<PAGE> 1
As Filed with the Securities and Exchange Commission on October 29, 1999
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(b)
OR 12(g) OF THE SECURITIES ACT OF 1934
CENTRACK INTERNATIONAL, INC.
----------------------------------------------
(Name of Small Business Issuer in Its Charter)
STATE OF DELAWARE 11-3342926
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(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
21045 COMMERCIAL TRAIL, BOCA RATON, FLORIDA 33486
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(Address of Principal Executive Offices) (Zip Code)
(561) 362-9444
---------------------------
(Issuer's Telephone Number)
COPIES TO:
STEVEN J. SERLING, ESQ.
GUNSTER, YOAKLEY, VALDES-FAULI & STEWART, P.A.
777 SOUTH FLAGLER DRIVE, SUITE 500-EAST
WEST PALM BEACH, FLORIDA 33301
(561) 650-0577
FACSIMILE (561) 655-5677
Securities to be registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
- ------------------- ------------------------------
None.
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $.0001 par value per share
----------------------------------------
(Title of Class)
----------------------------------------
(Title of Class)
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TABLE OF CONTENTS
<TABLE>
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Page No.
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PART I
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Item 1. Description of Business........................................................... 1
Item 2. Plan of Operation................................................................. 7
Item 3. Description of Property........................................................... 7
Item 4. Security Ownership of Certain Beneficial Owners and Management.................... 7
Item 5. Directors, Executive Officers, Promoters and Control Persons...................... 8
Item 6. Executive Compensation............................................................ 9
Item 7. Certain Relationships and Related Transactions.................................... 10
Item 8. Description of Securities......................................................... 11
PART II
Item 1. Market Price and Dividends on the Registrant's Common Equity and
Other Shareholder Matters......................................................... 12
Item 2. Legal Proceedings................................................................... 12
Item 3. Changes in and Disagreements With Accountants....................................... 12
Item 4. Recent Sales of Unregistered Securities............................................. 12
Item 5. Indemnification of Directors and Officers........................................... 13
PART F/S
The information required by this Part F/S is
included in the Audited and Consolidated Financial Statements set
forth on pages F-1 through F-13 hereof.
PART III
Item 1. Index to Exhibits .................................................................... 14
Item 2. Description of Exhibits............................................................... 14
</TABLE>
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Centrack International, Inc. is an Internet based advertising and information
services company specializing in the heavy equipment industry. The use of the
terms "Centrack," "we," "our," the "Company" and similar terms, means "Centrack
International, Inc." The Company provides online Internet classified
advertising listings for the sale of used heavy equipment and online Internet
advertising for vendors who provide appraisal, consulting, financing and other
services to the heavy equipment industry. Our Web site, WWW.CENTRACK.COM, has
been fully operational since June, 1999. Additionally, we are developing
technology to facilitate online auctions to be conducted by us for
business-to-business purchases of heavy equipment. We presently employ
approximately 25 full-time employees and utilize independent consultants.
Our History and Structure. Centrack was incorporated in Delaware in 1996. The
Company's principal executive offices are located at 21045 Commercial Trail,
Boca Raton, Florida 33486. The telephone number is (561) 362-9444. Our Web
sites are located at WWW.CENTRACK.COM and WWW.CENTRACKAUCTIONS.COM. Information
contained on these Web sites is not part of this Registration Statement. We are
in the development stage. From April 1996 through June 1999, we developed our
equipment listings' Web site and arranged strategic alliances with regard to
used equipment listings and related vendor advertising.
In April, 1999, we recapitalized by merging with Hudson Valley Industries,
Inc., an OTC Bulletin Board publicly traded company with no substantial assets
or liabilities. The previously outstanding shares and warrants of Centrack were
exchanged for 16,809,151 shares of common stock and warrants to purchase
2,098,999 shares; the previously outstanding 5,702,580 shares of Hudson Valley
Industries, Inc. remain outstanding. Hudson Valley Industries, Inc., the
surviving corporation in the merger, changed its name to Centrack
International, Inc.
Industry Background. Loaders, crawler tractors, excavators, off-road trucks,
motor graders, asphalt equipment, concrete equipment, backhoes, forklifts, and
cranes, together with a multitude of other heavy equipment, are important
components of every major industrial, construction, mining, forestation and
transportation project. It is common for this equipment to change owners
several times during its lifetime. Our goal is to serve as an efficient
low-cost intermediary for buyers and sellers of heavy equipment.
The Internet offers the opportunity to create a global marketplace for used
equipment sales. This trading has traditionally been conducted through printed
classified advertisements and dealers. A centralized Internet-based
business-to-business commerce site can overcome the inefficiencies associated
with traditional trading methods. Through an Internet listing service, buyers
can access a significantly broader range of goods to purchase, and sellers have
the opportunity to offer their goods for sale more efficiently and to a broader
base of buyers.
Equipment Listings. The WWW.CENTRACK.COM Web site permits sellers to list items
for sale, buyers to locate items of interest, and all users to browse through
listed items in a topically arranged service that is available 24 hours a day,
7 days a week. Our site has been designed to allow equipment sellers to enter
listings directly into the system. They maintain these listings by following
easy to use templates provided on-line during the equipment listing process.
The equipment is sorted into more than 75 categories and subcategories.
Visitors can browse our Web site, WWW.CENTRACK.COM, without charge. Many
listings include photographs of the equipment provided by the sellers.
Potential buyers can search the equipment listing by manufacturer, model, year
or range of years, price or price range, and serial number. All search
functions are presented in a user-friendly, menu-driven format to provide the
buyer with the most efficient means to find the desired equipment. Through the
centrack.com Web site, potential buyers are also provided access to a broad
range of complementary services, such as leasing, financing, transportation,
insurance, and appraisal.
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Our site includes an e-mail notification system, which will notify sellers of
active buyers' specific requirements which are not satisfied by current
listings. The system will also notify the prospective buyer of any new
classified listings which meet their search requirements.
As of July 31, 1999 our Web site had approximately 17,000 listings representing
approximately $1.2 billion in asking price of used heavy construction equipment
for sale. Approximately 85% of our current listings originate with Contractors
Hot Line magazine, the leading industry trade journal. The magazine has the
right to share listings that originate elsewhere and receives advertising space
on our site in exchange for advertising space in Contractors Hot Line magazine.
Under our agreement with Contractors Hot Line, we do not charge for listings
for the first month. This strategy has provided our Web site with a substantial
number of listings and has supported our goal of providing an alternative means
of buying and selling used heavy equipment. As a result of this strategy, we
have had only nominal revenues. It is our intention to invoice those who list
equipment on our site for subsequent months.
We have agreed to grant options to Contractor's Hot Line to purchase our shares
in an amount and on terms to be mutually agreed.
Amigas Venture Group, which manages the Americas Information Gateway System
("AMIGAS"), has linked its Web site with ours. AMIGAS is an Internet-based
trade promotion and electronic commerce portal designed to facilitate trade
with Latin and South America by coordinating interaction between buyers and
sellers. We have also agreed to establish a joint customer referral and
marketing distribution plan.
Our site currently receives from 4,000-6,000 user sessions per week. We believe
that most listings of equipment on our site are by construction industry
equipment dealers, and that visitors to our site include construction equipment
brokers, dealers, contractors, leasing companies and financing companies.
By using our software system, users can post, modify, delete and pay for
listings from their computers.
We expect our sources of revenue will consist of:
o equipment listing charges
o advertising by industry suppliers, such as finance, manufacturing, and
insurance companies and appraisers
Our initial marketing program will be to create awareness of our site. We will
use direct mail, trade publications, banner ads on other Web sites, telephone
solicitations, joint Web sites, and trade shows.
Auction Site under Development. The Company is developing a Web site to conduct
auctions of used heavy equipment (WWW.CENTRACKAUCTIONS.COM). This site will
facilitate the sale of heavy equipment via an auction environment where
equipment will be provided for sale by approved sellers. Pre-qualified buyers
will bid to acquire the equipment. Initially, we are seeking up to 100 pieces of
quality equipment with an expected aggregate auction value of approximately $5
to $6 million in order to have sufficient volume for the auction event. A
transaction fee will be charged to the seller based on a percentage of the sale
price of the item sold at the auction. Buyers will not be charged to make a bid
or a purchase.
The Company will seek to generate advertising revenue on the auction site,
focusing on those vendors providing services to the heavy equipment industry
which may be required to complete the sale. Examples of these complementary
services include appraisal, equipment financing, transportation, insurance, and
freight forwarding.
The interactive format of our auction Web site has been designed to meet
necessary industry specific needs of the heavy equipment buyer and seller. On
the auction site customers can review a list of equipment categories, upcoming
equipment lots, and the closing dates and times for each lot. One lot consists
of one piece of equipment. The equipment is identified, for auction purposes,
by its lot number. Customers are able to select specific items of interest and
view
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in-depth details of ownership, location, condition, serial numbers,
attachments, accessories, inspection reports and photographs of the equipment.
The equipment is displayed online approximately three weeks prior to the
closing of the auction bidding on the individual lot. As in traditional heavy
equipment auctions, our auction is held as an event, where many pieces of
equipment are advertised on display and available for inspection approximately
three weeks prior to the event date. Bidding closes for each lot successively
in five-minute intervals over a one or two-day period.
To participate in the auction, a business representative or individual must
first register and be pre-qualified. The bidder must pass our credit screening
to receive a bidder password and identification number. Once approved, a
customer may actively bid as the auction is taking place, or by an electronic
bid agent. The lot will open for bidding approximately three to five business
days prior to its closing time. Auction and bid tracking features are provided
to aid the customer in managing the bidding process. Once a customer bids on a
lot, the bidder list is instantly updated to reflect the bid and the customer's
new position amongst the bidders. At the customer's option, they may elect to
receive an e-mail notification when the current bid exceeds theirs.
For each lot, we are requesting that the sellers provide us with certificates
of clean title or letters from all lien-holders stating that the liens will be
released upon receipt of the auction proceeds. Sellers must withdraw the
equipment from their production fleet at least three weeks prior to the auction
start date. Sellers may not bid on their own equipment for sale in an auction,
or contact bidders. Sellers agree, upon an auction sale, to make the equipment
available at the location represented upon receipt of notice of full payment
from our auction administrator.
All sales are made "as is." Bidders agree to rely solely on their own
pre-auction inspection or appraisals, if any, with regard to the equipment they
purchase.
When the auction closes, the highest bidder wins and will receive an invoice
for the winning equipment lot price. The buyer will be given three business
days to provide payment or to arrange, through us, other terms with the seller.
All funds will be directed through a third party escrow agent. Upon receipt of
good funds, our auction administrator will notify the seller to release the
property, and will instruct the escrow agent to disburse the funds to any
lienholders and the seller.
As we develop and deploy our auction site, we plan to be responsive to the
dynamic Internet auction environment and to our customers. Therefore, we may
change any or all of the features and functions of our auction site.
Web site. Hosting of our equipment listings' Web site and its connection to the
Internet is handled by a hosting provider under an agreement terminable by
either party upon notice at least 15 days prior to the end of any month.
We have engaged OpenSite Technologies, Inc. to develop and host our auction Web
site. The auctions will operate using OpenSite's proprietary software. Monthly
license fees will be due based on the number of auctions held.
Competition. Used construction equipment has traditionally been sold through
dealers, conventional auctions, classified ads in trade publications, and more
recently through Web sites. At least three construction industry magazines
offer listings of their classified ads on their Web sites, and some equipment
dealers list offerings on individual Web sites. Recently, a number of Web-based
equipment listing services have entered the market, including one that appears
to have more listings than we do.
We are aware of other Internet auction sites for the heavy construction
industry, although we believe only one such site has actually conducted an
auction. Dealers or other owners of equipment may occasionally offer a specific
item for auction.
Our potential competitors have longer operating histories, larger customer
bases, greater brand recognition, and greater financial, marketing and other
resources than we do. In the traditional used equipment auction business, there
is currently one major national auctioneer, Ritchie Bros., and a number of
regional firms. These firms maintain one or
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more physical auction locations, where the equipment is placed and may be
inspected prior to the auction, and where the auction is conducted. The auction
firm:
o may help the seller determine an appropriate value for its equipment
o may coordinate any refinishing needed to help get the equipment ready for
auction
o may guarantee the seller a minimum price
We compete with these firms for sources of supply. Ritchie Bros. has announced
that it will add real time broadcasts of its auctions on its Web site.
Experienced auction firms may have a database of customers with equipment
preferences and previous buying activity, and may be better able than we are to
target customers who might be interested in a particular auction. They may also
have regional sales representatives to locate equipment for auction.
Government Regulation. Although there are currently few laws and regulations
directly applicable to the Internet, it is likely that new laws and regulations
will be adopted in the United States and elsewhere covering issues such as
copyrights, privacy, pricing, sales taxes, and characteristics and quality of
Internet services. It is possible that governments will enact legislation that
may be applicable to us in areas such as content, network security, encryption,
and the use of key escrow, data and privacy protection, electronic
authentication or "digital" signatures, access charges and retransmission
activities. Moreover, the applicability to the Internet of existing laws
governing issues such as property ownership, content and taxation is uncertain.
The majority of such laws were adopted before the widespread use and
commercialization of the Internet and, as a result, do not contemplate or
address the unique issues of the Internet and related technologies. Any such
export or import restrictions, new legislation or regulation or governmental
enforcement of existing regulations may limit the growth of the Internet,
increase our cost of doing business or increase our legal exposure, which could
have a material adverse effect on our business, financial condition and results
of operations.
By distributing content over the Internet, we face potential liability for
claims based on the nature and content of the materials that we distribute,
including claims for negligence or copyright, patent or trademark infringement,
which claims have been brought, and sometimes successfully litigated, against
Internet companies. To protect us from such claims, we maintain general
liability insurance. The general liability insurance may not cover all
potential claims of this type or may not be adequate to indemnify us for any
liability to which we may be imposed. Any liability not covered by insurance or
in excess of insurance coverage could have a material adverse effect on our
business, results of operations and financial condition.
We may be subject to auction licensing and regulation in the State of Florida.
The State requires a licensed auctioneer to administer auctions and regulates
the manner and conduct of auctions as well as the records to be kept by the
auction business. We are licensed by Florida and operate through a licensed
auctioneer.
Intellectual Property. Our success depends in part on our ability to protect
our intellectual property. To protect our proprietary rights, we rely generally
on copyright, trademark and trade secret laws, confidentiality agreements with
employees and third parties, and license agreements with consultants, vendors
and customers, although we have not signed such agreements in every case.
Despite such protections, a third party could, without authorization, copy or
otherwise obtain and use our content. We can give no assurance that our
agreements with employees, consultants and others who participate in
development activities will not be breached, or that we will have adequate
remedies for any breach, or that our trade secrets will not otherwise become
known or independently developed by competitors.
We pursue the registration of certain of our trademarks and service marks in
the United States, although we have not secured registration of all our marks.
In addition, the laws of some foreign countries do not protect our proprietary
rights to the same extent as do the laws of the United States, and effective
copyright, trademark and trade secret protection may not be available in such
jurisdictions. In general, there can be no assurance that our efforts to
protect
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our intellectual property rights through copyright, trademark and trade secret
laws will be effective to prevent misappropriation of our content. Our failure
or inability to protect our proprietary rights could materially adversely
affect our business, financial condition and results of operations.
Year 2000 Issues. Many currently installed computer systems, software packages
and microprocessor dependent equipment are coded to accept only two-digit
entries in a date code field and cannot reliably distinguish dates into the
year 2000 and beyond. We may realize exposure and risk if the systems upon
which we are dependent do not correctly process dates beginning in 2000. Our
potential areas of exposure include electronic data exchange systems operated
by third parties with which we transact business, and computers, software,
telephone systems and other equipment purchased from third parties and used
internally.
We have reviewed our internal programs and have determined that there are no
significant Year 2000 issues with our computer systems or software and have
developed a contingency plan to resolve any issues, should they arise. We have
been communicating with the suppliers and others with whom we do business to
assess their Year 2000 readiness. The responses we have received to date
generally have indicated that steps are currently being undertaken by the
respondents to address this concern. However, if such third parties are not
able to make all systems Year 2000 compliant, there could be a material adverse
impact on our business and financial condition. We estimate that our total cost
in connection with our Year 2000 compliance will not be material; however,
future anticipated costs are difficult to estimate with any certainty and may
differ materially from those currently projected based on the results of the
assessment of our Year 2000 compliance. Anticipated costs associated with our
Year 2000 compliance program do not include time costs that may be incurred as
a result of any potential failure of third parties to become Year 2000
compliant or cost to implement our contingency plans.
We believe that both of our Web sites and auction software are Year 2000
compliant; however, full compliance will be verified by our third party
providers no later than the end of December, 1999. We currently run various
third party applications that may require Year 2000 updates. These are
available and are expected to implemented no later than the end of the third
quarter of 1999.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Registration Statement contains forward-looking statements. These
forward-looking statements are not historical facts, but rather are based on
our current expectations, estimates and projections about our industry, beliefs
and assumptions. Words such as "anticipates," "expects," "intends," "plans,"
"believes," "seeks," "estimates" and similar expressions are intended to
identify forward-looking statements. These statements are not guarantees of
future performance and are subject to certain risks, uncertainties and other
factors, some of which are beyond our control, are difficult to predict and
could cause actual results to differ materially from those expressed or
forecasted in the forward-looking statements. These risks and uncertainties are
described elsewhere in this Registration Statement. We caution you not to place
undue reliance on these forward-looking statements, which reflect our
management's view only as of the date of this Registration Statement. We are
not obligated to update these statements or publicly release the result of any
revisions to them to reflect events or circumstances after the date of this
Registration Statement or to reflect the occurrence of unanticipated events.
Risk Factors. The following are among the risks which could materially and
adversely affect our business, financial condition or results of future
operations:
1. We have an accumulated deficit and we anticipate continuing losses.
Accordingly, we may experience significant liquidity and cash flow
problems if we are not able to raise additional capital as needed and
on acceptable terms.
2. Because we have been in business for a short period of time, there is
limited information upon which investors can evaluate our business.
You should consider the likelihood of our future success to be highly
speculative
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in view of our limited operating history, as well as the complications
frequently encountered by similarly situated companies in the early
stages of development, particularly companies in the new and rapidly
changing Internet market.
3. We may not be able to compete effectively. The market for used heavy
equipment sales on the Internet is rapidly evolving. We believe that
in order to attract the maximum amount of traffic to our Web sites and
increase our customer base, we must establish ourselves as a leading
used equipment site on the Internet. If we fail to do so quickly,
competitors may prevent us from obtaining a leading market position.
4. We cannot predict our future revenues or whether our services will be
accepted. We have only recently developed and begun marketing our
services and, to date, our revenues have been negligible.
5. We depend on the Internet. Internet usage may be inhibited if the
Internet infrastructure is not able to support the demands placed on
it, or if there are security and authentication concerns with respect
to the transmission over the Internet of confidential information.
6. We depend on third party providers and Web site operators, who may
experience service slowdowns, malfunctions, outages and capacity
limitations.
7. We may become subject to burdensome government regulation. There are
currently few laws or regulations directly attributable to access to
or commerce on the Internet. It is possible that laws may be adopted
covering issues such as privacy, defamation, pricing, taxation,
content regulation, quality of products and services and intellectual
property ownership and infringement.
8. Misappropriation of our intellectual property could impact our
competitive position. We rely on trade secret and copyright laws to
protect our proprietary technologies. There can be no assurance that
these laws will provide sufficient protection to us.
9. Sale of used equipment over the Internet is a new and emerging market.
Growth in our user base relies on obtaining customers who have
historically used traditional means of commerce to purchase equipment.
For us to be successful, these companies must accept and use novel
ways of conducting business and exchanging information.
10. Risk of capacity constraints. We seek to generate a high volume of
traffic in transactions. Accordingly, any substantial increase in the
volume of traffic on our Web site or in the number of auctions being
conducted will require us to expand and upgrade our technology,
transaction processing systems and network infrastructure. Any failure
to expand or upgrade our systems could have a material adverse effect
on our business.
11. Rapid technological change. Our future success will depend on our
ability to adapt to rapidly changing technologies, to adapt our
services to evolving industry standards and new Internet, networking
or telecommunications technologies or other technological changes
which could require substantial expenditures by us to modify or adapt
our services or infrastructure.
12. Risks associated with international operations. A component of our
strategy is to expand internationally. We have limited experience in
international operations, and there are certain risks inherent in
doing business on an international basis, such as legal uncertainty
regarding liability, tariffs and other trade barriers, longer payment
cycles, different accounting practices, problems in collecting
accounts receivable, political instability, seasonal reductions in
business activity and potentially adverse tax consequences.
13. Ability to compete. Many of our potential competitors have longer
operating histories, larger customer bases, greater brand recognition
and significantly greater financial, marketing and other resources
than we do.
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ITEM 2. PLAN OF OPERATION.
We estimate that we will require $2,000,000 in excess of anticipated revenues
over the next twelve months in working capital to operate the equipment listing
portion of our business and to develop and launch our auction Web site
business.
We are seeking additional funds, primarily equity investment, in order to meet
this goal.
As a result, the report of our independent auditor on our financial statement
as of May 31, 1999 included elsewhere herein, expresses doubt about our ability
to continue as a going concern.
ITEM 3. DESCRIPTION OF PROPERTY
We lease 6,958 square feet in an office building located at 21045 Commercial
Trail, Boca Raton, FL 33486.
<TABLE>
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Square Gross annual rent
Commencement Date Termination Date Footage (including Utilities)
--------------------- ---------------------- -------------------- -------------- -------------------------
<S> <C> <C> <C> <C>
Lease #1 March 11, 1999 March 11, 2000 1,200 $18,000
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Suite 101
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Lease #2 May 20, 1999 Jan 20, 2002 1,843 $39,624
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Mezzanine
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Lease #3 July 19, 1999 June 24, 2002 3,915 $39,624
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Top Floor
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ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following information is furnished as of September 30, 1999 with respect to
the beneficial ownership of our shares of common stock by each current director
and executive officer, all of our directors and executive officers as a group
and all persons known by us to be the beneficial owners of five percent or more
of our outstanding stock.
Name and Address Percent of Class
of Beneficial Owner (1) Amount Beneficially Owned (2)
- ----------------------- ----------- ----------------------
John J. Lofquist (4)(5) ....... 10,478,610 39.68%
David R. Ait .................. 2,714,177 10.28%
Stephen C. Owen, Jr.(3) ....... 1,588,650 6.0%
Kenneth L. Neeley ............. 0 0%
All directors and executive
officers as a group
(4 persons).................. 14,781,437 55.98%
- ----------------
(1) Unless otherwise indicated, the address of each shareholder is 21045
Commercial Trail, Boca Raton, Florida, 33486.
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(2) Based on 23,935,173 shares of common stock currently issued and
outstanding and warrants to purchase in the aggregate 2,471,634 shares of
common stock which may be exercised within 60 days.
(3) Includes 151,300 shares of our common stock owned by Mr. Owen
individually, 378,250 shares owned by KJO Trust, a New York trust for
which Mr. Owen is the sole trustee, warrants to purchase 302,600 shares
of our common stock held by Mr. Owen individually which may be exercised
within 60 days, and warrants to purchase 756,500 shares of our common
stock held by KJO Trust which may be exercised within 60 days.
(4) If Mr. Lofquist were to default under the plan of debt adjustment
approved by the Bankruptcy Court in February, 1999, as discussed in Item 5
below, the shares would be subject to distribution by the Bankruptcy
Court. As discussed in Item 5 below, Mr. Lofquist has advised the Company
that he is seeking Court approval to pay in full his unsecured debt and
the arrearage on his secured debt and terminate the debt adjustment
proceeding, and has set aside funds with his counsel which Mr. Lofquist
believes are sufficient for this purpose.
(5) 2,250,000 shares are pledged to an unrelated third party as security for
a loan.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Our directors, executive officers, and certain significant employees as of the
date hereof, their ages, and positions are set forth below:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C>
John J. Lofquist 59 Chief Executive Officer, President, Treasurer and Director
Kenneth L. Neeley 35 Chief Financial Officer, Vice President of Finance
David R. Ait 61 Director
Stephen C. Owen, Jr. 67 Director
Significant Employees
---------------------
Darryl L. Dennis 48 Vice President of Internet Marketing
Scott C. Blundell 31 Vice President, Chief Technology Officer
Doug Tverstol 52 Vice President, Auction Administrator
William S. Whiteside 56 Vice President of Information Services
</TABLE>
EXECUTIVE OFFICERS AND DIRECTORS
John J. Lofquist founded Centrack in 1996 and has been its President and Chief
Executive Officer and a director since its inception. Prior to founding
Centrack, Mr. Lofquist served as Director of Corporate Development for Daleen
Technologies, Inc. a software company in Boca Raton Florida from 1994 to 1996.
Mr. Lofquist's prior experience in the heavy equipment industry includes
employment as Vice President of Marketing of Comstock International, Inc. a
multinational construction company from 1964 to 1972 and Co-Managing Director
of Intercontinental Dynamics, Ltd., an international equipment and materials
brokerage company from 1972 to 1978. Mr. Lofquist filed a voluntary petition
for relief under Chapter 7 of the Federal Bankruptcy Code and the court
discharged his debts in August, 1991. In October, 1998, Mr. Lofquist sought a
Chapter 13 Debt Readjustment under the Federal Bankruptcy Code and his plan of
debt adjustment was confirmed by the Bankruptcy Court in February, 1999. The
plan provides for curing the arrearage of his secured debt and discharge of his
unsecured debt. Mr. Lofquist has advised the Company that he is seeking Court
approval to pay in full his unsecured debt and the arrearage on his secured
debt and terminate the Chapter 13 proceeding, and has set aside funds with his
counsel which Mr. Lofquist believes are sufficient for this purpose.
Kenneth L. Neeley joined us on June 23, 1999. From February, 1998 to June,
1999, Mr. Neeley was the Vice President of Finance for the Closet Team, Ltd, a
company specializing in installation and designs of custom closets located in
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Boca Raton, Florida. In April, 1999, Closet Team, Ltd. filed a petition for
liquidation under Chapter 7 of the Federal Bankruptcy Law. Prior to his
position with Closet Team, Ltd., Mr. Neeley was the Treasurer and Corporate
Controller for Cancer Treatment Holdings, Inc., a corporation specializing in
healthcare from January, 1997 to February, 1998. From March, 1995 through May,
1996 Mr. Neeley was a Division Controller for ANDA Generics, Inc., a generic
drug distribution company. Prior to March, 1995 Mr. Neeley was the Accounting
Manager of General Accounting for Allied Signal Aerospace in the Commercial
Avionics Division, a subsidiary of Allied Signal, Inc.
David R. Ait was elected as a director on April 2, 1999. Mr. Ait has served as
a private consultant to the construction industry for the past five years. From
1970 to 1993, Mr. Ait was Senior Partner and Senior Manager of Forke Brothers,
a company engaged in the auction of used heavy equipment.
Stephen C. Owen, Jr. was elected as a director on September 29, 1999. Since
1990 Mr. Owen has served as President of Stephen Owen, Inc., a private
investment company. Mr. Owen has also served as chairman of Privet Row, Inc., a
limited partnership engaged in investment activities, since 1992.
SIGNIFICANT EMPLOYEES
Darryl L. Dennis joined us in March, 1999. Prior to that, Mr. Dennis was
employed by DeLight Industries, a manufacturer and distributer of specialty and
gourmet food products, as Vice President and, subsequently, President
responsible for executive level marketing since 1989.
Scott C. Blundell joined us in May, 1999. Prior to that, Mr. Blundell served as
Vice President of Information Technology for Forke Auctioneers, Inc., a company
engaged in the auction of used heavy equipment, from 1994 to 1999.
William S. Whiteside joined us in August, 1999. Prior to that, Mr. Whiteside
served as a technical writer for TSI International, Ltd., a software
development company, from January to August, 1999. Mr. Whiteside was an
independent technical consultant from 1997 through 1998. From 1993 through
1996, Mr. Whiteside was a technical writer for Daleen Technologies, a software
company located in Boca Raton, Florida.
Doug Tverstol, joined us in August, 1999. Prior to that, Mr. Tverstol served as
Vice President of Finance and Auction Administration for Forke Auctioneers,
Inc., a company engaged in the auction of used heavy equipment, since 1993. Mr.
Tverstol was a partner in the Forke Auctioneers' predecessor, Forke Brothers,
and worked for Forke since 1977.
ITEM 6. EXECUTIVE COMPENSATION
The following table sets forth all compensation paid during our last three
fiscal years to our Chief Executive Officer. No executive officers received
total annual compensation in excess of $100,000 in any of the last three
completed fiscal years. We recently adopted an incentive stock option plan that
allows our board to grant stock options to our employees, directors, and other
strategic third parties. No stock options have been granted under the plan as
of yet.
9
<PAGE> 12
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
-------------------
Name and Principal Fiscal Year Other Annual
Position Ending 5/31 Salary Bonus Compensation(1)
- -------- ----------- ------ ----- ---------------
<S> <C> <C> <C> <C>
John J. Lofquist 1999 $2,500(2) -0- $8,020
Chief Executive Officer, 1998 -0- -0- $1,000
President and Director 1997 -0- -0- -0-
</TABLE>
- -----------------------
(1) Consists solely of automobile and automobile insurance payments.
(2) Accrued pursuant to the employment agreement described below.
EMPLOYMENT AGREEMENT
The Company entered into an employment agreement with its President and Chief
Executive Officer which became effective as of January 1, 1999 and continues
for five years. Under the terms of this agreement, Mr. Lofquist will be paid a
salary of $150,000 for 1999, $175,000 per year beginning in January, 2000,
$200,000 per year beginning in January, 2001, $250,000 per year beginning in
January, 2002, and $350,000 beginning in January, 2003. Mr. Lofquist is also
entitled to receive at least 25% of the stock options issued to all of our
employees, as well as a revenue bonus equal to 2% of the increase in total
gross revenues of the Company in each fiscal year, and a profits bonus equal to
5% of the net pre-tax earnings of the Company in each fiscal quarter. Further,
under this agreement, in the event that he is terminated or resigns within two
years after a change in control of the Company, Mr. Lofquist may be entitled to
receive, at least three years' base salary plus two times the largest total of
the revenue and profits bonuses previously paid to him. No material bonuses
were earned for the fiscal year ending May 31, 1999. In addition, Mr. Lofquist
has signed agreements not to compete with the business of the Company anywhere
within the United States for one year after his employment with the Company is
terminated for any reason, to assign to the Company all intellectual property
rights to any inventions he creates or helps to create as a Centrack employee,
and not to disclose any trade secrets of the Company.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company loaned various amounts to Mr. Lofquist, Chief Executive Officer,
director, and principal shareholder, from April, 1996 to March, 1999 on open
account. The largest amount outstanding at any one time was $75,000, and as of
May 31, 1999, $65,028 was outstanding. Such amounts were repaid from time to
time with interest of 6% per annum, and repaid in full in September, 1999.
In connection with the purchase of shares from the Company in September, 1999,
by Stephen C. Owen, Jr. and a trust for which Mr. Owen is sole trustee, Mr.
Owen became a director and principal shareholder of the Company. The Company
agreed with Mr. Owen to register his shares of the Company and the trust's
shares for sale under the Securities Act of 1933, as amended (the "Act") within
150 days. Mr. Owen and the trust also have the right to add their shares to
certain other registrations by the Company of its shares under the Act.
10
<PAGE> 13
ITEM 8. DESCRIPTION OF SECURITIES
COMMON STOCK
General. We are authorized to issue 100,000,000 shares of common stock, $.0001
par value per share. As of September 30, 1999, we had 23,935,173 shares of
common stock issued and outstanding. As of such date, we had issued outstanding
warrants to purchase in the aggregate 2,471,634 shares of common stock at
exercise prices ranging from $0.095 to $2.1525 per share.
Voting Rights. Each share of our common stock has the same relative rights and
is identical in all respects to every other share of common stock. The holders
of our common stock possess exclusive voting rights in us. Each holder of our
common stock is entitled to one vote for each share held of record on all
matters submitted to a vote of holders of shares of our common stock.
Dividends. In the event that a dividend is declared, holders of common stock
will be entitled to share equally in any such dividends. Under the General
Corporation Law of the State of Delaware (the "DGCL"), we will not be allowed
to pay dividends if, after giving effect to the dividend, we would not be able
to pay our debts as they become due in the usual course of business, or our
total assets would be less than the sum of our total liabilities plus the
amount that would be needed, if we were to be dissolved at the time of the
dividend, to satisfy the preferential rights upon dissolution of shareholders
whose rights are superior to those receiving the distribution.
Liquidation. In the event of our liquidation, dissolution or winding up, each
holder of shares of the common stock would be entitled to receive, after
payment of all of our debts and liabilities, a pro rata portion of all of our
assets available for distribution to holders of the common stock.
Other Characteristics. Holders of our common stock do not have preemptive
rights with respect to any additional shares of common stock which may be
issued. Our common stock is not subject to call for redemption, and the
outstanding shares of our common stock, upon payment of the full purchase price
therefor, are fully paid and nonassessable.
CERTAIN ANTI-TAKEOVER PROVISIONS
There are currently no anti-takeover provisions in the Articles of
Incorporation or Bylaws.
The following discussion is a summary of statutory shareholder protection
provisions under the General Corporation Law of the State of Delaware ("DGCL")
which apply to certain Delaware corporations, including us. This summary is
provided for informational purposes only. As such, this summary does not
purport to be a complete discussion of, and is qualified in its entirety by
reference to, the governing law and governing corporate documents of the
Company.
Subject to some exceptions, Delaware law prohibits us from entering into
certain "business combinations" (as defined) involving persons beneficially
owning 15% or more of our outstanding common stock (or who is an affiliate of
ours and has over the past three years beneficially owned 15% or more of our
common stock) (either, for the purpose of this paragraph, an "Interested
Stockholder"), unless the Board of Directors has approved either (i) the
business combination or (ii) prior to the stock acquisition by which such
person's beneficial ownership interest reached 15% (a "Stock Acquisition"), the
Stock Acquisition. The prohibition lasts for three years from the date of the
Stock Acquisition. Notwithstanding the preceding, Delaware law allows us to
enter into a business combination with an Interested Stockholder if (i) the
business combination is approved by the our Board of Directors and authorized
by an affirmative vote of at least 66 2/3% of our outstanding voting stock
which is not owned by the Interested Stockholder or (ii) upon consummation of
the transaction which resulted in the shareholder becoming an Interested
Stockholder, such shareholder owned at least 85% of our outstanding common
stock (excluding common stock held by our officers and directors or by certain
Centrack stock plans).
11
<PAGE> 14
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S COMMON STOCK
Our common stock is currently traded on the NASDAQ Bulletin Board under the
symbol, CENK. As of September 30, 1999, the shares of our common stock were
held of record by 306 persons.
The following are the high bid and low ask prices for our common stock for the
periods indicated as reported by the NASDAQ Bulletin Board. (Centrack first
became publicly traded in connection with a reorganization on April 2, 1999.
See Description of Business - Our History and Structure) These quotations
reflect inter-dealer prices, without retail mark-up, mark-down, or commission,
and may not represent actual transactions.
NASDAQ BULLETIN BOARD STOCK PRICE TABLE
<TABLE>
<CAPTION>
- --------------------------------------- ------------------------ ------------------------
Period High Bid Low Ask
- --------------------------------------- ------------------------ ------------------------
<S> <C> <C>
April 2, 1999 - May 31, 1999 6.750 2.625
June 1, 1999 - August 31, 1999 3.125 1.125
- --------------------------------------- ------------------------ ------------------------
</TABLE>
We have never declared dividends on our common stock and do not intend to in
the near future.
ITEM 2. LEGAL PROCEEDINGS
Not Applicable.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Not Applicable.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
From October, 1996 through April, 1999, our predecessor, Centrack
International, Inc. (a Florida corporation) issued 706,625 shares of its Class
A common stock to 12 individuals for cash or conversion of convertible
promissory notes, and 750,000 shares of its Class B common stock to three
individuals and warrants to purchase 198,750 shares of its common stock to six
individuals for cash, and 135,000 shares of its common stock to six individuals
for services. Such issuances were exempt from registration under Section 4(2)
of the Securities Act of 1933, as amended (the "Act") as transactions not
involving any public offering.
In April, 1999, in connection with the merger with Hudson Valley Industries,
Inc., we issued 16,809,151 shares of our common stock and warrants to purchase
2,098,999 shares of our common stock to our existing shareholders in exchange
for the shares of Class A and Class B common stock then outstanding, in a ratio
of 10.561 post-merger shares for each share of Class A or Class B common stock
held by the shareholder. Such issuance was exempt from registration under
Section 3(a)(9) of the Act as an exchange with existing security holders
exclusively where no commission or other remuneration was paid or given
directly or indirectly for soliciting such exchange.
In July, 1999, we issued 15,842 shares of our common stock to one individual
upon conversion of a convertible promissory note. Such issuance was exempt from
registration under Section 4(2) of the Act as a transaction not involving any
public offering.
12
<PAGE> 15
From July 1, 1999 to September 30, 1999, we issued 528,050 shares of our common
stock to 8 warrant holders upon the exercise of outstanding warrants. Such
shares were exempt from registration under Section 4(2) of the Act as
transactions not involving any public offering.
In September of 1999, we issued 529,550 shares of our common stock and warrants
to purchase up to 1,059,100 shares of our common stock at prices ranging from
$1.6525 per share to $2.1525 per share, exercisable until September, 2003, to
two purchasers for cash. Such issuances were exempt from registration under
Section 4(2) of the Act as transactions not involving any public offering.
We issued 350,000 shares of our common stock to one individual upon his
cancellation as of August 31, 1999 of three promissory notes. Such issuance was
exempt from registration under Section 4(2) of the Act as a transaction not
involving any public offering.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL") makes
provision for the indemnification of officers and directors of corporations in
terms sufficiently broad to indemnify our officers and directors under certain
circumstances from liabilities (including reimbursement of expenses incurred)
arising under the Securities Act. Section 102(b)(7) of the DGCL permits a
corporation to provide in its Certificate of Incorporation that a director of
the Company shall not be personally liable to the Company or its stockholders
for monetary damages for breach of fiduciary duty as a directors, except for
liability (i) for any breach of the director's duty of loyalty to the Company
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) in respect
of certain unlawful dividend payments or stock redemption or repurchases, or
(iv) for any transaction from which the director derived an improper personal
benefit.
As permitted by the DGCL, our Certificate of Incorporation (the "Charter")
provides that, to the fullest extent permitted by the DGCL, no director shall
be personally liable to the Company or to its stockholders for monetary damages
for breach of his or her fiduciary duty as a director. The effect of this
provision in the Charter is to eliminate the rights of the Company and its
stockholders (through stockholders' derivative suits on behalf of the Company)
to recover monetary damages against a director for breach of fiduciary duty as
a director thereof (including breaches resulting from negligent or grossly
negligent behavior) except in the situations described in clauses (i)-(iv),
inclusive, above. These provisions will not alter the liability of directors
under federal securities laws. Our Bylaws (the "Bylaws") provide that the
Company shall indemnify any of our officers and directors, and may indemnify
any of our employees or agents, both as to action in their official capacity
and action in any other capacity while an officer, director, employee, or agent
of the Company, from and against any and all of the expenses or liabilities,
including attorneys' fees, incurred in defending a civil, criminal,
administrative or investigative action, to the fullest extent authorized by the
DGCL (except an action, suit or proceeding brought by us upon the authority of
our Board of Directors, unless the Delaware Court of Chancery determines that
indemnification is fair and reasonable.) These expenses shall be paid in
advance of the final proceedings.
The Bylaws also provide that indemnification provided for in the Bylaws shall
not be deemed exclusive of any other rights to which the indemnified party may
be entitled; and that the amount of indemnity to which any officer or any
director may be entitled shall be fixed by the Board of Directors, except that
in any case where there is no disinterested majority of the Board available,
the amount shall be fixed by arbitration pursuant to then existing rules of the
American Arbitration Association.
In addition to the above, we provide indemnity insurance pursuant to which
officers and directors are indemnified or insured against liability or loss
under certain circumstances, which may include liability or related loss under
the Act and the Securities Exchange Act of 1934, as amended.
13
<PAGE> 16
Insofar as indemnification for liabilities under the Act may be permitted to
directors, officers or persons controlling the Company pursuant to the
foregoing provisions, we believe, such indemnification is against public policy
as expressed in the Act and is therefore unenforceable.
PART F/S
The information required by this item is included in the Financial Statements
set forth on pages F-1 through F-13 hereof.
PART III
ITEM 1. INDEX TO EXHIBITS
3.1 Certificate of Incorporation of the Company filed October,
1996, Certificate of Amendment of Certificate of
Incorporation filed March, 1999, Corrected Certificate of
Merger filed April, 1999, Certificate of Amendment filed
October, 1999
3.2 Bylaws of the Company adopted October 14, 1999
10.1 Agreement between Centrack International, Inc. and Heartland
Communications, Inc. dated June 4, 1999
10.2 Agreement between Centrack International, Inc. and Amigas
Venture Group dated June 18, 1999
10.3 Agreement between Centrack International, Inc. and i-on
Interactive, Inc. dated April 6, 1999
10.4 Agreement between Centrack International, Inc. and OpenSite
Technologies, Inc. dated May 28, 1999
10.5 Employment Agreement between Centrack International, Inc. and
John J. Lofquist dated January 1, 1999 (Exhibits omitted),
Invention Assignment and Confidentiality Agreement between
Centrack International, Inc. and John J. Lofquist dated
January 1, 1999, and Non-solicitation and Non-compete
Agreement between Centrack International, Inc. and John J.
Lofquist dated January 1, 1999
10.6(a) Registration Rights Agreement between Centrack
International, Inc. and KJO Trust dated September 29, 1999
10.6(b) Registration Rights Agreement between Centrack
International, Inc. and Stephen C. Owen, Jr. dated
September 29, 1999
10.6(c) Warrant to purchase common stock of Centrack
International, Inc. issued to Stephen C. Owen, Jr. on
September 29, 1999
10.6(d) Warrant to purchase common stock of Centrack
International, Inc. issued to KJO Trust on September 29, 1999
10.7(a) Pledge and Escrow Agreement by and between John Lofquist,
Nofal Kahook, and Burt E. Eisenberg, P.A. dated May 17, 1999
(Exhibits omitted)
10.7(b) Pledge and Escrow Agreement by and between John Lofquist,
Nofal Kahook, and Burt E. Eisenberg, P.A. dated September 17,
1999 (Exhibits omitted) ($50,000)
10.7(c) Pledge and Escrow Agreement by and between John Lofquist,
Nofal Kahook, and Burt E. Eisenberg, P.A. dated September 17,
1999 (Exhibits omitted) ($60,000)
27.1 Financial Data Schedule
ITEM 2. DESCRIPTION OF EXHIBITS
The exhibits referred to in Item 1 of this Part III are attached to this Form
10-SB and follow the Company's Audited Consolidated Financial Statements.
14
<PAGE> 17
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, as
amended, the registrant has caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
CENTRACK INTERNATIONAL, INC.
By: /s/ John J. Lofquist
-----------------------------------
John J. Lofquist
President and Chief Executive Officer
Date: October 29, 1999
15
<PAGE> 18
CENTRACK INTERNATIONAL, INC.
(A Company in the Development Stage)
FINANCIAL STATEMENTS
Balance Sheets as of May 31, 1999 and 1998 and
August 31, 1999 (unaudited)
Statements of Operations, Statements of Changes in Stockholders'
Equity and Statements of Cash Flows for the Years Ended
May 31, 1999, 1998 and 1997 and for the
Period April 4, 1996 (inception) to May 31, 1999, the Three Months
Ended August 31, 1999 and 1998 (unaudited),
and for the Period April 4, 1996 (inception) to August 31, 1999
(unaudited)
<PAGE> 19
CENTRACK INTERNATIONAL, INC.
(A Company in the Development Stage)
TABLE OF CONTENTS
Page
----
Report of Independent Auditors .................................. 1
Balance Sheets
As of May 31, 1999 and 1998 and
August 31, 1999 (unaudited)............................. 2
Statements of Operations
For the years Ended May 31, 1999, 1998 and 1997,
for the Period From April 4, 1996 (inception) to
May 31, 1999, for the three months ended
August 31, 1999 and 1998 (unaudited) and
for the period from April 4, 1996 (inception) to
August 31, 1999 (unaudited) ............................ 3
Statements of Changes of in Stockholders' Equity
For the period from April 4, 1996 (inception) to
May 31, 1999 and for the three months ended
August 31, 1999 (unaudited) ............................ 4
Statements of Cash Flows
For the years ended May 31, 1999, 1998 and 1997,
for the period from April 4, 1996 (inception) to
May 31, 1999, for the three months ended
August 31, 1999 and 1998 (unaudited) and
for the period from April 4, 1996 (inception) to
August 31, 1999 (unaudited) ............................ 5
Notes to the Financial Statements ............................... 6-11
<PAGE> 20
CARUSO & CARUSO
Certified Public Accountants, P.A.
================================================================================
6971 N. Federal Highway o Suite 402 o Boca Raton, Florida 33487
Tel: (561) 995-1070 o Fax: (561) 994-5506
To the Board of Directors and Stockholders
Centrack International Inc., a Delaware corporation
We have audited the accompanying balance sheets of Centrack International, Inc.
(a company in the development stage) as of May 31, 1999 and 1998, and the
related statements of operations, changes in stockholders' equity, and cash
flows for each of the three years in the period ended May 31, 1999 and for the
period April 4, 1996 (inception) through May 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 the opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Centrack International, Inc.
(a company in the development stage) as of May 31, 1999 and 1998, and the
results of its operations and its cash flows for each of the three years in the
period ended May 31, 1999 and for the period April 4, 1996 (inception) through
May 31, 1999 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 8 to the
financial statements, the Company has incurred significant operating losses
during the development stage. Although the Company is negotiating financing
arrangements that will provide additional working capital until revenues from
full scale operations are sufficient, the Company cannot predict what the
outcome of the negotiations will be. These conditions raise substantial doubt
about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ Caruso & Caruso, CPA's, P.A.
----------------------------------
Caruso & Caruso, CPA's, P.A.
Boca Raton, Florida
August 31, 1999
<PAGE> 21
CENTRACK INTERNATIONAL, INC.
(A Company in the Development Stage)
BALANCE SHEETS
<TABLE>
<CAPTION>
MAY 31, 1998 MAY 31, 1999 AUGUST 31, 1999
------------ ------------ ---------------
unaudited
<S> <C> <C> <C>
Assets
Current Assets
Cash and Cash Equivalents $ 4,801 $ 281,318 $ 145,600
Loan Receivable - related party Note (2) 48,329 65,028 65,028
Prepaid and Other Assets 200 2,138 38,981
--------- --------- -----------
Total Current Assets 53,330 348,484 249,609
--------- --------- -----------
Fixed Assets
--------- --------- -----------
Web site Development 15,836 139,245 224,230
Furniture & Fixtures -- 48,803 98,854
Leasehold Improvements -- 3,384 19,627
Computer Hardware -- 51,882 79,771
Telephone System -- 4,404 17,981
--------- --------- -----------
15,836 247,718 440,463
Less: Accumulated Depreciation & Amortization -- (21,694) (51,218)
--------- --------- -----------
Fixed Assets, net 15,836 226,024 389,245
Other Assets
Deposits 100 14,100 19,287
--------- --------- -----------
Total Assets $ 69,266 $ 588,608 $ 658,141
========= ========= ===========
Liabilities & Stockholders' Equity
Current Liabilities
Accounts Payable and Accrued Expenses $ -- $ 240,318 $ 310,719
Loan Payable - Related Parties Note (2) 12,500 -- --
Loan Payable Note (4) -- 250,000 --
--------- --------- -----------
Total Current Liabilities 12,500 490,318 310,719
Long Term Liabilities
Commitments and Contingencies Note (3)
--------- --------- -----------
Total Liabilities 12,500 490,318 310,719
--------- --------- -----------
Stockholders' Equity
Common Stock, .0001 par, 100,000,000
shares authorized, 62,500 issued and
outstanding at 5/31/98, 21,402,034 issued
and outstanding at 5/31/99, 23,055,623
issued and outstanding at 8/31/99 7 2,140 2,305
Additional Paid in Capital 111,663 736,405 1,656,691
Deficit Accumulated During the
Development Stage (54,904) (640,255) (1,311,574)
--------- --------- -----------
Total Stockholders' Equity 56,766 98,290 347,422
--------- --------- -----------
Total Liabilities & Stockholders' Equity $ 69,266 $ 588,608 $ 658,141
========= ========= ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
2
<PAGE> 22
CENTRACK INTERNATIONAL, INC.
