U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1999
Commission file no. 0-27917
IPVoice.com, Inc.
--------------------------------------------
(Name of small business issuer in its charter)
Nevada 65-0729900
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5050 No. 19th Avenue, Suite 416/417
Phoenix, Arizona 85015
- ------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (602) 335-1231
Securities registered under Section 12(b) of the Exchange Act:
Name of each exchange on
Title of each class which registered
None
- ---------------------------- -------------------------
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.001 par value
-----------------------------------
(Title of class)
Copies of Communications Sent to:
Mercedes Travis, Esq.
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480
Tel: (561) 832-5696:
Fax: (561) 659-5371
<PAGE>
Indicate by Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes No X
-- ---
As of September 30, 1999, there are 16,212,758 shares of voting stock
of the registrant issued and outstanding (16,612,758 shares less 300,000 shares
which were rescinded at the time the Company rescinded the Satlink 3000, Inc.
acquisition).
<PAGE>
PART I
Item 1. Financial Statements
INDEX TO FINANCIAL STATEMENTS
Consolidated Balance Sheets.............................................F-2
Consolidated Statements of Operations...................................F-3
Consolidated Statements of Changes in Stockholders' Deficiency..........F-4
Consolidated Statements of Cash Flows...................................F-5
Notes to Consolidated Financial Statements..............................F-6
F-1
<PAGE>
<TABLE>
<CAPTION>
IPVoice,com, Inc.
(A Development Stage Enterprise)
Consolidated Balance Sheet
December 31, 1998 September 30, 1999
------------------------ ---------------------
(unaudited)
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash $ 908 $ 542,390
Accounts receivable, net of allowance of $48,532 0 64,784
Inventory 152,980 259,321
------------------------ ---------------------
Total current assets 153,888 866,495
------------------------ ---------------------
FIXED ASSETS
Computer equipment 30,953 35,115
Office machines and equipment 11,015 53,859
------------------------ ---------------------
41,968 88,974
Less accumulated depreciation (4,343) (13,066)
------------------------ ---------------------
Total property and equipment 37,625 75,908
------------------------ ---------------------
Total Assets $ 191,513 $ 942,403
======================== =====================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable
Trade $191,817 $ 145,698
Officer 34,268 18,721
Shareholder 20,564 16,668
Accrued payroll taxes 35,730 0
Accrued interest - shareholders 0 11,784
Advances from shareholder 24,750 0
------------------------ ---------------------
Total current liabilities 307,129 192,871
------------------------ ---------------------
LONG-TERM LIABILITIES
Notes payable - shareholders 0 1,145,400
------------------------ ---------------------
Total long-term liabilities 0 1,145,400
------------------------ ---------------------
Total Liabilities 307,129 1,338,271
------------------------ ---------------------
STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value, authorized 10,000,000
shares; 0 and 1,150
issued and outstanding at December 31,
1998 and September 30, 1999, respectively 0 4,600
Common stock, $0.001 par value, authorized 50,000,000
shares; 12,578,999 and 16,212,758 issued and outstanding
December 31, 1998 and September 30, 1999, respectively 12,579 16,213
Additional paid-in capital 465,171 1,522,101
Stock subscription receivable (62,700) 0
Deficit accumulated during the development stage (530,666) (1,938,782)
------------------------ ---------------------
Total stockholders' equity (115,616) (395,868)
------------------------ ---------------------
Total Liabilities and Stockholders' Equity $191,513 $942,403
======================== =====================
</TABLE>
The accompanying notes are an integral part of the financial statements
F-2
<PAGE>
<TABLE>
<CAPTION>
IPVoice.com, Inc.
(A Development Stage Enterprise)
Consolidated Statements of Operations
Nine Months ended September 30,
(Unaudited)
Period from
February 19, 1997
(Inception) through
1998 1999 September 30, 1999
--------------------- --------------------- --------------------
<S> <C> <C> <C>
Sales $ 41,254 $ 50,700 91,954
Cost of sales 0 (49,140) (49,140)
--------------------- --------------------- --------------------
Gross Profit 41,254 1,560 42,814
EXPENSES
Consulting fees - related party 39,982 73,193 127,193
Depreciation 2,773 8,723 13,066
Organization expense - related party 0 0 14,000
General and administrative 172,160 524,915 758,628
Professional fees - related party 26,944 492,324 538,420
Salaries
Officers 102,213 273,495 413,571
Other 12,847 58,024 95,739
--------------------- --------------------- --------------------
Total operating expenses 356,919 1,430,674 1,960,617
--------------------- --------------------- --------------------
Loss from Operations (315,665) (1,429,114) (1,917,803)
Other expense - interest 0 38,128 38,128
Other income - interest 0 (17,130) (17,149)
--------------------- --------------------- --------------------
Net Loss $ (315,665)$ (1,408,116)$ (1,938,782)
===================== ===================== ====================
Loss per weighted average common share $ (0.03)$ (0.09)$ (13.7)
===================== ===================== ====================
Weighted average number of common shares
outstanding 11,456,459 15,248,436 14,174,890
===================== ===================== ====================
</TABLE>
The accompanying notes are an integral part of the financial statements
F-3
<PAGE>
<TABLE>
<CAPTION>
IPVoice.com, Inc.
(A Development Stage Enterprise)
Consolidated Statements of Changes in Stockholders' Deficiency
Preferred Common Deficit
Stock Stock Accumulated
Number Number Additional Stock During the Total
of of Preferred Common Paid-in Subscription Development Stockholders'
Shares Shares Stock Stock Capital Receivable Stage Equity
---------- ---------- -------- -------- ---------- --------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BEGINNING BALANCE,
December 31, 1997 0 10,400,000 $ 0 $ 10,400 $ 12,600 $ (12,274) $ (22,981) $ (12,255)
3/19 - donated - related party ($0.001/sh.) 0 (9,000,000) 0 (9,000) 9,000 0 0 0
3/19 - issued for acquisition ($0.001/sh.) 0 9,000,000 0 9,000 (9,000) 0 0 0
3/20 - cash paid for stock subscription 0 0 0 0 0 12,274 0 12,274
2nd quarter - cash ($1.00/sh.) 0 144,000 0 144 143,856 0 0 144,000
3rd quarter - cash ($1.00/sh.) 0 10,000 0 10 9,990 0 0 10,000
3rd quarter - cash ($0.75/sh.) 0 53,333 0 53 39,947 0 0 40,000
3rd quarter - cash ($0.50/sh.) 0 20,000 0 20 9,980 0 0 10,000
3rd quarter - cash ($0.25/sh.) 0 100,000 0 100 24,900 0 0 25,000
3rd quarter - cash ($0.10/sh.) 0 627,000 0 627 62,073 (62,700) 0 0
3rd quarter - services ($0.10/sh.) 0 473,000 0 473 46,827 0 0 47,300
4th quarter - cash ($0.15/sh.) 0 396,666 0 397 56,103 0 0 59,500
4th quarter - services ($0.15/sh.) 0 275,000 0 275 40,975 0 0 41,250
4th quarter - cash ($0.19/sh.) 0 80,000 0 80 14,920 0 0 15,000
Net loss 0 0 0 0 0 0 (507,685) (507,685)
---------- ---------- -------- -------- ---------- --------- -------------- -------------
BALANCE, December 31, 1998 0 12,578,999 0 12,579 465,171 (62,700) (530,666) (115,616)
1st quarter - cash ($.25-.40/sh) 0 687,499 0 687 149,313 0 0 150,000
1st quarter - stock issued for services 0 193,760 0 194 120,070 0 0 120,264
1st quarter - subscription receivable 0 437,500 0 438 174,562 (175,000) 0 0
2nd quarter - cash ($.06-.65/sh) 0 2,005,000 0 2,005 293,995 0 0 296,000
2nd quarter - received from subscription 0 0 0 0 0 60,000 0 60,000
2nd quarter - stock issued for services 0 300,000 0 300 309,000 0 0 309,300
Issuance of preferred stock 1,150 0 1 0 4,599 0 0 4,600
3rd quarter - stock issued for services 0 10,000 0 10 9,990 0 0 10,000
3rd quarter - received from subscription 0 0 0 0 0 177,700 0 177,700
Net loss 0 0 0 0 0 0 (1,408,116) (1,408,116)
---------- ---------- -------- -------- ---------- --------- -------------- --------------
BALANCE, September 30, 1999
(Unaudited) 1,150 16,212,758 $ 1 $ 16,213 $1,526,700 $ 0 $ (1,938,782) $ (395,868)
========== ========== ======== ======== ========== ========= ============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements
F-4
<PAGE>
<TABLE>
<CAPTION>
IPVoice.com, Inc.
