SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
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GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant To Section 12(b) or (g) of the Securities Exchange Act of 1934
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Reliant Interactive Media Corp.
formerly Reliant Corporation
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Nevada 87-0411941
(Jurisdiction of Incorporation) (I.R.S. Employer Identification No.)
13535 Feather Sound Drive -Suite 220, Clearwater, Florida 33762
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (727) 299-0020
The following Securities are to be registered pursuant to Section 12(g)/12(b) of
the Act:
Class-A Common Voting Equity Stock
4,251,770
June 30, 1999
The EXHIBIT INDEX is located at Page 25 of this Registration Statement
Form 10-SB June 30, 1999 Reliant Interactive Media Corp.
Exhibit Index on Page 45 Sequential Page 1
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENT
This Report contains "forward-looking" statements regarding potential
future events and developments affecting the business of the Company. Such
statements relate to, among other things, (i) competition for customers for its
products and services; (ii) the uncertainty of developing or obtaining rights to
new products that will be accepted by the market and the timing of the
introduction of new products into the market; (iii) the limited market life of
the Company's products; and (iv) other statements about the Company or the
direct response industry.
The Company's ability to predict results or the effects of any pending
events on the Company's operating results is inherently subject to various risks
and uncertainties, including competition for products, customers and media
access; the risks of doing business abroad; the uncertainty of developing or
obtaining rights to new products that will be accepted by the market; the
limited market life of the Company's products; and the effects of government
regulations. See MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
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PART I
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Item 1. Description of Business.
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(a) Business Development.
(1) Form and Year of Organization.
This Corporation Reliant Interactive Media Corp. (of Nevada) was first
incorporated in Utah on July 30, 1984, as Reliant Corporation for the purpose of
creating a vehicle to obtain capital and seek out, investigate and acquire
interests in products and businesses with the potential for profit. On or about
July 15, 1998 the company acquired its present name, Reliant Interactive Media
Corp. On or about March 18, 1999, the company moved its place of incorporation
from Utah to Nevada without other changes in its corporate organization. On
December 31, 1995, and continuously through December 31, 1997, the issuer had
2,369,600 shares of common stock issued and outstanding.
The numbers used herein are those which give effect to two successive
reverse splits of the common stock of the issuer, in August 1998, and March
1999, each having been a five to one reverse. Please refer to Part II, Item 4,
for subsequent share issuances, during the past three years, totaling 1,882,170.
Accordingly, the total issued and outstanding shares of the issuer's common
stock stands at 4,251,770.
(2) Bankruptcy, Receivership or Similar Proceeding. None from inception
to date.
(b) Business of the Issuer. This Company will engage in the business of
Electronic & Multi Media Retailing (print, radio, television and the internet).
Reliant Interactive Media Corp. is an emerging leader in the use of direct
response transactional television programming, known as infomercials, to market
consumer products. Reliant, with its global products, will bring its products
into more than 370 million households in 70 countries worldwide.
Background
The infomercial industry was first developed in the United States after
the FCC rescinded its limitations on advertising minutes per hour in 1984,
thereby permitting 30-minute blocks of television advertising. The deregulation
of the cable television industry and the resulting proliferation of cable
channels increased the available media time and led to the growth of the United
Form 10-SB June 30, 1999 Reliant Interactive Media Corp.
Exhibit Index on Page 45 Sequential Page 2
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States infomercial industry. Producers of infomercials combined direct response
marketing and retailing principles within a television talk show-type format and
purchased media time from cable channels to air their infomercials. After an
initial growth period, the industry consolidated through the end of the 1980's.
At the same time, increased attention from the FTC and the federal and state
consumer protection agencies led to greater regulation of the industry and to
the development of the National Infomercial Marketing Association as a
self-regulatory organization. By the early 1990's, infomercials and home
shopping cable channels had become a more accepted forum for obtaining
information about products and services and making purchases from home. As the
infomercial industry has matured, the variety of products marketed through
infomercials has steadily increased. Today, offerings as diverse as car care
products and computers are marketed through infomercials.
Industry Overview
The development of the international infomercial industry began in Western
Europe following the initial industry development in the United States. Quantum
Marketing International, which was founded by Reliant's chairman, Kevin
Harrington, was acquired by National Media in 1991, and was one of the pioneers
in the international infomercial industry's development, commencing operations
in 1990. The industry expanded throughout Europe and then into non-European
markets through the early 1990's and continues to expand into other worldwide
markets today. Whereas domestically, distribution of products through
infomercials is viewed as an alternative to retail, mail order and other means
of distribution, in many international markets distribution through traditional
channels is not readily accessible to many consumers. As a result of these
factors, the Company believes that it has an opportunity to be one of the
primary distributors of innovative consumer products in the international
marketplace.
Prior to 1984, the maximum allowable minutes of television per hour was
limited (16 minutes of commercial messages per hour) by the Federal
Communications Commission ("FCC"), making the television infomercial an
impossibility. In 1984, the FCC rescinded its limitations, permitting the sale
of blocks of advertising and the television infomercial was born. Currently, the
electronic retailing industry, which includes infomercials and short-form
commercials, television shopping channels and multimedia marketing, has
estimated annual sales of $8.6 billion. According to Electronic Retailing
Association, of which Kevin Harrington is a founding Board member, approximately
thirteen million adults in the United States (about 6% of the adult population)
bought at least at one item from a TV offer in 1997 versus in 1995, when
approximately nine million bought merchandise. Many electronic retailers are now
approaching cyberspace and the world of e-commerce as their next frontier. A
U.S. Commerce Department study shows that 100 million consumers are now online.
Internet traffic is doubling every 100 days. The "digital economy" is growing
twice as fast the economy overall. 10 million Internet users made online
purchases by the end of 1997, up from 4.7 million six months earlier.
Company Strategy
Reliant's goal is to be recognized as a worldwide leader in direct
marketing. Through direct response transactional television programming and
integrated consumer marketing techniques, the Company is pursuing a business
strategy focusing on: (i) increasing the utilization of its global relationship,
(ii) developing and marketing innovative consumer products to develop its
library of infomercial programs and (iii) engineering an efficient business
model for the conduct of its worldwide direct response business. The Company is
revving up its efforts to create a position as a worldwide leader in infomercial
programming. Through its global contracts, and media access, the Company will
have the ability to deliver infomercial programming and products to over 370
million households worldwide. The Company intends to continue to explore new
ways to effectively utilize and leverage this worldwide distribution, reach and
capability. In addition, the Company intends to aggressively utilize its assets
such as its customer lists in order to realize the true value thereof.
Form 10-SB June 30, 1999 Reliant Interactive Media Corp.
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Develop and Market Innovative Products to
Develop a Library of Infomercial Programs
The Company continually seeks out innovative consumer products which it can
market and distribute profitably. The Company has an in-house product
development/marketing capability responsible for researching, developing and
analyzing products and product ideas. The Company augments its product
development activities through relationships with third parties. The Company
believes that a large library of infomercial programs, together with its
extensive international operations experience in product sourcing,
telemarketing, order fulfillment and customer service, will give it a
significant competitive advantage over other companies desiring to enter this
marketplace. While the Company incurs certain initial and ongoing costs in
connection with adapting a product and infomercial for specific markets, the
primary expenses are incurred when the product/infomercial is first developed
for its initial target market. Thus, as the Company decides to introduce a
product into additional markets, it can do so quickly, efficiently and
relatively inexpensively. The Company believes that by further expanding its
coverage into other parts of the world it will be able to further leverage its
library of infomercial programs and associated products by extending the time
period during which each product generates revenues and, therefore, the total
worldwide revenues for a particular product.
Engineering the Most Efficient Business Model for the Company
The Company continues to explore methods to better control each step in
the development and life cycle of a product/infomercial and develop its
expertise in, and refine its systems with regards to, product sourcing, in-bound
telemarketing, production, order fulfillment and customer service. Reliant
believes that its current competitive advantages of international media
relationships and fully-integrated program production, sourcing, as well as the
development of new marketing partners, provide it with a strong base from which
it can lower its costs and engineer a business model which is the most efficient
for a worldwide direct response business.
Once a speculative, hit-driven fringe industry, infomercials are now seen
as a predictable, financially sound business that provides clues to emerging
trends in global consumer marketing and the burgeoning electronic retailing
industry. The Company will utilize its executive managements' proven expertise
in the direct response transactional television (DRTV) arena, known as
infomercials, to market consumer products. By combining television's proven
ability to drive product sales with the global informational and access
capabilities of the Internet, the Company is a true multi-media marketing
company. Print, radio and direct mail are the other key components of the
Company's strategy. The Company is a Corporate Member of the Association of
Internet Professionals ("AIP"). AIP's website can be found at
www.association.org. The AIP is the premier professional association for
internet professionals worldwide. AIP, founded in 1994, is the largest and
fastest growing professional association in the industry. The Company's initial
focus will be to market consumer products through the infomercial vehicle.
Reliant has chosen products that offer sales continuity, and Reliant endeavors
to own the full product rights, the name, manufacturing and the product itself.
In product sales, television creates interest: a broader, multi-media approach
ensures maximum profits. The Company plans to use its infomercial programming to
develop a worldwide presence in e- commerce markets. Reliant will use segments
of its TV infomercial programs to drive consumers to its websites,
www.lifestylesmall.com, www.cigarnow.com, www.rimc.com and
www.reliantinteractive.com.
The Cigar Television Network is a wholly-owned subsidiary of the Company.
This subsidiary produces the half-hour, celebrity driven Smokin' Lifestyles
video magazine show, which draws national and local advertising revenues and
cross-markets the CigarNow.com website. It also promotes its exclusive "CoBee
Dual-Flame Lighter/Cutter" for cigars. CigarNow.com is the Company's first web-
based e-commerce venture and features over 550 premium cigars, plus accessories
and upscale lifestyle products. Cigarnow.com will also serve as the electronic
cigar vendor on several high-profile, high- traffic partner sites.
Form 10-SB June 30, 1999 Reliant Interactive Media Corp.
Exhibit Index on Page 45 Sequential Page 4
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The Company entered into a Web Site Purchase Agreement on May 26, 1999 to
purchase from Tony Little the Tony Little Web Site. Tony Little is one of the
most recognized fitness personalities on television and is often referred to as
"America's Fitness Guru." This web site currently offers a variety of
health-related products promoted by Tony Little. The Company is responsible for
the operating expenses of the web site and will receive one-half of the net
revenues. The consideration for the purchase was $10,000 and 100,000 shares of
the Company's common stock to be issued subject to the exemption provided by
section 4(2) of the Securities Act of 1933.
Product Development
The Company's product development/marketing department is the most vital
component of the Company. Kevin and Tim Harrington, along with Mel Arthur,
actively participate on a daily basis in the ongoing effort to research and
develop new products that may be suited for direct response television marketing
and subsequent marketing through non-infomercial distribution channels. This
group develops new product ideas from a variety of sources, including inventors,
suppliers, trade shows, industry conferences, strategic alliances with
manufacturing and consumer product companies and the Company's ongoing review of
new developments within its targeted product categories. As a result of
management's prominence in the infomercial and retail television industry, it
also receives unsolicited new product proposals from independent third parties.
During the evaluation phase of product development, the Company evaluates the
suitability of the product for television demonstration and explanation as well
as the anticipated perceived value of the product to consumers, determines
whether an adequate and timely supply of the product can be obtained and
analyzes whether the estimated profitability of the product satisfies the
Company's criteria.
The Company is devoting attention to the development and products
specifically targeted at markets outside of North America. The Company will
review its infomercial library on an ongoing basis to select those products
which it believes will be successful in Europe and/or Asia and/or its other
international markets. When a product which was initially sold domestically is
selected for international distribution, the infomercial is dubbed and product
literature is created in the appropriate foreign languages. In addition, a
review of the product's and the infomercial's compliance with the local laws is
completed. The Company's licensed distributor then begins airing the infomercial
internationally. The Company also airs shows and distributes products of other
independent domestic infomercial companies.
The Company obtains the rights to new products created by third parties
through various licensing arrangements generally involving royalties related to
sales of the product. The amount of the royalty is negotiated and generally
depends upon the level of involvement of the third party in the development and
marketing of the product. The Company generally pays the smallest royalty to a
third party that only provides a product concept. A somewhat higher royalty to a
third party that has fully developed and manufactured a product. The Company
also obtains the rights to sell products which have already been developed,
manufactured and marketed through infomercials produced by other companies. In
such cases, the Company generally pays a higher royalty rate to the third party
because of the relatively small amount of the Company's resources required to
develop the product. The Company generally seeks exclusive worldwide rights to
all products in all means of distribution. In some cases, the Company does not
obtain all marketing and distribution rights, but seeks to receive a royalty on
sales made by the licensor pursuant to the rights retained by the licensor.
Infomercial Development and Test Marketing
Once the Company decides to bring a product to market, it arranges for the
production of a 30- minute infomercial that will provide in-depth demonstrations
and explanations of the product. The Company attempts to present a product in an
entertaining and informative manner utilizing a variety of program formats. The
Company's infomercials are currently produced in-house by contracting with
established independent experienced producers who work under Reliant's
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direction. The cost of producing an infomercial generally ranges from $25,000 to
$350,000. In addition, producers, hosts and spokespersons generally receive fees
based upon sales of the products.
Following completion of the production of an infomercial, the program is
then tested in the United States in specific time slots on both national cable
networks and targeted broadcast stations. If a show achieves acceptable results
in the market tests, it is generally aired on a rapidly increasing schedule on
cable networks and broadcast channels. During this initial phase, the Company
may modify the creative presentation of the infomercial and/or the retail
pricing, depending upon viewer response. After the initial marketing phase, the
Company may adjust the frequency of a program's airing to achieve a schedule of
programs that it believes maximizes the profitability of all of the Company's
products being marketed through infomercial programming at a given time.
Media Access
An important part of the Company's ability to successfully market products
is its access to media time. The Company's infomercial programming will be
available through licensed distributors to more than 370 million households in
70 countries worldwide, including Argentina, Australia, Austria, Belarus, the
Benelux countries, Brazil, China, Denmark, Ecuador, most Eastern European
countries, Finland, France, Germany, Greece, Ireland, Italy, Japan, Mexico, most
Middle Eastern countries, New Zealand, Norway, Peru, Portugal, Russia, Spain,
most South American countries, Sweden, Switzerland, Taiwan, Turkey, Ukraine and
the United Kingdom.
Internationally, the Company's infomercials are aired on one or more of
three technologies by its licensed distributors: (i) satellite transmission
direct to home with satellite reception dishes; (ii) cable operators who
retransmit satellite broadcasts to cable-ready homes and (iii) terrestrial
broadcast television.
Domestically, the Company purchases most of its cable television time
directly from cable networks and their respective media representatives. In
addition to domestic air time purchased on cable networks, the Company also
purchases broadcast television time from network affiliates and independent
stations. Broadcast television time segments are purchased primarily in
30-minute spots. The Company believes that there is currently more than an
adequate supply of broadcast television time available from these sources in the
United States to satisfy the Company's needs. The Company is dependent on having
access to media time to televise its infomercials on cable networks, satellite
networks, network affiliates and local stations.
Sourcing and Manufacturing
The Company will use sources in the United States and several countries in
Europe and Asia to manufacture products sold through its infomercials if it
deems it to be economically advantageous. In general, before the Company takes
any sizable inventory position in a product, the Company test markets the
product. The Company then purchases additional inventory for roll-out of the
product.
In-Bound Telemarketing
The Company strives to create a problem-free fulfillment process for its
customers. This process consists of in-bound telemarketing, order fulfillment
and customer service. The first step in this process is the order-taking
function known as in-bound telemarketing. Customers may order products marketed
through infomercials during or after the infomercial by calling a telephone
number (toll-free in the United States), which is shown periodically on the
television screen during the broadcast. Both domestically and, in most cases,
internationally, the Company currently subcontracts its telemarketing function
to one of various third parties that provide this service for a fee-based
principally on the number of telephone calls answered. In all instances
domestically, in-bound telemarketers electronically transmit orders to the
Company's order fulfillment contractors where the product is packaged and
shipped. In certain cases, at the time of purchase, the in-bound telemarketers
Form 10-SB June 30, 1999 Reliant Interactive Media Corp.
Exhibit Index on Page 45 Sequential Page 6
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also promote, cross-sell and upsell complementary and/or additional products
relating to the product for which the inquiry is received. Such sales efforts
are orchestrated by the Company's marketing personnel who script the sales
approaches of the telemarketing personnel.
The majority of customer payments in the United States are made by credit
cards over the telephone with the remainder paid by check.
Order Fulfillment
The Company contracts with various fulfillment centers. Activities at
these facilities include receiving merchandise from manufacturers, inspecting
merchandise for damages or defects, storing and assembling product for later
delivery, packaging and shipping of products and processing of customer returns.
They primarily use bulk shippers to deliver products to customers in the United
States. In certain instances, the manufacturer of the product ships orders
directly to the customer. Each customer is charged a shopping handling fee,
which varies among products.
Customer Service
An important aspect of the Company's marketing strategy is to maintain and
improve the quality of customer service and to respond to customer inquires,
provide product information to customers and process product returns. Customer
service is provided on a contract basis through third parties who operations are
monitored by the Company. The Company generally offers an unconditional 30-day
money back return policy to purchasers of any of its products. In addition,
products are generally covered by warranties offered by the manufacturer for
defective products. The terms of such warranties vary depending upon the product
and the manufacturer. The Company believes that its return rates will be within
the customary range for direct marketing businesses.
Non-Infomercial Marketing
Based on the success of certain of its products in traditional retail
markets and the evolution of its business, the Company believes that its
transactional television programming is effective in building consumer awareness
of its products, as well as positioning the Company to act as the media
marketing partner for manufacturers of consumer products. The Company's
attempting to capitalize on its ability to create product awareness and its
ability to act as a media marketing partner to extend the sales life of its
products by shifting products from traditional infomercial programming to
non-infomercial marketing channels such as retail distribution, catalogs, direct
mail, direct response print ads, television home shopping programs, credit card
statement inserts and other channels resulting from the development of strategic
partnerships. The Company believes that established manufacturers are
increasingly regarding infomercials as a desirable vehicle to showcase their
products to create and build brand awareness and generate follow-up product
sales through traditional retail outlets.
The Company intends to pursue expansion of its retail operations in order
to capitalize on the consumer brand-awareness created by the Company's
infomercials and reinforced by the "As Seen On TV" in-store signage. The Company
believes that the product exposure created by the Company's transactional
television programming enables the Company and its partners to utilize
traditional retail distribution channels without incurring any of the additional
advertisement costs that other consumer product companies may incur. In this
manner, the Company believes that it will be able to market products to
consumers who view its programming, but do not traditionally purchase products
through direct response marketing.
Current Products
The Company markets consumer products in a wide variety of categories,
i.e.: health fitness, beauty, weight loss, business opportunities, household
appliances, etc. The Company will be dependent, in significant part, upon its
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ability to develop or obtain rights to new products to supplement and replace
existing products as they mature through their product life cycles. The
Company's expansion into international markets reduces somewhat its dependency
on new shows by lengthening the potential duration of the life cycle of programs
that will comprise the Company's infomercial library. Historically, the majority
of the industry's products generate their most significant domestic revenues in
the first 6 months following initial airing of the product's infomercial.
Internationally, however, products typically generate revenues more evenly over
a longer period.
The Company currently has agreements for the sale of the following
products:
Pure Protein Bar. The Company has an International Marketing and
Distribution Agreement with Worldwide Sports Nutrition, Inc. for the sale
of the world's number one selling high protein, low carbohydrate, low fat
Pure Protein Bar.
BIOflex Therapeutic Magnet Product Line. The Company has an International
Marketing and Distribution Agreement with BWL Distributors, Ltd. to market
the Sobakawa BIOflex therapeutic magnet product line through direct
response infomercials.
Tel-Com Wireless Cable TV Corp. The Company has signed a Letter of Intent
with Tel-Com Wireless Cable TV Corp. (NASDAQ: TCTV). The relationship
between the two companies will focus on three elements. The first is a
licensing agreement that will grant TCTV the rights to air Reliant's
'Smokin' Lifestyles' show on Ivana Trump's 5th Avenue Channel.
Additionally, the two companies will form a strategic link between TCTV's
5thAvenueChannel.com website and Reliant's Cigarnow.com internet
store-front, where CigarNow.com products will be offered for sale on
5thAvenueChannel.com and vice versa. Finally, Reliant and TCTV will embark
on a joint venture for the launching of both 5th Avenue Channel and
5thAvenueChannel.com in Japan.
The 5th Avenue Channel is the luxury lifestyles television channel hosted
by Ivana Trump, who also serves as the 5th Avenue's Chairman of the Board.
The Channel will air Bloomberg Television programming and other business
programs in its "5th Avenue Financial" segments; fashion shows and
interviews from Fashion TV; travel and other lifestyles programs; and
shopping opportunities, including segments from the House of Ivana.
The 5th Avenue Channel's Internet site - 5thAvenueChannel.com, features
high-end products and services to be offered for sale on the Internet.
Realm(R) Fragrances. The Company has an International Marketing and
Distribution Agreement with Human Pheromone Sciences, Inc. for the sale of
products containing patented, synthesized human pheromones. These products
include a line of fragrances, talc, body lotions, after shaves, deodorants
and candles. This Agreement is for the countries of Japan, Argentina, and
Italy.
Natural Hair. The Company has an International Marketing and Distribution
Agreement with Daniel Rogers Laboratories, Inc. for the sale of a natural
hair growth product.
1-Shot Laundry Vitamins. The Company has an International Marketing and
Distribution Agreement with Cactus Jack's Marketing Corp. for the sale of
1-Shot Laundry Vitamins. This product is in the form of a solid
effervescent tablet, which can be used for multiple cleaning purposes when
dissolved.
Eternal Energy Products. The Company has an International Marketing and
Distribution Agreement with Golden Pride, Inc., which manufactures a
proprietary line of vitamin and energy supplement products. The Agreement
provides for selling a starter kit of various products and inviting
viewers to join "Tony Little's Eternal Energy" multi-level marketing
program.
Y2K Kit. The Company has an International Marketing and Distribution
Agreement with Dynamic Solutions, dba Buzz Nofal, Inc., for the sale of
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its Y2K kit. This product includes three hours of video designed to give
the consumer information with respect to dealing with the problems
expected to arise because of the Y2K related problems.
Smart Shower. The Company has an exclusive agreement with Essential
Ingredients, Inc. to market Smart Shower on the QVC Network. This product
is a functionalized chelate/surfactant that dries on shower walls and
doors to form an invisible barrier against water-spotting and soap
build-up, while providing anti-fogging qualities for glass and mirrors.
Youthology. The Company has an exclusive agreement with Youthology, LLC to
market a precursor to HGH (human growth hormone). The products sold
include a nutrient drink and facial night cream.
Steam Iron. The Company has a talent agreement with Sandy Bradley to
promote a light-weight steam iron for pressing clothes while they hang.
Government Regulation
Various aspects of the Company's business are subject to regulation and
ongoing review by a variety of federal, state, and local agencies, including the
FTC, the United States Post Office, the CPSC, the FCC, FDA, various States'
Attorneys General and other state and local consumer protection and health
agencies. The statutes, rules and regulations applicable to the Company's
operations, and to various products marketed by it, are numerous, complex and
subject to change.
The Company collects and remits sales tax in the states in which it has a
physical presence. The Company is prepared to collect sales taxes for other
states, if laws are passed requiring such collection. The Company does not
believe that a change in the tax laws requiring the collecting of sales tax will
have a material adverse effect on the Company's financial condition or results
of operations.
(1) Competitive business conditions and the small business issuer's competitive
position in the industry. Competition in the Electronic Retailing Industry is
intense and may be expected to intensify. There are other, larger and
well-established electronic retailers, with whom this development stage company
must compete. The Company competes directly with several companies which
generate sales from infomercials. The Company also competes with a large number
of consumer product companies and retailers which have substantially greater
financial, marketing and other resources than the Company, some of which have
recently commenced, or indicated their intent to conduct, direct response
marketing. The Company also competes with companies that make imitations of the
Company's products at substantially lower prices. Products similar to the
Company's products may be sold in department stores, pharmacies, general
merchandise stores and through magazines, newspapers, direct mail advertising
and catalogs.
(2) Properties and Employees. This Company's principal offices are located at
13535 Feather Sound Drive, Suite 220, Clearwater, Florida, 33762 Telephone:
(727) 299-0020 Facsimile: (727) 299-0101. The Company currently leases
approximately four thousand (4000) square feet of office space pursuant to a
year lease for its Clearwater, Florida, principal executive offices. The lease,
which commenced in 1999, provides for annual rent payments of $81,000. The
facility encompasses 25 separate offices and a board room. As of March 31, 1999,
the Company had approximately 10 full-time employees and a substantial number of
contract employees, i.e. producers, technical and artistic talent. None of the
Company's employees are covered by collective bargaining agreements and
management considers relations with its employees to be good.
Form 10-SB June 30, 1999 Reliant Interactive Media Corp.
Exhibit Index on Page 45 Sequential Page 9
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Item 2. Management's Discussion and Analysis or Plan of Operation.
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(a) Plan of Operation.
(1) Plan of Operation for the next twelve months.
(i) Cash Requirements and of Need for additional funds, twelve
months.
The Issuer is a development stage Company and has only limited capital
resources. It will be necessary for the Company to seek additional capital over
time to pursue its business plan. Of the 878,200 shares issued most recently
(please refer to Part II, Item 4), the Company received an aggregate of
$663,225.00 from a total of nine highly sophisticated investors for the purpose
of producing four infomercials. In consideration of this investment, the
investors received an aggregate of 1,000,000 shares of restricted common stock
of the Company. In addition, the investors will receive an aggregate of 5% of
the gross revenues (as defined by agreement) from sales generated by the four
infomercials produced until 120% of the investment has been returned to the
investors. Thereafter, the percentage received by these investors will be
reduced to an aggregate of .04%. These investors were also granted an option to
provide funding on two additional infomercials for similar consideration. The
Company has recently made an agreement with Oasis Entertainment's Fourth Movie
Project, Inc. to provide funding in the amount of $250,000.00 for use in the
production of three additional infomercials. Oasis is to receive 250,000 shares
of common stock upon completion of the funding in April, plus a royalty of 2% of
the adjusted gross revenues derived on all products designated in the agreement
until Oasis has been paid $625,000.00, and thereafter 1% thereof in perpetuity.
The company is expected to generate enough sales revenues to satisfy its cash
requirements for the next twelve months, although there is no assurance that
this can be achieved. The sum and substance of these arrangements is that the
Company has the funding to pursue its business plan, for the next twelve months,
but has paid a substantial premium to secure it.
The fact remains that, in all likelihood, unless the Company is successful
in generating continuing investor interest, and in securing additional
investment, or possibly debt-financing arrangements, the business of the
Company, however promising, cannot expand toward its full potential, and may not
achieve the profitability expected. The Company's business plan is ambitious,
and although its products and services enjoy a certain synergy with each other,
the sheer number of projects, each with its own focus and potential market, will
require that Company grow and expand its operations over time. Its failure to
grow in a timely manner would be expected to leave incentive openings for other
competitors to fill.
(ii) Summary of Product Research and Development.