(A Company in the Development Stage)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR YEAR YEAR PERIOD FROM
ENDED ENDED ENDED APRIL 4, 1996
MAY 31, MAY 31, MAY 31, (INCEPTION) TO
1997 1998 1999 MAY 31, 1999
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Revenues
Listing Fees $ -- $ 2,619 $ 10,342 $ 12,961
Value Added Partner Fees -- 1,000 -- 1,000
------------ ------------ ------------ ------------
Total Revenues -- 3,619 10,342 13,961
------------ ------------ ------------ ------------
Operating Expenses
Marketing & Sales -- 1,663 39,390 41,053
General, Administrative and Development 11,661 36,770 552,600 606,011
------------ ------------ ------------ ------------
Total Operating Expenses 11,661 38,433 591,990 647,064
------------ ------------ ------------ ------------
Net Loss Before Other Income (Expense) (11,661) (34,814) (581,648) (633,103)
Other Income (Expense)
Interest Expense (449) (3,000) (6,444) (9,893)
Interest Income -- -- 2,741 2,741
------------ ------------ ------------ ------------
Net Loss $ (12,110) $ (37,814) $ (585,351) $ (640,255)
============ ============ ============ ============
Earnings (Loss) per share of common stock
basic (Note 1) $ (0.001) $ (0.002) $ (0.035) $ (0.040)
============ ============ ============ ============
Earnings (Loss) per share of common stock -
assuming dilution (Note 1) $ (0.001) $ (0.002) $ (0.035) $ (0.040)
============ ============ ============ ============
Weighted average shares 15,699,454 15,699,454 16,621,241 15,991,513
============ ============ ============ ============
Fully diluted weighted average shares 15,699,454 15,699,454 16,949,247 16,095,438
============ ============ ============ ============
<CAPTION>
THREE MONTHS THREE MONTHS PERIOD FROM
ENDED ENDED APRIL 4, 1996
AUGUST 31, AUGUST 31, (INCEPTION) TO
1998 1999 AUGUST 31, 1999
------------ ------------ ----------------
UNAUDITED UNAUDITED UNAUDITED
<S> <C> <C> <C>
Revenues
Listing Fees $ -- $ -- $ 12,961
Value Added Partner Fees -- -- 1,000
------------ ------------ ------------
Total Revenues -- -- 13,961
------------ ------------ ------------
Operating Expenses
Marketing & Sales -- 161,846 202,899
General, Administrative and Development 14,702 496,460 1,102,471
------------ ------------ ------------
Total Operating Expenses 14,702 658,306 1,305,370
------------ ------------ ------------
Net Loss Before Other Income (Expense) (14,702) (658,306) (1,291,409)
Other Income (Expense)
Interest Expense -- (13,013) (22,906)
Interest Income -- -- 2,741
------------ ------------ ------------
Net Loss $ (14,702) $ (671,319) $ (1,311,574)
============ ============ ============
Earnings (Loss) per share of common stock
basic (Note 1) $ (0.001) $ (0.030) $ (0.080)
============ ============ ============
Earnings (Loss) per share of common stock -
assuming dilution (Note 1) $ (0.001) $ (0.028) $ (0.079)
============ ============ ============
Weighted average shares 15,699,454 22,718,147 16,488,981
============ ============ ============
Fully diluted weighted average shares 15,699,454 24,329,274 16,608,132
============ ============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
3
<PAGE> 23
CENTRACK INTERNATIONAL, INC.
(A Company in the Development Stage)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
DURING THE
COMMON STOCK ADDITIONAL DEVELOPMENT
SHARES AMOUNT PAID IN CAPITAL STAGE
--------------------------------------------------------
<S> <C> <C> <C> <C>
Inception, April 4, 1996, initial capitalization of 100 $ -- $ 496 $ --
Centrack International, Inc., a Florida Corp.
Net Loss -- -- -- (4,980)
--------------------------------------------------------
Balance, May 31, 1996 100 -- 496 (4,980)
Additional Capital Contributions -- -- 4,031 --
Net Loss -- -- -- (12,110)
--------------------------------------------------------
Balance, May 31, 1997 100 -- 4,527 (17,090)
Centrack International, Inc., a Florida Corp
Common Stock cancelled (100) -- -- --
Issuance of Centrack International, Inc., a -- -- 107,136 --
Florida Corp. Class A Common 47,500 5 -- --
Class B Common Stock 15,000 2 -- --
Net Loss -- -- -- (37,814)
--------------------------------------------------------
Balance, May 31, 1998 62,500 7 111,663 (54,904)
Issuance of Centrack International, Inc., a -- -- 124,742 --
Florida Corp. Class A Common 789,125 79 -- --
Class B Common Stock 735,000 74 -- --
Reverse Acquisition, April 2, 1999 (Note 1)
Exchange of Centrack International, Inc. a
Florida Corp. Class A Common (851,625) (85) -- --
Class B Common Stock (735,000) (74) -- --
Issuance of Common Stock of Centrack
International, Inc., a Delaware Corp. to owners
of Centrack International, Inc., a Florida Corp. 15,699,454 1,570 500,000 --
Outstanding Common Stock of Centrack
International, Inc., a Delaware Corp., formerly
Hudson Valley Industries, Inc. 5,702,580 569 -- --
Net Loss -- -- -- (585,351)
--------------------------------------------------------
Balance at May 31, 1999 21,402,034 2,140 736,405 (640,255)
Issuance of Common Stock (unaudited) 543,892 54 357,300 --
Issuance of Common Stock of Centrack
International, Inc., a Delaware Corp. to owners
of Centrack International, Inc.,
a Florida Corp. (unaudited) 1,109,697 111 -- --
Conversion of Outstanding
Debt to Equity (Note 4) (unaudited) -- -- 562,986 --
Net Loss (unaudited) -- -- -- (671,319)
--------------------------------------------------------
Balance, August 31, 1999 (unaudited) 23,055,623 $ 2,305 $ 1,656,691 $(1,311,574)
========================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
4
<PAGE> 24
CENTRACK INTERNATIONAL, INC.
(A Company in the Development Stage)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR YEAR YEAR PERIOD FROM
ENDED ENDED ENDED APRIL 4, 1996
MAY 31, MAY 31, MAY 31, (INCEPTION) TO
1997 1998 1999 MAY 31, 1999
------------ ------------ ------------ ------------
UNAUDITED
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities
Net Loss $ (12,110) $ (37,814) $ (585,351) $ (640,255)
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation & Amortization -- -- 21,694 21,694
(Increase) Decrease in
Prepaid & Other Assets -- (200) (1,938) (2,138)
Deposits (100) -- (14,000) (14,100)
Increase (Decrease) in Accounts
Payable & Accrued Expenses 1,587 (1,204) 240,318 240,318
----------- ----------- ----------- -----------
Net Cash Used in Operating Activities (10,623) (39,218) (339,277) (394,481)
----------- ----------- ----------- -----------
Cash Flows from Investing Activities
Loan Receivable & Interest -- (48,329) (16,699) (65,028)
Acquisition of Fixed Assets &
Web site Development (908) (14,928) (231,882) (247,718)
----------- ----------- ----------- -----------
Net Cash Used in Investing Activities (908) (63,257) (248,581) (312,746)
----------- ----------- ----------- -----------
Cash Flows from Financing Activities
Reductions in Debt & Interest Income -- (12,367) (12,500) (24,867)
Proceeds from Debt & Interest Expense 7,500 12,500 250,000 274,867
Conversion of Outstanding Debt to
Contributed Capital -- -- -- --
Equity Contributions 4,031 107,136 624,742 736,405
Issuance of Common Stock -- 7 2,133 2,140
----------- ----------- ----------- -----------
Net Cash Provided by Financing Activities 11,531 107,276 864,375 988,545
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH -- 4,801 276,517 281,318
CASH - BEGINNING -- -- 4,801 --
----------- ----------- ----------- -----------
CASH - ENDING $ -- $ 4,801 $ 281,318 $ 281,318
=========== =========== =========== ===========
<CAPTION>
THREE MONTH THREE MONTHS PERIOD FROM
ENDED ENDED APRIL 4, 1996
AUGUST 31, AUGUST 31, (INCEPTION) TO
1998 1999 AUGUST 31, 1999
------------ ----------- ------------
UNAUDITED UNAUDITED
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net Loss $ (14,702) $ (671,319) $(1,311,574)
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation & Amortization -- 29,524 51,218
(Increase) Decrease in
Prepaid & Other Assets 200 (36,843) (38,981)
Deposits (50) (5,187) (19,287)
Increase (Decrease) in Accounts
Payable & Accrued Expenses 1,200 70,401 310,719
----------- ----------- -----------
Net Cash Used in Operating Activities (13,352) (613,424) (1,007,905)
----------- ----------- -----------
Cash Flows from Investing Activities
Loan Receivable & Interest (8,000) -- (65,028)
Acquisition of Fixed Assets &
Web site Development -- (192,745) (440,463)
----------- ----------- -----------
Net Cash Used in Investing Activities (8,000) (192,745) (505,491)
----------- ----------- -----------
Cash Flows from Financing Activities
Reductions in Debt & Interest Income -- -- (24,867)
Proceeds from Debt & Interest Expense -- 312,986 587,853
Conversion of Outstanding Debt to
Contributed Capital -- (562,986) (562,986)
Equity Contributions 17,349 920,286 1,656,691
Issuance of Common Stock 2 165 2,305
----------- ----------- -----------
Net Cash Provided by Financing Activities 17,351 670,451 1,658,996
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH (4,001) (135,718) 145,600
CASH - BEGINNING 4,801 281,318 --
----------- ----------- -----------
CASH - ENDING $ 800 $ 145,600 $ 145,600
=========== =========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
5
<PAGE> 25
CENTRACK INTERNATIONAL, INC
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Centrack International, Inc. (the Company) is a profit corporation organized
under the laws of the State of Delaware. The Company was incorporated on October
1, 1996 as Hudson Valley Industries, Inc. (HUVI). On April 2, 1999, the Company,
an OTC Bulletin Board publicly traded company, with no substantial assets or
liabilities, merged with Centrack International, Inc. (the predecessor company),
a Florida corporation, which maintained an internet based business involving
listing fees, advertising, sourcing and information services for the heavy
equipment industry. Shareholders of the predecessor company received 10.561
shares of Hudson Valley stock for each share of the predecessor company; a total
of 16,809,151 shares, in exchange for 100% of the outstanding stock of the
predecessor company and the conversion of a $500,000 bridge loan to capital. Of
the 16,809,151 shares authorized per the merger agreement, 15,699,454 shares had
been issued as of May 31, 1999, the balance of which has been issued subsequent
to year end. In connection with the merger Hudson Valley changed its name to
Centrack International, Inc. The merger was accounted for as a capital
transaction with no recognition of goodwill or other intangible assets.
Subsequent to the merger, the owners of the predecessor company owned 75% of the
Company. Since the transaction was, in substance, a recapitalization of Centrack
International, Inc. (the predecessor company) and not a business combination,
pro forma information is not presented. Accordingly, the historical data
contained in the financial statements is that of the predecessor company.
DEVELOPMENT STAGE
The Company's principal operations, comprised of services of listings on its Web
site, advertising, sourcing, information and auctions of used heavy equipment,
have not commenced as of May 31, 1999. Although some nominal advertising and
listing revenues have been earned as of the date of these financial statements,
substantially all the efforts of the Company have been focused on the
establishment of its Web site, internal infrastructure, and beta testing of the
Company's auction services. Accordingly, the Company is in the Development
Stage.
INTERIM FINANCIAL INFORMATION
The accompanying unaudited financial statements as of August 31, 1999 and for
the three months ended August 31, 1999 and 1998 have been prepared by the
Company and do not include all disclosures provided in the annual financial
statements. These interim financial statements are the representation of
management and should be read in conjunction with the accompanying annual
audited financial statements and the footnotes thereto. Results for the interim
period are not necessarily indicative of the results to be expected for the year
ended May 31, 2000. However, the accompanying interim financial statements
reflect all material adjustments, which are, in the opinion of management, of a
normal and recurring nature necessary for a fair presentation of the financial
position and results of operations of the Company. Unless otherwise stated, all
information subsequent to May 31, 1999 is unaudited.
6
<PAGE> 26
CENTRACK INTERNATIONAL, INC
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
REVENUE RECOGNITION
Revenues are derived primarily from listing fees for used heavy equipment for
sale on the Company's Web site, success fees on auction transactions calculated
as a percentage of the final sales value and advertising revenues. Revenues
related to listing fees are recognized in the period when the item is listed.
Revenues related to success fees are recognized at the conclusion of the auction
when there is at least one bid above the seller's specified minimum price or
reserve price, whichever is higher. Advertising revenues are recognized in the
period they are earned.
EARNINGS PER SHARE
As per Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 128 (SFAS 128), Earnings Per Share, standards for computing and
presenting earnings per share (EPS) applies to publicly held common stock or
potential common stock. It requires dual presentation of basic and diluted EPS
on the face of the income statement for all entities with complex capital
structures. Basic EPS excludes dilution and is computed by dividing income
available to common stockholders by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity.
In computing EPS as a result of the reverse acquisition, the number of shares
outstanding for the period from June 1, 1998 until the date of the reverse
acquisition, April 2, 1999, is the number of shares issued by the Company to the
shareholders of the predecessor company. For the period April 2, 1999 the number
of shares considered to be outstanding is computed as actual number of shares of
the Company outstanding during that period. The average number of shares
outstanding for the full year being reported upon has been computed by averaging
these two amounts. Other appropriate adjustments have been made to deal with
changes in numbers of shares issued during the period. Diluted EPS was computed
assuming the conversion of all outstanding warrants to common stock. EPS for
periods prior to May 31, 1999 presented for comparative purposes is computed
using the number of shares issued by the Company to the shareholders of the
predecessor company in the reverse acquisition transaction.
ADVERTISING EXPENSE
The Company recognizes advertising expenses in accordance with Statement of
Position ("SOP") 93-7 "Reporting on Advertising Costs." As such, the company
expenses the costs of producing advertisements at the time production occurs,
and expenses the cost of communicating advertising in the period in which the
advertising space or airtime is used.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is computed using the
straight-line method based on the estimated useful lives of the assets, which
range from three to five years. Costs for routine repairs and maintenance are
expensed as incurred and gains and losses on the disposal of assets are
recognized in the period such disposals occur. Depreciation expense for the
years ended May 31, 1999, 1998 and 1997 is $21,694, $0 and $0, respectively.
7
<PAGE> 27
CENTRACK INTERNATIONAL, INC
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
SOFTWARE DEVELOPMENT COSTS
Internal and external costs incurred to develop internal-use software are
capitalized as incurred and such costs will be amortized over three years once
the software is placed into use or made available on the Web site.
INCOME TAXES
The Company files its tax return with the Internal Revenue Service as a "C"
Corporation. Deferred income taxes are recognized by applying statutory tax
rates to future years' differences between the tax bases and financial reporting
amounts of assets and liabilities. Due to the fact that the Company is in the
development stage, no deferred tax asset/valuation allowance has been recognized
as it is not determinable that the Company will realize any benefit from the
loss carryforwards before they expire. The Company has net operating loss
carryforwards for federal and State purposes at May 31, 1999 of $139,860 that
expire at varying times through fiscal year 2013.
USE OF ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with generally accepted
accounting principles requires that management make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the respective reporting
periods. Actual results could vary from these estimates and assumptions.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations of
credit risk consist primarily of cash and cash equivalents. The Company
maintains its cash and cash equivalents in bank deposit accounts, the balances
of which, at times, may exceed federally insured limits.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issued SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. The Company does not anticipate
the impact of this pronouncement will be material.
2. RELATED PARTY TRANSACTIONS
The Company's financing during its development stage has been provided by
non-interest bearing loans and capital contributions to the Company by its
shareholders and other third parties. Shareholders' contribution amounts
recorded as additional paid in capital as of May 31, 1999 and 1998 were $736,405
and $111,663, respectively. At May 31, 1998 the Company had liabilities to its
shareholders of $12,500. Additionally, the Company has loaned funds to the Chief
Executive
8
<PAGE> 28
CENTRACK INTERNATIONAL, INC
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
Officer from time to time on open account with interest accrued at 6% per annum.
The balance of the amounts outstanding at May 31, 1999 and 1998, were $65,028
and $48,329, respectively.
3. COMMITMENTS
The Company leases its corporate offices in South Florida under three lease
agreements. In March 1999, the initial lease was entered into for one year with
a monthly rent of $1,500 plus applicable sales tax. In May 1999 the Company
contracted for an additional 1,843 square feet of commercial space at the same
location to house future operations and current Web site development. The lease
term is for 37 months. Rent for the first year will be $3,302 per month plus
applicable sales tax and will increase 5% in each of the succeeding two years.
Additional space was leased in July 1999 for a 35-month period. Lease payments
are $4,894 per month. Future minimum requirements are:
FYE 5/31/00 $103,565
FYE 5/31/01 99,353
FYE 5/31/02 99,353
FYE 5/31/03 4,894
-----------
$307,165
In February 1999 the Company entered into a contract with a computer service
company to provide computer related and software related service and maintenance
for a contract period of one (1) year. The Company will pay a contract fee of
$16,500 plus $86 per hour for any service hours in excess of the 200 contract
hours provided for in the contract.
4. LOAN/DEBT
In August 1996, the Company borrowed $7,500 from an unrelated third party in the
form of a demand note. In April 1998, the Company borrowed $12,500 from another
unrelated third party. In December of 1998 the Company issued Centrack
International, Inc. Stock in exchange for the notes.
In May 1999 the Company borrowed $250,000 from a third party supported by an
unsecured promissory note. The note carries a six-month term at a stated rate of
10% per annum.
5. OFFICERS' COMPENSATION
Prior to the reverse acquisition, the Company's day to day activities were
managed by certain officer/shareholders, who contributed their time on the
Company's behalf without compensation in either cash or stock. No value for
these services has been determined or recorded on the accompanying financial
statements. The Company currently employs these individuals and all other
employees through the services of an unrelated payroll leasing company. Certain
officers have received warrants to purchase common stock of the Company. The
Company has accrued salary expense due to the Chief Executive Officer and the
related payroll taxes through May 31, 1999 totaling $49,000.
9
<PAGE> 29
CENTRACK INTERNATIONAL, INC
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
6. WARRANTS AND OPTIONS
The Company has issued warrants to purchase common stock to various employees,
shareholders and unrelated parties. The warrants are for a total of
approximately 1.5 million shares and have various exercise prices ranging from
$.095 per share to $.237 per share. The warrants expire at varying times through
February 2004.
7. YEAR 2000
Many currently installed computer systems and software products are coded to
accept only two-digit entries in the date code field and cannot reliably
distinguish dates beginning January 1, 2000 from dates prior to the year 2000.
Many companies' software and computer systems may need to be upgraded or
replaced in order to correctly process dates beginning in 2000 and to comply
with the "Year 2000" requirements. The Company has reviewed its internal
programs and has determined that there are no significant Year 2000 issues
within the Company's systems or services. The Company will complete
modifications to its internal systems to attempt to ensure Year 2000 compliance.
The costs of these modifications will not be material and involve a reallocation
of internal resources rather than incremental expenditures. In addition the
Company utilizes third party hardware, software and services that may not be
Year 2000 compliant. Although the Company believes that its software and
software provided by third parties is Year 2000 compliant, the Company may be
wrong. If the Company is wrong, it could face unexpected expenses to resolve any
related issues. Further, any interruptions could negatively impact its business.
8. GOING CONCERN
The Company is in the development stage as defined by Generally Accepted
Accounting Principles. The Company's financing has been provided by capital
contributions from the shareholders and third party loans. The Company
anticipates that during the fiscal year ended May 31, 2000, revenues will begin
to increase as a result of full scale operations and capital will be increased
by the continued sale of its common stock. If either or both of these sources
fail to meet the Company's capital requirements, the Company's ability to
continue as a going concern would be in doubt. The financial statements do not
include any adjustments regarding the going concern and have been prepared with
the assumption that the Company will continue perpetually.
9. SUBSEQUENT EVENTS
In June 1999 the Company borrowed $250,000 from a third party supported by an
unsecured promissory note. The note carried a six-month term at a stated rate of
10% per annum.
In August 1999 the Company borrowed $50,000 from the same third party supported
by an unsecured promissory note. The note carried a six-month term at a stated
rate of 10% per annum.
10
<PAGE> 30
CENTRACK INTERNATIONAL, INC
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
On August 31, 1999, the Company converted the $250,000 received in May 1999,
$250,000 received in June 1999 and the $50,000 received in August 1999, $550,000
in total, plus accrued interest of $12,986 to equity for 350,000 common shares
to be issued upon receipt of the canceled notes.
In July 1999 the Company entered into a lease agreement for an additional 3,915
square feet of office space at its present location. The lease is for 35 months.
Base rent under the new lease agreement is $4,897 per month plus applicable
sales tax.
11
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
HUDSON VALLEY INDUSTRIES, INC.
FIRST: The name of the Corporation is Hudson Valley Industries, Inc.
SECOND: Its registered office is to be located at Suite 606, 1220 N. Market St.,
Wilmington, DE 19801, County of New Castle. The registered agent is American
Incorporators Ltd. whose address is the same as above.
THIRD: The nature of business and purpose of the corporation is to engage in
any lawful act or activity for which corporations may be organized under the
Delaware General Corporation Laws.
FOURTH: The total number of shares of stock which the corporation shall have
authority to issue is twenty million (20,000,000). All such shares are to have a
par value of $0.0001 and are to be of one class.
FIFTH: The name and mailing address of the incorporator is as follows:
Jennifer C. Toscano
Suite 606
1220 N. Market Street
Wilmington, DE 19801
SIXTH: The powers of the undersigned incorporator will terminate upon filing of
the certificate of incorporation. The name and mailing address of the person(s)
who will serve as initial director(s) until the first annual meeting of
stockholders or until a successor(s) is elected and qualified are:
Joan Erber
111 Great Neck Road, Suite 215
Great Neck, NY 11021
SEVENTH: Each person who serves or who has served as a director shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, provided that this provision shall
not eliminate or limit the liability of a director: (i) for any breach of
loyalty to the corporation or its stockholders: (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law: (iii) for unlawful payment of dividend or unlawful stock purchase or
redemption as such liability is imposed under Section 174 of the General
Corporation Laws of Delaware; or (iv) for any transaction from which the
director derived an improper personal benefit.
I, THE UNDERSIGNED, for the purpose of forming a corporation under the laws of
the State of Delaware, do make, file and record this Certificate, and do
certify that the facts stated herein are true, and I have accordingly hereunto
set my hand.
/s/ Jennifer C. Toscano
-----------------------
Jennifer C. Toscano
Incorporator
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 10/01/1996
960284407-2668703
<PAGE> 2
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
HUDSON VALLEY INDUSTRIES, INC.
* * * * *
Hudson Valley Industries, Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, at a meeting duly
held, adopted a resolution proposing and declaring advisable the following
amendment to the Certificate of Incorporation of said corporation.
RESOLVED. Article Fourth is hereby amended to read as follows:
"FOURTH. The total number of shares of stock which the Corporation
shall have authority to issue is One Hundred Million (100,000,000).
All such shares are to have a par value of $0.0001 and are to be of
one class."
SECOND: That in lieu of a meeting and a vote of stockholders, a majority
of the stockholders have given written consent to said amendment in accordance
with the provisions of Section 228 of the General Corporation Law of the State
of Delaware and written notice of the adoption of the amendment has been given
as provided in Section 228 of the General Corporation Law of the State of
Delaware to every stockholder entitled to such notice.
THIRD: That the aforesaid amendment was duly adopted in accordance with
the
<PAGE> 3
applicable provisions of Section 242 and 228 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, said Hudson Valley Industries, Inc. has caused this
certificate to be signed by Carl J. Kosnar, its President and attested by Carl
J. Kosnar, its Secretary, this 25th day of March, 1999.
HUDSON VALLEY INDUSTRIES, INC.
By: /s/ Carl J. Kosnar
------------------------------
Carl J. Kosnar, President
(CARL J. KOSNAR)
<PAGE> 4
CORRECTED
CERTIFICATE OF MERGER
OF
CENTRACK INTERNATIONAL, INC.
INTO
HUDSON VALLEY INDUSTRIES, INC.
*****
Pursuant to Section 103(f) of the General Corporation Law of the State of
Delaware the undersigned Corporation hereby certifies as follows:
FIRST: A Certificate of Merger of CENTRACK INTERNATIONAL, INC.,
into HUDSON VALLEY INDUSTRIES, INC. was filed in the office of the Secretary of
State of Delaware on the 1st day of April 1999.
SECOND: Article Third of the Certificate of Merger as so filed in
the State of Delaware incorrectly stated that the name of the surviving
corporation, a Delaware corporation, is HUDSON VALLEY INDUSTRIES, INC. Said
Article Third should read as follows:
THIRD: The name of the surviving corporation, a Delaware
corporation, is HUDSON VALLEY INDUSTRIES, INC., which
shall change its name to CENTRACK INTERNATIONAL, INC.
THIRD: Article Fourth of the Certificate of Merger so filed in
the State of Delaware incorrectly omitted that Article First of the Certificate
of Incorporation of HUDSON VALLEY INDUSTRIES, INC., be amended. Said Article
Fourth should read as follows:
FOURTH: The Certificate of Incorporation of HUDSON VALLEY
INDUSTRIES, INC., a Delaware corporation, shall be the
Certificate of Incorporation of the Surviving
Corporation, except that Article First of said
Certificate of Incorporation shall be amended to read
as follows:
"FIRST: The name of the corporation is CENTRACK
INTERNATIONAL, INC."
<PAGE> 5
FOURTH: Article Fifth of said Certificate of Merger incorrectly stated
that the executed agreement of merger is on file at the principal place of
business of HUDSON VALLEY INDUSTRIES, INC., at 116 John Street, Suite 1313, New
York, New York. Said Article Fifth should read as follows:
FIFTH: The executed agreement of merger is on file at the principal
place of business of HUDSON VALLEY INDUSTRIES, INC., a
Delaware corporation, at 21045 Commercial Trail, Suite 101,
Boca Raton, Florida 33486.
FIFTH: In substitution of the Certificate of Merger as originally filed,
herewith attached is a corrected Certificate of Merger is being filed in the
office of the Secretary of State of Delaware.
SIXTH: The correction affected herein is authorized by Section 103(f) of
the General Corporation Law of the State of Delaware.
<PAGE> 6
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Corrected to be executed by its President under its corporate seal this seventh
day of April 1999.
CENTRACK INTERNATIONAL, INC.
(f/k/a HUDSON VALLEY INDUSTRIES, INC.)
By: /s/ John J. Lofquist
--------------------------------
John J. Lofquist, President
<PAGE> 7
CERTIFICATE OF MERGER
CENTRACK INTERNATIONAL, INC.
INTO
HUDSON VALLEY INDUSTRIES, INC.
Filed by: Gunster, Yoakley, Valdes-Fauli & Stewart
500 East Broward Boulevard
Suite 1400
Fort Lauderdale, Florida 33394
<PAGE> 8
CERTIFICATE OF MERGER
CENTRACK INTERNATIONAL, INC.
(a Florida Corporation)
INTO
HUDSON VALLEY INDUSTRIES, INC.
(a Delaware Corporation)
The undersigned corporation, pursuant to Section 252 of the Delaware
General Corporation Law does hereby certify that:
FIRST: The name and state of incorporation of the constituent corporation
to be merger are:
(a) HUDSON VALLEY INDUSTRIES, INC., a Delaware corporation.
(b) CENTRACK INTERNATIONAL, INC., a Florida corporation.
SECOND: An agreement of merger has been approved, adopted, certified,
executed and acknowledged by each of the constituent corporations in accordance
with the provisions of Section 252(c) of the Delaware General Corporation Law.
THIRD: The name of the surviving corporation, a Delaware corporation, is
HUDSON VALLEY INDUSTRIES, INC., which shall change its name to CENTRACK
INTERNATIONAL, INC.
FOURTH: The certificate of incorporation of HUDSON VALLEY INDUSTRIES,
INC., a Delaware corporation, shall be the certificate of incorporation of the
surviving corporation, except that Article First of said Certificate of
Incorporation shall be amended to read as follows:
"FIRST: The name of the corporation is CENTRACK INTERNATIONAL, INC."
<PAGE> 9
FIFTH: The executed agreement of merger is on file at the principal
place of business of HUDSON VALLEY INDUSTRIES, INC., a Delaware corporation, at
21045 Commercial Trail, Suite 101, Boca Raton, Florida, 33486.
SIXTH: A copy of the agreement of merger will be furnished by the
surviving corporation, on request and without cost, to any stockholder of any
constituent corporation.
SEVENTH: The authorized capital stock of CENTRACK INTERNATIONAL, INC., a
Florida corporation, and the only constituent corporation which is not a
corporation of the state of Delaware is, Two Million (2,000,000) shares of
common stock, with a par value of $0.001, of which One Million Five Hundred
Eighty Six Thousand Six Hundred Twenty Five (1,586,625) shares are issued and
outstanding.
<PAGE> 10
IN WITNESS WHEREOF, this certificate has been subscribed this 1st
April 1999 by the undersigned who affirm that the statements made herein are
true under the penalties of perjury.
HUDSON VALLEY INDUSTRIES, INC. CENTRACK INTERNATIONAL, INC.
(Delaware) (Florida)
/s/ CARL KOSNAR /s/ JOHN J. LOFQUIST
- ------------------------------ -----------------------------
Carl Kosnar John J. Lofquist
<PAGE> 11
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CENTRACK INTERNATIONAL, INC.
* * * * *
Centrack International, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware.
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, pursuant to
Section 141 of the General Corporation Law of the State of Delaware, adopted a
resolution by unanimous written consent proposing and declaring advisable the
following amendment to the Certificate of Incorporation of said corporation:
RESOLVED, the Certificate of Incorporation is hereby amended by adding
Article Eighth to read as follows:
"EIGHTH: The Board of Directors shall have the authority to
adopt, amend or repeal the bylaws of the corporation."
SECOND: That in lieu of a meeting and a vote of stockholders, a
majority of the stockholders have given written consent to said amendment in
accordance with the provision of Section 228 of the General Corporation Law of
the State of Delaware and written notice of the adoption of the amendment has
been given as provided in Section 228 of the General Corporation Law of the
State of Delaware to every stockholder entitled to such notice.
THIRD: That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Sections 242 and 228 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, said Centrack International, Inc., has caused this
Certificate to be signed by John J. Lofquist, its President, this 14th day of
October, 1999.
CENTRACK INTERNATIONAL, INC.
By: /s/ John J. Lofquist
-----------------------------------
John J. Lofquist, President
Dated: October 14, 1999
---------------------------------
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
CENTRACK INTERNATIONAL, INC.
ARTICLE I - OFFICES
Section 1. The registered office of the corporation in the State of
Delaware shall be at 1220 North Market Street, Suite 606, City of Wilmington,
Delaware 19801 or at any other location designated by the Board of Directors.
The registered agent in charge thereof shall be American Incorporators, Ltd. or
any other agent as designated by the Board of Directors.
Section 2. The corporation may also have offices at such other places
as the Board of Directors may from time to time appoint or the business of the
corporation may require.
ARTICLE II - SEAL
Section 1. The corporate seal shall have inscribed thereon the name of
the corporation, the year of its organization and the words "Corporate Seal,
Delaware".
ARTICLE III - STOCKHOLDERS' MEETINGS
Section 1. GENERAL: Meetings of stockholders shall be held at the
corporation's principal place of business in Florida or at such place, either
within or without Delaware, as may be selected from time to time by the Board of
Directors.
Section 2. ANNUAL MEETINGS: The annual meeting of the stockholders
shall be held on such date and at such time as shall be designated from time to
time by the Board of Directors and stated in the notice of the meeting, at which
meetings the stockholders shall elect a Board of Directors and transact such
other business as may properly be brought before the meeting. If the annual
meeting for election of directors is not held on the date designated therefor,
the directors shall cause the meeting to be held as soon thereafter as
convenient.
<PAGE> 2
Section 3. ELECTION OF DIRECTORS: Elections of the directors of the
corporation may be by written ballot.
Section 4. SPECIAL MEETINGS: Special meetings of the stockholders may
be called at any time by the President, or the Board of Directors, or
stockholders entitled to cast at least one-fifth of the votes which all
stockholders are entitled to cast at the particular meeting. At any time, upon
written request of any person or persons who have duly called a special meeting,
it shall be the duty of the Secretary to fix the date of the meeting, to be held
not more than sixty days after receipt of the request, and to give due notice
thereof. If the Secretary shall neglect or refuse to fix the date of the meeting
and give notice thereof, then the person or persons calling the meeting may do
so.
Business transacted at all special meetings shall be confined to the
objects stated in the notice and matters germane thereto, unless all
stockholders entitled to vote are present and consent to such additional
matters.
Written notice of a special meeting of stockholders stating the time
and place and object thereof, shall be given to each stockholder entitled to
vote thereat at least ten days before such meeting, unless a greater period of
notice is required by statute in a particular case.
Section 5. QUORUM: A majority of the outstanding shares of the
corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders. If less than a majority of the
outstanding shares entitled to vote is represented at a meeting, a majority of
the shares so represented may adjourn the meeting from time to time without
further notice. 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 noticed. The stockholders present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum.
<PAGE> 3
Section 6. PROXIES: Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy, but no such proxy shall be voted or acted upon after three years from its
date, unless the proxy provides for a longer period.
A duly executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the corporation generally. All
proxies shall be filed with the Secretary of the meeting before being voted
upon.
Section 7. NOTICE OF MEETINGS: Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given which shall state the place, date and hour of the meeting, and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called.
Unless otherwise provided by law, written notice of any meeting shall
be given not less than ten nor more than sixty days before the date of the
meeting to each stockholder entitled to vote at such meeting.
Section 8. CONSENT IN LIEU OF MEETINGS: Any action required to be taken
at any annual or special meeting of stockholders of a corporation, or any action
which may be taken at any annual or special meeting of such stockholders, may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
<PAGE> 4
Section 9. LIST OF STOCKHOLDERS: The officer who has charge of the
stock ledger of the corporation shall prepare and make, at least ten days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. No share of stock upon which any installment is due and unpaid
shall be voted at any meeting. The list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the City where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
ARTICLE IV - DIRECTORS
Section 1. IDENTITY; TERM: The business and affairs of the corporation
shall be managed by its Board of Directors. The directors need not be residents
of Delaware or stockholders in the corporation. They shall be elected by the
stockholders at the annual meeting of stockholders of the corporation, and each
director shall be elected for the term of one year, and until his successor
shall be elected and shall qualify or until his earlier resignation or removal.
Section 2. REGULAR MEETINGS: Regular meetings of the Board of Directors
shall be held without notice immediately following regular meetings of the
stockholders, at the registered office of the corporation, or at such other time
and place as shall be determined by the Board of Directors.
Section 3. SPECIAL MEETINGS: Special Meetings of the Board of Directors
may be called by the President or any director on at least three days notice to
each director, either personally or by mail or by telegram.
<PAGE> 5
Special meetings shall be held at the principal place of business of the
corporation or at such other place as shall be determined by the Board of
Directors.
Section 4. QUORUM: A majority of the total number of directors shall
constitute a quorum for the transaction of business.
Section 5. CONSENT IN LIEU OF MEETING: 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 all members of the Board of Directors
or committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 6. CONFERENCE TELEPHONE: One or more directors may participate
in a meeting of the Board, of a committee of the Board of Directors or of the
stockholders, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other; participation in this manner shall constitute presence in person at
such meeting.
Section 7. COMPENSATION: Directors as such, shall not receive any
stated salary for their services, but by resolution of the Board of Directors, a
fixed sum and expenses of attendance, if any, may be allowed for attendance at
each regular or special meeting of the Board of Directors provided, that nothing
herein contained shall be construed to preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
Section 8. REMOVAL: Any director or the entire Board of Directors may
be removed, with or without cause, by the holders of a majority of the shares
then entitled to vote at an election of directors, except that when cumulative
voting is permitted, if less than the entire Board is to be removed, no director
may be removed without cause if the votes cast against his removal would
<PAGE> 6
be sufficient to elect him if then cumulatively voted at an election of the
entire Board of Directors, or, if there by classes of directors, at an election
of the class of directors of which he is a part.
Section 9. COMMITTEES. The Board of Directors, by resolution adopted by
a majority of the full Board of Directors, may designate from among its members
an executive committee and one or more other committees each of which, to the
extent provided in such resolution, shall have and may exercise all the
authority of the Board of Directors, except as prohibited by the Act.
Each committee must have two (2) or more members who serve at the
pleasure of the Board of Directors. The Board of Directors, by resolution
adopted in accordance with this Section, may designate one (1) or more directors
as alternate members of any such committee who may act in the place and stead of
any absent member or members at any meeting of such committee.
ARTICLE V - OFFICERS
Section 1. GENERAL: The executive officers of the corporation shall be
chosen by the Board of Directors and shall be a Chief Executive Officer,
President/Chief Operating Officer, Chief Financial Officer/Treasurer, Executive
Vice President, and Secretary. The Board of Directors may also choose a Chairman
and such other officers as it shall deem necessary. Any number of offices may be
held by the same person.
Section 2. SALARIES: Salaries of the officers of the corporation chosen
by the Board of Directors shall be fixed by the Board of Directors.
Section 3. TERM OF OFFICE: The officers of the corporation shall hold
office for one year and until their successors are chosen and have qualified.
Any officer or agent elected or appointed by the Board may be removed by the
Board of Directors whenever in its judgment the best interest of the corporation
will be served thereby.
Section 4. REMOVAL OF OFFICERS. An officer or agent elected or
appointed by the Board of Directors may be removed by the Board of Directors
whenever in its judgment the best interests of the corporation will be served
thereby.
<PAGE> 7
Any vacancy in any office may be filled by the Board of Directors.
Section 5. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall
see that all orders and resolutions of the Board of Directors are carried into
effect, shall have the power to appoint, set compensation for and remove such
subordinate officers and agents other than those actually appointed or elected
by the directors as the business of the Corporation may require, shall have
general management of the business of the Corporation, and shall perform all
other duties incident to the office of Chief Executive Officer and shall have
such other powers and perform such other duties as may from time to time be
assigned by the Board.
Section 6. PRESIDENT/CHIEF OPERATING OFFICER. The President/Chief
Operating Officer shall be the chief operating officer of the Corporation. Such
individual shall be responsible for the active management of the business of the
Corporation, shall perform such other duties incident to the office of
President/Chief Operating Officer, and shall have such other powers and perform
such other duties as may from time to time be assigned by the Chief Executive
Officer or the Board.
Section 7. EXECUTIVE VICE PRESIDENT: The Executive Vice President will
in the event of the absence or inability of the President to exercise his office
become acting president of the Corporation with all the rights, privileges and
powers as if he had been duly elected President. The Executive Vice President
shall also perform any and all other duties as are incident to the office or are
properly required by the Board of Directors, the Chief Executive Officer and the
President.
Section 8. SECRETARY: The Secretary will have custody of, and maintain
all of the corporate records except the financial records. Furthermore, the
Secretary will record the minutes of all meetings of the stockholders and Board
of Directors, send all notices of meetings and perform such other duties as may
be prescribed by the Board of Directors or the President. The Secretary shall
also perform any and all other duties as are incident to the office or are
properly required by the Board of Directors, and the Chief Executive Officer and
the President.
Section 9. CHIEF FINANCIAL OFFICER/TREASURER: The Chief Financial
Officer/Treasurer shall retain custody of all corporate funds and financial
<PAGE> 8
records, maintain full and accurate accounts of receipts and disbursements and
render accounts thereof at the annual meetings of stockholders and whenever else
required by the Board of Directors. The Chief Financial Officer/Treasurer shall
also perform any and all other duties as are incident to the office or are
properly required by the Chief Executive Officer or the President.
ARTICLE VI - VACANCIES
Section 1. GENERAL: Any vacancy occurring in any office of the
corporation by death, resignation, removal or otherwise, shall be filled by the
Board of Directors. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, although less than a quorum, or by a sole
director. If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of these bylaws.
Section 2. RESIGNATIONS EFFECTIVE AT FUTURE DATE: When one or more
directors shall resign from the Board, effective at a future date, a majority of
the directors then in office, including those who have so resigned, shall have
power to fill such vacancy or vacancies, the vote thereon to take effect when
such resignation or resignations shall become effective.
ARTICLE VII - CORPORATE RECORDS
Section 1. Corporate records shall be maintained at the corporation's
principal place of business or at such other location as determined by the Board
of Directors. Any stockholder of record, in person or by attorney or other
agent, shall, upon written demand under oath stating the purpose thereof, have
the right during the usual hours for business to inspect for any proper purpose
the corporation's stock ledger, a list of its stockholders, and its other books
and records, and to make copies or extracts therefrom. A proper purpose shall
mean a purpose reasonably related to such person's interest as a stockholder. In
every instance where an attorney or other agent shall be the person who seeks
<PAGE> 9
the right to inspection, the demand under oath shall be accompanied by a power
of attorney or such other writing which authorizes the attorney or other agent
to so act on behalf of the stockholder. The demand under oath shall be directed
to the corporation at its registered office in Delaware or at its principal
place of business.
ARTICLE VIII - STOCK CERTIFICATES, DIVIDENDS, ETC.
Section 1. GENERAL: The stock certificates of the corporation shall be
numbered and registered in the share ledger and transfer books of the
corporation as they are issued. They shall bear the corporate seal and shall be
signed by the Chief Executive Officer or the President and the Secretary.
Section 2. TRANSFER: Transfers of shares shall be made on the books of
the corporation upon surrender of the certificates therefor, endorsed by the
person named in the certificate or by attorney, lawfully constituted in writing.
No transfer shall be made which is inconsistent with law.
Section 3. LOST CERTIFICATE: The corporation may issue a new
certificate of stock in the place of any certificate theretofore signed by it,
alleged to have been lost, stolen or destroyed, and the corporation may require
the owner of the lost, stolen or destroyed certificate, or his legal
representative to give the corporation a bond sufficient to indemnify it against
any claim that may be made against it on account of the alleged loss, theft or
destruction of any such certificate or the issuance of such new certificate.
Section 4. RECORD DATE: In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action.
<PAGE> 10
more than sixty days prior to any other action.
If no record date is fixed:
(a) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close
of business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held.
(b) The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when
no prior action by the Board of Directors is necessary, shall be the
day on which the first written consent is expressed.
(c) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board
of Directors adopts the resolution relating thereto.
(d) A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
Section 5. DIVIDENDS: The Board of Directors may declare and pay
dividends upon the outstanding shares of the corporation from time to time and
to such extent as they deem advisable, in the manner and upon the terms and
conditions provided by statute and the Certificate of Incorporation.
Section 6. RESERVES: Before payment of any dividend there may be set
aside out of the net profits of the corporation such sum or sums as the
directors, from time to time, in their absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interests of the
corporation, and the directors may abolish any such reserve in the manner in
which it was created.
<PAGE> 11
ARTICLE IX - INDEMNIFICATION
Section 1. Provided the person proposed to be indemnified satisfies the
requisite standard of conduct for permissive indemnification by a corporation as
set forth in the applicable provisions of the General Corporation Law of the
State of Delaware (currently, Sections 145(a) and (b)), as the same may be
amended from time to time, the Corporation shall indemnify its officers and
directors, and may indemnify its employees and agents, to the fullest extent
permitted by the provisions of such Law, as the same may be amended and
supplemented, from and against any and all of the expenses or liabilities
incurred in defending a civil, criminal, administrative or investigative action,
suit or proceeding (other than in an action, suit or proceeding brought by this
corporation upon authorization of the Board of Directors, unless such
indemnification is determined fair and reasonable by the Court of Chancery or
the court in which the action is brought) or other matters referred to in or
covered by said provisions, including advancement of expenses prior to the final
disposition of such proceedings and amounts paid in settlement of such
proceedings, both as to action in their official capacity and as to action in
any other capacity while an officer, director, employee or other agent. Expenses
(including attorneys' fees) incurred by an officer or director in defending any
civil, criminal, administrative or investigative action, suit or proceeding
shall be paid by the corporation in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on behalf of
such director or officer to repay such amount if it shall ultimately be
determined that he or she is not entitled to be indemnified by the corporation
as authorized in this Section. Such expenses (including attorneys' fees)
incurred by other employees and agents shall also be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate. The
indemnification and advancement of expenses provided for herein shall not be
deemed exclusive of any other rights to which those indemnified may be entitled
under any bylaw, agreement, vote of shareholders or directors or otherwise, both
as to action in his or her official capacity and as to action in another
capacity while holding such office. Such indemnification shall continue as to a
person who has ceased to be a director, officer, employee or agent, and shall
inure to the benefit of the heirs and personal and other legal representatives
of such a person. Except as otherwise provided above, an adjudication of
liability shall not affect the right to indemnification for those indemnified.
<PAGE> 12
ARTICLE X - MISCELLANEOUS PROVISIONS
Section 1. CHECKS: All checks or demands for money and notes of the
corporation shall be signed by such officer or officers as the Board of
Directors may from time to time designate.
Section 2. FISCAL YEAR: The fiscal year shall begin on the first day of
June.
Section 3. NOTICE: Whenever written notice is required to be given to
any person, it may be given to such person, either personally or by sending a
copy thereof through the mail, or by telegram, charges prepaid, to his address
appearing on the books of the corporation, or supplied by him to the corporation
for the purpose of notice. If the notice is sent by mail or by telegraph, it
shall be deemed to have been given to the person entitled thereto when deposited
in the United States mail or with a telegraph office for transmission to such
person. Such notice shall specify the place, day and hour of the meeting and, in
the case of a special meeting of stockholders, the general nature of the
business to be transacted.
Section 4. WAIVER OF NOTICE: Whenever any written notice is required by
statute, or by the Certificate or the bylaws of the corporation a waiver thereof
in writing, signed by the person or persons entitled to such notice, whether
before or after the time stated therein, shall be deemed equivalent to the
giving of such notice. Except in the case of a special meeting of stockholders,
neither the business to be transacted at nor the purpose of the meeting need be
specified in the waiver of notice of such meeting. Attendance of a person either
in person or by proxy, at any meeting shall constitute a waiver of notice of
such meeting, except where a person attends a meeting for the express purpose of
objecting to the transaction of any business because the meeting was not
lawfully called or convened.
Section 5. DISALLOWED COMPENSATION: Any payments made to an officer or
employee of the corporation such as a salary, commission, bonus, interest, rent,
travel or entertainment expense incurred by him, which shall be disallowed in
whole or in part as a deductible expense by the Internal Revenue Service, shall
be reimbursed by such officer or employee to the corporation to the full extent
of such disallowance. It shall be the duty of the directors, as a Board of
<PAGE> 13
Directors, to enforce payment of each such amount disallowed. In lieu of payment
by the officer or employee, subject to the determination of the directors,
proportionate amounts may be withheld from his future compensation payments
until the amount owed to the corporation has been recovered.
