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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS UNDER SECTION 12(b)
OR
12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
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WALL STREET STRATEGIES CORPORATION
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
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NEVADA 13-4100704
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(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
130 WILLIAM STREET
SUITE 401
NEW YORK, NY 10038
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(212) 514-9500
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(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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SECURITIES TO BE REGISTERED UNDER SECTION 12(b) OF THE ACT:
NONE
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SECURITIES TO BE REGISTERED UNDER SECTION 12(g) OF THE ACT:
COMMON STOCK, $.001 PAR VALUE PER SHARE
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(TITLE OF CLASS)
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TABLE OF CONTENTS
ITEM PAGE
- ---- ----
Introduction...............................................................
Forward Looking Statements.................................................
Part I
Item 1. Description of Business...........................................
History...........................................................
Business Overview.................................................
Products and Services.............................................
Distribution of Products..........................................
Competition.......................................................
Dependence on Major Customers.....................................
Intellectual Property.............................................
Governmental Regulations..........................................
Employees.........................................................
Item 2. Management's Discussion and Analysis..............................
Item 3. Description of Property...........................................
Item 4. Security Ownership of Certain Beneficial Owners and Management....
Item 5. Directors and Executive Officers..................................
Item 6. Executive and Director's Compensation.............................
Item 7. Certain Relationships and Related Party Transactions..............
Item 8. Description of Securities.........................................
Part II
Item 1. Market Price of and Dividends on Registrant's Common Equity
and Other Shareholder Matters.....................................
Item 2. Legal Proceedings.................................................
Item 3. Changes in and Disagreements with Accountants.....................
Item 4. Recent Sales of Unregistered Securities...........................
Item 5. Indemnification of Directors and Officers.........................
Part F/S
Financial Statements.......................................................
Part III
Index to Exhibits..........................................................
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INTRODUCTION
This is a Registration Statement on Form 10-SB relating to the
common stock, par value $0.001 per share (the "Common Stock"), of Wall Street
Strategies Corporation, a Nevada corporation ("WSSC"). WSSC has voluntarily
filed this Registration Statement in order to register the Common Stock under
Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), so as to permit the Common Stock to continue to trade on the OTC
Electronic Bulletin Board. The Registration Statement contains the information
required by Alternative 3 of Form 10-SB. The Common Stock has traded on the OTC
Electronic Bulletin Board under the symbol "VEMP" since August 20, 1999 and,
since September 25, 1999, under the symbol "WSST". On February 9, 2000, the
closing bid price for the Common Stock was $14.625 per share.
FORWARD-LOOKING STATEMENTS
The following statements are or may constitute forward-looking
statements:
1. statements set forth in this Registration Statement, including
possible or assumed future results of operations, WSSC's expectations concerning
its future profitability, WSSC's ability to generate positive cash flows in the
future, and WSSC's ability to expand its operations;
2. any statements preceded by, followed by or that include the words
"believes," "expects," "predicts," "anticipates," "intends," "estimates,"
"should," "may" or similar expressions; and
3. other statements contained or incorporated by reference in this
Registration Statement regarding matters that are not historical facts.
Because such statements are subject to risks and uncertainties,
actual results may differ materially from those expressed or implied by such
forward-looking statements. Such factors include:
- general economic and business conditions;
- technology changes;
- competition;
- changes in business strategy or development plans;
- the ability to attract and retain qualified management and staff;
and
- liability and other claims which might be asserted against WSSC.
Such statements speak only as of the date that they were made, and
undue reliance should not be placed on such statements. WSSC's independent
public accountant has not examined or compiled the forward-looking statements
and, accordingly, does not provide any assurance with respect to such
statements. These cautionary statements should be considered in connection with
any written or oral forward-looking statements that WSSC may issue in the
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future. WSSC does not undertake any obligation to release publicly any revisions
to such forward-looking statements after the effective date of this Registration
Statement.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
HISTORY
WSSC, a Nevada corporation formed under the name Vacation Emporium
Corporation on April 2, 1999, is the surviving entity in a merger with its then
corporate parent, The Vacation Emporium International, Inc., a Colorado
corporation formed under the name Rising Sun Capital, Ltd. ("VEI-Colorado") on
May 12, 1988. The background to the merger and related transactions is as
follows:
VEI-Colorado commenced commercial operations on June 12, 1998, when,
through a wholly owned subsidiary, Vacation Emporium Marketing, Inc., a Colorado
corporation formed in April 1998 ("VEM"), it acquired all of the membership
interests of The Vacation Emporium LLC, a Colorado limited liability company
("VECO"), and The Vacation Emporium Tennessee, LLC, a Tennessee limited
liability company ("VET"). The acquisition was effected by means of a merger
(the "1998 Merger") of VECO and VET with and into VEM, as a result of which all
of the assets, liabilities and operations of VECO and VET were acquired by VEM
and the separate existence of VECO and VET ceased. Thereafter, VEI-Colorado,
through VEM, engaged in the business of marketing and selling vacation ownership
interests, commonly known as timeshares, at resort properties in Hawaii and
elsewhere in the United States.
In connection with the 1998 Merger, VEI-Colorado issued an aggregate
of 6,000,000 shares of its common stock to the former member-owners of VECO and
VET (the "1998 Merger Group"). Also in conjunction with the 1998 Merger, an
existing shareholder of VEI-Colorado voluntarily canceled a total of 7,500,000
shares of common stock and VEI-Colorado raised a total of $550,000 from the sale
of 550,000 shares of its common stock in reliance upon Rule 504 of Regulation D
promulgated under the Securities Act of 1933, as amended (the "Securities Act").
These funds were advanced to VEM and carried on the books of VEI-Colorado as a
loan to VEM. Upon completion of the 1998 Merger and related transactions,
9,050,000 common shares of VEI-Colorado were issued and outstanding.
Effective March 31, 1999, the 1998 Merger was unwound pursuant to an
Unwinding and Stock Exchange Agreement among VEI-Colorado, VEM and the 1998
Merger Group. Pursuant to the Unwinding and Stock Exchange Agreement,
VEI-Colorado canceled all of the shares issued in the 1998 Merger, reducing the
number of issued and outstanding shares to 3,050,000, and in exchange for the
cancellation of the merger shares, transferred ownership of VEM to the 1998
Merger Group. In connection with such unwinding, VEI-Colorado forgave and wrote
off its $550,000 advance to VEM.
Following the unwinding of the 1998 Merger on March 31, 1999,
VEI-Colorado did not engage in business of any kind, other than to seek
investment opportunities, including a possible acquisition of a business by
means of a business combination with a privately held company interested in
becoming publicly traded through such a business combination.
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On June 4, 1999, VEI-Colorado sold 4,000,000 shares of its common
stock to Ian Rice ("Rice") for an aggregate purchase price of $20,000 ($.0025
per share purchased). The shares issued to Rice represented approximately 57% of
the then issued and outstanding shares of VEI-Colorado and, accordingly, Rice
was thereafter able to exercise control over VEI-Colorado. On June 18, 1999,
John D. Brasher, Jr., resigned as the sole director of VEI-Colorado, and Rice
was elected the sole director of VEI-Colorado. Following completion of such
change of control, VEI-Colorado continued its efforts to seek investment
opportunities, including business combinations.
On June 21, 1999, VEI-Colorado merged (the "1999 Merger") with and
into its wholly-owned subsidiary, WSSC, for the purpose of effecting the
reincorporation of VEI-Colorado as a Nevada corporation. In the 1999 Merger,
WSSC issued to shareholders of VEI-Colorado two (2) common shares for each share
of common stock in VEI-Colorado owned by them immediately prior to the 1999
Merger.
All references below to the "Company" include WSSC and VEI-Colorado.
On July 30, 1999, the Company entered into an Agreement and Plan of
Share Exchange ("Share Exchange Agreement") with Charles V. Payne ("Payne"), the
sole shareholder of Wall Street Strategies, Inc. ("WSSI"), a Delaware
corporation engaged in providing investment research and information services
for individual and institutional investors and financial professionals. Pursuant
to the Share Exchange Agreement, the Company agreed to purchase from Payne all
of the issued and outstanding shares of common stock of WSSI, thus making WSSI a
wholly-owned subsidiary of the Company, in exchange for the issuance to Payne of
shares of Common Stock which, after giving effect to certain other issuances and
cancellations of Common Stock contemplated by the Share Exchange Agreement,
would represent approximately 53.84% of the total issued and outstanding shares
of Common Stock.
On July 30, 1999, in contemplation of the possible transaction with
Payne for the purchase of WSSI in accordance with the Share Exchange Agreement,
the Company entered into Subscription and Rights Agreements with ten individuals
pursuant to which such individuals purchased an aggregate of 1,258,205 shares of
Common Stock for a purchase price of $.0025 per share.
Eight of the ten individuals, purchasing an aggregate of 380,000
shares of Common Stock, were, as of such date, existing employees of WSSI. Each
of such individuals has continued as employees at will of WSSI subsequent to the
completion of the Company's acquisition of WSSI. The shares purchased by such
individuals are subject to repurchase by the Company in declining increments
over a two year period (the "Escrow Period"), at the same purchase price of
$.0025 per share, if the individuals' employment is terminated other than by
reason of death or disability. The shares purchased by the individuals were
placed into escrow to be released therefrom (and from the Company's
corresponding repurchase right) in eight equal quarter annual installments over
the course of the Escrow Period.
A ninth individual, David McCallen ("McCallen"), entered into a
Subscription and Rights Agreement with the Company on July 30, 1999, pursuant to
which McCallen
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purchased 526,923 shares of Common Stock. Simultaneously therewith, McCallen
entered into a two year Employment Agreement with the Company which employment
commenced on September 23, 1999, the date of the closing of the Company's
acquisition of WSSI. Pursuant to the Employment Agreement, McCallen serves as
Executive Vice President of the Company.
In his Subscription and Rights Agreement, McCallen granted to the
Company the right to repurchase such shares, in declining increments, during the
two year period commencing on the date of the closing of the Company's
acquisition of WSSI (the "McCallen Escrow Period"), at the same purchase price
of $.0025 per share, if McCallen's employment by the Company is terminated for
cause. The shares purchased by McCallen were placed into escrow to be released
therefrom (and from the Company's corresponding repurchase right) during the
McCallen Escrow Period. One-third of McCallen's shares were released from escrow
on September 23, 1999, one-third will be released on March 23, 2000, and the
balance will be released in five equal quarter annual increments over the
remainder of the McCallen Escrow Period.
Simultaneously with the execution of his Employment Agreement, and
in accordance with the terms thereof, the Company granted to McCallen an option
under the Company's 1996 Compensatory Stock Option Plan (the "Plan") to acquire
351,282 shares of Common Stock at an exercise price equal to the closing bid
price for common shares as quoted on the OTC Electronic Bulletin Board on the
first day after the date of grant on which the common shares traded (i.e., $3.50
per share). The options vest in six equal quarter annual increments over an 18
month period commencing on the date, if any, on which certain specified events
occur, provided McCallen's employment by the Company has not been terminated for
cause.
The tenth individual, Shawn D. Baldwin ("Baldwin"), entered into a
Subscription and Rights Agreement with the Company on July 30, 1999, pursuant to
which Baldwin purchased 351,282 shares of Common Stock. Simultaneously
therewith, Baldwin entered into a three year Employment Agreement with the
Company which commenced on October 1, 1999. Pursuant to the Employment
Agreement, Baldwin serves as Chief Operating Officer of the Company.
In his Subscription and Rights Agreement, Baldwin granted to the
Company the right to repurchase up to 263,461 of the shares subscribed for (the
"Baldwin Escrow Shares"), at the same purchase price of $.0025 per share, if
Baldwin's employment by the Company is terminated for cause. The Baldwin Escrow
Shares were placed into escrow and 87,820 of such shares were released therefrom
as of October 28, 1999, and the balance of the shares subscribed for will be
released from escrow on April 7, 2000.
Simultaneously with the execution of his Employment Agreement, and
in accordance with the terms thereof, the Company granted to Baldwin an option
under the Plan to acquire 526,923 shares of Common Stock at an exercise price
per share equal to the closing bid price for common shares as quoted on the OTC
Electronic Bulletin Board on the first day after the date of grant on which the
common shares traded (i.e., $3.50). The option vests in nine equal
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quarter annual increments commencing nine months after the commencement date of
Baldwin's employment by the Company pursuant to his Employment Agreement (July
1, 2000).
The ten individuals referred to above also entered into a voting
agreement with Payne dated July 30, 1999, conditioned on the closing of the
Company's acquisition of WSSI, pursuant to which, among other matters, the
individuals agreed to vote their shares of Common Stock to elect Payne and his
designees as directors of the Company for so long as Payne beneficially owns at
least 10% of the voting shares of capital stock of the Company.
On August 9, 1999, Stephen Gross, David McCallen and Gerald Turner
were elected to the Board of Directors of the Company.
On September 23, 1999, the Company completed the purchase from Payne
of all of the issued and outstanding shares of common stock of WSSI in
accordance with the terms of the Share Exchange Agreement. In connection with
the closing of the Company's acquisition of WSSI, (i) an aggregate of 7,850,000
shares of the outstanding Common Stock owned by Rice were canceled, (ii) the
Company completed the sale to accredited investors, pursuant to Rule 506 of
Regulation D under the Securities Act, of an aggregate of 600,000 shares of
Common Stock for aggregate proceeds of $3,000,000, (iii) the Company and Payne
entered into an employment agreement, (iv) certain parties, including the
Company and Rice, entered into a Voting Agreement dated September 23, 1999 (the
"Voting Agreement") with respect to certain shares of Common Stock, and (v)
Payne became a director of the Company. The Company changed its name from
Vacation Emporium Corporation to Wall Street Strategies Corporation on September
24, 1999.
WSSI was incorporated in the State of Delaware on September 18,
1991. Except in connection with its acquisition by the Company as described
above, WSSI has not been subject to or involved with any material
classification, merger, consolidation or purchase or sale of a significant
amount of assets not in the ordinary course of business. Neither the Company nor
WSSI has been involved in any bankruptcy, receivership or similar proceeding.
All references below to the "Company" include (in addition to WSSC
and VEI-Colorado) WSSI, except as otherwise indicated or where the context
otherwise requires.
BUSINESS OVERVIEW
The Company, through its WSSI subsidiary, is a leading provider of
investment research and information services for individual and institutional
investors and financial professionals, including brokerage firms and their
clients, investment banks and their clients, and mutual fund and portfolio
managers. WSSI, which was founded in 1991, historically has delivered its
products, including financial and market information, analysis, advice and
commentary, to paying subscribers through a variety of media including phone,
fax, e-mail, audio recordings, newsletters and traditional mail.
The Company currently has approximately 2,700 active subscribers,
consisting primarily of financial professionals. Subscription fees paid by such
subscribers for one or more
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of the Company's products or services, presently constitute the Company's sole
source of revenue. During the second calendar quarter of 1999, WSSI adopted a
business strategy designed to increase the total number of its subscribers,
including significant numbers of individual investors, and to increase and
diversify its revenue sources. To those ends, the Company has announced a number
of initiatives, including the creation, launch and marketing of its website and
the establishment of strategic distribution relationships through which the
Company will reach both institutional and individual investors. The website, the
first phase of which became operational during January 2000 and subsequent
phases of which will be introduced during the first half of 2000, will offer the
Company's own proprietary content, including financial information and analysis,
as well as access to other financial information and services in a real-time,
interactive medium. The Company expects to use the website to build brand
awareness, attract paying subscribers for its products, and generate advertising
revenue.
PRODUCTS AND SERVICES
Since 1991, WSSI has provided independent research, analysis, news
and information, advice and commentary concerning investments and financial
markets to the investment community. This information is packaged in a range of
products tailored to the needs of particular types of investors and financial
professionals. The products are priced at different levels and subscribers pay
subscription fees on a monthly, quarterly or annual basis. See "Existing
Products and Services" below. Such fees have historically represented the
Company's sole source of revenues. The Company currently delivers its products
to subscribers through a variety of media including phone, fax, e-mail, audio
recordings, newsletters and traditional mail.
The Company currently has approximately 2,700 active subscribers for
one or more of the products offered. Historically, the Company has marketed its
products to institutional investors and financial professionals, including
mutual funds managers, portfolio managers and brokers. Such persons have
represented the bulk of the Company's subscribers. The Company intends to
continue to market its products to such persons and to increase the number of
such persons subscribing for the Company's products. However, the Company has
also attracted individual investors as subscribers and has adopted a business
strategy designed, among other things, to attract significant numbers of
individual investors as new subscribers. In addition, the Company's strategy
emphasizes the creation, launch and marketing of, and attraction of substantial
numbers of visitors and registered users to its website.
In recent years, there has been substantial growth in the individual
ownership of equity and fixed income securities worldwide. According to the
Investment Company Institute ("the Institute"), total financial assets of U.S.
households were more than $21 trillion at the end of 1995, and in 1997, U.S.
households made $549 billion worth of net purchases of financial assets. The
Institute further reports that 44 million U.S. households held invested assets
in 1997.
The Company believes that various factors have contributed to the
growth in financial assets, including organization of increased numbers of
mutual funds, increased investment into mutual funds, the allocation by
households of more assets to equity investments, sustained high returns in the
equity markets over a number of years, and lower trading costs as a
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result of regulatory changes and improved technologies. The proliferation in
equity ownership and associated trading activity has created a need for more
investment research and market information on the part of individual investors
who seek higher returns on their portfolios.
The Company believes that the World Wide Web (the "web") has rapidly
established itself as an effective means for investors to manage their
portfolios, research investments and trade securities. At the same time,
individuals have been taking greater control of their investments by directly
researching their investments, tracking their portfolios, purchasing no-load
mutual funds and playing a more proactive role in their relationships with
financial advisors. The web has facilitated these behavioral shifts by providing
individual investors with easy access to information that was once generally
available only to investment professionals, such as timely market news,
intra-day and historical quotes, charts, Securities and Exchange Commission
("SEC") filings and analysts' earnings estimates.
The Company believes that these trends evidence a fundamental change
in the way many individual investors manage their financial assets. As
individual investors seek to independently manage their financial assets, the
demand for independent financial analysis and research, including SEC filings,
business and financial news, stock quotes, stock price graphs and annual
reports, has grown. Such analysis and research represent key tools used by
individual and institutional investors in deciding whether to invest in a
company or industry and when to buy and sell a particular security.
The Company believes that by combining its existing products and
services with financial news and information and employing the interactive
qualities of the Internet to create a leading branded financial web site, it can
capitalize on the increased demand among individual investors for financial
analysis and research and attract such investors as new subscribers. For this
reason, as part of the business strategy adopted by WSSI in the second calendar
quarter of 1999, the Company launched the first phase of its website during
January 2000.
Existing Products and Services
Charles Payne, the Company's Chief Executive Officer and principal
analyst works with the Company's staff of six additional professional analysts
and researchers to produce commentary, analysis and stock selections on a daily
basis which provide the content for the Company's products. Mr. Payne edits all
product content and is the Company's featured personality and spokesman,
appearing regularly on television and radio and speaking regularly at financial
seminars and other events and engagements.
The Company currently offers subscribers a range of products
incorporating the Company's financial and market research, analysis, advice and
commentary, tailored to the needs and interests of investors and financial
professionals with various investment objectives. These products include:
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First Alert
First Alert is a research service focusing specifically on equity
securities and issued to subscribers four times each trading day. Each First
Alert report consists of a stock selection with information on the stock's
current price, trading targets - both immediate and longer term - and,
generally, a recommended stop loss. Reports also include a brief synopsis of the
reasons for the Company's stock selection and the basis for the Company's belief
that the selected stock is likely to increase in value. The Company believes
that First Alert generally appeals to active traders holding equity investments
on a short-term (i.e. one hour to one month) basis.
Hotline
Hotline provides subscribers with overall market commentary combined
with a stock selection. The commentary portion consists of an overall review of
the current market environment as well as an analysis of events that may impact
the day's trading session, such as economic data, earnings reports, and rumors.
The stock selection portion usually consists of a single stock pick the Company
believes may outperform the broader market. The Company believes that Hotline
generally appeals to investors holding equity investments for an intermediate to
longer-term (i.e. thirty days to six months) period. Subscribers receive the
report twice each trading day.
Newsletter
The Newsletter is a monthly publication addressing equity
securities. Each issue of the Newsletter generally contains market commentary
and two or three specific selections of stocks the Company believes may be
undervalued and/or undiscovered and may outperform the broader market over the
period held. The Newsletter, which, the Company believes, generally appeals to
longer-term investors (i.e. more than three months), is designed to identify
investment opportunities WSSI believes may be overlooked by traditional
brokerage research and the general media.
Storyline
The Storyline is a daily publication reporting and assessing rumors
and takeover speculation gathered by WSSI's analysts from their network of
market contacts and professionals. The Storyline seeks to provide subscribers
with trading guidance and insight with respect to existing rumors and takeover
speculation.
wstreet.com--The Company's Web Site
The Company's business strategy is designed, among other things, to
increase the total number of subscribers to the Company's products, by
attracting additional institutional subscribers and financial professionals, as
well as a significant number of individual investors. The Company's website,
wstreet.com (the "Site"), the first phase of which was launched in January 2000,
is designed to be a leading and comprehensive financial news and information
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destination for institutional and individual investors and financial
professionals, enabling the Company to build its subscriber base, draw
substantial numbers of registered users and visitors to Site areas available to
them, and attract advertisers. Through the Site, the Company will deliver its
products to subscribers in a real-time, interactive medium, making the products
more readily, immediately and efficiently accessible than through the Company's
historical delivery methods. The Company will use the Site to combine its
traditional products, available to subscribers paying for access to product
areas, with access to additional financial news and information, stock quotes,
community features such as message boards, investment and analytical tools and
other features.
The Company will offer subscribers to its First Alert, Hotline,
Storyline and Newsletter products the option to receive such products via the
Site. In addition to the Company's traditional products, the Site will offer the
following:
Community Features
The Site will include interactive features designed to attract
traffic to the Site and build community among users and subscribers. Such
features will include message boards available for use by users and divided by
topic, and question and answer forums conducted after the close of trading
sessions.
Investment Tools
The Site will include a variety of interactive investment tools
provided by or in conjunction with Standard & Poor's including real time and
delayed stock quotes, portfolio watch lists, charts, news headlines, news
stories, company profile overviews, company profile vital statistics, market
statistics, market commentary, mutual fund profiles and a learning center
(including a glossary).
Third Party Investment Research
The Company has entered into a co-branding agreement with Zacks
Investment Research ("Zacks") which will enable the Site to include investment
research and information prepared by Zacks. Similarly, material prepared by the
Company will be offered on Zacks' website.
Site Area Access
Specific Site areas and features will be accessible to the public at
different levels.
All visitors to the Site will have access to certain basic Site
areas and features including general information concerning the Company and its
products. Visitors will have the option of becoming "registered users" by
completing a simple registration process. Registered users will provide the
Company with certain basic demographic information about themselves, their
investment interests, histories and goals, thus enabling the Company to promote
to such registered users the products most likely to be of interest to them. The
demographic information
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is not sold or distributed to any third party. Registered users will have access
to twice daily market commentaries as well as certain community features and
investment tools, including delayed stock quotes and the Company's proprietary
portfolio tracking tools.
Paid subscribers to one or more of the Company's products will have
access via the Site to the products purchased, as well as to most Site areas,
features and investment tools including real time stock quotes and all Standard
& Poor's features. Subscribers will enter into a Subscriber Agreement with the
Company and will be charged for the products on a monthly, quarterly or annual
basis. The Company may, from time to time, make certain products and features
available to subscribers on a discounted basis or pursuant to introductory
offers.
Website Status
In January 2000, the Company launched the initial phase of the Site;
in the initial phase, certain descriptive information concerning the Company and
its products is available to all visitors, with the Company's First Alert,
Hotline, Newsletter and Storyline products available to paid subscribers.
Contemplated Products and Services
The Company expects to add additional products, features and Site
areas on an on-going basis.
As soon as practicable following the filing of this Registration
Statement, WSSI intends to submit to the SEC an application for registration as
an investment adviser under the Investment Advisers Act of 1940 (the "Advisers
Act"). WSSI will seek to become a registered investment adviser to enable it to
provide certain individualized products and services to subscribers for which
registration as an investment adviser is required. Additional products and
services which WSSI expects to offer to subscribers upon and subject to approval
of its application include the following:
Institutional Service
WSSI's "Institutional Service" would provide more comprehensive and
customized information to subscribers, offering greater insight and analysis
than that available through other WSSI products. WSSI believes that
institutional investors (generally, those investors with more than three years
of trading experience and investments of more than $250,000 in the equity
markets) would be the audience most interested in this service. Many such
qualified investors would be subscribers to other Company products who desire
more intensive service.
Portfolio Tracking
Upon completion of the investment adviser registration process, WSSI
would also offer subscribers paying for the service the opportunity to notify
WSSI immediately and on an ongoing basis of their holdings and transactions.
WSSI will enter the information provided into
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its database and track subscribers' portfolios on an ongoing basis. By
monitoring participating subscribers' portfolios, WSSI will be in a position to
provide subscribers with subsequent updates and information as well as its
latest opinions on the positions taken.
By operation of regulations promulgated by the SEC, the application
for registration as an investment adviser is deemed to be effective 45 days from
its submission. In the event, however, that the staff of the SEC seeks
additional information or has comments on the application, the approval of the
application could be delayed or denied. WSSI intends to diligently pursue
registration as an investment adviser and to commence offering additional
products and services upon approval of its registration application.
DISTRIBUTION OF PRODUCTS
Since its inception in 1991, WSSI has maintained an internal direct
sales department for the marketing and sale of its products. As of January 31,
2000, WSSI's sales and marketing staff numbered 14 persons. The sales and
marketing force, which is compensated based on subscriptions sold, develops
sales presentations and demonstrations for potential subscribers and manages the
Company's entire marketing and sales effort. In addition, the Company uses a
variety of other means to promote its products and the Wall Street Strategies
brand. Charles Payne, the Company's Chief Executive Officer and principal
analyst, is also the Company's featured personality and spokesman, regularly
appearing on and promoting the Company through a variety of media outlets,
including television, radio, newspapers and magazines. Mr. Payne also speaks at
trade shows, conferences and seminars on a regular basis.
The Company expects to continue these marketing activities while
also undertaking new promotional initiatives in conjunction with the launch of
the website and the efforts to attract additional subscribers including
significant numbers of individual investors. In particular, the Company plans to
conduct advertising and direct mail campaigns, establish strategic distribution
relationships and syndicate its content to other sites and outlets. Furthermore,
while the Company has, historically, directed its products primarily to United
States investors, the Company believes there may be a substantial market for its
products in Europe and expects to expand its marketing and distribution efforts
to European investors during calendar year 2000.
Advertising and Direct Mail
In connection with the launch and marketing of the Site, the Company
anticipates conducting a multi-faceted advertising campaign in print as well as
electronic media. The Company also expects to conduct direct mail marketing
initiatives targeting groups likely to be interested in the Company's products.
The precise strategy and budget for such campaigns are expected to be determined
during the first half of 2000.
Strategic Distribution Relationships and Content Syndication
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The Company intends to develop strategic relationships with third
parties for the distribution of the Company's products and services and for the
syndication and co-branded publication of portions of the content produced by
the Company. Strategic distribution relationships will provide the Company with
access to targeted groups of potential subscribers who are currently customers
or clients of third parties; revenue generated by sales of the Company's
products to such persons will be shared with third party distributors. Content
syndication will create targeted exposure of WSSI's name and content, driving
additional traffic to the Site. All such relationships are designed to promote
and brand WSSI and its products to particular audiences and to enable the
Company to offer its products and services on a targeted basis to persons likely
to be interested in such products and services.
To date, the Company has entered into strategic relationships with
Data Broadcasting Communications Corporation and Zacks Investment Research.
COMPETITION
The Company competes with a substantial number of providers of
financial news and information, market analysis and stock selections for the
attention of subscribers and advertisers. The growth in consumer demand for such
content has been accompanied by enormous growth in the availability of such
content and the number and types of sources for such content. Among the sources
of competition are:
o Online services or websites focused on business, finance and
investing, such as CBS MarketWatch.com, The Wall Street Journal Interactive
Edition, CNNfn and The Street.com.
o Publishers and distributors of traditional media, including print,
radio and television, such as The Wall Street Journal, Investors' Daily,
Barrons, Fortune, CNN and CNBC.
o Providers of terminal-based financial news and data, such as
Bloomberg Business News, Reuters News Service, Dow Jones Markets and Bridge News
Service.
o Web "portal" companies such as Yahoo!, MSN and America Online.
o Online brokerage firms which provide financial and investment news
and information, such as Charles Schwab and E*TRADE.
o Online market analysis and stock analysis and selection companies
such as Clear Station, Polar Trading and Pristine Trading.
The market for the electronic distribution of investment research
and related services is intensely competitive and this competition is expected
to continue to increase. The Company seeks to differentiate itself from its
competitors based on numerous factors including ease of delivery of products and
use of the Site, performance, price, reliability, customer service and support,
and sales and marketing efforts, as well as the quality, originality, variety
and timeliness of the Company's products and services. The Company believes that
its strategic
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distribution and content syndication relationships also represent important
competitive advantages.
The Company also believes that competitive position within the
financial news and information, market analysis and stock selection market is,
to a significant degree, personality driven; spokesmen and analysts for
enterprises in such market are often highly visible and can be an important
factor in differentiating a business from its competition. The Company believes
that Charles Payne's role in its business and continuing visibility for the
Company provides it with an important competitive characteristic and advantage.
DEPENDENCE ON MAJOR CUSTOMERS
The Company's business is not dependent on one or a few major
customers.
INTELLECTUAL PROPERTY
Although the Company's success depends on maintaining and protecting
its intellectual property, including its software, trademarks and tradenames,
the Company has not registered any of its trademarks in the United States or
abroad. The Company may in the future seek to protect its intellectual property
under applicable copyright and trademark laws in the countries in which it
conducts business. The Company may prosecute litigation against infringements of
its intellectual property. In order to protect its trade secrets and other
intellectual property, the Company has required some, and may in the future
require all of its employees, consultants, advisors and collaborators to enter
into confidentiality agreements which prohibit the disclosure of proprietary
information to third parties or the use of proprietary information for
commercial purposes.
GOVERNMENTAL REGULATIONS
WSSI intends to submit an application for registration as an
investment adviser under the Advisers Act. If the application is approved (and
provided that no material limitation or condition is placed on WSSI's activities
pursuant to the grant of such application), WSSI intends to provide certain
individualized services to current and new subscribers, as described above. As a
registered investment adviser, WSSI will be subject to various laws, rules, and
regulations that may not otherwise be applicable to persons whose business
activities are exempt from registration, such as the exemption relied on by WSSI
for publishers of bona fide business or financial publications of general and
regular circulation. In addition, there are various costs and risks that will be
incurred by persons acting in a capacity requiring registration as an investment
adviser. By way of example, and not intended as a comprehensive discussion of
all of the applicable regulatory provisions, such persons are required to adopt
and implement various policies and procedures, including those designed to avoid
the improper use of inside information, maintain certain books and records, and
refrain from engaging in certain transaction with investment advisory clients or
activities that could be inconsistent with their client's interest. Moreover,
persons acting as investment advisors are subject to having their operations,
including certain books and records, examined by authorized state or federal
regulators. While WSSI fully intends to comply with all applicable law, rules,
and regulations, if a regulator
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<PAGE>
determines that a violation of applicable law has occurred, such regulator could
seek to impose a monetary fine or some disciplinary measure, which could include
limitations or cessation of certain or all investment advisory activities. Any
such action by the regulator would likely occur only after inquiry of the facts
and circumstances, in the event that an investigation was commenced in the first
instance; in that event, however, WSSI and/or the Company would incur costs
associated with preparing for and responding to such inquiry. Because WSSI does
not intend to act as a "traditional" investment advisor (in that it will not
hold subscriber's securities or assets and will not have any authority,
discretionary or otherwise, over subscriber's assets or securities) it is
anticipated that the costs associated with complying with applicable regulations
will be less than those of traditional investment advisers.
WSSI is subject to various federal and state securities and other
laws that may limit WSSI's activities and, under certain circumstances, subject
WSSI to additional costs of compliance or the imposition of sanctions if it did
not comply. In addition, the laws and regulations potentially applicable to an
entity that engages in the activities contemplated by WSSI are subject to change
or modification. Any such change could subject WSSI to additional costs in the
form of changes to its systems and procedures and/or potential limitations on
its activities.
EMPLOYEES
At January 31, 2000, the Company had a total of 32 employees, all of
whom are full-time employees. Of these persons, 14 are in sales and marketing,
six are analysts, researchers, writers or editorial personnel, and 12 are in
accounting, operations, administration and management.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following analysis of the results of operations and financial
condition of the Company should be read in conjunction with the consolidated
financial statements, including the notes thereto, of the Company contained
elsewhere in this Registration Statement.
Overview
Since its founding in 1991, the Company has engaged in the business of
providing investment research and information services for institutional and
individual investors and financial professionals. The Company has historically
delivered its products, including financial and market information, analysis,
advice and commentary, to paying subscribers through a variety of media
including phone, fax, e-mail, audio recordings, newsletters and traditional
mail. Sales of subscriptions to the Company's products have represented the
Company's sole source of revenue, and the Company's subscribers have
predominantly been composed of institutional investors and financial
professionals.
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<PAGE>
During 1999, the Company adopted a business strategy designed to increase
the total number of its subscribers, including significant numbers of individual
investors, and to increase and diversify its sources of revenue. To those ends,
the Company has announced a number of initiatives, including the creation,
launch and marketing of its website and the establishment of strategic
distribution relationships through which the Company will reach both
institutional and individual investors. In particular, the Company expects to
use the website to build brand awareness, attract paying subscribers for its
products and generate advertising revenue.
In connection with the execution of its business strategy, in 1999, the
Company engaged various service providers including website designers and
providers of content for its website, purchased computer systems and software,
and hired additional management, sales, operational and administrative
personnel.
The Company anticipates that it will continue to develop its website
during 2000, and will undertake a significant marketing and advertising program
to promote its brand and products. The Company will also pursue additional
strategic relationships and, as appropriate, hire additional personnel,
including management personnel, and purchase additional computer systems and
software.
As discussed below, the fiscal year ended December 31, 1998, and the nine
months ended September 30, 1999 were characterized by significant sales
increases offset by significant expenses associated with sales commissions on
subscriptions, increased personnel and, in 1999, website design and other
strategic and operational initiatives.
Results of Operations
Comparison of the Year Ended December 31, 1997 to the Year Ended December
31, 1998
Revenues increased from $1,442,228 in 1997 to $2,329,215 in 1998, an
increase of 62%. Income from sales of subscriptions to the Company's products
represented virtually all of the Company's revenues in both years. The increase
in subscription revenue resulted primarily from increased sales and promotional
efforts, the increased visibility of Charles Payne, the Company's chief analyst
and spokesman, and the continued general growth in U.S. households' purchasing
and ownership of financial assets.
Total operating expenses increased from $1,438,226 in 1997 to $2,440,404
in 1998, an increase of 70%. The largest components of operating expenses in
both years were salaries and commissions, payroll taxes and related costs.
Salaries and commissions increased 84% from 1997 to 1998, from $878,959 to
$1,614,658, while payroll taxes and related costs increased 157% over the same
period, from $107,032 to $274,832. The Company expects that salaries and
commissions together with payroll taxes and related costs will continue to be
the largest components of the Company's operating expenses; the Company
anticipates that it will continue to hire and engage personnel in connection
with its strategy to increase subscription sales.
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<PAGE>
Rent and occupancy costs increased from $24,825 in 1997 to $42,068 in
1998, an increase of 69%. The increase was attributable to an increase in the
total amount of space occupied by the Company. Additional space was required to
house the increased number of employees and salespeople hired or engaged by the
Company.
Other operating costs increased by 20% from 1997 to 1998, from $416,810 to
$498,823. The increase was attributable to an increase in certain general and
administrative expenses, primarily telephone charges, on-line subscriptions and
quotation and consulting services.
The net loss for 1998 was $109,619 as compared to a net loss of $18,078
for 1997, representing an increase of $91,541 or 506%. The net loss per share
was $0.01 in 1998 as compared to $0.00 in 1997. Management believes that the
increased net loss primarily resulted from the increased operating expenses
incurred during 1998.
Although the Company cannot accurately determine the precise effect of
inflation on its operations, it does not believe that inflation has had a
material effect on sales or results of operations in 1997 or 1998.
Comparison of the Nine Months Ended September 30, 1998 to the Nine Months
Ended September 30, 1999
Revenues increased from $1,762,974 in the nine months ended September 30,
1998 (the "1998 Period") to $2,922,791 in the nine months ended September 30,
1999 (the "1999 Period"), representing an increase of 66%. Subscription income
continued to represent nearly all of the revenues for the two periods,
increasing 72%, from $1,714,033 to $2,950,666 from the 1998 Period to the 1999
Period. Furthermore, the Company realized a loss of $31,794 on the sale of
marketable securities in the 1999 Period as compared to a gain of $47,446 on the
sale of marketable securities in the 1998 Period. The increase in subscription
income and total revenue was attributable solely to increased promotional and
sales efforts, including the increasing prominence and visibility of Charles
Payne, the Company's chief analyst and spokesman.
The Company experienced a substantial increase in operating expenses from
the 1998 Period to the 1999 Period, offsetting the increase in revenues over the
same period. A substantial portion of the increase in operating expenses is
attributable to stock compensation earned and charged to expense in connection
with the issuance of shares of Common Stock to new management personnel
recruited by the Company as part of the Company's expansion strategy. Total
operating expenses increased from $1,611,815 for the 1998 Period to $4,835,276
for the 1999 Period, an increase of 200%. Of these amounts, $4,043,479
represented salaries and commissions in the 1999 Period, compared to $1,049,382
in the 1998 Period, an increase of 285%. The portion of this 1999 Period expense
attributable to the stock compensation earned and charged to expense was
$2,380,424. In the absence of these charges, salaries and commissions would have
increased to $1,663,050, a 58% increase over the 1998 Period. Payroll taxes and
related costs actually decreased 22% over the same periods, from $185,556 to
$145,315, as a result of the Company not making a profit sharing contribution
during the 1999 Period. Apart from the charge to expense represented by stock
compensation, increases in salaries and commissions continued to represent a
substantial portion of the overall increase in operating
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<PAGE>
expenses, and were attributable to retention of existing personnel and
engagement of additional personnel, particularly management personnel required
to effect the Company's business strategy of growth and expansion, as well as to
increased commissions payable to sales representatives in connection with
increased subscription sales. The Company anticipates continuing efforts to
retain and recruit personnel and corresponding increases in expenses
attributable to salaries and commissions, as well as increased commissions
payable as subscription sales increase. The Company further anticipates
significant additional charges to expense for earned stock compensation during
2000 and 2001.
Other factors in the increase in total operating expenses included an
increase in rent and occupancy costs from $21,519 in the 1998 Period to $59,395
in the 1999 Period, a 176% increase over the periods. The increase was
attributable to the relocation of the Company's offices in the Fall of 1998.
Additional space was required to house the increased number of employees and
sales people hired or engaged by the Company. The Company has signed a lease for
new office space and expects to relocate its offices to the new space during the
Spring of 2000. The Company's new facility will be significantly larger than its
existing office space, and, accordingly, the Company anticipates substantial
increases in its rent and occupancy costs during 2000 and in subsequent years.
Comparison of the Nine Months Ended September 30, 1998 to the Nine
Months Ended September 30, 1999
Other operating expenses increased by 67% over the periods, from
$345,335 for the 1998 Period to $577,106 for the 1999 Period. The increase was
attributable to an increase in certain general and administrative expenses,
primarily telephone charges, on-line subscriptions and quotation and consulting
services.
<PAGE>
The Company experienced a net loss for the 1999 Period of $2,120,084,
or $0.12 per share, as compared to net income for the 1998 Period of $97,159, or
$0.01 per share. Management believes that the Company's net loss was primarily
due to the stock compensation charge described above, as well as increased
salaries and commissions paid to additional personnel and in respect of
increased subscriptions.
LIQUIDITY AND CAPITAL RESOURCES
The Company historically has financed its operations out of revenues
from sales of its products. In September 1999, the Company received net proceeds
of $3,000,000 from the sale of 600,000 shares of its Common Stock (the "Private
Placement").
Net cash provided by the operating activities for the 1999 Period was
$432,111 compared to $195,148 for the 1998 Period. This increase was primarily
due to increased sales of subscriptions. Net cash used in investing activities
grew from $1,650 for the 1998 Period to $112,889 for the 1999 Period. The
increased cash used in investing activities was used for purchases of property
and equipment of $86,925 and net investments in marketable securities of
$25,964. The net cash provided by financing activities for the 1999 Period was
$2,980,465, compared to net cash used in financing activities of $30,692 for the
1998 Period. The increase in cash provided by financing activities was primarily
attributable to the Private Placement. At September 30, 1999, the Company had
cash and cash equivalents on hand of $3,396,372.
The Company anticipates increased cash demands to meet such
requirements as increased salary costs related to retention and attraction of
personnel, continuing costs of development, maintenance and expansion of the
Company's website, costs associated with advertising and marketing campaigns
contemplated for 2000, higher rent and occupancy expenses associated with the
Company's move to new and larger facilities currently planned for the Spring of
2000, costs associated with upgrading internal accounting and other operating
systems, costs associated with becoming and remaining a reporting issuer and
other working capital and general corporate purposes.
The Company anticipates that during the next 12 months it may require
cash in addition to that on hand and that generated by operations to meet its
cash requirements if it is to continue to pursue aggressively its growth
strategy, particularly for advertising and marketing campaigns. Management
believes that equity financing would most likely serve as the source of such
additional cash. Any such equity financing would be expected to result in
dilution to the holders of the Company's Common Stock. The Company could also
seek to finance such expenses through debt financing. However, there can be no
assurance that additional financing, whether through sales of equity of debt,
will be available on terms and conditions acceptable to the Company, if
available at all. If such financing is required and cannot be obtained, the
Company would be required to reduce or postpone expenditures, particularly with
respect to advertising and promotional campaigns. In December 1999, the Company
retained Joseph Charles & Assoc., Inc. to assist the Company with respect to
matters relating to the financing of the Company's business, recapitalizations,
mergers and acquisitions. The Company paid such firm an advance of $50,000
against future fees and expense allowances that is non-refundable except under
certain circumstances.
YEAR 2000 ISSUES
To date, the Company has not experienced, and does not anticipate
experiencing, any problems due to year 2000 related issues.
ITEM 3. DESCRIPTION OF PROPERTY
The Company leases approximately 4,500 square feet of office space
occupying a part of the fourth floor at 130 William Street, New York, NY 10038,
from 130 William LLC, an unaffiliated party. The lease has a remaining term of
approximately three years and provides for annual lease payments of $94,413
payable in equal monthly installments. The Company's obligations under the lease
are guaranteed by the Company's president, Charles V. Payne. The Company has
advised the landlord of its intention to vacate the offices in the Spring of
2000 when its new offices are completed as discussed below. The Company is
negotiating with the landlord a surrender of the lease, the assignment thereof
or a subletting of the office space.
On November 23, 1999, the Company leased approximately 8,500 square
feet of office space occupying the entire 31st floor at 80 Broad Street, New
York, NY 10004-2209, from Praedium II Broadstone LLC, an unaffiliated party. The
lease has a term of ten years and provides for annual lease payments of $253,680
for the first three years payable in equal monthly installments; $270,592 for
the next three years and $287,504 for the balance of the lease term. The Company
anticipates that it will relocate its executive offices to the leased space in
the Spring of 2000.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of February 9, 2000,
based on information obtained from the persons named below, with respect to the
beneficial ownership of the Common Stock by (i) each person known by the Company
to own beneficially 5% or more of the Common Stock, (ii) each director and
officer of the Company and (iii) all directors and officers as a group. The
number of shares of Common Stock owned are those "beneficially owned" as
determined under the rules of the SEC, including any shares of Common Stock as
to
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which a person has sole or shared voting or investment power and any shares of
Common Stock which the person has the right to acquire within 60 days through
the exercise of any option, warrant or right.
