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SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, N.W.
Washington, D. C. 20549
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FORM 10-SB
General Form for Registration of Securities
Pursuant to Section 12(b) or (g) of
The Securities Exchange Act of 1934
Whitney Information Network, Inc.
(Exact name of registrant as specific in its charter)
Colorado 84-1475486
(State of Incorporation) (I.R.S. Employer
Identification No.)
4818 Coronado Parkway
Cape Coral, Florida 33904
(Address of executive offices, including postal code)
Registrant's telephone number: (941) 542-8999
Copies to: Conrad C. Lysiak, Esq.
601 West First Avenue
Suite 503
Spokane, Washington 99201
Securities to be registered pursuant to Section 12(b) of the Act:
NONE
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(Title of Class)
Securities to be registered pursuant to Section 12(g) of the Act:
COMMON STOCK
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(Title of Class)
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ITEM 1. DESCRIPTION OF BUSINESS.
History
Whitney Information Network, Inc. (the "Company") was incorporated
under the laws of the state of Colorado on February 23, 1996 as Gimmel
Enterprises, Inc. On August 18, 1998, the Company acquired all of the
issued and outstanding shares of common stock of Whitney Education
Group, Inc., formerly, Win Systems, Inc., hereinafter "WSI," a
corporation incorporated under the laws of the state of Florida, on
November 12, 1992. Thereafter, WSI became a wholly owned subsidiary
corporation of the Company. On August 10, 1998, the Company changed its
name to WIN Systems, Inc. and on February 11, 1999, the Company again
changed its name to Whitney Information Network, Inc.
General
The Company is engaged in the business of providing educational
and training services through its publications and lectures to create
wealth, achieve financial independence and protect it. The Company
currently concentrates its principal efforts in the area of real estate
training.
Publications
The Company currently produces approximately twenty-four (24)
publications which are promoted by the Company to the general public
and for use at the Company's training and educational classes. The
publications are written by the Company. The Company then retains
independent publishers to produce the publications. The publications
are sold to the public or incorporated in the cost of training courses.
The Company does not rely exclusively on any one publishing firm. In
the event that one publisher ceased operations or refused to continue
to publish the Company's products, the Company could easily retain
another publisher.
Software
The Company sells a line of software primarily for the real estate
and small business industry. The software is developed and licensed by
Precision Software Services, Inc., a corporation controlled by Russell
Whitney, the Company's Chief Executive Officer and Chairman of the Board
of Directors.
Lectures
The Company delivers a series of lectures and training programs
which relate to its publications and software. The Company charges
fees its training programs, however, the Company does not charge for
its free informational lectures. The Company has many instructors that
teach throughout the United States and Canada, while at the same time
promoting the Company's publications, software, and the Company's
programs to succeed in business, successfully invest in real estate,
achieve financial independence and protect their assets. The Company
promotes an initial program outlining how to invest in real estate and
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how to succeed via small business ownership. Upon completion of the
Company's initial real estate investment training, the Company offers
additional programs that allow a customer to concentrate on a
specialized area. Each lecture topic is supplemented with the Company's
publications.
Real Estate Programs
The Company's base program is a three day seminar on basic real
estate investing. The program is supplemented with its publications
and software. Upon completion of the basic real estate investing
course, the Company promotes an intensified training camp which is
designed to expand the knowledge gained at the basic real estate
investing program. The intensified training camp is held at the
Company's corporate offices in Cape Coral, Florida.
The Company also operates six regional training camps at locations
in the United States and Canada that emphasis specific areas of real
estate investing, small business and asset protection. The camps
consist of lectures and interactive dialogue between the lecturer and
student. The Company promotes its publications and software at the
camps. The specific areas of concentration are: wholesale buying;
foreclosure; landlording; purchase/lease option; asset protection; and
commercial properties.
Mentoring
The Company provides a program whereby trained personnel travel to
a customer's home town and assist the customer in implementing the
knowledge gained at the Company's lectures within the customer's
community.
Financial Management
In addition to the real estate investment programs, the Company
also provides additional ancillary programs relating to enhancing and
the customer's knowledge of managing and protecting his money.
Internet
The Company is currently developing a program to assist business
minded individuals to take advantage of the Internet, including the
creation of a Web-site and marketing thereon. As of the date hereof,
the program has not been fully developed and is currently not available
to the public.
Marketing
The Company markets its publications, videos and lectures through
a number of medias, including newspapers, periodic publications, direct
mail, telemarketing, television, radio and world of mouth. The Company
has retained Professional Marketing International, Inc. of Lehigh, Utah
to provide telemarketing services. Further, the Company's wholly owned
subsidiary corporation, Whitney Consulting Services, Inc. furnishes
telemarketing and mail services to the Company.
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Certification
The Company is accredited by the state of Texas as a Certified
Proprietary School. No other state has accredited the Company in any
manner and there is no assurance that the Company will ever be
accredited by any other state for any reason.
Subsidiary Corporations
The Company conducts its business through seven subsidiary
corporations: Whitney Education Group, Inc. (formerly, Win Systems,
Inc.); Whitney Internet Services, Inc.; Russ Whitney's Wealth Education
Centers, Inc.; Whitney Consulting Services, Inc.; 1311448 Ontario,
Inc.; Whitney Canada, Inc.; and, Wealth Intelligence Network, Inc.
Year 2000
The Year 2000 issue is the result of computer programs written
using two digits rather than four to define the applicable year. As a
result, date sensitive software may recognize a date using "00" as the
year 1900 rather than the year 2000. This could result in system
failures or miscalculations causing disruptions of operations,
including among others, temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
The Company has reviewed its current software and made all
necessary adjustments to bring the software into compliance with the
Year 2000 issue. In the future, the planned acquisitions of software
will most likely involve hardware and software which is relatively new
and therefore management does not anticipate that it will incur
significant operating expenses or be required to invest heavily in
computer systems improvements to be Year 2000 compliant. As the Company
makes arrangements with significant hardware and software suppliers,
the Company intends to determine the extent to which the Company's
systems may be vulnerable should those third parties fail to address
and correct their own Year 2000 issues and take measures to reduce the
Company's exposure, such as, finding alternative suppliers or requiring
the suppliers to correct Year 2000 compliance issues prior to the
Company acquiring the product. The Company anticipates that this will
be an ongoing process as the Company begins to implement its marketing
plan through 1999. There can be no assurances that the systems of
suppliers or other companies on which the Company may rely on will be
converted in a timely manner and will not have a materially adverse
effect on the Company's systems. Additionally there can be no assurances
that the computer systems necessary to maintain the viability of the
Internet will be Year 2000 compliant. The Company believes that it is
taking the steps necessary regarding Year 2000 compliance issues with
respect to matters within its control. However, no assurance can be
given that the Company's systems will be made Year 2000 compliant in
a timely manner or that the Year 2000 problem will not have a material
adverse effect on the Company's business, financial condition and
results of operations.
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Trademarks and Copyrights
The Company owns certain rights, names, trademarks, and
copyrights. The Company will disclose all trademarks and copyrights on
promotional materials and product literature.
Competition
The Company is involved in highly competitive business. There are
several other entities which manufacture, publish and conduct training
programs, many of which are much larger companies possessing
substantially greater financial resources and facilities than the
Company.
Company's Office
The Company's headquarters are located 4818 Coronado Parkway, Cape
Coral, Florida 33904 and the telephone number is (941) 542-8999.
Employees
The Company employs eighty-one (81) full time employees and one
(1) part-time employee.
RISK FACTORS
1. Development and Market Acceptance of Products. The Company's
success and growth will depend upon the Company's ability to market its
existing products and services, of which there is no assurance. See
"Business - Products" and "Business - Programs."
2. Liquidity; Need for Additional Financing. The Company
believes that it has the cash it needs for at least the next twelve
months based upon its internally prepared budget. The Company's cash
requirements, however, are not easily predictable and there is a
possibility that its budget estimates will prove to be inaccurate. If
the Company is unable to generate a positive cash flow before its cash
is depleted, it will be required to curtail operations substantially,
seek additional capital. There is no assurance that the Company will
be able to obtain additional capital if required, or if capital is
available, to obtain it on terms favorable to the Company. The Company
may suffer from a lack of liquidity in the future which could impair
its short-term marketing and sales efforts and adversely affect its
results of operations. See "Management's Discussion and Analysis or
Plan of Operation."
3. Competition. Most of the Company's competitors have
substantially greater financial, technical and marketing resources than
the Company. In addition, the Company's products compete indirectly
with numerous other products. As the market for the Company's products
expand, the Company expects that additional competition will emerge and
that existing competitors may commit more resources to those markets.
See "Business - Competition."
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4. Reliance Upon Directors and Officers. The Company is wholly
dependent, at the present, upon the personal efforts and abilities of
its Officer and Directors, Russell A. Whitney, Chief Executive Officer
and Chairman of the Board of Directors; Richard W. Brevoort, President
and a member of the Board of Directors; and Ronald S. Simon,
Secretary/Treasurer and a member of the Board of Directors, who
exercise control over the day to day affairs of the Company. See
"Business" and "Management."
5. Issuance of Additional Shares. 17,500,000 shares of Common
Stock or 70% of the 25,000,000 authorized shares of Common Stock of the
Company are unissued. The Board of Directors has the power to issue
such shares, subject to shareholder approval, in some instances.
Although the Company presently has no commitments, contracts or
intentions to issue any additional shares to other persons, other than
in the exercise of options and warrants, the Company may in the future
attempt to issue shares to acquire products, equipment or properties,
or for other corporate purposes. Any additional issuance by the
Company, from its authorized but unissued shares, would have the effect
of diluting the interest of existing shareholders. See "Description of
Securities."
6. Indemnification of Officers and Directors for Securities
Liabilities. The Company's Articles of Incorporation provide that the
Company will indemnify any Director, Officer, agent and/or employee as
to those liabilities and on those terms and conditions as are specified
in The Company Act of the State of Colorado. Further, the Company may
purchase and maintain insurance on behalf of any such persons whether
or not the corporation would have the power to indemnify such person
against the liability insured against. The foregoing could result in
substantial expenditures by the Company and prevent any recovery from
such Officers, Directors, agents and employees for losses incurred by
the Company as a result of their actions. Further, the Company has
been advised that in the opinion of the Securities and Exchange
Commission, indemnification is against public policy as expressed in
the Securities Act of 1933, as amended, and is, therefore,
unenforceable.
7. Cumulative Voting, Preemptive Rights and Control. There are
no preemptive rights in connection with the Company's Common Stock.
Shareholders may be further diluted in their percentage ownership of
the Company in the event additional shares are issued by the Company in
the future. Cumulative voting in the election of Directors is not
provided for. Accordingly, the holders of a majority of the shares of
Common Stock, present in person or by proxy, will be able to elect all
of the Company's Board of Directors. See "Description of Securities."
8. No Dividends Anticipated. At the present time the Company
does not anticipate paying dividends, cash or otherwise, on its Common
Stock in the foreseeable future. Future dividends will depend on
earnings, if any, of the Company, its financial requirements and other
factors. See "Dividend Policy."
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto.
Overview
On August 18, 1998, Gimmel Enterprises, Inc., a shell company
listed on the NASD OTC Bulletin Board acquired all of the outstanding
shares of Whitney Education Group, Inc. (formerly Win Systems, Inc.).
Prior to this Gimmel Enterprises, Inc. had no operations and its
activities consisted of efforts to establish a new business. Gimmel
Enterprises, Inc. changed its name to Whitney Information Network, Inc
(WIN!). Whitney Education Group, Inc was a privately held company
formed in 1992. For financial and reporting purposes the acquisition
has been treated as a recapitalization of WIN! with WIN! as the
acquirer (a reverse merger). The historical financial statements prior
to August 19, 1998 are those of Whitney Education Group, Inc.
Whitney Information Network, Inc. (WIN!) is a provider of
education in the areas of real estate, finance, Internet and other post
secondary career related training, Its learning solutions are designed
to deploy and manage knowledge practically and more effectively for use
as a competitive advantage. The Company has accomplished its position
in the market and growth through its innovative distribution channels,
including classroom education, one-on-one mentoring, group instruction,
training centers and Internet marketing.
Six Months and Quarter Ended June 30,1999
Revenue
Revenue decreased by 3.5% from $5,833,306 to $5,631,788 for the three
months ended June 30, 1999 as compared to the three months ended June
30, 1998. However, gross revenue before deferrals increased by
$2,283,611 over the comparable prior years quarter as follows:
Second Quarter Second Quarter
1999 1998
Gross Revenues $ 7,719,932 $ 5,436,321
Less: Amounts Deferred
in the second quarter $ (2,088,144) $ 396,985
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Net Revenues $ 5,631,788 $ 5,833,306
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Revenues for the six months ended June 30, 1999 increased to
$10,286,320 as compared with $8,178,965 for the six months ended June
30, 1998 an increase of $2,107,355 or 26%. Total deferred revenues on
the balance sheet were $8,357,501 and $842,304 at June 30, 1999 and
1998, respectively. Cost of sales increased to $2,139,434 in the three
months ending June 30, 1999 from $1,886,438 in the three months ending
June 30,1998. Total cost of sales increased to $4,340,090 in the six
months ending June 30, 1998 from $2,865,029 in the six months ending
June 30, 1998.
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Total Advertising, Selling and General and Administrative expenses
decreased in the 2nd quarter of 1999 to $3,066,759 form $3,746,300 and
remained substantially the same for the six months ending June 30, 1999
as compared with the same six month period in 1908. This lack of change
in total expenses represents a greater number of period costs incurred
in the first six months of 1998 where certain marketing strategies were
being tested and refined, The results of these tests and refinements
have materialized in the first six months of the current year. Thus,
expenses did not increase proportionately with sales due to the
increased expenditures in the first half of 1998.
Sales and marketing expenses consist primarily of TV and newspaper
advertising. direct mailings, travel, public relations, trade shows and
other marketing literature and overhead allocations. General and
administrative expenses consist mainly of salaries and other person
personnel-related expenses for the Company's administrative, executive
and finance personnel as well as outside legal and audit costs.
Net income $274,754 (net of taxes of $150,841) in the 2nd quarter
of 1999 increased by 122% over the prior 2nd quarter of -1998 of
$173,375 or $.04 a share as compared with $.02 a share for the
comparable quarter last year. Six months net income were $626,909 for
the period ending June 30, 1999 and $272,805 for the period ending June
30, 1998, an increase of $354,024 or 130% over the prior period. This
resulted in earnings per share of $.08 per share for the six months
ending June 30, 1999 as compared with $.04 for the six months ending
June 30, 1998.
Liquidity and, Working Capital
At June 30, 1999 the company had cash of $1,512,456 as compared
with $578,013 at June 30, 1998, This increase of $934,442 is
attributable solely to operations, The company anticipates that its
cash flow from operations will be sufficient to meet its working
capital needs for the next 12 months
Years Ended December 31,1997 and December 31,1998
Revenues for the year ended December 31, 1998 increased to
$12,760,208 as compared with $5,558,280 for the year ended December 31,
1997 an increase of $7,201,928 or 130%. Total deferred revenues on the
balance sheet were $3,958,244 and $239,000 at December 31, 1998 and
1997, respectively. Cost of sales increased to $4,682,850 in the year
ended December 31, 1998 from $1,910,300 in the year ended December 31,
1997.
Total Advertising, Selling and General and Administrative expenses
increased in the year ended December 31, 1998 to $7,893,922 form
$3,637,716 as compared with 1997. These substantial increases in
revenues and expenses in 1998 over 1997 reflect a general increase in
business and reflect the results of the company's plan to expand its
business into new markets and develop new products.
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Sales and marketing expenses consist primarily of TV and newspaper
advertising, direct mailings, travel, public relations, trade shows and
other marketing literature and overhead allocations. General and
administrative expenses consist mainly of salaries and other person
personnel-related expenses for the Company's administrative, executive
and finance personnel as well as outside legal and audit costs.
Net income $768,436 (net of taxes of $415,000) for the year ended
December 31, 1998 increased dramatically over the year ended December
31, 1997 of $10,264 or $-10 a share as compared with $.01 01 a share
for the comparable year.
Liquidity and Working Capital
At December 31, 1998 the company had cash of $370,571 as compared
with $30,036 at December 31, 1997. This increase of $340,535 is
attributable primarily to operations. The company anticipates that its
cash flow from operations will be sufficient to meet its needs in the
next 12 months.
In addition, the company from time to time evaluates potential
acquisitions of business, products and/or technologies that complement
the company's business. To the extent that resources are insufficient
to fund the company's activities, the company may need to raise
additional funds. There can be no assurance that such additional
funding, if needed, will be available. If adequate funds are not
available on acceptable terms, the company may be unable to expand its
business, develop or enhance its products and services, take advantage
of future opportunities or respond to competitive pressures, any of
which could have a material adverse effect on the Company's business,
operating results and financial condition.
The Company does not anticipate a problem in funding its "Wealth
Centers" (Storefront adult education facilities located in upscale
strip malls), as the up front costs are minimal and its Joint Venture
Partners will pay half of the star-up costs.
Fluctuations in Quarterly Operating Results
The Company's quarterly operating results have varied in the past
and are expected to vary in the future as a result of a variety of
factors, some of which are outside the Company's control. Factors that
may adversely affect the Company's quarterly operating results include
the demand for tech technology-based training in general and demand for
online learning solutions in particular: the size and timing of
educational sessions and registrations, the mix of revenue from
products and services, the mix of products sold, market acceptance,
etc.
ITEM 3. DESCRIPTION OF PROPERTIES.
The Company does not own any real or personal property. The
Company's only asset is cash.
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The Company has leases office space from Russ Whitney, Chief
Executive Officer and Chairman of the Board of Directors, pursuant to
the terms of a three year lease which commenced on September 1, 1999
and terminates on October 31, 2002 with a monthly rental payment of
$5,805.34. Russ Whitney is the President of the Company and a member
of its Board of Directors. The terms of the lease are no less
favorable as can be obtained from independent third parties.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth the Common Stock ownership of each
person known by the Company to be the beneficial owner of five percent
or more of the Company's Common Stock, each director individually and
all officers and directors of the Company as a group. Each person has
sole voting and investment power with respect to the shares of Common
Stock shown, unless otherwise noted, and all ownership is of record and
beneficial.
Name and Number of Percent of
address of owner Shares Position Class
Russell A. Whitney 6,480,000 Chief Executive Officer 86.40%
4818 Corodado Parkway and Chairman of the
Cape Coral, Florida Board of Directors
33904
Richard W. Brevoort 146,500[1] President and a 1.95%
4500 S.E. Fifth Place member of the Board of
#206 Directors
Cape Coral, Florida
33904
Ronald S. Simon 34,000[2] Secretary/Treasurer 0.45%
1402 Beechwood Trail and a member of the
Fort Myers, Florida Board of Directors
33919
All officers and 6,660,500 88.52%
directors as a
group (3 persons)
[1] Does not include warrant to purchase up to 68,000 shares of common
stock at an exercise price of $4.00 per share which expires on
August 21, 2003.
[2] Does not include warrant to purchase up to 68,000 shares of common
stock at an exercise price of $4.00 per shares which expires on
August 21, 1999.
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ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The officers and directors of the Company are as follows:
Name Age Position
Russell A. Whitney 43 Chief Executive Officer and
Chairman of the Board of Directors
Richard W. Brevoort 62 President and a member of the Board
of Directors
Ronald S. Simon 56 Secretary/Treasurer, Chief
Financial Officer, and a member of
the Board of Directors
Each director serves for a term of three years and one-third of
the directors are elected at the annual meeting of shareholders. The
Company's officers are appointed by the Board of Directors and hold
office at the discretion of the Board.
Russell A. Whitney - Chief Executive Officer and Chairman of the Board
of Directors
Mr. Whitney was a founder and has been the Chief Executive Officer
and Chairman of the Board of Directors of the Company and its
predecessor, since 1987. Since 1992, Mr. Whitney has been Chief
Executive Officer of Whitney Education Group, Inc. (formerly Win
Systems, Inc.) which is engaged in the business of education and
training. Since October 1998, Mr. Whitney has been the President and
a member of the Board of Directors of 1311448 Ontario, Inc. 1311448
Ontario is in the business of education and training. Since October
1998, Mr. Whitney has been the President and a member of the Board of
Directors of Whitney Canada, Inc. Whitney Canada is in the business of
education and training. Since February 1999, Mr. Whitney has been the
President and a member of the Board of Directors of Wealth Intelligence
Network, Inc. Wealth Intelligence Network is in the business of
education and training. Since June 1999, Mr. Whitney has been the
President and a member of the Board of Directors of Whitney Internet
Services, Inc. Whitney Internet Services is in the business of
providing Internet services, education and training. Since June 1999,
Mr. Whitney has been the President and a member of the Board of
Directors of Whitney Consulting Services, Inc. Whitney Consulting is
in the business of providing telemarketing services. Since June 1999,
Mr. Whitney has been the President and a member of the Board of
Directors of Russ Whitney's Wealth Education Centers, Inc. Russ
Whitney's Wealth Education Centers are in the business of education and
training. Since June 1999, Mr. Whitney has been the President and a
member of the Board of Directors of Russ Whitney's Wealth Education
Centers of Jackson, Mississippi, Inc. Since March 1991, Mr. Whitney
has been Chief Executive Officer of Whitney Leadership Group, Inc., a
Florida corporation located in Cape Coral, Florida, engaged in the
business of publishing and marketing. Since February 1995, Mr. Whitney
has been President of RAW, Inc., a Florida corporation engaged in the
business of buying, selling and investing in real estate which is
located in Cape Coral, Florida, Since August 1993, Mr. Whitney has
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been Vice President of Precision Software Services, Inc., a Florida
corporation located in Cape Coral, Florida, which is engaged in the
business of developing and licensing software primarily for the real
estate and small business industries. Since March 1992, Mr. Whitney
has been President of MRS Equity Corp., a Florida corporation located
in Cape Coral, Florida, which is engaged in the business of selling
mortgage related products and services. Since November 1996, Mr.
Whitney has been affiliated with Teamwork Communications, Inc., a
company that provides sales and marketing services located in Cape
Coral, Florida.
Richard W. Brevoort - President and a member of the Board of Directors.
Since August 1998, Mr. Brevoort has been a member of the Board of
Directors of the Company and spends substantially full-time on Company
matters. Mr. Brevoort became the President of Whitney Education Group,
Inc. (formerly, Win Systems, Inc.) in February 1997, and President of
the Company in August 1998. From January 1984 to February 1991, Mr.
Brevoort was the President of the Hudson Agency, a marketing company
based in New York City. From September 1970 to October 1975, Mr.
Brevoort was a Deputy Finance Administrator and Commissioner of Tax
Collection. From June 1969 to August 1970, Mr. Brevoort was an
Assistant Administrator of Economic Development. From August 1968 to
March 1969, Mr. Brevoort was a Deputy Commissioner of Commerce. From
March 1966 to November 1966, Mr. Brevoort was a Director of Weights and
Measures for the City of New York. From November 1975 to December
1983, Mr. Brevoort was the Chief of Staff for the Democratic Party in
the New York State Senate. From 1982 to 1987, Mr. Brevoort was a member
of the Board of Directors of the New York City Convention Center. From
1996 to 1997, Mr. Brevoort was an Instructional Supervisor of the
Trace Program at Bronx Community College. From 1968 to 1969, Mr.
Brevoort was a member of an Advisory Committee for the New York City
Superintendent of Schools. Mr. Brevoort has been included in the 1996
Who's Who in America and 1996 Who's Who in the World.
Ronald S. Simon - Secretary/Treasurer, Chief Financial Officer, and a
member of the Board of Directors.
Since August 1998, Mr. Simon was been the Secretary/Treasurer,
Chief Financial Officer, and a member of the Board of Directors of the
Company and spends such time that is necessary on Company matters.
Since August 1998, Mr. Simon has been the Secretary/Treasurer and a
member of the Board of Directors of Whitney Education Group, Inc.
(formerly, Win Systems, Inc.). Whitney Education Group is in the
business of education and training. Since August 1998, Mr. Simon has
been the Secretary/Treasurer and a member of the Board of Directors of
Wealth Intelligence Network, Inc. Wealth Intelligence Network is in the
business of education and training. Since June 1999, Mr. Simon has
been the Secretary/Treasurer and a member of the Board of Directors of
Whitney Consulting Group, Inc. Whitney Consulting Group is in the
business of telemarketing. From October 1995 to January 1999, Mr. Simon
was the President of On Line Services USA, Inc., an Internet service
provider and web site design company. Since 1971, Mr. Simon has been
Certified Public Accountant in the states of Florida and Illinois.
<PAGE> 13
Since 1993, Mr. Simon has had his real estate license in the state of
Florida. Since 1996, Mr. Simon has had his insurance license in the
state of Florida. Mr. Simon graduated from the University of Illinois
with Bachelor of Science degree in accounting.
ITEM 6. EXECUTIVE COMPENSATION.
Summary Compensation.
The following table sets forth the compensation paid by the
Company during the last three years, for each officer and director of
the Company. This information includes the dollar value of base
salaries, bonus awards and number of stock options granted, and certain
other compensation, if any.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Restricted Securities
Name and Annual Stock Underlying LTIP All
Other
Principal Compen- Options/ Compen-
Position Year Salary Bonus sation Award(s) SARs Payouts sation
($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Russell 1998 $52,000 0 0 0 0 0 $52,000
Whitney 1997 $39,365 0 0 0 0 0 $39,365
CEO 1996 -0- 0 0 0 0 0 -0-
Richard 1998 $30,281 0 0 0 0 0 $30,281
Brevoort 1997 $32,224 0 0 0 0 0 $32,224
President 1996 $19,480 0 0 0 0 0 $19,480
Ronald 1998 $ 5,927 0 0 0 0 0 $ 5,927
Simon 1997 -0- 0 0 0 0 0 -0-
Secretary 1996 -0- 0 0 0 0 0 -0-
</TABLE>
The Company anticipates paying the following salaries in 1999,
subject to the Company beginning profitable operations and generating
sufficient revenues to pay the same:
Russell Whitney President 1999 $ 75,000
Richard Brevoort Treasurer 1999 $ 40,000
Ronald Simon Secretary 1999 $ 36,000
There are no retirement, pension, or profit sharing plans for the
benefit of the Company's officers and directors. The Company has
adopted a Non-Qualified Incentive Stock Option Plan and the Company
supplies health insurance to its officers, directors and employees.
The following grants of stock options, whether or not in tandem
with stock appreciation rights ("SARs") and freestanding SARs have been
made to officers and/or directors:
<PAGE> 14
Number of
Securities
Number of Underlying
Securities Options/SARs
Underlying Granted Exercise Number of
Options During Last or Base Options Expiration
Name SARs Granted 12 Months[1] Price ($/Sh) Exercised Date
Richard Brevoort 75,000 75,000 $1.875 -0- 09/01/2008
Ronald Simon 125,000 125,000 $1.875 -0- 09/01/2008
Long-Term Incentive Plan Awards.
The Company does not have any long-term incentive plans that
provide compensation intended to serve as incentive for performance.
Compensation of Directors.
Directors do not receive any compensation for serving as members
of the Board of Directors. The Board has not implemented a plan to
award options to any Directors. There are no contractual arrangements
with any member of the Board of Directors.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On August 18, 1998, the Company acquired all (100 shares) of the
issued and outstanding shares of common stock of Win Systems, Inc. in
exchange for 6,750,000 shares, 187,500 Class A Warrants, and 340,000
Class B Warrants. All the shares of Win Systems, Inc. were owned by
Russell Whitney, the current Chief Executive Officer and Chairman of
the Board of Directors of the Company.
The Company has leased office space from Russ Whitney, its Chief
Executive Officer and a member of the Board of Directors pursuant to
the terms of a three year lease which commenced on September 1, 1999
and terminates on October 31, 2002 with a monthly rental payment of
$5,805.34. Russ Whitney is the Chief Executive Officer of the Company
and Chairman of its Board of Directors. The terms of the lease are no
less favorable as can be obtained from independent third parties.
The Company is indebted to Russ Whitney, the Company's Chief
Executive Officer and Chairman of the Board of Directors in the sum of
$19,979 for cash advances.
The Company has advanced to Precision Software Services, Inc. and
MRS Equity Corp., the amount of $528.00 and $8.00, respectively. The
aforementioned corporations are owned and controlled by Russ Whitney.
In addition, the Company has receivables from Whitney Leadership
Group, Inc. in the amount of $94,417 for sales of products and from
Teamwork Communication, Inc. in the amount of $20,000 in the form of a
short-term loan. The aforementioned corporations are controlled by
Russ Whitney.
<PAGE> 15
MRS Equity Corp. provides products and services for the Company
and the Company provides MRS Equity Corp. with payroll services. MRS
Equity is a wholly owned subsidiary corporation of Equity Corp.
Holdings which is owned and controlled by Russell Whitney, the
Company's Chief Executive Officer and Chairman of the Board of
Directors.
Precision Software Services, Inc. develops and licenses software
to the Company. Russell Whitney, the Company's Chief Executive Officer
and Chairman of the Board of Directors owns controlling interest in
Precision Software Services, Inc.
The Company provides payroll services to Whitney Leadership Group,
Inc. and in the past, Whitney Leadership Group, Inc. has lent money to
the Company. Russell Whitney, the Company's Chief Executive Officer
and Chairman of the Board of Directors President and Chief Operating
Officer of Whitney Leadership Group.
In January 1997, RAW, Inc. a corporation owned and controlled by
Russell Whitney, the Company's Chief Executive Officer and Chairman of
the Board of Directors, sold to the Company a portion of its inventory
consisting of vacant land.
The terms of all of the transactions between related parties were
no less favorable than could be obtained from independent third
parties.
ITEM 8. LEGAL PROCEEDINGS.
The Company is not a party defendant in any pending or threatened
litigation and to its knowledge, no action, suit or proceedings has
been threatened against its officers and its directors.
