<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended March 31, 1999.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ___________________ to _______________________
Commission File Number 0-24815
INTEGRATED TRANSPORTATION NETWORK GROUP INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3993618
- ------------------------------- --------------------------------------
(State or other jurisdiction of (I.R.S Employer Identification Number)
incorporation or organization)
575 LEXINGTON AVENUE, SUITE 410, NEW YORK, NEW YORK 10022
- --------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(212) 572-9612
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15d of the Securities Exchange Act of 1934 during
the preceding 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 [ ]
Indicate the number of shares outstanding in each of the issuer's classes of
common stock, as of the latest practicable date.
12,595,264 common shares, $.01 par value, were outstanding as of May 11, 1999.
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<PAGE> 2
INTEGRATED TRANSPORTATION NETWORK GROUP INC.
AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited).
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS:
Balance sheets, March 31, 1999 and December 31, 1998
Statements of operations, three months ended March 31, 1999 and 1998
Statements of shareholders' equity, three months ended March 31, 1999
Statements of cash flows, three months ended March 31, 1999 and 1998
Notes to consolidated condensed financial statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Item 2. Changes in Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Submission of Matters to Vote of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
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<PAGE> 3
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED).
INTEGRATED TRANSPORTATION NETWORK GROUP INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(US DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, March 31,
1998 1999
---------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 4,910 $ 8,899
Trade receivables, net of allowance of $-0- and $-0-, respectively 105 126
Due from affiliate - 103
Other assets (Notes 3 and 4) 17,077 16,180
Inventories 38 41
Property and equipment, net 1,136 1,074
Revenue-earning equipment, net 29,379 34,692
Taxi licenses, net 11,814 12,270
Construction-in-progress (Note 5) 2,263 2,263
Deposit 1,935 1,935
---------------------------------------------------------------------------------------------------------------------
$68,657 $77,583
---------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Bank loans $ 2,402 $ 2,402
Notes payable (Note 2) 320 2,320
Trade payables 1,167 149
Other payables 5,160 4,992
Due to directors 71 66
Due to affiliates 149 -
Due to minority shareholders, net 19 19
Deferred revenue 3,001 3,462
Accrued expenses 1,770 2,495
Income tax payable 2,651 3,168
Deferred income taxes 247 167
---------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 16,957 19,240
---------------------------------------------------------------------------------------------------------------------
MINORITY INTEREST 2,919 3,263
---------------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (NOTE 5)
SHAREHOLDERS' EQUITY (NOTES 2 AND 4):
Common stock, $.01 par value - authorized 50,000,000 shares;
issued and outstanding 10,435,030 shares at December 31, 1998
and 12,625,411 shares at March 31, 1999 104 127
Additional paid-in capital 23,385 27,825
Retained earnings 24,919 26,766
Accumulated other comprehensive income - foreign currency
translation adjustments 373 362
---------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 48,781 55,080
---------------------------------------------------------------------------------------------------------------------
$68,657 $77,583
---------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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INTEGRATED TRANSPORTATION NETWORK GROUP INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(US DOLLARS AND SHARES IN THOUSANDS
EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended March 31, 1998 1999
---------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
REVENUE, NET $5,161 $5,692
---------------------------------------------------------------------------------------------------------------------
EXPENSES:
Depreciation of revenue-earning equipment 898 1,073
Amortization of taxi licenses 67 85
Loss on disposal of revenue-earning equipment 58 596
Other operating expenses 1,179 1,418
Interest expense, net of interest income 252 135
---------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 2,454 3,307
---------------------------------------------------------------------------------------------------------------------
INCOME BEFORE PROVISION FOR INCOME TAX AND MINORITY INTEREST 2,707 2,385
PROVISION FOR INCOME TAX 201 434
---------------------------------------------------------------------------------------------------------------------
INCOME BEFORE MINORITY INTEREST 2,506 1,951
MINORITY INTEREST 193 104
---------------------------------------------------------------------------------------------------------------------
NET INCOME 2,313 1,847
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX - FOREIGN CURRENCY
TRANSLATION ADJUSTMENTS 2 (11)
---------------------------------------------------------------------------------------------------------------------
COMPREHENSIVE INCOME $2,315 $1,836
---------------------------------------------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE (NOTE 6):
Basic $ .38 $ .16
Diluted .33 .13
---------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (NOTE 6):
Basic 6,057 11,421
Diluted 7,383 13,986
---------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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<PAGE> 5
INTEGRATED TRANSPORTATION NETWORK GROUP INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
(US DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Accumulated
other
comprehensive
income -
foreign
Common stock Additional currency Total
----------------------- paid-in Retained translation shareholders'
Shares Amount capital earnings adjustments equity
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1999 10,435,030 $104 $23,385 $24,919 $373 $48,781
Issuance of shares in
connection with private
placements, net of issuance
costs (Note 4) (unaudited) 2,152,381 22 4,338 - - 4,360
Issuance of shares for
consulting and other
services (Note 4)
(unaudited) 38,000 1 102 - - 103
Foreign currency translation
adjustments (unaudited) - - - - (11) (11)
Net income (unaudited) - - - 1,847 - 1,847
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE, MARCH 31, 1999
(UNAUDITED) 12,625,411 $127 $27,825 $26,766 $362 $55,080
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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<PAGE> 6
INTEGRATED TRANSPORTATION NETWORK GROUP INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(US DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended March 31, 1998 1999
---------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,313 $ 1,847
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization of property, equipment and
revenue-earning equipment 961 1,135
Amortization of taxi licenses 67 85
Minority interest 615 344
Amortization of organization costs 314 -
Non-cash consulting and other services - 103
Deferred income tax 133 (80)
Exchange adjustment 2 -
Loss on disposal of revenue-earning equipment 58 596
Changes in assets and liabilities:
(Increase) decrease in trade and other receivables (2,196) 613
(Increase) decrease in inventories 34 (2)
Decrease in trade and other payables 118 (1,196)
Increase (decrease) in accrued expenses (88) 278
Increase in income tax payable 74 517
Increase (decrease) in deferred income (124) 461
---------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,281 4,701
---------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, equipment and revenue-earning equipment (437) (2,430)
Acquisition of taxi licenses - (543)
Proceeds from sale of property, equipment and revenue-earning
equipment 20 116
Organization costs (241) -
Prepayment for acquisition of revenue-earning equipment (28) -
---------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (686) (2,857)
---------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from directors - 195
Repayments of bank loans (63) -
Advances from (repayments of amount due to) affiliates (737) 40
Proceeds from notes payable - 2,000
Proceeds from issuance of common stock, net - 360
---------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (800) 2,595
---------------------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 795 4,439
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,723 4,460
---------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,518 $ 8,899
---------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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<PAGE> 7
INTEGRATED TRANSPORTATION NETWORK GROUP INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(US DOLLARS IN THOUSANDS)
(UNAUDITED)
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION The consolidated condensed interim financial
statements included herein have been prepared by
the Company, without audit, pursuant to the rules
and regulations of the Securities and Exchange
Commission. Certain information and footnote
disclosures normally included in financial
statements prepared in accordance with generally
accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations,
although the Company believes that the disclosures
are adequate to make the information presented not
misleading.
These statements reflect all adjustments,
consisting of normal recurring adjustments which,
in the opinion of management, are necessary for
fair presentation of the information contained
therein. It is suggested that these consolidated
condensed financial statements be read in
conjunction with the financial statements and
notes thereto included in the Company's annual
audited financial statements for the year ended
December 31, 1998. The Company follows the same
accounting policies in preparation of interim
reports.
Results of operations for the interim periods are
not indicative of annual results.
2. NOTES PAYABLE Notes payable consist of the following:
<TABLE>
<CAPTION>
Year ended December 31, 1998
---------------------------------------------------------------------------------
Principal Interest rate Maturity Collateral
--------------------------------------------------------------------------------
<S> <C> <C> <C>
$320 8.0% 4/02/98 (a)
--------------------------------------------------------------------------------
Three months ended March 31, 1999 (unaudited)
--------------------------------------------------------------------------------
Principal Interest rate Maturity Collateral
--------------------------------------------------------------------------------
$ 320 8.0% 4/02/98 (in default) (a)
2,000 5.0% 2/10/01 (b)
--------------------------------------------------------------------------------
$2,320
--------------------------------------------------------------------------------
</TABLE>
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<PAGE> 8
INTEGRATED TRANSPORTATION NETWORK GROUP INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(US DOLLARS IN THOUSANDS)
(UNAUDITED)
- --------------------------------------------------------------------------------
(a) On July 3, 1997, the Company entered into a
financing agreement which provides for
borrowings of up to $1,000. Advances are
payable monthly. The loan is collateralized
by the Company's inventory, equipment and
machinery, existing or acquired. The balance
outstanding at December 31, 1998 and March
31, 1999 was $320. The note was due April 2,
1998 and is in default.
(b) On February 10, 1999, the Company issued a
$2,000, 5% convertible promissory note. At
any time after the maturity date and prior to
repayment of all amounts due, the note, at
the option of the holder, is convertible into
shares of the Company's common stock at the
conversion price of $2.00 per share.
3. OTHER ASSETS Other assets include deposits paid totaling
$11,473 for the acquisition of 3,000 automobiles
for car rental purposes.
Other assets further includes a $4,000 receivable
from subscribers of common stock (see Note 4). The
funds were received in April 1999.
4. SHAREHOLDERS' EQUITY On January 1, 1999, the Company adopted a stock
option plan and reserved for issuance 2,500,000
shares of common stock. As of that date, the
Company granted options to purchase an aggregate
2,210,000 shares of common stock to certain of the
Company's officers and directors. The options have
an exercise price of $2.00 per share, which was
above the quoted price of the common stock as
reported on the National Association of Securities
Dealers, Inc.'s OTC Bulletin Board at the time of
grant.
During January 1999, the Company issued 152,381
shares of common stock to a private investor for
an aggregate of $400 (less issuance costs of $40).
Additionally, the Company issued warrants to
purchase an aggregate of 240,000 shares of common
stock in payment of finder's fees.
-9-
<PAGE> 9
INTEGRATED TRANSPORTATION NETWORK GROUP INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(US DOLLARS IN THOUSANDS)
(UNAUDITED)
- --------------------------------------------------------------------------------
On January 29, 1999, the Company issued 3,000
shares of common stock to a business and financial
consultant as consideration for consulting
services.
During March 1999, the Company agreed to issue
2,000,000 shares of common stock to private
investors for an aggregate of $4,000 (Note 3).
On March 12, 1999, the Company agreed to issue
20,000 shares of common stock and warrants to
purchase 30,000 shares of common stock to a
financial consultant as consideration for
consulting services.
On March 25, 1999, the Company issued warrants to
purchase 30,000 shares of common stock to a
financial consultant as consideration for
consulting services.
In connection with the convertible promissory note
transaction discussed in Note 2(b), during March
1999, the Company agreed to issue 15,000 shares of
common stock as consideration for finder's fees.
5. COMMITMENTS AND Contractual Obligations
CONTINGENCIES
The Company contracted with a building contractor
in 1996 to construct a hotel in Hunan, PRC. The
budgeted costs of the whole project are estimated
to be $4,073. Through March 31, 1999, the Company
has made hotel-related expenditures of $2,263. Due
to financial constraints, the Company has
suspended construction of the hotel project. The
Company intends to resume construction of the
hotel as soon as it has sufficient capital to do
so.
-10-
<PAGE> 10
INTEGRATED TRANSPORTATION NETWORK GROUP INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(US DOLLARS IN THOUSANDS)
(UNAUDITED)
- --------------------------------------------------------------------------------
The Company contracted with a car manufacturing
company in early 1998 to acquire 3,000 cars for
car rental business purposes. The contracted
amount for such agreement was $47,464 and the
outstanding commitment was $35,992 after deduction
of deposits paid of $11,473. As of March 31, 1999,
the Company had not performed its obligations
under the contract. The Company has agreed with
the car supplier to extend the time for
performance of the contract to September 30, 1999.
If the company does not perform its obligations
under the contract within the extended period, the
Company may be subject to a penalty, up to a
maximum of $1,812.
The Company has contracted with a building
developer for the acquisition of villa houses
located in Shenzhen, PRC for $2,114. The
outstanding commitment at March 31, 1999 is $181,
after deducting a deposit paid of $1,933.
Legal Matters
In early 1998, the United States Securities and
Exchange Commission commenced an informal inquiry
relating to public disclosures in 1997 by Dawson
Science Corporation, the Company's former parent
company ("Dawson"). The public disclosures
involved, among other things, press releases
relating to the acquisition of Shenzhen
Jinzhenghua Transport Industrial Development Co.,
Ltd., the value of Dawson's assets, Dawson's
financial prospects and Dawson's anticipated
revenues and earnings (collectively, the "Public
Disclosures").
In August 1998, a stockholder of the Company filed
a class action complaint in the United States
District Court for the Southern District of New
York naming the Company, Dawson, and their
respective executive officers and directors as
defendants. The complaint alleges that the Public
Disclosures omitted or misrepresented material
facts. The plaintiff seeks unspecified damages on
behalf of himself and all other persons who
purchased shares of Dawson's common stock between
March 25, 1997 and December 30, 1997, together
with interest and costs, including attorney fees,
under sections 10(b) and 20(a) of the Securities
and Exchange Act of 1934 and Rule 10(b)(5)
thereunder.
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<PAGE> 11
INTEGRATED TRANSPORTATION NETWORK GROUP INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(US DOLLARS IN THOUSANDS)
(UNAUDITED)
- --------------------------------------------------------------------------------
The Company currently is engaged in settlement
discussions with respect to the class action
referred to above. Based on these discussions,
during the fourth quarter of 1998, the Company
established a $1,500 liability with respect to the
class action. There can be no assurance, however,
that the settlement discussions will result in a
final settlement, or that the liability for a
final settlement will be limited to $1,500. If
these settlement discussions are not the basis for
a final settlement, the liability with respect to
the class action could materially exceed $1,500.
Capital Investment Obligation
Pursuant to Jinzhenghua Transport's organizational
documents, the Company and the minority owners of
Jinzhenghua Transport are obligated to contribute
$9,200 and $800, respectively, to the capital of
Jinzhenghua Transport. In particular, the Company
was obligated to make its capital contribution to
Jinzhenghua Transport in two equal installments of
$4,600, the first of which was due October 30,
1998 and the second of which will be due December
26, 1999. The minority owners were obligated to
contribute $340 by October 30, 1998 and the
balance by December 26, 1999. To date, the Company
has contributed approximately $300 of its
aggregate $9,200 obligation to the capital of
Jinzhenghua Transport. Accordingly, the Company
has not performed on its obligation to contribute
$4,200 to Jinzhenghua Transport by October 30,
1998. The minority owners also did not perform on
their obligations to contribute the aggregate of
$340 by October 30, 1998. The Company and the
minority owners may amend the organizational
documents of Jinzhenghua Transport to extend the
time for payment of the required capital
contributions, subject to government approval. The
Company believes this kind of approval is a
regular process and approval can usually be
obtained. The Company believes that it will be
able to reach an agreement with the minority
owners to extend the time for payment, and that
the relevant
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<PAGE> 12
INTEGRATED TRANSPORTATION NETWORK GROUP INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(US DOLLARS IN THOUSANDS)
(UNAUDITED)
- --------------------------------------------------------------------------------
government authority will approve such extension
of time. In April 1999, subsequent to the due date
(October 30, 1999) of the Company's required
capital contribution of $4.6 million, the Company
has passed the annual inspection conducted by the
relevant Chinese licensing authority. This annual
inspection forms part of the annual renewal
process of the business license which expires on
December 26, 1999. If the Company is unable to
obtain an extension of time that is approved by
the government, Jinzhenghua Transport's business
license could be cancelled by the government,
which would materially and adversely affect the
Company.
6. EARNINGS PER SHARE The following table sets forth the computation of
basic and diluted earnings per share:
<TABLE>
<CAPTION>
Three months ended March 31, 1998 1999
----------------------------------------------------------------------------------------
<S> <C> <C>
Numerator:
Net income, numerator for basic
earnings per share - income
available to common shareholders $ 2,313 $ 1,847
Effect of dilutive securities: Interest
on convertible debt after tax 108 12
----------------------------------------------------------------------------------------
Numerator for diluted earnings per
share-income available to common
shareholders 2,421 1,859
----------------------------------------------------------------------------------------
Denominator:
Denominator for basic earnings
per share-weighted average
shares 6,057 11,421
Effect of dilutive securities:
Options and warrants - 2,010
Convertible debt 1,326 555
----------------------------------------------------------------------------------------
Dilutive potential common shares:
Denominator for dilutive earnings
per share-adjusted weighted
average shares and assumed conversions 7,383 13,986
----------------------------------------------------------------------------------------
BASIC EARNINGS PER SHARE .38 .16
----------------------------------------------------------------------------------------
DILUTED EARNINGS PER SHARE .33 .13
----------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
GENERAL
- -------
The Company, through its 92%-owned subsidiary, Shenzhen Jinzhenghua
Transport Industrial Development Co., Ltd. ("Jinzhenghua Transport"), primarily
operates a group of transportation related businesses (the "Transportation
Businesses"). The Transportation Businesses are comprised of the automobile
rental business (the "Rental Business"), the taxi business (the "Taxi Business")
and the automobile repair services business (the "Repair Business"). The Company
does not have any operating business other than the businesses operated through
Jinzhenghua Transport. The Company has also been developing a hotel business,
which is planned to commence operations in year 2000. All of the Company's
revenue and profits are attributable to Jinzhenghua Transport's businesses in
China. All the Company's operations are located in China. The Company maintains
executive offices in both New York City (USA) and Shenzhen (China).
The Company's transportation businesses began with the acquisition of taxi
licenses in the first auction of such licenses in 1988 in Shenzhen, China.
Jinzhenghua Transport has continued to acquire taxi licenses and expand its taxi
business into other cities and provinces.
In 1994, Jinzhenghua Transport expanded its transportation business to
include automobile repair services in Shenzhen.
In 1997, Jinzhenghua Transport further expanded its transportation business
to include automobile rental services in the Provinces of Jiangxi, Guangdong,
Jiangsu and Shaanxi. The Rental Business began operations in August 1997 with
the purchase of 350 new automobiles and the establishment during 1997 of
automobile rental stations in Ganzhou, Guangzhou, Nanchang, Nanjing and Xian.
During the first quarter of 1999, the Company raised an aggregate of
approximately $6,400,000 (before deduction of cash finder's fees in the amount
of $70,000) through the sale of (i) an aggregate 2,152,381 shares of Common
Stock (2,000,000 shares at a price of $2.00 per share and 152,381 shares at a
price of $2.625), and (ii) a 5% Convertible Note in the principal amount of
$2,000,000.
On a consolidated basis, revenue, net, increased $531,000 (10.3%) from
$5,161,000 during the three months ended March 31, 1998 to $5,692,000 during the
three months ended March 31, 1999. Net income decreased $466,000 (20.1%) from
$2,313,000 during the three months ended March 31, 1998 to $1,847,000 during the
three months ended March 31, 1999.
-14-
<PAGE> 14
The Rental Business, which began operations in August 1997, accounted for
$2,770,000 (53.7%) and $3,205,000 (56.3%) of the Company's total revenue, net,
during the three months ended March 31, 1998 and 1999, respectively. As of
December 31, 1998, the Rental Business had acquired a rental fleet of 1,218
automobiles. During the first quarter of 1999, a total of 50 automobiles were
moved from the non-operating rental fleet to establish a new taxi unit in the
city of Yueyang of the Hunan Province. The Rental Business also possesses
additional licenses which authorize it to establish rental operations in certain
other cities and provinces in China. As of March 31, 1999, the total rental
fleet consisted of 1,168 automobiles, of which 770 were deployed in actual
rental operations and the remaining 398 were not yet placed in service. The
Company intends to place the additional 398 automobiles in service as and when
it has funds available to do so. See "Liquidity and Capital Resources." The
Rental Business contributed $2,007,000 (74.1%) and $2,152,000 (90.2%) of total
income before provision for income tax and minority interest during the three
months ended March 31, 1998 and 1999, respectively.
The Taxi Business accounted for $2,025,000 (39.2%) and $2,176,000 (38.2%)
of the Company's total revenue, net, during the three months ended March 31,
1998 and 1999, respectively. At March 31, 1998 and 1999, the Taxi Business had
deployed 728 and 778 taxis, respectively. The Taxi Business contributed
$1,168,000 (43.1%) and $595,000 (25%) to income before provision for income tax
and minority interest during the three months ended March 31, 1998 and 1999.
The Repair Business accounted for $366,000 (7.1%) and $311,000 (5.5%) of
the Company's total revenue, net, during the three months ended March 31, 1998
and 1999, respectively. The Repair Business contributed $133,000 (4.9%) and
$174,000 (7.3%) to income before provision for income tax and minority interest
during the three months ended March 31, 1998 and 1999, respectively.
The Company's only operations besides the Rental Business, the Taxi
Business and the Repair Business relate to the hotel being developed in Hunan
Province, in respect of which neither revenue nor expenses were recorded in the
current or comparable prior quarter. All expenditures related to the hotel
before and during the quarter ended March 31, 1999 have been capitalized and
recorded as construction in progress.
The Company had entered into an agreement to purchase 3,000 cars for an
aggregate purchase price of $47,464,000. See "Liquidity and Capital Resources."
The Company plans to continue to expand the Rental and Taxi Businesses as
rapidly as the Company's capital resources permit, and to expand the Repair
Business as necessary to accommodate any expansion of the Rental Business and
Taxi Business. However, the Company currently does not have sufficient capital
to expand its businesses. See "Liquidity and Capital Resources."
The Company enjoys preferential tax treatment as a result of its location
in Shenzhen, a Special Economic Zone. Enterprises in Shenzhen are subject to an
-15-
<PAGE> 15
income tax rate of 15%, compared with the standard enterprise income tax rate of
33%. In addition, Shenzhen enterprises in the transportation service industry
have a 100% income tax credit for the first year in which they have a profit and
a 50% income tax credit for the second and third years. Various other localities
in China provide similar tax incentives. As the Company matures, fewer tax
incentives are and will be available to the Company. Therefore, the Company's
effective tax rate is expected to increase in future periods which will increase
income tax expense as a percentage of taxable income.
Comparison of three months ended March 31, 1999 and 1998
<TABLE>
<CAPTION>
Three
Months Three
Ended Percentage Months Percentage
March of Revenue, Ended of Revenue,
31, 1998 NET MARCH 31, 1999 NET
-------- --- -------------- ---
<S> <C> <C> <C> <C>
Revenue, net $5,161,000 100,0% $5,692,000 100.0%
Total expenses (excluding income tax) 2,454,000 47.6% 3,307,000 58.1%
Income before provision for income tax 2,707,000 52.4% 2,385,000 41.9%
and minority interest
Income before minority interest 2,506,000 48.6% 1,951,000 34.3%
Net Income 2,313,000 44.8% 1,847,000 32.5%
</TABLE>
Revenue, net was $5,692,000 in the three months ended March 31, 1999, an
increase of 10.3% from $5,161,000 during the comparable prior period. The
increase was primarily due to a $435,000 (15.7%) increase in revenue from the
Rental Business. The Rental, Taxi and Repair Businesses contributed $3,205,000
(56.3%), $2,176,000 (38.2%) and $311,000 (5.5%), respectively, to revenue, net,
during the three months ended March 31, 1999, compared with $2,770,000 (53.7%),
$2,025,000 (39.2%), and $366,000 (7.1%), respectively, during the comparable
prior period. Revenue, net, from the Taxi Business increased from $2,025,000 in
the comparable prior quarter to $2,176,000 in the current quarter, a 7.5%
increase. Revenue, net, for the Repair Business was $311,000 in the current
quarter, compared to $366,000 during the comparable prior period, a 15.0%
decrease. The increase in net revenue from the Rental Business is primarily due
to the deployment of 80 new rental cars since March, 1998 in Yueyang, Hunan
Province in China and the deployment in March 1999 of an additional 50 rental
cars in Changsa, Hunan Province. Further, during late March, 1999, an additional
100 rental cars were deployed in servicing the newly-opened Nanning operation in
the Guangxi Province. The increase in net revenue from the Taxi Business is
primarily due to the addition of 50 taxis in Yueyang, Hunan Province, since
April, 1998. The decrease in net revenue from the Repair Business is primarily
due to a general slow down in the repair business.
Total Expenses (excluding income taxes) were $3,307,000 during the three
months ended March 31, 1999, an increase of $853,000 (34.8%) from $2,454,000
during the comparable prior period. During the current quarter, total expenses
as a percentage of revenue, net, increased to 58.1%, compared to 47.5% in the
prior period.
-16-
<PAGE> 16
The increase in the amount of total expenses was comprised primarily of a
$175,000 increase in depreciation of revenue-earning equipment, a $538,000
increase in loss on disposal of revenue-earning equipment (taxis), an $18,000
increase in amortization of taxi licenses, and a $239,000 increase in other
operating expenses, partially offset by a decrease in net interest expense of
$177,000.
Depreciation and Amortization Expense. During the current quarter,
depreciation and amortization expense was $1,158,000, compared with $965,000 in
the comparable prior period, an increase of $193,000. During the current
quarter, the depreciation and amortization expense associated with the Rental
Business, Taxi Business, and Repair Business was $567,000, $585,000, and $6,000,
respectively. Depreciation and amortization expense, as a percentage of revenue,
net, increased during the current quarter, to 20.3%, compared to 18.7% during
the comparable prior period. The increase in depreciation expense was due
primarily to an increase in the number of rental cars and taxis in service and
the amortization of the additional 50 taxi licenses.
Loss on disposal of revenue-earning equipment increased to $596,000 during
the current quarter, from $58,000 during the comparable prior quarter. The
increase in loss on revenue-earning equipment was due to disposition of old
taxis in connection with the Company's modernizing its taxi fleet. New taxis are
estimated to have a service life of six to eight years before disposal.
Other Operating Expenses. Other operating expenses includes traffic
regulation fees, road maintenance fees, insurance, salaries, rent, costs of
materials, depreciation (non-revenue earning equipment) and other general and
administrative expenses. During the current quarter, other operating expenses
were $1,418,000, compared with $1,179,000 during the comparable prior period, an
increase of $239,000. During the current quarter, other operating expenses, as a
percentage of revenue, net, increased slightly to 24.9%, compared with 22.8% for
the comparable prior period. The increase in operating expenses as a percentage
of revenue, net, was due primarily to additional setup costs of new rental car
operations which are expensed on a current basis. The increase in the amount of
other operating expenses was primarily due to a $123,000 increase in setup costs
of new rental operations in the Rental Business and increases in management
costs, road maintenance fees and insurance charges.