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows
Nine Months Ended September 30,
(Unaudited)
Period from
February 19, 1997
(Inception) through
1998 1999 September 30, 1999
------------------ ----------------- --------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net Loss $ (315,665)$ (1,408,116)$ (1,938,782)
Adjustments to reconcile net loss to net cash used by operating
activities:
Stock issued for services 47,300 439,564 537,114
Depreciation 2,773 8,723 13,066
Changes in operating assets and liabilities
Inventory (173,932) (106,341) (259,321)
(Increase) in accounts receivable (478) (64,784) (64,784)
Increase (decrease) in accounts payable - trade 181,757 (46,119) 145,698
Increase (decrease) in accounts payable - officer 11,721 (15,547) 18,721
Increase (decrease) in accounts payable - related party (9,693) 0 0
Increase (decrease) in accounts payable - shareholder 9,688 ( 3,896) 16,668
Increase (decrease) in accrued payroll taxes 9,937 (35,730) 0
Increase (decrease) in accrued interest - shareholder 0 11,784 11,784
------------------ ----------------- --------------------
Net cash (used) provided by operating activities (236,592) (1,220,462) (1,519,836)
------------------ ----------------- --------------------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of property and equipment (27,422) (47,006) (88,974)
------------------ ----------------- --------------------
Net cash used by investing activities (27,422) (47,006) (88,974)
------------------ ----------------- --------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Advance from shareholder 26,750 (24,750) 0
Proceeds from notes payable 0 1,145,400 1,145,400
Preferred stock issued for cash 0 4,600 4,600
Common stock issued for cash 229,000 446,000 751,226
Proceeds from stock subscription receivable 12,274 237,700 249,974
------------------ ----------------- --------------------
Net cash provided by financing activities 268,024 1,808,950 2,151,200
------------------ ----------------- --------------------
Net increase (decrease) in cash and equivalents 4,010 541,482 542,390
CASH, beginning of period 1,745 908 0
------------------ ----------------- --------------------
CASH, end of period $ 5,755 $ 542,390 $542,390
================== ================= ====================
NON-CASH FINANCING ACTIVITIES:
Common stock issued for subscription receivable $ (62,700)$ 0 $ (175,000)
================== ================= ====================
Donated capital - related party $ 0 $ 0 $ 9,000
================== ================= ====================
</TABLE>
The accompanying notes are an integral part of the financial statements
F-5
<PAGE>
IPVoice.com, Inc.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Principles
The Company IPVoice Communications, Inc., is a Nevada chartered
development stage corporation which conducts business from its
headquarters in Phoenix, Arizona. The Company was incorporated on
February 19, 1997 as Nova Enterprises, Inc., and changed its name to
IPVoice Communications, Inc. in March 1998. On March 24, 1999, the
Company formally changed its name to IPVoice.com, Inc.
The Company is principally involved in the internet telephony industry.
Current activities include software and hardware development, raising
additional equity, and negotiating with potential key personnel and
facilities.
The Company is in the development stage and is acquiring the necessary
operating assets and is beginning its proposed business. While the
Company is developing tools necessary to enter the internet telephony
market, there is no assurance that any benefit will result from such
activities. The Company will receive limited operating revenues and
will continue to incur expenses during its development, possibly in
excess of revenue.
The financial statements for the nine months ended September 30, 1999
and 1998 contain all adjustments, which in the opinion of management
are necessary for fair presentation.
The following summarize the more significant accounting and reporting
policies and practices of the Company:
a) Use of estimates The consolidated financial statements have been
prepared in conformity with generally accepted accounting principles.
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities as of the date of the statements of
financial condition, and revenues and expenses for the year then ended.
Actual results may differ significantly from those estimates.
b) Principles of consolidation The consolidated financial statements
include the accounts of IPVoice Communications, Inc. and its wholly
owned subsidiary. All significant intercompany balances and
transactions have been eliminated.
c) Start-up costs Cost of start-up activities, including organization
costs, are expensed as incurred, in accordance with State of Position
(SOP) 98-5. This SOP sets forth the generally accepted accounting
principles for costs of start-up activities as it applies to
development stage entities.
d) Net loss per share Basic loss per weighted average common share is
computed by dividing the net loss by the weighted average number of
common shares outstanding during the period.
e) Stock compensation for services rendered The Company issues shares
of common stock in exchange for services rendered. The costs of the
services are valued according to generally accepted accounting
principles and have been charged to operations.
f) Accounts receivable An allowance for uncollectible accounts has been
provided related to the receivable from a former subsidiary.
F-6
<PAGE>
IPVoice.com, Inc.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Principles (Continued)
g) Inventory Inventory consists mainly of computer parts to be used in
the assembly of units to be sold to customers, or utilized by the
Company in its operations. Once the assembly is complete, the
respective computer part costs are charged to operations or
reclassified to property and equipment based on the nature of the
transaction. Inventory is valued at the lower of cost or market. Cost
is determined using the first-in, first-out (FIFO) method.
h) Property and equipment All property and equipment are recorded at
cost and depreciated over their estimated useful lives, using the
straight-line method. Upon sale or retirement, the costs and related
accumulated depreciation are eliminated from their respective accounts,
and the resulting gain or loss is included in the results of
operations. Repairs and maintenance charges which do not increase the
useful lives of the assets are charged to operations as incurred.
(2) Stockholders' Equity The Company has authorized 50,000,000 shares of
$0.001 par value common stock and 10,000,000 shares of $0.001 par value
preferred stock. The Company had 16,212,758 and 11,827,333 and 1,150
and 0 shares of common and preferred stock issued and outstanding at
September 30, 1999 and 1998, respectively. In February 1997, the
Company issued 9,000,000 shares to its founder for services rendered to
the Company valued at par value, or $9,000. In March 1997, the Company
completed a Regulation D Rule 504 Placement for 1,400,000 shares in
exchange for $14,000 cash.
In March 1998, a majority shareholder donated 9,000,000 shares of
common stock to the Company. 9,000,000 shares were simultaneously
issued for the acquisition of IPVoice Communications, Inc., a Delaware
corporation (Note (1)(b)). During the second quarter of 1998, the
Company issued 144,000 shares of common stock for $144,000 in cash. The
Company issued 473,000 shares of common stock for services rendered,
valued at the current market rate of $47,300, during the third quarter
of 1998. Also during the third quarter, the Company issued 183,333
shares of common stock for $85,000 in cash, and 627,000 shares of
common stock for a subscription receivable of $62,700. In the fourth
quarter of 1998, the Company issued 275,000 shares of common stock for
services rendered, valued at the current market rate of $41,250. In the
same quarter, 476,666 shares of common stock were issued for $121,800
in cash.
In the first quarter of 1999, the Company issued 687,499 shares of
common stock for $150,000 in cash and 193,760 shares of common stock
for services rendered, valued at the current market rate of $120,264.
Also during the first quarter, the Company issued 437,500 shares of
common stock for a subscription receivable of $175,000. In the second
quarter of 1999, the Company issued 2,005,000 shares of common stock
for $296,000 in cash and 300,000 shares of common stock for services
rendered, valued at the current market rate of $309,300. In the third
quarter, the Company issued 10,000 shares of common stock for services
rendered valued at $1.00 per share.
As part of the Private Offering completed in the second quarter of
1999, the Company issued 1,150 twenty-five year senior convertible
preferred shares for $4,600 in cash.
F-7
<PAGE>
IPVoice.com, Inc.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(3) Income Taxes Deferred income taxes (benefits) are provided for certain
income and expenses which are recognized in different periods for tax
and financial reporting purposes. The Company had net operating loss
carry-forwards for income tax purposes of approximately $1,939,000,
which expire beginning December 31, 2117.
The amount recorded as a deferred tax asset, cumulative as of September
30, 1999, is approximately $775,000, which represents the amount of tax
benefits of the loss carry-forwards. The Company has established a 100%
valuation allowance for this deferred tax asset, as the Company has no
history of profitable operations.
(4) Going Concern As shown in the accompanying consolidated financial
statements, the Company has incurred, from February 19, 1997
(Inception) through September 30, 1999, a total net loss of $1,978,782.
The ability of the Company to continue as a going concern is dependent
upon increasing sales and obtaining additional capital and financing.
The financial statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going concern. The
Company is currently seeking financing to allow it to begin its planned
operations.
(5) Related Parties During the nine months ended September 30, 1999, the
Company repaid funds totaling $14,000. This amount was paid a company
under common control for organization expenses incurred on behalf of
the Company in 1997.
At September 30, 1999 and 1998, the Company owed officers $18,721 and
$11,721, respectively, for reimbursement of expenses paid on behalf of
the Company. These amounts are presented in Accounts payable - officer.
At September 30, 1999, the Company owed a shareholder $16,668 for
consulting and professional services performed on behalf of the
Company. This amount is presented in Accounts payable - shareholder.
Total consulting and professional fees incurred by the shareholder
during the nine months ended September 30, 1999 and 1998 amounted to
$35,000 and $19,688, respectively.
At September 30, 1999, the Company owed $11,784 to shareholders who
participated in the Private Offering in the second quarter of 1999.
This amount is presented in Accrued interest - shareholders.
During the nine months ended September 30, 1999, the Company repaid
$24,750 advanced from one of the Company's shareholders for payment of
general operating expenses.
(6) Significant Acquisition In March 1998, IPVoice Communications, Inc., a
Nevada corporation, acquired 100% of the issued and outstanding shares
of common stock of IPVoice Communications, Inc., a Delaware
corporation, in a reverse merger, which was accounted for as a
reorganization of the Delaware company.
On April 7, 1999, the Company acquired all of the issued and
outstanding common stock of SatLink 3000, Inc., d/b/a Independent
Network Services, a Nevada Corporation (INS). The Company issued
250,000 shares
F-8
<PAGE>
IPVoice.com, Inc.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(6) Significant Acquisition (continued) of redeemable convertible preferred
shares. Each share is convertible, on or after one year after Closing,
into one share of the Company's common stock or, at the shareholder's
option, redeemable by the Company at a price of $2.00 per share, giving
a total valuation of $500,000 to this transaction.
