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
EQUORUMNET
(Name of Small Business Issuer in its charter)
Nevada 88-0431508
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
3009 Rose Lane, Phoenix, AZ 85016
(Address of principal executive offices) (zip code)
Issuer's telephone number: (877) 603-4382
Securities to be registered under section 12(b) of the Act:
Title of each class Name on each exchange on which each class
is to be registered
- --------------------------------------------------------------------------------
NONE
Securities to be registered pursuant to Section 12(g) of the Act.
Common Stock, $.0001 par value
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TABLE OF CONTENTS
Introductory Statement i
Part I
Item 1 DESCRIPTION OF BUSINESS 1
A. Business Development and Summary 1
B. Principal Products and Services and Principal Markets 1
Overview 1
Strategy 2
C. Distribution Methods of the Products or Services 2
a) Distribution 2
b) Advertising and Promotion 2
c) Customer Service 2
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF
OPERATION 2
A. Overview 3
B. Segment Data 4
C. Results of Operations 4
a) Pre-Operating Expenses 4
b) Revenues 4
D. Liquidity and Capital Resources 4
E. Governmental Approval, Regulation and Environmental Compliance 5
F. Risks Associated with Operations 5
G. Competition 5
H. Developing and Changing Market 5
I. Employees 6
J. Risks Associated with Year 2000 6
K. Additional Information 6
Item 3 DESCRIPTION OF PROPERTY 6
Item 4 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 7
Item 5 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS 7
Item 6 EXECUTIVE COMPENSATION 8
Item 7 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 9
Item 8 DESCRIPTION OF SECURITIES 9
Part II
Item 1 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 10
Item 2 LEGAL PROCEEDINGS 10
Item 3 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS 10
Item 4 RECENT SALES OF UNREGISTERED SECURITIES 10
Item 5 INDEMNIFICATION OF DIRECTORS AND OFFICERS 10
Part F/S
FINANCIAL STATEMENTS AND EXHIBITS 12
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Introductory Statement
eQuorumNet (the "Company") has elected to file this Form 10SB registration
statement on a voluntary basis in order to become a reporting company under the
Securities Act of 1934. The primary purpose for this is that the Company
intends to be listed for trading on the OTC Electronic Bulletin Board. Under
the current NASD rules, in order to become listed on the OTC Electronic Bulletin
Board, a company now must be a reporting company under the Securities Act of
1934.
This registration statement, including the information that may be
incorporated herein by reference, contains forward-looking statements including
statements regarding, among other items, the Company's business and growth
strategies, and anticipated trends in the Company's business and demographics.
These forward-looking statements are subject to a number of risks and
uncertainties, certain of which are beyond the Company's control. Actual
results could differ materially from these forward-looking statements as a
result of factors described in this section "Risk Factors," including among
others, regulatory or economic influences.
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Item 1 DESCRIPTION OF BUSINESS
A. Business Development and Summary
eQuorumNet, hereinafter referred to as "The Company" or eQuorumNet, was
organized by the filing of articles of incorporation with the Secretary of State
of the State of Nevada on July 15, 1999. The Company formed a Missouri LLC,
eQuorumNet, LC, in order to facilitate the private offering. The Company plans
to dissolve the LLC once the Company becomes publicly traded on the OTC Bulletin
Board. The articles of The Company authorized the issuance of fifty million
(50,000,000) shares of Common Stock at a par value of $0.0001 per share.
The Company is a developmental stage company with the principal business
objective to provide network and e-commerce marketing for upscale and mass
market consumer products direct from the manufacturer. The Company intends to
distinguish itself as "the technology leader" in these fields with its quality
products, its network marketing compensation plans, its marketing materials and
support programs, and its e-commerce site.
The Company intends to identify overseas manufacturers of consumer products
that have a need for a marketing arm in the United States. According to the
Company's management, the development of new products such as nutritional aids
and electronics in the Far East is expansive and the need for a specialized
marketing company for the United States market has continued to grow in the last
ten years. eQuorumNet plans to market its network marketing and e-commerce
services to these manufacturers.
During its initial phase of development, the Company is formulating
profitability budgets, and marketing plans with the intention to make
presentations to overseas manufacturing firms to become its marketing company in
the United States. No specific manufacturing companies have signed a contract
with eQuorumNet as yet, and the Company anticipates 6 to 8 months until the
research phase is completed. A manufacturer/client needs to be identified and
contracted with in order to begin phase II, when revenues will be expected.
The Company intends to build a distributor base and attract a new
generation of distributor leadership by providing additional financial
incentives for the core leadership (i.e., short-term income incentives,
recruiting incentives). It plans to increase long-term stability by addressing
key distributor structure/compensation areas: 1) create several "base of tree"
distributor lines to foster competition and increase opportunities for
aggressive new leadership 2) implement a compensation plan which foster
long-term sustainable growth by continuing to highly reward aggressive, serious
business builders, while better rewarding the 95% of part-time
consumer/retailer-type distributor, and better ensuring that new distributor
leaders will have a solid organization under them before "breaking away", so
that they will better be able to qualify for leadership bonuses, and 3)
continually train distributor leadership to focus on building deep and wide with
a solid base of consumers and to nurture their networks.
The Company intends to focus on achieving and maintaining profitability
also ensuring tight financial and systems control by 1) being fully prepared for
cyclical sales performance while still providing top quality customer service,
2) focusing on quality, not quantity, of new staff, 3) instituting
financial/accounting software systems to enable much tighter cash flow and
inventory control, and minimizing long-term contractual arrangements with
suppliers and keeping minimum order quantities as low as possible.
B. Principal Products and Services and Principal Markets
Overview
eQuorumNet has a principal business objective to emerge as a global leader
in the network marketing industry, with millions of distributors around the
world enjoying the full benefits of the secure and enhanced lifestyle that its
products/services/company could bring. The Company's focus will be to develop a
1
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stable, cohesive distributor force to market its targeted products. As a
secondary objective, but equally important, eQuorumNet intends to expand its
marketing capabilities to the Internet via e-commerce and reusable, mass
products.
Strategy
The principal components of the Company's strategy are as follows:
- - Provide highly attractive financial incentives needed to attract powerful
new distributor leaders and reward loyal leadership as well as the
key management team
Under development is a Compensation Pl.an which intends to foster
long-term sustainable growth of its distributors and provide for a
continuous training program of distributors.
- - Identify future products and expansions, with profitability and
marketability
- - Focus on achieving and maintaining profitability
- - Maintain tighter cash flow and inventory control through
financial/accounting software systems
- - Minimize long-term contractual arrangements with suppliers
- - Identify cyclical sales performances and prepare accordingly
C. Distribution Methods of the Products or Services
a) Distribution:
Distribution of products will be carried out through the
following channels:
1) Network Marketing: Distributors will sell products directly from
the manufacturer to the consumer. The Company believes this will
cut out the many levels of wholesalers, distributors and
retailers, and reduces the markup that is placed on the products
at each of these levels. The result is intended to be larger
profits, passed along to the consumer, the distributor and the
Company
2) e-Commerce. Mass-marketed products such as electronics, and
lifestyle services will be sold via the Internet to the general
public. The Company hopes to achieve a high volume site with
added income from advertising banners and referrals.
b) Advertising and Promotion
The Company's advertising is expected to be through high-visibility
methods, including press releases and targeted print and media campaigns,
as well as Internet sources. Effective tours in key cities to attract
distributors may be implemented, as well as a yearly convention for
distributors and leaders. Product videos, CD-Roms, DVDs can be developed to
attract potential new distributors. Training kits for each distributor
including a continual training programs intended to motivate and to create
loyal distributors can be designed.
c) Customer Service
The Company recognizes the need for an effective and responsive customer
service base. To that end, the Company is developing a Customer Service Plan to
include a Distributor Support Plan.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN
OF OPERATION
The following discussion should be read in conjunction with, and is
qualified in its entirety by the Financial Statements section included below.
With the exception of historical matters, the matters discussed herein are
forward looking statements that involve risks and uncertainties. Forward
looking statements include, but are not limited to, statements concerning
anticipated trends in revenues and net income, the date of introduction or
completion of the Company's products, projections concerning operations and
available cash flow. The Company's actual results could differ materially from
the results discussed in such forward looking statements. The following
discussion of the Company's financial condition ad results of operations should
be read in conjunction with the Company's financial statements and the related
notes thereto appearing elsewhere herein.
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Overview
(1) The Company, since raising its initial capital, has concentrated on
researching and developing contacts in the manufacturing community to identify
quality products for its network marketing and e-commerce site. The Company has
specifically targeted new products and services aimed at "securing and enhancing
life" including 1) Direct-from-factory electronics via Internet 2) New
generation security products 3) Lifestyle services (recreation, travel sports
memberships) 4) Nutritional and personal care products e.g., "nourish and
cleanse" Chinese herbal supplements, skin care systems.
During the initial phase of researching and developing contacts, the
Company does not anticipate the need for any additional capital. Its office at
the home of its President, 3009 E Rose Lane, Phoenix AZ 85016 is being used
free of charge. On July 24, 1999, the Company completed an offering of 170,000
shares of the Common Stock of the Company to approximately 29 unaffiliated
shareholders. This offering was made in reliance upon an exemption from the
registration provisions of Section 4(2) of the Securities Act of 1933 (the
"Act"), as amended, pursuant to Regulation D, Rule 504 of the Act. As of the
date of this filing, the Company has approximately 7,500,000 shares of its
$0.0001 par value common voting stock issued and outstanding which are held by
30 shareholders of record. Management fully anticipates that the proceeds from
the sale will be sufficient to provide for the Company's capital needs for the
next approximately three (3) to six (6) months, during its research stage of
development.
In addition, management of the Company believes the needs for additional
capital going forward will be derived somewhat from internal revenues and
earnings generated from the sale of its products and services. If the Company
is unable to begin to generate revenues from its anticipated products,
management believes the Company will need to raise additional funds to meet its
cash requirements.
The Company believes that its initial revenues will be primarily dependent
upon the number of distributors it has, the number of customers it has, and the
profit margins on the products it offers. Realization of significant sales of
the Company's products and services during the fiscal year ending December 31,
1999 is vital to its plan of operations. To that end, realization of developing
a stable organization of distributors is paramount to its plan.
(2) No engineering, management or similar report has been prepared or
provided for external use by the Company in connection with the offer of its
securities to the public.
(3) Management believes that the Company's future growth and success will
be largely dependent on its ability to obtain several overseas manufacturers as
clients, to attract a stable distributor force, its ability to target repeat
sales through reusable products, the marketing efforts for its e-commerce site,
and its choice of profitable products.
The Company has yet to incur any research and development costs from July
15, 1999, to present, and the Company does not expect to incur any significant
research and development expenses during the fiscal year ending December 31,
1999.
(4) The Company expects to purchase regular office equipment, i.e., desks,
calculators, a computer when revenues warrant such purchases, and a
client/manufacturer has hired the Company to do its marketing. The Company does
not have any facilities or equipment to sell at this time.
(5) Management anticipates that it will hire and add 5 full time employees
over the next twelve (12) months, as well as distributors who will be paid on
commission-only basis. Employees will not be added during Phase I, the research
period. Employees will be added as revenues permit.
(6) From inception in July, 1999 through present, the Company has devoted
a majority of its time on research and development. The Company has incurred
start up costs of $35,000.and anticipates an additional $45,000 in start up
costs. Richard Hung, individually, has paid all start up costs and will pay the
additional $45,000 in start up costs. This cost includes all start up costs of
attorneys, filing fees, and accountants. This $80,000.00 start up costs is
borne solely by Richard Hung, and is part of his contribution to the Company,
with no expected payback from the Company.
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B. Segment Data
There were no revenues from sales since its inception July 15, 1999.
Because there was no revenue, no table showing percentage breakdown of revenue
by business segment or products/service line is included.
C. Results of Operations
There were no revenues from sales up to the date of this filing. Since its
inception, July 15, 1999, the Company has formed the Company's organization to
pursue its business strategy.
a) Pre-Operating Expenses. Pre-Operating expenses were not necessary, as
all costs for the Company's legal organization, legal expenses, and financial
audits are included in the start of costs of $80,000, to be paid in full by
Richard Hung, individually.
b) Revenues. The Company is a development state enterprise as defined in
SFAS #7, and has yet to generate any revenues. The Company is devoting
substantially all of its present efforts to: (1) develop the contacts to attract
overseas manufacturers (2) developing plans of operations (network marketing,
customer service, e-commerce), and (3) obtaining sufficient capital to commence
full operations.
D. Liquidity and Capital Resources
As of the date of this filing, the Company has $4,173 on hand or in the
bank. Until such time as the Company sets forth and implements its business
plan, there will be no need for additional capital, since Richard Hung is
contributing his time and expenses at no cost during that time. Although the
complete strategic business plan has not yet been fully researched and put
together, management, at present, foresees the possibility of the need to raise
about $400,000 in additional capital to fully enter the revenue stage of its
plan.
The receipt of funds from Private Placement Offerings and loans obtained
through private sources by the Company are a possibility to fund the Company
until revenues can be achieved. Since inception, the Company has financed its
cash flow requirements through issuance of common stock and through
contributions from Richard Hung. As the Company expands its activities, it may
continue to experience net negative cash flows from operations, pending receipt
of sales revenues. Additionally the Company may be required to obtain
additional financing to fund operations through Common Stock offerings and bank
borrowings, to the extent available, or to obtain additional financing to the
extent necessary to augment its working capital.
Over the next twelve months, the Company intends to increase its revenues
by obtaining an overseas manufacturer/client and network marketing its products
to consumers in the United States. However, the Company will continue the
research and development of clients/products and in-depth plans. The Company
believes that existing capital and anticipated funds from operations will be
sufficient to sustain operations and planned expansion in the next three(3) to
six(6) months. However, the need for additional capital after that time may be
necessary. Consequently, the Company may seek additional financing in order to
sustain operations. There can be no assurance such additional funds will be
available or that, if available, such additional funds will be on terms
acceptable to the Company. In either case, the financing could have negative
impact on the financial conditions of the Company and its Shareholders.
The Company anticipates that it will incur operating losses in the next
twelve months. The Company's lack of operating history make predictions of
future operating results difficult to ascertain. The Company's prospects must
be considered in light of the risks, expenses and difficulties frequently
encountered by companies in their early stage of development, particularly
companies in new and rapidly evolving markets. Such risks for the Company
include, but are not limited to, an evolving and unpredictable business model
and the management of growth. To address these risks, the Company must, among
other things, obtain a customer base, implement and successfully execute its
business and marketing strategy, continue to develop its overseas contacts,
provide superior customer services and order fulfillment, respond to competitive
developments, and attract, retain and motivate qualified personnel. There can
be no assurance that the Company will be successful in addressing such risks,
and the failure to do so can have a material adverse effect on the Company's
business prospects, financial condition and results of operations.
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Initial financing is only to provide funds to prove the business be
necessary to obtain manufacturer/clients. The Company hopes to enter into
additional funding arrangements through strategic partnerships, merger, equity
offering or debt offering. Nothing has been secured as of this time.
E. Governmental Approval, Regulation and Environmental Compliance
Other than general business licensing requirements, management is unaware
of any governmental approval necessary for the Company's operations in the
marketing industry. In addition, management is unaware of existing or probably
governmental regulations on the marketing industry. Management anticipates no
material costs associated with compliance with either federal, state or local
environmental law.
Export laws for Hong Kong are currently favorable for the United States,
according to management. However, there can be no assurance that this condition
will continue and that new laws or embargos or other hazardous enactments could
adversely affect the Company's plan.
F. Risks Associated with Operations
The Company's long-term success is partially predicated on the strength
of obtaining a favorable alliance with an overseas manufacturer with profitable
and marketable products.
Its principal competition consists of entities within the marketing
industry which are well established. The Company's ability to compete against
these more established and more financially stable companies is premised upon
the Company's ability to provide effective network marketing and e-commerce.
Another uncertainty is the dependence on key personnel familiar with the
control, administration, development, and training of distributors. The loss of
Richard Hung, President, could have an adverse effect on its continued
operations.
Although research in the Company indicates that the Internet will continue
with little, if any regulation, and will continue to become a viable marketing
tool, there can be no assurances that the Internet will prove to be a profitable
outlay for the Company in its business plans.
While the Company's plan is being researched and developed thoroughly,
there is no assurance the plan will be accepted in or by the marketplace, nor,
that if it is accepted, that demand will be sufficient to make the Company
profitable. The Company cannot project with certainty the outcome of its
operations, and there are no assurances that the Company will operate profitably
in either the near or long term.