<TABLE>
<CAPTION>
NUMBER OF %
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OWNED OWNED
- ------------------------------------ ------------ -----
<S> <C> <C>
Charles V. Payne(1)(2) 10,939,103 58.8%
c/o Wall Street Strategies Corporation
130 William Street, Suite 401
New York, NY 10038
Shawn D. Baldwin (3) 351,282 2.0%
c/o Wall Street Strategies Corporation
130 William Street, Suite 401
New York, NY 10038
David J. McCallen (4) 526,923 3.0%
c/o Wall Street Strategies Corporation
130 William Street, Suite 401
New York, NY 10038
Ian Rice(2)
Collier House
163/169 Brompton Road
London SW3 1PY
England 150,000 *
Stephen Gross(5)
2625 Cumberland Parkway
Atlanta, GA 30339 100,000 *
Gerald Turner(6)
3110 Fairview Park Drive
Suite 1400
Falls Church, VA 22042-4503 102,000 *
All executive officers and directors as a group
(1)(2)(3)(4)(5)(6) 11,141,103 59.2%
</TABLE>
- ----------
* Less than 1%
(1) Includes 800,000 shares held of record by Todd Moore. Pursuant to a Stock
Transfer Agreement between Messrs. Payne and Moore and a related
irrevocable proxy from Mr. Moore, Mr. Payne has the right, for a period of
up to one year ending not later than January 17, 2001, to vote the 800,000
shares held of record by Mr. Moore.
Includes an aggregate of 1,258,205 shares held of record by certain
employees of the Company. Mr. Payne has the right in certain instances
pursuant to a voting agreement with
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such employees to direct the voting of the shares held by such employees.
In addition, includes 15,000 shares issuable upon exercise of options
exercisable within 60 days. Does not include 285,000 shares issuable upon
exercise of options which are not currently exercisable.
(2) Includes 150,000 shares held of record by Ian Rice and 60,000 shares held
of record by Corporate Communications Network, Inc. ("CCN"). Pursuant to a
Voting Agreement among Mr. Payne, Mr. Rice, CCN and Sigma Limited, S.A.
("Sigma"), for a period of two years ending September 23, 2001, Mr. Payne
will vote his shares for the election to the Board of Directors of two
designees of Sigma (including Mr. Rice), and Mr. Rice and CCN will vote
their shares for the election to the Board of Directors of Mr. Payne and
two of his designees (who, pursuant to the terms of the Voting Agreement,
are Messrs. Turner and McCallen).
(3) Does not include 526,923 shares issuable upon exercise of options which
are not exerciseable within 60 days.
(4) Does not include 351,282 shares issuable upon exercise of options which
are not exerciseable within 60 days.
(5) Consists of 100,000 shares issuable upon exercise of currently
exerciseable stock options.
(6) Includes 100,000 shares issuable upon exercise of currently exerciseable
stock options.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age and position of each
director and executive officer of the Company.
NAME AGE POSITION
---- --- --------
Charles V. Payne 37 Chief Executive Officer,
President and Director
Shawn D. Baldwin 33 Chief Operating Officer
David J. McCallen 43 Executive Vice
President, Chief
Technical Officer,
Secretary and Director
Ian Rice 60 Chairman of the Board of
Directors
Gerald Turner 57 Director
Stephen Gross 52 Director
Charles V. Payne has been Chief Executive Officer, President and a
director of the Company since the Company's acquisition of WSSI in September
1999. Since 1991, Mr. Payne
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has been President, Chief Executive Officer, director and chief analyst of WSSI.
See Part II-Item 2-"Legal Proceedings" below.
Shawn D. Baldwin joined the Company as Chief Operating Officer in October
1999. From October 1998 through September 1999, Mr. Baldwin was with Melvin
Securities LLC, an investment bank located in Chicago, Illinois, where he served
as Managing Director, Equity and Fixed Income. From September 1996 through
October, 1998, Mr. Baldwin was with Optima Investment Research, an international
research firm based in Chicago, first as Vice President, Marketing and Business
Development from September 1996 through November 1997, and then as Senior Vice
President. From October 1995 through August 1996, Mr. Baldwin was Regional Sales
Manager, Midwest Region for First Bank Systems/US Bancorp, Chicago, Illinois.
From 1993 through September 1995, Mr. Baldwin was Sales Manager - Unsecured
Assets, for American Express Company.
David J. McCallen became a director of the Company in August 1999 and has
been Executive Vice President and Secretary of the Company since September 1999.
From September 1997 to April 1999 Mr. McCallen was associated with Potomac
Capital Group, Inc., Falls Church, Virginia, a private investment bank, where he
focused on capital raising and strategy consulting. From July 1996 through June
1997, Mr. McCallen was Director of Marketing for Xybernaut Corp., Fair Lakes,
Virginia. From October 1995 to June 1996, Mr. McCallen was Marketing Director at
TELE-TV, a broadband interactive services firm formed as a joint venture by Bell
Atlantic, NYNEX and Pacific Telesis. Prior to October 1995, Mr. McCallen was
director of marketing for a computer networking company located in Los Gatos,
California.
Ian Rice has been Chairman and a director of the Company since June 1999.
From June 1997 to date, Mr. Rice has been Chairman, Chief Executive Officer and
a director of Ikon Ventures, Inc. a holding company whose shares are traded in
the National Quotation Bureau Pink Sheets. From January 1994 until October 1996,
Mr. Rice was Chairman and a director of Asia Media Communications Ltd. (n/k/a
MyWeb Inc.com), then a holding company based in Switzerland whose shares are
traded on the OTC Electronic Bulletin Board. Since November 1985, Mr. Rice has
been a consultant to Sigma Limited, S.A., a private investment firm based in
Switzerland which is a consultant to the Company.
Gerald Turner has been a director of the Company since August 1999. Mr.
Turner is Chairman and co-founder of Potomac Capital Group, Inc., an advisory
firm focusing on acquisition and divestiture services, capital raising, and
strategy consulting. Mr. Turner has been Chairman of Potomac Capital Group, Inc.
since before 1995.
Stephen Gross has been a director of the Company since August 1999. Mr.
Gross, a certified public accountant, was a founding member, and since November
1970, has been the Chairman of the Board of HLB Gross Collins, P.C., an
accounting firm located in Atlanta, Georgia, and its predecessor firms. During
the past five years, Mr. Gross has been a director of the following companies,
all of whose shares are publicly traded: Charter Bank & Trust from January 1987
to January 1997; Common Sense Trusts from January 1987 to date; Comstar.net,
Inc. from November 1999 to date; e-bank.com, Inc. from April 1998 to date; Ikon
Ventures, Inc.
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from June 1997 to date; Van Kampen American Capital Bond Fund, Inc., SSB Concert
Investment Series from January 1998 to date; Van Kampen American Capital
Exchange Fund from January 1996 to January 1998; Van Kampen American Capital
Convertible Securities from January 1996 to January 1998; Van Kampen Capital
Income Trust from January 1996 to January 1998; and WebMD, Inc. from January
1997 to August 1998.
The Company's by-laws provide that the Board of Directors shall
consist of not less than one and no more than seven persons as resolved by the
Board from time to time. Members of the Board serve until the next annual
meeting of stockholders and until their successors are elected and qualified.
Directors are elected by plurality vote. At least one-fourth in number of the
directors must be elected annually. Meetings of the Board are held when and as
deemed necessary or appropriate. Officers are appointed by and serve at the
discretion of the Board. There are no family relationships among any of the
Company's directors.
The Company has entered into a voting agreement with various parties
fixing the number of directors at five and identifying the individuals who are
to act as members of the Board. See "Description of Securities--Voting
Agreements."
ADVISORY BOARD
In August 1999, the Company formed an advisory board (the "Advisory
Board") which currently consists of five members. The Company considers the
Advisory Board to be an important source of professional talent, as well as an
important resource for the development of organizational infrastructure and
processes. In addition, the Board is expected to assist the Company in enhancing
awareness about the Company's products, establishing strategy and financial
relationships and developing the Company's website.
The Company has entered into agreements with each member of the
Advisory Board. The principal provisions of these agreements, which are similar
in their terms, provide for reimbursement of certain expenses and the grant of a
non-qualified stock option. Each member of the Advisory Board has also agreed,
pursuant to such agreements, not to disclose any confidential information of the
Company.
The members of the Company's Advisory Board are:
Kenneth C. Allen Vice President at Lehman Brothers Investment Banking
Division. Mr. Allen currently focuses on providing
corporate finance to technology companies, specifically,
Internet consulting businesses and systems integration
firms.
Robert Boehm Vice President of Human Resources for the Americas for
Baan Company N.V., a Netherlands based global provider
of enterprise business management software.
Ari Kaufman Executive Vice President of Internet Operations at Zacks
Investment Research where he overseas Internet
Advertising Sales
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<PAGE>
and Media. Mr. Kaufman is also the President of
AdBuyer.com, LLC, a new media Advertising Sales and
Buying consulting effort.
Joanna McGinley Director of Marketing at Morningstar, Inc. Ms. McGinley
is responsible for all product development and
management of institutional products for the investment
company, broker/dealer, bank and insurance company
markets.
Steven Schwartz Research Scientist at the Massachusetts Institute
of Technology's Media Lab. Mr. Schwartz has been
instrumental in the creation of many technical
innovations for the television and film industry,
including video and music scoring systems for use in
film production while serving as Chief Video Engineer at
Lucasfilm Ltd.
ITEM 6. EXECUTIVE COMPENSATION
On September 23, 1999, the Company entered into an employment
agreement with Charles Payne, the Company's President and Chief Executive
Officer. The agreement has a term of three years at an annual salary of $250,000
subject to increases at the discretion of the Company's Board but no less than
10% per annum. The agreement also provides for annual bonuses of no less than
$125,000 provided that the Company reaches certain revenue milestones. The
agreement contains customary terms relating to expense reimbursement and
benefits, as well as confidentiality and non-compete provisions.
The Company has also entered into employment agreements, dated July
30, 1999, with Shawn Baldwin, the Company's Chief Operating Officer, and David
McCallen, the Company's Executive Vice President. Mr. Baldwin's agreement has a
term of three years and provides for an annual salary of $175,000. Mr.
McCallen's agreement has a term of two years and provides for an annual salary
of $125,000. The agreements also provide for an incentive bonus of up to 40% of
base salary and a grant of 526,923 options to Mr. Baldwin and 351,282 options to
Mr. McCallen, respectively.
The following table sets forth the compensation paid to the
Principal Executive Officer, who was the only executive officer whose annual
salary and bonus exceeded $100,000 for services rendered to the Company and its
predecessors for the nine months ended September 30, 1999 and for the years
ended December 31, 1998 and December 31, 1997.
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<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards
-------------------------------------- -----------------------------
Other
Name and Annual Securities Underlying Options
Principal Position Year Salary Bonus Compensation (#)
<S> <C> <C> <C> <C> <C>
Charles V. Payne 1999 $363,607 $155,000 $19,669 300,000
President 1998 $134,835 $100,000 $ 5,470 -0-
1997 $ 65,516 -0- $ 4,800 -0-
</TABLE>
Stock Option Plans
The Company has adopted two separate stock option plans that provide
for the grant of options and other forms of incentive awards to selected
officers, employees, directors, and consultants to the Company or any subsidiary
thereof. The purpose of these plans is to promote the growth of the Company by
enabling the Company to attract and retain the best available persons for
positions of substantial responsibility and to provide certain key employees
with additional incentives to contribute to the success of the Company. Both
plans are administered by the Company's Board of Directors (unless it elects a
committee to administer the plans).
1996 Compensatory Stock Option Plan
The Company's 1996 Compensatory Stock Option Plan (the "1996 Stock
Option Plan") was adopted by the Board of Directors and approved by the
Company's stockholders in October 1996. Subject to adjustment in the event of
certain specified corporate events, options to purchase a maximum of 2,000,000
shares of common Stock may be granted under the 1996 Stock Option Plan. The 1996
Stock Option Plan has a term of ten years and no options may be granted after
its expiration. On December 7, 1999, the Company's Board of Directors determined
that no further awards will be made under the 1996 Stock Option Plan. As of such
date, a total of 1,153,205 options were outstanding under the 1996 Stock Option
Plan.
The 1996 Stock Option Plan provides solely for the grant of options
that are not intended to qualify as incentive stock options within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
Under the terms of the 1996 Stock Option Plan, the exercise price of the options
must be at least 85% of the fair market value of the Company's Common Stock on
the date of grant. Options to be granted shall have a term not to exceed 10
years from the date of grant and generally terminate automatically: upon
termination of employment for cause; within a period (specified in the
individual option grant) after termination of employment without cause; within
twelve months after the death of an employee;
24
<PAGE>
and, in the event of total disability, one year after termination of employment
unless otherwise specified in the grant. Generally, options are not transferable
other than by will or by operation of law.
Options may be exercised by paying the cash exercise price, or, with
the consent of the Board of Directors, by delivering to the Company securities
or a personal recourse promissory note. At the discretion of the Board, as
determined in the individual options grant, an option may contain a cashless
exercise provision.
1999 Incentive Program
The Company's 1999 Incentive Program (the "1999 Program") was
adopted by the Board of Directors and approved by the Company's stockholders on
December 7, 1999. The 1999 Program permits the granting of any or all of the
following types of awards: stock options, including incentive stock options,
stock appreciation rights in tandem with stock options or freestanding, and
restricted stock grants.
The aggregate number of shares of Common Stock that may be issued or
transferred under the 1999 Program is 5,000,000, subject to adjustment in the
event of certain specified corporate events, plus (i) any shares which are
forfeited under the 1999 Program or the 1996 Stock Option Plan, (ii) the number
of shares repurchased by the Company in the open market and otherwise with an
aggregate price no greater than the cash proceeds received by the Company from
the sale of shares under the 1999 Program and (iii) any shares surrendered to
the Company in payment of the exercise price of options issued under the 1999
Program. However, no award may be issued that would bring the total of all
outstanding awards under the 1999 Program to more than 15% of the total number
of shares of Common Stock of the Company at the time outstanding. The maximum
number of shares for which options and stock appreciation rights may be granted
under the 1999 Program to any person during any calendar year is 300,000
(subject to appropriate adjustment in the event of any changes in capitalization
of the Company).
Options may be exercised in cash or, with the Board of Director's
approval, by delivering shares of Common Stock already owned by the Grantee and
having a fair market value on the date of exercise equal to the option price, or
a combination of cash and shares. At the discretion of the Board of Directors,
as determined in the individual grant, an option may contain a cashless exercise
provision.
The Board of Directors may from time to time amend, alter, suspend
or discontinue the 1999 Program, subject to any requirement of stockholder
approval required by applicable law; provided, that no amendment shall be made
without stockholder approval if such amendment would (1) increase the maximum
number of shares of Common Stock available for issuance under the 1999 Program,
(2) reduce the minimum option price in the case of an option or the base price
in the case of a stock appreciation right, (3) effect any change inconsistent
with Section 422 of the Code or (4) extend the term of the 1999 Program. The
1999 Program terminates on the tenth anniversary of its effective date unless
terminated earlier by the Board or unless extended by the Board.
25
<PAGE>
In the case of incentive stock options granted under the 1999
Program, the following special rules apply:
The aggregate fair market value of the stock covered by incentive
stock options granted under the 1999 Program or any other stock option plan of
the Company or any subsidiary or parent of the Company that become exercisable
for the first time by any optionee in any calendar year shall not exceed
$100,000. The period for exercise of such option shall not exceed ten years from
the date of the grant (or five years if the optionee is also a 10% stockholder).
The option price at which Common Stock may be purchased under an incentive stock
option shall be the fair market value (or 110% of the fair market value if the
optionee is a 10% stockholder) of the Common Stock on the date of the grant.
Incentive stock options may only be granted to employees (including officers) of
the Company or any subsidiary or parent of the Company. Such options by their
terms shall not be transferable by the optionee other than by the laws of
descent and distribution, and shall be exercisable, during the lifetime of the
optionee, only by the optionee.
As of January 31, 2000, a total of 945,000 options were outstanding
under the 1999 Program.
The following table sets forth certain information concerning stock
options granted to the Principal Executive Officer during 1999. The exercise
price for the grant to such named person was the fair market value of the shares
of Common Stock on the date of grant, determined by reference to the closing
price as quoted in the OTC Electronic Bulletin Board on such date.
Options Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Number of Percent of Total Options Exercise
Securities Granted to Employees or Base Expiration
Name Underlying Options in Fiscal Year Price Date
- ---- ------------------ --------------------------- ----- ----
<S> <C> <C> <C> <C>
Charles Payne 300,000 14.3% $4.00 12/7/04
</TABLE>
The following table sets forth certain information with respect to
the Principal Executive Officer regarding the value of his unexercised options
held as of December 31, 1999. No options were exercised (or exercisable) during
1999.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year
End Option Values
<TABLE>
<CAPTION>
Shares Number of Securities
Acquired Underlying Unexercised Value of Unexercised in the
Name On Exercise Value Realized Options at Fiscal Year End Money Options at Fiscal Year End
- ---- ----------- -------------- -------------------------- --------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles Payne -0- -0- -0- 300,000 -0- $656,000
</TABLE>
Profit Sharing Plan
26
<PAGE>
Effective January 1, 1996, WSSI adopted a profit sharing plan (the
"PS Plan"). Contributions to the PS Plan are made at the discretion of
management. No contributions are made by employees. Receipt of benefits under
the PS Plan is subject to vesting based on an employee's years of service. All
funds in the PS Plan are held in a separate trust of which Charles Payne is the
sole trustee. The Company contributed $150,000 to the plan in respect of fiscal
1998; no contributions were made to the plan in respect of fiscal 1997 or fiscal
1999.
In January 2000, the PS Plan was amended to add a salary deferral
feature under Section 401(k) of the Internal Revenue Code of 1986, as amended.
Under such feature, an employee may elect to have part of his or her
compensation contributed on a before-tax basis to the PS Plan. Such salary
deferred contributions are 100% vested at all times.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The Company has not entered into any transactions during the last
two fiscal years with any director, executive officer, director nominee, 5% or
more shareholder, nor has the Company entered into transactions with any member
of the immediate families of the foregoing persons (including spouses, parents,
children, siblings and in-laws), except as previously described in this
registration statement, nor is any such transaction proposed except for the
following:
The Company is party to a Consulting Agreement dated September 23,
1999 with Sigma Limited, S.A., a company organized under the laws of Switzerland
("Sigma"), pursuant to which Sigma provides consulting services to the Company.
Sigma's consulting services to the Company are rendered by Ian Rice, the
Chairman of the Board of Directors of the Company. The term of the Consulting
Agreement is two years and the Corporation pays Sigma a consulting fee of
$50,000 per annum, plus a non-accountable expense allowance of $35,000 per
annum. All of the capital stock of Sigma is owned by a discretionary trust of
which Rice is neither a trustee nor a beneficiary. Among the discretionary
beneficiaries of the trust are member of Rice's family. Rice disclaims
beneficial ownership of Sigma. Since the date of the Consulting Agreement
between the Company and Sigma, Rice has not received any consulting fees from
Sigma.
ITEM 8. DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 50,000,000
shares of common stock, $0.001 par value per share, of which 17,594,103 shares
are issued and outstanding, and 5,000,000 shares of preferred stock (the
"Preferred Stock"), none of which have been issued. The issued and outstanding
common stock is fully-paid and nonassessable.
Preferred Stock
The Board of Directors is authorized, subject to limitations
prescribed by law, to provide for the issuance of the Preferred Stock in series
and by filing a certificate with the Nevada Secretary of State to establish the
number of shares to be included in each series. The
27
<PAGE>
Preferred Stock may be issued either as a class without series, or if so
determined from time to time by the Board of Directors, either in whole or in
part in one or more series, each series to be appropriately designated by a
distinguishing number, letter or title prior to the issue of any shares thereof.
The Board of Directors has the authority to fix the voting power,
the designations, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions of the
Preferred Stock in the resolution or resolutions adopted by the Board of
Directors providing for the issuance of the Preferred Stock.
Common Stock
Common Stock may be issued from time to time in one or more series
as determined by the Board of Directors. The Common Stock may have such voting
powers, designations, preferences and relative, participating, optional or other
special rights and be subject to such qualifications, limitations and
restrictions as the Board of Directors shall determine. Subject to the
provisions of law and the preferences of the Preferred Stock, dividends may be
paid on the Common Stock at such time and in such amounts as the Board of
Directors may deem advisable. All currently issued and outstanding shares of
Common Stock have equal dividend, voting and other rights.
The Company's by-laws provide that holders of 10% of the Company's
Common Stock may call a special meeting of shareholders.
General Provisions Applicable To Both Common And Preferred Stock
No holder of Common Stock or Preferred Stock has any preemptive
right to subscribe to stock, obligations, warrants, rights to subscribe to stock
or other securities of any class.
Subject to the provisions of law and the provisions of the Company's
Certificate of Incorporation, as amended, the Company may issue shares of its
Preferred Stock or Common Stock, from time to time for such consideration (not
less than the par value or stated value thereof) as may be fixed by the Board of
Directors. Shares so issued, for which the consideration has been paid or
delivered to the Company, shall be deemed fully paid stock, and shall not be
liable to any further call or assessments thereon, and the holders of such
shares shall not be liable for any further payments in respect of such shares.
28
<PAGE>
Voting Agreement
The Company is a party to a voting agreement with Charles Payne, the
Company's President and largest shareholder, Sigma Limited, S.A., a Swiss
corporation and a consultant to the Company ("Sigma"), Ian Rice, the Company's
Chairman and a shareholder of the Company, and Corporate Communications Network,
Inc., a shareholder of and consultant to the Company ("CCN"), pursuant to which,
for a period of two years, Mr. Payne will vote his shares of Common Stock to
cause (i) the Company's Board of Directors to consist of five members and (ii)
the election to the Board of Directors of two designees of Sigma, one of which
designees is to be the Company's Chairman. Sigma designated Messrs. Rice and
Stephen Gross as the Chairman and a director, respectively. In addition, under
the agreement, each of Sigma, CCN and Mr. Rice are to vote its or his shares in
favor of Mr. Payne and two of his nominees. As set forth in the voting
agreement, Mr. Payne has designated Messrs. Gerald Turner and David McCallen as
his nominees.
Transfer Agent
Madison Stock Transfer, Inc., 1813 East 24th Street, Brooklyn, New
York 11229, is the transfer agent and registrar for the Common Stock.
29
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S COMMON EQUITY AND OTHER
SHAREHOLDER MATTERS
Market Price For Common Stock and Related Shareholder Matters
The Common Stock has traded on the OTC Electronic Bulletin Board
under the symbol "VEMP" since August 20, 1999 and, since September 25, 1999,
under the symbol "WSST." The following table sets forth, for the periods
indicated, the high and low closing bid prices for the Common Stock.
1999 High Low
- ---- ---- ---
Third Quarter since August 20 $7.50 $4.00
Fourth Quarter $6.187 $2.437
2000
First Quarter through February 9 $14.75 $6.625
- --------------
The foregoing information reflects inter-dealer prices, without mark-up,
mark-down or commission, and may not represent actual transactions. On February
9, 2000, the closing bid price for the Common Stock was $14.625 per share.
Penny Stock Rules
Unless and until the Common Stock is quoted on the Nasdaq system or
on a national securities exchange and if and so long as the Common Stock trades
below $5.00 per share, the Common Stock would come within the definition of
"penny stock" as defined in the Exchange Act and be covered by Rule 15g-9 of the
Exchange Act. That rule imposes additional sales practices requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally institutions with assets in excess
of $5 million or individuals with net worth in excess of $1 million or annual
income exceeding $200,000 or $300,000 jointly with their spouse). For
transactions covered by Rule 15g-9, the broker-dealer must make a special
suitability determination for the purchaser and receive the purchaser's written
agreement to the transaction prior to sale. Consequently, the applicability of
Rule 15g-9 may effect the ability or willingness of broker-dealers to sell the
Company's securities.
Rule 144 Resales
As of the date of the Registration Statement the Company has
17,594,103 shares of Common Stock issued and outstanding, of which approximately
5,364,778 shares are unrestricted and may be freely traded in the securities
markets. The remaining 12,229,325 shares of Common Stock, including 9,686,103
shares owned by affilliates, are "restricted" shares within the meaning of Rule
144 under the Securities Act. In general, Rule 144, as currently in effect,
30
<PAGE>
provides that a person who acquired securities in a private placement
transaction and has beneficially owned those securities, fully paid, for a
period of at least one year may, under certain conditions, sell every three
months, in brokerage transactions, a number of shares that does not exceed one
percent (1%) of the issuer's outstanding common stock. For issuers whose shares
are listed on a stock exchange or Nasdaq , a shareholder may alternatively sell
a number of shares that does not exceed the average weekly trading volume during
the four calendar weeks prior to his or her sale.
However, if a person has beneficially owned securities for a period
of at least two years and has not been an affiliate (control person) of the
issuer for the preceding three-month period, the person may request that all
restrictive legends affecting the securities be removed, and there is no limit
on the number of shares that the non-affiliate may then sell. The sale of a
substantial number of shares of the Company under Rule 144 or under any other
exemption from the Act could have a depressive effect upon the price of the
Common Stock.
Related Stockholder Matters
The Company has not agreed to register any shares of Common Stock
under the Act for sale by security holders except that the Company (i) has
granted demand and piggy-back registration rights to Charles V. Payne and his
assigns with respect to 9,455,898 shares of Common Stock, (ii) has granted
piggy-back registration rights to Bamby Investments Limited, HK Partners LLC and
Gerald H. Turner and their respective assigns with respect to an aggregate of
600,000 shares of Common Stock and (iii) has granted piggy-back registration
rights to Continental Capital & Equity Corporation and its assigns with respect
to 30,000 shares of Common Stock as well as 100,000 shares of Common Stock
underlying certain options granted to it.
The Company is not, and has not proposed to, publicly offer any
shares of Common Stock.
Number of Shareholders
As of February 4, 2000, there were approximately 66 holders of
record of Common Stock, and the number of beneficial owners was approximately
300.
Dividend Information
The Company has never paid a cash dividend on its Common Stock nor
does the Company anticipate paying cash dividends on its Common Stock in the
near future. It is the present policy of the Company not to pay cash dividends
on the Common Stock but to retain earnings, if any, to fund growth and
expansion. Under Nevada law, a company is prohibited from paying dividends if
the company, as a result of paying such dividends, would not be able to pay its
debts as they come due, or if the company's total liabilities and preferences to
preferred shareholders exceed total assets. Any payment of cash dividends on the
Common Stock in the future will be dependent upon the Company's financial
condition, results of operations, current
31
<PAGE>
and anticipated cash requirements, plans for expansion, as well as other factors
the Board of Directors deems relevant.
ITEM 2. LEGAL PROCEEDINGS
As of the date hereof, the Company is not a party to any legal
proceeding and is not aware of any threatened legal proceeding.
In a complaint dated June 13, 1997, the SEC brought an action
against various persons, including WSSI and Charles Payne, alleging violations
of the federal securities laws. SEC v. Members Services Corp., et al., No. 97
CV1146 (D.D.C.). As to WSSI and Payne, the SEC alleged the failure to disclose
the receipt of compensation from an issuer that was the subject of information
circulated by WSSI. Without admitting or denying the allegations in the
complaint, WSSI and Payne each consented to the entry of a permanent injunction
against violations of Section 17(b) of the Securities Act. In addition, Payne
agreed to pay a civil penalty of $25,000 and WSSI agreed to pay a civil penalty
of $10,000.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
No securities that were not registered under the Securities Act have
been issued or sold by the Company within the past three years, except as
described below.
1. On June 12, 1998, VEI-Colorado issued 6,000,000 shares of its
Common Stock to five individuals, who were the former member-owners of VECO and
VET, in connection with the merger of VECO and VET with and into VEM
(VEI-Colorado's wholly-owned subsidiary). The shares were issued to
sophisticated investors in reliance upon the exemption provided by Section 4(2)
of the Securities Act. Effective March 31, 1999, the 1998 Merger was unwound and
the 6,000,000 shares issued in connection therewith were canceled.
2. In June 1998, VEI-Colorado completed a private placement of
550,000 shares of its common stock at $1.00 per share to four sophisticated
investors in reliance upon the exemption provided by Rule 504 of Regulation D,
as promulgated by the SEC under the Securities Act. The shares were issued to
the following investors:
Number of Shares
Name of Investor Purchased Amount Invested
- ---------------- --------- ---------------
Avarn Investments Inc. 250,000 $250,000
Avatar Business Corp. 250,000 $250,000
John D. Brasher, Jr. 25,000 $ 25,000
Corporate Communications Network Inc. 25,000 $ 25,000
32
<PAGE>
3. On June 4, 1999, VEI-Colorado sold and issued to Ian Rice, a
sophisticated investor, 4,000,000 shares of its common stock for an aggregate
purchase price of $20,000 ($.0025 per share purchased). The shares were issued
in reliance upon the exemption provided by Section 4(2) of the Securities Act.
On or about September 23, 1999, 7,850,000 shares of Common Stock owned by Mr.
Rice were canceled.
4. On June 21, 1999, WSSC issued 7,050,000 shares of Common Stock to
the shareholders of its then parent corporation, VEI-Colorado, in connection
with the merger of VEI-Colorado into WSSC which merger was effected for the sole
purpose of reincorporating the parent in the State of Nevada. The shares were
issued in reliance upon Rule 145(a)(2) as promulgated by the SEC under the
Securities Act.
5. On July 30, 1999, the Company sold an aggregate of 1,255,205
shares of Common Stock at $0.0025 per share to ten sophisticated individuals,
eight of whom were employees of WSSI, and two of whom subsequently became
employees of the Company. The shares were issued in reliance upon the exemption
provided by Section 4(2) of the Securities Act.
6. On September 23, 1999, the Company issued to Charles V. Payne, a
sophisticated investor, 9,455,898 shares of Common Stock in exchange for Mr.
Payne's 100 shares of common stock of Wall Street Strategies, Inc. The issuance
of these shares was exempt from registration pursuant to Section 4(2) under the
Securities Act.
7. In September 1999, the Company completed a private placement of
600,000 shares of Common Stock at $5.00 per share to three accredited investors
in reliance upon the exemption provided by Rule 506 of Regulation D, as
promulgated under the Securities Act. The shares were issued to the following
investors:
<TABLE>
<CAPTION>
Name of Investor Number of Shares Purchased Amount Invested
---------------- -------------------------- ---------------
<S> <C> <C>
Bamby Investments Limited 586,000 $2,930,000
HK Partners LLC 12,000 $60,000
Gerald H. Turner 2,000 $10,000
</TABLE>
8. On February 9, 2000, the Company issued to Continental Capital &
Equity Corporation ("CCEC"), a sophisticated investor, 30,000 shares of Common
Stock in partial compensation for services to be rendered by CCEC to the Company
pursuant to a Market Access Program Marketing Agreement between the parties
dated January 26, 2000.
With respect to the issuances of securities referenced above, other
than those described in paragraphs 2 and 4, investors were furnished with
information regarding the Company and the offering and issuance, and each had
the opportunity to verify the information supplied. Additionally, the Company
obtained a representation from each investor of such investor's intent to
acquire the securities for the purpose of investment only, and not with a view
33
<PAGE>
toward the subsequent distribution thereof. The securities bear appropriate
restrictive legends, and the Company issued stop transfer instruction to its
transfer agent.
9. From time to time from August through December 1999, the Company
granted stock options to officers, directors and employees of, and advisors and
consultants to the Company. These grants have been made at exercise prices
ranging from $3.50 to $4.00 per share. In addition, on January 26, 2000, the
Company granted to CCEC, stock options to purchase 100,000 shares of Common
Stock at prices ranging from $10.00 to $16.00 per share. To date, no stock
options have been exercised. Options have been issued in reliance upon the
exemption provided by Section 4(2) of the Securities Act, and the securities
have been appropriately legended.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's certificate of incorporation generally provides for
indemnification of each director, officer, employee or agent as long as such
person acted in good faith and in a manner he or she believed to be in or not
opposed to the best interest of the Company and had no reasonable cause to
believe that such conduct was unlawful.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the Company, the Company has been informed that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
PART F/S
The following financial statements of the Company are included in this Part F/S.
Independent Auditor's Report
Consolidated Balance Sheets for the year
ended December 31, 1998 and the
nine months ended September 30, 1999 (unaudited)
Consolidated Statements of Operations for the years ended December 31,
1998 and 1997 and the nine month periods ended September 30, 1999
(unaudited) and 1998 (unaudited)
Consolidated Statement of Stockholders' Equity from January 1, 1997 to
December 31, 1998 and for the nine months ended September 30, 1999
(unaudited)
Consolidated Statements of Cash Flows for
the year ended December 31, 1998 and 1997 and the nine month periods
ended September 30, 1999 (unaudited) and 1998 (unaudited)
Notes to Consolidated Financial Statements
34
<PAGE>
Lilling & Company LLP
Certified Public Accountants
Board of Directors and Shareholders
Wall Street Strategies Corporation
New York, New York
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying consolidated balance sheet of Wall Street
Strategies Corporation and subsidiary (the "Company") as of December 31, 1998
and the related consolidated statements of operations, shareholders' equity and
cash flows for each of the two years in the period ended December 31, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Wall Street
Strategies Corporation and subsidiary as of December 31, 1998 and results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.
/s/ Lilling & Company
January 31, 2000
Great Neck, New York
Ten Cutter Mill Road, Great Neck, New York 11021-3201 o (516) 829-1099
o Fax (516) 829-1065
F-1
<PAGE>
WALL STREET STRATEGIES CORPORATION
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
December 31, 1999
1998 (unaudited)
------------ ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 96,685 $ 3,396,372
Accounts receivable 13,400 --
Marketable securities, available for sale, at market value 55,524 132,463
Deferred commission expense 97,278 114,430
Other current assets -- 63,084
------------ ------------
Total current assets 262,887 3,706,349
Property and equipment, net 16,247 30,108
Other assets 24,883 42,470
------------ ------------
$ 304,017 $ 3,778,927
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilites
Accrued expenses $ 68,760 $ 35,218
Income taxes payable 9,400 208,356
Deferred subscription income 277,938 326,944
Accrued pension expense 150,000 150,000
Loan from shareholder 36,380 350
------------ ------------
Total current liabilities 542,478 720,868
------------ ------------
Commitments and contingencies (Notes 5, 6, 7 and 8)
Shareholders' equity
Preferred stock, $.001 par value; 5,000,000 shares authorized;
none issued and outstanding
Common stock, $.001 par value; 50,000,000 shares authorized; issued and
outstanding, 9,455,898 and 17,564,103 shares
at December 31, 1998 and September 30, 1999, respectively 9,456 17,564
Additional paid-in capital -- 13,081,092
Retained earnings (deficit) (179,305) (2,292,289)
Accumulated other comprehensive income (loss) (68,612) (48,927)
Unearned compensation -- (7,699,381)
------------ ------------
Total shareholders' equity (238,461) 3,058,059
------------ ------------
$ 304,017 $ 3,778,927
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-2
<PAGE>
WALL STREET STRATEGIES CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine months ended
Years ended December 31, September 30,
---------------------------- ----------------------------
1999 1998
1998 1997 (unaudited) (unaudited)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue
Subscription income $ 2,226,726 $ 1,333,248 $ 2,950,666 $ 1,714,033
Interest and dividends 2,662 3,202 3,919 1,495
Realized gain (loss) on sale of
marketable securities 99,827 105,778 (31,794) 47,446
------------ ------------ ------------ ------------
2,329,215 1,442,228 2,922,791 1,762,974
------------ ------------ ------------ ------------
Operating expenses
Salaries and commissions 1,614,658 878,959 4,043,479 1,049,382
Payroll taxes and related costs 274,832 107,032 145,315 185,556
Depreciation and amortization 10,023 10,600 9,980 10,023
Rent and occupancy costs 42,068 24,825 59,395 21,519
Other operating expenses 498,823 416,810 577,106 345,335
------------ ------------ ------------ ------------
2,440,404 1,438,226 4,835,275 1,611,815
------------ ------------ ------------ ------------
(Loss) income before provision
(benefit) for income taxes (111,189) 4,002 (1,912,484) 151,159
Provision (benefit) for income taxes (1,570) 22,080 207,600 54,000
------------ ------------ ------------ ------------
Net (loss) income $ (109,619) $ (18,078) $ (2,120,084) $ 97,159
============ ============ ============ ============
Basic and diluted net (loss) income
per share $ (0.01) $ (0.00) $ (0.19) $ 0.01
============ ============ ============ ============
Weighted average common shares
outstanding 10,714,103 10,714,103 10,889,744 10,714,103
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-3
<PAGE>
WALL STREET STRATEGIES CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
PERIOD FROM JANUARY 1, 1997 TO DECEMBER 31, 1998 AND FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
Common stock Additional Retained
------------ paid-in earnings
Shares Amount capital (deficit)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Wall Street Strategies, Inc., January 1, 1997 100 $ 100 $ 1,400 $ (43,652)
Recapitalization (Note 1)
Exchange of Wall Street Strategies, Inc. shares (100) (100) (1,400) 43,652
Issuance of common stock to owner of
Wall Street Strategies, Inc. 9,455,898 9,456 -- (51,608)
Net loss, year ended December 31, 1997 -- -- -- (18,078)
------------ ------------ ------------ ------------
Total comprehensive loss
Balance, December 31, 1997 9,455,898 9,456 -- (69,686)
Marketable securities valuation adjustment -- -- -- --
Net loss, year ended December 31, 1998 -- -- -- (109,619)
------------ ------------ ------------ ------------
Total comprehensive loss
Balance, December 31, 1998 9,455,898 9,456 -- (179,305)
Outstanding common stock of Wall Street
Strategies Corporation (unaudited) (Note 1) 6,250,000 6,250 -- 7,100
Issuance of common stock for cash (unaudited) 600,000 600 2,999,400 --
Issuance of common stock and options for
services (unaudited) 1,258,205 1,258 10,081,692 --
Amortization of stock compensation (unaudited) -- -- -- --
Marketable securities valuation adjustment
(unaudited) -- -- -- --
Net loss, nine months ended September 30, 1999
(unaudited) -- -- -- (2,120,084)
------------ ------------ ------------ ------------
Total comprehensive loss (unaudited)
Balance, September 30, 1999 (unaudited) 17,564,103 $ 17,564 $ 13,081,092 $ (2,292,289)
============ ============ ============ ============
<CAPTION>
Accumulated
other Total Comprehensive
Unearned comprehensive shareholders' income
compensation income (loss) equity (deficit) (loss)
------------ ------------ --------------- ------------
<S> <C> <C> <C>
Wall Street Strategies, Inc., January 1, 1997 $ -- $ -- $ (42,152)
Recapitalization (Note 1)
Exchange of Wall Street Strategies, Inc. shares -- -- 42,152
Issuance of common stock to owner of
Wall Street Strategies, Inc. -- -- (42,152)
Net loss, year ended December 31, 1997 -- -- (18,078) $ 18,078
------------ ------------ ------------ ------------
Total comprehensive loss $ 18,078
============
Balance, December 31, 1997 -- -- (60,230)
Marketable securities valuation adjustment -- (68,612) (68,612) $ (68,612)
Net loss, year ended December 31, 1998 -- -- (109,619) (109,619)
------------ ------------ ------------ ------------
Total comprehensive loss $ (178,231)
============
Balance, December 31, 1998 -- (68,612) (238,461)
Outstanding common stock of Wall Street
Strategies Corporation (unaudited) (Note 1) -- -- 13,350
Issuance of common stock for cash (unaudited) -- -- 3,000,000
Issuance of common stock and options for
services (unaudited) (7,810,086) -- 2,272,864
Amortization of stock compensation (unaudited) 110,705 -- 110,705
Marketable securities valuation adjustment
(unaudited) -- 19,685 19,685 $ 19,685
Net loss, nine months ended September 30, 1999
(unaudited) -- -- (2,120,084) (2,120,084)
------------ ------------ ------------ ------------
Total comprehensive loss (unaudited) $ (2,100,399)
============
Balance, September 30, 1999 (unaudited) $ (7,699,381) $ (48,927) $ 3,058,059
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-4
<PAGE>
WALL STREET STRATEGIES CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended
Years ended December 31, September 30,
-------------------------- --------------------------
1999 1998
1998 1997 (unaudited) (unaudited)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INCREASE (DECEASE) IN CASH AND CASH EQUIVALENTS
Cash flows from operating activities
Net (loss) income $ (109,619) $ (18,078) $(2,120,084) $ 97,159
Adjustments to reconcile net (loss) income to net
cash provided by (used in) operating activities:
Depreciation 10,023 10,600 9,980 10,023
Realized (gain) loss on sale of marketable securities (99,827) (105,778) 31,794 (47,446)
Stock compensation -- -- 2,380,424 --
Changes in operating assets and liabilities
(Increase) decrease in accounts receivable (9,800) 15,323 13,400 3,600
(Increase) decrease in other assets (24,883) 9,000 (80,671) (24,333)
(Increase) decrease in deferred commission expense (43,552) (4,503) (17,152) (47,564)
Increase (decrease) in accrued expenses 44,833 (54,586) (33,542) 31,779
(Decrease) increase in income taxes payable (31,900) 41,300 198,956 (59,079)
Increase in deferred subscription income 194,867 13,027 49,006 118,509
Increase (decrease) in accrued pension expense 150,000 (35,000) -- 112,500
----------- ----------- ----------- -----------
Net cash provided by (used in) operating activities 80,142 (128,695) 432,111 195,148
----------- ----------- ----------- -----------
Cash flow from investing activities
Payments for the purchase of property and equipment (1,650) (17,465) (86,925) (1,650)
Cash paid for marketable securities (124,136) -- (104,365) --
Proceeds from the sale of marketable securities 99,827 105,778 78,401 --
----------- ----------- ----------- -----------
Net cash (used in) provided by investing activities (25,959) 88,313 (112,889) (1,650)
----------- ----------- ----------- -----------
Cash flow from financing activities
Proceeds from issuance of common stock -- -- 3,003,145 --
Cash acquired in reverse acquistion 13,350
Repayment of loan from shareholder (64,380) (39,217) (36,030) (30,692)
----------- ----------- ----------- -----------
Net cash (used in) provided by financing activities (64,380) (39,217) 2,980,465 (30,692)
----------- ----------- ----------- -----------
Net (decrease) increase in cash and equivalents (10,197) (79,599) 3,299,687 162,806
Cash and equivalents, beginning of period 106,882 186,481 96,685 120,232
----------- ----------- ----------- -----------
Cash and equivalents, end of period $ 96,685 $ 106,882 $ 3,396,372 $ 283,038
=========== =========== =========== ===========
Supplemental disclosure of cash flow information
Income taxes paid $ 30,300 $ 28,661 $ 8,594 $ 29,610
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-5
<PAGE>
WALL STREET STRATEGIES CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
AND THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
1 The Company
Organization
Wall Street Strategies Corporation (the "Company"), formerly Vacation
Emporium Corporation, was originally formed as a Nevada corporation on
April 2, 1999, and is the surviving entity in a merger with its then
corporate parent, The Vacation Emporium International, Inc., a Colorado
corporation formed under the name Rising Sun Capital Ltd. on May 12, 1988.
