UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of The Securities Exchange Act of 1934
ePHONE Telecom, Inc.
--------------------------------------------
(Name of Small Business Issuer in its charter)
Florida 98-0204749
- ------------------------------ --------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
46505 Landing Parkway, Fremont, California, 94538
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (510) 661-9898
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class: Name of each exchange on which registered:
Securities to be registered pursuant to Section 12(g) of the Act:
Common shares $0.001 par value
(Title of Class)
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
A. Business Development
ePhone Telecom, Inc. (the "Company" has been in business for a period less
than three years. It started to develop its present business in November, 1998.
From incorporation until November, 1998, the Company was inactive. From
November, 1998 to March, 1999, it reviewed business potentials and, ultimately,
decided to enter the business described below. The Company does not have a
predecessor nor has there been any material reclassification of its business or
any purchase of any assets not in the ordinary course of business.
The Company incorporated under to the laws of the State of Florida on May
3, 1996, under the name, IRA Fund Brokers Corp., and changed its name to IFB
Corp. on April 6, 1998. On March 22, 1999, it changed its name to ePHONE Telecom
Inc.
B. Business of the Company
The presentation of the Company's business is preceded below by a
description of the context in which it will operate - the Technology and the
Market.
1. The Technology
The possibility of voice communications travelling over the Internet,
rather than through the Public Telephone Network, first became a reality in 1995
when VocalTec, Inc. introduced its Internet Phone software. Designed to run on a
PC equipped with a sound card, speakers, microphone, and modem, the software
compressed the voice signal, and translated it into IP packets for transmission
over the Internet. This PC-to-PC Internet telephony worked, only if both parties
were using the same Internet Phone software and had made an appointment to be
connected to the Internet at the same time.
The basic steps involved in originating an IP Telephony call are: (1)
conversion of the analog voice signal to digital format; and (2)
compression/translation of the signal into IP packets for transmission over the
Internet or managed IP networks. The process is reversed at the receiving end.
"IP" stands for "Internet Protocol", a method of taking information,
usually data that represents images or keystrokes and dividing it into many
small pieces, or "packets". These packets are marked with an originating
address, a destination address, and a map for reassembling those packets when
they reach their destination. IP was created to carry data, the same collection
of zeros and ones that underlie every programme, document, and image created
using a computer. In recent years, technology has been developed that allows
voice messages to be digitized and compressed into packets of data, and then
reconverted from data to voice at the receiving end.
IP is a very flexible protocol for sending information across a network
that has many different possible starting points and destinations, commonly
known as "any-to-any". Because IP packets can travel from their starting point
to their destination without staying linked together during the journey, they do
not have to look for pathways across networks large enough to carry large chunks
of information. Instead, the packets can scatter and exploit every small pathway
across a network. Over the Public Switched Telephone System (PSTN), analog voice
communications need a direct point-to-point path and tie up this connection
during the entire duration of the communication.
2. The Market
2.1 Voice over IP Market
A new study from Killen & Associates, a leading research and consulting
firm, ("Internet Voice: Opportunities and Threats,") forecasts that
global Voice/Internet services revenues will top $63 billion by the
year 2002 from $741 million in 1997. Approximately 48% of the 2002
revenues will be generated in North America while 33% will come from
Europe, and the rest from Asia.
2.2 Fax over IP Market
According to International Data Corp. (www.idc.com ), the 1999 global
bill for fax transmission will be $83 billion, growing to $90 billion
by 2000. In the US alone, there are 40 million fax machines in use and
the market is growing at about 20% a year. Of telephone expenditures
for Fortune 500 and mid-sized companies, 41% are fax related. Growth in
FAX expenditures (long distance charges) is estimated to have increased
by 42% in 1997 alone. Globally 1.5 billion people have access to fax
machines. It is preferred over email or postage mail.
2.3 European Telecom Market
The European market will continue its furious pace of growth in the
coming year as the cost of Internet access continues to drop throughout
the continent. The European scene looks a lot like the U.S., with a
couple of important differences. Free ISPs are thriving in Europe and
hence keeping a lid on higher connectivity fees. In addition, the move
to a standard monetary currency, the "Euro" will eliminate barriers and
further accelerate the pace of cross-border consolidation. The free ISP
model is also more appealing in Europe because the ISP is actually paid
by the local telco for every minute that an ISP customer goes online.
2.4 Asian Telecom Market
The year 1999 will mark the beginning of an extended period of rapid
growth for the Internet in Asia, far outpacing growth in the United
States. According to an industry research firm Asia Network Research,
Internet usage in the Asia-Pacific region is forecast to rise to 27
million users by 2001.
The challenge in this embryonic market is to get the basic
infrastructure and regulatory framework in place. Countries like Japan
are already beyond this threshold, but the largest Asian nations are
still struggling with it. China will grow to be the biggest market with
a series of initiatives on massive, national Intranet and Internet
projects. China is also taking steps toward creating a regulatory
framework for boosting Internet growth. Privatization of some ISPs has
already taken place and the coming year will see several alliances with
U.S. ISPs.
But while China holds the most promise, today's market leaders in the
region are Japan, South Korea, Hong Kong and Singapore, Behind their
phenomenal growth is an advanced information infrastructure and
forward-looking, proactive government policies.
3. ePHONE Telecom Inc.
3.1 The Mission
ePHONE will offer to business users worldwide a low-cost, high-quality
alternative to traditional long distance carriers. Using a call
origination approach that involves customer premise equipment, the
ePHONE iGate, ePHONE will offer phone-to-phone one-step dialing
services. Seamless toggling between IP networks, the Internet and the
PSTN, enables ePHONE to take advantage of the most cost effective call
routes, striking the optimal balance between cost and quality.
3.2 The ePHONE iGate
The ePHONE iGate is a telecom-grade embedded device, which, deployed at
the customer's premise interfaces with any PBX, key system or single
lines phone equipment or fax device. IP connections are via ISDN, E1/T1
or dial-up, as well as Ethernet connection to CATV or DSL modems. The
iGate enables phone-to-phone and fax-to-fax IP Telephony, making the
service transparent to users who simply pick up the phone and dial the
destination number. When a call is dialled, it is transparent to the
user what least-cost route the call might take, whether a managed IP
network, the Internet or the PSTN.
The ePHONE iGate enables customers to place real-time full-duplex high
quality digital long distance calls worldwide. Using dedicated
bandwidth from large backbone providers, the Internet or the Public
Telephone Network (PSTN), ePHONE will offer high quality voice and fax
connections at a saving of up to 80% over the traditional carriers.
3.3 Target Market
ePHONE is initially targeting the small office, small business market,
and plans to reach these businesses through a web based strategy as
well as through established channels. ePHONE has been actively working
with potential customers and strategic business partners to streamline
all aspects associated with successful implementation of its service.
Consequently, ePHONE is developing a multi-phased approach. The initial
focus will be North America, Europe and Asia.
ePHONE will initially concentrate on areas where it finds the
combination of the greatest savings on long distance usage and on the
most concentrated markets.
3.4 Distribution Channels
E-Commerce, particularly in business-to-business offerings is an
important part of today's marketing and sales strategy. ePHONE is
devoting important resources to its Web presence, including recruitment
of customers and distributors. A major campaign will address the Web
audience through the ePHONE web site as well as a number of other web
portals and business sites. Orders will be taken directly and payment
accepted. The equipment can be sent directly to the end user or the
lead sent to the ePHONE local agent/distributor for processing.
ePHONE will also distribute its suite of products and services through
partnerships with channel partners around the world. ePHONE is
targeting telephone equipment distributors and/or Internet Service
Providers in each geographical area. These distributors traditionally
sell telephone equipment and provide training to "interconnectors" who
in turn sell, install and maintain PBX, key systems and other
telecommunications equipment to businesses. These distributors also
sell telephone equipment to retail outlets in their area.
3.5 Billing
An important component of the business plan is a flexible billing
platform. A Call Detail Record" (CDR) is generated and sent in real
time to ePHONE's billing server. This CDR record identifies the
customer, the dialled number and type of transmission, fax or voice,
time, date and duration. The server is fully web-based. This allows
customers to view their account 24 hours a day, 7 days a week. This
web interface will display all calls made. This real time capability
is required so that customers can "charge up" their accounts via a
simple web interface. When their account starts to be depleted, an
email notification and/or fax is automatically sent identifying the
status of the client's account.
4. Other Relevant Considerations
(i) As the Company is only developing the business described above
it is not dependent on one or a few major customers;
(ii) The Company does not have any patents, trademarks, licences or
protective agreements other than that it has trademarked its
logo in Canada. The Company also has concluded the Agreement
with Charles Yang described in Item 7D hereof and attached as
Exhibit 6.1.
(iii) The Company does not, to the best of its knowledge, require
any government approval for the conduct of its business or the
sale of its products or services in any jurisdiction in North
America or Europe - nor in the principal potential business
markets in Asia. Before undertaking an entry into an Asian
market, or a market elsewhere in the World, the potential need
for government approval or regulation will be reviewed.
(iv) The Company considers that it has to the date hereof spent on
research and development activities related to its
above-described business approximately $200,000. There is no
specific allocation of any of those costs to the Company's
future customers - although it will be the Company's objective
to charge for its products and services in sufficient amounts
to enable it to recover its research and development costs.
(v)At the date hereof the Company has only 1 employee, being Charles
Yang, who is employed as the Company's President and Chief
Operating Officer on a full-time basis. The Company otherwise
functions through the efforts of its officers and contracted
consultants.
C. Report to Securityholders
The Company is not presently required under any Act or Regulation to
deliver financial statements or other information to any of its shareholders.
However:
(i) Regardless of whether it becomes required to do so by
applicable rules or regulations, the Company will,
voluntarily, send to all of its securityholders an Annual
Report on or before the 30th day of June in each year, which
will include the financial statements of the Company audited
to the preceding December 31st, being the Company's fiscal
year-end;
(ii) The Company is not a reporting company and will not become one
unless and until this Registration Statement becomes
effective.
(iii) The public may read and copy any materials that this Company
files with the United States Securities and Exchange
Commission at its Public Reference Room at 450 - 5th Street
N.W., Washington, D.C., U.S.A. 20549. The public may also
obtain information on the operation of the Public Reference
Room by calling the SEC at 1-800-SEC-0330. Further, to the
extent that the Company files with the SEC electronically the
SEC maintains an Internet site that contains reports, proxy
and Information Statements and other information regarding
issuers, and interested persons may obtain information on the
site http:\\www.sec.gov. The Company's Internet address is
http:\\ www.ephonetel.com.
ePHONE TELECOM, INC.
(FORMERLY IFB CORP.)
(FORMERLY IRA FUND BROKERS CORP.)
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
June 30, 1999
December 31, 1998
December 31, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
INDEPENDENT AUDITOR'S REPORT.......................................1
ASSETS.............................................................2
LIABILITIES AND STOCKHOLDERS' EQUITY...............................3
STATEMENT OF OPERATIONS............................................4
STATEMENT OF STOCKHOLDERS' EQUITY..................................5
STATEMENT OF CASH FLOWS............................................6
NOTES TO FINANCIAL STATEMENTS......................................7-8
<PAGE>
BARRY L. FRIEDMAN, P.C.
Certified Public Accountant
1582 TULITA DRIVE OFFICE (702) 361-8414
LAS VEGAS, NEVADA 89123 FAX NO.(702)896-0278
INDEPENDENT AUDITORS' REPORT
Board of Directors July 30, 1999
ePhone Telecom, Inc.
Vancouver, BC, Canada
I have audited the accompanying Balance Sheets of ePhone Telecom, Inc.,
(Formerly IFB Corp.), (Formerly Ira Fund Brokers Corp.), (A Development Stage
Company), as of June 30, 1999, December 31, 1998, and December 31, 1997, and the
related statements of operations, stockholders' equity and cash flows for period
January 1, 1999, to June 30, 1999, and for the two years ended December 31,
1998, and December 31, 1997. These financial statements are the responsibility
of the Company's management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my 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.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ePhone Telecom, Inc.,
(Formerly IFB Corp.),(Formerly Ira Fund Brokers Corp.), (A Development Stage
Company) as of June 30, 1999, December 31, 1998, and December 31, 1997, and the
results of its operations and cash flows for the period January 1, 1999, to June
30, 1999, and for the two years ended December 31, 1998, and December 31, 1997,
in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note #3 to the
financial statements, the Company has no established source of revenue. This
raises substantial doubt about its ability to continue as a going concern.
Management's plan in regard to these matters are also described in Note #3. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/Barry L Friedman
Barry L. Friedman
Certified Public Accountant
<PAGE>
ePHONE TELECOM, INC.
(FORMERLY IFB CORP.)
(FORMERLY IRA FUND BROKERS CORP.)
(A Development Stage Company)
BALANCE SHEET
ASSETS
June 30, 1999 December 31, December 31,
1999 1998 1997
----------------------------------------------
CURRENT ASSETS
Cash $ 120,058 $ 0 $ 0
---------- --------- -----------
TOTAL CURRENT ASSETS $ 120,058 $ 0 $ 0
---------- --------- ------------
OTHER ASSETS
Purchase Advance (Note #7) $ 200,000 $ 0 $ 0
Computer (Net) (Note #2) 4,333 4,875 0
----------- --------- ------------
TOTAL OTHER ASSETS $ 204,333 $ 4,875 $ 0
---------- --------- ------------
TOTAL ASSETS $ 324,391 $ 4,875 $ 0
========== ========= ============
The accompanying notes are an integral part of these financial statements
F-2
<PAGE>
ePHONE TELECOM, INC.
(Formerly IFB CORP.)
(FORMERLY IRA FUND BROKERS CORP.)
(A Development Stage Company)
BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
June December December
30, 1999 31, 1998 31, 1997
----------------------------------------
CURRENT LIABILITIES
Officers Advances (Note #6) $ 13,802 $ 12,046 $ 0
Shareholders Advances (Note #6) 275,000 0 0
Accounts Payable 156,523 11,073 0
--------- --------- ----------
TOTAL CURRENT LIABILITIES $445,325 $ 23,119 $ 0
--------- --------- ----------
STOCKHOLDERS' EQUITY (Note #1)
Common stock, $0.001 par value
authorized 50,000,000 Shares
issued and outstanding at
December 31, 1997-1,000,000 shs $ 1,000
December 31, 1998-1,000,000 shs $ 1,000
June 30, 1999-4,000,000 shares $ 4,000
Additional paid in Capital 97,000 0 0
Deficit accumulated during
the development stage (221,934) (19,244) (1,000)
TOTAL STOCKHOLDERS' EQUITY (120,934) $(18,244) $ 0
--------- --------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $324,391 $ 4,875 $ 0
========= ========= ==========
F-3
The accompanying notes are an integral part of these financial statements
<PAGE>
ePHONE TELECOM, INC.
(FORMERLY IFB CORP.)
(FORMERLY IRA FUND BROKERS CORP.)
(A Development Stage Company)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Jan. 1, Year Year May 3,1996
1999, to Ended Ended (inception)
June 30, Dec. 31, Dec. 31, to June 30,
1999 1998 1997 1999
------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCOME
Revenue $ 0 $ 0 $ 0 $ 0
----------- ---------- ----------- -------------
EXPENSES
Depreciation $ 542 $ 542 $ 0 $ 1,084
General and
Administrative 85,048 1,516 0 87,564
Internet Web Site 7,359 0 0 7,359
Investor Relations 8,000 990 0 8,990
Market Development 47,306 0 0 47,306
Office Supplies 1,723 150 0 1,873
Postage 207 0 0 207
Professional Fees 34,610 14,643 0 49,253
Regulatory Expense 2,068 0 0 2,068
Rent 1, 837 0 0 1, 837
Travel 13,990 403 0 14,393
----------- ---------- ----------- -------------
$ 202,690 $ 18,244 $ 0 $ 221,934
----------- ---------- ----------- -------------
Total Expenses $ 202,690 $ 18,244 $ 0 $ 221,934
----------- ---------- ----------- -------------
Net Profit/(Loss) $ (202,690) $(18,244) $ 0 $ (221,934)
=========== ========= ========== =============
Net Profit/(Loss)
per weighted
share (Note #1) $ (.0756) $ (.0182) $ 0 $ (.1755)
=========== ========= ========== =============
Weighted average
number of common
shares outstanding 2,679,558 1,000,000 1,000,000 1,264,578
=========== ========== ========== =============
</TABLE>
F-4
The accompanying notes are an integral part of these financial statements
<PAGE>
ePHONE TELECOM, INC.
(FORMERLY IFB CORP.)
(FORMERLY IRA FUND BROKERS CORP.)
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional Accumulated
Shares Amount Paid-in capital Deficit
------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1996 1,000,000 $ 1,000 0 $ (1,000)
Net loss year ended December 31,
1997 0
-----------------------------------------------------
Balance, December 31, 1997 1,000,000 $ 1,000 0 (1,000)
Net loss year ended December 31,
1998 18,244
-----------------------------------------------------
Balance, December 31, 1998 1,000,000 $ 1,000 0 (19,244)
March 1, 1999 public offering for cash 1,000,000 1,000 9,000
April 1, 1999 public offering
for cash 2,000,000 2,000 88,000
Net income January 1, 1999
to June 30, 1999 (202,690)
-----------------------------------------------------
Balance, June 30, 1999 4,000,000 $ 4,000 97,000 $ (221,934)
=====================================================
</TABLE>
The accompanying notes are an integral part of these financial statements
F-5
<PAGE>
ePHONE TELECOM, INC.
(FORMERLY IFE CORP.)
(FORMERLY IRA FUND BROKERS CORP.)
(A Development Stage Company)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Jan 1, 1999 to Year Ended Year Ended May 3, 1996
June 30, 1999 Dec. 31, 1998 Dec. 31, 1997 (inception) to
June 30, 1999
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash Flows from Operating
Activities
Net Loss $ (202,690) $ (18,244) $ 0 $ (221,934)
Adjustment to reconcile net
loss to net cash provided
by operating activities
Depreciation 542 542 0 1,084
Changes in assets and liabilites
Increase in other assets
(200,000) (5,417) 0 (205,417)
Increase in current
liabilites 442,206 23,119 0 445,325
----------- ---------- --------- -----------
Net cash used in operating
activites $ 20,058 $ 0 $ 0 $ 19,058
Cash Flows from investing
Activites 0 0 0 0
Cash Flows from Financing
Activites
Issuance of Common Stock
for services
100,000 0 0 101,000
----------- ---------- --------- -----------
Net increase (decrease) in
cash $ 120,058 0 0 120,058
Cash, beginning of period 0 0 0 0
----------- ---------- --------- -----------
Cash, end of period $ 120,058 $ 0 $ 0 $ 120,058
========== ========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-6
<PAGE>
ePHONE TELECOM, INC.
(FORMERLY IFB CORP.)
(FORMERLY IRA FUND BROKERS CORP.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
June 30, 1999, December 31, 1998, and December 31, 1997
NOTE I -- HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized May 3, 1996, under the laws of the State of
Florida, as Ira Fund Brokers Corp. The Company currently has no operations and,
in accordance with SFAS #7, is considered a development stage company.
On May 8, 1996, the company issued 1,000,000 shares of its $0.001 par value
common stock for $ 1,000.
On April 17, 1998, the Company changed it's name to IFB Corp.
On March 1, 1999, the Company completed an offering of its Common Stock
under Regulation "D" Rule 504 for 1 , 000,000 Common Shares of stock at $0.01
per share or $ 10,000.00.
On April 1, 1999, the Company completed an offering of its Common Stock
under Regulation "D" Rule 504 for 2,000,000 Common Shares of stock at $0.045 per
share or $ 90,000.00.
On April 9, 1999, the Company changed it's name to ePhone Telecom, Inc.
