SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(B) OR (G)
OF THE SECURITIES EXCHANGE ACT OF 1934
___________________
INTRACO SYSTEMS, INC.
(Name of Small Business Issuer in Its Charter)
Nevada 87-0381511
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(State or Other Jurisdiction of (IRS Employer Identification Number)
Incorporation or Organization)
3998 Florida Atlantic University Boulevard, Suite 210
Boca Raton, Florida 33431
(561) 367-0600
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(Address and Telephone Number of Principal Executive Offices)
Copies of communications to:
Michael D. Karsch, Esq.
Broad and Cassel
7777 Glades Road, Suite 300
Boca Raton, Florida 33434
Telephone No. (561) 483-7000
_______________________________
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
To be so registered each class is to be registered
None
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Securities to be registered under Section 12(g) of the Act:
Common Stock
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(Title of class)
THIS DOCUMENT CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. INTRACO'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS
DOCUMENT. THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION AND IS QUALIFIED
IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS
APPEARING ELSEWHERE IN THE DOCUMENT AND PARTICULARLY IN THE SECTION ENTITLED
"RISK FACTORS."
PART I
ITEM 1. DESCRIPTION OF BUSINESS
General
Intraco Systems Inc. (the "Company") was incorporated in Florida in
March 1990. In April 1999, Intraco completed an exchange agreement with
Custom Touch Electronics, Inc. ("CTE"), a Nevada corporation with no material
operations whose common stock traded on the OTC Bulletin Board, pursuant to
which all outstanding shares of Intraco capital stock were exchanged for
10,531,500 CTE shares. The prior shareholders and promoters of CTE hold
2,429,489 shares and the Intraco shareholders at the time of the exchange
hold 10,531,500 shares. As a result, Intraco Systems became a wholly-owned
subsidiary of CTE and CTE changed its name to Intraco Systems, Inc. All
references in this document to "Intraco" refer to the Nevada parent and the
Florida subsidiary. The principal offices of Intraco are located at 3998 FAU
Boulevard, Boca Raton, Florida 33431 and its phone number is (561) 367-0600.
Intraco is a Communications Solution Provider ("CSP"), offering the
integration of voice, data and Internet based technology solutions to a wide
range of customers. Intraco offers complementary IT solutions to clients on a
local and regional basis. Intraco's targeted customers include small and
mid-size companies in a wide range of industries including communications,
health care, financial services, manufacturing, professional services and
technology.
Intraco is currently seeking to execute an aggressive growth strategy which
includes both internal (product, sales and marketing expansion) and external
(mergers and acquisitions) strategies. Intraco is currently acquiring
companies in the Telecommunications, Internet Development and Network Systems
Integration areas. During June 1999, Intraco completed the acquisition of
Page Telecomputing Inc., a Delray Beach, FL-based developer of telemarketing
and call center computer telephony and Voice-over-IP applications.
The acquisition will increase Intraco's focus on computer telephony
integration and allow it to best serve sales and marketing-oriented
customers, such as insurance brokers, investment advisors, real estate
agents, healthcare marketers and more who rely on intensive inbound and
outbound phone activity. Page Telecomputing develops proprietary automated
telemarketing software, including its Sales Call Software™, LINK™
Page Prospect!™ and SCRSLITE ™ for telecommunications facilities,
sales offices, customer support centers and more.
Intraco's broad range of complementary IT business solutions includes the
following services:
Voice over IP (VoIP) and Computer Telephony Integration (CTI)
High-end Web Application Development and Integration
Network and Systems Design and Implementation
IT Operational Support
Currently, Intraco is primarily serving customers in the Southeast region of
the United States with a number of national and international customers.
Intraco intends to extend its comprehensive service offerings nationally
through strategic alliances. Intraco delivers IT solutions including services
and support for all the major technology needs of its customers. This
includes a variety of operating systems (Windows 95/98/NT, Tru-64 (Digital)
Unix, NetWare, SunOS, Digital Open VMS, and HP-UX) on a variety of hardware
platforms, (Intel, Sun, HP, and Compaq/Digital). In addition, Intraco
supports its customers' hardware and software needs in such areas as the World
Wide Web and high-end telephony services. The solutions developed often
include a mix of hardware, software and services.
Market And Industry Overview
Since the mid-1980s, dramatic changes have occurred in the delivery of IT
solutions to end users. The explosive growth of Web-enabled systems and
client/server technology is changing the nature of the IT industry from
servicing personal computer network systems to servicing high-powered servers
with open platforms, scalable architectures, integrated applications,
security, back-up and fail-safe operability issues. As the complexities of
acquiring, sharing and managing information become a
business-within-a-business for mid-sized companies, the corporate approach to
IT management and deployment is changing significantly.
Businesses have been increasingly turning to outside organizations such
as Intraco for the design, development, implementation, and support of IT
systems. The United States market for IT services is expected to grow from
approximately $85 billion in 1998 to approximately $150 billion in 2001. Due
in part to the rapid pace of technological change, business solutions
frequently are too sophisticated and complex for a business enterprise to
undertake internally . The increased use of outside IT solutions firms is
also being driven by competitive pressures requiring rapid implementation of
new systems and the adverse effects of selecting inappropriate or outdated
technology. Many companies have made strategic decisions to focus on core
competencies, minimize fixed costs, reduce workforces, and defer investment
in large IT staffs.
Intraco's Strategy
Intraco's objective is to service clients' strategic business needs by
becoming their Communications Solutions Provider. Intraco intends to meet
this objective through a combination of targeted strategic acquisitions and
internal growth including the addition of new services and IT specialties.
Intraco's acquisition strategy is to simultaneously expand its range of
services while extending its geographic reach to the regions outside of the
Southeast United States by acquiring existing, profitable businesses in the
Telecommunications Interconnect, Internet Developers and Network Systems
areas.
Intraco has identified three key growth categories of converging
technologies that best serve existing and targeted customers: Internet
Business Solutions, Computer Telephony Services, and Network and Systems
Integration. Each of these areas complements the other as well as having
distinct advantages and opportunities of its own.
Internet Business Solutions - This includes e-mail integration, website
creation and design, management of website traffic, on-line marketing,
Internet/intranet/extranet connectivity, database design, implementation and
management, migration and web enabling of legacy systems, e-commerce
applications, and traditional network and systems integration services.
Internet solutions generate ongoing annuity revenue and profits through the
use of annual support contracts. Intraco operates, updates and manages
Internet sites for customers while increasing customer website traffic
through on-line marketing.
Computer Telephony Services - Intraco provides a complete environment for
businesses with the data information system as a backbone to all data
processing and communications. Through Intraco, the customer has all
components of their communications and information systems integrated into a
seamless working environment. This convergence of data and voice technologies
is commonly referred to as Computer Telephony Integration or CTI. For
example, the phone system is fully integrated into the computer network, along
with such functions as fax servers and page/messaging capabilities. This
also includes video and sound transfer as well as voice recognition and
automated attendant systems. The real value to the customer is in the
delivery of a working business environment while improving the efficiencies
and effectiveness of their operations.
Network and Systems Integration - For over nine years Intraco has provided
enterprise level solutions that include complex systems, non-stop
cluster-based computing environments, complete networks and a wide range of
support services. These include 24x7 support and Y2K expertise for the
traditional systems, legacy systems and networking markets.
Collectively these categories offer ongoing incremental sales
opportunities as new technologies are introduced. Customers realize high
value from the increased productivity and enhanced functionality inherent to
these technologies. The combination of Voice, Data and Internet Development
Services enable Intraco to exploit new market opportunities as well as
maximize existing markets.
The Intraco Solution
Intraco offers clients a single source for Business Data and Communications
solutions and services. Intraco has identified four sectors that constitute
its current offerings. These sectors of Intraco's business and the services
provided within each sector are:
Telephony Design and Integration Services
Design and integrate voice plus VoIP solutions
Design and integrate strategic corporate-wide voice solutions
Voice enabled web applications
Integration of CTI with PBX systems
Intraco seeks to maintain current knowledge of the attributes of all
telecommunications systems, and to use this knowledge to develop systems for
specific customer environments from simple key systems to complex voice/data
communications systems. Intraco recognizes the importance of global
communication, and has the ability to integrate LAN and WAN, data and voice
communications, video conferencing, voicemail, and voice processing into the
telecommunications infrastructure of' the future.
High-end Web Application Development and Integration Services
Design and integrate complex websites with sophisticated back-end systems
Develop strategies for business to business applications
Web enabling existing back-end legacy systems and databases
Create and implement online marketing campaigns for increased web traffic
Enhance current web presence by adding high tech features and functionality
Expertise in e-commerce solutions and web enabling offline business models
Intraco offers fully interactive database development, eye-catching
layouts and design, integration to legacy systems for web connectivity,
scalable and robust e-commerce solutions, ongoing website maintenance,
comprehensive intranet design and development, and methods to increase
efficiency and streamline operations.
Network and Systems Design and Implementation Services
Local area network (LAN) and wide area network (WAN) client/server design and
integration
Internet/intranet/extranet infrastructure design and integration
Voice and data communication infrastructure
Communication network solutions involving hubs, routers, DSU/CSUs and switches
Capacity planning
Network performance management and monitoring
Connectivity and security services
Intraco delivers enterprise-wide turnkey IT business solutions by
combining business knowledge with technical expertise concerning hardware,
software, and support capabilities to achieve customer objectives. These
solutions address customer needs for high bandwidth applications, from
transaction processing to Internet commerce.
Intraco designs, develops, installs and supports full application-ready,
distributed client/server computing platforms and integrates them into
existing IT infrastructures. Capabilities include project planning,
technology integration and installation that maximize system performance and
delivery of computing solutions in the most cost-effective way, assuring
flexible, open systems capable of integrating new technologies.
IT Engineering and Support Services
Outsourcing of IT professional services
Outsourcing of IT product procurement
Engineering and network management services
Warranty support - Help desk support
On-site and remote support services
Hardware and software maintenance and support
Facility infrastructure cabling and installation
Intraco provides both short and long-term technical expertise to address a
wide range of network operation and project needs, including LAN and WAN
design, installation, implementation, management, systems management, system
administration, and support services.
Organizational Structure
Intraco operates with a decentralized management structure that enables
it to deliver superior client service and a motivating environment for its
operating companies. To minimize overhead, Intraco provides corporate
management, marketing, finance, accounting, legal, management information
systems, treasury, employee benefits (HR), and purchasing centrally.
Sales and Marketing
Intraco focuses its sales and marketing efforts on the small and
mid-size business market sector in the U.S. where the demand for outsourced
IT consulting services is strong and loyal. To develop new clients, Intraco
uses a combination of sales, engineering and consulting sales services,
including trade shows and professional seminars. Intraco will also be
enhancing its own Websites (www.intraco.com and www.intracodirect.com) on an
ongoing basis to provide easy, convenient, cost-effective access to
information for customers.
Through the acquisition of Telecommunications Interconnects Intraco will
expand its client base exponentially. The targeted acquisitions have a large
base of business customers that are likely to utilize network connectivity to
their existing telecommunications system. This distribution channel is
utilized for the proactive introduction of new technologies as they become
available.
Intraco has built relationships with many of the industry's leading
technology manufacturers, including Compaq/Digital, HP, Nortel/Bay,
Microsoft, Cisco, Oracle, Xyplex as well as others. These vendors provide a
source of leads for Intraco, augment technical sales expertise, and offer
additional name recognition for marketing events and programs.
The current sales management team at Intraco Systems has well over 100 years
of combined experience in the technology industry providing a strong ability
to understand existing and new technologies as well as the ability to
determine how to create and deliver value from integrating various
technologies.
Customers
Intraco currently has a significant installed customer base which provides a
ready market for new and other emerging technologies. The profile of the
installed customer base represents larger enterprise customers requiring a
high degree of customized solutions. Clients include middle market and
Fortune 1000 companies in a wide range of industries (including
communications, healthcare, financial services, government, manufacturing,
pharmaceuticals, professional services, and technology. Intraco has developed
an aggressive promotional campaign to inform existing Intraco customers of
these latest innovations. The following is a partial list of past and existing
customers:
Gambro Health Care (previously REN Labs) Encore Computer Products
Shell Oil Novartis (previously Ciba Geigy)
INPHYNET Medical Management Tenix Pty
Internet Financial Network U.S.Plastics
Florida Atlantic University Vacation Break
Florida International University Interim Services
Sensormatic Security Plastics
Racal-Datacom Arvida
Competition
The IT solutions market is very competitive, subject to rapid
change, and includes a large number of participants whose expertise covers an
expansive range. Intraco faces extensive competition from large national
providers who specialize in one or more of its target markets as well as from
numerous smaller local competitors. Intraco's principal competitors include
IKON Office Solutions, Inc., MicroAge Integration, Inc, National Business
Group, Inc. and TotalTec Systems, Inc., all of which have significantly
greater financial, technical and marketing resources, generate substantially
higher revenues and have greater name recognition. Intraco believes the
principal competitive factors in the segment of the industry in which it
competes include scope of services, service delivery approach, technical and
industry expertise, perceived value, objectivity and results orientation.
Intraco believes that its ability to compete successfully against such
competitors depends in part on a number of factors both within and outside of
its control, including the ability to hire, retain and motivate senior IT
consultants, competitors' pricing for comparable services, and the extent of
competitors' responsiveness to customer needs. There can be no assurance that
Intraco will be able to compete successfully in the future.
Relationship with Suppliers
Intraco has entered into dealer agreements with its major
vendors/manufacturers. These agreements are typically subject to periodic
renewal and to termination on short notice. Substantially all of Intraco's
dealer agreements may be terminated by the vendor without cause upon 30 to 90
days advance notice, or immediately upon the occurrence of certain events. A
vendor could also terminate an authorized dealer agreement for reasons
unrelated to Intraco's performance. The loss of such a vendor/product line or
the deterioration of Intraco's relationship with such a vendor/manufacturer
would have a material adverse effect on Intraco.
Intraco has also established relationships with industry leaders relating to
its services segment including the authorization to perform warranty and
non-warranty repair work. Intraco's technical personnel currently have an
aggregate of more than 40 certifications from major vendors.
Sales Arrangements
Most products and services are sold pursuant to written contracts with
customers. These contracts typically establish prices for certain equipment
and services and require short delivery dates for equipment and services
ordered by the customer. These contracts do not require the customer to
purchase microcomputer products or services exclusively from Intraco and may
be terminated without cause upon 30 to 90 days notice.
Intraco generally provides its services to customers on a
time-and-materials basis pursuant to written contracts or purchase orders.
Intraco's arrangements with its customers generally can be terminated by
either party with limited or no advance notice. Intraco also provides some of
its services under fixed-price contracts. Fixed-price contracts are used when
Intraco believes it can clearly define the scope of services to be provided
and the cost of providing those services.
Human Resources
As a service provider, Intraco views its employees as the most valuable
asset. Accordingly, a continuously evolving program has been implemented to
encourage and sustain long-term employee retention. Intraco offers a
competitive compensation package which includes, stock options, technical
education, a progressive human resources program, and other competitive
benefits designed to enhance long-term employee retention.
As of June 30, 1999, Intraco had a total staff of 21 employees,
comprised of 7 technical professionals, 8 sales and marketing personnel and 6
administrative personnel. No employees are represented by a labor union or
subject to a collective bargaining agreement. Management believes that
employee relations generally are good.
Intraco's success will depend in large part upon the ability to
attract, retain and motivate highly-skilled employees. Qualified technical
professionals are in great demand and are likely to remain a scarce resource
for the foreseeable future. However, management believes that Intraco has
been successful in its efforts to attract, develop and retain the
high-quality professionals needed to support present operations and future
growth. Although Intraco expects to continue to attract sufficient numbers of
highly-skilled employees and to retain senior personnel for the foreseeable
future, there can be no assurance that Intraco will be able to continue to do
so.
Intellectual Property Rights
Intraco relies on a combination of nondisclosure and other contractual
arrangements and trade secret, copyright, and trademark laws to protect
proprietary rights and the proprietary rights of third parties. Intraco
enters into confidentiality agreements with key employees, and limits the
distribution of proprietary information.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis of financial condition and results of
operations contain some forward-looking statements. Forward-looking
statements give Intraco's and management's current expectations or forecasts
of future events. The reader can identify these statements by the fact that
they do not relate strictly to historical or current facts. They use words
such as "anticipate," "estimate," "expect," "project," "intend," "plan,"
"believe," and other words and terms of similar meaning in connection with
any discussion of future operating or financial performance. In particular,
these include statements relating to anticipated operating results for the
full year ended December 31, 1999, and anticipated cash flow, and to future
actions, future performance or results of current and anticipated sales and
marketing efforts, expenses, the outcome of contingencies such as legal
proceedings, and other financial results. From time to time, Intraco or its
management also may provide oral or written forward-looking statements in
other materials released to the public.
Neither Intraco nor its management undertake any obligation to publicly
update any forward-looking statements, whether as a result of new information,
future events or otherwise. The reader is advised, however, to consult any
further disclosures made on related subjects in future SEC filings. Also note
that there is a cautionary discussion of risks, uncertainties and possibly
inaccurate assumptions relevant to Intraco's business under this section.
These are factors that could cause actual results to differ materially from
expected and historical results. Other factors besides those listed could
also adversely affect Intraco.
Overview
Intraco is a Communications Solution Provider ("CSP"), offering the
integration of voice, data and internet based technology solutions to a wide
range of customers. Intraco offers complementary IT solutions to clients on a
local and regional basis. Intraco's targeted customers include small and
mid-size companies in a wide range of industries including communications,
health care, financial services, manufacturing, professional services and
technology.
Intraco's consolidated financial statements do not give effect to the results
of a business acquired in June 1999 in a business combination accounted for
under the purchase method (the "Purchased Company") because it was after the
date of the financial statements and is not considered material.
The report of Intraco's independent auditors for the year ended December
31, 1998 included a footnote that there is a substantial doubt about
Intraco's ability to continue as a going concern unless it can improve its
sales or obtain additional financing. Management's plan to increase sales and
obtain additional capital includes several specific actions. On the sales
side, Intraco will place greater emphasis on systems, CTI, web development
and services, as these areas have higher profit margins and represent more
rapidly growing markets than traditional contract services. Intraco is also
actively pursuing acquisitions that will add significantly to revenues and
profits. For capital sourcing, Intraco will continue to seek private capital as
well as public funds through the sale of its securities. Between November 1,
1998 and June 30, 1999, Intraco raised approximately $1,007,525 through sales
of preferred and common stock.
Results Of Operations
The following table sets forth various items for the four months ended
April 30, 1999(unaudited) and April 30,1998(unaudited).
Four months ended April 30, 1999 Compared to April 30, 1998
Note that the company did not perform monthly closings for 1998 and therefore
all comparisons to 1998 are approximate.
Revenues. Revenues decreased 10.1% from $962,945 for 1998 to $865,739 for
1999. This decrease was primarily due to a $315,745 decrease in service
contracts offset by an increase of $218,536 in systems and network revenue.
As part of management's plan to restructure the Company and broaden the
product offerings, the decision was made to discontinue low margin sales and
offer more value added products and services.
Cost of revenues. Cost of revenues decreased $17,139 consistent with the
decline in revenues.
Gross Profit. Gross profit decreased $80,067 consistent with the decline in
revenues.
Selling, General and Administrative. Selling, general and administrative
expenses increased $204,989 or 71.9%. This is due primarily to the
investment in staff and facility to support the broader product offerings.
Interest Expense. Interest expense, net of interest income decreased $8,634
from net interest expense of $10,880 in 1998 to $2,246 in 1999.
Provision For Income Taxes. Intraco has an unused net operating loss
carryforward of $663,000 for use on its federal and state income tax returns
and thus has not reserved for any income taxes for 1999.
Net Loss. As a result of the foregoing, Intraco reported a net loss of
($259,382) in 1999 and a profit of $17,040 in 1998.
Year Ended December 31, 1998 Compared To December 31, 1997
Revenues. Consolidated revenues decreased 23.9% from $3,556,177 for 1997
to $2,704,931 for 1998. This decrease was primarily due to a $1,039,037
decrease in revenues from system and network design and installation, offset
by a $187,791 increase in service contract revenues. As part of management's
plan to restructure Intraco and broaden the product offerings, the decision
was made to focus on higher margin sales.
Cost of revenues. Cost of revenues decreased $839,949 or 32.2% from
$2,606,669 for 1997 to $1,712,720 for 1998. Cost of systems were $638,885 or
51.2% of systems revenues in 1998 compared to $1,443,080 or 63.1% of systems
revenue in 1997. Cost of service contracts were $1,073,835 or 73.7% of
service contract revenue in 1998 compared to $1,163,589 or 91.7% in 1997.
This improvement in the cost of product ratio to sales is the result of the
action described above.
Gross profit. Gross profit increased $42,703 or 4.5% from $949,508, or
26.7% of revenues, for 1997 to $992,211, or 36.7% of revenues, for 1998. This
increase in gross profit as a percentage of revenues was due to a higher
concentration of business in projects and sales of higher margin items.
Selling, general and administrative. Selling, general and administrative
expenses decreased $78,369 or 7.0% from $1,116,198, or 31.4% of revenues, for
1997 to $1,037,829, or 38.4% of revenues, for 1998.
Interest expense. Interest expense, net of interest income, increased
$30,004 from net interest expense of $4,573 in 1997 to $34,577 in 1998. The
increase was due primarily to the conversion of accounts payable due Digital
Equipment Corp into a note with interest at 10%.
Provision for income taxes. Intraco has an unused net operating loss
carryforward of $663,000 for use on its federal and state income tax returns
and thus has not reserved for any income taxes for 1998. Until May 1997
Intraco was taxed as an S Corporation.
Net loss. As a result of the foregoing, Intraco reported a net loss of
$80,195 in 1998 and $171,263 in 1997.
Liquidity And Capital Resources
At December 31, 1998, Intraco had current assets of $273,930, consisting
of cash, accounts receivable, inventory and prepaid expenses, and current
liabilities of $981,071, consisting of payables, deferred revenues, deposits
and notes payable. This resulted in a working capital deficit of $707,141.
Intraco's capitalization, defined as the sum of long-term debt and
stockholders' equity, at December 31, 1998, was $ ($390,207).
At April 30, 1999, Intraco had current assets of $708,345, consisting of
cash, accounts receivable, inventory and prepaid expenses, and current
liabilities of $1,196,421, consisting of payables, deferred revenues,
deposits and notes payable. This resulted in a working capital deficit of
$488,076. Intraco's capitalization, defined as the sum of long-term debt and
stockholders' equity, at April 30, 1999, was $ ($532,391).
During 1998, net cash used in operating activities was $116,730. Accounts
receivable decreased by $185,727 due to timing of completion of several sales
and improved collection efforts and accounts payable is decreased by $143,236
due to timing of purchases and the conversion of the Digital Equipment
payable to a note. Deferred revenue decreased by $441,559 as a result of
Intraco completing performance of contracts entered into in prior periods and
recognizing the revenues in 1998. Net cash used in investing activities was
$58,058 due to the purchase of property and equipment. Net cash used in
financing activities was $48,001 as Intraco realized 218,800 for the issuance
of stock, offset by $110,107 of costs in connection with these issuances and
the repayment of $156,694 of long-term debt. As a result, Intraco realized a
net decrease in cash of $222,789.
During the 1999 period, net cash used in operating activities was
$94,328. Accounts receivable increased by $166,233 due to timing of
completion of several sales and improved collection efforts and accounts
payable is decreased by $387,813 due to timing of purchases and the conversion
of the Digital Equipment payable to a note. Deferred revenue decreased by
$70,322 as a result of Intraco completing performance of contracts entered
into in prior periods and recognizing the revenues in 1999. Net cash used in
investing activities was $2,420 due to the purchase of property and equipment.
Net cash provided by financing activities was $177,380 as Intraco realized
737,663 for the issuance of stock, offset by $202,964 of costs in connection
with these issuances and the repayment of $73,074 of long-term debt and costs
of our recapitalization of $283,153. As a result, Intraco realized a net
increase in cash of $80,632.
At December 31, 1998, Intraco had approximately $420,212 of outstanding
debt to Digital Equipment Corporation, of which $306,526 was classified as
short-term. The notes are payable in monthly installments ranging from
$12,000 to $39,000, bear interest at 10% and have a final maturity date of
March 2000. These notes are secured by all of Intraco's assets. At April
30, 1999 the then full amount of $347,142 of this debt was treated as
short-term.
In order to meet its liquidity requirements for the remainder of 1999,
Intraco will be required to raise additional capital. Intraco is working
with several financing sources to raise additional capital. If Intraco is
unsuccessful in raising cash, it may have to curtail or restructure
operations.
Year 2000 Readiness Disclosure Statements
Historically, many computer programs have been written using two digits
rather than four to define the applicable year. This could lead, in many
cases, to a computer recognizing a date ending in "00" as 1900 rather than
the year 2000. This phenomenon could result in major computer system failures
or miscalculations, and is generally referred to as the "Year 2000" problem.
Intraco is currently in the process of assessing its exposure to the Year
2000 problem and will establish a detailed response to any exposure that may
be identified. Generally, Intraco has Year 2000 exposure in three areas: (1)
Information Technology ("IT") Related Systems--financial and management
computerized operating systems used to manage Intraco's business; (2) Non-IT
Related Systems-- equipment with "embedded chips" used by Intraco, including
telephone and building security systems; and (3) Third Parties--computer
systems used by third parties, in particular customers and suppliers of
Intraco.
Although Intraco, based on its analysis to date, does not believe that it
will incur any material costs or experience material disruptions in its
business, related to the Year 2000 problem, there can be no assurances that
Intraco or its third parties, customers or suppliers will successfully become
Year 2000 compliant on a timely basis and thus will not experience serious
unanticipated negative consequences or material costs. Undetected errors or
defects in the technology used for Intraco's systems, which include hardware
and software, and defects in the systems of Intraco's third parties, could
cause these consequences. The most likely worst case scenario would include
hardware failure, software failure resulting in an inability to receive
orders from customers or shipments from suppliers or to bill customers and
pay suppliers, and failure of infrastructure services provided by third parties
(such as phone systems and building security systems).
Factors That May Affect Future Results
The following important factors, among others, could cause actual results
to differ from those indicated in forward-looking statements made in this
document. The following factors contain some forward-looking statements.
Forward-looking statements give current expectations or forecasts of future
events. You can identify these statements by the fact that they do not relate
strictly to historical or current facts. They use words such as "anticipate,"
"estimate," "expect," "project," "intend," "plan," "believe," and other words
and terms of similar meaning in connection with any discussion of future
operating or financial performance. In particular, these include statements
relating to our anticipated operating results for the year ending December
31, 1999, and our anticipated cash flow and to future actions, future
performance or results of current and anticipated sales and marketing efforts,
expenses, the outcome of contingencies, and other financial results. From time
to time, Intraco or its management may provide oral or written
forward-looking statements in other materials released to the public.
Any or all forward-looking statements in this document and in any other
public statements made may turn out to be wrong. They can be affected by
inaccurate assumptions or by known or unknown risks and uncertainties. Many
factors mentioned in the discussion below will be important in determining
future results. Consequently, no forward-looking statement can be guaranteed.
Actual future results may vary materially.
Neither Intraco nor its management undertake any obligation to publicly
update any forward-looking statements, whether as a result of new
information, future events or otherwise. The reader is advised, however, to
consult any further disclosures made on related subjects in future filings
with the SEC.
History of Losses
Intraco has reported a net loss for each of the last two years. We
cannot assure you that we will report a profit for 1999 or for future years.
Need For Additional Capital
Intraco must raise additional capital in the near term to continue its
business plan. Intraco is working with several financial sources to raise
additional capital but there are no guarantees that Intraco will be able to
raise sufficient capital on a timely basis and on reasonable terms.
Rapid Growth
Intraco intends to continue to pursue both acquisitions and internal growth
opportunities as part of its business strategy. Management cannot assure the
reader that Intraco will be successful in achieving rapid growth in the
future. Intraco expects that more of its future growth will result from
acquisitions. Intraco recently completed a small acquisition, is negotiating
several more and continues to evaluate expansion and acquisition
opportunities that would complement our ongoing operations. There can be no
assurance that Intraco will be able to identify, acquire or profitably manage
additional companies or successfully integrate additional businesses into
Intraco without substantial costs, delays or other problems. In addition,
there can be no assurance that companies acquired in the future will be
profitable at the time of their acquisition or will achieve levels of
profitability that would justify the investment. Acquisitions may involve a
number of special risks, including, but not limited to, adverse short-term
effects on Intraco's reported operating results, diversion of management's
attention, dependence on retaining, hiring and training key personnel, risks
associated with unanticipated problems or legal liabilities and amortization
of acquired intangible assets, some or all of which could have a material
adverse effect on Intraco's operations and financial results.
Manufacturer Market Development Funds
Several manufacturers offer market development funds, cooperative advertising
and other promotional programs to computer resellers such as Intraco. Intraco
utilizes these programs to fund some of its advertising and promotional
programs. The funds received from manufacturers are offset directly against
the expense, thereby reducing selling, general and administrative expenses
and increasing net income. While these programs have been available to Intraco
in the past, there is no assurance that these programs will be continued. Any
discontinuance or material reduction of these programs could have an adverse
effect on Intraco's operations and financial results.