Reverse acquisition
Effective September 23, 1999, the Company acquired all of the outstanding
common stock of Wall Street Strategies, Inc. ("WSSI"), a Delaware
corporation, pursuant to an Agreement and Plan of Share Exchange (the
"Exchange Agreement") dated July 30, 1999.
Under the terms of the Exchange Agreement, the Company issued to the sole
shareholder of WSSI, 9,455,898 shares of the Company's common stock in
exchange for all of the issued and outstanding common stock of WSSI. This
issuance represented approximately 53.84% of the post-merger issued and
outstanding common shares of the Company. For accounting purposes, this
transaction has been treated as an acquisition of the Company by WSSI and
as a re-capitalization of WSSI. The acquisition of the Company by WSSI has
been recorded based on the fair value of the Company's net tangible
assets, which consisted of cash of $13,350. The Company prior to the
acquisition was an inactive shell Company. The historical financial
statements prior to September 23, 1999 are those of WSSI. Since this
transaction is in substance a recapitalization of WSSI and not a business
combination, pro forma information is not presented. All costs associated
with this transaction have been expensed.
In connection with, and in contemplation of this transaction, on July 30,
1999, the Company sold 1,258,205 shares of common stock for $.0025 per
share to certain key employees of WSSI, and to two other individuals who
entered into employment agreements with the Company. These shares were
placed in escrow and are subject to repurchase by the Company over a
period of time at the same purchase price of $.0025 if the individuals'
employment is terminated for cause. Additionally, on September 23, 1999,
the Company completed the sale of 600,000 shares of common stock at $5.00
per share in a private placement to certain accredited investors (Note 5).
Business
The Company, through its subsidiary (WSSI), provides investment research
and related information services for individual and institutional
investors and financial professionals. WSSI, which was founded in 1991,
has historically delivered its products and services, including financial
and market information, analysis, advice and commentary, to subscribers
through a variety of media including telephone, facsimile, e-mail, audio
recordings, newsletters and traditional mail.
F-6
<PAGE>
WALL STREET STRATEGIES CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
AND THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
2 Significant accounting policies
Principles of consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, WSSI. All significant intercompany
transactions and balances have been eliminated in consolidation.
Interim financial information
The unaudited balance sheet as of September 30, 1999, the unaudited
consolidated statements of operations and cash flows for the nine months
ended September 30, 1999 and 1998 and the unaudited consolidated statement
of shareholders' equity for the nine months ended September 30, 1999 have
been prepared by the Company and in the opinion of management include all
adjustments consisting only of normal recurring accruals, which management
considers necessary for the fair presentation of the financial statements
for such periods. The Company's results of operations for the nine months
ended September 30, 1999, are not necessarily indicative of results that
may be expected for any other future interim periods or for the year
ending December 31, 1999.
Concentrations and fair value of financial instruments
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash investments,
trade receivables and marketable securities. At December 31, 1998, the
Company's cash investments are held at various financial institutions,
which limits the amount of credit exposure to any one financial
institution. The Company's trade receivables represent amounts due from a
large number of customers who are disbursed among numerous industries and
locations, which limits the amount of credit risk. Concentrations of
credit risk with respect to marketable securities are limited due to the
Company's varied portfolio, which limits the amount of credit exposure to
any one particular investment. Unless otherwise disclosed, the fair value
of financial instruments approximates their recorded values.
Cash and cash equivalents
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
Marketable securities
Marketable securities, which are classified as "available for sale," are
valued at fair market value. Unrealizable gains or losses are recorded net
of income taxes as "accumulated other comprehensive income" in
shareholders' equity, whereas realized gains and losses are recognized in
the Company's statements of operations using the first-in, first-out
method.
F-7
<PAGE>
WALL STREET STRATEGIES CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
AND THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
2 Significant accounting policies (continued)
Property, equipment and depreciation
Property and equipment are stated at cost and depreciated on a
straight-line basis over the estimated useful lives of the related assets.
Expenditures for maintenance and repairs are charged to operations at the
time the expense is incurred. Expenditures determined to represent
additions are capitalized.
Income taxes
The Company accounts for income taxes using the liability method which
requires the determination of deferred tax assets and liabilities based on
the differences between the financial and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which
differences are expected to reverse. The net deferred tax asset is
adjusted by a valuation allowance, if, based on the weight of available
evidence, it is more likely than not that some portion or all of the net
deferred tax asset will not be realized.
The Company has net deferred tax assets arising principally from stock
compensation expenses, deferred subscription income and deferred
commission expense. The Company has fully reserved their net deferred tax
assets due to the uncertainty of their utilization.
Revenue recognition
The Company provides investment research and related information services
through subscription agreements with its customers for periods which
generally range in length from one month to one year. Subscription income
is earned ratably over the term of the agreement. The unearned portion of
such income is reflected as Deferred subscription income in the
accompanying consolidated balance sheets. The Company also defers the
accompanying commission expense related to the deferred subscription
income in the accompanying consolidated balance sheets.
Basic and diluted net income (loss) per common share
The Company displays earnings per share in a dual presentation of basic
and diluted earnings per share. Basic earnings per share includes no
dilution and is computed by dividing net income (loss) available to common
shareholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per share include the potential dilution
that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock.
The effects of the recapitalization and the issuance of the 1,285,205
shares of stock sold at $.0025 per share discussed in Note 1 have been
given retroactive application in the earnings per share calculation. The
common stock issued and outstanding with respect to the pre-merger
shareholders has been included since the effective date of the merger.
Outstanding stock options have not been considered in the computation of
diluted per share amounts, since the effect of their inclusion would be
antidilutive. Accordingly, basic and diluted earnings per share amounts
are identical.
F-8
<PAGE>
WALL STREET STRATEGIES CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
AND THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
2 Significant accounting policies (continued)
Start-up and organization costs
The Company accounts for start-up costs in accordance with Statement of
Position 98-5, "Reporting on the Costs of Start-up Activities" ("SOP
98-5"), issued by the American Institute of Certified Public Accountants.
SOP 98-5 requires the cost of start-up activities, including organization
costs, to be expensed as incurred.
Stock based compensation
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation" ("SFAS 123"). The Company applies APB Opinion No. 25,
"Accounting for Stock Issued to Employees", and related interpretations,
in accounting for its plans and recognizes non-cash compensation charges
related to the intrinsic value of stock options granted to employees.
Use of estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the consolidated financial statements and the reported amounts of
revenue and expenses during the reporting periods. Actual results could
differ from those estimates.
3 Marketable securities, available for sale
Marketable securities, available for sale, consist of the following:
Unrealized Market
Cost gain (loss) value
----------- ----------- ----------
December 31, 1998
U.S. equity securities $ 124,136 $ (68,612) $ 55,524
=========== =========== ==========
September 30, 1999 (unaudited)
U.S. equity securities $ 181,390 $ (48,927) $ 132,463
=========== =========== ==========
Changes in the unrealized gain (loss) on marketable securities, available
for sale are reported as separate components of shareholders' equity.
F-9
<PAGE>
WALL STREET STRATEGIES CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
AND THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
4 Property and equipment
Property and equipment consists of the following:
September 30,
December 31, 1999
1998 (unaudited)
-------------- -------------
Furniture and fixtures $ 26,655 $ 26,655
Computer and office equipment 26,297 50,139
-------------- --------------
52,952 76,794
Less accumulated depreciation (36,705) (46,686)
-------------- --------------
$ 16,247 $ 30,108
============== ==============
5 Shareholders' equity
Common stock issued
On July 30, 1999, in contemplation of the acquisition by WSSI and the
execution of the Exchange Agreement described in (Note 1), the Company
entered into Subscription and Rights Agreements with ten individuals to
purchase 1,258,205 shares of the Company's common stock for $0.0025 per
share. These agreements, as amended and restated, provide as follows:
o Eight individuals who are employees of WSSI purchased 380,000 shares
for $0.0025 per share. These shares are subject to repurchase by the
Company in declining increments over a two-year period at $0.0025
per share if employment is terminated for cause. The issuance of
these shares has been valued at $5.8125 per share, the closing
market price of the stock on September 23, 1999 as listed on the OTC
Electronic Bulletin Board. The issuance gave rise to Unearned
compensation in the amount of $2,207,800 at September 23, 1999 and
is reflected in the accompanying consolidated statement of
shareholders' equity. The compensation will be earned and charged to
expense ratably over the two year escrow period and $21,171 has been
expensed through September 30, 1999 and is included in the
accompanying consolidated statements of operations.
o The Company's Executive Vice President (who is also a director of
the Company) purchased 526,923 shares for $0.0025 per share.
Simultaneously with this transaction, the executive entered into a
two-year employment agreement with the Company, which commenced on
September 23, 1999, the date of the closing of the Company's
acquisition. The executive granted to the Company the right to
repurchase these shares, in declining increments, during the
two-year period commencing September 23, 1999 if the executive's
employment with the Company is terminated for cause. The repurchase
right is at the same purchase price of $0.0025 per share. The
issuance of these shares has been valued at $5.8125 per share, the
closing market price of the stock on September 23, 1999 as listed on
the OTC Electronic Bulletin Board. The issuance gave rise to
Unearned compensation in the amount of
F-10
<PAGE>
WALL STREET STRATEGIES CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
AND THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
5 Shareholders' equity (continued)
Common stock issued (continued)
$3,061,423 at September 23, 1999 and is reflected in the
accompanying consolidated statement of shareholders' equity. One
third (175,641) of the shares vested upon the closing of the Merger
transaction on September 23, 1999 and accordingly $1,020,474 of
compensation was earned and charged to expense in the accompanying
consolidated statement of operations. The balance of the Unearned
compensation ($2,040,949) will be earned and charged to expense
ratably over the two year escrow period and $19,571 has been
expensed through September 30, 1999 and is included in the
accompanying consolidated statement of operations.
In accordance with the terms of the executive's employment agreement
(Note 8), the Company granted the executive an option under its 1996
Compensatory Stock Option Plan to acquire 351,282 shares of the
Company's common stock at an exercise price of $3.50 per share. The
options begin to vest after six months and then vest in six equal
quarterly increments over an eighteen month period provided the
executive's employment is not terminated. The intrinsic value of
these options were measured using the share price of $5.8125 on
September 23, 1999 and accounted for as compensatory options in
accordance with APB Opinion No. 25 and gave rise to Unearned
compensation in the amount of $812,340 at September 23, 1999 and is
reflected in the accompanying consolidated statement of
shareholders' equity. The Unearned compensation will be earned and
charged to expense ratably over the two year vesting period of the
options and $7,790 has been expensed through September 30, 1999 and
is included in the accompanying consolidated statements of
operations.
o The Company's Chief Operating Officer purchased 351,282 shares for
$0.0025 per share. Simultaneously with this transaction, the
executive entered into a three-year employment agreement with the
Company, which commenced on October 1, 1999. The executive granted
to the Company the right to repurchase up to 263,461 of these
shares, in declining increments, during the period commencing
October 1, 1999 through April 7, 2000 if the executive's employment
with the Company is terminated for cause. The repurchase right is at
the same purchase price of $0.0025 per share. The issuance of these
shares has been valued at $5.8125 per share, the closing market
price of the stock on September 23, 1999 as listed on the OTC
Electronic Bulletin Board. The issuance gave rise to Unearned
compensation in the amount of $2,040,948 at September 23, 1999 and
is reflected in the accompanying consolidated statement of
shareholders' equity. One fourth (87,821) of the shares vested upon
the closing of the Merger transaction on September 23, 1999 and
accordingly $510,460 of compensation was earned and charged to
expense in the accompanying consolidated statement of operations.
The balance of the Unearned compensation ($1,530,488) will be earned
and charged to expense ratably through April 7, 2000, the escrow
period, and $54,383 has been expensed through September 30, 1999 and
is included in the accompanying consolidated statement of
operations.
F-11
<PAGE>
WALL STREET STRATEGIES CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
AND THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
5 Shareholders' equity (continued)
Common stock issued (continued)
In accordance with the terms of the executive's employment agreement
(Note 8), the Company granted the executive an option under its 1996
Compensatory Stock Option Plan to acquire 526,923 shares of the
Company's common stock at an exercise price of $3.50 per share. The
options vest in nine consecutive equal quarterly annual installments
commencing on the nine month anniversary of the agreement over a
twenty seven month period provided the executive's employment is not
terminated. The intrinsic value of these options were measured using
the share price of $5.8125 on September 23, 1999 and accounted for
as compensatory options in accordance with APB Opinion No.25 and
gave rise to Unearned compensation in the amount of $1,218,509 at
September 23, 1999 and is reflected in the accompanying consolidated
statement of shareholders' equity. The Unearned compensation will be
earned and charged to expense ratably over the three year vesting
period of the options and $7,790 has been expensed through September
30, 1999 and is included in the accompanying consolidated statement
of operations.
o In contemplation of the acquisition of WSSI (Note 1), on September
23, 1999 the Company completed the sale of 600,000 shares of common
stock for $5.00 per share to accredited investors in accordance with
the terms of a private placement offering.
6 Stock option plans
The Company has adopted two separate stock option plans that provide for
the grant of options and other forms of incentive awards to selected
officers, employees, directors and consultants of the Company. The purpose
of these plans is to promote the growth of the Company by enabling the
Company to attract and retain the best available persons for positions of
substantial responsibility and to provide certain key employees with
additional incentives and to contribute to the success of the Company. The
Company's Board of Directors administers both plans.
1996 Compensatory Stock Option Plan
The Company's 1996 Compensatory Stock Option Plan ("1996 Plan") was
adopted by the Board of Directors and approved by the Company's
stockholders in October 1996. Options to purchase a maximum of 2,000,000
shares of common stock may be granted under the 1996 Plan. The 1996 Plan
has a term of ten years and no options may be granted after expiration. On
December 7, 1999, the Company's Board of Directors determined that, after
the grants discussed below, no further awards will be made under the 1996
Plan.
The 1996 Plan provides for the grant of options that are not intended to
qualify as incentive stock options within the meaning of Section 422 of
the Internal Revenue Code, as amended. Under the terms of the 1996 Plan,
the exercise price of the options must be at least 85% of the fair market
value of the Company's common stock on the date of grant. Options granted
shall expire no later than ten years after the date of grant.
F-12
<PAGE>
WALL STREET STRATEGIES CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
AND THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
6 Stock option plans (continued)
1996 Compensatory Stock Option Plan (continued)
During 1999, the Company granted to officers, directors, key employees and
advisors, options to purchase 1,153,205 shares of common stock under the
1996 Plan. The options were issued as follows: (i) 878,205 options were
granted to two of the Company's executive officers as discussed in (Note
5) (ii) 200,000 options were granted to two of the Company's directors
which are exercisable at $3.50 per share and vested immediately, and (iii)
75,000 options were granted to the Company's Advisory Board members which
are exercisable at $3.50 per share and vested immediately.
The intrinsic value of 200,000 options granted to the directors' were
measured using the share price of $5.8125 per share on September 23, 1999
and accounted for as compensatory options in accordance with APB Opinion
No.25 and gave rise to earned compensation in the amount of $462,500 on
that date. The 75,000 options granted to the Company's Advisory Board
members (non-director advisors) were valued in accordance with SFAS 123 on
September 23, 1999 and gave rise to earned compensation in the amount of
$276,285 on that date.
1999 Incentive Stock Program
The Company's 1999 Incentive Stock Program ("1999 Program") was adopted by
the Board of Directors and approved by the stockholders during 1999. The
1999 Program permits the granting of stock options, including incentive
stock options, stock appreciation rights with or without stock options and
restricted stock grants.
The actual number of shares that may be issued or transferred under the
1999 Program is 5,000,000 subject to certain adjustments. The maximum
number of shares for which options and stock appreciation rights may be
granted under the 1999 Program to any person during any calendar year is
300,000.
On December 7, 1999, the Company granted to its officers and key employees
options to purchase 945,000 shares of common stock under the 1999 Program.
Each of these grants are exercisable at $4.00 per share and vest over two
years commencing on the date of issuance.
The Company has adopted the disclosure provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). The Company applies APB Opinion No. 25,
"Accounting for Stock issued to Employees," and related interpretations in
accounting for its plan and recognizes non cash compensation charges
related to the intrinsic value of stock options granted to employees. If
the Company had elected to recognize compensation expense based upon the
fair value at the date of grant for awards under these plans, consistent
with the methodology prescribed by SFAS 123, the effect on the Company's
net loss would be as follows:
F-13
<PAGE>
WALL STREET STRATEGIES CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
AND THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
6 Stock option plans (continued)
1999 Incentive Stock Program (continued)
Nine months
ended
September 30,
1999
Net loss
As reported $ (2,120,084)
Pro forma $ (2,603,025)
The fair value of Company common stock options granted to employees during
the nine months ended September 30, 1999 approximated $961,000 and was
estimated on the date of grant using the Black-Scholes option-pricing
model with the following assumptions: (1) 90% expected volatility, (2)
risk-free interest rate of 5.79% and (3) expected lives of five years.
7 Retirement plans
In January 1996, WSSI adopted a profit sharing plan whereby contributions
to the plan are made at the discretion of management and no contributions
are made by employees. During 1998, the Company provided for a $150,000
contribution to the plan which was paid into the plan's trust in October
1999.
F-14
<PAGE>
WALL STREET STRATEGIES CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
AND THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
8 Commitments and contingencies
Leases
On November 23, 1999, the Company entered into a ten year lease agreement
for office space located in New York City commencing in 2000. The lease
provides for annual payments of $253,680 per annum for the first three
years; $270,592 per annum for the next three years and $287,504 per annum
for the remainder of the lease term.
Approximate future minimum required lease payments, not including
operating escalations or other charges are as follows:
Year ending December 31,
2000 $ 254,000
2001 254,000
2002 254,000
2003 271,000
2004 271,000
Thereafter 1,422,000
------------
$ 2,726,000
============
Rent expense under the Company's existing lease amounted to $42,068 and
$24,825 for the years ended December 31, 1998 and 1997 and $59,395 and
$21,519 for the nine months ended September 30, 1999 and 1998 (unaudited).
Employment agreements
In conjunction with, and in contemplation of the Exchange Agreement
discussed in (Note 1), the Company entered into employment agreements with
its key executives as follows:
o A three year agreement with the Company's President and largest
shareholder who was formerly the sole shareholder of WSSI prior to
the acquisition by the Company. The agreement provides for a base
salary of $250,000 per annum with annual bonuses up to $250,000
dependent upon specified revenue targets. The agreement may be
terminated by mutual consent or by the Company for cause.
o A three year agreement with the Company's Chief Operating Officer
which provides for a base salary of $175,000 and an annual bonus of
up to 40% of base salary dependent upon specified revenue targets.
The agreement also provides for the issuance of options under the
1996 Plan to acquire 526,923 shares of the Company's common stock
(Note 5). This agreement may be terminated by mutual consent or by
the Company for cause.
F-15
<PAGE>
WALL STREET STRATEGIES CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
AND THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
8 Commitments and contingencies (continued)
Employment agreements (continued)
o A two year agreement with the Company's Executive Vice President
which provides for a base salary of $125,000 and an annual bonus of
up to 40% of base salary dependent upon specified revenue targets.
The agreement also provides for the issuance of options under the
1996 Plan to acquire 351,282 shares of the Company's common stock
(Note 5). This agreement may be terminated by mutual consent or by
the Company for cause.
Consulting agreements
o In August 1999, the Company formed an Advisory Board to provide the
Company with assistance in meeting its overall business objectives.
The Advisory Board currently consists of five members who were each
granted options under the 1996 Program to acquire 15,000 shares of
the Company's common stock for $3.50 per share (Note 6).
o On September 23, 1999, the Company entered into a two year
consulting agreement with Sigma Limited, S.A., a Swiss company where
the Company's Chairman is a consultant. The agreement provides for
an annual fee of $50,000 plus a non-accountable expense allowance of
$35,000 per annum.
o On September 23, 1999, the Company entered into a one year
consulting agreement with Corporate Communications Network, Inc.
whereby they will provide the Company with regular and customary
public relations and strategic advisory services. The Agreement
provides for an annual fee of $50,000, payable in equal monthly
payments over the term of the Agreement.
Regulatory matters
On August 11, 1999, the Company and its President reached an agreement
with the Securities and Exchange Commission in connection with certain
disclosures regarding the Company's relationship with a company being
recommended for purchase. The settlement calls for a consent injunction
prohibiting violations of Section 17(b) and the payment of civil penalties
of $10,000 and $25,000, respectively. The Company's costs associated with
this matter have been included in the accompanying consolidated statement
of operations.
F-16
<PAGE>
PART III
See the attached Exhibit Index.
35
<PAGE>
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.
February 14, 2000
WALL STREET STRATEGIES CORPORATION
By: /s/ Charles V. Payne
--------------------------------
Charles V. Payne, President
36
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
2.1 Agreement and Plan of Share Exchange dated July 30, 1999, by
and between Charles V. Payne and Registrant
3.1 Certificate of Incorporation
3.2 Articles and Certificate of Merger
3.3 Certificate of Amendment of Certificate of Incorporation
3.4 By-laws as currently in effect
4.1 Specimen Common Stock Certificate
4.2 1996 Compensatory Stock Option Plan
4.3 1999 Incentive Program
10.1 Agreement of Lease dated as of July 1, 1998, between 130
William LLC and Wall Street Strategies, Inc.*
10.2 Agreement of Lease dated as of November 23, 1999, between
Praedium II Broadstone LLC and Wall Street Strategies, Inc.
10.3 Registration Rights Agreement dated as of September 23, 1999,
by and among the Registrant and Charles Payne
10.4 Voting Agreement dated September 23, 1999, by and among
Charles Payne, Registrant, Sigma Limited, S.A., Ian Rice and
Corporate Communications Network, Inc.
10.5 Employment Agreement dated September 23, 1999, among Wall
Street Strategies, Inc., Registrant and Charles Payne
10.6 Employment Agreement dated July 30, 1999, by and between
Registrant and David McCallen
10.7 Employment Agreement dated July 30, 1999, by and between
Registrant and Shawn Baldwin
10.8 Amended and Restated Subscription and Rights Agreement dated
July 30, 1999, by and between the Registrant and David
McCallen
10.9 Amended and Restated Subscription and Rights Agreement dated
July
37
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30, 1999, by and between the Registrant and Shawn Baldwin
10.10 Form of Subscription and Rights Agreement by and between
Registrant and Subscriber
10.11 Amended and Restated Escrow Agreement dated July 30, 1999, by
and among Registrant, David McCallen and Escrow Agent
10.12 Amended and Restated Escrow Agreement dated July 30, 1999, by
and among Registrant, Shawn Baldwin and Escrow Agent
10.13 Form of Escrow Agreement by and among Registrant, the
Subscribers for shares of Registrant's common stock and Escrow
Agent
10.14 Stock Option Agreement dated July 30, 1999, by and between the
Registrant and David McCallen
10.15 Form of Advisor Agreement between the Registrant and each
member of the Advisory Board
10.16 Form of Stock Option Agreement (Advisor)
10.17 Consulting Agreement dated as of September 23, 1999, by and
between the Registrant and Sigma Limited, S.A.
10.18 Market Access Program Marketing Agreement dated January 26,
2000, by and between Continental Capital & Equity Corporation
and the Registrant
10.19 Engagement Letter dated December 23, 1999, by and between the
Registrant and Joseph Charles & Assoc., Inc.*
27.1 Financial Data Schedule
* To be filed by amendment
38
<PAGE>
AGREEMENT AND PLAN OF SHARE EXCHANGE
AGREEMENT (the "Agreement"), dated as of July 30, 1999, by and
between Charles V. Payne, an individual with an address c/o Wall Street
Strategies, Inc., 130 William Street, Suite 401, New York, New York 10038
("Seller"), and Vacation Emporium Corporation, a Nevada corporation with an
address at 90 Madison Street, Suite 707, Denver, Colorado 80206 ("Purchaser").
W I T N E S S E T H:
WHEREAS, Wall Street Strategies, Inc., a Delaware corporation (the
"Company") is engaged in the business of providing financial services (the
"Business");
WHEREAS, Seller owns of record and beneficially 100 shares (the
"Purchased Shares") of the Company's common stock, without par value (the
"Company Common Stock"), which shares represent all of the issued and
outstanding capital stock of the Company;
WHEREAS, Purchaser, a non-reporting company under the Securities
Exchange Act of 1934, as amended, with shares publicly quoted on the OTC
Electronic Bulletin Board (the "OTCBB"), is a "shell" company that has conducted
no business activities since March 31, 1999 (other than those associated with
the acquisition described herein and with seeking other potential business
opportunities ); and
WHEREAS, the Seller is desirous of selling the Purchased Shares to
the Company in exchange for 9,455,898 shares of Purchaser's common stock, par
value $.001 per share (the "Purchaser Common Stock"),
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereby agree as follows:
<PAGE>
ARTICLE 1.
EXCHANGE OF PURCHASED SHARES
SECTION 1.1 Sale of Purchased Shares. On the terms and subject to
the conditions set forth in this Agreement, Seller hereby agrees to sell,
assign, transfer and deliver the Purchased Shares to Purchaser, free and clear
of all liens, claims, charges or encumbrances, and Purchaser hereby agrees to
purchase the Purchased Shares from Seller, at the Closing, for the consideration
set forth in Section 1.2 hereof.
SECTION 1.2 Purchase Price. In exchange for the Purchased Shares,
Purchaser shall issue and deliver to Seller, at the Closing, 9,455,898 shares of
the Purchaser Common Stock (the "Exchange Shares"), which shall represent
approximately 53.84% of the then total issued and outstanding shares of the
Purchaser Common Stock, free and clear of all liens, claims, charges or
encumbrances.
SECTION 1.3 Delivery of Shares. Subject to the terms and conditions
hereof, at the Closing (a) the Seller shall transfer to Purchaser the Purchased
Shares by delivering the stock certificate(s) evidencing the Purchased Shares,
accompanied by duly endorsed stock powers, with signatures guaranteed, in form
and substance satisfactory to Purchaser permitting the transfer of the Purchased
Shares to Purchaser; and (b) Purchaser shall deliver to Seller stock
certificate(s) registered in the name of Seller representing the Exchange
Shares.
SECTION 1.4. Supplemental Action. If at any time after the Closing
Date, Seller or Purchaser shall determine that any further conveyances,
agreements, documents, instruments, and assurances or any further action is
necessary or desirable to carry out the provisions of this Article 1, Seller or
Purchaser, as the case may be, shall execute and deliver any and all proper
conveyances, agreements, documents, instruments, and assurances and perform all
necessary or proper acts to carry out the provisions of this Article 1.
2
<PAGE>
ARTICLE 2.
CLOSING; CLOSING DATE
SECTION 2.1. The exchange of the Purchased Shares for the Exchange
Shares as contemplated hereby (the "Closing") shall take place at 10:00 a.m. on
such date as the parties mutually agree, but in no event later than September
30, 1999, at the offices of Bryan Cave LLP, 245 Park Avenue, New York, New York
10167 (or such other time or date as the parties hereto may mutually agree in
writing). The date upon which the Closing occurs is herein called the "Closing
Date."
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
SECTION 3.1 Due Incorporation and Qualification. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware, has all requisite power and authority to own, lease and
operate its assets, properties and business and to conduct the Business as now
being and as heretofore conducted. The Company is qualified to do business as a
foreign corporation in the jurisdictions listed on the annexed Schedule 3.1, and
is not doing business in any other jurisdiction where qualification is required
or the failure to qualify would have a material adverse effect on the business
or operations of the Company.
SECTION 3.2. Authority to Execute and Perform Agreements. Seller has
full power and capacity to execute and deliver this Agreement and any other
agreement or instrument contemplated by this Agreement (such other agreements
and instruments are hereinafter collectively referred to as the "Transaction
Documents") to consummate the
3
<PAGE>
transactions contemplated hereby and thereby (collectively, the "Transactions").
This Agreement has been duly executed and delivered and is the valid and binding
obligation of Seller enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws from time to time in effect which affect
creditors' rights generally and by general principles of equity regardless of
whether such enforceability is considered in a proceeding in equity or at law.
The execution and delivery of this Agreement and the Transaction Documents, the
consummation of the Transactions and the performance by Seller of this Agreement
and each of the Transaction Documents in accordance with its respective terms
and conditions will not require the approval, consent of, waiver, order or
authorization of, notification to, or registration, declaration or filing with,
any federal, state, county, local or other governmental or regulatory body or
the approval or consent of any other person.
SECTION 3.3 Subsidiaries and Affiliates. The Company does not,
directly or indirectly, own any shares of stock or other equity interest
(including any form of profit participation) in, has not made any investment in,
and does not control or have any proprietary interest in any corporation,
partnership, joint venture or other business association or entity. Schedule 3.3
annexed hereto sets forth the name of each of the Company's affiliates (other
than subsidiaries), including joint venture affiliates (incorporated and
unincorporated), and the nature of the affiliation.
SECTION 3.4 Articles of Incorporation and By-Laws. Seller has
delivered to Purchaser true and complete copies of the certificate of
incorporation and by-laws of the Company as in effect on the date hereof, which
instruments shall not be or have been amended between the dates thereof and the
Closing Date.
SECTION 3.5 Capitalization. The total authorized capital stock of
the Company consists solely of 1,500 shares of common stock, without par value,
of which only the
4
<PAGE>
Purchased Shares are issued and outstanding. The Purchased Shares are validly
issued, fully paid and non-assessable. Except for the transactions contemplated
hereby, there are no authorized or outstanding options, warrants, subscription
calls, rights (including preemptive rights and rights to demand registration
under the Securities Act of 1993, as amended), commitments, conversion rights,
plans or other agreements of any character obligating the Company to authorize,
issue, deliver, sell or redeem any shares of its capital stock or any securities
convertible into or evidencing the right to purchase any shares of such stock..
SECTION 3.6 Officers and Directors. Attached hereto as Schedule 3.6
is a true and correct list of the officers and directors of the Company.
SECTION 3.7 Financial Statements; Financial Matters.
(a) Attached hereto as Schedule 3.7 (a) are the audited
balance sheets of the Company as at December 31, 1996, 1997 and 1998, and the
related audited statements of operations and retained earnings and cash flows as
at and for each of the years then ended, together with the unqualified report
thereon of Lilling & Company LLP ("Lilling"), certified independent accountants
(collectively, the "Company Audited Financials").
(b) Attached hereto as Schedule 3.7 (b) is the unaudited
balance sheet of the Company as at May 31, 1999, and the related unaudited
statements of profit and loss and changes in financial position as at and for
the five months ended May 31, 1999 (collectively the "Company Interim
Financials"; the unaudited balance sheet as at May 31, 1999 included therein is
sometimes referred to as the "Company Interim Balance Sheet").
(c) At or prior to the Closing Date, Seller will have
furnished Purchaser with the unaudited balance sheets of the Company as at March
31, 1999 and June 30, 1999 , and the unaudited statements of profit and loss and
changes in financial position as at and for the three
5
<PAGE>
months ended March 31, 1998 and March 31, 1999 and the six months ended June 30,
1998 and June 30, 1999 (collectively, the "Company Quarterly Financials").
(d) The Company Audited Financials and the Company Interim
Financials are, and the Company Quarterly Financials will be, (i) in accordance
with the books and records of the Company, (ii) correct and complete, (iii)
fairly present the financial position and results of operations of the Company
as of the dates indicated, and (iv) prepared in accordance with generally
accepted accounting principles applied on a consistent basis ("GAAP") (except
that (x) unaudited financial statements may not be in accordance with GAAP
because of the absence of footnotes normally contained therein, and (y) interim
financials are subject to normal year-end audit adjustments which in the
aggregate will not have a material adverse effect on the business properties,
assets, operations, liabilities, financial condition or prospects of the
Company).
SECTION 3.8 Liabilities. Except as set forth on Schedule 3.8 annexed
hereto, as of the date hereof, the Company has no direct or indirect
indebtedness, liability, claim, loss, damage, deficiency, obligation or
responsibility, known, or unknown, fixed or unfixed, liquidated or unliquidated,
secured or unsecured, accrued, absolute, contingent or otherwise, including,
without limitation, liabilities on account of taxes, other governmental charges
or lawsuits brought ("Liabilities"), other than (i) Liabilities fully and
adequately reflected or reserved against on the Company Interim Balance Sheet,
and (ii) Liabilities incurred since May 31, 1999 in the ordinary course of
business. Seller has no knowledge of any past or existing circumstance,
condition, event or arrangement that may hereafter give rise to any Liabilities
of the Company, or any successor to its business except in the ordinary course
of business or as otherwise set forth on Schedule 3.8. Seller will not cause or
permit the Company between the date hereof and the Closing Date, without the
prior written consent of Purchaser, to incur or become subject to, or agree to
incur or become subject to, any Liabilities except current liabilities
6
<PAGE>
and obligations incurred in the ordinary course of business or as contemplated
by this Agreement or any exhibit or schedule hereto.
SECTION 3.9 Absence of Certain Changes. Since May 31, 1999, there
has been no material adverse change in the condition, financial or otherwise, of
the Company, other than changes occurring in the ordinary course of business
which changes have not, individually or in the aggregate, had a material adverse
effect on the business, properties, assets, operations, liabilities, financial
condition or prospects of the Company.
SECTION 3.10 Tax Matters. The Company has filed all federal, state,
county and local income tax, franchise tax, real and personal property tax,
payroll tax, occupation tax, sales tax, excise tax, and other tax returns which
it is required to file, the failure to file which would materially adversely
affect the assets, properties, business, operations or financial condition or
prospects of the Company, taken as a whole, and has paid or provided for all
taxes shown on such returns, and all deficiencies or other assessments of tax,
interest or penalties which have been served on or delivered to the Company.
There are no claims with respect to federal, state, county, local, foreign or
other taxes. The federal income tax returns of the Company have never been
audited by the Internal Revenue Service. Seller knows of no unassessed tax
deficiency proposed or threatened against the Company. No audit of any tax
return of the Company is in progress. There are not in force any extensions of
time with respect to the date on which any tax return was or is due to be filed
by the Company or any waivers or agreements by the Company for an extension of
time for the assessment or payment of any tax.
SECTION 3.11 Real and Personal Property - Leased to the Company. Set
forth on Schedule 3.11(a) hereto is a description of each lease under which the
Company is the lessee of any real property, and on Schedule 3.11(b) hereto is a
description of each lease under which the Company is the lessee of any personal
property. The premises or property described in said leases are presently
occupied or used by the Company as lessee under the terms
7
<PAGE>
of such leases. All rentals due under such leases have been paid and there exist
no defaults under the terms of such leases and no event has occurred which, upon
passage of time or the giving of notice, or both, would result in any events of
default or prevent the Company from exercising and obtaining the benefits of any
rights or options contained therein. The Company has the full right, title and
interest of the lessee under the terms of said leases, free of all liens, claims
or encumbrances and all such leases are valid and in full force and effect.
SECTION 3.12 Title. The Company Interim Balance Sheet reflects all
of the assets and properties of the Company, except to the extent the Company
has acquired or disposed of any assets and properties, in the ordinary course of
its business since May 31, 1999. The Company owns outright and has good and
marketable title to all of its assets and properties, in each case free and
clear of any lien or other encumbrance except for (i) immaterial assets and
properties; (ii) liens or other encumbrances securing taxes, assessments,
governmental charges or levies, or the claims of materialmen, carriers,
landlords and like persons, all of which are not yet due and payable and
purchase money interests and similar security interests for goods purchased by
the Company since May 31, 1999 in the ordinary course of business; (iii) defects
of title, liens or other encumbrances of a character that do not materially
impair the assets or properties of the Company or detract materially from the
Business, or (iv) liens, claims, encumbrances or security interests reflected in
the Company Interim Balance. The assets and properties owned by the Company, as
reflected on the Company Interim Balance Sheet, are adequate to permit the
Company to conduct the Business as presently conducted and to continue to
conduct the Business after the Closing.
SECTION 3.13 Intangible Property.
(a) Attached hereto as Schedule 3.13 is a list of patents, patent
applications, trademark and service mark registrations and registration
applications, U.S. copyright registrations and registration applications owned
by the Company and confidentiality, nondisclosure and license
8
<PAGE>
agreements granting rights under one or more patents, patent applications,
trademark and service registrations and registration applications, U.S.
copyright registrations and registration applications by or to the Company.
(b) (i) The Company does not infringe a patent, U.S. trademark
registration, U.S. service mark registration or copyright of a third party and
(ii) no party has asserted a claim against the Company that the Company
infringes a patent, trademark, copyright, trade name or trade secret of a third
party.
SECTION 3.14 Contracts and Other Agreements. Schedule 3.14 hereto
sets forth, as of the date of this Agreement, all contracts, commitments,
understandings, arrangements and other agreements to which the Company is a
party or by or to which any of the Company's properties are bound or subject
(collectively, the "Contracts"), except (i) Contracts made in the ordinary
course of business of the Company and involving the payment to or by the Company
of less than $30,000 with respect to any one contract or $50,000 with respect to
any related Contracts and (ii) any Contract that is terminable by the Company
upon not more than 30 days notice and with the payment of a termination penalty,
if any, not exceeding $25,000. There have been delivered or made available to
Purchaser true and complete copies of all the Contracts and other agreements set
forth on Schedule 3.14 or on any other Schedule. All of the Contracts are valid,
subsisting, in full force and effect and binding upon the parties thereto in
accordance with their terms, and the Company has paid in full or accrued all
amounts due thereunder and has satisfied in full or provided for all of its
liabilities and obligations thereunder, and is not in default in any material
respect under any of them, nor, to Seller's knowledge, is any other party to any
Contract in default thereunder, nor, to Seller's knowledge, does any condition
exist that with notice or lapse of time or both would constitute a default
thereunder that would give the other party thereto the right to terminate such
Contract. Except as separately identified on Schedule 3.14, no approval or
consent of any person is needed in order that the Contracts set
9
<PAGE>
forth on Schedule 3.14 or on any other Schedule continue in full force and
effect following the consummation of the Transactions. Seller will not cause or
permit the Company, between the date hereof and the Closing Date, without
Purchaser's prior written consent, to become a party to any Contract of the
types listed in this Section 3.14 (other than contracts with bona fide third
parties entered into in the ordinary course of the Company's business on terms
commercially reasonable within the industry or on terms similar to those
contained in Contracts currently in effect to which the Company is a party), or
make or permit the amendment or termination (other than in the ordinary course
and excluding the termination of Contracts by their terms) of any Contract
listed on Schedule 3.14.
SECTION 3.15 Insurance. Attached hereto as Schedule 3.15 is a list
of all policies of insurance covering the Company (specifying the insurer,
amount of coverage, type of insurance, policy number and any pending claims
thereunder). True copies of all such policies have been made available by the
Company to Purchaser. Such policies will be maintained in effect until and at
the Closing Date. To the best knowledge of Seller, the Company has not failed to
give any notice or present any material claim under any insurance policy in due
and timely fashion.
SECTION 3.16 Litigation; Actions and Proceedings. There are no
outstanding orders, judgments, injunctions, awards or decrees of any court,
governmental, administrative or regulatory body or arbitration or mediation
tribunal against or involving the Company. Except as set forth in Schedule 3.16
attached hereto, there are no actions, suits or claims or legal, administrative,
regulatory, governmental or arbitral proceedings or investigations (whether or
not the defense thereof or liabilities in respect thereof are covered by
insurance) pending or threatened against or involving the Company or any of its
properties or assets or Seller, nor, to the knowledge of Seller, are there any
grounds therefor, that individually or in the aggregate, could have a material
adverse effect upon the transactions contemplated hereby or
10
<PAGE>
upon the assets, properties, business, operations, or condition (financial or
otherwise) of the Company or Seller. There are no actions, suits or claims or
legal, administrative, regulatory, governmental or arbitral proceedings pending
or threatened that would give rise to any right of indemnification on the part
of any director or officer of the Company, or the heirs, executors or
administrators of such director or officer, against the Company or any successor
to the Business.
SECTION 3.17 Operations of the Company. (a) Except as set forth on
Schedule 3.17 hereto, since May 31, 1999, the Company has not:
(i) amended its Certificate of Incorporation or By-laws or merged
with or into or consolidated with any other person, subdivided or in any way
reclassified any shares of its capital stock or changed or agreed to change in
any manner the rights of its outstanding capital stock or the character of its
business;
(ii) issued or sold or purchased, or issued options or rights to
subscribe to, or entered into any contracts or commitments to issue or sell or
purchase, any shares of its capital stock;
(iii) entered into or amended any employment agreement (other than
employment agreements or at will employment arrangements entered into or amended
in the ordinary course of the Company's business), entered into or amended any
agreement with any labor union or association representing any employee,
adopted, entered into, or amended any employee benefit plan;
(iv) incurred any indebtedness for borrowed money;
(v) declared or paid any dividends or declared or made any other
distributions of any kind to its shareholders, or made any direct or indirect
redemption, retirement, purchase or other acquisition of any shares of its
capital stock;
(vi) materially reduced its cash or short term investments or their
equivalent;
(vii) waived any right of material value to its business;
11
<PAGE>
(viii) made any change in its accounting methods or practices or
made any change in depreciation or amortization policies or rates adopted by it;
(ix) materially changed any of its business policies;
(x) except for the Payne Employment Agreement (as defined below) to
be executed at the Closing, approved, granted or paid any wage or salary
increase in excess of $25,000 per annum, or any bonus in excess of $5,000, or
any increase in any other direct or indirect compensation, for or to any of its
officers, directors, employees, consultants, agents, brokers, independent
contractors or other representatives, or any accrual for or commitment or
agreement to make or pay the same;
(xi) made any loan or advance to any of its shareholders, officers,
directors, employees, consultants, agents, brokers, independent contractors or
other representatives (other than travel, entertainment or business expense
advances made in the ordinary course of business), or made any other loan or
advance otherwise than consistently with past practice in the ordinary course of
business;
(xii) made any payment or commitment to pay any severance or
termination pay to any of its officers, directors, consultants, agents, brokers,
independent contractors or other representatives, other than payments or
commitments to pay persons other than its officers, directors or shareholders
made in the ordinary course of business;
(xiii) entered into any lease (as lessor or lessee); sold, abandoned
or made any other disposition of any of its assets or properties (except in the
ordinary course of business); granted or suffered any lien or other encumbrance
on any of its assets or properties; entered into (except in the ordinary course
of business) or amended any contract or other agreement to which it is a party,
or by or to which it or its assets or properties are bound or subject, or
pursuant to which it agrees to indemnify any party or to refrain from competing
with any party;
(xiv) except in the ordinary course of business and in amounts less
than $10,000 in each case, incurred or assumed any Liability;
12
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(xv) made any acquisition of or entered into any agreement to
acquire all or any part of the assets, properties, capital stock or business of
any other person;
(xvi) failed to pay timely any of its material liabilities in
accordance with their terms or otherwise in the ordinary course of business; and
(xvii) except in the ordinary course of business, entered into any
other material contract or other agreement or other material transaction.
(b) The Company will not, between the date hereof and the
Closing, without the prior written consent of Purchaser, do any of the things
listed in clauses (i) through (xvii) of Section 3.17(a), except that on or
before the Closing Date Seller shall cause the Company to repay in full all
outstanding loans to shareholders and all employee loans, other than customary
business expense advances, shall be repaid to the Company or written- off as an
asset.
SECTION 3.18 Compliance with Laws. The Company is not in default
under or in violation of any applicable order, judgment, injunction, award or
decree, of any material applicable federal, state, or local statute, law,
ordinance, rule or regulation, including without limitation, the Employee
Retirement Income Security Act of 1974, as amended ("ERISA",) or the provisions
of any franchise or license, or of any other material requirement of any
governmental, regulatory, administrative or industry body, court or arbitrator
applicable to the Company or the Business. The Company is not in default under
or in violation of any provisions of its certificate of incorporation or its
by-laws, or any material instrument, contract, mortgage, indebtedness, indenture
or other agreement to which the Company is a party or by or to which the Company
or any of its assets or properties may be bound or subject.