Local, national, and international economic conditions may have a
substantial adverse affect on the efforts of the Company. The Company cannot
guarantee against the possible eventuality of any potential adverse economic
conditions.
G. Competition
The Company competes with numerous other marketing companies. Many of
these competitors have substantially greater resources than eQuorumNet. The
Company has identified a niche in the market as it relates to network marketing,
selling a manufacturer's product on a one-to-one basis to a consumer.
H. Developing and Changing Market
The market conditions for importing products from overseas is continually
evolving and changing. The Company believes the current conditions will
continue favorably for this type of venture. There can be no assurance that the
Company's assessment of the situation is correct, nor that the products it
selects will be accepted by the consumer.
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I. Employees
As of the current date, the Company has no paid employees. The Company is
dependent on Richard Hung, President. Mr. Hung does not plan to spend full time
efforts on the research and development of products, plans, and clients during
the first six months of operation. Once these plans are formulated, the Company
will need to hire full time operational staff as its operations commence. Mr.
Hung is fully prepared to devote full time efforts at that time, but there can
be no assurance that the current full time employment of Mr. Hung would not
offer a better salary and package to Mr. Hung and Mr. Hung could abandon the
Company. The Company's future success also depends on its ability to attract
and retain other qualified personnel, for which competition is intense. The
loss of Mr. Hung or the Company's inability to attract and retain other
qualified employees could have material adverse affect on the Company.
J. Risks Associated with Year 2000
In less than six months, computer systems and/or software used by many
companies may need to be upgraded to accept four digit entries to distinguish
21st century dates from 20th century dates. As the Company has no software or
computers at this time, management does not anticipate any loss of or delay in
market acceptance of our products and services, increased service and warranty
costs, or payment by the Company of compensatory or other damages which could
have a material adverse effect on the Company's business, financial condition,
and results of operations.
K. Additional Information
The Company intends to provide an annual report to its security holders,
and to make quarterly reports available for inspection by its security holders.
The annual report will include audited financial statements.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Act") and, n accordance the Commission. Such
reports, proxy statements and other information may bed inspected at public
reference facilities of the Commission at Judiciary Plaza, 450 Fifth Street
N.W., Washington D.C. 20549; Northwest Atrium Center, 500 West Madison Street
Suite 1400, Chicago, Illinois 60661; 7 World Trade Center, New York, New York,
10048; and 5670 Wilshire Boulevard, Los Angeles, California 90036. Copies of
such material can be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street N.W., Washington, D.C. 20549,
at prescribed rates. For further information, the SEC maintains a website that
contains reports, proxy and information statements, and other information
regarding reporting companies at http://www.sec.gov.
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ITEM 3 DESCRIPTION OF PROPERTY
The Company currently pays no rent for its executive offices. Office space
is currently being used at the home of Richard Hung. This office arrangement is
considered adequate for current and short-term operations of the Company.
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ITEM 4 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of August 31, 1999,
with respect to the beneficial ownership of Common Stock by (i) each person who
to the knowledge of the Company, beneficially owned or had the right to acquire
more than 5% of the Outstanding Common Stock, (ii) each director of the Company
and (iii) all executive offices and directors of the Company as a group
Name of Beneficial Owner (1) Number Percent
of Shares of Class (2)
Richard Hung (3) 7,330,000 98%
3009 E Rose Lane
Phoenix, AZ 85016
All Directors & Officers as a Group 7,330,000
(1) As used in this table, "beneficial ownership" means the sole or shared
power to vote, or to direct the voting of, a security, or the sole or
shared investment power with respect to a security (i.e., the power to
dispose of, or to direct the disposition of, a security). In addition, for
purposes of this table, a person is deemed, as of any date, top have
"beneficial ownership" of any security that such person has the right to
acquire within 60 days after such date.
(2) Figures are rounded to the nearest percentage.
(3) As part of an advisory and servicing agreement, J. Thomas Howard, LTD
retains all voting rights of the 7,330,000 until the fee of $80,000.00 has
been paid in full. As of August 31, 1999, $45,000.00 is still due and
payable from Richard Hung, individually.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS
The following table sets forth the names, positions with the Company and
ages of the executive officers and directors of the Company. Directors will be
elected at the Company's annual meeting of shareholders and serve for one year
or until their successors are elected and qualify. Officers are elected by the
Board, and their terms of office are, except to the extent governed by
employment contract, at the discretion of the Board.
Name Age Title
Richard Hung 47 President, Chairman
Duties, Responsibilities and Experience
Richard Hung, President, Chairman
Richard Hung graduated from the University of Toronto, Toronto,
Ontario, Canada, with a B.A.Sc. (Industrial Engineering) in 1976. In 1978, he
received a Bachelor of Commerce, with a major in organization behavior from the
University of Windsor, Windsor, Ontario, Canada, and a M.B.A. with a major in
finance in 1979. He has more than 15 years of mass volume manufacturing
experience in the consumable electronics industry, and 6 years of multi-level
marketing operations management He speaks fluent English and Chinese
(Cantonese, Chiu Chow), plus elementary Mandarin.
Mr. Hung is currently Senior Vice President/Operations at Applied
International Holdings Ltd, a Hong Kong company operating in Hong Kong, China,
North America and Europe. Applied International Holdings Ltd has 1500 employees
and is involved in consumer electronics manufacturing, and multi-level network
marketing. As Senior Vice President/Operation since 1994, Mr. Hung reports
directly to the Chairman, manages all manufacturing related function, and is
involved in new product development, budget review, P/L. In 1993, Mr. Hung was
Vice President/Operations for one of the company's subsidiaries in the United
States that specialized in multi-level network marketing for consumable
products. In that capacity, he was responsible for the customer service center
with more than 300 staff members, managed order entry, customer service, MIS,
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purchasing, quality control and shipping departments. As General Manager of
another company subsidiary in 1992, Mr. Hung was responsible for a manufacturing
center with 3000 employees in China, managed all the manufacturing related
departments, and liased with the overseas subsidiaries on the logistics and
shipments.
From 1987 to 1992, Mr. Hung was employed by Golden Alpha Electronics
Ltd, an electronic company in the IBM compatible market and old fashioned wood
cassette radios. He managed a manufacturing plant in China, was involved in the
product development, toolings, pilot and mass production, worked with customers
in the development and the production of 80286 and 80385 IBM compatibles.
From 1985 to 1986, Mr. Hung was Operations Manager for Commodore
Electronic Ltd, a USA Personal Home Computer Manufacturer. He managed a 24 hour
continuous mass volume production, 6 days a week with total production employees
of 1000 in the Hong Kong factory. He headed Production Engineering, Plant
Engineering, Production and Process Control Engineering departments.
From 1984 to 1985, Mr. Hong was General Manager of Bondwell Computech
Ltd, a computer electronic company engaged in the home and small business
computer industry. He began as the General Manager of one of the international
marketing companies of the group and then as the General Manager of one of the
major manufacturing subsidiaries within the group. He managed the Hong Kong
plant manufacturing, Purchasing, Material Control, Quality Control, Shipping,
Accounting and Personnel, development, and international marketing.
Mr. Hung is not an officer or director of a publicly traded company at
this time.
Notable achievements during his career include:
* Trimmed down the monthly factory operating expenses from
HK$13mil to HK$9mil while maintaining the same sales value
* Cost reduction via renegotiations with UPS, Federal Express,
Visa, Tel-e-Check
* Improved ship-out time to within 36 hours of sales order
placements
* Project leader who organized network marketing conventions
with 12,000 attendants
* Improved quality of packing by applying industrial
engineering approaches
* Improved profit margins of marketing materials by
renegotiations with USA local vendors
* Maintained an operating profit before tax to an average of
HK$10mil per month for 10-consecutive months
* Launched production of 10 new products within a six month
period
* Shipment of more than 1 million units per month
ITEM 6. EXECUTIVE COMPENSATION
Richard Hung has not received, nor is he projected to receive, any
compensation for his services, including his capacities as Chairman and
President other than the issuance of the Company's Common Stock as set forth in
Item 4 above.
Should the Company become profitable and produce commensurate cash flows
from operations and/or through the sale of strategic investments, there may be
some level of compensation paid to him, however, this will be subject to
approval by the Company's Board of Directors. It is the responsibility of the
Company's Officers and its Board of Directors to determine the timing of any
remuneration for key personnel. Such determination and timing thereof will be
based upon such factors as positive cash flow to include equity sales, operating
cash flows, capital requirements, and a positive cash flow balance in excess of
$12,500 per month. At the time cash flow reaches this point, and appears to be
sustainable, the Officers and Board of Directors will again readdress the
compensation of its key personnel and set forth a more formal and complete plan
for remuneration in line with operations of the Company. At present, the
Company's management cannot accurately estimate the point when revenues and
operating cash flows will be sufficient enough to implement this compensation
plan, nor are they able to estimate the exact amount of compensation at this
time.
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There are no annuity, pension, or retirement benefits proposed to be paid
of Officers, Directors, or employees of the Company in the event of retirement
at normal date pursuant to any presently existing plan provided or contributed
to by the Company, or any of its subsidiaries, if any.
Key Officer Employment Agreements
No employment contracts have been negotiated or signed as yet. However,
the Company plans on having all key employees and officers sign a detailed
employment contract as appropriate.
Compensation of Directors
All directors will be reimbursed for expenses incurred in attending Board
or committee meetings.
Stock Option Plan and Non-Employee Directors' Plan
No stock option plan has been set forth, and no non-employee directors'
plan has been instituted. The Company may decided, at a later date, and
reserves the right to, initiate these plans as deemed necessary by the Board.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Business Consultants. The Company has relied on J. Thomas Howard, LTD as
key business consultants while in its development stage. J. Thomas Howard, LTD
has provided the assistance in preparing the Company to become a reporting
company. For this assistance, the Company has issued 90,000 shares of Common
Stock at $.02 per share to companies under control by J. Thomas Howard, LTD.
ITEM 8. DESCRIPTION OF SECURITIES
The Company's Articles of Incorporation authorizes the issuance of
50,000,000 shares of common stock, $.0001 par value per share, of which
7,500,000 shares were outstanding as of the date of this Prospectus. The
Company is not authorized to issue shares of preferred stock. Holders of shares
of common stock are entitled to one vote for each share on all maters to be
voted on by the stockholders. Holders of common stock have no cumulative voting
rights. Holders of shares of common stock are entitled to share ratably in
dividends, if any, as may be declared, from time to time by the Board of
Directors in its discretion, from funds legally available therefor. In the
event of a liquidation, dissolution or winding up of the Company, the holders of
shares of common stock are entitled to share pro rata all assets remaining after
payment in full of all liabilities. Holders of common stock have no preemptive
rights to purchase the Company's common stock. There are no conversion rights
or redemption or sinking fund provisions with respect to the common stock. All
of the outstanding shares of common stock are validly issued, fully paid and
non-assessable. The Company has not authorized any Preferred Stock, Convertible
Stock, or Warrants as of the date of this filing.
Transfer Agent
The transfer agent for the common stock is Florida Atlantic Stock Transfer,
7130 Nob Hill Road, Tamarac, Florida 33321.
<PAGE>
PART II
ITEM 1. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's shares of Common Stock are not registered with the U.S.
Securities and Exchange Commission under the Securities Act of 1933, as amended
(hereinafter referred to as the "Act"), and with the exception of certain shares
issued pursuant to Regulation D-504, are "restricted securities." A total of
170,000 shares are unrestricted, based on the Texas Securities Act, Section 5T
and Rule 109 3 (c), and the Missouri Uniform Securities Act, Section 30-54.215.
Since its inception July 15, 1999, the Company has not paid cash dividends
on its Common Stock. It is the present policy of the Company not to pay cash
dividends and to retain future earnings to support the Company's growth. Any
payments of cash dividends in the future will be dependent upon, among other
things, the amount of fund available therefor, the Company's earnings, financial
condition, capital requirements, and other factors which the Board of Directors
deem relevant.
As of August 31, 1999, there were 30 Common Shareholders of record.
ITEM 2. LEGAL PROCEEDINGS
The Company is not presently a party to any litigation, nor to the
knowledge of management is any litigation threatened against the Company, which
would materially affect the Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None.
ITEM 4. RECENT SAL.ES OF UNREGISTERED SECURITIES
Private Placements.
In July, 1999, The Company completed an exempt placement of 169,000 shares
of common stock, Pursuant to Rule 504, at a price of $0.02 per share, and 1,000
shares of common stock, Pursuant to Rule 504, at a price of $0.06 per share for
a total of $3,440.00. There are 29 shareholders, all of which hold less than 5%
of the shares.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles of Incorporation for the Company do contain provisions for
indemnification of the officers and directors; in addition, Section 78.751 of
the Nevada General Corporation Laws provides as follows:
78.751 Indemnification of officers, directors, employees and agents;
advance of expenses.
1. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, except 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 expenses, including attorney's fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if he acted in good
faith and in a manner which 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 action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea
of nolo contendere or its equivalent, does 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, and that, with respect to any criminal
action or proceeding, he had reasonable cause to believe that his
conduct was unlawful.
2. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit 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, of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses, including amounts paid in
settlement and attorneys' fees actually and reasonably incurred by him
in connection with the defense or settlement of the action or suit if
he acted in good faith and in a manner which he reasonably believed to
be in or not opposed to the best interests of the corporation.
Indemnification may not be made for any claim, issue or matter as to
which such a person has been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be liable
to the corporation or for amounts paid in settlement to the
corporation, unless and only to the extent that the court in which the
action or suit was brought or other court of competent jurisdiction
determines upon application that in view of all the circumstances of
the case, the person is fairly and reasonably entitled to indemnity
for such expenses as the court deems proper.
3. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense
of any action, suit or proceeding referred to in subsection 1 and 2,
or in defense of any claim, issue or matter therein, he must be
indemnified by the corporation against expenses, including attorneys'
fees, actually and reasonably incurred by him in connection with the
defense.
4. Any indemnification under subsections 1 and 2, unless ordered by a
court or advanced pursuant to subsection 5, must 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. The determination must be
made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum consisting
of directors who were not parties to act, suit or proceeding;
(c) If a majority vote of a quorum consisting of directors who were
not parties to the act, suit or proceeding so orders, by
independent legal counsel in a written opinion; or
(d) If a quorum consisting of directors who were not parties to the
act, suit or proceeding cannot be obtained, by independent legal
counsel in a written opinion; or
5. The articles of incorporation, the bylaws or an agreement made by the
corporation may provide that the expenses of officers and directors
incurred in defending a civil or criminal, suit or proceeding must be
paid by the corporation as they are incurred and in advance of the
final disposition of the action, suit or proceeding, upon receipt of
an undertaking by or on behalf of the director or officer to repay the
amount if it is ultimately determined by a court of competent
jurisdiction that he is not entitled to be indemnified by corporation.
The provisions of this subsection do not affect any rights to
advancement of expenses to which corporate personnel other than the
directors or officers may be entitled under any contract or otherwise
by law.
6. The indemnification and advancement of expenses authorized in or
ordered by a court pursuant to this section:
(a) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under
the articles of incorporation or any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, for either
an action in his official capacity or an action in another
capacity while holding his office, except that indemnification,
unless ordered by a court pursuant to subsection 2 or for the
advancement of expenses jade pursuant to subsection 5, may not be
made to or on behalf of any director or officer if a final
adjudication establishes that his act or omissions involved
intentional misconduct, fraud or a knowing violation of the law
and was material to the cause of action.
(b) Continues for a person who has ceased to be a director, officer,
administrators of such person.
<PAGE>
PART F/S
FINANCIAL STATEMENTS
The Audited Financial Statement of the Company, prepared by Williams & Webster,
PS, Certified Public Accountants, Seafirst Financial Center, W. 601 Riverside,
Suite 1940, Spokane, WA 99201 required by Regulation S-X commence on page F/S 1
hereof in response to this Item 13 of this Registration Statement on Form 10SB
and are incorporated herein by this reference.
EXHIBITS
Exhibit 2 Charter & bylaws
Exhibit 2 (1) Articles of Incorporation
Exhibit 2 (2) By-Laws
Exhibit 3 Instruments defining rights of security holders
(see Exhibit 2)
Exhibit 5 Voting Trust agreement
(not applicable)
Exhibit 6 Material contracts
Exhibit 6 (1) Advisory and Servicing Contract between Richard Hung
and J. Thomas Howard, LTD
Exhibit 6 (2) Operating Agreement of eQuorumNet, LC.
Exhibit 7 Material foreign patents
(not applicable)
Exhibit 12 Additional exhibits
(not applicable)
Exhibit 13 Canadian issuer's power of atty
(not applicable)
<PAGE>
SIGNATURE PAGE
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.