Section 6. RESIGNATIONS: Any director or other officer may resign at
any time, such resignation to be in writing, and to take effect from the time of
its receipt by the corporation, unless some time be fixed in the resignation and
then from that date. The acceptance of a resignation shall not be required to
make it effective.
ARTICLE XI - ANNUAL STATEMENT
Section 1. The President and Board of Directors shall present at each
annual meeting a full and complete statement of the business and affairs of the
corporation for the preceding year. Such statement shall be prepared and
presented in whatever manner the Board of Directors shall deem advisable and
need not be verified by a certified public accountant.
ARTICLE XII - AMENDMENTS
Section 1. These bylaws may be amended or repealed by the vote of
stockholders entitled to cast at least a majority of the votes which all
stockholders are entitled to cast thereon, at any regular or special meeting of
the stockholders, duly convened after notice to the stockholders of that
purpose.
Section 2. These bylaws may be amended or repealed by the unanimous
action of the Board of Directors.
<PAGE> 1
EXHIBIT 10.1
AGREEMENT
THIS AGREEMENT ("Agreement") by and between CENTRACK INTERNATIONAL,
INC., a Delaware Corporation ("Centrack") and HEARTLAND COMMUNICATIONS GROUP,
INC., an Iowa Corporation ("Heartland") is entered into as of this 4th day of
June, 1999.
WHEREAS, Centrack, maintains a Web Site on the Internet devoted to the
construction industry, including thereon classified and other advertising of
used construction equipment for sale; and
WHEREAS, based upon the operation of the foregoing Web Site, Centrack
has developed and maintains a database of used construction equipment and
purchasers and sellers of such equipment, to offer used construction equipment
for sale via the Internet; and
WHEREAS, Centrack anticipates launching an auction site for used
construction equipment during 1999 as part of the Web Site operated by Centrack
and this Agreement has been entered into in anticipation of such a launch; and
WHEREAS, Heartland is a publisher of construction trade magazines and
an Internet Web Site to advertise used construction equipment for sale via print
media and the Internet and maintains a database of used construction equipment
and purchasers and sellers of such equipment as derived therefrom; and
WHEREAS, Centrack and Heartland executed that certain letter of intent
dated April 30, 1999 ("Letter of Intent") in anticipation of this definitive
agreement to exchange access to certain databases and to provide certain
marketing and advertising services for each other, all as hereinafter set forth.
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties agree as follows:
1. TERM. Unless sooner terminated pursuant to Section 7 hereof,
this Agreement shall continue in full force and effect through June 30, 2002
(the "Term"), and for successive periods of one (1) year ("Successive Terms")
thereafter unless terminated by either party by written notice provided not less
than six (6) months prior to the expiration of the Term or any Successive Term
in accordance with Section 21 hereof.
2. HEARTLAND'S OBLIGATIONS. During the Term of this Agreement,
Heartland shall provide the following services to Centrack:
a. Construction Division Database. Heartland shall
provide Centrack with a complete copy of the following lists (collectively, the
"Heartland Database") as maintained by Heartland:
<PAGE> 2
i. The mailing list utilized for the
distribution of the construction trade publications of
Heartland as identified on Schedule A attached hereto,
including names, addresses, telephone numbers, contact names
and titles, and SIC codes, to the extent maintained and
available on such list.
ii. The listing of used construction equipment,
parts and attachments as advertised for sale on the Internet
Web Site of the construction division of Heartland, including
names, addresses, telephone numbers and contact names and
titles relating to the sellers thereof, to the extent
maintained and available on such list.
The Heartland Database shall be updated by Heartland as of the first day of each
month and such update provided to Centrack within five (5) business days
thereafter. As long as the computer systems of Heartland and Centrack are, and
remain, compatible, the Heartland Database shall be provided in a machine
readable form that is compatible for direct import into Centrack's computer
database system. In the event Heartland proposes to implement a new computer
database system, or reconfigure its existing computer database system, which may
cause such computer database system to no longer be compatible with the Centrack
computer database system, Heartland shall give Centrack not less than thirty
(30) days written notice prior to the implementation or reconfiguration thereof.
b. Advertisements and Hyperlink Listings. Schedule A
contains a description of (i) the advertisements (the "Advertisements") and/or
hyperlinks ("Hyperlinks") that Heartland shall cause to be published or
implemented, (ii) with respect to Advertisements, the frequency of publication,
and (iii) the Web Site locations at which such Advertisements and Hyperlinks
shall appear, all as more specifically described in Schedule A. Notwithstanding
anything to the contrary contained in this Agreement, nothing in this Agreement
shall be construed as giving Heartland permission or a license of any kind to
reproduce or use Centrack's name, logo, or any Centrack trademark, service mark,
copyrights, or any other intellectual property in any form whatsoever (the
"Centrack Marks"), and Heartland shall be prohibited, without the prior written
consent of Centrack, from so reproducing, referencing or using Centrack's name
of any of Centrack's Marks, except for publication pursuant to this subparagraph
(c) as described on Schedule A and as provided in Section 5(b) hereof.
3. CENTRACK'S OBLIGATIONS. In consideration of the services to be
provided by Heartland to Centrack, Centrack agrees to the following:
a. Buyer and Seller Database. Centrack shall provide
Heartland with a complete copy of the list as maintained by Centrack of all
names, addresses, phone numbers, and contact persons desiring to sell or
purchase construction equipment (the "Centrack Database"). As long as the
computer systems of Heartland and Centrack are, and remain, compatible, the
Centrack Database shall be in a machine readable form that is compatible for
direct import into Heartland's computer database system. The Centrack Database
shall be updated as of the first day of each month and provided to Heartland
within five (5) business days thereafter. In the event Centrack proposes to
implement a new computer database system, or reconfigure its existing computer
database system,
2
<PAGE> 3
which may cause such computer database system to no longer be compatible with
the Heartland computer database system, Centrack shall give Heartland not less
than thirty (30) days written notice prior to the implementation or
reconfiguration thereof.
b. Advertisements and Hyperlink Listings. Schedule B
contains a description of the promotional statement (the "Promotions") and/or
hyperlinks ("Hyperlinks") that Centrack shall cause to be published or
implemented on its Internet Web Site, and the location within such Internet Web
Site in which such Promotions and Hyperlinks shall appear. Notwithstanding
anything to the contrary contained in this Agreement, nothing in this Agreement
shall be construed as giving Centrack permission or a license of any kind to
reproduce or use Heartland's name, logo, or any Heartland trademark, service
mark, copyrights, or any other intellectual property in any form whatsoever (the
"Heartland Marks"), and Centrack shall be prohibited, without the prior written
consent of Heartland, from so reproducing, referencing or using Heartland's name
or any of Heartland's Marks, except for publication pursuant to this
subparagraph(b) as described in Schedule B hereof and as provided in Section
5(b) hereof.
c. Payment.
i. Schedule C sets forth the listing and
transaction fees to be charged by Centrack to its customers in
connection with the listing and sale of construction
equipment, parts and attachments on the construction equipment
Auction Web Site to be launched and maintained by Centrack.
Within thirty (30) days from the receipt of the funds by
Centrack derived therefrom, Centrack shall remit payment to
Heartland of twenty percent (20%) of the gross online Auction
fees. For purposes of this Agreement, "gross online Auction
fees" shall mean all listing and transaction fees collected
and received by Centrack from the sale of any piece of
equipment via its Internet Auction Web Site to be calculated
and determined in accordance with Schedule C, less all
applicable sales and use taxes paid by Centrack from such
fees.
ii. Centrack shall forward a full, complete and
accurate sales report generated through the online auction and
calculating the payment due Heartland under Section 3(c)(i)
that will accompany all payments to Heartland. Heartland shall
have the right annually, at its sole cost and expense, to
audit Centrack's books and records in order to verify that the
proper amounts have been paid Heartland by Centrack under this
Agreement. Notwithstanding the foregoing, if Heartland's audit
discloses errors in accounting or payment to the disadvantage
of Heartland in an amount of ten percent (10%) or more of the
amount actually paid to Heartland for the period audited, the
expense of such audit shall be reimbursed by Centrack to
Heartland, plus prompt payment to Heartland of any such
amounts determined to be due and owing to Heartland.
d. Stock Options. Within thirty (30) days from the date
hereof, Centrack shall grant and issue to Heartland the written right and option
to purchase shares of the common stock of Centrack at a price not exceeding the
closing bid price per share for such shares as reflected on the OTC Bulletin
Board as of the date of the execution of this Agreement by Heartland. The number
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<PAGE> 4
of such shares of common stock, term of the option to purchase such shares,
manner of exercise thereof and such terms relating thereto shall be as mutually
agreed by and between Heartland and Centrack. Heartland shall execute and
deliver to Centrack such written representations and agree to such restrictions
in reference thereto as may be reasonably required by Centrack to assure
compliance with the Securities Act of 1933, as amended, and, as appropriate, any
applicable state securities laws.
4. CONFIDENTIALITY. Both Centrack and Heartland agree that any
information that it or its employees, directors or independent contractors
obtains from the other party in connection with this Agreement that is
proprietary to the disclosing party and regularly kept confidential by the
disclosing party, including without limitation all databases disclosed hereunder
(the "Confidential Information") shall be kept confidential by the receiving
party and Confidential Information shall be disclosed by the receiving party, or
its employees, officers, directors or independent contractors, only to the
receiving party's legal counsel or to persons otherwise authorized by the
disclosing party in writing. Notwithstanding the foregoing, the parties may
publish, use and distribute such Confidential Information as part of a
compilation, and develop derivative works therefrom, as permitted by Section
5(b) hereof.
Confidential Information shall not include information that belongs to
the recipient party or is (i) already known by the recipient without an
obligation of confidentiality other than under this Agreement, (ii) publicly
known or becomes publicly known through no unauthorized act of Heartland
recipient, (iii) rightfully received from a third party, (iv) independently
developed by the recipient party without use of the other party's Confidential
Information, (v) disclosed without similar restrictions to a third party by the
party owning Confidential Information, (vi) approved by the other party for
disclosure, or (vii) required to be disclosed pursuant to a requirement of a
governmental agency or law of the United States of America or a state thereof,
or any governmental or political subdivision thereof, or any court process, so
long as the party required to disclose the Confidential Information provides the
disclosing party with timely prior notice of such requirement.
5. PROPRIETARY RIGHTS AND COPYRIGHTS.
a. Proprietary Protection. Each party agrees that all
lists and databases supplied hereunder, and any advertising materials furnished
by either party, (i) are proprietary to the disclosing party and contain
specialized and unique information not obtainable from ordinary sources, (ii)
have been created by the disclosing party at considerable time and expense, and
(iii) shall remain the exclusive and sole property of the disclosing party,
except as specifically provided herein. In furtherance thereof, each party shall
identify all lists and database information furnished by the other party by a
source code identifying the party providing such information as the source
thereof.
b. Copyrights. Each party acknowledges and agrees that
the Heartland Database and Centrack Database, respectively, constitute
copyrightable work developed and owned by Heartland and Centrack, respectively.
To the extent that the Heartland Database is imported or merged into the
Centrack Database as maintained by Centrack or the Centrack Database is imported
or merged into Heartland Database maintained by Heartland, Heartland and
Centrack have each
4
<PAGE> 5
contributed their respective copyrightable work to a compilation thereof to be
maintained by the other party, but each party shall retain all rights, including
copyrights, in their respective works. Each such compilation as maintained by
the parties hereto shall be jointly owned by Heartland and Centrack and each
such party grants to the other a limited license to publish, use and distribute
such compilation, and any derivative works based thereon, but the right of
publication, use and distribution of such compilation shall not be licensed or
sub-licensed to any third party. PROVIDED, however, Centrack shall not publish,
use or distribute the compilation, or any derivation based thereon, in print
media form, whether in magazine, digest, newspaper or newsletter format,
directly or indirectly competitive with any print media publications of
Heartland.
6. RETURN OF MATERIALS. All Confidential Information furnished
hereunder shall be returned upon termination of this Agreement, upon written
request upon termination or non-renewal of this Agreement or upon the receiving
party's determination that it no longer has a need for such Confidential
Information. On the termination date of this Agreement, each of the parties
hereto shall delete and remove from their respective compilation database, or
any derivatives thereof, as maintained by them, any database information
provided by the other party, identified by the source code thereof as required
by Section 5(a) hereof.
7. TERMINATION.
a. Termination for Cause. Either party may terminate
this Agreement at any time upon any of the following events:
i. A breach of any material provision of this
Agreement by the other party, which breach is not remedied
within thirty (30) days following written notice to the other
party of such breach;
ii. The filing of a voluntary or involuntary
petition for bankruptcy by any party or by a creditor of any
party, the appointment of a receiver with respect to any
party's assets, or an assignment by any party for the benefit
of its creditors; or
iii. The approval by the other party (as evidenced by
a resolution or other action of the other party's Board of
Directors) of a merger, share exchange or consolidation
involving more than fifty percent (50%) of the voting stock of
a party or the sale of all or substantially all of a party's
assets.
b. Heartland's Right to Terminate. Heartland may
terminate this Agreement upon the occurrence of any of the following events:
i. The failure of Centrack to grant a stock option
on mutually agreed terms within the time period and as set
forth in Section 3(d);
ii. Centrack shall fail to launch an operational
used construction equipment auction Internet Web Site as
contemplated by this Agreement or or before November 30, 1999;
5
<PAGE> 6
iii. Centrack shall fail to conduct and complete
not less than one (1) online Auction of used construction
equipment on the foregoing Web Site on or before November 30,
1999;
iv. Centrack shall fail to conduct and complete a
minimum of two (2) online Auctions of used construction
equipment on the foregoing Web Site each calendar quarter,
commencing with the calendar quarter ending March 31, 2000,
and each calendar quarter thereafter; or
v. The amount paid by Centrack to Heartland as
required by Section 2(c) hereof in any calendar quarter shall
be less than Fifteen Thousand Dollars ($15,000), commencing
with the calendar quarter ending March 31, 1999, and each
calendar quarter thereafter.
c. Effect of Termination. Any termination pursuant to
this Section 7 shall be without any further liability or obligation of the
terminating party, other than with respect to any breach of this Agreement prior
to such termination and any earned or accrued amounts due, but unpaid, to
Heartland as of the termination date. The provisions of Sections 4 through 25
hereof shall expressly survive the termination of this Agreement.
8. INDEMNITY.
a. Heartland's Indemnification. From and after the
execution date of this Agreement, Heartland agrees to indemnify and hold
harmless Centrack, its agents, employees, successors and assigns from and
against any and all liabilities, losses, damages, claims, suits, and expenses
(including reasonable attorney's fees) relating to and arising out of any breach
by Heartland of any of its agreements or obligations contained in this Agreement
or any action by Heartland in connection with this Agreement.
b. Centrack's Indemnification. From and after the
execution date of this Agreement, Centrack agrees to indemnify and hold harmless
Heartland, its agents, employees, successors, and assigns from and against any
and all liabilities, losses, damages, claims, suits, and expenses (including
attorneys' fees) relating to and arising out of any breach by Heartland of any
of its agreements or obligations contained in this Agreement or any action by
Centrack in connection with this Agreement.
9. AMENDMENTS. The provisions of this Agreement may not be
amended, supplemented, waived or changed orally, but only by a writing signed by
the party as to whom enforcement of any such amendment, supplement, waiver or
modification is sought and making specific reference to this Agreement.
10. ASSIGNMENTS. Neither party shall assign his or its right
and/or obligations under this Agreement without the prior written consent of the
other party.
6
<PAGE> 7
11. BINDING EFFECT. All of the terms and provisions of this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by
the parties and their respective legal representatives, successors and permitted
assigns, whether so expressed or not.
12. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument. Confirmation of execution
by electronic transmission of a facsimile signature page shall be binding upon
any party so confirming.
13. ENFORCEMENT COSTS. If any civil action, arbitration or other
legal proceeding is brought for the enforcement of this Agreement, or because of
an alleged dispute, breach, default or misrepresentation in connection with any
provision of this Agreement, the successful or prevailing party or parties shall
be entitled to recover reasonable attorneys' fees, sales and use taxes, court
costs and all expense even if not taxable as court costs (including, without
limitation, all such fees, taxes, costs and expenses incident to arbitration,
appellate, bankruptcy and post-judgment proceedings), incurred in that civil
action, arbitration or legal proceeding, in addition to any other relief to
which such party or parties may be entitled. Attorneys' fees shall include,
without limitation, paralegal fees, investigative fees, administrative costs,
sales and use taxes and all other charges billed by the attorney to the
prevailing party.
14. EQUITABLE REMEDIES. Each of the parties acknowledges that the
parties will be irreparably damaged (and damages at law would be an inadequate
remedy) if this Agreement is not specifically enforced. Therefore, in the event
of a breach or threatened breach by any party of any provision of this
Agreement, then the other parties shall be entitled, in addition to all other
rights or remedies, to an injunction restraining such breach, without being
required to show any actual damage or to post an injunction bond, and/or to a
decree for specific performance of the provisions of this Agreement.
15. FORCE MAJEURE. Each party shall be excused from performance of
its non-monetary obligations for any period and the time of any performance
shall be extended as reasonably necessary under the circumstances, to the extent
that such party is prevented from performing, in whole or in part, its
obligations under this Agreement, as a result of acts of God any governmental
authority, war, civil disturbance, court order, labor dispute, third party
non-performance (including the acts or omissions of any suppliers, agents or
subcontractors) or any other cause beyond its reasonable control, including
failures or fluctuations in electrical power, heat, light, air conditioning or
telecommunication equipment or lines or any other equipment. Such
non-performance shall not be a default under this Agreement or grounds for
termination of this Agreement unless such non-performance is not cured within 60
days. A party who is prevented from performing for any reason shall immediately
notify the other party of the cause for such non-performance and the anticipated
extent of the delay.
16. FURTHER ASSURANCES. The parties hereby agree from time to time
to execute and deliver such further and other transfers, assignments and
documents and do all matters and things which may be convenient or necessary to
more effectively and completely carry out the intentions of this Agreement.
7
<PAGE> 8
17. DISPUTE RESOLUTION AND ARBITRATION
a. Dispute Resolution. Except for the failure to make payment of
any amounts due to any party hereunder if the amounts thereof are not disputed,
any dispute arising between the parties hereto relating to, or arising from,
this Agreement, or any of the other documents, certificates and agreements
required by this Agreement, shall be submitted to and resolved by the exclusive
use of the following procedure in lieu of either party pursuing remedies
otherwise available by statute or common law:
i. Initiation of Procedure. The party claiming a dispute
or a default (the "Initiating Party") shall in the manner provided
herein provide written notice to the other party (the "Responding
Party") reasonably describing the claimed dispute or default and the
nature of the remedial act or conduct requested of the Responding party
to correct, alleviate or cure the dispute or default.
ii. Good Faith Meeting. Within ten (10) business days
after receipt of the written notice by the Responding Party, a meeting
shall be held at the principal place of business of the Responding
Party between designated representatives of both the Initiating and
Responding Party, which designated representatives shall have both the
decision making and settlement authority to resolve and settle the
dispute or claimed default. These designated representatives may be
assisted by each party's legal counsel and the meeting shall be
conducted in good faith with a primary purpose to negotiate a
resolution of the dispute or claimed default.
iii. Time Limit for Dispute Resolution. If, within twenty
(20) calendar days after the good faith meeting described in
subparagraph (b) above, a negotiated resolution of the dispute or
claimed default has not occurred, then each party agrees to submit the
dispute or claimed default to binding arbitration in accordance with
Section 17 (b) below.
b. Binding Arbitration. The arbitration of any dispute or claim
of default shall be binding and conducted in accordance with the Commercial
Arbitration Rules of the American Arbitration Association and judgement upon the
award or decision rendered by the arbitrators may be entered in any court having
jurisdiction. The following procedures shall be utilized:
i. Selection of Arbitration Panel. Within forty-five
(45) calendar days after the twenty (20) calendar day time limit for
resolution of the dispute or claimed default has expired, each party
hereto shall appoint one member of the arbitration panel and agree in
writing with the arbitration panel members so appointed to be solely
responsible for that designated panel member's cost and expenses. The
two designated panel members shall then communicate with each other and
within ten (10) days of their appointment these panel members shall by
mutual agreement select a third panel member who shall serve as the
panel chairperson. If the appointed panel members are unable within
this time frame to agree on a panel chairperson, application by any
party hereto shall be made to the American Arbitration Association for
an appointment of a panel chairperson and the decision of the American
Arbitration Association as to the selection of the panel chairperson
shall be
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<PAGE> 9
binding on all parties hereto. The costs and expenses of the panel
chairperson shall be borne equally by the parties hereto.
ii. Arbitration Site. All arbitration proceedings
hereunder shall be conducted at a location as mutually agreed by the
parties hereto. If the parties hereto fail to agree as to the location
of the arbitration proceedings, such location shall be determined by
the arbitration panel selected as provided in subparagraph (i) hereof.
iii. Applicable Law. In any such arbitration proceeding,
the arbitration panel shall apply the law of the jurisdiction of the
Initiating Party.
iv. Panel's Decision. The arbitration panel, by not less
than a majority vote, shall within twenty-one (21) days following final
submission render its award or decision, and such award or decision
shall be final and conclusive as to the parties hereto and heir
respective successors and assigns. As part of the award or decision,
the arbitration panel shall determine whether and to what extent a
party shall be entitled to recover from the other party or parties the
costs and expenses incurred by such party in the arbitration
proceeding, including reasonable attorney's fees and costs, as
permitted by Section 13 hereof.
18. NO CONSTRUCTION AGAINST DRAFTERS. The parties acknowledge that
this is a negotiated agreement, and that in no event shall the terms hereof be
construed against either party on the basis that such party, or its counsel,
drafted this Agreement.
19. PUBLICITY. Except by mutual agreement between Centrack and
Heartland, no party shall issue any press release or otherwise make any public
statement with respect to the execution of, or the transactions contemplated by,
this Agreement, except as may be required by law.
20. TRANSACTION COSTS. Each party shall pay all of its costs and
expenses (including attorney's fees and other legal costs and expenses and
accountant's fees and other accounting costs and expenses) incurred in
connection with this Agreement.
21. NOTICES. All notices, requests, consents and other
communications required or permitted under this Agreement shall be in writing
(including electronic transmission) and shall be (as elected by the person
giving such notice) hand delivered by messenger or courier service,
electronically transmitted, or mailed (airmail if international) by registered
or certified mail (postage prepaid), return receipt requested, addressed to:
<TABLE>
<CAPTION>
If to CENTRACK: With a Copy to:
- --------------- ---------------
<S> <C>
Centrack International, Inc. Gunster, Yoakley, Valdes-Fauli &
21045 Commercial Trail, Suite 101 Stewart, P.A.
Boca Raton, Florida 33486-1099 Broward Financial Centre, Suite 1400
Attn: John J. Lofquist, President & C.E.O. 500 East Broward Boulevard
Telephone: (561) 362-9444 Fort Lauderdale, Florida 33394
Facsimile: (561) 362-0570 Attn: Michael G. Platner, Esq.
Telephone: (954) 462-2000
Facsimile: (954) 523-1722
</TABLE>
9
<PAGE> 10
<TABLE>
<CAPTION>
IF TO HEARTLAND: WITH A COPY TO:
- ---------------- ---------------
<S> <C>
Heartland Communications Group, Inc. Smith, Schneider, Stiles, Hudson, Serengeli,
1003 Central Avenue Mallaney & Shindler, P.C.
Fort Dodge, Iowa 50501 10th Floor Equitable Building
Attn: Steven R. Scanlan, President & C.E.O. 604 Locust, Suite 1000
Telephone: (515) 574-2188 Des Moines, Iowa 50309-3715
Facsimile: (515) 574-2152 Attn: Fred R. Schneider, Esq.
Telephone: (515) 245-6789
Facsimile: (515) 244-1328
</TABLE>
or to such other address as any party may designate by notice complying with the
terms of this Section. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery; (b) on the date of transmission with
confirmed answer back if by electronic transmission; and (c) on the date upon
which the return receipt is signed or delivery is refused or the notice is
designated by the postal authorities as not deliverable, as the case may be, if
mailed.
22. SEVERABILITY. If any provision of this Agreement or any other
agreement entered into pursuant hereto is contrary to, prohibited by or deemed
invalid under applicable law or regulation, such provision shall be inapplicable
and deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given full force
and effect so far as possible. If any provision of this Agreement may be
construed in two or more ways, one of which would render the provision invalid
or otherwise, voidable or unenforceable and another of which would render the
provision valid and enforceable, such provision shall have the meaning which
renders it valid and enforceable.
23. THIRD PARTIES. Unless expressly stated herein to the contrary,
nothing in this Agreement, whether express or implied, is intended to confer any
rights or remedies under or by reason of this Agreement on any persons other
than the parties hereto and their respective legal representatives, successors
and permitted assigns. Nothing in this Agreement is intended to relieve or
discharge the obligation or liability of any third persons to any party to this
Agreement, nor shall any provision give any third persons any right of
subrogation or action over or against any party to this Agreement.
24. HEADINGS. The headings contained in this Agreement are for
convenience of reference only, are not to be considered a part of the Agreement
and shall not limit or otherwise affect in any way the meaning or interpretation
of this Agreement.
25. ENTIRE AGREEMENT. This Agreement represents the entire
understanding and agreement between the parties with respect to the subject
matter hereof, and supersedes all other negotiations, understandings and
representations (if any) made by and between such parties.
{signature page follows}
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<PAGE> 11
IN WITNESS WHEREOF, the parties hereby execute this Agreement
as of the day and year first above written.
CENTRACK INTERNATIONAL, INC.
/s/ John F. Lofquist
----------------------------------------
John F. Lofquist, President and C.E.O.
HEARTLAND COMMUNICATIONS GROUP, INC.
/s/ Steven R. Scanlan
----------------------------------------
Steven R. Scanlan, President and C.E.O.
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<PAGE> 12
SCHEDULE A
ADVERTISEMENTS AND HYPERLINKS TO BE PUBLISHED BY HEARTLAND (CHL)
1. Web Site link from www.contractorshotline.com home page to
www.centrack.com home page.
2. Web Site link from http://www.contractorshotline.com/directories/
default.htm1 reference links to www.centrack.com.
3. Web Site link from http://www.contractorshotline.com/directories/
showcase.htm to www.centrack.com.
4. Advertisements listing Centrack auction events and
www.centrackauctions.com in CHL print media auction calendar and CHL's
Web Site auction calendar.
5. Full page, four-color advertisements in each issue of the following
Heartland publications (frequency noted in parentheses): Contractors
Hotline (weekly), Parts Connection (quarterly), Mine and Quarry
(monthly), Crane Hotline (monthly), Construction Equipment Guide
(monthly and annually), Demolition Hotline (as scheduled), Recycling
Hotline (as scheduled), and any additional publications added to
Heartland's construction division publications. Ad content and design
to be supplied by Centrack to Heartland mechanical requirements.
6. Line listing of Centrack classified to appropriate CHL Web Site.
Centrack will supply updated database of listings monthly.
7. Standard size banner ad of Centrack design displayed in random rotation
on www.contractorshotline.com. Banner ad design and URL to be supplied
by Centrack. Frequency of ad to be not less than two percent (2%) of
www.contractorshotline.com total page views.
8. News article in appropriate CHL publication featuring Centrack
services. Centrack will supply content of article with CHL approval.
Frequency of articles to reciprocate with CHL news articles in Centrack
e-mail newsletter.
HEARTLAND RESERVES THE RIGHT TO CHANGE OR REFORMAT THE WEB SITE PAGES
IDENTIFIED ABOVE AND CHANGE FREQUENCY OR CEASE PUBLICATION OF ANY OF THE
PUBLICATIONS IDENTIFIED ABOVE. IF SUCH CHANGES OCCUR, HEARTLAND WILL UTILIZE ITS
BEST EFFORTS TO PROVIDE SIMILAR OR EQUIVALENT EXPOSURE FOR THE HYPERLINKS AND/OR
ADVERTISEMENTS OF CENTRACK.
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<PAGE> 13
SCHEDULE B
PROMOTIONS AND HYPERLINKS TO BE PUBLISHED BY CENTRACK (WWW.CENTRACK.COM)
1. Web site hyperlink from www.centrack.com home page to
www.contractorshotline.com.
2. Web site hyperlink from www.centrack.com to
http://www.contractorshotline.com/directories/default.htm#1Equipment
Dimensions
3. Web site hyperlink from www.centrack.com to
http://www.contractorshotline.com/directodes/default.htm#
1ReferenceLinks.
4. Standard size banner ads of Contractors Hot Line (CHL) design displayed
in random rotation on www.centrack.com. Banner ad design and URL to be
supplied by CHL. Frequency of ads to be not less than 2% of
www.centrack.com total page views.
5. Line listing of CHL classifieds to appear in www.centrack.com
classified listings. CHL will supply updated database of listings
monthly.
6. Listing of Contractors Hot Line in appropriate Centrack advertisements,
direct mail or collateral materials.
7. Advertisements or news article about CHL with hyperlinks to
appropriate CHL. URL displayed in the Centrack e-mail newsletter.
Frequency shall be bi-monthly when newsletter is available.
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<PAGE> 14
SCHEDULE C
HEAVY EQUIPMENT AUCTION REVENUE
<TABLE>
<S> <C> <C> <C>
# Auctions 7 24 30
# Listings 1,925 8,750 15,555
% Units sell through* 70% 80% 90%
Avg. sale price $ 25,000 $ 26,700 $ 28,000
2.5% Listing fee (average) $1,203,125 $ 5,840,000 $10,888,000
5% Transaction fee $1,684,375 $ 9,345,000 $19,600,000
Total HE Auction Revenues $2,887,500 $15,185,000 $30,488,000
</TABLE>
- -------------------
* Percent of listings that actually sell
FIGURE 8: HEAVY EQUIPMENT AUCTION SCHEDULE
AUCTION EQUIPMENT LISTING FEES
Auction equipment listing fees are non-refundable fees charged to a seller for
entering equipment into the online auction. These fees equal 3% of the reserve
value of the equipment, with a maximum fee of $1,000 per piece, charged before
auction. The listing fee for equipment with no reserve is 1.5% charged after
auction i.e. added to transaction fee.
AUCTION EQUIPMENT TRANSACTION FEES
Transaction fees are based on a sliding scale. They have been assumed at 10%
for transactions under $10,000, 5% for transactions between $10,001 to $30,000,
4.75% for transactions between $25,001 and $100,000, 4.5% for transactions
between $100,001 and $250,000, and 4% for all transactions over $250,001. Since
the average sale price over the three-year period is between $25,000 and
$28,000 the transaction fees are averaged at 5% to calculate this revenue.
AUCTION FOR ATTACHMENTS & MAJOR COMPONENTS
The fee to list a unit for auction with a value of less than $7,500 will be
10%, which is non-refundable. There will be no additional transaction fee for
units sold for less than $7,500.
For units, with a listing price greater than $7,500, there will be both listing
and transaction fees which are similar to those defined for the used heavy
equipment with the exception that the next range will be from $7,501 to
$25,000. Beyond this point, listing and transaction fees for both auctions will
be the same.
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<PAGE> 1
EXHIBIT 10.2
MEMORANDUM OF UNDERSTANDING
THIS MEMORANDUM OF UNDERSTANDING ("MOU"), Date is made by and between Amigas
Venture Group, Inc., a Florida corporation ("AMIGAS") with a place of business
at 5600 N.W. 36 Street, Miami, Florida 33122 and Centrack International, Inc., a
Delaware corporation ("CII") with a place of business at 21045 Commercial Trail
Boca Raton, FL 33486.
BACKGROUND
1. The International Trade Data Resource and Research Center, Inc. a
Florida not-for-profit corporation, doing business as the Florida Trade
Data Center ("FTDC"), has designed, developed and implemented the first
production version of the "Americas Information Gateway System
(AMIGAS)" (the "System"), an Internet based trade promotion and
electronic commerce portal.
2. FTDC created AMIGAS to serve as the System's electronic gateway
services company to provide information and electronic commerce
solutions in connection with the implementation of the System segmented
into three (3) functional areas, 1) marketing strategy, 2) information
management and 3) internet/intranet technology;
3. CII is an internet based advertising service for used heavy equipment
in the construction, mining and forestry industries.
4. AMIGAS and CII desire to establish a program of joint customer referral
and marketing distribution that will facilitate the creation of new
revenues and increase market exposure of the System, AMIGAS' services
and CII's internet site.
NOW, THEREFORE, the parties set forth below the framework for certain matters
and agree as follows:
1. COOPERATIVE ALLIANCE.
Through this MOU and the definitive agreement following from this MOU, the
parties agree to engage in a cooperative alliance as set forth in this MOU, and
to the extent permitted by applicable law and regulation, to provide information
and electronic commerce solutions to CII's and AMIGAS' customers (the
"Alliance"). The information and electronic commerce solutions will include but
will not be limited to CII's and AMIGAS' products and services. To facilitate
the formation and continuing success of electronic solutions initiatives, the
parties agree to make certain business level commitments on a start-up and an
on-going basis. The parties anticipate that this business level commitment will
be fulfilled by each party providing contributions (monetary or in kind), human
resources, accounts and/or sales or marketing targets, which are reciprocal and
commensurate between the parties and, on a summary basis, will include the
following:
<PAGE> 2
1.1 CII and AMIGAS will provide or be responsible for the matters
described in Attachment A.
2. TERM; TERMINATION.
2.1 The term of this Alliance will begin as of the date of this
MOU, and will continue in effect until (i) both parties execute a definitive
agreement regarding the foregoing subject matter which expressly supersedes this
MOU; or (ii) six months from the date of this MOU if a definitive agreement has
not been executed, or (iii) either party gives written notice to the other
expressly terminating this MOU for (a) cause, defined as willful misconduct or
gross negligence on the part of a party, (b) non-performance, defined as the
failure of the other party to perform to measurable standards of market
competitiveness along parameters mutually defined and agreed, or (c) a change in
circumstances, whereby each party has the unilateral ability to withdraw from
and to terminate this MOU and this Alliance upon sixty (60) days written notice
provided to the other party.
In the event of termination, the party responsible for the termination
shall provide a mutually agreed, reasonable, but in any event no longer than
thirty (30) day transition period to the other party, during which the parties
shall continue to provide the then relevant products, services and support each
to the other while the parties make provisions to operate following the
termination. Thereafter, all obligations of the parties, each to the other,
shall cease, provided, however, that the respective obligations of each party
under this MOU which by their nature would continue beyond the termination,
cancellation or expiration of this MOU, shall survive.
3. TERRITORY.
The scope of activities under the terms of this MOU is not limited to
any state, territory or country.
4. NON-EXCLUSIVE RIGHTS.
This MOU does not represent, and in no way should imply, a commitment
by either party to purchase or sell any products or services of the other party.
None of the activities to be performed under this MOU are or are intended to be
exclusive (unless stated otherwise), and each party or any affiliate may engage
any third party to perform the same or similar activities or to enter into any
similar MOU's or other agreements with any third party.
5. INTELLECTUAL PROPERTY OWNERSHIP; USE OF MARKS
The parties will be contributing intellectual property to the Alliance.
The parties agree that the ability to service their markets is crucial to the
business future of each party. Therefore, the parties agree that ownership of
and intellectual property rights in inventions, discoveries, ideas,
improvements, computer and other apparatus programs and related documentation
and other works of authorship, whether or not patentable, copyrightable or
susceptible to other forms of protection created under this MOU (hereinafter
referred to as "Intellectual Property") shall be subject to the following terms,
unless otherwise provided in an attachment.
<PAGE> 3
5.1 Ownership of Intellectual Property shall be as follows:
(a) Intellectual Property already developed or owned by
AMIGAS or CII prior to the effective date of this MOU shall remain the property
of the party, with no obligation to license the property to the other party.
(b) Unless otherwise agreed to by the parties,
Intellectual Property that is developed by one party shall be owned by that
party, with no obligation to license the Intellectual Property to the other.
Either party may, however, propose a licensing agreement with the other party,
whereby the other party would be allowed to use and modify the Intellectual
Property to develop the other party's applications.
(c) Intellectual Property that is Jointly Developed, as
that term is defined below, shall be owned jointly by the parties. Each party
shall have an equal, undivided one-half interest in and to any Jointly Developed
Intellectual Property without any obligation to account to or share with the
other party any benefits or compensation received from licensing or exploitation
of any the Intellectual Property. "Jointly Developed" shall mean that (1) the
Intellectual Property was conceived or reduced to practice by one or more
employees of AMIGAS with one or more employees of CII; or (2) that one or more
of the employees of one of the parties contributed an independent part of the
entire Intellectual Property that, together with the parts produced by the
employees of the other party creates the whole Intellectual Property; or (3) in
the case of Intellectual Property that is an invention, that one or more
employees of one of the parties conceives the invention and one or more
employees of the other party makes an inventive contribution to the invention
conceived by the employees of the other party.
(d) With respect to Jointly Developed Intellectual
Property, each party shall, at the earliest practical date, apprise the other of
each piece of Jointly Developed Intellectual Property, why the party believes
that it constitutes Jointly Developed Intellectual Property, and explain the
party's participation in the Jointly Developed Intellectual Property.
(e) With respect to Jointly Developed Intellectual
Property that is an invention, the parties shall share equally in the expenses
of seeking and maintaining patent protection for the invention, except that
either party at its own expense may seek and maintain patent protection for both
parties if the other party declines to share the expenses.
(f) Either party may file a copyright registration in the
joint names of both parties on any Intellectual Property. The non-filing party
shall cooperate in every reasonable way, at its own expense, with the filing
party to obtain the registration.
5.2 Licensing of any Intellectual Property solely owned by a party
to the other party shall be on reasonable terms and conditions to be mutually
agreed to in a licensing agreement between the parties.
5.3 Intellectual Property resulting from a party's improvements or
modifications of the other party's Intellectual Property shall be owned by the
party creating or conceiving the improvements or modifications. Any license of
the underlying Intellectual Property, however, to the improving party shall
<PAGE> 4
be at the sole discretion of the party whose Intellectual Property was improved
or modified, and subject to the terms and conditions of sections 6.1(a), 6.1(b),
and 6.1(c).
5.4 Enforcement of Jointly Developed Intellectual Property rights
shall occur as follows:
(a) Each party shall notify the other party promptly upon
the discovery of an apparatus or method, which may infringe the Jointly
Developed Intellectual Property rights or be a misuse of Confidential
Information. After notification, either or both parties may begin litigation or
take other enforcement action.
(b) If one party chooses to begin litigation regarding
the Jointly Developed Intellectual Property rights or misuse of Confidential
Information or chooses to take other enforcement action, the other party may, at
its option, join the action. If the other party joins the action, the parties
shall be responsible for an equal share of the costs incurred in the action.
Additionally, the parties shall be entitled to an equal portion of any monetary
settlement or judgment, which may ultimately be awarded to the parties as a
result of the action. If both parties are involved in the action, the parties
shall share decision-making when practical. At the beginning of the action, one
of the parties will be appointed to have final decision if the parties are
unable to agree.
(c) If the other party declines to join in litigation or
other enforcement action, the party declining shall not assume liability for any
cost incurred in the action, nor will that party be entitled to any portion of a
monetary settlement or judgment which may ultimately be awarded as a result of
the action.
(d) Nothing in this section shall be construed to require
that either party take action to enforce its rights against any or all suspected
infringements of any Intellectual Property right.
5.5 AMIGAS will grant to CII and CII grants to AMIGAS for the term
of this MOU a limited non-exclusive license to use their respective service and
trade marks (Marks) in a mutually agreed upon format (i.e. electronic, camera
ready, etc.) and listed in Attachment B. The use of the Marks will be in
accordance with the guidelines described in Attachment B hereof and paragraph
5.6. Each party will supply to the other party sample copies of the party's
promotional materials that utilize the other party's marks prior to the use of
the materials. Each party, within five business days from the date the materials
are submitted for approval will indicate its approval or disapproval of the
materials. If a party determines that the other party has not adhered to the
applicable guidelines for use of the mark the party will make the necessary
mutually agreed upon corrections to the materials. If the parties cannot agree
on the use of the materials in the mark in question, the submitting party shall
not use the submitted materials.
5.6 In using each other's Marks, the parties shall include proper
ownership identification as described in Attachment B hereof or as may be
approved in writing from time to time by the other party on any advertising and
collateral materials. Each party agrees that it will only use the other's Marks
in connection with this MOU and Attachment B hereof, that all use will be in
conformance with the other party's graphic standards for the Marks. Forms of
advertising and promotions are subject to prior written approval of the other
party, and in no event shall a party use the other party's Marks in any manner,
which is detrimental to the goodwill and prestige associated with the Marks.
AMIGAS' and CII'S Marks are described in Attachment B. Each party shall promptly
discontinue any use of the other party's Marks
<PAGE> 5
objected to by the party, and upon termination of this MOU, the parties agree
not to issue or release for publication any article, advertising or publicity
matter relating to this MOU or mentioning or implying the name of the other
party or its subsidiaries, affiliates, officers, directors or employees unless
written consent is granted by the party. The parties hereby acknowledge and
agree that the other party's Marks are valid marks, are the exclusive property
of the party and all use thereof shall inure to the benefit of the party. Each
party further agrees that this MOU does not confer any right on the other party
to grant sublicenses or assign a party's Marks. Each party shall notify the
other party of any unauthorized use of the party's Marks or any marks
confusingly similar thereto by others promptly as it comes to the party's
attention. Each party shall, unless it grants to the other party permission to
do so, have the sole right to engage in infringement or unfair competition
proceedings involving the party's Marks, and shall reasonably cooperate in the
prosecution or defense by the party of any proceedings. Each party covenants and
agrees that it will not adopt, use or attempt to register in any state, federal
or other forum in the United States or any other country, any word, name,
symbol, or device or any combination thereof which is confusingly similar to the
other party's Marks or any portion or portions thereof. Other than expressly set
forth in this MOU, no license under any trademark, patent or copyright, or
applications, which are now or may thereafter be owned by either party, is
either granted to the other party or implied by this MOU.
5.7 As used in sections 5.5 and 5.6 the reference to the other
party or the party's Marks, shall in the case of AMIGAS also be deemed a
reference to FTDC or its Marks.
6. CONFIDENTIALITY.
6.1 In the course of performing their obligations under this MOU,
it may be necessary for AMIGAS or CII to disclose to the other information that
it considers confidential and proprietary, including information furnished to
either party by customers ("Information"). Any Information disclosed by AMIGAS
or CII either orally or in writing shall be treated as confidential and shall be
subject to the confidentiality obligations of this Section 6. Without limiting
the generality of the foregoing, Information shall not include information about
which the receiving party can conclusively establish: (i) was in the possession
of the receiving party at the time of disclosure; (ii) prior to or after the
time of disclosure becomes public knowledge without the act or omission of the
party to whom it was disclosed; (iii) is disclosed to the receiving party by a
third party under no legal obligations to maintain the confidentiality of such
information; or (iv) was independently developed by the receiving party without
reference to the Information of the disclosing party.
6.2 Each party agrees to use the same degree of care to protect
the Information from disclosure to third parties as it uses to protect its own
information of similar importance. Disclosures of the Information shall be
restricted to the parties' employees, consultants and agents on a need to know
basis who are directly participating in any activity covered by this MOU.
6.3 The Information furnished shall be used and reproduced only in
connection with performance under and for the purposes of this MOU.
6.4 The limitations on reproduction, disclosure, and use of the
Information shall lapse three (3) years after the termination of this MOU, or
upon the occurrence of one of the following events: (i) if
<PAGE> 6
such Information is publicly available or later becomes publicly available other
than through a breach of this MOU; (ii) if such Information is furnished to a
third party by the disclosing party without similar confidentiality restrictions
on the third party's rights; or (iii) if disclosure of the Information is
compelled by court order, or judicial or administrative process, provided,
however, that the limitations on reproduction, disclosure, and use will not
lapse with respect to Information which is considered trade secret under
applicable law so long as that Information remains a trade secret. In addition,
a party shall not be liable for reproduction, disclosure, or use of the
Information disclosed to it if the Information is known to the party prior to
disclosure; is independently developed by the party subsequent to disclosure; or
is lawfully obtained by the party from a third party without obligations of
confidentiality.
6.5 Notwithstanding the above requirements, either party may
disclose to the customer or other subcontractors, Information necessary for the
party to perform its obligations under this MOU, provided that an agreement
which imposes confidentiality obligations similar to these contained in this
section 6 is in effect with the other party.
6.6 These confidentiality obligations shall not prevent either
party from developing, acquiring, and furnishing to its customers products or
services being furnished under this MOU, provided that such is accomplished
without use of the Information disclosed.
6.7 All marketing and other information developed by AMIGAS during
the term of this MOU shall be considered AMIGAS Information. All marketing and
other information developed by CII during the term of this MOU shall be
considered CII Information.
7. PUBLICITY.
Except as required under United States Securities Laws, neither party
shall issue a press release or make any public announcements or disclosures
(including disclosures to third parties under a nondisclosure agreement, except
as otherwise provided herein) concerning this MOU or the activities of or
relationship with the other party with respect to this MOU without the other
party's prior approval.
8. INDEMNIFICATION.
8.1 Each party agrees to indemnify and save harmless the other
party from any liabilities, causes of action, lawsuits, penalties, claims or
demands (including the costs, expenses and reasonable attorneys, fees on account
thereof) that may be made: (1) by anyone for injuries of any kind, including but
not limited to personal injury, death, property damage and theft, resulting from
the indemnifying party's negligent or willful acts or omissions or those of
persons furnished by the indemnifying party, its agents or subcontractors, or
resulting from the indemnifying party's failure to perform its obligations under
this MOU; or (2) by any of either the indemnifying party, its agents' or
subcontractors' employees or former employees for which the indemnifying
party's, its agents' or subcontractors' liability to such employee or former
employee would otherwise be subject to payments under state Worker's
Compensation laws, premises liability principles or any other law or form of
legal duty obligation; or (3) by either indemnifying party's, its agents' or
subcontractors' employees or former employees, including applicants, for any and
all claims arising out of the employment relationship with respect to performing
under this
<PAGE> 7
MOU, including but not limited to, employment discrimination charges and actions
arising under Title VII of The Civil Rights Act of 1964, as amended; The Equal
Pay Act; The Age Discrimination Disabilities Act; The Fair Labor Standards Act;
The National Labor Relations Act; and any other applicable law. The indemnifying
party, at its own expense, agrees to defend the indemnified party, at its
request, against any such liability, cause of action, penalty, claim, demand,
administrative proceeding or lawsuit, including any in which the indemnified
party is named as an "employer" or "joint employer" with the indemnifying party.
Each party agrees to notify the other party promptly of any written claims or
demands against it for which the other party is responsible under this MOU.
8.2 The foregoing indemnity shall be in addition to any other
indemnity obligations for either party set forth in this MOU.
9. GENERAL PROVISIONS.
9.1 In the performance of obligations under this MOU, each party
shall comply with all applicable laws.
9.2 Unless otherwise expressly agreed between the parties in a
definitive agreement, the relationship of the parties is that of independent
contractors, and neither party may act as an agent for or make a commitment on
behalf of the other. No matter contained in this MOU, or the acts of the parties
will be construed to create a partnership or joint venture between the parties.
9.3 The rights and remedies of the parties provided in this MOU
shall not be exclusive and are in addition to any other rights and remedies at
law or in equity.
9.4 This MOU shall be binding upon and inure to the benefit of the
successors and permitted assigns of the parties.
9.5 If any provision of this MOU is held to be illegal or
unenforceable by any court of competent jurisdiction, the provision shall be
deemed separable from the remaining provisions of this MOU and shall not affect
or impair the validity or enforceability of the remaining provisions of this
MOU.