SECTION 3.19 Licenses, Permits and Certificates. The Company has all
material licenses, permits, certificates, authorizations, approvals and consents
required by any governmental authority to legally operate the Business and such
licenses, permits, certificates, authorizations, approvals and consents are
listed on Schedule 3.19. No governmental, regulatory
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or industry permits, consents, waivers, approvals or authorizations are
necessary in connection with the consummation of the Transactions or to permit
the Company to conduct the Business after the Closing in the manner and to the
extent presently conducted.
SECTION 3.20 No Conflicts. The execution, delivery and performance
of the Transaction Documents by the Seller and the consummation by the Seller of
the Transactions will not (a) result in a violation of the Company's Certificate
of Incorporation or By-laws, (b) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, indenture or instrument to which the
Company is a party, or (c) result in a violation of any law, rule, regulation,
by-law, directive, order, judgment or decree (including federal, state,
provincial and municipal securities laws and regulations) applicable to the
Company or by which any of its property or assets is bound or affected, except
to the extent that matters within clauses (b) and (c) immediately above would
not have a material adverse effect on the business properties, assets,
operations, liabilities, financial condition or prospects of the Company, or the
ability of the Seller to perform this Agreement and the other Transaction
Documents.
SECTION 3.21 Labor Agreements, Employee Benefit Plans, and
Employment Agreements. Except as set forth on Schedule 3.21 attached hereto and
except for the Wall Street Strategies, Inc. Profit Sharing Plan and Trust,
effective as of January 1, 1996, a true and correct copy of which has been
provided to Purchaser (the "Company Profit Sharing Plan"), the Company is not a
party to (a) any union collective bargaining, works council, or similar
agreement or arrangement, (b) any qualified or non-qualified pension,
retirement, severance, profit-sharing, deferred compensation, bonus, stock
option, stock purchase, retainer, consulting, health, welfare or incentive plan
or agreement, (c) any plan or policy providing for employee benefits, including
but not limited to vacation, disability, sick leave, medical,
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hospitalization, life and other insurance plans, and related benefits, or (d)
any employment agreement. The Company is not presently a party to any "employee
leasing" agreement or arrangement, nor does the Company have any liability in
respect of any such agreement or arrangement to which it was, at any time, a
party, but which is no longer in effect.
SECTION 3.22 Books and Records. The books of account and other
corporate records of the Company made or to be made available to Purchaser in
connection with the Transactions and the due diligence inquiries made by
Purchaser in connection herewith, are in all respects complete and correct, have
been maintained in accordance with good business practices and the matters
contained therein are accurately reflected on the financial statements of the
Company furnished or to be furnished hereunder by Seller to Purchaser..
SECTION 3.23 Accounts Receivable. All accounts receivable of the
Company that are reflected on the Company Interim Balance Sheet or on the
accounting records of the Company as of the Closing Date (collectively, the
"Accounts Receivable"), represent or will represent valid obligations arising
from sales actually made or services actually performed in the ordinary course
of business. The reserves shown on the Company Interim Balance Sheet or on the
accounting records of the company as of the Closing Date with respect to the
Accounts Receivable are adequate consistent with past practice. There is no
contest, claim, or right of set-off in any agreement with any maker of an
Account Receivable relating to the amount or validity of such Account
Receivable.
SECTION 3.24 Stock Restrictions. Seller acknowledges and understands
that: (a) the Exchange Shares shall not be registered under either United States
federal or state securities laws or other securities laws of any other
jurisdiction, but are expected to be issued under and in reliance upon
exemptions from registration provided by Section 4(2) and other provisions of
the Securities Act of 1933, as amended (the "Act"), and regulations promulgated
thereunder; (b) while Purchaser may undertake to register certain of its
Purchaser Common Stock
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for public sale in the future, it has made no decision or commitment to do so,
has no present intention either to do so or to consider such a registration,
and, in any event, is under no obligation to do so with respect to the Exchange
Shares, except as contemplated in that certain Registration Rights Agreement
between Purchaser and Seller to be entered into at the Closing in accordance
with Section 7.9 hereof; (c) if in fact Purchaser undertakes to register any of
its Purchaser Common Stock for public sale in the future, there would be no
assurance that it would be successful in causing such registration to occur; (d)
an exemption from registration with respect to the Exchange Shares may not be
available under the Securities Act or may not permit Seller to transfer the
Exchange Shares in the amounts or at the times desired by Seller; (e) and, as a
result of the foregoing, the Exchange Shares may be required to be held by
Seller indefinitely. Seller further acknowledges that each certificate
evidencing Exchange Shares shall contain a legend identical to or substantially
to the effect of the following:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY
NOT BE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT COVERING THE SHARES OR OF AN OPINION OF
COUNSEL TO THE CORPORATION THAT SUCH TRANSFER WILL NOT REQUIRE
REGISTRATION OF SUCH SHARES UNDER THE ACT.
SECTION 3.25 Purchase for Investment, Etc.. Seller represents and
warrants that: (a) Seller is acquiring and will acquire the Exchange Shares for
his own account for investment only and not with a view to, or for sale in
connection with, a distribution within the meaning of the Securities Act; (b) he
has no present intention of selling or otherwise disposing of any portion of the
Exchange Shares; (c) he has had access to all information regarding Purchaser
and its present and prospective business, assets, liabilities and financial
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condition and the backgrounds of the principals of Purchaser, as he has deemed
material to making the decision to acquire the Exchange Shares and has been
afforded the opportunity to ask questions of and receive answers from senior
management of Purchaser concerning present and prospective business prospects of
Purchaser; (d) he has fully considered this information in valuing Purchaser and
assessing the merits of the Transactions and is satisfied with the consideration
he is receiving hereunder for the Purchased Shares; (e) he recognizes that there
may be no future market for resale of the Exchange Shares; (f) he has knowledge
in business and financial matters and accordingly is capable of evaluating and
has evaluated the merits of the Transactions; (g) he has made the determination
to enter into the Transactions based upon his own independent evaluation and
assessment of the value of Purchaser and its present and prospective business
prospects and has not relied on, or been induced to enter into this Agreement on
account of, any representation or warranty of any kind or nature, whether oral
or written, express or implied, except for such representations and warranties
of Purchaser as are specifically set forth in this Agreement; and (h) he is
financially capable of bearing a total loss of his investment in the Exchange
Shares.
SECTION 3.26 Ownership of the Purchased Shares. (a) Seller owns the
Purchased Shares, both legally and beneficially, free and clear of any and all
liens, charges or encumbrances of any kind or nature whatsoever; (b) Seller is
not bound by or subject to any voting trust arrangement, proxy, voting
agreement, shareholder agreement, purchase agreement or other agreement or
understanding (i) granting any option, warrant or other right to purchase all or
any of the Purchased Shares to any person, (ii) restricting the right of Seller
to sell or convey the Purchased Shares, or (iii) otherwise restricting any
rights of Seller with respect to the Purchased Shares (including restrictions as
to the voting or disposition of the Purchased Shares); (c) Seller has the
absolute and unrestricted right, power and capacity to sell, assign and transfer
the Purchased Shares; and (d) upon transfer to Purchaser of the Purchased Shares
hereunder,
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Purchaser will acquire good and valid title to the Purchased Shares, free and
clear of any liens, charges or encumbrances.
SECTION 3.27 Finders and Investment Bankers. Seller has not employed
any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated
hereby.
SECTION 3.28 Full Disclosure. All documents and other papers
delivered by or on behalf of Seller relating to Seller and the Company in
connection with this Agreement and the Transactions are, to the best of Seller's
knowledge, authentic and true and complete in all material respects. No
representation or warranty of Seller contained in this Agreement, and no
document or other paper furnished by or on behalf of Seller or the Company
pursuant to this Agreement or in connection with the Transactions, contains an
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements made in the context in
which made, not false or misleading. To Seller's best knowledge, there is no
fact that Seller has not disclosed to Purchaser that materially adversely
affects, or so far as Seller can now foresee, will materially adversely affect,
the Business or the assets, properties, operations or condition (financial or
otherwise) of the Company or the ability of Seller to perform this Agreement.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
SECTION 4.1 Due Incorporation and Qualification. Purchaser is a
corporation duly incorporated, validly existing and in good standing under the
laws of Nevada, and has all requisite power and authority to own, lease and
operate its assets, properties and
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business and to conduct its business as now being and as heretofore conducted.
Purchaser is not qualified to do business as a foreign corporation in any
jurisdiction, and is not doing business in any jurisdiction, where qualification
is required or the failure to qualify would have a material adverse effect on
the business or operations of Purchaser.
SECTION 4.2 Authority to Execute and Perform Agreements. Purchaser
has full authority to execute and deliver this Agreement and the other
Transaction Documents, and the consummation of the Transactions have been duly
authorized by all necessary corporate action of Purchaser. This Agreement has
been duly executed and delivered and is the valid and binding obligation of
Purchaser, enforceable against it in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws from time to time in effect which affect
creditors' rights generally and by general principles of equity regardless of
whether such enforceability is considered in a proceeding in equity or at law.
The execution and delivery of this Agreement, the consummation of the
Transactions and the performance by Purchaser of this Agreement in accordance
with its terms and conditions will not require the approval, consent of, waiver,
order or authorization of, notification to, or registration, declaration or
filing with, any federal, state, county, local or other governmental or
regulatory body or the approval or consent of any other person.
SECTION 4.3 Subsidiaries and Affiliates. Purchaser does not,
directly or indirectly, own any shares of stock or other equity interest
(including any form of profit participation) in, has not made any investment in,
and does not control or have any proprietary interest in any corporation,
partnership, joint venture or other business association or entity. Schedule 4.3
annexed hereto sets forth the name of each of Purchaser's affiliates (other than
subsidiaries), including joint venture affiliates (incorporated and
unincorporated), and the nature of the affiliation.
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SECTION 4.4 Officers and Directors. Attached hereto as Schedule 4.4
is a true and correct list of the officers and directors of Purchaser.
SECTION 4.5 Articles of Incorporation and By-Laws. Purchaser has
delivered to Seller true and complete copies of its certificate of incorporation
and by-laws as in effect on the date hereof, which instruments shall not be or
have been amended between the dates thereof and the Closing Date.
SECTION 4.6 Capitalization. (a) The total authorized capital stock
of Purchaser consists of (i) 50,000,000 shares of Common Stock, par value $0.001
per share, of which 15,358,205 shares are issued and outstanding, validly
issued, fully paid and non-assessable, and (ii) 5,000,000 shares of preferred
stock, par value $.001 per share, of which no shares are issued and outstanding.
Except as set forth in Schedule 4.6 annexed hereto, there are no authorized or
outstanding options, warrants, subscription calls, rights (including preemptive
rights and rights to demand registration under the Securities Act), commitments,
conversion rights, plans or other agreements of any character obligating
Purchaser to authorize, issue, deliver, sell or redeem any shares of its capital
stock or any securities convertible into or evidencing the right to purchase any
shares of such stock.
(b) The Exchange Shares to be issued pursuant to this Agreement, in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable.
SECTION 4.7 Financial Statements.
(a) Annexed hereto as Schedule 4.7 (a) are the audited balance
sheets of the Company as at June 30, 1998 and 1997, and the related combined
statements of operations, shareholders' equity (deficit) and cash flows for the
year ended June 30, 1998 and the period from December 12, 1996 through June 30,
1997, together with the report thereon (qualified with respect
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to continuation as a going concern) of Gelfand Hochstadt Pangburn & Co.
("GHPC"), certified public accountants (collectively, the "Purchaser's Audited
Financials").
(b) Annexed hereto as Schedule 4.7 (b) is the unaudited
balance sheet of Purchaser as at June 30, 1999 ( the "Purchaser Unaudited
Balance Sheet"). Since March 31, 1999, Purchaser has been inactive except for
maintaining its corporate existence, seeking business opportunities and
negotiating this Agreement.
(c) At or prior to the Closing Date, Purchaser will have
furnished Seller with the audited balance sheet of Purchaser as at June 30, 1999
and the related statements of operations, shareholders' equity (deficit) and
cash flow as at and for the year then ended, together with the unqualified
opinion thereon (except with respect to being a "going concern") of GHPC
(collectively, the "Purchaser 1999 Financials)."
(d) The Purchaser Audited Financials and the Purchaser
Unaudited Balance Sheet are, and the Purchaser 1999 Financials will be, (i) in
accordance with the books and records of Purchaser, (ii) correct and complete,
(iii) fairly present the financial position and results of operations of
Purchaser as of the dates indicated, and (iv) prepared in accordance with GAAP
(except that (x) unaudited financial statements may not be in accordance with
GAAP because of the absence of footnotes normally contained therein, and (y)
interim and unaudited year-end financials are subject to normal year-end audit
adjustments which in the aggregate will not have a material adverse effect on
the business properties, assets, operations, liabilities, financial condition or
prospects of Purchaser).
SECTION 4.8 Liabilities. Except as set forth on Schedule 4.8 annexed
hereto, as of the date hereof, Purchaser has no direct or indirect indebtedness,
liability, claim, loss, damage, deficiency, obligation or responsibility, known,
or unknown, fixed or unfixed, liquidated or unliquidated, secured or unsecured,
accrued, absolute, contingent or otherwise, including, without limitation,
liabilities on account of taxes, other governmental charges or
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lawsuits brought ("Liabilities"), other than (i) Liabilities fully and
adequately reflected or reserved against on the Purchaser Unaudited Balance
Sheet, and (ii) Liabilities incurred since June 30, 1999 in the ordinary course
of business. Purchaser has no knowledge of any past or existing circumstance,
condition, event or arrangement that may hereafter give rise to any Liabilities
of the Purchaser, or any successor to its business except in the ordinary course
of business or as otherwise set forth on Schedule 4.8. Purchaser will not
between the date hereof and the Closing Date, without the prior written consent
of Seller, incur or become subject to, or agree to incur or become subject to,
any Liabilities except current liabilities and obligations incurred in the
ordinary course of business or as contemplated by this Agreement or any exhibit
or schedule hereto.
SECTION 4.9 Tax Matters. Purchaser has filed all federal, state,
county and local income tax, franchise tax, real and personal property tax,
payroll tax, occupation tax, sales tax, excise tax, and other tax returns which
they are required to file, the failure to file which would materially adversely
affect the assets, properties, business, operations or financial condition or
prospects of Purchaser, and has paid or provided for all taxes shown on such
returns, and all deficiencies or other assessments of tax, interest or penalties
which have been served on or delivered to Purchaser. There are no claims against
Purchaser with respect to federal, state, county, local, foreign or other taxes.
The federal income tax returns of Purchaser have never been audited by the
Internal Revenue Service. Purchaser knows of no unassessed tax deficiency
proposed or threatened against it. No audit of any tax return of Purchaser is in
progress. There are not in force any extensions of time with respect to the date
on which any tax return was or is due to be filed by Purchaser or any waivers or
agreements by Purchaser for an extension of time for the assessment or payment
of any tax.
SECTION 4.10 Real and Personal Property - Leased to Purchaser.
Purchaser is not a party to or otherwise bound by any lease of real or personal
property.
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SECTION 4.11 Title. Purchaser does not own any assets other than
cash or cash equivalents.
SECTION 4.12 Intangible Property.
(a) Purchaser does not own any patents, patent applications,
trademark and service mark registrations or registration applications, U.S.
copyright registrations or registration applications. Purchaser is not a party
to or otherwise bound by any confidentiality, nondisclosure or license
agreements granting rights under one or more patents, patent applications,
trademark or service registrations and registration applications, U.S. copyright
registrations or registration applications by or to Purchaser.
(b) (i) Purchaser does not infringe a patent, U.S. trademark
registration, U.S. service mark registration or copyright of a third party and
(ii) no party has asserted a claim against Purchaser that Purchaser infringes a
patent, trademark, copyright, trade name or trade secret of a third party.
SECTION 4.13 Contracts and Other Agreements. Schedule 4.13 annexed
hereto sets forth, as of the date of this Agreement, all contracts, commitments,
understandings, arrangements and other agreements to which Purchaser is a party
or by or to which any of Purchaser's properties are bound or subject
(collectively also referred to herein as the "Contracts"). There have been
delivered or made available to Seller true and complete copies of all the
Contracts and other agreements set forth on Schedule 4.13 or on any other
Schedule. All of the Contracts are valid, subsisting, in full force and effect
and binding upon the parties thereto in accordance with their terms, and
Purchaser has paid in full or accrued all amounts due thereunder and has
satisfied in full or provided for all of its liabilities and obligations
thereunder, and is not in default in any material respect under any of them,
nor, to Purchaser's knowledge, is any other party to any Contract in default
thereunder, nor, to Purchaser's knowledge, does any condition exist that with
notice or lapse of time or both would constitute a default thereunder that
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would give the other party thereto the right to terminate such Contract. Except
as separately identified on Schedule 4.13, no approval or consent of any person
is needed in order that the Contracts set forth on Schedule 4.13 or on any other
Schedule continue in full force and effect following the consummation of the
Transactions. Purchaser will not, between the date hereof and the Closing Date,
without Seller's prior written consent, become a party to any Contract or make
or permit the amendment or termination (other than in the ordinary course and
excluding the termination of Contracts by their terms) of any Contract listed on
Schedule 4.13.
SECTION 4.14 Litigation; Actions and Proceedings. There are no
outstanding orders, judgments, injunctions, awards or decrees of any court,
governmental, administrative or regulatory body or arbitration or mediation
tribunal against or involving Purchaser. There are no actions, suits or claims
or legal, administrative, regulatory, governmental or arbitral proceedings or
investigations (whether or not the defense thereof or liabilities in respect
thereof are covered by insurance) pending or threatened against or involving
Purchaser or any of its properties or assets, nor, to the knowledge of
Purchaser, are there any grounds therefor, that individually or in the
aggregate, could have a material adverse effect upon the transactions
contemplated hereby or upon the assets, properties, business, operations, or
condition (financial or otherwise) of Purchaser. There are no actions, suits or
claims or legal, administrative, regulatory, governmental or arbitral
proceedings pending or threatened that would give rise to any right of
indemnification on the part of any director or officer of Purchaser, or the
heirs, executors or administrators of such director or officer, against
Purchaser or any successor to its business.
SECTION 4.15 Operations of Purchaser. (a) Except as set forth on
Schedule 4.15 hereto, since June 30, 1999, Purchaser has not:
(i) amended its Certificate of Incorporation or By-laws or merged
with or into or consolidated with any other person, subdivided or in any way
reclassified any shares of its
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capital stock or the character of its business;
(ii) issued or sold or purchased, or issued options or rights to
subscribe to, or entered into any contracts or commitments to issue or sell or
purchase, any shares of its capital stock;
(iii) entered into or amended any employment agreement (other than
employment agreements or at will employment arrangements entered into or amended
in the ordinary course of the Company's business), entered into or amended any
agreement with any labor union or association representing any employee,
adopted, entered into, or amended any employee benefit plan;
(iv) incurred any indebtedness for borrowed money;
(v) declared or paid any dividends or declared or made any other
distributions of any kind to its shareholders, or made any direct or indirect
redemption, retirement, purchase or other acquisition of any shares of its
capital stock;
(vi) materially reduced its cash or short term investments or their
equivalent;
(vii) waived any right of material value to its business;
(viii) made any change in its accounting methods or practices or
made any change in depreciation or amortization policies or rates adopted by it;
(ix) materially changed any of its business policies;
(x) approved, granted or paid any wage or salary increase in excess
of $25,000 per annum, or any bonus in excess of $5,000, or any increase in any
other direct or indirect compensation, for or to any of its officers, directors,
employees, consultants, agents, brokers, independent contractors or other
representatives, or any accrual for or commitment or agreement to make or pay
the same;
(xi) made any loan or advance to any of its shareholders, officers,
directors, employees, consultants, agents, brokers, independent contractors or
other representatives (other
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than travel, entertainment or business expense advances made in the ordinary
course of business), or made any other loan or advance otherwise than
consistently with past practice in the ordinary course of business;
(xii) made any payment or commitment to pay any severance or
termination pay to any of its officers, directors, consultants, agents, brokers,
independent contractors or other representatives, other than payments or
commitments to pay persons other than its officers, directors or shareholders
made in the ordinary course of business;
(xiii) entered into any lease (as lessor or lessee); sold, abandoned
or made any other disposition of any of its assets or properties (except in the
ordinary course of business); granted or suffered any lien or other encumbrance
on any of its assets or properties; entered into (except in the ordinary course
of business) or amended any contract or other agreement to which it is a party,
or by or to which it or its assets or properties are bound or subject, or
pursuant to which it agrees to indemnify any party or to refrain from competing
with any party;
(xiv) except in the ordinary course of business and in amounts less
than $10,000 in each case, incurred or assumed any Liability;
(xv) made any acquisition of or entered into any agreement to
acquire all or any part of the assets, properties, capital stock or business of
any other person;
(xvi) failed to pay timely any of its material liabilities in
accordance with their terms or otherwise in the ordinary course of business; and
(xvii) except in the ordinary course of business, entered into any
other material contract or other agreement or other material transaction.
(b) Purchaser will not, between the date hereof and the
Closing, without the prior written consent of Seller, do any of the things
listed in clauses (i) through (xvii) of Section 4.15(i).
SECTION 4.16 Compliance with Laws. Purchaser is not in default under
or in violation of any applicable order, judgment, injunction, award or decree,
of any material
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applicable federal, state, or local statute, law, ordinance, rule or regulation
including, without limitation, ERISA or the provisions of any franchise or
license, or of any other material requirement of any governmental, regulatory,
administrative or industry body, court or arbitrator applicable to Purchaser.
Purchaser is not in default under or in violation of any provisions of its
certificate of incorporation or its by-laws, or any material instrument,
contract, mortgage, indebtedness, indenture or other agreement to which
Purchaser is a party or by or to which Purchaser or any of its assets or
properties may be bound or subject.
SECTION 4.17 Licenses, Permits and Certificates. Purchaser has all
material licenses, permits, certificates, authorizations, approvals and consents
required by any governmental authority to legally operate and such licenses,
permits, certificates, authorizations, approvals and consents are listed on
Schedule 4.17. No governmental, regulatory or industry permits, consents,
waivers, approvals or authorizations are necessary in connection with the
consummation of the Transactions
SECTION 4.18 No Conflicts. The execution, delivery and performance
of the Transaction Documents by Purchaser and the consummation by Purchaser of
the Transactions will not (a) result in a violation of Purchaser's Certificate
of Incorporation or By-laws, (b) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, indenture or instrument to which
Purchaser is a party, or (c) result in a violation of any law, rule, regulation,
by-law, directive, order, judgment or decree (including federal, state,
provincial and municipal securities laws and regulations) applicable to
Purchaser or by which any of its property or assets is bound or affected, except
to the extent that matters within clauses (b) and (c) immediately above would
not have a material adverse effect on the business properties, assets,
operations, liabilities, financial
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condition or prospects of Purchaser, or the ability of Purchaser to perform this
Agreement and the other Transaction Documents.
SECTION 4.19 Labor Agreements, Employee Benefit Plans and Employment
Agreements. Except as set forth on Schedule 4.19 attached hereto, Purchaser is
not a party to (a) any union collective bargaining, works council, or similar
agreement or arrangement, (b) any qualified or non-qualified pension,
retirement, severance, profit-sharing, deferred compensation, bonus, stock
option, stock purchase, retainer, consulting, health, welfare or incentive plan
or agreement, oral or written, whether legally binding or not, (c) any plan or
policy providing for employee benefits, including but not limited to vacation,
disability, sick leave, medical, hospitalization, life and other insurance
plans, and related benefits, or (d) any employment agreement. Purchaser is not
presently a party to any "employee leasing" agreement or arrangement, nor does
Purchaser have any liability in respect of any such agreement or arrangement to
which it was, at any time, a party, but which is no longer in effect.
SECTION 4.20 Books and Records. The books of account and other
corporate records of Purchaser made or to be made available to Seller in
connection with the Transactions and the due diligence inquiries made by Seller
in connection herewith, are in all respects complete and correct, have been
maintained in accordance with good business practices and the matters contained
therein are accurately reflected on the financial statements furnished or to be
furnished hereunder by Purchaser to Seller.
SECTION 4.21 Stock Restrictions. Purchaser acknowledges and
understands that the Purchased Shares shall not be registered under either
United States federal or state securities laws or other securities laws of any
other jurisdiction, but are expected to be transferred to Purchaser under and in
reliance upon exemptions from registration provided by Section 4(2) and other
provisions of the Securities Act, as amended and regulations promulgated
thereunder. Purchaser further acknowledges that the certificate(s) evidencing
its ownership of
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shares in the Company following the acquisition of the Purchased Shares in
accordance herewith, shall contain a legend identical to or substantially to the
effect of the following:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING THE
SHARES OR OF AN OPINION OF COUNSEL TO THE CORPORATION THAT
SUCH TRANSFER WILL NOT REQUIRE REGISTRATION OF SUCH SHARES
UNDER THE ACT.
SECTION 4.22 Purchase for Investment. Purchaser: (a) is acquiring
and will acquire the Purchased Shares for its own account for investment only
and not with a view to, or for sale in connection with, a distribution within
the meaning of the Securities Act; (b) has no present intention of selling or
otherwise disposing of any portion of the Purchased Shares; (c) has had access
to all information regarding the Company and its present and prospective
business, assets, liabilities and financial condition and the backgrounds of its
principals, as it has deemed material to making the decision to acquire the
Purchased Shares and has been afforded the opportunity to ask questions of and
receive answers from senior management of the Company concerning present and
prospective business prospects of the Company; (d) has fully considered this
information in valuing the Company and assessing the merits of the Transaction
and is satisfied with the consideration it is receiving hereunder for the
Exchange Shares; (e) has knowledge in business and financial matters and
accordingly is capable of evaluating and has
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evaluated the merits of the transactions contemplated hereby, and (f) has made
the determination to enter into the Transactions based upon its own independent
evaluation and assessment of the value of the Company and its present and
prospective business prospects and has not relied on, or been induced to enter
into this Agreement on account of, any representation or warranty of any kind or
nature, whether oral or written, express or implied, except for such
representations and warranties of Seller as are specifically set forth in this
Agreement.
SECTION 4.23 Ownership of the Exchange Shares. (a) Purchaser is not
bound by or subject to any voting trust arrangement, proxy, voting agreement,
shareholder agreement, purchase agreement or other agreement or understanding,
except as contemplated hereunder, (i) granting any option, warrant or other
right to purchase all or any of the Exchange Shares to any person, (ii)
restricting the right of Purchaser to sell or convey the Exchange Shares, or
(iii) otherwise restricting any rights of Purchaser with respect to the Exchange
Shares (including restrictions as to the voting or disposition of the Exchange
Shares); (b) Seller has the absolute and unrestricted right, power and capacity
to issue and sell the Exchange Shares, and (c) upon issuance to Seller of the
Exchange Shares hereunder, Seller will acquire good and valid title to the
Exchange Shares, free and clear of any liens, charges or encumbrances except as
contemplated hereunder.
SECTION 4.24 Finders and Investment Bankers. Purchaser has not
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated
hereby.
SECTION 4.25 Absence of Certain Changes. Since June 30, 1999, there
has been no material adverse change in the condition, financial or otherwise, of
Purchaser, other than changes occurring in the ordinary course of business which
changes have not, individually or in the aggregate, had a material adverse
effect on the business properties, assets, operations,
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liabilities, financial condition or prospects of Purchaser and other than as set
forth in Schedule 4.15 annexed hereto.
SECTION 4.26 Insurance. Purchaser does not maintain any insurance.
SECTION 4.27 Full Disclosure. All documents and other papers
delivered by or on behalf of Purchaser in connection with this Agreement and the
Transactions are, to the best of Purchaser's knowledge, authentic and true and
complete in all material respects. No representation or warranty of Purchaser
contained in this Agreement, and no document or other paper furnished by or on
behalf of Purchaser pursuant to this Agreement or in connection with the
Transactions, contains an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary to make the
statements made in the context in which made, not false or misleading. To
Purchaser's best knowledge, there is no fact that Purchaser has not disclosed to
Seller that materially adversely affects, or so far as Purchaser can now
foresee, will materially adversely affect, the assets, properties, business,
operations or condition (financial or otherwise) of Purchaser or the ability of
Purchaser to perform this Agreement.
ARTICLE 5.
COVENANTS AND AGREEMENTS OF THE PARTIES
SECTION 5.1 Conduct of Business. (a) Between the date hereof and the
Closing Date, except as otherwise contemplated in this Agreement, Seller shall
cause the Company to conduct its business in the ordinary and usual course, and
the Seller shall cause the Company to, without the prior consent of Purchaser,
change in any material respect any business policy or practice or take any
action which would violate Section 3.17 hereof.
(b) Between the date hereof and the Closing Date, except as
otherwise contemplated in this Agreement, Purchaser shall conduct its business
in the ordinary and usual
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course, and shall not, without the prior consent of Seller, change in any
material respect any business policy or practice or take any action which would
violate Section 4.15 hereof.
SECTION 5.2 Access and Investigation. (a) Between the date hereof
and the Closing Date, Seller will afford, and will cause the Company to afford,
Purchaser and its directors, officers, employees, agents, consultants, advisors,
or other representatives, including legal counsel, accountants, and financial
advisors (collectively, "Representatives") full and free access, during normal
business hours and at such other reasonable times as otherwise may be required
under the circumstances, to the Company's personnel, properties, contracts,
books, records and other existing documents and data as Purchaser may reasonably
request.
(b) Between the date hereof and the Closing Date, Purchaser will
afford Seller and its Representatives full and free access, during normal
business hours and at such other reasonable times as otherwise may be required
under the circumstances, to Purchaser's personnel, properties, contracts, books,
records and other existing documents and data as Seller may reasonably request.
SECTION 5.3 Litigation. Between the date hereof and the Closing
Date, Seller and Purchaser will promptly notify each other of any lawsuits,
claims, proceedings or investigations which are threatened or commenced against
either, or against any officer, employee, agent, consultant or director thereof,
which may relate to, or affect the Business of the Company, the Purchaser, their
respective assets, this Agreement or the Transactions.
SECTION 5.4 Actions with Respect to Closing. Each of the parties
hereto agrees to use its best efforts to bring about the satisfaction of the
conditions precedent to the obligation of the other party hereto to effect the
Closing (to the extent that such satisfaction is dependent on the actions on the
part of the initial party of commission or omission) and to cause its covenants
and agreements contained in this Agreement to be satisfied and performed
hereunder.
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SECTION 5.5 Public Statement. Neither party hereto shall, without
the prior consent of the other, make any public statement, announcement or
release to trade publications or to the press, or make any statements to any
competitor, customer or any third party, with respect to this Agreement except
to the extent that either party is advised by its counsel that a public
statement is required by law and then only upon prior notice to the other party.
SECTION 5.6 Consent to Jurisdiction and Service of Process. Any
legal action, suit or proceeding arising out of or relating to this Agreement or
the transactions contemplated hereby shall be instituted in any state or federal
court of competent jurisdiction located in New York County, State of New York,
United States, and each party agrees not to assert, by way of motion, as a
defense, or otherwise, in any such action, suit or proceeding, any claim that it
is not subject personally to the jurisdiction of such court, that its property
is exempt or immune from attachment or execution, that the action, suit or
proceeding is brought in an inconvenient forum, that the venue of the action,
suit or proceeding is improper or that this Agreement or the subject matter
hereof may not be enforced in or by such court. Each party further irrevocably
submits to the exclusive jurisdiction of any such court in any such action, suit
or proceeding. Purchaser hereby appoints Bryan Cave LLP (Attn: Steven A. Saide,
Esq.), at its offices at 245 Park Avenue, New York, New York 10167, and Seller
hereby appoints Gusrae, Kaplan & Bruno (Attn.: Mark Astarita, Esq.), at its
offices at 120 Wall Street, New York, NY 10005 (or at each such person's or
entity's office at such other address as such person or entity hereafter
furnishes to the other parties), as such party's authorized agent to accept and
acknowledge on such party's behalf service of any and all process that may be
served in any such action, suit or proceeding. Any and all service of process
and any other notice in any such action, suit or proceeding shall be effective
against any party if given personally or by registered or certified mail, return
receipt requested, or by any other means of mail that requires a signed receipt,
postage prepaid, mailed to such party as herein provided
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SECTION 5.7 Expenses. Each of the parties to this Agreement shall,
except as otherwise specifically provided herein, bear his and its respective
expenses incurred in connection with the preparation, execution and performance
of this Agreement and the transactions contemplated hereby, including without
limitation, all fees and expenses of agents, representatives, counsel and
accountants.
SECTION 5.8 Purchaser 1999 Financials. Purchaser hereby undertakes
and agrees to cause to be prepared, at its sole cost and expense, and deliver to
Seller as soon as reasonably practicable after the date hereof, but in any
event, not later than three (3) business days prior to the Closing, the
Purchaser 1999 Financials as provided in Section 4.7 (c) hereof.
SECTION 5.9 Closing Date Balance Sheet; Closing Date Net Worth.
(a) As soon as practicable following the Closing, but in any event
within ninety (90) days after the Closing, Seller shall deliver to Purchaser the
audited balance sheet of the Company as of the Closing Date (the "Closing Date
Balance Sheet"), together with Seller's calculation of the net worth (i.e.,
total assets, net of allowances for doubtful accounts, accumulated depreciation
and loans receivable from employees, minus total liabilities) of the Company as
of the Closing Date as derived from the Closing Date Balance Sheet (the "Closing
Date Net Worth"). The Closing Date Balance Sheet (i) shall be accompanied by the
unqualified report thereon of Lilly, (ii) shall be in accordance with the books
and records of the Company and (iii) shall present fairly the financial position
of the Company as at the Closing Date in accordance with GAAP, with the
application of GAAP to be consistent with its application in the financial
statements of the Company furnished by Seller to Purchaser pursuant to this
Agreement
(b) The Closing Date Net Worth shall be determined from the Closing
Date Balance sheet and shall be as proposed by Seller unless Purchaser within
fifteen (15) days after receipt of the Closing Date Balance Sheet delivers to
Seller a statement signed by Purchaser proposing adjustments to the Closing Date
Net Worth. If Lilly and Purchaser's accountants,
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GHPC, are unable to resolve the dispute regarding the Closing Date Net Worth
within ten (10) days after Seller receives the written notice of proposed
adjustments, Seller and Purchaser shall, as soon as reasonably possible
thereafter, employ a firm of independent public accountants that is mutually
acceptable to Seller and Purchaser, to examine the items about which a dispute
exists. The determination of the disputed items by such firm shall be binding
upon Seller and Purchaser. The cost of employing such firm shall be prorated
between Seller and Purchaser in proportion to the amounts in dispute resolved
against each of them.
ARTICLE 6.
CONDITIONS TO PURCHASER OBLIGATIONS
The obligations of Purchaser to consummate the transactions provided
for in this Agreement shall be subject to the satisfaction of each of the
following conditions on or before the Closing Date, subject to the right of
Purchaser to waive any one or more of such conditions:
SECTION 6.1 Representations and Warranties of Seller. The
representations and warranties of Seller contained in this Agreement, including
the Schedules hereto, and in the certificates to be delivered to Purchaser
pursuant hereto and in connection herewith shall be true and correct in all
material respects (except to the extent any such representations and warranties
is already qualified as to materiality in Article 3, in which case, such
representations and warranties shall be true and correct without further
qualifications as to materiality under this Section 6.1) on the date hereof and
on the Closing Date as though such representations and warranties were made on
the Closing Date, except for representations and warranties made as of a
specific date which shall be true and correct on the Closing Date as of such
specific date.
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SECTION 6.2 Performance of this Agreement. Seller shall have duly
performed or complied in all material respects with all of the obligations to be
performed or complied with by him under the terms of this Agreement on or prior
to the Closing Date.
SECTION 6.3 Certificate of Seller. Purchaser shall have received a
certificate signed by Seller, dated as of the Closing Date and subject to no
qualification, certifying that the conditions set forth in Sections 6.1 and 6.2
hereof have been fully satisfied. Such certificate shall be deemed
representations and warranties of Seller under this Agreement.
SECTION 6.4 No Material Adverse Change. Purchaser shall have
received a certificate signed by Seller to the effect that as of the Closing
Date there has been no material adverse change in the financial condition,
results of operations, business or prospects of the Company since May 31, 1999
or any material adverse change in the nature of the Business, the manner of
conducting the Business or the prospects of the Business since such date, except
as for the execution, delivery and performance of this Agreement and the other
Transaction Documents.
SECTION 6.5 Satisfactory Business Review. Purchaser shall have
satisfied itself, after receipt and consideration of the Schedules and after
Purchaser and its Representatives have completed the review of the Business and
the Company contemplated by this Agreement, that none of the information
revealed thereby or in the Company Audited Financials or the Company Interim
Balance Sheet has resulted in, or in the opinion of Purchaser, may result in, a
material adverse change in the assets, properties, business or condition
(financial or otherwise) of the Company.
SECTION 6.6 Governmental Permits and Approvals. All permits,
including any environmental or regulatory consents or permits required for the
lawful consummation of the Closing, shall have been obtained.
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SECTION 6.7 Third Party Consents. All consents, permits and
approvals from parties to contracts or other agreements with the Company or with
Seller that may be required in connection with the performance by Seller of his
obligations under this Agreement or the continuance of such contracts or other
agreements after the Closing shall have been obtained.
SECTION 6.8 Voting Agreement. Seller shall have executed and
delivered to Purchaser a Voting Agreement (the "Voting Agreement") in the form
annexed hereto as Exhibit A, among Purchaser, Seller, Sigma Limited S.A.
("Sigma") Ian Rice ("Rice") and Corporate Communications Network, Inc. ("CNN").
SECTION 6.9 Employment Agreement. Seller shall have executed and
delivered an Employment Agreement (the "Payne Employment Agreement") in the form
annexed as Exhibit B.
SECTION 6.10 Charter Documents. Seller shall have delivered to
Purchaser copies of the Company's Certificate of Incorporation, certified as
true and complete as of a recent date by the appropriate governmental authority
of the Company's jurisdiction of incorporation, and certified as true and
complete as of the Closing Date by Seller.
SECTION 6.11 By-Laws. Seller shall have delivered to Purchaser a
copy of the Company By-Laws as in effect on the date of the Closing certified by
Seller.
SECTION 6.12 Good Standing. Seller shall have delivered to Purchaser
certificates of good standing, existence or its equivalent with respect to the
Company, certified as of a recent date by the appropriate governmental authority
of the Company's jurisdiction of incorporation, and each other jurisdiction in
which the failure to so qualify and be in good standing would have a material
adverse effect on the Company and its Business.
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SECTION 6.13 Litigation. At the Closing Date no suit, action or
other proceeding shall be pending or threatened before any court or governmental
agency in which it is sought (i) to restrain, prohibit, invalidate or set aside
(in whole or in part) the Transactions contemplated by this Agreement, (ii) to
affect the right of Seller or the Company to operate or control, after the
Closing Date, its respective assets, properties and businesses (in whole or in
part) or (iii) to obtain damages or a discovery order in connection with this
Agreement or the consummation of the Transactions contemplated hereby. On or
before the Closing Date, the pending action brought by the Securities Exchange
Commission against Members Service Corporation, the Company, Seller, et. al.
shall have been settled or otherwise terminated with prejudice with respect to
Seller and the Company and, as a result thereof, neither Seller nor the Company
shall be suspended, barred or prohibited from engaging in the securities
industry or acting as a investment advisor for any period of time.
SECTION 6.14 Consulting Agreements. Purchaser shall have entered
into a consulting agreement with each of Sigma and Corporate Communications
Network Inc. substantially in the form of Exhibits C and D, respectively,
attached hereto.
SECTION 6.15 Company Profit Sharing Plan. On or prior to the closing
Date, Seller shall have caused the Company to adopt an Adoption Agreement for
the Datair Mass-Submitter Prototype Non-Standardized Profit Sharing Plan and
Trust as a complete restatement of the Company Profit Sharing Plan and Seller
shall have provided to Purchaser a true and correct copy of such restatement.
SECTION 6.16 Company Quarterly Financials. Seller shall have
provided Purchaser with the Company Quarterly Financials.
ARTICLE 7.
CONDITIONS TO SELLER OBLIGATIONS
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The obligations of Seller to consummate the transactions provided
for in this Agreement shall be subject to the satisfaction of each of the
following conditions on or before the Closing Date, subject to the right of
Seller to waive any one or more of such conditions:
SECTION 7.1 Representations and Warranties of Purchaser. The
representations and warranties of Purchaser contained in this Agreement,
including the Schedules hereto, and in the certificates to be delivered to
Seller pursuant hereto and in connection herewith shall be true and correct in
all material respects (except to the extent any such representations and
warranties is already qualified as to materiality in Article 4, in which case,
such representations and warranties shall be true and correct without further
qualifications as to materiality under this Section 7.1) on the date hereof and
on the Closing Date as though such representations and warranties were made on
the Closing Date except for representation and warranties made as of a specific
date which shall be the and correct on the Closing Date as of such specific
date..
SECTION 7.2 Performance of this Agreement. Purchaser shall have duly
performed or complied in all material respects with all of the obligations to be
performed or complied with by them under the terms of this Agreement on or prior
to the Closing Date.
SECTION 7.3 Certificate of Purchaser. Seller shall have received a
certificate signed by Purchaser, dated as of the Closing Date and subject to no
qualification certifying that the conditions set forth in Sections 7.1 and 7.2
hereof have been fully satisfied. Such certificate shall be deemed
representations and warranties of Purchaser under this Agreement.
SECTION 7.4 No Material Adverse Change. Seller shall have received a
certificate, signed by a duly authorized officer of Purchaser, to the effect
that as of the Closing Date there has been no material adverse change in the
financial condition, results of operations, business or prospects of Purchaser
since June 30, 1999 or any material adverse change in the nature of Purchaser's
business, the manner of conducting such business or the prospects of the
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business since such date, except as associated with the execution, delivery and
performance of this Agreement and the other Transaction Documents.
SECTION 7.5 Satisfactory Business Review. Seller shall have
satisfied himself, after Seller and his Representatives have completed the
review of the Purchaser's business contemplated by this Agreement, that none of
the information revealed thereby has resulted in, or in the opinion of Seller,
may result in, a material adverse change in the assets, properties, business or
condition (financial or otherwise) of Purchaser.
SECTION 7.6 Governmental Permits and Approvals. All permits,
including any environmental or regulatory consents or permits required for the
lawful consummation of the Closing, shall have been obtained.
SECTION 7.7 Third Party Consents. All consents, permits and
approvals from parties to contracts or other agreements with Purchaser that may
be required in connection with the performance by Purchaser of their respective
obligations under this Agreement or the continuance of such contracts or other
agreements after the Closing shall have been obtained.
SECTION 7.8 Cancellation of Certain Outstanding Shares. On or before
the Closing Date Purchase shall have delivered to Seller evidence reasonably
satisfactory to Seller that an aggregate of 7,850,000 shares of the Purchaser
Common Stock issued and outstanding as of the date hereof has been canceled.
SECTION 7.9 Registration Rights Agreement. Purchaser shall have
executed and delivered a Registration Rights Agreement (the "Registration Rights
Agreement") in substantially the form annexed as Exhibit E.
SECTION 7.10 Financing. Purchaser shall have cash reserves of not
less than $3,000,000, and total assets exceeding total liabilities by at least
$3,000,000. Purchaser
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shall have delivered to Seller a certificate, signed by a duly authorized
officer of Purchaser, confirming such cash reserves and surplus, and such other
documents or records as Seller may reasonably request to establish compliance
with first sentence of this Section 7.10.