The above acquisition was subject to the Company entering into
agreements with the President and Chief Executive Officer of INS,
including, but not limited to, an employment agreement, consulting
agreement, compensation agreement, stock operation agreement, and stock
grant agreement. The Employment/Compensation Agreement provides
compensation to this individual as Director and Chief Financial Officer
of the Company. In addition, certain stock incentives are provided.
(See Note 9)
(7) Private Offering During the second quarter of 1999, the Company raised
$ 1,150,000 through the issuance of forty-six investment units in the
amount of $ 25,000. Each unit consisted of a two year note in the
principal amount of $ 24,900, with interest payable quarterly at 9% per
annum; a warrant for 18,750 shares of stock of the Company; and
twenty-five senior convertible preferred shares. The warrant exercise
price is 125% of the average closing price of the Company's shares of
common stock for the 30 trading days immediately prior to the offering
date. The senior convertible preferred shares are convertible into
shares of common stock representing 51% of the then issued and
outstanding common stock of the Company. This conversion can only
occur upon an event of default, which is not reasonably cured, of the
two-year notes.
Management anticipates the net proceeds, less initial expenses payable,
will be applied to the business of the Company to provide working
capital.
(8) Subsequent Events - Significant Acquisition During the course of the
audit of the SatLink 3000, Inc. December 31, 1998 financial statements,
certain information was disclosed to the Company. Based on this
information, the Board of Directors elected, on October 29, 1999, to
rescind the acquisition transaction and nullify the above-mentioned
agreements with the President and Chief Executive Officer of SatLink
3000, Inc. These transactions are being treated as if they never
occurred, except for the assumption of an office space lease. The
annually renewable lease obligation commences August 1999, with monthly
payments of $3,862.
F-9
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations.
General
The Company's Form 10SB becomes effect on January 2, 2000. Although not
technically a reporting company under the Securities and Exchange Act of 1934,
as amended, until such time, the Company is voluntarily filing this Form 10QSB
so that current financial information is available to the public and so that
there is no gap between the reports in its Form 10SB and its report on Form
10KSB due for filing on March 31, 2000.
In July 1999, the Company entered into an agreement with RSL Com
U.S.A., Inc. ("RSL") for the purchase of wholesale long distance minutes for
domestic and international calls.. The term is for a period of twelve (12)
months and may be terminated by either party upon thirty (30) days written
notice. The Company is required to purchase a minimum of 100,000 minutes per
month.
In July 1999, the Company entered into an agreement with MetroPlus
Communication Technology, Inc. ("MetroPlus"), wherein the Company granted
MetroPlus the exclusive right to market, advertise and sell the Company's
products and services in certain cities in Canada, Washington and Oregon. As
consideration for these services by MetroPlus to the Company, MetroPlus is
entitled to purchase Company products and service at a wholesale rate. The term
of the agreement is for a period of three (3) years. No date has been scheduled
for this installation.
In August 1999, the Company entered into an agreement with Star
Telecommunications, Inc. for telephone communications between its locations in
New York and Los Angeles and the outbound to termination points around the
world. The initial term is for six (6) months and it is automatically renewable
on a month to month basis .
In August 1999, the Company entered into an agreement with ILD
Communications, Inc. ("IDL") for switching services and long distance wholesale
minutes. The agreement is for a term of one (1) year and is automatically
renewable.
In August, 1999, the Company entered into an agreement with MCI
WorldCom Technologies, Inc. for use of its UUNET network for wholesale
bandwidths. The contract is for a term of three (3) years.
In September 1999, the Company issued 100,000 shares of its
unrestricted Common Stock in exchange for legal services valued at $10,000. The
shares were issued pursuant to an obligation incurred in 1998. The Company
relied upon Section 3(b) of the Securities Act of 1933, as amended (the "Act"),
Rule 504 of Regulation D of the Act ("Rule 504") and Section 517.061(11) of the
Florida Code. A Form D was filed with the SEC.
For purposes of Rule 504, such reliance was based on the following: (i)
the aggregate offering price of the offering of the shares of Common Stock and
warrants did not exceed $1,000,000, less the aggregate offering price for all
securities sold with the twelve months before the start of and during the
offering of shares in reliance on any exemption under Section 3(b) of, or
-1-
<PAGE>
in violation of Section 5(a) of the Act; (ii) no general solicitation or
advertising was conducted by the Company in connection with the offering of any
of the shares; (iii) the fact that the Company had not been since its inception
(a) subject to the reporting requirements of Section 13 or 15(d) of the
Securities Act of 1934, as amended, (b) and an "investment company" within the
meaning of the Investment Company Act of 1940, as amended, or (c) a development
stage company that either had no specific business plan or purpose or had
indicated that its business plan was to engage in a merger or acquisition with
an unidentified company or companies or other entity or person.
For purposes of Florida Code Section 517.061(11), such reliance was
based on the following: (i) sales of the shares of Common Stock were not made to
more than thirty-five (35) persons; (ii) neither the offer nor the sale of any
of the shares was accomplished by the publication of any advertisement; (iii)
all purchasers either had a preexisting personal or business relationship with
one or more of the executive officers of the Company or, by reason of their
business or financial experience, could be reasonably assumed to have the
capacity to protect their own interests in connection with the transaction; (iv)
each purchaser represented that he was purchasing for his own account and not
with a view to or for sale in connection with any distribution of the shares;
and (v) prior to sale, each purchaser had reasonable access to or was furnished
all material books and records of the Company, all material contracts and
documents relating to the proposed transaction, and had an opportunity to
question the executive officers of the Company. Pursuant to Rule 3E- 500.005, in
offerings made under Section 517.061(11) of the Florida Statutes, an offering
memorandum is not required; however each purchaser (or his representative) must
be provided with or given reasonable access to full and fair disclosure of
material information. An issuer is deemed to be satisfied if such purchaser or
his representative has been given access to all material books and records of
the issuer; all material contracts and documents relating to the proposed
transaction; and an opportunity to question the appropriate executive officer.
In the regard, the Company supplied such information and was available for such
questioning.
On November 11, 1999, the Company executed a letter employment
agreement dated November 10, 1999 with Harry R. Bowman. Under the terms of the
agreement, Mr. Bowman is to serve as an Executive Vice President of the Company
for a term of two (2) years at a base salary of $78,000 per year. In addition,
Mr. Bowman, a resident of Pennsylvania, receives health insurance, a paid
vacation, travel twelve (12) times a year to his residence and living,
automobile and subsistence allowances. Mr. Bowman is required to spend at least
three (3) weeks a month at the Company's offices in Phoenix and one (1) week a
month at a location to be decided in Pennsylvania.. The agreement includes a
sixty (60) day probationary period. Under the terms of the agreement, Mr. Bowman
was granted four (4) years options to purchase 50,000 shares of the Company's
Common Stock at an exercise price of $1.75 exercisable one half when the stock
trades for any ten (10) days out of thirty (30) consecutive days at or above
$7.00 per share and one half when the stock trades at or above $12.00 in the
same manner. Any shares acquired under the option must be held for the two-year
period in which Mr. Bowman has committed to work for the Company, and, in the
event the commitment is not met or Mr. Bowman is discharged due to poor
performance or cause, unexercised options expire and shares acquired are
forfeited.
At a meeting of the Board in November 1999, the Company granted to
Russell Watson, a Director of the Company, four (4) years options to purchase
20,000 shares of the Company's Common Stock at an exercise price of $1.75
-2-
<PAGE>
exercisable one half when the stock trades for any ten (10) days out of thirty
(30) consecutive days at or above $7.00 per share and one half when the stock
trades at or above $12.00 in the same manner.
On November 17, 1999, the Company executed a memorandum of
understanding with Telic.net whereby the parties entered a strategic alliance
under which Telic.net will provide enhanced services to the Company and the
Company will acquire from Telic.net gateways at Telic.net's cost for use by the
Company's customers. Although a non-binding agreement, the parties have
expressed the wish to maintain the alliance as long as it is beneficial to each
of them. The Company maintains the right to purchase hardware elsewhere. In
addition, the Company can license certain of Telic.net's software, acquire
certain source codes and Telic.net will modify the Company's gateways to
accommodate the Company's billing system and call flow. It is intended that
Telic.net will provide full network support for the Company thereby advancing
the Company's timetable for full integration of its network.
On December 9, 1999, the shareholders adopted an executive incentive
stock award plan under which 1,000,000 are reserved for grants under the plan.
The plan takes effect on January 1, 2000 and terminates on December 31, 2005.
Under the plan, options can be granted to select employees, officers,
executives, directors and consultant and advisors to the Company. It is intended
that all options be granted at fair market value on a particular date determined
by the Compensation and Option Committee which is made up of James Howson,
Director and Chief Executive Officer and Russell Watson, Director; however, a
lesser price may be set by such Committee. The exercise period for the options
is determined by the Committee but cannot exceed six (6) years.
Discussion and Analysis
The Company, IPVoice Communications, Inc., is a Nevada chartered
development stage corporation which conducted business from its headquarters in
Denver, Colorado until August 1999 when it relocated to Phoenix, Arizona. The
Company was incorporated on February 19,1997, as Nova Enterprises, Inc. and
changed its name to IPVoice Communications in March, 1998.
The Company is principally involved in the internet telephony industry.
