<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g) of
The Securities Exchange Act of 1934
CONVERGE GLOBAL, INC.
----------------------------------------------
(Name of Small Business Issuer in its charter)
Utah 87-0426858
- --------------------------------- ---------------------------------
(State or Other Jurisdiction (IRS Employer Identification No.)
of Incorporation or Organization)
233 Wilshire Boulevard, Suite 930, Santa Monica, California 90401
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(310) 434-1974
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
------------------- ------------------------------
None None
---------- ----------
---------- ----------
Securities to be registered pursuant to section 12(g) of the Act:
Common Stock, par value $.001
-----------------------------
(Title of Class)
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
A. BUSINESS DEVELOPMENT
1. FORM AND YEAR OF ORGANIZATION
The corporation was incorporated under the laws of the State of
Utah, on October 4, 1985, under the name of Mormon Mint, Inc. The corporation
was originally organized to manufacture and market commemorative medallions
as related to the Church of Jesus Christ of Latter Day Saints, the "Mormons."
The company was inactive for ten years. In 1998, the Company changed its name
to Capital Placement Specialists, Inc. as it began to seek new business
opportunities.
Pursuant to an Acquisition Agreement, dated January 5, 1999,
Bekam Investments, Ltd.("Bekam") acquired one hundred percent (100%)of the
common shares of the company at that time; or 2,430,000 shares. Bekam
subsequently spun off the company by contributing the shares to the treasury
of the Company. The Company then changed its name to Converge Global, Inc.
Converge Global, Inc. ("Converge" or the "Company") currently trades on the
OTC Bulletin Board under the trading symbol: CVRG.
B. BUSINESS OF ISSUER
The Company's business is focused in the globally emerging
electronic commerce ("e-commerce") industry. The Company is in the process of
building specialty portals catering to niche market segments, as well as
building a market that provides complete e-commerce solutions to other
businesses. The Company plans to provide these e-commerce solutions with
specific emphasis on audio and video delivery over the Internet. The
Company's Internet address is: WWW.CONVERGECOM.COM.
1. PRINCIPAL PRODUCTS AND THE MARKET.
THE MARKET
THE INTERNET
International Data Corporation estimates that the number of users
accessing the Web will grow from 28 million in 1996 to 175 million in 2001
and that the amount of commerce conducted over the Web will increase from
approximately $2.6 billion in 1996 to $220 billion in 2001. Growth in
Internet usage has been fueled by a number of factors, including the large
and growing base of personal computers installed in the workplace and home,
advances in the performance and speed of personal computers and modems,
improvements in network infrastructure, easier and cheaper access to the
Internet and increased awareness of the Internet among consumer and trade
customers.
The emergence of the Internet as a significant communications medium
is driving the development and adoption of Web content and commerce
applications that offer both convenience and value to consumers, as well as
unique marketing opportunities and reduced operating costs to business. A
growing number of consumer and trade customers have begun to conduct business
on the Internet including paying bills, booking airline tickets, trading
securities and purchasing consumer goods (e.g., personal computers, consumer
electronics, compact disks, books, groceries and vehicles). Moreover, online
transactions can be faster, less expensive, more accurate and
convenient than transactions conducted through a human intermediary.
2
<PAGE>
THE PRODUCTS
The following is a summary of the Company's products and services
which evidence the Company's recent shift in creation and development of
Internet niche portals, with an emphasis on special Internet web sites. The
Company is in the process of developing audio and video delivery over the
Internet. By leveraging its well-established marketing and technical
expertise, along with constantly updated content and technology supplied or
procured by its proven team of experts, the Company will design and implement
each portal to meet the tastes, interests and demands of its target
audiences. By positioning its portals as leading-edge, comprehensive
communities, and by extending the Company's status through a portfolio of
credible and relevant consumer-based content, features, products and
services, the Company believes it will establish its portals as mandatory
destinations for targeted consumers. Leading to ever-increasing base of sales
and earnings. As a result, Converge believes it will achieve a significant
market valuation through subsequent offerings of its equity securities, or by
selling the Company to a major force on the Internet, communications,
entertainment or consumer products industries. The Internet Technology ("IT")
industry is witnessing the onset of an e-commerce explosion. Price Waterhouse
in it's "Annual Technology Forecast" predicts that by 2002, e-commerce is
anticipated to generate $94 billion in revenues. Further industry projections
anticipate a significant influx of e-merchants will flock to the Internet in
2000. In fact, by 2003 over 400,000 US based e-merchants will have a presence
on the World Wide Web. That is a 20 fold increase from current figures
reporting 17,500 on line e-merchants. The majority of these e-merchants
realize the advantages of portals, such as they once realized the need to be
in commercial districts and shopping centers. The key to survival for
merchants was Location, Location, Location. As we reach the dawn of a new
millennium, the trend is quickly becoming Portals, Portals, Portals.
E-MERCHANTS
One of the Company's services is providing E-Merchant services.
E-Merchants are increasingly realizing the ease of conducting business on the
World Wide Web. Becoming an e-merchant is no longer a choice, but rather a
critical component of survival in the business world. Had this necessity been
realized, small bookstores, brokerage firms and travel agencies would not
have suffered drastic losses in revenues to their Internet savvy competitors
such as Amazon.com, E-trade and Travelocity.com. According to a report
published by Keenan Vision, there are approximately 17,500 e-merchants on
line and over 5 million offline merchants in the US alone, who currently use
credit cards to process payments. The growth opportunity is spectacular, with
millions of potential e-merchants across the globe increasing everyday.
The promise of reaching more customers, increasing productivity and
ultimately resulting in increased profits will attract even the smallest
business owners to portal infrastructures.
Similar to searching and investigating for a good location and
storefront, E-Merchants will be searching for the right portal most suitable
to reach their specific market. We are witnessing the gap narrow between the
real world and the virtual world. Converge has packaged together technology
and services that can assist any entrepreneur into an e-merchant with little
effort. Converge develops portal site for specific niche market where the
Internet user quickly reach his destination of choice or have more options
available to him in the same niche areas.
PORTAL SERVICES
Portals are defined as Internet infrastructures serving as entry
points and destinations for on line users. Currently, existing portals can be
overwhelming for the end user. The unavoidable portals control the sales and
marketing channels that reach on line consumers. Converge develops high
quality, attractive, easy to navigate specialty portals with user friendly
interface programmed with the most amateur Internet user in mind.
Often many E-Merchants risk drowning in vast search engines. What
happens to the speciality web site offering unique products and services?
What happens to the e-merchants catering exclusively to a particular
demographical group?
3
<PAGE>
"Internet Portals will lead the E-Merchant stampede in 1999. Portals
are better positioned than other infrastructure players to take advantage of the
e-merchant market," states the Keenan Vision newsletter. The report predicts the
revenue opportunities resulting from the e-merchant stampede to portals with the
same enthusiasm as the cries of `Gold!' during the California Gold Rush of 150
years ago!
Electronic commerce is a proven opportunity. Ensuring success and
avoiding failure in this opportunity can be as simple as choosing the wrong
portal. Thus, Converge is an inevitable phenomenon drastically changing the face
of commerce.
Converge is strategically positioned for this demand by developing and
implementing niche portals.
2. DISTRIBUTION
As discussed above, the Company's products and services are all
distributed via the Internet. The Company's intention is to increase awareness
and distribution of its products and site through both mainstream marketing
(billboards, radio, television, etc.) and Internet marketing (listing in various
search engines, banner ads on various sites, etc.)
3. STATUS OF ANY PUBLICLY ANNOUNCED NEW PRODUCT OR
SERVICE.
The Company feels that with the increase in bandwidth through
channels such as Cable Modems and DSL, the Internet is going to allow for more
efficient distribution of multimedia such as video and audio. It is the
Company's intention to produce and broadcast audio/video productions over the
Internet through its Webfomercials.
4. COMPETITION.
The online commerce industry, particularly on the Internet, is new,
rapidly evolving and intensely competitive, which the Company expects to
intensify in the future. Barriers to entry are minimal, allowing current and new
competitors to launch new Web sites at a relatively low cost. The company
currently or potentially competes with other companies which have e-commerce
websites. These competitors include Broadcast.Com, Amazon.com and Yahoo!
5. SOURCES AND AVAILABILITY OF INFORMATION AND PRINCIPAL
SUPPLIERS.
The majority of the content and development of products is done
internally. The sites are hosted through various Internet Service Providers.
6. DEPENDENCE ON ONE OR A FEW MAJOR CUSTOMERS.
Not applicable.
7. PATENTS, TRADEMARKS, LICENSES, FRANCHISES,
CONCESSIONS, ROYALTY AGREEMENTS AND/OR LABOR CONTRACTS.
The Company filed its trademark application for the trademark
"Webfomercials" with the Patent and Trademark Office and is awaiting
registration of the mark. It has also applied to trademark its slogans
"solutions for the e-conomy" as well as "man's final destination."
8. GOVERNMENT APPROVAL.
No government approval is required for any of the Company's current
products or services.
9. EFFECT OF ANY EXISTING OR PROPOSED GOVERNMENT
REGULATIONS.
None.
4
<PAGE>
10. RESEARCH AND DEVELOPMENT COSTS
Development costs are being absorbed since most of the research and
development is done internally by Converge's team. Any additional work incapable
of being completed by the Company will be sent to independent contractors.
11. COST AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL
LAWS AND REGULATIONS
The Company is not involved in a business which involves the use of
materials in a manufacturing stage where such materials are likely to result in
the violation of any existing environmental rules and/or regulations. Further,
the Company does not own any real property which would lead to liability as a
land owner. Therefore, the Company does not anticipate that there will be any
costs associated with the compliance of environmental laws and regulations.
12. EMPLOYEES
As of the date hereof, the Company employs 8 full-time employees and
1 part-time employee. The Company hires independent contractors on an "as
needed" basis only. The Company has no collective bargaining agreements with
its employees. The Company believes that its employee relationships are
satisfactory. Long term, the Company will attempt to hire additional
employees as needed based on its growth rate.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
The following table sets forth, for the years indicated, selected
financial information for the Company:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED YEAR ENDED
MARCH 31 DECEMBER 31
(UNAUDITED) (AUDITED)
1999 1998 1998 1999
<S> <C> <C> <C> <C>
Total revenue --- --- --- ---
Cost of revenue --- --- --- ---
Gross profit --- --- --- ---
General, administrative, and selling expenses $ 154,721 --- --- $ 26,110
Income (loss) from operations $(154,721) --- --- $(26,110)
Interest expense --- --- --- ---
Other expense --- --- --- ---
Income (loss) before taxes $(154,721) --- --- $(26,110)
Taxes on income $ 800 --- --- ---
Net income (loss) $(155,521) --- --- $(26,110)
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
</TABLE>
THREE MONTHS ENDED MARCH 31, 1999 UNAUDITED AS COMPARED TO THREE MONTHS ENDED
MARCH 31, 1998 (UNAUDITED)
5
<PAGE>
REVENUES. The Company has not generated any revenues since inception.
GENERAL, ADMINISTRATIVE, AND SELLING EXPENSES.
The Company expended $154,721 for general and administrative expenses
for the three months ended March 31, 1999 as compared to zero general and
administrative expenses generated for the same period in 1998. These costs were
for development of technology for e-commerce.
LOSS FROM OPERATIONS.
The Company has $155,521 net loss for the three months ended March 31,
1999 as compared to the three months ended March 31, 1998 where the Company had
no losses from operations.
INTEREST EXPENSE.
The Company did not generate any interest expense in the three months
ended in March 31, 1999 or March 31, 1998.
OTHER EXPENSE.
None.
INCOME (LOSS) BEFORE TAXES.
None.
TAXES ON INCOME.
The Company paid its annual tax of $800 in period ending March 31,
1999. No income tax was paid for the same period in 1998, as the Company was
dormant for that time.
NET INCOME/LOSS.
The Company experienced a net loss of $155,521 as of three months
ended March 31, 1999 as compared to neither a net loss or gain for the same
period in 1998.
FISCAL YEAR ENDED DECEMBER 31, 1998 (AUDITED) AS COMPARED TO FISCAL YEAR ENDED
DECEMBER 31, 1997 (AUDITED)
REVENUES. The Company has not generated revenues since inception.
GENERAL, ADMINISTRATIVE, AND SELLING EXPENSES.
The Company had no general, administrative and/or selling expenses for
the year ended December 31, 1998 as compared to $26,110 in selling, general and
administrative expenses generated for the same period in 1997 which were for
services rendered by an individual consultant to the Company.
INTEREST EXPENSE.
None.
OTHER EXPENSE.
None.
6
<PAGE>
INTEREST EXPENSE.
None.
OTHER EXPENSE.
None.
INCOME (LOSS) BEFORE TAXES.
The Company has no income loss before taxes for the year ended
December 31, 1998 since the Company had no revenues or expenses. The Company
had a $26,110 loss before income taxes for the same period in 1997.
TAXES ON INCOME.
None.
NET INCOME/LOSS.
The Company experienced a net loss of $155,521 as of three months
ended December 31, 1998 as compared to neither a net loss or gain for the
same period in 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company has received no venture capital investment. The Company
concluded an offering under Rule 504 of Regulation D. Under this offering the
Company raised $25,000 and issued 2,000,000 options to purchase shares of its
common stock at an exercise price of $0.10 each. These options were exercised
on March 30, 1999, May 7, 1997 and June 1999, raising $200,000.
Throughout its history the Company had employed a variety of methods
for diversifying its operations and pursuing its strategic and business
objectives without pulling badly needed capital from its on-going operations,
or incurring onerous overhead and financing obligations. These have included
licenses, joint-ventures, and even counter-trade (technologies for
technologies) mechanisms as part of this diversification methodology.
As of June 30, 1998, the Company had no appreciable short or
long-term debt and had been reorganized to prepare for future business.
The Company does not believe that inflation has had a significant
impact on its operations since inception of the Company.
SUBSIDIARIES
On February 5, 1999, the Articles of Incorporation for Gearz.com,
Inc. ("Gearz.com") were filed with the California secretary of State. The
directors of the company are Imran Husain and Samar Khan.
Gearz.com is a wholly owned subsidiary of Converge whereby Converge
holds 1,000,000 shares of common stock of this Company. Gearz.com is a portal
site geared towards mens' interest. The target group ranges from ages 18-45
with interests in finance, travel, entertainment, fashion and electronics.
Gearz.com considers itself as a "iVillage.com" or "woman.com" portal site for
men.
On April 30, 1999, Converge became a 50% shareholder of
Liquidationbid.com, Inc. ("Liquidationbid") whereby Converge holds 1,000,000
shares of common stock of Liquidationbid. Mr. Imran Husain serves as the
President and Director of Liquidationbid.
7
<PAGE>
Liquidationbid is in the business of global business-to-business
auctioning and bartering exchange. It assists corporate clients in auctioning
or bartering excess inventory or, in case of liquidation, selling of assets,
inventories to highest bidder in an efficient and cost-effective manner.
YEAR 2000
The Company has developed and acquired its computer systems with an
objective to be Year 2000 compliant. The Company has engaged the services of
qualified technicians to determine the extent to which it may be vulnerable
to third party Year 2000 issues. As a relatively new corporation, all
computer equipment purchased, in August 1997 and August 1998, is Year 2000
compliant. The internal software written by The Company's programmers is
written with the long-date format included and consequently is Year 2000
compliant. The Company uses Microsoft software and has installed all the
available "patches" to up-date this software. Further, Microsoft "patches"
will be installed as they become available from Microsoft in 1999, but this
affects less than 20% of the Company's software and does not impact on the
on-going operation of the Company.
The Company has assessed and continues to asses whether its
information and non-information technology systems will be effected by the
Year 2000 issues. The Company has investigated its third party communications
suppliers such as the telephone company and its Internet service provider and
found that all are in the process of becoming Year 2000 compliant in 1999.
Based upon current information, management believes that the necessary
modifications have been made internally to effectively continue The Company
into the Year 2000, however, management is continuing to monitor internal
systems, and to assess the readiness of its systems, to ensure Year 2000
compliance. As a contingency, The Company has identified other communication
suppliers who could provide the necessary service at a minimal cost to the
Company, and a minimal effect on the operations of the Company. In the event
no other communication suppliers can be found, there could be a material
adverse effect on the Company and its operations. Based upon current
information, The Company does not believe that the costs associated with Year
2000 compliance is material for the Company.
ITEM 3. DESCRIPTION OF PROPERTY
The main administrative offices of the Company are located at 233
Wilshire Boulevard, Suite 930, Santa Monica, California 90401.
The Company has sub-leased these premises from Manhattan West, Inc.,
for a period of three (3) years. The sublease payments are due on the first
day of each month at approximately $4,400.00 per month. All utilities and
staff expenses are borne by the Company.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock, as of the date hereof and as
adjusted to reflect the sale of the Shares offered hereby by (i) each
stockholder known by the Company to be the beneficial owner of more than five
percent of the outstanding Common Stock, (ii) each director of the Company,
(iii) each officer of the Company, and (iv) all directors and officers as a
group.
8
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Title of Names and Amount and Percent of Outstanding
Class Address of Nature of Common Stock Beneficially Owned
Beneficial Beneficial
Owner Ownership
- ----------------------------------------------------------------------------------------------------
Common Imran Husain 1,000,000(1) 6.32%
Shares 10560 Wilshire Boulevard Director/
Unit No. 704 Officer
Los Angeles, CA 90024
Common Samar Khan 1,000,000(2) 6.32%
Shares 1233 San Vicente Boulevard Secretary/
Santa Monica, CA 90401 Treasurer
Common Reza Rahman 25,000 .0044%
Shares 6917 Valley View Lane, 254 Director
Irving, TX 75039
Common Montague Securities 3,400,000 17.58%
Shares International, Ltd.
Saffrey Square
Bay Street and Bank Lane
P.O. Box N-8303
Nassau, N.P., The Bahamas
- ----------------------------------------------------------------------------------------------------
All officers and directors as a group (3 persons) 2,025,000 32%
- ----------------------------------------------------------------------------------------------------
</TABLE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------
(1) On January 6, 1999, the Company issued 1,000,000 options to
purchase Common Stock of the Company at an exercise price of $0.001 for a term
of five years to Mr. Husain under the Company's 1999 Incentive and Nonstatutory
Stock Option Plan.
(2) On January 6, 1999, the Company issued 1,000,000 options to
purchase Common Stock of the Company at an exercise price of $0.001 for a term
of five years to Mrs. Khan under the Company's 1999 Incentive and Nonstatutory
Stock Option Plan.
9
<PAGE>
The directors and officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE OFFICE
- -------------------------------------------------------------------------
<S> <C> <C>
Imran Husain 32 President, Chief Executive
Officer and Director
Samar Khan 27 Secretary, Treasurer
Reza Rahman 32 Director
- -------------------------------------------------------------------------
</TABLE>
IMRAN HUSAIN, PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR. Mr. Imran
Husain is President, Chief Executive Officer and Director of Converge
Global, Inc. Mr. Husain holds a B.S. in Science Florida International
University.
SAMAR KHAN, SECRETARY AND TREASURER. Ms. Samar Khan has been involved with
corporate consulting since May, 1997. Ms. Khan has worked with GTI
Partners, a corporate consulting firm for one year. Ms. Khan was employed
as an office manager at Tansa Group, a public relations firm in Anaheim
Hills, California from 1993-1996. She attended California State
University at Pomona from 1989-1991, taking courses in business and
accounting.
REZA RAHMAN, DIRECTOR. Reza Rahman has been employed by Nokia Mobile Phones,
Inc. since 1995, a leader in the mobile phone manufacturing industry based in
Irving, Texas. As a customer satisfaction manager, his responsibilities
include measuring and analyzing key customer dissatisfaction issues, managing
resolution efforts and communicating lessons learned to other business units.
He is also responsible for developing and implementing strategies to improve
market share and has improved the Customer Satisfaction Index by a factor of
75 percent in nine months. Mr. Rahman holds a B.S. in Industrial Engineering
from the University of Texas at Arlington.
ITEM 6. EXECUTIVE COMPENSATION
The following table and attached notes sets forth the compensation of
the Company's executive officers and directors during each of the fiscal years
since inception of the Company. The remuneration described in the table does not
include the cost to the Company of benefits furnished to the named executive
officers, including premiums for health insurance, reimbursement of expense, and
other benefits provided to such individual that are extended in connection with
the ordinary conduct of the Company's business. The value of such benefits
cannot be precisely determined, but the executive officers named below did not
receive other compensation in excess of the lesser of $25,000 or 10% of such
officer's cash compensation.
10
<PAGE>
The following table sets forth all compensation scheduled to be
received for services rendered to the Company in all capacities during the
1998-99 fiscal year by those persons who are the Company's officers and
directors.
<TABLE>
<CAPTION>
<S> <C> <C>
Name and Annual Compensation Long Term Compensation
Principal Position Stock Options
Bonuses / Other
- ------------------------------------------------------------------------------------
Imran Husain $ 60,000 Stock Options 1,000,000(1)
President, CEO and Director
Samar Khan $ 60,000 Stock Options 1,000,000(2)
Secretary/Treasurer
Reza Rahman $ -0- Stock Options -0-
Director -------------
$ 120,000
</TABLE>
See audited and unaudited financial statements for fiscal year detail
of executive compensation.
The Company carries no officers and directors liability insurance, nor
disability and life insurance benefits. The Company has historically reimbursed
Messrs. Husain, Rahman and Mrs. Khan for quarterly private health insurance
premiums and for expenses. All executive officers are currently covered by
employment agreements. The Company does not maintain any pension plan, profit
sharing plan or similar retirement or employee benefit plans.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to an Acquisition Agreement dated January 5, 1999, Bekam
Investments, Ltd. ("Bekam") acquired 100% of the common shares of the Company at
the time or 2,430,100 shares. Bekam subsequently spun off the Company by
contributing the shares to the treasury of the Company. The Company then changed
its name to Converge Global, Inc.
On January 6, 1999, the Board of Directors approved the 1999 Incentive
Stock Option Plan to certain employees and officers exercised within five (5)
years from February 1, 1999, at a par value common stock price of $0.001 per
share.
ITEM 8. DESCRIPTION OF SECURITIES
COMMON STOCK
The Company's Articles of Incorporation authorize the issuance of
50,000,000 shares of common stock, $.001 par value per share, of which
approximately 5,977,800 shares were outstanding as of August 8, 1999.
- --------------------------------
(1) On January 6, 1999, the Company issued 1,000,000 options to
purchase Common Stock of the Company at an exercise price of $0.001 for a term
of five years to Mr. Husain under the Company's 1999 Incentive and Nonstatutory
Stock Option Plan.
(2) On January 6, 1999, the Company issued 1,000,000 options to
purchase Common Stock of the Company at an exercise price of $0.001 for a term
of five years to Mrs. Khan under the Company's 1999 Incentive and Nonstatutory
Stock Option Plan.
11
<PAGE>
Holders of shares of common stock are entitled to one vote for each
share on all matters to be voted on by the stockholders. Holders of common
stock have no cumulative voting rights. Accordingly, the holders of in excess
of 50% of the aggregate number of shares of Common Stock outstanding will be
able to elect all of the directors of the Company and to approve or
disapprove any other matter submitted to a vote of all shareholders. See
"Principal Shareholders."
Holders of shares of common stock are entitled to share ratably in
dividends, if any, as may be declared, from time to time, by the Board of
Directors in its discretion, from funds legally available therefor. The
Company does not currently anticipate paying any dividends on its Common
Stock. In the event of a liquidation, dissolution or winding up of the
Company, the holders of shares of common stock are entitled to share pro rata
all assets remaining after payment in full of all liabilities. Holders of
common stock have no preemptive rights to purchase the Company's common
stock. There are no conversion rights or redemption or sinking fund
provisions with respect to the common stock. All of the outstanding shares of
common stock are fully paid and non-assessable.
Shares of Common Stock are registered at the office of the Company and
are transferable at such office by the registered holder (or duly authorized
attorney) upon surrender of the Common Stock certificate, properly endorsed. No
transfer shall be registered unless the Company is satisfied that such transfer
will not result in a violation of any applicable federal or state securities
laws. The Company's transfer agent is Holladay Stock Transfer, Inc., 4350 East
Camelback Road, Suite 100F, Phoenix, Arizona 85018.
PREFERRED STOCK
The Company has a single common class of stock and there is no
preferred class of stock at this time.
DISTRIBUTION OF ACQUISITION SHARES
Pursuant to the Acquisition Agreement dated January 5, 1999, Bekam
retired all the acquired shares, 2,430,000 shares, to the treasury of the
Company.
WARRANTS AND OPTIONS
WARRANTS
The Company has no warrants issued and outstanding at this time.
OPTIONS
As of January 6, 1999 the Company implemented its 1999 Incentive and
Non-Statutory Stock Option Plan which authorized 7,000,000 shares exercisable
upon grant to beneficiary over a period of five (5) years, and no less than
twenty percent (20%) shall be exercised annually. As of the date of this filing,
there have been 2,000,000 options issued to two (2) employees.
12
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANTS' COMMON EQUITY AND
OTHER STOCKHOLDERS MATTERS
A. MARKET INFORMATION
MARKET FOR THE ISSUER'S COMMON STOCK
AND RELATED MATTERS
Converge has a total authorized capitalization of 50,000,000 shares of
a single class of common stock, par value $.001. As of the date hereof, the
Company has approximately 5,977,800 total issued and outstanding shares.
Management and insider holdings comprise approximately 32% of the total issued
and outstanding; while the remainder is distributed amongst approximately 11
registered shareholders and 120 streetholders. The current actual public float
is approximately 3,000,000 shares. The Company's common stock is presently held
in client accounts and/or in "street name" by over 9 U.S. securities firms.
The Company's common stock had been traded in the over-the-counter
market since the January 5, 1999 acquisition with Converge and is quoted on the
OTC Bulletin Board under the symbol CVRG.
The following table sets forth the high and low bid prices for the
Company's common stock as reported on the OTC Bulletin Board.
The prices below also reflect inter-dealer quotations, without retail
mark-up, mark-down or commissions and may not represent actual transactions:
<TABLE>
<CAPTION>
Low High
Quarter ended Bid Bid
-----------------------------------------------------------
<S> <C> <C>
February 1999 5.25 5.25
March 1999 5.5 5.5
April 1999 4.75 4.75
May 1999 4.875 4.875
June 1999 2.875 2.875
July 1999 2.125 2.125
</TABLE>
As of August 10, 1999 the bid price of the Company's common shares was
$3.25 per share. As of August 9, 1999 there were approximately 11 registered and
120 street holders of record of the Company's common stock.
MARKET MAKERS
Management understands that the following firms currently make a market
for the Company's securities on the OTC Bulletin Board: Hill Thompson, Paragon,
Sharpe and National.
TRADING SYMBOL: CVRG
13
<PAGE>
B. HOLDERS
As of August 9, 1999, there were approximately 11 holders of Company
Common Stock, and 120 street holders of the Company stock, as reported by the
Company's transfer agent.
SHAREHOLDER ACCOUNTS
Although to date a small market cap and unregistered issue, the
Company's stock is widely distributed. Converge stock is currently held in
individual and institutional client names at 9 U.S. registered broker dealer
firms. The Company understands that the following firms currently hold its
common stock in registered client names, unregistered "street name" and/or
client accounts.
Bear Stearns & Co., Inc.
Merrill Lynch
The Depository Trust
National Financial Services
RBC Dominion Securities
Solomon Smith Barney
U.S. Clearing
Yorktown Securities I
Chase Manhattan Bank
The Company's transfer is Holladay Stock Transfer, Inc., 4350 East
Camelback Road, Suite 100F, Phoenix, Arizona 85018.
C. DIVIDENDS
The Company has not paid any dividends on its Common Stock. The Company
currently intends to retain any earnings for use in its business, and therefore
does not anticipate paying cash dividends in the foreseeable future.
ITEM 2. LEGAL PROCEEDINGS
To the best knowledge of management, there are no legal proceedings
pending or threatened against the Company.
ITEM 3. ACCOUNTANTS
The Company has engaged Stonefield Josephson, Inc., 1620 26th Street,
Suite 400-South, Santa Monica, California 90401 as its principal accountants as
of April 30, 1999. The decision to engage Stonefield Josephson, Inc. was
approved by the Board of Directors.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
The Company conducted an offering under Rule 504 of Regulation D of the
Securities Act of 1933 in February 1999. Under this offering, the Company raised
$25,000 from an investment group and issued 2,000,000 options to purchase shares
of the Company's common stock at an exercise price of $0.10 per share. These
options were exercised on March 30, 1999, May 7, 1997 and June 1999, raising
$200,000 for the Company.
14
<PAGE>
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Utah Corporation Law and the Company's Certificate of Incorporation
and Bylaws authorize indemnification of a director, officer, employee or agent
of the Company against expenses incurred by him or her in connection with any
action, suit, or proceeding to which such person is named a party by reason of
having acted or served in such capacity, except for liabilities arising from
such person's own misconduct or negligence in performance of duty. In addition,
even a director, officer, employee or agent of the Company who was found liable
for misconduct or negligence in the performance of duty may obtain such
indemnification if, in view of all the circumstances in the case, a court of
competent jurisdiction determines such person is fairly and reasonably entitled
to indemnification. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, or persons controlling
the Company pursuant to the foregoing provisions, the Company has been informed
that in the opinion of the Commission, such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
PART F/S
FINANCIAL STATEMENTS
The following financial statements are included herein:
Audited Consolidated Financial Statements for the Fiscal Years ended 1998 and
1997
Unaudited Consolidated Financial Statements for the Six Months Ended March 31,
1998 and March 31, 1997
PART III
<TABLE>
<CAPTION>
<S> <C> <C>
ITEM 1 AND
ITEM 2. INDEX TO EXHIBITS AND DESCRIPTION OF EXHIBITS
EXHIBIT NO. DOCUMENT DESCRIPTION
3.1 Certificate of Incorporation of Mormon Mint, Inc., a Utah corporation, dated October 4, 1985
3.2 Amendment to Articles of Incorporation with name change to Capital Placement Specialists, Inc.,
dated December 4, 1997
3.3 Amendment to Articles of Incorporation with name change to Converge Global, Inc., dated
January 28, 1999
3.4 Bylaws of Converge Global, Inc., dated January 19, 1999
10.1 Sub-Lease Agreement, dated February 1, 1999 (to be filed by amendment)
10.2 Acquisition Agreement, dated January 5, 1999
10.3 Employment Agreement for Imran Husain dated February 1, 1999
10.4 Employment Agreement for Samar Khan dated February 1, 1999
10.5 1999 Incentive & Nonstatutory Stock Option Plan dated January 6, 1999
</TABLE>
15
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
CONVERGE GLOBAL, INC.
By:
-------------------------------------
Imran Husain
Its: President, Chief Executive
Officer, Director
<TABLE>
<CAPTION>
<S> <C> <C>
SIGNATURE TITLE DATE
/s/ Imran Husain President, Chief Executive Officer
- ------------------------ and Director August 9, 1999
Imran Husain
/s/ Samar Khan Secretary and Treasurer August 9, 1999
- -------------------------
Samar Khan
/s/ Reza Rahman Director August 9, 1999
- -------------------
Reza Rahman
</TABLE>
16
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
(FORMERLY KNOWN AS
CAPITAL PLACEMENT SPECIALISTS, INC.)
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEPENDENT AUDITORS' REPORT F-1
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets F-2
Consolidated Statements of Operations F-3
Consolidated Statements of Shareholder's Deficit F-4
Consolidated Statements of Cash Flows F-5-6
Notes to Consolidated Financial Statements F-7-11
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Converge Global, Inc. and Subsidiaries
Santa Monica, California
We have audited the accompanying consolidated balance sheet of Converge
Global, Inc. and Subsidiaries (a development stage enterprise) as of December
31, 1998, and the related consolidated statements of operations,
stockholders' deficit and cash flows for the year then ended. 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 audit. The financial statements as of December 31, 1997 and for the
year then ended, were audited by other auditors whose report dated July 9,
1999, included an explanatory paragraph which expressed substantial doubt
about the Company's ability to continue as a going concern.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Converge
Global, Inc. and Subsidiaries as of December 31, 1998, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As shown in the
financial statements, the Company has incurred net losses from operations,
has negative cash flows from operations, and has a net capital deficiency.
These factors raise substantial doubt about the Company's ability to continue
as a going concern. Management's plans in regard to these matters are also
described in Note 1. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
CERTIFIED PUBLIC ACCOUNTANTS
Santa Monica, California
June 16, 1999
F-1
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS March 31, March 31, December 31,
1999 1998 1998
---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C>
CURRENT ASSETS -
cash $ 3,951 $ - $ -
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization 12,083 - -
--------- --------- ---------
$ 16,034 $ - $ -
--------- --------- ---------
--------- --------- ---------
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accrued expenses $ 65,675 $ - $ -
Loan payable, related party 10,000 - -
--------- --------- ---------
Total current liabilities 75,675 - -
--------- --------- ---------
STOCKHOLDERS' DEFICIT:
Common stock; $0.001 par value, 50,000,000 shares
authorized, 5,518,100 and 2,340,100 shares issued
and outstanding at March 31, 1999 and December 31,
1998, respectively 5,518 2,340 2,340
Additional paid-in capital 204,532 111,830 111,830
Deficit accumulated during development stage (269,691) (114,170) (114,170)
--------- --------- ---------
Total stockholders' deficit (59,641) - -
--------- --------- ---------
$ 16,034 $ - $ -
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying independent auditors' report and notes to consolidated
financial statements.