SECTION 7.11 Certified Resolutions. Purchaser shall have delivered
to Seller copies of board resolutions approving and adopting this Agreement and
the other Transaction Documents and authorizing the Transactions, certified as
true and correct by the Secretary of Purchaser.
SECTION 7.12 Charter Documents. Purchaser shall have delivered to
Seller copies of its Certificate of Incorporation, certified as true and
complete as of a recent date by the appropriate governmental authority of
Purchaser's jurisdiction of incorporation, and certified as true and complete as
of the Closing Date by the Secretary of Purchaser.
SECTION 7.13 By-Laws. Purchaser shall have delivered to Seller a
copy of the By-Laws certified by the secretary of Purchaser as of the Closing
Date to be true and correct and in full force and effect as of the Closing Date.
SECTION 7.14 Good Standing. Purchaser shall have delivered to Seller
certificates of good standing, existence or its equivalent with respect to
Purchaser, certified as of a recent date by the appropriate governmental
authority of Purchaser's jurisdiction of incorporation, and each other
jurisdiction in which the failure to so qualify and be in good standing would
have a material adverse effect on Purchaser and its business.
SECTION 7.15 Purchaser Deliveries. Purchaser shall have delivered to
Seller all shareholder records of Purchaser and a true and complete copy of
Purchaser's corporate minute books.
SECTION 7.16 Litigation. At the Closing Date no suit, action or
other proceeding shall be pending or threatened before any court or governmental
agency in which it is
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sought (i) to restrain, prohibit, invalidate or set aside (in whole or in part)
the Transactions contemplated by this Agreement, (ii) to affect the right of
Purchaser to operate or control, after the Closing Date, its assets, properties
and businesses (in whole or in part) or (iii) to obtain damages or a discovery
order in connection with this Agreement or the consummation of the Transactions
contemplated hereby.
SECTION 7.17 Voting Agreement. Purchaser, Sigma, Rice and CCN shall
have executed and delivered the Voting Agreement to Seller.
SECTION 7.18 Employment Agreement. Purchaser and the Company shall
have executed and delivered the Payne Employment Agreement to Seller.
ARTICLE 8.
INDEMNIFICATION; SURVIVAL
SECTION 8.1 Obligation of Seller to Indemnify. (c) Seller agrees to
indemnify, defend and hold harmless Purchaser and its stockholders as of the
date of this Agreement and their respective directors, officers, heirs, legal
representatives, successors and assigns, from and against all losses,
liabilities, damages, deficiencies, actions, suits, proceedings, claims,
demands, orders, assessments, amounts paid in settlement, fines, and reasonable
costs and expenses (including interest, penalties and reasonable attorneys' fees
and disbursements and reasonable investigative costs) (collectively, "Losses")
based upon, arising out of or otherwise in respect of (i) any breach in any of
the representations and warranties of Seller set forth in Article 3 hereof, (ii)
any breach in any of the representations and warranties of Seller set forth in
any other provision hereof, and (iii) any breach or non-fulfillment of any of
the covenants or agreements of Seller contained in this Agreement.
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SECTION 8.2 Obligation of Purchaser to Indemnify. Purchaser agrees
to indemnify, defend and hold harmless Seller, and his heirs, legal
representatives, successors and assigns, from and against any Losses based upon,
arising out of or otherwise in respect of (i) any breach in any of the
representations and warranties of Purchaser set forth in Article 4 hereof, (ii)
any breach in any of the representations and warranties of Purchaser set forth
in any other provision hereof and (iii) any breach or nonfulfillment of any
covenant or agreement of Purchaser contained in this Agreement.
SECTION 8.3 Claims Notice. Each party hereto (an "Indemnified
Party") shall, promptly upon becoming aware of any event or circumstance (an
"Indemnifiable Event") which, in his or its reasonable judgment, may result in a
Loss for which the Indemnified Party could assert a right of indemnification
against any other party (or parties) hereto (the "Indemnifying Party") under
this Article 8, give notice thereof (the "Claims Notice") to the Indemnifying
Party (but the obligations of the Indemnifying Party under this Article 8 shall
not be impaired by the Indemnified Party's failure to give such notice, except
to the extent that said failure actually prejudices the rights of the
Indemnifying Party). The Claims Notice shall describe the Indemnifiable Event in
reasonable detail, shall indicate whether the Indemnifiable Event involves a
"Third Party Claim" (defined below), and shall indicate the amount (estimated,
if necessary) of the Loss that has been or may be suffered by the Indemnified
Party. In such event, the Indemnifying Party shall, within fifteen (15) business
days after receipt of the Claims Notice, give notice to the Indemnified Party of
whether he or it intends to dispute the claim described in the Claims Notice
(the "Response Notice"). If the Indemnifying Party timely disputes the Claims
Notice as provided above, the Indemnified Party shall, for a period of not more
than fifteen (15) business days after receipt of the Response Notice (or less,
if the nature of the Indemnifiable Event so requires), seek out a negotiated
settlement of the dispute with the Indemnifying Party and shall refrain during
that period from commencing any judicial proceeding or other action to enforce
this Article 8. If, despite their good faith negotiations, the
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parties are unable to resolve the dispute within the aforesaid period (or if the
Indemnifying Party fails to timely give the Response Notice), the Indemnified
Party shall be free to exercise all rights and remedies available to him or it
hereunder, at law in equity or otherwise to enforce his or its rights under this
Article 8. As used herein, "Third Party Claim" means any demand, claim or
circumstance which, with the lapse of time or otherwise, would give rise to a
claim or the commencement (or threatened commencement) of any action, proceeding
or investigation against the Indemnified Party by any other person.
SECTION 8.4 Opportunity to Defend Against Third Party Claims. If the
Claims Notice relates to a Third Party Claim, the Indemnifying Party may elect
to compromise or defend, at its own expense and by its own counsel, such Third
Party Claim. If the Indemnifying Party elects to compromise or defend such Third
Party Claim, it shall within 30 business days (or sooner, if the nature of the
Third Party Claim so requires) after his or its receipt of the Claims Notice,
notify the Indemnified Party of its intent to do so, and the Indemnified Party
shall cooperate, at the expense of the Indemnifying Party, in the compromise of,
or defense against, such Third Party Claim. If the Indemnifying Party elects not
to compromise or defend such Third Party claim, fails to notify the Indemnified
Party of its election as herein provided or contests its obligation to indemnify
under this Agreement, the Indemnified Party may pay, compromise or defend such
Third Party Claim. Notwithstanding the foregoing, neither the Indemnifying Party
nor the Indemnified Party may settle or compromise any claim over the objection
of the other, provided, however, that consent to settlement or compromise shall
not be unreasonably withheld. In any event, the Indemnified Party and the
Indemnifying Party may participate, at their own expense, in the defense of such
Third Party Claim. If the Indemnifying Party chooses to defend any claim, the
Indemnified Party shall make available to the Indemnifying Party any books,
records or other documents within its control that are necessary or appropriate
for such defense. The Indemnifying Party shall be subrogated to all rights and
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remedies of the Indemnified Party to the extent of any indemnification provided
by the Indemnifying Party to the Indemnified Party.
SECTION 8.5 Limitation on Indemnification. Indemnified Parties
hereunder shall be entitled to receive indemnification under this Article 8 only
if and to the extent the aggregate amount of indemnification due to such
Indemnified Parties hereunder exceeds the lesser of $150,000 or the Closing Date
Net Worth in the case where Purchaser is the Indemnified Party, and $20,000 in
the case where Seller is the Indemnified Party. The maximum aggregate liability
of Seller on the one hand, and Purchaser on the other hand, shall be $ 350,000.
SECTION 8.6 Survival. Notwithstanding the investigations by the
parties hereto of each other's affairs, and notwithstanding any knowledge of
facts determined or determinable by such parties pursuant to such investigation,
each of Seller and Purchaser shall have the right to rely fully upon the
representations, warranties, covenants and agreements of the other parties
contained in this Agreement. The representations and warranties of the parties
contained herein shall survive the Closing (i) to the extent contained in
Section 3.24, 3.25, 3.26, 4.21 and 4.22 and 4.23 hereof, for the duration of the
applicable statute of limitations, (ii) to the extent relating to any other
matter, for twelve (12) months following the Closing. A claim for
indemnification hereunder must be asserted by a party seeking indemnification
within the respective period of survival.
SECTION 8.7 Indemnification Exclusive Remedy. The parties hereto
acknowledge and confirm that, except in the event of fraud, the indemnification
procedures described in this Article 8 shall be the sole and exclusive remedies
available to them for any breach or non-fulfillment of the representations,
warranties, covenants, agreements and other provisions of this Agreement.
45
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ARTICLE 9.
TERMINATION
SECTION 9.1 Termination. Anything herein or elsewhere to the
contrary notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing Date:
(a) By mutual consent of Seller and Purchaser; or
(b) By Seller if any of the conditions set forth in Section 7 hereof
shall have become incapable of fulfillment, and shall not have been waived by
Seller; or
(c) By Purchaser if any of the conditions set forth in Section 6
hereof shall have become incapable of fulfillment, and shall not have been
waived by Buyer; or
(d) By Purchaser or Seller if the Closing has not occurred on or
before September 30, 1999.
SECTION 9.2 Effects of Termination. If this Agreement is terminated
and the transactions contemplated hereby are not consummated as described above,
this Agreement shall become void and of no further force and effect, except for
the provisions of Section 5.7 relating to expenses.
ARTICLE 10.
MISCELLANEOUS
SECTION 10.1 Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally, telegraphed, telexed or
46
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sent by facsimile transmission or, if mailed, three (3) days after the date of
deposit in the mails, as follows:
(i) if to Seller, to:
Charles V. Payne
237 Elm Avenue
Teaneck, NJ 07666
with a copy to:
Mark Astarita, Esq.
Gusrae, Kaplan & Bruno
120 Wall Street
New York, NY 10005
Fax No. (212) 809-5449
(ii) if to Purchaser, to:
Vacation Emporium Corporation
90 Madison Street
Suite 707
Denver, Colorado 80206
with a copy to:
Steven A. Saide, Esq.
Bryan Cave LLP
245 Park Avenue
New York, New York 10167
Fax No. (212) 692-1900
Any party may by notice given in accordance with this Section to the
other parties designate another address or person for receipt of notices
hereunder.
SECTION 10.2 Entire Agreement. This Agreement (including the
schedules and exhibits) and the agreements referred to herein and/or executed in
connection with the consummation of the Transactions contemplated herein contain
the entire agreement among
47
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the parties with respect to the exchange of the Purchased Shares for the
Exchange Shares and the related transactions, and supersede all prior
agreements, written or oral, with respect thereto.
SECTION 10.3 Waivers and Amendments; Non-Contractual Remedies;
Preservation of Remedies. This Agreement may be amended, superseded, canceled,
renewed or extended, and the terms hereof may be waived, only by a written
instrument signed by the parties or, in the case of a waiver, by the parties
waiving compliance. No delay on the part of any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof. Nor shall any
waiver on the part of any party of any such right, power or privilege, nor any
single or partial exercise of any such right, power or privilege. The rights and
remedies herein provided are cumulative and are not exclusive of any rights or
remedies that any party may otherwise have at law or in equity. The rights and
remedies of any party based upon, arising out of or otherwise in respect of any
inaccuracy in or breach of any representation, warranty, covenant or agreement
contained in this Agreement shall in no way be limited by the fact that the act,
omission, occurrence or other state of facts upon which any claim of any such
inaccuracy or breach is based may also be the subject of any other
representation, warranty, covenant or agreement contained in this Agreement (or
in any other agreement between the parties) as to which there is no inaccuracy
or breach.
SECTION 10.4 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of New York, applicable to
agreements made and to be performed entirely within such State (without giving
effect to conflicts of law principles thereof).
SECTION 10.5 Binding Effect; No Assignment; No Third Party
Beneficiaries. This Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and legal representatives. Nothing
contained herein is intended or
48
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shall be construed as creating third party beneficiaries to this Agreement. This
Agreement is not assignable except by operation of law.
SECTION 10.6 Variations in Pronouns. All pronouns and any variations
thereof refer to the masculine, feminine or neuter, singular or plural, as the
context may require.
SECTION 10.7 Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a number
of copies hereof each signed by less than all, but together signed by all of the
parties hereto.
SECTION 10.8 Exhibits and Schedules. The Exhibits and Schedules are
a part of this Agreement as if fully set forth herein. All references herein to
Sections, subsections, clauses, Exhibits and Schedules shall be deemed
references to such parts of this Agreement, unless the context shall otherwise
require.
SECTION 10.9 Headings. The headings in this Agreement are for
reference only, and shall not affect the interpretation of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date first above written.
VACATION EMPORIUM CORPORATION
By: /s/ Ian Rice
----------------------
/s/ Charles V. Payne
--------------------------
Charles V. Payne
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TABLE OF CONTENTS
ARTICLE 1. Exchange of Purchased Shares.....................................2
Section 1.1. Sale of Purchased Shares.................................2
Section 1.2 Purchase Price............................................2
Section 1.3 Delivery of Shares........................................2
Section 1.4 Supplemental Action.......................................2
ARTICLE 2. Closing; Closing Date............................................3
ARTICLE 3. Representations and Warranties of Seller.........................3
Section 3.1 Due Incorporation and Qualification.......................3
Section 3.2 Authority to Execute and Perform Agreements...............3
Section 3.3 Subsidiaries and Affiliates...............................4
Section 3.4 Articles of Incorporation and By-Laws.....................4
Section 3.5 Capitalization............................................4
Section 3.6 Officers and Directors....................................5
Section 3.7 Financial Statements; Financial Matters...................5
Section 3.8 Liabilities...............................................6
Section 3.9 Absence of Certain Changes................................7
Section 3.10 Tax Matters..............................................7
Section 3.11 Real and Personal Property - Leased to the Company.......7
Section 3.12 Title....................................................8
Section 3.13 Intangible Property......................................8
Section 3.14 Contracts and Other Agreements...........................9
Section 3.15 Insurance...............................................10
Section 3.16 Litigation; Actions and Proceedings.....................10
Section 3.17 Operations of the Company...............................11
Section 3.18 Compliance with Laws....................................13
Section 3.19 Licenses, Permits and Certificates......................13
Section 3.20 No Conflicts............................................14
Section 3.21 Labor Agreements, Employee Benefit Plans, and Employment
Agreements......................................................14
Section 3.22 Books and Records.......................................15
Section 3.23 Accounts Receivable.....................................15
Section 3.24 Stock Restrictions......................................15
Section 3.25 Purchase for Investment, Etc............................16
Section 3.26 Ownership of the Purchased Shares.......................17
Section 3.27 Finders and Investment Bankers..........................18
Section 3.28 Full Disclosure.........................................18
ARTICLE 4. Representations and Warranties of Purchaser.....................18
Section 4.1 Due Incorporation and Qualification......................18
Section 4.2 Authority to Execute and Perform Agreements..............19
Section 4.3 Subsidiaries and Affiliates..............................19
Section 4.4 Officers and Directors...................................20
Section 4.5 Articles of Incorporation and By-Laws....................20
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Section 4.6 Capitalization...........................................20
Section 4.7 Financial Statements.....................................20
Section 4.8 Liabilities..............................................21
Section 4.9 Tax Matters..............................................22
Section 4.10 Real and Personal Property - Leased to Purchaser........22
Section 4.11 Title...................................................23
Section 4.12 Intangible Property.....................................23
Section 4.13 Contracts and Other Agreements..........................23
Section 4.14 Litigation; Actions and Proceedings.....................24
Section 4.15 Operations of Purchaser.................................24
Section 4.16 Compliance with Laws....................................26
Section 4.17 Licenses, Permits and Certificates......................27
Section 4.18 No Conflicts............................................27
Section 4.19 Labor Agreements, Employee Benefit Plans, and Employment
Agreements......................................................28
Section 4.20 Books and Records.......................................28
Section 4.21 Stock Restrictions......................................28
Section 4.22 Purchase for Investment.................................29
Section 4.23 Ownership of the Exchange Shares........................30
Section 4.24 Finders and Investment Bankers..........................30
Section 4.25 Absence of Certain Changes..............................30
Section 4.26 Insurance...............................................31
Section 4.27 Full Disclosure.........................................31
ARTICLE 5. Covenants and Agreements of the Parties.........................31
Section 5.1 Conduct of Business......................................31
Section 5.2 Access and Investigation.................................32
Section 5.3 Litigation...............................................32
Section 5.4 Actions with Respect to Closing..........................32
Section 5.5 Public Statement.........................................33
Section 5.6 Consent to Jurisdiction and Service of Process...........33
Section 5.7 Expenses.................................................34
Section 5.8 Purchaser 1999 Financials................................34
Section 5.9 Closing Date Balance Sheet; Closing Date Net Worth.......34
ARTICLE 6. Conditions To Purchaser Obligations.............................35
Section 6.1 Representations and Warranties of Seller.................35
Section 6.2 Performance of this Agreement............................36
Section 6.3 Certificate of Seller....................................36
Section 6.4 No Material Adverse Change...............................36
Section 6.5 Satisfactory Business Review.............................36
Section 6.6 Governmental Permits and Approvals.......................36
Section 6.7 Third Party Consents.....................................37
Section 6.8 Voting Agreement.........................................37
Section 6.9 Employment Agreement.....................................37
Section 6.10 Charter Documents.......................................37
Section 6.11 By-Laws.................................................37
Section 6.12 Good Standing...........................................37
Section 6.13 Litigation..............................................38
Section 6.14 Consulting Agreements...................................38
Section 6.15 Company Profit Sharing Plan.............................38
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Section 6.16 Company Quarterly Financials.............................38
ARTICLE 7. Conditions To Seller Obligations................................38
Section 7.1 Representations and Warranties of Purchaser..............39
Section 7.2 Performance of this Agreement............................39
Section 7.3 Certificate of Purchaser.................................39
Section 7.4 No Material Adverse Change...............................39
Section 7.5 Satisfactory Business Review.............................40
Section 7.6 Governmental Permits and Approvals.......................40
Section 7.7 Third Party Consents.....................................40
Section 7.8 Cancellation of Certain Outstanding Shares...............40
Section 7.9 Registration Rights Agreement............................40
Section 7.10 Financing...............................................40
Section 7.11 Certified Resolutions...................................41
Section 7.12 Charter Documents.......................................41
Section 7.13 By-Laws.................................................41
Section 7.14 Good Standing...........................................41
Section 7.15 Purchaser Deliveries...................................41
Section 7.16 Litigation..............................................41
Section 7.17 Voting Agreement........................................42
Section 7.18 Employment Agreement....................................42
ARTICLE 8. Indemnification; Survival.......................................42
Section 8.1 Obligation of Seller to Indemnify........................42
Section 8.2 Obligation of Purchaser to Indemnify.....................43
Section 8.3 Claims Notice............................................43
Section 8.4 Opportunity to Defend Against Third Party Claims.........44
Section 8.5 Limitation on Indemnification............................45
Section 8.6 Survival.................................................45
Section 8.7 Indemnification Exclusive Remedy.........................45
ARTICLE 9. Termination.....................................................46
Section 9.1 Termination..............................................46
Section 9.2 Effects of Termination...................................46
ARTICLE 10. Miscellaneous..................................................46
Section 10.1 Notices.................................................46
Section 10.2 Entire Agreement........................................47
Section 10.3 Waivers and Amendments; Non-Contractual Remedies;
Preservation of Remedies........................................48
Section 10.4 Governing Law...........................................48
Section 10.5 Binding Effect; No Assignment; No Third Party
Beneficiaries ..................................................48
Section 10.6 Variations in Pronouns..................................49
Section 10.7 Counterparts............................................49
Section 10.8 Exhibits and Schedules..................................49
Section 10.9 Headings................................................49
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SCHEDULE 4.3
SUBSIDIARIES AND AFFILIATES
None, except Ian Rice in his capacity as Director and Shareholder or any
Purchaser who owns 10% or more of Purchaser's outstanding common stock.
4
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SCHEDULE 4.4
OFFICERS AND DIRECTORS
Ian Rice is the sole Director and the President of Purchaser. The only other
officer of Purchaser is Lisa Crosse, the Secretary.
5
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SCHEDULE 4.6
CAPITALIZATION
Purchaser has granted options to purchase shares of its common stock to the
following persons in the amount indicated opposite their respective names.
NUMBER OF SHARES
NAME SUBJECT TO OPTION
- ---- -----------------
David McCallen 351,282
Shawn Baldwin 526,923
Purchaser has entered into escrow agreements with the following individuals,
true and correct copies of which have been provided to Seller, that contain
provisions that obligate the Purchaser to repurchase certain shares of its
common stock on the terms and conditions set forth therein: Timothy David,
Sedric Richardson, Ralph Reme, Joseph R. Smith, Alan Brown, Maria Garcia, Cecil
Payne, Juana Penson, David McCallen and Shawn Baldwin.
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SCHEDULE 4.7(a)
PURCHASER'S AUDITED FINANCIALS
7
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SCHEDULE 4.7(b)
PURCHASER'S UNAUDITED BALANCE SHEET
8
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SCHEDULE 4.8
LIABILITIES
None
9
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SCHEDULE 4.13
CONTRACTS AND OTHER AGREEMENTS
Purchaser is a party to an Employment Agreement, Subscription Agreement and
Escrow Agreement with each of David McCallen and Shawn Baldwin. Purchaser is
also a party to a Subscription Agreement and a Escrow Agreement with each of the
parties listed in Schedule 4.6.
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SCHEDULE 4.15
OPERATIONS OF PURCHASER
Since June 30, 1999, Purchaser has done the following:
a) Granted stock options to the individuals set forth in Schedule 4.6 and
sold an aggregate of 1,258,205 shares of its common stock to the persons
listed in Schedule 4.6
b) Entered into Employment Agreements with each of David McCallen and Shawn
Baldwin.
c) Used $10,000 in cash to pay legal fees in connection with the
Transactions.
d) Entered into Escrow Agreements with each of the persons listed in Schedule
4.6.
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SCHEDULE 4.17
LICENSES, PERMITS AND CERTIFICATES
None
12
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SCHEDULE 4.19
LABOR AGREEMENTS, EMPLOYEE BENEFIT PLANS
AND EMPLOYMENT AGREEMENT
Purchaser is a party to an Employment Agreement with each of David McCallen and
Shawn Baldwin.
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3.1
CERTIFICATE OF INCORPORATION
of
VACATION EMPORIUM CORPORATION
(A Nevada Corporation)
FIRST. The name of this corporation is VACATION EMPORIUM
CORPORATION.
SECOND. The Corporation's Registered Office in the State of Nevada
is located at 2533 N. Carson Street, Carson City, Nevada 89706. The
Corporation's Resident Agent at this address is Laughlin Associates, Inc.
THIRD. The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of Nevada. The Corporation may conduct all or any part of its
business, and may hold, purchase, mortgage, lease and convey real and personal
property, anywhere in the world. The Corporation shall have perpetual duration.
FOURTH. The name and mailing address of the Incorporator is:
Name Mailing Address
John D. Brasher Jr. 90 Madison Street, Suite 707
Denver, Colorado 80206
Upon the filing of this Certificate of Incorporation the powers of
the Incorporator shall terminate. The name and address of the person who is to
serve as the one director until the first annual meeting of shareholders or
until his successor is duly elected and has qualified is:
Name Mailing Address
John D. Brasher Jr. 90 Madison Street, Suite 707
Denver, Colorado 80206
{CAPITAL STOCK}
FIFTH. The aggregate number of shares of capital stock of all
classes which the Corporation shall have authority to issue is FIFTY-FIVE
MILLION (55,000,000), of which FIFTY MILLION (50,000,000) shares having a par
value of $.001 per share shall be of a class designated "Common Stock" (or
"Common Shares") and FIVE MILLION (5,000,000) shares having a par value of $.001
per share shall be of a class designated "Preferred Stock" (or "Preferred
Shares"). All shares of the Corporation shall be issued for such consideration
or considerations as the Board of Directors may from time to time determine. The
designations, voting powers, preferences, optional or other special rights and
qualifications, limitations, or restrictions of the above classes of stock shall
be as follows:
<PAGE>
I. PREFERRED STOCK
(a) Issuance in Class and Series. Shares of Preferred Stock may be
issued in one or more classes or series at such time or times as the Board of
Directors may determine. All shares of any one series shall be of equal rank and
identical in all respects.
(b) Authority of Board for Issuance. Authority is hereby expressly
granted to the Board of Directors to fix from time to time, by resolution or
resolutions providing for the issuance of any class or series of Preferred
Stock, the designation of such classes and series and the powers, preferences
and rights of the shares of such classes and series, and the qualifications,
limitations or restrictions thereof, including the following:
1. The distinctive designation and number of shares comprising
such class or series, which number may (except where otherwise provided by
the Board of Directors in creating such class or series) be increased or
decreased (but not below the number of shares then outstanding) from time
to time by action of the Board of Directors;
2. The rate of dividend, if any, on the shares of that class
or series, whether dividends shall be cumulative and, if so, from which
date or dates, the relative rights of priority, if any, of payment of
dividends on shares of that class or series over shares of any other class
or series;
3. Whether the shares of that class or series shall be
redeemable at the option of the Corporation or of the holder of the shares
or of another person or upon the occurrence of a designated event and, if
so, the terms and conditions of such redemption, including the date or
dates upon or after which they shall be redeemable, and the amount per
share payable in case of redemption, which amount may vary under different
conditions and different redemption dates;
4. Whether that class or series shall have a sinking fund
for the redemption or purchase of shares of that class or series and, if
so, the terms and amounts payable into such sinking fund;
5. The rights to which the holders of the shares of that
series shall be entitled in the event of voluntary or involuntary
liquidation, dissolution, distribution of assets or winding-up of the
Corporation, relative rights of priority, if any, of payment of shares of
that class or series;
6. Whether the shares of that class or series shall be
convertible into or exchangeable for shares of stock of any class or any
other series of Preferred Stock and, if so, the terms and conditions of
such conversion or exchange, including the method of adjusting the rates
of conversion or exchange in the event of a stock split, stock dividend,
combination of shares or similar event;
7. Whether the issuance of any additional shares of such
class or series, or of any shares of any other class or series, shall be
subject to restrictions as to issuance, or as to the powers, preferences
or rights of any such other class or series;
2
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8. Any other preferences, privileges and powers, and
relative, participating, optional or other special rights, and
qualifications, limitations or restrictions of such class or series, as
the Board of Directors may deem advisable and as shall not be inconsistent
with the provisions of the Corporation's Charter, as from time to time
amended, and to the full extent now or hereinafter permitted by the laws
of Nevada.
(c) Dividends. Payment of dividends shall be as follows:
1. The holders of Preferred Stock of each class or series, in
preference to the holders of Common Stock, shall be entitled to receive,
as and when declared by the Board of Directors out of funds legally
available therefor, all dividends, at the rate for such class or series
fixed in accordance with the provisions of this Article FIFTH and no more;
2. Dividends may be paid upon, or declared or set aside for,
any class or series of Preferred Stock in preference to the holders of any
other class or series of Preferred Stock in the manner determined by the
resolutions of the Board of Directors authorizing and creating such class
or series;
3. So long as any shares of Preferred Stock shall be
outstanding, in no event shall any dividend, whether in cash or in
property, be paid or declared nor shall any distribution be made, on the
Common Stock, nor shall any shares of Common Stock be purchased, redeemed
or otherwise acquired for value by the Corporation, unless all dividends
on all cumulative classes and series Preferred Stock with respect to all
past dividend periods, and unless all dividends on all classes and series
of Preferred Stock for the then current dividend period shall have been
paid or declared, and provided for, and unless the Corporation shall not
be in default with respect to any of its obligations with respect to any
sinking fund for any class or series of Preferred Stock. The foregoing
provisions of this subparagraph (3) shall not, however, apply to any
dividend payable in Common Stock;
4. No dividend shall be deemed to have accrued on any share of
Preferred Stock of any class or series with respect to any period prior to
the date of the original issue of such share or the dividend payment date
immediately preceding or following such date of original issue, as may be
provided in the resolutions of the Board of Directors creating such class
or series. Preferred Stock shall not be entitled to participate in any
dividends declared and paid on Common Stock, whether payable in cash,
stock or otherwise. Accruals of dividends shall not pay interest.
(d) Dissolution or Liquidation. In the event of any voluntary or
involuntary liquidation, dissolution of assets or winding-up of the Corporation,
the holders of the shares of each class or series of Preferred Stock then
outstanding shall be entitled to receive out of the net assets of the
Corporation, but only in accordance with the preferences, if any, provided for
such series, before any distribution or payment shall be made to the holders of
Common Stock, the amount per share fixed by the resolution or resolutions of the
Board of Directors to be received by the holder of each such share on such
voluntary or involuntary liquidation, dissolution, distribution of assets or
winding-up, as the case may be. If such payment shall have been made
3
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in full to the holders of all outstanding Preferred Stock of all classes and
series, or duly provided for, the remaining assets of the Corporation shall be
available for distribution among the holders of Common Stock as provided in this
Article FIFTH. If upon any such liquidation, dissolution, distribution of assets
or winding-up, the net assets of the Corporation available for distribution
among the holders of any one or more classes or series of Preferred Stock which
(i) are entitled to a preference over the holders of Common Stock upon such
liquidation, dissolution, distribution of assets or winding-up, and (ii) rank
equally in connection therewith, shall be insufficient to make payment for the
preferential amount to which the holders of such shares shall be entitled, then
such assets shall be distributed among the holders of each such series of
Preferred Stock ratably according to the respective amounts to which they would
be entitled in respect of the shares held by them upon such distribution if all
amounts payable on or with respect to such shares were paid in full. Neither the
consolidation nor merger of the Corporation, nor the exchange, sale, lease or
conveyance (whether for cash, securities or other property) of all,
substantially all or any part of its assets, shall be deemed a liquidation,
dissolution, distribution of assets or winding-up of the Corporation within the
meaning of this provision.
(e) Voting Rights. Except to the extent otherwise required by law or
provided in the resolution of the Board of Directors adopted pursuant to
authority granted in this Article FIFTH, the share of Preferred Stock shall have
no voting power with respect to any matter whatsoever. The Board of Directors
may determine whether the shares of any class or series shall have limited,
contingent, full or no voting rights, in addition to the voting rights provided
by law and, if so, the terms of such voting rights. Whenever holders of
Preferred Stock are entitled to vote on a matter, each holder of record of
Preferred Stock shall be entitled to one vote for each share standing in his
name on the books of the Corporation and entitled to vote.
II. COMMON STOCK
(a) Issuance. The Common Stock may be issued from time to time in
one or more classes or series in any manner permitted by law, as determined by
the Board of Directors and stated in the resolution or resolutions providing for
issuance thereof. Each class or series shall be appropriately designated, prior
to issuance of any shares thereof, by some distinguishing letter, number or
title. All shares of each class or series of Common Stock shall be alike in
every particular and shall be of equal rank and have the same power, preferences
and rights, and shall be subject to the same qualifications, limitations and
restrictions, if any.
(b) Voting Powers. The Common Stock may have such voting powers
(full, limited, contingent or no voting powers), such designations, preferences
and relative, participating, optional or other special rights, and be subject to
such qualifications, limitations and restrictions, as the Board of Directors
shall determine by resolution or resolutions. Unless otherwise resolved by the
Board of Directors at the time of issuing Common Shares, (i) each Common Share
shall be of the same class, without any designation, preference or relative,
participating, optional or other special rights, and subject to no
qualification, limitation or restriction, and (ii) Common Shares shall have
unlimited voting rights, including but not limited to the right to vote in
elections for directors, and each holder of record of Common Shares entitled to
vote shall have one vote for each share of stock standing in his name on the
books of the Corporation and entitled to vote.
4
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(c) Dividends. After the requirements with respect to preferential
dividends, if any, on Preferred Stock, and after the Corporation shall have
complied with all requirements, if any, with respect to the setting aside of
sums in a sinking fund for the purchase or redemption of shares of any class or
series of Preferred Stock, then and not otherwise, the holders of Common Stock
shall receive, to the extent permitted by law, such dividends as may be declared
from time to time by the Board of Directors.
(d) Dissolution or Liquidation. After distribution in full of the
preferential amount, if any, to be distributed to the holders of Preferred
Stock, in the event of the voluntary or involuntary liquidation, dissolution,
distribution of assets or winding-up of the Corporation, the holders of Common
Stock shall be entitled to receive all the remaining assets of the Corporation
of whatever kind available for distribution to shareholders ratably in
proportion to the number of shares of Common Stock respectively held by them.
III. GENERAL MATTERS
(a) Capital. The portion of the consideration received by the
Corporation upon issuance of any of its shares that shall constitute "capital"
within the meaning of the General Corporation Law of Nevada shall be (1) in the
case of par-value shares, the par value thereof, and (2) in the case of shares
without par value, the stated value of such shares as determined by the Board of
Directors at the time of issuance; provided, that if no stated value is
determined at the time that shares without par value are issued, the entire
consideration to be received for the shares shall constitute capital.
(b) Fully Paid and Nonassessable. Any and all shares of Common or
Preferred Stock issued by the Corporation for which not less than the portion of
the consideration to be received determined to be "capital" has been paid to the
Corporation, provided the Corporation has received a promissory note or other
binding legal obligation of the purchaser to pay the balance thereof, shall be
deemed fully paid and nonassessable shares.
(c) Amendment of Shareholder Rights. So long as no shares of any
class or series established by resolution of the Board of Directors have been
issued, the voting rights, designations, preferences and relative, optional,
participating or other rights of these shares may be amended by resolution of
the Board of Directors.
(d) Status of Certain Shares. Shares of Preferred or Common Stock
which have redeemed, converted, exchanged, purchased, retired or surrendered to
the Corporation, or which have been reacquired in any other manner, shall have
the status of authorized and unissued shares and may be reissued by the Board of
Directors as shares of the same or any other series, unless otherwise provided
herein or in the resolution authorizing and establishing the shares.
(e) Denial of Preemptive Rights. No holder of any shares of the
Corporation shall be entitled as a matter of right to subscribe for or purchase
any part of any new or additional issue of stock of any class or of securities
convertible into or exchangeable for stock of any class, whether now or
hereafter authorized or whether issued for money, for a consideration other than
money, or by way of dividend.
5
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(f) Convertibility. Common Shares or other shares of any class or
series, and notes, debentures, bonds and other debt instruments issued by the
Corporation or any affiliated company, may be made convertible into or
exchangeable for, at the option of the Corporation or the holder or upon the
occurrence of a specified event, shares of any other class or classes or any
other series of the same or any other class or classes of shares of the
Corporation, at such price or prices or at such rate or rates of exchange and
with such adjustments as shall be set forth in the resolution or resolutions
providing for the issuance of such convertible or exchangeable shares adopted by
the Board of Directors.
(g) Redeemability. Common Shares may be made redeemable at the
option of the Corporation or upon the occurrence of a designated event, if and
to the extent now or subsequently allowed by the General Corporation Law of
Nevada, as such law may subsequently be amended, and the terms and conditions of
redemption, including the date or dates upon or after which they shall be
redeemable, the amount per share payable in case of redemption and any variance
in the amount or amounts payable, among other terms, conditions and limitations
which may be imposed, may be fixed and established by the Board of Directors in
the resolution or resolutions authorizing the issuance of redeemable Common
Shares.
{VOTING OF SHAREHOLDERS}
SIXTH. The following provisions are hereby adopted for the purpose
of regulating certain matters relating to the voting of shareholders of the
Corporation:
(a) Definitions. Whenever the term "total voting power" appears in
this Charter, it shall mean all shares of the Corporation entitled to vote at a
meeting or on a question presented for shareholder approval, and of every class
or series of shares entitled to vote by class or series. Whenever the term
"votes cast" appears in this Charter, it shall mean the total number of voting
shares out of the total voting power which were unequivocally voted in favor of
or against a director standing for election or a matter presented for
shareholder approval at a legal meeting which commenced with a quorum.
(b) Quorum. A majority of the total voting power, or where a
separate vote by class or series is required, a majority of the voting shares of
each such class or series, represented in person or by proxy, shall constitute a
quorum at any meeting of the Corporation's shareholders.
(c) Vote Required. Any action to be taken by the Corporation's
shareholders at any valid meeting which commenced with a quorum shall require
the affirmative vote only of a majority of the votes cast, except where this
Charter or the Corporation's Bylaws then in effect requires the affirmative vote
of a higher proportion of the votes cast or requires the affirmative vote of a
proportion of the total voting power, and except where the Nevada General
Corporation Law specifically requires the affirmative vote of a majority of all
the votes entitled to be cast. Directors shall be elected by plurality vote.
Abstentions from voting shall not be considered in the tallying of votes.
Nothing contained in this Article SIXTH shall affect the voting rights of
holders of any class or series of shares entitled to vote as a class or by
series. The Bylaws may provide for the vote necessary at any adjournment of a
duly called meeting for which a quorum was not obtained.
6
<PAGE>
(d) Manner of Voting; Etc. The vote of shareholders may be taken at
a meeting by a show of hands or other method authorized by the Board of
Directors. Written ballots shall be used only upon authorization of the Board of
Directors or as provided in the Corporation's Bylaws. Cumulative voting shall
not be allowed in the election of directors.
(e) Action Without Meeting. Any action required or permitted to be
taken at a meeting of the shareholders may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting forth the
action so taken, shall be signed by shareholders holding at least a majority of
the voting power, except that if a different proportion of voting power is
required for such an action at a meeting, then that proportion of written
consents is required.
(f) Shareholder Ratification. Any contract, transaction, or act of
the Corporation or of the directors which shall be ratified by vote of the
shareholders at any annual meeting, or at any special meeting called for such
purpose, or by means of a written consent of shareholders in lieu of a meeting,
shall so far as permitted by law be as valid and as binding as though ratified
by every shareholder of the Corporation.
{CONCERNING SHAREHOLDERS, DIRECTORS AND OFFICERS}
SEVENTH. The following provisions are hereby adopted for the purpose
of defining, limiting, and regulating the powers of the Corporation and of the
directors, officers and shareholders:
(a) Number of Directors. The number of Directors shall be as fixed
in the Bylaws. In the absence of such provision in the Bylaws, the Corporation
shall have ONE (1) Director. Directors shall be elected by plurality vote and
need not be elected by written ballot, except as provided in the Bylaws.
(b) Removal of Directors. A director of the Corporation, or the
entire Board of Directors of the Corporation, may be removed by the
shareholders, with or without cause, only upon the affirmative vote of the
holders of not less than two-thirds (2/3) of the total voting power, without
considering the vote of the director or directors sought to be removed.
(c) Removal of Officers and Employees. Unless the Bylaws otherwise
provide, any officer or employee of the Corporation may be removed at any time
with or without cause by the Board of Directors or by any committee or superior
officer upon whom such power of removal may be conferred by the Bylaws or by
authority of the Board of Directors, without prejudice, however, to existing
contractual rights.
(d) Corporate Opportunities. The officers, directors and other
members of management of the Corporation shall be subject to the doctrine of
"corporate opportunities" only insofar as it applies to any business opportunity
(i) of a type falling within the regular business or operations of the
Corporation, or (ii) in which the Corporation has expressed an interest as
determined from time to time by the Corporation's Board of Directors as
evidenced by resolutions appearing in the Corporation's minutes. All such
business opportunities which come to the attention of the officers, directors,
and other members of management of the Corporation shall be disclosed promptly
to the Corporation and made available to it. The Board of Directors
7
<PAGE>
may reject any business opportunity presented to it, and only thereafter may any
officer, director or other member of management avail himself of such
opportunity. The provisions of this paragraph shall not be construed to release
any employee of the Corporation from any fiduciary duties which he may have to
the Corporation.
{BYLAWS}
EIGHTH. The initial Bylaws of the Corporation shall be adopted by
its Board of Directors. The power to alter, amend or repeal the Bylaws or adopt
new Bylaws shall be vested in the Board of Directors, subject to the right of
the shareholders to alter, amend or repeal such Bylaws or adopt new Bylaws. The
Bylaws may contain any provisions for the regulation and management of the
affairs of the Corporation not inconsistent with law or this Charter.
{INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS}
NINTH. The following provisions are hereby adopted for the purpose
of defining and regulating certain rights of directors, officers and others in
respect of indemnification and related matters.
(a) Actions, Suits or Proceedings Other than by or in the Right of
the Corporation. The Corporation may indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that he is or was or has agreed to become a director,
officer, employee or agent of the Corporation, or is or was serving or has
agreed to serve at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, against costs, charges, expenses (including attorney's
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or on his behalf in connection with such action, suit or
proceeding and any appeal therefrom, if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation or that, with respect to any criminal proceeding, he had reasonable
cause to believe that his conduct was unlawful.
(b) Actions or Suits by or in the Right of the Corporation. The
Corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding by or in the right of the Corporation to procure a judgment in its
favor by reason of the fact that he is or was or has agreed to become a
director, officer, employee or agent of the Corporation, or is or was serving or
has agreed to serve at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, against costs, charges and expenses
8
<PAGE>
(including amounts paid in settlement and attorney's fees) actually and
reasonably incurred by him or on his behalf in connection with the defense or
settlement of such action or suit and any appeal therefrom, if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation. No indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged by a
court of competent jurisdiction after exhaustion of all appeals therefrom to be
liable to the Corporation or for amounts paid in settlement to the Corporation
unless and only to the extent that the court in which such action or suit was
brought or other court of competent jurisdiction shall determine upon
application that, despite the adjudication of such liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such costs, charges and expenses which the court shall deem
proper.
(c) Indemnification for Costs, Charges and Expenses of Successful
Party. Notwithstanding the other provisions of this Article NINTH, to the extent
that a director, officer, employee or agent of the Corporation has been
successful on the merits or otherwise, including, without limitation, the
dismissal of an action without prejudice, in defense of any action, suit or
proceeding referred to in Sections (a) and (b) of this Article NINTH, or in
defense of any claim, issue or matter therein, he shall be indemnified against
all costs, charges and expenses (including attorney's fees) actually and
reasonably incurred by him or on his behalf in connection therewith.
(d) Determination of Right to Indemnification. Any indemnification
under Sections (a) and (b) of this Article NINTH (unless ordered by a court)
shall be paid by the Corporation unless a determination is made (i) by a
disinterested majority of the Board of Directors who were not parties to such
action, suit or proceeding, or (ii) if such disinterested majority of the Board
of Directors so directs or cannot be obtained, by independent legal counsel in a
written opinion, or (iii) by the shareholders, that indemnification of the
director or officer is not proper in the circumstances because he has not met
the applicable standard of conduct set forth in Sections (a) and (b) of this
Article NINTH.
(e) Advances of Costs, Charges and Expenses. Costs, charges and
expenses (including attorney's fees) incurred by a person referred to in
Sections (a) or (b) of this Article NINTH in defending a civil or criminal
action, suit or proceeding may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding; provided, however, that
the payment of such costs, charges and expenses incurred by a director or
officer in his capacity as a director or officer (and not in any other capacity
in which service was or is rendered by such person while a director or officer)
in advance of the final disposition of such action, suit or proceeding shall be
made only upon receipt of an undertaking by or on behalf of the director or
officer to repay all amounts so advanced in the event that it shall ultimately
be determined that such director or officer is not entitled to be indemnified by
the Corporation as authorized in this Article, accompanied by evidence
satisfactory to the Board of Directors of ability to make such repayment. Such
costs, charges and expenses incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the majority of the Directors
deems appropriate. The majority of the Directors may, in the manner set forth
above, and upon approval of such director, officer employee or agent of the
Corporation, authorize the Corporation's counsel to represent such person, in
any action, suit or proceeding, whether or not the Corporation is a party to
such action, suit or proceeding.
