 on
Form SB-2.
(2) Incorporated by reference to 10K-SB filed October 13, 1998.
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.
NetSol International, Inc.
Date: SEPTEMBER 24 , 1999 BY:/S/ NAJEEB U. GHAURI
------------------------ ----------------------------------
Najeeb U. Ghauri
President, Chief Financial Officer
and Secretary
Date: SEPTEMBER 24 , 1999 BY:/S/ SALIM GHAURI
------------------------ -----------------------------------
Salim Ghauri
Chief Executive Officer
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.
Date: SEPTEMBER 24 , 1999 BY:/S/ NAJEEB U. GHAURI
---------------------- ------------------------------------
Najeeb U. Ghauri
President, Chief Financial Officer
Secretary and Director
Date: SEPTEMBER 24 , 1999 BY:/S/ SALIM GHAURI
-------------------------- ------------------------------------
Salim Ghauri
Chief Executive Officer, Director
Date: SEPTEMBER 24 , 1999 BY:/S/ NAEEM GHAURI
-------------------------- ------------------------------------
Naeem Ghauri
Chief Operating Officer, Director
Date: SEPTEMBER 24 , 1999 BY:/S/ SHAHAB GHAURI
-------------------------- ------------------------------------
Shahab Ghauri
Director
Date: SEPTEMBER 24 , 1999 BY:/S/ IRFAN MUSTAFA
-------------------------- ------------------------------------
Irfan Mustafa
Director
Date: SEPTEMBER 24 , 1999 BY:/S/ EARL SHANNON
-------------------------- ------------------------------------
Earl Shannon
Director
13
<PAGE>
NETSOL INTERNATIONAL, INC.
(FORMERLY MIRAGE HOLDINGS, INC.)
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1999 AND 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' Equity F-4
Consolidated Statements of Cash Flows F5-F6
Notes to Consolidated Financial Statements F7-F15
</TABLE>
14
<PAGE>
Board of Directors
Netsol International, Inc. (formerly
Mirage Holdings, Inc.)
Santa Monica, California
We have audited the accompanying consolidated balance sheet of Netsol
International, Inc. (formerly Mirage Holdings, Inc.) as of June 30, 1999, and
the related consolidated statements of operations, stockholders' equity and
cash flows for the years ended June 30, 1999 and 1998. 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 did not audit the financial statements of
Network Solutions PVT, Ltd. and Netsol UK, Limited, wholly owned
subsidiaries, whose statements reflect combined total assets of $1,194,000 as
of June 30, 1999 and combined total net revenues of $3,002,107 for the year
then ended. Those statements were audited by other auditors whose report has
been furnished to us, and our opinion, insofar as it relates to the amounts
included for Network Solutions PVT, Ltd., and Netsol UK, Limited, is based
solely on the report of the other auditors.
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 audits provide
a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Netsol
International, Inc. and subsidiaries as of June 30, 1999, and the results of
its consolidated operations and its cash flows for the years ended June 30,
1999 and 1998 in conformity with generally accepted accounting principles.
/s/ Stonefield Josephson, Inc
CERTIFIED PUBLIC ACCOUNTANTS
Santa Monica, California
September 8, 1999
F-1
<PAGE>
NETSOL INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET - JUNE 30, 1999
ASSETS
<TABLE>
<S> <C> <C>
CURRENT ASSETS:
Cash $ 31,713
Accounts receivable 519,106
Other current assets 167,070
---------------
Total current assets $ 717,889
PROPERTY AND EQUIPMENT, net of
accumulated depreciation and amortization 244,638
OTHER ASSETS:
Deposits 4,415
Product licenses, renewals, enhancements, copyrights,
trademarks and tradenames, net 5,006,222
Customer lists, net 1,173,333
Goodwill, net 3,525,872
---------------
Total other assets 9,709,842
----------------
$ 10,672,369
----------------
----------------
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 652,750
Current maturities of obligations under capitalized lease 23,281
Loans payable, stockholders 51,746
---------------
Total current liabilities $ 727,777
OBLIGATIONS UNDER CAPITALIZED LEASES,
less current maturities 38,601
STOCKHOLDERS' EQUITY:
Common stock; $.001 par value, 25,000,000 shares
authorized, 7,452,065 shares issued and outstanding 7,452
Additional paid-in capital 12,400,643
Accumulated deficiency (2,502,104)
---------------
Total stockholders' equity 9,905,991
----------------
$ 10,672,369
----------------
----------------
</TABLE>
See accompanying independent auditors' report and notes to consolidated
financial statements.
F-2
<PAGE>
NETSOL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended Year ended
June 30, 1999 June 30, 1998
--------------- ---------------
<S> <C> <C>
NET REVENUES $ 3,002,107 $ 168,835
COST OF REVENUES 1,662,259 133,860
--------------- ---------------
GROSS PROFIT 1,339,848 34,975
OPERATING EXPENSES 2,790,466 620,454
--------------- ---------------
NET LOSS BEFORE INCOME ALLOCATED TO
MINORITY INTEREST (1,450,618) (585,479)
MINORITY INTEREST IN SUBSIDIARIES' EARNINGS (305,616) -
NET LOSS BEFORE EXTRAORDINARY ITEM (1,756,234) (585,479)
GAIN ON FORGIVENESS OF DEBT, net of tax 129,500 -
--------------- ---------------
NET LOSS $ (1,626,734) $ (585,479)
--------------- ---------------
--------------- ---------------
NET LOSS PER SHARE -
basic and diluted $ (0.44) $ (0.33)
--------------- ---------------
--------------- ---------------
WEIGHTED AVERAGE SHARES OUTSTANDING -
basic and diluted 3,733,606 1,774,065
--------------- ---------------
--------------- ---------------
</TABLE>
See accompanying independent auditors' report and notes to consolidated
financial statements.
F-3
<PAGE>
NETSOL INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEAR ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
Total
Common stock Additional stockholders'
------------ paid-in Accumulated equity/
Shares Amount capital Deficit (deficiency)
------ ------ ------- ------- ------------
<S> <C> <C> <C> <C> <C>
Balance at July 1, 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)
Common stock and warrants sold
through initial public offering, net 251,000 251 987,733 987,984
Issuance of common stock in
exchange for services rendered 235,000 235 710,631 710,866
Common stock options granted
for services 199,844 199,844
Exercise of common stock options 105,000 105 945 1,050
Sale of common stock warrants 5,667 5,667
Exercise of warrants to convert to
common stock 397,000 397 294,952 295,349
Issuance of common stock relating
to acquisition of subsidiaries 4,690,000 4,690 9,658,810 9,663,500
Net loss for the year ended
June 30, 1999 (1,626,734) (1,626,734)
----------- ----------- ------------- ------------- --------------
Balance at June 30, 1999 7,452,065 $ 7,452 $ 12,400,643 $ (2,502,104) $ 9,905,991
----------- ----------- ------------- ------------- --------------
----------- ----------- ------------- ------------- --------------
</TABLE>
See accompanying independent auditors' report and notes to consolidated
financial statements.
F-4
<PAGE>
NETSOL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
<TABLE>
<CAPTION>
Year ended Year ended
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Net loss $ (1,626,734) $ (585,479)
--------------- --------------
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES:
Depreciation and amortization 359,018 1,814
Gain (loss) on sale of marketable securities - 13,587
Non-cash compensation expense 910,710 -
Minority interest income (305,616) -
Forgiveness of debt 129,500 -
Bad debts - 46,051
Loss on impairment of property and equipment - 43,867
CHANGES IN ASSETS AND LIABILITIES:
(INCREASE) DECREASE IN ASSETS:
Accounts receivable (519,106) 4,009
Other current assets (16,507) -
Inventory - 46,891
Deposits (4,415) -
INCREASE (DECREASE) IN LIABILITIES -
accounts payable and accrued expenses 305,531 316,058
--------------- --------------
Total adjustments 859,115 472,277
--------------- --------------
Net cash used for operating activities (767,619) (113,202)
---------------- --------------
CASH FLOWS PROVIDED BY (USED FOR) INVESTING ACTIVITIES:
Proceeds from note receivable - 113,104
Purchase (sale) of investments (184,618) (75,000)
Purchase of property, plant and equipment (224,791) (3,736)
--------------- --------------
Net cash provided by (used for) investing activities (409,409) 34,368
--------------- --------------
CASH FLOWS PROVIDED BY (USED FOR) FINANCING ACTIVITIES:
Issuance of common stock and warrants, net 1,687,713 -
Redemption of common stock - (20,000)
Proceeds from loans payable, stockholders 51,746 224,050
Payments on loans payable, related party (328,110) -
Deferred offering costs (193,850) (163,813)
Payments on capital lease obligations (3,240) -
--------------- --------------
Net cash provided by financing activities 1,214,259 40,237
--------------- --------------
NET INCREASE (DECREASE) IN CASH 37,231 (38,597)
CASH AND CASH EQUIVALENTS, beginning of period (5,518) 33,079
--------------- --------------
CASH AND CASH EQUIVALENTS, end of period $ 31,713 $ (5,518)
--------------- --------------
--------------- --------------
</TABLE>
(Continued)
See accompanying independent auditors' report and notes to consolidated
financial statements.
F-5
<PAGE>
NETSOL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
INCREASE (DECREASE) IN CASH
<TABLE>
<CAPTION>
Year ended Year ended
June 30, 1999 June 30, 1998
--------------- --------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 22,218 $ 33,918
--------------- --------------
--------------- --------------
Income taxes paid $ 2,400 $ -
--------------- --------------
--------------- --------------
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of 4,690,000 shares of common stock per
stock purchase agreement $ 9,663,500 $ -
--------------- --------------
--------------- --------------
Granting of common stock options in exchange for
services received $ 199,844 $ -
--------------- --------------
--------------- --------------
Issuance of common stock shares for services received $ 710,631 $ -
--------------- --------------
--------------- --------------
Forgiveness of debt $ 129,500 $ -
--------------- --------------
--------------- --------------
Deferred offering costs offset against gross proceeds from
initial public offering $ 203,813
---------------
---------------
</TABLE>
See accompanying independent auditors' report and notes to consolidated
financial statements.
F-6
<PAGE>
NETSOL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1999 AND 1998
(1) GENERAL:
Netsol International, Inc. (the "Company"), formerly known as Mirage
Holdings, Inc., was incorporated under the laws of the State of Nevada
on March 18, 1997. During November of 1998, Mirage Collections, Inc., a
wholly owned and non-operating subsidiary, was dissolved.
On September 15, 1998 and April 17, 1999, the Company purchased from
related parties, 51% and 49%, respectively, of the outstanding common
stock of Network Solutions PVT, Ltd., a Pakistani Company, and 43% and
57% of the outstanding common stock of Netsol UK, Limited, a United
Kingdom Company issuance of 4,690,000 restricted common shares of the
Company and cash payments of $775,000, for an aggregate purchase price
of approximately $10.4 million. These acquisitions were accounted for
using the purchase method of accounting, and accordingly, the purchase
price was allocated to the assets purchased and liabilities assumed
based upon their estimated fair values on the date of acquisition,
which approximated $300,000. Included in the accompanying consolidated
financial statements are other assets acquired at fair market value
consisting of product licenses, product renewals, product enhancements,
copyrights, trademarks, tradenames and customer lists. The management
of the Company allocated approximately $6.3 million to these assets,
which is being amortized straight line over 15 years, based on
independent valuation reports prepared for the Company. The excess of
the purchase prices over the estimated fair values of the net assets
acquired, approximately $3.8 million, was recorded as goodwill, and is
being amortized straight line over 15 years from the date of each
purchase.
During April 1999, the Company formed Netsol USA, Inc. as a wholly
owned subsidiary. There were no material activities during the period
from inception to June 30, 1999.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION:
The accompanying consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries,
Network Solutions PVT, Ltd., Netsol UK, Limited, and Netsol USA,
Inc. All material intercompany accounts have been eliminated in
consolidation.
BUSINESS ACTIVITY:
The Company designs, develops, markets, and exports proprietary
software products to customers in the automobile finance and
leasing industry worldwide. The Company also provides consulting
services in exchange for fees from customers.
See accompanying independent auditors' report.
F-7
<PAGE>
NETSOL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1999 AND 1998
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
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.
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. Common stock equivalents have been
excluded from the net loss per share calculation because their
effect would reduce loss per share.
FOREIGN CURRENCY:
The accounts of Netsol UK, Limited and Network Solutions PK,
Ltd. use British Pounds and Pakistan Rupees as the functional
currencies, respectively. Assets and liabilities are translated
at the exchange rate on the balance sheet date, and operating
results are translated at the average exchange rate throughout
the period. Any future translation gains and losses (not
material at June 30, 1999) will be classified as an item of
other comprehensive income in the stockholders' equity section
of the consolidated balance sheet.
See accompanying independent auditors' report.
F-8
<PAGE>
NETSOL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1999 AND 1998
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
ACCOUNTING FOR STOCK-BASED COMPENSATION:
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.
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, 1999, the Company had net federal and state
operating loss carryforwards totaling approximately $1,450,00
and $1,600,000, respectively, expiring in various years through
2019. 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:
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.
NEW ACCOUNTING PRONOUNCEMENTS:
The Company has adopted Statements of Financial Accounting
Standards No. 130 "Reporting Comprehensive Income" and 131
"Disclosures About Segments of an Enterprise and Related
Information". Adoption of these pronouncements did not
materially affect the financial statements.
See accompanying independent auditors' report.
F-9
<PAGE>
NETSOL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1999 AND 1998
(3) MAJOR CUSTOMERS:
During the year ended June 30, 1999, one customer accounted for
approximately 55% of total sales. This customer owed
approximately $158,000 as of June 30, 1999.
(4) OTHER CURRENT ASSETS:
A summary is as follows:
Prepaid consultants fees $ 125,463
Prepaid expenses 25,100
Other 16,507
--------------
$ 167,070
--------------
--------------
(5) PROPERTY AND EQUIPMENT:
A summary is as follows:
Office furniture and equipment $ 164,180
Assets under capital leases 104,588
Automobiles 42,372
Building improvements 8,685
--------------
319,825
Less accumulated depreciation and amortization 75,187
--------------
$ 244,638
--------------
--------------
Depreciation and amortization expenses related to property and
equipment amounted to $42,035 and $1,814 for the years ended
June 30, 1999 and 1998, respectively.
(6) PRODUCT LICENSES, RENEWALS, ENHANCEMENTS, COPYRIGHTS, TRADEMARKS
AND TRADENAMES:
A summary is as follows:
Product licenses, renewals, enhancements,
copyrights, trademarks and tradenames $ 5,120,000
Less accumulated amortization 113,778
--------------
$ 5,006,222
--------------
--------------
Amortization expense related to product licenses, renewals,
enhancements, copyrights, trademarks and tradenames amounted
to $113,778 and $0 for the years ended June 30, 1999 and 1998,
respectively.
See accompanying independent auditors' report.
F-10
<PAGE>
NETSOL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1999 AND 1998
(7) CUSTOMER LISTS:
A summary is as follows:
Customer lists $ 1,200,000
Less accumulated amortization 26,667
--------------
$ 1,173,333
--------------
--------------
Amortization expense related to customer lists amounted to $26,667 and
$0 for the years ended June 30, 1999 and 1998, respectively.
(8) GOODWILL:
A summary is as follows:
Goodwill $ 3,702,410
Less accumulated amortization 176,538
--------------
$ 3,525,872
--------------
--------------
Amortization expense related to goodwill amounted to $176,538 and $0
for the years ended June 30, 1999 and 1998, respectively.
(9) FORGIVENESS OF DEBT:
During the year, the Company recognized an extraordinary gain of
$129,500, net of tax effect. Basic and diluted earnings per share, net
of tax effect, amounted to $0.03.
Total interest expense amounted to $22,218 and $33,918 for the years
ended June 30, 1999 and 1998, respectively.
(10) STOCKHOLDERS' EQUITY:
Initial Public Offering
On September 15, 1998, the Parent completed the sale of its minimum
offering of shares in its initial public offering which generated gross
proceeds of $1,385,647 from the sale of 251,000 shares of common stock
and 929,825 warrants, each warrant to purchase one share of the
Parent's common stock at an exercise price of $6.50 for a term of five
years. During December of 1998, the Company sold an additional 56,667
warrants for gross proceeds of $5,667. As of June 30, 1999, 986,492
warrants were outstanding.
See accompanying independent auditors' report.
F-11
<PAGE>
NETSOL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1999 AND 1998
(10) STOCKHOLDERS' EQUITY, CONTINUED:
INITIAL PUBLIC OFFERING, CONTINUED
Deferred offering costs of $397,663 have been netted against gross
proceeds of $1,385,647 and are presented in the accompanying statement
of stockholders' equity.
ACQUISITIONS OF NETWORK SOLUTIONS PVT, LTD. AND NETSOL UK, LIMITED
On September 15, 1998, the Company purchased 51% of the outstanding
common stock of Network Solutions PVT, Ltd., a Pakistani Company, and
43% of the outstanding common stock of Netsol UK, Limited, a United
Kingdom Company, in exchange for cash payment of $775,000 and issuance
of 490,000 restricted common shares of Netsol International, Inc. On
April 17, 1999, the Company acquired an additional 49% of the
outstanding common stock of Network Solutions PVT, Ltd., and 57% of the
outstanding common stock of Netsol UK, Limited through the issuance of
4,200,000 restricted common shares of Netsol International, Inc.
UNAUDITED PROFORMA DISCLOSURES
The following unaudited proforma results of operations and net loss per
share assume that the acquisitions of Network Solutions PVT, Ltd. and
Netsol UK, Limited occurred as of the beginning of each period
presented, after giving effect to proforma adjustments. The proforma
adjustment represents amortization of goodwill, product licenses,
renewals, enhancements, copyrights, trademarks and tradenames, and
customer lists. The proforma adjustment also includes adjustments to
common stock shares issued and outstanding, that relate to the
acquisition of subsidiaries, as if they had occurred as of the
beginning of each period presented. The proforma financial information
is presented for informational purposes only and may not necessarily be
indicative of the operating results that would have occurred had these
acquisitions been consummated as of the beginning of each period
presented, nor is it indicative of future operating results.
June 30, June 30,
1999 1998
-------------- --------------
Net sales $ 3,002,107 $ 2,083,476
-------------- --------------
-------------- --------------
Cost of sales $ 1,662,259 $ 1,327,125
-------------- --------------
-------------- --------------
Operating expenses $ 3,152,588 $ 2,022,760
-------------- --------------
-------------- --------------
Net loss $ (2,118,356) $ (1,266,409)
-------------- --------------
-------------- --------------
Net loss per share:
Basic $ (0.30) $ (0.20)
-------------- --------------
-------------- --------------
Diluted $ (0.26) $ (0.18)
-------------- --------------
-------------- --------------
See accompanying independent auditors' report.
F-12
<PAGE>
NETSOL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1999 AND 1998
(11) 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 known 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.