F-2
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
inception of
Three months Three months Year ended Year ended operations on
ended ended December 31, December 31, October 4, 1985 to
March 31, 1999 March 31, 1998 1998 1997 March 31, 1999
-------------- -------------- ---- ---- --------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES $ - $ - $ - $ - $ -
COST OF REVENUES - - - - -
------------ ------------ ----------- ----------- ------------
GROSS PROFIT - - - - -
SELLING, GENERAL AND ADMINISTRATIVE 154,721 - - 26,110 268,891
------------ ------------ ----------- ----------- ------------
LOSS BEFORE INCOME TAXES (154,721) - - (26,110) (268,891)
INCOME TAXES 800 - - - 800
------------ ------------ ----------- ----------- ------------
NET LOSS $ (155,521) $ - $ - $ (26,110) $ (269,691)
------------ ------------ ----------- ----------- ------------
------------ ------------ ----------- ----------- ------------
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING -
basic and diluted 4,052,322 2,340,100 2,340,100 2,340,100 -
------------ ------------ ----------- ----------- ------------
------------ ------------ ----------- ----------- ------------
NET LOSS PER SHARE -
basic and diluted $ (0.04) $ - $ - $ (0.01) $ -
------------ ------------ ----------- ----------- ------------
------------ ------------ ----------- ----------- ------------
</TABLE>
See accompanying independent auditors' report and notes to consolidated
financial statements.
F-3
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
Deficit
accumulated
Common Stock Additional during Total
----------------------- paid-in development stockholders'
Shares Amount Capital Stage Deficit
------ ------ ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997 20,790,000 $ 20,790 $ 67,270 $ (88,060) $
Issuance of common stock in
exchange for services received 2,611,000 2,611 23,499 26,110
1 to 10 reverse stock split (21,060,900) (21,061) 21,061
Net loss for the year
ended December 31, 1997 (26,110) (26,110)
----------- ----------- ----------- ------------ -----------
Balance at December 31, 1997 2,340,100 2,340 111,830 (114,170)
Net loss for the year ended
December 31, 1998
----------- ----------- ----------- ------------ -----------
Balance at December 31, 1998 2,340,100 2,340 111,830 (114,170)
Issuance of common stock
during private placement 2,500,000 2,500 22,500 25,000
Exercise of common stock
options 600,000 600 59,400 60,000
Capital contribution 10,100 10,100
Issuance of common stock in
exchange for services received 78,000 78 702 780
Net loss for the three months
ended March 31, 1999
(unaudited) (155,521) (155,521)
----------- ----------- ----------- ------------ -----------
Balance at March 31, 1999
(unaudited) 5,518,100 $ 5,518 $ 204,532 $ (269,691) $ (59,641)
----------- ----------- ----------- ------------ -----------
----------- ----------- ----------- ------------ -----------
</TABLE>
See accompanying independent auditors' report and notes to consolidated
financial statements.
F-4
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
Three months Three months Year ended
ended ended December 31,
March 31, 1999 March 31, 1998 1998
-------------- -------------- ------------
(unaudited) (unaudited)
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED FOR)
OPERATING ACTIVITIES:
Net loss $ (155,521) $ - $ -
--------------- --------------- ---------------
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Depreciation and amortization 417 - -
Services in exchange for common stock 780 - -
CHANGES IN OPERATING LIABILITIES:
Increase (decrease) in liabilities 65,675 - -
--------------- --------------- ---------------
Total adjustments 66,872 - -
--------------- --------------- ---------------
Net cash used for operating activities (88,649) - -
--------------- --------------- ---------------
CASH FLOWS USED FOR INVESTING ACTIVITIES:
payments to acquire property and equipment (12,500) - -
--------------- --------------- ---------------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Proceeds from loan payable, related party 10,000 - -
Proceeds from issuance of common stock and
paid in capital 95,100 - -
--------------- --------------- ---------------
Net cash provided by financing activities 105,100 - -
--------------- --------------- ---------------
NET INCREASE IN CASH 3,951 - -
CASH, beginning of period/year - - -
--------------- --------------- ---------------
CASH, end of period/year $ 3,951 $ - $ -
--------------- --------------- ---------------
--------------- --------------- ---------------
</TABLE>
<TABLE>
<CAPTION>
Period from
inception of
Year ended operations on
December 31, October 4, 1985 to
1997 March 31, 1999
------------ ------------------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED FOR)
OPERATING ACTIVITIES:
Net loss $ (26,110) $ (269,691)
------------- -------------
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Depreciation and amortization - 417
Services in exchange for common stock 26,110 26,890
CHANGES IN OPERATING LIABILITIES:
Increase (decrease) in liabilities - 65,675
------------- -------------
Total adjustments 26,110 92,982
------------- -------------
Net cash used for operating activities - (176,709)
------------- -------------
CASH FLOWS USED FOR INVESTING ACTIVITIES:
payments to acquire property and equipment - (12,500)
------------- -------------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Proceeds from loan payable, related party - 10,000
Proceeds from issuance of common stock and
paid in capital - 183,160
------------- -------------
Net cash provided by financing activities - 193,160
------------- -------------
NET INCREASE IN CASH - 3,951
CASH, beginning of period/year - -
CASH, end of period/year $ - $ 3,951
------------- -------------
------------- -------------
</TABLE>
(Continued)
See accompanying independent auditors' report and notes to consolidated
financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
Three months Three months Year ended
ended ended December 31,
March 31, 1999 March 31, 1998 1998
-------------- -------------- ------------
(unaudited) (unaudited)
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
income taxes paid $ 800 $ - $ -
--------------- --------------- ---------------
--------------- --------------- ---------------
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES -
services rendered in exchange for
common stock $ 780 $ - $ -
--------------- --------------- ---------------
--------------- --------------- ---------------
</TABLE>
<TABLE>
<CAPTION>
Period from
inception of
Year ended operations on
December 31, October 4, 1985 to
1997 March 31, 1999
------------ ------------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
income taxes paid $ - $ 800
---------- -----------
---------- -----------
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES -
services rendered in exchange for
common stock $ 26,110 $ 26,890
---------- -----------
---------- -----------
</TABLE>
See accompanying independent auditors' report and notes to consolidated
financial statements.
F-6
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997 AND
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION AND BASIS OF PRESENTATION:
The Company was organized October 4, 1985, under the laws of the
State of Utah, as Mormon Mint, Inc.
On October 15, 1997, the Company reverse split its common stock
1:10, thus decreasing the number of outstanding common stock
shares from 23,401,000 shares to 2,340,100 shares.
On December 4, 1997, the Company changed its name from Mormon
Mint, Inc. to Capital Placement Specialists, Inc.
On January 5, 1999, all of the outstanding shares were purchased
for $200,000 and accordingly, there was a change in control of
the Company. Immediately following this transaction, the new
stockholders changed its name from Capital Placement Specialists,
Inc. to Converge Global, Inc.
PRINCIPLES OF CONSOLIDATION:
The accompanying financial statements include the accounts of
Converge Global, Inc. (the "Parent"), and its subsidiaries,
Gearz.com, Inc., a wholly owned subsidiary, and
Liquidationbid.com, Inc., a 50% owned subsidiary, collectively
"the Company." All significant intercompany accounts and
transactions have been eliminated in consolidation.
GOING CONCERN:
The Company's consolidated financial statements are prepared
using the generally accepted accounting principles applicable to
a going concern, which contemplates the realization of assets and
liquidation of liabilities in the normal course of business. The
Company has no current source of revenue. Without realization of
additional capital, it would be unlikely for the Company to
continue as a going concern. This factor raises substantial doubt
about the Company's ability to continue as a going concern.
BUSINESS ACTIVITY:
The Company plans to provide in-depth and unique e-commerce
solutions with specific emphasis on audio and video delivery over
the Internet. The Company also plans to design and develop
websites in exchange for fees from its customers.
See accompanying independent auditors' report.
F-7
<PAGE>
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
CASH:
EQUIVALENTS
For purposes of the statement of cash flows, cash equivalents
include all highly liquid debt instruments with original
maturities of three months or less which are not securing any
corporate obligations.
CONCENTRATION
The Company maintains its cash in bank deposit accounts which, at
times, may exceed federally insured limits. The Company has not
experienced any losses in such accounts.
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.
PROPERTY AND EQUIPMENT:
Property and equipment are valued at cost. Expenditures for
maintenance and repairs are charged to earnings as incurred;
additions, renewals and betterments are capitalized. When
property and equipment are retired or otherwise disposed of, the
related cost and accumulated depreciation are removed from the
respective accounts, and any gain or loss is included in
operations. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets.
INCOME TAXES:
The Company uses the liability method of accounting for income
taxes pursuant to SFAS No. 109, "Accounting for Income Taxes."
Deferred income tax assets result from temporary differences when
certain amounts are deducted for financial statement purposes and
when they are deducted for income tax purposes.
The principal temporary difference is the net operating loss
carryforward, which were immaterial at December 31, 1998 and
1997, respectively. A deferred tax asset has been provided and is
completely offset by a valuation allowance because its
utilization does not appear to be reasonably assured.
See accompanying independent auditors' report.
F-8
<PAGE>
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
INCOME TAXES, CONTINUED:
On January 5, 1999, there was a 100% change in the control and
ownership of the Company. As a result of this change in control,
there are significant limitations on the utilization of the net
operating loss carryforwards through December 31, 1998. Federal
net operating loss carryforward starts to expire on December 31,
2018 and California state net operating loss carryforward starts
to expire on December 31, 2003.
NET LOSS PER SHARE:
The Company has adopted Statement of Financial Accounting
Standard No. 128, Earnings per Share ("SFAS No. 128"), which is
effective for annual and interim financial statements issued for
periods ending after December 15, 1997. SFAS No. 128 was issued
to simplify the standards for calculating earnings per share
("EPS") previously in APB No. 15, Earnings Per Share. SFAS No.
128 replaces the presentation of primary EPS with a presentation
of basic EPS. The new rules also require dual presentation of
basic and diluted EPS on the face of the statement of operations.
Net loss per common share is computed based on the weighted
average number of common shares outstanding. Common stock
equivalents, consisting of outstanding common stock options, are
not included since their effect would decrease loss per share.
INTERIM FINANCIAL STATEMENTS (UNAUDITED):
The accompanying unaudited condensed consolidated financial
statements for the interim periods ended March 31, 1999 and 1998
have been prepared in accordance with generally accepted
accounting principles for interim financial information and with
the instructions to Form 10-QSB and Regulation S-B. Accordingly,
they do not include all of the information and footnotes required
by generally accepted accounting principles for complete
financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating
results for the three months ended March 31, 1999 are not
necessarily indicative of the results that may be expected for
the year ending December 31, 1999.
(2) PROPERTY AND EQUIPMENT:
A summary at March 31, 1999 is as follows:
<TABLE>
<S> <C>
Computer equipment $ 12,500
Less accumulated depreciation 417
--------------
$ 12,083
--------------
--------------
</TABLE>
Depreciation expense for the three months ended March 31, 1999 amounted
to $417. There were no property and equipment as of December 31, 1998
and 1997, and accordingly, there was no deprecation expense for the
years ended December 31, 1998 and 1997.
See accompanying independent auditors' report.
F-9
<PAGE>
(3) ACCRUED EXPENSES:
A summary at March 31, 1999 is as follows:
<TABLE>
<S> <C>
Accrued payroll and related taxes $ 46,712
Other overhead expenses 8,163
Accrued rent 5,800
Accrued legal 5,000
--------------
$ 65,675
--------------
--------------
</TABLE>
There were no accrued expenses for the years ended December 31, 1998 and
1997.
(4) STOCKHOLDERS' DEFICIT:
PRIVATE PLACEMENT OFFERING
The Company commenced a private placement offering under Regulation D,
rule 504 of the Securities Act of 1933, up to the limit of $1,000,000.
During January 1999, the Company raised $25,000 from the issuance of
2,500,000 shares of common stock to an investment group. The Company
also granted 2,000,000 stock options to this investment group to
purchase additional shares of common stock at an exercise price of $0.10
per share. During the three months ended March 31, 1999, 600,000 options
were exercised for $60,000. As of June 16, 1999, 1,400,000 additional
options were exercised for gross proceeds of $140,000.
EMPLOYEE STOCK OPTION PLAN
Effective January 6, 1999, the Company adopted a Stock Option Plan (the
"Plan") for its directors, employees and consultants under which a
maximum number of 7,000,000 options maybe granted to purchase common
stock of the Company. The Compensation Committee of the Board of
Directors administers the Plan, selects recipients to whom options are
granted and determines the number of shares to be awarded. Options
granted under the Plan are exercisable at a price determined by the
Compensation Committee at the time of grant, but in no event less than
fair market value.
The number and weighted average exercise price of options granted for
the three months ended March 31, 1999 are as follows:
<TABLE>
<CAPTION>
Weighted Average
Shares Exercise Price
------ ----------------
<S> <C> <C>
Outstanding at beginning of year - $ -
Outstanding at end of period - -
Exercisable at end of period - -
Granted during period 2,000,000 .001
Exercised during period 2,000,000 .001
</TABLE>
See accompanying independent auditors' report.
F-10
<PAGE>
(4) STOCKHOLDERS' DEFICIT, CONTINUED:
EMPLOYEE STOCK OPTION PLAN, CONTINUED
The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related
interpretations in accounting for its employee stock options because the
alternative fair value accounting provided for under FASB Statement No.
123, "Accounting for Stock-Based Compensation," requires use of option
valuation models that were not developed for use in valuing employee
stock options. Under APB 25, because the exercise price of the Company's
employee stock options equals the fair market value of the underlying
stock on the date of grant, no compensation expense is recognized.
Proforma information regarding net income and earnings per share under
the fair value method has not been presented as the amounts are
immaterial.
(5) RELATED PARTY TRANSACTION:
Prior to January 5, 1999, the Company neither owned nor leased any real
or personal property. Office services were provided without charge by a
director. Such costs were immaterial to the financial statements and,
accordingly, have not been reflected therein.
Effective January 5, 1999, the Company rents office space and certain
office equipment on a monthly basis from a related party through common
ownership. Rent expense for the three months ended March 31, 1999
amounted to approximately $12,000.
Effective February 1, 1999, the Company entered into a one-year
employment agreement with two of its officers. Pursuant to this
agreement, the Company will compensate each officer $5,000 per month.
Adjustments for compensation and renewal of employment terms are subject
to the Board of Directors approval.
See accompanying independent auditors' report.
F-11
<PAGE>
EXHIBIT 3.1
ARTICLES OF INCORPORATION OF
MORMON MINT, INC., A UTAH CORPORATION
DATED OCTOBER 4, 1985
<PAGE>
Approved by the Division of Corporations
and Commercial Code of the Utah State
Department of Business Regulation on the
4th day of October A.D., 1985
Corporate Documents Examiner LM 117127
Fees paid $50.00
ARTICLES OF INCORPORATION
OF
MORMON MINT, INC.
We, the undersigned natural persons of the age of 21 years or more
acting as incorporators of a corporation under the Utah Business Corporation
Act, adopt the following Articles of Incorporation for such a corporation.
ARTICLE I
The name of the corporation hereby formed shall be Mormon Mint, Inc.
ARTICLE II
The period of its duration shall be perpetual.
ARTICLE III
The purposes for which the corporation is organized are to engage in
primarily any minting of coins and/or medallions of either monatory or
historic value. To engage in any business, investment or other pursuit or
activity, whether retail or wholesale, whether commercial or industrial; and
OT perform any and all other lawful acts or purposes as are or may be granted
to corporate entities under the laws of the State of Utah and by any other
state or foreign country. the corporation may conduct its business anywhere
within the States of the United States or in any foreign country, without in
any way limiting the foregoing powers. It is hereby provided that the
corporation shall have the power to do any and all acts and things that may
be reasonably necessary or appropriate to accomplish any of the foregoing
purposes for which the corporation is formed.
ARTICLE IV
The aggregate number of shares which the corporation shall have the
authority to issue is 50,000,000 shares of common stock at par value of
$0.001 per share, or a total capitalization of $5,000.
There shall be no cumulative voting, and all pre-emptive rights are
denied. Each share shall entitle the holder thereof to one vote at all
meetings of the stockholders.
Stockholders shall not be liable to the corporation or its creditors
for any debts or obligations of the corporation.
<PAGE>
ARTICLE V
The corporation shall not commence business until at least $1,000.00
has been received by it as consideration for the issuance of shares.
ARTICLE VI
The principal place of business and the principal office of the
corporation shall be 3650 Toulouse Drive, in Salt Lake County, State of Utah,
84120. Branch offices or other places of business may be established
elsewhere in the State of Utah or without the State of Utah and in the United
States or without the United States as the Board of Directors may determine.
ARTICLE VII
Provisions for the regulations of the internal affairs of the
corporation will be contained in By-laws appropriately by the Board of
Directors in accordance with Section 16-10-25 of the Utah Code Annotated
(1953), as amended.
ARTICLE VIII
The address of the initial registered office of the corporation 3650
Toulouse Drive is Salt Lake City, Utah, 84120, and the name of its initial
registered agent is Hans Jorgenson.
ARTICLE IX
The number of directors shall be not less than three nor more than
nine, and the directors constituting the initial Board shall be three, and
the names and addresses of the persons who are to serve as directors until
the first annual meeting of the shareholders or until their successors are
elected and shall qualify are:
Wallace Plum 1825 W.N. Temple, Salt Lake City,
Utah, 84104
Hans Jorgenson 3650 Toulouse Drive, W.V.C., Utah,
84120
Roger G. Coleman, Sr. 2217 Heatherglen Drive, W.V.C., Utah,
84119
ARTICLE X
The name and address of each incorporator is:
Wallace Plum 1825 W.N. Temple, Salt Lake City,
Utah, 84104
Hans Jorgenson 3650 Toulouse Drive, W.V.C., Utah,
84120
Roger G. Coleman, Sr. 2217 Heatherglen Drive, W.V.C.,
Utah, 84119
<PAGE>
/s/ Wallace Plum
- ---------------------------------
Wallace Plum
/s/ Hans Jorgenson
- ---------------------------------
Hans Jorgenson
/s/ Roger Coleman
- ---------------------------------
Roger G. Coleman, Sr.
INCORPORATORS
STATE OF UTAH )
:
COUNTY OF SALT LAKE )
On September 3, 1985, personally appeared before me, Wallace Plum, Hans
Jorgenson, and Roger G. Coleman, Sr., who being duly sworn by me first,
declared that they had read the foregoing Articles of Incorporation, that
they had signed the foregoing document as an incorporator and that the
statements contained therein are true.
IN WITNESS WHEREOF, I have hereunto set may hand and seal this 3rd day
of September, 1985.
/s/ Gina Fily
---------------------------------
Gina Fily, Notary Public Residing
in Salt Lake County, Utah
My Commission Expires:
May 19, 1987
<PAGE>
EXHIBIT 3.2
AMENDMENT TO ARTICLES OF INCORPORATION
NAME CHANGE TO CAPITAL PLACEMENT SPECIALISTS, INC.
DATED DECEMBER 4, 1997
<PAGE>
State of Utah CO117127
Department of Commerce
Division of Corporations and Commercial Code RECEIVED
DEC 04, 1997
I Hereby certify that the foregoing has been filed
and approved on the 4th day of December 1997
in the office of this Division and hereby issue this 7338000054
Certificate thereof.
Examiner B.S. Date 12/5/97
Korla T. Woods
Division Director
ARTICLES OF AMENDMENT
OF
MORMON MINT, INC.
This Articles of Amendment to the original Articles of Incorporation of
Mormon Mint, Inc., a Utah Corporation, are set forth as follows:
A. ARTICLE I-Name
The name of the corporation is Mormon Mint, Inc.
AMENDMENT- ARTICLE I-Name
The name of the corporation is amended to: CAPITAL PLACEMENT SPECIALISTS, INC.
C. As of the date of the Special Shareholders Meeting, the
corporation had issued and outstanding two million, two hundred sixty seven
thousand shares, all of which were entitled to vote on the proposed
amendment. None of the shares were entitled to vote as a class.
C. As a special meeting of the shareholders held October 15, 1997,
one million, eight hundred twenty two thousand, six hundred forty, voted for
the amendment and zero voted against.
DATED this third day of November, 1997
/s/ Roger Coleman /s/ Jenifer Ayers
- ----------------------------------- -----------------------------------
Roger G. Coleman, President Jenifer C. Ayers, Secretary
<PAGE>
EXHIBIT 3.3
AMENDMENT TO ARTICLES OF INCORPORATION
WITH NAME CHANGE TO CONVERGE GLOBAL, INC.
DATED JANUARY 28, 1999
<PAGE>
State of Utah CO117127
Department of Commerce
Division of Corporations and Commercial Code RECEIVED
DEC 04, 1997
I Hereby certify that the foregoing has been filed
and approved on the 28th day of January 99
in the office of this Division and hereby issue this 90284-0025
Certificate thereof.
Examiner B.S. Date 1/29/99
Lorena P. Riffo
Division Director EXPEDITE
ARTICLES OF AMENDMENT
OF
CAPITAL PLACEMENT SPECIALISTS, INC.
The Articles of Amendment to the original Articles of
Incorporation of CAPITAL PLACEMENT SPECIALISTS, INC., a Utah
Corporation, are set forth as follows:
A. ARTICLE I-Name
The name of the corporation is Capital Placement Specialists, Inc.
AMENDMENT- ARTICLE I-Name
The name of the corporation is amended to: Converge Global, Inc.
C. As of the date of the Special Shareholders Meeting, the
corporation had issued and outstanding two million, four hundred thirty
thousand one hundred shares, all of which were entitled to vote on the
proposed amendment. None of the shares were entitled to vote as a class.
C. As a special meeting of the shareholders held January 18, 1999,
two million, four hundred thirty thousand one hundred voted for the amendment
and zero voted against.
DATED this 13th day of January, 1999
BEKAM INVESTMENTS, LTD.
A Gibraltar corporation, holder
of 100% of the issued and
outstanding shares
/s/ Imran Husain
- ---------------------------------
By: Imran Husain
<PAGE>
EXHIBIT 3.4
BYLAWS OF
CONVERGE GLOBAL, INC., A UTAH CORPORATION
DATED JANUARY 19, 1999
<PAGE>
BYLAWS
OF
CONVERGE GLOBAL, INC.,
A UTAH CORPORATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - OFFICES........................................................1
Section 1. PRINCIPAL OFFICE..............................................1
Section 2. OTHER OFFICES.................................................1
ARTICLE II - DIRECTORS - MANAGEMENT........................................1
Section 1. POWERS, STANDARD OF CARE......................................1
1.1 POWERS...................................................1
1.2 STANDARD OF CARE; LIABILITY..............................1
Section 2. NUMBER AND QUALIFICATION OF DIRECTORS.........................2
Section 3. ELECTION AND TERM OF OFFICE OF DIRECTORS......................2
Section 4. VACANCIES.....................................................3
Section 5. REMOVAL OF DIRECTORS..........................................3
Section 6. PLACE OF MEETINGS.............................................4
Section 7. ANNUAL MEETINGS...............................................4
Section 8. OTHER REGULAR MEETINGS........................................4
Section 9. SPECIAL MEETINGS/NOTICES......................................4
Section 10. WAIVER OF NOTICE..............................................5
Section 11. QUORUMS.......................................................5
Section 12. ADJOURNMENT...................................................5
Section 13. NOTICE OF ADJOURNMENT.........................................5
Section 14. SOLE DIRECTOR PROVIDED BY ARTICLES OR BYLAWS..................5
Section 15. DIRECTORS ACTION BY UNANIMOUS WRITTEN CONSENT.................6
Section 16. COMPENSATION OF DIRECTORS.....................................6
Section 17. COMMITTEES....................................................6
Section 18. MEETINGS AND ACTION OF COMMITTEES.............................6
i
<PAGE>
Section 19. ADVISORS......................................................6
ARTICLE III - OFFICERS.....................................................7
Section 1. OFFICERS......................................................7
Section 2. ELECTION OF OFFICERS..........................................7
Section 3. SUBORDINATE OFFICERS, ETC.....................................7
Section 4. REMOVAL AND RESIGNATION OF OFFICERS...........................7
Section 5. VACANCIES.....................................................7
Section 6. CHAIRMAN OF THE BOARD.........................................7
Section 7. PRESIDENT.....................................................8
Section 8. VICE PRESIDENT................................................8
Section 9. SECRETARY.....................................................8
Section 10. TREASURER.....................................................9
ARTICLE IV - STOCKHOLDERS' MEETINGS........................................9
Section 1. PLACE OF MEETINGS.............................................9
Section 2. ANNUAL MEETING................................................9
Section 3. SPECIAL MEETINGS..............................................9
Section 4. NOTICE OF MEETINGS - REPORTS.................................10
Section 5. QUORUM.......................................................11
Section 6. ADJOURNED MEETING AND NOTICE THEREOF.........................11
Section 7. WAIVER OR CONSENT BY ABSENT STOCKHOLDERS.....................12
ARTICLE V - AMENDMENTS TO BYLAWS..........................................12
Section 1. AMENDMENT BY STOCKHOLDERS....................................12
Section 2. AMENDMENT BY DIRECTORS.......................................12
Section 3. RECORD OF AMENDMENTS.........................................12
ARTICLE VI - SHARES OF STOCK..............................................13
ii
<PAGE>
Section 1. CERTIFICATE OF STOCK.........................................13
Section 2. LOST OR DESTROYED CERTIFICATES...............................13
Section 3. TRANSFER OF SHARES...........................................13
Section 4. RECORD DATE..................................................14
ARTICLE VII - DIVIDENDS...................................................14
ARTICLE VIII - FISCAL YEAR................................................14
ARTICLE IX - CORPORATE SEAL...............................................14
ARTICLE X - INDEMNITY.....................................................15
ARTICLE XI - MISCELLANEOUS................................................15
Section 1. STOCKHOLDERS' AGREEMENTS.....................................15
Section 2. SUBSIDIARY CORPORATIONS......................................16
</TABLE>
iii
<PAGE>
BYLAWS
OF
CONVERGE GLOBAL, INC.,
A UTAH CORPORATION
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The principal office for the transaction
of business of the Corporation is hereby fixed and located at 233 Wilshire
Boulevard, Suite 930, Santa Monica, California 90401. The location may be
changed by approval of a majority of the authorized directors, and additional
offices may be established and maintained at such other place or places,
either within or outside of Utah, as the Board of Directors may from time to
time designate.
Section 2. OTHER OFFICES. Branch or subordinate offices may at any
time be established by the Board of Directors at any place or places where
the Corporation is qualified to do business.
ARTICLE II
DIRECTORS - MANAGEMENT
Section 1. POWERS, STANDARD OF CARE.
1.1 POWERS: Subject to the provisions of the Utah Code
(hereinafter the "Code"), and subject to any limitations in the Articles of
Incorporation of the Corporation relating to action required to be approved
by the Stockholders, as that term is defined in the Code, or by the
outstanding shares, as that term is defined Code, the business and affairs of
the Corporation shall be managed and all corporate powers shall be exercised
by or under the direction of the Board of Directors. The Board of Directors
may delegate the management of the day-to-day operation of the business of
the Corporation to a management company or other persons, provided that the
business and affairs of the Corporation shall be managed, and all corporate
powers shall be exercised, under the ultimate direction of the Board.
1.2 STANDARD OF CARE; LIABILITY:
1.2.1 Each Director shall exercise such powers and otherwise
perform such duties, in good faith, in the matters such Director believes to
be in the best interests of the Corporation, and with such care, including
reasonable inquiry, using ordinary prudence, as a person in a like position
would use under similar circumstances.
1.2.2 In performing the duties of a Director, a Director shall
be entitled to rely on information, opinions, reports, or statements,
including financial statements and other financial data, in which case
prepared or presented by:
(a) One or more officers or employees of the
Corporation whom the Director believes to be reliable and competent in the
matters presented,
1
<PAGE>
(b) Counsel, independent accountants or other
persons as to which the Director believes to be within such person's
professional or expert competence, or
(c) A Committee of the Board upon which the
Director does not serve, as to matters within its designated authority,
which committee the Director believes to merit confidence, so long as in any
such case the Director acts in good faith, after reasonable inquiry when the
need therefor is indicated by the circumstances and without knowledge that
would cause such reliance to be unwarranted.
Section 2. NUMBER AND QUALIFICATION OF DIRECTORS. The authorized
number of Directors of the Corporation shall be not less than one (1) nor
more than nine (9) until changed by a duly adopted amendment to the Articles
of Incorporation or by an amendment to this Section 2 of Article II of these
Bylaws or, without amendment of these Bylaws, the number of directors may be
fixed or changed by resolution adopted by the vote of the majority of
directors in office or by the vote of holders of shares representing a
majority of the voting power at any annual meeting, or any special meeting
called for such purpose; but no reduction of the number of directors shall
have the effect of removing any director prior to the expiration of his term.
The number of Directors shall not be less than two (2) unless all of the
outstanding shares of stock are owned beneficially and of record by less than
two (22) stockholders, in which event the number of Directors shall not be
less than the number of stockholders or the minimum permitted by statute.
Section 3. ELECTION AND TERM OF OFFICE OF DIRECTORS.
3.1 Directors shall be elected at each annual meeting of the
Stockholders to hold office until the next annual meeting. If any such annual
meeting of Stockholders is not held or the Directors are not elected thereat,
the Directors may be elected at any special meeting of Stockholders held for
that purpose. Each Director, including a Director elected to fill a vacancy,
shall hold office until the expiration of the term for which elected and
until a successor has been elected and qualified.
3.2 Except as may otherwise be provided herein, or in the Articles
of Incorporation by way of cumulative voting rights, the members of the Board
of Directors of this Corporation, who need not be stockholders, shall be
elected by a majority of the votes cast at a meeting of stockholders, by the
holders of shares of stock present in person or by proxy, entitled to vote in
the election.
Section 4. VACANCIES.
4.1 A vacancy or vacancies on the Board of Directors shall be
deemed to exist in the event of the death, resignation or removal of any
Director, or if the Board of Directors by resolution declares vacant the
office of a Director who has been declared of unsound mind by an order of
court or convicted of a felony, or if the authorized number of directors be
increased, or if the shareholders fail, at any annual or special meeting of
shareholders at which any director or directors are elected, to elect the
full authorized number of directors to be voted for at the meeting.
4.2 Vacancies on the Board of Directors, except for a vacancy
created by the removal of a Director, may be filled by a majority of the
remaining Directors, though less than a quorum, or by a sole remaining
Director. Each Director so elected shall hold office until the next annual
meeting of the Stockholders and until a successor has been elected and
qualified. A vacancy in the Board of Directors created by the removal of a
Director may only be filled by the vote of a
2
<PAGE>
majority of the shares entitled to vote represented at a duly held meeting at
which a quorum is present, or by the written consent of the holders of a
majority of the outstanding shares.
4.3 The Stockholders may elect a Director or Directors at any time
to fill any vacancy or vacancies, but any such election by written consent
shall require the consent of a majority of the outstanding shares entitled to
vote.
4.4 Any Director may resign, effective on giving written notice to
the Chairman of the Board, the President, the Secretary, or the Board of
Directors, unless the notice specifies a later time for that resignation to
become effective. When one or more directors give notice of his or her or
their resignation from the Board of Directors, effective at a future date,
the Board may fill the vacancy or vacancies to take effect when the
resignation or resignations become effective, each Director so appointed to
hold office during the remainder of the term of office of the resigning
Director(s)."
4.5 No reduction of the authorized number of Directors shall have
the effect of removing any Director before that Director's term of office
expires.
Section 5. REMOVAL OF DIRECTORS.
5.1 The entire Board of Directors, or any individual Director, may
be removed from office as provided by Section 16-10a-808 of the Code at any
special meeting of stockholders called for such purpose by vote of the
holders of two-thirds of the voting power entitling them to elect directors
in place of those to be removed, subject to the provisions of Section 5.2.
5.2 No Director may be removed (unless the entire Board is
removed) when the votes cast against removal or not consenting in writing to
such removal would be sufficient to elect such Director if voted cumulatively
at an election at which the same total number of votes were cast (or, if such
action is taken by written consent, all shares entitled to vote, were voted)
and the entire number of Directors authorized at the time of the Directors
most recent election were then being elected; and when by the provisions of
the Articles of Incorporation the holders of the shares of any class or
series voting as a class or series are entitled to elect one or more
Directors, any Director so elected may be removed only by the applicable vote
of the holders of the shares of that class or series.
Section 6. PLACE OF MEETINGS. Regular meetings of the Board of
Directors shall be held at any place within or outside the state that has
been designated from time to time by resolution of the Board. In the absence
of such resolution, regular meetings shall be held at the principal executive
office of the Corporation. Special meetings of the Board shall be held at any
place within or outside the state that has been designated in the notice of
the meeting, or, if not stated in the notice or there is no notice, at the
principal executive office of the Corporation. Any meeting, regular or
special, may be held by conference telephone or similar communication
equipment, so long as all Directors participating in such meeting can hear
one another, and all such Directors shall be deemed to have been present in
person at such meeting.