Income before provision for income tax and minority interest was $2,385,000
in the current quarter, a decrease of 11.9% from $2,707,000 in the comparable
prior period. Before deducting $533,000 (consisting of $507,000 in general and
administrative expenses, and $26,000 in interest expense) and $601,000 of
expenses of the parent company (unconsolidated) during the current quarter and
the comparable prior quarter, respectively, the Rental, Taxi and Repair
Businesses contributed $2,152,000, $595,000, and $174,000, respectively, to
total income before provision for income tax and minority interest, compared
with $2,007,000, $1,168,000, and $133,000, respectively, in the comparable prior
period. The decrease in income before provision for income tax and minority
interest is primarily attributable to the 49.1% decrease in the contribution of
the Taxi Business, offset by an increase in both the Rental Business and the
Repair Business. The decreased contribution from the Taxi
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<PAGE> 17
Business is primarily due to a $596,000 loss on disposal of old taxis during the
current quarter.
Provision for income tax was $434,000 in the current quarter (18.2% of
income before provision for income tax and minority interest), compared with
$201,000 in the comparable prior period (7.4% of income before provision for
income tax and minority interest). The increase was primarily due to the
expiration of certain tax benefits that were available to the Company during
earlier tax years. The expiration of these tax benefits has resulted and will
continue to result in higher effective tax rates. The Company's taxi and rental
car operations, which enjoyed tax benefits in 1998, will be subject to regular
income tax rates during 1999, due to the expiration of these benefits. The
expiration of tax benefits will have the effect of reducing the Company's future
net income below the level it would otherwise be if the Company's tax benefits
continued to be available.
Minority interest was $104,000 in the current quarter, compared with
$193,000 in the comparable prior period, which reflects the Company's having
generated less income during the current period.
As a result of the foregoing, net income was $1,847,000 in the current
quarter, compared with $2,313,000 in the comparable prior period.
Currently, the exchange rate for conversion of Renminbi to U.S. Dollars is
RMB 8.278 to $1.00. The Financial position and results of operations of
Jinzhenghua Transport are determined using Renminbi. Assets and liabilities are
translated at the exchange rate in effect at each year or period end. Income
statement amounts are translated at the average rate of exchange prevailing
during the year. Any significant devaluation of the Renminbi relative to U.S.
dollars would materially and adversely affect the Company's reported earnings
and assets as reported in U.S. dollars.
LIQUIDITY AND CAPITAL RESOURCES
Generally, the Rental and Taxi Businesses are cash flow businesses that do
not require significant amounts of working capital; but they are capital
intensive and require substantial capital expenditures for revenue producing
equipment. Working capital for the Repair Business was initially financed mainly
by cash flow from the Taxi Business.
At March 31, 1999, the Company had trade receivables ($126,000), cash and
cash equivalents ($8,899,000), and subscription receivable ($4,000,000),
aggregating $13,025,000. The Company's liabilities due within a year aggregated
$10,619,000. Accordingly, at March 31, 1999, cash (including cash equivalents)
and receivables exceeded the Company's liabilities due within a year by
$2,406,000. At December 31, 1998, liabilities due within a year exceeded cash
(including cash equivalents) and receivables by $3,354,000. This $5,760,000
increase in working capital was primarily attributable to an overall increase in
cash (including cash equivalents) and receivables of approximately $8,000,000,
partially offset by an overall increase in liabilities due within a year of
approximately $2,200,000, consisting primarily of increased notes
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<PAGE> 18
payable ($2,000,000) and increased accrued expenses and income taxes payable
($1,200,000), partially offset by a $1,000,000 decrease in trades payable.
As the Company's financial resources permit, the Company intends to make
capital expenditures, primarily for the purchase of new automobiles for the
Rental and Taxi Business and the completion of construction of the Company's
hotel project. At March 31, 1999, the Company had committed to purchase an
aggregate 3,000 new automobiles for an aggregate purchase price of $47,464,000
(in respect of which a deposit in the amount of approximately $11.7 Million was
made as of March 31, 1999 (the "Auto Purchase Contract"). The balance due under
the Auto Purchase contract is approximately $36 million. The Company had also
entered into an agreement to purchase 300 taxis for approximately $4.0 million.
As of March 31, 1999, the Company had paid approximately $4,000,000 in full
satisfaction of the purchase price for the 300 new cars for the Taxi Business,
of which 100 have been delivered to the Company. The Company currently does not
have sufficient capital to fulfill its obligations under the Auto Purchase
Contract. In April, 1999, the Company and the auto supplier agreed to extend
until September, 1999 the time for performance of the Company's obligations
under the Auto Purchase Contract. If the Company is unable to obtain financing
to fund the balance of the purchase price by September, 1999, the Company could
be subject to damages/penalties under the Auto Purchase Contract, but the
parties have agreed to limit any damages/penalties to $1.8 million.
At March 31, 1999, the rental Business has 398 new automobiles which had
not yet been placed in service, as the Company did not have available the
capital necessary (approximately $2,500,000) to pay the expenses related to
placing the cars in service (license fees, taxes, and levies). The company
intends to place these cars in service in the Rental Business as soon as it has
the capital to do so.
At March 31, 1999, the estimated cost of completing construction of the
hotel project was approximately $4.0 million, of which $2.2 million has been
paid to date. The Company has suspended construction of the hotel project, as
the Company does not currently have sufficient capital to fund the construction
of such project. The Company intends to resume construction on the hotel project
at such time as the Company has sufficient capital to do so.
The Company has defaulted on payment of existing indebtedness in the
aggregate principal amount of $320,000 which was due and payable in April 1998.
The Company is currently negotiating to restructure this debt. In addition, the
Company has existing indebtedness in the aggregate principal amount of
approximately $2.4 million, that was originally due and payable in March, 1999.
The Company has negotiated an agreement to extend to April 2000 the time for
payment for this $2.4 million in indebtedness, as the Company was unable to
repay this indebtedness by the due date.
As described under Part II, Item 1, "Legal Proceedings," based on
settlement discussions with respect to the class action lawsuit against the
Company, the Company established in the fourth quarter of 1998 a liability and
recorded a related expense in the amount of $1.5 million, in respect of such
lawsuit. If these discussions do not form
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<PAGE> 19
the basis for any final settlement, the liability arising out of the class
action could materially exceed $1.5 million. The Company expects to satisfy any
amounts owing pursuant to any settlement through issuance of shares of common
stock, which would dilute the interests of the Company's stockholders. If,
however, the Company is required to pay any settlement in cash, there could be a
material adverse effect on the Company's financial condition.
Pursuant to Jinzhenghua Transport's organizational documents, the Company
and the minority owners of Jinzhenghua Transport are obligated to contribute
$9.2 Million and $800,000 (in cash or assets), respectively, to the capital of
Jinzhenghua Transport. In particular, the Company was obligated to make its
capital contribution to Jinzhenghua Transport in two equal installments of $4.6
Million, the first of which was due October 30, 1998 and the second of which
will be due December 26, 1999. The minority owners were obligated to contribute
$340,000 by October 30, 1998 and the balance by December 26, 1999. To date, the
Company has contributed approximately $300,000 of its aggregate $9.2 Million
obligation to the capital of Jinzhenghua Transport. Accordingly, the Company has
not performed on its obligation to contribute $4.2 Million to Jinzhenghua
Transport by October 30, 1998. The minority owners also did not perform on their
obligations to contribute the aggregate $340,000 by October 30, 1998. The
Company and the minority owners may amend the organizational documents of
Jinzhenghua Transport to extend the time for payment of the required capital
contributions, subject to government approval. In April, 1999, subsequent to the
due date (October 30, 1998) of the Company's required capital contribution of
$4.6 million, Jinzhenghua Transport passed the annual inspection conducted by
the relevant Chinese licensing authority. This annual inspection forms part of
the annual renewal process of the business license which expires December 26,
1999. The Company believes that it will be able to reach an agreement with the
minority owners to extend the time for payment and that the relevant government
authority will approve such extension of time. The Company understands that, in
general, as a matter of practice, the relevant Chinese licensing authority
routinely approves agreements to extend the time for payment of the required
capital contribution, and that the licensing authority does not generally cancel
business licenses for failing to make the required capital contribution by the
due date.
If the Company is unable to obtain an extension of time that is approved by
the government, Jinzhenghua Transport's business license could be cancelled by
the government, which would materially and adversely affect the Company. In any
event, the Company expects that it will be required to make the remaining
capital contribution to Jinzhenghua Transport ($8.9 Million) by December 26,
1999. Although there can be no assurance, the Company believes that it will be
able to raise sufficient capital from additional financings to contribute the
remaining balance of $8.9 Million to the capital of Jinzhenghua Transport by
December 26, 1999. If the Company is unable to make the required contribution by
December 26, 1999, the government may cancel Jinzhenghua Transport's business
license, which would materially and adversely affect the Company.
-20-
<PAGE> 20
The Company believes that through a combination of cash flow from
operations and proceeds from potential financings, the Company will be able to
repay existing indebtedness and finance capital expenditures, including the
purchase of some new automobiles. At present, the Company has no commitments
from third parties to finance capital expenditures or to refinance any of its
existing indebtedness, and does not have sufficient resources to finance planned
capital expenditures or to repay such indebtedness without refinancing. The
Company expects to generate significant cash flow from operations and will seek
to obtain capital from the sale of securities, borrowings, and vendor financing
arrangements. There can be no assurance the Company will be successful in
raising additional capital, or, if it raises additional capital, the terms on
which such capital will be raised.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded
to accept only two-digits entries in the date code field and cannot distinguish
dates after the year 2000. These date code fields will need to distinguish "Year
2000" dates from earlier dates and, as a result, many companies' software and
computer systems may need to be upgraded or replaced in order to comply with
"Year 2000" requirements.
The Company believes that its computerized systems are Year 2000 compliant.
If the Company's computerized systems are not in fact Year 2000 compliant,
the failure of the Company to make its systems Year 2000 compliant in a timely
manner will have a material adverse effect on the Company.
The Company relies upon various vendors, utility companies,
telecommunications service companies, delivery service companies and other
service providers, which are outside of the Company's control. The failure of
such service providers to make their systems Year 2000 compliant could have a
material adverse effect on the Company's financial condition and results of
operations. The Company has not yet determined the extent to which the computer
systems of such service providers are Year 2000 compliant, if at all. The
failure of the Company's vendors to make their systems Year 2000 compliant in a
timely manner will have a material adverse effect on the Company.
-21-
<PAGE> 21
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Government Control of Currency Conversion and Exchange Rate Risks
The Renminbi currently is not a freely convertible currency. The State
Administration for Foreign Exchange ("SAFE"), under the authority of the
People's Bank of China (the "PBOC"), controls the conversion of Renminbi into
foreign currency. Prior to January 1, 1994, Renminbi could be converted to
foreign currency through designated banks or other authorized institutions at
official rates fixed daily by the SAFE. Renminbi also could be converted at swap
centers ("swap centers") open to Chinese enterprises and foreign invested
enterprises ("FIEs"), subject to SAFE approval of each foreign currency trade,
at exchange rates negotiated by the parties for each transaction. Effective
January 1, 1994, a unitary exchange rate system was introduced in China,
replacing the dual-rate system previously in effect. In connection with the
creation of a unitary exchange rate, the Chinese government announced the
establishment of an inter-bank foreign exchange market, the China Foreign
Exchange Trading System ("CFETS"), and the phasing out of the swap centers.
However, the swap centers have been retained as an interim measure.
In general, under existing foreign exchange regulations, domestic
enterprises operating in China must price and sell their goods and services in
China in Renminbi. Any foreign exchange reserves received by such enterprises
must be sold to authorized foreign exchange banks in China.
Jinzhenghua Transport is an FIE. Jinzhenghua Transport has obtained a
foreign currency account with a designated bank and is able to exchange foreign
currency for settlement of foreign currency transactions (as defined in the
applicable regulations) and, subject to satisfaction of certain conditions, may
pay dividends. However, the Company has not made certain capital contributions
to Jinzhenghua Transport necessary to enable Jinzhenghua Transport to pay
dividends to the Company. See Part 1, Item 2, "Management's Discussion and
Analysis of Financial Condition and Results of Operations Liquidity and Capital
Resources." Accordingly, Jinzhenghua Transport's ability to pay dividends to the
Company is currently restricted. There can be no assurance that Jinzhenghua
Transport will be able to maintain FIE status, that the current authorizations
for FIEs to retain their foreign exchange in the future to satisfy foreign
exchange liabilities or to pay dividends will not be limited or eliminated or
that Jinzhenghua Transport will be able to obtain sufficient foreign exchange to
pay dividends or satisfy its foreign exchange liabilities.
The value of the Renminbi is subject to changes in central government
policies and to international economic and political developments affecting
supply and demand in the CFETS market. Over the last five years, the Renminbi
has experienced a devaluation against most major currencies. A significant
devaluation of the Renminbi occurred on January 1, 1994 in connection with the
adoption of the new unitary exchange rate. On that date, the official exchange
rate for conversion of Renminbi to U.S. dollars changed from approximately RMB
5.8000 to $1.00 to approximately RMB 8.7000 to $1.00, representing a devaluation
of approximately 50%. Since 1994, the
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<PAGE> 22
official exchange rate for the conversion of Renminbi to U.S. dollars has been
stable, and the Renminbi has appreciated slightly against the U.S. dollar.
However, there can be no assurance that the exchange rate will not become
volatile again or that there will be no further devaluation of the Renminbi.
Currently, the exchange rate for conversion of Renminbi to U.S. Dollars is
RMB 8.278 to $1.00. The Financial position and results of operations of
Jinzhenghua Transport are determined using Renminbi. Assets and liabilities are
translated at the exchange rate in effect at each year or period end. Income
statement amounts are translated at the average rate of exchange prevailing
during the year. Any significant devaluation of the Renminbi relative to U.S.
dollars would materially and adversely affect the Company's reported earnings
and assets as reported in U.S. dollars.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In late 1997, the United States Securities and Exchange Commission
commenced an informal inquiry relating to public disclosures in 1997 by Dawson
Science Corporation ("Dawson"), the Company's former parent company. The public
disclosures involved, among other things, press releases relating to the
acquisition of Shenzhen Jinzhenghua Transport Industrial Development Co., Ltd.,
the value of Dawson's assets, Dawson's financial prospects and Dawson's
anticipated revenues and earnings (collectively, the "Public Disclosures"). The
Company engaged counsel in connection with the inquiry. The outcome of such
inquiry could materially and adversely affect the Company.
On August 28, 1998, David Weightman, a stockholder of the Company, filed a
class action complaint in the United States District Court for the Southern
District of New York naming the Company, Dawson, and their respective executive
officers and directors as defendants. The complaint alleges that the Public
Disclosures omitted or misrepresented material facts. The plaintiff seeks
unspecified damages on behalf of himself and all other persons who purchased
shares of Dawson common stock between March 25, 1997 and December 30, 1997,
together with interest and costs, including attorney fees, under sections 10(b)
and 20(a) of the Securities and Exchange Act of 1934 and Rule 10(b)(5)
thereunder.
The Company currently is engaged in settlement discussions with respect to
the class action referred to above. Based on these discussions, the Company
established in the fourth quarter of 1998 a liability and recorded a related
expense in the amount of $1.5 million in respect of the class action. There can
be no assurance, however, that the settlement discussions will result in a final
settlement, or that the liability of a final settlement will be limited to $1.5
million. If these settlement discussions are not the basis for a final
settlement, the liability with respect to the class action could materially
exceed $1.5 million.
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<PAGE> 23
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On January 26, 1999, the Company raised $400,000, before deducting a
finder's fee of approximately $40,000, through the private sale of 152,381
shares of common stock at a price of $2.625 per share. As additional finder's
compensation, the Company issued immediately exercisable warrants to purchase
240,000 shares of common stock for a five year term at an exercise price of
$2.00 per share. The shares of Common Stock and Warrants were sold in
transactions exempt from Section 5 of the Act, pursuant to Rule 506. The shares
were sold to Yeung Shu Kin, a non-U.S. resident and an "accredited investor."
The finder's warrants were also issued to a non-U.S. resident and "accredited
investor." There was no general solicitation.
On January 29, 1999, the Company issued 3,000 shares of common stock to a
business and financial consultant as consideration for consulting services. The
shares of Common Stock were issued in a transaction exempt from Section 5 of the
Act, pursuant to Rule 506. There was no general solicitation.
On February 10, 1999 the Company raised $2,000,000 through the private sale
of a Convertible Note in the principal amount of $2,000,000 with a two year
maturity and a right to convert into shares of common stock at a conversion
price of $2.00. As finder's compensation, the Company paid $30,000 in cash and
agreed to issue 15,000 shares of common stock. The Convertible Note and shares
of common stock were sold in transactions exempt from Section 5 of the Act,
pursuant to Rule 506. The Convertible Note was sold to Kwok Kee Billy Yung and
the shares of common stock were issued to Zhong Hua Chen, each a non-U.S.
resident and an "accredited investor." There was no general solicitation.
On March 12, 1999, the Company issued 20,000 shares of common stock and
warrants to purchase 30,000 shares of common stock to Orient Financial Services
Limited, a business and financial consultant, as consideration for consulting
services. The shares of common stock and warrants were issued in a transaction
exempt from Section 5 of the Act, pursuant to Rule 506. There was no general
solicitation.
On March 25, 1999, the Company issued warrants to purchase 30,000 shares of
common stock to Virtual Financial Corp., a business and financial consultant, as
consideration for consulting services. The warrants were issued in a transaction
exempt from Section 5 of the Act, pursuant to Rule 506. There was no general
solicitation.
On March 26, 1999, the Company through a private sale sold 500,000 and
1,500,000 shares of common stock to Mr. Kwok Kee Billy Yung and Dr. Yung Yau,
respectively, at a price of $2.00 per share, for an aggregate purchase price of
$4,000,000. The shares of Common Stock were sold in transactions exempt from
Section 5 of the Act, pursuant to Rule 506. Each of the purchasers are non-U.S.
residents and "accredited investors." There was no general solicitation.
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<PAGE> 24
See Part 1. Financial Information, Item 3. Quantitative and Qualitative
Disclosures About Market Risk for a description of restrictions on Jinzhenghua
Transport's ability to pay dividends to the Company.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Listing of Exhibits
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------------- ----------------------
------------------------------------------------------------------------------------------------------------------
<S> <C>
2.1(1) Agreement and Plan of Reorganization.
------------------------------------------------------------------------------------------------------------------
3.1(1) Certificate of Incorporation of the Company, as Amended.
------------------------------------------------------------------------------------------------------------------
3.2(1) Bylaws of the Company.
------------------------------------------------------------------------------------------------------------------
4.1(2) Assignment of Indebtedness, dated December 11, 1998 by Shenzhen Zhenghua Group Co. Ltd. to Wu
Zhi Jian, New Century International S.R.L., Billy Yung and Chusa International Ltd.
------------------------------------------------------------------------------------------------------------------
4.2(2) Subscription Agreement, dated December 11, 1998, between Integrated Transportation Network
Group Inc. and Wu Zhi Jian.
------------------------------------------------------------------------------------------------------------------
4.3(2) Stock Purchase Warrant, dated December 11, 1998 in favor of Wu Zhi Jian.
------------------------------------------------------------------------------------------------------------------
4.4(2) Subscription Agreement, dated December 11, 1998, between Integrated Transportation Network
Group Inc. and New Century International S.R.L.
------------------------------------------------------------------------------------------------------------------
4.5(2) Stock Purchase Warrant, dated December 11, 1998 in favor of New Century International S.R.L.
------------------------------------------------------------------------------------------------------------------
4.6(2) Subscription Agreement, dated December 11, 1998, between Integrated Transportation Network
Group Inc. and Chusa International Limited.
------------------------------------------------------------------------------------------------------------------
4.7(2) Stock Purchase Warrant, dated December 11, 1998 in favor of Chusa International Limited.
------------------------------------------------------------------------------------------------------------------
4.8(2) Subscription Agreement, dated December 11, 1998, between Integrated Transportation Network
Group Inc. and Yeung Shu Kin
------------------------------------------------------------------------------------------------------------------
4.9(2) Subscription Agreement, dated December 11, 1998, between Integrated Transportation Network
Group Inc. and Surewin International Limited.
------------------------------------------------------------------------------------------------------------------
4.10(2) Stock Purchase Warrant, dated December 11, 1998 in favor of Surewin International Limited.
------------------------------------------------------------------------------------------------------------------
4.11(2) Subscription Agreement, dated December 17, 1998, between Integrated Transportation Network
Group Inc. and Kwok Kee Billy Yung.
------------------------------------------------------------------------------------------------------------------
4.12(2) Stock Purchase Warrant, dated December 11, 1998 in favor of Kwok Kee Billy Yung.
------------------------------------------------------------------------------------------------------------------
4.13(2) Subscription Agreement, dated December 23, 1998, between Integrated Transportation
------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 25
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
------------------------------------------------------------------------------------------------------------------
<S> <C>
Network Group Inc.and Kwok Kee Billy Yung.
------------------------------------------------------------------------------------------------------------------
4.14* Subscription Agreement, dated January 26, 1999, between Integrated Transportation Network
Group Inc. and Yeung Shu Kin.
------------------------------------------------------------------------------------------------------------------
4.15* Subscription Agreement, dated January 29, 1999 between Integrated Transportation Network Group
Inc. and Roy Lerman.
------------------------------------------------------------------------------------------------------------------
4.16* Subscription Agreement, dated February 10, 1999 between Integrated Transportation Network
Group, Inc. and Kwok Kee Billy Yung.
------------------------------------------------------------------------------------------------------------------
4.17* 5% Convertible Note, dated February 10, 1999, issued to Kwok Kee Billy Yung.
------------------------------------------------------------------------------------------------------------------
4.18* Subscription Agreement, dated March 12, 1999, between Integrated Transportation Network Group
Inc. and Zhong Hua Chen.
------------------------------------------------------------------------------------------------------------------
4.19* Subscription Agreement, dated March 5, 1999, between Integrated Transportation Network Group
Inc. and Orient Financial Services Limited.
------------------------------------------------------------------------------------------------------------------
4.20* Stock Purchase Warrant, dated March 5, 1999 in favor of Orient Financial Services Limited.
------------------------------------------------------------------------------------------------------------------
4.21* Subscription Agreement, dated March 25, 1999, between Integrated Transportation Network Group
Inc. and Virtual Financial Corp.
------------------------------------------------------------------------------------------------------------------
4.22* Stock Purchase Warrant, dated March 25, 1999 in favor of Virtual Finance Corp.
------------------------------------------------------------------------------------------------------------------
4.23* Subscription Agreement, dated March 26, 1999, between Integrated Transportation Network Group
Inc. and Dr. Yung Yau.
------------------------------------------------------------------------------------------------------------------
4.24* Subscription Agreement, dated March 26, 1999, between Integrated Transportation Network Group
Inc. and Kwok Kee Billy Yung.
------------------------------------------------------------------------------------------------------------------
10.1(1) Letter Agreement, dated March 19, 1997 between Dawson Science Corporation and Shenzhen City
Zhenghua Traffic and Transportation Main Company, Ltd.
------------------------------------------------------------------------------------------------------------------
10.2(1) Letter Agreement, dated June 27, 1997 between Dawson Science Corporation and Wharton Capital
Partners Ltd.
------------------------------------------------------------------------------------------------------------------
10.3(1) Consulting Agreement, dated February 11, 1998 between Dawson Science Corporation and R.I.P.
Consultants.
------------------------------------------------------------------------------------------------------------------
10.4(1) Contract for Chinese Foreign Equity Joint Venture, dated October 8, 1997 between Dawson Science
Corporation and Wu Qui Mei (Shenzhen Jinzhenghua Transport Industrial Development Co. Ltd.).
------------------------------------------------------------------------------------------------------------------
10.5(1) Regulations for Chinese Foreign Equity Joint Venture, dated October 8, 1997 between Dawson
Science Corporation and Shenzhen Jinzhenghua Transport Industrial Development Co. Ltd.
------------------------------------------------------------------------------------------------------------------
10.6(1) Business Loan and Security Agreement, dated November 3, 1997 between Dawson Science
Corporation and Yeung Ming-Sum.
------------------------------------------------------------------------------------------------------------------
10.7(1) Business Loan and Security Agreement, dated September 19, 1997 between Dawson Science
Corporation and Yeung Shu-kin.
------------------------------------------------------------------------------------------------------------------
10.8(1) Business Loan and Security Agreement, dated September 30, 1997 between Dawson Science
Corporation and Neolite Neon Co. Pty. Ltd.
------------------------------------------------------------------------------------------------------------------
10.9(1) Grid Promissory Note, dated July 3, 1997, payable to Wharton Capital Partners, Ltd.
------------------------------------------------------------------------------------------------------------------
10.10(1) Agreement, dated May 28, 1998 between Dawson Science Corporation, Integrated Transportation
Network Group Inc. and R.I.P. Consultants.
------------------------------------------------------------------------------------------------------------------
10.11(2) Agreement to purchase 2000 automobiles, between Sun Loong and Shenzhen
------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 26
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
------------------------------------------------------------------------------------------------------------------
<S> <C>
Jinzhenghua Transport Industrial Development Co., Ltd. (terminated)
------------------------------------------------------------------------------------------------------------------
10.12(2) Agreement to purchase 3000 automobiles, between First Automobile and Shenzhen Jinzhenghua
Transport Industrial Development Co., Ltd.
------------------------------------------------------------------------------------------------------------------
10.13* Consulting Agreement, dated January 29, 1999, between Integrated Transportation Network Group
Inc. and Roy Lerman.
------------------------------------------------------------------------------------------------------------------
10.14* 1999 Combination Stock Option Plan.
------------------------------------------------------------------------------------------------------------------
10.15* Consulting Agreement, dated March 12, 1999, between Integrated Transportation Network Group
Inc., and Orient Financial Services Limited.
------------------------------------------------------------------------------------------------------------------
10.16* Consulting Agreement, dated February 16, 1999 between Integrated Transportation Network Group
Inc., and Virtual Financial Corp.
------------------------------------------------------------------------------------------------------------------
10.17* Consulting Agreement, dated March 12, 1999, between Integrated Transportation Network Group
Inc., and Orient Financial Services Limited.
------------------------------------------------------------------------------------------------------------------
21(2) List of Subsidiaries.
------------------------------------------------------------------------------------------------------------------
27.1* Financial Data Schedule.