Date: October 6, 1999
eQuorumNet
By: /S/ Richard Hung, President
----------------------------------
Richard Hung, President
<PAGE>
EQUORUMNET
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
AUGUST 31, 1999
WILLIAMS & WEBSTER PS
CERTIFIED PUBLIC ACCOUNTANTS
SEAFIRST FINANCIAL CENTER
W 601 RIVERSIDE, SUITE 1940
SPOKANE, WA 99201
(509) 838-5111
<PAGE>
EQUORUMNET
(A DEVELOPMENT STAGE COMPANY)
TABLE OF CONTENTS
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS
Balance Sheet 2
Statement of Operations 3
Statement of Stockholders' Equity 4
Statement of Cash Flows 5
NOTES TO FINANCIAL STATEMENTS 6
<PAGE>
Board of Directors
eQuorumNet
3009 Rose Lane
Phoenix AZ 85016
Independent Auditor's Report
We have audited the accompanying balance sheet of eQuorumNet (a development
stage company) as of August 31, 1999 and the related statements of operations,
cash flows, and stockholder's equity for the period from July 15, 1999
(inception) through August 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of eQuorumNet as of August 31,
1999, and the results of its operations and its cash flows for the period from
July 15, 1999 (inception) to August 31, 1999, in conformity with generally
accepted accounting principles.
As discussed in Note 2, the Company has been in the development stage since its
inception and has no revenues. Realization of a major portion of the assets is
dependent upon the Company's ability to meet its future financing requirements,
and the success of future operations. These factors raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
regarding those matters are described in Note 2. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
/S/ Williams & Webster, P.S.
Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington
September 17, 1999
<PAGE>
<TABLE>
<CAPTION>
EQUORUMNET
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
August 31,
A S S E T S 1999
---------------
<S> <C>
CURRENT ASSETS
Cash $ 4,173
Receivable from shareholder 45,000
---------------
TOTAL CURRENT ASSETS 49,173
---------------
TOTAL ASSETS $ 49,173
===============
L I A B I L I T I E S & S T O C K H O L D E R S ' E Q U I T Y
TOTAL LIABILITIES $ -
---------------
COMMITMENTS AND CONTINGENCIES -
---------------
STOCKHOLDER'S EQUITY
Common stock, 50,000,000 shares authorized,
$.0001 par value; 7,500,000 shares
issued and outstanding 750
Additional paid-in capital 83,423
Accumulated deficit (35,000)
---------------
TOTAL STOCKHOLDERS' EQUITY 49,173
---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 49,173
===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
EQUORUMNET
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
Year
Ended
August 31,
1999
---------------
<S> <C>
R E V E N U E S $ -
---------------
E X P E N S E S
TOTAL OPERATING EXPENSES 35,000
---------------
NET LOSS $ (35,000)
===============
Net Loss per common share $ 0.01
===============
Weighted average number of
common stock shares outstanding 7,500,000
===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
EQUORUMNET
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
Common Stock
------------------- Total
Number Additional Accumulated Stockholders'
of Shares Amount Paid-in Capital Deficit Equity
--------- --------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Issuance of common stock in July 1999:
for cash at an average of $.0006 per share 7,500,000 $ 750 $ 3,423 $ - $ 4,173
Additional capital contributed by the president
of the company - - 80,000 - 80,000
Loss for period ending, August 31, 1999 - - - (35,000) (35,000)
--------- --------- --------------- -------------- ---------------
Balance at August 31, 1999 7,500,000 $ 750 $ 83,423 $ (35,000) $ 49,173
========= ========= =============== ============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
EQUORUMNET
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
Year
Ended
August 31,
1999
--------------
<S> <C>
Cash flows from operating activities:
Net loss $ (35,000)
--------------
Net cash used in operating activities (35,000)
--------------
Cash flows from investing activities: -
--------------
Cash flows from financing activities:
Cash contributed by President of the Company 35,000
Issuance of stock 4,173
--------------
Net cash provided by financing activities 39,173
--------------
Net increase in cash 4,173
Cash, beginning of period -
--------------
Cash, end of period $ 4,173
==============
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest and income taxes:
Interest $ -
==============
Income taxes $ -
==============
NON-CASH INVESTING AND FINANCING ACTIVITIES
Start-up costs paid by shareholder $ 80,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
EQUORUMNET
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 1999
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
eEQuorumNet, (hereinafter "the Company"), was incorporated in July 1999 under
the laws of the State of Nevada primarily for the purpose of network marketing
of electronics, nutritional and personal care products. At August 31, 1999, the
Company is operating from the residence of the Company's President, in Phoenix,
Arizona rent free. In August 1999 the Company formed eQuorumNet, LC, a limited
liability Company, to facilitate the Initial Public Offering (IPO) of the
Company's stock. This limited liability company will be dissolved upon
finalization of the Company's IPO.
The Company is in the development stage and as of August 31, 1999 had not
realized any significant revenues from its planned operations.
NOTE 2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of eQuorumNet is presented to
assist in understanding the Company's financial statements. The financial
statements and notes are representations of the Company's management which is
responsible for their integrity and objectivity. These accounting policies
conform to generally accepted accounting principles and have been consistently
applied in the preparation of the financial statements.
Development Stage Activities
- ------------------------------
The Company has been in the development stage since its formation on July 15,
1999. It is primarily engaged in network marketing.
Going Concern
- --------------
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern.
As shown in the accompanying financial statements, the Company has generated no
revenues since inception. The Company, being a developmental stage enterprise,
is currently putting technology in place which will, if successful, mitigate
these factors which raise substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded
assets, or the amounts and classification of liabilities that might be necessary
in the event the Company cannot continue in existence.
Management has established plans designed to increase the sales of the Company's
products. Management intends to seek new capital from new equity securities
issuances that will provide funds needed to increase liquidity, fund internal
growth and fully implement its business plan.
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Accounting Method
- ------------------
The Company's financial statements are prepared using the accrual method of
accounting.
Loss Per share
- ----------------
Loss per share was computed by dividing the net loss by the weighted average
number of shares outstanding during the period. The weighted average number of
shares was calculated by taking the number of shares outstanding and weighting
them by the amount of time that they were outstanding.
Income Taxes
- -------------
No provision for taxes or tax benefit has been reported in the financial
statements, as there is not a measurable means of assessing future profits or
losses.
Year 2000
- ----------
The Company, like other firms, could be adversely affected if the computer
systems used by it, its suppliers or customers do not properly process and
calculate date-related information and data from the period surrounding and
including January 1, 2000. This is commonly known as the "Year 2000" issue.
Additionally, this issue could impact non-computer systems and devices such as
production equipment.
At this time, because of the complexities involved in the issue, management
cannot provide absolute assurances that the Year 2000 issue will not have an
impact on the Company's operations.
The Company has not purchased any software or hardware. When the Company does
purchase software and hardware it will determine at that time if there could be
any adverse effects to the Company's operations regarding Year 2000 issues.
Management also believes that Year 2000 issues should not adversely affect the
ability of its clients and customers to conduct business with the Company. Any
costs associated with Year 2000 compliance will be expensed when incurred.
NOTE 3 - PROPERTY AND EQUIPMENT
At August 31, 1999 the Company does not own any property or equipment.
<PAGE>
NOTE 4 - ACCOUNTS RECEIVABLE FROM STOCKHOLDER
At August 31, 1999, the Company has a receivable from its president, the major
stockholder, in the amount of $45,000. This receivable arose from a contract
signed by the president with an advisory firm designated to assist in
establishing an initial public offering for the Company. The total amount of
advisory services of $80,000, of which $35,000 has been expensed to date, has
been recorded by the Company as additional paid in capital.
NOTE 5-COMMON STOCK
Upon incorporation, the Company authorized the issuance of 50,000,000 shares of
common stock at a par value of $0.0001 per share of which 7,500,000 shares are
outstanding. Holders of shares of common stock are entitled to one vote for
each share on all matters to be voted on by the stockholders, but have no
cumulative voting rights. Holders of shares of common stock are entitled to
share ratably in dividends, if any, as may be declared by the Board of Directors
in its discretion, from funds legally available therefor. The Company has not
authorized any preferred stock, convertible stock, warrants or options as of
August 31, 1999.
<PAGE>
FILED ARTICLES OF INCORPORATION
Jul 15 1999 OF
eQuorumNet
a Nevada Corporation
FIRST. The name of the corporation is:
eQuorumNet
SECOND. The resident agent for this corporation shall be:
SAGE INTERNATIONAL INC.
The address of said agent, and the principal or statutory address of this
corporation in the State of Nevada, shall be 1135 Terminal Way, Suite 209, Reno,
Nevada 89502, located in Washoe County, State of Nevada. This corporation may
maintain an office, or offices, in such other place within or without the State
of Nevada as may be from time to time designated by the Board of Directors, or
by the By-Laws of said corporation, and that this corporation may conduct all
corporation business of every kind and nature, including the holding of all
meetings of Directors and Stockholders, outside the State of Nevada as well as
within the State of Nevada.
THIRD. The objects for which this corporation is formed are as follows: to
engage in any lawful activity.
FOURTH. That the total number of voting common stock authorized that may be
issued by the corporation is FIFTY MILLION (50,000,000) shares of stock with
.0001 PAR VALUE, and no other class of stock shall be authorized. Said shares
may be issued by the corporation from time to time for such considerations as
may be fixed from time to time by the Board of Directors.
FIFTH. The governing board of this corporation shall be known as directors,
and the number of directors may from time to time be increased or decreased in
such manner as shall be provided by the bylaws of this corporation, providing
that the number of directors shall not be reduced to less than one (1). The name
and post office address of the first Board of Directors shall be one (1) in
number and listed as follows:
NAME POST OFFICE ADDRESS
---- ---------------------
CHERI S. HILL 1135 TERMINAL WAY, SUITE 209
RENO, NEVADA 89502
SIXTH. After the amount of the subscription price, the purchase price, of
the par value of the stock of any class or series is paid into the corporation,
owners or holders of shares of any stock in the corporation may never be
assessed to pay the debts of the corporation.
<PAGE>
SEVENTH. The name and post office address of the Incorporator signing the
Articles of Incorporation is as follows:
NAME POST OFFICE ADDRESS
---- ---------------------
CHERI S. HILL 1135 TERMINAL WAY, SUITE 209
RENO, NEVADA 89502
EIGHTH. The corporation is to have a perpetual existence.
NINTH. No director or officer of the corporation shall be personally liable
to the corporation or any of its stockholders for damages for breach of
fiduciary duty as a director or officer or for any act or omission of any such
director or officer; however, the foregoing provision shall not eliminate or
limit the liability of a director or officer for (a) acts or omissions which
involve intentional misconduct, fraud or a knowing violation of law; or (b) the
payment of dividends in violation of Section 78.300 of the Nevada Revised
Statutes. Any repeal or modification of this Article by the stockholders of this
corporation shall be prospective only and shall not adversely affect any
limitation on the personal liability of a director or officer of the corporation
for acts or omissions prior to such repeal or modification.
TENTH. No shareholder shall be entitled as a matter of right to subscribe
for or receive additional shares of any class of stock of the corporation,
whether now or hereafter authorized, or any bonds, debentures or securities
convertible into stock, but such additional shares of stock or other securities
convertible into stock may be issued or disposed of by the Board of Directors to
such persons and on such terms as in its discretion it shall deem advisable.
ELEVENTH. This corporation reserves the right to amend, alter, change or
repeal any provision contained in the Articles of Incorporation, in the manner
now or hereafter prescribed by statute, or by the Articles of Incorporation, and
all rights conferred upon Stockholders herein are granted subject to this
reservation.
I, THE UNDERSIGNED, being the Incorporator hereinbefore named for the purpose of
forming a corporation pursuant to the General Corporation Laws of the State of
Nevada, do make and file these Articles of Incorporation, hereby declaring and
certifying the facts herein stated are true, and accordingly have hereunto set
my hand July 14, 1999.
/S/ CHERI S. HILL
-----------------------------------
CHERI S. HILL, Incorporator
<PAGE>
JUL 15 1999
CERTIFICATE OF ACCEPTANCE OF
APPOINTMENT BY RESIDENT AGENT
SAGE INTERNATIONAL, INC., hereby accepts appointment as Resident Agent
of eQuorumNet in accordance with NRS 78.090.
SAGE INTERNATIONAL, INC.
By /S/ CHERI S. HILL
------------------------
CHERI S. HILL, Senior V.P. Date: July 14, 1999
<PAGE>
TABLE OF CONTENTS
BY-LAWS
ARTICLE ONE - OFFICES
1.1 Registered Office.
1.2 Other Offices.
ARTICLE TWO - MEETINGS OF STOCKHOLDERS
2.1 Place.
2.2 Annual Meetings.
2.3 Special Meetings.
2.4 Notices of Meetings.
2.5 Purpose of Meetings.
2.6 Quorum.
2.7 Voting.
2.8 Share Voting.
2.9 Proxy.
2.10 Written Consent in Lieu of Meeting.
ARTICLE THREE - DIRECTORS
3.1 Powers.
3.2 Number of Directors.
3.3 Vacancies.
ARTICLE FOUR - MEETLNGS OF THE BOARD OF DIRECTORS
4.1 Place.
4.2 First Meeting.
4.3 Regular Meetings.
4.4 Special Meetings.
4.5 Notice.
4.6 Waiver.
4.7 Quorum.
4.8 Adjournment.
ARTICLE FIVE - COMMITTEES OF DIRECTORS
5.1 Power to Designate.
5.2 Regular Minutes.
5.3 Written Consent.
ARTICLE SIX - COMPENSATION OF DIRECTORS
6.1 Compensation.
ARTICLE SEVEN - NOTICES
7.1 Notice.
7.2 Consent.
7.3 Waiver of Notice.
<PAGE>
ARTICLE EIGHT - OFFICERS
8.1 Appointment of Officers.
8.2 Time of Appointment.
8.3 Additional Officers.
8.4 Salaries.
8.5 Vacancies.
8.6 Chairman of the Board.
8.7 Vice-Chairman.
8.8 President.
8.9 Vice-President.
8.10 Secretary.
8.11 Assistant Secretaries.
8.12 Treasurer.
8.13 Surety.
8.14 Assistant Treasurer.
ARTICLE NINE - CERTIFICATES OF STOCK
9.1 Share Certificates.
9.2 Transfer Agents.
9.3 Lost or Stolen Certificates.
9.4 Share Transfers.
9.5 Voting Shareholder.
9.6 Shareholders Record.
ARTICLE TEN - GENERAL PROVISIONS
10.1 Dividends.
10.2 Reserves.
10.3 Checks.
10.4 Fiscal Year.
10.5 Corporate Seal.
ARTICLE ELEVEN - INDEMNIFICATION
ARTICLE TWELVE - AMENDMENTS
12.1 By Shareholder.
12.2 By Board of Directors.
<PAGE>
BY-LAWS OF
eQuorumNet
A NEVADA CORPORATION
ARTICLES ONE
------------
OFFICES
-------
Section 1 1 Registered Office - The registered office of this corporation
-----------------
shall be in the County of Washoe State of Nevada.
Section 1.2. Other Offices - The corporation may also have offices at such
-------------
other places both within and without the State of Nevada as the Board of
Directors may from time to time determine or the business of the corporation may
require.
ARTICLE TWO
-----------
MEETINGS OF STOCKHOLDERS
------------------------
Section 2.1 Place- All annual meetings of the stockholders shall be held
-----
at the registered office of the corporation or at such other place within or
without the State of Nevada as the directors shall determine. Special meetings
of the stockholders may be held at such time and place within or without the
State of Nevada as shall be stated in the notice of the meeting, or in a duly
executed waiver of notice thereof.
Section 2.2 Annual Meetings - Annual meetings of the stockholders,
----------------
commencing with the year 2000, shall be held on the 15th day of June each year
if not a legal holiday and, if a legal holiday, then on the next secular day
following, or at such other time as may be set by the Board of Directors from
time to time, at which the stockholders shall elect by vote a Board of Directors
and transact such other business as may properly be brought before the meeting.
Section 2.3 Special Meetings - Special meetings of the stockholders, for
-----------------
any purposes or purposes, unless otherwise prescribed by statute or by the
Articles of Incorporation, may be called by the President or the Secretary by
resolution of the Board of Directors or at the request in writing of
stockholders owning a majority in amount of the entire capital stock of the
corporation issued and outstanding and entitled to vote. Such request shall
state the purpose of the proposed meeting.