9.6 CII acknowledges that as a provider of communications services
subject to various legal or regulatory requirements, AMIGAS may be required to
offer or provide its services on a non-discriminatory basis to any customer or
to or through other vendors or to participate with other parties as prime
contractors or otherwise.
9.7 The failure of either party to enforce, in any one or more
instances, any of the terms or conditions of this MOU shall not be construed as
a waiver of the future performance of any such term or condition. No amendment,
interpretation or waiver of any of the provisions of this MOU shall be effective
unless made in writing and signed by the parties.
9.8 All headings used in this MOU and its attachments are intended
for convenience of reference only and shall not affect the construction or
interpretation of the MOU.
<PAGE> 8
9.9 This MOU shall be considered confidential Information of both
parties. Neither party shall disclose the contents or existence of this MOU
without the prior consent of the other party.
9.10 Neither party shall be liable for its failure to perform any
of its obligations under this MOU during any period in which performance is
directly delayed by the occurrence of any events beyond the control of the
failing party such as fire, explosion, flood, storm or the acts of God, war,
embargo, riot, labor action, or the intervention of any governmental authority,
provided that the party suffering the delay promptly notifies the other party of
such delay. IN ADDITION, UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE FOR
ANY LOST PROFITS (ACTUAL OR ANTICIPATED), LOST USE, LOST SAVINGS, LOST DATA OR
COSTS OF RECREATING LOST DATA, OR ANY INCIDENTAL, COLLATERAL, SPECIAL, PUNITIVE,
EXEMPLARY OR CONSEQUENTIAL DAMAGES OF THE OTHER PARTY OR ANY CUSTOMER OF THE
OTHER PARTY, EVEN IF THE PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF THE
DAMAGES.
9.11 Each party shall execute and deliver any other documents and
do any other acts and things as may be reasonably necessary to carry out the
terms, provisions and purposes of this MOU.
9.12 The parties agreement to provide services to each other under
this MOU is not intended and shall not be construed to enable, encourage or
require either party to induce any customer or other party to breach any
existing contractual obligations or otherwise tortiously interfere with the
business or contractual relationships between any party.
9.13 This MOU may be executed in any number of counterparts all of
which shall constitute one agreement, and each counterpart shall be deemed to
have been made, executed and delivered on the date set out at the head of this
MOU, without regard to the dates or times when the counterparts may actually
have been made, executed or delivered.
9.14 Each party represents and warrants to the other that (i) it
has the corporate power and authority to execute, deliver and perform this MOU,
(ii) the execution, delivery and performance does not conflict with or
constitute a default under any contract or agreement by which the party is
bound, and (iii) this MOU creates a legal, valid and binding obligation of the
party, enforceable against the party in accordance with its terms, subject, as
to enforceability, to bankruptcy, insolvency, reorganization, moratorium and
other laws of general applicability affecting the rights of creditors and to
general principles of equity.
9.15 Except as otherwise provided herein, any notices or demands
which are required by law or under the terms of this MOU shall be given or made
by the parties in writing and shall be given by hand delivery, telegram or
similar communications, or by certified or registered mail, and addressed to the
parties set forth below. The notices shall be deemed to have been given in the
case of telegrams or similar communications when sent, and in the case of
certified or registered mail when deposited in the United States mail with
postage prepaid.
<PAGE> 9
To: Jose F. Matto, President and CIO
Amigas Venture Group, Inc.
5600 NW 36 St
Miami Florida 33122
To: John J. Lofquist, President & CEO
Centrack International, Inc.
21045 Commercial Trail
Boca Raton, FL 33486
The above addresses may be changed at any time by giving written notice as above
provided.
IN WITNESS WHEREOF, the parties hereto have executed this Memorandum of
Understanding as of the day and year first written above.
Amigas Venture Group, Inc. Centrack International, Inc.
By: /s/ Jose F. Matto By: /s/ John J. Lofquist
-------------------------- --------------------------
Name: Jose F. Matto Name: John J. Lofquist
Title: President and CIO Title: President & CEO
Date: 6\18\99 Date: 6\18\99
------------------------- -------------------------
<PAGE> 10
Attachment B
CII'S SERVICE MARKS AND TRADEMARKS TO BE LICENSED TO AMIGAS
TERMS OF CII'S LICENSE TO AMIGAS
AMIGAS SERVICE MARKS AND TRADEMARKS TO BE LICENSED TO CII
TERMS OF AMIGAS LICENSE TO CII
<PAGE> 1
Exhibit 10.3
I-on. (LOGO)
www.i-on.com
561.394.9484 o 561.394-9773 fax
1733 avenida del sol, boca raton, florida, 33432
WEB SITE HOSTING AGREEMENT
This WEB SITE HOSTING AGREEMENT ("this Agreement") is entered into this 6th day
of April, 1999 by and between Centrack International, a Florida corporation
("the Customer"), and i-on interactive, a Florida corporation ("i-on").
DEFINITIONS
As used in this Agreement, the term "Web site" shall mean a computer system
intended to be accessed through the World Wide Web segment of the Internet,
including software and content intended to be viewed and/or operated upon by
persons accessing the computer system via the Internet. A Web site may exist on
a single computer system with other Web sites.
The term "Hosted Site" shall mean the Web site of the Customer that is hosted
by i-on under the terms and conditions of this Agreement.
The term "Hosting Computer" shall mean the computer system and related
equipment on which the Hosted Site exists.
SERVICES PROVIDED TO THE CUSTOMER
i-on will maintain the operation of the Hosted Site continuously, twenty-four
(24) hours per day, seven (7) days per week, including holidays, with the
exception of reasonable hardware and software maintenance that must be
performed on the Hosting Computer and/or the Hosted Site. i-on will use best
efforts to schedule and perform such maintenance between the hours of 8pm and
8am Eastern Standard Time on weekdays, or during weekends.
Under this Agreement, i-on will provide the following limited services for the
Hosted Site:
1. connectivity to the Internet via a T1 (that may be shared by other
Web sites) to a leading Internet backbone access provider such as
UUNET, and reasonable efforts to maintain such connectivity with the
phone company and the Internet backbone access provider;
2. use of the Hosting Computer (that may be shared by other Web sites)
as described in this Agreement and maintenance required to keep such
Hosting Computer in good working order;
3. physical space for the Hosting Computer at a facility that maintains
proper environmental conditions in the area(s) where the Hosting
Computer is located and maintains reasonable efforts to prevent
unauthorized access to the physical location of the Hosting
Computer;
4. an emergency electrical power backup system for the Hosting
Computer;
5. up to 150 MB of mirrored computer storage on the Hosting Computer;
6. archival backups of such mirrored computer storage on a weekly
basis;
<PAGE> 2
7. off-site storage of such backups at separate facility than the
location of the Hosting Computer;
8. use of the Microsoft Windows NT Server 4.0 or higher operating
system software for the Hosting Computer and the Hosted Site;
9. use of the Microsoft Internet Information Service (IIS) 3.0 or
higher Web server software for the Hosted Site (providing support
for the HTTP Web protocol);
10. use of the Microsoft SQL Server 6.5 or higher database server
software for the Hosted Site, within the boundaries of allocated
computer storage, per #5 above;
11. access to the Hosted Site via the ftp protocol to an administrative
account designated by the Customer for the Customer to maintain the
Hosted Site's static content (such as HTML Web pages and computer
graphics);
12. up to 10 mailboxes accessible via the POP3 mail protocol that are
mapped to the Hosted Site's Internet address;
13. up to 1 hour per month of Web site administration services at no
additional charge, limited to:
requests for changes to ftp/e-mail users and passwords;
requests for e-mail configuration changes;
modification of mail aliases;
changes to server MIME types;
files restored from backup;
answering questions about server-side scripts;
ftp configuration changes;
log file configuration changes;
importing or exporting of database records;
and consultation on site operation and administration.
Additional Web site administration services will be billed at $200
per hour.
14. a monthly report of user activity on the Hosted Site.
RESPONSIBILITIES OF THE CUSTOMER
The Customer is responsible for paying i-on the recurring monthly fee in the
amount of $450. The Customer is responsible for paying the recurring monthly
fees by the 5th day of each month beginning in April 1, 1999. The Customer
acknowledges that failure to pay such fees in a timely manner will result in the
interruption or discontinuation of services for the Hosted Site.
The Customer is solely responsible for all content on the Hosted Site, including
but not limited to, HTML pages, graphics, sounds, animations, video clips, Java
applets, client-site scripts such as JavaScript and VBScript features, ActiveX
controls, and other files and/or executable components for use or download by
the users of the Hosted Site, as well as the accuracy and validity of any
information or data contained within, as well as the overall look-and-feel of
the Hosted Site from a user's perspective. The Customer is solely responsible
for the ongoing maintenance of such content. The Customer acknowledges that this
Agreement is explicitly not an agreement for i-on to provide content creation or
maintenance services for the Hosted Site.
The Customer is solely responsible for all customer support required by users of
Hosted Site. In the case of a problem with the Hosted Site that is the
responsibility of i-on according to this Agreement, the Customer shall directly
notify i-on, which shall report the resolution of such problem directly to the
Customer. If the problem of which i-on is notified is not a problem that is the
responsibility of i-on according to this Agreement, the time spent by i-on
relating to the incident will count towards the Customer's monthly allocation of
Web administration services, and any additional time
<PAGE> 3
exceeding such allocation will be billed to the Customer at the rate set forth
for such services. At no time will i-on take responsibility for directly
interacting with the Customer's users. The Customer acknowledges that this
Agreement is explicitly not an agreement for i-on to provide "help desk"
services to the users of the Hosted Site.
The Customer is solely responsible for all marketing and promotion of the
Hosted Site and is solely responsible for generating traffic to the Hosted Site.
The Customer is solely responsible for the security of its administrator
account(s) and respective password(s) for the Hosted Site, and is solely
responsible for any loss of data or damage to the Hosted Site that arises out of
any breach of such security.
The Customer is solely responsible for any and all advertising on the Hosted
Site.
The Customer is responsible for any and all software programs, server-side
scripts, and/or executable components that are installed on the Hosting Computer
for the purpose of providing interactive applications or dynamic content on the
Hosted Site. Any such programs, scripts, or components that might affect the
stability of the Hosting Computer or interfere with other Web sites on the
Hosting Computer must be approved by i-on before being installed on the Hosted
Site, i-on reserves the right to deny the Customer permission to install any
such programs, scripts, or components, to require additional fees for the
installation and/or ongoing operation of any such programs, scripts, or
components, or to remove any such programs, scripts, or components, if in i-on's
sole discretion they will interfere with the operation of the Hosting Computer
or exceed the Customer's monthly allocation of Web administration services.
CONDITIONS OF SERVICE
The Customer acknowledges that the Internet is an unreliable, unsecured, and
error-prone network and agrees to hold i-on harmless for any interruptions in
service to the Hosted Site or inability for users to reach or effectively use
the Hosted Site that arises outside the scope of i-on's responsibilities as
explicitly described in this Agreement.
The Customer acknowledges that data loss is a possibility, even with mirrored
computer storage and archival backup of such storage as provided by i-on per
this Agreement, and agrees to hold i-on harmless for any such data loss for the
Hosted Site, provided that i-on maintains reasonable steps as described in this
Agreement to protect against such data loss.
The Customer shall use i-on's resources in a manner that is clearly consistent
with the purposes of the products and services offered. The Customer shall
comply with applicable laws, standards, policies, and procedures. The Customer
incurs the responsibility to determine what restrictions apply and to review the
policies and procedures that will be updated continually. The customer is
responsible to use the resources with sensitivity to the rights of others. Any
conduct by the Customer that in i-on's sole discretion restricts or inhibits any
other user, whether a customer of i-on or a user of any other system, from using
and enjoying any of i-on's services is strictly prohibited. This includes, but
is not limited to, the posting or transmitting on or through any of i-on's
services, any information that is, in i-on's sole discretion, unlawful, obscene,
threatening, abusive, libelous, or harmful, or encourages conduct that would
constitute a criminal offense, give rise to civil liability, or otherwise
violate any local, state, national, or International law.
The Customer expressly agrees to use all of i-on's services only for lawful
purposes. Transmission or storage of any information, data, or material in
violation of United States or state regulation or law is prohibited, including
but not limited to, material protected by copyright, trademark, trade secret, or
any other statute.
TERM AND TERMINATION
The term of this Agreement for the Hosted Site shall commence upon April 1, 1999
and shall continue for a period of six (6) months, unless earlier terminated in
accordance with provisions hereof. This Agreement shall automatically be renewed
for one (1) or more one (1) month periods unless either the Customer or i-on
gives notice to the other party of its intention not to renew the
<PAGE> 4
Agreement, which notice must be given not less than fifteen (15) days before the
end of the respective initial or renewal term.
Either party may terminate this Agreement without cause at any time effective
upon thirty (30) days' written notice. Notwithstanding anything to the contrary
contained in this Agreement, no termination of this Agreement for any reason
whatsoever shall relieve the Customer of the obligation to pay all amounts due
to i-on and to make such payments on a timely basis.
LIMITATION OF LIABILITY
i-on will not be liable under any circumstances for any lost profits or other
consequential damages, even if i-on has been advised as to the possibility of
such damages. i-on's liability for damages to the Customer for any cause
whatsoever, regardless of the form of action, and whether in contract or in
tort, including negligence, shall be limited to one (1) month's fees and the
remaining portion of any prepaid fees.
INDEMNIFICATION
The Customer agrees to indemnify and hold harmless i-on, against any lawsuits,
claims, damages, or liabilities (or actions or proceedings in respect thereof)
to which i-on may become subject related to or arising out of Customer's use of
i-on's services, and will reimburse i-on for all legal and other expenses,
including attorney's fees, incurred in connection with investigating, defending,
or settling any such loss, claim, damage, liability, action, or proceeding
whether or not in connection with pending or threatened litigation in which i-on
is a party. The provisions of this Agreement relating to indemnification shall
survive termination of the Customer's Hosted Site.
THIRD-PARTY SOFTWARE
i-on expressly assumes no responsibility of the proper operation or maintenance
of any of the Centrack site software that we authored by Imaginet and/or other
third parties.
MISCELLANEOUS
This Agreement constitutes the entire understanding and agreement between the
parties hereto and supersedes any and all prior or contemporaneous
representations, understandings, and agreements between the Customer and i-on
with respect to the subject matter hereof, all of which are merged herein. The
parties understand that work i-on does in the development and maintenance of Web
content and applications for Centrack International is governed by separate
agreement(s).
Nothing contained herein shall be deemed or construed to create a joint venture
or partnership between the Customer and i-on. Neither party is, by virtue of
this Agreement or otherwise, authorized as an agent or legal representative of
the other party. Neither party is granted any such right or authority to assume
or to create any obligation or responsibility, express or implied, on behalf of
or in the name of the other party or to bind such other party in any manner.
No waiver of any provision of this Agreement or any rights or obligations of
either party hereunder shall be effective, except pursuant to a written
instrument signed by the party or parties waiving compliance, and any such
waiver shall be effective only in the specific instance and for the specific
purpose stated in such writing.
In the event that any provision hereof is found invalid or unenforceable
pursuant to judicial decree or decision, the remainder of this Agreement shall
remain valid and enforceable according to its terms.
This Agreement was entered into in the State of Florida, and its validity,
construction, interpretation, and legal effect shall be governed by the laws and
judicial decisions of the State of Florida applicable to contracts entered into
and performed entirely within the State of Florida.
Neither the Customer nor i-on shall be deemed in default if its performance or
obligations hereunder are delayed or become impossible or impractical by reason
of any act of God, war,
<PAGE> 5
fire, earthquake, labor dispute, sickness, accident, civil commotion, epidemic,
act of government or government agency or offices, or any other cause beyond
such party's control.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.
CENTRACK INTERNATIONAL, INC. I-ON INTERACTIVE, INC.
By: /s/ JOHN J. LOFQUIST By: /s/ ANNA TALERICO
------------------------- -----------------------------
Name: John J. Lofquist Name: Anna Talerico
Title: President & CEO Title: Vice President
<PAGE> 1
EXHIBIT 10.4
AUCTION HOSTING AND SERVICES AGREEMENT
THIS AUCTION HOSTING AND SERVICES AGREEMENT (the "Agreement"), is made and
entered into effective as of May 26, 1999 (the "Effective Date") by and between
OPENSITE TECHNOLOGIES, INC., a Delaware corporation ("OpenSite"), and Centrack
International, Inc., a Delaware corporation (the "Client").
WHEREAS, OpenSite develops and markets certain computer software products
know as OpenSite Auction for creating and operating Internet-based auctions (the
"Software") and develops, hosts, and maintains auctions for its clients using
the Software; and
WHEREAS, the Client desires for OpenSite to develop, host, and maintain a
public auction for the Client upon the terms and conditions herein.
NOW THEREFORE, in consideration of the mutual agreements and
representations and warranties set forth herein, OpenSite and the Client hereby
agree as follows:
1. Definitions.
(a) Acceptance Tests. The term "Acceptance Tests" shall have the meaning
set forth in Section 2(d) hereof.
(b) Auction Items. The term "Auction Items" shall mean all products or
other items or services offered by the Client for auction on the Auction Site.
(c) Auction Policies. The term "Auction Policies" shall mean OpenSite's
policies governing the Auction Site and the conduct of Internet-based auctions,
as amended from time to time by OpenSite within its sole discretion and upon
notice to the Client. A copy of such policies as in effect as of the Effective
Date is attached hereto as Exhibit A.
(d) Auction Services. The term "Auction Services" shall mean OpenSite's
business of making the Software available through an outsourcing arrangement and
services for use by the "Client's Customers," as defined herein, through the
"Internet," as defined herein, with the features as set forth on Exhibit B
attached hereto.
(e) Auction Site. The term "Auction Site" shall mean the web pages
constituting the Client's site on the Internet through which the Auction items
and the Auction Services are made accessible to the Client's Customers.
(f) Client Content. The term "Client Content" shall mean all information
provided by the Client to be included on the Auction Site, including without
limitation, listings and descriptions of the Auction Items, animations, Images,
trademarks, logos, photographs, sounds, texts, and video segments.
(g) Client's Customers. The term "Client's Customers" shall mean any
person authorized by the Client to have access to, or participate in, the
Auction Site.
(h) Errors. The term "Errors" shall mean any failure of the Auction Site
to conform to the "Specifications," as defined herein. Notwithstanding the
foregoing, any nonconformity resulting from the alteration or misuse by the
Client, the Client's Customers, or any other third party shall be not an Error.
(i) Internet. The term "Internet" shall mean the principal international
network interconnecting computers and other networks through the Internet
Protocol and all web pages and web sites that can be accessed thereby.
(j) Prohibited Content. The term "Prohibited Content" shall mean all
information included in the Client Content, that OpenSite reasonably determines,
within its sole discretion to be: (i) obscene, in poor taste, or otherwise
socially objectionable; (ii) false, misleading, or libelous; (iii) in violation
of any international, federal, state, or local law, statute, regulation, or
rule; or (iv) infringing upon or in violation of any copyright, patent, service
mark, trademark, or any other intellectual or proprietary right of any third
party.
(j) Schedule. The term "Schedule" shall have the meaning set forth in
Section 2(a) hereof.
(k) Search Service. The term "Search Service" shall have the meaning set
forth in Section 2(g) hereof.
(l) Specifications. The term "Specifications" shall have the meaning set
forth in Section 2(a) hereof.
(m) Term. The term "Term" shall have the meaning set forth in Section
11(a) hereof.
(n) Web Server. The term "Web Server" shall mean all of the shared
hardware and software that are located at OpenSite's location or at such
location as may be designated by OpenSite that are necessary to host the Auction
Site and to make the Auction Site available to the Client's Customers on the
Internet.
2. Development of Auction Site.
(a) Development of Auction Site. As soon as practicable after the
Effective Date, OpenSite and the Client shall mutually agree on: (i) the
functional specifications, the graphics, and the "look and feel" of the Auction
Site all of which shall be attached hereto as Exhibit C (the "Specifications")
and (ii) the schedule for the development by OpenSite of the Auction Site which
shall be attached hereto as Exhibit D (the "Schedule"). OpenSite shall use its
commercially reasonable efforts to develop the Auction Site in accordance with
the Schedule. The Client hereby acknowledges and agrees that OpenSite shall be
solely responsible for the method and manner in which OpenSite develops the
Auction Site. If the Specifications provide for any custom development work, the
Client shall pay OpenSite for such custom development work in accordance with
OpenSite's standard fees and hourly rates, a copy of which is attached hereto as
Exhibit E.
(b) Changes to the Specifications. If the Client desires to change the
Specifications, the Client shall immediately notify OpenSite. All such changes
to the Specifications shall be made by OpenSite pursuant to the terms and
conditions of a separate Consulting Services Agreement and not pursuant to the
terms and conditions of this Agreement. The Client hereby acknowledges and
agrees that such changes to the Specifications may result in one or more of the
following: (i) changes to the Schedule; (ii) delays in the development of the
Auction Site; or (iii) custom development work.
(c) Client Content. The Client shall provide the Client Content required
for the development of the Auction Site to OpenSite in accordance with the
Schedule. The Client hereby acknowledges and agrees that it shall be solely
responsible for the accuracy and completeness of the Client Content. The Client
hereby acknowledges and agrees that OpenSite shall not have any duty or
obligation to review the Client Content or to confirm its accuracy or
completeness. Notwithstanding the foregoing, The
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Client hereby acknowledges and agrees that OpenSite may refuse to include in
the Auction Site any Client Content that OpenSite reasonably determines, within
its sole discretion, to be or to include Prohibited Content.
The Client hereby grants OpenSite a non-exclusive and royalty-free license
during the Term to use the Client Content in connection with the Auction Site as
contemplated by this Agreement. OpenSite hereby acknowledges and agrees that
the Client Content and HTML modified version of the Client Content, is the sole
and exclusive property of the Client or its licensors. Except for the limited
license to use the Client Content, including the HTML modified version of the
Client Content, set forth in the foregoing sentences. OpenSite has no rights in
or to the Client Content, and OpenSite shall not, and it shall not permit any
third party to, alter, copy, modify, or use the Client Content except as
described in Section 2(g).
(d) Acceptance Tests. Upon the completion of the development of the
Auction Site, OpenSite shall provide the Client access to the Auction Site on
the Web Server for the sole purpose of examining and testing the Auction Site.
As soon as practicable thereafter, OpenSite and the Client shall examine the
Auction Site and shall perform the acceptance test mutually agreed upon in the
Specifications (the "Acceptance Tests") to determine whether the Auction Site
materially conforms to the features and functions set forth in the Auction
Services. If the Acceptance Tests reasonably establish that the Auction Site
does not conform to the features and functions set forth in the Auction
Services, then the Client shall notify OpenSite and OpenSite shall, at its sole
cost and expense and as soon as practicable after receipt of such notice, make
such changes as are reasonably necessary such that the Auction Site materially
conforms to the features and functions set forth in the Auction Services. As
soon as practicable thereafter, OpenSite and the Client shall reexamine the
Auction Site and perform the Acceptance Tests to determine whether the Auction
Site materially conforms to the features and functions set forth in the Auction
Services. OpenSite and the Client shall repeat the foregoing procedures until
such time as the Auction Site materially conforms to the features and functions
set forth in the Auction Services.
(e) Hosting. OpenSite shall host and operate the Auction Site on the Web
Server, for and on behalf of the Client, solely for the purpose of running
auctions of the Auction Items. OpenSite shall provide the Client storage
capacity on the Web Server and necessary system and file back-up as set forth
in the Specifications.
(f) Auction Services. During the Term and subject to the terms and
conditions hereof, OpenSite shall provide the Auction Services for and on
behalf of the Client. During the Term, the Client hereby agrees to comply with
the Auction Policies, as they amended from time to time by OpenSite within its
sole discretion and upon notice to the Client.
(g) Auction Listings. The Client hereby grants to OpenSite the right to
access, reproduce, display and distribute a list of the Auction Items and the
descriptions thereof provided by the Client through a central search service
(the "Search Service") located on OpenSite's corporate site on the Internet or
any other site on the Internet that is owned or controlled by OpenSite. The
Client hereby acknowledges and agrees that the Search Service may contain
listings and descriptions of auction items of other OpenSite clients or
customers and which may include listings of similar or competing auction items
by competitors of the Client. OpenSite shall ensure that Client site is
referenced each and every time Client Content is reproduced, displayed,
distributed or access granted pursuant to this Section 2(g).
3. MAINTENANCE OF THE AUCTION SITE AND TRAINING.
(a) Continuous Operation. OpenSite shall use its commercially reasonable
efforts to maintain the operation of the Web Server and access to the Auction
Site by the Client's Customers continuously on a twenty four (24) hours a day
three hundred and sixty five (365) day a year basis. Notwithstanding the
foregoing, OpenSite may, from time to time, shut down the Web Server and the
Auction Site during off-peak hours as reasonably determined by OpenSite in
order to perform maintenance or install upgrades. OpenSite shall use its
commercially reasonable efforts to provide reasonable notice to the Client of
all such shut downs and to complete such maintenance and upgrades as soon as
practicable.
(b) Correction of Errors. OpenSite shall use its commercially reasonable
efforts to maintain the Auction Site so that it continues to conform to the
features and functions set forth in the Auction Services. OpenSite shall use
its commercially reasonable efforts to correct all Errors as soon as
practicable after receipt of notice thereof from the Client.
(c) Operation. If OpenSite, despite its commercially reasonable efforts,
fails to keep its Web Server in operation for a period of five consecutive
days, Client may terminate the Agreement 10 days following written notice to
OpenSite.
4. FEES.
(a) Fee Schedule. In consideration of the services provided by OpenSite
to the Client pursuant to this Agreement, the Client shall pay OpenSite the
fees set forth on Exhibit F attached hereto. All such fees shall be due and
payable by the Client to OpenSite in accordance with the payment terms and
conditions set forth on Exhibit F attached hereto.
(b) Taxes. The fees set forth on Exhibit F attached hereto do not include
applicable local, state, or federal excise, personal property, sales, use, or
other duties or taxes. The Client hereby acknowledges and agrees that it shall
be solely responsible for the payment of all such applicable duties and taxes.
The Client hereby further acknowledges and agrees that it shall be solely
responsible for the collection, reporting and remittance of all applicable
local, state or federal, sales, user or other duties or taxes on sales of the
items listed on the Auction Site.
(c) Late Payment; Default in Payment. Any amount not paid within thirty
(30) days after the date due shall bear interest from the date due until paid
at the rate of one and one-half percent (1-1/2%) per month or, if less, the
highest rate allowed by applicable law.
5. CLIENT OBLIGATIONS.
In connection with the sale and purchase of all Auction Items on the
Auction Site, the Client shall be solely responsible for: (i) shipping and
delivering the Auction Items to the purchasers thereof; (ii) billing the
purchasers for all amounts due; (iii) collecting all amounts due from the
purchasers; and (iv) handling all purchaser complaints and questions. The
Client acknowledges and agrees that OpenSite shall be responsible only for
providing to the Client each purchaser's name, address, and email address as
provided to OpenSite by such purchasers. The Client further acknowledges and
agrees that OpenSite shall not have any liability or responsibility for any of
the Auction Items, including without limitation, shipping, delivery, billing,
collection, or purchaser complaints and questions. The Client further
acknowledges and agrees that OpenSite shall not have any liability or
responsibility for any auction conducted through any "Seller's Module" that is
included in the Software.
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6. REPRESENTATIONS AND WARRANTIES OF THE CLIENT. The Client hereby
represents and warrants to OpenSite that:
(a) The Client is a corporation duly organized, validly existing, and in
good standing under the laws of the State of its incorporation, and has all
requisite power and authority to execute and deliver this Agreement and to
perform its duties and obligations hereunder.
(b) The execution and delivery of this Agreement by the Client has been
approved by all necessary action.
(c) This Agreement constitutes a valid and binding agreement of the
Client enforceable against it in accordance with its terms, except to the
extent that the same may be affected by bankruptcy or other insolvency laws
affecting the rights of creditors generally.
(d) The Client Content does not and shall not contain any Prohibited
Content.
(e) The Client either: (i) is the sole owner of the Client Content free
and clear of all claims and rights of third parties or (ii) has all licenses
from third parties that are necessary to grant OpenSite the license set forth
in Section 2(c) to use the Client Content.
(f) The Client owns all right, title and interest in and to the Auction
Items listed for or has obtained all rights necessary for the sale of the
Auction Items by the Client free and clear of all liens, security interests, and
other encumbrances.
(g) OpenSite is a corporation duly organized, validly existing in good
standing under the laws of the state of its incorporation, and has all the
requisite power and authority to execute and deliver this Agreement, and to
perform its duties and obligations hereunder.
(h) The execution and delivery of this Agreement by OpenSite has been
approved by all necessary actions.
7. DISCLAIMER AND LIMITATION OF LIABILITY
(a) Disclaimer. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, OPENSITE
DOES NOT MAKE ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND, EITHER EXPRESS,
IMPLIED, OR STATUTORY REGARDING THE AUCTION SITE, THE SOFTWARE OR ANY SERVICES
PROVIDED BY OPENSITE UNDER THIS AGREEMENT. OPENSITE HEREBY EXPRESSLY DISCLAIMS
ALL WARRANTIES, EITHER EXPRESS, IMPLIED, OR STATUTORY, OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE REGARDING THE AUCTION SITE, THE SOFTWARE AND
ANY SERVICES PERFORMED BY OPENSITE UNDER THIS AGREEMENT. OPENSITE DOES NOT MAKE
ANY REPRESENTATIONS OR WARRANTIES REGARDING: (I) THE SUCCESS OF ANY AUCTION
REQUESTED BY THE CLIENT AND HOSTED BY OPENSITE; (II) THE ACCURACY OR
COMPLETENESS OF THE CLIENT CONTENT; (III) THE SECURITY OF THE AUCTION SITE; OR
(IV) THE QUALITY OR CONTINUITY OF THIRD PARTY TELECOMMUNICATIONS OR INFORMATION
SYSTEMS OR SERVICES. THE CLIENT HEREBY ACKNOWLEDGES AND AGREES THAT THE
INTERNET IS NOT CONTROLLED, OPERATED, OR OWNED BY A SINGLE ENTITY, AND AS A
RESULT, OPENSITE DOES NOT MAKE ANY REPRESENTATION OR WARRANTY THAT ANY CLIENT
CUSTOMER SHALL BE ABLE TO ACCESS THE AUCTION SITE AT ANY PARTICULAR TIME.
(b) Limitation of Liability. THE AGGREGATE AMOUNT OF OPENSITE'S LIABILITY
HEREUNDER TO THE CLIENT SHALL BE THE AGGREGATE AMOUNT OF ALL FEES PAID BY THE
CLIENT TO OPENSITE FOR THE (3) THREE MONTH PERIOD IMMEDIATELY PRECEDING ANY
CLAIM HEREUNDER. OPENSITE SHALL NOT BE LIABLE TO THE CLIENT FOR CONSEQUENTIAL,
INCIDENTAL, SPECIAL, OR EXEMPLARY DAMAGES, INCLUDING LOST PROFITS OR LOSS OF
USE, EVEN IF OPENSITE IS NOTIFIED OF THE LIKELIHOOD OF SUCH DAMAGES. OPENSITE
SHALL NOT BE LIABLE TO THE CLIENT FOR DAMAGES RESULTING FROM A THIRD PARTY
ACCESSING THE WEB SERVER OR THE AUCTION SITE.
8. CONFIDENTIALITY
OpenSite and the Client hereby acknowledge and agree that all information
provided to the other during the Term constitutes the proprietary and valuable
property of the disclosing party (the "Confidential Information"). Except as
required in connection with this Agreement, as required by law, or with the
prior consent of the other party, during the Term and for a period of three (3)
years after the expiration of the Term or termination of this Agreement,
OpenSite and the Client shall not use, copy, recreate, or disclose the
Confidential Information of the other party. OpenSite and the Client shall use
their respective best efforts to ensure and preserve the confidentiality of the
other party's Confidential Information. Upon the expiration of the Term or the
termination of this Agreement, OpenSite and the Client shall return to the
other all Confidential Information, and all of copies thereof, of the other
party. Notwithstanding the foregoing, Confidential Information shall not
include: (i) Information that at the time of its disclosure was or thereafter
becomes part of the public domain through no act or omission of the receiving
party; (ii) information that was in the receiving party's lawful possession
prior to the time of the disclosure; (iii) Information that is thereafter
lawfully disclosed to the receiving party by a third party under no obligation
of confidentiality with respect to such information; and (iv) information that
is thereafter independently developed by the receiving party without access to
the Confidential Information of the other party as shown by written record
maintained contemporaneously with such development.
9. OWNERSHIP
The Client hereby acknowledges and agrees that OpenSite owns all
intellectual property rights in and to the Software and the Auction Sites,
excluding the rights with respect to the Client Content that are retained or
granted to the Client in Section 2(c) of this Agreement. The Client hereby
acknowledges and agrees that this is an agreement for services only, and
OpenSite does not grant to the Client any right, title, interest or license in
or to the Software.
10. INDEMNIFICATION
(a) Indemnification by OpenSite. Subject to the provisions of Section
10(b) hereof, OpenSite shall defend and indemnify and hold harmless the Client
and its directors, officers, employees, and agents against and with respect to
all claims, lawsuits, liabilities, losses, costs, and expenses (including
reasonable attorneys' fees) suffered or incurred by them as a result of: (i)
any act or omission of OpenSite and its directors, officers, employees, and
agents and (ii) any breach by OpenSite of any provision hereof.
(b) Indemnification by the Client. The Client shall defend and indemnify
and hold harmless OpenSite and its directors, officers, employees, and agents
against and with respect to all claims, including without limitation, any tax
claims or assessments, lawsuits, liabilities, losses, costs, and expenses
(including reasonable attorneys' fees) suffered or incurred by them as a
result of: (i) any act or omission of the Client and its directors, officers,
employees, and agents; (ii) any breach by the Client of any provision hereof;
and (iii) the sale of the Auction
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Items by the Client, including without limitation the shipping, delivery,
billing, and collection with respect to the Auction Items and the failure by
Client to collect or pay any taxes or fees which it is obligated to pay in
connection with the sale of the Auction Items.
(c) Notice. A party claiming indemnification shall give the other party
prompt written notice of all claims, provide reasonable cooperation in its
investigation and defense, and permit the other party to defend the claims at
its expense with legal counsel of its choice.
11. Term and Termination
(a) Term. Unless earlier terminated as provided herein, the initial term
of this Agreement shall begin on the Effective Date and shall expire on June 1,
1999 (the "Term").
(b) Termination by OpenSite. OpenSite may terminate this Agreement upon
delivery of notice to the Client: (i) if the Client breaches any provision of
this Agreement and such breach remains uncured for a period of thirty (30) days
following the delivery by OpenSite to the Client of notice of such breach; (ii)
if the Client becomes insolvent or makes a general assignment for the benefit of
creditors; or (iii) if the Client files a petition in bankruptcy or an
involuntary petition in bankruptcy is filed against it.
(c) Termination by the Client. The Client may terminate this Agreement
upon delivery of notice to OpenSite: (i) if OpenSite breaches any provision of
this Agreement and such breach remains uncured to for a period of thirty (30)
days following the delivery by Client to OpenSite of notice of such breach; (ii)
if OpenSite becomes insolvent or makes a general assignment for the benefit of
creditors; or (iii) if OpenSite files a petition in bankruptcy or an involuntary
petition in bankruptcy is filed against it.
(d) Effect of Termination. Upon the termination or expiration of this
Agreement: (i) the Client shall pay all amounts due to OpenSite hereunder, and
(ii) OpenSite shall, upon request, return to the Client all of the Client
Content, and the HTML modified version of the Client Content.
(e) Termination of Auctions. OpenSite reserves the right to terminate,
suspend, or limit access to any auction which it determines within its sole
discretion: (i) contains Prohibited Content; (ii) involves illegal, infringing
obscene, or offensive Auction items; or (iii) violates OpenSite's then current
Auction Policies.
12. Miscellaneous
(a) Force Majeure. Neither OpenSite nor the Client shall be responsible
for delays or failures to perform their respective duties and obligations
hereunder to the extent that such delays or failures result from acts of God,
strikes, lockouts, riots, war, epidemics, governmental regulations, fire, power
failures, materials shortages, earthquakes, other natural elements, or any other
act beyond such party's control. In addition, OpenSite shall not be responsible
for delays or failures to perform its duties and obligations hereunder to the
extent that such delays or failures result from changes in the Specifications by
the Client pursuant to Section 2(b) hereof or the Client Content that does not
conform to the Specifications.
(b) Relationship of the Parties. For all purposes, OpenSite and the Client
shall be deemed to be independent contractors and nothing contained herein shall
be deemed to constitute a joint venture, partnership, employer-employee
relationship, or other agency relationship.
(c) Notices. All notices, consents, approvals, invoices, reports, and
other communications to, upon, and between the parties shall be in writing and
shall be deemed to have been given, delivered, made, and received when
personally delivered, when sent by facsimile, with confirmation, when sent by a
nationally recognized overnight delivery service, delivery charges prepaid, or
when sent by certified mail, postage prepaid and return receipt requested,
addressed to OpenSite at: 5315 Highgate Drive, Suite 102, Durham, North Carolina
27713, Facsimile Number (919) 544-9367, Attention: Jim Ford, and addressed to
the Client at: , Facsimile Number , Attention:
(d) Effect. This agreement shall be binding upon and inure to the benefit
of OpenSite and the Client and their respective successors and permitted
assigns.
(e) Entire Agreement. This Agreement, together with the several Exhibits
hereto, constitutes the entire agreement between OpenSite and the Client with
respect to the subject matter hereof and supercedes all or any prior written or
oral understandings or agreements with respect to the subject matter hereof.
(f) Defined Terms. Unless and except as the context requires otherwise,
defined terms when used in this Agreement in the singular shall include the
plural and when used in the plural shall include the singular.
(g) Modification. No provision of this Agreement, including the provisions
of this Section, and the Exhibits hereto, may be amended, modified, or deleted,
except by an agreement in writing executed by OpenSite and the Client.
(h) Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision hereof.
(i) No Assignment. Neither this Agreement nor any interest herein may be
assigned by either OpenSite or the Client without the consent of the other;
provided, however no such consent shall be required in connection with the sale
of all or substantially all the assets or stock of a party, whether by merger,
sale or otherwise.
(j) Construction. This Agreement shall be construed and enforced in
accordance with the laws of the State of North Carolina applicable to agreements
that are executed, delivered, and performed entirely within such State without
regard to the rules with respect to conflicts of laws.
(k) Counterparts. This Agreement is executed and delivered by the parties
in more than one counterpart, each of which shall be deemed to be an original,
and all of which shall be deemed to be the same Agreement.
(l) Headings. The underlined headings herein are for convenience only and
shall not affect the interpretation of this Agreement.
(m) Publicity. OpenSite may prepare press releases concerning the
existence of this Agreement and may reference the Client and this Agreement in
its advertising, sales promotions, trade shows, or other marketing material.
Additionally, the Client agrees to have the Auction Site display a "Powered by
OpenSite" logo as provided by OpenSite.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
OpenSite and the Client as of the Effective Date.
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OPENSITE TECHNOLOGIES, INC.
By: /s/ Tom Hanlon
----------------------
Title: V.P. Sales
----------------------
CENTRACK INTERNATIONAL INC.
By: /s/ John J. Lofquist
----------------------
Title: President & CEO
----------------------
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EXHIBIT A
AUCTION POLICIES
THE FOLLOWING ARE THE STANDARD OPENSITE AUCTION HOSTING POLICIES:
Number of categories and sub-categories limited to 100.
Item images uploaded must be less than 50,000 bytes (50KB each).
Single Auction duration must be at least 24 hours.
Client must provide new auction item information at least 48 hours prior to
an auction opening.
Item information must be provided in the specified Item Upload file format.
THE FOLLOWING POLICY CHANGES MAY BE MADE:
Total Number of categories and sub-categories up to 899
Large item images
Auctions shorter than 24 hours.
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EXHIBIT B
AUCTION SERVICES
THE FOLLOWING ADMINISTRATION SERVICES ARE PROVIDED AS PART OF THE CONCIERGE
AUCTION SERVICES:
- - Software Installation and Configuration at hosting site
- - Initial Site Design not to exceed two (2) days
- - Web Server sizing, administration and maintenance 24hrs x 7days/week
- - Daily uploading of auction items to the Auction Site based on the Client
Content provided in the proper format
- - Issue auction results and reports including:
- - Email notification to both Client and Winner (Client's customer) within 24
hours of auction closing
- - Results and reports to include winning user information, shipping address
and payment processing data within 2 business days of an auction closing.
- - A Monthly report on all customer including contact information
THE FOLLOWING ADMINISTRATION SERVICES ARE AVAILABLE AT EXTRA CHARGE:
- - Customized reports in hard copy or specialized format such as Quickbooks
or MS Access
- - Integration with Transaction Processing systems such as CyberCash or Open
Market Transact
- - Integration with a fulfillment system
- - Integration with customer's ad serving system
- - Private Labeled AuctionWatch Desktop
- - Auction administration training (Admin access is not provided as part of
base service)
THE FOLLOWING OPENSITE AUCTION SOFTWARE COMPONENTS ARE PROVIDED AS PART OF THE
CONCIERGE AUCTION SERVICES:
- - Single auction type auction with multiple categories and sub categories as
agreed upon in Specifications
- - Bidder registration
- - AuctionWatch features
- - Bidding Activity Feature
- - New Item Listings
- - Winners Listing
- - Activate Hot Item Component
- - Activate OpenSite Search Engine
- - Activate Category Watch Module
- - Dynamic Paging
THE FOLLOWING OPENSITE AUCTION SOFTWARE COMPONENTS MAY BE ADDED AT EXTRA CHARGE:
- - AuctionRate(TM) Component
- - Banner Ad Module
- - Classified Ads Module
- - Online Store Module
- - Sellers Module
- - Multiple Auction Types
- - Private Auction Module
- - Custom Security Features
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<PAGE> 8
EXHIBIT C
Specifications for Auction Site
[To Be Completed After the Effective Date]
8 of 11
<PAGE> 9
EXHIBIT D
DEVELOPMENT SCHEDULE
[To Be Completed After the Effective Date]
9 of 11
<PAGE> 10
EXHIBIT E
STANDARD FEES AND HOURLY RATES FOR CUSTOM DEVELOPMENT
10 of 11
<PAGE> 11
EXHIBIT F
AUCTION SITE FEES
ONE-TIME SETUP FEE $2,500
The One-time Setup Fee is for services provided by OpenSite regarding initial
installation and implementation of the Auction Site.
MONTHLY FEE SCHEDULE
<TABLE>
<CAPTION>
NUMBER OF HELD AUCTIONS MONTHLY LICENSE FEE
- ----------------------- -------------------
<S> <C>
001-500 *$2,500
501-1,500 $4,000
1,501-2,500 $6,500
Each Additional 1,000 Auctions $1,000
</TABLE>
*Minimum Monthly Fee
ADDITIONAL SERVICES
- -------------------------------------------------------------
[ ] Seller's Module $1,500 per month
- -------------------------------------------------------------
[ ] OEM version of Auction Watch Desktop $10,000 one time
customization fee
$1.00 per copy
license fee.
- -------------------------------------------------------------
[ ]
- -------------------------------------------------------------
[ ]
- -------------------------------------------------------------
PAYMENT TERMS
The Client shall pay to OpenSite the Minimum Monthly Fee for the first month of
the contract, plus the One-time Setup Fee and any completed Custom Development
Fees in advance of the first day of the Auction Site going live. If the number
of Held Auctions during the prior month exceeds the Minimum Monthly Fee for
which the Client has paid in advance, the Client shall pay an additional fee
equal to the difference between the Minimum Monthly Fee and the applicable fee
due based on the number of Held Auction. The Minimum Monthly Fee and any
additional fees are due within 10 days of receiving the prior months auction
results from OpenSite. For the purposes of this Agreement, a "Held Auction"
shall mean any auction that opens on the Auction Site, whether or not that
auction receives any bids or results in any winners.
FEES DUE PRIOR TO LAUNCH OF AUCTION SITE:
Initial Fee $3,000.00
11 of 11
<PAGE> 1
Exhibit 10.5
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("this Agreement") is made and effective as
of this 1st day of January, 1999, by and between CENTRACK INTERNATIONAL, INC.,
a Florida corporation (the "Company" or "Employer"), and JOHN J. LOFQUIST
(hereinafter "Employee").
WITNESSETH:
WHEREAS, Employee is the Company founder and has since inception been a
loyal and devoted employee;
WHEREAS, Company believes it is in Company's best interest to employ
Employee, and Employee desires to be employed by Company; and
WHEREAS, Company and Employee desire to set forth the terms and
conditions on which Employee shall be employed by and provide his services to
Company;
NOW, THEREFORE, in consideration of the premises, and for other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto, intending to be legally bound, do hereby
agree as follows:
1. Employment. Company hereby employs Employee in its business as
President, Chairman of the Board of Directors of the Company ("Board") and
Chief Executive Officer, and Employee hereby accepts such employment, all upon
the terms and conditions hereinafter set forth.
2. Term. Unless sooner terminated pursuant to the provisions of this
Agreement, the term of employment under this Agreement shall be for five (5)
years ("Employment Period"). The Employment Period shall be automatically
extended for additional three year periods unless either party notifies the
other in writing that the Employment Period will not be renewed at least six
(6) months prior to the end of the initial term or six (6) months prior to the
end of any such three year renewal.
3. Salary and Base Compensation. Employee shall be entitled to receive
salary during the Employment Period at the rate of One Hundred Fifty Thousand
Dollars ($150,000) per annum, increased to One Hundred Seventy-Five Thousand
Dollars ($175,000) per annum effective January 1, 2000 increased to Two Hundred
Thousand Dollars ($200,000) per annum effective January 1, 2001, increased to
Two Hundred Fifty Thousand Dollars ($250,000) per annum effective January 1,
2002, increased to Three Hundred Fifty Thousand Dollars ($350,000)
- -------------------------------------------------------------------------------
Centrack International, Inc. Proprietary and Confidential
<PAGE> 2
per annum effective Janury 1, 2003 (the "Base Salary"). In addition to the Base
Salary paid to Employee during the Employment Period, Employee shall be
entitled to receive the Benefits, Profits Bonus, Revenue Bonus and Stock
Options (as those terms are hereinafter defined) during the Employment Period.
The Base Salary shall be payable bi-weekly in accordance with the current
normal payroll policies of Company, which policies may be changed by Company
from time to time in its sole discretion, and shall be subject to all
appropriate withholding taxes.
4. Business Expenses and Reimbursements. Employee shall be entitled to
reimbursement by the Company for ordinary and necessary business expenses
incurred by Employee in the performance of his duties for Company, which types
of expenditures shall be determined and approved by the Company, and further
provided that:
(a) Each such expenditure is of a nature qualifying it as a
proper deduction on the Federal and State income tax returns of Company as a
business expense (determined without regard to statutory limitations) and not
as deductible compensation to Employee; and
(b) Employee furnishes Company with adequate records and other
documentary evidence required by federal and State statutes and regulations for
the substantiation of such expenditures as deductible business expenses of
Company and not as deductible compensation to Employee, as well as any other
documentation reasonably requested by Company.
(c) Employee agrees that, if at any time, any payment made to
Employee by Company, whether for salary or as a business expense reimbursement,
shall be disallowed in whole or in part as a deductible expense by the
appropriate taxing authorities, Employee shall reimburse Company to the full
extent of such disallowance.