The Company's product development/marketing department is the most vital
component of the Company. Kevin and Tim Harrington, along with Mel Arthur,
actively participate on a daily basis in the ongoing effort to research and
develop new products that may be suited for direct response television marketing
and subsequent marketing through non-infomercial distribution channels. This
group develops new product ideas from a variety of sources, including inventors,
suppliers, trade shows, industry conferences, strategic alliances with
manufacturing and consumer product companies and the Company's ongoing review of
new developments within its targeted product categories. As a result of
management's prominence in the infomercial and retail television industry, it
also receives unsolicited new product proposals from independent third parties.
During the evaluation phase of product development, the Company evaluates the
suitability of the product for television demonstration and explanation as well
as the anticipated perceived value of the product to consumers, determines
whether an adequate and timely supply of the product can be obtained and
analyzes whether the estimated profitability of the product satisfies the
Company's criteria.
Form 10-SB June 30, 1999 Reliant Interactive Media Corp.
Exhibit Index on Page 45 Sequential Page 10
<PAGE>
The Company is devoting attention to the development and products
specifically targeted at markets outside of North America. The Company will
review its infomercial library on an ongoing basis to select those products
which it believes will be successful in Europe and/or Asia and/or its other
international markets. When a product which was initially sold domestically is
selected for international distribution, the infomercial is dubbed and product
literature is created in the appropriate foreign languages. In addition, a
review of the product's and the infomercial's compliance with the local laws
completed. The Company's licensed distributor then begins airing the infomercial
internationally. The Company also airs shows and distributes products of other
independent domestic infomercial companies.
The Company obtains the rights to new products created by third parties
through various licensing arrangements generally involving royalties related to
sales of the product. The amount of the royalty is negotiated and generally
depends upon the level of involvement of the third party in the development and
marketing of the product. The Company generally pays the smallest royalty to a
third party that only provides a product concept. A somewhat higher royalty to a
third party that has fully developed and manufactured a product. The Company
also obtains the rights to sell products which have already been developed,
manufactured and marketed through infomercials produced by other companies. In
such cases, the Company generally pays a higher royalty rate to the third party
because of the relatively small amount of the Company's resources required to
develop the product. The Company generally seeks exclusive worldwide rights to
all products in all means of distribution. In some cases, the Company does not
obtain all marketing and distribution rights, but seeks to receive a royalty on
sales made by the licensor pursuant to the rights retained by the licensor.
(iii) Expected purchase or sale of plant and significant equipment.
None.
(iv) Expected significant change in the number of employees. Not
known.
(b) Discussion and Analysis of Financial Condition and Results of Operations.
In 1998, the company closed the year with a loss, with minimal revenues,
in pre-launch development mode, but these results are not deemed to reflect true
business operations. In 1998, the company had significant expenses that resulted
in a loss for the year. Management believes that revenues will continue to
increase in 1999, but to achieve the continued growth of the Company's business,
advertising, promotional and production expenses will remain significant. While
the upside potential from successful infomercial marketing is tremendous, the
risk of failure is always present. Some of the projects may fail, or all may
fail. If some are successful, the success may offset the losses from others
significantly or may not. Accordingly, there can be no assurance that
substantial profitability will be achieved in the next twelve months.
While this Company is presently able to manage its present phase of
development, for a indefinite interim, it cannot regard its financial condition
as stable. Unless events in the future are favorable, both in terms of profit
from operations now being undertaken, and also favorable in attracting investor
interest, even debt financing will not produce a stable financial condition for
the Company.
- --------------------------------------------------------------------------------
Item 3. Description of Property.
- --------------------------------------------------------------------------------
This Company's principal offices are located at 13535 Feather Sound Drive,
Suite 220, Clearwater, Florida, 33762 Telephone: (727) 299-0020 Facsimile: (727)
299-0101. The Company currently leases approximately four thousand (4000) square
feet of office space pursuant to a year lease for its Clearwater, Florida,
principal executive offices. The lease, which commenced in 1999, provides for
annual rent payments of $81,000. The facility encompasses 25 separate offices
and a board room.
Form 10-SB June 30, 1999 Reliant Interactive Media Corp.
Exhibit Index on Page 45 Sequential Page 11
<PAGE>
- --------------------------------------------------------------------------------
Item 4. Security Ownership of Certain Beneficial Owners and Management.
- --------------------------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners. To the best of
Registrant's knowledge and belief the following disclosure presents the total
security ownership of all persons, entities and groups, known to or discoverable
by Registrant, to be the beneficial owner or owners of more than five percent of
any voting class of Registrant's stock. More than one person, entity or group
could be beneficially interested in the same securities, so that the total of
all percentages may accordingly exceed one hundred percent of some or any
classes. Please refer to explanatory notes if any, for clarification or
additional information.
(b) Security Ownership of Management. To the best of Registrant's knowledge
and belief the following disclosure presents the total beneficial security
ownership of all Directors and Nominees, naming them, and by all Officers and
Directors as a group, without naming them, of Registrant, known to or
discoverable by Registrant. More than one person, entity or group could be
beneficially interested in the same securities, so that the total of all
percentages may accordingly exceed one hundred percent of some or any classes.
Please refer to explanatory notes if any, for clarification or additional
information. Table A following discloses the share ownership actually issued and
outstanding.
Table B following Table A and its notes, discloses the existence and the
effect of certain management options, as if exercised, on the share ownership of
management and affiliates. Please refer to Executive Compensation, Item 6 of
this Part, for details as to entitlement, terms of exercise and prices for the
Options disclosed.
TABLE A
COMMON STOCK
OFFICERS AND DIRECTORS AND OWNERS OF 5% OR MORE
================================================================================
Name and Address of Beneficial Owner Actual
Ownership %
- --------------------------------------------------------------------------------
Kevin Harrington Chairman and CEO 1,456,100 34.25
80 Gulf Blvd
Belleair Beach FL 33786
- --------------------------------------------------------------------------------
Tim Harrington President and COO 300,000 7.06
531 Rafael Blvd NE
St. Petersburg FL 33704
- --------------------------------------------------------------------------------
Mel Arthur, Executive Vice President 5,000 0.12
12001 9th St N #2509
St. Petersburg FL 33716
- --------------------------------------------------------------------------------
Karl Rodriguez Secretary 1,000 0.02
3400 Ave of the Arts C421
Costa Mesa CA 92626
================================================================================
All Officers and Directors as a Group 1,762,100 41.44
================================================================================
================================================================================
Total Shares Issued and Outstanding 4,251,770 100.00
================================================================================
Form 10-SB June 30, 1999 Reliant Interactive Media Corp.
Exhibit Index on Page 45 Sequential Page 12
<PAGE>
Table B following, and its notes, discloses the existence and the effect
of certain management options, as if exercised, on the share ownership of
management and affiliates. Please refer to Executive Compensation, Item 6 of
this Part, Table C, for details as to entitlement, terms of exercise and prices
for the Options disclosed. The following Table B discloses the effect of share
ownership if all options and rights disclosed in Table C were exercised.
TABLE B
EFFECT OF OPTION EXERCISE ON SHARE OWNERSHIP
================================================================================
Shares TOTAL IF
Actual OPTIONS
Option Owner and as % OPTIONS EXERCISED %
Attributed
- --------------------------------------------------------------------------------
Kevin Harrington 1,456,100 34.25 3,720,000 5,176,100 44.96
- --------------------------------------------------------------------------------
Tim Harrington 300,000 7.06 2,480,000 2,780,000 24.15
- --------------------------------------------------------------------------------
Mel Arthur 5,000 0.12 1,060,000 1,065,000 9.25
================================================================================
Total Shares/Options 4,251,770 100.00 7,260,000 11,511,770 100.00
Outstanding
================================================================================
(c) Changes in Control/Reverse Acquisition. There are no arrangements known to
Registrant, including any pledge by any persons, of securities of Registrant,
which may at a subsequent date result in a change of control of the Issuer. A
"reverse acquisition" is the acquisition of a private company by a public
company, by which the private company's shareholders acquired control of the
public company. This Issuer is presently committed to the development of its
infomercial business. While this Issuer is continuously interested in
opportunities for direct acquisition of products, projects, assets and possible
businesses, which may have some synergy with its core business, this Issuer may
not be used as a vehicle for a reverse acquisition.
- --------------------------------------------------------------------------------
Item 5. Directors, Executive Officers, Promoters and Control Persons.
- --------------------------------------------------------------------------------
The following persons are the Directors of Registrant, having taken office
from the inception of the issuer, to serve until their successors might be
elected or appointed. The time of the next meeting of shareholders has called
for May 3, 1999.
Kevin Harrington. 42, prior to his current tenure as Chairman and CEO of
Reliant Interactive Media, Kevin Harrington helped pioneer the growth and
acceptance of televised direct-response marketing, or what our culture more
commonly calls "infomercials." In fact, Harrington produced his first
infomercial in 1985, and then founded Quantum International, one of the most
successful companies in direct response history. Limited to a three-person staff
(which included his brother, Tim), Harrington turned a $25,000 investment into
sales of more $140 million in the company's first two years of operation. While
at the helm of Quantum, Harrington launched a string of highly-profitable shows
featuring such universally popular products as The Great Wok of China, Wolfman
Jack's Solid Gold Rock 'n Roll Hits (the first ever music infomercial), The
JetStream Oven, The Daily Mixer, Ginsu/The Blade Knives, Kevin Trudeau's Mega
Memory and The Flying Lure (the industry's first fishing lure show). In 1989,
Harrington started the expansion of direct-response television into more than 30
foreign markets. In 1991, Quantum was sold to industry giant National Media. As
a result of this transaction, Harrington ascended to the presidency of National,
Form 10-SB June 30, 1999 Reliant Interactive Media Corp.
Exhibit Index on Page 45 Sequential Page 13
<PAGE>
where he presided over the launch of another string of a blockbuster shows,
including Bruce Jenner's Stair Climber, Bruce Jenner's Super Step, Bruce
Jenner's Powerwalk, Blue Coral's Autofom and Regal Royal Diamond Cookware. In
July, 1994, Harrington left National Media to form joint venture company with
The Home Shopping Network. Called HSN Direct International, the aim of the
venture was to develop an infomercial company that could take products that had
performed successfully on HSN and roll them out into traditional infomercial
formats for broadcast around the world. The high-profile domestic and foreign
successes of HSN Direct include shows such as Tony Little's Ab Isolator; Sweet
Simplicity, a hair removal product; and Kathy Smith's AirTech Glider. HSN Direct
also forged a number of ground-breaking alliance with international marketers in
countries throughout Europe, Latin America, Asia and the Middle East.
Eventually, the company saw its shows broadcast in some 70 countries around the
world. In August of 1998, Harrington was appointed Chairman and CEO of Reliant
Interactive Media Corp., a joint-venture public company (OTC BB: RIMC).
Tim Harrington. 33, prior to his current tenure as President and COO of
Reliant Interactive Media, Tim Harrington worked in close concert with his
brother pioneering the growth of the infomercial industry into an accepted means
of driving both direct and retail sales. Through his primary focus on the
details of legal, contractual and production matters. He continued in that role
as the executive vice-president of National Media, also picking up executive
responsibility for the firm's marketing and sales departments. As the co-founder
and executive vice-president of HSN Direct International, Tim exercised
executive control and leadership over product development and marketing groups
that generated approximately $30 million in annual sales. HSN Direct's solid
production values and media-buying savvy are directly attributed to his
leadership of those two key areas. In his current role as president of Reliant,
Tim is more involved than ever in over-seeing the infomercial production and
product development activities for the Company.
Mel Arthur. 56, prior to his current tenure as Executive Vice President
and Director of Reliant Interactive Media, Mr. Arthur was the "Top Producing
show host," producing approximately a billion dollars in revenues while on the
air during his eight-year career with Home Shopping Network, and was
acknowledged in the industry as one of the most versatile hosts on the air. His
expertise ranges from computers, fine jewelry, oriental rugs, exercise
equipment, home electronics, vitamins, health and fitness to collectibles and
more. Mr. Arthur achieved record sales, including almost 3 million dollars sold
in computers, in less than 30 minutes. He has appeared with some of the top
celebrities on television and in sports, such as Vanna White, Barbara Mandrel,
Ed McMahon, Mickey Mantle, Ted Williams, Willie Mays, and Jim Brown, just to
name a few. His business experience is highlighted by a six-year career as a
sportscaster and color announcer for the USFL, NASL, the Jacksonville University
Basketball Team, and he was the force behind the first half hour magazine shows
emanating from PGA Tour Headquarters and The Tournament Player's Championship.
Mel was voted Jacksonville's Most Popular radio personality. Mr. Arthur was
President of his own insurance agency for three years; was a leader in the
telecommunications industry for eight years between 1972 and 1980 as a pioneer
in the telephone interconnect industry; and between 1970 and 1972 he was one of
the top sales producers for Honeywell's EDP division, marketing large scale,
multimillion-dollar mainframe computers. From 1962 through 1970, Mel starred all
over the United States, Canada, Europe and the Caribbean as a stand-up comedian,
as well as writing for other stand-up comedians such as Jackie Mason and Gabe
Kaplan.
Karl E. Rodriguez, 52, the Company's Secretary, received his Juris Doctor
degree in 1972 from Louisiana State University Law School. He has practiced
business and corporate law since 1972, emphasizing securities and entertainment
matters, and has been self-employed in that capacity for the past five years. He
has served as a director of Oasis Entertainment's Fourth Movie Project, Inc.,
since April 1998. During his law practice he has also been involved in a variety
of dynamic business experiences. From 1975 to 1982, he was active in real estate
development in the Baton Rouge, Louisiana area. From 1980 until 1985, he
specialized in the sale of businesses and franchises as the owner and operator
Form 10-SB June 30, 1999 Reliant Interactive Media Corp.
Exhibit Index on Page 45 Sequential Page 14
<PAGE>
of VR Business Brokers. In 1986, he became the Project Manager for Bluffs
Limited Partnership, where he structured the development of an Arnold Palmer
Design Golf Course and in 1992, Mr. Rodriguez was the Managing Director for
MedAmerica, LLC., medicine clinics for children. From 1993 through 1998, he was
the Director, Corporate Secretary and General Counsel for Telco Communications,
Inc., which is a long distance reseller company. From 1992 until 1996, he was
the President of Healthcare Financial and Management Services, Inc., providing
billing services to three Louisiana hospitals.
- --------------------------------------------------------------------------------
Item 6. Executive Compensation.
- --------------------------------------------------------------------------------
The Company has entered into Employment Agreements with Kevin Harrington
and Tim Harrington for 5 years and with Mel Arthur for 3 years. (See Exhibit 6.1
"Employment Agreements"). The Company's Officers and Directors serve with the
following elements of compensation at this time: Kevin Harrington and Tim
Harrington are scheduled to receive $10,000.00 and $8,000.00, respectively, as a
base, with overrides of 9/10 of 1% for Kevin Harrington and 6/10 of 1% for Tim
Harrington of "ADJUSTED GROSS REVENUES" as hereinafter defined. Mel Arthur
receives $3500 per month as an advance against his scheduled compensation of 1/2
of 1% of "ADJUSTED GROSS REVENUES", with a maximum of $10,000.00 per month.
"GROSS" and "ADJUSTED GROSS REVENUES" are defined as follows: "GROSS REVENUES"
shall mean all income of Employer from all sources exclusive of sales taxes, use
taxes, value added taxes, and any other taxes imposed upon sales of products.
"ADJUSTED GROSS REVENUES" shall mean Employer's Gross Revenues from sales of the
Products, less all of the following:
(i) refunds, credits or other allowances on account of return or rejection
of goods or otherwise granted in the ordinary course of business, as
actually incurred and as reserved for ("Returns");
(ii) uncollectible accounts due to credit card charge backs, bad checks or
other reasons of uncollectibility, as actually incurred and as reserved
for ("Uncollectibles"); and
(iii) sales made at or below Reliant's cost of goods for purposes of
liquidation or closeout ("Liquidation Sales").
The Harringtons have deferred and are deferring a substantial portion of
their accrued compensation pending increased corporate liquidity and
profitability. The Company pays 100% of a medial insurance plan for the three
officers above mentioned, and life insurance for Kevin Harrington. Karl
Rodriguez, serves without compensation from the Issuer. Please see EXHIBIT 2.3
for MAJORITY SHAREHOLDER authorization for certain options or rights, which was
authorized by shareholders and effectuated by the Board of Directors to augment
the compensation of Management.
Form 10-SB June 30, 1999 Reliant Interactive Media Corp.
Exhibit Index on Page 45 Sequential Page 15
<PAGE>
TABLE C
OPTIONS
The Company has provided certain additional bonuses, incentives and
benefits for Kevin Harrington, Tim Harrington and Mel Arthur, all pursuant to
ss.4(2) of the 1933 Securities Act, as follows:
<TABLE>
<CAPTION>
=============================================================================================================================
Additional Bonuses,
Incentives/Benefits Kevin Harrington Tim Harrington Mel Arthur
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Compensatory Stock 6 months: 60,000 6 months: 40,000 6 months: 5,000
Option Plan (See shares @ $2.50 shares @ $2.50 shares @ $2.50
Exhibit 6.2):
- -----------------------------------------------------------------------------------------------------------------------------
12 months: 60,000 12 months: 40,000 12 months: 5,000
shares @ $4.00 shares @ $4.00 shares @ $4.00
- -----------------------------------------------------------------------------------------------------------------------------
18 months: 60,000 18 months: 40,000 18 months: 5,000
shares @ $6.00 shares @ $6.00 shares @ $6.00
- -----------------------------------------------------------------------------------------------------------------------------
24 months: 60,000 24 months: 40,000 24 months: 5,000
shares @ $7.50 shares @ $7.50 shares @ $7.50
- -----------------------------------------------------------------------------------------------------------------------------
Revenue For each $10,000,000 For each $10,000,000 For each $10,000,000
Performance Stock in gross revenues, in gross revenues, in gross revenues,
Bonus issuance of 100,000 issuance of 100,000 issuance of 100,000
shares up to a total of shares up to a total of shares up to a total of
3,000,000 shares (no 2,000,000 shares (no 1,000,000 shares (no
more than 1/6 of total more than 1/6 of total more than 1/6 of total
to vest in any 6 month to vest in any 6 month to vest in any 6
period) period) month period)
- -----------------------------------------------------------------------------------------------------------------------------
Stock Trading Purchase 144,000 Purchase 100,000 Purchase 12,500
Performance Stock shares if trading at shares if trading at shares if trading at
Options @ $7.50 per $15; 144,000 shares if $15; 100,000 shares if $15; 12,500 shares if
share trading at $20; trading at $20; trading at $20; 15,000
192,000 shares if 120,000 shares if shares if trading at
trading at $25. trading at $25. $25.
- -----------------------------------------------------------------------------------------------------------------------------
Life, Health &
Disability Insurance Yes Yes Yes
- -----------------------------------------------------------------------------------------------------------------------------
Automobile $1,000/month $750/month $500/month
=============================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Item (a). Certain Relationships and Related Transactions.
- --------------------------------------------------------------------------------
A. The Following Relationships are deemed material relationships and
transactions between the Company, and its Officers, Directors, and 5%
Controlling persons: None other than as disclosed.
Kevin and Tim Harrington are brothers and officers and directors of the
Company. Both of them are the owners of business interests acquired by this
Company; namely, Kevin Harrington Enterprises (Kevin Harrington), and Cigar
Television Network (Tim Harrington). Karl Rodriguez serves as an secretary and
general counsel of Oasis Fourth Movie Project, Inc., engaged in business with
Form 10-SB June 30, 1999 Reliant Interactive Media Corp.
Exhibit Index on Page 45 Sequential Page 16
<PAGE>
the Company, in the film and video tape production industry. The Ownership and
Management of Oasis is otherwise unrelated to the ownership and management of
this Issuer.
B. The following information discloses that the Company, and its Officers,
Directors, and 5% Controlling persons, interests may have interests which, from
time to time, may be inconsistent in some respects with the interests of the
Issuer. The nature of these conflicts of interest may vary. There may be
circumstances in which they may take advantage of an opportunity that might be
suitable for the Company. Although there can be no assurance that a conflict of
interest will not arise or that resolutions of any such conflicts will be made
in a manner most favorable to the Company and its shareholders, the officers and
directors have a fiduciary responsibility to the Company and its shareholders
and, therefore, must adhere to a standard of good faith and integrity in their
dealings with and for the Company and its shareholders. Certain specific
conflicts of interest may include the following:
1. Conflicts Arising From Related Party Transactions. From time to time,
transactions may be proposed between the Company and related persons or
entities. It is expected that any such transactions will be consummated on terms
and conditions no less favorable to the Company than could be obtained in
arm's-length negotiations with unaffiliated third parties. The Company's
shareholders may not be notified prior to any related party transaction, but any
significant related party transactions are expected to be disclosed in the
Company's annual report. There can be no assurance, in such a circumstance, that
some consideration, benefit or value would not be lost to or relinquished by the
Company and accrue to such related persons. The Company expects, however, that
following any business combination involving the Company, present management
will be replaced with candidates of the acquired company, and that, thereafter,
any transactions with presently related persons may be deemed arm's-length
transactions.
2. Lack of Separate Representation. Related persons and the Company have
not been represented by separate counsel and it is not expected that they will
be represented by separate counsel prior to the consummation of any proposed
business combination. The officers and directors are accountable to the Company
and its shareholders as fiduciaries and, therefore, must adhere to a standard of
good faith and integrity in their dealings with and for the Company. The area of
fiduciary responsibility is a rapidly developing area of law, and persons who
have questions concerning the duties of the officers and directors should
consult with their legal counsel.
Form 10-SB June 30, 1999 Reliant Interactive Media Corp.
Exhibit Index on Page 45 Sequential Page 17
<PAGE>
- --------------------------------------------------------------------------------
PART II
- --------------------------------------------------------------------------------
Item 1.
Market Price of and Dividends on Registrant's Common Equity
and Shareholder Matters Equity and Shareholder Matters.
- --------------------------------------------------------------------------------
(a) Market Information. The Common Stock of this Issuer is quoted Over the
Counter on the Bulletin Board ("OTCBB"). There was no substantial market
activity before December 1998. Based upon standard reporting sources, the
following information is provided:
================================================================================
PERIOD high bid low bid period high bid low bid
- --------------------------------------------------------------------------------
1st 1998 0.44 0.22 3rd 1998 1.75 0.63
- --------------------------------------------------------------------------------
2nd 1998 0.56 0.19 4th 1998 1.68 0.60
- --------------------------------------------------------------------------------
1st 1999 1.69 0.72 2nd 1999
- --------------------------------------------------------------------------------
================================================================================
The foregoing price information is based upon inter-dealer prices without
retail mark-up, markdown or commissions and may not reflect actual transactions.
(b) Holders. 128
(c) Dividends. No dividends have been paid by the Company on its Common Stock
or other Stock and no such payment is anticipated in the foreseeable future.
- --------------------------------------------------------------------------------
Item 2. Legal Proceedings.
- --------------------------------------------------------------------------------
There are no proceedings, legal, enforcement or administrative, pending,
threatened or anticipated involving or affecting this Issuer.
- --------------------------------------------------------------------------------
Item 3. Changes in and Disagreements with Accountants.
- --------------------------------------------------------------------------------
There have been no disagreements of any sort or kind with Auditors or
Accountants respecting any matter or item reflected in the financial statements
of this Issuer.
Form 10-SB June 30, 1999 Reliant Interactive Media Corp.
Exhibit Index on Page 45 Sequential Page 18
<PAGE>
- --------------------------------------------------------------------------------
Item 4. Recent Sales of Unregistered Securities.
- --------------------------------------------------------------------------------
The following disclosure is provided of sales and placements of
unregistered securities, for the past three years, from July 1, 1996 through
June 30, 1999. There having been two historical reverse splits, all numbers
represent the after and current condition and coordinate with the issuer's
financial statements.
During 1998, the Issuer acquired Reliant Corporation (a.k.a. Kevin
Harrington Enterprises) and Cigar Television Network for the issuance of a total
of 570,400 shares of common stock. Kevin and Tim Harrington are brothers and are
officers and directors of this Issuer. Both of them are the owners of business
interests acquired by this Company; namely, Kevin Harrington Enterprises (Kevin
Harrington), and Cigar Television Network (Tim Harrington). These shares were
issued pursuant to ss.4(2) of the Securities Act of 1933.
During 1998, the issuer placed a total of 329,770 shares of common stock
to sophisticated investors with pre-existing relationships, for cash totaling
$513,400. These shares were issued pursuant to Regulation D, Rule 504,
promulgated by the Commission pursuant to ss.3(b) of the Securities Act of 1933.
Also during 1998, the issuer issued 103,800 to management for services to
the issuer, valued at $129,750. These shares were issued pursuant to ss.4(2) of
the Securities Act of 1933.
Also during the spring of 1999, the Issuer privately placed and additional
278,200 shares, for cash totalling $363,255, again to sophisticated investors
with pre-existing relationships.
On or about April 1, 1999, and before the effective changes to Rule 504,
three highly sophisticated investors purchase 600,000 additional shares of
common stock, for cash totalling $300,000
- --------------------------------------------------------------------------------
Item 5. Indemnification of Officers and Directors.
- --------------------------------------------------------------------------------
The following indemnification provision is contained in the Employment
Agreements (See Exhibit 6.1) of Kevin Harrington, Tim Harrington and Mel Arthur:
"Indemnification. Employer shall indemnify Employee and hold Employee
harmless from liability for acts or decisions made by Employee while performing
services for Employer to the greatest extent permitted by applicable law.
Employer shall use its best efforts to obtain coverage for Employee under any
insurance policy now in force or hereafter obtained during the term of this
Agreement insuring officers and directors of Employer against such liability."
Karl Rodriguez has no Employment Agreement and no indemnification from the
Company.
Form 10-SB June 30, 1999 Reliant Interactive Media Corp.
Exhibit Index on Page 45 Sequential Page 19
<PAGE>
- --------------------------------------------------------------------------------
PART F/S
- --------------------------------------------------------------------------------
Financial Statements
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS PAGE
- --------------------------------------------------------------------------------
F-1 AUDITED FINANCIAL STATEMENTS: Years Ended December 31, 1998, 1997 F-1
- --------------------------------------------------------------------------------
F-2 UN-AUDITED FINANCIAL STATEMENTS: Quarter ended March 31, 1999 F-14
================================================================================
Form 10-SB June 30, 1999 Reliant Interactive Media Corp.
Exhibit Index on Page 45 Sequential Page 20
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
(Formerly Reliant Corporation)
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
F-1
<PAGE>
CONTENTS
Independent Auditors' Report.................................................F-3
Consolidated Balance Sheet..........................................F-4 thru F-5
Consolidated Statements of Operations........................................F-6
Consolidated Statements of Stockholders' Equity..............................F-7
Consolidated Statements of Cash Flows........................................F-8
Notes to the Consolidated Financial Statements...............................F-9
F-2
<PAGE>
INDEPENDENT AUDITORS'S REPORT
Board of Directors
Reliant Interactive Media Corporation
And Subsidiaries
(Formerly Reliant Corporation)
(A Development State Company)
Clearwater, Florida
We have audited the accompanying consolidated balance sheet of Reliant
Interactive Media Corporation and Subsidiaries (formerly Reliant Corporation) (a
development stage company) at December 31, 1998 and the related consolidated
statements of operations, stockholders' equity and cash flows for the years
ended December 31, 1998 and 1997. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosure in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidate financial position of Reliant
Interactive Media Corporation and Subsidiaries (formerly Reliant Corporation) (a
development stage company) as of December 31, 1998 and the consolidated results
of their operations and their cash flows for the years ended December 31, 1998
and 1997 in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company is a development stage company with no
significant operating results to date, which raises substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 2. The financial statements do not include
any adjustments that might result from the outcome of the uncertainty.