Section 7. ANNUAL MEETINGS. Immediately following each annual meeting of
Stockholders, the Board of Directors shall hold a regular meeting for the
purpose of organization, the election of officers and the transaction of other
business. Notice of this meeting shall not be required. Minutes
3
<PAGE>
of any meeting of the Board, or any committee thereof, shall be maintained as
required by the Code by the Secretary or other officer designated for that
purpose.
Section 8. OTHER REGULAR MEETINGS.
8.1 Other regular meetings of the Board of Directors shall be held
without call at such time as shall from time to time be fixed by the Board of
Directors. Such regular meetings may be held without notice, provided the
time and place of such meetings has been fixed by the Board of Directors, and
further provided the notice of any change in the time of such meeting shall
be given to all the Directors. Notice of a change in the determination of the
time shall be given to each Director in the same manner as notice for such
special meetings of the Board of Directors.
8.2 If said day falls upon a holiday, such meetings shall be
held on the next succeeding day thereafter.
Section 9. SPECIAL MEETINGS/NOTICES.
9.1 Special meetings of the Board of Directors for any purpose or
purposes may be called at any time by the Chairman of the Board or the
President or any Vice President or the Secretary or any two Directors.
9.2 Notice of the time and place for special meetings shall be
delivered personally or by telephone to each Director or sent by first class
mail or telegram, charges prepaid, addressed to each Director at his or her
address as it is shown in the records of the Corporation. In case such notice
is mailed, it shall be deposited in the United States mail at least four days
prior to the time of holding the meeting. In case such notice is delivered
personally, or by telephone or telegram, it shall be delivered personally or
be telephone or to the telegram company at least 48 hours prior to the time
of the holding of the meeting. Any oral notice given personally or by
telephone may be communicated to either the Director or to a person at the
office of the Director who the person giving the notice has reason to believe
will promptly communicate same to the Director. The notice need not specify
the purpose of the meeting, nor the place, if the meeting is to be held at
the principal executive office of the Corporation.
Section 10. WAIVER OF NOTICE.
10.1 The transactions of any meeting of the Board of Directors,
however called, noticed, or wherever held, shall be as valid as though had at
a meeting duly held after the regular call and notice if a quorum is present
and if, either before or after the meeting, each of the Directors not present
signs a written waiver of notice, a consent to holding the meeting or an
approval of the minutes thereof. Waivers of notice or consent need not
specify the purposes of the meeting. All such waivers, consents and approvals
shall be filed with the corporate records or made part of the minutes of the
meeting.
10.2 Notice of a meeting shall also be deemed given to any
Director who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to such Director.
Section 11. QUORUMS. Presence of a majority of the authorized number of
Directors shall constitute a quorum for the transaction of business, except
to adjourn as provided in Section 12 of this Article II. Members of the Board
may participate in a meeting through use of conference
4
<PAGE>
telephone or similar communications equipment, so long as all members
participating in such meeting can hear one another. Participation in a
meeting as permitted by the preceding sentence constitutes presence in person
at such meeting. Every act or decision done or made by a majority of the
Directors present at a meeting duly held at which a quorum was present shall
be regarded as the act of the Board of Directors, unless a greater number is
required by law or the Articles of Incorporation. A meeting at which a quorum
is initially present may continue to transact business notwithstanding the
withdrawal of Directors, if any action taken is approved by at least a
majority of the required quorum for that meeting.
Section 12. ADJOURNMENT. A majority of the directors present, whether
or not constituting a quorum, may adjourn any meeting to another time and
place.
Section 13. NOTICE OF ADJOURNMENT. Notice of the time and place of the
holding of an adjourned meeting need not be given, unless the meeting is
adjourned for more than 24 hours, in which case notice of such time and place
shall be given prior to the time of the adjourned meeting to the Directors
who were not present at the time of the adjournment.
Section 14. SOLE DIRECTOR PROVIDED BY ARTICLES OR BYLAWS. In the event
only one Director is required by the Bylaws or the Articles of Incorporation,
then any reference herein to notices, waivers, consents, meetings or other
actions by a majority or quorum of the Board of Directors shall be deemed or
referred as such notice, waiver, etc., by the sole Director, who shall have
all rights and duties and shall be entitled to exercise all of the powers and
shall assume all the responsibilities otherwise herein described, as given to
the Board of Directors.
Section 15. DIRECTORS ACTION BY UNANIMOUS WRITTEN CONSENT. Pursuant to
Section 16-10a-821 of the Code, any action required or permitted to be taken
by the Board of Directors may be taken without a meeting and with the same
force and effect as if taken by a unanimous vote of Directors, if authorized
by a writing signed individually or collectively by all members of the Board
of Directors. Such consent shall be filed with the regular minutes of the
Board of Directors.
Section 16. COMPENSATION OF DIRECTORS. Directors, and members as such,
shall not receive any stated salary for their services, but by resolution of
the Board of Directors, a fixed sum and/or expenses, if any, may be allowed
for their attendance at each regular and special meeting of the Board of
Directors or for their services contributed to the Board of Directors;
provided, however, that nothing contained herein shall be construed to
preclude any Director from serving the Corporation in any other capacity as
an officer, employee or otherwise receiving compensation for such services.
Section 17. COMMITTEES. Committees of the Board of Directors may be
appointed by resolution passed by a majority of the whole Board. Committees
shall be composed of two or more members of the Board of Directors. The Board
may designate one or more Directors as alternate members of any committee,
who may replace any absent member at any meeting of the committee. Committees
shall have such powers as those held by the Board of Directors as may be
expressly delegated to it by resolution of the Board of Directors, except
those powers expressly made non-delegable by the Code.
Section 18. MEETINGS AND ACTION OF COMMITTEES. Meetings and action of
committees shall be governed by, and held and taken in accordance with, the
provisions of Article II, Sections 6, 8, 9, 10, 11, 12, 13 and 15, with such
changes in the context of those Sections as are necessary to
5
<PAGE>
substitute the committee and its members for the Board of Directors and its
members, except that the time of the regular meetings of the committees may
be determined by resolution of the Board of Directors as well as the
committee, and special meetings of committees may also be given to all
alternate members, who shall have the right to attend all meetings of the
committee. The Board of Directors may adopt rules for the government of any
committee not inconsistent with the provisions of these Bylaws.
Section 19. ADVISORS. The Board of Directors from time to time may
request and/or hire for a fee one or more persons to be Advisors to the Board
of Directors, but such persons shall not by such appointment be members of
the Board of Directors. Advisors shall be available from time to time to
perform special assignments specified by the President, to attend meetings of
the Board of Directors upon invitation, and to furnish consultation to the
Board of Directors. The period during which the title shall be held may be
prescribed by the Board of Directors. If no period is prescribed, the title
shall be held at the pleasure of the Board of Directors.
ARTICLE III
OFFICERS
Section 1. OFFICERS. The principal officers of the Corporation shall be
a President, a Secretary, and a Treasurer. The Corporation may also have, at
the discretion of the Board of Directors, a Chairman of the Board, one or
more Vice Presidents, one or more Assistant Secretaries, one or more
Assistant Treasurers, and such other officers as may be appointed in
accordance with the provisions of Section 3 of this Article III. Any number
of offices may be held by the same person.
Section 2. ELECTION OF OFFICERS. The principal officers of the
Corporation, except such officers as may be appointed in accordance with the
provisions of Section 3 or Section 5 of this Article, shall be chosen by the
Board of Directors, and each shall serve at the pleasure of the Board of
Directors, subject to the rights, if any, of an officer under any contract of
employment. Each officer shall hold office until his successor shall be duly
elected and qualified, or until his death, resignation, or removal in the
manner hereinafter provided.
Section 3. SUBORDINATE OFFICERS, ETC. The Board of Directors may
appoint such other officers as the business of the Corporation may require,
each of whom shall hold office for such period, have such authority and
perform such duties as are provided in the Bylaws or as the Board of
Directors may from time to time determine.
Section 4. REMOVAL AND RESIGNATION OF OFFICERS.
4.1 Subject to the rights, if any, of an officer under any
contract of employment, any officer may be removed, either with or without
cause, by a majority of the Directors at that time in office, at any regular
or special meeting of the Board of Directors, or, except in the case of an
officer chosen by the Board of Directors, by any officer upon whom such power
of removal may be conferred by the Board of Directors.
4.2 Any officer may resign at any time by giving written notice to
the Board of Directors. Any resignation shall take effect on the date of the
receipt of that notice or at any later time specified in that notice; and,
unless otherwise specified in that notice, the acceptance of the resignation
shall not be necessary to make it effective. Any resignation is without
prejudice to the rights, if any, of the Corporation under any contract to
which the officer is a party.
6
<PAGE>
Section 5. VACANCIES. A vacancy in any office because
of death, resignation, removal, disqualification or any other cause
shall be filled in the manner prescribed in the Bylaws for regular
appointments to that office.
Section 6. CHAIRMAN OF THE BOARD.
6.1 The Chairman of the Board, if such an officer be elected,
shall, if present, preside at the meetings of the Board of Directors and
exercise and perform such other powers and duties as may, from time to time,
be assigned by the Board of Directors or prescribed by the Bylaws. If there
is no President, the Chairman of the Board shall, in addition, be the Chief
Executive Officer of the Corporation and shall have the powers and duties
prescribed in Section 7 of this Article III.
Section 7. PRESIDENT. Subject to such supervisory powers, if
any, as may be given by the Board of Directors to the Chairman of the Board,
if there is such an officer, the President shall be the Chief Executive
Officer of the Corporation and shall, subject to the control of the Board of
Directors, have general supervision, direction and control of the business
and officers of the Corporation. The President shall preside at all meetings
of the Stockholders and, in the absence of the Chairman of the Board, or if
there be none, at all meetings of the Board of Directors. The President shall
have the general powers and duties of management usually vested in the office
of President of a corporation, shall be ex officio a member of all the
standing committees, including the Executive Committee, if any, and shall
have such other powers and duties as may be prescribed by the Board of
Directors or the Bylaws.
Section 8. VICE PRESIDENT. In the absence or disability of the
President, the Vice Presidents, if any, in order of their rank as fixed by
the Board of Directors, or if not ranked, the Vice President designated by
the Board of Directors, shall perform all the duties of the President, and
when so acting, shall have all the powers of, and be subject to all the
restrictions upon, the President. The Vice Presidents shall have such other
powers and perform such other duties as from time to time may be prescribed
for them, respectively, by the Board of Directors or the Bylaws, the
President, or the Chairman of the Board.
Section 9. SECRETARY.
9.1 The Secretary shall keep, or cause to be kept, a book of
minutes of all meetings of the Board of Directors and Stockholders at the
principal office of the Corporation or such other place as the Board of
Directors may order. The minutes shall include the time and place of holding
the meeting, whether regular or special, and if a special meeting, how
authorized, the notice thereof given, and the names of those present at
Directors' and committee meetings, the number of shares present or
represented at Stockholders' meetings and the proceedings thereof.
9.2 The Secretary shall keep, or cause to be kept, at the
principal office of the Corporation or at the office of the Corporation's
transfer agent, a share register, or duplicate share register, showing the
names of the Stockholders and their addresses; the number and classes or
shares 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.
9.3 The Secretary shall give, or cause to be given, notice of all
the meetings of the Stockholders and of the Board of Directors required by
the Bylaws or by law to be given. The
7
<PAGE>
Secretary shall keep the seal of the Corporation in safe custody, and shall
have such other powers and perform such other duties as may be prescribed by
the Board of Directors or by the Bylaws.
Section 10. TREASURER.
10.1 The Treasurer shall keep and maintain, or cause to be kept
and maintained, in accordance with generally accepted accounting principles,
adequate and correct accounts of the properties and business transactions of
the Corporation, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, earnings (or surplus) and shares
issued. The books of account shall, at all reasonable times, be open to
inspection by any Director.
10.2 The Treasurer shall deposit all monies and other valuables in
the name and to the credit of the Corporation with such depositaries as may
be designated by the Board of Directors. The Treasurer shall disburse the
funds of the Corporation as may be ordered by the Board of Directors, shall
render to the President and Directors, whenever they request it, an account
of all of the transactions of the Treasurer and of the financial condition of
the Corporation, and shall have such other powers and perform such other
duties as may be prescribed by the Board of Directors or the Bylaws.
ARTICLE IV
STOCKHOLDERS' MEETINGS
Section 1. PLACE OF MEETINGS. Meetings of the Stockholders shall
be held at any place within or outside the state of Utah designated by the
Board of Directors. In the absence of any such designation, Stockholders'
meetings shall be held at the principal executive office of the Corporation.
Section 2. ANNUAL MEETING.
2.1. The annual meeting of the Shareholders shall be held, each
year, as follows:
Time of Meeting: 10:00 A.M.
Date of Meeting: May 1
2.2 If this day shall be a legal holiday, then the meeting shall
be held on the next succeeding business day, at the same time. At the annual
meeting, the Shareholders shall elect a Board of Directors, consider reports
of the affairs of the Corporation and transact such other business as may be
properly brought before the meeting.
2.3 If the above date is inconvenient, the annual meeting of
Shareholders shall be held each year on a date and at a time designated by
the Board of Directors within a reasonable date of the above date upon proper
notice to all Shareholders.
Section 3. SPECIAL MEETINGS.
3.1 Special meetings of the Stockholders for any purpose or
purposes whatsoever, may be called at any time by the Board of Directors, the
Chairman of the Board, the President, or by one or more Stockholders holding
shares in the aggregate entitled to cast not less than 50% of the votes at
any such meeting. Except as provided in paragraph B below of this Section 3,
notice shall be given as for the annual meeting.
8
<PAGE>
3.2 If a special meeting is called by any person or persons other
than the Board of Directors, the request shall be in writing, specifying the
time of such meeting and the general nature of the business proposed to be
transacted, and shall be delivered personally or sent by registered mail or
by telegraphic or other facsimile transmission to the Chairman of the Board,
the President, any Vice President or the Secretary of the Corporation. The
officer receiving such request shall forthwith cause notice to be given to
the Stockholders entitled to vote, in accordance with the provisions of
Sections 4 and 5 of this Article, that a meeting will be held at the time
requested by the person or persons calling the meeting, not less than 35 nor
more than 60 days after the receipt of the request. If the notice is not
given within 20 days after receipt of the request, the person or persons
requesting the meeting may give the notice in the manner provided in these
Bylaws or upon application to the Superior Court. Nothing contained in this
paragraph of this Section shall be construed as limiting, fixing or affecting
the time when a meeting of Stockholders called by action of the Board of
Directors may be held.
Section 4. NOTICE OF MEETINGS - REPORTS.
4.1 Notice of any Stockholders meetings, annual or special, shall
be given in writing not less than 10 days nor more than 60 days before the
date of the meeting to Stockholders entitled to vote thereat by the Secretary
or the Assistant Secretary, or if there be no such officer, or in the case of
said Secretary or Assistant Secretary's neglect or refusal, by any Director
or Stockholder.
4.2 Such notices or any reports shall be given personally or by
mail or other means of written communication as provided in the Code and
shall be sent to the Stockholder's address appearing on the books of the
Corporation, or supplied by the Stockholder to the Corporation for the
purpose of notice, and in the absence thereof, as provided in the Code by
posting notice at a place where the principal executive office of the
Corporation is located or by publication at least once in a newspaper of
general circulation in the county in which the principal executive office is
located.
4.3 Notice of any meeting of Stockholders shall specify the place,
the day and the hour of meeting, and (i) in case of a special meeting, the
general nature of the business to be transacted and that no other business
may be transacted, or (ii) in the case of an annual meeting, those matters
which the Board of Directors, at the date of mailing of notice, intends to
present for action by the Stockholders. At any meetings where Directors are
elected, notice shall include the names of the nominees, if any, intended at
the date of notice to be presented for election.
4.4 Notice shall be deemed given at the time it is delivered
personally or deposited in the mail or sent by other means of written
communication. The officer giving such notice or report shall prepare and
file in the minute book of the Corporation an affidavit or declaration
thereof.
4.5 If action is proposed to be taken at any meeting for approval
of (i) contracts or transactions in which a Director has a direct or indirect
financial interest, pursuant to the Code, (ii) an amendment to the Articles
of Incorporation, pursuant to the Code, (iii) a reorganization of the
Corporation, pursuant to the Code, (iv) dissolution of the Corporation,
pursuant to the Code, or (v) a distribution to preferred Stockholders,
pursuant to the Code, the notice shall also state the general nature of such
proposal.
Section 5. QUORUM.
9
<PAGE>
5.1 The holders of a majority of the shares entitled to vote at a
Stockholders' meeting, present in person, or represented by proxy, shall
constitute a quorum at all meetings of the Stockholders for the transaction
of business except as otherwise provided by the Code or by these Bylaws.
5.2 The Stockholders present at a duly called or held meeting at
which a quorum is present may continue to transact business until
adjournment, notwithstanding the withdrawal of enough Stockholders to leave
less than a quorum, if any action taken (other than adjournment) is approved
by a majority of the shares required to constitute a quorum.
Section 6. ADJOURNED MEETING AND NOTICE THEREOF.
6.1 Any Stockholders' meeting, annual or special, whether or not a
quorum is present, may be adjourned from time to time by the vote of the
majority of the shares represented at such meeting, either in person or by
proxy, but in the absence of a quorum, no other business may be transacted at
such meeting.
6.2 When any meeting of Stockholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place thereof are announced at a meeting at which the
adjournment is taken, unless a new record date for the adjourned meeting is
fixed, or unless the adjournment is for more than 45 days from the date set
for the original meeting, in which case the Board of Directors shall set a
new record date. Notice of any adjourned meeting shall be given to each
Stockholder of record entitled to vote at the adjourned meeting in accordance
with the provisions of Section 4 of this Article. At any adjourned meeting,
the Corporation may transact any business which might have been transacted at
the original meeting.
Section 7. WAIVER OR CONSENT BY ABSENT STOCKHOLDERS.
7.1 The transactions of any meeting of Stockholders, either annual
or special, however called and noticed, shall be valid as though had at a
meeting duly held after regular call and notice, if a quorum be present
either in person or by proxy, and if, either before or after the meeting,
each of the Stockholders entitled to vote, not present in person or by proxy,
sign a written waiver of notice, or a consent to the holding of such meeting
or an approval of the minutes thereof.
7.2 The waiver of notice or consent need not specify either the
business to be transacted or the purpose of any regular or special meeting of
Stockholders, except that if action is taken or proposed to be taken for
approval of any of those matters specified in Section E of Section 4 of this
Article, the waiver of notice or consent shall state the general nature of
such proposal. All such waivers, consents or approvals shall be filed with
the corporate records or made a part of the minutes of the meeting.
7.3 Attendance of a person at a meeting shall also constitute a
waiver of notice of such meeting, except when the person objects, at the
beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened, and except that attendance at a
meeting is not a waiver of any right to object to the consideration of
matters not included in the notice.
10
<PAGE>
ARTICLE V
AMENDMENTS TO BYLAWS
Section 1. AMENDMENT BY STOCKHOLDERS.
All Bylaws of the Corporation shall be subject to alteration or
repeal, and new Bylaws may be made by the affirmative vote of stockholders
holding of record in the aggregate at least a majority of the outstanding
shares of stock entitled to vote in the election of directors at any annual
or special meeting of stockholders, provided that the notice or waiver of
notice of such meeting shall have summarized or set forth in full therein,
the proposed amendment.
Section 2. AMENDMENT BY DIRECTORS.
The Board of Directors shall have power to make, adopt, alter,
amend and repeal, from time to time, Bylaws of the Corporation, provided,
however, that the stockholders entitled to vote with respect thereto as in
this Article V above-provided may alter, amend or repeal Bylaws made by the
Board of Directors, except that the Board of Directors shall have no power to
change the quorum for meetings of stockholders or of the Board of Directors
or to change any provisions of the Bylaws with respect to the removal of
directors or the filling of vacancies in the Board resulting from the removal
by the stockholders. If any bylaw regulating an impending election of
directors is adopted, amended or repealed by the Board of Directors, there
shall be set forth in the notice of the next meeting of stockholders for the
election of directors, the Bylaws so adopted, amended or repealed, together
with a concise statement of the changes made.
Section 3. RECORD OF AMENDMENTS.
Whenever an amendment or new Bylaw is adopted, it shall be copies
in the corporate book of Bylaws with the original Bylaws, in the appropriate
place. If any Bylaw is repealed, the fact of repeal with the date of the
meeting at which the repeal was enacted or written assent was filed shall be
stated in the corporate book of Bylaws.
ARTICLE VI
SHARES OF STOCK
Section 1. CERTIFICATE OF STOCK.
1.1 The certificates representing shares of the Corporation's
stock shall be in such form as shall be adopted by the Board of Directors,
and shall be numbered and registered in the order issued. The certificates
shall bear the following: the Corporate Seal, the holder's name, the number
of shares of stock and the signatures of: (1) the Chairman of the Board, the
President or a Vice President and (2) the Secretary, Treasurer, any Assistant
Secretary or Assistant Treasurer.
1.2 No certificate representing shares of stock shall be issued
until the full amount of consideration therefore has been paid, except as
otherwise permitted by law.
1.3 To the extent permitted by law, the Board of Directors may
authorize the issuance of certificates for fractions of a share of stock
which shall entitle the holder to exercise voting rights, receive dividends
and participate in liquidating distributions, in proportion to the fractional
holdings; or it may authorize the payment in cash of the fair value of
fractions of a share of stock as of the time when those entitled to receive
such fractions are determined; or its may authorize the issuance, subject to
such conditions as may be permitted by law, of scrip in registered or bearer
form over the signature of an officer or agent of the corporation,
exchangeable as therein
11
<PAGE>
provided for full shares of stock, but such scrip shall not entitle the
holder to any rights of a stockholder, except as therein provided.
Section 2. LOST OR DESTROYED CERTIFICATES.
The holder of any certificate representing shares of stock of the
Corporation shall immediately notify the Corporation of any loss or
destruction of the certificate representing the same. The Corporation may
issue a new certificate in the place of any certificate theretofore issued by
it, alleged to have been lost or destroyed. On production of such evidence of
loss or destruction as the Board of Directors in its discretion may require,
the Board of Directors may, in its discretion, require the owner of the lost
or destroyed certificate, or his legal representatives, to give the
Corporation a bond in such sum as the Board may direct, and with such surety
or sureties as may be satisfactory to the Board, to indemnify the Corporation
against any claims, loss, liability or damage it may suffer on account of the
issuance of the new certificate. A new certificate may be issued without
requiring any such evidence or bond when, in the judgment of the Board of
directors, it is proper to do so.
Section 3. TRANSFER OF SHARES.
3.1 Transfer of shares of stock of the Corporation shall be made
on the stock ledger of the Corporation only by the holder of record thereof,
in person or by his duly authorized attorney, upon surrender for cancellation
of the certificate or certificates representing such shares of stock with an
assignment or power of transfer endorsed thereon or delivered therewith, duly
executed, with such proof of the authenticity of the signature and of
authority to transfer and of payment of taxes as the Corporation or its
agents may require.
3.2 The Corporation shall be entitled to treat the holder of
record of any share or shares of stock as the absolute owner thereof for all
purposes and , accordingly, shall not be bound to recognize any legal,
equitable or other claim to, or interest in, such share or shares of stock on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise expressly provided by law.
Section 4. RECORD DATE.
In lieu of closing the stock ledger of the Corporation, the Board
of Directors may fix, in advance, a date not exceeding sixty (60) days, nor
less than ten (10) days, as the record date for the determination of
stockholders entitled to receive notice of, or to vote at, any meeting of
stockholders, or to consent to any proposal without a meeting, or for the
purpose of determining stockholders entitled to receive payment of any
dividends or allotment of any rights, or for the purpose of any other action.
If no record date is fixed, the record date for the determination of
stockholders entitled to notice of, or to vote at, a meeting of stockholders
shall be at the close of business on the day next preceding the day on which
the notice is given, or, if no notice is given, the day preceding the day on
which the meeting is held. The record date for determining stockholders for
any other purpose shall be at the close of business on the day on which the
resolution of the directors relating thereto is adopted. When a determination
of stockholders of record entitled to notice of, or to vote at, any meeting
of stockholders has been made, as provided for herein, such determination
shall apply to any adjournment thereof, unless the directors fix a new record
date for the adjourned meeting.
12
<PAGE>
ARTICLE VII
DIVIDENDS
Subject to applicable law, dividends may be declared and paid out of
any funds available therefor, as often, in such amount, and at such time or
times as the Board of Directors may determine.
ARTICLE VIII
FISCAL YEAR
The fiscal year of the Corporation shall be December 31, and may be
changed by the Board of Directors from time to time subject to applicable law.
ARTICLE IX
CORPORATE SEAL
The corporate seal shall be circular in form, and shall have inscribed
thereon the name of the Corporation, the date of its incorporation, and the
word "Utah" to indicate the Corporation was incorporated pursuant to the laws
of the State of Utah.
ARTICLE X
INDEMNITY
Section 1. Every person who was or is a party or is threatened to be
made a party to or is involved in any action, suit, or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that
he or a person of whom he is the legal representative is or was a director or
officer of the corporation or is or was serving at the request of the
corporation or for its benefit as a director or officer of another
corporation, or as its representative in a partnership, joint venture, trust,
or other enterprise, shall be indemnified and held harmless to the fullest
extent legally permissible under the Utah Code from time to time against all
expenses, liability and loss (including attorneys' fees, judgments, fines,
and amounts paid or to be paid in settlement) reasonably incurred or suffered
by him in connection therewith. The Board of Directors may, in its
discretion, cause the expense of officers and directors incurred in defending
a civil or criminal action, suit or proceeding to be paid by the corporation
as they are incurred and in advance of the final disposition of the action,
suit or proceeding upon receipt of an undertaking by or on behalf of the
director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he is not entitled to be indemnified by
the corporation. No such person shall be indemnified against, or be
reimbursed for, any expense or payments incurred in connection with any claim
or liability established to have arisen out of his own willful misconduct or
gross negligence. Any right of indemnification shall not be exclusive of any
other right which such directors, officers or representatives may have or
hereafter acquire and, which such directors, officers, or representatives may
have or hereafter acquire and, without limiting the generality of such
statement, they shall be entitled to their respective rights of
indemnification under any bylaw, agreement, vote of stockholders, provision
of law or otherwise, as well as their rights under this Article.
Section 2. The Board of Directors may cause the corporation to purchase
and maintain insurance on behalf of any person who is or was a director or
officer of the corporation, or is or was serving at the request of the
corporation as a director or officer of another corporation, or as its
representative in a partnership, joint venture, trust or other enterprise
against any liability asserted
13
<PAGE>
against such person and incurred in any such capacity or arising out of such
status, whether or not the corporation would have the power to indemnify such
person.
Section 3. The Board of Directors may from time to time adopt further
Bylaws with respect to indemnification and may amend these and such Bylaws to
the full extent permitted by the Utah Code.
ARTICLE XI
MISCELLANEOUS
Section 1. STOCKHOLDERS' AGREEMENTS. Notwithstanding anything contained
in this Article XI to the contrary, in the event the Corporation elects to
become a close corporation, an agreement between two or more Stockholders
thereof, if in writing and signed by the parties thereto, may provide that in
exercising any voting rights, the shares held by them shall be voted as
provided therein, and may otherwise modify the provisions contained in
Article IV, herein as to Stockholders' meetings and actions.
Section 2. SUBSIDIARY CORPORATIONS. Shares of the Corporation owned by
a subsidiary shall not be entitled to vote on any matter. For the purpose of
this Section, a subsidiary of the Corporation is defined as another
corporation of which shares thereof possessing more than 25% of the voting
power are owned directly or indirectly through one or more other corporations
of which the Corporation owns, directly or indirectly, more than 50% of the
voting power.
14
<PAGE>
CERTIFICATE OF SECRETARY
I, the undersigned, certify that:
1. I am the duly elected and acting Secretary of CONVERGE GLOBAL, INC.,
a Utah corporation; and
2. The foregoing Amended and Restated Bylaws, consisting of 16 pages, are
the Bylaws of this Corporation as adopted by the Board of Directors.
IN WITNESS WHEREOF, I have subscribed my name and affixed the seal of
this Corporation on this 19th day of January, 1999.
/s/ Samar Khan
------------------------------------
Samar Khan, Secretary
<PAGE>
EXHIBIT 10.2
ACQUISITION AGREEMENT
DATED JANUARY 5, 1999
<PAGE>
ACQUISITION AGREEMENT
BY AND BETWEEN
BEKAM INVESTMENTS, LTD.
AND
CAPITAL PLACEMENT SPECIALISTS, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1SALE AND ISSUANCE OF SHARES AND OTHER TERMS..............................................................1
1.1 Initial Closing........................................................................................1
1.2 Final Closing..........................................................................................1
ARTICLE 2REPRESENTATIONS AND WARRANTIES...........................................................................2
2.1 Representations and Warranties of CPS..................................................................2
2.1.1 Organization, Standing, Power.............................................................4
2.1.2 Authority.................................................................................2
2.1.3 Capitalization of CPS.....................................................................3
2.1.4 Subsidiaries..............................................................................3
2.1.5 No Defaults...............................................................................3
2.1.6 Governmental Consents.....................................................................4
2.1.7 Financial Statements......................................................................4
2.1.8 Liabilities...............................................................................4
2.1.9 Absence of Changes........................................................................4
2.1.10 Patents and Trademarks....................................................................5
2.1.11 Certain Agreements........................................................................5
2.1.12 Compliance with Other Instruments.........................................................5
2.1.13 Employee Benefit Plans....................................................................6
2.1.14 Other Personal Property...................................................................6
2.1.15 Properties and Liens......................................................................6
2.1.16 Inventory.................................................................................6
2.1.17 Major Contracts...........................................................................6
2.1.18 Questionable Payments.....................................................................7
2.1.19 Recent Transactions.......................................................................7
2.1.20 Leases in Effect..........................................................................8
2.1.21 Environmental.............................................................................8
2.1.22 Taxes.....................................................................................8
2.1.23 Disputes and Litigation...................................................................9
2.1.24 Compliance with Laws......................................................................9
2.1.25 Related Party Transactions...............................................................10
2.1.26 Insurance................................................................................10
2.1.27 Minute Books.............................................................................10
2.1.28 Disclosure...............................................................................10
2.1.29 Reliance.................................................................................10
2.2 Representations and Warranties of BEKAM...............................................................10
2.2.1 Organization, Standing, Power............................................................10
2.2.2 Authority................................................................................10
2.2.3 No Defaults..............................................................................11
2.2.4 Disclosure...............................................................................11
2.2.5 Reliance.................................................................................11
ARTICLE 3 CONDITIONS PRECEDENT...................................................................................11
3.1 Conditions to Each Party's Obligations................................................................11
3.2 Conditions to BEKAM's Obligations.....................................................................12
i
<PAGE>
3.3 Conditions to CPS's Obligations.......................................................................12
ARTICLE 4COVENANTS...............................................................................................13
4.1 Confidentiality.......................................................................................13
4.2 Further Assurances....................................................................................13
ARTICLE 5THE CLOSINGS............................................................................................14
5.1 Time and Place........................................................................................14
5.2 Deliveries by the Parties.............................................................................14
5.2.1 The Initial Closing......................................................................14
5.2.2 The Final Closing........................................................................14
ARTICLE 6INDEMNIFICATION.........................................................................................15
6.1 CPS's Indemnity.......................................................................................15
6.2 BEKAM's Indemnity.....................................................................................15
ARTICLE 7DEFAULT, AMENDMENT AND WAIVER...........................................................................16
7.1 Default...............................................................................................16
7.2 Waiver and Amendment..................................................................................16
7.3 Failure to Satisfy Contingencies or Close ............................................................16
ARTICLE 8MISCELLANEOUS...........................................................................................17
8.1 Expenses..............................................................................................17
8.2 Notices...............................................................................................17
8.3 Entire Agreement......................................................................................18
8.4 Survival of Representations...........................................................................18
8.5 Incorporated by Reference.............................................................................18
8.6 Remedies Cumulative...................................................................................18
8.7 Execution of Additional Documents.....................................................................18
8.8 Finders' and Related Fees.............................................................................18
8.9 Governing Law.........................................................................................19
8.10 Forum.................................................................................................19
8.11 Binding Effect and Assignment.........................................................................19
8.12 Counterparts; Facsimile Signatures....................................................................19
8.13 Conflict Waiver.......................................................................................19
</TABLE>
ii
<PAGE>
TABLE OF SCHEDULES AND EXHIBITS
Schedule 1.1 Issuance of CPS Shares Upon Initial Closing
Schedule 1.2 Issuance of CPS Shares Upon Final Closing
Exhibit A Opinion Letter
CPS Disclosure Schedule
BEKAM Disclosure Schedule
iii
<PAGE>
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (this "Agreement"), dated January 5, 1999,
is entered into by and between BEKAM INVESTMENTS, LTD., a Gibraltar
corporation ("BEKAM") and CAPITAL PLACEMENT SPECIALISTS, INC., a Utah
corporation ("CPS"). BEKAM and CPS will sometimes be referred to collectively
herein as the "Parties."