9
<PAGE>
(f) Procedure for Indemnification. Any indemnification under
Sections (a), (b) and (c), or advance of costs, charges and expenses under
Section (e) of this Article NINTH, shall be made promptly, and in any event
within 60 days, upon the written request of the director or officer. The right
to indemnification or advances as granted by this Article shall be enforceable
by the director or officer in any court of competent jurisdiction if the
Corporation denies such request, in whole or in part, or if no disposition
thereof is made within 60 days. Such person's costs and expenses incurred in
connection with successfully establishing his right to indemnification, in whole
or in part, in any such action shall also be indemnified by the Corporation. It
shall be a defense to any such action (other than an action brought to enforce a
claim for the advance of costs, charges and expenses under Section (e) of this
Article NINTH where the required undertaking, if any, has been received by the
Corporation) that the claimant has not met the standard of conduct set forth in
Sections (a) or (b) of this Article NINTH, but the burden of proving such
defense shall be on the Corporation. Neither the failure of the Corporation
(including its Board of Directors, its independent legal counsel and its
shareholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct set forth in Sections (a)
or (b) of this Article NINTH, nor the fact that there has been an actual
determination by the Corporation (including its Board of Directors, its
independent legal counsel and its shareholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that the claimant has not met the applicable standard of conduct.
(g) Settlement. If in any action, suit or proceeding, including any
appeal, within the scope of Sections (a) or (b) of this Article NINTH, the
person to be indemnified shall have unreasonably failed to enter into a
settlement thereof, then, notwithstanding any other provision hereof, the
indemnification obligation of the Corporation to such person in connection with
such action, suit or proceeding shall not exceed the total of the amount at
which settlement could have been made and the expenses by such person prior to
the time such settlement could reasonably have been effected.
(h) Other Rights; Continuation of Right to Indemnification. The
indemnification provided by this Article shall not be deemed exclusive of any
other rights to which any director, officer, employee or agent seeking
indemnification may be entitled under any law (common or statutory), agreement,
vote of shareholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
office or while employed by or acting as agent for the Corporation, and shall
continue as to a person who has ceased to be a director, officer, employee or
agent, shall and shall inure to the benefit of the estate, heirs, executors and
administrators of such person. All rights to indemnification under this Article
shall be deemed to be a contract between the Corporation and each director or
officer of the Corporation who serves or served in such capacity at any time
while this Article NINTH is in effect. Any repeal or modification of this
Article NINTH or any repeal or modification of relevant provisions of the
General Corporation Law of Nevada or any other applicable laws shall not in any
way diminish any rights to indemnification of such director, officer, employee
or agent or the obligations of the Corporation arising hereunder. This Article
NINTH shall be binding upon any successor corporation to this Corporation,
whether by way of acquisition, merger, consolidation or otherwise.
10
<PAGE>
(i) Exceptions to Indemnification Right. Notwithstanding any other
language in this Charter, the Corporation shall not be obligated pursuant to the
terms of this Charter:
(1) Claims Initiated by Indemnitee. To indemnify or advance
expenses to any person with respect to proceedings or claims
initiated or brought voluntarily by him or her and not by way of
defense, expect with respect to proceedings brought to establish or
enforce a right to indemnification under this Charter or any other
statute or law or otherwise as required under the General
Corporation Law of Nevada, but such indemnification or advancement
of expenses may be provided by the Corporation in specific cases if
the Board of Directors finds it to be appropriate; or
(2) Lack of Good Faith. To indemnify any person for any
expenses incurred by him or her with respect to any proceeding
instituted by him or her to enforce or interpret this Agreement, if
a court of competent jurisdiction determines that each of the
material assertions made by him or her in such proceeding was not
made in good faith or was frivolous;
(3) Insured Claims. To indemnify any person for expenses or
liabilities of any type whatsoever (including, but not limited to,
judgments, fines, ERISA excise taxes or penalties, and amounts paid
in settlement) which have been paid directly to him or her by an
insurance carrier under a policy of officers' and directors'
liability insurance maintained by the Corporation.
(4) Claims Under Section 16(b). To indemnify any person for
expenses or the payment of profits arising from the purchase and
sale by him or her of securities in violation of Section 16(b) of
the Securities Exchange Act of 1934, as amended, or any similar or
successor statute.
(j) Insurance. The Corporation may purchase and maintain insurance
on behalf of any person who is or was or has agreed to become a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him or on his behalf in any such
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 this Article NINTH; provided, however, that such insurance is
available on acceptable terms, which determination shall be made by a vote of a
majority of the Directors.
(k) Savings Clause. If this Article NINTH or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the Corporation (i) shall nevertheless indemnify each director and officer of
the Corporation and (ii) may nevertheless indemnify each employee and agent of
the Corporation, as to any cost, charge and expense (including attorney's fees),
judgment, fine and amount paid in settlement with respect to any action, suit or
proceeding, whether civil, criminal, administrative or investigative, including
an action by or in the right of the Corporation, to the full extent permitted by
any applicable portion
11
<PAGE>
of this Article NINTH that shall not have been invalidated and to the full
extent permitted by applicable law.
(l) Amendment. No amendment, termination or repeal of this Article
NINTH shall affect or impair in any way the rights of any director or officer of
the Corporation to indemnification under the provisions hereof with respect to
any action, suit or proceeding arising out of, or relating to, any actions,
transactions or facts occurring prior to the final adoption of such amendment,
termination or appeal.
(m) Subsequent Legislation. If the General Corporation Law of Nevada
is amended after adoption of this Charter to further expand the indemnification
permitted to directors, officers, employees or agents of the Corporation, then
the Corporation shall indemnify such persons to the fullest extent permitted by
the General Corporation Law of Nevada, as so amended.
(n) Restriction. Notwithstanding any other provision hereof
whatsoever, no person shall be indemnified under this Article NINTH who is
adjudged liable for (i) a breach of duty to the Corporation or its shareholders
that resulted in personal enrichment to which he was not legally entitled, (ii)
intentional fraud or dishonesty or illegal conduct, or (iii) for any other cause
prohibited by applicable state or federal law, unless a court determines
otherwise.
{EXCLUSION OF DIRECTOR LIABILITY}
TENTH. As authorized by Section 78.037(1) of the General Corporation
Law of Nevada, no director or officer of the Corporation shall be personally
liable to the Corporation or any shareholder thereof for monetary damages for
breach of his fiduciary duty as a director or officer, except for liability for
(a) any acts or omissions which involve intentional misconduct, fraud or a
knowing violation of law, or (b) any payment of dividends in violation of
Section 78.300 of the General Corporation Law of Nevada, as it now exists or may
hereafter be amended. This Article TENTH shall apply to a person who has ceased
to be a director or officer of the Corporation with respect to any breach of
fiduciary duty which occurred when such person was serving as a director or
officer. This Article TENTH shall not be construed to limit or modify in any way
any director's or officer's right to indemnification or other right whatsoever
under this Charter, the Corporation's Bylaws or the General Corporation Law of
Nevada.
If the General Corporation Law of Nevada hereafter is amended to
authorize the further elimination or limitation of the liability of directors or
officers generally, then the liability of the Corporation's directors and
officers, in addition to the limitation on personal liability provided herein,
shall be limited to the fullest extent permitted by the General Corporation Law
of Nevada as so amended. Any repeal or modification of this Article TENTH by the
shareholders shall be prospective only and shall not adversely affect any
limitation on the personal liability of any director or officer existing at the
time of such repeal or modification.
{AMENDMENT}
ELEVENTH. The Corporation reserves the right to amend, restate or
repeal any provision contained in this Charter, in the manner now or hereafter
prescribed by statute, and all rights conferred on shareholders are granted
subject to this reservation.
12
<PAGE>
{INAPPLICABILITY OF CONTROL SHARE ACQUISITION STATUTE}
TWELFTH. The Corporation expressly elects not to be governed by
Sections 78.378 through 78.3793 of the General Corporation Law of Nevada
(concerning acquisitions of controlling interest in corporations), as it now
exists or may hereafter be amended, or any successor statute. The affirmative
vote of at least a majority of the total voting power shall be required to
amend, repeal or adopt any provision inconsistent with this Article TWELFTH.
IN WITNESS WHEREOF, the undersigned, being the Incorporator named
above, for the purpose of forming a corporation pursuant to the General
Corporation Law of Nevada, does hereby make and file this Certificate of
Incorporation for VACATION EMPORIUM CORPORATION.
DATED: March 31, 1999
INCORPORATOR:
X /s/ John D. Brasher Jr.
----------------------------
John D. Brasher Jr.
13
<PAGE>
ACKNOWLEDGMENT
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
I HEREBY CERTIFY that before me, a Notary Public duly commissioned
and qualified in and for the above jurisdiction, personally came and appeared
JOHN D. BRASHER JR., the Incorporator named in the foregoing Certificate of
Incorporation, who after being duly sworn declared that he executed the
Certificate of Incorporation as his free act and deed.
IN WITNESS WHEREOF, I have hereunto set my hand and seal on March
31, 1999.
X /s/ Elisabeth M. Crosse My Commission Expires:
--------------------------------------
NOTARY PUBLIC
(SEAL)
<PAGE>
3.2
ARTICLES AND CERTIFICATE OF MERGER
of
THE VACATION EMPORIUM INTERNATIONAL, INC.
(A Colorado Corporation)
Into
VACATION EMPORIUM CORPORATION
(A Nevada Corporation)
Pursuant to Section 92A.190 of the Nevada General Corporation Law
and Section 7-111-107 of the Colorado Business Corporation Act, the two
undersigned corporations (the "Constituent Corporations") adopt the following
Articles and Certificate of Merger for the purpose of merging them into one
corporation (the "Merger"), and each corporation hereby certifies to the
information below with respect to the Merger:
FIRST: The names and state of incorporation of the two Constituent
Corporations effecting the Merger are:
Name Domicile Status
---- -------- ------
VACATION EMPORIUM CORPORATION Nevada Surviving Corporation
THE VACATION EMPORIUM INTERNATIONAL, INC. Colorado Assimilated Corporation
SECOND: The name of the Surviving Corporation in the Merger shall be
VACATION EMPORIUM CORPORATION. Section 7-111-107 of the Colorado Business
Corporation Act and Section 92A.190 of the Nevada General Corporation Law
permits this Merger. The Surviving Corporation has authorized 50,000,000 common
shares, $.001 par value, of which 100 shares (all owned by Assimilated
Corporation) are issued and outstanding, and 5,000,000 preferred shares, $.001
par value, none of which have been issued or are outstanding. The Assimilated
Corporation has authorized 500,000,000 common shares, $.00001 par value,
7,050,000 of which are issued and outstanding, and 20,000,000 preferred shares,
without par value, none of which have been issued or are outstanding.
THIRD: The Merger shall not effect any change in the Certificate of
Incorporation of the Surviving Corporation as in effect on the date these
Articles and Certificate of Merger are duly filed with the respective
Secretaries of State of the States of Nevada and Colorado.
FOURTH: A copy of the Merger Agreement dated June 18, 1999, setting
forth the terms and conditions of the Merger and of the manner of converting the
outstanding securities of the Assimilated Corporation into securities of the
Surviving Corporation, is appended in the form executed to these Articles and
Certificate of Merger as Exhibit A and is herein fully incorporated by
reference, and will be furnished to any shareholder of a Constituent
Corporation, without charge, who so requests.
<PAGE>
FIFTH: The Merger Agreement has been approved and adopted by the
respective boards of directors of the Constituent Corporations and certified,
executed and acknowledged by each of the Constituent Corporations in the manner
prescribed by the respectively applicable laws of Nevada and Colorado.
SIXTH: The Merger Agreement was duly approved, as follows:
(a) by the shareholders of the Assimilated Corporation on June
18, 1999, voting 5,287,150 shares FOR and -0- AGAINST, out of a
total of 7,050,000 voting shares issued and outstanding entitled to
vote thereon, all of a class, a number sufficient for approval; and
(b) by the shareholders of the Surviving Corporation on June
18, 1999, voting 100 shares FOR and -0- AGAINST, out of a total of
100 voting shares issued and outstanding entitled to vote thereon,
all of a class, a number sufficient for approval.
SEVENTH: An executed Merger Agreement is on file at the principal
place of business of the Surviving Corporation, which is located at 90 Madison
Street, Suite 707, Denver, Colorado 80206, and a copy thereof will be furnished
without charge to any shareholder of a Constituent Corporation who so requests.
EIGHTH: The Registered Office of the Surviving Corporation in the
State of Nevada is located at 2533 North Carson Street, Carson City, Nevada
89706, and the Registered Agent at such address is Laughlin Associates, Inc.
NINTH: The Surviving Corporation in this Merger by execution and the
due filing of these Articles of Merger hereby agrees that it:
(a) may be served with process in the State of Colorado in any
proceeding for the enforcement of any obligation of the Assimilated
Corporation and in any proceeding for the enforcement of the rights
of any dissenting shareholder of the Assimilated Corporation against
the Surviving Corporation;
(b) irrevocably appoints the Secretary of the Department of
State of the State of Colorado as its agent to accept service of
process in any such proceeding brought against the Assimilated
Corporation in the State of Colorado, which should be served on the
Surviving Corporation at the address set forth in Article SEVENTH
above; and
(c) will promptly pay to the dissenting shareholders, if any,
of the Assimilated Corporation the amount, if any, to which they are
entitled under the provisions of the Colorado Business Corporation
Act with respect to the rights of dissenting shareholders.
TENTH: The Merger shall be effective when these Articles of Merger
are duly filed for recordation with the office of the Secretary of State of the
State of Nevada.
2
<PAGE>
IN WITNESS WHEREOF, these Articles and Certificate of Merger have
been duly executed as of the date set forth below by the authorized officers of
the Constituent Corporations.
Dated: June 18, 1999
VACATION EMPORIUM CORPORATION
A Nevada Corporation
By /s/ John D. Brasher Jr.
-------------------------------
John D. Brasher Jr., President
ATTEST:
By /s/ Elisabeth M. Crosse
----------------------------------
Secretary or Assistant Secretary
THE VACATION EMPORIUM
INTERNATIONAL, INC.
A Colorado Corporation
(SEAL)
By /s/ John D. Brasher Jr.
-------------------------------
John D. Brasher Jr., President
ATTEST:
By /s/ Elisabeth M. Crosse
------------------------------------
Secretary or Assistant Secretary
(SEAL)
3
<PAGE>
VERIFICATION
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
On this 18th day of June, 1999, before me, a Notary Public duly
commissioned and qualified in and for the above stated jurisdiction, personally
came and appeared John D. Brasher Jr., who being duly sworn, declared that he is
the President of VACATION EMPORIUM CORPORATION, a Nevada corporation, that he
executed the foregoing Articles and Certificate of Merger as the free act and
deed of such corporation, and that he has signed his name thereto by order of
the Board of Directors of such corporation.
X /s/ Jennifer S. Myers Commission Expires:
-----------------------------------
Notary Public
(SEAL)
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
On this 18th day of June, 1999, before me, a Notary Public duly
commissioned and qualified in and for the above stated jurisdiction, personally
came and appeared John D. Brasher Jr., who being duly sworn, declared that he is
the President of THE VACATION EMPORIUM INTERNATIONAL, INC. a Colorado
corporation, that he executed the foregoing Articles and Certificate of Merger
as the free act and deed of such corporation, and that he has signed his name
thereto by order of the Board of Directors of such corporation.
X /s/ Jennifer S. Myers Commission Expires:
-----------------------------------
Notary Public
(SEAL)
4
<PAGE>
VERIFICATION
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
On this 18th day of June, 1999, before me, a Notary Public duly
commissioned and qualified in and for the above stated jurisdiction, personally
came and appeared Elisabeth M. Crosse, who being duly sworn, declared that she
is the Secretary of VACATION EMPORIUM CORPORATION, a Nevada corporation, that
she executed the foregoing Articles and Certificate of Merger as the free act
and deed of such corporation, and that she has signed her name thereto by order
of the Board of Directors of such corporation.
X /s/ Jennifer S. Myers Commission Expires:
-----------------------------------------
Notary Public
(SEAL)
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
On this 18th day of June, 1999, before me, a Notary Public duly
commissioned and qualified in and for the above stated jurisdiction, personally
came and appeared Elisabeth M. Crosse, who being duly sworn, declared that she
is the Secretary of THE VACATION EMPORIUM INTERNATIONAL, INC. a Colorado
corporation, that she executed the foregoing Articles and Certificate of Merger
as the free act and deed of such corporation, and that she has signed her name
thereto by order of the Board of Directors of such corporation.
X /s/ Jennifer S. Myers Commission Expires:
-------------------------------------------
Notary Public
(SEAL)
5
<PAGE>
EXHIBIT A
MERGER AGREEMENT
of
VACATION EMPORIUM CORPORATION
(A Nevada Corporation)
and
THE VACATION EMPORIUM INTERNATIONAL, INC.
(A Colorado Corporation)
This Merger Agreement, dated as of June 18, 1999, is entered into
pursuant to the provisions of Section 92A.190 of the General Corporation Law of
Nevada and Section 7-111-107 of the Colorado Business Corporation Act, by and
between VACATION EMPORIUM CORPORATION, a Nevada corporation (the "Survivor"),
and THE VACATION EMPORIUM INTERNATIONAL, INC., a Colorado corporation (the
"Assimilated"), both corporations being sometimes referred to herein as the
"Constituent Corporations."
RECITALS:
A. Survivor is a corporation duly organized and existing under the
laws of the State of Nevada and has an authorized capital of 55,000,000 shares,
of which 50,000,000 shares are designated as common stock, par value $.001, of
which 100 shares are outstanding, and which 5,000,000 shares are designated as
preferred shares, $.001 par value, none of which have been issued or are
outstanding.
B. Assimilated is a corporation duly organized and existing under
the laws of the State of Colorado and has an authorized capital of 520,000,000
shares, $.00001 par value, of which 500,000,000 shares are designated as Common
Stock and of which 20,000,000 shares are designated as Preferred Stock. A total
of 7,050,000 shares of Common Stock are issued and outstanding. No preferred
shares have been issued or are outstanding.
C. The respective Boards of directors of Survivor and Assimilated
have approved this Agreement and have directed that this Agreement be submitted
to a vote of their respective shareholders.
Now therefore, in consideration of the premises and of the mutual
representations, warranties and covenants herein contained, Survivor and
Assimilated hereby agree, subject to the terms and conditions hereinafter set
forth, as follows:
ARTICLE I. MERGER.
1.1 Merger and Name Change. In accordance with the provisions of this
Agreement, the General Corporation Law of Nevada, and the Colorado Business
Corporation Act, Assimilated shall be merged with and into Survivor (the
"Merger"), and the name of the surviving corporation shall be VACATION EMPORIUM
CORPORATION.
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<PAGE>
1.2 Filing and Effectiveness. The Merger shall become effective when the
following actions shall have been completed:
(a) This Agreement and the Merger shall have been adopted and
approved by the shareholders of each Constituent Corporation in accordance with
the respective requirements of the General Corporation Law of Nevada and the
Colorado Business Corporation Act.
(b) An executed counterpart of this Agreement shall have been filed
with the Secretary of State of the State of Nevada; and
(c) Executed Articles of Merger or other documents meeting the
requirements of the Colorado Business Corporation Act shall have been filed with
the Secretary of State of the State of Colorado.
The date and time when the Merger shall become effective, as aforesaid, is
herein called the "Effective Date."
1.3 Certificate of Incorporation. The Certificate of Incorporation of
Survivor as in effect immediately prior to the Effective Date shall continue in
full force and effect as the Certificate of Incorporation of the Survivor until
duly amended in accordance with the provisions thereof and applicable law.
1.4 Bylaws. The Bylaws of Survivor as in effect immediately prior to the
Effective Date shall continue in full force and effect as the Bylaws of Survivor
without any change as a result of the Merger.
1.5 Directors and Officers. The directors and officers of Survivor in
office immediately prior to the Effective Date shall continue in office and
shall constitute the directors and officers of Survivor until their respective
successors shall have been elected and duly qualified or until otherwise
provided by law, the Certificate of Incorporation of Survivor and the Bylaws of
Survivor.
1.6 Effect of Merger. Upon the Effective Date, the separate existence of
Assimilated shall cease and the Survivor (i) shall continue to possess all of
the assets, rights, powers and property of Survivor as constituted immediately
prior to the Effective Date, shall be subject to all actions previously taken by
the Board of Directors of Assimilated and shall succeed, without other transfer,
to all of the assets, rights, powers and property of Assimilated, (ii) shall
continue to be subject to all of the debts, liabilities and obligations of
Assimilated as constituted immediately prior to the Effective Date and shall
succeed, without other transfer, to all of the debts, liabilities and
obligations of Assimilated in the same manner as if Survivor had itself incurred
them, all as more fully provided under the applicable provisions of the General
Corporation Law of Nevada and the Colorado Business Corporation Act.
ARTICLE II. MANNER OF CONVERSION OF COMMON STOCK.
2.1 Assimilated Common Stock. Upon the Effective Date, each share of
common stock, $.00001 par value, of Assimilated issued and outstanding
immediately prior thereto shall, by virtue of the Merger and without any action
by any holder of such shares or any other person,
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<PAGE>
be converted into and exchanged for two (2) fully paid and nonassessable shares
of Common Stock, $.001 par value, of Survivor (the "Merger Shares").
2.2 Outstanding Common Stock of Survivor. Upon the Effective Date, each
share of the 100 shares of Common Stock of Survivor issued and outstanding
immediately prior thereto shall, by virtue of the Merger and without any action
by the holder of such shares or any other person, be cancelled and returned to
the status of authorized but unissued shares.
2.3 Exchange of Certificates. On or after the Effective Date of the
Merger:
(a) All of the outstanding certificates which prior to that time
represented the outstanding Common Shares of Assimilated shall be deemed for all
purposes to evidence ownership of and to represent the Merger Shares into which
the shares of Assimilated represented by such certificates have been converted
as herein provided. The registered owner on the books and records of Assimilated
or its transfer agent of any such outstanding stock certificate shall, until
such certificate shall have been surrendered for transfer or conversion or
otherwise accounted for to Survivor or its transfer agent, have and be entitled
to exercise any voting and other rights with respect to and to receive any
dividend and other distributions upon the Merger Shares evidenced by such
outstanding certificate as above provided.
(b) Each certificate evidencing Merger Shares issued in the Merger
shall bear the same legends, if any, with respect to the restrictions on
transferability as the certificates of Assimilated so converted and given in
exchange therefor, unless otherwise determined by the Board of Directors of
Survivor in compliance with applicable laws.
(c) If any certificate for Merger Shares is to be issued in a name
other than that in which the certificate surrendered in exchange therefor is
registered, it shall be a condition of issuance thereof that the certificate so
surrendered shall be properly endorsed and otherwise in proper form for
transfer, that such transfer otherwise be proper and that the person requesting
such transfer pay any transfer or other taxes payable by reason of the issuance
of such new certificate in a name other than that of the registered holder of
the certificate surrendered or establish to the satisfaction of Survivor that
such tax has been paid or is not payable.
2.4 Assumption of Benefit Plans. Upon the Effective Date, Survivor shall
assume and continue both the 1996 Compensatory Stock Option Plan and the 1996
Employee Stock Compensation Plan of Assimilated, without change other than
conforming changes in the corporate name, par value of common stock, governing
law and similar non-substantive changes. Survivor and its Board of Directors
shall have the same rights and powers in regard to such plans as Assimilated and
its Board of Directors.
ARTICLE III. GENERAL MATTERS.
3.1 Covenants of Survivor. Survivor covenants and agrees that it will, on
or before the Effective Date:
(a) Qualify to do business as a foreign corporation in all states
wherein its operations require it to qualify under applicable state laws.
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<PAGE>
(b) File all documents with the franchise tax authorities of the
State of Colorado necessary to the assumption by Survivor of all the franchise
tax liabilities of Assimilated.
(c) Take such other actions as may be required by the Colorado
Business Corporation Act or other applicable law.
3.2 Abandonment. At any time before the Effective Date, this Agreement may
be terminated and the Merger abandoned for any reason whatever by the Board of
Directors of Survivor or Assimilated, or both, notwithstanding the approval of
this Agreement and Merger by the shareholders of Assimilated or Survivor or
both.
3.3 Amendment. The Boards of Directors of the Constituent Corporations may
amend this Agreement at any time prior to the filing of this Agreement (or a
certificate in lieu thereof) with the Secretary of State of the State of Nevada,
provided that an amendment made subsequent to the adoption of this Agreement by
the shareholders of either Constituent Corporation shall not (i) alter or change
the amount or kind of Merger Shares to be received in exchange for or on
conversion of all or any of the shares of any class or series thereof of such
Constituent Corporation, (ii) alter or change any term of the Certificate of
Incorporation of the Survivor to be effected by the Merger, or (iii) alter or
change any of the terms and conditions of this Agreement if such alteration or
change would adversely affect the holders of any class or series thereof of such
Constituent Corporation.
3.4 Expenses. Survivor shall pay all costs related to the Merger and
necessary filings and actions in connection therewith.
3.5 Mutual Covenants of Constituent Corporations. Survivor and Assimilated
each agree that, between the date hereof and the Effective Date, it will not (i)
enter into any employment contracts, (ii) grant any options, warrants or similar
rights (nor any instrument or security containing such an option, warrant or
similar right) exercisable for, exchangeable for or convertible into its common
shares or other securities, (iii) issue any stock or other securities, including
debt instruments, or (iv) declare or pay any dividends in stock or cash or make
any other distribution on or with respect to its outstanding common stock.
Either party may but need not abandon the Merger if the holders of more than 5%
of the outstanding shares of Assimilated should dissent from the Merger.
3.6 Registered Office. The Registered Office of the Survivor in the State
of Nevada is located at 2533 North Carson Street, Carson City, Nevada 89706, and
Laughlin Associates, Inc. is the Resident Agent of the Survivor at such address.
3.7 Further Actions. If at any time Survivor shall consider or be advised
that any further assignment or assurances in law are necessary or desirable to
vest or to perfect or confirm of record in Survivor the title to any property or
rights of Assimilated, or to otherwise carry out the provisions of this
Agreement, then the proper officers and directors of Assimilated as of the
Effective Date shall execute and deliver to Survivor any and all proper deeds,
assignments and assurances in law, and do all things necessary or proper to
vest, perfect or confirm title to such property or rights in Survivor.
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<PAGE>
3.8 Governing Law. This Agreement shall in all respects be interpreted and
enforced in accordance with and governed by the laws of the State of Colorado.
3.9 Counterparts. In order to facilitate the filing and recording of this
Agreement, it may be executed in any number of counterparts, each of which shall
be deemed to be an original.
3.10 Agreement. Executed copies of this Agreement will be on file at the
principal place of business of Survivor located at 90 Madison Street, Suite 707,
Denver, Colorado 80206, and copies thereof will be furnished to any shareholder
of any Constituent Corporation upon request and without cost.
IN WITNESS WHEREOF, this Agreement, having first been approved by
resolution of the Boards of Directors Assimilated and survivor, is hereby
executed on behalf of each of such corporations and attested by their respective
officers thereto duly authorized.
VACATION EMPORIUM CORPORATION
A Nevada Corporation
ATTEST: By /s/ John D. Brasher, Jr.
-----------------------------------
John D. Brasher, Jr., President
By /s/ Elisabeth M. Crosse
----------------------------------
Secretary or Assistant Secretary
[SEAL] THE VACATION EMPORIUM
INTERNATIONAL, INC.
A Colorado Corporation
ATTEST: By /s/ John D. Brasher, Jr.
-----------------------------------
John D. Brasher, Jr., President
By /s/ Elisabeth M. Crosse
---------------------------------
Secretary or Assistant Secretary
[SEAL]
10
<PAGE>
3.3
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
(After Issuance of Stock)
VACATION EMPORIUM CORPORATION
We the undersigned, Ian Rice, President and David McCallen, Secretary of
Vacation Emporium Corporation do hereby certify:
That the Board of Directors of said corporation by Special Meeting of the
Board of Directors held on September 21, 1999, adopted a resolution to amend the
original article as follows:
Article FIRST is hereby amended to read as follows:
FIRST: The name of the corporation is WALL STREET STRATEGIES
CORPORATION (hereinafter called the "Corporation").
The number of shares of the Corporation outstanding and entitled to vote
on an amendment to the Certificate of Incorporation is 15,358,205 shares of
Common Stock, par value $.001 per share; that the said change and amendment has
been consented to and approved by a majority vote of the stockholders holding at
least a majority of each class of stock outstanding and entitled to vote
thereon.
/s/ Ian Rice
--------------------------
Ian Rice, President
/s/ David McCallen
--------------------------
David McCallen, Secretary
STATE OF )
) ss.
COUNTY OF )
On September 22, 1999, personally appeared before me, a Notary Public,
Ian Rice who acknowledged that he executed the above instrument.
/s/ Steven A. Saide
---------------------------
Signature of Notary
(Notary Stamp or Seal)
STATE OF )
) ss.
COUNTY OF )
On September 22, 1999, personally appeared before me, a Notary Public,
David McCallen, who acknowledged that he executed the above instrument.
/s/ Steven A. Saide
----------------------------------------
Signature of Notary
(Notary Stamp or Seal)
<PAGE>
3.4
BYLAWS
of
WALL STREET STRATEGIES CORPORATION
(A Nevada Corporation)
ARTICLE I.
General
1.1. Applicability. These Bylaws provide rules for conducting the
business of this corporation (the "Company"). Every shareholder and person who
subsequently becomes a shareholder, the Board of Directors, Committees and
Officers of the Company shall comply with these Bylaws, as amended from time to
time. All bylaws and resolutions heretofore adopted by the Board of Directors
are hereby repealed, to the extent in conflict with the provisions of these
Bylaws.
1.2. Offices. The principal office of the Company shall be selected
by the Board of Directors from time to time and may be within or without the
State of Nevada. The Company may have such other offices, within or without the
State of Nevada, as the Board of Directors may, from time to time, determine.
The registered office of the Company required by the General Corporation Law of
Nevada to be maintained in Nevada may be, but need not be, identical with the
principal office if in Nevada, and the address of the registered office may be
changed from time to time by the Board of Directors.
1.3. Definition of Terms. Terms defined in the Company's Certificate
of Incorporation, as amended and restated from time to time (the "Charter"),
shall have the same meanings when used in these Bylaws.
ARTICLE II.
Stock Certificates
2.1. Stock Certificates. The shares of the Company's capital stock
shall be represented by consecutively numbered certificates signed by the
President or a Vice President and the Secretary or Assistant Secretary of the
Company, and sealed with the seal of the Company, or a facsimile thereof. If
certificates are signed by a transfer agent and registrar other than the Company
or an employee thereof, the signatures of the officers of the Company may be
facsimile. In case any officer who has signed (by real or facsimile signature) a
certificate shall have ceased to hold such office before the certificate is
issued, it may be issued by the Company with the same effect as if he continued
to hold such office on the date of issue. Each certificate representing shares
shall state upon the face thereof: (i) that the Company is organized under the
laws of the State of Nevada; (ii) the name of the person to whom issued; (iii)
the number, class and series (if any) of shares which such certificate
represents; and (iv) the par value, if any, of the shares represented by such
certificate, or a statement that the shares have no par value.
If any class or series of shares is subject to special powers,
designations, preferences or relative, participating or other special rights,
then such (together with all qualifications, limitations or restrictions of such
preferences or rights) shall be set forth in full or summarized on the
certificate representing such class or series. Moreover, each certificate shall
<PAGE>
state that the Company will furnish, without charge, to the registered holder of
the shares represented by such certificate who so requests a statement setting
forth such information in full.
Each certificate also shall set forth restrictions upon transfer, if
any, or a reference thereto, as shall be adopted by the Board of Directors or by
the shareholders, or as may be contained in this Article II. Any shares issued
without registration under the Securities Act of 1933, as amended ("Act"), shall
bear a legend restricting transfer unless such shares are registered under such
act or an exemption from registration is available for a proposed transfer.
2.2. Consideration for Shares. Shares of the Company shall be
issued, and treasury shares may be disposed of, for such consideration or
considerations as shall be fixed from time to time by the Board of Directors. No
shares shall be issued for less than the par value thereof. The consideration
for the issuance of shares may be paid, in whole or in part, in money, in other
property, tangible or intangible, or in labor or services actually performed for
the Company, or as permitted in the Charter.
2.3. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Company alleged to have been lost or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, and the Board of Directors when authorizing
such issue of a new certificate or certificates may in its discretion, and as a
condition precedent to the issuance thereof, require the owner of such lost or
destroyed certificate or certificates or his legal representative to advertise
the same in such manner as it shall require, and/or furnish to the Company a
bond in such sum as it may direct, as indemnity against any claim that may be
made against the Company. Except as hereinabove in this section provided, no new
certificate or certificates evidencing shares of stock shall be issued unless
and until the old certificate or certificates, in lieu of which the new
certificate or certificates are issued, shall be surrendered for cancellation.
2.4. Registered Holder as Owner. The Company shall be entitled to
treat the registered holder of any shares of the Company as the owner of such
shares, and shall not be bound to recognize any equitable or other claim to, or
interest in, such shares or rights deriving from such shares, unless and until
such purchaser, assignee, transferee or other person becomes the registered
holder of such shares, whether or not the Company shall have either actual or
constructive notice of the interests of such purchaser, assignee, or transferee
or other person. The purchaser, assignee, or transferee of any of the shares of
the Company shall not be entitled: to receive notice of the meetings of the
shareholders; to vote at such meetings; to examine a list of the shareholders;
to be paid dividends or other sums payable to shareholders; or to own, enjoy and
exercise any other property or rights deriving from such shares against the
Company, until such purchaser, assignee, or transferee has become the registered
holder of such shares.
2.5. Reversions. Cash, property or share dividends, shares issuable
to shareholders in connection with a reclassification of stock, and the
redemption price of redeemed shares, which are not claimed by the shareholders
entitled thereto within TWO years after the dividend or redemption price became
payable or the shares became issuable, despite reasonable efforts by the Company
to pay the dividend or redemption price or deliver the certificate(s) for the
shares to such shareholders within such time shall, at the expiration of such
time, revert in
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<PAGE>
full ownership to the Company, and the Company's obligation to pay any such
dividend or redemption price or issue such shares, as the case may be, shall
thereupon cease; provided, that the Board of Directors may at any time and for
any reason satisfactory to it, but need not, authorize (i) payment of the amount
of cash or property dividend or (ii) issuance of any shares, ownership of which
has reverted to the Company pursuant to this Section of Article II, to the
person or entity who or which would be entitled thereto had such reversion not
occurred.
2.6. Returned Certificates. All certificates for shares changed or
returned to the Company for transfer shall be marked by the Secretary
"CANCELLED," with the date of cancellation, and the transaction shall be
immediately recorded in the certificate book opposite the memorandum of their
issue. The returned certificate may be inserted in the certificate book.
2.7. Transfer of Shares. Upon surrender to the Company or to a
transfer agent of the Company of a certificate of stock endorsed or accompanied
by proper evidence of succession, assignment or authority to transfer, and such
documentary stamps as may be required by law, it shall be the duty of the
Company to issue a new certificate, upon payment by the transferee of such
nominal charge therefor as the Company or its transfer agent may impose. Each
such transfer of stock shall be entered on the stock book of the Company.
Respecting any securities issued in reliance upon Rule 903 of Regulation S under
the Act at any time when the Company is not a "reporting issuer" as defined in
Rule 902 of Regulation S, no transfer of such securities shall be registered
unless made in accordance with the provisions of Regulation S.
2.8. Transfer Agent. The Board of Directors shall have power to
appoint one or more transfer agents and registrars for the transfer and
registration of certificates of stock of any class, and may require that stock
certificates shall be countersigned and registered by one or more of such
transfer agents and registrars. Any powers or duties with respect to the
transfer and registration of certificates may be delegated to the transfer agent
and registrar.
ARTICLE III.
Meetings of the Shareholders
3.1. Annual Meeting. The annual meeting of the shareholders shall be
held between the 90th and 180th day after the tax year end, at such date and
time and at such place, within or without the State of Nevada, as is designated
from time to time by the Board of Directors and stated in the notice of the
meeting. At each annual meeting the shareholders shall elect a Board of
Directors in accordance with the Charter and shall transact such other business
as may properly be brought before the meeting.
3.2. Special Meetings. Unless otherwise proscribed by law, the
Charter or these Bylaws, special meetings of the shareholders may be called by
the Chairman of the Board, the President, or a majority of the Board of
Directors, or by persons who as of the date of calling the meeting are the
holders of not less than ten percent (10%) of the total voting power. Requests
for special meetings shall state the purpose or purposes of the proposed
meeting.
3.3. Notice of Meetings. Except as otherwise provided by law, the
Charter or these Bylaws, written notice of any annual or special meeting of the
shareholders shall state the place, date, and time thereof and, in the case of a
special meeting, the purpose or purposes for
3
<PAGE>
which the meeting is called, shall be given to each shareholder of record
entitled to vote at such meeting not fewer than 10 nor more than 60 days prior
to the meeting by any means permitted in Article IX hereof. No business other
than that specified in the notice of a special meeting shall be transacted at
any such special meeting.
3.4. Record Date. In order that the Company may determine
shareholders of record who are entitled (i) to notice of or to vote at any
shareholders meeting or adjournment thereof, (ii) to express written consent to
corporate action in lieu of a meeting, (iii) to receive payment of any dividend
or other distribution, or (iv) to allotment of any rights or to exercise any
rights in respect of any change, conversion or exchange of stock, or in order
that the Company may make a determination of shareholders of record for any
other lawful purpose, the Board of Directors may fix in advance a date as the
record date for any such determination. Such date shall not be more than 60
days, and in case of a meeting of shareholders, not less than 10 days prior to
the date on which the particular action, requiring such determination of
shareholders, is to be taken, and in no event may the record date precede the
date upon which the Directors adopt a resolution fixing the record date.
If no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders, or shareholders
entitled to receive payment of a dividend, the date on which notice of the
meeting is given (as defined in Article IX hereof) or the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of the
shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this Section such
determination shall apply to any adjournment thereof, unless the Board of
Directors fixes a new record date for the adjournment.
3.5. Voting List. At least 10 days but not more than 60 days before
any meeting of shareholders, the officer or transfer agent in charge of the
Company's stock transfer books shall prepare a complete alphabetical list of the
shareholders entitled to vote at such meeting, which list shows the address of
each shareholder and the number of shares registered in his or her name. The
list so prepared shall be maintained at the corporate offices of the Company and
shall be open to inspection by any shareholder, for any purpose germane to the
meeting, at any time during usual business hours during a period of no fewer
than 10 days prior to the meeting. The list shall also be produced and kept open
at any shareholders meeting and, except as otherwise provided by law, may be
inspected by any shareholder or proxy of a shareholder who is present in person
at the meeting. The original stock transfer books shall be prima facie evidence
as to who are the shareholders entitled to examine the list of shareholders and
to vote at any meeting of shareholders.
3.6. Quorum; Adjournments. (a) The holders of a majority of the
total voting power at any shareholders meeting present in person or by proxy
shall be necessary to and shall constitute a quorum for the transaction of
business at all shareholders meetings, except as otherwise provided by law or by
the Articles.
(b) If a quorum is not present in person or by proxy at any
shareholders meeting, a majority of the voting shares present or represented
shall have the power to adjourn the meeting from time to time to the same or
another place within 30 days thereof and no further
4
<PAGE>
notice of such adjourned meeting need be given if the time and place thereof are
announced at the meeting at which the adjournment is taken.
(c) Even if a quorum is present in person or by proxy at any
shareholders meeting, a majority of the voting shares present or represented
shall have the power to adjourn the meeting from time to time, for good cause,
without notice of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken, until a new date
which is not more than 30 days after the date of the original meeting.
(d) Any business which might have been transacted at a shareholders
meeting as originally called may be transacted at any meeting held after
adjournment as provided in this Section 3.6 at which reconvened meeting a quorum
is present in person or by proxy. Anything in paragraph (b) of this Section to
the contrary notwithstanding, if an adjournment is for more than 30 days, or if
after an adjournment a new record date is fixed for the adjourned meeting,
notice of the adjourned meeting shall be given to each shareholder of record
entitled to vote thereat.
(e) The shareholders present at a duly called meeting may continue
to transact business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
3.7. Proxies. At all meetings of shareholders, a shareholder may
vote by proxy, executed in writing by the shareholder or by his duly authorized
attorney in fact. Any proxyholder shall be authorized to sign, on the
shareholder's behalf, any written consent for shareholder action taken in lieu
of a meeting. Such proxy shall be filed with the Secretary of the Company before
or at the time of the meeting. No proxy shall be valid after the expiration of
six (6) months from the date of its execution, unless coupled with an interest,
or unless the person executing it specifies therein the length of time for which
it is to continue in force, which in no case shall exceed three (3) years from
the date of its execution.
3.8. Voting of Shares. At any shareholders meeting every shareholder
having the right to vote shall be entitled to vote in person or by proxy. Except
as otherwise provided by law, by the Articles or in the Board resolution
authorizing the issuance of shares, each shareholder of record shall be entitled
to one vote (on each matter submitted to a vote) for each share of capital stock
registered in his, her or its name on the Company's books. Except as otherwise
provided by law or by the Articles, all matters submitted to the shareholders
for approval shall be determined by a majority of the votes cast (not counting
abstentions) at a legal meeting commenced with a quorum.
3.9. Voting of Shares by Certain Holders. Neither treasury shares,
nor shares of its own stock held by the Company in a fiduciary capacity, nor
shares held by another corporation if the majority of the shares entitled to
vote for the election of directors of such other corporation is held by the
Company, shall be voted at any meeting or counted in determining the total
number of outstanding shares at any given time.
Shares standing in the name of another corporation, domestic or
foreign, may be voted by such officer, agent, or proxy as the bylaws of such
corporation may prescribe, or, in the absence of such provision, as the board of
directors of such corporation may determine.
5
<PAGE>
Shares held by an administrator, executor, personal representative,
guardian, or conservator may be voted by him, either in person or by proxy,
without a transfer of such shares into his name. Shares standing in the name of
a trustee may be voted by him, either in person or by proxy, but no trustee
shall be entitled to vote shares held by him without a transfer of such shares
into his name.
Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his name if authority to do so
be contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote
such shares until the shares have been transferred into the name of the pledgee,
and thereafter the pledgee shall be entitled to vote the shares so transferred.
3.10. Chairman. The Chairman of the Board of Directors of the
Company, if there is one, or in his absence, the President, shall act as
chairman at all meetings of shareholders.
3.11. Manner of Shareholder Voting. Voting at any shareholders'
meeting shall be oral or by show of hands; provided, however, that voting shall
be by written ballot if such demand is made by any shareholder present in person
or by proxy and entitled to vote.
3.12. Informal Action by Shareholders; Record Date. Any action
required or permitted to be taken at a meeting of the shareholders may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by shareholders
holding at least a majority of the voting power, except that if a different
proportion of voting power is required for such an action at a meeting, then
that proportion of written consents is required. Such a consent must be filed
with the minutes of the proceedings of shareholders and shall have the same
force and effect as a vote of the shareholders, and may be stated as such in any
document filed with the Secretary of State of Nevada under the General
Corporation Law of Nevada. Written notice of such action shall be given to all
shareholders who have not consented in writing to the action taken. The record
date for determining shareholders entitled to consent to corporate actions in
writing without a meeting (the "consent record date") shall not precede, and
shall not be more than ten (10) days after, the date upon which the resolution
fixing the record date was adopted. However, if no consent record date is fixed,
the consent record date shall be, respectively, (i) if prior action by the Board
of Directors is required under the General Corporation Law of Nevada for the
consent to be validly taken, the close of business on the day on which the Board
of Directors adopts the resolution taking such prior action; and (ii) if prior
action by the Board of Directors is not required, the first date on which a
properly signed and dated consent setting forth the action taken or proposed to
be taken is delivered as required above.