ITEM 9. MARKET PRICE FOR COMMON EQUITY AND OTHER SHAREHOLDER MATTERS.
The Company's shares are traded on the Bulletin Board operated by
the National Association of Securities Dealers, Inc. (the "Bulletin
Board") under the trading symbol "RUSS." The Company's shares began
trading in August 1998. Summary trading by quarter for the 1998 and
1997 fiscal years and the first and second quarter of 1999 are as
follows:
Fiscal Quarter High Bid[1] Low Bid[1]
1999
Second Quarter $ 2.00 $ 1.87
First Quarter $ 2.00 $ 1.75
1998
Fourth Quarter $ 2.50 $ 2.00
Third Quarter $ 3.50 $ 3.00
Second Quarter $ 0.00 $ 0.00
First Quarter $ 0.00 $ 0.00
<PAGE> 16
1997
Fourth Quarter $ 0.00 $ 0.00
Third Quarter $ 0.00 $ 0.00
[1] These quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commissions and may not represent actual
transactions.
As of July 26, 1999, the Company has 195 holders of record of its
Common Stock.
The Company has not paid any dividends since its inception and
does not anticipate paying any dividends on its Common Stock in the
foreseeable future.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
The Company has 7,524,022 shares of Common Stock issued and
outstanding as of July 26, 1999. Of the 7,524,022 shares of the
Company's Common Stock outstanding, 750,022 shares are freely tradeable
and 6,770,000 shares can only be resold in compliance with Reg. 144
adopted under the Securities Act of 1933 (the "Act").
In general, under Rule 144 as currently in effect, a person (or
persons whose Shares are aggregated) who has beneficially owned Shares
privately acquired directly or indirectly from the Company or from an
affiliate, for at least one year, or who is an affiliate, is entitled
to sell within any three month period a number of such Shares that does
not exceed the greater of 1% of the then outstanding shares of the
Company's Common Stock or the average weekly trading volume in the
Company's Common Stock during the four calendar weeks, immediately
preceding such sale. Sales under Rule 144 are also subject to certain
manner of sale provisions, notice requirements and the availability of
current public information about the Company. A person (or persons
whose Shares are aggregated) who is not deemed to have been an
affiliate at any time during the 90 day preceding a sale, and who has
beneficially owned Restricted Shares for at least two years, is
entitled to sell all such Shares under Rule 144 without regard to the
volume limitations, current public information requirements, manner of
sale provisions or notice requirements.
In 1996, the Company issued 976,200 shares of common stock to its
officers, directors and others pursuant to Reg. 504 of the Securities
Act of 1933.
On or about August 18, 1998, the Company reverse split its shares
of common stock on a 1 for 1.3016 basis.
On or about August 18, 1998, the Company issued 93,750 Class A
Warrants to Earnest Mathis, Jr. in consideration of $100.00 and 93,750
Class A Warrants to Gary Agron in consideration of $100.00. Messrs.
Mathis and Agron are former directors of the Company. The Class A
Warrants were issued pursuant to Section 4(2) of the Securities Act of
<PAGE> 17
1933 (the "Act") and are deemed "restricted" securities as that term is
defined in Reg. 144 of the Act. As of the date hereof, Messrs. Mathis
and Agron have not exercised any of the foregoing Class A Warrants.
For a description of the Class A Warrants, see "Description of
Securities."
On August 18, 1998, the Company acquired all of the issued and
outstanding shares of common stock of Win Systems, Inc., a corporation
controlled by Russell Whitney, the Company's Chief Executive Officer and
Chairman of the Board of Directors in consideration of 6,750,000 shares
of the Company's common stock and 340,000 Class B Warrant entitling the
holders thereof to acquire an addition 340,000 shares of the Company's
common stock at an exercise price of $4.00 per share up to August 18,
2002. The shares of common stock and warrants were issued pursuant to
Section 4(2) of the Securities Act of 1933. For a description of the
Class B Warrants, see "Description of Securities."
On February 1, 1999, the Company issued 20,000 "restricted" shares
to James Francis in exchange for the stock of Wealth Intelligence
Network, Inc. which is now a subsidiary of Whitney Information Network,
Inc. Also on May 31, 1999 and again on June 30, 1999, the Company
issued 2,000 "restrictecd" shares (4,000 total) to Visibility
Consulting, Inc., a financial public relations firm, for services. The
issuances of the foregoing shares were exempt from registration under
the Securities Act of 1933 pursuant to Section 4(2) of the Act.
ITEM 11. DESCRIPTION OF SECURITIES.
Common Stock
The authorized Common Stock of the Company consists of 25,000,000
shares, $0.001 par value per share. All shares have equal voting
rights, are non-assessable and have one vote per share. Voting rights
are not cumulative and, therefore, the holders of more than 50% of the
Common Stock could, if they choose to do so, elect all of the directors
of the Company.
Upon liquidation, dissolution or winding up of the Company, the
assets of the Company, after the payment of liabilities, will be
distributed pro rata to the holders of the Common Stock. The holders
of the Common Stock do not have preemptive rights to subscribe for any
securities of the Company and have no right to require the Company to
redeem or purchase their shares. The shares of Common Stock presently
outstanding are fully paid and non-assessable.
Dividends
Holders of the Common Stock are entitled to share equally in
dividends when, as and if declared by the Board of Directors of the
Company, out of funds legally available therefore. No dividend has
been paid on the Common Stock since inception, and none is contemplated
in the foreseeable future.
<PAGE> 18
Warrants
There are currently outstanding, 187,500 Class A Warrants and
340,000 Class B Warrants.
The Class A Warrants are exercisable at anytime prior to the
expiration of two (2) years from the date the Class A Warrants are
first registered with the Securities and Exchange Commission (the
"Commission"). As of the date hereof, the Class A Warrants have not
been registered with the Commission. Each Class A Warrant entitles the
warrant holder to purchase one additional share of common stock at an
exercise price of $4.00 per share. The Class A Warrants may not be
exercised by the holder thereof unless a current registration statement
covering the shares underlying the Class A Warrants is effective with
the Securities and Exchange Commission (the "Commission"). The
exercise price of the Class A Warrants is subject to adjustment upon
the occurrence of certain events and the Company may reduce the
exercise price of the Class A Warrants, subject to notifying the
warrant holder of such adjustment. The Class A Warrants are subject to
the terms and conditions of a Warrant Agreement between the Company and
Corporate Stock Transfer. The foregoing is a brief summary of the
material conditions of said Warrant Agreement and is qualified by the
terms of the Warrant Agreement.
The Class B Warrants are exercisable at anytime prior to the
expiration of four (4) years from the date the Class B Warrants are
first registered with the Commission. As of the date hereof, the Class
B Warrants have not been registered with the Commission. Each Class B
Warrant entitles the warrant holder to purchase one additional share of
common stock at an exercise price of $4.00 per share. The Class B
Warrants may not be exercised by the holder thereof unless a current
registration statement covering the shares underlying the Class B
Warrants is effective with the Securities and Exchange Commission (the
"Commission"). The exercise price of the Class B Warrants is subject
to adjustment upon the occurrence of certain events and the Company may
reduce the exercise price of the Class B Warrants, subject to notifying
the warrant holder of such adjustment. The Class B Warrants are
subject to the terms and conditions of a Warrant Agreement between the
Company and Corporate Stock Transfer. The foregoing is a brief summary
of the material conditions of said Warrant Agreement and is qualified
by the terms of the Warrant Agreement.
Transfer and Warrant Agent
The Company's transfer and warrant agent is Corporate Stock
Transfer, Republic Plaza, 370 17th Street, Suite 2350, Denver Colorado
80202-46147 and its telephone number is (303) 595-3300.
<PAGE> 19
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The laws of the state of Nevada under certain circumstances
provide for indemnification of the Company's Officers, Directors and
controlling persons against liabilities which they may incur in such
capacities. A summary of the circumstances in which such
indemnification is provided for is contained herein, but this
description is qualified in its entirety by reference to the Company's
Articles of Incorporation and to the statutory provisions.
In general, any Officer, Director, employee or agent may be
indemnified against expenses, fines, settlements or judgments arising
in connection with a legal proceeding to which such person is a party,
if that person's actions were in good faith, were believed to be in the
Company's best interest, and were not unlawful. Unless such person is
successful upon the merits in such an action, indemnification may be
awarded only after a determination by independent decision of the Board
of Directors, by legal counsel, or by a vote of the shareholders, that
the applicable standard of conduct was met by the person to be
indemnified.
The circumstances under which indemnification is granted in
connection with an action brought on behalf of the Company is generally
the same as those set forth above; however, with respect to such
actions, indemnification is granted only with respect to expenses
actually incurred in connection with the defense or settlement of the
action. In such actions, the person to be indemnified must have acted
in good faith and in a manner believed to have been in the Company's
best interest, and have not been adjudged liable for negligence or
misconduct.
ITEM 13. FINANCIAL STATEMENTS.
Financial Statements begin on following page.
<PAGE> 20
LARRY LEGEL, CPA
5100 NORTH FEDERAL HIGHWAY, #409
FORT LAUDERDALE, FL 33308
(954) 493-8900
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors of the
WIN SYSTEMS INTERNATIONAL, INC.
Cape Coral, FL
I have audited the accompanying consolidated balance sheet of Win
Systems International, Inc. as of December 31, 1998 and 1997, and the
related statements of consolidated operations, changes in consolidated
stockholders' equity and consolidated cash flows for the years ended
December 31, 1998 and 1997. These financial statements are the
responsibility of the Company's management. My responsibility is to
express an opinion on these consolidated financial statements based on
my audits.
I have conducted my audit in accordance with generally accepted
auditing standards. Those standards require that I plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. I believe that my audits provide a reasonable basis for
my opinion.
In my opinion, the consolidated financial statements referred to above
present fairly, the financial position of Win Systems International,
Inc. as of December 31, 1998 and 1997, and the results of its
consolidated operations and its consolidated cash flows for the years
then ended, in conformity with generally accepted accounting principles
consistently applied.
LARRY LEGEL
/s/ Larry Legel
Certified Public Accountant
June 9, 1999
F-1
<PAGE> 21
WIN SYSTEMS INTERNATIONAL, INC.
Consolidated Balance Sheet
At December 31, 1998 and 1997
<TABLE>
<CAPTION>
ASSETS
1998 1997
<S> <C> <C>
Current Assets:
Cash $ 370,571 $ 30,036
Accounts Receivable 980,263 78,116
Notes Receivable 10,558 25,537
Prepaid Advertising and Other 141,448 179,688
Due From Affiliates 117,322
Land for Resale 12,336 79,961
Deferred Production Costs 114,953
Deferred Seminar Costs 3,983,689 66,000
Miscellaneous Receivable 17,831 8,226
----------- ---------
Total Current Assets 5,748,971 467,564
----------- ---------
Total Assets $ 5,748,971 $ 467,564
=========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES
Current Liabilities
Accounts Payable $ 564,708 $ 84,107
Income Taxes Currently Payable 148,000
Loans From Affiliates 12,428 171,437
Deferred Educational Revenues 3,958,244 239,000
Other Accrued Liabilities 62,948 5,813
----------- ---------
Total Current Liabilities $ 4,746,328 $ 500,357
----------- ---------
Other Liabilities and Deferred Credits
Deferred Income Taxes $ 267,000
Loans from Shareholder 64,979 64,979
----------- ---------
Total Other Liabilities 331,979 64,979
----------- ---------
Total Liabilities $ 5,078,307 $ 565,336
----------- ---------
SHAREHOLDERS' EQUITY
Shareholders' Equity
Common Stock (no par value stock,
7,500,047 shares issued and
outstanding) $ 2,602 $ 2,602
Paid In Capital 900 900
Retained Earnings 667,162 (101,274)
----------- ---------
Total Shareholders' Equity 670,664 (97,772)
----------- ---------
Total Liabilities and Shareholders'
Equity $ 5,748,971 $ 467,564
=========== =========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-2
<PAGE> 22
WIN SYSTEMS INTERNATIONAL, INC.
Consolidated Statement of Operations
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Sales $ 13,760,208 $ 5,558,280
Cost of Sales $ 4,682,850 $ 1,910,300
------------ -----------
Gross Profit $ 9,077,358 $ 3,647,980
------------ -----------
Expenses
Advertising and Sales Expense $ 5,351,293 $ 2,769,896
General and Administrative Expense $ 2,542,629 $ 867,820
------------ -----------
$ 7,893,922 $ 3,637,716
------------ -----------
Income Before Taxes $ 1,183,436 $ 10,264
Income Taxes (see note) $ (415,000)
------------ -----------
NET INCOME $ 768,436 $ 10,264
Retained Earnings, beginning of year $ (101,274) $ (111,538)
------------ -----------
Retained Earnings, end of year $ 667,162 $ (101,274)
============ ===========
Basic and Fully Diluted Earnings
Per Share** $ 0.10 $ 0.01
============ ===========
** Adjusted for Reverse Split
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-3
<PAGE> 23
WIN SYSTEMS INTERNATIONAL, INC.
Consolidated Statement of Changes in Stockholders' Equity
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
Common Stock Retained Total
Number of Paid-In Earnings Shareholders'
Shares Value Capital (Deficit) Equity
<S> <C> <C> <C> <C> <C>
Balance
December 31, 1996 976,200 $ 2,602 $ (2,500) $ 102
Net loss for 1997 $ (64) $ (64)
Balance
December 31, 1997 976,200 $ 2,602 $ (2,564) $ 38
Reverse Split (226,153)
Merger with Win
Systems, Inc. 6,750,000 $ 900 $ (98,710) $ (97,810)
Net income for the
period ending
December 31, 1998 $ 768,436 $ 768,436
--------- ------- ----- --------- ---------
Balance
December 31, 1998 7,500,047 $ 2,602 $ 900 $ 667,162 $ 670,664
========= ======= ===== ========= =========
Weighted Average Number
of Shares Outstanding
During the Period 7,500,047 **
=========
** Assumes the merger took place at the beginning of the period
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-4
<PAGE> 24
WIN SYSTEMS INTERNATIONAL, INC.
Consolidated Statement of Cash Flows
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings from operations $ 768,436 $ 10,264
Changes in operating assets and liabilities
Increase in Accounts Receivable (902,148) (78,116)
Increase in Deferred Production Costs (114,953) (25,537)
Decrease in Notes Receivable 14,979
(Increase) Decrease in Prepaids
and other assets 110,306 (179,688)
Increase in Other Receivables (9,405) (8,326)
Increase in Accounts Payable 480,601 84,107
Increase in Deferred Income 3,719,244 239,000
Increase in Income Tax Payable 415,000
Increase in Other Liabilities 55,097 4,095
----------- ---------
Net cash flow from operations 4,537,157 45,799
----------- ---------
CASH USED IN INVESTING ACTIVITIES
Purchase of Real Estate for Resale (79,961)
Loans made to Affiliates (117,973)
----------- ---------
Net cash used in investing activities (117,973) (79,961)
----------- ---------
CASH USED IN FINANCING ACTIVITIES
Issuance of Common Stock (2,602)
Loans from Affiliates 128,358
Net Repayments of Loans by Affiliates (158,358) (5,644)
Increase in Deferred Expenses (3,917,689) (66,000)
----------- ---------
Net cash used in financing activities (4,078,649) 56,714
----------- ---------
Increase in cash 340,535 22,552
Cash at beginning of year 30,036 7,484
----------- ---------
Cash at end of year $ 370,571 $ 30,036
=========== =========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-5
<PAGE> 25
WIN SYSTEMS INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31,1998 AND 1997
SIGNIFICANT ACCOUNTING POLICIES
General
WIN SYSTEMS INTERNATIONAL, INC. was incorporated under the laws of the
State of Colorado and began operations in the Educational Seminar industry
on August 18, 1998 when it merged with Win Systems, Inc.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
Fair Value of Financial Statements
The Company's financial instruments consist principally of cash, accounts
receivable and notes receivable, deferred seminar costs, accounts payable,
accrued expenses, deferred educational revenues, and notes payable. The
carrying amounts of such financial instruments as reflected in the balance
sheets approximate their estimated fair value as of December 31, 1998. The
estimated fair value is not necessarily indicative of the amounts the
Company could realize in a current market exchange or of future earnings
or cash flows.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of Win Systems International, Inc. and its wholly owned subsidiaries, Win
Systems, Inc, Whitney Canada, Ltd. and 1311448 Ontario Corp. All
significant intercompany accounts and transactions have been eliminated.
F-6
<PAGE> 26
WIN SYSTEMS INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31,1998 AND 1997
Revenue Recognition
Revenue from product sales is recognized at the time the sale is made.
Revenue from educational seminars is recorded (1) when the non refundable
deposit is received for the seminars (2) when it is reasonably certain
that the balance of the option to purchase additional educational programs
will be exercised and paid and (3) revenues are deferred when the seminar
proceeds are received in full in the current period and the seminar takes
place in a subsequent period. See liability for Deferred Revenues on the
balance sheet in the amount of $3,958,244.
Deferred Expenses for Future Educational Programs
The Company incurs a liability when a student signs up to attend a future
educational seminar with the Company and the tuition that was collected
or accrued is deferred. The expenses related to the deferred tuition are
also deferred. The deferred expenses associated with future educational
programs is shown on the balance sheet as Deferred Seminar Costs in the
amount of $3,983,689.
Property and Equipment
The Company owned no property or equipment at the balance sheet dates.
However; it did own some land for resale at December 31, 1998, which it
plans to sell to an affiliate in 1999 (at the same price it purchased the
land from the affiliate at the beginning of 1997). See related party
transactions.
Income Taxes
The Company adopted Statement of Financial Accounting Standards No. 109
(SFAS No. 109), "Accounting for Income Taxes" in 1993. SFAS No. 109
requires the liability method of accounting for income taxes. Deferred
income taxes result in temporary differences in the recognition of revenue
and expenses for income tax and financial reporting purposes. These
differences are primarily due to the differences in accrual basis
reporting for statement purposes and cash basis reporting for tax
purposes.
F-7
<PAGE> 27
WIN SYSTEMS INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31,1998 AND 1997
Accounts and Notes Receivable
Notes Receivable represent one-year notes at various interest rates
received on sales of real estate. The accounts receivable are trade
receivables arising from the sale of educational products and seminars.
The company believes the allowance for doubtful accounts is sufficient to
cover any uncollectible amounts as of December 31, 1998.
Land for Resale
The land held for resale on the balance sheet is recorded at cost and is
reasonably expected to be sold or exchanged during the succeeding year.
Net Income Per Common Share
In 1997 the Company adopted SFAS No. 128 "Earnings Per Share." SFAS No.
128 (the "Statement") establishes standards for computing and presenting
earnings per share ("EPS"). This Statement replaces the presentation of
primary EPS with a presentation of basic EPS and requires dual
presentation of basic and diluted EPS on the face of the statement of
operations for all entities with complex capital structures. This
Statement also requires a reconciliation of the numerator and denominator
of the basic EPS computation to the numerator and denominator of the
diluted EPS computation.
Merger With Win Systems, Inc.
On August 18,1998, Win Systems, Inc. merged with WIN SYSTEMS
INTERNATIONAL, INC. (formerly Gimmel Enterprises, Inc.) and exchanged 100%
of its shares for 90% of Gimmel's shares bringing the total shares of Win
Systems International, Inc. (issued and outstanding) at August 18, 1998
to 7,500,047. Win Systems, Inc. became a wholly owned subsidiary of Win
System International, Inc. The acquisition was treated as a pooling of
interests. The financial statements from January 1, 1997 through December
31, 1998 are based upon the assumption that the companies were combined
for the entire period and all stock splits have been reflected in the
statements as of the beginning of the period. Also on August 18, 1998, Win
Systems International Inc. issued 187,500 Class A stock purchase warrants
and 340,000 Class B stock purchase warrants. Both the Class A and Class
B warrants are exercisable at $4.00 per share.
F-8
<PAGE> 28
WIN SYSTEMS INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31,1998 AND 1997
Merger With Win Systems, Inc. (continued)
The Class A warrants and the Class B warrants are exercisable 2 years and
4 years respectively after the underlying stock is registered. The Company
also instituted a stock option plan for key personnel. Under the plan
options are to be granted at the fair market value at the date of the
grant and exercisable for a 1 1--year period after the grant with a three-
year vesting schedule. The Company has reserved 750,000 shares for the
stock option plan of which 385,000 option shares have been granted (at an
exercise price of $2.00 per share) to the balance sheet date. None have
been exercised or expired to date.
Related Party Transactions
The Company has rented its premises since 1992 from the Chairman of the
Board and pays rent on annual leases. Rentals under the related party
lease were $37,657 $17,025 for the years ended 31, 1998 and 1997,
respectively. The company leases approximately 8,200 square feet
presently. Its space requirements doubled in 1998. Future minimum
payments, by year and in the aggregate under capital and noncancellable
operating leases with initial or remaining terms of one year or more are
$44,202 for 1999.
At December 31,1997 and December 31, 1998 the related party receivables
and payables on the balance sheet were as follows:
December 31, December 31,
1997 1998
Payables:
Long-term
Loans Payable to the Chairman
of the Board $ 64,979 $ 64,979
Short-Term
Accounts Payable to Precision
Software Services, Inc. $ 21,466 $ -0-
Amounts due to Whitney
Leadership Group, Inc. $ 97,938 $ -0-
Amounts Due to RAW, Inc. $ 37,552 $ 1,220
Amounts Due to MRS Equity
Corp, $ 14,481 $ 11,208
--------- --------
$ 171,437 $ 12,428
========= ========
F-9
<PAGE> 29
WIN SYSTEMS INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31,1998 AND 1997
Related Party Transactions (continued)
Receivables:
Due to Whitney Leadership Group $ 89,754
Due to MRS Equity Corp $ 1,073
Due to Precision Software Services, Inc. $ 6,495
Due to Teamwork Communications, Inc. $ 20,000
---------
$ 117,322
=========
The Company has receivables from Whitney Leadership Group in the amount
of $89,754; Precision Software Services, Inc. in the amount of $6,495; MRS
Equity Corp. in the amount of $1,073 and Teamwork Communications, Inc. in
the amount of $20,000 shown on the balance sheet as Due from Affiliates
at December 31, 1998.
MRS Equity Corp. provides certain products and services for WIN SYSTEMS
INTERNATIONAL, INC. and WIN SYSTEMS INTERNATIONAL, INC. provides MRS
Equity Corp. with payroll services including leased employees. WIN SYSTEMS
INTERNATIONAL, INC. provides payroll services to MRS Equity Corp in the
amount of $115,583 for 1997 and $100,272 for 1998. MRS Equity Corp.
provided WIN SYSTEMS INTERNATIONAL, INC. with $43,212 and $216,500 for
product costs for 1997 and 1998 respectively. MRS Equity Corp. is a 100
percent subsidiary of Equity Corp. Holdings, Inc. of which the Chairman
of the Board of WIN SYSTEMS INTERNATIONAL, INC. owns a controlling
interest.
Precision Software Services, Inc. is a Company that develops and licenses
software primarily for the real estate and small business industries. The
Chairman of the Board of Directors of WIN SYSTEMS INTERNATIONAL, INC. owns
a majority interest in Precision Software Services, Inc. During 1997 and
1998 the Company provided WIN SYSTEMS INTERNATIONAL, INC. $115,791 and
$67,925 in product cost, respectively. WIN SYSTEMS INTERNATIONAL, INC.
provides payroll services to Precision Software Services, Inc in the
amount of $30,704 for 1997 and $44,135 for 1998.
F-10
<PAGE> 30
WIN SYSTEMS INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31,1998 AND 1997
Related Party Transactions (continued)
WIN SYSTEMS INTERNATIONAL, INC. provides payroll services to Whitney
Leadership Group, Inc. in the amount of $123,051 for 1997 and $133,928 for
1998. Whitney Leadership Group, Inc. also loaned WIN SYSTEMS
INTERNATIONAL, INC. $50,000 in 1997 and provided office and other services
to WIN SYSTEMS INTERNATIONAL, INC. amounting to $123,489 for 1998. The
Chairman of the Board of WIN SYSTEMS INTERNATIONAL, INC. is the President
and Chief Operating Officer of Whitney Leadership Group, Inc.
RAW, Inc. is a company owned by the Chairman of the Board of WIN SYSTEMS
INTERNATIONAL, INC., which buys, sells and invests in real property. It
was felt that WIN SYSTEMS, INC. could enhance its operations if it could
also provide the same services that RAW, Inc. did. RAW, Inc. on January
1, 1997 sold Win Systems, Inc a portion of its inventory of real estate
on hand at that date for $70,077. Repayments on this loan were $68,857
through December 31, 1998 leaving a balance of $1,220 at that date. During
1997 RAW, Inc. sold real estate valued at $94,075 to WIN SYSTEMS, INC.
Management decided in late 1997 to discontinue this practice in WIN
SYSTEMS, INC. as this practice detracted WIN SYSTEMS, INC. from its
primary focus of education and training.
In 1998, the company's outside accountant became the Chief Financial
Officer of the company and a shareholder of the company. In the year ended
December 31, 1997 the company paid $ 5,000 in accounting fees to its now
Chief Financial Officer and $19,052 for 1998.
Those items above that are reasonably expected to be collected within one
year are shown as short term and those, which are not expected to be
collected during the next twelve months, are shown as long-term.
F-11
<PAGE> 31
WIN SYSTEMS INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31,1998 AND 1997
Income Taxes
The reconciliation between the provision for income taxes and the amount
which results from applying the federal statutory rate of 34% to the
income before income taxes is as follows:
Income tax expense at the statutory rate
for continuing operations $ 404,000
State taxes, net of federal tax benefit $ 45,000
Utilization of net operating losses $ (34,000)
---------
Income tax expense per books $ 415,000
=========
Currently Payable $ 148,000
Deferred $ 267,000
---------
$ 415,000
=========
INDEBTEDNESS
There were no short or long-term borrowings from unrelated third parties
for 1997 and the year ended December 31, 1998. The interest expense was
$-0- for 1997 and 1998 to date. (See Related Party Transactions). The
Company was indebted to its Chairman for short term non-interest bearing
advances in the amount of $64,979 at both December 31,1997 and December
31, 1998.
INCOME TAXES
At December 31, 1997 the company had Federal net operating loss
carryforwards of approximately $96,000 that will be used in 1998. The
company has previously reported its revenues and expenses for income tax
purposes on the "cash basis" of accounting. A small provision has been
recorded in 1997 due to the further utilization of prior year's net
operating losses. Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for
income tax purposes.
F-12
<PAGE> 32
WIN SYSTEMS INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31,1998 AND 1997
COMMITMENTS AND CONTINGENCIES
The company carries liability insurance coverage, which it considers
sufficient to meet regulatory and consumer requirements and to protect the
company's employees, assets and operations.
The company, in the ordinary course of conducting its business, is subject
to various state and federal requirements. In the opinion of management,
the company is in compliance with these requirements.
The company is currently working to resolve the potential impact of the
Year 2000 on the processing of date-sensitive information by the Company's
computerized information systems. The year 2000 problem is the result of
computer programs being written using two digits (rather than four) to
define the applicable year. Any of the Company's programs that have time-
sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000, which could result in miscalculations or system
failures. Costs of addressing potential problems are expensed as incurred
and are not expected to have a material adverse impact on the Company's
financial position, results of operations or cash flows in future periods.
However, if the Company or its vendors are unable to resolve such issues
in a timely manner, it could result in a financial risk. Accordingly, the
Company plans to devote the necessary resources to resolve all significant
Year 2000 issues in a timely manner. While the Company does not at this
time anticipate significant problems with suppliers, it will develop
contingency plans, if required, with these third parties due to the
possibility of compliance issues.
Subsequent Event
At a meeting on May 26, 1999, the Company, with the-consent of the Board
of Directors, the shareholders voted unanimously voted in favor of
changing the name of the Company from Win Systems International, Inc. to
Whitney Information Network, Inc.
F-13
<PAGE> 33
WHITNEY INFORMATION NETWORK, INC.
Consolidated Balance Sheet
At June 30, 1999 and 1998
ASSETS
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Current Assets:
Cash $ 1,512,455 $ 578,013
Accounts Receivable $ 1,730,688 $ 588,122
Notes Receivable $ 29,687
Prepaid Advertising and Other $ 531,949 $ 300,605
Due From Affiliates $ 114,015
Land for Resale $ 12,336 $ 15,596
Deferred Production Costs $ 114,953
Deferred Seminar Costs $ 6,831,389 $ 351,000
Miscellaneous Receivable $ 58,008 $ 25,271
------------ -----------
Total Current Assets $ 10,905,793 $ 1,888,294
------------ -----------
Property and Equipment
depreciation of $7,659 in 1999 $ 127,444 $ -
------------ -----------
Other Assets
Contract Rights (net of
amortization) $ 49,500 $ -
------------ -----------
Total Assets $ 11,082,737 $ 1,888,294
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Current Liabilities
Accounts Payable $ 666,667 $ 471,746
Income Taxes Currently Payable $ 342,868 $ 107,000
Loans From Affiliates $ 192,616
Deferred Educational Revenues $ 8,357,501 $ 842,304
Other Accrued Liabilities $ 74,199 $ 35,264
------------ -----------
Total Current Liabilities $ 9,441,235 $ 1,648,930
------------ -----------
Other Liabilities and Deferred Credits
Deferred Income Taxes $ 267,000
Loans from Shareholder $ 19,979 $ 64,979
------------ -----------
Total Other Liabilities $ 286,979 $ 64,979
------------ -----------
Total Liabilities $ 9,728,214 $ 1,713,909
------------ -----------
1-a
<PAGE> 34
WHITNEY INFORMATION NETWORK, INC.
Consolidated Balance Sheet
At June 30, 1999 and 1998
SHAREHOLDERS' EQUITY
1999 1998
<S> <C> <C>
Shareholders' Equity
Common Stock (no par value stock,
7,500,047 shares issued and
outstanding) $ 60,352 $ 100
Paid In Capital $ 900 $ 900
Retained Earnings $ 1,293,271 $ 173,375
------------ -----------
Total Shareholders' Equity $ 1,354,523 $ 174,375
------------ -----------
Total Liabilities and
Shareholders' Equity $ 11,082,737 $ 1,888,284
============ ===========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
1-b
<PAGE> 35
WHITNEY INFORMATION NETWORK, INC.