5. Car Allowance. During the Employment Period, Employee shall be
reimbursed for all automobile expenses, with such automobile expenses limited
to $850.00 per month (increased by the Consumer Price Index increase on each
anniversary of this Agreement) in accordance with Company's normal automobile
allowance payment practices, as in existence from time to time, and the
Employee shall supply the Company with accurate invoices of all expenses under
this paragraph.
6. Benefits. Employee shall be entitled to receive during the entire
Employment Period the following benefits herein below described ("Benefits").
Employee agrees that the Base Salary, the Profits Bonus, the Revenue Bonus, the
Stock Option, and the Benefits and the other compensation provided in
accordance with this Agreement, are the sole and exclusive compensation of
Employee for his duties hereunder.
Continuing throughout the Employment Period:
Employee shall receive all of the employee benefits including,
without limitation,
- -------------------------------------------------------------------------------
Centrack International, Inc. Proprietary and Confidential
2
<PAGE> 3
health insurance, pension, disability, profit sharing and
retirement benefits, provided at any time by Company to any of
its senior executive employees.
7. Vacation. Employee shall be entitled to paid vacation in accordance
with the vacation policy of the Company in effect for senior executives from
time to time, in no event to be less than three (3) weeks per calendar year.
8. Revenue and Profits Bonuses.
(a) During the Employment Period, Employee shall be paid, within thirty
(30) days after delivery of the Company's annual audited financial statements
for its fiscal year end, a bonus in cash equal to two percent (2%) of the
increase in total gross revenues of the Company including all subsidiaries on a
consolidated basis for the most recently ended fiscal year over the total gross
revenues for the Company as of the end of the immediately prior fiscal year.
For example, if total gross revenue for fiscal year "A" equals $2,100,000 and
if total gross revenue for fiscal year "B" equals $3,100,000, the bonus amount
payable hereunder would be two percent (2%) of said $1,000,000 difference, in
that case equal to $20,000 ("Revenue Bonus").
(b) Employee shall be paid, within thirty (30) days of the end of each
full calendar quarter during the Employment Period, a quarterly bonus equal to
five percent (5%) of the net pre-tax earnings of the Company including all
subsidiaries on a consolidated basis (the "Profits Bonus"). The term "net
pre-tax earnings" as used herein shall be determined by the Company's internal
financial statements and shall be subject at the Company's fiscal year end to
adjustment based upon the annual audit of the Company financial statements by
the Company's independent CPA firm in accordance with generally accepted
accounting principles and shall constitute income before interest, tax,
appreciation and amortization.
(c) Notwithstanding anything to the contrary in this Agreement, the
Profits Bonus shall be payable only provided Employee is in the employ of
Company on the last day of the respective quarter for which such Profits Bonus
is being calculated. Employee shall be entitled to the Revenue Bonus on a pro
rata basis for partial year calculations, based on full year results and
further payable in accordance with and subject to the normal payroll policies
of the Company with respect to similar forms of compensation, including without
limitation, being subject to all appropriate withholding taxes.
(d) If the fiscal year of the Company is changed, the annual Revenue
Bonus shall be adjusted for the year in which the election is made and the next
fiscal year so that the calculation will have been made on an equitable basis
for comparable periods.
9. Stock Option. Employee shall be eligible to receive stock options in
accordance
- -------------------------------------------------------------------------------
Centrack International, Inc. Proprietary and Confidential
3
<PAGE> 4
with the stock option plans adopted by the Company from time to time or
determined by the Board of Directors of the Company, in all events annually
within thirty (30) days of the end of the Company's fiscal year in an amount
not less than twenty five percent (25%) of the aggregate of all stock options
granted to all other employees of the Company during the most recently ended
fiscal year.
10. Registration Rights. In the event Company registers common stock
held by other employees of Company, then the Company shall also register a pro
rata portion of the stock held by Employee.
11. Compensation Review. The Board shall from time to time, no less
frequently than annually, review Employee's compensation and may (in his sole
discretion) increase, but not decrease, the compensation provided for in
Section 3 hereof. Any such increase in compensation shall be valid only if in
writing, executed by a duly authorized officer of the Company, and such writing
shall constitute an amendment solely to the payments to be made to Employee
under this Agreement, without waiver or modification of any other provision
hereof.
12. Invention Assignment and Confidentiality Agreement. Against the
execution and delivery of this Agreement, Employee shall enter into an
agreement in the form of Exhibit "A" hereto (the "Invention Assignment and
Confidentiality Agreement").
13. Non-Competition Agreement. Against the execution and delivery of
this Agreement, Employee shall enter into a non-competition and
non-solicitation agreement (in the form of Exhibit "B" hereto) (the
"Non-Competition Agreement")
14. No Other Compensation or Benefits. Employee agrees that the
compensation set forth in this Agreement is the sole and exclusive compensation
of Employee for his duties hereunder, and that he shall have no rights to
receive any other compensation or benefits of any nature except for payments
for service as a director equal to those payments, if any paid by the Company
to its other members of its Board of Directors, which the Company shall be
obligated to pay to employee also, if any.
15. Duties. During the Employment Period:
(a) Employee shall furnish all manner of services in connection
with his position as Chairman of the Board, President and Chief Executive
Officer or as otherwise designated by the Board including, without limitation,
primary responsibility for management of the Company to carry out the policies
and programs of the Board and as from time to time may be delegated or assigned
to him by the Board;
(b) Employee shall report directly to the Board in the
performance of all his duties herein.
- -------------------------------------------------------------------------------
Centrack International, Inc. Proprietary and Confidential
4
<PAGE> 5
(c) Employee shall comply with all Company policies for the
employees as such policies may exist from time to time.
(d) Employee shall devote his entire time, energy and skill to
the service of Company and the promotion of Company's interests, and shall use
his best efforts in the performance of his services hereunder. The parties
agree that Employee may not, during the Employment Period, be engaged in any
other business activity whether or not such activity is pursued for gain,
profit, or other pecuniary advantage including, without limitation, management
or management consulting activities; provided, however, Employee may invest his
personal assets in businesses where the form or manner of such investment will
not require services on the part of Employee conflicting with the duties of
Employee under this Agreement and in which his participation is solely that of
a passive investor. Employee agrees to abide by all rules and regulations
established from time to time by the Board; and all commissions, fees or other
income earned and received by Employee, if any, in furtherance of the business
of Company, or its affiliates or from any other business or financial
opportunity or endeavor in which Employee is an active participant and not a
passive investor, shall be accepted by Employee for the account of Company, and
shall be remitted to Company within three (3) days of Employee's receipt
thereof.
16. Authority to Contract. Employee shall have authority to enter into
contracts binding upon Employer and believed in good faith by Employee to be in
the best interest of the Company.
17. Termination.
(a) Employer shall have the right to terminate the Employment Period
only for substantial cause or if Employee becomes permanently disabled.
(b) As used in this Section 17, the term "substantial cause" shall
mean:
(i) the commission by Employee of any act of fraud, theft,
or embezzlement against Employer; or
(ii) Any material breach by Employee of this Agreement,
provided that Employer first shall have delivered to
Employee written notice of the alleged breach,
specifying the exact nature of the breach in detail,
and provided, further, that Employee shall have failed
to cure or substantially mitigate such breach within
thirty days after receiving notice thereof.
- -------------------------------------------------------------------------------
Centrack International, Inc. Proprietary and Confidential
5
<PAGE> 6
(c) For purposes of this Section 17, the term "permanently disabled" or
"permanent disability" shall mean a physical or mental incapacity of Employee
which renders Employee unable to perform his duties hereunder and which shall
continue for nine (9)consecutive months or for twelve (12) months during any
period of eighteen (18) consecutive months.
(d) If Employer terminates the Employment Period for death or
substantial cause, the termination shall be effective immediately upon
Employee's receipt of written notice of termination from Employer, except in
the event of death. If Employer terminates the Employment Period by reason of
the permanent disability of Employee, the termination shall be effective ninety
days after the delivery by Employer of written notice of termination from
Employer.
18. Severance Pay. If Employer terminates the Employment Period for any
reason other than substantial cause, Employee shall be entitled to severance
pay from Employer in an amount equal to the greater of (a) three years' base
salary, at the rate in effect at the time of termination; or (b) the base
salary due to Employee for the remaining term of this Agreement, determined at
the rate of Employee's base salary at the date of termination. In addition,
Employee shall be entitled, if Employer terminates the Employment Period for
any reason other than substantial cause, all the Benefits, Profits Bonus,
Revenue Bonus and Stock Options (as those terms are herein defined) for the
remaining term of this Agreement. Employee shall be entitled, if Employer
terminates the Employment Period for any reason other than substantial cause,
all the Benefits (as described herein) for a period of five (5) years following
the termination of this Agreement.
19. Change in Control.
(a) For the purposes of this Agreement, a "change in control of
Employer" shall mean the occurrence of any of the following events:
(i) any "person" (as that term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as
amended ("Exchange Act")),who holds less than 20% of
the combined voting power of the securities of the
Employer, becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of Employer representing
twenty-five percent or more of the combined voting
power of the securities of Employer then outstanding;
or
(ii) during any period of twenty-four (24) consecutive
months, individuals who at the beginning of such
period constitute all members of the Board of
Directors of Employer shall cease, for any reason, to
constitute at least a majority of the Directors,
unless the election of each Director who was not a
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Centrack International, Inc. Proprietary and Confidential
6
<PAGE> 7
Director at the beginning of the period was approved
by a vote of at least two-thirds of the Directors then
still in office who were Directors at the beginning of
the period; or
(iii) Employer shall consolidate or merge with another
company and Employer is not the continuing or
surviving corporation, or shares of Employer's common
stock are converted into cash, securities, or other
property, other than a merger of Employer in which the
holders of the Employer's common stock immediately
prior to the merger have the same proportionate
ownership of common stock of the surviving corporation
immediately after the merger as they had in Employer
immediately prior to the merger; or
(iv) Employer shall sell, lease, exchange, or otherwise
transfer all or substantially all of its assets (in
one transaction or in a series of related
transactions); or
(v) the stockholders of Employer shall approve a plan or
proposal for the liquidation or dissolution of
Employer.
(b) Employee shall have the right to resign from the employ of Employer
at any time after a change in control of Employer. If Employee resigns within
two years of such a change in control, he shall be entitled to the payment
provided in subsection (c) of this Section 19.
(c) If Employee resigns from the employ of Employer within two years of
a change in control of Employer, of if Employer terminates this Agreement after
a change in control of Employer for any reason other than substantial cause,
then the following provisions of this Section 19 shall apply:
(i) in lieu of any further salary payments to Employee for
periods subsequent to the date of the termination of
his employment, Employer shall pay to Employee, in a
lump sum and in cash, as liquidated damages, an amount
equal to the sum of:
(A) the greater of (I) three years' base salary,
or (II) the base salary due to Employee for
the remaining term of this Agreement, in
either case at the greater of the rate in
effect at the date of the change in control
of Employer or at the date of termination;
plus
(B) an amount equal to a multiple of two (2)
times the largest total of Revenue and
Profits Bonuses previously paid in any one
year by Employer to Employee pursuant to the
provisions of Section IV(c) hereof.
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Centrack International, Inc. Proprietary and Confidential
7
<PAGE> 8
(ii) Employer shall maintain in full force and effect until
the expiration of the term of this Agreement, at its
expense, all group insurance and other employee
benefit plans (including, without limitation,
qualified profit- sharing and retirement type plans)
in which Employee was entitled to participate prior to
the date of his termination, provided that Employee's
continued participation is possible under the terms of
such plans. If Employee's continued participation
under such plans is not possible, Employer shall
arrange to provide Employee with alternative benefits
substantially similar to those provided under the
group insurance and employee benefit plans of Employer
in which Employee was participating prior to the date
of his termination.
Any payment due to Employee pursuant to the provisions of subsection
(c) of this Section 19 shall be paid to him by Employer on the fifth day
following the date of Employee's termination.
(d) For purposes of the remaining provisions of this Section 19, the
following terms shall have the following meanings:
(i) The term "Code" shall mean the Internal Revenue Code
of 1986, as amended; and any references to sections
thereof shall include any successor provisions of the
Code or of any future income tax laws enacted as
successors to the Code;
(ii) The term "Excise Tax" shall mean the tax imposed by
Section 4999 of the Code;
(iii) The term "Gross-Up Payment" shall mean the payment
referred to in subsection (e) of this Section 19.
(iv) The term "Section 19 Payments" shall mean all payments
to which Employee shall become entitled under the
provisions of this Section 19.
(v) The term "Other Payments" shall mean any payments or
benefits, other than the Section 19 Payments, received
or to be received by Employee in connection with a
change in control of Employer, or in connection with
Employee's termination of employment, and which are
payable pursuant to the terms of any plan,
arrangement, or agreement (other than this Agreement)
with Employer, with Employer's successors, with any
person
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Centrack International, Inc. Proprietary and Confidential
8
<PAGE> 9
whose actions result in a change in control of
Employer, or with any person affiliated either with
Employer or with any person whose actions result in a
change in control of Employer.
(e) If Employee becomes entitled to any payments under this Section 19,
and if the Section 19 Payments or any Other Payments will be subject to the
Excise Tax, then Employer shall pay to Employee an additional sum (the
"Gross-Up Payment") sufficient to provide Employee with a net amount equal to
the sum of the Section 19 and the Other Payments, after deduction of any Excise
Tax on such Payments and after deduction of any federal, state, or local income
taxes, and of any Excise Tax, upon the Gross-Up Payment. The amount due from
Employer under this Section 19(e) shall be paid to Employee within five days of
the date of Employee's termination.
(f) The following rules shall apply for the purpose of determining
whether any of the Section 19 Payments or any of the Other Payments will be
subject to the Excise Tax and for the purpose of computing the amount of any
such Excise Tax:
(i) All of the Other Payments shall be treated as
"parachute payments," within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of Section 280G(b)(1) of
the Code shall be treated as being subject to the
Excise Tax; and
(ii) The value of any benefits payable to Employee in any
form other than cash, and the value of any deferred
payments or benefits due to Employee from Employer,
shall be determined by Employer's independent auditors
in accordance with the provisions of Section
280G(d)(3) of the Code.
(g) For purpose of determining the amount of the Gross-Up Payment:
(i) Employee shall be deemed to be subject to state and
local income taxes at the highest marginal rate of
taxation in the state and locality of Employee's
principal residence on the date of his termination;
and
(ii) Employee shall be deemed to be subject to federal
income taxes at the highest marginal rate of federal
income taxation in the calendar year in which the
Gross-Up Payment is due (net of the maximum reduction
in federal income taxes which Employee can obtain from
deduction of the state and local taxes described in
the preceding clause).
(h) If the Excise Tax is determined to exceed the amount taken into
account under the provisions of this Section 19 at the time of the termination
of Employee (including by reason of
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Centrack International, Inc. Proprietary and Confidential
9
<PAGE> 10
any payment, the existence or the amount of which could not be determined at
the time of the Gross-Up Payment), Employer shall make an additional Gross-Up
Payment in respect of such excess and in respect of any interest payable with
respect to such excess, at the time that the amount of such excess is finally
determined.
(i) Employee shall not be required to mitigate the amount
of any payment provided for in this Section 19 by
seeking other employment or otherwise; and the amount
of any payment provided for in this Section 19 shall
not be reduced by any compensation earned by Employee,
either as the result of employment by any other
employer after the date of his termination of
employment with Employer or otherwise.
20. Surrender of Records. Upon the termination of the Employee's
employment hereunder, for any reason whatsoever, and in addition to such other
actions as may be reasonably required by Employer, the Employee agrees to
surrender to the Employer, in good condition, any record or records kept by him
containing the names, addresses, and other information with regard to customers
or suppliers of the Employer.
21. Entire Agreement. This Agreement represents the entire
understanding and agreement between the parties with respect to the subject
matter hereof, and supersedes all other negotiations, understandings and
representations (if any) made by and between such parties.
22. Amendments. The provisions of this Agreement may not be amended,
supplemented, waived or changed orally, but only by a writing signed by the
party as to whom enforcement of any such amendment, supplement, waiver or
modification is sought and making specific reference to this Agreement.
23. Assignments. Employee shall not assign his rights and/or
obligations hereunder.
24. Binding Effect. All of the terms and provisions of this Agreement,
whether so expressed or not, shall be binding upon, inure to the benefit of,
and be enforceable by the parties and their respective administrators,
executors, legal representatives, heirs, successors and permitted assigns.
25. Severability. If any part of this Agreement or any other Agreement
entered into pursuant hereto is contrary to, prohibited by or deemed invalid
under applicable law or regulation, such provision shall be inapplicable and
deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given full force
and effect so far as possible.
26. Survival. Notwithstanding anything to the contrary herein, the
provisions of Sections 11 through 29 (inclusive) shall survive and remain in
effect in accordance with their respective terms in the event the employment is
terminated.
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Centrack International, Inc. Proprietary and Confidential
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<PAGE> 11
27. Waivers. The failure or delay of Company at any time to require
performance by Employee of any provision of this Agreement, even if known,
shall not affect the right of Company to require performance of that provision
or to exercise any right, power or remedy hereunder, and any waiver by Company
of any breach of any provision of this Agreement should not be construed as a
waiver of any continuing or succeeding breach of such provision, a waiver of
the provision itself, or a waiver of any right, power or remedy under this
Agreement. No notice to or demand on Employee in any case shall, of itself,
entitle such party to any other or further notice or demand in similar or other
circumstances.
28. Specific Performance. Employee acknowledges that the services to be
rendered by Employee hereunder are extraordinary and unique and are vital to
the success of the Company, and that damages at law would be an inadequate
remedy for any breach or threatened breach of this Agreement by Employee.
Therefore, in the event of a breach or threatened breach by Employee of any
provision of this Agreement, then Company shall be entitled, in addition to all
other rights or remedies, to injunctions restraining such breach, without being
required to show any actual damage or to post any bond or other security.
29. Notices. All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing (including telex
and telegraphic communication) and shall be (as elected by the person giving
such notice) hand delivered by messenger or courier service, telecommunicated,
or mailed (airmail if international) by registered or certified mail (postage
prepaid), return receipt requested, addressed to:
If to Employee:
Mr. John J. Lofquist
21045 Commercial Trail, Suite 101
Boca Raton, FL 33486
<TABLE>
<CAPTION>
If to the Company: With a Copy to:
- ------------------ ---------------
<S> <C>
Centrack International, Inc. Gunster, Yoakley, Valdes-Fauli & Stewart, P.A.
21045 Commercial Trail, Suite 101 500 East Broward Blvd., Suite 1400
Boca Raton, Florida Fort Lauderdale, Florida 33394
ATTN: John J. Lofquist ATTN: Michael G. Platner
</TABLE>
or to such other address as any party may designate by notice complying with
the terms of this Section. Each such notice shall be deemed delivered (a) on
the date delivered if by personal
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Centrack International, Inc. Proprietary and Confidential
11
<PAGE> 12
delivery, (b) on the date telecommunicated if by telegraph, (c) on the date of
transmission with confirmed answer back if by telex or telecommunicated, and
(d) on the date upon which the return receipt is signed or delivery is refused
or the notice is designated by the postal authorities as not deliverable, as
the case may be, if mailed.
30. Jurisdiction and Venue. The parties acknowledge that a substantial
portion of negotiations, anticipated performance and execution of this
Agreement occurred or shall occur in Palm Beach County, Florida, and that,
therefore, without limiting the jurisdiction or venue of any other federal or
state courts, each of the parties irrevocably and unconditionally (a) agrees
that any suit, action or legal proceeding arising out of or relating to this
Agreement may be brought in the courts of record of the State of Florida in
Palm Beach County or the court of the United States, Southern District of
Florida; (b) consents to the jurisdiction of each such court in any such suit,
action or proceeding; (c) waives any objection which it may have to the laying
of venue of any such suit, action or proceeding in any of such courts; and (d)
agrees that service of any court paper may be effected on such party by mail,
as provided in this Agreement, or in such other manner as may be provided under
applicable laws or court rules in said state.
31. Remedies Cumulative. No remedy herein conferred upon any party is
intended to be exclusive of any other remedy, and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise. No single or partial exercise by any party of any right, power or
remedy hereunder shall preclude any other or further exercise thereof.
32. Employee Representations, Warranties, and Acknowledgments.
Employee represents and warrants to Company that he is fully empowered to enter
and perform his obligations under this Agreement and, without limitation, that
he is under no restrictive covenants to any person or entity that will be
violated by his entering into and performing this Agreement, and that this
Agreement constitutes the valid and legally binding obligation of Employee
enforceable in accordance with its terms. The execution and delivery of this
Agreement by Employee has been duly authorized by all necessary action.
Employee shall indemnify Company upon demand for and against any and all
judgments, losses, claims, damages, costs (including without limitation all
legal fees and costs, even if incident to appeals) incurred or suffered by any
of them as a result of the breach of the representations and warranties made in
this section, or as a result of the failure of the acknowledgment made in this
section to be true and correct at all times.
33. Governing Law. This Agreement and all transactions contemplated by
this Agreement shall be governed by, and construed and enforced in accordance
with, the internal laws of the State of Florida without regard to principles of
conflicts of laws.
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<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Attest: CENTRACK INTERNATIONAL, INC.
/s/ John J. Lofquist
-----------------------------
By: John J. Lofquist
Title: C.E.O.
Witness: EMPLOYEE:
/s/ Charles J. Duffy, III /s/ John J. Lofquist
- ------------------------- -----------------------------
John J. Lofquist
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Centrack International, Inc. Proprietary and Confidential
13
<PAGE> 14
INVENTION ASSIGNMENT AND CONFIDENTIALITY AGREEMENT
THIS AGREEMENT is entered into as of this 1st day of January, 1999, by
and between CENTRACK INTERNATIONAL, INC., a Florida corporation (the "Company"
) and John J. Lofquist, (hereinafter referred to as "Employee") for and in
consideration of Employee's continued employment or engagement by the Company
and the compensation that Employee shall receive during Employee's employment
or engagement, the parties agree as follows:
1. Both during and after Employee's employment or engagement:
a. Employee shall not disclose to anyone outside the Company any
Confidential Information. "Confidential Information" is defined
as information which has not been made publicly available by
the Company or the third party owner of such information, and
1. Which was developed by the Company, and relates to the
Company's past, present, and future business,
including but not limited to developments (defined
below, technical data, specifications, designs,
concepts, discoveries, copyrights, improvements,
product plans, research and development, personal
information, personnel information, financial
information, customer lists, leads, and/or marketing
programs;
2. All documents marked as confidential and/or containing
such confidential information; and/or
3. All information the Company has acquired or received
from a third party in confidence.
b. Employee shall use Confidential Information only for the
Company's business purposes; and
c. Employee shall use any information received in confidence by
the Company from any third party only as permitted by written
agreement between the Company and the third party; and
d. Employee shall not be permitted to justify any disregard of the
obligations of Employee hereunder by using any of the
Confidential Information to guide a search by it of
publications and other publicly available information,
selecting a series of items of knowledge from unconnected
sources and fitting them together
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Centrack International, Inc. Proprietary and Confidential
<PAGE> 15
by use of the integrated disclosure of the information thereby
to justify its disregard of the obligations of confidence.
2. Employee shall not disclose to the Company, use in the Company's
business, or cause the Company to use any information or material which
is confidential to any third party unless the Company has a written
agreement with the third party allowing the Company to receive and use
the confidential information or materials. Employee will not incorporate
into Employee's work any material which is subject to the copyrights of
any third party unless the Company has the right to copy and incorporate
such copyrighted material.
3. When Employee is no longer employed or engaged by the Company, Employee
shall return to the Company all the Company property, and any and all
third party property, including all Confidential Information, drawings,
computer programs or copies thereof, documentation, notebooks and notes,
reports and any other materials on electronic or printed media.
4. Employee hereby grants, transfers and assigns and agrees to grant,
transfer and assign to the Company all of his rights, title and
interest, if any, in and to any and all Developments (as defined below),
including rights to translation and reproductions in all forms or
formats and the copyrights and patent rights thereto, if any, and he
agrees that the Company may copyright said materials in the Company's
name and secure renewal, reissues and extensions of such copyrights for
such periods of time as the law may permit. "Developments" is defined as
any idea, invention, process, design, concept, or useful article
(whether the design is ornamental or otherwise), computer program,
documentation, literary work, audiovisual work and any other work of
authorship, hereafter expressed, made or conceived solely or jointly by
consultant during Employee's employment or engagement, whether or not
subject to patent, copyright or other forms of protection that:
a. Are related to the actual or anticipated business,
research or Development of the Company; and/or
b. Are suggested by or result from any task assigned to
Employee or work performed by Employee for or on
behalf of the Company.
Employee acknowledges that the copyrights in Developments created by
Employee in the scope of Employee's employment or engagement, belong to
the Company by operation of law, or may belong to a party engaged by the
Company by operation of law pursuant to a works for hire contract
between the Company and such contracted part. To the extent the
copyrights in such works may not be owned by the Company or such
contracted party by
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Centrack International, Inc. Proprietary and Confidential
2
<PAGE> 16
operation of law, Employee hereby assigns to the Company or such
contracted party, as the case may be , all copyrights (if any) Employee
may have in Developments.
At all times hereafter, Employee agrees to assist the Company in
obtaining patents or copyrights on any Developments assigned to the
Company that the Company, in its sole discretion, seeks to patent or
copyright. Employee also agrees to sign all documents, and do all things
necessary to obtain such patents or copyrights, to further assign them
to the Company, and to reasonably protect them and the Company against
infringement by other parties at the Company expense with the Company
prior approval.
Employee irrevocably appoints any the Company-selected designee to act,
at all times hereafter, as his agent and attorney-in-fact to perform all
acts necessary to obtain patents and/or copyrights as required by this
Agreement if Employee (i) refuses to perform those acts or (ii) is
unavailable, within the meaning of the United States Patent and
Copyright laws. It is expressly intended by Employee that the foregoing
power of attorney is coupled with an interest.
Employee shall keep complete, accurate, and authentic information and
records on all Developments in the manner and form reasonably requested
by the Company. Such information and records, and all copies thereof,
shall be the property of the Company as to any Developments assigned the
Company. Employee agrees to promptly surrender such information and
records at the request of the Company as to any Developments.
5. In connection with any of the Developments assigned by Section 4,
Employee agrees:
a. To disclose them promptly to the Company, and
b. At the Company's request, to execute separate written
assignments to the Company and do all things reasonable
necessary to enable the Company to secure patents, register
copyrights or obtain any other form of protection for
Developments in the United States and in other countries. If
Employee fails or is unable to do so, Employee hereby
authorizes the Company to act under power of attorney for
Employee to do all things to secure such rights.
c. To provide the Company with notice of any inadvertent
disclosure of Confidential Information related to any
Development.
6. Without limitation of any other Agreement between Employee and the
Company, Employee shall not employ or engage or attempt to employ or
engage the services of any employee of the Company, either directly or
through the agency of a third party during the term of, or within six
(6) months after, the termination of Employee's employment or engagement
with the Company.
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Centrack International, Inc. Proprietary and Confidential
3
<PAGE> 17
7. The Company, its subsidiaries, licensees, successors or assigns, (direct
or indirect) are not required to designate Employee as author of any
Development when such Development is distributed publicly or otherwise.
Employee waives and releases, to the extent permitted by law, all
Employee's rights to such designation and any rights concerning future
modifications of such Developments.
8. Rights, assignments, and representations made or granted by Employee in
this Agreement, are assignable by the Company and are for the benefit of
the Company's successors, assigns, and parties contracted with the
Company.
9. Miscellaneous Provisions.
a. Amendments. The provisions of this Agreement may not be
amended, supplemented, waived or changed orally, but only by a
writing signed by the party as to whom enforcement of any such
amendment, supplement, waiver or modification is sought and
making specific reference to this Agreement.
b. Further Assurances. The parties hereby agree from time to time
to execute and deliver such further and other transfers,
assignments and documents and do all matters and things which
may be convenient or necessary to more effectively and
completely carry out the intentions of this Agreement.
c. Brokers. Each of the parties represents and warrants that such
party has dealt with no broker or finder in connection with any
of the transactions contemplated by this Agreement, and,
insofar as such party knows, no broker or other person is
entitled to any commission or finder's fee in connection with
any of these transactions. The parties each agree to indemnify
and hold harmless one another against any loss, liability,
damage, cost, claim or expense incurred by reason of any
brokerage commission or finder's fee alleged to be payable
because of any act, omission or statement of the indemnifying
party.
d. Binding Effect. All of the terms and provisions of this
Agreement, whether so expressed or not, shall be binding upon,
inure to the benefit of, and be enforceable by the parties and
their respective administrators, executors, legal
representatives, heirs, successors and permitted assigns.
e. Headings. The headings contained in this Agreement are for
convenience of reference only, are not to be considered a part
hereof and shall not limit or otherwise affect in any way the
meaning or interpretation of this Agreement.
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Centrack International, Inc. Proprietary and Confidential
4
<PAGE> 18
f. Severability. If any provision of this Agreement or any other
Agreement entered into pursuant hereto is contrary to,
prohibited by or deemed invalid under applicable law or
regulation, such provision shall be inapplicable and deemed
omitted to the extent so contrary, prohibited or invalid, but
the remainder hereof shall not be invalidated thereby and shall
be given full force and effect so far as possible. If any
provision of this Agreement may be construed in two or more
ways, one of which would render the provision invalid or
otherwise voidable or unenforceable and another of which would
render the provision valid and enforceable, such provision
shall have the meaning which renders it valid and enforceable.
g. Survival. All covenants, agreements, representations and
warranties made herein or otherwise made in writing by any
party pursuant hereto shall survive the execution and delivery
of this Agreement and the termination of employment or
engagement of Employee.
h. Waivers. The failure or delay of any party at any time to
require performance by another party of any provision of this
Agreement, even if known, shall not affect the right of such
party to require performance of that provision or to exercise
any right, power or remedy hereunder. Any waiver by any party
of any breach of any provision of this Agreement should not be
construed as a waiver of any continuing or succeeding breach of
such provision, a waiver of the provision itself, or a waiver
of any right, power or remedy under this Agreement. No notice
to or demand on any party in any case shall, of itself, entitle
such party to any other or further notice or demand in similar
or other circumstances.
i. Specific Performance. Each of the parties acknowledges that the
parties will be irreparably damage (and damages at law would be
an inadequate remedy) if this Agreement is not specifically
enforced. Therefore, in the event of a breach or threatened
breach by any party of any provision of this Agreement, then
the other parties shall be entitled, in addition to all other
rights or remedies, to injunctions restraining such breach,
without being required to show any actual damage or to post any
bond or other security, and/or to a decree for specific
performance of the provisions of this Agreement.
j. Jurisdiction and Venue. The parties acknowledge that a
substantial portion of negotiations and anticipated performance
and execution of this Agreement occurred or shall occur in Palm
Beach County, Florida, and that, therefore, without limiting
the jurisdiction or venue of any other federal or state courts,
each of the parties irrevocably and unconditionally (a) agrees
that any suit, action or legal proceeding arising out of or
relating to this Agreement may be brought in the
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Centrack International, Inc. Proprietary and Confidential
5
<PAGE> 19
courts of record of the State of Florida in Palm Beach County
or the court of the United States, Southern District of
Florida; (b) consents to the jurisdiction of each such court in
any suit, action or proceeding; (c) waives any objection which
it may have to the laying of venue of any such suit, action or
proceeding in any of such courts; and (d) agrees that service
of any court paper may be effected on such party by mail, as
provided in this Agreement, or in such other manner as may be
provided under applicable laws or court rules in said state.
k. Remedies Cumulative. Except as otherwise expressly provided
herein, no remedy herein conferred upon any party is intended
to be exclusive of any other remedy, and each and every such
remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at
law or in equity or by statute or otherwise. No single or
partial exercise by any party of any right, power or remedy
hereunder shall preclude any other or further exercise thereof.
l. Governing Law. This Agreement and all transactions contemplated
by this Agreement shall be governed by, and construed and
enforced in accordance with, the internal laws of the State of
Florida without regard to principles of conflicts of laws.
m. Preparation of Agreement. This Agreement shall not be construed
more strongly against any party regardless of who is
responsible for its preparation. The parties acknowledge each
contributed and is equally responsible for its preparation.
n. Entire Agreement. This Agreement represents the entire
understanding and agreement among the parties with respect to
the subject matter hereof, and supersedes all other
negotiations, understandings and representations (if any) made
by and among such parties.
[REMAINDER OF PAGE LEFT BLANK]
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Centrack International, Inc. Proprietary and Confidential
6
<PAGE> 20
IN WITNESS WHEREOF, the parties have duly set their hands to this Agreement,
effective as of the day and year first written above.
Centrack International, Inc. Employee
/s/ John J. Lofquist /s/ John J. Lofquist
- -------------------------------- --------------------------------
The Company Authorized Signature John J. Lofquist
John J. Lofquist
--------------------------------
Employee's Printed Name
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Centrack International, Inc. Proprietary and Confidential
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<PAGE> 21
NON-SOLICITATION AND NON-COMPETE AGREEMENT
THIS NON-SOLICITATION AND NON-COMPETE AGREEMENT ("Agreement") made as of
this 1st day of January, 1999 by and between CENTRACK INTERNATIONAL, INC., a
Florida corporation (hereinafter called "the Company) and John J. Lofquist, a
resident of Boca Raton, Florida (hereinafter "Employee").
WHEREAS, Employee is accepting employment with the Company; and
WHEREAS, the parties wish to reflect their agreement as to Employee's
promises regarding Employee's solicitation and competition which have induced
the Company to employ Employee at Employee's status with the Company, as well
as the Company's extension of certain severance benefits to Employee.
NOW, THEREFORE, Employee and the Company (hereinafter sometimes referred
to collectively as the "parties" and separately as a "party") in consideration
of Employee's employment with the Company and the covenants hereinafter set
forth and other good and valuable consideration and intending to be legally
bound hereby, agree as follows:
1. Non-solicitation. Employee will not, at any time while employed by
the Company and for one (1) year after the termination of Employee's employment
with the Company for any reason whatsoever, directly or indirectly (by
assisting or suggesting to another, or otherwise) solicit otherwise attempt to
induce or accept the initiative of another in such regard, alone or by
combining or conspiring with anyone, any employees, officers, directors,
agents, consultants, representatives, contractors, suppliers, distributors,
customers or other business contacts (collectively, "Business Affiliates") of
the Company to terminate or modify its position as an employee, officer,
director, agent, consultant, representative, contractor, supplier, distributor,
customer or business contact with the Company or to compete against the
Company.
2. Non-competition. (a) Employee shall not while employed by the
Company, and after the termination of said employment for any reason whatsoever
for one (1) year after such termination (the "No-Compete Period"), directly or
indirectly, as owner, officer, director, employee, agent, lender, broker,
investor, consultant or representative of any corporation or as owner of any
interest in, or as an employee, agent, consultant, partner, affiliate or in any
other capacity whatsoever or representative of any other form of business
association, sole proprietorship or partnership, conduct or be related to any
business in competition with any business of the Company now or in the future,
including without limitation, the sale of used construction equipment via the
Internet (herein referred to as the "Competitive Business") anywhere within the
United States, including without limitation, the solicitation of any
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Centrack International, Inc. Proprietary and Confidential
<PAGE> 22
customers, who were at any time customers of the Company and in connection with
a business which is competitive with the Competitive Business.
(b) In addition to, and not in limitation of the other provisions hereof
or of any other Agreement between Employee and the Company, Employee shall not
at any time in any manner other than in the ordinary course of good faith
competition only as permitted herein interfere with, disturb, disrupt, decrease
or otherwise jeopardize the business of the Company or do or permit to be done
anything which may tend to take away or diminish the trade, business or good
will of the Company or give to any person the benefit or advantage of Company's
or Seller's methods of operation, advertising, publicity, training, business
customers or accounts, or any other information relating or useful to the
Company's business.
3. Legal Effect. The foregoing covenants of Employee shall be deemed
severable, and the invalidity of any covenant shall not affect the validity or
enforceability of any other covenant. The existence of any claim or cause of
action by Employee against the Company predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company of
these covenants. The Company's failure to object to any conduct in violation of
this Agreement shall not be deemed a waiver by the Company, but the Company
may, if it wishes, specifically waive any part or all of those covenants to the
extent that such waiver is set forth in writing duly authorized by the
Company's Board of Directors.
Employee acknowledges and confirms that the length of the term and
geographical restrictions contained herein are fair and reasonable and not the
result of overreaching, duress or coercion of any kind. Employee further
acknowledges and confirms that his full, uninhibited and faithful observance of
each of the covenants contained in this Agreement will not cause him any undue
hardship, financial or otherwise, and that enforcement of each of the covenants
contained in this Agreement will not impair his ability to obtain employment
commensurate with his abilities and on terms fully acceptable to him or
otherwise to obtain income required for the comfortable support of him and his
family and the satisfaction of the needs of his creditors. Employee
acknowledges and confirms that his special knowledge of the business of the
Company is such as would cause the Company serious injury and loss if he were
to use such ability and knowledge to the benefit of a competitor or were to
compete with the Company.
In the event that any court shall finally hold that the time or
territory or any other provision stated in this Agreement constitutes an
unreasonable restriction upon Employee, Employee hereby expressly agrees that
the provisions of this Agreement shall not be rendered void, but shall apply as
to time and territory or to such other extent as such court may judicially
determine or indicate constitutes a reasonable restriction under the
circumstances involved. Employee hereby agrees that in the event of the
violation by him of any of the provisions of this Agreement, The Company will
be entitled if it so elects, to institute and prosecute proceedings at law or
in equity to obtain damages with respect to such violation or to enforce the
specific
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Centrack International, Inc. Proprietary and Confidential
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<PAGE> 23
performance of this Agreement by Employee or to enjoin Employee from engaging
in any activity in violation hereof without any requirement on the part of the
Company to post any bond.
In the event the Company should bring any legal action or other
proceeding for the enforcement of this Agreement, the time for calculating the
No-Compete Period or terms of any other restriction herein shall not include
the period of time commencing with the filing of legal action or other
proceeding to enforce the terms of this Agreement through the date of final
judgment or final resolution, including all appeals, if any, of such legal
action or other proceeding.
4. Miscellaneous Provisions.
The provisions of this Agreement may not be amended, supplemented,
waived or changed orally, but only by a writing signed by the party as to whom
enforcement of any such amendment, supplement, waiver or modification is sought
and making specific reference to this Agreement. All of the terms and
provisions of this Agreement, whether so expressed or not, shall be binding
upon, inure to the benefit of, and be enforceable by the parties and their
respective administrators, executors, legal representatives, heirs, successors
and permitted assigns. The headings contained in this Agreement are for
convenience of reference only, are not to be considered a part hereof and shall
not limit or otherwise affect in any way the meaning or interpretation of this
Agreement. The failure or delay of any party at any time to require performance
by another party of any provision of this Agreement, even if known, shall not
affect the right of such party to require performance of that provision or to
exercise any right, power or remedy hereunder. Any waiver by any party of any
breach of any provision of this Agreement should not be construed as a waiver
of any continuing or succeeding breach of such provision, a waiver of the
provision itself, or a waiver of any right, power or remedy under this
Agreement, No notice to or demand on any party in any case shall, of itself,
entitle such party to any other or further notice or demand in similar or other
circumstances.
The parties acknowledge that a substantial portion of negotiations,
anticipated performance and execution of this Agreement occurred or shall occur
in Palm Beach County, Florida, and that, therefore, without limiting the
jurisdiction or venue of any other federal or state courts, each of the parties
irrevocably and unconditionally (a) agrees that any suit, action or legal
proceeding arising out of or relating to this Agreement may be brought in the
courts of record of the State of Florida in Palm Beach County or the District
Court of the United States, Southern District of Florida; (b) consents to the
jurisdiction of each such court in any suit, action or proceeding; (c) waives
any objection which it may have to the laying of venue of any such suit, action
or proceeding in any of such courts; and (d) agrees that service of any court
paper may be effected on such party by mail, as provided in this Agreement, or
in such other manner as may be provided under applicable laws or court rules in
said state. Except as
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Centrack International, Inc. Proprietary and Confidential
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<PAGE> 24
otherwise expressly provided herein, no remedy herein conferred upon any party
is intended to be exclusive of any other remedy, and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise. No single or partial exercise by any party of any right, power or
remedy hereunder shall preclude any other or further exercise thereof. This
Agreement and all transactions contemplated by this Agreement shall be governed
by, and construed and enforced in accordance with, the internal laws of the
State of Florida without regard to principles of conflicts of laws. This
Agreement shall not be construed more strongly against any party regardless of
who is responsible for its preparation. The parties acknowledge each
contributed and is equally responsible for its preparation. Any time period
provided for herein which shall end on a Saturday, Sunday or legal holiday
shall extend to 5:00 p.m. of the next full business day. This Agreement
represents the entire understanding and agreement amount the parties with
respect to the subject matter hereof, and supersedes all other negotiations,
understandings and representations (if any) made by and among such parties.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written above.
Centrack International, Inc. Employee
/s/ John J. Lofquist /s/ John J. Lofquist
- -------------------------------- --------------------------------
The Company Authorized Signature John J. Lofquist
John J. Lofquist
--------------------------------
Employee's Printed Name
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Centrack International, Inc. Proprietary and Confidential
4
<PAGE> 1
Exhibit 10.6(a)
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of September 29,
1999 (this "Agreement"), is made by and between CENTRACK INTERNATIONAL, INC. a
Delaware corporation (the "Company"), and the person named on the signature page
hereto (the "Initial Investor").
W I T N E S S E T H:
WHEREAS, in connection with the Stock Purchase Agreement,
dated as of September 29, 1999, between the Initial Investor and the Company
(the "Stock Purchase Agreement"), the Company has agreed, upon the terms and
subject to the conditions of the Stock Purchase Agreement, to issue and sell to
the Initial Investor shares (the "Shares") of Common Stock, $.0001 par value
(the "Common Stock"), of the Company, to grant the Initial Investor the option
(the "Option") to purchase shares (the "Option Shares") of Common Stock, and to
issue common stock purchase warrants (the "Warrants") entitling the Initial
Investor to purchase shares (the "Warrant Shares") of Common Stock; and
WHEREAS, to induce the Initial Investor to execute and deliver
the Stock Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"1933 Act"), and applicable state securities laws with respect to the Shares,
the Option Shares and the Warrant Shares;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agree as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall have
the following meanings:
"Blackout Period" means the period of up to 15 consecutive
Trading Days commencing on the day immediately after the date the Company
notifies the Investors that they are required, pursuant to Section 4(d), to
suspend offers and sales of Registrable Securities as a result of an event or
circumstance described in Section 3(f)(1) during which period, by reason of
Section 3(f)(2), the Company is not required to amend the Registration Statement
or to supplement the prospectus contained therein.
"Closing Date" means the date of the purchase and sale of the
Shares pursuant to
-1-
<PAGE> 2
the Stock Purchase Agreement.
"Investor" or "Investors" means the Initial Investor and any
transferee or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
"Majority Holders" means those persons who hold a majority of
the Registrable Securities which are then outstanding.
"Nasdaq" means the Nasdaq SmallCap Market.
"1934 Act" means the Securities Exchange Act of 1934, as
amended.
"1934 Act Effective Date" means the date the registration of
the Common Stock becomes effective under the 1934 Act.
"OTC" means the OTC Bulletin Board.
"register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the SEC.
"Registrable Securities" means the Shares, the Option Shares
and the Warrant Shares.
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<PAGE> 3
"Registration Period" means the period from the Closing Date
to the earliest of (i) the later of (x) the date which is two years after the
SEC Effective Date and (y) the earlier of (1) the date which is two years after
the latest expiration date of the Warrants and (2) the date that is two years
after the date on which the Warrants are exercised in full; PROVIDED, HOWEVER,
if on the date otherwise specified in this clause (i) any Investor is an
"affiliate" of the Company for purposes of Rule 144, the Registration Period
shall continue until the earlier of the dates specified in clauses (ii) and
(iii) of this definition, (ii) the date on which each Investor may sell all of
its Registrable Securities without registration under the 1933 Act pursuant to
subsection (k) of Rule 144, without restriction on the manner of sale or the
volume of securities which may be sold in any period and without the requirement
for the giving of any notice to, or the making of any filing with, the SEC and
(iii) the date on which the Investors no longer beneficially own any Registrable
Securities.
"Registration Statement" means a registration statement of the
Company under the 1933 Act, including any amendment thereto.
"Rule 144" means Rule 144 promulgated under the 1933 Act or
any other similar rule or regulation of the SEC that may at any time permit a
holder of any securities to sell securities of the Company to the public without
registration under the 1933 Act.
"SEC" means the Securities and Exchange Commission.
"SEC Effective Date" means the date the Registration Statement
is declared effective by the SEC.
"SEC Filing Date" means the date the Registration Statement is
first filed with the SEC pursuant to Section 2(a).
"Trading Day" means a day on whichever of (v) the national
securities exchange, (x) Nasdaq, (y) the Nasdaq SmallCap or (z) the OTC, which
at the time constitutes the principal securities market for the Common Stock, is
open for general trading.
-3-
<PAGE> 4
(b) Capitalized terms defined in the introductory paragraph or
the recitals to this Agreement shall have the respective meanings therein
provided. Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Stock Purchase Agreement.
2. REGISTRATION.
(a) MANDATORY REGISTRATION. (1) The Company shall prepare, and
on or prior to the date which is 150 days after the Closing Date, file with the
SEC a Registration Statement on Form S-1 or SB-2 which, on the SEC Filing Date,
covers the resale by the Initial Investor of a number of shares of Common Stock
equal to the sum of (x) an amount equal to three times the number of Shares,
PLUS (y) if the Option has been exercised, the number of Option Shares that are
issued or issuable upon such exercise.
(2) The Registration Statement shall not include securities to
be sold for the account of any selling securityholder other than the Investors.
(3) Prior to the SEC Effective Date or during any time
subsequent to the SEC Effective Date when the Registration Statement for any
reason is not available for use by any Investor for the resale of any of
Registrable Securities, the Company shall not file any other registration
statement or any amendment thereto with the SEC under the 1933 Act or request
the acceleration of the effectiveness of any other registration statement
previously filed with the SEC, other than any registration statement on Form S-4
or Form S-8.
(b) 1934 ACT REGISTRATION. The Company shall file a
registration statement with the SEC under the 1934 Act relating to the Common
Stock within 30 days after the Closing Date and use its best efforts to complete
the registration of the Common Stock under the 1934 Act within 90 days after the
Closing Date.
(c) ELIGIBILITY FOR FORM S-3. The Company shall file all
reports required to be filed by the Company with the SEC in a timely manner and
otherwise use its best efforts to become eligible and thereafter maintain its
eligibility for the use of Form S-3 (or a comparable successor
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<PAGE> 5
form) for registration of the Registrable Securities for resale by the
Investors. So long as the Company is then eligible to use Form S-3 (or a
comparable successor form), the first post-effective amendment to the
Registration Statement required to be filed by the Company on or after the date
that is one year after the 1934 Act Effective Date (and all post-effective
amendments to the Registration Statement filed thereafter) pursuant to Section
3(b) shall be filed on Form S-3 (or a comparable successor form).
(d) CERTAIN OFFERINGS. If any offering pursuant to a
Registration Statement pursuant to Section 2(a) hereof involves an underwritten
offering, Investors who hold a majority in interest of the Registrable
Securities subject to such underwritten offering shall have the right to select
one legal counsel to represent the Investors and an investment banker or bankers
and manager or managers to administer the offering, which investment banker or
bankers or manager or managers shall be reasonably satisfactory to the Company.
The Investors who hold the Registrable Securities to be included in such
underwriting shall pay all underwriting discounts and commissions and other fees
and expenses of such investment banker or bankers and manager or managers so
selected in accordance with this Section 2(b) (other than fees and expenses
relating to registration of Registrable Securities under federal or state
securities laws, which are payable by the Company pursuant to Section 5 hereof)
with respect to their Registrable Securities and the fees and expenses of such
legal counsel so selected by the Investors.
