Securities and Exchange Commission
Washington DC 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
Saratoga International Holdings Corp.
(Name of Small Business Issuer in its charter)
Nevada 98-0169082
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8756 - 122nd Avenue NE Kirkland, WA 98033
(Address of principal executive offices)
425-827-7817
------------
Issuer's telephone number
Securities to be registered under Section 12(b) of the Act: NONE
Securities to be registered under Section 12(g) of the Act:
$0.001 Par Value Voting Common Shares
-------------------------------------
(Title of Class)
Documents Incorporated by Reference: NONE
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PART I
Item 1 Description of Business
- - Organization and General History
The following summarizes the organizational history of Saratoga
International Holdings Corp. herein referred to as "Saratoga", "SHCC" or
the "Company":
In December 1997, the Company began development stage activity under the
corporate name Western Oil & Tire Distributors Inc. ("Western"), a
privately owned company originally incorporated under the name FCP Ltd. on
June 1, 1993 in the State of Washington which had no operating activity
until fiscal 1998. The corporate name was changed to Western in December,
1997. Western's original business development plan adopted in December,
1997 was to engage in the acquisition of retail and wholesale tire
businesses and petroleum product distribution companies ("The WOTD
Project").
In July 1998 the shareholders of Western exchanged all of their common
shares for controlling interest in Knightsbridge Corporation
("Knightsbridge") a company originally incorporated on June 17, 1996 in the
State of Nevada and the surviving corporation's name was changed to
Western.
Since the former shareholders of Western owned a majority of the
outstanding stock of the surviving corporation following its July 1998
merger with Knightsbridge, the combination of the two companies has been
treated as a recapitalization of Western and the information and historical
financial statements presented herein are those of Western.
On March 24, 1999 the corporate name was changed from Western to Saratoga
International Holdings Corp. and the WOTD Project was spun-off to the
shareholders of the Company as of March 19, 1999. The Company redirected
its business development activity at the e-commerce industry.
- - Authorized Capital
The Company is authorized to issue 200,000,000 shares of non-assessable
voting common stock, par value $0.001 per share and 50,000,000 shares of
preferred stock, par value $0.001 per share with such rights and
preferences as determined from time to time by the Board of Directors.
Copies of the Company's Articles of Incorporation and By-Laws, including
amendments thereto, are attached hereto and incorporated herein by this
reference. See Part III Item I.
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<PAGE>
- - Business Activity
In June 1999 the Company formed a wholly-owned subsidiary Saratoga Telecom
Corp. ("Saratoga Telecom"), a Nevada corporation, through which it acquired
the right from Internet Interview Inc., a Florida based company, to develop
a technology to market prepaid long distance telephone calling service via
the Internet as a reseller for long distance suppliers servicing foreign
based markets such as Central and South America.
The Company's overall business goal is to become operational as a vertical
growth Internet and telecommunications facilitator specializing in
penetrating low and mid-level niche market sectors often overlooked by
major service providers. The Company's initial business development goal is
to market and sell prepaid long distance telephone calling service over the
internet targeted at potential customers who originate calls from foreign
countries to the United States and to other foreign countries. One of the
Company's marketing strategies is to establish a network of "Web Site"
agents in targeted markets to direct potential customers to a Web Site
(www.TalkisCheapCard.com) developed and owned by Saratoga Telecom Corp. to
dispense long distance usage purchased online by the customers. Long
distance telephone calling service is to be provided by long service
suppliers carriers which provide telecommunications services to the markets
targeted by the Company. The Company as an independent contractor
("reseller"), purchases units of long distance service usage from such
suppliers under non-exclusive agreements with the suppliers.
Item 2 Management's Discussions and Analysis or Plan of Operations
- - Plan of Operations
The Company's current plan is to concentrate its business development
efforts at opportunities available in the e-commerce industry.
In June, 1999, the Company took initial steps to establish itself in the
telecommunications industry by acquiring, from Internet Interview Inc., a
Florida based company, through a newly formed wholly-owned subsidiary,
Saratoga Telecom Corp., an operational right to develop a technology to
market prepaid long distance telephone calling service via the Internet.
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The Company's plan is to become operational as soon as possible and as
economically practicable by implementing the business development plan
designed for Saratoga Telecom Corp. herein referred to as the "Company" or
"Saratoga Telecom".
The Company is in the process of establishing itself as a reseller of
prepaid long distance telephone calling service provided by major
international long distance service suppliers. The Company's initial
marketing efforts are targeted at potential customers who originate long
distance calls in foreign countries to the United States and other areas of
the globe.
The Company's major marketing strategy is based on selling prepaid long
distance usage to customers over the internet. The Company has developed a
Web Site (www.TalkisCheapCard.com) to facilitate the sale of prepaid long
distance usage. By dialing up the Web Site on the internet, customers may
order and receive long distance usage by prepaying for such usage online
with a credit card.
Upon purchasing long distance service online, a "virtual calling card" will
appear on the customer's computer monitor, complete with usage instructions
and a Personal Identification Number ("PIN") superimposed over the online
virtual card to be used by the customer to access his or her account. Such
information can then be printed out by the customer for record keeping and
personal use by the customer.
The units of long distance service and PINs are supplied to the Company
under non-exclusive reseller agreements with long service suppliers who
provide telephone service to the target markets selected by the Company. At
present, the Company, as an independent contractor, has agreements with
Teleglobe Communications Corp. ("Teleglobe") and Cable and Wireless to
supply the Company with units of long distance service on an "as ordered",
"as needed" basis.
Teleglobe has the ability to create customized global connectivity, PINs
and full turn-key calling solutions to its customers. Teleglobe's sizeable
portfolio of global telecommunications services also includes domestic and
international voice services, Internet access, domestic and international
private lines, Asynchoronous Transfer Mode (ATM) services, international
toll-free services and postpaid calling services. Therefore, the Company
has selected Teleglobe as its principal supplier of long distance services.
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<PAGE>
Teleglobe Inc. (NYSE, TSE, ME: TGO) is a recognized leader in global
telecommunications. Through its subsidiary Teleglobe Communications
Corporation, Teleglobe develops and supplies global connectivity services
to carriers, Internet service providers, business customers and content
providers worldwide. Teleglobe also caters to an expanding international
consumer customer base. According to TeleGeography, an industry
publication, Teleglobe is the fourth-ranked long distance provider in the
United States and, according to a recent KMI Corporation study, the third
largest owner of undersea fiber optic cable systems. Teleglobe has a 50%
interest in ORBCOMM, the world's first commercial low-earth-orbit,
satellite-based, data communications system. Additional information is
available at www.teleglobe.com.
Teleglobe's prepaid card service is unique in that it allows
telecommunications carriers and large corporations to deliver a global
calling service completely branded in their own name. The prepaid cards not
only carry the brand of the carrier, but when callers use the card they
hear custom-branded messages identifying the network with the retailer's
name, a capability other carriers do not offer.
Saratoga's plan to originate customer contact and sales orders is based on
establishing a network of Web Site agents in markets targeted by the
Company to direct potential customers to Saratoga Telecom's virtual calling
card Web Site. The Company has engaged the services of a marketing
consulting service firm in Florida to assist the Company with its efforts
to establish Web Site agents in Central and South America.
Under its marketing plan, the Company is also pursuing a strategy of
offering private label branding of its virtual calling cards to companies
involved in international business, such as air transportation carriers,
travel agencies, financial service providers and other service and
commercial businesses.
The Company also plans to aggressively pursue the acquisition of other
products, technologies and services through licensing and/or acquiring
businesses with proven sales and operating history which are compatible
with corporate strategies to become operational in the e-commerce industry.
To date, the Company's current business development activities have
consisted primarily of acquiring the internet telecom operational right of
Internet Interview Inc., assembling a management team and raising capital.
Since inception of the Company's development stage activities in December
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<PAGE>
1997 to October 31, 1999, the Company's business development costs have
totaled approximately $2,550,000 of which approximately $1,525,000 is
attributable to the tire and petroleum business project which was spun-off
to shareholders during March, 1999. These expenditures have been funded
primarily with the proceeds from the private sales of the Company's
convertible debt and equity securities as well as with the issuance of its
common stock in exchange for services.
During the periods from December 1, 1997 (inception) to October 31, 1998
and the year ended October 31, 1999, the Company used cash in operating
activities of approximately $487,000 and $723,000 respectively. The use of
cash was primarily the result of net losses of approximately $872,000 in
1998 and approximately $1,680,000 in 1999 offset by non-cash charges of
approximately $290,000 in 1998 and approximately $1,108,000 in 1999.
Additionally, the use of cash from operations was offset by changes in
assets and liabilities of approximately $93,000 as a source of cash in 1998
and approximately $152,000 as a use of cash in 1999.
The Company's financing activities provided cash flow of approximately
$653,000 for the period from December 1, 1997 (inception) to October 31,
1998 offset by approximately $156,000 attributable to payment of debt, a
debt issue cost and direct costs of a reverse merger. The Company's
financing activities provided cash flow of approximately $1,138,000 for the
year ended October 31, 1999 offset by approximately $168,000 attributable
to payments of debt and debt issue costs. The Company issued approximately
36,383,000 shares of its common stock in the year ended October 31, 1999
including approximately 8,500,000 shares for services.
The Company has raised approximately $1,750,000 of operating capital since
inception of its business development activities in December 1997 and plans
to continue its efforts to raise additional operating capital through
various financing methods including private placements of its equity
securities. Funding of future operations is dependent on management's
ability to raise additional capital.
- - Research & Development
Other than developing, updating and expanding its Web Site and internet
software to facilitate sales of its prepaid long distance virtual calling
card, the Company does not intend to undertake any activities that may be
characterized as research and development. The Company has not incurred any
research and development expenses since its inception.
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<PAGE>
- - Number of Employees
The Company presently has nine (9) employees; six (6) full time and three
(3) part time employees. During the next 12 months, management intends to
hire up to twelve additional employees, including technical, marketing and
sales and administrative support personnel. The Company believes there is
an ample supply of qualified candidates available to fill such positions.
However, the continuance of employment of existing personnel and the hiring
of any additional employees is subject to the availability of sufficient
funds from operating revenues or proceeds from future financings to pay
them.
- - NASD OTC Bulletin Board Quotations
Effective January 4, 1999, the NASD adopted rules and regulations requiring
that prior to any issuer having its securities quoted on the OTC Bulletin
Board of the NASD that such issuer must be a "reporting issuer" which is
required to file reports under Section 13 or 15 (d) of the Securities and
Exchange Act of 1934, as amended (the "1934 Act"). The Company is not
currently a "reporting issuer," and this Registration Statement will bring
the Company into compliance with these listing provisions of the OTC
Bulletin Board and should prevent the NASD from "delisting" quotations of
the Company's common stock. Under the "phase-in" schedule of the NASD, the
Company has until May 2000, within which to become a "reporting issuer" and
to satisfy all comments of the Securities and Exchange Commission with
respect to this Registration Statement.
Item 3 Description of Property
Neither the Company nor its subsidiary own any real property. The Company's
executive and administrative offices are located in Kirkland Washington in 1300
square feet of office space provided to it under a month to month administrative
support services agreement with Coast Northwest Inc., a company controlled by
Patrick F. Charles and Terrence K. Picken, Officers of the Company.
Administrative support services provided under a verbal agreement include use of
office space, office equipment, clerical services, data processing, local and
long distance telephone service and other miscellaneous administrative support
services for which the Company pays $8,500 per month.
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<PAGE>
Saratoga Telecom Corp has a one year lease on 1500 sq. ft. of office space
located in Hallandale, Florida at a rate of approximately $1,506 per month
through June 2000. There is one two year lease renewal option on this office
space.
The Company believes the office space shall be adequate for its needs for the
foreseeable future.
Item 4 Security Ownership of Certain Beneficial Owners and
Management
This table describes the ownership of the Company's outstanding common stock by
(i) each of the Company's Officers and Directors; (ii) each person who is known
by the Company to own more than 5% of the Company's outstanding common stock;
and (iii) all of the Company's Officers and Directors as a group:
<TABLE>
Amount and nature
<CAPTION>
Title of Name of Beneficial of Beneficial Percent
Class Owner Owner of Class
- -------- ------------------ ----------------- --------
<S> <C> <C> <C>
Common Patrick F Charles 7,710,752 (a) 14.26%
Stock 8756-122nd Avenue NE
Kirkland, WA 98033
Common Terrence K. Picken 7,190,752 (b) 13.30%
Stock 8756-122nd Avenue NE
Kirkland, WA 98033
Common Tom Morsey
Stock 2500 E Hallandale 35,800 .07%
Beach Blvd. Ste #210
Hallandale, FL 33009
Common Samuel H. Eisenberg 200,000 .37%
Stock 6 Lake Street
Monroe, NY 10950
Common Harold P. Capozzi 200,000 .37%
Stock 595 Howe St. Ste #308
Vancouver BC V6C 2T5
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<PAGE>
Common International Internet 5,000,000 (c) 9.25%
Stock Petroleum & Tire
Distributors Corp.
8756-122nd Avenue NE
Kirkland, WA 98033
All Officers and 15,337,304 28.37%
Directors as a group
(5 persons)
- --------------------------------------------------------------------------------
<FN>
(a) Includes 2,250,000 shares held by PDDE, LLC a State of Washington limited
liability company formed in Februray 1998 of which Patrick F. Charles is
Managing Member and owns controlling interest and 2,236,000 shares held by
Coast Northwest Management, LLC a State of Washington Limited Liability
Company formed in February 1998 of which Patrick F. Charles is a
co-Managing Member and owns a 50% interest.
(b) Includes 2,250,000 shares held by United West Holdings LLC, a State of
Washington limited liability company formed in February 1998 of which
Terrence K. Picken is Managing Member and owns controlling interest,
1,610,000 shares held by TKY Holdings LLC, a State of Washington limited
liability company formed in February 1998 of which Terrence K. Picken is
Managing Member and owns controlling interest, and 2,326,000 shares held by
Coast Northwest Management LLC, a State of Washington limited liability
company formed in February 1998 of which Terrence K. Picken is a
co-Managing Member and owns a 50% interest.
(c) International Internet Petroleum & Tire Distributors Corp. ("IIPT") was a
wholly-owned subsidiary of the Company which was formed in March 1999 and
the shares of which were distributed to the shareholders in a spin-off
transaction effective March 19, 1999. Patrick F. Charles is President, CEO
and a Director of IIPT and beneficially owns 24.7% of IIPT's outstanding
common stock. Terrence K. Picken is Executive Vice-President and Director
of IIPT and beneficially owns 23.2% of IIPT's outstanding common stock.
</FN>
</TABLE>
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<PAGE>
Item 5 Directors, Executive Officers, Promoters, and Control
Persons
This table describes the Company's current Directors and Executive Officers.
<TABLE>
<CAPTION>
NAME AGE TITLE
<S> <C> <C>
Patrick F. Charles 58 President, Chief Executive
Officer and Director
Terrence K. Picken 61 Executive Vice-President,
Chief Operating Officer and
Director
Tom Morsey 52 President, Saratoga Telecom
Corp., a wholly-owned subsidiary
and Director
Samuel H. Eisenberg 54 Director
Harold Peter Capozzi 74 Director
</TABLE>
Patrick F. Charles has been the Company's Chief Executive Officer and Chairman
of the Board of Directors since the inception of the Company. Mr. Charles is
also a founder, President and Chief Executive Officer of Coast Northwest Inc., a
privately owned Washington Corporation, since its inception in 1981. Coast
Northwest Inc. provides financial and management consulting services to various
clients. Mr. Charles has also served as National Director of Legislative
consulting services for PriceWaterhouseCoopers, an international accounting
firm. Mr. Charles also currently serves as a Director for Absolute Future Tech.
Inc. ("AFTI"), a publicly traded company listed on the OTC Bulletin Board. AFTI
is a temporary employment service and internet resume service specializing in
providing skilled professionals to the high-tech industry. Mr. Charles holds a
Bachelor of Science degree in marketing from Seattle University and an MBA from
the University of Arizona.
Terrence K. Picken has served the Company as Executive Vice-President and
Director since its inception. Mr. Picken is also Executive Vice President and
Director of Coast Northwest Inc. since 1992. Coast Northwest Inc. is a privately
owned company which provides business management and financial consulting
services to various clients. Mr. Picken was also a general partner with
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<PAGE>
PriceWaterhouseCoopers, an international accounting firm. Mr. Picken has over 20
years of international accounting experience and was licensed as a CPA in
California and Washington as well as a Chartered Accountant in Canada. He
graduated with a Chartered Accountant (CA) degree from the University of
Manitoba, Canada.
Tom Morsey was appointed a Director of the Company and has served as President
of Saratoga Telecom Corp., a wholly-owned subsidiary of the Company, since June
1999. Mr. Morsey previously was President of Internet Interview Inc. which he
co-founded in 1997 and from which the Company acquired the telecom operational
right in June 1999. In 1989, Mr. Morsey founded Telecommunications Consulting
Institute Inc. ("Telecon Inc.") which he managed and operated for over 5 years.
Telecon Inc. was a reseller of AT & T and Sprint telephone calling services and
prior to its sale to Telenational Communications Inc. of Omaha Nebraska, had
over 968 representatives nationwide offering innovative calling programs
developed by Telecon Inc.
Samuel H. Eisenberg has served as a Director of the Company since its inception.
Mr. Eisenberg is Senior Vice-President of Portfolio Investment Strategies
Corporation based in New York which specializes in private investment banking.
He has served in such capacity for over 5 years.
Harold P. Capozzi has been a Director of the Company, formerly known as
Knightsbridge Corporation, since February 1997 and was President, Chairman and
CEO of Knightsbridge from June 1997 to July 1998, the date of Knightsbridge's
merger with the Company. Mr. Capozzi is manager of his own investment portfolio
and is an independent business advisory consultant. For ten years, 1990 - 1999,
he served as a Director of PLC Medical Systems Inc., a publicly traded Company
listed on the American Stock Exchange and was an officer and Director of
Richland Mines Inc., (VSE), and Dynamic Associates, (NASDAQ). He is currently a
Director and Officer of Ceasar's Explorations Inc., and Blackwater Ltd., (CVE).
Mr. Capozzi holds a Bachelor of Science Degree and a Bachelor of Commerce
Degree, with First Class Honors from the University of British Columbia, and a
Teaching Degree from the University of Italy.
The Directors serve in their positions until the next annual meeting of
stockholders or until the Directors' successors have been elected and qualified.
The executive officers are appointed by the Board of Directors and serve at the
discretion of the Board.
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Item 6. Executive Compensation
The following tables set forth the compensation paid by the Company to the named
executive officers for the periods indicated:
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long-Term Compensation
- -------------------------------------------------------------------------------
Awards Payouts
----------------------------------------
(5)
Securities
Other (1)(3)(4) Under-
Name and annual Restricted lying All other
Principal Compen- Stock Options/ LTIP Compen-
Position Year Salary Bonus sation Award SARs Payouts sation
($) ($) ($) ($) (#) ($) ($)
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Patrick F.10/31/98 93,331 0 0 0 0 0 0
Charles 10/31/99 125,665 0 0 20,458 500,000 0 0
Chief
Executive
Officer
and
Director
Terrence 10/31/98 93,331 0 0 0 0 0 0
K. Picken 10/31/99 125,665 0 0 20,458 500,000 0 0
Executive
Vice-
President
and
Director
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<PAGE>
Thomas S. 10/31/98 0 0 0 0 0 0 0
Morsey 10/31/99 24,250 0 0 0 250,000 0 0
President
of wholly-
owned
subsidiary,
Saratoga
Telecom
Corp. and
Director
- -------------------------------------------------------------------------------
<FN>
(1) The restricted stock award amounts reported in column (f) above for Patrick
F. Charles and Terrence K. Picken represent a 20% discount from market
price on restricted common shares used to partially pay for salary included
in column (c) above.
(2) Thomas S. Morsey joined Saratoga Telecom Corp as its President in June
1999. He was previously co-founder and President of Internet Interview,
Inc. from which the Company acquired the telecom operational right in June
1999.
(3) Dividends would be paid on restricted common stock shares if
dividends are declared and paid on the common stock of the Company in
accordance with the Articles of Incorporation, as amended.
(4) The number
and market value of aggregate restricted stock holdings of Patrick F.
Charles and Terrence K. Picken held at October 31, 1999 were 7,710,752
shares and $1,079,505 for Mr. Charles and 7,190,752 shares and $1,006,705
for Mr. Picken.
(5) The stock options listed in column (g) above were all
exercisable at date of grant.
</FN>
</TABLE>
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<PAGE>
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
<CAPTION>
Percent
of
Total
Options/
Number SARs
of Granted
Securities to Exercise Market
Underlying Employees Or Base Price on
Options/SARs in Fiscal Price Expiration Date of
Name Granted (#) Year ($/Sh) Date Grant
(a) (b) (c) (d) (e) (f)
- ------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Patrick F. 500,000 39.2% $0.20 9/17/04
Charles
Chief
Executive
Officer and
Director
Terrence K. 500,000 39.2% $0.20 9/17/04
Picken
Executive
Vice President
and Director
Thomas S. 250,000 19.6% $0.10 6/16/04 $0.14
Morsey
President of
Wholly-owned
Subsidiary,
Saratoga
Telecom Corp.
and Director
</TABLE>
Effective October 1, 1999, the Company signed Corporate Officer Employment
Agreements (the "Agreements") with Patrick F. Charles and Terrence K. Picken.
All significant provisions of the Agreements are identical. The Agreements are
for a three year term and provide basic salary of $150,000 in the first year,
$175,000 in the second year and $200,000 in the final year. The Agreements also
provide for incentive bonuses based on pre-tax operating cash flow. A bonus of
5.0% will be paid on the first $250,000; 4.0% on the next $250,000; 3.0% on the
next $250,000; 2.0% on the next $250,000 and 1.0% on pre-tax operating cash flow
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amounts over $1,000,000. The Agreements also provide that at the discretion of
the officer, monthly amounts over $10,000 or any amount not paid when due may be
paid in common shares of the Company based on the closing bid price at the time
the officer gives notice. In the event the Company issues restricted common
shares under this provision, the officer is entitled to receive additional
shares based on a factor of up to a 40% discount of the closing bid price at the
time the officer gives notice.
For common stock issued in non-monetary transactions involving marketability
discounts the Company's policy is to account for marketability discounts in
accordance with guidelines provided by published empirical studies and financial
research on marketability discounts.
The Agreements provide that Patrick F. Charles and Terrence K. Picken may not be
terminated for any reason unless the Company offers in writing to purchase all
of their shares directly or beneficially owned at market price, as defined in
the Agreements; pays in cash all amounts owing to the officer and; pays in cash
an amount for a buy-out of the remainder of the Agreement at the rate of 50% of
the regular salary.
The Agreements also require the Company to provide and pay for $1,000,000 and
$500,000 life insurance on the lives of Patrick F. Charles and Terrence K.
Picken, respectively, to be paid to their estates. In addition, the Agreements
require the Company to provide death and disability benefits to Patrick F.
Charles and Terrence K. Picken or their estates equivalent to six (6) months pay
at the time of the death or disability. The Company is also required to pay an
automobile allowance of $750 per month each plus automobile operating expenses.
The Company has paid term life insurance premiums for the benefit of Patrick F.
Charles and Terrence K. Picken in the annual amounts of $1,915 and $1,265
respectively.
In June 1999, Saratoga Telecom Corp entered into a three year Employment
Agreement with Thomas S. Morsey as part of the Agreement for Sale and Purchase
of Telecom Business Assets between Saratoga Telecom Corp and Internet Interview,
Inc. The Employment Agreement provides a base salary of $5,000 per month, an
incentive bonus to be determined by the Board of Directors, stock options to
purchase up to 250,000 shares of the Company's common stock at $.10 per share,
immediately exercisable with a term of five (5) years and a $500 per month auto
allowance. Mr. Morsey, in June, 1999, received Warrants to purchase up to
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500,000 shares of the Company's common stock at $0.10 per share, in connection
with the Company's acquisition of operational rights to develop an internet
telecom technology from Internet Interview, Inc., the company which Mr. Morsey
was the former President and principal stockholder. The Warrants are exercisable
at any time and expire June 15, 2004. None of the warrants have been exercised
at this time.
Stock Options
During October 1998, the Company approved a Qualified and Non-Qualified Stock
Option Plan ("the Plan"). A total of 8,000,000 shares are available for future
grants to directors, officers, employees and consultants who are in a position
to make significant contributions to the success of the Company.
The exercise price of each option will be determined by the Company's board of
directors, in its discretion, at the time of grant. The vesting period and the
expiration date shall not exceed ten years. Under the 1998 option plan,
incentive stock options that become exercisable in any fiscal year may not
exceed the fair market value of $100,000 as determined at the time the options
are granted. No options granted, to officers and directors under the Plan have
been exercised as of the date of this filing.
Compensation of Directors
Beginning in fiscal year ended October 31, 1999, non-employee directors are paid
$300 per Board of Directors meeting. The two outside directors were paid $2,100
each for the year ended October 31, 1999 and in April, 1999 each was granted
options to purchase up to 250,000 shares of the Company's common stock at $0.10
per share under the Company's Stock Option Plan. Such options expire within five
years from date of grant. There currently are no standard arrangements whereby
the Company's directors are compensated for committee participation or special
assignments.
Item 7 Certain Relationships and Related Transactions
Coast Northwest Inc. provided substantially all of the Company's corporate
administrative services since inception of the Company's development stage
activities for which the Company paid to Coast Northwest Inc. $96,373 for the
year ended October 31, 1999 and $73,600 for the period from inception of
development stage, activity December 1997, to October 31, 1998. At October 31,
1999 and October 31, 1998 the Company owed an additional $1,127 and $10,100
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<PAGE>
respectively to Coast Northwest Inc. for administrative support services. The
Company's President, Patrick F. Charles and Executive Vice-President, Terrence
K. Picken, collectively own controlling interest in Coast Northwest Inc.
Item 8 Description of Securities
The Company has two classes of securities authorized, consisting of 200,000,000
shares of common stock with a par value of $.001 per share and 50,000,000 shares
of preferred stock with a par value of $.001 per share.
- - Common Stock
The Company has authorized 200,000,000 shares of common stock with a par
value of $0.001 per share. The holders of common stock are entitled to one
vote per share on all matters to be voted on by shareholders and do not
have cumulative voting rights. The shares of common stock have no
pre-emptive, subscription, conversion or redemption rights and may be
issued only as fully paid and non assessable shares. In the event of
liquidation, dissolution or winding up of the company, the holders of the
common stock are entitled to share ratably in all assets remaining which
are available for distribution to them after payment of liabilities and
after provision has been made for each class or series of stock having
preference over the common stock. Holders of the common stock are entitled
to share pro rata in dividends and distributions with respect to the common
stock, as may be declared by the Board of Directors out of funds legally
available subject to a restriction that dividends on the common stock may
not be paid until dividends on the Company's issued cumulative Series A
Convertible Redeemable Preferred Stock have been paid.
Part II
Item 1 Market Price and Dividends on the Company's common equity and other
stockholder matters
The Company's common stock has traded on the OTC Bulletin Board since its merger
with Knightsbridge, July, 1998. Prior to the merger, Knightsbridge had commenced
trading on the OTC Bulletin Board in May, 1998 under the trading symbol KBDG. At
the time of the merger, the trading symbol was changed to WOTD. It was again
changed to SHCC in March 1999. The high and low sales prices for each quarter
from May 1998 to October 31,1999 were as follows:
Page 17
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<PAGE>
<TABLE>
<CAPTION>
Quarter Ended High Low
<S> <C> <C>
July 31, 1998 $0.500 $0.156
October 31, 1998 $0.500 $0.130
January 31, 1999 $0.220 $0.025
April 30, 1999 $0.290 $0.020
July 31, 1999 $0.220 $0.100
October 31, 1999 $0.215 $0.120
</TABLE>
Quotations for the Company's common stock reflect inter-dealer prices, without
retail markups, markdowns or commissions and may not represent actual
transactions.
The Company has approximately 282 holders of its common stock.
No dividends have been declared on the Company's common stock. Holders of the
common stock are entitled to share pro rata in dividends and distributions with
respect to the common stock, as may be declared by the Board of Directors out of
funds legally available subject to a restriction that dividends on the common
stock may not be paid until dividends on the cumulative Series A Convertible
Redeemable Preferred Stock have been paid.
Item 2 Legal Proceedings
The Company is not a party to any pending legal proceedings.
Item 3 Changes in and Disagreements with Accountants
There have not been any changes in or disagreements with Accountants.
Item 4 Recent Sales of Unregistered Securities
Prior to the merger with Knightsbridge, the Company, then named Western Oil &
Tire Distributors Inc. ("Western") issued 6,000,000 shares of its common stock
at $0.0001 par value per share principally to its founding stockholders and to
others for services pursuant to Section 4 (2) of the Securities Act of 1933.
In accordance with an Agreement and Plan of Merger ("Merger") effective July 28,
1998, the 6,000,000 common shares of Western were exchanged for 12,000,000
shares of Knightsbridge common stock recorded at $0.001 per share par value,
11,577,000 of which were restricted and newly issued from Knightsbridge treasury
and 423,000 of which were delivered by certain stockholders of Knightsbridge.
Page 18
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<PAGE>
950,000 shares of restricted common stock recorded at $0.001 par value were
newly issued as finder's fees under the Merger Agreement. The shares issued
under the Merger Agreement were issued without registration pursuant to an
exemption from registration under Section 4 (2) of the Securities Act of 1933.
In July 1998, the Company issued $150,000 principal amount of a 9% Series A
Subordinated Convertible Redeemable Debenture due July 24, 1999 ("Series A
Debenture") to an accredited investor in a private placement. The Series A
Debenture and the shares of common stock into which it was converted were exempt
from registration in reliance on Rule 504 of Regulation D of the Securities Act
of 1933. The Series A Debenture was convertible into common stock at a
conversion price equal to 72.5% of the average closing bid price of the common
stock for the five (5) trading days immediately preceding the date of receipt of
the conversion notice. The Series A Debenture plus interest thereon of $8,414
was converted to 6,345,908 shares of common stock between October 1998 and April
1999 at an average price of approximately $.025 per share. At the time of the
sale of the Series A Debenture, the Company recorded $56,897 of additional
paid-in capital representing the beneficial conversion feature value of the
discount. This amount was charged to interest expense over the expected
conversion period.
In November 1998 through January 1999 the Company issued 850,000 shares of
common stock valued at a total of $50,071 for an average price of $.059 per
share to J.B. Marc and Associates for financial advisory and corporate public
relations services. Such shares were issued without registration in reliance on
Rule 504 of Regulation D of the Securities Act of 1933.
In December 1998, the Company issued $15,000 principal amount of a Subordinated
Convertible Redeemable Debenture due December, 1999 to Coast Northwest
Management LLC ("Coast LLC Debenture") a limited liability company owned by
Patrick F. Charles and Terrence K. Picken, officers, directors and controlling
shareholders of the Company in a private placement as payment of a loan to the
Company. The Coast LLC Debenture and the shares of common stock into which it
was converted were exempt from registration in reliance on Rule 504 of
Regulation D of the Securities Act of 1933. The Coast LLC Debenture was
convertible into common stock at a conversion price equal to 72.5% of the
average closing bid price of the common stock for the five (5) trading days
immediately preceding the date of receipt of the conversion notice. The Coast
LLC Debenture was converted to 300,000 shares of common stock on December 18,
1998 at a price of approximately $.05 per share. At the time of the sale of the
Page 19
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<PAGE>
Coast LLC Debenture, the Company recorded $5,690 of additional paid-in capital
representing the beneficial conversion feature value of the discount. This
amount was charged to interest expense over the expected conversion period.
On January 7, 1999 the Company issued 3,600,000 shares of common stock for
$90,000 cash to two non-U.S. resident investors in an arms length transaction.
The shares were sold at an average of $.025 per share. The purchase price per
share of the transaction was significantly discounted from the reported trade
price of the shares due to a lack of trading volume and sufficient history to
determine per share market value. Such shares were issued without registration
in reliance on Rule 504 of Regulation D of the Securities Act of 1933.
In January 1999 the Company issued $30,000 principal amount of a Subordinated
Convertible Redeemable Debenture due January 2000 to Coast Northwest Management
LLC ("Coast LLC Debenture 2") a limited liability company owned by Patrick F.
Charles and Terrence K. Picken, officers, directors and major shareholders of
the Company in a private placement as payment of a loan to the Company. The
Coast LLC Debenture 2 and the shares of common stock into which it was converted
were exempt from registration in reliance on Rule 504 of Regulation D of the
Securities Act of 1933. The Coast LLC Debenture 2 was convertible into common
stock at a conversion price equal to 72.5% of the average closing bid price of
the common stock for the five (5) trading days immediately preceding the date of
receipt of the conversion notice. $29,000 of the Coast LLC Debenture 2 was
converted to 1,250,000 shares of common stock on January 21, 1999 at a price of
approximately $.023 per share. The remaining $1,000 of the Coast LLC Debenture
two was forgiven. At the time of the sale of the Coast LLC Debenture 2, the
Company recorded $11,380 of additional paid-in capital representing the
beneficial conversion feature value of the discount. This amount was charged to
interest expense over the expected conversion period.
In January 1999 the Company issued $15,000 of principal amount of Subordinated
Convertible Redeemable Debentures (the "Debentures") due January 2000 to each of
Patrick F. Charles and Terrence K. Picken, officers, directors and major
shareholders of the Company in a private placement for a total of $30,000 in
payment of services provided to the Company. The Debentures and the shares of
common stock into which they were converted were exempt from registration in
reliance on rule 504 of Regulation D of the Securities Act of 1933. The
Debentures were convertible into common stock at a conversion price equal to
Page 20
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<PAGE>
72.5% of the average closing bid price of the common stock for the five (5)
trading days immediately preceding the date of receipt of the conversion notice.
$14,500 of each Debenture totaling $29,000 was converted into a total of
1,250,000 shares of common stock on January 21, 1999 at a price of approximately
$.023 per share. The remaining $1,000 of the Debentures was forgiven. At the
time of the sale of the Debentures, the Company recorded $11,380 of additional
paid-in capital representing the beneficial conversion feature value of the
discount. This amount was charged to interest expense over the expected
conversion period.
On February 11, 1999 the Company issued 2,250,000 shares of common stock valued
at $.016 per share to Patrick F. Charles, an officer, director and a controlling
shareholder of the Company as partial payment for management services provided
to the company. These shares were issued at a 20% discount from the closing
market price at the date of issuance. Such shares were issued without
registration pursuant to an exemption from registration under Section 4 (2) of
the Securities Act of 1933.
On February 11, 1999 the Company issued 2,250,000 shares of common stock valued
at $.016 per share to Terrence K. Picken an officer, director and major
shareholder of the Company as partial payment for management services provided
to the company. These shares were issued at a 20% discount from the closing
market price on the date of issuance. Such shares were issued without
registration pursuant to an exemption from registration under Section 4 (2) of
the Securities Act of 1933.
On February 11, 1999 the Company issued 25,000 shares of common stock valued at
$.016 per share to a limited liability corporation controlled by Patrick F.
Charles an Officer, Director and major shareholder of the Company as payment for
management services. These shares were issued at a 20% discount from the closing
market price on the date of issuance. Such shares were issued without
registration pursuant to an exemption from registration under Section 4 (2) of
the Securities Act of 1933.
On February 11, 1999 the Company issued 50,000 restricted shares of common stock
valued at $.016 per share to a non-U.S. resident for merger and acquisition
consulting services. These shares were issued at a 20% discount from the closing
market price on the date of issuance. Such shares were issued without
registration pursuant to an exemption from registration under Section 4 (2) of
the Securities Act of 1933.
Page 21
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<PAGE>
On February 11, 1999 the Company issued 500,000 shares of common stock valued at
$.02 per share to Prime Ventures Corporation as payment of a fee to extend
payments under a consulting agreement. Such shares were issued without
registration in reliance on rule 504 of Regulation D of the Securities Act of
1933.
On February 11, 1999 the Company issued 100,000 shares of common stock valued at
$.02 per share to Portfolio Investment Strategies Corp for merger and
acquisition consulting services. Such shares were issued without registration in
reliance on Rule 504 of Regulation D of the Securities Act of 1933.
On February 18, 1999 the Company issued 500,000 shares of common stock valued at
$.023 per share as payment to PMR and Associates for corporate public relations
services. Such shares were issued without registration in reliance on Rule 504
of Regulation D of the Securities Act of 1933.
Pursuant to a February 18, 1999 corporate public relations service agreement
entered into between PMR and Associates ("PMR") and the Company including
amendments thereto. PMR, in October, 1999 exercised its right to purchase
1,700,000 shares of the Company's common stock under warrants granted to PMR
under the agreement at a price of approximately $.029 per share. Such shares
were issued without registration pursuant to an exemption from registration
under Section 4(2) of the Securities Act of 1933.
On February 18, 1999 the company issued 95,000 shares of common stock valued at
an average price of $.023 per share to (4) four individuals under arrangements
whereby they provided administrative services to the company. Such shares were
issued without registration in reliance on rule 504 of Regulation D or Section 4
(2) of the Securities Act of 1933.
On March 17, 1999 the Company issued 50,000 restricted shares of common stock
valued at $.03 per share to an independent consultant who provided merger and
acquisition services to the Company. These shares were issued at a 9.1% discount
from the closing market price on the date of issuance. Such shares were issued
without registration pursuant to an exemption from registration under Section 4
(2) of the Securities Act of 1933.
On March 17, 1999 the Company issued 250,000 shares of common stock valued at
$.03 per share to Commonwealth Partners for merger and acquisition consulting
services. These shares were issued at a 9.1% discount from the closing market
price on the date of issuance. Such shares were issued without registration
Page 22
22
<PAGE>
pursuant to an exemption from registration under Section 4 (2) of the Securities
Act of 1933.
On March 19, 1999 the Company issued 5,000,000 shares of common stock valued at
$.05 per share to International Internet Petroleum & Tire Distributors Corp
("IIPT") in connection with the spin-off transaction whereby the shares of IIPT
were distributed to the stockholders of the Company as of March 19, 1999. These
shares were issued at approximately a 20% discount from the closing market price
on the date of issuance. The Company shares issued to IIPT were issued without
registration pursuant to an exemption from registration under Section 4 (2) of
the Securities Act of 1933.
In March 1999, the Company issued $450,000 principal amount of a 9% Series B
Subordinated Convertible Redeemable Debentures due March 30, 2000 ("Series B
Debenture") to three accredited investors in a private placement. The Series B
Debentures and the shares of common stock into which they were converted were
exempt from registration in reliance on Rule 504 of Regulation D of the
Securities Act of 1933. The Series B Debentures were convertible into common
stock at a conversion price equal to 72.5% of the average closing bid price of
the common stock for the five (5) trading days immediately preceding the date of
receipt of the conversion notice. The Series B Debentures plus interest thereon
of $2,857 were converted to 5,795,564 shares of common stock in May 1999 at an
average price of approximately $.078 per share. At the time of the sale of the
Series B Debentures, the Company recorded $170,691 of additional paid-in capital
representing the beneficial conversion feature value of the discount. This
amount was charged to interest expense over the expected conversion period.
On April 6, 1999 the Company issued 10,000 restricted shares of common stock
valued at $.04 per share to an individual for services. Such shares were issued
without registration pursuant to an exemption from registration under Section 4
(2) of the Securities Act of 1933.
On May 17, 1999 the Company issued 550,000 shares of common stock valued at
approximately $.131 per share to PMR and Associates for corporate public
relations services. These shares were issued at a 3.03% discount from the
closing market price on the date of issuance. Such shares were issued without
registration pursuant to an exemption from registration under Section 4 (2) of
the Securities Act of 1933.
Page 23
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<PAGE>
In May 1999 the Company issued 377,742 shares of its Series A Convertible
Redeemable Preferred Stock in payment of a $377,742 Note Payable due March 3,
2003. These Series A Convertible Redeemable Preferred shares are convertible
into common stock of the Company one-third after April 30, 2000, another
one-third after April 30,2001, and a final one-third after April 30,2002. The
conversion rate is $1.00 divided by the average closing price for the Company's
common stock for the five trading days immediately prior to the notice of
conversion. Such preferred shares were issued without registration pursuant to
an exemption from registration under Section 4(2) of the Securities Act of 1933.
In June 1999, the Company issued $150,000 principal amount of a 9% Series C
Subordinated Convertible Redeemable Debenture due June 11, 2001 ("Series C
Debenture") to a corporation in a private placement. The Series C Debenture and
the shares of common stock into which it was converted were exempt from
registration in reliance on Rule 504 of Regulation D of the Securities Act of
1933. The Series C Debenture was convertible into common stock at a conversion
price equal to 72.5% of the average closing bid price of the common stock for
the five (5) trading days immediately preceding the date of receipt of the
conversion notice. The Series C Debenture plus interest thereon of $97 was
converted to 1,548,158 shares of common stock in June 1999 at an average price
of approximately $.097 per share. At the time of the sale of the Series C
Debenture, the Company recorded $ 56,897 of additional paid-in capital
representing the beneficial conversion feature value of the discount. This
amount was charged to interest expense over the expected conversion period.
On June 16, 1999 the Company issued 150,000 shares of common stock valued at
$.112 per share to a corporation for services. These shares were issued at a 20%
discount from the closing market price on the date of issuance. Such shares were
issued without registration pursuant to an exemption from registration under
Section 4 (2) of the Securities Act of 1933.
