SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
Small Business Issuers
Under Section 12(b) or 12(g) of the Securities Exchange
Act of 1934
INTELLIWORXX, INC.
-------------------------------------------
(Name of Small Business Issuer in its Charter)
Florida 59-3336148
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(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
1819 Main Street, 11th Floor Sarasota, Florida 34236
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(941) 365-7790
-------------------------
(Issuer's Telephone Number)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class to be registered: Name of each exchange on which
each class is to be registered:
N/A N/A
- ------------------------------------- ---------------------------------
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock
- --------------------------------------------------------------------------------
<PAGE>
PART I
Item 1. DESCRIPTION OF BUSINESS.
INTRODUCTION
- ------------
Intelliworxx, Inc. ("Intelliworxx" or the "Company") specializes in creating
advanced, speech-driven mobile computer solutions. With products both in
production and under development, systems are designed primarily using
microprocessors from Intel Corporation ("Intel") and Windows(R) operating
systems from Microsoft Corporation ("Microsoft"). Having expertise in mobile
computing, human-machine interface, advanced multimedia, voice recognition,
video compression, Internet applications, software design and manufacturing,
Intelliworxx creates, designs and delivers products that offer specific
solutions for individual customer needs.
Intelliworxx was incorporated as a private, Florida research and development
firm in February 1998 ("Intelliworxx Florida"). Outdoor Resorts, Inc., a Florida
corporation, was organized on July 1, 1995 for the purposes of acquiring
campgrounds. On November 23, 1998, a transaction was closed in which
Intelliworxx Florida was merged into Outdoor Resorts, Inc. Through this reverse
merger, the shareholders of Intelliworxx Florida exchanged 600,000 shares for
12,000,000 shares of Outdoor Resorts, Inc. Outdoor Resorts, Inc. acquired all of
the assets and liabilities of Intelliworxx Florida, the name of Outdoor Resorts,
Inc. was changed to Intelliworxx, Inc. and new officers and directors were
elected. The authorized common shares were increased from 50,000,000 to
100,000,000 shares and a future issuance of up to 200,000 shares of restricted
common stock was approved in order to retire debt of Intelliworxx Florida of
which $365,000 of debt was retired by the issuance of 199,166 shares of common
stock. After the merger, new management changed the direction of the Company
from campground management to mobile computer-based technologies. Since this
time, the Company has developed numerous mobile-computing products.
There have been no bankruptcies, receiverships or similar proceedings in this
company.
INDUSTRY OVERVIEW
- -----------------
Maintaining a competitive edge in the advanced electronic product arena is a
challenge that developers and manufacturers continually face. These challenges
include, but are not limited to, market demands for increased product
performance, the need for a lower cost per function, and the need to decrease
the time from product development to market.
Mobile computers (notebook computers, computers in cars, airplanes or boats,
etc.) have become increasingly popular as part of the solution to many business
problems. As mobile computers gain greater levels of computing power, so do the
demands for additional features from mobile users. New demands such as
voice-driven operation, multimedia playback ability and wireless access to data
are challenging designers to provide these features in increasingly smaller
packages.
<PAGE>
From 1992 to 1997 the production of electronic equipment in the United States
grew from $217 billion to over $345 billion spread over several categories
(source: The US Census Bureau, http://www.census.gov/epcd/www/advanc2b.htm#S3).
Management believes that mobile computing has been and will continue to be one
of the fastest growing segments of electronic equipment production.
BUSINESS AND PRODUCT OVERVIEW
- -----------------------------
Intelliworxx specializes in creating advanced mobile computer-based solutions.
Management has developed what it believes is a fairly unique business model that
enables it to develop a range of seemingly diverse product lines with maximum
efficiency and speed. These product lines include both hardware and software and
offer specific solutions for individual customer needs.
The Intelliworxx Business Model
- -------------------------------
The Intelliworxx business model embodies two distinct concepts, "reusable
technologies" and the "virtual original equipment manufacturer" ("virtual OEM")
model.
Modern computer-based technology uses a collection of basic components such as
Pentium(TM) microprocessors from Intel and speech engine software from Lernout &
Hauspie Speech Products N.V. ("Lernout & Hauspie"). In the fast-evolving world
of technology products, new components appear at an ever-increasing pace. The
concept of reusable technologies means the Company develops advanced circuitry
and software (its "core technologies") in a well-defined, modular manner such
that the end results can be quickly deployed in a range of new products. This
concept also includes designing with an eye towards tomorrow's basic components.
Emphasis on reusable technologies leads to a three-step product development
process.
In step one the Company develops its core technologies with an emphasis on this
concept of reusable technologies. Step two is the development of product
platforms based on these core technologies. The product platforms include the
current state-of-the-art technology in mobile computing. They are designed so
that they can be turned into multiple products in a fraction of the usual
development time. Step three of the process is the creation of the individual
customer's solution from a selected product platform. The Company's emphasis on
reusable technologies results in fast, efficient and customer specific product
creation.
Intelliworxx does not manufacture its products. The Company "outsources" its
product manufacturing to electronic manufacturing services companies. A company
that develops and sells its own products but has other companies perform the
manufacturing is known as a "virtual original equipment manufacturer".
Possessing in excess of forty combined years of contract manufacturing
<PAGE>
experience, Intelliworxx's management has the expertise to manage outsourced
manufacturing efforts. The virtual OEM model frees the Company from staffing
manufacturing personnel and funding manufacturing equipment. It enables the
Company to focus on applying technology to meet customer requirements.
Intelliworxx Products
- ---------------------
The UCM(TM)
The Company has developed a multipurpose Pentium(TM)-based, multimedia-equipped
module called the Ubiquitous Computing Module ("UCM"). This device incorporates
advanced mobile computing features in a package smaller than a videocassette. In
keeping with the Company's reusable technologies concept, the UCM(TM) has been
developed as a computing "engine" to be embedded into vehicles as well as into
other devices. It can accommodate any of Intel's family of Pentium(R) processors
and is capable of running Microsoft's Windows(R) 95/98, NT/2000, or Windows(R)
CE operating systems.
The UCM(TM) is being used in airplanes at De Crane Holdings, Inc. and in police
cars for several police departments.
The VoiceTablet(TM)
A portable tablet computer is a hand-held clipboard with a flat display screen
and the electronics to drive the device. Intelliworxx has created the
VoiceTablet(TM), a rugged, portable tablet computer that can be voice-driven, or
touch/pen activated. The main differences between standard tablet computers and
the VoiceTablet(TM) are in the interface advantages. The VoiceTablet(TM) is
uniquely equipped with advanced audio circuitry optimized for voice input and
output and advanced video multimedia capabilities including the ability to play
digital video disk ("DVD") movies. Additionally, the VoiceTablet(TM) uses the
Intel Pentium(R) II Processor as a large amount of processing power is necessary
to perform both multi-media and speech applications simultaneously. The
VoiceTablet(TM) has been designed to use the Intel Pentium(R) III Processor as
well.
Intelliworxx has partnered with Lernout & Hauspie to provide advanced
voice-driven applications for the VoiceTablet(TM). Lernout & Hauspie is a
leading provider of speech and linguistics products and have a commanding
worldwide market share of the voice-driven medical applications arena (source:
Lernout & Hauspie web site http://www.lhs.com and conversations with Lernout &
Hauspie personnel). Intelliworxx is an authorized Value Added Reseller ("VAR")
for the entire line of Lernout & Hauspie products and applications. Lernout &
Hauspie is an authorized VAR for the Company's VoiceTablet(TM) and
Mentorworxx(TM) software, described in the following section.
The VoiceTablet(TM) has applications for the healthcare, public safety,
technology maintenance, insurance, manufacturing, and in-flight entertainment
markets. VoiceTablets(TM) are being produced for various customers including
General Motors Corp., Telxon Corporation, Florida Power & Light, the Department
<PAGE>
of Defense, several police departments, a major European airline and Lernout &
Hauspie. VoiceTablets(TM) equipped with the Company's Mentorworxx(TM) software
have been delivered to the US Marines and US Navy.
Mentorworxx(TM) Software
Intelliworxx has developed interactive mentoring software for the technology
maintenance and medical procedure assist markets. Mentoring is when one person
with expertise in a given area aids another in solving problems. This is
accomplished by the person with expertise answering questions and offering tips.
Mentoring as used by the Company involves replacing the human expertise with
computer technology. The Company refers to its software as Mentorworxx(TM)
software incorporating "interactive multimedia mentoring" or "iM3(TM)"
technology. This software provides voice-driven, interactive access to specific
diagnostic and/or procedure data for commercial or military technology and
medical providers. The software, written for the Microsoft Windows(R) operating
systems, functions best on the Company's VoiceTablet(TM), UCM(TM), or Advanced
AutoPC, but works for any Pentium class, Windows(R)- based computer. Management
believes that this software will increase the productivity of technology
maintenance personnel and medical workers.
The Mentorworxx(TM) software has three components. Mentorworxx Explore(TM) is
the software component that plays back multimedia content to the user via voice
commands. It functions similar to the familiar "internet web-browser" wherein
the user intuitively selects underlined word or phrases ("links") on the screen
and is taken to the page directed by the link. Mentorworxx Create(TM) is the
program customers use to design their own mentoring applications. It is a visual
development environment that conceptually guides the user through the process of
creating the mentoring application. The user enjoys complete control over the
content preparation, presentation and linking data. The pages that are generated
can be read by any browser as well as by the Company's Mentorworxx Explore(TM)
product. Mentorworxx Convert(TM) is designed to overcome the single most
daunting concern regarding the development of mentoring systems - converting
existing data. Mentorworxx Convert(TM) can save hundreds of hours previously
devoted to the preparation of a mentoring system. Once templates have been
configured, Mentorworxx Convert(TM) automatically reads in all existing manual
based text and graphic data and prepares pages with links for use in Mentorworxx
Explore(TM).
The Advanced AutoPC
An Advanced AutoPC system and accompanying software has been developed for the
commercial and military automotive industries to provide information and
entertainment in a moving vehicle. The system is voice and touch-driven with a
compliment of interactive features that include Global Positioning Satellite
based navigation, cellular phone control, wireless Internet access,
environmental control and other functions. The system is capable of running
Microsoft's Windows 95/98, NT, 2000, or Windows(R) CE operating systems and is
the only such product to accommodate Intel's Pentium(R) MMX and Pentium(R) II
Processors.
<PAGE>
A version of our Advanced AutoPC is in pre-production (250 unit build) for a
major U.S. automotive manufacturer. Current purchase orders specify delivery of
up to 10,000 units. The Company is developing its own Advanced AutoPC product
that will be offered to existing AutoPC OEMs and resellers for them to resell as
their own brand.
WaveLink(TM)
Intelliworxx has combined advanced compression software with dedicated hardware
circuitry and a proprietary camera design to enable the fast transfer of video
data over POTs ("plain old telephone") wires as well as in the wireless arena.
The product, Wavelink(TM), is a PC card that plugs into a PC card slot and is
ideally suited to tablet or laptop computing. The Company's unique solution for
real-time mobile video conferencing over POTs will allow for high quality
transmission of video signals over low bandwidth mediums.
Initial marketing demonstrations are planned for the fourth quarter of 1999 and
will be targeted at the Company's existing customer base. However,
WaveLink(TM)will allow any desktop or laptop computer to provide full motion,
high quality video conferencing.
TARGET MARKETS
- --------------
The Advanced AutoPC market
- --------------------------
Introduction of AutoPC products for navigation purposes from stereo equipment
manufacturers such as Clarion Corporation ("Clarion"), Pioneer Electronics Inc.
("Pioneer"), and Alpine Electronics Inc. ("Alpine") excited auto buyers.
However, they expressed the need for more features and functionality. Therefore,
suppliers to the industry are engaging in two separate subdivisions of AutoPC
development; less sophisticated models for more economical vehicles and
feature-rich designs for luxury and recreational vehicles. The AutoPC suppliers
will be providing products aimed at lower cost vehicles where consumers are
adaptable to narrower feature sets. According to market analysis from a major US
automotive manufacturer, vehicles with suggested retail prices in excess of
$30,000 will include Advanced AutoPC offerings that will provide genuine PC
computing power with more features including continuous voice dictation and
multiple DVD playback. As prices for the Advanced AutoPC drop, it will replace
the existing, limited functionality AutoPC.
Domestic automakers are projecting requirements for in excess of one million
systems annually going into the new century. Near term projections for advanced
systems will hinge upon the sales of moderate to higher priced vehicles. Below
is a table indicating potential for domestic car sales for 1999 for Advanced
AutoPC systems (source: http://carpoint.msn.com).
<PAGE>
1999 Projected Moderate to High
-------------------------------
Priced Auto Sales
-----------------
Auto Maker Proj. Unit Sales 1999 Cars over $30,000
- ---------- --------------------- -----------------
General Motors Corp. 9,239,000 369,560
Ford Motor Co. 6,943,000 277,720
Chrysler Corp. 4,789,000 191,560
With 54 million automobiles and trucks manufactured each year, Microsoft, Intel
and industry analysts agree that the AutoPC market is the next area of explosive
growth for PC-based hardware and software. Below are management-derived
projections estimating potential Advanced Auto PC Sales.
Projections of Advanced Auto PC Sales
-------------------------------------
Manufacturer 2000 and 2001 autos Total ($ millions)
- ------------ ------------------- ------------------
General Motors Corp. 406,000 $203
Ford Motor Co. 305,000 $152
Chrysler Corp. 210,000 $105
Manufacturer 2002 and 2003 autos Total ($ millions)
- ------------ ------------------- ------------------
General Motors Corp. 447,000 $223
Ford Motor Co. 335,000 $167
Chrysler Corp. 231,000 $115
*(The above table assumes that 20% of the buyers of the moderate to
high priced car buyers shown in the previous table would be interested
in an Advanced AutoPC system priced at approximately $2,500.)
The Company also intends to target the Recreational Vehicle ("RV") market for
AutoPC sales. Fleetwood, Winnebago, Skyline and other RV companies sell over
250,000 vehicles each year in the United States alone.
Tablet Computing
- ----------------
Tablet computing is not a new market arena. Tablet computers have existed for
many years, but, much like the palmtop industry, were not viable choices for
mobile job assistance, as they did not have the features necessary to entice
buyers. Even so, tablet computers have enjoyed increasing sales due to demand
for data access for mobile workers. The table below indicates the sales picture
for tablet computing.
<PAGE>
Tablet Computer Sales
---------------------
1997 1998
Manufacturer Unit Sales / $ millions Unit Sales / $ millions
- ------------ ----------------------- -----------------------
Fujitsu Corporation 33,000 / $75 44,000 / $100
Telxon Corporation 24,000 / $54 32,000 / $ 72
MicroSlate Inc. 15,000 / $34 20,000 / $ 45
(Source: Derived from the Fujitsu Corporation, Telxon Corporation and
MicroSlate Inc. Web Sites and Management's Estimates.)
Intelliworxx has engineered a combination of Pentium(R)II electronics,
multimedia features and interactive software that allow the user to operate the
tablet "hands-free". Typically, tablet computers are operated through the use of
a pen or touch screen interface. While these options are still available, the
Intelliworxx enhanced tablet computer is driven primarily by voice command.
Tablet computing is increasing in popularity in healthcare, technology
maintenance, transportation, insurance, and in-flight entertainment. Public
Safety is also a growing market for tablet computers. There are over 560,000
police squad cars nationwide, with 738,000 sworn officers (source: Cross Match,
Inc., correspondence with Intelliworxx).
Mentoring
- ---------
The $85 billion per year (source: Bureau of Labor Statistics,
http://stats.bls.gov/news.release/sept.t12.htm and management's calculation)
education and training industry is undergoing a profound change. The need for
targeted, real time training of workers in the military and industry has been
growing for several years. Knowledge must be delivered to the technical
workforce at precisely the right time to insure workers can perform. Improved
job performance and productivity and increased worker competence and flexibility
are compelling factors in the growth of mentoring systems.
Mentoring in the Automotive Industry--There are 200 million vehicles registered
in the U.S. (source: Automotive News, Dec. 1998), with 50 million new vehicles
produced worldwide each year. Each of these vehicles requires an average of $600
per year in repair and maintenance (Source: General Motors Service Parts
Division 1998 Estimate) resulting in a $120 billion dollar per year industry. It
has been reported that as much as one third of this total is consumed by
misdiagnosis. The domestic automotive industry currently supports the repair and
maintenance of its vehicles with 21,000 dealerships and 300,000 independent
service facilities, employing over 750,000 light-duty vehicle technicians and
500,000 heavy-duty vehicle technicians (source: Environmental Protection Agency
("EPA") correspondence with Intelliworxx).
Mentoring in the Military--The Deputy Undersecretary of Defense for Readiness
and Training, Mr. Thomas Longstreth, has indicated that mentoring is a primary
initiative for all branches of the US Military. Over 50% of the entire military
budget is spent on maintenance and training (source: Longstreth, TechLearn
Conference 1998 Orlando, FL). Intelliworxx is a member of the Department of
<PAGE>
Defense's Advanced Distributed Learning core team and has participated in top
level government training policy discussions.
Mentoring in Public Safety--Emergency response to chemical or biological
terrorist attacks or spills has become a national concern at the highest levels
of the government, and is of significant immediate concern to police, fire and
rescue organizations. The list of chemical and biological agents has grown, as
has the estimated risk of terrorist attacks. The current materials required for
use by all military and public safety workers in the event of public
endangerment has grown in complexity and bulk. The Company's Mentorworxx
solution simplifies access and use of data and its intuitive, voice interactive
interface facilitates accurate decision making in high-stress situations.
Mentoring represents a valuable market opportunity for the Company in this area,
in addition to its activities in AutoPC and Tablet Computing.
MARKETING STRATEGY
- ------------------
The Company markets to Original Equipment Manufacturers ("OEMs") and Value Added
Resellers ("VARs") for whom the Intelliworxx advanced mobile computing solutions
provide sustainable competitive advantages. Targeted industries include
automotive, healthcare, aviation, military (personal combat data units, vehicle
mounted electronics, training, maintenance and repair), public safety and
commercial equipment maintenance and repair (aircraft, motor vehicle,
industrial, plant, etc.). The target OEMs in these industries are the final
equipment assemblers or system integrators themselves. The appeal of these
targets is high margins, substantial but manageable volumes and minimal
competition.
By targeting large, established OEMs and VARs, the Company does not need to
staff a large sales department itself. In effect, the OEM and VAR sales forces
become the Company's "virtual" sales force. In addition, our OEM and VAR
partners are directly responsible for supporting the end user. This frees the
Company from staffing a large customer support department and allows it to focus
on solutions for its target markets.
COMPETITION
- -----------
The computer technology industry is highly competitive and fragmented, and the
Company may face significant competition in each of its product markets. The
Company's competitors differ depending on product type, geographic market, and
application type. Several of the Company's competitors are well established and
have greater assets and financial resources than the Company, and have larger
marketing and research and development budgets. Several of the Company's
competitors also have larger service organizations.
Competition in the Company's markets is influenced by technical capacity,
customer support, product longevity, supplier stability, breadth of product
offerings, reliability, performance, and price. The Company believes that it can
successfully compete in its chosen market niches due to its advanced
technological capabilities, quick and efficient product development process and
<PAGE>
its ability to meet customer price points. In addition, the Company's marketing
strategy focuses on becoming a supplier to would be competitors. In this way the
Company concentrates on core technology, product development and efficient
manufacturing. The Company also can utilize the sales force and established
relationships of these customers who otherwise would be competitors.
WORLD WIDE WEB
- --------------
The Company has a World Wide Web home page at http://www.intelliworxx.com. This
web page contains basic information about the Company, its latest news,
technology, products, application notes, links to partners, special programs,
investor information and frequently asked questions, as well as how to contact
the Company. The Intelliworxx web page is also listed with many of the most
popular web search engines. The Company has identified many sales leads and beta
testers through use of the web.
TRADEMARKS
- ----------
The Company's intellectual property attorneys are actively pursuing the
following trademark protection and intend to file by the end of 1999.
1. VoiceTablet
2. Interactive Multi Media Mentoring
3. iM3
4. Mentorworxx
5. Mentorworxx Explore
6. Mentorworxx Create
7. Mentorworxx Convert
8. Intelliworxx
9. VoiceAudio
10. UCM
11. WaveLink
PATENTS
- -------
The Company's intellectual property attorneys are reviewing potentially
patentable technology.
GOVERNMENT APPROVALS
- --------------------
None of the Company's products or services require any government approval. The
Company does not know of any existing or probable governmental regulations that
would have an effect on its business.
SERVICE AND SUPPORT
- -------------------
The Company demands that its resellers and OEM partners have complete service
and support in place for their end users including telephone help desk centers
and depot repair centers. The Company also has a range of personnel, from
technical customer service representatives to program managers to design
engineers, who support the resellers and OEM partners with customer service
issues.
<PAGE>
SEASONALITY
- -----------
The Company's product diversification is such that it does not expect to
experience seasonal up or down turns.
SOURCES AND AVAILABILITY OF RAW MATERIALS
- -----------------------------------------
The Company relies on the availability of Microsoft operating systems and Intel
microprocessors in order to manufacture its products. In addition, there are a
number of other electronic components the Company includes in its designs. These
components are available from a wide range of vendors, none of which are deemed
to be a critical single source supplier.
WORKFORCE
- ---------
The Company currently employs 35 individuals in the following functional areas:
20 employees in Engineering and Technical Support, six employees in Sales and
Marketing, six employees in Administration and three employees in Manufacturing
and Materials. The Company does not have a collective bargaining agreement with
its employees and considers its relationship with its employees to be excellent.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Introduction
- ------------
This discussion summarizes the significant factors affecting the operating
results, financial condition and liquidity/cash flow of the Company during the
period from Inception (February 12, 1998) to December 31, 1998 and the eight
months ended August 31, 1999. This should be read in conjunction with the
financial statements and notes thereto included. As discussed in Note 2 to the
financial statements dated August 31, 1999, meaningful quarterly results are
unavailable for the period from Inception (February 12, 1998) to December 31,
1998 because of the start-up nature of the Company and its lack of dependence on
financial reporting. However, a financial audit was performed as of December 31,
1998 for the period from Inception (February 12, 1998) to December 31, 1998.
Quarterly results are available for the three-month periods ending March 31,
1999 and June 30, 1999. The following comments will discuss the Company's
operating results on a standalone basis as opposed to a quarterly or comparative
basis.
<PAGE>
Results of Operations
- ---------------------
The Period from Inception (February 12, 1998) to December 31, 1998 ("Prior
Period")
- --------------------------------------------------------------------------------
Revenue for the Prior Period totaled approximately $994,000 consisting primarily
of new product development contracts with a major US automotive manufacturer and
with the US Navy, administered by the National Committee for Manufacturing
Sciences, Inc. ("NCMS"). The attendant cost of revenue totaling approximately
$654,000 consisted of direct development costs incurred by the Company's
hardware and software engineering staff.
Selling, general and administrative expenses for the Prior Period totaled
approximately $1,376,000. These costs provided the basis for the Company's
infrastructure that will maintain the selling and general expenses into the
future.
Depreciation, amortization and interest expense totaled approximately $153,000.
The Eight Months Ended August 31, 1999 ("Current Period")
- ---------------------------------------------------------
Revenue for the Current Period is approximately $1,776,000, consisting of
software and hardware development revenue of approximately $1,446,000 and
product sales of $330,000. The Company began shipping product in February 1999.
Both software and hardware development revenues and product sales in the Current
Period compare favorable to the results in the Prior Period, notwithstanding the
additional two and one-half months in the Prior Period.
Selling, General and Administration totals approximately $1,335,000 which also
compares favorable to the Prior Period although as a monthly average it exceeds
the Prior Period monthly average. This increase is associated with the Company's
growth as a start-up. Research and Development likewise has increased as the
Company expands its software development capabilities.
Depreciation and Amortization and Interest Expense for the Current Period total
approximately $286,000 and have increased over the Prior Period resulting from
the Company's use of short-term credit facilities to fund the operation.
Liquidity and Capital Resources
- -------------------------------
The Company has financed its operations and capital expenditures primarily
through cash flow from operations, short-term credit facilities and the sale of
the Company's common stock. Long-term lease transactions have also been used by
the Company. For the Prior Period, the Company's primary source of cash was from
financing activities that totaled approximately $888,000. Of this amount, net
proceeds from the issuance of promissory notes totaled approximately $638,000
and proceeds from the sale of its common stock totaled $250,000. For the Current
<PAGE>
Period, the Company's primary source of cash was also from financing activities.
Net proceeds from the issuance of promissory notes totaled approximately
$973,000 while proceeds from the sale of common stock totaled $750,000.
The Company's cash totaled approximately $76,000 and $2,000 on December 31, 1998
and August 31, 1999 respectively. Capital expenditures for the Prior Period
totaled approximately $374,000, of which approximately $210,000 is computers and
related hardware and software principally used in the Company's research and
development efforts. For the Current Period, the Company spent an additional
$143,000 on capital expenditures which includes those expenditures financed with
capitalized lease obligations totaling $77,000. Such capitalized leases were
entered into to acquire substantially all of the Company's office furniture.
The Company expects to be able to meet its debt obligations and to finance
operations and capital expenditures through internally generated funds, future
borrowing (including amounts expected to be available under revolving bank
credit facilities, purchase order and accounts receivable financing and capital
lease transactions) and capital stock transactions to possibly include private
placements and a registered offering.
During the next twelve months, the Company does not expect to make any
significant purchases of plant or equipment.
The Company anticipates its number of employees to increase from 35 to 55 during
the next twelve months.
Impact of Year 2000 Issues
- --------------------------
Due to the method of storing date information in computers using two digits to
indicate the year instead of four digits (for example "99 instead of "1999")
some computer systems may not accept input of, store, manipulate or output dates
in the years 2000 or thereafter without error or interruption. This is known as
the Year 2000 or Y2K problem. It is possible that the Company's software
products and internal information systems and the business systems of its
suppliers or customers will be negatively impacted by Year 2000 problems.
Intelliworxx has conducted a review of its business systems in an attempt to
identify ways in which its systems could be affected by Year 2000 problems.
Based on this review, the Company believes that its internal information systems
are Year 2000 compliant and the Company does not expect the Year 2000 issue to
have a material adverse affect on its systems. However, the Company relies upon
the statements of its software vendors, other parts suppliers and its insurance
and financial institutions. There can be no assurance that these groups will
identify all date-handling problems in advance of their occurrence, or that the
Company will be able to successfully remedy all problems that arise from any
date-handling problems.
All internal information systems of the Company and all software used in
products of the Company were purchased in 1998 or later, well after its software
vendors stated that their products were Year 2000 compliant. The Company
believes that the risk of Year 2000 issues and the costs associated with Year
2000 issues are minimal.
<PAGE>
The Company plans to back up to tape all corporate information systems and all
employee computers at the end of the day on December 31, 1999 and to test for
proper functioning on January 1, 2000. Any issues that arise will be addressed
by the Company's software engineers and software vendors.
Item 3. PROPERTIES.
The Company's principal office is located at 1819 Main Street, Sarasota, Florida
34236, where it leases approximately 20,000 square feet under a lease agreement
that expires September, 2004.
(Remainder of this page left intentionally blank.)