Section 2.4 Notice of Meetings - Notices of meetings shall be in writing
-------------------
and signed by the President or a Vice-President or the Secretary or an Assistant
Secretary or by such other person or persons as the directors shall designate.
Such notice shall state the purpose or purposes for which the meeting is called
and the time and the place, which may be within or without this State, where it
is to be held. A copy of such notice shall be either delivered personally to or
shall be mailed, postage prepaid to each stockholder of record entitled to vote
at such meeting not less than ten nor more than sixty days before such meeting.
If mailed, it shall be directed to a stockholder at his address as it appears
upon the records of the corporation and upon such mailing of any such notice,
the service thereof shall be complete and the time of the notice shall being to
run from the date upon which such notice is deposited in the mail for
<PAGE>
transmission to such stockholder. Personal delivery of any such notice to any
officer of a corporation or association or to any member of a partnership shall
constitute delivery of such notice to such corporation. association or
partnership. In the event of the transfer of stock after delivery of such notice
of and prior to the holding of the meeting it shall not be necessary to deliver
or mail notice of the meeting to the transferee.
Section 2.5 Purpose of Meetings - Business transacted at any special
---------------------
meeting of stockholders shall be limited to the purposes stated in the notice.
Section 2.6 Quorum - The holders of a majority of the stock issued and
------
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
Articles of Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall he present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified.
Section 2.7 Voting - When a quorum is present or represented at any
------
meeting, the vote of the holders of a majority of the stock having voting power
present in person or represented by proxy shall be sufficient to elect directors
or to decide any questions brought before such meeting, unless the question is
one upon which by express provision of the statutes or of the Articles of
Incorporation, a different vote is required in which case such express provision
shall govern and control the decision of such question.
Section 2.8 Share Voting - Each stockholder of record of the corporation
-------------
shall he entitled at each meeting of stockholders to one vote for each share of
stock standing in his name on the books of the corporation. Upon the demand of
any stockholder, the vote for directors and the vote upon any question before
the meeting shall be by ballot.
Section 2.9 Proxy - At any meeting of the stockholders any stockholder may
-----
be represented and vote by a proxy or proxies appointed by an instrument in
writing. In the event that any such instrument in writing shall designate two or
more persons to act as proxies, a majority of such persons present at the
meeting, or, if only one shall be present, then that one shall have and may
exercise all of the powers conferred by such written instrument upon all of the
persons so designated unless the instrument shall otherwise provide. No proxy or
power of attorney to vote shall be used to vote at a meeting of the stockholders
unless it shall have been filed with the secretary of the meeting when required
by the inspectors of election. All questions regarding the qualification of
voters, the validity of proxies and the acceptance or rejection of votes shall
be decided by the inspectors of election who shall be appointed by the Board of
Directors, or if not so appointed, then by the presiding officer of the meeting.
Section 2.10 Written Consent in Lieu of Meeting - Any action which may be
----------------------------------
taken by the vote of the stockholders at a meeting may be taken without a
meeting if authorized by the written consent of stockholders holding at least a
<PAGE>
majority of the voting power, unless the provisions of the statutes or of the
Articles of Incorporation require a greater proportion of voting power to
authorize such action in which case such greater proportion of written consents
shall be required.
ARTICLE THREE
-------------
DIRECTORS
---------
Section 3.1 Powers - The business of the corporation shall be managed by
------
its Board of Directors which may exercise all such powers of the corporation and
do all such lawful acts and things as are not by statute or by the Articles of
Incorporation or by these Bylaws directed or required to be exercised or done by
the stockholders.
Section 3.2 Number of Directors - The number of directors which shall
---------------------
constitute the whole board shall be one (1) The number of directors may from
time to time be increased or decreased to not less than one nor more than
fifteen by action of the Board of Directors. The directors shall be elected at
the annual meeting of the stockholders and except as provided in Section 2 of
this Article, each director elected shall hold office until his successor is
elected and qualified. Directors need not be stockholders.
Section 3.3 Vacancies - Vacancies in the Board of Directors including
---------
those caused by an increase in the number of directors, may be filled by a
majority of the remaining directors, though less than a quorum, or by a sole
remaining director, and each director so elected shall hold office until his
successor is elected at an annual or a special meeting of the stockholders. The
holders of a two-thirds of the outstanding shares of stock entitled to vote may
at any time peremptorily terminate the term of office of all or any of the
directors by vote at a meeting called for such purpose or by a written statement
filed with the secretary or, in his absence, with any other officer. Such
removal shall be effective immediately, even if successors are not elected
simultaneously and the vacancies on the Board of Directors resulting therefrom
shall be filled only by the stockholders.
A vacancy or vacancies in the Board of Directors shall be deemed to exist
in case of the death, resignation or removal of any directors, or if the
authorized number of directors be increased, or if the stockholders fail at any
annual or special meeting of stockholders at which any director or directors are
elected to elect the full authorized number of directors to be voted for at that
meeting.
The stockholders may elect a director or directors at any time to fill any
vacancy or vacancies not filled by the directors. If the Board of Directors
accepts the resignation of a director tendered to take effect at a future time,
the Board or the stockholders shall have power to elect a successor to take
office when the resignation is to become effective.
No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of his term of office.
<PAGE>
ARTICLE FOUR
------------
MEETINGS OF THE BOARD OF DIRECTORS
----------------------------------
Section 4.1 Place - Regular meetings of the Board of Directors shall be
-----
held at any place within or without the State which has been designated from
time to time by resolution of the Board or by written consent of all members of
the Board. In the absence of such designation regular meetings shall be held at
the registered office of the corporation. Special meetings of the Board may be
held either at a place so designated or at the registered office.
Section 4.2 First Meeting - The first meeting of each newly elected Board
-------------
of Directors shall be held immediately following the adjournment of the meeting
of stockholders and at the place thereof. No notice of such meeting shall be
necessary to the directors in order legally to constitute the meeting. provided
a quorum be present. In the event such meeting is not so held, the meeting may
be held at such time and place as shall be specified in a notice given as
hereinafter provided for special meetings of the Board of Directors.
Section 4.3 Regular Meetings - Regular meetings of the Board of Directors
----------------
may be held without call or notice at such time and at such place as shall from
time to time be fixed and determined by the Board of Directors.
Section 4.4 Special Meetings - Special Meetings of the Board of Directors
----------------
may be called by the Chairman or the President or by any Vice-President or by
any two directors.
Written notice of the time and place of special meetings shall be delivered
personally to each director, or sent to each director by mail or by other form
of written communication, charges prepaid, addressed to him at his address as it
is shown upon the records or is not readily ascertainable, at the place in which
the meetings of the directors are regularly held. In case such notice is mailed
or telegraphed, it shall be deposited in the United States mail or delivered to
the telegraph company at lease forty-eight (48) hours prior to the time of the
holding of the meeting. In case such notice is delivered as above provided, it
shall be so delivered at lease twenty-four (24) hours prior to the time of the
holding of the meeting. Such mailing, telegraphing or delivery as above provided
shall be due, legal and personal notice to such director.
Section 4.5 Notice - Notice of the time and place of holding an adjourned
------
meeting need not be given to the absent directors if the time and place be fixed
at the meeting adjourned.
Section 4.6 Waiver - The transactions of any meeting of the Board of
------
Directors however called and noticed or wherever held, shall be as valid as
though had at a meeting duly held after regular call and notice if a quorum be
present, and if, either before or after the meeting, each of the directors not
present signs a written waiver of notice, or a consent to holding such meeting,
or an approval of the minutes thereof. All such waivers, consents or approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting.
Section 4.7 Quorum - A majority of the authorized number of directors
------
shall be necessary to constitute a quorum for the transaction of business,
except to adjourn as hereinafter provided. Every act or decision done or made by
a majority of the directors present at a meeting duly held at which a quorum is
present shall be regarded as the act of the Board of Directors, unless a greater
<PAGE>
number be required by law or by the Articles of Incorporation. Any action of a
majority, although not at a regularly called meeting, and the record thereof, if
assented to in writing by all of the other members of the Board shall he as
valid and effective in all respects as if passed by the Board in regular
meeting.
Section 4.8 Adjournment - A quorum of the directors may adjourn any
-----------
directors meeting to meet again at a stated day and hour; provided, however,
that in the absence of a quorum, a majority of the directors present at any
directors meeting, either regular or special, may adjourn from time to time
until the time fixed for the next regular meeting of the Board.
ARTICLE FIVE
------------
COMMITTEES OF DIRECTORS
-----------------------
Section 5.1 Power to Designate - The Board of Directors may, by resolution
------------------
adopted by a majority of the whole Board, designate one or more committees of
the Board of Directors, each committee to consist of one or more of the
directors of the corporation which, to the extent provided in the resolution,
shall have and may exercise the power of the Board of Directors in the
management of the business and affairs of the corporation and may have power to
authorize the seal of the corporation to he affixed to all papers which may
require it. Such committee or committees shall have such name or names as may he
determined from time to time by the Board of Directors. The members of any such
committee present at any meeting and not disqualified from voting may, whether
or not they constitute a quorum, unanimously appoint another member of the Board
of Directors to act at the meeting in the place of any absent or disqualified
member. At meetings of such committees, a majority of the members or alternate
members shall constitute a quorum for the transaction of business, and the act
of a majority of the members or alternate members at any meeting at which there
is a quorum shall be the act of the committee.
Section 5.2 Regular Minutes - The committees shall keep regular minutes of
---------------
their proceedings and report the same to the Board of Directors.
Section 5.3 Written Consent - Any action required or permitted to he taken
---------------
at any meeting of the Board of Directors or of any committee thereof may be
taken without a meeting if a written consent thereto is signed by all members of
the Board of Directors or of such committee, as the case may he, and such
written consent is filed with the minutes of proceedings of the Board or
committee.
ARTICLE SIX
-----------
COMPENSATION OF DIRECTORS
-------------------------
Section 6.1 Compensation - The directors may he paid their expenses of
------------
attendance at each meeting of the Board of Directors and may be paid a fixed sum
for attendance at each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may he allowed like reimbursement and
compensation for attending committee meetings.
<PAGE>
ARTICLE SEVEN
-------------
NOTICES
-------
Section 7.1 Notice - Notices to directors and stockholders shall be in
------
writing and delivered personally or mailed to the directors or stockholders at
their addresses appearing on the books of the corporation. Notice by mail shall
be deemed to be given at the time when the same shall be mailed. Notice to
directors may also be given by telegram.
Section 7.2 Consent - Whenever all parties entitled to vote at any
-------
meeting, whether of directors or stockholders, consent, either by a writing on
the records of the meeting or filed with the secretary, or by presence at such
meeting and oral consent entered on the minutes, or by taking part in the
deliberations at such meeting without objection, the doings of such meetings
shall be as valid as if had at a meeting regularly called and noticed. and at
such meeting any business may be transacted which is not excepted from the
written consent or to the consideration of which no objection for want of notice
is made at the time, and if any meeting be irregular for want of notice or of
such consent, provided a quorum was present at such meeting, the proceedings of
said meeting may be ratified and approved and rendered likewise valid and the
irregularity or defect therein waived by a writing signed by all parties having
the right to vote at such meeting; and such consent or approval of stockholders
may be by proxy or attorney, but all such proxies and powers of attorney must be
in writing.
Section 7.3 Waiver of Notice - Whenever any notice whatever is required to
----------------
be given under the provisions of the statutes, of the Articles of Incorporation
or of these Bylaws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE EIGHT
-------------
OFFICERS
--------
Section 8.1 Appointment of Officers - The officers of the corporation
shall be chosen by the Board of Directors and shall be a President, a Secretary
and a Treasurer. Any person may hold two or more offices.
Section 8.2 Time of Appointment - The Board of Directors at its first
---------------------
meeting after each annual meeting of stockholders shall choose a Chairman of the
Board who shall be a director, and shall choose a President, a Secretary. and a
Treasurer, none of whom need be directors.
Section 8.3 Additional Officers - The Board of Directors may appoint a
--------------------
Vice-Chairman of the Board, Vice-Presidents and one or more Assistant
Secretaries and Assistant Treasurers and such other officers and agents as it
shall deem necessary who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the Board of Directors.
Section 8.4 Salaries - The salaries and compensation of all officers of
--------
the corporation shall be fixed by the Board of Directors.
Section 8.5 Vacancies - The officers of the corporation shall hold office
---------
at the pleasure of the Board of Directors. Any officer elected or appointed by
the Board of Directors may be removed at any time by the Board of Directors.
Any vacancy occurring in any office of the corporation by death, resignation,
removal or otherwise shall be filled by the Board of Directors.
<PAGE>
Section 8.6 Chairman of the Board - The Chairman of the Board shall
------------------------
preside at meetings of the stockholders and the Board of Directors, and shall
see that all orders and resolutions of the Board of Directors are carried into
effect.
Section 8.7 Vice-Chairman - The Vice-Chairman shall, in the absence or
-------------
disability of the Chairman of the Board. perform the duties and exercise the
powers of the Chairman of the Board and shall perform such other duties as the
Board of Directors may from time to time prescribe.
Section 8.8 President - The President shall be the chief executive officer
---------
of the corporation and shall have active management of the business of the
corporation. He shall execute on behalf of the corporation all instruments
requiring such execution except to the extent the signing and execution thereof
shall be expressly designated by the Board of Directors to some other officer or
agent of the corporation.
Section 8.9 Vice-President - The Vice-President shall act under the
--------------
direction of the President and in the absence or disability of the President
shall perform the duties and exercise the powers of the President. They shall
perform such other duties and have such other powers as the President or the
Board of Directors may from time to time prescribe. The Board of Directors may
designate one or more Executive Vice- Presidents or may otherwise specify the
order of seniority of the Vice-Presidents. The duties and powers of the
President shall descend to the Vice-Presidents in such specified order of
seniority.
Section 8.10 Secretary - The Secretary shall act under the direction of
---------
the President. Subject to the direction of the President he shall attend all
meetings of the Board of Directors and all meetings of the stockholders and
record the proceedings. He shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors. and shall
perform such other duties as may be prescribed by the President or the Board of
Directors.
Section 8.11 Assistant Secretaries - The Assistant Secretaries shall act
----------------------
under the direction of the President. In order of their seniority, unless
otherwise determined by the President or the Board of Directors, they shall, in
the absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary. They shall perform such other duties and have such
other powers as the President or the Board of Directors may from time to time
prescribe.
Section 8.12 Treasurer - The Treasurer shall act under the direction of
---------
the President. Subject to the direction of the President he shall have custody
of the corporate funds and securities and shall keep full and accurate accounts
of receipts and disbursements in books belonging to the corporation and shall
deposit all monies and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the corporation as may be ordered by
the President or the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
corporation.
<PAGE>
Section 8.13 Surety - If required by the Board of Directors, he shall give
------
the corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the corporation, in case of his
death, resignation, retirement or removal from office. of all books, papers,
vouchers. money and other property of whatever kind in his possession or under
his control belonging to the corporation.
Section 8.14 Assistant Treasurer - The Assistant Treasurer in the order of
-------------------
their seniority, unless otherwise determined by the President or the Board of
Directors, shall, in the absence or disability of the Treasurer, perform the
duties and exercise the powers of the Treasurer. They shall perform such other
duties and have such other powers as the President or the Board of Directors may
from time to time prescribe.
ARTICLE NINE
------------
CERTIFICATES OF STOCK
---------------------
Section 9.1 Share Certificates - Every stockholder shall be entitled to
-------------------
have a certificate signed by the President or a Vice-President and the Treasurer
or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the
corporation, certifying the number of shares owned by him in the corporation.
If the corporation shall be authorized to issue more than once class of stock or
more than one series of any class, the designations, preferences and relative,
participating, optional or other special rights of the various classes of stock
or series thereof and the qualifications, limitations or restrictions of such
rights, shall be set forth in full or summarized on the face or back of the
certificate which the corporation shall issue to represent such stock.
Section 9.2 Transfer Agents - If a certificate is signed (a) by a transfer
---------------
agent other than the corporation or its employees or (b) by a registrar other
than the corporation or its employees, the signatures of the officers of the
corporation may be facsimiles. In case any officer who has signed or whose
facsimile signature has been placed upon a certificate shall cease to be such
officer before such certificate is issued, such certificate may be issued with
the same effect as though the person had not ceased to be such officer. The seal
of the corporation, or a facsimile thereof, may, but need not be, affixed to
certificates of stock.
Section 9.3 Lost or Stolen Certificates - The Board of Directors may
------------------------------
direct a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the corporation alleged to
have been lost or destroyed upon the making of an affidavit of that fact by the
person claiming the certificate of stock to be lost or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost or destroyed.