On July 1, 1999 the Company issued 25,000 shares of common stock valued at $.136
per share to an individual for services. These shares were issued at a 20%
discount from the closing market price on the date of issuance. Such shares were
issued without registration pursuant to an exemption from registration under
Section 4 (2) of the Securities Act of 1933.
On July 22, 1999 the Company issued 220,000 shares of common stock to an
individual for corporate public relations services. The agreed value of the
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<PAGE>
shares was 85% of the average closing price of the common stock for the five (5)
preceding trading days or $.149 per share. Such shares were issued without
registration pursuant to an exemption from registration under Section 4 (2) of
the Securities Act of 1933.
In July 1999, the Company issued $150,000 principal amount of a 2% Series D
Subordinated Convertible Redeemable Debenture due July 30, 2001 ("Series D
Debenture") to a company in a private placement. The Series D Debenture and the
shares of common stock into which it was converted were exempt from registration
in reliance on Rule 504 of Regulation D of the Securities Act of 1933. The
Series D Debenture was convertible into common stock at a conversion price equal
to 75% of the average closing bid price of the common stock for the five (5)
trading days immediately preceding the date of receipt of the conversion notice.
The Series D Debenture plus interest thereon of $1,275 was converted to
1,182,261 shares of common stock in August 1999 at an average price of
approximately $.127 per share. At the time of the sale of the Series C
Debenture, the Company recorded $50,000 of additional paid-in capital
representing the beneficial conversion feature value of the discount. This
amount was charged to interest expense over the expected conversion period.
On August 25, 1999 the Company issued 170,000 shares of common stock valued at
$.15 per share to a corporation for corporate public relations services. Such
shares were issued without registration pursuant to an exemption from
registration under Section 4 (2) of the Securities Act of 1933.
On October 4, 1999 the Company issued 400,000 restricted shares of common stock
valued at $.14 per share to Patrick F. Charles an officer, director and a
controlling shareholder of the Company as reimbursement for consulting services
paid by Mr. Charles on behalf of the Company. Such shares were issued without
registration pursuant to an exemption from registration under Section 4 (2) of
the Securities Act of 1933.
On October 4, 1999 the Company issued 29,762 restricted shares of common stock
to each of Patrick F. Charles and Terrence K. Picken, officers, directors and
controlling shareholders of the Company. These shares were valued at $.112 per
share and were partial payment of their salary in accordance with employment
agreements between them and the Company. These shares were issued at a 20%
discount from the closing market price on the date of issuance. Such shares were
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<PAGE>
issued without registration pursuant to an exemption from registration under
Section 4 (2) of the Securities Act of 1933.
The Company believed that each of the foregoing persons or entities to whom
shares of common stock were issued were either "accredited investors" or
"sophisticated investors" as defined in the Securities Act of 1933. Each had
access to all material information regarding the Company, its business and
financial condition prior to the offer and sale of the securities in question.
The Company took into consideration a number of factors in determining the price
per share of its common stock in the described transactions. These consisted of
(1) the "restricted" nature of the securities (except for those transactions
under Regulation D Rule 504); (2) the limited market for the Company's common
stock on the OTC Bulletin Board; (3) the low book value per share; and (4) the
Company's history of limited revenues.
For common stock issued in non-monetary transactions involving marketability
discounts the Company's policy is to account for marketability discounts in
accordance with guidelines provided by published empirical studies and financial
research on marketability discounts.
Item 5 Indemnification of Officer and Directors
Section 78.751 (1) of the Nevada Revised Statutes ("NRS") authorizes a Nevada
corporation to indemnify any director, officer, employee or corporate agent "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" due to
his or her corporate role. Section 78.751 (1) extends this protection "against
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her in connection with the
action, suit or proceeding if he or she acted in good faith and in a manner
which he or she 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 or her conduct was unlawful."
Section 78.751 (2) of the NRS also authorizes indemnification of the reasonable
defense or settlement expenses of a corporate director, officer, employee or
agent who is sued, or is threatened with a suit, by or in the right of the
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<PAGE>
corporation. The party must have been acting in good faith and with the
reasonable belief that his or her actions were not opposed to the corporation's
best interests. Unless the court rules that the party is reasonably entitled to
indemnification, the party seeking indemnification must not have been found
liable to the corporation.
To the extent that a corporate director, officer, employee, or agent is
successful on the merits or otherwise in defending any action or proceeding
referred to in Section 789.751 (1) or 78.751 (2), Section 78.751 (3) of the NRS
requires that he be indemnified "against expenses, including attorneys' fees,
actually and reasonably incurred by him or her in connection with the defense."
Section 78.751 (4) of the NRS limits indemnification under Sections 78.751 (1)
and 78.751 (2) to situations in which either (1) the stockholders (2) the
majority of a disinterested quorum of directors, or (3) independent legal
counsel determine that indemnification is proper under the circumstances.
Pursuant to Section 78.751 (5) of the NRS, the corporation may advance an
officer's or director's expenses incurred in defending any action or proceeding
upon receipt of an undertaking. Section 78.751 (6) (a) provides that the rights
to indemnification and advancement of expenses shall not be deemed exclusive of
any other rights under any bylaw, agreement, stockholder vote or vote of
disinterested directors. Section 78.751 (6) (b) extends the rights to
indemnification and advancement of expenses to former directors, officers,
employees and agents, as well as their heirs, executors, and administrators.
Regardless of whether a director, officer, employee or agent has the right to
indemnity, Section 78.752 allows the corporation to purchase and maintain
insurance on his behalf against liability resulting from his or her corporate
role.
Article II of the Company's Articles of Incorporation provides that any person
serving as a Director or Officer is to be indemnified and held harmless to the
fullest extent legally permissible under the General Corporate Law of the State
of Nevada.
Page 27
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<PAGE>
<TABLE>
<CAPTION>
PART F/S
SARATOGA INTERNATIONAL HOLDINGS CORP. AND SUBSIDIARY
(A Development Stage Company)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------
Page
<S> <C>
Independent Auditor's Report F-2
Consolidated Balance Sheet as of October 31, 1999 F-3
Consolidated Statements of Operations for the year
ended October 31, 1999 and from December 1, 1997
(inception) through October 31, 1998 and the
cumulative period during the development stage
from December 1, 1997 (inception) through
October 31, 1999 F-4
Consolidated Statements of Changes in Shareholders'
Equity (Deficiency) for the year ended October 31,
1999 and from December 1, 1997 (inception) through
October 31, 1998 F-5
Consolidated Statements of Cash Flows for the year
ended October 31, 1999 and from December 1, 1997
(inception) through October 31, 1998 and the
cumulative period during the development stage
from December 1, 1997 (inception) through
October 31, 1999 F-6
Notes to Consolidated Financial Statements F-7 - F-23
</TABLE>
Page F-1
28
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders of
Saratoga International Holdings Corp. and Subsidiary
Kirkland, Washington
We have audited the accompanying consolidated balance sheet of Saratoga
International Holdings Corp. and Subsidiary, (A Development Stage Company) as of
October 31, 1999, and the related consolidated statements of operations,
shareholders' equity (deficiency) and cash flows for the year ended October 31,
1999 and for the period December 1, 1997 (inception) through October 31, 1998
and the cumulative period during the development stage from December 1, 1997
(inception) through October 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Saratoga
International Holdings Corp. and Subsidiary, (A Development Stage Company) as of
October 31, 1999, and the results of their operations and their cash flows for
the year ended October 31, 1999 and for the period December 1, 1997 (inception)
through October 31, 1998, and the cumulative period during the development stage
from December 1, 1997 (inception) through October 31, 1999, in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2(a), to
the consolidated financial statements the Company is in the development stage,
has incurred losses since inception of approximately $2,552,000 and expects to
incur net losses for the foreseeable future. These conditions raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are described in note 2(a). The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Feldman Sherb Horowitz & Co., P.C.
--------------------------------------
Feldman Sherb Horowitz & Co., P.C.
Certified Public Accountants
New York, New York
January 7, 2000
Page F-2
29
<PAGE>
<TABLE>
<CAPTION>
SARATOGA INTERNATIONAL HOLDINGS CORP. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
OCTOBER 31,1999
ASSETS
<S> <C>
CURRENT ASSETS:
Cash ........................................................ $ 241,589
Common stock subscription receivable ........................ 25,000
Deferred financing cost ..................................... 35,475
Prepaid expense and other current assets .................... 72,250
-----------
TOTAL CURRENT ASSETS ...................................... 374,314
PROPERTY AND EQUIPMENT - at cost, net ......................... 5,357
INTANGIBLE ASSET, net ......................................... 81,733
-----------
$ 461,404
===========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C>
CURRENT LIABILITIES:
Note payable ................................................. $ 200,000
Loans payable - shareholders and officers .................... 31,789
Accrued expenses and other current liabilities ............... 36,932
-----------
TOTAL CURRENT LIABILITIES .................................. 268,721
COMMITMENTS AND CONTINGENCIES .................................. -
SHAREHOLDERS' EQUITY:
8%cumulative convertible redeemable preferred stock, $.001
par value, 50,000,000 authorized, 377,742 shares, issued
and outstanding, liquidating preference of $1 .............. 377,742
Common stock, par value $.001, 200,000,000 authorized
54,058,125 shares, issued and outstanding .................. 54,058
Additional paid in capital ................................... 2,312,714
Deficit accumulated during the development stage ............. (2,551,831)
-----------
TOTAL SHAREHOLDERS' EQUITY ................................. 192,683
-----------
$ 461,404
===========
</TABLE>
See notes to the consolidated financial statements
Page F-3
30
<PAGE>
<TABLE>
SARATOGA INTERNATIONAL HOLDINGS CORP. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>
From Cumulative
December 1, During The
Year Ended 1997 (inception) Development Stage
October 31, to October 31, (December 1, 1997
1999 1998 to October 31, 1999)
----------------- ----------------- --------------------
<S> <C> <C> <C>
NET SALES $ 2,660 $ - $ 2,660
COST OF GOODS SOLD 23,810 - 23,810
----------------- ----------------- --------------------
GROSS LOSS (21,150) - (21,150)
OPERATING EXPENSES 1,044,126 475,489 1,519,615
----------------- ----------------- --------------------
LOSS FROM OPERATIONS (1,065,276) (475,489) (1,540,765)
----------------- ----------------- --------------------
OTHER INCOME (EXPENSE):
Loss on impairment of investments (278,499) (255,500) (533,999)
Write-off of terminated acquisition costs - (99,043) (99,043)
Interest expense (393,369) (48,357) (441,726)
Forgiveness of note payable 50,000 - 50,000
Other income 7,416 6,286 13,702
----------------- ----------------- --------------------
NET OTHER EXPENSES (614,452) (396,614) (1,011,066)
----------------- ----------------- --------------------
NET LOSS (1,679,728) (872,103) (2,551,831)
LESS:
CUMULATIVE PREFERRED DIVIDEND 15,110 - 15,110
----------------- ----------------- --------------------
NET LOSS TO COMMON SHARES $ (1,694,838) $ (872,103) $ (2,566,941)
================= ================= ====================
LOSS PER COMMON SHARE, BASIC AND DILUTED $ (0.04) $ (0.06) $ (0.09)
================= ================= ====================
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING, BASIC AND DILUTED 39,259,311 13,768,953 27,068,270
================= ================= ====================
</TABLE>
See Notes to the consolidated financial statements
Page F-4
31
<PAGE>
<TABLE>
SARATOGA INTERNATIONAL HOLDINGS CORP. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY)
<CAPTION>
Deficit
Accumulated Total
Common Stock Preferred stock Additional During the Shareholders'
----------------------- ------------------ Paid-In Development Equity
Shares Amount Shares Amount Capital Stage (Deficiency)
------------ --------- -------- -------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 1, 1997 (INCEPTION) 20,217,400 $ 20,217 - $ - $ 863,389 $ (488,219) $ 395,387
Reverse stock split 1-for-4 (15,163,050) (15,163) - - 15,163 - -
Issuance of common stock pursuant to reverse
acquisition 11,577,000 11,577 - - (11,577) - -
Issuance of common stock for services related
to reverse acquisition 950,000 950 - - (950) - -
Direct cost of reverse acquisition - - - - (78,816) - (78,816)
Net loss from Knightsbridge operations prior
to reverse acquisition - - - - - (197,909) (197,909)
Recapitalization adjustment - - - - (686,128) 686,128 -
Adjustment for beneficial conversion feature
from issuance of a debenture - - - - 56,897 - 56,897
Issuance of common stock from conversion
of debenture 94,085 94 - - 10,138 - 10,232
Net loss - - - - - (872,103) (872,103)
----------- ---------- --------- -------- ---------- ------------ -------------
BALANCE, OCTOBER 31, 1998 17,675,435 17,675 - - 168,116 (872,103) (686,312)
Issuance of common stock for services 8,504,524 8,505 - - 362,943 - 371,448
Issuance of common stock from conversion
of debentures 17,578,166 17,578 - - 957,833 - 975,411
Adjustment for beneficial conversion feature
from issuance of debentures - - - - 306,036 - 306,036
Issuance of common stock for cash 5,300,000 5,300 - - 134,700 - 140,000
Issuance of common stock in connection
with a spin-off of Western 5,000,000 5,000 - - 245,000 - 250,000
Issuance of warrants for operational right - - - - 102,166 - 102,166
Issuance of options and warrants for services - - - - 35,920 - 35,920
Issuance of 8% cumulative convertible
redeemable preferred stock - - 377,742 377,742 - - 377,742
Net loss - - - - - (1,679,728) (1,679,728)
----------- ---------- --------- -------- ---------- ------------ -------------
BALANCE, OCTOBER 31, 1999 54,058,125 $ 54,058 377,742 $377,742 $2,312,714 $(2,551,831) $ 192,683
=========== ========== ========= ======== ========== ============ =============
</TABLE>
See notes to the cosolidated financial statements
Page F-5
32
<PAGE>
<TABLE>
SARATOGA INTERNATIONAL HOLDINGS CORP. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
Cumulative
During The
From December 1, Development Stage
Year Ended 1997 (inception) to (December 1, 1997
October 31, 1999 October 31, 1998 to October 31, 1999)
----------------- -------------------- --------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,679,728) $ (872,103) $ (2,551,831)
Adjustment to reconcile net loss to
net cash used in operations:
Loss on impairment of investments 278,499 255,500 533,999
Forgiveness of note payable (50,000) - (50,000)
Issuance of options and warrants for services 35,920 - 35,920
Issuance of common stock for service 371,448 - 371,448
Amortization 117,933 15,000 132,933
Interest expense from beneficial conversion features 341,597 21,336 362,933
Interest expense from convertible debentures
exchanged for common stock 12,411 232 12,643
Changes in assets and liabilities:
Deferred financing cost (35,475) - (35,475)
Prepaid expense and other current assets (72,249) - (72,249)
Accrued expenses and other current liabilities (43,556) 92,978 49,422
------------------ -------------------- --------------------
NET CASH USED IN OPERATING ACTIVITIES (723,200) (487,057) (1,210,257)
------------------ -------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (5,357) - (5,357)
------------------ -------------------- --------------------
NET CASH USED IN INVESTING ACTIVITIES (5,357) - (5,357)
------------------ -------------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Loans payable - shareholders and officers (59,778) 41,567 (18,211)
Proceeds from notes payable 200,000 - 200,000
Proceeds from long term debt - 461,122 461,122
Repayment of long term debt (10,942) (72,438) (83,380)
Proceeds from convertible debentures 823,000 150,000 973,000
Debt issue costs (97,500) (15,000) (112,500)
Direct cost of reverse acquisition - (78,816) (78,816)
Proceeds from issuance of common stock 115,000 - 115,000
------------------ -------------------- --------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 969,780 486,435 1,456,215
------------------ -------------------- --------------------
NET INCREASE IN CASH 241,223 (622) 240,601
CASH AT BEGINNING OF YEAR 366 988 988
------------------ -------------------- --------------------
CASH AT END OF YEAR $ 241,589 $ 366 $ 241,589
================== ==================== ====================
Supplemental Disclosure of Cash Flow Information
Cash paid during the period:
Interest $ 73,324 $ 26,789 $ 100,113
================== ==================== ====================
Income Taxes $ - $ - $ -
================== ==================== ====================
Supplemental Disclosure of Non-Cash Flow Investing and Financing Activities
Issuance of common stock from reverse acquisition $ $ 12,527 $ 12,527
================== ==================== ====================
Issuance of common stock for stock subscription receivable $ 25,000 $ - $ 25,000
================== ==================== ====================
Issuance of common stock from conversion of debentures $ 963,000 $ 10,000 $ 973,000
================== ==================== ====================
Issuance of common stock in connection with a spin-off
of Western $ 250,000 $ - $ 250,000
================== ==================== ====================
Issuance of 8% cumulative convertible redeemable
preferred stock for notes payable $ 377,742 $ - $ 377,742
================== ==================== ====================
See notes to the consolidated financial statements
</TABLE>
Page F-6
33
<PAGE>
SARATOGA INTERNATIONAL HOLDINGS CORP. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND HISTORY
The following summarizes the organizational history of Saratoga
International Holdings Corp. and subsidiary (herein referred to as
"Saratoga", "SHCC" or the "Company"):
In December 1997, the Company began development stage activity under the
corporate name Western Oil & Tire Distributors Inc. ("Western"), a
privately owned company originally incorporated on June 1, 1993 in the
State of Washington under the corporate name FCP Ltd. which had no
operating activity until fiscal 1998. The corporate name was changed to
Western in December 1997. Western's original business development plan,
adopted in December, 1997, was to engage in the acquisition of retail and
wholesale tire businesses and petroleum product distribution companies
("The WOTD Project")
In July 1998, the shareholders of Western exchanged all of their common
shares for controlling interest in Knightsbridge Corporation
("Knightsbridge") a company originally incorporated on June 17, 1996 in the
State of Nevada. Western was merged into Knightsbridge on July 28, 1998 and
Knightsbridge changed its name to Western, the surviving corporation.
Since the former shareholders of Western owned a majority of the
outstanding stock following its July, 1998, merger with Knightsbridge this
exchange of shares has been accounted for as a reverse merger, under the
purchase method of accounting. Accordingly, the combination of the two
companies is recorded as a recapitalization of shareholders' equity of
Western pursuant to which Western is treated as the continuing entity for
accounting purposes and the historical financial statements presented are
those of Western. Pro-forma information has not been presented since the
transaction was deemed a capital stock transaction rather than a business
combination.
On March 24, 1999, the corporate name was changed from Western to Saratoga
International Holdings Corp. and the operations of the Company's petroleum
and tire business was spun-off to the shareholders of the Company as of
March 19, 1999 (See Note 3). The Company redirected its business
development activity at the e-commerce industry.
Page F-7
34
<PAGE>
In June 1999, the Company formed a wholly-owned subsidiary Saratoga Telecom
Corp. ("Saratoga Telecom") through which it acquired an operational right
from Internet Interview Inc. to develop a technology to market prepaid long
distance telephone calling service via the Internet as a reseller for long
distance suppliers servicing foreign based markets such as Central and
South America.
The Company has been in the development stage since its inception in
accordance with statement of Financial Accounting Standards No. 7.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Presentation
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. The Company, since its
inception, December 1, 1997 has incurred net losses of approximately
$2,552,000 and has had negative cash flow from operations of
approximately $1,210,000 through October 31, 1999. These conditions
raise substantial doubt about its ability to continue as a going
concern. Management expects to incur additional losses for the
foreseeable future and recognizes the need to raise capital to achieve
their business plans. The Company has raised approximately $1,750,000
of operating capital since inception for its business development
activities and plans to continue its efforts to raise additional
operating capital through various financing methods including private
placements of its equity securities. Funding of future operations is
dependent on management's ability to raise additional capital. The
Company's ability to continue as a going concern is dependent upon
profitable operations and support from shareholders. Unless the
Company can generate positive cash flow from operations and raise
additional capital, the company may be unable to continue in
existence. The financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset
amounts or the amounts and classification of liabilities that might be
necessary should the Company be unable to continue in existence.
b. Principles of Consolidation
The consolidated financial statements include the accounts of Saratoga
and its Subsidiary, Saratoga Telecom Corp. All material intercompany
transactions and balances have been eliminated.
Page F-8
35
<PAGE>
c. Investments
Investments are carried at cost except, where in the opinion of
management, there has been a loss in value other than a temporary
decline in which case the carrying value is reduced to its estimated
value.
d. Intangible Asset
The cost of the operational right acquired in June 1999 is being
amortized on a straight line basis over five years. Amortization
expense charged to operations in fiscal 1999 was $20,433. No
amortization expense was charged to operations in fiscal 1998.
e. Income Taxes
The Company utilizes the asset and liability method of accounting for
income taxes as set forth in FASB Statement No.109, "Accounting for
Income Taxes." Under the asset and liability method, deferred taxes
are determined based on the difference between the financial statement
and tax bases of assets and liabilities using enacted tax rates in
effect in the years in which the differences are expected to reverse.
f. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and revenues and expenses during the
reporting period. Actual results could differ from those estimates.
g. Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash, accrued
expenses, and loans payable which approximate fair value because of
their short maturities. The Company's investments were estimated by
management to have been impaired and as such have been written down
from their original cost to their estimated fair value at October 31,
Page F-9
36
<PAGE>
1999 (see Notes 3 and 10). The Company's note payable approximates the
fair value of such instrument based upon management's best estimate of
interest rates that would be available to the Company for a similar
financial arrangement at October 31, 1999.
h. Stock Options
The Company accounts for all transactions under which employees,
officers and directors receive options to purchase shares of stock in
the Company in accordance with the provisions of Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees." In
accordance with Statement of Financial Accounting Standards No. 123
("SFAS 123"), "Accounting for Stock-Based Compensation," the Company
adopted the pro forma disclosure requirements of SFAS 123.
Accordingly, no compensation has been recognized in the results of
operations for the employees, officers and directors stock option plan
other than for options issued to non-employees for consulting
services.
i. Loss Per Share
The Company has adopted the provisions of Financial Accounting
Standards No. 128, "Earnings per share", which became effective for
financial statements for fiscal years ending after December 15, 1997.
This statement requires that the Company report basic and diluted
earnings (loss) per share for all periods reported. Basic net income
(loss) per share is computed by dividing net income (loss) by the
weighted average number of common shares outstanding for the period.
Diluted net income (loss) per share is computed by dividing net income
(loss) less undeclared and not recorded cumulative Series A
Convertible Preferred stock dividends of $15,110 for the year ended
October 31, 1999 by the weighted average number of common shares
outstanding for the period, adjusted for the dilutive effect of common
stock equivalents, consisting of stock options and warrants at October
31, 1999.
For all periods presented, diluted net loss per share was the same as
basic net loss per share since the inclusion of stock options and
warrants would have been anti-dilutive.
j. Recent Accounting Pronouncement
The Company does not currently hold any derivative instruments and has
not held any derivative instruments since its inception and therefore
is not impacted by SFAS No. 133 "Accounting for Derivative Instruments
Page F-10
37
<PAGE>
and Hedging Activities" issued by the FASB in June 1998, effective for
all fiscal periods beginning after June 15, 1999.
3. DIVESTITURE
In March 1999, the Company formed International Internet Petroleum & Tire
Distributors, Inc. ("International") as a wholly owned subsidiary
incorporated under Nevada law. The Company transferred to International the
trade name "Western Oil & Tire Distributors, Inc." along with all of the
rights, title and interest to the petroleum and tire business and related
business development plan ("the WOTD Project"). The Company also
transferred to International approximately $400,000 of its debt obligations
relating to the WOTD Project.
The Company then distributed the common stock and Class A and B Warrants of
International to the Company's shareholders in a spin-off transaction
effective March 19, 1999.
As consideration for International's assumption of the WOTD Project and
related debt obligations at the time of the spin-off, the Company
capitalized International by issuing to it 5,000,000 shares of the
Company's restricted common stock which was valued at $250,000 based on 80%
of the per share trade price quoted on the date of the spin-off.
Subsequent thereto in May 1999, the Company issued 377,742 shares of its 8%
cumulative convertible redeemable preferred shares in settlement of
$377,742 of debt obligations related to the WOTD Project and International
in turn issued to the Company 377,742 shares of its 8% redeemable preferred
stock as consideration for the relief of the debt obligation settled by the
Company.
International is an early stage development company and lacks sufficient
operating history to predict its future with any degree of certainty.
Therefore, the Company recorded the value of the preferred stock it
received from International at $1 and the write down of the preferred
shares received from International was reflected as a $228,499 loss on
impairment of investment.
4. CONCENTRATION OF CREDIT RISK
The Company maintains cash balances at two commercial banks. Accounts at
these financial institutions are insured by the Federal Deposit Insurance
Corporation up to $100,000.
Page F-11
38
<PAGE>
5. LOANS PAYABLE-SHAREHOLDERS AND OFFICERS
At October 31, 1999, the balances consisted of the following:
<TABLE>
<S> <C>
Loan payable to Patrick F. Charles $ 15,331
Loan payable to Terrence K. Picken 15,331
--------
$ 30,662
</TABLE>
The loans payable are non-interest bearing, uncollateralized, and have no
specific due date for repayment. Patrick F. Charles is a shareholder and
Chief Executive Officer of the Company and Terrence K. Picken is a
shareholder and Vice President of the Company.
6. NOTE PAYABLE
In October 1999, the Company issued a note payable for $276,000, including
a $76,000 discount, that is payable in three installments of $92,000,
including interest at 6.5% through February 2000. Patrick F. Charles, Chief
Executive Officer and Terrence K. Picken assigned shares of the company
they personally own or control as collateral for the note.
7. INCOME TAXES
As of October 31, 1999, the Company has available unused federal, net
operating loss carryforwards of approximately $2,552,000 that may be
applied against future taxable income and that expire in 2020. The Company
has established a valuation allowance with respect to the available unused
federal net operating loss carryforwards because the likelihood of
realization of this benefit cannot be presently determined.
<TABLE>
Deferred tax assets:
<S> <C>
Net operating loss carryforward $870,000
Valuation allowance 870,000
--------
Net deferred tax asset $ 0
========
</TABLE>
Page F-12
39
<PAGE>
8. RELATED PARTY TRANSACTIONS
Coast Northwest Inc., a management consulting firm, provided substantially
all of the Company's corporate administrative services since inception of
the Company's development stage activities for which the Company incurred
expense of $97,500 for the year ended October 31, 1999 and $83,700 for the
period from inception of development stage activity, December 1997, to
October 31, 1998. At October 31, 1999 and October 31, 1998 the Company owed
$1,177 and $10,100, respectively to Coast Northwest Inc. for administrative
support services. The Company's President, Patrick F. Charles and Executive
Vice-President, Terrence K. Picken, collectively own controlling interest
in Coast Northwest Inc. (see Notes 9 and 11).
9. SHAREHOLDERS' EQUITY
Stock Split and Authorization of Shares
Prior to and in conjunction with the Company's merger with
Knightsbridge Corporation in July 1998, the Board of Directors of
Knightsbridge approved a 1 for 4 reverse stock split including the
reduction of authorized common stock from 200,000,000 shares to
50,000,000 shares. All per share data in these statement reflect the
reverse stock split.
In March 1999, the board of directors of the Company approved the
increase of authorized common stock from 50,000,000 shares to
200,000,000 shares. The stockholders also approved the authorization
of the issuance of a new class of 50,000,000 shares of $.001 par value
preferred stock. The preferred stock of the Company can be issued in
series. With respect to each series issued, the Board of Directors of
the Company will determine, among other things, the number of shares
in the series, voting rights and term, dividend rates and terms,
liquidation preferences and redemption and conversion privileges.
8% Convertible Redeemable Preferred Stock
In May 1999, the Company issued nonvoting restricted cumulative Series
A convertible redeemable preferred stock ("Preferred Stock") as
payment for the outstanding balance of $377,742 on a note payable.
Upon the declaration of the board of directors, the Preferred Stock
pays a dividend at 8% per share and any unpaid dividends are
cumulative. The shares of Preferred Stock are convertible into common
stock, over a three year period, at the rate of 125,914 preferred
shares each year beginning one year from date of issue. At the
Page F-13
40
<PAGE>
holder's option, each preferred share, valued at $1 each, plus unpaid
cumulative dividends on such shares may be converted into common
shares based on the published trade price of the common shares at date
of conversion notice. In addition, upon written notice to the holders,
the Company has the right to redeem shares, at its discretion, at
$1.00 per share plus any accumulated unpaid dividends and the
preferred Stock has a liquidation preference over common stock of
$1.00 per share plus any accumulated unpaid dividends.
Common Stock Issuances
The following is a summary of common stock issued by the Company
effective with and following the reverse merger transaction with
Knightsbridge Corporation and the related 1 for 4 reverse stock split
in July 1998:
In July 1998, 11,577,000 restricted common shares were issued to
Western's shareholders under a share exchange agreement to give
effect to the reverse merger transaction with Knightsbridge.
In addition, 950,000 restricted common shares were issued as
finder's fees for introducing Western to Knightsbridge (see Note
1).
The total of 12,527,000 shares issued in connection with the
reverse merger transaction were recorded at $0.001 per share.
Page F-14
41
<PAGE>
Shares of common stock of the Company issued subsequent to the reverse
merger through October 31, 1999 are summarized as follows:
<TABLE>
<CAPTION>
Average Number
Per Of
Transaction Share Shares
Date Description Value Valuation Issued
<S> <C> <C> <C> <C>
11/98-1/99 Issued for $ 50,071 $0.059 850,000
services
1/99 Private $ 90,000 $0.025 3,600,000
placement for
cash
2/99 Issued for $ 26,485 $0.021 1,245,000
services
2/99 Issued for $ 72,400 $0.016 4,525,000
services
provided by
Officers
2/99 Private $ 50,000 $0.029 1,700,000
Placement for
cash
3/99 Issued for $ 9,000 $0.030 300,000
services
3/99 Issued to $250,000 $0.050 5,000,000
International
in connection with
the WOTD Project
Spin-off transaction
(See Note 3)
4/99 Issued for $ 400 $0.040 10,000
services
5/99 Issued for $ 72,000 $0.131 550,000
services
6/99 Issued for $ 16,800 $0.112 150,000
services
Page F-15
42
<PAGE>
7/99 Issued for $ 36,126 $0.147 245,000
services
8/99 Issued for $ 25,500 $0.150 170,000
services
10/99 Issued for $ 56,000 $0.14 400,000
services
10/99 Issued to $ 6,666 $0.112 59,524
Officers for
salaries
</TABLE>
The "Per Share Valuation" set forth above is based on the recorded
value of the transaction divided by the number of shares issued as
consideration for each transaction.
Debentures Converted to Common Stock
In July 1998, the Company issued 9% series A subordinated convertible
redeemable debenture ("series A debenture") for $150,000 due July
1999, under an exemption from registration afforded by Rule 504,
Regulation D, of the Securities act of 1933. The series A debenture
was convertible into common stock of the Company at 72.5% of the
average closing bid price of the common stock for the five days
immediately preceding the date of notice of conversion by the holder.
During October 1998, the holder converted $10,000 of principal plus
accrued interest into 94,085 shares of common stock. During the period
from January 21, 1999, to April 6, 1999, the holder converted the
principal balance of $140,000 at October 31, 1999, plus accrued
interest of $8,182 into 6,251,823 shares of common stock.
In March 1999, the Company issued 9% series B subordinated convertible
redeemable debentures ("series B debentures") for $450,000 due March
30, 2000, under an exemption from registration afforded by Rule 504,
Regulation D, of the Securities act of 1933. The series B debentures
were convertible into common stock of the Company at 72.5% of the
average closing bid price of the common stock for the five days
immediately preceding the date of notice of conversion by the holder.
In May 1999, the holders of these series B debentures converted the
principal balance of $450,000 plus accrued interest of $2,857 into
5,795,564 shares of common stock.
Page F-16
43
<PAGE>
In June 1999, the Company issued 9% series C subordinated convertible
redeemable debentures ("series C debentures") for $150,000 due June
11, 2001, under an exemption from registration afforded by Rule 504,
Regulation D, of the Securities act of 1933. The series C debentures
was convertible into common stock of the Company at 72.5% of the
average closing bid price of the common stock for the five days
immediately preceding the date of notice of conversion by the holder.
In June 1999, the holders of these series C debentures converted the
principal balance of $150,000 plus accrued interest of $97 into
1,548,158 shares of common stock.
In July 1999, the Company issued a 2% series D subordinated
convertible redeemable debenture ("series D debenture") for $150,000
due July 30, 2001, under an exemption from registration afforded by
Rule 504, Regulation D, of the Securities act of 1933. The series D
debenture is convertible into common stock of the Company at 75% of
the average closing bid price of the common stock for the five days
immediately preceding the date of notice of conversion by the holder.
In August 1999, the holder of this series D debenture converted the
principal balance of $150,000 plus accrued interest of $1,275 into
1,182,621 shares of common stock.
In December 1998, the Company issued $15,000 principal amount of a
Subordinated Convertible Redeemable Debenture due December, 1999 to
Coast northwest Management LLC ("Coast LLC Debenture") a limited
liability company owned by Patrick F. Charles and Terrence K. Picken,
officers, directors and controlling shareholders of the Company in a
private placement as payment of a loan to the Company. The Coast LLC
Debenture and the shares of common stock into which it was converted
were exempt from registration in reliance on Rule 504 of Regulation D
of the Securities Act of 1933. The Coast LLC Debenture was convertible
into common stock at a conversion price equal to 72.5% of the average
closing bid price of the common stock for the five trading days
immediately preceding the date of receipt of the conversion notice. In
December 1998, the holder of this Debenture converted the principal
balance of $15,000 into 300,000 shares of common stock.
In January 1999 the Company issued $30,000 principal amount of a
Subordinated Convertible Redeemable Debenture due January 2000 to
Coast Northwest Management LLC ("Coast LLC Debenture 2") a limited
liability company owned by Patrick F. Charles and Terrence K. Picken,
officers, directors and controlling shareholders of the Company in a
private placement as payment of a loan to the Company. The Coast LLC
Debenture 2 and the shares of common stock into which it was converted
were exempt from registration in reliance on Rule 504 of Regulation D
of the Securities Act of 1933. The Coast LLC Debenture 2 was
convertible into common stock at a conversion price equal to 72.5% of
the average closing bid price of the common stock for the five (5)
trading days immediately preceding the date of receipt of the
conversion notice. In January 1999 the holder of this Debenture
converted $29,000 of the principal balance into 1,250,000 shares of
common stock. The remaining $1,000 of the Coast LLC Debenture 2 was
forgiven.
In January 1999 the Company issued $15,000 of principal amount of
Subordinated Convertible Redeemable Debentures (the "Debentures") due
January 2000 to each of Patrick F. Charles and Terrence K. Picken,
Page F-17
44
<PAGE>
officers, directors and controlling shareholders of the Company in a
private placement for a total of $30,000 in payment of services
provided to the Company. The Debentures and the shares of common stock
into which they were converted were exempt from registration in
reliance on rule 504 of Regulation D of the Securities Act of 1933.
The Debentures were convertible into common stock at a conversion
price equal to 72.5% of the average closing bid price of the common
stock for the five (5) trading days immediately preceding the date of
receipt of the conversion notice. $29,000 principal amount of these
Debentures were converted to 1,250,000 shares of common stock in
January, 1999. The remaining $1,000 of the Debentures was forgiven.
For common stock issued in non-monetary transactions involving
marketability discounts the Company's policy is to account for
marketability discounts in accordance with guidelines provided by
published empirical studies and financial research on marketability
discounts.
In an Emerging Issues Task Force meeting sponsored by the Financial
Accounting Standards Board, held on March 13, 1997, the Securities and
Exchange Commission ("SEC") announced their position on the accounting
for the issuance of convertible debt securities with a nondetetachable
conversion feature that is "in-the-money" at the date of issue. Those
securities are usually convertible into common stock at the lower of a
conversion rate fixed at the date of issue or a fixed discount to the
common stock's market price at the date of conversion, creating a
"beneficial conversion feature". The SEC's position is that the
beneficial conversion feature should be recognized and measured by
Page F-18
45
<PAGE>
allocating a portion of the proceeds equal to the intrinsic value of
that feature to additional paid-in capital. The amount is calculated
at the date of issuance as the difference between the conversion price
and the fair value of the common stock into which the security is
convertible, multiplied by the number of shares into which the
security is convertible. The discount resulting from the allocation of
proceeds, in effect, increases the interest rate of the security and
should be amortized as a charge to interest expense over the period
from the date the security is issued to the date it first becomes
convertible. The beneficial conversion feature of the debentures were
accounted for as additional interest expense, and as a result, such
interest expense was charged to operations for the year ended October
31, 1999 and for the period December 1, 1997 (inception) through
October 31, 1998, amounted to approximately $340,000 and $21,000,
respectively.
Stock Options and Warrants
During October 1998, the Company approved a Qualified and
Non-Qualified Stock Option Plan ("1998 option Plan"). A total of
8,000,000 shares are available for future grants to directors,
officers, employees and consultants who are in a position to make
significant contributions to the success of the Company.
The exercise price of each option will be determined by the Company's
board of directors, in its discretion, at the time of grant, provided
that such exercise price shall not be lower than the fair market value
at the time of grant in the case of options that are intended to
constitute incentive stock options. Further, at the time of grant and
at the discretion of the board of directors, the vesting period and
the expiration date shall not exceed ten years. Under the 1998 option
plan, incentive stock options that become exercisable in any fiscal
year may not exceed the fair market value of $100,000 as determined at
the time the options are granted.
The Company granted 400,000 options under the 1998 stock plan to
various consultants for services rendered in fiscal 1999. The options
expire from two to five years from the date of grant, are currently
exercisable and have an exercise price ranging from $.10 to $.20 per
share. The Company has recorded approximately $34,000 of consulting
costs relating to these options.
As of October 31, 1999, options to purchase 1,775,000 shares have been
granted to employees, officers and directors under the 1998 stock
plan. The options have an exercise price ranging from $.10 to $.20 per
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<PAGE>
share, expire five years from the date of grant and all options
granted to employees, officers and directors are exercisable.
In May 1999, the Company extended the corporate public relations
services contract with PMR and Associates. In connection therewith the
Company issued warrants entitling PMR to purchase up to 1,000,000
shares of its common stock at $0.15 per share and 1,000,000 shares at
$0.20 per share. The warrants are exercisable at any time and expire
May 18, 2001. None have been exercised at this time.
In June 1999, the Company issued 1,000,000 common stock purchase
warrants ("warrants") at an exercise price of ten cents per share to
purchase 1,000,000 shares of the Company's common stock. Management
has estimated the value of the warrants, based on the Black-Scholes
option pricing model, in order to record a $102,666 intangible asset
as a result of the operational right purchased from Internet Interview
Inc. (see Notes 1 and 2 (d)).
Stock Option Compensation
For disclosure purposes of employees and officers stock option
compensation, the fair value of options is estimated on the date of
grant using the Black-Scholes option pricing model with the following
weighted average assumptions used for stock options granted during
fiscal 1999: annual dividends of $0; expected volatility of 50%;
risk-free interest rate of 6%; and expected lives ranging from 2 years
to 5 years. The weighted average fair values of stock options granted
to employees and officers during the fiscal year 1999 was
approximately $125,000 and the Company's pro forma loss and net loss
per share would have been as follows:
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<PAGE>
<TABLE>
<CAPTION>
Year Ended
October 31, 1999
<S> <C>
Net loss per common shares
As reported $1,679,728
==========
Pro forma $1,804,820
==========
Net loss per common share
As reported $0.04
=====
Pro forma $0.05
=====
</TABLE>
The Black-Scholes option pricing model was developed for use in
estimating the fair value of traded options, which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions including
the expected stock price volatility. The Company's employee stock
options have characteristics significantly different from those of
traded options, and since changes in subjective input assumptions can
materially affect the fair value estimate, in management's opinion,
the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options and warrants.
10. NON-RECURRING EXPENSES
The Company's merger with Knightsbridge (see Note 1) was effective July 28,
1998. Prior to such merger, Knightsbridge, under former management, entered
into an agreement to acquire controlling interest in a language translation
technology company, Language Force Inc. ("LFI") in exchange for cash and
shares of Knightsbridge. Shares called for by the agreement were issued by
both parties and placed in an escrow account to be released subject to and
pending finalization of the transaction. Knightsbridge also advanced to LFI
approximately $306,000 in connection with the transaction. The agreement
between Knightsbridge and LFI was never fulfilled and the parties are
seeking in negotiations to rescind the agreement. Knightsbridge is also
seeking to recover the cash it advanced to LFI and return of the two
million (post reverse stock split) shares issued to LFI and being held in
escrow. The Company believes it will recover the two million shares of its
common stock held in escrow and is pursuing negotiations with LFI to
recover the sums of cash advanced to LFI.
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<PAGE>
Prior to Western's reverse merger transaction with Knightsbridge, Prime
Ventures Corporation. was engaged by the Company to manage the LFI matter.
At the time of the reverse merger, the Company entered into a ten-month
consulting service agreement with Prime Ventures principally to continue
with its efforts to manage the LFI matter toward a final resolution and to
provide the Company with other business advisory services as needed from
time to time.