<PAGE>
<TABLE>
<CAPTION>
Item 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Name and Address Amount Percent
Title of Class of Owner Owned of Class (3)(4)
- -------------- -------- ----- -------------
<S> <C> <C> <C>
Common Kevin B. Rogers, Chairman,
President/Chief Executive Officer
1819 Main St, Eleventh Floor
Sarasota, FL 34236 1,875,000 12.34%
Common Michael P. Jonas, Executive Vice
President, Director
1819 Main St., Eleventh Floor
Sarasota, FL 34236 1,875,000 12.34%
Common Christopher J. Floyd, Vice President
Finance, Chief Financial Officer
Treasurer, Director
1819 Main St., Eleventh Floor
Sarasota, FL 34236 1,900,000 (1) 12.50%
Common Donald H. Pound, Jr., Vice President
Engineering, Secretary, Director
1819 Main St., Eleventh Floor
Sarasota, FL 34236 1,875,000 12.34%
Common Vincent D. Reynolds, Vice President
Software Technology, Director
1819 Main St., Eleventh Floor
Sarasota, FL 34236 1,875,000 12.34%
Common Ian N. Whitehead, Director
1819 Main St., Eleventh Floor
Sarasota, FL 34246 1,515,000 (2) 9.97%
Common James L. Roach, Vice President
Mentoring Systems
1819 Main St., Eleventh Floor
Sarasota, FL 34236 375,000 2.47%
All Officers and Directors as a group (7 persons) 11,290,000 74.28%
</TABLE>
- --------------
(1) Christopher J. Floyd is Co-Trustee of the Floyd Family Trust that owns
25,000 shares of common stock of the Company.
<PAGE>
(2) The number of shares owned by Ian N. Whitehead are net of 360,000 shares of
common stock of the Company transferred by Mr. Whitehead to irrevocable
Trusts in which he has no beneficial interests.
(3) There were 15,199,166 shares of common stock outstanding as of August 31,
1999.
(4) Percent of Class Owned does not reflect the potential exercise of any of
the 801,894 employee stock options currently outstanding of which 155,411
can be exercised after February 25, 2000, and 245,536 can be exercised
after October 26, 2000. No officers, directors, or security holders listed
in the table above own any warrants, options or rights. The Company has not
issued any warrants, options or other rights except to its employees
through the 1999 Equity Incentive Plan as described next.
1999 Equity Incentive Plan
- --------------------------
On February 25, 1999, the Board of Directors of the Company adopted the
Intelliworxx, Inc. 1999 Equity Incentive Plan (the "Plan") which was
subsequently approved by a majority of the shareholders on March 19, 1999. The
Plan designated an Equity Incentive Committee (the "Committee") appointed by the
Board of Directors and authorizes the Committee to grant or award to eligible
participants of the Company and its subsidiaries and affiliates, until February
25, 2009, stock options, stock appreciation rights, restricted stock or deferred
stock awards for up to 3,000,000 shares of the common stock of the Company.
The following is a general description of certain features of the Plan that is
annexed in this filing as an exhibit.
1. Eligibility. Officers, employees and consultants of the Company, its
subsidiaries and its affiliates who are responsible for the
management, growth and profitability of the business of the Company,
its subsidiaries and its affiliates, are eligible to be granted stock
options, stock appreciation rights, and restricted or deferred stock
awards under the Plan. Directors are eligible to receive Director
Stock Options.
2. Administration. The Plan is administered by the Committee of the
Company. The Committee has full power to select, from among the
persons eligible for awards, the individuals to whom awards will be
granted, to make any combination of awards to any participants and to
determine the specific terms of each grant, subject to the provisions
of the Plan.
3. Stock Options. The Plan permits the granting of non-transferable stock
options that are intended to qualify as incentive stock options
("ISO's") under Section 422 of the Internal Revenue Code of 1986 and
stock options that do not qualify ("Non-Qualified Stock Options"). The
option exercise price for each share covered by an option shall be
<PAGE>
determined by the Committee, but shall not be less than 100% of the
fair market value of a share on the date of grant. The term of each
option will be fixed by the Committee, but may not exceed 10 years
from the date of the grant in the case of an ISO or 10 years and two
days from the date of the grant in the case of a Non-Qualified Stock
Option.
.4. Stock Appreciation Rights. Non-transferable stock appreciation rights
("SAR's") may be granted in conjunction with options, entitling the
holder upon exercise to receive an amount in any combination of cash
or unrestricted common stock of the Company (as determined by the
Committee), not greater in value than the increase since the date of
grant in the value of shares covered by such right. Each SAR will
terminate upon the termination of the related option.
5. Restricted Stock. Restricted shares of the common stock may be awarded
by the Committee subject to such conditions and restrictions as they
may determine, which may include the attainment of performance goals.
The Committee shall also determine whether a recipient of restricted
shares will pay a purchase price per share or will receive such
restricted shares without any payment in cash or property.
6. Deferred Stock. Deferred stock awards may also be made under the Plan.
These are non-transferable awards entitling the recipient to receive
common stock of the Company without any payment in cash or property in
one or more installments at a future date or dates, as determined by
the Committee. Receipt of deferred stock may be conditioned on such
matters as the Committee shall determine, including continued
employment and attainment of personal goals.
7. Loan Provisions. The Plan authorizes the Company, with the consent of
the Committee, to make or arrange for loans to employees in connection
with the exercise of options, or the payment of any purchase price for
restricted stock granted under the Plan, or the payment of Federal and
State income taxes resulting from the granting or exercising of
options or other awards under the Plan. The Committee has full
authority to decide whether to make such loans and to determine the
term and provisions of any such loans including interest charged and
repayment terms.
8. Transfer Restrictions. Grants under the Plan are not transferable
except, in the event of death, by will or by the laws of descent and
distribution.
9. Termination of Benefits. In certain circumstances, such as death,
disability, and termination without cause; beneficiaries in the Plan
may exercise options and SAR's and receive the benefits of restricted
stock grants following their termination or their employment or tenure
as a Director as the case may be.
<PAGE>
10. Change of Control. The Plan provides that (a) in the event of a
"Change of Control" (as defined in the Plan), unless determined by the
Committee prior to such Change in Control, or (b) to the extent
expressly provided by the Committee at or after the time of grant, in
the event of a " Potential Change of Control" (as defined in the
Plan), (i) all stock options and related SAR's (to the extent
outstanding for at least six months) will become immediately
exercisable; (ii) the restrictions and deferral limitations applicable
to outstanding restricted stock awards and deferred stock awards will
lapse and the shares in question will be fully vested; and (iii) the
value of such options and awards, to the extent determined by the
Committee, will be cashed out on the basis of the highest price paid
(or offered) during the preceding 60- day period, as determined by the
Committee. The Change of Control and Potential Change of Control
provisions may serve as a disincentive or impediment to a prospective
acquirer of the Company and, therefore, may adversely affect the
market price of the common stock of the Company.
11. Amendment of the Plan. The Plan may be amended from time to time by
majority vote of the Board of Directors provided as such amendment may
affect outstanding options without the consent of an option holder nor
may the plan be amended to increase the number of shares of common
stock subject to the Plan without stockholder approval.
On February 25, 1999, the Company granted incentive stock options for 257,572
shares at a purchase price of $6.00 per share and granted non-incentive stock
options for 53,250 shares at a purchase price of $6.00 per share. On October 26,
1999, the Company granted incentive stock options for 264,548 shares at a
purchase price of $6.70 and granted non-incentive stock options for 226,524
shares at a purchase price of $6.70. All options granted are exercisable as
follows: 50% on the first anniversary of the option grant date and 25% on each
subsequent anniversary of the option grant date. No options are exercisable
under the Plan until February 25, 2000 and no underlying shares have been
issued.
<PAGE>
Item 5. DIRECTORS AND EXECUTIVE OFFICERS.
The following table sets forth certain information concerning each of the
company's directors and executive officers:
Name Age Position
- ---- --- --------
Kevin B. Rogers 45 Chairman of the Board, President, Chief
Executive Officer
Michael P. Jonas 37 Executive Vice President, Director
Christopher J. Floyd 37 Vice President Finance, Chief Financial
Officer, Treasurer, Director
Donald H. Pound, Jr. 40 Vice President Engineering, Secretary,
Director
Vincent D. Reynolds 40 Vice President Software Technology,
Director
Ian N. Whitehead 38 Director Platform Development, Director
James L. Roach 47 Vice President Mentoring Systems
Kevin B. Rogers - Chairman of the Board, President, and Chief Executive Officer
- - Mr. Rogers has served as Chairman of the Board, President and Chief Executive
Officer of Intelliworxx since its inception. From 1995 to 1997, Mr. Rogers
served as President of Interactive Solutions, Inc., a company he founded to
develop and manufacture voice activated, wearable computer technology. In 1993
Mr. Rogers founded RiverBend Technologies, Inc. to develop and market products
for the healthcare and restaurant industries. He served as its President and CEO
until 1995 and sold RiverBend in 1996. From 1990 to 1993 Mr. Rogers served as
partner and Chief Designer for Universal Technologies, Inc., creating integrated
Point of Sale, outdoor video ordering and paperless back office database
systems. Mr. Rogers graduated in 1980 from the University of Kentucky with a
Bachelor of Science in Psychology. In 1983, he earned a Master of Arts in
Psychology from University of California, Los Angeles concentrating in Human
Factors Engineering and Interface Design.
Michael P. Jonas - Executive Vice President, Director - Mr. Jonas has served as
Executive Vice President of Intelliworxx, Inc., since its inception and was
elected as a director on April 3, 1998. From 1993 to 1998, Mr. Jonas worked for
Teltronics, Inc., an electronic manufacturing services corporation in the
positions of Manager of Contract Manufacturing, Director of Contract
<PAGE>
Manufacturing and finally, as Vice President of Contract Manufacturing. From
1989 to 1993, Mr. Jonas worked for EMI/ECS, Inc., serving first as Director of
Marketing and Sales and later as Vice President of Operations. Mr. Jonas
graduated in 1984 with a Bachelor of Engineering from Stevens Institute of
Technology. He received his Master of Business Administration in 1993 from
Kensington University.
Christopher J. Floyd - Vice President Finance, Chief Financial Officer,
Treasurer and Director - Mr. Floyd has served as Vice President Finance, Chief
Financial Officer, Treasurer and Director of Intelliworxx, Inc. since July 20,
1998. From 1996 to 1998 Mr. Floyd served as President of Floyd Media, Inc., a
privately held consulting firm. From 1993 to 1996, Mr. Floyd served as partner,
Executive Vice President and Chief Financial Officer for Microflex
International, Inc., a computer reseller and network services company in
Lakeland, Florida. From 1991 to 1993 Mr. Floyd served as an auditor and
management consultant for Ernst & Young in Berlin, Germany. Mr. Floyd graduated
in 1986 from the University of South Florida with a Bachelor of Science in
Electrical Engineering degree. He received his Master of Business Administration
degree in 1991 from The Wharton School in Philadelphia.
Donald H. Pound, Jr. - Vice President Engineering, Secretary and Director - Mr.
Pound has served as Vice President Engineering and Secretary of Intelliworxx,
Inc. since inception and was elected as a Director on April 3, 1998. From 1996
through 1997 he served as Director of Electronics Engineering for Interactive
Solutions, Inc., a developer and manufacturer of voice activated, wearable
computer technology. From 1992 until 1996, Mr. Pound was employed in the
contract electronic design industry working for ASIC Designs, Inc. in
Naperville, IL, designing mobile computers. Mr. Pound graduated in 1983 from
Purdue University with a Bachelor of Science in Electrical Engineering.
Vincent D. Reynolds - Vice President Software Technology and Director - Mr.
Reynolds has served as Vice President Software Technology of Intelliworxx, Inc.
since inception and was elected as a Director on April 3, 1998. From 1996 to
1997 Mr. Reynolds was Director of Software Technology for Interactive Solutions,
a developer and manufacturer of voice activated, wearable computer technology.
From 1995 to 1996 Mr. Reynolds served as Programmer/Analyst for Key
Communications, a company that provides medical lab systems. From 1993 to 1995
Mr. Reynolds worked as Senior Technologist at RiverBend Technologies, a company
founded by Mr. Rogers to develop and market products for the healthcare and
restaurant industries. In 1993 Mr. Reynolds served as Senior Software Developer
for Rally's Hamburgers developing a multimedia order confirmation system.
Ian N. Whitehead - Director Platform Development and Director - Mr. Whitehead
has served as Director Platform Development of Intelliworxx, Inc. since
inception and was elected as a Director on April 3, 1998. From 1996 to 1997 he
served as Senior Design Engineer of Interactive Solutions, Inc., a developer and
manufacturer of voice activated, wearable computer technology. From 1985 to
1996, Mr. Whitehead was Senior Engineer of Citadel Computer Corp., a computer
hardware designer and manufacturer located in New Hampshire, Massachusetts. Mr.
Whitehead graduated in 1982 from Cambridge University with a Bachelor of Arts in
Engineering.
<PAGE>
James L. Roach - Vice President Mentoring Systems - Mr. Roach has served as Vice
President Mentoring Systems since January 1999. From 1991 to 1998 Mr. Roach was
employed at General Motors Corporation as the Senior Project Engineer in the
Service Research department developing and field-testing new technologies for
improving the diagnostic abilities of dealership technicians. From 1988 to 1991
Mr. Roach worked as an advanced service readiness engineer for Saturn Corp. Mr.
Roach graduated in 1981 from Midlands Technical College with a degree in
Electronics Engineering Technology.
Item 6. EXECUTIVE COMPENSATION.
The Summary Compensation Table below details all plan and non-plan compensation
awarded to, earned by, or paid to the named executive officers in 1998 and in
1999.
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------
Annual Compensation (1)
- --------------------------------------------------------------------------------
Name
and Principal Position Year Salary ($)
(a) (b) (c)
- --------------------------------------------------------------------------------
Kevin B. Rogers, 1999 124,600
Chairman, CEO, President 1998 90,000
Michael P. Jonas, 1999 90,000
Executive Vice President, Director 1998 65,000
Christopher J. Floyd, 1999 79,600
Vice Pres. Finance, CFO, Treasurer, Director 1998 36,000
Donald H. Pound, Jr., 1999 86,500
Vice Pres. Engineering, Secretary, Director 1998 62,500
Vincent P. Reynolds, 1999 73,000
Vice Pres. Software Technology, Director 1998 50,000
Ian N. Whitehead, 1999 76,100
Director Platform Development, Director 1998 55,000
- --------------------------------------------------------------------------------
- ----------
(1) For 1998, Mr. Floyd's salary is from July 1 through December 31. Other
Salaries for 1998 are from February 1 through December 31. Salaries for
1999 are from January 1 through October 31.
In 1998 and in 1999 there were no Bonuses or Other Annual Compensation awarded,
earned or paid. No Bonuses or Other Annual Compensation will be awarded, earned
or paid in the remainder of 1999.
In 1998 and in 1999 there was no Long Term Compensation and no Other
Compensation awarded, earned or paid. No Long Term Compensation and no Other
Compensation will be awarded, earned or paid in the remainder of 1999.
<PAGE>
Item 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Christopher J. Floyd is Co-Trustee of the Floyd Family Trust that owns 25,000
shares of common stock of the Company. A $100,000 note is held by the Floyd
Family Trust that can be converted into an additional 50,000 shares of common
stock of the Company. Mr. Floyd also personally guaranteed a $225,000 note on
behalf of the Company.
Wavelogic, Inc., a Florida corporation owned by Kevin Rogers, borrowed $105,000
from the Company in 1998. These funds were used to pay for a compression
software licensing agreement with Infinet Op, Inc., a Texas corporation. This
loan was fully reserved for on Intelliworxx' 1998 financial statements. In
September of 1999, Wavelogic assigned the compression software licensing
agreement to Intelliworxx.
Item 8. DESCRIPTION OF SECURITIES.
Common Stock
- ------------
The Company is authorized to issue 100,000,000 shares of common stock, no par
value. The holders of each share are entitled to one vote for each share held
and are entitled to dividends when and as declared by the Board of Directors. At
December 31, 1998, common shares issued and outstanding totaled 14,066,666. As
of August 31, 1999, and currently, common shares issued and outstanding total
15,199,166.
Options granted on the common stock of the Company to employees under the 1999
Equity Incentive Plan total 801,894 at an average exercise price of $6.43 as
detailed in Part I, Item 4 above. No shares have been issued for the options and
no other options have been granted.
Preferred Stock
- ---------------
The Company is authorized to issue 25,000,000 shares of preferred stock, no par
value, which may be issued in classes or series with various rights and
designations to be determined by the Board of Directors. Each share of preferred
stock is entitled to dividends when and if declared by the Board of Directors.
To date, no preferred shares have been issued.
<PAGE>
PART II
Item 1. LEGAL PROCEEDINGS.
The Company is not a party to any material litigation.
Item 2. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS.
The Company's common stock is listed on the OTC Bulletin Board under the trading
symbol "IWXX." The Company's common stock has been traded since December, 1998.
Currently, the following brokerage firms are making a market in the Company's
common stock: Hill Thompson Magid & Co., Sharpe Capital, Inc., Paragon Capital
Corp., Wm. V. Frankel & Co. Inc., Knight Securities and Herzog & Co.
The following table sets forth for the period indicated, the range of high and
low closing bid quotations per share. These quotations represent inter-dealer
prices, without retail markups, markdowns or commissions and may not necessarily
represent actual transactions.
Price per Share
---------------
Period Ended High Low
- ------------ ---- ---
Third Quarter 1999 $7.75 $6.03
Second Quarter 1999 $7.25 $6.13
First Quarter 1999 $6.75 $5.25
Fourth Quarter 1998 $5.75 $2.00
The Company has approximately 58 shareholders of record. The Company has not
paid, nor does it anticipate paying dividends in the foreseeable future.
The common shares of the Company are subject to the "Penny Stock Rules" of Rule
15(g) of the Securities Exchange Act of 1934. These rules impose additional
sales requirements on broker dealers selling securities to persons other than
established customers and accredited investors as defined in the Securities Act
of 1933. Brokerage transactions falling within these rules require brokers to
make a special suitability determination for the purchaser and to obtain the
purchaser's written consent to make the trade before making the sale.
Accordingly, these Penny Stock Rules may adversely affect the ability of the
purchasers to resell these securities.
Item 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
None.
<PAGE>
Item 4. RECENT SALES OF UNREGISTERED SECURITIES.
The following securities were sold in reliance upon Regulation D, Rule 504 of
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder. The company kept 100% of the proceeds from the sale of
securities and no underwriters were used and no commissions or discounts were
paid.
<TABLE>
<CAPTION>
ISSUE NO. OF
DATE TITLE SHARES SHARES ISSUED TO CONSID. AMOUNT
- ---- ----- ------ ---------------- ------- ------
<S> <C> <C> <C> <C> <C>
12/12/98 Common 175,000 Terez, Ltd. Cash $ 43,750
12/12/98 Common 175,000 Finman Establishment Cash $ 43,750
12/12/98 Common 300,000 Gunner Investments Cash $ 75,000
12/12/98 Common 50,000 Yagalla Holdings, Inc. Cash $ 12,500
12/12/98 Common 300,000 Ashbury Capital Mgmt. Cash $ 75,000
02/19/99 Common 325,000 Ashbury Capital Mgmt. Cash $ 243,750
02/19/99 Common 50,000 Yagalla Holdings, Inc. Cash $ 37,500
02/19/99 Common 225,000 Finman Establishment Cash $ 168,750
02/19/99 Common 400,000 Gunner Investments Cash $ 300,000
</TABLE>
Item 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company provides indemnification of its officers and directors from personal
liability for their actions, conduct and recommendations taken or made in good
faith in the exercise of their business judgement under the given circumstances,
all in accordance with applicable sections of the statutes of the State of
Florida.
ADDITIONAL INFORMATION
The Exchange Act Registration Statement and the exhibits and schedules thereto
filed by Intelliworxx may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 5th Street NW,
Washington, D.C. 20549. Information may be obtained on the operation of the
Public Reference Room by calling the Commission at 1-800-SEC-0330. The
Commission maintains an Internet site that contains reports, proxy and
information statements, and other information regarding issuers that file
electronically (http://www.sec.gov.) The Internet address for the company is
http://www.intelliworxx.com.
<PAGE>
INTELLIWORXX, INC.
FINANCIAL STATEMENTS
For the Period Ended December 31, 1998
<PAGE>
ALESSANDRI & ALESSANDRI, P.A.
Certified Public Accountants
- --------------------------------------------------------------------------------
Independent Auditors' Report
Intelliworxx, Inc.
Sarasota, Florida
We have audited the accompanying balance sheet of Intelliworxx, Inc.
("Company"), as of December 31, 1998 and the related statements of income,
stockholders' equity, and cash flows for the period since inception (February
12, 1998) to December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audit 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 Intelliworxx, Inc., as of
December 31, 1998, and the results of its operations, and cash flows, for the
period from inception (February 12, 1998) to December 31, 1998 in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in the notes to the
financial statements, the Company is in the development stage; had a working
capital deficit at December 31, 1998; and, has not achieved profitable
operations. Accordingly, the Company is dependent upon loans and equity
financing to conduct its operations, which situation raises substantial doubt
about its ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of these
uncertainties.
/s/ Alessandri & Alessandri, P.A.
April 23, 1999
- --------------------------------------------------------------------------------
Accountants & Consultants
5121 Ehrlich Road Suite 107-B Tampa, Florida 33624
(813) 969-1995 Fax (813) 960-2740
Member: American Institute of Certified Public Accountants
/Division of CPA Firms
Member: Florida Institute of Certified Public Accountants
<PAGE>
<TABLE>
<CAPTION>
INTELLIWORXX, INC.
(a development stage company)
BALANCE SHEET
December 31, 1998
- ---------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
<S> <C>
Cash $ 76,526
Accounts receivable 238,846
Inventory (at acquisition cost-not in excess of market) 210,128
Prepaid expenses 23,553
Other 5,000
-----------
Total Current Assets 554,053
-----------
EQUIPMENT & FURNITURE
Equipment & Furniture, at cost (net of depreciation of $55,800) 262,856
-----------
OTHER ASSETS
Software license, at cost (net of amortization of $11,000) 44,000
Deposits 19,606
-----------
Total Other Assets 63,606
-----------
TOTAL $ 880,515
===========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 538,350
Customer deposits 102,000
Accounts Payable 440,812
Wages and related taxes payable 272,199
Accrued interest 65,546
-----------
Total Current Liabilities 1,418,907
-----------
STOCKHOLDERS' EQUITY
Preferred Stock - No Par Value; 25,000,000 shares authorized; none issued
Common Stock - No Par Value; 100,000,000 shares authorized; shares
issued and outstanding 14,066,666 914,848
Retained Earnings (deficit) (1,453,240)
-----------
Total Stockholders' Equity (538,392)
-----------
TOTAL $ 880,515
===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
INTELLIWORXX, INC.
(a development stage company)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (February 12, 1998) TO DECEMBER 31, 1998
- --------------------------------------------------------------------------------
REVENUES $ 994,448
COST OF SALES 653,995
-----------
GROSS MARGIN 340,453
-----------
OPERATING EXPENSES:
General & Administrative and Selling 1,375,691
Research and development 264,785
Depreciation and Amortization 66,800
-----------
Total Operating Expenses 1,707,276
-----------
LOSS BEFORE OTHER ITEMS (1,366,823)
OTHER INCOME & EXPENSE
Interest expense 86,417
-----------
NET LOSS ($1,453,240)
===========
Loss per share $ (0.11)
-----------
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
INTELLIWORXX, INC.
(a development stage company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (February 12, 1998) TO December 31, 1998
- ------------------------------------------------------------------------------------
Retained
Common Stock Earnings
Shares $ (Loss)
-------------------------------------------
<S> <C> <C> <C>
Issuance of founders shares 999,900
Shares issued to reflect reverse
purchase acquisition 12,000,000 $ 564,748
Proceeds from issuance of common stock 1,000,100 250,100
Common stock issued for liabilities 66,666 100,000
Net Income (Loss) $ (1,453,240)
------------ ------------ ------------
Balance, December 31, 1998 14,066,666 $ 914,848 $ (1,453,240)
============ ============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTELLIWORXX, INC.
(a development stage company)
STATEMENT OF CASH FLOWS
FOR THE PERIOD SINCE INCEPTION (February 12,1998) to December 31, 1998
- ------------------------------------------------------------------------------------
CASH FLOWS FROM (TO) OPERATING ACTIVITIES:
<S> <C>
Net Income (Loss) From Operations: ($1,453,240)
Add: Non-Cash Items
Depreciation and Amortization 66,800
Common stock issued affect reverse purchase acquisition 564,768
Changes in Assets and Liabilities:
Accounts receivable (238,846)
Inventory (210,128)
Prepaid expenses (23,533)
Other (24,606)
Customer deposits 102,000
Accounts payable 440,812
Wages and related taxes 272,199
Accrued interest 65,546
-----------
Net Cash From (To) Operating Activities (438,228)
-----------
CASH FLOWS FROM (TO) INVESTING ACTIVITIES:
Acquisition of Equipment & Furniture (318,656)
Purchase of software license (55,000)
-----------
Net Cash From (To) Investing Activities (373,656)
-----------
CASH FLOWS FROM (TO) FINANCING ACTIVITIES:
Proceeds from notes payable 740,681
Repayment of notes payable: (102,351)
Proceeds from sale of common stock 250,100
-----------
Net Cash From (To) Financing Activities 888,430
-----------
Increase (Decrease) in Cash 76,546
Cash Balance, Beginnng 0
-----------
Cash Balance, Ending $ 76,546
-----------
Supplemental Disclosures of Cash Flow Information:
Interest Paid $ 86,417
Supplemental Disclosures of Non-cash transactions:
A total of 12,066,666 common shares were issued to accomplish an
acquisition and pay liabilities of $100,000
See Notes to Financial Statements.
</TABLE>
<PAGE>
INTELLIWORXX, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
- --------------------------------------------------------------------------------
1. BASIS OF ACCOUNTING:
- -----------------------
The financial statements of Intelliworxx, Inc. ("Company") as of December
31, 1998 and for the year then ended have been prepared on the basis that the
Company is a going concern, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business, and, accordingly,
no adjustments have been recorded because of this uncertainty. At December 31,
1998 the Company's current assets totaled $554,053 and its current (and total)
liabilities aggregated $1,418,907, for a working capital deficit of $864,854.
For the period from inception (February 12, 1998) to December 31, 1998, the
Company incurred losses of $1,453,240, that has significantly reduced the
liquidity and capital resources of the Company.
During the period ended December 31, 1998, the Company met its cash needs
primarily from short-term borrowings from individuals, a private placement of
1,000,000 of its common shares for $250,000, and from revenues of $994,448.
Management expects to achieve its future cash needs from a combination of sales
of its equity securities and borrowings, pending attainment of profitable
operations.
2. HISTORY AND OPERATIONS:
- --------------------------
The Company was organized on February 12, 1998 under the laws of the State
of Florida. Since inception, its primary business has been the development of
specialized computer program applications and certain related computer hardware.