NOTE 2 -- ACCOUNTING POLICIES AND PROCEDURES
Accounting policies and procedures have not been determined except as follows:
1. The Company uses the accrual method of accounting.
2. Earnings per share is computed using the weighted average number of common
shares outstanding.
3. The Company has not yet adopted any policy regarding payment of dividends.
No dividends have been paid since inception.
4. Depreciation is calculated on the computer on the basis of 5 year straight
line method half year convention.
NOTE 3 -- GOING CONCERN
The Company's 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. However, the Company has no current source of revenue. Without
realization of additional capital, it would be
F-7
<PAGE>
ePHONE TELECOM, INC.
(FORMERLY IFB CORP.)
(FORMERLY IRA FUND BROKERS CORP.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS CONTINUED
June 30, 1999, December 31, 1998, and December 31, 1997
unlikely for the Company to continue as a going concern. It is management's plan
to seek to raise additional capital.
NOTE 4 -- WARRANTS AND OPTIONS
There are no warrants or options outstanding to issue any additional shares
of common stock as of June 30, 1999.
NOTE 5 -- RELATED PARTY TRANSACTION
The Company neither owns or leases any real property. Office services are
provided without charge by a director. Such costs are immaterial to the
financial statements and, accordingly, have not been reflected therein. The
officers and directors of the Company are involved in other business activities
and may, in the future, become involved in other business opportunities. If a
specific business opportunity becomes available, such persons may face a
conflict in selecting between the Company and their other business interests.
The Company has not formulated a policy for the resolution of such conflicts.
NOTE 6 -- OFFICERS/SHAREHOLDERS ADVANCES
While the Company is seeking additional capital through a merger with an
existing operating company, an officer/shareholders of the Company has advanced
funds on behalf of the Company to pay for any costs incurred by it. These funds
are interest free.
NOTE 7 -- PURCHASE ADVANCE
The Company has advanced $200,000.00 to Tek Digitel Corporation, for
inventory to be delivered as follows: 20 units by July 15, 1999, 40 units by
July 30, 1999, and the balance of 226 units by August 24, 1999. These deliveries
have been rescheduled to October, 1999.
NOTE 8 -- SUBSEQUENT EVENTS
On July 2, 1999, the Company declared a stock dividend of two shares for
each share held as at July 6, 1999. This dividend was effected July 16, 1999,
thus increasing the number of outstanding common shares from 4,000,000 common
shares to 12,000,000 common shares.
On July 19, 1999, the Company issued options for 3,500,000 common shares
exercisable at $0.50 per share expiring on June 30, 2001.
F-8
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Company has not had any revenues from any operations as it has not
commenced its proposed business operations. The Company's plan of operation for
the next 12 months principally includes:
(a) The raising of additional financing. The Company does not have funding
on hand to enable it to substantially progress with its plans. The
Company is projecting development of the business over the next 12
months which it has estimated will require funding of $2,500,000.
Optimally, the Company would like to raise $5,000,000 - $7,000,000 to
carry forth its business development plans at an enhanced rate. The
Company does not consider that there is any minimum amount that it must
raise - and the amount that it raises less the $2,500,000 will be
applied as Management deems appropriate to the development of the
Company's business.
(b) The Company does not currently have any plans for any product research
or development. The Company anticipates that if and when it considers
further product development is required it will make such requirements
known and the necessary research and development will be made by TEK
Digitel Corporation or other companies.
(c) Currently, the Company has an ePhone iGate installed at the UUNet
colocation facilities in San Jose, California. The Company is
installing a Gateway/Gatekeeper for worldwide operation purposes at its
headquarters in Fremont, California.
During the next 12 months the Company plans to acquire two additional
Gateways/Gatekeepers to be located in Europe and Hong Kong,
respectively. Negotations are being finalized for their placements.
The Company has secured an agreement with UUNet, a subsidary of MCI
Worldcom, to provide a worldwide high speed Internet backbone network
for all of its clients. The Company will also be able to utilize all of
UUNet's Points of Presence throughout the world as their termination
points when sending voice or data via the Internet.
The Company has begun discussions with companies in Europe, North
America and Asia to provide "last-mile" of "off-net" traffic, i.e. the
link between the worldwide Internet backbone (UUNet), the public
service telephone network (PSTN) and the local end-user.
The Company has requested estimates and production schedules for the
manufacture of the iGate under license from TEK Digitel Corporation.
The Company has had strong interest expressed by European and Asian
companies concerning potential prospects for the ePhone iGate concept.
(d) The Company is forecasting the purchase of office equipment, computer
hardware (excluding gateways) and software over the next 12 months in
the amount of $400,000. The Company anticipates - but is not
contractually required - to purchase some of its hardware and software
from TEK Digitel Corporation.
(e) The Company does anticipate some additional employees being hired. The
Company expects to develop the business of the sale of its products and
services through distributors and agents and but will have some
requirement for additional employees.
ITEM 3 DESCRIPTION OF PROPERTY
(a) The Company does not own or have any rights to purchase any plants or
other property. Its only physical assets are computers and office
equipment.
(b) Investment Policies
The Company does not have any policies which limit or guide the types
of investments that it might acquire or invest in. However, at the date
hereof, the Company does not have any expectations that it will acquire
any investments other than those which might be compatible with, and
will enhance or support, the Company's business objectives as described
above. The Company does not have any policy which would lead it to
acquiring assets or investments for capital gain. Such assets or
investments as it may acquire or invest in would be to advance the
business described above with the objective of generating income.
ITEM 4 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table contains information with respect to beneficial ownership of
the outstanding common shares of the Company as of September 20, 1999 for: (i)
each shareholder known to be the beneficial owner of 5% or more of the
outstanding common shares; (ii) each of the Company's executive officers and
directors; and (iii) all executive officers and directors of the Company as a
group. In general, a person is deemed to be a "beneficial owner" of a security
if that person has or shares the power to vote or direct the voting of such
security, or has the power to dispose or direct the disposition of such
security. A person is also deemed to be a beneficial owner of any securities of
which the person has the right to acquire beneficial ownership within 60 days.
At September 20, 1999 the Company had 12,000,000 shares issued and outstanding
and had outstanding options entitling the purchase, within 60 days, of 3,775,000
shares. The following information as to percentage of beneficial ownership is
therefore of the total of the shares issued or under option, being 15,975,000.
<TABLE>
<CAPTION>
Name and Address Number of Common Shares Percent of
or Identity of Individual Beneficially Owned Beneficial
or Group or Deemed Beneficially Ownership
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Robert G. Clarke
915 Leyland Street
West Vancouver, B.C. V7T 2L6 Nil shares
Director, Chairman and Chief 1,000,000 options 6.34%
Executive Officer
39767 Paseo Padre Parkway
Suite E, Nil shares
Fremont, California, 94538 500,000 options
Director, President and Chief Operating of which only 300,000 are 1.9%
Officer exercisable within 60 days)
Peter Francis
Suite 3C, Tung Shan Terrace, Nil shares 1.58%
Stubbs Road, 250,000 options
Hong Kong
Director and Executive Vice-President
Hans van Yzeren
Goizendreef 12 Nil shares 1.58%
2360 Oud-Turnhout 250,000 options
Belgium
Director
Charlie Rodriguez
162 West Petunia Place Nil shares 1.58%
Tucson, Arizona 250,000 options
U.S.A.
85737
Secretary and Vice-President
John Fraser
104 Elm Avenue Nil shares 1.58%
Toronto, Ontario 250,000 options
M4W 1P2
Ben Leboe
16730 Carrs Landing Rd. Nil shares 1.58%
Lake Country, B.C. 250,000 options
V4V 1B2
Chief Financial Officer
Executive Officers and Directors as a group Nil shares
(7) persons 2,550,000 options 16.16%
Americana International Inc.
Hong Kong 2,550,000 shares 16.16%
Holder of more than 5%
</TABLE>
ITEM 5 DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following sets forth the names, positions and ages of the executive officers
and directors. All Directors serve until the next Annual General Meeting of the
Shareholders or until they earlier resign. Officers are elected by the Board of
Directors and their terms of office are, except to the extent that the
engagement of Mr. Yang is governed by an Agreement, at the discretion of the
Board of Directors.
Name Age Position
- --------------------------------------------------------------------------------
Robert G. Clarke 55 Director, Chairman and Chief
Executive Officer
Charlie Rodriguez 55 Vice President of Corporate
Affairs, Secretary
Charles Yang 39 Director, President and Chief
Operating Officer
Peter Francis 50 Director
Hans van Yzeren 39 Director
John G. Fraser 53 Director, Executive Vice President
Ben Leboe 53 Chief Financial Officer
Robert G. Clarke, M.B.A. Chairman and Chief Executive Officer. Mr. Clarke's
experience coves a broad range of general management skills and experience
relating to public companies including general management, corporate finance,
public equity markets and regulatory affairs, business planning and marketing.
He is a director of several public companies and was the President and Chief
Executive Officer of WaveRider Communications Inc. (OTC: WAVC) which is
developing an innovative wireless technology in the telecommunications field.
Mr. Clarke has had extensive international business experience in Canada, United
States, Europe, Asia, South America, Australia and New Zealand. Mr. Clarke was
appointed a Director, Chairman and Chief Executive Officer on June 3, 1999.
Charles Yang. President and Chief Operating Officer. Mr. Charles C. Yang
brings over 17 years of experience in the fields of data communication and
telecommunication. He is the Founder, President and CEO of General-Tel Inc., a
telecommunications company, specializing in Virtual Private Networks,
Fixed-Wire/Wireless communications and Internet technologies. In addition to his
technical expertise, Mr. Yang has been successful in developing businesses
within the USA, Southeast Asia, China, Taiwan and Vietnam. During this time, Mr.
Yang established relationships with United States manufacturers, but also with
companies located in the science-based park in Hsin-Chu, Taiwan. Mr. Yang was
appointed a Director, President and Chief Operating Officer of the Company,
August, 17, 1999.
Ben Leboe, CA. Chief Financial Officer. Mr. Leboe was formerly Senior
Consulting Partner with KPMG in Vancouver and Victoria BC. He has provided
financial consulting services to numerous clients, including WaveRider
Communications Inc. and was previously the Vice President and CFO of VECW
Industries Ltd., a private business operating 12 divisions and
President/Director of CPT Pemberton Technologies Ltd. (CPT), a public company.
He holds a degree in Commerce and Business Administration from UBC and has
earned memberships in the Institute of Management Consultants of BC and the
Institute of Chartered Accountants of BC. Mr. Leboe was appointed Chief
Financial Officer of the Company on June 3, 1999.
John G. Fraser. M.B.A., B.C.A. Executive Vice-President. Mr. Fraser is in
charge of Business Operations for ePHONE. He has extensive international
professional experience over a span of several decades. Most recently he was
Vice Chairman, KPMG Canada, and responsible nationally for the management
consulting division. He has line- managed both start-up and on-going companies.
He has worked in Europe, Africa, North America, Australia and New Zealand. He is
also a member of the Institute of Management Consultants of Ontario. Mr. Fraser
was appointed Director and Executive Vice President of the Company June 3, 1999.
Charlie Rodriguez. C.H.E., C.M.P.E., M.B.A. Vice-President Corporate
Affairs. Mr. Rodriguez is responsible for all the public company and regulatory
aspects of ePHONE. He has extensive experience in financing and developing
infrastructure for public and privately held companies. He has served as
President and Chief Financial Officer of an OTC listed company and was
instrumental in merging the company with its successor in the telecommunications
business. Previously, Mr. Rodriguez was the treasurer of a NASDAQ listed company
in telecommunication services. Mr. Rodriguez was appointed Vice President of
Corporate Affairs and Secretary, June 3, 1999.
Hans van Yzeren. Supervisor of the Company's European development. Mr. van
Yzeren is a graduate from the PolyTechnical University in Rotterdam, The
Netherlands. As a partner in Data Devices he established the AXXESS brand name
of computer peripherals on the European market. Previously, as a partner in
G-Tel Telecom, he introduced their own line of cordless telephones and was
involved in the development and production aspects of the products for the
European market. Mr. van Yzeren was appointed a Director June 3, 1999.
Peter J. Francis. Supervisor of the Company's Asian development. Mr. Francis is
a financial and investment advisor based in Hong Kong. He spent 12 years in
senior executive positions within the finance and merchant banking divisions of
a major Australian banking group before setting up his own business in 1983.
Within the New Zealand, Australian and Hong Kong business communities he has
acted as promoter and advisor to numerous corporate transactions on behalf of
clients and in recent years on his own account. His corporate involvement and
experience has covered a broad range of business sectors. These activities have
been in both the private and publicly listed corporate markets throughout the
Asian region. Mr. Francis was appointed a Director June 3, 1999.
ITEM 6 EXECUTIVE COMPENSATION
A. Cash compensation
The Company paid no compensation, cash or otherwise, to any of its directors or
executive officers during the fiscal years ended December 31, 1998.
No directors or executive officers are presently under any agreement pursuant to
which they are guaranteed salary or other direct compensation. Various of the
directors and executive officers perform functions for the Company on a
consulting basis and are paid for their services rendered from time to time on
such basis as is negotiated with them from time to time by the President. Mr.
Yang is currently entitled to compensation on a basic monthly basis with
additional potential commissions and shares of the Company pursuant to the
agreement described in Item 7 below.
B. Option grants
No options were granted by the Company during any period prior to December 31,
1998. The Company does not have a stock option plan. However, the Company did
grant, effective July, 1998, share purchase incentive options to 12 directors,
executive officers, non-executive officers and individuals providing service to
the Company entitling them to purchase up to an aggregate total of 3,975,000
shares of the Company exercisable at $0.50 per share on or before June 30, 2001.
Provided that, the options granted to any individual will terminate within 30
days after the individual ceases to perform services for the Company or within 6
months after the date of the death of such individual. The numbers of shares
optioned to each of the Company's Directors and Executive Officers is shown in
the table in Item 4 above.
C. Charles Yang
With the number of shares Charles Yang could receive pursuant to the agreement
described in Item 7(d) and attached as an Exhibit hereto, he could become the
largest single shareholder with enough shares to affect control of the Company.
ITEM 7 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
A. On May 8, 1996, immediately following the incorporation of the Company, the
Company issued 1,000,000 common shares for $0.001 per share. Of these,
975,000 shares were issued by the Company to Ira Schwartz, the Company's
then sole director and officer.
B. Effective March 1, 1999 the Company issued 1,000,000 shares in its capital
for a price of $0.01 per share.
C. Effective April 1, 1999 the Company issued 2,000,000 shares in its capital
for a price of $0.045 per share.
All of the shares referred to in Clauses A, B and C have since been split
on a 1:3 basis so that they have become a total of 12,000,000 issued shares.
D. By an Agreement dated July 8, 1999 the Company engaged Charles Yang (who
was not previously related to the Company) to provide his services on a
full-time basis as the President and Chief Operating Officer of the Company
for a basic term of 4 years. The Agreement provides for the payment to Mr.
Yang of a fee of $7,500 per month initially, escalating to $17,500 per
month for the period April 1 - June 30, 2000. For the second, third and
fourth years of Mr. Yang's engagement his compensation will be reviewed but
will increase by a minimum of not less than 15% over the amount paid to him
in the preceding year.
The Agreement also provided for Mr. Yang to be granted options and,
pursuant thereto, Mr. Yang was granted options to purchase 500,000 common shares
of the Company exercisable at $0.50 per share, during the term of his Engagement
Agreement, the options vesting on the following schedule:
100,000 shares on execution of the Agreement 200,000 shares October 1,
1999 200,000 shares January 1, 2000
In the Agreement the Company also agreed to purchase from Mr. Yang 100% of
the issued shares of a company owned by him, General-Tel Inc., for consideration
of 1,500,000 voting common shares of the Company. The Agreement provides that
the Company must, within 6 months of the closing of the acquisition of
General-Tel, raise funding for itself (and possibly use by General-Tel) of not
less than $1,100,000, and if such financing is not raised within the said
deadline Mr. Yang will be entitled to cancel the negotiations or the acquisition
agreement and have 100% of the shares of General-Tel re-transferred to him in
consideration for which he must return 1,350,000 of the Company's shares to it.
The Company has also agreed to issue Mr. Yang 2,000,000 voting common
shares (which it has not yet done). The certificates for the shares will be held
in escrow by the Company's Canadian lawyers, and 25% of such shares - i.e.
500,000 shares - will be released to Mr. Yang upon the Company achieving the
following performance thresholds:
(i) net sales revenues of $5,000,000
(ii) aggregate cumulative net sales revenues of $12,000,000
(iii) aggregate cumulative net sales revenues of $30,000,000
(iv) aggregate cumulative net sales revenues of $50,000,000
The Agreement requires that Mr. Yang bring to the company the benefit of all
negotiations and technical knowledge initiated or held by him to sell hardware
or services with respect to a technology referred to as Wireless Local Loop
("WLL"). The Company has agreed to issue Mr. Yang 1,000,000 voting common shares
if he succeeds in developing an agreement for the sale of WLL to one or more
purchasers brought to the Company by Mr. Yang - such shares to be issued on the
following schedule:
(i) 300,000 shares upon completion of negotiation and signing of
Memorandum of Understanding with the purchaser of WLL;
(ii) 300,000 shares upon completion of signing of a formal contract for
the sale of WLL;
(iii) 400,000 shares upon the receipt by the Company from the sale of WLL
of payments and revenues of not less than $500,000.
Further, Mr. Yang will receive 10% of the gross profits earned by the
Company from the sales of WLL.
Mr. Yang will also, from the sale of the Company's products or services,
receive royalties on the following basis:
(i) from sales of equipment or services in China, Vietnam or Taiwan,
provided the Company's gross profit margin is not less than 20%
from such sales, Mr. Yang will be paid 5% of the gross profits from
such business; and
(ii) for countries other than China, Vietnam or Taiwan where the Company
pays sales commissions or representatives or agents in such other
country, Mr. Yang will be paid monies equal to 1% of the amount of
the gross sales revenues from such countries;
(iii) where sales to China, Vietnam or Taiwan produce gross profits of
less than 20% then Mr. Yang will, in lieu of the aforesaid 5%,
receive commissions equal to 1% of the gross sales revenues from
such countries.
E. The Company issued the options described in Item 6B hereof to various of
its directors and executive officers.
ITEM 8 DESCRIPTION OF SECURITIES
The Company's authorized capital consists only of voting common shares.
12,000,000 shares are issued and outstanding as of the date of this Statement.
The Company does not have, does not propose to issue (except as otherwise
disclosed in this document), and is not attempting to register any other shares
or other securities.
All of the common shares rank equally with each other, and none have any
rights or restrictions attached to them. Each share has attached to it one (1)
non-cumulative vote.
The Registrar and Transfer Agent of the Company's shares is Interwest
Transfer Co., Inc., 100 - 1981 East 4800 south, Salt Lake City, Utah, U.S.A.
PART II
ITEM 1 MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
A. Market Information
The common voting shares of the Company are traded on the Over-The-Counter
electronic Bulletin Board - under the symbol "EPHO". The Company's shares do not
trade on any stock exchange or any other market.
The reported high and low bid prices for the Company's shares for the
quarters of the last two completed fiscal years ending December 31, 1998 and the
first two quarters of 1999 are as follows. The quotations reflect inter-dealer
prices and do not include retail mark-ups, mark-downs or commissions, and may
not represent actual transactions. The source of the bid information given is
the Nasdaq-Amex Market Group.
Year and Quarter High Bid Low Bid
$ $
- --------------------------------------------------------------------------------
1997
1st Quarter 0 0
2nd Quarter 0 0
3rd Quarter 0 0
4th Quarter 0 0
1998
1st Quarter 0 0
2nd Quarter 0 0
3rd Quarter $0.50 $0.50
4th Quarter $0.50 $0.50
1999
1st Quarter $0.625 $0.50
2nd Quarter $2.125 $0.5313
As the Company's shares started trading on a 1:3 split basis effective July
16, 1999 the figures given above for the periods prior to that date are of
pre-split shares. The Company's shares were not posted for trading on thue OTC
Bulletin Board until May 18, 1998.