The number and weighted average exercise prices of options granted
under the 1997 Plan for the years ended June 30, 1999 and 1998 are as
follows:
<TABLE>
<CAPTION>
1999 1998
--------------------- ----------------------
Average Average
Exercise Exercise
Number Price Number Price
------ ----- ------ -----
<S> <C> <C> <C> <C>
Outstanding at the beginning of the year 120,000 $ 0.01 - $ -
Outstanding at the end of the year 230,000 $ 0.77 120,000 $ 0.01
Granted during the year 215,000 $ 0.82 120,000 $ 0.01
Exercised during the year 105,000 $ 0.01 - $ -
Exercisable at the end of the year 186,250 $ 0.71 120,000 $ 0.01
Weighted average remaining life (years) 4.2 5.0
</TABLE>
See accompanying independent auditors' report.
F-13
<PAGE>
NETSOL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1999 AND 1998
(11) INCENTIVE AND NONSTATUTORY STOCK OPTION PLAN, CONTINUED:
On May 18, 1999, the Company enacted an Incentive and Nonstatutory
Stock Option Plan (the "Plan") for its employees, directors and
consultants under which a maximum of 5,000,000 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 known 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, directors
and consultants without regard to any performance measures. All options
issued pursuant to the Plan are nontransferable and subject to
forfeiture.
Any Option granted to an Employee of the Corporation shall become
exercisable over a period of no longer than ten (10) years and no less
than twenty percent (20%) of the shares covered thereby shall become
exercisable annually. No Incentive Stock Option shall be exercisable,
in whole or in part, prior to one (1) year from the date it is granted
unless the Board shall specifically determine otherwise, as provided
herein. In no event shall any Option be exercisable after the
expiration of ten (10) years from the date it is granted, and no
Incentive Stock Option granted to a Ten Percent Holder shall, by its
terms, be exercisable after the expiration of ten (10) years from the
date of the Option. Unless otherwise specified by the Board or the
Committee in the resolution authorizing such option, the date of grant
of an Option shall be deemed to be the date upon which the Board or the
Committee authorizes the granting of such Option.
The number and weighted average exercise prices of options granted
under the 1999 Plan for the year ended June 30, 1999 is as follows:
Average
Exercise
Number Price
------ -----
Outstanding at the beginning of the year - $ -
Outstanding at the end of the year 1,350,000 $ 1.58
Granted during the year 1,350,000 $ 1.58
Exercised during the year - -
Exercisable at the end of the year 18,750 $ 1.58
Weighted average remaining life (years) 5.0
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.
See accompanying independent auditors' report.
F-14
<PAGE>
NETSOL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1999 AND 1998
(12) COMMITMENTS:
LEASES
The following is a schedule by years of future minimum rental payments
required under operating leases that have noncancellable lease terms in
excess of one year as of June 30, 1999:
Year ending June 30,
2000 $ 38,360
2001 49,505
2002 20,590
--------------
$ 108,455
--------------
--------------
Rent expense amounted to $47,462 and $65,916 for the years ended June
30, 1999 and 1998, respectively.
EMPLOYMENT AGREEMENTS
Effective May 18, 1999, the Company entered into employment agreements
with 3 officers for a period of three years. Pursuant to this
agreement, these officers will be compensated at salaries ranging from
$100,000 to $150,000 annually. In addition, these officers have also
been granted 450,000 stock options each, which will vest over the 3
years and are exercisable at prices ranging from $1.58 to $3.50.
(13) SUBSEQUENT EVENTS:
ACQUISITION OF NETWORK SOLUTIONS LIMITED
Subsequent to June 30, 1999, Netsol UK, Limited (buyer), wholly owned
subsidiary of the Company, acquired 100% of the outstanding capital
stock of Network Solutions Limited and subsidiaries, a United Kingdom
Company (seller), in exchange for 155,000 shares of Rule 144 restricted
common shares of the Company.
JOINT VENTURE
The Company entered into a joint venture agreement with 1st Net
Technologies, Inc. to share profits from an online business of
providing electronic commerce. Pursuant to this agreement, both parties
will also share the costs related to maintaining and operating this
joint venture. In the event this joint venture is subject to lawsuits
or loss contingencies, the Company maybe responsible for the entire
loss and will have a right to be indemnified by 1st Net Technologies,
Inc. for their share of the losses.
See accompanying independent auditors' report.
F-15
<PAGE>
EXHIBIT 3.3
Amendment to Articles of Incorporation dated May 21, 1999
<PAGE>
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
MAY 21, 1999
No. C5490-97
/s/ DEAN HELLER
DEAN HELLER, SECRETARY OF STATE
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(AFTER PAYMENT OF CAPITAL OR ISSUANCE OF STOCK)
OF
MIRAGE HOLDINGS, INC.
The President and the Secretary of MIRAGE HOLDINGS, INC. certify:
1. Article 1 of Articles of Incorporation of this Corporation is amended
to read as follows:
Article 1. The name of the Corporation is:
NetSol International, Inc.
2. The foregoing Amendment of the Articles of Incorporation has been duly
approved by the Board of Directors.
3. The foregoing Amendments of the Articles of Incorporation has been duly
approved by the required vote of shareholders in accordance with Section 78.390
of the Nevada Revised Statutes. The total number of outstanding shares of the
Corporation is 1,000. The number of shares voting in favor of the Amendment
equaled or exceeded the vote required. The percentage vote required was more
than fifty percent (50%).
/s/ NAJEEB GHAURI
- -----------------------------
Najeeb Ghauri,
President and Secretary
1
<PAGE>
State of California )
) ss
County of ORANGE )
On May 19, 1999, personally appeared before me, a Notary Public,
personally appeared NAJEEB GHAURI, personally known to me (or proven to me on
the basis of satisfactory evidence) to be the person whose name is subscribed to
the within instrument and acknowledged to me that she executed the same in her
authorized capacity, and that her signature on the instrument, the person, or
the entity upon behalf of which the person acted, executed the instrument.
/s/ COURTNEY LINES
--------------------------
WITNESS my hand and official seal. Signature of Notary
++++++++++++++++++++++++++++++++++++++++
COURTNEY LINES
Commission # 1197995
Notary Public - California
Orange County
My Comm. Expires Oct 9, 2002
++++++++++++++++++++++++++++++++++++++++
2
<PAGE>
STATE OF NEVADA
Secretary of State
I hereby certify that this is a
true and complete copy of
the document as filed in this
office.
MAY 24, 1999
/s/ DEAN HELLER
SECRETARY OF STATE
By /s/ D. Farmer
---------------------
3
<PAGE>
EXHIBIT 10.2
10.2 Company Stock Option Plan dated May 18, 1999
<PAGE>
NETSOL INTERNATIONAL INC.
1999 INCENTIVE AND NONSTATUTORY STOCK OPTION PLAN
1 PURPOSE
This Incentive and Nonstatutory Stock Option Plan (the "Plan") is
intended to further the growth and financial success of NETSOL INTERNATIONAL,
INC., a Nevada corporation (the "Corporation") by providing additional
incentives to selected employees, directors, and consultants of the
Corporation or parent corporation or subsidiary corporation of the
Corporation as those terms are defined in Sections 424(e) and 424(f) of the
Internal Revenue Code of 1986, as amended (the "Code") (such parent
corporations and subsidiary corporations hereinafter collectively referred to
as "Affiliates") so that such employees, directors, and consultants may
acquire or increase their proprietary interest in the Corporation. Stock
options granted under the Plan (hereinafter "Options") may be either
"Incentive Stock Options," as defined in Section 422A of the Code and any
regulations promulgated under said Section, or "Nonstatutory Options" at the
discretion of the Board of Directors of the Corporation (the "Board") and as
reflected in the respective written stock option agreements granted pursuant
hereto.
2 ADMINISTRATION
The Plan shall be administered by the Board of Directors of the
Corporation; provided however, that the Board may delegate such
administration to a committee of not fewer than three (3) members (the
"Committee"), at least two (2) of whom are members of the Board and all of
whom are disinterested administrators, as contemplated by Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended ("Rule
16b-3"); and provided further, that the foregoing requirement for
disinterested administrators shall not apply prior to the date of the first
registration of any of the securities of the Corporation under the Securities
Act of 1933, as amended (the "Act").
Subject to the provisions of the Plan, the Board and/or the Committee
shall have authority to (a) grant, in its discretion, Incentive Stock Options
in accordance with Section 422A of the Code or Nonstatutory Options; (b)
determine in good faith the fair market value of the stock covered by an
Option; (c) determine which eligible persons shall be granted Options and the
number of shares to be covered thereby and the term thereof; (d) construe and
interpret the Plan; (e) promulgate, amend and rescind rules and regulations
relating to its administration, and correct defects, omissions, and
inconsistencies in the Plan or any Option; (f) consistent with the Plan and
with the consent of the optionee, as appropriate, amend any outstanding
Option or amend the exercise date or dates thereof; (g) determine the
duration and purpose of leaves of absence which may be granted to
optionholders without constituting termination of their employment for the
purpose of the Plan; and (h) make all other determinations necessary or
advisable for the Plan's administration. The interpretation and construction
by the Board of any provisions of the Plan or of any Option shall be
conclusive and final. No member of the Board or the Committee shall be liable
for any action or determination made in good faith with respect to the Plan
or any Option.
1
<PAGE>
3 ELIGIBILITY
The persons who shall be eligible to receive Options shall be key
employees, directors, and consultants of the Corporation or any of its
Affiliates ("Optionees"). The term consultant shall mean any person who is
engaged by the Corporation to render services and is compensated for such
services, and any director of the Corporation whether or not compensated for
such services; provided that, if the Corporation registers any of its
securities pursuant to the Act, the term consultant shall thereafter not
include directors who are not compensated for their services or are paid only
a director fee by the Corporation.
(a) INCENTIVE STOCK OPTIONS. Incentive Stock Options may
only be issued to employees of the Corporation or its Affiliates. Incentive
Stock Options may be granted to officers, whether or not they are directors,
but a director shall not be granted an Incentive Stock Option unless such
director is also an employee of the Corporation. Payment of a director fee
shall not be sufficient to constitute employment by the Corporation. Any
grant of option to an officer or director of the Corporation subsequent to
the first registration of any of the securities of the Corporation under the
Act shall comply with the requirements of Rule 16b-3. An optionee may hold
more than one Option.
The Corporation shall not grant an Incentive Stock Option
under the Plan to any employee if such grant would result in such employee
holding the right to exercise for the first time in any one calendar year,
under all options granted to such employee under the Plan or any other stock
option plan maintained by the Corporation or any Affiliate, with respect to
shares of stock having an aggregate fair market value, determined as of the
date of the Option is granted, in excess of $100,000. Should it be determined
that an Incentive Stock Option granted under the Plan exceeds such maximum
for any reason other than a failure in good faith to value the stock subject
to such option, the excess portion of such option shall be considered a
Nonstatutory Option. If, for any reason, an entire option does not qualify as
an Incentive Stock Option by reason of exceeding such maximum, such option
shall be considered a Nonstatutory Option.
(b) NONSTATUTORY OPTION. The provisions of the foregoing
Section 3(a) shall not apply to any option designated as a "Nonstatutory
Stock Option Agreement" or which sets forth the intention of the Parties that
the option be a Nonstatutory Option.
4 STOCK
The stock subject to Options shall be the shares of the Corporation's
authorized but unissued or reacquired Common Stock (the "Stock").
2
<PAGE>
(a) NUMBER OF SHARES. Subject to adjustment as provided in
Paragraph 5(i) of this Plan, the total number of shares of Stock which may be
purchased through exercise of Options granted under this Plan shall not
exceed Five Million (5,000,000) shares. If any Option shall for any reason
terminate or expire, any shares allocated thereto but remaining unpurchased
upon such expiration or termination shall again be available for the grant of
Options with respect thereto under this Plan as though no Option had been
granted with respect to such shares.
(b) RESERVATION OF SHARES. The Corporation shall reserve
and keep available at all times during the term of the Plan such number of
shares as shall be sufficient to satisfy the requirements of the Plan. If,
after reasonable efforts, which efforts shall not include the registration of
the Plan or Options under the Act, the Corporation is unable to obtain
authority from any applicable regulatory body, which authorization is deemed
necessary by legal counsel for the Corporation for the lawful issuance of
shares hereunder, the Corporation shall be relieved of any liability with
respect to its failure to issue and sell the shares for which such requisite
authority was so deemed necessary unless and until such authority is obtained.
5 TERMS AND CONDITIONS OF OPTIONS
Options granted hereunder shall be evidenced by agreements between the
Corporation and the respective Optionees, in such form and substance as the
Board or Committee shall from time to time approve. Such agreements need not
be identical, and in each case may include such provisions as the Board or
Committee may determine, but all such agreements shall be subject to and
limited by the following terms and conditions:
(a) NUMBER OF SHARES: Each Option shall state the number of
shares to which it pertains.
(b) OPTION PRICE: Each Option shall state the Option
Price, which shall be determined as follows:
(i) Any Option granted to a person who at the
time the Option is granted owns (or is deemed to own pursuant to Section
424(d) of the Code) stock possessing more than ten percent (10%) of the total
combined voting power of value of all classes of stock of the Corporation, or
of any Affiliate, ("Ten Percent Holder") shall have an Option Price of no
less than one hundred ten percent (110%) of the fair market value of the
common stock as of the date of grant; and
(ii) Incentive Stock Options granted to a
person who at the time the Option is granted is not a Ten Percent Holder
shall have an Option price of no less than one hundred percent (100%) of the
fair market value of the common stock as of the date of grant. The board had
determined fair market value to be $1.44.
(iii) Nonstatutory Options granted to a
person who at the time the
3
<PAGE>
Option is granted is not a Ten Percent Holder shall have an Option Price
determined by the Board as of the date of grant. The board had determined
fair market value to be $1.44.
For the purposes of this paragraph 5(b), the fair market
value shall be as determined by the Board, in good faith, which determination
shall be conclusive and binding; provided however, that if there is a public
market for such stock, the fair market value per share shall be the average
of the bid and asked prices (or the closing price if such stock is listed on
the NASDAQ National Market System) on the date of grant of the Option, or if
listed on a stock exchange, the closing price on such exchange on such date
of grant.
(c) MEDIUM AND TIME OF PAYMENT: To the extent permissible
by applicable law, the Option price shall be paid, at the discretion of the
Board, at either the time of grant or the time of exercise of the Option (i)
in cash or by check, (ii) by delivery of other common stock of the
Corporation, provided such tendered stock was not acquired directly or
indirectly from the Corporation, or, if acquired from the Corporation, has
been held by the Optionee for more than six (6) months, (iii) by the
Optionee's promissory note in a form satisfactory to the Corporation and
bearing interest at a rate determined by the Board, in its sole discretion,
but in no event less than 6% per annum, or (iv) such other form of legal
consideration permitted by the Nevada Revised Statutes and case law related
thereto as may be acceptable to the Board.
(d) TERM AND EXERCISE OF OPTIONS: Any Option granted to an
Employee of the Corporation shall become exercisable over a period of no
longer than ten (10) years and no less than twenty percent (20%) of the
shares covered thereby shall become exercisable annually. No Incentive Stock
Option shall be exercisable, in whole or in part, prior to one (1) year from
the date it is granted unless the Board shall specifically determine
otherwise, as provided herein. In no event shall any Option be exercisable
after the expiration of ten (10) years from the date it is granted, and no
Incentive Stock Option granted to a Ten Percent Holder shall, by its terms,
be exercisable after the expiration of ten (10) years from the date of the
Option. Unless otherwise specified by the Board or the Committee in the
resolution authorizing such option, the date of grant of an Option shall be
deemed to be the date upon which the Board or the Committee authorizes the
granting of such Option.
Each Option shall be exercisable to the nearest whole
share, in installments or otherwise, as the respective option agreements may
provide. During the lifetime of an Optionee, the Option shall be exercisable
only by the Optionee and shall not be assignable or transferable by the
Optionee, and no other person shall acquire any rights therein. To the extent
not exercised, installments (if more than one) shall accumulate, but shall be
exercisable, in whole or in part, only during the period for exercise as
stated in the option agreement, whether or not other installments are then
exercisable.
(e) TERMINATION OF STATUS AS EMPLOYEE, DIRECTOR, OR
CONSULTANT: If Optionee's status as an employee, director, or consultant
shall terminate for any reason other than Optionee's death, then the Optionee
(or if the Optionee shall die after such termination, but prior to exercise,
Optionee's personal representative or the person entitled to succeed
4
<PAGE>
to the Option) shall have the right to exercise the portions of any such
termination, in whole or in part, at any time within thirty (30) days after
such termination (or in the event Optionee's termination was caused permanent
disability [within the meaning of Section 22(e)(3) of the Code) this 30 day
period shall be extended to six (6) months] of "termination for good cause" as
that term is defined under the Nevada Revised Statutes and case law related
thereto, such shorter period as the option agreement may specify, but not less
than three (3) days) or the remaining term of the Option, whichever is the
lesser; provided, however, that with respect to Nonstatutory Options, the Board
may specify such longer period, not to exceed one hundred eighty (180) days,
for exercise following termination as the Board deems reasonable and
appropriate. The Option may be exercised only with respect to installments that
the Optionee could have exercised at the date of termination of employment.
Nothing contained herein or in any Option granted pursuant hereto shall be
construed to affect or restrict in any way the right of the Corporation to
terminate the Optionee with or without cause.
(f) DEATH OF OPTIONEE: If an Optionee dies while employed
or engaged as a director or consultant by the Corporation or an Affiliate,
the portion of such Optionee's Option or Options which were exercisable at
the date of death may be exercised, in whole or in part, by the estate of the
decedent or by a person succeeding to the right to exercise such Option or
Options, at any time within the remaining term of this Option, but only to
the extent, that Optionee could have exercised this Option as of the date of
Optionee's death; provided, in any case, that this Option may be so exercised
only to the extent that this Option has not previously been exercised by
Optionee.
(g) NONTRANSFERABILITY OF OPTION: No Option shall be
transferable by the Optionee, except by will or by the laws of descent and
distribution.
(h) RECAPITALIZATION: Subject to any required action by the
stockholders, the number of shares of common stock covered by each
outstanding Option, and the price per share thereof set forth in each such
Option, shall be proportionately adjusted for any increase or decrease in the
number of issued shares of common stock of the Corporation resulting from a
subdivision or consolidation of shares or the payment of a stock dividend, or
any other increase or decrease in the number of such shares affected without
receipt of consideration by the Corporation.
Subject to any required action by the stockholders, if the
Corporation shall be the surviving entity in any merger or consolidation,
each outstanding Option thereafter shall pertain to and apply to the
securities to which a holder of shares of common stock equal to the shares
subject to the Option would have been entitled by reason of such merger or
consolidation. A dissolution or liquidation of the Corporation or a merger or
consolidation in which the Corporation is not the surviving entity shall
cause each outstanding Option to terminate on the effective date of such
dissolution, liquidation, merger or consolidation. In such event, if the
entity which shall be the surviving entity does not tender to Optionee an
offer, for which it has no obligation to do so, to substitute for any
unexercised Option a stock option or capital stock of such surviving entity,
as applicable, which on an equitable basis shall provide the Optionee with
substantially the same economic benefit as such unexercised
5
<PAGE>
Option, then the Board may grant to such Optionee, but shall not be obligated
to do so, the right for a period commencing thirty (30) days prior to and
ending immediately prior to such dissolution, liquidation, merger or
consolidation or during the remaining term of the Option, whichever is the
lesser, to exercise any unexpired Option or Options, without regard to the
installment provisions of Paragraph 5(d) of this Plan; provided, that any
such right granted shall be granted to all Optionees not receiving an offer
to substitute on a consistent basis, and provided further, that any such
exercise shall be subject to the consummation of such dissolution,
liquidation, merger or consolidation.