------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------------
(1) Filed as an Exhibit, with the same Exhibit number, to
Amendment No. 3 to the Registrant's registration statement on
Form S-1 filed with the Securities and Exchange Commission on
June 29, 1998, and incorporated herein by this reference
(2) Filed as an Exhibit, with the same Exhibit number, to
Registrant's Form 10-K filed with the Securities and Exchange
Commission on April 15, 1999 and incorporated herein by
reference.
* Filed herewith.
(b) The Company did not file a Current Report on Form 8-K during the 1st Quarter
of 1999.
-27-
<PAGE> 27
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 15, 1999 INTEGRATED TRANSPORTATION
NETWORK GROUP, INC.
By: /s/ Andrew Lee
-----------------------
Andrew Lee
President
By: /s/ Willy Wu
-----------------------
Willy Wu
Chief Financial Officer
-28-
<PAGE> 28
EXHIBIT INDEX
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
EXHIBIT NO. DESCRIPTION OF EXHIBIT
-----------------------------------------------------------------------------------------------------------------
<S> <C>
2.1(1) Agreement and Plan of Reorganization.
-----------------------------------------------------------------------------------------------------------------
3.1(1) Certificate of Incorporation of the Company, as Amended.
-----------------------------------------------------------------------------------------------------------------
3.2(1) Bylaws of the Company.
-----------------------------------------------------------------------------------------------------------------
4.1(2) Assignment of Indebtedness, dated December 11, 1998 by Shenzhen Zhenghua Group Co. Ltd. to Wu
Zhi Jian, New Century International S.R.L., Billy Yung and Chusa International Ltd.
-----------------------------------------------------------------------------------------------------------------
4.2(2) Subscription Agreement, dated December 11, 1998, between Integrated Transportation Network
Group Inc. and Wu Zhi Jian.
-----------------------------------------------------------------------------------------------------------------
4.3(2) Stock Purchase Warrant, dated December 11, 1998 in favor of Wu Zhi Jian.
-----------------------------------------------------------------------------------------------------------------
4.4(2) Subscription Agreement, dated December 11, 1998, between Integrated Transportation Network
Group Inc. and New Century International S.R.L.
-----------------------------------------------------------------------------------------------------------------
4.5(2) Stock Purchase Warrant, dated December 11, 1998 in favor of New Century International S.R.L.
-----------------------------------------------------------------------------------------------------------------
4.6(2) Subscription Agreement, dated December 11, 1998, between Integrated Transportation Network
Group Inc. and Chusa International Limited.
-----------------------------------------------------------------------------------------------------------------
4.7(2) Stock Purchase Warrant, dated December 11, 1998 in favor of Chusa International Limited.
-----------------------------------------------------------------------------------------------------------------
4.8(2) Subscription Agreement, dated December 11, 1998, between Integrated Transportation Network
Group Inc. and Yeung Shu Kin
-----------------------------------------------------------------------------------------------------------------
4.9(2) Subscription Agreement, dated December 11, 1998, between Integrated Transportation Network
Group Inc. and Surewin International Limited.
-----------------------------------------------------------------------------------------------------------------
4.10(2) Stock Purchase Warrant, dated December 11, 1998 in favor of Surewin International Limited.
-----------------------------------------------------------------------------------------------------------------
4.11(2) Subscription Agreement, dated December 17, 1998, between Integrated Transportation Network
Group Inc. and Kwok Kee Billy Yung.
-----------------------------------------------------------------------------------------------------------------
4.12(2) Stock Purchase Warrant, dated December 11, 1998 in favor of Kwok Kee Billy Yung.
-----------------------------------------------------------------------------------------------------------------
4.13(2) Subscription Agreement, dated December 23, 1998, between Integrated Transportation Network
Group Inc. and Kwok Kee Billy Yung.
-----------------------------------------------------------------------------------------------------------------
4.14* Subscription Agreement, dated January 26, 1999, between Integrated Transportation Network
Group Inc. and Yeung Shu Kin.
-----------------------------------------------------------------------------------------------------------------
4.15* Subscription Agreement, dated January 29, 1999 between Integrated Transportation Network Group
Inc. and Roy Lerman.
-----------------------------------------------------------------------------------------------------------------
4.16* Subscription Agreement, dated February 10, 1999 between Integrated Transportation Network
Group, Inc. and Kwok Kee Billy Yung.
-----------------------------------------------------------------------------------------------------------------
4.17* 5% Convertible Note, dated February 10, 1999, issued to Kwok Kee Billy Yung.
-----------------------------------------------------------------------------------------------------------------
4.18* Subscription Agreement, dated March 12, 1999, between Integrated Transportation Network Group
Inc. and Zhong Hua Chen.
-----------------------------------------------------------------------------------------------------------------
4.19* Subscription Agreement, dated March 5, 1999, between Integrated Transportation Network Group
Inc. and Orient Financial Services Limited.
-----------------------------------------------------------------------------------------------------------------
4.20* Stock Purchase Warrant, dated March 5, 1999 in favor of Orient Financial Services Limited.
-----------------------------------------------------------------------------------------------------------------
</TABLE>
-29-
<PAGE> 29
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
-----------------------------------------------------------------------------------------------------------------
<S> <C>
4.21* Subscription Agreement, dated March 25, 1999, between Integrated Transportation Network Group
Inc. and Virtual Financial Corp.
-----------------------------------------------------------------------------------------------------------------
4.22* Stock Purchase Warrant, dated March 25, 1999 in favor of Virtual Finance Corp.
-----------------------------------------------------------------------------------------------------------------
4.23* Subscription Agreement, dated March 26, 1999, between Integrated Transportation Network Group
Inc. and Dr. Yung Yau.
-----------------------------------------------------------------------------------------------------------------
4.24* Subscription Agreement, dated March 26, 1999, between Integrated Transportation Network Group
Inc. and Kwok Kee Billy Yung.
-----------------------------------------------------------------------------------------------------------------
10.1(1) Letter Agreement, dated March 19, 1997 between Dawson Science Corporation and Shenzhen City
Zhenghua Traffic and Transportation Main Company, Ltd.
-----------------------------------------------------------------------------------------------------------------
10.2(1) Letter Agreement, dated June 27, 1997 between Dawson Science Corporation and Wharton Capital
Partners Ltd.
-----------------------------------------------------------------------------------------------------------------
10.3(1) Consulting Agreement, dated February 11, 1998 between Dawson Science Corporation and R.I.P.
Consultants.
-----------------------------------------------------------------------------------------------------------------
10.4(1) Contract for Chinese Foreign Equity Joint Venture, dated October 8, 1997 between Dawson Science
Corporation and Wu Qui Mei (Shenzhen Jinzhenghua Transport Industrial Development Co. Ltd.).
-----------------------------------------------------------------------------------------------------------------
10.5(1) Regulations for Chinese Foreign Equity Joint Venture, dated October 8, 1997 between Dawson
Science Corporation and Shenzhen Jinzhenghua Transport Industrial Development Co. Ltd.
-----------------------------------------------------------------------------------------------------------------
10.6(1) Business Loan and Security Agreement, dated November 3, 1997 between Dawson Science
Corporation and Yeung Ming-Sum.
-----------------------------------------------------------------------------------------------------------------
10.7(1) Business Loan and Security Agreement, dated September 19, 1997 between Dawson Science
Corporation and Yeung Shu-kin.
-----------------------------------------------------------------------------------------------------------------
10.8(1) Business Loan and Security Agreement, dated September 30, 1997 between Dawson Science
Corporation and Neolite Neon Co. Pty. Ltd.
-----------------------------------------------------------------------------------------------------------------
10.9(1) Grid Promissory Note, dated July 3, 1997, payable to Wharton Capital Partners, Ltd.
-----------------------------------------------------------------------------------------------------------------
10.10(1) Agreement, dated May 28, 1998 between Dawson Science Corporation, Integrated Transportation
Network Group Inc. and R.I.P. Consultants.
-----------------------------------------------------------------------------------------------------------------
10.11(2) Agreement to purchase 2000 automobiles, between Sun Loong and Shenzhen Jinzhenghua Transport
Industrial Development Co., Ltd. (terminated)
-----------------------------------------------------------------------------------------------------------------
10.12(2) Agreement to purchase 3000 automobiles, between First Automobile and Shenzhen Jinzhenghua
Transport Industrial Development Co., Ltd.
-----------------------------------------------------------------------------------------------------------------
10.13* Consulting Agreement, dated January 29, 1999, between Integrated Transportation Network Group
Inc. and Roy Lerman.
-----------------------------------------------------------------------------------------------------------------
10.14* 1999 Combination Stock Option Plan.
-----------------------------------------------------------------------------------------------------------------
10.15* Consulting Agreement, dated March 12, 1999, between Integrated Transportation Network Group
Inc., and Orient Financial Services Limited.
-----------------------------------------------------------------------------------------------------------------
10.16* Consulting Agreement, dated February 16, 1999 between Integrated Transportation Network Group
Inc., and Virtual Financial Corp.
-----------------------------------------------------------------------------------------------------------------
10.17* Consulting Agreement, dated March 12, 1999, between Integrated Transportation Network Group
Inc., and Orient Financial Services Limited.
-----------------------------------------------------------------------------------------------------------------
21(2) List of Subsidiaries.
-----------------------------------------------------------------------------------------------------------------
27.1* Financial Data Schedule.
-----------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------------
-30-
<PAGE> 30
(1) Filed as an Exhibit, with the same Exhibit number, to
Amendment No. 3 to the Registrant's registration statement on
Form S-1 filed with the Securities and Exchange Commission on
June 29, 1998, and incorporated herein by this reference
(2) Filed as an Exhibit, with the same Exhibit number, to
Registrant's Form 10-K filed with the Securities and Exchange
Commission on April 15, 1999 and incorporated herein by
reference.
* Filed herewith.
-31-
<PAGE> 1
EXHIBIT 4.14
------------
Integrated Transportation Network Group Inc.
205 West 39th St., 16th Floor
New York, NY 10018
Attn: Andrew Lee, President
Ladies and Gentlemen:
The undersigned, YEUNG SHU KIN, hereby subscribes to the immediate
acquisition of 152,381 shares of Common Stock, $.01 par value ("Common Stock").
of Integrated Transportation Network Group Inc., a Delaware corporation (the
"Company"), at a price of US$2.625 per share for aggregate consideration of
US$400,000 (such shares of Common Stock are referred to herein collectively as
the "Securities").
Upon the Company's acceptance of this subscription, the Company shall
deliver the Securities to the undersigned at the address indicated below.
In connection with the purchase of the Securities, the undersigned
acknowledges, warrants and represents to the Company as follows:
1. The undersigned is acquiring the Securities for investment for its own
account and without the intention of participating, directly or indirectly, in a
distribution of the Securities, and not with a view to resale or any
distribution of the Securities, or any portion thereof.
2. The undersigned has knowledge and experience in financial and business
matters and has consulted with its own professional representatives as it has
considered appropriate to assist in evaluating the merits and risks of this
investment. The undersigned has reviewed the Company's prospectus dated June 29,
1998 and the Company's Quarterly Reports on Form 10Q for the quarter ended June
30 and September 30, 1998, respectively. Thc undersigned has had access to and
an opportunity to question the officers of the Company, or persons acting on
their behalf, with respect to material information about the Company and, in
connection with its evaluation of this investment, has, to the best of its
knowledge, received all information and data with respect to the Company that
the undersigned has requested. The undersigned is acquiring the Securities based
solely upon its independent examination and judgment as to the prospects of the
Company.
3. The Securities were not offered to the undersigned by means of
publicly disseminated advertisements or sales literature.
4. The undersigned acknowledges that an investment in the Securities is
speculative and the undersigned may have to continue to bear the economic risk
of the investment in the Securities for an indefinite period. The undersigned
acknowledges that the Securities are being sold to the undersigned without
registration under any state, or federal or PRC law requiring the registration
of securities for sale, and accordingly will constitute "restricted securities"
as defined in Rule 144 of the U.S. Securities and Exchange Commission. The
transferability of the Securities is therefor restricted by applicable United
States Federal and state securities laws and
<PAGE> 2
may be restricted under the laws of other jurisdictions.
5. The undersigned is an "accredited investor" as such term is defined in
Appendix A.
6. In consideration of the acceptance of this subscription, the
undersigned agrees that the Securities will not be offered for sale, sold or
transferred by the undersigned other than pursuant to (i) an effective
registration under the Securities Act of 1933, as amended ("the Act"), an
exemption available under the Act or a transition that is otherwise in
compliance with the Act; and (ii) an effective registration under the securities
law of any state or other jurisdiction applicable to the transaction, an
exemption available under such laws, or a transaction that is otherwise in
compliance with such laws.
7. The undersigned understands that no U.S. federal or state agency has
passed upon the offering of the Securities or has made any finding or
determination as to the fairness of any investment in the Securities.
8. The undersigned agrees to indemnify and hold harmless the Company and
its officers, directors, employees and agents from and against any and all
costs, liabilities and expenses (including attorneys' fees) arising out of or
related in any way to any breach of' any representation or warranty contained
herein.
9. The Company agrees to use commercially reasonable efforts to file and
cause to become effective within 180 days of the date hereof a Registration
Statement under the U.S. Securities Act of 1933, as amended, covering the
Securities.
ACCEPTANCE OF SUBSCRIPTION SUBSCRIBER
Integrated Transportation Network Group Inc.
By: /S/ Andrew Lee By: /s/Yeung Shu Kin
----------------------------- -------------------------------
Andrew Lee, President Name: Yeung Shu Kin
Address:
Unit 1-2, 1/F, Join In Hang Sing Centre
71-75 Container Port Road
Kwai Chung, N.T., Hong Kong
<PAGE> 3
APPENDIX A
An "Accredited Investor" within the meaning of Regulation D under the Securities
Act of 1933 includes the following:
ORGANIZATIONS
- --------------
(1) A bank as defined in section 3(a)(2) of the Act, or any savings and
loan association or other institution as defined in section 3(a)(5)(A) of the
Act, whether acting in its individual or fiduciary capacity; a broker or dealer
registered pursuant to section 15 of the Securities Exchange Act of 1934;
insurance company as defined in section 2(13) of the Act; an investment company
registered under the Investment Company Act of 1940 or a business development
company as defined in section 2(a)(48) of that act; a Small Business Investment
Company licensed by the U.S. Small Business Administration under section 301(c)
or (d) of the Small Business Investment Act of 1958; an employee benefit plan
within the meaning of Title I of the Employee Retirement Income Security Act of
1974, if the investment decision is made by a plan fiduciary, as defined in
section 3(2l) of such act, which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or if the employee benefit
plan has total assets in excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are accredited investors.
(2) A private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940.
(3) A trust (i) with total assets in excess of $5,000,000, (ii) not formed
for the specific purpose of acquiring the Securities, (iii) whose purchase is
directed by a person who, either alone or with his purchaser representative, has
such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the proposed investment.
(4) A corporation, business trust, partnership, or an organization
described in section 501(c)(3) of the Internal Revenue Code, which was not
formed for the specific purpose of acquiring the Securities, and which has total
assets in excess of $5,000,000.
INDIVIDUALS
- -----------
(5) Individuals with income from all sources for each of the last two full
calendar years whose reasonably expected income for this calendar year exceeds
either of:
(i) $200,000 individual income; or
(ii) $300,000 joint income with spouse.
NOTE: Your "income" for a particular year may be calculated by adding to your
adjusted gross income as calculated for Federal income tax purposes any
deduction for long term capital gains, any deduction for depletion allowance,
any exclusion for tax exempt interest and any losses of a partnership allocated
to you as a partner.
(6) Individuals with net worth as of the date hereof (individually or
jointly with your spouse), including the value of home, furnishings, and
automobiles, in excess of $1,000,000.
<PAGE> 4
(7) Directors, executive officers or general partners of the Issuer.
<PAGE> 1
EXHIBIT 4.15
------------
January 29, 1999
Integrated Transportation Network Group Inc.
205 West 39th St., 16th Floor
New York, NY 10018
Attn: Andrew Lee, President
Ladies and Gentlemen:
The undersigned, ROY LERMAN, hereby subscribes to the immediate acquisition
of 3,000 shares of Common Stock, $.01 par value ("Common Stock"), of Integrated
Transportation Network Group Inc., a Delaware corporation (the "Company") (such
shares of Common Stock are referred to herein collectively as the "Securities").
The Securities are being issued to the undersigned in full and complete
satisfaction of all amounts owing to the undersigned as compensation for
consulting services rendered to the Company for the period July 1, 1998 to
December 31, 1998.
Upon the Company's acceptance of this subscription, the Company shall
deliver the Securities to the undersigned at the address indicated below.
In connection with the purchase of the Securities, the undersigned
acknowledges, warrants and represents to the Company as follows:
1. The undersigned is acquiring the Securities for investment for its own
account and without the intention of participating, directly or indirectly, in a
distribution of the Securities, and not with a view to resale or any
distribution of the Securities, or any portion thereof.
2. The undersigned has knowledge and experience in financial and business
matters and has consulted with its own professional representatives as it has
considered appropriate to assist in evaluating the merits and risks of this
investment. The undersigned has reviewed the Company's prospectus dated June 29,
1998 and the Company's Quarterly Reports on Form 10Q for the quarter ended June
30 and September 31, 1998, respectively. The undersigned has had access to and
an opportunity to question the officers of the Company, or persons acting on
their behalf, with respect to material information about the Company and, in
connection with its evaluation of this investment, has, to the best of its
knowledge, received all information and data with respect to the Company that
the undersigned has requested. The undersigned is acquiring the Securities based
solely upon its independent examination and judgment as to the prospects of the
Company.
3. The Securities were not offered to the undersigned by means of
publicly disseminated advertisements or sales literature.
4. The undersigned acknowledges that an investment in the Securities is
speculative and the undersigned may have to continue to bear the economic risk
of the investment in the Securities for an indefinite period. The undersigned
acknowledges that the Securities are being sold to the undersigned without
registration under any state or federal law requiring the registration of
securities for sale, and accordingly will constitute "restricted securities" as
defined in Rule 144 of the U.S. Securities and Exchange Commission. The
transferability of the Securities is therefor restricted by applicable United
States Federal and state securities laws and may be restricted under the laws of
other jurisdictions.
<PAGE> 2
5. The undersigned is an "accredited investor" as such term is defined in
Appendix A.
6. In consideration of the acceptance of this subscription, the
undersigned agrees that the Securities will not be offered for sale, sold or
transferred by the undersigned other than pursuant to (i) an effective
registration under the Securities Act of 1933, as amended ("the Act"), an
exemption available under the Act or a transaction that is otherwise in
compliance with the Act; and (ii) an effective registration under the securities
law of any state or other jurisdiction applicable to the transaction, an
exemption available under such laws, or a transaction that is otherwise in
compliance with such laws.
7. The undersigned understands that no U.S. federal or state agency has
passed upon the offering of the Securities or has made any finding or
determination as to the fairness of any investment in the Securities.
8. The undersigned agrees to execute such further documents as the
Company may request in order to give effect to the repayment of indebtedness
contemplated hereby.
9. The undersigned agrees to indemnify and hold harmless the Company and
its officers, directors, employees and agents from and against any and all
costs, liabilities and expenses (including attorneys' fees) arising out of or
related in any way to any breach of any representation or warranty contained
herein.
ACCEPTANCE OF SUBSCRIPTION SUBSCRIBER
Integrated Transportation Network Group Inc. /s/Roy Lerman
----------------------------
Name: Roy Lerman
By: /s/Andrew Lee
-------------------------------------- Address:
Andrew Lee, President 36 Piedmont Drive
Old Bridge, New Jersey 08857
People's Republic of China
<PAGE> 3
APPENDIX A
An "Accredited Investor" within the meaning of Regulation D under the Securities
Act of 1933 includes the following:
ORGANIZATIONS
(1) A bank as defined in section 3(a)(2) of the Act, or any savings and
loan association or other institution as defined in section 3(a)(5)(A) of the
Act, whether acting in its individual or fiduciary capacity; a broker or dealer
registered pursuant to section 15 of the Securities Exchange Act of 1934;
insurance company as defined in section 2(13) of the Act; an investment company
registered under the Investment Company Act of 1940 or a business development
company as defined in section 2(a)(48) of that act; a Small Business Investment
Company licensed by the U.S. Small Business Administration under section 301(c)
or (d) of the Small Business Investment Act of 1958; an employee benefit plan
within the meaning of Title I of the Employee Retirement Income Security Act of
1974, if the investment decision is made by a plan fiduciary, as defined in
section 3(21) of such act, which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or if the employee benefit
plan has total assets in excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are accredited investors.
(2) A private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940.
(3) A trust (i) with total assets in excess of $5,000,000, (ii) not formed
for the specific purpose of acquiring the Securities, (iii) whose purchase is
directed by a person who, either alone or with his purchaser representative, has
such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the proposed investment.
(4) A corporation, business trust, partnership, or an organization
described in section 501(c)(3) of the Internal Revenue Code, which was not
formed for the specific purpose of acquiring the Securities, and which has total
assets in excess of $5,000,000.
INDIVIDUALS
(5) Individuals with income from all sources for each of the last two full
calendar years whose reasonably expected income for this calendar year exceeds
either of:
(i) $200,000 individual income; or
(ii) $300,000 joint income with spouse.
NOTE: Your "income" for a particular year may be calculated by adding to your
adjusted gross income as calculated for Federal income tax purposes any
deduction for long term capital gains, any deduction for depletion allowance,
any exclusion for tax exempt interest and any losses of a partnership allocated
to you as a partner.
(6) Individuals with net worth as of the date hereof (individually OR
jointly with your spouse), including the value of home, furnishings, and
automobiles, in excess of $1,000,000.
(7) Directors, executive officers or general partners of the Issuer.
<PAGE> 1
EXHIBIT 4.16
SUBSCRIPTION AGREEMENT
ARTICLE I
SUBSCRIPTION
THIS SUBSCRIPTION AGREEMENT is dated as of February 10, 1999, between Kwok
Kee Billy Yung (the "Subscriber") and Integrated Transportation Network Group,
Inc., a Delaware corporation (the "Company").
Section 1.01 SUBSCRIPTION. The Subscriber hereby subscribes to the immediate
acquisition of 5% Convertible Notes in the aggregate principal amount of
US$2,000,000, for a purchase price of US$2,000,000 which may be paid in People's
Republic of China Renminbi ("RMB") as set forth below at an exchange rate of
RMB8.25 to US$1.00, resulting in an aggregate purchase price in RMB of
RMB16,500,000. The Convertible Note(s) shall be in the form of EXHIBIT A hereto.
Such Convertible Notes (and the underlying shares of Common Stock, $.01 par
value, of the Company ("Common Stock")), are referred to herein as the
"Securities".
The Subscriber shall on the Company's behalf deliver RMB 16,500,000 to
Shenzhen Jinzhenghua Transport Industrial Development Co., Ltd, the Company's
92% owned subsidiary ("Jinzhenghua Transport") in satisfaction of the purchase
price hereunder. Promptly upon the execution hereof and receipt by Jinzhenghua
Transport of RMB 16,500,000 (US $2,000,000), the Company shall deliver the
Convertible Notes to the undersigned at the address indicated below.
ARTICLE II
PRESENTATIONS AND WARRANTIES
Section 2.01 In connection with the purchase of the Securities, the
Subscriber acknowledges, warrants and represents to the Company as follows:
(a) He is acquiring the Securities for investment for his own account and
without the intention of participating, directly or indirectly, in a
distribution of the Securities, and not with a view to resale or any
distribution of the Securities, or any portion thereof.
(b) He has knowledge and experience in financial and business matters and
has consulted with his own professional representatives as he has considered
appropriate to assist in evaluating the merits and risks of this investment. He
has reviewed the Company's Registration Statement on Form S-1 dated June 29,
1998 and the Company's Quarterly Reports on Form 10Q for the quarter ended June
30 and
1
<PAGE> 2
September 30, 1998, respectively. He has had access to and an opportunity to
question the officers of the Company, or persons acting on their behalf, with
respect to material information about the Company and, in connection with his
evaluation of this investment, has, to the best of his knowledge, received all
information and data with respect to the Company that he has requested. He is
acquiring the Securities based solely upon his independent examination and
judgment as to the prospects of the Company.
(c) The Securities were not offered to the Subscriber by means of publicly
disseminated advertisements or sales literature.
(d) Subject to the provisions of Section 3.01, he acknowledges that an
investment in the Securities is speculative and he may have to continue to bear
the economic risk of the investment in the Securities for an indefinite period.
He acknowledges that the Securities are being sold to the undersigned without
registration under any state, or federal or PRC law requiring the registration
of securities for sale, and accordingly will constitute "restricted securities"
as defined in Rule 144 of the U.S. Securities and Exchange Commission. The
transferability of the Securities is therefore restricted by applicable United
States Federal and state securities laws and may be restricted under the laws of
other jurisdictions.
(e) The Subscriber is an "accredited investor" as such term is defined in
Appendix A.
(f) In consideration of the acceptance of this subscription, the
Subscriber agrees that the Securities will not be offered for sale, sold or
transferred by the undersigned other than pursuant to (i) an effective
registration under the Securities Act of 1933, as amended (the "Act"), an
exemption available under the Act or a transaction that is otherwise in
compliance with the Act; and (ii) an effective registration under the securities
law of any state or other jurisdiction applicable to the transaction, an
exemption available under such laws, or a transaction that is otherwise in
compliance with such laws.
(g) He understands that no U.S. federal or state agency has passed upon
the offering of the Securities or has made any finding or determination as to
the fairness of any investment in the Securities.
Section 2.02 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. As an
inducement to the Subscriber to enter into this Agreement and to consummate the
transactions contemplated herein, the Company hereby represents and warrants to
the Subscriber and agrees as follows:
(a) ORGANIZATION; AUTHORITY. The Company is a corporation duly
organized, validly existing and in good standing under the laws of Delaware and
has full power and authority to enter into this Agreement and to perform its
obligations hereunder. This Agreement constitutes, and any other agreements and
instruments
2
<PAGE> 3
required to be delivered by the Company hereunder, when duly executed and
delivered by the Company, will constitute, valid and binding obligations of the
Company and will be enforceable in accordance with their respective terms. The
Company has previously provided to the Subscriber true copies of all resolutions
of the Company's Board of Directors necessary to authorize the transactions
described herein, and all such resolutions are in full force and effect and have
not been revoked.