Management Information System
Intraco relies upon the accuracy and proper utilization of its management
information system to provide timely distribution services, manage its
inventory and track its financial information. To manage its growth, Intraco
is continually evaluating the adequacy of its existing systems and procedures
(including Year 2000 issues) and continues to update and integrate critical
functions. Intraco anticipates that it will regularly need to make capital
expenditures to upgrade and modify its management information system,
including software and hardware, as Intraco grows and the needs of its
business change. There can be no assurance that Intraco will anticipate all
of the demands which its expanding operations will place on its management
information system. The occurrence of a significant system failure or
Intraco's failure to expand or successfully implement its systems could have
a material adverse effect on Intraco's operations and financial results.
Dependence On Technical Employees
The success of Intraco's services business, in particular its network and
integration services, depends in large part upon Intraco's ability to attract
and retain highly skilled technical employees in competitive labor markets.
There can be no assurance that Intraco will be able to attract and retain
sufficient numbers of skilled technical employees. The loss of a significant
number of Intraco's existing technical personnel or difficulty in hiring or
retaining technical personnel in the future could have a material adverse
effect on Intraco's operations and financial results.
Inventory Management
The information technology industry is characterized by rapid product
improvement and technological change resulting in relatively short product
life cycles and rapid product obsolescence. While most of the inventory
stocked by Intraco is for specific customer orders, inventory devaluation or
obsolescence could have a material adverse effect on Intraco's operations and
financial results. Current industry practice among manufacturers is to
provide price protection intended to reduce the risk of inventory
devaluation, although such policies are subject to change at any time and there
can be no assurance that such price protection will be available to Intraco in
the future. During fiscal 1998, many manufacturers reduced the number of days
for which they provided price protection. Also, Intraco currently has the
option of returning inventory to certain manufacturers and distributors,
subject to certain limitations. The amount of inventory that can be returned to
manufacturers without a restocking fee varies under Intraco's agreements and
such return policies may provide only limited protection against excess
inventory. There can be no assurance that new product developments will not
have a material adverse effect on the value of Intraco's inventory or that
Intraco will successfully manage its existing and future inventory. In
addition, Intraco stocks parts inventory for its services business. Parts
inventory is more likely to experience a decrease in valuation as a result of
technological change and obsolescence and there are no price protection
practices offered by manufacturers with respect to parts.
Dependence On Key Personnel
The success of Intraco is dependent on the services of Jack Berger its
President and Chief Executive Officer and other key personnel. The loss of
the services of Mr. Berger or other key personnel could have a material
adverse effect on Intraco's business. Intraco has entered into employment
agreements with certain of its key personnel, including Mr. Berger. Intraco's
success and plans for future growth will also depend on its ability to attract
and retain highly skilled personnel in all areas of its business. Intraco does
not currently maintain key man life insurance policies for any of its officers
or other personnel.
Backlog
Intraco does not have a significant backlog of business since it normally
delivers and installs products purchased by its customers within 30 days from
the date of order. Accordingly, backlog is not material to Intraco's business
or indicative of future sales. From time to time, Intraco experiences
difficulty in obtaining products from its major vendors as a result of
general industry conditions. These delays have not had, and are not
anticipated to have, a material adverse effect on Intraco's results of
operations.
Growth Through Acquisitions
Acquisitions are expected to contribute significantly to Intraco's growth.
Intraco believes that acquisitions are one method of increasing its presence
in existing markets, expanding into new geographic markets, adding
experienced service personnel, gaining new product offerings and services,
obtaining more competitive pricing as a result of increased purchasing volumes
of particular products and improving operating efficiencies through economies
of scale. In recent years, there has been consolidation among providers of
microcomputer products and services and Intraco believes that this
consolidation will continue, which, in turn, may present additional
opportunities for Intraco to grow through acquisitions. Intraco continually
seeks to identify and evaluate potential acquisition candidates. Intraco is
currently engaged in preliminary discussions with potential acquisition
candidates. Although it has no binding commitments to acquire such candidates,
management believes that Intraco may acquire one or more of these candidates
in the future.
The consideration for these acquisitions may consist of cash, stock and/or
notes. The stock may cause dilution to current stockholders.
Integration Of Acquisitions
Integration of acquisitions may involve a number of risks that could have
a material adverse effect on Intraco's operating results and financial
condition, including: restructuring charges associated with the acquisitions
and other expenses associated with a change of control; non-recurring
acquisition costs such as accounting and legal fees; investment banking fees;
amortization of acquired intangible assets; recognition of
transaction-related obligations and various other acquisition-related costs;
diversion of management's attention; difficulties with retention, hiring and
training of key personnel; and risks of incurring unanticipated problems or
legal liabilities.
Although Intraco conducts due diligence, hires outside independent
financial and accounting consultants, and generally requires representations,
warranties and indemnifications from the former owners of acquired companies,
there can be no assurance that such owners will have accurately represented
the financial and operating conditions of their companies. If an acquired
company's financial or operating results were misrepresented, or the acquired
company otherwise fails to perform as anticipated, the acquisition could have
a material adverse effect on the operating results and financial condition of
Intraco.
Variability Of Quarterly Operating Results
Intraco has experienced, and may in the future continue to experience,
fluctuations in its quarterly operating results. Factors that may cause
Intraco's quarterly operating results to vary include the number of active
client projects, the requirements of client projects, the termination of
major client projects, the loss of major clients, the timing of new client
engagements, and the timing of personnel cost increases. Certain of these
factors may also affect Intraco's personnel utilization rates which may cause
further variation in quarterly operating results. The timing of revenues is
difficult to forecast because Intraco's sales cycle is relatively long and
Intraco's services are impacted by both the financial condition and
management decisions of its clients and general economic conditions. Because a
high percentage of Intraco's expenses are relatively fixed at the beginning of
any period and Intraco's general policy is to not adjust its staffing levels
based upon what it views as short-term circumstances, a variation in the
timing of the initiation or the completion of client assignments, particularly
at or near the end of any quarter, can cause significant variations in
operating results from quarter to quarter and could result in losses for any
particular period. In addition, many of Intraco's engagements are, and may be
in the future, terminable by its clients without penalty. A termination of a
major project could require Intraco to maintain under-utilized employees,
resulting in a higher than expected percentage of unassigned professionals, or
to terminate the employment of excess personnel. Due to all of the foregoing
factors, there can be no assurance that Intraco's results of operations will
not be below the expectations of investors for any given fiscal period or
periods.
Dependence On Major Customers
During 1998, approximately 29% of Intraco's total net sales and revenues were
derived from one customer and 65% from our top 10 customers.
Attraction And Retention Of Employees
Intraco's business involves the delivery of professional services and is
labor intensive. Intraco's success depends in large part on its ability to
attract, develop, motivate, and retain technical professionals. At June 30,
1999 approximately 33% of Intraco's employees were technical professionals.
Qualified technical professionals are in great demand and are likely to
remain a limited resource for the foreseeable future. There can be no
assurance that Intraco will be able to attract and retain sufficient numbers
of technical professionals in the future. An increase in turnover rates could
have a material adverse effect on Intraco's business, including its ability
to secure and complete engagements and obtain new business, which could have a
material adverse effect on Intraco's operating results and financial
condition.
Rapid Technological Change
As with all IT solutions companies, Intraco's success will depend in part
on its ability to develop IT solutions that keep pace with continuing changes
in IT, evolving industry standards and changing client preferences. There can
be no assurance that Intraco will be successful in adequately addressing
these developments on a timely basis or that, if these developments are
addressed, Intraco will be successful in the marketplace. In addition, there
can be no assurance that products or technologies developed by others will not
render Intraco's services noncompetitive or obsolete. Intraco's failure to
address these developments could have a material adverse effect on Intraco's
operating results and financial condition.
Material Amount Of Goodwill And Intangibles
If Intraco completes a significant number of acquisitions, it may be
required to record a significant amount of goodwill. Goodwill represents the
excess of cost over the fair market value of net tangible and identified
intangible assets acquired in business combinations accounted for under the
purchase method of accounting. In addition, Intraco will be required to
periodically evaluate the recoverability of goodwill by reviewing the
anticipated undiscounted future cash flows from the operations of the
acquired companies and comparing such cash flows to the carrying value of the
associated goodwill. If goodwill becomes impaired, Intraco would be required
to write down the carrying value of the goodwill and incur a related charge
to its income. A reduction in net income resulting from the amortization or
write down of goodwill could have a material and adverse impact upon the
market price of Intraco Common Stock.
Effect Of Anti-Takeover Provisions
The Intraco Board has the authority to issue up to 10,000,000 shares of
preferred stock and to determine the price, rights, preferences and
privileges of those shares without any further vote or action by Intraco
stockholders. The rights of the holders of Intraco Common Stock will be
subject to, and may be adversely affected by, the rights of the holders of
preferred stock. While Intraco has no present intention to issue shares of
preferred stock, such issuance, while providing desired flexibility in
connection with possible acquisitions or other corporate purposes, could have
the effect of delaying, deferring or preventing a change in control of Intraco
and entrenching current management. In addition, such preferred stock may have
other rights, including economic rights senior to those of the Intraco Common
Stock, and, as a result, the issuance thereof could have a material adverse
effect on the market value of the Intraco Common Stock.
A number of provisions of Intraco's Amended and Restated Certificate of
Incorporation and By-Laws and the Nevada General Corporation Law relating to
matters of corporate governance, certain rights of directors, and the
issuance of preferred stock without stockholder approval, may be deemed to
have and may have the effect of making more difficult, and thereby discourage
a merger, tender offer, proxy contest or assumption of control and change of
incumbent management, even when stockholders other than Intraco's management
or principal stockholders consider such a transaction to be in their best
interest.
Intellectual Property Rights
Intraco's success is dependent in part on methodologies used in
designing, installing and integrating computer software and systems and other
proprietary intellectual property rights. Intraco relies on a combination of
nondisclosure and other contractual arrangements and trade secret, copyright,
and trademark laws to protect their proprietary rights and the proprietary
rights of third parties, enter into confidentiality agreements with their key
employees, and limit distribution of proprietary information. There can be no
assurance that the steps taken in this regard will be adequate to deter
misappropriation of proprietary information or that Management will be able
to detect unauthorized use and take appropriate steps to enforce the
intellectual property rights.
Although Intraco believes that its services do not infringe the
intellectual property rights of others and that it has all rights necessary
to utilize the intellectual property employed in its business, Intraco is
subject to the risk of claims alleging infringement of third-party
intellectual property rights. Any such claims could require Intraco to spend
significant sums in litigation, pay damages, develop non-infringing
intellectual property, or acquire licenses to the intellectual property that
is the subject of an asserted infringement claim.
Intraco owns no trademarks or patents. Although Intraco's various dealer
agreements do not generally allow Intraco to use the trademarks and trade
names of these various manufacturers, the agreements do permit Intraco to
refer to itself as an "authorized representative" or an "authorized service
provider" of the products of those manufacturers and to use their trademarks
and trade names for marketing purposes. Intraco considers the use of these
trademarks and trade names in its marketing efforts to be important to its
business.
ITEM 3. DESCRIPTION OF PROPERTY
Intraco's corporate headquarters are located in approximately 6,800 square
feet of leased office space in Boca Raton, Florida. The lease expires in
October, 2003 and provides for annual payments ranging from $84,060 in the
first year to $98,431 in the fifth year. Intraco has two 5-year renewal
options.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of Intraco, beneficially by each person owning
more than 5% of such common shares and the directors and executive officers,
and by all officers and directors, as a group.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent of Class
Beneficial Owner (1), (2) Beneficial Ownership Outstanding
<S> <C> <C>
Jack S. Berger 8,109,000 63%
Robert G. Hildreth, Jr. 20,0000 .15%
Vestar Capital, Inc. 891,000 6.87%
All Officers and Directors
as a Group 8,129,000 63.15%
(3 persons)
</TABLE>
(1) Except as indicated, the address of each person named in the table is
c/o Intraco Systems, Inc., 3998 Florida Atlantic University Boulevard, Suite
210, Boca Raton, Florida 33431
(2) Except as otherwise indicated, the persons named in this table have sole
voting and investment power with respect to all shares of Common Stock
listed, which include shares of common stock that such persons have the right
to acquire a beneficial interest within 60 days from the date of this Report.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of Intraco are set forth below. All
directors and officers hold office for one year or until their successors
have been elected and qualified. Vacancies in the existing board are filled
by
majority vote of the remaining directors.
<TABLE>
<CAPTION>
Name Age Position (s) Held
<S> <C> <C>
Jack S. Berger 45 President, Secretary and Director
Robert Marcus 56 Chief Financial Officer and Treasurer
Carlos A. Munoz 46 Vice President of Technology Services
Robert G. Hildreth, Jr. 61 Director
</TABLE>
Jack S. Berger has been Chief Executive Officer, President, and a
Director of Intraco since its inception in 1990. Mr. Berger has over 20
years of experience in the domestic and international computer systems
industry. During this time he has been involved in systems design, production
control, domestic sales and marketing, international sales and marketing and
field service for systems installation, maintenance, both on-site and
off-site support, management and training. This combination of experiences
gives Mr. Berger a keen understanding of all aspects of the computer industry.
Robert Marcus joined Intraco in January 1999 as Chief Financial Officer
and Treasurer. Prior to this he was a partner in American Imprints, LLC, an
advertising specialty company, from 1996 to 1998, chief executive officer of
In-Store Opportunities, Inc., a marketing and display company serving major
food manufacturers, from 1991 to 1996 and Chief Financial Officer from 1988
to 1990, Chief Operating Officer and Chief Financial Officer of Pioneer
Communications Network, a publicly- traded publishing company, from 1985 to
1988. He previously worked for the Xerox Corporation from 1972 to 1985, in
the Information Resources Group in various positions including Manager of
Business Development & Manager of Financial Planning & Analysis.
Carlos Munoz joined Intraco in 1998 as Vice President of Engineering
Services and oversees project management and engineering personnel. He is a
senior level systems and design engineer with a broad base of experience.
Prior to joining Intraco he was with Digital/Compaq since 1980, most recently
as the NT Server Technical Marketing Manager. He was responsible for
providing high level support for sales campaigns, project management, PC
Server business, product marketing and training for WNT business on Intel and
Alpha. He was also responsible for new Intel and Alpha product line
promotions and projects. He coordinated Benchmarks, Demos, Events and
Product Presentations in the US, Latin America, Central America and the
Caribbean with Oracle, Novell, and Microsoft and promoted NT/E, MS Clusters
Digital Clusters, Oracle Failsafe and Network Management Tools. Mr. Munoz has
developed business plans and marketing strategies while interfacing with
Product Managers for information of forecast, margins and discounts of new
products. He has certifications with Microsoft MCSE, Novell CNE,
DIGITAL/COMPAQ (VMS, PathWorks, Networks, Servers, and Clusters). He has
First Class FCC and Electrician licenses.
Robert G. Hildreth, Jr. has been a director since May 1999. He is
currently president of Hildreth Associates, a consulting firm, and was
formerly the international director of the law firm of LeBouef, Lamb, Leiby &
McRae, a senior utility advisor to Goldman Sachs Co., a Managing Director of
Investment Banking for Merrill Lynch and a director of Merrill Lynch
International Bank in London.
ITEM 6. EXECUTIVE COMPENSATION
Summary Compensations Table
The following table sets forth information concerning compensation for
1996-1998 received by the Chief Executive Officer (the "CEO").
<TABLE>
<CAPTION>
Long
Term Annual Compensation
Compensation
Securities
Name and Fiscal Other Annual Underlying
Principal Position Year Salary Bonus Compensation Options/SARs
<S> <C> <C> <C> <C> <C>
Jack S. Berger, Pres. 1998 $137,800 -0- -0- -0-
Jack S. Berger, Pres. 1997 $ 99,900 -0- -0- -0-
Jack S. Berger, Pres. 1996 $ 91,500 -0- -0- -0-
</TABLE>
Compensation of Directors
Non-employee directors of Intraco do not receive cash compensation for their
services. Mr. Hildreth was granted options to purchase 20,000 shares of
common stock at an exercise price of $.25 in October 1998.
Employment Agreements
Intraco entered into a three-year employment agreement with Jack S. Berger,
effective as of January 1, 1998, pursuant to which he serves as Intraco's
president, secretary, and treasurer. The agreement provides for an annual
salary of $137,800, payable in installments according to Intraco's regular
payroll schedule. The base salary shall be adjusted at the end of each year
of employment at the discretion of the board of directors.
The agreement also provides that Mr. Berger's employment may be terminated at
Intraco's discretion during the initial term, provided that Intraco shall pay
Mr. Berger an amount equal to payment at his base salary rate for the
remaining period of the initial term, plus an amount equal to 50% of his base
salary. In the event of such termination, Mr. Berger is not entitled to any
incentive salary payment of any other compensation then in effect, prorated
or otherwise. At its discretion, Intraco may also terminate Mr. Berger any
time after the initial term, provided that in such case Mr. Berger shall be
paid 50% of his then applicable base salary. In the event of such
termination, Mr. Berger shall not be entitled to receive any incentive salary
payment or any other compensation then in effect, prorated or otherwise.
The agreement may also be terminated by Mr. Berger at his discretion by
providing at least 30 days prior written notice to Intraco, in which case
Intraco may immediately relieve Mr. Berger of all duties and immediately
terminate the agreement, provided that Intraco shall pay Mr. Berger at the
then applicable base salary rate to the termination date included in Mr.
Berger's original termination notice.
In the event that Mr. Berger is in breach of any material obligation owed to
Intraco, habitually neglects the duties to be performed under the agreement,
engages in any conduct which is dishonest, damages the reputation or standing
of Intraco, or is convicted of any criminal act or engages in any act of
moral turpitude, then Company may terminate the agreement upon five days
notice to Mr. Berger. In the event of such termination, Mr. Berger shall be
paid only at the then applicable base salary rate up to and including the date
of the termination, and shall not be paid any incentive salary payments or
other compensation, prorated or otherwise.
Intraco entered into a three-year employment agreement with Robert Marcus,
effective as of January 18, 1999, pursuant to which he serves as Intraco's
Chief Financial Officer. The agreement provides for a base salary of $84,000
during the first year. Upon the first anniversary of the consummation of
this agreement, the compensation will be reviewed and raised to a salary base
of $10,000 per month provided that Intraco has grown to an annual run rate of
$15,000,000 gross revenues and a profitability of at least 8% net before
taxes measured over the average of the preceding 90 days of operations.
Further increases will be at the discretion of the board of directors.
The agreement provides that Mr. Marcus's employment may be terminated at
Intraco's discretion during the initial term, provided that Intraco shall pay
Mr. Marcus an amount equal to payment at his base salary rate for the
remaining period of the initial term. In the event of such termination, Mr.
Marcus shall not be entitled to any incentive salary payment of any other
compensation then in effect, prorated or otherwise. The agreement may also
be terminated by Mr. Marcus at his discretion, according to the same terms
and conditions applicable to Mr. Berger, described above.
In the event that Mr. Marcus is in breach of any material obligation owed to
Intraco, habitually neglects the duties to be performed under the agreement,
engages in any conduct which is dishonest, damages the reputation or standing
of Intraco, or is convicted of any criminal act or engages in any act of
moral turpitude, Intraco may terminate the agreement upon the same terms and
conditions applicable to Mr. Berger, as described above.
In recognition of the potential value of Mr. Marcus to Intraco and to induce
him to forego other employment opportunities, Intraco agreed to issue to Mr.
Marcus an option to purchase 200,000 shares of Intraco common stock. The
option to purchase 100,000 shares is exercisable by Mr. Marcus on January
18th of the years 2000 and 2001, at a purchase price of $.25 per share, and
expires January 18, 2004.
Intraco entered into an employment agreement with Carlos Munoz, effective as
of January 4, 1998, through December 31, 1999, pursuant to which he serves as
Intraco's Vice-President of Technology Services. The agreement provides for
a base rate of $75,000 per annum effective July 1, 1999, with an increase to
$80,000 per annum effective October 1, 1999.
Compensation Committee Interlocks and Insider Participation
Intraco had no compensation committee during 1998. Intraco anticipates
forming and implementing a compensation committee during 1999.
Stock Option Plan
Intraco's stock option plan currently authorizes the award of up to 2,000,000
shares of common stock in the form of stock options As of June 1, 1999, stock
options to purchase 1,127,500 shares of common stock were outstanding under
the plan. Accordingly, 872,500 shares of common stock are available for
future awards under the plan. The purpose of the plan is to enable Intraco
to attract and retain qualified and competent employees and to enable such
persons to participate in the long-term success and growth of Intraco by
giving them an equity interest in Intraco, and to enable Intraco to pay all
or part of the compensation of the directors of Intraco other than a director
who is an officer or employee of Intraco, and to provide consultants and
advisors with options to purchase shares of Intraco's common stock, thereby
increasing the proprietary interest in Intraco.
All employees of Intraco are eligible to be granted awards under the plan.
Consultants of and advisors to Intraco are eligible to be granted awards
under the plan if their services are of a continuing nature or otherwise
contribute to the long-term success and growth of Intraco.
The participants under the plan shall be selected from time to time by the
board of directors, or if constituted by the board of directors, by the
compensation committee, in its sole discretion, from among those eligible.
In granting options, the compensation committee considers current levels of
compensation, the need to provide incentives to particular employees, past
performance, comparison to employees at comparable companies holding similar
positions and Intraco's overall performance.
The plan is administered by the compensation committee, currently the board
of directors or such other committee of directors as the board shall
designate. The committee makes all decisions or determinations by either a
majority vote of its members at a meeting or by the unanimous written approval
of its members. The committee may adopt, alter or repeal any administrative
rules, guidelines and practices for carrying out the purposes of the plan.
The committee has the right to determine, among other things, the persons to
whom awards are granted, the terms and conditions of any awards granted, the
number of shares of common stock covered by the awards, the exercise price of
options and the term thereof.
The exercise price, term and exercise period of each stock option shall be
fixed by the committee at the time of grant. Notwithstanding the fixed
option price, no incentive stock option shall (i) have an option price which
is less than 100% of the fair market value of the common stock on the date of
the award of the stock option and, in the case of an Incentive Stock Option
granted to a 10% shareholder, the per share exercise price will not be less
than 110% of the fair market value, (ii) be exercisable more than ten years
after the date such incentive stock option is awarded, or (iii) be awarded
more than ten years after the plan is adopted by the board.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From time to time, Intraco has loaned funds to and sold products to
Intraco, Ltd., which is owned by Jack Berger, Intraco's president. In 1997
Intraco sold $216,000 and received cash payments of $82,590 and in 1998 sold
$235,255 and received cash payments of $199,126. The remaining $123,059 was
converted in a note receivable bearing interest at 6% per annum and payable
in 36 monthly installments. This note is current.
In May 1997, Intraco entered into a consulting agreement with Vestar
Capital Corporation pursuant to which Vestar provides organizational and
strategic planning services. Vestar has assisted Intraco with an internal
reorganization in 1998 and assisted in the identification of potential
acquisitions. The compensation under this agreement provided for monthly fees
of $3,000 through February 1998, and $1,650 per week thereafter. Vestar was
also issued 891,000 shares of common stock, which represented 9.9% of the
then-outstanding shares, and had the right to be issued warrants to maintain
its 9.9% interest for all issuances of capital stock until May 2000 as an
anti-dilution provision. During March 1999, Intraco issued to Vestar
warrants to purchase 150,000 shares of common stock at $0.25 per share in
exchange for the cancellation of the anti-dilution clause of its 1997
agreement.
In April 1999, Intraco completed an exchange agreement with Custom Touch
Electronics, Inc. ("CTE"), a Nevada corporation with no material operations
whose common stock traded on the OTC Bulletin Board, pursuant to which all
outstanding shares of Intraco capital stock were exchanged for 10,531,500 CTE
shares. The prior shareholders and promoters of CTE hold 2,429,489 shares and
the Intraco shareholders at the time of the exchange hold 10,531,500 shares.
As a result, Intraco Systems became a wholly-owned subsidiary of CTE and CTE
changed its name to Intraco Systems, Inc. A total of 1,487,298 shares were
issued to Jensen Services and Associates for services associated with the
exchange agreement.
In April 1999, Intraco entered into an agreement with H&J Investments to sell
on its behalf 866,000 shares of Common Stock at $1.00 per share to non-U.S.
investors. H&J issued to Intraco a 12-month note in the principal amount of
$866,000, of which $325,000 has been paid as of August 1, 1999.
ITEM 8. DESCRIPTION OF SECURITIES
Intraco's authorized capital stock consists of 100,000,000 shares of common
stock, par value $0.001 per share, 12,960,989 shares of which are issued and
outstanding. The outstanding shares of Common Stock are fully paid and
non-assessable. Intraco is further authorized to issue up to 10,000,000
shares of "blank check preferred stock," par value $0.001 per share, 748,500
shares of which are issued and outstanding as of the date hereof.
Common Stock
The holders of Common Stock are entitled to one vote per share for the
election of directors and with respect to all other matters submitted to a
vote of stockholders. Shares of Common Stock do not have cumulative voting
rights, which means that the holders of more than 50% of such shares voting
for the election of directors can elect 100% of the directors if they choose
to do so and, in such event, the holders of the remaining shares so voting
will not be able to elect any directors. Current holders of Intraco's Common
Stock, will have majority voting control. As a result, such persons will be
in the position to effectively control the affairs of Intraco.
Upon any liquidation, dissolution or winding-up of Intraco, the assets of
Intraco, after the payment of Company debts and liabilities and any
liquidation preferences of, and unpaid dividends on, any class of preferred
stock which may then be outstanding, if at all, will be distributed pro-rata
to the holders of the Common Stock. The holders of the Common Stock do not
have preemptive rights to subscribe for any securities of Intraco and have no
right to require Intraco to redeem or purchase their shares.
Holders of Intraco's Common Stock are entitled to receive such dividends as
the board of directors may from time to time declare to be paid in accordance
with Nevada law and if Intraco has sufficient surplus or net earnings.
Intraco has never paid cash dividends. Intraco seeks growth and expansion of
its business through the reinvestment of profits, if any, and does not
anticipate that it will pay dividends in the foreseeable future.
Intraco may issue substantial additional shares of its Common Stock in the
future for such valid corporate purposes, as management may, in its sole
discretion, determine, which would then cause substantial dilution to
Intraco's then Common Stockholders.
Preferred Stock
Intraco's Board of Directors are authorized to issue such preferred stock in
one or more series and to fix the voting powers and the designations,
preferences and relative, participating, optional or other rights and
restrictions thereof. Accordingly, Intraco may issue one or more series of
preferred stock in the future that will have preference over its Common Stock
with respect to the payment of dividends and upon its liquidation,
dissolution or winding up or have voting or conversion rights which could
adversely affect the voting power and percentage ownership of the holders of
the Common Stock.
Intraco has designated 10,000,000 shares of Preferred Stock as Series A
Convertible Redeemable Preferred Stock, of which 748,500 shares are currently
outstanding. Each share is convertible into one share of Common Stock,
subject to adjustment in certain circumstances. Each share of Series A
Preferred Stock is entitled to receive a cumulative dividend of 7% per annum,
payable quarterly. Each share has a liquidation value of $1.00. The shares
may be redeemed at Intraco's option at any time for $1.00 per share. Each
share of Preferred Stock is entitled to one vote per share, and the Series A
Preferred Stock will vote as a class with the Common Stock except as required
by law.
Warrants
Intraco has issued warrants to purchase 150,000 shares of common stock at
$0.25 per share to Vestar Capital Corporation which represent all currently
issued warrants.
PART II
ITEM 1. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
(A) MARKET INFORMATION
Intraco's Common Stock has been listed for trading on the OTC Bulletin Board
under the symbol "INSY" since April 29, 1999. Intraco does not believe that
there was any trading activity in the CTE Common Stock in 1997 and 1998. The
following table shows the high and low bid prices for the Common Stock during
the period from April 29 , 1999 (the date of initial quotation on the OTC
Bulletin Board) through June 30, 1999. Intraco believes that these quotations
reflect inter-dealer prices, without retail mark- up, mark-down or
commission, and may not represent actual transactions.
<TABLE>
<CAPTION>
<S> <C> <C>
HIGH LOW
April 29 through June 30, 1999 $7.75 $1.50
July 1 through August 5, 1999 $5.00 $1.125
</TABLE>
(B) HOLDERS
At June 30, 1999, there were approximately 365 holders of record of
Intraco's common stock. Intraco believes the number of beneficial owners of
its common stock is in excess of 360. There were 63 holders of Series A
Preferred Stock.
(C) DIVIDENDS
Intraco has paid $1,092 of dividends on the Series A Preferred Stock in
1999. Intraco has not paid dividends on its common stock and does not intend
to pay dividends for the foreseeable future. Intraco intends to retain
earnings, if any, to finance the development and expansion of its business.