B. Holders
As of September 23, 1999 there were 26 shareholders of record of the
Company's outstanding shares. One registered holder was the brokers' nominee and
clearing house Cede & Co., of New York, New York, which was the registered
holder of 5,368,000 shares.
C. Dividends
The Company has not paid any cash dividends to date and no cash dividends
will be declared or paid on the Common Shares in the foreseeable future. Payment
of dividends is solely at the discretion of the Board of Directors.
On July 2, 1999, the Board of Directors unanimously approved a stock dividend of
2 shares for each 1 issued share - having the same net effect as a 3-1 forward
split of the Company's Common Shares. The record date of the stock split was the
close of business on July 6, 1999 and was such that each shareholder received 2
additional shares for each share owned at the close of business on July 16,
1999. The Company does not anticipate that there will be any stock dividends
paid by the Company in the foreseeable future.
ITEM 2 LEGAL PROCEEDINGS
The Company is not involved in, or has no knowledge of, any threatened or
pending legal proceedings against it.
ITEM 3 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
The Company has had no disagreements with its auditor Barry Friedman,
C.P.A., during the fiscal years ended December 31, 1997 and 1998, six months
ended June 30, 1999, and subsequent periods.
ITEM 4 RECENT SALES OF UNREGISTERED SECURITIES
The Company has, in the past 3 years, sold securities, namely voting common
shares - without registering the securities under the United States Securities
Act of 1933, as detailed in Clauses A, B and C of Item 7 of Part I.
All of the sales were made directly by the Company and not through the use
of underwriters. No underwriting discounts or commissions were paid with respect
to any of the sales - all of which were made for cash at the prices designated
above.
The sales were made without registration pursuant to the exemption granted
by Rule 504 of Regulation D to the Securities Act.
ITEM 5 INDEMNIFICATION OF DIRECTORS AND OFFICERS
Neither the Company's Charter documents nor any contracts or arrangements
in existence provide for any insurance or indemnification of any Director,
Officer or controlling person of the Company affecting his or her liability in
such capacity.
Section 607.0850 of the Statutes of Florida (pursuant to which the Company
was incorporated) grants to a company the power to provide indemnification to
directors, officers, employees or agents of the corporation. While the
provisions of the Statute contain an extensive description of situations where
indemnification may be granted generally, the corporation can grant
indemnification to directors, officers, employees or agents or others serving
the company with respect to either actions by third parties or by the company if
the person being indemnified was, with respect to the subject of the action,
acting in good faith and in a manner he or she reasonably believed to be in the
best interests of the company, and had no reason to believe was unlawful.
Indemnification and the extent of the indemnification must be determined in each
instance after a claim arises by a majority vote of the board of directors.
Indemnification, even if previously approved, shall not be given if a final
adjudication determines that the actions which are the subject of the
indemnification were:
(a) a violation of the criminal law unless the person being indemnified had
reasonable cause to believe that the conduct was not unlawful; or
(b) involves a transaction in which the person derived or was to derive an
improper personal benefit; or
(c) the person is a director and liability provisions elsewhere in the Statutes
of Florida are applicable; or
(d) the actions of the person proposed to be indemnified constituted wilful
misconduct or conscious disregard for the best interests of the
corporation.
As of the date hereof the Company has not agreed to grant any
indemnification to any person pursuant to the foregoing statutory provisions.
PART F/S
Audited financial statements of the Company are provided herein. They cover the
last two completed fiscal years of the Company ending December 31, 1997 and
December 31, 1998 and the half-yearly period ending June 30, 1999.
PART III
ITEM 2 DESCRIPTION OF EXHIBITS
3.1 Articles of Incorporation
3.2 First Amendment to Articles of Incorporation
3.3 Bylaws
3.4 Stock Certificate (to be submitted by amendment)
3.5 Second Amendment to Articles of Incorporation (to be submitted by
amendment)
4.1 Specimen of form of Option Incentive Agreement signed by the Company
with the various optionees as detailed in Item 6.B of Part I
10.1 Engagement Agreement dated July 8, 1999 with Charles Yang
27 Financial Data Schedule
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
ePHONE TELECOM, INC.
(Registrant)
Date: September 12, 1999 By: /s/Robert Clarke
------------------
Robert E. Clarke
Chief Executive Officer
ARTICLES OF INCORPORATION
OF
IRA FUND BROKERS CORP.
The undersigned, desiring to form a corporation (the "Corporation") under
the laws of Florida, hereby y adopts the following Articles of Incorporation:
ARTICLE I
CORPORATE NAME
The name of the Corporation is Ira Fund Brokers Corp.
ARTICLE II
PURPOSE
The Corporation shall be organized for any and all purposes authorized
under the laws of the state of Florida.
ARTICLE III
PERIOD OF EXISTENCE
The period during which the Corporation shall continue is perpetual.
ARTICLE IV
SHARES
The Capital stock of this corporation shall consist of 50,000,000 shares of
common stock, $.001 par value.
ARTICLE VI
PLACE OF BUSINESS
The initial address of the principal place of business of this corporation
in the State of Florida shall be 1428 Brickell Avenue, 8th Floor, Miami, Fl
33131. The Board of Directors may at any time and from time to time move the
principal office of the corporation.
ARTICLE VI
DIRECTORS AND OFFICERS
The business of this corporation shall be managed by its Board of
Directors. The number of such directors shall be not less than one (1) and,
subject to such minimum may be increased or decreased from time to time in the
manner provided in the By-Laws.
The number of persons constituted the initial Board of Directors shall be
1. The Board of Directors shall be elected by the Stockholders or the
corporation at such time and in such manner as provided in the By-Laws. The name
and addresses of the initial Board of Directors and officers are as follows:
Eric P. Littman President/Director
8th Floor
1428 Brickell Avenue
Miami, FL 33131
ARTICLE VII
DENIAL OF PREEMPTIVE RIGHTS
No shareholder shall have any right to acquire shares or other securities
of the Corporation except to the extent such right may be granted by an
amendment to these Articles of Incorporation or by a resolution of the board of
Directors.
ARTICLE VIII
AMENDMENT OF BYLAWS
Anything in these Articles of Incorporation, the Bylaws, or the Florida
Corporation Act notwithstanding, bylaws shall not be adopted, modified, amended
or repealed by the shareholders of the Corporation except upon the affirmative
vote of a simple majority vote of the holders of all the issued and outstanding
shares of the corporation entitled to vote thereon.
ARTICLE IX
SHAREHOLDERS
9.1 Inspection of Books. The board of directors shall make reasonable rules
to determine at what times and places and under what conditions the books of the
Corporation shall be open to inspection by shareholders or a duly appointed
representative or a shareholder.
9.2 Control Share Acquisition. The provisions relating to any control share
acquisition as contained in Florida Statutes now, or hereinafter amended, and
any successor provision shall not apply to the Corporation.
9.3 Quorum. The holders of shares entitled to one-third of the votes at a
meeting of shareholder's shall constitute a quorum.
9.4 Required Vote. Acts of shareholders shall require the approval of
holders of 50.01% of the outstanding votes of shareholders.
ARTICLE X
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
To the fullest extent permitted by law, no director or officer of the
Corporation shall be personally liable to the Corporation or its shareholders
for damages for breach of any duty owed to the Corporation or its shareholders.
In addition, the Corporation shall have the power, in its By-Laws or in any
resolution of its stockholders or directors, to undertake to indemnify the
officers and directors of this corporation against any contingency or peril as
may be determined to be in the bests interests of this corporation and in
conjunction therewith, to procure, at this corporation's expense, policies of
insurance.
ARTICLE XI
SUBSCRIBER
The name and address of the person signing these Articles of Incorporation
as subscriber is:
Eric P. Littman
8th Floor
1428 Brickell Avenue
Miami, FL 33131
ARTICLE XII
CONTRACTS
No contract or other transaction between this corporation and any person,
firm or corporation shall be affected by the fact that any officer or director
of this corporation is such other party or is, or at some time in the future
becomes, an officer, director or partner or such other contracting party, or has
now or hereafter a direct or indirect interest in such contract.
ARTICLE XIII
RESIDENT AGENT
The name and address of the initial resident agent of this cooperation is:
Eric P. Littman
8th Floor
1428 Brickell Avenue
Miami, FL 33131
IN WITNESS WHEREOF, I have hereunto subscribed to and executed these
Articles of Incorporation this on April 30, 1996.
/s/Eric P. Littman
Eric P. Littman, Subscriber
Subscribed and Sworn on April 30, 1996
Before me:
/s/Isabel Cantera
- -----------------------------------------
Isabel Cantara, Notary Public
My Commission Expires February 28, 1998
AMENDMENT TO
ARTICLES OF INCORPORATION
OF
IRA FUND BROKERS CORP.
THE UNDERSIGNED, being the president of IRA FUND BROKERS CORP. does hereby
amend the Articles of IRA FUND BROKERS CORP. as follows:
ARTICLE III
NAME
Effective upon the date of filing of this amendment, the name of the
corporation shall be IFB CORP.
I hereby certify that the following was adopted by a majority vote of the
shareholders and directors of the corporation on March 4, 1998 and that the
number of votes cast was sufficient for approval.
IT WITNESS WHEREOF, I have hereunto subscribed to and executed the
Amendment to Articles of Incorporation this on 6 day of April, 1998
/s/ Ira Schwartz
IRA SCHWARTZ, President
State of Florida
County of Dade
The foregoing instrument was acknowledge before me this 13 day of April by
Ira Schwartz, who is personally known to me, or who have produced --- --- as
identification.
/s/ E. P. Littman
E. P Littman
My Commission expires Maxch 29, 2000
BY-LAWS
OF
ePHONE TELECOM, INC.
A FLORIDA CORPORATION
<PAGE>
INDEX
-----
PAGE
----
ARTICLE I
OFFICES
Section 1.01 PRINCIPAL OFFICE .........................................1
Section 1.02 REGISTERED OFFICE ........................................1
Section 1.03 OTHER OFFICES ............................................1
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 2.01 ANNUAL MEETING ...........................................1
Section 2.02 SPECIAL MEETINGS .........................................2
Section 2.03 SHAREHOLDERS' LIST FOR MEETING ...........................2
Section 2.04 RECORD DATE ..............................................3
Section 2.05 NOTICE OF MEETINGS AND ADJOURNMENT .......................3
Section 2.06 WAIVER OF NOTICE .........................................4
ARTICLE III
SHAREHOLDER VOTING
Section 3.01 VOTING GROUP DEFINED .....................................5
Section 3.02 QUORUM AND VOTING REQUIREMENTS FOR
VOTING GROUPS ............................................5
Section 3.03 ACTION BY SINGLE AND MULTIPLE VOTING
GROUPS ...................................................5
Section 3.04 SHAREHOLDER QUORUM AND VOTING: GREATER
OR LESSER VOTING REQUIREMENTS ............................6
Section 3.05 VOTING FOR DIRECTORS: CUMULATIVE VOTING ..................6
<PAGE>
Section 3.06 VOTING ENTITLEMENT OF SHARES..............................7
Section 3.07 PROXIES ..................................................8
Section 3.08 SHARES HELD BY NOMINEES ..................................9
Section 3.09 CORPORATION'S ACCEPTANCE OF VOTES .......................10
Section 3.10 ACTION BY SHAREHOLDERS WITHOUT MEETING ..................11
ARTICLE IV
BOARD OF DIRECTORS AND OFFICERS
Section 4.01 QUALIFICATIONS OF DIRECTORS .............................11
Section 4.02 NUMBER OF DIRECTORS .....................................11
Section 4.03 TERMS OF DIRECTORS GENERALLY ............................12
Section 4.04 STAGGERED TERMS FOR DIRECTORS ...........................12
Section 4.05 VACANCY ON BOARD ........................................12
Section 4.06 COMPENSATION OF DIRECTORS ...............................12
Section 4.07 MEETINGS ................................................13
Section 4.08 ACTION BY DIRECTORS WITHOUT A MEETING ...................13
Section 4.09 NOTICE OF MEETINGS ......................................13
Section 4.10 WAIVER OF NOTICE ........................................13
Section 4.11 QUORUM AND VOTING .......................................14
Section 4.12 COMMITTEES ..............................................14
Section 4.13 LOANS TO OFFICERS, DIRECTORS AND
EMPLOYEES: GUARANTY OF OBLIGATIONS ......................15
Section 4.14 REQUIRED OFFICERS .......................................15
Section 4.15 DUTIES OF OFFICERS ......................................16
ii
<PAGE>
Section 4.16 RESIGNATION AND REMOVAL OF OFFICERS .....................16
Section 4.17 CONTRACT RIGHTS OF OFFICERS .............................16
Section 4.18 GENERAL STANDARDS FOR DIRECTORS .........................16
Section 4.19 DIRECTOR CONFLICTS OF INTEREST ..........................17
Section 4.20 RESIGNATION OF DIRECTORS ................................18
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
Section 5.01 DIRECTORS, OFFICERS, EMPLOYEES
AND AGENTS ..............................................18
ARTICLE VI
OFFICE AND AGENT
Section 6.01 REGISTERED OFFICE AND REGISTERED AGENT ..................22
Section 6.02 CHANGE OF REGISTERED OFFICE OR REGISTERED
AGENT: RESIGNATION OF REGISTERED AGENT ..................23
ARTICLE VII
SHARES, OPTION, DIVIDENDS AND DISTRIBUTIONS
Section 7.01 AUTHORIZED SHARES .......................................24
Section 7.02 TERMS OF CLASS OR SERIES DETERMINED
BY BOARD OF DIRECTORS ...................................24
Section 7.03 ISSUED AND OUTSTANDING SHARES ...........................25
Section 7.04 ISSUANCE OF SHARES ......................................25
Section 7.05 FORM AND CONTENT OF CERTIFICATES ........................26
Section 7.06 SHARES WITHOUT CERTIFICATES .............................27
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Section 7.07 RESTRICTION ON TRANSFER OF SHARES
AND OTHER SECURITIES ....................................27
Section 7.08 SHAREHOLDER'S PRE-EMPTIVE RIGHTS ........................27
Section 7.09 CORPORATION'S ACQUISITION OF ITS
OWN SHARES ..............................................28
Section 7.10 SHARE OPTIONS ...........................................28
Section 7.11 TERMS AND CONDITIONS OF STOCK RIGHTS
AND OPTIONS .............................................28
Section 7.12 SHARE DIVIDENDS .........................................29
Section 7.13 DISTRIBUTIONS TO SHAREHOLDERS ...........................29
ARTICLE VIII
AMENDMENT OF ARTICLES AND BYLAWS
Section 8.01 AUTHORITY TO AMEND THE ARTICLES OF
INCORPORATION ...........................................31
Section 8.02 AMENDMENT BY BOARD OF DIRECTORS .........................31
Section 8.03 AMENDMENT OF BYLAWS BY BOARD OF
DIRECTORS ...............................................32
Section 8.04 BYLAW INCREASING QUORUM OR VOTING
REQUIREMENTS FOR DIRECTORS ..............................32
ARTICLE IX
RECORDS AND REPORT
Section 9.01 CORPORATE RECORDS .......................................33
Section 9.02 FINANCIAL STATEMENTS FOR SHAREHOLDERS ...................34
Section 9.03 OTHER REPORTS TO SHAREHOLDERS ...........................34
Section 9.04 ANNUAL REPORT FOR DEPARTMENT OF STATE ...................35
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ARTICLE X
MISCELLANEOUS
SECTION 10.01 DEFINITION OF THE "ACT .................................35
SECTION 10.02 APPLICATION OF FLORIDA LAW .............................36
SECTION 10.03 FISCAL YEAR ............................................36
SECTION 10.04 CONFLICTS WITH ARTICLES OF
INCORPORATION...........................................36
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ARTICLE I
OFFICES
SECTION 1.01. PRINCIPAL OFFICE.
The principal office of the corporation in the State of Florida shall be
established at such places as the board of directors from time to time
determine.
SECTION 1.02. REGISTERED OFFICE.
The registered office of the corporation in the State of Florida shall be
at the office of its registered agent as stated in the articles of incorporation
or as the board of directors shall from time to time determine.
SECTION 1.03. OTHER OFFICES.
The corporation may have additional offices at such other places, either
within or without the State of Florida, as the board of directors may from time
to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 2.01. ANNUAL MEETING.
(1) The corporation shall hold a meeting of shareholders annually, for the
election of directors and for the transaction of any proper business, at a
time stated in or fixed in accordance with a resolution of the board of
directors.
(2) Annual shareholders' meeting may be held in or out of the State of Florida
at a place stated in or fixed in accordance with a resolution by the board
of directors or, when not inconsistent with the board of directors'
resolution stated in the notice of the annual meeting. If no place is
stated in or fixed in accordance with these bylaws, or stated in the notice
of the annual meeting, annual meetings shall be held at the corporation's
principal office.
(3) The failure to hold the annual meeting at the time stated in or fixed in
accordance with these bylaws or pursuant to the Act does not affect the
validity of any corporate action and shall not work a forfeiture of or
dissolution of the corporation.
SECTION 2.02. SPECIAL MEETING.
(1) The corporation shall hold a special meeting of shareholders:
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(a) On call of its board of directors or the person or persons authorized
to do so by the board of directors; or
(b) If the holders of not less than 10% of all votes entitled to be cast
on any issue proposed to be considered at the proposed special meeting
sign, date and deliver to the corporation's secretary one or more
written demands for the meeting describing the purpose or purposes for
which it is to be held.
(2) Special shareholders' meetings may be held in or out of the State of
Florida at a place stated in or fixed in accordance with a resolution of
the board of directors, or, when not inconsistent with the board of
directors' resolution, in the notice of the special meeting. If no place is
stated in or fixed in accordance with these bylaws or in the notice of the
special meeting, special meetings shall be held at the corporation's
principal office.
(3) Only business within the purpose or purposes described in the special
meeting notice may be conducted at a special shareholders' meeting.
SECTION 2.03. SHAREHOLDERS' LIST FOR MEETING.
(1) After fixing a record date for a meeting, a corporation shall prepare a
list of the names of all its shareholders who are entitled to notice of a
shareholders' meeting, in accordance with the Florida Business Corporation
Act (the "Act"), or arranged by voting group, with the address of, and the
number and class and series, if any, of shares held by, each.
(2) The shareholders' list must be available for inspection by any shareholder
for a period of ten days prior to the meeting or such shorter time as
exists between the record date and the meeting and continuing through the
meeting at the corporation's principal office, at a place identified in the
meeting notice in the city where the meeting will be held, or at the office
of the corporation's transfer agent or registrar. A shareholder or his
agent or attorney is entitled on written demand to inspect the list
(subject to the requirements of Section 607.1602(3) of the Act), during
regular business hours and at his expense, during the period it is
available for inspection.
(3) The corporation shall make the shareholders' list available at the meeting,
and any shareholder or his agent or attorney is entitled to inspect the
list at any time during the meeting or any adjournment.
SECTION 2.04. RECORD DATE.
(1) The board of directors may set a record date for purposes of determining
the shareholders entitled to notice of and to vote at a
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shareholders' meeting; however, in no event may a record date fixed by the
board of directors be a date preceding the date upon which the resolution
fixing the record date is adopted.
(2) Unless otherwise fixed by the board of directors, the record date for
determining shareholders entitled to demand a special meeting is the date
the first shareholder delivers his demand to the corporation. In the event
that the board of directors sets the record date for a special meeting of
shareholders, it shall not be a date preceding the date upon which the
corporation receives the first demand from a shareholder requesting a
special meeting.