In the event of a change in the common stock of the
Corporation as presently constituted, which is limited to a change of all of
its authorized shares without par value into the same number of shares with a
par value, the shares resulting from any such change shall be deemed to be
the common stock within the meaning of this Plan.
To the extent that the foregoing adjustments relate to
stock or securities of the Corporation, such adjustments shall be made by the
Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided in this Paragraph 5(h), the Optionee
shall have no rights by reason of any subdivision or consolidation of shares
of stock or any class or the payment of any stock dividend or any other
increase or decrease in the number of shares of stock of any class, and the
number or price of shares of common stock subject to any Option shall not be
affected by, and no adjustment shall be made by reason of, any dissolution,
liquidation, merger or consolidation, or any issue by the Corporation of
shares of stock of any class or securities convertible into shares of stock
of any class.
The grant of an Option pursuant to the Plan shall not
affect in any way the right or power of the Corporation to make any
adjustments, reclassifications, reorganizations or changes in its capital or
business structure or to merge, consolidate, dissolve, or liquidate or to
sell or transfer all or any part of its business or assets.
(i) RIGHTS AS A STOCKHOLDER: An Optionee shall have no
rights as a stockholder with respect to any shares covered by an Option until
the date of the issuance of a stock certificate to Optionee for such shares.
No adjustment shall be made for dividends (ordinary or extraordinary, whether
in cash, securities or other property) or distributions or other rights for
which the record date is prior to the date such stock certificate is issued,
except as expressly provided in Paragraph 5(h) hereof.
(j) MODIFICATION, ACCELERATION, EXTENSION, AND RENEWAL OF
OPTIONS: Subject to the terms and conditions and within the limitations of
the Plan, the Board may modify an Option, or once an Option is exercisable,
accelerate the rate at which it may be exercised, and may extend or renew
outstanding Options granted under the Plan or accept the surrender of
outstanding Options (to the extent not theretofore exercised) and authorize
the granting of new Options in substitution for such Options, provided such
action is permissible under Section 422A of the Code and the Nevada Revised
Statutes and case law related thereto.
6
<PAGE>
Notwithstanding the foregoing provisions of this Paragraph
5(j), however, no modification of an Option shall, without the consent of the
Optionee, alter to the Optionee's detriment or impair any rights or obligations
under any Option theretofore granted under the Plan.
(k) INVESTMENT INTENT: Unless and until the issuance and
sale of the shares subject to the Plan are registered under the Act, each
Option under the Plan shall provide that the purchases of stock thereunder
shall be for investment purposes and not with a view to, or for resale in
connection with, any distribution thereof. Further, unless the issuance and
sale of the stock have been registered under the Act, each Option shall
provide that no shares shall be purchased upon the exercise of such Option
unless and until (i) any then applicable requirements of state and federal
laws and regulatory agencies shall have been fully complied with to the
satisfaction of the Corporation and its counsel, and (ii) if requested to do
so by the Corporation, the person exercising the Option shall (i) give
written assurances as to knowledge and experience of such person (or a
representative employed by such person) in financial and business matters and
the ability of such person (or representative) to evaluate the merits and
risks of exercising the Option, and (ii) execute and deliver to the
Corporation a letter of investment intent, all in such form and substance as
the Corporation may require. If shares are issued upon exercise of an Option
without registration under the Act, subsequent registration of such shares
shall relieve the purchaser thereof of any investment restrictions or
representations made upon the exercise of such Options.
(l) EXERCISE BEFORE EXERCISE DATE: At the discretion of the
Board, the Option may, but need not, include a provision whereby the Optionee
may elect to exercise all or any portion of the Option prior to the stated
exercise date of the Option or any installment thereof. Any shares so
purchased prior to the stated exercise date shall be subject to repurchase by
the Corporation upon termination of Optionee's employment as contemplated by
Paragraphs 5(e) and 5(f) hereof prior to the exercise date stated in the
Option and such other restrictions and conditions as the Board or Committee
may deem advisable.
(m) OTHER PROVISIONS: The Option agreements authorized
under this Plan shall contain such other provisions, including, without
limitation, restrictions upon the exercise of the Options, as the Board or
the Committee shall deem advisable. Shares shall not be issued pursuant to
the exercise of an Option, if the exercise of such Option or the issuance of
shares thereunder would violate, in the opinion of legal counsel for the
Corporation, the provisions of any applicable law or the rules or regulations
of any applicable governmental or administrative agency or body, such as the
Act, the Securities Exchange Act of 1934, as amended, the rules promulgated
under the foregoing or the rules and regulations of any exchange upon which
the shares of the Corporation are listed.
7
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6 AVAILABILITY OF INFORMATION
During the term of the Plan and any additional period during which an
Option granted pursuant to the Plan shall be exercisable, the Corporation
shall make available, not later than one hundred and twenty (120) days
following the close of each of its fiscal years, such financial and other
information regarding the Corporation as is required by the bylaws of the
Corporation and applicable law to be furnished in an annual report to the
stockholders of the Corporation.
7 EFFECTIVENESS OF PLAN; EXPIRATION
Subject to approval by the stockholders of the Corporation, this Plan
shall be deemed effective as of the date it is adopted by the Board. The Plan
shall expire on February 3, 2009, but such expiration shall not affect the
validity of outstanding Options.
8 AMENDMENT AND TERMINATION OF THE PLAN
The Board may, insofar as permitted by law, from time to time, with
respect to any shares at the time not subject to Options, suspend or
terminate the Plan or revise or amend it in any respect whatsoever, except
that without the approval of the stockholders of the Corporation, no such
revision or amendment shall (i) increase the number of shares subject to the
Plan, (ii) decrease the price at which Options may be granted, (iii)
materially increase the benefits to Optionees, or (iv) change the class of
persons eligible to receive Options under this Plan; provided, however, no
such action shall alter or impair the rights and obligations under any Option
outstanding as of the date thereof without the written consent of the
Optionee thereunder. No Option may be granted while the Plan is suspended or
after it is terminated, but the rights and obligations under any Option
granted while the Plan is in effect shall not be impaired by suspension or
termination of the Plan.
9 INDEMNIFICATION OF BOARD
In addition to such other rights or indemnifications as they may have
as directors or otherwise, and to the extent allowed by applicable law, the
members of the Board and the Committee shall be indemnified by the
Corporation against the reasonable expenses, including attorneys' fees,
actually and necessarily incurred in connection with the defense of any
claim, action, suit or proceeding, or in connection with any appeal thereof,
to which they or any of them may be a party by reason of any action taken, or
failure to act, under or in connection with the Plan or any Option granted
thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected
by the Corporation) or paid by them in satisfaction of a judgment in any such
claim, action, suit or proceeding, except in any case in relation to matters
as to which it shall be adjudged in such claim, action, suit or proceeding
that such Board member is liable for negligence or misconduct in the
performance of his or her duties; provided that within sixty (60) days after
institution of any such action, suit or Board proceeding the member involved
shall offer the Corporation, in writing, the opportunity, at its own expense,
to handle and
8
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defend the same.
10 APPLICATION OF FUNDS
The proceeds received by the Corporation from the sale of common stock
pursuant to the exercise of Options will be used for general corporate
purposes.
11 NO OBLIGATION TO EXERCISE OPTION
The granting of an Option shall impose no obligation upon the Optionee
to exercise such Option.
12 NOTICES
All notice, requests, demand, and other communications pursuant this
Plan shall be in writing and shall be deemed to have been duly given on the
date of service if served personally on the party to whom notice is to be
given, or on the third day following the mailing thereof to the party to whom
notice is to be given, by first class mail, registered or certified, postage
prepaid.
13 FINANCIAL STATEMENTS
Optionees under this Plan shall receive financial statements annually
regarding the Corporation during the period the options are outstanding. The
financial statements provided need not comply with Title 10, Section 260.613
of the California Code of Regulations.
* * * * *
The foregoing Incentive and Nonstatutory Stock Option Plan was duly
adopted and approved by the Board of Directors on May 18, 1999, and approved and
ratified by the Shareholders of the Corporation at the Annual Meeting of the
Shareholders.
/s/ Najeeb Ghauri
-------------------------
Najeeb Ghauri, Secretary
9
<PAGE>
NETSOL INTERNATIONAL, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT is made and entered into as of this ____
day of ______________, ____, by and between NETSOL INTERNATIONAL, INC., a
Nevada corporation ("Company"), and ________________________________
(referred to herein as the "Optionee"), with reference to the following
recitals of facts:
WHEREAS, the Board has authorized the granting to Optionee of a
nonstatutory stock option ("Option") to purchase shares of common stock of
the Company (the "Shares") upon the terms and conditions hereinafter stated;
and
WHEREAS, the Board and stockholders of the Company have heretofore
adopted a 1999 Incentive and Nonstatutory Stock Option Plan (the "Plan"),
pursuant to which this Option is being granted;
WHEREAS, it is the intention of the Parties that this Option be a
Nonstatutory Stock Option;
NOW, THEREFORE, in consideration of the covenants herein set forth, the
Parties hereto agree as follows:
1. SHARES; PRICE. The Company hereby grants to Optionee the right to
purchase, upon and subject to the terms and conditions herein stated,
___________ Shares for cash (or other consideration acceptable to the Board
of Directors of the Company, in their sole and absolute discretion) at the
price of $ 1.44 per Share, such price being determined in accordance with the
Plan.
2. TERM OF OPTION; CONTINUATION OF EMPLOYMENT. This Option shall
expire, and all rights hereunder to purchase the Shares shall terminate, five
(5) years from the date hereof. This Option shall earlier terminate subject
to Paragraphs 5 and 6 hereof if, and as of the date, Optionee ceases to be an
employee, director, or consultant of the Company. Nothing contained herein
shall be construed to interfere in any way with the right of the Company to
terminate the employment or engagement, as applicable, of Optionee or to
increase or decrease the compensation of Optionee from the rate in existence
at the date hereof.
3. VESTING OF OPTION. Subject to the provisions of Paragraphs 5 and 6
hereof, this Option shall vest and become exercisable during the term of
Optionee's employment or engagement in whole or in part beginning one year
from the date of this Agreement.
4. EXERCISE. This Option shall be exercised by delivery to the Company
of (a) a written notice of exercise stating the number of Shares being
purchased (in whole shares only) and such other information set forth on the
form of Notice of Exercise attached hereto as Appendix A, (b) a check or cash
in the amount of the purchase price of the Shares covered
10
<PAGE>
by the notice, and (c) a written statement as provided for in Paragraph 11
hereof. This Option shall not be assignable or transferable, except by will
or by the laws of descent and distribution, and shall be exercisable only by
Optionee during his or her lifetime.
5. TERMINATION OF EMPLOYMENT OR ENGAGEMENT. If Optionee shall cease to
serve as an employee, director, or consultant of the Company for any reason,
whether voluntarily or involuntarily, other than by his or her death or the
conclusion of the term of a written consulting agreement, provided such term
exceeds one year, Optionee shall have the right at any time within thirty
(30) days after date Optionee ceases to be an employee, director, or
consultant of the Company, or the remaining term of this Option, whichever is
the lesser, to exercise in whole or in part this Option to the extent, but
only to the extent, that this Option was exercisable as of the last day of
employment or engagement, as applicable, and had not previously been
exercised; provided, however:
(i) if Optionees termination of employment or engagement
was caused by permanent disability (within the meaning of Section 22(e)(3) of
the Code), the foregoing thirty (30) day period shall be extended to six (6)
months.
Notwithstanding anything herein to the contrary, all rights under this
Option shall expire in any event on the date specified in Paragraph 2 hereof.
6. DEATH OF OPTIONEE. If the Optionee shall die while an employee,
director, or consultant of the Company, Optionee's personal representative or
the person entitled to Optionee's rights hereunder may at any time during the
remaining term of this Option, exercise this Option and purchase Shares to
the extent, but only to the extent, that Optionee could have exercised this
Option as of the date of Optionee's death; provided, in any case, that this
Option may be so exercised only to the extent that this Option has not
previously been exercised by Optionee.
7. NO RIGHTS AS STOCKHOLDER. Optionee shall have no rights as a
stockholder with respect to the Shares covered by any installment of this
Option until the date of the issuance of a stock certificate to Optionee, and
no adjustment will be made for dividends or other rights for which the record
date is prior to the date such stock certificate or certificates are issued
except as provided in Paragraph 8 hereof.
8. RECAPITALIZATION. Subject to any required action by the stockholders
of the Company, the number of Shares covered by this Option, and the price
per Share thereof, shall be proportionately adjusted for any increase or
decrease in the number of issued Shares resulting from a subdivision or
consolidation of shares or the payment of a stock dividend, or any other
increase or decrease in the number of such shares affected without receipt of
consideration by the Company; provided however that the conversion of any
convertible securities of the Company shall not be deemed having been
"effected without receipt of consideration by the Company."
11
<PAGE>
In the event of a proposed dissolution or liquidation of the Company, a
merger or consolidation in which the Company is not the surviving entity, or
a sale of all or substantially all of the assets of the Company, this Option
shall terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Board. The Board may, at its sole
and absolute discretion and without obligation, declare that this Option
shall terminate as of a date fixed by the Board and grant Optionee the right
for a period commencing thirty (30) days prior to and ending immediately
prior to such date, or during the remaining term of this Option, whichever
occurs sooner, to exercise this Option as to all or any part of the Shares,
without regard to any installment provision of Paragraph 3; provided,
however, that such exercise shall be subject to the consummation of such
dissolution, liquidation, merger, consolidation or sale.
Subject to any required action by the stockholders of the Company, if
the Company shall be the surviving entity in any merger or consolidation,
this Option thereafter shall pertain to and apply to the securities to which
a holder of Shares equal to the Shares subject to this Option would have been
entitled by reason of such merger or consolidation, and the vesting
provisions of Section 3 shall continue to apply.
In the event of a change in the Shares of the Company as presently
constituted, which is limited to a change of all of its authorized Shares
without par value into the same number of Shares with a par value, the Shares
resulting from any such change shall be deemed to be the Shares within the
meaning of this Agreement.
To the extent that the foregoing adjustments relate to shares or
securities of the Company, such adjustments shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. Except
as hereinbefore expressly provided, Optionee shall have no rights by reason
of any subdivision or consolidation of share of stock of any class or the
payment of any stock dividend or any other increase or decrease in the number
of shares of stock of any class, and the number and price of shares subject
to this Option shall not be affected by, and no adjustments shall be made by
reason of, any dissolution, liquidation, merger or consolidation, or any
issue by the Company of shares of stock of any class or securities
convertible into shares of stock of any class.
The grant of this Option shall not affect in any way the right or power
of the Company to make adjustments, reclassifications, reorganizations or
changes in its capital or business structure or to merge, consolidate,
dissolve or liquidate or to sell or transfer all or any part of its business
or assets.
9. TAXATION UPON EXERCISE OF OPTION. Optionee understands that, upon
exercise of this Option, Optionee may recognize income, for federal and state
income tax purposes, in an amount equal to the amount by which the fair
market value of the Shares, determined as of the date of exercise, exceeds
the exercise price. The acceptance of the Shares by Optionee shall constitute
an agreement by Optionee to report such income in accordance with then
applicable law and to cooperate with Company in establishing the amount of
such income and corresponding deduction to the Company for its income tax
purposes.
12
<PAGE>
Withholding for federal or state income and employment tax purposes
will be made, if and as required by law, from Optionee's then current
compensation, or, if such current compensation is insufficient to satisfy
withholding tax liability, the Company may require Optionee to make cash
payment to cover such liability as a condition of the exercise of this Option.
10. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. The Board may
modify, extend or renew this Option or accept the surrender thereof (to the
extent not theretofore exercised) and authorize the granting of a new option
in substitution therefore (to the extent not theretofore exercised), subject
at all times to the Plan. Notwithstanding the foregoing provisions of this
Paragraph 10, no modification shall, without the consent of the Optionee,
alter to the Optionee's detriment or impair any rights of Optionee hereunder.
11. INVESTMENT INTENT; RESTRICTIONS ON TRANSFER. Optionee represents
and agrees that if Optionee exercises this Option in whole or in part,
Optionee will in each case acquire the Shares upon such exercise for the
purpose of investment and not with a view to, or for resale in connection
with, any distribution thereof; and that upon such exercise of this Option in
whole or in part, Optionee (or any person or persons entitled to exercise
this Option under the provisions of Paragraphs 5 and 6 hereof) shall furnish
to the Company a written statement to such effect, satisfactory to the
Company in form and substance. The Company, at its option, may include a
legend on each certificate representing Shares issued pursuant to any
exercise of this Option, stating in effect that such Shares have not been
registered under the Securities Act of 1933, as amended (the "Act"), and
that the transferability thereof is restricted. If the Shares represented by
this Option are registered under the Act, either before or after the exercise
of this Option in whole or in part, the Optionee shall be relieved of the
foregoing investment representation and agreement and shall not be required
to furnish the Company with the foregoing written statement.
Optionee further represents that Optionee has had access to the
financial statements or books and records of the Company, has had the
opportunity to ask questions of the Company concerning its business,
operations and financial condition, and to obtain additional information
reasonably necessary to verify the accuracy of such information, and further
represents that Optionee has either such experience and knowledge in
investment, financial and business matters or has investments similar to the
stock of the Company such that Optionee is capable of evaluating the merits
and risks thereof and has the capacity to protect his or her own interest in
connection therewith. Optionee acknowledges and agrees that the Nevada
Securities Administrator or other applicable state securities agencies, as a
condition to the issuance of the permit pursuant to which this Option is
granted, may impose restrictions on the transfer of Shares purchased by
Optionee pursuant hereto and may require that all certificates representing
such Shares bear restrictive legends.
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<PAGE>
12. REGISTRATION RIGHTS.
(a) PIGGYBACK REGISTRATION RIGHTS. If the Company at any
time proposes to register any of its securities under the Act, including
under an S-8 Registration Statement, an SB-2 Registration Statement or
otherwise, it will each such time give written notice to all holders of
outstanding or exercised options of its intention so to do. Upon the written
request of a holder or holders of any such outstanding or exercised options
given within thirty (30) days after receipt of any such notice, the Company
will use its best efforts to cause all such outstanding or exercised options,
the holders of which shall have so requested registration thereof, to be
registered under the Act (with the securities which the Company at the time
proposes to register), all to the extent requisite to permit the sale or
other disposition by the prospective Sellers of the outstanding or exercised
options so registered; provided, however, that the Company may, as a
condition precedent to its effecting such registration, require each
prospective Seller to agree with the Company and the managing underwriter or
underwriters of the offering to be made by the Company in connection with
such registration that such Seller will not sell any securities of the same
class or convertible into the same class as those registered by the Company
(including any class into which the securities registered by the Company are
convertible) for such reasonable period after such registration becomes
effective (not exceeding one hundred eighty (180) days) as shall then be
specified in writing by such underwriter or underwriters if in the opinion of
such underwriter or underwriters the Company's offering would be materially
adversely affected in the absence of such an agreement.