R E C I T A L S
A. The capital stock of CPS consists of fifty million authorized shares of
Common Stock, par value $0.001 (the "CPS Shares").
B. CPS currently has 2,430,100 Shares of its capital stock issued or
outstanding.
C. Upon the terms and conditions set forth below, CPS desires to issue and
sell all of the CPS Shares to BEKAM, and BEKAM is willing to purchase from CPS
all of the CPS Shares, such that, following such transaction, CPS will be a
wholly owned subsidiary of BEKAM.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, the Parties hereto
agree as follows:
ARTICLE I.
SALE AND ISSUANCE OF SHARES AND OTHER TERMS
Subject to the terms and conditions herein set forth, and on the basis of
the representations, warranties and agreements herein contained, the Parties
shall perform the following actions:
A. THE INITIAL CLOSING. CPS shall deliver, in fully transferable form,
2,265,100 Shares of the issued and outstanding Shares of CPS as set forth in
attached Schedule 1.1 and all original corporate books and records of CPS. In
exchange for 2,265,100 transferable CPS Shares and all corporate books and
records of CPS, BEKAM shall deliver to CPS, the amount of $200,000 in cash,
cashier's check, or wire in the discretion of CPS. This transaction shall be
referred to as the "Initial Closing."
B. THE FINAL CLOSING. CPS shall deliver, in fully transferable form, the
remaining 165,000 Shares of the issued and outstanding Shares of CPS as set
forth in attached Schedule 1.2. In exchange for 165,000 transferable CPS Shares,
BEKAM shall deliver to CPS, the amount of $100,000 in cash, cashier's check, or
wire in the discretion of CPS; and shall deliver to SHOGUN INVESTMENT GROUP,
LTD. ("SHOGUN") a certificate for 50,000 Shares of CPS common stock, restricted
under Rule 144. This transaction shall be referred to as the "Final Closing."
The Initial Closing and the Final Closing shall be referred to collectively as
the "Closings."
1
<PAGE>
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
A. REPRESENTATIONS AND WARRANTIES OF CPS. Except as disclosed in a
document referring specifically to the representations and warranties in this
Agreement that identifies by section number the section and subsection to
which such disclosure relates and is delivered by CPS to BEKAM prior to the
Final Closing (the "CPS Disclosure Schedule"), CPS represents and warrants to
BEKAM, as of the date hereof and as of the Final Closing, as follows:
1. ORGANIZATION, STANDING, POWER. CPS is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Utah. It has all requisite corporate power, franchises, licenses, permits,
and authority to own its properties and assets and to carry on its business
as it has been and is being conducted. CPS is duly qualified and in good
standing to do business in each jurisdiction in which a failure to so qualify
would have a Material Adverse Effect (as defined below) on CPS. For purposes
of this Agreement, the term "Material Adverse Effect" means any change or
effect that, individually or when taken together with all other such changes
or effects which have occurred prior to the date of determination of the
occurrence of the Material Adverse Effect, is or is reasonably likely to be
materially adverse to the business, assets (including intangible assets),
financial condition, or results of operations of the entity.
2. AUTHORITY. CPS has all requisite power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery by CPS of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all
necessary action on the part of CPS, including the approval of the Board of
Directors of CPS. This Agreement has been duly executed and delivered by CPS
and constitutes a valid and binding obligation of CPS enforceable in
accordance with its terms, except that such enforceability may be subject to:
(i) bankruptcy, insolvency, reorganization, or other similar laws relating to
enforcement of creditors' rights generally; and (ii) general equitable
principles. Subject to the satisfaction of the conditions set forth in
Article 3 below, the execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby will not, conflict with
or result in any violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation,
or acceleration of any obligation, or to loss of a material benefit under, or
the creation of a lien, pledge, security interest, charge, or other
encumbrance on any assets of CPS (any such conflict, violation, default,
right, loss, or creation being referred to herein as a "Violation") pursuant
to: (i) any provision of the organization documents of CPS; or (ii) any loan
or credit agreement, note, bond, mortgage, indenture, contract, lease, or
other agreement, or instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule, or regulation
applicable to CPS's respective properties or assets, other than, in the case
of (ii), any such Violation which individually or in the aggregate would not
have a Material Adverse Effect on CPS.
3. CAPITALIZATION OF CPS.
(a) The authorized equity securities of CPS consist of fifty
million shares of CPS Common Stock, $0.001 par value, of which 2,430,100
Shares are currently issued or outstanding.
(b) Upon issuance pursuant to the terms of this Agreement, the CPS
Shares will be duly and validly issued, fully paid and nonassessable, and issued
in accordance with the registration or qualification provisions of the
Securities Act of 1933, as amended (the "Securities Act"), and any relevant
state securities laws or pursuant to valid exemptions therefrom. The CPS
2
<PAGE>
Shares are free of restrictions on transfer other than restrictions on
transfer as set forth in the CPS Disclosure Schedule and under applicable
state and federal securities laws. The CPS Shares shall be issued in a
private transaction and consequently will be deemed to be "Restricted
Securities" as set forth in Rule 144 promulgated under the Securities Act of
1933, as amended.
(c) Except as set forth on the CPS Disclosure Schedule, there
are no options, warrants, rights, calls, commitments, plans, contracts, or
other agreements of any character granted or issued by CPS which provide for
the purchase, issuance, or transfer of any additional shares of the capital
stock of CPS nor are there any outstanding securities granted or issued by
CPS that are convertible into any shares of the equity securities of CPS, and
none is authorized. CPS does not have outstanding any bonds, debentures,
notes, or other indebtedness the holders of which have the right to vote (or
convertible or exercisable into securities having the right to vote) with
holders of CPS capital stock on any matter.
(d) Except as set forth on the CPS Disclosure Schedule, CPS is
not a party or subject to any agreement or understanding, and, to the best of
CPS's knowledge, there is no agreement or understanding between any persons
and/or entities, which affects or relates to the voting or giving of written
consents with respect to any security or by a director of CPS.
(e) Except as set forth on the CPS Disclosure Schedule, CPS has
not granted or agreed to grant any registration rights, including piggyback
rights, to any person or entity.
4. SUBSIDIARIES. "Subsidiary" or "Subsidiaries" means all
corporations, trusts, partnerships, associations, joint ventures, or other
Persons, as defined below, of which CPS or any other Subsidiary of CPS owns
not less than twenty percent (20%) of the voting securities or other equity
or of which CPS or any other Subsidiary of CPS possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies, whether through ownership of voting shares, management contracts,
or otherwise. "Person" means any individual, corporation, trust, association,
partnership, proprietorship, joint venture, or other entity. There are no
Subsidiaries of CPS.
5. NO DEFAULTS. CPS is not, and has not received notice that it
would be with the passage of time, in default or violation of any term,
condition, or provision of: (i) the Articles of Incorporation or Bylaws of
CPS: (ii) any judgment, decree, or order applicable to CPS; or (iii) any loan
or credit agreement, note, bond, mortgage, indenture, contract, agreement,
lease, license, or other instrument to which CPS is now a party or by which
it or any of its properties or assets may be bound, except for defaults and
violations which, individually or in the aggregate, would not have a Material
Adverse Effect on CPS.
6. GOVERNMENTAL CONSENTS. No consent, approval, order, or
authorization of or registration, qualification, designation, declaration, or
filing with or exemption by (collectively "Consents"), any court,
administrative agency, or commission, or other federal, state, or local
governmental authority or instrumentality, whether domestic or foreign (each
a "Governmental Entity"), is required by or with respect to CPS in connection
with the execution and delivery of this Agreement or the consummation by CPS
of the transactions contemplated hereby, except for such Consents which if
not obtained or made would not have a Material Adverse Effect on CPS or the
transactions contemplated by this Agreement.
3
<PAGE>
7. FINANCIAL STATEMENTS. CPS has furnished BEKAM with a true and
complete copy of its audited financial statements for the periods ending June
30, 1998, December 31, 1997, and December 31, 1996 (the "CPS Financial
Statements"), which comply as to form in all material respects with all
applicable accounting requirements with respect thereto and have been
prepared internally and fairly present the financial position of CPS as at
the dates thereof and the results of its operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal,
recurring audit adjustments not material in scope or amount). There has been
no change in CPS's accounting policies or the methods of making accounting
estimates or changes in estimates that are material to CPS Financial
Statements, except as described in the notes thereto.
8. LIABILITIES. As of the Closings, there shall be no Liabilities
(as defined below) of CPS. "Liabilities" as used herein shall mean all debt,
liabilities, or obligations of any nature, whether absolute, accrued, or
contingent, including, without limitation, accounts payable, accrued employee
benefits, accrued taxes payable, and debt instruments.
9. ABSENCE OF CHANGES. Since June 30, 1998, CPS has conducted its
business in the ordinary course and there has not been: (i) any Material
Adverse Effect on the business, financial condition, liabilities, or assets
of CPS or any development or combination of developments of which management
of CPS has knowledge which is reasonably likely to result in such an effect;
(ii) any damage, destruction, or loss, whether or not covered by insurance,
having a Material Adverse Effect on CPS; (iii) any declaration, setting aside
or payment of any dividend or other distribution (whether in cash, stock, or
property) with respect to the capital stock of CPS; (iv) any increase or
change in the compensation or benefits payable or to become payable by CPS to
any of its employees, except in the ordinary course of business consistent
with past practice; (v) any sale, lease, assignment, disposition, or
abandonment of a material amount of property of CPS, except in the ordinary
course of business; (vi) any increase or modification in any bonus, pension,
insurance, or other employee benefit plan, payment, or arrangement made to,
for, or with any of its employees; (vii) the granting of stock options,
restricted stock awards, stock bonuses, stock appreciation rights, and
similar equity based awards; (viii) any resignation or termination of
employment of any officer of CPS; and CPS, to the best of its knowledge, does
not know of the impending resignation or termination of employment of any
such officer; (ix) any merger or consolidation with another entity, or
acquisition of assets from another entity except in the ordinary course of
business; (x) any loan or advance by CPS to any person or entity, or guaranty
by CPS of any loan or advance; (xi) any amendment or termination of any
contract, agreement, or license to which CPS is a party, except in the
ordinary course of business; (xii) any mortgage, pledge, or other encumbrance
of any asset of CPS; (xiii) any waiver or release of any right or claim of
CPS, except in the ordinary course of business; (xiv) any write off as
uncollectible any note or account receivable or portion thereof; or (xv) any
agreement by CPS to do any of the things described in this Section 2.1.9.
10. PATENTS AND TRADEMARKS. CPS has sufficient title and ownership of
all patents, trademarks, service marks, trade names, copyrights, trade secrets,
information, proprietary rights, and processes (collectively, "Intellectual
Property") necessary for its business as now conducted without any conflict with
or infringement of the rights of others. The Intellectual Property owned by CPS
is listed in the CPS Disclosure Schedule. There are no outstanding options,
licenses, or agreements of any kind relating to the Intellectual Property, nor
is CPS bound by or a party to any options, licenses, or agreements of any kind
with respect to the Intellectual Property of any other person or entity. CPS has
not received any communications
4
<PAGE>
alleging that CPS has violated or, by conducting its business as proposed,
would violate any of the Intellectual Property of any other person or entity.
CPS is not aware that any of its employees is obligated under any contract
(including licenses, covenants, or commitments of any nature) or other
agreement, or subject to any judgment, decree, or order of any court or
administrative agency, that would interfere with the use of his or her best
efforts to promote the interests of CPS or that would conflict with CPS's
business as proposed to be conducted. Neither the execution or delivery of
this Agreement, nor the carrying on of CPS's business by the employees of
CPS, nor the conduct of CPS's business as proposed, will, to the best of
CPS's knowledge, conflict with or result in a breach of the terms, conditions
or provisions of, or constitute a default under, any contract, covenant, or
instrument under which any of such employees is now obligated. CPS does not
believe it is or will be necessary to utilize any inventions of any of its
employees (or people it currently intends to hire) made prior to their
employment by CPS.
11. CERTAIN AGREEMENTS. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will:
(i) result in any payment (including, without limitation, severance,
unemployment compensation, parachute payment, bonus, or otherwise), becoming
due to any director, employee, or independent contractor of CPS, from CPS
under any agreement or otherwise; (ii) materially increase any benefits
otherwise payable under any agreement; or (iii) result in the acceleration of
the time of payment or vesting of any such benefits.
12. COMPLIANCE WITH OTHER INSTRUMENTS. CPS is not in violation or
default of any provision of its articles of incorporation or bylaws, or of
any instrument, judgment, order, writ, decree, or contract to which it is a
party or by which it is bound, or, to the best of its knowledge, of any
provision of any federal or state statute, rule, or regulation applicable to
CPS. The execution, delivery, and performance of this Agreement and the
consummation of the transactions contemplated hereby will not result in any
such violation or be in conflict with or constitute, with or without the
passage of time and giving of notice, either a default under any such
provision, instrument, judgment, order, writ, decree, or contract, or an
event that results in the creation of any lien, charge, or encumbrance upon
any assets of CPS or the suspension, revocation, impairment, forfeiture, or
nonrenewal of any material permit, license, authorization, or approval
applicable to CPS, its business, or operations, or any of its assets or
properties.
13. EMPLOYEE BENEFIT PLANS. All employee benefit plans (including
without limitation all plans which authorize the granting of stock options,
restricted stock, stock bonuses, or other equity based awards) covering
active, former, or returned employees of CPS are listed in the CPS Disclosure
Schedule.
14. OTHER PERSONAL PROPERTY. The books and records of CPS contain
a complete and accurate description, and specify the location, of all trucks,
automobiles, machinery, equipment, furniture, supplies, and other tangible
personal property owned by, in the possession of, or used by CPS in
connection with its business. Except as set forth in the CPS Disclosure
Schedule, no personal property used by CPS in connection with its business is
held under any lease, security agreement, conditional sales contract, or
other title retention or security arrangement.
15. PROPERTIES AND LIENS. Except as reflected in CPS Financial
Statements or as set forth in the CPS Disclosure Schedule, and except for
statutory mechanics' and materialmen's liens, liens for current taxes not yet
delinquent, CPS owns, free and clear of any liens, claims,
5
<PAGE>
charges, options, or other encumbrances, all of its tangible and intangible
property, real and personal, whether or not reflected in CPS Financial
Statements (except that sold or disposed of in the ordinary course of
business since the date of such statements) and all such property acquired
since the date of such statements. All real property and tangible personal
property of CPS is in good operating condition and repair, ordinary wear and
tear excepted.
16. INVENTORY. The inventories of CPS shown on the CPS Financial
Statements and inventories acquired by it subsequent to the date of the CPS
Financial Statements consist solely of items of a quality and quantity usable
and salable in the normal course of its business, with the exception of
obsolete materials and materials below standard quality, all of which have
been written down in the books of CPS to net realizable market value or have
been provided for by adequate reserves. Except for sales made in the ordinary
course of business, all inventory is the property of CPS. No items are
subject to security interests, except as set forth in the CPS Disclosure
Schedule. The value of the inventories has been determined on a first-in,
first-out basis consistent with prior years.
17. MAJOR CONTRACTS. Except as otherwise disclosed in the CPS
Disclosure Schedule, CPS is not a party or subject to:
(a) Any union contract, or any employment contract or
arrangement providing for future compensation, written or oral, with any
officer, consultant, director, or employee which is not terminable by CPS on
30 days' notice or less without penalty or obligations to make payments
related to such termination;
(b) Any joint venture contract, partnership agreement or
arrangement or any other agreement which has involved or is expected to
involve a sharing of revenues with other persons or a joint development of
products with other persons;
(c) Any manufacture, production, distribution, sales, franchise,
marketing, or license agreement, or arrangement by which products or services
of CPS are developed, sold, or distributed;
(d) Any material agreement, license, franchise, permit,
indenture, or authorization which has not been terminated or performed in its
entirety and not renewed which may be, by its terms, accelerated, terminated,
impaired, or adversely affected by reason of the execution of this Agreement,
or the consummation of the transactions contemplated hereby or thereby;
(e) Any material agreement, contract, or commitment that
requires the consent of another person for CPS to enter into or consummate
the transactions contemplated by this Agreement;
(f) Except for object code license agreements for CPS's
products executed in the ordinary course of business, any indemnification by
CPS with respect to infringements of proprietary rights; or
(g) Any contract containing covenants purporting to materially
limit CPS's freedom to compete in any line of business in any geographic area.
6
<PAGE>
All contracts, plans, arrangements, agreements, licenses, franchises,
permits, indentures, authorizations, instruments, and other commitments
listed in the CPS Disclosure Schedule are valid and in full force and effect
and CPS has not, nor to the knowledge of CPS has any other party thereto,
breached any material provisions of, or is in default in any material respect
under the terms thereof.
18. QUESTIONABLE PAYMENTS. Neither CPS nor to its knowledge any
director, officer, employee, or agent of CPS, has: (i) made any payment or
provided services or other favors in the United States or any foreign country
in order to obtain preferential treatment or consideration by any
Governmental Entity with respect to any aspect of the business of CPS; or
(ii) made any political contributions that would not be lawful under the laws
of the United States, any foreign country or any jurisdiction within the
United States or any foreign country. Neither CPS, nor, to the knowledge of
CPS, any director, officer, employee, or agent of CPS, has been or is the
subject of any investigation by any Governmental Entity in connection with
any such payment, provision of services, or contribution.
19. RECENT TRANSACTIONS. Neither CPS, nor to its knowledge any
director, officer, employee, or agent of CPS, is participating in any
discussions and do not intend to engage in any discussion: (i) with any
representative of any corporation or corporations regarding the consolidation
or merger of CPS with or into any such corporation or corporations; (ii) with
any corporation, partnership, association, or other business entity or any
individual regarding the sale, conveyance, or disposition of all or
substantially all of the assets of CPS or a transaction or series of related
transactions in which more than fifty percent (50%) of the voting power of
CPS is disposed of; or (iii) regarding any other form of acquisition,
liquidation, dissolution, or winding up of CPS.
20. LEASES IN EFFECT. All real property leases and subleases as to
which CPS is a party and any amendments or modifications thereof (each a
"Lease" and, collectively, the "Leases") are listed in the CPS Disclosure
Schedule and are valid, in full force and effect and enforceable, and there
are no existing defaults on the part of CPS, and CPS has not received nor
given notice of default or claimed default with respect to any Lease, nor is
there any event that with notice or lapse of time, or both, would constitute
a default thereunder. Except as set forth on the CPS Disclosure Schedule, no
consent is required from any party under any Lease in connection with the
completion of the transactions contemplated by this Agreement, and CPS has
not received notice that any party to any Lease intends to cancel, terminate,
or refuse to renew the same or to exercise any option or other right
thereunder, except where the failure to receive such consent, or where such
cancellation, termination, or refusal would not have a Material Adverse
Effect on CPS.
7
<PAGE>
21. ENVIRONMENTAL.
(a) To the best knowledge of CPS: (i) the business as presently
or formerly engaged in by CPS is and has been conducted in compliance with
all applicable Environmental Laws (as defined in subparagraph (b) below),
including without limitation, having all permits, licenses, and other
approvals and authorizations, during the time CPS engaged in such businesses;
(ii) there are no civil, criminal, or administrative actions, suits, demands,
claims, hearings, investigations, or proceedings pending or threatened
against CPS relating to any violation, or alleged violation, of any
Environmental Law; and (iii) CPS has not incurred, and none of CPS properties
presently or formerly owned or operated by CPS are presently subject to, any
material liabilities (fixed or contingent) relating to any suit, settlement,
court order, administrative order, judgment, or claim asserted or arising
under any Environmental Law.
(b) "Environmental Law" means any federal, state, foreign, and
local law, statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, legal doctrine, order, judgment, decree,
injunction, requirement, or agreement with any governmental entity relating
to: (i) the protection, preservation, or restoration of the environment
(including, without limitation, air, water, vapor, surface water,
groundwater, drinking water supply, surface land, subsurface land, plant and
animal life, or any other natural resource), to human health or safety; or
(ii) the exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release, or
disposal of hazardous substances, in each case as amended and as now or
hereafter in effect.
22. TAXES. Except as set forth elsewhere in this
Agreement or in the CPS Disclosure Schedule:
(a) All taxes, assessments, fees, penalties, interest, and
other governmental charges with respect to CPS which have become due and
payable have been paid in full or adequately reserved against by CPS on its
books of account and such reserves are sufficient for the payment of all
unpaid federal, state, local, foreign, and other taxes, fees, and assessments
(including without limitation, income, property, sales, use, franchise,
capital stock, excise, added value, employees' income withholding, social
security, and unemployment taxes), and all interest and penalties thereon
with respect to the periods then ended and for all periods prior thereto;
(b) There are no agreements, waivers, or other arrangements
providing for an extension of time with respect to the assessment of any tax
or deficiency against CPS, nor are there any actions, suits, proceedings,
investigations, or claims now pending against CPS in respect of any tax or
assessment, or any matters under discussion with any federal, state, local,
or foreign authority relating to any taxes or assessments, or any claims for
additional taxes or assessments asserted by any such authority; and
(c) There are no liens for taxes upon the assets of CPS except
for taxes that are not yet payable. CPS has withheld all taxes required to be
withheld in respect of wages, salaries, and other payments to all employees,
officers, and directors and timely paid all such amounts withheld to the
proper taxing authority.
23. DISPUTES AND LITIGATION. Except as disclosed in the CPS
Disclosure Schedule, there is no suit, claim, action, litigation, or
proceeding pending or, to the knowledge of CPS, threatened against or
affecting CPS or any of its properties, assets, or business or to which CPS
is a party, in any court or before any arbitrator of any kind or before or by
any Governmental
8
<PAGE>
Entity, which would, if adversely determined, individually or in the
aggregate, have a Material Adverse Effect on CPS, nor is there any judgment,
decree, injunction, rule, or order of any Governmental Entity or arbitrator
outstanding against CPS having, or which, insofar as reasonably can be
foreseen, in the future could have, any such effect. To the knowledge of CPS,
there is no investigation pending or threatened against CPS before any
foreign, federal, state, municipal, or other governmental department,
commission, board, bureau, agency, instrumentality, or other Governmental
Entity.
24. COMPLIANCE WITH LAWS. Except as set forth in the CPS
Disclosure Schedule, CPS's business is not being conducted in violation of,
or in a manner which could cause liability under any applicable law, rule, or
regulation, judgment, decree, or order of any Governmental Entity, except for
any violations or practices, which, individually or in the aggregate, have
not had and will not have a Material Adverse Effect on CPS. CPS has all
franchises, permits, licenses, and any similar authority necessary for the
conduct of its business as now being conducted by it, the lack of which could
materially and adversely affect the business, properties, prospects, or
financial condition of CPS, and believes it can obtain, without undue burden
or expense, any similar authority for the conduct of its business as it is
planned to be conducted. CPS is not in default in any material respect under
any of such franchises, permits, licenses, or other similar authority. A true
and complete list of all such franchises, permits, and licenses held by CPS
is set forth in the CPS Disclosure Schedule.
25. RELATED PARTY TRANSACTIONS. No employee, officer, or director
of CPS or member of his or her immediate family is indebted to CPS, nor is
CPS indebted (or committed to make loans or extend or guarantee credit) to
any of them. To the best of CPS's knowledge, none of such persons has any
direct or indirect ownership interest in any firm or corporation with which
CPS is affiliated or with which CPS has a business relationship, or any firm
or corporation that competes with CPS, except that employees, officers, or
directors of CPS and members of their immediate families may own stock in
publicly traded companies that may compete with CPS. To CPS's knowledge, no
member of the immediate family of any officer or director of CPS is directly
or indirectly interested in any material contract with CPS.
26. MINUTE BOOKS. The minute books of CPS provided to BEKAM
contain a complete summary of all meetings of directors and shareholders
since the time of incorporation and reflect all transactions referred to in
such minutes accurately in all material respects.
27. DISCLOSURE. No representation or warranty made by CPS in this
Agreement, nor any document, written information, statement, financial
statement, certificate, or exhibit prepared and furnished or to be prepared
and furnished by CPS or their representatives pursuant hereto or in
connection with the transactions contemplated hereby, when taken together,
contains any untrue statement of a material fact, or omits to state a
material fact necessary to make the statements or facts contained herein or
therein not misleading in light of the circumstances under which they were
furnished.
28. RELIANCE. The foregoing representations and warranties are
made by CPS with the knowledge and expectation that BEKAM is placing reliance
thereon.
B. REPRESENTATIONS AND WARRANTIES OF BEKAM. Except as disclosed in a
document referring specifically to the representations and warranties in this
Agreement that identifies by section number the section and subsection to
which such disclosure relates and is delivered by
9
<PAGE>
BEKAM to CPS prior to the execution of this Agreement (the "BEKAM Disclosure
Schedule"), BEKAM represents and warrants to CPS, as of the date hereof and
as of the Closings, as follows:
1. ORGANIZATION, STANDING, POWER. BEKAM is a corporation duly
organized, validly existing, and in good standing under the laws of the
Country of Gibraltar. It has all requisite corporate power, franchises,
licenses, permits, and authority to own its properties and assets and to
carry on its business as it has been and is being conducted. BEKAM is duly
qualified and in good standing to do business in each jurisdiction in which a
failure to so qualify would have a Material Adverse Effect on BEKAM.
2. AUTHORITY. BEKAM has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery by BEKAM of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of BEKAM, including
the approval of the Board of Directors and the stockholders of BEKAM. This
Agreement has been duly executed and delivered by BEKAM and constitutes a
valid and binding obligation of BEKAM enforceable in accordance with its
terms, except that such enforceability may be subject to: (i) bankruptcy,
insolvency, reorganization, or other similar laws relating to enforcement of
creditors' rights generally; and (ii) general equitable principles. Subject
to the satisfaction of the conditions set forth in Article 3, the execution
and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby will not, conflict with or result in any
Violation pursuant to: (i) any provision of the Articles of Incorporation or
Bylaws of BEKAM; or (ii) any loan or credit agreement, note, bond, mortgage,
indenture, contract, lease, or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule, or regulation applicable to BEKAM or its properties or
assets, other than, in the case of (ii), any such Violation which
individually or in the aggregate would not have a Material Adverse Effect on
BEKAM.
3. NO DEFAULTS. BEKAM is not, and has not received notice that it
would be with the passage of time, in default or violation of any term,
condition, or provision of: (i) the Articles of Incorporation or Bylaws of
BEKAM, as amended; (ii) any judgment, decree, or order applicable to BEKAM;
or (iii) any loan or credit agreement, note, bond, mortgage, indenture,
contract, agreement, lease, license, or other instrument to which BEKAM is
now a party or by which it or any of its properties or assets may be bound,
except for defaults and violations which, individually or in the aggregate,
would not have a Material Adverse Effect on BEKAM.
4. DISCLOSURE. No representation or warranty made by BEKAM in this
Agreement, nor any document, written information, statement, financial
statement, certificate, or exhibit prepared and furnished or to be prepared
and furnished by BEKAM or their representatives pursuant hereto or in
connection with the transactions contemplated hereby, when taken together,
contains any untrue statement of a material fact, or omits to state a
material fact necessary to make the statements or facts contained herein or
therein not misleading in light of the circumstances under which they were
furnished.
5. RELIANCE. The foregoing representations and warranties are made
by BEKAM with the knowledge and expectation that CPS is placing reliance
thereon.
10
<PAGE>
ARTICLE III.
CONDITIONS PRECEDENT
A. CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective obligations
of each party hereunder shall be subject to the satisfaction prior to or at
the Closings of the following conditions:
(a) NO RESTRAINTS. No statute, rule, regulation, order, decree, or
injunction shall have been enacted, entered, promulgated, or enforced by any
court or Governmental Entity of competent jurisdiction which enjoins or
prohibits the consummation of this Agreement and shall be in effect.
(b) LEGAL ACTION. There shall not be pending or threatened in
writing any action, proceeding, or other application before any court or
Governmental Entity challenging or seeking to restrain or prohibit the
consummation of the transactions contemplated by this Agreement, or seeking
to obtain any material damages.
B. CONDITIONS TO BEKAM'S OBLIGATIONS. The respective obligations of the
BEKAM shall be subject to the satisfaction prior to or at the Closings of the
following conditions unless waived by CPS:
(a) REPRESENTATIONS AND WARRANTIES OF BEKAM. The representations
and warranties of BEKAM set forth in this Agreement shall be true and correct
as of the date of this Agreement and as of the Closings as though made on and
as of the Closings, except: (i) as otherwise contemplated by this Agreement;
or (ii) in respects that do not have a Material Adverse Effect on BEKAM or on
the benefits of the transactions provided for in this Agreement.
(b) PERFORMANCE OF OBLIGATIONS OF BEKAM. BEKAM shall have
performed all agreements and covenants required to be performed by it under
this Agreement prior to the Closings, except for breaches that do not have a
Material Adverse Effect on BEKAM or on the benefits of the transactions
provided for in this Agreement.
C. CONDITIONS TO CPS'S OBLIGATIONS. The obligations of CPS shall be
subject to the satisfaction prior to or at the Closings of the following
conditions unless waived by BEKAM:
(a) REPRESENTATIONS AND WARRANTIES OF CPS. The representations and
warranties of CPS set forth in this Agreement shall be true and correct as of
the date of this Agreement and as of the Closings as though made on and as of
the Closings, except: (i) as otherwise contemplated by this Agreement; or
(ii) in respects that do not have a Material Adverse Effect on CPS or on the
benefits of the transactions provided for in this Agreement. BEKAM shall have
received a certificate signed on behalf of CPS by the Officers and Directors
of CPS to such effect prior to the Final Closing.
(b) PERFORMANCE OF OBLIGATIONS OF CPS. CPS shall have performed
all agreements and covenants required to be performed by it under this
Agreement prior to the Final Closing, except for breaches that do not have a
Material Adverse Effect on CPS or on the benefits of the transactions
provided for in this Agreement. BEKAM shall have received a certificate
signed on behalf of CPS by the Officers and Directors of CPS to such effect
on the Final Closing.
11
<PAGE>
(c) GOVERNMENTAL APPROVALS. All Consents of Governmental Entities
legally required by CPS for the transactions contemplated by this Agreement
shall have been filed, occurred, or been obtained, other than such Consents,
the failure of which to obtain would not have a Material Adverse Effect on
the consummation of the transactions contemplated by this Agreement.
(d) CONSENTS OF OTHER THIRD PARTIES. CPS shall have received and
delivered to BEKAM all requisite consents and approvals of all lenders,
lessors, and other third Parties whose consent or approval is required in
order for CPS to consummate the transactions contemplated by this Agreement,
or in order to permit the continuation after the Closings of the business
activities of CPS in the manner such business is presently carried on by CPS.
BEKAM shall have received copies of any necessary written consent(s) to this
Agreement and the transactions contemplated herein.
(e) MATERIAL ADVERSE CHANGE. Since the date hereof and through the
Final Closing, there shall not have occurred any change, occurrence, or
circumstance in CPS having or reasonably likely to have, individually or in
the aggregate, in the reasonable judgment of BEKAM, a Material Adverse Effect
on CPS.
(f) OPINION OF COUNSEL. BEKAM shall have received an opinion,
dated as of the Final Closing, from counsel to CPS, in form and substance
substantially in the form of Exhibit "A" hereto.
ARTICLE IV.
COVENANTS
A. CONFIDENTIALITY. Each party hereto will hold and will cause its
consultants and advisors to hold in strict confidence, unless compelled to
disclose by judicial or administrative process or, in the opinion of its
counsel, by other requirements of law, all documents and information
concerning the other party furnished it by such other party or its
representatives in connection with the transactions contemplated by this
Agreement (except to the extent that such information can be shown to have
been: (i) previously known by the party to which it was furnished; (ii) in
the public domain through no fault of such party; or (iii) later lawfully
acquired from other sources by the party to which it was furnished), and each
party will not release or disclose such information to any other person,
except its auditors, attorneys, financial advisors, bankers, and other
consultants, and advisors in connection with this Agreement. Each party shall
be deemed to have satisfied its obligation to hold confidential information
concerning or supplied by the other party if it exercises the same care as it
takes to preserve confidentiality for its own similar information. In the
event of termination of this Agreement, each party shall use its best efforts
to return to the other party all documents and copies thereof received from
the other party that contain information subject to the confidentiality
requirements of this Section. Notwithstanding the foregoing, CPS acknowledges
and agrees that following the Initial Closing, BEKAM may issue a press
release regarding the transactions contemplated hereunder.
B. FURTHER ASSURANCES. Each party agrees that upon the request of any
other they will, from time to time, without further consideration, execute
and deliver to such other all such instruments and documents of further
assurance or otherwise, and will do any and all such acts and things as may
be reasonably required to carry out the obligations of such party hereunder
and to consummate the transactions contemplated hereby.
12
<PAGE>
ARTICLE V.
THE CLOSINGS
A. TIME AND PLACE. The Closings shall take place at the offices of
Horwitz & Beam, 2 Venture Plaza, Suite 350, Irvine, CA 92618. The Initial
Closing shall take place upon execution of this Agreement. The Final Closing
shall take place forty-five calendar days after the Initial Closing, or at
such other time and place as the Parties mutually agree upon in writing.