On November 20, 1998, the Board of Directors of the Company approved a
merger with Outdoor Resorts, Inc. ("Resorts"), a publicly registered entity,
which merger was consummated on November 23, 1998. Under the terms of the
merger, the stockholders of the Company received 12,000,000 shares of the common
stock of Resorts in exchange for the 600,000 common shares of the Company then
outstanding. At the date of the merger, Resorts did not have any assets or
liabilities. Resorts changed its name to Intelliworxx, Inc. For financial
reporting purposes, this transaction was accounted for as a reverse purchase
acquisition under which the entities were recaptialized to include the
historical financial information of the Company.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
- ----------------------------------------------
CASH AND CASH EQUIVALENTS: Cash and cash equivalents are comprised of cash
and highly liquid investments with a maturity of three months or less when
purchased. The Company had no cash equivalents as of December 31, 1998.
INVENTORY: Inventory is carried at the lower of acquisition cost or market.
<PAGE>
EQUIPMENT AND FURNITURE: Equipment and furniture are stated at their
acquisition cost. The cost of replacements, renewals, and betterments, that
neither add materially to the value of the equipment and furniture, nor
appreciable prolong their lives are charged to expense as incurred. Depreciation
is provided using the straight-line method over the estimated useful lives,
which generally ranges from two to five years.
INTANGIBLE ASSETS: Intangible assets, such as software licenses, are
carried at cost, and are amortized using the straight-line method over the life
of the license.
INCOME TAXES: The provision (benefit) for income taxes is based upon the
pre-tax earnings (loss) reported in the financial statements, adjusted for
transactions that may never enter in the computation of income taxes payable. A
deferred tax asset or liability is recognized for the estimated future tax
affect attributable to temporary differences in the recognition of income and
expenses for financial statements and income tax purposes. A valuation allowance
is provided in the event that the tax benefits are not expected to be realized.
EARNINGS (LOSS) PER SHARE: Earnings (loss) per common share are based upon
the weighted number of common shares outstanding during the period.
For the period ended December 31, 1998, the calculation of the loss per
share is based upon the weighted average number of shares outstanding as though
the merger had occurred at the beginning of the period.
USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION: The Company derives its revenues from sales of
products and from computer software and hardware consulting design services.
Revenues are recognized upon the delivery of the products and services. The
Company also derives revenues under contracts that include either or both the
design, development, and manufacture of computer program applications and
related hardware. Percentage of completion accounting has been adopted by the
Company to recognize revenues from those contracts that extend beyond interim
and annual reporting periods.
RESEARCH & DEVELOPMENT, ADVERTISING, AND START-UP COSTS: Research &
development, advertising, and start-up costs are charged to expense as incurred.
CONCENTRATIONS OF RISK and CREDIT RISK: The Company is operating solely in
a specialized part of the computer application industry. Its operations in that
specialized area requires development of unique computer program software and
<PAGE>
certain related hardware. Competing entities in the specialized area generally
have more extensive resources and have been operating for longer periods of
time. The Company does not have a material concentration of accounts receivable
or other credit risk.
IMPAIRMENT OF LONG-LIVED ASSETS: The Company has not recognized any charges
from the impairment of its long-lived assets, as it believes that its long-lived
assets have not been impaired.
FINANCIAL INSTRUMENTS: Assets and liabilities, as a matter of accounting
policy, are reflected in the accompanying financial statements at values that
the Company considers to represent their respective fair values.
4. NOTES PAYABLE:
- -----------------
At December 31, 1998, the Company had an aggregate unpaid principal balance
of $538,350 of notes payable. None of the notes payable had collateral, except
for one note with a principal balance of $225,000 which had the personal
guarantee of an officer of the Company. The notes payable bear interest at rates
ranging from 10% to 50% per annum. During the first quarter of 1999, the Company
exchanged $265,000 of the notes payable for 132,500 common shares.
5. INCOME TAXES:
- ----------------
The provision (benefit) for income taxes differs from the amount of income
tax determined by applying the applicable United States statutory federal income
tax rate to pre-tax income as a result of the following differences at December
31, 1998.
Income tax provision (benefit) at 34% $(494,000)
Increase in rates resulting from
state taxes (53,000)
Valuation allowance 547,000
-----------
Effective tax rates $ -0-
The Company will need to realize significant profits to utilize the net
operating losses, all of which may not be available due to the change in control
and issuance of additional stock. Because of these uncertainties, a valuation
allowance was established in the same amounts as the deferred tax assets because
the benefit is more likely than not to be lost. Net operating losses of the
Company totaled approximately $1,453,000 at December 31, 1998 and expire in
2013.
6. COMMON AND PREFERRED STOCK
- -----------------------------
PREFERRED STOCK: The Company is authorized to issue 25,000,000 shares of no
par value preferred stock. At December 31, 1998, no preferred stock had been
issued.
<PAGE>
COMMON STOCK: The Company is authorized to issue 100,000,000 shares of
common stock. Dividends are available when declared by the Company. At December
31, 1998, there were 14,066,000 of the common shares outstanding.
7. COMMON STOCK OFFERINGS:
- --------------------------
In December 1998, the Company issued 1,000,000 shares of common stock at
$.25 per share for a total of $250,000 under a registration exemption provided
by Securities and Exchange Commission Rule 504. In addition, during the first
quarter of 1999, the Company issued 1,000,000 shares of common stock at $.75 per
share for a total of $750,000.
8. YEAR 2000 COMPUTER ISSUE:
- ----------------------------
Management asserts that it has reviewed all of its computer programs and
systems and believes that they are Year 2000 compliant. While management cannot
insure that the computer systems of its customers and suppliers are Year 2000
compliant, it believes that because their primary customers and suppliers are
generally in, or closely associated with, the computer industry, that such are
or will be Year 2000 compliant.
9. COMMITMENTS AND CONTINGENCIES:
- ---------------------------------
The Company leases its facilities under a lease that requires monthly
rental payments of $10,000 per month and expires in September 1999.
The Company is presently, and from time to time, subject to pending claims
and lawsuits arising in the ordinary course of business. In the opinion of
management, the ultimate resolution of these pending legal proceedings will not
have a material adverse affect upon the Company's operations or financial
position.
10. REVENUES:
- ------------
During the period ended December 31, 1998, the Company recorded revenues of
$994,448 that was primarily from development and consulting projects.
<PAGE>
INTELLIWORXX, INC.
FINANCIAL STATEMENTS
For the Quarters and Period Ended
March 31, June 30, and August 31, 1999
<PAGE>
ALESSANDRI & ALESSANDRI, P.A.
CERTIFIED PUBLIC ACCOUNTANTS
Independent Auditors' Report
Intelliworxx, Inc.
Sarasota, Florida
We have reviewed the accompanying balance sheets of Intelliworxx, Inc.
("Company") as of March 31, June 30, and August 31, 1999 and the related
statements of operations, stockholders' equity, and cash flows for the quarters
and period then ended, in accordance with Statements on Standards for Accounting
and Review Services issued by the American Institute of Certified Public
Accountants. All information included in these financial statements is the
representation of the management of Intelliworxx, Inc.
A review consists principally of inquiries of Company personnel and
analytical procedures applied to financial data. It is substantially less in
scope than an audit in accordance with generally accepted auditing standards,
the objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements in order for them to be
in conformity with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, certain conditions
indicate that there is substantial doubt about the Company's ability to continue
as a going concern. The accompanying financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Alessandri & Alessandri
---------------------------------
November 9, 1999
Tampa, Florida
<PAGE>
<TABLE>
<CAPTION>
INTELLIWORXX, INC.
BALANCE SHEETS
March 31, 1999, June 30, 1999, and August 31, 1999
- ------------------------------------------------------------------------------------------------------------------------
ASSETS
March 31 June 30 August 31
----------- ----------- -----------
CURRENT ASSETS
<S> <C> <C> <C>
Cash $ 107,976 $ 1,144 $ 2,136
Accounts receivable 639,407 840,637 783,593
Inventory (at acquisition cost-not in excess of market) 757,088 822,903 787,171
Prepaid expenses 21,916 53,682 43,897
----------- ----------- -----------
Total Current Assets 1,526,387 1,718,366 1,616,797
----------- ----------- -----------
EQUIPMENT AND FURNITURE
Equipment and furniture, at cost (net of depreciation of $86,401,
$117,507, and $138,477, respectively) 352,577 337,389 323,531
----------- ----------- -----------
OTHER ASSETS
Note receivable from officer 30,200
Software license, at cost (net of amortization of $11,917, 43,083 40,334 38,500
$14,667, and $16,500, respectively
Software license deposit 150,000 150,000 150,000
Other 52,448 19,543 33,618
----------- ----------- -----------
Total Other Assets 245,531 209,877 252,318
----------- ----------- -----------
TOTAL $ 2,124,495 $ 2,265,632 $ 2,192,646
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable (including current portion of capitalized lease payable) $ 224,186 $ 765,051 $ 1,213,646
Accounts payable 1,102,830 982,926 999,788
Wages and related taxes payable 399,816 553,921 790,868
Accrued interest 96,508 148,387 213,085
Other 102,000 42,500 67,200
----------- ----------- -----------
Total Current Liabilities 1,925,340 2,492,785 3,284,587
----------- ----------- -----------
LONG-TERM LIABILITIES:
Capitalized lease payable - less current portion 33,091 26,812 22,544
----------- ----------- -----------
Total Liabilities 1,958,431 2,519,597 3,307,131
----------- ----------- -----------
STOCKHOLDERS' EQUITY
Preferred Stock - No Par Value; 25,000,000 shares authorized; none issued
Common Stock - No Par Value; 100,000,000 shares authorized; shares
issued and outstanding 15,199,166 1,929,848 1,929,848 1,929,848
Retained Earnings (deficit) (1,763,784) (2,183,813) (3,044,333)
----------- ----------- -----------
Total Stockholders' Equity 166,064 (253,965) (1,114,485)
----------- ----------- -----------
TOTAL $ 2,124,495 $ 2,265,632 $ 2,192,646
=========== =========== ===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
INTELLIWORXX, INC.
STATEMENT OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1999
- --------------------------------------------------------------------------------
REVENUES $ 893,626
COST OF SALES 390,179
------------
GROSS MARGIN 503,447
------------
OPERATING EXPENSES:
General and administrative 315,492
Sales and marketing 202,603
Research and development 214,644
Depreciation and amortization 31,518
------------
Total Operating Expenses 764,257
------------
LOSS BEFORE OTHER ITEMS (260,810)
OTHER INCOME & EXPENSE
Interest expense (49,734)
------------
NET LOSS $ (310,544)
============
Loss per share $ 0.021
Weighted average number of shares 14,683,833
See Notes to Financial Statements.
<PAGE>
INTELLIWORXX, INC.
STATEMENT OF OPERATIONS
FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1999
- --------------------------------------------------------------------------------
Three months Six months
ended ended
June 30, 1999 June 30, 1999
-------------------------------
REVENUES $ 715,932 $ 1,609,558
COST OF SALES 547,134 937,313
------------------------------
GROSS MARGIN 168,798 672,245
------------------------------
OPERATING EXPENSES:
General and administrative 209,158 524,649
Sales and marketing 184,799 387,402
Research and development 93,529 308,174
Depreciation and amortization 33,856 65,374
------------------------------
Total Operating Expenses 521,342 1,285,599
------------------------------
LOSS BEFORE OTHER ITEMS (352,544) (613,354)
OTHER INCOME & EXPENSE
Miscellaneous income 7,808 7,808
Interest expense (75,293) (125,027)
------------------------------
NET LOSS $ (420,029) $ (730,573)
==============================
Loss per share $ 0.028 $ 0.049
Weighted average number of shares 15,199,166 14,942,923
See Notes to Financial Statements.
<PAGE>
INTELLIWORXX, INC.
STATEMENT OF OPERATIONS
FOR THE TWO AND EIGHT MONTH PERIODS ENDED AUGUST 31, 1999
- --------------------------------------------------------------------------------
Two months Eight months
ended ended
August 31, 1999 August 31, 1999
----------------------------------
REVENUES $ 166,857 $ 1,776,415
COST OF SALES 194,994 1,132,308
------------------------------
GROSS MARGIN (28,137) 644,107
------------------------------
OPERATING EXPENSES:
General and administrative 226,076 750,725
Sales and marketing 196,509 583,911
Research and development 314,698 622,872
Depreciation and amortization 22,803 88,177
------------------------------
Total Operating Expenses 760,086 2,045,685
------------------------------
LOSS BEFORE OTHER ITEMS (788,223) (1,401,578)
OTHER INCOME & EXPENSE
Interest and miscellaneous income 493 8,301
Interest expense (72,790) (197,816)
------------------------------
NET LOSS $ (860,520) $ (1,591,093)
==============================
Loss per share $ 0.057 $ 0.106
Weighted average number of shares 15,199,166 15,008,302
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
INTELLIWORXX, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (February 12, 1998) TO August 31, 1999
- ------------------------------------------------------------------------------------
Retained
Common Stock Earnings
Shares $ (Loss)
------------ ------------ ------------
<S> <C> <C> <C>
Issuance of founders shares 999,900
Shares issued to reflect reverse
purchase acquisition 12,000,000 $ 564,748
Proceeds from issuance of common stock 1,000,100 250,100
Common stock issued for liabilities 66,666 100,000
Net Income (Loss) $ (1,453,240)
------------ ------------ ------------
Balance, December 31, 1998 14,066,666 914,848 (1,453,240)
Issuance of shares for notes payable 132,500 265,000
Sale of common shares 1,000,000 750,000
Net Income (Loss) (310,544)
------------ ------------ ------------
Balance, March 31, 1999 15,199,166 1,929,848 (1,763,784)
Net Income (Loss) (420,029)
------------ ------------ ------------
Balance, June 30, 1999 15,199,166 1,929,848 (2,183,813)
Net Income (Loss) (860,520)
------------ ------------ ------------
Balance, August 31, 1999 15,199,166 $ 1,929,848 $ (3,044,333)
============ ============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
INTELLIWORXX, INC.
STATEMENT OF CASH FLOWS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1999
- --------------------------------------------------------------------------------
CASH FLOWS FROM (TO) OPERATING ACTIVITIES:
Net Income (Loss) From Operations: $(310,544)
Add: Non-Cash Items
Depreciation and amortization 31,518
Changes in Assets and Liabilities:
Accounts receivable (400,561)
Inventory (546,960)
Prepaid expenses 1,637
Other assets (177,842)
Accounts payable 662,018
Wages and related taxes 127,617
Accrued interest 30,962
---------
Net Cash From (To) Operating Activities (582,155)
---------
CASH FLOWS FROM (TO) INVESTING ACTIVITIES:
Acquisition of equipment and furniture (120,322)
---------
Net Cash From (To) Investing Activities (120,322)
---------
CASH FLOWS FROM (TO) FINANCING ACTIVITIES:
Proceeds from borrowings 56,023
Repayment of borrowings (72,096)
Proceeds from sale of common stock 750,000
---------
Net Cash From (To) Financing Activities 733,927
---------
Increase (Decrease) in Cash 31,450
Cash Balance, Beginnng 76,526
---------
Cash Balance, Ending $ 107,976
---------
Supplemental Disclosures of Cash Flow Information:
Interest Paid $ 16,401
Supplemental Disclosures of Non-cash transactions:
A total of 132,500 common shares were issued in payment of
$265,000 of notes payable
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
INTELLIWORXX, INC.
STATEMENT OF CASH FLOWS
FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1999
- --------------------------------------------------------------------------------------------
Three month Six month
period ended period ended
June 30, 1999 June 30, 1999
----------------------------
CASH FLOWS FROM (TO) OPERATING ACTIVITIES:
<S> <C> <C>
Net Income (Loss) From Operations: $ (420,029) $ (730,573)
Add: Non-Cash Items
Depreciation and amortization 33,856 65,374
Adjustment of note payable (10,308) (10,308)
Changes in Assets and Liabilities:
Accounts receivable (201,230) (601,791)
Inventory (65,815) (612,775)
Prepaid expenses (31,766) (30,129)
Other assets 32,905 (144,937)
Accounts payable (119,904) 542,114
Wages and related taxes 154,105 281,722
Accrued interest 51,879 82,841
Other liabilities (59,500) (59,500)
--------------------------
Net Cash From (To) Operating Activities (635,807) (1,217,962)
--------------------------
CASH FLOWS FROM (TO) INVESTING ACTIVITIES:
Acquisition of equipment and furniture (15,919) (136,241)
--------------------------
Net Cash From (To) Investing Activities (15,919) (136,241)
--------------------------
CASH FLOWS FROM (TO) FINANCING ACTIVITIES:
Proceeds from borrowings 853,157 909,180
Repayment of borrowings (308,263) (380,359)
Proceeds from sale of common stock 750,000
--------------------------
Net Cash From (To) Financing Activities 544,894 1,278,821
--------------------------
Increase (Decrease) in Cash (106,832) (75,382)
Cash Balance, Beginnng 107,976 76,526
==========================
Cash Balance, Ending $ 1,144 $ 1,144
==========================
Supplemental Disclosures of Cash Flow Information:
Interest Paid $ 15,551
Supplemental Disclosures of Non-cash transactions:
A total of 132,500 common shares were issued in payment of
$265,000 of notes payable
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTELLIWORXX, INC.
STATEMENT OF CASH FLOWS
FOR THE TWO AND EIGHT MONTH PERIODS ENDED AUGUST 31, 1999
- ----------------------------------------------------------------------------------------------------------
Two month Eight month
period ended period ended
August 31, 1999 August 31, 1999
-------------------------------------
CASH FLOWS FROM (TO) OPERATING ACTIVITIES:
<S> <C> <C>
Net Income (Loss) From Operations: $ (860,520) $(1,591,093)
Add: Non-Cash Items
Depreciation and amortization 22,803 88,177
Adjustment of note payable (10,308)
Changes in Assets and Liabilities:
Note receivable (30,200) (30,200)
Accounts receivable 57,044 (544,747)
Inventory 35,732 (577,043)
Prepaid expenses 9,785 (20,344)
Other assets (14,075) (159,012)
Accounts payable 16,862 558,976
Wages and related taxes 236,947 518,669
Accrued interest 64,698 147,539
Other liabilities 24,700 (34,800)
----------------------------------
Net Cash From (To) Operating Activities (436,224) (1,654,186)
----------------------------------
CASH FLOWS FROM (TO) INVESTING ACTIVITIES:
Acquisition of equipment and furniture (7,111) (143,352)
----------------------------------
Net Cash From (To) Investing Activities (7,111) (143,352)
----------------------------------
CASH FLOWS FROM (TO) FINANCING ACTIVITIES:
Proceeds from borrowings 525,000 1,434,180
Repayment of borrowings (80,673) (461,032)
Proceeds from sale of common stock 750,000
----------------------------------
Net Cash From (To) Financing Activities 444,327 1,723,148
----------------------------------
Increase (Decrease) in Cash 992 (74,390)
Cash Balance, Beginnng 1,144 76,526
==================================
Cash Balance, Ending $ 2,136 $ 2,136
==================================
Supplemental Disclosures of Cash Flow Information:
Interest Paid $ 8,083
Supplemental Disclosures of Non-cash transactions:
A total of 132,500 common shares were issued in payment of
$265,000 of notes payable
See Notes to Financial Statements
</TABLE>
<PAGE>
INTELLIWORXX, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, June 30, and August 31, 1999
- --------------------------------------------------------------------------------
1. BASIS OF ACCOUNTING:
- -----------------------
The financial statements of Intelliworxx, Inc. ("Company") as of March 31,
June 30, and August 31, 1999 and for the periods then ended have been prepared
on the basis that the Company is a going concern, which contemplates the
realization of assets and satisfaction of liabilities in the normal course of
business, and, accordingly, no adjustments have been recorded because of this
uncertainty. At August 31, 1999 the Company's current assets totaled $1,616,797
and its current liabilities totaled $3,284,587, for a working capital deficit of
$1,667,790. For the period from inception (February 12, 1998) to August 31,
1999, the Company incurred losses of $3,044,333, which have significantly
impacted the liquidity and capital resources of the Company.
Since inception, the Company met its cash needs primarily from short-term
borrowings from individuals, a private placement of 2,000,000 of its common
shares for $1,000,000, and from revenues of $2,586,000. Management expects to
achieve its future cash needs from a combination of revenues, sales of its
equity securities, and continued borrowings, pending attainment of profitable
operations.
2. HISTORY AND OPERATIONS:
- --------------------------
The Company was organized on February 12, 1998 under the laws of the State
of Florida. Since inception, its primary business has been the development of
specialized computer program applications and certain related computer hardware.
On November 20, 1998, the Board of Directors of the Company approved a
merger with Outdoor Resorts, Inc. ("Resorts"), a publicly registered entity,
which merger was consummated on November 23, 1998. Under the terms of the
merger, the stockholders of the Company received 12,000,000 shares of the common
stock of Resorts in exchange for the 600,000 common shares of the Company then
outstanding. At the date of the merger, Resorts did not have any assets or
liabilities. Resorts changed its name to Intelliworxx, Inc. For financial
reporting purposes, this transaction was accounted for as a reverse purchase
acquisition under which the entities were recaptialized to include the
historical financial information of the Company.
During the period from inception (February 12, 1998) to December 31, 1998,
the Company was in its development stage, which stage ended as of December 31,
1998. In the development stage period, the Company did not maintain its
financial records such that meaningful quarterly financial information is
available. The Company's financial statements as December 31, 1998 and for the
period then ended were subjected to a financial audit.
<PAGE>
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
- ----------------------------------------------
CASH AND CASH EQUIVALENTS: Cash and cash equivalents are comprised of cash
and highly liquid investments with a maturity of three months or less when
purchased. The Company has no cash equivalents.
INVENTORY: Inventory is carried at the lower of acquisition cost or market.
EQUIPMENT AND FURNITURE: Equipment and furniture are stated at their
acquisition cost. The cost of replacements, renewals, and betterments, that
neither ad materially to the value of the equipment and furniture, nor
appreciable prolong their lives are charged to expense as incurred. Depreciation
is provided using the straight-line method over the estimated useful lives,
which generally ranges from two to five years.
INTANGIBLE ASSETS: Intangible assets, such as software licenses, are
carried at cost, and are amortized using the straight-line method over the life
of the license.
INCOME TAXES: The provision (benefit) for income taxes is based upon the
pre-tax earnings (loss) reported in the financial statements, adjusted for
transactions that may never enter in the computation of income taxes payable. A
deferred tax asset or liability is recognized for the estimated future tax
affect attributable to temporary differences in the recognition of income and
expenses for financial statements and income tax purposes. A valuation allowance
is provided in the event that the tax benefits are not expected to be realized.
EARNINGS (LOSS) PER SHARE: Earnings (loss) per common share are based upon
the weighted number of common shares outstanding during the period.
USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION: The Company derives its revenues from sales of
products and from computer software and hardware consulting design services.
Revenues are recognized upon the delivery of the products and services. The
Company also derives revenues under contracts that include either or both the
design, development, and manufacture of computer program applications and
related hardware. Percentage of completion accounting has been adopted by the
Company to recognize revenues from those contracts that extend beyond interim
and annual reporting periods.
RESEARCH AND DEVELOPMENT, ADVERTISING, AND START-UP COSTS: Research and
development, advertising, and start-up costs are charged to expense as incurred.
<PAGE>
CONCENTRATIONS OF RISK and CREDIT RISK: The Company is operating solely in
a specialized part of the computer application industry. Its operations in that
specialized area requires development of unique computer program software and
certain related hardware. Competing entities in the specialized area generally
have more extensive resources and have been operating for longer periods of
time. The Company does not have a material concentration of accounts receivable
or other credit risk.
IMPAIRMENT OF LONG-LIVED ASSETS: The Company has not recognized any charges
from the impairment of its long-lived assets, as it believes that its long-lived
assets have not been impaired.
FINANCIAL INSTRUMENTS: Assets and liabilities, as a matter of accounting
policy, are reflected in the accompanying financial statements at values that
the Company considers to represent their respective fair values.
4. NOTES PAYABLE:
- -----------------
At August 31, 1999, the Company had an aggregate unpaid principal balance
of $1,236,190 of notes payable and capitalized leases payable. None of the notes
payable had collateral, except for one note with a principal balance of $225,000
that had the personal guarantee of an officer of the Company. The notes payable
bear interest at rates ranging from 10% to 52% per annum and are due upon
demand. During the first quarter of 1999, the Company exchanged $265,000 of the
notes payable for 132,500 common shares.
The Company recorded assets of $60,180 that are represented by capitalized
lease payables of a like amount. The capitalized payable bears interest at the
per annum rate of 20.95% and is payable in monthly amounts of $2,336 through
June 2001.
5. INCOME TAXES:
- ----------------
The provision (benefit) for income taxes differs from the amount of income
tax determined by applying the applicable United States statutory federal income
tax rate to pre-tax income as a result of the following differences at August
31, 1999.
Income tax provision (benefit) at 34% $(541,000)
Increase in rates resulting from
state taxes (59,000)
Valuation allowance 600,000
---------
Effective tax rates $ -0-
The Company will need to realize significant profits to utilize the net
operating losses, all of which may not be available due to the change in control
and issuance of additional stock. Because of these uncertainties, a valuation
allowance was established in the same amounts as the deferred tax assets because
the benefit is more likely than not to be lost. Net operating losses of the
<PAGE>
Company totaled approximately $1,453,000 at December 31, 1998 and expire in
2013, and an additional amount of $1,591,093 that expires in 2014.
6. COMMON AND PREFERRED STOCK
- -----------------------------
PREFERRED STOCK: The Company is authorized to issue 25,000,000 shares of no
par value preferred stock. At August 31, 1999, no preferred stock had been
issued.
COMMON STOCK: The Company is authorized to issue 100,000,000 shares of
common stock. Dividends are available when declared by the Company. At August
31, 1999, there were 15,199,166 common shares outstanding.
As of October 1999, the Company has granted stock options under incentive
and non-incentive plans for 801,894 common shares that are exercisable at $6 and
$6.70 per share. Fifty percent of the stock options are exercisable on the first
anniversary date of the option, and 25% on each subsequent anniversary. None of
the stock options are exercisable before February 25, 2000.
7. COMMON STOCK OFFERINGS:
- --------------------------
In December 1998 and January 1999, the Company issued 2,000,000 shares of
common stock for a total of $1,000,000 under a registration exemption provided
by Securities and Exchange Commission Rule 504.
8. YEAR 2000 COMPUTER ISSUE:
- ----------------------------
Management asserts that it has reviewed all of its computer programs and
systems and believes that they are Year 2000 compliant. While management cannot
insure that the computer systems of its customers and suppliers are Year 2000
compliant, it believes, based upon inquiries and because their primary customers
and suppliers are generally in, or closely associated with the computer
industry, that such are or will be Year 2000 compliant.
9. COMMITMENTS AND CONTINGENCIES:
- ---------------------------------
The Company leases its facilities under a lease that requires monthly
rental payments of $32,000 per month and expires in September 2004.
The Company is presently, and from time to time, subject to pending claims
and lawsuits arising in the ordinary course of business. In the opinion of
management, the ultimate resolution of these pending legal proceedings will not
have a material adverse affect upon the Company's operations or financial
position.