Payment of dividends in the future will depend, among other things, upon
Intraco's ability to generate earnings, its need for capital and its overall
financial condition. As part of the Preferred Stock sold during 1999, Intraco
created a capital pool to assure investors of dividend payments during the
first year regardless of profitability or other circumstances.
ITEM 2. LEGAL PROCEEDINGS
Intraco is not a party to any legal proceedings which individually or in the
aggregate, is believed to be material to Intraco's business.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements with accountants on accounting
or financial disclosure matters.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
In November 1998, Intraco sold an aggregate of 665,,200 shares of Common
Stock for gross proceeds of $166,300 to 33 accredited investors in an
offering exempt from registration pursuant to Rule 504 promulgated pursuant to
the Securities Act of 1933. From December 1998 through April, 1999, Intraco
sold an aggregate of 748,500 shares of Series A Preferred Stock for gross
proceeds of $748,500 to 63 accredited investors in an offering exempt from
registration pursuant to Rule 506 and Regulation S promulgated pursuant to the
Securities Act of 1933. Primex Securities, Inc. acted as placement agent and
received $97,305 for commissions.
In April 1999, Intraco entered into an agreement with H&J Investments to sell
on its behalf 866,300 shares of Common Stock at $1.00 per share to non-U.S.
investors. H&J issued to Intraco a 12-month note in the principal amount of
$866,300, of which $300,000 has been paid as of July 31, 1999.
In May 1997 Intraco issued 891,000 shares to Vestar Capital in exchange for
services pursuant to a consulting agreement. In April 1999, in connection
with the transaction pursuant to which Intraco became a subsidiary of CTE, an
aggregate of 1,487,298 shares of Common Stock was issued to Jensen Services
and Associates for services rendered in connection with the transaction.
This transaction was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933.
In 1996, CTE issued an aggregate of 3,600,000 shares of Common Stock for
services to Terry Nish (3,000,000) and Duane Ford (600,000) and 10,000,000
shares for cash at a purchase price of $.001 per share.
In 1997, CTE issued an aggregate of 5,000,000 shares of Common Stock for
services to Terry Nish.
In 1998, CTE issued an aggregate of 5,200,000 shares of common stock for
services to Terry Nish (4,000,000) and Cecil McCray (1,200,000).
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Intraco may agree to the terms and conditions upon which any director,
officer, employee or agent accepts an office or position and in its By-laws,
by contract or in any other manner may agree to indemnify and protect any
director, officer, employee or agent of Intraco, or any person who serves at
the request of Intraco as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, to the fullest extent permitted by the Nevada Revised
Statutes (including, without limitation, the statutes, case law and principles
of equity) of the State of Nevada. If the NRS (including without limitation,
the statutes, case law or principles of equity, as the case may be) of the
State of Nevada are amended or changed to permit or authorize broader rights
of indemnification to any of the persons referred to in the immediately
preceding sentence, then Intraco shall be automatically authorized to agree
to indemnify such respective persons to the fullest extent permitted or
authorized by such law, as so amended or changed, without the need for
amendment or modification of the Articles of Intraco and without further
action by the Directors or stockholders of Intraco.
Without limiting the generality of the foregoing provision of this item, to
the fullest extent permitted or authorized by the NRS as now in effect and as
the same may from time to time hereafter be amended, no director of Intraco
shall be personally liable to Intraco or to its stockholders for monetary
damages for breach of fiduciary duty as a director. Any repeal or
modification of the immediately preceding sentence shall not adversely affect
any right or protection of a director of Intraco existing hereunder with
respect to any act or omission occurring prior to or at the time of such
repeal or modification.
INTRACO SYSTEMS, INC.
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
TABLE OF CONTENTS
Independent Auditor's Report
Financial Statements:
Balance Sheets as of December 31, 1998 and 1997,
and Unaudited at April 30, 1999 and 1998 2-3
Statements of Operations for the Years Ended December 31, 1998
and 1997, and Unaudited for the Four Months Ended April 30, 1999 and
1998 4
Statements of Changes in Stockholders' Deficit for the Years Ended
December 31, 1998 and 1997, and Unaudited for the Four Months
Ended April 30, 1999 and 1998 5
Statements of Cash Flows for the Years Ended December 31, 1998
and 1997, and Unaudited for the Four Months Ended April 30, 1999 and
1998 6
Notes to Financial Statements 7-14
DASZKAL, BOLTON, MANELA, DEVLIN & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
A PARTNERSHIP OF PROFESSIONAL ASSOCIATIONS
2401 N.W. BOCA RATON BOULEVARD, SUITE 100, BOCA RATON, FLORIDA 33431
TELEPHONE (561) 367-1040 FAX (561) 750-3236
JEFFERY A. BOLTON, CPA, P.A. MEMBER OF THE AMERICAN INSTITUTE
MICHAEL I. DASZKAL, CPA, P.A. OF CERTIFIED PUBLIC ACCOUNTANTS
ROBERT A. MANELA, CPA, P.A.
TIMOTHY R. DEVLIN, CPA, P.A.
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Intraco Systems, Inc.
We have audited the accompanying balance sheets of Intraco Systems, Inc., as
of December 31, 1998 and 1997, the related statements of operations, changes
in stockholders' deficit and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the 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 audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Intraco Systems, Inc., as of
December 31, 1998 and 1997, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted
accounting principles.
Boca Raton, Florida
February 26, 1999, except for
Notes 12 and 13 as to which the date is
March 3, 1999
<TABLE>
<CAPTION>
INTRACO SYSTEMS, INC.
BALANCE SHEETS
ASSETS
April 30,
December 31, (Unaudited)
1998 1997 1999 1998
<S> <C> <C> <C> <C>
Current assets:
Cash $32,245 $255,034 $112,877 $ 7,680
Accounts receivable 49,900 235,627 216,133 428,221
Notes receivable - - 200,000 -
Inventory 65,840 - 115,007 -
Interest receivable - - 8,519 -
Prepaid expenses 125,945 127,265 55,809 99,758
Total current assets 273,930 617,926 708,345 535,659
Property and equipment, net 113,076 73,444 109,094 81,742
Other assets:
Due from related party 46,480 133,410 - 174,484
Note receivable -
related party 123,059 - 48,096 -
Due from shareholder 20,500 - - -
Deposits 13,819 2,708 18,064 2,708
Total other assets 203,858 136,118 66,160 177,192
Total assets $590,864 $827,488 $883,599 $794,593
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
INTRACO SYSTEMS, INC.
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' DEFICIT
April 30,
December 31, (Unaudited)
1998 1997 1999 1998
<S> <C> <C> <C> <C>
Current liabilities:
Accounts payable $332,476 $716,146 $720,289 $347,245
Deferred revenue 152,174 593,733 81,852 678,549
Accrued expenses - - 37,142 -
Customer deposits 172,195 - 10,000 -
Note payable 306,526 50,000 347,138 284,150
Due to shareholder 17,700 - - -
Total current liabilities 981,071 1,359,879 1,196,421 1,309,944
Note payable 113,686 - - -
Stockholders' deficit:
Convertible redeemable
preferred stock, $.001 par
value, 10,000,000 shares
authorized and 52,500
shares outstanding, 7%
cumulative, with a $1.00
per share preference value 53 - 749 -
Common stock, $.001 and $.001
par value 100,000,000 shares
authorized, 9,665,200 and
9,000,000 shares issued and
outstanding 9,665 9,000 12,960 9,000
Additional paid-in capital 131,797 23,822 1,244,559 23,822
Subscription receivable - - (666,300) -
Accumulated deficit (645,408) (565,213) (904,790) (548,173)
Total stockholders'
deficit (503,893) (532,391) (312,822) (515,351)
Total liabilities and
stockholders' deficit $590,864 $827,488 $883,599 $794,593
</TABLE>
See accompanying notes to financial statements
<TABLE>
<CAPTION>
INTRACO SYSTEMS, INC.
STATEMENTS OF OPERATIONS
Four months ended
Years ended April 30,
December 31, (Unaudited)
1998 1997 1999 1998
<S> <C> <C> <C> <C>
Revenues:
Systems/networks $1,248,824 $2,287,861 $ 632,925 $414,389
Service contracts 1,456,107 1,268,316 232,814 548,556
Total revenues 2,704,931 3,556,177 865,739 962,945
Cost of revenues:
Systems/networks 638,885 1,443,080 474,066 207,961
Service contracts 1,073,835 1,163,589 158,704 441,948
Total cost of revenues 1,712,720 2,606,669 632,770 649,909
Gross profit 992,211 949,508 232,969 313,036
General and
administrative 1,037,829 1,116,198 490,105 285,116
Income (loss)
from operations (45,618) (166,690) (257,136) 27,920
Interest income 2,490 1,432 8,632 1,911
Interest expense (37,067) (6,005) (10,878) (12,791)
Income (loss) before
income taxes (80,195) (171,263) (259,382) 17,040
Provision (benefit)
for income taxes - - - -
Net income (loss) $ (80,195) $ (171,263) $(259,382) $ 17,040
Net income (loss)
per share
(basic and diluted) $ (.009) $ (.019) $ (.025) $ .002
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
INTRACO SYSTEMS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
Preferred Common Add'l
Stock Stock Paid-in Subscr. Accum.
Shares Amount Shares Amount Capital Rec. Deficit Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1996
- $ - 100 $ - $ - $ - $ 32,023 $ -
Common stock split
(90,000 to 1)
- - 8,999,900 8,900 (8,900) - - -
Prior period
adjustments
- - - - - - (425,973)(425,973)
- -----------------------------------------------------------------------------
Balance at
December 31, 1996
as adjusted
- - 9,000,000 9,000 (8,900) - (393,950)(393,850)
Conversion of
shareholder note
- - - - 32,722 - - 32,722
Net loss for
the year
- - - - - - (171,263)(171,263)
- -----------------------------------------------------------------------------
Balance at
December 31, 1997
- - 9,000,000 9,000 32,822 - (565,213)(532,391)
Issuance of common
stock for cash
- - 665,200 665 165,635 - - 166,300
Costs associated
with issuance
of stock
- - - -(110,107) - - (110,107)
Issuance of
preferred stock
for cash
52,500 53 - - 52,447 - - 52,500
Net loss for
the year
- - - - - - (80,195) (80,195)
- -----------------------------------------------------------------------------
Balance at
December 31, 1998
52,500 53 9,665,200 9,665 131,797 - (645,408) (503,893)
Issuance of
common stock
- - 1,631,300 1,631 902,894 - - 904,525
Costs associated
with issuance
of stock
- - - -(202,964) - - (202,964)
Dividends paid
- - - - (1,092) - - (1,092)
Issuance of
preferred
stock
696,000 696 - - 695,304 - - 696,000
Acquisition of
assets of CTE
- - 1,664,489 1,664 1,773 - - 3,437
Subscriptions
receivable
- - - - - (666,300) - (666,300)
- -----------------------------------------------------------------------------
Balance at
April 30, 1999
748,500 749 12,960,989 12,960 1,244,559(666,300)(904,790)(312,822)
------- --- ---------- ------ --------- ------- ------- -------
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
INTRACO SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
Four months ended
Years ended April 30,
December 31, (Unaudited)
1998 1997 1999 1998
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net (loss) $ (80,195) $(171,263) $(259,382) $ 17,040
Adjustments to reconcile
net loss to net cash
provided (used) by
operating activities:
Depreciation 18,426 16,099 6,401 5,529
Changes in assets
and liabilities:
(Increase) decrease in:
Inventory (65,840) - (49,167) -
Accounts receivable 185,727 (34,855) (166,233) (192,594)
Interest receivable - - (8,519) -
Note receivable -
related - - 74,963 -
Prepaid expenses 1,320 107,569 70,136 27,507
Due from related
parties (38,929) (133,410) 46,480 (41,074)
Due from Shareholder - - 2,800 -
Security deposits (11,111) - (4,245) -
Increase (decrease) in:
Accounts payable 143,236 609,544 387,813 (368,901)
Accrued expenses - - 37,142 -
Deferred revenue (441,559) 109,094 (70,322) 84,816
Customer deposits 172,195 - - (162,195)
Net cash provided (used)
by operating activities (116,730) 502,778 (94,328) (467,677)
Cash flows from investing activities:
Purchase of property
and equipment (58,058) (13,931) (2,420) (13,827)
Cash flows from financing activities:
Proceeds from issuance of
common stock 166,300 - 41,663 -
Proceeds from issuance of
preferred stock 52,500 - 696,000 -
Costs associated with
issuance of stock (110,107) - (202,964) -
Dividends paid - - (1,092) -
Repayment of long-term debt (156,694) (290,124) (73,074) -
Proceeds from long-term debt - - - 234,150
Increase stockholder loans - 1,739 - -
Costs associated with
recapitalization - - (283,153) -
Net cash provided (used)
by financing activities (48,001) (288,385) 177,380 234,150
Net increase (decrease)
in cash (222,789) 200,462 80,632 (247,354)
Cash, beginning of year 255,034 54,572 32,245 255,034
Cash, end of year $ 32,245 $255,034 $112,877 $7,680
Supplemental disclosure of cash flow information:
Interest paid $ 37,067 $ 6,005 $ 10,878 $ 12,791
Non-cash transactions affecting financing activities:
Conversion of shareholder
note into common stock $ - $ 32,722 $ - $ -
Conversion of accounts
payable to note payable $ 438,906 $ - $ - $ -
Common stock issued
for note $ - $ - $866,300 $ -
</TABLE>
See accompanying notes to financial statements.
INTRACO SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Intraco Systems, Inc., (the "Company") specializes in providing a full range
of computer solutions worldwide based on its software products, complete
systems, complex networks, and Internet solutions. These include hardware
and/or software technical services such as custom software and software
migrations, as well as technical support both on-site and remote as may be
required.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash Equivalents
The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.
Property and Equipment
Property and equipment is recorded at cost and is depreciated using the
straight-line method over their estimated useful lives.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect certain reported amounts and disclosures. Accordingly, actual
results could differ from those estimates.
Revenue Recognition
Generally, revenues from sales of products are recognized when products are
shipped unless the Company has obligations remaining under a sales or
licensing agreement, in which case revenue is either deferred until all
obligations are satisfied or recognized ratably over the term of the
contract. Revenues from sales of maintenance contracts in 1998 and 1997 were
$1,456,407 and $1,268,316, respectively.
Inventory
Inventory consists primarily of computer equipment purchased for resale, and
is stated at the lower of cost or market, with cost determined on the
first-in, first-out (FIFO) method.
Unaudited Interim Information
The information presented as of April 30, 1999 and 1998, and for the four
month periods ended April 30, 1999 and 1998, has not been audited. In the
opinion of management, the unaudited interim financial statements include all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the Company's financial position as of April 30, 1999 and
1998, and the results of its operations
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Unaudited Interim Information (Continued)
and its cash flows for the four months ended April 30, 1999 and 1998, and the
stockholders deficit for the four months ended April 30, 1999.
Earnings Per Share
Earnings per share are computed based on the weighted average number of
common shares outstanding during the year. Stock warrants and options
outstanding are common stock equivalents and are included in the calculation
of earnings per share to the extent they are dilutive using the treasury-stock
method. Basic and diluted earnings per share are the same.
NOTE 3 - PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
Property and equipment consist of the following:
<S> <C> <C>
1998 1997
Leasehold improvements $ 50,282 $ -
Equipment 111,696 103,919
Furniture and fixtures 22,260 22,260
Total property and equipment 184,238 126,179
Less: accumulated depreciation (71,162) (52,735)
Property and equipment, net $ 113,076 $ 73,444
</TABLE>
Depreciation expense for the years ended December 31, 1998 and 1997, was
$18,426 and $16,099, respectively.
NOTE 4 - RELATED PARTY TRANSACTIONS
The Company is affiliated with various companies through common ownership.
During the years ended December 31, 1998 and 1997, the Company had the
following transactions with a related party (Intraco, Ltd.):
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
Due from related party - beginning of year $ 133,410 $ -
Sales to related party 235,255 216,000
Cash received (199,126) (82,590)
Less: Amount converted to note receivable
(Due in 36 monthly installments, with
an interest rate of 6%) 123,059 -
Due from related party - end of year $ 46,480 $ 133,410
</TABLE>
The Company paid a minority shareholder of the Company $90,000 during 1998
pursuant to a consulting agreement.
NOTE 5 - OPERATING LEASES
The Company leases facilities and equipment under operating leases, with
terms from three to five years, payable in monthly installments. Total lease
expense for the years ended December 31, 1998 and 1997, was $67,860 and
$45,711, respectively.
Future minimum lease payments for leases with a term in excess of one year
are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Years ended
December 31,
1999 $157,000
2000 161,000
2001 151,000
2002 130,000
2003 127,000
</TABLE>
NOTE 6 - LONG-TERM DEBT
At December 31, 1998 and 1997, long-term debt consists of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
Note payable, due on demand,
with an interest rate of 13.5%,
with remaining balance due
January 31, 1998. $ - $ 50,000
Note payable due in monthly
installments ranging from
$12,000 to $39,000 plus interest
at 10%, with remaining balances
due March 2000. Secured by all
assets of the Company. 420,212 -
Less current portion 306,526 50,000
$ 113,686 $
- -
</TABLE>
<TABLE>
<CAPTION>
Aggregate maturities of long-term debt are as follows:
<S> <C> <C>
1999 $306,526
2000 113,686
Total $420,212
</TABLE>
Total interest expense for the years ended December 31, 1998 and 1997, was
approximately $37,000 and $6,000, respectively.
NOTE 7 - CONCENTRATION OF CREDIT RISK
The Company maintains its cash bank deposit at various financial
institutions. Accounts at these institutions are insured by the Federal
Deposit Insurance Corporation up to $100,000 and the balance, at times, may
exceed federally insured limits. At December 31, 1998, the Company's cash
balance did not exceed the insured limit. The balance exceeded the insurance
limit by approximately $155,000 at December 31, 1997.
NOTE 8 - MAJOR CUSTOMER
Sales to one customer in 1998 and 1997, represented approximately 29% and 64%
of total sales, respectively.
NOTE 9 - PRIOR PERIOD ADJUSTMENTS
During 1997, an adjustment was made to correct the Company's revenue and
expense recognition method relating to its service contracts. In previous
years the Company recognized the revenue and expense on the cash basis. This
error was corrected and revenue and expenses are now recognized when earned
or incurred, respectively. The effect of this adjustment, when reported in
the appropriate year was to decrease stockholders' equity as reported at
December 31, 1996 by $(254,653).
The Company also adjusted the financial statement to correct the
overstatement of the capitalized software costs. During 1997, it was
determined that the capitalized software costs had no future benefit as of
December 31, 1996. The effect of this adjustment, when reported in the
appropriate year was to decrease stockholders' equity as reported at December
31, 1996 by $(171,320).
The total effect of these adjustments was to decrease the stockholders'
equity balance as reported at December 31, 1996 by $(425,973).
NOTE 10 - STOCKHOLDERS' DEFICIT AND STOCK OPTION PLAN
In August and in November 1998, the Company amended and restated the Articles
of Incorporation. The Company increased the aggregate number of shares to
60,000,000 consisting of 50,000,000 shares of common stock, par value $.001
per share and 10,000,000 shares of preferred stock, par value $.001 per
share, 7% cumulative dividend, payable quarterly starting February 1, 1999.
The preferred stock is redeemable at any time at the option of the Company at
$1.00 per share. Five years from the date of issuance or 180 days after the
effective date of the Company's initial public offering, the holders of at
least 51% of the Series A preferred stock will have one demand registration
right. The Company will be contractually required to use its best efforts to
file a registration statement and to have such registration statement become
effective.
In November of 1998, the Company commenced a Regulation D 504 stock offering
and as a result of the offering the Company issued 665,200 shares of common
stock for $166,300 or $.25 per share. Also in November of 1998, the Company
began a preferred stock offering and as a result of the offering, the Company
issued 52,500 shares of preferred stock of which 12,500 shares were issued
under Regulation D 506 and 40,000 shares under Regulation S, at $1.00 per
share which totals $52,500. Costs incurred associated with these offerings
totaled $110,000. The Company is continuing these offerings of common and
preferred stock and during the period January 1, 1999 through March 3, 1999,
raised additional capital of approximately $328,000.
Holders will have the right to convert the Series A preferred stock, in whole
or in part, at any time, or from time to time, into the common stock, par
value $0.001, of the Company. The initial conversion rate shall be on a
one-to-one basis and shall be subject to proportional stock splits, stock
dividends and reverse stock splits, and to standard weighted average
price-based anti-dilution provisions as well as specific anti-dilution
provisions with respect to any future series of preferred stock.
Stock Option Plan
Under the Company's stock option plan, 2,000,000 shares of common stock were
reserved for issuance upon exercise of options granted to directors, officers
and employees of the Company. Options issued through December 31, 1998, carry
exercise prices equal to that of the fair market value on the date of the
grant. The options vest equally over a period of two years following the
date of grant and the unexercised portion of the options expires and ceases to
be exercisable on the earlier of the tenth year after the date of the grant
or
specified date following termination of employment.
The Company has elected to account for the stock options under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees,"
and related interpretations. Accordingly, no compensation expense has been
recognized on the stock options.
Had compensation expense for the stock option plan been determined based on
the fair value of the options at the grant date consistent with the
methodology prescribed under Statement of Financial Standards No. 123,
"Accounting for Stock Based Compensation," the Company's 1998 net loss would
have increased by $6,649. The fair value of each option is estimated on the
date of grant using fair market option pricing model with the following
assumption:
<TABLE>
<CAPTION>
<S> <C> <C>
Risk-free interest rate 5.28%
Expected life (years) 10
Expected volatility n/a
Expected dividends None
Weighed average remaining contractual life 1.75 years
</TABLE>
A summary of option transactions during the years ended December 31, 1998 and
1997, is shown below:
<TABLE>
<CAPTION>
<S> <C> <C>
Weighted
Average Number of Exercise Price
Options Per Option
Outstanding at December 31, 1997 - $ -
Granted 900,000 .25
Exercised - -
Forfeited (85,000) .25
Outstanding at December 31, 1998 815,000 $ .25
</TABLE>
NOTE 11 - INCOME TAXES
The provision (benefit) for income taxes is as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
Taxes currently payable $ - $ -
Deferred income tax benefit 27,485 229,897
Change in beginning valuation allowance (27,485) (229,897)
Provision (benefit) for income taxes $ - $ -
</TABLE>
Reconciliation of the Federal statutory income tax rate to the
Company's effective income tax rate is as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
Computed at the statutory rates (34%) $(27,266) $ (58,229)
Increase (decrease) resulting from:
Non-deductible expenses 2,692 678
State income taxes, net of federal income
tax benefit (2,911) (6,216)
Reinstatement of deferred tax asset at 5/7/97 - (188,554)
Reinstatement/change in deferred tax asset
valuation allowance 27,485 229,897
Other - 22,424
Tax provision (benefit) $ - $ -
</TABLE>
The components of the deferred tax asset were as follows at December 31:
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
Net operating loss carryforward $ 249,648 $ 59,519
Deferred revenue 57,263 223,422
Total deferred tax asset 306,911 282,941
Deferred tax liabilities:
Deferred costs (41,239) (46,807)
Depreciation expense (8,290) (6,237)
Net deferred tax asset 257,382 229,897
Valuation allowance:
Beginning of year (229,897) -
Decrease (increase) during year (27,485) (229,897)
Ending balance (257,382) (229,897)
Net deferred taxes $ - $ -
</TABLE>
At December 31, 1998 and 1997, the Company has unused net operating loss
carryforwards of approximately $663,000 and $158,000, respectively, expiring
primarily in 2013 and 2012, which are available for use on its future
corporate Federal and State tax returns.
NOTE 12 - SUBSEQUENT EVENTS
During the period from January 1, 1999 to March 3, 1999, the Company raised
additional capital, from stock offerings, totaling, approximately $328,000.
Unaudited
In April of 1999, CTE, a public shell, acquired all of the outstanding common
stock of the Company. For accounting purposes, the acquisition has been
treated as an acquisition of CTE by the Company and as a recapitalization of
the company. As a result of the recapitalization, the Company is now
authorized to issue 100,000,000 shares of common stock.
NOTE 13 - MANAGEMENT'S PLAN
As shown in the accompanying financial statements, the Corporation incurred a
net loss of $80,195 during the year ended December 31, 1998, and $171,263 for
the year ended December 31, 1997. The Company's current liabilities exceeded
its current assets by $707,141 and $741,953, respectively. The ability of
the Corporation to continue as a going concern is dependent on increasing
sales and obtaining additional capital and financing. The financial
statements do not include any adjustments that might be necessary if the
Corporation is unable to continue as a going concern.
Management's plan to increase sales and obtain additional capital includes
several specific actions. On the sales side, greater emphasis will be placed
on systems, web development and services as these areas have higher profit
margins and represent a market which is growing much more rapidly than the
company's traditional contract services. Management is also pursuing an
aggressive acquisition strategy which is expected to add significantly to
revenues and profits while strengthening the organization.
For capital sourcing, management will continue the private placement
offerings of common and preferred stock, which during the period from January
1, 1999 through March 3, 1999 have raised $328,000. In addition, in April
1999 the Company completed a merger with CTE, a public shell. This merger
was
accounted for as a reverse merger.
No estimate has been made should management's plan be unsuccessful.
PART III
EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Description
<S><C> <C>
EX-2 Exchange Agreement among Intraco Systems, Inc.,
Custom Touch Electronics, Inc.
EX-3.(i) Amended and Restated Certificate of Incorporation
EX-3.(ii) Bylaws
EX-10.1 Stock Option Plan
EX-10.2 Employment Agreement between Intraco and Jack Berger
EX-10.3 Employment Agreement between Intraco and Bob Marcus
EX-10.4 Employment Agreement between Intraco and Carlos Munoz
EX-10.5 Agreement for Professional Consulting Services
between Intraco and Vestar Capital
EX-10.6 Letter Agreement between Intraco and Digital
Equipment Corporation
EX-27 Financial Data Schedule
</TABLE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
INTRACO SYSTEMS, INC.
Date: August 17, 1999 By: /s/ Jack S. Berger
-------------------------
Jack S. Berger, President
AGREEMENT AND PLAN OF EXCHANGE
AGREEMENT AND PLAN OF EXCHANGE ("Agreement"), dated as of the 9th day of
April, 1999, by and between Custom Touch Electronics, Inc., a Nevada
corporation ("CTE"), and lntraco Systems, Inc., a Florida corporation ("ISI").
Plan of Exchange
The Plan of Exchange will consist of the acquisition by statutory merger
of 100% of the issued and outstanding shares of ISI by CTE and the issuance
by CTE to ISI of a total of 12,500,000 shares of CTE's restricted common
stock, having a par value of $.001, to be issued upon and subject to the terms
and conditions of the Agreement hereinafter set forth. In addition, there
shall be issued 1,487,298 shares of CTE's restricted common stock, having a
par value of $.001, to Jensen Services and Associates for services associated
with this Agreement and Plan of Exchange.
NOW, THEREFORE, in consideration of the promises and the mutual and
dependent covenants hereinafter contained, the parties hereto represent,
warrant, covenant, and agree as follows:
ARTICLE I
1.1 Agreement to Consummate Transactions. Subject to the terms and
conditions of this Agreement, ISI and CTE agree to consummate or cause to be
consummated, the transactions contemplated by Sections 1.2 through 8.1 of
this Agreement ("Transactions"), and agree that the consummation of each of
the Transactions is conditional upon the consummation of each of the other
Transactions.
1.2 Closing. A meeting of the parties to this Agreement ("Closing")
will take place at which time certificates, letters and other documents
required by this Agreement will be delivered or exchanged. The Closing will
take place at the office of CTE as soon as practicable after the parties have
obtained the required shareholder approval, and this Agreement shall be
declared effective as of April 5, 1999.
1.3 Consummation of Transactions. If at the Closing no condition
exists which would permit any of the parties to terminate this Agreement, or
a condition then exists and the party entitled to terminate because of that
condition elects not to do so, then and thereupon CTE and ISI will exchange
the documents necessary to effect the reorganization contemplated by this
agreement.
1.4 Acquisition of Shares. Upon, and subject to the terms and
conditions herein stated, CTE shall acquire from ISI's shareholders and ISI's
shareholders shall transfer, assign and convey to CTE 100% of the issued and
outstanding shares of common stock of ISI.
1.5 Consideration, Issuance and Delivery of Stock. In consideration
of, and in exchange for the foregoing transfer, assignment and conveyance,
and subject to compliance by ISI with its warranties and undertakings
contained herein. CTE shall:
A. At Closing, issue and deliver to ISI 12,500,000 shares of
CTE's common stock in exchange for all of the issued and outstanding common
shares of ISI. The stock will be issued on a restricted and investment basis,
which upon such issuance and delivery, shall be fully paid and non-assessable.
B. Place on each certificate representing their shares of CTE a
standard form investment legend stating that the shares are not registered
under the Securities Act of 1933 and cannot be sold, hypothecated, or
transferred without registration or under an appropriate exemption from
registration. CTE has not represented, directly or indirectly, that it will
take any measure to make the exemption available.