(b) PROCEDURES. In connection with the registration of any
securities pursuant to Section 12(a) hereof, the Company and the Optionee
covenant and agree as follows:
(i) The Company shall pay all costs, fees, and
expenses incurred by the Company and the Optionee in connection with the
Registration Statement and the offering thereunder including, without
limitation, the Company's legal fees and expenses of counsel, accounting
fees, printing expenses, and blue sky fees and expenses (but excluding
discounts or selling commissions of any underwriter or broker dealer acting
on behalf of the Company or the Optionee).
(ii) The Company shall take all necessary
action which may be reasonably required in qualifying or registering the
securities included in the Registration Statement for offering and sale under
the securities or blue sky laws of all states reasonably requested by
Optionee, provided that the Company shall not be obligated to qualify as a
foreign corporation to do business under the laws of any such jurisdiction.
(iii) The Company shall indemnify Optionee and
each person, if any, who controls Optionee within the meaning of Section 15
of the Act or Section 20(a) of the Securities Exchange Act of 1934 (the
"Exchange Act" Act"), against all loss, claim, damage, expense or liability
(including all expenses reasonably incurred in investigating, preparing
14
<PAGE>
or defending against any claim whatsoever) to which any of them may become
subject under the Act, the Exchange Act or otherwise, arising from the
Registration Statement.
(iv) The Company shall, as soon as practicable
after the effective date of the Registration Statement, and in any event
within fifteen (15) months thereafter, make "generally available to its
security holders" (within the meaning of Rule 158 under the Act) an earnings
statement (which need not be audited) complying with Section 11(a) of the Act
and covering a period of at least twelve (12) consecutive months beginning
after the effective date of the Registration Statement.
(v) The Company shall (A) deliver promptly to
Optionee and its counsel, upon request, copies of all correspondence between
the Securities and Exchange Commission (the Commission) and the Company, its
counsel, or auditors and all memoranda relating to discussions with the
Commission or its staff with respect to the Registration Statement; and (B)
permit Optionee and its counsel to perform such investigation, upon
reasonable advance notice, with respect to information contained in or
omitted from the Registration Statement, as it deems reasonably necessary to
comply with applicable securities laws or rules of the National Association
of Securities Dealers, Inc. Such investigation shall include, but not be
limited to, access to financial and accounting information and opportunities
to discuss the business of the Company with the Company's officers and
independent auditors, all to such reasonable extent, at such reasonable times
and as often as Optionee and its counsel shall reasonably request.
(vi) The Company shall cause all securities of
Optionee registered pursuant to a Registration Statement to be listed on any
national securities exchange or quoted on any automated quotation system on
which similar securities of the Company are listed or quoted.
13. STAND-OFF AGREEMENT. Optionee agrees that in connection with any
registration of the Company's securities, that upon the request of the
Company or any underwriter managing an underwritten offering of the Company's
securities, that Optionee shall not sell, short any sale of, loan, grant an
option for, or otherwise dispose of any of the Shares (other than Shares
included in the offering) without the prior written consent of the Company or
such managing underwriter, as applicable, for a period of at least one
hundred eighty days (180) days following the effective date of registration
of such offering.
14. NOTICES. Any notice required to be given pursuant to this Option or
the Plan shall be in writing and shall be deemed to be delivered upon receipt
or, in the case of notices by the Company, five (5) days after deposit in the
US. mail, postage prepaid, addressed to Optionee at the address last provided
to the Company by Optionee for his or her employee records.
15. AGREEMENT SUBJECT TO PLAN; APPLICABLE LAW. This Agreement is made
pursuant to the Plan and shall be interpreted to comply therewith. A copy of
such Plan is available to Optionee, at no charge, at the principal office of
the Company. Any provision
15
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of this Agreement inconsistent with the Plan shall
be considered void and replaced with the applicable provision of the Plan.
This Agreement has been granted, executed and delivered in the State of
Nevada, and the interpretation and enforcement shall be governed by the laws
thereof and subject to the exclusive jurisdiction of the courts therein.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
NETSOL INTERNATIONAL, INC.,
a Nevada corporation
--------------------------------
BY: Najeeb Ghauri
ITS: President
--------------------------------
[NAME]_______________, Optionee
16
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Appendix A
NOTICE OF EXERCISE
NetSol International, Inc.
233 Wilshire Blvd., Suite 510
Santa Monica, CA 90401
--------------------
(date)
Re: Nonstatutory Stock Option
Notice is hereby given pursuant to Section 4 of my Nonstatutory Stock
Option Agreement that I elect to purchase the number of shares set forth below
at the exercise price set forth in my option agreement:
Stock Option dated ______________________
Number of shares being purchased: ______________________
Option Exercise Price: $______________________
A check in the amount of the aggregate price of the shares being purchased
is attached.
I hereby confirm that such shares are being acquired by me for my own
account for investment purposes, and not with a view to, or for resale in
connection with, any distribution thereof.
Further, I understand that, as a result of this exercise of rights, I
may recognize income in an amount equal to the amount by which the fair
market value of the Shares exceeds the exercise price. I agree to report such
income in accordance with then applicable law and to cooperate with Company
in establishing the withholding and corresponding deduction to the Company
for its income tax purposes.
I agree to provide to the Corporation such additional documents or
information as may be required pursuant to the Corporation's 1999 Incentive
and Nonstatutory Stock Option Plan.
-------------------------
(Signature)
-------------------------
(Name of Optionee)
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NETSOL INTERNATIONAL, INC.
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT is made and entered into as of
this ____ day of ______________, ____, by and between NETSOL INTERNATIONAL
INC., a Nevada corporation ("Company"), and ________________________________
(referred to herein as the "Optionee"), with reference to the following
recitals of facts:
WHEREAS, the Board has authorized the granting to Optionee of an
incentive stock option ("Option") to purchase shares of common stock of the
Company (the "Shares") upon the terms and conditions hereinafter stated; and
WHEREAS, the Board and stockholders of the Company have heretofore
adopted a 1999 Incentive and Nonstatutory Stock Option Plan (the "Plan"),
pursuant to which this Option is being granted;
WHEREAS, it is the intention of the Parties that this Option be a
Incentive Stock Option (a Qualified Stock Option);
NOW, THEREFORE, in consideration of the covenants herein set forth, the
Parties hereto agree as follows:
0.0.1 SHARES; PRICE. The Company hereby grants to Optionee the right to
purchase, upon and subject to the terms and conditions herein stated, _______
Shares for cash (or other consideration acceptable to the Board of Directors
of the Company, in their sole and absolute discretion) at the price of $ 1.44
per Share, such price being not less than the fair market value per share of
the Shares covered by these Options as of the date hereof and as determined
by the Board of Directors of the Company.
2. TERM OF OPTION; CONTINUATION OF EMPLOYMENT. This Option shall
expire, and all rights hereunder to purchase the Shares shall terminate, five
(5) years from the date hereof. This Option shall earlier terminate subject
to Paragraphs 5 and 6 hereof if, and as of the date, Optionee ceases to be an
employee, director, or consultant of the Company. Nothing contained herein
shall be construed to interfere in any way with the right of the Company to
terminate the employment or engagement, as applicable, of Optionee or to
increase or decrease the compensation of Optionee from the rate in existence
at the date hereof.
3. VESTING OF OPTION. Subject to the provisions of Paragraphs 5 and 6
hereof, this Option shall vest and become exercisable during the term of
Optionee's employment or engagement in whole or in part beginning one year
from the date of this Agreement.
4. EXERCISE. This Option shall be exercised by delivery to the Company
of (a) a written notice of exercise stating the number of Shares being
purchased (in whole shares
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<PAGE>
only) and such other information set forth on the form of Notice of Exercise
attached hereto as Appendix A, (b) a check or cash in the amount of the
purchase price of the Shares covered by the notice, and (c) a written
statement as provided for in Paragraph 11 hereof. This Option shall not be
assignable or transferable, except by will or by the laws of descent and
distribution, and shall be exercisable only by Optionee during his or her
lifetime.
5. TERMINATION OF EMPLOYMENT OR ENGAGEMENT. If Optionee shall cease to
serve as an employee, director, or consultant of the Company for any reason,
whether voluntarily or involuntarily, other than by his or her death or the
conclusion of the term of a written consulting agreement, provided such term
exceeds one year, Optionee shall have the right at any time within thirty
(30) days after the date Optionee ceases to be an employee, director, or
consultant of the Company, or the remaining term of this Option, whichever is
the lesser, to exercise in whole or in part this Option to the extent, but
only to the extent, that this Option was exercisable as of the last day of
employment or engagement, as applicable, and had not previously been
exercised; provided, however:
(i) if Optionees termination of employment or engagement
was caused by disability (within the meaning of Section 22(e)(3) of the Code)
the foregoing thirty (30) day period shall be extended to six (6) months.
Notwithstanding anything herein to the contrary, all rights
under this Option shall expire in any event on the date specified in
Paragraph 2 hereof.
6. DEATH OF OPTIONEE. If the Optionee shall die while an employee or
consultant of the Company, Optionee's personal representative or the person
entitled to Optionee's rights hereunder may at any time during the remaining
term of this Option, exercise this Option and purchase Shares to the extent,
but only to the extent, that Optionee could have exercised this Option as of
the date of Optionee's death; provided, in any case, that this Option may be
so exercised only to the extent that this Option has not previously been
exercised by Optionee.
7. NO RIGHTS AS STOCKHOLDER. Optionee shall have no rights as a
stockholder with respect to the Shares covered by any installment of this
Option until the date of the issuance of a stock certificate to Optionee, and
no adjustment will be made for dividends or other rights for which the record
date is prior to the date such stock certificate or certificates are issued
except as provided in Paragraph 8 hereof.
8. RECAPITALIZATION. Subject to any required action by the stockholders
of the Company, the number of Shares covered by this Option, and the price
per Share thereof, shall be proportionately adjusted for any increase or
decrease in the number of issued Shares resulting from a subdivision or
consolidation of shares or the payment of a stock dividend, or any other
increase or decrease in the number of such shares affected without receipt of
consideration by the Company; provided however that the conversion of any
convertible securities of the Company shall not be deemed having been
"effected without receipt of consideration by the Company."
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In the event of a proposed dissolution or liquidation of the Company, a
merger or consolidation in which the Company is not the surviving entity, or
a sale of all or substantially all of the assets of the Company, this Option
shall terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Board. The Board may, at its sole
and absolute discretion and without obligation, declare that this Option
shall terminate as of a date fixed by the Board and grant Optionee the right
for a period commencing thirty (30) days prior to and ending immediately
prior to such date, or during the remaining term of this Option, whichever
occurs sooner, to exercise this Option as to all or any part of the Shares,
without regard to any installment provision of Paragraph 3; provided,
however, that such exercise shall be subject to the consummation of such
dissolution, liquidation, merger, consolidation or sale.
Subject to any required action by the stockholders of the Company, if
the Company shall be the surviving entity in any merger or consolidation,
this Option thereafter shall pertain to and apply to the securities to which
a holder of Shares equal to the Shares subject to this Option would have been
entitled by reason of such merger or consolidation, and the vesting
provisions of Section 3 shall continue to apply.
In the event of a change in the Shares of the Company as presently
constituted, which is limited to a change of all of its authorized Shares
without par value into the same number of Shares with a par value, the Shares
resulting from any such change shall be deemed to be the Shares within the
meaning of this Agreement.
To the extent that the foregoing adjustments relate to shares or
securities of the Company, such adjustments shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. Except
as hereinbefore expressly provided, Optionee shall have no rights by reason
of any subdivision or consolidation of share of stock of any class or the
payment of any stock dividend or any other increase or decrease in the number
of shares of stock of any class, and the number and price of shares subject
to this Option shall not be affected by, and no adjustments shall be made by
reason of, any dissolution, liquidation, merger or consolidation, or any
issue by the Company of shares of stock of any class or securities
convertible into shares of stock of any class.
The grant of this Option shall not affect in any way the right or power
of the Company to make adjustments, reclassifications, reorganizations or
changes in its capital or business structure or to merge, consolidate,
dissolve or liquidate or to sell or transfer all or any part of its business
or assets.
9. TAXATION UPON EXERCISE OF OPTION. Optionee understands that, upon
exercise of this Option, Optionee may recognize income, for federal and state
income tax purposes, in an amount equal to the amount by which the fair
market value of the Shares, determined as of the date of exercise, exceeds
the exercise price. The acceptance of the Shares by Optionee shall constitute
an agreement by Optionee to report such income in accordance with
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then applicable law and to cooperate with Company in establishing the amount
of such income and corresponding deduction to the Company for its income tax
purposes. withholding for federal or state income and employment tax purposes
will be made, if and as required by law, from Optionee's then current
compensation, or, if such current compensation is insufficient to satisfy
withholding tax liability, the Company may require Optionee to make cash
payment to cover such liability as a condition of the exercise of this Option.
10. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. The Board may
modify, extend or renew this Option or accept the surrender thereof (to the
extent not theretofore exercised) and authorize the granting of a new option
in substitution therefore (to the extent not theretofore exercised), subject
at all times to the Plan. Notwithstanding the foregoing provisions of this
Paragraph 10, no modification shall, without the consent of the Optionee,
alter to the Optionee's detriment or impair any rights of Optionee hereunder.
11. INVESTMENT INTENT; RESTRICTIONS ON TRANSFER. Optionee represents
and agrees that if Optionee exercises this Option in whole or in part,
Optionee will in each case acquire the Shares upon such exercise for the
purpose of investment and not with a view to, or for resale in connection
with, any distribution thereof; and that upon such exercise of this Option in
whole or in part, Optionee (or any person or persons entitled to exercise
this Option under the provisions of Paragraphs 5 and 6 hereof) shall furnish
to the Company a written statement to such effect, satisfactory to the
Company in form and substance. The Company, at its option, may include a
legend on each certificate representing Shares issued pursuant to any
exercise of this Option, stating in effect that such Shares have not been
registered under the Securities Act of 1933, as amended (the "Act"), and that
the transferability thereof is restricted. If the Shares represented by this
Option are registered under the Act, either before or after the exercise of
this Option in whole or in part, the Optionee shall be relieved of the
foregoing investment representation and agreement and shall not be required
to furnish the Company with the foregoing written statement.
Optionee further represents that optionee has had access to the
financial statements or books and records of the Company, has had the
opportunity to ask questions of the Company concerning its business,
operations and financial condition, and to obtain additional information
reasonably necessary to verify the accuracy of such information, and further
represents that Optionee (either such experience and knowledge in investment,
financial and business matters in investments similar to the stock of the
Company that Optionee is capable of evaluating the merits and risks thereof
and has the capacity to protect his or her own interest in connection
therewith. Optionee acknowledges and agrees that the Nevada Securities
Administrator or other applicable state securities agencies, as a condition
to the issuance of the permit pursuant to which this Option is granted, may
impose restrictions on the transfer of Shares purchased by Optionee pursuant
hereto and may require that all certificates representing such Shares bear
restrictive legends.
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<PAGE>
12. REGISTRATION RIGHTS.
(a) PIGGYBACK REGISTRATION RIGHTS. If the Company at any
time proposes to register any of its securities under the Act, including
under an S-8 Registration Statement, an SB-2 Registration Statement or
otherwise, it will each such time give written notice to all holders of
outstanding or exercised options of its intention so to do. Upon the written
request of a holder or holders of any such outstanding or exercised options
given within thirty (30) days after receipt of any such notice, the Company
will use its best efforts to cause all such outstanding or exercised options,
the holders of which shall have so requested registration thereof, to be
registered under the Act (with the securities which the Company at the time
proposes to register), all to the extent requisite to permit the sale or
other disposition by the prospective Sellers of the outstanding or exercised
options so registered; provided, however, that the Company may, as a
condition precedent to its effecting such registration, require each
prospective Seller to agree with the Company and the managing underwriter or
underwriters of the offering to be made by the Company in connection with
such registration that such Seller will not sell any securities of the same
class or convertible into the same class as those registered by the Company
(including any class into which the securities registered by the Company are
convertible) for such reasonable period after such registration becomes
effective (not exceeding one hundred eighty (180) days) as shall then be
specified in writing by such underwriter or underwriters if in the opinion of
such underwriter or underwriters the Company's offering would be materially
adversely affected in the absence of such an agreement.
(b) PROCEDURES. In connection with the registration of any
securities pursuant to Section 12(a) hereof, the Company and the Optionee
covenant and agree as follows:
(i) The Company shall pay all costs, fees, and
expenses incurred by the Company and the Optionee in connection with the
Registration Statement and the offering thereunder including, without
limitation, the Company's legal fees and expenses of counsel, accounting
fees, printing expenses, and blue sky fees and expenses (but excluding
discounts or selling commissions of any underwriter or broker dealer acting
on behalf of the Company or the Optionee).
(ii) The Company shall take all necessary
action which may be reasonably required in qualifying or registering the
securities included in the Registration Statement for offering and sale under
the securities or blue sky laws of all states reasonably requested by
Optionee, provided that the Company shall not be obligated to qualify as a
foreign corporation to do business under the laws of any such jurisdiction.
(iii) The Company shall indemnify Optionee and
each person, if any, who controls Optionee within the meaning of Section 15
of the Act or Section 20(a) of the Securities Exchange Act of 1934 (the
"Exchange Act"), against all loss, claim, damage, expense or liability
(including all expenses reasonably incurred in investigating, preparing
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or defending against any claim whatsoever) to which any of them may become
subject under the Act, the Exchange Act or otherwise, arising from the
Registration Statement.
(iv) The Company shall, as soon as practicable
after the effective date of the Registration Statement, and in any event
within fifteen (15) months thereafter, make "generally available to its
security holders" (within the meaning of Rule 158 under the Act) an earnings
statement (which need not be audited) complying with Section 11(a) of the Act
and covering a period of at least twelve (12) consecutive months beginning
after the effective date of the Registration Statement.
(v) The Company shall (A) deliver promptly to
Optionee and its counsel, upon request, copies of all correspondence between
the Securities and Exchange Commission (the "Commission") and the Company,
its counsel, or auditors and all memoranda relating to discussions with the
Commission or its staff with respect to the Registration Statement; and (B)
permit Optionee and its counsel to perform such investigation, upon
reasonable advance notice, with respect to information contained in or
omitted from the Registration Statement, as it deems reasonably necessary to
comply with applicable securities laws or rules of the National Association
of Securities Dealers, Inc. Such investigation shall include, but not be
limited to, access to financial and accounting information and opportunities
to discuss the business of the Company with the Company's officers and
independent auditors, all to such reasonable extent, at such reasonable times
and as often as Optionee and its counsel shall reasonably request.
(vi) The Company shall cause all securities
of Optionee registered pursuant to a Registration Statement to be listed
on any national securities exchange or quoted on any automated quotation
system on which similar securities of the Company are listed or quoted.
13. STAND-OFF AGREEMENT. Optionee agrees that in connection with any
registration of the Company's securities, that upon the request of the
Company or any underwriter managing an underwritten offering of the Company's
securities, that Optionee shall not sell, short any sale of, loan, grant an
option for, or otherwise dispose of any of the Shares (other than Shares
included in the offering) without the prior written consent of the Company or
such managing underwriter, as applicable, for a period of at least one
hundred eighty (180) days following the effective date of registration of
such offering.