(3) If no prior action is required by the board of directors pursuant to the
Act, and, unless otherwise fixed by the board of directors, the record date
for determining shareholders entitled to take action without a meeting is
the date the first signed written consent is delivered to the corporation
under Section 607.0704 of the Act. If prior action is required by the board
of directors pursuant to the Act, the record date for determining
shareholders entitled to take action without a meeting is at the close of
business on the day on which the board of directors adopts the resolution
taking such prior action.
(4) Unless otherwise fixed by the board of directors, the record date for
determining shareholders entitled to notice of and to vote at an annual or
special shareholders' meeting is the close of business on the day before
the first notice is delivered to shareholders.
(5) A record date may not be more than 70 days before the meeting or action
requiring a determination of shareholders.
(6) A determination of shareholders entitled to notice of or to vote at a
shareholders' meeting is effective for any adjournment of the meeting
unless the board of directors fixes a new record date, which it must do if
the meeting is adjourned to a date more than one 120 days after the date
fixed for the original meeting.
SECTION 2.05. NOTICE OF MEETINGS AND ADJOURNMENT.
(1) The corporation shall notify shareholders of the date, time and place of
each annual and special shareholders' meeting no fewer than 10 or more than
60 days before the meeting date. Unless the Act requires otherwise, the
corporation is required to give notice only to shareholders entitled to
vote at the meeting. Notice shall be given in the manner provided in
Section 607.0141 of the Act, by or at the direction of the president, the
secretary, of the officer or persons calling the meeting. If the notice is
mailed at least 30 days before the date of the meeting, it may be done by a
class of United States mail other than first class. Notwithstanding Section
607.0141, if mailed, such notice shall be deemed to be delivered when
deposited in the United Statement mail addressed to the shareholder at his
address as it appears on the stock transfer books of the corporation, with
postage thereon prepaid.
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(2) Unless the Act or the articles of incorporation requires otherwise, notice
of an annual meeting need not include a description of the purpose or
purposes for which the meeting is called.
(3) Notice of a special meeting must include a description of the purpose or
purposes for which the meeting is called.
(4) If an annual or special shareholders meeting is adjourned to a different
date, time, or place, notice need not be given of the new date, time, or
place if the new date, time or place is announced at the meeting before
adjournment is taken, and any business may be transacted at the adjourned
meeting that might have been transacted on the original date of the
meeting. If a new record date is or must be fixed under Section 607.0707 of
the Act, however, notice of the adjourned meeting must be given under this
section to persons who are shareholders as of the new record date who are
entitled to notice of the meeting.
(5) Notwithstanding the foregoing, no notice of a shareholders' meeting need be
given if. (a) an annual report and proxy statements for two consecutive
annual meetings of shareholders, or (b) all, and at least two checks in
payment of dividends or interest on securities during a 12-month period,
have been sent by first-class United States mail, addressed to the
shareholder at his address as it appears on the share transfer books of the
corporation, and returned undeliverable. The obligation of the corporation
to give notice of a shareholders' meeting to any such shareholder shall be
reinstated once the corporation has received a new address for such
shareholder for entry on its share transfer books.
SECTION 2.06. WAIVER OF NOTICE.
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(1) A shareholder may waive any notice required by the Act, the articles of
incorporation, or bylaws before or after the date and time stated in the
notice. The waiver must be in writing, be signed by the shareholder
entitled to the notice, and be delivered to the corporation for inclusion
in the minutes or filing with the corporate records. Neither the business
to be transacted at nor the purpose of any regular or special meeting of
the shareholders need be specified in any written waiver of notice.
(2) A shareholder's attendance at a meeting: (a) Waives objection to lack of
notice or defective notice of the meeting, unless the shareholder at the
beginning of the meeting objects to holding the meeting or transacting
business at the meeting; or (b) waives objection to consideration of a
particular matter at the meeting that is not within the purpose or purposes
described in the meeting notice, unless the shareholder objects to
considering the matter when it is presented.
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ARTICLE III
SHAREHOLDER VOTING
SECTION 3.01. VOTING GROUP DEFINED.
A "voting group" means all shares of one or more classes or series that
under the articles of incorporation or the Act are entitled to vote and be
counted together collectively on a matter at a meeting of shareholders. All
shares entitled by the articles of incorporation or the Act to vote generally on
the matter are for that purpose a single voting group.
SECTION 3.02. QUORUM AND VOTING REQUIREMENTS FOR VOTING GROUPS.
(1) Shares entitled to vote as a separate voting group may take action on a
matter at a meeting only if a quorum of those shares exists with respect to
that matter. Unless the articles of incorporation or the Act provides
otherwise, a majority of the votes entitled to be cast on the matter by the
voting group constitutes a quorum of that voting group for action on that
matter.
(2) Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for
that adjourned meeting.
(3) If a quorum exists, action on a matter (other than the election of
directors) by a voting group is approved if the votes cast within the
voting group favoring the action exceed the votes cast opposing the action,
unless the articles of incorporation or the Act requires a greater number
of affirmative votes.
SECTION 3.03. ACTION BY SINGLE AND MULTIPLE VOTING GROUPS.
(1) If the articles of incorporation or the Act provides for voting by a single
voting group on a matter, action on that matter is taken when voted upon by
that voting group as provided in Section 3.02 of these bylaws.
(2) If the articles of incorporation or the Act provides for voting by two or
more voting groups on a matter, action on that matter is taken only when
voted upon by each of those voting groups counted separately as provided in
Section 3.02 of these bylaws. Action may be taken by one voting group on a
matter even though no action is taken by another voting group entitled to
vote on the matter.
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SECTION 3.04. SHAREHOLDER QUORUM AND VOTING: GREATER OR LESSER VOTING
REQUIREMENTS.
(1) A majority of the shares entitled to vote, represented in person or by
proxy, shall constitute a quorum at a meeting of shareholders, but in no
event shall a quorum consist of less than one-third of the shares entitled
to vote. When a specified item of business is required to be voted on by a
class or series of stock, a majority of the shares of such class or series
shall constitute a quorum for the transaction of such item of business by
that class or series.
(2) An amendment to the articles of incorporation that adds, changes or deletes
a greater or lesser quorum or voting requirement must meet the same quorum
requirement and be adopted by the same vote and voting groups required to
take action under the quorum and voting requirements then in effect or
proposed to be adopted, whichever is greater.
(3) If a quorum exists, action on a matter, other than the election of
directors, is approved if the votes cast by the holders of the shares
represented at the meeting and entitled to vote on the subject matter
favoring the action exceed the votes cast opposing the action, unless a
greater number of affirmative votes or voting by classes is required by the
Act or the articles of incorporation.
(4) After a quorum has been established at a shareholders' meeting, the
subsequent withdrawal of shareholders, so as to reduce the number of shares
entitled to vote at the meeting below the number required for a quorum,
shall not affect the validity of any action taken at the meeting or any
adjournment thereof.
(5) The articles of incorporation may provide for a greater voting requirement
or a greater or lesser quorum requirement for shareholders (or voting
groups of shareholders) than is provided by the Act, but in no event shall
a quorum consist of less than one-third of the shares entitled to vote.
SECTION 3.05. VOTING FOR DIRECTORS: CUMULATIVE VOTING.
(1) Directors are elected by a plurality of the votes cast by the shares
entitled to vote in the election at a meeting at which a quorum is present.
(2) Each shareholder who is entitled to vote at an election of directors has
the right to vote the number of shares owned by him for as many persons as
there are directors to be elected and for whose election he has a right to
vote. Shareholders do not have a right to cumulate their votes for
directors unless the articles of incorporation so provide.
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SECTION 3.06. VOTING ENTITLEMENT OF SHARES.
(1) Unless the articles of incorporation or the Act provides otherwise, each
outstanding share, regardless of class, is entitled to one vote on each
matter submitted to a vote at a meeting of shareholders. Only shares are
entitled to vote.
(2) The shares of the corporation are not entitled to vote if they are owned,
directly or indirectly, by a second corporation, domestic or foreign, and
the first corporation owns, directly or indirectly, a majority of shares
entitled to vote for directors of the second corporation.
(3) This section does not limit the power of the corporation to vote any
shares, including its own shares, held by it in a fiduciary capacity.
(4) Redeemable shares are not entitled to vote on any matter, and shall not be
deemed to be outstanding, after notice of redemption is mailed to the
holders thereof and a sum sufficient to redeem such shares has been
deposited with a bank, trust company, or other financial institution upon
an irrevocable obligation to pay the holders the redemption price upon
surrender of the shares.
(5) Shares standing in the name of another corporation, domestic or foreign,
may be voted by such officer, agent, or proxy as the bylaws of the
corporate shareholder may prescribe or, in the absence of any applicable
provision, by such person as the board of directors of the corporate
shareholder may designate. In the absence of any such designation or in
case of conflicting designation by the corporate shareholder, the chairman
of the board, the president, any vice president, the secretary, and the
treasurer of the corporate shareholder, in that order, shall be presumed to
be fully authorized to vote such shares.
(6) Shares held by an administrator, executor, guardian, personal
representative, or conservator may be voted by him, either in person or by
proxy, without a transfer of such shares into his name. Shares standing in
the name of a trustee may be voted by him, either in person or by proxy,
but no trustee shall be entitled to vote shares held by him without a
transfer of such shares into his name or the name of his nominee.
(7) Shares held by or under the control of a receiver, a trustee in bankruptcy
proceedings, or an assignee for the benefit of creditors may be voted by
him without the transfer thereof into his name.
(8) If a share or shares stand of record in the names of two or more persons,
whether fiduciaries, members of a partnership, joint tenants, tenants in
common, tenants by the entirety, or otherwise, or if two or more persons
have the same fiduciary relationship respecting the same shares, unless the
secretary of the corporation is given notice to the contrary and is
furnished with a copy
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of the instrument or order appointing them or creating the relationship
wherein it is so provided, then acts with respect to voting have the
following effect:
(a) If only one votes, in person or in proxy, his act binds all;
(b) If more than one vote, in person or by proxy, the act of the majority
so voting binds all;
(c) If more than one vote, in person or by proxy, but the vote is evenly
split on any particular matter, each faction is entitled to vote the
share or shares in question proportionally;
(d) If the instrument or order so filed shows that any such tenancy is
held in unequal interest, a majority or a vote evenly split for
purposes of this subsection shall be a majority or a vote evenly split
in interest;
(e) The principles of this subsection shall apply, insofar as possible, to
execution of proxies, waivers, consents, or objections and for the
purpose of ascertaining the presence of a quorum;
(f) Subject to Section 3.08 of these bylaws, nothing herein contained
shall prevent trustees or other fiduciaries holding shares registered
in the name of a nominee from causing such shares to be voted by such
nominee as the trustee or other fiduciary may direct. Such nominee may
vote shares as directed by a trustee or their fiduciary without the
necessity of transferring the shares to the name of the trustee or
other fiduciary.
SECTION 3.07. PROXIES.
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(1) A shareholder, other person entitled to vote on behalf of a shareholder
pursuant to Section 3.06 of these bylaws, or attorney in fact may vote the
shareholder's shares in person or by proxy.
(2) A shareholder may appoint a proxy to vote or otherwise act for him by
signing an appointment form, either personally or by his attorney in fact.
An executed telegram or cablegram appearing to have been transmitted by
such person, or a photographic, photostatic, or equivalent reproduction of
an appointment form, is a sufficient appointment form.
(3) An appointment of a proxy is effective when received by the secretary or
other officer or agent authorized to tabulate votes. An appointment is
valid for up to 11 months unless a longer period is expressly provided in
the appointment form.
(4) The death or incapacity of the shareholder appointing a proxy does not
affect the right of the corporation to accept the proxy's authority unless
notice of the death or incapacity is received by the secretary or other
officer or agent authorized to tabulate votes before the proxy exercises
his authority under the appointment.
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(5) An appointment of a proxy is revocable by the shareholder unless the
appointment form conspicuously states that it is irrevocable and the
appointment is coupled with an interest. Appointments coupled with an
interest include the appointment of: (a) a pledgee; (b) a person who
purchased or agreed to purchase the shares; (c) a creditor of the
corporation who extended credit to the corporation under terms requiring
the appointment; (d) an employee of the corporation whose employment
contract requires the appointment; or (e) a party to a voting agreement
created in accordance with the Act.
(6) An appointment made irrevocable under this section becomes revocable when
the interest with which it is coupled is extinguished and, in a case
provided for in Subsection 5(c) or 5(d), the proxy becomes revocable three
years after the date of the proxy or at the end of the period, if any,
specified herein, whichever is less, unless the period of irrevocability is
renewed from time to time by the execution of a new irrevocable proxy as
provided in this section. This does not affect the duration of a proxy
under subsection (3).
(7) A transferee for value of shares subject to an irrevocable appointment may
revoke the appointment if he did not know of its existence when he acquired
the shares and the existence of the irrevocable appointment was not noted
conspicuously on the certificate representing the shares or on the
information statement for shares without certificates.
(8) Subject to Section 3.09 of these bylaws and to any express limitation on
the proxy's authority appearing on the face of the appointment form, a
corporation is entitled to accept the proxy's vote or other action as that
of the shareholder making the appointment.
(9) If an appointment form expressly provides, any proxy holder may appoint, in
writing, a substitute to act in his place.
SECTION 3.08. SHARES HELD BY NOMINEES.
(1) The corporation may establish a procedure by which the beneficial owner of
shares that are registered in the name of a nominee is recognized by the
corporation as the shareholder. The extent of this recognition may be
determined in the procedure.
(2) The procedure may set forth (a) the types of nominees to which it applies;
(b) the rights or privileges that the corporation recognizes in a
beneficial owner; (c) the manner in which the procedure is selected by the
nominee; (d) the information that must be provided when the procedure is
selected; (e) the period for which selection of the procedure is effective;
and (f) other aspects of the rights and duties created.
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SECTION 3.09. CORPORATION'S ACCEPTANCE OF VOTES.
(1) If the name signed on a vote, consent, waiver, or proxy appointment
corresponds to the name of a shareholder, the corporation if acting in good
faith is entitled to accept the vote, consent waiver, or proxy appointment
and give it effect as the act of the shareholder.
(2) If the name signed on a vote, consent, waiver, or proxy appointment does
not correspond to the name of its shareholder, the corporation if acting in
good faith is nevertheless entitled to accept the vote, consent, waiver, or
proxy appointment and give it effect as the act of the shareholder if: (a)
the shareholder is an entity and the name signed purports to be that of an
officer or agent of the entity; (b) the name signed purports to be that of
an administrator, executor, guardian, personal representative, or
conservator representing the shareholder and, if the corporation requests,
evidence of fiduciary status acceptable to the corporation has been
presented with respect to the vote, consent, waiver, or proxy appointment;
(c) the name signed purports to be that of a receiver, trustee in
bankruptcy, or assignee for the benefit of creditors of the shareholder
and, if the corporation requests, evidence of this status acceptable to the
corporation has been presented with respect to the vote, consent, waiver,
or proxy appointment; (d) the name signed purports to be that of a pledgee,
beneficial owner, or attorney in fact of the shareholder and, if the
corporation requests, evidence acceptable to the corporation of the
signatory's authority to sign for the shareholder has been presented with
respect to the vote, consent, waiver, or proxy appointment; or (e) two or
more persons are the shareholder as covenants or fiduciaries and the name
signed purports to be the name of at least one of the co-owners and the
person signing appears to be acting on behalf of all the co-owners.
(3) The corporation is entitled to reject a vote, consent, waiver, or proxy
appointment if the secretary or other officer or agent authorized to
tabulate votes, acting in good faith, has reasonable basis for doubt about
the validity of the signature on it or about the signatory's authority to
sign for the shareholder.
(4) The corporation and its officer or agent who accepts or rejects a vote,
consent, waiver, or proxy appointment in good faith and in accordance with
the standards of this section are not liable in damages to the shareholder
for the consequences of the acceptance or rejection.
(5) Corporate action based on the acceptance or rejection of a vote, consent,
waiver, or proxy appointment under this section is valid unless a court of
competent jurisdiction determines otherwise.
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SECTION 3.10. ACTION BY SHAREHOLDERS WITHOUT MEETING.
(1) Any action required or permitted by the Act to be taken at any annual or
special meeting of shareholders of the corporation may be taken without a
meeting, without prior notice and without a vote, if the action is taken by
the holders of outstanding stock of each voting group entitled to vote
thereon having not less than the minimum number of votes with respect to
each voting group that would be necessary to authorize or take such action
at a meeting at which all voting groups and shares entitled to vote thereon
were present and voted. In order to be effective, the action must by
evidenced by one or more written consents describing the action taken,
dated and signed by approving shareholders having the requisite number of
votes of each voting group entitled to vote thereon, and delivered to the
corporation by delivery to its principal office in this state, its
principal place of business, the corporate secretary, or another office or
agent of the corporation having custody of the book in which proceedings of
meetings of shareholders are recorded. No written consent shall be
effective to take the corporate action referred to therein unless, within
60 days of the date of the earliest dated consent is delivered in the
manner required by this section, written consent signed by the number of
holders required to take action is delivered to the corporation by delivery
as set forth in this section.
(2) Within 10 days after obtaining such authorization by written consent,
notice in accordance with Section 607.0704(3) of the Act must be given to
those shareholders who have not consented in writing.
ARTICLE IV
BOARD OF DIRECTORS AND OFFICERS
SECTION 4.01. QUALIFICATIONS OF DIRECTORS.
Directors must be natural persons who are 18 years of age or older but need
not be residents of the State of Florida or shareholders of the corporation.
SECTION 4.02. NUMBER OF DIRECTORS.
(1) The board of directors shall consist of not less than one nor more than
nine individuals.
(2) The number of directors may be increased or decreased from time to time by
amendment to these bylaws.
(3) Directors are elected at the first annual shareholders' meeting and at each
annual meeting thereafter unless their terms are staggered under Section
4.04 of these bylaws.
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SECTION 4.03. TERMS OF DIRECTORS GENERALLY.
(1) The terms of the initial directors of the corporation expire at the first
shareholders' meeting at which directors are elected.
(2) The terms of all other directors expire at the next annual shareholders'
meeting following their election unless their terms are staggered under
Section 4.04 of these bylaws.
(3) A decrease in the number of directors does not shorten an incumbent
director's term.
(4) The term of a director elected to fill a vacancy expires at the next
shareholders' meeting at which directors are elected.
(5) Despite the expiration of a director's term, he continues to serve until
his successor is elected and qualifies or until there is a decrease in the
number of directors.
SECTION 4.04. STAGGERED TERMS FOR DIRECTORS.
The directors of any corporation organized under the Act may, by the
articles of incorporation, or by amendment to these bylaws adopted by a vote of
the shareholders, be divided into one, two or three classes with the number of
directors in each class being as nearly equal as possible; the term of office of
those of the first class to expire at the annual meeting next ensuing; of the
second class one year thereafter; at the third class two years thereafter; and
at each annual election held after such classification and election, directors
shall be -chosen for a full term, as the case may be, to succeed those whose
terms expire. If the directors have staggered terms, then any increase or
decrease in the number of directors shall be so apportioned among the classes as
to make all classes as nearly equal in number as possible.
SECTION 4.05. VACANCY ON BOARD.
(1) Whenever a vacancy occurs on a board of directors, including a vacancy
resulting from an increase in the number of directors, it may be filled by
the affirmative vote of a majority of the remaining directors.
(2) A vacancy that will occur at a specific later date (by reason of a
resignation effective at a later date may be filled before the vacancy
occurs but the new director may not take office until the vacancy occurs.
SECTION 4.06. COMPENSATION OF DIRECTORS.
The board of directors may fix the compensation of directors.
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SECTION 4.07. MEETINGS.
(1) The board of directors may hold regular or special meetings in or out of
the State of Florida.