<PAGE>
10. REVENUES AND ACCOUNTS RECEIVABLES:
- --------------------------------------
During the eight-month period ended August 31, 1999, the Company recorded
revenues of $1,776,415 from product development and contracts ($1,445,826) and
product sales ($330,589). As of March 31, June 30, and August 31, 1999, accounts
receivable included unbilled receivables of $315,700, $503,500, and $243,560
from development and consulting work.
11. DILUTED EARNINGS PER SHARE:
Diluted earnings (loss) per share is not presented because the
outstanding options to purchase 801,894 common shares under the Company's
incentive and non-incentive plans (see Note 6) would cause an anti-dilutive
affect upon the diluted earnings (loss) per share amounts for each of the
periods.
<PAGE>
PART III
Item 1. INDEX TO EXHIBITS.
Exhibit Description of Document
- ------- -----------------------
2.0 Agreement and Plan of Reorganization by and among Outdoor
Resorts, Inc., Intelliworxx, Inc., and Kevin B. Rogers, Michael
P. Jonas, Donald H. Pound, Jr., Vincent D. Reynolds, Ian N.
Whitehead, and Christopher J. Floyd, the Shareholders of
Intelliworxx, Inc., dated November 23, 1998.
3(i) Articles of Incorporation for Outdoor Resorts, Inc. (now known as
Intelliworxx, Inc. ) filed July 1, 1995.
3(ii) Articles of Merger of Intelliworxx, Inc. with and into Outdoor
Resorts, Inc. and Articles of Amendment to Articles of
Incorporation of Intelliworxx, Inc., f/k/a Outdoor Resorts, Inc.,
filed December 1, 1998.
3(iii) Bylaws.
99.0 Form of Stock Certificate.
99.1 Intelliworxx, Inc. 1999 Equity Incentive Plan.
Item 2. DESCRIPTION OF EXHIBITS.
The required exhibits are attached hereto, as noted in Item 1 above.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
INTELLIWORXX, INC.
Date: November 15, 1999 By: /s/ Kevin B. Rogers
----------------------------
Kevin B. Rogers, President
Exhibit 2.0
AGREEMENT
AND
PLAN OF REORGANIZATION
BY AND AMONG
OUTDOOR RESORTS, INC.,
INTELLIWORXX, INC.,
AND
KEVIN B. ROGERS, MICHAEL P. JONAS, DONALD H. POUND, JR.
VINCENT D. REYNOLDS, IAN N. WHITEHEAD,
AND CHRISTOPHER J. FLOYD,
THE SHAREHOLDERS OF
INTELLIWORXX, INC.
Date: November 23, 1998
<PAGE>
2
Agreement and Plan of Reorganization ("Agreement"), dated as of November
23, 1998, by and among Outdoor Resorts, Inc., a Florida corporation ("Outdoor");
Intelliworxx, Inc., a Florida corporation (the "Acquiree"); and the individuals
whose names appear on the signature page hereof, ("Selling Shareholders").
RECITALS
--------
A. As of the date hereof, there are an aggregate of 50,000,000 shares of
Outdoor's Common Stock, no par value (the "Outdoor Shares") authorized, of which
1,000,000 shares are issued and outstanding. The Board of Directors will no
later than the Effective Date (as defined in Article 4 hereof) duly authorize
the amendment of the Company's Articles of Incorporation so as to increase the
authorized Outdoor Shares to 100,000,000. Upon the Effective Date, 12,000,000
shares are to be issued as herein below more fully described in Section 4 of
this Agreement.
B. Intelliworxx, Inc. is a Florida corporation, whose issued and
outstanding common stock (the "Intelliworxx Stock") is owned, beneficially and
of record, by the individuals whose names appear on the signature page hereof
under the designation "Selling Shareholders", who together own all of the
600,000 issued and outstanding shares of the Intelliworxx Stock, each owning the
number of shares set forth opposite their respective names.
C. The parties hereto intend that the issuance of the Outdoor Shares in
exchange for the Intelliworxx Stock shall be in accordance with the applicable
statutes of the State of Florida and shall qualify as a "tax-free"
reorganization within the meaning of Section 368(a)(2)(D) of the Internal
Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing promises and the mutual
covenants, agreements and representations contained herein, the parties hereto
agree as follows:
OPERATIVE PROVISIONS
--------------------
ARTICLE 1
MERGER
------
1.1 Transfer of Property and Liabilities. Upon the Effective Date (as defined in
Article 4 hereof) of the merger, the separate existence of Acquiree shall cease;
all of the outstanding shares of stock of Acquiree shall be exchanged for and
converted into the Outdoor Shares; and upon the filing of a Certificate of
Merger with the Secretary of State of the State of Florida, Outdoor shall
possess all the rights, privileges, immunities, powers and purposes, and all
property, causes of action and every other asset of Acquiree and shall assume
and be liable for all the liabilities, obligations and penalties of Acquiree, in
accordance with Florida law.
1.2 Surviving Corporation. Following the merger, the existence of Outdoor shall
continue unaffected and unimpaired by the merger, with all the rights,
privileges, immunities and powers, and subject to all the duties and liabilities
of a corporation organized under the laws of Florida. The Certificate of
<PAGE>
3
Incorporation and Bylaws of Outdoor, as in effect immediately prior to the
Effective Date, shall continue in full force and effect, and, except as provided
otherwise in this document, shall not be changed in any manner by the merger.
ARTICLE 2
---------
CONVERSION OF SHARES
--------------------
2.1 Conversion Ratio. As a result of the merger contemplated by this Agreement,
the holders of the Intelliworxx Stock will receive twenty (20) restricted
Outdoor shares for each share of Intelliworxx stock that they own on the Closing
Date (as defined herein). In order to effect such conversion, all of the 600,000
shares of Intelliworxx Stock issued and outstanding prior to the Merger will, as
a result of the Merger and with no further action on the part of the holder
thereof, be transformed and converted into the right to receive twelve million
(12,000,000) Outdoor shares, upon surrender of the certificates for the
Intelliworxx Stock.
2.2 Shares of Outdoor. On the date of the Closing, Outdoor represents that
1,000,000 shares of its common stock, no par value per share, are issued and
outstanding. None of the issued and outstanding shares of Outdoor shall be
converted as a result of the merger and all of such shares shall remain issued
and outstanding shares of capital stock of Outdoor.
2.3 Assets of Acquiree. Prior to the Effective Date, Acquiree will retain all
the assets, properties, business and goodwill of Acquiree of every kind and
description, wherever located, including without limitation, all property,
tangible or intangible, real, personal, or mixed, accounts receivable, patent
rights, trademarks, trade names, bank accounts, cash and securities, claims and
rights under contracts of Acquiree, rights to use its corporate name and all
other names or slogans used by Acquiree in connection with its business or
products and all books and records of Acquiree relating to its business
(collectively referred to as the "Assets"), all as the same shall exist at the
date of this Agreement. Such Assets shall, without limitation, include all
Assets of Acquiree shown on the Interim Balance Sheet referenced in Section 5.8
below, and all Assets thereafter acquired by Acquiree prior to the Effective
Date, except such of those Assets of Acquiree as (1) may have been disposed of
prior to the Effective Date in the ordinary course of business, and (2) may have
been otherwise disposed of prior to the Closing Date at the request or with
Outdoor's written consent.
ARTICLE 3
---------
RELATED TRANSACTIONS
ADDITIONAL AGREEMENTS
---------------------
3.1 Change in Corporate Name. The Board of Directors of Outdoor shall authorize
the change of its name to "Intelliworxx, Inc.", or such other name approved by
the Selling Shareholders, on the Effective Date and shall file an amendment to
its Articles of Incorporation to reflect such change.
<PAGE>
4
3.2 Increase Authorized Shares. The Board of Directors of Outdoor shall cause
its Articles of Incorporation to be amended, as of the Effective Date, to
increase the number of shares of its authorized common stock from 50,000,000 to
100,000,000 shares.
3.3 Change in Board of Directors of Outdoor. At the Closing, the current
director of Outdoor shall elect Kevin B. Rogers as Chairman of the Board and
Michael P. Jonas, Donald H. Pound, Jr., Vincent D. Reynolds, Ian N. Whitehead,
and Christopher J. Floyd as members of the Board of Directors of Outdoor and
immediately thereafter, Donald R. Mastropietro shall resign as Outdoor's sole
officer and director. Such persons shall serve as members of the Board of
Directors of Outdoor until the next annual meeting of the shareholders of
Outdoor, or until their successors are duly elected and seated. Copies of the
Meeting of the Board of Directors of Outdoor and Mr. Mastropietro's resignation
are attached hereto as Composite Schedule 3.3.
3.4 Officers. Donald R. Mastropietro, as the sole officer of Outdoor, shall
resign as of the Closing Date and the Board of Directors of Outdoor, shall as of
the Closing Date appoint the following officers: Kevin B. Rogers (President and
Chief Executive Officer), Michael P. Jonas (Executive Vice President),
Christopher J. Floyd (Vice President Finance, Chief Financial Officer and
Treasurer), Donald H. Pound, Jr. (Vice President Engineering and Secretary),
Vincent D. Reynolds (Vice President Software Technology) and Ian N. Whitehead
(Director of Platform Integration). Such persons shall serve at the direction of
the Board of Directors.
3.5 Conversion of Debt to Common Shares. As of the Closing Date, the Board of
Directors of Acquiree and Outdoor have agreed to reserve for issuance up to
190,000 shares of restricted common stock of Outdoor in order that debt of
Acquiree, represented by promissory notes, may be converted. Schedule 3.5
details the amounts to be converted.
3.6 Books and Records. The Selling Shareholders shall have delivered to Outdoor
all of the books and records of Acquiree in their possession.
ARTICLE 4
---------
CLOSING; CERTIFICATE OF MERGER
------------------------------
4.1 Closing. The Closing contemplated by Section 1.1 shall be held at the
offices of Intelliworxx, Inc., 1819 Main Street, Suite 11, Sarasota, Florida
34236 at 2:00 p.m. on Monday, November 23, 1998, unless another place or date is
agreed upon in writing by the parties (the "Closing Date"). At the Closing, all
documents called for by this Agreement (the "Closing Documents") shall be
executed by the respective parties. The Selling Shareholders shall deliver to
Outdoor the stock certificates representing the shares of Intelliworxx to be
acquired and the books and records of Acquiree. The Outdoor Shares shall be
issued as follows:
<PAGE>
5
Kevin B. Rogers and/or assigns 2,000,000 shares
Michael P. Jonas and/or assigns 2,000,000 shares
Donald H. Pound, Jr. and/or assigns 2,000,000 shares
Vincent D. Reynolds and/or assigns 2,000,000 shares
Ian N. Whitehead and/or assigns 2,000,000 shares
Christopher J. Floyd and/or assigns 2,000,000 shares
4.2 Certificate of Merger. After the Closing provided for in Section 4.1 above,
the Certificate of Merger executed by the parties at Closing shall be submitted
for filing with the Secretary of State of Florida. The date of the latter of
such filing, or such other date as the parties may agree upon in writing
pursuant to applicable law, shall be the effective date of the Merger (the
"Effective Date").
ARTICLE 5
---------
Representations and Warranties of
Acquiree and Selling Shareholders
---------------------------------
Acquiree and the Selling Shareholders represent and warrant to Outdoor as
follows:
5.1 Organization, Power, Standing and Qualification. Acquiree is a corporation
duly organized, validly existing, and in good standing under the laws in the
State of Florida and has full corporate power and authority to carry on its
business as it is now being conducted and to own and operate the properties and
assets now owned and operated by it. Acquiree is duly qualified to do business
and is in good standing in each and every jurisdiction where the failure to
qualify or to be in good standing would have an adverse effect upon its
financial condition, the conduct of its business or the ownership of its assets.
5.2 Authority. Acquiree and the Selling Shareholders have the power and
authority to execute, deliver and perform this Agreement; and this Agreement is
a valid and binding obligation of the Selling Shareholders, enforceable in
accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, moratorium, or similar laws affecting the
enforcement of creditors' rights generally.
5.3 Validity of Contemplated Transactions; Interference. Other than as provided
in Schedule 5.3, the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby do not and will not (a)
contravene any provision of the Certificate of Incorporation or Bylaws of
Acquiree; (b) violate, be in conflict with, constitute a default under, cause
the acceleration of any payments pursuant to, or otherwise impair the good
standing, validity, or effectiveness of any material agreement, contract,
indenture, lease, or mortgage to which Acquiree is a party; (c) subject the
assets of Acquiree to any indenture, mortgage, contract, commitment, or
agreement, other than this Agreement; (d) reasonably interfere with any other
<PAGE>
6
agreement to which Acquiree is a party; or (e) violate any material provision of
law, rule, regulation, order, permit, or license to which Acquiree is subject.
5.4 Capitalization of Acquiree. Acquiree's authorized capital stock consists of
2,000,000 shares of common stock, no par value, 600,000 of which shares are
presently outstanding, validly issued, fully paid and non-assessable. There are
no outstanding options, warrants, conversion privileges, subscriptions, calls,
commitments or rights of any character relating to any authorized but unissued
capital stock of Acquiree.
5.5 Subsidiaries. Except as disclosed in Schedule 5.5 hereto, Acquiree owns no
shares of capital stock or other equity interest in any corporation,
partnership, joint venture or other business organization or enterprise.
5.6 Ownership of Shares. The Selling Shareholders hold all legal and beneficial
ownership of and title to the issued and outstanding shares of the capital stock
of Acquiree and have full authority to vote such shares in favor of the
transactions contemplated by this Agreement.
5.7 Title to Properties. Except as set forth in Schedule 5.7 hereto, Acquiree
has good, valid and marketable title to all of its assets, free and clear of all
mortgages, liens, pledges, security interests and other encumbrances, except (a)
mortgages, liens, pledges, security interests, and other encumbrances reflected
in the Interim Financial Statements or the notes thereto [as such term is
defined in Section 5.8 herein], (b) liens for current taxes not delinquent or
being contested in good faith by appropriate proceedings, (c) liens in
connection with workmen's compensation, unemployment insurance or other social
security obligations, (d) deposits or pledges to secure bids, tenders, contracts
(other than contracts for the payment of money), leases, statutory obligations,
surety and appeal bonds and other obligations of like nature arising in the
ordinary course of business, (e) mechanic's, workmen's, materialmen's or other
like liens arising in the ordinary course of business with respect to
obligations which are not due or which are being contested in good faith, and
(f) such imperfections of title, lien, easements and encumbrances, if any, as
are not substantial and do not materially detract from the value, or interfere
with the present use, of any of the properties subject thereto or affected
thereby, or otherwise impair the business, operations or prospects of Acquiree.
5.8 Financial Statements and Operating Information. Acquiree has delivered to
Outdoor its unaudited balance sheet as of October 31, 1998 (the "Interim Balance
Sheet") and its related statements of income and changes in financial position
for the one month period then ended (collectively the "Interim Financial
Statements"). The financial statements are, to the best knowledge of Acquiree
and the Selling Shareholders consistent with the books and records of Acquiree
and present fairly the financial condition and results of operations as of the
respective dates thereof and the respective periods then ended, and there has
been no material change in such financial condition of Acquiree since October
31, 1998, other than as set forth in Schedule 5.8.
5.9 Absence of Undisclosed Liabilities. Except as provided in Schedule 5.9,
Acquiree has no material liabilities or obligations except for those (i)
reflected on the Interim Balance Sheet; (ii) reflecting contractual liabilities
or obligations incurred in the ordinary course of business that are not required
<PAGE>
7
by generally accepted accounting principles to be reflected in a balance sheet;
(iii) incurred in the ordinary course of business subsequent to the date of the
Interim Balance Sheet and not required to be disclosed pursuant to the terms of
this Agreement; and (iv) specifically disclosed in a schedule to this Agreement.
Except as otherwise provided in this Agreement, the term "liabilities or
obligations" as used in this Agreement shall include any direct or indirect
indebtedness, claim, loss, damage, deficiency (including deferred income tax and
other net tax deficiencies), cost, expense, obligation, guarantee, or
responsibility, whether accrued, absolute, or contingent, known or unknown,
fixed or unfixed, liquidated or unliquidated, secured or unsecured.
5.10 Certain Tax Matters. Acquiree has duly filed all federal, state, and local
tax returns and reports required to be filed by Acquiree for all periods ending
on or prior to October 31, 1998 and all taxes, including income, gross receipts,
and other taxes and any penalties with respect thereto, shown thereon to be due
and payable, have been paid, withheld, or reserved for or are reflected as a
liability in the Interim Balance Sheet. Except as provided in Schedule 5.10,
Acquiree has not entered into any agreements for the extension of time for the
assessment of any tax or tax delinquency, has received no outstanding or
unresolved notices from the Internal Revenue Service or any taxing body of any
proposed examination or of any proposed deficiency or assessment, and has
properly withheld all amounts required by law to be withheld for income taxes
and unemployment taxes, including without limitation social security and
unemployment compensation, relating to its employees, and remitted such withheld
amounts to the appropriate taxing authority as required by law. Acquiree has no
permanent establishment located in any tax jurisdiction other than in the United
States and is not liable for the payment of any taxes levied by any foreign tax
jurisdiction.
5.11 Litigation; Compliance with Laws. Except as set forth in Schedule 5.11
attached hereto, there is no suit, action, claim, arbitration, administrative or
legal or other proceeding, or governmental investigation pending or, to the
knowledge of the Selling Shareholders, threatened against or related to
Acquiree. Except as set forth in Schedule 5.11 attached hereto, there has been
no failure to comply with, nor any default under, any law, ordinance,
requirement, regulation, or order applicable to Acquiree or its business
operations, nor any violation of or default with respect to any order, writ,
injunction, judgment, or decree of any court or federal, state or local
department, official, commission, authority, board, bureau, agency, or other
instrumentality issued or pending against Acquiree which in any such case would
reasonably be expected to have a material adverse effect on the financial
condition, business, results of operations, properties or assets of Acquiree.
Except as set forth in Schedule 5.11 attached hereto, Acquiree has obtained all
permits, licenses, zoning variances, approvals, and other authorization for
which the failure to so obtain would have a material adverse effect on
Acquiree's operations. All such material permits, licenses, approvals and
authorizations are currently valid and in full force and no revocation,
cancellation or withdrawal thereof has been effected or threatened. The
execution of this Agreement and the performance of the transactions contemplated
hereby have not and will not change in any respect, or result in the termination
of, any such material permits, licenses, certificates, zoning variances and
authorizations. There have been no illegal kickbacks, bribes or political
contributions made by Acquiree.
<PAGE>
8
5.12 ERISA Matters. Schedule 5.12 attached hereto contains a complete and
accurate list of all Benefit Plans (as defined in Section 3 of the Employee
Retirement Income Security Act of 1974, as amended) and insurance policies
relating thereto sponsored by Acquiree or to which Acquiree is making
contributions as of the date hereof with respect to employees of Acquiree.
Acquiree has timely paid, or will timely pay as soon as practicable, all
employee benefits due and owing under the Benefit Plans sponsored by Acquiree in
accordance with the terms of each such Benefit Plan.
5.13 Insurance. All inventories, machinery, equipment, buildings, improvements,
and other tangible assets owned or leased by Acquiree are insured against fire
and casualty under the policies and in the amounts and types of coverage set
forth in Schedule 5.13 attached hereto (the "Policies") and between the date
hereof and the Effective Date, Acquiree shall use commercially reasonable
efforts to maintain all of the Policies, or policies which are substantially
equivalent to the Policies. The Policies are outstanding and duly in force and
the premiums thereon fully paid when and as the same are due and payable.
Schedule 5.13 is a true and correct schedule of all policies of fire, liability,
and other forms of insurance, excluding the Benefit Plans listed in Schedule
5.12 pursuant to which the assets of Acquiree are insured (whether or not held
by Acquiree) or with respect to which Acquiree pays all or part of the premium.
5.14 Proprietary Information. Acquiree owns, possesses or lawfully uses all
patents, patent applications, trademarks, trademark applications, service marks,
service mark applications, trade names, trade dress, franchises, copyrights,
copyright applications and similar intangible rights used in its business and
trade secrets or other proprietary information similarly used (collectively, the
"Patents and Trademarks"), each item of which is listed in Schedule 5.14
attached hereto, and those Patents and Trademarks designated on Schedule 5.14
are owned exclusively by Acquiree, are valid and enforceable, and none infringe
(nor has any claim been made that there is any such infringement) the patents,
trademarks, service marks, trade names, copyrights or similar intangible rights
of others. After due inquiry, to the best of Acquiree's knowledge, there is no
claim against Acquiree or any Shareholder that either is or may be infringing on
or otherwise acting adversely to the rights of any person under or in respect of
any patent, trademark, service mark, trade name, trade dress, copyright,
license, franchise, permission, or other intangible right. Acquiree is not
obligated or under any liability to make any payments by way of royalties, fees,
or otherwise to any owner or licensee of, or other claimant to, any patent,
trademark, trade name, trade dress, copyright, or other intangible asset with
respect to the use thereof, in connection with the conduct of its business or
otherwise.
5.15 Labor Disputes. Except as set forth in Schedule 5.15, Acquiree is not a
party to any contract or other agreement with any labor union nor is Acquiree
experiencing or the subject of or, to Acquiree's knowledge, threatened by, any
union organization campaign or any strike, slowdown, picketing, work stoppage,
or other labor disturbance by any labor union or group of employees.
5.16 Contracts. Except as set forth in Schedule 5.16 or in another Schedule to
this Agreement, Acquiree is not a party to any material contract, agreement,
commitment, lease, indenture, fringe benefit or other plan. For purposes of this
Section 5.16 "material" shall mean any contract, agreement, commitment, lease,
<PAGE>
9
indenture, fringe benefit or other plan entered into which is not in the
ordinary course of business or, if entered into in the ordinary course of
business, which involves a payment, commitment or entitlement in excess of
$40,000. True and correct copies of all of the contracts, agreements,
commitments, leases, indentures, fringe benefits or other plans, documents and
instruments identified in Schedule 5.16, have been supplied to Outdoor.
5.17 Other Transactions. Acquiree has not, since inception, (a) operated its
business except in the ordinary course of business, (b) incurred any debts,
liabilities or obligations except in the ordinary course of business, (c)
discharged or satisfied any liens or encumbrances, or paid any liens or
encumbrances, or paid any material debts, liabilities or obligations, except in
the ordinary course of business, (d) mortgaged, pledged or subjected to lien or
other encumbrance any of its assets, tangible or intangible, except in the
ordinary course of business and except those permitted by Section 5.7 hereof,
(e) sold or transferred any of its tangible assets having a book value of
$25,000 or more, or canceled any debts or claims, except, in each case, in the
ordinary course of business, or (f) suffered any extraordinary losses or waived
any rights of substantial value.
5.18 Product Liability Insurance Claims. Acquiree is identified as an insured
party under all policies of insurance relating to product liability listed on
Schedule 5.18 for and against any claim for product liability on an occurrence
basis for events occurring prior to the Closing Date.
5.19 Bank Accounts. Schedule 5.19 attached hereto lists the names and addresses
of every bank and other financial institution in which Acquiree maintains an
account (whether checking, savings or otherwise), lock box or safe deposit box,
and the account numbers and names of persons having signing authority or other
access thereto.
5.20 No Changes. Except as provided in Schedule 5.20, since October 31, 1998
there has not been:
a. Any change in the financial or other condition, assets, liabilities
or business of Acquiree, except changes described in Schedule 5.20 hereto, none
of which individually or in the aggregate has been materially adverse to
Acquiree;
b. Any damage, destruction or loss (whether or not covered by
insurance) or any condemnation by governmental authorities which has or would
reasonably have an adverse affect on the business or assets of Acquiree to a
material degree;
c. Any strike, lockout, labor trouble or any similar event or
condition of any character adversely affecting the business of Acquiree;
d. Except as disclosed in writing to Outdoor from time to time, any
declaration, setting aside or payment of any dividend or other distribution in
respect of any of the shares of capital stock of Acquiree or any direct or
indirect redemption, purchase or other acquisition of the shares of capital
stock of Acquiree or any direct or indirect payment or incurring of management
fees or other transactions between the Selling Shareholders and Acquiree; or
<PAGE>
10
e. Any increase in the compensation payable or to become payable by
Acquiree to any of its officers, employees or agents, or any known payment or
arrangement made to or with any thereof, except in the ordinary course of
business as disclosed to Outdoor.
5.21 Veracity of Statements. To the knowledge of Acquiree and the Selling
Shareholders, no representation or warranty by Acquiree or the Selling
Shareholders contained in this Agreement and no statement contained in any
certificate, schedule or other instrument furnished to Outdoor pursuant hereto
or in connection with the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state a material fact necessary to make
it not misleading.
5.22 Copies of Articles and Bylaws and Stock Records. A copy of Acquiree's
Certificate of Incorporation (certified by the Secretary of State of Florida),
Bylaws and stock records (certified by the Secretary of Acquiree) has been
delivered to Outdoor and each is correct and in effect as at the date of this
Agreement. Such books and records have been regularly and properly kept and are
complete, accurate and legally sufficient under applicable law.
5.23 Condition of Tangible Assets. All material tangible portions of Acquiree's
assets are in a condition sufficient for Acquiree's operations.
5.24 Directors and Officers. Acquiree has delivered to Outdoor a true and
complete list as of the date of this Agreement showing the names of Acquiree's
directors and officers, each of whom has been duly elected and/or appointed.
5.25 Accounts Receivable. The accounts receivable of Acquiree reflected on the
Interim Balance Sheet and those acquired and accrued thereafter through the date
of this Agreement are valid and bona fide accounts receivable, created in the
ordinary course of business, and, except as provided in Schedule 5.25, the
allowance for doubtful accounts with respect thereto has been prepared in
accordance with generally accepted accounting principles. No part of such
accounts receivable is contingent upon performance by Acquiree of any
obligation, other than any warranty obligation, and no agreements for deductions
or discounts have been made with respect to any part of such receivables.
5.26 Inventories. All material portions of the inventories of Acquiree are fit
for their intended use and the net finished goods portion thereof is saleable in
the ordinary course of business, and the provision for slow and obsolete
inventories has been made in accordance with generally accepted accounting
principles.
5.27 Environmental Matters.
a. Schedule 5.27 attached hereto sets forth:
(1) all facts regarding hazardous substances, hazardous wastes
and constituents used, handled, stored or disposed of on the
Premises (as herein defined) by Acquiree, and to the
knowledge of Acquiree of all predecessors in interest and
all prior occupants of the Premises, where such use,
<PAGE>
11
handling, storage or disposal may reasonably be expected to
cause an adverse effect on the business, assets, or the
financial condition of Acquiree;
(2) all reports, studies or documents regarding releases of
hazardous substances and hazardous wastes and constituents
in, on, under or above the Premises filed with any
governmental agency by Acquiree, and to the knowledge of
Acquiree by all predecessors in interest and all prior
occupants of the Premises; and
(3) all studies or reports authorized by Acquiree, and to the
knowledge of Acquiree by all predecessors in interest and
all prior occupants of the Premises regarding environmental
conditions of the Premises.
b. Except as set forth in Schedule 5.27 attached hereto, Acquiree is
not aware of, nor has received notice of any past or present events, conditions,
circumstances, activities, practices, incidents, actions or plans which may
reasonably be expected to interfere with or adversely affect its business, its
assets or the financial condition of Acquiree or prevent compliance or continued
compliance with Environmental Laws (as herein defined), or may reasonably be
expected to give rise to any liability, or otherwise form the basis of any
claim, action, demand, suit, proceeding, hearing, study or investigation, based
on or related to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling, or the emission, discharge, release
or threatened release into the environment, of any hazardous substance or
hazardous wastes or constituents by Acquiree, all predecessors in interest and
all prior occupants of the Premises.
c. Acquiree has used due diligence to discover the existence of the
information to be disclosed as itemized in Paragraphs (a) and (b).
d. (1) Outdoor reserves the right prior to closing, but is not
hereby obligated, to undertake an investigation of the
Premises and Acquiree shall cooperate in providing
reasonable access to the Premises and any documents deemed
by Outdoor necessary for such investigation; provided,
however, that such investigation shall not interfere with or
cause any damage to the business or the assets of Acquiree.