14. NOTICES. Any notice required to be given pursuant to this Option or
the Plan shall be in writing and shall be deemed to be delivered upon receipt
or, in the case of notices by the Company, five (5) days after deposit in the
US. mail, postage prepaid, addressed to Optionee at the address last provided
to the Company by Optionee for his or her employee records.
15. AGREEMENT SUBJECT TO PLAN; APPLICABLE LAW. This Agreement is made
pursuant to the Plan and shall be interpreted to comply therewith. A copy of
such Plan is
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available to Optionee, at no charge, at the principal office of
the Company. Any provision of this Agreement inconsistent with the Plan shall
be considered void and replaced with the applicable provision of the Plan.
This Agreement has been granted, executed and delivered in the State of
Nevada, and the interpretation and enforcement shall be governed by the laws
thereof and subject to the exclusive jurisdiction of the courts therein.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
NETSOL INTERNATIONAL, INC.
a Nevada corporation
--------------------------------
BY: Najeeb Ghauri
ITS: President
--------------------------------
[NAME]_______________, Optionee
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Appendix A
NOTICE OF EXERCISE
NetSol International, Inc.
233 Wilshire Blvd., Suite 510
Santa Monica, CA 90401
--------------------
(date)
Re: Incentive Stock Option
Notice is hereby given pursuant to Section 4 of my Incentive Stock
Option Agreement that I elect to purchase the number of shares set forth
below at the exercise price set forth in my option agreement:
Stock Option dated: ______________________
Number of shares being purchased: ______________________
Option Exercise Price: $_____________________
A check in the amount of the aggregate price of the shares being
purchased is attached.
I hereby confirm that such shares are being acquired by me for my own
account for investment purposes, and not with a view to, or for resale in
connection with, any distribution thereof.
Further, I understand that, as a result of this exercise of rights, I
may recognize income in an amount equal to the amount by which the fair
market value of the Shares exceeds the exercise price. I agree to report such
income in accordance with then applicable law and to cooperate with Company
in establishing the withholding and corresponding deduction to the Company
for its income tax purposes.
I agree to provide to the Corporation such additional documents or
information as may be required pursuant to the Corporation's 1999 Incentive
and Nonstatutory Stock Option Plan.
--------------------------
(Signature)
--------------------------
(Name of Optionee)
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EXHIBIT 10.3
10.3 Employment Agreement, dated April 17, 1999 by and between
Mirage Holdings, Inc. and Najeeb U. Ghauri
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made, entered into, and
effective as of April 17, 1999 (the "Effective Date"), by and between Mirage
Holdings, Inc., a Nevada corporation ("Company"), and Najeeb Ghauri, an
individual ("Employee").
RECITALS
A. Company is engaged in the technology industry and maintains an
office in Santa Monica, California.
B. Company desires to have an employment agreement with Employee for
the position set forth in SCHEDULE A subject to the terms and conditions of
this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, the parties hereto hereby agree as follows:
AGREEMENT
1. TERM AND DUTIES. Company hereby employs Employee in the position set out
on SCHEDULE A to this Agreement, and Employee agrees to fulfil the duties and
responsibilities as the Chief Executive Officer, President and interim Chief
Financial Officer of the Company, subject to changes consistent with the
usual duties and responsibilities of that position as may be reasonably
prescribed by the Board of Directors of the Company (the "Board") from time
to time. Employee shall devote such time and attention to the business of
Company as shall be required to perform the required services and duties.
Employee at all times during the employment term shall strictly adhere to and
obey all policies, rules and regulations established from time to time
governing the conduct of employees of Company.
2. DUTIES OF EMPLOYEE.
2.1 Employee agrees to perform Employee's services efficiently and to
the best of Employee's ability. Employee agrees throughout the term of this
Agreement to devote his time, energy and skill to the business of the Company
and to the promotion of the best interests of the Company.
2.2 Employee agrees that he shall not at any time, either during or
subsequent to his employment term, unless expressly consented to in writing
by Company, either directly or indirectly use or disclose to any person or
entity any confidential information of any kind, nature or description
concerning any matters affecting or relating to the business of Company,
including, but not limited to, information concerning the customers of
Company, Company's marketing methods, compensation paid to employees,
independent contractors or suppliers
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and other terms of their employment or contractual relationships, financial
and business records, know-how, or any other information concerning the
business of Company, its manner of operations, or other data of any kind,
nature or description. Employee agrees that the above information and items
are important, material and confidential trade secrets and these affect the
successful conduct of Company's business and its goodwill. This
non-disclosure obligation does not apply to any information which is
presently in the public domain, or any information that subsequently becomes
part of the public domain through no fault of Employee.
2.3 Employee will not, during his employment with the Company, engage
in any business, enterprise or activity that is contrary to or detracts from
the business of the Company or the proper fulfilment of his duties and
responsibilities to the Company.
2.4 Employee will comply with all the restrictions set forth below at
all times during his employment and for a period of eighteen months after the
termination of his employment:
a. Employee will not, either individually or in conjunction
with any person, as principal, agent, director, officer, employee, investor
or in any other manner whatsoever, directly or indirectly engage in or become
financially interested in any competitive business within North America,
except as a passive investor holding not more than one percent of the
publicly traded stock of a corporation in which Employee is not involved in
management;
b. Employee will not, either directly or indirectly, on its
own behalf of on behalf of others, solicit, divert or appropriate or attempt
to solicit, divert or appropriate to any competitive business, any business
or actively sought prospective business of the Company or any customers with
whom the Company or any affiliate of the Company has current agreements
relating to the business of the Company, or with whom Employee has dealt, or
with whom Employee has supervised negotiations or business relations, or
about whom Employee has acquired confidential information in the course of
Employee's employment;
c. Employee will not, either directly or indirectly, on
Employee's behalf or on behalf of others, solicit, divert or hire away, or
attempt to solicit, divert, or hire away, any independent contractor or any
person employed by the Company or any affiliate of the Company or persuade or
attempt to persuade any such individual to terminate his or her employment
with the Company; and,
d. Employee will not directly or indirectly impair or seek
to impair the reputation of the Company or any affiliate of the Company, nor
any relationship that the Company or any affiliate of the Company has with
its employees, customers, suppliers, agents or other parties with which the
Company or any other affiliate of the Company does business or has
contractual relations;
2
<PAGE>
e. Employee will not receive or accept for its own benefit,
either directly or indirectly, any commission, rebate, discount, gratuity or
profit from any person having or proposing to have one or more business
transactions with the Company or any affiliate of the Company, without the
prior approval of the Board, which may be withheld; and,
f. Employee will, during the term of this employment with
the Company, communicate and channel to the Company all knowledge, business
and customer contacts and any other information that could concern or be in
any way beneficial to the business of the Company. Any such information
communicated to the Company as aforesaid will be and remain the property of
the Company notwithstanding any subsequent termination of Employee's
employment.
3. COMPENSATION.
3.1 Subject to the termination of this Agreement as provided herein,
Company shall compensate Employee for his services hereunder at an annual
salary set forth in SCHEDULE A, subject to changes by mutual agreement,
payable in accordance with the Company's standard salary payment schedule.
Payment of Employee's Salary will be subject to income tax source deductions
and other deductions required by applicable laws.
3.2 Employee is also eligible to receive such additional compensation
as the Board of Directors of Company determines is proper in recognition of
Employee's contributions and services to Company. Such additional
compensation shall be paid to Employee on the anniversary date of this
Agreement during the Employment Term, and at such other times as may be
determined by the Board of Directors.
3.3 Employee shall be entitled to stock options each year of employment
for the term of his employment as set forth in summary in Schedule A. The
details of the stock options are set forth in the Company's Employee Stock
Option Plan.
3.4 In addition to the compensation set forth above, Employee shall be
entitled to participate in or to receive benefits under all of Company's
employee benefit plans made available by Company now or in the future to
similarly situated employees, subject to the terms, conditions and overall
administration of such plans.
(a) Employee shall be entitled to participate in or to
receive benefits under all of Company's employee benefit plans made available
by Company or in the future to similarly situated employees, subject to the
terms, conditions and overall administration of such plans. Including but not
limited to 401(k) plans, IRA plans, E.R.I.S.A Plans, any other retirement or
benefit plans that the Company has made available to similarly situated
employees.
(b) Upon receipt of the bills or other evidence of
expenses, Company shall reimburse Employee for all medical, dental and
hospital expenses incurred by Employee for
3
<PAGE>
himself and for his dependant(s), if any, pursuant to the medical care plan
adopted by the Company.
4. EXPENSES. Company shall reimburse Employee for all reasonable business
related expenses incurred by Employee in the course of his normal duties on
behalf of the Company. In compensating Employee for expenses, the ordinary
and usual business guidelines and documentation requirements shall be adhered
to by Company and Employee.
(a) Employee will be required to incur travel, meals, entertainment and
other business expenses on behalf of the Company in the performance of
Employee's duties hereunder. Company will reimburse Employee for all such
reasonable business expenses incurred by Employee in connection with
Company's business upon presentation of receipts or other acceptable
documentation of the expenditures.
5. VACATION. Employee shall be entitled to the period of vacation set
forth on SCHEDULE A to this Agreement. Vacation should be taken at such times
as may be convenient to Company and Employee. Any vacation time not used in
any one year may be carried forward to subsequent employment years. For
purposes of this Agreement, "employment years" shall mean the successive one
(1) year periods beginning on the Effective Date of this Agreement and on
each anniversary date of the Effective Date of this Agreement during the term
of this Agreement.
6. ASSIGNMENT OF INTELLECTUAL PROPERTY RIGHTS. As consideration for your
employment with Company, Employee covenants and agrees as follows:
(a) Employee will make prompt and full disclosure to the Company of any
discovery, processes, inventions, patents, computer software, copyrights,
trademarks and other intangible rights (collectively referred to as
"Intellectual Property") that may be conceived, made, improved upon,
developed, or participated by Employee, solely or jointly, in the course of,
arising from or relating to any Intellectual Property Rights of the Company,
or his employment with the Company or any affiliate of the Company (the "Work
Products").
(b) The Company will hold all Intellectual Property Rights in respect
of the Work Products for the exclusive benefit of the Company and Employee
agrees not to claim or apply for registration or challenge the Company's
registration of, any such Intellectual Property Rights. Employee's acceptance
of the terms of this Agreement constitutes an absolute, unconditional and
irrevocable assignment, transfer and conveyance of all past, present and
future right, title, benefit and interest in and to all Intellectual Property
Rights in respect of the Work Products. Employee hereby waives, in favor of
the Company, all claims of any nature whatsoever that Employee now or
hereafter may have for infringement of any Intellectual Property Rights for
the Work Products so assigned to the Company. To the extent that copyright
may subsist in the Work Products, Employee hereby waives all past, present
and future moral rights he may have.
4
<PAGE>
(c) The Work Products and all related Intellectual Property Rights will
be the absolute and exclusive property of the Company. The Company may apply
for patent, copyright or other intellectual property protection in the
Company's name or, where such procedure is proper, in Employee's name,
anywhere in the world. Employee will, at the Company's request, execute all
documents and do all such acts and things considered necessary by the Company
to obtain, confirm or enforce any Intellectual Property Rights in respect of
the Inventions. In case the Company requires, but is unable to secure
Employee's signature for any such purpose in a timely manner, Employee hereby
irrevocably designate and appoint the Company and any duly authorized officer
or agent of the Company as Employee's agent and attorney, to act for Employee
and in Employee's behalf an stead to execute any such documents and to do all
other lawfully permitted acts to carry out the intent of this provision, with
the same legal force and effect as if executed or done by Employee. This
power of attorney is coupled with an interest.
7. DISABILITY OF EMPLOYEE.
7.1 Employee shall be considered disabled if, due to illness or injury,
either physical or mental, Employee is unable to perform Employee's customary
duties as an employee of Company for more than thirty (30) days in the
aggregate out of a period of twelve (12) consecutive months. The disability
shall be determined by a certification from a physician.
7.2 If Employee is determined to be disabled, Company shall continue to
pay Employee's base salary for the initial ninety (90) days of "disability."
The continuation of the salary compensation after the initial ninety (90)
days shall be determined by the Board of Directors of the Company.
8. TERMINATION BY COMPANY.
8.1 Unless terminated earlier as provided in this Agreement, Employee
shall be employed for a term set forth in SCHEDULE A. Thereafter, the
employment term shall continue on an at will basis until terminated at the
option of Company or Employee upon thirty (30) days prior written notice.
This Agreement may be terminated at any time by written agreement between the
parties, or as provided in Section 8.2 below. This Agreement will terminate
immediately upon Employee's death.
8.2 Company may terminate this Agreement for cause at any time without
notice. For purposes of this Agreement, the term "cause" shall include, but
not be limited to, the following: a material breach of or failure to perform
any covenant or obligation in this Agreement, disloyalty, dishonesty, neglect
of duties, unprofessional conduct, acts of moral turpitude, disappearance,
felonious conduct or fraud, the use of illegal drugs or the habitual and
disabling use of alcohol and drugs, embezzlement or similar conduct.
9. NOTICE. Any notice, request, demand, or other communication given
pursuant to the terms of this Agreement shall be deemed given upon delivery,
if hand delivered, or
5
<PAGE>
forty-eight (48) hours after deposit in the United States mail, postage
prepaid, and sent certified or registered mail, return receipt requested,
correctly addressed to the addresses of the parties indicated below or at
such other address as such party shall in writing have advised the other
party.
If to Company: Mirage Holdings, Inc.
233 Wilshire Blvd., Suite 510
Santa Monica, CA 90404
Attn.: Najeeb Ghauri, President
Copy to: Horwitz & Beam
Two Venture Plaza, Suite 350
Irvine, CA 92618
Attn.: Lawrence W. Horwitz, Esq.
If to Employee: ________________________
________________________
________________________
Copy to: ________________________
________________________
________________________
10. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto their respective devisees, legatees, heirs,
legal representatives, successors, and permitted assigns. The preceding
sentence shall not affect any restriction on assignment set forth elsewhere
in this Agreement.
11. ARBITRATION. If a dispute or claim shall arise with respect to any of
the terms or provisions of this Agreement, or with respect to the performance
by either of the parties under this Agreement, other than a dispute with
respect to Section 2 of this Agreement, then either party may, with notice as
herein provided, require that the dispute be submitted under the Commercial
Arbitration Rules of the American Arbitration Association ("AAA"). Each party
shall bear one-half (1/2) of the cost of appointing the arbitrator and of
paying such arbitrator's fees. The written decision of the arbitrator(s)
ultimately appointed by or for both parties shall be binding and conclusive
on the parties. Judgment may be entered on such written decision of the
single arbitrator in any court having jurisdiction. Any arbitration
undertaken pursuant to the terms of this section shall occur in the county of
the Company's office in Los Angeles, California.
12. ASSIGNMENT. Subject to all other provisions of this Agreement, any
attempt to assign or transfer this Agreement or any of the rights conferred
hereby, by judicial process or
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<PAGE>
otherwise, to any person, firm, Company, or corporation without the prior
written consent of the other party, shall be invalid, and may, at the option
of such other party, result in an incurable event of default resulting in
termination of this Agreement and all rights hereby conferred.
13. CHOICE OF LAW. This Agreement and the rights of the parties hereunder
shall be governed by and construed in accordance with the laws of the State
of California including all matters of construction, validity, performance,
and enforcement and without giving effect to the principles of conflict of
laws.
14. INDEMNIFICATION. Company shall indemnify, defend and hold Employee
harmless, to the fullest extent permitted by law, for all claims, demands,
losses, costs, expenses, obligations, liabilities, damages, recoveries and
deficiencies, including interest, penalties and reasonable attorney's fees
that Employee shall incur or suffer that arise from, result from or relate to
the discharge of Employee's duties under this Agreement.
15. ENTIRE AGREEMENT. Except as provided herein, this Agreement, including
exhibits, contains the entire agreement of the parties, and supersedes all
existing negotiations, representations, or agreements and all other oral,
written, or other communications between them concerning the subject matter
of this Agreement. There are no representations, agreements, arrangements, or
understandings, oral or written, between and among the parties hereto
relating to the subject matter of this Agreement that are not fully expressed
herein.
16. SEVERABILITY. If any provision of this Agreement is unenforceable,
invalid, or violates applicable law, such provision, or unenforceable portion
of such provision, shall be deemed stricken and shall not affect the
enforceability of any other provisions of this Agreement.
17. CAPTIONS. The captions in this Agreement are inserted only as a matter
of convenience and for reference and shall not be deemed to define, limit,
enlarge, or describe the scope of this Agreement or the relationship of the
parties, and shall not affect this Agreement or the construction of any
provisions herein.
18. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
shall together constitute one and the same instrument. 19. MODIFICATION. No
change, modification, addition, or amendment to this Agreement shall be valid
unless in writing and signed by all parties hereto.
20. ATTORNEYS' FEES. Except as otherwise provided herein, if a dispute
should arise between the parties including, but not limited to arbitration,
the prevailing party shall be reimbursed by the non-prevailing party for all
reasonable expenses incurred in resolving such dispute, including reasonable
attorneys' fees exclusive of such amount of attorneys' fees as shall be a
premium for result or for risk of loss under a contingency fee arrangement.
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<PAGE>
21. TAXES. Any income taxes required to be paid in connection with the
payments due hereunder, shall be borne by the party required to make such
payment. Any withholding taxes in the nature of a tax on income shall be
deducted from payments due, and the party required to withhold such tax shall
furnish to the party receiving such payment all documentation necessary to
prove the proper amount to withhold of such taxes and to prove payment to the
tax authority of such required withholding.
22. NOT FOR THE BENEFIT OF CREDITORS OR THIRD PARTIES. The provisions of
this Agreement are intended only for the regulation of relations among the
parties. This Agreement is not intended for the benefit of creditors of the
parties or other third parties and no rights are granted to creditors of the
parties or other third parties under this Agreement. Under no circumstances
shall any third party, who is a minor, be deemed to have accepted, adopted,
or acted in reliance upon this Agreement.
23. FACSIMILE SIGNATURES. Facsimile signatures shall be acceptable and
binding as originals.
24. CONFLICT WAIVER. Both Employee and the Company (the "Parties") hereby
agree and acknowledge that the law firm of Horwitz and Beam ("H&B"), which
represents the Company, has drafted this Agreement. The Parties hereto
further acknowledge that they have been informed of the inherent conflict of
interest associated with the drafting of this Agreement by H&B and waive any
action they may have against H&B regarding such conflict. The Parties have
been given the opportunity to consult with counsel of their choice regarding
their rights under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the Effective Date.
"Company" "Employee"
Mirage Holdings, Inc., Najeeb Ghauri
a Nevada corporation
/s/Najeeb Ghauri /s/Najeeb Ghauri
- ---------------------- -------------------
BY: Najeeb U. Ghauri
ITS: President
8
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SCHEDULE A
EMPLOYEE'S NAME: Najeeb Ghauri
EFFECTIVE DATE AND TERM: Effective date of Employment shall be as of April 17,
1999 for a period of three years from the effective date.
POSITION: Chief Executive Officer, President and
interim Chief Financial Officer
SALARY: $100,000 per year.