/s/
Jones, Jensen & Company
Salt Lake City, Utah
April 13, 1999
F-3
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
(Formerly Reliant Corporation)
(A Development Stage Company)
Consolidated Balance Sheets
ASSETS
------
December 31,
1998
---------
CURRENT ASSETS
Cash $ 122,257
Inventory (Note 1) 27,342
---------
Total Current Assets 149,599
---------
PROPERTY AND EQUIPMENT (Note 1)
Machinery and equipment 25,925
Office furniture and equipment 45,292
---------
Total Property and Equipment 71,217
Less Accumulated depreciation (10,258)
---------
Net Property and Equipment 60,959
---------
OTHER ASSETS
Deposits 12,773
Prepaid advertising (Note 1) 85,302
Patent and trademark costs (Note 1) 26,668
---------
Total Other Assets 124,743
---------
TOTAL ASSETS $ 335,301
=========
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
(Formerly Reliant Corporation)
(A Development Stage Company)
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
December 31,
1998
-----------
CURRENT LIABILITIES
Accounts payable $ 73,192
Accrued expenses 5,418
Notes payable - current portion (Note 7) 40,000
-----------
Total Current Liabilities 118,610
-----------
LONG-TERM DEBT
Notes payable - shareholders (Note 6) 87,500
-----------
Total Long-Term Debt 87,500
-----------
TOTAL LIABILITIES 206,110
-----------
COMMITMENTS AND CONTINGENCIES (Note 3)
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock: 50,000,000 shares authorized of $0.001
par value, 18,218,850 and 16,867,850 shares issued
and outstanding, respectively 16,868
Additional paid-in capital 1,346,491
Deficit accumulated during the development stage (1,234,168)
-----------
Total Stockholders' Equity (Deficit) 129,191
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) $ 335,301
===========
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
<PAGE>
<TABLE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
(Formerly Reliant Corporation)
(A Development Stage Company)
Consolidated Statements of Operations
<CAPTION>
From
Inception on
For the Years Ended June 15,
December 31, 1995 Through
------------------------------ December 31,
1998 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
SALES $ 120,234 $ -- $ 120,234
COST OF GOODS SOLD 68,654 -- 66,654
------------ ------------ ------------
GROSS MARGIN 53,580 -- 53,580
------------ ------------ ------------
OPERATING EXPENSES
Depreciation 6,629 3,629 10,258
General and administrative 792,533 28,114 854,976
Research and development 41,449 -- 41,449
Marketing 339,877 25,147 365,024
Rent 48,226 8,036 56,262
------------ ------------ ------------
Total Operating Expenses 1,228,714 64,926 1,327,969
------------ ------------ ------------
OPERATING LOSS (1,178,134) (64,926) (1,274,389)
------------ ------------ ------------
OTHER INCOME (EXPENSES)
Interest expense (9,033) -- (9,033)
Interest income 296 -- 296
Other income 48,958 -- 48,958
------------ ------------ ------------
Total Other Income (Expenses) 40,221 -- 40,221
------------ ------------ ------------
LOSS BEFORE INCOME TAXES (1,134,913) (64,926) (1,234,168)
INCOME TAXES -- -- --
------------ ------------ ------------
NET LOSS $ (1,134,913) $ (64,926) $ (1,234,168)
============ ============ ============
BASIC LOSS PER SHARE $ (0.08) $ (0.01)
============ ============
WEIGHTED AVERAGE NUMBER
OF SHARES 13,367,052 11,848,000
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-6
<PAGE>
<TABLE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
(Formerly Reliant Corporation)
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the
--------------------------- Paid-in Development
Shares Amount Capital Stage
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, June 15, 1995 -- $ -- $ -- $ --
Shares issued to the founders at
inception at $0.00025 per share 11,848,000 11,848 (9,848) --
Net loss from inception on June 15,
1995 through December 31, 1995 -- -- -- (2,000)
----------- ----------- ----------- -----------
Balance, December 31, 1995 11,848,000 11,848 (9,848) (2,000)
Capital contributions, 1996 -- -- 34,401 --
Net loss for the year ended
December 31, 1996 -- -- -- (32,329)
----------- ----------- ----------- -----------
Balance, December 31, 1996 11,848,000 11,848 24,553 (34,329)
Capital contributions, 1997 -- -- 343,688 --
Net loss for the year ended
December 31, 1997 -- -- -- (64,926)
----------- ----------- ----------- -----------
Balance, December 31, 1997 11,848,000 11,848 368,241 (99,255)
Capital contributions, 1998 -- -- 340,020 --
Common stock issued to acquire
Reliant Corporation and Cigar
Television Network, Inc. 2,852,000 2,852 (2,852) --
Common stock issued for cash at an
average price of $0.31 per share 1,648,850 1,649 511,851 --
Common stock issued for services
valued at $0.25 per share 519,000 519 129,231 --
Net loss for the year ended
December 31, 1998 -- -- -- (1,134,913)
----------- ----------- ----------- -----------
Balance, December 31, 1998 16,867,850 $ 16,868 $ 1,346,491 $(1,234,168)
----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-7
<PAGE>
<TABLE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
(Formerly Reliant Corporation)
(A Development Stage Company)
Consolidated Statements of Cash Flows
<CAPTION>
From
Inception on
For the year ended June 15,
December 31, 1995 Through
---------------------------- December 31,
1998 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,134,913) $ (64,926) $(1,234,168)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 6,629 3,629 10,258
Common stock issued for services 129,750 -- 129,750
Changes in assets and liabilities:
Due from stockholder 4,000 (4,000) --
Inventory (27,342) -- (27,342)
Deposits 19,727 (32,500) (12,773)
Prepaids expenses (73,970) (11,332) (85,302)\
Accounts payable 73,159 (74) 73,192
Accrued expenses 5,318 -- 5,418
----------- ----------- -----------
Net Cash Used in Operating Activities (997,642) (109,203) (1,140,967)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment (51,343) (19,674) (71,217)
Patent and trademark costs (19,783) (6,885) (26,668)
----------- ----------- -----------
Net Cash Used in Investing Activities (71,126) (28,759) (97,885)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable 127,500 -- 127,500
Proceeds from issuance of common stock 513,500 -- 515,500
Proceeds from additional capital contribution 340,020 343,688 718,109
----------- ----------- -----------
Net Cash Provided by Financing Activities 981,020 343,688 1,361,109
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (87,748) 207,726 122,257
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 210,005 2,279 --
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END
OF PERIOD $ 122,257 $ 210,005 $ 122,257
=========== =========== ===========
Cash Payments For:
Income taxes $ -- $ -- $ --
Interest $ 3,615 $ -- $ 3,615
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-8
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
(Formerly Reliant Corporation)
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1998 and 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
------------
Reliant Interactive Media Corporation (formerly Reliant
Corporation) (the Company) was organized under the laws of the
State of Utah on July 30, 1984. The Company subsequently ceased
its original business activity in 1993 and was not engaged in any
business activity but was seeking potential investments or
business acquisitions and consequently was considered a
development stage company as defined in SFAS No. 7. The Company
changed its name from Reliant Corporation to Reliant Interactive
Media Corporation (Reliant) in August 7, 1998.
Kevin Harrington Enterprises, Inc. (KHE) was organized under the
laws of the State of Florida on June 15, 1995. The Company is
currently developing a dual flame lighter/cutter cigar product.
Cigar Television Network, Inc. (Cigar TV) was organized under the
laws of the State of Florida on April 1, 1998. The Company was
formed to create a cigar related television show that will air
monthly on a national television network as well as being on the
Internet. Cigar TV in conjunction with major magazines will
operate its TV show in conjunction with an Internet site currently
under development called Cigamow.com.
On July 21, 1998, the Company completed an agreement and plan of
reorganization whereby Reliant issued 11,848,000 shares of its
common stock in exchange for all of the outstanding common stock
of KHE and Cigar TV. Immediately prior to the agreement and plan
of reorganization, the Company had 2,852,000 shares of common
stock issued and outstanding. The reorganization was accounted for
as a recapitalization of Reliant because the shareholders of KHE
and Cigar TV controlled the Company immediately after the
acquisition. Therefore, KHE and Cigar TV are treated as the
acquiring entities. Accordingly, there was no adjustment to the
carrying value of the assets or liabilities of Reliant. Reliant is
the acquiring entity for legal purposes and KHE is the surviving
entity for accounting purposes. Also on July 21, 1998, the
shareholders of the Company authorized a reverse stock split of
1-for-5 prior to the agreement and plan of reorganization. All
references to shares of common stock have been retroactively
restated.
Basic Loss Per Share
--------------------
The computation of basic loss per share is based on the weighted
average number of shares outstanding during the period presented.
Accounting Method
-----------------
The Company's financial statements are prepared using the accrual
method of accounting. The Company has elected a December 31 year
end.
F-9
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
(Formerly Reliant Corporation)
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1998 and 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Cash and Cash Equivalents
-------------------------
For purposes of financial statement presentation, the Company
considers all highly liquid investments with a maturity of three
months or less, from the date of purchase, to be cash equivalents.
Inventory
---------
Inventory is stated at the lower of cost determined by the
first-in, first-out method or market.
Property and Equipment
----------------------
Property and equipment are stated at cost less accumulated
depreciation. Expenditures for small tools, ordinary maintenance
and repairs are charged to operations as incurred. Major additions
and improvements are capitalized. Depreciation is computed using
the straight-line method over estimated useful lives as follows:
Office furniture and equipment 5 to 7 years
Machinery and equipment 5 to 7 years
Depreciation expense for the year ended December 31, 1998 was
$ 6,629.
Patent and Trademark Costs
--------------------------
These costs will be amortized on the straight-line method over
their remaining lives beginning with the commencement of
operations in 1999.
Prepaid Advertising
-------------------
Prepaid advertising consisted of the following at December 31,
1998:
Production costs of informercials $ 44,523
Production costs of tv show 52,430
-----------------
Subtotal 96,953
Less: accumulated amortization (11,651)
-----------------
Net prepaid advertising $ 85,302
=================
These advertising costs are amortized over the useful life of the
Informercials and tv show which is estimated at 18 months. These
production costs will begin amortizing when they begin
broadcasting which was August 1998 for the tv show and March 1999
for the informercials. Advertising expenses for the year ended
December 31, 1998 was $11,651.
F-10
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
(Formerly Reliant Corporation)
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1998 and 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Credit Risks
------------
The Company maintains its cash accounts primarily in one bank in
Florida. The Federal Deposit Insurance Corporation insures
accounts to $100,000. The Company's accounts occasionally exceed
the insured amount.
Estimates
---------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of
Reliant Interactive Media Corporation (Reliant), Kevin Harrington
Enterprises, Inc. (KHE) (a wholly-owned subsidiary) and Cigar
Television Network, Inc. (Cigar TV) (a wholly-owned subsidiary).
All significant intercompany accounts and transactions have been
eliminated in the consolidation.
Income Taxes
------------
No provision for federal income taxes has been made at March 31,
1999 due to accumulated operating losses. The Company has
accumulated approximately $129,750 of net operating losses as of
December 31, 1998 which may be used to reduce taxable income and
income taxes in future years. The use of these losses to reduce
future income taxes will depend on the generation of sufficient
taxable income prior to the expiration of the net operation loss
carryforwards. The carryforwards expire in 2013.
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the relation of assets and liquidation of liabilities
in the normal course of business. However, the Company does not
have significant cash or other material assets, nor does it have
an established source of revenues sufficient to cover its
operating costs and to allow it to continue as a going concern. It
is the intent of the Company to complete a limited offering of its
common stock. In the interim, shareholders of the Company have
committed to meeting its minimal operating expenses.
F-11
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
(Formerly Reliant Corporation)
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1998 and 1997
NOTE 3 - COMMITMENTS AND CONTINGENCIES
In May 1998, the Company entered into a one year lease agreement
for office space located in Florida. The lease obligation is
currently $5,157 per month and expires on May 31, 1999.
NOTE 4 - RELATED PARTY TRANSACTIONS
Related party transactions charged to operations for the year
ended December 31, 1998 were as follows:
Interest expense to stockholder $ 1,918
Advertising and promotional services provided
by a stockholders' related company $ 36,813
NOTE 5 - COMMON STOCK TRANSACTIONS
During 1998, the Company sold 1,648,850 shares of its common stock
for $513,500, or an average price of $0.31 per share. The Company
also issued 519,000 shares of its common stock for services
rendered, valued at $129,750 or $0.25 per share.
NOTE 6 - NOTES PAYABLE - SHAREHOLDERS
Notes payable - shareholders consisted of the following:
December 31,
1998
---------
Note payable to a shareholder,
unsecured, interest at 8.0%,
interest payments due quarterly
beginning March 31, 1999,
principal balance due December 31,
2000. $ 37,500
Note payable to a shareholder,
unsecured, interest at 8.0%,
interest payments due quarterly
beginning March 31, 1999,
principal balance due December 31,
2000. 50,000
---------
Total notes payable - shareholders 87,500
Less: current portion --
---------
Long-term notes payable-shareholders $ 87,500
=========
F-12
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
AND SUBSIDIARIES
(Formerly Reliant Corporation)
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1998 and 1997
NOTE 6 - NOTES PAYABLE - SHAREHOLDERS (Continued)
Maturities of notes payable - shareholders are as follows:
Year Ending
December 31,
1999 $ --
2000 87,500
2001 --
2002 --
2003 --
2004 and thereafter --
---------
Total $ 87,500
=========
NOTE 7 - NOTES PAYABLE
Notes payable consisted of the following:
December 31,
1998
---------
Note payable to Nations Bank,
secured by stock, interest at
8.0%, interest payments due
monthly, principal balance due on
demand. $ 40,000
---------
Total notes payable 40,000
Less: current portion (40,000)
---------
Long-term notes payable $ --
=========
Maturities of notes payable are as follows:
Year Ending
December 31,
1999 $ 40,000
2000 --
2001 --
2002 --
2003 --
2004 and thereafter --
---------
Total $ 40,000
=========
F-13
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
UNAUDITED FINANCIAL STATEMENTS
for the period ending
March 31, 1999
F-14
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
INDEX TO FINANCIAL STATEMENTS
Page
Balance Sheets for the period ended March 31, 1999
and December 31 1997 and 1998 (unaudited)..........................F-16
Statements of Loss and Accumulated Deficit for the period ended
March 31, 1999 and December 31, 1997 and 1998 (unaudited)..........F-17
Statements of Changes in Financial Position for the period ended
March 31, 1999 and December 31, 1997 and 1998 (unaudited)..........F-18
Statements of Stockholders' (Deficit) Equity for the period from
inception (June 15, 1995) through December 31, 1995, for the
period ended March 31, 1999 and for the years ended
December 31, 1986 through 1998 (unaudited).........................F-19
Notes to Financial Statements...........................................F-20
page F-15
<PAGE>
<TABLE>
RELIANT INTERACTIVE MEDIA CORPORATION
BALANCE SHEETS (UNAUDITED)
December 31, 1997 and 1998
and the three months ended March 31, 1999
<CAPTION>
December 31,
March 31, ------------------------------
1999 1998 1997
------------ ------------ ------------
ASSETS
<S> <C> <C> <C>
CURRENT ASSETS
Cash $ 56,787 $ 122,257 $ 210,005
Accounts receivable 254,936
Prepaid rent 618
Inventory 27,342 27,342
------------ ------------ ------------
Total current assets 339,065 149,599 210,623
PROPERTY & EQUIPMENT
Machinery and equipment 25,925 25,925 19,874
Furniture and fixtures 45,680 45,292 10,714
Less accumulated depreciation (13,819) (10,258) (3,629)
------------ ------------ ------------
Total property and equipment 57,786 60,959 26,959
OTHER ASSETS
Rental Deposits 12,773 12,773 32,500
Infomercials 211,776 85,302
Patent and trademark application costs 26,668 26,668 6,885
------------ ------------ ------------
Total other assets 251,217 124,743 39,385
TOTAL ASSETS $ 648,068 $ 335,301 $ 276,967
============ ============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses 151,567 78,610 133
Notes payable 40,000
------------ ------------ ------------
Total Current Liabilities 151,567 118,610 133
LONG-TERM DEBT
Notes payable - shareholders 87,500 87,500 (4,000)
------------ ------------ ------------
Total Long-term debt 87,500 87,500 (4,000)
STOCKHOLDERS' EQUITY
Common Stock, $.001 par value; authorized 50,000,000
shares; issued and outstanding, 2,369,600 shares,
3,373,570 shares and 3,651,770 shares for 1997,
1998 and March 31, 1999 respectively 3,652 3,374 2,370
Additional Paid In Capital 1,722,962 1,359,985 377,719
Accumulated equity (deficit ) (1,317,613) (1,234,168) (99,255)
------------ ------------ ------------
Total Stockholders' Equity 409,001 129,191 280,834
------------ ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 648,068 $ 335,301 $ 276,967
============ ============ ============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
page F-16
<PAGE>
<TABLE>
RELIANT INTERACTIVE MEDIA CORPORATION
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT (UNAUDITED)
December 31, 1997 and 1998
and the three months ended March 31, 1999
<CAPTION>
Cumulative
December 31, Totals Since
March 31, -------------------------------------- Date of
1999 1998 1997 Inception
------------------ ------------------ ----------------- ------------------
<S> <C> <C> <C> <C>
Sales $ 707,477 $ 120,234 $ -0- $ -0-
Cost of goods sold 68,525 66,654 -0- 68,525
------------------ ------------------ ----------------- ------------------
Gross Margin 638,952 53,580 -0- 638,952
------------------ ------------------ ----------------- ------------------
Operating expenses
Amortization 27,750
Depreciation 1,014 6,629 3,629 11,272
General and administrative 716,263 792,533 42,270 1,554,389
Research and development 41,449 41,449
Marketing 339,877
Rent 48,226
Advertising 23,747 34,745
------------------ ------------------ ----------------- ------------------
Total Expenses 717,277 1,228,714 69,646 1,692,193
------------------ ------------------ ----------------- ------------------
Operating (Loss) (78,325) (1,175,134) (69,646) (1,053,241)
------------------ ------------------ ----------------- ------------------
Other Income (Expenses)
Interest expense (5,120) (9,033) (14,153)
Interest income 296 8,424 8,720
Other income 48,958 59,956
------------------ ------------------ ----------------- ------------------
Total Other Income (Expenses) (5,120) 40,221 8,424 54,523
------------------ ------------------ ----------------- ------------------
Net Income (Loss) $ (83,445) $ (1,134,913) $ (61,222) $ (1,692,193)
================== ================== ================= ==================
Earnings (Loss) per Share $ (0.004770) $ (0.101500) $ (0.007751)
================== ================== =================
Weighted Average Number
of Shares Outstanding 17,493,350 11,181,394 7,898,667
================== ================== =================
</TABLE>
The accompanying notes are an integral part
of these financial statements.
page F-17
<PAGE>
<TABLE>
RELIANT INTERACTIVE MEDIA CORPORATION
STATEMENT OF STOCKHOLDERS' (DEFICIT) EQUITY
for the period from inception (June 15, 1995) through December 31, 1995,
for the years ended December 31, 1996 through December 31, 1998
and for the three months ended March 31, 1999
<CAPTION>
Common Stock
-------------------------------- Additional Accumulated Total Stock-
Number of Par Paid-In Equity holders' Equity
Shares Value Capital (Deficit) (Deficit)
------------- ---------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
Inception (June 15, 1995) $ 0 $ 0 $ 0 $ 0 $ 0
Inception through December
31, 1995: Stock issued for
$0.00025 per share 2,369,600 2,370 (370)
Net loss for the year ended
December 31, 1995 (2,000)
------------- ---------------- ---------------- ----------------- ----------------
Balance December 31, 1995 2,369,600 2,370 (370) (2,000) 0
Capital contributions, 1996 34,401
Net loss for the year ended
December 31, 1996 (32,329)
------------- ---------------- ---------------- ----------------- ----------------
Balance December 31, 1996 2,369,600 2,370 34,031 (34,329) 2,072
Capital contributions, 1997 343,688
Net loss for the year ended
December 31, 1997 (64,926)
------------- ---------------- ---------------- ----------------- ----------------
Balance December 31, 1997 2,369,600 2,370 377,719 (99,255) 280,834
Capital contributions, 1998 340,020
Common stock issued to acquire
Reliant Corporation and Cigar
Television Network, Inc. 570,400 570 (570)
Common stock issued for cash 329,770 330 513,170
Common stock issued for services 103,800 104 129,646
Net loss for the year ended
December 31, 1998 (1,134,913)
------------- ---------------- ---------------- ----------------- ----------------
Balance December 31, 1998 3,373,570 3,374 1,359,985 (1,234,168) 129,191
Common stock issued for cash 278,200 278 362,977
Net loss for the period ended
March 31, 1999 (83,445)
------------- ---------------- ---------------- ----------------- ----------------
Balance March 31, 1999 3,651,770 3,652 1,722,962 (1,317,613) 409,001
</TABLE>
The accompanying notes are an integral part
of these financial statements.
page F-18
<PAGE>
<TABLE>
RELIANT INTERACTIVE MEDIA CORPORATION
STATEMENTS OF CASH FLOW (UNAUDITED)
December 31, 1997 and 1998
and the three months ended March 31, 1999
<CAPTION>
December 31,
March 31, ---------------------------- Cumulative
1999 1998 1997 Amounts
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net (Loss) $ (83,445) $(1,134,913) $ (61,222) $(1,347,462)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 1,657 6,629 3,629 11,915
Common stock issued for services 129,750 129,750
Changes in assets and liabilities: 0
Due from stockholder 4,000 (4,000) 0
Inventory (27,342) (27,342)
Deposits 19,727 (32,500) (12,773)
Prepaid expenses (43,935) (73,970) (11,332) (129,237)
Accounts payable 78,408 73,159 (74) 151,600
Accounts Receivable (254,936) (254,936)
Accrued expenses 5,318 5,418
----------- ----------- ----------- -----------
Net cash used in operating activities (302,251) (997,642) (105,499) (1,473,067)
Cash flows provided from investing activities:
Acquisition of infomercials (126,474)
Acquisition of property and equipment (51,343) (19,874) (71,217)
Patent and trademark costs (19,783) (6,885) (26,668)
----------- ----------- ----------- -----------
Net cash used in investing activities (126,474) (71,126) (26,759) (97,885)
Cash flows provided from financing activities:
Proceeds from notes payable 127,500 127,500
Proceeds from sale of Common Stock 363,255 513,500 878,755
Proceeds from additional
capital contribution 340,020 339,984 747,958
----------- ----------- ----------- -----------
Net cash provided by financing activities 363,255 981,020 339,984 1,754,213
Increase (Decrease) in Cash (65,470) (87,748) 207,726 56,787
Cash at Beginning of Period 122,257 210,005 2,279 -0-
----------- ----------- ----------- -----------
Cash at End of Period 56,787 122,257 210,005 56,787
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
page F-19
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
Notes to the Consolidated Financial Statements (Unaudited)
for the fiscal years ended December 31, 1998 and 1997
and the three months ended March 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
------------
Reliant Interactive Media Corporation (formerly Reliant
Corporation) (the Company) was organized under the laws of the
State of Utah on July 30, 1984. The Company subsequently ceased its
original business activity in 1993 and was not engaged in any
business activity but was seeking potential investments or business
acquisitions and consequently was considered a development stage
company as defined in SFAS No. 7. The Company changed its name from
Reliant Corporation to Reliant Interactive Media Corporation
(Reliant) on August 7, 1998.
Kevin Harrington Enterprises, Inc. (KHE) was organized under the
laws of the State of Florida on June 15, 1995. The Company is
currently developing a dual flame lighter/cutter cigar product.
Cigar Television Network, Inc. (Cigar TV) was organized under the
laws of the State of Florida on April 1, 1998. The Company was
formed to create a cigar related television show that will air
monthly on a national television network as well as being on the
Internet. Cigar TV in conjunction with major magazines will operate
its TV show in conjunction with an Internet site currently under
development called Cigamow.com.
On July 21, 1998, the Company completed an agreement and plan of
reorganization whereby Reliant issued 11,848,000 shares of its
common stock in exchange for all of the outstanding common stock of
KHE and Cigar TV. Immediately prior to the agreement and plan of
reorganization, the Company had 2,852,000 shares of common stock
issued and outstanding. The reorganization was accounted for as a
recapitalization of Reliant because the shareholders of KHE and
Cigar TV controlled the Company immediately after the acquisition.
Therefore, KHE and Cigar TV are treated as the acquiring entities.
Accordingly, there was no adjustment to the carrying value of the
assets or liabilities of Reliant. Reliant is the acquiring entity
for legal purposes and KHE is the surviving entity for accounting
purposes. Also on July 21, 1998, the shareholders of the Company
authorized a reverse stock split of 1-for-5 prior to the agreement
and plan of reorganization. All references to shares of common
stock have been retroactively restated.
Basic Earnings (Loss) per Share
-------------------------------
The computation of basic earnings (loss) per share is based on the
weighted average number of shares outstanding during the period
presented.
Accounting Method
-----------------
The Company's financial statements are prepared using the accrual
method of accounting. The Company has elected a December 31 year
end.
page F-20
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
Notes to the Consolidated Financial Statements (Unaudited)
for the fiscal years ended December 31, 1998 and 1997
and the three months ended March 31, 1999
NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Cash and Cash Equivalent
------------------------
For purposes of financial statement presentation, the Company
considers all highly liquid investments With a maturity of three
months or less, from the date of purchase, to be cash equivalents.
Inventory
---------
Inventory is stated at the lower of cost determined by the
first-in, first-out method or market.
Property and Equipment
----------------------
Property and equipment are stated at cost less accumulated
depreciation. Expenditures for small tools, ordinary maintenance
and repairs are charged to operations as incurred. Major additions
and improvements are capitalized. Depreciation is computed using
the straight-line method over estimated useful lives as follows:
Office furniture and equipment 5 to 7 years
Machinery and equipment 5 to 7 years
Depreciation expense for the three months ended March 31, 1999 was
$2,530.
Patent and Trademark Costs
--------------------------
These costs will be amortized on the straight-line method over
their remaining lives beginning with the commencement of
operations.
Prepaid Advertising
-------------------
Prepaid advertising consisted of the following at March 31, 1999:
Production costs of informercials $ 44,523
Production Costs of TV show 52,430
-------------
Subtotal 96,953
Less: accumulated amortization (11,651)
Not prepaid advertising $ 85,302
=============
These advertising costs are amortized over the useful life of the
informercials and TV show which is estimated at 18 months. These
production costs will begin amortizing when they begin broadcasting
which was August 1998 for the TV show and March 1999 for the
infomercials. Advertising expense for the period ended March 31,
1999 was $11,651.
page F-21
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
Notes to the Consolidated Financial Statements (Unaudited)
for the fiscal years ended December 31, 1998 and 1997
and the three months ended March 31, 1999
NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Credit Risks
------------
The Company maintains its cash accounts primarily in one bank in
Florida, The Federal Deposit Insurance Corporation insures accounts
to $100,000. The Company's accounts occasionally exceed the insured
amount.