Current activities include software and hardware development, raising additional
equity, and negotiating with key personnel and facilities.
Inventory consists mainly of computer parts to be used in the assembly
of units to be sold to customers, or utilized by the Company in its operations.
Once the assembly is complete, the respective computer part costs are charged to
operations or reclassified to property and equipment based on the nature of the
transaction. Inventory is valued at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method.
In March 1998, IPVoice Communications, Inc., a Nevada corporation,
acquired 100% of the issued and outstanding shares of the common stock of
IPVoice Communications, Inc., a Delaware corporation, in a reverse merger, which
was accounted for as a reorganization of the Delaware company.
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The Company is in the development stage, it is acquiring the necessary
operating assets and it is beginning its proposed business. While the Company is
developing tools necessary to enter the internet telephony market, there is no
assurance that any benefit will result from such activities. The Company will
receive limited operating revenues and will continue to incur expenses during
its development, possibly in excess of revenue.
The ability of the Company to continue as a going concern is dependent
upon increasing sales and obtaining additional capital and financing. The
financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern. The Company is currently
seeking financing to allow it to begin its planned operations.
On April 7, 1999, the Company acquired all of the issued and
outstanding common stock of INS. The Company issued 250,000 shares of redeemable
convertible preferred shares, each convertible on or after one (1) year after
Closing into one share of the Company's common stock or, at the sellers' option,
redeemable by the Company at a redemption price of $2.00 per share. The Company
rescinded this transaction ab initio just prior to filing its Form 10SB after
finding that there was no clear link between the ownership of the CIC Code and
INS.
The purchase was done to acquire FCC tariffs, corporate certification
in over 30 states in the United States, and the INS name. At the time of the
acquisition, the Company believed that it was acquiring the CIC. The Company
also obtained all cash, furniture and equipment, staff and office space in
Arizona. An independent business valuation solely of the intangible assets,
which are comprised of the CIC code and state certifications and tariffs,
concluded a fair market value at the date of acquisition of $460,000. During the
course of the audit, it was discovered that clear title may not have passed to
INS and subsequently the Company. The Company believed that the acquisition of
INS would provide the Company with an operational and marketing advantage in the
United States, by being tariffed and, provided clear title had passed to the
Company, by having the CIC.
The acquisition was subject to IPVC entering into agreements with the
Company's President and Chief Executive Officer, including but not limited to,
an employment agreement, consulting agreement, compensation agreement, stock
option agreement, and stock grant agreement. The Employment/Compensation
Agreement provides compensation for services performed in the capacity of
Director and Chief Financial Officer of the Company. In addition, certain stock
incentives were provided. The Board has voted to unwind the transaction ab
initio, to rescind the issuances made under the acquisition and employment
agreements and to terminate Mr. Stazzone's employment.
During the second quarter of 1999, the Company raised $1,150,000
through the issuance of forty-six (46) investment units in the amount of
$25,000. Each unit consisted of a two-year note in the principal amount of
$24,900 including interest payable quarterly in cash at 9% per annum; a warrant
for the purchase of 18,750 shares of restricted stock of the Company; and twenty
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five (25) Senior Convertible Preferred shares. Management anticipates the net
proceeds, less initial expenses payable, will provide sufficient working capital
to meet the Company's capital needs through the first quarter of 2000 and
anticipates that it may generate sufficient revenue and/or be required to raise
additional capital in order to meet its needs through calendar year 2000.
However, there can be no assurance that sufficient revenues will be generated or
that additional capital can be raised, if needed.
On May 24, 1999 the Company formally changed its name to IPVoice.com,
Inc.
Results of Operations for the Three and Nine Months Ended September 30, 1999 and
1998
Overview
From its inception, the Company has incurred losses from operations. As
of September 30, 1999, the Company had cumulative net losses totaling
approximately $1,939,000. Through fiscal 1998, the Company focused primarily on
the design and development of its propriety products, as well as providing
consulting services. During fiscal 1999, management shifted its focus to
aggressively marketing its proprietary products and commencing the installation
of its Gateways.
Financial Position
Working capital as of September 30, 1999 was $673,627, as compared to a
working capital deficit of $153,241 at December 31, 1998. This increase is
primarily due to the issuance of long-term debt in exchange for $1,150,000 in
cash.
Revenues
For the three months ended September 30, 1999 and 1998, the Company had
total revenues of $50,700 and $866, respectively. For the three months ended
September 30, 1999, revenues were comprised solely from the sale of pre-paid
calling cards. For the nine months ended September 30, 1999, total revenues were
$50,700 compared to $41,250 in the same period last year. The increase of $9,450
or 23% is due to revenue from the commencement of the Company's pre-paid calling
card business.
Selling, General, and Administrative Expenses
For the nine months ended September 30, 1999, operating expenses
increased by $1,073,755 or 301% from $356,919 for the nine months ended
September 30, 1998. This increase is primarily related to increases in general
and administrative expenses and professional fees. In accordance with the
Company's marketing plan for fiscal 1999, expenses related to general and
administrative expenses were increased to $524,915 from 172,160 in the same
period last year and expenses related to professional fees were increased to
$492,324 from $26,944 in the same period last year.
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In the past, the Company has focused on the design and development of
proprietary products. For fiscal 1999, the Company has launched an aggressive
marketing plan that is designed to increase worldwide sales of its products.
IPVoice believes that the increased operating expenses incurred during the nine
months ended September 30, 1999 will position the Company to generate increased
revenue in the 2000 fiscal year.
Liquidity and Capital Resources
The Company's operations have been funded primarily from the sale of
its Common Stock and the issuance of long-term debt. At September 30, 1999, the
Company has a $542,000 cash position.
Net cash used for investing for the nine months ended September 30,
1999 was approximately $47,000, representing primarily fixed asset purchases.
In the short term, to fund operations through the fourth quarter, 1999,
the Company will utilize cash on hand and seek additional sources of debt or
equity funding. There can be no assurance such cash on hand will be sufficient
or that the Company will be successful in these funding efforts.
The Company is aware that Peter Stazzone and Satlink 3000 Inc.
("Satlink") intend to bring lawsuits against it as a result of the termination
of Mr. Stazzone's employment, his removal as a Director and the rescission of
the Satlink share exchange. The Company believes it has meritorious defenses to
such suits and substantial counterclaims. However, in the event the Company were
unsuccessful, any judgment which may be rendered, if any, could have a
detrimental effect upon the liquidity and financial condition of the Company.
There can be no assurance that the Company would be in a position to satisfy
such judgment, if rendered. Further, there is no way for the Company to
determine the amount of such judgment, if any, at this time or the potential
impact which such judgment would or could have upon its liquidity and financial
condition.
Impact of the Year 2000 Issue
The Year 2000 Issue is the result of potential problems with computer
systems or any equipment with computer chips that use dates where the date has
been stored as just two digits (e.g. 98 for 1998). On January 1, 2000, any clock
or date recording mechanism including date sensitive software which uses only
two digits to represent the year, may recognize the date using 00 as the year
1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruption of operations, including among other things,
a temporary inability to process transactions, send invoices, or engage in
similar activities.
The Company is aware of the issues associated with the programming code
in existing computer systems as the millennium (Year 2000) approaches. All
software used for the Company's systems is supplied by software vendors or
outside service providers. The Company has confirmed with such providers that
its present software is Year 2000 Compliant.
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The Company believes, after investigation, that all software and
hardware products that it is currently in the process of developing (directly or
through vendors) are Year 2000 compliant. The Company believes, after
investigation, that its own software operating systems are Year 2000 compliant.
The Company believes that it has disclosed all required information
relative to Year 2000 issues relating to its business and operations. However,
there can be no assurance that the systems of other companies on which the
Company's systems rely also will be timely converted or that any such failure to
convert by another company would not have an adverse affect on the Company's
systems.
Forward-Looking Statements
This Form 10-QSB includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. All statements, other
than statements of historical facts, included or incorporated by reference in
this Form 10-QSB which address activities, events or developments which the
Company expects or anticipates will or may occur in the future, including such
things as future capital expenditures (including the amount and nature thereof),
demand for the Company's products and services, expansion and growth of the
Company's business and operations, and other such matters are forward-looking
statements. These statements are based on certain assumptions and analyses made
by the Company in light of its experience and its perception of historical
trends, current conditions and expected future developments as well as other
factors it believes are appropriate in the circumstances. However, whether
actual results or developments will conform with the Company's expectations and
predictions is subject to a number of risks and uncertainties, general economic
market and business conditions; the business opportunities (or lack thereof)
that may be presented to and pursued by the Company; changes in laws or
regulation; and other factors, most of which are beyond the control of the
Company. Consequently, all of the forward-looking statements made in this Form
10-QSB are qualified by these cautionary statements and there can be no
assurance that the actual results or developments anticipated by the Company
will be realized or, even if substantially realized, that they will have the
expected consequence to or effects on the Company or its business or operations.
PART II
Item 1. Legal Proceedings.
On December 9, 1999, the Company was advised that Peter Stazzone
intends to bring a lawsuit against the Company and certain of its advisors
relative to his termination as an Officer and Director of the Company in which
he will allege breach of his employment contract, breach of fiduciary duty by
certain advisors, tortious interference by certain advisors, intentional
misrepresentation by the Company and negligent misrepresentation by the Company.