(b) CAPITALIZATION. As of January 26, 1999, the authorized share
capital of the Company consists of 50,000,000 common shares, par value US$.01
per share, of which 10,235,204 are fully issued and remain outstanding, and
5,000,000 preferred shares, par value US$.01 per share, none of which are issued
and outstanding. Except as set forth above and as set forth in Appendix B, no
other shares or equity securities of the Company have been issued and remain
outstanding, and there are no outstanding options, warrants or other rights to
purchase or acquire any share capital of the Company, whether granted by the
Company or otherwise, and there are no existing contracts by which the Company
is or may become bound to issue any additional shares. The Company has never
reduced, repaid, redeemed or purchased any of its share capital. The Securities
shall, upon issuance, shall be fully paid and non-assessable.
(c) NO CONSENTS. Neither the consummation of the transactions
contemplated hereby, nor compliance with nor fulfillment of the terms and
provisions hereof, will (i) require the consent of any governmental authority or
any person under any contract to which the Company is a party or to which the
Company is subject or (ii) give any party with rights under any material
contract to which the Company or any subsidiary of the Company is a party the
right to terminate, modify or otherwise change the material rights or
obligations of any party under such contract.
(d) COMPLIANCE WITH LAWS. The Company is in compliance, and there
exists no alleged material noncompliance, with all applicable laws relating in
any material respect to the Company and the operation or conduct of its
business, except where the failure to so comply would not have a material
adverse effect on the Company, and, except as previously disclosed in the
Prospectus of the Company dated June 29, 1998 or the quarterly reports of the
Company filed with the SEC on Form 10-Q for the three-month periods ending June
30, 1998 and September 30, 1998, the Company has not received any notice of
alleged violation of any such applicable law.
ARTICLE III
MISCELLANEOUS
Section 3.01 MISCELLANEOUS. The Company agrees that it shall file with the
United States Securities and Exchange Commission (the "SEC") a registration
statement under the U.S. Securities Act of 1933 (the "Securities Act") in
accordance with Rule 415 thereof (the "Shelf Registration") registering the
shares underlying the Convertible Notes for resale by the Subscriber, and shall
use its best efforts to cause such registration
3
<PAGE> 4
statement to become effective within 180 days after the date hereof and to
remain effective at all times for a period of three years after the date hereof.
In addition, if the Company at any time files a Registration Statement under the
Securities Act with respect to its Common Stock after the date hereof, the
Company shall so notify the undersigned and shall include such of the Securities
as the Subscriber may request on such Registration Statement.
Section 3.02 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
Section 3.03 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, applicable to
contracts executed in and to be performed entirely within that state. All
actions and proceedings arising out of or relating to this Agreement shall be
heard and determined in any New York state or federal court sitting in the City
of New York and, to the extent permitted by Law, the parties hereto expressly
consent to the jurisdiction of such courts, agree to venue in such courts and
hereby waive any defense or claim of FORUM NON CONVENIENS they may have with
respect to any such action or proceeding.
[INTENTIONALLY LEFT BLANK]
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<PAGE> 5
IN WITNESS WHEREOF, the Subscriber and the Company have executed this
Agreement or caused this Agreement to be executed as of the date first written
above.
COMPANY SUBSCRIBER
Integrated Transportation
Network Group Inc. /S/ KWOK KEE BILLY YUNG
--------------------------------------
Name: Kwok Kee Billy Yung
Address: 1/F Shell Industrial Building
By: /S/ ANDREW LEE 12 Lee Chung Street, Chai Wan
--------------------------------- Hong Kong, PRC
Andrew Lee, President
205 West 39th Street
16th Floor
New York, NY 10018
U.S.A.
5
<PAGE> 6
APPENDIX A
An "accredited Investor" within the meaning of Regulation D under the
Securities Act of 1933 includes the following:
ORGANIZATIONS
-------------
(1) A bank as defined in section 3(a)(2) of the Act, or any savings and
loan association or other institution as defined in section 3(a)(5)(A) of the
Act, whether acting in its individual or fiduciary capacity; a broker or dealer
registered pursuant to section 15 of the Securities Exchange Act of 1934;
insurance company as defined in section 2(13) of the Act; an investment company
registered under the Investment Company Act of 1940 or a business development
company as defined in section 2(a)(48) of that act; a Small Business Investment
Company licensed by the U.S. Small Business Administration under section 301(c)
or (d) of the Small Business Investment Act of 1958; an employee benefit plan
within the meaning of Title I of the Employee Retirement Income Security Act of
1974, if the investment decision is made by a plan fiduciary, as defined in
section 3(21) of such act, which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or if the employee benefit
plan has total assets in excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are accredited investors.
(2) A private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940.
(3) A trust (i) with total assets in excess of $5,000,000, (ii) not formed
for the specific purpose of acquiring the Securities, (iii) whose purchase is
directed by a person who, either alone or with his Subscriber representative,
has such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the proposed investment.
(4) A corporation, business trust, partnership, or an organization
described in section 501(c)(3) of the Internal Revenue Code, which was not
formed for the specific purpose of acquiring the Securities, and which has total
assets in excess of $5,000,000.
INDIVIDUALS
-----------
(5) Individuals with income from all sources for each of the last two full
calendar years whose reasonably expected income for this calendar year exceeds
either of: (i) $200,000 individual income; or (ii) $300,000 joint income with
spouse.
NOTE: Your "income" for a particular year may be calculated by adding to your
adjusted gross income as calculated for Federal income tax purposes any
deduction for
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<PAGE> 7
long term capital gains, any deduction for depletion allowance, any exclusion
for tax exempt interest and any losses of a partnership allocated to you as a
partner.
(6) Individuals with net worth as of the date hereof (individually OR
jointly with your spouse), including the value of home, furnishings, and
automobiles, in excess of $1,000,000.
(7) Directors, executive officers or general partners of the Issuer.
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<PAGE> 8
APPENDIX B
Options and Warrants
Employee Options The Company has issued and outstanding
options to purchase 2,210,000 shares
of Common Stock at a price per share
of US $2.00.
Consultant's Option/Shares The Company has agreed to issue a
financial consultant an option to
purchase 30,000 shares of Common Stock
at a purchase price of US$3.00 per
share. The Company has also agreed to
issue a financial consultant 3,000
shares of Common Stock for services.
Warrants Purchase rights to 1,394,286 shares of
Common Stock, at US $2.00 per share.
Financier Option Option to purchase 1,992,000
shares of Common Stock at US $2.00 per
share, subject to issuance.
Reserved Shares The Company has reserved for
issuance 119,821 shares of Common
Stock in connection with the surrender
of remaining outstanding shares of
Common Stock of Dawson Science
Corporation, the Company's former
parent.
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<PAGE> 9
EXHIBIT A
---------
THE NOTE EVIDENCED HEREBY HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW
TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR
DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR PURSUANT TO AN
EXEMPTION UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
5% CONVERTIBLE NOTE
US $2,000,000 Integrated Transportation
Network Group, Inc.
February 10, 1999
FOR VALUE RECEIVED, the undersigned, Integrated Transportation Network Group,
Inc., a Delaware Corporation, with its principal executive offices at 205 West
39th Street, 16th Floor, New York, New York 10022 ("Maker"), hereby promises to
pay to the order of Kwok Kee Billy Yung, whose address is 1/F Shell Industrial
Building, 12 Lee Chung St., Chai Wan, Hong Kong, PRC ("Holder"), the sum of Two
Million U.S. Dollars (US $2,000,000), together with interest on the unpaid
principal amount from time to time outstanding at a rate per annum equal to five
(5)% percent, as provided herein. The entire balance of unconverted principal,
accrued but unpaid interest, and any other fees and charges shall be due and
payable on February 10, 2001 (the "Maturity Date") and shall, at the option of
the Holder, be paid in U.S. Dollars, lawful currency of the People's Republic of
China ("Reminbi" or "RMB"), or shares of Common Stock of the Maker, $.01 par
value ("Common Stock"), at the conversion price of US $2.00. In the event the
Holder elects to be repaid RMB, the Company shall repay the Holder based on the
then prevailing US$/RMB exchange rate, as announced by the People's Bank of
China on the business day in China immediately preceding the date of such
repayment.
This Note is being issued pursuant to, and is entitled to the benefits of,
that certain Subscription Agreement (the "Subscription Agreement") between the
Maker and the Holder of even date.
1. INTEREST. Interest and fees shall be calculated on the basis of a
360-day year times the actual number of days elapsed. In no event shall interest
payable hereunder exceed the highest rate permitted by applicable law. To the
extent any interest received by Holder exceeds the maximum amount permitted,
such payment shall be credited to principal, and any excess remaining after full
payment of principal shall be refunded to Maker. Accrued but unpaid
2
<PAGE> 10
interest shall be paid at the time of conversion of this Note, whether in whole
or in part, as provided herein, in shares of Common Stock, at the conversion
price of US $2.00 per share. To the extent there is accrued and unpaid interest
at the Maturity Date, such interest shall be paid in cash or in shares of Common
Stock, at the conversion price of US $2.00 per share, at the option of the
Holder.
2. PREPAYMENT. The principal balance of this Note may only be prepaid
with the consent of the Holder.
3. EVENTS OF DEFAULT. The entire balance of unpaid principal and interest
shall, at the option of the Holder, become immediately due and payable if any of
the following events shall occur and be continuing:
(i) The Maker shall fail to make any payment herein provided when due and
such failure shall have continued uncured for a period of (twenty) 20
days; or
(ii) The Maker shall fail to issue the shares of common stock issuable to
the Holder in accordance with this Note upon submission of the Note
for conversion in accordance with the terms hereof; or
(iii) There shall occur a default under any mortgage, indenture, loan
agreement or other instrument evidencing indebtedness exceeding US
$500,000 binding on the Maker or any of its subsidiaries which shall
have resulted in the indebtedness evidenced thereby becoming or being
declared due and payable prior to the date on which it would otherwise
have been due and payable, without such indebtedness having been
discharged or such acceleration having been rescinded or annulled; or
(iv) The Maker or any of its subsidiaries shall admit in writing its
inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding shall be
instituted by or against the Maker or any of its subsidiaries seeking
to adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or similar official for it or for any
substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it), either
such proceeding shall remain undismissed or unstayed for a period of
forty-five (45) days, or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for relief
against, or the appointment of a receiver, trustee, custodian or other
similar official for, it or for any substantial part of its property)
shall occur; or the Maker or any of its subsidiaries shall take any
corporate action to authorize any of the actions set forth above in
this subsection (iv);
then, and in any such event, the Holder may, by notice to the Maker, declare the
Note and all interest thereon to be forthwith due and payable, whereupon the
Note and all such interest shall
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<PAGE> 11
become and be forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Maker; provided, however, that in the event of any actual or deemed entry of an
order for relief with respect to the Maker under the U.S. Federal Bankruptcy
Code, the Note and all such interest shall automatically become and be due and
payable, without presentment, demand, protest or any notice of any kind, all of
which are hereby expressly waived by the Maker.
All payments due hereunder shall be made at the address of the Holder as
set forth in the Subscription Agreement, or at such other place as the Holder
may designate from time to time in writing.
4. CONVERTIBILITY OF NOTE. At any time prior to the repayment in full of
all amounts due hereunder, the unpaid principal amount of this Note shall at the
option of the Holder be convertible in whole or in part into shares of Common
Stock at a conversion price of US $2.00 per share ("Conversion Price"), subject
to adjustment as provided below. At the time of conversion, the Maker shall pay
the Holder in shares of Common Stock, at a price equal to the Conversion Price,
all accrued but unpaid interest on the Note. The Company shall reserve out of
its authorized but unissued Common Stock or its Common Stock held in treasury a
number of shares of its common stock equal at all times to the number of shares
into which the Note may then be converted. All shares of Common Stock which are
issued upon conversion of the Note shall be fully paid and non-assessable, and
shall be issued free and clear of all liens, charges and encumbrances of any
kind whatsoever, except for any restrictions under applicable securities laws.
5. CONVERSION OF NOTE. Subject to Section 4, the conversion rights
represented by this Note may be exercised in whole, or in part, by the surrender
of this Note and the duly executed Notice of Conversion (the form of which is
attached as Schedule 1 hereto) at the principal office of the Maker as set forth
in the Subscription Agreement or as notified by the Maker to the Holder from
time to time. Promptly upon conversion, the Holder shall be entitled to receive
a certificate, issued in the Holder's name or in such name or names as the
Holder may direct, which shall evidence the shares of Common Stock issuable upon
conversion. The shares of Common Stock so acquired shall be deemed to be issued
as of the close of business on the date on which the Notice of Conversion is
delivered by the Holder. In the event the Note is converted in part, a
replacement Note with identical terms and of like tenor evidencing the remaining
principal amount owed after the conversion shall be issued to the Holder,
provided, however, that any failure on the part of the Maker to deliver such
replacement Note shall not in any way affect the validity of the Holder's claims
with respect to the remaining principal amount owed after the conversion.
6. ADJUSTMENTS OF CONVERSION PRICE. As set forth in Schedule 2 hereto,
which shall be for all purposes an integral part of this Note, the Conversion
Price shall be adjusted from time to time upon the occurrence of certain events.
4
<PAGE> 12
7. NO RIGHTS AS STOCKHOLDERS. This Note does not entitle the Holder to
any voting rights or other rights as a stockholder of the Maker prior to
conversion and surrender of this Note. Notwithstanding the foregoing, the Maker
agrees, upon the request of the Holder, to transmit to the Holder such
information, documents and reports as are generally distributed to holders of
the Common Stock. Upon valid conversion in accordance with the terms hereof, the
Holder or the Holder's designee, as the case may be, shall be deemed a
stockholder of the Maker.
8. SALE OR TRANSFER OF THE NOTE AND THE UNDERLYING SHARES OF COMMON
STOCK; LEGEND. The Note and the underlying shares of Common Stock shall not be
sold or transferred unless either (i) they first shall have been registered
under the Securities Act of 1933, as amended (the "Act") and applicable state
securities laws, or (ii) such sale or transfer is exempt from the registration
requirements of the Act and applicable state securities laws. Each certificate,
if any, representing the shares of Common Stock issued upon conversion of this
Note shall bear a legend substantially in the following form, as appropriate:
THE SHARES OF COMMON STOCK EVIDENCED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR
PURSUANT TO AN EXEMPTION UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
Prior to recognizing any transfer, the Company will be entitled to receive a
written legal opinion of experienced securities counsel reasonably acceptable to
the Company concerning compliance with federal and state securities laws. Such
shares of Common Stock may be subject to additional restrictions on transfer
imposed under applicable securities laws. At any time that any of the shares
issued upon conversion of this Note may, under the Act, be freely traded without
restriction, the Company shall, upon request of any holder of such shares and
upon receipt by the Company of a written legal opinion of experienced securities
counsel reasonably acceptable to the Company concerning compliance with federal
and state securities laws, issue to such holder replacement certificates
evidencing the shares of Common Stock held by such holder from which the legend
set forth above has been removed. The expense of any legal opinions required
pursuant to this Section 8 shall be paid by the transferor or holder (as the
case may be) of the relevant shares.
9. MODIFICATIONS AND WAIVERS. This Note may not be changed, waived,
discharged or terminated except by an instrument in writing signed by the Maker
and the Holder.
10. NOTICES. Any notice, request or other document required or permitted
to be given or delivered to the Holder or the Maker shall be delivered, or shall
be sent by certified or registered mail, postage prepaid, or by courier service
to the Holder at its address indicated herein or as notified by the Holder to
the Maker from time to time or in the case of the Maker, at the address
indicated in the Subscription Agreement, or, if different, at the principal
office of the Maker as notified by the Maker to the Holder.
5
<PAGE> 13
11. LOSS, THEFT, DESTRUCTION OR MUTILATION OF NOTE OR CERTIFICATE
REPRESENTING SHARES OF COMMON STOCK. The Maker covenants with the Holder that
upon its receipt of evidence reasonably satisfactory to the Maker of the loss,
theft, destruction or mutilation of this Note or any certificate evidencing any
shares of Common Stock and, in the case of mutilation, upon surrender and
cancellation of this Note or the relevant certificate evidencing shares of
Common Stock, the Maker will make and deliver a new Note or stock certificate,
with identical terms and of like tenor, in lieu of the lost, stolen, destroyed
or mutilated Note or stock certificate.
12. BINDING EFFECT ON SUCCESSORS. This Note may not be assigned by the
Maker without the consent of the Holder and shall be binding upon any business
association succeeding the Maker by merger, consolidation or acquisition of all
or substantially all of the Maker's assets, and all of the obligations of the
Maker relating to the shares of Common Stock issuable upon conversion of this
Note shall survive the conversion and termination of this Note and all of the
covenants and agreements of the Maker shall inure to the benefit of the
successors and assigns of the Holder.
13. GOVERNING LAW. This Note shall be construed and enforced in accordance
with, and the rights of the parties shall be governed by, the laws of the State
of New York, without regard to the choice of law principles thereof.
IN WITNESS WHEREOF, INTEGRATED TRANSPORTATION NETWORK GROUP INC. has caused
this Note to be executed by a representative thereunto duly authorized.
ORIGINAL ISSUANCE DATE: As of February 10, 1999
WITNESS: INTEGRATED TRANSPORTATION
NETWORK GROUP INC.
_________________________________ By:________________________
Name: ___________________________ Andrew Lee, President
Address:_________________________ duly authorized
_________________________
_________________________
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<PAGE> 14
Schedule 1
NOTICE OF CONVERSION
--------------------
To: INTEGRATED TRANSPORTATION NETWORK GROUP INC.
1. The undersigned hereby elects to convert the attached Note into
_______ shares of Common Stock of Integrated Transportation Network Group Inc.
pursuant to the terms of the attached Note, and tenders herewith the Note for
cancellation.
2. Please issue a certificate representing said shares of Common Stock in
the name of the undersigned or in such other name or names as are specified
below.
3. In the event that there remains unpaid principal after the conversion
requested hereby, please issue a replacement Note on the same terms and of like
tenor for the remaining unpaid principal amount.
4. The undersigned represents that the aforesaid shares of Common Stock
are being acquired for the account of the undersigned for investment and not
with a view to, or for resale in connection with, the distribution thereof and
that the undersigned has no present intention of distributing or reselling such
shares of Common Stock. The undersigned further represents that such shares of
Common Stock shall not be sold or transferred unless either (i) such sale is
effected pursuant to registration under applicable federal and state securities
laws or (ii) or an exemption from such registration requirements is available.
[The undersigned requests that the aforesaid shares of Common Stock be
registered for resale pursuant to the Company's registration statement in
accordance with Rule 415 of the U.S. Securities Act of 1933, all in accordance
with Section 3.01 of the Subscription Agreement.]
--------------------------
(Name)
--------------------------
(Address)
--------------------------
(Signature)
--------------------------
1. (Date)
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<PAGE> 15
Schedule 2
Adjustments to Conversion Price
1. Adjustment for change in capital stock. If the Company:
(1) pays a dividend or makes a distribution on its Common Stock in
shares of its Common Stock;
(2) subdivides its outstanding shares of Common Stock into a greater
number of shares;
(3) combines its outstanding shares of Common Stock into a smaller
number of shares; or
(4) issues by reclassification of its Common Stock any shares of its
capital stock;
then the Conversion Price in effect immediately prior to such action shall be
adjusted so that upon any subsequent conversion of the Note, the Holder shall
receive the number of shares of capital stock of the Company which he would have
owned immediately following such action if he had made the conversion
immediately prior to such action.
The adjustment shall become effective immediately after the record date in
the case of a dividend or distribution and immediately after the effective date
in the case of a subdivision, combination or reclassification.
If after an adjustment the Holder upon conversion of the Note may receive
shares of two or more classes of capital stock of the Company, the Company shall
determine the allocation of the adjusted Conversion Price between the classes of
capital stock. After such allocation, the Conversion Price with respect to each
class of capital stock shall thereafter be subject to adjustment on terms
comparable to those applicable to Shares in this Schedule 2.
2. Adjustment for sales to insiders. If the Company issues shares of
Common Stock for cash or securities convertible into or exchangeable for Common
Stock to any shareholder of the Company or any affiliate of a shareholder of the
Company which, immediately prior to such issuance, either individually or
together with its affiliates (as defined in Rule 405 of the Securities Act),
owns 10% or more of the issued and outstanding common stock of the Company, at a
price per share (or having a conversion or exchange price per share) less than
US$2.00 per share, the Conversion Price shall be adjusted in accordance with the
formula:
N x P
C' = C x O + US$2.00
O + N
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<PAGE> 16
where:
C' = the adjusted Conversion Price.
C = the current Conversion Price.
O = the number of shares of Common Stock outstanding on the record date of
issuance date, as applicable.
N = the number of additional shares of Common Stock offered or issuable
upon conversion or exchange.
P = the offering, conversion or exchange price per share of the additional
shares.
The adjustment shall be made whenever any such securities are issued and
shall become effective on the date of such issuance.
The provisions of this paragraph 2 shall not apply to (i) the exercise of
options or warrants to purchase Common Stock existing on the date of execution
of this Agreement, (ii) Common Stock issued to employees of the Company or any
of its subsidiaries under bona fide employee benefit plans adopted by the Board
of Directors and approved by the holders of Common Stock when required by law;
(iii) Common Stock or convertible securities issued in a bona fide public
offering pursuant to a firm commitment underwriting, or sales at the market
pursuant to a continuous stock offering program; (iv) Common Stock issued upon
the exercise of warrants, rights or options which are issued with an Conversion
Price at least equal to US$2.00; or (v) any issuance of securities described on
Appendix B of the Subscription Agreement.
3. Adjustment for other distributions. If the Company distributes to all
holders of its Common Stock any shares of capital stock of the Company (other
than Common Stock), any of its assets or debt securities or any rights or
warrants to purchase assets or securities of the Company, the Conversion Price
shall be adjusted in accordance with the formula:
C' = C x M - F
M
where:
C' = the adjusted Conversion Price.
C = the current Conversion Price.
M = the current market price (as defined in paragraph 4) per share of
Common Stock on the record date mentioned below.
F = the fair market value on the record date of the assets, securities,
rights or warrants applicable to one share of Common Stock. The Company
shall determine the fair market value.
9
<PAGE> 17
The adjustment shall become effective immediately after the record date for
the determination of stockholders entitled to receive the distribution.
This paragraph does not apply to regular or quarterly cash dividends or
cash distributions paid out of consolidated current or retained earnings as
shown on the books of the Company. Also, this paragraph does not apply to rights
or warrants referred to in paragraph 2.
4. Current market price. In paragraph 3 the current market price per
share of Common Stock on any date is the average of the last reported sales
prices of the Common Stock on the OTC Bulletin Board, or other quotation system
or exchange on which the Common Stock is then quoted or listed, for the thirty
consecutive trading days commencing forty-five trading days before the date in
question. In the absence of one or more such quotations, the Company shall
determine the current market price on the basis of such quotations as it
considers appropriate.
5. Consideration received. For purposes of computing compensation
received for the purposes of the calculations set forth in paragraph 2, the
following shall apply:
(1) in the case of issuance of shares of Common Stock for cash, the
consideration shall be the amount of such cash, provided that in no case shall
any deduction be made for commissions, discounts or other expenses incurred by
the Company for any underwriting of the issue or otherwise in connection
therewith;
(2) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair market thereof as determined in good faith
by the Board of Directors (irrespective of the accounting treatment thereof),
whose determination shall be conclusive absent manifest error, and shall be
described in a Board resolution, a copy of which shall be delivered to the
Holder; and
(3) in the case of the issuance of securities convertible into or
exchangeable or exercisable for shares, the aggregate consideration received
therefor shall be deemed to be the consideration received by the Company for the
issuance of such securities plus the additional minimum consideration, if any,
to be received by the Company upon the conversion or exchange thereof (the
consideration in each case to be determined in the same manner as provided in
clauses (1) and (2) of this paragraph 5.
6. Notice of adjustment. Whenever the Conversion Price is adjusted, the
Company shall promptly mail to the Holder a notice of the adjustment, and shall
include therein a certificate from the Company's independent public accountants
briefly stating the facts requiring the adjustment and the manner of computing
it.
7. Notice of certain transactions. If the Company takes any action that
would require an adjustment in the conversion rate pursuant to paragraphs 1, 2
or 3, the Company shall mail to the Holder a notice stating the proposed record
date for a dividend or distribution or the proposed effective date of a
subdivision, combination, reclassification, consolidation, merger, transfer,
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<PAGE> 18
liquidation or dissolution. The Company shall mail the notice at least fifteen
days before such date and also send a copy by facsimile.
8. Reorganization of Company. For so long as the Note shall remain
outstanding, the Company shall not enter into any reorganization or merger in
which an entity other than the Company would be the surviving entity, or which
would reclassify or change the Company's outstanding Common Stock, or any sale,
transfer or conveyance of all or substantially all of the assets of the Company
unless such surviving entity, the Company or the transferee, respectively,
enters into an amendment of this Agreement or a supplemental agreement with the
Holder that provides that the Holder may convert the Note at the Conversion
Price in effect immediately before the consummation of such transaction to
purchase the kind and amount of securities, cash and other assets which it would
have owned immediately after the consolidation, merger or transfer if it had
converted the Note immediately before the effective date of the transaction. The
amendment or supplemental agreement shall provide for adjustments which shall be
as nearly equivalent as may be practical to the adjustments provided for in this
Schedule 2.
11
<PAGE> 1
EXHIBIT 4.17
THE NOTE EVIDENCED HEREBY HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW
TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR
DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR PURSUANT TO AN
EXEMPTION UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
5% CONVERTIBLE NOTE
US $2,000,000 Integrated Transportation
Network Group, Inc.
February 10, 1999
FOR VALUE RECEIVED, the undersigned, Integrated Transportation Network Group,
Inc., a Delaware Corporation, with its principal executive offices at 205 West
39th Street, 16th Floor, New York, New York 10022 ("Maker"), hereby promises to
pay to the order of Kwok Kee Billy Yung, whose address is 1/F Shell Industrial
Building, 12 Lee Chung St., Chai Wan, Hong Kong, PRC ("Holder"), the sum of Two
Million U.S. Dollars (US $2,000,000), together with interest on the unpaid
principal amount from time to time outstanding at a rate per annum equal to five
(5)% percent, as provided herein. The entire balance of unconverted principal,
accrued but unpaid interest, and any other fees and charges shall be due and
payable on February 10, 2001 (the "Maturity Date") and shall, at the option of
the Holder, be paid in U.S. Dollars, lawful currency of the People's Republic of
China ("Reminbi" or "RMB"), or shares of Common Stock of the Maker, $.01 par
value ("Common Stock"), at the conversion price of US $2.00. In the event the
Holder elects to be repaid RMB, the Company shall repay the Holder based on the
then prevailing US$/RMB exchange rate, as announced by the People's Bank of
China on the business day in China immediately preceding the date of such
repayment.