Estimates
---------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of
Reliant Interactive Media Corporation (Reliant), Kevin Harrington
Enterprises, Inc. (KHE) (a wholly-owned subsidiary) and Cigar
Television Network, Inc. (Cigar TV) (a wholly-owned subsidiary).
All significant intercompany accounts and transactions have been
eliminated in the consolidation.
Income Taxes
------------
No provision for federal income taxes has been made at March 31,
1999 due to accumulated operating losses. The Company has
accumulated approximately $1,317,613 of net operating losses as of
March 31, 1999, which may be used to reduce taxable income and
income taxes in future years. The use of these losses to reduce
future income taxes will depend on the generation of sufficient
taxable income prior to the expiration of the not operation loss
carryforwards. The carryforwards expire in 2013.
NOTE 2 - GOING CONCERN
The company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the relation of assets and liquidation of liabilities
in the normal course of business. However, the Company does not
have significant cash or other material assets, nor does it have an
established source of revenues sufficient to cover its operating
costs and to allow it to continue as a going concern. It is the
intent of the Company to complete a limited offering of its common
stock. In the interim, shareholders of the Company have committed
to meeting its minimal operating expenses.
page F-22
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
Notes to the Consolidated Financial Statements (Unaudited)
for the fiscal years ended December 31, 1998 and 1997
and the three months ended March 31, 1999
NOTE 3 - COMMITMENTS AND CONTINGENCIES
In May 1998, the Company entered into a one year lease agreement
for office space located in Florida. The lease obligation is
currently $5,157 per month and expires on May 31, 1999.
NOTE 4 - RELATED PARTY TRANSACTIONS
Related party transactions charged to operations for the year ended
March 31, 1999 were as follows:
Interest expense to stockholders $ 1,918
Advertising and promotional services provided
by a stockholders' related company. $ 36,813
NOTE 5 - COMMON STOCK TRANSACTIONS
During 1998, the Company sold 329,770 shares of its common stock
for $513,500, or an average price of $1.55 per share. The Company
also issued 103,800 shares of common stock for services tendered,
valued at $129,750 or $1.25 per share. During 1999, the Company
sold 278,200 shares of its common stock for $363,255, or an average
price of $1.31 per share. On March 23, 1999 the Company reverse
split its common stock on a one for five (1:5) basis. On these and
all future financial statements, all references to shares of common
stock will be retroactively restated as if the reverse stock split
had been in effect since inception.
NOTE 6 - NOTES PAYABLE - SHAREHOLDERS
Notes payable - shareholders consisted of the following:
March 31,
1998
---------
Note payable to a shareholder, unsecured, interest
at 8.0%, interest payments due quarterly beginning
March 31, 1999, principal balance due December 31, 2000. $ 37,500
Note payable to a shareholder, unsecured, interest
at 8.0%, interest payments due quarterly beginning
March 31, 1999, principal balance due December 31, 2000. 50,000
---------
Total notes payable - shareholders 87,500
Less: current portion -0-
Long-term notes payable - shareholders $ 87,500
=========
page F-23
<PAGE>
RELIANT INTERACTIVE MEDIA CORPORATION
Notes to the Consolidated Financial Statements (Unaudited)
for the fiscal years ended December 31, 1998 and 1997
and the three months ended March 31, 1999
NOTE 6 - NOTES PAYABLE - SHAREHOLDERS (Continued)
Maturities of notes payable - shareholders are as follows:
Year Ending
December 31,
------------
1999 $ -0-
2000 87,500
2001 -0-
2002 -0-
2003 -0-
2004 and thereafter -0-
-----------
Total $ 87,500
==========
NOTE 7 - NOTES PAYABLE
Notes payable consisted of the following: March 31,
1998
Note payable to Nations Bank, secured by stock,
interest at 8.0%, interest payments due monthly,
principal balance due on demand. $ 40,000
----------
Total notes payable 40,000
Less: current portion (40,000)
Long-term notes payable $ -0-
Maturities of notes payable are as follows::
Year Ending
December 31,
1999 $ 40,000
2000 -0-
2001 -0-
2002 -0-
2003 -0-
2004 and thereafter -0-
-----------
Total $ 40,000
===========
NOTE 8 - SUBSEQUENT EVENTS:
During April 1999, the Company sold 600,000 shares of its post
split common stock for $300,000, or an average price of $0.50 per
share. After the issuance of these shares, the reverse stock split
and the issuance of 170 "round-up" shares, there were 4,265,271
common shares issued and outstanding.
page F-24
<PAGE>
- --------------------------------------------------------------------------------
PART III
- --------------------------------------------------------------------------------
Item 1. Index to Exhibits.
- --------------------------------------------------------------------------------
Exhibit Index
================================================================================
# Table Category / Description of Exhibit Page
- --------------------------------------------------------------------------------
[2] Articles/Certificates of Incorporation,
By-Laws and Minutes
- --------------------------------------------------------------------------------
2.0 ARTICLES OF INCORPORATION of the Issuer:
Reliant Interactive Media Corp. (a Nevada
Corporation)
- --------------------------------------------------------------------------------
2.1 ARTICLES OF AMENDMENT: Reliant Corporation.
- --------------------------------------------------------------------------------
2.2 BY-LAWS
- --------------------------------------------------------------------------------
2.3 MAJORITY SHAREHOLDER ACTION, dated March 23, 1999
- --------------------------------------------------------------------------------
[6] Material Contracts
- --------------------------------------------------------------------------------
6.0 PLAN OF REORGANIZATION AND MERGER FOR
CHANGE OF SITUS: Utah to Nevada, March 15,
1999
- --------------------------------------------------------------------------------
6.1 EMPLOYMENT AGREEMENTS (3)
- --------------------------------------------------------------------------------
6.2 COMPENSATORY STOCK OPTION PLAN
================================================================================
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to signed on its behalf by the undersigned,
thereunto authorized.
Reliant Interactive Media Corp
formerly Reliant Corporation
by
/s/ /s/
------------------------- -------------------------
Kevin Harrington Tim Harrington
CHAIRMAN AND CEO/DIRECTOR PRESIDENT AND COO/DIRECTOR
/s/ /s/
------------------------- -------------------------
Mel Arthur Karl E. Rodriguez
EXECUTIVE VICE PRESIDENT/DIRECTOR SECRETARY/DIRECTOR
- --------------------------------------------------------------------------------
Exhibit 2.0
Articles of Incorporation
Reliant Interactive Media Corp.
March 18, 1999
- --------------------------------------------------------------------------------
<PAGE>
ARTICLES OF INCORPORATION
OF
Reliant Interactive Media Corp.
Article I. The name of the Corporation is Reliant Interactive Media
Corp.
Article II. Its principal office in the State of Nevada is 774 Mays
Blvd. #10, Incline Village NV 89452. The initial resident agent for services of
process at that address is N&R Ltd. Group, Inc..
Article III. The purposes for which the corporation is organized are to
engage in any activity or business not in conflict with the laws of the State of
Nevada or of the United States of America. The period of existence of the
corporation shall be perpetual.
Article IV. The corporation shall have authority to issue an aggregate
of 50,000,000 shares of common voting equity stock of par value one mil ($0.001)
per share, and no other class or classes of stock, for a total capitalization of
$50,000. The corporation's capital stock may be sold from time to time for such
consideration as may be fixed by the Board of Directors, provided that no
consideration so fixed shall be less than par value.
Article V. No shareholder shall be entitled to any preemptive or
preferential rights to subscribe to any unissued stock or any other securities
which the corporation may now or hereafter be authorized to issue, nor shall any
shareholder possess cumulative voting rights at any shareholders meeting, for
the purpose of electing Directors, or otherwise.
Article VI. The name and address of the Incorporator of the corporation
is WILLIAM STOCKER, Attorney at Law, 34700 Pacific Coast Highway, Suite 303,
Capistrano Beach CA 92624, PHONE (949) 248-9561, FAX (949) 248-1688. The affairs
of the corporation shall be governed by a Board of Directors of not less than
one (1) nor more than (7) persons. The Incorporator shall act as Sole Initial
Director.
Article VII. The Capital Stock, after the amount of the subscription
price or par value, shall not be subject to assessment to pay the debts of the
corporation, and no stock issued, as paid up, shall ever be assessable or
assessed.
Article VIII. The initial By-laws of the corporation shall be adopted
by its Board of Directors. The power to alter, amend or repeal the By-laws, or
adopt new By-laws, shall be vested in the Board of Directors, except as
otherwise may be specifically provided in the Bylaws.
<PAGE>
I THE UNDERSIGNED, being the Incorporator hereinbefore named for the
purpose of forming a corporation pursuant the General Corporation Law of the
State of Nevada, do make and file these Articles of Incorporation, hereby
declaring and certifying that the facts herein stated are true, and accordingly
have set my hand hereunto this Day,
March 17, 1999.
/s/
WILLIAM STOCKER
ATTORNEY AT LAW
INCORPORATOR
- --------------------------------------------------------------------------------
Exhibit 2.1
Articles of Amendment: Reliant Interactive Media Corp.
- --------------------------------------------------------------------------------
<PAGE>
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF
RELIANT CORPORATION
Pursuant to the provisions of Section 16-10a-1006 of the Utah Revised
Business Corporation Act, Reliant Corporation, a Utah corporation, hereinafter
referred to as the "corporation," hereby adopts the following Articles of
Amendment to its Articles of Incorporation.
FIRST: The name of the Corporation is Reliant Corporation
SECOND: Article I of the Articles of Incorporation shall be amended to read as
follows:
Article I
The name of the corporation is Reliant Interactive Media Corp.
THIRD: Except as otherwise expressly amended hereby, the Articles of
Incorporation of the Corporation shall remain in full force and affect.
FOURTH: By executing these Articles of Amendment to the Articles of
Incorporation, the president and secretary of the Corporation do hereby
certify that on August 7, 1998, the foregoing amendment to the Articles
of Incorporation of Reliant Corporation, was authorized and approved
pursuant to Section 16-10a-1001 et. seq. of Utah Revised Business
Corporation Act by the vote of the majority of the Corporation's
shareholders. The number of issued and outstanding shares entitled to
vote on the foregoing amendment to the Articles of Incorporation was
14,260,000 of which 11,626,000 shares voted for. -0- shares voted
against and -0- shares abstained from the foregoing amendment to the
Articles of Incorporation. No other class of shares was entitled to
vote thereon as a class.
DATED this 7th day of August, 1998
/s/
----------------------------
T. Kent Rainey, President
/s/
----------------------------
Vicki Lynn Rainey, Secretary
State of Utah )
County of Salt Lake )
On this 7th day of August, 1998, personally appeared before me, the
undersigned, a notary public. T. Kent Rainey and Vicki Lynn Rainey, who being by
me first duly sworn, declared that they are the president and secretary,
respectively, of the above-named corporation, that they signed the foregoing
Articles of Amendment to the Articles of Incorporation and that the statements
contained therein are true.
Notary Public WITNESS MY HAND AND OFFICIAL SEAL
Victor D. Schwarz
350 South 400 East Ste. G-6 /s/
Salt Lake City UT 84111 ----------------------------
My Commission Expires Notary Public
August 10, 1998
State of Utah
- --------------------------------------------------------------------------------
Exhibit 2.2
By-Laws
- --------------------------------------------------------------------------------
<PAGE>
By-Laws
OF
Reliant Interactive Media Corp.
A NEVADA CORPORATION
Article I
CORPORATE OFFICES
The principal office of the corporation in the State of Nevada shall be
located at 774 Mays Blvd. Suite 10, Incline Village NV 89451. The corporation
may have such other offices, either within or without the State of incorporation
as the board of directors may designate or as the business of the corporation
may from time to time require.
Article II
SHAREHOLDERS' MEETINGS
Section 1. Place of Meetings
The directors may designate any place, either within or without the State
unless otherwise prescribed by statute, as the place of meeting for any annual
meeting or for any special meeting called by the directors. A waiver of notice
signed by all stockholders entitled to vote at a meeting may designate any
place, either within or without the State unless otherwise prescribed by
statute, as the place for holding such meeting. If no designation is made, or if
a special meeting be otherwise called, the place of meeting shall be the
principal office of the corporation.
Section 2. Annual Meetings
The annual meeting of the shareholders shall be held on the second Monday
of March in each year, if not a holiday, at Ten o'clock A.M., at which time the
shareholders shall elect a Board of Directors and transact any other proper
business. If this date falls on a holiday, then the meeting shall be held on the
following business day at the same hour.
Section 3. Special Meetings
Special meetings of the shareholders may be called by the President, the
Board of Directors, by the holders of at least ten percent of all the shares
entitled to vote at the proposed special meeting, or such other person or
persons as may be authorized in the Articles of Incorporation.
Section 4. Notices of Meetings
Written or printed notice stating the place, day and hour of the meeting
and, in the case of a special meeting, the purpose or purposes for which the
meeting is called, shall be delivered not less than ten (l0) days nor more than
twenty (20) days before the date of the meeting, either personally or by mail,
by the direction of the president, or secretary, or the officer or persons
calling the meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, addressed to the stockholder at his address
as it appears on the stock transfer books of the corporation, with postage
thereon prepaid.
<PAGE>
Reliant Interactive Media Corp.
BY-LAWS page 2
Section 5. Closing of Transfer Books or Fixing Record Date.
For the purpose of determining stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, or stockholders
entitled to receive payment of any dividend, or in order to make a determination
of stockholders for any other proper purpose, the directors of the corporation
may provide that the stock transfer books shall be closed for a stated period
but not to exceed, in any case twenty (20) days. If the stock transfer books be
closed for the purpose of determining stockholders entitled to notice or to vote
at a meeting of stockholders, such books shall be closed for at least twenty
(20) days immediately preceding such meeting. In lieu of closing the stock
transfer books, the directors may fix in advance a date as the record date for
and such determination of stockholders, such date in any case to be not more
than twenty (20) days and, in case of a meeting of stockholders, not less than
ten (l0) days prior to the date on which the particular action requiring such
determination of stockholders entitled to notice of or to vote at a meeting of
stockholders, or stockholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the directors declaring such dividend is adopted, as the case may
be, shall be the record date for such determination of stockholders. When a
determination of stockholders entitled to vote at any meeting of stockholders
has been made as provided in this section, such determination shall apply to any
adjournment thereof.
Section 6. Voting List.
The officer or agent having charge of the stock transfer books for the
shares of the corporation shall make, at least ten (l0) days before each meeting
of stockholders, a complete list of stockholders entitled to vote at such
meeting, or any adjournment thereof, arranged in alphabetical order, with the
address of and number of shares held by each, which list, for a period of ten
(l0) days prior to such meeting, shall be kept on file at the principal office
of the corporation and shall be subject to inspection by any stockholder at any
time during usual business hours. Such list shall also be produced and kept open
at the time and place of the meeting and shall be subject to the inspection of
any stockholder during the whole time of the meeting. The original stock
transfer book shall be prima facie evidence as to who are the stockholders
entitled to examine such list or transfer books or to vote at the meeting of
stockholders.
Section 7. Quorum.
At any meeting of stockholders fifty-one (5l) percent of the outstanding
shares of the corporation entitled to vote, represented in person or by proxy,
shall constitute a quorum at a meeting of stockholders. If less than said number
of the outstanding shares are represented at a meeting, a majority of the
outstanding shares so represented may adjourn the meeting from time to time
without further notice. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the meeting originally notified. The stockholders present at a
duly organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum.
<PAGE>
Reliant Interactive Media Corp.
BY-LAWS page 3
Section 8. Proxies.
At all meetings of the stockholders, a stockholder may vote by proxy
executed in writing by the stockholder or by his duly authorized attorney in
fact. Such proxy shall be filed with the secretary of the corporation before or
at the time of the meeting.
Section 9. Voting.
Each stockholder entitled to vote in accordance with the terms and
provisions of the certificate of incorporation and these by-laws shall be
entitled to one vote, in person or by proxy, for each share of stock entitled to
vote held by such shareholder. Upon the demand of any stockholder, the vote for
directors and upon any question before the meeting shall be by ballot. All
elections for directors shall be decided by plurality vote; all other questions
shall be decided by majority vote except as otherwise provided by the
Certificate of Incorporation or the laws of Nevada.
Section 10. Order of Business.
The order of business at all meetings of the stockholders, shall be as
follows:
a. Roll Call.
b. Proof of notice of meeting or waiver of notice.
c. Reading of minutes of preceding meeting.
d. Reports of Officers.
e. Reports of Committees.
f. Election of Directors.
g. Unfinished Business.
h. New Business.
Section 11. Informal Action by Stockholders.
Unless otherwise provided by law, any action required to be taken, or any
other action which may be taken, at a meeting of the stockholders, may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the stockholders entitled to vote with respect to the
subject matter thereof. Unless otherwise provided by law, any action required to
be taken, or any other action which may be taken, at a meeting of the
stockholders, may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by a Majority of all of the
stockholders entitled to vote with respect to the subject matter thereof at any
regular meeting called on notice, and if written notice to all shareholders is
promptly given of all action so taken.
Section 12. Books and Records.
The Books, Accounts, and Records of the corporation, except as may be
otherwise required by the laws of the State of Nevada, may be kept outside of
the State of Nevada, at such place or places as the Board of Directors may from
time to time appoint. The Board of Directors shall determine whether and to what
extent the accounts and the books of the corporation, or any of them, other than
the stock ledgers, shall be open to the inspection of the stockholders, and no
stockholder shall have any right to inspect any account or book or document of
<PAGE>
Reliant Interactive Media Corp.
BY-LAWS page 4
this Corporation, except as conferred by law or by resolution of the
stockholders or directors. In the event such right of inspection is granted to
the Stockholder(s) all fees associated with such inspection shall be the sole
expense of the Stockholder(s) demanding the inspection. No book, account, or
record of the Corporation may be inspected without the legal counsel and the
accountants of the Corporation being present. The fees charged by legal counsel
and accountants to attend such inspections shall be paid for by the Stockholder
demanding the inspection.
Article III
BOARD OF DIRECTORS
Section 1. General Powers.
The business and affairs of the corporation shall be managed by its board
of directors. The directors shall in all cases act as a board, and they may
adopt such rules and regulations for the conduct of their meetings and the
management of the corporation, as they may deem proper, not inconsistent with
these by-laws and the laws of this State.
Section 2. Number, Tenure, and Qualifications.
The number of directors of the corporation shall be a minimum of one (l)
and a maximum of nine (9). Each director shall hold office until the next annual
meeting of stockholders and until his successor shall have been elected and
qualified.
Section 3. Regular Meetings.
A regular meeting of the directors, shall be held without other notice
than this by-law immediately after, and at the same place as, the annual meeting
of stockholders. The directors may provide, by resolution, the time and place
for holding of additional regular meetings without other notice than such
resolution.
Section 4. Special Meetings.
Special meetings of the directors may be called by or at the request of
the president or any two directors. The person or persons authorized to call
special meetings of the directors may fix the place for holding any special
meeting of the directors called by them.
Section 5. Notice.
Notice of any special meeting shall be given at least one day previously
thereto by written notice delivered personally, or by telegram or mailed to each
director at his business address. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail so addressed, with postage
thereon prepaid. The attendance of a director at a meeting shall constitute a
waiver of notice of such meeting, except where a director attends a meeting for
the express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened.
<PAGE>
Reliant Interactive Media Corp.
BY-LAWS page 5
Section 6. Quorum.
At any meeting of the directors fifty (50) percent shall constitute a
quorum for the transaction of business, but if less than said number is present
at a meeting, a majority of the directors present may adjourn the meeting from
time to time without further notice.
Section 7. Manner of Acting.
The act of the majority of the directors present at a meeting at which a
quorum is present shall be the act of the directors.
Section 8. Newly Created Directorships and Vacancies.
Newly created directorships resulting from an increase in the number of
directors and vacancies occurring in the board for any reason except the removal
of directors without cause may be filled by a vote of the majority of the
directors then in office, although less than a quorum exists. Vacancies
occurring by reason of the removal of directors without cause shall be filled by
vote of the stockholders. A director elected to fill a vacancy caused by
resignation, death or removal shall be elected to hold office for the unexpired
term of his predecessor.
Section 9. Removal of Directors.
Any or all of the directors may be removed for cause by vote of the
stockholders or by action of the board. Directors may be removed without cause
only by vote of the stockholders.
Section 10. Resignation.
A director may resign at any time by giving written notice to the board,
the president or the secretary of the corporation. Unless otherwise specified in
the notice, the resignation shall take effect upon receipt thereof by the board
or such officer, and the acceptance of the resignation shall not be necessary to
make it effective.
Section 11. Compensation.
No compensation shall be paid to directors, as such, for their services,
but by resolution of the board a fixed sum and expenses for actual attendance at
each regular or special meeting of the board may be authorized. Nothing herein
contained shall be construed to preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
Section 12. Executive and Other Committees.
The board, by resolution, may designate from among its members an
executive committee and other committees, each consisting of one (l) or more
directors. Each such committee shall serve at the pleasure of the board.
<PAGE>
Reliant Interactive Media Corp.
BY-LAWS page 6
Article IV
OFFICERS
Section 1. Number.
The officers of the corporation shall be the president, a secretary and a
treasurer, each of whom shall be elected by the directors. Such other officers
and assistant officers as may be deemed necessary may be elected or appointed by
the directors.
Section 2. Election and Term of Office.
The officers of the corporation to be elected by the directors shall be
elected annually at the first meeting of the directors held after each annual
meeting of the stockholders. Each officer shall hold office until his successor
shall have been duly elected and shall have qualified or until his death or
until he shall resign or shall have been removed in the manner hereinafter
provided.
Section 3. Removal.
Any officer or agent elected or appointed by the directors may be removed
by the directors whenever in their judgement the best interest of the
corporation would be served thereby, but such removal shall be without prejudice
to contract rights, if any, of the person so removed.
Section 4. Vacancies.
A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the directors for the unexpired
portion of the term.
Section 5. President.
The president shall be the principal executive officer of the corporation
and, subject to the control of the directors, shall in general supervise and
control all of the business and affairs of the corporation. He shall, when
present, preside at all meetings of the stockholders and of the directors. He
may sign, with the secretary or any other proper officer of the corporation
thereunto authorized by the directors, certificates for shares of the
corporation, any deeds, mortgages, bonds, contracts, or other instruments which
the directors have authorized to be executed, except in cases where the
directors or by these by-laws to some other officer or agent of the corporation,
or shall be required by law to be otherwise signed or executed; and in general
shall perform all duties incident to the office of president and such other
duties as may be prescribed by the directors from time to time.
Section 6. Chairman of the Board.
In the absence of the president or in the event of his death, inability
or refusal to act, the chairman of the board of directors shall perform the
duties of the president, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the president. The chairman of the board of
directors shall perform such other duties as from time to time may be assigned
to him by the directors.
<PAGE>
Reliant Interactive Media Corp.
BY-LAWS page 7
Section 7. Secretary.
The secretary shall keep the minutes of the stockholders' and of the
directors' meetings in one or more books provided for that purpose, see that all
notices are duly given in accordance with the provisions of these by-laws or as
required, be custodian of the corporate records and of the seal of the
corporation and keep a register of the post office address of each stockholder
which shall be furnished to the secretary by such stockholder, have general
charge of the stock transfer books of the corporation and in general perform all
the duties incident to the office of secretary and such other duties as from
time to time may be assigned to him by the president or by the directors.
Section 8. Treasurer.
If required by the directors, the treasurer shall give a bond for the
faithful discharge of his duties in such sum and with such surety or sureties as
the directors shall determine. He shall have charge and custody of and be
responsible for all funds and securities of the corporation; receive and give
receipts for moneys due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation in such
banks, trust companies or other depositories as shall be selected in accordance
with these by-laws and in general perform all of the duties incident to the
office of treasurer and such other duties as from time to time may be assigned
to him by the president or by the directors.
Section 9. Salaries.
The salaries of the officers shall be fixed from time to time by the
directors and no officer shall be prevented from receiving such salary by reason
of fact that he is also a director of the corporation.
Article V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts.
The directors may authorize any officer or officers, agent or agents to
enter into any contract or execute and deliver any instrument in the name of and
on behalf of the corporation, and such authority may be general or confined to
specific instances.
Section 2. Loans.
No loans shall be contracted on behalf of the corporation and no
evidences of indebtedness shall be issued in its name unless authorized by a
resolution of the directors. Such authority may be general or confined to
specific instances.
<PAGE>
Reliant Interactive Media Corp.
BY-LAWS page 8
Section 3. Checks, Drafts, etc.
All checks, drafts or other orders for the payment of money, notes or
other evidences of indebtedness issued in the name of the corporation, shall be
signed by such officer or officers, agent or agents of the corporation and in
such manner as shall from time to time be determined by resolution of the
directors.
Section 4. Deposits.
All funds of the corporation not otherwise employed shall be deposited
from time to time to the credit of the corporation in such banks, trust
companies or other depositories as the directors may select.
Article VI
FISCAL YEAR
The fiscal year of the corporation shall begin on the lst day of January
in each year, or on such other day as the Board of Directors shall fix.
Article VII
DIVIDENDS
The directors may from time to time declare, and the corporation may pay,
dividends on its outstanding shares in the manner and upon the terms and
conditions provided by law.
Article VIII
SEAL
The directors may provide a corporate seal which shall have inscribed
thereon the name of the corporation, the state of incorporation, year of
incorporation and the words, "Corporate Seal".
Article IX
WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is required to be
given to any stockholder or director of the corporation under the provisions of
these by-laws or under the provisions of the articles of incorporation, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
<PAGE>
Reliant Interactive Media Corp.
BY-LAWS page 9
Article X
AMENDMENTS
These by-laws may be altered, amended or repealed and new by-laws may be
adopted in the same manner as their adoption, by the Board of Directors if so
adopted; by a vote of the stockholders representing a majority of all the shares
issued and outstanding, if so adopted or adopted by the Board of Directors; or,
in any case, at any annual stockholders' meeting or at any special stockholders'
meeting when the proposed amendment has been set out in the notice of such
meeting.
CERTIFICATION
The Secretary of the Corporation hereby certifies that the foregoing is a
true and correct copy of the By-Laws of the Corporation named in the title
thereto and that such By-Laws were duly adopted by the Board of Directors of
said Corporation on the date set forth below.
Executed, and Corporate Seal affixed, this day of March 19, 1999.
/S/
--------------------------------------------
Tim Harrington
Acting Secretary
- --------------------------------------------------------------------------------
Exhibit 2.3
Majority Shareholder Action
March 23, 1999
- --------------------------------------------------------------------------------
<PAGE>
Reliant Interactive Media Corp.