In June 1999, the Company agreed to a further extension of Prime Ventures
services to manage the LFI matter. Under their June 1, 1999 agreement,
Prime Ventures and the Company agreed upon the following payment and
incentive terms:
The Company agreed to pay $10,000 toward legal fees regarding the LFI
matter recoverable from the first cash proceeds, if any, from the LFI
settlement. Prime Ventures and another creditor agreed to settle $95,000 of
amounts owing to them by the Company, including the forgiveness of $50,000
of a note payable, in exchange for an assignment of the cash proceeds, if
any, from the LFI settlement.
If any LFI shares are received from the LFI settlement, the first 300,000
LFI shares are to be the property of the Company, the balance, if any, in
excess of 300,000 shares is to be split based on future negotiations
between the Company and Prime Ventures.
Settlement of the LFI matter is subject to the prior approval of the
Company's Board of Directors.
Due to the uncertainty of the outcome of the Company's negotiations with
LFI, the investment in LFI has been written off in the amount of $255,500
in fiscal 1998 and $50,000 in fiscal 1999.
In fiscal 1998, the Company wrote off $99,043 relating to the acquisition
of a retail tire company because the agreement expired and was terminated.
Under the reverse merger agreement dated July 28, 1998 between
Knightsbridge and Western they agreed to issue four additional shares of
the Company's common stock to the former shareholders of Western for each
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<PAGE>
share of the Company's stock issued to LFI ("LFI shares") which is released
from escrow and not returned to the Company's treasury. If all of the
2,000,000 LFI shares currently held in escrow are released from escrow and
none returned to its treasury, the Company will be required to issue
8,000,000 additional common shares to former stockholders of Western.
11. COMMITMENTS AND CONTINGENCIES
In June 1999, the Company entered into an employment agreement with the
former Chief Executive Officer and shareholder of Internet Interview Inc.
which entitles this employee to a base salary plus performance bonus and
stock options to purchase up to 250,000 shares of the Company. Further, in
connection with the acquisition of the telecom operation right from
Internet Interview Inc. the Company entered into a consulting agreement
with AJAY Enterprises Inc. ("AJAY") which entitles AJAY to a monthly
service fee and stock options to purchase up to 250,000 shares of the
Company. Ajay is controlled by a former principal shareholder of Internet
Interview Inc. The consulting service agreement with AJAY was terminated by
mutual agreement in August, 1999 except for the stock options granted to
Ajay.
On October 1, 1999 the company entered into three year Employment
Agreements ("Agreements") with Patrick F. Charles, Chief Executive Officer
of the Company and Terrence K. Picken, Executive Vice President of the
Company. Each Agreement provides for a base salary for each of the three
years plus performance bonus and stock options to purchase up to 500,000
shares each of the Company's common stock. The Agreement provides that at
each Officers option, part of the payments may be paid in common stock of
the Company.
Saratoga Telecom has an operating lease on 1500 square feet of office space
at a rate of $1,506 per month through June, 2000.
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<PAGE>
<TABLE>
<CAPTION>
PART III
ITEM 1 INDEX OF EXHIBITS
Exhibit Description*
Number
<S> <C>
2 Agreement and Plan of Merger dated
July 24, 1998 between Knightsbridge and
Western Oil & Tire Distributors Inc.
3.1 Articles of Incorporation, as amended
for Parent Company, Saratoga
International Holdings Corp.
3.2 Articles of Incorporation, as amended
for Subsidiary, Saratoga Telecom Corp.
3.3 By-Laws for Parent Company, Saratoga
International Holdings Corp.
3.4 By-Laws for Subsidiary, Saratoga Telecom
Corp.
4 Specimen Stock Certificate
5 $276,000 Note Purchase Agreement dated
October 30, 1999
10.1 Teleglobe Agreement dated August 18, 1999
10.2 Agreement for Sale and Purchase of
Telecom Business Assets dated June 15,
1999 between Saratoga Telecom Corp. and
Internet Interview Inc.
10.3 Corporate Officer Employment Agreements
with Patrick F. Charles and Terrence K.
Picken, each dated October 1, 1999
10.4 Warrant Agreement between Saratoga
International holdings Corp. and Tom
Morsey, President of Saratoga Telecom
Corp. dated June 16, 1999
10.5 Stock Option Plan
21 Subsidiaries of the Registrant
27 Financial Data Schedule
<FN>
* Summaries of all Exhibits contained within this Registration Statement are
modified in their entirety by reference to these Exhibits.
</FN>
</TABLE>
51
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant has caused this Registration Statement to be signed on its behalf by
the undersigned, hereunto duly authorized.
SARATOGA INTERNATIONAL HOLDINGS CORP.
Date: 1/24/00 By: /s/ Patrick F. Charles
----------------------
Patrick F. Charles
CEO, President and Director
52
<PAGE>
EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of July 24, 1998 ("Agreement"), among
Knightsbridge Corporation, a Nevada corporation ("Knightsbridge"), and Western
Oil and Tire Distributors, Inc., a State of Washington Corporation hereinafter
referred to as "Western" or "Company".
BACKGROUND
The respective Boards of Directors of Knightsbridge and Western have each
approved, upon the terms and subject to the conditions set forth in this
Agreement, the merger ("Merger") of Western with and into Knightsbridge whereby
each issued and outstanding share of common stock of Western not owned directly
or indirectly by Western will be converted into the common stock of
Knightsbridge ("Common Stock") as set forth in Article I.
In consideration of the respective representations, warranties, covenants
and agreements contained in this Agreement, Knightsbridge and Western hereby
agree as follows:
ARTICLE I
THE MERGER
1.01 The Merger. Upon the terms and subject to the conditions hereof, and in
accordance with the relevant provisions of the Nevada Corporation Act
("Nevada Statute"), Western shall be merged with and into Knightsbridge
subject to the conditions set forth in Article VI. Following the Merger,
Knightsbridge shall continue as the surviving corporation ("Surviving
Corporation") and shall continue its existence under the laws of the State
of Nevada, and the separate corporate existence of Western shall cease.
1.02 Effective Time. As soon as practicable following the satisfaction or
waiver, if permissible, of the conditions set forth in Article VI, the
Merger shall be consummated by filing with the Secretary of State of the
State of Nevada articles of merger, amended Certificate of Incorporation,
or other appropriate documents ("Articles of Merger") in accordance with
the Nevada Statute. The Merger shall become effective at such time as the
Articles of Merger are duly filed, or at such later time as Knightsbridge
and Western shall specify in the Articles of Merger (the time the Merger
becomes effective being the "Effective Time").
1.03 Effects of the Merger. The Merger shall have the effects specified in the
Nevada Statute. This Plan of Merger is intended to constitute "a plan of
reorganization" within the meaning of Section 354 of the Internal Revenue
Code, 1986 as amended. Further for federal income tax purposes it is
intended that the merger shall qualify as a reorganization as defined in
Section 368 (a) of the Internal Revenue Code.
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1.04 Amendments to Articles of Incorporation and Bylaws. At the Effective Time,
(i) the Articles of Incorporation of Knightsbridge as amended, and as in
effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation, except that Article "I" of the
"Certificate of Incorporation of Knightsbridge Corporation", the Surviving
Corporation shall be amended to read as follows: "The name of the
Corporation is Western Oil & Tire Distributors, Inc. and the original date
of incorporation is June 17, 1996" , and (ii) the Bylaws of Western as in
effect immediately prior to the Effective time shall be the Bylaws of the
Surviving Corporation, except that the Bylaws shall be amended such that
Section 1 of Article III thereof shall be amended and restated in its
entirety to read as follows until thereafter amended as provided by law:
Section 1. Effective upon the merger of Western Oil & Tire Distributors,
Inc. with and into the corporation, the number of directors shall be five
(5); thereafter, the number of directors shall consist of no fewer than
three (3) members and no more than fifteen (15) members as determined from
time to time in accordance with these bylaws by resolution of the board of
directors, but no decrease in the number of directors shall have the effect
of shortening the term of any incumbent director. In the event of a tie
(50% for, 50% against) in the voting by the Board members on any corporate
action brought before the Board, the Chairman shall have the right to break
the tie and approve or disapprove the action. The directors shall be
elected at the annual meeting of shareholders. Each director elected shall
hold office until such director's successor is elected and qualified, or
until such director's earlier resignation or removal. Directors need not be
shareholders.
1.05 Directors and Officers of the Surviving Corporation. From and after the
Effective Time, the directors and officers of the Surviving Corporation
shall be the persons set forth on Exhibit 1.05 hereto, until their
successors shall have been duly elected or appointed and qualified or until
their earlier death, resignation or removal in accordance with the
Surviving Corporation's Certificate of Incorporation and by laws.
1.06 Shares. At or prior to the Effective Time, by virtue of the Merger the
following events shall occur:
(a) Each share of common stock or preferred stock held by Western as
treasury stock shall be cancelled and retired and shall cease to
exist, and no payment or consideration shall be made with respect
thereto;
(b) Knightsbridge shall take all necessary corporate action to
effectuate a reverse stock split so that the total issued and
outstanding Common Stock shall not exceed 5,054,350 shares
("Reverse Stock Split") immediately prior to the issuance of
Common Stock as set forth in Section 1.06(c).
(c) Knightsbridge shall arrange delivery of 423,000 post reverse
stock split common shares without any trading restrictions from
certain of Knightsbridge's existing shareholders to effectuate
closing of this agreement. These 423,000 shares plus an
additional 11,577,000 common shares to be issued from
Knightsbridge's treasury (total 12,000,000 shares) shall be
issued to each of Western's shareholders, as set forth on Exhibit
1.06(c) annexed hereto, in the number of Common Stock shares set
forth next to each name.
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<PAGE>
1.07 Private Placement.
(a) The Common Stock issued to Western's shareholders have not been
and will not be registered with the Securities and Exchange
Commission ("SEC") or the securities commission of any state,
including but not limited to Nevada and Washington state,
pursuant to an exemption from registration by virtue of
Knightsbridge's intended compliance with the provisions of
Sections 4(2) and 4(6) of the Securities Act of 1933, as amended
("Securities Act"), and the Common Stock will be made available
only to "accredited investors" or Company shareholders who have
used a "Purchaser representative", as defined in Rule 501(a) of
Regulation D promulgated under the Securities Act. Such exemption
limits the number and types of investors to which the offering of
Common Stock may be made and restricts subsequent transfers of
the Common Stock so offered which also may be restricted by state
securities laws. The Common Stock may not be resold or otherwise
disposed of by Western's shareholders unless, in the opinion of
counsel to Knightsbridge, registration under federal and
applicable state securities laws is not required or compliance is
made with the registration requirements of such laws.
ARTICLE II
EXCHANGE OF SHARES
2.01 Issuance of Certificates. Promptly after the Effective Time, the
Surviving Corporation shall issue to each person set forth on Exhibit
1.06(c) a certificate representing the Common Stock to be issued to
each Western shareholder and simultaneously each Western shareholder
shall exchange and surrender the certificate representing all of such
Western shareholder's shares in the Company. At the close of business
on the day of the Effective Time, the stock ledger of Western shall be
closed.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
KNIGHTSBRIDGE
Knightsbridge represents and warrants to Western as of the date of this
Agreement and as of the Effective Time as follows:
3.01 Existence; Good Standing. Knightsbridge is a corporation duly
incorporated, validly existing and in good standing under the laws of
its jurisdiction of incorporation.
3.02 Capitalization. The authorized capital stock of Knightsbridge prior to
the Reverse Stock Split consists of 200,000,000 shares of Common
Stock, par value $0.001 ("Shares") and no other classes of stock,
common or preferred, or other securities. As of July 24, 1998, there
were 20,217,400 shares of Common Stock issued and outstanding
including 8,000,000 shares held in escrow pending completion and
outcome of Knightsbridge's claim and related lawsuit against Language
Force, Inc. All issued and outstanding shares of Common Stock are duly
authorized, validly issued, free of preemptive rights, non-assessable,
and, except for the 8,000,000 shares held in escrow, are fully paid.
Except as set forth in this Section 3.02, (i) Knightsbridge is not a
party to or bound by any written or oral contract or agreement which
grants to any person an option, warrant or right of first refusal or
other right of any character to acquire at any time, or upon the
happening of any stated events any shares of or interest in
Knightsbridge, whether or not presently authorized, issued or
outstanding, and (ii) there are outstanding (a) no shares of capital
stock or other voting securities of Knightsbridge, (b) no securities
of Knightsbridge or any of its subsidiaries convertible into or
exchangeable for shares of capital stock or voting securities of
Knightsbridge, (c) no options or other rights to acquire from
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<PAGE>
Knightsbridge or any of its subsidiaries, and no obligation of
Knightsbridge or any of its subsidiaries to issue, any capital stock,
voting securities or securities convertible into or exchangeable for
capital stock or voting securities of Knightsbridge, and (d) no equity
equivalents, interests in the ownership or earnings of Knightsbridge
or any of its subsidiaries or other similar rights. Upon issuance of
the Common Stock to Western's shareholders, such shares of Common
Stock shall be duly authorized, validly issued, fully paid,
non-assessable, and free of preemptive rights.
3.03 Authorization: Validity and Effect of Agreements. Knightsbridge has
the requisite corporate power and authority to execute and deliver
this Agreement. The consummation by Knightsbridge of the transactions
contemplated hereby has been duly authorized by all requisite
corporate action and the issuance of the Common Stock to Western's
shareholders is required to be approved by the shareholders of
Knightsbridge and such approval was obtained by shareholder consent on
July 24, 1998. This Agreement constitutes the valid and legally
binding obligation of Knightsbridge, enforceable in accordance with
its terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights and general
principles of equity.
3.04 No Violation. To the best of Knightsbridge's knowledge neither the
execution and delivery by Knightsbridge of this Agreement, nor the
consummation by Knightsbridge of the transactions contemplated hereby
in accordance with the terms hereof, will: (i) conflict with or result
in a breach of any provisions of the Articles of Incorporation or
Bylaws of Knightsbridge (ii)violate, or conflict with, or result in a
breach of any provision of, or constitute a default (or an event which
with notice or lapse of time or both, would constitute a default)
under, or result in the termination or in a right of termination or
cancellation of, or accelerate the performance required by, or result
in the triggering of any payment of compensation under, or result in
the creation of any lien, security interest, charge or
encumbrance("Lien")upon any of the material properties of
Knightsbridge or its subsidiaries under, or result in being declared
void, voidable, or without further binding effect, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed
of trust or any material license, franchise permit, lease, contract,
agreement or other instrument, commitment or obligation to which
Knightsbridge or any of Knightsbridge's subsidiaries if a party, or by
which Knightsbridge or any of Knightsbridge's subsidiaries or any of
their respective properties is bound or affected, except for any of
the foregoing matters which would not have a material adverse effect
on the business, results of operations financial condition or
prospects of Knightsbridge and its subsidiaries taken as a whole
("Knightsbridge Material Adverse Effect"); or (iii) other than the
filings required under the Hart-Scott-Rodino Antitrust Improvements
Act of 1978 ("HSR Act"), the Securities Exchange Act of 1934,
("Exchange Act"), the Securities Act or applicable state securities
and "Blue Sky" laws or filings in connection with the maintenance of
its qualification to do business in other jurisdictions, and the
filings contemplated by Section 5.02 of this Agreement (collectively,
"Regulatory Filings"), require any material consent, approval or
authorization of, or declaration, filings or registration with, any
domestic governmental or regulatory authority, the failure to obtain
or make which would have a Knightsbridge Material Adverse Effect.
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<PAGE>
3.05 Documents. Knightsbridge has delivered to Western the following
reports and/or statements: Audited financial statements for the year
ended October 31, 1997. Unaudited financial statements for the six (6)
month period ended April 30, 1998. Issuer Information and Disclosure
Statement Pursuant to Rule 15 c 2-11(a)(5)
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF WESTERN
Western represents and warrants to Knightsbridge as of the date of this
Agreement and as of the Effective Time as follows:
4.01 Existence; Good Standing; Corporate Authority; Compliance with Law
Western is a corporation duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its incorporation.
The copies of Western's Articles of Incorporation and by laws
previously delivered to Knightsbridge are true and correct and have
not since been amended, modified or rescinded.
4.02 Authorization, Validity and Effect of Agreements. Western has the
requisite corporate power and authority to execute and deliver this
Agreement, subject to the approval of the Merger by the shareholders
of Western. The consummation by Western of all transactions
contemplated hereby has been duly authorized by all requisite
corporate action. This Agreement constitutes the valid and legally
binding obligation of Western, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights and general
principles of equity.
4.03 Capitalization. The authorized capital stock of Western consists of
10,000,000 shares of no par value common stock and no other classes of
stock, common or preferred, or other securities. There are 6,000,000
shares of common stock issued and outstanding as of July 24, 1998. All
issued and outstanding shares of common stock are duly authorized,
validly issued, fully paid, non-assessable and free of preemptive
rights. Except as set forth in Exhibit 4.03 Western is not a party to
or bound by any written or oral contract or agreement which grants to
any person an option, warrant or right of first refusal or other right
of any character to acquire at any time, or upon the happening of any
stated events, any shares of or interest in Western, whether or not
presently authorized, issued or outstanding. Except as set forth in
Exhibit 4.03, there are outstanding (i) no shares of capital stock or
other voting securities of Western, (ii) no securities of Western or
any of its subsidiaries convertible into or exchangeable for shares of
capital stock or voting securities of Western, (iii) no options or
other rights to acquire from Western or any of its subsidiaries, and
no obligations of Western or any of its subsidiaries to issue, any
capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of Western, and
(iv) no equity equivalents, interest in the ownership or earnings of
Western or any of its subsidiaries or other similar rights. There are
no outstanding obligations of Western or any of its subsidiaries to
repurchase, redeem or otherwise acquire any securities of Western.
4.04 No Violation. Neither the execution and delivery by Western of this
Agreement nor the consummation by Western of the transactions
contemplated hereby in accordance with the terms hereof will: (i)
conflict with or result in a breach of any provisions of the Articles
of Incorporation or Bylaws of Western or its subsidiaries, (ii)
violate, or conflict with, or result in a breach of any provision of,
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<PAGE>
or constitute a default (or an event which, with notice or lapse of
time or both, would constitute a default) under, or result in the
termination or in a right of termination or cancellation of, or
accelerate the performance required by, or result in the triggering of
any payment or compensation under, or result in the creation of any
Lien upon any of the properties of Western or its subsidiaries under,
or result in being declared void, voidable, or without further binding
effect, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust or any material license, franchise,
permit, lease, contract, agreement or other instrument, commitment or
obligation of which Western or its subsidiaries is a party, or by
which Western or its subsidiaries or any of their respective
properties or assets is bound or affected, except for any of the
foregoing matters which, singularly or in the aggregate, would not
have a Company Material Adverse Effect; (iii) other than the
Regulatory filings, require any material consent, approval or
authorization of, or declaration, filing or registration with, any
domestic governmental or regulatory authority, the failure to obtain
or make which would have a Company Material Adverse Effect, as defined
in Section 7.01(c) below, or (iv) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Western, any of its
subsidiaries or any of their assets, except for violations which in
the aggregate would not have a Company Material Adverse Effect or
materially adversely affect the ability of Western to consummate the
Merger.
4.05 Consulting Service Agreements. Western has entered into consulting
agreements with various consultants. The terms of such agreements are
no more than three months in duration except for Western's consulting
agreement with RMJ & Associates set forth on Exhibit 4.05 annexed
hereto.
4.06 Acquisition Agreement. Western has entered into an Agreement to
Purchase the Business Assets of Ed's Tire Service, Inc. a copy of
which is set forth on Exhibit 4.06 annexed hereto.
ARTICLE V
COVENANTS
5.01 Conduct of Business. From and after the date of this Agreement until
the Merger is affected or this Agreement is terminated, unless
Knightsbridge has consented in writing thereto, Western, and, with
respect to (e) and (f) below, Knightsbridge and Western:
(a) Shall, and shall cause its subsidiaries to, conduct its
operations according to its usual, regular and ordinary course in
substantially the same manner as heretofore conducted;
(b) Shall use reasonable efforts, and shall cause its subsidiaries to
use reasonable efforts, to preserve intact its business
organization and goodwill, keep available the services of its
officers and employees and maintain satisfactory relationships
with those persons having business relationships with it;
(c) Shall confer on a regular basis with one or more representatives
of Knightsbridge to report operational matters of materiality and
any proposals to engage in material transactions;
(d) Shall not amend its Articles of Incorporation or By Laws;
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(e) Shall promptly notify the other parties hereto of any material
emergency or other material change in the condition (financial or
otherwise), business, properties, assets, liabilities, prospects
or the normal course of its businesses or in the operation of its
properties, any material litigation or material governmental
complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the breach in
any material respect of any representation or warranty contained
herein;
(f) Shall promptly deliver to the other parties hereto true and
correct copies of any report, statement or schedule filed with or
delivered to the SEC, any other Governmental entity (other than
routine corporate tax and other filings in the ordinary course of
business) or any shareholder of Western or Knightsbridge, as the
case may be, subsequent to the date of this Agreement;
(g) Shall not (i) issue, sell or pledge, or agree to issue, sell or
pledge, any shares of its capital stock, effect any stock split
or otherwise change its capitalization as it existed on the date
hereof, (ii) grant, confer or award any option, warrant,
conversion, right or other right to acquire any shares of its
capital stock or grant any right to convert or exchange any
securities of Western for Common Stock, (iii) increase any
compensation or enter into or amend any employment agreement with
any of its present or future officers or directors, other than in
the ordinary course of Western's business, (iv) adopt any new
employee benefit plan, other than in the ordinary course of
Western's business (including any stock option, stock benefit or
stock purchase plan) or amend any existing employee benefit plan
in any material respect, other than in the ordinary course of
business, except, in each case, for changes which are less
favorable to participants in such plans or as may be required by
applicable law, or (v) amend any Officer Employment Agreement or
increase any compensation payable pursuant to such Officer
Employment Agreements;
(h) Shall not (i) except in the normal course of business as
consistent with prior practice, declare, set aside or pay any
dividend (whether in cash, stock or property) or make any other
distribution or payment with respect to any shares of its capital
stock or (ii) directly or indirectly redeem, purchase or
otherwise acquire any shares of its capital stock or make any
commitment for any such action;
(i) Shall not, and shall not permit its subsidiaries to (i) sell,
lease or otherwise dispose of any assets of Western or its
subsidiaries (including capital stock) which are of a material
amount, individually or in the aggregate, or (ii) make any
acquisition, by means of merger or otherwise, of any assets or
securities which are of a material amount, individually or in the
aggregate; and
(j) Shall not, and shall not permit its subsidiaries to, agree in
writing to take or otherwise take (i) any of the foregoing
actions or (ii) any action which would make any representation or
warranty of Western herein untrue or incorrect.
5.02 Filings; Other Action. Subject to the terms and conditions herein
provided, Western and Knightsbridge shall: (i) promptly make their
respective filings and thereafter make any other required submissions
under the HSR act with respect to the Merger if required; (ii) use all
reasonable efforts to cooperate with one another in (a) determining
which filings are required to be made prior to the Effective Time
with, and which consents, approvals, permits or authorizations are
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required to be obtained prior to the Effective Time from, governmental
or regulatory authorities of the United States, the several states,
and other jurisdictions in connection with the execution and delivery
of this Agreement and the consummation of the transactions
contemplated hereby and (b) timely making all such filings and timely
seeking all such consents, approvals, permits or authorizations; and
(iii) use best efforts to take, or cause to be taken, all other action
and do, or cause to be done, all other things necessary, proper or
appropriate to consummate and make effective the transactions
contemplated by this Agreement. If, at any time after the Effective
Time, any further action is necessary or desirable to carry out the
purpose of this Agreement, the proper officers and directors of
Knightsbridge and Western shall use best efforts to take all such
necessary action.
5.03 Inspection of Records. From the date hereof to the Effective Time,
each of Knightsbridge and Western shall allow all designated officers,
attorneys, accountants and other representatives of Knightsbridge and
Western, as the case may be, access at all reasonable times to the
records and files, correspondence, audits and properties, as well as
to all information relating to commitments, contracts, titles and
financial position, or otherwise pertaining to the business and
affairs of Knightsbridge, Western and their subsidiaries.
5.04 Indemnification.
(a) (i) After the Effective Time, the Surviving Corporation
shall, to the fullest extent permitted, indemnify, defend
and hold harmless the present and former directors and
officers of Knightsbridge and Western and any subsidiaries
and their respective heirs, executors, administrators and
legal representatives (individually, an "Indemnified Party"
and, collectively, the "Indemnified Parties" ) against all
losses, expenses, claims, damages or liabilities arising out
of actions or omissions occurring on or prior to the
Effective Time (including, without limitation, acts or
omissions relating to the transactions contemplated by this
Agreement (collectively "Losses")). In connection with the
foregoing obligations from and after the Effective Time, the
Surviving Corporation, shall bear the cost of expenses
incurred in defending against any claim, action, suit,
proceeding or investigation arising out of any alleged acts
or omissions occurring on or prior to the Effective Time
(including, without limitation, acts or omissions relating
to the transactions contemplated by this Agreement), as
incurred to the fullest extent permitted under applicable
law. All rights to indemnification, including provisions
relating to advances, expenses and exculpation of director
liability, existing in favor of the Indemnified Parties as
provided in Knightsbridge's or Western's Articles of
Incorporation and Bylaws, as in effect as of the date of
this Agreement, with respect to matters occurring through
the Effective Time, will survive the Effective Time and will
continue in full force and effect.
(ii) Any Indemnified Party will promptly notify the Surviving
Corporation of any claim, action, suit, proceeding or
investigation for which such party may seek indemnification
under this Section (a "Third Party Claim"). In the event of
any such Third Party Claim, (x) within twenty (20) days of
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receipt of such notice, the Surviving Corporation will have
the right to assume the defense thereof, and the Surviving
Corporation will not be liable to such Indemnified Parties
for any legal expenses of other counsel or any other
expenses subsequently incurred thereafter by such
Indemnified Parties in connection with the defense thereof,
except that all Indemnified Parties (as a group) will have
the right to retain one separate counsel, acceptable to such
Indemnified Parties, as the expense of the Indemnifying
Party if the named parties to any such proceeding include
both the Indemnified Party and the Surviving Corporation and
the representation of such parties by the same counsel would
be inappropriate due to a conflict of interest between them,
and each Indemnified Party will have the right to retain a
separate counsel, acceptable to such Indemnified Party, at
the expense of the Indemnifying Party, if representation of
such Indemnified Party and the other Indemnified Parties as
a group would be inappropriate due to a conflict of interest
between them and (y) the Indemnified Parties will cooperate
in the defense of any such matter. If the Surviving
Corporation fails to take action within twenty (20) days as
set forth in (x) above, then the Indemnified Party shall
have the right to pay, compromise or defend any Third Party
Claim and to assert the amount of any payment on the Third
Party Claim plus the expense of defense or settlement as a
Loss. The Surviving Corporation will not be liable for any
settlement affected without its prior written consent,
unless it has failed to take action within the twenty (20)
day period after receipt of notice as set forth above.
Notwithstanding the foregoing, the Surviving Corporation
will not have any obligation under this Section 5.04 to
indemnify an Indemnified Party when and if a court of
competent jurisdiction ultimately determines and such
determination becomes final, that the indemnification of
such Indemnified Party in the manner contemplated hereby is
prohibited by applicable law.
(b) The Surviving Corporation shall pay all reasonable expenses,
including reasonable attorneys' fees, that may be incurred by any
Indemnified Parties in enforcing the indemnity and other
obligations provided for in this Section 5.04.
(c) The rights of each Indemnified Party hereunder shall be in
addition to any other rights such Indemnified Party may have
under the Articles of Incorporation or by laws of Knightsbridge,
under the Nevada Statute or otherwise. The provisions of this
Section shall survive the consummation of the Merger and
expressly are intended to benefit each of the Indemnified Parties
and will be binding on all successors and assigns of the
Surviving Corporation.
5.05 Further Action. Each party hereto shall, subject to the fulfillment at
or before the Effective Time of each of the conditions of performance
set forth herein or the waiver thereof, perform such further acts and
execute such documents as may be reasonably required to effect the
Merger.
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5.06 Expenses. Whether or not the Merger is consummated, except as provided
in Section 7.02 hereof or as provided otherwise herein, all costs and
expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring
such expenses.
5.07 Consent of Western's Shareholders. Western shall submit the Merger to
the shareholders of the Company for their consideration in accordance
with Chapter 23B.11 of the Washington State Business Corporation Act
and other provisions of applicable law, and obtain the consent of its
shareholders. Western shall notify Knightsbridge in writing that the
consent of the shareholders has been obtained, and shall set forth the
names of any dissenting shareholders at least one (1) day prior to the
Effective Time.
5.08 Publicity. The initial press release relating to this Agreement shall
be a joint press release and thereafter Western and Knightsbridge
shall, subject to their respective legal obligations (including
requirements of the Nasdaq National Market, stock exchanges and other
similar regulatory bodies), consult with each other, and use
reasonable efforts to agree upon the text of any press release, before
issuing any such press release or otherwise making public statements
with respect to the transactions contemplated hereby and in making any
filings with any federal or state governmental or regulatory agency or
with Nasdaq National Market, or any national securities exchange with
respect thereto.
5.09 Best Efforts to Close. The parties hereto agree to use their best
efforts to close the transactions contemplated hereby by July 24,
1998.
ARTICLE VI
CONDITIONS TO CONSUMMATION
OF THE MERGER
6.01 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger are subject
to the satisfaction or waiver, where permissible, prior to the
Effective Time, of the following conditions:
(a) This Agreement shall have been approved by the affirmative vote
of the shareholders of Knightsbridge and Western by the requisite
vote in accordance with applicable law;
(b) No statute, rule, regulation, executive order, decree, injunction
or other order (whether temporary, preliminary or permanent),
shall have been enacted, entered, promulgated or enforced by any
court or governmental authority which is in effect and has the
effect of prohibiting the consummation of the Merger; provided,
however, that each of the parties shall have used its best
efforts to prevent the entry of any injunction or other order and
to appeal as promptly as possible any injunction or other order
that may be entered;
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(c) The waiting period (and any extension thereof ) applicable to the
consummation of the Merger under the HSR Act if required shall
have expired or been terminated;
(d) Each of the consents listed on Schedule 6.01(d) hereto shall have
been obtained.
(e) A minimum of $50,000 of operating capital is required at closing
to be used by the Surviving Corporation to pay a shareholder loan
payable by Knightsbridge as set forth in Exhibit 6.01(e) annexed
hereto. Western shall be responsible for arranging this operating
capital financing for the Surviving Corporation. Knightsbridge
shall cooperate in approving documents and authorizing the
issuance of debt or equity securities of Knightsbridge on or
before closing as consideration for the financing. Such funds are
to be used to pay the expenses set forth above in this section.
Funds from financing in excess of $50,000 shall be placed in
accounts with signatory requirements as authorized by the Board
of Directors of the Surviving Corporation.
(f) Western shall deliver the legal opinion of its general counsel,
substantially in the form annexed hereto as Exhibit 6.01 (e) and
Knightsbridge shall deliver the legal opinion of its counsel,
substantially in the form annexed hereto as Exhibit 6.01(e)(1).
(g) A consulting agreement between Knightsbridge and CPT shall have
been executed, a copy of which is annexed to this Agreement as
Exhibit 6.01(g). This consulting agreement shall become an
obligation of the Surviving Corporation.
(h) 950,000 post reverse stock split Common Stock shares (restricted)
shall be issued as finder's fees as set forth on Exhibit 6.01(h)
annexed hereto.
(i) The parties hereto agree that any Language Force, Inc. ("LFI")
assets, including shares of LFI net of payment of expenses ("LFI
Assets") which remain following the conclusion of pending
Arbitration proceedings or other legal action concerning the
dispute between Knightsbridge and LFI shall be offered to
Knightsbridge shareholders of record immediately prior to the
issuance of common stock to Western as set forth in Article 1.06(
c) in an offer ("Share Purchase Offer") by the Surviving
Corporation to purchase shares from such Knightsbridge
shareholders. Consideration to purchase shares under the Share
Purchase Offer shall be subject to and limited to the amount of
LFI Assets available, if any.
(j) Within forty-five days of Closing Western shall arrange
additional financing to be used by the Surviving Corporation for
the following purposes:
(k) $50,000 to pay a loan payable by Knightsbridge as set forth in
Exhibit 6.01(e) annexed hereto, with a principal balance of
$50,000 plus $12,500 in loan discounts, finance fees and interest
("Interest"). In the event all or a portion of the Interest is
settled by a payment in cash the Surviving Corporation shall have
the right to recover such payments from the LFI Assets.
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(l) Up to $25,000 to pay legal costs directly incurred by the
Surviving Corporation in pursuing the Language Force Lawsuit.
Upon and subject to receipt of any proceeds from settlement of
the LFI claim and related lawsuit the surviving Corporation shall
be reimbursed, out of first proceeds received, its out-of-pocket
expenses which were paid out of the $25,000 of financing
established for such purpose.
(m) Lock-Up Agreement On or prior to closing Western shareholders and
certain Knightsbridge shareholders shall enter into an agreement
("Lock-up Agreement") which imposes voluntary restrictions and
other terms and conditions on the shares held and owned by such
shareholders upon closing this Agreement. The Lock-Up Agreement
is set forth on Exhibit 6.01(k) annexed hereto.
(n) 8,000,000 voting common shares (2,000,000 post reverse stock
split) issued by Knightsbridge are held in an escrow account in
connection with a project commonly referred to as Language Force,
Inc. ("LFI"). LFI and Knightsbridge are in dispute over their
agreement and arbitration proceedings have been scheduled to
resolve disagreements between the parties. Under the escrow
agreement 9,600,000 common shares of LFI issued in the name of
Knightsbridge are held pending outcome of the claim and related
lawsuit. The Merger is entered into by Western on Knightsbridge's
representation that Knightsbridge will prevail in its claim and
lawsuit against LFI and that the 8,000,000 Knightsbridge common
shares held in escrow will be returned to treasury and cancelled.
In the event any of such escrowed Knightsbridge shares are
released to any party other than Knightsbridge, additional
Knightsbridge shares shall be issued to Western shareholders on
the basis of four (4) Knightsbridge shares for each share so
released from escrow.
(o) Knightsbridge shall arrange delivery of 377,000 post reverse
stock split common shares without any trading restrictions from
certain of Knightsbridge's existing shareholders as follows:
RMJ Associates 350,000 shares
Portfolio Investment Strategies Corp. 27,000 shares
(p) Upon the close of this Agreement the executive offices of the
Surviving Corporation shall be relocated to 8756 - 122nd Avenue
NE, Kirkland, Washington 98033.
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
7.01 Closing and Termination. Except as otherwise set forth in this Section
7.01, this Agreement shall close by no later than 11:59 p.m. Seattle,
Washington, July 28, 1998, ("Closing Date") provided that either party
may extend this Agreement for an additional seven (7) day period by
written notice to the other party prior to the Closing Date. This
Agreement shall terminate if not closed by 11:59 p.m., Seattle,
Washington, August 4, 1998. Notwithstanding the foregoing and/or the
approval of this Agreement by the shareholders of Knightsbridge and
Western, this Agreement may be terminated and the Merger contemplated
hereby may be abandoned at any time prior to the Effective Time:
(a) By mutual written consent, duly authorized by their respective
Boards of Directors, by Knightsbridge and Western; (b) By either
Knightsbridge or Western
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(i) if any court of competent jurisdiction or any other
governmental body shall have issued an order, decree or
ruling or taken any other action permanently enjoining,
restraining or otherwise permanently prohibiting the Merger
and such order, decree, ruling or other action shall have
become final and non-appealable;
(ii) if, upon a vote at a duly held meeting or upon any
adjournment thereof, the shareholders of Knightsbridge and
Western shall have failed to give any required approvals; or
(c) By Knightsbridge if Western shall have breached any of its
representations and warranties or covenants contained herein and
if such breach or breaches, either individually or in the
aggregate, will have, or are reasonably likely to have, a
material adverse effect on the business, results of operations,
financial condition or prospects of Western (a "Western Material
Adverse Effect"), unless, in the case of a breach of covenant,
such failure to perform has been caused by a breach of this
Agreement by Knightsbridge.
(d) By Western if Knightsbridge shall have breached any of its
representations and warranties and such breach or breaches,
either individually or in the aggregate, will have, or are
reasonably likely to have, a Knightsbridge Material Adverse
Effect, or if a Knightsbridge shall have breached in any material
respect any of its covenants contained herein, unless, in the
case of a breach of any covenant, such failure to perform has
been caused by a breach of this Agreement by Western;
7.02 Effect of Termination. In the event of the termination and abandonment
of this Agreement pursuant to Section 7.01, this Agreement, except for
the obligations of the parties pursuant to this Section 7.02 and the
provisions of Section 5.06, shall forthwith become void and have no
effect, without any liability on the part of any party or its
directors, officers or shareholders; provided that nothing in this
Section 7.02 shall relieve any party to this Agreement of liability
for breach of this Agreement.
7.03 Amendment. To the extent permitted by applicable law, this Agreement
may be amended by the parties, at any time before or after approval of
this Agreement and the merger by the shareholders of Western but,
after any such shareholder approval, no amendment shall be made that
by law requires further approval of such shareholders without the
approval of such shareholders. This Agreement may not be amended
except by an instrument in writing signed on behalf of all the
parties.
7.04 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto may (i) extend the time for the performance of any of
the obligations or other acts of the other parties hereto, (ii) waive
any inaccuracies in the representations and warranties contained
herein by any other applicable party or in any document, certificate
or writing delivered pursuant hereto by any other applicable party, or
(iii) subject to the terms hereof, waive compliance with any of the
agreements or conditions of the other parties contained herein. Any
agreement on the part of any party to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of a party to this Agreement to
assert any of its rights under this Agreement shall not constitute a
waiver of those rights.
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7.05 Procedure for Closing, Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 7.01, an amendment
of this Agreement pursuant to Section 7.03 or an extension or waiver
pursuant to Section 7.04 shall, in order to be effective, require (a)
in the case of Knightsbridge, action by its Board of Directors or the
duly authorized designee of its Board of Directors and (b) in the case
of Western, action by its Board of Directors.
ARTICLE VIII
MISCELLANEOUS
8.01 Nonsurvival of Representations, Warranties and Agreements. All
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall be deemed to be
only conditions to the Merger and shall not survive the Merger,
provided, however, that the representations and warranties contained
in Section 1.07, and in this Article VIII shall survive the Merger.
8.02 Assignment, Binding Effect; Benefit; Entire Agreement. Neither this
Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns. Notwithstanding anything
contained in this Agreement to the contrary, nothing in this
Agreement, expressed or implied, is intended to confer on any person
other than the parties hereto or their respective heirs, successors,
executors, administrators and assign any rights, remedies, obligations
or liabilities under or by reason of this Agreement. This Agreement
and any documents delivered by the parties in connection herewith
constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and
understandings (oral and written) among the parties with respect
thereto. No addition to or modification of any provision of this
Agreement shall be binding upon any party hereto unless made in
writing and signed by all parties hereto.
8.03 Severability. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability
without rendering invalid or unenforceable the remaining terms and
provisions of this Agreement or otherwise affecting the validity or
enforceability of any of the terms or provisions of this Agreement in
any other jurisdiction. If any provision, clause, section or port of
this Agreement is so broad as to be unenforceable, the provision,
clause, section or part shall be interpreted to be only so broad as is
enforceable, and all other provisions, clauses, sections or parts of
this Agreement which can be effective without such unenforceable
provision, clause, section or part shall, nevertheless, remain in full
force and effect.
8.04 Notices. Any notice required to be given hereunder shall be sufficient
if in writing, and sent by facsimile transmission and by courier
service (with proofof service), hand delivery or certified or
registered mail (return receipt requested and first-class postage
prepaid), addressed as follows:
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If to Knightsbridge, to
Knightsbridge Corporation
Harold Peter (Herb) Capozzi,
President and CEO
PO Box 4 595 Howe Street, Suite #308
Vancouver, BC Canada V6 C2T5
604-718-2808 Fax
With a copy to:
Ken Ball
Barrister & Solicitor DuMoulin Black 10th Floor - 595 Howe Street
Vancouver, B.C. Canada V6C 2T5 Fax: 604-687-8772
If to Western, to
Western Oil and Tire Distributors, Inc.
8756 122nd Avenue NE
Kirkland, WA 98033
Att'n: Pat Charles, President
Fax: 425-827-2216
With a copy to:
Robert C. Laskowski
Attorney At Law
S.W. Fifth Avenue, Suite 1300
Portland, OR 97204-1151
Fax: 503-226-6278
or to such other address as any party shall specify by written notice
so given, and such notice shall be deemed to have been delivered as of
the date it is telecommunicated, personally delivered or mailed.
8.05 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada without regard to its
rules of conflict of laws.
8.06 Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled under the
Arbitration Rules of the State of Nevada.
8.07 Descriptive Headings. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
8.08 Counterparts and Facsimile Signatures. This Agreement may be executed
by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts
shall together constitute one and the same instrument. Each
counterpart may consist of a number of copies of this Agreement each
of which may be signed by less than all of the parities hereto, but
together all such copies shall constitute one and the same instrument.
Execution and delivery of this Agreement by exchange of facsimile
copies bearing the facsimile signature of a party hereto shall
constitute a valid and binding execution and delivery of this
Agreement by such party. Such facsimile copies shall constitute
enforceable original documents.
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8.09 Certain Definitions. For purposes of this Agreement, the following
terms shall have the meanings ascribed to them below:
(a) "Affiliate" of a person means a person that directly or
indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the
first-mentioned person.