B. DELIVERIES BY THE PARTIES.
5.2.1 THE INITIAL CLOSING.
(a) At the Initial Closing, CPS shall make the following
deliveries to BEKAM:
(i) Certificates representing the CPS Shares that
BEKAM is acquiring as set forth in Section 1.1 above; and
(ii) All original corporate books and records of CPS.
(b) At the Initial Closing, BEKAM shall make deliver to CPS full
payment of the purchase price as set forth in Section 1.1 above.
5.2.2 THE FINAL CLOSING.
(a) At the Final Closing, CPS shall make the following deliveries
to BEKAM:
(i) Certificates representing the CPS Shares that
BEKAM is acquiring as set forth in Section 1.2 above;
(ii) A certificate of good standing for CPS from the
office of the Utah Secretary of State, dated within 60 days of the date of
the Final Closing;
(iii) Federal and state tax clearance certificates
for CPS, dated within 60 days of the date of the Final Closing;
(iv) Properly completed and executed Due Diligence
Checklists and Officer and Director Questionnaires in the form previously
provided to CPS;
(v) A certificate executed by CPS certifying that
all CPS's representations and warranties under this Agreement are true as of
the Final Closing, as though each of those representations and warranties had
been made on that date;
(vi) Certified resolutions of the Board of Directors
of CPS, in form satisfactory to counsel for BEKAM, authorizing the execution
and performance of this Agreement; and
(vii) An opinion of CPS's counsel, dated as of the
Final Closing, as set forth in Section 3.3(f).
13
<PAGE>
(b) At the Final Closing, BEKAM shall deliver to CPS full
payment of the purchase price as set forth in Section 1.2 above.
ARTICLE VI.
INDEMNIFICATION
A. CPS'S INDEMNITY.
(a) Upon receipt of notice thereof, CPS shall, jointly and
severally, indemnify, defend, and hold harmless BEKAM, its agents, employees,
officers, directors, consultants, advisors, attorneys, and accountants from
any and all claims, demands, liabilities, damages, deficiencies, losses,
obligations, costs and expenses, including attorney fees and any costs of
investigation that BEKAM or its agents, employees, officers, directors,
consultants, advisors, attorneys, and accountants shall incur or suffer, that
arise, result from or relate to: (i) any breach of, or failure by CPS to
perform, any of their representations, warranties, covenants, or agreements
in this Agreement or in any schedule, certificate, exhibit, or other
instrument furnished or to be furnished by CPS under this Agreement; and (ii)
the employment of any of CPS's employees which is in violation of any law,
regulation, or ordinance of any Governmental Entity.
(b) BEKAM shall notify promptly CPS of the existence of any claim,
demand, or other matter to which CPS's indemnification obligations would
apply, and shall give them a reasonable opportunity to defend the same at
their own expense and with counsel of their own selection, provided that
BEKAM shall at all times also have the right to fully participate in the
defense. If CPS, within a reasonable time after this notice, fails to defend,
BEKAM shall have the right, but not the obligation, to undertake the defense
of, and, with the written consent of CPS, to compromise or settle the claim
or other matter on behalf, for the account, and at the risk, of CPS.
B. BEKAM'S INDEMNITY.
(a) Upon receipt of notice thereof, BEKAM shall indemnify, defend,
and hold harmless CPS from any and all claims, demands, liabilities, damages,
deficiencies, losses, obligations, costs, and expenses, including attorney
fees and any costs of investigation that CPS shall incur or suffer, that
arise, result from or relate to any breach of, or failure by BEKAM to perform
any of its representations, warranties, covenants, or agreements in this
Agreement or in any schedule, certificate, exhibit, or other instrument
furnished or to be furnished by BEKAM under this Agreement.
(b) CPS shall notify promptly BEKAM of the existence of any claim,
demand or other matter to which BEKAM's indemnification obligations would
apply, and shall give it a reasonable opportunity to defend the same at its
own expense and with counsel of its own selection, provided that CPS shall at
all times also have the right to fully participate in the defense. If BEKAM,
within a reasonable time after this notice, fails to defend, CPS shall have
the right, but not the obligation, to undertake the defense of, and, with the
written consent of BEKAM, to compromise or settle the claim or other matter
on behalf, for the account, and at the risk, of BEKAM.
14
<PAGE>
ARTICLE VII.
DEFAULT, AMENDMENT AND WAIVER
A. DEFAULT. Upon a breach or default under this Agreement by any of the
Parties (following the cure period provided herein), the non-defaulting party
shall have all rights and remedies given hereunder or now or hereafter
existing at law or in equity or by statute or otherwise. Notwithstanding the
foregoing, in the event of a breach or default by any party hereto in the
observance or in the timely performance of any of its obligations hereunder
which is not waived by the non-defaulting party, such defaulting party shall
have the right to cure such default within 15 days after receipt of notice in
writing of such breach or default.
B. WAIVER AND AMENDMENT. Any term, provision, covenant, representation,
warranty, or condition of this Agreement may be waived, but only by a written
instrument signed by the party entitled to the benefits thereof. The failure
or delay of any party at any time or times to require performance of any
provision hereof or to exercise its rights with respect to any provision
hereof shall in no manner operate as a waiver of or affect such party's right
at a later time to enforce the same. No waiver by any party of any condition,
or of the breach of any term, provision, covenant, representation, or
warranty contained in this Agreement, in any one or more instances, shall be
deemed to be or construed as a further or continuing waiver of any such
condition or breach or waiver of any other condition or of the breach of any
other term, provision, covenant, representation, or warranty. No modification
or amendment of this Agreement shall be valid and binding unless it be in
writing and signed by all Parties hereto.
7.3 FAILURE TO SATISFY CONTINGENCIES OR CLOSE. Failure to satisfy any
contingency listed herein or failure to complete the Initial Closing or Final
Closing provides the nonfailing Party "cause" to terminate this Agreement and
constitutes a breach of this Agreement. If a contingency is not satisfied or
a Closing not completed, the nonfailing Party has the right to: (a) terminate
this Agreement for cause; (b) waive the contingency; or (c) modify this
Agreement. If this Agreement is terminated for cause, all deposits and other
items of value shall be immediately returned to both Parties, but the
nonfailing Party shall have all rights and remedies available to them in law
or at equity for damages against the breaching Party..
ARTICLE VIII.
MISCELLANEOUS
A. EXPENSES. Whether or not the transactions contemplated hereby are
consummated, each of the Parties hereto shall bear all taxes of any nature
(including, without limitation, income, franchise, transfer, and sales taxes)
and all fees and expenses relating to or arising from its compliance with the
various provisions of this Agreement and such party's covenants to be
performed hereunder, and except as otherwise specifically provided for
herein, each of the Parties hereto agrees to pay all of its own expenses
(including, without limitation, attorneys and accountants' fees, and printing
expenses) incurred in connection with this Agreement, the transactions
contemplated hereby, the negotiations leading to the same and the
preparations made for carrying the same into effect, and all such taxes,
fees, and expenses of the Parties hereto shall be paid prior to Closing.
B. NOTICES. Any notice, request, instruction, or other document
required by the terms of this Agreement, or deemed by any of the Parties
hereto to be desirable, to be given to any other party hereto shall be in
writing and shall be given by facsimile, personal delivery, overnight
15
<PAGE>
delivery, or mailed by registered or certified mail, postage prepaid, with
return receipt requested, to the following addresses:
TO CPS: CAPITAL PLACEMENT SPECIALISTS, INC.
c/o Shogun Investment Group, Ltd.
Attn: Donald C. Bradley, C.E.O.
P.O. Box 81285
Las Vegas, NV 89180
Fax: (702) 221-0376
TO BEKAM: BEKAM INVESTMENTS, LTD.
Attn: Imran Husain
9461 Charleville Boulevard, Suite 615
Beverly Hills, CA 90212
Fax: (800) 308-3374
WITH A COPY TO: Horwitz & Beam
Attn: Lawrence W. Horwitz, Esq.
2 Venture Plaza, Suite 350
Irvine, CA 92618
Fax: (949) 453-9416
The persons and addresses set forth above may be changed from time to time by
a notice sent as aforesaid. If notice is given by facsimile, personal
delivery, or overnight delivery in accordance with the provisions of this
Section, said notice shall be conclusively deemed given at the time of such
delivery. If notice is given by mail in accordance with the provisions of
this Section, such notice shall be conclusively deemed given seven days after
deposit thereof in the United States mail.
C. ENTIRE AGREEMENT. This Agreement, together with the Schedule and
Exhibits hereto, sets forth the entire agreement and understanding of the
Parties hereto with respect to the transactions contemplated hereby, and
supersedes all prior agreements, arrangements and understandings related to
the subject matter hereof. No understanding, promise, inducement, statement
of intention, representation, warranty, covenant, or condition, written or
oral, express or implied, whether by statute or otherwise, has been made by
any party hereto which is not embodied in this Agreement, or in the schedules
or exhibits hereto or the written statements, certificates, or other
documents delivered pursuant hereto or in connection with the transactions
contemplated hereby, and no party hereto shall be bound by or liable for any
alleged understanding, promise, inducement, statement, representation,
warranty, covenant, or condition not so set forth.
D. SURVIVAL OF REPRESENTATIONS. All statements of fact (including
financial statements) contained in the Schedule, the exhibits, the
certificates, or any other instrument delivered by or on behalf of the
Parties hereto, or in connection with the transactions contemplated hereby,
shall be deemed representations and warranties by the respective party
hereunder. All representations, warranties, agreements, and covenants
hereunder shall survive the Closings and remain effective regardless of any
investigation or audit at any time made by or on behalf of the Parties or of
any information a party may have in respect hereto. Consummation of the
transactions contemplated hereby shall not be deemed or construed to be a
waiver of any right or remedy possessed by any
16
<PAGE>
party hereto, notwithstanding that such party knew or should have known at
the time of Closings that such right or remedy existed.
E. INCORPORATED BY REFERENCE. The schedules, exhibits, and all
documents (including, without limitation, all financial statements) delivered
as part hereof or incident hereto are incorporated as a part of this
Agreement by reference.
F. REMEDIES CUMULATIVE. No remedy herein conferred upon the Parties is
intended to be exclusive of any other remedy and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
G. EXECUTION OF ADDITIONAL DOCUMENTS. Each party hereto shall make,
execute, acknowledge, and deliver such other instruments and documents, and
take all such other actions as may be reasonably required in order to
effectuate the purposes of this Agreement and to consummate the transactions
contemplated hereby.
H. FINDERS' AND RELATED FEES. Each of the Parties hereto is responsible
for, and shall indemnify the other against, any claim by any third party to a
fee, commission, bonus, or other remuneration arising by reason of any
services alleged to have been rendered to or at the instance of said party to
this Agreement with respect to this Agreement or to any of the transactions
contemplated hereby.
I. GOVERNING LAW. This Agreement has been negotiated and executed in
the State of California and shall be construed and enforced in accordance
with the laws of such state.
J. FORUM. Each of the Parties hereto agrees that any action or suit
which may be brought by any party hereto against any other party hereto in
connection with this Agreement or the transactions contemplated hereby may be
brought only in a federal or state court in Orange County, California.
K. BINDING EFFECT AND ASSIGNMENT. This Agreement shall inure to the
benefit of and be binding upon the Parties hereto and their respective heirs,
executors, administrators, legal representatives, and assigns.
L. COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. The Parties agree that facsimile signatures of this Agreement
shall be deemed a valid and binding execution of this Agreement.
8.13 CONFLICT WAIVER: The Parties hereto agree and acknowledge that
Horwitz &Beam ("H&B" or "the Firm") represents Imran Husain, principal of
BEKAM, in connection with various legal matters. H&B drafted this Agreement.
The Parties hereto further acknowledge that they have been informed of the
inherent conflict of interest associated with the representation of Mr.
Husain and the drafting of this Agreement by H&B and waive any action they
may have against H&B regarding such conflicts. All parties to this Agreement
have been given the opportunity to consult with counsel of their choice
regarding their rights under this Agreement.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement,
as of the date first written hereinabove.
17
<PAGE>
BEKAM:
BEKAM INVESTMENTS, LTD.,
a Gibraltar corporation
/s/ Imran Husain
-----------------------------------
By: Imran Husain
--------------------------------
Its:
-------------------------------
CPS:
CAPITAL PLACEMENTS SPECIALISTS, INC.,
a Utah corporation
/s/ Jennifer Ayers
-----------------------------------
By: Jennifer Ayers
--------------------------------
Its: President
-------------------------------
18
<PAGE>
SCHEDULE 1.1
CPS SHARES TO BE TRANSFERRED UPON THE INITIAL CLOSING
See attached list.
<PAGE>
SCHEDULE 1.2
CPS SHARES TO BE TRANSFERRED UPON THE FINAL CLOSING
See attached list.
<PAGE>
EXHIBIT "A"
OPINION LETTER
<PAGE>
[LETTERHEAD]
[CLOSING DATE]
BEKAM INVESTMENTS, LTD.
Attn: Mr. Imran Husain
9461 Charleville Boulevard, Suite 615
Beverly Hills, CA 90212
Re: Capital Placement Specialists, Inc.
Gentlemen:
We have acted as counsel for CAPITAL PLACEMENT SPECIALISTS, INC., a
Utah corporation ("CPS"), in connection with the acquisition by BEKAM
INVESTMENTS, LTD., a Gibraltar corporation ("BEKAM"), of all of the Shares of
CPS. This Opinion is delivered to you pursuant to Section 3.3(f) of that
certain Acquisition Agreement dated January 5, 1999, by and between CPS and
BEKAM (the "Acquisition Agreement").
In connection with this Opinion, we have reviewed: (i) the
Acquisition Agreement, and (ii) the corporate books and records of CPS.
Based on the foregoing, we are of the opinion that:
(1) CPS has been duly incorporated and is a validly existing
corporation in good standing under the laws of Utah with full power and
authority to own, operate and/or lease its properties and assets and to carry
on its business as currently contemplated.
(2) The Acquisition Agreement has been duly authorized, executed,
and delivered by CPS and is a legal, valid, and binding agreement of CPS
enforceable in accordance with its terms, except as rights to indemnity and
contribution thereunder may be limited by federal or state securities laws,
and except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, or similar laws affecting creditors' rights generally and
subject to general principles of equity.
(3) CPS has authorized capital of fifty million shares of common
stock, $0.001 par value, of which 2,340,100 Shares are issued or outstanding
(collectively, the "Capital Stock"). All Shares of the Capital Stock will be,
upon issuance pursuant to the Acquisition Agreement, duly authorized, validly
issued, fully paid and non-assessable.
(4) To the best of our knowledge, other than as set forth in the
Acquisition Agreement, there are no outstanding or authorized subscriptions,
options, warrants, calls, rights, commitments, or other agreements of any
character that obligate CPS to issue any additional shares of any capital
stock or any securities convertible into or evidencing the right to subscribe
for any shares of CPS's capital stock. The Utah Corporations Code does not
contain any "statutory preemptive rights," as hereinafter defined, regulating
CPS. "Statutory preemptive rights" shall mean a right provided by the Utah
Corporations Code, providing an existing
<PAGE>
shareholder of CPS with a right to maintain its percentage interest in the
corporation, with or without the payment of additional consideration.
(5) The execution, delivery and performance of the Acquisition
Agreement and the consummation of the transactions contemplated thereby will
not (unless otherwise contemplated by the Acquisition Agreement):
(a) Constitute a violation (with or without the giving of
notice or lapse of time, or both) of any provision of any law, regulation or
rule or any judgment, decree, or order known to us of any court, agency, or
other governmental authority applicable to CPS;
(b) Require any consent, approval or authorization of
any government authority;
(c) Result in a default (with or without the giving of
notice or lapse of time or both) under, acceleration or termination of, or
the creation by any party of the right to accelerate, terminate, modify or
cancel, any material agreement to which CPS is a party or by which it is
bound or to which any assets of CPS are subject;
(d) Result in the creation of any lien or encumbrance upon
the assets of CPS pursuant to any material agreement;
(e) Conflict with, or result in a breach of, or constitute
default under any provision of CPS's Articles of Incorporation or Bylaws.
(6) There are no claims, actions, suits, arbitrations, criminal or
civil investigations or proceedings pending or overtly threatened in writing
against CPS before or by a court or state or federal governmental or
regulatory authority, department, commission, board, bureau, or agency or
instrumentality.
This Opinion and the matters addressed herein are as of the date
hereof, and we undertake no, and hereby disclaim any obligation to advise you
of any change in any matter set forth herein occurring after the date hereof.
This Opinion is solely for your benefit and no other persons shall be
entitled to rely upon the opinions herein expressed. This letter is limited
to the matters expressly stated herein and no opinion is implied or may be
inferred beyond the matters expressly stated. Without our prior written
consent, this Opinion may not be quoted in whole or in part or otherwise
referred to in any document and may not be furnished to any other person or
entity.
Sincerely,
<PAGE>
CPS DISCLOSURE SCHEDULE
The items set forth below are exceptions to the representations and warranties
of CPS set forth in Section 2.1 of the Agreement. Any matter set forth herein as
an exception to a section of the Agreement shall be deemed to constitute an
exception to all other applicable sections of the Agreement. Capitalized terms
not otherwise defined herein shall have the meaning ascribed to them in the
Agreement.
<TABLE>
<CAPTION>
Section Exception
- ------- ---------
<S> <C>
2.1.23 Dispute with The Interactive Business Channel
regarding payment of Finders Fees. On December 30,
1998, the Interactive Business Channel signed a
Non-Circumvention/Non-Disclosure Agreement.
Documentation attached hereto. Bekam is aware of this
dispute and is settling this dispute with a release
of Bekam, Shogan, and CPS.
</TABLE>
<PAGE>
BEKAM DISCLOSURE SCHEDULE
The items set forth below are exceptions to the representations and
warranties of BEKAM set forth in Section 2.3 of the Agreement. Any matter set
forth herein as an exception to a section of the Agreement shall be deemed to
constitute an exception to all other applicable sections of the Agreement.
Capitalized terms not otherwise defined herein shall have the meaning
ascribed to them in the Agreement.
<TABLE>
<CAPTION>
Section Exception
- ------- ---------
<S> <C>
</TABLE>
<PAGE>
CERTIFICATE OF THE OFFICERS
OF
CAPITAL PLACEMENT SPECIALISTS, INC.
The undersigned hereby certify that they are, respectively, the duly
elected, qualified and acting President and Director, Vice President and
Director, and Secretary and Treasurer of CAPITAL PLACEMENT SPECIALISTS, INC.,
a Utah corporation (the "Company"), and, as such, are authorized to execute
this certificate on behalf of the Company and do further certify as follows:
1. This certificate is being delivered pursuant to Article 3.3(a)
and Article 3.3(b) of that certain Acquisition Agreement dated January 5,
1999 (the "Agreement"), by and between the Company and BEKAM INVESTMENTS,
LTD., a Gibraltar corporation ("BEKAM"). All capitalized terms not otherwise
defined herein shall have the respective meanings assigned to them in the
Agreement.
2. All representations and warranties of the Company set forth in
the Agreement are true and correct as of the date of the Agreement and as of
the Initial Closing and Final Closing as though made on and as of the
Closings, except: (i) as otherwise contemplated by the Agreement; or (ii) in
respects that do not have a Material Adverse Effect on the Company or on the
benefits of the transactions provided for in the Agreement.
3. The Company has performed all agreements and covenants required
to be performed by it under the Agreement prior to the Closings, except for
breaches that do not have a Material Adverse Effect on the Company or on the
benefits of the transactions provided for in the Agreement.
IN WITNESS WHEREOF, the undersigned have executed this certificate
as of the ____ day of January, 1999.
CAPITAL PLACEMENT SPECIALISTS, INC.,
a Utah corporation
/s/ Jennifer Ayres
----------------------------------------
By: Jennifer C. Ayres
Its: President and Director
/s/ Stephen Stoker
----------------------------------------
By: Stephen C. Stoker
Its: Vice President and Director
/s/ Sherri Henderson
----------------------------------------
By: Sherri Henderson
Its: Secretary and Treasurer
<PAGE>
[LETTERHEAD]
January 5, 1999
BEKAM INVESTMENTS, LTD. ACQUISITION AGREEMENT WITH CAPITAL
PLACEMENT SPECIALISTS, INC.
CLOSING MEMORANDUM
This Memorandum outlines the action taken in connection with the
sale by Capital Placement Specialists, Inc., a Utah corporation ("CPS"), of
100% of its issued and outstanding capital stock (the "capital stock") to
Bekam Investments, Ltd., a Gibraltar ("BEKAM") in exchange for the payment of
a total of $300,000 and other consideration, such sale being made pursuant to
an Acquisition Agreement (the "Agreement"), dated January 5, 1999, between
the CPS and BEKAM. All capitalized terms used herein have that meaning as
defined in the Agreement.
1. ACTIONS TAKEN PRIOR TO THE CLOSING.
A. ACTIONS TAKEN BY BEKAM AND CPS. At a meetings of the
respective Board of Directors of each party, the respective Boards of
Directors took all corporate action necessary to: (i) authorize the purchase
and sale of the capital stock; (ii) authorize the execution and delivery of
the Agreement; and (iii) fulfill the conditions precedent of each party as
set forth in the Agreement.
B. TIMING. The Parties agreed that the transaction
would be completed in two separate steps:
i. THE SIGNING. The signing of the
Agreement and all other documents related thereto would be held on January 5,
1999 (the "Signing Date"), at the offices of Horwitz & Beam, Two Venture
Plaza, Suite 350, Irvine, California, 92618.
ii. THE INITIAL CLOSING. The Initial Closing
of the Agreement, consisting of the exchange of 2,265,100 fully transferable
Shares of the issued and outstanding Shares of CPS and all original corporate
books and records of CPS delivered by CPS in exchange for the payment of
$200,000 delivered by BEKAM, would be held as soon as practicable after the
Signing Date at the offices of Horwitz & Beam, Two Venture Plaza, Suite 350,
Irvine, California, 92618.
<PAGE>
iii. THE FINAL CLOSING. The Final Closing,
consisting of the delivery by CPS of remaining 165,000 fully transferable
Shares of the issued and outstanding Shares of CPS and any and all other
remaining outstanding documents as set forth in the Agreement by CPS in
exchange for the payment of $100,000 delivered by BEKAM would occur within
forty-five calendar days of the Initial Closing.
2. THE SIGNING AND CLOSINGS
A. THE SIGNING. The Signing was held on January 5, 1999
(the "Signing Date"), at the offices of the Horwitz & Beam, Two Venture
Plaza, Suite 350, Irvine, California, 92618. Both Parties properly executed
the Agreement.
B. THE INITIAL CLOSING.
The Initial Closing was held on January 5, 1999 (the
"Initial Closing Date"), at the offices of Horwitz & Beam, Two Venture Plaza,
Suite 350, Irvine, California, 92618.
At the Initial Closing, BEKAM delivered to CPS, good and cleared
funds in the amount of $200,000.
At the Initial Closing, CPS delivered to BEKAM, the shares of stock
as designated in Schedule 1.1 of the Agreement. Also at the Initial Closing,
CPS delivered to BEKAM all of the original corporate books and records of CPS.
The Initial Closing was then declared completed.
C. THE FINAL CLOSING.
The Final Closing was held on January 5, 1999 (the "Final
Closing Date"), at the offices of Horwitz & Beam, Two Venture Plaza, Suite
350, Irvine, California, 92618.
At the Final Closing, BEKAM delivered to CPS, good and cleared funds
in the amount of $100,000.
At the Final Closing, CPS delivered to BEKAM, the shares of stock as
designated in Schedule 1.2 of the Agreement. Also at the Final Closing, CPS
executed and delivered to BEKAM the following documents: (i) a Certificate,
certified by the Secretary of State of the State of Utah, dated within 60
days of the Final Closing Date, as to the due incorporation and corporate
good standing of CPS; (ii) Federal and State Tax Clearance Certificates for
CPS, dated within 60 days of the Final Closing Date; (iii) a Certificate,
duly certified by all officers and directors of CPS; (iv) the Legal Opinion
in a form substantially as set forth in Exhibit A to the Agreement; and (v) a
Certificate, duly executed by all of the officers and directors of CPS, as
required by Sections 3.3(a) and 3.3(b) of the Agreement.
The Final Closing was then declared completed.
<PAGE>
EXHIBIT 10.3
EMPLOYMENT AGREEMENT FOR IMRAN HUSAIN
DATED FEBRUARY 1, 1999
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("AGREEMENT") IS MADE, ENTERED INTO, AND
EFFECTIVE AS OF FEBRUARY 1, 1999 (THE "EFFECTIVE DATE"), BY AND BETWEEN
CONVERGE GLOBAL, INC., A UTAH CORPORATION ("COMPANY"), AND IMRAN HUSAIN, AN
INDIVIDUAL ("EMPLOYEE").
RECITALS
A. COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING IN-DEPTH AND
UNIQUE E-COMMERCE SOLUTIONS WITH SPECIFIC EMPHASIS ON AUDIO AND VIDEO
DELIVERY OVER THE INTERNET AND MAINTAINS AN OFFICE IN THE STATE OF CALIFORNIA.
B. COMPANY DESIRES TO HAVE AN EMPLOYMENT AGREEMENT WITH EMPLOYEE AS
ITS PRESIDENT SUBJECT TO THE TERMS AND CONDITIONS OF THIS AGREEMENT.
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS AND
CONDITIONS CONTAINED HEREIN, THE PARTIES HERETO HEREBY AGREE AS FOLLOWS:
AGREEMENT
IX.. TERM AND DUTIES. COMPANY HEREBY EMPLOYS EMPLOYEE AS PRESIDENT AS OF THE
EFFECTIVE DATE AND EMPLOYEE AGREES TO ENTER INTO AND REMAIN IN THE EMPLOY OF
COMPANY UNTIL THIS AGREEMENT IS TERMINATED AS PROVIDED HEREIN BELOW. EMPLOYEE
SHALL FAITHFULLY AND DILIGENTLY PERFORM ALL PROFESSIONAL DUTIES AND ACTS AS
PRESIDENT AS MAY BE REQUESTED AND REQUIRED OF EMPLOYEE BY COMPANY OR ITS
DIRECTORS. EMPLOYEE SHALL DEVOTE SUCH TIME AND ATTENTION TO THE BUSINESS OF
COMPANY AS SHALL BE REQUIRED TO PERFORM THE REQUIRED SERVICES AND DUTIES.
EMPLOYEE AT ALL TIMES DURING THE EMPLOYMENT TERM SHALL STRICTLY ADHERE TO AND
OBEY ALL POLICIES, RULES AND REGULATIONS ESTABLISHED FROM TIME TO TIME
GOVERNING THE CONDUCT OF EMPLOYEES OF COMPANY.
X.. EXCLUSIVITY, NON-DISCLOSURE.
a. EMPLOYEE AGREES TO PERFORM EMPLOYEE'S SERVICES EFFICIENTLY AND TO
THE BEST OF EMPLOYEE'S ABILITY. EMPLOYEE AGREES THROUGHOUT THE TERM OF THIS
AGREEMENT TO DEVOTE HIS TIME, ENERGY AND SKILL TO THE BUSINESS OF THE COMPANY
AND TO THE PROMOTION OF THE BEST INTERESTS OF THE COMPANY.
b. EMPLOYEE AGREES THAT HE SHALL NOT AT ANY TIME, EITHER DURING OR
SUBSEQUENT TO HIS EMPLOYMENT TERM, UNLESS EXPRESSLY CONSENTED TO IN WRITING
BY COMPANY, EITHER DIRECTLY OR INDIRECTLY USE OR DISCLOSE TO ANY PERSON OR
ENTITY ANY CONFIDENTIAL INFORMATION OF ANY KIND, NATURE OR DESCRIPTION
CONCERNING ANY MATTERS AFFECTING OR RELATING TO THE BUSINESS OF COMPANY,
INCLUDING, BUT NOT LIMITED TO, INFORMATION CONCERNING THE CUSTOMERS OF
COMPANY, COMPANY'S MARKETING METHODS, COMPENSATION PAID TO EMPLOYEES,
INDEPENDENT CONTRACTORS OR SUPPLIERS AND OTHER TERMS OF THEIR EMPLOYMENT OR
CONTRACTUAL RELATIONSHIPS, FINANCIAL AND BUSINESS RECORDS, KNOW-HOW, OR ANY
OTHER INFORMATION CONCERNING THE BUSINESS OF COMPANY, ITS MANNER OF
OPERATIONS, OR OTHER DATA OF ANY KIND, NATURE OR DESCRIPTION. EMPLOYEE AGREES
THAT THE ABOVE INFORMATION AND ITEMS ARE IMPORTANT, MATERIAL AND CONFIDENTIAL
TRADE SECRETS AND THESE AFFECT THE SUCCESSFUL CONDUCT OF COMPANY'S BUSINESS
AND ITS GOODWILL.
<PAGE>
XI. COMPENSATION.
a. SUBJECT TO THE TERMINATION OF THIS AGREEMENT AS PROVIDED HEREIN,
COMPANY SHALL COMPENSATE EMPLOYEE FOR HIS SERVICES HEREUNDER AT A MONTHLY
SALARY OF FIVE THOUSAND DOLLARS ($5,000) PAYABLE IN ACCORDANCE WITH THE
COMPANY'S PRACTICES, LESS NORMAL PAYROLL DEDUCTIONS, AND PRORATED FOR THE
ACTUAL EMPLOYMENT TERM.
b. EMPLOYEE IS ALSO ELIGIBLE TO RECEIVE SUCH ADDITIONAL COMPENSATION
AS THE BOARD OF DIRECTORS OF COMPANY DETERMINES IS PROPER IN RECOGNITION OF
EMPLOYEE'S CONTRIBUTIONS AND SERVICES TO COMPANY. SUCH ADDITIONAL
COMPENSATION SHALL BE PAID TO EMPLOYEE ON THE ANNIVERSARY DATE OF THIS
AGREEMENT DURING THE EMPLOYMENT TERM, AND AT SUCH OTHER TIMES AS MAY BE
DETERMINED BY THE BOARD OF DIRECTORS.
c. IN ADDITION TO THE COMPENSATION SET FORTH ABOVE, EMPLOYEE SHALL
BE ENTITLED TO PARTICIPATE IN OR TO RECEIVE BENEFITS UNDER ALL OF COMPANY'S
EMPLOYEE BENEFIT PLANS MADE AVAILABLE BY COMPANY NOW OR IN THE FUTURE TO
SIMILARLY SITUATED EMPLOYEES, SUBJECT TO THE TERMS, CONDITIONS AND OVERALL
ADMINISTRATION OF SUCH PLANS.
(i) PLAN PARTICIPATION. EMPLOYEE SHALL BE ENTITLED TO
PARTICIPATE IN OR TO RECEIVE BENEFITS UNDER ALL OF COMPANY'S EMPLOYEE BENEFIT
PLANS MADE AVAILABLE BY COMPANY OR IN THE FUTURE TO SIMILARLY SITUATED
EMPLOYEES, SUBJECT TO THE TERMS, CONDITIONS AND OVERALL ADMINISTRATION OF
SUCH PLANS, INCLUDING BUT NOT LIMITED TO 401(k) PLANS, IRA PLANS, E.R.I.S.A
PLANS, ANY OTHER RETIREMENT OR BENEFIT PLANS THAT THE COMPANY HAS MADE
AVAILABLE TO SIMILARLY SITUATED EMPLOYEES.
XII. EXPENSES. COMPANY SHALL REIMBURSE EMPLOYEE FOR ALL REASONABLE
BUSINESS RELATED EXPENSES INCURRED BY EMPLOYEE IN THE COURSE OF HIS NORMAL
DUTIES ON BEHALF OF THE COMPANY. IN COMPENSATING EMPLOYEE FOR EXPENSES,
THE ORDINARY AND USUAL BUSINESS GUIDELINES AND DOCUMENTATION REQUIREMENTS
SHALL BE ADHERED TO BY COMPANY AND EMPLOYEE.
a. BUSINESS EXPENSES. EMPLOYEE WILL BE REQUIRED TO INCUR TRAVEL,
MEALS, ENTERTAINMENT AND OTHER BUSINESS EXPENSES ON BEHALF OF THE COMPANY IN
THE PERFORMANCE OF EMPLOYEE'S DUTIES HEREUNDER. COMPANY WILL REIMBURSE
EMPLOYEE FOR ALL SUCH REASONABLE BUSINESS EXPENSES INCURRED BY EMPLOYEE IN
CONNECTION WITH COMPANY'S BUSINESS UPON PRESENTATION OF RECEIPTS OR OTHER
ACCEPTABLE DOCUMENTATION OF THE EXPENDITURES.