All fees, costs and expenses in connection with such
investigation shall be paid by Outdoor.
(2) If Outdoor discovers that any of the representations or
warranties of Acquiree or the Selling Shareholders contained
in Section 5.28(a) of this Agreement are inaccurate in any
material respect and that, except as previously disclosed by
Acquiree to Outdoor, hazardous wastes, hazardous substances
or constituents, are present in, on, under or above the
Premises, the presence of which has or may reasonably be
expected to have a material adverse effect on the business,
the assets or the financial condition of Acquiree, upon
notice to Acquiree to that effect Outdoor may terminate this
Agreement and shall have no further obligations under this
Agreement.
<PAGE>
12
e. For purposes of Section 5.27 of this Agreement:
(1) The term "hazardous substance" has the definition set forth
in 42 USC ss.9601(1);
(2) The term "hazardous wastes and/or constituents" has the
definition set forth in 42 USCss.6903(5) and 40 CFR part
261;
(3) The term "Environmental Laws" means the collective federal,
state, and local statutes, rules, regulations, ordinances
and laws relating to environmental conditions or hazardous
substances as currently in effect, including but not limited
to the Solid Waste Disposal Act, 42 USC ss.ss.6901-6991i;
the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"), 42 USC ss.ss. 9601-9675,
as amended by the Superfund Amendments and Reauthorization
Act of 1986 ("SARA"); the Hazardous Materials Transportation
Act, 49 USC ss.6901 et seq.; the Federal Water Pollution
Control Act, 33 USC ss.1251 et seq.; the Clean Air Act, 42
USC ss.7401 et seq.; the Toxic Substance Control Act, 15 USC
ss.ss. 2601-2629; the Safe Drinking Water Act, 42 USC
ss.ss.300f-300j, all as amended; all similar state statutes
and local ordinances; and the regulations, orders, judicial
and administrative decisions presently in effect thereunder;
and
(4) The term "Premises" shall mean all of the leasehold
interests held by or property owned by Acquiree, together
with any improvements thereon located at or any other
property where the business is or had been operated (the
"Premises").
5.28 Acquisition of Outdoor Shares for Investment. The Selling
Shareholders are acquiring the Outdoor Shares for investment purposes, for their
own account and not with a view to the resale or distribution thereof in
violation of any state or federal securities laws. The Selling Shareholders
shall not sell, transfer, pledge or hypothecate any of the Outdoor Shares in the
absence of registration under or pursuant to an applicable exception from,
federal and all applicable security law. The Selling Shareholders further
acknowledge and agree that the certificates representing the Outdoor Shares
shall bear a restrictive legend, in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED
WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933 AS
AMENDED (THE "ACT"), ARE RESTRICTED SECURITIES, AND MAY NOT
BE SOLD, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR IN A
TRANSACTION WHICH, IN THE OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY, IS NOT REQUIRED TO BE REGISTERED UNDER THE
ACT."
<PAGE>
13
ARTICLE 6
---------
Representations and Warranties of Outdoor
-----------------------------------------
Outdoor represents and warrants to Acquiree and the Selling
Shareholders as follows:
6.1 Organization, Power, Standing and Qualification. Outdoor is a corporation
duly organized, validly existing and in good standing under the laws in the
State of Florida and has full corporate power and authority to carry on its
business as it is now being conducted and to own and operate the properties and
assets now owned and operated by it. Outdoor is duly qualified to do business
and is in good standing in each and every jurisdiction where the failure to
qualify or to be in good standing would have an adverse effect upon its
financial condition, the conduct of its business or the ownership of its assets.
6.2 Authority. Outdoor has the power and authority to execute, deliver and
perform this Agreement; and this Agreement is a valid and binding obligation of
Outdoor, enforceable in accordance with its terms, except as such enforcement
may be limited by applicable bankruptcy, insolvency, moratorium, or similar laws
affecting the enforcement of creditors' rights generally.
6.3 Validity of Contemplated Transactions; Interference. The execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby do not and will not (a) contravene any provision of the
Certificate of Incorporation or Bylaws of Outdoor; (b) violate, be in conflict
with, constitute a default under, cause the acceleration of any payments
pursuant to, or otherwise impair the good standing, validity, or effectiveness
of any material agreement, contract, indenture, lease, or mortgage to which
Outdoor is a party; (c) subject the assets of Outdoor to any indenture,
mortgage, contract, commitment, or agreement, other than this Agreement; (d)
reasonably interfere with any other agreement to which Outdoor is a party; or
(e) violate any material provision of law, rule, regulation, order, permit, or
license to which Outdoor is subject.
6.4 Capitalization of Outdoor Resorts, Inc. Outdoor's authorized capital stock
consists of 50,000,000 shares of common stock, no par value, 1,000,000 of which
shares are presently outstanding, validly issued, fully paid and non-assessable.
As of the Effective Date, the Board of Directors and a majority of shareholders
will have duly authorized an amendment of Outdoor's Articles of Incorporation so
as to increase the number of authorized Common Shares from 50,000,000 to
100,000,000. Said amendment to the Articles of Incorporation will be duly and
properly filed as soon after the Effective Date as is feasible possible. The
Outdoor Shares to be issued and sold to each Selling Shareholder pursuant to
this Agreement, when issued and delivered as provided herein will be duly
authorized, validly issued, fully paid and non-assessable and free of preemptive
or similar rights. There currently are no rights, agreements, commitments,
option or warrants of any character obligating Outdoor, contingently or
otherwise, to issue any additional shares of Outdoor stock or to register any
shares of its capital stock under any applicable federal or state securities
laws.
<PAGE>
14
6.5 Subsidiaries. Except as disclosed in Schedule 6.5 hereto, Outdoor owns no
shares of capital stock or other equity interest in any corporation,
partnership, joint venture or other business organization or enterprise.
6.6 Financial Statements. Outdoor has delivered to Acquiree and the Selling
Shareholders its balance sheets for each of the last two full fiscal years
ending before the date of this Agreement as well as its statement of income and
loss for the same periods. In addition, Outdoor has delivered to Acquiree and
the Selling Shareholders its audited financial statements for period ending
August 31, 1998 and unaudited balance sheet and income statement for the period
ending November 22, 1998 (the "Outdoor Interim Balance Sheet") which has been
prepared in accordance with the applicable books and records of Outdoor and
presents fairly the financial condition of Outdoor as of November 22, 1998, and
represents there has been no material change in such financial condition of
Outdoor since November 22, 1998.
6.7 Absence of Undisclosed Liabilities. Outdoor has no liabilities or
obligations except for those (i) reflected on the Outdoor Interim Balance Sheet;
(ii) reflecting contractual liabilities or obligations incurred in the ordinary
course of business that are not required by generally accepted accounting
principles to be reflected in a balance sheet; (iii) incurred in the ordinary
course of business subsequent to the date of the Outdoor Interim Balance Sheet
and not required to be disclosed pursuant to the terms of this Agreement; and
(iv) specifically disclosed in Schedule 6.7 attached hereto. Except as otherwise
provided in this Agreement, the term "liabilities or obligations" as used in
this Agreement shall include any direct or indirect indebtedness, claim, loss,
damage, deficiency (including deferred income tax and other net tax
deficiencies), cost, expense, obligation, guarantee, or responsibility, whether
accrued, absolute, or contingent, known or unknown, fixed or unfixed, liquidated
or unliquidated, secured or unsecured.
6.8 Certain Tax Matters. Outdoor has duly filed all federal, state, and local
tax returns and reports required to be filed by Outdoor for all periods ending
on or prior to October 31, 1998 and all taxes, including income, gross receipts,
and other taxes and any penalties with respect thereto, shown thereon to be due
and payable, have been paid, withheld, or reserved for or are reflected as a
liability in the Outdoor Interim Balance Sheet. The returns and reports are, to
the best knowledge of Outdoor, correct and complete. Outdoor has not entered
into any agreements for the extension of time for the assessment of any tax or
tax delinquency, has received no outstanding or unresolved notices from the
Internal Revenue Service or any taxing body of any proposed examination or of
any proposed deficiency or assessment, and has properly withheld all amounts
required by law to be withheld for income taxes and unemployment taxes,
including without limitation social security and unemployment compensation,
relating to its employees, and remitted such withheld amounts to the appropriate
taxing authority as required by law. Outdoor does not have a permanent
establishment located in any tax jurisdiction other than in the United States
and is not liable for the payment of any taxes levied by any foreign tax
jurisdiction.
6.9 Litigation; Compliance with Laws. There is no suit, action, claim,
arbitration, administrative or legal or other proceeding, or governmental
investigation pending or, to the knowledge of Outdoor threatened against or
related to Outdoor. There has been no failure to comply with, nor any default
<PAGE>
15
under, any law, ordinance, requirement, regulation, or order applicable to
Outdoor or its business operations, nor any violation of or default with respect
to any order, writ, injunction, judgment, or decree of any court or federal,
state or local department, official, commission, authority, board, bureau,
agency, or other instrumentality issued or pending against Outdoor which might
have a material adverse effect on the financial condition, its business, results
of operations, properties or assets of Outdoor. There have been no illegal
kickbacks, bribes or political contributions made by Outdoor.
6.10 No Changes. Since October 31, 1998 there has not been:
a. Any change in the financial or other condition, assets, liabilities
or business of Outdoor, except changes described in Schedule 6.10 hereto, none
of which individually or in the aggregate has been materially adverse to
Outdoor;
b. Any damage, destruction or loss (whether or not covered by
insurance) or any condemnation by governmental authorities which has or may
adversely affect the business or assets of Outdoor to a material degree;
c. Any strike, lockout, labor trouble or any similar event or
condition of any character adversely affecting the business of Outdoor;
d. Except as disclosed in writing to the Selling Shareholders from
time to time, any declaration, setting aside or payment of any dividend or other
distribution in respect of any of Outdoor's shares or any direct or indirect
redemption, purchase or other acquisition of Outdoor's shares or any direct or
indirect payment or incurring of management fees or other transactions between
the shareholders of Outdoor; or
e. Any increase in the compensation payable or to become payable by
Outdoor to any of its officers, employees or agents, or any known payment or
arrangement made to or with any thereof, except in the ordinary course of
business as disclosed to the Selling Shareholders.
6.11 Veracity of Statements. No representation or warranty by Outdoor contained
in this Agreement and no statement contained in any certificate, schedule or
other instrument furnished to the Selling Shareholders pursuant hereto or in
connection with the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state a material fact necessary to make
it not misleading.
6.12 Copies of Articles of Incorporation, Bylaws and Stock Records. A copy of
Outdoor's Certificate of Incorporation, Bylaws and stock records (certified by
the Secretary of Outdoor) has been delivered to the Selling Shareholders and
each is correct and in effect as at the date of this Agreement. Such books and
records have been regularly and properly kept and are complete, accurate and
legally sufficient under applicable law.
<PAGE>
16
6.13 Directors and Officers. Schedule 6.13 attached hereto is a true and
complete list as of the date of this Agreement showing the names of Outdoor's
directors and officers, each of whom has been duly elected.
6.14 ERISA Matters. Outdoor has no Benefit Plans (as defined in Section 3 of the
Employee Retirement Income Security Act of 1974, as amended).
6.15 OTS - Bulletin Board. Outdoor has filed a Form 15c-211 with the National
Association of Securities Dealers ("NASD") and has received clearance to be
listed on the OTC-Bulletin Board under the symbol "OUDR". The filing with the
NASD was true and complete and contained no misleading or false information. On
the Effective Date, the common stock of Outdoor will be listed on the
OTC-Bulletin Board with at last one market maker publishing a quotation for the
Outdoor Common Stock.
ARTICLE 7
---------
ACTIVITIES PRIOR TO THE CLOSING DATE BY ACQUIREE
------------------------------------------------
AND THE SELLING SHAREHOLDERS
----------------------------
7.1 Operation of Business. Acquiree and the Selling Shareholders hereby agree
that from and after the date hereof to the Effective Date, except as otherwise
contemplated by this Agreement or with Outdoor's express written consent,
Acquiree and the Selling Shareholders shall conduct its business solely in the
ordinary course and Acquiree shall:
a. Not amend Acquiree's Certificate of Incorporation or Bylaws except
as may be necessary to carry out this Agreement or as required by law;
b. Not change Acquiree's corporate name or consent to the use thereof
by any other corporation;
c. Not pay or agree to pay to any employee, officer, or director of
Acquiree, without the consent of Outdoor, compensation that is in excess of the
current compensation level of such employee, officer, or director except in the
ordinary course of business as disclosed from time to time to Outdoor;
d. Not make any changes in Acquiree's management without the consent
of Outdoor;
e. Not merge or consolidate Acquiree with any other corporation or
allow it to acquire or agree to acquire or be acquired by any corporation,
association, partnership, joint venture, or other entity;
f. Not sell, transfer, or otherwise dispose of any material assets
without the prior written consent of Outdoor, except in the ordinary course of
business;
<PAGE>
17
g. Not create, incur, assume, or guarantee any indebtedness for money
borrowed except in the ordinary course of business; create or suffer to exist
any mortgage, lien, or other encumbrance on any of its properties or assets,
real or personal, except those in existence on the date hereof or permitted by
Section 5.7; or increase the amount of any indebtedness outstanding under any
loan agreement, mortgage, or other borrowing arrangement in existence on the
date hereof;
h. Cause Acquiree to pay when due in accordance with historical
practice all accounts payable and trade obligations of Acquiree;
i. Maintain all material tangible portions of the assets of Acquiree
in good operating repair, order, and condition, reasonable wear and tear
excepted, and notify Outdoor immediately upon any loss of, damage to, or
destruction of any material tangible portion of the assets;
j. Use their best efforts to maintain in full force and effect
insurance coverage of the types and in the amounts set forth in Schedule 5.13
attached hereto and apply the proceeds received under any insurance policy or as
a result of any loss or destruction of or damage to any assets to the repair or
replacement of such assets;
k. Use its best efforts to maintain in full force and effect all
material agreements, contracts, leases, licenses, permits, authorizations, and
approvals necessary for or related to the operation of the business of Acquiree
in all respects and in all places as the business is now conducted;
l. Use its best efforts to preserve Acquiree's business organization
intact, to keep available the services of its present employees and to preserve
the good will of its customers and others having business relations with it;
m. Timely pay in accordance with the terms of each Benefit Plan all
bona fide claims for Benefits thereunder; and
n. Promptly advise Outdoor in writing of the commencement of, and of
any known threat to commence any, suit, claim, action, arbitration, legal or
administrative proceeding, governmental investigation, or tax audit against
Acquiree.
7.2 Access to Information. Acquiree shall provide Outdoor and its accountants,
counsel and other representatives, during normal business hours and upon
reasonable notice, access to the properties of Acquiree, including books,
records, equipment, real estate, contracts, and other assets, and upon
reasonable notice shall provide an opportunity to discuss the business and
assets with its officers, employees, and independent accountants, customers,
suppliers and sales representatives and furnish to Outdoor and its
representatives copies of such documents, records, and information with respect
to the affairs of Acquiree as Outdoor or its representatives may reasonably
request and Outdoor shall afford such information confidential treatment.
<PAGE>
18
7.3 Labor Disputes. Between the date hereof and the Effective Date, Acquiree
shall promptly advise Outdoor of any actual or threatened union organization
campaign, strike, slowdown, work stoppage, or other labor disturbance ("Labor
Dispute") by any labor union or group of employees against Acquiree, and
Acquiree shall use its best efforts to resolve any and all Labor Disputes to the
mutual satisfaction of Outdoor and Acquiree.
7.4 Best Efforts. Subject to the other provisions of this Agreement, Acquiree
shall use its best efforts to cause the conditions listed in Article 9.1 hereof
to be satisfied on the Effective Date.
ARTICLE 8
---------
ACTIVITIES PRIOR TO CLOSING DATE BY OUTDOOR
-------------------------------------------
8.1 Operation of Business. Outdoor hereby agrees that from and after the date
hereof to the Effective Date, except as otherwise contemplated by this Agreement
or with Acquiree's express written consent, Outdoor shall conduct its business
solely in the ordinary course and Outdoor shall:
a. Not amend Outdoor's Certificate of Incorporation or Bylaws except
as may be necessary to carry out this Agreement or as required by law;
b. Not merge or consolidate Outdoor, or any subsidiary, with another
entity, acquire another entity or agree to be acquired by any other entity;
c. Not sell, transfer, or otherwise dispose of any material assets
without the prior written consent of Acquiree, except in the ordinary course of
business; and
d. Maintain in full force and effect all material agreements,
contracts, leases, licenses, permits, authorizations, and approvals necessary
for or related to the operation of the business of Outdoor in all respects and
in all places as the business is now conducted.
8.2 Best Efforts. Subject to the other conditions of this Agreement, Outdoor
shall use its best efforts to cause the conditions listed in Article 9.2 hereof
to be satisfied on the Closing Date.
ARTICLE 9
---------
CONDITIONS PRECEDENT TO THE CLOSING
-----------------------------------
9.1 Obligation of Outdoor to Close. The obligation of Outdoor to consummate the
merger on the Effective Date shall be subject to the satisfaction or the waiver
by Outdoor of the following conditions on or prior to the Closing Date:
a. Representations and Warranties; Compliance with Agreement. The
representations and warranties of Acquiree and the Selling Shareholders set
forth in this Agreement shall be true and correct in all material respects as of
<PAGE>
19
the date of this Agreement and as of the Effective Date as though made on and as
of the Effective Date, and Acquiree and the Selling Shareholders shall have
performed all covenants and agreements to be performed by either of them under
this Agreement on or prior to the Effective Date, and Acquiree and the Selling
Shareholders shall have delivered to Outdoor certificates to such effect dated
the Effective Date signed by the Selling Shareholders and by Acquiree, which
certificates shall be in the form attached hereto as Schedule 9.1(a);
b. Litigation Affecting Closing. On the Effective Date, no proceeding
shall be pending or threatened before any court or governmental agency in which
it is sought to restrain or prohibit or to obtain damages or other relief in
connection with this Agreement or the consummation of the transactions
contemplated hereby, and no investigation that might eventuate in any such suit,
action or proceeding shall be pending or threatened;
c. Required Consents. The holders of any single debt obligation of
Acquiree exceeding $250,000, the lessors of any material real or property or
assets leased by Acquiree, the parties (other than Acquiree) to any other
material contract, commitment or agreement to which Acquiree is a party, any
governmental agency or body or any other individual or entity which owns or has
authority to grant any franchise, license, permit, easement, right or other
authorization necessary for the business of Acquiree and any governmental body
or regulatory agency having jurisdiction over Acquiree, to the extent that their
consent or approval is required under the pertinent debt, lease, contract,
commitment or agreement or other document or instrument or under applicable
laws, rules or regulations for the consummation of the merger contemplated
hereby in the manner herein provided, shall have granted such consent or
approval;
d. No Material Damage to Business. The assets shall not have been and
shall not be threatened to be materially adversely affected in any way as a
result of fire, explosion, earthquake, disaster, accident, labor dispute, any
action by any governmental authority, flood, drought, embargo, riot, civil
disturbance, uprising, activity of armed forces or act of God or public enemy.
9.2 Obligation of Acquiree and the Selling Shareholders to Close. The obligation
of Acquiree and the Selling Shareholders to consummate the merger on the
Effective Date shall be subject to the satisfaction of the following conditions
on or prior to the Effective Date:
a. Representations and Warranties; Compliance with Agreement. The
representations and warranties of Outdoor set forth in this Agreement shall be
true and correct in all material respects as of the date of this Agreement and
as of the Effective Date as though made on and as of the Effective Date, and
Outdoor shall have performed all covenants and agreements to be performed by
either of them under this Agreement on or prior to the Effective Date, and
Outdoor shall have delivered to Acquiree certificates to such effect dated the
Effective Date and signed by Outdoor, which certificates shall be in the form
attached hereto as Schedule 9.2(a); or
b. Litigation Affecting Closing. On the Effective Date, no proceeding
shall be pending or threatened before any court or governmental agency in which
it is sought to restrain or prohibit or to obtain damages or other relief in
connection with this Agreement or the consummation of the transaction
contemplated hereby, and no investigation that might eventuate in any such suit,
action or proceeding shall be pending or threatened.
<PAGE>
20
c. No Material Damage to Business. The assets of Outdoor shall not
have been and shall not be threatened to be materially adversely affected in any
way as a result of fire, explosion, earthquake, disaster, accident, labor
dispute, any action by any governmental authority, flood, drought, embargo,
riot, civil disturbance, uprising, activity of armed forces or act of God or
public enemy.
ARTICLE 10
----------
INDEMNIFICATION
---------------
10.1 By Acquiree and the Selling Shareholders. From and after the Effective
Date, Acquiree and the Selling Shareholders, jointly and severally, shall
indemnify and hold harmless Outdoor from and against (i) any and all damages,
losses, obligations, deficiencies, liabilities, claims, encumbrances, penalties,
costs, and expenses, including reasonable attorneys' fees (together, a "Loss"),
and which Outdoor may suffer or incur, resulting from, related to, or arising
out of any misrepresentation, breach of warranty, or nonfulfillment of any of
the covenants or agreements of Acquiree or the Selling Shareholders in this
Agreement or from any misrepresentation in or omission from any schedule to this
Agreement, and (ii) any and all actions, suits, investigations, proceedings,
demands, assessments, audits, judgments and claims (including employment-related
claims) arising out of any of the foregoing; provided, however, that before
Outdoor may assert a claim for indemnity under this Article, Outdoor must give
or cause to be given written notice of such claim to the Selling Shareholders
and Acquiree as provided in Section 10.4.
10.2 By Outdoor. From and after the Effective Date, Outdoor shall indemnify and
hold harmless the Selling Shareholders from and against (i) any and all Loss
which the Selling Shareholders may suffer or incur, resulting from, related to,
or arising out of any misrepresentation, breach of warranty, or nonfulfillment
of any of the covenants or agreements of Outdoor in this Agreement or from any
misrepresentation in or omission from any certificate or document furnished or
to be furnished to the Selling Shareholders hereunder and (ii) any and all
actions, suits, investigations, proceedings, demands, assessments, audits,
judgments, and claims (including employment-related claims) arising out of any
of the foregoing; provided, however, that before the Selling Shareholders may
assert a claim for indemnity under this Section, the Selling Shareholders must
give or cause to be given written notice of such claim to Outdoor as provided in
Article 10.4.
10.3 Limitation of Indemnity. Notwithstanding any provisions herein to the
contrary:
a. Neither party shall be liable to the other party for any
misrepresentation, the breach of any warranty or the failure to fulfill any
covenant or agreement herein if such other party shall have had "actual
knowledge" of the facts upon which such misrepresentation, breach or failure to
fulfill is based at or prior to the Effective Date. For purposes of this Section
10.3(a) "actual knowledge" on the part of Outdoor or Acquiree, respectively,
shall mean the actual knowledge of one or more of its executive employees; and
<PAGE>
21
b. The liability of either party computed otherwise in accordance with
this Article 10 shall be limited to the after-tax consequence to the indemnified
party (or the affiliated group of which such indemnified party is a member) of
any such damage, loss, liability, deficiency cost or expense suffered or
incurred by such indemnified party and shall be computed after giving effect to
the recovery, if any, by the indemnified party of any applicable insurance
proceeds, the pursuit of which shall be mandatory by the indemnified party.
10.4 Notice. Promptly after acquiring knowledge of any Loss or action, suit,
investigation, proceeding, demand, assessment, audit, judgment, or claim against
which the Selling Shareholders have indemnified Outdoor against which Outdoor
have indemnified the Selling Shareholders, or as to which any party may be
liable, the Selling Shareholders, Acquiree, Outdoor, as the case may be, shall
give to the other party written notice thereof. Each indemnifying party shall,
at its own expense, promptly defend, contest or otherwise protect against any
Loss or action, suit, investigation, proceeding, demand, assessment, audit,
judgment, or claim against which it or he has indemnified an indemnified party,
and each indemnified party shall receive from the other party all necessary and
reasonable cooperation in said defense including, but not limited to, the
services of employees of the other party who are familiar with the transactions
out of which any such Loss or action, suit, investigation, proceeding, demand,
assessment, audit, judgment, or claim may have arisen. The indemnifying party
shall have the right to control the defense of any such proceeding unless
relieved of its or his liability hereunder with respect to such defense by the
indemnified party. The indemnifying party shall have the right, at its or his
option, and, unless so relieved, to compromise or defend, at its or his own
expense by its or his own counsel, any such matter involving the asserted
liability of the indemnified party. In the event that the indemnifying party
shall undertake to compromise or defend any such asserted liability, it or he
shall promptly notify the indemnified party of its or his intention to do so. In
the event that an indemnifying party, after written notice from an indemnified
party, fails to take timely action to defend the same, the indemnified party
shall have the right to defend the same by counsel of its or his own choosing,
but at the cost and expense of the indemnifying party.
10.5 Money Damages. If the Losses indemnified against pursuant to the provisions
of Articles 10.1 and 10.2 hereof can be compensated by the payment of money to
the other party, the indemnifying party shall, within 21 days after receipt of a
written notice of a claim pursuant to Article 10.4 deliver to the other party
either: (i) the amount of such claim by check or by wire transfer to the bank
account of that party's choosing, or (ii) a written notice stating that it or he
objects to the validity of such claim and setting forth in reasonable detail the
grounds on which it or he is contesting the validity of the claim.
ARTICLE 11
----------
SURVIVAL OF REPRESENTATIONS,
WARRANTIES, GUARANTEES, AND COVENANTS
-------------------------------------
11.1 Date Certain for Survival. All representations and warranties made by the
Selling Shareholders, Outdoor or Acquiree in this Agreement or pursuant hereto
shall survive the closing hereunder for a period ending on the first anniversary
of the Effective Date.
<PAGE>
22
ARTICLE 12
----------
CONDUCT OF ACQUIREE, THE SELLING SHAREHOLDERS, AND OUTDOOR AFTER THE MERGER
---------------------------------------------------------------------------
12.1 Additional Actions and Cooperation. After the Effective Date, at the
request of either party and at the requesting party's expense, but without
additional consideration, the other party shall execute and deliver from time to
time such further instruments of assignment, conveyance and transfer, shall
cooperate in the conduct of litigation and the processing and collection of
insurance claims, and shall take such other actions as may reasonably be
required to convey and deliver more effectively to Outdoor the assets of
Acquiree Shares or to confirm and perfect the shareholder interest in the common
stock of Outdoor, and otherwise to accomplish the orderly transfer to Outdoor of
the assets and business of Acquiree as contemplated by this Agreement.