This Note is being issued pursuant to, and is entitled to the benefits of,
that certain Subscription Agreement (the "Subscription Agreement") between the
Maker and the Holder of even date.
1. INTEREST. Interest and fees shall be calculated on the basis of a
360-day year times the actual number of days elapsed. In no event shall interest
payable hereunder exceed the highest rate permitted by applicable law. To the
extent any interest received by Holder exceeds the maximum amount permitted,
such payment shall be credited to principal, and any excess remaining after full
payment of principal shall be refunded to Maker. Accrued but unpaid interest
shall be paid at the time of conversion of this Note, whether in whole or in
part, as provided herein, in shares of Common Stock, at the conversion price of
US $2.00 per share. To
1
<PAGE> 2
the extent there is accrued and unpaid interest at the Maturity Date, such
interest shall be paid in cash or in shares of Common Stock, at the conversion
price of US $2.00 per share, at the option of the Holder.
2. PREPAYMENT. The principal balance of this Note may only be prepaid
with the consent of the Holder.
3. EVENTS OF DEFAULT. The entire balance of unpaid principal and interest
shall, at the option of the Holder, become immediately due and payable if any of
the following events shall occur and be continuing:
(i) The Maker shall fail to make any payment herein provided when due
and such failure shall have continued uncured for a period of
(twenty) 20 days; or
(ii) The Maker shall fail to issue the shares of common stock issuable
to the Holder in accordance with this Note upon submission of the
Note for conversion in accordance with the terms hereof; or
(iii)There shall occur a default under any mortgage, indenture, loan
agreement or other instrument evidencing indebtedness exceeding
US $500,000 binding on the Maker or any of its subsidiaries which
shall have resulted in the indebtedness evidenced thereby
becoming or being declared due and payable prior to the date on
which it would otherwise have been due and payable, without such
indebtedness having been discharged or such acceleration having
been rescinded or annulled; or
(iv) The Maker or any of its subsidiaries shall admit in writing its
inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding shall
be instituted by or against the Maker or any of its subsidiaries
seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any
law relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking the entry of an order for relief or
the appointment of a receiver, trustee, custodian or similar
official for it or for any substantial part of its property and,
in the case of any such proceeding instituted against it (but not
instituted by it), either such proceeding shall remain
undismissed or unstayed for a period of forty-five (45) days, or
any of the actions sought in such proceeding (including, without
limitation, the entry of an order for relief against, or the
appointment of a receiver, trustee, custodian or other similar
official for, it or for any substantial part of its property)
shall occur; or the Maker or any of its subsidiaries shall take
any corporate action to authorize any of the actions set forth
above in this subsection (iv);
then, and in any such event, the Holder may, by notice to the Maker, declare the
Note and all interest thereon to be forthwith due and payable, whereupon the
Note and all such interest shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Maker; provided, however, that in the event
of any actual or deemed entry of an order for relief with respect to the Maker
2
<PAGE> 3
under the U.S. Federal Bankruptcy Code, the Note and all such interest shall
automatically become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Maker.
All payments due hereunder shall be made at the address of the Holder as
set forth in the Subscription Agreement, or at such other place as the Holder
may designate from time to time in writing.
4. CONVERTIBILITY OF NOTE. At any time prior to the repayment in full of
all amounts due hereunder, the unpaid principal amount of this Note shall at the
option of the Holder be convertible in whole or in part into shares of Common
Stock at a conversion price of US $2.00 per share ("Conversion Price"), subject
to adjustment as provided below. At the time of conversion, the Maker shall pay
the Holder in shares of Common Stock, at a price equal to the Conversion Price,
all accrued but unpaid interest on the Note. The Company shall reserve out of
its authorized but unissued Common Stock or its Common Stock held in treasury a
number of shares of its common stock equal at all times to the number of shares
into which the Note may then be converted. All shares of Common Stock which are
issued upon conversion of the Note shall be fully paid and non-assessable, and
shall be issued free and clear of all liens, charges and encumbrances of any
kind whatsoever, except for any restrictions under applicable securities laws.
5. CONVERSION OF NOTE. Subject to Section 4, the conversion rights
represented by this Note may be exercised in whole, or in part, by the surrender
of this Note and the duly executed Notice of Conversion (the form of which is
attached as Schedule 1 hereto) at the principal office of the Maker as set forth
in the Subscription Agreement or as notified by the Maker to the Holder from
time to time. Promptly upon conversion, the Holder shall be entitled to receive
a certificate, issued in the Holder's name or in such name or names as the
Holder may direct, which shall evidence the shares of Common Stock issuable upon
conversion. The shares of Common Stock so acquired shall be deemed to be issued
as of the close of business on the date on which the Notice of Conversion is
delivered by the Holder. In the event the Note is converted in part, a
replacement Note with identical terms and of like tenor evidencing the remaining
principal amount owed after the conversion shall be issued to the Holder,
provided, however, that any failure on the part of the Maker to deliver such
replacement Note shall not in any way affect the validity of the Holder's claims
with respect to the remaining principal amount owed after the conversion.
6. ADJUSTMENTS OF CONVERSION PRICE. As set forth in Schedule 2 hereto,
which shall be for all purposes an integral part of this Note, the Conversion
Price shall be adjusted from time to time upon the occurrence of certain events.
7. NO RIGHTS AS STOCKHOLDERS. This Note does not entitle the Holder to
any voting rights or other rights as a stockholder of the Maker prior to
conversion and surrender of this Note. Notwithstanding the foregoing, the Maker
agrees, upon the request of the Holder, to transmit to the Holder such
information, documents and reports as are generally distributed to holders of
the Common Stock. Upon valid conversion in accordance with the terms hereof, the
3
<PAGE> 4
Holder or the Holder's designee, as the case may be, shall be deemed a
stockholder of the Maker.
8. SALE OR TRANSFER OF THE NOTE AND THE UNDERLYING SHARES OF COMMON
STOCK; LEGEND. The Note and the underlying shares of Common Stock shall not be
sold or transferred unless either (i) they first shall have been registered
under the Securities Act of 1933, as amended (the "Act") and applicable state
securities laws, or (ii) such sale or transfer is exempt from the registration
requirements of the Act and applicable state securities laws. Each certificate,
if any, representing the shares of Common Stock issued upon conversion of this
Note shall bear a legend substantially in the following form, as appropriate:
THE SHARES OF COMMON STOCK EVIDENCED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR
PURSUANT TO AN EXEMPTION UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
Prior to recognizing any transfer, the Company will be entitled to receive a
written legal opinion of experienced securities counsel reasonably acceptable to
the Company concerning compliance with federal and state securities laws. Such
shares of Common Stock may be subject to additional restrictions on transfer
imposed under applicable securities laws. At any time that any of the shares
issued upon conversion of this Note may, under the Act, be freely traded without
restriction, the Company shall, upon request of any holder of such shares and
upon receipt by the Company of a written legal opinion of experienced securities
counsel reasonably acceptable to the Company concerning compliance with federal
and state securities laws, issue to such holder replacement certificates
evidencing the shares of Common Stock held by such holder from which the legend
set forth above has been removed. The expense of any legal opinions required
pursuant to this Section 8 shall be paid by the transferor or holder (as the
case may be) of the relevant shares.
9. MODIFICATIONS AND WAIVERS. This Note may not be changed, waived,
discharged or terminated except by an instrument in writing signed by the Maker
and the Holder.
10. NOTICES. Any notice, request or other document required or permitted
to be given or delivered to the Holder or the Maker shall be delivered, or shall
be sent by certified or registered mail, postage prepaid, or by courier service
to the Holder at its address indicated herein or as notified by the Holder to
the Maker from time to time or in the case of the Maker, at the address
indicated in the Subscription Agreement, or, if different, at the principal
office of the Maker as notified by the Maker to the Holder.
11. LOSS, THEFT, DESTRUCTION OR MUTILATION OF NOTE OR CERTIFICATE
REPRESENTING SHARES OF COMMON STOCK. The Maker covenants with the Holder that
upon its receipt of evidence reasonably satisfactory to the Maker of the loss,
theft, destruction or mutilation of this Note or any certificate evidencing any
shares of Common Stock and, in the case of mutilation, upon surrender and
cancellation of this Note or the relevant certificate evidencing shares of
Common Stock, the Maker will make and deliver a new Note or stock certificate,
with identical
4
<PAGE> 5
terms and of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Note or stock certificate.
12. BINDING EFFECT ON SUCCESSORS. This Note may not be assigned by the
Maker without the consent of the Holder and shall be binding upon any business
association succeeding the Maker by merger, consolidation or acquisition of all
or substantially all of the Maker's assets, and all of the obligations of the
Maker relating to the shares of Common Stock issuable upon conversion of this
Note shall survive the conversion and termination of this Note and all of the
covenants and agreements of the Maker shall inure to the benefit of the
successors and assigns of the Holder.
13. GOVERNING LAW. This Note shall be construed and enforced in accordance
with, and the rights of the parties shall be governed by, the laws of the State
of New York, without regard to the choice of law principles thereof.
IN WITNESS WHEREOF, INTEGRATED TRANSPORTATION NETWORK GROUP INC. has caused
this Note to be executed by a representative thereunto duly authorized.
ORIGINAL ISSUANCE DATE: As of February 10, 1999
WITNESS: INTEGRATED TRANSPORTATION
NETWORK GROUP INC.
_________________________________ By: /S/ ANDREW LEE
---------------------
Name: ___________________________ Andrew Lee, President
Address:_________________________ duly authorized
_________________________
_________________________
5
<PAGE> 6
Schedule 1
NOTICE OF CONVERSION
--------------------
To: INTEGRATED TRANSPORTATION NETWORK GROUP INC.
1. The undersigned hereby elects to convert the attached Note into
_______ shares of Common Stock of Integrated Transportation Network Group Inc.
pursuant to the terms of the attached Note, and tenders herewith the Note for
cancellation.
2. Please issue a certificate representing said shares of Common Stock in
the name of the undersigned or in such other name or names as are specified
below.
3. In the event that there remains unpaid principal after the conversion
requested hereby, please issue a replacement Note on the same terms and of like
tenor for the remaining unpaid principal amount.
4. The undersigned represents that the aforesaid shares of Common Stock
are being acquired for the account of the undersigned for investment and not
with a view to, or for resale in connection with, the distribution thereof and
that the undersigned has no present intention of distributing or reselling such
shares of Common Stock. The undersigned further represents that such shares of
Common Stock shall not be sold or transferred unless either (i) such sale is
effected pursuant to registration under applicable federal and state securities
laws or (ii) or an exemption from such registration requirements is available.
[The undersigned requests that the aforesaid shares of Common Stock be
registered for resale pursuant to the Company's registration statement in
accordance with Rule 415 of the U.S. Securities Act of 1933, all in accordance
with Section 3.01 of the Subscription Agreement.]
-----------------------------
(Name)
-----------------------------
(Address)
-----------------------------
(Signature)
-----------------------------
1. (Date)
6
<PAGE> 7
Schedule 2
Adjustments to Conversion Price
1. Adjustment for change in capital stock. If the Company:
(1) pays a dividend or makes a distribution on its Common Stock in
shares of its Common Stock;
(2) subdivides its outstanding shares of Common Stock into a greater
number of shares;
(3) combines its outstanding shares of Common Stock into a smaller
number of shares; or
(4) issues by reclassification of its Common Stock any shares of its
capital stock;
then the Conversion Price in effect immediately prior to such action shall be
adjusted so that upon any subsequent conversion of the Note, the Holder shall
receive the number of shares of capital stock of the Company which he would have
owned immediately following such action if he had made the conversion
immediately prior to such action.
The adjustment shall become effective immediately after the record date in
the case of a dividend or distribution and immediately after the effective date
in the case of a subdivision, combination or reclassification.
If after an adjustment the Holder upon conversion of the Note may receive
shares of two or more classes of capital stock of the Company, the Company shall
determine the allocation of the adjusted Conversion Price between the classes of
capital stock. After such allocation, the Conversion Price with respect to each
class of capital stock shall thereafter be subject to adjustment on terms
comparable to those applicable to Shares in this Schedule 2.
2. Adjustment for sales to insiders. If the Company issues shares of
Common Stock for cash or securities convertible into or exchangeable for Common
Stock to any shareholder of the Company or any affiliate of a shareholder of the
Company which, immediately prior to such issuance, either individually or
together with its affiliates (as defined in Rule 405 of the Securities Act),
owns 10% or more of the issued and outstanding common stock of the Company, at a
price per share (or having a conversion or exchange price per share) less than
US$2.00 per share, the Conversion Price shall be adjusted in accordance with the
formula:
N x P
C' = C x O + US$2.00
O + N
7
<PAGE> 8
where:
C' = the adjusted Conversion Price.
C = the current Conversion Price.
O = the number of shares of Common Stock outstanding on the record date of
issuance date, as applicable.
N = the number of additional shares of Common Stock offered or issuable
upon conversion or exchange.
P = the offering, conversion or exchange price per share of the additional
shares.
The adjustment shall be made whenever any such securities are issued and
shall become effective on the date of such issuance.
The provisions of this paragraph 2 shall not apply to (i) the exercise of
options or warrants to purchase Common Stock existing on the date of execution
of this Agreement, (ii) Common Stock issued to employees of the Company or any
of its subsidiaries under bona fide employee benefit plans adopted by the Board
of Directors and approved by the holders of Common Stock when required by law;
(iii) Common Stock or convertible securities issued in a bona fide public
offering pursuant to a firm commitment underwriting, or sales at the market
pursuant to a continuous stock offering program; (iv) Common Stock issued upon
the exercise of warrants, rights or options which are issued with an Conversion
Price at least equal to US$2.00; or (v) any issuance of securities described on
Appendix B of the Subscription Agreement.
3. Adjustment for other distributions. If the Company distributes to all
holders of its Common Stock any shares of capital stock of the Company (other
than Common Stock), any of its assets or debt securities or any rights or
warrants to purchase assets or securities of the Company, the Conversion Price
shall be adjusted in accordance with the formula:
C' = C x M - F
M
where:
C' = the adjusted Conversion Price.
C = the current Conversion Price.
M = the current market price (as defined in paragraph 4) per share of
Common Stock on the record date mentioned below.
F = the fair market value on the record date of the assets, securities,
rights or warrants applicable to one share of Common Stock. The Company
shall determine the fair market value.
8
<PAGE> 9
The adjustment shall become effective immediately after the record date for
the determination of stockholders entitled to receive the distribution.
This paragraph does not apply to regular or quarterly cash dividends or
cash distributions paid out of consolidated current or retained earnings as
shown on the books of the Company. Also, this paragraph does not apply to rights
or warrants referred to in paragraph 2.
4. Current market price. In paragraph 3 the current market price per
share of Common Stock on any date is the average of the last reported sales
prices of the Common Stock on the OTC Bulletin Board, or other quotation system
or exchange on which the Common Stock is then quoted or listed, for the thirty
consecutive trading days commencing forty-five trading days before the date in
question. In the absence of one or more such quotations, the Company shall
determine the current market price on the basis of such quotations as it
considers appropriate.
5. Consideration received. For purposes of computing compensation
received for the purposes of the calculations set forth in paragraph 2, the
following shall apply:
(1) in the case of issuance of shares of Common Stock for cash, the
consideration shall be the amount of such cash, provided that in no case shall
any deduction be made for commissions, discounts or other expenses incurred by
the Company for any underwriting of the issue or otherwise in connection
therewith;
(2) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair market thereof as determined in good faith
by the Board of Directors (irrespective of the accounting treatment thereof),
whose determination shall be conclusive absent manifest error, and shall be
described in a Board resolution, a copy of which shall be delivered to the
Holder; and
(3) in the case of the issuance of securities convertible into or
exchangeable or exercisable for shares, the aggregate consideration received
therefor shall be deemed to be the consideration received by the Company for the
issuance of such securities plus the additional minimum consideration, if any,
to be received by the Company upon the conversion or exchange thereof (the
consideration in each case to be determined in the same manner as provided in
clauses (1) and (2) of this paragraph 5.
6. Notice of adjustment. Whenever the Conversion Price is adjusted, the
Company shall promptly mail to the Holder a notice of the adjustment, and shall
include therein a certificate from the Company's independent public accountants
briefly stating the facts requiring the adjustment and the manner of computing
it.
7. Notice of certain transactions. If the Company takes any action that
would require an adjustment in the conversion rate pursuant to paragraphs 1, 2
or 3, the Company shall mail to the Holder a notice stating the proposed record
date for a dividend or distribution or the proposed effective date of a
subdivision, combination, reclassification, consolidation, merger, transfer,
liquidation or dissolution. The Company shall mail the notice at least fifteen
days before such date and also send a copy by facsimile.
9
<PAGE> 10
8. Reorganization of Company. For so long as the Note shall remain
outstanding, the Company shall not enter into any reorganization or merger in
which an entity other than the Company would be the surviving entity, or which
would reclassify or change the Company's outstanding Common Stock, or any sale,
transfer or conveyance of all or substantially all of the assets of the Company
unless such surviving entity, the Company or the transferee, respectively,
enters into an amendment of this Agreement or a supplemental agreement with the
Holder that provides that the Holder may convert the Note at the Conversion
Price in effect immediately before the consummation of such transaction to
purchase the kind and amount of securities, cash and other assets which it would
have owned immediately after the consolidation, merger or transfer if it had
converted the Note immediately before the effective date of the transaction. The
amendment or supplemental agreement shall provide for adjustments which shall be
as nearly equivalent as may be practical to the adjustments provided for in this
Schedule 2.
<PAGE> 1
EXHIBIT 4.18
------------
March 12, 1999
Integrated Transportation Network Group Inc.
205 West 39th St., 16th Floor
New York, NY 10018
Attn: Andrew Lee, President
Ladies and Gentlemen:
The undersigned, ZHONG HUA CHEN, hereby subscribes to the immediate
acquisition of 15,000 shares of Common Stock, $.01 par value, of Integrated
Transportation Network Group Inc., a Delaware corporation (the "Company"). The
shares of common stock are referred to herein as the "Securities." The
undersigned hereby also acknowledges receipt of $30,000 in cash from the Company
(the "Finder's Fee"). The undersigned further acknowledges that the Finder's Fee
and the Securities represent payment in full of the Company's obligations to the
undersigned in connection with the purchase by Kwok Kee Billy Yung of the
Company's Convertible Notes in the principal amount of US$2,000,000.
Upon the Company's acceptance of this subscription, the Company shall
deliver the Securities to the undersigned at the address indicated below.
In connection with the purchase of the Securities, the undersigned
acknowledges, warrants and represents to the Company as follows:
1. The undersigned is acquiring the Securities for investment for its own
account and without the intention of participating, directly or indirectly, in a
distribution of the Securities, and not with a view to resale or any
distribution of the Securities, or any portion thereof.
2. The undersigned has knowledge and experience in financial and business
matters and has consulted with its own professional representatives as it has
considered appropriate to assist in evaluating the merits and risks of this
investment. The undersigned has reviewed the Company's prospectus dated June 29,
1998 and the Company's Quarterly Reports on Form 10Q for the quarter ended June
30 and September 31, 1998, respectively. The undersigned has had access to and
an opportunity to question the officers of the Company, or persons acting on
their behalf, with respect to material information about the Company and, in
connection with its evaluation of this investment, has, to the best of its
knowledge, received all information and data with respect to the Company that
the undersigned has requested. The undersigned is acquiring the Securities based
solely upon its independent examination and judgment as to the prospects of the
Company.
3. The Securities were not offered to the undersigned by means of
publicly disseminated advertisements or sales literature.
4. The undersigned acknowledges that an investment in the Securities is
speculative and the undersigned may have to continue to bear the economic risk
of the investment in the Securities for an indefinite period. The undersigned
acknowledges that the Securities are being sold to the undersigned without
registration under any state, or federal or PRC law requiring the registration
of securities for sale, and accordingly will constitute "restricted securities"
as defined in Rule 144 of the U.S. Securities and Exchange Commission. The
transferability of the Securities is
<PAGE> 2
therefor restricted by applicable United States Federal and state securities
laws and may be restricted under the laws of other jurisdictions.
5. The undersigned is an "accredited investor" as such term is defined in
Appendix A.
6. In consideration of the acceptance of this subscription, the
undersigned agrees that the Securities will not be offered for sale, sold or
transferred by the undersigned other than pursuant to (i) an effective
registration under the Securities Act of 1933, as amended ("the Act"), an
exemption available under the Act or a transaction that is otherwise in
compliance with the Act; and (ii) an effective registration under the securities
law of any state or other jurisdiction applicable to the transaction, an
exemption available under such laws, or a transaction that is otherwise in
compliance with such laws.
7. The undersigned understands that no U.S. federal or state agency has
passed upon the offering of the Securities or has made any finding or
determination as to the fairness of any investment in the Securities.
8. The undersigned agrees to execute such further documents as the
Company may request in order to give effect to the cancellation of indebtedness
contemplated hereby.
9. The undersigned agrees to indemnify and hold harmless the Company and
its officers, directors, employees and agents from and against any and all
costs, liabilities and expenses (including attorneys' fees) arising out of or
related in any way to any breach of any representation or warranty contained
herein.
ACCEPTANCE OF SUBSCRIPTION SUBSCRIBER
Integrated Transportation Network Group Inc.
By: /s/ Andrew Lee /s/ Zhong Hua Chen
---------------------------------------- --------------------------------
Andrew Lee, President Name: Zhong Hua Chen
Address:
Zhong Hua Chen
2049 Century Park East, ST. 3760
Los Angeles, CA 90067
<PAGE> 3
APPENDIX A
An "Accredited Investor" within the meaning of Regulation D under the Securities
Act of 1933 includes the following:
ORGANIZATIONS
- -------------
(1) A bank as defined in section 3(a)(2) of the Act, or any savings and
loan association or other institution as defined in section 3(a)(5)(A) of the
Act, whether acting in its individual or fiduciary capacity; a broker or dealer
registered pursuant to section 15 of the Securities Exchange Act of 1934;
insurance company as defined in section 2(13) of the Act; an investment company
registered under the Investment Company Act of 1940 or a business development
company as defined in section 2(a)(48) of that act; a Small Business Investment
Company licensed by the U.S. Small Business Administration under section 301(c)
or (d) of the Small Business Investment Act of 1958; an employee benefit plan
within the meaning of Title I of the Employee Retirement Income Security Act of
1974, if the investment decision is made by a plan fiduciary, as defined in
section 3(21) of such act, which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or if the employee benefit
plan has total assets in excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are accredited investors.
(2) A private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940.
(3) A trust (i) with total assets in excess of $5,000,000, (ii) not formed
for the specific purpose of acquiring the Securities, (iii) whose purchase is
directed by a person who, either alone or with his purchaser representative, has
such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the proposed investment.
(4) A corporation, business trust, partnership, or an organization
described in section 501(c)(3) of the Internal Revenue Code, which was not
formed for the specific purpose of acquiring the Securities, and which has total
assets in excess of $5,000,000.
INDIVIDUALS
- -----------
(5) Individuals with income from all sources for each of the last two full
calendar years whose reasonably expected income for this calendar year exceeds
either of: (i) $200,000 individual income; or (ii) $300,000 joint income with
spouse.
NOTE: Your "income" for a particular year may be calculated by adding to your
adjusted gross income as calculated for Federal income tax purposes any
deduction for long term capital gains, any deduction for depletion allowance,
any exclusion for tax exempt interest and any losses of a partnership allocated
to you as a partner.
(6) Individuals with net worth as of the date hereof (individually OR
jointly with your spouse), including the value of home, furnishings, and
automobiles, in excess of $1,000,000.
(7) Directors, executive officers or general partners of the Issuer.
<PAGE> 1
EXHIBIT 4.19
------------
March 15, 1999
Integrated Transportation Network Group Inc.
205 West 39th St., 16th Floor
New York, NY 10018
Attn: Andrew Lee, President
Ladies and Gentlemen:
The undersigned, ORIENT FINANCIAL SERVICES LIMITED, hereby subscribes to
the immediate acquisition of 20,000 shares of Common Stock, $.01 par value
("Common Stock"), of Integrated Transportation Network Group Inc., a Delaware
corporation (the "Company") and a warrant to purchase 30,000 shares of Common
Stock at an exercise price of U.S.$4.50 (such shares of Common Stock and such
warrants are referred to herein collectively as the "Securities"). The
Securities are being issued to the undersigned in full and complete satisfaction
of the Company's obligation to issue warrants and Common Stock to the
undersigned as compensation for consulting services rendered to the Company
pursuant to that certain letter agreement between the Company and the
undersigned dated March 1999.
Upon the Company's acceptance of this subscription, the Company shall
deliver the Securities to the undersigned at the address indicated below.
In connection with the purchase of the Securities, the undersigned
acknowledges, warrants and represents to the Company as follows:
1. The undersigned is acquiring the Securities for investment for its own
account and without the intention of participating, directly or indirectly, in a
distribution of the Securities, and not with a view to resale or any
distribution of the Securities, or any portion thereof.
2. The undersigned has knowledge and experience in financial and business
matters and has consulted with its own professional representatives as it has
considered appropriate to assist in evaluating the merits and risks of this
investment. The undersigned has reviewed the Company's prospectus dated June 29,
1998 and the Company's Quarterly Reports on Form 10Q for the quarter ended June
30 and September 31, 1998, respectively. The undersigned has had access to and
an opportunity to question the officers of the Company, or persons acting on
their behalf, with respect to material information about the Company and, in
connection with its evaluation of this investment, has, to the best of its
knowledge, received all information and data with respect to the Company that
the undersigned has requested. The undersigned is acquiring the Securities based
solely upon its independent examination and judgment as to the prospects of the
Company.
3. The Securities were not offered to the undersigned by means of
publicly disseminated advertisements or sales literature.
4. The undersigned acknowledges that an investment in the Securities is
speculative and the undersigned may have to continue to bear the economic risk
of the investment in the Securities for an indefinite period. The undersigned
acknowledges that the Securities are being sold to the undersigned without
registration under any state or federal law requiring the registration of
securities for sale, and accordingly will constitute "restricted securities" as
defined in Rule 144 of the
<PAGE> 2
U.S. Securities and Exchange Commission. The transferability of the Securities
is therefor restricted by applicable United States Federal and state securities
laws and may be restricted under the laws of other jurisdictions.
5. The undersigned is an "accredited investor" as such term is defined in
Appendix A.