Consolidated Statement of Operations
For the Six Months Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Sales $ 10,286,320 $ 8,178,965
Cost of Sales $ 4,340,090 $ 2,865,929
------------ -----------
Gross Profit $ 5,946,230 $ 5,313,036
------------ -----------
Expenses
Advertising and Sales Expense $ 2,974,198 $ 3,256,358
General and Administrative Expense $ 2,002,042 $ 1,677,593
------------ -----------
$ 4,976,240 $ 4,933,951
------------ -----------
Income Before Taxes $ 969,990 $ 379,085
Income Taxes (see note) $ (343,881) $ (107,000)
------------ -----------
NET INCOME $ 626,109 $ 272,085
Retained Earnings, beginning
of period $ 667,162 $ (98,710)
------------ -----------
Retained Earnings, end of period $ 1,293,271 $ (101,274)
============ ===========
Basic and Fully Diluted Earnings
Per Share** $ 0.08 $ 0.04
============ ===========
Weighted average number of shares
outstanding during the period. 7,513,859 7,500,047
============ ===========
</TABLE>
Prior periods have been restated to reflect
the merger as if it took place at the beginning
of the period.
The accompanying notes are an integral part of the consolidated
financial statements.
2
<PAGE> 36
WHITNEY INFORMATION NETWORK, INC.
Consolidated Statement of Cash Flows
For the Six Months Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings from operations $ 626,109 $ 272,086
Add back Depreciation and Amortization $ 8,476
----------- ----------
$ 634,585 $ 272,086
Changes in operating assets and liabilities
Increase in Accounts Receivable $ (750,425) $ (510,006)
Increase in Deferred Production Costs $ (285,000)
Decrease in Notes Receivable $ 10,558 $ (4,150)
(Increase) Decrease in Prepaids and
other assets $ (390,501) $ (120,917)
Increase in Other Receivables $ (40,137) $ (16,945)
Increase in Accounts Payable $ 101,959 $ 387,639
Increase in Deferred Income $ 4,399,257 $ 888,304
Increase in Income Tax Payable $ 194,868 $ 107,000
Increase in Other Liabilities $ 11,211 $ 29,451
----------- ----------
Net cash flow from operations $ 4,171,375 $ 747,462
----------- ----------
CASH USED IN INVESTING ACTIVITIES
Purchase of Property and Equipment $ (135,103)
Real Estate Sold $ 64,375
Acquisition of Contract Rights $ (50,317)
Loans made to Affiliates $ 3,307 $ 21,178
----------- ----------
Net cash used in investing activities $ (182,113) $ 85,553
----------- ----------
CASH USED IN FINANCING ACTIVITIES
Issuance of Common Stock $ 57,750
Loans from affiliates $ (57,428)
Increase in Deferred Expenses $(2,847,700) $ (285,000)
----------- ----------
Net cash used in financing activities $(2,847,378) $ (285,000)
----------- ----------
Increase in cash $ 1,141,884 $ 548,015
Cash at beginning of year $ 370,571 $ 29,998
----------- ----------
Cash at end of year $ 1,512,455 $ 578,013
=========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
3
<PAGE> 37
WHITNEY INFORMATION NETWORK, INC.
Consolidated Statement of Changes in Stockholders' Equity
For the Six Months Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
Common Stock Retained Total
Number of Paid-In Earnings Shareholders'
Shares Value Capital (Deficit) Equity
<S> <C> <C> <C> <C> <C>
Balance
December 31, 1996 976,200 $ 2,602 $ (2,500) $ 102
Net loss for 1997 $ (64) $ (64)
--------- -------- ----- ----------- -----------
Balance
December 31, 1997 976,200 $ 2,602 $ (2,564) $ 38
Reverse Split (226,153)
Merger with Win Systems,
Inc. 6,750,000 $ 900 $ (98,710) $ (97,810)
Net income for the
period ending
December 31, 1998 $ 768,436 $ 768,436
--------- -------- ----- ----------- -----------
Balance
December 31, 1998 7,500,047 $ 2,602 $ 900 $ 667,162 $ 670,664
Issuance of Shares
for Acquisitions 20,000 $ 50,000 $ 50,000
Issuance of Shares
for Services 4,000 $ 7,750 $ 7,750
Net income for the
six months ending
June 30, 1999 $ 626,109 $ 626,109
--------- -------- ----- ----------- -----------
Balance
June 30, 1999 7,524,047 $ 60,352 $ 900 $ 1,293,271 $ 1,354,523
========= ======== ===== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
4
<PAGE> 38
WHITNEY INFORMATION NETWORK, INC.
Comparative Consolidated Statement of Operations
For the Six Months and Three Months Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
Quarter Quarter Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
<C> <C> <C> <C>
Sales $ 5,631,788 $ 5,833,306 $10,286,320 $ 8,178,965
Cost of Sales $ 2,139,434 $ 1,886,438 $ 4,340,090 $ 2,865,929
----------- ----------- ----------- -----------
Gross Profit $ 3,492,354 $ 3,946,868 $ 5,946,230 $ 5,313,036
----------- ----------- ----------- -----------
Expenses
Advertising and Sales
Expense $ 2,102,307 $ 2,752,179 $ 2,974,198 $ 3,256,358
General and Administrative
Expense $ 964,452 $ 994,121 $ 2,002,042 $ 1,677,593
----------- ----------- ----------- -----------
$ 3,066,759 $ 3,746,300 $ 4,976,240 $ 4,933,951
----------- ----------- ----------- -----------
Income Before Taxes $ 425,595 $ 200,568 $ 969,990 $ 379,085
Income Taxes
(see note) $ (150,841) $ (77,000) $ (343,881) $ (107,000)
----------- ----------- ----------- -----------
NET INCOME $ 274,754 $ 123,568 $ 626,109 $ 272,085
Retained Earnings, beginning
of year $ 1,018,517 $ 49,807 $ 667,162 $ (98,710)
----------- ----------- ----------- -----------
Retained Earnings,
end of year $ 1,293,271 $ 173,375 $ 1,293,271 $ 173,375
=========== =========== =========== ===========
Basic and Fully Diluted
Earnings Per Share**$ 0.04 $ 0.02 $ 0.08 $ 0.04
=========== =========== =========== ===========
Weighted average number of
shares outstanding during
the period. 7,513,859 7,500,047 7,510,398 7,500,047
=========== =========== =========== ===========
</TABLE>
Prior periods have been restated to reflect
the merger as if it took place at the beginning
of the period.
The accompanying notes are an integral part of the consolidated
financial statements.
5
<PAGE> 39
WHITNEY INFORMATION NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
SIGNIFICANT ACCOUNTING POLICIES
General
WHITNEY INFORMATION NETWORK, INC. (formerly Win Systems International,
Inc.) was incorporated under the laws of the State of Colorado and began
operations in the Educational Seminar industry on August 18, 1998 when
it merged with Win Systems, Inc.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
Fair Value of Financial Statements
The Company's financial instruments consist principally of cash, accounts
receivable and notes receivable, deferred seminar costs, accounts
payable, accrued expenses, deferred educational revenues, and notes
payable. The carrying amounts of such financial instruments as reflected
in the balance sheets approximate their estimated fair value as of
December 31, 1998. The estimated fair value is not necessarily
indicative of the amounts the Company could realize in a current market
exchange or of future earnings or cash flows.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of WHITNEY INFORMATION NETWORK, INC. and its wholly owned subsidiaries,
Whitney Education Group, Inc. (formerly Win Systems, Inc,) Whitney
Canada, Ltd. and 1311448 Ontario Corp and Wealth Intelligence Network,
Inc., Whitney Consulting Services, Russ Whitney's Wealth Centers, Inc. and
Whitney Consulting, Inc. All significant inter-company accounts and
transactions have been eliminated.
5
<PAGE> 40
WHITNEY INFORMATION NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
Revenue Recognition
Revenue from product sales is recognized at the time the sale is made.
Revenue from educational seminars is recorded (1) when the non refundable
deposit is received for the seminars (2) when it is reasonably certain
that the balance of the option to purchase additional educational
programs will be exercised and paid and (3) revenues are deferred when
the seminar proceeds are received in full in the current period and the
seminar takes place in a subsequent period. See liability for Deferred
Revenues on the balance sheet in the amount of $8.657,501 at June 30,
1999 and $842,304 at June 30, 1998.
Deferred Expenses for Future Educational Programs
The Company incurs a liability when a student signs up to attend a future
educational seminar with the Company and the tuition that was collected
or accrued is deferred. The expenses related to the deferred tuition are
also deferred. The deferred expenses associated with future educational
programs are shown on the balance sheet as Deferred Seminar Costs in the
amount of $6,831,389 at June 30, 1999 and $351,000 at June 30, 1998.
Property and Equipment
Property and equipment are carried at cost. Depreciation is provided
using accelerated and straight-line methods over the following useful
lives:
Office Furniture 7 years
Office Equipment 5 years
Intangibles (Contract Rights) 15 years
Also; the Company owned land for resale at June 30, 1999, which it plans
to sell to an affiliate in the second half of1999 (at the same price it
purchased the land from the affiliate at the beginning of 1997). See
related party transactions.
6
<PAGE> 41
WHITNEY INFORMATION NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
Income Taxes
The Company adopted Statement of Financial Accounting Standards No. 109
(SFAS No. 109), "Accounting for Income Taxes" in 1993. SFAS No. 109
requires the liability method of accounting for income taxes. Deferred
income taxes result in temporary differences in the recognition of
revenue and expenses for income tax and financial reporting purposes.
These differences are primarily due to the differences in accrual basis
reporting for statement purposes and cash basis reporting for tax
purposes.
Accounts and Notes Receivable
Notes Receivable represent one-year notes at various interest rates
received on sales of real estate. The accounts receivable are trade
receivables arising from the sale of educational products and seminars.
The company believes the allowance for doubtful accounts is sufficient
to cover any uncollectible amounts as of December 31, 1998.
Land for Resale
The land held for resale on the balance sheet is recorded at cost and is
reasonably expected to be sold or exchanged during the succeeding year.
Net Income Per Common Share
In 1997 the Company adopted SFAS No. 128 "Earnings Per Share." SFAS No.
128 (the "Statement") establishes standards for computing and presenting
earnings per share ("EPS"). This Statement replaces the presentation of
primary EPS with a presentation of basic EPS and requires dual
presentation of basic and diluted EPS on the face of the statement of
operations for all entities with complex capital structures. This
Statement also requires a reconciliation of the numerator and denominator
of the basic EPS computation to the numerator and denominator of the
diluted EPS computation.
7
<PAGE> 42
WHITNEY INFORMATION NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
Merger With Win Systems, Inc.
On August 18, 1998, Win Systems, Inc. was acquired by WHITNEY INFORMATION
NETWORK, INC. (formerly Win Systems International, Inc. and prior to that
Gimmel Enterprises, Inc.) in a reverse merger whereby Win Systems, Inc.
exchanged 100% of its shares for 90% of Gimmel's shares bringing the total
shares of WHITNEY INFORMATION NETWORK, INC. (issued and outstanding) at
August 18, 1998 to 7,500,047. Win Systems, Inc. became a wholly owned
subsidiary of Whitney Information Network, Inc. (WIN). The acquisition
was treated as a pooling of interests. The financial statements from
January 1, 1997 through December 31, 1998 are based upon the assumption
that the companies were combined for the entire period and all stock
splits have been reflected in the statements as of the beginning of the
period. Also on August 18, 1998, WIN issued 187,500 Class A stock
purchase warrants and 340,000 Class B stock purchase warrants. Both the
Class A and Class B warrants are exercisable at $4.00 per share.
The Class A warrants and the Class B warrants are exercisable 2 years and
4 years respectively after the underlying stock is registered. The
Company also instituted a stock option plan for key personnel. Under the
plan options are to be granted at the fair market value at the date of
the grant and exercisable for a 10-year period after the grant with a
three-year vesting schedule. The Company has reserved 750,000 shares for
the stock option plan of which 415,000 option shares have been granted
(at an exercise price of approximately $2.00 per share) to the balance
sheet date. None have been exercised or expired to date.
Related Party Transactions
The Company has rented its headquarters premises in Cape Coral, Florida
since 1992 from the Chairman of the Board and pays rent on annual leases.
Rentals under the related party lease were $22,100 and $13,233 for the
six months ended June 30, 1999 and 1998, respectively. The company leases
approximately 8,200 square feet presently. Future minimum payments, by
year and in the aggregate under capital and noncancellable operating
leases with initial or remaining terms of one year or more are shown in
the Commitments footnote.
8
<PAGE> 43
WHITNEY INFORMATION NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
Related Party Transactions (continued)
At June 30,1999 and June 30, 1998 the related party receivables and
payables on the balance sheet were as follows:
June 30, 1998 June 30,1999
Payables:
Long-term
Loans Payable to the Chairman
of the Board $ 64,979 $ 19,979
========= =========
Short-Term
Accounts Payable to Precision
Software Services, Inc. $ 21,466 $ -0-
Amounts due to Whitney
Leadership Group, Inc. $ 119,117 $ -0-
Amounts Due to RAW, Inc. $ 37,552 $ -0-
Amounts Due to MRS Equity
Corp, $ 14,481 $ -0-
--------- ---------
$ 192,616 $
========= =========
Receivables:
Due from Whitney Leadership Group $ 94,417
Due form MRS Equity Corp $ 528
Due from Precision Software Services, Inc. $ 8
Due from Teamwork Communications, Inc. $ 20,000
---------
$ 114,953
=========
The Company has receivables from Whitney Leadership Group in the amount
of $94,917; Precision Software Services, Inc. in the amount of $8; MRS
Equity Corp. in the amount of $528 and Teamwork Communications, Inc. in
the amount of $20,000 shown on the balance sheet as Due from Affiliates
at December 31, 1999.
9
<PAGE> 44
WHITNEY INFORMATION NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
Related Party Transactions (continued):
MRS Equity Corp. provides certain products and services for WHITNEY
INFORMATION NETWORK, INC. and WHITNEY INFORMATION NETWORK, INC. provides
MRS Equity Corp. with payroll services including leased employees.
WHITNEY INFORMATION NETWORK, INC. provides payroll services to MRS Equity
Corp in the amount of $51,747 for the six months ended June 30 1999 and
$51,795 for the six months ended June 30,1998. MRS Equity Corp.
provided WHITNEY INFORMATION NETWORK, INC. with $148,350 and $89,600 for
product costs for the six months ending1999 and 1998 respectively. MRS
Equity Corp. is a 100 percent subsidiary of Equity Corp. Holdings, Inc.
of which the Chairman of the Board of WHITNEY INFORMATION NETWORK, INC.
owns a controlling interest.
Precision Software Services, Inc. is a Company that develops and licenses
software primarily for the real estate and small business industries.
The Chairman of the Board of Directors of WHITNEY INFORMATION NETWORK,
INC. owns a majority interest in Precision Software Services, Inc.
During the first six months of1999 and 1998 the Company provided WHITNEY
INFORMATION NETWORK, INC. $180,123 and $115,791 in product cost,
respectively. WHITNEY INFORMATION NETWORK, INC. provides payroll
services to Precision Software Services, Inc in the amount of $22,367 for
the six months ended June 30,1999 and $16,119 for six months ended June
30,1998.
WHITNEY INFORMATION NETWORK, INC. provides payroll services to Whitney
Leadership Group, Inc. in the amount of $46,767 for 1999 and $75,071 for
1998. The Chairman of the Board of WHITNEY INFORMATION NETWORK, INC. is
the President and Chief Operating Officer of Whitney Leadership Group,
Inc.
RAW, Inc. is a company owned by the Chairman of the Board of WHITNEY
INFORMATION NETWORK, INC., which buys, sells and invests in real
property. It was felt that the Company could enhance its operations if
it could also provide the same services that RAW, Inc. did. RAW, Inc.
on January 1, 1997 sold WHITNEY INFORMATION NETWORK, INC., a portion of
its inventory of real estate on hand at that date, Management decided in
late 1997 to discontinue real estate purchases in WHITNEY INFORMATION
NETWORK, INC., as this practice detracted the Company from its primary
focus of education and training.
10
<PAGE> 45
WHITNEY INFORMATION NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
Related Party Transactions (continued):
In 1998, the company's outside accountant became the Chief Financial
Officer of the company and a shareholder of the company. In the year
ended December 31, 1998 the company paid $ 19,052 in accounting fees to
its now Chief Financial Officer and $-0- in 1999.
Those items above that are reasonably expected to be collected within one
year are shown as short term and those, which are not expected to be
collected during the next twelve months, are shown as long-term.
Income Taxes
The reconciliation between the provision for income taxes and the amount
which results from applying the federal statutory rate of 34% to the
income before income taxes is as follows:
Income tax expense at the statutory rate
for continuing operations $ 314,881
State taxes, net of federal tax benefit $ 29.000
----------
Income tax expense per books $ 343,881
Currently Payable $ 343,881
Deferred -0-
----------
$ 343,881
==========
At December 31, 1997 the company had Federal net operating loss carry
forwards of approximately $96,000 that were used in 1998. The company
has previously reported its revenues and expenses for income tax purposes
on the "cash basis" of accounting. Deferred income taxes reflect the net
tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts
used for income tax purposes.
INDEBTEDNESS
There were no short or long-term borrowings from unrelated third parties
for the six months ending June 30, 1998 and 1999. The interest expense
was $-0- for the six months ending June 30, 1998 and 1999 to date. (See
Related Party Transactions). The Company was indebted to its Chairman
for short-term non-interest bearing advances in the amount of $64,979 at
both June 30, 1998 and $19,979 at June 30, 1999.
11
<PAGE> 46
WHITNEY INFORMATION NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
COMMITMENTS AND CONTINGENCIES
The company carries liability insurance coverage, which it considers
sufficient to meet regulatory and consumer requirements and to protect
the company's employees, assets and operations.
The company, in the ordinary course of conducting its business, is
subject to various state and federal requirements. In the opinion of
management, the company is in compliance with these requirements.
The company is currently working to resolve the potential impact of the
Year 2000 on the processing of date-sensitive information by the Company's
computerized information systems. The year 2000 problem is the result
of computer programs being written using two digits (rather than four)
to define the applicable year. Any of the Company's programs that have
time-sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000, which could result in miscalculations or
system failures. Costs of addressing potential problems are expensed as
incurred and are not expected to have a material adverse impact on the
Company's financial position, results of operations or cash flows in
future periods. However, if the Company or its vendors are unable to
resolve such issues in a timely manner, it could result in a financial
risk. Accordingly, the Company plans to devote the necessary resources
to resolve all significant Year 2000 issues in a timely manner. While
the Company does not at this time anticipate significant problems with
suppliers, it will develop contingency plans, if required, with these
third parties due to the possibility of compliance issues.
The Company leases the following properties: (1) Its headquarters
building in Cape Coral Florida at an annual rental of $69,664 for
approximately 8,200 square feet, (2) Its telemarketing facility in
Draper, Utah at an annual rental of $46,563 for 3,678 square feet
beginning August 8, 1999 and (3) a Wealth Center facility in Jackson, MS
for $42,600 per year for 3,000 square feet beginning September 1, 1999.
Future minimum payments, by year and in the aggregate under capital and
noncancellable operating leases with initial or remaining terms of one
year or more are as follows:
First year $ 133,795
Second Year $ 158,820
Third Year $ 120,020
Fourth Year $ 39,675
12
<PAGE> 47
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There have been no disagreements on accounting and financial
disclosures from the inception of the Company through the date of this
Registration Statement.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
(a) List of Financial Statements
Independent Auditors' Report
Balance Sheet
Statement of Income
Statement of Cash Flows
Statement of Shareholders' Equity
Notes to Financial Statements
Unaudited Quarterly Financial Statements for 6/30/99
b) List of Exhibits.
Exhibit No. Description
3.1 Articles of Incorporation.
3.2 Bylaws.
3.3 Amended Articles of Incorporation
3.4 Amended Articles of Incorporation
4.1 Specimen Stock Certificate.
27 Financial Data Schedule
99.1 Class A Warrant Agreement
99.2 Class B Warrant Agreement
99.3 Non-Qualified Incentive Stock Option Plan
99.4 Office Lease
<PAGE> 48
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of
1934, the registrant caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
Whitney Information Network, Inc.
BY: /s/ Richard Brevoort
Richard Brevoort, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Form 10-SB Registration Statement has been signed by the following
persons in the capacities and on the dates indicated:
Signatures Title Date
/s/ Russell A. Whitney
Russell A. Whitney Chief Executive Officer September 17, 1999
and Chairman of the Board
of Directors
/s/ Richard W. Brevoort
Richard W. Brevoort President and a member September 17, 1999
of the Board of Directors
/s/ Ronald S. Simon
Ronald S. Simon Secretary, Treasurer, September 17, 1999
Chief Financial Officer,
and a member of the Board
of Directors
<PAGE> 49
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
GIMMEL ENTERPRISES, INC.
The undersigned, who, if a natural person, is eighteen years of
age or older, hereby establishes a corporation pursuant to the Colorado
Business Corporation Act as amended and adopts the following Articles
of Incorporation:
FIRST: The name of the corporation is GIMMEL ENTERPRISES, INC.
SECOND: The corporation shall have and may exercise all of the
rights, powers and privileges now or hereafter conferred upon
corporations organized under the laws of Colorado. In addition, the
corporation may do everything thing necessary, suitable or proper for
the accomplishment of any of its corporate purposes. The corporation
may conduct part or all of its business in any part of Colorado, the
United States or the world and may hold, purchase, mortgage, lease and
convey real and personal property in any of such places.
THIRD: (a) The aggregate number of common shares which the
corporation shall have the authority to issue is 25,000,000 shares of
Common Stock. The shares of this class of Common Stock shall have
unlimited voting rights and shall constitute the sole voting group of
the corporation, except to the extent any additional established in
accordance with the Colorado Business Corporation Act. The shares of
this class shall also be entitled to receive the net assets the
corporation upon dissolution.
(b) Each shareholder of record shall have one vote for each share
of stock standing in his name on the books of the corporation and
entitled to vote, except that in the election of directors each
shareholder shall have as many votes for each share held by him as
there are directors to be elected and for whose election the
shareholders has a right to vote. Cumulative voting shall not be
permitted in the election of directors or otherwise. Preemptive rights
to purchase additional shares of stock are denied.
(c) Unless otherwise ordered by a court of competent jurisdiction,
at all meetings of shareholders one-third of the shares of a voting
group entitled to vote at such meeting, represented in person or by
proxy, shall constitute a quorum of that voting group. Unless otherwise
required by law, a majority vote of those shareholders represented in
person or by proxy will be sufficient to take any corporate action.
(d) The corporation shall have the authority to issue 10,000,000
shares of Preferred Stock, which may be issued in one or more series at
the discretion of the board of directors. In establishing a series,
the board of directors shall give to it a distinctive designation so as
to distinguish it from the shares of all other series and classes,
shall fix the number of shares in such series, and the preferences,
rights and restrictions thereof. All shares of any one series shall be
alike in every particular except as otherwise provided by these
Articles of Incorporation or the Colorado Business Corporation Code.
<PAGE> 50
(1) Dividends. Dividends in cash, property or shares shall be
paid upon the Preferred Stock for any year on a cumulative or
noncumulative basis as determined by a resolution of the board of
directors prior to the issuance of such Preferred Stock, to the extent
earned surplus for each such year is available, in an amount as
determined by a resolution of the board of directors. Such Preferred
Stock dividends shall be paid pro rata to holders of Preferred Stock as
determined by a resolution of the board of directors prior to the
issuance of such Preferred Stock. No other dividend shall be paid on
the Preferred Stock.
Dividends in cash, property or shares of the corporation may
be paid upon the Common Stock, as and when declared by the board of
directors, out of funds of the corporation to the extent and in the
manner permitted by law, except that no Common Stock dividend shall be
paid for any year unless the holders of Preferred Stock, if any, shall
receive the maximum allowable Preferred Stock dividend for such year.
(2) Distribution in Liquidation. Upon any liquidation,
dissolution or winding up of the corporation, and after paying or
adequately providing for the payment of all its obligations, the
remainder of the assets of the corporation shall be distributed, either
in cash or in kind, first pro rata to the holders of the Preferred
Stock until an amount to be determined by a resolution of the board of
directors prior to issuance of such Preferred Stock has been
distributed per share, and, then, the remainder pro rata to the holders
of the Common Stock.
(3) Redemption. The Preferred Stock may be redeemed in whole or in
part as determined by a resolution of the board of directors prior to
the issuance of such Preferred Stock, upon prior notice to the holders
of record of the Preferred Stock, published, mailed and given in such
manner and form and on such other terms and conditions as may be
prescribed by the Bylaws or by resolution of the board of directors, by
payment in cash or Common Stock for each share of the Preferred Stock
to be redeemed, as determined by a resolution of the board of directors
prior to the issuance of such Preferred Stock. Common Stock used to
redeem Preferred Stock shall be valued as determined by a resolution of
the board of directors prior to the issuance of such Preferred Stock.
Any rights to or arising from fractional shares shall be treated as
rights to or arising from one share. No such purchase or retirement
shall be made if the capital of the corporation would be impaired
thereby.
FOURTH: The number of directors of the corporation shall be fixed
by the bylaws, or if the bylaws fail to fix such a number, then by
resolution adopted from time to time by the board of directors,
provided that the number of directors shall not be less than three nor
more than nine. Three directors shall constitute the initial board of
directors. The following persons are elected to serve as the
corporation's initial directors until the first annual meeting of
shareholders or until their successors are duly elected and qualified:
<PAGE>
<PAGE> 51
Name Address
Earnest Mathis, Jr. 14 Red Tail Road
Highlands Ranch, Colorado 80126
Gary McAdam 14 Red Tail Road
Highlands Ranch, Colorado 80126
Gary A. Agron 5445 DTC Parkway, Suite 520
Englewood, Colorado 80111
FIFTH: The street address of the initial registered office of the
corporation is 4 W. Dry Creek Circle, Suite 140, Littleton, Colorado
80120. The name of the initial registered agent of the corporation at
such address is Earnest Mathis, Jr.
SIXTH: The address of the initial principal office of the
corporation is 4 W. Dry Creek Circle, Suite 140, Littleton, Colorado
80120.
SEVENTH: The following provisions are inserted for the management
of the business and for the conduct of the affairs of the corporation,
and the same are in furtherance of and not in limitation or exclusion
of the powers conferred by law.
(a) Conflicting Interest Transactions. As used in this paragraph,
"conflicting interest transaction means any of the following: (i) a
loan or other assistance by the corporation to a director of the
corporation or to an entity in which a director of the corporation is
a director or officer or has a financial interest; (ii) a guaranty by
the corporation of an obligation of a director of the corporation or of
an obligation of an entity in which a director of the corporation is a
director or officer or has a financial interest; or (iii) a contract or
transaction between the corporation and a director of the corporation
or between the corporation and an entity in which a director of the
corporation is a director or officer or has a financial interest. No
conflicting, interest transaction shall be void or voidable, be
enjoined, be set aside, or give rise to an award of damages or other
sanctions in a proceeding by a shareholder or by or in the right of the
corporation, solely because the conflicting interest transaction
involve's a director of the corporation or an entity in which a
director of the corporation is a director or officer or has a financial
interest, or solely because the director is present at or participates
in the meeting of the corporation's board of directors or of the
committee of the board of directors which authorizes, approves or
ratifies a conflicting interest transaction, or solely because the
director's vote is counted for such purpose if: (A) the material facts
as to the director's relationship or interest and as to the conflicting
interest transaction are disclosed or are known to the board of
directors or the committee, and the board of directors or committee in
good faith authorizes, approves or ratifies the conflicting interest
transaction by the affirmative vote of a majority of the disinterested
directors, even though the disinterested directors are less than a
quorum; or (B) the material facts as to the director's relationship or
interest and as to the conflicting interest transaction are disclosed
or are known to the shareholders entitled to vote thereon, and the
<PAGE> 52
conflicting interest transaction is specifically authorized, approved
or ratified in good faith by a vote of the shareholders; or (C) a
conflicting interest transaction is fair as to the corporation as of
the time it is authorized, approved or ratified by the board of
directors, a committee thereof, or the shareholders. Common or
interested directors may be counted in determining the presence of a
quorum at a meeting of the board of directors or of a committee which
authorizes, approves or ratifies the conflicting interest transaction.
(b) Loans and Guaranties for the Benefit of Directors. Neither the
board of directors nor any committee thereof shall authorize a loan by
the corporation to a director of the corporation or to an entity in
which a director of the corporation is a director or officer or has a
financial interest, or a guaranty by the corporation of an obligation
of a director of the corporation or of an obligation of an entity in
which a director of the corporation is a director or officer or has a
financial interest, until at least ten days after written notice of the
proposed authorization of the loan or guaranty has been given to the
shareholders who would be entitled to vote thereon if the issue of the
loan or guaranty were submitted to a vote of the shareholders. The
requirements of this paragraph (b) are in addition to, and not in
substitution for, the provisions of paragraph (a) of Article SEVENTH.
(c) Indemnification. The corporation shall indemnify, to the
maximum extent permitted by law, any person who is or was a director,
officer, agent, fiduciary or employee of the corporation against any
claim, liability or expense arising against or incurred by such person
made party to a proceeding because he is or was a director, officer,
agent, fiduciary or employee of the corporation or because he is or was
serving another entity or employee benefit plan as a director, officer,
partner, trustee, employee, fiduciary or agent at the corporation's
request. The corporation shall further have the authority to the
maximum extent permitted by law to purchase and maintain insurance
providing such indemnification.