Section 9.4 Share Transfers - Upon surrender to the corporation or the
----------------
transfer agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation, if it is satisfied that all
provisions of the laws and regulations applicable to the corporation regarding
transfer and ownership of shares have been complied with, to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
<PAGE>
Section 9.5 Voting Shareholder - The Board of Directors may fix in advance
------------------
a date not exceeding sixty (60) days nor less than ten (10) days preceding the
date of any meeting of stockholders. or the date for the payment of any
dividend, or the date for the allotment of rights, or the date when any change
or conversion or exchange of capital stock shall go into effect, or a date in
connection with obtaining the consent of stockholders for any purpose, as a
record date for the determination of the stockholders entitled to notice of and
to vote at any such meeting, and any adjournment thereof. or entitled to receive
payment of any such dividend. or to give such consent, and in such case, such
stockholders, and only such stockholders as shall be stockholder of record on
the date so fixed, shall be entitled to notice of and to vote at such meeting,
or any adjournment thereof, or to receive payment of such dividend, or to
receive such allotment of rights, or to exercise such rights. or to give such
consent, as the case may be, notwithstanding any transfer of any stock on the
books of the corporation after any such record date fixed as aforesaid.
Section 9.6 Shareholders Record - The corporation shall be entitled to
--------------------
recognize the person registered on its books as the owner of shares to be the
exclusive owner for all purposes including voting and dividends, and the
corporation shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as other wise provided by
the laws of Nevada.
ARTICLE TEN
-----------
GENERAL PROVISIONS
------------------
Section 10.1 Dividends - Dividends upon the capital stock of the
---------
corporation, subject to the provisions of the Articles of Incorporation, if any,
may be declared by the Board of Directors at any regular or special meeting,
pursuant to law. Dividends may be paid in cash, in property or in shares of the
capital stock, subject to the provisions of the Articles of Incorporation.
Section 10.2 Reserves - Before payment of any dividend, there may be set
--------
aside out of any funds of the corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends or for repairing or maintaining any property of the corporation or for
such other purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
Section 10.3 Checks - All checks or demands for money and notes of the
------
corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 10.4 Fiscal Year - The fiscal year of the corporation shall be
------------
fixed by resolution of the Board of Directors.
Section 10.5 Corporate Seal - The corporation may or may not have a
---------------
corporate seal, as may from time to time be determined by resolution of the
Board of Directors. If a corporate seal is adopted, it shall have inscribed
thereon the name of the Corporation and the words "Corporate Seals" and
"Nevada". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any manner reproduced.
<PAGE>
ARTICLE ELEVEN
--------------
INDEMNIFICATION
---------------
Every person who was or is a party or is threatened to be made a party to
or is involved in any action, suit or proceeding, whether civil. criminal,
administrative or investigative, by reason of the fact that he or a person of
whom he is the legal representative is or was a director or officer of the
corporation or is or was serving at the request of the corporation or for its
benefit as a director or officer of another corporation, or as its
representative in a partnership, joint venture, trust or other enterprise, shall
be indemnified and held harmless to the fullest extent legally permissible under
the General Corporation Law of the State of Nevada from time to time against all
expenses, liability and loss (including attorneys' fees, judgments, fines and
amounts paid or to be paid in settlement) reasonably incurred or suffered by him
in connection therewith. The expenses of officers and directors incurred in
defending a civil or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final disposition of the
action. Suit or proceeding upon receipt of an undertaking by or on behalf of the
director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he is not entitled to be indemnified by the
corporation. Such right of indemnification shall be a contract right which may
be enforced in any manner desired by such person. Such right of indemnification
shall not be exclusive of any other right which such directors, officers or
representatives may have or hereafter acquire and, without limiting the
generality of such statement, they shall be entitled to their respective rights
of indemnification under any bylaw, agreement, vote of stockholders, provision
of law or otherwise, as well as their rights under this Article.
The Board of Directors may cause the corporation to purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director or officer of another corporation, or as its representative in a
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred in any such capacity or arising out of
such status, whether or not the corporation would have the power to indemnify
such person.
The Board of Directors may from time to time adopt further Bylaws with
respect to indemnification and may amend these and such Bylaws to provide at all
times the fullest indemnification permitted by the General Corporation Law of
the State of Nevada.
<PAGE>
ARTICLE TWELVE
--------------
AMENDMENTS
----------
Section 12.1 By Shareholder - The Bylaws may be amended by a majority vote
--------------
of all the stock issued and outstanding and entitled to vote at any annual or
special meeting of the stockholders, provided notice of intention to amend shall
have been contained in the notice of the meeting.
Section 12.2 By Board of Directors - The Board of Directors by a majority
---------------------
vote of the whole Board at any meeting may amend these Bylaws, including Bylaws
adopted by the stockholders, but the stockholders may from time to time specify
particular provisions of the Bylaws which shall not be amended by the Board of
Directors.
APPROVED AND ADOPTED this 24th day of July, l999.
/S/ James Howard
------------------
James Howard
Secretary
<PAGE>
CERTIFICATE OF SECRETARY
------------------------
I hereby certify that I am the Secretary of eQuorumNet and
that the foregoing Bvlaws consisting of 12 pages, constitute the code of Bylaws
of eQuorumNet as duly adopted at a regular meeting of the Board of Directors of
the corporation held July 24, 1999.
IN WITNESS WHEREOF, I have hereunto subscribed my name this
24th day of July 1999.
/S/ James Howard
------------------
James Howard
Secretary
<PAGE>
ADVISORY AND SERVICING AGREEMENT
This Advisory and Servicing Agreement (this "Agreement") is entered into as
of July14, 1999, by and between Richard Hung, having his principal place of
business at 3009 Rose Lane Phoenix, AZ 85016 (the "Company") and J. Thomas
Howard, LTD, a Missouri LLC, having its principal place of business at 301 West
Armour Blvd. Suite 1000, Kansas City, MO 64111 ("JTHL")
W I T N E S S E T H:
A. The Company intends to have JTHL establish a publicly held corporation
(eQuorumNet, of the state of Nevada) to be traded on the OTC Bulletin
Board, more specifically described on Exhibit A attached hereto and
incorporated herein by this reference (the "Public Company"), which
Public Company will be in the business of network marketing and
e-commerce.
B. JTHL, through its management and staff, is experienced in the areas
starting up publicly held companies to be traded on the OTC Bulletin
Board, and possesses adequate personnel and contacts to advise and
perform certain other services for the Company with regard to the
organization of the Public Company.
C. The Company desires to avail itself of the experience, advice and
assistance of JTHL and to have JTHL undertake the duties and
responsibilities hereinafter set forth.
D. JTHL is willing to render such services for the compensation and in
accordance with the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. ENGAGEMENT: Company hereby engages JTHL and JTHL hereby agrees to
-- ----------
render advisory and other services for the Company, to the best of its
ability, including, without limitation, the following:
(a) assisting and advising the Company with regard to the corporate
structure of the Public Company, including, without limitation,
providing Articles of Incorporation, Bylaws, organizational
corporate minutes; necessary business licenses; obtaining
transfer agent, printing and distribution of stock certificates
(the "Corporate Services")
(b) assisting in obtaining appropriate audited financial statements
and tax returns (the "Financial Services"); and
(c) assisting the Company in preparing an Offering Memorandum under
Section 504 of the Securities Exchange Act, together with all
ancillary documentation, including, without limitation, Form D;
Form 10; 15c2-11 filing; SB-2 Stock Registration; obtaining a
trading symbol and CUSIP number for the Public Company,
preparation of necessary offering circulars; preparation of
necessary Blue Sky ("Securities Services").
Notwithstanding the foregoing, JTHL will not be required by the
Company to take any action or perform any services for which it must
be registered with or licensed by the Securities Exchange Commission,
any State Bar association or any state's securities commission.
2. TERM: JTHL agrees to have completed, or caused to be completed, all
-- ----
necessary activities in order that the Public Company will begin
trading on the OTC Bulletin Board within One Eighty Hundred (180) days
of the date of this contract. In the event that the Public Company
does not begin trading on the OTC Bulletin Board on or before that
date, JTHL will reimburse the Company for all amounts previously paid
by the Company to JTHL; provided, however, the Company will remain
responsible for the payment of all Third Party Professionals and
Expenses (as those terms are defined herein); and provided further
that the Company has timely provided JTHL with all necessary
information to perform the services required hereunder.
3. THIRD PARTY PROFESSIONALS: The parties hereto acknowledge and agree
-- --------------------------
that in order to provide the Corporate Services, the Financial
Services and the Securities Services, it will be necessary for JTHL to
engage third party professionals, including, without limitation,
attorneys, corporation services
<PAGE>
and accountants ("Third Party Professionals"). JTHL shall be
responsible for the payment of all Third Party Professionals and
Expenses.
4. COMPENSATION: As compensation for all services rendered by JTHL under
-- -------------
this Agreement, Company shall pay JTHL a total of Eighty Thousand
Dollars ($80,000) in the following sums, in immediately available
funds by bank wire transfer or cashier check:
(a) Twenty Thousand Dollars ($20,000) upon signing of this agreement:
(PAID) and
(b) Ten Thousand Dollars ($10,000) within Ten (10) days of the date
of this agreement: (PAID) and
(c) Five Thousand Dollars ($5,000) upon completion of 504 Reg. D
Offering Memorandum: and
(d) Ten Thousand Dollars ($10,000) upon submittal of Form 10
Registration and SB-2 stock Registration materials to legal
counsel for review and filing of the Form 10 Registration with
SEC and the filing of SB-2 Stock Registration with the SEC: and
(e) Ten Thousand Dollars ($10,000) upon completion and filing of the
15c2-11 with the NASD and:
(f) Twenty Five Thousand Dollars ($25,000) upon notice from NASD of
effective trading date that the stock will be publicly traded on
the OTC Bulletin Board.
5. EXPENSES: Except as otherwise expressly indicated herein, JTHL shall
-- --------
be reimbursed by the Company for all reasonable out-of-pocket expenses
incurred by JTHL in obtaining services or products from any third
party during the performance of its services hereunder ("Expenses").
The company's obligation to reimburse JTHL pursuant to this
subparagraph shall be subject to the presentation to Company by JTHL
of an itemized account of such expenditures, together with supporting
vouchers, in accordance with Company's policies as in effect from time
to time.
6. DEFAULT: In the event that the Company shall default in the payment of
- --------
any of the payments outlined in Paragraph 4 above, JTHL, may, but
shall not be obligated to, terminate this Agreement and retain all
amounts paid to JTHL prior to said date of termination. In addition,
the Company shall assign to JTHL, or its nominees, all of the
Company's right, title and interest in the Public Company as of the
date of termination.
7. INDEPENDENT CONTRACTOR: It is expressly agreed that JTHL is acting as
-- ----------------------
an independent contractor in performing its services hereunder.
Company shall not pay any contributions to Social Security,
unemployment insurance, federal or state withholding taxes, nor
provide any other contributions or benefits, which might be expected
in an employer-employee relationship.
8. ASSIGNMENT: This Agreement is a personal one, being entered into in
-- ----------
reliance upon and in consideration of the singular skill and
qualifications of JTHL. JTHL shall therefore not voluntarily or by
operation of law assign or otherwise transfer the obligations incurred
on its part pursuant to the terms of this Agreement without the prior
written consent of Company. Any attempted assignment or transfer by
JTHL of its obligation without such consent shall be wholly void.
9. MODIFICATION OF AGREEMENT: This Agreement may be modified by the
-- ---------------------------
parties hereto only by a written supplemental agreement executed by
both parties.
10. NOTICE: Any notice required or permitted to be given hereunder shall
--- ------
be sufficient if in writing, and if sent by registered or certified
mail, postage prepaid, addressed as follows:
If to Company:
Richard Hung
3009 Rose Lane
Phoenix, AZ 85016
If to JTHL: J. Thomas Howard, LTD
3014West Armour Blvd. Suite 1000
Kansas City, MO 64111
<PAGE>
With a copy to: McDowell, Rice, Smith & Gaar
605 West 47th Street, Suite 350
Kansas City, Missouri 64112
Attention: R. Pete Smith
Or to such other address as the parties hereto may specify, in writing, from
time to time.
11. WAIVER OF BREACH: This waiver by either party of any breach of any
--- -----------------
provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach.
12. ARBITRATION: Any and all disputes and controversies arising out of, or
--- -----------
in any manner relating to permanent performance of this Agreement
which cannot be settled by an agreement between the parties hereto,
shall be submitted to and settled by arbitration in the state of
Oklahoma in accordance with the rules of the American Arbitration
Association, and judgement upon any arbitration award may be entered
in any court having jurisdiction.
13. TITLES: The titles of the Sections herein are for convenience of
--- ------
reference only and are not to be considered in construing this
Agreement.
14. GOVERNING LAW: This Agreement has been executed and delivered in the
--- --------------
State of Missouri and its interpretation, validity and performance
shall be construed and enforced in accordance with the laws of such
State.
15. SEVERABILITY: If any provision of this Agreement or the application of
--- ------------
any provision to any person or circumstances is held invalid or
unenforceable, the remainder hereof and the application of the
remainder hereof to other persons or circumstances shall remain valid
and enforceable.
16. INDEMNIFICATION: The parties hereto hereby remise, release and forever
--- ---------------
discharge the other and their respective officers, directors, agents,
servants, employees, attorneys, subsidiaries, affiliates, successors,
assigns and any firm, organization, corporation, partnership, entity
or person liable by, through, under or on behalf of them, from any and
all liability, actions, contracts, indebtedness, obligations, claims,
causes of action, suits, damages, demands, costs and expenses
whatsoever, of every kind and nature, known or unknown, disclosed or
undisclosed, whether or not known or contemplated, whether in law or
in equity, arising out of any act, omission or transaction that has
happened, occurred or arisen prior to and including the date of this
Agreement. Further, the parties hereto hereby agree to indemnify and
hold harmless the other and their respective agents, employees,
directors and officers from and against any and all liability, loss,
cost, damage, claim, counterclaims, actions and causes of action and
all costs and expenses related thereto (including but not limited to
attorneys' fees and court costs) that the other and/or its agents,
employees, directors and officers have now incurred or may hereafter
suffer or incur arising out of or in any way related to the execution
of this Agreement and the performance by it of its functions under
this Agreement.
17. BINDING AGREEMENT: This Agreement shall be binding upon and shall
--- ------------------
inure to the benefit of the respective legal representatives,
successors and assigns of the parties hereto.
18. ENTIRE AGREEMENT: This Agreement contains the entire contract of the
--- ----------------
parties with respect to the subject matter hereof and supersedes all
agreements and understandings between the parties concerning the
subject matter hereof.
19. TRANSMISSION: The transmission of this Agreement by fax, wire,
--- ------------
telexes, or mail shall be deemed a legal and binding transmission.
<PAGE>
The parties hereto have executed this Agreement as of the date first above
written.
Richard Hung
By: /S/ Richard Hung
----------------------
Richard Hung
J. Thomas Howard, LTD.
By: /S/ James T. Howard
------------------------
James T. Howard
<PAGE>
EXHIBIT A
eQuorumNet, of Nevada (Public Corporation) will be structured as follows:
50,000,000 shares authorized
8,500,000 shares issued and outstanding
Breakdown as follows:
*7,330,000 shares to Richard Hung
80,000 shares to be divided amongst 30-100 shareholders
90,000 shares to JTHL or its assignees; 24 month non-dilutable .0075%
position to be maintained
If any additional shares are to be issued for any reason whatsoever during the
first 24 months beginning upon the date of this Service Agreement, JTHL will be
issued additional shares to constitute a .0075% ownership of the Company.
SERVICES RENDERED:
A. Nevada corporation, with presence of business in Nevada
B. Nevada and city of Reno business licenses
C. Good standing certificate from the state of Nevada
D. Articles of Incorporation, by-laws and minutes
E. Audited shareholder list
F. 98% controlling block of stock
G. Federal and state tax returns, if required
H. Form 10 registration prepared and filed with the SEC
I. SB-2 stock registration
J. Form D filed with the SEC
K. 15c 2-1 filed by corporate Broker/Dealer with the NASD
L. 504 Reg. D Offering Memorandum, with legal opinion from legal
counsel attesting to the condition and validity of the company
and offering
M. Offering circular
N. Transfer Agent selected, and shares printed
O. Legal counsel opinion letter to Transfer Agent covering states
that the company can issue stock in
P. CUSIP #
Q. Trading symbol
R. Audited financial statements
S. Financial statements filed with Moody's or Standard & Poor
(secondary market blue sky in over 35 states)
T. Primary market Blue Sky filing in 7 states
U. All legal work to accomplish this goal
V. Consulting services provided for 60 days at no additional charge
to assist in the understanding of the public arena
*The 98% controlling (7,330.000 Shares) block of stock issued to Richard Hung
will be legended and held in trust until J Thomas Howard LTD is paid in full the
amount of this agreement.