(b) "Control" (including the terms "controlling", "controlled by" and
"under common control with") means the possession, direct or
indirect, of the power to direct or cause the direction of the
management and policies of a person, whether through ownership of
voting securities, by contract, or otherwise.
(c) "Person" means a natural person, company, corporation,
partnership, joint venture, association, trust, unincorporated
organization or other entity.
(d) "Subsidiary" of any person means a person in which such first
referenced person owns directly or indirectly an amount of the
voting securities, other voting ownership or voting partnership
interest which is sufficient to elect at least a majority of its
Board of directors or other governing body (or, if there are no
such voting interest, owns directly or indirectly 50% or more of
the equity interest).
8.10 Waivers. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to
constitute a waiver by the party taking such action of compliance with
any representations, warranties, covenants or agreements contained in
the Agreement. The waiver by any party hereto to a breach of any
provision hereunder shall not operate or be construed as a waiver of
any prior or subsequent breach of the same or any other provision
hereunder.
8.11 Incorporation of Exhibits. All Exhibits and annexes attached hereto
and referred to herein are hereby incorporated herein and made a part
hereof for all purposes as if fully set forth herein.
8.12 Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the
plural and vice versa, words denoting any gender shall include all
genders and words denoting natural persons shall include corporations
and partnerships and vice versa.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its respective officers thereunto duly authorized, all
as of the day and year first above written.
KNIGHTSBRIDGE CORPORATION
By: /s/ Harold Capozzi
-------------------------
Harold Peter (Herb) Capozzi,
President and CEO
WESTERN OIL & TIRE DISTRIBUTORS, INC.
By: /s/ Patrick F. Charles
-------------------------
Patrick F. Charles, President and CEO
<TABLE>
<CAPTION>
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<PAGE>
List of Exhibits
Agreement and Plan of Merger
<S> <C>
Directors and Officers of the Surviving Corporation Exhibit "1.05"
Common Stock to be issued to Western shareholders Exhibit "1.06(c)"
Commitments to issue Shares, Warrants or Options Exhibit "4.03"
Western's Agreement with RMJ & Associates Exhibit "4.05"
Agreement For Sale and Purchase of Business Assets Exhibit "4.06"
Between Western Oil and Tire Distributors, Inc.
and Ed's Tire Service, Inc.
Knightsbridge and Western Shareholder Consents Schedule 6.01(d)
List of Knightsbridge accounts payable and expenses Exhibit "6.01(e)"
to be paid
Legal Opinion of Western's General Counsel Exhibit "6.01(f)"
Legal Opinion of Knightsbridge's General Counsel Exhibit "6.01(f)(1)"
Consulting Agreement with CPT Exhibit "6.01(g)"
Finder's Fee Agreement Exhibit "6.01(h)"
Lock Up Agreement Exhibit "6.01(k)"
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</TABLE>
EXHIBIT 3.1
[FILED STAMP]
STATE OF NEVADA
SECRETARY OF STATE
ARTICLES OF INCORPORATION
OF
KNIGHTSBRIDGE CORPORATION
KNOW ALL MEN BY THESE PRESENTS:
That we the undersigned, have this day voluntarily associated ourselves
together for the purpose of forming a corporation under the laws of the State of
Nevada and do hereby certify:
ONE
The name of this corporation is Knightsbridge Corporation.
TWO
The resident agent of said corporation shall Pacific Corporate Services
Company, 7631 Bermuda Road, Las Vegas, NV 89123 and such other offices as may be
determined by the By-Laws in and outside the State of Nevada.
THREE
The objects to be transacted, business and pursuit and nature of the
business, promoted or carried on by this corporation are and shall continue to
be engaged in any lawful activity.
FOUR
The members of the governing board shall be styled Directors and the first
Board of Directors shall consist of one (1). The number of stockholders of said
corporation shall consist of one (1). The number of directors and shareholders
of this corporation may, from time to time, be increased or decreased by an
amendment to the By-Laws of this corporation in that regard, and without the
necessity of amending these Articles of Incorporation. The name and address of
the first Board of Directors and of the Incorporation signing these Articles is
as follows:
Kendall White
PO Box 308
Nerang, 4211
Queensland Australia
FIVE
The Corporation is to have perpetual existence.
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SIX
The total authorized capitalization of this Corporation shall be and is the
sum of 200,000,000 shares Common Stock at $0.001 par value, said stock to carry
full voting power and the said shares shall be issued fully paid at such time as
the Board of Directors may designate in exchange for cash, property, or
services, the stock of other corporations or other values, rights, or things,
and the judgement of the Board of Directors as to the value thereof shall be
conclusive.
SEVEN
The capital stock shall be and remain non-assessable. The private property
of the stockholders shall not be liable for the debts or liabilities of the
Corporation.
IN WITNESS WHEREOF, I have set my hand this 6th day of June, 1996.
/s/ Kendall White
-----------------
Kendall White
STATE OF QUEENSLAND )
)
AUSTRALIA )
On this 6th day of June 1996, before me, a Notary Public in and for said
State of Queensland, Australia. Personally appeared Kendall White, known to me
to be the person whose name is subscribed to the foregoing instrument, and she
duly acknowledged to me that she executed the same for the purpose therein
mentioned.
IN WITNESS WHEREOF, I have set my hand and offered by official seal in said
State of Queensland, Australia, the day and year in this Certificate first above
written.
/s/ P.J. O'Neill
----------------
Notary Public
Peter John O'Neill
Solicitor
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[FILED STAMP]
STATE OF NEVADA
SECRETARY OF STATE
CERTIFICATE OF DECREASE IN AUTHORIZED SHARES
AND ISSUE SHARES OF COMMON STOCK OF
KNIGHTSBRIDGE CORPORATION
Harold P. Capozzi and Byron Cox certify:
1. That they are the President and Secretary, respectively, of Knightsbridge
Corporation, a Nevada corporation.
2. That by an action by unanimous consent in writing in lieu of a special
meeting of the board of directors of the corporation dated as of July 15,
1998, the board approved the following resolutions:
RESOLVED, that pursuant to Nevada Revised Statutes Section 78.207, the
directors of the corporation approve the decrease in the number of
authorized common stock of the corporation provided in Article SIX of the
corporation's Articles of Incorporation from 200,000,000 to 50,000,000;
RESOLVED, that pursuant to Nevada Revised Statutes Section 78.207, the
directors of the corporation approve the decrease of all the issued and
outstanding shares of common stock of the corporation held by the
corporation's shareholders so that each shareholder, after the effective
date of this resolution, shall be the holder of one share for each four
shares of common stock previously owned;
RESOLVED, that any fractional shares, to be received, shall be rounded
up to one whole share in addition to the whole number of shares to which a
shareholder would be entitled.
3. That the current number of authorized shares and the par value of the
shares before the change were 200,000,000 and $0.001, respectively.
4. That the number of the authorized shares and the par value of the shares
after the change were 50,000,000 and $0.001, respectively.
5. That the number of shares to be issued after the change in exchange for one
of the number of issued shares is .25 for a total of 5,054,350 shares.
6. That any shareholder who would be entitled to less than a whole share shall
receive a whole share for the fractional share and the percentage of
outstanding shares affected thereby is less than 1%.
7. That any required approval of the stockholders has been obtained.
8. That the change is effective on July 24, 1998.
IN WITNESS WHEREOF, the undersigned have executed this certificate on July 15,
1998.
/S/ Harold P. Capozzi Stephen M. Doust
- ---------------------
Harold P. Capozzi Barrister & Solicitor
10th Floor 595 Howe Street
Vancouver B.C. V6C 2T5
/s/ Byron Cox /s/ Stephen Doust
- ------------- -----------------
Byron Cox
Page E-20
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<PAGE>
[FILED STAMP]
STATE OF NEVADA
SECRETARY OF STATE
CERTIFICATE OF AMENDMENT OF AMENDMENT TO ARTICLES OF
INCORPORATION
KNIGHTSBRIDGE CORPORATION
I, Patrick F. Charles, the President of the corporation certifies that:
1. The original articles were filed with the Office of the Secretary of
State on June 17, 1996.
2. As of the date of this certificate, 17,581,350 shares of stock of the
corporation have been issued.
3. Pursuant to a shareholders meeting at which more than 51% voted in
favor of the following amendment, the company hereby adopts the
following amendment to the amendment of the Articles of Incorporation
of this Corporation: First: Name of Corporation The name of the
corporation is Western Oil & Tire Distributors, Inc. (the
"Corporation")
/s/ Patrick F. Charles
----------------------
Patrick F. Charles, President
State of Washington
County of King
I certify that I know or have satisfactory evidence that Patrick F. Charles
is the person who appeared before me, and said person acknowledged that he
signed this instrument and acknowledged it to be his free and voluntary act for
the uses and purposes mentioned in the instrument.
Dated: August 24, 1998
/s/Judith E. Nims
-----------------
Judith E. Nims - Notary Public
appointment expires March 19, 2001
Page E-21
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<PAGE>
[FILED STAMP]
STATE OF NEVADA
SECRETARY OF STATE
CERTIFICATE OF AMENDMENT TO ARTICLES OF
INCORPORATION
WESTERN OIL & TIRE DISTRIBUTORS INC.
THE UNDERSIGNED, Patrick F. Charles, President and Terrence K. Picken, Secretary
of the corporation certify that:
1. The original articles were filed with the Office of the Secretary of State
on June 17, 1996.
2. A special meeting of stockholders of the corporation was held on March 24,
1999 for stockholders of record as of March 2, 1999 at which date
28,356,567 shares of voting common stock of the corporation were issued and
outstanding. Pursuant to the March 24, 1999 special meeting of stockholders
at which more than 51% voted in favor of the following amendments, the
company hereby adopts the following amendments to the Articles of
Incorporation of this Corporation:
Article One: Name of Corporation The name of the corporation is Saratoga
International Holdings Corp. (the "Corporation")
Article Six: Authorized Capitalization The authorized capitalization of
this corporation shall be and is the sum of 200,000,000 shares common stock
at $0.001 par value, said stock to carry full voting power, and 50,000,000
shares of preferred stock at no par value. The said common and preferred
shares shall be issued fully paid at such time as the Board of Directors
may designate in exchange for cash, property, or services, the stock of
other corporations or other values, rights, or things, and the judgement of
the Board of Directors as to the value thereof shall be conclusive.
/s/ Patrick F. Charles
- ----------------------
Patrick F. Charles, President
State of Washington
County of King
Signed or attested before me on
March 30, 1999
by Patrick F. Charles
/s/ Judith E. Nims
------------------
Judith E. Nims, Notary Public
My Appointment expires: March 19,
2001
/s/ Terrence K. Picken
- ----------------------
Terrence K. Picken, Secretary
State of Washington
County of King
Signed or attested before me on
March 30, 1999
by Terrence K. Picken.
/s/ Judith E. Nims
-------------------
Judith E. Nims, Notary Public
My Appointment expires: March 19,
2001
Page E-22
74
<PAGE>
Registry Number: 4-99
Certificate of Amendment
of Articles of Incorporation
(After Issuance of Stock)
SARATOGA INTERNATIONAL HOLDINGS CORP.
We the undersigned, Patrick Charles, President and Terrence Picken,
Secretary, of Saratoga Holdings International Corp., do hereby certify:
That the Board of Directors of said corporation at a meeting on April 29,
1999 adopted resolutions to amend the original articles as follows:
Article six is hereby amended to read as described in the attached Exhibit
"A" which is incorporated by this reference.
No shareholder approval was required for the amendments to the Articles of
Incorporation since the Board of Directors has the authority to create the
rights, preferences and limitations of any class of preferred stock.
/s/ Patrick Charles
--------------------
Patrick Charles, President
/s/ Terrence Picken
--------------------
Terence Picken, Secretary
State of Washington
County of King
On April 30, 1999, personally appeared before me, a Notary Public, Patrick
Charles and Terrence Picken, who acknowledged that they executed the foregoing
instrument.
/s/ Valerie W. Watkins
----------------------
Notary Public for Washington
My Commission expires: 2/26/2000
Page E-23
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<PAGE>
EXHIBIT "A"
Article 6. Authorized Capitalization
The authorized capitalization of this corporation shall be and is the sum
of 200,000,000 shares of Common Stock at $0.001 par value and 50,000,000 shares
of Preferred Stock at $0.001 par value. The common stock and the preferred stock
shall be fully paid at such time as the Board of Directors may designate in
exchange for cash, property or services, the stock of other corporations or
other values, rights, or things and the judgment of the Board of Directors as to
the value thereof shall be conclusive.
6.1 Issuance of Common and Preferred Stock in Series
The Common Stock and Preferred Stock may be issued from time to time
in one or more series the shares of each series to have such voting powers,
full or limited, and such designations, preferences and relative,
participating, optional or other special rights and qualifications,
limitations or restrictions thereof as are stated and expressed herein or
in the resolution or resolutions providing for the issue of such series
adopted by the Board of Directors.
6.1.1 Dividends
Subject to any preferential rights granted for any series of
Preferred Stock, the holders of shares of the Common Stock shall be
entitled to receive dividends out of the funds of the corporation
legally available therefor at the rate and at the time or times,
whether cumulative or noncumulative, as may be provided by the board
of directors. The holders of shares of the Preferred Stock shall be
entitled to receive dividends to the extend provided herein or by the
board of directors in designating the particular series of Preferred
Stock. The holders of shares of the Common Stock shall not be entitled
to receive any dividends thereon other than the dividends referred to
in this section.
6.1.2 Voting
To the extend provided herein or by resolution or resolutions of
the board of directors providing for the issue of a class or series of
Common Stock or Preferred Stock, the holders of each such class or
series shall have the right to vote for the election of members of the
board of directors of the corporation and the right to vote on all
other matters, except those matters as to which Nevada law or these
Articles provide for a separate vote.
Page E-24
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<PAGE>
6.1.3 Issuance of Shares
The corporation may from time to time issue any authorized and
unissued shares of Common Stock or Preferred Stock for such
consideration as may be fixed from time to time by the board of
directors, without action by the shareholders. The board of directors
may provide for payment therefor to be received by the corporation in
cash, property, services or such other consideration as is approved by
the board of directors. Any and all such shares of Common Stock or
Preferred Stock, the issuance of which has been so authorized, and for
which consideration so fixed by the board of directors has been paid
or delivered, shall be deemed fully paid stock and shall not be liable
to any further call or assessment thereon.
6.2 Designation of Common Stock
6.2.1 Dividends
Dividends shall be declared and set aside for any shares of the
Common Stock only upon resolution of the Board of Directors.
6.2.2 Liquidation Rights
Upon the voluntary or involuntary dissolution, liquidation or
winding up of the corporation, the assets available for distribution
to the Common Stock shall be distributed in the order and amounts
described in Section 6.3.8.
6.2.3 Voting Power
Each holder of Common Stock shall be entitled to one vote for
each share of Common Stock held at the record date for the
determination of Common Stockholders entitled to vote on such matter
or, if no such record date is established, at the date on which notice
of the meeting of shareholders at which the vote is to be taken is
marked, or the date any written consent of shareholders is solicited
if the vote is not to be taken at a meeting.
6.3 Designation of Series A Convertible Redeemable Preferred Stock
6.3.1 Designations
The series of Series A Convertible Redeemable Preferred Stock,
consisting of 377,742 shares, authorized herein, shall be designated
herein as the "Series A Stock" and which shall be issued in three
certificates of 125,914 shares each. The powers, preferences and
rights and the qualifications, limitations and restrictions of the
Series A Stock are as described herein.
6.3.2 Dividends
Dividends shall be declared and set aside for any shares of the
Series A Stock only upon resolution of the board of directors;
provided, that:
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<PAGE>
a. Dividend Amount. The holders of record of outstanding shares
of the Series A Stock shall be entitled to receive
dividends, which shall be cumulative, out of any funds of
the corporation legally available therefor, prior and in
preference to any declaration or payment of any dividend
(payable other than in Common Stock of the corporation) on
the Common Stock of the corporation during any fiscal year,
at the rate of $0.08 per share during such fiscal year
payable when, as and if declared by the board of directors.
Dividends on the Series A Stock shall be paid semi-annually
in arrears no later than the 10th day immediately following
the dividend due date. After payment of such dividends to
the holders of the Series A Stock (and of any other class or
series of Preferred Stock having preferential rights as to
dividends) in any fiscal year, the corporation may in the
same fiscal year declare and pay a dividend on the Common
Stock, provided the corporation shall simultaneously declare
and pay a dividend on each outstanding share of Series A
Stock. No dividends, other than those payable in the Common
Stock of the corporation, shall be paid on any Common Stock
of the corporation during any fiscal year of the corporation
until dividends in the total amount of $0.08 per share, as
adjusted for any stock dividends, combinations or splits
with respect to such shares, on the Series A Stock, shall
have been paid or declared and set apart during said fiscal
year and any other prior year in which dividends accumulated
but remain unpaid.
b. Limitation on Common Stock Distribution. No dividend,
redemption or similar distribution may be declared or paid
on shares of the Common Stock or on any other shares of
capital stock of the corporation ranking below the Series A
Stock with respect to the payment of dividends if the net
assets of the corporation after such event would be
insufficient to make the liquidation payment for the Series
A Stock, or any liquidation payment on the shares, if any,
of any other series of Preferred Stock of the corporation
having a preferential right to liquidation payments superior
to the Common Stock (whether or not such payment actually is
to be paid).
6.3.3 Voting Power
Series A Stock shall have no voting rights.
6.3.4 Liquidation Rights
Upon the voluntary or involuntary dissolution, liquidation or
winding up of the corporation, the assets of the corporation available
for distribution to its shareholders shall be distributed in the order
and amounts described in Section 6.3.8.
6.3.5 Conversion Rights
The holders of the Series A Stock shall have the following rights
with respect to the conversion of Series A Stock into shares of Common
Stock:
Page E-26
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<PAGE>
a. General
(i) Voluntary Conversion. Shares of the Series A Stock may,
at the option of the holder, be converted into such
number of fully paid and nonassessable shares of Common
Stock as are equal to the product obtained by
multiplying the Series A Conversion Rate (determined
under Section 6.3.5b) by the number of shares of Series
A Stock being converted. Such conversion shall take
place according to the following schedule:
A. Up to 125,914 shares may be converted after
(1) year from April 30, 1999;
B. Up to 125,914 shares may be converted after
two (2) years from April 30, 1999;
C. Up to 125,914 shares may be converted after
three (3) years from April 30, 1999.
(ii) Mandatory Conversion. Each share of Series A Stock
shall be converted automatically, without any further
action by the holders of such shares and whether or not
the certificates representing such shares are
surrendered to the corporation or its transfer agent
for the Common Stock, into the number of shares of
Common Stock into which such Series A Stock is
convertible pursuant to Section 6.3.5a(i) upon the
earlier of (A) immediately prior to the closing of a
firmly underwritten, public offering by the corporation
of its Common Stock, registered under the Securities
Act of 1933, as amended, or (B) upon the demand of the
corporation upon thirty (30) days written notice.
b. Conversion Rate. The conversion rate for Series A Stock in
effect at any time (the "Series A Conversion Rate") shall
equal $1.00 dividend by the Series A Conversion Price,
calculated as provided in Section 6.3.5c.
c. Conversion Price. The conversion price for Series A Stock
shall initially be equal to the average daily closing price
of the Common Stock for the five (5) trading days
immediately prior to the notice of conversion referred to in
6.3.5g (the "Series A Conversion Price"). The Series A
Conversion Price shall be adjusted from time to time in
accordance with Section 6.3.5d.
d. Exercise of Conversion Privilege. To exercise its privilege,
each holder of Series A Stock shall surrender the
certificate or certificates representing the shares being
converted to the corporation at its principal office, and
shall give written notice to the corporation at that office
that such holder elects to convert such shares. Such notice
shall also state the name or names (with address or
addresses) in which the certificate or certificates for
shares of Common Stock issuable upon such conversion shall
be issued. The certificate or certificates for shares of
Series A Stock surrendered for conversion shall be
accompanied by proper assignment thereof to the corporation
Page E-27
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<PAGE>
or in blank. The date when such written notice is received
by the corporation, together with the certificate or
certificates representing the shares of Series A Stock being
converted, shall be the "Series A Conversion Date." As
promptly as practicable after the Series A Conversion Date,
the corporation shall issue and shall deliver to the holder
of the shares of Series A Stock being converted, or on its
written order such certificate or certificates as it may
request for the number of whole shares of Common Stock
issuable upon the conversion of such shares of Series A
Stock in accordance with the provisions of this Section
6.3.5, cash in the amount of all declared and unpaid
dividends on such shares of Series A Stock up to and
including the Series A Conversion Date, and cash, as
provided in Section 6.3.5e, in respect of any fraction of a
share of Common Stock issuable upon such conversion. Such
conversion shall be deemed to have been effected immediately
prior to the close of business on the Series A Conversion
Date, and at such time the rights of the holder as holder of
the converted shares of Series A Stock shall cease and the
person or persons in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable
upon such conversion shall be deemed to have become the
holder or holders of record of the shares of Common Stock
represented thereby.
e. Cash in Lieu of Fractional Shares. No fractional shares of
Common Stock or scrip representing fractional shares shall
be issued upon the conversion of shares of Series A Stock,
but the corporation shall pay to the holder of such shares a
cash adjustment in respect of such fractional shares in an
amount equal to the same fraction of the market price per
share of the Common Stock (as determined in a reasonable
manner prescribed by the board of directors) at the close of
business on the Series A Conversion Date. The determination
as to whether or not any fractional shares are issuable
shall be based upon the total number of shares of Series A
Stock being converted at any one time by any holder thereof,
not upon each share of Series A Stock being converted.
Page E-28
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<PAGE>
f. Partial Conversion. In the event some but not all of the
shares of Series A Stock represented by a certificate or
certificates surrendered by a holder are converted, the
corporation shall execute and deliver to or on the order of
the holder, at the expense of the corporation, a new
certificate representing the shares of Series A Stock that
were not converted.
g. Reservation of Common Stock. The corporation shall at all
times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of the Series A
Stock, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of
all outstanding shares of the Series A Stock and, if at any
time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the conversion of
all then outstanding shares of the Series A Stock, the
corporation shall take such corporate action as may be
necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient
for such purposes.
h. No Impairment. The corporation will not, by amendment of its
certificate of incorporation or through any reorganization,
transfer of assets consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the
terms to be observed or performed hereunder by the
corporation, but will at all times in good faith assist in
the carrying out of all the provisions of this Section 6.3
and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the
holders of the Series A Stock against impairment.
6.3.6 Redemption
a. Redemption Right. The corporation may redeem, in its
absolute discretion, from any source legally available
therefor, the Series A Stock at any time ("Series A
Redemption Date"). The corporation shall effect such
redemption by paying in cash in exchange for the shares of
Series A Stock to be redeemed the sum of $1.00 per share of
Series A Stock (as adjusted for any stock dividends,
combinations or splits with regard to such shares) plus any
accumulated but unpaid dividends ("Series A Redemption
Price").
b. Notice of Redemption. At least 15 days but no more than 30
days prior to the Series A Redemption Date written notice
("Redemption Notice") shall be mailed, first class postage
prepaid, to each holder of record (at the close of business
on the business day next preceding the day on which the
notice is given) of the Series A Stock to be redeemed, at
the address shown on the records of the corporation for such
Page E-29
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<PAGE>
holder. The Redemption Notice shall notify each holder of
the Redemption Date and Redemption Price, the place at which
payment may be obtained and calling upon each holder to
surrender to the corporation, in the manner and at the place
designated, his certificates representing the shares to be
redeemed. Each holder of Series A Stock to be redeemed shall
surrender to the corporation the certificates representing
such shares in the manner and at the place designated in the
Redemption Notice. Thereafter, the Redemption Price shall be
payable to the order of the person whose name appears on
such certificates as the owner thereof. Each such
surrendered certificate shall be cancelled.
c. Redemption Payment. On or prior to the Redemption Date, the
corporation shall deposit the redemption Price of all shares
of Series A Stock designated for redemption in the
Redemption Notice with a bank as a trust fund for the
benefit of the respective holders of the shares designated
for redemption and not yet redeemed. The corporation shall
issue irrevocable instructions and authority to the bank to
pay the Redemption Price of such shares to their respective
holders on or after the Redemption Date upon receipt of
notification from the corporation that such holder has
surrendered his share certificate to the corporation
pursuant to Section 6.3.6b. above.
d. Termination of Rights. From and after the Redemption Date,
unless there has been a default in the payment of the
Redemption Price, all rights of the holders of shares of
Series A Stock designated for redemption in the Redemption
Notice as holders of Series A Stock shall cease with respect
to such shares and such shares shall not thereafter be
transferred on the books of the corporation or be deemed
outstanding for any purpose whatsoever.
6.3.7 Reissuance of Stock
No share or shares of Series A Stock redeemed or otherwise
acquired by the corporation shall be reissued, and all such shares
shall be canceled, retired and eliminated from the shares which the
corporation shall be authorized to issue. The corporation may from
time to time take such appropriate corporate action as may be
necessary to reduce the authorized number of shares of the Series B
Stock accordingly.
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<PAGE>
6.3.8 Liquidation Rights
Upon the voluntary or involuntary dissolution, liquidation or
winding up of the corporation, the assets of the corporation available
for distribution to its shareholders shall be distributed in the
following order and amounts:
a. General
(i) Series A Stock. Second, the holders of shares of Series
A Stock shall be entitled to receive $1.00
(appropriately adjusted for any stock dividend, split
or combination of such Series A Stock) for each
outstanding share of Series A Stock held by them plus
any declared but unpaid dividends per share on such
outstanding shares of Series A Stock (the "Series A
Liquidation Amount"). If upon the occurrence of such
event the asserts of the corporation shall be
insufficient to permit the payment of the full Series A
Liquidation Amount, then the assets of the corporation
available for distribution shall be distributed ratably
among the holders of the Series Stock in the same
proportions as the aggregate of the Series A
Liquidation Amount each such holder would otherwise be
entitled to receive bears to the total Series A
Liquidation Amount that would otherwise be payable to
all such holders, and no distribution to other
shareholders of the corporation shall be made. Upon the
completion of the distribution of the full Series A
Liquidation Amount, if assets remain in the
corporation, such remaining assets shall be distributed
as set forth in Section 6.3.8a(ii) and 6.3.8a(iii).
(ii) Common Stock. Second, subject to payment in full of the
Series A Liquidation Amount, the holders of shares of
Common Stock shall be entitled to receive $1.00,
appropriately adjusted for any stock dividend, split or
combination of such Common Stock for each outstanding
share of Common Stock held by them (the "Common Stock
Liquidation Amount"). If the assets of the corporation
shall be insufficient to permit the payment of the full
Common Stock Liquidation Amount, then the assets of the
corporation available for distribution shall be
distributed ratably among the holders of the Common
Stock in the same proportions as the aggregate of the
Common Stock Liquidation Amount each such holder would
otherwise be entitled to receive bears to the total
Common Stock Liquidation Amount that would otherwise be
payable to all such holders, and no further
distribution to other shareholders of the corporation
shall be made. Upon the completion of the preferential
rights granted for any subsequent series of Preferred
Stock and the full Common Stock Liquidation Amount if
assets remain in the corporation, such remaining assets
shall be distributed as set forth in Section
6.3.8a(iii).
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<PAGE>
(iii)Participation. Finally, subject to the payment in full
of Series A Liquidation Amount, any other preferred
rights granted for any subsequent series of Preferred
Stock, and the payment in full or the Common Stock
Liquidation Amount as provided in Section 6.3.8a(ii),
if assets remain in the corporation, such remaining
assets shall be distributed to the holders of shares of
Common Stock together, who shall each be entitled to
receive their Pro Rata Amount; provided that the rights
of the holders of shares of Common Stock are subject to
any preferential rights granted for any subsequent
series of Preferred Stock. "Pro Rate Amount" means that
portion of remaining assets to which a group would be
entitled based on its percentage of the number of
shares of Common Stock outstanding and the number of
shares of Common Stock into which the outstanding
shares of Series B Stock could then be converted.
b. Treatment of Sales of Assets or Acquisitions. The sale of
all or substantially all of the assets of the corporation of
the acquisition of the corporation by another entity by
means of merger, consolidation or otherwise, resulting in
the exchange of the outstanding shares of the corporation
for securities of or consideration issued, or caused to be
issued, by the acquiring entity or any of its affiliates,
shall be regarded as a liquidation within the meaning of
this Section 6.3.8.
c. Distributions Other Than Cash. Whenever the distribution
provided for in this Section 6.3.8 shall be payable in
property other than cash, the value of such distribution
shall be the fair market value of such property as
determined in good faith by the board of directors.
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<PAGE>
CERTIFICATE OF CORRECTION
OF CERTIFICATE OF AMENDMENT TO
ARTICLES OF INCORPORATION
OF
SARATOGA INTERNATIONAL HOLDINGS CORP.
The undersigned, Patrick F. Charles, certifies that:
1. The original Articles of Incorporation were filed with the Office of the
Secretary of State on June 17, 1996.
2. A Certificate of Amendment to Articles of Incorporation was filed with the
Office of the Secretary of State on April 2, 1999.
3. The Certificate of Amendment to Articles of Incorporation contains the
following incorrect statement: "The authorized capital stock of this
corporation shall be and is in the sum of 200,000,000 shares common stock
at $0.001 par value, said stock to carry full voting power, and 50,000,000
shares of preferred stock." This statement is incorrect because the par
value of $0.001 of the preferred stock was inadvertently left out of the
Certificate.
4. This Certificate of Correction hereby correct the incorrect statement to
read: "The authorized capital stock of this corporation shall be and is in
the sum of 200,000,000 shares common stock at $0.001 par value, said stock
to carry full voting power, and 50,000,000 shares of preferred stock at
$0.001 par value."
Saratoga International
Holdings Corp.
By:/s/ Patrick F. Charles
----------------------
Patrick F. Charles, President
Verification
State of Washington
ss.
County of King
On this 24 day of June, 1999, before me, the undersigned, a Notary Public
in and for said State, personally appeared Patrick F. Charles personally known
to me (or proved to me on the basis of satisfactory evidence) to be the person
who subscribed his name to the Certification of Correction of Certificate of
Amendment to Articles of Incorporation and acknowledged to me that he executed
the same freely and voluntarily and for the use and purposes therein mentioned.
By:/s/ Valerie W. Watkins
----------------------
Notary Public in and for said
County and State
Page E-33
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<PAGE>
AMENDED CERTIFICATE OF AMENDMENT OT ARTICLES OF
INCORPORATION
WESTERN OIL & TIRE DISTRIBUTORS, INC.
THE UNDERSIGNED, Patrick F. Charles, President, and Terrence K. Picken,
Secretary of the Corporation certify that:
1. The original articles were filed with the Office of the Secretary of State
on June 17, 1996.
2. A special meeting of stockholders of the corporation was held on March 24,
1999 for the stockholders of record as of March 2, 1999 at which date
28,356,567 shares of voting common stock of the corporation were issued and
outstanding. Pursuant to the March 24, 1999 special meeting of stockholders
at which more than 51% voted in favor of the following amendments, the
company hereby adopts the following amendments to the Articles of
Incorporation of this Corporation:
Article One: Name of Corporation
The name of the Corporation is Saratoga International Holdings Corp.
(the Corporation)
Article Six: Authorized Capitalization
The authorized capitalization of this corporation shall be and is the
sum of 200,000,000 shares common stock at $0.001 par value, said stock to
carry full voting power, and 50,000,000 shares of preferred stock at $0.001
par value. The said common and preferred shares shall be issued fully paid
at such time as the Board of Directors may designate in exchange for cash,
property, or services, the stock of other corporations or other values,
rights or things, and the judgment of the Board of Directors as to the
value thereof shall be conclusive.
/s/ Patrick F. Charles
- ----------------------
Patrick F. Charles, President
/s/ Terrence K. Picken
- -----------------------
Terrence K. Picken, Secretary
State of Washington
County of King
On June 3, 1999, personally appeared before me, a Notary Public, Patrick Charles
and Terrence Picken, who acknowledged that they executed the foregoing
instrument.
/s/ Valerie W. Watkins
Notary Public for Washington
My commission expires 2/26/2000
---------
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<PAGE>
EXHIBIT 3.2
ARTICLES OF INCORPORATION
OF
SARATOGA TELECOM CORP.
KNOW ALL MEN BY THESE PRESENTS:
That we the undersigned, have this day voluntarily associated ourselves
together for the purpose of forming a corporation under the laws of the State of
Nevada and do hereby certify:
ONE
The name of this corporation is Saratoga Telecom Corp.
TWO
The resident agent of said corporation shall be Shawn F. Hackman, 3360 W.
Sahara, Suite 200, Las Vegas, NV 89102, and such other offices as may be
determined by the By-Laws in and outside the State of Nevada.
THREE
The objects to be transacted, business and pursuit and nature of the
business, promoted or carried on by this corporation are and shall continue to
be engaged in any lawful activity.
FOUR
The members of the governing board shall be styled Directors and the first
Board of Directors shall consist of one (1). The number of stockholders of said
corporation shall consist of one (1). The number of directors and shareholders
of this corporation may, from time to time, be increased or decreased by an
amendment to the By-Laws of this corporation in that regard, and without the
necessity of amending these Articles of Incorporation. The name and address of
the first Board of Directors and of the Incorporation signing these Articles is
as follows:
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Patrick F. Charles
8756 - 122nd Avenue NE
Kirkland, WA 98033
FIVE
The Corporation is to have perpetual existence.
SIX
The total authorized capitalization of this Corporation shall be and is the
sum of 100,000,000 shares Common Stock at $0.001 par value and 50,000,000 shares
Preferred Stock at $0.001 par value, said stock to carry full voting power and
the said shares shall be issued fully paid at such time as the Board of
Directors may designate in exchange for cash, property, or services, the stock
of other corporations or other values, rights, or things, and the judgement of
the Board of Directors as to the value thereof shall be conclusive.
SEVEN
The capital stock shall be and remain non-assessable. The private property
of the stockholders shall not be liable for the debts or liabilities of the
Corporation.
IN WITNESS WHEREOF, I have set my hand this 10th day of June, 1999.
/s/ Patrick F. Charles
-----------------------
Patrick F. Charles
State of Washington
County of King
I certify that I know that Patrick F. Charles signed this instrument and
acknowledged it to be his free and voluntary act for the uses and purposes
herein mentioned.
Dated: June 10, 1999
/s/ Valerie W. Watkins
------------------------
Valerie W. Watkins
My appointment expires 2/26/2000
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EXHIBIT 3.3
BYLAWS
OF
KNIGHTSBRIDGE CORPORATION
a Nevada Corporation
ARTICLE 1
Offices
Section 1. The registered office of this corporation shall be in the County
of Clark, State of Nevada.
Section 2. 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 2
Meeting of Stockholders
Section 1. 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. Annual meetings of the stockholders, commencing with the year
1997 shall be held on the 29th 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 3. Special meetings of the stockholders, for any purpose 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 4. Notices of meetings shall be in writing and signed by the
President or 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 begin to run from the date
upon which such notice is deposited in the mail for 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
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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 5. Business transacted at any special meeting of stockholders shall
be limited to the purposes stated in the notice.
Section 6. The holders of a 10% 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 stock holders 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 there at,
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 be 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 7. When a quorum is present or represented at any meeting, the vote
of the holders of a 10% 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 shall govern and control the decision of such question.
Section 8. Each stockholder of record of the corporation shall be 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 9. 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 qualifications of
voters, the validity of proxies and the acceptance of 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 10. 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 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.
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ARTICLE 3
Directors
Section 1. 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 2. The number of Directors which shall constitute the whole board
shall be One. 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. 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 only be filled from 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
authorised 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 authorised 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.
ARTICLE 4
Meetings of the Board of Directors
Section 1. 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.
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Section 2. 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 hereinafter provided
for special meetings of the Board of Directors.
Section 3. 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. Special meetings of the Board of Directors may be called by the
Chairman or the President or by the 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 if 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 least 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 least twenty-four (24) hours prior to the time of the
holding of the meeting. Such mailing, telegraph or delivery as above provided
shall be due, legal and personal notice to such director.
Section 5. 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 6. The transaction 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 approvals
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 7. A majority of the authorised 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
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 be as
valid and effective in all respects as if passed by the Board in regular
meeting.
Section 8. A quorum of the directors may adjourn any directors meeting to
meet again at 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.
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ARTICLE 5
Committees of Directors
Section 1. 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 two or more of the directors of the corporation
which, to the extent provided in the resolution, shall 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 authorise the seal of the corporation to
be affixed to all papers which may require it. Such committee or committees
shall have such name or names as may be 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 at any meeting at
which there is a quorum shall be the act of the committee.
Section 2. The committee shall keep regular minutes of their proceedings
and report the same to the Board of Directors.
Section 3. Any action required or permitted to be 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 be, and such written consent is
filed with the minutes of proceedings of the Board or committee.
ARTICLE 6
Compensation of Directors
Section 1. The directors may be 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 be allowed like reimbursement and compensation for attending
committee meetings.
ARTICLE 7
Notices
Section 1. 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 telegrm.
Section 2. 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 meeting 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 to the
consideration of which no object 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 parities having the right to vote at
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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 3. 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 8
Officers
Section 1. 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 2. 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 3. 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 4. The salaries and compensation of all officers of the corporation
shall be fixed by the Board of Directors.
Section 5. 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 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.
Section 6. 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 7. 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 other such duties as the board of
Directors may from time to time prescribe.
Section 8. 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 9. 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
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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 10. 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 will perform
other such duties as may be prescribed by the President or the Board of
Directors.
Section 11. 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 other duties and have such other powers as the President or the
Board of Directors may from time to time prescribe.
Section 12. 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.
Section 13. If required by the Board of Directors, he shall give the
corporation a bond in such sum and with such surety 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 14. 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 9
Certificates of Stock
Section 1. 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 authorised to issue more than one class of stock or more
than one series of any class, the designations, preferences and relative,
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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 summarised on the face or back of the
certificate which the corporation shall issue to represent such stock.
Section 2. 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 3. 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 4. 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.
Section 5. 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 termination 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 stockholders 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 such payment of 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 6. The corporation shall be entitled to recognise 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 recognise any equitable or other claim to or interest in such share or shares
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on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of Nevada.
ARTICLE 10
General Provisions
Section 1. 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 2. 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 equalising 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 3. 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 4. The fiscal year of the corporation shall be fixed by resolution
of the Board of Directors.
Section 5. 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 Seal" and "Nevada". The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or in any manner
reproduced.
ARTICLE 11
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
General Corporation Law of the State of Nevada time to time against all
expenses, liability and loss (including attorney's fees, judgements, 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
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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 amend these and such Bylaws to provide at all
times the fullest indemnification permitted by the General Corporation Law of
the State of Nevada.
ARTICLE 12
Amendments
Section 1. 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 2. 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 29th day of June, 1996.
CERTIFICATE OF SECRETARY
I, Kendall White, hereby certify that I am the Secretary of Knightsbridge
Corporation, and the foregoing Bylaws, consisting of 8 pages, constitute the
code of Bylaws of Knightsbridge Corporation, as duly adopted at a regular
meeting of the Board of Directors of the corporation held 29th June, 1996.
IN WITNESS WHEREOF, I have hereunto subscribed my name this 29th June,
1996.
[CORPORATE SEAL]
/s/ Kendall White
-----------------
Secretary
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Exhibit 3.4
BYLAWS
OF
Saratoga Telecom Corp.
a Nevada Corporation
ARTICLE 1
Offices
Section 1. The registered office of this corporation shall be in the County
of Clark, State of Nevada.
Section 2. 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 2
Meeting of Stockholders
Section 1. 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. Annual meetings of the stockholders, commencing with the year
1997 shall be held on the 29th 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, Board of Directors and transact such other
business as may properly be brought before the meeting.
Section 3. Special meetings of the stockholders, for any purpose 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 4. Notices of meetings shall be in writing and signed by the
President or 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 begin to run from the date
upon which such notice is deposited in the mail for 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
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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 5. Business transacted at any special meeting of stockholders shall
be limited to the purposes stated in the notice.
Section 6. The holders of 10% 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 stock holders 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 there at,
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 be 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 7. When a quorum is present or represented at any meeting, the vote
of the holders of 10% 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 shall govern and control the decision of such question.
Section 8. Each stockholder of record of the corporation shall be 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 9. 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 qualifications of
voters, the validity of proxies and the acceptance of 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 10. 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 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 3
Directors
Section 1. 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.
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Section 2. The number of Directors which shall constitute the whole board
shall be One. 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. 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 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 only be filled from 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
authorised 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 authorised 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.
ARTICLE 4
Meetings of the Board of Directors
Section 1. 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 2. 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 hereinafter provided
for special meetings of the Board of Directors.
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Section 3. 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. Special meetings of the Board of Directors may be called by the
Chairman or the President or by the 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 if 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 telegraphed company at least 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 least twenty-four (24) hours prior to the time of the
holding of the meeting. Such mailing, telegraphed or delivery as above provided
shall be due, legal and personal notice to such director.
Section 5. 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 6. The transaction 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 approvals
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 7. A majority of the authorised 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
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 be as
valid and effective in all respects as if passed by the Board in regular
meeting.