1.6 Limitation of Subsequent Corporate Actions. It is expressly
understood and agreed that ISI, CTE and their affiliates, will not effect a
reverse split of the Company's common stock after the Reorganization for a
period of eighteen months unless it is determined that it is necessary for
additional funding. In no case shall the reverse split be greater than 3 to
1. If a reverse split is effected Jensen Services and Associates shall retain
the same interest as was held prior to the reverse split. It is also agreed
that reverse splits of the Company's common stock shall be discussed with
Jensen and Associates prior to implementation. Additionally, the assets of
ISI shall remain in place as part of the business operations of ISI for a
period of one year, barring written waiver by the parties.
1.7 As of April 5, 1999 the 506 private placement currently being
offered by ISI will be discontinued until after the Reorganization is
complete.
1.8 Exchange of shares for ISI preferred shareholders and option
holders shall be completed after the Reorganization by ISI.
ARTICLE II
Representations and Warranties of ISI
ISI represents and warrants to CTE as follows:
2.1 Organization and Good Standing. ISI is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Florida and has the corporate power to carry on its business as it is now
being conducted. Copies of ISI's Articles of Incorporation, as amended or as
restated, and By-laws, both as presently in effect, are complete and correct.
2.2 Capitalization. ISI 's authorized capital stock consists of
50,000,000 shares of common stock having $.001 par value per share, of which
10,531,500 shares are presently issued and outstanding, and 10,000,000 shares
of preferred stock, $.001 par value, of which 818,500 shares are presently
issued and outstanding, all of which is held by the Shareholders. There are
warrants for the purchase of 150,000 shares and 1,000,000 employee stock
options granted as per the ISI ESOP. No pre-emptive rights are conferred by
the class of stock, and there are no outstanding calls, commitments,
convertible securities or demands, other than those listed above, of any
character relating to the capital stock of ISI, whether issued or unissued.
2.3 Authority. ISI has the corporate power to enter into this
Agreement and carry out the transactions contemplated hereby. The execution,
delivery, and performance of the Agreement by ISI will have been duly and
validly authorized and adopted by CTE Board of Directors, this Agreement and
the consummation of the Plan of Exchange will have been duly and validly
authorized and approved by all necessary corporate action on the part of ISI,
and this Agreement will be legally binding, and enforceable against ISI in
accordance with its terms, subject to applicable bankruptcy, reorganization,
insolvency, moratorium and other laws affecting creditors' rights generally
from time to time in effect and subject to principles of equity, which may
affect the availability of remedies with respect thereto. To the best
knowledge of ISI, the entering into this Agreement by ISI does not, and the
consummation by ISI of the Transactions contemplated by this Agreement will
not violate the provisions of (i) any applicable laws of the United States or
any other state or jurisdiction in which ISI does business; (ii) ISI's
Certificate of Incorporation or By-Laws-, or (iii) any judgment or decree
applicable to ISI subject to the obtaining of ISI of the permits, approvals,
consents, authorizations and modifications referred to in Section 6.3 hereof,
no default or breach will occur in any material respect by virtue of the Plan
of Exchange under any material contract, agreement, mortgage, indenture or
other instrument, which ISI is a part or by which it is bound, and no
material right of ISI under any such existing contract, agreement, mortgage,
indenture or other instrument will be extinguished by virtue of the Agreement.
2.4 Rights, Titles and Interests. The shares to be acquired by CTE
represent 100% interests in all the assets and business of ISI. ISI will not
withhold or withdraw any of the same without prior written approval of CTE.
2.5 Financial Statements. ISI's audited financial report dated
December 31, 1998 listed as Exhibit A, are attached hereto and made a part
hereof.
2.6 Absence of Certain Changes of Events. Except as permitted or
contemplated by this Agreement, or disclosed to CTE, there has not been:
A. Any material adverse change in the assets (including any
such change caused by damage, destruction or loss, whether or not insured),
the results of operations (including any change caused by discontinued
operations), or the business prospects or conditions, financial or otherwise
of ISI; not to the knowledge of ISI has any event or condition occurred which
may result in such change;
B. Any declaration, setting aside or payment of any dividend or
other distribution in respect to ISI Common Stock;
C. Any repurchase or redemption by ISI of any ISI Common Stock; or
D. Any sale or transfer by ISI of any material, tangible asset,
or any mortgage, pledge, lease or lien, charge or encumbrance on any assets,
or any such lease or real property, machinery, equipment or buildings, other
than in the ordinary course of business.
2.7 Litigation. Except as disclosed to CTE, there are no judicial
or administrative actions, suits, proceeding or investigations pending, or,
to the best knowledge and belief of ISI threatened against which might result
in any material adverse change in the condition (financial or other),
properties, assets, business, operations or prospects of ISI or in any
material liability on the part of ISI or which question the validity of this
Agreement or of any action taken or to be taken in connection herewith. There
are no citations, fines or penalties heretofore asserted against ISI under any
federal, state or local law relating to air or water pollution, or other
environmental protection matters, or relating to occupational health or
safety.
2.8 Disclosing of Material Information. Neither this Agreement nor
any exhibit hereto contains any untrue statement or material fact, or admits
to state a material fact necessary to make the statements herein or therein
not misleading, relating to the business or affairs of ISI. There is no fact
known to ISI which materially adversely affects the business, condition
(financial or otherwise) or prospects of ISI which has not been set further
herein or disclosed to CTE.
2.9 Liabilities. There are no material liabilities of ISI, whether
accrued, absolute, contingent or otherwise, which arose or relate to any
transaction of ISI, its agents or servants occurring prior to the statement
date, which are not disclosed by or reflected in said financial statements,
except as disclosed in the Disclosure Statement. There are no such
liabilities of ISI which have arisen or relate to any transaction of ISI, its
agents or servants, occurring since that statement date, other than normal
liabilities incurred in the normal conduct of the business of ISI, and none
of which have a material adverse effect on the business or financial
condition of ISI, except as disclosed in the Disclosure Statement. As of the
date hereof, there are no known circumstances, conditions, happenings, events
or arrangements, contractual or otherwise, which may hereafter give rise to
liabilities, except in the normal course of business of ISI, except as
disclosed in the Disclosure Statement.
2.10 Taxes. All federal, province, county and local income, ad
valorem, excise, profits, franchise, occupation, property, sales, use, gross
receipts and other taxes (including any interest or penalties relating
thereto) and assessments which are due and payable have been duly reported,
fully paid and discharged as reported by ISI, and there are no unpaid taxes
which are, or could become a lien on the properties and assets of ISI, except
as provided for in the financial statements of their date, or have been
incurred in the normal course of business of ISI since that date. All tax
returns of any kind required to be filed have been filed and the taxes paid
or accrued.
2.11 Accuracy of All Statements Made by ISI. No representation or
warranty by ISI in this Agreement, nor any statement certificate, schedule or
exhibit hereto furnished or to be furnished by or on behalf of ISI pursuant
to this Agreement, nor any document or certificate delivered to CTE pursuant
to this Agreement or in connection with actions contemplated hereby, contains
or shall contain any untrue statement of material fact or omits or shall omit
a material fact necessary to make the statement contained therein not
misleading.
ARTICLE III
Representations and Warranties of CTE
CTE represents and warrants to ISI as follows;
3.1 Organization and Good Standing of CTE. CTE is a corporation
duly organized, existing and of good standing under the laws of the State of
Nevada with full corporate power to carry on its business as it is now being
conducted. CTE has qualified as a foreign corporation to do business and is
in good standing in each jurisdiction in which the character and location of
the properties owned or leased by it, or the nature of the business
transacted by it, makes such qualification necessary. Copies of CTE's
Articles of Incorporation, as amended, and By-Laws, both as presently in
effect, are complete and correct.
3.2 Capitalization. CTE's authorized capital stock consists of
100,000,000 shares of common stock, par value of $.001, of which 2,429,989
shares, are issued and outstanding, fully paid and non-assessable. There are
no outstanding warrants to purchase CTE common stock. No pre-emptive rights
are conferred by the class of stock, and there are no outstanding calls,
commitments, convertible securities or demands, other than those listed
above, of any character relating to the capital stock of CTE, whether issued
or unissued. Investment shares of CTE common stock to be issued in
connection
with this Agreement, when so issued will be duly authorized, validly issued,
fully paid, and non-assessable.
3.3 Authority. CTE has the corporate power to enter into this
Agreement and to carry out the transactions contemplated hereby. The
execution, delivery and performance of this Agreement by CTE has been duly
and validly authorized and approved by CTE's Board of Directors. Otherwise,
the entering into of this Agreement by CTE does not, and the consummation by
ISI and CTE of the transactions contemplated hereby, will not violate the
provisions of (i) any applicable laws of the State of Nevada, or any other
jurisdiction in which CTE does business; (ii) CTE's Articles of
Incorporation; as amended, or its By-Laws; or (iii) any judgement or decree
applicable to subject to the obtaining of CTE approvals, consents,
authorizations and modifications referred to in Sections 6.3 hereof, no
default or breach will occur in any material respect by virtue of this
Agreement under any material contract mortgage, agreement, indenture or other
instrument applicable to CTE and no rights of CTE under any existing contract,
agreement, mortgage, indenture or other instrument will be extinguished by
virtue of the Agreement.
3.4 Financial Statements. CTE's audited financial report dated
December 31, 1998, listed as Exhibit "B" attached hereto and made a part
hereof, is true and complete in all material respects, such having been
prepared in accordance with generally accepted accounting principles
consistently followed through the periods covered by such statements, and
present fairly, in accordance with generally accepted accounting principles,
the financial condition of CTE and the results of its operations for the
period covered thereby. Excepting a one (1) for Five Hundred (500) share
reverse split of the outstanding shares of CTI as reported in December 31,
1998 balance sheet there has not been, ince the date of said Report, any
material change in the financial condition, properties, assets, liabilities,
business or operations of CTE which has been, or to the best knowledge of
CTE, is likely to be materially adverse with respect to CTE. As soon as
practicable after consummation of the transaction contemplated by this
Agreement CTE will prepare audited consolidated financial statements, and
will update and file any necessary reports and filings required by applicable
Rules and Regulations of the Securities And Exchange Commission as required.
3.5 Absence of Certain Changes of Events. Since the date of CTE's
last financial report there have not been:
A. Any material adverse change in the assets (including any such
change caused by damage, destruction or loss, whether or not insured). The
results of operations (including any change caused by discontinued
operations) or the business prospects or condition, financial or otherwise of
CTE, nor, to the knowledge of CTE, has any event or condition occurred which
may result in such change;
B. Until the date of Closing, CTE will conduct its business in
the ordinary and usual course; and prior to the time of Closing, it will not,
without the written consent of ISI dispose of any property, except in the
regular, ordinary course of business, declare or pay any dividends, or make
any other distribution to the shareholders, or issue or purchase any stock.
3.6 Litigation. There are no judicial or administrative actions,
suits of a material nature, proceedings or investigations pending, or
threatened against CTE which might result in any material adverse change in
the condition (financial or other), properties, assets, business, operations
or prospects of CTE or in any material liability on the part of CTE or which
question the validity of the Agreement or of any action taken or to be taken
in connections herewith. There are no citations, fines or penalties
heretofore asserted against CTE under any federal, state or local law
relating to air or water pollution, or other environmental protection matters,
or relating to occupational health or safety.
3.7 Disclosing of Material Information. Neither this Agreement nor
any exhibit hereto contains any untrue statement of material fact, or admits
to state a material fact necessary to make the statement herein or therein
not misleading, relating to the business or affairs of to the best knowledge
and belief of its officers and directors. There is no fact known to CTE
which materially adversely affects the business, condition (financial or
otherwise) or prospects of CTE which has not been set forth herein or otherwise
disclosed to ISI and its legal counsel.
3.8 Liabilities. There are no material liabilities of CTE, whether
accrued, absolute, contingent or otherwise, which arose or relate to any
transaction of CTE, its agents or servants occurring prior to the statement
date, which are not disclosed by or reflected in said financial statements,
except as disclosed in the Disclosure Statement. There are no such
liabilities of CTE which have arisen or relate to any transaction of CTE, its
agents or servants, occurring since that statement date, other than normal
liabilities incurred in the normal conduct of the business of CTE, and none
of which have a material adverse effect on the business or financial
condition of CTE, except as disclosed in the Disclosure Statement. As of the
date hereof, there are no known circumstances, conditions, happenings, events
or arrangements, contractual or otherwise, which may hereafter give rise to
liabilities, except in the normal course of business of CTE, except as
disclosed in the Disclosure Statement.
3.9 Finders' fees. CTE has engaged the services of Jensen Services
and Associates as finder and advisor in connection with the transaction
contemplated hereby and has delivered to Jersen Services and Associates, as
consideration for those services, 1,487,298 of its restricted common shares.
3.10 Taxes. All federal, province, county and local income, ad
valorem, excise, profits, franchise, occupation, property, sales, use, gross
receipts and other taxes (including any interest or penalties relating
thereto) and assessments which are due and payable have been duly reported,
fully paid and discharged as reported by CTE, and there are no unpaid taxes
which are, or could become a lien on the properties and assets of CTE, except
as provided for in the financial statements of their date, or have been
incurred in the normal course of business of CTE since that date. All tax
returns of any kind required to be filed have been filed and the taxes paid
or accrued.
3.11 Accuracy of All Statements Made by CTE. No representation or
warranty by CTE in this Agreement, nor any statement certificate, schedule or
exhibit hereto furnished or to be furnished by or on behalf of CTE pursuant
to this Agreement, nor any document or certificate delivered to ISI pursuant
to this Agreement or in connection with actions contemplated hereby, contains
or shall contain any untrue statement of material fact or omits or shall omit
a material fact necessary to make the statement contained therein not
misleading.
ARTICLE IV
Covenants of ISI
ISI Covenants with CTE as follows:
4.1 Negative Covenants. From the date of this Agreement, and prior
to closing, ISI will not, without the prior written consent of CTE engage in
any of the following transactions:
A. Engage in any activities or transactions which will be
outside the normal course of its business;
B. Issue any additional shares of ISI common stock, or issue
any shares of stock in ISI or any shares of stock in ISI or any option,
warrant or right to acquire stock in ISI;
C. Pay any dividend or make any distribution in respect to this
capital stock;
D. Sell any of its assets, other than in the ordinary course of
business;
E. Amend its Certificate of Incorporation or its By-Laws;
F. Recapitalize, reorganize or be a party to any merger or
consolidation or sale of all or substantially all of its assets; or
G. Make any loans or grant increases in compensation to its
officers or employees.
4.2 Affirmative Covenants. Prior to the Closing Date, ISI will do
or has done the following:
A. ISI has convened a special meeting of the stockholders of
ISI, at which time the shareholders of ISI agreed to proceed with the
Agreement and the Plan of Exchange;
B. ISI will use its best efforts to preserve its business
organization intact, and retain the services of its officers and employees;
C. ISI will afford to the officers, attorneys, accountants and
other authorized representatives of CTE full and free access to its
properties, books, tax returns and records, in order that CTE may have a full
opportunity to make such investigations as CTE desires of the affairs of ISI;
D. ISI will promptly advise CTE in writing of any materially
adverse change in the financial condition, business, operations or key
personnel of ISI, any breach of its representations or warranties contained
herein, and any material contract, agreement, license or other arrangement
which, if in effect on the date of this Agreement, should have been included
in this Agreement; and
E. ISI will use its best efforts to accomplish all actions
necessary to consummate the Plan of Exchange, including the satisfaction of
all the conditions set forth in this Agreement.
ARTICLE V
Covenants of CTE
CTE covenants with ISI as follows:
5.1 Negative Covenants. CTE will not, without the prior written
consent of ISI:
A. Declare any dividends payable in shares of CTE common stock;
B. Spilt or combine or reclassify the outstanding shares of CTE
common stock; or
C. Merge into, sell all or substantially all of its assets to
any person or entity.
5.2 Affirmative Covenants. Prior to Closing date, CTE will do the
following:
A. CTE will reserve, and promptly after the Closing will issue
and deliver the number of shares of CTE common stock required, and will take
all other actions contemplated hereby with respect to CTE common stock to be
registered under the Securities or "Blue Sky" Laws of every jurisdiction in
the United States in which any trading of CTE's common stock is contemplated
or is taking place, or in any state which such qualifications is required;
B. CTE will use its best efforts to accomplish all actions
necessary to consummate the Agreement, including satisfaction of all the
conditions contained in this Agreement;
C. CTE will promptly advise ISI in writing of any materially
adverse changes in the financial condition, business, operations, or key
personnel of CTE any breach of its representations or warranties contained
herein, and any material contract, agreement, license or other arrangement
which, if in effect on the date of this agreement, should have been included
in the Agreement;
D. CTE will afford to the officers, attorneys, accountants and
other authorized representatives of ISI full and free access to its
properties, books, tax returns and records, in order that ISI may have a full
opportunity to make such investigations as ISI desires of the affairs of CTE.
ARTICLE VI
Mutual Conditions
Neither ISI nor CTE will be obligated to complete or cause to be
completed the transactions contemplated by this agreement unless the
following conditions have been met prior to or at the Closing:
6.1 Absence of Restraint. No order to restrain, enjoin or otherwise
prevent the consummation of this Agreement, or the transactions contemplated
herein shall have been entered by any court of or administrative body, and no
proceeding to obtain any such order shall have been commenced or shall be
threatened.
6.2 Absence of Termination. The obligations to consummate the
transactions contemplated hereby shall not have been canceled pursuant to
sections 9.l.
6.3 Required Approvals. ISI and CTE shall have received all such
approvals, consents, authorizations or modifications as may be required to
permit the performance of ISI and CTE of their respective obligations under
this Agreement, and the consummations of the transactions herein contemplated
(whether for governmental authorities or other persons), and ISI and CTE
shall each have received any and all permits and approvals from any
regulatory authority having jurisdiction required for the lawful consummation
for the Plan of Exchange.
6.4 Blue Sky Compliance. There shall have been obtained any and all
permits, approvals and consents of the Securities or "Blue Sky" Commissions
or any jurisdictions, and of any other governmental body or agency, which
counsel for CTE may reasonably deem necessary or appropriate so that
consummation of the transactions contemplated by this Agreement will be in
compliance with applicable laws.
ARTICLE VII
Conditions to ISI's Obligations
ISI shall not be obligated to complete or cause to be completed the
transactions contemplated by this Agreement unless the following conditions
have been met prior to or at the Closing:
7.1 Compliance with Representations, Warranties and Covenants. All
of the representations and warranties of CTE made in or pursuant to this
Agreement are true and shall be true in all material respects at and as of
the Closing date, with the same force and effect for changes contemplated or
permitted by the Agreement or otherwise approved in writing by ISI. CTE shall
have complied with and performed all of the covenants contained in this
Agreement to be performed by them at or prior to the Closing Date. Such
shall be evidenced by appropriate Schedules to be attached hereto and
incorporated by reference and certified as correct by the President of CTE.
ARTICLE VIII
Conditions to Obligations of CTE
CTE shall not be obligated to complete or cause to be completed the
transactions contemplated by this Agreement unless the following conditions
have been met prior to or at the Closing:
8.1 Representations, Warranties and Covenants. All of the
representations and warranties of ISI contained in this Agreement and in its
Business Plan provided CTE are true and shall be true in all material
respects at and as of the Closing date. Such shall be evidenced by
appropriate Schedules attached hereto and incorporated by reference and
certified as correct by the Shareholders and President of ISI.
ARTICLE IX
Miscellaneous
9.1 Termination. This Agreement may be terminated or canceled, and
the transactions contemplated hereby may be abandoned, notwithstanding
stockholder authorization, at any time before consummation of the Agreement:
A. By mutual consent of the Board of Directors of ISI and CTE;
B. By any party in the event that any of the conditions
specified in Article VI shall not have been satisfied within the time
contemplated by this Agreement;
C. By CTE if any of the conditions specified in Article VIII
shall not have been satisfied within the time contemplated by this Agreement;
or
D. By ISI if any of the conditions specified in Article VII
shall not have been satisfied within the time contemplated by this Agreement.
9.2 Effect of Termination. If this Agreement is terminated, this
Agreement, except as to Sections 9.3 and 9.4, shall no longer be of any force
or effect and there shall be no liability on the part of any part of any
party or its respective directors, officers or stockholders provided, however,
that in the case of a termination without cause by a party or a termination
pursuant to Sections 9.1 (c) or (d) hereof because of a prior material
default under or material breach of this Agreement by another party, the
damages which the aggrieved party or parties may recover from the defaulting
party or parties shall in no event exceed the amount of out-of-pocket costs
and expenses incurred by such aggrieved party or parties in connection with
this Agreement.
9.3 Return of Information; Confidentially. In the event this
Agreement is terminated or the Plan of Exchange is not consummated for any
reason. ISI and CTE agree that all written information and documents
supplied by either ISI and CTE to each other shall be promptly returned to the
other party at its request, and ISI and CTE shall each use its best efforts
to cause confidential information to continue to be treated as confidential.
9.4 Costs and Expenses. All costs and expenses incurred in
connection with this Agreement will be paid by the party incurring expenses.
In the event of any termination of this Agreement, pursuant to Section 9.1,
subject to the provisions of 9.2, ISI and CTE will each bear their own
expenses.
9.5 Extension of Time; Waivers. At any time prior to the Closing
date:
A. CTE may (i) extend the time for the performance of the
obligations or other acts of ISI; (ii) waive any inaccuracies in the
representations and warranties of ISI contained herein or in any document
delivered pursuant hereto by ISI, and (iii) waive compliance with any of the
agreements or conditions herein to be performed by CTE. Any agreement on the
part of ISI to any such extension or waiver shall be valid only if set forth
in an instrument, in writing, signed on behalf of ISI.
9.6 Assignability. This Agreement shall inure to the benefit of,
and be binding on the parties hereto and their respective successors and
assigns, provided that this Agreement may not be assigned by any party without
the prior written consent of the other party.
9.7 Reliance of Counsel. In rendering any opinion referred to
herein, counsel may rely, as to any factual matters involved in their
opinion, on certificates of public officials and of corporate officers, opinions
of corporate general counsel, and such other evidence as such counsel may
reasonably deem appropriate, and as to matters governed by laws of
jurisdictions other than the United States or the state in which said counsel
is located, an opinion of local counsel in jurisdictions, which counsel shall
be satisfactory to the other parties in the exercise of their reasonable
judgement.
9.8 Notices. Any notice to any party hereto pursuant to this
Agreement shall be given by Certified or Registered mail, addressed as
follows:
Custom Touch Electronics, Inc.
764 W. South Temple
Salt Lake City, UT 84104
Intraco Systems, Inc.
3998 FAU Blvd., Suite 210
Boca Raton, FL 33431
9.9 Amendment. This Agreement may be amended with the approval of
the Board of Directors of ISI and CTE at any time before or after approval
thereof by the stockholders of ISI and CTE; but after any such stockholder
approval, no amendment shall be made which substantially and adversely
changes the terms hereof. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
9.10 Entire Agreement; Counterparts; Applicable Law. This Agreement
(a) constitutes the entire agreement and superseded all prior agreements and
understanding, both written and oral among the parties with respect to the
subject matter hereof, (b) may be executed in several counterparts, each of
which will be deemed an original and all of which shall constitute one and
the same instrument, and (c) shall be governed in all respects, including
validity, interpretation and effect, by the laws of the State of Nevada.
9.11 Titles. The titles and capitals of the Sections and paragraphs
of this Agreement are included for convenience of reference any and shall
have no effect on the constructions or meaning of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
CUSTOM TOUCH ELECTRONICS, INC.
By:_________________________________
Terry Nish, President
INTRACO SYSTEMS, INC.
By:_________________________________
Jack S. Berger, President
AMENDED AND RESTATED ARTICLES OF INCORPORATION OF
CUSTOM TOUCH ELECTRONICS, INC.
The undersigned, Custom Touch Electronics, Inc., a Nevada corporation
(the "Corporation"), for the purpose of amending and restating the Articles
of Incorporation of the Corporation, in accordance with the applicable
provisions of the Nevada Revised Statutes, as from time to time amended (the
"NRS"), does hereby make and execute these Amended and Restated Articles of
Incorporation and does hereby certify that:
I. The name of the Corporation is Custom Touch Electronics, Inc.
Its original Articles of Incorporation were filed with the Secretary of State
of Nevada on March 16, 1999.
II. Upon a proposal recommended and submitted to the majority
stockholders of the Corporation by the Corporation's directors pursuant to
Section 78.315 of the NRS resolutions setting forth the within Amended and
Restated Articles of Incorporation of this Corporation were duly adopted by
majority vote of the stockholders of the Corporation by written consent, in
accordance with Section 78.320 of the NRS.
III. The Amended and Restated Articles of Incorporation of the
Corporation submitted and recommended by the Corporation's directors and
approved by the majority stockholders of the Corporation read as follows:
Article ONE. The name of the Corporation is Intraco Systems, Inc.
Article TWO. The address of the Corporation's registered office in
the State of Nevada is: 3230 E. Flamingo Road, Suite. 156, Las Vegas, Nevada
89121, and the name of its resident agent at that address is Gateway
Enterprises, Inc.
Article THREE. The nature of the business or purposes to be
conducted or promoted by the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the laws of the State
of Nevada, as amended from time to time. In addition to the powers and
privileges conferred upon the Corporation by law and those incidental
thereto, the Corporation shall possess and may exercise all the powers and
privileges which are necessary or convenient to the conduct, promotion or
attainment of the business or purposes of the Corporation.
Article FOUR. The aggregate number of shares of all classes of
stock which the Corporation shall have authority to issue is 110,000,000 (one
hundred ten million), consisting of:
a. 10,000,000 (ten million) shares of Series A Preferred
Stock, $0.001 par value (the "Preferred Stock"); and
b. 100,000,000 (one hundred million) shares of Common
Stock, $0.001 par value (the "Common Stock").
All or any part of the shares of the Preferred Stock and the Common
Stock may be issued by the Corporation from time to time and for such
consideration as may be determined and fixed by the Board of Directors, as
provided by law, with due regard to the interest of the existing shareholders;
and when consideration for these shares has been received by the Corporation,
the shares. shall be deemed fully paid. The designations, powers,
preferences and relative participating, optional or other special rights, and
the qualifications, limitations and restrictions thereof in respect of the
Preferred Stock and the Common Stock are as follows:
A. Preferred Stock
The designations, powers, preferences and relative participating,
optional or other special rights, and the qualifications, limitations and
restrictions thereof in respect of the Preferred Stock to be issued by the
Corporation from time to time shall be established by the Board of Directors,
in accordance with and as authorized by the NRS;
B. Common Stock
1. Voting. Each holder of Common Stock shall be entitled to
one vote for each share of Common Stock held on all matters as to which
holders of Common Stock shall be entitled to vote. Anything contained in
these Amended and Restated Articles of Incorporation to the contrary
notwithstanding, the number of authorized shares of Common Stock may be
increased or decreased (but not below the number of shares thereof then
outstanding or reserved for issuance upon the conversion, exercise or exchange
of securities, options warrants or rights then outstanding) by the affirmative
vote of the holders of a majority of the shares of Preferred Stock and Common
Stock, voting together as one class. In any election of directors, no holder
of Common Stock shall be entitled to cumulate his votes by giving one
candidate more than one vote per share.
2. Other Rights. Each share of Common Stock issued and
outstanding shall be identical in all respects one with the other, and no
dividends shall be paid on any shares of Common Stock unless the same
dividend is paid on all shares of Common Stock outstanding at the time of
such payment. Except for and subject to those rights exclusively granted to
the holders of the Preferred Stock or except as may be provided by law, the
holders of Common Stock shall have all other rights of stockholders,
including but not by way of limitation, (i) the right to receive dividends,
when and as declared by the Board of Directors out of assets legally available
therefor, and (ii) in the event of any distribution of assets upon
liquidation, dissolution or winding up of the Corporation or otherwise, the
right to receive ratably and equally all the assets and funds of the
Corporation remaining after the payment to the holders of the Preferred Stock
of the specific amounts which they are entitled to receive upon such
liquidation, dissolution or winding up of the Corporation as herein provided.
Article FIVE. Unless otherwise determined by the Board of
Directors, no shareholder shall be entitled, as a matter of right, to
purchase, subscribe for, or receive any right or rights to subscribe for any
stock of any class that the Corporation may issue or sell, whether or not
exchangeable for any stock of the Corporation of any class or classes, and
whether or not of unissued shares authorized by the articles of incorporation
or out of shares of stock of the Corporation acquired by it after the
issuance of the shares, and whether issued for cash, promissory notes,
services, personal or real property, or other securities of the Corporation,
nor shall any holder of stock of the Corporation be entitled to any right of
subscription to any of such shares. Further, unless otherwise determined by
the board of directors, no holder of any shares of the stock of the
corporation is entitled, as a matter of right, to purchase or subscribe for
any obligation which the Corporation may issue or sell that shall be
convertible into or exchangeable for any shares of the stock of the
Corporation of any class or classes, or to which shall be attached or
appurtenant any warrant or warrants or other instrument or instruments which
confer on the holder or holders of the obligation the right to subscribe for
or purchase from the Corporation any shares of its capital stock of any class
or classes.