(d) Limitation on Director's Liability. No director of this
corporation shall have any personal liability for monetary damages to
the corporation or its shareholders for breach of his fiduciary duty as
a director, except that this provision shall not eliminate or limit the
personal liability of a director to the corporation or its shareholders
for monetary damages for: (i) any breach of the director's duty of
loyalty to the corporation or its shareholders; (ii) acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) voting, for or assenting, to a distribution in
violation of Colorado Revised Statutes subsection 7-104-401 or the
articles of incorporation if it is established that the director did
not perform his duties in compliance with Colorado Revised Statutes
subsection 7-108-401, provided that the personal liability of a
director in this circumstance shall be limited to the amount of the
distribution which exceeds what could have been distributed without
violation of Colorado Revised Statutes subsection 7-106-401 or the
articles of incorporation; or (iv) any transaction from which the
director directly or indirectly derives an improper personal benefit.
Nothing contained herein will be construed to deprive any director of
his right to all defenses ordinarily available to a director nor will
anything herein be construed to deprive any director of any right he
may have for contribution from any other director or other person.
<PAGE> 53
(e) Negation of Equitable Interests in Shares or Rights. Unless a
person is recognized as a shareholder through procedures established by
the corporation pursuant to Colorado Revised Statutes subsection 7-
107-204 or any similar law, the corporation shall be entitled to treat the
registered holder of any shares of the corporation as the owner thereof
for all purposes permitted by the Colorado Business Corporation Act,
including without limitation all rights deriving from such shares, and
the corporation shall not be bound to recognize any equitable or other
claim to, or interest in, such shares or rights deriving from such
shares on the part of any other person including without limitation, a
purchaser, assignee or transferee of such shares, unless and until such
other person becomes the registered holder of such shares or is
recognized as such, whether or not the corporation shall have either
actual or constructive notice of the claimed interest of such other
person. By way of example and not of limitation, until such other
person has become the registered holder of such shares or is recognized
pursuant to Colorado Revised Statutes subsection 7-107-204 or any
similar applicable law, he shall not be entitled: (i) to receive notice
of the meetings of the shareholders; (ii) to vote at such meetings;
(iii) to examine a list of the shareholders; (iv) to be paid dividends
or other distributions payable to shareholders; or (v) to own, enjoy
and exercise any other rights deriving from such shares against the
corporation. Nothing contained herein will be construed to deprive any
beneficial shareholder, as defined in Colorado Revised Statutes
subsection 7-113-101(1) of any right he may have pursuant to Article
113 of the Colorado Business Corporation Act or any subsequent law.
(f) Merger With or Acquisition of Another Entity. Inasmuch as the
corporation has been formed to merge with or to acquire another
business entity, it shall not be necessary for the corporation to
obtain shareholder approval for such a transaction. Any such
determination shall be at the discretion of the corporation's board of
directors.
EIGHTH: The name and address of the incorporator is:
Earnest Mathis, Jr.
4 W. Dry Creek Circle, Suite 140
Littleton, Colorado 80120
DATED the 22nd of February, 1996.
/s/ Earnest Mathis, Jr.
Incorporator
Earnest Mathis, Jr. hereby consents to the appointment as the
initial registered agent for the Corporation.
/s/ Earnest Mathis, Jr.
Initial Registered Agent
<PAGE> 54
EXHIBIT 3.2
BYLAWS
OF
GIMMEL ENTERPRISES, INC.
ARTICLE I - Offices
The principal office of the corporation shall be designated from
time to time by the corporation and may be within or outside of
Colorado.
The corporation may have such other offices, either within or
outside Colorado, as the board of directors may designate or as the
business of the corporation may require from time to time.
The registered office of the corporation required by the Colorado
Business Corporation Act to be maintained in Colorado may be, but need
not be, identical with the principal office, and the address of the
registered office may be changed from time to time by the board of
directors.
ARTICLE II - Shareholders
Section 1. Annual Meeting. The annual meeting of the shareholders
shall be held during the month of January of each year on a date and at
a time fixed by the board of directors of the corporation (or by the
president in the absence of action by the board of directors),
beginning with the year 1997, for the purpose of electing directors and
for the transaction of such other business as may come before the
meeting. If the election of directors is not held on the day fixed as
provided herein for any annual meeting of the shareholders, or any
adjournment thereof, the board of directors shall cause the election to
be held at a special meeting of the shareholders as soon thereafter as
it may conveniently be held.
A shareholder may apply to the district court in the county in
Colorado where the corporation's principal office is located or, if the
corporation has no principal office in Colorado, to the district court
of the county in which the corporation's registered office is located
to seek an order that a shareholder meeting be held (i) if an annual
meeting was not held within six months after the close of the
corporation's most recently ended fiscal year or fifteen months after
its last annual meeting, whichever is earlier, or (ii) if the
shareholder participated in a proper call of or proper demand for a
special meeting and notice of the special meeting was not given within
thirty days after the date of the call or the date the last of the
demands necessary to require calling of the meeting was received by the
corporation pursuant to C.R.S. subsection 7-107-102(1)(b), or the
special meeting was not held in accordance with the notice.
Section 2. Special Meetings. Unless otherwise prescribed by
statute, special meetings of the shareholders may be called for any
purpose by the president or by the board of directors. The president
shall call a special meeting of the shareholders if the corporation
receives one or more written demands for the meeting, stating the
<PAGE> 55
purpose or purposes for which it is to be held, signed and dated by
holders of shares representing at least ten percent of all the votes
entitled to be cast on any issue proposed to be considered at the
meeting.
Section 3. Place of Meeting. The board of directors may designate
any place, either within or outside Colorado, as the place for any
annual meeting or any special meeting called by the board of directors.
A waiver of notice signed by all shareholders entitled to vote at a
meeting may designate any place, either within or outside Colorado, as
the place for such meeting. If no designation is made, or if a special
meeting is called other than by the board, the place of meeting shall
be the principal office of the corporation.
Section 4. Notice of Meeting. Written notice stating the place,
date, and hour of the meeting shall be given not less than ten nor more
than sixty days before the date of the meeting, except that (i) if the
number of authorized shares is to be increased, at least thirty days'
notice shall be given, or (ii) any other longer notice period is
required by the Colorado Business Corporation Act. The secretary shall
be required to give such notice only to shareholders entitled to vote
at the meeting except as otherwise required by the Colorado Business
Corporation Act.
Notice of a special meeting shall include a description of the
purpose or purposes of the meeting. Notice of an annual meeting need
not include a description of the purpose or purposes of the meeting
except the purpose or purposes shall be stated with respect to (i) an
amendment to the articles of incorporation of the corporation, (ii) a
merger or share exchange in which the corporation is a party and, with
respect to a share exchange, in which the corporation's shares will be
acquired, (iii) a sale, lease, exchange or other disposition, other
than in the usual and regular course of business, of all or
substantially all of the property of the corporation or of another
entity which this corporation controls, in each case with or without
the goodwill, (iv) a dissolution of the corporation, (v) restatement of
the articles of incorporation, or (vi) any other purpose for which a
statement of purpose is required by the Colorado Business Corporation
Act. Notice shall be given personally or by mail, private carrier,
telegraph, teletype, electronically transmitted facsimile or other form
of wire or wireless communication by or at the direction of the
president, the secretary, or the officer or persons calling the
meeting, to each shareholder of record entitled to vote at such
meeting. If mailed and if in a comprehensible form, such notice shall
be deemed to be given and effective when deposited in the United States
mail, properly addressed to the shareholder at his address as it
appears in the corporation's current record of shareholders, with first
class postage prepaid. If notice is given other than by mail, and
provided that such notice is in a comprehensible form, the notice is
given and effective on the date actually received by the shareholder.
<PAGE> 56
If requested by the person or persons lawfully calling such
meeting, the secretary shall give notice thereof at corporate expense.
No notice need be sent to any shareholder if three successive notices
mailed to the last known address of such shareholder have been returned
as undeliverable until such time as another address for such
shareholder is made known to the corporation by such shareholder. In
order to be entitled to receive notice of any meeting, a shareholder
shall advise the corporation in writing of any change in such
shareholder's mailing address as shown on the corporation's books and
records.
When a meeting is adjourned to another date, time or place, notice
need not be given of the new date, time or place if the new date, time
or place of such meeting is announced before adjournment at the meeting
at which the adjournment is taken. At the adjourned meeting the
corporation may transact any business which may have been transacted at
the original meeting. If the adjournment is for more than 120 days, or
if a new record date is fixed for the adjourned meeting, a new notice
of the adjourned meeting shall be given to each shareholder of record
entitled to vote at the meeting as of the new record date.
A shareholder may waive notice of a meeting before or after the
time and date of the meeting by a writing signed by such shareholder.
Such waiver shall be delivered to the corporation for filing with the
corporate records, but this delivery and filing shall not be conditions
to the effectiveness of the waiver. Further, by attending a meeting
either in person or by proxy, a shareholder waives objection to lack of
notice or defective notice of the meeting unless the shareholder
objects at the beginning of the meeting to the holding of the meeting
or the transaction of business at the meeting because of lack of notice
or defective notice. By attending the meeting, the shareholder also
waives any objection to consideration at the meeting of a particular
matter not within the purpose or purposes described in the meeting
notice unless the shareholder objects to considering the matter when it
is presented.
Section 5. Fixing of Record Date. For the purpose of determining
shareholders entitled to (i) notice of or vote at any meeting of
shareholders or any adjournment thereof, (ii) receive distributions or
share dividends, (iii) demand a special meeting, or (iv) make a
determination of shareholders for any other proper purpose, the board
of directors may fix a future date as the record date for any such
determination of shareholders, such date in any case to be not more
than seventy days, and, in case of a meeting of shareholders, not less
than ten days, prior to the date on which the particular action
requiring such determination of shareholders is to be taken. If no
record date is fixed by the directors, the record date shall be the day
before the notice of the meeting is given to shareholders, or the date
on which the resolution of the board of directors providing for a
distribution is adopted, as the case may be. When a determination of
shareholders entitled to vote at any meeting of shareholders is made as
provided in this section, such determination shall apply to any
adjournment thereof unless the board of directors fixes a new record
date, which it must do if the meeting is adjourned to a date more than
<PAGE> 57
120 days after the date fixed for the original meeting. Unless
otherwise specified when the record date is fixed, the time of day for
such determination shall be as of the corporation's close of business
on the record date.
Notwithstanding the above, the record date for determining the
shareholders entitled to take action without a meeting or entitled to
be given notice of action so taken shall be the date a writing upon
which the action is taken is first received by the corporation. The
record date for determining shareholders entitled to demand a special
meeting shall be the date of the earliest of any of the demands
pursuant to which the meeting is called.
Section 6. Voting Lists. After a record date is fixed for a
shareholders' meeting, the secretary shall make, at the earlier of ten
days before such meeting or two business days after notice of the
meeting has been given, a complete list of the shareholders entitled to
be given notice of such meeting or any adjournment thereof The list
shall be arranged by voting groups and within each voting group by
class or series of shares, shall be in alphabetical order within each
class or series, and shall show the address of and the number of shares
of each class or series held by each shareholder. For the period
beginning the earlier of ten days prior to the meeting or two business
days after notice of the meeting is given and continuing through the
meeting and any adjournment thereof, this list shall be kept on file at
the principal office of the corporation, or at a place (which shall be
identified in the notice) in the city where the meeting will be held.
Such list shall be available for inspection on written demand by any
shareholder (including for the purpose of this Section 6 any holder of
voting trust certificates) or his agent or attorney during regular
business hours and during the period available for inspection. The
original stock transfer books shall be prima facie evidence as to who
are the shareholders entitled to examine such Est or transfer books or
to vote at any meeting of shareholders.
Any shareholder, his agent or attorney may copy the list during
regular business hours and during the period it is available for
inspection, provided (i) the shareholder has been a shareholder for at
least three months immediately preceding the demand or holds at least
five percent of all outstanding shares of any class of shares as of the
date of the demand, (ii) the demand is made in good faith and for a
purpose reasonably related to the demanding shareholder's interest as
a shareholder, (iii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to
inspect, (iv) the records are directly connected with the described
purpose, and (v) the shareholder pays a reasonable charge covering the
costs of labor and material for such copies, not to exceed the
estimated cost of production and reproduction.
Section 7. Recognition Procedure for Beneficial Owners. The board
of directors may adopt by resolution a procedure whereby a shareholder
of the corporation may certify in writing to the corporation that all
or a portion of the shares registered in the name of such shareholder
are held for the account of a specified person or persons. The
resolution may set forth (i) the types of nominees to which it applies,
(ii) the rights or privileges that the corporation will recognize in a
<PAGE> 58
beneficial owner, which may include rights and privileges other than
voting, (iii) the form of certification and the information to be
contained therein, (iv) if the certification is with respect to a
record date, the time within which the certification must be received
by the corporation, (v) the period for which the nominee's use of the
procedure is effective, and (vi) such other provisions with respect to
the procedure as the board deems necessary or desirable. Upon receipt
by the corporation of a certificate complying with the procedure
established by the board of directors, the persons specified in the
certification shall be deemed, for the purpose or purposes set forth in
the certification, to be the registered holders of the number of shares
specified in place of the shareholder making the certification.
Section 8. Quorum and Manner of Acting. A majority of the votes
entitled to be cast on a matter by a voting group represented in person
or by proxy, shall constitute a quorum of that voting group for action
on the matter. If less than a majority of such votes are represented at
a meeting, a majority of the votes so represented may adjourn the
meeting from time to time without further notice, for a period not to
exceed 120 days for any one adjournment. If a quorum is present at such
adjourned meeting any business may be transacted which might have been
transacted at the meeting as originally noticed. The shareholders
present at a duly organized meeting may continue to transact business
until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum, unless the meeting is
adjourned and a new record date is set for the adjourned meeting.
If a quorum exists, action on a matter other than the election of
directors by a voting group is approved if the votes cast within the
voting group favoring the action exceed the votes cast within the
voting group opposing the action, unless the vote of a greater number
or voting by classes is required by law or the articles of
incorporation.
Section 9. Proxies. At all meetings of shareholders, a shareholder
may vote by proxy by signing an appointment form or similar writing,
either personally or by his duly authorized attorney-in-fact. A
shareholder may also appoint a proxy by transmitting or authorizing the
transmission of a telegram, teletype, or other electronic transmission
providing a written statement of the appointment to the proxy, a proxy
solicitor, proxy support service organization, or other person duly
authorized by the proxy to receive appointments as agent for the proxy,
or to the corporation. The transmitted appointment shall set forth or
be transmitted with written evidence from which it can be determined
that the shareholder transmitted or authorized the transmission of the
appointment. The proxy appointment form or similar writing shall be
filed with the secretary of the corporation before or at the time of
the meeting. The appointment of a proxy is effective when received by
the corporation and is valid for eleven months unless a different
period is expressly provided in the appointment form or similar
writing.
Any complete copy, including an electronically transmitted
facsimile, of an appointment of a proxy may be substituted for or used
in lieu of the original appointment for any purpose for which the
original appointment could be used.
<PAGE> 59
Revocation of a proxy does not affect the right of the corporation
to accept the proxy's authority unless (i) the corporation had notice
that the appointment was coupled with an interest and notice that such
interest is extinguished is received by the secretary or other officer
or agent authorized to tabulate votes before the proxy exercises his
authority under the appointment, or (ii) other notice of the revocation
of the appointment is received by the secretary or other officer or
agent authorized to tabulate votes before the proxy exercises his
authority under the appointment. Other notice of revocation may, in the
discretion of the corporation, be deemed to include the appearance at
a shareholders' meeting of the shareholder who granted the proxy and
his voting in person on any matter subject to a vote at such meeting.
The death or incapacity of the shareholder appointing a proxy does
not affect the right of the corporation to accept the proxys authority
unless notice of the death or incapacity is received by the secretary
or other officer or agent authorized to tabulate votes before the proxy
exercises his authority under the appointment.
The corporation shall not be required to recognize an appointment
made irrevocable if it has received a writing revoking the appointment
signed by the shareholder (including a shareholder who is a successor
to the shareholder who granted the proxy) either personally or by his
attorney-in-fact, notwithstanding that the revocation may be a breach
of an obligation of the shareholder to another person not to revoke the
appointment.
Subject to Section I I and any express limitation on the proxy's
authority appearing on the appointment form, the corporation is
entitled to accept the proxy's vote or other action as that of the
shareholder making the appointment.
Section 10. Voting of Shares. Each outstanding share, regardless
of class, shall be entitled to one vote, except in the election of
directors, and each fractional share shall be entitled to a
corresponding fractional vote on each matter submitted to a vote at a
meeting of shareholders, except to the extent that the voting rights of
the shares of any class or classes are limited or denied by the
articles of incorporation as permitted by the Colorado Business
Corporation Code. Cumulative voting shall not be permitted in the
election of directors or for any other purpose. Each record holder of
stock shall be entitled to vote in the election of directors and shall
have as many votes for each of the shares owned by him as there are
directors to be elected and for whose election he has the right to
vote.
At each election of directors, that number of candidates equaling
the number of directors to be elected, having the highest number of
votes cast in favor of their election, shall be elected to the board of
directors.
Except as otherwise ordered by a court of competent jurisdiction
upon a finding that the purpose of this Section would not be violated
in the circumstances presented to the court, the shares of the
corporation are not entitled to be voted if they are owned, directly or
indirectly, by a second corporation, domestic or foreign, and the first
<PAGE> 60
corporation owns, directly or indirectly, a majority of the shares
entitled to vote for directors of the second corporation except to the
extent the second corporation holds the shares in a fiduciary capacity.
Redeemable shares are not entitled to be voted after notice of
redemption is mailed to the holders and a sum sufficient to redeem the
shares has been deposited with a bank, trust company or other financial
institution under an irrevocable obligation to pay the holders the
redemption price on surrender of the shares.
Section 11. Corporation's Acceptance of Votes. If the name signed
on a vote, consent, waiver, proxy appointment, or proxy appointment
revocation corresponds to the name of a shareholder, the corporation,
if acting in good faith, is entitled to accept the vote, consent,
waiver, proxy appointment or proxy appointment revocation and give it
effect as the act of the shareholder. If the name signed on a vote,
consent, waiver, proxy appointment or proxy appointment revocation does
not correspond to the name of a shareholder, the corporation, if acting
in good faith, is nevertheless entitled to accept the vote, consent,
waiver, proxy appointment or proxy appointment revocation and to give
it effect as the act of the shareholder if
(i) the shareholder is an entity and the name signed purports to
be that of an officer or agent of the entity;
(ii the name signed purports to be that of an administrator,
executor, guardian or conservator representing the
shareholder and, if the corporation requests, evidence of
fiduciary status acceptable to the corporation has been
presented with respect to the vote, consent, waiver, proxy
appointment or proxy appointment revocation;
(ii the name signed purports to be that of a receiver or trustee
in bankruptcy of the shareholder and, if the corporation
requests, evidence of this status acceptable to the
corporation has been presented with respect to the vote,
consent, waiver, proxy appointment or proxy appointment
revocation;
(iv the name signed purports to be that of a pledgee, beneficial
owner or attorney-in-fact of the shareholder and, if the
corporation requests, evidence acceptable to the corporation
of the signatory's authority to sign for the shareholder has
been presented with respect to the vote, consent, waiver,
proxy appointment or proxy appointment revocation;
(v) two or more persons are the shareholder as co-tenants or
fiduciaries and the name signed purports to be the name of at
least one of the co-tenants or fiduciaries, and the person
signing appears to be acting on behalf of all the co-tenants
or fiduciaries; or
(ii the acceptance of the vote, consent, waiver, proxy
appointment or proxy appointment revocation is otherwise
proper under rules established by the corporation that are
not inconsistent with this Section 11.
<PAGE> 61
The corporation is entitled to reject a vote, consent, waiver,
proxy appointment or proxy appointment revocation if the secretary or
other officer or agent authorized to tabulate votes, acting in good
faith, has reasonable basis for doubt about the validity of the
signature on it or about the signatory's authority to sign for the
shareholder.
Neither the corporation nor its officers nor any agent who accepts
or rejects a vote, consent, waiver, proxy appointment or proxy
appointment revocation in good faith and in accordance with the
standards of this Section is liable in damages for the consequences of
the acceptance or rejection.
Section 12. Informal Action by Shareholders. Any action required
or permitted to be taken at a meeting of the shareholders may be taken
without a meeting if a written consent (or counterparts thereof) that
sets forth the action so taken is signed by all of the shareholders
entitled to vote with respect to the subject matter thereof and
received by the corporation. Such consent shall have the same force and
effect as a unanimous vote of the shareholders and may be stated as
such in any document. Action taken under this Section 12 is effective
as of the date the last writing necessary to effect the action is
received by the corporation, unless all of the writings specify a
different effective date, in which case such specified date shall be
the effective date for such action. If any shareholder revokes his
consent as provided for herein prior to what would otherwise be the
effective date, the action proposed in the consent shall be invalid.
The record date for determining shareholders entitled to take action
without a meeting is the date the corporation first receives a writing
upon which the action is taken.
Any shareholder who has signed a writing describing and consenting
to action taken pursuant to this Section 12 may revoke such consent by
a writing signed by the shareholder describing the action and stating
that the shareholder's prior consent thereto is revoked, if such
writing is received by the corporation before the effectiveness of the
action.
Section 13. Meetings by Telecommunication. Any or all of the
shareholders may participate in an annual or special shareholders'
meeting by, or the meeting may be conducted through the use of, any
means of communication by which all persons participating in the
meeting may hear each other during the meeting. A shareholder
participating in a meeting by this means is deemed to be present in
person at the meeting.
ARTICLE III - Board of Directors
Section 1. General Powers. All corporate powers shall be exercised
by or under the authority of, and the business and affairs of the
corporation shall be managed under the direction of, its board of
directors, except as otherwise provided in the Colorado Business
Corporation Act or the articles of incorporation.
<PAGE> 62
Section 2. Number, Qualifications and Tenure. The number of
directors of the corporation shall be fixed from time to time by the
board of directors, within a range of no less than three or more than
nine, but no decrease in the number of directors shall have the effect
of shortening the term of any incumbent director. A director shall be
a natural person who is eighteen years of age or older. A director need
not be a resident of Colorado or a shareholder of the corporation.
Directors shall be elected at each annual meeting of shareholders.
Each director shall hold office until the next annual meeting of
shareholders following his election and thereafter until his successor
shall have been elected and qualified. Directors shall be removed in
the manner provided by the Colorado Business Corporation Act. Any
director may be removed by the shareholders of the voting group that
elected the director, with or without cause, at a meeting called for
that purpose. The notice of the meeting shall state that the purpose or
one of the purposes of the meeting is removal of the director. A
director may be removed only if the number of votes cast in favor of
removal exceeds the number of votes cast against removal.
Section 3. Vacancies. Any director may resign at any time by
giving written notice to the secretary. Such resignation shall take
effect at the time the notice is received by the secretary unless the
notice specifies a later effective date. Unless otherwise specified in
the notice of resignation, the corporation's acceptance of such
resignation shall not be necessary to make it effective. Any vacancy on
the board of directors may be filled by the affirmative vote of a
majority of the shareholders at a special meeting called for that
purpose or by the board of directors. If the directors remaining in
office constitute fewer than a quorum of the board, the directors may
fill the vacancy by the affirmative vote of a majority of all the
directors remaining in office. If elected by the directors, the
director shall hold office until the next annual shareholders' meeting
at which directors are elected. If elected by the shareholders, the
director shall hold office for the unexpired term of his predecessor in
office; except that, if the director's predecessor was elected by the
directors to fill a vacancy, the director elected by the shareholders
shall hold office for the unexpired term of the last predecessor
elected by the shareholders.
Section 4. Regular Meetings. A regular meeting of the board of
directors shall be held without notice immediately after and at the
same place as the annual meeting of shareholders. The board of
directors may provide by resolution the time and place, either within
or outside Colorado, for the holding of additional regular meetings
without other notice.
Section 5. Special Meetings. Special meetings of the board of
directors may be called by or at the request of the president or any
one (1) of the directors. The person or persons authorized to call
special meetings of the board of directors may fix any place, either
within or outside Colorado, as the place for holding any special
meeting of the board of directors called by them, provided that no
meeting shall be called outside the State of Colorado unless a majority
of the board of directors has so authorized.
<PAGE> 63
Section 6. Notice. Notice of the date, time and place of any
special meeting shall be given to each director at least two days prior
to the meeting by written notice either personally delivered or mailed
to each director at his business address, or by notice transmitted by
private courier, telegraph, telex, electronically transmitted facsimile
or other form of wire or wireless communication. If mailed, such notice
shall be deemed to be given and to be effective on the earlier of (i)
five days after such notice is deposited in the United States mail,
properly addressed, with first class postage prepaid, or (ii) the date
shown on the return receipt, if mailed by registered or certified mail
return receipt requested, provided that the return receipt is signed by
the director to whom the notice is addressed. If notice is given by
telex, electronically transmitted facsimile or other similar form of
wire or wireless communication, such notice shall be deemed to be given
and to be effective when sent, and with respect to a telegram, such
notice shall be deemed to be given and to be effective when the
telegram is delivered to the telegraph company. If a director has
designated in writing one or more reasonable addresses or facsimile
numbers for delivery of notice to him, notice sent by mail, telegraph,
telex, electronically transmitted facsimile or other form of wire or
wireless communication shall not be deemed to have been given or to be
effective unless sent to such addresses or facsimile numbers, as the
case may be.
A director may waive notice of a meeting before or after the time
and date of the meeting by a writing signed by such director. Such
waiver shall be delivered to the secretary for filing with the
corporate records, but such delivery and filing shall not be conditions
to the effectiveness of the waiver. Further, a director's attendance at
or participation in a meeting waives any required notice to him of the
meeting unless at the beginning of the meeting, or promptly upon his
later arrival, the director objects to holding the meeting or
transacting business at the meeting because of lack of notice or
defective notice and does not thereafter vote for or assent to action
taken at the meeting. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the board of directors
need be specified in the notice or waiver of notice of such meeting.
Section 7. Quorum. A majority of the number of directors fixed by
the board of directors pursuant to Article III, Section 2 or, if no
number is fixed, a majority of the number in office immediately before
the meeting begins, shall constitute a quorum for the transaction of
business at any meeting of the board of directors.
Section 8. Manner of Acting. The act of the majority of the
directors present at a meeting at which a quorum is present shall be
the act of the board of directors.
Section 9. Compensation. By resolution of the board of directors,
any director may be paid any one or more of the following: his
expenses, if any, of attendance at meetings, a fixed sum for attendance
at each meeting, a stated salary as director, or such other
compensation as the corporation and the director may reasonably agree
upon. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
<PAGE> 64
Section 10. Presumption of Assent. A director of the corporation
who is present at a meeting of the board of directors or committee of
the board at which action on any corporate matter is taken shall be
presumed to have assented to all action taken at the meeting unless (i)
the director objects at the beginning of the meeting, or promptly upon
his arrival, to the holding of the meeting or the transaction of
business at the meeting and does not thereafter vote for or assent to
any action taken at the meeting, (ii) the director contemporaneously
requests that his dissent or abstention as to any specific action taken
be entered in the minutes of the meeting, or (iii) the director causes
written notice of his dissent or abstention as to any specific action
to be received by the presiding officer of the meeting before its
adjournment or by the secretary promptly after the adjournment of the
meeting. A director may dissent to a specific action at a meeting,
while assenting to others. The right to dissent to a specific action
taken at a meeting of the board of directors or a committee of the
board shall not be available to a director who voted in favor of such
action.
Section 11. Committees. By resolution adopted by a majority of all
the directors in office when the action is taken, the board of
directors may designate from among its members an executive committee
and one or More other committees, and appoint one or more members of
the board of directors to serve on them. To the extent provided in the
resolution, each committee shall have all the authority of the board of
directors, except that no such committee shall have the authority to
(i) authorize distributions, (ii) approve or propose to shareholders
actions or proposals required by the Colorado Business Corporation Act
to be approved by shareholders, (iii) fill vacancies on the board of
directors or any committee thereof (iv) amend articles of
incorporation, (v) adopt, amend or repeal the bylaws, (vi) approve a
plan of merger not requiring shareholder approval, (vii) authorize or
approve the reacquisition of shares unless pursuant to a formula or
method prescribed by the board of directors, or (viii) authorize or
approve the issuance or sale of shares, or contract for the sale of
shares or determine the designations and relative rights, preferences
and limitations of a class or series of shares, except that the board
of directors may authorize a committee or officer to do so within
limits specifically prescribed by the board of directors. The committee
shall then have full power within the limits set by the board of
directors to adopt any final resolution setting forth all preferences,
limitations and relative rights of such class or series and to
authorize an amendment of the articles of incorporation stating the
preferences, limitations and relative rights of a class or series for
filing with the Secretary of State under the Colorado Business
Corporation Act.
Sections 4, 5, 6, 7, 8 or 12 of Article III, which govern
meetings, notice, waiver of notice, quorum, voting requirements and
action without a meeting of the board of directors, shall apply to
committees and their members appointed under this Section 11.
<PAGE> 65
Neither the designation of any such committee, the delegation of
authority to such committee, nor any action by such committee pursuant
to its authority shall alone constitute compliance by any member of the
board of directors or a member of the committee in question with his
responsibility to conform to the standard of care set forth in Article
III, Section 14 of these bylaws.
Section 12. Informal Action by Directors. Any action required or
permitted to be taken at a meeting of the directors or any committee
designated by the board of directors may be taken without a meeting if
a written consent (or counterparts thereof) that sets forth the action
so taken is signed by all of the directors entitled to vote with
respect to the action taken. Such consent shall have the same force and
effect as a unanimous vote of the directors or committee members and
may be stated as such in any document. Unless the consent specifies a
different effective time or date, action taken under this Section 12 is
effective at the time or date the last director signs a writing
describing the action taken, unless, before such time, any director has
revoked his consent by a writing signed by the director and received by
the president or the secretary of the corporation.