Section 8. A quorum of the directors may adjourn any directors meeting to
meet again at 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 5
Committees of Directors
Section 1. 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 two or more of the directors of the corporation
which, to the extent provided in the resolution, shall 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 authorise the seal of the corporation to
be affixed to all papers which may require it. Such committee or committees
shall have such name or names as may be determined from time to time by the
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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 at any meeting at
which there is a quorum shall be the act of the committee.
Section 2. The committee shall keep regular minutes of their proceedings
and report the same to the Board of Directors.
Section 3. Any action required or permitted to be 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 be, and such written consent is
filed with the minutes of proceedings of the Board or committee.
ARTICLE 6
Compensation of Directors
Section 1. The directors may be 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 be allowed like reimbursement and compensation for attending
committee meetings.
ARTICLE 7
Notices
Section 1. 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 2. 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 meeting 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 to the
consideration of which no object 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 parities 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 3. 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.
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ARTICLE 8
Officers
Section 1. 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 2. 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 3. 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 4. The salaries and compensation of all officers of the corporation
shall be fixed by the Board of Directors.
Section 5. 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 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.
Section 6. 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 7. 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 other such duties as the board of
Directors may from time to time prescribe.
Section 8. The President shall be the chief executive officer of the
corporation, unless otherwise designated by the Board of Directors, 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 9. 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 10. 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 will perform
other such duties as may be prescribed by the President or the Board of
Directors.
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Section 11. 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 other duties and have such other powers as the President or the
Board of Directors may from time to time prescribe.
Section 12. 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.
Section 13. If required by the Board of Directors, he shall give the
corporation a bond in such sum and with such surety 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 14. 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 9
Certificates of Stock
Section 1. 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 authorised to issue more than one 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 2. 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 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
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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 4. 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.
Section 5. 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 termination 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 stockholders 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 such payment of 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 6. The corporation shall be entitled to recognise 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 recognise 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 otherwise provided by the laws of Nevada.
ARTICLE 10
General Provisions
Section 1. 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 2. 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 equalising 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.
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Section 3. 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 4. The fiscal year of the corporation shall be fixed by resolution
of the Board of Directors.
Section 5. 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 Seal" and "Nevada". The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or in any manner
reproduced.
ARTICLE 11
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
General Corporation Law of the State of Nevada time to time against all
expenses, liability and loss (including attorney's 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 amend these and such Bylaws to provide at all
times the fullest indemnification permitted by the General Corporation Law of
the State of Nevada.
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ARTICLE 12
Amendments
Section 1. 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 2. 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 16th day of June, 1999.
CERTIFICATE OF SECRETARY
------------------------
I, Terrence K. Picken, hereby certify that I am the Secretary of Saratoga
Telecom Corp., and the foregoing Bylaws, consisting of 9 pages, constitute the
code of Bylaws of Saratoga Telecom Corp., as duly adopted at a regular meeting
of the Board of Directors of the corporation held June 15, 1999.
IN WITNESS WHEREOF, I have hereunto subscribed my name this 16th day of
June, 1999.
/s/ Terrence K. Picken
Secretary
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EXHIBIT 4
SARATOGA INTERNATIONAL
HOLDINGS CORP.
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
200,000,000 SHARES COMMON STOCK AUTHORIZED, $.001 PAR VALUE
Number Shares
CUSIP 80348W 10 2
SEE REVERSE FOR
CERTAIN DEFINITIONS
This certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF
SARATOGA INTERNATIONAL HOLDINGS CORP.
transferable on the books of the corporation in person or by duly authorized
attorney upon surrender of this certificate properly endorsed. The certificate
and the shares represented hereby are subject to the laws of the State of
Nevada, and to the Certificate of Incorporation and Bylaws of the Corporation,
as now or hereafter amended. This certificate is not valid unless countersigned
by the Transfer Agent. WITNESS the facsimile seal of the Corporation and the
signature of its duly authorized officers.
Countersigned
PACIFIC STOCK TRANSFER COMPANY
P.O. Box 93385
Las Vegas, NV 89193
By
Authorized Signature
Dated
/s/ Patrick F. Charles /s/ T K Picken
- ---------------------- --------------
President Secretary
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws of regulations.
TEN COM -as tenants in common UNIF GIFT MIN ACT.........Custodian.......
TEN ENT -as tenants by the entireties (Cust) (Minor)
JT TEN -as joint tenants with the right Act..............................
of survivorship and not as (State)
tenants in common
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Additional abbreviations may also be used though not in the above list
For value received, hereby sell , assign and transfer unto
----------------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
of the capital stock of the within Certificate, and do hereby irrevocably
constitute and appoint , Attorney to transfer the said stock on the books of the
within named Corporation with full power of substitution in the premises.
Dated
X----------------------------
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND With THE NAME AS WRITTEN
UPON THE FACE OF This CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER. THE SIGNATURE(S) MUST BE AN ELIGIBLE
GUARANTOR INSTITUTION (Banks, Stockbrokers, Savings and Loan Associations and
Credit Unions.)
SIGNATURE GUARANTEED:
TRANSFER WILL APPLY
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EXHIBIT 5
276,000 NOTE PURCHASE AGREEMENT
Dated October 30, 1999
BETWEEN
Saratoga International Holdings Corp.
BORROWER
AND
ZZG Holdings LLC
LENDER
THIS LOAN AGREEMENT ("Agreement") is dated October 30, 1999 between Saratoga
International Holdings Corp. a Nevada corporation, with its principal place of
business at 8756 - 122nd Avenue NE, Kirkland, WA 98033 ("Borrower") and ZZG
Holdings LLC, a Washington Limited Liability Company having an address of 120
State Avenue #536, Olympia, Washington 98501 ("Lender")
RECITALS
A. Borrower is a publicly held corporation whose common stock is quoted on the
OTC Bulletin Board. Through a wholly-owned subsidiary, the Borrower is in
the business as a reseller of prepaid long distance services over the
internet targeted principally at customers who originate international
calls from foreign countries to the USA and to other countries throughout
the globe. Borrower is a development stage business and to date has not
generated any significant revenues.
B. Borrower desires to borrow from Lender $276,000.00 including loan discounts
in order to finance the costs of continuing with Borrower's Capital
Formation and Business Development Plans.
NOW, THEREFORE, in consideration of the foregoing and of the covenants,
conditions and agreements contained herein, the Borrower and Lender agree as
follows:
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ARTICLE 1
AGREEMENT TO LEND
1.1 Agreement to Lend. On the basis of the covenants, agreements and
representations of Borrower contained in, and subject to the terms and
conditions of this Agreement and the Promissory Note from Borrower to
Lender, attached hereto as Exhibit A and made a part hereof by
reference, Lender agrees to lend to Borrower the principal sum of
$276,000.00 including loan discount fees ("Loan"). The net proceeds of
the loan shall be disbursed to finance the cost of preparing and
filing documents with the SEC to a) become fully reporting and to
maintain Borrower's listing privileges on the Over The Counter
Bulletin Board (OTC: BB) operated by the NASD and, b) raise additional
equity capital. Borrower also plans to use a portion of the proceeds
to finance its Business Development Plan.
1.2 Disbursement. On the basis of the covenants, agreements and
representations of Borrower contained in this Agreement, the Loan will
be disbursed at Closing, as defined in Article IV herein.
ARTICLE II
BORROWER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
2. Borrower hereby represents, warrants and covenants as follows:
2.1 Existence/Good Standing. Borrower is now and at Closing will be a
corporation, duly organized, validly existing and active under the
laws of the State of Nevada. Borrower has all requisite corporate
power and authority to carry on its business as now being conducted
and is duly qualified to do business in the State of Washington and is
in good standing in all jurisdictions where it owns or leases
property, maintains employees or conducts business.
2.2 Authorization; Validity and Effect of Agreements. Borrower has the
requisite corporate power and authority to execute and deliver this
Agreement. The consummation by Borrower of the transactions
contemplated hereby has been duly authorized by all requisite
corporate action. This Agreement constitutes the valid and legally
binding obligation of Borrower, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights and general
principles of equity.
2.3 Compliance With Law. To the best of Borrower's knowledge, rules,
ordinances, decrees and orders applicable to the operation of its
business or to its owned or leased properties, including, without
limitation, applicable environmental, pollution control and land use
provisions. Borrower has obtained all necessary permits, licenses,
variances, exemptions, orders and approvals from federal, state, local
and foreign regulatory bodies in order to conduct its business as
presently conducted.
2.4 No Approval or Notices Required; No Conflicts. To the best of
Borrower's knowledge, the execution, delivery and performance of this
Agreement and each of the other agreements, exhibits and documents
referred to herein or necessary to effectuate this Agreement by
Borrower and the consummation of the transactions contemplated hereby
or thereby will not:
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2.4.1 Constitute a violation of any provision of applicable law;
2.4.2Require any consent, approval, permit or authorization of any
person or governmental authority;
2.4.3Result in a breach of or a default under (with or without the
giving of notice or lapse of time), acceleration or termination
of, or the creation in any party of the right to accelerate,
terminate, modify or cancel any agreement or other restriction,
encumbrance, obligation or liability to which Borrower is a party
or by which it is bound or to which any of its assets are
subject; or
2.4.4Conflict with or result in a breach of or constitute a default
under any provision of Borrower's Restated Articles of
Incorporation or By-Laws, or of any applicable order, writ,
injunction or decree of any court or governmental
instrumentality.
2.5 Taxes. Borrower has timely filed or will timely file with the
appropriate governmental agencies all tax returns, information returns
and reports required to have been filed with respect to all periods
ending on or before Closing. Borrower has paid or will pay, in full,
as of the Closing, all taxes, interest, penalties, assessments,
deficiencies and other charges ("Taxes"), the non-payment of which
could result in the imposition of Taxes on Borrower or the imposition
of a lien on or in any of its assets, or that could otherwise result
in a risk of forfeiture of any of its assets. Borrower has not filed
or entered into any election, consent or extension agreement which
extends any applicable statute of limitations. Borrower has made
adequate provisions for all accrued and unpaid Taxes of Borrower. To
the best of Borrower's knowledge, Borrower is not a party to any
action or proceeding pending or threatened by any governmental
authority for assessment or collection of Taxes, no unresolved claims
for assessment or collection of such Taxes has been asserted against
it, and no audit or investigation by governmental authorities is
underway.
2.6 Representations in Other Documents. The representations and warranties
of Borrower in all documents executed by Borrower in connection with
the Loan are, to the best of Borrower's knowledge, true and accurate
in all material respects as of the date of such representation and
warranty and as of Closing.
2.7 Legal Proceedings; Claims. There are no claims, actions, suits,
arbitrations, proceedings or investigations pending or threatened
against Borrower, before or by any governmental or non-governmental
department commission board bureau agency or instrumentality, whether
federal, state, local or foreign, or any other person, and there are
no outstanding or unsatisfied judgments, orders, decrees or
stipulations to which Borrower is a party, which relate to either the
Assets or the transaction contemplated herein, or which would alone or
in the aggregate have a material adverse effect upon the business,
business prospects, assets or financial condition of Borrower.
2.8 No Fraudulent Conveyance. The Loan does not violate an applicable law
or regulation or constitute a fraudulent conveyance.
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2.9 Accuracy of Representations and Warranties. No representation or
warranty made or to be made by Borrower in this Agreement or in any
other document furnished or to be furnished from time to time in
connection herewith, contains or will contain any misrepresentation of
a material fact or omits or will omit to state any material fact
necessary to make the statements herein or therein not misleading.
There is not fact known to Borrower which would materially adversely
affect, or which would, in the future, materially adversely affect,
the business, prospects, assets, property or condition (financial or
otherwise) of Borrower which has not been set forth in this Agreement,
except those facts concerning general economic, legislative,
regulatory, or other matters such as may generally impact all
businesses of the type operated by Borrower.
ARTICLE III
GENERAL CONDITIONS OF LOAN
3.1 Loan Documents. It shall be a condition precedent to Lender's
obligation to make the Loan that at or before Closing, Borrower shall
execute and deliver to Lender this Agreement and the Note
(collectively "Loan Documents") and that the Loan Documents shall be
satisfactory to Lender in form and substance.
3.2 Additional Requirements. In addition to the Loan Documents, at
Closing, Borrower shall deliver to Lender the following, in form and
substance satisfactory to Lender:
3.2.1Pledge Agreement. Stock Pledge and Security Agreement of Patrick
F. Charles ("Charles") and United West Holdings, LLC ("United")
to Lender ("Pledge Agreement") in the form attached hereto as
Exhibit B, pledging 3,250,000 shares of the Borrower's common
stock owned collectively by Charles and United, as security for
Borrower's performance under this Agreement and the Note.
3.3 Other Items. Such other documents and instruments as Lender may
reasonably require.
ARTICLE IV
CLOSING
4.1 Closing. This Agreement and the transactions contemplated herein shall
be closed by any means mutually agreed upon by Borrower and Lender.
The date of Closing shall be October 30, 1999, or as soon thereafter
as all conditions precedent to Closing have occurred and all necessary
documents to be executed and delivered at Closing have been prepared.
4.2 Actions at Closing. At Closing, Borrower shall execute and deliver to
Lender the documents referred to in Article III herein and Lender
shall tender to Borrower the proceeds of the Loan.
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ARTICLE V
BORROWER'S DEFAULT
5.1 Events of Default. Each of the following shall constitute an Event of
Default under this Agreement.
5.1.1Borrower fails to pay, within ten (10) days following the due
date thereof, any installment of interest or principal on the
Note or Borrower fails to pay the Note in full on or before the
maturity date thereof;
5.1.2Borrower fails to pay within ten (10) days following written
notice from lender any amounts due hereunder or under the Note,
other than installments of principal and interest on the Note; or
5.1.3Any representation or warranty made by the Borrower in or
pursuant to this Agreement or otherwise made in writing in
connection with or as contemplated by this Agreement shall be
incorrect or false or misleading in any material respect as to
the period of time to which it relates; or
5.1.4Any representation to Lender by Borrower as to the financial
condition or credit standing of Borrower, or any financial
statement provided to lender pursuant to this Agreement or the
Note, is or proves to be false or misleading in any material
respect; or
5.1.5Any order or decree is entered by any court of competent
jurisdiction directly or indirectly enjoining or prohibiting
Lender or Borrower from performing any of their respective
obligations under this Agreement; or
5.1.6Borrower makes an assignment for the benefit of creditors; or
petitions or applies to any court for the appointment of a
trustee or receiver for itself or for any part of its assets, or
commences any proceedings under any bankruptcy, insolvency,
readjustment of debt or reorganization statute or law of any
jurisdiction; or if any such petition or application is filed or
any such proceedings are commenced, and Borrower by any act
indicates approval thereof, consents thereto, or acquiescence
therein; or an order is entered appointing such trustee or
receiver, or adjudicating Borrower bankrupt or insolvent, or
approving the petition in any such proceeding; or if any petition
or application for any such proceeding or for the appointment of
a trustee or receiver is filed by any third party against
Borrower or its assets and any of the aforesaid proceedings is
not dismissed within sixty (60) days of its filing; or
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5.1.7Borrower fails to comply with, keep or perform any of its other
obligations, agreements, undertakings, covenants, conditions or
warranties under (i) this Agreement, (ii) the Note, or (iii) any
other document or instrument executed and delivered to Lender by
Borrower pursuant to this Agreement, and such failure continues
for a period of thirty (30) days after written notice thereof by
Lender to Borrower.
5.2 Remedies. Upon the happening of an Event of Default, Lender shall have
the right, in addition to all remedies conferred upon lender by law or
equity or the terms of this Agreement and the Note, to do any or all
of the following, concurrently or successively,
5.2.1Declare the Note to be, and the Note shall thereupon become,
immediately due and payable, without presentation, demand,
protest, notice of intention to accelerate, notice of
acceleration or notice of any kind, all of which are hereby
expressly waived and exercise any one or more of its rights and
remedies under this Agreement and/or the Note;
5.2.2Exercise all of its rights and remedies under the Pledge
Agreement.
In case of any Event of Default hereunder, Borrower will pay Lender's
reasonable attorneys' fees and disbursements and court cost (including those
relating to appeals) and all related expenses in connection with the enforcement
of this Agreement, the Note or the Pledge Agreement.
ARTICLE VI
MISCELLANEOUS
6.1 Assignment by Borrower. Borrower shall not assign or attempt to assign
its rights or obligations under this Agreement, the Note or the Pledge
Agreement.
6.2 Lender's Actions. The authority herein conferred upon the lender and
any action taken by Lender hereunder, or under the Note or Pledge
Agreement, will be taken by Lender for its own protection only, and
Lender does not and shall not be deemed to have assumed any
responsibility to Borrower or any other person with respect to any
such action herein authorized or taken by Lender. No person shall be
entitled to rely upon, or claim to have relied upon, any action taken
or failed to have been taken by Lender or any of its representatives.
6.3 Time is of the Essence. Time is of the essence of this Agreement.
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6.4 Waivers. No waiver of any term, condition, covenant or agreement
contained herein or in the Note or Pledge Agreement shall be effective
unless set forth in writing signed by Lender, and any such waiver
shall be effective only to the extent set forth in such writing. No
failure by Lender to exercise, or delay by Lender in exercising, any
such right, power or privilege hereunder or in the Note or Pledge
Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other
right or remedy provided by law.
6.5 Notice. Any notice to either Borrower or Lender which may be required
or desired to be given hereunder shall be delivered personally or if
mailed, postage prepaid, by United Sates registered or certified mail,
return receipt requested, or by overnight express courier, addressed
in the case of Borrower to:
Saratoga International Holdings Corp.
8756 - 122nd Avenue NE
Kirkland, WA 98033
with a copy to:
Robert C. Laskowski
Attorney at Law
1001 SW Fifth Ave., Suite 1300
Portland, OR 97204
in the case of Lender to:
ZZG Holdings LLC
120 State Avenue #536
Olympia, WA 98501
with a copy to:
Edward H. Burnbaum, Esq.
Lynch, Rowan, Burnbaum & Crystal P.C.
300 East 42nd Street
New York, NY 10017
or at such other addresses as may from time to time be designated by
the party to be addressed by written notice to the other in the manner
provided in this Article VI. Notices, demands and requests given in
the manner indicated herein shall be deemed sufficiently served or
given for all purposes hereunder when received or when delivery is
refused or when the same are returned to sender for failure to be
called for.
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6.6 Successors and Assigns. This Agreement shall inure to the benefit of
the parties and their respective successors and permitted assigns. No
assignment made by Borrower in violation of this Agreement shall
confer any rights on any assignee of the Borrower.
6.7 No Partnership. Nothing contained herein, or in the note or Pledge
Agreement, and no action taken on the part of the Lender, shall be
deemed to make Lender a partner or joint venturer with Borrower.
6.8 Additional Assurances. At any time or from time to time, upon the
written request of Lender, Borrower shall execute all such further
documents and take such further action as Lender may reasonably
request to effectuate the transaction contemplated herein.
6.9 Entire Agreement. This Agreement and the Exhibits hereto constitute
the entire agreement between the Borrower and Lender with respect to
the subject matter hereof and may not be modified or amended in any
manner other than by supplemental written agreement executed by
Borrower and Lender. THE RIGHTS AND OBLIGATIONS OF BORROWER AND LENDER
SHALL BE DETERMINED SOLELY FROM THIS WRITTEN LOAN AGREEMENT, THE NOTE
AND THE PLEDGE AGREEMENT AND ANY PRIOR ORAL OR WRITTEN AGREEMENTS
BETWEEN LENDER AND BORROWER CONCERNING THE SUBJECT MATTER HEREOF ARE
SUPERSEDED BY AND MERGED INTO THIS LOAN AGREEMENT, THE NOTE AND THE
PLEDGE AGREEMENT.
6.10 Choice of Law. New York Law; Submission to Jurisdiction; Waiver of
Jury Trial. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. EACH PARTY HERETO
HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW
YORK STATE COURT SITTING IN NEW YORK CITY FOR PURPOSES OF ALL LEGAL
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO IRREVOCABLY WAIVES
TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT
IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY
HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY. NOTWITHSTANDING ANYTHING TO THE
CONTRARY IN THE FOREGOING, AT THE ELECTION OF A HOLDER, ANY DISPUTE
BETWEEN THE HOLDER AND THE COMPANY MAY BE ARBITRATED, RATHER THAN
LITIGATED IN THE COURTS, BEFORE AND IN ACCORDANCE WITH THE RULES OF
THE AMERICAN ARBITRATION ASSOCIATION IN NEW YORK CITY. THE COMPANY
AGREES TO SUBMIT TO AND PARTICIPATE IN ANY SUCH ARBITRATION.
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6.11 Commercial Transaction. To induce Lender to enter into this commercial
loan transaction evidenced by and secured by the Loan Agreement, the
Note and the Pledge Agreement, Borrower agrees that the said
transaction is a commercial and not a consumer transaction.
6.12 Counterparts. This agreement may be executed by telecopy signature in
one or more counterparts, each of which shall be deemed an original,
and all of which together shall constitute but one and the same
instrument and agreement.
6.13 Severability. If any provision of this Agreement, the Note or the
Pledge Agreement shall be held invalid or unenforceable, the remainder
of this Agreement or the Note or the Pledge Agreement shall not be
affected thereby, but shall continue valid and enforceable to the
fullest extent permitted by applicable law.
IN WITNESS WHEREOF, Borrower and Lender have caused this Agreement to be
executed by their authorized representatives as of the date first above written.
BORROWER:
Saratoga International Holdings Corp.
By: /s/ Terrence K. Picken
---------------------------
Terrence K. Picken, Exec.
Vice-President
LENDER:
ZZG Holdings LLC
By:
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EXHIBIT 10.1
TELECOMMUNICATIONS SERVICES AGREEMENT
(Prepaid Calling Card Services)
THIS TELECOMMUNICATIONS SERVICES AGREEMENT (this "Agreement"), is entered
into as of the 18th day of August, 1999 (the "Effective Date"), by and between:
TELEGLOBE USA INC., a Delaware corporation and U.S. carrier having a business
address at 11480 Commerce Park Drive, Reston, Virginia 20191 ("Teleglobe"); and
SARATOGA TELECOM, INC., a Nevada corporation having a business address at 2500
East Hallandale Boulevard, Suite 210, Hallandale, Florida 33009 ("Customer", and
with Teleglobe, collectively, the "Parties" and individually, a "Party").
WITNESSETH;
WHEREAS, Customer desires to purchase certain pre-paid calling card
services provided by Teleglobe for resale in the Territory (as defined in Annex
1 attached hereto), in accordance with the terms and conditions contained
herein.
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the Parties agree as follows:
1. RESALE OF THE SERVICES
1.1 Teleglobe shall provide to Customer for resale in the Territory, on a
non-exclusive basis, network and related services necessary to provide
prepaid calling card services for the provision of international switched
voice telephony via the United States, as more particularly described in
Annex 1 attached hereto (the "Services"). Customer understands and agrees
that Teleglobe, directly or through other resellers or sales agents, may
also market the Services in the Territory and elsewhere.
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1.2 The countries from which Customer may offer to its customers access to the
Services (the "Countries") shall be set forth in each order for the
Services submitted by Customer pursuant to Section 4.1 below (an "Order"),
Subject to Section 9 and other applicable provisions of this Agreement, the
Countries shall remain in effect for all Services purchased pursuant to a
particular Order, however, Teleglobe shall have the right to discontinue
any Country for any subsequent Order. Notwithstanding the foregoing,
however, Teleglobe reserves the right immediately to discontinue any of the
Countries in the event required by law the applicable PTT or any other
regulatory authority. Further, Customer acknowledges that a particular PTT
or other regulatory authority may unilaterally block access to or from any
particular Country and/or Territory.
1.3 The rates charged by Teleglobe to the Countries (the "Teleglobe Rates")
shall be set forth in each Order. The Teleglobe Rates shall remain in
effect for all Services purchased pursuant to a particular Order, however,
Teleglobe shall have the right to change the Teleglobe Rates for any
subsequent Order.
1.4 Customer understands and agrees that any Order is subject to Teleglobe's
approval and shall not be final and binding until accepted by Teleglobe
pursuant to Section 4.1 below. Teleglobe shall have the right to accept or
refuse, in whole or in part, any Order for Services obtained from Customer,
or to terminate Services to any particular Country with respect to a prior
Order, if acceptance of such Order or continued usage pursuant to a prior
Order will be or is in violation of any law, statute, governmental policy,
or is contrary to any agreement between Teleglobe and any of its
correspondents or would otherwise be contrary to Teleglobe's business
interests. Such determinations shall be made by Teleglobe in its sole
discretion. In the event of such refusal or discontinuance, Teleglobe will
advise Customer in writing of its decision and may, at its option, provide
Customer with an explanation of the reasons for refusal in order to help
Customer detect Orders which are likely to be refused in the future.
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2. OBLIGATIONS OF CUSTOMER
2.1 Customer shall be solely responsible for all activities in respect of the
resale, marketing, advertising, branding, billing, collection, customer
service and any other activity related to the Services, except as
specifically set forth in Annex 2.
2.2 Subject to Article 1.4 above, Customer shall contract directly with its
customers for the provision of the Services, and shall establish rates to
be charged to its customers (the "Customer Rates"), which Customer Rates
must be attached to the applicable Order. The Customer Rates may not be
modified on any Order already accepted by Teleglobe.
2.3 Customer agrees to designate one of its employees to attend, at Customer's
cost and expense, Teleglobe training sessions to learn the technical
aspects and provisioning requirements related to the Services. Such
training sessions will be held at Teleglobe-designated facilities from time
to time as Teleglobe deems appropriate. The cost for the presentation of
such training and the materials related thereto will be paid for by
Teleglobe. Training may be provided to Customer's personnel at Customer's
premises upon request, at Teleglobe's standard training rates plus
expenses. Customer shall be responsible for the training of any sub-agents
or resellers engaged by Customer to market and promote the Services.
2.4 Within thirty (30) days after the Effective Date, Customer shall provide
Teleglobe with prompt and accurate traffic forecasting information,
including without limitation, the number of estimated minutes per month of
Service usage by Country. Traffic forecasts also shall be provided by
Customer thereafter as may be reasonable requested by Teleglobe.
2.5 Customer understands and agrees that it is acting as carrier of record with
respect to the Services and may not co-brand any of the Services or refer
in any respect to the Services as Teleglobe Services or refer to Teleglobe
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as the underlying Service provider unless agreed to in writing by
Teleglobe. Any marketing and sale of the Services by Customer must be done
by Customer branding the Services as Customer's own, without any reference
to Teleglobe or any of its affiliates.
2.6 Customer shall prepare and develop, at its own cost and expense, such
technical, sales and/or promotional materials as it considers necessary,
which technical, sales and/or promotional materials shall comply with all
applicable laws, including without limitation, applicable consumer
disclosure laws. Any such technical, sales and/or promotional materials
utilized by Customer shall not misrepresent those representations and
warranties with respect to the Services as are provided to Customer in
writing by Teleglobe. Customer understands and agrees that Teleglobe shall
have no responsibility with respect to any such technical, sales and/or
promotional materials prepared by Customer. Upon request, Customer shall
provide Teleglobe with copies of any such technical, sales and/or
promotional materials. Receipt of any such materials shall not be deemed an
approval or acceptance thereof by Teleglobe.
2.7 Customer shall provide first line of support for all of its customer
inquiries, account changes, complaints and billing related matters. Under
no circumstances shall Customer refer retail customers directly to the
Teleglobe service center.
2.8 Customer shall maintain at all times a designated person to be primarily
and directly responsible for the performance of its obligations hereunder.
Customer shall not change such assignment without prior notice to
Teleglobe. Customer shall be permitted to resell the Services in the
Territory but shall, upon request, provide Teleglobe with the names,
business addresses and other material information about any such sales
agents and/or other resellers or carriers utilized by customer to resell
the Services. Customer shall at all times, remain liable for any actions or
omissions of any such resellers, carriers and/or sales agents and shall
indemnify and hold harmless Teleglobe from any liability therefrom.
2.9 Customer covenants and agrees to resell the Services only in the Territory
for access in the Countries, and understands and agrees that it is
expressly prohibited from reselling the Services outside of the Territory,
without Teleglobe's prior written approval.
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3. TERM AND TERMINATION
3.1 This Agreement shall commence on the Effective Date and shall continue
until terminated by either Party at any time by providing thirty (30) days
written notice. No new Orders will be accepted during the notice period.
3.2 Notwithstanding Article 3.1 above, Teleglobe may terminate this Agreement
with immediate effect and without prior recourse to any judicial authority,
by giving written notice to Customer in the event that:
(i) Customer commits a breach of any obligation imposed upon it by
this Agreement (including without limitation the failure to make
any payment when due hereunder); or
(ii) Any representation made by Customer in this Agreement is no
longer true; or
(iii)Customer becomes insolvent, or subject to a petition in
bankruptcy filed by or against it or is placed under the control
of a receiver, liquidator or committee of creditors; or
(iv) Customer assigns or attempts to assign this Agreement without
Teleglobe's prior written consent; or
(v) Customer dissolves, ceases to function as a going concern or to
conduct its operations in the normal course of business.
3.3 In the event of any termination pursuant to this Article 3, Customer
shall pay to Teleglobe any amounts owing through and including the
date of termination. In addition, Customer immediately shall cease
selling the Services, and Teleglobe shall not be liable to Customer
for any expected compensation or profits or for any investments,
expenditures or commitments made in connection with this Agreement.
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4. ORDERING, PRICING AND BILLING
4.1 Customer shall order the Services by submitting an Order in writing to
Teleglobe, in the form set forth and attached hereto as Annex 3.
Teleglobe shall confirm the acceptance for such Order as soon as
practicable after receipt. The cost for the Services shall include the
cost of any calling card provided by Teleglobe, any printing and
customized greeting charges, any shipping and handling charges, and
any other charges set forth on the particular Order.
4.2 Each Order placed must be for a minimum value of Twenty Five Thousand
US Dollars (US$ 25,000) or One Hundred Thousand (100,000) Units, or
consist of at least One Thousand (1000) calling cards (if Teleglobe is
responsible for printing the calling cards) or calling card amount
numbers.
4.3 Teleglobe shall use commercially reasonable efforts to deliver any
calling cards ordered by Customer as soon as practicable following
Teleglobe's approval of the Order. Customer acknowledges that printing
the calling cards shall take approximately four (4) weeks, and
Teleglobe shall have no liability whatsoever for any failure or delay
in the delivery of calling cards. All calling cards will be delivered
FOB Shipping Point (USA) (INCOTERMS 1990). Upon Teleglobe's shipment
of the calling cards, Customer shall assume all risk of loss or
misuse.
4.4 All calling cards and/or account numbers shall remain inactive until
Teleglobe receives a written request from Customer to activate them,
and Teleglobe receives payment in full. All calling card and/or
account numbers in the lot specified on the Order shall be activated
at the same time. All calling cards and/or account numbers shall
expire six (6) months after the date of activation. Customer
covenants and agrees to activate all calling cards and/or account
numbers within twelve (12) months after the date of the Order. Failure
to activate within such time frame will result in cancellation of the
Order without further notice, and Teleglobe shall have no further
liability to Customer in connection with such Order. Customer may
request a shorter expiration for the calling cards and/or account
numbers in its Order.
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4.5 If Customer notifies Teleglobe in writing that a particular calling
card or account number has been lost or stolen, Teleglobe will use
commercially reasonable efforts not to activate the calling card or
account number, or if already activated, to deactivate the calling
card or account number. However, Teleglobe shall have no liability to
Customer or any third party for any claims that a calling card or
account number, has been lost, stolen or fraudulently used and
Teleglobe shall not be obligated to restore any calling card or
account number value or otherwise reimburse Customer or any third
party for any calls charged to the calling card or account number.
4.6 Customer shall pay in full all amounts due Teleglobe, including
without limitation, charges described in Annex 2 as well as any
shipping and handling costs, prior to Teleglobe's activation of
calling cards and/or account numbers pursuant to an Order.
Notwithstanding Section 4.4 above, Customer agrees that the first lot
of any Order will be activated immediately upon acceptance of the
Order by Teleglobe. The remaining balance of all amounts due shall be
paid in full prior to Teleglobe's activation of calling cards and/or
account numbers pursuant to an Order. Customer acknowledges and agrees
that there shall be no credit or refund of all or any portion of the
Deposit in the event the calling cards and/or account numbers are not
utilized or expire prior to full usage.
4.7 All charges for the Services are exclusive of all taxes, duties,
surcharges (including without limitation the pay phone surcharge),
tariffs and levies or withholdings, including, but not limited to,
sales, use, or value added taxes imposed by any governmental authority
(collectively referred to as "Taxes"). If Teleglobe is for any reason
obligated to pay any Taxes in connection with the sale of the Services
hereunder then the amount of such Taxes also shall be reimbursed to
Teleglobe by Customer at the time of Customer's payment for the
Services. Customer shall be responsible for any Taxes or other
regulatory fees or expenses imposed on its sale of Services to end
users.
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5. FORCE MAJEURE
No failure or omission by Teleglobe to carry out or observe any of the
terms and conditions of this Agreement shall give rise to any claim against
Teleglobe or be deemed a breach of this Agreement by Teleglobe if such
failure or omission arises from an act of God, an act of Government, any
event specified in Section 1.2 above or any other circumstance commonly
knows and force majeure.
6. RELATIONSHIP OF CUSTOMER AND TELEGLOBE
6.1 Customer has no authority to act for or on behalf of Teleglobe, and
Customer acknowledges and agrees that it is not authorized to bind
Teleglobe to any contract or agreement of any nature whatsoever or in
any way to misrepresent the application of the Services.
6.2 Customer acknowledges and agrees that Teleglobe shall not incur any
responsibility or obligation (including but not limited to state and
federal taxes, unemployment, social security and commissions) to any
employees, agents or other permitted independent contractors of
Customer utilized by Customer in connection with Customer's commercial
use of the Services. Such persons shall at all times remain employees,
agents or independent contractors, as applicable, of Customer, and
Customer shall pay promptly when due all taxes and other liabilities
on account of such employees, agents or independent contractors.
7. ADVERTISING, USE OF TELEGLOBE MARKS
Customer understands and agrees that it may not use any of Teleglobe's
trademarks, service marks, trade names or logos (collectively, the "Marks")
or refer to Teleglobe (or any of its affiliates) in any respect in
connection with the marketing and sale of the Services hereunder. Customer
shall not use any part of any of the Marks as part of its own name or in
any other manner. It is expressly understood by Customer that the Marks
are, and shall at all times remain, the exclusive property of Teleglobe.
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8. CONFIDENTIALITY AND PROPRIETARY INFORMATION
8.1 During the Term of this Agreement and for two (2) years thereafter,
each Party shall regard and preserve as confidential all information
related to the business of the other Party, or its parent,
subsidiaries, or affiliated companies which is clearly labeled as
"proprietary or confidential" ("Confidential Information"). Each Party
agrees not to disclose any such Confidential information without first
obtaining the other Party's prior written consent. In addition,
Customer agrees not to disclose the existence of this Agreement or any
of the terms thereof, or refer to Teleglobe (or any of its affiliates)
in connection with the Services.
8.2 Each Party shall provide the same care to avoid disclosure or an
unauthorized use of the Confidential information as it provides to
protect its own Confidential information. It is agreed that access to
all Confidential information shall be limited to only such employees
or agents of thee Customer who need to know such information for
purposes of fulfilling the obligations required by this Agreement.
8.3 All Confidential information shall remain the property of the Party
releasing it, and such Confidential information, including all copies
thereof, shall be returned to the other Party or destroyed, upon
request, upon termination of this Agreement.
8.4 Notwithstanding the foregoing, neither Party shall have any obligation
with respect to Confidential information to the extent, but only to
the extent, that such information:
(i) is already in the possession of such Party, free from any
obligation to keep such information confidential;
(ii) is or becomes publicly known through no wrongful act of a Party
or any third party;
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(iii)is rightfully received from a third party without restriction
and without breach of any obligation of confidentiality;
(iv) is independently developed without use of any Confidential
information of the other Party and/or its affiliates; or
(v) must be disclosed pursuant to a court order or as required by any
competent governmental authority having jurisdiction over such
Party.
9. COMPLIANCE WITH LAWS
9.1 In performing this Agreement, Customer shall not use the Services in
any manner or for any purpose which constitutes a violation of the
laws of the Untied States or the Territory, or of the laws of any
Country in which Customer obtains access to the Services pursuant to
this Agreement, and Customer shall indemnify and hold Teleglobe
harmless from Customer's failure to do so or for the failure of its
customers to do so. Furthermore, if this Agreement, the relationship
created hereby, or the performance hereof is determined by Teleglobe
to be contrary either (a) to the laws, rules or regulations of any
such jurisdiction now or hereafter in effect, or (b) the Customer's
representations set forth in this Article 9, this Agreement will be
null and void from its inception.
9.2 Teleglobe reserves the right to cancel and/or temporarily suspend any
or all of the Services, or discontinue any Country, if Customer
engages into activities which, in the sole discretion of Teleglobe,
may cause disruption or damage to Teleglobe's network of facilities or
business reputation, or are contrary to Teleglobe's business interest.
Teleglobe shall use commercially reasonable efforts to provide
Customer with advance notice of such suspension and or cancellation
and in any case shall endeavor to provide written confirmation of such
suspension and or cancellation within a commercially reasonable time
thereafter.
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9.3 Customer acknowledges that Teleglobe has entered into this Agreement
with Customer in material reliance on the following representations
and covenants made by Customer.
(i) neither this Agreement, the relationship created hereby nor the
performance hereof is contrary to the current laws, rules, or
regulations or the Territory or of any Country in which Customer
will offer access to the Services; and
(ii) Customer has not refunded and will not refund either directly or
indirectly any money to any director, officer, employee or other
representative of Teleglobe (or of any subsidiary controlled by
or affiliated with Teleglobe) or to any such person's family.
Further, Customer represents and covenants that it has not and
will not commit itself to make nor will it actually make any
direct or indirect payments in connection with the business of
Teleglobe to any directors, officers, officials, employees or
shareholders of any governmental or private customer or
prospective customer or to such person's family, or that are
otherwise illegal under the applicable law of the Untied States
(including the Foreign Corrupt Practices Act) as well as the laws
of the Territory or any Country in which the Services are being
offered; and
(iii)Customer has all necessary authority and approvals required to
provide the Services in the Territory and in nay Country in which
Customer will offer access to the Services.
9.4 In the event that Teleglobe offers the Services subject to tariff in
the United States, if there is a conflict between the terms of this
Agreement and any such tariff, the terms of the tariff shall govern.
10. WARRANTY, LIMITATION OF LIABILITY AND INDEMNIFICATION
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10.1 EXCEPT FOR ANY EXPRESS WARRANTIES OR REPRESENTATIONS EXPRESSLY MADE
HEREIN, TELEGLOBE MAKES NO WARRANTY, EXPRESS OR IMPLIED, With RESPECT
TO THE SERVICES.
10.2 Teleglobe shall not be liable for any loss or damage sustained by
Customer or its customers due to any failure in or breakdown of the
communication facilities associated with the use of the Services, for
any interruption or degradation of the Services, whatsoever shall be
the cause or duration thereof, or for any other cause or claim
whatsoever arising under this Agreement, including without limitation,
the blocking of a Country or Territory by the applicable PTT or other
regulatory authority as specified in Section 1.2 above.
10.3 In no event shall Teleglobe be liable to Customer for consequential,
special or indirect losses or damages howsoever arising and whether
under contract, tort or otherwise (including, without limitation,
third party claims, loss of profits, or damage to reputation or
goodwill).
10.4 Customer shall indemnify, defend, and hold harmless Teleglobe (and its
affiliates, employees, agents, directors and officers) from and
against any and all liabilities, costs, damages, and costs and
expenses (including attorney's fees) resulting from Customer's (or its
employees', agents' resellers, or other independent contractors')
actions hereunder, including, but not limited to, acts of negligence,
breach of any provision in this Agreement, violation of any applicable
law or regulation, misrepresentation of the Services or unauthorized
or illegal acts.
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11. ASSIGNMENT
Except as set forth in Article 2.8 above, Customer may not assign or
transfer all or any part of its rights or obligations under this Agreement.
The provisions of this Agreement shall inure to the benefit of, and be
binding upon, any affiliate or successor in interest of Teleglobe, whether
by merger, consolidation or transfer of all or substantially all of its
assets or otherwise.
12. NOTICE
12.1 All notices, requests, or other communications hereunder shall be in
writing, addressed to the Parties as follows:
If to Customer: Saratoga Telecom Inc.
2500 East Hallandale Boulevard,
Suite 210
Hallandale, Florida 33009
Attention: Tom Morsey
Facsimile: (954) 455-4226
If to Teleglobe Teleglobe USA Inc.
11480 Commerce Park Drive
Reston, Virginia 20191
Attention: Vice President, US Sales
Facsimile: (703) 755-2620
With a copy to: Teleglobe USA Inc.
11480 Commerce Park Drive
Reston, Virginia 20191
Attention: Vice President,
General Counsel
Facsimile: (703) 755-2694
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12.2 Notices mailed by registered or certified mail shall be conclusively
deemed to have been received by the addressee on the fifth business
day following the mailing or sending thereof. Notices sent by telex or
facsimile shall be conclusively deemed to have been received when the
delivery confirmation is received if followed by first class mail,
postage prepaid, if either Party wishes to alter the address to which
communications to it are sent, it may do so by providing the new
address in writing to the other Party.