3.13. Presiding Officers; Order of Business. (a) Shareholders
meetings shall be presided over by the Chairman of the Board; or if the Chairman
(and Vice Chairman) is not present, by the President; or if the President is not
present, by a Vice President; or if a Vice President is not present, by such
person chosen by the Board of Directors;
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or if none, by a chairperson to be chosen at the meeting by shareholders present
in person or by proxy who own a majority of the voting power present. The
Secretary of a shareholders meeting shall be the Secretary of the Company; or if
the Secretary is not present, an Assistant Secretary; of if an Assistant
Secretary is not present, such person as may be chosen by the Board of
Directors; or if none, by such person who is chosen by the chairperson at the
meeting.
(b) The following order of business, unless otherwise ordered at the
shareholders meeting by the chairperson thereof, shall be observed as far as
practicable and consistent with the purposes of the meeting:
1. Calling of the shareholder's meeting to order.
2. Presentation of proof of mailing of the notice of the meeting
and, if a special meeting, the call thereof.
3. Presentation of proxies.
4. Determination and announcement that a quorum is present.
5. Reading and approval (or waiver thereof) of the minutes of the
previous meeting of shareholders.
6. Reports, if any, of officers.
7. Election of directors, if the meeting is an annual meeting or
a meeting called for such purpose.
8. Consideration of the specific purpose or purposes for which
the meeting has been called, other than election of directors.
9. Transaction of such other business as may properly come before
the meeting.
10. Adjournment.
3.14. Annual Report. The President of the Company shall prepare an
annual report which will set forth a statement of affairs of the Company as of
the end of its last fiscal year, including a balance sheet, an income statement
and a statement of changes in financial position, which need not be audited, and
present them at the annual meeting of shareholders. Failure to prepare or
present an annual report shall not affect the validity of any shareholder
meeting. No such report need be prepared or presented for any fiscal year in
which the Company was inactive. This Section shall not apply as to any fiscal
year if the Company (i) was at the year end subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, and
subsequently furnishes to the shareholders an annual report or report on Form
10-K under such Act covering such fiscal year, or (ii) furnishes to shareholders
an Information Statement which conforms to the requirements of Rule 15c2-11 of
the Securities and Exchange Commission.
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ARTICLE IV.
Directors, Powers and Meetings
4.1. General Powers. All corporate powers shall be exercised, and
the Company's business and affairs shall be managed, by or under the authority
of its Board of Directors, except as otherwise provided in the General
Corporation Law of Nevada or the Charter.
4.2. Number, Tenure and Qualifications. The Company's Board of
Directors shall consist of not less than one (1) and not more than seven (7)
Directors, as resolved from time to time by the Board of Directors. If such
number is not so fixed, the Company shall have one Director. Directors shall be
elected at each annual meeting of shareholders, except as otherwise provided
below. Each Director shall hold office until the next annual meeting of
shareholders and thereafter until his successor shall have been elected and duly
qualified. Directors need not be residents of Nevada or shareholders of the
Company. Directors shall be elected by plurality vote. At least one-fourth in
number of the Directors must be elected annually. No decrease in the number of
Directors shall shorten the term of any incumbent Director.
4.3. Vacancies, Resignation. (a) Any vacancy occurring in the Board
of Directors, except resulting from an increase in the number of directors, may
be filled by the affirmative vote of a majority of the remaining Directors,
though less than a quorum, or by a sole remaining Director. A Director elected
to fill a vacancy shall be elected for the unexpired term of his predecessor in
office. Any directorship to be filled by reason of an increase in the number of
Directors shall be filled by the affirmative vote of a majority of the entire
board or by a majority of the total voting power at any annual meeting or at a
special meeting of shareholders called for that purpose, or by means of written
shareholder consents taken in lieu of a meeting. Every director chosen to fill a
vacancy as provided in this Section shall hold office until the next annual
meeting of shareholders or until his successor has been elected and qualified.
(b) Any Director may resign at any time by giving written notice to
the Board, the Chairman of the Board, the President or the Secretary of the
Company. Unless otherwise specified in such written notice, a resignation shall
take effect upon delivery to the Board or the designated officer. A resignation
need not be accepted in order for it to be effective.
4.4. Removal of Directors. Any Director may be removed only by the
shareholders in the manner provided in the Company's Charter and, if no such
provision appears therein, then as provided by law. Such action may be taken at
any special meeting called for that purpose or by means of written shareholder
consents. In case any vacancy so created shall not be filled by the shareholders
at such meeting or in the written consent effecting removal, such vacancy may be
filled by a majority of the Board of Directors.
4.5. Place of Meetings. The Board of Directors may hold both
regular and special meetings either within or without the State of Nevada, at
such place as the Board of Directors from time to time deems advisable.
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4.6. Regular Meetings. A regular meeting of the Board of Directors
shall be held without other notice than these Bylaws 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 for the holding of additional regular
meetings without other notice than such resolution; provided, that any Director
not present when any such resolution is passed is given notice of the
resolution.
4.7. Special Meetings. A special meeting of the Board of Directors
shall be held without other notice than these Bylaws immediately after and at
the same place as every special meeting of shareholders. Special meetings of the
Board of Directors also may be called by or at the request of the Chairman of
the Board, the President, or any two Directors upon two days' notice to each
director if such notice is delivered personally or sent by telegram, or upon
five days' notice if sent by mail.
4.8. Telephonic Meetings. One or more members of the Board of
Directors or any committee designated by the Board may participate in a meeting
of the Board of Directors or committee by means of conference telephone or
similar communications equipment by which all persons participating in the
meeting can hear one another at the same time. Such participation shall
constitute presence in person at the meeting. All participants in any meeting of
Directors, by virtue of their participation and without further action on their
part, shall be deemed to have consented to the recording of such meeting by
electronic device or otherwise, and to the making of a written transcript
thereof, in order that minutes thereof shall be available for the Company's
records.
4.9. Notice. Except as otherwise provided above, notice of the time,
date and place, of every special meeting of Directors or any committee thereof
shall be given. Any Director may waive notice of any meeting. The attendance of
a Director at a meeting shall constitute a waiver of notice of such meeting,
except where a Director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened. 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.
4.10. Quorum; Adjournments. A majority of the number of directors
then in office, present in person or by means of conference telephone or similar
equipment, shall constitute a quorum for the transaction of business at every
Board meeting, and 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, except
as may otherwise specifically be provided by law, the Charter or these Bylaws.
If a quorum is not present at any Board meeting, the directors present may
adjourn the meeting, from time to time, without notice other than announcement
of the meeting, until a quorum is present.
4.11. Compensation. Directors shall be entitled to such compensation
for their services as directors as from time to time may be fixed by the Board
and shall be entitled to reimbursement of all reasonable expenses incurred by
them in attending Board meetings. A Director may waive compensation for any
Board meeting. No director who receives compensation as a director shall be
barred from serving the Company in any other capacity or
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from receiving compensation and reimbursement of reasonable expenses for any or
all such other services.
4.12. Presumption of Assent. A Director of the Company who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as the Secretary
of the meeting before the adjournment thereof, or shall forward such dissent by
registered or certified mail, first class, postage prepaid, to the Secretary of
the Company, provided such mailing is postmarked within ten calendar days after
the adjournment of the meeting. Such right to dissent shall not apply to a
Director who voted in favor of such action.
4.13. Action by Directors Without Meeting. Any action required to be
taken at a meeting of the Directors of the Company or of a committee of
Directors or any action which may be taken at such a meeting, may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the Directors entitled to vote with respect to the
subject matter thereof. A consent shall be sufficient for this Section if it is
executed in counterparts, in which event all of such counterparts, when taken
together, shall constitute one and the same consent.
4.14. Bank Accounts, etc. Anything herein to the contrary
notwithstanding, the Board of Directors may, except as may otherwise be required
by law, authorize any officer or officers, agent or agents, in the name of and
on behalf of the Company, to sign checks, drafts, or other orders for the
payment of money or notes or other evidences of indebtedness, to endorse for
deposit, deposit to the credit of the Company at any bank or trust company or
banking institution in which the Company may maintain an account or to cash
checks, notes, drafts, or other bankable securities or instruments, and such
authority may be general or confined to specific instances, as the Board of
Directors may elect.
4.15. Inspection of Records. Every Director shall have the absolute
right at any reasonable time to inspect all books, records, documents of every
kind, and the physical properties, of the Company and of its subsidiaries. Such
inspection may be made personally or by an agent and includes the right to make
copies and extracts.
4.16. Executive Committee. (a) The Board of Directors may, by
resolution adopted by a majority of the whole Board, appoint two or more of its
members to constitute an Executive Committee. One of such directors shall be
designated as Chairman of the Executive Committee. Each member of the Executive
Committee shall continue as a member thereof until the expiration of his term as
a director, or until his earlier resignation from the Executive Committee, in
either case unless sooner removed as a director or member of the Executive
Committee by any means authorized by the Charter or herein.
(b) The Executive Committee shall have and may exercise, to the
extent provided in such resolution and except as prohibited by law, all of the
rights, power and authority of the Board of Directors.
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(c) The Executive Committee shall fix its own rules of procedure and
shall meet at such times and at such place or places as may be provided by its
rules. The Chairman of the Executive Committee, or in the absence of the
Chairman, a member of the Executive Committee chosen by a majorty of the members
present, shall preside at all meetings of the Executive Committee, and another
member thereof chosen by the Executive Committee shall act as Secretary. A
majority of the Executive Committee shall constitute a quorum for the
transaction of business, and the affirmative vote of a majority of the members
thereof shall be required for any action of the Executive Committee. The
Executive Committee shall keep minutes of its meetings and deliver such minutes
to the Board of Directors.
4.17. Other Committees. The Board of Directors may, by resolution
duly adopted by a majority of directors at a meeting at which a quorum is
present, appoint an audit committee, compensation committee, and such other
committee or committees as it shall deem advisable and with such limited
authority as the Board of Directors shall from time to time determine.
4.18. Other Provisions Regarding Committees. (a) The Board of
Directors shall have the power at any time to fill vacancies in, change the
membership of, or discharge any committee. The members of any committee present
at any meeting of a committee, whether or not they constitute a quorum, may
appoint a director to act in the place of an absent member.
(b) Members of any committee shall be entitled to such compensation
for their services as such as from time to time may be fixed by the Board of
Directors and in any event shall be entitled to reimbursement of all reasonable
expenses incurred in attending committee meetings. Any member of a committee may
waive compensation for any meeting. No member of a committee who receives
compensation as a member of one or more committees shall be barred from serving
the Company in any other capacity or from receiving compensation and
reimbursement of reasonable expenses for any or all such other services.
(c) Unless otherwise prohibited by law, the provisions above
concerning action by written consent of directors and meetings of directors by
telephonic or similar means shall apply to all committees from time to time
created by the Board of Directors.
ARTICLE V.
Officers and Agents
5.1. Positions. The Company's officers generally shall be chosen by
the Board of Directors and shall consist of a Chairman of the Board, a
President, one or more Vice Presidents if desired, a Secretary and a Treasurer.
The Board of Directors may appoint one or more other officers, assistant
officers and agents as it from time to time deems necessary or appropriate, who
shall be chosen in such manner and hold their offices for such terms and have
such authority and duties as from time to time may be determined by the Board of
Directors. The Board may delegate to the Chairman of the Board the authority to
appoint any officer or agent of the Company and to fill a vacancy other than the
Chairman of the Board or President. Any two or more offices may be held by the
same person, except that no person may simultaneously hold the offices of
President and Secretary and of President and Vice President. In all cases where
the duties of any officer, agent or employee are not prescribed by these bylaws
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or by the Board of Directors, such officer, agent or employee shall follow the
orders and instructions of the President.
5.2. Term of Office; Removal. Each officer of the Company shall hold
office at the pleasure of the Board and any officer may be removed, with or
without cause, at any time by the affirmative vote of a majority of the
directors then in office; provided, that any officer appointed by the Chairman
of the Board pursuant to authority delegated by the Board may be removed, with
or without cause, at any time by the Chairman whenever the Chairman in his or
her absolute discretion shall consider that the Company's best interests shall
be served by such removal. Removal of an officer by the Board (or the Chairman,
as the case may be) shall not prejudice the contract rights, if any, of the
person so removed. Election or appointment of an officer or agent shall not in
itself create contract rights.
5.3. Vacancies. A vacancy in any office, however occurring, may be
filled by the Board or the Executive Committee, for the unexpired portion of the
term by majority vote of its members, or by the Chairman of the Board in the
case of a vacancy occurring in an office to which the Chairman has been
delegated authority to make appointments.
5.4. Compensation. The salaries of all officers of the Company shall
be fixed from time to time by the Board, and no officer shall be prevented from
receiving a salary by reason of the fact that he also receives compensation from
the Company in any other capacity.
5.5. Chairman of the Board. The Chairman of the Board ("Chairman"),
if such officer shall be chosen by the Board of Directors, shall preside at all
meetings of the Board of Directors and meetings of shareholders at which he is
present and shall exercise general supervision and direction over the
implementation of Board policy affecting the affairs of the Company. Any act
which may be performed by the Chief Executive Officer or President may be
performed by the Chairman.
5.6. Chief Executive Officer; Chief Operating Officer. The Chairman
of the Board shall, unless the Board determines otherwise, serve as the Chief
Executive Officer ("CEO") of the Company. If the Chairman is not designated the
CEO, then the President shall serve as CEO. The Board may, from time to time,
designate from among the executive officers of the Company an officer to serve
as Chief Operating Officer ("COO") of the Company. If the Chairman serves as the
CEO, then the President shall serve as COO. If the President is designated CEO,
then the Executive Vice President (or if there is none, then the next most
senior Vice President) shall serve as COO. A person designated to serve in the
capacity of CEO or COO shall serve at the pleasure of the Board.
A person designated Chief Executive Officer (CEO) shall have primary
responsibility for and active charge of the management and supervision of the
Company's business and affairs. The CEO may execute in the name of the Company
authorized corporate obligations and other instruments, shall perform such other
duties as may be prescribed by the Board (or Chairman, as the case may be) from
time to time and, in the absence or disability of the President, shall exercise
all of the duties and powers of the President. In the event that the President
is not the CEO, then the CEO shall supervise the performance of the President
and shall be responsible for the execution of the policies and directives of the
Board. The CEO shall
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report directly to the Board. The CEO shall perform such other duties as may be
assigned by the Board (or Chairman, as the case may be). The CEO may perform any
act which might be performed by the President.
A person designated Chief Operating Officer (COO) shall be
responsible for the day-to-day management of the Company's operations, subject
to the authority of the CEO. The COO shall report directly to the CEO of the
Company and shall consult with the CEO on all matters of corporate policy and
material business activities of the Company. The COO shall perform such other
duties as may be assigned by the Board or the CEO.
5.7. President. The President shall have general active management
of the business of the Company, subject to the authority of the Chief Executive
officer if the President is not designated as such, and general supervision of
its meetings of the shareholders and of the Board. In the absence of a
designated Chief Executive Officer he shall see that all policies and directives
of the Board are carried into effect.
He shall, unless otherwise directed by the Board of Directors,
attend in person or by substitute appointed by him, or shall execute in behalf
of the Company written instruments appointing a proxy or proxies to represent
the Company, at all meetings of the stockholders of any other company in which
the Company shall hold any stock. He may, on behalf of the Company, 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 as aforesaid, may vote the stock so held by
the Company and may execute written consent and other instruments and power
incident to the ownership of said stock, subject however to the instructions, if
any, of the Chairman or the Board of Directors. The President shall have custody
of the Treasurer's bond, if any.
5.8. Executive Vice President. The Executive Vice President shall
assist the President in the discharge of supervisory, managerial and executive
duties and functions. In the absence of the President or in the event of his
death, or inability or refusal to act, the Executive Vice President shall
perform the duties of the President and when so acting shall have the duties and
powers of the President. He shall perform such other duties as from time to time
may be assigned to him by the President, Chairman or Board of Directors.
5.9. Vice Presidents. The Vice Presidents, if any, shall assist the
President and Executive Vice President and shall perform such duties as may be
prescribed by the Board, the Chairman or the President. Vice Presidents in the
order of their seniority shall, in the absence or disability of the Chairman and
President, exercise all of the duties and powers of such officers. The Executive
Vice President, if any, shall be the most senior of Vice Presidents, and the
Senior Vice President, if any, shall be the next most senior of Vice Presidents.
In regard to other Vice Presidents, they shall have the respective ranks
designated by the Board of Directors, or if none has been so designated, as
designated by the Chairman, or if none has been so designated by the Chairman,
they shall rank in the order of their respective elections to such office. The
execution of any instrument on the Company's behalf by a Vice President shall be
conclusive evidence, as to third parties, of his authority to act in the stead
of the President and Executive Vice President.
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5.10. Secretary. The Secretary shall: (i) keep the minutes of the
proceedings of the shareholders and the Board of Directors and record all votes
and proceedings thereof in a book kept for that purpose; (ii) see that all
notices are duly given in accordance with the provisions of these Bylaws or as
required by law; (iii) be custodian of the corporate records and of the seal of
the Company and affix the seal to all documents when authorized by the Board of
Directors; (iv) keep at its registered office or principal place of business
within or outside Delaware a record containing the names and addresses of all
shareholders and the number and class of shares held by each, unless such a
record shall be kept at the office of the Company's transfer agent or registrar;
(v) sign with the President, or a Vice President, certificates for shares of the
Company, the issuance of which shall have been authorized by resolution of the
Board of Directors; (vi) have general charge of the stock transfer books of the
Company, unless the Company has a transfer agent; and (vii) 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 the Board of Directors.
The Board of Directors may give general authority to officers other than the
Secretary or any Assistant Secretary to affix the Company's seal and to attest
the fixing thereof by his or her signature.
5.11. Assistant Secretary. The Assistant Secretary, if any (or if
there is more than one, the Assistant Secretaries in the order designated, or in
the absence of any designation, in the order of their appointment), in the
absence or disability of the Secretary, shall perform the duties and exercise
the powers of the Secretary. The Assistant Secretary(ies) shall perform such
other duties and have such other powers as from time to time may be prescribed
by the Board, the Chairman or the Chief Executive Officer. The Chairman may
appoint one or more Assistant Secretary(ies) to office.
5.12. Treasurer. The Treasurer shall, unless the Board otherwise
resolves, be the principal financial officer and principal accounting officer of
the Company and shall have the care and custody of all funds, securities,
evidence of indebtedness and other valuable effects of the Company, shall keep
full and accurate accounts of receipts and disbursements in books belonging to
the Company and shall deposit all money and other valuable effects of the
Company in the name and to the credit of the Company in such depositories as
from time to time may be designated by the Board. The Treasurer shall disburse
the funds of the Company in such manner as may be ordered by the Board from time
to time and shall render to the Chairman of the Board, the President and the
Board, at regular Board meetings or whenever any of them may so require, an
account of all transactions and of the Company's financial condition.
5.13. Assistant Treasurer. The Assistant Treasurer, if any (or if
there is more than one, the Assistant Treasurers in the order designated, or in
the absence of any designation, in the order of their appointment), in the
absence or disability of the Treasurer, shall perform the duties and exercise
the powers of the Treasurer. The Assistant Treasurer(s) shall perform such other
duties and have such other powers as from time to time may be prescribed by the
Board, the Chairman or the Chief Executive Officer. The Chairman may appoint one
or more Assistant Treasurer(s) to office.
5.14. Resignations. Any officer may resign at any time by giving
written notice to the Board or to the Chairman. Such resignation shall take
effect at the time specified therein
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and, unless specified therein, no acceptance of the resignation shall be
required for the resignation to be effective.
5.15. Delegation of Duties. In the event of the absence or
disability of any officer of the Company, or for any other reason the Board
shall deem sufficient, the Board may temporarily designate the powers and
duties, or particular powers and duties, of such officer to any other officer,
or to any director.
5.16. Fidelity Bonds. The Board of Directors shall have the power,
to the extent permitted by law, to require any officer, agent or employee of the
Company to give bond for the faithful discharge of his duties in such form and
with such surety or sureties as the Board deems advisable.
ARTICLE VI
Indemnification
Every Director, officer, employee and agent of the Company, and
every person serving at the Company's request as a director, officer (or in a
position functionally equivalent to that of officer or director), employee or
agent of another corporation, partnership, joint venture, trust or other entity,
shall be indemnified to the extent and in the manner provided by the Company's
Charter, as it may be amended, and in the absence of any such provision therein,
in accordance with Nevada law.
ARTICLE VII
Execution of Instruments and Deposit of Corporate Funds
7.1. Execution of Instruments Generally. The Chairman of the Board,
the President, any Vice President, the Secretary or the Treasurer, subject to
the approval of the Board of Directors, may enter into any contract or execute
and deliver any instrument in the name and on behalf of the Company. The Board
of Directors may authorize any officer or officers, or agent or agents, to enter
into any contract or execute and deliver any instrument in the name and on
behalf of the Company, and such authorization may be general or confined to
specific instances.
7.2. Borrowing. Unless and except as authorized by the Board of
Directors, no loans or advances shall be obtained or contracted for, by or on
behalf of the Company, and no negotiable paper shall be issued in its name. Such
authorization may be general or confined to specific instances. Any officer or
agent of the Company thereunto so authorized may attain loans and advances for
the Company and for such loans and advances may make, execute and deliver any
promissory notes, bonds, or other evidences of indebtedness of the Company. Any
officer or agent of the Company so authorized may pledge, hypothecate or
transfer as security for the payment of any and all loans, advances,
indebtedness and liabilities of the Company, any and all stocks, bonds, other
securities and other personal property at any time held by the Company, and to
that end may endorse, assign and deliver the same and do every act and thing
necessary or proper in connection therewith.
7.3. Deposits. All funds of the Company not otherwise employed shall
be deposited from time to time to its credit in such banks or trust companies or
with such bankers or
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other depositaries as the Board of Directors may select, or as may be selected
by any officer or officers or agent or agents authorized to do so by the Board
of Directors. Endorsements for deposit to the credit of the Company in any of
its duly authorized depositories shall be made in such manner as the Board of
Directors from time to time may determine.
7.4. Checks, Drafts, etc. All checks, drafts or other orders for the
payment of money, and all notes or other evidence of indebtedness issued in the
name of the Company, shall be signed by such officer or officers or agent or
agents of the Company and in such manner as the Board of Directors from time to
time may determine.
7.5. Proxies. Proxies to vote with respect to shares of stock of
other corporations owned by, or standing in the name of, the Company may be
executed and delivered from time to time on behalf of the Company by the
Chairman of the Board, the President or any Vice President or by any other
person or persons thereunto authorized by the Board of Directors.
ARTICLE VIII
Miscellaneous
8.1. Declaration of Dividends. The Board of Directors at any regular
or special meeting may declare dividends payable, whenever in the exercise of
its discretion it may deem such declaration advisable and such is permitted by
law. Such dividends may be paid in cash, property, or shares of the Company.
8.2. Benefit Plans. Directors shall have the power to install and
authorize any pension, profit sharing, stock option, stock award or stock bonus,
insurance, welfare, educational, bonus, health and accident or other benefit
program which the Board deems to be in the interest of the Company, at the
expense of the Company, and to amend or revoke any plan so adopted. Any such
plan may be adopted and have full force and effect by resolution of the Board of
Directors, except where applicable laws, rules or regulations require prior
approval of the Company's shareholders of such plan in order for the plan to be
valid.
8.3. Seal. The corporate seal of the Company shall be circular in
form and shall contain the name of the Company, the year incorporated and the
words "Seal" and "Nevada".
8.4. Fiscal Year. The Board of Directors shall have the power to
fix, and from time to time change, the fiscal year of the Company. Any such
adoption of or change in a fiscal year shall not constitute or require an
amendment to these Bylaws.
8.5. Amendment of Bylaws. These Bylaws may be amended or repealed in
the manner provided for in the Charter, or if none is there provided: by
majority vote of the Board of Directors, taken at any meeting or by written
consent, subject to the shareholders' right to change or repeal any Bylaws so
made or adopt new Bylaws by vote of at least a majority of the total voting
power. Bylaws amendments may be proposed by any Director or shareholder. Any
action duly taken by the Board or the shareholders which conflicts or is
inconsistent with these Bylaws (as they may be amended) shall constitute an
amendment of the Bylaws, if the action was taken by such number of directors or
shares voting as would be sufficient for amendment of the Bylaws.
16
<PAGE>
8.6. 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.
8.7. Conflicts. In the event of any irreconcilable conflict between
these Bylaws and either the Company's Charter or applicable law, the latter
shall control.
8.8. Definitions. Except as these Bylaws otherwise specifically
provide, all terms used in these Bylaws shall have the definitions given them in
the Company's Charter or the Nevada General Corporation Law.
ARTICLE IX.
Notices
9.1. Receipt of Notices by the Company. Notices, shareholder
writings consenting to action, and other documents or writings shall be deemed
to have been received by the Company when they are actually received: (i) at the
registered office of the Company in Nevada; (ii) at the principal office of the
Company (as designated in the most recent document filed by the Company with the
Nevada Secretary of State designating a principal office) addressed to the
attention of the Secretary of the Company; (iii) by the Secretary of the Company
wherever the Secretary may be found; or (iv) 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.
9.2. Giving of Notice. Except as otherwise provided by the General
Corporation Law of Nevada, these Bylaws, the Charter or resolution of the Board
of Directors, every meeting notice or other notice, demand, bill, statement or
other communication (collectively, "Notice") from the Company to a Director,
Officer or shareholder shall be duly given if it is written or printed and is
(i) sent by first class or express mail, postage prepaid, (ii) sent by any
commercial overnight air courier service, such as DHL, Federal Express, Emery,
Airborne, UPS or similar service, (iii) sent by telegraph, cablegram, telex,
telecopier, facsimile or similar transmission, (iv) delivered by any commercial
messenger service which regularly retains its receipts, or (v) personally
delivered, provided a receipt is obtained reflecting the date of delivery.
Notice shall not be duly given unless all delivery or postage charges are
prepaid. Notice shall be given to an addressee's most recent address as it
appears on the Company's records or to such other address as has been provided
in writing to the Secretary. A Notice shall be deemed "given" when dispatched
for delivery, when personally delivered, when transmitted electronically, or if
mailed, on the date postmarked. This Section shall not have the effect of
shortening any notice period provided for in these Bylaws.
9.3. Waiver of Notice. Any Notice required or permitted by the
General Corporation Law of Nevada, the Charter or these Bylaws may be waived in
writing at any time by the person entitled to the Notice, and such waiver shall
be equivalent to the giving of notice. Notice of any shareholders' meeting shall
be waived by attendance, in person or by proxy, at the meeting, unless any
question of lack of or defect in a Notice is raised prior to conclusion of the
meeting. A waiver of Notice of a special meeting of shareholders shall state the
purpose for which the meeting was called or the business to be transacted
thereat.
17
<PAGE>
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT INCORPORATED UNDER
THE LAWS OF THE STATE OF NEVADA
/ / / /
NUMBER SHARES
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
WALL STREET STRATEGIES CORPORATION
SEE REVERSE FOR
AUTHORIZED 50,000,000 SHARES CERTAIN DEFINITIONS
OF COMMON STOCK
CUSIP 932089-105
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF WALL STREET STRATEGIES CORPORATION
transferable only on the books of the Corporation by the holder hereof in person
or by duly authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid until countersigned by the Transfer
Agent and registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
PAR VALUE: $.001 PER SHARE
WALL STREET STRATEGIES CORPORATION
CORPORATE NEVADA
CORPORATE SEAL
/S/ David McCallen /S/ Ian Rice
- ------------------------------------ --------------------------------------
SECRETARY CHAIRMAN
<PAGE>
4.2
RISING SUN CAPITAL, LTD.
1996 COMPENSATORY STOCK OPTION PLAN
1. Purpose of this Plan.
This Compensatory Stock Option Plan ("Plan") is intended as an
employment incentive, to aid in attracting and retaining in the employ or
service of RISING SUN CAPITAL, LTD. ("Company"), a Colorado corporation, and any
Affiliated Company, persons of experience and ability and whose services are
considered valuable, to encourage the sense of proprietorship in such persons,
and to stimulate the active interest of such persons in the development and
success of the Company. This Plan provides for the issuance of non-statutory
stock options ("CSOs" or "Options") which are not intended to qualify as
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended ("Code"). Certain other terms also are defined
in Paragraph 17 and elsewhere of this Plan.
2. Administration of this Plan.
The Company's Board of Directors ("Board") may appoint and maintain
as administrator of this Plan the Compensation Committee ("Committee") of the
Board which shall consist of at least two members of the Board who are
Non-Employee Directors as defined in Rule 16b-3 under the Securities Exchange
Act of 1934, as amended ("Exchange Act'"). At any time that the Committee is not
duly constituted, the Board itself shall have and fulfill the duties herein
allocated to the Committee. The Committee shall have full power and authority to
designate Plan participants, to determine the provisions and terms of respective
CSOs (which need not be identical as to number of shares covered by any CSO, the
method of exercise as related to exercise in whole or in installments, or
otherwise), including the CSO price, and to interpret the provisions and
supervise the administration of this Plan. The Committee may in its discretion
provide that certain CSOs not vest (that is, become exercisable) until
expiration of a certain period after issuance or until other conditions are
satisfied, so long as not contrary to this Plan.
A majority of the members of the Committee shall constitute a
quorum. All decisions and selections made by the Committee pursuant to this
Plan's provisions shall be made by a majority of its members. Any decision
reduced to writing and signed by all of the members shall be fully effective as
if it had been made by a majority at a meeting duly held. The Committee shall
select one of its members as its chairman and shall hold its meetings at such
times and places as it deems advisable. Each Option shall be evidenced by a
written agreement containing terms and conditions established by the Committee
consistent with the provisions of this Plan.
3. Designation of Participants.
Only Employees shall be eligible for participation in this Plan. The
Committee shall have full power to designate, from among eligible individuals,
the persons to whom CSOs may be granted. A person who has been granted a CSO
hereunder may be granted an additional
<PAGE>
CSO or CSOs, if the Committee shall so determine. Persons eligible under this
Plan additionally may be granted one or more options under any other
compensation or stock option plan or awarded shares under any other benefit plan
of the Company. No Option shall confer any right upon the Optionee with respect
to the continuation of his employment (or his position as an officer, director,
employee or consultant) with the Company or any Affiliated Company, and shall
not interfere with the right of the Company or any Affiliated Company to
terminate such relationship(s) at any time in accordance with law and any
agreements then in force.
4. Stock Reserved for this Plan.
Subject to adjustment as provided in Paragraph 9 below, a total of
1,000,000 shares of Common Stock of the Company ("Option Stock" or "Option
Shares") shall be subject to this Plan. The Option Stock subject to this Plan
shall consist of unissued shares of Common Stock or previously issued shares of
Common Stock reacquired and held by the Company or any Affiliated Company, and
such number of Option Shares shall be and is hereby reserved for sale for such
purpose. Any Option Shares which may remain unsold and which are not subject to
outstanding CSOs at the termination of this Plan shall cease to be reserved for
the purpose of this Plan, but until termination of this Plan the Company shall
at all times reserve a sufficient number of shares to meet the requirements of
this Plan. Should any CSO expire or be cancelled prior to its exercise in full,
the unexercised Option Shares theretofore subject to such CSO may again be
subjected to a CSO under this Plan.
5. Option Exercise Price.
The purchase (exercise) price of each share of Option Stock made
subject to an Option shall not be less than eighty-five percent (85%) of the
Fair Market Value of a share of Common Stock on the date the Option is granted.
For purposes of this Plan, the "Fair Market Value" of a share of the Company's
Common Stock as of a given date shall be: (i) the closing price of a share of
the Company's Common Stock on the principal exchange, NASDAQ system, NASDAQ
Small Cap Market, or other quotation medium, on which shares of the Company's
Common Stock are then trading or quoted, or (ii) if the Company's Common Stock
is not publicly traded, the fair market value established by the Committee
acting in good faith. The cash proceeds from the sale of Option Stock are to be
added to the general funds of the Company.
6. Exercise Period; Vesting. (a) An Option shall have a term of not more than
ten (10) years from the date of grant and shall automatically terminate:
(i) Upon termination of the Optionee's employment with the Company
for cause;
(ii) At the expiration of a period to be determined by the
Committee at the time of grant which is not to exceed six (6)
months following the date of termination of the Optionee's
employment with the Company without cause for any reason other
than death; provided, that if no such period is specified in
the Option, the Option shall automatically terminate thirty
(30) days following termination of Optionee's employment;
provided,
2
<PAGE>
further, that if the Optionee dies within such period,
subclause (iii) below shall apply; or
(iii) At the expiration of twelve (12) months after the date of
death of the Optionee; provided, that the Committee may in its
discretion provide that any Option not be exercisable after
the Optionee's death or may be exercised for a period less
than twelve months.
(iv) Unless otherwise specified in the Option, if termination is
due to the Optionee's "permanent and total disability" within
the meaning of Section 422(c)(6) of the Code, an Option may be
exercised at any time within one (1) year following
termination of employment or relationship as a consultant or
director.
(b) "Employment with the Company" as used in this Plan shall include
employment or relationship as a consultant, adviser or director with the Company
or any Affiliated Company in any such capacity, even if employment or engagement
in another capacity ceases. Options granted under this Plan shall not be
affected by an employee's transfer of employment among the Company and any one
or more Affiliated Companies. An Optionee's employment with the Company shall
not be deemed interrupted or terminated by a bona fide leave of absence (such as
sabbatical leave or employment by the Government) duly approved, military leave
or sick leave.
(c) Each Option may be made exercisable (that is, vest) in whole or in
installments, cumulative or otherwise, during its term, or subject to other
restrictions or limitations. Unless otherwise set forth in the granting
resolution, an Option shall vest immediately upon grant. If an Option is made to
vest over time, any portion not vested at the time of termination of employment
or relationship as a director or consultant with the Company shall lapse as if
never granted. Nothing contained in this Section shall be construed to extend
the term of any Option or to permit anyone to exercise an Option after
expiration of its term, nor shall it be construed to increase the number of
shares as to which any Option is exercisable from the amount exercisable on the
date of termination of the Optionee's employment or relationship as a consultant
or director.
7. Exercise of Options.
(a) The Committee, in granting CSOs, shall have discretion to determine
the terms upon which CSOs shall be exercisable, subject to applicable provisions
of this Plan. Once available for purchase, unpurchased Option Shares shall
remain subject to purchase until the CSO expires or terminates in accordance
with Paragraph 6 above. Unless otherwise provided in the CSO, a CSO may be
exercised in whole or in part, one or more times, but no CSO may be exercised
for a fractional share. Resulting fractions shall be rounded up or down, as
appropriate.
(b) CSOs may be exercised solely by the Optionee or a permitted transferee
during his lifetime or by a spouse or former spouse pursuant to a qualified
domestic relations order, or if the Option permits, after his death (with
respect to the number of shares which the Optionee could have purchased at the
time of death) by the person or persons entitled thereto under the decedent's
will or the laws of descent and distribution.
3
<PAGE>
(c) The purchase price of the Option Shares as to which a CSO is exercised
shall be paid or delivered in full at the time of exercise and no Option Shares
shall be issued until full payment is made therefor. Payment shall be made by
any one or more of the following means:
(i) in cash, represented by bank or cashier's check, certified
check or money order, or made by bank wire transfer;
(ii) by offsetting against the purchase price a cash obligation of
the Company which is both liquidated (meaning the dollar
amount is fixed and known or easily determinable) and
uncontested;
(iii) with the prior approval of the Committee, by delivering shares
of the Company's Common Stock which have been beneficially
owned by the Optionee, the Optionee's spouse or both of them,
for a period of at least six (6) months prior to the time of
exercise (the "Delivered Stock"), the Delivered Stock to be
valued by the Committee in good faith at its Fair Market Value
on the date of exercise;
(iv) with the prior approval of the Committee, by delivery of
shares of corporate stock which are freely tradeable without
restriction and which are part of a class of securities which
has been listed for trading on the NASDAQ system, the NASDAQ
Small Cap Market or a national securities exchange, with an
aggregate Fair Market Value on the date of exercise equal to
or greater than the exercise price of the Option Shares being
purchased under the CSO ("Other Shares"); or
(v) with the prior approval of the Committee, by delivering to the
Company the Optionee's personal recourse promissory note,
adequately secured by property other than the Option Shares
thereby purchased, containing such terms and conditions as the
Committee shall determine.
(d) An Option shall be deemed exercised when written notice thereof,
accompanied by the appropriate payment in full, is received by the Company. No
holder of an Option shall be, or have any of the rights and privileges of, a
shareholder of the Company in respect of any Option Shares purchasable upon
exercise of an Option unless and until certificates evidencing such shares shall
have been issued by the Company to him, her or it.
(e) An Option may, but need not, provide that the Optionee may at any time
when and to the extent the Option is exercisable, effect an Option Exchange,
provided the then market price of the Common Stock exceeds the Option's exercise
price. To effect an Option Exchange, the Optionee must surrender the Option at
the Company's principal offices stating the intent to effect the Option Exchange
and the number of Option Shares being exchanged, and the Option Exchange shall
be deemed to take place on the date of the Company's receipt thereof or such
later date as the Optionee specifies in writing. In connection with any Option
Exchange, an Option shall represent the right to subscribe for and acquire the
number of Option Shares equal to [i] the number of Option Shares specified by
the Optionee in its notice of exchange (the "Total Number") LESS [ii] the number
of Option Shares equal to the quotient obtained by dividing (A)
4
<PAGE>
the product of the Total Number and the exercise price by (B) the current Fair
Market Value of a share of the Common Stock on the date of exchange, or if such
date is not a trading day, on the trading day preceding. One or more
certificates for the Option Shares issuable and, if applicable, a new Option of
like tenor evidencing the balance of the Option Shares remaining subject to the
Option, shall be issued as of the exercise date.
8. Non-Transferability of Options.
No Option shall be assignable or otherwise transferable except by
will or by operation of law, pursuant to a qualified domestic relations order
(as defined in Rule 16b-3 of the Securities and Exchange Commission, or any
successor rule), or pursuant to Title I of the Employee Retirement Income
Security Act of 1974, as amended (ERISA), or rules thereunder. No CSO shall be
pledged or hypothecated in any manner, whether by operation of law or otherwise,
nor be subject to execution, attachment or similar process. The same
restrictions on transfer or assignment shall apply to any heirs, devisees,
beneficiaries, legal representatives or other persons acquiring this Option or
an interest herein under such an instrument or by operation of law. Any attempt
to transfer or otherwise dispose of an Option in contravention of its terms
shall void the Option.
9. Reorganizations and Recapitalizations of the Company.
(a) No Limit Imposed on Corporate Powers. The existence of this Plan and
Options granted hereunder shall not affect in any way the right or power of the
Company or its shareholders to make or authorize any and all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or any
issue of bonds, debentures or other indebtedness, or any preferred or prior
preference stocks senior to or affecting the Common Stock or the rights thereof,
or the dissolution or liquidation of the Company, or any sale, exchange or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or otherwise.
(b) Certain Adjustments to be Made. The Option Shares with respect to
which Options may be granted hereunder are shares of the Common Stock of the
Company as currently constituted. In certain instances, the number of shares
purchasable upon exercise of Options and the exercise price shall be adjusted as
provided herein. All adjustments and made under this Section shall be made by
the Committee in good faith in its sole discretion. Every adjustment in
outstanding Options shall be made without change in the total price applicable
to the unexercised portion of the Option but with a corresponding adjustment in
the exercise price per share and number (and if applicable, kind) of shares
purchasable.
(c) Stock Splits, Stock Combinations, Etc. If, and whenever, prior to
delivery by the Company of all of the Option Shares which are subject to Options
granted hereunder, the Company shall effect a split or combination of the Common
Stock or other capital readjustment, the payment of a Common Stock dividend, or
recapitalization, reclassification or other increase or reduction of the number
of shares of the Common Stock outstanding without receiving compensation
therefor in money, services or property, then the number of Option Shares
available under this Plan and the number of Option Shares with respect to which
Options
5
<PAGE>
granted hereunder may thereafter be exercised shall (i) in the event of an
increase in the number of outstanding shares of Common Stock, be proportionately
increased, and the cash consideration payable per share shall be proportionately
reduced; and (ii) in the event of a reduction in the number of outstanding
shares of Common Stock, be proportionately reduced, and the cash consideration
payable per share shall be proportionately increased.
(d) Certain Other Changes In the Common Stock. If the outstanding Common
Stock shall be hereafter increased or decreased, or changed into or exchanged
for a different number or kind of shares or other securities of the Company or
of another corporation, by reason of reorganization, merger, consolidation,
share exchange or other business combination in which the Company is the
surviving parent corporation, appropriate adjustment shall be made by the
Committee in the number and kind of shares for which Options may be granted
under the Plan. In addition, the Committee shall make appropriate adjustment in
the number and kind of shares as to which outstanding and unexercised Options
shall be exercisable, to the end that the proportionate interest of the holder
of the Option shall, to the extent practicable, be maintained as before the
occurrence of such event.
(e) Certain Defined Reorganizations. For purposes of this Section, the
term "Reorganization" shall mean any reorganization, merger, consolidation,
share exchange, or other business combination pursuant to which the Company is
not the surviving parent corporation after the effective date of the
Reorganization, or any sale or lease of all or substantially all of the assets
of the Company, and the term "Reorganization Agreement" shall mean a plan or
agreement with respect to a Reorganization. Nothing herein shall require the
Company to adopt a Reorganization Agreement, or to make provision for the
adjustment, change, conversion, or exchange of any Options, or the shares
subject thereto, in any Reorganization Agreement which it does adopt. In the
event of a Reorganization (as hereinafter defined), then,
(i) If there is no Reorganization Agreement, or if the
Reorganization Agreement does not specifically provide for the
adjustment, change, conversion, or exchange of the outstanding
and unexercised options for cash or other property or
securities of another corporation, then any outstanding and
unexercised options shall terminate as of a future date to be
fixed by the Committee; or,
(ii) If there is a Reorganization Agreement, and the Reorganization
Agreement specifically provides for the adjustment, change,
conversion, or exchange of the outstanding and unexercised
options for cash or other property or securities of another
corporation, the Committee shall adjust the shares under such
outstanding and unexercised options, and shall adjust the
shares remaining under the Plan which are then available for
the issuance of options under the Plan if the Reorganization
Agreement for the adjustment, change, conversion, or exchange
of such options and shares.
(iii) The Committee shall provide to each Optionee then holding an
outstanding and unexercised Option not less than thirty (30)
calendar Days' advance written notice of any date fixed by the
Committee pursuant to this Section 13 and of the terms of any
Reorganization Agreement
6
<PAGE>
providing for the adjustment, change, conversion, or exchange
of outstanding and unexercised Options. Except as the
Committee may otherwise provide, each Optionee shall have the
right during such period to exercise his Option only to the
extent that the Option was exercisable on the date such notice
was provided to the Optionee.
(f) Dissolution or Liquidation. In the event of the dissolution or
liquidation of the Company, any outstanding and unexercised options shall
terminate as of a future date to be fixed by the Committee.
(g) No Adjustments to be Made. Except as expressly provided above, the
Company's issuance of shares of its capital stock of any class, or securities
convertible into shares of its capital stock of any class, for cash or property,
or for labor or services, either upon direct sale or upon the exercise of rights
or warrants to subscribe therefor, or upon conversion of shares or obligations
of the Company convertible into or exchangeable for shares of capital stock or
other securities of the Company, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number of Option Shares subject to
CSOs granted hereunder or the purchase price of such shares.