(2) A majority of the directors present, whether or not a quorum exists, may
adjourn any meeting of the board of directors to another time and place.
Notice of any such adjourned meeting shall be given to the directors who
were not present at the time of the adjournment and, unless the time and
place of the adjourned meeting are announced at the time of the
adjournment, to the other directors.
(3) Meetings of the board of directors may be called by the chairman of the
board or by the president.
(4) The board of directors may permit any or all directors to participate in a
regular or special meeting by, or conduct the meeting through the use of,
any means of communication by which all directors participating may
simultaneously hear each other during the meeting. A director participating
in a meeting by this means is deemed to be present in person at the
meeting.
SECTION 4.08. ACTION BY DIRECTORS WITHOUT A MEETING.
(1) Action required or permitted by the Act to be taken at a board of
directors' meeting or committee meeting may be taken without a meeting if
the action is taken by all members of the board or of the committee. The
action must be evidenced by one or more written consents describing the
action taken and signed by each director or committee member.
(2) Action taken under this section is effective when the last director signs
the consent, unless the consent specifies a different effective date.
(3) A consent signed under this section has the effect of a meeting vote and
may be described as such in any document.
SECTION 4.09. NOTICE OF MEETINGS.
Regular and special meetings of the board of directors may be held without
notice of the date, time, place, or purpose of the meeting.
SECTION 4.10. WAIVER OF NOTICE.
Notice of a meeting of the board of directors need not be given to any
director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting shall constitute a waiver of notice of
such meeting and a waiver of any and all objections to the place of the meeting,
the time of the meeting, or the manner in which it has been called or convened,
except when a director states, at the beginning of the meeting or promptly upon
arrival at the meeting, any objection to the transaction of business because the
meeting is not lawfully called or convened.
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SECTION 4.11. QUORUM AND VOTING.
(1) A quorum of a board of directors consists of a majority of the number of
directors prescribed by the articles of incorporation or these bylaws.
(2) If a quorum is present when a vote is taken, the affirmative vote of a
majority of directors present is the act of the board of directors.
(3) A director of a corporation who is present at a meeting of the board of
directors or a committee of the board of directors when corporate action is
taken is deemed to have assented to the action taken unless:
(a) He objects at the beginning of the meeting (or promptly upon his
arrival) to holding it or transacting specified business at the
meeting; or
(b) He votes against or abstains from the action taken.
SECTION 4.12. COMMITTEES.
(1) The board of directors, by resolution adopted by a majority of the full
board of directors, may designate from among its members an executive
committee and one or more other committees each of which, to the extent
provided in such resolution, shall have and may exercise all the authority
of the board of directors, except that no such committee shall have the
authority to:
(a) Approve or recommend to shareholders actions or proposals required by
the Act to be approved by shareholders.
(b) Fill vacancies on the board of directors or any committee thereof.
(c) Adopt, amend, or repeal these bylaws.
(d) Authorize or approve the reacquisition of shares unless pursuant to a
general formula or method specified by the board of directors.
(e) Authorize or approve the issuance or sale or contract for the sale of
shares, or determine the designation and relative rights, preferences,
and limitations of a voting group except that the board of directors
may authorize a committee (or a senior executive officer of the
corporation) to do so within limits specifically prescribed by the
board of directors.
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(2) The sections of these bylaws which govern meetings, notice and waiver of
notice, and quorum and voting requirements of the board of directors apply
to committees and their members as well.
(3) Each committee must have two or more members who serve at the pleasure of
the board of directors. The board, by resolution adopted in accordance
herewith, may designate one or more directors as alternate members of any
such committee who may act in the place and stead of any absent member or
members at any meeting of such committee.
(4) Neither the designation of any such commiftee, the delegation thereto of
authority, nor action by such committee pursuant to such authority shall
alone constitute compliance by any member of the board of directors not a
member of the committee in question with his responsibility to act in good
faith, in a manner he reasonably believes to be in the best interests of
the corporation, and with such care as an ordinarily prudent person in a
like position would use under similar circumstances.
SECTION 4.13. LOANS TO OFFICERS, DIRECTORS, AND EMRLOYEES: GUARANTY OF
OBLIGATIONS.
The corporation may lend money to, guaranty any obligation of, or otherwise
assist any officer, director, or employee of the corporation or of a subsidiary,
whenever, in the judgment of the board of directors, such loan, guaranty, or
assistance may reasonably be expected to benefit the corporation. The loan,
guaranty, or other assistance may be with or without interest and may be
unsecured or secured in such manner as the board of directors shall approve,
including, without limitation, a pledge of shares of stock of the corporation.
Nothing in this section shall be deemed to deny, limit, or restrict the powers
of guaranty or warranty of any corporation at common law or under any statute.
Loans, guaranties, or other types of assistance are subject to section 4.19.
SECTION 4.14. REQUIRED OFFICERS.
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(1) The corporation shall have such officers as the board of directors may
appoint from time to time.
(2) A duly appointed officer may appoint one or more assistant officers.
(3) The board of directors shall delegate to one of the officers responsibility
for preparing minutes of the directors' and shareholders' meetings and for
authenticating records of the corporation.
(4) The same individual may simultaneously hold more than one office in the
corporation.
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SECTION 4.15. DUTIES OF OFFICERS.
Each officer has the authority and shall perform the duties set forth in a
resolution or resolutions of the board of directors or by direction of any
officer authorized by the board of directors to prescribe the duties of other
officers.
SECTION 4.16. RESIGNATION AND REMOVAL OF OFFICERS.
(1) An officer may resign at any time by delivering notice to the corporation.
A resignation is effective when the notice is delivered unless the notice
specifies a later effective date. If a resignation is made effective at a
later date and the corporation accepts the future effective date, the board
of directors may fill the pending vacancy before the effective date if the
board of directors provides that the successor does not take office until
the effective date.
(2) The board of directors may remove any officer at any time with or without
cause. Any assistant officer, if appointed by another officer, may likewise
be removed by the board of directors or by the officer which appointed him
in accordance with these bylaws.
SECTION 4.17. CONTRACT RIGHTS OF OFFICERS.
The appointment of an officer does not itself create contract rights.
SECTION 4.18. GENERAL STANDARDS FOR DIRECTORS.
(1) A director shall discharge his duties as a director, including his duties
as a member of a committee:
(a) In good faith;
(b) With the care an ordinarily prudent person in a like position would
exercise under similar circumstances; and
(c) In a manner he reasonably believes to be in the best interests of the
corporation.
(2) In discharging his duties, a director is entitled to rely on information,
opinions, reports or statements, including financial statements and other
financial data, if prepared or presented by:
(a) One or more officers or employees of the corporation whom the director
reasonably believes to be reliable and competent in the matters
presented;
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(b) Legal counsel, public accountants, or other persons as to matters the
director reasonably believes are within the persons' professional or
expert competence; or
(c) A committee of the board of directors of which he is not a member if
the director reasonably believes the committee merits confidence.
(3) In discharging his duties, a director may consider such factors as the
director deems relevant., including the long-term prospects and interests
of the corporation and its shareholders, and the social, economic, legal,
or other effects of any action on the employees, suppliers, customers of
the corporation or its subsidiaries, the communities and society in which
the corporation or its subsidiaries operate, and the economy of the state
and the nation.
(4) A director is not acting in good faith if he has knowledge concerning the
matter in question that makes reliance otherwise permitted by subsection
(2) unwarranted.
(5) A director is not liable for any action taken as a director, or any failure
to take any action, if he performed the duties of his office in compliance
with this section.
SECTION 4.19. DIRECTOR CONFLICTS OF INTEREST.
No contract or other transaction between a corporation and one or more
interested directors shall be either void or voidable because of such
relationship or interest, because such director or directors are present at the
meeting of the board of directors or a committee thereof which authorizes,
approves or ratifies such contract or transaction, or because his or their votes
are counted for such purpose, if:
(1) The fact of such relationship or interest is disclosed or known to the
board of directors or committee which authorizes, approves or ratifies the
contract or transactions by a vote or consent sufficient for the purpose
without counting the votes or consents of such interested directors;
(2) The fact of such relationship or interest is disclosed or known to the
shareholders entitled to vote and they authorize, approve or ratify such
contract or transaction by vote or written consent; or
(3) The contract or transaction is fair and reasonable as to the corporation at
the time it is authorized by the board, a committee or the shareholders.
(4) There is the presence of a quorum at the meeting of the board of directors
or a committee thereof which authorizes, approves or ratifies such contract
or transaction.
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For the purpose of paragraph (2) above, a conflict of interest transaction
is authorized, approved or ratified if it receives the vote of a majority of the
shares entitled to be counted under this subsection. Shares owned by or voted
under the control of a director who has a relationship or interest in the
conflict of interest transaction may not be counted in a vote of shareholders to
determine whether to authorize, approve or ratify a conflict of interest
transaction under paragraph (2). The vote of those shares, however, is counted
in determining whether the transaction is approved under other sections of the
Act. A majority of the shares, whether or not present, that are entitled to be
counted in a vote on the transaction under this subsection constitutes a quorum
for the purpose of taking action under this section.
SECTION 4.20. RESIGNATION OF DIRECTORS.
A director may resign at any time by delivering written notice to the board
of directors or its chairman or to the corporation.
A resignation is effective when the notice is delivered unless the notice
specifies a later effective date. If a resignation is made effective at a later
date, the board of directors may fill the pending vacancy before the effective
date if the board of directors provides that the successor does not take office
until the effective date.
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
SECTION 5.01. DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS.
(1) The corporation shall have power to indemnify any person who was or is a
party to any proceeding (other than an action by, or in the right of, the
corporation), by reason of the fact that he is or was a director, officer,
employee, or agent of the corporation or is or was serving at the request
of the corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise against
liability incurred in connection with such proceeding, including any appeal
thereof, if he acted in good faith and in a manner he reasonably believed
to be in, or not opposed to, the best interests of the corporation, and,
with respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful. The termination of any proceeding by
judgment, order, settlement, or conviction or upon a plea of nolo
contendere or its equivalent shall not, of itself, create a presumption
that the person did not act in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests of the
corporation or, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
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(2) The corporation shall have power to indemnify any person, who was or is a
party to any proceeding by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee, or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other
enterprise, against expenses and amounts paid in settlement not exceeding,
in the judgment of the board of directors, the estimated expense of
litigating the proceeding to conclusion, actually and reasonably incurred
in connection with the defense or settlement of such proceeding, including
any appeal thereof. Such indemnification shall be authorized if such person
acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the corporation, except that no
indemnification shall be made under this subsection in respect of any
claim, issue, or matter as to which such person shall have been adjudged to
be liable unless, and only to the extent that, the court in which such
proceeding was brought, or any other court of competent jurisdiction, shall
determine upon application that, despite the adjudication of liability but
in view of all circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which such court shall
deem proper.
(3) To the extent that a director, officer, employee, or agent of the
corporation has been successful on the merits or otherwise in defense of
any proceeding referred to in subsections (1) or (2), or in defense of any
claim, issue, or matter therein, he shall be indemnified against expenses
actually and reasonably incurred by him in connection therewith.
(4) Any indemnification under subsections (1) or (2), unless pursuant to a
determination by a court, shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
of the director, officer, employee, or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (1) or (2). Such determination shall be made:
(a) By the board of directors by a majority vote of a quorum consisting of
directors who were not parties to such proceeding;
(b) If such a quorum is not obtainable or, even if obtainable, by majority
vote of a committee duly designated by the board of directors (in
which directors who are parties may participate) consisting solely of
two or more directors not at the time parties to the proceeding;
(c) By independent legal counsel:
(i) Selected by the board of directors prescribed in paragraph (a) or
the committee prescribed in paragraph (b); or
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(ii) If a quorum of the directors cannot be obtained for paragraph (a)
and the committee cannot be designed under paragraph (b),
selected by majority vote of the full board of directors (in
which directors who are parties may participate); or
(d) By the shareholders by a majority vote of a quorum consisting of
shareholders who were not parties to such proceeding or, if no such
quorum is obtainable, by a majority vote of shareholders who were not
parties to such proceeding.
(5) Evaluation of the reasonableness of expenses and authorization of
indemnification shall be made in the same manner as the determination that
indemnification is permissible. However, if the determination of
permissibility is made by independent legal counsel, persons specified by
paragraph (4)(c) shall evaluate the reasonableness of expenses and may
authorize indemnification.
(6) Expenses incurred by an officer or director in defending a civil or
criminal proceeding may be paid by the corporation in advance of the final
disposition of such proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if he is ultimately
found not to be entitled to indemnification by the corporation pursuant to
this section. Expenses incurred by other employees and agents may be paid
in advance upon such terms or conditions that the board of directors deems
appropriate.
(7) The indemnification and advancement of expenses provided pursuant to this
section are not exclusive, and the corporation may make any other or
further indemnification or advancement of expenses of any of its directors,
officers, employees, or agents, under any bylaw, agreement, vote of
shareholders or disinterested directors, or otherwise, both as to action in
his official capacity and as to action in another capacity while holding
such office. However, indemnification or advancement of expenses shall not
be made to or on behalf of any director, officer, employee, or agent if a
judgment or other final adjudication establishes that his actions, or
omissions to act, were material to the cause of action so adjudicated and
constitute:
(a) A violation of the criminal law, unless the director, officer,
employee, or agent had reasonable cause to believe his conduct was
lawful or had no reasonable cause to believe his conduct was unlawful;
(b) A transaction from which the director, officer, employee, or agent
derived an improper personal benefit;
(c) In the case of a director, a circumstance under which the liability
provisions of Section 607.0834 under the Act are applicable; or
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(d) Willful misconduct or a conscious disregard for the best interests of
the corporation in a proceeding by or in the right of the corporation
to procure a judgment in its favor or in a proceeding by or in the
right of a shareholder.
(8) Indemnification and advancement of expenses as provided in this section
shall continue as, unless otherwise provided when authorized or ratified,
to a person who has ceased to be a director, officer, employee, or agent
and shall inure to the benefit of the heirs, executors, and administrators
of such a person, unless otherwise provided when authorized or ratified.
(9) Notwithstanding the failure of the corporation to provide indemnification,
and despite any contrary determination of the board or of the shareholders
in the specific case, a director, officer, employee, or agent of the
corporation who is or was a party to a proceeding may apply for
indemnification or advancement of expenses, or both, to the court
conducting the proceeding, to the circuit court, or to another court of
competent jurisdiction. On receipt of an application, the court, after
giving any notice that it considers necessary, may order indemnification
and advancement of expenses, including expenses incurred in seeking
court-ordered indemnification or advancement of expenses, if it determines
that:
(a) The director, officer, employee, or agent if entitled to mandatory
indemnification under subsection (3), in which case the court shall
also order the corporation to pay the director reasonable expenses
incurred in obtaining court-ordered indemnification or advancement of
expenses;
(b) The director, officer, employee, or agent is entitled to
indemnification or advancement of expenses, or both, by virtue of the
exercise by the corporation of its power pursuant to subsection (7);
or
(c) The director, officer, employee, or agent is fairly and reasonably
entitled to indemnification or advancement of expenses, or both, in
view of all the relevant circumstances, regardless of whether such
person met the standard of conduct set forth in subsection (1),
subsection (2) or subsection (7).
(10) For purposes of this section, the term "corporation" includes, in addition
to the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger, so
that any person who is or was a director, officer, employee, or agent of a
constituent corporation, or is or was serving at the request of a
constituent corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust or other enterprise,
is in the same position under this section with respect to the resulting or
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
(11) For purposes of this section:
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(a) The term "other enterprises" includes employee benefit plans;
(b) The term "expenses" includes counsel fees, including those for appeal;
(c) The term "liability" includes obligations to pay a judgment,
settlement, penalty, fine (including an excise tax assessed with
respect to any employee benefit plan), and expenses actually and
reasonably incurred with respect to a proceeding;
(d) The term "proceeding" includes any threatened, pending, or completed
action, suit or other type of proceeding, whether civil, criminal,
administrative, or investigative and whether formal or informal;
(e) The term "agent" includes a volunteer;
(f) The term "serving at the request of the corporation" includes any
service as a director, officer, employee, or agent of the corporation
that imposes duties on such persons, including duties relating to an
employee benefit plan and its participants or beneficiaries; and
(g) The term "not opposed to the best interest of the corporation"
describes the actions of a person who acts in good faith and in a
manner he reasonably believes to be in the best interests of the
participants and beneficiaries of an employee benefit plan.
(12) The corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee, or agent
of the corporation or is or was serving at the request of the corporation
as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise against any
liability asserted against him and incurred by him in any such capacity or
arising out of his status as such, whether or not the corporation would
have the power to indemnify him against such liability under the provisions
of this section.
ARTICLE VI
OFFICE AND AGENT
SECTION 6.01. REGISTERED OFFICE AND REGISTERED AGENT.
(1) The corporation shall have and continuously maintain in the State of
Florida:
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(a) A registered office which may be the same as its place of business;
and
(b) A registered agent, who, may be either:
(i) An individual who resides in the State of Florida whose business
office is identical with such registered office; or
(ii) Another corporation or not-for-profit corporation as defined in
Chapter 617 of the Act, authorized to transact business or
conduct its affairs in the State of Florida, having a business
office identical with the registered office; or
(iii)A foreign corporation or not-for-profit foreign corporation
authorized pursuant to chapter 607 or chapter 617 of the Act to
transact business or conduct its affairs in the State of Florida,
having a business office identical with the registered office.
SECTION 6.02. CHANGE OF REGISTERED OFFICE OR REGISTERED AGENT: RESIGNATION
OF REGISTERED AGENT.
(1) The corporation may change its registered office or its registered agent
upon filing with the Department of State of the State of Florida a
statement of change setting forth:
(a) The name of the corporation;
(b) The street address of its current registered office;
(c) If the current registered office is to be changed, the street address
of the new registered office;
(d) The name of its current registered agent;
(e) If its current registered agent is to be changed, the name of the new
registered agent and the new agent's written consent (either on the
statement or attached to it) to the appointment;
(f) That the street address of its registered office and the street
address of the business office of its registered agent, as changed,
will be identical;
(g) That such change was authorized by resolution duly adopted by its
board of directors or by an officer of the corporation so authorized
by the board of directors.
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ARTICLE VII
SHARES, OPTIONS, DIVIDENDS AND DISTRIBUTIONS
SECTION 7.01. AUTHORIZED SHARES.
(1) The articles of incorporation prescribe the classes of shares and the
number of shares of each class that the corporation is authorized to issue,
as well as a distinguishing designation for each class, and prior to the
issuance of shares of a class the preferences, limitations, and relative
rights of that class must be described in the articles of incorporation.
(2) The articles of incorporation must authorize:
(a) One or more classes of shares that together have unlimited voting
rights, and
(b) One or more classes of shares (which may be the same class or classes
as those with voting rights) that together are entitled to receive the
net assets of the corporation upon dissolution.
(3) The articles of incorporation may authorize one or more classes of shares
that have special, conditional, or limited voting rights, or no rights, or
no right to vote, except to the extent prohibited by the Act;
(a) Are redeemable or convertible as specified in the articles of
incorporation;
(b) Entitle the holders to distributions calculated in any manner,
including dividends that may be cumulative, non-cumulative, or
partially cumulative;
(c) Have preference over any other class of shares with respect to
distributions, including dividends and distributions upon the
dissolution of the corporation.
(4) Shares which are entitled to preference in the distribution of dividends or
assets shall not be designated as common shares. Shares which are not
entitled to preference in the distribution of dividends or assets shall be
common shares and shall not be designated as preferred shares.
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SECTION 7.02. TERMS OF CLASS OR SERIES DETERMINED BY BOARD OF DIRECTORS.