13. MISCELLANEOUS
13.1 Any Article or any other provision of this Agreement which is or
becomes illegal, invalid or unenforceable shall be severed herefrom
and shall be ineffective to the extent of such illegality, invalidity
or unenforceability and shall not affect or impair the remaining
provisions hereof, which provisions shall be severed from any illegal,
invalid or unenforceable Article or any other provision of this
Agreement and shall otherwise remain in full force and effect.
13.2 No waiver by either Party to any provisions of this Agreement shall be
binding unless made in writing, any such waiver shall relate only to
such specific matter, non-compliance or breach to which it relates to
and shall not apply to any subsequent matter, non-compliance or
breach.
13.3 The Parties agree that the terms and conditions of Article 8 and
Article 10 shall survive termination or expiration of this Agreement.
13.4 This Agreement shall be governed by the laws of the Commonwealth of
Virginia, without reference to its principles of conflict of laws.
Customer irrevocably consents and submits to exclusive personal
jurisdiction in the courts of the Commonwealth of Virginia for all
matters arising under this Agreement.
13.5 This Agreement may be executed in multiple counterparts, each of which
shall be deemed an original.
13.6 In any action brought by Teleglobe against Customer to enforce any of
the provisions of this Agreement, Teleglobe shall be entitled to
reimbursement from Customer for all collection and enforcement costs,
including without limitation, attorneys' fees.
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13.7 This Agreement, including the following Annexes:
Annex 1 Territory
Annex 2 Services Description
Annex 3 Order Form
represents the entire understanding between the Parties in relation to
the matters herein and supersedes all previous agreements made by
either Party, whether oral or written. This "Agreement may only be
modified by a writing sighed by both Parties.
IN WITNESS WHEREOF, the Parties have executed this Agreement, or caused this
Agreement to be executed by a duly authorized officer, as of the Effective Date.
TELEGLOBE USA INC. SARATOGA TELECOM INC.
By: /s/ John Cahill By: /s/ Thomas S. Morsey
----------------- --------------------
Name: John Cahill Name: Thomas s. Morsey
Title: President Title: President
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ANNEX 1
TERRITORY
UNITED STATES
- - Cost of an operator-assisted call shall be debited at time of call.
- - Rates set forth are quoted based on traffic mix set forth in forecasts
provided by Customer. Notwithstanding Article 1.3, Teleglobe reserves the
right to change rates in event of any significant change in traffic mix,
either prospectively or retroactively, and invoice Customer accordingly.
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ANNEX 2
SERVICES DESCRIPTION
Teleglobe's Services allow Customer's customers to pre-purchase international
telephone services to complete international calls, while in the countries in
which access to the Services is provided (as set forth in Annex 1), by accessing
international toll-free numbers. Teleglobe shall debit the calling card and/or
account number for each call made. All debits to the calling card and/or account
number shall be in full minute increments, rounded up to the nearest minute.
Chargeable calls shall begin on Teleglobe receiving answer supervision.
Teleglobe will provide the following standard features:
- generation of account numbers and calling card processing;
- Customer selection of prepaid values for the calling cards/account
numbers;
- provision of toll-free numbers required to place international calls
and call termination;
- debiting of the calling card/account number for each call made;
- up to ten speed dial numbers per calling card/account number can be
programmed by the end user;
- call reorigination allowing the end-user to make multiple calls
without redialing the toll-free number and calling card/account
number;
- in-language custom prompts;
- in-language live operator assitance; and
- security features include automatic expiration of the calling
card/account number when specified in Section 4.4 of the Agreement and
forced disconnect after two invalid card number attempts.
For an additional charge, Customer may also request in its Order that Teleglobe
(1) manufacture and print the calling cards by selecting form one of Teleglobe's
standard designs, (2) add the Customer's name and logo to the printed calling
cards, (3) record a customized greeting (not to exceed thirty (30) seconds in
duration), or (4) obtain monthly traffic reports by program (SAC). All
customized calling card designs and greetings shall be subject to Teleglobe's
prior review and approval.
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Teleglobe will provide Customer Service support to a person designated by the
Customer during extended business hours between 6:00 a.m. and 12:00 a.m. (EST),
Monday through Friday, for second line trouble ticketing and support for
Customer's invoicing questions. Additionally, Trouble Reporting - facility
traffic, and quality of service faults - is available to the Customer 24
hours-a-day, 7 days-a-week.
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EXHIBIT 10.2
AGREEMENT FOR SALE AND PURCHASE
OF TELECOM BUSINESS ASSETS
BETWEEN: Saratoga Telecom Corp., a Nevada Corporation
8756 - 122nd Avenue NE
Kirkland, WA 98033
("Buyer")
AND: Internet Interview Inc., a Florida Corporation
20533 Biscayne Blvd. Suite 320
Aventura, FL 33180
("Seller")
RECITALS
A. Seller operates a business known as "Internet Interview Inc." which, among
other business activities, is developing a long distance prepaid calling
technology via the internet to serve certain Central and South American
countries (the "Telecom Business"). Seller owns or has the rights to
software, intellectual property rights, programs, contracts and other
tangible and intangible assets used in connection with the operation of the
Telecom Business.
B. Buyer is a wholly-owned subsidiary of Saratoga International Holdings Corp.
("SHCC") engaged in the acquisition of businesses for its future operations
including those specializing in e-commerce sales of products and services
and desires to purchase substantially all the assets used or useful, or
intended to be used, in the operation of Seller's Telecom Business.
NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth herein, the parties hereto do hereby agree as follows:
AGREEMENT
1. Effective Date The effective date of this Agreement shall be June 15, 1999,
or the date on which the last party executes an original or counterpart
copy of this Agreement, whichever is later ("Effective Date").
2. Purchase and Sale At the Closing, as defined in Section 12 herein, Seller
shall sell to Buyer and Buyer shall purchase from Seller the assets listed
in the attached Exhibit "2.0" (the "Telecom Assets"), which is incorporated
herein by this reference. The sale, transfer, assignment and delivery by
Seller of the Telecom Assets to Buyer shall be effected on the Closing
Date, as defined in said Section 12, by Seller's execution and delivery of
documents and instruments necessary to sell, transfer, assign and deliver
the Telecom Assets. At Closing, good, valid and marketable title to the
Telecom Assets shall be transferred, assigned and delivered by Seller to
Buyer free and clear of any and all liens, encumbrances, security
interests, claims and other restrictions or charges of any kind whatsoever.
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3. Purchase Price for the Telecom Assets/Payment of Purchase Price. The
purchase price for the Telecom Assets shall be common stock purchase
warrants to purchase up to 1,000,000 shares of Buyer's parent company,
SHCC's common stock. The purchase price shall be paid as follows:
a) On and effective on the Closing Date, or as soon as practicable,
thereafter SHCC shall issue to Seller or its assigns, warrants for
Seller or its assigns to acquire up to 1,000,000 shares of Buyer's
parent company, SHCC's common stock at $0.10 per share with terms and
conditions as set forth in the attached Exhibit "3(a)" which is
incorporated by this reference.
4. Personal Service Agreements
4.1 Employment Agreement The parties acknowledge that the willingness of
Buyer to enter into this Agreement is contingent upon the ability of
Buyer, as more particularly described in Section 13 herein, to retain
the services of Seller's Officer, Thomas S. Morsey ("Morsey") for a
minimum of thirty-six (36) months after the Closing Date. Base salary
under the Employment Agreement shall be $5,000.00 per month payable on
the first business day of each month covered by the Employment
Agreement. The Employment Agreement shall include a provision, whereby
Morsey shall be granted an option to purchase up to 250,000 shares of
SHCC's common stock at $0.10 per share under SHCC's Stock Incentive
Plan. The parties hereto agree to negotiate other terms and conditions
of the Employment Agreement and stock options to be included therein
and to execute such Employment Agreement on or before the Closing
Date, which will become part of this Agreement as Exhibit "4.1".
4.2 Consulting Agreement This Agreement is further contingent on Buyer and
AJAY Enterprises Inc. ("AJAY") executing a Consulting Agreement on or
before the Closing Date, which will become part of this Agreement as
Exhibit "4.2".
5. Board of Directors Upon closing, Seller shall be entitled to appoint one
member to SHCC's Board of Directors to serve as a Director until the next
annual meeting of the shareholders of SHCC or until his or her successor
shall have been duly qualified and elected.
6. This section is left blank intentionally.
7. Due Diligence Review Buyer and Seller shall permit their respective
employees, agents, accountants, legal counsel and other representatives to
have access to each others books, records, employees, counsel, accountants,
engineers and other representatives at all reasonable times for the purpose
of conducting their respective due diligence investigation. Each party will
make available to the other for examination and reproduction all documents
and data of every kind and character relating to this Agreement and the
transactions contemplated hereby, in possession or control of, or subject
to reasonable access by either party. All such due diligence investigation
shall be completed and each party shall notify the other in writing of the
satisfaction or removal of this due diligence review condition within six
(6) days of the Effective Date. Upon mutual agreement of the parties,
additional time may be allowed to complete such due diligence
investigation. Should a party ("Reviewing Party") become aware of any
information during its due diligence investigation which, in the opinion of
the Reviewing Party, could have material adverse impact on this Agreement
and/or the transactions contemplated hereby, the Reviewing Party shall
immediately notify the other party ("Receiving Party") in writing of such
information and the concerns which such information has caused. The
Receiving Party shall have a reasonable time to respond to those concerns.
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In the event that the concerns cannot be resolved to the satisfaction of
the Reviewing Party, the Reviewing Party shall have the right to terminate
this Agreement without further liability hereunder. Each party shall bear
the costs and expenses of its own due diligence investigation hereunder,
including the fees and expenses of professional advisors. Either party may
terminate this Agreement during the due diligence review period described
herein without any liability to the other party for damages, expenses or
failure to execute the Agreement.
8. Conduct of Business: Interim Operations Upon the Effective Date of this
Agreement provided for in Section 1 herein and pending the Closing and the
transactions contemplated thereby, Seller shall use its best efforts to
conduct its Telecom Business in a reasonable and prudent manner in
accordance with its past practices, to preserve its existing business
organizations and relationships with its employees, customers, suppliers
and others with whom it has a business relationship, to preserve and
protect its properties, and to conduct its business in compliance with
applicable laws and regulations.
8.1 Without the prior written consent of Buyer, Seller shall not:
a) merge into or with or consolidate with, any other corporation;
b) amend its articles of incorporation or bylaws;
c) issue any capital stock or other securities, or grant or enter
into any agreement to grant, any options, convertible rights,
warrants, calls, or agreements relating to its securities;
d) enter into, or terminate, any material agreement;
e) engage in any one or more activities or transactions outside the
ordinary course of business;
f) enter into any transaction or make any commitment which could
result in any of the warranties and representations of Seller
contained in this Agreement not being true and correct after the
occurrence of such transaction or event.
9. Warranties and Representations of Buyer Buyer warrants and represents to
Seller and Selling Shareholders as follows:
a) Buyer is a corporation duly organized under the laws of the State of
Nevada, validly existing and in good standing, is authorized to
exercise all its corporate powers, rights and privileges and has the
corporate power and authority to own and operate its properties and to
carry on its businesses as now conducted.
b) Buyer has all requisite legal and corporate power to execute and
deliver this Agreement, consummate the transactions contemplated
hereby and perform its obligations hereunder.
c) All corporate action on Buyer's part necessary for the authorization,
execution, delivery and performance of all obligations under this
Agreement and for the issuance and delivery of the consideration in
payment for Seller's Assets will be taken, and this Agreement
constitutes a legal, valid and binding obligation of Buyer enforceable
according to its terms.
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d) Neither the execution and delivery of this Agreement nor the carrying
out of any of the transactions contemplated hereby will:
i. violate or conflict with any of the terms and conditions or
provisions of the articles of incorporation or bylaws of Buyer;
ii. violate any legal requirement applicable to Buyer;
iii. violate, conflict with, result in a breach of, constitute a
default under, or accelerate or permit the acceleration of the
performance required by, or give any other party the right to
terminate, any contract or permit applicable to Buyer;
iv. result in the creation of any lien, charge or other encumbrance
on any property of Buyer; or
v. require Buyer to obtain or make any waiver, consent, action,
approval or authorization of, or registration, declaration,
notice or filing with, any private non-governmental third party
or any governmental authority.
e) It has no subsidiaries or affiliated companies and does not otherwise
own or control, directly or indirectly, any other corporation,
association or business entity.
f) No suit, action or other proceeding is pending or, to Buyer's best
knowledge, threatened before any governmental authority seeking to
restrain Buyer or prohibit entry into this Agreement or prohibit the
Closing, or seeking damages against Buyer or its properties as a
result of the consummation of this Agreement.
g) The current authorized capital stock of SHCC consists of Fifty Million
(50,000,000) shares of non-voting preferred stock, $0.001 per share
par value, of which 377,742, 8% redeemable convertible preferred
shares are issued and outstanding, and Two Hundred Million
(200,000,000) shares of common stock, entitled to vote, $0.001 par
value per share, of which 42,232,260 shares are issued and outstanding
as of April 30, 1999. There are no other securities, options,
warrants, or other rights to purchase any securities of SHCC
outstanding except as set forth in the attached Exhibit "9(g)" which
is incorporated herein by this reference. All outstanding securities
of SHCC are duly and validly issued, are fully paid and non-assessable
and were issued in compliance with all applicable federal and state
securities laws.
h) SHCC is a development stage company with little or no operating
history. It's only business activity to date has been to arrange
financing, hire management and other personnel and develop and
implement its business development plan.
i) The management prepared financial statements of SHCC are set forth in
Exhibit "9(i)" attached hereto and incorporated by this reference.
Other than as set forth therein, SHCC and Buyer have no contingent or
other liabilities nor any pending outstanding claims, suits or other
proceedings against them.
The warranties and representations of Buyer and SHCC set forth in hereunder are
exclusive of all other representations of Buyer and SHCC in this Agreement. All
representations and understandings of Buyer and SHCC are merged into this
Agreement and do not survive Closing.
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10. Warranties and Representations of Seller. Seller warrants and represents to
Buyer, as of the date hereof, as follows:
a.) It is a corporation duly organized under the laws of the State of
Florida, validly existing and in good standing, authorized to exercise
all its corporate powers, rights and privilege and has the corporate
power and authority to own and operate its properties and to carry on
its business as now conducted.
b.) Seller warrants and represents to Buyer that Seller has and will have
at Closing, legal and beneficial ownership of Seller's Telecom Assets,
free and clear of any and all liens and encumbrances or other
restrictions or limitations and has, and will have at Closing, all
required legal power and authority to transfer and convey the Telecom
Assets to Buyer.
c.) It has all requisite legal and corporate power to execute and deliver
this Agreement, consummate the transactions contemplated hereby and
perform its obligations hereunder.
d.) All corporate action on its part necessary for the authorization,
execution, delivery and performance of all obligations under this
Agreement will be taken, and this Agreement constitutes a legal, valid
and binding obligation enforceable according to its terms.
e.) There are no claims, actions, suits, investigations or proceedings
against it pending or, to its knowledge , threatened in any court or
before or by any governmental authority, or before any arbitrator,
that might have an adverse effect on it or its business, and to its
knowledge, there is no basis for any such claim, action, suit,
investigation or proceeding that is likely to result in a judgment,
decree or order having an adverse effect on it or its business. It is
not in default under, and no condition exists that would (i)
constitute a default under, or breach or violation of, any legal
requirement, permit or contract applicable to its business or (ii)
accelerate or permit the acceleration of the performance required
under, or give any party the right, to terminate any contract.
f.) No suit, action or other proceeding is pending or, to its knowledge,
threatened before any governmental authority seeking to restrain or
prohibit its entry into this Agreement or prohibit the Closing, or
seeking damages against it as a result of the consummation of this
Agreement.
g.) Neither the execution and delivery of this Agreement nor the carrying
out of any of the transactions contemplated hereby will:
i. violate or conflict with any of the terms and conditions or
provisions of its articles of incorporation or bylaws;
ii. violate any legal requirement applicable to it;
iii. violate, conflict with, result in a breach of, constitute a
default under, or accelerate or permit the acceleration of the
performance required by, or give any other party the right to
terminate, any contract or permit applicable to it ;
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iv. result in the creation of any lien, charge or other encumbrance
on any of its property other than as provided for herein; or
v. require it to obtain or make any waiver, consent, action,
approval or authorization of, or registration, declaration,
notice or filing with, any private non-governmental third party
or any governmental authority.
11. Covenants
11.1 Approval of Directors Prior to the effective date of this Agreement,
Buyer and Seller shall each hold a special meeting of their respective
Boards of Directors to approve the Agreement and the transactions
contemplated thereby.
11.2 Approval of Seller's Shareholders Seller shall (a) cause a special
meeting of its shareholders to be duly called and held in accordance
with the laws of the State of Florida, its Articles of Incorporation
and Bylaws as soon as reasonably practicable for the purpose of voting
on the adoption and approval of this Agreement, (b) recommend to its
shareholders approval of the Agreement, (c) use its best efforts to
obtain the necessary approval of its shareholders, and (d) take all
other action necessary to effect the Closing.
11.3 Third Party Consents Buyer and Seller each agree to use their
respective best efforts to obtain, as soon as reasonably practicable,
all permits, authorizations, consents, waivers and approvals from
third parties or governmental authorities necessary to consummate this
Agreement and the transactions contemplated hereby.
12. Closing Subject to the satisfaction of the conditions set forth in Sections
13 and 14 herein, the closing of the transactions contemplated hereby (the
"Closing") shall be held at Saratoga Telecom Corp. 8756 122nd Ave. NE,
Kirkland, Washington by no later than June 18, 1999, or, if all of the
conditions set forth in Section 13 and Section 14 of this Agreement have
not been satisfied or waived, no later than June 30, 1999. The date upon
which the Closing occurs is hereinafter referred to as the "Closing Date".
If by the close of business on June 30, 1999, Closing has not occurred,
then either party hereto may terminate this Agreement by written notice to
such effect to the other party without liability to any other party to this
Agreement unless the reason for the Closing having not occurred is (i) such
party's willful breach of this Agreement, or (ii) , if all of the
conditions to such party's obligations set forth in Sections 13 and 14
herein have been satisfied or waived in writing by the date scheduled for
the Closing, the failure of such party to perform its obligations under
this Agreement on such date. However, any termination pursuant to this
Section 12 shall not relieve any party hereto who was responsible for
Closing having not occurred of liability for such party's willful breach of
this Agreement or the failure of such party to perform its obligations
under this Section 12 on such date.
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13. Conditions to Obligations of Buyer The obligations of Buyer to carry out
the transactions contemplated by this Agreement are subject, at the option
of the Buyer, to the satisfaction, or waiver by Buyer, of the following
conditions:
a) All warranties and representations of Seller contained in this
Agreement shall be true and correct in all material respects as of the
Closing and Seller shall have performed and satisfied in all material
respects all agreements and covenants required by this Agreement to be
performed or satisfied by it at or prior to the Closing.
b) As of the Closing Date, no suit, action, or other proceeding, shall be
pending or threatened before any court or governmental agency seeking
to restrain Buyer or prohibit the Closing or seeking damages against
Buyer as a result of the consummation of this Agreement.
c) Since the date of this Agreement and up to and including the Closing
there have not been:
i. any changes in the business, operations, prospects or financial
condition of Seller that had or might have a material adverse
effect on Seller's Telecom Business; or ii. any damage,
destruction or loss to Seller that had or might have an adverse
effect on its Telecom Business.
d) Buyer shall have received the opinion of counsel to Seller, dated as
of the Closing Date, addressed to Buyer and in the form and substance
reasonably satisfactory to Buyer, as set forth in Exhibit "13(d)"
attached hereto:
e) Seller shall have furnished Buyer with a copy of all necessary
corporate action on its behalf approving Seller's execution, delivery
and performance of this Agreement.
f) Buyer shall have completed its due diligence investigation and the
results thereof have not revealed that any of the warranties and
representations of Seller set forth herein are untrue or incorrect in
any respect or otherwise unsatisfactory to Buyer or that exceptions,
if any, have been resolved to the satisfaction of Buyer.
g) Buyer shall have received written evidence, in form and substance
satisfactory to it, of the consent to the transactions contemplated by
this Agreement of all governmental and private third parties where the
absence of any such consent would result in a violation of law or
breach or default under any agreement to which Seller is a party.
h) Buyer shall have entered into an Employment Agreement with Morsey, as
described in Section 4.1 herein, to provide management and technical
services to Buyer for a minimum of thirty-six (36) months from the
Closing Date.
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i) Buyer shall have entered into a Consulting Agreement with AJAY, as
described in Section 4.2 herein.
j) Prior to the Closing Date, Buyer shall have secured a commitment for
financing sufficient to fund Seller's initial $50,000 operating budget
requirements as set forth in Exhibit "13(i)" attached hereto.
14. Conditions to Obligations of Seller The obligations of Seller to carry out
the transactions contemplated by this Agreement are subject, at the option
of the Seller, to the satisfaction, or waiver by Seller, of the following
conditions:
a) Buyer shall have furnished Seller with copies of all necessary
corporate action on its behalf approving the execution, delivery and
performance of this Agreement.
b) All warranties and representations of Buyer contained in this
Agreement shall be true and correct in all material respects as of the
Closing and Buyer shall have performed and satisfied in all material
respects all agreements and covenants required by this Agreement to be
performed or satisfied by it at or prior to the Closing.
c) As of the Closing Date, no suit, action, or other proceeding, shall be
pending or threatened before any court or governmental agency seeking
to restrain Seller or prohibit the Closing or seeking damages against
Buyer or Seller as a result of the consummation of this Agreement.
d) Seller shall have completed its respective due diligence
investigations and the results thereof have not revealed that any of
the warranties and representations of Buyer set forth herein are
untrue or incorrect in any respect or otherwise unsatisfactory to
Seller or that exceptions, if any, have been resolved to the
satisfaction of Seller.
15. Survival and Indemnification
a) All representations and warranties of Seller made in this Agreement
shall survive the Closing Date of this Agreement.
b) Seller agrees to indemnify and hold harmless Buyer and SHCC from and
against any and all damages, liabilities, obligations, penalties,
fines, judgments, claims, deficiencies, losses, costs, expenses and
assessments arising out of, resulting from or in any way related to
(i) a breach of, or failure to perform or satisfy any of, the
warranties and representations, covenants and agreements made by
Seller in this Agreement or in any document or certificate delivered
by Seller at the Closing, (ii) the existence of any liabilities or
obligations of Seller.
16. News Releases Prior to Closing neither party shall issue or approve a news
release or other announcement concerning the transactions contemplated by
this Agreement without the prior written consent of the other as to the
contents of the announcement and its release, which approval shall not be
unreasonably withheld.
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17. No Broker To the best of the knowledge and belief of the parties hereto
there are no agents, brokers, finders or other persons or entities
representing either party for which acquisition fees are payable in
connection with this transaction.
18. Expenses Each party shall bear the costs and expenses of its own fees and
expenses of professional advisors and other costs relating to this
Agreement.
19. Entire Agreement This Agreement, together with all exhibits attached
hereto, constitutes the entire agreement between the parties with respect
to the subject matter hereof and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written, by
any of the parties or by any officer or representative of any party. No
amendment or modification of this Agreement shall be binding unless
executed in writing by the party to be bound thereby.
20. Binding Effect This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns;
but neither this Agreement nor any of the rights, benefits or obligations
hereunder shall be assigned, by operation of law or otherwise, by either
party hereto without the prior written consent of the other party, which
approval shall not be unreasonably withheld.
21. Survival of Warranties and Representations All warranties and
representations, covenants and agreements by Seller shall expressly survive
the Closing.
22. Governing Law This Agreement and the documents and instruments delivered
pursuant hereto shall be governed by and construed in accordance with the
laws of the State of Nevada. Each party hereto irrevocably submits to the
jurisdiction of the court of the State of Nevada, in any action or
proceeding arising out of or relating to this Agreement. Each party hereto
consents to service of process by any means authorized by applicable law
and waives the defense of an inconvenient form to the maintenance of such
action or proceeding in any such court.
23. Severability The provisions of this Agreement are severable. If any one or
more provisions may be determined to be illegal or otherwise unenforceable,
in whole or in part, the remaining provisions, to the extent enforceable,
shall nevertheless be binding and enforceable.
24. Non-Waiver Failure by any party at any time to require performance of the
other party of the provisions of this Agreement shall in no way affect any
party's rights hereunder to enforce the same, nor shall any such waiver by
either party of any breach be held to be a waiver of any succeeding breach
or waiver of this clause.
25. Remedies The rights and remedies provided by this Agreement are cumulative
and the use of any one right or remedy by any party hereto shall not
preclude or constitute a waiver of its rights to use any or all other
remedies. Such rights and remedies are given in addition to any other
rights and remedies a party may have by law, statute or otherwise.
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26. Attorneys' Fees In the event the services of an attorney at law are
necessary to enforce any of the terms of this Agreement or to resolve any
disputes arising under this Agreement, the prevailing party shall be
entitled to recover its attorney's fees as determined by the appropriate
trial or appellate court.
27. Counterparts and Facsimile Signature This Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same instrument.
Execution and delivery of this agreement by exchange of facsimile copies
bearing the facsimile signature of a party hereto shall constitute a valid
and binding execution and delivery of this Agreement by such part. Such
facsimile copies shall constitute enforceable original documents.
IN WITNESS WHEREOF, the parties have executed this Agreement on the dates
indicated below.
Buyer: Seller:
Saratoga Telecom Corp. Internet Interview Inc..
By: /s/ Patrick F. Charles By: /s/ Norman Reisch
---------------------- --------------------
Patrick F. Charles, President & CEO
Dated: 6/16/99 Dated: 6/16/99
Buyer's Parent Company: Selling Shareholder:
As to provisions of this
Agreement involving Saratoga /s/ Thomas S. Morsey
International Holdings Corp.
("SHCC") Dated: 6/16/99
By: /s/ Patrick F. Charles
-----------------------------
Patrick F. Charles, President & CEO
Dated: 6/16/99
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Exhibit "3(f)"
WARRANT PROVISIONS
In accordance with Section 3(c), Buyer shall issue to Seller or its assigns,
Common Stock Purchase Warrants to purchase up to 1,000,000 shares of Buyer's
parent company, SHCC's common stock on the following terms and conditions:
1. The Warrants are to be issued to the following individuals:
* Norman Reisch 500,000 Warrants
* Tom Morsey 500,000 Warrants
2. The exercise price shall be $0.10 per share;
3. The Warrants may be exercisable, in whole or in part, at any time following
Closing; in minimum blocks of 100,000 shares each.
4. The Shares of Common Stock issuable upon the exercise of the Warrants shall
be subject to restrictions on transferability under the Securities Act of
1933 and applicable state securities laws;
5. SHCC shall file an appropriate registration statement under the Securities
Act of 1933 covering the shares of common stock issuable upon the exercise
of the warrants and have such registration state declared effective within
one year from the date of exercise of the Warrants.
6. Term of warrant is 5 years from date of closing.
At Closing or as soon as practicable thereafter, SHCC will deliver warrant
documents necessary to fulfill this provision (Section 3f) of the Agreement.
EXHIBIT "9(g)"
Except as provided for in the Agreement, SHCC granted options to purchase SHCC's
stock to P. Rost & Associates in conjunction with a corporate public relations
service contract between SHCC and P. Rost & Associates a copy of which will be
made available to Seller on or prior to the Closing Date.
SHCC also granted options to two of its outside Directors to purchase SHCC's
stock under SHCC's stock incentive plan.
EXHIBIT "9(i)"
(SHCC's financial statements to be provided by SHCC)
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EXHIBIT "13(d)"
OPINION OF SELLER'S COUNSEL
, 1999
Patrick F. Charles, President and CEO
Saratoga Telecom Corp.
8756 - 122nd Avenue NE
Kirkland, WA 98033
Dear Mr. Charles:
We have acted as counsel to Internet Interview Inc. (the "Company"), in
connection with that certain Agreement for Sale and Purchase of Telecom Business
Assets, dated ______________, 1999 (the "Agreement"), between the Company and
Saratoga Telecom Corp. ("Buyer"), providing for the sale of all of the Company's
telecom business assets.
This opinion is being rendered pursuant to Section 13(d) of the Agreement.
Unless otherwise defined herein, the definitions of capitalized terms used in
this opinion shall be the same as those set forth in the Agreement.
In arriving at this opinion, we have examined originals or copies, certified to
our satisfaction, of the following:
1. The Agreement;
2. The Articles of Incorporation and by-laws of the Company;
3. The corporate records of the Company;
4. Such other records, documents and papers as we deemed necessary to examine
for purposes of this opinion.
Based on the above, and subject to the qualifications set forth below, it is our
opinion that:
1. The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Florida and has full power to carry
on its business as it is now being conducted and is duly qualified to do
business and is in good standing as a foreign corporation in all other
states where the nature of such Company's business or the location of such
Company's assets make such qualification necessary and where the failure to
so qualify would have a material adverse effect on such Company or its
assets.
2. The Company has full corporate power and authority to enter into the
Agreement, and perform its obligations thereunder, and the execution,
delivery and performance of the Agreement by the Company have been duly and
validly authorized by all requisite corporate action and the Agreement has
been duly executed and delivered by the Company.
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3. The Agreement is valid and binding upon the Company and is enforceable
against the Company in accordance with its terms except as limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights in general. The enforceability of the obligations of the
Company under the Agreement is, with respect to the availability of
equitable remedies, also subject to general principles of equity and the
discretion of the court having jurisdiction thereof.
4. Neither the execution nor delivery of the Agreement by the Company nor the
consummation of the transactions contemplated thereby will constitute a
default or an event which would with notice or lapse of time or both
constitute a default under or violation or breach of (i) the Company's
Articles of Incorporation or Bylaws, or (ii) to the best of our knowledge,
any material indenture, license, lease, agreement or other instrument or
any writ, judgment, or decree to which any Company is a party or by which
any Company or its properties may be bound nor would such execution,
delivery or consummation constitute an event which would permit any party
to any agreement or instrument to terminate it or to accelerate the
maturity of any indebtedness or obligation of any Company or an event that
would result in the creation or imposition of any lien or encumbrance on
any asset of any Company.
5. No action of or filing with any governmental or public body or authority is
required to authorize or is otherwise required for the validity of
execution, delivery and performance by the Company of the Agreement.
6. We do not know of or have reason to believe that the Company is a party to
any pending suit, action, investigation or inquiry by any governmental
body, or arbitration proceedings or any material labor dispute relating to
or affecting any Company, its assets or its business.
7. No fact or circumstance has come to our attention which gives us cause to
believe that any representation or warranty by any Company set forth in the
Agreement is untrue in any material respect.
8. To the best of our knowledge, there is no governmental permit, license,
certificate of inspection, authorization, filing or registration which is
material to the Company's business and which has not been secured or made.
None of the transactions contemplated by the Agreement will terminate or
violate, either by virtue of the terms thereof or because of the
non-assignability thereof, any governmental permit, license, certificate of
inspection, other authorization, filing or registration necessary to the
conduct of the Company's business.
We have assumed that documents we have reviewed in connection with this opinion
which purport to have been executed by parties other than the Company have been
duly executed by such parties and that such parties had all requisite power to
enter into and perform all obligations thereunder, that execution and delivery
thereof has been duly authorized by all requisite action and that the subject
instruments are valid and binding upon said parties.
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We have assumed the authenticity of all documents submitted to us as originals,
and the conformity to originals of all documents submitted to us as copies.
EXHIBIT "4.1"
Employment Agreement
DATE: June 16, 1999
PARTIES: Saratoga Telecom, Corp, a wholly-owned subsidiar (the "Company")
of Saratoga International Holdings Corp.
8756 - 122nd Avenue NE
Kirkland, WA 98033
Tom Morsey ("Employee")
RECITAL
The Company desires to employ and retain the unique experience, abilities,
and services of Employee to perform certain duties pursuant to the terms and
conditions described herein.
AGREEMENT
The parties agree as follows:
1. EMPLOYMENT
1.1 Term. The Company agrees to employ Employee as President - Chief
Operating Officer for a term commencing on June 16, 1999 and
continuing until terminated in accordance with Section 5 herein.
Employee acknowledges that his initial hire date is June 16,
1999.
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<PAGE>
1.2 Duties. Employee accepts employment with the Company on the terms
and conditions set forth in this Agreement, and agrees to devote
his full time and attention (reasonable periods of illness
excepted) to the performance of his duties as President - Chief
Operating Officer under this Agreement. Employee shall perform
his duties and shall exercise such specific authority as may be
assigned to Employee from time to time. In performing such
duties, Employee shall be subject to the direction and control of
the Board of Directors of the Company. Employee further agrees
that in all aspects of such employment, Employee shall comply
with the policies, standards, and regulations of the Company
established from time to time, and shall perform his duties
faithfully, intelligently, to the best of his ability, and in the
best interest of the Company. The devotion of reasonable periods
of time by Employee for personal purposes, outside business
activities, or charitable activities shall not be deemed a breach
of this Agreement, provided that such purposes or activities do
not materially interfere with the services required to be
rendered to or on behalf of the Company.
2. COMPENSATION
2.1 Compensation. The compensation to be paid Employee for services
rendered under this Agreement shall be as set forth in schedule A
attached hereto.
2.2 Other Benefits. Base compensation and any bonus compensation paid
to Employee shall be in addition to any contribution made by the
Company for the benefit of Employee to any qualified retirement
plan which may be established by the Company for the exclusive
benefit of its employees. The Company shall provide to Employee
and Employee's family the same benefits that the Company may
provide to other similarly employed personnel and their families,
subject to Employee's satisfaction of the respective eligibility
conditions for such benefits.
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<PAGE>
3. CONFIDENTIALITY
3.1 Confidentiality. Employee acknowledges and agrees that all
planning information, lists of the Company's clients, financial
information, and other Company data related to its business
("Confidential Information") are valuable assets of the Company.
Except for information that is a matter of public record,
Employee shall not, during the term of this Agreement or after
the termination of employment with the Company, disclose any
Confidential Information to any person or use any Confidential
Information for the benefit of Employee or any other person,
except with the prior written consent of the Company.
3.2 Return of Documents. Employee acknowledges and agrees that all
originals and copies of records, reports, documents, lists,
plans, drawings, memoranda, notes, and other documentation
related to the business of the Company or containing any
Confidential Information shall be the sole and exclusive property
of the Company, and shall be returned to the Company upon the
termination of employment with the Company or upon the written
request of the Company.
3.3 Injunction. Employee agrees that it would be difficult to measure
damage to the Company from any breach by Employee of Section 3.1
or 3.2 and that monetary damages would be an inadequate remedy
for any such breach. Accordingly, Employee agrees that if
Employee shall breach or take steps preliminary to breaching
Section 3.1 or 3.2, the Company shall be entitled, in addition to
all other remedies it may have at law or in equity, to an
injunction or other appropriate orders to restrain any such
breach, without showing or proving any actual damage sustained by
the Company.
3.4 No Release. Employee agrees that the termination of employment
with the Company or the expiration of the term of this Agreement
shall not release Employee from any obligations under Section
3.1, 3.2 or 3.3.
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<PAGE>
4. EXPENSES
Employee shall be entitled to reimbursement from the Company for
reasonable expenses necessarily incurred by Employee in the
performance of Employee's duties under this Agreement, upon
presentation of vouchers indicating in detail the amount and business
purpose of each such expense and upon compliance with the Company's
reimbursement policies established from time to time.
5. TERMINATION
5.1 Term of Agreement. The term of this Agreement shall be for three
years beginning with the initial hire date set forth in Section
1.1 to this Agreement unless terminated in accordance with the
provisions set forth herein. This Agreement may be terminated at
any time upon the mutual written agreement of the Company and
Employee.
5.2 Immediate Termination. The employment of Employee by the Company
may be terminated immediately in the sole discretion of the
Company upon the occurrence of any one of the following events:
5.2.1Employee willfully and continuously fails or refuses to
comply with the policies, standards, and regulations of the
Company established from time to time;
5.2.2Employee engages in fraud, dishonesty, or any other act of
misconduct in the performance of Employee's duties on behalf
of the Company;
5.2.3Employee fails to perform any provision of this Agreement
to be performed by Employee;
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<PAGE>
5.2.4All or substantially all the assets of the Company are
sold, transferred, or otherwise disposed of, the Company's
assets are distributed to its shareholders in liquidation,
or the Company's business is discontinued; or
5.2.5Employee suffers a permanent disability. For purposes of
this Agreement. "permanent disability" shall be defined as
Employee's inability, due to illness, accident, or other
cause, to perform the majority of Employee's usual duties
for a period of ninety (90) days or more despite reasonable
accommodation by the Company.
5.3 Proration of Base Compensation. Upon the termination of
employment, the base compensation payable to Employee pursuant to
Section 3.1 shall be prorated to the date of such termination. In
addition, Employee shall receive any previously earned but unpaid
bonus compensation.
6. REPRESENTATIONS AND WARRANTIES OF EMPLOYEE
Employee represents and warrants to the Company that there is no employment
contract or any other contractual obligation to which Employee is subject which
prevents Employee from entering into this Agreement or from performing fully
Employee's duties under this Agreement.
7. COVENANT NOT TO COMPETE
For a period of five (5) years from the initial hire date set forth in
Section 1.1 of this Agreement and including and during the term of his
employment under this Agreement, Employee shall not, directly or indirectly, as
proprietor, partner, limited partner, member of a limited liability company,
shareholder, officer, director, employee, agent or representative, engage in a
Competitive Business Activity. "Competitive Business Activity" shall mean the
Page E-103
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<PAGE>
usual and customary products and services provided by the Company. In addition,
during the five year term set forth in this Section 7, Employee shall not,
directly or indirectly, hire the employees of the Company to engage in a
Competitive Business Activity nor shall Employee solicit any employees or
customers to leave the Company.
The parties hereto acknowledge that consideration for Employee to enter
into this covenant not to compete is included in this Agreement.
8. MISCELLANEOUS PROVISIONS
8.1 The waiver by either the Company or Employee of a breach of any
provision of this Agreement will not operate by either the
Company or Employee as a waiver of any subsequent breach by
either the Company or Employee.
8.2 This Agreement shall be binding upon and shall inure to the
benefit of both the Company and Employee and their respective
successors, heirs, and legal representatives; however, neither
this Agreement nor any rights hereunder may be assigned by either
the company or Employee without the written consent of the other
party.
8.3 No amendment or variation of the terms and conditions of this
Agreement shall be valid unless it is in writing and signed by
the Company and Employee.
8.4 In the event suit or action is instituted to enforce any of the
terms of this Agreement, the prevailing party shall be entitled
to recover from the other party such sum as the Court may adjudge
reasonable as attorney's fees at trial or on appeal, in addition
to all other sums provided by law.
IN WITNESS WHEREOF, this Agreement is executed on the day and year first
above written.
"Company" Saratoga Telecom Corp.
By: /s/ Patrick F. Charles
---------------------------
Patrick F Charles, President & CEO
"Employee" /s/ Thomas S. Morsey
--------------------
Tom Morsey
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<PAGE>
SCHEDULE A
TO
Employment Agreement Between
Saratoga Telecom Corp. and Tom Morsey
Compensation
Base Salary
Base salary $5,000 per month payable on the first day of each month
throughout the term of this agreement.
Performance Incentive Bonus
A performance incentive bonus to be determined by the Board of Directors.
Employee Stock Options
Employee shall be entitled to receive options of up to 250,000 shares of
the parent company, Saratoga International Holdings Corp. ("SIHC") exercisable
at $0.10 per share subject to the terms and conditions set forth in SIHC's Stock
Incentive Plan.
Automobile Allowance
Employee shall be entitled to receive an allowance for business use of
Employee's vehicle of $500.00 per month payable the first day of each month
throughout the term of this agreement. Employee shall be responsible for all
expenses relating to Employee's vehicle and for maintaining proper records for
income tax reporting purposes. Employee shall secure an endorsement from
Employee's insurance carrier naming the Company as additional beneficiary with
comprehensive liability coverage of not less than $500,000 per occurrence.
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Exhibit 4.2
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is made and entered into this
day of June, 1999, by and between AJAY Enterprises Inc., (the "Consultant"),
whose principal place of business is 20533 Biscayne Blvd. Suite #320, Avenutra
FL 33180 and Saratoga Telecom Corp. (the "Company"), whose principal place of
business is at 8756 - 122nd Avenue NE, Kirkland, WA 98033.
WHEREAS, the Consultant is in the business of providing management
consulting and advisory services; and
WHEREAS, the Company deems it to be in its best interest to retain the
Consultant to render to the Company management consulting and advisory services,
and
WHEREAS, the Consultant is ready, willing and able to render such
consulting and advisory services to the Company as hereinafter described on the
terms and conditions more fully set forth below.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth in this Agreement, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows.
1. Consulting Services. The Company hereby retains the Consultant as an
independent consultant to the Company and the Consultant hereby accepts and
agrees to such retention. The Consultant shall render to the Company such
services as set forth on Exhibit A, attached hereto and by reference
incorporated herein.
It is acknowledged and agreed by the Company that the Consultant carries no
professional licenses, other than any that may be listed on Exhibit A, and
is not rendering legal advice or performing accounting services, nor acting
as an investment advisor or broker-dealer within the meaning of applicable
state and federal securities laws. It is further acknowledged and agreed by
the Company that the consulting advisory services to be provided to the
Company hereunder shall not be rendered in connection with the offer and
sale of Securities in a capital raising transaction.