Article SIX.
a. Except as may be otherwise specifically provided by the
NRS, all powers of management, direction and control of the Corporation shall
be, and hereby are, vested in the Board of Directors.
b. A majority of the whole Board of Directors shall
constitute a quorum for the transaction of business, and, except as otherwise
provided in these Amended and Restated Articles of Incorporation, as amended,
or the By-laws, the vote of a majority of the directors present at a meeting
at which a quorum is then present shall be the act of the Board. As used in
this Amended and Restated Articles of Incorporation, as amended, the terms
"whole Board" and "whole Board of Directors" are hereby exclusively defined
and limited to mean the total number of directors which the Corporation would
have if the Board had no vacancies.
c. The number of directors shall be fixed by, or in the
manner provided in, the By-Laws.
d. Any vacancies in the Board of Directors for any reason and
any newly created directorships resulting from any increase in the number of
directors, may be filled by the Board of Directors, acting by a majority of
the directors then in office, although less that a quorum, and any directors
so chosen shall hold office until the next election and until their
successors shall be elected and qualified or until their respective earlier
resignation, removal or death. No decrease in the number of directors shall
shorten the term on any incumbent director.
e. Notwithstanding any other provision of these Amended
and Restated Articles of Incorporation, as amended, or the By-laws, and
notwithstanding the fact that some lesser percentage may be specified by law,
these Amended and Restated Articles of Incorporation, as amended, or the
By-laws, any director or the whole Board of Directors of the Corporation may
be removed at any time, but only for cause and only upon the affirmative vote
of the holders of a majority or more of the then outstanding shares of Voting
Stock, considered for this purpose as one class (for the purposes of this
Article SIX, section (e), each share of the Voting Stock shall have the
number of votes granted to it pursuant to Article FOUR of these Amended and
Restated Articles of Incorporation, as amended).
f. As used in these Amended and Restated Articles of
Incorporation, as amended, the term "for cause" is hereby exclusively defined
and limited to mean commission of a felony or a finding by a court of
competent jurisdiction of liability for negligence, or misconduct, in the
performance of the director's duty to the Corporation in a matter of
substantial importance to the Corporation, where such adjudication is no
longer subject to direct appeal.
g. There shall be no qualifications for election as
directors of the Corporation, except that no person shall be eligible to
stand for election as a director if such person has been convicted of a felony
by a court of competent jurisdiction where such conviction is no longer
subject to direct appeal.
h. Except as provided in this Article SIX, no director of
the Corporation shall be removed his office as a director by vote or other
action of stockholders or otherwise except for cause.
i. Advance notice of nominations for the election of
directors other than nominations by the Board of Directors or a committee
thereof shall be given to the Corporation in the manner provided in the
By-laws.
j. Except as may be otherwise specifically provided in
this Article SIX, the term of office and voting power of each director of the
Corporation shalt be neither greater than nor less than that of any other
director or class of directors of the Corporation.
k. Elections of directors need not be by ballot unless the
By-laws of the Corporation shall so provide.
Article SEVEN. The By-laws of the Corporation shall be adopted in
any manner provided by law. In furtherance, and not in limitation of, the
powers conferred by statute, the Board of Directors is expressly authorized
to make, adopt, alter, amend or repeal the By-laws of the Corporation.
Notwithstanding any other provisions in these Amended and Restated Articles
of Incorporation, as amended, or the By-laws of the Corporation, and
notwithstanding the fact that some lesser percentage may be specified by law,
the stockholders of the Corporation shall have the power to make, adopt,
alter, amend or repeal the By-laws of the Corporation only upon the
affirmative vote of a majority or more of the then outstanding shares of
Voting stock, considered for this purpose as one class (for purposes in this
Article SEVEN, each share of the Voting Stock shall have the number of votes
granted to it pursuant to Article FOUR of these Amended and Restated Articles
of Incorporation, as amended).
Article EIGHT. The Corporation may agree to the ten-ns and
conditions upon which any director, officer, employee or agent accepts his
office or position and in it By-laws, by contract or in any other manner may
agree to indemnify and protect any director, officer, employee or agent of
the Corporation, or any person who serves at the request of the Corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, to the
fullest extent permitted by the NRS (including without limitation, the
statutes, case law and principles of equity) of the State of Nevada. If the
NRS (including without limitation, the statutes, case law or principles of
equity, as the case may be) of the State of Nevada are amended or changed to
permit or authorize broader rights of indemnification to any of the persons
referred to in the immediately preceding sentence, then the Corporation shall
be automatically authorized to agree to indemnify such respective persons to
the fullest extent permitted or authorized by such law, as so amended or
changed, without the need for amendment or modification of this Article EIGHT
and without further action by the Directors or stockholders of the
Corporation.
Without limiting the generality of the foregoing provisions of this
Article EIGHT, to the fullest extent permitted or authorized by the NRS as
now in effect and as the same may from time to time hereafter be amended, no
director of the Corporation shall be personally liable to the Corporation or
to its stockholders for monetary damages for breach of fiduciary duty as a
director. Any repeal or modification of the immediately preceding sentence
shall not adversely affect any right or protection of a director of the
Corporation existing hereunder with respect to any act or omission occurring
prior to or at the time of such repeal or modification.
Article NINE. Whenever a compromise or arrangement is proposed
between this Corporation and its creditors or any class of them and/or
between this Corporation and its stockholders or any class of them, any court
of equitable jurisdiction within the State of Nevada may, on the application
in a summary way of this Corporation under the provisions of the NRS or on
the application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provisions of the NRS order a
meeting of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of this Corporation, as the case may be, agree to any
compromise or arrangement and to any reorganization of this Corporation as a
consequence of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by the court to
which the said application has been made, be binding on all the creditors or
class of creditors, or on all the stockholders or class of stockholders, of
this Corporation, as the case may be, and also on this Corporation.
Article TEN. Except as may be otherwise provided by statute, the
Corporation shall be entitled to treat the registered holder of any shares of
the Corporation as the owner of such shares and of all rights derived from
such shares for all purposes, and the Corporation shall not be obligated to
recognize any equitable or other claim to or interest in such shares or
rights on the part of any other person, including, but without limiting the
generality of the term "person" to, a purchaser, pledge, assignee or
transferee of such shares or rights, unless and until such person becomes the
registered holder of such shares. The foregoing shall apply whether or not
the Corporation shall have either actual or constructive notice of the claim
by or the interest of such person.
Article ELEVEN. The books of the Company may be kept (subject to
any provisions contained in the NRS) outside the State of Nevada at such
place or places as may be designated from time to time by the Board of
Directors or in the By-laws of the Corporation.
Article TWELVE. Any action required or permitted to be taken by
the stockholders of the Corporation must be effected at a duly called annual
or special meeting of such holders and may not be effected by any consent in
writing by such holders; provided, however, that the foregoing shall not
derogate from the authority of all the directors and all of the stockholders
of the Corporation eligible to vote, to adopt an amendment to these Amended
and Restated Articles of Incorporation, as amended, by signing a written
statement manifesting their intention that an amendment to these Amended and
Restated Articles of Incorporation, as amended, be adopted pursuant to the
NRS.
Article THIRTEEN. Except as otherwise required by law and subject
to the rights, if any, of the holders of Preferred Stock or any series
thereof, special meeting of the stockholders of the Corporation may be called
only by the Chairman of the Board of Directors, the President of the
Corporation or the Board pursuant to a resolution adopted by the majority of
the whole Board.
Article FOURTEEN. The Corporation reserves the right to amend,
alter, change or repeal any provision contained in these Amended and Restated
Articles of Incorporation, as amended, in the manner now or hereafter
prescribed by statute, and all rights conferred upon stockholders herein are
granted subject to this reservation.
Article FIFTEEN. The duration of the Corporation is perpetual.
Article SIXTEEN. None of the provisions of Articles FOUR, FIVE or
this Article SIXTEEN may be amended, altered, changed or repealed except upon
the affirmative vote at any annual or special meeting of the stockholders, of
the holders of at least a majority or more of the then outstanding shares of
Voting Stock, considered for this as one class (for the purpose of this
Article SIXTEEN, each share of Voting Stock shall have the number of votes
granted to it pursuant to Article FOUR of these Amended and Restated Articles
of Incorporation), nor shall new provisions to these Amended and Restated
Articles of Incorporation, as amended, be amended, altered or repealed which
in either instance are in conflict or inconsistent with Articles FOUR, FIVE
or this Article SIXTEEN except upon the affirmative vote at any annual or
special meeting of the stockholders of the holders of at least a majority or
more of the then outstanding shares of Voting Stock, considered for this
purpose as one class. Any inconsistency between the provisions of a By-law
and any provision of these Amended and Restated Articles of Incorporation, as
amended, shall be controlled by these Amended and Restated Articles of
Incorporation, as amended.
IV. The foregoing Amended and Restated Articles of Incorporation
restate and integrate and do not further amend the provisions of the
Corporation's Articles of Incorporation as theretofore amended or
supplemented, and there is no discrepancy between those provisions and the
provisions of these Amended and Restated Articles of Incorporation; and
V. These Amended and Restated Articles of Incorporation have been
duly adopted in accordance with the provisions of the NRS.
IN WITNESS WHEREOF, these Amended and Restated Articles of Incorporation
have been executed on behalf of the Corporation as of this 8th day of April,
1999, by its President, who does make, file and record these Amended and
Restated Articles of Incorporation, and does certify that this instrument is
the act and deed of the Corporation and that the facts stated herein are
true, and that he has accordingly hereunto met his hand this 8th day of April,
1999.
Intraco Systems, Inc.
By: /s/
Jack S. Berger, President
CUSTOM TOUCH, INC.
BY LAWS
ARTICLE ONE
CAPITAL STOCK
SECTION ONE: Share certificates, as approved by the Board. of Directors,
shall be issued to shareholders specifying the name of the owner, number of
shares, and date of issue. Each certificate shall be signed by the President
and Secretary with the corporate seal affixed thereon. Each certificate shall
be numbered in the order in which it is issued.
SECTION TWO: Each shareholder shall be entitled to one vote per share of
common stock, unless otherwise stated in Article of Incorporation.
SECTION THREE: Transfer of shares of stock shall be in the transfer ledger of
the corporation. Such transfers shall be done in person or by power of
attorney. Transfers shall be completed on the surrender of the old
certificate, duly assigned.
ARTICLE TWO
SHAREHOLDER'S MEETINGS
SECTION ONE: The annual meeting of the shareholders shall be held on the day
of each year at the company's offices. If the stated day is a weekend day
or a legal holiday, the meeting shall be held on the next succeeding day not
a weekend day or a holiday.
SECTION TWO: The place of the annual meeting may be changed by the Board of
Directors within or without the State of Incorporation for any given year
upon days notice to the shareholders. Special meetings may be held within or
without of the State of incorporation and at such time ask the Board of
Directors may fix.
SECTION THREE: Special meetings of the shareholders may be called at any time
by the President or any holder(s) of at least twenty-five percent of the
outstanding capital stock.
SECTION FOUR: Notice of any special meeting of the shareholders shall be
given to all shareholders to their last known address by registered mail.
Notice of any special meeting of the shareholders shall state the purpose of
such meeting. Notice of a special meeting may be waived in writing either
before or after such meeting.
SECTION FIVE: Unless otherwise provided by law or the Articles of
Incorporation, all meetings of the shareholders, action may be taken by a
majority vote of the number of shares entitled to vote as represented by the
shareholders present at such meeting. Directors shall be elected by a
plurality vote. A quorum shall constitute one share over fifty percent of the
outstanding shares entitled to vote as represented by the shareholders
present at such meeting. No business may be transacted without the presence of
a quorum. At any time during any shareholders meeting, if it is determined
that a quorum is no longer present, the meeting shall be then adjourned.
SECTION SIX: Action may be taken by the shareholders without a formal meeting
by consent, if such consent is executed in writing by all of the shareholders
entitled to vote and if allowed under the laws of the State of incorporation.
ARTICLE THREE
DIRECTORS
SECTION ONE: The Board of Directors shall control the full and entire
management of the affairs and business of the corporation. The Board of
Directors shall adopt rules and regulations to manage the affairs and
business of the corporation by resolution at special or the annual meeting. A
quorum shall consist of a majority of the directors. Resolutions adopted and
all business transacted by the Board of Directors shall be done by a majority
vote of the directors present at such meetings.
SECTION TWO: The Board of Directors shall consist of members to be elected by
the shareholders at an annual meeting. The term of office shall be one year.
Vacancies may be filled by the Board of Directors prior to the expiration of
the term. Such appointment shall continue until the next annual meeting of
shareholders. I
SECTION THREE: The Board of Directors shall meet annually at the same place
of the shareholders meetings immediately following the annual meeting of the
shareholders. Special meetings of the Board of Directors may be called by the
President or any two (2) directors on ten (10) days notice, or such other and
further notice as required by the 'Laws of the State of incorporation.
SECTION FOUR: Notice of special or regular meetings of the Board of Directors
other than the annual meeting of the Board of Directors, shall be made by
mail to the last known address of each director. Such notice shall be mailed
ten (10) days prior to such meeting and shall include time and place and
reasons for the meeting. All other requirements of the laws of the State of
incorporation for notices shall be followed.
SECTION FIVE: All directors of the corporation who are present at a meeting
of the Board of Directors shall be deemed to have assented to action taken at
such-meeting as to any corporate action taken, unless a director who did not
vote in favor on such action goes on record in. the minutes as dissenting. In
such a case, the dissenting director will not be deemed to having assented to
the action taken.
SECTION SIX: Directors may be removed for cause by a majority vote at a
meeting of the shareholders or Directors. Directors may be removed without
cause by a majority vote at a meeting of the shareholders.
ARTICLE FOUR
OFFICERS
SECTION ONE: The officers of the corporation shall consist of a President,
Secretary and Treasurer. All officers shall be elected by the Board of
Directors and shall serve a term for compensation as fixed by the Board of
Directors. The Board of Directors may establish other offices as it may be
deem fit.
SECTION TWO: The chief executive officer shall be the President. The
president shall have management powers of the corporation. His duties shall
include but are not limited to administration of the corporation presiding
over shareholders meeting including general supervision of the policies of
the corporation as well as general management. The President shall execute
contracts, mortgages, loans and bonds under the seal of the corporation. The
President shall have other powers as determined by the Board of Directors by
resolution.
SECTION THREE: The Secretary shall keep the minutes of meetings of the Board
of Directors and shareholder meetings. The Secretary shall have charge of the
minute books, seal and stock books of the corporation. The Secretary shall
have other powers as delegated by the President.
SECTION FOUR: The Treasurer shall have the power to manage the financial
affairs of the corporation. The Treasurer shall keep books and records of the
financial affairs and make such available to the President and Board of
Directors upon request. The Treasurer may make recommendations to the
officers and directors in regard to the financial affairs of the corporation.
SECTION FIVE: The Vice-President, if one is appointed by the Board of
Directors, shall have such powers as delegated to him by the President. Upon
the inability to perform by the President, the Vice-President shall serve as
President until such time as the President shall be able to perform or
further action by the Board of Directors. The President shall be deemed unable
to perform his duties upon written notification by the President of such
inability or resignation to the Board of Directors that tile President is
unable to perform.
SECTION SIX: Vacancies shall be filled by the Board of Directors. Until such
time as vacancies are filled the following rules of succession shall apply
without regard to Section Five of this Article. The Vice President shall act
as President, the Treasurer shall act as Secretary, and the Secretary shall
act as Treasurer.
SECTION SEVEN: Assistants to officers may be appointed by the President.
These duties shall be those delegated to them by the President or the board
of Directors.
SECTION EIGHT: Compensation of the officers shall be determined by the Board
of Directors.
ARTICLE FIVE
CONTRACTS AND INSTRUMENTS OF INDEBTEDNESS
SECTION ONE: No contracts or any instrument of indebtedness shall be executed
without approval by the Board of Directors by resolution. Upon such
resolution, the President shall be authorized to execute contracts or
instruments of indebtedness as specified in the resolution.
SECTION TWO: All checks, drafts or other instruments of
indebtedness shall be executed in the manner as determined by the Board of
Directors by resolution.
ARTICLE SIX
CORPORATE SEAL
The seal of the corporation shall be provided by the Board of Directors
by resolution. The seal shall be used by the President or other officers of
the corporation as provided for in these BY-Laws.
ARTICLE SEVEN
AMENDMENT
These By-Laws may be amended from time to time by a majority vote of the
Board of Directors or by a majority vote of the shareholders. These By-Laws
may be repealed and new By-Laws established in the same manner as amendments.
These By-Laws will continue in full force and effect until amended or
repealed and replaced by new By-Laws.
ARTICLE EIGHT
DIVIDENDS
The Board of Directors may from time to time declare dividends to the
shareholders. These distributions may be in cash or property. No such
dividends may be made out of the capital of the corporation.
INTRACO SYSTEMS, INC.
1998 STOCK OPTION PLAN
1. Purpose. The purpose of this Plan is to advance the interests of
Intraco Systems, Inc., a Florida corporation (the "Company"), by providing an
additional incentive to attract, retain and motivate highly qualified and
competent persons who are key to the Company, including key employees,
consultants, independent contractors, Officers and Directors, and upon whose
efforts and judgment the success of the Company and its Subsidiaries is
largely dependent, by authorizing the grant of options to purchase Common
Stock of the Company to persons who are eligible to participate hereunder,
thereby encouraging stock ownership in the Company by such persons, all upon
and subject to the terms and conditions of this Plan.
2. Definitions. As used herein, the following terms shall have the
meanings indicated:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Cause" shall mean any of the following:
(i) a determination by the Company that there has been a willful,
reckless or grossly negligent failure by the Optionee to perform his or her
duties as an employee of the Company;
(ii) a determination by the Company that there has been a willful
breach by the Optionee of any of the material terms or provisions of any
employment agreement between such Optionee and the Company;
(iii)any conduct by the Optionee that either results in his or her
conviction of a felony under the laws of the United States of America or any
state thereof, or of an equivalent crime under the laws of any other
jurisdiction;
(iv) a determination by the Company that the Optionee has committed
an act or acts involving fraud, embezzlement, misappropriation, theft, breach
of fiduciary duty or material dishonesty against the Company, its properties
or personnel;
(v) any act by the Optionee that the Company determines to be in
willful or wanton disregard of the Company's best interests, or which
results, or is intended to result, directly or indirectly, in improper gain
or personal enrichment of the Optionee at the expense of the Company;
(vi) a determination by the Company that there has been a willful,
reckless or grossly negligent failure by the Optionee to comply with any
rules, regulations, policies or procedures of the Company, or that the
Optionee has engaged in any act, behavior or conduct demonstrating a
deliberate and material violation or disregard of standards of behavior that
the Company has a right to expect of its employees; or
(vii) if the Optionee, while employed by the Company and for two years
thereafter, violates a confidentiality and/or noncompete agreement with the
Company, or fails to safeguard, divulges, communicates, uses to the detriment
of the Company or for the benefit of any person or persons, or misuses in any
way, any Confidential Information; provided, however, that, if the Optionee
has entered into a written employment agreement with the Company which
remains effective and which expressly provides for a termination of such
Optionee's employment for "cause", the term "Cause" as used herein shall have
the meaning as set forth in the Optionee's employment agreement in lieu of the
definition of "Cause" set forth in this Section 2(b).
(c) "Change of Control" shall mean the acquisition by any person or
group (as that term is defined in the Securities Exchange Act of 1934 (the
"Exchange Act"), and the rules promulgated pursuant to that act) in a single
transaction or a series of transactions of thirty percent (30%) or more in
voting power of the outstanding stock of the Company and a change of the
composition of the Board of Directors so that, within two years after the
acquisition took place, a majority of the members of the Board of Directors
of the Company, or of any corporation with which the Company may be
consolidated or merged, are persons who were not directors or officers of the
Company or one of its Subsidiaries immediately prior to the acquisition, or to
the first of a series of transactions which resulted in the acquisition of
thirty percent (30%) or more in voting power of the outstanding stock of the
Company.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(e) "Committee" shall mean the stock option committee appointed by
the Board or, if not appointed, the Board.
(f) "Common Stock" shall mean the Company's Common Stock, par value
$.01 per share.
(g) "Confidential Information" shall mean any and all information
pertaining to the Company's financial condition, clients, customers,
prospects, sources of prospects, customer lists, trademarks, trade names,
service marks, service names, "know-how," trade secrets, products, services,
details of client or consulting contracts, management agreements, pricing
policies, operational methods, site selection, results of operations, costs
and methods of doing business, owners and ownership structure, marketing
practices, marketing plans or strategies, product development techniques or
plans, procurement and sales activities, promotion and pricing techniques,
credit and financial data concerning customers and business acquisition
plans, that is not generally available to the public.
(h) "Director" shall mean a member of the Board.
(i)"Employee" shall mean any person, including officers, directors,
consultants and independent contractors employed by the Company or any parent
or Subsidiary of the Company within the meaning of Section 3401(c) of the
regulators promulgated thereunder.
(j) "Fair Market Value" of a Share on any date of reference shall be
the Closing Price of a share of Common Stock on the business day immediately
preceding such date, unless the Committee in its sole discretion shall
determine otherwise in a fair and uniform manner. For this purpose, the
"Closing Price" of the Common Stock on any business day shall be (i) if the
Common Stock is listed or admitted for trading on any United States national
securities exchange, or if actual transactions are otherwise reported on a
consolidated transaction reporting system, the last reported sale price of
the Common Stock on such exchange or reporting system, as reported in any
newspaper of general circulation, (ii) if the Common Stock is quoted on the
National Association of Securities Dealers Automated Quotations System
("NASDAQ"), or any similar system of automated dissemination of quotations of
securities prices in common use, the mean between the closing high bid and
low asked quotations for such day of the Common Stock on such system, or (iii)
if neither clause (i) nor (ii) is applicable, the mean between the high bid
and low asked quotations for the Common Stock as reported by the National
Quotation Bureau, Incorporated if at least two securities dealers have
inserted both bid and asked quotations for the Common Stock on at least five
of the 10 preceding days. If the information set forth in clauses (i)
through (iii) above is unavailable or inapplicable to the Company (e.g., if
the Company's Common Stock is not then publicly traded or quoted), then the
"Fair Market Value" of a Share shall be the fair market value (i.e., the price
at which a willing seller would sell a Share to a willing buyer when neither
is acting under compulsion and when both have reasonable knowledge of all
relevant facts) of a share of the Common Stock on the business day
immediately preceding such date as the Committee in its sole and absolute
discretion shall determine in a fair and uniform manner.
(k) "Incentive Stock Option" shall mean an incentive stock option as
defined in Section 422 of the Code.
(l) "Non-Statutory Stock Option" or "Non-qualified Stock Option"
shall mean an Option which is not an Incentive Stock Option.
(m) "Officer" shall mean the Company's chairman, president,
principal financial officer, principal accounting officer (or, if there is no
such accounting officer, the controller), any vice-president of the Company
in charge of a principal business unit, division or function (such as sales,
administration or finance), any other officer who performs a policy-making
function, or any other person who performs similar policy-making functions
for the Company. Officers of Subsidiaries shall be deemed Officers of the
Company if they perform such policy-making functions for the Company. As used
in this paragraph, the phrase "policy-making function" does not include
policy-making functions that are not significant. Unless specified otherwise
in a resolution by the Board, an "executive officer" pursuant to Item 401(b)
of Regulation S-K (17 C.F.R. ?229.401(b)) shall be only such person
designated
as an "Officer" pursuant to the foregoing provisions of this paragraph.
(n) "Option" (when capitalized) shall mean any stock option granted
under this Plan.
(o) "Optionee" shall mean a person to whom an Option is granted
under this Plan or any person who succeeds to the rights of such person under
this Plan by reason of the death of such person.
(p) "Plan" shall mean this 1998 Stock Option Plan of the Company,
which Plan shall be effective upon approval by the Board, subject to
approval, within 12 months of the date thereof by holders of a majority of
the Company's issued and outstanding Common Stock of the Company.
(q) "Securities Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
(r) "Share" or "Shares" shall mean a share or shares, as the case
may be, of the Common Stock, as adjusted in accordance with Section 10 of
this Plan.
(s) "Subsidiary" shall mean any corporation (other than the Company)
in any unbroken chain of corporations beginning with the Company if, at the
time of the granting of the Option, each of the corporations other than the
last corporation in the unbroken chain owns stock possessing 50 percent or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
3. Shares and Options. Subject to adjustment in accordance with Section
10 hereof, the Company may grant to Optionees from time to time Options to
purchase an aggregate of up to Two Hundred Thousand (200,000) Shares from
Shares held in the Company's treasury or from authorized and unissued
Shares. If any Option granted under this Plan shall terminate, expire, or be
canceled, forfeited or surrendered as to any Shares, the Shares relating to
such lapsed Option shall be available for issuance pursuant to new Options
subsequently granted under this Plan. Upon the grant of any Option hereunder,
the authorized and unissued Shares to which such Option relates shall be
reserved for issuance to permit exercise under this Plan. Subject to the
provisions of Section 14 hereof, an Option granted hereunder shall be either
an Incentive Stock Option or a Non-Statutory Stock Option as determined by the
Committee at the time of grant of such Option and shall clearly state whether
it is an Incentive Stock Option or Non-Statutory Stock Option. All Incentive
Stock Options shall be granted within 10 years from the effective date of this
Plan.
4. Limitations. Options otherwise qualifying as Incentive Stock
Options hereunder will not be treated as Incentive Stock Options to the extent
that the aggregate Fair Market Value (determined at the time the Option is
granted) of the Shares, with respect to which Options meeting the requirements
of Code Section 422(b) are exercisable for the first time by any individual
during any calendar year (under all stock option or similar plans of the
Company and any Subsidiary), exceeds $100,000.
5. Conditions for Grant of Options.
(a) Each Option shall be evidenced by an option agreement that may
contain any term deemed necessary or desirable by the Committee, provided
such terms are not inconsistent with this Plan or any applicable law.
Optionees shall be those persons selected by the Committee from the class of
all regular Employees of the Company or its Subsidiaries, including Employee
Directors and Officers who are regular or former regular employees of the
Company, Directors who are not regular employees of the Company, as well as
consultants to the Company. Any person who files with the Committee, in a
form satisfactory to the Committee, a written waiver of eligibility to receive
any Option under this Plan shall not be eligible to receive any Option under
this Plan for the duration of such waiver.
(b) In granting Options, the Committee shall take into consideration
the contribution the person has made, or is expected to make, to the success
of the Company or its Subsidiaries and such other factors as the Committee
shall determine. The Committee shall also have the authority to consult with
and receive recommendations from Officers and other personnel of the Company
and its Subsidiaries with regard to these matters. The Committee may from
time to time in granting Options under this Plan prescribe such terms and
conditions concerning such Options as it deems appropriate, including,
without limitation, (i) the exercise price or prices of the Option or any
installments thereof, (ii) prescribing the date or dates on which the Option
becomes and/or remains exercisable, (iii) providing that the Option vests or
becomes exercisable in installments over a period of time, and/or upon the
attainment of certain stated standards, specifications or goals, (iv) relating
an Option to the continued employment of the Optionee for a specified period
of time, or (v) conditions or termination events with respect to the
exercisability of any Option, provided that such terms and conditions are not
more favorable to an Optionee than those expressly permitted herein; provided,
however, that to the extent not canceled pursuant to Section 9(b) hereof, upon
a Change in Control, any Options that have not yet vested, shall vest upon
such Change in Control.
(c) The Options granted to employees under this Plan shall be in
addition to regular salaries, pension, life insurance or other benefits
related to their employment with the Company or its Subsidiaries. Neither
this Plan nor any Option granted under this Plan shall confer upon any person
any right to employment or continuance of employment (or related salary and
benefits) by the Company or its Subsidiaries.
6. Exercise Price. The exercise price per Share of any Option
shall be any price determined by the Committee but shall not be less than the
par value per Share; provided, however, that in no event shall the exercise
price per Share of any Incentive Stock Option be less than the Fair Market
Value of the Shares underlying such Option on the date such Option is granted
and, in the case of an Incentive Stock Option granted to a 10% shareholder,
the per Share exercise price will not be less than 110% of the Fair Market
Value in accordance with Section 14 of this Plan. Re-granted Options, or
Options which are canceled and then re-granted covering such canceled Options,
will, for purposes of this Section 6, be deemed to have been granted on the
date of the re-granting.