Although the suit has not been filed at this time, the Company's attorneys were
provided with a draft copy of the suit which they intend to file in Maricopa
County, Arizona. At such time as such suit is brought, the Company intends
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vigorously to defend such action and believes it has meritorious defenses and
counterclaims against Mr. Stazzone.
Also on December 9, 1999, the Company was advised that Satlink 3000
Inc. ("Satlink") intends to bring a lawsuit against the Company for breach of
contract as a result of the Company's decision to rescind the merger
transaction. Although the suit has not been filed at this time, the Company's
attorneys were provided with a draft copy of the suit which they intend to file
in Maricopa County, Arizona. At such time as such suit is brought, the Company
intends vigorously to defend such action and believes it has meritorious
defenses and counterclaims against Satlink.
Prior to the vote by the Shareholders and the Board of Directors of the
Company to rescind the transactions with Satlink and Mr. Stazzone, advice of
counsel was sought as to the appropriateness of such actions. It was determined
that affirmative legal action instigated by the Company was not the best use of
the Company's assets which would be better spent pursuing the Company's
business. However, it was determined that, in the event Mr. Stazzone and/or
Satlink took action, that the Company would defend and pursue all of its
remedies at law and in equity.
The Company knows of no other legal proceedings to which it is a party
or to which any of its property is the subject, which are pending, threatened or
contemplated or any unsatisfied judgments against the Company.
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults in Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the quarter ending September 30, 1999,
covered by this report to a vote of the Company's shareholders, through the
solicitation of proxies or otherwise.
On October 29, 1999, Shareholders representing a majority of shares
entitled to vote, at an emergency meeting called in accordance with the
Company's Bylaws, by a vote of 11,253,666 shares to 0 voted to rescind the Share
Exchange Agreement dated April 7, 1999 with Satlink ab initio and to remove Mr.
Stazzone as a Director for cause. At a meeting of the Board called immediately
thereafter, by unanimous vote, Mr. Stazzone was removed as an Officer for Cause.
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The Company held its annual meeting on December 9, 1999 in Phoenix,
Arizona at which time the shareholders, by a vote of 9,823,189 shares to 0 voted
(1) to have Barbara Will, Anthony Welch, James Howson and Russell Watson serve
on the Board of Directors for another one (1) year term, (2) ratified the
appoint of Durland & Company, C.P.A's as its auditors for the year ending
December 31, 1999 and (3) adopted a stock award plan which allows for up to
1,000,000 shares to be reserved for grants under the plan.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits required to be filed herewith by Item 601 of Regulation
S-B, as described in the following index of exhibits, are incorporated herein by
reference, as follows:
Exhibit No. Description
- -------------------------------------------------------------------------------
3.(i).1 Articles of Incorporation of Nova Enterprises, Inc. filed
February 19, 1997.
3.(i).2 Certificate of Amendment of Articles of Incorporation changing
name to IPVoice Communications, Inc. filed March 24, 1998.
3.(i).3 Certificate of Amendment of Articles of Incorporation changing
name to IPVC.com, Inc.
3.(i).4 Certificate of Amendment of Articles of Incorporation changing
name to IPVoice.com, Inc.
3.(ii).1 Bylaws of Nova Enterprises, Inc.
4.1 Form of Private Placement Offering of 1,600,000 common shares
at $0.01 per share.
4.2 Form of Private Placement Offering of 992,500 common shares at $1.00
per share.
4.3 Form of Private Placement Offering of 100,000 common shares at $0.50
per share.
4.4 Form of Private Placement Offering of 1,000,000 common shares at
$0.15 per share.
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4.5 Form of Private Placement Offering of 1,250,000 common shares at
$0.40 per share.
4.6 Form of Private Placement Offering of 104 Units at $25,000 per unit.
4.7 Form of Promissory Note for Private Placement Offering of 104 Units
at $25,000 per unit.
4.8 Form of Warrant for Private Placement Offering of 104 Units at
$25,000 per unit.
10.1 Agreement dated March 1998 with Nova Enterprises, Inc.
10.2 Agreement dated April 1999 with Independent Network Services.
10.3 Agreement dated February 1998 with Natural MicroSystems Corporation.
10.4 Agreement dated June 1999 with ICG Telecom Group, Inc.
10.5 Agreement dated August 1999 with RSL Com U.S.A., Inc.
10.6 Agreement dated July 1999 with Star Telecommunications, Inc.
10.7 Agreement dated August 1999 with ILD Communications, Inc.
10.8 Agreement dated June 1999 with Level 3 Communications LLC.
10.9 Agreement dated August, 1999 with Worldcom Technologies, Inc.
10.10 Agreement dated March 1999 with Teleco Service International, Inc.
10.11 Agreement dated March 1999 with Billion Telecommunication
Services, Ltd.
10.12 Agreement dated May 1999 with Firstnet Telephony Ltd.
10.13 Agreement dated July 1999 with MetroPlus Communication
Technology, Inc.
10.14 Agreement dated February 1999 with BlueGrass Net.
10.15 Agreement dated July 1998 with The Armstrong International
Group, Inc.
10.16 Agreement dated February 1999 with International Investment
Partners, Ltd.
10.17 Agreement dated March 1999 with Kenneth M. Brown
10.18 Agreement dated April 1999 with Netgenie.com LLC
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10.19 Agreement dated April 1999 with Benae International Inc.
10.20 Consulting Agreement dated November 1997 with Condor Worldwide, Ltd.
10.21 Consulting Agreement dated July 1998 with Calpe, Ltd.
10.22 Consulting Agreement dated July 1998 with The Investor
Communications Group, Inc.
10.23 Consulting Agreement dated July 1998 with Corporate Imaging.
10.24 Consulting Agreement dated September 1998 with First Capital
Partners, Inc.
10.25 Consulting Agreement dated October 1998 with International
Investment Partners, Ltd.
10.26 Consulting Agreement dated October 1998 with Insidestock.com, Inc.
10.27 Consulting Agreement dated March 1999 with Buying Power Network.
10.28 Employment Agreement dated April 1998 with Barbara S. Will.
10.29 Employment Agreement dated April 1998 with Anthony K. Welch.
10.30 Employment Agreement dated April 1999 with Peter M. Stazzone.
10.31 Lease effective August 1, 1999 for Phoenix offices
10.32 * Employment Agreement dated November 10, 1999 with Harry R. Bowman
10.33 * Memorandum of Understanding between the Company and Telic.net dated
November 17, 1999
10.34 * Executive Incentive Stock Awards Plan adopted by Shareholders on
December 9, 1999
27.1 * Financial Data Sheet.
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(* Filed herewith, all other exhibits previously filed as exhibits to the
Company's Form 10-SB.
(b) No Reports on Form 8-K were filed during the quarter ended September
30, 1999.
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SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
IPVoice.com, Inc. (Registrant)
Date: December 22, 1999 By:/s/ Barbara S,. Will
------------------------------------
Barbara S. Will, Director, President
and Chief Operating Officer
By:/s/ James L, DeSalle
------------------------------------
James L. DeSalle, Acting Chief
Financial Officer
[Form 10QSB - 9/30/99]
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EXHIBIT 10.32
November 10, 1999
Mr. Harry R. Bowman
181 Woodland Drive
York, PA 17403
Dear Bud:
IPVoice.com, Inc. agrees to provide you with employment and the compensation
package described herein, all components and provisions of which, as well as
your employment in any capacity by IPVC, shall remain subject to revocation or
change by IPVC at its will, at any time in its sole discretion, upon written
notification of such change or revocation, but without the obligation on the
part of IPVC to provide you with any prior notice of such change or revocation,
it is understood and agreed that should you or the Company decide to terminate
employment for any reason, other than for cause, at least a month's advance
notice is needed for this professional position.
Employment Date: November 22, 1999
Position: Executive Vice President
Commitment: Employee must commit to working in the Arizona
Corporate Headquarters for at least two years.
Probationary Period: 60 days
BASE BENEFITS:
Paid health insurance
3 weeks paid vacation
12 paid advance booked tickets to Baltimore, MD per year
1 week per month to be spent working on IPVC matters in Pennsylvania,
at a location to be decided by Company.
SALARY
Base Salary as described herein will be payable semi-monthly or as per
IPVC policy as amended from time to time. Such salary, and other
components of this Compensation package which are or which become
subject to State and Federal Witholdings, and any other
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taxes or other funds required to be withheld by any Government agency
so empowered, shall receive such treatment IPVC.
Annual Base Salary of Seventy Eight Thousand Dollars ($78,000.00)
LIVING EXPENSES:
Apartment allowance to be mutually determined
Car allowance or car provided to mutually determined
$200.00 per calendar month subsistence allowance
STOCK:
Four-year stock options for 50,000 shares at $1.75 per share, one half
to become exercisable when the stock trades for any 10 days out of 30
consecutive days at or above $7.00 per share; and the other half to
become exercisable when the stock trades at or above $12.00 measured in
the same manner.
The shares obtained by exercising options must be held until the end of
the two-year commitment. All unexercised options expire and shares
acquired by options are forfeited, at cost, at the company's
discretion, if employee unilaterally decides not to fulfill his two
year commitment or if he is discharged due to poor performance or for
cause.
CONFIDENTIALITY AGREEMENT:
Additionally, and as a condition of and part of the foregoing agreement, you
hereby agree to indemnify and save IPVC harmless from any and all claims,
disputes or actions arising out of any former employer's claims of unfair
competition, claims of breach of any employment agreements and/or any agreements
not to compete. You also agree to provide IPVC with copies of any such written
employment agreements or agreements not to compete.