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<PAGE>
2. Independent Contractor. The Consultant agrees to perform its consulting
duties hereto as an independent contractor. Nothing contained herein shall
be considered to create the relationship of employer-employee between the
parties to this Agreement. The Company shall not be liable to third parties
for the acts of the Consultant or its servants or agents, in performing the
consulting duties hereunder, except in the case of damages or injuries
caused directly by the Company's agents or employees, or if the Consultant
shall have been acting on behalf of the Company. The Company shall not make
social security, workers' compensation or unemployment insurance payments
on behalf of the Consultant. The parties hereto acknowledge and agree that
the Consultant cannot guarantee the results or effectiveness of any of the
services rendered or to be rendered by the Consultant hereunder. Rather,
the Consultant shall use its best efforts to conduct its services and
affairs in a professional manner and in accordance with good industry
practice.
3. Time, Place and Manner of Performance. The Consultant shall be available
for advice and counsel to the officers and directors of the Company at such
reasonable and convenient times and places as may be mutually agreed upon.
Except as aforesaid, the time, place and manner of performance of the
services hereunder, including the amount of time to be allocated by the
Consultant to any specific service, shall be determined in the sole
discretion of the Consultant.
4. Term of Agreement. The term of this Agreement shall be as set forth in
Exhibit B.
5. Compensation. In full consideration of the services to be provided for the
Company by the Consultant, as fully set forth in Exhibit A, upon execution
of this Agreement, the Company agrees to compensate the Consultant in the
manner set forth on Exhibit B.
6. Expenses. The Company shall reimburse the Consultant for all pre-approved
expenses and disbursements incurred by the Consultant on behalf of the
Company in connection with the performance of the consulting services
pursuant to this Agreement. The Consultant shall be solely responsible for
all other expenses and disbursements anticipated to be made in connection
with its performance under this Agreement.
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7. Termination.
(a) This Agreement shall terminate upon the Company's dissolution,
bankruptcy, insolvency, inability to meet its current financial
obligations or refusal to reimburse the Consultant for expenses
incurred for the account of the Company.
(b) Without excusing the Company's obligations under Section 5 herein
above, which shall continue to be effective, the Consultant shall have
the right and discretion to immediately terminate this Agreement
should the Company violate any law, ordinance, permit or regulation of
any governmental entity, or should the Company in any way misrepresent
or omit to disclose any relevant fact on the financial and legal
condition of the Company that would impair the Consultant's ability to
perform hereunder.
8. Work Product. It is agreed that all information and materials produced for
the Company shall be the property of the Consultant, free and clear of all
claims thereto by the Company, and the Company shall retain no claim of
authorship therein.
9. Confidentiality. The Consultant recognizes and acknowledges that it has and
will have access to certain confidential information of the Company and its
affiliates that are valuable, special and unique assets and property of the
Company and such affiliates. The Consultant will not, during or after the
term of this Agreement, disclose, without the prior written consent or
authorization of the Company, any of such information to any person, except
to authorized representatives of the Consultant or its affiliates, for any
reason or purpose whatsoever. In this regard, the Company agrees that such
authorization or consent to disclose may be conditioned upon the disclosure
being made pursuant to a secrecy agreement, protective order, provision of
statute, rule, regulation or procedure under which the confidentiality of
the information is maintained in the hands of the person to whom the
information is to be disclosed or in compliance with the terms of a
judicial order or administrative process.
10. Conflict of Interest. The Consultant shall be free to perform services for
other persons. The Consultant will notify the Company of its performance of
the Consultant services for any other person which could conflict with its
obligations under the Agreement. Upon receiving such notice, the Company
may terminate this Agreement or consent to the Consultant's outside
consulting activities; failure to terminate this Agreement, within seven
(7) days of receipt of written notice of conflict, shall constitute the
Company's ongoing consent to the Consultant's outside consulting services.
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11. Disclaimer of Responsibility for Acts of the Company. The obligations of
the Consultant described in this Agreement consist solely of the furnishing
of information and advice to the Company in the form of services. In no
event shall the Consultant be required by this Agreement to represent or
make management decisions for the Company. All final decisions with respect
to acts and omissions of the Company or any affiliates and subsidiaries,
shall be those of the Company or such affiliates and subsidiaries, and the
Consultant shall under no circumstances be liable for any expense incurred
or loss suffered by the Company as a consequence of such acts or omissions.
12. Indemnity by the Company. The Company shall protect, defend, indemnify and
hold the Consultant and its assigns and attorneys, accountants, employees,
officer and directors harmless from and against all losses, liabilities,
damages, judgments, claims, counterclaims, demands, actions, proceedings,
costs and expenses (including reasonable attorneys' fees) of every kind and
character resulting from or relating to or arising out of (a) the
inaccuracy, non-fulfillment or breach of any representation, warranty,
covenant or agreement made by the Company herein; or (b) any legal action,
including any counterclaim, to the extent it is based upon alleged facts
that, if true, would constitute a breach of any representation, warranty,
covenant or agreement made by the Company herein; or (c) negligent actions
or omissions of the Company or any employee or agent of the Company, or any
reckless or willful misconduct, occurring during the term hereof with
respect to any of the decisions made by the Company.
13. Notices. Any notices required or permitted to be given under this Agreement
shall be sufficient if in writing and delivered or sent by registered or
certified mail to the principal office of each party.
14. Waiver of Breach. Any waiver by either party of a breach of any provision
of this Agreement by the other party shall not operate or be construed as a
waiver of any subsequent breach by any party.
15. Assignment. This Agreement and the rights and obligations of the Consultant
hereunder shall not be assignable without the written consent of the
Company.
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16. Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Nevada. The negotiation,
execution, delivery, consummation hereof, and the performance of and
consideration for this Agreement shall be deemed to have taken place in Las
Vegas, Nevada, Any suit, dispute, litigation, action, claim, and/or
proceeding in connection herewith, the subject matter hereof or between the
parties hereto, will be brought, prosecuted and resolved solely and
exclusively in the courts of the State of Nevada, Las Vegas. Each party
hereto hereby consents to the personal jurisdiction of the State of Nevada
for all actions, disputes, litigation, claims, suits, and/or proceedings
arising out of this Agreement or the subject matter hereof, whether based
on tort, contract, warranty, misrepresentation, fraud, or otherwise, in any
way related hereto or arising herefrom including, but not limited to, the
termination hereof.
17. Severability. All agreements and covenants contained herein are severable,
and in the event any of them shall be held to be invalid by any competent
court, the Agreement shall be interpreted as if such invalid agreements or
covenants were not contained herein.
18. Entire Agreement. This Agreement constitutes and embodies the entire
understanding and agreement of the parties and supersedes and replaces all
prior understandings, agreements and negotiations between the parties.
19. Waiver and Modification. Any waiver, alteration modification of any of the
provisions of this Agreement shall be valid only if made in writing and
signed by the parties hereto. Each party hereto, from time to time, may
waive any of its rights hereunder without effecting a waiver with respect
to any subsequent occurrences or transactions hereof.
20. Attorneys' Fees and Costs. In the event of any dispute arising out of the
subject matter of this Agreement, the prevailing party shall recover, in
addition to any damages assessed, its attorneys' fees and court costs
incurred in litigating or otherwise settling or resolving such dispute. In
construing this Agreement, none of the parties hereto shall have any term
or provision construed against such party solely by reason of such party
having drafted the same.
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21. Liquidated Damages. The Company and the Consultant hereby acknowledge and
agree that any default hereunder by the Company will cause damage to the
Consultant in an amount difficult to ascertain. Accordingly, the Company
agrees that, upon a default of this Agreement by the Company, the
Consultant shall retain all compensation provided for under Section 5 as
liquidated damages, as the Consultant's sole legal and equitable remedy.
22. Counterparts and Facsimile Signatures. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed
an original, but all of which taken together shall constitute one and the
same instrument. Execution and delivery of this Agreement by exchange of
facsimile copies bearing the facsimile signature of a party hereto shall
constitute a valid and binding execution and delivery of this Agreement by
such party. Such facsimile copies shall constitute enforceable original
documents.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this
Agreement as of the day and year first above written.
THE CONSULTANT:
AJAY Enterprises Inc.
By: /s/ Norman Reisch
------------------
THE COMPANY:
Saratoga Telecom Corp.
By: /s/ Patrick F. Charles
----------------------
Patrick F. Charles, President / CEO
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EXHIBIT A
The Consultant agrees to provide the following services to the Company:
The Consultant shall provide services to the Company as an independent
management consultant to assist the Company as mutually agreed upon from time to
time. The Consultant shall make itself available to consult with the Company's
board of directors, officers, employees and representatives and agents of the
Company at reasonable times, concerning matters pertaining to the overall
business and financial operations of the Company, as well as the organization of
the administrative staff of the Company, the fiscal policy of the Company and in
general, concerning any problem of importance concerning the business affairs of
the Company.
The Consultant will not perform any activities that could subject the Consultant
or the Company to any allegation of violations of Federal or applicable state
securities law.
THE Consultant:
AJAY Enterprises Inc.
By: /s/ Norman Reisch
Date: 6/16/99
Saratoga Telecom Corp.
By: /s/ Patrick F. Charles
------------------------
Patrick F. Charles, President / CEO
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EXHIBIT B
The Company agrees to compensate the Consultant as follows:
Fees
For all services rendered by the Consultant under this Agreement, the Company
shall pay the Consultant Five thousand dollars ($5,000) per month for one year
beginning with the Effective Date of this Agreement. Each payment shall be due
and payable at the beginning of the period.
Stock Options
Consultant shall be entitled to receive options of up to 250,000 shares of the
parent company, Saratoga International Holdings Corp. ("SHCC") exercisable at
$0.10 per share subject to the terms and conditions set forth in SHCC's Stock
Incentive Plan.
Terms
This agreement shall expire and terminate the earlier of the occurrence of any
of the following events:
1. The date upon which Internet Interview Inc. sells or otherwise disposes its
internet resume data base
technology.
2. One year from the date of this Agreement.
In any event, this agreement may be extended by mutual agreement of the parties.
THE Company:
Saratoga Telecom Corp.
By: /s/ Patrick F. Charles
----------------------
Patrick F. Charles, President / CEO
Date: 6/16/99
THE CONSULTANT:
AJAY Enterprises Inc.
By: /s/ Norman Reisch
-----------------
EXHIBIT 13(i)
Operating Budget Requirements (to be provided by seller prior to Closing)
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EXHIBIT 10.3
CORPORATE OFFICER EMPLOYMENT AGREEMENT
-----------------------------------------------------------------
THIS EMPLOYMENT AGREEMENT is made between SARATOGA INTERNATIONAL HOLDINGS CORP.
as Employer and PATRICK F. CHARLES, as an officer of SARATOGA INTERNATIONAL
HOLDINGS CORP., effective October 1, 1999. The terms and conditions of this
Agreement are stated below.
I. EMPLOYMENT PROVISION.
1) Employment Positions; Responsibility, Duties and Authority. This
Corporate Officer Employment Agreement is made and entered into
between SARATOGA INTERNATIONAL HOLDINGS CORP. a corporation organized
under the laws of the State of Nevada, hereinafter referred to as
"Corporation" or "Employer" and PATRICK F. CHARLES, President and
Chief Executive Officer of the Corporation, hereinafter referred to as
"Charles" or "Employee" The Corporation and Charles each agree that
the Corporation shall employ Charles as the President and Chief
Executive Officer and Charles shall perform the responsibilities and
duties of, and shall have the full authority of the officer position
of President and Chief Executive Officer of the Corporation for the
term stated in Section II. of this Agreement, unless sooner terminated
pursuant to the provisions of Section VIII. of this Agreement.
2) Responsibilities, Duties and Authority of Charles. Charles shall have
such responsibilities and duties and authority as determined from time
to time by the Board of Directors of the Corporation, as provided in
the corporate bylaws.
II. TERM OF THIS AGREEMENT
This Agreement shall have a term of three (3) years beginning October 1,
1999, and shall end September 30, 2002, unless sooner terminated pursuant
to the provisions of Section VIII. of this Agreement.
III. ALLOCATION OF TIME
Charles shall devote as much time, in his judgement, as necessary to
perform his duties and responsibilities described in Section I(2) of this
Agreement. Charles may engage for his own account, or for the account of
others, in other business ventures for which the Corporation shall not be
entitled to any interest.
IV. COMPENSATION.
1) Basic Salary. As consideration for all services to be rendered by
Charles to the Corporation, Charles shall be paid the following listed
annual salary amounts per year as follows:
First Year -- 10/01/99 - 09/30/00 -- $150,000.00
Second Year -- 10/01/00 - 09/30/01 -- $175,000.00
Third Year -- 10/01/01 - 09/30/02 -- $200,000.00
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2) Regular Annual Bonuses. Each year Charles shall be entitled to an
annual bonus based on cash flow from operations of the Corporation and
its subsidiaries at the end of each fiscal year before deduction of
corporate income taxes as determined by Generally Accepted Accounting
Principles ("GAAP") for the fiscal years ending October 31, 2000,
October 31, 2001 and October 31, 2002 even though the bonus due
October 31, 2002 shall come one month after expiration of this
Agreement. The bonus shall be calculated as follows:
Bonus % Applicable
Pre-Tax Operating To Each Layer or
Cash Flow Portion Thereof
First $250,000 5%
Next $250,000 4%
Next $250,000 3%
Next $250,000 2%
Amounts over $1 million 1%
In the event this Agreement is terminated as provided for in Section
VIII of this Agreement "Termination of Charles' Employment", Charles
shall be entitled to a bonus through the Effective Date of Charles'
Employment Termination as defined in Section VIII (3) of this
Agreement. Such "Termination Bonus" shall be calculated on the same
basis as outlined in Section IV (2) of this Agreement and shall be due
and payable on the Effective Date of Charles' Employment Termination
as set forth in Section VIII (3) of this Agreement.
3) Payments of Salary and Bonuses.
A. Salary. The annual salary provided for in Section IV (1) shall be
due and payable in monthly installments by the Corporation at the
beginning of each month on the first business day of each month,
which shall be established by this Agreement as the regular
payday.
B. Bonus. The annual bonus provided for in Section IV(2) shall be
due and owing as of the last day of the Corporate fiscal year and
shall be payable within forty-five (45) days from the last day of
the corporate fiscal year.
C. Accruals of Unpaid Salary and Bonuses--When Paid.
(1) Salaries. In the event the Corporation's cash position is
insufficient to pay salary and bonuses when due under this
Agreement, any salary payments and bonus payments not paid
by the Corporation when due shall accrue as a corporate debt
payable to Charles, and shall be paid as soon as possible by
the Corporation and in any event, accrued salary shall be
paid to the fullest extent possible whenever a payroll is
disbursed to other employees of the Corporation.
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(2) Bonuses. Any bonus not paid when due shall accrue as a
corporate debt payable to Charles and shall be paid to the
fullest extent possible whenever any bonus is disbursed to
other employees of the Corporation.
(3) Deductions From Compensation. Corporation shall have the
right and responsibility to deduct all federal, state and
local government taxes and other charges as are now in
effect, if any, or which may hereafter be enacted or
required by applicable government laws and regulations, if
any, required as deductions from compensation of Charles as
an employee.
(4) Stock as Payment. Charles may elect in his absolute
discretion, to receive common shares of the Corporation in
payment of salary amounts, in excess of $10,000 each month
and/or for any salary payments and bonus payments not paid
by the Corporation when due and accrued as a corporate debt
payable to Charles as described in Section IV (3) C (1) and
(2) of this Agreement. The value of any shares issued by the
Corporation under this provision of this Agreement shall be
based on the closing bid price of the common shares as
reported on the OTC Bulletin Board on the date the
Corporation receives notice from Charles. In the event the
Corporation issues restricted shares under this provision
such published per share trade price shall be discounted
forty percent (40%).
(5) Past Due unpaid Salary and Bonuses. Charles and the
Corporation agree to negotiate in good faith settlement of
any accrued unpaid salary and bonuses provided for in
Section IV (3) C (1) and (2) of this Agreement. Charles and
the Corporation further agree that any salary and bonus
payments due and unpaid which remain unpaid for a period of
120 days from the date such payment was due, without a
settlement mutually agreeable to the parties, shall
constitute a breach of this Agreement. Remedies available in
the event of Breach of this Agreement are set forth in
Section XIII of this Agreement.
V. EMPLOYMENT BENEFITS IN ADDITION TO COMPENSATION.
1) Participation In Existing Company Benefit Programs.
A. Medical and Health Care Benefit Program. Charles, as an executive
employee shall be entitled to receive and shall receive all
medical and health care benefits provided by Employer to its
executive employees. Such benefits shall be paid for by the
Employer for Charles and for Charles's dependents, if any, on the
terms and provisions provided in the medical and health care
benefit plan; however, if for any reason Charles cannot qualify
for the current medical and health care benefits or if the
Corporation has no such plan, then Charles shall be entitled to
obtain medical and health care benefits coverage from whatever
source is available and the Employer shall pay the premium
charges for that coverage as an executive employee benefit for
Charles.
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B. Life Insurance. The corporation shall provide and pay for life
insurance on the life of Charles in the amount of $1 million. The
beneficiary shall be Charles' estate, unless otherwise directed
by Charles in writing at any time prior to his death.
C. Vacation and Holiday Benefits. Charles shall be entitled to have
a paid vacation for forty-five (45) days each calendar year; plus
all paid holidays observed by the Employer. Charles shall use
reasonable care in scheduling the vacation time so as to not
interfere unreasonably with Employer's business, and Charles'
performance of his responsibilities and duties.
2) Stock Options. The Corporation hereby grants Charles the option to
purchase up to 500,000 common shares of the Corporation's capital
stock at $0.20 per share exercisable at any time and expiring five
years from the effective date of this Agreement. These options shall
not be cancelled in the event this Employment Agreement expires or is
otherwise terminated. This provision shall survive the term of this
Agreement. Except as otherwise provided herein, these stock options
shall be governed by the terms and conditions set forth in the
Corporation's Stock Incentive Plan.
3) Membership in Social and Athletic Club. Charles shall be entitled to
membership in the Washington Athletic Club ("WAC") or other club
comparable to that of the WAC during the term of this Agreement. The
Corporation shall pay all regular dues. Other charges to the account
shall be paid to the extent that such charges relate to athletic
and/or exercise programs designed to maintain or improve the
well-being of Charles and expenses such as business meetings etc.
relating to Charles's performance as an officer of the Corporation.
4) Participation in Other Employment Benefits. Charles shall be entitled
to receive all other benefits and conditions of employment which may
become available to all other executives of the corporation, including
by way of illustration, but not limited to, any life insurance
benefits, any disability income continuation and any profit sharing
and any retirement income plans of any kind, whether qualified or
non-qualified, whether pre-funded or not, if any are established after
the inception date of this Agreement, and before it expires pursuant
to Section II. or sooner terminated pursuant to Section VIII. of this
Agreement
5) Death Benefit. In the event of Charles's death at a time before this
Agreement has expired under Section II., or sooner terminated under
Section VIII. of this Agreement, the Corporation shall pay to
Charles's surviving spouse a death benefit payable as the regular
payday on the same month on the same day established in Section
IV.3.A. in the full amount which would otherwise be paid to Charles as
salary, if Charles were living, for a period of six months beginning
with the first regular payday date after Charles's death.
VI. EXPENSE REIMBURSEMENT AND AUTOMOBILE EXPENSE ALLOWANCE.
1) Expense Reimbursement, Generally. Charles will be reimbursed in
accordance with the Employer's company policies for traveling,
entertainment and any other expenses reasonably incurred and related
to the performance of Charles's duties and responsibilities on behalf
of Employer.
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2) Automobile Allowance Plus Expenses. In addition, Charles shall receive
$750.00 per month for automobile expense allowance for use of his
automobile in business, plus additional reimbursement for insurance,
servicing and operation of his automobile in business. This allowance
shall be reviewed each anniversary date of this Agreement for adequacy
and shall be increased for the following year by the amount Charles's
expenses exceed the allowance, subject to approval by the
Corporation's Board of Directors.
VII. DISABILITY COMPENSATION.
1) If Charles becomes disabled at any time, and for any number of times,
due to any cause so that he is physically unable to perform his
ordinary duties and responsibilities of President and Chief Executive
Officer, pursuant to this Agreement, for a period of thirty (30) days,
then Charles shall be entitled to receive, in lieu of salary, an
amount equal to his salary, payable at the same time and in the same
manner as Charles's salary is paid provided however, that this benefit
shall be limited to not more than a total of six months during the
term of the Agreement, regardless of the number or duration of each
disability.
2) Charles' entitlement to disability income pursuant to this Section
VII. shall begin and end as determined by a certificate issued by a
qualified M.D. or D.O. licensed by the State of Washington to practice
in this state. The certificate shall state in substance that PATRICK
F. CHARLES was determined to be disabled and unable to perform the
ordinary and usual duties of' President and CEO of Saratoga
International Holdings Corp. beginning with [date] - and Charles's
disability continues as of this [date] . Such a certificate shall be
submitted every three (3) months beginning with the date of disability
and continuing thereafter until Charles's disability ends and he is
able to return to work full time or his disability compensation
benefit has been fully used, whichever occurs first.
VIII. TERMINATION OF CHARLES' EMPLOYMENT.
1) Termination By The Corporation. Charles's employment as President and
Chief Executive Officer may be terminated by the Board of Directors of
the Corporation with or without cause, after receipt by Charles of
written notice received at least ninety (90) days in advance of the
employment termination date set by the Board of Directors, PROVIDED
THAT all terms and provisions of Section VIII.2., stated below are
met. Such notice ("Notice") shall be sent pursuant to Section XII.,
below. The termination of Charles's employment shall be effective as
stated in Section VIII.3., below.
2) Terms and Provisions of Termination of Charles's Employment.
Regardless of the reasons or purpose of the termination of Charles's
Employment, the Corporation shall not and may not terminate Charles's
employment as President and Chief Executive Officer unless and until
the Corporation has fully arranged for and commenced performance of
the following:
A. Offer in writing by the Corporation, approved by the Board of
Directors to purchase all shares of stock of the Corporation
directly or beneficially owned by PATRICK F. CHARLES for cash at
least thirty (30) days prior to the proposed termination date of
Charles' employment, at the then existing market price based on
the average published closing trade price for the five (5)
business days prior to the date of Notice referred to in Section
VIII (1) above. Charles may elect in his absolute discretion to
waive this provision, VIII 2.) A., by notifying the Corporation
in writing.
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B. Payment, in cash, by the Corporation of all sums then due and
owing, if any, as compensation, pursuant to Section IV.,
Compensation, and/or Section VII., Disability Compensation, of
this Employment Agreement.
C. Payment, in cash, by the Corporation of all sums then due and
owing, if any, pursuant to Section VI., Reimbursement, of the
Employment Agreement.
D. Payment, in cash, by the Corporation for buyout of Remainder of
the Employment Agreement at the rate of fifty percent (50%) of
the regular salary in effect under Section IV., above, of this
Agreement.
3) Effective Date of Charles's Employment Termination, The effective date
of Charles's employment termination pursuant to Section VIII of this
Agreement shall be the latest of the following dates:
A. The date of Charles's employment termination provided for in the
written notice of his employment termination;
B. The Ninety-first (91st) day after receipt by Charles of the
written notice of his employment termination;
C. The date of fulfillment of all the terms and provisions of Part
VIII. (2)., above, entitled Terms and Provisions of Termination
of Charles's Employment by the Corporation.
IX. PROPERTY RIGHTS
1) Intellectual Property Rights. All rights, title and interest of every
kind and nature whatsoever, in and to any intellectual property,
including any inventions, patents, trademarks, copyrights, films,
scripts, ideas, creations and properties invented, created, written,
developed, furnished, produced or disclosed by Charles in the course
of rendering his services to the Corporation under this Agreement
shall, as between the parties hereto, be and remain the sole and
exclusive property of the Corporation for any and all purposes and
uses whatsoever, and Charles shall have no right, title or interest of
any kind or nature therein or thereto, or in and to any results and
proceeds therefrom.
2) Return of All of the Corporation's Property. Upon termination of this
Agreement, regardless of how termination may be effected or whenever
requested by the Corporation, Charles shall immediately turn over to
the Corporation all of the Corporation's property, including all items
used by Charles in rendering services hereunder or otherwise, that may
be in Charles's possession or under his control.
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X. CONFIDENTIALITY AND NON-DISCLOSURE OF INFORMATION.
1) During Employment. Charles agrees that during the entire term of his
employment as an executive officer by this Corporation, he will not
disclose to any other person, partnership, company or corporation any
confidential information about this Corporation or its related
corporations, or the business activities or interests of this
Corporation or its related corporations, including, but not limited
to, the following which is agreed as between the parties to be
confidential information: customer data, customer lists, sales
figures, sales projections, estimates of any kind, sales proposals,
price lists, accounting procedures, any and all accounting records,
any technology and applications of technology, developed by the
Corporation before or during his employment, EXCEPT such disclosure as
is for the benefit of or the furthering of the intent of the
Corporation, or is expressly disclosed as part of the performance of
his duties and responsibilities as President and Chief Executive
Officer.
2) Surrender of All Confidential Information On Termination of
Employment. Charles agrees at the time his employment with the
Corporation terminates, to turn over to the Corporation any and all
confidential information which may be in his possession, including any
and all copies thereof, except that one copy of such information may
be retained in Charles' confidential legal files for record keeping
purposes only.
3) Following Termination of Employment. Charles agrees that following the
termination of his employment with the Corporation, he will not
disclose any confidential information, as described in Section X.(1.),
above, which he obtained about the Corporation at any time or for any
purpose.
XI. NON-COMPETITION AFTER TERMINATION OF EMPLOYMENT.
1) Non-Competition Period--Duration and Geographic Scope. Charles and the
Corporation recognize and acknowledge that in his employment as
President and Chief Executive Officer, he will become familiar with
all of the Corporation's products and all of the geographic areas
throughout the United States and Canada in which the Corporation
already has made marketing efforts and sales of products and services,
and he will become knowledgeable about present and future marketing
proposals and plans for those products and services in those
geographic areas. Charles agrees, as part of the consideration for
this Employment Agreement that Charles will not engage directly or
indirectly in the business of manufacture or sale of any products or
services which compete with the products or services provided by the
Corporation or its related corporations for a period of two (2) years
within the geographic limits of any state of the United States, or any
province of Canada. The parties agree that the phrase "engage directly
or indirectly in the business of manufacture or sale of any products
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or services which compete with the products or services of the
Corporation or its related Corporations" shall include any situation
or circumstance in which Charles shall be owner, partner, officer,
director or shareholder of a corporation, or agent or employee or
consultant of any business entity engaged or about to become engaged
in competition with the Corporation.
2) Injunctive Relief From Competition By Charles. The parties agree
that if Charles were to violate the provisions of Section XI. 1.,
above, the use by Charles of the information he learned while employed
by the Corporation could enable him to engage in basically unfair
competition with the Corporation and its related corporations, and
that such competition in violation of Section XI.(1.), above, probably
would cause irreparable harm to the marketing and sales success of the
Corporation and its related corporations. Therefore, if Charles
violates Section XI. (1.), above, the Corporation shall be entitled to
obtain a temporary restraining order without delay, and proceed to
obtain a preliminary injunction and permanent injunction against such
violations by Charles and any person, partnership, company or
corporation through which or for which he acts, directly or indirectly
to violate Section XI.(1.), above.
XII. NOTICES.
1) How Sent or Delivered. Any notices sent by any party which is intended
to give written notice required by this Employment Agreement shall be
sent or delivered by sender to the intended recipient by one or more
of the following methods:
A. By certified mail, return receipt requested, postage prepaid, to
the last known address of the intended recipient; or
B. By delivery personally to the intended recipient.
2) Effective Date of Notice. If a written notice is sent or delivered by
either of the above methods, then the effective date of the notice for
purposes of considering it to have been received by the intended
recipient shall be the earliest of the following:
A. If by certified mail, return receipt requested, which is
delivered, then or on the date the recipient, or anyone signing
for the recipient, signed the return receipt;
B. If by certified mail, return receipt requested, which is not
delivered, then on the date five business days after the date the
notice was sent;
C. If by personal delivery to the intended recipient, then on the
date the written notice was delivered personally to the
recipient.
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3) Proof of Delivery of Notice.
A. Certified Mail, Return Receipt Requested. If the written notice
was sent by certified mail, return receipt requested, proof of
sending may be shown by the U.S. Post Office receipt for the
certified mail, return receipt requested and proof of delivery
may be shown by the signed returned receipt and proof of
attempted delivery sufficient for effective date of notice
without delivery may be shown by the returned envelope with U.S.
Post Office notations showing attempted delivery dates and
notices to the intended recipient.
B. Personal Delivery. Personal delivery of a written notice may be
shown by a signature of the intended recipient on a copy of the
notice, together with the legend on the copy of the notice which
will read, "Received," with the date received noted thereafter.
Personal delivery may also be shown by a sworn statement of the
person who delivered the notice, stating that the notice was
delivered to the recipient or representative of recipient on the
date of delivery, and attaching a copy of the notice, with
reference in the sworn statement to the attached copy of the
notice.
XIII. REMEDIES AVAILABLE IN EVENT OF BREACH OF AGREEMENT; VENUE.
In the event that any party breaches this Employment Agreement, the other
party shall have the right to pursue any remedies available to the party
claiming breach, including, but not limited to damages, injunctive relief
and declaratory judgment, which may be available under the laws of the
State of Nevada. The parties agree that any claims shall be brought in the
appropriate court(s) located in Clark County, Nevada, which may have
jurisdiction pursuant to Nevada Law.
XIV. This Employment Agreement shall be construed and interpreted and
enforceable pursuant to the laws of the State of Nevada.
XV. ENTIRE AGREEMENT.
This Employment Agreement states the entire agreement between the parties
with respect to the employment of Charles by the Corporation. This
Agreement cannot be modified by any oral agreement or course of conduct by
either or both parties and any attempt at such modification shall be null
and void. This Agreement may be modified only by a written document signed
by each party.
Effective this 1st day of October 1999.
EXECUTIVE OFFICER:
/s/ Patrick F. Charles
------------------------
Patrick F. Charles
THE CORPORATION:
Saratoga International Holdings Corp.
By /s/ Terrence K. Picken, Exec. V.P.
---------------------------------
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I certify that I know or have satisfactory evidence
that Patrick Charles is the person who appeared before me, and said
person acknowledged that he/she signed this instrument and acknowledged it to be
his/her free and voluntary act for the uses and purposes mentioned in
instrument.
DATED: November 24, 1999
-----------------
/s/ Corinne J. Weber
------------------------------
Corinne J. Weber - Notary Public
My commission expires: 6/16/03
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CORPORATE OFFICER EMPLOYMENT AGREEMENT
-----------------------------------------------------------------
THIS EMPLOYMENT AGREEMENT is made between SARATOGA INTERNATIONAL HOLDINGS CORP.
as Employer and TERRENCE K. PICKEN, as an officer of SARATOGA INTERNATIONAL
HOLDINGS CORP., effective October 1, 1999. The terms and conditions of this
Agreement are stated below.
I. EMPLOYMENT PROVISION.
1) Employment Positions; Responsibility, Duties and Authority. This
Corporate Officer Employment Agreement is made and entered into
between SARATOGA INTERNATIONAL HOLDINGS CORP. a corporation organized
under the laws of the State of Nevada, hereinafter referred to as
"Corporation" or "Employer" and TERRENCE K. PICKEN, Executive
Vice-President and Chief Operating Officer of the Corporation,
hereinafter referred to as "Picken" or "Employee" The Corporation and
Picken each agree that the Corporation shall employ Picken as the
Executive Vice President and Chief Operating Officer and Picken shall
perform the responsibilities and duties of, and shall have the full
authority of the officer position of Executive Vice-President and
Chief Operating Officer of the Corporation for the term stated in
Section II. of this Agreement, unless sooner terminated pursuant to
the provisions of Section VIII. of this Agreement.
2) Responsibilities, Duties and Authority of Picken. Picken shall have
such responsibilities and duties and authority as determined from time
to time by the Board of Directors of the Corporation, as provided in
the corporate bylaws.
II. TERM OF THIS AGREEMENT
This Agreement shall have a term of three (3) years beginning October 1,
1999, and shall end September 30, 2002, unless sooner terminated pursuant
to the provisions of Section VIII. of this Agreement.
III. ALLOCATION OF TIME
Picken shall devote as much time, in his judgement, as necessary to perform
his duties and responsibilities described in Section I(2) of this
Agreement. Picken may engage for his own account, or for the account of
others, in other business ventures for which the Corporation shall not be
entitled to any interest.
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<PAGE>
IV. COMPENSATION.
1) Basic Salary. As consideration for all services to be rendered by
Picken to the Corporation, Picken shall be paid the following listed
annual salary amounts per year as follows:
First Year -- 10/01/99 - 09/30/00 -- $150,000.00
Second Year -- 10/01/00 - 09/30/01 -- $175,000.00
Third Year -- 10/01/01 - 09/30/02 -- $200,000.00
2) Regular Annual Bonuses. Each year Picken shall be entitled to an
annual bonus based on cash flow from operations of the Corporation and
its subsidiaries at the end of each fiscal year before deduction of
corporate income taxes as determined by Generally Accepted Accounting
Principles ("GAAP") for the fiscal years ending October 31, 2000,
October 31, 2001 and October 31, 2002 even though the bonus due
October 31, 2002 shall come one month after expiration of this
Agreement. The bonus shall be calculated as follows:
Bonus % Applicable
Pre-Tax Operating To Each Layer or
Cash Flow Portion Thereof
First $250,000 5%
Next $250,000 4%
Next $250,000 3%
Next $250,000 2%
Amounts over $1 million 1%
In the event this Agreement is terminated as provided for in Section
VIII of this Agreement "Termination of Picken's Employment", Picken
shall be entitled to a bonus through the Effective Date of Picken's
Employment Termination as defined in Section VIII (3) of this
Agreement. Such "Termination Bonus" shall be calculated on the same
basis as outlined in Section IV (2) of this Agreement and shall be due
and payable on the Effective Date of Picken's Employment Termination
as set forth in Section VIII (3) of this Agreement.
3.) Payments of Salary and Bonuses.
A. Salary. The annual salary provided for in Section IV (1) shall be
due and payable in monthly installments by the Corporation at the
beginning of each month on the first business day of each month,
which shall be established by this Agreement as the regular
payday.
B. Bonus. The annual bonus provided for in Section IV(2) shall be
due and owing as of the last day of the Corporate fiscal year and
shall be payable within forty-five (45) days from the last day of
the corporate fiscal year.
C. Accruals of Unpaid Salary and Bonuses--When Paid.
(1.) Salaries. In the event the Corporation's cash position is
insufficient to pay salary and bonuses when due under this
Agreement, any salary payments and bonus payments not paid
by the Corporation when due shall accrue as a corporate debt
payable to Picken, and shall be paid as soon as possible by
the Corporation and in any event, accrued salary shall be
paid to the fullest extent possible whenever a payroll is
disbursed to other employees of the Corporation.
Page E-125
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<PAGE>
(2.) Bonuses. Any bonus not paid when due shall accrue as a
corporate debt payable to Picken and shall be paid to the
fullest extent possible whenever any bonus is disbursed to
other employees of the Corporation.
(3.) Deductions From Compensation. Corporation shall have the
right and responsibility to deduct all federal, state and
local government taxes and other charges as are now in
effect, if any, or which may hereafter be enacted or
required by applicable government laws and regulations, if
any, required as deductions from compensation of Picken as
an employee.
(4.) Stock as Payment. Picken may elect in his absolute
discretion, to receive common shares of the Corporation in
payment of salary amounts, in excess of $10,000 each month
and/or for any salary payments and bonus payments not paid
by the Corporation when due and accrued as a corporate debt
payable to Picken as described in Section IV (3) C (1) and
(2) of this Agreement. The value of any shares issued by the
Corporation under this provision of this Agreement shall be
based on the closing bid price of the common shares as
reported on the OTC Bulletin Board on the date the
Corporation receives notice from Picken. In the event the
Corporation issues restricted shares under this provision,
such published per share trade price shall be discounted
forty percent (40%).
(5.) Past Due unpaid Salary and Bonuses. Picken and the
Corporation agree to negotiate in good faith settlement of
any accrued unpaid salary and bonuses provided for in
Section IV (3) C (1) and (2) of this Agreement. Picken and
the Corporation further agree that any salary and bonus
payments due and unpaid which remain unpaid for a period of
120 days from the date such payment was due, without a
settlement mutually agreeable to the parties, shall
constitute a breach of this Agreement. Remedies available in
the event of Breach of this Agreement are set forth in
Section XIII of this Agreement.
V. EMPLOYMENT BENEFITS IN ADDITION TO COMPENSATION.
1.) Participation In Existing Company Benefit Programs.
A. Medical and Health Care Benefit Program. Picken, as an executive
employee shall be entitled to receive and shall receive all
medical and health care benefits provided by Employer to its
executive employees. Such benefits shall be paid for by the
Employer for Picken and for Picken's dependents, if any, on the
terms and provisions provided in the medical and health care
benefit plan; however, if for any reason Picken cannot qualify
for the current medical and health care benefits or if the
Corporation has no such plan, then Picken shall be entitled to
obtain medical and health care benefits coverage from whatever
source is available and the Employer shall pay the premium
charges for that coverage as an executive employee benefit for
Picken.
B. Life Insurance. The corporation shall provide and pay for life
insurance on the life of Picken in the amount of $500,000. The
beneficiary shall be Picken's estate, unless otherwise directed
by Picken in writing at any time prior to his death.
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<PAGE>
C. Vacation and Holiday Benefits. Picken shall be entitled to have a
paid vacation for forty-five (45) days each calendar year; plus
all paid holidays observed by the Employer. Picken shall use
reasonable care in scheduling the vacation time so as to not
interfere unreasonably with Employer's business, and Picken's
performance of his responsibilities and duties.
2.) Stock Options. The Corporation hereby grants Picken the option to
purchase up to 500,000 common shares of the Corporation's capital
stock at $0.20 per share exercisable at any time and expiring five
years from the effective date of this Agreement. These options shall
not be cancelled in the event this Employment Agreement expires or is
otherwise terminated. This provision shall survive the term of this
Agreement. Except as otherwise provided herein, these stock options
shall be governed by the terms and conditions set forth in the
Corporation's Stock Incentive Plan.
3.) Membership in Social and Athletic Club. Picken shall be entitled to
membership in the Bellevue Club or other club comparable to that of
the Bellevue Club during the term of this Agreement. The Corporation
shall pay all regular dues. Other charges to the account shall be paid
to the extent that such charges relate to athletic and/or exercise
programs designed to maintain or improve the well-being of Picken and
expenses such as business meetings etc. relating to Picken's
performance as an officer of the Corporation.
4.) Participation in Other Employment Benefits. Picken shall be entitled
to receive all other benefits and conditions of employment which may
become available to all other executives of the corporation, including
by way of illustration, but not limited to, any life insurance
benefits, any disability income continuation and any profit sharing
and any retirement income plans of any kind, whether qualified or
non-qualified, whether pre-funded or not, if any are established after
the inception date of this Agreement, and before it expires pursuant
to Section II. or sooner terminated pursuant to Section VIII. of this
Agreement
5.) Death Benefit. In the event of Picken's death at a time before this
Agreement has expired under Section II., or sooner terminated under
Section VIII. of this Agreement, the Corporation shall pay to Picken's
surviving spouse or estate a death benefit payable as the regular
payday on the same month on the same day established in Section
IV.3.A. in the full amount which would otherwise be paid to Picken as
salary, if Picken were living, for a period of six months beginning
with the first regular payday date after Picken's death.
Page E-127
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<PAGE>
VI. EXPENSE REIMBURSEMENT AND AUTOMOBILE EXPENSE ALLOWANCE.
1.) Expense Reimbursement, Generally. Picken will be reimbursed in
accordance with the Employer's company policies for traveling,
entertainment and any other expenses reasonably incurred and related
to the performance of Picken's duties and responsibilities on behalf
of Employer.
2.) Automobile Allowance Plus Expenses. In addition, Picken shall receive
$750.00 per month for automobile expense allowance for use of his
automobile in business, plus additional reimbursement for insurance,
servicing and operation of his automobile in business. This allowance
shall be reviewed each anniversary date of this Agreement for adequacy
and shall be increased for the following year by the amount Picken's
expenses exceed the allowance, subject to approval by the
Corporation's Board of Directors.
VII. DISABILITY COMPENSATION.
1.) If Picken becomes disabled at any time, and for any number of times,
due to any cause so that he is physically unable to perform his
ordinary duties and responsibilities of Executive Vice-President and
Chief Operating Officer, pursuant to this Agreement, for a period of
thirty (30) days, then Picken shall be entitled to receive, in lieu of
salary, an amount equal to his salary, payable at the same time and in
the same manner as Picken's salary is paid provided however, that this
benefit shall be limited to not more than a total of six months during
the term of the Agreement, regardless of the number or duration of
each disability.
2.) Picken's entitlement to disability income pursuant to this Section
VII. shall begin and end as determined by a certificate issued by a
qualified M.D. or D.O. licensed by the State of Washington to practice
in this state. The certificate shall state in substance that TERRENCE
K. PICKEN was determined to be disabled and unable to perform the
ordinary and usual duties of' Executive Vice-President and Chief
Operating Officer of Saratoga International Holdings Corp. beginning
with [date] - and Picken's disability continues as of this [date] .