STOCK OPTION:
Specific terms as detailed in the Employee Stock Option Plan with general terms
as follows:
(a) On May 18, 1999, Employee shall be issued 150,000 shares of common
stock of the Company with Rule 144 restriction at an exercise price of
$1.50 per share;
(b) On May 18, 2000, Employee shall be issued 150,000 shares of common
stock of the Company with Rule 144 restriction at an exercise price of
$2.50 per share;
(c) On May 18, 2001, Employee shall be issued 150,000 shares of common
stock of the Company with Rule 144 restriction at an exercise price of
$3.50 per share;
PAID VACATION: Two weeks paid vacation.
"Company" "Employee"
Mirage Holdings, Inc., Najeeb Ghauri
a Nevada corporation
/s/Najeeb Ghauri /s/Najeeb Ghauri
- ----------------------- ---------------------
BY: Najeeb U. Ghauri
ITS: President
9
<PAGE>
EXHIBIT 10.4
10.4 Employment Agreement, dated April 17, 1999 by and between
Mirage Holdings, Inc. and Salim Ghauri
1
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made, entered into, and
effective as of April 17, 1999 (the "Effective Date"), by and between Mirage
Holdings, Inc., a Nevada corporation ("Company"), and Salim Ghauri, an
individual ("Employee").
RECITALS
A. Company is engaged in the technology industry and maintains an
office in Santa Monica, California.
B. Company desires to have an employment agreement with Employee for the
position set forth in SCHEDULE A subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, the parties hereto hereby agree as follows:
AGREEMENT
10. TERM AND DUTIES. Company hereby employs Employee in the position set
out on SCHEDULE A to this Agreement, and Employee agrees to fulfil the duties
and responsibilities as the Chief Executive Officer (Pakistan), subject to
changes consistent with the usual duties and responsibilities of that
position as may be reasonably prescribed by the Board of Directors of the
Company (the "Board") from time to time. Employee shall devote such time and
attention to the business of Company as shall be required to perform the
required services and duties. Employee at all times during the employment
term shall strictly adhere to and obey all policies, rules and regulations
established from time to time governing the conduct of employees of Company.
11. DUTIES OF EMPLOYEE.
11.1 Employee agrees to perform Employee's services efficiently and to
the best of Employee's ability. Employee agrees throughout the term of this
Agreement to devote his time, energy and skill to the business of the Company
and to the promotion of the best interests of the Company.
11.2 Employee agrees that he shall not at any time, either during or
subsequent to his employment term, unless expressly consented to in writing
by Company, either directly or indirectly use or disclose to any person or
entity any confidential information of any kind, nature or description
concerning any matters affecting or relating to the business of Company,
including, but not limited to, information concerning the customers of
Company, Company's marketing methods, compensation paid to employees,
independent contractors or suppliers and other terms of their employment or
contractual relationships, financial and business
2
<PAGE>
records, know-how, or any other information concerning the business of
Company, its manner of operations, or other data of any kind, nature or
description. Employee agrees that the above information and items are
important, material and confidential trade secrets and these affect the
successful conduct of Company"s business and its goodwill. This
non-disclosure obligation does not apply to any information which is
presently in the public domain, or any information that subsequently becomes
part of the public domain through no fault of Employee.
2.3 Employee will not, during his employment with the Company, engage
in any business, enterprise or activity that is contrary to or detracts from
the business of the Company or the proper fulfilment of his duties and
responsibilities to the Company.
2.4 Employee will comply with all the restrictions set forth below at
all times during his employment and for a period of eighteen months after the
termination of his employment:
a. Employee will not, either individually or in conjunction
with any person, as principal, agent, director, officer, employee, investor or
in any other manner whatsoever, directly or indirectly engage in or become
financially interested in any competitive business within North America and
Pakistan, except as a passive investor holding not more than one percent of the
publicly traded stock of a corporation in which Employee is not involved in
management;
b. Employee will not, either directly or indirectly, on its
own behalf of on behalf of others, solicit, divert or appropriate or attempt to
solicit, divert or appropriate to any competitive business, any business or
actively sought prospective business of the Company or any customers with whom
the Company or any affiliate of the Company has current agreements relating to
the business of the Company, or with whom Employee has dealt, or with whom
Employee has supervised negotiations or business relations, or about whom
Employee has acquired confidential information in the course of Employee's
employment;
c. Employee will not, either directly or indirectly, on
Employee's behalf or on behalf of others, solicit, divert or hire away, or
attempt to solicit, divert, or hire away, any independent contractor or any
person employed by the Company or any affiliate of the Company or persuade or
attempt to persuade any such individual to terminate his or her employment with
the Company; and,
d. Employee will not directly or indirectly impair or seek to
impair the reputation of the Company or any affiliate of the Company, nor any
relationship that the Company or any affiliate of the Company has with its
employees, customers, suppliers, agents or other parties with which the Company
or any other affiliate of the Company does business or has contractual
relations;
3
<PAGE>
e. Employee will not receive or accept for its own benefit,
either directly or indirectly, any commission, rebate, discount, gratuity or
profit from any person having or proposing to have one or more business
transactions with the Company or any affiliate of the Company, without the prior
approval of the Board, which may be withheld; and,
f. Employee will, during the term of this employment with the
Company, communicate and channel to the Company all knowledge, business and
customer contacts and any other information that could concern or be in any way
beneficial to the business of the Company. Any such information communicated to
the Company as aforesaid will be and remain the property of the Company
notwithstanding any subsequent termination of Employee's employment.
12. COMPENSATION.
12.1 Subject to the termination of this Agreement as provided herein,
Company shall compensate Employee for his services hereunder at an annual salary
set forth in SCHEDULE A, subject to changes by mutual agreement, payable in
accordance with the Company's standard salary payment schedule. Payment of
Employee's Salary will be subject to income tax source deductions and other
deductions required by applicable laws.
12.2 Employee is also eligible to receive such additional compensation as
the Board of Directors of Company determines is proper in recognition of
Employee's contributions and services to Company. Such additional compensation
shall be paid to Employee on the anniversary date of this Agreement during the
Employment Term, and at such other times as may be determined by the Board of
Directors.
3.3 Employee shall be entitled to stock options each year of employment
for the term of his employment as set forth in summary in Schedule A. The
details of the stock options are set forth in the Company's Employee Stock
Option Plan.
3.4 In addition to the compensation set forth above, Employee shall be
entitled to participate in or to receive benefits under all of Company's
employee benefit plans made available by Company now or in the future to
similarly situated employees, subject to the terms, conditions and overall
administration of such plans.
(a) Employee shall be entitled to participate in or to receive
benefits under all of Company's employee benefit plans made available by Company
or in the future to similarly situated employees, subject to the terms,
conditions and overall administration of such plans. Including but not limited
to 401(k) plans, IRA plans, E.R.I.S.A Plans, any other retirement or benefit
plans that the Company has made available to similarly situated employees.
(b) Upon receipt of the bills or other evidence of expenses,
Company shall reimburse Employee for all medical, dental and hospital expenses
incurred by Employee for
4
<PAGE>
himself and for his dependant(s), if any, pursuant to the medical care plan
adopted by the Company.
13. EXPENSES. Company shall reimburse Employee for all reasonable business
related expenses incurred by Employee in the course of his normal duties on
behalf of the Company. In compensating Employee for expenses, the ordinary
and usual business guidelines and documentation requirements shall be adhered
to by Company and Employee.
(a) Employee will be required to incur travel, meals, entertainment and
other business expenses on behalf of the Company in the performance of
Employee's duties hereunder. Company will reimburse Employee for all such
reasonable business expenses incurred by Employee in connection with Company's
business upon presentation of receipts or other acceptable documentation of the
expenditures.
14. VACATION. Employee shall be entitled to the period of vacation set
forth on SCHEDULE A to this Agreement. Vacation should be taken at such times
as may be convenient to Company and Employee. Any vacation time not used in
any one year may be carried forward to subsequent employment years. For
purposes of this Agreement, "employment years" shall mean the successive one
(1) year periods beginning on the Effective Date of this Agreement and on
each anniversary date of the Effective Date of this Agreement during the term
of this Agreement.
15. ASSIGNMENT OF INTELLECTUAL PROPERTY RIGHTS. As consideration for your
employment with Company, Employee covenants and agrees as follows:
(a) Employee will make prompt and full disclosure to the Company of any
discovery, processes, inventions, patents, computer software, copyrights,
trademarks and other intangible rights (collectively referred to as
"Intellectual Property") that may be conceived, made, improved upon, developed,
or participated by Employee, solely or jointly, in the course of, arising from
or relating to any Intellectual Property Rights of the Company, or his
employment with the Company or any affiliate of the Company (the "Work
Products").
(b) The Company will hold all Intellectual Property Rights in respect of
the Work Products for the exclusive benefit of the Company and Employee agrees
not to claim or apply for registration or challenge the Company's registration
of, any such Intellectual Property Rights. Employee's acceptance of the terms of
this Agreement constitutes an absolute, unconditional and irrevocable
assignment, transfer and conveyance of all past, present and future right,
title, benefit and interest in and to all Intellectual Property Rights in
respect of the Work Products. Employee hereby waives, in favor of the Company,
all claims of any nature whatsoever that Employee now or hereafter may have for
infringement of any Intellectual Property Rights for the Work Products so
assigned to the Company. To the extent that copyright may subsist in the Work
Products, Employee hereby waives all past, present and future moral rights he
may have.
5
<PAGE>
(c) The Work Products and all related Intellectual Property Rights will be
the absolute and exclusive property of the Company. The Company may apply for
patent, copyright or other intellectual property protection in the Company's
name or, where such procedure is proper, in Employee's name, anywhere in the
world. Employee will, at the Company's request, execute all documents and do all
such acts and things considered necessary by the Company to obtain, confirm or
enforce any Intellectual Property Rights in respect of the Inventions. In case
the Company requires, but is unable to secure Employee's signature for any such
purpose in a timely manner, Employee hereby irrevocably designate and appoint
the Company and any duly authorized officer or agent of the Company as
Employee's agent and attorney, to act for Employee and in Employee's behalf an
stead to execute any such documents and to do all other lawfully permitted acts
to carry out the intent of this provision, with the same legal force and effect
as if executed or done by Employee. This power of attorney is coupled with an
interest.
16. DISABILITY OF EMPLOYEE.
16.1 Employee shall be considered disabled if, due to illness or injury,
either physical or mental, Employee is unable to perform Employee's customary
duties as an employee of Company for more than thirty (30) days in the aggregate
out of a period of twelve (12) consecutive months. The disability shall be
determined by a certification from a physician.
16.2 If Employee is determined to be disabled, Company shall continue to
pay Employee's base salary for the initial ninety (90) days of "disability." The
continuation of the salary compensation after the initial ninety (90) days shall
be determined by the Board of Directors of the Company.
17. TERMINATION BY COMPANY.
17.1 Unless terminated earlier as provided in this Agreement, Employee
shall be employed for a term set forth in SCHEDULE A. Thereafter, the employment
term shall continue on an at will basis until terminated at the option of
Company or Employee upon thirty (30) days prior written notice. This Agreement
may be terminated at any time by written agreement between the parties, or as
provided in Section 8.2 below. This Agreement will terminate immediately upon
Employee's death.
17.2 Company may terminate this Agreement for cause at any time without
notice. For purposes of this Agreement, the term "cause" shall include, but not
be limited to, the following: a material breach of or failure to perform any
covenant or obligation in this Agreement, disloyalty, dishonesty, neglect of
duties, unprofessional conduct, acts of moral turpitude, disappearance,
felonious conduct or fraud, the use of illegal drugs or the habitual and
disabling use of alcohol and drugs, embezzlement or similar conduct.
6
<PAGE>
18. NOTICE. Any notice, request, demand, or other communication given
pursuant to the terms of this Agreement shall be deemed given upon delivery,
if hand delivered, or forty-eight (48) hours after deposit in the United
States mail, postage prepaid, and sent certified or registered mail, return
receipt requested, correctly addressed to the addresses of the parties
indicated below or at such other address as such party shall in writing have
advised the other party.
If to Company: Mirage Holdings, Inc.
233 Wilshire Blvd., Suite 510
Santa Monica, CA 90404
Attn.: Najeeb Ghauri, President
Copy to: Horwitz & Beam
Two Venture Plaza, Suite 350
Irvine, CA 92618
Attn.: Lawrence W. Horwitz, Esq.
If to Employee: Salim Ghauri
________________________
________________________
Copy to: ________________________
________________________
________________________
10. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto their respective devisees, legatees, heirs,
legal representatives, successors, and permitted assigns. The preceding
sentence shall not affect any restriction on assignment set forth elsewhere
in this Agreement.
11. ARBITRATION. If a dispute or claim shall arise with respect to any of
the terms or provisions of this Agreement, or with respect to the performance
by either of the parties under this Agreement, other than a dispute with
respect to Section 2 of this Agreement, then either party may, with notice as
herein provided, require that the dispute be submitted under the Commercial
Arbitration Rules of the American Arbitration Association ("AAA"). Each party
shall bear one-half (2) of the cost of appointing the arbitrator and of
paying such arbitrator's fees. The written decision of the arbitrator(s)
ultimately appointed by or for both parties shall be binding and conclusive
on the parties. Judgment may be entered on such written decision of the
single arbitrator in any court having jurisdiction. Any arbitration
undertaken pursuant to the terms of this section shall occur in the county of
the Company's office in Los Angeles, California.
7
<PAGE>
12. ASSIGNMENT. Subject to all other provisions of this Agreement, any attempt
to assign or transfer this Agreement or any of the rights conferred hereby, by
judicial process or otherwise, to any person, firm, Company, or corporation
without the prior written consent of the other party, shall be invalid, and may,
at the option of such other party, result in an incurable event of default
resulting in termination of this Agreement and all rights hereby conferred.
13. CHOICE OF LAW. This Agreement and the rights of the parties hereunder shall
be governed by and construed in accordance with the laws of the State of
California including all matters of construction, validity, performance, and
enforcement and without giving effect to the principles of conflict of laws.
14. INDEMNIFICATION. Company shall indemnify, defend and hold Employee
harmless, to the fullest extent permitted by law, for all claims, demands,
losses, costs, expenses, obligations, liabilities, damages, recoveries and
deficiencies, including interest, penalties and reasonable attorney's fees
that Employee shall incur or suffer that arise from, result from or relate to
the discharge of Employee's duties under this Agreement.
15. ENTIRE AGREEMENT. Except as provided herein, this Agreement, including
exhibits, contains the entire agreement of the parties, and supersedes all
existing negotiations, representations, or agreements and all other oral,
written, or other communications between them concerning the subject matter of
this Agreement. There are no representations, agreements, arrangements, or
understandings, oral or written, between and among the parties hereto relating
to the subject matter of this Agreement that are not fully expressed herein.
16. SEVERABILITY. If any provision of this Agreement is unenforceable, invalid,
or violates applicable law, such provision, or unenforceable portion of such
provision, shall be deemed stricken and shall not affect the enforceability of
any other provisions of this Agreement.
17. CAPTIONS. The captions in this Agreement are inserted only as a matter of
convenience and for reference and shall not be deemed to define, limit, enlarge,
or describe the scope of this Agreement or the relationship of the parties, and
shall not affect this Agreement or the construction of any provisions herein.
18. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which shall together
constitute one and the same instrument.
19. MODIFICATION. No change, modification, addition, or amendment to this
Agreement shall be valid unless in writing and signed by all parties hereto.
20. ATTORNEYS' FEES. Except as otherwise provided herein, if a dispute should
arise between the parties including, but not limited to arbitration, the
prevailing party shall be reimbursed by the non-prevailing party for all
reasonable expenses incurred in resolving such dispute, including reasonable
attorneys' fees exclusive of such amount of attorneys' fees as shall be a
premium for result or for risk of loss under a contingency fee arrangement.
8
<PAGE>
21. TAXES. Any income taxes required to be paid in connection with the
payments due hereunder, shall be borne by the party required to make such
payment. Any withholding taxes in the nature of a tax on income shall be
deducted from payments due, and the party required to withhold such tax shall
furnish to the party receiving such payment all documentation necessary to
prove the proper amount to withhold of such taxes and to prove payment to the
tax authority of such required withholding.
22. NOT FOR THE BENEFIT OF CREDITORS OR THIRD PARTIES. The provisions of
this Agreement are intended only for the regulation of relations among the
parties. This Agreement is not intended for the benefit of creditors of the
parties or other third parties and no rights are granted to creditors of the
parties or other third parties under this Agreement. Under no circumstances
shall any third party, who is a minor, be deemed to have accepted, adopted,
or acted in reliance upon this Agreement.
23. FACSIMILE SIGNATURES. Facsimile signatures shall be acceptable and
binding as originals.
24. CONFLICT WAIVER. Both Employee and the Company (the "Parties") hereby
agree and acknowledge that the law firm of Horwitz and Beam ("H&B"), which
represents the Company, has drafted this Agreement. The Parties hereto
further acknowledge that they have been informed of the inherent conflict of
interest associated with the drafting of this Agreement by H&B and waive any
action they may have against H&B regarding such conflict. The Parties have
been given the opportunity to consult with counsel of their choice regarding
their rights under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the Effective Date.
"Company" "Employee"
Mirage Holdings, Inc., Salim Ghauri
a Nevada corporation
- ----------------------------------
/s/ Najeeb U. Ghauri
- ----------------------------------
BY: Najeeb U. Ghauri
ITS: President
9
<PAGE>
SCHEDULE A
EMPLOYEE'S NAME: Salim Ghauri
EFFECTIVE DATE AND TERM: Effective date of Employment shall be as of April 17,
1999 for a period of three years from the effective date.
POSITION: Chief Executive Officer (Pakistan)
SALARY: $100,000 per year.
STOCK OPTION:
Specific terms as detailed in the Employee Stock Option Plan with general terms
as follows:
(a) On May 18, 1999, Employee shall be issued 150,000 shares of common
stock of the Company with Rule 144 restriction at an exercise price of
$1.50 per share;
(b) On May 18, 2000, Employee shall be issued 150,000 shares of common
stock of the Company with Rule 144 restriction at an exercise price of
$2.50 per share;
(c) On May 18, 2001, Employee shall be issued 150,000 shares of common
stock of the Company with Rule 144 restriction at an exercise price of
$3.50 per share;
PAID VACATION: Two weeks paid vacation.
"Company" "Employee"
Mirage Holdings, Inc., Salim Ghauri
a Nevada corporation
/s/Najeeb Ghauri /s/ Salim Ghauri
- ---------------------------------- ----------------------------------
BY: Najeeb U. Ghauri
ITS: President
10
<PAGE>
EXHIBIT 10.5
10.5 Employment Agreement, dated April 17, 1999 by and between
Mirage Holdings, Inc. and Naeem Ghauri
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made, entered into, and
effective as of April 17, 1999 (the "Effective Date"), by and between Mirage
Holdings, Inc., a Nevada corporation ("Company"), and Naeem Ghauri, an
individual ("Employee").
RECITALS
A. Company is engaged in the technology industry and maintains an
office in Santa Monica, California.