J. Thomas Howard LTD
/S/ James T. Howard
Richard Hung
/S/ Richard Hung
<PAGE>
OPERATING AGREEMENT
OF
EQUORUMNET, L.C.
A MISSOURI LIMITED LIABILITY COMPANY
TABLE OF CONTENTS
ARTICLE 1 - FORMATION AND CONTINUANCE 1
Section 1.1 Intent 1
Section 1.2 Articles of Organization 1
Section 1.3 Name and Principal Office 1
Section 1.4 Term 1
Section 1.5 Purpose of LLC 1
Section 1.6 Registered Office and Agent 1
Section 1.7 Defined Terms 1
ARTICLE 2- CAPITAL 4
Section 2.1 Capital Contributions/Admission of Members 4
Section 2.2 Use of Capital 4
Section 2.3 Return of Capital 4
Section 2.4 Capital Accounts 4
Section 2.5 Additional Capital 4
2.5.1 Deferred Capital Contributions 4
2.5.2 New Capital 4
Section 2.6 Failure to Contribute 4
2.6.1 Material Breach 4
2.6.2 Interest on Defaulted Amounts 5
2.6.3 Purchase and Sale of Interest 5
2.6.4 Foreclosure of Security Interest 5
2.6.5 Suspension of Defaulting Members' Rights 6
2.6.6 Redemption Rights of Defaulting Members 6
Section 2.7 Limited Liability of Members 6
Section 2.8 Loans 6
2.8.1 Member's Loans 6
ARTICLE 3- MANAGEMENT OF LLC & AGREEMENTS AMONG MEMBERS 7
Section 3.1 Authority of the Managing Member 7
Section 3.2 Liability of Members; Indemnification 8
Section 3.3 Compensation of Managing Member, Members
or Affiliates 8
3.3.1 Compensation/Reimbursement of Expenses 8
Section 3.4 Title to Property 9
Section 3.5 Special Power of Attorney 9
<PAGE>
ARTICLE 4- DISTRIBUTIONS AND ALLOCATIONS 10
Section 4.1 Distributions and Allocations Generally 10
Section 4.2 Distributable Net Proceeds 10
Section 4.3 Net Losses, Income and Gain 10
Section 4.4 LLC Reserves 10
ARTICLE 5- BOOKS AND RECORDS; ACCOUNTING; TAX ELECTIONS 10
Section 5.1 Books and Records 10
Section 5.2 Annual Reports 11
Section 5.3 Tax Information 11
Section 5.4 Bank Accounts 11
Section 5.5 LLC Elections 11
Section 5.6 Fiscal Year 11
ARTICLE 6- MEMBERS' RELATIONSHIPS 11
Section 6.1 Transfer of a Member's Interest--Approval 11
Section 6.2 Assignment of Member's Interest as Security for
Loan 11
Section 6.3 Right of First Refusal 12
Section 6.4 Additional Restrictions 12
Section 6.5 Legend Conditions 12
Section 6.6 Substituted Members 12
Section 6.7 Withdrawal of a Member 13
Section 6.8 Terminating Events 13
Section 6.9 Repurchase of Ownership Interests 13
Section 6.10 Rights of Members to Receive Property Other
Than Cash 13
Section 6.11 Encumbrance of a Member's Interest 13
Section 6.12 Dissolution or Partition 13
Section 6.13 Right to Purchase Other Property 13
Section 6.14 Meetings of, or Actions by, the Members 14
Section 6.15 Election and Removal of Managing Member 14
6.15.1 Election of Managing Member 14
6.15.2 Removal of Managing Member 14
6.15.3 Status of Managing Member 14
6.15.4 Resignation of Managing Member 14
ARTICLE 7- DISSOLUTION AND WINDING UP 15
Section 7.1 Dissolving Events 15
Section 7.2 Liquidation and Final Distribution of Proceeds 15
Section 7.3 Time of Liquidation 15
Section 7.4 Liquidation Statement 16
ARTICLE 8- MISCELLANEOUS 16
Section 8.1 Voting and Approval 16
Section 8.2 Amendment of the Agreement 16
Section 8.3 Notices 16
Section 8.4 Binding Arbitration 16
Section 8.5 Tax Controversies 16
<PAGE>
Section 8.6 Captions and Pronouns 17
Section 8.7 Binding Effect 17
Section 8.8 Entire Agreement 17
Section 8.9 Choice of Law 17
Section 8.10 Severability 17
Section 8.11 Rebates, Kickbacks and Reciprocal Arrangements 17
Section 8.12 Counterparts and Execution 17
<PAGE>
OPERATING AGREEMENT
OF
EQUORUMNET, L.C.
A MISSOURI LIMITED LIABILITY COMPANY
This OPERATING AGREEMENT (the "Agreement") is made and entered into as of
the 3rd day of August, 1999, by and among the members (the "Members") of
eQuorumNet, L.C., a Missouri limited liability company.
ARTICLE 1- FORMATION AND CONTINUANCE
Section 1 1 Intent. The Members hereto desire to form a limited liability
------
company (the "LLC") pursuant to the terms and conditions set forth herein and in
the Missouri Limited Liability Company Act, R.S. Mo. 347 010 et seq., as
-- ----
amended (the "Actt"). In the event of a conflict between the Act and this
Agreement, this Agreement shall control.
Section 1.2 Articles of Organization. The Members shall file an original
-------------------------
and one copy of the Articles of Organization (sometimes referred to herein as
the "Articles") in the office of the Secretary of State of the State of
Missouri. There shall promptly be filed an amendment to the Articles eliminating
any inconsistency between the Articles and Section 1.5 hereof or any other
provision hereof.
Section 1.3 Name and Principal Office. The name of the LLC is eQuorumNet,
-------------------------
L.C. The LLC's principal office is 301 W. Armour, Suite 1000, Kansas City,
Missouri 64111, and thereafter at such other place or places as the Members may
from time to time designate. Such name shall be used at all times in connection
with the business and affairs of the LLC. The LLC and its trade name shall be
registered with the appropriate authorities in any jurisdiction in which the LLC
conducts its business.
Section 1.4 Term. The LLC shall commence as of the date of filing of the
----
original Articles and shall continue until perpetually, unless sooner wound up,
dissolved and terminated under the terms, conditions and agreements set forth
herein.
Section 1.5 Purpose of LLC. The LLC is formed for the purpose of
----------------
acquiring, owning and administering the LLC Property and operating the Business
of the LLC as described below. In addition, the LLC may engage in all other
general business activities related to or incidental to the above-stated
purposes.
Section 1.6 Registered Office and Agent. The LLC's registered office shall
---------------------------
be 301 W. Armour Blvd., Suite 1000, Kansas City, Missouri 64111, and the LLC's
registered agent at this address shall be Verna Howard.
Section 1.7 Defined Terms. The following terms used in this Agreement
--------------
shall have the following meanings (unless otherwise provided herein):
"Agreement" shall mean this Operating Agreement of eQuorumNet, L.C., as
amended from time to time.
<PAGE>
"Affiliate" shall mean any person or entity which: (i) directly or
indirectly controls, is controlled by, or is under common control with a Member;
or (ii) owns or controls 10% or more of the outstanding voting securities of a
Member; or (iii) is an officer, director, employee, partner or trustee of any
entity described above; or (iv) is an entity for which a Member is an officer,
director, partner or trustee.
"Appraised Value" shall mean a M.A.J. appraisal of the LLC Property which
is approved by a majority of the Ownership Interests exclusive of those
Ownership Interests being sold, redeemed or otherwise transferred.
"Articles" shall mean the Articles of Organization of the LLC, as amended
from time to time.
"Bank" shall mean the bank designated by the Members as the LLC's primary
bank.
"Bankruptcy" shall mean the initiation of proceedings under Title XI of the
United States Code for any Member, whether voluntarily or involuntarily; or, the
appointment of a trustee, administrator, receiver or other entity for the
purpose of administrating assets of any Member for the benefit of creditors; or,
any other transfer of assets by a Member, whether voluntarily or involuntarily,
for the benefit of creditors.
"Bankruptcy Code" shall mean Title XI of the United States Code as now or
hereafter amended.
"Business" shall mean the business of the LLC which shall include all
lawful acts in the State of Missouri.
"Capital Accounts" shall mean the accounts maintained with respect to
Members as described in Section 2.4.
"Capital Contributions" shall mean the contributions in cash and property
of the Members to the capital of the LLC as described on Exhibit "B".
"Code" shall mean the Internal Revenue Code of 1986, as now or hereafter
amended.
"Deferred Capital Contribution" shall mean the future Capital Contribution
obligation, if any, of each Member which may be called by the Members as
provided in Section 2.5.
"Distributable Net Proceeds" shall mean, as of any date, all cash funds of
the LLC from whatever source derived on hand at such date, after:
(a) payment of all operating expenses of the LLC payable at such time;
(b) payment of all costs of purchase, sale, refinance, condemnation or
other disposition, including any fees paid to a Member or an Affiliate of a
Member;
(c) payment of all then-due unsecured indebtedness of the LLC; and
(d) provision for LLC Reserves.
<PAGE>
"LLC" shall mean eQuorumNet, L.C., a Missouri limited liability company.
"LLC Property" shall mean all real and personal property owned by the LLC,
including the Property.
"LLC Reserves" shall mean the cash reserves established by the Members for
any expenses related to the LLC Property, and for the payment of any future
contingencies and anticipated obligations considering, among other things,
projected cash requirements for the LLC, the amount and source of cash on hand,
and the projected receipt of cash by the LLC from operations.
"Managing Member" shall initially mean James Howard and any successors,
replacements or other parties elected or appointed as provided herein who must
be a member of the LLC. The Managing Member's authority shall be limited to
routine day-to-day business as described in Section 3. There shall be no
requirement that the LLC have a Managing Member.
"Members" shall mean those parties who have been admitted as members in the
LLC.
"Members' Loan" shall mean any loan the Members make to the LLC at any time
during the LLC's existence as provided in Section 2.8.1.
"Ownership Interest" shall mean the capital and profits ownership of a
Member in the LLC, as generally described in Section 4.2, and shall include all
rights to participate in the management of the LLC granted to Members. For
purposes of voting, the Distributable Net Proceeds allocation percentages set
forth in Section 4.2 shall be deemed to be the "Ownership Interest Percentages".
"Ownership Interest Value" shall mean the value of an Ownership Interest
equal to the product of the Ownership Interest and the Appraised Value of the
LLC Property, reduced by all Property debt and all obligations of the LLC.
"Prime Rate" shall mean the prime rate of interest announced or published
from time to time by the Bank.
"Pro Rata" shall mean the ratio that each Member's Ownership Interest bears
to the Ownership Interests of all the Members.
"Property" shall mean the real and personal property described on Exhibit
"A" attached hereto and made a part hereof.
"Regulations" shall mean the Treasury Department Regulations issued
pursuant to the Code.
"Sale Notice" shall mean a written notice delivered in connection with a
sale of a Member's Ownership Interest setting forth (a) the name(s) of the
person(s) to whom a sale is proposed to be made, ~) the purchase price to be
paid for the Ownership Interest, including a complete description of any and all
non- cash consideration to be derived, (c) the terms and conditions of the sale,
(d) the date of the closing of the sale and (e) all other pertinent details of
the transaction.
"Service" shall mean the Internal Revenue Service.
<PAGE>
ARTICLE 2- CAPITAL
Section 2.1 Capital Contributions/Admission of Members. The Members who
--------------------------------------------
have made the required Capital Contribution set forth on Exhibit "B" shall be
admitted. Members shall also agree to contribute the Deferred Capital
Contributions, if any, specified in the Agreement when called by the Members.
Each Member shall be severally liable for his own Capital Contribution and
Deferred Capital Contribution and not jointly and severally liable for the
Capital Contribution and Deferred Capital Contribution of any other Member.
Section 2.2 Use of Capital. All capital contributed to the LLC shall only
--------------
be employed in the business and for the benefit and advantage of the LLC.
Section 2.3 Return of Capital. Except as expressly provided herein, no
-------------------
Member shall be entitled to the return of his Capital Contributions. No Capital
Account of any Member shall earn interest.
Section 2.4 Capital Accounts. The LLC shall maintain a Capital Account for
----------------
each Member. The Capital Account shall be increased by Capital Contributions and
income and shall be decreased by distributions and losses. The Capital Account
shall be generally maintained in conformity with Code 704 and Regulations
1.704-1 (b)(2)(iv). All decisions regarding the Capital Accounts shall be made
by Members holding a majority of the Ownership Interests.
Section 2.5 Additional Capital.
-------------------
2.5.1 Deferred Capital Contributions. Additional Capital
--------------------------------
Contributions as set forth on Exhibit "B" may be required from the Members from
time to time as requested by Members holding a majority of the Ownership
Interests thirty (30) days after written notice.
2.5.2 New Capital. If at any time during the LLC's term there are
-----------
insufficient LLC Reserves (after consideration of Deferred Capital
Contributions) to pay the debt service, operating expenses, or other expenses or
costs necessary to operate the Property, the Members shall have the authority to
raise additional capital by selling additional Ownership Interests, first to
Members and, if necessary, to non-Members. The Members must first offer any new
Ownership Interests pro rata to the existing Members, excluding any Members in
default under Section 2.6, upon such terms and conditions, and for such prices,
as are proposed for sale to third parties. If the Members do not purchase all
the new Ownership Interests within twenty (20) days of notice, then the
remaining new Ownership Interests may be offered to non- Members on the same
terms and conditions. Such new Members shall be admitted to the LLC upon
purchase of the new interests and completion of all required documentation.
Section 2.6 Failure to Contribute.
-----------------------
2.6.1 Material Breach. The Members agree that any failure to make
---------------
a required Deferred Capital Contribution is critical to the success of the LLC
and will jeopardize the investment of all Members. The failure of any Member to
make any Deferred Capital Contribution when due (a "Payment Default") shall
constitute a material breach of this Agreement and shall forthwith, upon such
Payment Default, give rise to the remedies set forth in this Section (any one or
more of which may be pursued by the Members by vote of a majority of the
remaining Ownership Interests) in addition to all other remedies which
<PAGE>
the LLC and all non-defaulting Members may otherwise have under Missouri law
excluding consequential damages and damages for lost profits.
2.6.2 Interest on Defaulted Amounts. If any Member is in Payment
-------------------------------
Default and does not cure such default within fifteen (15) days after notice of
such default, he shall pay an interest charge at an annual rate equal to two
percent (2.00%) over the Prime Rate, at the time such default occurs, or the
then legal maximum, whichever is lower. Such interest rate shall be adjusted
every six months during the period of default.
2.6.3 Purchase and Sale of Interest. If any Member is in Payment
------------------------------
Default, and the Member does not cure the default within fifteen (15) days by
payment of the full amount of the Deferred Capital Contribution which is due,
plus accrued interest on the defaulted amount, the Managing Member may send a
notice to all non-defaulting Members stating that those non-defaulting Members
wishing to purchase said interest shall have the pro rata right to do so by
giving notice of such intent to the Managing Member within fifteen (15) days of
their receipt of the notice. Any Member failing to give such notice of intent
within such fifteen (15) day period shall be deemed to have waived such right
and any portion of the defaulting Member's interest not so acquired by
non-defaulting Members shall be offered to the remaining non-defaulting Members
by notice from the Managing Member and any such non-defaulting Member shall have
a pro rata right to acquire the interest offered by giving the Managing Member
notice within fifteen (15) days of their receipt of the notice. This procedure
will be followed until all of the defaulting Member's interest has been acquired
by the non-defaulting Members if they so elect. (Any Member acquiring such
interest is sometimes hereinafter referred to as a "Replacement Member".)
The total purchase price for any purchase under this Section shall be
eighty percent (80%) of the defaulting Member's Ownership Interest Value, less
all interest accrued on the defaulted amount to the date of such purchase, such
twenty percent (20%) discount representing the risk, hardship and administrative
costs of the default to the LLC. The purchase price shall be payable in cash.
Notwithstanding the foregoing, if Replacement Member or Members purchase(s) the
defaulting Member's interest, the Replacement Member(s) shall have all rights
associated with the entire interest. Any purchaser acquiring a defaulting
Member's interest pursuant to this Section shall be obligated to contribute any
remaining additional contributions required of such Member under this Agreement.