(1) If the articles of incorporation so provide, the board of directors may
determine, in whole or part, the preferences, limitations, and relative
rights (within the limits set forth in Section 7.01) of:
(a) Any class of shares before the issuance of any shares of that class,
or
(b) One or more series within a class before the issuance of any shares of
that series.
(2) Each series of a class must be given a distinguishing designation.
(3) All shares of a series must have preferences, limitations, and relative
rights identical with those of other shares of the same series and, except
to the extent otherwise provided in the description of the series, of those
of other series of the same class.
(4) Before issuing any shares of a class or series created under this section,
the corporation must deliver to the Department of State of the State of
Florida for filing articles of amendment, which are effective without
shareholder action, in accordance with Section 607.0602 of the Act.
SECTION 7.03. ISSUED AND OUTSTANDING SHARES.
(1) A corporation may issue the number of shares of each class or series
authorized by the articles of incorporation. Shares that are issued are
outstanding shares until they are reacquired, redeemed, converted, or
canceled.
(2) The reacquisition, redemption, or conversion of outstanding shares is
subject to the limitations of subsection (3) and to Section 607.06401 of
the Act.
(3) At all times that shares of the corporation are outstanding, one or more
shares that together have unlimited voting rights and one or more shares
that together are entitled to receive the net assets of the corporation
upon dissolution must be outstanding.
SECTION 7.04. ISSUANCE OF SHARES.
(1) The board of directors may authorize shares to be issued for consideration
consisting of any tangible or intangible property or benefit to the
corporation, including cash, promissory notes, services performed, promises
to perform services evidenced by a written contract, or other securities of
the corporation.
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(2) Before the corporation issues shares, the board of directors must determine
that the consideration received or to be received for shares to be issued
is adequate. That determination by the board of directors is conclusive
insofar as the adequacy of consideration for the issuance of shares relates
to whether the shares are validly issued, fully paid, and non-assessable.
When it cannot be determined that outstanding shares are fully paid and
non-assessable, there shall be a conclusive presumption that such shares
are fully paid and non-assessable if the board of directors makes a good
faith determination that there is no substantial evidence that the full
consideration for such shares has not been paid.
(3) When the corporation receives the consideration for which the board of
directors authorized the issuance of shares, the shares issued therefor are
fully paid and non-assessable. Consideration in the form of a promise to
pay money or a promise to perform services is received by the corporation
at the time of the making of the promise, unless the agreement specifically
provides otherwise.
(4) The corporation may place in escrow shares issued for a contract for future
services or benefits or a promissory note, or make other arrangements to
restrict the transfer of the shares, and may credit distributions in
respect of the shares against their purchase price, until the services are
performed, the note is paid, or the benefits received. If the services are
not performed, the shares escrowed or restricted and the distributions
credited may be canceled in whole or part.
SECTION 7.05. FORM AND CONTENT OF CERTIFICATES.
(1) Shares may but need not be represented by certificates. Unless the Act or
another statute expressly provides otherwise, the rights and obligations of
shareholders are identical whether or not their shares are represented by
certificates.
(2) At a minimum, each share certificate must state on its face:
(a) The name of the issuing corporation and that the corporation is
organized under the laws of the State of Florida;
(b) The name of the person to whom issued; and
(c) The number and class of shares and the designation of the series, if
any, the certificate represents.
(3) If the shares being issued are of different classes of shares or different
series within a class, the designations, relative rights, preferences, and
limitations applicable to each class and the variations in rights,
preferences, and limitations determined for each series (and the authority
of the board of directors to determine variations for future series) must
be summarized on the front or back of each certificate. Alternatively, each
certificate may state conspicuously on its front or back that the
corporation will furnish the shareholder a full statement of this
information on request and without charge.
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(4) Each share certificate:
(a) Must be signed (either manually or in facsimile) by an officer or
officers designated by the board of directors, and
(b) May bear the corporate seal or its facsimile.
(5) If the person who signed (either manually or in facsimile) a share
certificate no longer holds office when the certificate is issued, the
certificate is nevertheless valid.
(6) Nothing in this section may be construed to invalidate any share
certificate validly issued and outstanding under the Act on July 1, 1990.
SECTION 7.06. SHARES WITHOUT CERTIFICATES.
(1) The board of directors of the corporation may authorize the issue of some
or all of the shares of any or all of its classes or series without
certificates. The authorization does not affect shares already represented
by certificates until they are surrendered to the corporation.
(2) Within a reasonable time after the issue or transfer of shares without
certificates, the corporation shall send the shareholder a written
statement of the information required on certificates by the Act.
SECTION 7.07. RESTRICTION ON TRANSFER OF SHARES AND OTHER SECURITIES.
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(1) The articles of incorporation, these bylaws, an agreement among
shareholders, or an agreement between shareholders and the corporation may
impose restrictions on the transfer or registration of transfer of shares
of the corporation. A restriction does not affect shares issued before the
restriction was adopted unless the holders of such shares are parties to
the restriction agreement or voted in favor of the restriction.
(2) A restriction on the transfer or registration of transfer of shares is
valid and enforceable against the holder or a transferee of the holder if
the restriction is authorized by this section, and effected in compliance
with the provisions of the Act, including having a proper purpose as
referred to in the Act.
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SECTION 7.08. SHAREHOLDER'S PRE-EMPTIVE RIGHTS.
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The shareholders of the corporation do not have a pre-emptive right to
acquire the corporation's unissued shares.
SECTION 7.09. CORPORATION'S ACQUISITION OF ITS OWN SHARES.
(1) The corporation may acquire its own shares, and, unless otherwise provided
in the articles of incorporation or except as provided in subsection (4),
shares so acquired constitute authorized but unissued shares of the same
class but undesignated as to series.
(2) If the articles of incorporation prohibit the reissue of acquired shares,
the number of authorized shares is reduced by the number of shares
acquired, effective upon amendment of the articles of incorporation.
(3) Articles of amendment may be adopted by the board of directors without
shareholder action, shall be delivered to the Department of State of the
State of Florida for filing, and shall set forth the information required
by Section 607.0631 of the Act.
(4) Shares of the corporation in existence on June 30, 1990, which are treasury
shares under Section 607.004(18), Florida Statutes (1987), shall be issued,
but not outstanding, until canceled or disposed of by the corporation.
SECTION 7.10. SHARE OPTIONS.
(1) Unless the articles of incorporation provide otherwise, the corporation may
issue rights, options, or warrants for the purchase of shares of the
corporation. The board of directors shall determine the terms upon which
the rights, options, or warrants are issued, their form and content, and
the consideration for which the shares are to be issued.
(2) The terms and conditions of stock rights and options which are created and
issued by the corporation, or its successor, and which entitle the holders
thereof to purchase from the corporation shares of any class or classes,
whether authorized by unissued shares, treasury shares, or shares to be
purchased or acquired by the corporation, may include, without limitation,
restrictions, or conditions that preclude or limit the exercise, transfer,
receipt, or holding of such rights or options by any person or persons,
including any person or persons owning or offering to acquire a specified
number or percentage of the outstanding common shares or other securities
of the corporation, or any transferee or transferees of any such person or
persons, or that invalidate or void such rights or options held by any such
person or persons or any such transferee or transferees.
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SECTION 7.11. TERMS AND CONDITIONS OF STOCK RIGHTS AND OPTIONS.
The terms and conditions of the stock rights and options which are created
and issued by the corporation [or its successor], and which entitle the holders
thereof to purchase from the corporation shares of any class or classes, whether
authorized but unissued shares, treasury shares, or shares to be purchased or
acquired by the corporation, may include, without limitation, restrictions or
conditions that preclude or limit the exercise, transfer, receipt or holding of
such rights or options by any person or persons, including any person or persons
owning or offering to acquire a specified number or percentage of the
outstanding common shares or other securities of the corporation, or any
transferee or transferees of any such person or persons, or that invalidate or
void such rights or options held by any such person or persons or any such
transferee or transferees.
SECTION 7.12. SHARE DIVIDENDS.
(1) Shares may be issued pro rata and without consideration to the
corporation's shareholders or to the shareholders of one or more classes or
series. An issuance of shares under this subsection is a share dividend.
(2) Shares of one class or series may not be issued as a share dividend in
respect of shares of another class or series unless:
(a) The articles of incorporation so authorize,
(b) A majority of the votes entitled to be cast by the class or series to
be issued approves the issue, or
(c) There are no outstanding shares of the class or series to be issued.
(3) If the board of directors does not fix the record date for determining
shareholders entitled to a share dividend, it is the date of the board of
directors authorizes the share dividend.
SECTION 7.13. DISTRIBUTIONS TO SHAREHOLDERS.
(1) The board of directors may authorize and the corporation may make
distributions to its shareholders subject to restriction by the articles of
incorporation and the limitations in subsection (3).
(2) If the board of directors does not fix the record date for determining
shareholders entitled to a distribution (other than one involving a
purchase, redemption, or other acquisition of the corporation's shares), it
is the date the board of directors authorizes the distribution.
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(3) No distribution may be made if, after giving it effect:
(a) The corporation would not be able to pay its debts as they become due
in the usual course of business; or
(b) The corporation's total assets would be less than the sum of its total
liabilities plus (unless the articles of incorporation permit
otherwise) the amount that would be needed, if the corporation were to
be dissolved at the time of the distribution, to satisfy the
preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution.
(4) The board of directors may base a determination that a distribution is not
prohibited under subsection (3) either on financial statements prepared on
the basis of accounting practices and principles that are reasonable in the
circumstances or on a fair valuation or other method that is reasonable in
the circumstances. In the case of any distribution based upon such a
valuation, each such distribution shall be identified as a distribution
based upon a current valuation of assets, and the amount per share paid on
the basis of such valuation shall be disclosed to the shareholders
concurrent with their receipt of the distribution.
(5) Except as provided in subsection (7), the effect of a distribution under
subsection (3) is measured;
(a) In the case of distribution by purchase, redemption, or other
acquisition of the corporation's shares, as of the earlier of-
(i) The date money or other property is transferred or debt incurred
by the corporation, or
(ii) The date the shareholder ceases to be a shareholder with respect
to the acquired shares;
(b) In the case of any other distribution of indebtedness, as of the date
the indebtedness is distributed;
(c) In all other cases, as of:
(i) The date the distribution is authorized if the payment occurs
within 120 days after the date of authorization, or
(ii) The date the payment is made if it occurs more than 120 days
after the date of authorization.
(6) A corporation's indebtedness to a shareholder incurred by reason of a
distribution made in accordance with this section is at parity with the
corporation's indebtedness to its general, unsecured creditors except to
the extent subordinated by agreement.
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(7) Indebtedness of the corporation, including indebtedness issued as a
distribution, is not considered a liability for purposes of determinations
under subsection (3) if its terms provide that payment of principal and
interest are made only if and to the extent that payment of a distribution
to shareholders could then be made under this section. If the indebtedness
is issued as a distribution, each payment of principal or interest is
treated as a distribution, the effect of which is measured on the date the
payment is actually made.
ARTICLE VIII
AMENDMENT OF ARTICLES AND BYLAWS
SECTION 8.01. AUTHORITY TO AMEND THE ARTICLES OF INCORPORATION.
(1) The corporation may amend its articles of incorporation at any time to add
or change a provision that is required or permitted in the articles of
incorporation or to delete a provision not required in the articles of
incorporation. Whether a provision is required or permitted in the articles
of incorporation is determined as of the effective date of the amendment.
(2) A shareholder of the corporation does not have a vested property right
resulting from any provision in the articles of incorporation, including
provisions relating to management, control, capital structure, dividend
entitlement, or purpose or duration of the corporation.
SECTION 8.02. AMENDMENT BY BOARD OF DIRECTORS.
The corporation's board of directors may adopt one or more amendments
to the corporation's articles of incorporation without shareholder action:
(1) To extend the duration of the corporation if it was incorporated at a time
when limited duration was required by law;
(2) To delete the names and addresses of the initial directors;
(3) To delete the name and address of the initial registered agent or
registered office, if a statement of change is on file with the Department
of State of the State of Florida;
(4) To delete any other information contained in the articles of incorporation
that is solely of historical interest;
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(5) To change each issued and unissued authorized share of an outstanding class
into a greater number of whole shares if the corporation has only shares of
that class outstanding;
(6) To delete the authorization for a class or series of shares authorized
pursuant to Section 607.0602 of the Act, if no shares of such class or
series have been issued;
(7) To change the corporate name by substituting the word "corporation,"
"incorporated," or "company," or the abbreviation "corp.," Inc.," or Co.,"
for a similar word or abbreviation in the name, or by adding, deleting, or
changing a geographical attribution for the name; or
(8) To make any other change expressly permitted by the Act to be made without
shareholder action.
SECTION 8.03. AMENDMENT OF BYLAWS BY BOARD OF DIRECTORS.
The corporation's board of directors may amend or repeal the corporation's
bylaws unless the Act reserves the power to amend a particular bylaw provision
exclusively to the shareholders.
SECTION 8.04. BYLAW INCREASING QUORUM OR VOTING REQUIREMENTS FOR DIRECTORS.
(1) A bylaw that fixes a greater quorum or voting requirement for the board of
directors may be amended or repealed:
(a) If originally adopted by the shareholders, only by the shareholders;
(b) If originally adopted by the board of directors, either by the
shareholders or by the board of directors.
(2) A bylaw adopted or amended by the shareholders that fixes a greater quorum
or voting requirement for the board of directors may provide that it may be
amended or repealed only by a specified vote of either the shareholders or
the board of directors.
(3) Action by the board of directors under paragraph (1)(b) to adopt or amend a
bylaw that changes the quorum or voting requirement for the board of
directors must meet the same quorum requirement and be adopted by the same
vote required to take action under the quorum and voting requirement then
in effect or proposed to be adopted, whichever is greater.
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ARTICLE IX
RECORDS AND REPORTS
SECTION 9.01. CORPORATE RECORDS.
(1) The corporation shall keep as permanent records minutes of al meetings of
its shareholders and board of directors, a record of all actions taken by
the shareholders or board of directors without a meeting, and a record of
all actions taken by a committee of the board of directors in place of the
board of directors on behalf of the corporation.
(2) The corporation shall maintain accurate accounting records.
(3) The corporation or its agent shall maintain a record of its shareholders in
a form that permits preparation of a list of the names and addresses of all
shareholders in alphabetical order by class of shares showing the number
and series of shares held by each.
(4) The corporation shall maintain its records in written form or in another
form capable of conversion into written form within a reasonable time.
(5) The corporation shall keep a copy of the following records:
(a) Its articles or restated articles of incorporation and all amendments
to them currently in effect;
(b) Its bylaws or restated bylaws and all amendments to them currently in
effect;
(c) Resolutions adopted by the board of directors creating one or more
classes or series of shares and finding their relative rights,
preferences, and limitations, if shares issued pursuant to those
resolutions are outstanding;
(d) The minutes of all shareholders' meetings and records of all action
taken by shareholders without a meeting for the past three years;
(e) Written communications to all shareholders generally or all
shareholders of a class or series within the past three years,
including the financial statements furnished for the past three years;
(f) A list of the names and business street addresses of its current
directors and officers; and
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(g) Its most recent annual report delivered to the Department of State of
the State of Florida.
SECTION 9.02. FINANCIAL STATEMENTS FOR SHAREHOLDERS.
(1) Unless modified by resolution of the shareholders within 120 days of the
close of each fiscal year, the corporation shall furnish its shareholders
annual financial statements which may be consolidated or combined
statements of the corporation and one or more of its subsidiaries, as
appropriate, that include a balance sheet as of the end of the fiscal year,
an income statement for that year, and a statement of cash flows for that
year. If financial statements are prepared for the corporation on the basis
of generally-accepted accounting principles, the annual financial
statements must also be prepared on that basis.
(2) If the annual financial statements are reported upon by a public
accountant, his report must accompany them. If not, the statements must be
accompanied by a statement of the president or the person responsible for
the corporation's accounting records:
(a) Stating his reasonable belief whether the statements were prepared on
the basis of generally-accepted accounting principles and, if not,
describing the basis of preparation; and
(b) Describing any respects in which the statements were not prepared on a
basis of accounting consistent with the statements prepared for the
preceding year.
(3) The corporation shall mail the annual financial statements to each
shareholder within 120 days after the close of each fiscal year or within
such additional time thereafter as is reasonably necessary to enable the
corporation to prepare its financial statements, if for reasons beyond the
corporation's control, it is unable to prepare its financial statements
within the prescribed period. Thereafter, on written request from a
shareholder who was not mailed the statements, the corporation shall mail
him the latest annual financial statements.
SECTION 9.03. OTHER REPORTS TO SHAREHOLDERS.
(1) If the corporation indemnifies or advances expenses to any director,
officer, employee or agent otherwise than by court order or action by the
shareholders or by an insurance carrier pursuant to insurance maintained by
the corporation, the corporation shall report the indemnification or
advance in writing to the shareholders with or before the notice of the
next shareholders' meeting, or prior to such meeting if the indemnification
or advance occurs after the giving of such notice but prior to the time
such meeting is held, which report shall include a statement specifying the
persons paid, the amounts paid, and the nature and status at the time of
such payment of the litigation or threatened litigation.
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(2) If the corporation issues or authorizes the issuance of shares for promises
to render services in the future, the corporation shall report in writing
to the shareholders the number of shares authorized or issued, and the
consideration received by the corporation, with or before the notice of the
next shareholders' meeting.
SECTION 9.04. ANNUAL REPORT FOR DEPARTMENT OF STATE.
(1) The corporation shall deliver to the Department of State of the State of
Florida for filing a sworn annual report on such forms as the Department of
State of the State of Florida prescribes that sets forth the information
prescribed by Section 607.1622 of the Act.
(2) Proof to the satisfaction of the Department of State of the State of
Florida on or before July 1 of each calendar year that such report was
deposited in the United States mail in a sealed envelope, properly
addressed with postage prepaid, shall be deemed in compliance with this
requirement.
(3) Each report shall be executed by the corporation by an officer or director
or, if the corporation is in the hands of a receiver or trustee, shall be
executed on behalf of the corporation by such receiver or trustee, and the
signing thereof shall have the same legal effect as if made under oath,
without the necessity of appending such oath thereto.
(4) Information in the annual report must be current as of the date the annual
report is executed on behalf of the corporation.
(5) Any corporation failing to file an annual report which complies with the
requirements of this section shall not be permitted to maintain or defend
any action in any court of this state until such report is filed and all
fees and taxes due under the Act are paid and shall be subject to
dissolution or cancellation of its certificate of authority to do business
as provided in the Act.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. DEFINITION OF THE "ACT".
All references contained herein to the "Act" or to sections of the "Act"
shall be deemed to be in reference to the Florida Business Corporation Act.
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SECTION 10.02. APPLICATION OF FLORIDA LAW.
Whenever any provision of these bylaws is inconsistent with any provision
of the Florida Business Corporation Act, Statutes 607, as they may be amended
from time to time, then in such instance Florida law shall prevail.
SECTION 10.03. FISCAL YEAR.
The fiscal year of the corporation shall be determined by resolution of the
board of directors.
SECTION 10.04. CONFLICTS WITH ARTICLES OF INCORPORATION.
In the event that any provision contained in these bylaws conflicts with
any provision of the corporation's articles of incorporation, as amended from
time to time, the provisions of the articles of incorporation shall prevail and
be given full force and effect, to the full extent permissible under the Act.
SECTION 10.05 FLORIDA CONTROL SHARE ACQUISITION ACT
Pursuant to Florida Statute Annotated, Chapter 607.0902(5), the Corporation
hereby elects not to be governed by Chapter 607.0902, the "Florida Control Share
Acquisition Act."
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THIS AGREEMENT made and dated the -------------------, 1999.