B. Company desires to have an employment agreement with Employee for the
position set forth in SCHEDULE A subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, the parties hereto hereby agree as follows:
AGREEMENT
19. TERM AND DUTIES. Company hereby employs Employee in the position set out on
SCHEDULE A to this Agreement, and Employee agrees to fulfil the duties and
responsibilities as the Chief Executive Officer (UK) and Chief Operating Officer
(USA) of the Company, subject to changes consistent with the usual duties and
responsibilities of that position as may be reasonably prescribed by the Board
of Directors of the Company (the "Board") from time to time. Employee shall
devote such time and attention to the business of Company as shall be required
to perform the required services and duties. Employee at all times during the
employment term shall strictly adhere to and obey all policies, rules and
regulations established from time to time governing the conduct of employees of
Company.
20. DUTIES OF EMPLOYEE.
20.1 Employee agrees to perform Employee's services efficiently and to the
best of Employee's ability. Employee agrees throughout the term of this
Agreement to devote his time, energy and skill to the business of the Company
and to the promotion of the best interests of the Company.
20.2 Employee agrees that he shall not at any time, either during or
subsequent to his employment term, unless expressly consented to in writing by
Company, either directly or indirectly use or disclose to any person or entity
any confidential information of any kind, nature or description concerning any
matters affecting or relating to the business of Company, including, but not
limited to, information concerning the customers of Company, Company's marketing
methods, compensation paid to employees, independent contractors or suppliers
and other terms of their employment or contractual relationships, financial and
business
2
<PAGE>
records, know-how, or any other information concerning the business of
Company, its manner of operations, or other data of any kind, nature or
description. Employee agrees that the above information and items are
important, material and confidential trade secrets and these affect the
successful conduct of Company's business and its goodwill. This
non-disclosure obligation does not apply to any information which is
presently in the public domain, or any information that subsequently becomes
part of the public domain through no fault of Employee.
2.3 Employee will not, during his employment with the Company, engage in
any business, enterprise or activity that is contrary to or detracts from the
business of the Company or the proper fulfilment of his duties and
responsibilities to the Company.
2.4 Employee will comply with all the restrictions set forth below at all
times during his employment and for a period of eighteen months after the
termination of his employment:
a. Employee will not, either individually or in conjunction
with any person, as principal, agent, director, officer, employee, investor or
in any other manner whatsoever, directly or indirectly engage in or become
financially interested in any competitive business within North America and the
United Kingdom, except as a passive investor holding not more than one percent
of the publicly traded stock of a corporation in which Employee is not involved
in management;
b. Employee will not, either directly or indirectly, on its
own behalf of on behalf of others, solicit, divert or appropriate or attempt to
solicit, divert or appropriate to any competitive business, any business or
actively sought prospective business of the Company or any customers with whom
the Company or any affiliate of the Company has current agreements relating to
the business of the Company, or with whom Employee has dealt, or with whom
Employee has supervised negotiations or business relations, or about whom
Employee has acquired confidential information in the course of Employee's
employment;
c. Employee will not, either directly or indirectly, on
Employee's behalf or on behalf of others, solicit, divert or hire away, or
attempt to solicit, divert, or hire away, any independent contractor or any
person employed by the Company or any affiliate of the Company or persuade or
attempt to persuade any such individual to terminate his or her employment with
the Company; and,
d. Employee will not directly or indirectly impair or seek to
impair the reputation of the Company or any affiliate of the Company, nor any
relationship that the Company or any affiliate of the Company has with its
employees, customers, suppliers, agents or other parties with which the Company
or any other affiliate of the Company does business or has contractual
relations;
3
<PAGE>
e. Employee will not receive or accept for its own benefit,
either directly or indirectly, any commission, rebate, discount, gratuity or
profit from any person having or proposing to have one or more business
transactions with the Company or any affiliate of the Company, without the prior
approval of the Board, which may be withheld; and,
f. Employee will, during the term of this employment with the
Company, communicate and channel to the Company all knowledge, business and
customer contacts and any other information that could concern or be in any way
beneficial to the business of the Company. Any such information communicated to
the Company as aforesaid will be and remain the property of the Company
notwithstanding any subsequent termination of Employee's employment.
21. COMPENSATION.
21.1 Subject to the termination of this Agreement as provided herein,
Company shall compensate Employee for his services hereunder at an annual salary
set forth in SCHEDULE A, subject to changes by mutual agreement, payable in
accordance with the Company's standard salary payment schedule. Payment of
Employee's Salary will be subject to income tax source deductions and other
deductions required by applicable laws.
21.2 Employee is also eligible to receive such additional compensation as
the Board of Directors of Company determines is proper in recognition of
Employee's contributions and services to Company. Such additional compensation
shall be paid to Employee on the anniversary date of this Agreement during the
Employment Term, and at such other times as may be determined by the Board of
Directors.
3.3 Employee shall be entitled to stock options each year of employment
for the term of his employment as set forth in summary in Schedule A. The
details of the stock options are set forth in the Company's Employee Stock
Option Plan.
3.4 In addition to the compensation set forth above, Employee shall be
entitled to participate in or to receive benefits under all of Company's
employee benefit plans made available by Company now or in the future to
similarly situated employees, subject to the terms, conditions and overall
administration of such plans.
(a) Employee shall be entitled to participate in or to receive
benefits under all of Company's employee benefit plans made available by Company
or in the future to similarly situated employees, subject to the terms,
conditions and overall administration of such plans. Including but not limited
to 401(k) plans, IRA plans, E.R.I.S.A Plans, any other retirement or benefit
plans that the Company has made available to similarly situated employees.
(b) Upon receipt of the bills or other evidence of expenses,
Company shall reimburse Employee for all medical, dental and hospital expenses
incurred by Employee for
4
<PAGE>
himself and for his dependant(s), if any, pursuant to the medical care plan
adopted by the Company.
22. EXPENSES. Company shall reimburse Employee for all reasonable business
related expenses incurred by Employee in the course of his normal duties on
behalf of the Company. In compensating Employee for expenses, the ordinary and
usual business guidelines and documentation requirements shall be adhered to by
Company and Employee.
(a) Employee will be required to incur travel, meals, entertainment and
other business expenses on behalf of the Company in the performance of
Employee's duties hereunder. Company will reimburse Employee for all such
reasonable business expenses incurred by Employee in connection with Company's
business upon presentation of receipts or other acceptable documentation of the
expenditures.
23. VACATION. Employee shall be entitled to the period of vacation set forth on
SCHEDULE A to this Agreement. Vacation should be taken at such times as may be
convenient to Company and Employee. Any vacation time not used in any one year
may be carried forward to subsequent employment years. For purposes of this
Agreement, "employment years" shall mean the successive one (1) year periods
beginning on the Effective Date of this Agreement and on each anniversary date
of the Effective Date of this Agreement during the term of this Agreement.
24. ASSIGNMENT OF INTELLECTUAL PROPERTY RIGHTS. As consideration for your
employment with Company, Employee covenants and agrees as follows:
(a) Employee will make prompt and full disclosure to the Company of any
discovery, processes, inventions, patents, computer software, copyrights,
trademarks and other intangible rights (collectively referred to as
"Intellectual Property") that may be conceived, made, improved upon, developed,
or participated by Employee, solely or jointly, in the course of, arising from
or relating to any Intellectual Property Rights of the Company, or his
employment with the Company or any affiliate of the Company (the "Work
Products").
(b) The Company will hold all Intellectual Property Rights in respect of
the Work Products for the exclusive benefit of the Company and Employee agrees
not to claim or apply for registration or challenge the Company's registration
of, any such Intellectual Property Rights. Employee's acceptance of the terms of
this Agreement constitutes an absolute, unconditional and irrevocable
assignment, transfer and conveyance of all past, present and future right,
title, benefit and interest in and to all Intellectual Property Rights in
respect of the Work Products. Employee hereby waives, in favor of the Company,
all claims of any nature whatsoever that Employee now or hereafter may have for
infringement of any Intellectual Property Rights for the Work Products so
assigned to the Company. To the extent that copyright may subsist in the Work
Products, Employee hereby waives all past, present and future moral rights he
may have.
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(c) The Work Products and all related Intellectual Property Rights will be
the absolute and exclusive property of the Company. The Company may apply for
patent, copyright or other intellectual property protection in the Company's
name or, where such procedure is proper, in Employee's name, anywhere in the
world. Employee will, at the Company's request, execute all documents and do all
such acts and things considered necessary by the Company to obtain, confirm or
enforce any Intellectual Property Rights in respect of the Inventions. In case
the Company requires, but is unable to secure Employee's signature for any such
purpose in a timely manner, Employee hereby irrevocably designate and appoint
the Company and any duly authorized officer or agent of the Company as
Employee's agent and attorney, to act for Employee and in Employee's behalf an
stead to execute any such documents and to do all other lawfully permitted acts
to carry out the intent of this provision, with the same legal force and effect
as if executed or done by Employee. This power of attorney is coupled with an
interest.
25. DISABILITY OF EMPLOYEE.
25.1 Employee shall be considered disabled if, due to illness or injury,
either physical or mental, Employee is unable to perform Employee's customary
duties as an employee of Company for more than thirty (30) days in the aggregate
out of a period of twelve (12) consecutive months. The disability shall be
determined by a certification from a physician.
25.2 If Employee is determined to be disabled, Company shall continue to
pay Employee's base salary for the initial ninety (90) days of "disability." The
continuation of the salary compensation after the initial ninety (90) days shall
be determined by the Board of Directors of the Company.
26. TERMINATION BY COMPANY.
26.1 Unless terminated earlier as provided in this Agreement, Employee
shall be employed for a term set forth in SCHEDULE A. Thereafter, the employment
term shall continue on an at will basis until terminated at the option of
Company or Employee upon thirty (30) days prior written notice. This Agreement
may be terminated at any time by written agreement between the parties, or as
provided in Section 8.2 below. This Agreement will terminate immediately upon
Employee's death.
26.2 Company may terminate this Agreement for cause at any time without
notice. For purposes of this Agreement, the term "cause" shall include, but not
be limited to, the following: a material breach of or failure to perform any
covenant or obligation in this Agreement, disloyalty, dishonesty, neglect of
duties, unprofessional conduct, acts of moral turpitude, disappearance,
felonious conduct or fraud, the use of illegal drugs or the habitual and
disabling use of alcohol and drugs, embezzlement or similar conduct.
27. NOTICE. Any notice, request, demand, or other communication given pursuant
to the terms of this Agreement shall be deemed given upon delivery, if hand
delivered, or
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forty-eight (48) hours after deposit in the United States mail, postage
prepaid, and sent certified or registered mail, return receipt requested,
correctly addressed to the addresses of the parties indicated below or at
such other address as such party shall in writing have advised the other
party.
If to Company: Mirage Holdings, Inc.
233 Wilshire Blvd., Suite 510
Santa Monica, CA 90404
Attn.: Najeeb Ghauri, President
Copy to: Horwitz & Beam
Two Venture Plaza, Suite 350
Irvine, CA 92618
Attn.: Lawrence W. Horwitz, Esq.
If to Employee: Naeem Ghauri
__________________________
__________________________
Copy to: __________________________
__________________________
__________________________
10. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto their respective devisees, legatees, heirs, legal
representatives, successors, and permitted assigns. The preceding sentence shall
not affect any restriction on assignment set forth elsewhere in this Agreement.
11. ARBITRATION. If a dispute or claim shall arise with respect to any of the
terms or provisions of this Agreement, or with respect to the performance by
either of the parties under this Agreement, other than a dispute with respect to
Section 2 of this Agreement, then either party may, with notice as herein
provided, require that the dispute be submitted under the Commercial Arbitration
Rules of the American Arbitration Association ("AAA"). Each party shall bear
one-half (1/2) of the cost of appointing the arbitrator and of paying such
arbitrator's fees. The written decision of the arbitrator(s) ultimately
appointed by or for both parties shall be binding and conclusive on the parties.
Judgment may be entered on such written decision of the single arbitrator in any
court having jurisdiction. Any arbitration undertaken pursuant to the terms of
this section shall occur in the county of the Company's office in Los Angeles,
California.
12. ASSIGNMENT. Subject to all other provisions of this Agreement, any attempt
to assign or transfer this Agreement or any of the rights conferred hereby, by
judicial process or
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otherwise, to any person, firm, Company, or corporation without the prior
written consent of the other party, shall be invalid, and may, at the option
of such other party, result in an incurable event of default resulting in
termination of this Agreement and all rights hereby conferred.
13. CHOICE OF LAW. This Agreement and the rights of the parties hereunder shall
be governed by and construed in accordance with the laws of the State of
California including all matters of construction, validity, performance, and
enforcement and without giving effect to the principles of conflict of laws.
14. INDEMNIFICATION. Company shall indemnify, defend and hold Employee harmless,
to the fullest extent permitted by law, for all claims, demands, losses, costs,
expenses, obligations, liabilities, damages, recoveries and deficiencies,
including interest, penalties and reasonable attorney's fees that Employee shall
incur or suffer that arise from, result from or relate to the discharge of
Employee's duties under this Agreement.
15. ENTIRE AGREEMENT. Except as provided herein, this Agreement, including
exhibits, contains the entire agreement of the parties, and supersedes all
existing negotiations, representations, or agreements and all other oral,
written, or other communications between them concerning the subject matter of
this Agreement. There are no representations, agreements, arrangements, or
understandings, oral or written, between and among the parties hereto relating
to the subject matter of this Agreement that are not fully expressed herein.
16. SEVERABILITY. If any provision of this Agreement is unenforceable, invalid,
or violates applicable law, such provision, or unenforceable portion of such
provision, shall be deemed stricken and shall not affect the enforceability of
any other provisions of this Agreement.
17. CAPTIONS. The captions in this Agreement are inserted only as a matter of
convenience and for reference and shall not be deemed to define, limit, enlarge,
or describe the scope of this Agreement or the relationship of the parties, and
shall not affect this Agreement or the construction of any provisions herein.
18. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which shall together
constitute one and the same instrument.
19. MODIFICATION. No change, modification, addition, or amendment to this
Agreement shall be valid unless in writing and signed by all parties hereto.
20. ATTORNEYS' FEES. Except as otherwise provided herein, if a dispute should
arise between the parties including, but not limited to arbitration, the
prevailing party shall be reimbursed by the non-prevailing party for all
reasonable expenses incurred in resolving such dispute, including reasonable
attorneys' fees exclusive of such amount of attorneys' fees as shall be a
premium for result or for risk of loss under a contingency fee arrangement.
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21. TAXES. Any income taxes required to be paid in connection with the payments
due hereunder, shall be borne by the party required to make such payment. Any
withholding taxes in the nature of a tax on income shall be deducted from
payments due, and the party required to withhold such tax shall furnish to the
party receiving such payment all documentation necessary to prove the proper
amount to withhold of such taxes and to prove payment to the tax authority of
such required withholding.
22. NOT FOR THE BENEFIT OF CREDITORS OR THIRD PARTIES. The provisions of this
Agreement are intended only for the regulation of relations among the parties.
This Agreement is not intended for the benefit of creditors of the parties or
other third parties and no rights are granted to creditors of the parties or
other third parties under this Agreement. Under no circumstances shall any third
party, who is a minor, be deemed to have accepted, adopted, or acted in reliance
upon this Agreement.
23. FACSIMILE SIGNATURES.Facsimile signatures shall be acceptable and binding
as originals.
24. CONFLICT WAIVER. Both Employee and the Company (the "Parties") hereby agree
and acknowledge that the law firm of Horwitz and Beam ("H&B"), which represents
the Company, has drafted this Agreement. The Parties hereto further acknowledge
that they have been informed of the inherent conflict of interest associated
with the drafting of this Agreement by H&B and waive any action they may have
against H&B regarding such conflict. The Parties have been given the opportunity
to consult with counsel of their choice regarding their rights under this
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the Effective Date.
"Company" "Employee"
Mirage Holdings, Inc., Naeem Ghauri
a Nevada corporation
/s/ Najeeb Ghauri /s/ Naeem Ghauri
- ---------------------------- --------------------------
BY: Najeeb U. Ghauri
ITS: President
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SCHEDULE A
EMPLOYEE'S NAME: Naeem Ghauri
EFFECTIVE DATE AND TERM: Effective date of Employment shall be as of April 17,
1999 for a period of three years from the effective date.
POSITION: Chief Executive Officer (UK) and Chief Operating Officer (USA)
SALARY: $150,000 per year with a signing bonus of $30,000 to be paid upon
execution of this Agreement.
STOCK OPTION:
Specific terms as detailed in the Employee Stock Option Plan with general terms
as follows:
(a) On May 18, 1999, Employee shall be issued 150,000 shares of common
stock of the Company with Rule 144 restriction at an exercise price of
$1.50 per share;
(b) On May 18, 2000, Employee shall be issued 150,000 shares of common
stock of the Company with Rule 144 restriction at an exercise price of
$2.50 per share;
(c) On May 18, 2001, Employee shall be issued 150,000 shares of common
stock of the Company with Rule 144 restriction at an exercise price of
$3.50 per share;
PAID VACATION: Two weeks paid vacation.
"Company" "Employee"
Mirage Holdings, Inc., Naeem Ghauri
a Nevada corporation
/s/ Najeeb Ghauri /s/ Naeem Ghauri
- ---------------------------- --------------------------
BY: Najeeb U. Ghauri
ITS: President
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EXHIBIT 10.6
10.6 Acquisition Agreement dated April 3, 1999 by and between
NetSol PVT and NetSol UK and SGO
ACQUISITION AGREEMENT
BETWEEN
MIRAGE HOLDINGS, INC.,
AND
SALIM GHAURI AND OTHERS
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1
SALE AND PURCHASE OF THE SHARES.....................................................................2
1.1 Issuance of the Shares..................................................................2
1.2 Consideration and Payment for the Shares................................................2
1.3 Employment Agreements...................................................................2
ARTICLE 2REPRESENTATIONS 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......................................................................3
2.1.3 Capitalization of NetSol Pvt and NetSol UK.....................................3
2.1.4 Subsidiaries...................................................................4
2.1.5 No Defaults....................................................................4
2.1.6 Governmental Consents..........................................................4
2.1.7 Financial Statements...........................................................5
2.1.8 Liabilities....................................................................5
2.1.9 Absence of Undisclosed Liabilities.............................................5
2.1.10 Absence of Changes.............................................................5
2.1.11 Patents and Trademarks.........................................................6
2.1.12 Certain Agreements.............................................................6
2.1.13 Compliance with Other Instruments..............................................6
2.1.14 Employee Benefit Plans.........................................................5
2.1.15 Other Personal Property........................................................7
2.1.16 Properties and Liens...........................................................7
2.1.17 Inventory......................................................................7
2.1.18 Major Contracts................................................................7
2.1.19 Questionable Payments..........................................................7
2.1.20 Recent Transactions............................................................8
2.1.21 Leases in Effect...............................................................8
2.1.22 Environmental..................................................................9
2.1.23 Taxes..........................................................................9
2.1.24 Disputes and Litigation.......................................................10
2.1.25 Compliance with Laws..........................................................10
2.1.26 Related Party Transactions....................................................11
2.1.27 Insurance.....................................................................11
2.1.28 Minute Books..................................................................11
2.1.29 Disclosure....................................................................11
2.1.30 Reliance......................................................................11
2.1.31 Valuation Report for the Combined Operations of
Network Solutions (Pvt) Limited and NetSol (UK) Limited.......................11
2.2 Representations and Warranties of Mirage...............................................11
2.2.1 Organization, Standing, Power.................................................12
</TABLE>
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<TABLE>
<S> <C> <C>
2.2.2 Authority.....................................................................12
2.2.3 No Defaults...................................................................12
2.2.4 Disclosure....................................................................12
2.2.5 Independent Investigation.....................................................13
2.2.6 Reliance......................................................................13
ARTICLE 3 CONDITIONS PRECEDENT...........................................................................13
3.1 Conditions to Each Party's Obligations.................................................13
3.2 Conditions to Mirage's Obligations.....................................................13
3.3 Conditions to SGO, NetSol Pvt, and NetSol UK's Obligations.............................14
ARTICLE 4COVENANTS.......................................................................................15
4.1 Corporate Structure of NetSol Pvt and NetSol UK........................................15
ARTICLE 5
CLOSING AND DELIVERY OF DOCUMENTS..................................................................15
5.1 Time and Place.........................................................................15
5.2 Deliveries by SGO, NetSol Pvt, and NetSol UK ..........................................15
5.3 Deliveries by Mirage...................................................................16
ARTICLE 6INDEMNIFICATION.................................................................................16
6.1 SGO, NetSol Pvt, and NetSol UK's Indemnity.............................................16
6.2 Mirage's Indemnity.....................................................................17
ARTICLE 7DEFAULT, AMENDMENT AND WAIVER...................................................................17
7.1 Default................................................................................17
7.2 Waiver and Amendment...................................................................18
ARTICLE 8MISCELLANEOUS...................................................................................18
8.1 Expenses...............................................................................18
8.2 Notices................................................................................18
8.3 Entire Agreement.......................................................................19
8.4 Survival of Representations............................................................19
8.5 Incorporated by Reference..............................................................20
8.6 Remedies Cumulative....................................................................20
8.7 Execution of Additional Documents......................................................20
8.8 Finders' and Related Fees..............................................................20
8.9 Governing Law..........................................................................20
8.10 Forum..................................................................................20
8.11 Professional Fees......................................................................20
8.12 Binding Effect and Assignment..........................................................20
8.13 Counterparts; Facsimile Signatures.....................................................20
8.14 Representation.........................................................................20
</TABLE>
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TABLE OF SCHEDULES AND EXHIBITS
Exhibit A List of Shareholders Entering Into This Agreement
Exhibit B Opinion Letters
Exhibit C SGO, NetSol Pvt, and NetSol UK Disclosure Schedule
Exhibit D Mirage Disclosure Schedule
Exhibit E Employment Agreement
Exhibit F Board of Directors' Resolution of Network Solutions Pvt. Ltd.