A NEVADA CORPORATION
MAJORITY SHAREHOLDER ACTION
THE MEETING WAS HELD on March 23, 1999, at 2:00 p.m., of the shareholder
or shareholder representatives constituting an absolute majority of all shares
issued and outstanding, and which would be entitled to vote at meeting of
shareholders if called on notice to all shareholders. Present in person or by
telecommunications were Shareholders listed and signing below. William Stocker,
Special Securities Counsel acting as Secretary of the meeting and as Inspector
of Elections, determined that total shares issued and outstanding and entitled
to vote and that the ownership of shares represented at the Meeting, were as
detailed in Tables A and B respectively. Facsimile signatures of voting
shareholders are requested and will be accepted.
I. MANAGEMENT AND SHAREHOLDERS DISCUSSED: the Proposal for the Capitalization of
the Company, following the move from Utah to Nevada.
II. THE FOLLOWING ACTION WAS RESOLVED AND TAKEN BY MAJORITY SHAREHOLDER ACTION:
Accordingly, the foregoing Proposals 1-7 were declared duly adopted by Majority
Shareholder Action, pursuant to the Nevada Business Corporation Law, Art.
78.320(2).
<TABLE>
TABLE A
QUORUM CALCULATIONS AND TALLY OF VOTES
<CAPTION>
==========================================================================================================================
QUORUM CALCULATIONS SHARES %
==========================================================================================================================
<S> <C> <C>
Total # Shares Entitled to Vote
per shareholder list 18,118,850 100.00
- --------------------------------------------------------------------------------------------------------------------------
50% of All Shares Entitled to Vote 9,059,425 50.00
- --------------------------------------------------------------------------------------------------------------------------
Quorum required to conduct business = 50% + 1 share 9,059,426
- --------------------------------------------------------------------------------------------------------------------------
Total Shares Present 10,073,500 55.60
==========================================================================================================================
Share voting for the proposal to: % of present and voting
- --------------------------------------------------------------------------------------------------------------------------
Proposal 1: Approve and empower the Board of Directors to 10,073,500
effect a reverse split of the issuer's common stock, every five 100.00
shares to become one share.
- --------------------------------------------------------------------------------------------------------------------------
Proposal 2: Approve an Agreement and Plan of Reorganization 10,073,500
whereby the Company would acqurie TPH Marketing, Inc., in a 100.00
tax-free exchange, of the issuance of 1,500,000 [post-reverse]
shares of the Company's common stock.
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Reliant Interactive Media Corp. (Nevada) MAJORITY SHAREHOLDER ACTION 3/23/99
Page 2
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Proposal 3: Approve a Qualified Shareholder Option Plan for 24 10,073,500
months for 500,000 [post-reverse] shares at $2.50 to $7.50 per 100.00
share, based on a formula and terms to be determined by the
Board of Directors, for key employees, consultants and other key people.
- --------------------------------------------------------------------------------------------------------------------------
Proposal 4: Approve the Issuance [post-reverse] to each of the 10,073,500
following, based upon 100,000 shares for each $10,000,000.00 in 100.00
gross revenues, received by the Company and determined in accordance with
Regulation SX accounting standards; no more than 1/6 of the shares shall be
vested in any 6 month period: up to 1,000,000 shares for Mel Arthur; up to
3,000,000 shares to Kevin Harrington; and up to 2,000,000 shares for Tim
Harrington.
- --------------------------------------------------------------------------------------------------------------------------
Proposal 5: Approve issuance of the following stock [post- 10,073,500
reverse] for services in connection with financing obtained for the 100.00
company within the the next 24 months, for each of the
following: Intrepid International S.A. and N&R Ltd. Group, Inc.
as follows:
100,000 shares per $1,000,000.00 for up to $10,000,000.00
raised;
50,000 shares per $1,000,000.00 for the next $20,000.00
raised;
20,000 shares per $1,000,000.00 for over $30,000,000.00
raised.
The number of "dollars raised" shall be the gross dollars raised
before payment of commissions, fees and other expenses directly connected to
raising these funds.
- --------------------------------------------------------------------------------------------------------------------------
Proposal 6: Approve the sale of corporate debentures for a total
issuance of not less than $6,000,000 in demnominations of $1,000 10,073,500 100.00
and bearing interest at the market rate, of 8% or less, due in 5
years from issuance. Debentures shall be convertible to shares of
common stock of the company at a conversion rate of $7.50 per
share.
- --------------------------------------------------------------------------------------------------------------------------
Proposal 7 Confirm, Elect and/or re-elect four directors, Kevin
Harrington, Tim Harrington, Mel Arthur, and Karl Rodriguez, to 10,073,500 100.00
serve until the next meeting of shareholders.:
==========================================================================================================================
</TABLE>
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
<PAGE>
Reliant Interactive Media Corp. (Nevada) MAJORITY SHAREHOLDER ACTION 3/23/99
Page 3
<TABLE>
TABLE B
SHARES PRESENT AND VOTING
<CAPTION>
===============================================================================================================
Shareholder/Representative # Shares % of Total
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
25,000 0.14
/s/
--------------------------------------------
Mel Arthur
- ---------------------------------------------------------------------------------------------------------------
250,000 1.38
/s/
--------------------------------------------
Charles Harrington
- ---------------------------------------------------------------------------------------------------------------
7,280,500 40.18
/s/
--------------------------------------------
Kevin Harrington
- ---------------------------------------------------------------------------------------------------------------
1,500,000 8.28
/s/
--------------------------------------------
Tim Harrington
- ---------------------------------------------------------------------------------------------------------------
10,000 0.06
/s/
--------------------------------------------
Merlin C. Mason
- ---------------------------------------------------------------------------------------------------------------
10,000 0.06
/s/
--------------------------------------------
Naomi Mason
- ---------------------------------------------------------------------------------------------------------------
380,000 2.10
/s/
--------------------------------------------
Rick Mason
- ---------------------------------------------------------------------------------------------------------------
300,000 1.66
/s/
--------------------------------------------
N&R Limited Group, Inc.
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Reliant Interactive Media Corp. (Nevada) MAJORITY SHAREHOLDER ACTION 3/23/99
Page 4
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
318,000 1.76
/s/
--------------------------------------------
J. Dan Sifford
Intrepid International S.A
- ---------------------------------------------------------------------------------------------------------------
TOTAL PRESENT AND VOTING IN FAVOR 10,073,500 55.60
- ---------------------------------------------------------------------------------------------------------------
TOTAL INDICATED ISSUED AND 18,118,850 100.00
OUTSTANDING
===============================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Exhibit 6.0
Plan of Reorganization and Merger
for Change of Situs: Utah to Nevada
March 15, 1999
- --------------------------------------------------------------------------------
<PAGE>
PLAN OF REORGANIZATION AND MERGER
FOR CHANGE OF SITUS
BY WHICH
Reliant Interactive Media, Inc.
(A UTAH CORPORATION)
WILL MERGE WITH AND INTO
Reliant Interactive Media, Inc.
(A NEVADA CORPORATION)
FOR THE PURPOSE OF CHANGING THE PLACE OF INCORPORATION
This Plan of Reorganization is made effective and dated this day of March
15, 1999, by and between the above referenced corporations, sometimes referred
to herein as "the Public Company" and "the Private Company", respectively.
I. RECITALS
A. The Parties to this Agreement
1. RELIANT INTERACTIVE MEDIA, INC. ("the Public Company") is a Utah
Corporation.
2. RELIANT INTERACTIVE MEDIA, INC. ("the Private Company") is a Nevada
Corporation, having been created (or to be created) on behalf of Reliant
Interactive Media, Inc. for the purpose of changing the place of incorporation
from Utah to Nevada.
B. The Capital of the Parties:
1. THE CAPITAL OF THE PUBLIC COMPANY consists of 50,000,000 shares of
common voting stock of $0.001 par value authorized, of which 15,000,000 shares
are issued and outstanding.
2. THE CAPITAL OF THE PRIVATE COMPANY consists of 50,000,000 shares of
common voting stock of $0.001 par value authorized, of which no shares have been
or are issued or outstanding.
C. The Decision to Reorganize to Change Situs: The Parties have resolved,
accordingly, to merge and relocated the place of incorporation, by means of the
following reorganization, by which the Public Company will merge with and into
the Private Company move to Nevada.
II. PLAN OF REORGANIZATION
A. Change of Situs: The Public Company (Utah) and the Private Company (Nevada)
are hereby reorganized for the sole and singular purpose of changing the place
of incorporation of Reliant Interactive Media, Inc.; such that immediately
following the Reorganization the Utah Public Company will move to Nevada.
<PAGE>
1. THE PUBLIC COMPANY: Reliant Interactive Media, Inc. of Utah will
merge with and into and thereafter be Reliant Interactive Media, Inc.of Nevada.
The Public Company will retain its corporate personality and status, and will
continue its corporate existence uninterrupted, in and through, and only in and
through the Nevada Corporation.
2. CONVERSION OF OUTSTANDING SHARES: Forthwith upon the effective date
hereof, each and every one share of stock of the Public Utah Company shall be
converted to one share of the Nevada Company. Any such holders of shares may
surrender them to the transfer agent for common stock of the Public Utah
Company, which transfer agent shall remain and continue as transfer agent for
the Nevada Company.
3. EFFECTIVE DATE: This Plan of Reorganization shall become effective
immediately upon approval and adoption by Corporate parties hereto, in the
manner provided by the law of its place of incorporation and its constituent
corporate documents, the time of such effectiveness being called the effective
date hereof.
4. SURVIVING CORPORATIONS: The Nevada Company shall survive the
Reorganization after Reorganization, with the operational history of the Utah
Company before the Reorganization, and with the management, duties and
relationships to its shareholders unchanged by the Reorganization and with all
of its property and with its shareholder list unchanged.
5. FURTHER ASSURANCE, GOOD FAITH AND FAIR DEALING: the Directors of each
Company shall and will execute and deliver any and all necessary documents,
acknowledgments and assurances and do all things proper to confirm or
acknowledge any and all rights, titles and interests created or confirmed
herein; and both companies covenant hereby to deal fairly and good faith with
each other and each others shareholders.
THIS REORGANIZATION AGREEMENT is executed on behalf of each Company by
its duly authorized representatives, and attested to, pursuant to the laws of
its respective place of incorporation and in accordance with its constituent
documents.
Reliant Interactive Media, Inc. Reliant Interactive Media, Inc.
(A UTAH CORPORATION) (A NEVADA CORPORATION)
by by
/s/ /s/
- ------------------------------- -------------------------------
Kevin Harrington Kevin Harrington
PRESIDENT, DIRECTOR PRESIDENT, DIRECTOR
/s/ /s/
- ------------------------------- -------------------------------
Tim Harrington Tim Harrington
SECRETARY, DIRECTOR SECRETARY, DIRECTOR
- --------------------------------------------------------------------------------
Exhibit 6.1
Employment Agreements (3)
- --------------------------------------------------------------------------------
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into effective this
day of June, 1999, by and between Reliant Interactive Media Corp. (the
"Employer"), and Kevin Harrington (the "Employee").
PREMISES
a) Employee possesses expertise, experience and skill in the development
and marketing of products via electronic and other multi-media means.
b) Employee has demonstrated the ability to run, manage and build a
development stage business.
c) Employer desires to employ Employee to serve as its Chief Executive
Officer to run, manage and build its business.
d) Employee desires to perform all of such services as Employer's
employee and both parties want to enter into a written agreement as to
their understanding of the employment relationship.
AGREEMENT
For and in Consideration of the mutual covenants contained herein and of
the mutual benefits to be derived hereunder, the parties agree as follows:
1. Definitions. Whenever used in this Agreement, the following terms
shall have the meanings set forth below:
(a) "Accrued Benefits" shall mean the amount payable not later than
ten (10) days following an applicable Termination Date and which shall be
equal to the sum of the following amounts:
(i) All salary earned or accrued through the Termination Date;
(ii) Reimbursement for any and all monies advanced in connection
with Employee's employment for reasonable and necessary expenses incurred
by Employee and approved by the Employer through the Termination Date; and
(iii) All other payments and benefits to which Employee may be
entitled under the terms of any benefit plan of the Employer.
(b) "Board" shall mean the board of directors of the Employer.
(c) "Cause" shall mean any of the following:
(i) The engagement by Employee in fraudulent conduct, which has
a significant adverse impact on the Employer in the conduct of the
Employer's business;
<PAGE>
EMPLOYMENT AGREEMENT
Reliant Interactive Media Corp. ("Employer")
and Kevin Harrington ("Employee").
June 1999 Page 2
(ii) Conviction of a felony involving a crime against the
Employer, as evidenced by a binding and final judgment, order or decree of
a court of competent jurisdiction.
(iii) Gross negligence or refusal by Employee to perform his
duties or responsibilities; or
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(e) "Confidential Information" means information (i) disclosed to or
actually known by Employee as a consequence of or through his/her
employment with the Employer, (ii) not generally known outside the
Employer, and (iii) which relates to the Employer's business. Confidential
Information includes, but is not limited to, information of a technical
nature, such as methods and materials, trade secrets, inventions,
processes, formulas, systems, computer programs, and studies, and
information of a business nature such as project plans, market
information, costs, customer lists, and so forth.
(f) "Disability" shall mean a physical or mental condition whereby
Employee is unable to perform on a full-time basis his customary duties
under this Agreement.
(g) "Developments" means all Inventions (defined hereafter), computer
programs, copyright works, mask works, trademarks, Confidential
Information, Works of Authorship (defined hereafter), and other
Intellectual Property (defined hereafter), made, conceived or authored by
Employee, alone or jointly with others, while employed by the Employer;
whether or not during normal business hours or on the Employer's premises,
that are within the present scope of the Employer's business at the time
such Developments are made, conceived, or authored, or which result from
or are suggested by any work Employee or others may do for or on behalf of
the Employer.
(h) "Employer" means Reliant Interactive Media Corp. and its
subsidiaries, divisions and affiliates as well as majority owned companies
of such subsidiaries, divisions and affiliates, or their successors or
assigns.
(i) "Invention" means discoveries, concepts, and ideas, whether or
not patentable or copyrightable, including but not limited to
improvements, know-how, data, processes, methods, formulae, and
techniques, as well as improvements thereof, or know-how related thereto,
concerning any present or prospective activities of the Employer which
Employee makes, discovers or conceives (whether or not during the hours of
his engagement of with the use of the Employer's facilities, materials or
<PAGE>
EMPLOYMENT AGREEMENT
Reliant Interactive Media Corp. ("Employer")
and Kevin Harrington ("Employee").
June 1999 Page 3
personnel), either solely or jointly with others during his engagement by
the Employer or any affiliate and, if based on or related or Proprietary
Information, at any time after termination of such engagement.
(j) "Intellectual Property" means Inventions, Confidential
Information, Works of Authorship, patent rights, trademark rights, service
mark rights, copyrights, know-how, Developments and rights of like nature
arising or subsisting anywhere in the world, in relation to all of the
foregoing, whether registered or unregistered.
(k) "Notice of Termination" shall mean the notice described in
Section 13 hereof.
(l) "Person" shall mean any individual, partnership, joint venture,
association, trust, corporation or other entity, other than an employee
benefit plan of the Employer of an entity organized, appointed of
established pursuant to the terms of any such benefit plan.
(m) "Proprietary Information" shall mean any and all methods,
inventions, improvements or discoveries, whether or not patentable or
copyrightable, and any other information of a similar nature related to
the business of the Employer disclosed to the Employee or otherwise made
known to him as a consequence of or through his engagement by the Employer
(including information originated by Employee) in any technological area
previously developed by the Employer or developed, engaged in, or
researched, by the Employer during the term of Employee's engagement,
including, but not limited to, trade secrets, processes, products,
formulae, apparatus, techniques, know-how, marketing plans, data,
improvements, strategies, forecasts, customer lists, and technical
requirements of customers, unless such information is in the public domain
to such an extent as to be readily available to competitors.
(n) "Termination Date" shall mean, except as otherwise provided in
Section 12 hereof.
(i) Employee's date of death;
(ii) Thirty (30) days after the delivery of the Notice of
Termination if Employee's employment on account of Disability pursuant to
Section 16 hereof, unless Employee returns on a full-time basis to the
performance of his duties prior to the expiration of such period;
(iii) Thirty (30) days after the delivery of the Notice of
Termination if Employee's employment is terminated by Employee
voluntarily; and
<PAGE>
EMPLOYMENT AGREEMENT
Reliant Interactive Media Corp. ("Employer")
and Kevin Harrington ("Employee").
June 1999 Page 4
(iv) Thirty (30) days after the delivery of the Notice of
Termination if Employee's employment is terminated by the Employer for any
reason other than death or Disability.
(o) "Termination Payment" shall mean the payment described in Section
14 hereof.
(p) "Works of Authorship" means an expression fixed in a tangible
medium of expression regardless of the need for a machine to make the
expression manifest, and includes but is not limited to, writings,
reports, drawings, sculptures, illustrations, video recordings, audio
recordings, computer programs, and charts.
2. Employment. Employer hereby employs Employee to perform those duties
generally described in this Agreement, and Employee hereby accepts and agrees to
such employment on the terms and conditions hereinafter set forth.
3. Term. Subject to the terms and conditions of this Agreement, the term
of this Agreement shall commence retroactively from December 1, 1998, and end on
December 1, 2003.
4. Duties. During the term of this Agreement, Employee shall be employed
by Employer as its Chief Executive Officer. In addition to the office of Chief
Executive Officer, Employee agrees to serve in such other office or position
with Employer or any subsidiary of Employer and as such shall, from time to
time, be determined by Employer's Board. Employee agrees to serve as a member of
the Employer's Board as Chairman of its Board. Employee shall devote
substantially all of his working time and efforts to the business of Employer
and its subsidiaries and shall not during the term of this Agreement be engaged
in any other substantial business activities which will significantly interfere
or conflict with the reasonable performance of his duties hereunder.
5. Compensation.
(a) Salary. For all services rendered by Employee, Employer shall pay
to Employee a base salary of $120,000 for the first year, and the base
salary shall increase by $12,000 per year for each of the remaining four
years of this Agreement, payable in bi-monthly installments. Employee
shall also be due a base salary from the time of the inception of
employment by Employer of the Employee to the date of this Agreement equal
to the rate of compensation as defined for the first year of this
Agreement. If Employer's financial constraints so dictate, Employee agrees
to defer a portion of the salary contained in this Section. This deferred
base salary along with any deferred base salary earned prior to the date
of this Agreement shall be paid to Employee at such time or times as
<PAGE>
EMPLOYMENT AGREEMENT
Reliant Interactive Media Corp. ("Employer")
and Kevin Harrington ("Employee").
June 1999 Page 5
financial constraints so dictate. All salary payments shall be subject to
withholding and other applicable taxes. The rate of salary may be
increased at any time, as the Board may determine, based on earnings,
increased activities of the Employer, or such other factors as the Board
may deem appropriate from time to time. Employee shall receive bonus or
incentive compensation as approved by the Board.
(b) Incentive Compensation. In the event that Employer achieves
"ADJUSTED GROSS REVENUES" annually in excess of $10,000,000 Employee shall
receive additional compensation equal to 9/10 of 1% of "ADJUSTED GROSS
REVENUES". This Incentive compensation shall be paid on a quarterly basis
within thirty days of the end of the calendar quarter based on the
preceding calendar quarter's "ADJUSTED GROSS REVENUES". "GROSS" and
"ADJUSTED GROSS REVENUES" are defined as follows: "GROSS REVENUES" shall
mean all income of Employerfrom all sources exclusive of sales taxes, use
taxes, value added taxes, and any other taxes imposed upon sales of
products. "ADJUSTED GROSS REVENUES" shall mean Employer's Gross Revenues
from sales of the Products, less all of the following:
(i) refunds, credits or other allowances on account of return or
rejection of goods or otherwise granted in the ordinary course of
business, as actually incurred and as reserved for ("Returns");
(ii) uncollectible accounts due to credit card charge backs, bad
checks or other reasons of uncollectability, as actually incurred and
as reserved for ("Uncollectibles"); and
(iii) sales made at or below Reliant's cost of goods for purposes of
liquidation or closeout ("Liquidation Sales").
(c) Insurance Benefits. Employer shall provide health and medical
insurance for Employee in a form and program to be chosen by Employer for
certain of its full-time employees. Employer shall provide Employee with
directors and officers liability insurance in the amount of $2,000,000 and
life and disability insurance in amounts approved by the Board.
(d) Other Benefits. Employee shall be entitled to participate in any
retirement, pension, profit-sharing, or other plan as may be put in effect
from time to time by the Board, including the following:
(i) Qualified Stock Option Plan. Pursuant to a Qualified Stock Option
Plan authorized by the Board and approved by the Shareholders of
Employer, Employee shall have the option to purchase up to 60,000
shares of Employer's stock in six months at $2.50 per share, in 12
months at $4.00 per share, in eighteen months at $6.00 per share and
in twenty-four months at $7.50 per share;
<PAGE>
EMPLOYMENT AGREEMENT
Reliant Interactive Media Corp. ("Employer")
and Kevin Harrington ("Employee").
June 1999 Page 6
(ii) Revenue Performance Bonuses. Employee shall be issued 100,000
shares of Employer's stock for each $10,000,000 in gross revenues (in
accordance with SEC Reg SX accounting rules) received by Employer
with a maximum of 3,000,000 shares to be issued; and
(iii) Stock Performance Options. Employee shall have the option to
purchase stock of Employer at $7.50 per share as follows: up to
144,000 shares if the public trading price close at a minimum of $15
per share for five consecutive days; up to an additional 144,000
shares should the public trading price close at a minimum of $20 per
share for five consecutive days; and up to an additional 192,000
shares if the public trading price should close at a minimum of $25
for five consecutive days.
(e) Automobile / Transportation. Employer shall pay for Employees
monthly automobile payment, not to exceed $1,000 per month, including
applicable insurance.
6. Expenses. Employer will reimburse Employee for expenses incurred in
connection with Employer's business, including expenses for travel, lodging,
meals, beverages, entertainment, and other items of Employee's periodic
presentation of an account of such expenses. Employer shall reimburse Employee
for the following expenses whether incurred or to be incurred on behalf of
Employer:
(a) Reimbursement for Legal Expenses Incurred by Employee. To date,
Employee has paid and/or incurred legal fees in the amount of $50,000 for
services rendered in connection with the operation of Reliant Interactive
Media Corp. Employer hereby agrees to either release Employee from any
further obligation or reimburse Employee for all such expenses on or
before December 1, 1999.
(b) Reimbursement for Accounting Expenses Incurred by Employee. To
date Employee has paid and/or incurred accounting fees in the amount of
$20,000 for services rendered in connection with the operation of Reliant
Interactive Media Corp. Employer hereby agrees to either release Employee
from any further obligations or reimburse Employee of such expenses on or
before December 1, 1999.
(c) Assumption of Loan. Employer agrees to assume all financial
obligations to the loans in the approximate aggregate amounts of $300,000,
now held in the name of Kevin Harrington and as shown in detail on the
attache Schedule A. Employer shall sign and execute all necessary
documents of assumption as required by the banks on or before June 30,
1999.
<PAGE>
EMPLOYMENT AGREEMENT
Reliant Interactive Media Corp. ("Employer")
and Kevin Harrington ("Employee").
June 1999 Page 7
7. Working Facilities. Employer shall provide to Employee offices and
facilities appropriate to Employee's position and suitable for the performance
of Employee's duties as set forth in this Agreement.
8. Nondisclosure of Proprietary and Confidential Information. Recognizing
that the Employer is presently engaged, and may hereafter continue to be engaged
in the research and development of processes, the manufacturing of products or
performance of services, which involve experimental and inventive work and that
the success of the Employer's business depends upon the protection of the
processes, products and services by patent, copyright or by secrecy and that
Employee has had, or during the course of his engagement may have, access to
Proprietary and Confidential Information, as herein defined, of the Employer or
other information and data of a secret or proprietary nature of the Employer
which the Employer wishes to keep confidential and Employee has furnished, or
during the course of his engagement may furnish, such information to the
Employer, Employee agrees and acknowledges that:
(a) The Employer has exclusive property rights to all Proprietary and
Confidential Information and Employee hereby assigns all rights he might
otherwise possess in any Proprietary and Confidential Information to the
Employer. Except as required in the performance of his duties to the
Employer, Employee will not at any time during or after the term of his
engagement, which term shall include any time in which Employee may be
retained by the Employer as a consultant, directly or indirectly use,
communicate, disclose or disseminate any Proprietary or Confidential
Information of a secret, proprietary, confidential or generally
undisclosed nature relating to the Employer, its products, customers,
processes and services, including information relating to testing,
research, development, manufacturing, marketing and selling.
(b) All documents, records, notebooks, notes, memoranda and similar
repositories of, or containing, Proprietary and Confidential Information
or any other information of a secret, proprietary, confidential or
generally undisclosed nature relating to the Employer or its operations
and activities made or compiled by Employee at any time or made available
to him prior to or during the term of his engagement by the Employer,
including any and all copies thereof, shall be the property of the
Employer, shall be held by him in trust solely for the benefit of the
Employer, and shall be delivered to the Employer by him on the termination
of his engagement or at any other time on the request of the Employer.
(c) Employee will not assert any rights under any inventions,
trademarks, copyrights, discoveries, concepts or ideas, or improvements
thereof, or know-how related thereto, as having been made or acquired by
<PAGE>
EMPLOYMENT AGREEMENT
Reliant Interactive Media Corp. ("Employer")
and Kevin Harrington ("Employee").
June 1999 Page 8
him during the term of his engagement if based on or otherwise related to
Proprietary or Confidential Information.
9. Assignment Of Inventions.
(a) All Inventions shall be the sole property of the Employer, and
Employee agrees to perform the provisions of the Section 9 with respect
thereto without the payment by the Employer of any royalty or any
consideration therefor other than the regular compensation paid to
Employee in the capacity of any employee or consultant, with the exception
that Employee shall continue to receive royalties from sales of the Cobee
Dual- Flame Lighter, as per the previously contracted agreement.
(b) Employee shall apply, at the Employer's request and expense, for
United States and foreign letters patent or copyrights either in
Employee's name or otherwise an the Employer shall desire.
(c) Employee hereby assigns to the Employer all of his rights to such
Inventions, and to applications for United States and/or foreign letters
patent or copyrights and to United States and/or foreign letter patent or
copyrights granted upon such Inventions.
(d) Employee shall acknowledge and deliver promptly to the Employer,
without charge to the Employer, but at its expense, such written
instruments (including applications and assignments) and do such other
acts, such as giving testimony in support of Employee's inventorship, as
may be necessary in the opinion of the Employer to obtain, maintain,
extend, reissue and enforce United States and/or foreign letters patent
and copyrights relation to the Inventions and to vest the entire right and
title thereto in the Employer of its nominee. Employee acknowledges and
agrees that any copyright developed or conceived of, by Employee during
the term of his employment which is related to the Business of the
Employer shall be a "work for hire" under the copyright law of the United
States and other applicable jurisdictions.
(e) Employee represents that his performance of all the terms of this
Agreement and as an employee of or consultant to the Employer does not and
will not breach any trust prior to his employment by the Employer.
Employee agrees not to enter into any agreement either written or oral in
conflict herewith and represents and agrees that he has not brought and
will not bring with to the Employer or use in the performance of his
responsibilities at the Employer any materials or documents of a former
employer which are not generally available to the public, unless he has
obtained written authorization from the former employer for their
possession and use, a copy of which has been provided to the Employer.