12.2 Audit Access. Outdoor will preserve the books, records, reports, documents
and lists obtained by it pursuant to this Agreement for a period of at least
seven years from the Effective Date, will not thereafter destroy or otherwise
dispose of such records without giving the Selling Shareholders notice and the
opportunity to take possession thereof, and, while in possession of such
records, will permit representatives of the Selling Shareholders to have access
at reasonable times to such books, records, reports, documents and files, to
make such copies therefrom as such representatives reasonably request. Outdoor
shall, subject to applicable law and regulation, and the terms of any
confidentiality agreement, hold in confidence any nonpublic information
concerning Acquiree obtained hereunder.
12.3 Insurance. On and after the Effective Date Outdoor shall cause Acquiree to
maintain liability insurance coverage customary for the business engaged in by
Acquiree and Outdoor shall use its best efforts for a period of three years from
the Effective Date to cause the Selling Shareholders to be named as an
additional insured thereon. On the Effective Date, Outdoor shall inform Acquiree
as to the name of the insurer and terms of the policy providing such coverage,
including the amount of any deductible, and shall inform the Selling
Shareholders promptly upon any change in the insurer or the terms of such
policy.
ARTICLE 13
----------
BROKERAGE; EXPENSES
-------------------
13.1 None of the parties have employed or will employ any broker, agent, finder,
or consultant (collectively, "Broker") or has incurred or will incur any
liability for any brokerage fees, commissions, finders' fees, or other fees, in
connection with the negotiation or consummation of the transactions contemplated
by this Agreement, except as herein set forth on Schedule 13.1 hereto. The
Selling Shareholders are responsible for and hereby indemnify and hold Outdoor
harmless against and in respect of any claim for brokerage fees, commissions, or
other finders' fees or commissions of any such Broker employed by the Selling
Shareholders or Acquiree and any additional such claims incurred by the Selling
<PAGE>
23
Shareholders or Acquiree relative to this Agreement and the transactions
contemplated hereby and any attorney fees incurred by any of these parties in
relation to any such claim by a Broker. Similarly, Outdoor is responsible for
and hereby indemnify and hold the Selling Shareholders harmless against and in
respect of any claim for brokerage fees, commissions, or other finders' fees or
commissions of any such Broker employed by Outdoor and any additional such
claims incurred by Outdoor relative to this Agreement and the transactions
contemplated hereby and any attorney fees incurred by Outdoor in relation to any
such claim by a Broker. Except as otherwise expressly provided in this
Agreement, Acquiree shall bear the expenses of Acquiree and the Selling
Shareholders in connection with this Agreement or the transactions contemplated
hereby, including without limitation, any brokerage commission. Outdoor shall
bear their respective expenses incurred in connection with this Agreement or the
transactions contemplated hereby.
ARTICLE 14
----------
TERMINATION
-----------
14.1 Events of Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated by written notice of
termination at any time before the Effective Date only as follows:
a. By mutual consent of Acquiree and Outdoor within 3 days of the date
of this Agreement;
b. Provided that Outdoor is not in material default hereunder, by
Outdoor upon three days' written notice to Acquiree and the Selling
Shareholders, if all of the conditions precedent set forth in Article 9.1 hereof
have not been met; or
c. Provided that Acquiree and the Selling Shareholders are not in
material default hereunder, by Acquiree or the Selling Shareholders upon three
days' written notice to Outdoor if all of the conditions precedent set forth in
Article 9.2 hereof have not been met.
ARTICLE 15
----------
CORPORATE NAME
--------------
15.1 Outdoor shall have the exclusive right to use the corporate name
"Intelliworxx, Inc." after the Effective Date and the Selling Shareholders shall
retain no rights therein.
ARTICLE 16
----------
GENERAL
-------
16.1 Conflicts between Documents. In the event of any conflict between the terms
of this Agreement and the terms of any other documents or instrument, the terms
of this Agreement shall control and such documents and instruments shall be
deemed amended and reformed to the extent required to eliminate any such
conflict or inconsistency.
<PAGE>
24
16.2 Entire Agreement; Amendments. This Agreement constitutes the entire
understanding among the parties with respect to the subject matter contained
herein and supersedes any prior understandings and agreements among them
respecting such subject matter. This Agreement may be amended, supplemented, and
terminated only by a written instrument duly executed by all of the parties.
16.3 Headings. The headings in this Agreement are for convenience of reference
only and shall not affect its interpretation.
16.4 Gender; Number. Words of gender may be read as masculine, feminine, or
neuter, as required by context. Words of number may be read as singular or
plural, as required by context.
16.5 Exhibits and Schedules. Each Exhibit and Schedule referred to herein is
incorporated into this Agreement by such reference.
16.6 Severability. If any provision of this Agreement is held illegal, invalid,
or unenforceable, such illegality, invalidity, or unenforceability will not
affect any other provision hereof. This Agreement shall, in such circumstances,
be deemed modified to the extent necessary to render enforceable the provisions
hereof.
16.7 Notices. All notices and other communications hereunder shall be in writing
and shall be given to the person by sending a copy thereof by certified mail or
by telecopy. Notice shall be deemed to have been given to the person entitled
thereto when deposited in the United States mail or when transmitted by
telecopy.
If to Outdoor to:
Mr. Donald R. Mastropietro, President
Outdoor Resorts, Inc.
1509 South Florida Avenue, Suite 2
Lakeland, FL 33803
(941) 686-1932 (fax)
If to Acquiree:
Mr. Kevin Rogers, President
Intelliworxx, Inc.
1819 Main Street, Suite 1101
Sarasota, FL 34236
(941) 365-1304 (fax)
With a copy to:
Joel Schneider, Esq.
Sommer & Schneider, P.A.
600 Old Country Rd., Suite 535
Garden City, NY 11530
(516) 228-8211 (fax)
<PAGE>
25
Notice of any change in any such address shall also be given in the manner set
forth above. Whenever the giving of notice is required, the giving of such
notice may be waived by the party entitled to receive such notice.
16.8 Waiver. The failure of any party to insist upon strict performance of any
of the terms or conditions of this Agreement will not constitute a waiver of any
of its rights hereunder.
16.9 Assignment. No party may assign any of its rights or delegate any of its
obligations hereunder without the prior written consent of the other parties.
16.10 Successors and Assigns. This Agreement binds, inures to the benefit of,
and is enforceable by the successors and assigns of the parties, and does not
confer any rights on any other persons or entities.
16.11 Governing Law; Jurisdiction. The parties agree that, irrespective of any
wording that might be construed to be in conflict with this paragraph, this
Agreement is one for performance in Florida. The parties to this Agreement agree
that they waive any objection, constitutional, statutory or otherwise, to a
Florida court taking jurisdiction of any dispute between them. By entering into
this agreement, the parties, and each of them understand that they might be
called upon to answer a claim asserted in a Florida court. This Agreement shall
be construed and enforced in accordance with law of the State of Florida. Venue
for any such action shall be deemed proper in Hillsborough County, Florida.
16.12 No Benefit to Others. The representations, warranties, covenants and
agreements contained in this Agreement are for the sole benefit of the parties
hereto and their successors and assigns, and they shall not be construed as
conferring and are not intended to confer any rights on any other persons.
16.13 Publicity. Prior to the Effective Date, all notices to third parties and
all other publicity relating to the transactions contemplated by this Agreement
shall be jointly planned, coordinated and agreed to by the Acquiree, the Selling
Shareholders and Outdoor. Except as may be required by law, prior to the
Effective Date none of the parties hereto shall act unilaterally in this regard
without the prior approval of the Acquiree, the Selling Shareholders and
Outdoor; provided, however, that such approval shall not be unreasonably
withheld.
16.14 Counterparts. This Agreement may be executed in any number of counterparts
and any party hereto may execute any such counterpart, each of which when
executed and delivered shall be deemed to be an original and all of which
counterparts taken together shall constitute but one and the same instrument.
The execution of this Agreement by any party hereto will not become effective
until counterparts hereof have been executed by all the parties hereto. It shall
not be necessary in making proof of this Agreement or any counterpart hereof to
produce or account for any of the other counterparts.
<PAGE>
26
16.15 Limitations Upon Consent: Whenever, under the terms of this Agreement, the
parties hereto are called upon to give their written consent, such written
consent will not be unreasonably withheld.
16.16 Form of Consent: All consents of any kind required under this Agreement
shall be in writing. Whenever, under the terms of this Agreement, Outdoor,
and/or Acquiree are authorized to give consent, such consent may be given and
shall be conclusively evidenced by the Chairman of the Board of Directors or the
president of each respective corporation giving such consent.
16.17 Attorneys' Fees and Court Actions: If a legal action is initiated by any
party to this Agreement against another, arising out of or relating to the
alleged performance or non-performance of any right or obligation established
hereunder, or any dispute concerning the same, any and all fees, costs and
expenses reasonably incurred by each successful party or his or its legal
counsel in investigating, preparing for, prosecuting, defending against, or
providing evidence, producing documents or taking any other action in respect of
such action, shall be the joint and several obligation of and shall be paid or
reimbursed by the unsuccessful party.
16.18 Binding Effect: This Agreement shall inure to the benefit of and be
binding upon Outdoor, Acquiree and the Selling Shareholders, and their
successors or assigns, including but not limited to any corporation or other
business entity which may acquire all or substantially all of Outdoor's and/or
Acquiree's assets and business, or with, or into which Acquiree and/or any
Acquiree subsidiary may be consolidated or merged, and upon the executors,
administrators and legal representatives thereof.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
OUTDOOR RESORTS, INC.
By: /s/ Donald R. Mastropietro
-------------------------------------
Donald R. Mastropietro, President
INTELLIWORXX, INC.
By: /s/ Kevin B. Rogers
-------------------------------------
Kevin Rogers, President
<PAGE>
27
THE SELLING SHAREHOLDERS
Amount of Shares of
Intelliworxx Stock Owned
------------------------
/s/ Kevin B. Rogers 100,000
- -------------------------------------
Kevin B. Rogers, an individual
/s/ Michael P. Jonas 100,000
- -------------------------------------
Michael P. Jonas, an individual
/s/ Donald H. Pound, Jr. 100,000
- -------------------------------------
Donald H. Pound, Jr., an individual
/s/ Vincent D. Reynolds 100,000
- -------------------------------------
Vincent D. Reynolds, an individual
/s/ Ian N. Whitehead 100,000
- -------------------------------------
Ian N. Whitehead, an individual
/s/ Christopher J. Floyd 100,000
- ------------------------------------- -------
Christopher J. Floyd, an individual
Total Shares 600,000
Exhibit 3(i)
ARTICLES OF INCORPORATION
OF
OUTDOOR RESORTS, INC.
ARTICLE I
Corporate Name and Principal Office
-----------------------------------
The name of this corporation in Outdoor Resorts, Inc. and its principal
office and mailing address is 1509 South Florida Ave. Suite 3, Lakeland, FL
33803.
ARTICLE II
Commencement of Corporate Existence
-----------------------------------
The corporation shall come into existence on July 1, 1995.
ARTICLE III
General Nature of Business
--------------------------
This corporation may engage in any activity or business permitted under the
laws Of the United States or of the State of Florida.
ARTICLE IV
Common Capital Stock
--------------------
The aggregate number of shares of common stock that this corporation shall
be authorized to have outstanding at any one time shall be 50 n3illion shares of
common stock at no par per share. F-ach share of issued and outstanding common
stock shall entitle the holder thereof to participate in all shareholder
meetings, to cast one vote on each matter with respect to which shareholders
have the right to vote, and to share ratably in all dividends and other
distributions declared and paid with respect to the common stock, as well as in
the net assets of the corporation upon liquidation or dissolution.
ARTICLE V
Preferred Stock
---------------
The aggregate number of shares of preferred stock that this corporation
shall be authorized to have outstanding at any one time shall be 25 million
shares at no par value. The corporation may divide and issue the preferred
shares in series, designated to distinguish each series from the shares of other
series. The Board of Directors is hereby specially vested with
<PAGE>
authority to divide the classed of preferred shares into series so established
to the full extent permitted by the Articles of Incorporation and laws in the
State of Florida in respect to the following: (a) the number of shares to
constitute such series, and the distinctive designation thereof; (b) the rate
and preference of dividends, if any, time of payment of dividends, whether
dividends are cumulative and the date from which any dividend shall accrue; (c)
whether shares may be redeemed and, if so, the redemption price and terms and
conditions of redemption; (d) the amount payable upon shares in the event of
involuntary liquidation; (e) the amount payable upon shares in the event of
voluntary liquidation; (f) sinking fund or other provisions, if any; for the
redemption or purchase of shares (g) the terms and conditions on which shares
may be converted if the share of any series are issued with the privilege of
conversion; (h) voting powers, if any; and (i) any other relative rights and
preferences of the shares of such series, including, without limitation, and
restrictions on an increase in the number of shares of any series theretofore
authorized and any limitation or restriction of rights and powers to which
shares of any further series shall be subject.
ARTICLE VI
Initial Registered Office and Agent
-----------------------------------
The street address of the initial registered office of the corporation
shall be 1509 South Florida Ave., Suite 3, Lakeland, FL 33803, and the initial
registered agent of the corporation at such address is Donald Mastropietro.
ARTICLE VII
Incorporator
------------
The name and address of the corporation's incorporator is:
NAME ADDRESS
- ---- -------
Richard Diamond 1509 S. Florida Ave. Suite 3
Lakeland, Florida 33803
ARTICLE VIII
By-Laws
-------
The power to adopt, alter, amend or repeal by-laws of this corporation
shall be vested in its shareholders and separately in its Board of Directors, as
prescribed by the by-laws of the corporation.
<PAGE>
ARTICLE IX
Indemnification
---------------
If in the judgment of a majority of the entire Board of Directors,
(excluding from such majority any director under consideration for
indemnification), the criteria set forth in 607.0850(l) or (2), Florida
Statutes, as then in effect, have been met, then the corporation shall indemnify
any director, officer, employee, or agent thereof, whether current of former,
together with his or her personal representatives, devisees or heirs, in the
manner and to the extent contemplated by 607.0850, as then in effect, or by any
successor law thereto.
IN WITNESS WHEREOF, the undersigned has executed these Articles this 30th
day of June, 1995.
/s/ Richard Diamond
----------------------------------
Richard Diamond
<PAGE>
CERTIFICATE DESIGNATING
REGISTERED AGENT
----------------
Pursuant to the provisions of 48.091 and 607.050 1, Florida Statutes,
Outdoor Resorts, Inc. desiring to organize under the laws of the State of
Florida, hereby designates Donald Mastropietro, an individual resident of the
State of Florida, as its Registered Agent for the purpose of accepting service
of process within such State and designates 1509 S. Florida Ave., Suite 3,
Lakeland, Florida 33803, the business office of its Registered Agent, as its
Registered Office. OUTDOOR RESORTS, INC.
By: /s/ Richard Diamond
------------------------------------
Richard Diamond
Incorporator
ACKNOWLEDGMENT
--------------
I hereby accept my appointment as Registered Agent of the above named
corporation, acknowledgment that I am familiar with and accept the obligation
imposed by Florida law upon that position, and agree to act as such in
accordance with provisions of 48.091 and 607.0505, Florida Statutes.
/s/ Donald Mastropietro
------------------------------------
Donald Mastropietro
Exhibit 3(ii)
Articles of Merger
of
Intelliworxx, Inc.
with and into
Outdoor Resorts, Inc.
- --------------------------------------------------------------------------------
Outdoor Resorts, Inc., a Florida corporation, and Intelliworxx, Inc., a
Florida corporation (collectively the "Constituent Corporations"), acting in
compliance with the provisions of Florida Statutes Section 607.1104, hereby
certify as follows:
1. The Board of Directors of each of the Constituent Corporations has
approved a plan of merger. A copy of the Agreement and Plan of Merger,
dated November 23, 1998, setting forth the terms of the merger, is
attached hereto as Exhibit "A" and made a part hereof.
2. The effective date of the merger shall be the date these Articles of
Merger are filed with the Florida Secretary of State.
3. The merger was adopted and approved by the Board of Directors of each
of the Constituent Corporations on November 23, 1998.
4. The merger was adopted and approved by a majority of the shareholders
of each of the Constituent Corporations on November 23, 1998.
Effective: November 23, 1998
INTELLIWORXX, INC.
By: /s/ Christopher J. Floyd
-----------------------------------------
Christopher J. Floyd, Vice President
Finance, Chief Financial Officer,
Treasurer and Director
OUTDOOR RESORTS, INC.
By: /s/ Donald R. Mastropietro
-----------------------------------------
Donald R. Mastropietro, President
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
Agreement and Plan of Merger ("Agreement") dated as of November 23, 1998,
by and between Outdoor Resorts, Inc., a Florida corporation ("Outdoor") and
Intelliworxx, Inc., a Florida corporation ("Intelliworxx").
BACKGROUND INFORMATION
----------------------
The Board of Directors of each of Outdoor and Intelliworxx, by affirmative
vote of a majority of the members of each such board convened to consider and
act upon such issue or by unanimous written consent of the members of the Board
of Directors, has determined that it is advisable and to the advantage of each
such corporation and its respective shareholders that Intelliworxx be merged
into Outdoor, at the conclusion of which Outdoor shall remain as the surviving
or resulting entity and the corporation existence of Intelliworxx shall
terminate and expire. In furtherance thereof, each board has approved and
adopted the terms of this Agreement. Accordingly, in consideration of the
representations, convenants, agreements and other provisions set forth herein,
Intelliworxx and Outdoor (collectively the "Constituent Corporations") hereby
agree to effect a statutory merger of their respective corporate entities as
follows:
OPERATIVE PROVISIONS
--------------------
1. Merger. In accordance with applicable provisions of Florida Statutes
Section 607.1104, at the Effective Date (as defined below), Intelliworxx shall
be merged with and into Outdoor (the "Merger") and Outdoor shall constitute the
surviving and resulting corporation of such Merger (Outdoor being hereinafter
sometimes referred to as the "Surviving Corporation"). The separate and
corporate existence of Intelliworxx shall cease and Outdoor shall continue its
corporate existence pursuant to the laws of the State of Florida.
2. Effective Date. The Merger shall become effective on the date the
Articles of Merger reflecting the Merger are filed with the Florida Secretary of
State (the "Effective Date").
3. Surviving Corporation. The Surviving Corporation shall possess and
retain every interest in all assets and property of every description. The
rights, privileges, immunities powers, franchises and authority, of a public as
well as private nature of each of the Constituent Corporations shall be vested
in the Surviving Corporation without further act or deed. The title to and any
interest in all real estate vested in either of the Constituent Corporations
shall not revert or in any way be impaired by reason of the Merger.
4. Obligations. All obligations belonging to or due to each of the
Constituent Corporations shall be vested in the Surviving Corporation without
further act or deed, and the Surviving Corporation shall be liable for all of
the obligations of each of the Constituent Corporations existing as of the
Effective Date.
<PAGE>
5. Terms of the Merger. Upon the Effective Date of the Merger, all of the
issued and outstanding shares of the common capital stock of Intelliworxx shall
be deemed canceled and voided.
6. Articles of Incorporation. The Articles of Incorporation of Outdoor in
effect immediately prior to the Effective Date shall continue and be the
articles of incorporation of the Surviving Corporation.
7. Changes to the Articles of Incorporation. Immediately following the
Effective Date of the Merger, the Articles of Incorporation shall be amended to
(i) change the name of the corporation to Intelliworxx, Inc., and (ii) increase
the number of authorized shares of the common stock from 50,000,000 to
100,000,000 shares.
8. Counterparts. This Plan of Merger may be executed in one or more
counterparts, each of which shall be deemed an original.
In witness whereof, Intelliworxx and Outdoor have caused this Agreement and
Plan of Merger to be executed by their respective officers thereunto duly
authorized as of the date first written above.
INTELLIWORXX, INC.
By: /s/ Kevin B. Rogers
----------------------------------------
Kevin Rogers, President
By: /s/ Don Pound
----------------------------------------
Don Pound, Secretary
OUTDOOR RESORTS, INC.
By: /s/ Donald R. Mastropietro
----------------------------------------
Donald R. Mastropietro, President
and Secretary
<PAGE>
ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
OUTDOOR RESORTS, INC.
- --------------------------------------------------------------------------------
OUTDOOR RESORTS, INC., a Florida corporation (the "Corporation"), hereby
certified as follows:
1. The Articles of Incorporation of the Corporation are hereby amended by
deleting the present form of each of Articles I and IV in their entirety and by
substituting, in lieu thereof, the following:
"ARTICLE I
Corporate Name and Principal Office
-----------------------------------
The name of this corporation is Intelliworxx, Inc. and its principal office
and mailing address is 1819 Main Street, Suite 1101, Sarasota, Florida 34236."
and
"ARTICLE IV
Common Capital Stock
--------------------
The aggregate number of shares of common stock that this corporation shall
be authorized to have outstanding at any one time shall be 100,000,000 shares of
common stock at no par value per share. Each share of issued and outstanding
common stock shall entitle the holder thereof to participate in all shareholder
meetings, to cast one vote on each matter with respect to which shareholders
have the right to vote, and to share ratably in all dividends and other
distributions declared and paid with respect to the common stock, as well as in
the net assets of the corporation upon liquidation or dissolution, but each such
share shall be subject to the rights and preferences of the Preferred Stock as
hereinafter set forth."
2. The foregoing amendment shall become effective as of the close of
business on the date these Articles of Amendment are approved by the Florida
Department of State and all filing fees then due have been paid, all in
accordance with the corporation laws of the State of Florida.
3. The amendment recited in Section 1 above has been duly adopted in
accordance with the provisions of Chapter 607, Florida Statutes, by the Board of
Directors of the Corporation who adopted a resolution setting forth such
amendment and declaring its advisability and directing that such amendment be
considered by the Shareholders of the Corporation; and by a majority in interest
of the Corporation's common voting stock having voted in favor thereof by
<PAGE>
written action dated November 26, 1998, which said votes cast for the amendment
were sufficient for approval.
IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment
to be prepared under the signature of its President and Chief Executive Officer
and the attestation of its Secretary, this 23rd day of November, 1998.
OUTDOOR RESORTS, INC.
Attest:
By: /s/ Donald H. Pound, Jr. By: /s/ Kevin B. Rogers
--------------------------- --------------------------------
Donald H. Pound, Jr. Kevin B. Rogers, President
Secretary and Chief Executive Officer
STATE OF FLORIDA
COUNTY OF SARASOTA
The foregoing instrument was acknowledged before me this 23rd day of
November, 1998 by Kevin B. Rogers and Donald H. Pound, Jr., individuals known to
me, in their respective capacities as President and Chief Executive Officer and
Secretary of Outdoor Resorts, Inc., a Florida corporation, on behalf of the
corporation and for the uses and purposes described therein.
/s/ Teresa B. Crowley
- ---------------------------------
Teresa B. Crowley, Notary Public
My Commission Expires:
Exhibit 3(iii)
BY-LAWS
OF
OUTDOOR RESORTS, INC.
ARTICLE I
Share Certificates and Transfer
-------------------------------
Section 1. Certificates.
-------------
Certificates representing the shares of capital stock of this Corporation
shall be printed or engraved in such form and contain such recitals, signatures
and seals as required by law, or to the extent not in conflict therewith, as may
be determined by the Board of Directors. Every Shareholder shall be entitled to
receive a certificate representing the number of shares owned once such shares
are fully paid.
Section 2. Transfer.
---------
Upon surrender to the secretary or transfer agent of the Corporation of a
certificate representing a share or shares of its stock, duly endorsed or
accompanied by evidence of succession, assignment or authority to transfer
reasonably satisfactory to the Secretary or transfer agent, as well as all
necessary Florida stock transfer tax stamps or the funds therefor and evidence
of compliant with any conditions or restrictions set forth or referred to on the
certificate, the Corporation shall be required to issue a new certificate to the
person entitled thereto, cancel the old certificate and record the transaction
on its books.
Section 3. Issuance of Substitute Certificates.
------------------------------------
A new certificate may be issued in lieu of any certificate previously
issued which has been defaced or mutilated, upon surrender or cancellation of a
part of the old certificate sufficient, in the opinion of the Treasurer, to
protect the Corporation against loss or liability. A new certificate may also be
issued in lieu of any certificate then not in the possession of the holder of
record if such holder shall by written affirmation, under oath, state the
circumstances of its absence, and shall, if required by the Board, provide the
Corporation with an indemnity bond in form and with one or more sureties
satisfactory to the Board, in at least double the value of the shares
represented by the absent certificate and satisfy any other reasonable
requirements which it may impose.
<PAGE>
ARTICLE II
Corporate Records and Seal; Authority to Act
--------------------------------------------
Section 1. Records.
--------
The Corporation shall maintain at its principal place of business accurate
and complete records of its operations and properties, including a record of its
Shareholders and minutes of the proceedings of its Shareholders, Board of
Directors and Board committees. Unless modified by Shareholder resolution
adopted not later than four months following the close of each of the
Corporation's operational years, the Corporation shall prepare within a
reasonable time following the close of each such year and maintain at its
principal place of business, as well as at its registered office, financial
records which shall include a statement of financial position as of the end of
each such year and a statement of profit earned or loss incurred therein.
Section 2. Inspection.
-----------
All records required by the Florida Business Corporation Act to be
maintained by the Corporation shall be open for inspection by the individuals
and in the manner specified in such Act as the same may be in effect from time
to time.
Section 3. Closing Shareholder Record Book.
--------------------------------
The Board may close the Shareholder record book for a period of not more
than 30 nor less than ten days preceding any Shareholder meeting or the day
fixed for the payment of a dividend, and upon its failure to do so the
Shareholder record date for either purpose shall be 14 days preceding the event.
Section 4. Seal.
-----
The Corporation shall own a corporate seal which shall be circular in
form and have inscribed thereon its name and the date and state of its
incorporation.
Section 5. Contracts.
----------
The Board of Directors may by resolution authorize any officer or agent to
enter into any contract or execute and deliver any instrument in the name of or
on behalf of the Corporation, and such authority may be general or confined to
specific instances; but absent the grant of such authority no individual, other
than the President, shall have power to bind the Corporation under any contract,
pledge its credit or render it liable for any purpose or in any amount.
2
<PAGE>
Section 6. Checks and Drafts.
------------------
All checks, drafts or other orders for the payment of money, notes or other
evidences of indebtedness issued in the name of the Corporation shall be signed
or endorsed by such person or persons and in such manner as shall be determined
by resolution of the Board of Directors.
ARTICLE III
Shareholder Meetings and Voting Rights
--------------------------------------
Section 1. Annual Meeting:
---------------
The annual meeting of the Shareholders of the Corporation shall be held on
the first Tuesday of the fourth month following the close of the Corporation's
operational year. If that day is a legal holiday, the annual meeting will be
held on the first day thereafter that is not a legal holiday. At the annual
meeting the Shareholders, by vote of the holders of a majority of the shares
represented, shall elect a Board of Directors, consider reports of the affairs
of the Corporation and transact such other business as is properly brought
before the meeting.