7. Exercise of Options.
(a) An Option shall be deemed exercised when (i) the Company has
received written notice of such exercise in accordance with the terms of the
Option, (ii) full payment of the aggregate option price of the Shares as to
which the Option is exercised has been made, (iii) the Optionee has agreed to
be bound by the terms, provisions and conditions of any applicable
shareholders' agreement, and (iv) arrangements that are satisfactory to the
Committee in its sole discretion have been made for the Optionee's payment to
the Company of the amount that is necessary for the Company or the Subsidiary
employing the Optionee to withhold in accordance with applicable Federal or
state tax withholding requirements. Unless further limited by the Committee
in any Option, the exercise price of any Shares purchased pursuant to the
exercise of such Option shall be paid in cash, by certified or official bank
check, by money order, with Shares or by a combination of the above;
provided, however, that the Committee in its sole discretion may accept a
personal check in full or partial payment of any Shares. If the exercise
price is paid in whole or in part with Shares, the value of the Shares
surrendered shall be their Fair Market Value on the date the Option is
exercised. The Company in its sole discretion may, on an individual basis or
pursuant to a general program established by the Committee in connection with
this Plan, lend money to an Optionee to exercise all or a portion of the
Option granted hereunder. If the exercise price is paid in whole or part with
the Optionee's promissory note, such note shall (i) provide for full recourse
to the maker, (ii) be collateralized by the pledge of the Shares that the
Optionee purchases upon exercise of such Option, (iii) bear interest at a rate
no less than the rate of interest payable by the Company to its principal
lender, and (iv) contain such other terms as the Committee in its sole
discretion shall require. No Optionee shall be deemed to be a holder of any
shares subject to an Option unless and until a stock certificate or
certificates for such shares are issued to the person(s) under the terms of
this Plan. No adjustments shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or property) or distributions or
other rights for which the record date is prior to the date such stock
certificate is issued, except as expressly provided in Section 10 hereof.
(b) No Optionee shall be deemed to be a holder of any Shares subject
to an Option unless and until a stock certificate or certificates for such
Shares are issued to such person(s) under the terms of this Plan. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for
which the record date is prior to the date such stock certificate is issued,
except as expressly provided in Section 10 hereof.
8. Exercisability of Options. Any Option shall become exercisable
in such amounts, at such intervals, upon such events or occurrences and upon
such other terms and conditions as shall be provided in an individual Option
agreement evidencing such Option, except as otherwise provided in Section
5(b) or this Section 8.
(a) The expiration date(s) of an Option shall be determined by the
Committee at the time of grant, but in no event shall an Option be
exercisable after the expiration of 10 years from the date of grant of the
Option.
(b) Unless otherwise expressly provided in any Option as approved by
the Committee, notwithstanding the exercise schedule set forth in any Option,
each outstanding Option, may, in the sole discretion of the Committee, become
fully exercisable upon the date of the occurrence of any Change of Control,
but, unless otherwise expressly provided in any Option, no earlier than six
months after the date of grant, and if and only if Optionee is in the employ
of the Company on such date.
(c) The Committee may in its sole discretion accelerate the date on
which any Option may be exercised and may accelerate the vesting of any
Shares subject to any Option or previously acquired by the exercise of any
Option.
9. Termination of Option Period.
(a) Unless otherwise expressly provided in any Option, the
unexercised portion of any Option shall automatically and without notice
immediately terminate and become forfeited, null and void at the time of the
earliest to occur of the following:
(i) three months after the date on which the Optionee's employment
is terminated for any reason other than by reason of (A) Cause, (B) the
termination of the Optionee's employment with the Company by such Optionee
following less than sixty days' prior written notice to the Company of such
termination (an "Improper Termination"), (C) a mental or physical disability
(within the meaning of Section 22(e) of the Code) as determined by a medical
doctor satisfactory to the Committee, or (D) death;
(ii) immediately upon (A) the termination by the Company of the
Optionee's employment for Cause, or (B) an Improper Termination;
(iii) one year after the date on which the Optionee's employment is
terminated by reason of a mental or physical disability (within the meaning
of Code Section 22(e)) as determined by a medical doctor satisfactory to the
Committee or the later or earlier of three months after the date on which the
Optionee shall die if such death shall occur during the one-year period
specified herein; or
(iv) one year after the date of termination of the Optionee's
employment by reason of death of the employee;
(b) The Committee in its sole discretion may, by giving written
notice ("cancellation notice"), cancel effective upon the date of the
consummation of any corporate transaction described in Subsection 10(d)
hereof, any Option that remains unexercised on such date. Such cancellation
notice shall be given a reasonable period of time prior to the proposed date
of such cancellation and may be given either before or after approval of such
corporate transaction.
(c) Upon Optionee's termination of employment as described in this
Section 9, or otherwise, any Option (or portion thereof) not previously
vested or not yet exercisable pursuant to Section 8 of this Plan or the
vesting schedule set forth in such Option shall be immediately canceled.
10. Adjustment of Shares.
(a) If at any time while this Plan is in effect or unexercised
Options are outstanding, there shall be any increase or decrease in the
number of issued and outstanding Shares through the declaration of a stock
dividend or through any recapitalization resulting in a stock split,
combination or exchange of Shares (other than any such exchange or issuance of
Shares through which Shares are issued to effect an acquisition of another
business or entity or the Company's purchase of Shares to exercise a "call"
purchase option), then and in such event:
(i) appropriate adjustment shall be made in the maximum number of
Shares available for grant under this Plan, so that the same percentage of
the Company's issued and outstanding Shares shall continue to be subject to
being so optioned;
(ii) appropriate adjustment shall be made in the number of Shares
and the exercise price per Share thereof then subject to any outstanding
Option, so that the same percentage of the Company's issued and outstanding
Shares shall remain subject to purchase at the same aggregate exercise price;
and
(iii) such adjustments shall be made by the Committee, whose
determination in that respect shall be final, binding and conclusive.
(b) Subject to the specific terms of any Option, the Committee may
change the terms of Options outstanding under this Plan, with respect to the
option price or the number of Shares subject to the Options, or both, when,
in the Committee's sole discretion, such adjustments become appropriate by
reason of a corporate transaction described in Subsection 10(d) hereof, or
otherwise.
(c) Except as otherwise expressly provided herein, the issuance by
the Company of shares of its capital stock of any class, or securities
convertible into or exchangeable for shares of its capital stock of any
class, either in connection with a direct or unwritten sale or upon the
exercise of rights or warrants to subscribe therefor or purchase such Shares,
or upon conversion of shares of obligations of the Company convertible into
such shares or other securities, shall not affect, and no adjustment by
reason thereof shall be made with respect to the number of or exercise price of
Shares then subject to outstanding Options granted under this Plan.
(d) Without limiting the generality of the foregoing, the existence
of outstanding Options granted under this Plan shall not affect in any manner
the right or power of the Company to make, authorize or consummate (i) any or
all adjustments, reclassifications, recapitalizations, reorganizations or
other changes in the Company's capital structure or its business; (ii) any
merger or consolidation of the Company or to which the Company is a party;
(iii) any issuance by the Company of debt securities, or preferred or
preference stock that would rank senior to or above the Shares subject to
outstanding Options; (iv) any purchase or issuance by the Company of Shares
or other classes of common stock or common equity securities; (v) the
dissolution or liquidation of the Company; (vi) any sale, transfer,
encumbrance, pledge or assignment of all or any part of the assets or business
of the Company; or (vii) any other corporate act or proceeding, whether of a
similar character or otherwise.
(e) The Optionee shall receive written notice within a reasonable
time prior to the consummation of such action advising the Optionee of any of
the foregoing. The Committee may, in the exercise of its sole discretion, in
such instances declare that any Option shall terminate as of a date fixed by
the Board and give each Optionee the right to exercise his or her Option.
11. Transferability of Options. No Option granted hereunder shall
be sold, pledged, assigned, hypothecated, disposed or otherwise transferred
by the Optionee other than by will or the laws of descent and distribution,
unless otherwise authorized by the Board, and no Option shall be exercisable
during the Optionee's lifetime by any person other than the Optionee.
12. Issuance of Shares. As a condition of any sale or issuance of
Shares upon exercise of any Option, the Committee may require such agreements
or undertakings, if any, as the Committee may deem necessary or advisable to
assure compliance with any such law or regulation including, but not limited
to, the following:
(i) a representation and warranty by the Optionee to the Company, at
the time any Option is exercised, that he is acquiring the Shares to be
issued to him for investment and not with a view to, or for sale in connection
with, the distribution of any such Shares; and
(A) an agreement and undertaking to comply with all of the terms,
restrictions and provisions set forth in any then applicable shareholders'
agreement relating to the Shares, including, without limitation, any
restrictions on transferability, any rights of first refusal and any option
of the Company to "call" or purchase such Shares under then applicable
agreements, and
(B) any restrictive legend or legends, to be embossed or imprinted
on Share certificates, that are, in the discretion of the Committee,
necessary or appropriate to comply with the provisions of any securities law
or other restriction applicable to the issuance of the Shares.
13. Administration of this Plan.
(a) This Plan shall be administered by the Committee, which shall
consist of not less than two Non-Employee Directors. The Committee shall
have all of the powers of the Board with respect to this Plan. Any member of
the Committee may be removed at any time, with or without cause, by resolution
of the Board and any vacancy occurring in the membership of the Committee may
be filled by appointment by the Board.
(b) Subject to the provisions of this Plan, the Committee shall have
the authority, in its sole discretion, to: (i) grant Options, (ii) determine
the exercise price per Share at which Options may be exercised, (iii)
determine the Optionees to whom, and time or times at which, Options shall be
granted, (iv) determine the number of Shares to be represented by each
Option, (v) determine the terms, conditions and provisions of each Option
granted (which need not be identical) and, with the consent of the holder
thereof, modify or amend each Option, (vi) defer (with the consent of the
Optionee) or accelerate the exercise date of any Option, and (vii) make all
other determinations deemed necessary or advisable for the administration of
this Plan, including repricing, canceling and regranting Options.
(c) The Committee, from time to time, may adopt rules and
regulations for carrying out the purposes of this Plan. The Committee's
determinations and its interpretation and construction of any provision of
this Plan shall be final, conclusive and binding upon all Optionees and any
holders of any Options granted under this Plan.
(d) Any and all decisions or determinations of the Committee shall
be made either (i) by a majority vote of the members of the Committee at a
meeting of the Committee or (ii) without a meeting by the unanimous written
approval of the members of the Committee.
(e) No member of the Committee, or any Officer or Director of the
Company or its Subsidiaries, shall be personally liable for any act or
omission made in good faith in connection with this Plan.
14. Incentive Options for 10% Shareholders. Notwithstanding any
other provisions of this Plan to the contrary, an Incentive Stock Option
shall not be granted to any person owning directly or indirectly (through
attribution under Section 424(d) of the Code) at the date of grant, stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company (or of its Subsidiary) at the date of grant unless the
exercise price of such Option is at least 110% of the Fair Market Value of
the Shares subject to such Option on the date the Option is granted, and such
Option by its terms is not exercisable after the expiration of 10 years from
the date such Option is granted.
15. Interpretation.
(a) This Plan shall be administered and interpreted so that all
Incentive Stock Options granted under this Plan will qualify as Incentive
Stock Options under Section 422 of the Code. If any provision of this Plan
should be held invalid for the granting of Incentive Stock Options or illegal
for any reason, such determination shall not affect the remaining provisions
hereof, and this Plan shall be construed and enforced as if such provision
had never been included in this Plan.
(b) This Plan shall be governed by the laws of the State of Florida.
(c) Headings contained in this Plan are for convenience only and
shall in no manner be construed as part of this Plan or affect the meaning or
interpretation of any part of this Plan.
(d) Any reference to the masculine, feminine, or neuter gender shall
be a reference to such other gender as is appropriate.
(e) Time shall be of the essence with respect to all time periods
specified for the giving of notices to the company hereunder, as well as all
time periods for the expiration and termination of Options in accordance with
Section 9 hereof (or as otherwise set forth in an option agreement).
16. Amendment and Discontinuation of this Plan. Either the Board or
the Committee may from time to time amend this Plan or any Option without the
consent or approval of the shareholders of the Company; provided, however,
that, except to the extent provided in Section 9, no amendment or suspension
of this Plan or any Option issued here under shall substantially impair any
Option previously granted to any Optionee without the consent of such
Optionee.
17. Termination Date. This Plan shall terminate ten years after the
date of adoption by the Board of Directors.
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement ("Agreement") is made and effective
1/1/98, by and between Intraco Systems, Inc., a Florida Corporation
("Company") and Jack S. Berger ("Executive").
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment.
Company hereby agrees to initially employ Executive as its Chief Executive
Officer and Executive hereby accepts such employment in accordance with the
terms of this Agreement and the terms of employment applicable to regular
employees of Company. In the event of any conflict or ambiguity between the
terms of this Agreement and terms of employment applicable to regular
employees, the terms of this Agreement shall control. Election or
appointment of Executive to another office or position, regardless of whether
such office or position is inferior to Executive's initial office or position,
shall not be a breach of this Agreement.
2. Duties of Executive.
The duties of Executive shall include the performance of all of the duties
typical of the office held by Executive as described in the bylaws of the
Company and such other duties and projects as may be assigned by a superior
officer of the Company, if any, or the board of directors of the Company.
Executive shall devote his entire productive time, ability and attention to
the business of the Company and shall perform all duties in a professional,
ethical and businesslike manner. Executive will not, during the term of this
Agreement, directly or indirectly engage in any other business, either as an
employee, employer, consultant, principal, officer, director, advisor, or in
any other capacity, either with or without compensation, without the prior
written consent of Company.
3. Compensation.
Executive will be paid compensation during this Agreement as follows:
A. A base salary of One Hundred Thirty Seven Thousand, Eight Hundred Dollars
($137,800) per year, payable in installments according to the Company's
regular payroll schedule. The base salary shall be adjusted at the end of
each year of employment at the discretion of the board of directors.
4. Benefits.
A. Holidays. Executive shall be entitled to Holiday, Vacation & Sick Leave
and Emergency leave according to the regular policies and procedures of
Company. Additional sick leave or emergency leave over and above paid leave
provided by the Company, if any, shall be unpaid and shall be granted at the
discretion of the Board of Directors.
B. Medical and Group Life Insurance. Company agrees to include Executive in
the group medical and hospital plan of Company and provide group life
insurance for Executive at no charge to Executive in the amount of Five
Hundred Thousand ($500,000) during this Agreement. Executive shall be
responsible for payment of any federal or state income tax imposed upon these
benefits.
E. Pension and Profit Sharing Plans. Executive shall be entitled to
participate in any pension or profit sharing plan or other type of plan
adopted by Company for the benefit of its officers and/or regular employees.
F. Automobile. Company will provide to Executive the use of an automobile
of Executive's choice. Company will pay all automobile operating expenses
incurred by Executive in the performance of an Executive's company duties.
Company will procure and maintain in force an automobile liability policy for
the automobile with coverage, including Executive, in the amount as it
currently exists in combined single limit on bodily injury and property
damage.
G. Expense Reimbursement. Executive shall be entitled to reimbursement for
all reasonable expenses, including travel and entertainment, incurred by
Executive in the performance of Executive's duties. Executive will maintain
records and written receipts as required by the Company policy and reasonably
requested by the board of directors to substantiate such expenses.
5. Term and Termination.
A. The Initial Term of this Agreement shall commence on January 1, 1998 and
it shall continue in effect for a period of Three (3) years. Thereafter, the
Agreement shall be renewed upon the mutual agreement of Executive and
Company. This Agreement and Executive's employment may be terminated at
Company's discretion during the Initial Term, provided that Company shall pay
to Executive an amount equal to payment at Executive's base salary rate for
the remaining period of Initial Term, plus an amount equal to Fifty percent
(50%) of Executive's base salary. In the event of such termination,
Executive shall not be entitled to any incentive salary payment or any other
compensation then in effect, prorated or otherwise.
B. This Agreement and Executive's employment may be terminated by Company at
its discretion at any time after the Initial Term, provided that in such
case, Executive shall be paid Fifty percent (50%) of Executive's then
applicable base salary. In the event of such a discretionary termination,
Executive shall not be entitled to receive any incentive salary payment or any
other compensation then in effect, prorated or otherwise.
C. This Agreement may be terminated by Executive at Executive's discretion
by providing at least thirty (30) days prior written notice to Company. In
the event of termination by Executive pursuant to this subsection, Company
may immediately relieve Executive of all duties and immediately terminate this
Agreement, provided that Company shall pay Executive at the then applicable
base salary rate to the termination date included in Executive's original
termination notice.
D. In the event that Executive is in breach of any material obligation owed
Company in this Agreement, habitually neglects the duties to be performed
under this Agreement, engages in any conduct which is dishonest, damages the
reputation or standing of the Company, or is convicted of any criminal act or
engages in any act of moral turpitude, then Company may terminate this
Agreement upon five (5) days notice to Executive. In event of termination of
the agreement pursuant to this subsection, Executive shall be paid only at
the then applicable base salary rate up to and including the date of
termination. Executive shall not be paid any incentive salary payments or
other compensation, prorated or otherwise.
E. In the event Company is acquired, or is the non-surviving party in a
merger, or sells all or substantially all of its assets, this Agreement shall
not be terminated and Company agrees to use its best efforts to ensure that
the transferee or surviving company is bound by the provisions of this
Agreement.
6. Notices.
Any notice required by this Agreement or given in connection with it, shall
be in writing and shall be given to the appropriate party by personal
delivery or by certified mail, postage prepaid, or recognized overnight
delivery services;
If to Company:
Intraco Systems, Inc.
3998 FAU Blvd #210
Boca Raton, FL 33431
If to Executive:
Jack S. Berger
1101 Park Ave
Boca Raton FL 33486
7. Final Agreement.
This Agreement terminates and supersedes all prior understandings or
agreements on the subject matter hereof. This Agreement may be modified only
by a further writing that is duly executed by both parties.
8. Governing Law.
This Agreement shall be construed and enforced in accordance with the laws of
the state of Florida with venue in Palm Beach County..
9. Headings.
Headings used in this Agreement are provided for convenience only and shall
not be used to construe meaning or intent.
10. No Assignment.
Neither this Agreement nor any or interest in this Agreement may be assigned
by Executive without the prior express written approval of Company, which may
be withheld by Company at Company's absolute discretion.
11. Severability.
If any term of this Agreement is held by a court of competent jurisdiction to
be invalid or unenforceable, then this Agreement, including all of the
remaining terms, will remain in full force and effect as if such invalid or
unenforceable term had never been included.
12. Arbitration.
The parties agree that they will use their best efforts to amicably resolve
any dispute arising out of or relating to this Agreement. Any controversy,
claim or dispute that cannot be so resolved shall be settled by final binding
arbitration in accordance with the rules of the American Arbitration
Association and judgment upon the award rendered by the arbitrator or
arbitrators may be entered in any court having jurisdiction thereof. Any
such arbitration shall be conducted in Boca Raton, Florida, or such other
place as may be mutually agreed upon by the parties. Within fifteen (15) days
after the commencement of the arbitration, each party shall select one person
to act as arbitrator, and the two arbitrators so selected shall select a
third arbitrator within ten (10) days of their appointment. Each party shall
bear its own costs and expenses and an equal share of the arbitrator's expenses
and administrative fees of arbitration.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
Intraco Systems, Inc.
By: ______________________________ _________________________________
Jack S. Berger, Jack S. Berger
President An Individual
Memorandum of Understanding
As of the above referenced date, Intraco Systems, Inc, ("Intraco") hereby
excepts Jack S. Berger to engage in the normal business activities as they
relate to; 1) Pro-Data Systems, Inc, 2) Intraco International, Inc. 3)
Intraco Holding, Inc. 4) Intraco Trading, Inc., (the "Excepted Businesses").
It is further understood that the business activities of the Excepted
Businesses are non-competitive to those of Intraco's and that Mr. Berger's
involvement will not interfere with his duties as they relate to Intraco. In
the event that this understanding is breached in either respect, Intraco
reserves the right to revoke this Memorandum of Understanding. Subsequent to
any notice as it may be given, continued involvement with the Excepted
Businesses will be considered a breach of a material obligation as defined in
that Executive Employment Agreement dated 1/1/98 between Mr. Berger and
Intraco.
Agreed this 1st day of January, 1998
______________________________ ______________________________
Jack S. Berger, President Jack S Berger, an Individual
Intraco Systems, Inc.
INTRACO SYSTEMS, INC.
NONDISCLOSURE AND NON-COMPETITION AGREEMENT
ADDENDUM B
As an employee of Intraco Systems, Inc., I hereby agree to observe all
the provisions of this Agreement, as well as all other rules and policies
that Intraco Systems, Inc. may announce from time to time. Furthermore, this
AGREEMENT is provided by me for the benefit of Intraco Systems, Inc., its
subsidiaries, affiliates, successors and assigns (collectively referred to
"Intraco Systems" or the "Company"). This Agreement serves as a legally
binding acknowledgment and assignment of the ownership of all "Work Product"
(as defined below) that Company may encounter.
Section 1. AVOIDANCE OF CONFLICT OF INTEREST
While employed by Intraco Systems, I will not engage in. any other
business activity that conflicts with my duties to Intraco Systems. Under no
circumstances win I work for any competitor or have any financial interest in
any competitor of Intraco Systems; provided, however, that this Agreement
does not prohibit investment of a reasonable part of my assets in the stock
or securities of any competitor whose stock or securities are publicly traded
on a national exchange.
Section 2. OWNERSHIP AND RIGHTS IN WORK PRODUCT
For purposes of this Agreement, "Work Product" shall mean all
intellectual property rights, including all trade secrets, U.S. and
international copyrights, patentable inventions, and other intellectual
property rights in any programming, documentation, technology, or other work
product that is created in connection with my Work. In addition, all rights
in any preexisting programming, documentation, technology, or other Work
Product provided to Company during the course of my employment or engagement
shall automatically become part of the Work Product. hereunder, whether or not
it arises specifically out of my "Work." For purposes of this Agreement, "Work"
shall mean (1) any direct assignments and required performance by or for
Company, and (2) any other productive output that relates to the business of
Company and is produced during the course of my engagement by Company. For
this purpose, Work may be considered present even after normal working hours,
away from Owner's premises, on an unsupervised basis, alone or with others.
Unless otherwise provided in a subsequent writing signed by Company, this
Agreement shall apply to all Work Product created in connection with all Work
conducted before or after the date of this Agreement.
Intraco Systems, Inc. shall own all rights in the Work Product. To this end,
all Work Product shall be considered Work made by me for hire for Company. If
any of the Work Product may not, by operation of law or agreement be
considered Work made by me for hire for Company (or if ownership of all
rights therein do not otherwise vest exclusively in Company), I agree to
assign, and upon creation thereof automatically assign, without further
consideration, the ownership thereof to Company. I hereby irrevocably
relinquish for the benefit of Company and its assigns any moral rights in the
Work Product recognized by applicable law. Company shall have the right to
obtain and hold, in whatever name or capacity it selects, copyrights,
registrations, and any other protection available in the Work Product.
I agree to perform upon the request of Company, during or after my Work,
such Further acts as may be necessary or desirable to transfer, perfect, and
defend Owner's ownership of the Work Product, including by (1) executing,
acknowledging, and delivering any requested affidavits and documents of
assignment and conveyance, (2) obtaining and/or aiding in the enforcement of
copyrights, trade secrets, and (if applicable) patents with respect to the
Work Product in any countries, and (3) providing testimony in connection with
any proceeding affecting the rights of Company in any Work Product.
I warrant that my Work for Company does not and will not in any way
conflict with any remaining obligations I may have with any prior employer or
contractor. I also agree to develop all Work Product in a manner that avoids
even the appearance of infringement of any third party's intellectual
property rights.
Section 3. CONFIDENTIALITY AND NON-DISCLOSURE
During the course of my engagement and afterwards, I agree not to use or
disclose any trade secrets of Company at any time except as necessary to
perform my duties for Company. Under the law, a "trade secret" -is a type of
intangible property, the theft (i.e., misappropriation) of which is a tort
and crime in most states. It does not have to be in written form to be
protected.
A trade secret generally consists of valuable, secret information or ideas
that Company collects or uses in order to keep its competitive edge,
including confidential information supplied to Company by its customers,
clients, vendors, or agents. Examples of trade secrets are such technical
information as manufacturing or operating processes, equipment design,
product specifications, computer software in source code form, and other
proprietary technology, and such business information as selling and pricing
information and procedures, customer lists, business and marketing plans, ideas
and plans for products, services or other business development, and internal
financial statements. These restrictions do not apply to any information
generally available to the public or any information properly obtained from a
completely independent source.
Furthermore, I agree to maintain in strict confidence, and agree not to
use and disclose except as authorized by Intraco Systems, any information of
a competitively sensitive or proprietary nature that I receive from Intraco
Systems, Inc. or its clients or contractors in connection with my services
hereunder. Intraco Systems agrees to take reasonable steps to identify, and
cause its clients and contractors to identify, for my benefit such
information, including by using confidentiality notices in written material
where appropriate. These restrictions shall not be construed to apply to (1)
information generally available to the public, (2) information released by
Intraco Systems or its clients or contractors, as the case may be, generally
without restriction, (3) information independently developed or acquired by
me without reliance in any way on other protected information of Intraco
Systems or its clients or contractors, or (4) information approved by Intraco
Systems or its clients or contractors, as the case may be, for my use and.
disclosure without restriction.
Section 4. RETURN OF MATERIALS
Upon the request of Intraco Systems and, in any event, upon termination
of my employment, I will leave with Intraco Systems all memoranda, notes,
records, drawings, manuals, disks, or other documents and media pertaining to
Intraco Systems's business, including all copies thereof.
Section 5. COVENANT NOT TO COMPETE
During the term hereof and for a period of two years thereafter, I shall
not compete, directly or indirectly, with the Company, interfere with,
disrupt or attempt to disrupt the relationship, contractual or otherwise,
between the Company and any customer, client, supplier, consultant or employee
of the Company, including, without limitation, employing or being an investor
(representing more than a 5% equity interest) in, or officer, director or
consultant to, any person or entity which employs any former key or technical
employee whose employment with the Company was terminated after the date
which is one year prior to the date of termination of the employee's
employment therewith. An activity competitive with an activity engaged in by
the Company shall mean performing services specifically in the computer
systems integration industry (whether as an employee, officer, consultant,
director, partner or sole proprietor) for any person or entity engaged in the
business engaged in by the Company during the time of my relationship with the
Company or at the time of my termination of my relationship with the Company.
It is the desire and intent of the parties that the provisions of this
Section shall be enforced to the fullest extent permissible under the laws
and public policies applied in each jurisdiction in which enforcement is
sought. Accordingly, if any particular portion of this Section shall be
adjudicated to be invalid or unenforceable, this Section shall be deemed
amended to delete therefrom the portion thus adjudicated to be invalid or
unenforceable, such deletion to apply only with respect to the operation of
this Section in the particular jurisdiction in which such adjudication is made.
Nothing in this Section shall reduce or abrogate the employee's
obligations during the term of this Agreement..
Section 6. NONINTERFERENCE WITH PERSONNEL RELATIONS
During my employment with Intraco Systems and for a period of twelve
months afterwards, I will not knowingly solicit, entice, or persuade any
other employees of Intraco Systems to leave the services of Intraco Systems,
Inc. for any reason.
Section 7. REMEDIES
If there is a breach or threatened breach of the provisions of this
Agreement, the Company shall be entitled to an injunction restraining the
employee from such breach. Nothing herein shall be construed as prohibiting
the Company from pursuing any other remedies for such breach or threatened
breach.
Section 8. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
Laws of the State of Florida with venue in Palm Beach County.
Section 9. MISCELLANEOUS
This Agreement shall inure to the benefit of, and be binding upon,
Intraco Systems and its subsidiaries and affiliates, together with their
successors and assigns, and me, together with my executor, administrator,
personal representative, heirs, and legatees.
This Agreement merges and supersedes all prior and contemporaneous
agreements, undertakings, covenants, or conditions (including specifically
all prior confidentiality and non-competition agreements I have entered),
whether oral or written, express or implied, to the extent they contradict or
conflict with the provisions hereof.
Although it is understood that my employment is contingent on the
acceptance and observance of this Agreement, this Agreement shall not be
construed to make my employment other than -terminable at will at any time by
me or. Intraco Systems in the sole discretion of either party.
IN WITNESS WHEREOF, I have accepted and executed this Agreement under
seal as of the 1st day of January 1998.
EMPLOYEE INTRACO
SYSTEMS, INC.
__________________________ _____________________________
Signature: Jack S. Berger Signature: Jack
Berger, President
Social Security No.____________________
Address:________________________
_______________________________
INTRACO SYSTEMS. INC.
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement ("Agreement") is made and effective this
18th Day of January, 1999, by and between Intraco Systems, Inc., a Florida
Corporation ("Company") and Robert Marcus, an individual residing at 1401 NW
14th Ave, Boca Raton, Florida 33486.
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment
Company hereby agrees to initially employ Executive as its Chief Financial
Officer and Executive hereby accepts such employment in accordance with the
terms of this Agreement and the terms of employment applicable to regular
employees of Company. In the event of any conflict or ambiguity between the
terms of this Agreement and terms of employment applicable to regular
employees, the terms of this Agreement shall control. Election or appointment
of Executive to another office or position, regardless of whether such office
or position is inferior to Executive's initial office or position, shall not
be a breach of this Agreement.