<PAGE>
EMPLOYMENT AGREEMENT
Reliant Interactive Media Corp. ("Employer")
and Kevin Harrington ("Employee").
June 1999 Page 9
(f) No provisions of the Paragraph shall be deemed to limit the
restrictions applicable to Employee under Section 8 and 9.
10. Shop Rights.
The Employer shall also have the royalty-free right to use in its
business, and to make, use and sell products, processes and/or services derived
from any inventions, discoveries, concepts and ideas, whether or not patentable,
including but not limited to processes, methods, formulas and techniques, as
well as improvements thereof or know-how related thereto, which are not within
the scope of Inventions as defined herein but which are conceived of or made by
Employee during the period he is engaged by the Employer or with the use or
assistance of the Employer's facilities, materials or personnel.
11. Non-Compete.
Employee hereby agrees that during the term of this Agreement, that
Employee will not:
(a) Within any jurisdiction or marketing area in the United States in
which the Employer or any subsidiary thereof is doing business, own,
manage, operate, or control any business of the type and character engaged
in and competitive with the Employer or any subsidiary thereof. For
purposes of this paragraph, ownership of securities of not in excess of
five percent (5%) of any class of securities of a public employer listed
on a national securities exchange or on the National Association of
Securities Dealers Automated Quotation System (NASDAQ) shall not be
considered to be competition with the Employer or any subsidiary thereof;
(b) Within any jurisdiction or marketing area in the United States in
which the Employer or any subsidiary thereof is doing business, act as, or
become employed as an officer, director, employee, consultant or agent of
any business of the type and character engaged in and competitive with the
Employer or any of its subsidiaries;
(c) Solicit any similar business to that of the Employer's for, or
sell any products that are in competition with the Employer's products to
which is, as of the date hereof, a customer or client of the Employer or
any of its subsidiaries, or was such a customer or client thereof within
two years prior to the date of this Agreement; or
(d) For up to six months following the termination of this Agreement
solicit the employment of, or hire, any full time employee employed by the
Employer or its subsidiaries as of the date of termination of this
Agreement.
<PAGE>
EMPLOYMENT AGREEMENT
Reliant Interactive Media Corp. ("Employer")
and Kevin Harrington ("Employee").
June 1999 Page 10
12. Termination. Employer may not terminate this Agreement during its term
without Cause as defined herein. If this Agreement is terminated without Cause,
Employee shall be entitled to the Termination Payments set forth in Section 14
hereof. Any termination by Employer of Employee of Employee's employment during
the term hereof shall be communicated by written Notice of Termination to
Employee, if such Notice of Termination is delivered by the Employer, and to the
Employee, if such Notice of Termination is delivered by Employee, all in
accordance with the following procedures:
(a) The Notice of termination shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances alleged to provide a basis for
termination;
(b) Any Notice of Termination by the Employer shall be approved by a
resolution duly adopted by a majority of the members of the Employer;
(c) If Employee shall provide the president or chief executive
officer with a Notice of Termination at least 30 days prior to leaving the
employment of the Employer. Upon the end of the thirty days, all
compensation provisions of this Agreement shall cease.
13. Termination Upon Transfer of Business. Notwithstanding any provision
this Agreement to the contrary, Employee may terminate this Agreement upon the
happening of any of the following events: (a) the sale by Employer of
substantially all of its assets to a single purchaser or to a group of
associated purchasers; (b) the sale, exchange, or other disposition to a single
entity or group of entities under common control in one transaction or series of
related transactions of greater than 50% of the outstanding shares of Employer's
common stock; (c) the decision by Employer to terminate its business and
liquidate its assets; or (d) the merger or consolidation of Employer in a
transaction in which the shareholders of the Employer immediately prior to such
merger or consolidation receive less than 50% of the outstanding voting shares
of the new or continuing corporation. In the event Employee does not elect to
terminate this Agreement upon the happening of any of the events noted above,
and as a result of such event, Employer is not the surviving entity, then the
provisions of this Agreement shall inure to the benefit of and be binding upon
the surviving or resulting entity. If as a result of the merger, consolidation,
transfer of assets, or other event listed above, the duties of Employee are
increased, then the compensation of Employee provided for in paragraph 5 of this
Agreement shall be reasonably adjusted upward for the additional duties and
responsibilities assumed.
14. Termination Payments. In the event the Employee's employment is
terminated by the Employer during the term hereof for reasons other than Cause,
as defined herein, Employee shall be paid any sums owed under this Agreement,
<PAGE>
EMPLOYMENT AGREEMENT
Reliant Interactive Media Corp. ("Employer")
and Kevin Harrington ("Employee").
June 1999 Page 11
including but not limited to any salary, any deferred compensation, accrued
benefits, bonuses and options, and for any potential actions for breach of this
Agreement by Employer. Other than any payments set forth in this Section 14,
Employment shall be entitled to no further compensation nor any other payments
after termination. Employee shall receive no further payments if terminated for
Cause other than Accrued Benefits.
15. Death During Employment. If Employee dies during the term of this
Agreement, Employer shall have no further obligations to pay Employee other than
any Accrued Benefits.
16. Illness or Incapacity. If Employee is unable to perform Employee's
services by reason of illness or incapacity for a period of more than two (2)
consecutive months, the compensation thereafter payable to Employee during the
next two (2) consecutive months shall be 50% of the compensation provided for
herein. During such period of illness or incapacity, Employee shall be entitles
to receive incentive compensation if any. Notwithstanding the foregoing, if such
illness or incapacity does not cease to exist within a four (4) consecutive
month period, Employee shall not be entitled to receive any further compensation
nor any payments for such illness or incapacity, and Employer may terminate this
Agreement without further liability to Employee. Any existing options to
purchase Employer's common stock held by Employee at the time termination shall
be governed by the terms of the option and not affected by this provision. At
the termination of such illness or incapacity, Employee shall be entitled to
receive Employee's full compensation payable pursuant to the terms of this
Agreement.
17. Nontransferability. Neither Employee, Employee's spouse, Employee's
designated contingent beneficiary, nor their estates shall have any right to
anticipate, encumber, or dispose of any payment due under this Agreement. Such
payments and other rights are expressly declared nonassignable and
nontransferable except as specifically provided herein.
18. Indemnification. Employer shall indemnify Employee and hold Employee
harmless from liability for acts or decisions made by Employee while performing
services for Employer to the greatest extent permitted by applicable law.
Employer shall use its best efforts to obtain coverage for Employee under any
insurance policy now in force or hereafter obtained during the term of this
Agreement insuring officers and directors of Employer against such liability.
19. Assignment. This Agreement may not be assigned by either party without
the prior written consent of the other party.
20. Entire Agreement. This Agreement is and shall be considered to be the
only agreement or understanding between the parties hereto with respect to the
employment of employee by employer. All negotiations, commitments, and
<PAGE>
EMPLOYMENT AGREEMENT
Reliant Interactive Media Corp. ("Employer")
and Kevin Harrington ("Employee").
June 1999 Page 12
understandings acceptable to both parties have been incorporated herein. No
letter, telegram, or communication passing between the parties hereto covering
any matter during this contract period, or any plans or periods thereafter,
shall be deemed a part of this Agreement; nor shall it have the effect of
modifying or adding to this Agreement unless it is distinctly stated in such
letter, telegram, or communication that is to constitute a part of this
Agreement and is attached as an amendment to this Agreement and is signed by the
parties to this Agreement.
21. Enforcement. Each of the parties to this Agreement shall be entitled
to any remedies available in equity or by statute with respect to the breach of
the terms of this Agreement by the other party. Employee hereby specifically
acknowledges and agrees that a breach of the agreements, covenants and
conditions of this Agreement will cause irreparable harm and damage to the
Employer, that the remedy at law, for the breach or threatened breach of this
Agreement will be adequate, and that, in addition to all other remedies
available to the Employer for such breach or threatened breach (including,
without limitation, the right to recover damages), the Company shall be entitled
to injunctive relief for any breach or threatened breach of this Agreement.
22. Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Nevada.
23. Severability. If and to the extent that any court of competent
jurisdiction holds any provision or any part thereof of this Agreement to be
invalid or unenforceable, such holding shall in no way affect the validity of
the remainder of this Agreement.
24. Waiver. No failure by any party to insist upon the strict performance
of any covenant, duty, agreement, or condition of this Agreement or to exercise
any right or remedy consequent upon a breach hereof shall constitute a waiver of
any such breach or of any covenant, agreement, term, or condition.
25. Litigation Expenses. In the event that it shall be necessary or
desirable for the Employee or Employer to retain legal counsel and/or incur
other costs and expenses in connection with the enforcement of any or all of the
provisions of this Agreement, the prevailing party shall be entitled to recover
from the other party reasonable attorneys' fees, costs, and expenses incurred by
the prevailing party in connection with the enforcement of this Agreement.
Payment shall be made upon the conclusion of such action.
26. Survivability. The provisions of Section 8, 9, 10, 11 and 12 shall
survive termination of this Agreement.
AGREED AND ENTERED INTO as of the date first above written.
<PAGE>
EMPLOYMENT AGREEMENT
Reliant Interactive Media Corp. ("Employer")
and Kevin Harrington ("Employee").
June 1999 Page 13
EMPLOYER: EMPLOYEE:
Reliant Interactive Media Corp.
By: /s/ By: /s/
- ---------------------------------- --------------------------------
Duly Authorized Officer Kevin Harrington
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into effective this
day of June, 1999, by and between Reliant Interactive Media Corp. (the
"Employer"), and Tim Harrington(the "Employee").
PREMISES
a) Employee possesses expertise, experience and skill in the
development and marketing of products via electronic and other
multi-media means.
b) Employee has demonstrated the ability to run, manage and build a
development stage business.
c) Employer desires to employ Employee to serve as its President and
Chief Operating Officer to run, manage and build its business.
d) Employee desires to perform all of such services as Employer's
employee and both parties want to enter into a written agreement as
to their understanding of the employment relationship.
AGREEMENT
For and in Consideration of the mutual covenants contained herein and of
the mutual benefits to be derived hereunder, the parties agree as follows:
1. Definitions. Whenever used in this Agreement, the following terms shall
have the meanings set forth below:
(a) "Accrued Benefits" shall mean the amount payable not later than
ten (10) days following an applicable Termination Date and which shall be
equal to the sum of the following amounts:
(i) All salary earned or accrued through the Termination Date;
(ii) Reimbursement for any and all monies advanced in connection
with Employee's employment for reasonable and necessary expenses incurred
by Employee and approved by the Employer through the Termination Date; and
(iii) All other payments and benefits to which Employee may be
entitled under the terms of any benefit plan of the Employer.
(b) "Board" shall mean the board of directors of the Employer.
(c) "Cause" shall mean any of the following:
(i) The engagement by Employee in fraudulent conduct, which has
a significant adverse impact on the Employer in the conduct of the
Employer's business;
<PAGE>
EMPLOYMENT AGREEMENT
Reliant Interactive Media Corp. ("Employer")
and Tim Harrington ("Employee").
June 1999 Page 2
(ii) Conviction of a felony involving a crime against the
Employer, as evidenced by a binding and final judgment, order or
decree of a court of competent jurisdiction.
(iii) Gross negligence or refusal by Employee to perform his
duties or responsibilities; or
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(e) "Confidential Information" means information (i) disclosed to or
actually known by Employee as a consequence of or through his/her
employment with the Employer, (ii) not generally known outside the
Employer, and (iii) which relates to the Employer's business. Confidential
Information includes, but is not limited to, information of a technical
nature, such as methods and materials, trade secrets, inventions,
processes, formulas, systems, computer programs, and studies, and
information of a business nature such as project plans, market
information, costs, customer lists, and so forth.
(f) "Disability" shall mean a physical or mental condition whereby
Employee is unable to perform on a full-time basis his customary duties
under this Agreement.
(g) "Developments" means all Inventions (defined hereafter), computer
programs, copyright works, mask works, trademarks, Confidential
Information, Works of Authorship (defined hereafter), and other
Intellectual Property (defined hereafter), made, conceived or authored by
Employee, alone or jointly with others, while employed by the Employer;
whether or not during normal business hours or on the Employer's premises,
that are within the present scope of the Employer's business at the time
such Developments are made, conceived, or authored, or which result from
or are suggested by any work Employee or others may do for or on behalf of
the Employer.
(h) "Employer" means Reliant Interactive Media Corp. and its
subsidiaries, divisions and affiliates as well as majority owned companies
of such subsidiaries, divisions and affiliates, or their successors or
assigns.
(i) "Invention" means discoveries, concepts, and ideas, whether or
not patentable or copyrightable, including but not limited to
improvements, know-how, data, processes, methods, formulae, and
techniques, as well as improvements thereof, or know-how related thereto,
concerning any present or prospective activities of the Employer which
Employee makes, discovers or conceives (whether or not during the hours of
his engagement of with the use of the Employer's facilities, materials or
<PAGE>
EMPLOYMENT AGREEMENT
Reliant Interactive Media Corp. ("Employer")
and Tim Harrington ("Employee").
June 1999 Page 3
personnel), either solely or jointly with others during his engagement by
the Employer or any affiliate and, if based on or related or Proprietary
Information, at any time after termination of such engagement.
(j) "Intellectual Property" means Inventions, Confidential
Information, Works of Authorship, patent rights, trademark rights, service
mark rights, copyrights, know-how, Developments and rights of like nature
arising or subsisting anywhere in the world, in relation to all of the
foregoing, whether registered or unregistered.
(k) "Notice of Termination" shall mean the notice described in
Section 13 hereof.
(l) "Person" shall mean any individual, partnership, joint venture,
association, trust, corporation or other entity, other than an employee
benefit plan of the Employer of an entity organized, appointed of
established pursuant to the terms of any such benefit plan.
(m) "Proprietary Information" shall mean any and all methods,
inventions, improvements or discoveries, whether or not patentable or
copyrightable, and any other information of a similar nature related to
the business of the Employer disclosed to the Employee or otherwise made
known to him as a consequence of or through his engagement by the Employer
(including information originated by Employee) in any technological area
previously developed by the Employer or developed, engaged in, or
researched, by the Employer during the term of Employee's engagement,
including, but not limited to, trade secrets, processes, products,
formulae, apparatus, techniques, know-how, marketing plans, data,
improvements, strategies, forecasts, customer lists, and technical
requirements of customers, unless such information is in the public domain
to such an extent as to be readily available to competitors.
(n) "Termination Date" shall mean, except as otherwise provided in
Section 12 hereof.
(i) Employee's date of death;
(ii) Thirty (30) days after the delivery of the Notice of
Termination if Employee's employment on account of Disability
pursuant to Section 16 hereof, unless Employee returns on a full-time
basis to the performance of his duties prior to the expiration of
such period;
(iii) Thirty (30) days after the delivery of the Notice of
Termination if Employee's employment is terminated by Employee
voluntarily; and
<PAGE>
EMPLOYMENT AGREEMENT
Reliant Interactive Media Corp. ("Employer")
and Tim Harrington ("Employee").
June 1999 Page 4
(iv) Thirty (30) days after the delivery of the Notice of
Termination if Employee's employment is terminated by the Employer
for any reason other than death or Disability.
(o) "Termination Payment" shall mean the payment described in Section
14 hereof.
(p) "Works of Authorship" means an expression fixed in a tangible
medium of expression regardless of the need for a machine to make the
expression manifest, and includes but is not limited to, writings,
reports, drawings, sculptures, illustrations, video recordings, audio
recordings, computer programs, and charts.
2. Employment. Employer hereby employs Employee to perform those duties
generally described in this Agreement, and Employee hereby accepts and agrees to
such employment on the terms and conditions hereinafter set forth.
3. Term. Subject to the terms and conditions of this Agreement, the term
of this Agreement shall commence retroactively from December 1, 1998, and end on
December 1, 2003.
4. Duties. During the term of this Agreement, Employee shall be employed
by Employer as its President and Chief Operating Officer. In addition to the
office of President and Chief Operating Officer, Employee agrees to serve in
such other office or position with Employer or any subsidiary of Employer and as
such shall, from time to time, be determined by Employer's Board. Employee
agrees to serve as a member of the Employer's Board. Employee shall devote
substantially all of his working time and efforts to the business of Employer
and its subsidiaries and shall not during the term of this Agreement be engaged
in any other substantial business activities which will significantly interfere
or conflict with the reasonable performance of his duties hereunder.
5. Compensation.
(a) Salary. For all services rendered by Employee, Employer shall pay
to Employee a base salary of $96,000 for the first year and the base
salary shall increase by $12,000 per year for each of the remaining four
years of this Agreement payable in bi-monthly installments. Employee shall
also be due a base salary from the time of the inception of employment by
Employer of the Employee to the date of this Agreement equal to the rate
of compensation as defined for the first year of this Agreement. If
Employer's financial constraints so dictate, Employee agrees to defer a
portion of the salary contained in this Section. This deferred base salary
along with any deferred base salary earned prior to the date of this
Agreement shall be paid to Employee at such time or times as financial
<PAGE>
EMPLOYMENT AGREEMENT
Reliant Interactive Media Corp. ("Employer")
and Tim Harrington ("Employee").
June 1999 Page 5
constraints so dictate. All salary payments shall be subject to
withholding and other applicable taxes. The rate of salary may be
increased at any time, as the Board may determine, based on earnings,
increased activities of the Employer, or such other factors as the Board
may deem appropriate from time to time. Employee shall receive bonus or
incentive compensation as approved by the Board.
(b) Incentive Compensation. In the event that Employer achieves
"ADJUSTED GROSS REVENUES" annually in excess of $10,000,000 Employee shall
receive additional compensation equal to 6/10 of 1% of "ADJUSTED GROSS
REVENUES". This Incentive compensation shall be paid on a quarterly basis
within thirty days of the end of the calendar quarter based on the
preceding calendar quarter's "ADJUSTED GROSS REVENUES". "GROSS" and
"ADJUSTED GROSS REVENUES" are defined as follows: "GROSS REVENUES" shall
mean all income of Employer from all sources exclusive of sales taxes, use
taxes, value added taxes, and any other taxes imposed upon sales of
products. "ADJUSTED GROSS REVENUES" shall mean Employer's Gross Revenues
from sales of the products, less all of the following:
(i) refunds, credits or other allowances on account of return or
rejection of goods or otherwise granted in the ordinary course of
business, as actually incurred and as reserved for ("Returns");
(ii) uncollectible accounts due to credit card charge backs, bad
checks or other reasons of uncollectability, as actually incurred and
as reserved for ("Uncollectibles"); and
(iii) sales made at or below Reliant's cost of goods for purposes of
liquidation or closeout ("Liquidation Sales").
(c) Insurance Benefits. Employer shall provide health and medical
insurance for Employee in a form and program to be chosen by Employer for
certain of its full-time employees. Employer shall provide Employee with
directors and officers liability insurance in the amount of $2,000,000 and
life and disability insurance in amounts approved by the Board.
(d) Other Benefits. Employee shall be entitled to participate in any
retirement, pension, profit-sharing, or other plan as may be put in effect
from time to time by the Board, including the following:
(i) Qualified Stock Option Plan. Pursuant to a Qualified Stock Option
Plan authorized by the Board and approved by the Shareholders of
Employer, Employee shall have the option to purchase up to 40,000
shares of Employer's stock in six months at $2.50 per share, in 12
months at $4.00 per share, in eighteen months at $6.00 per share and
in twenty-four months at $7.50 per share;
<PAGE>
EMPLOYMENT AGREEMENT
Reliant Interactive Media Corp. ("Employer")
and Tim Harrington ("Employee").
June 1999 Page 6
(ii) Revenue Performance Bonuses. Employee shall be issued 100,000
shares of Employer's stock for each $10,000,000 in gross revenues (in
accordance with SEC Reg SX accounting rules) received by Employer
with a maximum of 2,000,000 shares to be issued; and
(iii) Stock Performance Options. Employee shall have the option to
purchase stock of Employer at $7.50 per share as follows: up to
100,000 shares if the public trading price close at a minimum of $15
per share for five consecutive days; up to an additional 100,000
shares should the public trading price close at a minimum of $20 per
share for five consecutive days; and up to an additional 120,000
shares if the public trading price should close at a minimum of $25
for five consecutive days.
(e) Automobile / Transportation. Employer shall pay for Employees
monthly automobile payment, not to exceed $750 per month, including
applicable insurance.
6. Expenses. Employer will reimburse Employee for expenses incurred in
connection with Employer's business, including expenses for travel, lodging,
meals, beverages, entertainment, and other items of Employee's periodic
presentation of an account of such expenses.
7. Working Facilities. Employer shall provide to Employee offices and
facilities appropriate to Employee's position and suitable for the performance
of Employee's duties as set forth in this Agreement.
8. Nondisclosure of Proprietary and Confidential Information. Recognizing
that the Employer is presently engaged, and may hereafter continue to be engaged
in the research and development of processes, the manufacturing of products or
performance of services, which involve experimental and inventive work and that
the success of the Employer's business depends upon the protection of the
processes, products and services by patent, copyright or by secrecy and that
Employee has had, or during the course of his engagement may have, access to
Proprietary and Confidential Information, as herein defined, of the Employer or
other information and data of a secret or proprietary nature of the Employer
which the Employer wishes to keep confidential and Employee has furnished, or
during the course of his engagement may furnish, such information to the
Employer, Employee agrees and acknowledges that:
(a) The Employer has exclusive property rights to all Proprietary and
Confidential Information and Employee hereby assigns all rights he might
otherwise possess in any Proprietary and Confidential Information to the
Employer. Except as required in the performance of his duties to the
<PAGE>
EMPLOYMENT AGREEMENT
Reliant Interactive Media Corp. ("Employer")
and Tim Harrington ("Employee").
June 1999 Page 7
Employer, Employee will not at any time during or after the term of his
engagement, which term shall include any time in which Employee may be
retained by the Employer as a consultant, directly or indirectly use,
communicate, disclose or disseminate any Proprietary or Confidential
Information of a secret, proprietary, confidential or generally
undisclosed nature relating to the Employer, its products, customers,
processes and services, including information relating to testing,
research, development, manufacturing, marketing and selling.
(b) All documents, records, notebooks, notes, memoranda and similar
repositories of, or containing, Proprietary and Confidential Information
or any other information of a secret, proprietary, confidential or
generally undisclosed nature relating to the Employer or its operations
and activities made or compiled by Employee at any time or made available
to him prior to or during the term of his engagement by the Employer,
including any and all copies thereof, shall be the property of the
Employer, shall be held by him in trust solely for the benefit of the
Employer, and shall be delivered to the Employer by him on the termination
of his engagement or at any other time on the request of the Employer.
(c) Employee will not assert any rights under any inventions,
trademarks, copyrights, discoveries, concepts or ideas, or improvements
thereof, or know-how related thereto, as having been made or acquired by
him during the term of his engagement if based on or otherwise related to
Proprietary or Confidential Information.
9. Assignment Of Inventions.
(a) All Inventions shall be the sole property of the Employer, and
Employee agrees to perform the provisions of the Section 9 with respect
thereto without the payment by the Employer of any royalty or any
consideration therefor other than the regular compensation paid to
Employee in the capacity of any employee or consultant.
(b) Employee shall apply, at the Employer's request and expense, for
United States and foreign letters patent or copyrights either in
Employee's name or otherwise an the Employer shall desire.
(c) Employee hereby assigns to the Employer all of his rights to such
Inventions, and to applications for United States and/or foreign letters
patent or copyrights and to United States and/or foreign letter patent or
copyrights granted upon such Inventions.
(d) Employee shall acknowledge and deliver promptly to the Employer,
without charge to the Employer, but at its expense, such written
instruments (including applications and assignments) and do such other
<PAGE>
EMPLOYMENT AGREEMENT
Reliant Interactive Media Corp. ("Employer")
and Tim Harrington ("Employee").
June 1999 Page 8
acts, such as giving testimony in support of Employee's inventorship, as
may be necessary in the opinion of the Employer to obtain, maintain,
extend, reissue and enforce United States and/or foreign letters patent
and copyrights relation to the Inventions and to vest the entire right and
title thereto in the Employer of its nominee. Employee acknowledges and
agrees that any copyright developed or conceived of, by Employee during
the term of his employment which is related to the Business of the
Employer shall be a "work for hire" under the copyright law of the United
States and other applicable jurisdictions.
(e) Employee represents that his performance of all the terms of this
Agreement and as an employee of or consultant to the Employer does not and
will not breach any trust prior to his employment by the Employer.
Employee agrees not to enter into any agreement either written or oral in
conflict herewith and represents and agrees that he has not brought and
will not bring with to the Employer or use in the performance of his
responsibilities at the Employer any materials or documents of a former
employer which are not generally available to the public, unless he has
obtained written authorization from the former employer for their
possession and use, a copy of which has been provided to the Employer.
(f) No provisions of the Paragraph shall be deemed to limit the
restrictions applicable to Employee under Section 8 and 9.
10. Shop Rights.
The Employer shall also have the royalty-free right to use in its
business, and to make, use and sell products, processes and/or services derived
from any inventions, discoveries, concepts and ideas, whether or not patentable,
including but not limited to processes, methods, formulas and techniques, as
well as improvements thereof or know-how related thereto, which are not within
the scope of Inventions as defined herein but which are conceived of or made by
Employee during the period he is engaged by the Employer or with the use or
assistance of the Employer's facilities, materials or personnel.
11. Non-Compete.
Employee hereby agrees that during the term of this Agreement Employee
will not:
(a) Within any jurisdiction or marketing area in the United States in
which the Employer or any subsidiary thereof is doing business, own,
manage, operate, or control any business of the type and character engaged
in and competitive with the Employer or any subsidiary thereof. For
purposes of this paragraph, ownership of securities of not in excess of
five percent (5%) of any class of securities of a public employer listed
<PAGE>
EMPLOYMENT AGREEMENT
Reliant Interactive Media Corp. ("Employer")
and Tim Harrington ("Employee").
June 1999 Page 9
on a national securities exchange or on the National Association of
Securities Dealers Automated Quotation System (NASDAQ) shall not be
considered to be competition with the Employer or any subsidiary thereof;
(b) Within any jurisdiction or marketing area in the United States in
which the Employer or any subsidiary thereof is doing business, act as, or
become employed as an officer, director, employee, consultant or agent of
any business of the type and character engaged in and competitive with the
Employer or any of its subsidiaries;
(c) Solicit any similar business to that of the Employer's for, or
sell any products that are in competition with the Employer's products to
which is, as of the date hereof, a customer or client of the Employer or
any of its subsidiaries, or was such a customer or client thereof within
two years prior to the date of this Agreement; or
(d) For up to six months following the termination of this Agreement,
solicit the employment of, or hire, any full time employee employed by the
Employer or its subsidiaries as of the date of termination of this
Agreement.
12. Termination. Employer may not terminate this Agreement during its term
without Cause as defined herein. If this Agreement is terminated without Cause,
Employee shall be entitled to the Termination Payments set forth in Section 14
hereof. Any termination by Employer of Employee of Employee's employment during
the term hereof shall be communicated by written Notice of Termination to
Employee, if such Notice of Termination is delivered by the Employer, and to the
Employee, if such Notice of Termination is delivered by Employee, all in
accordance with the following procedures:
(a) The Notice of termination shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances alleged to provide a basis for
termination;
(b) Any Notice of Termination by the Employer shall be approved by a
resolution duly adopted by a majority of the members of the Employer;
(c) If Employee shall provide the president or chief executive
officer with a Notice of Termination at least 30 days prior to leaving the
employment of the Employer. Upon the end of the thirty days, all
compensation provisions of this Agreement shall cease.