BETWEEN:
ePHONE TELECOM, INC., a body corporate, incorporated
under the laws of the State of Florida, United States
of America (herein referred to as the "Company")
OF THE FIRST PART
AND:
--------------------------, of ------------------------
in the City of ----------------------------------------
(herein referred to as the "Optionee")
OF THE SECOND PART
W H E R E A S:
A. The Optionee is, or has agreed to become, a director, officer, employee or
other direct or indirect provider of service to the Company.
B. As an incentive to the Optionee to continue to serve the Company, the
Company desires to grant to the Optionee an option to purchase shares in
its capital stock on the terms hereinafter contained;
NOW THEREFORE, in consideration of the premises and covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. The Company hereby grants to the Optionee an option ("Option") to purchase
------------- voting common shares in its capital, exercisable on or before
June 30, 2001 at a price of $0.50 (U.S.) per share.
2. During the term of the Option the Optionee may exercise, from time to time,
the whole or any part of the Option, by paying to the Company the purchase
price for the shares purchased pursuant thereto. Upon receipt of a request
for shares from the Optionee, and payment therefor, the Company shall
forthwith issue and allot to the Optionee the number of shares as shall
have been paid for.
3. The Option is not assignable by the Optionee; provided however, that if the
Optionee shall die while the Optionee is an employee, officer, director of,
or service provider to, the Company or of a subsidiary of the Company, the
Optionee's estate shall be entitled to exercise the whole or any part of
the Option existing at the date of death, at any time up to 1 year after
the date of death.
4. If, at any time during the continued existence of the Option, there shall
be any alteration in the capital stock of the Company, other than an
increase or decrease in its authorized or issued capital, the Option shall
attach to an appropriate number of the shares or securities of the Company
which shall have been created by any such alteration, and the price payable
on the exercise of the Option shall be adjusted proportionately to the
change in the shares resulting from such capital alteration.
5. The Optionee's continued service to the Company is a condition of the
continuance of the option herein granted. Accordingly, if the Optionee
shall, during the term of the within option, cease to be a director,
officer or employee of, or service provider to, the Company or a subsidiary
of the Company, the option herein granted to the Optionee shall cease and
terminate 30 days after the date upon which the Optionee last ceases to
hold any of the said positions or relationships to the Company.
6. The shares of the Company which an Optionee receives pursuant to this
Agreement may be subject to resale restrictions pursuant to the securities
laws of the United States or of the jurisdiction in which the Optionee
resides. The Optionee agrees to accept such shares subject to such
restrictions and acknowledges that if there are any such restrictions the
certificates received by the Optionee may be legended with a description of
such restrictions.
7. The Parties hereto agree to do such further and other acts and execute such
further and other documents as may be necessary to carry out the true
intent and meaning of this Agreement.
8. This Agreement shall enure to the benefit of and be binding upon the
Parties and their permitted heirs, executors, administrators and
successors.
IN WITNESS WHEREOF the parties have executed this Agreement as of the day
and year first above written.
ePHONE TELECOM, INC.
Per: -----------------------------
Authorized Signatory
- ----------------------------- ------------------------------
Witness Optionee
THIS ENGAGEMENT AGREEMENT made and dated the 8th day of July, 1999.
BETWEEN:
CHARLES YANG, a United States citizen, residing at 39767 Paseo
Padre Parkway, Suite E, in the City of Fremont, State of
California, U.S.A.
(hereinafter referred to as "Yang")
OF THE FIRST PART
AND:
ePHONE TELECOM, INC., a body corporate, incorporated under the
laws of the State of Florida, United States of America and having
its Registered Office at 1200 South Pine Island Road, Plantation,
State of Florida, U.S.A.
(hereinafter referred to as "ePhone")
OF THE SECOND PART
WHEREAS:
A. ePhone, being a publicly traded United States company, is subject to all of
the applicable securities laws and regulations of the United States and its
various States (collectively herein called the "Act") and to the Rules,
Regulations and policies of the United States Securities and Exchange
Commission ("SEC").
B. ePhone wishes to engage the full-time services of Yang.
NOW THEREFORE, this Agreement witnesseth:
1. Engagement
1.1 ePhone hereby engages Yang as its President and Chief Operating
Officer ("COO") on the terms hereinafter set forth for a period of 4
years from the effective date of this Agreement, and Yang hereby
accepts such engagement. The date of commencement of the engagement
and the Effective Date of this Agreement shall be July 8, 1999. Within
30 days of the Effective Date, Yang shall become a member of the Board
of Directors of ePhone ("Board") and shall remain on the Board so long
as he is engaged under this Agreement.
1.2 As used in this Agreement, the term "ePhone" means and includes all
other subsidiaries and divisions of ePhone now existing or later
organized, unless the context clearly indicates otherwise. When used
in this Agreement the terms "engagement" and "engagement with (or by)
ePhone" shall mean and include engagement with all subsidiaries and
divisions of ePhone, now existing or later organized.
2. Duties
2.1 Yang will render services in such executive, supervisory and general
administrative capacities as the Board shall from time to time
reasonably determine. Without limiting the foregoing, Yang will serve
as COO and President of ePhone and such of its subsidiaries as the
Board shall from time to time determine. Yang shall, as COO and
President, have primary responsibility for and active charge of the
management and supervision of the business and affairs of ePhone and
the execution of the policies and directives of the Board, and shall
in each case report directly to the Board of Directors, or as may be
directed by the Board, to ePhone's Chief Executive Officer. Without
limiting the generalities or specifics of the foregoing Yang will have
the following authority and responsibilities:
- Primary responsibility for directing the technological and network
development of ePhone
- Recommending to the Board actions and policies which require Board
approval, including the long-term development
of ePhone
- Directing the day-to-day operations of ePhone, including the
operations centre, with authority to hire personnel
- Management of the relationships with ePhone's strategic and network
partners
- Responsibility for preparation of budgets for Board approval and
implementation of approved budgets
- Overall direction of marketing and sales for ePhone, with,
particularly, a lead role to be played in ePhone's efforts in Asia
- Assist in contracts with partners, and key personnel
- Liaison with shareholders, lawyers, accountants, brokers and market
makers, as required
2.2 Yang acknowledges that his engagement by ePhone hereby is based on
expectations by ePhone that it will be able to pursue and will
reasonably achieve the objectives set forth in ePhone's Business Plan
to be finalized by August 31, 1999 ("Business Plan"), subject to
ePhone's acknowledgment that such expectations may not be achievable
on the basis to be described in the Business Plan. ePhone will provide
Yang with an opportunity to provide input into the Business Plan, to
review it and to vote as a Director on its acceptance. Yang agrees
that in carrying out his duties, and notwithstanding the provisions of
Clause 2.1, he will focus his activities and exercise the authority of
his position with ePhone with a view to achieving the objectives set
forth in the Business Plan - except and to the extent that he may be
otherwise directed by the Board.
2.3 Yang acknowledges that ePhone is intended to serve primarily as a
holding company and be publicly traded, while research, development
and operations will also be carried out by subsidiaries ePhone expects
to acquire or organize. Yang agrees to serve, as may be directed by
the Board, as COO and Director of both ePhone and one or more of its
subsidiaries and to properly discharge the duties and responsibilities
owed to all these companies during the term of this Agreement, for the
compensation set forth under Section 5. Should Yang be asked to serve
as officer or director of any other subsidiary, related company or
venture of ePhone, no additional compensation will be owed for such
service.
3. Head Office
The operations head office of ePhone, at which Yang will be primarily
providing his services to ePhone, will be established at a location which will
be in the "Silicon Valley" or "Bay" areas of the State of California. ePhone may
change the said office location to anywhere within the said general Silicon
Valley or Bay areas. Yang will render services away from the said office from
time to time on a temporary basis and travel wherever ePhone may reasonably
require. In connection with all such trips Yang will be entitled to reasonable
travel and hotel accommodations.
4. Exclusivity
Yang will devote all of his working time to performing his duties under
this Agreement, and during his engagement with ePhone Yang will not:
(a) act for his own account in any manner which is competitive with any of the
business of ePhone or which would interfere with the performance of his
duties under this Agreement, or
(b) serve as an officer, director or employee of or advisor to any other
business entity, without prior full disclosure to the Board of the nature
and extent of such service, which the Board must approve in advance, it
being agreed that such approval will not be unreasonably withheld, or
(c) invest or have any financial interest, direct or indirect, in any business
competitive with any of the business of ePhone, provided, however, that
notwithstanding the foregoing, Yang may own up to 1% of the outstanding
equity securities of any company engaged in any such competitive business
whose shares are listed on a national securities exchange or NASDAQ
National Market System. Yang will be deemed to have an indirect financial
interest in any business in which any financial interest is held by Yang's
spouse, or a corporation 50% or more of the shares of which are held by
Yang and/or his spouse.
5. Compensation
5.1 For the period ending September 30, 1999, Yang will be paid $7,500 per
month payable as of the 1st day of each such month, provided that for
the first month the period will commence on the 8th of July.
5.2 For the period between October 1, 1999 and March 31, 2000, Yang will
be paid a fee of $10,500 per month payable on the 1st day of each such
month.
5.3 For the period April 1, 2000 to June 30, 2000, Yang will be paid a fee
of $17,500 per month payable as of the 1st day of each such month.
5.4 For the second, third and fourth years of Yang's engagement his annual
compensation will be bona fide reviewed by ePhone and with him, but in
any event, his annual compensation for each such year will be
increased by not less than 15% over and above the amount paid in the
preceding year of his engagement.
5.5 Yang will not be entitled to overtime or other additional compensation
as a result of services performed during evenings, weekends, holidays
or at other times.
5.6 ePhone will deduct and withhold from any compensation payable to Yang
under this Agreement such amounts as ePhone is required to deduct and
withhold by law. ePhone may also deduct and withhold from any such
compensation, to the extent permitted by law, such amounts as Yang may
owe to ePhone.
6. Share Purchase Options
6.1 As further compensation and incentive to Yang, ePhone hereby grants to
him options to purchase 500,000 voting common shares (hereinafter
called "shares") in ePhone's capital, exercisable on the following
terms at $0.50 per share (shares being purchased by Yang pursuant
hereto being hereinafter called "Option Shares").
6.2 The options granted Yang will vest in his favour and become
exercisable by him, so long as this Engagement Agreement is still in
force and effect, to the extent of the following numbers of shares
from and after the following dates:
(a) 100,000 shares from and after the execution of this Agreement by
Yang;
(b) 200,000 shares after September 30, 1999;
(c) 200,000 shares after December 31, 1999.
6.3 The Option Shares shall not be registered under the Act when issued on
the grounds that the issuance of the Option Shares is a transaction
not involving any public offering, and all certificates issued
evidencing the Option Shares shall, until removed in accordance with
law, bear a customary form of investment legend, and a stop order
shall be placed in respect of all such shares in ePhone's transfer
records. However, ePhone will at its expense attempt to register the
Option Shares prior to their issuance under the Act on SEC Form S-8
for issuance to Yang.
6.4 If this Agreement shall be terminated by either Party for whatever
cause Yang may exercise any Options which have become vested as of the
date of termination, within 90 days after the date of termination.
6.5 Any options which have not been exercised by Yang as of the close of
business on June 30, 2003 will expire and thereafter no longer be
exercisable by Yang notwithstanding that his engagement by ePhone may
have been extended beyond that date.
7. Expenses
ePhone will reimburse Yang for all proper, normal and reasonable expenses
incurred by Yang in performing his obligations under this Agreement upon Yang's
furnishing ePhone with satisfactory evidence of such expenditures. Yang will not
incur any unusual or major expenditures greater than $2,000 without ePhone's
prior written approval. Without limiting the foregoing, Yang will not, without
ePhone's prior written approval, incur any travel expenses (including the cost
of transportation, meals and lodging) in excess of $2,000 in the aggregate for
any one trip.
8. Benefits
8.1 If made available to employees of ePhone, ePhone will provide Yang, at
ePhone's expense, with life insurance, major medical, hospitalization
and surgical insurance, eyeglass insurance, dental insurance, salary
continuance and long-term disability insurance and any other benefits
which are not less favourable than those which it provides to any
employee of ePhone.
8.2 Yang will be entitled to 10 business days vacation during each
calendar year (January 1 to December 31) in addition to any holidays
which ePhone observes. Vacation time must be used during each calendar
year and if it is not used it will be forfeited. No payment will be
made for unused vacation time.
8.3 Yang's compensation, commissions and other rights and benefits under
this Agreement will not be suspended or terminated because Yang is
absent from work due to illness, accident or other disability; but
ePhone may deduct from Yang's compensation under Section 5 any payment
received by Yang under any disability insurance which ePhone provides
Yang pursuant to Clause 8.1.
8.4 Yang will be entitled to 5 business days paid sick leave during each
calendar year. Sick leave must be used during each calendar year and
if it is not used, it will be forfeited. No payment will be made for
unused sick time.
9. Acquisition of General-Tel , Inc. ("General Tel")
9.1 It is a material term of ePhone and Yang, in entering into this
Agreement, that ePhone will acquire 100% of the issued shares of
General Tel and affiliated companies, from Yang (and any members of
his family who may hold any of such shares) free of all charges,
obligations and debts. Yang shall forthwith supply all relevant
information that ePhone would expect to have for its due diligence
review of General Tel.
9.2 Procedures will be initiated forthwith after the Effective Date for
the acquisition of General Tel.
9.3 The consideration for the acquisition of General Tel shall be
1,500,000 shares of ePhone (the "Consideration Shares"). The
Consideration Shares shall be subject to a non-trading or hold period
of at least 1 year as it is anticipated they will be subject to the
SEC's Rule 144. As per the time limit specified in section 9.2 these
are required to be issued to Yang and the other shareholders of
General Tel within 20 business days after the signing of this
Agreement.
9.4 When General Tel is acquired by ePhone it shall be a condition of
ePhone's continued ownership of General Tel that it raise, alone or
with General Tel, at least $1,100,000 within 6 months of the closing
of the acquisition of General Tel for the funding of ePhone's ongoing
business development. Funds received by ePhone after the Effective
Date from the sale of its securities will be included in the
calculation of the monies raised by ePhone. Failing the raising of
such monies Yang will have an option, exercisable by notice to ePhone
given within 60 days after the expiry of the said 6 months, to acquire
General Tel and all of the assets that ePhone contracted to acquire
and, in consideration thereof, 1,350,000 Consideration Shares shall be
transferred to ePhone or its designated nominee.
9.5 The $1,100,000 financing to be raised by or for ePhone may be through
equity offerings by ePhone, including the Regulation S financing
currently being raised by ePhone, or debt or other types of funding.
10. Performance Related Escrowed Shares
10.1 ePhone will, within 20 business days of the signing of this Agreement
by Yang, issue and allot 2,000,000 shares, registered in the name of
Yang or his nominee, without any consideration being paid therefor by
Yang (such shares being hereinafter called the "Escrowed Shares"). The
Escrowed Shares will be released to Yang on a performance related
basis as described below.
10.2 The certificates for the Escrowed Shares will be lodged in an escrow
which will be established with ePhone's lawyers, Tupper Jonsson &
Yeadon, or as may be otherwise mutually agreed. The lawyers will be
instructed to release 25% of the Escrowed Shares, namely 500,000
Escrowed Shares, to Yang by delivering to him appropriate share
certificates upon ePhone and its subsidiaries achieving, on a
consolidated basis each of the following:
(a) net sales revenues of $5,000,000;
(b) aggregate cumulative net sales revenues of $12,000,000;
(c) aggregate cumulative net sales revenues of $30,000,000;
(d) aggregate cumulative net sales revenues of $50,000,000;
Provided however that the above minimum net revenues figures must
involve a minimum of 35% of the gross sales figures being generated
from sales in each of Europe and Asia.
10.3 If this Agreement shall be terminated for any reason, whether through
the expiry of the 4-year term hereof or otherwise, any of the Escrowed
Shares which have not yet become due to be released to Yang will
thereafter be returned to ePhone for cancellation and Yang will have
no further rights to receive any of them.
10.4 Net sales for the purpose of this Section, and determining releases of
Escrowed Shares to Yang, will be the gross amounts received by ePhone
from the sale of its products and services less the amounts lost or
credited by ePhone on sales which have been returned or cancelled or
which ePhone is unable to collect due to the defaults of purchasers.
Subject to the foregoing definitions net sales revenues shall be as
calculated and audited by ePhone's auditors on a consolidated basis as
of the end of the calendar quarter in which the relevant net sales
level is reached, using United States generally accepted accounting
principles ("GAAP").
11. Bonus for Sales of Wireless Local Loop
11.1 It is the mutual expectation of the Parties entering into this
Agreement that Yang will be able to bring to ePhone and negotiate on
behalf of ePhone, with himself or others potentially involved, one or
more agreements to sell, or provide services with respect to, Wireless
Local Loop ("WLL") to buyers or users - potentially in Vietnam but not
restricted to Vietnam.
11.2 If ePhone, under the guidance of Yang, shall succeed in developing an
agreement for the sale of WLL to one or more purchasers brought to
ePhone by Yang or where Yang plays a leading role in securing a
contract or contracts even though the specific business opportunity
may have been first identified by another party, Yang will receive
further compensation therefore by way of up to 1,000,000 shares, to be
issued and allotted on the following schedule:
(a) 300,000 of the said shares will be issued, allotted and delivered
to Yang upon the completion of the signing of a Memorandum of
Understanding with a purchaser of WLL, acceptable to and approved
by the Board, such approval to not be unreasonably withheld;
(b) 300,000 shares upon the completion of the signing of a formal
contract for the sale of WLL, acceptable to the Board;
(c) 400,000 shares upon the completion, closing and receipt of
payment for the first sale of WLL in a gross amount of not less
than $500,000;
11.3 Further, Yang will, if one or more sales of WLL are completed as
anticipated by this Section, receive, in addition to all other
benefits and compensation under this Agreement, monies equal to 10% of
the gross profits earned by ePhone from the said sale or sales or from
agreements signed to provide WLL related services.
11.4 Where shares have been earned by Yang pursuant to this Section by
virtue of his performance in securing sales of WLL the shares will be
issued and delivered to Yang within 20 business days of the
satisfaction of the applicable condition described in Clause 11.2.
12. Commission Based Bonuses
12.1 If and to the extent that ePhone shall, during the term of this
Agreement, effect sales of equipment to purchasers in China, Vietnam
or Taiwan, or receive revenues from telecom services and traffic
originating in China, Vietnam or Taiwan, and so long as ePhone's gross
profit margin from such sales or traffic, on a monthly basis, is 20%
or more, Yang will be paid 5% of such gross profits margin.
12.2 For the purposes of this Clause, ePhone's gross profit margin will be
calculated using GAAP, on a calendar monthly basis and if monies are
payable to Yang for any calendar month they shall be paid within 30
days after the end of such month, accompanied by a statement showing
the calculations.
12.3 If in any calendar month ePhone's gross profit margin is less than 20%
then no commissions shall be payable hereunder to Yang for such month.
Within 30 days after the end of any such month Yang shall be supplied
with a copy of the calculations showing the gross profit margin to be
below the said 20%.
12.4 For all countries except China, Vietnam and Taiwan, where ePhone pays
sales commissions to representatives or agents in such country, Yang
will be paid monies equal to 1% of the gross sales in those countries.
In the case of China, Vietnam and Taiwan where Clause 12.3 applies
(that is, when ePhone's profit margin is less than 20%) then Yang will
be entitled to a commission equal to 1% of the gross sales in those
countries.
13. Change of Control of ePhone
13.1 In the event that the voting control of ePhone shall change as a
result of the acquisition of at least 51% of the issued voting common
shares of ePhone by a person or group of persons acting in concert,
who do not presently own at least 51% of the issued voting common
shares of ePhone, excluding consideration of any shares Yang or his
nominees or the shareholders of General Tel receive as anticipated by
this Agreement, Yang shall be entitled to the full vesting of all
outstanding options, plus the release of all escrowed shares not
previously released.