(e) PIGGY-BACK REGISTRATIONS. If at any time the Company shall
determine to prepare and file with the SEC a Registration Statement relating to
an offering for its own account or the account of others under the 1933 Act of
any of its equity securities, other than on Form<-1- 32>S-4 or Form<-1- 32>S-8
or their then equivalents relating to equity securities to be issued solely in
connection with any acquisition of any entity or business or equity securities
issuable in connection with stock option or other employee benefit plans, the
Company shall send to each Investor who is entitled to registration rights under
this Section 2(e) written notice of such determination and, if within ten days
after receipt of such notice, such Investor shall so request in writing, the
Company shall include in such Registration Statement all or any part of the
Registrable Securities such Investor requests to be registered, except that if,
in connection with any underwritten public offering for the account of the
Company, the managing underwriter(s) thereof shall impose a limitation on the
number of shares of Common Stock which may be included in the Registration
Statement because, in such underwriter(s)' judgment, such limitation is
necessary to effect an orderly public distribution, then the Company shall be
obligated to include in such Registration Statement only such limited portion of
the Registrable Securities with respect to which such Investor has requested
inclusion hereunder. Any exclusion of Registrable Securities shall be made pro
rata among the Investors seeking to include Registrable Securities, in
proportion to the number of Registrable Securities sought to be included by such
Investors; PROVIDED, HOWEVER, that the Company shall not exclude any Registrable
Securities unless the Company has first excluded all outstanding securities the
holders of which are not entitled by right to inclusion of securities in such
Registration Statement; and PROVIDED FURTHER, HOWEVER, that, after giving effect
to the immediately preceding
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<PAGE> 6
proviso, any exclusion of Registrable Securities shall be made pro rata with
holders of other securities having the right to include such securities in the
Registration Statement, based on the number of securities for which registration
is requested except to the extent such pro rata exclusion of such other
securities is prohibited under any written agreement entered into by the Company
with the holder of such other securities prior to the date of this Agreement, in
which case such other securities shall be excluded, if at all, in accordance
with the terms of such agreement. No right to registration of Registrable
Securities under this Section 2(e) shall be construed to limit any registration
required under Section 2(a) hereof. The obligations of the Company under this
Section 2(e) may be waived by Investors holding a majority in interest of the
Registrable Securities and shall expire after the Company has afforded the
opportunity for the Investors to exercise registration rights under this Section
2(e) for two registrations; PROVIDED, HOWEVER, that any Investor who shall have
had any Registrable Securities excluded from any Registration Statement in
accordance with this Section 2(e) shall be entitled to include in an additional
Registration Statement filed by the Company the Registrable Securities so
excluded. Notwithstanding any other provision of this Agreement, if the
Registration Statement required to be filed pursuant to Section 2(a) of this
Agreement shall have been ordered effective by the SEC and the Company shall
have maintained the effectiveness of such Registration Statement as required by
this Agreement and if the Company shall otherwise have complied in all material
respects with its obligations under this Agreement, then the Company shall not
be obligated to register any Registrable Securities on such Registration
Statement referred to in this Section 2(e).
3. OBLIGATIONS OF THE COMPANY. In connection with the
registration of the Registrable Securities, the Company shall:
(a) prepare promptly, and file with the SEC not later than the
date provided in Section 2(a), a Registration Statement with respect to the
number of Registrable Securities provided in Section 2(a), and thereafter to use
its best efforts to cause each Registration Statement relating to Registrable
Securities to become effective as soon as possible after such filing, and keep
the Registration Statement effective (pursuant to Rule 415 under the 1933 Act,
to the extent Rule 415 is available) at all times during the Registration
Period; submit to the SEC, within three Business Days after the Company learns
that no review of the Registration Statement will be made by the staff of the
SEC or that the staff of the SEC has no further comments on the Registration
Statement, as the case may be, a request for acceleration of effectiveness of
the Registration Statement to a time and date not later than 48 hours after the
submission of such request; notify the Investors of the effectiveness of the
Registration Statement on the date the Registration Statement is declared
effective; and the Company represents and warrants to, and covenants and agrees
with, the Investors that the Registration Statement (including any amendments or
supplements thereto and prospectuses contained therein), at the time it is first
filed with the SEC, at the time it is ordered effective by the SEC and at all
times during which it is required to be effective hereunder (and each such
amendment and supplement at the time it is filed with the SEC and at all times
during which it is available for use in connection with the offer and sale of
the Registrable Securities) shall not
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<PAGE> 7
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading;
(b) prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the 1933 Act with respect to the disposition of all Registrable
Securities of the Company covered by the Registration Statement until such time
as all of such Registrable Securities have been disposed of in accordance with
the intended methods of disposition by the seller or sellers thereof as set
forth in the Registration Statement;
(c) furnish to each Investor whose Registrable Securities are
included in the Registration Statement and its legal counsel, (1) promptly after
the same is prepared and publicly distributed, filed with the SEC or received by
the Company, one copy of the Registration Statement and any amendment thereto,
each preliminary prospectus and prospectus and each amendment or supplement
thereto, each letter written by or on behalf of the Company to the SEC or the
staff of the SEC and each item of correspondence from the SEC or the staff of
the SEC relating to such Registration Statement (other than any portion of any
thereof which contains information for which the Company has sought confidential
treatment) and (2) such number of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents, as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor;
(d) use reasonable efforts to (i) register and qualify the
Registrable Securities covered by the Registration Statement under such
securities or blue sky laws of such jurisdictions as the Investors who hold a
majority in interest of the Registrable Securities being offered reasonably
request, (ii) prepare and file in those jurisdictions such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof at all
times until the end of the Registration Period, (iii) take such other actions as
may be necessary to maintain such registrations and qualifications in effect at
all times during the Registration Period and (iv) take all other actions
reasonably necessary or advisable to qualify the Registrable Securities for sale
in such jurisdictions; PROVIDED, HOWEVER, that the Company shall not be required
in connection therewith or as a condition thereto (I) to qualify to do business
in any jurisdiction where it would not otherwise be required to qualify but for
this Section 3(d), (II) to subject itself to general taxation in any such
jurisdiction, (III) to file a general consent to service of process in any such
jurisdiction, (IV) to provide any undertakings
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<PAGE> 8
that cause more than nominal expense or burden to the Company or (V) to make any
change in its Certificate of Incorporation or by-laws, which in each case the
Board of Directors of the Company determines to be contrary to the best
interests of the Company and its stockholders;
(e) in the event that the Registrable Securities are being
offered in an underwritten offering, enter into and perform its obligations
under an underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering;
(f) (1) as promptly as practicable after becoming aware of
such event or circumstance, notify each Investor of any event or circumstance of
which the Company has knowledge, as a result of which the prospectus included in
the Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and use its best efforts promptly to
prepare a supplement or amendment to the Registration Statement to correct such
untrue statement or omission, file such supplement or amendment with the SEC at
such time as shall permit the Investors to sell Registrable Securities pursuant
to the Registration Statement as promptly as practicable, and deliver a number
of copies of such supplement or amendment to each Investor as such Investor may
reasonably request;
(2) notwithstanding Section 3(f)(1) above, if at any time the
Company notifies the Investors as contemplated by Section 3(f)(1) that the event
giving rise to such notice relates to a development involving the Company which
occurred subsequent to the later of (x) the SEC Effective Date and (y) the
latest date prior to such notice on which the Company has amended or
supplemented the Registration Statement, then the Company shall not be required
to use best efforts to make such amendment during a Blackout Period; PROVIDED,
HOWEVER, that the aggregate number of Trading Days on which any Blackout Period
is in effect may not exceed 15 Trading Days (whether or not consecutive) in any
period of 12 consecutive months; and PROVIDED FURTHER, HOWEVER, that no Blackout
Period may commence within 90 Trading Days after the end of an earlier Blackout
Period;
(g) as promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold (or, in
the event of an underwritten offering, the managing underwriters) of the
issuance by the SEC of any stop order or other suspension of effectiveness of
the Registration Statement at the earliest possible time;
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<PAGE> 9
(h) permit a single firm of counsel designated as selling
stockholders' counsel by the Investors who hold a majority in interest of the
Registrable Securities being sold to review and comment on the Registration
Statement and all amendments and supplements thereto a reasonable period of time
prior to their filing with the SEC;
(i) make generally available to its security holders as soon
as practical, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions of
Rule 158 under the 1933 Act) covering a twelve-month period beginning not later
than the first day of the Company's fiscal quarter next following the effective
date of the Registration Statement;
(j) at the request of the Investors who hold a majority in
interest of the Registrable Securities being sold, furnish on the date that
Registrable Securities are delivered to an underwriter, if any, for sale in
connection with the Registration Statement (i) a letter, dated such date, from
the Company's independent certified public accountants in form and substance as
is customarily given by independent certified public accountants to underwriters
in an underwritten public offering, addressed to the underwriters; and (ii) an
opinion, dated such date, from counsel representing the Company for purposes of
such Registration Statement, in form and substance as is customarily given in an
underwritten public offering, addressed to the underwriters and the Investors;
(k) make available for inspection by any Investor, any
underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by any such
Investor or underwriter (collectively, the "Inspectors"), all pertinent
financial and other records, pertinent corporate documents and properties of the
Company (collectively, the "Records"), as shall be reasonably necessary to
enable each Investor to exercise its due diligence responsibility, and cause the
Company's officers, directors and employees to supply all information which any
Inspector may reasonably request for purposes of such due diligence; PROVIDED,
HOWEVER, that each Inspector shall hold in confidence and shall not make any
disclosure (except to an Investor) of any Record or other information which the
Company determines in good faith to be confidential, and of which determination
the Inspectors are so notified, unless (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (ii) the release of such Records is ordered pursuant to a subpoena or
other order from a court or government body of competent jurisdiction or (iii)
the information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential
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<PAGE> 10
information in such Records to any Inspector until and unless such Inspector
shall have entered into confidentiality agreements (in form and substance
satisfactory to the Company) with the Company with respect thereto,
substantially in the form of this Section 3(k). Each Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at the Company's own
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, the Records deemed confidential. The Company shall hold
in confidence and shall not make any disclosure of information concerning an
Investor provided to the Company pursuant to Section 4(e) hereof unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor and
allow such Investor, at such Investor's own expense, to undertake appropriate
action to prevent disclosure of, or to obtain a protective order for, such
information;
(l) use its best efforts (i) to cause all the Registrable
Securities covered by the Registration Statement to be listed on the OTC or such
other principal securities market on which securities of the same class or
series issued by the Company are then listed or traded or (ii) if securities of
the same class or series as the Registrable Securities are not then listed on
the OTC or any such other securities market, to cause all of the Registrable
Securities covered by the Registration Statement to be listed on the New York
Stock Exchange, the American Stock Exchange, the Nasdaq National Market or the
Nasdaq;
(m) provide a transfer agent and registrar, which may be a
single entity, for the Registrable Securities not later than the effective date
of the Registration Statement;
(n) cooperate with the Investors who hold Registrable
Securities being offered and the managing underwriter or underwriters, if any,
to facilitate the timely preparation and delivery of certificates (not bearing
any restrictive legends) representing Registrable Securities to be offered
pursuant to the Registration Statement and enable such certificates to be in
such denominations or amounts, as the case may be, as the managing underwriter
or underwriters, if any, or the Investors may reasonably request and registered
in such names as the managing underwriter or underwriters, if any, or the
Investors may request; and, within three Business Days
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<PAGE> 11
after a Registration Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall deliver to the transfer agent for the
Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) an instruction
substantially in the form attached hereto as EXHIBIT 1 and shall cause legal
counsel selected by the Company to deliver to the Investors an opinion of such
counsel in the form attached hereto as EXHIBIT 2 (with a copy to the Company's
transfer agent);
(o) during the period the Company is required to maintain
effectiveness of the Registration Statement pursuant to Section 3(a), the
Company shall not bid for or purchase any Common Stock or any right to purchase
Common Stock or attempt to induce any person to purchase any such security or
right if such bid, purchase or attempt would in any way limit the right of the
Investors to sell Registrable Securities by reason of the limitations set forth
in Regulation M under the 1934 Act; and
(p) take all other reasonable actions necessary to expedite
and facilitate disposition by the Investors of the Registrable Securities
pursuant to the Registration Statement.
4. OBLIGATIONS OF THE INVESTORS. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations:
(a) It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least five days
prior to the first anticipated filing date of the Registration Statement, the
Company shall notify each Investor of the information that, based on the
requirements of the 1933 Act, the Company requires from each such Investor (the
"Required Information") if any of such Investor's Registrable Securities are
eligible for inclusion in the Registration Statement. If at least one Business
Day prior to the filing date the Company has not received the Required
Information from an Investor (a "Non-Responsive Investor"), then the Company may
file the Registration Statement without including Registrable Securities of such
Non-Responsive Investor but shall not be relieved of its obligation to file a
Registration Statement with the SEC relating to the Registrable Securities of
such Non-Responsive Investor promptly after such Non-Responsive Investor
provides the Required Information;
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<PAGE> 12
(b) Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement;
(c) In the event Investors holding a majority in interest of
the Registrable Securities being registered determine to engage the services of
an underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement;
(d) Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(f)
or 3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(f) or 3(g) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession of the prospectus covering such
Registrable Securities current at the time of receipt of such notice;
(e) No Investor may participate in any underwritten
registration hereunder unless such Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting arrangements
approved by the Investors entitled hereunder to approve such arrangements, (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements and (iii) agrees to pay its pro rata share of
all underwriting discounts and commissions and other fees and expenses of
investment bankers and any manager or managers of such underwriting and legal
expenses of the underwriters applicable with respect to its Registrable
Securities, in each case to the extent not payable by the Company pursuant to
the terms of this Agreement; and
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<PAGE> 13
(f) Each Investor agrees to take all reasonable actions
necessary to comply with the prospectus delivery requirements of the 1933 Act
applicable to its sales of Registrable Securities.
5. EXPENSES OF REGISTRATION. All reasonable expenses, other
than underwriting discounts and commissions and other fees and expenses of
investment bankers and other than brokerage commissions, incurred in connection
with registrations, filings or qualifications pursuant to Sections 2 and 3,
including, without limitation, all registration, listing and qualifications
fees, printers and accounting fees and the fees and disbursements of counsel for
the Company and the Investors, shall be borne by the Company, PROVIDED, HOWEVER,
that (i) the Company shall not be required to pay more than $10,000 for the fees
and disbursements of counsel for the Investors and the other investors under the
registration rights agreement, dated as of the date hereof, with the Company of
like tenor and (ii) the Investors shall bear the fees and out-of-pocket expenses
of the one legal counsel selected by the Investors pursuant to Section 2(b)
hereof in connection with any underwritten offering of Registrable Securities.
6. INDEMNIFICATION. In the event any Registrable Securities
are included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such Investor,
each person, if any, who controls any Investor within the meaning of the 1933
Act or the 1934 Act, any underwriter (as defined in the 1933 Act) for the
Investors, the directors, if any, of such underwriter and the officers, if any,
of such underwriter, and each person, if any, who controls any such underwriter
within the meaning of the 1933 Act or the 1934 Act (each, an "Indemnified
Person"), against any losses, claims, damages, liabilities or expenses (joint or
several) incurred (collectively, "Claims") to which any of them may become
subject under the 1933 Act, the 1934 Act or otherwise, insofar as such Claims
(or actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any of the following: (i) any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any post-effective amendment thereof or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein,
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<PAGE> 14
in light of the circumstances under which the statements therein were made, not
misleading or (iii) any violation or alleged violation by the Company of the
1933 Act, the 1934 Act, any state securities law or any rule or regulation under
the 1933 Act, the 1934 Act or any state securities law (the matters in the
foregoing clauses (i) through (iii) being, collectively, "Violations"). Subject
to the restrictions set forth in Section 6(d) with respect to the number of
legal counsel, the Company shall reimburse the Investors and the other
Indemnified Persons, promptly as such expenses are incurred and are due and
payable, for any reasonable legal fees or other reasonable expenses incurred by
them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (I) shall not apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by any Indemnified Person
or underwriter for such Indemnified Person expressly for use in connection with
the preparation of the Registration Statement, the prospectus or any such
amendment thereof or supplement thereto, if such prospectus was timely made
available by the Company pursuant to Section 3(c) hereof; (II) with respect to
any preliminary prospectus shall not inure to the benefit of any such person
from whom the person asserting any such Claim purchased the Registrable
Securities that are the subject thereof (or to the benefit of any person
controlling such person) if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected in the prospectus, as then
amended or supplemented, if such prospectus was timely made available by the
Company pursuant to Section 3(c) hereof; and (III) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior
written consent of the Company, which consent shall not be unreasonably
withheld. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9.
(b) In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to indemnify and hold
harmless, to the same extent and in the same manner set forth in Section 6(a),
the Company, each of its directors, each of its officers who signs the
Registration Statement, each person, if any, who controls the Company within the
meaning of the 1933 Act or the 1934 Act, any underwriter and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the 1933 Act or the 1934 Act (collectively and
together with an Indemnified Person, an "Indemnified Party"), against any Claim
to which any of them may become subject, under the 1933 Act, the 1934 Act or
otherwise, insofar as such Claim arises out of or is based upon any Violation,
in each case to the extent (and only to the extent) that such Violation occurs
in reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement; and such Investor will reimburse any legal or other expenses
reasonably incurred by any Indemnified Party in connection with investigating or
defending any such Claim; PROVIDED, HOWEVER, that the indemnity agreement
contained in this Section 6(b) shall not apply to amounts paid in settlement of
any Claim if such settlement is effected without the prior written consent of
such Investor, which consent shall not be unreasonably withheld; PROVIDED,
FURTHER, HOWEVER, that the
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<PAGE> 15
Investor shall be liable under this Section 6(b) for only that amount of a Claim
as does not exceed the amount by which the net proceeds to such Investor from
the sale of Registrable Securities pursuant to such Registration Statement
exceeds the cost of such Registrable Securities to such Investor. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such Indemnified Party and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(b) with respect to any preliminary prospectus shall
not inure to the benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
on a timely basis in the prospectus, as then amended or supplemented.
(c) The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information so furnished in writing by such persons
expressly for inclusion in the Registration Statement.
(d) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel selected by the indemnifying party
but reasonably acceptable to the Indemnified Person or the Indemnified Party, as
the case may be; PROVIDED, HOWEVER, that an Indemnified Person or Indemnified
Party shall have the right to retain its own counsel with the fees and expenses
to be paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. In such event, the Company shall pay for only one
separate legal counsel for the Investors; such legal counsel shall be selected
by the Investors holding a majority in interest of the Registrable Securities
included in the Registration Statement to which the Claim relates. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action shall not relieve such indemnifying party of
any liability to the Indemnified Person or Indemnified Party under this Section
6, except to the extent that the indemnifying party is prejudiced in its ability
to defend such action. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
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<PAGE> 16
7. CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 6 to the fullest extent permitted by
law; PROVIDED, HOWEVER, that (a) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 6, (b) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any seller of
Registrable Securities who was not guilty of such fraudulent misrepresentation
and (c) contribution by any seller of Registrable Securities shall be limited in
amount to the amount by which the net amount of proceeds received by such seller
from the sale of such Registrable Securities exceeds the purchase price paid by
such seller for such Registrable Securities.
8. REPORTS UNDER 1934 ACT. With a view to making available to
the Investors the benefits of Rule 144, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act; and
(c) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144 and the
1934 Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company and (iii)
such other information as may be reasonably requested to permit the Investors to
sell such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have
the Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of all or any portion
of such securities (or to any transferee of all or any
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<PAGE> 17
portion of the Warrants) only if: (a) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment, (b) the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name and address of such transferee or
assignee and (ii) the securities with respect to which such registration rights
are being transferred or assigned, (c) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the 1933 Act and applicable state securities laws,
and (d) at or before the time the Company receives the written notice
contemplated by clause (b) of this sentence the transferee or assignee agrees in
writing with the Company to be bound by all of the provisions contained herein.
In connection with any such transfer the Company shall, at its sole cost and
expense, promptly after such assignment take such actions as shall be reasonably
acceptable to the Initial Investor and such transferee to assure that the
Registration Statement and related prospectus are available for use by such
transferee for sales of the Registrable Securities in respect of which the
rights to registration have been so assigned. The Company acknowledges that upon
the liquidation or dissolution of an Investor which is a partnership or other
entity and the subsequent transfer of such entity's Registrable Securities and
Warrants to the partners or other owners thereof, such transferees shall be
automatically assigned the registration rights of such entity pursuant to this
Agreement with respect to the transferred securities, subject to the
requirements of this Section 9.
10. AMENDMENT, WAIVER, ETC. Any provision of this Agreement
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Majority Holders. Any amendment or waiver effected in
accordance with this Section 10 shall be binding upon each Investor and the
Company.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall
be in writing and shall be deemed to be sufficiently given when personally
delivered (by hand, by courier, by
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<PAGE> 18
telephone line facsimile transmission (with answer back confirmation) or other
means) (i) if to the Company, at 21045 Commercial Trail, Suite 101, Boca Raton,
Florida 33486-1094, Attention: President, telephone line facsimile transmission
number (561) 362-0570, (ii) if to the Initial Investor at its address set forth
in the Stock Purchase Agreement and (iii) if to any other Investor, at such
address as such Investor shall have provided in writing to the Company, or at
such other address as each such party furnishes by notice given in accordance
with this Section 11(b), and shall be effective upon receipt.
(c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be enforced, governed by and
construed in accordance with the laws of the State of Florida applicable to
agreements made and to be performed entirely within such State. In the event
that any provision of this Agreement is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any provision hereof which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision hereof.
(e) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(f) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of
reference only and
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<PAGE> 19
shall not limit or otherwise affect the meaning hereof.
(i) The Company acknowledges that any failure by the Company
to perform its obligations under this Agreement, including, without limitation,
the Company's obligations under Section 3(n), or any delay in such performance
could result in damages to the Investors and the Company agrees that, in
addition to any other liability the Company may have by reason of any such
failure or delay, the Company shall be liable for all direct and consequential
damages caused by any such failure or delay.
(j) Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
(k) The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent, and no rules
of strict construction will be applied against any party.
(l) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by telephone line facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
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<PAGE> 20
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
day and year first above written.
CENTRACK INTERNATIONAL, INC.
By: /s/ John J. Lofquist
---------------------------------
Name: John J. Lofquist
Title: President and Chief Executive Officer
KJO TRUST
By: /s/ Stephen C. Owen, Jr.
---------------------------------
Stephen C. Owen, Jr., Trustee
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<PAGE> 21
EXHIBIT 1
TO
REGISTRATION
RIGHTS AGREEMENT
[Company Letterhead]
[Date]
[NAME AND ADDRESS OF TRANSFER AGENT]
Ladies and Gentlemen:
This letter shall serve as our irrevocable authorization and
direction to you (1) to transfer or re-register the certificates for the shares
of Common Stock, $.0001 par value (the "Common Stock"), of Centrack
International, Inc., a Delaware corporation (the "Company"), represented by
certificate numbers _______ and _______ for an aggregate of _______ shares (the
"Outstanding Shares") of Common Stock presently registered in the name of [Name
of Investors] upon surrender of such certificate(s) to you, notwithstanding the
legend appearing on such certificates, and (2) to issue shares (the "Warrant
Shares") of Common Stock to or upon the order of the holder from time to time on
exercise of the Common Stock Purchase Warrants (the "Warrants") exercisable for
Common Stock issued by the Company upon receipt by you of a Subscription Form
from such holder in the form enclosed herewith and certification by the Company
of receipt of the Warrant Exercise Price. The transfer or re-registration of the
certificates for the Outstanding Shares by you should be made at such time as
you are requested to do so by the record holder of the Outstanding Shares. The
certificate issued upon such transfer or re-registration should be registered in
such name as requested by the holder of record of the certificate surrendered to
you and should not bear any legend which would restrict the transfer of the
shares represented thereby. In addition, you are hereby directed to remove any
stop-transfer
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<PAGE> 22
instruction relating to the Outstanding Shares. Certificates for the Warrant
Shares should not bear any restrictive legend and should not be subject to any
stop-transfer restriction.
Contemporaneously with the delivery of this letter, the
Company is delivering to you an opinion of ____________________ as to
registration of the resale of the Outstanding Shares and the Warrant Shares
under the Securities Act of 1933, as amended.
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<PAGE> 23
Should you have any questions concerning this matter, please
contact me.
Very truly yours,
CENTRACK INTERNATIONAL, INC.
By:
Name:
Title:
Enclosures
cc: [Names of Investors]
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<PAGE> 24
EXHIBIT 2
TO
REGISTRATION
RIGHTS AGREEMENT
[Names and Addresses of Investors]
CENTRACK INTERNATIONAL, INC.
Shares of Common Stock
----------------------------
Ladies and Gentlemen:
We are counsel to Centrack International, Inc., a Delaware
corporation (the "Company"), and we understand that the Company has sold to
[Names of Investors] (the "Holders") an aggregate of ________ shares (the
"Shares") of the Company's Common Stock, $.0001 par value (the "Common Stock"),
and issued to the Holders Common Stock Purchase Warrants (the
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<PAGE> 25
"Warrants"). The Shares were sold, and the Warrants were issued, to the Holders
pursuant to the several Stock Purchase Agreements, dated as of September ___,
1999, by and between the Holders and the Company (the "Stock Purchase
Agreements"). Pursuant to the several Registration Rights Agreements, dated as
of September ___, 1999, by and between the Company and each Holder (the
"Registration Rights Agreements") entered into in connection with the purchase
by the Holders of the Shares, the Company agreed with each Holder, among other
things, to register for resale (1) the Shares and (2) the shares (the "Warrant
Shares") of Common Stock issuable upon exercise of the Warrants under the
Securities Act of 1933, as amended (the "1933 Act"), upon the terms provided in
the Registration Rights Agreements. The Shares and the Warrant Shares are
referred to herein collectively as the "Registration Shares". Pursuant to the
Registration Rights Agreement, on _____________________, ____ the Company filed
a Registration Statement on Form _____ (File No. 333-__________) (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") relating to the Shares, which names the Holders as selling stockholders
thereunder.
[Other introductory and scope of examination language to be inserted]
Based on the foregoing, we are of the opinion that:
(1) The Registration Statement and the Prospectus contained
therein (other than the financial statements and financial schedules
and other financial and statistical information contained or
incorporated by reference therein, as to which we have not been
requested to and do not express any opinion) comply as to form in all
material respects with the applicable requirements of the 1933 Act and
the rules and regulations promulgated thereunder; and
(2) The Registration Statement has become effective under the
1933 Act, to the best of our knowledge after due inquiry, no stop order
proceedings with respect thereto have been instituted or threatened by
the SEC. The Registration Shares have been registered under the 1933
Act and may be resold by the respective Holders pursuant to the
Registration Statement.
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<PAGE> 26
We have participated in the preparation of the Registration
Statement and the Prospectus, including review and discussions with officers and
other representatives of the Company, representatives of the independent public
accountants for the Company, and your representatives at which the contents of
the Registration Statement and the Prospectus contained therein and related
matters were discussed, and, although we are not passing upon and do not assume
any responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement and the Prospectus contained therein, on
the basis of the foregoing, nothing has come to our attention that leads us to
believe either that the Registration Statement at the time the Registration
Statement became effective contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or that the Prospectus contained in
the Registration Statement, as of its date, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading (it being understood that we have not
been requested to and do not express any view with respect to the financial
statements and schedules and other financial and statistical data included or
incorporated by reference in the Registration Statement or the Prospectus
contained therein).
Paragraph (2) of this opinion may be relied upon by
[_____________________], as Transfer Agent and Registrar (the "Transfer Agent"),
as if addressed to the Transfer Agent.
Very truly yours,
cc: [ _______________________________ ]
as Transfer Agent and Registrar
2-26
<PAGE> 1
Exhibit 10.6(b)
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of September 29,
1999 (this "Agreement"), is made by and between CENTRACK INTERNATIONAL, INC. a
Delaware corporation (the "Company"), and the person named on the signature page
hereto (the "Initial Investor").
W I T N E S S E T H:
WHEREAS, in connection with the Stock Purchase Agreement,
dated as of September 29, 1999, between the Initial Investor and the Company
(the "Stock Purchase Agreement"), the Company has agreed, upon the terms and
subject to the conditions of the Stock Purchase Agreement, to issue and sell to
the Initial Investor shares (the "Shares") of Common Stock, $.0001 par value
(the "Common Stock"), of the Company, to grant the Initial Investor the option
(the "Option") to purchase shares (the "Option Shares") of Common Stock, and to
issue common stock purchase warrants (the "Warrants") entitling the Initial
Investor to purchase shares (the "Warrant Shares") of Common Stock; and
WHEREAS, to induce the Initial Investor to execute and deliver
the Stock Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"1933 Act"), and applicable state securities laws with respect to the Shares,
the Option Shares and the Warrant Shares;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agree as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall have
the following meanings:
"Blackout Period" means the period of up to 15 consecutive
Trading Days commencing on the day immediately after the date the Company
notifies the Investors that they are required, pursuant to Section 4(d), to
suspend offers and sales of Registrable Securities as a result of an event or
circumstance described in Section 3(f)(1) during which period, by reason of
Section 3(f)(2), the Company is not required to amend the Registration Statement
or to supplement the prospectus contained therein.
"Closing Date" means the date of the purchase and sale of the
Shares pursuant to
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<PAGE> 2
the Stock Purchase Agreement.
"Investor" or "Investors" means the Initial Investor and any
transferee or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
"Majority Holders" means those persons who hold a majority of
the Registrable Securities which are then outstanding.
"Nasdaq" means the Nasdaq SmallCap Market.
"1934 Act" means the Securities Exchange Act of 1934, as
amended.
"1934 Act Effective Date" means the date the registration of
the Common Stock becomes effective under the 1934 Act.
"OTC" means the OTC Bulletin Board.
"register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the SEC.
"Registrable Securities" means the Shares, the Option Shares
and the Warrant Shares.
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<PAGE> 3
"Registration Period" means the period from the Closing Date
to the earliest of (i) the later of (x) the date which is two years after the
SEC Effective Date and (y) the earlier of (1) the date which is two years after
the latest expiration date of the Warrants and (2) the date that is two years
after the date on which the Warrants are exercised in full; PROVIDED, HOWEVER,
if on the date otherwise specified in this clause (i) any Investor is an
"affiliate" of the Company for purposes of Rule 144, the Registration Period
shall continue until the earlier of the dates specified in clauses (ii) and
(iii) of this definition, (ii) the date on which each Investor may sell all of
its Registrable Securities without registration under the 1933 Act pursuant to
subsection (k) of Rule 144, without restriction on the manner of sale or the
volume of securities which may be sold in any period and without the requirement
for the giving of any notice to, or the making of any filing with, the SEC and
(iii) the date on which the Investors no longer beneficially own any Registrable
Securities.
"Registration Statement" means a registration statement of the
Company under the 1933 Act, including any amendment thereto.
"Rule 144" means Rule 144 promulgated under the 1933 Act or
any other similar rule or regulation of the SEC that may at any time permit a
holder of any securities to sell securities of the Company to the public without
registration under the 1933 Act.
"SEC" means the Securities and Exchange Commission.
"SEC Effective Date" means the date the Registration Statement
is declared effective by the SEC.
"SEC Filing Date" means the date the Registration Statement is
first filed with the SEC pursuant to Section 2(a).
"Trading Day" means a day on whichever of (v) the national
securities exchange, (x) Nasdaq, (y) the Nasdaq SmallCap or (z) the OTC, which
at the time constitutes the principal securities market for the Common Stock, is
open for general trading.
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<PAGE> 4
(b) Capitalized terms defined in the introductory paragraph or
the recitals to this Agreement shall have the respective meanings therein
provided. Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Stock Purchase Agreement.
2. REGISTRATION.
(a) MANDATORY REGISTRATION. (1) The Company shall prepare, and
on or prior to the date which is 150 days after the Closing Date, file with the
SEC a Registration Statement on Form S-1 or SB-2 which, on the SEC Filing Date,
covers the resale by the Initial Investor of a number of shares of Common Stock
equal to the sum of (x) an amount equal to three times the number of Shares,
PLUS (y) if the Option has been exercised, the number of Option Shares that are
issued or issuable upon such exercise.
(2) The Registration Statement shall not include securities to
be sold for the account of any selling securityholder other than the Investors.
(3) Prior to the SEC Effective Date or during any time
subsequent to the SEC Effective Date when the Registration Statement for any
reason is not available for use by any Investor for the resale of any of
Registrable Securities, the Company shall not file any other registration
statement or any amendment thereto with the SEC under the 1933 Act or request
the acceleration of the effectiveness of any other registration statement
previously filed with the SEC, other than any registration statement on Form S-4
or Form S-8.
(b) 1934 ACT REGISTRATION. The Company shall file a
registration statement with the SEC under the 1934 Act relating to the Common
Stock within 30 days after the Closing Date and use its best efforts to complete
the registration of the Common Stock under the 1934 Act within 90 days after the
Closing Date.
(c) ELIGIBILITY FOR FORM S-3. The Company shall file all
reports required to be filed by the Company with the SEC in a timely manner and
otherwise use its best efforts to become eligible and thereafter maintain its
eligibility for the use of Form S-3 (or a comparable successor
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<PAGE> 5
form) for registration of the Registrable Securities for resale by the
Investors. So long as the Company is then eligible to use Form S-3 (or a
comparable successor form), the first post-effective amendment to the
Registration Statement required to be filed by the Company on or after the date
that is one year after the 1934 Act Effective Date (and all post-effective
amendments to the Registration Statement filed thereafter) pursuant to Section
3(b) shall be filed on Form S-3 (or a comparable successor form).
(d) CERTAIN OFFERINGS. If any offering pursuant to a
Registration Statement pursuant to Section 2(a) hereof involves an underwritten
offering, Investors who hold a majority in interest of the Registrable
Securities subject to such underwritten offering shall have the right to select
one legal counsel to represent the Investors and an investment banker or bankers
and manager or managers to administer the offering, which investment banker or
bankers or manager or managers shall be reasonably satisfactory to the Company.
The Investors who hold the Registrable Securities to be included in such
underwriting shall pay all underwriting discounts and commissions and other fees
and expenses of such investment banker or bankers and manager or managers so
selected in accordance with this Section 2(b) (other than fees and expenses
relating to registration of Registrable Securities under federal or state
securities laws, which are payable by the Company pursuant to Section 5 hereof)
with respect to their Registrable Securities and the fees and expenses of such
legal counsel so selected by the Investors.
(e) PIGGY-BACK REGISTRATIONS. If at any time the Company shall
determine to prepare and file with the SEC a Registration Statement relating to
an offering for its own account or the account of others under the 1933 Act of
any of its equity securities, other than on Form<-1- 32>S-4 or Form<-1- 32>S-8
or their then equivalents relating to equity securities to be issued solely in
connection with any acquisition of any entity or business or equity securities
issuable in connection with stock option or other employee benefit plans, the
Company shall send to each Investor who is entitled to registration rights under
this Section 2(e) written notice of such determination and, if within ten days
after receipt of such notice, such Investor shall so request in writing, the
Company shall include in such Registration Statement all or any part of the
Registrable Securities such Investor requests to be registered, except that if,
in connection with any underwritten public offering for the account of the
Company, the managing underwriter(s) thereof shall impose a limitation on the
number of shares of Common Stock which may be included in the Registration
Statement because, in such underwriter(s)' judgment, such limitation is
necessary to effect an orderly public distribution, then the Company shall be
obligated to include in such Registration Statement only such limited portion of
the Registrable Securities with respect to which such Investor has requested
inclusion hereunder. Any exclusion of Registrable Securities shall be made pro
rata among the Investors seeking to include Registrable Securities, in
proportion to the number of Registrable Securities sought to be included by such
Investors; PROVIDED, HOWEVER, that the Company shall not exclude any Registrable
Securities unless the Company has first excluded all outstanding securities the
holders of which are not entitled by right to inclusion of securities in such
Registration Statement; and PROVIDED FURTHER, HOWEVER, that, after giving effect
to the immediately preceding
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<PAGE> 6
proviso, any exclusion of Registrable Securities shall be made pro rata with
holders of other securities having the right to include such securities in the
Registration Statement, based on the number of securities for which registration
is requested except to the extent such pro rata exclusion of such other
securities is prohibited under any written agreement entered into by the Company
with the holder of such other securities prior to the date of this Agreement, in
which case such other securities shall be excluded, if at all, in accordance
with the terms of such agreement. No right to registration of Registrable
Securities under this Section 2(e) shall be construed to limit any registration
required under Section 2(a) hereof. The obligations of the Company under this
Section 2(e) may be waived by Investors holding a majority in interest of the
Registrable Securities and shall expire after the Company has afforded the
opportunity for the Investors to exercise registration rights under this Section
2(e) for two registrations; PROVIDED, HOWEVER, that any Investor who shall have
had any Registrable Securities excluded from any Registration Statement in
accordance with this Section 2(e) shall be entitled to include in an additional
Registration Statement filed by the Company the Registrable Securities so
excluded. Notwithstanding any other provision of this Agreement, if the
Registration Statement required to be filed pursuant to Section 2(a) of this
Agreement shall have been ordered effective by the SEC and the Company shall
have maintained the effectiveness of such Registration Statement as required by
this Agreement and if the Company shall otherwise have complied in all material
respects with its obligations under this Agreement, then the Company shall not
be obligated to register any Registrable Securities on such Registration
Statement referred to in this Section 2(e).
3. OBLIGATIONS OF THE COMPANY. In connection with the
registration of the Registrable Securities, the Company shall:
(a) prepare promptly, and file with the SEC not later than the
date provided in Section 2(a), a Registration Statement with respect to the
number of Registrable Securities provided in Section 2(a), and thereafter to use
its best efforts to cause each Registration Statement relating to Registrable
Securities to become effective as soon as possible after such filing, and keep
the Registration Statement effective (pursuant to Rule 415 under the 1933 Act,
to the extent Rule 415 is available) at all times during the Registration
Period; submit to the SEC, within three Business Days after the Company learns
that no review of the Registration Statement will be made by the staff of the
SEC or that the staff of the SEC has no further comments on the Registration
Statement, as the case may be, a request for acceleration of effectiveness of
the Registration Statement to a time and date not later than 48 hours after the
submission of such request; notify the Investors of the effectiveness of the
Registration Statement on the date the Registration Statement is declared
effective; and the Company represents and warrants to, and covenants and agrees
with, the Investors that the Registration Statement (including any amendments or
supplements thereto and prospectuses contained therein), at the time it is first
filed with the SEC, at the time it is ordered effective by the SEC and at all
times during which it is required to be effective hereunder (and each such
amendment and supplement at the time it is filed with the SEC and at all times
during which it is available for use in connection with the offer and sale of
the Registrable Securities) shall not
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<PAGE> 7
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading;
(b) prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the 1933 Act with respect to the disposition of all Registrable
Securities of the Company covered by the Registration Statement until such time
as all of such Registrable Securities have been disposed of in accordance with
the intended methods of disposition by the seller or sellers thereof as set
forth in the Registration Statement;
(c) furnish to each Investor whose Registrable Securities are
included in the Registration Statement and its legal counsel, (1) promptly after
the same is prepared and publicly distributed, filed with the SEC or received by
the Company, one copy of the Registration Statement and any amendment thereto,
each preliminary prospectus and prospectus and each amendment or supplement
thereto, each letter written by or on behalf of the Company to the SEC or the
staff of the SEC and each item of correspondence from the SEC or the staff of
the SEC relating to such Registration Statement (other than any portion of any
thereof which contains information for which the Company has sought confidential
treatment) and (2) such number of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents, as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor;
(d) use reasonable efforts to (i) register and qualify the
Registrable Securities covered by the Registration Statement under such
securities or blue sky laws of such jurisdictions as the Investors who hold a
majority in interest of the Registrable Securities being offered reasonably
request, (ii) prepare and file in those jurisdictions such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof at all
times until the end of the Registration Period, (iii) take such other actions as
may be necessary to maintain such registrations and qualifications in effect at
all times during the Registration Period and (iv) take all other actions
reasonably necessary or advisable to qualify the Registrable Securities for sale
in such jurisdictions; PROVIDED, HOWEVER, that the Company shall not be required
in connection therewith or as a condition thereto (I) to qualify to do business
in any jurisdiction where it would not otherwise be required to qualify but for
this Section 3(d), (II) to subject itself to general taxation in any such
jurisdiction, (III) to file a general consent to service of process in any such
jurisdiction, (IV) to provide any undertakings
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<PAGE> 8
that cause more than nominal expense or burden to the Company or (V) to make any
change in its Certificate of Incorporation or by-laws, which in each case the
Board of Directors of the Company determines to be contrary to the best
interests of the Company and its stockholders;
(e) in the event that the Registrable Securities are being
offered in an underwritten offering, enter into and perform its obligations
under an underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering;
(f) (1) as promptly as practicable after becoming aware of
such event or circumstance, notify each Investor of any event or circumstance of
which the Company has knowledge, as a result of which the prospectus included in
the Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and use its best efforts promptly to
prepare a supplement or amendment to the Registration Statement to correct such
untrue statement or omission, file such supplement or amendment with the SEC at
such time as shall permit the Investors to sell Registrable Securities pursuant
to the Registration Statement as promptly as practicable, and deliver a number
of copies of such supplement or amendment to each Investor as such Investor may
reasonably request;
(2) notwithstanding Section 3(f)(1) above, if at any time the
Company notifies the Investors as contemplated by Section 3(f)(1) that the event
giving rise to such notice relates to a development involving the Company which
occurred subsequent to the later of (x) the SEC Effective Date and (y) the
latest date prior to such notice on which the Company has amended or
supplemented the Registration Statement, then the Company shall not be required
to use best efforts to make such amendment during a Blackout Period; PROVIDED,
HOWEVER, that the aggregate number of Trading Days on which any Blackout Period
is in effect may not exceed 15 Trading Days (whether or not consecutive) in any
period of 12 consecutive months; and PROVIDED FURTHER, HOWEVER, that no Blackout
Period may commence within 90 Trading Days after the end of an earlier Blackout
Period;
(g) as promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold (or, in
the event of an underwritten offering, the managing underwriters) of the
issuance by the SEC of any stop order or other suspension of effectiveness of
the Registration Statement at the earliest possible time;
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<PAGE> 9
(h) permit a single firm of counsel designated as selling
stockholders' counsel by the Investors who hold a majority in interest of the
Registrable Securities being sold to review and comment on the Registration
Statement and all amendments and supplements thereto a reasonable period of time
prior to their filing with the SEC;
(i) make generally available to its security holders as soon
as practical, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions of
Rule 158 under the 1933 Act) covering a twelve-month period beginning not later
than the first day of the Company's fiscal quarter next following the effective
date of the Registration Statement;
(j) at the request of the Investors who hold a majority in
interest of the Registrable Securities being sold, furnish on the date that
Registrable Securities are delivered to an underwriter, if any, for sale in
connection with the Registration Statement (i) a letter, dated such date, from
the Company's independent certified public accountants in form and substance as
is customarily given by independent certified public accountants to underwriters
in an underwritten public offering, addressed to the underwriters; and (ii) an
opinion, dated such date, from counsel representing the Company for purposes of
such Registration Statement, in form and substance as is customarily given in an
underwritten public offering, addressed to the underwriters and the Investors;
(k) make available for inspection by any Investor, any
underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by any such
Investor or underwriter (collectively, the "Inspectors"), all pertinent
financial and other records, pertinent corporate documents and properties of the
Company (collectively, the "Records"), as shall be reasonably necessary to
enable each Investor to exercise its due diligence responsibility, and cause the
Company's officers, directors and employees to supply all information which any
Inspector may reasonably request for purposes of such due diligence; PROVIDED,
HOWEVER, that each Inspector shall hold in confidence and shall not make any
disclosure (except to an Investor) of any Record or other information which the
Company determines in good faith to be confidential, and of which determination
the Inspectors are so notified, unless (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (ii) the release of such Records is ordered pursuant to a subpoena or
other order from a court or government body of competent jurisdiction or (iii)
the information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential
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<PAGE> 10
information in such Records to any Inspector until and unless such Inspector
shall have entered into confidentiality agreements (in form and substance
satisfactory to the Company) with the Company with respect thereto,
substantially in the form of this Section 3(k). Each Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at the Company's own
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, the Records deemed confidential. The Company shall hold
in confidence and shall not make any disclosure of information concerning an
Investor provided to the Company pursuant to Section 4(e) hereof unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor and
allow such Investor, at such Investor's own expense, to undertake appropriate
action to prevent disclosure of, or to obtain a protective order for, such
information;
(l) use its best efforts (i) to cause all the Registrable
Securities covered by the Registration Statement to be listed on the OTC or such
other principal securities market on which securities of the same class or
series issued by the Company are then listed or traded or (ii) if securities of
the same class or series as the Registrable Securities are not then listed on
the OTC or any such other securities market, to cause all of the Registrable
Securities covered by the Registration Statement to be listed on the New York
Stock Exchange, the American Stock Exchange, the Nasdaq National Market or the
Nasdaq;
(m) provide a transfer agent and registrar, which may be a
single entity, for the Registrable Securities not later than the effective date
of the Registration Statement;
(n) cooperate with the Investors who hold Registrable
Securities being offered and the managing underwriter or underwriters, if any,
to facilitate the timely preparation and delivery of certificates (not bearing
any restrictive legends) representing Registrable Securities to be offered
pursuant to the Registration Statement and enable such certificates to be in
such denominations or amounts, as the case may be, as the managing underwriter
or underwriters, if any, or the Investors may reasonably request and registered
in such names as the managing underwriter or underwriters, if any, or the
Investors may request; and, within three Business Days
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<PAGE> 11
after a Registration Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall deliver to the transfer agent for the
Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) an instruction
substantially in the form attached hereto as EXHIBIT 1 and shall cause legal
counsel selected by the Company to deliver to the Investors an opinion of such
counsel in the form attached hereto as EXHIBIT 2 (with a copy to the Company's
transfer agent);
(o) during the period the Company is required to maintain
effectiveness of the Registration Statement pursuant to Section 3(a), the
Company shall not bid for or purchase any Common Stock or any right to purchase
Common Stock or attempt to induce any person to purchase any such security or
right if such bid, purchase or attempt would in any way limit the right of the
Investors to sell Registrable Securities by reason of the limitations set forth
in Regulation M under the 1934 Act; and
(p) take all other reasonable actions necessary to expedite
and facilitate disposition by the Investors of the Registrable Securities
pursuant to the Registration Statement.
4. OBLIGATIONS OF THE INVESTORS. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations:
(a) It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least five days
prior to the first anticipated filing date of the Registration Statement, the
Company shall notify each Investor of the information that, based on the
requirements of the 1933 Act, the Company requires from each such Investor (the
"Required Information") if any of such Investor's Registrable Securities are
eligible for inclusion in the Registration Statement. If at least one Business
Day prior to the filing date the Company has not received the Required
Information from an Investor (a "Non-Responsive Investor"), then the Company may
file the Registration Statement without including Registrable Securities of such
Non-Responsive Investor but shall not be relieved of its obligation to file a
Registration Statement with the SEC relating to the Registrable Securities of
such Non-Responsive Investor promptly after such Non-Responsive Investor
provides the Required Information;
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<PAGE> 12
(b) Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement;
(c) In the event Investors holding a majority in interest of
the Registrable Securities being registered determine to engage the services of
an underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement;
(d) Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(f)
or 3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(f) or 3(g) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession of the prospectus covering such
Registrable Securities current at the time of receipt of such notice;
(e) No Investor may participate in any underwritten
registration hereunder unless such Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting arrangements
approved by the Investors entitled hereunder to approve such arrangements, (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements and (iii) agrees to pay its pro rata share of
all underwriting discounts and commissions and other fees and expenses of
investment bankers and any manager or managers of such underwriting and legal
expenses of the underwriters applicable with respect to its Registrable
Securities, in each case to the extent not payable by the Company pursuant to
the terms of this Agreement; and
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<PAGE> 13
(f) Each Investor agrees to take all reasonable actions
necessary to comply with the prospectus delivery requirements of the 1933 Act
applicable to its sales of Registrable Securities.