XIII. VACATION. EMPLOYEE SHALL BE ENTITLED TO ACCRUE TWO (2) VACATION WEEKS
WITH PAY DURING EACH EMPLOYMENT YEAR, TO BE TAKEN AT SUCH TIMES AS MAY BE
CONVENIENT TO COMPANY AND EMPLOYEE. ANY VACATION TIME NOT USED IN ANY ONE
YEAR MAY BE CARRIED FORWARD TO SUBSEQUENT EMPLOYMENT YEARS. FOR PURPOSES OF
THIS AGREEMENT, "EMPLOYMENT YEARS" SHALL MEAN THE SUCCESSIVE ONE (1) YEAR
PERIODS BEGINNING ON THE EFFECTIVE DATE OF THIS AGREEMENT AND ON EACH
ANNIVERSARY DATE OF THE EFFECTIVE DATE OF THIS AGREEMENT DURING THE TERM OF
THIS AGREEMENT.
XIV. INVENTIONS AND PATENTS. ALL PROCESSES, INVENTIONS, PATENTS, COMPUTER
SOFTWARE, COPYRIGHTS, TRADEMARKS AND OTHER INTANGIBLE RIGHTS (COLLECTIVELY
REFERRED TO AS "INTELLECTUAL PROPERTY") THAT MAY BE CONCEIVED OR DEVELOPED BY
EMPLOYEE DURING THE EMPLOYMENT TERM, EITHER ALONE OR WITH OTHERS, MADE OR
CONCEIVED BY HIM SHALL REMAIN THE SOLE PROPERTY OF COMPANY.
XV. DISABILITY OF EMPLOYEE.
a. EMPLOYEE SHALL BE CONSIDERED DISABLED IF, DUE TO ILLNESS OR INJURY,
EITHER PHYSICAL OR MENTAL, EMPLOYEE IS UNABLE TO PERFORM EMPLOYEE'S CUSTOMARY
DUTIES AS AN EMPLOYEE OF COMPANY FOR MORE THAN THIRTY (30) DAYS IN THE
AGGREGATE OUT OF A PERIOD OF TWELVE (12) CONSECUTIVE MONTHS. THE DISABILITY
SHALL BE DETERMINED BY A CERTIFICATION FROM A PHYSICIAN.
<PAGE>
b. IF EMPLOYEE IS DETERMINED TO BE DISABLED, COMPANY SHALL CONTINUE TO
PAY EMPLOYEE'S BASE SALARY FOR THE INITIAL NINETY (90) DAYS OF "DISABILITY."
THE CONTINUATION OF THE SALARY COMPENSATION AFTER THE INITIAL NINETY (90)
DAYS SHALL BE DETERMINED BY THE BOARD OF DIRECTORS OF THE COMPANY.
XVI. TERMINATION BY COMPANY.
a. UNLESS TERMINATED EARLIER AS PROVIDED IN THIS AGREEMENT, EMPLOYEE
SHALL BE EMPLOYED FOR A TERM COMMENCING ON THE EFFECTIVE DATE AND ENDING ONE
YEAR THEREAFTER. THEREAFTER, THE EMPLOYMENT TERM SHALL CONTINUE ON AN AT WILL
BASIS UNTIL TERMINATED AT THE OPTION OF COMPANY OR EMPLOYEE UPON THIRTY (30)
DAYS PRIOR WRITTEN NOTICE. THIS AGREEMENT WILL TERMINATE IMMEDIATELY UPON
EMPLOYEE'S DEATH.
b. COMPANY MAY TERMINATE THIS AGREEMENT FOR CAUSE AT ANY TIME WITHOUT
NOTICE. FOR PURPOSES OF THIS AGREEMENT, THE TERM "CAUSE" SHALL INCLUDE, BUT
NOT BE LIMITED TO, THE FOLLOWING: A MATERIAL BREACH OF OR FAILURE TO PERFORM
ANY COVENANT OR OBLIGATION IN THIS AGREEMENT, DISLOYALTY, DISHONESTY, NEGLECT
OF DUTIES, UNPROFESSIONAL CONDUCT, ACTS OF MORAL TURPITUDE, DISAPPEARANCE,
FELONIOUS CONDUCT OR FRAUD. DAMAGES WILL BE CALCULATED ACCORDINGLY UNDER
SECTION 16 OF THIS AGREEMENT.
c. IF COMPANY TERMINATES THIS AGREEMENT WITHOUT CAUSE, EMPLOYEE SHALL
RECEIVE LIQUIDATED DAMAGES IN ACCORDANCE WITH SECTION 16 HEREIN.
XVII. TERMINATION BY EMPLOYEE.
a. EMPLOYEE MAY TERMINATE THIS AGREEMENT WITHOUT CAUSE UPON THIRTY
(30) DAYS PRIOR WRITTEN NOTICE TO COMPANY.
b. EMPLOYEE MAY TERMINATE THIS AGREEMENT IMMEDIATELY WITH CAUSE, IN
WHICH EVENT EMPLOYEE SHALL RECEIVE LIQUIDATED DAMAGES IN ACCORDANCE WITH
SECTION 16 HEREIN. FOR THE PURPOSES OF THIS AGREEMENT, "CAUSE" FOR
TERMINATION BY EMPLOYEE SHALL BE A BREACH OF ANY MATERIAL COVENANT OR
OBLIGATION HEREUNDER, THE VOLUNTARY OR INVOLUNTARY DISSOLUTION OF THE
COMPANY, ANY MERGER OR CONSOLIDATION IN WHICH THE COMPANY IS NOT THE
SURVIVING OR RESULTING CORPORATION, ANY TRANSFER OF ALL OR SUBSEQUENTLY ALL
OF THE ASSETS OF COMPANY, TRANSFER OF A MAJORITY OF SHARES OF THE COMPANY BY
ONE OR MORE SHAREHOLDERS IN ONE OR MORE TRANSACTIONS, OR THE ISSUANCE OF
SHARES OF COMPANY CONSTITUTING A MAJORITY OF THE OUTSTANDING SHARES
IMMEDIATELY FOLLOWING SUCH ISSUANCE.
10. BINDING EFFECT. THIS AGREEMENT SHALL BE BINDING UPON AND INURE TO THE
BENEFIT OF THE PARTIES HERETO THEIR RESPECTIVE DEVISEES, LEGATEES, HEIRS,
LEGAL REPRESENTATIVES, SUCCESSORS, AND PERMITTED ASSIGNS. THE PRECEDING
SENTENCE SHALL NOT AFFECT ANY RESTRICTION ON ASSIGNMENT SET FORTH ELSEWHERE
IN THIS AGREEMENT.
11. EFFECT OF COMBINATION OR DISSOLUTION. THIS AGREEMENT SHALL NOT BE
TERMINATED BY THE VOLUNTARY OR INVOLUNTARY DISSOLUTION OF COMPANY, OR BY ANY
MERGER OR CONSOLIDATION IN WHICH COMPANY IS NOT THE SURVIVING OR RESULTING
CORPORATION, OR UPON ANY TRANSFER OF ALL OR SUBSTANTIALLY ALL OF THE
OUTSTANDING SHARES OR ASSETS OF COMPANY. INSTEAD , THE PROVISIONS OF THIS
AGREEMENT SHALL BE BINDING ON AND INURE TO THE BENEFIT OF COMPANY'S
CREDITORS, THE SURVIVING BUSINESS ENTITY OR THE BUSINESS ENTITY TO WHICH SUCH
SHARES OR ASSETS SHALL BE TRANSFERRED.
<PAGE>
12. ARBITRATION. IF A DISPUTE OR CLAIM SHALL ARISE WITH RESPECT TO ANY OF
THE TERMS OR PROVISIONS OF THIS AGREEMENT, OR WITH RESPECT TO THE PERFORMANCE
BY EITHER OF THE PARTIES UNDER THIS AGREEMENT, OTHER THAN A DISPUTE WITH
RESPECT TO SECTION 2 OF THIS AGREEMENT, THEN EITHER PARTY MAY, WITH NOTICE AS
HEREIN PROVIDED, REQUIRE THAT THE DISPUTE BE SUBMITTED UNDER THE COMMERCIAL
ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION ("AAA"). EACH PARTY
SHALL BEAR ONE-HALF (1/2) OF THE COST OF APPOINTING THE ARBITRATOR AND OF
PAYING SUCH ARBITRATOR'S FEES. THE WRITTEN DECISION OF THE ARBITRATOR(S)
ULTIMATELY APPOINTED BY OR FOR BOTH PARTIES SHALL BE BINDING AND CONCLUSIVE
ON THE PARTIES. JUDGMENT MAY BE ENTERED ON SUCH WRITTEN DECISION OF THE
SINGLE ARBITRATOR IN ANY COURT HAVING JURISDICTION AND THE PARTIES CONSENT TO
THE JURISDICTION OF THE MUNICIPAL AND SUPERIOR COURT OF ORANGE COUNTY,
CALIFORNIA FOR THIS PURPOSE. ANY ARBITRATION UNDERTAKEN PURSUANT TO THE TERMS
OF THIS SECTION SHALL OCCUR IN ORANGE COUNTY, CALIFORNIA.
13. ASSIGNMENT. SUBJECT TO ALL OTHER PROVISIONS OF THIS AGREEMENT, ANY
ATTEMPT TO ASSIGN OR TRANSFER THIS AGREEMENT OR ANY OF THE RIGHTS CONFERRED
HEREBY, BY JUDICIAL PROCESS OR OTHERWISE, TO ANY PERSON, FIRM, COMPANY, OR
CORPORATION WITHOUT THE PRIOR WRITTEN CONSENT OF THE OTHER PARTY, SHALL BE
INVALID, AND MAY, AT THE OPTION OF SUCH OTHER PARTY, RESULT IN AN INCURABLE
EVENT OF DEFAULT RESULTING IN TERMINATION OF THIS AGREEMENT AND ALL RIGHTS
HEREBY CONFERRED.
14. CHOICE OF LAW. THIS AGREEMENT AND THE RIGHTS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF CALIFORNIA INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY, PERFORMANCE,
AND ENFORCEMENT AND WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICT OF
LAWS.
15. INDEMNIFICATION. COMPANY SHALL INDEMNIFY, DEFEND AND HOLD EMPLOYEE
HARMLESS, TO THE FULLEST EXTENT PERMITTED BY LAW, FOR ALL CLAIMS, DEMANDS,
LOSSES, COSTS, EXPENSES, OBLIGATIONS, LIABILITIES, DAMAGES, RECOVERIES AND
DEFICIENCIES, INCLUDING INTEREST, PENALTIES AND REASONABLE ATTORNEY'S FEES
THAT EMPLOYEE SHALL INCUR OR SUFFER THAT ARISE FROM, RESULT FROM OR RELATE TO
THE DISCHARGE OF EMPLOYEE'S DUTIES UNDER THIS AGREEMENT. COMPANY SHALL
MAINTAIN ADEQUATE INSURANCE FOR THIS PURPOSE OR SHALL ADVANCE EMPLOYEE ANY
EXPENSES INCURRED IN DEFENDING ANY SUCH PROCEEDING OR CLAIM TO THE MAXIMUM
EXTENT PERMITTED BY LAW.
16. LIQUIDATED DAMAGES. IN THE EVENT OF ANY MATERIAL BREACH OF THIS
AGREEMENT BY COMPANY, EMPLOYEE AT HIS SOLE OPTION, MAY TERMINATE THIS
AGREEMENT AND, AT HIS SOLE OPTION, RECEIVE AS LIQUIDATED DAMAGES (THE
"LIQUIDATED DAMAGES") ONE OF THE FOLLOWING:
a. THE FULL AMOUNT OF THE SALARY AND INCENTIVE COMPENSATION PROVIDED
FOR IN SECTION 3 OF THIS AGREEMENT FOR THE REMAINING TERM OF THIS AGREEMENT.
THE SUM PAYABLE TO EMPLOYEE UNDER THIS SECTION SHALL BE PAYABLE IN MONTHLY
INSTALLMENTS ON THE FIRST DAY OF EACH MONTH, BEGINNING ONE MONTH FOLLOWING
THE DATE OF TERMINATION OF EMPLOYMENT.
b. THE LIQUIDATED DAMAGES SHALL NOT BE LIMITED OR REDUCED BY AMOUNTS
THAT EMPLOYMENT MIGHT OTHERWISE EARN OR BE ABLE TO EARN DURING THE PERIOD
BETWEEN TERMINATION OF HIS EMPLOYMENT UNDER THIS AGREEMENT AND PAYMENT OF THE
LIQUIDATED DAMAGES. THE PROVISIONS OF THIS SECTION SHALL BE IN ADDITION TO
ANY AND ALL RIGHTS EMPLOYEE MAY HAVE IN EQUITY OR AT LAW TO REQUIRE COMPANY
TO COMPLY WITH OR TO PREVENT THE BREACH BY COMPANY OF THIS AGREEMENT.
17. JURISDICTION. THE PARTIES SUBMIT TO THE JURISDICTION OF THE COURTS OF
THE STATE OF CALIFORNIA OR A FEDERAL COURT EMPANELED IN THE STATE OF
CALIFORNIA FOR THE RESOLUTION OF ALL LEGAL DISPUTES ARISING UNDER THE TERMS
OF THIS AGREEMENT, INCLUDING, BUT NOT LIMITED TO, ENFORCEMENT OF ANY
ARBITRATION AWARD.
<PAGE>
18. ENTIRE AGREEMENT. EXCEPT AS PROVIDED HEREIN, THIS AGREEMENT, INCLUDING
EXHIBITS, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES, AND SUPERSEDES ALL
EXISTING NEGOTIATIONS, REPRESENTATIONS, OR AGREEMENTS AND ALL OTHER ORAL,
WRITTEN, OR OTHER COMMUNICATIONS BETWEEN THEM CONCERNING THE SUBJECT MATTER
OF THIS AGREEMENT. THERE ARE NO REPRESENTATIONS, AGREEMENTS, ARRANGEMENTS, OR
UNDERSTANDINGS, ORAL OR WRITTEN, BETWEEN AND AMONG THE PARTIES HERETO
RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT THAT ARE NOT FULLY EXPRESSED
HEREIN.
19. SEVERABILITY. IF ANY PROVISION OF THIS AGREEMENT IS UNENFORCEABLE,
INVALID, OR VIOLATES APPLICABLE LAW, SUCH PROVISION, OR UNENFORCEABLE PORTION
OF SUCH PROVISION, SHALL BE DEEMED STRICKEN AND SHALL NOT AFFECT THE
ENFORCEABILITY OF ANY OTHER PROVISIONS OF THIS AGREEMENT.
20. CAPTIONS. THE CAPTIONS IN THIS AGREEMENT ARE INSERTED ONLY AS A MATTER
OF CONVENIENCE AND FOR REFERENCE AND SHALL NOT BE DEEMED TO DEFINE, LIMIT,
ENLARGE, OR DESCRIBE THE SCOPE OF THIS AGREEMENT OR THE RELATIONSHIP OF THE
PARTIES, AND SHALL NOT AFFECT THIS AGREEMENT OR THE CONSTRUCTION OF ANY
PROVISIONS HEREIN.
21. MODIFICATION. NO CHANGE, MODIFICATION, ADDITION, OR AMENDMENT TO THIS
AGREEMENT SHALL BE VALID UNLESS IN WRITING AND SIGNED BY ALL PARTIES HERETO.
22. ATTORNEYS' FEES. EXCEPT AS OTHERWISE PROVIDED HEREIN, IF A DISPUTE
SHOULD ARISE BETWEEN THE PARTIES INCLUDING, BUT NOT LIMITED TO ARBITRATION,
THE PREVAILING PARTY SHALL BE REIMBURSED BY THE NON-PREVAILING PARTY FOR ALL
REASONABLE EXPENSES INCURRED IN RESOLVING SUCH DISPUTE, INCLUDING REASONABLE
ATTORNEYS' FEES EXCLUSIVE OF SUCH AMOUNT OF ATTORNEYS' FEES AS SHALL BE A
PREMIUM FOR RESULT OR FOR RISK OF LOSS UNDER A CONTINGENCY FEE ARRANGEMENT.
23. TAXES. ANY INCOME TAXES REQUIRED TO BE PAID IN CONNECTION WITH THE
PAYMENTS DUE HEREUNDER, SHALL BE BORNE BY THE PARTY REQUIRED TO MAKE SUCH
PAYMENT. ANY WITHHOLDING TAXES IN THE NATURE OF A TAX ON INCOME SHALL BE
DEDUCTED FROM PAYMENTS DUE, AND THE PARTY REQUIRED TO WITHHOLD SUCH TAX SHALL
FURNISH TO THE PARTY RECEIVING SUCH PAYMENT ALL DOCUMENTATION NECESSARY TO
PROVE THE PROPER AMOUNT TO WITHHOLD OF SUCH TAXES AND TO PROVE PAYMENT TO THE
TAX AUTHORITY OF SUCH REQUIRED WITHHOLDING.
24. NOT FOR THE BENEFIT OF CREDITORS OR THIRD PARTIES. THE PROVISIONS OF
THIS AGREEMENT ARE INTENDED ONLY FOR THE REGULATION OF RELATIONS AMONG THE
PARTIES. THIS AGREEMENT IS NOT INTENDED FOR THE BENEFIT OF CREDITORS OF THE
PARTIES OR OTHER THIRD PARTIES AND NO RIGHTS ARE GRANTED TO CREDITORS OF THE
PARTIES OR OTHER THIRD PARTIES UNDER THIS AGREEMENT. UNDER NO CIRCUMSTANCES
SHALL ANY THIRD PARTY, WHO IS A MINOR, BE DEEMED TO HAVE ACCEPTED, ADOPTED,
OR ACTED IN RELIANCE UPON THIS AGREEMENT.
25. COUNTERPARTS; FACSIMILE SIGNATURES. THIS AGREEMENT MAY BE EXECUTED
SIMULTANEOUSLY IN ONE OR MORE COUNTERPARTS, EACH OF WHICH SHALL BE DEEMED AN
ORIGINAL, BUT ALL OF WHICH TOGETHER SHALL CONSTITUTE ONE AND THE SAME
INSTRUMENT. THE PARTIES AGREE THAT FACSIMILE SIGNATURES OF THIS AGREEMENT
SHALL BE DEEMED A VALID AND BINDING EXECUTION OF THIS AGREEMENT.
26. CONFLICT WAIVER. BOTH EMPLOYEE AND THE COMPANY (THE "PARTIES") HEREBY
AGREE AND ACKNOWLEDGE THAT THE LAW FIRM OF HORWITZ AND BEAM ("H&B"), WHICH
REPRESENTS THE COMPANY, HAS DRAFTED THIS AGREEMENT. THE PARTIES HERETO
FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN INFORMED OF THE INHERENT CONFLICT OF
INTEREST ASSOCIATED WITH THE DRAFTING OF THIS AGREEMENT BY H&B AND WAIVE ANY
ACTION THEY MAY HAVE AGAINST H&B REGARDING SUCH CONFLICT. THE PARTIES HAVE
BEEN GIVEN THE OPPORTUNITY TO CONSULT WITH COUNSEL OF THEIR CHOICE REGARDING
THEIR RIGHTS UNDER THIS AGREEMENT.
<PAGE>
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE CAUSED THIS AGREEMENT TO
BE DULY EXECUTED AS OF THE EFFECTIVE DATE.
"COMPANY" "EMPLOYEE"
CONVERGE GLOBAL, INC.,
A UTAH CORPORATION
/s/ IMRAN HUSAIN /s/ IMRAN HUSAIN
- ---------------------------------- ---------------------------------------
BY: IMRAN HUSAIN IMRAN HUSAIN
ITS: PRESIDENT
CONFIRMED AUTHORIZED BY BOARD OF DIRECTORS:
/s/ SAMAR KHAN
- ----------------------------------
BY: SAMAR KHAN
ITS: SECRETARY AND TREASURER
<PAGE>
EXHIBIT 10.4
EMPLOYMENT AGREEMENT FOR SAMAR KHAN
DATED FEBRUARY 1, 1999
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("AGREEMENT") IS MADE, ENTERED INTO, AND
EFFECTIVE AS OF FEBRUARY 1, 1999 (THE "EFFECTIVE DATE"), BY AND BETWEEN
CONVERGE GLOBAL, INC., A UTAH CORPORATION ("COMPANY"), AND SAMAR KHAN, AN
INDIVIDUAL ("EMPLOYEE").
RECITALS
A. COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING IN-DEPTH AND
UNIQUE E-COMMERCE SOLUTIONS WITH SPECIFIC EMPHASIS ON AUDIO AND VIDEO
DELIVERY OVER THE INTERNET AND MAINTAINS AN OFFICE IN THE STATE OF CALIFORNIA.
B. COMPANY DESIRES TO HAVE AN EMPLOYMENT AGREEMENT WITH EMPLOYEE AS
ITS SECRETARY AND TREASURER SUBJECT TO THE TERMS AND CONDITIONS OF THIS
AGREEMENT.
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS AND
CONDITIONS CONTAINED HEREIN, THE PARTIES HERETO HEREBY AGREE AS FOLLOWS:
AGREEMENT
XVIII.. TERM AND DUTIES. COMPANY HEREBY EMPLOYS EMPLOYEE AS SECRETARY AND
TREASURER AS OF THE EFFECTIVE DATE AND EMPLOYEE AGREES TO ENTER INTO AND
REMAIN IN THE EMPLOY OF COMPANY UNTIL THIS AGREEMENT IS TERMINATED AS
PROVIDED HEREIN BELOW. EMPLOYEE SHALL FAITHFULLY AND DILIGENTLY PERFORM ALL
PROFESSIONAL DUTIES AND ACTS AS SECRETARY AND TREASURER AS MAY BE REQUESTED
AND REQUIRED OF EMPLOYEE BY COMPANY OR ITS DIRECTORS. EMPLOYEE SHALL DEVOTE
SUCH TIME AND ATTENTION TO THE BUSINESS OF COMPANY AS SHALL BE REQUIRED TO
PERFORM THE REQUIRED SERVICES AND DUTIES. EMPLOYEE AT ALL TIMES DURING THE
EMPLOYMENT TERM SHALL STRICTLY ADHERE TO AND OBEY ALL POLICIES, RULES AND
REGULATIONS ESTABLISHED FROM TIME TO TIME GOVERNING THE CONDUCT OF EMPLOYEES
OF COMPANY.
XIX.. EXCLUSIVITY, NON-DISCLOSURE.
a. EMPLOYEE AGREES TO PERFORM EMPLOYEE'S SERVICES EFFICIENTLY AND TO
THE BEST OF EMPLOYEE'S ABILITY. EMPLOYEE AGREES THROUGHOUT THE TERM OF THIS
AGREEMENT TO DEVOTE HIS TIME, ENERGY AND SKILL TO THE BUSINESS OF THE COMPANY
AND TO THE PROMOTION OF THE BEST INTERESTS OF THE COMPANY.
b. EMPLOYEE AGREES THAT HE SHALL NOT AT ANY TIME, EITHER DURING OR
SUBSEQUENT TO HIS EMPLOYMENT TERM, UNLESS EXPRESSLY CONSENTED TO IN WRITING
BY COMPANY, EITHER DIRECTLY OR INDIRECTLY USE OR DISCLOSE TO ANY PERSON OR
ENTITY ANY CONFIDENTIAL INFORMATION OF ANY KIND, NATURE OR DESCRIPTION
CONCERNING ANY MATTERS AFFECTING OR RELATING TO THE BUSINESS OF COMPANY,
INCLUDING, BUT NOT LIMITED TO, INFORMATION CONCERNING THE CUSTOMERS OF
COMPANY, COMPANY'S MARKETING METHODS, COMPENSATION PAID TO EMPLOYEES,
INDEPENDENT CONTRACTORS OR SUPPLIERS AND OTHER TERMS OF THEIR EMPLOYMENT OR
CONTRACTUAL RELATIONSHIPS, FINANCIAL AND BUSINESS RECORDS, KNOW-HOW, OR ANY
OTHER INFORMATION CONCERNING THE BUSINESS OF COMPANY, ITS MANNER OF
OPERATIONS, OR OTHER DATA OF ANY KIND, NATURE OR DESCRIPTION. EMPLOYEE AGREES
THAT THE ABOVE INFORMATION AND ITEMS ARE IMPORTANT, MATERIAL AND CONFIDENTIAL
TRADE SECRETS AND THESE AFFECT THE SUCCESSFUL CONDUCT OF COMPANY'S BUSINESS
AND ITS GOODWILL.
<PAGE>
XX.. COMPENSATION.
a. SUBJECT TO THE TERMINATION OF THIS AGREEMENT AS PROVIDED HEREIN,
COMPANY SHALL COMPENSATE EMPLOYEE FOR HIS SERVICES HEREUNDER AT A MONTHLY
SALARY OF FIVE THOUSAND DOLLARS ($5,000) PAYABLE IN ACCORDANCE WITH THE
COMPANY'S PRACTICES, LESS NORMAL PAYROLL DEDUCTIONS, AND PRORATED FOR THE
ACTUAL EMPLOYMENT TERM.
b. EMPLOYEE IS ALSO ELIGIBLE TO RECEIVE SUCH ADDITIONAL COMPENSATION
AS THE BOARD OF DIRECTORS OF COMPANY DETERMINES IS PROPER IN RECOGNITION OF
EMPLOYEE'S CONTRIBUTIONS AND SERVICES TO COMPANY. SUCH ADDITIONAL
COMPENSATION SHALL BE PAID TO EMPLOYEE ON THE ANNIVERSARY DATE OF THIS
AGREEMENT DURING THE EMPLOYMENT TERM, AND AT SUCH OTHER TIMES AS MAY BE
DETERMINED BY THE BOARD OF DIRECTORS.
c. IN ADDITION TO THE COMPENSATION SET FORTH ABOVE, EMPLOYEE SHALL
BE ENTITLED TO PARTICIPATE IN OR TO RECEIVE BENEFITS UNDER ALL OF COMPANY'S
EMPLOYEE BENEFIT PLANS MADE AVAILABLE BY COMPANY NOW OR IN THE FUTURE TO
SIMILARLY SITUATED EMPLOYEES, SUBJECT TO THE TERMS, CONDITIONS AND OVERALL
ADMINISTRATION OF SUCH PLANS.
(i) PLAN PARTICIPATION. EMPLOYEE SHALL BE ENTITLED TO
PARTICIPATE IN OR TO RECEIVE BENEFITS UNDER ALL OF COMPANY'S EMPLOYEE BENEFIT
PLANS MADE AVAILABLE BY COMPANY OR IN THE FUTURE TO SIMILARLY SITUATED
EMPLOYEES, SUBJECT TO THE TERMS, CONDITIONS AND OVERALL ADMINISTRATION OF
SUCH PLANS, INCLUDING BUT NOT LIMITED TO 401(k) PLANS, IRA PLANS, E.R.I.S.A
PLANS, ANY OTHER RETIREMENT OR BENEFIT PLANS THAT THE COMPANY HAS MADE
AVAILABLE TO SIMILARLY SITUATED EMPLOYEES.
XXI.. EXPENSES. COMPANY SHALL REIMBURSE EMPLOYEE FOR ALL REASONABLE
BUSINESS RELATED EXPENSES INCURRED BY EMPLOYEE IN THE COURSE OF HIS NORMAL
DUTIES ON BEHALF OF THE COMPANY. IN COMPENSATING EMPLOYEE FOR EXPENSES,
THE ORDINARY AND USUAL BUSINESS GUIDELINES AND DOCUMENTATION REQUIREMENTS
SHALL BE ADHERED TO BY COMPANY AND EMPLOYEE.
a. BUSINESS EXPENSES. EMPLOYEE WILL BE REQUIRED TO INCUR TRAVEL,
MEALS, ENTERTAINMENT AND OTHER BUSINESS EXPENSES ON BEHALF OF THE COMPANY IN
THE PERFORMANCE OF EMPLOYEE'S DUTIES HEREUNDER. COMPANY WILL REIMBURSE
EMPLOYEE FOR ALL SUCH REASONABLE BUSINESS EXPENSES INCURRED BY EMPLOYEE IN
CONNECTION WITH COMPANY'S BUSINESS UPON PRESENTATION OF RECEIPTS OR OTHER
ACCEPTABLE DOCUMENTATION OF THE EXPENDITURES.
XXII.. VACATION. EMPLOYEE SHALL BE ENTITLED TO ACCRUE TWO (2) VACATION WEEKS
WITH PAY DURING EACH EMPLOYMENT YEAR, TO BE TAKEN AT SUCH TIMES AS MAY BE
CONVENIENT TO COMPANY AND EMPLOYEE. ANY VACATION TIME NOT USED IN ANY ONE
YEAR MAY BE CARRIED FORWARD TO SUBSEQUENT EMPLOYMENT YEARS. FOR PURPOSES OF
THIS AGREEMENT, "EMPLOYMENT YEARS" SHALL MEAN THE SUCCESSIVE ONE (1) YEAR
PERIODS BEGINNING ON THE EFFECTIVE DATE OF THIS AGREEMENT AND ON EACH
ANNIVERSARY DATE OF THE EFFECTIVE DATE OF THIS AGREEMENT DURING THE TERM OF
THIS AGREEMENT.
XXIII.. INVENTIONS AND PATENTS. ALL PROCESSES, INVENTIONS, PATENTS, COMPUTER
SOFTWARE, COPYRIGHTS, TRADEMARKS AND OTHER INTANGIBLE RIGHTS (COLLECTIVELY
REFERRED TO AS "INTELLECTUAL PROPERTY") THAT MAY BE CONCEIVED OR DEVELOPED BY
EMPLOYEE DURING THE EMPLOYMENT TERM, EITHER ALONE OR WITH OTHERS, MADE OR
CONCEIVED BY HIM SHALL REMAIN THE SOLE PROPERTY OF COMPANY.
XXIV.. DISABILITY OF EMPLOYEE.
a. EMPLOYEE SHALL BE CONSIDERED DISABLED IF, DUE TO ILLNESS OR
INJURY, EITHER PHYSICAL OR MENTAL, EMPLOYEE IS UNABLE TO PERFORM EMPLOYEE'S
CUSTOMARY DUTIES AS AN EMPLOYEE OF COMPANY FOR MORE THAN THIRTY (30) DAYS IN
THE AGGREGATE OUT OF A PERIOD OF TWELVE (12) CONSECUTIVE MONTHS. THE
DISABILITY SHALL BE DETERMINED BY A CERTIFICATION FROM A PHYSICIAN.
<PAGE>
b. IF EMPLOYEE IS DETERMINED TO BE DISABLED, COMPANY SHALL CONTINUE
TO PAY EMPLOYEE'S BASE SALARY FOR THE INITIAL NINETY (90) DAYS OF
"DISABILITY." THE CONTINUATION OF THE SALARY COMPENSATION AFTER THE INITIAL
NINETY (90) DAYS SHALL BE DETERMINED BY THE BOARD OF DIRECTORS OF THE COMPANY.
XXV.. TERMINATION BY COMPANY.
a. UNLESS TERMINATED EARLIER AS PROVIDED IN THIS AGREEMENT, EMPLOYEE
SHALL BE EMPLOYED FOR A TERM COMMENCING ON THE EFFECTIVE DATE AND ENDING ONE
YEAR THEREAFTER. THEREAFTER, THE EMPLOYMENT TERM SHALL CONTINUE ON AN AT WILL
BASIS UNTIL TERMINATED AT THE OPTION OF COMPANY OR EMPLOYEE UPON THIRTY (30)
DAYS PRIOR WRITTEN NOTICE. THIS AGREEMENT WILL TERMINATE IMMEDIATELY UPON
EMPLOYEE'S DEATH.
b. COMPANY MAY TERMINATE THIS AGREEMENT FOR CAUSE AT ANY TIME
WITHOUT NOTICE. FOR PURPOSES OF THIS AGREEMENT, THE TERM "CAUSE" SHALL
INCLUDE, BUT NOT BE LIMITED TO, THE FOLLOWING: A MATERIAL BREACH OF OR
FAILURE TO PERFORM ANY COVENANT OR OBLIGATION IN THIS AGREEMENT, DISLOYALTY,
DISHONESTY, NEGLECT OF DUTIES, UNPROFESSIONAL CONDUCT, ACTS OF MORAL
TURPITUDE, DISAPPEARANCE, FELONIOUS CONDUCT OR FRAUD. DAMAGES WILL BE
CALCULATED ACCORDINGLY UNDER SECTION 16 OF THIS AGREEMENT.
c. IF COMPANY TERMINATES THIS AGREEMENT WITHOUT CAUSE, EMPLOYEE
SHALL RECEIVE LIQUIDATED DAMAGES IN ACCORDANCE WITH SECTION 16 HEREIN.
XXVI.. TERMINATION BY EMPLOYEE.
a. EMPLOYEE MAY TERMINATE THIS AGREEMENT WITHOUT CAUSE UPON
THIRTY (30) DAYS PRIOR WRITTEN NOTICE TO COMPANY.
b. EMPLOYEE MAY TERMINATE THIS AGREEMENT IMMEDIATELY WITH CAUSE, IN
WHICH EVENT EMPLOYEE SHALL RECEIVE LIQUIDATED DAMAGES IN ACCORDANCE WITH
SECTION 16 HEREIN. FOR THE PURPOSES OF THIS AGREEMENT, "CAUSE" FOR
TERMINATION BY EMPLOYEE SHALL BE A BREACH OF ANY MATERIAL COVENANT OR
OBLIGATION HEREUNDER, THE VOLUNTARY OR INVOLUNTARY DISSOLUTION OF THE
COMPANY, ANY MERGER OR CONSOLIDATION IN WHICH THE COMPANY IS NOT THE
SURVIVING OR RESULTING CORPORATION, ANY TRANSFER OF ALL OR SUBSEQUENTLY ALL
OF THE ASSETS OF COMPANY, TRANSFER OF A MAJORITY OF SHARES OF THE COMPANY BY
ONE OR MORE SHAREHOLDERS IN ONE OR MORE TRANSACTIONS, OR THE ISSUANCE OF
SHARES OF COMPANY CONSTITUTING A MAJORITY OF THE OUTSTANDING SHARES
IMMEDIATELY FOLLOWING SUCH ISSUANCE.