13.2 If there shall be a change of control of ePhone as defined in Clause
13.1, the person or persons acquiring control shall be entitled to buy
out some or all of the commissions earnable by Yang pursuant to
Sections 11 and 12 above by paying to him an amount of money which
shall be equal to the discounted present value of those future
commissions, using a discount rate equal to the U.S. Federal Reserve
bank interest rate last published prior to the purchasers giving
notice to Yang of their intention to exercise their buyout rights,
plus 5%.
14. Death and Disability
14.1 If Yang dies prior to expiration of the term of his engagement, all
obligations of ePhone to Yang will cease as of the date of Yang's
death; Provided it is agreed that:
(a) shares that Yang has received or other rights that have vested in
Yang will continue to be the assets of Yang and his estate;
(b) the right to shares, or the release of shares from escrow,
bonuses or commissions that have not matured and vested at the
date of death will be cancelled as it is acknowledged that all
such benefits are incentive benefits which will have no
application after Yang's death;
(c) the percentage of gross profits Yang's estate shall be entitled
to pursuant to Clause 11.3 hereof shall be reduced from 10% to
5%, effective as of the date of Yang's death.
14.2 If Yang is unable to perform substantially all of his duties under
this Agreement because of illness, accident or other disability
(collectively referred to as "Disability"), and the Disability
continues for more than three consecutive months or an aggregate or
more than six months during any 12-month period, then ePhone may
suspend its obligations to Yang under Section 5 on or after the
expiration of the 3- or 6-month period until ePhone terminates such
suspension as hereinafter provided. ePhone will terminate any such
suspension after the Disability has, in fact, ended and after it has
received written notice from Yang that the Disability has ended and
that he is ready, willing and able to perform fully his services under
this Agreement. Termination of the suspension will be no later than
one week after ePhone has received such notice from Yang.
14.3 If a Disability of Yang shall continue for 6 consecutive months ePhone
may at any time prior to termination of the then current period of
suspension, give notice to Yang terminating Yang's engagement
hereunder.
14.4 If ePhone suspends its obligations under Clause 14.2, then for each
year ending December 31 during which such suspension is in effect, any
bonuses or compensation, if any, in addition to salary will be
prorated based upon the number of suspension days.
14.5 If Yang or ePhone asserts at any time that Yang is suffering a
Disability, ePhone may cause Yang to be examined by a doctor or
doctors selected by ePhone, and Yang will submit to all required
examinations and will cooperate fully with such doctor or doctors and,
if requested to do so, will make available to them his medical
records. Yang's own doctor may be present.
14.6 If ePhone terminates Yang's engagement pursuant to Clause 14.2 such
termination will have exactly the same effect as if Yang died on the
effective date of such termination.
15. Results Of Yang's Services
15.1 ePhone will be entitled to and will own all the results and proceeds
of Yang's services under this Agreement including, without limitation,
all rights throughout the World to any copyright, patent, trademark or
other right and to all ideas, inventions, products, programmes,
procedures, formats and other materials of any kind created or
developed or worked on by Yang during his engagement by ePhone; the
same shall be the sole and exclusive property of ePhone; and Yang will
not have any right, title or interest of any nature or kind therein.
Without limiting the foregoing, it will be presumed that any
copyright, patent, trademark or other right and any idea, invention,
product, programme, procedure, format or material created, developed
or worked on by Yang at any time during the term of his engagement
will be a result or proceed of Yang's services under this Agreement.
Yang will take such action and execute such documents as ePhone may
request to warrant and confirm ePhone's title to and ownership of all
such results and proceeds and to transfer and assign to ePhone any
rights which Yang may have therein.
15.2 Yang acknowledges that the violation of any of the provisions of
Clause 15.1 or Section 24 will cause irreparable loss and harm to
ePhone which cannot be reasonably or adequately compensated by damages
in an action at law and, accordingly, that ePhone will be entitled to
injunctive and other equitable relief to enforce the provisions
thereof; but no action for any such relief shall be deemed to waive
the right of ePhone to an action for damages.
16. Use of Yang's Name
ePhone is hereby granted the sole and exclusive right during the term of
Yang's engagement to make use of and to permit others to make use of Yang's
name, pictures, photographs and other likenesses, and voice, in connection with
the advertising, publicity and exploitation of any of its products, or in
connection with the use of implementation of any of Yang's services hereunder.
This right shall continue in perpetuity as a on-exclusive and non-compensable
right after termination of his engagement for any reason whatsoever including,
without limitation, termination by either party for cause or wrongful
termination by either party. No additional compensation shall be due Yang for
any such use by ePhone or a subsidiary. In no event, however, shall Yang,
directly or indirectly, be represented as endorsing any product or commodity
without Yang's written consent.
17. Insurance
If ePhone desires at any time or from time to time to apply for, in its own
name or otherwise, at its expense, life, health, accident or other insurance
cover Yang, ePhone may do so and may take out such insurance for any sum that it
deems desirable. Yang will have no right, title or interest in or to such
insurance or the proceeds thereof. Yang nevertheless will assist ePhone in
procuring the same by submitting from time to time to the customary medical,
physical and other examinations, and by signing such applications, statements
and other instruments as any reputable insurer may require.
18. Negative Covenants
18.1 Yang will not, during or after the term of this Agreement, disclose to
any third person or use or take any personal advantage of any
confidential information or any trade secret of any kind or nature
obtained by him during the term hereof or during his engagement by
ePhone, Subsidiary or other entity controlled by ePhone.
18.2 To the full extent permitted by law, Yang will not for a period of one
year following the termination of this Agreement:
(a) attempt to cause any person, firm or corporation which is a
customer of or has a contractual relationship with ePhone at the
time of the termination of his engagement to terminate such
relationship with ePhone, and this provision shall apply
regardless of whether such customer has a valid contractual
arrangement with ePhone;
(b) attempt to cause any employee of ePhone to leave such employment;
(c) engage any person who was an employee of ePhone at the time of
the termination of his engagement or cause such person otherwise
to become associated with Yang or with any other person,
corporation, partnership or other entity with which Yang may
thereafter become associated.
18.3 Yang acknowledges that the violation of any of the provisions of this
Section 18 will cause irreparable loss and harm to ePhone which cannot
be reasonably or adequately compensated by damages in an action at
law, and accordingly, that ePhone will be entitled to injunctive and
other equitable relief to prevent or cure any breach or threatened
breach thereof, but no action for any such relief shall be deemed to
waive the right of ePhone to an action for damages.
19. Governing Law; Remedies
19.1 This Agreement has not been executed in any specific State but it
shall be governed by and construed in accordance with the laws of the
State of California as if both parties have participated equally in
its drafting.
19.2 Section headings are for purposes of convenient reference only and
will not affect the meaning or interpretation of any provision of this
Agreement.
19.3 Except as otherwise expressly provided in this Agreement, any dispute
or claim arising under or with respect to this Agreement will be
resolved by arbitration in San Francisco, California in accordance
with the National Rules for the Resolution of Employment Disputes of
the American Arbitration Association before a panel of three (3)
arbitrators, one appointed by Yang, one appointed by ePhone, and the
third appointed by said Association. The decision or award of a
majority of the arbitrators shall be final and binding upon the
parties. Any arbitral award may be entered as a judgement or order in
any court of competent jurisdiction.
19.4 Notwithstanding the provisions for arbitration contained in this
Agreement, ePhone will be entitled to injunctive and other equitable
relief from the courts as provided in Sections 15 and 24 and as the
courts may otherwise determine appropriate, and Yang agrees that it
will not be a defence to any request for such relief that ePhone has
an adequate remedy at law. For purposes of any such proceeding ePhone
and Yang submit to the non-exclusive jurisdiction of the courts of the
State of California and of the United States located in the County of
Alameda, State of California, and each agrees not to raise and waives
any objection to or defence based on the venue of any such court or
forum non conveniens.
19.5 A court of competent jurisdiction, if it determines any provision of
this Agreement to be unreasonable in scope, time or geography, is
hereby authorized to enforce the provision in such narrower scope,
shorter time or lesser geography as such court determines to be
reasonable and proper under all the circumstances.
19.6 ePhone will also have such other legal remedies as may be appropriate
under the circumstances including, inter alia, recovery of damages
occasioned by a breach. ePhone's rights and remedies are cumulative
and the exercise or enforcement of any one or more of them will not
preclude ePhone from exercising or enforcing any other right or
remedy.
20. Termination
20.1 ePhone may terminate Yang's engagement for cause or other material
breach of this Agreement. As used in this Section, "cause" means a
breach of a fiduciary duty or a duty of loyalty to ePhone,
misappropriation or wasting of any asset or opportunity of ePhone,
failure to perform one's duties (other than because of ePhone's
failure to pay compensation as provided in this Agreement, or because
of illness, accident or other disability to the extent permitted by
this Agreement), failure to perform duties in a competent manner or in
a specific manner directed by ePhone, any other material breach of
this Agreement, or indictment for any felony irrespective of whether
the charge relates to ePhone. As described in Clause 2.1, Yang
acknowledges that the performance of his duties in a competent manner
will include using his best efforts to achieve the objectives set
forth in the ePhone Business Plan, as approved by the Board -except
and to the extent that he may be otherwise directed by the Board.
20.2 If Yang voluntarily quits his engagement or terminates this Agreement
without cause, or if his engagement is terminated by ePhone for cause
or other material breach of this Agreement, then Yang shall be
entitled to all salary and other compensation earned or due through
the date of termination, but no severance pay shall be owed, and all
options then remaining unexercised shall expire as of the time of
termination.
20.3 If Yang voluntarily quits his engagement or terminates this Agreement
without cause, or if his engagement is terminated by ePhone without
cause, the percentage of profits Yang shall be entitled to pursuant to
Clause 11.3 shall be reduced from 10% to 5% effective as of the date
of termination.
21. Indemnity
To the extent permitted by law, ePhone will indemnify Yang against any
claim or liability and will hold Yang harmless from and pay any expenses
(including, without limitation, legal fees and court costs), judgements, fines,
penalties, settlements and other amounts arising out of or in connection with
any act or omission of Yang performed or made in good faith on behalf of ePhone
pursuant to this Agreement, regardless of negligence. ePhone will not be
obligated to pay Yang's legal fees and related charges of counsel during any
period that ePhone furnishes, at its expense, counsel to defend Yang; but any
counsel furnished by ePhone must be reasonably satisfactory to Yang. The
foregoing provisions will survive termination of Yang's employment with ePhone
for any reason whatsoever and regardless of fault.
22. D & O Insurance
ePhone will, to the extent provided to other directors and executive
officers of ePhone, provide Yang with officers' and directors' liability
insurance covering acts or omissions by Yang in the performance of his duties to
ePhone under this Agreement.
23. Miscellaneous Provisions
23.1 Amendment. This Agreement may be amended only by an instrument in
writing signed by ePhone and Yang.
23.2 Assignment. This Agreement shall be binding upon the parties and their
respective successors and permitted assigns. ePhone may, without
Yang's consent, transfer or assign any of its rights and obligations
under this Agreement to any corporation which, directly or indirectly,
controls or is controlled by ePhone or is under common control with
ePhone or to any corporation succeeding to all or a substantial
portion of ePhone's business and assets, provided that ePhone shall
not be released from any of its obligations under this Agreement, and
provided further that any such transferee or assignee agrees in
writing to assume all the obligations of ePhone hereunder. Control
means the power to elect a majority of the directors of a corporation
or in any other manner to control or determine the management of a
corporation. Except as provided above, neither ePhone nor Yang may,
without the other's prior written consent, transfer or assign any of
its or his rights or obligations under this Agreement, and any such
transfer or assignment or attempt thereat without such consent shall
be null and void.
23.3 Severability of Provisions. If any provision of this Agreement or the
application of any such provision to any person or circumstance is
held invalid, the remainder of this Agreement, and the application of
such provision other than to the extent it is held invalid, will not
be invalidated or affected thereby.
23.4 Waiver. No failure by ePhone to insist upon the strict performance of
any term or condition of this Agreement or to exercise any right or
remedy available to it will constitute a waiver. No breach or default
of any provision of this Agreement will be waived, altered or
modified, and ePhone may not waive any of its rights, except by a
written instrument executed by ePhone. No waiver of any breach or
default will affect or alter any term or condition of this Agreement,
and such term or condition will continue in full force and effect with
respect to any other then existing or subsequent breach or default
thereof.
23.5 Notices
(a) Any notice which is required to be given hereunder shall be given
in writing and will be effectively given if the same is:
(i) delivered or mailed by prepaid registered or certified post
to the address of the intended recipient set forth at the
top of this agreement;
(ii) delivered to a director of officer of the intended
recipient; or
(iii)sent be telecopier (fax) to the intended recipient at the
following numbers:
ePhone: (604) 638-2615
Yang: (510) 661-9897
Provided that any Party may give notice to the other Party of new
addresses or new fax numbers to be used for the purpose of this
Clause;
(b) any notice which is delivered shall be deemed to have been given
on the date of delivery. Any notice which is sent by telecopier
shall be deemed to be given on the first weekday following the
date upon which the telecopied message is transmitted. Any notice
that is sent by prepaid mail shall be deemed to have been given
on the 5th weekday after the date upon which the notice is mailed
from a Post Office in continental Canada or the United States.
23.6 Share Splits. In all cases where numbers of shares are specified
in this agreement these shares will be adjured pro rata with all
other common shares of ePhone in cases of forward or backward
splits of shares after the date of signing this agreement.
23.7 Entire Agreement. This Agreement constitutes the entire agreement
of the parties and supersedes any and all prior agreements or
understandings between them.
24. Confidentiality
24.1 Yang acknowledges that as a result of his engagement by ePhone, he may
become aware of or familiar with processes, formulae, procedures,
materials or Technical Information (as hereinafter defined) which
ePhone has spent time and money to develop, which are essential to the
business of ePhone, and which comprise confidential information and
trade secrets of ePhone (collectively called "Trade Secrets"). The
term "Trade Secret" does not include any process, formula, procedure,
information or material which is currently in the public domain or
which hereafter becomes public knowledge in a way that does not
involve a breach of an obligation of confidentiality. Yang
acknowledges and agrees that any process, formula, procedure,
information or material of which he becomes aware during his
engagement by ePhone is presumed to be a Trade Secret unless ePhone
advises him in writing that it is not a Trade Secret.
24.2 Yang agrees that he will not during his engagement, and for a period
of one year after the termination of this Agreement, either directly
or indirectly, use or disclose to anyone any Trade Secret, except that
while he is engaged by ePhone, he may use Trade Secrets in the
performance of his services to ePhone, and may disclose Trade Secrets
to employees or agents of ePhone who need to know them in the
performance of their services for ePhone and who are bound by
confidentiality agreements. Yang also agrees that ePhone will be
entitled to and will own all the results and proceeds of his services
for ePhone including, without limitation, all rights throughout the
world to any copyright, patent, trademark or other right and to all
ideas, inventions, products, programmes, procedures, formats and other
materials of any kind created, developed or worked on by him during
his engagement by ePhone.
25. Representations of Yang
Yang represents and warrants to ePhone that he has not taken any trade
secret or confidential or proprietary information from any employer, that he has
not used and will not use any trade secret or confidential or proprietary
information of any employer to solicit or acquire business for ePhone or to
perform his services for ePhone, that he has not solicited or acquired any
business for ePhone while engaged by anyone else, and that he is not violating
and will not violate any agreement or obligation by his being engaged by ePhone
or by performing his services for ePhone. Yang acknowledges ePhone is relying on
these representations and warranties in entering into this Agreement and
engaging him.
26. Protection of Technical Information and Knowhow
26.1 For the purposes of this Clause and this Agreement the following words
and expressions have the following meanings:
(a) "Technical Information" includes but is not limited to any and
all patents, patent applications, trademarks, designs, design
patents, industrial designs, design applications, know-how, trade
secrets, documents, drawings, prototypes, components, controls
and associated hardware, computer stored information and copies
thereof, financial information, brochures, customer information,
distributor information, source of supply information, product
and component knowledge, other written and recorded material
including plans, diagrams and instruction manuals and any other
information relating to products or services.
(b) "Modifications" shall mean any improvements, changes,
modifications, designs and/or additions arising from or made in
connection with products or services developed subsequent to the
execution of this Agreement.
(c) "Technical Information" shall further include, but not be limited
to potential markets, potential purchasers or users as previously
contacted by ePhone within areas of potential market, and
information developed about potential market-places or purchasers
or users resulting from their unique cultural language or ethnic
backgrounds.
(d) "Know-how": is as defined in Article 1(7)(1) of European Economic
Community Regulation 556/89 which defines "know-how" as:
1(7)(1) ... a body of technical information that is secret,
substantial and identified in any appropriate form;
1(7)(2) ... "secret" means that the know-how package as a body or
in the precise configuration and assembly of its components is
not generally known or easily accessible, so that part of its
value consists in the lead-time the licensee gains when it is
communicated to him; it is not limited to the narrow sense that
each individual component of the know-how should be totally
unknown or unobtainable outside the licensor's business;
1(7)(3) ... "substantial" means that the know-how includes
information which is of importance for the whole or a significant
part of (i) a manufacturing process, or (ii) a product or
service, or (iii) for the development thereof and excludes
information which is trivial. Such know-how must thus be useful,
i.e. can reasonably be expected at the date of conclusion of the
agreement to be capable of improving the competitive position of
the licensee, for example by helping him to enter a new market or
giving him an advantage in competition with other manufacturers
or providers of services who do not have access to the licensed
secret know-how or other comparable secret know-how;
1(7)(4) ... "identified" means that the know-how is described or
recorded in such a manner as to make it possible to verify that
it fulfils the criteria of secrecy and substantiality and to
ensure that the licensee is not unduly restricted in his
exploitation of his own technology. To be identified the know-how
can either be set out in the licence agreement or in a separate
document or recorded in any other appropriate form at the latest
when the know-how is transferred or shortly thereafter, provided
that the separate document or other record can be made available
if the need arises.
(e) "ePhone's Technical Information" shall mean all of the technical
information and modifications owned or held by ePhone or its
directors and officers as of the date of this Agreement or as may
be developed or acquired by ePhone and its directors and officers
during the term of this Agreement.
(f) "Yang's Technical Information" means the technical information
that Yang has as of the date of this Agreement.
Provided however that no knowledge or technical information of
any nature or kind whatsoever shall be considered, at any time,
to be Technical Information if it is, at such point in time,
already in the public domain - that is to say, available to or
known to the public in the United States of America or elsewhere;
Provided also that no Party shall be denied the right to use any
information or knowledge which would otherwise be considered
Technical Information if such information and knowledge was
communicated to such Party other than by a person or company with
an obligation or confidentiality to the other Party hereto except
Technical Information which is covered by any patent, trademark
or other formal registration which is designed to, inter alia,
protect knowhow or proprietorial information.
26.2 During the term of this Agreement Yang shall use for the benefit of
ePhone all of Yang's Technical Information.
26.3 If Yang shall terminate this Agreement other than for cause he shall
not, for a period of two years following the date of such termination,
use any of ePhone's Technical Information for his personal profit or
benefit.
26.4 If ePhone shall terminate this Agreement prior to the end of its
prescribed term it shall not be entitled to, for a period of two years
from the effective date of such termination, be entitled to use Yang's
Technical Information for its profit or benefit.
27. Further Acts
The Parties agree to do such further acts and execute such further
documents as may be necessary to carry out the true intent and meaning of this
Agreement.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of
the day and year first above written.
Charles Yang
-----------------
/s/Charles Yang
Witness
Per: /s/Robert Clarke
-------------------
Robert Clarke,
Chairman & CEO
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Financial Data Schedule March 31, 1999
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 120,058
<SECURITIES> 0
<RECEIVABLES> 0
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0
0
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</TABLE>