5. EXPENSES OF REGISTRATION. All reasonable expenses, other
than underwriting discounts and commissions and other fees and expenses of
investment bankers and other than brokerage commissions, incurred in connection
with registrations, filings or qualifications pursuant to Sections 2 and 3,
including, without limitation, all registration, listing and qualifications
fees, printers and accounting fees and the fees and disbursements of counsel for
the Company and the Investors, shall be borne by the Company, PROVIDED, HOWEVER,
that (i) the Company shall not be required to pay more than $10,000 for the fees
and disbursements of counsel for the Investors and the other investors under the
registration rights agreement, dated as of the date hereof, with the Company of
like tenor and (ii) the Investors shall bear the fees and out-of-pocket expenses
of the one legal counsel selected by the Investors pursuant to Section 2(b)
hereof in connection with any underwritten offering of Registrable Securities.
6. INDEMNIFICATION. In the event any Registrable Securities
are included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such Investor,
each person, if any, who controls any Investor within the meaning of the 1933
Act or the 1934 Act, any underwriter (as defined in the 1933 Act) for the
Investors, the directors, if any, of such underwriter and the officers, if any,
of such underwriter, and each person, if any, who controls any such underwriter
within the meaning of the 1933 Act or the 1934 Act (each, an "Indemnified
Person"), against any losses, claims, damages, liabilities or expenses (joint or
several) incurred (collectively, "Claims") to which any of them may become
subject under the 1933 Act, the 1934 Act or otherwise, insofar as such Claims
(or actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any of the following: (i) any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any post-effective amendment thereof or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein,
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<PAGE> 14
in light of the circumstances under which the statements therein were made, not
misleading or (iii) any violation or alleged violation by the Company of the
1933 Act, the 1934 Act, any state securities law or any rule or regulation under
the 1933 Act, the 1934 Act or any state securities law (the matters in the
foregoing clauses (i) through (iii) being, collectively, "Violations"). Subject
to the restrictions set forth in Section 6(d) with respect to the number of
legal counsel, the Company shall reimburse the Investors and the other
Indemnified Persons, promptly as such expenses are incurred and are due and
payable, for any reasonable legal fees or other reasonable expenses incurred by
them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (I) shall not apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by any Indemnified Person
or underwriter for such Indemnified Person expressly for use in connection with
the preparation of the Registration Statement, the prospectus or any such
amendment thereof or supplement thereto, if such prospectus was timely made
available by the Company pursuant to Section 3(c) hereof; (II) with respect to
any preliminary prospectus shall not inure to the benefit of any such person
from whom the person asserting any such Claim purchased the Registrable
Securities that are the subject thereof (or to the benefit of any person
controlling such person) if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected in the prospectus, as then
amended or supplemented, if such prospectus was timely made available by the
Company pursuant to Section 3(c) hereof; and (III) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior
written consent of the Company, which consent shall not be unreasonably
withheld. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9.
(b) In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to indemnify and hold
harmless, to the same extent and in the same manner set forth in Section 6(a),
the Company, each of its directors, each of its officers who signs the
Registration Statement, each person, if any, who controls the Company within the
meaning of the 1933 Act or the 1934 Act, any underwriter and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the 1933 Act or the 1934 Act (collectively and
together with an Indemnified Person, an "Indemnified Party"), against any Claim
to which any of them may become subject, under the 1933 Act, the 1934 Act or
otherwise, insofar as such Claim arises out of or is based upon any Violation,
in each case to the extent (and only to the extent) that such Violation occurs
in reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement; and such Investor will reimburse any legal or other expenses
reasonably incurred by any Indemnified Party in connection with investigating or
defending any such Claim; PROVIDED, HOWEVER, that the indemnity agreement
contained in this Section 6(b) shall not apply to amounts paid in settlement of
any Claim if such settlement is effected without the prior written consent of
such Investor, which consent shall not be unreasonably withheld; PROVIDED,
FURTHER, HOWEVER, that the
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<PAGE> 15
Investor shall be liable under this Section 6(b) for only that amount of a Claim
as does not exceed the amount by which the net proceeds to such Investor from
the sale of Registrable Securities pursuant to such Registration Statement
exceeds the cost of such Registrable Securities to such Investor. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such Indemnified Party and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(b) with respect to any preliminary prospectus shall
not inure to the benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
on a timely basis in the prospectus, as then amended or supplemented.
(c) The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information so furnished in writing by such persons
expressly for inclusion in the Registration Statement.
(d) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel selected by the indemnifying party
but reasonably acceptable to the Indemnified Person or the Indemnified Party, as
the case may be; PROVIDED, HOWEVER, that an Indemnified Person or Indemnified
Party shall have the right to retain its own counsel with the fees and expenses
to be paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. In such event, the Company shall pay for only one
separate legal counsel for the Investors; such legal counsel shall be selected
by the Investors holding a majority in interest of the Registrable Securities
included in the Registration Statement to which the Claim relates. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action shall not relieve such indemnifying party of
any liability to the Indemnified Person or Indemnified Party under this Section
6, except to the extent that the indemnifying party is prejudiced in its ability
to defend such action. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
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<PAGE> 16
7. CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 6 to the fullest extent permitted by
law; PROVIDED, HOWEVER, that (a) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 6, (b) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any seller of
Registrable Securities who was not guilty of such fraudulent misrepresentation
and (c) contribution by any seller of Registrable Securities shall be limited in
amount to the amount by which the net amount of proceeds received by such seller
from the sale of such Registrable Securities exceeds the purchase price paid by
such seller for such Registrable Securities.
8. REPORTS UNDER 1934 ACT. With a view to making available to
the Investors the benefits of Rule 144, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act; and
(c) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144 and the
1934 Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company and (iii)
such other information as may be reasonably requested to permit the Investors to
sell such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have
the Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of all or any portion
of such securities (or to any transferee of all or any
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<PAGE> 17
portion of the Warrants) only if: (a) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment, (b) the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name and address of such transferee or
assignee and (ii) the securities with respect to which such registration rights
are being transferred or assigned, (c) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the 1933 Act and applicable state securities laws,
and (d) at or before the time the Company receives the written notice
contemplated by clause (b) of this sentence the transferee or assignee agrees in
writing with the Company to be bound by all of the provisions contained herein.
In connection with any such transfer the Company shall, at its sole cost and
expense, promptly after such assignment take such actions as shall be reasonably
acceptable to the Initial Investor and such transferee to assure that the
Registration Statement and related prospectus are available for use by such
transferee for sales of the Registrable Securities in respect of which the
rights to registration have been so assigned. The Company acknowledges that upon
the liquidation or dissolution of an Investor which is a partnership or other
entity and the subsequent transfer of such entity's Registrable Securities and
Warrants to the partners or other owners thereof, such transferees shall be
automatically assigned the registration rights of such entity pursuant to this
Agreement with respect to the transferred securities, subject to the
requirements of this Section 9.
10. AMENDMENT, WAIVER, ETC. Any provision of this Agreement
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Majority Holders. Any amendment or waiver effected in
accordance with this Section 10 shall be binding upon each Investor and the
Company.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall
be in writing and shall be deemed to be sufficiently given when personally
delivered (by hand, by courier, by
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<PAGE> 18
telephone line facsimile transmission (with answer back confirmation) or other
means) (i) if to the Company, at 21045 Commercial Trail, Suite 101, Boca Raton,
Florida 33486-1094, Attention: President, telephone line facsimile transmission
number (561) 362-0570, (ii) if to the Initial Investor at its address set forth
in the Stock Purchase Agreement and (iii) if to any other Investor, at such
address as such Investor shall have provided in writing to the Company, or at
such other address as each such party furnishes by notice given in accordance
with this Section 11(b), and shall be effective upon receipt.
(c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be enforced, governed by and
construed in accordance with the laws of the State of Florida applicable to
agreements made and to be performed entirely within such State. In the event
that any provision of this Agreement is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any provision hereof which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision hereof.
(e) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(f) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of
reference only and
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<PAGE> 19
shall not limit or otherwise affect the meaning hereof.
(i) The Company acknowledges that any failure by the Company
to perform its obligations under this Agreement, including, without limitation,
the Company's obligations under Section 3(n), or any delay in such performance
could result in damages to the Investors and the Company agrees that, in
addition to any other liability the Company may have by reason of any such
failure or delay, the Company shall be liable for all direct and consequential
damages caused by any such failure or delay.
(j) Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
(k) The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent, and no rules
of strict construction will be applied against any party.
(l) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by telephone line facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
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<PAGE> 20
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
day and year first above written.
CENTRACK INTERNATIONAL, INC.
By: /s/ John J. Lofquist
---------------------------------
Name: John J. Lofquist
Title: President and Chief Executive Officer
KJO TRUST
By: /s/ Stephen C. Owen, Jr.
---------------------------------
Stephen C. Owen, Jr., Trustee
-20-
<PAGE> 21
EXHIBIT 1
TO
REGISTRATION
RIGHTS AGREEMENT
[Company Letterhead]
[Date]
[NAME AND ADDRESS OF TRANSFER AGENT]
Ladies and Gentlemen:
This letter shall serve as our irrevocable authorization and
direction to you (1) to transfer or re-register the certificates for the shares
of Common Stock, $.0001 par value (the "Common Stock"), of Centrack
International, Inc., a Delaware corporation (the "Company"), represented by
certificate numbers _______ and _______ for an aggregate of _______ shares (the
"Outstanding Shares") of Common Stock presently registered in the name of [Name
of Investors] upon surrender of such certificate(s) to you, notwithstanding the
legend appearing on such certificates, and (2) to issue shares (the "Warrant
Shares") of Common Stock to or upon the order of the holder from time to time on
exercise of the Common Stock Purchase Warrants (the "Warrants") exercisable for
Common Stock issued by the Company upon receipt by you of a Subscription Form
from such holder in the form enclosed herewith and certification by the Company
of receipt of the Warrant Exercise Price. The transfer or re-registration of the
certificates for the Outstanding Shares by you should be made at such time as
you are requested to do so by the record holder of the Outstanding Shares. The
certificate issued upon such transfer or re-registration should be registered in
such name as requested by the holder of record of the certificate surrendered to
you and should not bear any legend which would restrict the transfer of the
shares represented thereby. In addition, you are hereby directed to remove any
stop-transfer
1-21
<PAGE> 22
instruction relating to the Outstanding Shares. Certificates for the Warrant
Shares should not bear any restrictive legend and should not be subject to any
stop-transfer restriction.
Contemporaneously with the delivery of this letter, the
Company is delivering to you an opinion of ____________________ as to
registration of the resale of the Outstanding Shares and the Warrant Shares
under the Securities Act of 1933, as amended.
1-22
<PAGE> 23
Should you have any questions concerning this matter, please
contact me.
Very truly yours,
CENTRACK INTERNATIONAL, INC.
By:
Name:
Title:
Enclosures
cc: [Names of Investors]
1-23
<PAGE> 24
EXHIBIT 2
TO
REGISTRATION
RIGHTS AGREEMENT
[Names and Addresses of Investors]
CENTRACK INTERNATIONAL, INC.
Shares of Common Stock
----------------------------
Ladies and Gentlemen:
We are counsel to Centrack International, Inc., a Delaware
corporation (the "Company"), and we understand that the Company has sold to
[Names of Investors] (the "Holders") an aggregate of ________ shares (the
"Shares") of the Company's Common Stock, $.0001 par value (the "Common Stock"),
and issued to the Holders Common Stock Purchase Warrants (the
2-24
<PAGE> 25
"Warrants"). The Shares were sold, and the Warrants were issued, to the Holders
pursuant to the several Stock Purchase Agreements, dated as of September ___,
1999, by and between the Holders and the Company (the "Stock Purchase
Agreements"). Pursuant to the several Registration Rights Agreements, dated as
of September ___, 1999, by and between the Company and each Holder (the
"Registration Rights Agreements") entered into in connection with the purchase
by the Holders of the Shares, the Company agreed with each Holder, among other
things, to register for resale (1) the Shares and (2) the shares (the "Warrant
Shares") of Common Stock issuable upon exercise of the Warrants under the
Securities Act of 1933, as amended (the "1933 Act"), upon the terms provided in
the Registration Rights Agreements. The Shares and the Warrant Shares are
referred to herein collectively as the "Registration Shares". Pursuant to the
Registration Rights Agreement, on _____________________, ____ the Company filed
a Registration Statement on Form _____ (File No. 333-__________) (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") relating to the Shares, which names the Holders as selling stockholders
thereunder.
[Other introductory and scope of examination language to be inserted]
Based on the foregoing, we are of the opinion that:
(1) The Registration Statement and the Prospectus contained
therein (other than the financial statements and financial schedules
and other financial and statistical information contained or
incorporated by reference therein, as to which we have not been
requested to and do not express any opinion) comply as to form in all
material respects with the applicable requirements of the 1933 Act and
the rules and regulations promulgated thereunder; and
(2) The Registration Statement has become effective under the
1933 Act, to the best of our knowledge after due inquiry, no stop order
proceedings with respect thereto have been instituted or threatened by
the SEC. The Registration Shares have been registered under the 1933
Act and may be resold by the respective Holders pursuant to the
Registration Statement.
2-25
<PAGE> 26
We have participated in the preparation of the Registration
Statement and the Prospectus, including review and discussions with officers and
other representatives of the Company, representatives of the independent public
accountants for the Company, and your representatives at which the contents of
the Registration Statement and the Prospectus contained therein and related
matters were discussed, and, although we are not passing upon and do not assume
any responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement and the Prospectus contained therein, on
the basis of the foregoing, nothing has come to our attention that leads us to
believe either that the Registration Statement at the time the Registration
Statement became effective contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or that the Prospectus contained in
the Registration Statement, as of its date, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading (it being understood that we have not
been requested to and do not express any view with respect to the financial
statements and schedules and other financial and statistical data included or
incorporated by reference in the Registration Statement or the Prospectus
contained therein).
Paragraph (2) of this opinion may be relied upon by
[_____________________], as Transfer Agent and Registrar (the "Transfer Agent"),
as if addressed to the Transfer Agent.
Very truly yours,
cc: [ _______________________________ ]
as Transfer Agent and Registrar
2-26
<PAGE> 1
Exhibit 10.6(c)
THIS WARRANT AND THE SECURITIES PURCHASABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND MAY NOT BE SOLD, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS
THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT COVERING
SUCH SECURITIES OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF
THESE SECURITIES (REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL), OR AN
OPINION OF THE COMPANY'S COUNSEL, STATING THAT SUCH SALE, ASSIGNMENT OR TRANSFER
IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
CENTRACK INTERNATIONAL, INC.
COMMON STOCK PURCHASE WARRANT
FOR VALUE RECEIVED, Stephen C. Owen, Jr., a resident of the State of
New York or his successors or permitted assigns (the "Holder"), is entitled to
purchase, from CENTRACK INTERNATIONAL, INC., a Delaware corporation (the
"Company"), subject to the provisions hereof, (1) One hundred fifty-one thousand
three hundred (151,300) shares of fully paid, validly issued and non-assessable
shares ("Shares") of common stock, par value $0.0001 per share ("Common Stock"),
of the Company at an exercise price ("Exercise Price") of $1.6525 per share if
this Warrant is exercised on or before the close of business on September 29,
2001 except as otherwise provided in Section 2.8 hereof ("Tranche 1"), and,
provided that Tranche 1 is exercised in full, (2) One hundred fifty-one thousand
three hundred (151,300) Shares of Common Stock of the Company at an Exercise
Price of $2.1525 per share ("Tranche 2"), (subject to adjustment as provided
below.) The right to purchase Shares under this Warrant is exercisable, in whole
or in part, as more specifically set forth below. This Warrant shall terminate
if not exercised by the close of business two (2) years from the exercise date
of Tranche 1, except as may otherwise be provided in Section 2.8 hereof.
ARTICLE 1
DEFINITIONS
For all purposes of this Warrant, unless the context otherwise
requires, the following terms have the following meanings:
1.1 "Common Stock" means the Company's authorized common stock, par
value $0.0001 per share.
1.2 "Company" means Centrack International, Inc., a corporation
organized and existing under the laws of the State of Delaware, and any
successor corporation.
<PAGE> 2
1.3 "Exercise Price" means the price with respect to each Tranche
referred to above.
1.4 "Warrant" means this Warrant and any warrants issued on or in
substitution for this Warrant including warrants issued in exchange for this
Warrant pursuant to Article 2.
1.5 "Warrant Stock" means the shares of Common Stock or other
securities acquired or to be acquired upon the exercise of this Warrant.
ARTICLE 2
GRANT AND EXERCISE OF WARRANT
2.1 GRANT AND EXERCISE. This Warrant may be exercised by the Holder, at
the Holder's election at any time prior to the Warrant's expiration under
Section 2.8 hereof.
2.2 HOLDER'S PROCEDURE. To exercise this Warrant and purchase the
Warrant Stock, the Holder shall deliver to the Company at its principal office:
(a) a written notice, in substantially the form of the Exercise
Notice appearing at the end of this Warrant, of the Holder's election to
exercise this Warrant;
(b) this Warrant; and
(c) a check payable to the Company in the amount of the Exercise
Price per share of Warrant Stock.
2.3 COMPANY'S PROCEDURE. The Company shall as promptly as practicable
cause the Company's transfer agent to execute and deliver one or more
certificates representing the aggregate number of shares of Warrant Stock to
which the Holder is entitled.
2.4 NAME AND EFFECTIVE DATE. The stock certificate(s) so delivered
shall be issued in the name of the Holder or such other name as shall be
designated in the Exercise Notice specified in Section 2.2. Such certificate(s)
shall be deemed to have been issued and the Holder or (subject to federal and
state securities law and any other restrictions on transfer) any other person so
designated to be named therein shall be deemed for all purposes to have become a
holder of record of such shares as of the date the Company actually receives the
notice specified in Section 2.2.
2.5 EXPENSES. The Company shall pay all expenses, taxes, and other
charges payable in connection with the preparation, issue, and delivery of such
stock certificate(s), except that, in case such stock certificate(s) shall be
registered in a name or names other than the name of the Holder of this Warrant,
stock transfer taxes that are payable upon the issuance of such stock
certificate(s) shall be paid by the Holder hereof.
2.6 LEGAL REQUIREMENTS. The Warrant Stock issued upon the exercise of
this Warrant shall be validly issued, fully paid, and nonassessable.
<PAGE> 3
2.7 REGISTRATION. The Company will keep at its principal office a
register that will provide for the registration and transfer of the Warrant.
2.8 EXPIRATION. The right to exercise Tranche 1 will expire at the
close of business on September 29, 2001 or the first business day thereafter if
such date is not a business day, or such other date as may be established by
mutual agreement of the parties hereto, and, provided that Tranche 1 is
exercised in full, the right to exercise Tranche 2 will expire at the close of
business two (2) years from the exercise date of Tranche 1, or the first
business day thereafter if such date is not a business day, or such other date
as may be established by mutual agreement of the parties hereto.
2.9 INVESTMENT INTENT. Neither the Company nor any person acting on its
behalf has offered this Warrant to Holder by means of any general solicitation
or general advertising. Holder is acquiring this Warrant and the Warrant Stock
for its own account and not on behalf of other persons. The securities are being
acquired with the intent of holding them for investment and without the intent
of participating, directly or indirectly, in a distribution thereof. Holder
understands that this investment involves a high degree of risk.
ARTICLE 3
TRANSFER
3.1. SECURITIES LAWS. Neither this Warrant nor the Warrant Stock shall
be transferable unless:
(a) (i) either a registration statement under the
Securities Act of 1933, as amended (the "Securities
Act"), is in effect covering this Warrant or the
Warrant Stock, as the case may be, or the Company has
received an opinion from the Company's counsel to the
effect that such registration is not required, or the
Holder has furnished to the Company an opinion of the
Holder's counsel, which counsel shall be reasonably
satisfactory to the Company, to the effect that such
registration is not required;
(ii) the transfer complies with any applicable state
securities laws; and
(b) Holder consents to a legend being placed on certificates
for the Warrant Stock stating that the securities have not been registered under
the Securities Act and referring to such restrictions on transferability and
sale.
(c) The Holder is entitled to the benefits of a Registration
Rights Agreement, dated as of September 29, 1999, relating to the Warrant Stock.
3.2. PROCEDURE.
(a) The Holder of this Warrant, or of any warrant substituted
therefor pursuant to the
<PAGE> 4
provisions of this Section 3.3, may, subject to the limitations set forth in
Section 3.1, in person or by duly authorized attorney, surrender the same for
exchange at the principal office of the Company and, within a reasonable time
thereafter and without expense (other than transfer taxes, if any), receive in
exchange therefor one or more duly executed warrants each evidencing the right
to receive one share of Common Stock or such other number of shares as may be
designated by the Holder at the time of surrender.
The Company and any agent of the Company may treat the person in
whose name a Warrant is registered as the owner of the Warrant for all purposes
hereunder and neither the Company nor such agent shall be affected by notice to
the contrary. The Company covenants and agrees to take and cause to be taken all
action necessary to effect such registrations, transfers and exchanges.
(b) Subject to Section 3.1, the Holder may transfer the
Warrant on the books of the Company by surrendering to the Company:
(i) the Warrant;
(ii) a written assignment of the Warrant, in substantially
the form of the Assignment appearing at the end of this
Warrant, naming the assignee and duly executed by the
Holder; and
(iii) funds sufficient to pay any stock transfer taxes
payable upon the making of such transfer.
The Company shall thereupon execute and deliver a new Warrant in the
name of the assignee specified in such instrument of assignment. Upon issuance
of the new Warrant or Warrants, the Warrant surrendered for transfer shall be
canceled by the Company.
3.3. EXPENSES. The Company shall pay all expenses, taxes (other than
transfer taxes), and other charges payable in connection with the preparation,
issue and delivery of any new Warrant under this Article 3.
ARTICLE 4
ADJUSTMENTS
4.1 STOCK SPLITS, STOCK DIVIDENDS AND REVERSE STOCK SPLITS. If at
any time the Company shall subdivide (by reclassification, by the issuance of a
Common Stock dividend on Common Stock, or otherwise) its outstanding shares of
Common Stock into a greater number, the number of shares of Common Stock that
may be purchased hereunder shall be increased proportionately and the Exercise
Price per share of Warrant Stock shall be decreased proportionately as of the
effective date of such action. The effective date of a stock dividend shall be
the date on which the dividend is declared. Issuance of a Common Stock dividend
shall be treated as a subdivision of the whole
<PAGE> 5
number of shares of Common Stock outstanding immediately before the record date
for such dividend into a number of shares equal to such whole number of shares
so outstanding plus the number of shares issued as a stock dividend. If at any
time the Company shall combine (by reclassification or otherwise) its
outstanding number of shares of Common Stock into a lesser number, the number of
shares of Warrant Stock that may be purchased hereunder shall be reduced
proportionately and the Exercise Price per share of Warrant Stock shall be
increased proportionately as of the effective date of such action.
4.2 REORGANIZATION AND RECLASSIFICATION. In case of any capital
reorganization or any reclassification of the capital stock of the Company or
while the Warrant remains outstanding, the Holder of the Warrant shall
thereafter be entitled to purchase pursuant to the Warrant (in lieu of the kind
and number of shares of Warrant Stock that the Holder would have been entitled
to purchase or acquire immediately before such reorganization or
reclassification) the kind and number of shares of stock of any class or classes
or other securities or property for or into which such shares of Common Stock
would have been exchanged, converted or reclassified if the Warrant Stock had
been purchased immediately before such reorganization, reclassification at a
total price not to exceed that payable upon the exercise of the unexercised
portion of this Warrant. In case of any such reorganization, reclassification,
appropriate provision (as determined by resolution of the Board of Directors of
the Company) shall be made with respect to the rights and interests thereafter
of the Holder of the Warrant, to the end that all the provisions of the Warrant
(including adjustment provisions) shall thereafter be applicable, as nearly as
reasonably practicable, in relation to such stock or other securities or
property.
4.3 STATEMENT OF ADJUSTMENT OF WARRANT STOCK. Whenever the number or
kind of shares comprising Warrant Stock or the Exercise Price is adjusted
pursuant to this Article 4, the Company shall promptly give notice to all
Holders, stating that such an adjustment has been effected and setting forth the
number and kind of shares purchasable and the amount of the then-current
Exercise Price, and stating in reasonable detail the facts requiring such
adjustment and the calculation of such adjustment.
4.4 NO OTHER ADJUSTMENTS. No adjustments in the number or kind or price
of shares constituting Warrant Stock shall be made except as provided in this
Article 4.
ARTICLE 5
COVENANTS OF THE COMPANY
The Company covenants and agrees that:
5.1 RESERVATION OF SHARES. At all times, the Company will reserve and
set apart and have, free from pre-emptive rights, a sufficient number of shares
of authorized but unissued Common Stock or other securities, if applicable, to
enable it at any time to fulfill all of its obligations hereunder.
<PAGE> 6
5.2 ADJUSTMENT OF PAR VALUE. Before taking any action that would cause
an adjustment reducing the Exercise Price per share below the then current par
value of the shares of Warrant Stock issuable upon exercise of the Warrant, the
Company will take any corporate action that may be necessary in order that the
Company may validly and legally issue fully paid and nonassessable shares of
such Warrant Stock at such adjusted price.
ARTICLE 6
LIMITATION OF LIABILITY
No provision of this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent or to receive dividends or to receive
notice as a stockholder in respect of meetings of stockholders for the election
of members of the Board of Directors of the Company or any other matter
whatsoever as stockholders of the Company. In the absence of affirmative action
by the Holder to purchase shares of Common Stock, no provision hereof shall give
rise to any liability of the Holder for the purchase price or as a stockholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.
ARTICLE 7
MISCELLANEOUS
7.1 GOVERNING LAW. The rights of the parties arising under this
Warrant shall be construed and enforced under the laws of the State of Florida
without giving effect to any choice of law or conflict of law rules.
7.2 NOTICES. Any notice or other communication required or permitted to
be given or delivered pursuant to this Warrant shall be in writing and shall be
deemed effective as of the date of receipt if delivered personally, by facsimile
transmission (if receipt is confirmed by the facsimile operator of the
recipient), by overnight courier service or on the date of deposit in the U.S.
mail if by registered or certified mail (return receipt requested), postage
prepaid, to the parties at the following addresses (or at such other address in
the United States of America for a party as shall be specified by like notice;
provided that notices of change of address be effective only upon receipt
thereof):
(i) to the Holder as follows:
Stephen C. Owen, Jr.
3 West 51st Street
New York, New York 10019
<PAGE> 7
(ii) to the Company as follows:
Centrack International, Inc.
21045 Commercial Trail, Suite 101
Boca Raton, FL 33486-1094
Attention: John J. Lofquist, President
7.3 SEVERABILITY. If any provision of this Warrant shall be held
invalid, such invalidity shall not affect any other provision of this Warrant
that can be given effect without the invalid provision, and to this end, the
provisions hereof are separable.
7.4 HEADINGS. The headings in this Warrant are for reference purposes
only and shall not affect in any way the meaning of interpretation of this
Warrant.
7.5 INTERNAL REFERENCES. References to an "article," "section" or a
"subsection" when used without further attribution shall refer to the particular
articles, sections or subsections of this Warrant.
7.6 AMENDMENT. This Warrant cannot be amended or modified except by a
written agreement executed by the Company and the Holder.
7.7 ASSIGNMENT. This Warrant shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns except that no party may assign or
transfer its rights or obligations under this Warrant except to the extent
explicitly permitted herein.
7.8 ENTIRE AGREEMENT. This Warrant, together with its attachments,
contains the entire understanding among the parties hereto with respect to the
subject matter hereof and supersedes all prior and contemporaneous agreements
and understandings, inducements or conditions, express or implied, oral or
written, except as herein contained.
<PAGE> 8
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in
its name by its President thereunto duly authorized.
Dated: September 29, 1999
CENTRACK INTERNATIONAL, INC.
/s/ John J. Lofquist
----------------------------------
By: John J. Lofquist, President
<PAGE> 9
EXERCISE NOTICE TRANCHE 1
The undersigned, the Holder of a Common Stock Purchase Warrant issued
by Centrack International, Inc., a Delaware corporation (the "Company"), dated
as of September 29, 1999, hereby elects to purchase thereunder shares
of Common Stock, par value $.0001 per share, of the Company covered by such
Warrant and herewith makes payment in full therefor of
and requests that the certificate(s) for such shares be
issued in the name of and delivered to , whose address is
and Social Security Number (individual) or Tax Identification
Number (entity) is _______________________________________________.
The undersigned hereby agrees to pay any transfer taxes on the transfer
of all or any portion of the Warrant or Common Stock requested herein.
Signature guaranteed:
Dated:
<PAGE> 10
EXERCISE NOTICE TRANCHE 2
The undersigned, the Holder of a Common Stock Purchase Warrant
issued by Centrack International, Inc., a Delaware corporation (the "Company"),
dated as of , 1999, hereby elects to purchase thereunder shares of
Common Stock, par value $.0001 per share, of the Company covered by such
Warrant and herewith makes payment in full therefor of and
requests that the certificate(s) for such shares be issued in the name of
and delivered to , whose address is _________________
_______________________________________ and Social Security Number (individual)
or Tax Identification Number (entity) is _____________________________________.
The undersigned hereby agrees to pay any transfer taxes on the transfer
of all or any portion of the Warrant or Common Stock requested herein.
Signature guaranteed:
Dated:
<PAGE> 1
Exhibit 10.6(d)
THIS WARRANT AND THE SECURITIES PURCHASABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND MAY NOT BE SOLD, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS
THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT COVERING
SUCH SECURITIES OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF
THESE SECURITIES (REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL), OR AN
OPINION OF THE COMPANY'S COUNSEL, STATING THAT SUCH SALE, ASSIGNMENT OR TRANSFER
IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
CENTRACK INTERNATIONAL, INC.
COMMON STOCK PURCHASE WARRANT
FOR VALUE RECEIVED, KJO Trust, a New York trust or its successors or
permitted assigns (the "Holder"), is entitled to purchase, from CENTRACK
INTERNATIONAL, INC., a Delaware corporation (the "Company"), subject to the
provisions hereof, (1) Three hundred seventy-eight thousand two hundred fifty
(378,250) shares of fully paid, validly issued and non-assessable shares
("Shares") of common stock, par value $0.0001 per share ("Common Stock"), of the
Company at an exercise price ("Exercise Price") of $1.6525 per share if this
Warrant is exercised on or before the close of business on September 29, 2001
except as otherwise provided in Section 2.8 hereof ("Tranche 1"), and, provided
that Tranche 1 is exercised in full, (2) Three hundred seventy-eight thousand
two hundred fifty (378,250) Shares of Common Stock of the Company at an Exercise
Price of $ 2.1525 per share ("Tranche 2"), (subject to adjustment as provided
below.) The right to purchase Shares under this Warrant is exercisable, in whole
or in part, as more specifically set forth below. This Warrant shall terminate
if not exercised by the close of business two (2) years from the exercise date
of Tranche 1, except as may otherwise be provided in Section 2.8 hereof.
ARTICLE 1
DEFINITIONS
For all purposes of this Warrant, unless the context otherwise
requires, the following terms have the following meanings:
1.1 "Common Stock" means the Company's authorized common stock, par
value $0.0001 per share.
1.2 "Company" means Centrack International, Inc., a corporation
organized and existing under the laws of the State of Delaware, and any
successor corporation.
1.3 "Exercise Price" means the price with respect to each Tranche
referred to above.
<PAGE> 2
1.4 "Warrant" means this Warrant and any warrants issued on or in
substitution for this Warrant including warrants issued in exchange for this
Warrant pursuant to Article 2.
1.5 "Warrant Stock" means the shares of Common Stock or other
securities acquired or to be acquired upon the exercise of this Warrant.
ARTICLE 2
GRANT AND EXERCISE OF WARRANT
2.1 GRANT AND EXERCISE. This Warrant may be exercised by the Holder, at
the Holder's election at any time prior to the Warrant's expiration under
Section 2.8 hereof.
2.2 HOLDER'S PROCEDURE. To exercise this Warrant and purchase the
Warrant Stock, the Holder shall deliver to the Company at its principal office:
(a) a written notice, in substantially the form of the
Exercise Notice appearing at the end of this Warrant, of the Holder's election
to exercise this Warrant;
(b) this Warrant; and
(c) a check payable to the Company in the amount of the
Exercise Price per share of Warrant Stock.
2.3 COMPANY'S PROCEDURE. The Company shall as promptly as practicable
cause the Company's transfer agent to execute and deliver one or more
certificates representing the aggregate number of shares of Warrant Stock to
which the Holder is entitled.
2.4 NAME AND EFFECTIVE DATE. The stock certificate(s) so delivered
shall be issued in the name of the Holder or such other name as shall be
designated in the Exercise Notice specified in Section 2.2. Such certificate(s)
shall be deemed to have been issued and the Holder or (subject to federal and
state securities law and any other restrictions on transfer) any other person so
designated to be named therein shall be deemed for all purposes to have become a
holder of record of such shares as of the date the Company actually receives the
notice specified in Section 2.2.
2.5 EXPENSES. The Company shall pay all expenses, taxes, and other
charges payable in connection with the preparation, issue, and delivery of such
stock certificate(s), except that, in case such stock certificate(s) shall be
registered in a name or names other than the name of the Holder of this Warrant,
stock transfer taxes that are payable upon the issuance of such stock
certificate(s) shall be paid by the Holder hereof.
2.6 LEGAL REQUIREMENTS. The Warrant Stock issued upon the exercise of
this Warrant shall be validly issued, fully paid, and nonassessable.
2.7 REGISTRATION. The Company will keep at its principal office a
register that will
<PAGE> 3
provide for the registration and transfer of the Warrant.
2.8 EXPIRATION. The right to exercise Tranche 1 will expire at the
close of business on September 29, 2001 or the first business day thereafter if
such date is not a business day, or such other date as may be established by
mutual agreement of the parties hereto, and, provided that Tranche 1 is
exercised in full, the right to exercise Tranche 2 will expire at the close of
business two (2) years from the exercise date of Tranche 1, or the first
business day thereafter if such date is not a business day, or such other date
as may be established by mutual agreement of the parties hereto.
2.9 INVESTMENT INTENT. Neither the Company nor any person acting on its
behalf has offered this Warrant to Holder by means of any general solicitation
or general advertising. Holder is acquiring this Warrant and the Warrant Stock
for its own account and not on behalf of other persons. The securities are being
acquired with the intent of holding them for investment and without the intent
of participating, directly or indirectly, in a distribution thereof. Holder
understands that this investment involves a high degree of risk.
ARTICLE 3
TRANSFER
3.1. SECURITIES LAWS. Neither this Warrant nor the Warrant Stock shall
be transferable unless:
(a) (i) either a registration statement under the
Securities Act of 1933, as amended (the "Securities
Act"), is in effect covering this Warrant or the
Warrant Stock, as the case may be, or the Company has
received an opinion from the Company's counsel to the
effect that such registration is not required, or the
Holder has furnished to the Company an opinion of the
Holder's counsel, which counsel shall be reasonably
satisfactory to the Company, to the effect that such
registration is not required;
(ii) the transfer complies with any applicable state
securities laws; and
(b) Holder consents to a legend being placed on
certificates for the Warrant
Stock stating that the securities have not been registered under the Securities
Act and referring to such restrictions on transferability and sale.
(c) The Holder is entitled to the benefits of a
Registration Rights Agreement, dated as of September
29, 1999, relating to the Warrant Stock.
3.2. PROCEDURE.
(a) The Holder of this Warrant, or of any warrant substituted
therefor pursuant to the provisions of this Section 3.3, may, subject to the
limitations set forth in Section 3.1, in person or by duly authorized attorney,
surrender the same for exchange at the principal office of the
<PAGE> 4
Company and, within a reasonable time thereafter and without expense (other than
transfer taxes, if any), receive in exchange therefor one or more duly executed
warrants each evidencing the right to receive one share of Common Stock or such
other number of shares as may be designated by the Holder at the time of
surrender.
The Company and any agent of the Company may treat the person in whose
name a Warrant is registered as the owner of the Warrant for all purposes
hereunder and neither the Company nor such agent shall be affected by notice to
the contrary. The Company covenants and agrees to take and cause to be taken all
action necessary to effect such registrations, transfers and exchanges.
(b) Subject to Section 3.1, the Holder may transfer the
Warrant on the books of the Company by surrendering to the Company:
(i) the Warrant;
(ii) a written assignment of the Warrant, in
substantially the form of the Assignment appearing at
the end of this Warrant, naming the assignee and duly
executed by the Holder; and
(iii) funds sufficient to pay any stock transfer
taxes payable upon the making of such transfer.
The Company shall thereupon execute and deliver a new Warrant in the
name of the assignee specified in such instrument of assignment. Upon issuance
of the new Warrant or Warrants, the Warrant surrendered for transfer shall be
canceled by the Company.
3.3. EXPENSES. The Company shall pay all expenses, taxes (other than
transfer taxes), and other charges payable in connection with the preparation,
issue and delivery of any new Warrant under this Article 3.
ARTICLE 4
ADJUSTMENTS
4.1 STOCK SPLITS, STOCK DIVIDENDS AND REVERSE STOCK SPLITS. If at any
time the Company shall subdivide (by reclassification, by the issuance of a
Common Stock dividend on Common Stock, or otherwise) its outstanding shares of
Common Stock into a greater number, the number of shares of Common Stock that
may be purchased hereunder shall be increased proportionately and the Exercise
Price per share of Warrant Stock shall be decreased proportionately as of the
effective date of such action. The effective date of a stock dividend shall be
the date on which the dividend is declared. Issuance of a Common Stock dividend
shall be treated as a subdivision of the whole number of shares of Common Stock
outstanding immediately before the record date for such dividend into a number
of shares equal to such whole number of shares so outstanding plus the number of
shares issued as a stock dividend. If at any time the Company shall combine (by
reclassification or otherwise) its outstanding number of shares of Common Stock
into a lesser
<PAGE> 5
number, the number of shares of Warrant Stock that may be purchased hereunder
shall be reduced proportionately and the Exercise Price per share of Warrant
Stock shall be increased proportionately as of the effective date of such
action.
4.2 REORGANIZATION AND RECLASSIFICATION. In case of any capital
reorganization or any reclassification of the capital stock of the Company or
while the Warrant remains outstanding, the Holder of the Warrant shall
thereafter be entitled to purchase pursuant to the Warrant (in lieu of the kind
and number of shares of Warrant Stock that the Holder would have been entitled
to purchase or acquire immediately before such reorganization or
reclassification) the kind and number of shares of stock of any class or classes
or other securities or property for or into which such shares of Common Stock
would have been exchanged, converted or reclassified if the Warrant Stock had
been purchased immediately before such reorganization, reclassification at a
total price not to exceed that payable upon the exercise of the unexercised
portion of this Warrant. In case of any such reorganization, reclassification,
appropriate provision (as determined by resolution of the Board of Directors of
the Company) shall be made with respect to the rights and interests thereafter
of the Holder of the Warrant, to the end that all the provisions of the Warrant
(including adjustment provisions) shall thereafter be applicable, as nearly as
reasonably practicable, in relation to such stock or other securities or
property.
4.3 STATEMENT OF ADJUSTMENT OF WARRANT STOCK. Whenever the number or
kind of shares comprising Warrant Stock or the Exercise Price is adjusted
pursuant to this Article 4, the Company shall promptly give notice to all
Holders, stating that such an adjustment has been effected and setting forth the
number and kind of shares purchasable and the amount of the then-current
Exercise Price, and stating in reasonable detail the facts requiring such
adjustment and the calculation of such adjustment.
4.4 NO OTHER ADJUSTMENTS. No adjustments in the number or kind or price
of shares constituting Warrant Stock shall be made except as provided in this
Article 4.
ARTICLE 5
COVENANTS OF THE COMPANY
The Company covenants and agrees that:
5.1 RESERVATION OF SHARES. At all times, the Company will reserve and
set apart and have, free from pre-emptive rights, a sufficient number of shares
of authorized but unissued Common Stock or other securities, if applicable, to
enable it at any time to fulfill all of its obligations hereunder.
5.2 ADJUSTMENT OF PAR VALUE. Before taking any action that would cause
an adjustment reducing the Exercise Price per share below the then current par
value of the shares of Warrant Stock issuable upon exercise of the Warrant, the
Company will take any corporate action that may be necessary in order that the
Company may validly and legally issue fully paid and nonassessable shares of
such Warrant Stock at such adjusted price.
<PAGE> 6
ARTICLE 6
LIMITATION OF LIABILITY
No provision of this Warrant shall be construed as conferring upon the
Holder hereof the right to vote or to consent or to receive dividends or to
receive notice as a stockholder in respect of meetings of stockholders for the
election of members of the Board of Directors of the Company or any other matter
whatsoever as stockholders of the Company. In the absence of affirmative action
by the Holder to purchase shares of Common Stock, no provision hereof shall give
rise to any liability of the Holder for the purchase price or as a stockholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.
ARTICLE 7
MISCELLANEOUS
7.1 GOVERNING LAW. The rights of the parties arising under this Warrant
shall be construed and enforced under the laws of the State of Florida without
giving effect to any choice of law or conflict of law rules.
7.2 NOTICES. Any notice or other communication required or permitted to
be given or delivered pursuant to this Warrant shall be in writing and shall be
deemed effective as of the date of receipt if delivered personally, by facsimile
transmission (if receipt is confirmed by the facsimile operator of the
recipient), by overnight courier service or on the date of deposit in the U.S.
mail if by registered or certified mail (return receipt requested), postage
prepaid, to the parties at the following addresses (or at such other address in
the United States of America for a party as shall be specified by like notice;
provided that notices of change of address be effective only upon receipt
thereof):
(i) to the Holder as follows:
KJO Trust
c/o Stephen C. Owen, Jr.
3 West 51st Street
New York, New York 10019
(ii) to the Company as follows:
Centrack International, Inc.
21045 Commercial Trail, Suite 101
Boca Raton, FL 33486-1094
Attention: John J. Lofquist, President
7.3 SEVERABILITY. If any provision of this Warrant shall be held
invalid, such invalidity
<PAGE> 7
shall not affect any other provision of this Warrant that can be given effect
without the invalid provision, and to this end, the provisions hereof are
separable.
7.4 HEADINGS. The headings in this Warrant are for reference purposes
only and shall not affect in any way the meaning of interpretation of this
Warrant.
7.5 INTERNAL REFERENCES. References to an "article," "section" or a
"subsection" when used without further attribution shall refer to the particular
articles, sections or subsections of this Warrant.
7.6 AMENDMENT. This Warrant cannot be amended or modified except by a
written agreement executed by the Company and the Holder.
7.7 ASSIGNMENT. This Warrant shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns except that no party may assign or
transfer its rights or obligations under this Warrant except to the extent
explicitly permitted herein.
7.8 ENTIRE AGREEMENT. This Warrant, together with its attachments,
contains the entire understanding among the parties hereto with respect to the
subject matter hereof and supersedes all prior and contemporaneous agreements
and understandings, inducements or conditions, express or implied, oral or
written, except as herein contained.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in
its name by its President thereunto duly authorized.
Dated: September 29, 1999
CENTRACK INTERNATIONAL, INC.
/s/ John J. Lofquist
-------------------------
By: John J. Lofquist, President
<PAGE> 8
EXERCISE NOTICE TRANCHE 1
The undersigned, the Holder of a Common Stock Purchase Warrant issued
by Centrack International, Inc., a Delaware corporation (the "Company"), dated
as of September 29, 1999, hereby elects to purchase thereunder shares of
Common Stock, par value $.0001 per share, of the Company covered by such Warrant
and herewith makes payment in full therefor of and requests that the
certificate(s) for such shares be issued in the name of and delivered to
, whose address is and Social Security Number (individual) or Tax Identification
Number (entity) is ____________________________________________.
The undersigned hereby agrees to pay any transfer taxes on the transfer
of all or any portion of the Warrant or Common Stock requested herein.
Signature guaranteed:
Dated:
<PAGE> 9
EXERCISE NOTICE TRANCHE 2
The undersigned, the Holder of a Common Stock Purchase Warrant
issued by Centrack International, Inc., a Delaware corporation (the "Company"),
dated as of , 1999, hereby elects to purchase thereunder
shares of Common Stock, par value $.0001 per share, of the Company
covered by such Warrant and herewith makes payment in full therefor of
and requests that the certificate(s) for such shares be issued in the
name of and delivered to , whose address is_____________
________________________________________and Social Security Number (individual)
or Tax Identification Number (entity) is ______________________________________.
The undersigned hereby agrees to pay any transfer taxes on the transfer
of all or any portion of the Warrant or Common Stock requested herein.
Signature guaranteed:
Dated:
<PAGE> 10
ASSIGNMENT
FOR VALUED RECEIVED, the undersigned hereby sells, assigns and
transfers unto the rights represented by the foregoing Common
Stock Purchase Warrant of Centrack International, Inc., and appoints ___________
_________________________ its attorney to transfer said rights on the books of
said corporation, with full power of substitution in the premises.
Signature guaranteed:
Dated:
<PAGE> 1
Exhibit 10.7(a)
PLEDGE AND ESCROW AGREEMENT
THIS AGREEMENT, made and entered into this 17th day of May, 1999, by
and between JOHN LOFQUIST ("Pledgor") and NOFAL KAHOOK ("Pledgee"), and BURT E.
EISENBERG, P.A. ("Escrow Agent").
W I T N E S S E T H:
WHEREAS, Pledgor has borrowed from Pledgee the sum of $50,000.00 and
has agreed to pledge One Million (1,000,000) shares of common stock (the
"Pledged Shares") of Centrack International, Inc., a Delaware corporation; and
WHEREAS, Pledgor has executed a Promissory Note ("Note") in favor of
Pledgee, attached hereto as Exhibit "A"; and
WHEREAS, to secure the payment of said Promissory Note, Pledgor hereby
grants Pledgee a security interest in the Pledged Shares; and
WHEREAS, Escrow Agent has agreed to hold the Pledged Shares under the
terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises, covenants and
agreements hereinafter set forth, the parties mutually agree as follows:
1. SECURITY INTEREST. Pledgor hereby grants to Pledgee a first lien
security interest, superior to all other liens and encumbrances, in and to the
Pledged Shares. A copy of an Assignment representing such Pledged Shares,
endorsed in blank, and a copy of the Certificate representing such Pledged
Shares are attached as Exhibit "B." Said Pledged Shares and Assignment shall be
held by Escrow Agent as collateral for the indebtedness owed by Pledgor to
Pledgee pursuant to the Note.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS. Pledgor hereby
represents, warrants and covenants that, except for the security interest
granted hereunder, Pledgor is the legal and equitable owner of the Pledged
Shares and holds same free and clear of all liens, charges, encumbrances and
security interest of every kind and nature, and that Pledgor will make no
assignment, pledge, mortgage, hypothecation or transfer of the Pledged Shares;
that Pledgor has good right and legal authority to pledge the Pledged Shares in
the manner hereby done or contemplated and will defend Pledgor's title to such
Pledged Shares against the claim of all persons whomsoever; that no consent or
approval of any governmental body or regulatory authority, or of any securities
exchange, is necessary to the validity of the pledges effected hereby, except
for any consents or approvals which have been obtained; that the pledge of the
Pledged Shares is effective to vest in Pledgee the rights of the Pledgee in such
Pledged Shares set forth herein; and that the Pledged Shares have been duly and
validly authorized and issued and are fully paid and nonassessable.