10. BINDING EFFECT. THIS AGREEMENT SHALL BE BINDING UPON AND INURE TO THE
BENEFIT OF THE PARTIES HERETO THEIR RESPECTIVE DEVISEES, LEGATEES, HEIRS,
LEGAL REPRESENTATIVES, SUCCESSORS, AND PERMITTED ASSIGNS. THE PRECEDING
SENTENCE SHALL NOT AFFECT ANY RESTRICTION ON ASSIGNMENT SET FORTH ELSEWHERE
IN THIS AGREEMENT.
11. EFFECT OF COMBINATION OR DISSOLUTION. THIS AGREEMENT SHALL NOT BE
TERMINATED BY THE VOLUNTARY OR INVOLUNTARY DISSOLUTION OF COMPANY, OR BY ANY
MERGER OR CONSOLIDATION IN WHICH COMPANY IS NOT THE SURVIVING OR RESULTING
CORPORATION, OR UPON ANY TRANSFER OF ALL OR SUBSTANTIALLY ALL OF THE
OUTSTANDING SHARES OR ASSETS OF COMPANY. INSTEAD , THE PROVISIONS OF THIS
AGREEMENT SHALL BE BINDING ON AND INURE TO THE BENEFIT OF COMPANY'S
CREDITORS, THE SURVIVING BUSINESS ENTITY OR THE BUSINESS ENTITY TO WHICH SUCH
SHARES OR ASSETS SHALL BE TRANSFERRED.
<PAGE>
12. ARBITRATION. IF A DISPUTE OR CLAIM SHALL ARISE WITH RESPECT TO ANY OF THE
TERMS OR PROVISIONS OF THIS AGREEMENT, OR WITH RESPECT TO THE PERFORMANCE BY
EITHER OF THE PARTIES UNDER THIS AGREEMENT, OTHER THAN A DISPUTE WITH RESPECT
TO SECTION 2 OF THIS AGREEMENT, THEN EITHER PARTY MAY, WITH NOTICE AS HEREIN
PROVIDED, REQUIRE THAT THE DISPUTE BE SUBMITTED UNDER THE COMMERCIAL
ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION ("AAA"). EACH PARTY
SHALL BEAR ONE-HALF (2) OF THE COST OF APPOINTING THE ARBITRATOR AND OF
PAYING SUCH ARBITRATOR'S FEES. THE WRITTEN DECISION OF THE ARBITRATOR(S)
ULTIMATELY APPOINTED BY OR FOR BOTH PARTIES SHALL BE BINDING AND CONCLUSIVE
ON THE PARTIES. JUDGMENT MAY BE ENTERED ON SUCH WRITTEN DECISION OF THE
SINGLE ARBITRATOR IN ANY COURT HAVING JURISDICTION AND THE PARTIES CONSENT TO
THE JURISDICTION OF THE MUNICIPAL AND SUPERIOR COURT OF ORANGE COUNTY,
CALIFORNIA FOR THIS PURPOSE. ANY ARBITRATION UNDERTAKEN PURSUANT TO THE TERMS
OF THIS SECTION SHALL OCCUR IN ORANGE COUNTY, CALIFORNIA.
13. ASSIGNMENT. SUBJECT TO ALL OTHER PROVISIONS OF THIS AGREEMENT, ANY
ATTEMPT TO ASSIGN OR TRANSFER THIS AGREEMENT OR ANY OF THE RIGHTS CONFERRED
HEREBY, BY JUDICIAL PROCESS OR OTHERWISE, TO ANY PERSON, FIRM, COMPANY, OR
CORPORATION WITHOUT THE PRIOR WRITTEN CONSENT OF THE OTHER PARTY, SHALL BE
INVALID, AND MAY, AT THE OPTION OF SUCH OTHER PARTY, RESULT IN AN INCURABLE
EVENT OF DEFAULT RESULTING IN TERMINATION OF THIS AGREEMENT AND ALL RIGHTS
HEREBY CONFERRED.
14. CHOICE OF LAW. THIS AGREEMENT AND THE RIGHTS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF CALIFORNIA INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY, PERFORMANCE,
AND ENFORCEMENT AND WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICT OF
LAWS.
15. INDEMNIFICATION. COMPANY SHALL INDEMNIFY, DEFEND AND HOLD EMPLOYEE
HARMLESS, TO THE FULLEST EXTENT PERMITTED BY LAW, FOR ALL CLAIMS, DEMANDS,
LOSSES, COSTS, EXPENSES, OBLIGATIONS, LIABILITIES, DAMAGES, RECOVERIES AND
DEFICIENCIES, INCLUDING INTEREST, PENALTIES AND REASONABLE ATTORNEY'S FEES
THAT EMPLOYEE SHALL INCUR OR SUFFER THAT ARISE FROM, RESULT FROM OR RELATE TO
THE DISCHARGE OF EMPLOYEE'S DUTIES UNDER THIS AGREEMENT. COMPANY SHALL
MAINTAIN ADEQUATE INSURANCE FOR THIS PURPOSE OR SHALL ADVANCE EMPLOYEE ANY
EXPENSES INCURRED IN DEFENDING ANY SUCH PROCEEDING OR CLAIM TO THE MAXIMUM
EXTENT PERMITTED BY LAW.
16. LIQUIDATED DAMAGES. IN THE EVENT OF ANY MATERIAL BREACH OF THIS AGREEMENT
BY COMPANY, EMPLOYEE AT HIS SOLE OPTION, MAY TERMINATE THIS AGREEMENT AND, AT
HIS SOLE OPTION, RECEIVE AS LIQUIDATED DAMAGES (THE "LIQUIDATED DAMAGES") ONE
OF THE FOLLOWING:
a. THE FULL AMOUNT OF THE SALARY AND INCENTIVE COMPENSATION PROVIDED
FOR IN SECTION 3 OF THIS AGREEMENT FOR THE REMAINING TERM OF THIS AGREEMENT.
THE SUM PAYABLE TO EMPLOYEE UNDER THIS SECTION SHALL BE PAYABLE IN MONTHLY
INSTALLMENTS ON THE FIRST DAY OF EACH MONTH, BEGINNING ONE MONTH FOLLOWING
THE DATE OF TERMINATION OF EMPLOYMENT.
b. THE LIQUIDATED DAMAGES SHALL NOT BE LIMITED OR REDUCED BY AMOUNTS
THAT EMPLOYMENT MIGHT OTHERWISE EARN OR BE ABLE TO EARN DURING THE PERIOD
BETWEEN TERMINATION OF HIS EMPLOYMENT UNDER THIS AGREEMENT AND PAYMENT OF THE
LIQUIDATED DAMAGES. THE PROVISIONS OF THIS SECTION SHALL BE IN ADDITION TO
ANY AND ALL RIGHTS EMPLOYEE MAY HAVE IN EQUITY OR AT LAW TO REQUIRE COMPANY
TO COMPLY WITH OR TO PREVENT THE BREACH BY COMPANY OF THIS AGREEMENT.
17. JURISDICTION. THE PARTIES SUBMIT TO THE JURISDICTION OF THE COURTS OF THE
STATE OF CALIFORNIA OR A FEDERAL COURT EMPANELED IN THE STATE OF CALIFORNIA
FOR THE RESOLUTION OF ALL LEGAL DISPUTES ARISING UNDER THE TERMS OF THIS
AGREEMENT, INCLUDING, BUT NOT LIMITED TO, ENFORCEMENT OF ANY ARBITRATION
AWARD.
<PAGE>
18. ENTIRE AGREEMENT. EXCEPT AS PROVIDED HEREIN, THIS AGREEMENT, INCLUDING
EXHIBITS, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES, AND SUPERSEDES ALL
EXISTING NEGOTIATIONS, REPRESENTATIONS, OR AGREEMENTS AND ALL OTHER ORAL,
WRITTEN, OR OTHER COMMUNICATIONS BETWEEN THEM CONCERNING THE SUBJECT MATTER
OF THIS AGREEMENT. THERE ARE NO REPRESENTATIONS, AGREEMENTS, ARRANGEMENTS, OR
UNDERSTANDINGS, ORAL OR WRITTEN, BETWEEN AND AMONG THE PARTIES HERETO
RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT THAT ARE NOT FULLY EXPRESSED
HEREIN.
19. SEVERABILITY. IF ANY PROVISION OF THIS AGREEMENT IS UNENFORCEABLE,
INVALID, OR VIOLATES APPLICABLE LAW, SUCH PROVISION, OR UNENFORCEABLE PORTION
OF SUCH PROVISION, SHALL BE DEEMED STRICKEN AND SHALL NOT AFFECT THE
ENFORCEABILITY OF ANY OTHER PROVISIONS OF THIS AGREEMENT.
20. CAPTIONS. THE CAPTIONS IN THIS AGREEMENT ARE INSERTED ONLY AS A MATTER OF
CONVENIENCE AND FOR REFERENCE AND SHALL NOT BE DEEMED TO DEFINE, LIMIT,
ENLARGE, OR DESCRIBE THE SCOPE OF THIS AGREEMENT OR THE RELATIONSHIP OF THE
PARTIES, AND SHALL NOT AFFECT THIS AGREEMENT OR THE CONSTRUCTION OF ANY
PROVISIONS HEREIN.
21. MODIFICATION. NO CHANGE, MODIFICATION, ADDITION, OR AMENDMENT TO THIS
AGREEMENT SHALL BE VALID UNLESS IN WRITING AND SIGNED BY ALL PARTIES HERETO.
22. ATTORNEYS' FEES. EXCEPT AS OTHERWISE PROVIDED HEREIN, IF A DISPUTE SHOULD
ARISE BETWEEN THE PARTIES INCLUDING, BUT NOT LIMITED TO ARBITRATION, THE
PREVAILING PARTY SHALL BE REIMBURSED BY THE NON-PREVAILING PARTY FOR ALL
REASONABLE EXPENSES INCURRED IN RESOLVING SUCH DISPUTE, INCLUDING REASONABLE
ATTORNEYS' FEES EXCLUSIVE OF SUCH AMOUNT OF ATTORNEYS' FEES AS SHALL BE A
PREMIUM FOR RESULT OR FOR RISK OF LOSS UNDER A CONTINGENCY FEE ARRANGEMENT.
23. TAXES. ANY INCOME TAXES REQUIRED TO BE PAID IN CONNECTION WITH THE
PAYMENTS DUE HEREUNDER, SHALL BE BORNE BY THE PARTY REQUIRED TO MAKE SUCH
PAYMENT. ANY WITHHOLDING TAXES IN THE NATURE OF A TAX ON INCOME SHALL BE
DEDUCTED FROM PAYMENTS DUE, AND THE PARTY REQUIRED TO WITHHOLD SUCH TAX SHALL
FURNISH TO THE PARTY RECEIVING SUCH PAYMENT ALL DOCUMENTATION NECESSARY TO
PROVE THE PROPER AMOUNT TO WITHHOLD OF SUCH TAXES AND TO PROVE PAYMENT TO THE
TAX AUTHORITY OF SUCH REQUIRED WITHHOLDING.
24. NOT FOR THE BENEFIT OF CREDITORS OR THIRD PARTIES. THE PROVISIONS OF THIS
AGREEMENT ARE INTENDED ONLY FOR THE REGULATION OF RELATIONS AMONG THE
PARTIES. THIS AGREEMENT IS NOT INTENDED FOR THE BENEFIT OF CREDITORS OF THE
PARTIES OR OTHER THIRD PARTIES AND NO RIGHTS ARE GRANTED TO CREDITORS OF THE
PARTIES OR OTHER THIRD PARTIES UNDER THIS AGREEMENT. UNDER NO CIRCUMSTANCES
SHALL ANY THIRD PARTY, WHO IS A MINOR, BE DEEMED TO HAVE ACCEPTED, ADOPTED,
OR ACTED IN RELIANCE UPON THIS AGREEMENT.
25. COUNTERPARTS; FACSIMILE SIGNATURES. THIS AGREEMENT MAY BE EXECUTED
SIMULTANEOUSLY IN ONE OR MORE COUNTERPARTS, EACH OF WHICH SHALL BE DEEMED AN
ORIGINAL, BUT ALL OF WHICH TOGETHER SHALL CONSTITUTE ONE AND THE SAME
INSTRUMENT. THE PARTIES AGREE THAT FACSIMILE SIGNATURES OF THIS AGREEMENT
SHALL BE DEEMED A VALID AND BINDING EXECUTION OF THIS AGREEMENT.
26. CONFLICT WAIVER. BOTH EMPLOYEE AND THE COMPANY (THE "PARTIES") HEREBY
AGREE AND ACKNOWLEDGE THAT THE LAW FIRM OF HORWITZ AND BEAM ("H&B"), WHICH
REPRESENTS THE COMPANY, HAS DRAFTED THIS AGREEMENT. THE PARTIES HERETO
FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN INFORMED OF THE INHERENT CONFLICT OF
INTEREST ASSOCIATED WITH THE DRAFTING OF THIS AGREEMENT BY H&B AND WAIVE ANY
ACTION THEY MAY HAVE AGAINST H&B REGARDING SUCH CONFLICT. THE PARTIES HAVE
BEEN GIVEN THE OPPORTUNITY TO CONSULT WITH COUNSEL OF THEIR CHOICE REGARDING
THEIR RIGHTS UNDER THIS AGREEMENT.
<PAGE>
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE CAUSED THIS AGREEMENT TO
BE DULY EXECUTED AS OF THE EFFECTIVE DATE.
"COMPANY" "EMPLOYEE"
CONVERGE GLOBAL, INC.,
A UTAH CORPORATION
/s/ IMRAN HUSAIN /s/ SAMAR KHAN
- ---------------------------- ------------------------------
BY: IMRAN HUSAIN SAMAR KHAN
ITS: PRESIDENT
CONFIRMED AUTHORIZED BY BOARD OF DIRECTORS:
/s/ SAMAR KHAN
- ----------------------------
BY: SAMAR KHAN
ITS: SECRETARY AND TREASURER
<PAGE>
EXHIBIT 10.5
1999 INCENTIVE & NONSTATUTORY STOCK OPTION PLAN
DATED JANUARY 6, 1999
<PAGE>
CONVERGE GLOBAL, INC.
1999 INCENTIVE AND NONSTATUTORY STOCK OPTION PLAN
1. PURPOSE
This Incentive and Nonstatutory Stock Option Plan (the "Plan") is
intended to further the growth and financial success of CONVERGE GLOBAL, INC., a
Utah corporation (the "Corporation") by providing additional incentives to
selected employees and consultants to the Corporation or parent corporation or
subsidiary corporation of the Corporation as those terms are defined in Sections
425(3) and 425(f) of the Internal Revenue Code of 1986, as amended (the "Code")
(such parent corporations and subsidiary corporations hereinafter collectively
referred to as "Affiliates") so that such employees and consultants may acquire
or increase their proprietary interest in the Corporation. Stock options granted
under the Plan (hereinafter "Options") may be either "Incentive Stock Options,@
as defined in Section 422A of the Code and any regulations promulgated under
said Section, or "Nonstatutory Options" at the discretion of the Board of
Directors of the Corporation (the "Board") and as reflected in the respective
written stock option agreements granted pursuant hereto.
2. ADMINISTRATION
The Plan shall be administered by the Board of Directors of the
Corporation; provided however, that the Board may delegate such administration
to a committee of not fewer than three (3) members (the "Committee"), at least
two (2) of whom are members of the Board and all of whom are disinterested
administrators, as contemplated by Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended ("Rule 16b-3"); and provided further, that the
foregoing requirement for disinterested administrators shall not apply prior to
the date of the first registration of any of the securities of the Corporation
under the Securities Act of 1933, as amended.
Subject to the provisions of the Plan, the Board and/or the Committee
shall have authority to (a) grant, in its discretion, Incentive Stock Options in
accordance with Section 422A of the Code or Nonstatutory Options; (b) determine
in good faith the fair market value of the stock covered by an Option; (c)
determine which eligible persons shall be granted Options and the number of
shares to be covered thereby and the term thereof; (d) construe and interpret
the Plan; (e) promulgate, amend and rescind rules and regulations relating to
its administration, and correct defects, omissions, and inconsistencies in the
Plan or any Option; (f) consistent with the Plan and with the consent of the
optionee, as appropriate, amend any outstanding Option or amend the exercise
date or dates thereof; (g) determine the duration and purpose of leaves of
absence which may be granted to optionholders without constituting termination
of their employment for the purpose of the Plan; and (h) make all other
determinations necessary or advisable for the Plan's administration. The
interpretation and construction by the Board of any provisions of the Plan or of
any Option it shall be conclusive and final. No member of the Board or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any Option.
3. ELIGIBILITY
<PAGE>
The persons who shall be eligible to receive Options shall be key
employees of or consultants to the Corporation or any of its Affiliates
("Optionees"). The term consultant shall mean any person who is engaged by the
Corporation to render services and is compensated for such services, and any
director of the Corporation whether or not compensated for such services;
provided that, if the Corporation registers any of its securities pursuant to
the Securities Exchange Act of 1934, the term consultant shall thereafter not
include directors who are not compensated for their services or are paid only a
director fee by the Corporation.
(a) INCENTIVE STOCK OPTIONS. Incentive Stock Options may only
be issued to employees of the Corporation or its Affiliates. Incentive Stock
Options may be granted to officers, whether or not they are directors, but a
director shall not be granted an Incentive Stock Option unless such director is
also an employee of the Corporation. Payment of a director fee shall not be
sufficient to constitute employment by the Corporation. Any grant of option to
an officer or director of the Corporation subsequent to the first registration
of any of the securities of the Corporation under Securities Act of 1933, as
amended, shall comply with the requirements of Rule 16b-3. An optionee may hold
more than one Option.
The Corporation shall not grant an Incentive Stock Option
under the Plan to any employee if such grant would result in such employee
holding the right to exercise for the first time in any one calendar year, under
all options granted to such employee under the Plan or any other stock option
plan maintained by the Corporation or any Affiliate, with respect to shares of
stock having an aggregate fair market value, determined as of the date of the
Option is granted, in excess of $100,000. Should it be determined that an
Incentive Stock Option granted under the Plan exceeds such maximum for any
reason other than a failure in good faith to value the stock subject to such
option, the excess portion of such option shall be considered a Nonstatutory
Option. If, for any reason, an entire option does not qualify as an Incentive
Stock Option by reason of exceeding such maximum, such option shall be
considered a Nonstatutory Option.
(b) NONSTATUTORY OPTION. The provisions of the foregoing
Section 3(a) shall not apply to any option designated as a "Non-statutory Stock
Option Agreement" or which sets forth the intention of the parties that the
option be a Nonstatutory Option.
4. STOCK
The stock subject to Options shall be the shares of the Corporation=s
authorized but unissued or reacquired Common Stock (the "Stock").
(a) NUMBER OF SHARES. Subject to adjustment as provided in
Paragraph 5(i) of this Plan, the total number of shares of Stock which may be
purchased through exercise of Options granted under this Plan shall not exceed
seven million (7,000,000) shares. If any Option shall for any reason terminate
or expire, any shares allocated thereto but remaining unpurchased upon such
expiration or termination shall again be available for the grant of Options with
respect thereto under this Plan as though no Option had been granted with
respect to such shares.
(b) RESERVATION OF SHARES. The Corporation shall reserve and
keep available at all times during the term of the Plan such number of shares as
shall be sufficient to satisfy the requirements of the Plan. If, after
reasonable efforts, which efforts shall not include the registration of the Plan
or Options under the Securities Act of 1933, the Corporation is unable to obtain
authority
<PAGE>
from any applicable regulatory body, which authorization is deemed necessary
by legal counsel for the Corporation for the lawful issuance of shares
hereunder, the Corporation shall be relieved of any liability with respect to
its failure to issue and sell the shares for which such requisite authority
was so deemed necessary unless and until such authority is obtained.
5. TERMS AND CONDITIONS OF OPTIONS
Options granted hereunder shall be evidenced by agreements between the
Corporation and the respective Optionees, in such form and substance as the
Board or Committee shall from time to time approve. Such agreements need not be
identical, and in each case may include such provisions as the Board or
Committee may determine, but all such agreements shall be subject to and limited
by the following terms and conditions:
(a) NUMBER OF SHARES: Each Option shall state the number of
shares to which it pertains.
(b) OPTION PRICE: Each Option shall state the Option
Price, which shall be determined as follows:
(i) Any Option granted to a person who at the time
the Option is granted owns (or is deemed to own pursuant to Section 425(d) of
the Code) stock possessing more than ten percent (10%) of the total combined
voting power of value of all classes of stock of the Corporation, or of any
Affiliate, ("Ten Percent Holder") shall have an Option Price of no less than
110% of the fair market value of the common stock as of the date of grant; and
(ii) Incentive Stock Options granted to a person who
at the time the Option is granted is not a Ten Percent Holder shall have an
Option price of no less than 100% of the fair market value of the common
stock as of the date of grant.
(iii) Nonstatutory Options granted to a person who at
the time the Option is granted is not a Ten Percent Holder shall have an
Option Price determined by the Board as of the date of grant.
For the purposes of this paragraph 5(b), the fair market value
shall be as determined by the Board, in good faith, which determination shall be
conclusive and binding; provided however, that if there is a public market for
such stock, the fair market value per share shall be the average of the bid and
asked prices (or the closing price if such stock is listed on the NASDAQ
National Market System) on the date of grant of the Option, or if listed on a
stock exchange, the closing price on such exchange on such date of grant.
<PAGE>
(c) MEDIUM AND TIME OF PAYMENT: To the extent permissible by
applicable law, the Option price shall be paid, at the discretion of the Board,
at either the time of grant or the time of exercise of the Option (i) in cash or
by check, (ii) by delivery of other common stock of the Corporation, provided
such tendered stock was not acquired directly or indirectly from the
Corporation, or, if acquired from the Corporation, has been held by the Optionee
for more than six (6) months, (iii) by the Optionee's promissory note in a form
satisfactory to the Corporation and bearing interest at a rate determined by the
Board, in its sole discretion, but in no event less than 6% per annum, or (iv)
such other form of legal consideration permitted by law as may be acceptable to
the Board.
(d) TERM AND EXERCISE OF OPTIONS: Any Option granted to an
Employee of the Corporation shall become exercisable over a period of no longer
than five (5) years, and no less than twenty percent (20%) of the shares covered
thereby shall become exercisable annually. No Option shall be exercisable, in
whole or in part, prior to one (1) year from the date it is granted unless the
Board shall specifically determine otherwise, as provided herein. In no event
shall any Option be exercisable after the expiration of ten (10) years from the
date it is granted, and no Incentive Stock Option granted to a Ten Percent
Holder shall, by its terms, be exercisable after the expiration of five (5)
years from the date of the Option. Unless otherwise specified by the Board or
the Committee in the resolution authorizing such option, the date of grant of an
Option shall be deemed to be the date upon which the Board or the Committee
authorizes the granting of such Option.
Each Option shall be exercisable to the nearest whole share,
in installments or otherwise, as the respective option agreements may provide.
During the lifetime of an Optionee, the Option shall be exercisable only by the
Optionee and shall not be assignable or transferable by the Optionee, and no
other person shall acquire any rights therein. To the extent not exercised,
installments (if more than one) shall accumulate, but shall be exercisable, in
whole or in part, only during the period for exercise as stated in the option
agreement, whether or not other installments are then exercisable.
(e) TERMINATION OF STATUS AS EMPLOYEE OR CONSULTANT: If
Optionee's status as an employee or consultant shall terminate for any reason
other than Optionee's disability or death, then the Optionee (or if the Optionee
shall die after such termination, but prior to exercise, Optionee's personal
representative or the person entitled to succeed to the Option) shall have the
right to exercise the portions of any such termination, in whole or in part, at
any time within three (3) months after such termination (or in the event of
"termination for good cause" as that term is defined under the applicable Labor
Code and case law related thereto, such shorter period as the option agreement
may specify, but not less than 30 days) or the remaining term of the Option,
whichever is the lesser; provided, however, that with respect to Nonstatutory
Options, the Board may specify such longer period, not to exceed six (6) months,
for exercise following termination as the Board deems reasonable and
appropriate. The Option may be exercised only with respect to installments that
the Optionee could have exercised at the date of termination of employment.
Nothing contained herein or in any Option granted pursuant hereto shall be
construed to affect or restrict in any way the right of the Corporation to
terminate the employee of an Optionee with or without cause.
<PAGE>
(f) DISABILITY OF OPTIONEE: If an Optionee dies while employed
or engaged as a consultant by the Corporation or an Affiliate, the portion of
such Optionee's Option or Options which were exercisable at the date of death
may be exercised, in whole or in part, by the estate of the decedent or by a
person succeeding to the right to exercise such Option or Options, at any time
within (i) a period, as determined by the Board and set forth in the Option, of
not less than six (6) months nor more than one (1) year after Optionee's death,
which period shall not be less, in the case of a Nonstatutory Option, than the
period for exercise following termination, or (ii) during the remaining term of
the Option, whichever is the lesser. The Option may be so exercised only with
respect to installments exercisable at the time of Optionee's death and not
previously exercised by the Optionee.
(g) NONTRANSFERABILITY OF OPTION: No Option shall be
transferable by the Optionee, except by will or by the laws of descent and
distribution.
(h) RECAPITALIZATION: Subject to any required action by the
stockholders, the number of shares of common stock covered by each outstanding
Option, and the price per share thereof set forth in each such Option, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of common stock of the Corporation resulting from a subdivision or
consolidation of shares or the payment of a stock dividend, or any other
increase or decrease in the number of such shares affected without receipt of
consideration by the Corporation.
Subject to any required action by the stockholders, if the
Corporation shall be the surviving entity in any merger or consolidation, each
outstanding Option thereafter shall pertain to and apply to the securities to
which a holder of shares of common stock equal to the shares subject to the
Option would have been entitled by reason of such merger or consolidation. A
dissolution or liquidation of the Corporation or a merger or consolidation in
which the Corporation is not the surviving entity shall cause each outstanding
Option to terminate on the effective date of such dissolution, liquidation,
merger or consolidation. In such event, if the entity which shall be the
surviving entity does not tender to Optionee an offer, for which it has no
obligation to do so, to substitute for any unexercised Option a stock option or
capital stock of such surviving entity, as applicable, which on an equitable
basis shall provide the Optionee with substantially the same economic benefit as
such unexercised Option, then the Board may grant to such Optionee, but shall
not be obligated to do so, the right for a period commencing thirty (30) days
prior to and ending immediately prior to such dissolution, liquidation, merger
or consolidation or during the remaining term of the Option, whichever is the
lesser, to exercise any unexpired Option or Options, without regard to the
installment provisions of Paragraph 5(d) of this Plan; provided, that any such
right granted shall be granted to all Optionees not receiving an offer to
substitute on a consistent basis, and provided further, that any such exercise
shall be subject to the consummation of such dissolution, liquidation, merger or
consolidation.
In the event of a change in the common stock of the
Corporation as presently constituted, which is limited to a change of all of its
authorized shares without par value into the same number of shares with a par
value, the shares resulting from any such change shall be deemed to be the
common stock within the meaning of this Plan.
<PAGE>
To the extent that the foregoing adjustments relate to stock
or securities of the Corporation, such adjustments shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided in this Paragraph 5(i), the Optionee shall have no
rights by reason of any subdivision or consolidation of shares of stock or any
class or the payment of any stock dividend or any other increase or decrease in
the number of shares of stock of any class, and the number or price of shares of
common stock subject to any Option shall not be affected by, and no adjustment
shall be made by reason of, any dissolution, liquidation, merger or
consolidation, or any issue by the Corporation of shares of stock of any class
or securities convertible into shares of stock of any class.
The grant of an Option pursuant to the Plan shall not affect
in any way the right or power of the Corporation to make any adjustments,
reclassifications, reorganizations or changes in its capital or business
structure or to merge, consolidate, dissolve, or liquidate or to sell or
transfer all or any part of its business or assets.
(i) RIGHTS AS A STOCKHOLDER: An Optionee shall have no rights
as a stockholder with respect to any shares covered by an Option until the date
of the issuance of a stock certificate to Optionee for such shares. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is issued, except as
expressly provided in Paragraph 5(i) hereof.
(j) MODIFICATION, ACCELERATION, EXTENSION, AND RENEWAL OF
OPTIONS: Subject to the terms and conditions and within the limitations of the
Plan, the Board may modify an Option, or once an Option is exercisable,
accelerate the rate at which it may be exercised, and may extend or renew
outstanding Options granted under the Plan or accept the surrender of
outstanding Options (to the extent not theretofore exercised) and authorize the
granting of new Options in substitution for such Options, provided such action
is permissible under Section 422A of the Code and state law.
Notwithstanding the foregoing provisions of this Paragraph
5(k), however, no modification of an Option shall, without the consent of the
Optionee, alter to the Optionee's detriment or impair any rights or obligations
under any Option theretofore granted under the Plan.
(k) INVESTMENT INTENT: Unless and until the issuance and sale
of the shares subject to the Plan are registered under the Securities Act of
1933, as amended (the "Act"), each Option under the Plan shall provide that the
purchases of stock thereunder shall be for investment purposes and not with a
view to, or for resale in connection with, any distribution thereof. Further,
unless the issuance and sale of the stock have been registered under the Act,
each Option shall provide that no shares shall be purchased upon the exercise of
such Option unless and until (i) any then applicable requirements of state and
federal laws and regulatory agencies shall have been fully complied with to the
satisfaction of the Corporation and its counsel, and (ii) if requested to do so
by the Corporation, the person exercising the Option shall (i) give written
assurances as to knowledge and experience of such person (or a representative
employed by such person) in financial and business matters and the ability of
such person (or representative) to evaluate the merits and risks of exercising
the Option, and (ii) execute and deliver to the Corporation a letter of
investment intent, all in such form and substance as the Corporation may
require. If shares are issued upon exercise of an Option without registration
under the Act, subsequent registration of such shares shall relieve
<PAGE>
the purchaser thereof of any investment restrictions or representations made
upon the exercise of such Options.
(l) EXERCISE BEFORE EXERCISE DATE: At the discretion of the
Board, the Option may, but need not, include a provision whereby the Optionee
may elect to exercise all or any portion of the Option prior to the stated
exercise date of the Option or any installment thereof. Any shares so purchased
prior to the stated exercise date shall be subject to repurchase by the
Corporation upon termination of Optionee's employment as contemplated by
Paragraphs 5(3), 5(f) and 5(g) hereof prior to the exercise date stated in the
Option and such other restrictions and conditions as the Board or Committee may
deem advisable.
(m) OTHER PROVISIONS: The Option agreements authorized under
this Plan shall contain such other provisions, including, without limitation,
restrictions upon the exercise of the Options, as the Board or the Committee
shall deem advisable. Shares shall not be issued pursuant to the exercise of an
Option, if the exercise of such Option or the issuance of shares thereunder
would violate, in the opinion of legal counsel for the Corporation, the
provisions of any applicable law or the rules or regulations of any applicable
governmental or administrative agency or body, such as the Act, the Securities
Exchange Act of 1934, the rules promulgated under the foregoing or the rules and
regulations of any exchange upon which the shares of the Corporation are listed.
6. AVAILABILITY OF INFORMATION
During the term of the Plan and any additional period during which an
Option granted pursuant to the Plan shall be exercisable, the Corporation shall
make available, not later than one hundred and twenty (120) days following the
close of each of its fiscal years, such financial and other information
regarding the Corporation as is required by the bylaws of the Corporation and
applicable law to be furnished in an annual report to the stockholders of the
Corporation.
7. EFFECTIVENESS OF PLAN; EXPIRATION
Subject to approval by the stockholders of the Corporation, this Plan
shall be deemed effective as of the date it is adopted by the Board. The Plan
shall expire on January 19, 2009, but such expiration shall not affect the
validity of outstanding Options.
8. AMENDMENT AND TERMINATION OF THE PLAN
The Board may, insofar as permitted by law, from time to time, with
respect to any shares at the time not subject to Options, suspend or terminate
the Plan or revise or amend it in any respect whatsoever, except that without
the approval of the stockholders of the Corporation, no such revision or
amendment shall (i) increase the number of shares subject to the Plan, (ii)
decrease the price at which Options may be granted, (iii) materially increase
the benefits to Optionees, or (iv) change the class of persons eligible to
receive Options under this Plan; provided, however, no such action shall alter
or impair the rights and obligations under any Option outstanding as of the date
thereof without the written consent of the Optionee thereunder. No Option may be
granted while the Plan is suspended or after it is terminated, but the rights
and obligations under any Option granted while the Plan is in effect shall not
be impaired by suspension or termination of the Plan.