6. In consideration of the acceptance of this subscription, the
undersigned agrees that the Securities will not be offered for sale, sold or
transferred by the undersigned other than pursuant to (i) an effective
registration under the Securities Act of 1933, as amended ("the Act"), an
exemption available under the Act or a transaction that is otherwise in
compliance with the Act; and (ii) an effective registration under the securities
law of any state or other jurisdiction applicable to the transaction, an
exemption available under such laws, or a transaction that is otherwise in
compliance with such laws.
7. The undersigned understands that no U.S. federal or state agency has
passed upon the offering of the Securities or has made any finding or
determination as to the fairness of any investment in the Securities.
8. The undersigned agrees to indemnify and hold harmless the Company and
its officers, directors, employees and agents from and against any and all
costs, liabilities and expenses (including attorneys' fees) arising out of or
related in any way to any breach of any representation or warranty contained
herein.
ACCEPTANCE OF SUBSCRIPTION SUBSCRIBER
Integrated Transportation Network Group Inc. Orient Financial Services Limited
By: /s/ Andrew Lee By: /s/
--------------------------- ------------------------------
Andrew Lee, President Print Name:___________________
Title:___________________
Duly Authorized
Dated: 3/15/99
Address:
13C, Chinaweal Centre
414-424 Jaffe Road
Wanchai, Hong Kong
<PAGE> 3
APPENDIX A
An "Accredited Investor" within the meaning of Regulation D under the Securities
Act of 1933 includes the following:
ORGANIZATIONS
- -------------
(1) A bank as defined in section 3(a)(2) of the Act, or any savings and
loan association or other institution as defined in section 3(a)(5)(A) of the
Act, whether acting in its individual or fiduciary capacity; a broker or dealer
registered pursuant to section 15 of the Securities Exchange Act of 1934;
insurance company as defined in section 2(13) of the Act; an investment company
registered under the Investment Company Act of 1940 or a business development
company as defined in section 2(a)(48) of that act; a Small Business Investment
Company licensed by the U.S. Small Business Administration under section 301(c)
or (d) of the Small Business Investment Act of 1958; an employee benefit plan
within the meaning of Title I of the Employee Retirement Income Security Act of
1974, if the investment decision is made by a plan fiduciary, as defined in
section 3(21) of such act, which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or if the employee benefit
plan has total assets in excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are accredited investors.
(2) A private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940.
(3) A trust (i) with total assets in excess of $5,000,000, (ii) not formed
for the specific purpose of acquiring the Securities, (iii) whose purchase is
directed by a person who, either alone or with his purchaser representative, has
such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the proposed investment.
(4) A corporation, business trust, partnership, or an organization
described in section 501(c)(3) of the Internal Revenue Code, which was not
formed for the specific purpose of acquiring the Securities, and which has total
assets in excess of $5,000,000.
INDIVIDUALS
- -----------
(5) Individuals with income from all sources for each of the last two full
calendar years whose reasonably expected income for this calendar year exceeds
either of:
(i) $200,000 individual income; or
(ii) $300,000 joint income with spouse.
NOTE: Your "income" for a particular year may be calculated by adding to
your adjusted gross income as calculated for Federal income tax purposes any
deduction for long term capital gains, any deduction for depletion allowance,
any exclusion for tax exempt interest and any losses of a partnership allocated
to you as a partner.
(6) Individuals with net worth as of the date hereof (individually OR
jointly with your spouse), including the value of home, furnishings, and
automobiles, in excess of $1,000,000.
(7) Directors, executive officers or general partners of the Issuer.
<PAGE> 1
EXHIBIT 4.20
NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR STATE SECURITIES LAWS. NO SALE, TRANSFER OR OTHER
DISPOSITION OF THIS WARRANT OR SAID SHARES MAY BE EFFECTED WITHOUT (I)
AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO UNDER APPLICABLE
STATE SECURITIES LAWS, OR (II) AN EXEMPTION FROM REGISTRATION UNDER SUCH
LAWS IS AVAILABLE.
WARRANT NO. _____ STOCK PURCHASE WARRANT NO. OF SHARES 30,000
- ----------------- --------------------
To Subscribe for and Purchase Common Stock of
INTEGRATED TRANSPORTATION NETWORK GROUP INC.
THIS CERTIFIES that, for value received, Orient Financial Services Limited
(together with any subsequent transferees of all or any portion of this Warrant,
the "Holder"), is entitled, upon the terms and subject to the conditions
hereinafter set forth, to subscribe for and purchase from INTEGRATED
TRANSPORTATION NETWORK GROUP INC., a Delaware corporation (hereinafter called
the "Company"), at the price hereinafter set forth in Section 2, up to 30,000
fully paid and non-assessable shares (the "Shares") of the Company's Common
Stock, $.01 par value per share (the "Common Stock").
1. DEFINITIONS. As used herein the following term shall have the
following meaning:
"ACT" means the Securities Act of 1933, as amended, or a successor statute
thereto and the rules and regulations of the Securities and Exchange Commission
issued under that Act, as they each may, from time to time, be in effect.
2. PURCHASE RIGHTS. The purchase rights represented by this Warrant shall
initially become exercisable by the Holder upon the completion of twenty
consecutive trading days during which the average closing bid price of the
Common Stock, as quoted on the National Association of Securities Dealers Inc.'s
OTC Bulletin Board ("Average Bid Price"), is at least US$8.00 per share,
provided that such purchase rights shall remain exercisable only so long as the
Average Bid Price of the Common Stock over the twenty trading days preceding
delivery of the Notice of Exercise is above US$8.00 per share. The purchase
rights represented by this Warrant shall expire on December 31, 2001. This
Warrant may be exercised for Shares at a price of four and one-half United
States dollars (US$4.50) per share, subject to adjustment as provided in Section
6 (the "Warrant Purchase Price"). In the event the Common Stock is no longer
traded on the OTC Bulletin Board, the Average Bid Price of the Common Stock
shall be determined with reference to the last reported sale price of the Common
Stock (over the twenty day trading period) on any exchange on which the Common
Stock is then traded.
3. EXERCISE OF WARRANT. Subject to Section 2 above, the purchase rights
represented by this Warrant may be exercised, in whole or in part and from time
to time, by the surrender of this Warrant and the duly executed Notice of
Exercise (the form of which is attached as Exhibit A) at the principal office of
the Company and by the payment to the Company, by check, of an amount equal to
the then applicable Warrant Purchase Price per share multiplied by the number of
Shares then being purchased. Upon exercise, the Holder shall be entitled to
receive, within a reasonable time, a certificate
<PAGE> 2
or certificates, issued in the Holder's name or in such name or names as the
Holder may direct, for the number of Shares so purchased. The Shares so
purchased shall be deemed to be issued as of the close of business on the date
on which this Warrant shall have been exercised.
4. SHARES TO BE ISSUED; RESERVATION OF SHARES. The Company covenants that
the Shares that may be issued upon the exercise of the purchase rights
represented by this Warrant will, upon issuance in accordance herewith, be fully
paid and non-assessable, and free from all liens and charges with respect to the
issue thereof. During the period within which the purchase rights represented by
the Warrant may be exercised, the Company will at all times have authorized and
reserved, for the purpose of issuance upon exercise of the purchase rights
represented by this Warrant, a sufficient number of shares of its Common Stock
to provide for the exercise of the right represented by this Warrant.
5. NO FRACTIONAL SHARES. No fractional shares shall be issued upon the
exercise of this Warrant. In lieu thereof, a cash payment shall be made equal to
such fraction multiplied by the fair market value of such shares of Common
Stock, as determined in good faith by the Company's Board of Directors.
6. ADJUSTMENTS OF WARRANT PURCHASE PRICE AND NUMBER OF SHARES. If there
shall be any change in the Common Stock of the Company through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split or
other change in the corporate structure of the Company, appropriate adjustments
shall be made by the Board of Directors of the Company (or if the Company is not
the surviving corporation in any such transaction, the Board of Directors of the
surviving corporation) in the aggregate number and kind of shares subject to
this Warrant, and the number and kind of shares and the price per share then
applicable to shares covered by the unexercised portion of this Warrant.
7. NO RIGHTS AS SHAREHOLDERS. This Warrant does not entitle the Holder to
any voting rights or other rights as a shareholder of the Company prior to
exercise of this Warrant and the payment for the Shares so purchased.
Notwithstanding the foregoing, the Company agrees to transmit to the Holder such
information, documents and reports as are generally distributed to holders of
the capital stock of the Company concurrently with the distribution thereof to
the shareholders. Upon valid exercise of this Warrant and payment for the Shares
so purchased in accordance with the terms of the Warrant, the Holder or the
Holder's designee, as the case may be, shall be deemed a shareholder of the
Company.
8. SALE OR TRANSFER OF THE WARRANT AND THE SHARES; LEGEND. The Warrant
and the Shares shall not be sold or transferred unless either (i) they first
shall have been registered under applicable State Securities laws, or (ii) such
sale or transfer is exempt from the registration requirements of such laws. Each
certificate representing any Warrant shall bear the legend set out on page 1
hereof. Each certificate representing any Shares shall bear a legend
substantially in the following form, as appropriate:
THE SHARES EVIDENCED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT
WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION
THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO UNDER APPLICABLE
STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION UNDER
APPLICABLE STATE SECURITIES LAWS.
-2-
<PAGE> 3
The Warrant and Shares may be subject to additional restrictions on
transfer imposed under applicable state and federal securities law.
9. MODIFICATIONS AND WAIVERS. This Warrant may not be changed, waived,
discharged or terminated except by an instrument in writing signed by the party
against which enforcement of the same is sought.
10. NOTICES. Any notice, request or other document required or permitted
to be given or delivered to the Holder or the Company shall be delivered, or
shall be sent by certified or registered mail, postage prepaid, to the Holder at
its address shown on the books of the Company or in the case of the Company, at
the address indicated therefor on the signature page of this Warrant, or, if
different, at the principal office of the Company.
11. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT. The Company
covenants with the Holder that upon its receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant or any stock certificate and, in the case of any such loss, theft
or destruction, of an indemnity or security reasonably satisfactory to it, and
upon reimbursement to the Company of all reasonable expenses incidental thereto,
and upon surrender and cancellation of this Warrant or stock certificate, if
mutilated, the Company will make and deliver a new Warrant or stock certificate,
of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or
stock certificate.
12. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets, and all of the obligations of
the Company relating to the Shares issuable upon exercise of this Warrant shall
survive the exercise and termination of this Warrant and all of the covenants
and agreements of the Company shall inure to the benefit of the successors and
assigns of the Holder.
13. GOVERNING LAW. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of New York.
IN WITNESS WHEREOF, INTEGRATED TRANSPORTATION NETWORK GROUP INC. has caused
this Warrant to be executed by its officer thereunto duly authorized.
ORIGINAL ISSUANCE AS OF: March 25, 1999
INTEGRATED TRANSPORTATION NETWORK GROUP INC.
/S/ ANDREW LEE
-----------------------------------------------------
By: Andrew Lee, President
Address: Integrated Transportation Network Group Inc.
205 West 39th St., 16th Floor
New York, NY 10018
-3-
<PAGE> 4
EXHIBIT A
NOTICE OF EXERCISE
------------------
To: INTEGRATED TRANSPORTATION NETWORK GROUP INC.
1. The undersigned hereby elects to purchase _________ shares of Common
Stock of INTEGRATED TRANSPORTATION NETWORK GROUP INC. pursuant to the terms of
the attached Warrant, and tenders herewith payment of the purchase price of such
shares in full.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name or names as are specified
below.
3. The undersigned represents that the aforesaid shares of Common Stock
are being acquired for the account of the undersigned for investment and not
with a view to, or for resale in connection with, the distribution thereof and
that the undersigned has no present intention of distributing or reselling such
shares. The undersigned further represents that such shares shall not be sold or
transferred unless either (1) they first shall have been registered under
applicable state securities laws or (ii) or an exemption from applicable state
registration requirements is available.
4. In the event of partial exercise, please re-issue an appropriate
Warrant exercisable into the remaining shares.
-------------------------------
Name:
Address:
-----------------------
-----------------------
-----------------------
-------------------------------
(Signature)
-------------------------------
(Date)
<PAGE> 1
EXHIBIT 4.21
------------
March 25, 1999
Integrated Transportation Network Group Inc.
205 West 39th St., 16th Floor
New York, NY 10018
Attn: Andrew Lee, President
Ladies and Gentlemen:
The undersigned, VIRTUAL FINANCIAL CORP., hereby subscribes to the
immediate acquisition of a warrant to purchase 30,000 shares of Common Stock,
$.01 par value ("Common Stock"), of Integrated Transportation Network Group
Inc., a Delaware corporation (the "Company"), at an exercise price of U.S.$3.00
(such warrants are referred to herein collectively as the "Securities"). The
Securities are being issued to the undersigned in full and complete satisfaction
of the Company's obligation to issue warrants to the undersigned as compensation
for consulting services rendered to the Company pursuant to that certain letter
agreement between the Company and the undersigned dated February 1999.
Upon the Company's acceptance of this subscription, the Company shall
deliver the Securities to the undersigned at the address indicated below.
In connection with the purchase of the Securities, the undersigned
acknowledges, warrants and represents to the Company as follows:
1. The undersigned is acquiring the Securities for investment for its own
account and without the intention of participating, directly or indirectly, in a
distribution of the Securities, and not with a view to resale or any
distribution of the Securities, or any portion thereof.
2. The undersigned has knowledge and experience in financial and business
matters and has consulted with its own professional representatives as it has
considered appropriate to assist in evaluating the merits and risks of this
investment. The undersigned has reviewed the Company's prospectus dated June 29,
1998 and the Company's Quarterly Reports on Form 10Q for the quarter ended June
30 and September 31, 1998, respectively. The undersigned has had access to and
an opportunity to question the officers of the Company, or persons acting on
their behalf, with respect to material information about the Company and, in
connection with its evaluation of this investment, has, to the best of its
knowledge, received all information and data with respect to the Company that
the undersigned has requested. The undersigned is acquiring the Securities based
solely upon its independent examination and judgment as to the prospects of the
Company.
3. The Securities were not offered to the undersigned by means of
publicly disseminated advertisements or sales literature.
4. The undersigned acknowledges that an investment in the Securities is
speculative and the undersigned may have to continue to bear the economic risk
of the investment in the Securities for an indefinite period. The undersigned
acknowledges that the Securities are being sold to the undersigned without
registration under any state or federal law requiring the registration of
securities for sale, and accordingly will constitute "restricted securities" as
defined in Rule 144 of the
<PAGE> 2
U.S. Securities and Exchange Commission. The transferability of the Securities
is therefor restricted by applicable United States Federal and state securities
laws and may be restricted under the laws of other jurisdictions.
5. The undersigned is an "accredited investor" as such term is defined in
Appendix A.
6. In consideration of the acceptance of this subscription, the
undersigned agrees that the Securities will not be offered for sale, sold or
transferred by the undersigned other than pursuant to (i) an effective
registration under the Securities Act of 1933, as amended ("the Act"), an
exemption available under the Act or a transaction that is otherwise in
compliance with the Act; and (ii) an effective registration under the securities
law of any state or other jurisdiction applicable to the transaction, an
exemption available under such laws, or a transaction that is otherwise in
compliance with such laws.
7. The undersigned understands that no U.S. federal or state agency has
passed upon the offering of the Securities or has made any finding or
determination as to the fairness of any investment in the Securities.
8. The undersigned agrees to indemnify and hold harmless the Company and
its officers, directors, employees and agents from and against any and all
costs, liabilities and expenses (including attorneys' fees) arising out of or
related in any way to any breach of any representation or warranty contained
herein.
ACCEPTANCE OF SUBSCRIPTION SUBSCRIBER
Integrated Transportation Network Group Inc. Virtual Financial Corp.
By: /S/ ANDREW LEE By: /s/
-------------------------------------- ----------------------------
Andrew Lee, President Print Name:_________________
Title:_________________
Duly Authorized
Dated:___________________
Address:
750 East Sample Road, Suite 204
Pompano Beach, FL 33064
<PAGE> 3
APPENDIX A
An "Accredited Investor" within the meaning of Regulation D under the Securities
Act of 1933 includes the following:
ORGANIZATIONS
- -------------
(1) A bank as defined in section 3(a)(2) of the Act, or any savings and
loan association or other institution as defined in section 3(a)(5)(A) of the
Act, whether acting in its individual or fiduciary capacity; a broker or dealer
registered pursuant to section 15 of the Securities Exchange Act of 1934;
insurance company as defined in section 2(13) of the Act; an investment company
registered under the Investment Company Act of 1940 or a business development
company as defined in section 2(a)(48) of that act; a Small Business Investment
Company licensed by the U.S. Small Business Administration under section 301(c)
or (d) of the Small Business Investment Act of 1958; an employee benefit plan
within the meaning of Title I of the Employee Retirement Income Security Act of
1974, if the investment decision is made by a plan fiduciary, as defined in
section 3(21) of such act, which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or if the employee benefit
plan has total assets in excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are accredited investors.
(2) A private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940.
(3) A trust (i) with total assets in excess of $5,000,000, (ii) not formed
for the specific purpose of acquiring the Securities, (iii) whose purchase is
directed by a person who, either alone or with his purchaser representative, has
such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the proposed investment.
(4) A corporation, business trust, partnership, or an organization
described in section 501(c)(3) of the Internal Revenue Code, which was not
formed for the specific purpose of acquiring the Securities, and which has total
assets in excess of $5,000,000.
INDIVIDUALS
- -----------
(5) Individuals with income from all sources for each of the last two full
calendar years whose reasonably expected income for this calendar year exceeds
either of:
(i) $200,000 individual income; or
(ii) $300,000 joint income with spouse.
NOTE: Your "income" for a particular year may be calculated by adding to
your adjusted gross income as calculated for Federal income tax purposes any
deduction for long term capital gains, any deduction for depletion allowance,
any exclusion for tax exempt interest and any losses of a partnership allocated
to you as a partner.
(6) Individuals with net worth as of the date hereof (individually OR
jointly with your spouse), including the value of home, furnishings, and
automobiles, in excess of $1,000,000.
(7) Directors, executive officers or general partners of the Issuer.
<PAGE> 1
EXHIBIT 4.22
------------
NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR STATE SECURITIES LAWS. NO SALE, TRANSFER OR OTHER
DISPOSITION OF THIS WARRANT OR SAID SHARES MAY BE EFFECTED WITHOUT (i)
AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO UNDER APPLICABLE
STATE SECURITIES LAWS, OR (ii) AN EXEMPTION FROM REGISTRATION UNDER SUCH
LAWS IS AVAILABLE.
WARRANT NO. ____ STOCK PURCHASE WARRANT NO. OF SHARES 30,000
- ---------------- --------------------
To Subscribe for and Purchase Common Stock of
INTEGRATED TRANSPORTATION NETWORK GROUP INC.
THIS CERTIFIES that, for value received, Virtual Financial Corp. (together
with any subsequent transferees of all or any portion of this Warrant, the
"Holder"), is entitled, upon the terms and subject to the conditions hereinafter
set forth, to subscribe for and purchase from INTEGRATED TRANSPORTATION NETWORK
GROUP INC., a Delaware corporation (hereinafter called the "Company"), at the
price hereinafter set forth in Section 2, up to 30,000 fully paid and
non-assessable shares (the "Shares") of the Company's Common Stock, $.01 par
value per share (the "Common Stock").
1. DEFINITIONS. As used herein the following term shall have the
following meaning:
"ACT" means the Securities Act of 1933, as amended, or a successor statute
thereto and the rules and regulations of the Securities and Exchange Commission
issued under that Act, as they each may, from time to time, be in effect.
2. PURCHASE RIGHTS. The purchase rights represented by this Warrant shall
be exercisable by the Holder in whole or in part commencing on date hereof. The
purchase rights represented by this Warrant shall expire five (5) years from the
date hereof. This Warrant may be exercised for Shares at a price of three United
States dollars (US$3.00) per share, subject to adjustment as provided in Section
6 (the "Warrant Purchase Price").
3. EXERCISE OF WARRANT. Subject to Section 2 above, the purchase rights
represented by this Warrant may be exercised, in whole or in part and from time
to time, by the surrender of this Warrant and the duly executed Notice of
Exercise (the form of which is attached as Exhibit A) at the principal office of
the Company and by the payment to the Company, by check, of an amount equal to
the then applicable Warrant Purchase Price per share multiplied by the number of
Shares then being purchased. Upon exercise, the Holder shall be entitled to
receive, within a reasonable time, a certificate or certificates, issued in the
Holder's name or in such name or names as the Holder may direct, for the number
of Shares so purchased. The Shares so purchased shall be deemed to be issued as
of the close of business on the date on which this Warrant shall have been
exercised.
<PAGE> 2
4. SHARES TO BE ISSUED; RESERVATION OF SHARES. The Company covenants that
the Shares that may be issued upon the exercise of the purchase rights
represented by this Warrant will, upon issuance in accordance herewith, be fully
paid and non-assessable, and free from all liens and charges with respect to the
issue thereof. During the period within which the purchase rights represented by
the Warrant may be exercised, the Company will at all times have authorized and
reserved, for the purpose of issuance upon exercise of the purchase rights
represented by this Warrant, a sufficient number of shares of its Common Stock
to provide for the exercise of the right represented by this Warrant.
5. NO FRACTIONAL SHARES. No fractional shares shall be issued upon the
exercise of this Warrant. In lieu thereof, a cash payment shall be made equal to
such fraction multiplied by the fair market value of such shares of Common
Stock, as determined in good faith by the Company's Board of Directors.
6. ADJUSTMENTS OF WARRANT PURCHASE PRICE AND NUMBER OF SHARES. If there
shall be any change in the Common Stock of the Company through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split or
other change in the corporate structure of the Company, appropriate adjustments
shall be made by the Board of Directors of the Company (or if the Company is not
the surviving corporation in any such transaction, the Board of Directors of the
surviving corporation) in the aggregate number and kind of shares subject to
this Warrant, and the number and kind of shares and the price per share then
applicable to shares covered by the unexercised portion of this Warrant.
7. NO RIGHTS AS SHAREHOLDERS. This Warrant does not entitle the Holder to
any voting rights or other rights as a shareholder of the Company prior to
exercise of this Warrant and the payment for the Shares so purchased.
Notwithstanding the foregoing, the Company agrees to transmit to the Holder such
information, documents and reports as are generally distributed to holders of
the capital stock of the Company concurrently with the distribution thereof to
the shareholders. Upon valid exercise of this Warrant and payment for the Shares
so purchased in accordance with the terms of the Warrant, the Holder or the
Holder's designee, as the case may be, shall be deemed a shareholder of the
Company.
8. SALE OR TRANSFER OF THE WARRANT AND THE SHARES; LEGEND. The Warrant
and the Shares shall not be sold or transferred unless either (i) they first
shall have been registered under applicable State Securities laws, or (ii) such
sale or transfer is exempt from the registration requirements of such laws. Each
certificate representing any Warrant shall bear the legend set out on page 1
hereof. Each certificate representing any Shares shall bear a legend
substantially in the following form, as appropriate:
THE SHARES EVIDENCED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH
A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO
SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO UNDER APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN EXEMPTION UNDER APPLICABLE STATE
SECURITIES LAWS.
-2-
<PAGE> 3
The Warrant and Shares may be subject to additional restrictions on
transfer imposed under applicable state and federal securities law.
9. MODIFICATIONS AND WAIVERS. This Warrant may not be changed, waived,
discharged or terminated except by an instrument in writing signed by the party
against which enforcement of the same is sought.
10. NOTICES. Any notice, request or other document required or permitted
to be given or delivered to the Holder or the Company shall be delivered, or
shall be sent by certified or registered mail, postage prepaid, to the Holder at
its address shown on the books of the Company or in the case of the Company, at
the address indicated therefor on the signature page of this Warrant, or, if
different, at the principal office of the Company.
11. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT. The Company
covenants with the Holder that upon its receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant or any stock certificate and, in the case of any such loss, theft
or destruction, of an indemnity or security reasonably satisfactory to it, and
upon reimbursement to the Company of all reasonable expenses incidental thereto,
and upon surrender and cancellation of this Warrant or stock certificate, if
mutilated, the Company will make and deliver a new Warrant or stock certificate,
of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or
stock certificate.
12. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets, and all of the obligations of
the Company relating to the Shares issuable upon exercise of this Warrant shall
survive the exercise and termination of this Warrant and all of the covenants
and agreements of the Company shall inure to the benefit of the successors and
assigns of the Holder.
13. GOVERNING LAW. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of New York.
IN WITNESS WHEREOF, INTEGRATED TRANSPORTATION NETWORK GROUP INC. has caused
this Warrant to be executed by its officer thereunto duly authorized.
ORIGINAL ISSUANCE AS OF: March 25, 1999
INTEGRATED TRANSPORTATION NETWORK GROUP INC.
/s/ Andrew Lee
-----------------------------------------------------
By: Andrew Lee, President
Address: Integrated Transportation Network Group Inc.
205 West 39th St., 16th Floor
New York, NY 10018
-3-
<PAGE> 4
EXHIBIT A
NOTICE OF EXERCISE
------------------
To: INTEGRATED TRANSPORTATION NETWORK GROUP INC.
1. The undersigned hereby elects to purchase _________ shares of Common
Stock of INTEGRATED TRANSPORTATION NETWORK GROUP INC. pursuant to the terms of
the attached Warrant, and tenders herewith payment of the purchase price of such
shares in full.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name or names as are specified
below.
3. The undersigned represents that the aforesaid shares of Common Stock
are being acquired for the account of the undersigned for investment and not
with a view to, or for resale in connection with, the distribution thereof and
that the undersigned has no present intention of distributing or reselling such
shares. The undersigned further represents that such shares shall not be sold or
transferred unless either (1) they first shall have been registered under
applicable state securities laws or (ii) or an exemption from applicable state
registration requirements is available.
4. In the event of partial exercise, please re-issue an appropriate
Warrant exercisable into the remaining shares.
-------------------------------
Name:
Address:
-----------------------
-----------------------
-----------------------
-------------------------------
(Signature)
-------------------------------
(Date)
<PAGE> 1
EXHIBIT 4.23
SUBSCRIPTION AGREEMENT
dated as of
March 26, 1999
ARTICLE I
SUBSCRIPTION
THIS SUBSCRIPTION AGREEMENT is dated as of March 26, 1999, between Dr. Yung
Yau (the "Subscriber"), and Integrated Transportation Network Group, Inc., a
Delaware corporation (the "Company").
Section 1.01 SUBSCRIPTION. The Subscriber hereby subscribes to the
immediate acquisition of 1,500,000 shares (the "Shares") of Common Stock, $0.01
par value ("Common Stock") of the Company at a purchase price of US$2.00 per
share, for an aggregate purchase price of US$3,000,000 (the "Purchase Price").