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<PAGE> 2
3. RIGHT TO VOTE. Except as otherwise provided herein, during the term
of this Agreement and so long as Pledgor is not in default in the performance of
any of the terms of this Agreement or in the payment of principal or interest
under the Note, the Pledgor shall be entitled to all rights of ownership,
including, but not limited to, the right to vote the Pledged Shares on all
corporate questions.
4. ADJUSTMENTS. In the event that, during the term of this Agreement,
any stock dividend shall be declared on or with respect to any of the Pledged
Shares, or there is a reclassifica tion, readjustment, merger, consolidation,
stock split or any other change is made in the capital structure of the
corporation which has issued the Pledged Shares or any successor thereto, all
new, substituted and additional shares or other securities issued by reason of
such a change shall be delivered and held by Escrow Agent under the terms of
this Agreement in the same manner as the Pledged Shares.
5. DEFAULT. In the event of default by Pledgor under the Note, in
addition to any right or remedy which it may have hereunder, the Pledgee shall
have all of the rights and remedies of a secured party under Article 9 of the
Uniform Commercial Code as it is now or hereafter in effect in the State of
Florida (Chapter 679 Florida Statutes), including without limitation the right
to sell or otherwise dispose of all or any portion of the Pledged Shares. Upon
the occurrence of a default under the Note, the Pledgee shall have the right to
offer for sale, and to sell, the Pledged Shares at any private or public sale;
provided, however, that the Pledgee shall give to the Pledgor at least ten (10)
days' notice of the time, date and place of any such private or public sale,
which provision for notice of the Pledgor hereby expressly agrees is
commercially reasonable. Furthermore, the Pledgor hereby expressly agrees that
the Pledgee may (i) sell all or any portion of the Pledged Shares at any private
or public sale for cash, upon credit, or for other property, for immediate or
future delivery, and for such price or prices and on such terms as the Pledgee
in its sole discretion shall deem appropriate, (ii) bid on and purchase the
Pledged Shares at any private or public sale, and (iii) hold any of the Pledged
Shares purchased by the Pledgee at any private or public sale in its own right,
free and clear of any and all claims of the Pledgor. The Pledgee may, from time
to time, sell all or any part of the Pledged Shares. The Pledgor hereby appoints
Pledgee as its attorney-in-fact to execute such documents and take such action
as may be necessary to accomplish the provisions of this Agreement, including,
without limiting the generality of the foregoing, the right to ask for, demand,
sue for, collect, receive and give acquittance for any and all monies due or to
become due with respect to or in connection with any of the Pledged Shares, to
endorse checks, drafts, orders and other instruments for the payment of money
representing any interest or dividend or other distribution with respect to or
in connection with the Pledged Shares or any part thereof and to give full
discharge for the same, to settle, compromise, prosecute or defend any action,
claim or proceeding with respect thereto and to sell, assign, endorse, pledge,
transfer and make any agreement respecting or otherwise deal with the same. Such
appointment is irrevocable and coupled with an interest.
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<PAGE> 3
6. ESCROW. Upon execution of this Agreement, Pledgor shall deposit with
Escrow Agent the Pledged Shares, along with the aforesaid Assignment (all of
which items shall hereinafter be referred to as the "Pledged Documents") to be
held in escrow for future delivery as follows:
a. Escrow Agent shall deliver the Pledged Documents to Pledgee
within ten (10) days after receiving an affidavit signed by Pledgee stating
that:
(i) Pledgor is in default under the Note and all periods of
time within which to cure such default have expired;
(ii) Pledgee is accelerating the entire unpaid balance due
under the Note; and
(iii) Pledgee demands delivery of the Pledged Documents.
Pledgee shall simultaneously furnish Pledgor with a copy of
said affidavit. Upon such delivery of the Pledged Documents, Escrow Agent's
duties hereunder shall terminate.
b. In the event Escrow Agent has not delivered the Pledged
Documents pursuant to subparagraph a above, then Escrow Agent shall deliver the
Pledged Documents to Pledgor within ten (10) days after receipt of the original
of the Note marked "paid in full," accompanied by instructions from Pledgor
indicating that said Note has been paid in full and the Pledged Documents shall
be delivered to Pledgor at the address specified therein. Upon such delivery of
the Pledged Documents, Escrow Agent's duties hereunder shall terminate. Pledgee
agrees to deliver the Note to Pledgor marked "paid in full," immediately upon
satisfaction thereof.
c. Upon execution of this Agreement, Pledgor shall deliver to
the Escrow Agent Stock Certificate Number 030121, representing Ten Million Six
Hundred Sixty Six Thousand Six Hundred Ten (10,666,610) shares of common stock
of Centrack International, Inc. Pledgor shall further execute an
endorsement/assignment of said Certificate appointing the Escrow Agent as
Attorney to effectuate division and reissuance of same as follows:
1. One Million (1,000,000) shares to Pledgor,
same to be held in escrow by the Escrow
Agent pursuant to the terms of this
Agreement.
2. Thirty Thousand (30,000) shares to the
Pledgee as consideration for the loan being
extended pursuant to the Promissory Note
attached hereto.
3. Nine Million Six Hundred Sixteen Thousand
Six Hundred Ten (9,636,610) shares which
shall be forwarded to Pledgor upon receipt
by the Escrow Agent.
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<PAGE> 4
Nothing hereinabove withstanding to the contrary, until such
time as the above division of the stock is accomplished, the total number of
shares shall constitute collateral for payment of the obligations pursuant to
this Agreement. Pledgor and Pledgee hereby acknowledge that the Escrow Agent is
making no representations as to right or legality pertaining to the above
division of the stock or its sale in the event of the default, and Pledgor and
Pledgee each agree that Escrow Agent shall have no liability resulting from the
inability to accomplish the terms of this Pledge Agreement due to the inability
to divide, transfer or sell the stock. Pledgor and Pledgee each agree to
indemnify and hold Escrow Agent harmless in this regard and as otherwise
provided for in this Agreement.
7. DISPUTE. It is specifically understood and agreed that should any
dispute arise between the parties hereto concerning this Agreement or its
construction, or for any other reason, the Escrow Agent, in its sole discretion,
shall have the right to deposit the Pledged Documents held by it pursuant to
this Escrow Agreement and any documents relating thereto that may have been
delivered to the Escrow Agent, with the Clerk of the Circuit Court of Broward
County, Florida, and notify all parties concerned, and whereupon, all liability
hereunder on the part of the Escrow Agent shall fully cease except to the extent
of accounting for the Pledged Documents and any other documents that may have
been delivered to it.
8. INTERPLEADER. In the event the Escrow Agent places the Pledged
Documents that have actually been delivered to Escrow Agent in the registry of
the Circuit Court in and for Broward County, Florida, and files an action of
interpleader naming Pledgor and Pledgee, and other necessary parties, Escrow
Agent shall be released and relieved from any and all further obligations and
liabilities hereunder or in connection herewith. Pledgor and Pledgee hereby,
jointly and severally, indemnify and hold Escrow Agent harmless from any damages
or losses arising hereunder or in connection herewith, including, but not
limited to, all costs and expenses incurred by Escrow Agent in connection with
the filing of such action and reasonable attorneys' fees and costs for Escrow
Agent's attorney(s) through and including all appeals.
9. NATURE OF ESCROW AGENT'S DUTIES. It is agreed that the duties of
Escrow Agent are only such as are herein specifically provided and are purely
ministerial in nature. Hence, Escrow Agent shall not be held liable for any
matter or thing except for Escrow Agent's gross negligence or willful
misconduct. Pledgor and Pledgee shall at all times hereafter, jointly and
severally indemnify Escrow Agent and hold Escrow Agent harmless from any claim
asserted against it and from any damages, costs, expenses, liability and/or
losses sustained by Escrow Agent (except for Escrow Agent's gross negligence or
willful misconduct), including, but not limited to, reasonable attorneys' fees
and costs for Escrow Agent's attorney(s) through and including all appeals and
whether or not litigation is instituted. The obligations and duties of the
Escrow Agent are confined to those specifically enumerated in this Agreement.
The Escrow Agent shall not be subject to nor be under any obligation to
ascertain or construe the terms and conditions of any instrument whether or not
now or hereafter deposited with or delivered to the Escrow Agent or referred to
in this Agreement. Nor shall the Escrow Agent be obliged to inquire as to the
form, execution and sufficiency or validity
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<PAGE> 5
of any instruments, or to inquire as to the identity, authority or rights of any
person executing or delivering the same.
10. RETENTION OF LEGAL COUNSEL. It is agreed that Escrow Agent shall
have full discretion as to whom it may retain as legal counsel to protect its
interests (including retaining itself as a law firm) and same shall not affect
or in any way prejudice or limit Escrow Agent's entitlement to reasonable
attorneys' fees for the services of such attorneys as set forth in this Escrow
Agreement.
11. VENUE. It is recognized that this Escrow Agreement shall be deemed
to have been entered into by the parties hereto in Broward County, Florida, and
that the property which is the subject of this Escrow Agreement is located in
Broward County, Florida. Therefore, it is agreed that venue with respect to any
matter arising herefrom shall only lie in Broward County, Florida, except to the
extent, and only to the extent, that this provision with respect to venue is
deemed in contravention of any application law.
12. AMBIGUITY; CONFLICTING INSTRUCTIONS. In the event the Escrow Agent
shall be uncertain as to its duties or rights hereunder or shall receive
instructions, claims or demands from any of the parties hereto or from third
persons with respect to the Pledged Documents held hereunder, which in its sole
opinion, are in conflict with any provision of this Agreement, it shall be
entitled to refrain from taking any action until it shall be directed otherwise
in writing by all the parties hereto and said third persons, if any, or by a
final order or judgment of a court of competent jurisdiction.
13 NOTICES. Whenever any such notice is required or permitted
hereunder, such notice shall be in writing and sent certified mail, postage
prepaid, return receipt requested, or by expedited overnight delivery service,
or by delivery in person to the persons at the addresses as set forth below.
Notice deposited in the mail or expedited overnight delivery, in the manner
herein described, shall be effective upon deposit. Notice given in person shall
be effective only when in writing and received by the party to be notified.
Notices shall be delivered to the parties at the addresses set forth below,
unless a party shall give notice that some other address shall be used:
As to Pledgor: John Lofquist
Centrack International, Inc.
21045 Commercial Trail
Boca Raton, FL 33486
As to Pledgee: Nofal Kahook
9941 SW 4th Street
Plantation, FL 33324
As to Escrow Agent: Burt E. Eisenberg, Esq.
5100 Tamiami Trail N.
Suite 123
Naples, FL 34013
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<PAGE> 6
With a copy to: Michael Caruso
Caruso & Caruso
6971 N. Federal Highway
Suite 402
Boca Raton, FL 33487
15. MISCELLANEOUS.
a. BENEFIT OF AGREEMENT. This Agreement shall be binding upon
the parties hereto and their heirs, successors, assigns and personal or legal
representatives.
b. MODIFICATION. The Escrow Agent shall not be bound by any
modification, cancellation or rescission of this Agreement unless in writing and
signed by the parties hereto. In no event, however, shall any modification of
this Agreement, which shall affect the rights or duties of the Escrow Agent, be
binding upon Escrow Agent unless it shall have given its prior written consent.
c. ATTORNEYS' FEES. In the event Pledgor or Pledgee shall seek
to enforce this Agreement, whether or not through litigation, the prevailing
party shall be entitled to receive reasonable attorneys' fees and all costs
incurred in connection with such enforcement, including fees and costs of
appeal.
d. FURTHER COOPERATION. From and after the date of this
Agreement, each of the parties hereto agrees to execute whatever additional
documentation or instruments as are necessary to carry out the intent and
purposes of this Agreement.
e. WAIVER. No indulgences extended by any party hereto or any
other party shall be construed as a waiver of any breach on the part of such
other party, nor shall any waiver of one breach be construed as a waiver of any
rights or remedies with respect to any subsequent breach.
f. CONSTRUCTION. It is the intention of the parties that the
laws of the State of Florida shall govern the validity of this Agreement, the
construction of its terms, and the interpretation of the rights and duties of
the parties. The parties agree and acknowledge that each party has reviewed and
revised this Agreement and that the normal rule of construction to the effect
that any ambiguities are to be resolved against the drafting parties shall not
be employed in the interpretation of this Agreement or any amendment or exhibits
thereto.
g. TRUTH OF RECITALS. The recitals and statements contained on
page 1 of this Agreement are true and correct and are hereby incorporated into
this Agreement.
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<PAGE> 7
h. ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement and understanding of the parties on the subject matter hereof and
supersedes all prior agreements and understandings relating thereto.
i. SEVERABILITY. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof and this Agreement shall be construed in all respects as if such invalid
or unenforceable provision was omitted.
j. GENDER. Wherever the context shall so require, all words
herein in any gender shall be deemed to include the masculine, feminine or
neuter gender; all singular words shall include the plural and all plural shall
include the singular.
k. HEADINGS. The headings used in this Agreement are used for
reference purposes only and are not to be deemed controlling with respect to the
contents thereof.
l. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, and each such counterpart shall for all purposes be deemed to
be an original.
m. INCORPORATION BY REFERENCE. The Exhibits referred to in
this Agreement are hereby incorporated into this Agreement by reference.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
Witnesses: PLEDGOR:
/s/ John Lofquist (SEAL)
- ------------------------------ -------------------------------------
JOHN LOFQUIST
- ------------------------------
PLEDGEE:
/s/ Nofal Kahook (SEAL)
- ------------------------------ -------------------------------------
NOFAL KAHOOK
- ------------------------------
ESCROW AGENT:
BURT E. EISENBERG, P.A.
By: /s/ Burt E. Eisenberg
-------------------------------------
BURT E. EISENBERG, ESQUIRE
Page 7 of 8
<PAGE> 1
Exhibit 10.7(b)
PLEDGE AND ESCROW AGREEMENT
THIS AGREEMENT, made and entered into this 17th day of September, 1999,
by and between JOHN LOFQUIST ("Pledgor") and NOFAL KAHOOK ("Pledgee"), and BURT
E. EISENBERG, P.A. ("Escrow Agent").
W I T N E S S E T H:
WHEREAS, Pledgor has borrowed from Pledgee the sum of $50,000.00 and
has agreed to pledge One Million (1,000,000) shares of common stock (the
"Pledged Shares") of Centrack International, Inc., a Delaware corporation; and
WHEREAS, Pledgor has executed a Promissory Note ("Note") in the amount
of $50,000.00 in favor of Pledgee, attached hereto as Exhibit "A"; and
WHEREAS, to secure the payment of said Promissory Note, Pledgor hereby
grants Pledgee a security interest in the Pledged Shares; and
WHEREAS, Escrow Agent has agreed to hold the Pledged Shares under the
terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises, covenants and
agreements hereinafter set forth, the parties mutually agree as follows:
1. SECURITY INTEREST. Pledgor hereby grants to Pledgee a first lien
security interest, superior to all other liens and encumbrances, in and to the
Pledged Shares. A Copy of the Assign ment representing such Pledged Shares,
endorsed in blank, and copies of the Certificates represent ing such Pledged
Shares are attached as Exhibit "B." Said Pledged Shares and Assignment shall be
held by Escrow Agent as collateral for the indebtedness owed by Pledgor to
Pledgee pursuant to the Note.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS. Pledgor hereby
represents, warrants and covenants that, except for the security interest
granted hereunder, Pledgor is the legal and equitable owner of the Pledged
Shares and holds same free and clear of all liens, charges, encumbrances and
security interest of every kind and nature, and that Pledgor will make no
assignment, pledge, mortgage, hypothecation or transfer of the Pledged Shares;
that Pledgor has good right and legal authority to pledge the Pledged Shares in
the manner hereby done or contemplated and will defend Pledgor's title to such
Pledged Shares against the claim of all persons whomsoever; that no consent or
approval of any governmental body or regulatory authority, or of any securities
exchange, is necessary to the validity of the pledges effected hereby, except
for any consents or approvals which have been obtained; that the pledge of the
Pledged Shares is effective to vest in Pledgee the rights of the Pledgee in such
Pledged Shares set forth herein; and that the Pledged Shares have been duly and
validly authorized and issued and are fully paid and nonassessable.
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<PAGE> 2
3. RIGHT TO VOTE. Except as otherwise provided herein, during the term
of this Agreement and so long as Pledgor is not in default in the performance of
any of the terms of this Agreement or in the payment of principal or interest
under the Note, the Pledgor shall be entitled to all rights of ownership,
including, but not limited to, the right to vote the Pledged Shares on all
corporate questions.
4. ADJUSTMENTS. In the event that, during the term of this Agreement,
any stock dividend shall be declared on or with respect to any of the Pledged
Shares, or there is a reclassifica tion, readjustment, merger, consolidation,
stock split or any other change is made in the capital structure of the
corporation which has issued the Pledged Shares or any successor thereto, all
new, substituted and additional shares or other securities issued by reason of
such a change shall be delivered and held by Escrow Agent under the terms of
this Agreement in the same manner as the Pledged Shares.
5. DEFAULT. In the event of default by Pledgor under the Note, in
addition to any right or remedy which it may have hereunder, the Pledgor shall
forfeit all interest in the Pledged Shares to the Pledgee and the Escrow Agent,
after the expiration of any grace period and following any required notices,
issue the Pledged Shares to the Pledgee.
If for any reason such form of transfer is deemed in violation of any
law, the Pledgee shall have all of the following rights and remedies of a
secured party under Article 9 of the Uniform Commercial Code as it is now or
hereafter in effect in the State of Florida (Chapter 679 Florida Statutes),
including without limitation the right to sell or otherwise dispose of all or
any portion of the Pledged Shares. Upon the occurrence of a default under the
Note, the Pledgee shall have the right to offer for sale, and to sell, the
Pledged Shares at any private or public sale; provided, however, that the
Pledgee shall give to the Pledgor at least ten (10) days' notice of the time,
date and place of any such private or public sale, which provision for notice of
the Pledgor hereby expressly agrees is commercially reasonable. Furthermore, the
Pledgor hereby expressly agrees that the Pledgee may (i) sell all or any portion
of the Pledged Shares at any private or public sale for cash, upon credit, or
for other property, for immediate or future delivery, and for such price or
prices and on such terms as the Pledgee in its sole discretion shall deem
appropriate, (ii) bid on and purchase the Pledged Shares at any private or
public sale, and (iii) hold any of the Pledged Shares purchased by the Pledgee
at any private or public sale in its own right, free and clear of any and all
claims of the Pledgor. The Pledgee may, from time to time, sell all or any part
of the Pledged Shares. The Pledgor hereby appoints Pledgee as its
attorney-in-fact to execute such documents and take such action as may be
necessary to accomplish the provisions of this Agreement, including, without
limiting the generality of the foregoing, the right to ask for, demand, sue for,
collect, receive and give acquittance for any and all monies due or to become
due with respect to or in connection with any of the Pledged Shares, to endorse
checks, drafts, orders and other instruments for the payment of money
representing any interest or dividend or other distribution with respect to or
in connection with the Pledged Shares or any part thereof and to give full
discharge for the same, to settle, compromise, prosecute or defend any action,
claim or proceeding with respect thereto and to sell,
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<PAGE> 3
assign, endorse, pledge, transfer and make any agreement respecting or otherwise
deal with the same. Such appointment is irrevocable and coupled with an
interest.
6. ESCROW. Upon execution of this Agreement, Pledgor shall deposit with
Escrow Agent the Pledged Shares, along with the aforesaid Assignment (all of
which items shall hereinafter be referred to as the "Pledged Documents") to be
held in escrow for future delivery as follows:
a. Escrow Agent shall deliver the Pledged Documents to Pledgee
within ten (10) days after receiving an affidavit signed by Pledgee stating
that:
(i) Pledgor is in default under the Note and all periods of
time within which to cure such default have expired;
(ii) Pledgee is accelerating the entire unpaid balance due
under the Note; and
(iii) Pledgee demands delivery of the Pledged Documents.
Pledgee shall simultaneously furnish Pledgor with a copy of
said affidavit. Upon such delivery of the Pledged Documents, Escrow Agent's
duties hereunder shall terminate.
b. In the event Escrow Agent has not delivered the Pledged
Documents pursuant to subparagraph a above, then Escrow Agent shall deliver the
Pledged Documents to Pledgor within ten (10) days after receipt of the original
of the Note marked "paid in full," accompanied by instructions from Pledgor
indicating that said Note has been paid in full and the Pledged Documents shall
be delivered to Pledgor at the address specified therein. Upon such delivery of
the Pledged Documents, Escrow Agent's duties hereunder shall terminate. Pledgee
agrees to deliver the Note to Pledgor marked "paid in full," immediately upon
satisfaction thereof.
c. Upon execution of this Agreement, Pledgor shall deliver to
the Escrow Agent Stock Certificate Number ___________, representing ____________
__________________________________ shares of common stock of Centrack
International, Inc. Pledgor shall further execute an endorsement/assignment of
said Certificate appointing the Escrow Agent as Attorney to effectuate division
and reissuance of same as follows:
1. Sixty Thousand (60,000) shares to Pledgor,
same to be held in escrow by the Escrow
Agent pursuant to the terms of this
Agreement.
2. One Million (1,000,000) shares to the
Pledgee as consideration for the loan being
extended pursuant to the $50,000.00
Promissory Note attached hereto.
3. ________________________________shares which
shall be forwarded to Pledgor upon receipt
by the Escrow Agent.
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<PAGE> 4
Nothing hereinabove withstanding to the contrary, until such
time as the above division of the stock is accomplished, the total number of
shares shall constitute collateral for payment of the obligations pursuant to
this Agreement. Pledgor and Pledgee hereby acknowledge that the Escrow Agent is
making no representations as to right or legality pertaining to the above
division of the stock or its sale in the event of the default, and Pledgor and
Pledgee each agree that Escrow Agent shall have no liability resulting from the
inability to accomplish the terms of this Pledge Agreement due to the inability
to divide, transfer or sell the stock. Pledgor and Pledgee each agree to
indemnify and hold Escrow Agent harmless in this regard and as otherwise
provided for in this Agreement.
7. DISPUTE. It is specifically understood and agreed that should any
dispute arise between the parties hereto concerning this Agreement or its
construction, or for any other reason, the Escrow Agent, in its sole discretion,
shall have the right to deposit the Pledged Documents held by it pursuant to
this Escrow Agreement and any documents relating thereto that may have been
delivered to the Escrow Agent, with the Clerk of the Circuit Court of Broward
County, Florida, and notify all parties concerned, and whereupon, all liability
hereunder on the part of the Escrow Agent shall fully cease except to the extent
of accounting for the Pledged Documents and any other documents that may have
been delivered to it.
8. INTERPLEADER. In the event the Escrow Agent places the Pledged
Documents that have actually been delivered to Escrow Agent in the registry of
the Circuit Court in and for Broward County, Florida, and files an action of
interpleader naming Pledgor and Pledgee, and other necessary parties, Escrow
Agent shall be released and relieved from any and all further obligations and
liabilities hereunder or in connection herewith. Pledgor and Pledgee hereby,
jointly and severally, indemnify and hold Escrow Agent harmless from any damages
or losses arising hereunder or in connection herewith, including, but not
limited to, all costs and expenses incurred by Escrow Agent in connection with
the filing of such action and reasonable attorneys' fees and costs for Escrow
Agent's attorney(s) through and including all appeals.
9. NATURE OF ESCROW AGENT'S DUTIES. It is agreed that the duties of
Escrow Agent are only such as are herein specifically provided and are purely
ministerial in nature. Hence, Escrow Agent shall not be held liable for any
matter or thing except for Escrow Agent's gross negligence or willful
misconduct. Pledgor and Pledgee shall at all times hereafter, jointly and
severally indemnify Escrow Agent and hold Escrow Agent harmless from any claim
asserted against it and from any damages, costs, expenses, liability and/or
losses sustained by Escrow Agent (except for Escrow Agent's gross negligence or
willful misconduct), including, but not limited to, reasonable attorneys' fees
and costs for Escrow Agent's attorney(s) through and including all appeals and
whether or not litigation is instituted. The obligations and duties of the
Escrow Agent are confined to those specifically enumerated in this Agreement.
The Escrow Agent shall not be subject to nor be under any obligation to
ascertain or construe the terms and conditions of any instrument whether or not
now or hereafter deposited with or delivered to the Escrow Agent or referred to
in this Agreement. Nor shall the Escrow Agent be obliged to inquire as to the
form, execution and sufficiency or validity
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<PAGE> 5
of any instruments, or to inquire as to the identity, authority or rights of any
person executing or delivering the same.
10. RETENTION OF LEGAL COUNSEL. It is agreed that Escrow Agent shall
have full discretion as to whom it may retain as legal counsel to protect its
interests (including retaining itself as a law firm) and same shall not affect
or in any way prejudice or limit Escrow Agent's entitlement to reasonable
attorneys' fees for the services of such attorneys as set forth in this Escrow
Agreement.
11. VENUE. It is recognized that this Escrow Agreement shall be deemed
to have been entered into by the parties hereto in Broward County, Florida, and
that the property which is the subject of this Escrow Agreement is located in
Broward County, Florida. Therefore, it is agreed that venue with respect to any
matter arising herefrom shall only lie in Broward County, Florida, except to the
extent, and only to the extent, that this provision with respect to venue is
deemed in contravention of any application law.
12. AMBIGUITY; CONFLICTING INSTRUCTIONS. In the event the Escrow Agent
shall be uncertain as to its duties or rights hereunder or shall receive
instructions, claims or demands from any of the parties hereto or from third
persons with respect to the Pledged Documents held hereunder, which in its sole
opinion, are in conflict with any provision of this Agreement, it shall be
entitled to refrain from taking any action until it shall be directed otherwise
in writing by all the parties hereto and said third persons, if any, or by a
final order or judgment of a court of competent jurisdiction.
13 NOTICES. Whenever any such notice is required or permitted
hereunder, such notice shall be in writing and sent certified mail, postage
prepaid, return receipt requested, or by expedited overnight delivery service,
or by delivery in person to the persons at the addresses as set forth below.
Notice deposited in the mail or expedited overnight delivery, in the manner
herein described, shall be effective upon deposit. Notice given in person shall
be effective only when in writing and received by the party to be notified.
Notices shall be delivered to the parties at the addresses set forth below,
unless a party shall give notice that some other address shall be used:
As to Pledgor: John Lofquist
Centrack International, Inc.
21045 Commercial Trail
Boca Raton, FL 33486
As to Pledgee: Nofal Kahook
9941 SW 4th Street
Plantation, FL 33324
As to Escrow Agent: Burt E. Eisenberg, Esq.
5100 Tamiami Trail N.
Suite 123
Naples, FL 34013
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<PAGE> 6
With a copy to: Michael Caruso
Caruso & Caruso
6971 N. Federal Highway
Suite 402
Boca Raton, FL 33487
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<PAGE> 7
15. MISCELLANEOUS.
a. BENEFIT OF AGREEMENT. This Agreement shall be binding upon
the parties hereto and their heirs, successors, assigns and personal or legal
representatives.
b. MODIFICATION. The Escrow Agent shall not be bound by any
modification, cancellation or rescission of this Agreement unless in writing and
signed by the parties hereto. In no event, however, shall any modification of
this Agreement, which shall affect the rights or duties of the Escrow Agent, be
binding upon Escrow Agent unless it shall have given its prior written consent.
c. ATTORNEYS' FEES. In the event Pledgor or Pledgee shall seek
to enforce this Agreement, whether or not through litigation, the prevailing
party shall be entitled to receive reasonable attorneys' fees and all costs
incurred in connection with such enforcement, including fees and costs of
appeal.
d. FURTHER COOPERATION. From and after the date of this
Agreement, each of the parties hereto agrees to execute whatever additional
documentation or instruments as are necessary to carry out the intent and
purposes of this Agreement.
e. WAIVER. No indulgences extended by any party hereto or any
other party shall be construed as a waiver of any breach on the part of such
other party, nor shall any waiver of one breach be construed as a waiver of any
rights or remedies with respect to any subsequent breach.
f. CONSTRUCTION. It is the intention of the parties that the
laws of the State of Florida shall govern the validity of this Agreement, the
construction of its terms, and the interpretation of the rights and duties of
the parties. The parties agree and acknowledge that each party has reviewed and
revised this Agreement and that the normal rule of construction to the effect
that any ambiguities are to be resolved against the drafting parties shall not
be employed in the interpretation of this Agreement or any amendment or exhibits
thereto.
g. TRUTH OF RECITALS. The recitals and statements contained on
page 1 of this Agreement are true and correct and are hereby incorporated into
this Agreement.
h. ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement and understanding of the parties on the subject matter hereof and
supersedes all prior agreements and understandings relating thereto.
i. SEVERABILITY. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof and this Agreement shall be construed in all respects as if such invalid
or unenforceable provision was omitted.
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<PAGE> 8
j. GENDER. Wherever the context shall so require, all words
herein in any gender shall be deemed to include the masculine, feminine or
neuter gender; all singular words shall include the plural and all plural shall
include the singular.
k. HEADINGS. The headings used in this Agreement are used for
reference purposes only and are not to be deemed controlling with respect to the
contents thereof.
l. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, and each such counterpart shall for all purposes be deemed to
be an original.
m. INCORPORATION BY REFERENCE. The Exhibits referred to in
this Agreement are hereby incorporated into this Agreement by reference.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
Witnesses: PLEDGOR:
/s/ John Lofquist (SEAL)
- ----------------------------- ---------------------------------
JOHN LOFQUIST
- -----------------------------
PLEDGEE:
/s/ Nofal Kahook (SEAL)
- ----------------------------- ---------------------------------
NOFAL KAHOOK
- -----------------------------
ESCROW AGENT:
BURT E. EISENBERG, P.A.
By: /s/ Burt E. Eisenberg
---------------------------------
BURT E. EISENBERG, ESQUIRE
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<PAGE> 1
Exhibit 10.7(c)
PLEDGE AND ESCROW AGREEMENT
THIS AGREEMENT, made and entered into this 17th day of September, 1999,
by and between JOHN LOFQUIST ("Pledgor") and NOFAL KAHOOK ("Pledgee"), and BURT
E. EISENBERG, P.A. ("Escrow Agent").
W I T N E S S E T H:
WHEREAS, Pledgor had previously borrowed from Pledgee the sum of
$50,000.00 and agreed to pledge One Million (1,000,000) shares of common stock
(the "Pledged Shares") of Centrack International, Inc., a Delaware corporation,
as memorialized by a Promissory Note dated May 17, 1999 and Pledge and Escrow
Agreement concurrently dated; and
WHEREAS, Pledgor has borrowed from Pledgee the additional sum of
$60,000.00 and has agreed to pledge an additional Two Hundred Fifty Thousand
(250,000) shares of common stock (the "Pledged Shares") of Centrack
International, Inc., a Delaware corporation; and
WHEREAS, Pledgor has executed a Promissory Note ("Note") in the amount
of $60,000.00 in favor of Pledgee, attached hereto as Exhibit "A"; and
WHEREAS, to secure the payment of said Promissory Notes, Pledgor hereby
grants Pledgee a security interest in the Pledged Shares; and
WHEREAS, all common stock held pursuant to this Pledge and Escrow
Agreement shall act as collateral for repayment of both of the aforesaid
Promissory Notes. A default in either Promissory Note shall constitute a default
in both Promissory Notes.
WHEREAS, Escrow Agent has agreed to hold the Pledged Shares under the
terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises, covenants and
agreements hereinafter set forth, the parties mutually agree as follows:
1. SECURITY INTEREST. Pledgor hereby grants to Pledgee a first lien
security interest, superior to all other liens and encumbrances, in and to the
Pledged Shares. Copies of Assignments representing such Pledged Shares, endorsed
in blank, and copies of the Certificates representing such Pledged Shares are
attached as Exhibit "B." Said Pledged Shares and Assignment shall be held by
Escrow Agent as collateral for the indebtedness owed by Pledgor to Pledgee
pursuant to the Note.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS. Pledgor hereby
represents, warrants and covenants that, except for the security interest
granted hereunder, Pledgor is the legal and equitable owner of the Pledged
Shares and holds same free and clear of all liens, charges, encumbrances and
security interest of every kind and nature, and that Pledgor will make no
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<PAGE> 2
assignment, pledge, mortgage, hypothecation or transfer of the Pledged Shares;
that Pledgor has good right and legal authority to pledge the Pledged Shares in
the manner hereby done or contemplated and will defend Pledgor's title to such
Pledged Shares against the claim of all persons whomsoever; that no consent or
approval of any governmental body or regulatory authority, or of any securities
exchange, is necessary to the validity of the pledges effected hereby, except
for any consents or approvals which have been obtained; that the pledge of the
Pledged Shares is effective to vest in Pledgee the rights of the Pledgee in such
Pledged Shares set forth herein; and that the Pledged Shares have been duly and
validly authorized and issued and are fully paid and nonassessable.
3. RIGHT TO VOTE. Except as otherwise provided herein, during the term
of this Agreement and so long as Pledgor is not in default in the performance of
any of the terms of this Agreement or in the payment of principal or interest
under the Note, the Pledgor shall be entitled to all rights of ownership,
including, but not limited to, the right to vote the Pledged Shares on all
corporate questions.
4. ADJUSTMENTS. In the event that, during the term of this Agreement,
any stock dividend shall be declared on or with respect to any of the Pledged
Shares, or there is a reclassifica tion, readjustment, merger, consolidation,
stock split or any other change is made in the capital structure of the
corporation which has issued the Pledged Shares or any successor thereto, all
new, substituted and additional shares or other securities issued by reason of
such a change shall be delivered and held by Escrow Agent under the terms of
this Agreement in the same manner as the Pledged Shares.
5. DEFAULT. In the event of default by Pledgor under the Note, in
addition to any right or remedy which it may have hereunder, the Pledgor shall
forfeit all interest in the Pledged Shares to the Pledgee and the Escrow Agent,
after the expiration of any grace period and following any required notices,
issue the Pledged Shares to the Pledgee.
If for any reason such form of transfer is deemed in violation of any
law, the Pledgee shall have all of the following rights and remedies of a
secured party under Article 9 of the Uniform Commercial Code as it is now or
hereafter in effect in the State of Florida (Chapter 679 Florida Statutes),
including without limitation the right to sell or otherwise dispose of all or
any portion of the Pledged Shares. Upon the occurrence of a default under the
Note, the Pledgee shall have the right to offer for sale, and to sell, the
Pledged Shares at any private or public sale; provided, however, that the
Pledgee shall give to the Pledgor at least ten (10) days' notice of the time,
date and place of any such private or public sale, which provision for notice of
the Pledgor hereby expressly agrees is commercially reasonable. Furthermore, the
Pledgor hereby expressly agrees that the Pledgee may (i) sell all or any portion
of the Pledged Shares at any private or public sale for cash, upon credit, or
for other property, for immediate or future delivery, and for such price or
prices and on such terms as the Pledgee in its sole discretion shall deem
appropriate, (ii) bid on and purchase the Pledged Shares at any private or
public sale, and (iii) hold any of the Pledged Shares purchased by the Pledgee
at any private or public sale in its own right, free and clear of any and all
claims of the Pledgor. The Pledgee may, from time to time, sell all or any part
of the Pledged Shares. The
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<PAGE> 3
Pledgor hereby appoints Pledgee as its attorney-in-fact to execute such
documents and take such action as may be necessary to accomplish the provisions
of this Agreement, including, without limiting the generality of the foregoing,
the right to ask for, demand, sue for, collect, receive and give acquittance for
any and all monies due or to become due with respect to or in connection with
any of the Pledged Shares, to endorse checks, drafts, orders and other
instruments for the payment of money representing any interest or dividend or
other distribution with respect to or in connection with the Pledged Shares or
any part thereof and to give full discharge for the same, to settle, compromise,
prosecute or defend any action, claim or proceeding with respect thereto and to
sell, assign, endorse, pledge, transfer and make any agreement respecting or
otherwise deal with the same. Such appointment is irrevocable and coupled with
an interest.
6. ESCROW. Upon execution of this Agreement, Pledgor shall deposit with
Escrow Agent the Pledged Shares, along with the aforesaid Assignment (all of
which items shall hereinafter be referred to as the "Pledged Documents") to be
held in escrow for future delivery as follows:
a. Escrow Agent shall deliver the Pledged Documents to Pledgee
within ten (10) days after receiving an affidavit signed by Pledgee stating
that:
(i) Pledgor is in default under the Note and all periods of
time within which to cure such default have expired;
(ii) Pledgee is accelerating the entire unpaid balance due
under the Note; and
(iii) Pledgee demands delivery of the Pledged Documents.
Pledgee shall simultaneously furnish Pledgor with a copy of
said affidavit. Upon such delivery of the Pledged Documents, Escrow Agent's
duties hereunder shall terminate.
b. In the event Escrow Agent has not delivered the Pledged
Documents pursuant to subparagraph a above, then Escrow Agent shall deliver the
Pledged Documents to Pledgor within ten (10) days after receipt of the original
of the Note marked "paid in full," accompanied by instructions from Pledgor
indicating that said Note has been paid in full and the Pledged Documents shall
be delivered to Pledgor at the address specified therein. Upon such delivery of
the Pledged Documents, Escrow Agent's duties hereunder shall terminate. Pledgee
agrees to deliver the Note to Pledgor marked "paid in full," immediately upon
satisfaction thereof.
c. Upon execution of this Agreement, Pledgor shall deliver to
the Escrow Agent Stock Certificate Number________________, representing_________
_____________________________ shares of common stock of Centrack International,
Inc. Pledgor shall further execute an endorsement/assignment of said Certificate
appointing the Escrow Agent as Attorney to effectuate division and reissuance of
same as follows:
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<PAGE> 4
1. Two Hundred Fifty Thousand (250,000) shares
to Pledgor, same to be held in escrow by the
Escrow Agent pursuant to the terms of this
Agreement.
2. One Hundred Twenty Thousand (120,000) shares
to the Pledgee as consideration for the loan
being extended pursuant to the $60,000.00
Promissory Note attached hereto.
3. ________________________________shares which
shall be forwarded to Pledgor upon receipt
by the Escrow Agent.
Nothing hereinabove withstanding to the contrary, until such
time as the above division of the stock is accomplished, the total number of
shares shall constitute collateral for payment of the obligations pursuant to
this Agreement. Pledgor and Pledgee hereby acknowledge that the Escrow Agent is
making no representations as to right or legality pertaining to the above
division of the stock or its sale in the event of the default, and Pledgor and
Pledgee each agree that Escrow Agent shall have no liability resulting from the
inability to accomplish the terms of this Pledge Agreement due to the inability
to divide, transfer or sell the stock. Pledgor and Pledgee each agree to
indemnify and hold Escrow Agent harmless in this regard and as otherwise
provided for in this Agreement.
7. DISPUTE. It is specifically understood and agreed that should any
dispute arise between the parties hereto concerning this Agreement or its
construction, or for any other reason, the Escrow Agent, in its sole discretion,
shall have the right to deposit the Pledged Documents held by it pursuant to
this Escrow Agreement and any documents relating thereto that may have been
delivered to the Escrow Agent, with the Clerk of the Circuit Court of Broward
County, Florida, and notify all parties concerned, and whereupon, all liability
hereunder on the part of the Escrow Agent shall fully cease except to the extent
of accounting for the Pledged Documents and any other documents that may have
been delivered to it.
8. INTERPLEADER. In the event the Escrow Agent places the Pledged
Documents that have actually been delivered to Escrow Agent in the registry of
the Circuit Court in and for Broward County, Florida, and files an action of
interpleader naming Pledgor and Pledgee, and other necessary parties, Escrow
Agent shall be released and relieved from any and all further obligations and
liabilities hereunder or in connection herewith. Pledgor and Pledgee hereby,
jointly and severally, indemnify and hold Escrow Agent harmless from any damages
or losses arising hereunder or in connection herewith, including, but not
limited to, all costs and expenses incurred by Escrow Agent in connection with
the filing of such action and reasonable attorneys' fees and costs for Escrow
Agent's attorney(s) through and including all appeals.
9. NATURE OF ESCROW AGENT'S DUTIES. It is agreed that the duties of
Escrow Agent are only such as are herein specifically provided and are purely
ministerial in nature. Hence, Escrow Agent shall not be held liable for any
matter or thing except for Escrow Agent's gross negligence or
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willful misconduct. Pledgor and Pledgee shall at all times hereafter, jointly
and severally indemnify Escrow Agent and hold Escrow Agent harmless from any
claim asserted against it and from any damages, costs, expenses, liability
and/or losses sustained by Escrow Agent (except for Escrow Agent's gross
negligence or willful misconduct), including, but not limited to, reasonable
attorneys' fees and costs for Escrow Agent's attorney(s) through and including
all appeals and whether or not litigation is instituted. The obligations and
duties of the Escrow Agent are confined to those specifically enumerated in this
Agreement. The Escrow Agent shall not be subject to nor be under any obligation
to ascertain or construe the terms and conditions of any instrument whether or
not now or hereafter deposited with or delivered to the Escrow Agent or referred
to in this Agreement. Nor shall the Escrow Agent be obliged to inquire as to the
form, execution and sufficiency or validity of any instruments, or to inquire as
to the identity, authority or rights of any person executing or delivering the
same.
10. RETENTION OF LEGAL COUNSEL. It is agreed that Escrow Agent shall
have full discretion as to whom it may retain as legal counsel to protect its
interests (including retaining itself as a law firm) and same shall not affect
or in any way prejudice or limit Escrow Agent's entitlement to reasonable
attorneys' fees for the services of such attorneys as set forth in this Escrow
Agreement.
11. VENUE. It is recognized that this Escrow Agreement shall be deemed
to have been entered into by the parties hereto in Broward County, Florida, and
that the property which is the subject of this Escrow Agreement is located in
Broward County, Florida. Therefore, it is agreed that venue with respect to any
matter arising herefrom shall only lie in Broward County, Florida, except to the
extent, and only to the extent, that this provision with respect to venue is
deemed in contravention of any application law.
12. AMBIGUITY; CONFLICTING INSTRUCTIONS. In the event the Escrow Agent
shall be uncertain as to its duties or rights hereunder or shall receive
instructions, claims or demands from any of the parties hereto or from third
persons with respect to the Pledged Documents held hereunder, which in its sole
opinion, are in conflict with any provision of this Agreement, it shall be
entitled to refrain from taking any action until it shall be directed otherwise
in writing by all the parties hereto and said third persons, if any, or by a
final order or judgment of a court of competent jurisdiction.
13. NOTICES. Whenever any such notice is required or permitted
hereunder, such notice shall be in writing and sent certified mail, postage
prepaid, return receipt requested, or by expedited overnight delivery service,
or by delivery in person to the persons at the addresses as set forth below.
Notice deposited in the mail or expedited overnight delivery, in the manner
herein described, shall be effective upon deposit. Notice given in person shall
be effective only when in writing and received by the party to be notified.
Notices shall be delivered to the parties at the addresses set forth below,
unless a party shall give notice that some other address shall be used:
Initials /
--------------
Page 5 of 9
<PAGE> 6
As to Pledgor: John Lofquist
Centrack International, Inc.
21045 Commercial Trail
Boca Raton, FL 33486
As to Pledgee: Nofal Kahook
9941 SW 4th Street
Plantation, FL 33324
Initials /
---------------
Page 6 of 9
<PAGE> 7
As to Escrow Agent: Burt E. Eisenberg, Esq.
5100 Tamiami Trail N.
Suite 123
Naples, FL 34013
With a copy to: Michael Caruso
Caruso & Caruso
6971 N. Federal Highway
Suite 402
Boca Raton, FL 33487
15. MISCELLANEOUS.
a. BENEFIT OF AGREEMENT. This Agreement shall be binding upon
the parties hereto and their heirs, successors, assigns and personal or legal
representatives.
b. MODIFICATION. The Escrow Agent shall not be bound by any
modification, cancellation or rescission of this Agreement unless in writing and
signed by the parties hereto. In no event, however, shall any modification of
this Agreement, which shall affect the rights or duties of the Escrow Agent, be
binding upon Escrow Agent unless it shall have given its prior written consent.
c. ATTORNEYS' FEES. In the event Pledgor or Pledgee shall seek
to enforce this Agreement, whether or not through litigation, the prevailing
party shall be entitled to receive reasonable attorneys' fees and all costs
incurred in connection with such enforcement, including fees and costs of
appeal.
d. FURTHER COOPERATION. From and after the date of this
Agreement, each of the parties hereto agrees to execute whatever additional
documentation or instruments as are necessary to carry out the intent and
purposes of this Agreement.
e. WAIVER. No indulgences extended by any party hereto or any
other party shall be construed as a waiver of any breach on the part of such
other party, nor shall any waiver of one breach be construed as a waiver of any
rights or remedies with respect to any subsequent breach.
f. CONSTRUCTION. It is the intention of the parties that the
laws of the State of Florida shall govern the validity of this Agreement, the
construction of its terms, and the interpretation of the rights and duties of
the parties. The parties agree and acknowledge that each party has reviewed and
revised this Agreement and that the normal rule of construction to the effect
that any ambiguities are to be resolved against the drafting parties shall not
be employed in the interpretation of this Agreement or any amendment or exhibits
thereto.
Initials /
---------------
Page 7 of 9
<PAGE> 8
g. TRUTH OF RECITALS. The recitals and statements contained on
page 1 of this Agreement are true and correct and are hereby incorporated into
this Agreement.
h. ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement and understanding of the parties on the subject matter hereof and
supersedes all prior agreements and understandings relating thereto.
i. SEVERABILITY. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof and this Agreement shall be construed in all respects as if such invalid
or unenforceable provision was omitted.
j. GENDER. Wherever the context shall so require, all words
herein in any gender shall be deemed to include the masculine, feminine or
neuter gender; all singular words shall include the plural and all plural shall
include the singular.
k. HEADINGS. The headings used in this Agreement are used for
reference purposes only and are not to be deemed controlling with respect to the
contents thereof.
l. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, and each such counterpart shall for all purposes be deemed to
be an original.
m. INCORPORATION BY REFERENCE. The Exhibits referred to in
this Agreement are hereby incorporated into this Agreement by reference.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
Witnesses: PLEDGOR:
/s/ John Lofquist (SEAL)
- ------------------------------ -----------------------------
JOHN LOFQUIST
- ------------------------------
PLEDGEE:
/s/ Nofal Kahook (SEAL)
- ------------------------------ -----------------------------
NOFAL KAHOOK
- ------------------------------
ESCROW AGENT:
BURT E. EISENBERG, P.A.
By: /s/ Burt E. Eisenberg
------------------------------
BURT E. EISENBERG, ESQUIRE
Page 8 of 9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the Audited
Financial Statements at May 31, 1999 and the interim financial statements for
the three months ended August 31, 1999, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> MAY-31-1999 AUG-31-1999
<PERIOD-START> MAY-31-1999 AUG-31-1999
<PERIOD-END> JUN-01-1998 JUN-01-1999
<CASH> 281,318 145,600
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 348,484 249,609
<PP&E> 247,718 440,463
<DEPRECIATION> 21,694 51,218
<TOTAL-ASSETS> 588,608 658,141
<CURRENT-LIABILITIES> 240,318 310,719
<BONDS> 0 0
0 0
0 0
<COMMON> 2,140 2,305
<OTHER-SE> 96,150 345,117
<TOTAL-LIABILITY-AND-EQUITY> 588,608 658,141
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (585,351) (671,319)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (585,351) (671,319)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (585,351) (671,319)
<EPS-BASIC> (0.035) (0.030)
<EPS-DILUTED> (0.035) (0.028)
</TABLE>