13. Termination Upon Transfer of Business. Notwithstanding any provision
this Agreement to the contrary, Employee may terminate this Agreement upon the
happening of any of the following events: (a) the sale by Employer of
substantially all of its assets to a single purchaser or to a group of
<PAGE>
EMPLOYMENT AGREEMENT
Reliant Interactive Media Corp. ("Employer")
and Tim Harrington ("Employee").
June 1999 Page 10
associated purchasers; (b) the sale, exchange, or other disposition to a single
entity or group of entities under common control in one transaction or series of
related transactions of greater than 50% of the outstanding shares of Employer's
common stock; (c) the decision by Employer to terminate its business and
liquidate its assets; or (d) the merger or consolidation of Employer in a
transaction in which the shareholders of the Employer immediately prior to such
merger or consolidation receive less than 50% of the outstanding voting shares
of the new or continuing corporation. In the event Employee does not elect to
terminate this Agreement upon the happening of any of the events noted above,
and as a result of such event, Employer is not the surviving entity, then the
provisions of this Agreement shall inure to the benefit of and be binding upon
the surviving or resulting entity. If as a result of the merger, consolidation,
transfer of assets, or other event listed above, the duties of Employee are
increased, then the compensation of Employee provided for in paragraph 5 of this
Agreement shall be reasonably adjusted upward for the additional duties and
responsibilities assumed.
14. Termination Payments. In the event the Employee's employment is
terminated by the Employer during the term hereof for reasons other than Cause,
as defined herein, Employee shall be paid any sums owed under this Agreement,
including but not limited to any salary, any deferred compensation, accrued
benefits, bonuses and options, and for any potential actions for breach of this
Agreement by Employer. Other than any payments set forth in this Section 14,
Employment shall be entitled to no further compensation nor any other payments
after termination. Employee shall receive no further payments if terminated for
Cause other than Accrued Benefits.
15. Death During Employment. If Employee dies during the term of this
Agreement, Employer shall have no further obligations to pay Employee other than
any Accrued Benefits.
16. Illness or Incapacity. If Employee is unable to perform Employee's
services by reason of illness or incapacity for a period of more than two (2)
consecutive months, the compensation thereafter payable to Employee during the
next two (2) consecutive months shall be 50% of the compensation provided for
herein. During such period of illness or incapacity, Employee shall be entitles
to receive incentive compensation if any. Notwithstanding the foregoing, if such
illness or incapacity does not cease to exist within a four (4) consecutive
month period, Employee shall not be entitled to receive any further compensation
nor any payments for such illness or incapacity, and Employer may terminate this
Agreement without further liability to Employee. Any existing options to
purchase Employer's common stock held by Employee at the time termination shall
be governed by the terms of the option and not affected by this provision. At
the termination of such illness or incapacity, Employee shall be entitled to
receive Employee's full compensation payable pursuant to the terms of this
Agreement.
<PAGE>
EMPLOYMENT AGREEMENT
Reliant Interactive Media Corp. ("Employer")
and Tim Harrington ("Employee").
June 1999 Page 11
17. Nontransferability. Neither Employee, Employee's spouse, Employee's
designated contingent beneficiary, nor their estates shall have any right to
anticipate, encumber, or dispose of any payment due under this Agreement. Such
payments and other rights are expressly declared nonassignable and
nontransferable except as specifically provided herein.
18. Indemnification. Employer shall indemnify Employee and hold Employee
harmless from liability for acts or decisions made by Employee while performing
services for Employer to the greatest extent permitted by applicable law.
Employer shall use its best efforts to obtain coverage for Employee under any
insurance policy now in force or hereafter obtained during the term of this
Agreement insuring officers and directors of Employer against such liability.
19. Assignment. This Agreement may not be assigned by either party without
the prior written consent of the other party.
20. Entire Agreement. This Agreement is and shall be considered to be the
only agreement or understanding between the parties hereto with respect to the
employment of employee by employer. All negotiations, commitments, and
understandings acceptable to both parties have been incorporated herein. No
letter, telegram, or communication passing between the parties hereto covering
any matter during this contract period, or any plans or periods thereafter,
shall be deemed a part of this Agreement; nor shall it have the effect of
modifying or adding to this Agreement unless it is distinctly stated in such
letter, telegram, or communication that is to constitute a part of this
Agreement and is attached as an amendment to this Agreement and is signed by the
parties to this Agreement.
21. Enforcement. Each of the parties to this Agreement shall be entitled
to any remedies available in equity or by statute with respect to the breach of
the terms of this Agreement by the other party. Employee hereby specifically
acknowledges and agrees that a breach of the agreements, covenants and
conditions of this Agreement will cause irreparable harm and damage to the
Employer, that the remedy at law, for the breach or threatened breach of this
Agreement will be adequate, and that, in addition to all other remedies
available to the Employer for such breach or threatened breach (including,
without limitation, the right to recover damages), the Company shall be entitled
to injunctive relief for any breach or threatened breach of this Agreement.
22. Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Nevada.
23. Severability. If and to the extent that any court of competent
jurisdiction holds any provision or any part thereof of this Agreement to be
invalid or unenforceable, such holding shall in no way affect the validity of
the remainder of this Agreement.
<PAGE>
EMPLOYMENT AGREEMENT
Reliant Interactive Media Corp. ("Employer")
and Tim Harrington ("Employee").
June 1999 Page 12
24. Waiver. No failure by any party to insist upon the strict performance
of any covenant, duty, agreement, or condition of this Agreement or to exercise
any right or remedy consequent upon a breach hereof shall constitute a waiver of
any such breach or of any covenant, agreement, term, or condition.
25. Litigation Expenses. In the event that it shall be necessary or
desirable for the Employee or Employer to retain legal counsel and/or incur
other costs and expenses in connection with the enforcement of any or all of the
provisions of this Agreement, the prevailing party shall be entitled to recover
from the other party reasonable attorneys' fees, costs, and expenses incurred by
the prevailing party in connection with the enforcement of this Agreement.
Payment shall be made upon the conclusion of such action.
26. Survivability. The provisions of Section 8, 9, 10, 11 and 12 shall
survive termination of this Agreement.
AGREED AND ENTERED INTO as of the date first above written.
EMPLOYER: EMPLOYEE:
Reliant Interactive Media Corp.
By: /s/ By: /s/
- ---------------------------------- --------------------------------
Duly Authorized Officer Tim Harrington
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into effective
this day of June, 1999, by and between Reliant Interactive Media Corp.
(the "Employer"), and Mel Arthur (the "Employee").
PREMISES
a) Employee possesses expertise, experience and skill in the
development and marketing of products via electronic and other
multi-media means.
b) Employee has demonstrated the ability to run, manage and build a
development stage business.
c) Employer desires to employ Employee to serve as its Executive Vice
President.
d) Employee desires to perform all of such services as Employer's
employee and both parties want to enter into a written agreement as
to their understanding of the employment relationship.
AGREEMENT
For and in Consideration of the mutual covenants contained herein and of
the mutual benefits to be derived hereunder, the parties agree as follows:
1. Definitions. Whenever used in this Agreement, the following terms shall
have the meanings set forth below:
(a) "Accrued Benefits" shall mean the amount payable not later than
ten (10) days following an applicable Termination Date and which shall be
equal to the sum of the following amounts:
(i) All salary earned or accrued through the Termination Date;
(ii) Reimbursement for any and all monies advanced in connection
with Employee's employment for reasonable and necessary expenses incurred
by Employee and approved by the Employer through the Termination Date; and
(iii) All other payments and benefits to which Employee may be
entitled under the terms of any benefit plan of the Employer.
(b) "Board" shall mean the board of directors of the Employer.
(c) "Cause" shall mean any of the following:
(i) The engagement by Employee in fraudulent conduct, which has
a significant adverse impact on the Employer in the conduct of the
Employer's business;
<PAGE>
EMPLOYMENT AGREEMENT
Reliant Interactive Media Corp. ("Employer")
and Mel Arthur ("Employee").
June 1999 Page 2
(ii) Conviction of a felony involving a crime against the
Employer, as evidenced by a binding and final judgment, order or
decree of a court of competent jurisdiction.
(iii) Gross negligence or refusal by Employee to perform his
duties or responsibilities; or
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(e) "Confidential Information" means information (i) disclosed to or
actually known by Employee as a consequence of or through his/her
employment with the Employer, (ii) not generally known outside the
Employer, and (iii) which relates to the Employer's business. Confidential
Information includes, but is not limited to, information of a technical
nature, such as methods and materials, trade secrets, inventions,
processes, formulas, systems, computer programs, and studies, and
information of a business nature such as project plans, market
information, costs, customer lists, and so forth.
(f) "Disability" shall mean a physical or mental condition whereby
Employee is unable to perform on a full-time basis his customary duties
under this Agreement.
(g) "Developments" means all Inventions (defined hereafter), computer
programs, copyright works, mask works, trademarks, Confidential
Information, Works of Authorship (defined hereafter), and other
Intellectual Property (defined hereafter), made, conceived or authored by
Employee, alone or jointly with others, while employed by the Employer;
whether or not during normal business hours or on the Employer's premises,
that are within the present scope of the Employer's business at the time
such Developments are made, conceived, or authored, or which result from
or are suggested by any work Employee or others may do for or on behalf of
the Employer.
(h) "Employer" means Reliant Interactive Media Corp. and its
subsidiaries, divisions and affiliates as well as majority owned companies
of such subsidiaries, divisions and affiliates, or their successors or
assigns.
(i) "Invention" means discoveries, concepts, and ideas, whether or
not patentable or copyrightable, including but not limited to
improvements, know-how, data, processes, methods, formulae, and
techniques, as well as improvements thereof, or know-how related thereto,
concerning any present or prospective activities of the Employer which
Employee makes, discovers or conceives (whether or not during the hours of
his engagement of with the use of the Employer's facilities, materials or
<PAGE>
EMPLOYMENT AGREEMENT
Reliant Interactive Media Corp. ("Employer")
and Mel Arthur ("Employee").
June 1999 Page 3
personnel), either solely or jointly with others during his engagement by
the Employer or any affiliate and, if based on or related or Proprietary
Information, at any time after termination of such engagement.
(j) "Intellectual Property" means Inventions, Confidential
Information, Works of Authorship, patent rights, trademark rights, service
mark rights, copyrights, know-how, Developments and rights of like nature
arising or subsisting anywhere in the world, in relation to all of the
foregoing, whether registered or unregistered.
(k) "Notice of Termination" shall mean the notice described in
Section 13 hereof.
(l) "Person" shall mean any individual, partnership, joint venture,
association, trust, corporation or other entity, other than an employee
benefit plan of the Employer of an entity organized, appointed of
established pursuant to the terms of any such benefit plan.
(m) "Proprietary Information" shall mean any and all methods,
inventions, improvements or discoveries, whether or not patentable or
copyrightable, and any other information of a similar nature related to
the business of the Employer disclosed to the Employee or otherwise made
known to him as a consequence of or through his engagement by the Employer
(including information originated by Employee) in any technological area
previously developed by the Employer or developed, engaged in, or
researched, by the Employer during the term of Employee's engagement,
including, but not limited to, trade secrets, processes, products,
formulae, apparatus, techniques, know-how, marketing plans, data,
improvements, strategies, forecasts, customer lists, and technical
requirements of customers, unless such information is in the public domain
to such an extent as to be readily available to competitors.
(n) "Termination Date" shall mean, except as otherwise provided in
Section 12 hereof.
(i) Employee's date of death;
(ii) Thirty (30) days after the delivery of the Notice of
Termination if Employee's employment on account of Disability
pursuant to Section 16 hereof, unless Employee returns on a full-time
basis to the performance of his duties prior to the expiration of
such period;
(iii) Thirty (30) days after the delivery of the Notice of
Termination if Employee's employment is terminated by Employee
voluntarily; and
<PAGE>
EMPLOYMENT AGREEMENT
Reliant Interactive Media Corp. ("Employer")
and Mel Arthur ("Employee").
June 1999 Page 4
(iv) Thirty (30) days after the delivery of the Notice of
Termination if Employee's employment is terminated by the Employer
for any reason other than death or Disability.
(o) "Termination Payment" shall mean the payment described in Section
14 hereof.
(p) "Works of Authorship" means an expression fixed in a tangible
medium of expression regardless of the need for a machine to make the
expression manifest, and includes but is not limited to, writings,
reports, drawings, sculptures, illustrations, video recordings, audio
recordings, computer programs, and charts.
2. Employment. Employer hereby employs Employee to perform those duties
generally described in this Agreement, and Employee hereby accepts and agrees to
such employment on the terms and conditions hereinafter set forth.
3. Term. Subject to the terms and conditions of this Agreement, the term
of this Agreement shall commence retroactively from , and end on
.
4. Duties. During the term of this Agreement, Employee shall be employed
by Employer as its Executive Vice President. In addition to the office of
Executive Vice President, Employee agrees to serve in such other office or
position with Employer or any subsidiary of Employer and as such shall, from
time to time, be determined by Employer's Board. Employee agrees to serve as a
member of the Employer's Board. Employee shall devote substantially all of his
working time and efforts to the business of Employer and its subsidiaries and
shall not during the term of this Agreement be engaged in any other substantial
business activities which will significantly interfere or conflict with the
reasonable performance of his duties hereunder.
5. Compensation.
(a) Salary. For all services rendered by Employee, Employer shall pay
to Employee a base salary of equal to 1/2 of 1% of "Adjusted Gross
Revenues" as defined in section 5(b), with a maximum paid of $10,000.00
per month, in bi-monthly installments. Employee shall also be due a base
salary from the time of the inception of employment by Employer of the
Employee to the date of this Agreement equal to the rate of compensation
as defined for the first year of this Agreement. If Employer's financial
constraints so dictate, Employee agrees to defer a portion of the salary
contained in this Section. This deferred base salary along with any
deferred base salary earned prior to the date of this Agreement shall be
paid to Employee at such time or times as financial constraints so
<PAGE>
EMPLOYMENT AGREEMENT
Reliant Interactive Media Corp. ("Employer")
and Mel Arthur ("Employee").
June 1999 Page 5
dictate. However, Employee shall be paid an advance draw against his
salary of $3,500.00 per month. All salary payments shall be subject to
withholding and other applicable taxes. The rate of salary may be
increased at any time, as the Board may determine, based on earnings,
increased activities of the Employer, or such other factors as the Board
may deem appropriate from time to time. Employee shall receive bonus or
incentive compensation as approved by the Board.
(b) "GROSS" and "ADJUSTED GROSS REVENUES" are defined as follows:
"GROSS REVENUES" shall mean all income of Employer from all sources
exclusive of sales taxes, use taxes, value added taxes, and any other
taxes imposed upon sales of products. "ADJUSTED GROSS REVENUES" shall mean
Employer's Gross Revenues from sales of the products, less all of the
following:
(i) refunds, credits or other allowances on account of return or
rejection of goods or otherwise granted in the ordinary course of
business, as actually incurred and as reserved for ("Returns");
(ii) uncollectible accounts due to credit card charge backs, bad
checks or other reasons of uncollectability, as actually incurred and
as reserved for ("Uncollectibles"); and
(iii) sales made at or below Reliant's cost of goods for purposes of
liquidation or closeout ("Liquidation Sales").
(c) Insurance Benefits. Employer shall provide health and medical
insurance for Employee in a form and program to be chosen by Employer for
certain of its full-time employees. Employer shall provide Employee with
directors and officers liability insurance in the amount of $2,000,000 and
life disability insurance in amounts approved by the Board.
(d) Other Benefits. Employee shall be entitled to participate in any
retirement, pension, profit-sharing, or other plan as may be put in effect
from time to time by the Board, including the following:
(i) Qualified Stock Option Plan. Pursuant to a Qualified Stock Option
Plan authorized by the Board and approved by the Shareholders of
Employer, Employee shall have the option to purchase up to 5,000
shares of Employer's stock in six months at $2.50 per share, in 12
months at $4.00 per share, in eighteen months at $6.00 per share and
in twenty-four months at $7.50 per share;
(ii) Revenue Performance Bonuses. Employee shall be issued 100,000
shares of Employer's stock for each $10,000,000 in gross revenues (in
accordance with SEC Reg SX accounting rules) received by Employer
<PAGE>
EMPLOYMENT AGREEMENT
Reliant Interactive Media Corp. ("Employer")
and Mel Arthur ("Employee").
June 1999 Page 6
with a maximum of 1,000,000 shares to be issued; provided that no
more than 1/6 of this stock can be vested in any six month period;
and
(iii) Stock Performance Options. Employee shall have the option to
purchase stock of Employer at $7.50 per share as follows: up to
12,500 shares if the public trading price close at a minimum of $15
per share for five consecutive days; up to an additional 12,500
shares should the public trading price close at a minimum of $20 per
share for five consecutive days; and up to an additional 15,000
shares if the public trading price should close at a minimum of $25
for five consecutive days.
(e). Automobile / Transportation. Emploer shall pay for Employee's
monthly automobile payment, not to exceed $500 per month, including
applicable insurance.
6. Expenses. Employer will reimburse Employee for expenses incurred in
connection with Employer's business, including expenses for travel, lodging,
meals, beverages, entertainment, and other items of Employee's periodic
presentation of an account of such expenses.
7. Working Facilities. Employer shall provide to Employee offices and
facilities appropriate to Employee's position and suitable for the performance
of Employee's duties as set forth in this Agreement.
8. Nondisclosure of Proprietary and Confidential Information. Recognizing
that the Employer is presently engaged, and may hereafter continue to be engaged
in the research and development of processes, the manufacturing of products or
performance of services, which involve experimental and inventive work and that
the success of the Employer's business depends upon the protection of the
processes, products and services by patent, copyright or by secrecy and that
Employee has had, or during the course of his engagement may have, access to
Proprietary and Confidential Information, as herein defined, of the Employer or
other information and data of a secret or proprietary nature of the Employer
which the Employer wishes to keep confidential and Employee has furnished, or
during the course of his engagement may furnish, such information to the
Employer, Employee agrees and acknowledges that:
(a) The Employer has exclusive property rights to all Proprietary and
Confidential Information and Employee hereby assigns all rights he might
otherwise possess in any Proprietary and Confidential Information to the
Employer. Except as required in the performance of his duties to the
Employer, Employee will not at any time during or after the term of his
engagement, which term shall include any time in which Employee may be
retained by the Employer as a consultant, directly or indirectly use,
<PAGE>
EMPLOYMENT AGREEMENT
Reliant Interactive Media Corp. ("Employer")
and Mel Arthur ("Employee").
June 1999 Page 7
communicate, disclose or disseminate any Proprietary or Confidential
Information of a secret, proprietary, confidential or generally
undisclosed nature relating to the Employer, its products, customers,
processes and services, including information relating to testing,
research, development, manufacturing, marketing and selling.
(b) All documents, records, notebooks, notes, memoranda and similar
repositories of, or containing, Proprietary and Confidential Information
or any other information of a secret, proprietary, confidential or
generally undisclosed nature relating to the Employer or its operations
and activities made or compiled by Employee at any time or made available
to him prior to or during the term of his engagement by the Employer,
including any and all copies thereof, shall be the property of the
Employer, shall be held by him in trust solely for the benefit of the
Employer, and shall be delivered to the Employer by him on the termination
of his engagement or at any other time on the request of the Employer.
(c) Employee will not assert any rights under any inventions,
trademarks, copyrights, discoveries, concepts or ideas, or improvements
thereof, or know-how related thereto, as having been made or acquired by
him during the term of his engagement if based on or otherwise related to
Proprietary or Confidential Information.
9. Assignment Of Inventions.
(a) All Inventions shall be the sole property of the Employer, and
Employee agrees to perform the provisions of the Section 9 with respect
thereto without the payment by the Employer of any royalty or any
consideration therefor other than the regular compensation paid to
Employee in the capacity of any employee or consultant.
(b) Employee shall apply, at the Employer's request and expense, for
United States and foreign letters patent or copyrights either in
Employee's name or otherwise an the Employer shall desire.
(c) Employee hereby assigns to the Employer all of his rights to such
Inventions, and to applications for United States and/or foreign letters
patent or copyrights and to United States and/or foreign letter patent or
copyrights granted upon such Inventions.
(d) Employee shall acknowledge and deliver promptly to the Employer,
without charge to the Employer, but at its expense, such written
instruments (including applications and assignments) and do such other
acts, such as giving testimony in support of Employee's inventorship, as
may be necessary in the opinion of the Employer to obtain, maintain,
extend, reissue and enforce United States and/or foreign letters patent
and copyrights relation to the
<PAGE>
EMPLOYMENT AGREEMENT
Reliant Interactive Media Corp. ("Employer")
and Mel Arthur ("Employee").
June 1999 Page 8
Inventions and to vest the entire right and title thereto in the Employer
of its nominee. Employee acknowledges and agrees that any copyright
developed or conceived of, by Employee during the term of his employment
which is related to the Business of the Employer shall be a "work for
hire" under the copyright law of the United States and other applicable
jurisdictions.
(e) Employee represents that his performance of all the terms of this
Agreement and as an employee of or consultant to the Employer does not and
will not breach any trust prior to his employment by the Employer.
Employee agrees not to enter into any agreement either written or oral in
conflict herewith and represents and agrees that he has not brought and
will not bring with to the Employer or use in the performance of his
responsibilities at the Employer any materials or documents of a former
employer which are not generally available to the public, unless he has
obtained written authorization from the former employer for their
possession and use, a copy of which has been provided to the Employer.
(f) No provisions of the Paragraph shall be deemed to limit the
restrictions applicable to Employee under Section 8 and 9.
10. Shop Rights.
The Employer shall also have the royalty-free right to use in its
business, and to make, use and sell products, processes and/or services derived
from any inventions, discoveries, concepts and ideas, whether or not patentable,
including but not limited to processes, methods, formulas and techniques, as
well as improvements thereof or know-how related thereto, which are not within
the scope of Inventions as defined herein but which are conceived of or made by
Employee during the period he is engaged by the Employer or with the use or
assistance of the Employer's facilities, materials or personnel.
11. Non-Compete.
Employee hereby agrees that during the term of this Agreement Employee
will not:
(a) Within any jurisdiction or marketing area in the United States in
which the Employer or any subsidiary thereof is doing business, own,
manage, operate, or control any business of the type and character engaged
in and competitive with the Employer or any subsidiary thereof. For
purposes of this paragraph, ownership of securities of not in excess of
five percent (5%) of any class of securities of a public employer listed
on a national securities exchange or on the National Association of
Securities Dealers Automated Quotation System (NASDAQ) shall not be
considered to be competition with the Employer or any subsidiary thereof;
<PAGE>
EMPLOYMENT AGREEMENT
Reliant Interactive Media Corp. ("Employer")
and Mel Arthur ("Employee").
June 1999 Page 9
(b) Within any jurisdiction or marketing area in the United States in
which the Employer or any subsidiary thereof is doing business, act as, or
become employed as an officer, director, employee, consultant or agent of
any business of the type and character engaged in and competitive with the
Employer or any of its subsidiaries;
(c) Solicit any similar business to that of the Employer's for, or
sell any products that are in competition with the Employer's products to
which is, as of the date hereof, a customer or client of the Employer or
any of its subsidiaries, or was such a customer or client thereof within
two years prior to the date of this Agreement; or
(d) For up to six months following the termination of this Agreement,
solicit the employment of, or hire, any full time employee employed by the
Employer or its subsidiaries as of the date of termination of this
Agreement.
12. Termination. Employer may not terminate this Agreement during its term
without Cause as defined herein. If this Agreement is terminated without Cause,
Employee shall be entitled to the Termination Payments set forth in Section 14
hereof. Any termination by Employer of Employee of Employee's employment during
the term hereof shall be communicated by written Notice of Termination to
Employee, if such Notice of Termination is delivered by the Employer, and to the
Employee, if such Notice of Termination is delivered by Employee, all in
accordance with the following procedures:
(a) The Notice of termination shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances alleged to provide a basis for
termination;
(b) Any Notice of Termination by the Employer shall be approved by a
resolution duly adopted by a majority of the members of the Employer;
(c) If Employee shall provide the president or chief executive
officer with a Notice of Termination at least 30 days prior to leaving the
employment of the Employer. Upon the end of the thirty days, all
compensation provisions of this Agreement shall cease.
13. Termination Upon Transfer of Business. Notwithstanding any provision
this Agreement to the contrary, Employee may terminate this Agreement upon the
happening of any of the following events: (a) the sale by Employer of
substantially all of its assets to a single purchaser or to a group of
associated purchasers; (b) the sale, exchange, or other disposition to a single
entity or group of entities under common control in one transaction or series of
related transactions of greater than 50% of the outstanding shares of Employer's
common stock; (c) the decision by Employer to terminate its business and
<PAGE>
EMPLOYMENT AGREEMENT
Reliant Interactive Media Corp. ("Employer")
and Mel Arthur ("Employee").
June 1999 Page 10
liquidate its assets; or (d) the merger or consolidation of Employer in a
transaction in which the shareholders of the Employer immediately prior to such
merger or consolidation receive less than 50% of the outstanding voting shares
of the new or continuing corporation. In the event Employee does not elect to
terminate this Agreement upon the happening of any of the events noted above,
and as a result of such event, Employer is not the surviving entity, then the
provisions of this Agreement shall inure to the benefit of and be binding upon
the surviving or resulting entity. If as a result of the merger, consolidation,
transfer of assets, or other event listed above, the duties of Employee are
increased, then the compensation of Employee provided for in paragraph 5 of this
Agreement shall be reasonably adjusted upward for the additional duties and
responsibilities assumed.
14. Termination Payments. In the event the Employee's employment is
terminated by the Employer during the term hereof for reasons other than Cause,
as defined herein, Employee shall be paid any sums owed under this Agreement,
including but not limited to any salary, any deferred compensation, accrued
benefits, bonuses and options, and for any potential actions for breach of this
Agreement by Employer. Other than any payments set forth in this Section 14,
Employment shall be entitled to no further compensation nor any other payments
after termination. Employee shall receive no further payments if terminated for
Cause other than Accrued Benefits.
15. Death During Employment. If Employee dies during the term of this
Agreement, Employer shall have no further obligations to pay Employee other than
any Accrued Benefits.
16. Illness or Incapacity. If Employee is unable to perform Employee's
services by reason of illness or incapacity for a period of more than two (2)
consecutive months, the compensation thereafter payable to Employee during the
next two (2) consecutive months shall be 50% of the compensation provided for
herein. During such period of illness or incapacity, Employee shall be entitles
to receive incentive compensation if any. Notwithstanding the foregoing, if such
illness or incapacity does not cease to exist within a four (4) consecutive
month period, Employee shall not be entitled to receive any further compensation
nor any payments for such illness or incapacity, and Employer may terminate this
Agreement without further liability to Employee. Any existing options to
purchase Employer's common stock held by Employee at the time termination shall
be governed by the terms of the option and not affected by this provision. At
the termination of such illness or incapacity, Employee shall be entitled to
receive Employee's full compensation payable pursuant to the terms of this
Agreement.