Section 13. Telephonic Meetings. The board of directors may permit
any director (or any member of a committee designated by the board) to
participate in a regular or special meeting of the board of directors
or a committee thereof through the use of any means of communication by
which all directors participating in the meeting can hear each other
during the meeting. A director participating in a meeting in this
manner is deemed to be present in person at the meeting.
Section 14. Standard of Care. A director shall perform his duties
as a director, including without limitation his duties as a member of
any committee of the board, in good faith, in a manner he reasonably
believes to be in the best interests of the corporation, and with the
care an ordinarily prudent person in a like position would exercise
under similar circumstances. In performing his duties, a director shall
be entitled to rely on information, opinions, reports or statements,
including financial statements and other financial data, in each case
prepared or presented by the persons herein designated. However, he
shall not be considered to be acting in good faith if he has knowledge
concerning the matter in question that would cause such reliance to be
unwarranted. A director shall not be liable to the corporation or its
shareholders for any action he takes or omits to take as a director if,
in connection with such action or omission, he performs his duties in
compliance with this Section 14.
The designated persons on whom a director is entitled to rely are
(i) one or more officers or employees of the corporation whom the
director reasonably believes to be reliable and competent in the
matters presented, (ii) legal counsel, public accountant, or other
person as to matters which the director reasonably believes to be
within such person's professional or expert competence, or (iii) a
committee of the board of directors on which the director does not
serve if the director reasonably believes the committee merits
confidence.
<PAGE> 66
ARTICLE IV - Officers and Agents
Section 1. General. The officers of the corporation shall be a
president, a secretary and a treasurer, and may also include one or
more vice presidents, each of which officer shall be appointed by the
board of directors and shall be a natural person eighteen years of age
or older. One person may hold more than one office. The board of
directors or an officer or officers so authorized by the board may
appoint such other officers, assistant officers, committees and agents,
including a chairman of the board, assistant secretaries and assistant
treasurers, as they may consider necessary. Except as expressly
prescribed by these bylaws, the board of directors or the officer or
officers authorized by the board shall from time to time determine the
procedure for the appointment of officers, their authority and duties
and their compensation, provided that the board of directors may change
the authority, duties and compensation of any officer who is not
appointed by the board.
Section 2. Appointment and Term of Office. The officers of the
corporation to be appointed by the board of directors shall be
appointed at each annual meeting of the board held after each annual
meeting of the shareholders. If the appointment of officers is not made
at such meeting or if an officer or officers are to be appointed by
another officer or officers of the corporation, such appointments shall
be made as determined by the board of directors or the appointing
person or persons. Each officer shall hold office until the first of
the following occurs: his successor shall have been duly appointed and
qualified, his death, his resignation, or his removal in the manner
provided in Section 3.
Section 3. Resignation and Removal. An officer may resign at any
time by giving written notice of resignation to the president,
secretary or other person who appoints such officer. The resignation is
effective when the notice is received by the corporation unless the
notice specifies a later effective date.
Any officer or agent may be removed at any time with or without
cause by the board of directors or an officer or officers authorized by
the board. Such removal does not affect the contract rights, if any, of
the corporation or of the person so removed. The appointment of an
officer or agent shall not in itself create contract rights.
Section 4. Vacancies. A vacancy in any office, however occurring,
may be filled by the board of directors, or by the officer or officers
authorized by the board, for the unexpired portion of the officer's
term. If an officer resigns and his resignation is made effective at a
later date, the board of directors, or officer or officers authorized
by the board, may permit the officer to remain in office until the
effective date and may fill the pending vacancy before the effective
date if the board of directors or officer or officers authorized by the
board provide that the successor shall not take office until the
effective date. In the alternative, the board of directors, or officer
or officers authorized by the board of directors, may remove the
officer at any time before the effective date and may fill the
resulting vacancy.
<PAGE> 67
Section 5. President. The president shall preside at all meetings
of shareholders and all meetings of the board of directors unless the
board of directors has appointed a chairman, vice chairman, or other
officer of the board and has authorized such person to preside at
meetings of the board of directors. Subject to the direction and
supervision of the board of directors, the president shall be the chief
executive officer of the corporation, and shall have general and active
control of its affairs and business and general supervision of its
officers, agents and employees. Unless otherwise directed by the board
of directors, the president shall attend in person or by substitute
appointed by him, or shall execute on behalf of the corporation written
instruments appointing a proxy or proxies to represent the corporation,
at all meetings of the stockholders of any other corporation in which
the corporation holds any stock. On behalf of the corporation, the
president may in person or by substitute or by proxy execute written
waivers of notice and consents with respect to any such meetings. At
all such meetings and otherwise, the president, in person or by
substitute or proxy, may vote the stock held by the corporation,
execute written consents and other instruments with respect to such
stock, and exercise any and all rights and powers incident to the
ownership of said stock, subject to the instructions, if any, of the
board of directors. The president shall have custody of the treasurer's
bond, if any. The president shall have such additional authority and
duties as are appropriate and customary for the office of president and
chief executive officer, except as the same may be expanded or limited
by the board of directors from time to time.
Section 6. Vice Presidents. The vice presidents shall assist the
president and shall perform such duties as may be assigned to them by
the president or by the board of directors. In the absence of the
president, the vice president, if any (or, if more than one, the vice
presidents in the order designated by the board of directors, or if the
board makes no such designation, then the vice president designated by
the president, or if neither the board nor the president makes any such
designation, the senior vice president as determined by first election
to that office), shall have the powers and perform the duties of the
president.
Section 7. Secretary. The secretary shall (i) prepare and maintain
as permanent records the minutes of the proceedings of the shareholders
and the board of directors, a record of all actions taken by the
shareholders or board of directors without a meeting, a record of all
actions taken by a committee of the board of directors in place of the
board of directors on behalf of the corporation, and a record of all
waivers of notice of meetings of shareholders and of the board of
directors or any committee thereof, (ii) see that all notices are duly
given in accordance with the provisions of these bylaws and as required
by law, (iii) serve as custodian of the corporate records and of the
seal of the corporation and affix the seal to all documents when
authorized by the board of directors, (iv) keep at the corporation's
registered office or principal place of business a record containing
the names and addresses of all shareholders in a form that permits
preparation of a list of shareholders arranged by voting group and by
class or series of shares within each voting group, that is
alphabetical within each class or series and that shows the address of,
and the number of shares of each class or series held by, each
shareholder, unless such a record shall be kept at the office of the
<PAGE> 68
corporation's transfer agent or registrar, (v) maintain at the
corporation's principal office the originals or copies of the
corporation's articles of incorporation, bylaws, minutes of all
shareholders' meetings and records of all action taken by shareholders
without a meeting for the past three years, all written communications
within the past three years to shareholders as a group or to the
holders of any class or series of shares as a group, a fist of the
names and business addresses of the current directors and officers, a
copy of the corporation's most recent corporate report filed with the
Secretary of State, and financial statements showing in reasonable
detail the corporation's assets and liabilities and results of
operations for the last three years, (vi) have general charge of the
stock transfer books of the corporation, unless the corporation has a
transfer agent, (vii) authenticate records of the corporation, and
(viii) in general, perform all duties incident to the office of
secretary and such other duties as from time to time may be assigned to
him by the president or by the board of directors. Assistant
secretaries, if any, shall have the same duties and powers, subject to
supervision by the secretary. The directors and/or shareholders may
however respectively designate a person other than the secretary or
assistant secretary to keep the minutes of their respective meetings.
Any books, records, or minutes of the corporation may be in
written form or in any form capable of being converted into written
form within a reasonable time.
Section 8. Treasurer. The treasurer shall be the principal
financial officer of the corporation, shall have the care and custody
of all funds, securities, evidences of indebtedness and other personal
property of the corporation and shall deposit the same in accordance
with the instructions of the board of directors. Subject to the limits
imposed by the board of directors, he shall receive and give receipts
and acquittances for money paid in on account of the corporation, and
shall pay out of the corporation's funds on hand all bills, payrolls
and other just debts of the corporation of whatever nature upon
maturity. He shall perform all other duties incident to the office of
the treasurer and, upon request of the board, shall make such reports
to it as may be required at any time. He shall, if required by the
board, give the corporation a bond in such sums and with such sureties
as shall be satisfactory to the board, conditioned upon the faithful
performance of his duties and for the restoration to the corporation of
all books, papers, vouchers, money and other property of whatever kind
in his possession or under his control belonging to the corporation. He
shall have such other powers and perform such other duties as may from
time to time be prescribed by the board of directors or the president.
The assistant treasurers, if any, shall have the same powers and
duties, subject to the supervision of the treasurer.
The treasurer shall also be the principal accounting officer of
the corporation. He shall prescribe and maintain the methods and
systems of accounting to be followed, keep complete books and records
of account as required by the Colorado Business Corporation Act,
prepare and file all local, state and federal tax returns, prescribe
and maintain an adequate system of internal audit and prepare and
furnish to the president and the board of directors statements of
account showing the financial position of the corporation and the
results of its operations.
<PAGE> 69
ARTICLE V - Stock
Section 1. Certificates. The board of directors shall be
authorized to issue any of its classes of shares with or without
certificates. The fact that the shares are not represented by
certificates shall have no effect on the rights and obligations of
shareholders. If the shares are-represented by certificates, such
shares shall be represented by consecutively numbered certificates
signed, either manually or by facsimile, in the name of the corporation
by the president. In case any officer who has signed or whose facsimile
signature has been placed upon such certificate shall have ceased to be
such officer before such certificate is issued, such certificate may
nonetheless be issued by the corporation with the same effect as if he
were such officer at the date of its issue. All certificates shall be
consecutively numbered, and the names of the owners, the number of
shares, and the date of issue shall be entered on the books of the
corporation. Each certificate representing shares shall state upon its
face:
(i) That the corporation is organized under the laws of Colorado;
(ii The name of the person to whom issued;
(ii The number and class of the shares and the designation of the
series, if any, that the certificate represents;
(iv The par value, if any, of each share represented by the
certificate;
(v) Any restrictions imposed by the corporation upon the transfer
of the shares represented by the certificate.
If shares are not represented by certificates, within a reasonable
time following the issue or transfer of such shares, the corporation
shall send the shareholder a complete written statement of all of the
information required to be provided to holders of uncertificated shares
by the Colorado Business Corporation Act.
Section 2. Consideration for Shares. Certificated or
uncertificated shares shall not be issued until the shares represented
thereby are fully paid. The board of directors may authorize the
issuance of shares for consideration consisting of any tangible or
intangible property or benefit to the corporation, including cash,
promissory notes, services performed or other securities of the
corporation. Future services shall not constitute payment or partial
payment for shares of the corporation. The promissory note of a
subscriber or an affiliate of a subscriber shall not constitute payment
or partial payment for shares of the corporation unless the note is
negotiable and is secured by collateral, other than the shares being
purchased, having a fair market value at least equal to the principal
amount of the note. For purposes of this Section 2, "promissory note"
means a negotiable instrument on which there is an obligation to pay
independent of collateral and does not include a non-recourse note.
Section 3. Lost Certificates. In case of the alleged loss,
destruction or mutilation of a certificate of stock, the board of
directors may direct the issuance of a new certificate in lieu thereof
upon such terms and conditions in conformity with law as the board may
prescribe. The board of directors may in its discretion require an
affidavit of lost certificate and/or a bond in such form and amount and
with such surety as it may determine before issuing a new certificate.
<PAGE> 70
Section 4. Transfer of Shares. Upon surrender to the corporation
or to a transfer agent of the corporation of a certificate of stock
duly endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer, and receipt, of such documentary
stamps as may be required by law and evidence of compliance with all
applicable securities laws and other restrictions, the corporation
shall issue a new certificate to the person entitled thereto, and
cancel the old certificate. Every such transfer of stock shall be
entered on the stock books of the corporation which shall be kept at
its principal office or by the person and at the place designated by
the board of directors.
Except as otherwise expressly provided in Article 11, Sections 7
and 11, and except for the assertion of dissenters' rights to the
extent provided in Article 113 of the Colorado Business Corporation
Act, the corporation shall be entitled to treat the registered holder
of any shares of the corporation as the owner thereof for all purposes,
and the corporation shall not be bound to recognize any equitable or
other claim to, or interest in, such shares or rights deriving from
such shares on the part of any person other than the registered holder,
including without limitation any purchaser, assignee or transferee of
such shares or rights deriving from such shares, unless and until such
other person becomes the registered holder of such shares, whether or
not the corporation shall have either actual or constructive notice of
the claimed interest of such other person.
Section 5. Transfer Agent, Registrars and Paying Agents. The board
may at its discretion appoint one or more transfer agents, registrars
and agents for making payment upon any class of stock, bond, debenture
or other security of the corporation. Such agents and registrars may be
located either within or outside Colorado. They shall have such rights
and duties and shall be entitled to such compensation as may be agreed.
ARTICLE VI - Indemnification of Certain Persons
Section 1. Indemnification. For purposes of Article VI, a "Proper
Person" means any person (including the estate or personal
representative of a director) who was or is a party or is threatened to
be made a party to any threatened, pending, or completed action, suit
or proceeding, whether civil, criminal, administrative or
investigative, and whether formal or informal, by reason of the fact
that he is or was a director, officer, employee, fiduciary or agent of
the corporation, or is or was serving at the request of the corporation
as a director, officer, partner, trustee, employee, fiduciary or agent
of any foreign or domestic profit or nonprofit corporation or of any
partnership, joint venture, trust, profit or nonprofit unincorporated
association, limited liability company, or other enterprise or employee
benefit plan. The corporation shall indemnify any Proper Person against
reasonably incurred expenses (including attorneys' fees), judgments,
penalties, fines (including any excise tax assessed with respect to an
employee benefit plan) and amounts paid in settlement reasonably
incurred by him in connection with such action, suit or proceeding if
it is determined by the groups set forth in Section 4 of this Article
that he conducted himself in good faith and that he reasonably believed
(i) in the case of conduct in his official capacity with the
corporation, that his conduct was in the corporation's best interests,
or (ii) in all other cases (except criminal cases), that his conduct
<PAGE> 71
was at least not opposed to the corporation's best interests, or (iii)
in the case of any criminal proceeding, that he had no reasonable cause
to believe his conduct was unlawful. Official capacity means, when used
with respect to a director, the office of director and, when used with
respect to any other Proper Person, the office in a corporation held by
the officer or the employment, fiduciary or agency relationship
undertaken by the employee, fiduciary, or agent on behalf of the
corporation. Official capacity does not include service for any other
domestic or foreign corporation or other person or employee benefit
plan.
A director's conduct with respect to an employee benefit plan for
a purpose the director reasonably believed to be in the interests of
the participants in or beneficiaries of the plan is conduct that
satisfies the requirement in (ii) of this Section 1. A director's
conduct with respect to an employee benefit plan for a purpose that the
director did not reasonably believe to be in the interests of the
participants in or beneficiaries of the plan shall be deemed not to
satisfy the requirement of this section that he conduct himself in good
faith.
No indemnification shall be made under this Article VI to a Proper
Person with respect to any claim, issue or matter in connection with a
proceeding by or in the right of a corporation in which the Proper
Person was adjudged liable to the corporation or in connection with any
proceeding charging that the Proper Person derived an improper personal
benefit, whether or not involving action in an official capacity, in
which he was adjudged liable on the basis that he derived an improper
personal benefit. Further, indemnification under this section in
connection with a proceeding brought by or in the right of the
corporation shall be limited to reasonable expenses, including
attorneys' fees, incurred in connection with the proceeding.
Section 2. Right to Indemnification. The corporation shall
indemnify any Proper Person who was wholly successful, on the merits or
otherwise, in defense of any action, suit, or proceeding as to which he
was entitled to indemnification under Section I of this Article VI
against expenses (including attorneys' fees) reasonably incurred by him
in connection with the proceeding without the necessity of any action
by the corporation other than the determination in good faith that the
defense has been wholly successful.
Section 3. Effect of Termination of Action. The termination of any
action, suit or proceeding by judgment, order, settlement or
conviction, or upon a plea of nolo contendere or its equivalent shall
not of itself create a presumption that the person seeking
indemnification did not meet the standards of conduct described in
Section I of this Article VI. Entry of a judgment by consent as part of
a settlement shall not be deemed an adjudication of liability, as
described in Section 2 of this Article VI.
Section 4. Groups Authorized to Make Indemnification
Determination. Except where there is a right to indemnification as set
forth in Sections I or 2 of this Article or where indemnification is
ordered by a court in Section 5, any indemnification shall be made by
the corporation only as determined in the specific case by a proper
group that indemnification of the Proper Person is permissible under
<PAGE> 72
the circumstances because he has met the applicable standards of
conduct set forth in Section 1 of this Article. This determination
shall be made by the board of directors by a majority vote of those
present at a meeting at which a quorum is present, which quorum shall
consist of directors not parties to the proceeding ("Quorum"). If a
Quorum cannot be obtained, the determination shall be made by a
majority vote of a committee of the board of directors designated by
the board, which committee shall consist of two or more directors not
parties to the proceeding, except that directors who are parties to the
proceeding may participate in the designation of directors for the
committee. If a Quorum of the board of directors cannot be obtained and
the committee cannot be established, or even if a Quorum is obtained or
the committee is designated and a majority of the directors
constituting such Quorum or committee so directs, the determination
shall be made by (i) independent legal counsel selected by a vote of
the board of directors or the committee in the manner specified in this
Section 4 or, if a Quorum of the full board of directors cannot be
obtained and a committee cannot be established, by independent legal
counsel selected by a majority vote of the full board (including
directors who are parties to the action) or (ii) a vote of the
shareholders.
Authorization of indemnification and advance of expenses shall be
made in the same manner as the determination that indemnification or
advance of expenses is permissible except that, if the determination
that indemnification or advance of expenses is permissible is made by
independent legal counsel, authorization of indemnification and advance
of expenses shall be made by the body that selected such counsel,
Section 5. Court-Ordered Indemnification. Any Proper Person may
apply for indemnification to the court conducting the proceeding or to
another court of competent jurisdiction for mandatory indemnification
under Section 2 of this Article, including indemnification for
reasonable expenses incurred to obtain court-ordered indemnification.
If a court determines that the Proper Person is entitled to
indemnification under Section 2 of this Article, the court shall order
indemnification, including the Proper Person's reasonable expenses
incurred to obtain court-ordered indemnification. If the court
determines that such Proper Person is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances, whether or
not he met the standards of conduct set forth in Section I of this
Article or was adjudged liable in the proceeding, the court may order
such indemnification as the court deems proper except that if the
Proper Person has been adjudged liable, indemnification shall be
limited to reasonable expenses incurred in connection with the
proceeding and reasonable expenses incurred to obtain court-ordered
indemnification.
Section 6. Advance of Expenses. Reasonable expenses (including
attorneys' fees) incurred in defending an action, suit or proceeding as
described in Section I may be paid by the corporation to any Proper
Person in advance of the final disposition of such action, suit or
proceeding upon receipt of (i) a written affirmation of such Proper
Person's good faith belief that he has met the standards of conduct
prescribed by Section I of this Article VI, (ii) a written undertaking,
executed personally or on the Proper Person's behalf, to repay such
advances if it is ultimately determined that he did not meet the
<PAGE> 73
prescribed standards of conduct (the undertaking shall be an unlimited
general obligation of the Proper Person but need not be secured and may
be accepted without reference to financial ability to make repayment),
and (iii) a determination is made by the proper group (as described in
Section 4 of this Article VI) that the facts as then known to the group
would not preclude indemnification. Determination and authorization of
payments shall be made in the same manner specified in Section 4 of
this Article VI.
Section 7. Additional Indemnification to Certain Persons Other
Than Directors. In addition to the indemnification provided to
officers, employees, fiduciaries or agents because of their status as
Proper Persons under this Article, the corporation may also indemnify
and advance expenses to them if they are not directors of the
corporation to a greater extent than is provided in these bylaws, if
not inconsistent with public policy, and if provided for by general or
specific action of its board of directors or shareholders or by
contract.
Section 8. Witness Expenses. The sections of this Article VI do
not limit the corporation's authority to pay or reimburse expenses
incurred by a director in connection with an appearance as a witness in
a proceeding at a time when he has not been made or named as a
defendant or respondent in the proceeding.
Section 9. Report to Shareholders. Any indemnification of or
advance of expenses to a director in accordance with this Article VI,
if arising out of a proceeding by or on behalf of the corporation,
shall be reported in writing to the shareholders with or before the
notice of the next shareholders' meeting. If the next shareholder
action is taken without a meeting at the instigation of the board of
directors, such notice shall be given to the shareholders at or before
the time the first shareholder signs a writing consenting to such
action.
ARTICLE VII
Section 1. Provision of Insurance. By action of the board of
directors, notwithstanding any interest of the directors in the action,
the corporation may purchase and maintain insurance, in such scope and
amounts as the board of directors deems appropriate, on behalf of any
person who is or was a director, officer, employee, fiduciary or agent
of the corporation, or who, while a director, officer, employee,
fiduciary or agent of the corporation, is or was serving at the request
of the corporation as a director, officer, partner, trustee, employee,
fiduciary or agent of any other foreign or domestic profit or nonprofit
corporation or of any partnership, joint venture, trust, profit or
nonprofit unincorporated association, limited liability company, other
enterprise or employee benefit plan, against any liability asserted
against, or incurred by, him in that capacity or arising out of his
status as such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of Article VI
or applicable law. Any such insurance may be procured from any
insurance company designated by the board of directors of the
corporation, whether such insurance company is formed under the laws of
Colorado or any other jurisdiction of the United States or elsewhere,
including any insurance company in which the corporation has an equity
interest or any other interest, through stock ownership or otherwise.
<PAGE> 74
ARTICLE VIII - Miscellaneous
Section 1. Seal. The board of directors may adopt a corporate
seal, which shall contain the name of the corporation and the words,
"Seal, Colorado."
Section 2. Fiscal Year. The fiscal year of the corporation shall
be as established by the board of directors.
Section 3. Amendments. The board of directors shall have power, to
the maximum extent permitted by the Colorado Business Corporation Act,
to make, amend and repeal the bylaws of the corporation at any regular
or special meeting of the board unless the shareholders, in making,
amending or repealing a particular bylaw, expressly provide that the
directors may not amend or repeal such bylaw. The shareholders also
shall have the power to make, amend or repeal the bylaws of the
corporation at any annual meeting or at any special meeting called for
that purpose.
Section 4. Receipt of Notices by the Corporation. Notices,
shareholder writings consenting to action, and other documents or
writings shall be deemed to have been received by the corporation when
they are actually received: (1) at the registered office of the
corporation in Colorado; (2) at the principal office of the corporation
(as that office is designated in the most recent document filed by the
corporation with the secretary of state for Colorado designating a
principal office) addressed to the attention of the secretary of the
corporation; (3) by the secretary of the corporation wherever the
secretary may be found; or (4) by any other person authorized from time
to time by the board of directors or the president to receive such
writings, wherever such person is found.
Section 5. Gender. The masculine gender is used in these bylaws as
a matter of convenience only and shall be interpreted to include the
feminine and neuter genders as the circumstances indicate.
Section 6. Conflicts. In the event of any irreconcilable conflict
between these bylaws and either the corporation's articles of
incorporation or applicable law, the latter shall control.
Section 7. Definitions. Except as otherwise specifically provided
in these bylaws, all terms used in these bylaws shall have the same
definition as in the Colorado Business Corporation Act.
<PAGE> 75
EXHIBIT 3.3
GIMMEL ENTERPRISES, INC.
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Business Corporation
Act, GIMMEL Enterprises, Inc., (hereinafter referred to as the
"Corporation"), adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the Corporation is GIMMEL Enterprises,
Inc.
SECOND: The Articles of Incorporation of the Corporation are
hereby amended as follows:
Article FIRST is amended to read as follows:
"The name of the Corporation is WIN Systems
International, Inc."
THIRD: The amendment was advised to the shareholders by
written informal action, unanimously taken by the Board of
Directors of the Corporation, pursuant to and in accordance with
the Colorado Business Corporation Act on the 27th day of July,
1998.
FOURTH: The amendment was adopted by action taken by the
shareholders of the Corporation in accordance with the Colorado
Business Corporation Act on the 10th day of August, 1998.
FIFTH: The number of votes cast which were represented by the
action by shareholders approving the amendment was sufficient for
approval.
GIMMEL ENTERPRISES, INC.
By: /s/ Earnest Mathis, Jr.
Earnest Mathis, Jr., President
<PAGE> 76
EXHIBIT 3.4
WIN Systems International, Inc.
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Business Corporation
Act, WIN Systems International, Inc., (hereinafter referred to as the
"Corporation"), adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST. The name of the Corporation is WIN Systems
International, Inc.
SECOND: The Articles of Incorporation of the Corporation are
hereby amended as follows:
Article FIRST is amended to read as follows:
"The name of the Corporation is Whitney Information
Network, Inc."
THIRD: The amendment was advised to the shareholders by
action, taken by the Board of Directors of the Corporation,
pursuant to and in accordance with the Colorado Business
Corporation Act on the 12th day of May, 1999.
FOURTH. The amendment was adopted by action taken by the.
shareholders of the Corporation in accordance with the Colorado
Business Corporation Act on the 26th day of May, 1999.
FIFTH: The number of votes cast which were represented by the
action by shareholders approving the amendment was sufficient for
approval.
WIN Systems International, Inc.
By: /s/ Ronald S. Simon, Secretary
<PAGE> 77
WIN SYSTEMS INTERNATIONAL, INC.
Incorporation under the Laws of the State of Colorado
Number Shares
___________ _______________
See Reverse for
Certain Definitions
CUSIP 966621104
This Certifies That _________________________________________________
Is the Owner of ______________________________________ Fully Paid and
Nonassessable Common Stock, no par value of,
Win Systems International, Inc.
transferable only on the books of the Corporation in person or by
attorney upon surrender of this Certificate properly endorsed. This
Certificate and the shares represented hereby are subject to all the
provisions of the Articles of Incorporation, to all of which the holder
by acceptance hereby assents. This Certificate is not valid until
countersigned by the Transfer Agent.
In Witness Whereof, the Corporation has caused this Certificate to
be endorsed by the facsimile signature of its duly authorized officer
and to be sealed with the facsimile seal of the Corporation.
Dated ________________________
_________________________ SEAL _______________________
Secretary President
COUNTERSIGNED:
CORPORATE STOCK TRANSFER, INC.
370 - 17th Street, Suite 2350
Denver, Colorado 80202
BY: ______________________________
Transfer Agent and Registrant
Authorized Officer
<PAGE> 78
Win Systems International, Inc.
Corporate Stock Transfer, Inc.
Transfer Fee: $15.00
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM - as tenant in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants
in common
UNIF GIFT MIN ACT - ___________ Custodian for _____________ (Minor)
under Uniform Gifts to Minors Act of ___________________ (State)
Additional abbreviations may also be used though not in the above list.
For value received ________________________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
[ ]
Please print or type name and address of assignee
__________________________________________________
__________________________________________________
__________________________________________________
___________________________________________ Shares
of the Common Stock represented by the within Certificate and do hereby
irrevocably constitute and appoint
__________________________________________________
__________________________________________________
Attorney to transfer the said stock on the books of the within name
Corporation, with full power of substitution in the premises.
Dated ________________ 19____
SIGNATURE GUARANTEED: x______________________________________
x______________________________________
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THIS CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER. THE SIGNATURE(S)
MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (Banks,
Stockbrokers, Savings and Loans Associations and Credit Unions) WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Financial Condition at 12/31/98 Audited and 06/30/99
Unaudited and the Consolidated Statement of Income for the year ended 12/31/98
Audited and the six months ended 06/30/98 Unaudited and is qualified in its
entirety by referenceee to such financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-END> DEC-31-1998 JUN-30-1999
<CASH> 370,571 1,512,455
<SECURITIES> 0 0
<RECEIVABLES> 980,263 1,730,688
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 5,748,971 10,905,763
<PP&E> 0 0
<DEPRECIATION> 0 127,444
<TOTAL-ASSETS> 5,748,971 11,802,737
<CURRENT-LIABILITIES> 4,746,328 9,728,214
<BONDS> 0 0
0 0
0 0
<COMMON> 2,602 60,352
<OTHER-SE> 900 900
<TOTAL-LIABILITY-AND-EQUITY> 5,748,971 11,802,737
<SALES> 13,760,208 10,286,320
<TOTAL-REVENUES> 13,760,208 10,286,320
<CGS> 4,682,850 4,340,090
<TOTAL-COSTS> 4,682,850 4,340,090
<OTHER-EXPENSES> 7,893,922 4,976,240
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 1,183,436 969,990
<INCOME-TAX> 415,000 343,881
<INCOME-CONTINUING> 768,436 626,109
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 768,436 626,109
<EPS-BASIC> 0.10 0.08
<EPS-DILUTED> 0.10 0.08
</TABLE>
<PAGE> 80
EXHIBIT 99.1
THIS WARRANT AGREEMENT (the "Agreement") is dated as of
_____________, 1998, between GIMMEL ENTERPRISES, INC., a Colorado
corporation (the "Company"), and CORPORATE STOCK TRANSFER, INC.,
Denver, Colorado (the "Warrant Agent").
WHEREAS, the Company has agreed to issue up to 187,500 Class A
Common Stock Purchase Warrants (the "Warrants") to purchase an
aggregate of up to 187,500 shares of the Company's no par common stock
(the "Common Stock" or the "Warrant Shares"); and
WHEREAS, the Company desires to provide for issuance of warrant
certificates (the "Warrant Certificates") representing up to 187,500
Warrants; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of
the Company, and the Warrant Agent is willing so to act, in connection
with the issuance, registration, transfer and exchange of Warrant
Certificates and exercise of the Warrants.