NON-COMPETE AGREEMENT:
As a condition of IPVC offering you this compensation package, you agree that
during the term of this agreement and for a period of one (1) year thereafter,
you shall not directly or indirectly in any capacity, either as an individual,
partner, employee, agent, officer, stockholder, friend, associate or otherwise,
compete against IPVC or any of its subsidiaries, solicit, induce, initiate
contact with or represent any customers, employees or competitors of IPVC or any
of its subsidiaries existing at the time of the execution of this agreement or
thereafter (including those customers or competitors previously serviced or
contacted by you prior to the time of this Agreement and which are hereinafter
introduced by you to IPVC or any IPVC subsidiary as a new customer) with respect
to the administration, selling, marketing or providing the same or similar
services or products provided
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<PAGE>
by IPVC or any IPVC subsidiary to any of its customers wherever IPVC or any of
its subsidiaries does business. Nor will you solicit or attempt to solicit,
divert or attempt to divert, or take away from IPVC or any of its subsidiaries
any of its employees or any of its business with any of its customers or
suppliers. You agree that the provisions herein relative to the duration, scope
and geographic area of the agreement not to compete are reasonable and will not
prevent you from earning a livelihood if they are enforce. If any court of
competent jurisdiction should determine that the duration, scope or geographic
area set forth herein exceeds the maximum duration, scope or geographic area
which said court deems reasonable and enforceable, it is the intention of the
parties that the provisions herein not be deemed invalid and enforceable, but
rather that the duration, scope or geographic area shall be deemed to be those
which the court deems to be the maximum enforceable restrictions, but only with
respect to the operation of the provisions in the jurisdiction of the court that
has made such adjudication. Additionally, this covenant on your part shall be
construed as an agreement independent of any other provisions to this agreement
and the existence of any claim or cause of action of yours against IPVC or any
IPVC subsidiary whether predicated on this Agreement or otherwise, shall not
constitute a defense at law or inequity to the enforcement by IPVC or any of its
subsidiaries of the covenant not to compete.
Should the provisions of the entirety of this agreement meet your approval and
understanding, kindly sign in the space provided below and return one of the two
originals of this agreement to me at the address shown on Page One of this
Agreement.
Sincerely,
/s/ James Howson
- -----------------------
James Howson
Chairman
My signature below attest to my understanding of and agreement with the
foregoing:
- -------------
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Date
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EXHIBIT 10.33
Memorandum of Understanding
---------------------------------------------------
Wednesday, November 17, 1999
Made between Telic and IPVoice.Com.
-Both Parties wish to enter into a strategic alliance that proves
mutually beneficial. -Both Parties shall maintain this relationship all
long as it continues to prove beneficial. -Both Parties agree that this
MOU is not binding and is meant to serve as a reference point for our
relationship while a more detailed and formal agreement is created.
Context
1. Telic wishes to provide enhanced services to its partners by offering a
business management system to said partners. Currently Telic is not is
possession of such a "billing" system and is not in the position to
develop one in a timely fashion.
2. IPVoice.Com wishes to provide a high-density gateway solutions to its
customers. IPVoice.Com is not currently in a position to develop this
high-density solution in a timely fashion. IPVoice.Com wishes to
provide a PC-based telephone that functions with a high-density gateway
solution.
3. Both parties believe that access to each other's networks and
facilities will prove to be an advantageous situation for all
concerned.
4. Both parties believe that mutual cooperation in both technology and
network expansion shall prove to be a highly beneficial circumstance.
Regarding Gateways
1. Telic.Net will allow IPVoice.Com to purchase gateways at Telic.Net's
purchase Hardware cost. Telic agrees to supply vendor invoices for
hardware purchases.
2. IPVoice shall have the right to purchase equivalent hardware from its own
sources.
3. IPVoice shall receive training from Telic in order to construct gateways.
4. IPVoice.Com can license the TeraVox (card control software) software
from Telic.Net at its best current price, not to exceed $50/port, (this
includes any Solaris drivers to support the AudioCode IP card). Telic
agrees to supply vendor invoices for software purchases.
5. IPVoice.Com can have a copy of the source code for both the "LinkNet"
and "Billing" interface software from Telic.Net upon request. This
source code will not include any Telic
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specific features that fall into the category of "new products" that
Telic has developed at its expense for its own marketing purposes.
6. Telic will modify the gateway software to accommodate IPVoice's billing
interface and call flow.
7. Gateways shall have fax, voice and softphone capability.
PC SoftPhone
1. IPVoice.Com can purchase the softphone for $2 per copy. IPVoice will
pay Telic the amount once the customer has activated and paid for the
SoftPhone service from IPVoice.
2. Telic shall have access to all reports required to audit this process.
3. Telic.Net shall provide the ability to purchase the source code for this
software.
4. Telic.Net will make best efforts to modify the softphone to work with
MultiCom and provide a small amount of custom labeling and cosmetic
changes. These efforts being driven by IPVoice business commitments for
the purchase of the softphone.
5. IPVoice shall have the right to custom label this software for its
partners or other promotional purposes.
Network Installation and Support
1. Telic.Net will provide full network support for all IPVoice.Com. This
includes: Troubleshooting, 24/7 Network monitoring, assistance in
provisioning, quality assurance and monitoring.
2. IPVoice.Com will pay .1 cent (one tenth of a cent) for each call record
passed through the network supported by Telic each month per month.
3. Telic.Net will install IPVoice.Com gateways. Telic.Net will charge
IPVoice travel expense plus a reasonable on-site install charge for
this service.
Billing Services
1. IPVoice.Com will provide Telic up to 4 MultiCom billing systems
(run-time software only) IPVoice.Com will support Telic and provide
guidance on required hardware. Telic shall pay for any Progress and
Unix license (at IPVoice cost) required to run a server.
2. Telic.Net will pay IPVoice.Com .1 cent per call record (one tenth of
one cent) created across every billing server within each month, per
month.
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3. IPVoice.Com will provide Telic.Net with all enhancement to MultiCom as
they are released by IPVoice.Com.
4. Telic.Net can have the source code to the MultiCom socket server
interface. this allows Telic to create enhanced features that are
specific to its purposes without relying upon IPVoice to provide these
enhancements.
General
1. IPVoice.Com and Telic.Net agree to make mutual best efforts to
accommodate the software features required by the other.
2. Both parties agree to assist the other in all manner of network,
carrier, facility, technology endeavors that bring to both.
3. Telic.Net shall be the first organization (and have preferred status)
of the "IPVoice.Com Interoperability Initiative" ("i3").
4. Both parties shall work together to insure network interoperability and
billing interoperability.
5. Both parties shall work closely together to enhance the others
technology development and value.
Carrier and Facility Rights
1. IPVoice and Telic shall have the right to place equipment at each other's
sites at cost.
2. IPVoice and Telic shall have the rate to purchase from each other, at
cost, pro rata, IP bandwidth between facilities from each other's
current bandwidth circuits or utilize existing contracts for said
bandwidth to install new IP connection. Each party shall have the
option to insist that the other order additional bandwidth should it be
required. (Each party shall be responsible for providing any equipment
required for this purpose.) The purpose of this is to enhance the
other's ability to acquire much-needed bandwidth from the other's
resources.
3. IPVoice and Telic shall have the right to order carrier circuits from the
other at install cost.
4. IPVoice and Telic shall provide each other favorable wholesale rates
from their respective carriers.
/s/ Anthony Welch /s/ Eric Hernaez
- -------------------------- -------------------------
Anthony K. Welch Eric Hernaez
Director, IPVoice.Com President, Telic.Net
-18-
EXHIBIT 10.34
IPVOICE.COM, INC.
2000 EXECUTIVE INCENTIVE PLAN
ARTICLE I PURPOSE
1:1 GENERAL The purpose of the IPVoice.com, Inc. 2000 Executive
Incentive Plan (the "Plan") is to promote the success, and enhance the value, of
IPVoice.com, Inc. (the "Company") by linking the personal interests of selected
employees, officers, executives, and directors of, and consultants and advisors
to, the Company to those of Company stockholders and by providing such
individuals with an incentive for outstanding performance in order to generate
superior returns to shareholders of the Company. The Plan is further intended to
provide flexibility to the Company in its ability to motivate, attract, and
retain the services of employees, officers, executives, and directors of, and
consultants and advisors to, the Company upon whose judgment, interest, and
special effort the successful conduct of the Company's operation is largely
dependent.
ARTICLE 2 EFFECTIVE DATE
2.1 EFFECTIVE DATES. The Plan is effective as of January 1, 2000 (the
"Effective Date"), subject to the subsequent approval of the Plan by the
Company's shareholders at its next regularly scheduled meeting after the
Effective Date and shall terminate on December 31, 2005.
ARTICLE 3 DEFINITIONS AND CONSTRUCTION.
3.1 DEFINITIONS. When a word or phrase appears in this Plan with the
initial letter capitalized, and the word or phrase does not commence a sentence,
the word or phrase shall generally be given the meaning ascribed to it in this
Section or in Sections 1.1 or 2.1 unless a clearly different meaning is required
by the context. The following words and phrases shall have the following
meanings:
(a) "Award" means any Option granted to a Participant under
the Plan.