The Purchase Price may be paid, at the option of the Subscriber, either by wire
transfer in U.S. Dollars to an account specified by the Company or by wire
transfer in People's Republic of China Renminbi ("RMB") at an exchange rate of
RMB8.25 to US$1.00 (resulting in an aggregate purchase price in RMB of
RMB8,250,000) to the Company's designee as set forth in Section 1.02.
Promptly upon the execution hereof and receipt of the Purchase Price by the
Company or its designee as set forth below, the Company shall deliver the Shares
to the undersigned at the address indicated below.
Section 1.02 PAYMENT OF PURCHASE PRICE IN RMB. In the event that the
Subscriber elects to pay the Purchase Price in RMB, the Purchase Price shall be
paid by wire transfer in Renminbi to an account of the Company's designee,
Shenzhen Jinzhenghua Transport Industrial Development Co., Ltd., a 92% owned
subsidiary of the Company ("Jinzhenghua"), as instructed by the Company. In
connection with any such payment to Jinzhenghua in Renminbi, the Subscriber
shall comply with the laws of the People's Republic of China relating to foreign
exchange restriction regulations, and shall indemnify the Company for any losses
incurred by the Company or Jinzhenghua as a direct result of any failure on the
part of the Subscriber to comply with such laws.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.01 In connection with the purchase of the Shares, the Subscriber
<PAGE> 2
acknowledges, warrants and represents to the Company as follows:
(a) It is acquiring the Shares for investment for its own account and
without the intention of participating, directly or indirectly, in a
distribution of the Shares, and not with a view to resale or any distribution of
the Shares, or any portion thereof.
(b) It has knowledge and experience in financial and business matters and
has consulted with its own professional representatives, as it has considered
appropriate to assist in evaluating the merits and risks of this investment. It
has reviewed the Company's Registration Statement on Form S-I dated June 29,
1998 and the Company's Quarterly Reports on Form 10Q for the quarter ended June
30 and September 30, 1998, respectively. It has had access to and an opportunity
to question the officers of the Company, or persons acting on their behalf, with
respect to material information about the Company and, in connection with his
evaluation of this investment, has, to the best of its knowledge, received all
information and data with respect to the Company that it has requested. It is
acquiring the Shares based solely upon its independent examination and judgment
as to the prospects of the Company.
(c) The Shares were not offered to the Subscriber by means of publicly
disseminated advertisements or sales literature.
(d) Subject to the provisions of Section 3.01, it acknowledges that an
investment in the Shares is speculative and it may have to continue to beat the
economic risk of the investment in the Shares for an indefinite period. It
acknowledges that the Shares are being sold to the undersigned , without
registration under any state, or federal or PRC law requiring the registration
of securities for sale, and accordingly will constitute "restricted securities"
as defined in Rule 144 of the U.S. Securities and Exchange Commission. The
transferability of the Shares is therefore restricted by applicable United
States Federal and state securities laws and may be restricted under the laws of
other jurisdictions.
(e) The Subscriber is an "accredited investor" as such term is defined in
Appendix A.
(f) In consideration of the acceptance of this subscription, the
Subscriber agrees that the Shares will not be offered for sale, sold or
transferred by the undersigned other than pursuant to (i) an effective
registration under the Securities Act of 1933, as amended (the "Act"). an
exemption available under the Act or a transaction that is otherwise in
compliance with the Act; and (ii) an effective registration under the securities
law of any state or other jurisdiction applicable to the transaction, an
exemption available under such laws, or a transaction that is otherwise in
compliance with such laws.
(g) It understands that no U.S. federal or state agency has passed upon
the offering of the Shares or has made any finding or determination as to the
fairness of any investment in the Shares.
Section 2.02 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. As an
inducement to the Subscriber to enter into this Agreement and to consummate the
transactions contemplated herein, the Company hereby represents and warrants to
the Subscriber and agrees as follows:
(a) ORGANIZATION; AUTHORITY. The Company is a corporation duly organized,
validly
-2-
<PAGE> 3
existing and in good standing under the laws of Delaware and has full power and
authority to enter into this Agreement and to perform its obligations hereunder.
This Agreement constitutes, and any other agreements and instruments required to
be delivered by the Company hereunder, when duly executed and delivered by the
Company, will constitute valid and binding obligations of the Company and will
be enforceable in accordance with their respective terms. The Company has
previously provided to the Subscriber true copies of all resolutions of the
Company's Board of Directors necessary to authorize the transactions described
herein, and all such resolutions are in full force and effect and have not been
revoked.
(b) CAPITALIZATION. As of March 23, 1999, the authorized share capital of
the Company consists of 50,000,000 common shares, par value US$.01 per share, of
which 10,467,915 are fully issued and remain outstanding, and 5,000,000
preferred shares, par value US$.01 per share, none of which are issued and
outstanding. Except as set forth above and as set forth in Appendix B, no other
shares or equity securities of the Company have been issued and remain
outstanding. and there are no outstanding options, warrants or other rights to
purchase or acquire any share capital of the Company, whether granted by the
Company or otherwise, and there are no existing contracts by which the Company
is or may become bound to issue any additional shares. The Company has never
reduced, repaid. redeemed or purchased any of its share capital. The Shares
shall, upon issuance, be fully paid and non-assessable.
(c) NO CONSENTS. Neither the consummation of the transactions contemplated
hereby, nor compliance with nor fulfillment of the terms and provisions hereof,
will (i) require the consent of any governmental authority or any person under
any contract to which the Company is a party or to which the Company is subject;
or (ii) give any party with rights under any material contract to which the
Company or any subsidiary of the Company is a party the right to terminate,
modify or otherwise change the material rights or obligations of any party under
such contract.
(d) COMPLIANCE WITH LAWS. The Company is in compliance, and there exists
no alleged material noncompliance, with all applicable laws relating in any
material respect to the Company and the operation or conduct of its business,
except where the failure to so comply would not have a material adverse effect
on the Company, and, except as previously disclosed in the Prospectus of the
Company dated June 29, 1998 or the quarterly reports of the Company filed with
the SEC on Form 10-Q for the three-month periods ending June 30, 1998 and
September 30, 1998, the Company has not received any notice of alleged violation
of any such applicable law.
ARTICLE III
MISCELLANEOUS
Section 3.01 REGISTRATION RIGHTS. The Company agrees that it shall file
with the United States Securities and Exchange Commission (the "SEC") a
registration statement under the U.S. Securities Act of 1933 (the "Securities
Act") in accordance with Rule 4I5 thereof (the "Shelf Registration") with
respect to all of the Shares, and shall use its best efforts to cause such
registration statement to become effective within 180 days after the date hereof
and to remain effective at all times for a period of four years after the date
hereof. In addition, if the Company
-3-
<PAGE> 4
at any time files a Registration Statement under the Securities Act with respect
to its Common Stock after the date hereof, the Company shall so notify the
undersigned and shall include such of the Shares as the Subscriber may request
on such Registration Statement.
Section 3.02 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts. each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
Section 3.03 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, applicable to
contracts executed in and to be performed entirely within that state. All
actions and proceedings arising out of or relating to this Agreement shall be
heard and determined in any New York state or federal court sitting in the City
of New York and, to the extent permitted by Law, the parties hereto expressly
consent to the jurisdiction of such courts, agree to venue in such courts and
hereby waive any defense or claim of FORUM NON CONVENIENS they may have with
respect to any such action or proceeding.
IN WITNESS WHEREOF, the Subscriber and the Company have executed this
Agreement or caused this Agreement to be executed as of the date first written
above.
COMPANY SUBSCRIBER
INTEGRATED TRANSPORTATION Dr. YUNG YAU
NETWORK GROUP, INC.
By:/s/ Andrew Lee By:/s/ Yung Yau
------------------------------- ----------------------------------------
Name: Andrew Lee Name: Yung Yau
Title: President Title:
Address: 205 West 39th Street Address: c/o I/F Shell Industrial Building
16th Floor 12 Lee Chung Street, Chai Wan
New York, NY 10018 Hong Kong
USA
<PAGE> 1
EXHIBIT 4.24
------------
SUBSCRIPTION AGREEMENT
dated as of
March 26, 1999
ARTICLE I
SUBSCRIPTION
THIS SUBSCRIPTION AGREEMENT is dated as of March 26, 1999, between Billy
Yung Kwok Kee (the "Subscriber"), and Integrated Transportation Network Group,
Inc., a Delaware corporation (the "Company").
Section 1.01 SUBSCRIPTION. The Subscriber hereby subscribes to the
immediate acquisition of 500,000 shares (the "Shares") of Common Stock, $0.01
par value ("Common Stock") of the Company at a purchase price of US$2.00 per
share, for an aggregate purchase price of US$1,000,000 (the "Purchase Price").
The Purchase Price may be paid, at the option of the Subscriber, either by wire
transfer in U.S. Dollars to an account specified by the Company or by wire
transfer in People's Republic of China Renminbi ("RMB") at an exchange rate of
RMB8.25 to US$1.00 (resulting in an aggregate purchase price in RMB of
RMB8,250,000) to the Company' s designee as set forth in Section 1.02.
Promptly upon the execution hereof and receipt of the Purchase Price by the
Company or its designee as set forth below, the Company shall deliver the Shares
to the undersigned at the address indicated below.
Section 1.02 PAYMENT OF PURCHASE PRICE IN RMB. In the event that the
Subscriber elects to pay the Purchase Price in RMB, the Purchase Price shall be
paid by wire transfer in Renminbi to an account of the Company's designee,
Shenzhen Jinzhenghua Transport Industrial Development Co., Ltd., a 92% owned
subsidiary of the Company ("Jinzhenghua"), as instructed by the Company. In
connection with any such payment to Jinzhenghua in Renminbi, the Subscriber
shall comply with the laws of the People's Republic of China relating to foreign
exchange restriction regulations, and shall indemnify the Company for any losses
incurred by the Company or Jinzhenghua as a direct result of any failure on the
part of the Subscriber to comply with such laws.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.01 In connection with the purchase of the Shares, the Subscriber
acknowledges, warrants and represents to the Company as follows:
<PAGE> 2
(a) It is acquiring the Shares for investment for its own account and
without the intention of participating, directly or indirectly, in a
distribution of the Shares, and not with a view to resale or any distribution of
the Shares, or any portion thereof.
(b) It has knowledge and experience in financial and business matters and
has consulted with its own professional representatives, as it has considered
appropriate to assist in evaluating the merits and risks of this investment. It
has reviewed the Company's Registration Statement on Form S-I dated June 29,
1998 and the Company's Quarterly Reports on Form 10Q for the quarter ended June
30 and September 30, 1998, respectively. It has had access to and an opportunity
to question the officers of the Company, or persons acting on their behalf, with
respect to material information about the Company and, in connection with his
evaluation of this investment, has, to the best of its knowledge, received all
information and data with respect to the Company that it has requested. It is
acquiring the Shares based solely upon its independent examination and judgment
as to the prospects of the Company.
(c) The Shares were not offered to the Subscriber by means of publicly
disseminated advertisements or sales literature.
(d) Subject to the provisions of Section 3.01, it acknowledges that an
investment in the Shares is speculative and it may have to continue to beat the
economic risk of the investment in the Shares for an indefinite period. It
acknowledges that the Shares are being sold to the undersigned , without
registration under any state, or federal or PRC law requiring the registration
of securities for sale, and accordingly will constitute "restricted securities"
as defined in Rule 144 of the U.S. Securities and Exchange Commission. The
transferability of the Shares is therefore restricted by applicable United
States Federal and state securities laws and may be restricted under the laws of
other jurisdictions.
(e) The Subscriber is an "accredited investor" as such term is defined in
Appendix A.
(f) In consideration of the acceptance of this subscription, the
Subscriber agrees that the Shares will not be offered for sale, sold or
transferred by the undersigned other than pursuant to (i) an effective
registration under the Securities Act of 1933, as amended (the "Act"). an
exemption available under the Act or a transaction that is otherwise in
compliance with the Act; and (ii) an effective registration under the securities
law of any state or other jurisdiction applicable to the transaction, an
exemption available under such laws, or a transaction that is otherwise in
compliance with such laws.
(g) It understands that no U.S. federal or state agency has passed upon
the offering of the Shares or has made any finding or determination as to the
fairness of any investment in the Shares.
Section 2.02 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. As an
inducement to the Subscriber to enter into this Agreement and to consummate the
transactions contemplated herein, the Company hereby represents and warrants to
the Subscriber and agrees as follows:
(a) ORGANIZATION; AUTHORITY. The Company is a corporation duly organized,
validly existing and in good standing under the laws of Delaware and has full
power and authority to enter into this Agreement and to perform its obligations
hereunder. This Agreement constitutes,
-2-
<PAGE> 3
and any other agreements and instruments required to be delivered by the Company
hereunder, when duly executed and delivered by the Company, will constitute
valid and binding obligations of the Company and will be enforceable in
accordance with their respective terms. The Company has previously provided to
the Subscriber true copies of all resolutions of the Company's Board of
Directors necessary to authorize the transactions described herein, and all such
resolutions are in full force and effect and have not been revoked.
(b) CAPITALIZATION. As of March 23, 1999, the authorized share capital of
the Company consists of 50,000,000 common shares, par value US$.01 per share, of
which 10,467,915 are fully issued and remain outstanding, and 5,000,000
preferred shares, par value US$.01 per share, none of which are issued and
outstanding. Except as set forth above and as set forth in Appendix B, no other
shares or equity securities of the Company have been issued and remain
outstanding. and there are no outstanding options, warrants or other rights to
purchase or acquire any share capital of the Company, whether granted by the
Company or otherwise, and there are no existing contracts by which the Company
is or may become bound to issue any additional shares. The Company has never
reduced, repaid. redeemed or purchased any of its share capital. The Shares
shall, upon issuance, be fully paid and non-assessable.
(c) NO CONSENTS. Neither the consummation of the transactions contemplated
hereby, nor compliance with nor fulfillment of the terms and provisions hereof,
will (i) require the consent of any governmental authority or any person under
any contract to which the Company is a party or to which the Company is subject;
or (ii) give any party with rights under any material contract to which the
Company or any subsidiary of the Company is a party the right to terminate,
modify or otherwise change the material rights or obligations of any party under
such contract.
(d) COMPLIANCE WITH LAWS. The Company is in compliance, and there exists
no alleged material noncompliance, with all applicable laws relating in any
material respect to the Company and the operation or conduct of its business,
except where the failure to so comply would not have a material adverse effect
on the Company, and, except as previously disclosed in the Prospectus of the
Company dated June 29, 1998 or the quarterly reports of the Company filed with
the SEC on Form 10-Q for the three-month periods ending June 30, 1998 and
September 30, 1998, the Company has not received any notice of alleged violation
of any such applicable law.
ARTICLE III
MISCELLANEOUS
Section 3.01 REGISTRATION RIGHTS. The Company agrees that it shall file
with the United States Securities and Exchange Commission (the "SEC") a
registration statement under the U.S. Securities Act of 1933 (the "Securities
Act") in accordance with Rule 4I5 thereof (the "Shelf Registration") with
respect to all of the Shares, and shall use its best efforts to cause such
registration statement to become effective within 180 days after the date hereof
and to remain effective at all times for a period of four years after the date
hereof. In addition, if the Company at any time files a Registration Statement
under the Securities Act with respect to its Common Stock after the date hereof,
the Company shall so notify the undersigned and shall include such
-3-
<PAGE> 4
of the Shares as the Subscriber may request on such Registration Statement.
Section 3.02 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts. each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
Section 3.03 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, applicable to
contracts executed in and to be performed entirely within that state. All
actions and proceedings arising out of or relating to this Agreement shall be
heard and determined in any New York state or federal court sitting in the City
of New York and, to the extent permitted by Law, the parties hereto expressly
consent to the jurisdiction of such courts, agree to venue in such courts and
hereby waive any defense or claim of FORUM NON CONVENIENS they may have with
respect to any such action or proceeding.
IN WITNESS WHEREOF, the Subscriber and the Company have executed this
Agreement or caused this Agreement to be executed as of the date first written
above.
COMPANY SUBSCRIBER
INTEGRATED TRANSPORTATION BILLY YUNG KWOK KEE
NETWORK GROUP, INC.
By: /s/ Andrew Lee By: /s/
------------------------------ ----------------------------------------
Name: Andrew Lee Name:
Title: President Title:
Address: 205 West 39th Street Address: c/o I/F Shell Industrial Building
16th Floor 12 Lee Chung Street, Chai Wan
New York, NY 10018 Hong Kong
USA
-4-
<PAGE> 1
EXHIBIT 10.13
January 29, 1999
Mr. Roy Lerman
36 Piedmont Drive
Old Bridge, NJ 08857
Re: CONSULTING SERVICES
-------------------
Dear Roy:
Integrated Transportation Network Group Inc., a Delaware corporation (the
"Company"), desires to engage you to provide business and financial consulting
services to the Company, as provided in this letter.
Our agreement shall be for a term of one (1) year, unless earlier
terminated by you or by us. Either you or we may terminate this agreement, with
or without cause, upon thirty (30) days written notice. The effective date of
this Agreement shall be January 1, 1999.
You will provide such business and financial consulting services to the
Company as the Company may request, including, but not limited to, consulting
with the Company concerning short and long term strategic and financial
planning, all with a view toward maximizing shareholder value. The Company
acknowledges that you rendered consulting services to the Company from July 1,
1998 through December 31, 1998, in full payment for which the Company shall
issue to you 3,000 shares of common stock of the Company, upon your execution
and delivery of the Subscription Agreement attached to this letter.
So long as this agreement remains in effect, the Company shall pay you at
the rate of $1,000.00 per month, payable semi-annually on June 30th and December
31st, in cash or in shares of common stock, at the option of the Company. In the
event the Company elects to pay you in shares of common stock, the number of
shares of common stock to be issued to you with respect to each semi-annual
period shall be equal to $6,000 (six months at $1,000 per month) divided by the
market price of the Company's common stock on the payment date, as reported on
the quotation system or exchange where the Company's common stock is then
quoted. In the event that this agreement is terminated prior to December 31,
1999, your compensation will be prorated through the date of your termination.
<PAGE> 2
You agree to abide by applicable law in connection with the services
rendered by you to the Company. You agree to indemnify and hold the Company
harmless from any losses, liabilities or expenses (including attorney's fees)
which arise out of your violation of any such laws.
If the foregoing terms are acceptable to you, please signify your agreement
by executing this letter below where indicated and returning it to the
undersigned.
INTEGRATED TRANSPORTATION
NETWORK GROUP, INC.
By: /s/ Andrew Lee
---------------------------------
Andrew Lee, President
AGREED AND ACCEPTED:
/s/ Roy Lerman
- ------------------------------------
Roy Lerman
<PAGE> 1
EXHIBIT 10. 14
--------------
INTEGRATED TRANSPORTATION NETWORK GROUP INC.
--------------------------------------------
1999 COMBINATION STOCK OPTION PLAN
----------------------------------
SECTION I. PURPOSE OF THE PLAN.
-------------------
The purposes of this Integrated Transportation Network Group Inc. 1999
Combination Stock Option Plan (the "1999 Plan") are (i) to provide long-term
incentives and rewards to those key employees (the "Employee Participants") of
Integrated Transportation Network Group Inc. (the "Corporation") and its
subsidiaries (if any), and any other persons (the "Non-employee Participants")
who are in a position to contribute to the long-term success and growth of the
Corporation and its subsidiaries, (ii) to assist the Corporation in retaining
and attracting executives and key employees with requisite experience and
ability, and (iii) to associate more closely the interests of such executives
and key employees with those of the Corporation's stockholders.
SECTION II. DEFINITIONS.
-----------
"CODE" is the Internal Revenue Code of 1986, as it may be amended from
time to time.
"COMMON STOCK" is the $.01 par value common stock of the Corporation.
"COMMITTEE" is defined in Section III, paragraph (a).
"CORPORATION" is defined in Section I.
"CORPORATION ISOs" are all stock options (including 1999 Plan ISOs)
which (i) are Incentive Stock Options and (ii) are granted under any plans
(including this 1999 Plan) of the Corporation, a Parent Corporation and/or
a Subsidiary Corporation.
"EMPLOYEE PARTICIPANTS" is defined in Section I.
"FAIR MARKET VALUE" of any property is the value of the property as
reasonably determined by the Committee.
"INCENTIVE STOCK OPTION" is a stock option which is treated as an
incentive stock option under Section 422 of the Code.
"1999 PLAN" is defined in Section I.
-1-
<PAGE> 2
"1999 PLAN ISOs" are Stock Options which are Incentive Stock Options.
"NON-EMPLOYEE PARTICIPANTS" is defined in Section I.
"NON-QUALIFIED OPTION" is a Stock Option which does not qualify as an
Incentive Stock Option or for which the Committee provides, in the terms of
such option and at the time such option is granted, that the option shall
not be treated as an Incentive Stock Option.
"PARENT CORPORATION" has the meaning provided in Section 424(e) of the
Code.
"PARTICIPANTS" are all persons who are either Employee Participants or
Non-employee Participants.
"PERMANENT AND TOTAL DISABILITY" has the meaning provided in Section
22(e)(3) of the Code.
"RULE 16B-3" means Securities and Exchange Commission Rule 16b-3.
"SECTION 16" means Section 16 of the Securities Exchange Act of 1934,
as amended, or any similar or successor statute, and any rules,
regulations, or policies adopted or applied thereunder.
"STOCK OPTIONS" are rights granted pursuant to this 1999 Plan to
purchase shares of Common Stock at a fixed price.
"SUBSIDIARY CORPORATION" has the meaning provided in Section 424(f) of
the Code.
"TEN PERCENT STOCKHOLDER" means, with respect to a 1999 Plan ISO, any
individual who directly or indirectly owns stock possessing more than 10%
of the total combined voting power of all classes of stock of the
Corporation or any Parent Corporation or any Subsidiary Corporation at the
time such 1999 Plan ISO is granted.
SECTION III. ADMINISTRATION.
--------------
(a) THE COMMITTEE. This 1999 Plan shall be administered by the Board of
Directors or by a compensation committee consisting solely of two or more
"non-employee directors", as defined in Rule 16b-3, who shall be designated by
the Board of Directors of the Corporation (the administering body is hereafter
referred to as the "Committee"). The Committee shall serve at the pleasure of
the Board of Directors, which may from time to time, and in its sole discretion,
-2-
<PAGE> 3
discharge any member, appoint additional new members in substitution for those
previously appointed and/or fill vacancies however caused. A majority of the
Committee shall constitute a quorum and the acts of a majority of the members
present at any meeting at which a quorum is present shall be deemed the action
of the Committee. No person shall be eligible to be a member of the Committee if
that person's membership would prevent the plan from complying with Section 16,
if applicable to the Corporation.
(b) AUTHORITY AND DISCRETION OF THE COMMITTEE. Subject to the express
provisions of this 1999 Plan and provided that all actions taken shall be
consistent with the purposes of this 1999 Plan, and subject to ratification by
the Board of Directors only if required by applicable law, the Committee shall
have full and complete authority and the sole discretion to: (i) determine those
persons who shall constitute key employees eligible to be Employee Participants;
(ii) select the Participants to whom Stock Options shall be granted under this
1999 Plan; (iii) determine the size and the form of the Stock Options, if any,
to be granted to any Participant; (iv) determine the time or times such Stock
Options shall be granted including the grant of Stock Options in connection with
other awards made, or compensation paid, to the Participant; (v) establish the
terms and conditions upon which such Stock Options may be exercised and/or
transferred, including the exercise of Stock Options in connection with other
awards made, or compensation paid, to the Participant; (vi) make or alter any
restrictions and conditions upon such Stock Options and the Stock received on
exercise thereof, including, but not limited to, providing for limitations on
the Participant's right to keep any Stock received on termination of employment;
(vii) determine whether the Participant or the Corporation has achieved any
goals or otherwise satisfied any conditions or requirements that may be imposed
on or related to the exercise of Stock Options; and (viii) adopt such rules and
regulations, establish, define and/or interpret these and any other terms and
conditions, and make all determinations (which may be on a case-by-case basis)
deemed necessary or desirable for the administration of this 1999 Plan.
Notwithstanding any provision of this 1999 Plan to the contrary, only Employee
Participants shall be eligible to receive 1999 Plan ISOs.
(c) APPLICABLE LAW. This 1999 Plan and all Stock Options shall be governed
by the law of the state in which the Corporation is incorporated.
SECTION IV. TERMS OF STOCK OPTIONS.
----------------------
(a) AGREEMENTS. Stock Options shall be evidenced by a written agreement
between the Corporation and the Participant awarded the Stock Option. This
agreement shall be in such form, and contain such terms and conditions (not
inconsistent with this 1999 Plan) as the Committee may determine. If the Stock
Option described therein is not intended to be an Incentive Stock Option, but
otherwise qualifies as an Incentive Stock Option, the agreement shall include
the following or a similar statement: "This stock option is not intended to be
an Incentive Stock
-3-
<PAGE> 4
Option, as that term is described in Section 422 of the Internal Revenue Code of
1986, as amended."
(b) TERM. Stock Options shall be for such periods as may be determined by
the Committee, provided that in the case of 1999 Plan ISOs, the term of any such
1999 Plan ISO shall not extend beyond three months after the time the
Participant ceases to be an employee of the Corporation. Notwithstanding the
foregoing, the Committee may provide in a 1999 Plan ISO that in the event of the
Permanent and Total Disability or death of the Participant, the 1999 Plan ISO
may be exercised by the Participant or his estate (if applicable) for a period
of up to one year after the date of such Permanent and Total Disability or
Death. In no event may a 1999 Plan ISO be exercisable (including provisions, if
any, for exercise in installments) subsequent to ten years after the date of
grant, or, in the case of 1999 Plan ISOs granted to Ten Percent Stockholders,
more than five years after the date of grant.
(c) PURCHASE PRICE. The purchase price of shares purchased pursuant to any
Stock Option shall be determined by the Committee, and shall be paid by the
Participant or other person permitted to exercise the Stock Option in full upon
exercise, (i) in cash, (ii) by delivery of shares of Common Stock (valued at
their Fair Market Value on the date of such exercise), (iii) any other property
(valued at its Fair Market Value on the date of such exercise), or (iv) any
combination of cash, stock and other property, with any payment made pursuant to
subparagraphs (ii), (iii) or (iv) only as permitted by the Committee, in its
sole discretion. In no event will the purchase price of Common Stock be less
than the par value of the Common Stock. Furthermore, the purchase price of
Common Stock subject to a 1999 Plan ISO shall not be less than the Fair Market
Value of the Common Stock on the date of the issuance of the 1999 Plan ISO,
provided that in the case of 1999 Plan ISOs granted to Ten Percent Stockholders,
the purchase price shall not be less than 110% of the Fair Market Value of the
Common Stock on the date of issuance of the 1999 Plan ISO.