NOW, THEREFORE, in consideration of the promises and the mutual
agreements hereinafter set forth, it is agreed that:
1. Warrants/Warrant Certificates. Each Warrant shall entitle the
holder (the "Registered Holder" or, in the aggregate, the "Registered
Holders") in whose name the Warrant Certificate shall be registered on
the books maintained by the Warrant Agent to purchase one share of
Common Stock of the Company on exercise thereof, subject to adjustment
as provided in Section 7. Warrant Certificates representing the right
to purchase Warrant Shares shall be executed by the Company's President
and attested to by the Company's Secretary or Assistant Secretary and
delivered to the Warrant Agent upon execution of this Agreement. Such
Warrant Certificates shall be distributed to the holders named thereon.
Subject to the provisions of Sections 3, 5 and 6, the Warrant
Agent shall deliver Warrant Certificates in required whole number
denominations to Registered Holders in connection with any transfer or
exchange permitted under this Agreement. Except as provided in Section
6 hereof, no Warrant Certificates shall be issued except (i) Warrant
Certificates initially issued hereunder, (ii) Warrant Certificates
issued on or after the initial issuance date, upon the exercise of any
Warrants, to evidence the unexercised Warrants held by the exercising
Registered holder, and (iii) Warrant Certificates issued after the
initial issuance date upon any transfer or exchange of Warrant
Certificates or replacement of lost or mutilated Warrant Certificates,
2. Form and Execution of Warrant Certificates. The Warrant
Certificates shall be substantially in the form attached as Exhibit A.
The Warrant Certificates shall be dated as of the date of their
issuance, whether on initial issuance, transfer or exchange or in lieu
of mutilated, lost, stolen or destroyed Warrant Certificates.
Each such Warrant Certificate shall be numbered serially in
accordance with the Common Stock initially attached thereto with the
designation "WA" appearing on each Warrant Certificate.
<PAGE> 81
The Warrant Certificates may be detached immediately and, in such
event, the Warrant Certificates may be issued by number preceded by the
designation "WA" without regard to the number of the certificate
representing the Common Stock initially attached thereto.
The Warrant Certificates shall be manually countersigned by the
Warrant Agent and shall not be valid for any purpose unless so
countersigned. In any event, if any officer of the Company who executed
the Warrant Certificates shall cease to be an officer of the Company
before the date of issuance of the Warrant Certificates or before
countersignature and delivery by the Warrant Agent, such Warrant
Certificates may be countersigned, issued and delivered by the Warrant
Agent with the same force and effect as though the person who signed
such Warrant Certificates had not ceased to be an officer of the
Company.
3. Exercise. The Company agrees to register, at its sole expense,
the shares of Common Stock underlying the Warrants at the same time it
registers any of its securities under the Securities Act of 1933, as
amended (the "Registration Statement"). Subject to the provisions of
Section 8, the Warrants may be exercised at a price of $4.00 per share
of Common Stock (the "Exercise Price") in whole or in part at any time
during the period commencing on the effective date of the Registration
Statement (the "Initial Exercise Date") and terminating on a date (the
"Expiration Date") two years after such Initial Exercise Date. A
Warrant shall be deemed to have been exercised immediately prior to the
close of business on the date (the "Exercise Date") of the surrender
for exercise of the Warrant Certificate. The exercise form shall be
executed by the Registered Holder or his attorney duly authorized in
writing and will be delivered together with payment to the Warrant
Agent at its corporate offices (the "Corporate Office"), in cash or by
official bank or certified check, of an amount equal to the aggregate
Exercise Price, in lawful money of the United States of America.
Unless Warrant Shares may not be issued as provided herein, the
person entitled to receive the number of Warrant Shares deliverable on
such exercise shall be treated for all purposes as the holder of such
Warrant Shares as of the close of business on the Exercise Date. In
addition, the Warrant Agent shall also, at such time, verify that all
of the conditions precedent to the issuance of Warrant Shares, set
forth in Section 4, have been satisfied as of the Exercise Date. If any
one of the conditions precedent set forth in Section 4 are not
satisfied as of the Exercise Date, the Warrant Agent shall request
written instructions from the Company as to whether to return the
Warrant and pertinent Exercise Price payment to the exercising
Registered Holder or to hold the same until all such conditions have
been satisfied. The Company shall not be obligated to issue any
fractional share interests in Warrant Shares issuable or deliverable on
the exercise of any Warrant or scrip or cash therefore and such
fractional shares shall be of no value whatsoever. If more than one
Warrant shall be exercised at one time by the same Registered Holder,
the number of full Shares which shall be issuable on exercise thereof
shall be computed on the basis of the aggregate number of full shares
issuable on such exercise.
<PAGE> 82
Within thirty days after the Exercise Date and, in any event,
prior to the pertinent Expiration Date, pursuant to a Stock Transfer
Agreement between the Company and Warrant Agent, the Warrant Agent
shall cause to be issued and delivered to the person or persons
entitled to receive the same, a certificate or certificates for the
number of Warrant Shares deliverable on such exercise. No adjustment
shall be made in respect of cash divide dividends on Warrant Shares
delivered on exercise of any Warrant.
Upon the exercise of any Warrant, the Warrant Agent shall promptly
deposit the payment into an escrow account established by mutual
agreement of the Company and the Warrant Agent at a federally insured
commercial bank. All funds deposited in the escrow account will be
disbursed on a weekly basis to the Company once they have been
determined by the Warrant Agent to be collected funds. Once the funds
are determined to be collected, the Warrant Agent shall cause the share
certificate(s) representing the exercised Warrants to be issued.
Expenses incurred by the Warrant Agent will be paid by the
Company. These expenses, including delivery of exercised Warrant Share
certificates to the shareholder, will be billed monthly to tile
Company.
A detailed accounting statement relating to the number of Warrants
exercised and the net amount of exercised funds remitted will be given
to the Company with the payment of each exercise amount.
The Company may deem and treat the Registered Holder of the
Warrants at any time as the absolute owner thereof for all purposes,
and the Company shall not be affected by any notice to the contrary.
The Warrants shall not entitle the holder thereof to any of the rights
of shareholders or to any dividend declared on the Common Stock unless
the holder shall have exercised the Warrants and purchased the shares
of Common Stock prior to the record date fixed by the Board of
Directors of the Company for the determinations of holders of Common
Stock entitled to such dividend or other right.
4. Reservation of Shares and Payment of Taxes. The Company
covenants that it will at all times reserve and have available from its
authorized Common Stock such number of shares as shall then be issuable
on the exercise of all outstanding Warrants. The Company covenants that
all Warrant Shares which shall be so issuable shall be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issue thereof.
The Company and the Warrant Agent acknowledge that the Company may
be required, pursuant to the Securities Act of 1933, as amended (the
"Act"), to deliver to each Registered Holder, upon the exercise of
Warrants and delivery of Warrant Shares, a prospectus covering the
issuance of the Warrant Shares which meets the requirements of the Act,
which prospectus must be a part of an effective registration statement
under the Act at the time that the Warrant is exercised. No Warrants
may be exercised nor may Warrant shares be issued by the Company's
transfer agent or delivered by the Warrant Agent unless, on the
Exercise Date: (i) the Company has an effective registration statement
covering the issuance of the Warrant Shares under the Act; (ii) the
<PAGE> 83
Warrant Agent has copies of the prospectus which is a part of such
effective registration statement and which the Warrant Agent hereby
agrees to deliver with the Warrant Shares; and (iii) the Warrant Shares
may legally be issued and delivered to the exercising Registered Holder
under the securities laws of the state in which such Registered Holder
resides.
The Company agrees to use its best efforts to maintain, to the
extent required by the Act, an effective registration statement
covering the issuance of the Warrant Shares during the period the
Warrants are exercisable. The Company further agrees, from time to
time, to furnish the Warrant Agent with copies of the Company's
prospectus to be delivered to exercising Registered Holders, as set
forth above.
If any shares of Common Stock to be reserved for the purpose of
exercise of Warrants hereunder require any other registration with or
approval of any government authority under any federal or state law
before such shares may be validly issued or delivered, then the Company
covenants that it will in good faith and as expeditiously as possible
endeavor to secure such registration or approval. No Warrant Shares
shall be issued unless and until any such registration requirements
have been satisfied or such approval has been obtained.
The Registered Holder shall all pay all documentary, stamp or
similar taxes and other governmental charges that may be imposed with
respect to the issuance of the Warrants, or the issuance, transfer or
delivery of any Warrant Shares on exercise of the Warrants. In the
event the Warrant Shares are to be delivered in a name other than the
name of the Registered Holder of the Warrant Certificate, no such
delivery shall be made unless the person requesting the same has paid
to the Warrant Agent the amount of any such taxes or charges incident
thereto.
In the event the Warrant Agent ceases to also serve as the stock
transfer agent for the Company, the Warrant Agent is irrevocably
authorized to requisition the Company's new transfer agent from time to
time for certificates of Warrant Shares required upon exercise of the
Warrants, and the Company will authorize such transfer agent to comply
with all such requisitions. The Company will file with the Warrant
Agent a statement setting forth the name and address of its new
transfer agent, for shares of Common Stock or other capital stock
issuable upon exercise of the Warrants and of each successor transfer
agent.
5. Registration of Transfer, The Warrant Certificates may be
transferred in whole or in part. Warrant Certificates to be exchanged
shall be surrendered to the Warrant Agent at its Corporate Office. The
Company shall execute and the Warrant Agent shall countersign, issue
and deliver in exchange therefor the Warrant Certificate or
Certificates which the holder making the transfer shall be entitled to
receive.
<PAGE> 84
The Warrant Agent shall keep transfer books at its Corporate
Office which shall register Warrant Certificates and the transfer
thereof. On due presentment for registration of transfer of any
Warrant Certificate at such office, the Company shall execute and the
Warrant Agent shall issue and deliver to the transferee or transferees
a new Warrant Certificate or Certificates representing an equal
aggregate number of Warrants. All Warrant Certificates presented for
registration of transfer or exercise shall be duly endorsed or be
accompanied by a written instrument or instruments or transferred in a
form satisfactory to the Company and the Warrant Agent. At the time of
exercise, the transfer fee shall be paid by the Company. The Company
may require payment of a sum sufficient to cover any tax or other
government charge that may be imposed in connection therewith.
All Warrant Certificates so surrendered, or surrendered for
exercise or for exchange in case of mutilated Warrant Certificates,
shall be promptly canceled by the Warrant Agent and thereafter retained
by the Warrant Agent until termination of the agency created by this
Agreement. Prior to due presentment for registration of transfer
thereof, the Company and the Warrant Agent may treat the Registered
Holder of any Warrant Certificate as the absolute owner thereof
(notwithstanding any notations of ownership or writing thereon made by
anyone other than the Company of the Warrant Agent), and the parties
hereto shall not be affected by any notice to the contrary.
6. Loss or Mutilation. On receipt by the Company and the Warrant
Agent of evidence satisfactory as to the ownership of and the loss,
theft, destruction or mutilation of any Warrant Certificate, the
Company shall execute, and the Warrant Agent shall countersign and
deliver in lieu thereof, a new Warrant Certificate representing an
equal aggregate number of Warrants. In the case of loss, theft or
destruction of any Warrant Certificates, the individual requesting
issuance of a new Warrant Certificate shall be required to indemnify
the Company and Warrant Agent in an amount satisfactory to each of
them. In the event a Warrant Certificate is mutilated, such Certificate
shall be surrendered and canceled by the Warrant Agent prior to
delivery of a new Warrant Certificate. Applicants for a new Warrant
Certificate shall also comply with such other regulations and pay such
other reasonable charges as the Company may prescribe.
7. Adjustment of Exercise Price and Shares. After each adjustment
of the Exercise Price pursuant to this Section 7, the number of shares
of Common Stock purchasable on the exercise of the Warrants shall be
the number derived by dividing such adjusted pertinent Exercise Price
into the original pertinent Exercise Price. The pertinent Exercise
Price shall be subject to adjustment as follows:
(a) In the event, prior to the expiration of the Warrants by
exercise or by their terms, the Company shall issue any shares of its
Common Stock as a share dividend or shall subdivide the number of
outstanding shares of Common Stock into a greater number of shares,
then, in either of such events, the Exercise Price per share of Common
Stock purchasable pursuant to the Warrants in effect at the time of
such action shall be reduced proportionately and the number of shares
purchasable pursuant to the Warrants shall be increased
proportionately. Conversely, in the event the Company shall reduce the
<PAGE> 85
number of shares of its outstanding Common Stock by combining such
shares into a smaller number of shares, then, in such event, the
Exercise Price per share purchasable pursuant to the Warrants in effect
at the time of such action shall be increased proportionately and the
number of shares of Common Stock at that time purchasable pursuant to
the Warrants shall be decreased proportionately. Any dividend paid or
distributed on the Common Stock in shares of any other class of the
Company or securities convertible into shares of Common Stock shall be
treated as a dividend paid in Common Stock to the extent that shares of
Common Stock are issuable on the conversion thereof.
(b) In the event the Company, at any time while the Warrants shall
remain unexpired and unexercised, shall sell all or substantially all
of its property, and thereafter dissolves, liquidates or winds up its
affairs, then prompt, proportionate, equitable, lawful and adequate
provision shall be made as part of the terms of any such sale,
dissolution, liquidation or winding up such that Warrantholders may
elect to exercise all or any Warrants held, in order to receive the
same kind and amount of any share, securities or assets as may be
issuable, distributable or payable on any such sale, dissolution,
liquidation or winding up with respect to each share of Common Stock of
the Company; provided, however, that in the event of any such sale,
dissolution, liquidation or winding up, the right to exercise Warrants
shall terminate on a date fixed by the Company, such date to be not
earlier than 5:00 p.m., Mountain Time, on the 30th day next succeeding
the date on which notice of such termination of the right to exercise
Warrants has been given my mail to the holders thereof at such
addresses as may appear on the books, of the Company.
(c) Notwithstanding the provisions of this Section 8, no
adjustment on the Exercise Price shall be made whereby such price is
adjusted in an amount less than $.50 or until the aggregate of such
adjustments shall equal or exceed $.50.
(d) In the event, prior to the expiration of the Warrants by
exercise or by their terms, the Company shall determine to take a
record of the holders of its Common Stock for the purpose of
determining shareholders entitled to receive any share dividend or
other right which will cause any change or adjustment in the number,
amount, price or nature of the shares of Common Stock or other
securities or assets deliverable on exercise of the Warrants pursuant
to the foregoing provisions, the Company shall give to the Registered
Holders of the Warrants at the addresses as may appear on the books of
the Company at least 15 days' prior written notice to the effect that
it intends to take such a record. Such notice shall specify the date as
of which such record is to be taken; the purpose for which such record
is to be taken and the number, amount, price and nature of the shares
of Common Stock or other shares, securities or assets which will be
deliverable on exercise of the Warrants after the action for which such
record will be taken has been completed. Without limiting the
obligation of the Company to provide notice to the Registered Holders
of the Warrant Certificates of any corporate action hereunder, the
failure of the Company to give notice shall not invalidate such
corporate action.
<PAGE> 86
(e) No adjustment of the Exercise Price shall be made as a result
of or in connection with (i) the issuance of Common Stock of the
Company pursuant to options, warrants and share purchase agreements
outstanding or in effect on the date hereof, (ii) the establishment of
additional stock option plans of the Company, the modification, renewal
or extension of any plan now in effect or hereafter created, or the
issuance of Common Stock on exercise of any options pursuant to such
plans, or (iii) the issuance of Common Stock in connection with an
acquisition or merger of any type.
(f) This Warrant Agreement shall be incorporated by reference on
the Warrant Certificates.
Upon any adjustment of the Exercise Price required to be made
pursuant to this Section 7, the Company within 30 days thereafter shall
(i) cause to be filed with the Warrant Agent a certificate setting
forth the pertinent Exercise Price after such adjustment and setting
forth in reasonable detail the method of calculation and the facts upon
which such calculation is based, and (ii) cause to be mailed to each of
the Registered Holders of the Warrant Certificates written notice of
such adjustment.
8. Reduction in Exercise Price at Company's Option. In addition to
any adjustments made to the Exercise Price pursuant to Section 7, the
Company's Board of Directors may, at its sole discretion, reduce the
Exercise Price of the Warrants in effect at any time either for the
life of the Warrants or any shorter period of time determined by the
Company's Board of Directors. The Company shall promptly notify the
Warrant Agent and the Registered Holders of any such reductions in the
Exercise Price.
9. Duties, Compensation and Termination of Warrant Agent. The
Warrant Agent shall act hereunder as agent and in a ministerial
capacity for the Company, and its duties shall be determined solely by
the provisions hereof. The Warrant Agent shall not, by issuing and
delivering Warrant Certificates or by any other act hereunder, be
deemed to make any representations as to the validity, value or
authorization of the Warrant Certificates or the Warrants represented
thereby or of the Common Stock or other property delivered on exercise
of any Warrant. The Warrant Agent shall not at any time be under any
duty or responsibility to any holder of the Warrant Certificates to
make or cause to be made any adjustment of the Exercise Price or to
determine whether any fact exists which may require any such
adjustments.
The Warrant Agent shall not (i) be liable for any recital or
statement of fact contained herein or for any action taken or omitted
by it in reliance on any Warrant Certificate or other document or
instrument believed by it in good faith to be genuine and to have
signed or presented by the proper party or parties, (ii) be responsible
for any failure on the part of the Company to comply with any of its
covenants and obligations contained in this Agreement, except for its
own negligence or willful misconduct, or (iii) be liable for any act or
omission in connection with this Agreement except for its own
negligence or willful misconduct.
<PAGE> 87
The Company agrees to indemnify the Warrant Agent against any and
all losses, expenses and liabilities which the Warrant Agent may incur
in connection with the delivery of copies of the Company's prospectus
to exercising Registered Holders upon the exercise of any Warrants.
The Warrant Agent may at any time consult with counsel
satisfactory to it (which may be counsel for the Company) and shall
incur no liability or responsibility for any action taken or omitted by
it in good faith in accordance with the opinion or advice of such
counsel. Any notice, statement, instruction, request, direction, order
or demand of the Company shall be sufficiently evidenced by an
instrument signed by its President and attested by its Secretary or
Assistant Secretary. The Warrant Agent shall not be liable for any
action taken or omitted by it in accordance with such notice,
statement, instruction, request, order or demand.
The Company agrees to pay the Warrant Agent reasonable
compensation for its services hereunder and to reimburse the Warrant
Agent for its reasonable expenses. The Company further agrees to
indemnify the Warrant Agent against any and all losses, expenses and
liabilities, including judgments, costs and counsel fees, for any
action taken or omitted by the Warrant Agent in the execution of its
duties and powers hereunder, excepting losses, expenses and liabilities
arising as a result of the Warrant Agent's negligence or willful
misconduct. The Warrant Agent may resign its duties or the Company may
terminate the Warrant Agent and the Warrant Agent shall be discharged
from all further duties and liabilities hereunder (except liabilities
arising as a result of the Warrant Agent's own negligence or willful
misconduct), on 30 days' prior written notice to the other party. At
least 15 days prior to the date such resignation is to become
effective, the Warrant Agent shall cause a copy of such notice of
resignation to be mailed to the Registered Holder of each Warrant
Certificate. On such resignation or termination the Company shall
appoint a new warrant agent. If the Company shall fail to make such
appointment within a period of 30 days after it has been notified in
writing of the resignation by the Warrant Agent, then the registered
holder of any Warrant Certificate may apply to any court of competent
jurisdiction for the appointment of a new warrant agent. Any new
warrant agent, whether appointed by the Company or by such court, shall
be a bank or trust company having a capital and surplus, as shown by
its last published report to its shareholders, of not less than
$5,000,000, and having its principal offices in the States of Arizona
and California.
After acceptance in writing of an appointment of a new warrant
agent is received by the Company, such new warrant agent shall be
vested with the same powers, rights, duties and responsibilities as if
it had been originally named herein as the Warrant Agent, without any
further assurance, conveyance, act or deed; provided, however, if it
shall be necessary or expedient to execute and deliver any further
assurance, conveyance, act or deed, the same shall be done at the
expense of the Company and shall be legally and validly executed. The
Company shall file a notice of appointment of a new warrant agent with
the resigning Warrant Agent and shall forthwith cause a copy of such
notice to be mailed to the Registered Holder of each Warrant
Certificate.
<PAGE> 88
Any corporation into which the Warrant Agent or any new warrant
agent may be converted or merged, or any corporation resulting from any
consolidation to which the Warrant Agent or any new warrant agent shall
be a party, or any corporation succeeding to the corporate trust
business of the Warrant Agent shall be a successor warrant agent under
this Agreement, provided that such corporation is eligible for
appointment as a successor to the Warrant Agent under the provisions of
the preceding paragraph. Any such successor warrant agent shall
promptly cause notice of its succession as Warrant Agent to be mailed
to the Company and to the Registered Holder of each Warrant
Certificate. No further action shall be required for establishment and
authorization of such successor warrant agent.
The Warrant Agent, its officers or directors and its subsidiaries
or affiliates may buy, hold or sell warrants or other securities of the
Company and otherwise deal with the Company in the same manner and to
the same extent and with like effect as though it were not Warrant
Agent. Nothing herein shall preclude the Warrant Agent from acting in
any other capacity for the Company or for any other legal entity.
10. Modification of Agreement. The Warrant Agent and the Company
may by supplemental agreement make any changes or corrections in this
Agreement (i) that they shall deem appropriate to cure any ambiguity or
to correct any defective or inconsistent provision or mistake or error
herein contained; or (ii) that they may deem necessary or desirable and
which shall not adversely affect the interests of the holders of
Warrant Certificates; provided, however, this Agreement shall not
otherwise be modified, supplemented or altered in any respect except
with the consent in writing of the Registered Holders of Warrant
Certificates representing not less than 51% of the Warrants
outstanding. Additionally, except as provided in Sections 7 and 8, no
change in the number or nature of the Warrant Shares purchasable on
exercise of a Warrant, increase of the purchase price therefor, or the
acceleration of the Expiration Date of a Warrant shall be made without
the consent in writing of the Registered Holder of the Warrant
Certificate representing such Warrant, other than such changes as are
specifically prescribed or allowed by this Agreement.
11. Notices. All notices, demands, elections, opinions or requests
(however characterized or described) required or authorized hereunder
shall be deemed sufficient if made in writing and sent by registered or
certified mail, return receipt requested and postage prepaid, or by
tested telex, telegram or cable to the principal office of the
addressee, and if to the Registered Holder of a Warrant Certificate, at
the address of such holder as set forth on the books maintained by the
Warrant Agent.
12. Binding Agreement. This Agreement shall be binding upon and
inure to the benefit of the Company, the Warrant Agent and their
respective successors and assigns, and the holders from time to time of
Warrant Certificates. Nothing in this. Agreement is intended or shall
be construed to confer upon any other person any eight, remedy or claim
or to impose on any other person any duty, liability or obligation.
<PAGE> 89
13. Further Instruments. The parties hereto shall execute and
deliver any and all such other instruments and shall take any and all
other actions as may be reasonably necessary to carry out the intention
of this Agreement.
14. Severability. If any provision of this Agreement shall be
held, declared or pronounced void, voidable, invalid, unenforceable, or
inoperative for any reason by any court of competent jurisdiction,
government authority or otherwise, such holding, declaration or
pronouncement shall not affect adversely any other provision of this
Agreement, which shall otherwise remain in full force and effect and be
enforced in accordance with its terms, and the effect of such holding,
declaration or pronouncement shall be limited to the territory or
jurisdiction in which made.
15. Waiver. All the rights and remedies of either party to this
Agreement are cumulative and not exclusive of any other rights and
remedies as provided by law. No delay or failure on the part of either
party in the exercise of any right or remedy arising from a breach of
this Agreement will constitute a waiver of any other right or remedy,
The consent of any party where required hereunder to act or occurrence
shall not be deemed to be a consent to any other action or occurrence.
16. General Provisions. This Agreement shall be construed and
enforced in accordance with, and governed by, the laws of the State of
Colorado. Except as otherwise expressly stated herein, time is of the
essence in performing hereunder. This Agreement embodies the entire
agreement and understanding between the parties and supersedes all
prior agreements and understandings relating to the subject matter
hereof, and this Agreement may not be modified or amended or any term
or provisions hereof waived or discharged except in writing, signed by
the party against whom such amendment, modification, waiver or
discharge is sought to be enforced. The headings of this Agreement are
for convenience and reference only and shall not limit or otherwise
affect the meaning hereof. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the date first above written.
GIMMEL ENTERPRISES, INC. CORPORATE STOCK TRANSFER, INC.
By: /s/ Earnest Mathis, Jr. By: /s/ illegible
Earnest Mathis, Jr., President President
<PAGE> 90
EXHIBIT 99.2
THIS WARRANT AGREEMENT (the "Agreement") is dated as of _________,
1998, between GIMMEL ENTERPRISES, INC., a Colorado corporation (the
"Company"), and CORPORATE STOCK TRANSFER, INC., Denver, Colorado (the
"Warrant Agent").
WHEREAS, in connection an Agreement Concerning the Exchange of
Common Stock between Gimmel Enterprises, Earnest Mathis, Jr., and WIN
Systems, Inc. and the Stockholders of WIN Systems, Inc., the Company
anticipates its issuance of up to 340,000 Class B Common Stock Purchase
Warrants (the "Warrants") to purchase an aggregate of up to 340,000
shares of the Company's no par common stock (the "Common Stock" or the
"Warrant Shares"); and
WHEREAS, the Company desires to provide for issuance of warrant
certificates (the "Warrant Certificates") representing up to 340,000
Warrants; and
WHEREAS, the Company desires the Warrant Agent to act on behalf
of the Company, and the Warrant Agent is willing so to act, in
connection with the issuance, registration, transfer and exchange of
Warrant Certificates and exercise of the Warrants.
NOW, THEREFORE, in consideration of the promises and the mutual
agreements hereinafter set forth, it is agreed that:
1. Warrants/Warrant Certificates. Each Warrant shall entitle the
holder (the "Registered Holder" or, in the aggregate, the "Registered
Holders") in whose name the Warrant Certificate shall be registered on
the books maintained by the Warrant Agent to purchase one share of
Common Stock of the Company on exercise thereof, subject to adjustment
as provided in Section 7. Warrant Certificates representing the right
to purchase Warrant Shares shall be executed by the Company's President
and attested to by the Company's Secretary or Assistant Secretary and
delivered to the Warrant Agent upon execution of this Agreement. Such
Warrant Certificates shall be distributed to the holders named thereon.
Subject to the provisions of Sections 3, 5 and 6, the Warrant
Agent shall deliver Warrant Certificates in required whole number
denominations to Registered Holders in connection with any transfer or
exchange permitted under this Agreement. Except as provided in Section
6 hereof, no Warrant Certificates shall be issued except (i) Warrant
Certificates initially issued hereunder, (ii) Warrant Certificates
issued on or after the initial issuance date, upon the exercise of any
Warrants, to evidence the unexercised Warrants held by the exercising
Registered holder, and (iii) Warrant Certificates issued after the
initial issuance date upon any transfer or exchange of Warrant
Certificates or replacement of lost or mutilated Warrant Certificates.
2. Form and Execution of Warrant Certificates. The Warrant
Certificates shall be substantially in the form attached as Exhibit A.
The Warrant Certificates shall be dated as of the date of their
issuance, whether on initial issuance, transfer or exchange or in lieu
of mutilated, lost, stolen or destroyed Warrant Certificates.
<PAGE> 91
Each such Warrant Certificate shall be numbered serially in
accordance with the Common Stock initially attached thereto with the
designation "WB" appearing on each Warrant Certificate. The Warrant
Certificates may be detached immediately and, in such event, the
Warrant Certificates may be issued by number preceded by the
designation "WB" without regard to the number of the certificate
representing the Common Stock initially attached thereto.
The Warrant Certificates shall be manually countersigned by the
Warrant Agent and shall not be valid for any purpose unless so
countersigned. In any event, if any officer of the Company who executed
the Warrant Certificates shall cease to be an officer of the Company
before the date of issuance of the Warrant Certificates or before
countersignature and delivery by the Warrant Agent, such Warrant
Certificates may be countersigned, issued and delivered by the Warrant
Agent with the same force and effect as though the person who signed
such Warrant Certificates had not ceased to be an officer of the
Company.
3. Exercise. The Company agrees to register, at its sole expense,
the shares of Common Stock underlying the Warrants at the same time it
registers any of its securities under the Securities Act of 1933, as
amended (the "Registration Statement"). Subject to the provisions of
Section 8, the Warrants may be exercised at a price of $4.00 per share
of Common Stock (the "Exercise Price") in whole or in part at any time
during the period commencing on the effective date of the Registration
Statement (the "Initial Exercise Date") and terminating on a date (the
"Expiration Date") four years after such Initial Exercise Date. A
Warrant shall be deemed to have been exercised immediately prior to the
close of business on the date (the "Exercise Date") of the surrender
for exercise of the Warrant Certificate. The exercise form shall be
executed by the Registered Holder or his attorney duly authorized in
writing and will be delivered together with payment to the Warrant
Agent at its corporate offices (the "Corporate Office"), in cash or by
official bank or certified check, of an amount equal to the aggregate
Exercise Price, in lawful money of the United States of America.
Unless Warrant Shares may not be issued as provided herein, the
person entitled to receive the number of Warrant Shares deliverable on
such exercise shall be treated for all purposes as the holder of such
Warrant Shares as of the close of business on the Exercise Date. in
addition, the Warrant Agent shall also, at such time, verify that all
of the conditions precedent to the issuance of Warrant Shares, set
forth in Section 4, have been satisfied as of the Exercise Date. If any
one of the conditions precedent set forth in Section 4 are not
satisfied as of the Exercise Date, the Warrant Agent shall request
written instructions from the Company as to whether to return the
Warrant and pertinent Exercise Price payment to the exercising
Registered Holder or to hold the same until all such conditions have
been satisfied. The Company shall not be obligated to issue any
fractional share interests in Warrant Shares issuable or deliverable on
the exercise of any Warrant or scrip or cash therefore and such
fractional shares shall be of no value whatsoever, if more than one
Warrant shall be exercised at one time by the same Registered Holder,
the number of full Shares which shall be issuable on exercise thereof
shall be computed on the basis of the aggregate number of full shares
issuable on such exercise.