(b)"Award Agreement" means any written agreement, contract, or
other instrument or document evidencing an Award.
(c)"Board" means the Board of Directors of the Company.
(d)"Change of Control" means any of the following:
(1) any merger of the Company in which the Company or
a wholly owned subsidiary of the Company is not the continuing or surviving
entity, or pursuant to which Stock would be converted into cash, securities or
other property, other than a merger of the Company in which the holders of the
Company's Stock immediately prior to the merger have the same
-19-
<PAGE>
proportionate ownership of beneficial interest of common stock or other voting
securities of the surviving entity immediately after the merger;
(2) any sale, lease, exchange or other transfer (in
one transaction or
a series of related transactions) of assets or earning power aggregating more
than 40% of the assets or earning power of the Company and its subsidiaries
(taken as a whole), other than pursuant to a sale-leaseback, structured finance
or other form of financing transaction;
(3) any plan or proposal for liquidation or
dissolution of the Company that
the shareholders shall approve;
` (4) any person (as such term is used in Section 13(d) and 14(d)(2) of the
Exchange Act), other than any current shareholder of the Company or affiliate
thereof or any employee benefit plan of the Company or any subsidiary of the
Company or any entity holding shares of capital stock of the Company for or
pursuant to the terms of any such employee benefit plan in its role as an agent
or trustee for such plan, shall become the beneficial owner (within the meaning
of Rule 1 3d-3 under the Exchange Act) of 20% or more of the Company's
outstanding Stock; or
(5) during any period of two consecutive years,
individuals who at the beginning of such period shall fail to constitute a
majority thereof, unless the election, or the nomination for election by the
Company's shareholders, of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of the period. (e) "Code" means the Internal Revenue Code of 1986, as
amended
(f) "Committee" means the committee of the Board described in
Article 4.
(g) "Covered Employee" means an Employee who is a "covered
employee" within the meaning of Section 162(m) of the Code.
(h) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time.
(i) "Fair Market Value" means, as of any given date, the fair
market value of Stock or other property on a particular date determined by such
methods or procedures as may be established from time to time by the Committee.
(j) "Non-Employee Director" means a member of the Board who
qualifies as a "Non-Employee Director" as defined in Rule 16b-3(b)(3) of the
Exchange Act, or any successor definition adopted by the Board.
(k) "Non-Qualified Stock Option" means an Option that is not
intended to be an Incentive Stock Option.
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<PAGE>
(l) "Option" means a right granted to a Participant under
Article 7 of the Plan to purchase Stock at a specified price, under specified
conditions, during specified time periods.
An Option is a Non-Qualified Stock Option
(m) "Participant" means a person whom, as an employee,
officer, executive or director of, or as a consultant or advisor to, the Company
or any Subsidiary, has been granted an Award under the Plan.
(n)"Plan" means this IPVoice.com, Inc. 2000 Executive Incentive
Plan, as amended from time to time.
(o) "Stock" means the common stock of the Company and such
other securities of the Company that may be substituted for Stock pursuant to
Article 1 2.
(p) "Subsidiary" means any corporation of which a majority of
the outstanding voting stock or voting power is beneficially owned directly or
indirectly by the Company.
ARTICLE 4 ADMINISTRATION
4.1 COMMITTEE. The Plan shall be administered by the Board or a
Committee appointed by, and which serves at the discretion of, the Board. If the
Board appoints a Committee, the Committee shall consist of at least two
individuals, each of whom qualifies as (i) a Non- Employee Director, and (ii) an
"outside director" under Code Section 162(m) and the regulations issued
thereunder. Reference to the Committee shall refer to the Board if the Board
does not appoint a Committee.
4.2 ACTION BY THE COMMITTEE. A majority of the Committee shall
constitute a quorum. The acts of a majority of the members present at any
meeting at which a quorum is present and acts approved in writing by a majority
of the Committee in lieu of a meeting shall be deemed the acts of the Committee.
Each member of the Committee is entitled to, in good faith, rely or act upon any
report or other information furnished to that member by any officer or other
employee of the Company or any Subsidiary, the Company's independent certified
public accountants, or any executive compensation consultant or other
professional retained by the Company to assist in the administration of the
Plan. No member of the Committee shall be able to take action with respect to
any Award granted to that particular member.
4.3 AUTHORITY OF COMMITTEE. The Committee has the exclusive power,
authority and discretion to:
(a) Designate Participants to receive Awards;
(b) Determine the number of Awards to be granted and the
number of shares of Stock to which an Award will relate;
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<PAGE>
(c) Determine the terms and conditions of any Award granted
under the Plan including but not limited to, the exercise price, grant price, or
purchase price, any restrictions or limitations on the Award, any schedule for
lapse of forfeiture restrictions or restrictions on the exercisability of an
Award, and accelerations or waivers thereof, based in each case on such
considerations as the Committee in its sole discretion determines;
(d) Amend, modify, or terminate any outstanding Award, with
the Participant's consent unless the Committee has the authority to amend,
modify or terminate Award without the Participant's consent under any other
provision of the Plan;
(e) Determine whether, to what extent, and under what
circumstances an Award may be settled in, or the exercise price of an Award may
be paid in, cash, Stock, other Awards, or other property, or an Award may be
canceled, forfeited, or surrendered;
(f) Prescribe the form of each Award Agreement, which need not
be identical for each Participant;
(g) Decide all other matters that must be determined in
connection with an Award
(h) Establish, adopt or revise any rules and regulations as it
may deem necessary or advisable to administer the Plan; and
(i) Make all other decisions and determinations that may be
required under the Plan or as the Committee deems necessary or advisable to
administer the Plan.
4.4 DECISIONS BINDING. The Committee's interpretation of the Plan, any
Awards granted under the Plan, any Award Agreement and all decisions and
determinations by the Committee with respect to the Plan are final, binding, and
conclusive on all parties.
ARTICLE 5 SHARES SUBJECT TO THE PLAN
5.1 NUMBER OF SHARES. Subject to adjustment provided in Section 9.1,
the aggregate number of shares of Stock reserved and available for grant under
the Plan shall be 1,000,000.
5.2 LAPSED AWARDS. To the extent that an Award terminates, expires or
lapses for any reason, any shares of Stock subject to the Award will again be
available for the grant of an Award under the Plan and shares settled in cash
will again be available for grant under the Plan.
5.3 STOCK DISTRIBUTED. Any Stock distributed pursuant to an Award may
consist, in whole or in part, of authorized and unissued Stock, treasury Stock
or Stock purchased on the open market.
5.4 LIMITATION ON NUMBER OF SHARES SUBJECT TO AWARDS.
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<PAGE>
Notwithstanding any provision in the Plan to the contrary, and subject to the
adjustment in Section 9.1, the maximum number of shares of Stock with respect to
one or more Awards that may be granted to any one Participant during the
Company's fiscal year shall be 100,000.
ARTICLE 6 ELIGIBILITY AND PARTICIPATION
6.1 ELIGIBILITY
(a) GENERAL. Persons eligible to participate in this Plan
include all employees, officers, executives, and directors of, and consultants
and advisors to, the Company or a Subsidiary, as determined by the Committee,
including such individuals who are also members of the Board.
(b) FOREIGN PARTICIPANTS. In order to assure the viability of
Awards granted to Participants employed in foreign countries, the Committee may
provide for such special terms as it may consider necessary or appropriate to
accommodate differences in local law, tax policy, or custom. Moreover, the
Committee may approve such supplements to, or amendments, restatements, or
alternative versions of the Plan as it may consider necessary or appropriate for
such purposes without thereby affecting the terms of the Plan as in effect for
any other purpose; provided, however, that no such supplements, amendments,
restatements, or alternative versions shall increase the share limitations
contained in Section 5.1 of the Plan.
6.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the
Committee may, from time to time, select from among all eligible individuals,
those to whom Awards shall be granted and shall determine the nature and amount
of each Award. No individual shall have any right to be granted an Award under
this Plan.
ARTICLE 7 STOCK OPTIONS
7.1 GENERAL. The Committee is authorized to grant Options to
Participants on the following terms and conditions:
(a) EXERCISE PRICE. The exercise price per share of Stock
under an Option shall be determined by the Committee and set forth in the Award
Agreement. It is the intention under the Plan that the exercise price for any
Option shall not be less than the Fair Market Value as of the date of grant;
provided, however that the Committee may, in its discretion, grant Options with
an exercise price of less than Fair Market Value on the date of grant.
(b) TIME AND CONDITIONS OF EXERCISE. The Committee shall
determine the time or times at which an Option may be exercised in whole or in
part. The Committee shall also determine the performance or other conditions, if
any, which must be satisfied before all or part of an Option may be exercised.
If an option holder ceases to be in the continuous, full-time employment of the
Company for any reason, all options not yet exercised will lapse. If employment
is terminated for any reason, including discharge, retirement, death or
disability, prior to the attainment of a price objective all options will lapse.
-23-
<PAGE>
(c) PAYMENT. The Committee shall determine the methods by
which the exercise price of an Option may be paid, the form of payment,
including, without limitation, cash, shares of Stock (through actual tender or
by attestation), or other property, and the methods by which shares of Stock
shall be delivered or deemed to be delivered to Participants. With Company's
concurrence, the Participant may elect to pay income taxes on the shares at the
time they are exercised by surrendering to the Company optioned shares with
aggregate market value equal to or less than the applicable taxes.