17. Nontransferability. Neither Employee, Employee's spouse, Employee's
designated contingent beneficiary, nor their estates shall have any right to
anticipate, encumber, or dispose of any payment due under this Agreement. Such
<PAGE>
EMPLOYMENT AGREEMENT
Reliant Interactive Media Corp. ("Employer")
and Mel Arthur ("Employee").
June 1999 Page 11
payments and other rights are expressly declared nonassignable and
nontransferable except as specifically provided herein.
18. Indemnification. Employer shall indemnify Employee and hold Employee
harmless from liability for acts or decisions made by Employee while performing
services for Employer to the greatest extent permitted by applicable law.
Employer shall use its best efforts to obtain coverage for Employee under any
insurance policy now in force or hereafter obtained during the term of this
Agreement insuring officers and directors of Employer against such liability.
19. Assignment. This Agreement may not be assigned by either party without
the prior written consent of the other party.
20. Entire Agreement. This Agreement is and shall be considered to be the
only agreement or understanding between the parties hereto with respect to the
employment of employee by employer. All negotiations, commitments, and
understandings acceptable to both parties have been incorporated herein. No
letter, telegram, or communication passing between the parties hereto covering
any matter during this contract period, or any plans or periods thereafter,
shall be deemed a part of this Agreement; nor shall it have the effect of
modifying or adding to this Agreement unless it is distinctly stated in such
letter, telegram, or communication that is to constitute a part of this
Agreement and is attached as an amendment to this Agreement and is signed by the
parties to this Agreement.
21. Enforcement. Each of the parties to this Agreement shall be entitled
to any remedies available in equity or by statute with respect to the breach of
the terms of this Agreement by the other party. Employee hereby specifically
acknowledges and agrees that a breach of the agreements, covenants and
conditions of this Agreement will cause irreparable harm and damage to the
Employer, that the remedy at law, for the breach or threatened breach of this
Agreement will be adequate, and that, in addition to all other remedies
available to the Employer for such breach or threatened breach (including,
without limitation, the right to recover damages), the Company shall be entitled
to injunctive relief for any breach or threatened breach of this Agreement.
22. Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Nevada.
23. Severability. If and to the extent that any court of competent
jurisdiction holds any provision or any part thereof of this Agreement to be
invalid or unenforceable, such holding shall in no way affect the validity of
the remainder of this Agreement.
24. Waiver. No failure by any party to insist upon the strict performance
of any covenant, duty, agreement, or condition of this Agreement or to exercise
<PAGE>
EMPLOYMENT AGREEMENT
Reliant Interactive Media Corp. ("Employer")
and Mel Arthur ("Employee").
June 1999 Page 12
any right or remedy consequent upon a breach hereof shall constitute a waiver of
any such breach or of any covenant, agreement, term, or condition.
25. Litigation Expenses. In the event that it shall be necessary or
desirable for the Employee or Employer to retain legal counsel and/or incur
other costs and expenses in connection with the enforcement of any or all of the
provisions of this Agreement, the prevailing party shall be entitled to recover
from the other party reasonable attorneys' fees, costs, and expenses incurred by
the prevailing party in connection with the enforcement of this Agreement.
Payment shall be made upon the conclusion of such action.
26. Survivability. The provisions of Section 8, 9, 10, 11 and 12 shall
survive termination of this Agreement.
AGREED AND ENTERED INTO as of the date first above written.
EMPLOYER: EMPLOYEE:
Reliant Interactive Media Corp.
By: /s/ By: \s\
----------------------------- -------------------------------
Duly Authorized Officer Mel Arthur
- --------------------------------------------------------------------------------
Exhibit 6.2
Compensatory Stock Option Plan
- --------------------------------------------------------------------------------
<PAGE>
Reliant Interactive Media Corp.
1999 COMPENSATORY STOCK OPTION PLAN
1. Purpose of this Plan.
This Compensatory Stock Option Plan ("Plan") is intended as an employment
incentive, to aid in attracting and retaining in the employ or service of
Reliant Interactive Media Corp. ("Company"), a Nevada corporation, and any
Affiliated company, persons of experience and ability and whose services are
considered valuable, to encourage the sense of proprietorship in such persons,
and to stimulate the active interest of such persons in the development and
success of the Company. This Plan provides for the issuance of non-statutory
stock options ("CSOs" or "Options") which are not intended to qualify as
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended ("Code"). Certain other terms also are defined
in Paragraph 17 and elsewhere of this Plan.
2. Administration of this Plan.
The Company's Board of Directors ("Board") may appoint and maintain as
administrator of this Plan the Compensation Committee ("Committee") of the Board
which shall consist of at least two members of the Board. At any time that the
Committee is not duly constituted, the Board itself shall have and fulfill the
duties herein allocated to the Committee. The Committee shall have full power
and authority to designate Plan participants, to determine the provisions and
terms of respective CSOs (which need not be identical as to number of shares
covered by any CSO, the method of exercise as related to exercise in whole or in
installments, or otherwise), including the CSO price, and to interpret the
provisions and supervise the administration of this Plan. The Committee may in
its discretion provide that certain CSOs not vest (that is, become exercisable)
until expiration of a certain period after issuance or until other conditions
are satisfied, so long as not contrary to this Plan.
A majority of the members of the Committee shall constitute a quorum. All
decisions and selections made by the Committee pursuant to this Plan's
provisions shall be made by a majority of its members. Any decision reduced to
writing and signed by all of the members shall be fully effective as if it had
been made by a majority at a meeting duly held. The Committee shall select one
of its members as its chairman and shall hold its meetings at such times and
places as it deems advisable. Each Option shall be evidenced by a written
agreement containing terms and conditions established by the Committee
consistent with the provisions of this Plan.
3. Designation of Participants
Only Employees shall be eligible for participation in this Plan. The
Committee shall have full power to designate, from among eligible individuals,
the persons to whom CSOs may be granted. A person who has been granted a CSO
hereunder may be granted an additional CSO or CSOs, if the committee shall so
determine. Persons eligible under this Plan additionally may be granted one or
more options under any other compensation or stock option plan or awarded shares
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<PAGE>
under any other benefit plan of the Company. No Option shall confer any right
upon the Optionee with respect to the continuation of his employment (or his
position as an officer, director, employee or consultant) with the Company or
any Affiliated Company, and shall not interfere with the right of the Company or
any Affiliated Company to terminate such relationship(s) at any time in
accordance with law and any agreements then in force.
4. Stock Reserved for this Plan.
Subject to adjustment as provided in Paragraph 9 below, a total of 500,000
Shares of Common Stock of the Company ("Option Stock" or "Option Shares") shall
be subject to this Plan. The Option Stock subject to this Plan shall consist of
unissued shares of Common Stock or previously issued shares of Common Stock
reacquired and held by the Company or any Affiliated Company, and such number of
Option Shares shall be and is hereby reserved for sale for such purpose. Any
Option Shares which may remain unsold and which are not subject to outstanding
CSOs at the termination of this Plan shall cease to be reserved for the purpose
of this Plan, but until termination of this Plan the Company shall at all times
reserve a sufficient number of shares to meet the requirements of this Plan.
Should any CSO expire or be cancelled prior to its exercise in full, the
unexercised Option Shares theretofore subject to such CSO may again be subjected
to a CSO under this Plan.
5. Option Exercise Price.
The purchase (exercise) price of each share of Option Stock made subject
to an Option shall be Two Dollars and fifty cents ($2.50) per share for the
first six (6) months; Four Dollars ($4.00) per share for the seventh (7th)
through twelfth (12th) month; Six Dollars ($6.00) per share for the thirteenth
(13th) through eighteenth (18th) month; and Seven Dollars and fifty cents
($7.50) for the nineteenth (19th) through twenty-fourth (24th) month of Common
Stock.
6. Exercise Period; Vesting.
(a) An Option shall have a term of not more than ten (5) years from the
date of grant and shall automatically terminate:
(i) Upon termination of the Optionee's employment with the
Company for cause;
(ii) At the expiration of a period to be determined by the
Committee at the time of grant which is not to exceed six
(6) months following the date of termination of the
Optionee's employment with the Company without cause for
any reason other than death; provided that if no such
period is specified in the Option, the Option shall
automatically terminate thirty days following termination
of Optionee's employment; provided, further, that if the
Optionee dies within such period, subclause (iii) below
shall apply; or
(iii) At the expiration of twelve (12) months after the date of
death of the Optionee; provided, that the Committee may in
its discretion provide that any Option not be exercisable
after the Optionee's death or may be exercised for a
further period which shall be less than further twelve
months.
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<PAGE>
(iv) Unless otherwise specified in the Option, if termination is
due to the Optionee's "permanent and total disability"
within the meaning of Section 422(c)(6) of the Code, on
Option may be exercised at any time within twelve (12)
months following termination of employment or relationship
as a consultant or director.
(b) "Employee" and "Employment with the Company" as used in this Plan
shall include employment or relationship as a consultant, adviser or director
with the Company or any Affiliated Company in any such capacity, even if
employment or engagement in another capacity ceases. Options granted under this
Plan shall not be affected by an employee's transfer of employment among the
Company and any one or more Affiliated Companies. An Optionee's employment with
the Company shall not be deemed interrupted or terminated by a bona fide leave
of absence (such as sabbatical leave or employment by the Government) duly
approved, military leave or sick leave. As to consultants, advisers or other
non-employee providers of services, employment with the Company shall be deemed
to cease upon formal termination of the Optionee's engagement.
(c) Each Option may be made exercisable (that is, vest) in whole or in
installments, cumulative or otherwise, during its term, or subject to other
restrictions or limitations. Unless otherwise set forth in the granting
resolution, an Option shall vest immediately upon grant. If an Option is made to
vest over time, any portion not vested at the time of termination of employment
or relationship as a direct or consultant with the Company shall lapse as if
never granted. Nothing contained in this Section shall be construed to extend
the term of any Option or to permit anyone to exercise an Option after
expiration of its term, nor shall it be construed to increase the number of
shares as to which any Option is exercisable from the amount exercisable on the
date of termination of the Optionee's employment or relationship as a consultant
or director.
7. Exercise Options.
(a) The Committee, in granting CSOs, shall have discretion to determine
the terms upon which CSOs shall be exercisable, subject to applicable provisions
of this Plan. Once available for purchase, unpurchased Option Shares shall
remain subject to purchase until the CSO expires or terminates in accordance
with Paragraph 6 above. Unless otherwise provided in the CSO, a CSO may be
exercised in whole or in part, one or more times, but no CSO may be exercised
for a fractional share. Resulting fractions shall be rounded up or down, as
appropriate.
(b) CSOs may be exercised solely by the Optionee or a permitted transferee
during his lifetime or by a spouse or former spouse pursuant to a qualified
domestic relations order, or if the Option permits, after his death (with
respect to the number of shares which the Optionee could have purchased at the
time of death) by the person or persons entitled thereto under the decedent's
will or the laws of descent and distribution.
(c) The purchase price of the Option Shares as to which a CSO is exercised
shall be paid or delivered in full at the time of exercise and no Option Shares
shall be issued until full payment is made therefore. Payment shall be made by
any one or more of the following means:
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<PAGE>
(i) in cash, represented by bank or cashier's check, certified
check or money order, or made by bank wire transfer;
(ii) by offsetting against the purchase price a cash obligation
of the Company which is both liquidated (meaning the dollar
amount is fixed and known or easily determinable) and
uncontested;
(iii) with the prior approval of the Committee, by delivering
shares of the Company's Common Stock which have been
beneficially owned by the Optionee, the Optionee's spouse
or both of them, for a period of at least six (6) months
prior to the time of exercise (the "Delivered Stock"), the
Delivered Stock to be valued by the Committee in good faith
at its Fair Market Value on the date of exercise;
(iv) with the prior approval of the Committee, by delivery of
shares of corporate stock which are freely tradeable
without restriction and which are part of a class of
securities which has been listed for trading on the Nasdaq
National Market System, the Nasdaq Small Cap Market or a
national securities exchange, with an aggregate Fair Market
Value on the date of exercise equal to or greater than the
exercise price of the Option Shares being purchased under
the Option ("Other Shares"); or
(v) with the prior approval of the Committee, by delivering to
the Company the Optionee's personal recourse promissory
note, adequately secured by property other than the Option
Shares thereby purchased, containing such terms and
conditions as the Committee shall determine.
(d) An Option shall be deemed exercised when written notice thereof,
accompanied by the appropriate payment in full, is received by the Company. No
holder of an Option shall be,or have any of the rights and privileges of, a
shareholder of the Company in respect of any Option Shares purchasable upon
exercise of an Option unless and until certificates evidencing such shares shall
have been issued by the Company to him, her or it.
(e) An Option may, but need not, provide that the Optionee may at any time
when and to the extent the Option is exercisable, effect an Option Exchange,
provided the then market price of the Common Stock exceeds the Option's exercise
price. To effect an Option Exchange, the Optionee must surrender the Option at
the Company's principal offices stating the intent to effect the Option Exchange
and the number of Option Shares being exchanged, an the Option Exchange shall be
deemed to take place on the date of the Company's receipt thereof or such later
date as the Optionee specifics in writing. In connection with any Option
Exchange, an Option shall represent the right to subscribe for and acquire the
number of Option Shares equal to (i) the number of Option Shares specified by
the Optionee in its notice of exchange (the "Total Number") LESS (ii) the number
of Option Shares equal to the quotient obtained by dividing (A) the product of
the Total Number and the exercise price by (B) the current Fair Market Value of
a share of the Common Stock on the date of exchange, or if such date is not a
trading day, on the trading day preceding. One or more certificates for the
Option Shares issuable and, if applicable, a new Option of like tenor evidencing
4
<PAGE>
the balance of the Option Shares remaining subject to the Option, shall be
issued as of the exercise date.
8. Non-Transferability of Options.
No Option shall be assignable or otherwise transferable except by will or
by operation of law, pursuant to a qualified domestic relations order (as
defined in Rule 16b-3 of the Securities and Exchange Commission, or any
successor rule), or pursuant to Title I of the Employee Retirement Income
Security Act of 1974, as amended (ERISA), or rules thereunder. No CSO shall be
pledged or hypothecated in any manner, whether by operation of law or otherwise,
nor be subject to execution, attachment or similar process. The same
restrictions on transfer or assignment shall apply to any heirs, devisees,
beneficiaries, legal representatives or other persons acquiring this Option or
an interest herein under such an instrument or by operation of law. Any attempt
to transfer or otherwise dispose of an Option in contravention of its terms
shall void the Option.
9. Reorganization and Recapitalization of the Company.
(a) No Limit Imposed on Corporate Powers. The existence of this Plan and
Options granted hereunder shall not affect in any way the right or power of the
Company or its shareholders to make or authorize any and all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or any
issue of bonds, debentures or other indebtedness, or any preferred or prior
preference stocks senior to or affecting the Common Stock or the rights thereof,
or the dissolution or liquidation of the Company, or any sale, exchange or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or otherwise.
(b) Certain Adjustments to be Made. The Option Shares with respect to
which Options may be granted hereunder are shares of the Common Stock of the
Company as currently constituted. In certain instances, the number of shares
purchasable upon exercise of Options and the exercise price shall be adjusted as
provided herein. All adjustments and made under this Section shall be made by
the Committee in good faith in its sole discretion. Every adjustment inn
outstanding options shall be made without change in the total price applicable
to the unexercised portion of the Option but with a corresponding adjustment in
the exercise price per share and numbers (and if applicable, kind) of share
purchasable.
(c) Stock Splits, Stock Combinations, Etc. If, and whenever, prior to
delivery by the Company of all of the Option Shares which are subject to Options
granted hereunder, the Company shall effect a split or combination of the Common
Stock or other capital readjustment, the payment of a Common Stock dividend, or
recapitalization, reclassification or other increase or reduction of the number
of shares of the Common Stock outstanding without receiving compensation
therefor in money, services or property, then the number of Option shares
available under this Plan and the number of Option shares with respect to which
Options granted hereunder may thereafter be exercised shall (i) in the event of
an increase in the number of outstanding shares of Common Stock, be
proportionately increased , and the cash consideration payable per share shall
be proportionately reduced; and (ii) in the event of a reduction in the number
5
<PAGE>
of outstanding shares of Common Stock, be proportionately reduced, and the cash
consideration payable per share shall be proportionately increased.
(d) Certain Other Changes in the Common Stock. If the outstanding Common
Stock shall be hereafter increased or decreased, or changed into or exchanged
for a different number or kind of shares or other securities of the Company or
of another corporation, by reason of reorganization, merger, consolidation,
share exchange or other business combination in which the Company is the
surviving parent corporation, appropriate adjustment shall be made by the
Committee in the number and kind of shares for which Options may be granted
under the Plan. In addition, the Committee shall make appropriate adjustment in
the number and kind of shares as to which outstanding and unexercised Options
shall be exercisable, to the end that the proportionate interest of the holder
of the Option shall, to the extent practicable, be maintained as before the
occurrence of such event.
(e) Certain Defined Reorganization. For purposes of this Section, the term
"Reorganization" shall mean any reorganization, merger, consolidation, share
exchange, or other business combination pursuant to which the Company is not the
surviving parent corporation after the effective date of the Reorganization, or
any sale or lease of all or substantially all of the assets of the Company, and
the therm "Reorganization Agreement" shall mean a plan or agreement with respect
to a Reorganization. Nothing herein shall require the Company to adopt a
Reorganization Agreement, or to make provision for the adjustment, change,
conversion, or exchange of any Options, or the shares subject thereto, in any
Reorganization Agreement which it does adopt. In the event of a Reorganization
(as hereinafter defined), then,
(i) If there is no Reorganization Agreement, or if the
Reorganization Agreement does not specifically provide for
the adjustment, change, conversion, or exchange of the
outstanding and unexercised options for cash or other
property or securities of another corporation, then any
outstanding and unexercised options shall terminate as of a
future date to be fixed by the Committee; or,
(ii) If there is a Reorganization Agreement, and the
Reorganization Agreement specifically provides for the
adjustment, change, conversion, or exchange of the
outstanding and unexercised options for cash or other
property or securities of another corporation, the
Committee shall adjust the shares under such outstanding
and unexercised options, and shall adjust the shares
remaining under the Plan which are then available for the
issuance of options under the Plan if the Reorganization
Agreement for the adjustment, change, conversion, or
exchange of such options and shares.
(iii) The Committee shall provide to each Optionee then holding
an outstanding and unexercised Option not less than thirty
(30) calendar days' advance written notice of any date
fixed by the Committee pursuant to this Section 13 and of
the terms of any Reorganization Agreement providing for the
adjustment, change, conversion, or exchange of outstanding
and unexercised Options. Except as the Committee may
otherwise provide, each Optionee shall have the right
6
<PAGE>
during such period to exercise his Option only to the
extent that the Option was exercisable on the date such
notice was provided to the Optionee.
(f) Dissolution or Liquidation. In the event of the dissolution or
liquidation of the Company, any outstanding and unexercised options shall
terminate as of a future date to be fixed by the Committee.
(g) No Adjustments to be Made. Except as expressly provided above, the
Company's issuance of shares of its capital stock of any class, or securities
convertible into shares of its capital stock of any class, for cash or property,
or for labor or services, either upon direct sale or upon the exercise of rights
or warrants to subscribe therefor, or upon conversion of shares or obligations
of the Company convertible into or exchangeable for shares of capital stock or
other securities of the Company, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number of Option shares subject to
CSOs granted hereunder or the purchase price of such shares.
10. Purchase for Investment.
Unless the Option Shares covered by this Plan have been registered under
the Act prior to issuance, each person exercising a CSO under this Plan may be
required by the Company to give a representation in writing that he is acquiring
such shares for his or her own account for investment and not with a view to, or
for sale in connection with, the distribution of any part thereof.
11. Effective Date and Expiration of this Plan.
This Plan shall be effective as of EFFECTIVE DATE, the date of its
adoption by the Board, and no CSO shall be granted pursuant to this Plan after
its expiration. This Plan shall expire on EXPIRATION DATE except as to CSOs then
outstanding, which shall remain in effect until they have expired or been
exercised.
12. Amendments or Termination.
The Committee or Board may amend, alter or discontinue this Plan at any
time in such respects as it shall deem advisable in order to conform to any
change in any other applicable law, or in order to comply with the provisions of
any rule or regulation of the Securities and Exchange Commission required to
exempt this Plan or any CSOs granted thereunder from the operation of Section
16(b) of the Exchange Act, or in any other respect not inconsistent with Section
16(b) of the Exchange Act; provided, that no amendment or alteration shall be
made which would impair the rights of any participant under any CSO theretofore
granted, without his consent (unless made solely to conform such CSO to, and
necessary because of, changes in the foregoing laws, rules or regulations), and
except that no amendment or alteration shall be made without the approval of
shareholders which would increase the total number of shares reserved for the
purposes of this Plan (except as provided in Paragraph 9) or extend the
expiration date of this Plan as set forth in Paragraph 11.
7
<PAGE>
13. Government Regulations.
This Plan, and the granting and exercise of CSOs hereunder, and the
obligation of the Company to sell and deliver Option Shares under such CSOs,
shall be subject to all applicable laws, rules and regulations, and to such
approvals by any governmental agencies or national securities exchanges as may
be required.
14. Liability.
No member of the Board of Directors or the Committee, nor any officers,
employees or agents of the Company or any Affiliated Company shall be personally
liable for any action, omission or determination made in good faith in
connection with this Plan.
15. Options in Substitution for Other Options.
The Committee may, in its sole discretion, at any time during the term of
this Plan, grant new options to an employee under this Plan or any other stock
option plan of the Company on the condition that such employee shall surrender
for cancellation one or more outstanding options which represent the right to
purchase (after giving effect to any previous partial exercise thereof) a number
of shares, in relation to the number of shares to be covered by the new
conditional grant hereunder, determined by the Committee. If the Committee shall
have so determined to grant such new options on such a conditional basis ("New
Conditional Options"), no such New Conditional Option shall become exercisable
in the absence of such employee's consent to the condition and surrender and
cancellation as appropriate. New Conditional Options shall be treated in all
respects under this Plan as newly granted option. Options may be granted under
this Plan from time to time in substitution for similar rights held by employees
of other corporations who are about to become employees of the Company or an
Affiliated Company as a result of a merger or consolidation of the employing
corporation with the Company or an Affiliated Company, or the acquisition by the
Company or an Affiliated Company of the assets of the employing corporation, or
the acquisition by the Company or an Affiliated Company of stock of the
employing corporation as the result of which such other corporation becomes an
Affiliated Company.
16. Withholding Taxes.
Pursuant to applicable federal and state laws, the Company may be required
to collect withholding taxes upon the exercise of a CSO. The Company may
require, as a condition to the exercise of a CSO, that the Optionee concurrently
pay to the Company the entire amount or a portion of any taxes which the Company
is required to withhold by reason of such exercise, in such amount as the
Committee or the Company in its discretion may determine. In lieu of part or all
of any such payment, the Optionee may elect to have the Company withhold from
the shares to be issued upon exercise of the option that number of shares having
a Fair Market Value equal to the amount which the Company is required to
withhold.
17. Other Definitions.
Whenever used in this Plan, except where the context might clearly
indicate otherwise, the following terms shall have the meanings set forth below:
a. "Act" means the U.S. Securities Act of 1933, as amended.
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<PAGE>
b. "Affiliated Company" means any Parent or Subsidiary of the Company.
c. "Award" or "grant" means any grant of a CSO (Option) made under this
Plan.
d. "Board of Directors" means the Board of Directors of the Company. The
term "Committee" is defined in Section 2 of this Plan.
e. "Common Stock" or "Common Shares" means the common stock, $.001 par
value per share, of the Company, or in the event that the outstanding
Common shares are hereafter changed into or exchanged for different
shares or securities of the Company or any other issuer, such other
shares or securities.
f. "Date of Grant" means the day the Committee authorizes the grant of a
CSO or such later date as may be specified by the Committee as the date
a particular grant will become effective.
g. "Employee" means and includes the following persons: (i) executive
officers, officers and directors (including advisory and other special
directors) of the Company or an Affiliated Company, (ii) full-time and
part-time employees of the Company or an Affiliated Company (iii)
persons engaged by the Company or an Affiliated Company as a
consultant, advisor or agent; and (iv) a lawyer, law firm, accountant
or accounting firm, or other professional or professional firm engaged
by the Company or an Affiliated Company.
h. "Optionee" means an Employee to whom a CSO is granted.
i. "Parent" means any corporation owning 50% or more of the total combined
voting stock of all classes of the Company or of another corporation
qualifying as a Parent within this definition.
j. "Subsidiary" means a corporation more than 50% of whose total combined
capital stock of all classes is held by the Company or by another
corporation qualifying as a Subsidiary within this definition.
18. Litigation.
In the event that any Optionee or Optionee's successor should bring any
lawsuit or other action or proceeding ("Action") against the Company or an
Affiliated Company based upon or arising in relation to an Option, an Optionee,
or successor, as the case may be, not prevailing in such Action shall be
required to reimburse the Company or Affiliated Company's costs and expenses,
including reasonable attorneys' fees, incurred in defending such action and
appealing any award by a lower court.
19. Miscellaneous Provisions.
The place of administration of this Plan shall be in the State of Nevada
(or subsequently, wherever the Company's principal executive offices are
located), and the validity, construction, interpretation and effect of this Plan
9
<PAGE>
and of its rules, regulations and rights relating to it, shall be determined
solely in accordance with the laws of the State of Nevada or subsequent state of
domicile, should the Company be redomiciled. Without amending this Plan, the
Committee may issue Options and Options Shares to employees of the Company who
are foreign nationals or employed outside the United States, or both, on such
terms and conditions different from those specified in this Plan but consistent
with the purpose of this Plan, as it deems necessary and desirable to create
equitable opportunities given differences in tax laws in other countries. All
expenses of administering this Plan and issuing Option and Option Shares shall
be borne by the Company.
By signature below, the undersigned officers of the Company hereby certify
that the foregoing is a true and correct copy of the 1999 Compensatory Stock
Option Plan of the Company.
DATED:
-----------------------
Reliant Interactive Media Corp.
By:/s/ By:/s/
-------------------------- -----------------------
Authorized Officer Secretary
10
<PAGE>
Reliant Interactive Media Corp.
------------------------------
CERTIFICATION OF PLAN ADOPTION
------------------------------
I, the undersigned Secretary of this corporation, hereby certify that the
foregoing Compensatory Stock Option Plan of this corporation was duly approved
by the requisite number of holders of the issued and outstanding common stock of
this corporation as of the date below.
Date of Approval:
---------------------------
/s/
------------------------------
Secretary
11
<PAGE>
- --------------------------------------------------------------------------------
Attachment
Reliant Interactive Media Corp. Option List
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
Reliant Interactive Media Corp.
Option List
-----------
<CAPTION>
==========================================================================================================
Kevin Harrington Tim Harrington Mel Arthur
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Up to 60,000 shares for each Up to 40,000 shares for each six Up to 5,000 shares for each
six month period up to a total month period up to a total of six month period up to a total
of 240,000 shares. 160,000 shares. of 20,000 shares.
==========================================================================================================
</TABLE>