Section 2. Special Meetings:
-----------------
Special Shareholder meetings shall be held upon the direction of the
President or Board of Directors or upon the written request of the holders of
not less than ten percent of all shares entitled to vote.
Section 3. Place of Meeting:
-----------------
All Shareholder meetings shall be held at the principal office of the
Corporation unless an alternate location shall be selected by the Board and
communicated to the Shareholders by written notice. The holders of a majority of
shares of the Corporation's outstanding voting stock shall have the right to
reject such alternative location by filing written notice to that effect with
the Secretary not less than two days prior to the called date of the meeting.
Section 4. Notice:
-------
Written notice stating the place, day and hour of each Shareholder meeting
and, in the case of a special meeting, the nature of the business to be
transacted shall be delivered to each Shareholder of record entitled to vote not
less than ten days prior to the date of such meeting and otherwise in the manner
specified in the Florida Business Corporation Act. When a meeting is adjourned
for 30 days or more, notice of the adjourned meeting shall be given as in the
case of the original meeting; otherwise no notice of the adjournment or of the
business to be transacted at the adjourned meeting need to be given other than
by way of an announcement made at the meeting at which such adjournment is
taken.
3
<PAGE>
Section 5. Voting List.
------------
Unless the Corporation has fewer than six Shareholders, as of the date
fixed in accordance with the provisions of Article II, Section 3., the officer
or agent having charge of the Shareholder record books shall prepare a list of
the Shareholders entitled to a vote at each Shareholder meeting or any
adjournment thereof, including the address of and the number and class and
series, if any, of shares held by each. For a period of ten days prior to the
meeting, such list shall be kept at the Corporation's principal place of
business where any Shareholder shall be entitled to inspect it during usual
business hours. The list shall also be made available and subject to inspection
by any Shareholder at any time during the subject meeting.
Section 6. Substance of Meeting.
---------------------
Any questions may be considered and acted upon at an annual meeting, but no
question not stated in the call for a special meeting shall be acted upon
thereat unless the provisions of Article III, Section 9. or Article VI, Section
3. are complied with.
Section 7. Shareholders' Quorum and Voting Rights:
---------------------------------------
The holders of a majority of the shares entitled to vote, present in person
or represented by proxy, shall constitute a quorum at all meetings of the
Shareholders, unless otherwise provided by law, but a lesser interest may
adjourn any meeting from time to time until the requisite amount of voting
shares shall be present.
Each outstanding share of the Corporation's capital stock shall entitle the
holder of record to one vote. An affirmative vote of a majority of the shares
represented at each meeting shall decide any question brought before it, unless
the question is one upon which, by express provision of law, the Corporation's
Articles of Incorporation of these By-Laws, a lager or different vote is
required, in which case such express provision shall govern and control the
decision of such question.
Section 8. Proxies:
--------
Every Shareholder entitled to vote, or to express consent to or dissent
from a proposed corporation action, may do so either in person or by written
proxy duly executed and filed with the Secretary of the Corporation. If a proxy
is executed, its use shall be controlled by the provisions of the Florida
Business Corporation Act.
Section 9. Action By Shareholders Without a Meeting:
-----------------------------------------
Any action required or allowed to be taken at a meeting of Shareholders may
be taken without a meeting, prior notice or vote, if a written consent, setting
forth the action taken, shall be signed by the holders of outstanding shares
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted, and the written consent specified in the Florida
Business Corporation Act shall be obtained and furnished to all non-consenting
Shareholders.
4
<PAGE>
ARTICLE IV
Board of Directors
------------------
Section 1. Power and Responsibility:
-------------------------
Subject to the limitations imposed by the Articles of Incorporation, these
By-Laws or the Florida Business Corporation Act, all corporate powers and
responsibilities shall be exercised by or under the authority of, and the
business and affairs of the Corporation shall be controlled by, the Board of
Directors.
Section 2. Number:
-------
The number of directors which shall constitute the entire Board of
Directors shall be not less than one nor more than seven. Within these limits
the actual number constituting the entire Board shall be that fixed from time to
time by Board resolution, and until such time as the Board determines otherwise,
the number of directors shall be two. No reduction in the number of Directors
shall have the effect of removing any director prior to the expiration of his
term of office.
Section 3. Election and Term:
-------------------
At the first annual Shareholder meeting and at each annual meeting
thereafter the Shareholders shall elect directors to hold office until the next
succeeding annual meeting. Each director shall hold office for the term for
which he is elected or until his successor shall have been elected and qualified
or until his earlier resignation, removal from office or death.
Section 4. Vacancy:
--------
Any vacancy occurring in the Board of Directors, including any vacancy
created by reason of an increase in the number of directors, may be filled by
the affirmative vote of a majority of all remaining directors, even if less than
a quorum, and a director so chosen shall hold office only until the next
election of directors by the Shareholders. The Shareholders may at any time
elect a director to fill any vacancy not filled by the directors, and may elect
additional directors at a meeting at which an amendment of the By-Laws is voted
authorizing an increase in the number of directors.
Section 5. Removal:
--------
At a meeting of Shareholders called expressly for that purpose, any
director or the entire Board may be removed, with or without cause, by a vote of
the holders of a majority of the shares then entitled to vote at an election of
directors.
5
<PAGE>
Section 6. Presumption of Assent:
----------------------
A director of the Corporation who is present at a meeting of its Board of
Directors at which action on any corporate matter is taken shall be presumed to
have assented to the action taken unless he votes against such action or
abstains from voting in respect thereto because of an asserted conflict of
interest.
Section 7. Quorum and Voting:
------------------
A majority of the number of directors fixed in the manner prescribed in
Article IV, Section 2 of these By-Laws shall constitute a quorum for the
transaction of business. The action of a majority of the directors present at
any meeting at which there is a quorum, when legally assembled, shall be a valid
corporate action.
Section 8. Director Conflicts of Interest:
-------------------------------
The legal effectiveness or enforceability of any contract or other
transaction authorized by the Corporation's Board, any committee thereof or its
Shareholders which may present a conflict of interest as contemplated by the
Florida Business Corporation Act shall be determined by the provisions thereof.
Directors whose relationship with another person or entity is the source of such
potential conflict of interest may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or a committee thereof which
authorizes, approves or ratifies such contract or transaction.
Section 9. Executive and Other Committees:
-------------------------------
(a) By resolution adopted by a majority of the entire Board of Directors,
there may be designated from among its members an executive committee and other
committees each of which, to the extent provided in such resolution, shall have
and may exercise all the authority of the Board of Directors, except with
respect to those matters which by law are precluded from being delegated to a
committee.
(b) Each committee (including the members thereof) shall serve at the
pleasure of the Board and shall keep minutes and report the same to the Board.
The Board may designate one or more directors as alternate members of any
committee. In the absence or upon the disqualification of a member of a
committee, if no alternate member has been designated by the Board, the members
present at any meeting and not disqualified from voting, whether or not they
constitute a quorum, may unanimously appoint another member of the Board to act
at the meeting in the place of the absent or disqualified member.
(c) A majority of all members of a committee shall constitute a quorum for
the transaction of business, and the vote of a majority of all the members of a
committee present at a meeting at which a quorum is present shall be the act of
the committee. Each committee shall adopt whatever other rules of procedure it
determines appropriate for the conduct of its activities.
6
<PAGE>
Section 10. Place of Meeting:
-----------------
Meetings of the Board of Directors may be held at any location specified in
the call of the meeting or as agreed to by the directors.
Section 11. Time, Notice and Call of Meetings:
----------------------------------
(a) Annual Meeting: Promptly following the adjournment of each annual
Shareholder meeting, the Board of Directors elected thereat shall, without
notice, convene an annual meeting and organize by the election of a Chairman who
shall preside over its further conduct.
(b) Regular Meeting: Regular meetings of the Board may be held during each
annual period in accordance with such schedule as may be agreed to by the Board
at its annual meeting. No notice need be given of such regular meetings.
(c) Special Meetings: Special meetings of the Board shall be held from time
to time upon call issued by the Chairman of the Board, any two directors, or the
President or Vice-President of the Corporation. Written notice of the time and
place of each special meeting shall be delivered personally to all directors or
sent to each by telegram or letter, charges prepaid, addressed to him at his
address shown on the records of the Corporation or as otherwise actually known
by the Secretary. If notice is mailed or telegraphed, it shall constitute
sufficient notice if it is delivered to the above address not less than 24 hours
prior to the time of the holding of the meeting.
(d) Adjournment: A majority of the directors present, whether or not a
quorum exists, may adjourn any meeting of the Board to another time and place.
Notice of the time and place of holding such adjourned meeting need not be given
if they are fixed at the meeting adjourned and while a quorum is present;
otherwise, notice shall be given to all directors in the manner directed in
subsection (c) above.
Section 12. Action Without a Meeting:
-------------------------
Any action required or permitted to be taken by the Board or a committee
thereof may be taken without a meeting if all members shall individually or
collectively consent in writing to such action. Such written consent shall be
filed in the minutes of the proceedings of the Board or committee and shall have
the same effect as a unanimous vote in favor of the action consented to.
7
<PAGE>
ARTICLE V
Officers
--------
Section 1. Composition and Term:
---------------------
The officers of the Corporation shall consist of a President,
Vice-President, Secretary, Treasurer and such other officers with such titles,
duties and powers as may be prescribed by the Board of Directors. All officers
shall be elected by and serve at the pleasure of the Board.
Section 2. Election:
---------
At their annual meeting the Directors shall elect officers of the
Corporation, any of whom may but need not be members of the Board. Any two or
more of such officers may be held by the same individual.
Section 3. Resignation or Removal:
-----------------------
Any officer may resign by giving written notice to the Board of Directors,
the President or the Secretary. Such resignation shall take effect upon receipt
of the notice, or at any later time specified therein (subject to the Board's
right of removal), and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Any officer may be removed, with or without case, by action of a
majority of the entire Board taken at any regular or special meeting of the
Board, or by another officer upon whom such power of removal is expressly
conferred by the Board.
Section 4. Vacancy:
--------
A vacancy in any office shall be filled by action of the Board, and its
appointee shall hold office for the unexpired term or until his successor is
elected and qualified.
Section 5. President:
----------
The President shall be the principal executive officer of the Corporation,
and, subject to the control of the Board, shall generally supervise and control
all of the business and affairs of the Corporation. He shall preside at all
meetings of the Shareholders and, unless a Chairman of the Board of Directors
has been elected and is present, shall preside at meetings of the Board of
Directors. He shall be an ex-officio member of all committees appointed by the
Board, and shall have the general powers and duties customarily performed and
exercised by the chief executive officer of any Corporation for profit organized
under the laws of Florida, as well as such additional powers or duties as may be
prescribed by these By-Laws or the Board.
8
<PAGE>
Section 6. Vice-President:
--------------------------
In the absence of the President or in the event of his death, inability or
refusal to act, the Vice-President shall be vested with the powers and duties of
the President. Any Vice-President may sign, with the Secretary, share
certificates issued by the Corporation; and shall perform such other duties as
from time to time may be assigned to him by the Board of Directors or President.
Section 7. Secretary:
----------
The Secretary shall keep, or cause to be kept, a book of minutes at the
principal office or such other place as the Board of Directors and Shareholders
may designate, a current Shareholder record book, showing the name of all
Shareholders and their addresses; and a record of all meetings conducted by the
Shareholders, Directors or Director Committees, which latter record shall
include the time and place of holding, whether regular or special, and, if
special, how authorized, the notice thereof given, the names of those present at
directors' meetings, the number of shares present or represented at
Shareholders' meetings, and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal office or
at the office of the Corporation's transfer agent, a Shareholder record, or a
duplicate Shareholder record, showing the names of the Shareholders and their
addresses, the number and classes of shared held by each, the number and date of
certificates issued for the same, and the number and date of cancellation of
every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all the meetings
of the Shareholders and of the Board of Directors required by the By-Laws or by
law to be given, and he shall keep the seal of the Corporation and affix said
seal to all documents requiring a seal, and shall have such other powers and
perform such other duties as may be prescribed by the Board of Directors or the
By-Laws.
Section 8. Treasurer:
----------
The Treasurer shall have custody of all corporate funds, securities,
valuable papers and financial records; shall keep full and accurate accounts of
receipts and disbursements and render accounts thereof at the annual meetings of
Shareholders and at such other times as requested by the Board or President; and
shall perform such other duties as may be prescribed by the Board or President.
Section 9. Assistant:
----------
Any Assistant Secretary or Assistant Treasurer, respectively, may exercise
any of the powers of Secretary or Treasurer, respectively, as provided in these
By-Laws or as directed by the Board of Directors, and shall perform such other
duties as may be prescribed by the Board or President.
9
<PAGE>
ARTICLE VI
Miscellaneous
-------------
Section 1. Parliamentary Procedure:
------------------------
When not in conflict with these By-Laws, Roberts Rules of Parliamentary
Procedure shall establish the rules at all Shareholder and director meetings.
Section 2. Fiscal Year:
------------
The fiscal year of the Corporation shall be fixed, and shall be subject to
change, by the Board.
Section 3. Consent to Meeting:
-------------------
The transactions approved at any meeting of Shareholders or the Board of
Directors, however called and noticed, shall be as valid as though acted upon at
a meeting duly held after regular call and notice, if a quorum is present
(either in person or by proxy in the case of a Shareholder meeting) and if,
either before or after the meeting, each of the Shareholders entitled to vote or
directors, as the case may be, not present (or represented by proxy in the case
of a Shareholder meeting) signs a written waiver of notice, or a consent to the
holding of such meeting, or an approval of the minutes thereof. All such
waivers, consents and approvals shall be filed with the corporate records or
made a part of the minutes of the meeting. Personal representatives, trustees
and other fiduciaries entitled to vote shares may sign such waivers, consents or
approvals.
Section 4. Amendment and Repeal of By-Laws:
--------------------------------
(a) By Shareholders: New By-Laws may be adopted or these By-Laws may be
repealed or amended at the annual or any other meeting of Shareholders called
for that purpose, by a vote of Shareholders entitled to exercise a majority of
the voting power of the Corporation, or by the written assent of such
Shareholders.
(b) By Board of Directors: Subject to the right of the Shareholders to
adopt, amend or repeal By-Laws, as provided in this section, the Board of
Directors may adopt, amend or repeal any of these By-Laws including the By-Law
or amendment thereof changing the authorized number of directors.
(c) Record of Amendments: Whenever an amendment to or repeal of any
existing By-Law is adopted, or an additional By-Law provision is approved, a
replacement page containing such new material and noting the date and manner of
its adoption shall be inserted in the original By-Laws, in the appropriate
place.
10
Exhibit 99.0
INTELLIWORXX, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF FLORIDA
AUTHORIZED: 100,000,000 COMMON SHARES, NO PAR VALUE
NUMBER SHARES
SEE REVERSE FOR
CERTAIN DEFINITIONS
CUSIP 45817E 10 7
This Certifies that
is the owner of
FULLY PAID AND NON-ASSESSBLE SHARES OF COMMON STOCK, NO PAR VALUE
Intelliworxx, Inc.
transferable only on the books of the Corporation by the holder hereof in
person or by duly authorized attorney upon surrender of this Certificate
properly endorsed. This Certificate is not valid until countersigned and
registered by the Transfer Agent and Registrar.
In Witness Whereof, the Corporation has caused this Certificate to be
signed by the facsimile signatures of its duly authorized officers and to be
sealed with the facsimile seal of the Corporation.
Dated:
Secretary [Logo Graphic Omitted] President
Countersigned:
Florida Atlantic Stock Transfer, Inc.
7130 Nob Hill Rd., Tamarac, FL 33321
By:
---------------------------------
Transfer Agent
<PAGE>
Intelliworxx, Inc.
Florida Atlantic Stock Transfer, Inc.
Transfer Fee: As Required
- --------------------------------------------------------------------------------
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian for
(Cust.) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with right of Act of
survivorship and not as tenants ------------------------------
in common (State)
Additional abbreviations may also be used though not in the above list.
For value received________________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
-----------------------------------------
Please print or type name and address of assignee
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------Shares
of the Common Stock represented by the within Certificate and do hereby
irrevocably constitute and appoint
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Attorney to transfer the said stock on the books of the within named
Corporation, with full power of substitution in the premises.
Dated:_______________, 19______
SIGNATURE GUARANTEED: x______________________________________
x______________________________________
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON
THE FACE OF THIS CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER. THE SIGNATURE(S) MUST BE GUARANTEED BY
AN ELIGIBLE GUARANTOR INSTITUTION (Banks, Stockbrokers, Savings and Loan
Associations and Credit Unions) WITH MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM.
Exhibit 99.1
INTELLIWORXX, INC.
1999 EQUITY INCENTIVE PLAN
1. NAME AND PURPOSE.
-----------------
The name of this plan is the Intelliworxx, Inc. 1999 Equity Incentive Plan
(the "Plan"). The purpose of this Plan is to enable Intelliworxx, Inc. (the
"Company") and its Subsidiaries and Affiliates to attract and retain employees,
consultants and directors who contribute to the Company's success by their
ability, ingenuity and industry, and to enable such employees, consultants and
directors to participate in the long-term success and growth of the Company
through an equity interest in the Company.
2. DEFINITIONS.
------------
For purposes of this Plan, the following terms shall be defined as set
forth below:
"Affiliate" means any corporation (other than a subsidiary), partnership,
joint venture or any other entity in which the Company owns, directly or
indirectly, at least a ten percent (10%) beneficial ownership interest.
"Board" means the Board of Directors of the Company.
"Cause" means a felony conviction of a participant or the failure of a
participant to contest prosecution for a felony, or a participant's willful or
grossly negligent action which is demonstrably inimical to the interests,
business or reputation of the Company or any Subsidiary or Affiliate.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor thereto.
"Committee" means the Stock Option Committee of the Board, whose members
shall be appointed from time to time by the Board. If at any time no Committee
shall be in existence, the Board shall exercise the functions of the Committee
specified in this Plan.
"Commission" means the Securities and Exchange Commission.
"Company" means Intelliworxx, Inc., a corporation organized under the laws
of the State of Florida (or any successor corporation).
"Deferred Stock" means an award made pursuant to Section 10 of the right to
receive Stock at the end of a specified deferral period.
"Director Stock Option" means any option to purchase shares of Stock
granted pursuant to Section 7.
1
<PAGE>
"Disability" as used in the Plan (and unless otherwise defined by the
Company's long term disability policy or in a written agreement between the
Company and the recipient of a grant under the Plan) shall mean an illness or
accident which prevents the recipient from performing his regular duties for a
period of six consecutive months. In the absence of a written agreement between
the Company and the recipient that includes a definition of "disability", the
definition set forth supersedes the definition of disability set forth in that
Plan.
"Disinterested Person" shall have the meaning set forth in Rule 16b-3(d)(3)
as promulgated by the Commission under the Exchange Act, or any successor
definition adopted by the Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
any successor thereto.
"Fair Market Value" means, as of any given date, the average closing price
of the Stock on the National Association of Securities Dealers Automated
Quotation System (NASDAQ) National Market System for the ten (10) days preceding
such date, or if not then traded or listed on that system, on the securities
trading system or stock exchange on which the Stock if then primarily traded or
listed; or if the stock is not traded or listed on an exchange the average of
the reported high and low price on such date.
"Incentive Stock Option" means any Stock Option intended to be and
designated as an "incentive stock option" within the meaning of Code Section
422.
"Intrinsic Value" means the difference between the Fair Market Value of the
Stock on the date of exercise and the Option Price as defined in section 6.1.
"Non-Cash Exercise Method" means the issuance of shares of Company stock
upon the exercise of any Stock Option such that (a) no cash or other
consideration is required of the optionee for the issuance of shares of Company
stock as (b) the fair market value of the number of shares issued is equal to
the sum total of the Intrinsic Value of the number of Stock Options exercised.
"Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
"Normal Retirement," solely for the purpose of this Plan means retirement
from active employment with the Company, any Subsidiary, and any Affiliate on or
after age 65.
"Plan" means this 1999 Equity Stock Incentive Plan.
"Restricted Stock" means an award of shares of Stock that are subject to
restrictions under Section 9.
2
<PAGE>
"Retirement" means Normal Retirement.
"Stock" means the common stock of the Company.
"Stock Appreciation Right" means a right granted under Section 8 to
surrender to the Company all or a portion of a Stock Option in exchange for an
amount equal to the difference between (i) the Fair Market Value, as of the date
such Stock Option or such portion thereof is surrendered, of the shares of Stock
covered by such Stock Option or such portion thereof, and (ii) the aggregate
exercise price of such Stock Option or such portion thereof.
"Stock Option" means any option to purchase shares of Stock granted
pursuant to Section 6.
"Subsidiary" means any corporation (other than the Company) in an unbroken
chain of corporations beginning with the Company if each of the corporations
(other than the last corporation in the unbroken chain) owns stock possessing
50% or more of the total combined voting power of all classes of stock in one of
the other corporations in the chain.
3. ADMINISTRATION.
---------------
This Plan shall be administered by the Committee which shall at all
times consist of no fewer than three Disinterested Persons (or, if there are
fewer than three Disinterested Persons then serving on the Board of Directors,
then all of such Disinterested Persons), each of whom shall be members of the
Board of the Directors. The Committee shall have the power and authority to
grant to eligible employees, pursuant to the terms of this Plan: (i) Stock
Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock, or (iv)
Deferred Stock. In particular, the Committee shall have the authority to:
3.1 Select the officers, other employees and consultants of the Company,
its Subsidiaries, and its Affiliates to whom Stock Options, Stock Appreciation
Rights, Restricted Stock or Deferred Stock awards, or a combination of the
foregoing from time to time will be granted hereunder;
3.2 Determine whether and to what extent Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock or
Deferred Stock, or a combination of the foregoing are to be granted hereunder;
3.3 Except as set forth in Section 7 hereof, determine the number of shares
of Stock to be covered by each such award granted hereunder;
3.4 Determine the terms and conditions, not inconsistent with the terms of
this Plan, of any award granted hereunder, including, but not limited to, any
restriction on any Stock Option or other award and/or the shares of Stock
relating thereto based on performance and/or such other factors as the Committee
may determine, in its sole discretion, and any vesting acceleration features
based on performance and/or such other factors as the Committee may determine,
in its sole discretion;
3
<PAGE>
3.5 Determine whether, to what extent, and under what circumstances
Stock and other amounts payable with respect to an award under this Plan shall
be deferred either automatically or at the election of a participant, including
providing for and determining the amount (if any) of deemed earnings on any
deferred amount during any deferral period;
3.6 Adopt, alter, and repeal such administrative rules, guidelines, and
practices governing this Plan as it shall, from time to time, deem advisable;
3.7 Interpret the terms and provisions of this Plan and any award
issued under this Plan (and any agreements relating thereto); and
3.8 Otherwise supervise the administration of this Plan.
All decisions made by the Committee pursuant to the provisions of this
Plan shall be final and binding on all persons, including the Company and
participants in this Plan.
4. STOCK SUBJECT TO PLAN.
----------------------
The total number of shares of Stock reserved and available for distribution
under this Plan shall be three million (3,000,000). Such shares may consist, in
whole or in part, of authorized and unissued shares or treasury shares. If any
shares of Stock that have been optioned cease to be subject to option, or if any
shares subject to any Restricted Stock or Deferred Stock award granted hereunder
are forfeited or such award otherwise terminates, those shares shall again be
available for distribution in connection with future awards under this Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, or other change in corporate structure
affecting the Stock, a substitution or adjustment shall be made in the aggregate
number of shares reserved for issuance under this Plan, in the number and option
price of shares subject to outstanding Stock Options and Director Stock Options
granted under this Plan, and in the number of shares subject to Restricted Stock
or Deferred Stock awards granted under this Plan, in such manner as may be
determined to be appropriate by the Committee, in its sole discretion, provided
that the number of shares subject to any award shall always be a whole number.
Such adjusted option price shall also be used to determine the amount payable by
the Company upon the exercise of any Stock Appreciation Right associated with
any Stock Option.
5. ELIGIBILITY.
------------
5.1 Officers, other employees and consultants of the Company, its
Subsidiaries or its Affiliates (but excluding members of the Committee and any
person who serves only as a director) who are responsible for or contribute to
the management, growth, and/or profitability of the business of the Company, its
Subsidiaries, or its Affiliates are eligible to be granted Stock Options, Stock
Appreciation Rights, Restricted Stock or Deferred Stock awards.
4
<PAGE>
5.2 Directors of the Company (other than directors who are also officers or
employees of the Company, its Subsidiaries or its Affiliates) are eligible to be
granted Director Stock Options pursuant to Section 7 of the Plan.
5.3 Except as set forth in Section 7 of the Plan, the optionees and
participants under this Plan shall be selected from time to time by the
Committee, in its sole discretion, from among those eligible, and the Committee
shall determine, in its sole discretion, the number of shares covered by each
award or grant to an optionee or participant.
6. STOCK OPTIONS FOR EMPLOYEES AND CONSULTANTS.
--------------------------------------------
Stock Options may be granted either alone or in addition to other awards
granted under this Plan. Any Stock Option granted under this Plan shall be in
such form as the Committee from time to time approves, and the provisions of
Stock Option awards need not be the same with respect to each optionee.
The Stock Options granted under this Plan may be of two types: (i)
Incentive Stock Options, or (ii) Non-Qualified Stock Options. The Committee
shall have the authority to grant any optionee Incentive Stock Options,
Non-Qualified Stock Options, or both types of Stock Options (in each case with
or without Stock Appreciation Rights) except that Incentive Stock Options shall
not be granted to employees of an Affiliate. To the extent that any Stock Option
does not qualify as an Incentive Stock Option, it shall constitute a separate
Non-Qualified Stock Option.
Anything in this Plan to the contrary notwithstanding, no term of this Plan
relating to Incentive Stock Options shall be interpreted, amended, or altered,
nor shall any discretion or authority granted under this Plan be so exercised,
so as to disqualify either this Plan or any Incentive Stock Option under Code
Section 422. Notwithstanding the foregoing, in the event an optionee voluntarily
disqualifies an option as an Incentive Stock Option within the meaning of Code
Section 422, the Committee may, but shall not be obligated to, make such
additional grants, awards, or bonuses as the Committee shall deem appropriate,
to reflect the tax savings to the Company which result from such
disqualification.
Stock Options granted under this Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of this Plan, as the Committee shall deem desirable:
6.1 Option Price. The option price per share of Stock purchasable under a
Stock Option shall be determined by the Committee at the time of grant but shall
not be less than 100% of the Fair Market Value of the Stock on the date of the
grant of the Incentive Stock Option and 80% of the Fair Market Value on the date
of the grant of the Non-Qualified Stock Options.
5
<PAGE>
6.2 Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable later than 10
years after the date such Incentive Stock Option is granted and no Non-Qualified
Stock Option shall be exercisable later than 10 years and two days after the
date such Non-Qualified Stock Option is granted.
6.3 Exercisability. Subject to Section 6.10 with respect to Incentive Stock
Options, Stock Options shall be exercisable at such time or times and subject to
such terms and conditions as shall be determined by the Committee at the date of
grant; provided, however, that, except as provided in Sections 6.6, 6.7, and
6.8, and unless otherwise determined by the Committee at the time of grant, no
Stock Option shall be exercisable prior to the first anniversary date of the
granting of the option. If the Committee provides, in its discretion, that any
Stock Option is exercisable only in installments, the Committee may waive such
installment exercise provisions at any time in whole or in part based on
performance and/or such other factors as the Committee may determine in its sole
discretion.