2.6.4 Foreclosure of Security Interest. To secure the obligations
--------------------------------
of the Members to make Deferred Capital Contributions, each Member expressly
grants the LLC a personal property security lien upon the interest of each
Member. If a Member is in Payment Default for fifteen (15) days and does not
cure such Payment Default by payment of the full amount of the Capital
Contribution which is due plus accrued interest before the end of the fifteen
(15) day period, the LLC shall have the right on ten (10) days written notice to
foreclose the lien and have the interest of the defaulting Member sold at a
public or private sale, at the election of the LLC, the foreclosure and sale to
be conducted in accordance with the applicable provisions of the Uniform
Commercial Code of the State of Missouri pertaining to the foreclosure of a
personal property security lien; provided, however, that the remedy provided by
this Section 2.6.4 shall be pursued only after the remedy provided by Section
2.6.3 has been exhausted without Replacement Members purchasing one-hundred
percent (100%) of the defaulting Member's interest.
Each Member acknowledges that it will not be feasible to have a
public sale for various reasons, including required compliance with provisions
concerning registration, qualification or
<PAGE>
compliance with, the Securities Act of 1933, any successor statute thereto, or
the rules and regulations of the Securities and Exchange Commission promulgated
thereunder, or in any other applicable securities law or any rule or regulation
promulgated thereunder. The Members, therefore, consent and agree that the
Ownership Interest(s) may be sold in one or more private sales to a restricted
group of purchasers who may be obliged to agree, among other things, to acquire
such Ownership Interest(s) for their own account for investment and not with the
view to the distribution or resale thereof, and each Member acknowledges that
any such private sale may be at prices and on other terms less favorable to the
defaulting Member than if such Ownership Interest were sold at a public sale.
Each Member agrees that any private sales made under the foregoing circumstances
shall be deemed to have been made in a commercially reasonable manner under the
Uniform Commercial Code as enforced in the State of Missouri or any other
jurisdiction.
2.6.5 Suspension of Defaulting Members' Rights. All rights and
-------------------------------------------
benefits of a defaulting Member attributable to the defaulting Member's
Ownership Interest, including the right to receive distributions of LLC Reserves
and Distributable Net Proceeds, shall be suspended during the period of default
and the Managing Member shall have the right to exercise all voting rights
attributable to the defaulting Member during the period of default; provided,
however, that if any distribution of funds is made during the period of default,
then the defaulted amounts plus accrued interest will be deducted from any
distribution otherwise payable to such defaulting Member; provided, further,
that if the amount of the defaulting Member's allocable share of such
distribution does not exceed such Member's defaulted amount plus accrued
interest, then the default shall not be cured, the Member shall continue to be
in default to the extent that his defaulted amount plus accrued interest exceeds
his allocable share of the distributions to the Members. If the defaulting
Member is also a Managing Member, then such Member shall be deemed to have
resigned as of the date any applicable cure period lapses and shall be replaced
as provided in Section 3.2.
2.6.6 Redemption Rights of Defaulting Members. A Member whose
------------------------------------------
Ownership Interest(s) will be sold at foreclosure sale under this Section 2.6
shall have the right only until the transfer of such Ownership Interest(s) to
redeem the Ownership Interest(s) by payment, in cash, to the LLC of (a) all
costs and expenses, including legal fees associated with any enforcement
actions; ~) payment of all Deferred Capital Contributions associated with the
Ownership Interest(s) (whether called or not); (c) interest on all amounts owed
under (a) and (b) at the lesser of eighteen percent (18%) per annum or the
maximum rate allowed by law from the date such costs and expenses were incurred
in the case of (a) and from the date of delinquency in the case of (b).
Section 2.7 Limited Liability of Members. Notwithstanding anything to the
----------------------------
contrary herein contained, however, the liability of a Member for the operating
or other losses of the LLC shall in no event exceed, in the aggregate, the
amount of his Capital Contributions and obligations to make Deferred Capital
Contributions under Sections 2.1 and 2.5. Members shall not be obligated to
restore any negative Capital Account balances. No creditor or any party other
than the other Members shall have the right to enforce any obligation to make
Deferred Capital Contributions pursuant to Section 2.5 against the Members.
Section 2.8 Loans.
-----
2.8.1 Member's Loans.
---------------
(a) Member's Loans. Members may make a "Member's Loan" to the
---------------
LLC for any purpose determined to be necessary or desirable
by the holders of a majority of the
<PAGE>
Ownership Interests. The Members shall give ten (10) days
written notice of such recommendation which shall be
approved or rejected as provided in Section 6.14.
(b) Repayment of Member's Loans. Member's Loans shall be repaid
---------------------------
as funds are available out of: (i) subsequent Capital
Contributions; (ii) cash proceeds generated from the
ownership and operation of the LLC's business; and/or (iii)
cash proceeds generated from the LLC Property. Member's
Loans shall be repaid prior to any distribution to Members
under Article 4.
(c) Interest Rate. Member's Loans to the LLC shall bear interest
-------------
at an annual rate of two percent (2.00%) over the Prime Rate
at the time such loan is made, or the then legal maximum
rate, whichever is lower, unless otherwise approved by
Members holding a majority of the Ownership Interests. The
Prime Rate shall be adjusted (increased or decreased) every
six months during the period of the loan.
(d) Obligation to Loan. No Member shall in any way be obligated
-------------------
or required to make loans to the LLC except as specifically
set forth herein. If a Member's Loan is to be made, all
Members shall have an opportunity, but not an obligation, to
participate in the loan on the basis of their Ownership
Interests.
ARTICLE 3- MANAGEMENT OF LLC AND AGREEMENTS AMONG MEMBERS
----------------------------------------------
Section 3.1 Authority of the Managing Member. Except as expressly provided
--------------------------------
to the contrary in this Agreement, the Managing Member shall have co-existent
authority with the Members over the daily routine and ordinary management and
control of the LLC business. Except as expressly provided in this Agreement or
as expressly directed by a vote of the holders of a majority of the Ownership
Interests, the Managing Member shall have no additional authority regarding
management of the LLC. All of the authority to manage the LLC and make all
decisions and bind and obligate the LLC shall remain with the Members. The
Members shall retain all rights to manage the LLC, which shall include, but not
be limited to, the following:
(a) take all action necessary or desirable to acquire the Property
and, own, manage and operate the Business of the LLC as set forth herein;
(b) sell or mortgage or otherwise dispose of or encumber or take any
action with regard to the LLC Property;
(c) acquire such insurance as the Members deem reasonable and
advisable;
(d) pay, collect, compromise, arbitrate or otherwise adjust any and
all claims or demands of or against the LLC;
(e) act for the LLC in all transactions concerning the LLC Business
and/or the LLC Property or underlying property, including execution on
behalf of the LLC of all documents in connection therewith;
<PAGE>
(f) employ at the LLC's expense such persons, firms, companies,
agents, employees, attorneys, accountants, financial advisors, business
consultants, and such other professional personnel, including Affiliates of
the Members;
(g) establish bank accounts for the LLC funds, authorize designees to
disburse such funds on behalf of the LLC, and for such purpose;
(h) negotiate with and compensate, as required, any governmental
authorities regarding assessments, taxes and related matters;
(i) invest LLC funds in any form of bank accounts, government
obligations, stocks, bonds or any other investment;
(j) admit Members to the LLC as provided herein;
(k) distribute to Members their share of Distributable Net Proceeds;
(1) perform all other acts reasonably necessary in connection with the
LLC business.
The execution and delivery of any instrument described above that is signed by
any Member shall be sufficient to bind the LLC. Notwithstanding the above,
Members holding a majority of the Ownership Interests shall approve any action
regarding the Property or the Business of the LLC which falls outside of the
routine day-to-day management of the LLC.
Section 3.2 Liability of Members, Indemnification. No Member shall be
----------------------------------------
liable under a judgment, decree or order of a court, or in any other manner, for
any debt, obligation or liability of the LLC. A Member of the LLC shall not be
personally liable to the LLC or its Members for monetary damages for breach of
fiduciary duty, except for liability for any acts or omissions which involve
intentional misconduct, fraud or knowing violation of law or for a distribution,
redemption or purchase of or with respect to a Member's Ownership Interest in
the LLC in violation of Missouri law. Any repeal or modification of this Section
by the Members of the LLC shall be prospective only, and shall not adversely
affect any limitation on the personal liability of a Member of the LLC existing
at the time of such repeal or modification or thereafter arising as a result of
the acts or omissions prior to the time of such repeal or modification. The LLC
shall indemnify, save and hold harmless a Member from any loss, damage,
liability or expense incurred or sustained by him by reason of any act performed
by him or any omission of his, for or on behalf of the LLC and in furtherance of
its interest; provided, however, that such right to indemnification shall not
apply to or relieve the Member from liability for gross negligence or willful
malfeasance.
Section 3.3 Compensation of Managing Member, Members or
------------------------------------------------
Affiliates.
-----------
3.3.1 Compensation/Reimbursement of Expenses. No Member,
----------------------------------------
including the Managing Member, shall receive compensation for managing the LLC.
The Members will receive reimbursement for all direct out-of-pocket expenses
incurred for and on behalf of the LLC when acting within the course and scope of
their authority hereunder.
<PAGE>
Section 3.4 Title to Property. Title to the Property and to all other LLC
-----------------
assets shall be held in the name of the LLC.
Section 3.5 Special Power of Attorney. Each Member hereby constitutes and
-------------------------
appoints the Managing Member of the LLC, or any of them, and any successor of a
Managing Member, and any duly appointed officer or general partner of an entity
which is a Managing Member, with full power of substitution, the true and lawful
attorney-in-fact of the undersigned, with the power to execute, acknowledge,
record, file and/or publish:
(a) any amendment to the Articles pursuant to the Act or the laws of
any state in which such documents are required to be filed to; provided
such document is not inconsistent with the terms of this Agreement;
(b) any instrument, certificate, or document required by any
regulatory agency, laws of the United States, any state, or any other
jurisdiction in which the LLC is doing or intends to do business or which
the Members direct, by majority vote, the Managing Member to file or
record; provided that such instrument, certificate or document is not
inconsistent with the terms of this Agreement as in effect at that time;
and
(c) any documents which may be required to continue the business of
the LLC, to admit additional or substitute Members or to dissolve and
terminate the LLC pursuant to the terms of this Agreement.
This power of attorney is expressly limited to those matters set forth in (a) -
(c) above and no Managing Member shall take any action as attorney-in-fact for
the Members beyond the authority expressly set forth in this Agreement or alter
the rights of the Members with regard to allocations, distributions or other
financial matters, voting, receipt of reports and information, or limitations on
actions by a Managing Member under the Agreement, unless the Member has given a
power of attorney to a Managing Member expressly for that purpose.
The foregoing grant of authority:
(a) is a special power of attorney coupled with an interest in favor
of the Managing Member and as such, shall be irrevocable and shall survive
and shall not be affected by the subsequent disability, incapacity, death,
incompetency, dissolution, or insanity of all or any of the Members;
(b) may be exercised for each Member by a signature of any Managing
Member or by listing the names of all the Members and executing any
instrument with the single signature of the Managing Member acting as
attorney-in-fact for all of them; and
(c) shall survive the assignment by a Member of the whole or any
portion of such Member's interest in the LLC, except that where the
assignee of the entire interest of a Member has furnished a power of
attorney and has been approved by the Members for admission to the LLC as a
substitute Member, this power of attorney shall survive the assignment for
the sole purpose of
<PAGE>
enabling the Managing Member to execute, acknowledge, and file any
instrument necessary to effect the substitution, and this power shall
terminate thereafter.
ARTICLE 4- DISTRIBUTIONS AND ALLOCATIONS
Section 4.1 Distributions and Allocations Generally. All distributions of
---------------------------------------
LLC funds to the Members and allocations of taxable income and loss shall be
allocated according to this Article 4 and shall be made in accordance with good
and sound business and accounting practices at such times as the Members, by
majority vote, may determine in their sole discretion. The LLC shall account for
income, losses and distributions as if the LLC were a partnership, and shall
file all tax returns and reports on that basis under Subchapter K of the Code.
Section 4.2 Distributable Net Proceeds. Subject to Section 4.1, the
----------------------------
Distributable Net Proceeds shall be allocated and distributed periodically to
the Members in the Ownership Interest Percentages set forth on Exhibit "B" as
they may change from time to time.
Section 4.3 Net Losses. Income and Gain. Except as otherwise provided in
-----------
the Special Allocations Provisions, if any, set forth in Exhibit "C", all
taxable income, loss or capital gains or losses, or any other item reportable by
the LLC for tax purposes shall be allocated in the Ownership Interest
Percentages set forth in Section 4.2 and Exhibit "B" as they may change from
time to time.
Section 4.4 LLC Reserves. The LLC shall at all times maintain sufficient
-------------
reserves to pay its debts as they become due in the normal course of business.
LLC Reserves that are distributed to the Members shall be allocated and
distributed to the Members as provided above for Distributable Net Proceeds.
ARTICLE 5- BOOKS AND RECORDS; ACCOUNTING; TAX ELECTIONS
Section 5.1 Books and Records. At all times during the LLC's existence,
-------------------
the Members shall keep or cause to be kept true and accurate books of account.
Such books and records shall be kept in accordance with the method of accounting
selected by the Members for federal income tax purposes. Each Member, or his
duly appointed representative, shall, at all reasonable times, have access to
such books. The Members shall maintain, at the registered office of the LLC, the
following:
(a) a list of all Members' names and addresses together with their
Capital Contributions;
(b) a copy of the Articles, this Agreement and all amendments thereto;
(c) copies of minutes of all meetings, including written consents
obtained from Members in lieu of meetings;
(d) copies of LLC tax returns and financial statements; and
(e) any other record required to be maintained by law.
<PAGE>
Section 5.2 Annual Reports. Within seventy-five (75) days after the end of
--------------
each fiscal year, the Managing Member shall cause to be delivered to each person
who was a Member at any time during the fiscal year, an annual report containing
the following:
(a) unaudited financial statements of the LLC, including without
limitation, a balance sheet as of the end of the LLC's fiscal year, and a
statement of income and expenses;
(b) a general description of the activities of the LLC during the
period covered by the report; and
(c) a report of any material transactions between the LLC and any
Members, or any of their Affiliates, including fees or compensation paid by
the LLC and the services performed by such Members or any such Affiliates,
for such fees and compensation.
Section 5.3 Tax Information. The Managing Member shall deliver to each of
---------------
the Members, within seventy-five (75) days after the expiration of each tax year
of the LLC, IRS Form 1065, including a "K-l" Statement and applicable state tax
return information. This statement shall show the allocation of profit or loss
of the LLC for federal income tax purposes, including all separately stated
items, to each Member. The Members shall arrange for the preparation and filing
of all necessary information returns of the LLC and shall make all necessary
elections, determinations and allocations. The LLC shall bear all costs in
connection with the requirements of this Section.
Section 5.4 Bank Accounts. The Members shall, in the name of the LLC, open
-------------
and maintain a bank account or accounts to deposit all LLC funds, and shall use
such funds solely for the LLC's business.
Section 5.5 LLC Elections. The LLC shall be taxed as a partnership for tax
-------------
purposes. The Managing Member shall make all elections for the LLC provided for
in the Code as directed by the Members, including, but not limited to, the
elections provided for in Section 754 of the Code.
Section 5.6 Fiscal Year. The fiscal year of the LLC (shall be the calendar
-----------
year) shall end on the 31st day of December in each year.
ARTICLE 6- MEMBERS' RELATIONSHIPS
Section 6.1 Transfer of a Member's Interest--Approval. Except as provided
-----------------------------------------
in this Article 6, no Member shall sell, transfer, assign, convey, encumber or
otherwise dispose of; by operation of law or otherwise, the whole or any part of
his interest in the LLC, without the prior express written consent of the
managing member. The approved right regarding the transfer of ownership's
interests may be unreasonably withheld. Any such unauthorized transfer shall not
vest the transferee with any rights as a Member other than the transferor's
right to receive distributions.
Section 6.2 Assignment of Member's Interest as Security for Loan. A Member
----------------------------------------------------
shall not be entitled to assign his Ownership Interest as security for a loan,
unless approved under the same criteria as a transfer under Section 6.1.