(d) FURTHER RESTRICTIONS AS TO INCENTIVE STOCK OPTIONS. To the extent that
the aggregate Fair Market Value of Common Stock with respect to which
Corporation ISOs (determined without regard to this section) are exercisable for
the first time by any Employee Participant during any calendar year exceeds
$100,000, such Corporation ISOs shall be treated as options which are not
Incentive Stock Options. For the purpose of this limitation, options shall be
taken into account in the order granted, and the Committee may designate that
portion of any Corporation ISO that shall be treated as not an Incentive Stock
Option in the event that the provisions of this paragraph apply to a portion of
any option, unless otherwise required by the Code or regulations of the Internal
Revenue Service. The designation described in the preceding sentence may be made
at such time as the Committee considers appropriate, including after the
issuance of the option or at the time of its exercise. For the purpose of this
section, Fair Market Value shall be determined as of the time the option with
respect to such stock is granted.
-4-
<PAGE> 5
(e) RESTRICTIONS. At the discretion of the Committee, the Common Stock
issued pursuant to the Stock Options granted hereunder may be subject to
restrictions on vesting or transferability. For the purposes of this limitation,
options shall be taken into account in the order granted.
(f) WITHHOLDING OF TAXES. Pursuant to applicable federal, state, local or
foreign laws, the Corporation may be required to collect income or other taxes
upon the grant of a Stock Option to, or exercise of a Stock Option by, a holder.
The Corporation may require, as a condition to the exercise of a Stock Option,
or demand, at such other time as it may consider appropriate, that the
Participant pay the Corporation the amount of any taxes which the Corporation
may determine is required to be withheld or collected, and the Participant shall
comply with the requirement or demand of the Corporation. In its discretion, the
Corporation may withhold shares to be received upon exercise of a Stock Option
if it deems this an appropriate method for withholding or collecting taxes.
(g) SECURITIES LAW COMPLIANCE. Upon exercise (or partial exercise) of a
Stock Option, the Participant or other holder of the Stock Option shall make
such representations and furnish such information as may, in the opinion of
counsel for the Corporation, be appropriate to permit the Corporation to issue
or transfer Stock in compliance with the provisions of applicable federal or
state securities laws. The Corporation, in its discretion, may postpone the
issuance and delivery of Stock upon any exercise of this Option until completion
of such registration or other qualification of such shares under any federal or
state laws, or stock exchange listing, as the Corporation may consider
appropriate. Furthermore, the Corporation is not obligated to register or
qualify the shares of Common Stock to be issued upon exercise of a Stock Option
under federal or state securities laws (or to register or qualify them at any
time thereafter), and it may refuse to issue such shares if, in its sole
discretion, registration or exemption from registration is not practical or
available. The Corporation may require that prior to the issuance or transfer of
Stock upon exercise of a Stock Option, the Participant enter into a written
agreement to comply with any restrictions on subsequent disposition that the
Corporation deems necessary or advisable under any applicable federal and state
securities laws. Certificates of Stock issued hereunder shall bear a legend
reflecting such restrictions.
(h) RIGHT TO STOCK OPTION. No employee of the Corporation or any other
person shall have any claim or right to be a participant in this 1999 Plan or to
be granted a Stock Option hereunder. Neither this 1999 Plan nor any action taken
hereunder shall be construed as giving any person any right to be retained in
the employ of the Corporation. Nothing contained hereunder shall be construed as
giving any person any equity or interest of any kind in any assets of the
Corporation or creating a trust of any kind or a fiduciary relationship of any
kind between the Corporation and any such person. As to any claim for any unpaid
amounts under this 1999 Plan, any person having a claim for payments shall be an
unsecured creditor.
-5-
<PAGE> 6
(i) INDEMNITY. Neither the Board of Directors nor the Committee, nor any
members of either, nor any employees of the Corporation or any parent,
subsidiary, or other affiliate, shall be liable for any act, omission,
interpretation, construction or determination made in good faith in connection
with their responsibilities with respect to this 1999 Plan, and the Corporation
hereby agrees to indemnify the members of the Board of Directors, the members of
the Committee, and the employees of the Corporation and its parent or
subsidiaries in respect of any claim, loss, damage, or expense (including
reasonable counsel fees) arising from any such act, omission, interpretation,
construction or determination to the full extent permitted by law.
(j) PARTICIPATION BY FOREIGNERS. Without amending this 1999 Plan, except
to the extent required by the Code in the case of Incentive Stock Options, the
Committee may modify grants made to participants who are foreign nationals or
employed outside the United States so as to recognize differences in local law,
tax policy, or custom.
SECTION V. AMENDMENT AND TERMINATION: ADJUSTMENTS UPON CHANGES IN STOCK.
------------------------------------------------------------
The Board of Directors of the Corporation may at any time, and from time to
time, amend, suspend or terminate this 1999 Plan or any portion thereof,
provided that no amendment shall be made without approval of the Corporation's
stockholders if such approval is necessary to comply with any applicable tax
requirement, any applicable rules or regulations of the Securities and Exchange
Commission, including Rule 16b-3 (or any successor rule thereunder), or the
rules and regulations of any exchange or stock market on which the Corporation's
securities are listed or quoted. Except as provided herein, no amendment,
suspension or termination of this 1999 Plan may affect the rights of a
Participant to whom a Stock Option has been granted without such Participant's
consent. The Committee is specifically authorized to convert, in its discretion,
the unexercised portion of any 1999 Plan ISO granted to an Employee Participant
to a Non-qualified Option at any time prior to the exercise, in full, of such
1999 Plan ISO. If there shall be any change in the Common Stock or to any Stock
Option granted under this 1999 Plan through merger, consolidation,
reorganization, recapitalization, stock dividend, stock split or other change in
the corporate structure of the Corporation, appropriate adjustments may be made
by the Committee (or if the Corporation is not the surviving corporation in any
such transaction, the Board of Directors of the surviving corporation, or its
designee) in the aggregate number and kind of shares subject to this 1999 Plan,
and the number and kind of shares and the price per share subject to outstanding
options, provided that such adjustment does not affect the qualification of any
1999 Plan ISO as an Incentive Stock Option. In connection with the foregoing,
the Committee may issue new Stock Options in exchange for outstanding Stock
Options.
-6-
<PAGE> 7
SECTION VI. SHARES OF STOCK SUBJECT TO THE PLAN.
-----------------------------------
The number of shares of Common Stock that may be the subject of awards
under this 1999 Plan shall not exceed an aggregate of 2,500,000 shares. Shares
to be delivered under this 1999 Plan may be either authorized but unissued
shares of Common Stock or treasury shares. Any shares subject to an option
hereunder which for any reason terminates, is canceled or otherwise expires
unexercised, and any shares reacquired by the Corporation due to restrictions
imposed on the shares, shares returned because payment is made hereunder in
stock of equivalent value rather than in cash, and/or shares reacquired from a
recipient for any other reason shall, at such time, no longer count towards the
aggregate number of shares which have been the subject of Stock Options issued
hereunder, and such number of shares shall be subject to further awards under
this 1999 Plan, provided, first, that the total number of shares then eligible
for award under this 1999 Plan may not exceed the total specified in the first
sentence of this Section VI, and second, that the number of shares subject to
further awards shall not be increased in any way that would cause this 1999 Plan
or any Stock Option to not comply with Section 16, if applicable to the
Corporation.
SECTION VII. EFFECTIVE DATE AND TERM OF THIS PLAN.
------------------------------------
The effective date of this 1999 Plan is January 1, 1999 (the "Effective
Date") and awards under this 1999 Plan may be made for a period of ten years
commencing on the Effective Date. The period during which a Stock Option may be
exercised may extend beyond that time as provided herein.
DATE OF APPROVAL BY STOCKHOLDERS: ________________, 1999
- --------------------------------
DATE OF APPROVAL BY BOARD OF DIRECTORS: January 1, 1999
- --------------------------------------
<PAGE> 1
EXHIBIT 10.15
-------------
Integrated Transportation Network Group Inc.
205 West 39th Street, 16th Floor
New York, NY 10022
Attn: Mr. Andrew Lee, President
Gentlemen
We are pleased to set out below, details of our proposal to organize and
implement a program of trading market development to assist in developing
liquidity and improving the trading performance of Integrated Transportation
Network Group Inc. (`ITNG' or the Company)'s Nasd Bulletin Board listed shares.
Subsequently, Orient will arrange a fund raising program for the Company to
raise a total of up to US$15 million at a minimum of US$10.00 per share through
private placement financing or secondary offering for a combination of old
and/or new shares.
1. OBJECTIVES
(i) Facilitate the development of an efficient and active trading
market (i.e. liquidity) in ITNG's stock, which is presently thinly
traded and which we believe has a market price unrelated to the
Company's fundamentals, through the continuous dissemination of
reliable information about the Company.
(ii) Through effective trading market development, improve the level
of the Company's share price, ultimately to that commensurate with a
reasonable price/earnings multiple.
(iii) Assist the Company in its transition from the OTC Bulletin Board
to the Amex.
(iv) Capitalize on improved trading performance to tap additional
equity based fund raising opportunities and to raise a total of up to
US$15 million at a minimum of US$10.00 per share.
2. PROPOSED METHOD
(i) TRADING MARKET DEVELOPMENT
--------------------------
a) With the assistance from ITNG's management, research
and analyze the present share structure of the Company, including
exact size of public float, major shareholders and general
shareholding `spread'.
b) Brief selected institutional investors, broker dealers
and equity fund managers on the Company, its fundamentals and
<PAGE> 2
prospects and introduce at least 2 additional market makers to
create sustained momentum and depth of trading liquidity.
c) Ensure continuing reliable flow of information on the
Company to ensure maximization of investor interest.
(ii) FUND RAISING
------------
Depending on completion of the market liquidity development
program (say 3 months), Orient will coordinate a private
placement financing or arrange for an underwritten secondary
offering for ITNG to expand its shareholder base and raise
capital of up to a total of US$15 million at a minimum of
US$10.00 per share to be completed by prior to the end of 1999.
The services being rendered hereunder are mutually understood to
be on a non-exclusive basis.
3. COMPENSATION
For its services with respect to the above, Orient will be entitled to
receive the following:
(i) A total of US$10,000 retainer fee payable on acceptance of the
terms of this proposal by signing this agreement.
(ii) 20,000 common shares of ITNG on signing of this agreement. ITNG
to use best efforts to register shares on Form S-3 by September 30,
1999.
(iii) Warrants to acquire 30,000 common shares of ITNG. Such warrants
to have an exercise price of US$4.50 per share, exercisable any time
on or before 31 December 2001 and with piggyback registration rights.
Such warrants will become exercisable on completion of a period of 20
consecutive trading days during which the average bid price for the
Company's stock remains at a minimum of US$8.00 and will continue to
be exercisable only for so long as the average bid price of the
Company's common stock during the twenty (20) trading days preceding
the exercise notice is above US $8.00 per share.
(iv) If ITNG receives capital from a source of capital introduced to
ITNG by Orient and with which ITNG had no prior relationship, Orient
will receive in full satisfaction of services rendered in introducing
such source of capital, a fee of 4% of the amount raised, payable at
time of closing of the financing program.
4. EXPENSES
In regard to the fund raising exercise for the Company, ITNG agrees to
reimburse Orient for reasonable out of pocket expenses incurred in relation
to this assignment, provided that Orient obtains written approval from ITNG
prior to incurring such expense. Except
<PAGE> 3
for the foregoing, ITNG shall have no obligation to reimburse any expenses
incurred by Orient in connection with rendering services under this
Agreement.
5. CONFIDENTIALITY
Orient agrees to keep all information regarding ITNG and its business or
affairs which may known to Orient in connection with this Agreement or the
performance of Orient's duties hereunder, strictly confidential and shall
release such information only to parties authorized by ITNG. Orient further
acknowledges that it may from time to time in the performance of services
under this Agreement come into possession of information that could be
deemed to be material non-public information and that the possession of
such information will limit Orient's ability to buy and sell shares of
ITNG.
6. TERM
This Agreement shall be for a term of twelve months, provided that this
agreement may be terminated by either party upon thirty (30) days written
notice.
7. INDEMNIFICATION
ITNG agrees to indemnify any hold harmless Orient and its affiliates from
and against any and all losses, claims, damages and liabilities, , related
to or arising out of any violation of law by ITNG in connection with this
Agreement.
Orient shall comply with all applicable laws in connection with rendering
services hereunder and Orient agrees to indemnify and hold harmless ITNG
and its affiliates from and against any and all losses, claims, damages and
liabilities and expenses (including attorney's fees and costs), related to
or arising out of any violation of law by Orient or its agents in
connection with rendering services under this Agreement.
8. GOVERNING LAW
This Agreement shall be governed by United States Federal Laws as well as
by the laws of the State of Delaware and the Parties shall submit to the
jurisdiction thereof.
Yours faithfully
For and on behalf of Accepted for and on behalf of
Orient Financial Services Limited Integrated Transportation Network Group
Inc.
/s/ /s/ Andrew Lee
- --------------------------------- ---------------------------------------
(Orient) (ITNG)
Date: 3/12/99 Date: 3/12/99
<PAGE> 1
EXHIBIT 10.16
-------------
VIRTUAL FINANCIAL CORP.
750 East Sample Road
Suite 204
Pompano Beach, Florida 33064
954-783-6992 Office
954-783-6952 Fax
February 16, 1999
Mr. Andrew Lee
Integrated Transportation Network Group Inc.
205 West 39th Street
16th Floor
New York, NY 10018
Facsimile: (212) 840-8845
Re: Consulting Services
Dear Andy,
This letter shall constitute the terms of the Consulting Agreement among
Virtual Financial Corp. ("VFC"), a corporation, and Integrated Transportation
Network Group Inc. ("ITNG"), a Delaware corporation. For good and valuable
consideration, it is agreed as follows:
1. EMPLOYMENT. VFC is retained by ITNG, on a nonexclusive basis, to
provide ITNG with corporate development consulting, marketing and strategic
planning such as:
a. The implementation of short range and long term strategic
planning to fully develop and enhance the Company's assets,
resources and services;
b. Produce a corporate profile;
c. Mail 2,500 corporate profiles per month to the financial
community, subject to obtaining the Company's prior written
approval;
d. Arrange analyst and fund manager meeting for ITNG each month,
subject to obtaining the Company's prior written approval.
2. COMPENSATION. In consideration for the performance of the services by
VFC under this Agreement, VFC shall receive the following compensation:
<PAGE> 2
a. $3,000 upon execution of this Agreement and $3,000 on the monthly
anniversary during the term of this Agreement, not to exceed
$9,000 for the initial three month term.
b. Subject to prior written approval of ITNG, $3,125 for each 2,500
piece mailing upon VFC sending ITNG verification of the mailing
acceptable to ITNG, in its sole discretion.
c. A five year option to purchase 30,000 shares of ITNG common stock
from treasury (the "Common Stock"), at an exercise price of $3.00
per share.
d. All invoices are due and payable on receipt. ITNG will not be
responsible for any expenses or invoices other than as provided
herein, unless pre-approved in writing by ITNG.
3. REGISTRATION RIGHTS.
a. ITNG agrees that it will, as soon as reasonably practicable and
at the sole expense of ITNG, register the shares of Common Stock
issuable upon exercise of the VFC Option under the Securities Act
of 1933 (the "Act") on a Form S-3 Registration Statement (or any
successor form). ITNG shall supply prospectuses meeting the
requirements of the Act and such other documents as VFC may
reasonably request for at least one year following the
effectiveness of such registration in order to facilitate the
public sale or disposition of such securities, to register and
qualify any of such securities for sale in such states as VFC
designates and do any and all other acts and things which are
reasonably necessary to enable VFC to consummate the public sale
or other disposition of such securities.
b. VFC has knowledge and experience in financial and business
matters that each is capable of evaluating the merits and risks
of an investment in ITNG. VFC is familiar with the nature and
risks inherent in investments in unregistered securities and in
the business in which ITNG engages and have determined that an
investment in ITNG is consistent with its investment objectives
and income prospects. VFC represents and warrants that it is an
"accredited investor" as defined in Rule 501(a) of Regulation D
promulgated under the Act. VFC is acquiring the Option and will
be acquiring the shares of Common Stock underlying the Option to
be issued, for its own account for investment purposes only and
not with a view toward resale or distribution of such shares
either in whole or in part.
4. TERM. This Agreement shall be effective for a period of three (3)
months, commencing upon the date of execution of this Agreement.
5. JOINT RELATIONSHIP. Nothing contained in this Agreement shall be
construed to imply a joint venture or partnership or principal/agent
relationship between the parties hereto, and no party by this Agreement shall
have any right, power or authority to act or create any obligation, expressed or
implied, on behalf of the other party other than as set forth herein.
<PAGE> 3
6. CONFIDENTIAL INFORMATION. The parties hereto recognize that a major
need of ITNG is to preserve its trade secrets and confidential information. By
reason of this Agreement, VFC will have access to, and will obtain specialized
knowledge, trade secrets and confidential information about ITNG's plans and
operations. Therefore, VFC hereby agrees that during and after the Term VFC will
not use, other than in performing services hereunder, disclose to others, or
publish any confidential business information about the affairs of ITNG,
including but not limited to confidential information concerning ITNG's
products, methods, analytical techniques, technical information, customer
information, employee information, and other confidential information acquired
by it in the course of its past or future services for ITNG. VFC agrees to take
reasonable and appropriate steps to prevent the improper or inadvertent
disclosure of any such confidential information. VFC further acknowledges that
it may from time to time in the performance of services under this Agreement
come into possession of information that could be deemed to be material
non-public information and that the possession of such information will limit
VFC's ability to buy or sell shares of ITNG, including shares underlying its
Option.
7. COMPLIANCE WITH LAWS. VFC shall comply with all applicable laws in
connection with rendering services hereunder and agrees to indemnify and hold
harmless ITNG and its officers, directors and agents from and against all
liabilities, losses, costs and expenses (including attorney's fees and costs)
arising out of VFC's failure to so comply.
8. ENTIRE AGREEMENT. This Agreement represents the entire Agreement
between the parties with respect to the subject matter hereof and is not subject
to alteration, modification or change except in writing signed by each of the
parties. In addition, this Agreement when executed shall supersede any and all
previous Agreements, whether written or oral, with respect to the subject matter
hereof. A waiver of any term or condition of this Agreement shall not be
construed as a general waiver. The obligations of the parties under this
Agreement shall not be assignable or transferable.
9. NOTICES. Any notices with respect to this Agreement shall be sent via
registered mail, return receipt requested, or facsimile to each of the parties
at the address designated at the top of page one.
10. CHOICE OF LAW. This Agreement shall be governed by and construed under
the laws of the State of New York.
11. DISPUTES. The prevailing party in any dispute pursuant to this
Agreement shall be entitled to reasonable attorneys' fees and costs.
<PAGE> 4
If the foregoing meets with your approval, please indicate by
counter-signing below.
Sincerely,
Virtual Financial Corp.
By: /s/ Richard R. Dwyer
-----------------------
Richard R. Dwyer, Jr.
Chief Operating Officer
AGREED TO AND ACCEPTED:
Integrated Transportation Network Group Inc.
/s/ Andrew Lee 2/16/99
- ----------------------------- ------------------
Mr. Andrew Lee Date
President
<PAGE> 1
EXHIBIT 10.17
VIRTUAL FINANCIAL CORP.
750 East Sample Road
Suite 204
Pompano Beach, Florida 33064
954-783-6992 Office
954-783-6952 Fax
February 16, 1999
Mr. Andrew Lee
Integrated Transportation Network Group Inc.
205 West 39th Street
16th Floor
New York, NY 10018
Facsimile: (212) 840-8845
Re: Finders Fee
Dear Andy,
This letter shall constitute the terms of the Consulting Agreement among
Virtual Financial Corp. ("VFC"), a corporation, and Integrated Transportation
Network Group Inc. ("ITNG"), a Delaware corporation. For good and valuable
consideration, it is agreed as follows:
1. ENGAGEMENT. VFC is retained by ITNG, on a nonexclusive basis, to
assist ITNG in locating sources of capital, such as:
a. High yield bonds;
b. Notes;
c. Bank loans;
d. Equity;
e. A combination of the above or any other form that is acceptable
to ITNG.
2. FINDERS FEE. Subject to the terms and conditions of this Section 2, if
ITNG receives capital from a source of capital introduced to ITNG by VFC, and
ITNG has not informed VFC that ITNG has a prior relationship with such source of
capital (after being informed by VFC of the identity of such source of capital),
VFC shall receive the following compensation:
a. 1.5% of all monies received up to $50 million.
<PAGE> 2
b. 1.25% of all monies received above $50 million up to $100
million.
c. 1% of all monies received above $100 million up to $500 million.
d. 3,000 shares of ITNG common stock for each $1 million received.
VFC shall notify ITNG of the identity of each potential source of
capital, prior to submitting ITNG materials to such person. If ITNG informs VFC
that it has a prior relationship with such source of capital, VFC shall not
submit ITNG materials to such person and shall not be entitled to any fee
hereunder concerning any capital invested in ITNG by such person, unless ITNG
authorizes VFC in writing to submit ITNG materials to such person, in which
case, VFC would be eligible to receive a fee, in accordance with the terms and
conditions of this agreement.
3. REGISTRATION RIGHTS.
a. ITNG agrees that it will, subject to the requirement that the
prior consent of any Secondary Underwriter be obtained, within
180 days of issuance and at the sole expense of ITNG, register
the shares of Common Stock issued hereunder under the Securities
Act of 1933 (the "Act") for resale by VFC. Such securities shall
be registered on a Form S-3 Registration Statement or any
successor form. ITNG shall supply prospectuses meeting the
requirements of the Act and such other documents as VFC may
reasonably request for at least one year following the
effectiveness of such registration in order to facilitate the
public sale or disposition of such securities, to register and
qualify any of such securities for sale in such states as VFC
designates and do any and all other acts and things which are
reasonably necessary to enable VFC to consummate the public sale
or other disposition of such securities.
b. VFC has knowledge and experience in financial and business
matters that each is capable of evaluating the merits and risks
of an investment in ITNG. VFC is familiar with the nature and
risks inherent in investments in unregistered securities and in
the business in which ITNG engages and have determined that an
investment in ITNG is consistent with its investment objectives
and income prospects. VFC represents and warrants that it is an
"accredited investor" as defined in Rule 501(a) of Regulation D
promulgated under the Act. VFC is acquiring the shares of Common
Stock issuable hereunder, for its own account for investment
purposes only and not with a view toward resale or distribution
of such shares either in whole or in part.
4. TERM. This Agreement shall be effective for a period of twelve months,
commencing upon the date of execution of this Agreement and may be terminated by
either party upon thirty (30) days written notice.
5. JOINT RELATIONSHIP. Nothing contained in this Agreement shall be
construed to imply a joint venture or partnership or principal/agent
relationship between the parties hereto, and no party y this Agreement shall
have any right, power or authority to act or create any obligation, expressed or
implied, on behalf of the other party other than as set forth herein.
<PAGE> 3
6. CONFIDENTIAL INFORMATION. The parties hereto recognize that a major
need of ITNG is to preserve its trade secrets and confidential information. By
reason of this Agreement, VFC will have access to, and will obtain specialized
knowledge, trade secrets and confidential information about ITNG's plans and
operations. Therefore, VFC hereby agrees that during and after the Term VFC will
not use, other than in performing services hereunder, disclose to others, or
publish any confidential business information about the affairs of ITNG,
including but not limited to confidential information concerning ITNG's
products, methods, analytical techniques, technical information, customer
information, employee information, and other confidential information acquired
by it in the course of its past or future services for ITNG. VFC agrees to take
reasonable and appropriate steps to prevent the improper or inadvertent
disclosure of any such confidential information. VFC further acknowledges that
it may from time to time in the performance of services under this Agreement
come into possession of information that could be deemed to be material
non-public information and that the possession of such information will limit
VFC's ability to buy and sell shares of ITNG.
7. COMPLIANCE WITH LAWS. VFC shall comply with all applicable laws in
connection with rendering services hereunder and agrees to indemnify and hold
harmless ITNG and its officers, directors and agents from and against all
liabilities, losses, costs and expenses (including attorney's fees and costs)
arising out of VFC's failure to so comply.
8. ENTIRE AGREEMENT. This Agreement represents the entire Agreement
between the parties with respect to the subject matter hereof and is not subject
to alteration, modification or change except in writing signed by each of the
parties. In addition, this Agreement when executed shall supersede any and all
previous Agreements, whether written or oral, with respect to the subject matter
hereof. A waiver of any term or condition of this Agreement shall not be
construed as a general waiver. The obligations of the parties under this
Agreement shall not be assignable or transferable.
9. NOTICES. Any notices with respect to this Agreement shall be sent via
registered mail, return receipt requested, or facsimile to each of the parties
at the address designated at the top of page one.
10. CHOICE OF LAW. This Agreement shall be governed by and construed under
the laws of the State of New York.
11. DISPUTES. The prevailing party in any dispute pursuant to this
Agreement shall be entitled to reasonable attorneys' fees and costs.
<PAGE> 4
If the foregoing meets with your approval, please indicate by
counter-signing below.
Sincerely,
Virtual Financial Corp.
By: /S/ RICHARD R. DWYER, JR.
-------------------------
Richard R. Dwyer, Jr.
Chief Operating Officer
AGREED TO AND ACCEPTED:
Integrated Transportation Network Group Inc.
/s/ Andrew Lee 2/16/99
- ------------------------------------------- --------------------------
Mr. Andrew Lee Date
President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF INTEGRATED TRANSPORTATION GROUP INC. AND
SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 8,899,000
<SECURITIES> 0
<RECEIVABLES> 126,000
<ALLOWANCES> 0
<INVENTORY> 41,000
<CURRENT-ASSETS> 0
<PP&E> 2,032,000
<DEPRECIATION> (958,000)
<TOTAL-ASSETS> 77,583,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 127,000
<OTHER-SE> 54,953,000
<TOTAL-LIABILITY-AND-EQUITY> 77,583,000
<SALES> 0
<TOTAL-REVENUES> 5,692,000
<CGS> 0
<TOTAL-COSTS> 3,172,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 135,000
<INCOME-PRETAX> 2,385,000
<INCOME-TAX> 434,000
<INCOME-CONTINUING> 1,951,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,847,000
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.13
</TABLE>