<PAGE> 92
Within thirty days after the Exercise Date and, in any event,
prior to the pertinent Expiration Date, pursuant to a Stock Transfer
Agreement between the Company and Warrant Agent, the Warrant Agent
shall cause to be issued and delivered to the person or persons
entitled to receive the same, a certificate or certificates for the
number of Warrant Shares deliverable on such exercise. No adjustment
shall be made in respect of cash dividends on Warrant Shares delivered
on exercise of any Warrant.
Upon the exercise of any Warrant, the Warrant Agent shall promptly
deposit the payment into an escrow account established by mutual
agreement of the Company and the Warrant Agent at a federally insured
commercial bank. All funds deposited in the escrow account will be
disbursed on a weekly basis to the Company once they have been
determined by the Warrant Agent to be collected funds. Once the funds
are determined to be collected, the Warrant Agent shall cause the share
certificate(s) representing the exercised Warrants to be issued.
Expenses incurred by the Warrant Agent will be paid by the
Company. These expenses, including delivery of exercised Warrant Share
certificates to the shareholder, will be billed monthly to the Company.
A detailed accounting statement relating to the number of Warrants
exercised and the net amount of exercised funds rernitted will be given
to the Company with the payment of each exercise amount.
The Company may deem and treat the Registered Holder of the
Warrants at any time as the absolute owner thereof for all purposes,
and the Company shall not be affected by any notice to the contrary.
The Warrants shall not entitle the holder thereof to any of the rights
of shareholders or to any dividend declared on the Common Stock unless
the holder shall have exercised the Warrants and purchased the shares
of Common Stock prior to the record date fixed by the Board of
Directors of the Company for the determinations of holders of Common
Stock entitled to such dividend or other right.
4. Reservation of Shares and Payment of Taxes. The Company
covenants that it will at all times reserve and have available from its
authorized Common Stock such number of shares as shall then be issuable
on the exercise of all outstanding Warrants. The Company covenants that
all Warrant Shares which shall be so issuable shall be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens and
charges respect to the issue thereof.
The Company and the Warrant Agent acknowledge that the Company may
be required, pursuant to the Securities Act of 1933, as amended (the
"Act"), to deliver to each Registered Holder, upon the exercise of
Warrants and delivery of Warrant Shares, a prospectus covering the
issuance of the Warrant Shares which meets the requirements of the Act,
which prospectus must be a part of an effective registration statement
under the Act at the time that the Warrant is exercised. No Warrants
may be exercised nor may Warrant shares be issued by the Company's
transfer agent or delivered by the Warrant Agent unless, on the
Exercise Date: (i) the Company has an effective registration statement
covering the issuance of the Warrant Shares under the Act; (ii) the
Warrant Agent has copies of the prospectus which is a part of such
<PAGE> 93
effective registration statement and which the Warrant Agent hereby
agrees to deliver with the Warrant Shares; and (iii) the Warrant Shares
may legally be issued and delivered to the exercising Registered Holder
under the securities laws of the state in which such Registered Holder
resides.
The Company agrees to use its best efforts to maintain, to the
extent required by the Act, an effective registration statement
covering the issuance of the Warrant Shares during the period the
Warrants are exercisable. The Company further agrees, from time to
time, to furnish the Warrant Agent with copies of the Company's
prospectus to be delivered to exercising Registered Holders, as set
forth above.
If any shares of Common Stock to be reserved for the purpose of
exercise of Warrants hereunder require any other registration with or
approval of any government authority under any federal or state law
before such shares may be validly issued or delivered, then the Company
covenants that it will in good faith and as expeditiously as possible
endeavor to secure such registration or approval. No Warrant Shares
shall be issued unless and until any such registration requirements
have been satisfied or such approval has been obtained.
The Registered Holder shall pay all documentary, stamp or similar
taxes and other governmental charges that may be imposed with respect
to the issuance of the Warrants, or the issuance, transfer or delivery
of any Warrant Shares on exercise of the Warrants. In the event the
Warrant Shares are to be delivered in a name other than the name of the
Registered Holder of the Warrant Certificate, no such delivery shall be
made unless the person requesting the same has paid to the Warrant
Agent the amount of any such taxes or charges incident thereto.
In the event the Warrant Agent ceases to also serve as the stock
transfer agent for the Company, the Warrant Agent is irrevocably
authorized to requisition the Company's new transfer agent from time to
time for certificates of Warrant Shares required upon exercise of the
Warrants, and the Company will authorize such transfer agent to comply
with all such requisitions. The Company will file with the Warrant
Agent a statement setting forth the name and address of its new
transfer agent, for shares of Common Stock or other capital stock
issuable upon exercise of the Warrants and of each successor transfer
agent.
5. Registration of Transfer. The Warrant Certificates may be
transferred in whole or in part. Warrant Certificates to be exchanged
shall be surrendered to the Warrant Agent at its Corporate Office, The
Company shall execute and the Warrant Agent shall countersign, issue
and deliver in exchange therefor the Warrant Certificate or
Certificates which the holder making the transfer shall be entitled to
receive.
The Warrant Agent shall keep transfer books at its Corporate
Office which shall register Warrant Certificates and the transfer
thereof. On due presentment for registration of transfer of any
Warrant Certificate at such office, the Company shall execute and the
Warrant Agent shall issue and deliver to the transferee or transferees
<PAGE> 94
a new Warrant Certificate or Certificates representing an equal
aggregate number of Warrants. All Warrant Certificates presented for
registration of transfer or exercise shall be duly endorsed or be
accompanied by a written instrument or instruments or transferred in a
form satisfactory to the Company and the Warrant Agent. At the time of
exercise, the transfer fee shall be paid by the Company. The Company
may require payment of a sum sufficient to cover any tax or other
government charge that may be imposed in connection therewith.
All Warrant Certificates so surrendered, or surrendered for
exercise or for exchange in case of mutilated Warrant Certificates,
shall be promptly canceled by the Warrant Agent and thereafter retained
by the Warrant Agent until termination of the agency created by this
Agreement. Prior to due presentment for registration of transfer
thereof, the Company and the Warrant Agent may treat the Registered
Holder of any Warrant Certificate as the absolute owner thereof
(notwithstanding any notations of ownership or writing thereon made by
anyone other than the Company or the Warrant Agent), and the parties
hereto shall not be affected by any notice to the contrary.
6. Loss or Mutilation. On receipt by the Company and the Warrant
Agent of evidence satisfactory as to the ownership of and the loss,
theft, destruction or mutilation of any Warrant Certificate, the
Company shall execute, and the Warrant Agent shall countersign and
deliver in lieu thereof, a new Warrant Certificate representing an
equal aggregate number of Warrants. In the case of loss, theft or
destruction of any Warrant Certificates, the individual requesting
issuance of a new Warrant Certificate shall be required to indemnify
the Company and Warrant Agent in an amount satisfactory to each of
them. In the event a Warrant Certificate is mutilated, such Certificate
shall be surrendered and canceled by the Warrant Agent prior to
delivery of a new Warrant Certificate. Applicants for a new Warrant
Certificate shall also comply with such other regulations and pay such
other reasonable charges as the Company may prescribe.
7. Adjustment of Exercise Price and Shares. After each adjustment
of the Exercise Price pursuant to this Section 7, the number of shares
of Common Stock purchasable on the exercise of the Warrants shall be
the number derived by dividing such adjusted pertinent Exercise Price
into the original pertinent Exercise Price. The pertinent Exercise
Price shall be subject to adjustment as follows:
(a) In the event, prior to the expiration of the Warrants by
exercise or by their terms, the Company shall issue any shares of its
Common Stock as a share dividend or shall subdivide the number of
outstanding shares of Common Stock into a greater number of shares,
then, in either of such events, the Exercise Price per share of Common
Stock purchasable pursuant to the Warrants in effect at the time of
such action shall be reduced proportionately and the number of shares
purchasable pursuant to the Warrants shall be increased
proportionately. Conversely, in the event the Company shall reduce the
number of shares of its outstanding Common Stock by combining such
shares into a smaller number of shares, then, in such event, the
Exercise Price per share purchasable pursuant to the Warrants in effect
at the time of such action shall be increased proportionately and the
number of shares of Common Stock at that time purchasable pursuant to
<PAGE> 95
the Warrants shall be decreased proportionately. Any dividend paid or
distributed on the Common Stock in shares of any other class of the
Company or securities convertible into shares of Common Stock shall be
treated as a dividend paid in Common Stock to the extent that shares
of Common Stock are issuable on the conversion thereof
(b) In the event the Company, at anytime while the Warrants shall
remain unexpired and unexercised, shall sell all or substantially all
of its property, and thereafter dissolves, liquidates or winds up its
affairs, then prompt, proportionate; equitable, lawful and adequate
provision shall be made as part of the terms of any such sale,
dissolution, liquidation or winding up such that Warrantholders, may
elect to exercise all or any Warrants held, in order to receive the
same kind and amount of any share, securities or assets as may be
issuable, distributable or payable on any such sale, dissolution,
liquidation or winding up with respect to each share of Common Stock of
the Company; provided, however, that in the event of any such sale,
dissolution, liquidation or winding up, the right to exercise Warrants
shall terminate on a date fixed by the Company, such date to be not
earlier than 5:00 p.m,, Mountain Time, on the 30th day next succeeding
the date on which notice of such termination of the right to exercise
Warrants has been given my mail to the holders thereof at such
addresses as may appear on the books of the Company.
(c) Notwithstanding the provisions of this Section 8, no
adjustment on the Exercise Price shall be made whereby such price is
adjusted in an amount less than $.50 or until the aggregate of such
adjustments shall equal or exceed $.50.
(d) In the event, prior to the expiration of the Warrants by
exercise or by their terms, the Company shall determine to take a
record of the holders of its Common Stock for the purpose of
determining shareholders entitled to receive any share dividend or
other right which will cause any change or adjustment in the number,
amount, price or nature of the shares of Common Stock or other
securities or assets deliverable on exercise of the Warrants pursuant
to the foregoing provisions, the Company shall give to the Registered
Holders of the Warrants at the addresses as may appear on the books of
the Company at least 15 days' prior written notice to the effect that
it intends to take such a record. Such notice shall specify the date as
of which such record is to be taken; the purpose for which such record
is to be taken and the number, amount, price and nature of the shares
of Common Stock or other shares, securities or assets which will be
deliverable on exercise of the Warrants after the action for which such
record will be taken has been completed.
Without limiting the obligation of the Company to provide notice
to the Registered Holders of the Warrant Certificates of any corporate
action hereunder, the failure of the Company to give notice shall not
invalidate such corporate action.
(e) No adjustment of the Exercise Price shall be made as a result
of or in connection with (i) the issuance of Common Stock of the
Company pursuant to options, warrants and share purchase agreements
outstanding or in effect on the date hereof, (ii) the establishment of
additional stock option plans of the Company, the modification, renewal
<PAGE> 96
or extension of any plan now in effect or hereafter created, or the
issuance of Common Stock of the Company pursuant to options, warrants
and share purchase agreements outstanding or in effect on the date
hereof, (ii) the establishment of additional stock option plans of the
Company, the modification, renewal or extension of any plan now in
effect or created, or the issuance of Common Stock on exercise of any
options pursuant to such plans, or (iii) the issuance of Common Stock
in connection with an acquisition or merger of any type.
(f) This Warrant Agreement shall be incorporated by reference on
the Warrant Certificates.
Upon any adjustment of the Exercise Price required to be made
pursuant to this Section 7, the Company within 30 days thereafter shall
(i) cause to be filed with the Warrant Agent a certificate setting
forth the pertinent Exercise Price after such adjustment and setting
forth in reasonable detail the method of calculation and the facts upon
which such calculation is based, and (ii) cause to be mailed to each of
the Registered Holders of the Warrant Certificates written notice of
such adjustment.
8. Reduction in Exercise Price at Company's Option. In addition to
any adjustments made to the Exercise Price pursuant to Section 7, the
Company's Board of Directors may, at its sole discretion, reduce the
Exercise Price of the Warrants in effect at any time either for the
life of the Warrants or any shorter period of time determined by the
Company's Board of Directors. The Company shall promptly notify the
Warrant Agent and the Registered Holders of any such reductions in the
Exercise Price.
9. Duties, Compensation and Termination of Warrant Agent. The
Warrant Agent shall act hereunder as agent and in a ministerial
capacity for the Company, and its duties shall be determined solely by
the provisions hereof. The Warrant Agent shall not, by issuing and
delivering Warrant Certificates or by any other act hereunder, be
deemed to make any representations as to the validity, value or
authorization of the Warrant Certificates or the Warrants represented
thereby or of the Common Stock or other property delivered on exercise
of any Warrant. The Warrant Agent shall not at any time be under any
duty or responsibility to any holder of the Warrant Certificates to
make or cause to be made any adjustment of the Exercise Price or to
determine whether any fact exists which may require any such
adjustments.
The Warrant Agent shall not (i) be liable for any recital or
statement of fact contained herein or for any action taken or omitted
by it in reliance on any Warrant Certificate or other document or
instrument believed by good faith to and to have or presented by the
proper party or parties, (ii) be responsible for any failure on the
part of the Company to comply with any of its covenants and obligations
contained in this Agreement, except for its own negligence or willful
misconduct, or (iii) be liable for any act or omission in connection
with this Agreement except for its own negligence or willful
misconduct.
<PAGE> 97
The Company agrees to indemnify the Warrant Agent against any and
all losses, expenses and liabilities which the Warrant Agent may incur
in connection with the delivery of copies of the Company's prospectus
to exercising Registered Holders upon the exercise of any Warrants.
The Warrant Agent may at any time consult with counsel
satisfactory to it (which may be counsel for the Company) and shall
incur no liability or responsibility for any action taken or omitted by
it in good faith in accordance with the opinion or advice of such
counsel. Any notice, statement, instruction, request, direction, order
or demand of the Company shall be sufficiently evidenced by an
instrument signed by its President and attested by its Secretary or
Assistant Secretary. The Warrant Agent shall not be liable for any
action taken or omitted by it in accordance with such notice,
statement, instruction, request, order or demand.
The Company agrees to pay the Warrant Agent reasonable
compensation for its services hereunder and to reimburse the Warrant
Agent for its reasonable expenses. The Company further agrees to
indemnify the Warrant Agent against any and all losses, expenses and
liabilities, including judgments, costs and counsel fees, for any
action taken or omitted by the Warrant Agent in the execution of its
duties and powers hereunder, excepting losses, expenses and liabilities
arising as a result of the Warrant Agent's negligence or willful
misconduct.
The Warrant Agent may resign its duties or the Company may
terminate the Warrant Agent and the Warrant Agent shall be discharged
from all further duties and liabilities hereunder (except liabilities
arising as a result of the Warrant Agent's own negligence or willful
misconduct), on 30 days' prior written notice to the other party. At
least 15 days prior to the date such resignation is to become
effective, the Warrant Agent shall cause a copy of such notice of
resignation to be mailed to the Registered Holder of each Warrant
Certificate. On such resignation or termination the Company shall
appoint a new warrant agent. If the Company shall fail to make such
appointment within a period of 30 days after it has been notified in
writing of the resignation by the Warrant Agent, then the registered
holder of any Warrant Certificate may apply to any court of competent
jurisdiction for the appointment of a new warrant agent. Any new
warrant agent, whether appointed by the Company or by such court, shall
be a bank or trust company having a capital and surplus, as shown by
its last published report to its shareholders, of not less than
$5,000,000, and having its principal offices in the States of Arizona
and California.
After acceptance in writing of an appointment of a new warrant
agent is received by the Company, such new warrant agent shall be
vested with the same powers, rights, duties and responsibilities as if
it had been originally named herein as the Warrant Agent, without any
further assurance, conveyance, act or deed; provided, however, if it
shall be necessary or expedient to execute and deliver any further
assurance, conveyance, act or deed, the same shall be done at the
expense of the Company and shall be legally and validly executed. The
Company shall file a notice of appointment of a new warrant agent with
<PAGE> 98
the resigning Warrant Agent and shall forthwith cause a copy of such
notice to be mailed to the Registered Holder of each Warrant
Certificate.
Any corporation into which the Warrant Agent or any new warrant
agent may be converted or merged, or any corporation resulting from any
consolidation to which the Warrant Agent or any new warrant agent shall
be a party, or any corporation succeeding to the corporate trust
business of the Warrant Agent shall be a successor warrant agent under
this Agreement, provided that such corporation is eligible for
appointment as a successor to the Warrant Agent under the provisions of
the preceding paragraph. Any such successor warrant agent shall
promptly cause notice of its succession as Warrant Agent to be mailed
to the Company and to the Registered Holder of each Warrant
Certificate. No further action shall be required for establishment and
authorization of such successor warrant agent.
The Warrant Agent, its officers or directors and its subsidiaries
or affiliates may buy, hold or sell warrants or other securities of the
Company and otherwise deal with the Company in the same manner and to
the same extent and with like effect as though it were not Warrant
Agent. Nothing herein shall preclude the Warrant Agent from acting in
any other capacity for the Company or for any other legal entity.
10. Modification of Agreement. The Warrant Agent and the Company
may by supplemental agreement make any changes or corrections in this
Agreement (i) that they shall deem appropriate to cure any ambiguity or
to correct any defective or inconsistent provision or mistake or error
herein contained; or (ii) that they may deem necessary or desirable and
which shall not adversely affect the interests of the holders of
Warrant Certificates; provided, however, this Agreement shall not
otherwise be modified, supplemented or altered in any respect except
with the consent in writing of the Registered Holders of Warrant
Certificates representing not less than 51% of the Warrants
outstanding. Additionally, except as provided in Sections 7 and 8, no
change in the number or nature of the Warrant Shares purchasable on
exercise of a Warrant, increase of the purchase price therefor, or the
acceleration of the Expiration Date of a Warrant shall be made without
the consent in writing of the Registered Holder of the Warrant
Certificate representing such Warrant, other than such changes as are
specifically prescribed or allowed by this Agreement.
11. Notices. All notices, demands, elections, opinions or requests
(however characterized or described) required or authorized hereunder
shall be deemed sufficient if made in writing and sent by registered or
certified mail, return receipt requested and postage prepaid, or by
tested telex, telegram or cable to the principal office of the
addressee, and if to the Registered Holder of a Warrant Certificate, at
the address of such holder as set forth on the books maintained by the
Warrant Agent.
12. Binding Agreement. This Agreement shall be binding upon and
inure to the benefit of the Company, the Warrant Agent and their
respective successors and assigns, and the holders from time to time of
Warrant Certificates.. Nothing in this Agreement is intended or shall
be construed to confer upon any other person any right, remedy or claim
or to impose on any other person any duty, liability or obligation.
<PAGE> 99
13. Further Instruments. The parties hereto shall execute and
deliver any and all such other instruments and shall take any and all
other actions as may be reasonably necessary to carry out the intention
of this Agreement.
14. Severability. If any provision of this Agreement shall be
held, declared or pronounced void, voidable, invalid, unenforceable, or
inoperative for any reason by any court of competent jurisdiction,
government authority or otherwise, such holding, declaration or
pronouncement shall not affect adversely any other provision of this
Agreement, which shall otherwise remain in full force and effect and be
enforced in accordance with its terms; and the effect of such holding,
declaration or pronouncement shall be limited to the territory or
jurisdiction in which made.
15. Waiver. All the rights and remedies of either party to this
Agreement are cumulative and not exclusive of any other rights and
remedies as provided by law. No delay or failure on the part of either
party in the exercise of any right or remedy arising from a breach of
this Agreement will constitute a waiver of any other right or remedy.
The consent of any party where required hereunder to act or occurrence
shall not be deemed to be a consent to any other action or occurrence.
16. General Provisions. This Agreement shall be construed and
enforced in accordance with, and governed by, the laws of the State of
Colorado. Except as otherwise expressly stated herein, time is of the
essence in performing hereunder. This Agreement embodies the entire
agreement and understanding between the parties and supersedes all
prior agreements and understandings relating to the subject matter
hereof, and this Agreement may not be modified or amended or any term
or provisions hereof waived or discharged except in writing, signed by
the party against whom such amendment, modification, waiver or
discharge is sought to be enforced. The headings of this Agreement are
for convenience and reference only and shall not limit or otherwise
affect the meaning hereof. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the date first above written.
GIMMEL ENTERPRISES, INC. CORPORATE STOCK TRANSFER, INC.
By: /s/ Earnst Mathis. Jr. By: /s/ illegible
Earnest Mathis, Jr., President
<PAGE> 100
EXHIBIT 99.3
WIN SYSTEMS INTERNATIONAL, INC.
1998 STOCK OPTION PLAN
Article I. Establishment and Purpose
1.1 Establishment. WIN Systems International, Inc., a Colorado
corporation (the "Company"), hereby establishes a stock option plan for
officers, directors, employees and consultants who provide services to
the Company, as described herein, which shall be known as the 1998
Stock Option Plan (the "Plan"). It is intended that certain of the
options issued under the Plan to employees of the Company shall
constitute "Incentive Stock Options" within the meaning of section 422A
of the Internal Revenue Code ("Code"), and that other options issued
under the Plan shall constitute "Nonstatutory Options" under the Code.
The Board of Directors of the Company (the "Board") shall determine
which options are to be Incentive Stock Options and which are to be
Nonstatutory Options and shall enter into option agreements with
recipients accordingly.
1.2 Purpose. The purpose of this Plan is to enhance the Company's
stockholder value and financial performance by attracting, retaining
and motivating the Company's officers, directors, key employees and
consultants and to encourage stock ownership by such individuals by
providing them with a means to acquire a proprietary interest in the
Company's success through stock ownership,
Article II. Definitions
2.1 Definitions. Whenever used herein, the following capitalized
terms shall have the meanings set forth below, unless the context
clearly requires otherwise.
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as
amended.
(c) "Committee" shall mean the Committee provided for by
Article IV hereof,
(d) "Company" means WIN Systems International, Inc., a
Colorado corporation.
(e) "Consultant" means any person or entity, including an
officer or director of the Company who provides services (other
than as an Employee) to the Company and shall include a
Nonemployee Director, as defined below,
(f) "Date of Exercise" means the date the Company receives
notice, by an Optionee, of the exercise of an Option pursuant to
Section 8.1 of the Plan. Such notice shall indicate the number of
shares of Stock the Optionee intends to exercise.
(g) "Employee" means any person, including an officer or
director of the Company who is employed by the Company.
<PAGE> 101
(h) "Fair Market Value" means the fair market value of Stock
upon which an Option is granted under this Plan.
(i) "Incentive Stock Option" means an Option granted under
this Plan which is intended to qualify as an "incentive stock
option" within the meaning of section 422A of the Code.
(j) "Nonemployee Director" means a member of the Board who is
not an employee of the Company at the time an Option is granted
hereunder.
(k) "Nonstatutory Option" means an Option granted under the
Plan which is not intended to qualify as an Incentive Stock Option
within the meaning of section 422A of the Code. Nonstatutory
Options may be granted at such times and subject to such
restrictions as the Board shall determine without conforming to
the statutory rules of section 422A of the Code applicable to
Incentive Stock Options.
(l) "Option" means the right, granted under the Plan, to
purchase Stock of the Company at the option price for a specified
period of time. For purposes of this Plan, an Option may be either
an Incentive Stock Option or a Nonstatutory Option.
(m) "Optionee" means an Employee or Consultant holding an
Option under the Plan.
(n) "Parent Corporation" shall have the meaning set forth in
section 425(e) of the Code with the Company being treated as the
employer corporation for purposes of this definition.
(o) "Significant Shareholder" means an individual who, within
the meaning of section 422A(b)(6) of the Code, owns securities
possessing more than ten percent of the total combined voting
power of all classes of securities of the Company. In determining
whether an individual is a Significant Shareholder, an individual
shall be treated as owning securities owned by certain relatives
of the individual and certain securities owned by corporations in
which the individual is a shareholder; partnerships in which the
individual is a partner; and estates or trusts of which the
individual is a beneficiary, all as provided in section 425(d) of
the Code.
(p) "Stock" means the no par value common stock of the
Company.
2.2 Gender and Number. Except when otherwise indicated by the
context, any masculine terminology when used in this Plan also shall
include the feminine gender, and the definition of any term herein in
the singular also shall include the plural.
<PAGE> 102
Article III. Eligibility and Participation
3.1 Eligibility and Participation. All Employees are eligible to
participate in this Plan and receive Incentive Stock Options and/or
Nonstatutory Options hereunder. All Consultants are eligible to
participate in this Plan and receive Nonstatutory Options hereunder.
Optionees in the Plan shall be selected by the Board from among those
Employees and Consultants who, in the opinion of the Board, are in a
position to contribute materially to the Company's continued growth and
development and to its long-term financial success.
Article IV. Administration
4.1 Administration. The Board shall be responsible for
administering the Plan.
The Board is authorized to interpret the Plan, to prescribe,
amend, and rescind rules and regulations relating to the Plan; to
provide for conditions and assurances deemed necessary or advisable to
protect the interests of the Company; and to make all other
determinations necessary or advisable for the administration of the
Plan, but only to the extent not contrary to the express provisions of
the Plan. Determinations, interpretations or other actions made or
taken by the Board, pursuant to the provisions of this Plan, shall be
final and binding and conclusive for all purposes and upon all persons.
The Plan shall be administered by the standing Compensation
Committee of the Board (the "Committee") which is an executive
committee of the Board, and consists of not less than three (3) members
of the Board, at least two of whom are not executive officers or
salaried employees of the Company. The members of the Committee may be
directors who are eligible to receive Options under the Plan, but
Options may be granted to such persons only by action of the full Board
and not by action of tile Committee. The Committee shall have full
power and authority, subject to the limitations of the Plan and any
limitations imposed by the Board, to construe, interpret and administer
the Plan and to make determinations which shall be final, conclusive
and binding upon all persons, including, without limitation, the
Company, the stockholders, the directors and any persons having any
interests in any Options which may be granted under the Plan, and, by
resolution or resolution providing for the creation and issuance of any
such Option, to fix the terms upon which, the time or times at or
within which, and the price or prices at which any Stock may be
purchased from the Company upon the exercise of Options, which terms,
time or times and price or prices shall, in every case, be set forth or
incorporated by reference in the instrument or instruments evidencing
such Option, and shall be consistent with the provisions of the Plan.
The Board may from time to time remove members from or add members
to, the Committee. The Board may terminate the Committee at any time.
Vacancies on the Committee, howsoever caused, shall be filled by the
Board. The Committee shall select one of its members as Chairman, and
shall hold meetings at such times and places as the Chairman may
determine. A majority of the Committee at which a quorum is present, or
acts reduced to or approved in writing by all of the members of the
Committee, shall be the valid acts of the Committee. A quorum shall
consist of two-thirds (2/3) of the members of the Committee.
<PAGE> 103
Where the Committee has been created by the Board, references
herein to actions to be taken by the Board shall be deemed to refer to
the Committee as well, except where limited by the Plan or the Board.
The Board shall have all of the enumerated powers of the Committee
but shall not be limited to such powers. No member of the Board or the
Committee shall be liable for any action or determination made in good
faith with respect to the Plan or any Option granted under it.
4.2 Special Provisions for Grants to Officers or Directors. Rule
16b-3 under the Securities and Exchange Act of 1934 (the "Act")
provides that the grant of a stock option to a director or officer of
a company subject to the Act will be exempt from the provisions of
section 16(b) of the Act if the conditions set forth in said Rule are
satisfied. Unless otherwise specified by the Board, grants of Options
hereunder to individuals who are officers or directors of the Company
shall be made in a manner that satisfies the conditions of said Rule.
Article V. Stock Subject to the Plan
5.1 Number. The total number of shares of Stock hereby made
available and reserved for issuance under the Plan shall be 750,000.
The aggregate number of shares of Stock available under this Plan shall
be subject to adjustment as provided in section 5.3. The total number
of shares of Stock may be authorized but unissued shares of Stock, or
shares acquired by purchase as directed by the Board from time to time
in its discretion, to be used for issuance upon exercise of Options
granted hereunder.
5.2 Unused Stock. If an Option shall expire or terminate for any
reason without having been exercised in full, the unpurchased shares of
Stock subject thereto shall (unless the Plan shall have terminated)
become available for other Options under the Plan.
5.3 Adjustment in Capitalization. In the event of any change in
the outstanding shares of Stock by reason of a stock dividend or split,
recapitalization, reclassification or other similar corporate change,
the aggregate number of shares of Stock set forth in section 5.1 shall
be appropriately adjusted by the Board to reflect such change. The
Board's determination shall be conclusive; provided, however, that
fractional shares shall be rounded to the nearest whole share. In any
such case, the number and kind of shares of Stock that are subject to
any Option (including any Option outstanding after termination of
employment) and the Option price per share shall be proportionately and
appropriately adjusted without any change in the aggregate Option price
to be paid therefor upon exercise of the Option.
Article VI. Duration of the Plan
6.1 Duration of the Plan. The Plan shall be in effect until August
31, 2008 unless extended by the Company's shareholders. Any Options
outstanding at the end of said period shall remain in effect in
accordance with their terms. The Plan shall terminate before the end of
said period, if all Stock subject to it has been purchased pursuant to
the exercise of Options granted under the Plan.
<PAGE> 104
Article VI Terms of Stock Options
7.1 Grant of Options. Subject to section 5.1, Options may be
granted to Employees or Consultants at any time and from time to time
as determined by the Board; provided, however, that Consultants may
receive only Nonstatutory Options, and may not receive Incentive Stock
Options. The Board shall have complete discretion in determining the
number of Options granted to each Optionee. In making such
determinations, the Board may take into account the nature of services
rendered by such Employees or Consultants, their present and potential
contributions to the Company, and such other factors as the Board in
its discretion shall deem relevant. The Board also shall determine
whether an Option is to be an Incentive Stock Option or a Nonstatutory
Option.