2. Duties of Executive.
The duties of Executive shall include the performance of all of the duties
typical of the office held by Executive as described in the bylaws of the
Company and such other duties and projects as may be assigned by a superior
officer of the Company, if any, or the board of directors of the Company.
Executive shall devote his entire productive time, ability and attention to
the business of the Company and shall perform all duties in a professional,
ethical and businesslike manner. Executive will not during the term of this
Agreement, directly or indirectly engage in any other business, either as an
employee, employer, consultant, principal, officer, director, advisor, or in
any other capacity, either with or without compensation, without- the prior
written consent, of, Company- In addition to the duties described herein,
Executive is also authorized and directed to do the following: Duties
commonly attributed to a corporate Chief Financial Officer.
3. Compensation.
Executive will be paid compensation during this Agreement as follows:
A. A base salary of $84,000 during the first year, payable in installments of:
1) Months 1-3 = $5,500
2) Months 4-6 = $6,000
3) Months 7-12 = $8,250
All payments are to be made pro-rata according to the Company's regular
weekly payroll schedule. Upon the first anniversary of the consummation of
this agreement, the compensation will be reviewed and raised to a salary base
of $ 10,000 per month provided that the Company has grown to an annual run
rate of $15,000,000 gross revenues and a profitability of at least 8% net
before taxes measured over the average of the preceding 90 days of operations.
Further increases will be at the discretion of the board of directors.
B. An. option to purchase 150,000 shares of Intraco Systems common stock will
be furnished to Executive as per the terms of the "Stock Option Agreement'
appended to and made a part of this Agreement.
4. Benefits.
A. Holidays, Vacation & Sick Leave. Executive shall be entitled to Holiday,
Vacation, Sick Leave and Emergency Leave according to the regular policies
and procedures of Company.
Additional sick leave or emergency leave over and above paid leave provided
by the Company, if any, shall be unpaid and shall be granted at the
discretion of the board of directors.
B. Medical and Group Insurance. Company agrees to include Executive in the
group medical and hospital plan of the Company. Executive shall be
responsible for payment of any federal or state income tax imposed upon these
benefits.
C. Pension and Profit Sharing Plans. Executive shall be entitled to
participate in any pension or profit sharing plan or other type of plan
adopted by Company for the benefit of its officers and/or regular employees.
D. Expense Reimbursement. Executive shall be entitled to reimbursement for
all reasonable expenses, including travel and entertainment, incurred by
Executive in the performance of Executive's duties. Executive will maintain
records and written receipts as required by the Company policy and reasonably
requested by the board of directors to substantiate such expenses.
5. Term and Termination,
A. The Term of this Agreement shall commence and it shall continue in effect
for a period of Three (3) years. Thereafter, the Agreement shall be renewed
upon mutual agreement of Executive and Company. The first 90 days of this
Agreement shall be considered probationary and, during this time, the Company
may terminate this Agreement by providing at least 30 days prior written
notice to Executive. In the event of termination by Company pursuant to this
subsection, Company may immediately relieve Executive of all duties ,
provided that Company shall pay Executive at the then applicable base salary
rate to the end of the probationary period. Thereafter, this Agreement and
Executive's employment may be terminated at Company's discretion during the
Term, provided that Company shall pay to Executive an amount equal to payment
at Executive's base salary rate for the remaining period of Term in effect,
prorated or otherwise. In the event of such termination, Executive shall not
be entitled to any other compensation then in effect, prorated or otherwise.
B. This Agreement may be terminated by Executive at Executive's discretion by
providing at least thirty (30) days prior written notice to Company. In the
event of termination by Executive pursuant to this subsection, Company may
immediately relieve Executive of all duties and immediately terminate this
Agreement, provided that Company shall pay Executive at the then applicable
base salary rate to the termination date included in Executive's original
termination notice.
C. In the event that Executive is in breach of any material obligation owed
Company in this Agreement, habitually neglects the duties to be performed
under this Agreement, engages in any conduct which is dishonest, damages the
reputation or standing of the Company, or is convicted of any criminal act or
engages in any act of moral turpitude, then Company may terminate this
Agreement upon five (5) days notice to Executive. In event of termination. of
the agreement pursuant to this subsection, Executive shall be paid only at
the then applicable base salary rate up to and including the date of
termination.
Executive shall not be paid any incentive salary payments or other
compensation, prorated or otherwise.
D. In the event Company is acquired, or is the non-surviving party in a
merger, or sells all or substantially all of its assets, this Agreement shall
not be terminated and Company agrees to use its best efforts to ensure that
the transferee or surviving company is bound by the provisions of this
Agreement.
6. Notices.
Any notice required by this Agreement or given in connection with it, shall
be in writing and shall be given to the appropriate party by personal
delivery or by certified mail, postage prepaid, or recognized overnight
delivery services;
If to Company:
Intraco Systems, Inc.
1356 NW 2nd Ave
Boca Raton, FL 33432
If to Executive:
Robert Marcus
1401 NW 14" Ave
Boca Raton FL 33486
7. Final Agreement.
This Agreement terminates and supersedes all prior understandings or
agreements on the subject matter hereof This Agreement may be modified only
by a further writing that is duly executed by both parties.
Governing Law.
This Agreement shall be construed and enforced in accordance with the laws of
the state of Florida with venue in. Palm Beach County.
9. Headings.
Headings used in this Agreement are provided for convenience only and shall
not be used to construe meaning or intent.
10. No Assignment.
Neither this Agreement nor any or interest in this Agreement may be assigned
by Executive without the prior express written approval of Company, which may
be withheld by Company at Company's absolute discretion.
11. Severability. If any term of this Agreement is held by a court of
competent jurisdiction- to be invalid or unenforceable, then this Agreement,
including all of the remaining terms, will remain in full force and effect as
if such invalid or unenforceable term had never been included.
12. Arbitration. The parties agree that they will use their best efforts to
amicably resolve any dispute arising out of or relating to this Agreement.
Any controversy, claim or dispute that cannot be so resolved shall be settled
by final binding arbitration in accordance with the rules of the American
Arbitration Association and judgment upon the award rendered by the
arbitrator or arbitrators may be entered in any court having jurisdiction
thereof Any such arbitration shall be conducted in Boca Raton, Florida, or
such other place as may be mutually agreed upon by the parties. Within fifteen
(15) days after the commencement of the arbitration, each party shall select
one person to act as arbitrator, and the two arbitrators so selected shall
select a third arbitrator within ten (10) days of their appointment. Each
party shall bear its own costs and expenses and an equal share of the
arbitrator's expenses and administrative fees of arbitration.
Executed by the parties as of the day and year first written above.
Company:
____________________________
By: Jack S. Berger, President
Executive
____________________________
Robert Marcus:
Memorandum of Understanding
As of the above referenced date, Intraco Systems, Inc, ("Intraco") hereby
excepts Robert Marcus to engage in the normal business activities as they
relate to;
Global Resources Group, Inc.
235 Sunrise Ave Ste C-24
Palm Beach FL 33480
New Life Anti-Aging Institute, Inc.
903 Crandon Blvd
Key Biscayne FL 33149
American Racing League
5499 North Federal Highway
Boca Raton FL 33487
Advanced Microcomputer Systems, Inc.
1460 SW 3rd St
Pompano Beach FL 33069
Hereafter the "Excepted Businesses".
It is further understood that the business activities of the Excepted
Businesses are non-competitive to those of Intraco's and that Mr. Marcus's
involvement will not interfere with his duties as they relate to Intraco and
that, in any event, all business activities with these Excepted Businesses
will be terminated within 90 days from this agreement. In the event that this
understanding is breached in either respect, Intraco reserves the right to
revoke this Memorandum of Understanding. Subsequent to any notice as it may
be given, continued involvement with the Excepted Businesses will be
considered a breach of a material obligation as defined in that Executive
Employment Agreement dated 1/18/99 between Mr. Marcus and Intraco.
Agreed this 18th day of January, 1999
______________________________ ______________________________
Jack S Berger, President Robert Marcus, an Individual
Intraco Systems, Inc.
INTRACO SYSTEMS, INC.
NONDISCLOSURE AND NON-COMPETITION AGREEMENT
ADDENDUM B
As an employee of Intraco Systems, Inc., I hereby agree to observe all
the provisions of this Agreement, as well as all other rules and policies
that Intraco Systems, Inc. may announce from time to time. Furthermore, this
AGREEMENT is provided by me for the benefit of Intraco Systems, Inc., its
subsidiaries, affiliates, successors and assigns (collectively referred to
"Intraco Systems" or the "Company"). This Agreement serves as a legally
binding acknowledgment and assignment of the ownership of all "Work Product"
(as defined below) that Company may encounter.
Section 1. AVOIDANCE OF CONFLICT OF INTEREST
While employed by Intraco Systems, I will not engage in. any other
business activity that conflicts with my duties to Intraco Systems. Under no
circumstances win I work for any competitor or have any financial interest in
any competitor of Intraco Systems; provided, however, that this Agreement
does not prohibit investment of a reasonable part of my assets in the stock
or securities of any competitor whose stock or securities are publicly traded
on a national exchange.
Section 2. OWNERSHIP AND RIGHTS IN WORK PRODUCT
For purposes of this Agreement, "Work Product" shall mean all
intellectual property rights, including all trade secrets, U.S. and
international copyrights, patentable inventions, and other intellectual
property rights in any programming, documentation, technology, or other work
product that is created in connection with my Work. In addition, all rights
in any preexisting programming, documentation, technology, or other Work
Product provided to Company during the course of my employment or engagement
shall automatically become part of the Work Product. hereunder, whether or not
it arises specifically out of my "Work." For purposes of this Agreement,
"Work" shall mean (1) any direct assignments and required performance by or
for Company, and (2) any other productive output that relates to the business
of Company and is produced during the course of my engagement by Company. For
this purpose, Work may be considered present even after normal working hours,
away from Owner's premises, on an unsupervised basis, alone or with others.
Unless otherwise provided in a subsequent writing signed by Company, this
Agreement shall apply to all Work Product created in connection with all Work
conducted before or after the date of this Agreement.
Intraco Systems, Inc. shall own all rights in the Work Product. To this end,
all Work Product shall be considered Work made by me for hire for Company. If
any of the Work Product may not, by operation of law or agreement be
considered Work made by me for hire for Company (or if ownership of all
rights therein do not otherwise vest exclusively in Company), I agree to
assign, and upon creation thereof automatically assign, without further
consideration, the ownership thereof to Company. I hereby irrevocably
relinquish for the benefit of Company and its assigns any moral rights in the
Work Product recognized by applicable law. Company shall have the right to
obtain and hold, in whatever name or capacity it selects, copyrights, registrati
ons, and any other protection available in the Work Product.
I agree to perform upon the request of Company, during or after my Work,
such Further acts as may be necessary or desirable to transfer, perfect, and
defend Owner's ownership of the Work Product, including by (1) executing,
acknowledging, and delivering any requested affidavits and documents of
assignment and conveyance, (2) obtaining and/or aiding in the enforcement of
copyrights, trade secrets, and (if applicable) patents with respect to the
Work Product in any countries, and (3) providing testimony in connection with
any proceeding affecting the rights of Company in any Work Product.
I warrant that my Work for Company does not and will not in any way
conflict with any remaining obligations I may have with any prior employer or
contractor. I also agree to develop all Work Product in a manner that avoids
even the appearance of infringement of any third party's intellectual
property rights.
Section 3. CONFIDENTIALITY AND NON-DISCLOSURE
During the course of my engagement and afterwards, I agree not to use or
disclose any trade secrets of Company at any time except as necessary to
perform my duties for Company. Under the law, a "trade secret" -is a type of
intangible property, the theft (i.e., misappropriation) of which is a tort
and crime in most states. It does not have to be in written form to be
protected.
A trade secret generally consists of valuable, secret information or ideas
that Company collects or uses in order to keep its competitive edge,
including confidential information supplied to Company by its customers,
clients, vendors, or agents. Examples of trade secrets are such technical
information as manufacturing or operating processes, equipment design,
product specifications, computer software in source code form, and other
proprietary technology, and such business information as selling and pricing
information and procedures, customer lists, business and marketing plans,
ideas and plans for products, services or other business development, and
internal financial statements. These restrictions do not apply to any
information generally available to the public or any information properly
obtained from a completely independent source.
Furthermore, I agree to maintain in strict confidence, and agree not to
use and disclose except as authorized by Intraco Systems, any information of
a competitively sensitive or proprietary nature that I receive from Intraco
Systems, Inc. or its clients or contractors in connection with my services
hereunder. Intraco Systems agrees to take reasonable steps to identify, and
cause its clients and contractors to identify, for my benefit such
information, including by using confidentiality notices in written material
where appropriate. These restrictions shall not be construed to apply to (1)
information generally available to the public, (2) information released by
Intraco Systems or its clients or contractors, as the case may be, generally
without restriction, (3) information independently developed or acquired by
me without reliance in any way on other protected information of Intraco
Systems or its clients or contractors, or (4) information approved by Intraco
Systems or its clients or contractors, as the case may be, for my use and.
disclosure without restriction.
Section 4. RETURN OF MATERIALS
Upon the request of Intraco Systems and, in any event, upon termination
of my employment, I will leave with Intraco Systems all memoranda, notes,
records, drawings, manuals, disks, or other documents and media pertaining to
Intraco Systems's business, including all copies thereof.
Section 5. COVENANT NOT TO COMPETE
During the term hereof and for a period of two years thereafter, I shall
not compete, directly or indirectly, with the Company, interfere with,
disrupt or attempt to disrupt the relationship, contractual or otherwise,
between the Company and any customer, client, supplier, consultant or employee
of the Company, including, without limitation, employing or being an investor
(representing more than a 5% equity interest) in, or officer, director or
consultant to, any person or entity which employs any former key or technical
employee whose employment with the Company was terminated after the date
which is one year prior to the date of termination of the employee's
employment therewith. An activity competitive with an activity engaged in by
the Company shall mean performing services specifically in the computer
systems integration industry (whether as an employee, officer, consultant,
director, partner or sole proprietor) for any person or entity engaged in the
business engaged in by the Company during the time of my relationship with the
Company or at the time of my termination of my relationship with the Company.
It is the desire and intent of the parties that the provisions of this
Section shall be enforced to the fullest extent permissible under the laws
and public policies applied in each jurisdiction in which enforcement is
sought. Accordingly, if any particular portion of this Section shall be
adjudicated to be invalid or unenforceable, this Section shall be deemed
amended to delete therefrom the portion thus adjudicated to be invalid or
unenforceable, such deletion to apply only with respect to the operation of
this Section in the particular jurisdiction in which such adjudication is
made.
Nothing in this Section shall reduce or abrogate the employee's
obligations during the term of this Agreement..
Section 6. NONINTERFERENCE WITH PERSONNEL RELATIONS
During my employment with Intraco Systems and for a period of twelve
months afterwards, I will not knowingly solicit, entice, or persuade any
other employees of Intraco Systems to leave the services of Intraco Systems,
Inc. for any reason.
Section 7. REMEDIES
If there is a breach or threatened breach of the provisions of this
Agreement, the Company shall be entitled to an injunction restraining the
employee from such breach. Nothing herein shall be construed as prohibiting
the Company from pursuing any other remedies for such breach or threatened
breach.
Section 8. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
Laws of the State of Florida with venue in Palm Beach County.
Section 9. MISCELLANEOUS
This Agreement shall inure to the benefit of, and be binding upon,
Intraco Systems and its subsidiaries and affiliates, together with their
successors and assigns, and me, together with my executor, administrator,
personal representative, heirs, and legatees.
This Agreement merges and supersedes all prior and contemporaneous
agreements, undertakings, covenants, or conditions (including specifically
all prior confidentiality and non-competition agreements I have entered),
whether oral or written, express or implied, to the extent they contradict or
conflict with the provisions hereof.
Although it is understood that my employment is contingent on the
acceptance and observance of this Agreement, this Agreement shall not be
construed to make my employment other than terminable at will at any time by
me or. Intraco Systems in the sole discretion of either party.
IN WITNESS WHEREOF, I have accepted and executed this Agreement under
seal as of the 4th day of January 1999.
EMPLOYEE INTRACO SYSTEMS, INC.:
______________________ ______________________________
Signature:
Signature: Jack Berger,
President
Social Security No.
Address:________________________
_______________________________
Employment Agreement
This Agreement is effective 4th January 1999 by and between Intraco Systems,
Inc. a Florida corporation, hereinafter called ("Employer") and Carlos A.
Munoz, an individual (hereinafter called "Employee").
Recitals
1. The Employee has acquired outstanding and special skills and abilities
and an extensive background in and knowledge of the Employer's industry.
2. The Employer desires the services of the Employee, and is therefore
willing to engage his / her services on the terms and conditions stated below.
3. The Employee desires to be employed by the Employer and is willing to
do so on those terms and conditions.
Now, therefore, in consideration of the above recitals and of the mutual
promises and conditions in this Agreement, it is agreed as follows:
1. Employee's Duties and Authority. The Employer shall employ the
Employee as a Vice President of Engineering Services or in such other capacity
or capacities as the Employer may from time to time prescribe.
2. Other Business Activities. During employment, the Employee shall
devote his her work efforts to the performance of this Agreement and shall
not, without the Employer's prior written consent, render to others services
of any kind for compensation, or engage in any other business activity that
would materially interfere with the performance of his / her duties under
this Agreement.
2.1 Reasonable Time and Effort Required. During his / her employment,
the Employee shall devote such time, interest, and effort to the performance
of this Agreement as may be fair and reasonable.
3. Non-Competition During Employment. During the employment term, the
Employee shall not, in any fashion participate or engage in any activity or
other business competitive with the Employer's business. In addition, the
Employee, while employed, shall not take any action without the Employer's
prior written consent to establish, form, or become employed by a competing
business on termination of employment by the Employer. The Employee's failure
to comply with the provisions of the preceding sentence shall give the
Employer the right (in addition to all other remedies the Employer may have)
to terminate any benefits or compensation that the Employee may be otherwise
entitled to following termination of this Agreement.
4. Term of Employment. The Employee shall be employed from January 4,
1999 to December 31, 1999 unless the Employee is terminated as provided in
this Agreement or this Agreement is extended by mutual written consent of the
parties. The first ninety (90) days of employment are probationary and as
such employment may be terminated anytime during the first ninety days.
5. Place of Employment. During the employment term the Employee shall
perform the services required at the Employer's offices, located at 3998 FAU
Blvd #210 Boca Raton, FL The Employee acknowledges that the Employer may from
time to time require the Employee to travel temporarily to other locations on
the Employer's business.
6. Salary. See Addendum A
7. Additional Benefits. The Employee shall receive all other benefits of
employment generally available to the Employer's other Employees including the
following:
8. Expenses. The Employer shall reimburse the Employee for reasonable
expenses incurred in connection with the Employee's performance of his / her
duties including travel expenses, food, and lodging while away from home,
pursuant to the Employer's reimbursement policies. Employee shall provide
appropriate receipts to accounting in a reasonable time frame.
8.1 Reimbursement of Training & Education Expense. In the course of
employment, Employer will provide training and education for the benefit of
the Employee. In such cases as these costs are paid by Employer and in event
of termination of employment under section I I or 12, Employee agrees to
reimburse costs incurred for these purposes during the proceeding twelve
months.
9. Employee's Right of Ownership. All inventions conceived or developed
by the Employee during the term of this Agreement shall remain the property
of the Employee, provided, however, that as to all such inventions with respect
that the equipment, supplies, facilities, or trade secret information of the
Employer was used, or that relate to the business of the Employer or to the
Employer's actual or demonstrably anticipated research and development, or
that result from any work performed by the Employee for the Employer shall
remain the property of the Employer.
10. Indemnification By Employer. The Employer shall, to the maximum
extent permitted by law, indemnify and hold the Employee harmless against,
judgments, fines, settlements, and other amounts actually and reasonably
incurred in connection with any proceeding arising by reason of the
Employee's employment by the Employer.
11. Employer Termination
11.1 Involuntary Termination of Agreement. The Employer may terminate
this Agreement without cause, either on the last day of any fiscal year of
the Employer or upon 14 days prior written notice to the Employee.
11.2 Termination For Cause. The Employer may terminate this Agreement at
any time without notice if the Employee commits any material act of
dishonesty, discloses confidential information, is guilty of gross
carelessness or misconduct, or - unjustifiably neglects his / her duties
under this Agreement, or acts in any way that has a direct, substantial, and
adverse effect on the Employer's reputation.
11.3 Termination or Assignment on Merger. In the event of a merger where
the Employer is not the surviving entity, or of a sale of all or
substantially all of the Employer's assets, the Employer may, at its sole
option (1) assign this Agreement and all rights and obligations under it to
any business entity that succeeds to all or substantially all of the
Employer's business through that merger or sale of assets, or (2) on at least
30 days' prior written notice to the Employee, terminate this Agreement
effective on the date of the merger or sale of assets.
12. Employee Termination
12.1 Termination on Resignation. The Employee may terminate this
Agreement by giving the Employer 14 days prior written notice of resignation.
12.2 Termination on Disability. (1) If, during the period of employment,
the Employee becomes unable due to mental or physical illness or injury to
perform his / her duties under this Agreement in his / her normal and regular
manner, this Agreement shall be then terminated.
12.3 Termination on Death. If the Employee dies during the period of
employment this Agreement shall then be terminated.
13. Non-disclosure After Termination. Reference Addendum B
14. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, and
Judgment on the award rendered by the arbitrators may be entered in any court
having jurisdiction. There shall be three arbitrators, one to be chosen
directly by each party at will, and the third arbitrator to be selected by
the two arbitrators so chosen. Each party shall pay the fees of the arbitrator
he/ she selects and of his / her own attorneys, and the expenses of his / her
witnesses and all other expenses connected with presenting his / her case.
Other costs of the arbitration, including the cost of any record or
transcripts of the arbitration, administrative fees, the fee of the third
arbitrator, and all other fees and costs, shall be borne equally by the
parties. Despite the forgoing, the arbitrators may assign to one party or the
other any and all fees and costs as part of any arbitration award.
15. Entire Agreement. This Agreement contains the entire Agreement
between the parties and supersedes all prior oral and written Agreements,
understandings, commitments, and practices between the parties. No amendments
to this Agreement may be made except by a writing signed by both parties.
16. Choice of Law. The formation, construction, and performance of this
Agreement shall be construed in accordance with the laws of Florida with
venue in Palm Beach County.
17. Notices. Any notice to the Employer required or permitted under this
Agreement shall be given in writing to the Employer, either by personal
service or by registered or certified mail, postage prepaid, addressed to
Company's President at its then principal place I of business. Any such
notice to the Employee shall be given in a like manner and, if mailed, shall
be addressed to the Employee at his / her home address then shown in the
Employer's files. For the purpose of determining compliance with any time
limit in this Agreement, a notice shall be deemed to have been duly given (1)
on the date of service, if served personally on the party to whom notice is
to be given, or (2) on the second business day after mailing, if mailed to
the party to whom the notice is to be given in the mariner provided in this
section.
18. Severability. If any provision of this Agreement is held invalid or
unenforceable, the remainder of this Agreement shall nevertheless remain in
fall force and effect. If any provision is held invalid or unenforceable with
respect to particular circumstances, it shall nevertheless remain in full
force and effect in all other circumstances.
Executed by the parties as of the day and year first written above.
Employer
_________________________________
By: Jack Berger
President
Employee
__________________________________
ADDENDUM A
COMPENSATION
CARLOSA/MUNOZ
Salary: Starting base rate of $ 65,000.00 Dollars per annum
Increase base rate of $ 70,000.00 Dollars per annum. April 1, 1999
Increase of base rate to $ 75,000.00 Dollars per annum July 1, 1999
Increase of base rate to $ 80,000.00 Dollars per annum
October1, 1999
Stock Options: Employee will be eligible for options as they become
available.
Vacation: Employee will be entitled to vacation time according to the
regular policies of the Company:
I - 4 Years - 10 business days
5 - 9 Years - 15 business days
10 - 14 Years - 20 business days
15+ Years - Management Review
Holidays: Employee will be entitled to at least 6 paid holidays each
calendar year. The Company will notify Employee at the beginning of each year
of the holiday schedule for the coming year.
Medical: The Company will include Employee in the group medical plan of
the Company at the Company's expense. Dependents of the Employee may
be added at the Employee's expense as a payroll deduction.
Sick Leave: Employee will be entitled to sick leave according to the
regular policies of the Company.
Expense
Reimbursement: Employer will reimburse Employee for any and all
pre-approved necessary customary, and usual expenses incurred by him while
traveling for and on behalf of the Employer pursuant to Employer's
directions. Employee will provide appropriate receipts in a timely manner for
all reimbursed expenses.
INTRACO SYSTEMS, INC.
NONDISCLOSURE AND NON-COMPETITION AGREEMENT
ADDENDUM B
As an employee of Intraco Systems, Inc., I hereby agree to observe all
the provisions of this Agreement, as well as all other rules and policies
that Intraco Systems, Inc. may announce from time to time. Furthermore, this
AGREEMENT is provided by me for the benefit of Intraco Systems, Inc., its
subsidiaries, affiliates, successors and assigns (collectively referred to
"Intraco Systems" or the "Company"). This Agreement serves as a legally
binding acknowledgment and assignment of the ownership of all "Work Product"
(as defined below) that Company may encounter.
Section 1. AVOIDANCE OF CONFLICT OF INTEREST
While employed by Intraco Systems, I will not engage in. any other
business activity that conflicts with my duties to Intraco Systems. Under no
circumstances win I work for any competitor or have any financial interest in
any competitor of Intraco Systems; provided, however, that this Agreement
does not prohibit investment of a reasonable part of my assets in the stock
or securities of any competitor whose stock or securities are publicly traded
on a national exchange.
Section 2. OWNERSHIP AND RIGHTS IN WORK PRODUCT
For purposes of this Agreement, "Work Product" shall mean all
intellectual property rights, including all trade secrets, U.S. and
international copyrights, patentable inventions, and other intellectual
property rights in any programming, documentation, technology, or other work
product that is created in connection with my Work. In addition, all rights
in any preexisting programming, documentation, technology, or other Work
Product provided to Company during the course of my employment or engagement
shall automatically become part of the Work Product. hereunder, whether or not
it arises specifically out of my "Work." For purposes of this Agreement,
"Work" shall mean (1) any direct assignments and required performance by or
for Company, and (2) any other productive output that relates to the business
of Company and is produced during the course of my engagement by Company. For
this purpose, Work may be considered present even after normal working hours,
away from Owner's premises, on an unsupervised basis, alone or with others.
Unless otherwise provided in a subsequent writing signed by Company, this
Agreement shall apply to all Work Product created in connection with all Work
conducted before or after the date of this Agreement.
Intraco Systems, Inc. shall own all rights in the Work Product. To this end,
all Work Product shall be considered Work made by me for hire for Company. If
any of the Work Product may not, by operation of law or agreement be
considered Work made by me for hire for Company (or if ownership of all
rights therein do not otherwise vest exclusively in Company), I agree to
assign, and upon creation thereof automatically assign, without further
consideration, the ownership thereof to Company. I hereby irrevocably
relinquish for the benefit of Company and its assigns any moral rights in the
Work Product recognized by applicable law. Company shall have the right to
obtain and hold, in whatever name or capacity it selects, copyrights,
registrations, and any other protection available in the Work Product.
I agree to perform upon the request of Company, during or after my Work,
such Further acts as may be necessary or desirable to transfer, perfect, and
defend Owner's ownership of the Work Product, including by (1) executing,
acknowledging, and delivering any requested affidavits and documents of
assignment and conveyance, (2) obtaining and/or aiding in the enforcement of
copyrights, trade secrets, and (if applicable) patents with respect to the
Work Product in any countries, and (3) providing testimony in connection with
any proceeding affecting the rights of Company in any Work Product.
I warrant that my Work for Company does not and will not in any way
conflict with any remaining obligations I may have with any prior employer or
contractor. I also agree to develop all Work Product in a manner that avoids
even the appearance of infringement of any third party's intellectual
property rights.
Section 3. CONFIDENTIALITY AND NON-DISCLOSURE
During the course of my engagement and afterwards, I agree not to use or
disclose any trade secrets of Company at any time except as necessary to
perform my duties for Company. Under the law, a "trade secret" -is a type of
intangible property, the theft (i.e., misappropriation) of which is a tort
and crime in most states. It does not have to be in written form to be
protected.
A trade secret generally consists of valuable, secret information or ideas
that Company collects or uses in order to keep its competitive edge,
including confidential information supplied to Company by its customers,
clients, vendors, or agents. Examples of trade secrets are such technical
information as manufacturing or operating processes, equipment design,
product specifications, computer software in source code form, and other
proprietary technology, and such business information as selling and pricing
information and procedures, customer lists, business and marketing plans, ideas
and plans for products, services or other business development, and internal
financial statements. These restrictions do not apply to any information
generally available to the public or any information properly obtained from a
completely independent source.