Such a certificate shall be submitted every three (3) months beginning
with the date of disability and continuing thereafter until Picken's
disability ends and he is able to return to work full time or his
disability compensation benefit has been fully used, whichever occurs
first.
VIII. TERMINATION OF PICKEN'S EMPLOYMENT.
1.) Termination By The Corporation. Picken's employment as Executive
Vice-President and Chief Operating Officer may be terminated by the
Board of Directors of the Corporation with or without cause, after
receipt by Picken of written notice received at least ninety (90) days
in advance of the employment termination date set by the Board of
Directors, PROVIDED THAT all terms and provisions of Section VIII.2.,
stated below are met. Such notice ("Notice") shall be sent pursuant to
Section XII., below. The termination of Picken's employment shall be
effective as stated in Section VIII.3., below.
2.) Terms and Provisions of Termination of Picken's Employment. Regardless
of the reasons or purpose of the termination of Picken's Employment,
the Corporation shall not and may not terminate Picken's employment as
Executive Vice-President and Chief Operating Officer unless and until
the Corporation has fully arranged for and commenced performance of
the following:
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<PAGE>
A. Offer in writing by the Corporation, approved by the Board of
Directors to purchase all shares of stock of the Corporation
directly or beneficially owned by TERRENCE K. PICKEN for cash at
least thirty (30) days prior to the proposed termination date of
Picken's employment, at the then existing market price based on
the average published closing trade price for the five (5)
business days prior to the date of Notice referred to in Section
VIII (1) above. Picken may elect in his absolute discretion to
waive this provision, VIII 2.) A., by notifying the Corporation
in writing.
B. Payment, in cash, by the Corporation of all sums then due and
owing, if any, as compensation, pursuant to Section IV.,
Compensation, and/or Section VII., Disability Compensation, of
this Employment Agreement.
C. Payment, in cash, by the Corporation of all sums then due and
owing, if any, pursuant to Section VI., Reimbursement, of the
Employment Agreement.
D. Payment, in cash, by the Corporation for buyout of Remainder of
the Employment Agreement at the rate of fifty percent (50%) of
the regular salary in effect under Section IV., above, of this
Agreement.
3.) Effective Date of Picken's Employment Termination, The effective date
of Picken's employment termination pursuant to Section VIII of this
Agreement shall be the latest of the following dates:
A. The date of Picken's employment termination provided for in the
written notice of his employment termination;
B. The Ninety-first (91st) day after receipt by Picken of the
written notice of his employment termination;
C. The date of fulfillment of all the terms and provisions of Part
VIII. (2)., above, entitled Terms and Provisions of Termination
of Picken's Employment by the Corporation.
IX. PROPERTY RIGHTS
1.) Intellectual Property Rights. All rights, title and interest of every
kind and nature whatsoever, in and to any intellectual property,
including any inventions, patents, trademarks, copyrights, films,
scripts, ideas, creations and properties invented, created, written,
developed, furnished, produced or disclosed by Picken in the course of
rendering his services to the Corporation under this Agreement shall,
as between the parties hereto, be and remain the sole and exclusive
property of the Corporation for any and all purposes and uses
whatsoever, and Picken shall have no right, title or interest of any
kind or nature therein or thereto, or in and to any results and
proceeds therefrom.
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<PAGE>
2.) Return of All of the Corporation's Property. Upon termination of this
Agreement, regardless of how termination may be effected or whenever
requested by the Corporation, Picken shall immediately turn over to
the Corporation all of the Corporation's property, including all items
used by Picken in rendering services hereunder or otherwise, that may
be in Picken's possession or under his control.
X. CONFIDENTIALITY AND NON-DISCLOSURE OF INFORMATION.
1.) During Employment. Picken agrees that during the entire term of his
employment as an executive officer by this Corporation, he will not
disclose to any other person, partnership, company or corporation any
confidential information about this Corporation or its related
corporations, or the business activities or interests of this
Corporation or its related corporations, including, but not limited
to, the following which is agreed as between the parties to be
confidential information: customer data, customer lists, sales
figures, sales projections, estimates of any kind, sales proposals,
price lists, accounting procedures, any and all accounting records,
any technology and applications of technology, developed by the
Corporation before or during his employment, EXCEPT such disclosure as
is for the benefit of or the furthering of the intent of the
Corporation, or is expressly disclosed as part of the performance of
his duties and responsibilities as Executive Vice-President and Chief
Operating Officer.
2.) Surrender of All Confidential Information On Termination of
Employment. Picken agrees at the time his employment with the
Corporation terminates, to turn over to the Corporation any and all
confidential information which may be in his possession, including any
and all copies thereof, except that one copy of such information may
be retained in Picken's confidential legal files for record keeping
purposes only.
3.) Following Termination of Employment. Picken agrees that following the
termination of his employment with the Corporation, he will not
disclose any confidential information, as described in Section
X.(1.)., above, which he obtained about the Corporation at any time or
for any purpose.
XI. NON-COMPETITION AFTER TERMINATION OF EMPLOYMENT.
1.) Non-Competition Period--Duration and Geographic Scope. Picken and the
Corporation recognize and acknowledge that in his employment as
Executive Vice-President and Chief Operating Officer, he will become
familiar with all of the Corporation's products and all of the
geographic areas throughout the United States and Canada in which the
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Corporation already has made marketing efforts and sales of products
and services, and he will become knowledgeable about present and
future marketing proposals and plans for those products and services
in those geographic areas. Picken agrees, as part of the consideration
for this Employment Agreement that Picken will not engage directly or
indirectly in the business of manufacture or sale of any products or
services which compete with the products or services provided by the
Corporation or its related corporations for a period of two (2) years
within the geographic limits of any state of the United States, or any
province of Canada. The parties agree that the phrase "engage directly
or indirectly in the business of manufacture or sale of any products
or services which compete with the products or services of the
Corporation or its related Corporations" shall include any situation
or circumstance in which Picken shall be owner, partner, officer,
director or shareholder of a corporation, or agent or employee or
consultant of any business entity engaged or about to become engaged
in competition with the Corporation.
2.) Injunctive Relief From Competition By Picken. The parties agree that
if Picken were to violate the provisions of Section XI. 1., above, the
use by Picken of the information he learned while employed by the
Corporation could enable him to engage in basically unfair competition
with the Corporation and its related corporations, and that such
competition in violation of Section XI. (1.), above, probably would
cause irreparable harm to the marketing and sales success of the
Corporation and its related corporations. Therefore, if Picken
violates Section XI. 1., above, the Corporation shall be entitled to
obtain a temporary restraining order without delay, and proceed to
obtain a preliminary injunction and permanent injunction against such
violations by Picken and any person, partnership, company or
corporation through which or for which he acts, directly or indirectly
to violate Section XI. (1.), above.
XII. NOTICES.
1.) How Sent or Delivered. Any notices sent by any party which is intended
to give written notice required by this Employment Agreement shall be
sent or delivered by sender to the intended recipient by one or more
of the following methods:
A. By certified mail, return receipt requested, postage prepaid, to
the last known address of the intended recipient; or
B. By delivery personally to the intended recipient.
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<PAGE>
2.) Effective Date of Notice. If a written notice is sent or delivered by
either of the above methods, then the effective date of the notice for
purposes of considering it to have been received by the intended
recipient shall be the earliest of the following:
A. If by certified mail, return receipt requested, which is
delivered, then or on the date the recipient, or anyone signing
for the recipient, signed the return receipt;
B. If by certified mail, return receipt requested, which is not
delivered, then on the date five business days after the date the
notice was sent;
C. If by personal delivery to the intended recipient, then on the
date the written notice was delivered personally to the
recipient.
3.) Proof of Delivery of Notice.
A. Certified Mail, Return Receipt Requested. If the written notice
was sent by certified mail, return receipt requested, proof of
sending may be shown by the U.S. Post Office receipt for the
certified mail, return receipt requested and proof of delivery
may be shown by the signed returned receipt and proof of
attempted delivery sufficient for effective date of notice
without delivery may be shown by the returned envelope with U.S.
Post Office notations showing attempted delivery dates and
notices to the intended recipient.
B. Personal Delivery. Personal delivery of a written notice may be
shown by a signature of the intended recipient on a copy of the
notice, together with the legend on the copy of the notice which
will read, "Received," with the date received noted thereafter.
Personal delivery may also be shown by a sworn statement of the
person who delivered the notice, stating that the notice was
delivered to the recipient or representative of recipient on the
date of delivery, and attaching a copy of the notice, with
reference in the sworn statement to the attached copy of the
notice.
XIII.REMEDIES AVAILABLE IN EVENT OF BREACH OF AGREEMENT; VENUE.
In the event that any party breaches this Employment Agreement, the other party
shall have the right to pursue any remedies available to the party claiming
breach, including, but not limited to damages, injunctive relief and declaratory
judgment, which may be available under the laws of the State of Nevada. The
parties agree that any claims shall be brought in the appropriate court(s)
located in Clark County, Nevada, which may have jurisdiction pursuant to Nevada
Law.
XIV. APPLICABLE LAW
This Employment Agreement shall be construed and interpreted and enforceable
pursuant to the laws of the State of Nevada.
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<PAGE>
XV. ENTIRE AGREEMENT.
This Employment Agreement states the entire agreement between the parties with
respect to the employment of Picken by the Corporation. This Agreement cannot be
modified by any oral agreement or course of conduct by either or both parties
and any attempt at such modification shall be null and void. This Agreement may
be modified only by a written document signed by each party.
Effective this 1st day of October 1999.
EXECUTIVE OFFICER:
/s/ T K Picken
----------------------
Terrence K. Picken
THE CORPORATION:
Saratoga International Holdings Corp.
By /s/ Patrick F. Charles
------------------------
I certify that I know or have satisfactory evidence that Terry Picken
is the person who appeared before me, and said person acknowledged that he/she
signed this instrument and acknowledged it to be his/her free and voluntary act
for the uses and purposes mentioned in instrument.
DATED: November 24, 1999
-----------------
/s/ Corinne J. Weber
--------------------------------
Corinne J. Weber - Notary Public
My commission expires: 6/15/03
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<PAGE>
EXHIBIT 10.4
THIS WARRANT HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY, HAS NOT BEEN AND
WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, A AMENDED, AND THE
RULES AND REGULATIONS PROMULGATED THEREUNDER (THE 1933 ACT), AND MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES (AS DEFINED IN REGULATIONS OF THE 1933
ACT) EXCEPT PURSUANT TO REGISTRATION UNDER OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE 1933 ACT. THIS LEGEND SHALL BE ENDORSED UPON ANY WARRANT
ISSUED IN EXCHANGE FOR THIS WARRANT.
Warrant No: 99-6-2 Right to Purchase 500,000
Shares of Common Stock of
June 16, 1999 Saratoga International Holdings Corp.
VOID UNLESS EXERCISED BEFORE 5:00 P.M. PACIFIC STANDARD TIME ON JUNE 15, 2004.
SARATOGA INTERNATIONAL HOLDINGS CORP.
Common Stock Purchase Warrant
Saratoga International Holdings Corp, a Nevada corporation (the "Company"),
hereby certifies that, for value received, Tom Morsey, or assigns, is entitled,
subject to the terms set forth below, to purchase from the Company, commencing
June 16, 1999, at any time or from time to time before 5:00 p.m., Pacific
Standard Time, on or before June 15, 2004 fully paid and nonassessable shares of
Common Stock $.001 par value, of the Company, at an exercise price per share
equal to $.10. Such exercise price per share as adjusted from time to time as
herein provided is referred to herein as the Exercise Price. The number and
character of such shares of Common Stock and the Exercise Price are subject to
adjustment as provided herein.
1. Exercise Warrant.
1.1 Full Exercise. This Warrant may be exercised in full by the holders by
surrender of this Warrant with the Election to Purchase form at the
end hereof duly executed by such holder, to the Company at its
principal office, accompanied by payment, in cash or by certified or
official bank check payable to the order of the Company, in the amount
obtained by multiplying the number of shares of Common Stock for which
this Warrant is then exercisable by the Exercise Price as set forth
herein.
1.2 Partial Exercise. This Warrant may be exercised in part by surrender
of this Warrant in the manner and at the place provided in Section 1.1
except that the amount payable to the holder on such partial exercise
shall be the amount obtained by multiplying (a) the number of shares
of Common Stock designated by the holder in the Election to Purchase
form at the end hereof by (b) the Exercise Price as set forth herein.
Any exercise of this Warrant must be for a minimum of 100,000 shares
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of Common stock of the Company or the number of shares indicated
herein, whichever is less. This Warrant is for full shares and no
fractional shares will be issued. On any such partial exercise, the
Company will forthwith issue and deliver to or upon the order of the
holder a new Warrant of like tenor, in the name of the holder or as
such holder (upon payment by such holder of any applicable transfer
taxes) may request, calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock for which such
Warrant may still be exercised.
2. Delivery of Stock Certificates of Exercise. As soon as practicable after
the exercise of the Warrant in full or in part, and in any event within
sixty (60) days thereafter, the Company will cause to be issued in the name
of and delivered to the holder, or as such holder (upon payment by such
holder of any applicable transfer taxes) may direct, a certificate or
certificates for the number of fully paid and nonassessable shares of
Common Stock to which such holder shall be entitled on such exercise,
pursuant to Section 1 or otherwise.
3. Adjustment for Reorganization Consolidation or Merger.
3.1. Reorganization, Consolidation or Merger. In case at any time or from
time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person or entity, or (c)
transfer all or substantially all of its properties or assets to any
other person under any plan or arrangement contemplating the
dissolution of the Company, then, in each such case, the holder of the
Warrant, on the exercise hereof as provided in Section 1 at any time
after the consummation of such reorganization, consolidation or merger
or the effective date of such dissolution, as the case may be, shall
receive, in lieu of the Common Stock issuable as such exercise prior
to such consummation or such effective date, the stock and other
securities and property (including cash) to which such holder would
have been entitled upon such consummation or in connection with such
dissolution, as the case may be, if such holder had so exercised the
Warrant, immediately prior thereto, all subject to further adjustment
thereafter as provided in Sections 4 and 5.
3.2. Continuation of Terms. Upon any reorganization, consolidation, merger
or transfer (and any dissolution following any transfer) referred to
in this Section 3, the Warrant shall continue in full force and effect
and the terms hereof shall be applicable to the shares of stock and
Other Securities and property receivable on the exercise of the
Warrant after the consummation of such reorganization, consolidation
or merger or the effective date of dissolution following any such
transfer, as the case may be, and shall be binding upon the issuer of
any such stock or other securities, including, in the case of any such
transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall
have expressly assumed the terms of the Warrant.
4. Adjustments for Stock Dividends and Stock Splits. In the event that the
Company shall (i) issue additional shares of Common Stock as a dividend or
other distribution on outstanding Common Stock, (ii) subdivide its
outstanding shares of Common Stock or (iii) combine its outstanding shares
of the Common Stock into a smaller number of shares of the Common Stock,
then, in each such event, the Exercise Price shall, simultaneously with the
happening of such event, be adjusted by multiplying the then prevailing
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Exercise Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such event
(calculated assuming the conversion or exchange of all outstanding shares
of convertible or exchangeable securities of the Company which are
convertible or exchangeable into, or exercisable for, shares of Common
Stock) and the denominator of which shall be the number of shares of Common
Stock outstanding immediately after such event (calculated assuming the
conversion or exchange of all outstanding shares of convertible or
exchangeable securities of the Company which are convertible or
exchangeable into, or exercisable for, shares of Common Stock), and the
product so obtained shall thereafter be the Exercise Price then in effect.
The Exercise Price, as so adjusted, shall be readjusted in the same manner
upon the happening of any successive event or events described herein in
this Section 4. The holder of the Warrant shall thereafter, on the exercise
thereof as provided in Section 1, be entitled to receive that number of
shares of Common Stock determined by multiplying the number of shares of
Common Stock which would otherwise (but for the provisions of this Section
4) be issuable on such exercise, by a fraction of which (i) the numerator
is the Exercise Price which would otherwise (but for the provisions of this
Section 4) be in effect, and (ii) the denominator is the Exercise Price in
effect on the date of such exercise.
5. Adjustment for Dividends in Other Stock, Property and Reclassifications. In
case at any time or from time to time, the holders of Common Stock (or
Other Securities) shall have received, or (on or after the record date
fixed for the determination of stockholders eligible to receive) shall have
become entitled to receive without payment therefor,
a. other or additional stock or other securities or property (other than
cash) by way of dividend, or
b. other or additional stock or other securities or property (including
cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate
rearrangement, other than additional shares of Common Stock (or Other
Securities) issued as a stock dividend or in a stock-split
(adjustments in respect of which, in the case of Common Stock, are
provided for in Section 4), then and in each such case the holder of
the Warrant, on the exercise thereof as provided in Section 1, shall
be entitled to receive the amount of other or additional stock and
other securities and property (including cash in the cases referred to
in subdivision (b) of this Section 5) which such holder would hold on
the date of such exercise if on the date of distribution of such other
or additional stock or other securities and property, or on the record
date fixed for determining the shareholders entitled to receive such
other or additional stock or other securities and property, such
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holder had been the holder of record of the number of shares of Common
Stock called for on the face of the Warrant and had thereafter, during
the period from the date thereof to and including the date of such
exercise, retained such shares and all such other or additional stock
and other securities and property (including cash in the cases
referred to in subdivision (b) of this Section 5) receivable by such
holder as aforesaid during such period, giving effect to all
adjustments called for during such period by Sections 3 and 4.
6. Notices of Record Date. In the event of
a. any taking by the Company of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution or any right to
subscribe for purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other
right, or
b. any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any transfer
of all or substantially all the assets of the Company to or
consolidation or merger of the Company with or into any other person,
or
c. any voluntary or involuntary dissolution, liquidation or winding-up of
the Company, then and in each such event the Company will mail or
cause to be mailed to the holder of this Warrant a notice specifying
(i) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right, and stating the amount and
character of such dividend, distribution or right, and (ii) the date
on which any such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as
of which the holders of record of Common Stock (or Other Securities)
shall be entitled to exchange their shares of Common Stock (or Other
Securities) for securities or other property deliverable on such
reorganization, reclassification, recapitalizaiton, transfer,
consolidation, merger, dissolution, liquidation or winding-up.
Such notice shall be mailed at least twenty (20) days prior to the
date specified in such notice and which any such action is to be
taken.
7. Reservation of Stock Issuable on Exercise of Warrants. The Company will at
all times reserve and keep available, solely for issuance and delivery on
the exercise of the Warrants, all shares of Common Stock (or Other
Securities) from time to time issuable on the exercise of the Warrant; the
shares of Common Stock which the holder of this Warrant shall receive upon
exercise of the Warrant will be duly authorized, validly issued, fully paid
and non-assessable.
8. Exchange of Warrants. On surrender for exchange of the Warrant, properly
endorsed, to the Company, the Company will issue and deliver to or on the
order of the holder thereof a new Warrant or Warrants of like tenor, in the
name of such holder or as such holder (on payment by such holder of any
applicable transfer taxes) may direct, calling in the aggregate on the face
or faces thereof for the number of shares of Common Stock called for in the
Warrant so surrendered.
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9. Replacement of Warrants. On receipt of evidence reasonable satisfactory to
the Company of the loss, theft, destruction or mutilation of a Warrant and,
in the case of any such loss, theft or destruction of a Warrant, on
delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of such Warrant, the Company will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
10. Warrantholder Not Deemed Stockholder; Restrictions on Transfer. The Warrant
is issued upon the following terms, to all of which the holder or owner
thereof by the taking consents and agrees:
a. No holder of the Warrant shall, as such, be deemed the holder of
Common Stock that may at any time be issuable upon exercise of the
Warrant for any purpose whatsoever, nor shall anything contained
herein be construed to confer upon such holder, as such, any of the
rights of a stockholder of the Company until such holder shall have
exercised the Warrant and been issued shares of Common Stock in
accordance with the provisions hereof.
b. Neither the Warrant nor any shares of Common Stock purchased pursuant
to the Warrant shall be registered under the Securities Act of 1933
(the "Securities Act") and applicable state securities laws. The
certificates evidencing the shares of Common Stock issued on the
exercise of the Warrant shall bear a legend to the effect that the
shares evidenced by such certificates have not been registered under
the Securities Act and applicable state securities laws.
11. Notices. All notices and other communications from the Company to the
holder of the Warrants shall be mailed by (i) first class mail, postage
prepaid, (ii) electronic facsimile transmission, or (iii) express overnight
courier service, at such address as may have been furnished to the Company
in writing by such holder or, until any such holder furnishes to the
Company an address, then to, and at the address of, the last holder of the
Warrant who has so furnished an address to the Company.
12. Warrant Callable. The Warrant may be called by the Company upon the
expiration of thirty (30) days written notice at the price of $.05 per
share of Common Stock represented by this Warrant.
13. Miscellaneous. The Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or
termination is sought. The Warrant and the shares of Common Stock
underlying the Warrant shall be construed and enforced in accordance with
and governed by the laws of the State of Nevada. The invalidity or
unenforceability of any provision hereof shall in no way affect the
validity or enforceability of any other provision.
14. Applicable Law. The validity, interpretation and performance of this
Agreement and of Warrants shall be governed by the laws of the State of
Washington.
Saratoga International Holdings Corp.
/s/ Patrick F. Charles
- ------------------------------
Patrick F. Charles, President
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EXHIBIT 10.5
SARATOGA INTERNATIONAL HOLDINGS CORP.
1998 STOCK OPTION PLAN
ARTICLE I
Purpose of the Plan
The purpose of this Plan is to encourage and enable directors, employees,
consultants and others who are in a position to make significant contributions
to the success of Western Oil & Tire Distributors, Inc. and of its affiliated
corporations upon whose judgment, initiative and efforts the Corporation depends
for the successful conduct of its business, to acquire a closer identification
of their interests with those of the Corporation by providing them with
opportunities to purchase stock in the Corporation pursuant to options granted
hereunder, thereby stimulating their efforts on behalf of the Corporation and
strengthening their desire to remain involved with the Corporation.
ARTICLE II
Definitions
2.1 "Affiliated Corporation" means any stock corporation of which a majority of
the voting common or capital stock is owned directly or indirectly by the
Corporation.
2.2 "Award" means an Option granted under Article V.
2.3 "Board" means the Board of Directors of the Corporation and "Director"
means a member of the Board of Directors.
2.4 "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
2.5 "Corporation" means Western Oil & Tire Distributors, Inc. a Nevada
corporation, or its successor.
2.6 "Employee" means any person who is a regular full-time or part-time
employee of the Corporation or an Affiliated Corporation on or after
November 1, 1998.
2.7 "Option" means an Incentive Stock Option or Non-Qualified Option granted by
the Board under Article V of this Plan in the form of a right to purchase
Stock evidenced by an instrument containing such provisions as the Board
may establish.
2.8 "Plan" means this 1998 Stock Option Plan.
2.9 "Participant" means a person who is to receive an award under the plan.
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2.10 "Reporting Person" means a person subject to Section 16 of the Securities
Exchange Act of 1934, as amended, or any successor provision.
2.11 "Incentive Stock Option" ("ISO") means an option which qualifies as an
incentive stock option as defined in Section 422A of the Code, as amended.
2.12 Non-Qualified Option" means any option not intended to qualify as an
Incentive Stock Option.
2.13 "Stock" means the Common Stock, par value $0.001, of the Corporation or any
successor, including any adjustments in the event of changes in capital
structure of the type described in Article IX.
ARTICLE III
Administration of the Plan
3.1 Administration by Board. This plan shall be administered by the Board of
Directors of the Corporation. The Board may, from time to time, delegate
any of its functions under this plan to one or more Committees. All
references in this Plan to the Board shall also include the Committee or
Committees, if one or more have been appointed by the Board. From time to
time the Board may increase the size of the Committee or committees and
appoint additional members thereto, remove members (with or without cause)
and appoint new members in substitution therefore, fill vacancies however,
caused, or remove all members of the committee or committees and thereafter
directly administer the Plan. No member of the Board or a committee shall
be liable for any action or determination made in good faith with respect
to the Plan or any options granted hereunder.
If a Committee is appointed by the Board, a majority of the members of the
Committee shall constitute a quorum, and all determinations of the
Committee under the Plan may be made without notice or meeting of the
Committee by a writing signed by a majority of Committee members. Upon the
registration of the Stock under the Securities Exchange Act of 1934, the
Board shall delegate the power to select officers to receive Awards under
the Plan, and the timing, pricing and amount of such Awards to a Committee,
all members of which shall be "disinterested persons" within the meaning of
Rule 16b-3 under the Act.
3.2 Powers. The Board of Directors and/or any committee appointed by the Board
shall have full and final authority to operate, manage and administer the
Plan on behalf of the Corporation. This authority includes, but is not
limited to:
(a) The power to grant Awards conditionally or unconditionally,
(b) The power to prescribe the form or forms of the instruments evidencing
Awards granted under this Plan,
(c) The power to interpret the Plan,
(d) The power to provide regulations for the operation of the incentive
features of the Plan, and otherwise to prescribe and rescind
regulations for interpretation, management and administration of the
Plan,
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(e) The power to delegate responsibility for Plan operation, management
and administration on such terms, consistent with the Plan, as the
Board may establish,
(f) The power to delegate to other persons the responsibility of
performing ministerial acts in furtherance of the Plan's purpose, and
(g) the Power to engage the services of persons, companies, or
organizations in furtherance of the Plan's purposes, including but not
limited to, banks, insurance companies, brokerage firms and
consultants.
3.3 Additional powers. In addition, as to each Option to buy Stock of the
Corporation, the Board shall have full and final authority in its
discretion:
(a) to determine the number of shares of Stock subject to each Option;
(b) to determine the time or times at which Options will be granted;
(c) to determine the option price of the shares of Stock subject to each
Option, which price shall be not less than the minimum price specified
in Article V of the Plan;
(d) to determine the time or times when each Option shall become
exercisable and the duration of the exercise period (including the
acceleration of any exercise period), which shall not exceed the
maximum period specified in Article V; and
(e) to determine whether each Option granted shall be an Incentive Stock
Option or a Non-Qualified Option.
In no event may the Company grant an Employee any Incentive Stock
Option that is first exercisable during any one calendar year to the
extent the aggregate fair market value of the Stock (determined at the
time the options are granted) exceeds $100,000 (under all stock option
plans of the Corporation and any Affiliated Corporation); provided,
however, that this paragraph shall have no force and effect if its
inclusion in the Plan is not necessary for Incentive Stock Options
issued under the Plan to qualify as such pursuant to Section
422A(d)(1) of the Code.
ARTICLE IV
Eligibility
4.1 Eligible Employees. All Employees (including Directors who are Employees)
are eligible to be granted Incentive Stock Option and Non-Qualified Option
Awards under this Plan.
4.2 Consultants, Directors and other Non-Employees. Any Consultant, Director
(whether or not an Employee) and any other Non-Employee is eligible to be
granted Non-Qualified Option Awards under the Plan.
4.3 Relevant Factors. In selecting individual Employees, Consultants, Directors
and other Non-Employees to whom Awards shall be granted, the Board shall
weigh such factors as are relevant to accomplish the purpose of the Plan as
stated in Article I. An individual who has been granted and Award may be
granted one or more additional Awards, if the Board so determines. The
granting of an Award to any individual shall neither entitle that
individual to, or disqualify him from, participation in any other grant of
Awards.
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ARTICLE V
Stock Option Awards
5.1 Number of Shares. Subject to the provisions of Article IX of this Plan, the
aggregate number of shares of Stock for which Options may be granted under
this Plan shall not exceed 3,000,000 shares. The shares to be delivered
upon exercise of Options under this Plan shall be made available, at the
discretion of the Board, either from authorized but unissued shares or from
previously issued and reacquired shares of Stock held by the Corporation as
treasury shares including shares purchased in the open market.
Stock issuable upon exercise of an Option granted under the Plan may be
subject to such restrictions on transfer, repurchase rights or other
restrictions as shall be determined by the Board of Directors.
5.2 Effect of Expiration, Termination or Surrender. If an Option under this
Plan shall expire or terminate unexercised as to any shares covered
thereby, or shall cease for any reason to be exercisable in whole or in
part, or if the Company shall reacquire any unvested shares issued pursuant
to Options under the Plan, such shares shall thereafter be available for
the granting of other Options under this Plan.
5.3 Term of Options. The full term of each Option granted hereunder shall be
for such period as the Board shall determine. In the case of Incentive
Stock Options granted hereunder, the term shall not exceed ten (10) years
from the date of granting thereof. Each Option shall be subject to earlier
termination as provided in Sections 6.3 and 6.4. Notwithstanding the
foregoing, options intended to qualify as "Incentive Stock Options" may not
be granted to any employee who at the time such option is granted owns more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company unless such option is not exercisable after the
expiration of five (5) years from the date such option is granted.
5.4 Option Price. The Option price shall be determined by the Board at the time
any Option is granted. In the case of Incentive Stock Options, the exercise
price shall not be less than 100% of the fair market value of the shares
covered thereby at the time the Incentive Stock Option is granted (but in
no event less than par value), provided that no Incentive Stock Option
shall be granted hereunder to any Employee if at the time of grant the
Employee, directly or indirectly, owns Stock possessing more than 10% of
the combined voting power of all classes of stock of the Corporation and
its Affiliated Corporations unless the Incentive Stock Option price equals
not less than 110% of the fair market value of the shares covered thereby
at the time the Incentive Stock Option is granted. In the case of
Non-Qualified Stock Options, the exercise price shall be any price which
may be less than the fair market value of the stock at the time the
Non-Qualified Stock Option is granted.
5.5 Fair Market Value. If, at the time an Option is granted under the Plan, the
Corporation's Stock is publicly traded, "fair market value" shall be
determined as of the last business day for which the prices or quotes
discussed in this sentence are available prior to the date such Option is
granted and shall mean (i) the average (on that date) of the high and low
prices of the Stock on the principal national securities exchange on which
the Stock is traded, if the Stock is then traded on a national securities
exchange; or (ii) the last reported sale price (on that date) of the Stock
on the NASDAQ National Market List, if the Stock is not then traded on a
national securities exchange; or (iii) the closing bid price (or average of
bid prices) last quoted (on that date) by an established quotation service
for over-the-counter securities, if the Stock is not reported on the NASDAQ
National Market List. However, if the Stock is not publicly traded at the
time an Option is granted under the Plan, "fair market value" shall be
deemed to be the fair value of the Stock as determined by the Board after
taking into consideration all factors which it deems appropriate,
including, without limitation, recent sale and offer prices of the Stock in
private transactions negotiated at arm's length.
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5.6 Non-Transferability of Options. No Option granted under this Plan shall be
transferable by the grantee otherwise than by will or the laws of descent
and distribution, and such Option may be exercised during the grantee's
lifetime only by the grantee.
5.7 Foreign Nationals. Awards may be granted to Participants who are foreign
nationals or employed outside the United States on such terms and
conditions different from those specified in the Plan as the Committee
considers necessary or advisable to achieve the purposes of the Plan or
comply with applicable laws.
ARTICLE VI
Exercise of Option
6.1 Exercise. Each Option granted under this Plan shall be exercisable on such
date or dates and during such period and for such number of shares as shall
be determined pursuant to the provisions of the instrument evidencing such
Option. The Board shall have the right to accelerate the date of exercise
of any option, provided that, the Board shall not accelerate the exercise
date of any Incentive Stock Option granted if such acceleration would
violate the annual vesting limitation contained in Section 422A(d)(1) of
the Code.
6.2 Notice of Exercise. A person electing to exercise an Option shall give
written notice to the Corporation of such election and of the number of
shares he or she has elected to purchase and shall at the time of exercise
under the full purchase price of the shares he or she has elected to
purchase. The purchase price can be paid partly or completely in shares of
the Corporation's Stock valued at Fair Market Value as defined in Section
5.5. hereof, or by any such other lawful currency.
6.3 Cessation of Employment. If the optionee shall cease to be an Employee for
any reason other than death, such Option shall thereafter be exercisable
only to the extent of the purchase rights, if any, which have accrued as of
the date of such cessation; provided that (i) the Board may provide in the
instrument evidencing any Option that the Board may in its absolute
discretion, upon any such cessation of employment, determine (but be under
no obligation to determine) that such accrued purchase rights shall be
deemed to include additional shares covered by such Option; and (ii) unless
the Board shall otherwise price in the instrument evidencing any Option,
upon any such cessation of employment, such remaining rights to purchase
shall in any event terminate upon the earlier of (A) the expiration of the
original term of the Option; or (B) where such cessation of employment is
on account of disability, the expiration of one year from the date of such
cessation of employment and, otherwise, the expiration of three months from
such date. For purposes of the Plan, the term "disability" shall mean
"permanent and total disability" as defined in Section 22(e)(3) of the
Code.
6.4 Death of Options. Should an optionee die while in possession of the legal
right to exercise an Option or Options under this Plan, such persons as
shall have acquired, by will or by the laws of descent and distribution,
the right to exercise any Options theretofore granted, may, unless
otherwise provided by the Board in any instrument evidencing any Option,
exercise such Options at any time prior to one year from the date of death;
provided, that such Option or Options shall expire in all events no later
than the last day of the original term of such Option; provided, further,
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that any such exercise shall be limited to the purchase rights which have
accrued as of the date when the optionee ceased to be an Employee, whether
by death or otherwise, unless the Board provides in the instrument
evidencing such Option that, in the discretion of the Board, additional
shares covered by such Option may become subject to purchase immediately
upon the death of the optionee.
ARTICLE VII
Terms and Conditions of Options
Options shall be evidenced by instruments (which need not be identical) in
such forms as the Board may from time to time approve. Such instruments shall
conform to the terms and conditions set forth in Articles 5 and 6 thereof and
may contain such other provisions as the Board deems advisable which are not
inconsistent with the Plan, including restrictions applicable to shares of Stock
issuable upon exercise of Options. In granting any Non-Qualified Option, the
Board may specify that such Non-Qualified Option shall be subject to the
restrictions set forth herein with respect to Incentive Stock Options, or to
such other termination and cancellation provisions as the Board may determine.
The Board may from time to time confer authority and responsibility on one or
more of its own members and/or one or more officers of the Corporation to
execute and deliver such instruments. The proper officers of the Corporation
authorized and directed to take any and all action necessary or advisable from
time to time to carry out the term of such instruments.
ARTICLE VIII
Benefit Plans
Awards under the Plan are discretionary and are not a part of regular
salary. Awards may not be used in determining the amount of compensation for any
purpose under the benefit plans of the Corporation, or an Affiliated
Corporation, except as the Board may from time to time expressly provide.
Neither the Plan, an Option or any instrument evidencing an Option confers upon
any Employee the right to continued employment with the Corporation or an
Affiliated Corporation.
ARTICLE IX
Amendment, Suspension or Terminationof the Plan
The Board may suspend the Plan or any part thereof at any time or may
terminate the Plan in its entirety. Awards shall not be granted after Plan
termination. The Board may also amend the Plan from time to time, except that
amendments which affect the following subjects must be approved by stockholders
of the Corporation:
(a) Except as provided in Article X relative to capital changes, the number of
shares as to which Options may be granted pursuant to Article V;
(b) The maximum term of Options granted;
(c) The minimum price at which Options may be granted;
(d) The term of the Plan; and
(e) The requirements as to eligibility for participation in the Plan. Awards
granted prior to suspension or termination of the Plan may not be cancelled
solely because of such suspension or termination, except with the consent
of the grantee of the Award.
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ARTICLE X
Changes in Capital Structure
The instruments evidencing Options granted hereunder shall be subject to
adjustment in the event of changes in the outstanding Stock of the Corporation
by reason of Stock dividends, Stock splits, recapitalizations, reorganizations,
mergers, consolidations, combinations, exchanges or other relevant changes in
capitalization occurring after the date of an Award to the same extend as would
affect an actual share of Stock issued and outstanding on the effective date of
such change. Such adjustment to outstanding Options shall be made without change
in the total price applicable to the unexercised portion of such options, and a
corresponding adjustment in the applicable option price per share shall be made.
In the event of any such change, the aggregate number and classes of shares for
which Options may thereafter be granted under Section 5.1 of this Plan may be
appropriately adjusted as determined by the Board so as to reflect such change.
Notwithstanding the foregoing, any adjustments made pursuant to this
Article X with respect to Incentive Stock Options shall be made only after the
Board, after consulting with counsel for the Corporation, determines whether
such adjustments would constitute a "modification" of such Incentive Stock
Options (as that term is defined in Section 425 of the Code) or would cause any
adverse tax consequences for the holders of such Incentive Stock Options. If the
Board determines that such adjustments made with respect to Incentive Stock
Options would constitute a modification of such Incentive Stock Options, it may
refrain from making such adjustments.
In the event of the proposed dissolution or liquidation of the Corporation,
each Option will terminate immediately prior to the consummation of such
proposed action or at such other time and subject to such other conditions as
shall be determined by the Board.
Except as expressly provided herein, no issuance by the Corporation of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares subject to Options. No adjustments
shall be made for dividends paid in cash or in property other than securities of
the Corporation.
No fractional shares shall be issued under the Plan and the optionee shall
receive from the Corporation cash in lieu of such fractional shares.
ARTICLE XI
Effective Date and Term of the Plan
The Plan shall become effective on November 1, 1998. The Plan shall
continue until such time as it may be terminated by action of the Board;
provided, however, that no Options may be granted under this plan on or after
the tenth anniversary of the effective date hereof.
ARTICLE XII
Conversion of ISO's into Non-Qualified Options
The Board, at the written request of any optionee, may in its discretion
take such actions as may be necessary to convert such optionee's Incentive Stock
Options, that have not been exercised on the date of conversion, into
Non-Qualified Options at any time prior to the expiration of such Incentive
Stock Options, regardless of whether the optionee is an employee of the
Corporation or an Affiliated Corporation at the time of such conversion. Such
actions may include, but not be limited to, extending the exercise period or
reducing the exercise price of such Options. At the time of such conversion, the
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Board (with the consent of the optionee) may impose such conditions on the
exercise of the resulting Non-Qualified Options as the Board in its discretion
may determine, provided that such conditions shall not be inconsistent with the
Plan. Nothing in the Plan shall be deemed to give any optionee the right to have
such optoinee's Incentive Stock Options converted into Non-Qualified Options,
and no such conversion shall occur until and unless the Board takes appropriate
action. The Board, with the consent of the optionee, may also terminate any
portion of any Incentive Stock Option that has not been exercised at the time of
such termination.
ARTICLE XIII
Application of Funds
The proceeds received by the Corporation from the sale of shares pursuant
to Options granted under the Plan shall be used for general corporate purposes.
ARTICLE XIV
Governmental Regulation
The Corporation's obligation to sell and deliver shares of Stock under this
Plan is subject to the approval of any governmental authority required in
connection with the authorization, issuance or sale of such shares.
ARTICLE XV
Withholding of Additional Income Taxes
Upon the exercise of a Non-Qualified Option or the making of a
Disqualifying Disposition (as defined in Article XVI) the Corporation, in
accordance with Section 3402 (a) of the Code, may require the optionee to pay
additional withholding taxes in respect of the amount that is considered
compensation includible in such person's gross income. The Board in its
discretion may condition the exercise of an Option on the payment of such
additional withholding taxes.
ARTICLE XVI
Notice to Company of Disqualifying Disposition
Each employee who receives an incentive Stock Option must agree to notify
the Corporation in writing immediately after the employee makes a Disqualifying
Disposition of any Stock acquired pursuant to the exercise of an Incentive Stock
Option. A Disqualifying Disposition is any disposition (including any sale) of
such Stock before the later of (a) two years after the date the employee was
granted the Incentive Stock Option or (b) one year after the date the employee
acquired Stock by exercising the incentive Stock Option. If the employee has
died before such stock is sold, these holding period requirements do not apply
and no Disqualifying Disposition can occur thereafter.
Page E-146
198
<PAGE>
ARTICLE XVII
Governing Law; Construction
The validity and construction of the Plan and the instruments evidencing
Options shall be governed by the laws of the State of Nevada. In construing this
Plan, the singular shall include the plural and the masculine gender shall
include the feminine and neuter, unless the context otherwise requires.
ARTICLE XVIII
Reporting Person limitations
To the extent required to qualify for the exemption provided by rule 16b-3
under the Securities Exchange Act of 1934, and any successor provision, at least
six months must lapse from the date of acquisition of an Option by a Reporting
Person to the date of disposition of such Option (other than upon exercise) or
its underlying Common Stock.
Page E-147
199
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE SMALL
BUSINESS ISSUER
The Registrant has one wholly-owned subsidiary. Saratoga Telecom Corp.
incorporated in the State of Nevada in 1999.
Page E-148
200
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-END> OCT-31-1999
<CASH> 241,589
<SECURITIES> 0
<RECEIVABLES> 25,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 374,314
<PP&E> 5,357
<DEPRECIATION> 0
<TOTAL-ASSETS> 461,404
<CURRENT-LIABILITIES> 268,721
<BONDS> 0
0
377,742
<COMMON> 54,058
<OTHER-SE> (239,117)
<TOTAL-LIABILITY-AND-EQUITY> 461,404
<SALES> 2,660
<TOTAL-REVENUES> 2,660
<CGS> 23,810
<TOTAL-COSTS> 1,067,936
<OTHER-EXPENSES> 278,499
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 393,369
<INCOME-PRETAX> (1,679,728)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,679,728)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,679,728)
<EPS-BASIC> 0.04
<EPS-DILUTED> 0.04
</TABLE>