In the case of Incentive Stock Options the total Fair Market Value
(determined at the date of grant) of shares of Stock with respect to
which incentive stock options are exercisable for the first time by the
Optionee during any calendar year under all plans of the Company under
which incentive stock options may be granted (and all such plans of any
Parent Corporations and any subsidiary corporations of the Company)
shall not exceed $100,000. (Hereinafter, this requirement is sometimes
referred to as the $100,000 Limitation.")
Nothing in this Article VII shall be deemed to prevent the grant
of Options permitting exercise in excess of the maximums established by
the preceding paragraph where such excess amount is treated as a
Nonstatutory Option.
The Board is expressly given the authority to issue amended or
replacement Options with respect to shares of Stock Subject to an
Option previously granted hereunder. An amended Option amends the terms
of an Option previously granted (including an extension of the terms of
such Option) and thereby supersedes the previous Option. A replacement
Option is similar to a new Option granted hereunder except that it
provides that it shall be forfeited to the extent that a previously
granted Option is exercised, or except that its issuance is conditioned
upon the termination of a previously granted Option,
7.2 No Tandem Options. Where an Option granted under the Plan is
intended to be an Incentive Stock Option, the Option shall not contain
terms pursuant to which the exercise of the Option would affect the
Optionee's right to exercise another Option, or vice versa, such that
the Option intended to be an Incentive Stock Option would be deemed a
tandem stock option within the meaning of the regulations under section
422A of the Code.
7.3 Option Agreement. Terms and Conditions to Apply Unless
Otherwise Specified. As determined by the Board oil the date of grant,
each Option shall be evidenced by an Option agreement (the "Option
Agreement") that includes the nontransferability provisions required by
section 10.2 hereof and specifies: whether the Option is an Incentive
Stock Option or a Nonstatutory Option, the Option price; the term
(duration) of the Option; the number of shares of Stock to which the
Option applies; any vesting or exercisability restrictions which the
Board may impose; in the case of an Incentive Stock Option, a provision
<PAGE> 105
implementing the $100,000 Limitation; and any other terms or Incentive
Stock Options granted to Significant Stockholders shall have an Option
price of not less than 110 percent of the Fair Market Value of the
Stock on the date of grant. The Option price for Nonstatutory Options
shall be established by the Board and shall not be less than 100
percent of the Fair Market Value of the Stock on the date of grant.
7.5 Term of Options. Each Option shall expire at such time as the
Board shall determine, provided, however, that no Option shall be
exercisable later than ten years from the date of its grant
7.6 Exercise of Options. Options granted under the Plan shall be
exercisable at such times and be subject to such restrictions and
conditions as the Board shall in each instance approve, which need not
be the same for all Optionees.
7.7 Payment. Payment for all shares of Stock shall be made at the
time that an Option, or any part thereof, is exercised, and no shares
shall be issued until full payment therefor has been made. Payment
shall be made (i) in cash or certified funds, or (ii) if acceptable to
the Board, in Stock or in some other form; provided, however, in the
case of an Incentive Stock Option, that said other form of payment does
not prevent the Option from qualifying for treatment as an Incentive
Stock Option within the meaning of the Code.
Article VIII. Written Notice, Issuance of Stock Certificates,
Stockholder Privileges
8.1 Written Notice. An Optionee wishing to exercise an Option
shall give written notice to the Company, in the form and manner
prescribed by the Board. Full payment for the shares exercised pursuant
to the Option must accompany the written notice.
8.2 Issuance of Stock Certificates. As soon as practicable after
the receipt of written notice and payment, the Company shall deliver to
the Optionee or to a nominee of the Optionee a certificate or
certificates for the requisite number of shares of Stock.
8.3 Privileges of a Stockholder. An Optionee or any other person
entitled to exercise an Option Under this Plan shall not have
stockholder privileges with respect to any Stock covered by the Option
until the date of issuance of a stock certificate for such stock.
Article IX. Termination of Employment or Services
Except as otherwise expressly specified by the Board for
Nonstatutory Options, all Options granted under this Plan shall be
subject to the following termination provisions:
9.1 Death. If an Optionee's employment in the case of an Employee,
or provision of services as a Consultant, in the case of a Consultant,
terminates by reason of death, the Option may thereafter be exercised
at any time prior to the expiration date of the Option or within 12
months after the date of such death, whichever period is the shorter,
by the person or persons entitled to do so under the Optionee's will
or, if the Optionee shall fail to make a testamentary disposition of an
<PAGE> 106
Option or shall die intestate, the Optionee's legal representative or
representatives. The Option shall be exercisable only to the extent
that such Option was exercisable as of the date of Optionee's death.
9.2 Termination Other Than For Cause or Due to Death. In the event
of an Optionee's termination of employment, in the case of an Employee,
or termination of the provision of services as a Consultant, in the
case of a Consultant, other than by reason of death, the Optionee may
exercise Such portion of his Option as was exercisable by him at the
date of such termination (the "Termination Date") at any time within
three (3) months of the Termination Date; provided, however, that where
the Optionee is an Employee, and is terminated due to disability within
the meaning of Code section 422A, he may exercise such portion of his
Option as was exercisable by him on his Termination Date within one
year of his Termination Date. In any event, the Option cannot be
exercised after the expiration of the term of the Option. Options not
exercised within the applicable period specified above shall terminate.
In the case of an Employee, a change of duties or position within
the Company, shall not be considered a termination of employment for
purposes of this Plan. The Option Agreements may contain such
provisions as the Board shall approve with reference to the effect of
approved leaves of absence upon termination of employment.
9.3 Termination for Cause. In the event of an Optionee's
termination of employment, in the case of an Employee, or termination
of the provision of services as a Consultant, in the case of a
Consultant, which termination is by the Company for cause, any Option
or Options held by him under the Plan, to the extent not exercised
before such termination, shall forthwith terminate.
Article X. Rights of Optionees
10.1 Service. Nothing in this Plan shall interfere with or limit
in any way the right of the Company to terminate any Employee's
employment, or any Consultant's services, at any time, nor confer upon
any Employee any right to continue in the employ of the Company, or
upon any Consultant any right to continue to provide services to the
Company.
10.2 Nontransferability. Except as otherwise specified by the
Board for Nonstatutory Options, Options granted under this Plan shall
be nontransferable by the Optionee, other than by will or the laws of
descent and distribution, and shall be exercisable during the
Optionee's lifetime only by the Optionee.
Article XI. Optionee-Employee's Transfer or Leave of Absence
11.1 Optionee-Employee's Transfer or Leave of Absence. For Plan
purposes:
(a) A transfer of an Optionee who is an Employee within the
Company, or
<PAGE> 107
(b) a leave of absence for such an Optionee (i) which is duly
authorized in writing by the Company, and (ii) if the Optionee
holds an Incentive Stock Option, which qualifies under the
applicable regulations under the Code which apply in the case of
Incentive Stock Options,
shall not be deemed a termination of employment. However, under no
circumstances may all Optionee exercise an Option during any leave of
absence, unless authorized by the Board.
Article XII. Amendment, Modification and Termination of the Plan
12.1 Amendment, Modification, and Termination of the Plan. The
Board may at any time terminate, and from time to time may amend or
modify the Plan, provided, however, that no such action of the Board,
without approval of the stockholders, may:
(a) increase the total amount of Stock which may be purchased
through Options granted under the Plan, except as provided in
Article V;
(b) change the class of Employees or Consultants eligible to
receive Options;
No amendment, modification or termination of the Plan shall in any
manner adversely affect any outstanding Option under the Plan without
the consent of the Optionee holding the Option.
Article XIII. Acquisition, Merger and Liquidation
13.1 Acquisition. In the event that an Acquisition occurs with
respect to the Company, the Company shall have the option, but not the
obligation, to cancel Options outstanding as of the effective date of
Acquisition, whether or not such Options are then exercisable, in
return for payment to the Optionees of an amount equal to a reasonable
estimate of an amount (hereinafter the "Spread") equal to the
difference between the net amount per share of Stock payable in the
Acquisition, or as a result of the Acquisition, less the exercise price
of the Option. In estimating the Spread, appropriate adjustments to
give effect to the existence of the Options shall be made, such as
deeming the Options to have been exercised, with the Company receiving
the exercise price payable thereunder, and treating the shares
receivable upon exercise of the Options as being outstanding in
determining the net amount per share. For purposes of this section, an
"Acquisition" shall mean any transaction in which substantially all of
the Company's assets are acquired or in which a controlling amount of
the Company's outstanding shares are acquired, in each case by a single
person or entity or an affiliated group of persons and/or entities. For
purposes of this section a controlling amount shall mean more than 50%
of the issued and outstanding shares of stock of the Company. The
Company shall have such an option regardless of how the Acquisition is
effectuated, whether by direct purchase, through a merger or similar
corporate transaction, or otherwise. In cases where the acquisition
consists of the acquisition of assets of the Company, the net amount
per share shall be calculated on the basis of the net amount receivable
with respect to shares upon a distribution and liquidation by the
<PAGE> 108
Company after giving effect to expenses and charges, including but not
limited to taxes, payable by the Company before the liquidation can be
completed.
Where the Company does not exercise its option under this section
13.1, the remaining provisions of this Article XIII shall apply, to the
extent applicable.
13.2 Merger or Consolidation. Subject to any required action by
the stockholders, if the Company shall be the surviving corporation in
any merger or consolidation, any Option granted hereunder shall pertain
to and apply to the securities to which a holder of the number of
shares of Stock Subject to the Option would have been entitled in such
merger or consolidation.
13.3 Other Transactions. A dissolution or a liquidation of the
Company or a merger and consolidation in which the Company is not the
surviving corporation shall cause every Option outstanding hereunder to
terminate as of the effective date of such dissolution, liquidation,
merger or consolidation. However, the Optionee either (i) shall be
offered a firm commitment whereby the resulting or surviving
corporation in a merger or consolidation will tender to the Optionee an
option (the "Substitute Option") to purchase its shares on terms and
conditions both as to number of shares and otherwise, which will
substantially preserve to the Optionee the rights and benefits of the
Option outstanding hereunder granted by the Company, or (ii) shall have
the right immediately prior to such dissolution, liquidation, merger,
or consolidation to exercise any unexercised Options whether or not
then exercisable, subject to the provisions or this Plan. The Board
shall have absolute and uncontrolled discretion to determine whether
the Optionee has been offered a firm commitment and whether the
tendered Substitute Option will substantially preserve to the Optionee
the rights and benefits of the Option outstanding hereunder. In any
event, any Substitute Option for an Incentive Stock Option shall comply
with the requirements of Code section 425(a).
Article XIV. Securities Registration
14.1 Securities Registration. In the event that the Company shall
deem it necessary or desirable to register under the Securities Act of
1933, as amended, or any other applicable statute, any Options or any
Stock with respect to which an Option may be or shall have been granted
or exercised, or to qualify any such Options or Stock under the
Securities Act of 1933, as amended, or any other statute, then the
Optionee shall cooperate with the Company and take such action as is
necessary to permit registration or qualification of such Option of
Stock.
Unless the Company has determined that the following
representation is unnecessary, each person exercising an Option under
the Plan may be required by the Company, as a condition to the issuance
of the shares pursuant to the exercise of the Option, to make a
representation in writing (a) that the Optionee is acquiring such
shares for his own account for investment and not with a view to, or
for sale in connection with, the distribution of any part thereof, (b)
that before any transfer in connection with the resale of such shares,
<PAGE> 109
the Optionee will obtain the written opinion of counsel for the
Company, or other counsel acceptable to the Company, that such shares
may be transferred. The Company may also require that the certificates
representing such shares contains legends reflecting the foregoing.
Article XV. Tax Withholding
15.1 Tax Withholding. Whenever shares of Stock are to be issued in
satisfaction of Options exercised under this Plan, the Company shall
have the power to require the recipient of the Stock to remit to the
Company an amount sufficient to satisfy federal, state and local
withholding tax requirements.
Article XVI. Indemnification
16.1 Indemnification. To the extent permitted by law, each person
who is or shall have been a member of the Board shall be indemnified
and held harmless by the Company against and from any loss, cost,
liability, or expense that may be imposed upon or reasonably incurred
by him in connection with or resulting from any claim, action, suit, or
proceeding to which he may be a party or in which lie may be involved
by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him in settlement thereof,
with the Company's approval, or paid by him in satisfaction of judgment
in any such action, suit or proceeding against him, provided he shall
give the Company an opportunity, at its own expense, to handle and
defend the same before he undertakes to handle and defend it on his own
behalf. The foregoing right of indemnification shall not be exclusive
of any other rights of indemnification to which such persons may be
entitled under the Company's articles of incorporation or bylaws, as a
matter of law, or otherwise, or any power that the Company may have to
indemnify them or hold them harmless.
Article XVII. Requirements of Law
17.1 Requirements of Law. The granting of Options and the issuance
of shares of Stock upon the exercise of an Option shall be subject to
all applicable laws, rules, and regulations, and to such approvals by
any governmental agencies or national securities exchanges as may be
required.
17.2 Governing Law. The Plan and all agreements hereunder shall be
construed in accordance with and governed by the laws of the state of
Colorado.
Article XVIII. Effective Date of Plan
18.1 Effective Date. The Plan shall be effective on August 31,
1998, the date of its adoption by the Company's stockholders.
Article XIX. Compliance with Code
19.1 Compliance with Code. Incentive Stock Options granted
hereunder are intended to qualify as Incentive Stock Options under Code
section 422A. If any provision of this Plan is susceptible to more than
one interpretation, such interpretation shall be given thereto as is
<PAGE> 110
consistent with Incentive Stock Options granted under this Plan being
treated as Incentive Stock Options under the Code.
Article XX No Obligation to Exercise Option
20.1 No Obligation to Exercise. The granting of an Option shall
impose no obligation upon the holder thereof to exercise such Option.
Dated at Ft. Meyers, Florida, August 31, 1998.
WIN SYSTEMS INTERNATIONAL, INC.
/s/ Richard W. Brevoort
President
<PAGE> 111
EXHIBIT 99.4
COMMERCIAL LEASE June 30,1999
LEASE, between Russ & Ingrid Whitney, residing at 4818 CORONADO
PARKWAY, as "Landlord" and WIN SYSTEMS INC., residing at 48 18 CORONADO
PARKWAY, SUITES, as follows; all of l, 2, 3, 4, 5, 6, 9, l0, 11, 12,
l2A, half of 15, all of 16, 18, 19 & 20 as "Tenant."
1. PREMISES, TERM AND USE - Landlord agrees to lease to Tenant
space known as SUITES, all of 1, 2, 3, 4, 5, 6, 9, 10, 11, 12, 12A,
half of 15, all of 16, 18, 19 & 20 and more particularly described on
the plan annexed to and made part of this Lease in the building located
at 4818 CORONADO PARKWAY in the City of CAPE CORAL, County of LEE,
State of FLORIDA (the "Promises"), for a term of THREE, years] OR [36
months) WITH FIVE, TWO YEAR OPTIONS, beginning on SEPTEMBER 1, 1999 and
ending on OCTOBER 31, 2002, for use end occupancy as a BUSINESS OFFICE.
2. RENT - Tenant shall pay the annual rental of SIXTY NINE
THOUSAND SIX HUNDRED SIXTY FOUR Dollars ($69,664.00) plus C.A.M. Paid
in equal monthly installments of $5,805.34 (plus applicable sales tax)
in advance on the 1ST day of each and every month during the term of
this Lease.
3. SECURITY - Tenant has deposited with Landlord $0.00 (AT THIS
TIME) as security for the faithful performance by Tenant of all the
terms covenants and conditions of this Lease on Tenant's part to be
performed. Provided Tenant has fully and faithfully carried out all of
said terms, covenants and conditions on Tenant's part to be performed,
this security deposit shall be returned to Tenant after the expiration
of this Lease [without] interest.
(A) In the event of a bona fide sale, said lease will be null
and void. Landlord, upon notice to Tenant of such sale and/or
assignment shall give tenant a 60-day notice to vacate premise.
Should new buyer elect to keep tenant, Landlord shall have the
right to transfer the security to the buyer for the benefit of
Tenant. Landlord, upon notice to Tenant of such sale and
assignment of the security deposit to the buyer, shall be released
from all liability for the return of such security. Tenant agrees
to look solely to the new Landlord for the return of the said
security, and it is agreed that this shall apply to subsequent
transfer or assignment of the security to any new Landlord.
(B) The security deposited under this Lease shall not be
mortgaged, assigned or encumbered by the Tenant without the
written consent of the Landlord.
(C) Landlord has the right to terminate said lease for any
and all substantial remodeling and or repairs needed.
4. CARE OF PREMISES, ALTERATIONS, ETC. - Tenant shall take good
care of the Premises and any fixtures which are and shall remain the
property of the Landlord which may be located or situated on, in or
made a part of the Premises and shall, at Tenant's own cost and expense
<PAGE> 112
make all repairs to the Premises and fixtures other than structural
repairs. At the end of the term of this Lease, Tenant shall deliver the
Premises in good order and condition, damages by the elements excepted.
(A) The Tenant shall promptly execute and comply with all
statutes, ordinances, rules, orders, regulations and requirements
of any governmental or quasi-governmental authority, including
departments, bureaus and the like, having jurisdiction applicable
to the Premises, for the correction, prevention, and abatement of
violations, nuisances or other grievances, in, upon, or connected
with the Premises during the term of this Lease, at the Tenants
own cost and expense.
(B) Tenant's, Tenant's successors, heirs, executors or
administrators shall not make any alterations to the Premises
without the Landlord's consent in writing; or occupy, or permit or
suffer the same to be occupied for any business or purpose deemed
disreputable or extra-hazardous on account of fire, under the
penalty of damages and forfeiture, and in the event of a breach
thereof, the term herein shall immediately cease and terminate at
the option of the Landlord as if it were the expiration of the
original term.
(C) Tenant will not do anything in or to the Premises, or
bring anything into the Premises, or permit anything to be done or
brought into or kept in the Premises, which will in any way
increase the rate of fire insurance on said Premises, nor use the
Premises or any part thereof, nor allow or permit its use for any
business or purpose which would cause an increase in the rate of
fire insurance on said building, and the Tenant agrees to pay as
additional rent the cost of any increase in fire insurance on
demand by Landlord.
(D) Tenant shall not encumber or obstruct the sidewalk in
front of, entrance to, or halls and stairs of said Premises, nor
allow the same to be obstructed or encumbered in any manner.
(E) Landlord is exempt from any and all liability for any
damage or injury to person or property caused by or resulting from
steam, electricity, gas, water, rain, ice or snow, or any leak or
flow from or into any part of said building or from any damage or
injury caused by or due to the negligence of the Landlord.
5. NO ABATEMENT OF RENT OR ADDITIONAL RENT - Landlord shall not be
liable for failure to give possession of the Premises upon commencement
date by reason of the fact that the Premises are not ready for
occupancy or because a prior tenant or any other person is wrongfully
holding over or is in wrongful possession, or for any other reason. The
rent shall not commence until possession is given or is available, but
the term herein shall not be extended.
(A) This lease and the obligation of Tenant to pay rent
hereunder and perform all of the other covenants and agreements
hereunder on part of Tenant to be performed shall in no way be
affected, impaired or excused because Landlord is unable to supply
or is delayed in supplying any service expressly or implied to be
<PAGE> 113
supplied or is unable to make, or is delayed in making any
repairs, additions, alterations or decorations or is unable to
supply or is delayed in supplying any equipment or fixtures if
Landlord is prevented or delayed from so doing by reasons of
government preemption in connection with a National Emergency or
in connection with any rule, order or regulation of any department
or subdivision thereof of any governmental agency or by reason of
the conditions of supply and demand which have been or are
affected by war or other emergency.
(B) No diminution or abatement of rent or other compensation,
shall be claimed or allowed for inconvenience or discomfort
arising form the making of repairs or improvements to the building
or to its appliances, nor for any space taken to comply with any
law, ordinance or order of a government authority. In respect to
the various "services" if any, herein expressly or implied agreed
to be furnished by Landlord to Tenant, it is agreed that there
shall be no diminution or abatement of the rent, or any other
compensation, for interruption or curtailment of such "service"
when such interruption or curtailment shall be due to accident,
alteration or repairs desirable or necessary to be made or to
inability or difficulty in securing supplies or labor for the
maintenance of such "service" or to some other cause, nor gross
negligence on the part of Landlord. No such interruption or
curtailment of any such "service" shall be deemed a constructive
eviction. Landlord shall not be required to furnish, and Tenant
shall not be entitled to receive any "services" during any period
when Tenant shall be in default in respect to the payment of rent.
Neither shall there be any abatement or diminution of rent because
of making of repairs, improvements or decorations to the Premises
after the date above fixed for the commencement of the term, it
being understood that rent shall, in any event, commence to run at
such date so above fixed.
6. REAL ESTATE TAXES - $10,000.00 Tenant acknowledges that the
Premises comprise approximately $500.00 per unit of the building and
which shall be defined as "Tenant's share." In the event that real
estate taxes due and owing by Landlord for the building shall be
increased above those charges during the base year (which is defined as
the tax or fiscal year used by the governmental authority assessing
such taxes in effect on the commencement date of this Lease), Tenant
agrees to pay as additional rent within thirty (30) days of receipt of
notice from Landlord, an amount equal to such additional real estate
taxes or Tenants share of additional real estate taxes.
7. DAMAGE TO THE PREMISES - Tenant must give Landlord prompt
notice of fire, accident, casualty, damage or dangerous or defective
condition. If the Premises can not be used because of fire or other
casualty, Tenant is not required to pay rent for the time the Premises
are unusable. If part of the Premises can not be used, Tenant must pay
rent for the usable part. Landlord shall have the right to decide,
which part of the Premises is usable. Landlord need only repair the
damaged structural parts of the Premises. Landlord is not required to
repair or replace any equipment, fixtures, furnishings or decorations
unless originally installed by Landlord. Landlord is not responsible
for delays due to settling insurance claims, obtaining estimates, labor
and supply problems or any other cause not fully under Landlord's
control.
<PAGE> 114
(A) If the fire or other casualty is caused by an act or
neglect of Tenant, Tenant's employees or persons on the Premises
with permission of Tenant, or at the time of the fire or casualty
Tenant is in default in any term of this Lease, then all repairs
will be made at Tenant's expense and Tenant must pay the full rent
with no adjustment. The cost of the repairs will be added to the
rent.
(B) Landlord has the right to demolish or rebuild the
building if there is substantial damage by fire or other casualty.
Landlord may cancel this Lease within 30 days after the
substantial fire or casualty by giving Tenant notice of Landlord's
intention to demolish or rebuild. The Lease will end 30 days after
Landlord's cancellation notice to Tenant Tenant must deliver the
Premises to Landlord on or before the cancellation date in the
notice and pay all rent due to the date of the fire or casualty.
If the lease is cancelled, Landlord is not required to repair the
Premises or building. The cancellation does not release Tenant of
liability in connection with the fire. or casualty.
8. INSPECTION AND ENTRY BY LANDLORD - Tenant agrees that Landlord
and Landlord's agents and other representatives shall have the right to
enter into and upon the Premises, or any part hereof, at all reasonable
hours for the purpose of examining the same, or making such repairs or
alterations therein as may be necessary for the safety and preservation
of the Premises.
(A) Tenant also agrees to permit Landlord or the Landlord's
agents to show the Premises to persons wishing to lease or
purchase the Premises. Tenant further agrees that on and after the
sixth month preceding the expiration of the term of this Lease,
Landlord or Landlords agents shall have the right to place notices
on the front of said Premises, or any part thereof, offering the
Premises "To Let" or "For Sale" and the Tenant agrees to permit
the same to remain thereof without hindrance or molestation.
(B) If the Premises, or any part thereof shall be deserted or
become vacant during the term of this Lease, or if Tenant shall
default in the payment of rent or any part thereof or shall
default in the performance of any of the covenants herein
contained, Landlord or its representatives may re-enter the
Premises by force, summary proceeding or otherwise, and remove all
persons therefrom, without being liable to prosecution therefor,
and Tenant hereby expressly waives the service of any notice in
writing of intention to re-enter, and Tenant shall pay at the same
time as the rent becomes payable under the terms hereof a sum
equivalent to the rent herein, and the Landlord may rent the.
Premises on behalf of the Tenant, reserving the right to rent the
Premises for a longer period of time than fixed in the original
lease without releasing the original Tenant from any liability,
applying any moneys collected, first to the expense of resuming or
obtaining possession, second to restoring the Premises to a rental
condition, and then to the payment of the rent and all other
charges due, and to become due to the Landlord, any surplus to be
paid to the Tenant, who shall remain liable for any deficiency.
<PAGE> 115
9. GLASS - Landlord may replace, at the expense of Tenant, any and
all broken glass in and about the Premises. Landlord may insure, and
keep insured, all plate glass in the Premises for and in the name of
Landlord. Landlord therefor shall render bills for the premiums to
Tenant at such times as Landlord may elect, and shall be due from and
payable by Tenant when rendered and the amount thereof shall be deemed
additional rental. Damage and injury to the said Premises, caused by
the carelessness, negligence or improper conduct on the part of Tenant
or Tenant's agents or employees shall be repaired as speedily as
possible by Tenant at Tenants own cost and expense.
10. SIGNS - Tenant shall neither place, nor cause nor allow to be
placed, any sign or signs of any kind whatsoever at, in or about the
entrance to said Premises or any part of same, except in or at such
place or places as may be indicated by the Landlord and upon written
consent by Landlord. In the event Landlord or Landlords representatives
shall deem it necessary to remove any such sign in order to paint the
Premises or the building wherein same is situated or make any repairs,
alterations, improvements in or upon the Premises or the building or
any part of the Premises or the building, Landlord shall have the right
to do so, providing any sign be removed and replaced at Landlord's
expense whenever the said repairs, alterations or improvements shall be
completed.
11. INSURANCE - Tenant agrees to maintain in full force and effect
during the term of this Lease, liability insurance insuring Landlord
against any loss or damage sustained or to which Landlord may be
subject by reason of Tenants occupancy and use of the Premised, which
policy shall have the following limits of liability: $1,000,000.00
dollars. Tenant agrees to furnish to Landlord, prior to the effective
date of this Lease, a binder or other such certificate evidencing such
insurance coverage.
(A) Tenant agrees that it will, at its own cost and expense,
keep its furniture, fixtures, equipment, records, and personal
property insured against loss or damage by fire or other peril
normally covered by "extended coverage" endorsements, and shall
deliver to Landlord prior to the effective date of this Lease, a
binder or other such certificate of such insurance coverage.
12. SUBLETTING OR ASSIGNMENT - Neither the Premises nor any
portion of the Premises may not be sublet, nor may this Lease be
assigned without the express written consent of Landlord upon such
terms and conditions as Landlord may require.
13. DEFAULT - If Tenant defaults in fulfilling any of the terms
and conditions of this Lease other than the payment of rent or
additional rent; or if the Premises becomes vacant or deserted; or if
any execution or attachment shall be issued against Tenant or any of
Tenants property located or situated at or on the Premises whereby the
Premises shall be taken or occupied by someone other than Tenant; or if
this Lease shall be rejected under any applicable provision of the
bankruptcy laws; or if Tenant shall fail to take possession within
fifteen (15) days of the commencement of this Lease; and upon Landlord
serving written notice to Tenant specifying the nature of the default
Tenant shall have (30) days from the date of receipt of such notice to
<PAGE> 116
cure the default (or if such default cannot be cured within such
period, Tenant must diligently and in good faith proceed to cure the
default). If Tenant shall have failed to cure or proceed to cure the
default within such period. Landlord may serve a seven (7) day notice
of cancellation of this Lease upon Tenant and upon the expiration of
the cancellation period this Lease shall terminate and expire and
Tenant shall quit and surrender the Premises to Landlord but Tenant
shall remain liable as provided in this Lease.
(A) If after default in payment of rent or violation of any
other provision of this Lease, or upon the expiration of this
Lease, Tenant moves out or is dispossessed and fail to remove any
trade fixtures or other property prior to such said default,
removal, expiration of Lease, or prior to the issuance of the
final order or execution of the warrant, then and in that event,
the said fixtures and property shall be deemed abandoned by the
said Tenant and shall become the property of Landlord.
14. NO WAIVER BY LANDLORD - The failure of Landlord to insist upon
a strict performance of any of the terms, conditions and covenants
herein shall not be deemed a waiver of any rights or remedies that
Landlord may have, and shall not be deemed a waiver of any subsequent
breach or default in the terms, conditions and covenants herein
contained. This instrument may not be changed, modified, discharged or
terminated orally.
15. LEASE NOT A LIEN - This Lease shall not be a lien against the
Premises in respect to any mortgage that may now or in the fixture be
placed against said Premises, and that the recording of such mortgage
or mortgages shall have preference and precedence and be superior and
prior in lien of this Lease, irrespective of the date of recording, and
the Tenant agrees to execute without cost any such instrument which may
be deemed necessary or desirable to further effect the subordination of
this Lease to any such mortgages, and a refusal to execute such
instrument shall entitle the Landlord, or the Landlord's assigns and
legal representative to the option of canceling this Lease without
incurring any expenses or damages and the term hereby granted is
expressly limited accordingly.
16. QUIET POSSESSION - Landlord covenants that Tenant, on paying
the rent and additional rent, and faithfully performing the covenants
required or imposed upon Tenant, shall and may peacefully and quietly
have, hold and enjoy the Premises for the term of this Lease, provided
however, that this covenant shall be conditioned upon the retention of
title to the Premises by the Landlord.
17. BINDING EFFECT - It is mutually understood and agreed that the
covenants and agreements contained in this Lease shall be binding upon
the parties hereto and upon their respective successors, heirs,
executors and administrators.
IN WITNESS WHEREOF, the parties have set their hand and seal this
30th day of JUNE, 1999.
RUSS OR INGRID WHITNEY WIN SYSTEMS, INC
BY /s/ Ingrid Whitney BY: /s/ Laura G. Shepherd
(Landlord) Laura S. Shepherd