(d) EVIDENCE OF GRANT. All Options shall be evidenced by a
written Award Agreement between the Company and the Participant. The Award
Agreement shall include such additional provisions as may be specified by the
Committee.
ARTICLE 8 PROVISIONS APPLICABLE TO AWARDS
8.1 STAND-ALONE, TANDEM. AND SUBSTITUTE AWARDS. Awards granted
under the Plan may, in the discretion of the Committee, be granted either alone
or in addition to, in tandem with, or in substitution for, any other Award
granted under the Plan. If an Award is granted in substitution for another
Award, the Committee may require the surrender of such other Award in
consideration of the grant of the new Award. Awards granted in addition to or in
tandem with other Awards may be granted either at the same time as or at a
different time from the grant of such other Awards.
8.2 EXCHANGE PROVISIONS. The Committee may at any time offer to
exchange or buy out any previously granted Award for a payment in cash, Stock,
or another Award (subject to Section 12.1), based on the terms and conditions
the Committee determines and communicates to the Participant at the time the
offer is made.
8.3 TERM OF AWARD. The term of each Award shall be for the period as
determined by the Committee not to exceed six years.
8.4 FORM OF PAYMENT FOR AWARDS. Subject to the terms of the Plan and
any applicable law or Award Agreement, payments or transfers to be made by the
Company or a Subsidiary on the grant or exercise of an Award may be made in such
forms as the Committee determines at or after the time of grant, including
without limitation, cash, Stock, other Awards, or other property, or any
combination, and may be made in a single payment or transfer, in installments,
or on a deferred basis, in each case determined in accordance with rules adopted
by, and at the discretion of, the Committee.
8.5 LIMITS ON TRANSFER. No right or interest of a Participant in any
Award may be pledged, encumbered, or hypothecated to or in favor of any party
other than the Company or a Subsidiary, or shall be subject to any lien,
obligation, or liability of such Participant to any other party other than the
Company or a Subsidiary. Except as otherwise provided by the Committee, no Award
shall be assignable or transferable by a participant other than by will or the
laws of descent and distribution.
-24-
<PAGE>
8.6 BENEFICIARIES. Notwithstanding Section 8.5, a Participant may, in
the manner determined by the Committee, designate a beneficiary to exercise the
rights of the Participant and to receive any distribution with respect to any
Award upon the Participant's death. A beneficiary, legal guardian, legal
representative, or other person claiming any rights under the Plan is subject to
all terms and conditions of the Plan and any Award Agreement applicable to the
Participant, except to the extent the Plan and Award Agreement otherwise
provide, and to any additional restrictions deemed necessary or appropriate by
the Committee. If the Participant is married, a designation of a person other
than the Participant's spouse as his beneficiary with respect to more than 50
percent of the Participant's interest in the Award shall not be effective
without the written consent of the Participant's spouse. If no beneficiary has
been designated or survives the Participant, payment shall be made to the person
entitled thereto under the Participant's will or the laws of descent and
distribution. Subject to the foregoing, a beneficiary designation may be changed
or revoked by a Participant at any time provided the change or revocation is
filed with the Committee.
8.7 STOCK CERTIFICATES All Stock certificates delivered under the Plan
are subject to any stop-transfer orders and other restrictions as the Committee
deems necessary or advisable to comply with Federal or state securities laws,
rules and regulations and the rules of any national securities exchange or
automated quotation system on with the Stock is listed, quoted, or traded. The
Committee may place legends on any Stock certificate to reference restrictions
applicable to the Stock.
8.8 ACCELERATION UPON A CHANGE OF CONTROL. If a Change of Control
occurs, all outstanding Options shall become fully exercisable and all
restrictions on outstanding Awards shall lapse, except in the event that the
surviving or resulting entity agrees to assume the Awards on terms and
conditions that substantially preserve the Participant's rights and benefits of
the Award then outstanding. Upon, or in anticipation of, such an event, the
Committee may cause every Award outstanding hereunder to terminate at a specific
time in the future and shall give each Participant the right to exercise Awards
during a period of time as the Committee, in its sole and absolute discretion,
shall determine, except in the event that the surviving or resulting entity
agrees to assume the Awards on terms and conditions that substantially preserve
the Participant's rights and benefits of the Award then outstanding.
ARTICLE 9 CHANGES IN CAPITAL STRUCTURE
9.1 GENERAL. In the event a stock dividend is declared upon the Stock
the shares of Stock then subject to each Award (and the number of shares subject
thereto) shall be increased proportionately without any change in the aggregate
purchase price therefor. In the event the Stock shall be changed into or
exchanged for a different number or class of shares of Stock or of another
corporation, whether through reorganization recapitalization, stock split-up,
combination of shares, merger or consolidation, there shall be substituted for
each such share of Stock then subject to each Award the number and class of
shares of Stock into which each outstanding share of Stock shall be so
exchanged, all without any change in the aggregate purchase price for the shares
then subject to each Award.
-25-
<PAGE>
ARTICLE 10 AMENDMENT, MODIFICATION AND TERMINATION
10.1 AMENDMENT. MODIFICATION AND TERMINATION. With the approval of the
Board, at any time and from time to time, the Committee may terminate amend or
modify the Plan as it pertains to subsequent awards; provided, however, that to
the extent necessary and desirable to comply with any applicable law,
regulation, or stock exchange rule, the Company shall obtain shareholder
approval of any Plan amendment in such a manner and to such a degree as
required.
10.2 AWARDS PREVIOUSLY GRANTED No termination, amendment, or
modification of the Plan shall adversely affect in any material way any Award
previously granted under the Plan, without the written consent of the
Participant.
ARTICLE 11 GENERAL PROVISIONS
11.1 NO RIGHTS TO AWARDS. No Participant, employee, or other person
shall have any claim to be granted any Award under the Plan, and neither the
Company nor the Committee is obligated to treat Participants, employees, and
other persons uniformly.
11.2 NO STOCKHOLDERS RIGHTS. No Award gives the Participant any of the
rights of a stockholder of the Company unless and until shares of Stock are in
fact issued to such person in connection with such Award
11.3 WITHHOLDING. The Company or any Subsidiary shall have the
authority and the right to deduct or withhold, or require a Participant to remit
to the Company, an amount sufficient to satisfy Federal, state, and local taxes
(including the Participant's FICA obligation) required by law to be withheld
with respect to any taxable event arising as a result of this Plan.
11.4 NO RIGHT TO EMPLOYMENT. Nothing in the Plan or any Award Agreement
shall interfere with or limit in any way the right of the Company or any
Subsidiary to terminate any Participant's employment at any time, nor confer
upon any Participant any right to continue in the employ of the Company or any
Subsidiary.
11.5 UNFUNDED STATUS OF AWARDS. The Plan is intended to be an
"unfunded" plan for incentive compensation. With respect to any payments not yet
made to a Participant pursuant to an Award, nothing contained in the Plan or any
Award Agreement shall give the Participant any rights that are greater than
those of a general creditor of the Company or any Subsidiary.
11.6 INDEMNIFICATION. To the extent allowable under applicable law,
each member of the Committee or of the Board shall be indemnified and held
harmless by the Company from any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by such member in connection with or
resulting from any claim, action, suit, or proceeding to which he or she may be
a party or in which he or she may be involved by reason of any action or failure
to act under the Plan and against and from any and all amounts paid by him or
her in satisfaction of judgment in such action, suit, or proceeding against him
or her provided he or she gives the Company an opportunity, at its own expense,
-26-
<PAGE>
to handle and defend the same before he or she undertakes to handle and defend
it on his or her own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be
entitled under the Company's Articles of Incorporation or By-Laws, as a matter
of law, or otherwise, or any power that the Company may have to indemnify them
or hold them harmless.
11.7 RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall be
taken into account in determining any benefits under any pension, retirement,
savings, profit sharing, group insurance, welfare or other benefit plan of the
Company or any Subsidiary.
11.8 EXPENSES. The expenses of administering the Plan shall be borne by
the Company and its Subsidiaries.
11.9 TITLES AND HEADINGS. The titles and headings of the Sections in
the Plan are for convenience of reference only, and in the event of any
conflict, the text of the Plan, rather than such. titles or headings, shall
control.
11.10 FRACTIONAL SHARES. No fractional shares of stock shall be issued
and the Committee shall determine, in its discretion, whether cash shall be
given in lieu of fractional shares or whether such fractional shares shall be
eliminated by rounding up or down as appropriate.
11.11 SECURITIES LAW COMPLIANCE. With respect to any person who is, on
the relevant date, obligated to file reports under Section 16 of the Exchange
Act, transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent
any provision of the Plan or action by the Committee fails to so comply, it
shall be void to the extent permitted by law and voidable as deemed advisable by
the Committee.
11.12 GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company
to make payment of awards in Stock or otherwise shall be subject to all
applicable laws, rules, and regulations, and to such approvals by government
agencies as may be required. The Company shall be under no obligation to
register under the Securities Act of 1933, as amended (the "1933 Act"); any of
the shares of Stock paid under the Plan. If the shares paid under the Plan may
in certain circumstances be exempt from registration under the 1933 Act, the
Company may restrict the transfer of such shares in such manner as it deems
advisable to ensure the availability of any such exemption.
11.13 GOVERNING LAW. The Plan and all Award Agreements shall be
construed in accordance with and governed by the laws of the State of Arizona.
-27-
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