Exhibit G Board of Directors' Resolution of NetSol (UK) Ltd.
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement"), dated as of April 3, 1999, 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
1,000 are currently issued and outstanding. SGO currently owns 490 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 57 NetSol UK Shares.
C. On September 15, 1998, Mirage, SGO, NetSol Pvt entered into a
Stock Purchase Agreement where SGO issued certain number of NetSol Pvt Shares
to Mirage to constitute 51% of the issued and outstanding common stock of
NetSol Pvt, such that, NetSol Pvt will be a majority owned subsidiary of
Mirage.
D. On September 15, 1998, Mirage, SGO, and NetSol UK entered into
an agreement where SGO issued 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. NetSol UK became a 43% owned subsidiary of Mirage.
E. Upon the terms and conditions set for the below, SGO desires
to issue certain number of NetSol Pvt Shares to Mirage to constitute 100% of
the issued and outstanding common stock of NetSol Pvt, such that, following
such transaction, NetSol Pvt will be a 100% owned subsidiary of Mirage.
F. Upon the terms and conditions set forth below, SGO desires to
issue certain number of NetSol Shares to Mirage to constitute 100% of the
issued and outstanding common stock of NetSol UK owned by SGO, such that,
following such transaction, NetSol UK will be a 100% 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:
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ARTICLE 28
SALE AND PURCHASE OF THE SHARES
28.1 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 49% of the issued
and outstanding common stock of NetSol Pvt increasing Mirage's ownership to
100% and shall sell and transfer to Mirage the remaining NetSol UK Shares
that will constitute 57% of the issued and outstanding common stock of NetSol
UK increasing its ownership to 100%.
28.2 CONSIDERATION AND PAYMENT FOR THE SHARES. In consideration
for the Shares, Mirage shall issue SGO 4.2 million shares of RESTRICTED
common stock of Mirage. Mirage shall issue to SGO, in whatever designation
SGO requests, a stock certificate(s) equal to 4.2 million shares of current
outstanding common stock of Mirage as of the date hereof.
1.3 EMPLOYMENT AGREEMENTS. Mirage shall enter into employment
agreements with the principals of NetSol Pvt and NetSol (UK) for a minimum of
36 months with continuation of executive responsibilities and subject to
non-competition clause. Mirage shall deliver such employment agreements in
the general form of Exhibit "E".
ARTICLE 29
REPRESENTATIONS AND WARRANTIES
29.1 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:
29.1.1 ORGANIZATION, STANDING, POWER.
(a) NETSOL PVT. NetSol Pvt. 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 Pvt. 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
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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.
29.1.2 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 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.
29.1.3 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 1,000 shares are currently issued or outstanding. SGO currently owns
490 NetSol Pvt Shares, while Mirage currently owns 510 shares.
(b) NETSOL UK. 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 57 NetSol UK Shares, while Mirage currently owns 43 shares.
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(c) 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.
(d) 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.
(e) 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.
(f) 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.
29.1.4 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.
29.1.5 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
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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.
29.1.6 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.
29.1.7 FINANCIAL STATEMENTS. NetSol Pvt and
NetSol UK have furnished Mirage with a true and complete copy of their
financial statements for the period ending December 31, 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.
29.1.8 LIABILITIES. As of June 30, 1998, the
Liabilities (as defined below) of NetSol Pvt and NetSol (UK) jointly were not
greater than $728,000. "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.
29.1.9 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 Balance Sheet attached to the Valuation report by
Houlihan Valuation Advisors; 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.
29.1.10 ABSENCE OF CHANGES. Since December 31,
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
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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 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.
29.1.11 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.
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29.1.12 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.
29.1.13 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.
29.1.14 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 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.
29.1.15 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.
29.1.16 PROPERTIES AND LIENS. Except as reflected
in the Financial Statement 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.
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29.1.17 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.
29.1.18 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;
(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.
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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.
29.1.19 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.
29.1.20 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.
29.1.21 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.
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29.1.22 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 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.
29.1.23 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
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(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.
29.1.24 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.
29.1.25 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
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.
29.1.26 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
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NetSol Pvt or NetSol UK is directly or indirectly interested in any material
contract with NetSol Pvt or NetSol UK.
29.1.27 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.
29.1.28 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.
29.1.29 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.
29.1.30 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.
29.2 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:
29.2.1 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.
29.2.2 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 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
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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.
29.2.3 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.
29.2.4 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.
29.2.5 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 VALUATION REPORT. Mirage shall obtain a
Valuation Report prepared by an independent valuation organization reflecting
the value of the assets of each Network Solutions Pvt, Ltd. and NetSol (UK)
Ltd.
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2.2.7 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.
2.2.8 LITIGATION. The management of Mirage
believe there is no litigation currently pending against the Company, unless
as otherwise stated herein.
ARTICLE 30
CONDITIONS PRECEDENT
30.1 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.
(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.
30.2 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.
30.3 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:
14
<PAGE>
(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.
(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.
15
<PAGE>
ARTICLE 31
COVENANTS
31.1 COMPOSITION OF THE BOARD OF DIRECTORS OF MIRAGE. On or
before Closing, Mirage shall take all necessary actions to amend bylaws of
Mirage to increase the number of members of the Board of Directors of Mirage
to a maximum of nine. Upon the Closing, SGO shall appoint 4 member(s) to
Mirage Board of Directors. Once the Mirage Board of Directors is fully
constituted, meaning 7 have been appointed to the current three members of
Mirage, all members shall serve on the Board of Directors from the date of
Closing until the Shareholders Meeting scheduled for October 15, 1999. At
that time, the majority of Shareholders shall ratify the Board of Directors
chosen and elect a new one.
ARTICLE 32
CLOSING AND DELIVERY OF DOCUMENTS
32.1 TIME AND PLACE. The closing of the transactions contemplated
by this Agreement shall take place at the offices of Mirage, located at 233
Wilshire Boulevard, Suite 510, Santa Monica, California 90401, on April 17,
1999, 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").
32.2 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;
(g) An opinion of counsel to SGO, NetSol Pvt, and NetSol
UK, dated as of Closing, as set forth in Section 3.3(f);
(h) A complete full and final Valuation Report for the
combined operations of NetSol Pvt and NetSol UK;
16
<PAGE>
(i) Permission for foreign investment shall be obtained
under the Foreign Exchange Regulation Act of 1947. Such Entitlement
Certificate shall be delivered to Mirage granting it permission to make this
acquisition;
(j) SGO shall obtain permission to move shares to
non-residents. Pursuant to Foreign Exchange Regulations Act, 1947 under
clause (d) subsection 1 of Section 13, this matter shall be resolved;
(k) Board of Directors of Network Solutions (Pvt) Limited
resolution authorizing this acquisition as contemplated herein by Mirage; and
(l) Board of Directors of NetSol (UK) Limited resolution
authorizing this acquisition as contemplated herein by Mirage;
32.3 DELIVERIES BY MIRAGE. At Closing, Mirage shall make the
following deliveries to SGO, NetSol Pvt, and NetSol UK:
(a) A certificate representing the Mirage Shares that SGO is
acquiring as set forth in Section 1.2(c);
(b) 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;
(c) A certificate of good standing for Mirage from the
office of the Nevada Secretary of State;
(d) Certified resolutions of the Board of Directors of
Mirage signed by at least two of the three directors of Mirage, in form
satisfactory to counsel for SGO, NetSol Pvt, and NetSol UK, authorizing the
execution and performance of this Agreement;
(e) A Consent Action in Writing by the Majority Shareholders
in lieu of meeting authorizing the execution and performance of this
Agreement; and
(f) SGO shall deliver at least Rs. 100,000 through normal
banking channels to the credit of existing shareholders in the amount equal
to their respective shares representing their par value. Such action shall
produce a realization certificate.
ARTICLE 33
INDEMNIFICATION
17
<PAGE>
33.1 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.
33.2 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 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.
18
<PAGE>
ARTICLE 34
DEFAULT, AMENDMENT AND WAIVER
34.1 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.
34.2 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 35
MISCELLANEOUS
35.1 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.
35.2 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
1st Floor, C-35, LCCHS
Lahore, Cantt.
Fax: 92425726740
19
<PAGE>
With a copy to: ___________________________
___________________________
___________________________
TO MIRAGE: Mirage Holdings, Inc.
Attn: Najeeb U. Ghauri, President
233 Wilshire Blvd. Suite 510
Santa Monica, CA 90401
Fax: 310/656-5291
With a copy to: Horwitz & Beam
Attn: Lawrence W. Horwitz
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.
35.3 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.
35.4 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.
20
<PAGE>
35.5 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.
35.6 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.
35.7 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.
35.8 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.
35.9 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.
35.10 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.
35.11 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.
35.12 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.
35.13 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.
8.14 REPRESENTATION. The parties hereto agree and acknowledge that the
law firm of Horwitz & Beam has represented Mirage in preparing this
21
<PAGE>
Agreement. All parties to this Agreement have been given the opportunity to
consult with counsel of their choice regarding their rights under this
Agreement.
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 Ghauri
-----------------------------------------
By: Najeeb U. Ghauri
Its: President
SGO:
/s/ Salim Ghauri
-----------------------------------------
Salim Ghauri
Print name here: Mr. Salim Ullah Ghauri
/s/ Nasreen Ghauri
-----------------------------------------
Print name here: Mrs. Nasreen Ghauri
/s/ Shahab Ghauri
-----------------------------------------
Print name here: Mr. Shahab-Ud-Din Ghauri
/s/ Aamrah Shahab
-----------------------------------------
Print name here: Mr. Aamrah Shahab
22
<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. 123
Mr. Shahab-Ud-Din Ghauri -0- 123
Mrs. Aamrah Shahab -0- 122
Mrs. Nasreen Ghauri -0- 122
---
TOTAL 490
</TABLE>
<PAGE>
EXHIBIT "B"
OPINION LETTERS
<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.
SECTION EXCEPTION
------- ---------
FOR SGO
Nil
FOR NETWORK SOLUTIONS (PVT) LTD.
Nil
FOR NETSOL (U.K.) LIMITED
Nil
<PAGE>
[closing date]
Page 2
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>
2.2.8 Litigation - A former officer and director of the Company has
threatened to sue the Company for wrongful termination. Upon his
departure Mr. Champion was given a total of 200,000 shares of
restricted stock and 50,000 options. In addition, certain numbers
of his shares are subject to a lock-up agreement with the Company.
As of the date of this Agreement, no law suites have been filed by
Mr. Champion.
</TABLE>
<PAGE>
[closing date]
Page 3
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 April
3, 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 3rd day
of April, 1999.
/s/ NAJEEB GHAURI
--------------------------------------
NAJEEB U. GHAURI, Secretary
<PAGE>
[closing date]
Page 1
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 49% of the outstanding shares of capital
stock of Network Solutions (Pvt) Limited, a Pakistan corporation ("NetSol
Pvt) and 57% 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 4.2 million shares of this Company's
restricted outstanding common stock, for a total of 7.0 million shares of
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.
NAME AND SYMBOL CHANGE
RESOLVED, that the officers of the Company specified above are
authorized to take such actions as they deem necessary to effectuate the name
and symbol change of the Company to NetSol International, Inc.
1
<PAGE>
[closing date]
Page 2
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.
Dated: April 3, 1999
DIRECTORS:
/s/ Najeeb Ghauri
-----------------------
Najeeb U. Ghauri
/s/ Earl Shannon
-----------------------
Earl T. Shannon
Irfan Mustafa
-----------------------
Irfan Mustafa
2
<PAGE>
[closing date]
Page 1
CERTIFICATE OF THE
PRESIDENT, CHIEF FINANCIAL OFFICER,
AND SECRETARY OF
MIRAGE HOLDINGS, INC.
The undersigned hereby certifies that he is the duly elected,
qualified and acting President, Secretary 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 April
3, 1999 (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 3rd day of April, 1999.
MIRAGE HOLDINGS, INC., a Nevada corporation
/S/ NAJEEB GHAURI
------------------------------------
By: Najeeb U. Ghauri
Its: President, Secretary and Chief Financial Officer
<PAGE>
[closing date]
Page 1
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 April
3, 1999 (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 3rd day of April, 1999.
NETWORK SOLUTIONS (PVT) LIMITED,
a Pakistan corporation
/S/ SALIM GHAURI
------------------------------------
By: Salim Ghauri
Its: President
/S/ SALIM GHAURI
------------------------------------
By: Salim Ghauri
Its: Chief Financial Officer
<PAGE>
[closing date]
Page 1
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 April
3, 1999 (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 3rd day of April, 1999.
NETSOL (UK) LIMITED,
a United Kingdom corporation
/S/ NAEEM GHAURI
------------------------------------
By: Naeem Ghauri
Its: President
/S/ NAEEM GHAURI
------------------------------------
By: Naeem Ghauri
Its: Chief Financial Officer
1
<PAGE>
[closing date]
Page 1
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 April
3, 1999 (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 3rd day of April, 1999.
SGO:
/s/ Salim Ghauri _______________________
Print Name here: Salim Ghauri
/s/ Shahab Ghauri____________________
Print name here: Mr. Shahab Ud-Din Ghauri
/s/ Nasreen Ghauri____________________
Print name here: Mrs. Nasreen Ghauri
/s/ Aamrah Ghauri ____________________
Print name here: Mrs. Aamrah Ghauri
1
<PAGE>
LAW OFFICES OF
HORWITZ & BEAM
TWO VENTURE PLAZA
SUITE 350
IRVINE, CALIFORNIA 92618
(949) 453-0300
(310) 842-8574
FAX: (949) 453-9416
Gregory B. Beam, Esq. Ralph R. Loyd, Esq.
Lawrence W. Horwitz, Esq. Patti L.W. McGlasson, Esq.
Lawrence M. Cron, Esq. Bernard C. Jasper, Esq.
Lynne Bolduc, Esq. K. William Pergande, Esq.
Malea M. Farsai, Esq. John Y. Igarashi, Esq.
April 3, 1999
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 49% of the issued and outstanding
capital stock of Network Solutions (Pvt) Limited, a Pakistan corporation
("NetSol Pvt") and of 57% 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 4.2 million shares of restricted 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 April 3, 1999 (the
"Signing Date"), at the offices of the Mirage, 233 Wilshire Boulevard, Suite
510, Santa Monica, California 90401.
<PAGE>
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 April 2, 1999 (the "Signing
Date"), at the offices of the Mirage, located at 233 Wilshire Boulevard,
Suite 510, Santa Monica, California 90401.
At the Signing, each party delivered to the other all required
corporate documents and consents as set forth in the Agreement.
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, Mirage
NetSol 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
Earl T. Shannon SGO
Irfan Mustafa NetSol Pvt
NetSol UK
- --------------------------------------------------- ------------------------------ ----------------------------------
Certificate of President, Secretary and Chief Najeeb U. Ghauri 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
- --------------------------------------------------- ------------------------------ ----------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------- ------------------------------ ----------------------------------
<S> <C> <C>
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, 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.
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 21.1
21.1A list of all subsidiaries of the Company
<PAGE>
List of Subsidiaries
1. NetSol UK Ltd.
2. Network Solutions Pvt Ltd.
3. NetSol (USA) Inc.
<PAGE>
EXHIBIT 24.1
24.1 Consent of Stonefield Josephson & Company
<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 consolidated financial
statements of NetSol International, Inc. for the year ending June 30, 1999,
in the Annual Report on Form 10-KSB for NetSol International, Inc.
/S/STONEFIELD JOSEPHSON, INC.
- -----------------------------
STONEFIELD JOSEPHSON, INC.
Certified Public Accountants
Santa Monica, California
Dated: September 24, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> JUN-30-1999 JUN-30-1999
<PERIOD-START> JUL-01-1998 JUL-01-1997
<PERIOD-END> JUN-30-1999 JUN-30-1998
<CASH> 31,713 0
<SECURITIES> 0 0
<RECEIVABLES> 519,106 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 167,070 0
<PP&E> 319,825 0
<DEPRECIATION> 75,187 0
<TOTAL-ASSETS> 10,672,369 0
<CURRENT-LIABILITIES> 727,777 0
<BONDS> 0 0
0 0
0 0
<COMMON> 7,452 0
<OTHER-SE> 9,898,539 0
<TOTAL-LIABILITY-AND-EQUITY> 10,672,369 0
<SALES> 0 168,835
<TOTAL-REVENUES> 3,002,107 168,835
<CGS> 0 (133,860)
<TOTAL-COSTS> (1,662,259) (133,860)
<OTHER-EXPENSES> (2,768,248) (586,536)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (22,218) (33,918)
<INCOME-PRETAX> (1,756,234) (585,479)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,756,234) (585,479)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 129,500 0
<CHANGES> 0 0
<NET-INCOME> (1,626,734) (585,479)
<EPS-BASIC> (0.44) (0.33)
<EPS-DILUTED> (0.44) (0.33)
</TABLE>