<PAGE>
9. INDEMNIFICATION OF BOARD
In addition to such other rights or indemnifications as they may have
as directors or otherwise, and to the extent allowed by applicable law, the
members of the Board and the Committee shall be indemnified by the Corporation
against the reasonable expenses, including attorneys' fees, actually and
necessarily incurred in connection with the defense of any claim, action, suit
or proceeding, or in connection with any appeal thereof, to which they or any of
them may be a party by reason of any action taken, or failure to act, under or
in connection with the Plan or any Option granted thereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Corporation) or paid by them in
satisfaction of a judgment in any such claim, action, suit or proceeding, except
in any case in relation to matters as to which it shall be adjudged in such
claim, action, suit or proceeding that such Board member is liable for
negligence or misconduct in the performance of his or her duties; provided that
within sixty (60) days after institution of any such action, suit or Board
proceeding the member involved shall offer the Corporation, in writing, the
opportunity, at its own expense, to handle and defend the same.
10. APPLICATION OF FUNDS
The proceeds received by the Corporation from the sale of common stock
pursuant to the exercise of Options will be used for general corporate purposes.
11. NO OBLIGATION TO EXERCISE OPTION
The granting of an Option shall impose no obligation upon the Optionee
to exercise such Option.
12. NOTICES
All notice, requests, demand, and other communications pursuant this
Plan shall be in writing and shall be deemed to have been duly given on the date
of service if served personally on the party to whom notice is to be given, or
on the third day following the mailing thereof to the party to whom notice is to
be given, by first class mail, registered or certified, postage prepaid.
* * * * *
The foregoing Incentive and Nonstatutory Stock Option Plan was duly
adopted and approved by the shareholders of the Corporation effective January 6
1999.
/s/ Samar Khan
------------------------------
Samar Khan, Secretary
<PAGE>
CONVERGE GLOBAL, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT is made and entered into as of this ____
day of ______________, ___, by and between CONVERGE GLOBAL, INC., a Utah
corporation ("Company"), and ________________________________ (referred to
herein as the "Optionee"), with reference to the following recitals of facts:
WHEREAS, the Board has authorized the granting to Optionee of a
nonstatutory stock option ("Option") to purchase shares of common stock of the
Company (the "Shares") upon the terms and conditions hereinafter stated; and
WHEREAS, the Board and stockholders of the Company have heretofore
adopted a 1999 Incentive and Nonstatutory Stock Option Plan (the "Plan"),
pursuant to which this Option is being granted;
WHEREAS, it is the intention of the parties that this Option be a
Nonstatutory Stock Option;
NOW, THEREFORE, in consideration of the covenants herein set forth, the
parties hereto agree as follows:
1. SHARES; PRICE. The Company hereby grants to Optionee the right to
purchase, upon and subject to the terms and conditions herein stated,
___________ Shares for cash (or other consideration acceptable to the Board of
Directors of the Company, in their sole and absolute discretion) at the price of
$____ per Share, such price being determined in accordance with the Plan.
2. TERM OF OPTION; CONTINUATION OF EMPLOYMENT. This Option shall
expire, and all rights hereunder to purchase the Shares shall terminate, five
(5) years from the date hereof. This Option shall earlier terminate subject to
Paragraphs 5 and 6 hereof if, and as of the date, Optionee ceases to be an
employee of or consultant to the Company. Nothing contained herein shall be
construed to interfere in any way with the right of the Company to terminate the
employment or engagement, as applicable, of Optionee or to increase or decrease
the compensation of Optionee from the rate in existence at the date hereof.
3. VESTING OF OPTION. Subject to the provisions of Paragraphs 5 and 6
hereof, this Option shall vest and become exercisable during the term of
Optionee's employment or engagement in whole or in part beginning on the date of
this Agreement.
4. EXERCISE. This Option shall be exercised by delivery to the Company
of (a) a written notice of exercise stating the number of Shares being purchased
(in whole shares only) and such other information set forth on the form of
Notice of Exercise attached hereto as Appendix A, (b) a check or cash in the
amount of the purchase price of the Shares covered by the notice, and (c) a
written statement as provided for in Paragraph 11 hereof. This Option shall not
be assignable or transferable, except by
1
<PAGE>
will or by the laws of descent and distribution, and shall be exercisable
only by Optionee during his or her lifetime.
5. TERMINATION OF EMPLOYMENT OR ENGAGEMENT. If Optionee shall cease to
serve as an employee of or consultant to the Company for any reason, whether
voluntarily or involuntarily, other than by his or her death or the conclusion
of the term of a written consulting agreement, provided such term exceeds one
year, Optionee shall have the right at any time within thirty (30) days after
date Optionee ceases to be an employee of or consultant to the Company, or the
remaining term of this Option, whichever is the lesser, to exercise in whole or
in part this Option to the extent, but only to the extent, that this Option was
exercisable as of the last day of employment or engagement, as applicable, and
had not previously been exercised; provided, however:
(i) if Optionee is permanently disabled (within the
meaning of Section 22(e)(3) of the Code) at the time of termination, the
foregoing thirty day period shall be extended to six (6) months; or
(ii) if Optionee is terminated "for good cause" as that term
is defined under the applicable Labor Code and case law related thereto, the
foregoing thirty day month period shall be reduced to three (3) days.
Notwithstanding anything herein to the contrary, all rights under this Option
shall expire in any event on the date specified in Paragraph 2 hereof.
6. DEATH OF OPTIONEE. If the Optionee shall die while an employee of or
consultant to the Company, Optionee's personal representative or the person
entitled to Optionee's rights hereunder may at any time within three (3) months
after the date of Optionee's death, or during the remaining term of this Option,
whichever is the lesser, exercise this Option and purchase Shares to the extent,
but only to the extent, that Optionee could have exercised this Option as of the
date of Optionee's death; provided, in any case, that this Option may be so
exercised only to the extent that this Option has not previously been exercised
by Optionee.
7. NO RIGHTS AS STOCKHOLDER. Optionee shall have no rights as a
stockholder with respect to the Shares covered by any installment of this Option
until the date of the issuance of a stock certificate to Optionee, and no
adjustment will be made for dividends or other rights for which the record date
is prior to the date such stock certificate or certificates are issued except as
provided in Paragraph 8 hereof.
8. RECAPITALIZATION. Subject to any required action by the stockholders
of the Company, the number of Shares covered by this Option, and the price per
Share thereof, shall be proportionately adjusted for any increase or decrease in
the number of issued Shares resulting from a subdivision or consolidation of
shares or the payment of a stock dividend, or any other increase or decrease in
the number of such shares affected without receipt of consideration by the
Company; provided however that the conversion of any convertible securities of
the Company shall not be deemed having been "effected without receipt of
consideration by the Company."
2
<PAGE>
In the event of a proposed dissolution or liquidation of the Company, a
merger or consolidation in which the Company is not the surviving entity, or a
sale of all or substantially all of the assets of the Company, this Option shall
terminate immediately prior to the consummation of such proposed action, unless
otherwise provided by the Board. The Board may, at its sole and absolute
discretion and without obligation, declare that this Option shall terminate as
of a date fixed by the Board and grant Optionee the right for a period
commencing thirty (30) days prior to and ending immediately prior to such date,
or during the remaining term of this Option, whichever occurs sooner, to
exercise this Option as to all or any part of the Shares, without regard to the
instalment provision of Paragraph 3; provided, however, that such exercise shall
be subject to the consummation of such dissolution, liquidation, merger,
consolidation or sale.
Subject to any required action by the stockholders of the Company, if
the Company shall be the surviving entity in any merger or consolidation, this
Option thereafter shall pertain to and apply to the securities to which a holder
of Shares equal to the Shares subject to this Option would have been entitled by
reason of such merger or consolidation, and the vesting provisions of Section 3
shall continue to apply.
In the event of a change in the Shares of the Company as presently
constituted, which is limited to a change of all of its authorized Shares
without par value into the same number of Shares with a par value, the Shares
resulting from any such change shall be deemed to be the Shares within the
meaning of this Agreement.
To the extent that the foregoing adjustments relate to shares or
securities of the Company, such adjustments shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. Except as
hereinbefore expressly provided, Optionee shall have no rights by reason of any
subdivision or consolidation of share of stock of any class or the payment of
any stock dividend or any other increase or decrease in the number of shares of
stock of any class, and the number and price of shares subject to this Option
shall not be affected by, and no adjustments shall be made by reason of, any
dissolution, liquidation, merger or consolidation, or any issue by the Company
of shares of stock of any class or securities convertible into shares of stock
of any class.
The grant of this Option shall not affect in any way the right or power
of the Company to make adjustments, reclassifications, reorganizations or
changes in its capital or business structure or to merge, consolidate, dissolve
or liquidate or to sell or transfer all or any part of its business or assets.
9. TAXATION UPON EXERCISE OF OPTION. Optionee understands that, upon
exercise of this Option, Optionee will recognize income, for federal and state
income tax purposes, in an amount equal to the amount by which the fair market
value of the Shares, determined as of the date of exercise, exceeds the exercise
price. The acceptance of the Shares by Optionee shall constitute an agreement by
Optionee to report such income in accordance with then applicable law and to
cooperate with Company in establishing the amount of such income and
corresponding deduction to the Company for its income tax purposes. Withholding
for federal or state income and employment tax purposes will be made, if and as
required by law, from Optionee's then current compensation, or, if such current
compensation is insufficient to satisfy withholding tax liability, the Company
may require Optionee to make cash payment to cover such liability as a condition
of the exercise of this Option.
3
<PAGE>
10. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. The Board may
modify, extend or renew this Option or accept the surrender thereof (to the
extent not theretofore exercised) and authorize the granting of a new option in
substitution therefore (to the extent not theretofore exercised), subject at all
times to the Plan. Notwithstanding the foregoing provisions of this Paragraph
10, no modification shall, without the consent of the Optionee, alter to the
Optionee's detriment or impair any rights of Optionee hereunder.
11. INVESTMENT INTENT; RESTRICTIONS ON TRANSFER. Optionee represents
and agrees that if Optionee exercises this Option in whole or in part, Optionee
will in each case acquire the Shares upon such exercise for the purpose of
investment and not with a view to, or for resale in connection with, any
distribution thereof; and that upon such exercise of this Option in whole or in
part, Optionee (or any person or persons entitled to exercise this Option under
the provisions of Paragraphs 5 and 6 hereof) shall furnish to the Company a
written statement to such effect, satisfactory to the Company in form and
substance. The Company, at its option, may include a legend on each certificate
representing Shares issued pursuant to any exercise of this Option, stating in
effect that such Shares have not been registered under the Securities Act of
1933, as amended (the "Act"), and that the transferability thereof is
restricted. If the Shares represented by this Option are registered under the
Act, either before or after the exercise of this Option in whole or in part, the
Optionee shall be relieved of the foregoing investment representation and
agreement and shall not be required to furnish the Company with the foregoing
written statement.
Optionee further represents that Optionee has had access to the
financial statements or books and records of the Company, has had the
opportunity to ask questions of the Company concerning its business, operations
and financial condition, and to obtain additional information reasonably
necessary to verify the accuracy of such information, and further represents
that Optionee has either such experience and knowledge in investment, financial
and business matters or has investments similar to the stock of the Company such
that Optionee is capable of evaluating the merits and risks thereof and has the
capacity to protect his or her own interest in connection therewith.
4
<PAGE>
12. REGISTRATION RIGHTS.
a. PIGGYBACK REGISTRATION RIGHTS. If the Company at any time
proposes to register any of its securities under the Act, including under an S-8
Registration Statement, an SB-2 Registration Statement or otherwise, it will
each such time give written notice to all holders of outstanding or exercised
options of its intention so to do. Upon the written request of a holder or
holders of any such outstanding or exercised options given within 30 days after
receipt of any such notice, the Company will use its best efforts to cause all
such outstanding or exercised options, the holders of which shall have so
requested registration thereof, to be registered under the Act (with the
securities which the Company at the time propose to register), all to the extent
requisite to permit the sale or other disposition by the prospective Sellers of
the outstanding or exercised options so registered; provided, however, that the
Company may, as a condition precedent to its effecting such registration,
require each prospective Seller to agree with the Company and the managing
underwriter or underwriters of the offering to be made by the Company in
connection with such registration that such Seller will not sell any securities
of the same class or convertible into the same class as those registered by the
Company (including any class into which the securities registered by the Company
are convertible) for such reasonable period after such registration becomes
effective (not exceeding 120 days) as shall then be specified in writing by such
underwriter or underwriters if in the opinion of such underwriter or
underwriters the Company's offering would be materially adversely affected in
the absence of such an agreement.
b. PROCEDURES. In connection with the registration of any
securities pursuant to Section 12.a. hereof, the Company and the Optionee
covenant and agree as follows:
(i) The Company shall pay all costs, fees, and
expenses incurred by the Company and the Optionee in connection with the
Registration Statement and the offering thereunder including, without
limitation, the Company's legal fees and expenses of counsel, accounting
fees, printing expenses, and blue sky fees and expenses (but excluding
discounts or selling commissions of any underwriter or broker dealer acting
on behalf of the company or the Optionee).
(ii) The Company shall take all necessary action which
may be reasonably required in qualifying or registering the securities
included in the Registration Statement for offering and sale under the
securities or blue sky laws of all states reasonably requested by Optionee,
provided that the Company shall not be obligated to qualify as a foreign
corporation to do business under the laws of any such jurisdiction.
(iii) The Company shall indemnify Optionee and each
person, if any, who controls Optionee within the meaning of Section 15 of the
Act or Section 20(a) of the Securities Exchange Act of 1934 (the "Exchange
Act"), against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the Act,
the Exchange Act or otherwise, arising from the Registration Statement.
(iv) The Company shall, as soon as practicable after
the effective date of the Registration Statement, and in any event within
fifteen (15) months thereafter, make "generally available to its security
holders" (within the meaning of Rule 158 under the Act) an earnings statement
(which need not be audited) complying with Section 11(a) of the Act and
covering a period of at least twelve (12) consecutive months beginning after
the effective date of the Registration Statement.
5
<PAGE>
(v) The Company shall (A) deliver promptly to Optionee
and its counsel, upon request, copies of all correspondence between the
Commission and the Company, its counsel, or auditors and all memoranda
relating to discussions with the Commission or its staff with respect to the
Registration Statement; and (B) permit Optionee and its counsel to perform
such investigation, upon reasonable advance notice, with respect to
information contained in or omitted from the Registration Statement, as it
deems reasonably necessary to comply with applicable securities laws or rules
of the National Association of Securities Dealers, Inc. Such investigation
shall include, but not be limited to, access to financial and accounting
information and opportunities to discuss the business of the Company with the
Company's officers and independent auditors, all to such reasonable extent,
at such reasonable times and as often as Optionee and its counsel shall
reasonably request.
(vi) The Company shall cause all securities of Optionee
registered pursuant to a Registration Statement to be listed on any national
securities exchange or quoted on any automated quotation system on which
similar securities of the Company are listed or quoted.
13. STAND-OFF AGREEMENT. Optionee agrees that in connection with any
registration of the Company's securities, that upon the request of the Company
or any underwriter managing an underwritten offering of the Company's
securities, that Optionee shall not sell, short any sale of, loan, grant an
option for, or otherwise dispose of any of the Shares (other than Shares
included in the offering) without the prior written consent of the Company or
such managing underwriter, as applicable, for a period of at least 120 days
following the effective date of registration of such offering.
14. NOTICES. Any notice required to be given pursuant to this Option or
the Plan shall be in writing and shall be deemed to be delivered upon receipt
or, in the case of notices by the Company, five (5) days after deposit in the
US. mail, postage prepaid, addressed to Optionee at the address last provided to
the Company by Optionee for his or her employee records.
15. AGREEMENT SUBJECT TO PLAN; APPLICABLE LAW. This Agreement is made
pursuant to the Plan and shall be interpreted to comply therewith. A copy of
such Plan is available to Optionee, at no charge, at the principal office of the
Company. Any provision of this Agreement inconsistent with the Plan shall be
considered void and replaced with the applicable provision of the Plan. This
Agreement has been granted, executed and delivered in the State of California,
and the interpretation and enforcement shall be governed by the laws thereof and
subject to the exclusive jurisdiction of the courts therein.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
CONVERGE GLOBAL, INC.
--------------------------------
BY: Imran Husain
ITS: President
--------------------------------
Optionee
6
<PAGE>
Appendix A
NOTICE OF EXERCISE
Converge Global, Inc.
233 Wilshire Boulevard, Suite 930
Santa Monica, CA 90401
--------------------
(date)
Re: Nonstatutory Stock Option
Notice is hereby given pursuant to Section 4 of my Nonstatutory Stock
Option Agreement that I elect to purchase the number of shares set forth below
at the exercise price set forth in my option agreement:
Stock Option dated: ______________________
Number of shares being purchased: ______________________
Option Exercise Price: $_____________________
A check in the amount of the aggregate price of the shares being
purchased is attached.
I hereby confirm that such shares are being acquired by me for my own
account for investment purposes, and not with a view to, or for resale in
connection with, any distribution thereof.
Further, I understand that, as a result of this exercise of rights, I
will recognize income in an amount equal to the amount by which the fair market
value of the Shares exceeds the exercise price. I agree to report such income in
accordance with then applicable law and to cooperate with Company in
establishing the withholding and corresponding deduction to the Company for its
income tax purposes.
I agree to provide to the Corporation such additional documents or
information as may be required pursuant to the Corporation's 1999 Incentive and
Nonstatutory Stock Option Plan.
-------------------------
(Signature)
-------------------------
(Name of Optionee)
<PAGE>
CONVERGE GLOBAL, INC.
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT is made and entered into as of
this ____ day of ______________, ____, by and between CONVERGE GLOBAL, INC., a
Utah corporation ("Company"), and ________________________________ (referred to
herein as the "Optionee"), with reference to the following recitals of facts:
WHEREAS, the Board has authorized the granting to Optionee of an
incentive stock option ("Option") to purchase shares of common stock of the
Company (the "Shares") upon the terms and conditions hereinafter stated; and
WHEREAS, the Board and stockholders of the Company have heretofore
adopted a 1999 Incentive and Nonstatutory Stock Option Plan (the "Plan"),
pursuant to which this Option is being granted;
WHEREAS, it is the intention of the parties that this Option be a
Incentive Stock Option (a Qualified Stock Option);
NOW, THEREFORE, in consideration of the covenants herein set forth, the
parties hereto agree as follows:
1. SHARES; PRICE. The Company hereby grants to Optionee the right to
purchase, upon and subject to the terms and conditions herein stated, _______
Shares for cash (or other consideration acceptable to the Board of Directors of
the Company, in their sole and absolute discretion) at the price of $____ per
Share, such price being not less than the fair market value per share of the
Shares covered by these Options as of the date hereof and as determined by the
Board of Directors of the Company.
2. TERM OF OPTION; CONTINUATION OF EMPLOYMENT. This Option shall
expire, and all rights hereunder to purchase the Shares shall terminate, five
(5) years from the date hereof. This Option shall earlier terminate subject to
Paragraphs 5 and 6 hereof if, and as of the date, Optionee ceases to be an
employee of or consultant to the Company. Nothing contained herein shall be
construed to interfere in any way with the right of the Company to terminate the
employment or engagement, as applicable, of Optionee or to increase or decrease
the compensation of Optionee from the rate in existence at the date hereof.
3. VESTING OF OPTION. Subject to the provisions of Paragraphs 5 and 6
hereof, this Option shall vest and become exercisable during the term of
Optionee's employment or engagement in whole or in part beginning on the date of
this Agreement.
4. EXERCISE. This Option shall be exercised by delivery to the Company
of (a) a written notice of exercise stating the number of Shares being purchased
(in whole shares only) and such
1
<PAGE>
other information set forth on the form of Notice of Exercise attached hereto
as Appendix A, (b) a check or cash in the amount of the purchase price of the
Shares covered by the notice, and (c) a written statement as provided for in
Paragraph 11 hereof. This Option shall not be assignable or transferable,
except by will or by the laws of descent and distribution, and shall be
exercisable only by Optionee during his or her lifetime.
5. TERMINATION OF EMPLOYMENT OR ENGAGEMENT. If Optionee shall cease to
serve as an employee of or consultant to the Company for any reason, whether
voluntarily or involuntarily, other than by his or her death or the conclusion
of the term of a written consulting agreement, provided such term exceeds one
year, Optionee shall have the right at any time within thirty (30) days after
date Optionee ceases to be an employee of or consultant to the Company, or the
remaining term of this Option, whichever is the lesser, to exercise in whole or
in part this Option to the extent, but only to the extent, that this Option was
exercisable as of the last day of employment or engagement, as applicable, and
had not previously been exercised; provided, however:
(i) if Optionee is permanently disabled (within the meaning of
Section 22(e)(3) of the Code) at the time of termination, the foregoing thirty
day period shall be extended to six (6) months; or
(ii) if Optionee is terminated "for good cause" as that term
is defined under the applicable Labor Code and case law related thereto, the
foregoing thirty day month period shall be reduced to three (3) days.
Notwithstanding anything herein to the contrary, all rights under this Option
shall expire in any event on the date specified in Paragraph 2 hereof.
6. DEATH OF OPTIONEE. If the Optionee shall die while an employee of or
consultant to the Company, Optionee's personal representative or the person
entitled to Optionee's rights hereunder may at any time within three (3) months
after the date of Optionee's death, or during the remaining term of this Option,
whichever is the lesser, exercise this Option and purchase Shares to the extent,
but only to the extent, that Optionee could have exercised this Option as of the
date of Optionee's death; provided, in any case, that this Option may be so
exercised only to the extent that this Option has not previously been exercised
by Optionee.
7. NO RIGHTS AS STOCKHOLDER. Optionee shall have no rights as a
stockholder with respect to the Shares covered by any installment of this Option
until the date of the issuance of a stock certificate to Optionee, and no
adjustment will be made for dividends or other rights for which the record date
is prior to the date such stock certificate or certificates are issued except as
provided in Paragraph 8 hereof.
8. RECAPITALIZATION. Subject to any required action by the stockholders
of the Company, the number of Shares covered by this Option, and the price per
Share thereof, shall be proportionately adjusted for any increase or decrease in
the number of issued Shares resulting from a subdivision or consolidation of
shares or the payment of a stock dividend, or any other increase or
2
<PAGE>
decrease in the number of such shares affected without receipt of
consideration by the Company; provided however that the conversion of any
convertible securities of the Company shall not be deemed having been
"effected without receipt of consideration by the Company."
In the event of a proposed dissolution or liquidation of the
Company, a merger or consolidation in which the Company is not the surviving
entity, or a sale of all or substantially all of the assets of the Company,
this Option shall terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. The Board may, at
its sole and absolute discretion and without obligation, declare that this
Option shall terminate as of a date fixed by the Board and grant Optionee the
right for a period commencing thirty (30) days prior to and ending
immediately prior to such date, or during the remaining term of this Option,
whichever occurs sooner, to exercise this Option as to all or any part of the
Shares, without regard to the instalment provision of Paragraph 3; provided,
however, that such exercise shall be subject to the consummation of such
dissolution, liquidation, merger, consolidation or sale.
Subject to any required action by the stockholders of the Company, if
the Company shall be the surviving entity in any merger or consolidation, this
Option thereafter shall pertain to and apply to the securities to which a holder
of Shares equal to the Shares subject to this Option would have been entitled by
reason of such merger or consolidation, and the vesting provisions of Section 3
shall continue to apply.
In the event of a change in the Shares of the Company as presently
constituted, which is limited to a change of all of its authorized Shares
without par value into the same number of Shares with a par value, the Shares
resulting from any such change shall be deemed to be the Shares within the
meaning of this Agreement.
To the extent that the foregoing adjustments relate to shares or
securities of the Company, such adjustments shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. Except
as hereinbefore expressly provided, Optionee shall have no rights by reason
of any subdivision or consolidation of share of stock of any class or the
payment of any stock dividend or any other increase or decrease in the number
of shares of stock of any class, and the number and price of shares subject
to this Option shall not be affected by, and no adjustments shall be made by
reason of, any dissolution, liquidation, merger or consolidation, or any
issue by the Company of shares of stock of any class or securities
convertible into shares of stock of any class.
The grant of this Option shall not affect in any way the right or
power of the Company to make adjustments, reclassifications, reorganizations
or changes in its capital or business structure or to merge, consolidate,
dissolve or liquidate or to sell or transfer all or any part of its business
or assets.
9. TAXATION UPON EXERCISE OF OPTION. Optionee understands that, upon
exercise of this Option, Optionee will recognize income, for federal and state
income tax purposes, in an amount equal to the amount by which the fair market
value of the Shares, determined as of the date of exercise, exceeds the exercise
price. The acceptance of the Shares by Optionee shall constitute an
3
<PAGE>
agreement by Optionee to report such income in accordance with then
applicable law and to cooperate with Company in establishing the amount of
such income and corresponding deduction to the Company for its income tax
purposes. withholding for federal or state income and employment tax purposes
will be made, if and as required by law, from Optionee's then current
compensation, or, if such current compensation is insufficient to satisfy
withholding tax liability, the Company may require Optionee to make cash
payment to cover such liability as a condition of the exercise of this Option.
10. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. The Board may
modify, extend or renew this Option or accept the surrender thereof (to the
extent not theretofore exercised) and authorize the granting of a new option
in substitution therefore (to the extent not theretofore exercised), subject
at all times to the Plan. Notwithstanding the foregoing provisions of this
Paragraph 10, no modification shall, without the consent of the Optionee,
alter to the Optionee's detriment or impair any rights of Optionee hereunder.
11. INVESTMENT INTENT; RESTRICTIONS ON TRANSFER. Optionee represents
and agrees that if Optionee exercises this Option in whole or in part,
Optionee will in each case acquire the Shares upon such exercise for the
purpose of investment and not with a view to, or for resale in connection
with, any distribution thereof; and that upon such exercise of this Option in
whole or in part, Optionee (or any person or persons entitled to exercise
this Option under the provisions of Paragraphs 5 and 6 hereof) shall furnish
to the Company a written statement to such effect, satisfactory to the
Company in form and substance. The Company, at its option, may include a
legend on each certificate representing Shares issued pursuant to any
exercise of this Option, stating in effect that such Shares have not been
registered under the Securities Act of 1933, as amended (the "Act"), and that
the transferability thereof is restricted. If the Shares represented by this
Option are registered under the Act, either before or after the exercise of
this Option in whole or in part, the Optionee shall be relieved of the
foregoing investment representation and agreement and shall not be required
to furnish the Company with the foregoing written statement.
Optionee further represents that optionee has had access to the
financial statements or books and records of the Company, has had the
opportunity to ask questions of the Company concerning its business,
operations and financial condition, and to obtain additional information
reasonably necessary to verify the accuracy of such information, and further
represents that Optionee (either such experience and knowledge in investment,
financial and business matters in investments similar to the stock of the
Company that Optionee is capable of evaluating the merits and risks thereof
and has the capacity to protect his or her own interest in connection
therewith.
12. REGISTRATION RIGHTS.
a. PIGGYBACK REGISTRATION RIGHTS. If the Company at any time
proposes to register any of its securities under the Act, including under an S-8
Registration Statement, an SB-2 Registration Statement or otherwise, it will
each such time give written notice to all holders of outstanding or exercised
options of its intention so to do. Upon the written request of a holder or
holders of any such outstanding or exercised options given within 30 days after
receipt of any such
4
<PAGE>
notice, the Company will use its best efforts to cause all such outstanding
or exercised options, the holders of which shall have so requested
registration thereof, to be registered under the Act (with the securities
which the Company at the time propose to register), all to the extent
requisite to permit the sale or other disposition by the prospective Sellers
of the outstanding or exercised options so registered; provided, however,
that the Company may, as a condition precedent to its effecting such
registration, require each prospective Seller to agree with the Company and
the managing underwriter or underwriters of the offering to be made by the
Company in connection with such registration that such Seller will not sell
any securities of the same class or convertible into the same class as those
registered by the Company (including any class into which the securities
registered by the Company are convertible) for such reasonable period after
such registration becomes effective (not exceeding 120 days) as shall then be
specified in writing by such underwriter or underwriters if in the opinion of
such underwriter or underwriters the Company's offering would be materially
adversely affected in the absence of such an agreement.
b. PROCEDURES. In connection with the registration of any
securities pursuant to Section 12.a. hereof, the Company and the Optionee
covenant and agree as follows:
(i) The Company shall pay all costs, fees, and
expenses incurred by the Company and the Optionee in connection with the
Registration Statement and the offering thereunder including, without
limitation, the Company's legal fees and expenses of counsel, accounting
fees, printing expenses, and blue sky fees and expenses (but excluding
discounts or selling commissions of any underwriter or broker dealer acting
on behalf of the company or the Optionee).
(ii) The Company shall take all necessary action which
may be reasonably required in qualifying or registering the securities
included in the Registration Statement for offering and sale under the
securities or blue sky laws of all states reasonably requested by Optionee,
provided that the Company shall not be obligated to qualify as a foreign
corporation to do business under the laws of any such jurisdiction.
(iii) The Company shall indemnify Optionee and each
person, if any, who controls Optionee within the meaning of Section 15 of the
Act or Section 20(a) of the Securities Exchange Act of 1934 (the "Exchange
Act"), against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the Act,
the Exchange Act or otherwise, arising from the Registration Statement.
(iv) The Company shall, as soon as practicable after the
effective date of the Registration Statement, and in any event within fifteen
(15) months thereafter, make "generally available to its security holders"
(within the meaning of Rule 158 under the Act) an earnings statement (which
need not be audited) complying with Section 11(a) of the Act and covering a
period of at least twelve (12) consecutive months beginning after the
effective date of the Registration Statement.
5
<PAGE>
(v) The Company shall (A) deliver promptly to Optionee
and its counsel, upon request, copies of all correspondence between the
Commission and the Company, its counsel, or auditors and all memoranda
relating to discussions with the Commission or its staff with respect to the
Registration Statement; and (B) permit Optionee and its counsel to perform
such investigation, upon reasonable advance notice, with respect to
information contained in or omitted from the Registration Statement, as it
deems reasonably necessary to comply with applicable securities laws or rules
of the National Association of Securities Dealers, Inc. Such investigation
shall include, but not be limited to, access to financial and accounting
information and opportunities to discuss the business of the Company with the
Company's officers and independent auditors, all to such reasonable extent,
at such reasonable times and as often as Optionee and its counsel shall
reasonably request.
(vi) The Company shall cause all securities of Optionee
registered pursuant to a Registration Statement to be listed on any national
securities exchange or quoted on any automated quotation system on which
similar securities of the Company are listed or quoted.
13. STAND-OFF AGREEMENT. Optionee agrees that in connection with any
registration of the Company's securities, that upon the request of the
Company or any underwriter managing an underwritten offering of the Company's
securities, that Optionee shall not sell, short any sale of, loan, grant an
option for, or otherwise dispose of any of the Shares (other than Shares
included in the offering) without the prior written consent of the Company or
such managing underwriter, as applicable, for a period of at least 120 days
following the effective date of registration of such offering.
14. NOTICES. Any notice required to be given pursuant to this Option
or the Plan shall be in writing and shall be deemed to be delivered upon
receipt or, in the case of notices by the Company, five (5) days after
deposit in the US. mail, postage prepaid, addressed to Optionee at the
address last provided to the Company by Optionee for his or her employee
records.
15. AGREEMENT SUBJECT TO PLAN; APPLICABLE LAW. This Agreement is
made pursuant to the Plan and shall be interpreted to comply therewith. A
copy of such Plan is available to Optionee, at no charge, at the principal
office of the Company. Any provision of this Agreement inconsistent with the
Plan shall be considered void and replaced with the applicable provision of
the Plan. This Agreement has been granted, executed and delivered in the
State of California, and the interpretation and enforcement shall be governed
by the laws thereof and subject to the exclusive jurisdiction of the courts
therein.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
CONVERGE GLOBAL, INC.
--------------------------------
BY: Imran Husain
ITS: President
--------------------------------
, Optionee
7
<PAGE>
Appendix A
NOTICE OF EXERCISE
Converge Global, Inc.
233 Wilshire Boulevard, Suite 930
Santa Monica, CA 90401
--------------------
(date)
Re: Incentive Stock Option
Notice is hereby given pursuant to Section 4 of my Incentive Stock
Option Agreement that I elect to purchase the number of shares set forth below
at the exercise price set forth in my option agreement:
Stock Option dated: ______________________
Number of shares being purchased: ______________________
Option Exercise Price: $_____________________
A check in the amount of the aggregate price of the shares being
purchased is attached.
I hereby confirm that such shares are being acquired by me for my
own account for investment purposes, and not with a view to, or for resale in
connection with, any distribution thereof.
Further, I understand that, as a result of this exercise of rights,
I will recognize income in an amount equal to the amount by which the fair
market value of the Shares exceeds the exercise price. I agree to report such
income in accordance with then applicable law and to cooperate with Company
in establishing the withholding and corresponding deduction to the Company
for its income tax purposes.
I agree to provide to the Corporation such additional documents or
information as may be required pursuant to the Corporation's 1999 Incentive
and Nonstatutory Stock Option Plan.
-------------------------
(Signature)
-------------------------
(Name of Optionee)