<PAGE>
Section 6.3 Right of First Refusal. If a sale or other transfer of a
-------------------------
Member's interest to a third party is otherwise approved, the remaining Members
shall have a right of first refusal to match any bona fide offer to purchase a
Member's interest in the LLC on the same terms and price as such bona fide
offer, to be elected and exercised within thirty (30) days after delivery of a
Sale Notice by the selling Member to the remaining Members. The Members shall
have the right to purchase not less than all of such Member's interest, to be
allocated pro rata based on the purchasing Members' Ownership Interests at such
time.
Section 6.4 Additional Restrictions. No Member shall sell, transfer or
------------------------
dispose of, by operation of law or otherwise, all or any part of his interest in
the LLC except by written instrument satisfactory to the Members, accompanied by
such assurance of the genuineness and effectiveness of each such signature. No
assignment shall be valid or effective unless such assignment is in compliance
with the conditions contained in this Article 6. Any unauthorized assignment or
transfer shall be void ab initio.
-- ------
Section 6.5 Legend Conditions. Any documents and records evidencing a
------------------
Member's interest in the LLC, whether issued originally or subsequently, shall
bear and be subject to legend conditions as follows:
"Ownership Interests evidenced by this certificate or otherwise may not be
sold, assigned, transferred or otherwise disposed of to any person or entity,
unless authorized or approved pursuant to the Articles of Organization and
Operating Agreement. Any unauthorized assignment or transfer shall be void ab
--
initio. Assignees of an Ownership Interest may become substituted Members only
- ------
as provided in the Articles of Organization and Operating Agreement."
Section 6.6 Substituted Members. No assignee of the whole or any portion
--------------------
of a Member's Ownership Interest (which shall include any purchaser, transferee,
donee, testate or intestate transferee or any other recipient receiving such
Ownership Interest for any reason) shall have the right to become a substituted
Member in place of his assignor, unless:
(a) his assignor designates such an intention in the instrument of
assignment;
(b) the Members holding fifty percent (50%) of the remaining Ownership
Interests consent (which consent may be unreasonably withheld);
(c) the form and substance of the assignment instrument are
satisfactory to the Members;
(d) the assignor and assignee execute and acknowledge any other
instrument or instruments necessary or desirable to effectuate the
admission, including, but not limited to, a power of attorney with
provisions more fully described in this Agreement;
(e) the assignee accepts, adopts and approves in writing all of the
terms and provisions of this Agreement and any amendments; and
(f) the assignee pays all reasonable expenses connected with the
admission. After all necessary approvals have been obtained, transfers
shall be considered effective for LLC
<PAGE>
administration purposes on the first day after the execution of all necessary
documents by the assignor, the assignee and the Managing Member, as appropriate.
Except for a transferee admitted as a Member pursuant to this Section, any
transferee shall hold his Ownership Interest as an assignee and shall at all
times be entitled to the proportionate share of such transferee's interest in
the profits of the LLC distributed in accordance with the terms and conditions
of this Agreement, but such transferee shall not become a Member and shall have
no voting rights in any LLC decisions or be entitled to any other rights of a
Member unless he becomes a Member.
Section 6.7 Withdrawal of a Member. Except as provided in this Agreement,
----------------------
no Member shall be entitled to withdraw or retire from the LLC. The amount that
such Member is entitled to shall be determined as provided in Section 2.6.3 and
shall include any discount in value set forth therein and all other expenses
associated with a withdrawal transaction and determination of value. A Member
shall be liable to the LLC and other Members for any damages caused by any
withdrawal or attempted withdrawal. The LLC shall not be required to make any
distributions to such Member until the amount of such damages are finally
determined and shall have the right to set off such damages against any
distributions.
Section 6.8 Terminating Events. The death, insanity, dissolution,
-------------------
termination, retirement, expulsion or Bankruptcy of a Member shall dissolve and
terminate the LLC, unless Members owning fifty percent (50%) of the remaining
Ownership Interests elect to continue the LLC. Upon the death, dissolution,
termination, incapacity or Bankruptcy of a Member, the personal representative,
trustee or successor in interest of the deceased, incapacitated, dissolved or
bankrupt Member shall become an assignee of the Ownership Interest of the
deceased, incapacitated, dissolved or bankrupt Member; provided, however, that
such assignee may become a substituted Member only in compliance with the terms
set forth in Section 6.6.
Section 6.9 Repurchase of Ownership Interests. The LLC shall have the
------------------------------------
right to purchase any Member's Ownership Interests in the LLC upon request of a
Member upon terms mutually agreeable to it and the Member if the purchase does
not impair the capital or the operation of the LLC and is approved by Members
holding a majority of the remaining Ownership Interests. The LLC is under no
obligation to ever repurchase any Member's interest in the LLC, and there is no
assurance that the LLC will ever repurchase any Member's interest in the LLC.
Section 6.10 Rights of Members to Receive Property Other Than Cash. No
--------------------------------------------------------
right is given to a Member to demand and receive property other than cash in
return for his Capital Contributions.
Section 6.11 Encumbrance of a Member's Interest. Except as otherwise
--------------------------------------
provided herein, no Member may encumber in interest in the LLC.
Section 6.12 Dissolution or Partition. Except as provided in Section
--------------------------
7.1(c), no Member shall have the right to, and each Member hereby agrees that it
shall not, seek to dissolve or cause the dissolution of the LLC or to seek to
partition or otherwise cause a partition of the LLC Property, whether by court
action or otherwise, it being agreed that such a dissolution (or attempted
dissolution) or partition (or attempted partition) would cause a substantial
hardship to the LLC and the remaining Members.
Section 6.13 Right to Purchase Other Property. Nothing contained in this
---------------------------------
Agreement shall be deemed to restrict in any way the freedom of each Member to
conduct any other business or any other
<PAGE>
activity whatsoever, including without limitation, the acquisition, ownership,
development, construction, leasing, operation, management and sale of real
property, without notice or accountability to the LLC or Members, without
participation by the LLC or Members, and without liability to any of them, even
if such business or activity competes with the LLC's business.
Section 6.14 Meetings of, or Actions by, the Members. Meetings of the
-------------------------------------------
Members to vote upon any matters under this Agreement or any amendments, may be
called at any time by any remaining Members, or by one or more Members who hold
at least fifty percent (50%) of the then Ownership Interests by delivering
written notice to the remaining Members, either in person or by first class mail
that a meeting will be held not less than ten (10) days nor more than sixty (60)
days after the mailing of the notice of the meeting. A detailed statement of the
proposed action, including a verbatim statement of the wording of any resolution
proposed for adoption by the Members and of any proposed amendment to this
Agreement shall be included with the notice of a meeting. The meeting shall be
held at the principal office of the LLC. All expenses of the meeting and
notification shall be borne by the LLC. Only Members who are not in default
shall be entitled to vote as Members.
Members who hold a majority of the then Ownership Interests eligible to
vote on any matter shall constitute a quorum for the transaction of that
specific action at any meeting. Personal presence of the Members shall not be
required; provided that an effective written consent to or rejection of such
proposed action is submitted. Attendance and voting in-person by a Member at any
meeting shall revoke any previously submitted written consents or rejections of
the proposed action. Submission of a later written consent or rejection with
respect to any action shall revoke an earlier one as to that action.
Any matter on which the Members are authorized to take action, under this
Agreement or under law, which may be taken by the Members without a meeting and
shall be as valid and effective as an action taken by the Members at a meeting,
if written consents to such action by the required number of Members are signed
by all the Members entitled to vote upon such action at a meeting.
Section 6.15 Election and Removal of Managing Member.
--------------------------------------------
6.15.1 Election of Managing Member. The Members may initially
------------------------------
appoint or elect by majority vote of the Ownership Interests (excluding the
Ownership Interests held by the Managing Member) a Managing Member to perform
the duties set forth in Section 3.1. Such appointment shall continue until such
Managing Member shall resign, shall be removed, or shall otherwise be unable to
serve.
6.15.2 Removal of Managing Member. During the term of this LLC, a
--------------------------
Managing Member may be removed for any reason by a vote of those Members who
hold a majority of the then Ownership Interests (excluding the Ownership
Interests held by the Managing Member).
6.15.3 Status of Managing Member. A Managing Member must always
---------------------------
be a Member in good standing. There shall be no requirement that the LLC shall
have a Managing Member at any time. Such office shall be filled in the
discretion of the Members.
6.15.4 Resignation of Managing Member. A Managing Member may
---------------------------------
resign on thirty (30) days notice to the Members. A Managing Member who shall
voluntarily or involuntarily be
<PAGE>
subject to Bankruptcy or who shall have defaulted as a Member for failure to pay
a Deferred Capital Contribution under Section 2.5 shall be deemed to have
resigned.
ARTICLE 7- DISSOLUTION AND WINDING UP
Section 7.1 Dissolving Events. This LLC shall be dissolved upon the
------------------
occurrence of any one of the following events:
(a) on the dissolution, termination, death or Bankruptcy of a Member
unless Members holding fifty percent (50%) of the remaining Ownership
Interests elect to continue the business within ninety (90) days after the
occurrence of such event
(b) on the voluntary sale, condemnation or foreclosure of all,
substantially all of the LLC property; or
(c) on the election to dissolve evidenced by the affirmative vote or
written consent of all Members.
Section 7.2 Liquidation and Final Distribution of Proceeds. On dissolution
----------------------------------------------
for any reason whatsoever, the LLC shall thereafter engage in no further
business other than that necessary to wind up the business and net profits or
net losses during the winding-up period shall be allocated in the same ratio as
net profits and net losses were allocated prior to dissolution. The Members
shall direct the Managing Member to file any required statement of intent to
dissolve. The proceeds from the liquidation of LLC assets shall be distributed
in the following order:
(a) the expenses of liquidation and the debts of the LLC shall be
paid;
(b) to the establishment of any reserves which the Members may deem
reasonably necessary for any contingent or unforeseen liabilities or
obligations of the LLC. Such reserves shall be paid to a trust to be held
for the purpose of disbursing such reserves in payment of any such
liabilities or obligations and, at the expiration of such period as the
Members shall deem advisable, the trust balance remaining shall be
distributed in the manner provided below by this Section 7.2;
(c) to the Members in accordance with their positive Capital Account
balances (after all allocations of gain or loss) in the manner provided in
Section 4.3 within the later of: (i) the end of the taxable year in which
the liquidation occurs; or (ii) ninety (90) days from the date of
liquidation;
(d) any remainder in accordance with the Members! Ownership Interest
percentages.
Any shortages in any category (a), (b) or (c) above shall be allocated first
based on the priority of claims and then ratably among claims and obligations of
equal priority.
Section 7.3 Time of Liquidation. A reasonable time shall be allowed for
---------------------
the orderly liquidation of the LLC's assets and the discharge of liabilities to
creditors so as to enable the Members to minimize the losses attendant upon a
liquidation.
<PAGE>
Section 7.4 Liquidation Statement. Each of the Members shall be furnished
---------------------
a statement prepared by a Member so directed, which shall set forth assets and
liabilities of the LLC as of the date of complete liquidation. Upon the Members
complying with the foregoing liquidation distribution plan, the Members shall
cease to be members, and shall execute, acknowledge and cause to be filed any
appropriate certificate of cancellation of the LLC.
ARTICLE 8 - MISCELLANEOUS
Section 8.1 Voting and Approval. All voting and approvals by Members under
-------------------
this LLC Agreement shall be by Ownership Interest and Ownership Interest
Percentage, and not by per capita vote of the Members. A "majority vote" shall
mean a vote of more than fifty percent (50%) of the Ownership Interests entitled
to vote and voting or approving any matter. Those Members who are in default
shall not be allowed to vote on any matter and their Ownership Interests shall
be excluded (from both numerator and denominator) in determining voting
percentages. Likewise, the Ownership Interests of Members in certain other
situations as specified in the LLC Agreement (such as Members requesting
approval of a transfer of their Ownership Interest) shall be excluded in
determining voting percentages.
Section 8.2 Amendment of the Agreement. Except as otherwise stated in this
--------------------------
Agreement, the approval of the Members who hold at least fifty percent (50%) of
the then Ownership Interests shall be required to amend this Agreement, it being
hereby agreed, however, that no change in the amount of Capital Contributions
may be made without the written consent of all Members.
Section 8.3 Notices. Any and all written communications required or
-------
permitted by this Agreement or by law shall be in writing and shall be deemed
served or given: (a) when personally delivered; or, (b) one business day
following its deposit in the United States mail, postage prepaid, addressed to
the Member(s) to be so served at the addresses set forth on the signature page.
Any Member may change his forwarding address for notices by delivering written
notice to the remaining Members of such change of address.
Section 8.4 Binding Arbitration. All disputes and controversies between
--------------------
any of the Members relating to the subject matter of this Agreement shall be
resolved by arbitration in Kansas City, Missouri before a proceeding
administered by the American Arbitration Association and in accordance with the
rules of the American Arbitration Association. In connection therewith,
discovery shall be permitted pursuant to the provisions of the Missouri and
Federal Rules of Civil Procedure. Any matter determined by arbitration as
aforesaid shall be final and binding upon all of the parties thereto.
Section 8.5 Tax Controversies. Should there be any controversy with the
------------------
Service or any other taxing authority involving the LLC or an individual Member
or Members, the outcome of which may adversely affect the LLC either directly or
indirectly, the LLC may incur expenses it deems necessary and advisable in the
interest of the LLC to oppose such proposed deficiency, including, but not
limited to, attorneys' and accountants' fees. James Howard is hereby designated
as the "Tax Matters Partner" pursuant to the requirements of Section 6231 (a)(7)
of the Code and in such capacity shall represent the LLC in any disputes,
controversies or proceedings with the Service. The Tax Matters Partner shall
take such action to make the remaining Members "Notice Partners" under I.R.C.
6223. The Tax Matters Partner shall only take such action as is approved by
holders of a majority of Ownership Interests.
<PAGE>
Section 8.6 Captions and Pronouns. Any titles or captions of sections
-----------------------
contained in this Agreement are for convenience only and shall not be deemed
part of the text of this Agreement. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, neuter, singular or plural
as required for the identification of the person or persons, firm or firms,
corporation or corporations.
Section 8.7 Binding Effect. Except as otherwise herein provided, this
---------------
Agreement shall be binding upon and inure to the benefit of the parties hereto,
their heirs, executors, administrators, successors and all persons hereafter
holding or having an interest in this LLC, whether as assignees or otherwise.
Section 8.8 Entire Agreement. This Agreement contains the entire
-----------------
understanding between the parties respecting the within subject matter and
supersedes any prior understanding and agreements between them with respect
thereto. All representations, agreements, arrangements or understandings, oral
or written, between and among the parties hereto are fully expressed herein.
Section 8.9 Choice of Law. This Agreement is made pursuant to and shall be
-------------
construed in accordance with the laws of the State of Missouri.
Section 8.10 Severability. If any term or provision of this Agreement or
------------
the performance thereof shall be invalid or unenforceable to any extent, such
invalidity or unenforceability shall not affect or render invalid or
unenforceable any other provision of this Agreement, and this Agreement shall be
valid and enforced to the fullest extent permitted by law.
Section 8.11 Rebates, Kickbacks and Reciprocal Arrangements. No Member nor
----------------------------------------------
its Affiliates shall receive any rebates or kickbacks or participate in any
reciprocal business arrangements that would circumvent any federal or state
securities laws or participate in any reciprocal business arrangements that
would circumvent the restrictions against dealing with affiliates or promoters
or would lower the profits or increase the losses of the LLC.
Section 8.12 Counterparts and Execution. This Agreement may be executed in
--------------------------
multiple counterparts, each of which shall be deemed an original Agreement, and
all of which shall constitute one Agreement among each of the parties,
notwithstanding that all of the parties are not signatories to the original or
the same counterpart, to be effective as of the day and year first set forth
above. This Agreement may also be executed by facsimile followed by overnight
transmission of the original execution copy.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and
year first above written.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES.
ADDRESSES: MEMBERS:
eQuorumNet
By /S/ James Howard
Name James Howard
Title Manager
STATE OF Missouri )
)SS
COUNTY OF Jackson )
On this 23rd day of August, 1999, before me appeared James Howard
to me personally known who being by me duly sworn, did say that he is the
manager of eQuorumNet, a Nevada corporation, and the seal affixed to the
foregoing instrument is the corporate seal of said corporation, and that said
instrument was signed and sealed on behalf of said corporation by authority of
its board of directors, and said James Howard acknowledged said instrument to be
the free act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed
my official seal the day and year last written above.
S/ J. D. O'Neal II
Notary Public
My Commission Expires: 08/08/02
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EXHIBIT "A"
LLC Property
NONE
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EXHIBIT "B"
Capital Contributions
Member Capital Contribution Ownership Interest
====== ==================== ==================
eQuorumNet $4,133.00 100%
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