6.4 Method of Exercise. Stock Options may be exercised in whole or in part
at any time during the option period, by (a) giving written notice of exercise
to the Company specifying the number of shares to be purchased, accompanied by
payment in full of the purchase price, in cash, by check or such other
instrument or mode of payment as may be acceptable to the Committee or by (b)
giving written notice of exercise to the Company requesting the issuance of
shares under the Non-Cash Exercise Method. As determined by the Committee, in
its sole discretion, at or after grant, payment in full or in part may also be
made in the form of unrestricted Stock already owned by the optionee or, in the
case of the exercise of a Non-Qualified Stock Option, Restricted Stock or
Deferred Stock subject to an award hereunder (based, in each case, on the Fair
Market Value of the Stock on the date the option is exercised, as determined by
the Committee). If payment of the option exercise price of a Non-Qualified Stock
Option is made in whole or in part in the form of Restricted Stock or Deferred
Stock, the shares received upon the exercise of such Stock Option shall be
restricted or deferred, as the case may be, in accordance with the original term
of the Restricted Stock award or Deferred Stock award in question, equal to the
number of shares of Restricted Stock or Deferred Stock surrendered upon the
exercise of that option. No shares of unrestricted Stock shall be issued until
full payment therefor has been made. An optionee shall have the right to
dividends or other rights of a stockholder with respect to shares subject to the
option when the optionee has given written notice of exercise and has paid in
full for those shares.
6.5 Non-transferability of Options. No Stock Option shall be transferable
by the optionee otherwise than by will or by the laws of descent and
distribution, and all Stock Options shall be exercisable, during the optionee's
lifetime, only by the optionee.
6.6 Termination by Death. Unless otherwise determined by the Committee at
grant, if an optionee's employment with the Company, any Subsidiary, and any
Affiliate terminates by reason of his death, the Stock Option may thereafter be
exercised, to the extent then exercisable (or on such accelerated basis as the
Committee shall determine at or after grant), by the legal representative of the
estate or by the legatee of the optionee under the will of the optionee or by
the heir of the optionee under the laws of descent and distribution, for a
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period of one year from the date of such death or until the expiration of the
stated term of such Stock Option, whichever period is the shorter.
6.7 Termination by Reason of Disability. Unless otherwise determined by the
Committee at grant, if an optionee's employment with the Company, any Subsidiary
and any Affiliate terminates by reason of Disability, any Stock Option held by
such optionee may thereafter be exercised to the extent it was exercisable at
the time of termination due to Disability (or on such accelerated basis as the
Committee shall determine at or after grant), but may not be exercised after one
year from the date of such termination of employment or the expiration of the
stated term or such Stock Option, whichever period is shorter; provided,
however, that, if the optionee dies within such one-year period, any unexercised
Stock Option held by such optionee shall thereafter be exercisable to the extent
to which it was exercisable at the time of death for a period of three months
from the date of such death or for the stated term of such Stock Option,
whichever period is the shorter. In the event of termination of employment by
reason of Disability, if an Incentive Stock Option is exercised after the
expiration of the exercise periods that apply for purposes of Code Section 422,
such Stock Option will thereafter be treated as a Non-Qualified Stock Option.
6.8 Termination by Reason of Retirement. Unless otherwise determined by the
Committee at grant, if an optionee's employment with the Company, any Subsidiary
and any Affiliate terminates by reason of Normal Retirement, any Stock Option
held by such optionee may thereafter be exercised to the extent it was
exercisable at the time of such Retirement (or on such accelerated basis as the
Committee shall determine at or after grant), but may not be exercised after one
year from the date of such termination of employment or the expiration of the
stated term of such Stock Option, whichever period is the shorter; provided,
however, that, if the optionee dies within such one-year period any unexercised
Stock Option held by such optionee shall thereafter be exercisable, to the
extent to which it was exercisable at the time of death, for a period of three
months from the date of such death or for the stated term of the Stock Option,
whichever period is the shorter. Notwithstanding the foregoing, the tax
treatment available pursuant to Section 422 of the Internal Revenue Code of 1986
upon the exercise of an Incentive Stock Option will not be available to an
optionee who exercises any Incentive Stock Options more than (i) 12 months after
the date of termination of employment due to permanent disability or (ii) three
months after the date of termination of employment due to retirement.
6.9 Other Termination. Unless otherwise determined by the Committee at
grant, if an optionee's employment with the Company, any Subsidiary and any
Affiliate terminates for any reason other than death, Disability or Normal
Retirement, any Stock Option held by such optionee shall thereupon terminate,
except that such Stock Option may be exercised for the lesser of three months
from the date of termination or the balance of such Stock Option's term if the
optionee's employment with the Company, any Subsidiary and any Affiliate is
involuntarily terminated by the optionee's employer without Cause.
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<PAGE>
6.10 Limit on Value of Incentive Stock Option First Exercisable Annually.
The aggregate Fair Market Value (determined at the time of grant) of the Stock
for which "incentive stock options" within the meaning of Code Section 422 are
exercisable for the first time by an optionee during any calendar year under
this Plan (and/or any other stock option plans of the Company, any Subsidiary
and any Affiliate) shall not exceed $100,000.
7. DIRECTOR STOCK OPTIONS.
-----------------------
Director Stock Options granted under this Plan shall be Non-Qualified Stock
Options which are not intended to be "incentive stock options" within the
meaning of Code Section 422. Director Stock Options granted under this Plan
shall be in such form as the Committee may from time to time approve, and the
provision that Director Stock Options need not be the same with respect to each
optionee. Director Stock Options shall be granted as follows:
7.1 Written Option Agreement. Director Stock Options granted under the Plan
shall be evidenced by a written agreement in such form as the Committee shall
from time to time approve, which agreements shall comply with and be subject to
the following terms and conditions:
7.2 Option Price. The minimum option price per share of Stock purchasable
under a Director Stock Option shall be 75% of the Fair Market Value of the Stock
on the date of the grant of the Director Stock Option.
7.3 Option Term. Each Director Stock Option shall be exercisable for 10
years and two days after the date such Director Stock Option is granted (subject
to prior termination as hereinafter provided).
7.4 Exercisability. Director Stock Options shall be exercisable at such
time or times and subject to such terms and conditions as shall be determined by
the Committee at the date of grant. If the Committee provides, in its
discretion, that any Director Stock Option is exercisable only in installments,
the Committee may waive such installment exercise provisions at any time in
whole or in part based on performance and/or such other factors as the Committee
may determine in its sole discretion; provided, however, that in the event of a
"Change of Control" (as defined in Section 14 below), the value of all
outstanding Director Stock Options that have been outstanding for at least six
months shall be cashed out on the basis of the "Change of Control Price" (as
defined in Section 14 below) as of the date the Change of Control occurs, and
all Director Stock Options that have not been outstanding for at least six
months shall be immediately exercisable.
7.5 Method of Exercise. Director Stock Options may be exercised in whole or
in part at any time during the option period, by giving written notice of
exercise to the Company specifying the number of shares to be purchased,
accompanied by payment in full of the purchase price, in cash, by check or such
other instrument or mode of payment as may, be acceptable to the Committee.
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<PAGE>
Payment in full or in part may also be made in the form of Stock already owned
by the optionee (based on the Fair Market value of the Stock on the date the
option is exercised). No shares of Stock shall be issued until full payment
therefor has been made. An optionee shall have the rights to dividends or other
rights of a stockholder with respect to shares subject to the option when the
optionee has given written notice of exercise and has paid in full for such
shares.
7.6 Non-transferability of Options. No Director Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution and all Director Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee.
7.7 Termination by Disability or Death. Upon an optionee's termination of
service as a director by reason of disability or death, any Director Stock
Options held by such optionee may thereafter be immediately exercised by the
optionee or, in the case of death, by the legal representative or the estate or
by the legatee of the optionee under the will of the optionee, until the
expiration of the stated term of such Director Stock Options.
7.8 Other Termination. Upon an optionee's termination of service as a
director with the Company for any reason other than disability or death, any
Director Stock Options held by such optionee may thereafter be exercised, to the
extent exercisable at termination, until the expiration of the stated term of
such Director Stock Options.
8. STOCK APPRECIATION RIGHTS.
--------------------------
8.1 Grant and Exercise. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under this Plan. In the
case of a Non-Qualified Stock Option, such rights may be granted either at or
after the time of the grant of such Non-Qualified Stock Option. In the case of
an Incentive Stock Option, such rights may be granted only at the time of the
grant of such Incentive Stock Option.
A Stock Appreciation Right or applicable portion thereof granted with
respect to a given Stock Option shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option, except that,
unless otherwise provided by the Committee at the time of grant, a Stock
Appreciation Right granted with respect to less than the full number of shares
covered by a related Stock Option shall only be reduced if and to the extent
that the number of shares covered by the exercise or termination of the related
Stock Option exceeds the number of shares not covered by the Stock Appreciation
Right.
A Stock Appreciation Right may be exercised by an optionee, in
accordance with Section 8.2, by surrendering the applicable portion of the
related Stock Option. Upon such exercise and surrender, the optionee shall be
entitled to receive amount determined in the manner prescribed in Section 8.2.
Stock Options having been so surrendered, in whole or in part, shall no longer
be exercisable to the extent the related Stock Appreciation Rights have been
exercised.
8.2 Terms and Conditions. Stock Appreciation Rights shall be subject to
such terms and conditions, not inconsistent with the provisions of this Plan, as
shall be determined from time to time by the Committee, including the following:
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<PAGE>
(a) Stock Appreciation Rights shall be exercisable only at such time or
times and to the extent that the Stock Options to which they relate
shall be exercisable in accordance with the provisions of Section 6
and this Section; provided, however, that any Stock Appreciation Right
granted subsequent to the grant of the related Stock Option shall not
be exercisable during the first six months of the term of the Stock
Appreciation Right, except that this additional limitation shall not
apply in the event of death or Disability of the optionee prior to the
expiration of the six-month period.
(b) Upon the exercise of a Stock Appreciation Right, an optionee shall be
entitled to receive up to, but not more than, an amount in cash or
shares of Stock equal in value to the excess of the Fair Market Value
of one share of Stock over the option price per share specified in the
related Stock Option multiplied by the number of shares with respect
to which the Stock Appreciation Right shall have been exercised, with
the Committee having the sole and exclusive right to determine the
form of payment.
(c) Stock Appreciation Rights shall be transferable only when and to the
extent that the underlying Stock Option would be transferable under
Section 6.5.
(d) Upon the exercise of a Stock Appreciation Right, the Stock Option or
part thereof to which such Stock Appreciation Right is related shall
be deemed to have been exercised for the purpose of the limitation set
forth in Section 4 on the number of shares of Stock to be issued under
this Plan.
(e) A Stock Appreciation Right granted in connection with an Incentive
Stock Option may be exercised only if and when the market price of the
Stock subject to the Incentive Stock Option exceeds the exercise price
of such Stock Option.
(f) In its sole discretion, the Committee may provide, at the time of
grant of a Stock Appreciation Right under this Section, that such
Stock Appreciation Right can be exercised only in the event of a
"Change of Control" and/or a "Potential Change of Control" (as defined
in Section 14).
(g) The Committee, in its sole discretion, may also provide that, in the
event of a "Change of Control" and/or a "Potential Change of Control"
(as defined in Section 14), the amount to be paid upon the exercise of
a Stock Appreciation Right shall be based on the "Change of Control
Price" (as defined in Section 14).
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9. RESTRICTED STOCK.
-----------------
9.1 Administration. Shares of Restricted Stock may be issued either alone
or in addition to other awards granted under this Plan. The Committee shall
determine the consultants, officers and key employees of the Company and its
Subsidiaries and Affiliates to whom, and the time or times at which, grants of
Restricted Stock will be made, the number of shares to be awarded, the price, if
any, to be paid by the recipient of Restricted Stock (subject to Section 9.2,
the time or times within which such awards may be subject to forfeiture, and all
other conditions of the awards. The Committee may also condition the grant of
Restricted Stock upon the attainment of specified performance goals, or such
other criteria as the Committee may determine, in its sole discretion. The
provisions of Restricted Stock awards need not be the same with respect to each
recipient.
9.2 Awards and Certificates. The prospective recipient of an award of
shares of Restricted Stock shall not have any rights with respect to such award,
unless and until such recipient has executed an agreement evidencing the award
(a "Restricted Stock Award Agreement") and has delivered a fully executed copy
thereof to the Company, and has otherwise complied with the then applicable
terms and conditions.
(a) Awards of Restricted Stock must be accepted within a period of 90 days
(or such shorter period as the Committee may specify) after the award
date by executing a Restricted Stock Award Agreement and paying
whatever price, if any, is required.
(b) Each participant who is awarded Restricted Stock shall be issued a
stock certificate with respect to those shares of Restricted Stock.
The certificate shall be registered in the name of the participant,
and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such award, substantially
in the following form:
"The transferability of this certificate and the
shares of stock represented hereby are subject to the
terms and conditions (including forfeiture) of the
INTELLIWORXX, INC. 1999 Equity Incentive Plan and a
Restricted Stock Award Agreement entered into between
the registered owner and INTELLIWORXX, INC. Copies of
the Plan and the Agreement are on file in the offices
of INTELLIWORXX, INC., 1819 Main Street, Suite 1101,
Sarasota, Florida 34236"
(c) The Committee shall require that the stock certificates evidencing
such shares will be held in custody by the Company until the
restrictions thereon shall have lapsed, and that, as a condition of
any Restricted Stock award, the participant shall have delivered a
stock power to the Company, endorsed in blank, relating to the Stock
covered by such award.
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9.3 Restrictions and Conditions. The shares of Restricted Stock awarded
pursuant to this Section shall be subject to the following restrictions and
conditions:
(a) Subject to the provisions of this Plan and the Restricted Stock Award
Agreements, during such period as may be set by the Committee
commencing on the grant date (the "Restriction Period"), the
participant shall not be permitted to sell, transfer, pledge or assign
shares of Restricted Stock awarded under this Plan. Within these
limits, the Committee may, in its sole discretion, provide for the
lapse of such restrictions in installments and may accelerate or waive
such restrictions in whole or in part based on performance and/or such
other factors as the Committee may determine, in its sole discretion.
(b) Except as provided in Section 9.3(a), the participant shall have, with
respect to the shares of Restricted Stock, all of the rights of a
stockholder of the Company, including the right to receive any
dividends. Dividends paid in stock of the Company or stock received in
connection with a stock split with respect to Restricted Stock shall
be subject to the same restrictions as on such Restricted Stock.
Certificates for shares of unrestricted Stock shall be delivered to
the participant promptly after, and only after, the period of
forfeiture shall expire without forfeiture in respect of such shares
of Restricted Stock.
(c) Subject to the provisions of the Restricted Stock Award Agreement and
this Section, upon the participant's termination of employment for any
reason during the Restriction Period, all shares still subject to
restriction shall be forfeited by the participant, and the participant
shall only receive the amount, if any, paid by the participant for
such forfeited Restricted Stock.
(d) In the event of special hardship circumstances of a participant whose
employment is involuntarily terminated (other than for Cause), the
Committee may, in its sole discretion, waive in whole or in part any
or all remaining restrictions with respect to such participant's
shares of Restricted Stock.
10. DEFERRED STOCK AWARDS.
----------------------
10.1 Administration. Deferred Stock may be awarded either alone or in
addition to other awards granted under this Plan. The Committee shall determine
the consultants, officers and key employees of the Company, its Subsidiaries and
Affiliates to whom, and the time or times at which, Deferred Stock shall be
awarded, the number of shares of Deferred Stock to be awarded to any
participant, the duration of the period (the "Deferral Period") during which,
and the conditions under which, receipt of the Stock will be deferred and the
terms and conditions of the award in addition to those set forth in Section
10.2. The Committee may also condition the grant of Deferred Stock upon the
attainment of specified performance goals, or such other criteria as the
Committee shall determine, in its sole discretion. The provisions of Deferred
Stock awards need not be the same with respect to each recipient.
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<PAGE>
10.2 Terms and Conditions. The shares of Deferred Stock awarded pursuant to
this Section shall be subject to the following terms and conditions:
(a) Subject to the provisions of this Plan and the award agreement,
Deferred Stock awards may not be sold, assigned, transferred, pledged,
or otherwise encumbered during the Deferral Period. At the expiration
of the Deferral Period (or Elective Deferral Period, where
applicable), share certificates shall be delivered to the participant,
or his legal representative, in a number equal to the shares covered
by the Deferred Stock award.
(b) At the time of the award, the Committee may, in its sole discretion,
determine that amounts equal to any dividends declared during the
Deferral Period with respect to the number of shares covered by a
Deferred Stock award will be: (a) paid to the participant currently,
(b) deferred and deemed to be reinvested, or (c) forfeited because the
participant has no rights with respect thereto.
(c) Subject to the provisions of the award agreement and this Section,
upon termination of employment for any reason during the Deferral
Period for a given award, the Deferred Stock in question including any
deferred and reinvested dividends thereon shall be forfeited by the
participant.
(d) Based on performance and/or such other criteria as the Committee may
determine, the Committee may, at or after the grant, accelerate the
vesting of all or any part of any Deferred Stock award and/or waive
the deferral limitations for all or any part of such award.
(e) In the event of special hardship circumstances of a participant whose
employment is involuntarily terminated (other than for Cause), the
Committee may, in its sole discretion, waive in whole or in part any
or all of the remaining deferral limitations imposed hereunder with
respect to any or all of the participant's Deferred Stock.
(f) A participant may elect to defer further receipt of the award for a
specified period or until a specified event (the "Elective Deferral
Period"), subject in each case to the Committee's approval and to such
terms as are determined by the Committee, all in its sole discretion.
Subject to any exceptions adopted by the Committee, such election must
be made at least six months prior to the completion of the Deferral
Period for a Deferred Stock award (or for an installment of such an
award).
(g) Each award shall be confirmed by, and subject to the terms of, a
Deferred Stock award agreement executed by the Company and the
participant.
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11. LOAN PROVISIONS.
- --------------------
With the consent of the Committee, the Company may make, guarantee, or
arrange for, a loan or loans to a Plan participant with respect to the exercise
of any Stock Option granted under this Plan and/or with respect to the payment
of the purchase price, if any, of any Restricted Stock awarded hereunder and/or
with respect to the payment by optionee of any or all federal and/or state
income taxes due on account of the granting or exercise of any stock option or
other awards hereunder. The Committee shall have full authority to decide
whether to make a loan or loans hereunder and to determine the amount, terms and
provisions of any such loan or loans, including the interest rate to be charged
in respect of any such loan or loans, whether the loan or loans are to be with
or without recourse against the borrower, the terms on which the loan is to be
repaid and the conditions, if any, under which the loan or loans may be
forgiven.
12. AMENDMENTS AND TERMINATION.
---------------------------
The Board may amend, alter, or discontinue this Plan, but no amendment,
alteration, or discontinuation shall be made which would impair the right of an
optionee or participant under a Stock Option, Director Stock Option, Stock
Appreciation Right, Restricted Stock or Deferred Stock award theretofore
granted, without the optionee's or participant's consent, or which without the
approval of the stockholders would:
12.1 Except as expressly provided in this Plan, increase the total number
of shares reserved for the purpose of this Plan;
12.2 Extend the maximum option period under Section 6.2 or 7.3 of the Plan.
The Committee may amend the terms of any award or option (other than
Director Stock Options) theretofore granted, prospectively or retroactively, but
no such amendment shall impair the rights of any holder without his consent. The
Committee may also substitute new Stock Options for previously granted Stock
Options having higher option prices.
13. UNFUNDED STATUS OF PLAN.
------------------------
This Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
Participant or optionee by the Company, nothing set forth herein shall give any
such participant or optionee any rights that are greater than those of an
unsecured, general creditor of the Company. In its sole discretion, the
Committee may authorize the creation of trusts or other arrangements to meet the
obligations created under this Plan to deliver Stock or payments in lieu of or
with respect to awards hereunder; provided, however, that the existence of such
trusts or other arrangements is consistent with the unfunded status of this
Plan.
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14. CHANGE OF CONTROL.
------------------
The following acceleration and valuation provisions shall apply in the
event of a "Change of Control" or "Potential Change of Control," as defined in
this Section:
14.1 In the event of a "Change of Control," as defined in Section 14.2,
unless otherwise determined by the Committee or the Board in writing at or after
grant, but prior to the occurrence of the Change of Control, or, if and to the
extent so determined by the Committee or the Board in writing at or after grant
(subject to any right of approval expressly reserved by the Committee or the
Board at the time of such determination) in the event of a "Potential Change of
Control," as defined in Section 14(c):
(a) Any Stock Appreciation Rights outstanding for at least six (6) months
and any Stock Options awarded under this Plan not previously
exercisable and vested shall become fully exercisable and vested;
(b) The restrictions and deferral limitations applicable to any Restricted
Stock and preferred Stock awards under this Plan shall lapse and such
shares and awards shall be deemed fully vested; and
(c) All outstanding Stock Options, Stock Appreciation Rights, Restricted
Stock and Deferred Stock awards, shall, to the extent determined by
the Committee at or after grant, be canceled and the holder thereof
shall be paid in cash therefor on the basis of the "Change of Control
Price" (as defined in Section 14.4) as of the date that the Change of
Control occurs or Potential Change of Control is determined to have
occurred, or such other date as the Committee may determine prior to
the Change of Control or Potential Change of Control.
14.2 For Purposes of Section 14.2, a "Change of Control" means the
happening of any of the following:
(a) When any "person" as such term is used in Sections 13(d) and 14(d) of
the Exchange Act (other than the Company, or any Company employee
benefit plan, including its trustee) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly of securities of the Company representing 40 percent or
more of the combined voting power of the Company's then outstanding
securities;
(b) The occurrence of any transaction or event relating to the Company
required to be described pursuant to the requirements of Item 6(e) of
Schedule 14A of Regulation 14A of the Commission under the Exchange
Act;
(c) The occurrence of a transaction requiring stockholder approval for the
acquisition of the company by an entity other than the Company or a
Subsidiary, through purchase of assets, or by merger, or otherwise;
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<PAGE>
(d) The dissolution of the Company; or
(e) The sale by the Company of substantially all of its assets.
14.3 For purposes of Section 14.1, a "Potential Change of Control" means
the happening of any of the following:
(a) The entering into an agreement by the Company, the consummation of
which would result in a Change of Control of the Company as defined in
Section 14.2;
(b) The determination by the Board that a public announcement by any
person (including the Company) of an intention to take or consider
taking actions which, if consummated, would constitute a Change in
Control; or
(b) The adoption by the Board of Directors of a resolution to the effect
that a Potential Change of Control of the Company has occurred for
purposes of this Plan.
14.4 For purposes of this Section, "Change of Control Price" means the
highest price based upon the Fair Market Value per share or the price paid or
offered in any transaction related to a potential or actual Change of Control of
the Company at any time during the preceding sixty day period as determined by
the Committee, except that (i) in the case of Incentive Stock Options and Stock
Appreciation Rights relating to Incentive Stock Options, such price shall be
based only on transactions reported for the date on which the Committee decides
to cash out such options, and (ii) in the case of Director Stock Options, the
sixty day period shall be the period immediately prior to the Change of Control.
15. GENERAL PROVISIONS.
-------------------
15.1 All certificates for shares of Stock delivered under this Plan shall
be subject to such stock transfer orders and other restrictions as the Committee
may deem advisable under the rules, regulations, and other requirements of the
Commission or the National Association of Securities Dealers, Inc., any stock
exchange upon which the Stock is then listed, and any applicable federal or
state securities law, and the Committee may cause a legend or legends to be
placed on any such certificates to make appropriate reference to such
restrictions.
15.2 Nothing set forth in this Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to stockholder approval
if such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases. The adoption of this Plan shall
not confer upon any employee of the Company, any Subsidiary or any Affiliate,
any right to continued employment (or, in the case of a director, continued
retention as a director, or, in the case of a consultant, continued retention as
a consultant) with the Company, a Subsidiary or an Affiliate, as the case may
be, nor shall it interfere in any way with the right of the Company, a
Subsidiary or an Affiliate to terminate the employment of any of its employees
at any time.
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15.3 Each participant shall, no later than the date as of which the value
of an award first becomes includable in the gross income of the participant for
federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of, any federal, state, or local
taxes of any kind required by law to be withheld with respect to the award. The
obligations of the Company under this Plan shall be conditioned on such payment
or arrangements and the Company (and, where applicable, its Subsidiaries and
Affiliates) shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment of any kind otherwise due to the participant. If
permitted by the Committee, a participant may irrevocably elect to have the
withholding tax obligation or, in the case of all awards hereunder except Stock
Options which have related Stock Appreciation Rights, if the Committee so
determines, any additional tax obligation with respect to awards hereunder
satisfied by (a) having the Company withhold shares of Stock otherwise
deliverable to the participant with respect to the award, or (b) delivering to
the Company shares of unrestricted Stock; provided, however, that any such
election shall be made either (i) during one of the "window" periods described
in section (e) (3) (iii) of Rule 16b-3 promulgated under the Exchange Act, or
(ii) at least six months prior to the date income is recognized with respect to
the award.
15.4 At the time of grant or purchase, the Committee may provide in
connection with any grant or purchase made under this Plan that the shares of
Stock received as a result of such grant or purchase shall be subject to a right
of first refusal, pursuant to which the participant shall be required to offer
to the Company any shares that the participant wishes to sell, with the price
being the then Fair Market Value of the Stock, subject to the provisions of
Section 14 and to such other terms and conditions as the Committee may specify
at the time of grant.
15.5 No member of the Board or the Committee, nor any officer or employee
of the Company acting on behalf of the Board or the Committee, shall be
personally liable for any action, determination, or interpretation taken or made
in good faith with respect to this Plan, and all members of the Board or the
Committee and each and any officer or employee of the Company acting on their
behalf shall, to the extent permitted by law, be fully indemnified and protected
by the Company with respect to any such action, determination or interpretation.
16. EFFECTIVE DATE OF PLAN.
-----------------------
This Plan shall be effective on the date it is approved by a majority of
the votes of stockholders either in writing or cast at a duly held stockholders'
meeting at which a quorum representing a majority of all outstanding voting
stock is, either in person or by proxy, present and voting on the Plan.
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17. TERM OF PLAN.
-------------
No Stock Option, Director Stock Option, Stock Appreciation Right,
Restricted Stock or Deferred Stock award shall be granted pursuant to this Plan
on or after February 25, 2009, but awards theretofore granted may extend beyond
that date.
CERTIFICATION OF ADOPTION
-------------------------
I, Donald H. Pound, Jr., Secretary of INTELLIWORXX, INC., hereby certify
that the foregoing is a true and correct copy of the 1999 Equity Incentive Plan
of the Company as adopted by the Board of Directors of the Company by Unanimous
Written Consent on February 26, 1999 and by the Stockholders of the Company by
Unanimous Written Consent on March 19, 1999.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal
of the Company this March 19, 1999.
/s/ Donald H. Pound, Jr.
-----------------------------------
Donald H. Pound, Jr., Secretary
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