Furthermore, I agree to maintain in strict confidence, and agree not to
use and disclose except as authorized by Intraco Systems, any information of
a competitively sensitive or proprietary nature that I receive from Intraco
Systems, Inc. or its clients or contractors in connection with my services
hereunder. Intraco Systems agrees to take reasonable steps to identify, and
cause its clients and contractors to identify, for my benefit such
information, including by using confidentiality notices in written material
where appropriate. These restrictions shall not be construed to apply to (1)
information generally available to the public, (2) information released by
Intraco Systems or its clients or contractors, as the case may be, generally
without restriction, (3) information independently developed or acquired by
me without reliance in any way on other protected information of Intraco
Systems or its clients or contractors, or (4) information approved by Intraco
Systems or its clients or contractors, as the case may be, for my use and.
disclosure without restriction.
Section 4. RETURN OF MATERIALS
Upon the request of Intraco Systems and, in any event, upon termination
of my employment, I will leave with Intraco Systems all memoranda, notes,
records, drawings, manuals, disks, or other documents and media pertaining to
Intraco Systems's business, including all copies thereof.
Section 5. COVENANT NOT TO COMPETE
During the term hereof and for a period of two years thereafter, I shall
not compete, directly or indirectly, with the Company, interfere with,
disrupt or attempt to disrupt the relationship, contractual or otherwise,
between the Company and any customer, client, supplier, consultant or employee
of the Company, including, without limitation, employing or being an investor
(representing more than a 5% equity interest) in, or officer, director or
consultant to, any person or entity which employs any former key or technical
employee whose employment with the Company was terminated after the date
which is one year prior to the date of termination of the employee's
employment therewith. An activity competitive with an activity engaged in by
the Company shall mean performing services specifically in the computer
systems integration industry (whether as an employee, officer, consultant,
director, partner or sole proprietor) for any person or entity engaged in the
business engaged in by the Company during the time of my relationship with the
Company or at the time of my termination of my relationship with the Company.
It is the desire and intent of the parties that the provisions of this
Section shall be enforced to the fullest extent permissible under the laws
and public policies applied in each jurisdiction in which enforcement is
sought. Accordingly, if any particular portion of this Section shall be
adjudicated to be invalid or unenforceable, this Section shall be deemed
amended to delete therefrom the portion thus adjudicated to be invalid or
unenforceable, such deletion to apply only with respect to the operation of
this Section in the particular jurisdiction in which such adjudication is
made.
Nothing in this Section shall reduce or abrogate the employee's
obligations during the term of this Agreement..
Section 6. NONINTERFERENCE WITH PERSONNEL RELATIONS
During my employment with Intraco Systems and for a period of twelve
months afterwards, I will not knowingly solicit, entice, or persuade any
other employees of Intraco Systems to leave the services of Intraco Systems,
Inc. for any reason.
Section 7. REMEDIES
If there is a breach or threatened breach of the provisions of this
Agreement, the Company shall be entitled to an injunction restraining the
employee from such breach. Nothing herein shall be construed as prohibiting
the Company from pursuing any other remedies for such breach or threatened
breach.
Section 8. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
Laws of the State of Florida with venue in Palm Beach County.
Section 9. MISCELLANEOUS
This Agreement shall inure to the benefit of, and be binding upon,
Intraco Systems and its subsidiaries and affiliates, together with their
successors and assigns, and me, together with my executor, administrator,
personal representative, heirs, and legatees.
This Agreement merges and supersedes all prior and contemporaneous
agreements, undertakings, covenants, or conditions (including specifically
all prior confidentiality and non-competition agreements I have entered),
whether oral or written, express or implied, to the extent they contradict or
conflict with the provisions hereof.
Although it is understood that my employment is contingent on the
acceptance and observance of this Agreement, this Agreement shall not be
construed to make my employment other than terminable at will at any time by
me or. Intraco Systems in the sole discretion of either party.
IN WITNESS WHEREOF, I have accepted and executed this Agreement under
seal as of the 4th day of January 1999.
EMPLOYEE INTRACO SYSTEMS, INC.:
______________________ ______________________________
Signature: Signature:
Jack Berger, President
Social Security No.
Address:________________________
_______________________________
AGREEMENT FOR PROFESSIONAL CONSULTING SERVICES
THIS AGREEMENT made this 7th day of May, 1997, between Intraco Systems,
Inc, (a Florida corporation), having its principal places of business at 1356
NW 2nd Ave, Boca Raton Florida 33432, (hereinafter referred to as the "Client"
or "Company"), and Vestar Capital Corporation, a California Corporation,
having its principal place of business at 2158 Montgomery Ave, Cardiff CA
92007 (hereinafter referred to as "Consultant").
1. Term of Contract. This Agreement will become effective on May 7,
1997 and will continue in effect until the services provided for herein have
been performed or until terminated as provided for herein. The term of this
agreement may be terminated by Consultant or the Company with thirty days
notice. If said termination occurs, all amounts due and owing Consultant, its
agents, and third parties shall be immediately due and payable.
2. Specific Services. Consultant agrees to perform the following
services associated with this Agreement:
A. To render professional advice, and to provide organization
and strategic planning to the Client. Consultant shall coordinate the
reorganization of Client, as to its present business matters, business
structure and organization, organize diligence and promotional materials as
well as oversee the completion of Client's business plan, create an investment
summary and analyze and identify potential acquisitions.
B. Any investment related document(s) will be prepared
primarily by Consultant with the guidance and final approval of Client's Legal
Counsel. The legality and suitability of disclosure represented in any
capital raising document is to be approved by the Client's Legal Counsel
before presentation to any potential investor. Furthermore, Client takes sole
responsibility for all such materials, representations and/or omissions
contained within.
C. To develop and coordinate the production of a marketing plan
for the Client's securities. It is understood that the Consultant will
specifically not be involved with the sales or brokering of any securities at
any time and that the Consultant nor any of Consultant's employees or
principals are NASD Licensed individuals or firms.
D. Client acknowledges and agrees that Consultant makes no
express or implied guarantee regarding the successful outcome of any effort on
behalf of the Client under this Agreement.
5. Method of Performing Services. Consultant will determine the
method, details, and means of performing the above-described services.
6. Compensation. Client agrees to pay for the services set forth herein
as follows:
A) Three Thousand Dollars to be paid on the date of signing of this contract
and upon the same date of each calendar month until March 1, 1998 or upon the
expiration of this Agreement (see Item One above).
One Thousand Six Hundred Fifty Dollars per week after March 1, 1998 or
until the expiration of this Agreement (see Item One above).
Upon the signing of this Agreement, Common Stock will be issued
to Consultant to equal 9.9% of all outstanding common stock, fully diluted,
after the issuance of this stock to Consultant.
Warrants will be issued to Consultant such that a 9.9% interest of all
outstanding common stock, fully diluted, will be maintained for a period of
three years from this agreement. The strike price of these warrants will
begin at Ten Cents ($0.10) per share and increase to equal the market price or
fair trading price as may be determined by the Company at the time of
issuance. But in no event will be more than 100% of the last traded price of
the Client's Common Stock.
In addition, Client agrees to pay any and all out-of-pocket costs and
expenses incurred by Consultant on behalf of Client in connection with the
services described in this Agreement. Said expenses include, but are not
limited to: travel, telephone, facsimile, meals and lodging as well as any
miscellaneous expenses related to the project.
EXPENSES ARE NOT TO EXCEED $300 IN ANY MONTHLY PERIOD WITHOUT PRIOR WRITTEN
AUTHORIZATION BY CLIENT.
Statements regarding all costs and expenses shall be invoiced no later than
thirty (30) days and will be due and payable upon five (5) days from receipt
unless other arrangements have been made with Consultant.
TERMS OF PAYMENT:
$3,300 Upon Execution (Includes $300 retainer against expenses)
Monthly payments as stipulated in paragraph 6 above.
Payment. Client shall make payments to Consultant and deliver by mail or
other courier service to Consultant at: Vestar Capital Corporation, 2158
Montgomery Ave, Cardiff CA 92007 or as stipulated by Consultant. Consultant
shall supply billing statements to Client every thirty (30) days for its service
s, costs, and expenses, as well as for any outside professionals or experts.
Payment regarding said statements shall be due and payable within five (5)
days of receipt by Client. Any objections regarding billing statements by the
Client must be in writing and delivered to Consultant no later than five (5)
days of receipt.
7. Hours During Which Services May Be Performed. Consultant agrees to
perform the above-described services on either Client's or Consultant's
premises, during regular business hours. Said business hours shall be
determined but the location of the premises where services are performed.
8. Tools and Instrumentalities. Consultant will supply all tools and
instrumentalities required to perform the services under this Agreement. This
does not however include the documentation, reports, or corporate records to
be supplied by Client.
9. Assignment. Neither this Agreement nor any duties or obligations
under this Agreement may be assigned by Consultant without prior written
notice to Client. Consultant reserves the right to assign and/or transfer upon
notice to Client, the rights, interests and responsibilities represented by
Consultant in this Agreement provided that the principles of the Consultant's
firm remain as such. Consultant's or Client's rights and obligations under
this Agreement will inure to the benefit of and be binding upon Consultant's
and Client's successors and assigns.
10. Cooperation of Client. Client agrees to comply with all reasonable,
requests of Consultant and provide access to all documents necessary to the
performance of Consultant's duties under this Agreement.
11. Place of Work. Client agrees to furnish space on Client's premises
for use by Consultant while performing the above-described services, if
applicable.
12. Partial Invalidity. If any provision in this Agreement is held by a
court of competent jurisdiction to be invalid, void, or unenforceable, the
remaining provisions will nevertheless continue in full force without being
impaired or invalidated in any way,
13. Arbitration. Any controversy or claim arising out of or relating to
this Agreement or the breach thereof will be settled by arbitration in
accordance with the rules of the American Arbitration Association, and
judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof.
14. Attorney Fees. If any action at law or in equity, including an
action for declaratory relief, is brought to enforce or interpret the
provisions of this Agreement, the prevailing party will be entitled to
reasonable attorney fees, which may be set by the court in the same action or
in a separate action brought for that purpose, in addition to any other relief
to which that party may be entitled.
15. Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Florida, venue of Palm Beach County.
16. Notices. All notices between the parties shall be in writing and
shall be deemed served when personally delivered to a party, or when deposited
in the United States mail (or other courier service) certified, first class,
postage prepaid, addressed to the party at the parties principal place of
business or to the address specified by the parties within this Agreement; or,
in the alternative, notices may be hand-delivered to each party with each
party signing a written receipt of notice.
17. Termination. In the event of a death, disability or other condition
(i.e. insolvency or bankruptcy) which would prevent Consultant from completing
its obligation(s) under said Agreement, any amounts outstanding or balances
owing on this contract described herein, shall become immediately due and
payable in full at the time of notice of such event.
18. Termination for Cause. Client and Consultant hereby agree that the
following causes of action fro termination shall become and remain effective
form the date of execution of this Agreement:
A. If during the term of this agreement, it is discovered by Consultant
that any information or documentation supplied to Consultant is either
misleading, substantially inaccurate or involve the possibility of a criminal
offense.
B. If payment for services is not promptly paid in accordance to the
terms of this Agreement; this shall be cause for termination of this Agreement
by Consultant, unless other arrangements have been made in writing between
Consultant and Client.
19. Termination by Client. Client may, upon giving thirty (30) days
notice to Consultant, cancel this Agreement for a good cause if it is found by
Client that Consultant and/or his agents are not acting in the best interest
of the Client's business.
If said termination by the Client occurs on or before the expiration of
this Agreement, paragraph 14 contained herein shall still be the governing
body as to any dispute between the parties. Further, if said termination
occurs, all expense amounts accrued, due and owing to Consultant, his agents,
and third parties shall be immediately become due and payable. In any event,
all securities allocated to Consultant shall be deemed vested and
non-refundable.
20. Miscellaneous. Client and Consultant hereby agree that, during the
term of this Agreement, Client will supply to Consultant and to the selected
accounting firm, monthly unaudited financial statements by the tenth day
following the month for which they are due (i.e., for the month of December,
the December statement will be due no later than January 10th).
21. Indemnification. (a) The Company, its Officers and Board of
Directors, irrevocably covenants, promises and agrees to indemnify Consultant,
its agents and any third parties and to hold Consultant, its agents and any
third parties associated with this project harmless from any liabilities which
may arise in the course of the term of this Agreement, against any and all
losses, claims, expenses, suffering, damages, costs, demands or liabilities,
joint or several, of whatever kind or nature which Consultant, its agents or
third parties may become subject arising out of or relating in any way to the
company, including without limitation, in each case attorney's fees, costs and
expenses actually incurred in defending against or enforcing and such losses,
claims, expenses, suffering, damages or liabilities, incurred by Consultant,
its agents or third parties by reason of any negligence, malfeasance,
misstatements or omissions to state material facts in connection with the work
contemplated for Client or any other action which may be brought or instituted
against the Company, its agents or third parties with respect to the
performance of Consultant's duties pursuant to this Agreement..
The Consultant irrevocably covenants, promises and agrees to indemnify
the Company, its officers and directors, its agents and any third parties and
to hold the Company and such persons, its agents and any third parties
associated with this project harmless from any liabilities which may arise in
the course of the term of this Agreement, against any and all losses, claims,
expenses, suffering, damages, costs, demands or liabilities, joint or several,
of whatever kind or nature which the Company and such persons, its agents or
third parties may become subject arising out of or relating in any way to the
company, including without limitation, in each case attorney's fees, costs and
expenses actually incurred in defending against or enforcing and such losses,
claims, expenses, suffering, damages or liabilities, incurred by the Company,
its officers and directors, its agents or third parties by reason of any
negligence, malfeasance, misstatements or omissions to state material facts in
connection with the work performed by Consultant or any other action which may
be brought or instituted against the Company, its officers and directors, its
agents or third parties with respect to the performance of Consultant's duties
pursuant to this Agreement.
This indemnification, however, will not extend to deliberate acts
performed by its agents, or third parties which are knowing and willful acts
intended to be misstatements or material fact non-disclosures or are criminal
acts in nature.
22. Entire Agreement of the Parties. This Agreement supersedes any and
all agreements, either oral or written, between the parties hereto with
respect to the rendering of services by Consultant for Client and contains all
the covenants and agreements between the parties with respect to the rendering
of such services in any manner whatsoever.
Each party to this Agreement acknowledges that no representations,
inducements, promises, or agreements, orally or otherwise, have been made by
any party, or anyone acting on behalf of any party, which are not embodied
herein, and that no other agreement, statement, or promise not contained in
this Agreement shall be valid or binding. Any modification of this Agreement
will be effective only if it is in writing signed by the parties.
EXECUTED at Boca Raton, Florida on the date and year first above written,
Client:_______________________ Consultant: ________________________
Jack Berger, President George M. Ecker, President
Intraco Systems, Inc., Vestar Capital Corporation,
a Florida Corporation a California Corporation
Notice of Assignment
Vestar Capital Corporation, a California Corporation, ("Consultant") as
Consultant to Intraco Systems Inc., a Florida Corporation ("Intraco") hereby
gives notice to Intraco of full assignment of that certain agreement entitled
"AGREEMENT FOR PROFESSIONAL CONSULTING SERVICES" signed May 7, 1997 between
Vestar Capital Corporation , a California Corporation and Intraco.
Full assignment of the rights, interests and responsibilities as represented
are hereby assigned and transferred from Vestar Capital Corporation, a
California Corporation to Vestar Capital Corporation, a Florida Corporation as
of July 18th, 1998.
Acknowledged and Accepted:
Jack S. Berger
President Intraco Systems, Inc.
A Florida Corporation
George M. Ecker, President
Vestar Capital Corporation,
A Florida Corporation
ADDENDUM TO CONTRACT
This addendum, upon mutual acceptance witnessed by the signatures of the
parties below, hereby modifies that "AGREEMENT FOR PROFESSIONAL CONSULTING
SERVICES" (the "Agreement") signed May 7th, 1997 by and between Intraco
Systems, Inc. ("Intraco") a Florida Corporation and Vestar Capital Corporation
("Vestar") a Florida Corporation and will be appended to and become a part of
the Agreement.
WHEREAS it is considered to be in the mutual best interest of both parties,
they hereby agree to modify Section 6 (D) "Compensation" such that Vestar will
receive warrants to purchase Intraco common stock under the following terms
and conditions:
Shares allowed to purchase Strike Price of Shares Exercisable
150,000 shares $0.25 5 years
Upon issuance of these warrants, it is agreed that Intraco will have met the
full intention and obligation of the Agreement, Vestar will become subject to
dilution along with all other shareholders and this section of the Agreement
will be canceled.
It is further agreed that Vestar has piggyback rights to the first
registration of the Company's common stock that will include all common stock
issued to Vestar as well as underlying common stock sufficient to exercise the
above referenced warrants. Such registration rights will not be subject to
further lockup or restriction as imposed by the Company.
Agreed to this 1st day of November, 1998.
________________________________ ______________________________
Jack S. Berger, President George M. Ecker. President
Intraco Systems, Inc. Vestar Capital Corporation
A Florida Corporation A Florida Corporation
Digital Equipment Corporation
10101 Alliance Drive
Cincinnati, Ohio USA
45242-4707
September 21, 1998
Intraco Systems, Inc.
1356 N. W. 2nd Ave.
Boca Raton, Fl 33432
Attn. Jack Berger - President
Dear Mr. Berger:
We have reviewed your Loan Restructure Proposal of September 16, 1998 and
agree to the basic proposal, with certain modifications as outlined below.
This letter is to stipulate the terms under which Digital Equipment
Corporation, hereafter referred to as "Digital", has agreed to extend a note
in the amount of $438,906.11 to Intraco Systems, Inc., hereafter referred to
as "Intraco", as well as other terms and conditions. This note along with the
payments outlined below will replace all open invoices dated 8/21/98 and
prior that Intraco has outstanding as well as the promissory note executed by
Intraco dated January 16, 1998. The following are the terms of this agreement:
1. This Note is to be secured with a I" Lien, represented by a Uniform
Commercial Code (UCC) Financing Statement, against all assets now owned and
hereafter acquired by Intraco. The signed note should be returned to Ron
Burkholder.
2. This Note is payable in 18 monthly installments, due on the 22nd of
each month starting October 22, 1998 at an annual interest rate of 10%. The
payment schedule is attached to the Note. This payment schedule is set to
allow full liquidation of the $438,906.11 debt over the 18 month term.
3. Upon signing the Note, Intraco will issue a check to Digital in the
amount of $28,385.00. These funds will be applied as follows: $26,000.00 will
be applied to the $212,000.00 outstanding balance on the current Digital Note
dated January 16, 1998. The additional $2,385.00 will be applied to accrued
interest due on the delinquent July Note payment. All payments should be sent
to Ron Burkholder at the address shown in the Note.
The New Note balance was computed as follows:
1/16/98 Note Balance as of 9/18/98: $212,000.00
Total of open invoices dated 7/31/98 and prior: $252,906.11
Sub-total: $464,906.11
Less July 17, 1998 principle payment: (26,000.00)
Balance of New Note dated Sept 22, 1998: $438,906.11
4. Intraco will execute an Escrow Agreement establishing an Escrow
Account, with Digital designating a 3rd Party acceptable to Digital as the
Escrow Agent. The Escrow Account will be established to include all current
invoices not included in the Note and invoices billed by Digital to Intraco
during the term of the Note. The terms of the Escrow Agreement shall include:
Intraco customer invoices issued on a Digital project will specify that
payment is to be made to "Intraco Systems Escrow Account". Intraco customer
payments will be deposited into the Escrow Account controlled by the Escrow
Agent. Disbursements of all payments deposited into the Escrow Account shall
be made by the Escrow Agent to Digital and Intraco on or before the 10th and
25th of each month. Digital invoices aged > 45 days as of each disbursement
date must be paid to Digital by the Escrow Agent or directly by Intraco or
Intraco will be in default on the Note. Intraco will be paid the difference
between the Intraco customer payment, on each Digital project, and the amount
owed Digital.
5. Contemporaneous with the execution of the Note, Intraco will provide
Digital with an unconditional release as it relates to all prior business
dealing between the two companies. The signed release should be returned to
Ron Burkholder.
6. Events of default:
Note payments not received on the stipulated dates, or
Digital contract billings that age beyond 45 days and are not paid by
the Escrow Agent or directly by Intraco, in accordance with the above Escrow
Terms. In the event of default the entire unpaid balance of the Note will
become immediately due and payable and all existing contracts or portions
thereof between Digital and Intraco that have not been prepaid, will be
terminated.
Regards,
Ron J. Burkholder
MCS SCT A/R Team Leader
Encl.: Promissory Note dated September 22, 1998
List of Invoices Included in Note
Release Form
Escrow Agreement
The above agreement is acknowledged and accepted;
By:
Jack Berger - President
Intraco Systems, Inc.
Date:- 9- 7,3
PROMISSORY NOTE
$438,906.11 September 22, 1998
FOR VALUE RECEIVED, INTRACO SYSTEMS, INC. (hereinafter" Intraco"), promises
to pay to the order of DIGITAL EQUIPMENT CORPORATION (hereinafter "Digital"),
the sum of FOUR HUNDRED THIRTY EIGHT THOUSAND NINE HUNDRED SIX and 11/100
DOLLARS ($438,906.11), plus interest at the rate of Ten percent (10 %) on
unpaid principal, in lawful money of the United States of America. The said
principal shall be payable without offset by (i) bank wire transfer or (ii)
Intraco company check made payable to "Digital Equipment Corporation", and
shall be paid or sent to Digital Equipment Corp, Attn: R. J. Burkholder,
10101 Alliance Road, Cincinnati, Ohio 45242, or at such other place as the
holder may otherwise specify in writing, such payments to be made as follows:
1) $12,000.00 on or before October 22, 1998, includes principal and
interest.
2) See attached amortization schedule for subsequent monthly payments.
Payments to be due on the 22nd day of each consecutive month thereafter as
set forth in the attached amortization schedule, such that the remaining
balance, plus interest, is paid in full by March 22, 2000.
Intraco reserves the privilege of prepayment without penalty. If any
installment of this Promissory Note is not paid when due, or upon an
assignment for the benefit of creditors by Intraco; or an application for the
appointment of a receiver for Intraco or for property of Intraco, or the
making, or assuming of a notice of an intended bulk sale by Intraco; or its
Principals, are otherwise in default of the terms of this Promissory Note
between Intraco and Digital (all of which are hereinafter referred to as
"Events of Default"), then the entire unpaid balance hereof shall be
accelerated and become immediately due and payable and it is agreed that
Digital may proceed without notice and demand with all available legal
remedies.
Every party to this Promissory Note, whether as maker, principal,
endorser, guarantor, surety, or otherwise, hereby waives presentment, demand,
protest and notice of dishonor and protest, and agrees that extension or
extensions of the time of payment of this Promissory Note or of any
installment or part thereof may be made before, at or after maturity by
agreement with any one or more of the parties hereto without notice to and
without releasing the liability of any party to this Promissory Note, and
also agree to pay all actual and reasonable expenses, including reasonable
attorney's fees, incurred in collecting this Promissory Note, in case this
Promissory Note or any installment or part thereof shall not be paid when due
or at maturity.
No delays or omission by the holder of this Promissory Note in
exercising any right hereunder will operate as a waiver of such right or any
other right under this Promissory Note. A waiver on one occasion will not be
constituted as a waiver of such right or any other right on another occasion.
Acceptance by Digital of any payments hereunder after the date specified shall
not be deemed a waiver of Digital's rights to proceed with its remedies after
such default.
This Promissory Note, executed under seal, will be governed by the law of the
State of Florida.
The undersigned, Jack Berger, personally and individually warrants that
he is the president, of Intraco, and that he is empowered with corporate
authority to execute this Promissory Note.
INTRACO SYSTEMS, INC.
By:__________________________
Name: Jack Berger
Title: President
RELEASE
For good and valuable consideration the receipt and sufficiency of which
is hereby acknowledged. Intraco Systems, Inc., for itself and for its
affiliates. predecessors. successors. directors, officers. attorneys.
employees, agents and assigns (collectively Intraco) and with the intention
of being legally bound, hereby voluntary, knowingly and willingly releases,
remises and forever discharges Digital Equipment Corporation and its parents,
subsidiaries, divisions, affiliates, predecessors, successors, directors,
officers, attorneys, employees, agents and assigns, (collectively.
"DIGITAL"), from any and all claims. debts, damages, liabilities, contracts,
actions, obligations, accounts, torts, causes of action, defenses, offsets,
judgments, demands, or claims for relief. of whatever kind or name, in law or
equity, whether known or unknown, which Intraco may have, or ever had,
relating in any way to all dealings between DIGITAL and Intraco prior to the
date of this Release.
Intraco agrees that all of the terms of this Release are contractual, and are
not merely recitals, and that this Release may not be orally modified or
changed.
Intraco understands, and agrees that the settlement for which this Release is
given is made in compromise of disputed claims and that the consideration and
other obligations made pursuant to this Release are not to be construed as an
admission of liability on the part of any party and that both parties deny
liability and intend merely to avoid the time, expense and uncertainty of
litigation.
Signed this ____ day of September, 1998.
Intraco Systems, Inc.
By: __________________________
Title:_________________________
ESCROW AGREEMENT
An Escrow Account shall be established by the Law Offices of Carman and
Smith, P.A., 199 E. Boca Raton Road, Boca Raton, FL 33432 as follows:
The parties have agreed to establish an escrow account which account shall be
used for the purpose of holding funds provided by Customers for payment of
purchase orders. The purpose of the escrow is to provide procedures for
payment of purchase orders from Intraco Systems, Inc. (hereinafter referred
to as "Intraco") to Digital Equipment Corporation (hereinafter referred to as
"Digital").
Intraco is to issue Purchase Orders to Digital as normal. Intraco will send a
copy of its Purchase Orders with payment distribution information to Escrow
Agent. This information will define the following: Ron Burkholder as the
Contact for Digital including the address, telephone and fax numbers; payment
submission details; and copies of Intraco Purchase Orders.
Escrow Agent shall then prepare a document package including a letter
confirming the amount of payment to be disbursed; the referenced Purchase
Order number and payment instructions; and a copy of the corresponding
Intraco Purchase Order. This document package will be faxed to Ron, who will
then review the documentation, and contact Intraco or the Escrow Agent with
any questions, changes or problems.
All invoices issued to a Customer on a project using the Escrow Account will
include payment terms specifying that payment is to be made to "Intraco
Systems Escrow Account". The Customer payments will be deposited into this
account. The Escrow Agent hereby agrees to distribute the proceeds as
specified.
1. Disbursements of all payments deposited into the Escrow Account shall
be made by the Escrow Agent to Digital and Intraco on or before the I Oh and
25"' of each month. Disbursements to Digital will be mailed to Digital
Equipment Corporation, PO. Box 100500, -Atlanta, GA, 30384 or at such other
place as the Digital may otherwise specify in writing, Disbursements to
Intraco will be mailed to: 1356 N.W. 2 Avenue, Boca Raton, FL 33432.
2. Digital invoices aged > 45 days as of each disbursement date must be
paid to Digital by the escrow Agent or directly by Intraco or Intraco will be
in default on the Note. Disputed invoices must be immediately identified and
communicated to Digital. If mutually agreed to by Digital in writing,
non-payment of these items would not create an event of default.
3. All Digital billings or credit memos will be paid based on the
original item date. Credit memo's issued to cancel or correct Digital billings
issued in error may be used upon receipt.
4. Intraco will be paid the difference between the Intraco customer
payment, on each Digital project, and the amount owed Digital.
5. Digital invoices will continue to be directed to Intraco, who will
provide copies to the Escrow Agent. On a monthly basis Digital will provide
the Escrow Agent a complete listing of all open invoices billed to Intraco.
This will allow the Escrow Agent to reconcile open invoices and payments due
Digital under Section 2 above.
If Escrow agent shall be uncertain as to its duties or rights hereunder or
shall receive instructions, claims or demands from either Intraco or Digital
or in regard to any third person with respect to the escrowed funds, which,
in its sole opinion, are in conflict with any provision of this Escrow
Agreement, Escrow Agent will be entitled to refrain from taking any action
until it shall be directed in writing from both Intraco and Digital and said
third person(s) if any, or by a final order or judgment of court of competent
jurisdiction.
In no event shall Escrow Agent be liable to either Intraco or Digital under
the terms of this Escrow Agreement, except for gross negligence or
misconduct.
In the event of any controversy involving the escrowed funds, Escrow Agent
shall be entitled to deposit the Escrowed Funds or any part thereof in the
registry of a court of competent jurisdiction, and upon such deposit, Escrow
Agent shall be released from all further liability in connection with the
escrowed funds and this Escrow Agreement. Escrow agent is entitled to
reasonable attorney's fees and costs if the above occurs.
Intraco and Digital acknowledge that Escrow Agent is the law firm
representing Intraco.
IN WITNESS THEREOF, the parties have executed this Escrow Agreement on
the day and year first above written.
Date:__________________________,1998
Digital Equipment Corporation
Dated:_________________________
By:________________________
Intraco Systems, Inc.
Dated:
________________________
By:_________________________
Escrow Agent:
Carman & Smith, P.A.
Dated:_________________________ By:__________________________
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