10. Purchase for Investment.
Unless the Option Shares covered by this Plan have been registered
under the Act prior to issuance, each person exercising a CSO under this Plan
may be required by the Company to give a representation in writing that he is
acquiring such shares for his or her own account for investment and not with a
view to, or for sale in connection with, the distribution of any part thereof.
11. Effective Date and Expiration of this Plan.
This Plan shall be effective as of October 10, 1996, the date of its
adoption by the Board, and no CSO shall be granted pursuant to this Plan after
its expiration. This Plan shall expire on October 9, 2006 except as to CSOs then
outstanding, which shall remain in effect until they have expired or been
exercised.
12. Amendments or Termination.
The Committee or Board may amend, alter or discontinue this Plan at
any time in such respects as it shall deem advisable in order to conform to any
change in any other applicable law, or in order to comply with the provisions of
any rule or regulation of the Securities and Exchange Commission required to
exempt this Plan or any CSOs granted thereunder from the operation of Section
16(b) of the Securities Exchange Act of 1934, as amended ("Exchange Act"), or in
any other respect not inconsistent with Section 16(b) of the Exchange Act;
provided, that no amendment or alteration shall be made which would impair the
rights of any participant under any CSO theretofore granted, without his consent
(unless made solely to conform such CSO to, and necessary because of, changes in
the foregoing laws, rules or regulations), and except that no amendment or
alteration shall be made without the approval of shareholders which would
increase the total number of shares reserved for the purposes of this Plan
(except as provided in Paragraph 9) or extend the expiration date of this Plan
as set forth in Paragraph 11.
7
<PAGE>
13. Government Regulations.
This Plan, and the granting and exercise of CSOs hereunder, and the
obligation of the Company to sell and deliver Option Shares under such CSOs,
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.
14. Liability.
No member of the Board of Directors or the Committee, nor any
officers, employees or agents of the Company or any Affiliated Company shall be
personally liable for any action, omission or determination made in good faith
in connection with this Plan.
15. Options in Substitution for Other Options.
The Committee may, in its sole discretion, at any time during the
term of this Plan, grant new options to an employee under this Plan or any other
stock option plan of the Company on the condition that such employee shall
surrender for cancellation one or more outstanding options which represent the
right to purchase (after giving effect to any previous partial exercise thereof)
a number of shares, in relation to the number of shares to be covered by the new
conditional grant hereunder, determined by the Committee. If the Committee shall
have so determined to grant such new options on such a conditional basis ("New
Conditional Options"), no such New Conditional Option shall become exercisable
in the absence of such employee's consent to the condition and surrender and
cancellation as appropriate. New Conditional Options shall be treated in all
respects under this Plan as newly granted options. Options may be granted under
this Plan from time to time in substitution for similar rights held by employees
of other corporations who are about to become employees of the Company or an
Affiliated Company as a result of a merger or consolidation of the employing
corporation with the Company or an Affiliated Company, or the acquisition by the
Company or an Affiliated Company of the assets of the employing corporation, or
the acquisition by the Company or an Affiliated Company of stock of the
employing corporation as the result of which such other corporation becomes an
Affiliated Company.
16. Withholding Taxes.
Pursuant to applicable federal and state laws, the Company may be
required to collect withholding taxes upon the exercise of a CSO. The Company
may require, as a condition to the exercise of a CSO, that the Optionee
concurrently pay to the Company the entire amount or a portion of any taxes
which the Company is required to withhold by reason of such exercise, in such
amount as the Committee or the Company in its discretion may determine. In lieu
of part or all of any such payment, the Optionee may elect to have the Company
withhold from the shares to be issued upon exercise of the option that number of
shares having a Fair Market Value equal to the amount which the Company is
required to withhold.
17. Other Definitions.
Whenever used in this Plan, except where the context might clearly
indicate otherwise, the following terms shall have the meanings set forth below:
8
<PAGE>
(a) "Act" means the U.S. Securities Act of 1933, as amended.
(b) "Affiliated Company" means any Parent or Subsidiary of the
Company.
(c) "Award" or "grant" means any grant of a CSO (Option) made
under this Plan.
(d) "Board of Directors" means the Board of Directors of the
Company. The term "Committee" is defined in Section 2 of this
Plan.
(e) "Common Stock" or "Common Shares" means the common stock,
$.00001 par value per share, of the Company, or in the event
that the outstanding Common Shares are hereafter changed into
or exchanged for different shares or securities of the Company
or any other issuer, such other shares or securities.
(f) "Date of Grant" means the day the Committee authorizes the
grant of a CSO or such later date as may be specified by the
Committee as the date a particular grant will become
effective.
(g) "Employee" means and includes the following persons: (i)
executive officers, officers and directors (including advisory
and other special directors) of the Company or an Affiliated
Company; (ii) full-time and part-time employees of the Company
or an Affiliated Company; (iii) persons engaged by the Company
or an Affiliated Company as a consultant, advisor or agent;
and (iv) a lawyer, law firm, accountant or accounting firm, or
other professional or professional firm engaged by the Company
or an Affiliated Company.
(h) "Optionee" means an Employee to whom a CSO is granted.
(i) "Parent" means any corporation owning 50% or more of the total
combined voting stock of all classes of the Company or of
another corporation qualifying as a Parent within this
definition.
(j) "Subsidiary" means a corporation more than 50% of whose total
combined capital stock of all classes is held by the Company
or by another corporation qualifying as a Subsidiary within
this definition.
18. Litigation.
In the event that any Optionee or Optionee's successor should bring
any lawsuit or other action or proceeding ("Action") against the Company or an
Affiliated Company based upon or arising in relation to an Option, an Optionee,
or successor, as the case may be, not prevailing in such Action shall be
required to reimburse the Company or Affiliated Company's costs and expenses,
including reasonable attorneys' fees, incurred in defending such action and
appealing any award by a lower court.
9
<PAGE>
19. Governing Law.
The Plan and all rights and obligations under it shall be construed
and enforced in accordance with the laws of the State of Colorado.
* * *
By signature below, the undersigned officers of the Company hereby
certify that the foregoing is a true and correct copy of the 1996 Compensatory
Stock Option Plan of the Company.
DATED: October 10, 1996
RISING SUN CAPITAL, LTD.
(SEAL)
By /s/ John D. Brasher Jr.
------------------------------
Authorized Officer
By /s/ Elisabeth M. Crosse
------------------------------------
Secretary or Assistant Secretary
10
<PAGE>
RISING SUN CAPITAL, LTD.
--------------------
CERTIFICATION OF PLAN ADOPTION
--------------------
I, the undersigned Secretary or assistant secretary of this
Corporation, hereby certify that the foregoing Compensatory Stock Option Plan of
this corporation was duly approved by the requisite number of holders of the
issued and outstanding common stock of this corporation as of the date below.
Date of Approval: October 30, 1996
X /s/ Elisabeth M. Crosse
----------------------------
Signature
(SEAL)
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4.3
WALL STREET STRATEGIES CORPORATION
1999 INCENTIVE PROGRAM
The 1999 Incentive Program (the "Program") provides for the grant to
officers, directors and employees of Wall Street Strategies Corporation and its
direct and indirect subsidiaries (collectively, the "Company"), and certain
consultants to the Company, with certain rights to acquire shares of the
Company's common stock, par value $.001 per share (the "Common Stock"). The
Company believes that this Program will cause those persons to contribute
materially to the growth and success of the Company, thereby benefiting its
stockholders.
1. Administration.
The Program shall be administered and interpreted by the Board of
Directors of the Company or by one or more Committees appointed by the Board of
Directors of the Company from among its members (the "Plan Administrator"). The
Board of Directors may appoint different Committees to handle different duties
under the Program. The Plan Administrator's decisions shall be final and
conclusive with respect to the interpretation and administration of the Program
and any Grant made under it.
2. Grants.
Incentives under the Program shall consist of incentive stock
options, non-qualified stock options, stock appreciation rights in tandem with
stock options or freestanding, and restricted stock grants (any of the
foregoing, in any combination, collectively, "Grants"). All Grants shall be
subject to the terms and conditions set out herein and to such other terms and
conditions consistent with this Program as the Plan Administrator deems
appropriate. The Plan Administrator shall approve the form and provisions of
each Grant. Grants under a particular section of the Program need not be
uniform, and Grants under two or more sections may be combined in one
instrument.
3. Eligibility for Grants.
Grants may be made to any employee, officer, key executive,
director, professional or administrative employee, consultant or advisor to the
Company or any subsidiary of the Company selected by the Plan Administrator to
receive Grants under the Program (persons so selected, the "Grantees").
Provided, that incentive stock options may only be granted to employees of the
Company.
4. Shares Available for Grant.
(a) Shares Subject to Issuance or Transfer. Subject to adjustment as
provided in Section 4(b), the aggregate number of shares of Common Stock (the
"Shares") that may be issued or transferred under the Program is 5,000,000
Shares, plus, (i) any Shares which are forfeited under the Program or the
Company's 1996 Compensatory Stock Option Plan ( the "1996 Plan") after the
adoption of the Program by the Company's Board of Directors (the "Adoption
Date"); plus (ii) the number of Shares repurchased by the Company in the open
market and otherwise with an aggregate price no greater than the cash proceeds
received by the Company from the sale of Shares under the Program or the 1996
Plan; plus (iii) any Shares surrendered to the Company in payment of the
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exercise price of options issued under the Program or the 1996 Plan. However, no
award may be issued that would bring the total of all outstanding awards under
the Program to more than 15% of the total number of Shares of Common Stock of
the Company at the time outstanding. The Shares may be authorized but unissued
Shares or treasury Shares. The number of Shares available for Grants at any
given time shall be reduced by the aggregate of all Shares previously issued or
transferred pursuant to the Program or the 1996 Plan plus the aggregate of all
Shares which may become subject to issuance or transfer under then-outstanding
and then-currently exercisable Grants under the Program or the 1996 Plan. The
maximum number of Shares for which options and stock appreciation rights may be
granted under the Program to any person during any calendar year is 300,000
(subject to appropriate adjustment in the event of any changes in capitalization
of the Company).
(b) Adjustments Upon Changes in Capitalization or Other Events. Upon
changes in the Common Stock of the Company by reason of a stock dividend, stock
split, reverse split, recapitalization, merger, consolidation, combination or
exchange of shares, separation, reorganization or liquidation, the number and
class of Shares available under the Program as to which Grants may be made (both
in the aggregate and to any one Grantee), the number and class of Shares under
each then-outstanding Stock Option and the Option Price per share of such
options, and the terms of stock appreciation rights shall be correspondingly
adjusted by the Plan Administrator, such adjustments to be made in the case of
outstanding Stock Options without change in the total price applicable to such
options. In the event of a merger, consolidation, combination, reorganization or
other transaction in which the Company will not be the surviving corporation, or
in which the Company becomes a wholly-owned subsidiary of the new corporation, a
Grantee of Stock Options under the Program shall be entitled to options on that
number of shares of stock in the new corporation which the Grantee would have
received had the Grantee exercised all of the unexercised options available to
the Grantee under the Program, whether or not then exercisable, at the instant
immediately prior to the effective date of such transaction, and, if such
unexercised options had related stock appreciation rights, the Grantee also will
receive new stock appreciation rights related to the new options. Thereafter,
adjustments as provided above shall relate to the options or stock appreciation
rights of the new corporation. Except as otherwise specifically provided in the
instrument of Grant, in the event of a Change in Control (as defined below),
merger, consolidation, combination, reorganization or other transaction in which
the shareholders of the Company will receive cash or securities (other than
Common Stock) or in the event that an offer is made to the holders of Common
Stock of the Company to sell or exchange such Common Stock for cash, securities
or stock of another corporation and such offer, if accepted, would result in the
offeror becoming the owner of (a) at least 50% of the outstanding Common Stock
of the Company or (b) such lesser percentage of the outstanding Common Stock
which the Plan Administrator in its sole discretion determines will materially
adversely affect the market value of the Common Stock after the tender or
exchange offer, the Plan Administrator shall have the right, but not the
obligation, in the exercise of its business judgment, prior to the shareholders'
vote on such transaction or prior to the expiration date (without extensions) of
the tender or exchange offer, (i) accelerate the time of exercise so that all
Stock Options and stock appreciation rights which are outstanding shall become
immediately exercisable in full, and all Restricted Stock Grants shall
immediately vest in full, without regard to any limitations of time, performance
or amount otherwise contained in the Program or in the instruments of Grant
and/or (ii) determine that the options and stock appreciation rights shall be
adjusted and make such adjustments by substituting for Common Stock of the
Company subject to options and stock appreciation rights, common stock of the
surviving corporation or offeror if such stock of such corporation is publicly
traded or, if such stock is not publicly traded, by substituting common stock of
a parent of the surviving corporation or offeror if the stock of such parent is
publicly traded, in which event the
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aggregate option price shall remain the same and the number of shares subject to
outstanding grants shall be the number of shares which could have been purchased
on the closing day of such transaction or the expiration date of the offer with
the proceeds which would have been received by the Grantee if the option had
been exercised in full prior to such transaction or expiration date and the
Grantee had exchanged all of such shares in the transaction or sold or exchanged
all of such shares pursuant to the tender or exchange offer, and if any such
option has related stock appreciation rights, the stock appreciation rights
shall likewise be adjusted. For purposes of this Section 4(b), "Change in
Control" means (i) any "person", as such term is used in Section 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other
than the Company, any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, or any corporation owned, directly or
indirectly, by the shareholders of the Company in substantially the same
proportion as their ownership of stock of the Company), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing 30% or more of the
combined voting power of the Company's then outstanding securities without the
approval of the Board of Directors of the Company; (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board, and any new director (other than a director designated by a person
who has entered into an agreement with the Company to effect a transaction
described in clause (i), (iii), or (iv) of this sentence) whose election by the
Board or nomination for election by the Company's shareholders was approved by a
vote of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved cease for any reason to
constitute at least a majority thereof; (iii) the shareholders of the Company
approve a merger or consolidation of the Company with any other company, other
than (1) a merger or consolidation which would result in the voting securities
of the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) more than 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation or (2) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in which no
"person" (as hereinabove defined) acquires more than 50% of the combined voting
power of the Company's then outstanding securities; or (iv) the shareholders of
the Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
of the Company's assets and properties.
5. Stock Options.
The Plan Administrator may grant options qualifying as incentive
stock options under the Internal Revenue Code of 1986, as amended ("Incentive
Stock Options"), or non-qualified options not entitled to special tax treatment
under Section 422 of the Internal Revenue Code of 1986 (the "Code"), as amended
(collectively, "Stock Options"). The following provisions of this Section 5 are
applicable to Stock Options:
(a) Exercise of Option. A Grantee may exercise a Stock Option by
delivering to the Company a written notice of exercise stating the number of
shares to be purchased (the "Notice"), either with or without accompanying
payment of the exercise price per share of Common Stock to be purchased (the
"Option Price"). The Notice, once delivered, shall be irrevocable.
(b) Satisfaction of Option Price. The Grantee shall pay the Option
Price (a) in cash or (b) with the Plan Administrator's permission, by tender,
either actually or by attestation, to
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the Company of shares of Common Stock already owned by Grantee and registered in
his or her name or held for his or her benefit by a registered holder, having a
fair market value on the date of exercise equal to the Option Price, or (c) in
the discretion of the Plan Administrator, by a combination of methods of payment
specified in clauses (a) and (b). The Grantee shall pay the Option Price not
later than thirty (30) days after the date of a statement from the Company
following exercise setting forth the Option Price, Fair Market Value of Common
Stock on the exercise date, the number of shares of Common Stock that may be
delivered in payment of the Option Price, and the amount of withholding tax due,
if any. If the Grantee fails to pay the Option Price within the thirty (30) day
period, the Plan Administrator shall have the right to take whatever action it
deems appropriate, including voiding the option exercise. The Company shall not
issue or transfer shares of Common Stock upon exercise of a Stock Option until
the Option Price is fully paid. No shares of Common Stock may be tendered in
exercise of this Option if such shares were acquired by Optionee through the
exercise of an Incentive Stock Option, unless (a) such shares have been held by
Optionee for at least one (1) year, and (b) at least two (2) years have elapsed
since such Incentive Stock Option was granted. In addition to the foregoing, in
the sole discretion of the Plan Administrator, the Grantee may elect to effect a
"cashless exercise" of a Stock Option at any time when and to the extent the
Stock Option is exercisable, provided the then Fair Market Value of the Common
Stock exceeds the Option Price. If permitted by the Plan Administrator and, in
accordance with such requirements and procedures as the Plan Administrator may
require, the Grantee shall effect a cashless exercise of a Stock Option by
delivering to the Company a Notice electing such exercise, stating the number of
shares to be exercised on such cashless basis ("Cashless Shares"). The Notice,
once delivered, shall be irrevocable. The cashless exercise shall be deemed to
take place on the date of the Company's receipt thereof or such later date as
the Grantee specifies in writing in such Notice ("Cashless Exercise Date"). In
connection with any cashless exercise, the Company shall permit the Grantee to
satisfy the Option Price, in whole or in part, by withholding the number of
shares of the Stock Option to be purchased equal to (i) the Cashless Shares LESS
(ii) the number of shares equal to the quotient obtained by dividing (a) the
product of the Cashless Shares and the Option Price by (b) the Fair Market Value
(as defined in Section 9(h) herein) of a share of the Common Stock on the
Cashless Exercise Date, or if such date is not a trading day, on the preceding
trading day.
(c) Share Withholding. With respect to any non-qualified option or
SAR (as defined below), the Plan Administrator may, in its discretion and
subject to such rules as the Plan Administrator may adopt, permit the Grantee to
satisfy, in whole or in part, any withholding tax obligation which may arise in
connection with the exercise of the non-qualified option or SAR by electing to
have the Company withhold shares of Common Stock having a Fair Market Value
equal to the amount of the withholding tax. Notwithstanding the foregoing, as a
condition of the Grant of any Stock Option or SAR to any officer or director of
the Company subject to the reporting requirements (a "Reporting Person") of
Section 16 promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the Plan Administrator shall require, upon the exercise of
any Stock Option or SAR by any Reporting Person, at a time when the Company
shall be required to file periodic reports under Section 13 of the Exchange Act,
that the number of shares of Common Stock otherwise issuable upon the exercise
of such Stock Option or SAR shall be reduced by the number of shares of Common
Stock having an aggregate Fair Market Value equal to the amount of the Reporting
Person's liability for any and all taxes required by law to be withheld.
(d) Price and Term. The Option Price per share, term and other
provisions of Stock Options granted under the Program shall be specified by the
Grant, as limited, in the case of Incentive Stock Options, by the provisions of
Section 5(e) below, if granted pursuant to such
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Section. In addition, the Plan Administrator may prescribe such other conditions
as it may deem appropriate, which conditions shall be specified in the
instrument of Grant.
(e) Limits on Incentive Stock Options. The aggregate fair market
value of the stock covered by Incentive Stock Options granted under the Program
or any other stock option plan of the Company or any subsidiary or parent of the
Company that become exercisable for the first time by any employee in any
calendar year shall not exceed $100,000. The aggregate Fair Market Value will be
determined at the time of grant. The period for exercise of an Incentive Stock
Option shall not exceed ten (10) years from the date of the Grant (or five years
if the Grantee is also a 10% stockholder). The Option Price at which Common
Stock may be purchased by the Grantee under an Incentive Stock Option shall be
the Fair Market Value (or 110% of the Fair Market Value if the Grantee is a 10%
stockholder) of the Common Stock on the date of the Grant. Incentive Stock
Options may only be granted to employees of the Company or any subsidiary or
parent of the Company. Incentive Stock Options by their terms shall not be
transferable by the Grantee other than by the laws of descent and distribution,
and shall be exercisable, during the lifetime of the Grantee, only by the
Grantee.
(f) Restored Options. Stock Options granted under the Program may,
with the Plan Administrator's permission, include the right to acquire a
restored option (a "Restored Option"). If a Stock Option grant contains a
Restored Option feature and if a Grantee pays all or part of the Option Price of
such Stock Option with shares of Common Stock held by the Grantee, then upon
exercise of such Stock Option the Grantee shall be granted a Restored Option to
purchase, at the Fair Market Value of the Common Stock as of the date of the
grant of the Restored Option, the number of shares of Common Stock of the
Company equal to the sum of the number of whole shares used by the Grantee in
payment of the Option Price and the number of whole shares, if any, withheld by
the Company as payment for withholding taxes. A Restored Option may be exercised
between the date of grant and the date of expiration, which will be the same as
the date of expiration of the Stock Option to which such Restored Option is
related.
6. Stock Appreciation Right.
The Plan Administrator may grant a Stock Appreciation Right ("SAR")
either independently or in conjunction with any Stock Option granted under the
Program. The following provisions are applicable to each SAR:
(a) Options to Which Right Relates. Each SAR which is issued in
conjunction with a Stock Option shall specify the Stock Option to which the SAR
is related, together with the Option Price and number of option shares subject
to the SAR at the time of its grant.
(b) Requirement of Employment. An SAR may be exercised only while
the Grantee is in the employment or consultancy of the Company, except that the
Plan Administrator may provide for partial or complete exceptions to this
requirement as it deems equitable.
(c) Exercise. A Grantee may exercise an SAR in whole or in part by
delivering a notice of exercise to the Company, except that the Plan
Administrator may provide for partial or complete exceptions to this requirement
as it deems equitable.
(d) Payment and Form of Settlement. If a Grantee exercises an SAR
which is issued in conjunction with a Stock Option, he shall receive the
aggregate of the excess of the fair market value of each share of Common Stock
with respect to which the SAR is being exercised
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over the Option Price of each such share. Payment, in any event, may be made in
cash, Common Stock or a combination of the two, in the discretion of the Plan
Administrator. Fair Market Value shall be determined as of the date of exercise.
(e) Expiration and Termination. Each SAR shall expire on a date
determined by the Plan Administrator at the time of grant. If a Stock Option is
exercised in whole or in part, any SAR related to the Shares purchased in
connection with such exercise shall terminate immediately.
7. Restricted Stock Grants.
The Plan Administrator may issue or transfer shares of Common Stock
("Restricted Stock") to a Grantee under a Restricted Stock Grant. Shares of
Restricted Stock are subject to forfeiture unless and until specified employment
vesting and/or performance vesting conditions are met, as determined by the Plan
Administrator. Until the shares vest or are forfeited, as the case may be, the
Grantee shall be entitled to vote the shares and to receive any dividends paid.
The following provisions are applicable to Restricted Stock Grants:
(a) Requirement of Employment. If the Grantee's employment
terminates prior to the fulfillment of the conditions for vesting of the
Restricted Stock, as set forth in the specific instrument of Grant, all shares
of Restricted Stock held by him or her and still subject to restriction will be
forfeited and must be returned immediately to the Company. However, the Plan
Administrator may provide for partial or complete exceptions to this requirement
as it deems equitable.
(b) Restrictions of Transfer and Legend on Stock Certificate. Prior
to the fulfillment of the conditions for vesting, a Grantee may not sell,
assign, transfer, pledge, or otherwise dispose of the shares of Common Stock
except to a Successor Grantee under Section 9(a). Each certificate for shares
issued or transferred under a Restricted Stock Grant shall contain a legend
giving appropriate notice of the restrictions applicable to the Grant. The Plan
Administrator may, in its sole discretion, require that such certificates be
placed into escrow with the Company until vesting.
(c) Lapse of Restrictions. All restrictions imposed under a
Restricted Stock Grant shall lapse upon the fulfillment of the conditions for
vesting set forth in the instrument of Grant provided that all of the conditions
stated in Sections 7(a) and (b) have been met as of the date of such lapse. The
Grantee shall then be entitled to have the legend removed from the certificate.
8. Amendment and Termination of the Program.
(a) Amendment. The Administrator may from time to time amend, alter,
suspend or discontinue the Program, subject to any requirement of stockholder
approval required by applicable law, rule or regulation, including Section
162(m) of the Code or, if the Common Stock is then listed or admitted for
trading on any United States securities exchange or on the National Association
of Securities Dealers, Inc. Automated Quotation System ("NASDAQ"), any
requirement for stockholder approval required under the rules of such exchange
or NASDAQ, as the case may be; provided, however, that no amendment shall be
made without stockholder approval if such amendment would (1) increase the
maximum number of shares of Common Stock available for issuance under this
Program (subject to Section 4(b)), (2) reduce the minimum Option
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Price in the case of an option or the base price in the case of an SAR, (3)
effect any change inconsistent with Section 422 of the Code or (4) extend the
term of this Program.
(b) Termination of the Program. The Program shall terminate on the
tenth anniversary of its effective date unless terminated earlier by the Board
or unless extended by the Board.
(c) Termination and Amendment of Outstanding Grants. A termination
or amendment of the Program that occurs after a Grant is made shall not result
in the termination or amendment of the Grant unless the Grantee consents or
unless the Plan Administrator acts under Section 9(d). The termination of the
Program shall not impair the power and authority of the Plan Administrator with
respect to outstanding Grants. Whether or not the Program has terminated, an
outstanding Grant may be terminated or amended under Section 9(d) or may be
amended by agreement of the Company and the Grantee on terms consistent with the
Program.
9. General Provisions.
(a) Prohibitions Against Transfer. Only a Grantee or his or her
authorized representative may exercise rights under a Grant. Such persons may
not transfer those rights, except upon the express written consent of the
Company, which may be granted or denied in the Company's discretion. Except as
otherwise expressly provided herein or in the instrument of grant, when a
Grantee dies, the personal representative or other person entitled under a Grant
under the Program to succeed to the rights of the Grantee ("Successor Grantee")
may exercise the rights. A Successor Grantee must furnish proof satisfactory to
the Plan Administrator of his or her right to receive the Grant under the
Grantee's will or under the applicable laws of descent and distribution.
(b) Suitable Grants. The Plan Administrator may make a Grant to an
employee of another corporation who becomes an Eligible Grantee by reason of a
corporate merger, consolidation, acquisition of stock or property, share
exchange, reorganization or liquidation involving the Company in substitution
for a stock option, stock appreciation right, performance award, or restricted
stock grant previously granted by such corporation (the "Original Incentives").
The terms and conditions of the substitute Grant may vary from the terms and
conditions required by the Program and from those of the Original Incentives.
The Plan Administrator shall prescribe the exact provisions of the substitute
Grants, preserving where possible the provisions of the Original Incentives.
(c) Subsidiaries. The term "subsidiary" means a corporation in which
the Company owns directly or indirectly 50% or more of the voting power.
(d) Compliance with Law. The Program, the exercise of Grants, and
the obligations of the Company to issue or transfer shares of Common Stock under
Grants shall be subject to all applicable laws and to approvals by any
governmental or regulatory agency as may be required. The Plan Administrator may
revoke any Grant if it is contrary to law or modify a Grant to bring it into
compliance with any valid and mandatory government regulation. The Plan
Administrator may also adopt rules regarding the withholding of taxes on payment
to Grantees.
(e) Ownership of Stock. A Grantee or Successor Grantee shall have no
rights as a stockholder of the Company with respect to any Shares covered by a
Grant until the Shares are issued or transferred to the Grantee or Successor
Grantee on the Company's books.
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(f) No Right to Employment. The Program and the Grants under it
shall not confer upon any Grantee the right to continue in the employment of the
Company or affect in any way the right of the Company to terminate the
employment of a Grantee at any time.
(g) Effective Date of the Program. The Program shall become
effective upon its approval by the Company's stockholders under applicable law
and regulatory requirements. Grants may be made prior to such approval but no
Grant may be exercised until such approval is obtained.
(h) Fair Market Value. For the purposes of the Program, the term
"Fair Market Value" means, as of any date, the closing price of a share of
Common Stock of the Company on such date. The closing price shall be (i) if the
Common Stock is then listed or admitted for trading on any national securities
exchange, or if not so listed or admitted for trading, is listed or admitted for
trading on NASDAQ, the last sale price of the Common Stock, regular way, or the
mean of the bid and asked prices thereof for any trading day on which no such
sale occurred, in each case as officially reported on the principal securities
exchange on which the Common Stock is listed or admitted for trading or on
NASDAQ, as the case may be, or (ii) if not so listed or admitted for trading on
a national securities exchange or NASDAQ, the mean between the closing high bid
and low asked quotations for the Common Stock in the over-the-counter market as
reported by NASDAQ, or any similar system for the automated dissemination of
securities prices then in common use, if so quoted, as reported by any member
firm of the New York Stock Exchange selected by the Company; provided, however,
that if, by reason of extended or continuous trading hours on any exchange or in
any market or for any other reason, the time, with respect to any trading day,
of the close of trading for the purpose of determining the "last sale price" or
the "closing" bid and asked prices is not objectively determinable, the time on
such trading day used for the purpose of reporting any compilation of last sale
prices or closing bid and asked prices in The Wall Street Journal shall be the
time on such trading day as of which the "last sale price" or "closing" bid and
asked prices are determined for purposes of this definition. If the Common Stock
is quoted on a national securities or central market system in lieu of a market
or quotation system described above, the closing price shall be determined in
the manner set forth in clause (i) of the preceding sentence if actual
transaction are reported, and in the manner set forth in clause (ii) of the
preceding sentence if bid and asked quotations are reported but actual
transactions are not. If on the date in question, there is no exchange or
over-the-counter market for the Common Stock, the "fair market value" of such
Common Stock shall be determined by the Plan Administrator acting in good faith.
(i) Application of Funds. The proceeds received by the Company from
the issuance of Grants pursuant to the Program will be used for general
corporate purposes.
(j) No Obligation to Exercise Option. The granting of an option to
any Grantee under the Program shall impose no obligation upon such Grantee to
exercise such option.
(k) Severability. If any provision of the Program, or any term or
condition of any Grant granted or form executed or to be executed thereunder, or
any application thereof to any person or circumstances is invalid, such
provision, term, condition or application shall to that extent be void (or, in
the discretion of the Plan Administrator, such provision, term or condition may
be amended so as to avoid such invalidity or failure), and shall not affect
other provisions, terms or conditions or applications thereof, and to this
extent such provisions, terms and conditions are severable.
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(l) Instrument of Grant. Each Grant under this Program shall be
evidenced by an agreement (i.e., an instrument of Grant) setting forth the terms
and conditions applicable to such Grant. No Grant shall be valid until an
agreement is executed by the Company and the recipient of such award and, upon
execution by each party and delivery of the agreement to the Company, such award
shall be effective as of the effective date set forth in the Agreement.
(m) Restricted Shares. Each award made hereunder shall be subject to
the requirement that if at any time the Company determines that the listing,
registration or qualification of the shares of Common Stock subject to such
award upon any securities exchange or under any law, or the consent or approval
of any governmental body, or the taking of any other action is necessary or
desirable as a condition of, or in connection with, the delivery of shares
thereunder, such shares shall not be delivered unless such listing,
registration, qualification, consent, approval or other action shall have been
effected or obtained, free of any conditions not acceptable to the Company. The
Company may require that certificates evidencing shares of Common Stock
delivered pursuant to any award made hereunder bear a legend indicating that the
sale, transfer or other disposition thereof by the holder is prohibited except
in compliance with the Securities Act of 1933, as amended, and the rules and
regulations thereunder.
(n) Program Controls. In the case of any conflict or inconsistency
between the terms of this Program and the terms of any instrument of Grant, the
terms of this Program will control, unless the instrument of grant expressly
provides that the terms of such instrument of grant will control.
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Exhibit 10.2
3/1/90
===================================================================
STANDARD FORM OF OFFICE LEASE
The Real Estate Board of New York, Inc.
===================================================================
AGREEMENT OF LEASE, made as of this 23rd day of November, 1999, between
PRAEDIUM II BROADSTONE LLC (hereinafter referred to as "Landlord" or
"Owner"), having an address c/o Broadway Management Co., Inc., 39
Broadway, New York, New York and WALL STREET STRATEGIES, INC., a
Delaware corporation having an office at 130 William Street, New York,
New York (hereinafter referred to as "Tenant").
WITNESSETH: Owner hereby leases to Tenant and Tenant hereby hires from
Owner the entire thirty-first (31st) floor, as approximately shown
hatched on the floor plan annexed hereto as Schedule A (hereinafter
called the "demised premises"), in the building known as 80 Broad
Street, New York, New York (hereinafter called the "Building"), for the
term of approximately ten (10) years, five (5) months (or until such
term shall sooner cease and expire as hereinafter provided) to commence
as of the date hereof (hereinafter called the "Commencement Date") and
to end on the date (hereinafter called the "Expiration Date") which
shall be the last day of the month preceding the month in which occurs
the tenth (10th) anniversary of the Rent Commencement Date (as defined
in Section 54(b) hereof), both dates inclusive, at an annual rental
rate as set forth in Article 54 hereof,
which Tenant agrees to pay in lawful money of the United States which shall be
legal tender in payment of all debts and dues, public and private, at the time
of payment, in equal monthly installments in advance on the first day of each
month during said term, at the office of Owner or such other place as Owner may
designate, without any set off or deduction whatsoever, except that Tenant shall
pay the first monthly installment(s) on the execution hereof (unless this
lease be a renewal).
In the event that, at the commencement of the term of this lease, or
thereafter, Tenant shall be in default in the payment of rent to Owner pursuant
to the terms of another lease with Owner or with Owner's predecessor in
interest, Owner may at Owner's option and without notice to Tenant add the
amount of such arrears to any monthly installment of rent payable hereunder and
the same shall be payable to Owner as additional rent.
The parties hereto, for themselves, their heirs, distributees,
executors, administrators, legal representatives, successors and assigns, hereby
covenant as follows:
Rent Occupancy
1. Tenant shall pay the rent as above and as hereinafter provided.
2. Tenant shall use and occupy demised premises for the Permitted Use
as defined in Article 35 hereof and for no other purpose.
Tenant Alterations:
3. Tenant shall make no changes in or to the demised premises of any
nature without Owner's prior written consent. Subject to the prior written
consent of Owner [3.1] and to the provisions of this article, Tenant at Tenant's
expense, may make alterations, installations, additions or improvements which
are non-structural and which do not affect utility services or plumbing and
electrical lines, in or to the interior of the demised premises by using
contractors or mechanics first approved by Owner.* Tenant shall, before making
any alterations, additions, installations or improvements, at its expense,
obtain [3.2] all permits, approvals and certificates required by any
governmental or quasi-governmental bodies and (upon completion) certificates of
final approval thereof and shall deliver promptly duplicates of all such
permits, approvals and certificates to Owner and Tenant agrees to carry and will
cause Tenant's contractors and sub-contractors to carry such workman's
compensation, general liability, personal and property damage insurance as Owner
may [3.3] require. If any mechanic's lien is filed against the demised premises,
or the building of which the same forms a part, for work claimed to have been
done for, or materials furnished to, Tenant, whether or not done pursuant to
this article, the same shall be discharged by Tenant within thirty days
thereafter, at Tenant's expense, by filing the bond required by law [3.4]. All
fixtures and all paneling, partitions, railings and like installations,
installed in the premises at any time, either by Tenant or by Owner in Tenant's
behalf, shall, upon installation, become the property of Owner and shall remain
upon and be surrendered with the demised premises unless Owner, by notice to
Tenant no later than twenty days prior to the date fixed as the termination of
this lease, elects to relinquish Owner's right thereto and to have them removed
by Tenant, in which event the same shall be removed from the premises by Tenant
prior to the expiration of the lease, at Tenant's expense [3.5]. Nothing in this
Article shall be construed to give Owner title to or to prevent Tenant's removal
of trade fixtures, moveable office furniture and equipment, but upon removal of
any such from the premises or upon removal of other installations as may be
required by Owner, Tenant shall immediately and at its expense, repair and
restore the premises to the condition existing prior to installation and repair
any damage to the demised premises or the building due to such removal. All
property permitted or required to be removed, by Tenant at the end of the term
remaining in the premises after Tenant's removal shall be deemed abandoned and
may, at the election of Owner, either be retained as Owner's property or may be
removed from the premises by Owner, at Tenant's expense.
Maintenance and Repairs
4. Tenant shall, throughout the term of this lease, take good care of
the demised premises and the fixtures and appurtenances therein. Tenant shall be
responsible for all damage or injury to the demised premises or any other part
of the building and the systems and equipment thereof, whether requiring
structural or nonstructural repairs caused by or resulting from carelessness,
omission, neglect or improper conduct of Tenant, Tenant's subtenants, agents,
employees, invitees or licensees, or which arise out of any work, labor, service
or equipment one for or supplied to Tenant or any subtenant or arising out of
the installation, use or operation of the property or equipment of Tenant or any
subtenant. Tenant shall also repair all damage to the building and the demised
premises caused by the moving of Tenant's fixtures, furniture and equipment.
Tenant shall promptly make, at Tenant's expense, all repairs in and to the
demised premises for which Tenant is responsible, using only the contractor for
the trade or trades in question, selected from a list of at least two
contractors per trade submitted by Owner. Any other repairs in or to the
building or the facilities and systems thereof for which Tenant is responsible
shall be performed by Owner at the Tenant's expense. Owner shall maintain in
good working order and repair the exterior and the structural portions of the
building, including the structural portions of its demised premises, and the
public portions of the building interior and the building plumbing, electrical,
heating and ventilating systems (to the extent such systems presently exist)
serving the demised premises. Tenant agrees to give prompt notice of any
defective condition in the premises for which Owner may be responsible
hereunder. There shall be no allowance to Tenant for diminution of rental value
and no liability on the part of Owner by reason of inconvenience, annoyance or
injury to business arising from Owner or others making repairs, alterations,
additions or improvements in or to any portion of the building or the demised
premises or in and to the fixtures, appurtenances or equipment thereof. It is
specifically agreed that Tenant shall not be entitled to any setoff or reduction
of rent by reason of any failure of Owner to comply with the covenants of this
or any other article of this Lease. Tenant agrees that Tenant's sole remedy at
law in such instance will be by way of an action for damages for breach of
contract. The provisions of this Article 4 shall not apply in the case of fire
or other casualty which are dealt with in Article 9 hereof.
Window Cleaning:
5. Tenant will not clean nor require, permit, suffer or allow any
window in the demised premises to be cleaned from the outside in violation of
Section 202 of the Labor Law or any other applicable law or of the Rules of the
Board of Standards and Appeals, or of any other Board or body having or
asserting jurisdiction.
Requirements of Law, Fire Insurance, Floor Loads:
6. Prior to the commencement of the lease term, if Tenant is then in
possession, and at all times thereafter, Tenant, at Tenant's sole cost and
expense, shall promptly comply with all present and future laws, orders and
regulations of all state, federal, municipal and local governments, departments,
commissions and boards and any direction of any public officer pursuant to law,
and all orders, rules and regulations of the New York Board of Fire
Underwriters, Insurance Services Office, or any similar body which shall impose
any violation, order or duty upon Owner or Tenant with respect to the demised
premises, whether or not arising out of Tenant's use or manner of use thereof,
(including Tenant's permitted use) or, with respect to the building if arising
out of Tenant's use or manner of use of the premises or the building (including
the use permitted under the lease). Nothing herein shall require Tenant to make
structural repairs or alterations unless Tenant has, by its manner of use of the
demised premises or method of operation therein, violated any such laws,
ordinances, orders, rules, regulations or requirements with respect thereto.
Tenant may, after securing Owner to Owner's satisfaction against all damages,
interest, penalties and expenses, including, but not limited to, reasonable
attorney's fees, by cash deposit or by surety bond in an amount and in a company
satisfactory to Owner, contest and appeal any such laws, ordinances, orders,
rules, regulations or requirements provided same is done with all reasonable
promptness and provided such appeal shall not subject Owner to prosecution for a
criminal offense or constitute a default under any lease or mortgage under which
Owner may be obligated, or cause the demised premises or any part thereof to be
condemned or vacated. Tenant shall not do or permit any act or thing to be done
in or to the demised premises which is contrary to law, or which will invalidate
or be in conflict with public liability, fire or other policies of insurance at
any time carried by or for the benefit of Owner with respect to the demised
premises or the building of which the demised premises form a part, or which
shall or might subject Owner to any liability or responsibility to any person or
for property damage. Tenant shall not keep anything in the demised premises
except as now or hereafter permitted by the Fire Department, Board of Fire
Underwriters, Fire Insurance Rating Organization or other authority having
jurisdiction, and then only in such manner and such quantity so as not to
increase the rate for fire insurance applicable to the building, nor use the
premises in a manner which will increase the insurance rate for the building or
any property located therein over that in effect prior to the commencement of
Tenant's occupancy. Tenant shall pay all costs, expenses, fines, penalties, or
damages, which may be imposed upon Owner by reason of Tenant's failure to comply
with the provisions of this article and if by reason of such failure the fire
insurance rate shall, at the beginning of this lease or at any time thereafter,
be higher than it otherwise would be, then Tenant shall reimburse Owner, as
additional rent hereunder, for that portion of all fire insurance premiums
thereafter paid by Owner which shall have been charged because of such failure
by Tenant. In any action or proceeding wherein Owner and Tenant are parties, a
schedule or "make-up" of rate for the building or demised premises issued by the
New York Fire Insurance Exchange, or other body making fire insurance rates
applicable to said premises shall be conclusive evidence of the facts therein
stated and of the several items and charges in the fire insurance rates then
applicable to said premises. Tenant shall not place a load upon
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*Tenant agrees that all such alterations, installations, additions or
improvements shall be performed by Tenant in accordance with Landlord's Uniform
Rules and Regulations for Alterations.
<PAGE>
any floor of the demised premises exceeding the floor load per square foot area
which it was designed to carry and which is allowed by law. Owner reserves the
right to prescribe the weight and position of all safes, business machines and
mechanical equipment. Such installations shall be placed and maintained by
Tenant, at Tenant's expense, in settings sufficient, in Owner's judgement, to
absorb and prevent vibration, noise and annoyance.
Subordination:
7. This lease is subject and subordinate to all ground or underlying
leases and to all mortgages which may now or hereafter affect such leases or the
real property of which demised premises are a part and to all renewals,
modifications, consolidations, replacements and extensions of any such
underlying leases and mortgages. This clause shall be self-operative and no
further instrument of subordination shall be required by any ground or
underlying lessor or by any mortgagee, affecting any lease or the real property
of which the demised premises are a part. In confirmation of such subordination,
Tenant shall execute promptly any certificate that Owner may request.
Property - Loss, Damage, Reimbursement, Indemnity:
8. Owner or its agents shall not be liable for any damage to property
of Tenant or of others entrusted to employees of the building, nor for loss of
or damage to any property of Tenant by theft or otherwise, nor for any injury or
damage to persons or property resulting from any cause of whatsoever nature,
unless caused by or due to the negligence [8.1] of Owner, its agents, servants
or employees [8.2]. Owner or its agents will not be liable for any such damage
caused by other tenants or persons in, upon or about said building or caused by
operations in construction of any private, public or quasi public work. If at
any time any windows of the demised premises are temporarily closed, darkened or
bricked up (or permanently closed, darkened or bricked up, if required by law)
for any reason whatsoever including, but not limited to Owner's own acts, Owner
shall not be liable for any damage Tenant may sustain thereby and Tenant shall
not be entitled to any compensation therefor nor abatement or diminution of rent
nor shall the same release Tenant from its obligations hereunder nor constitute
an eviction. Tenant shall indemnify and save harmless Owner against and from all
liabilities, obligations, damages, penalties, claims, costs and expenses for
which Owner shall not be reimbursed by insurance, including reasonable attorneys
fees, paid, suffered or incurred as a result of any breach by Tenant, Tenant's
agents, contractors, employees, invitees, or licensees, of any covenant or
condition of this lease, or the carelessness, negligence or improper conduct of
the Tenant, Tenant's agents, contractors, employees, invitees or licensees.
Tenant's liability under this lease extends to the acts and omissions of any
sub-tenant, and any agent, contractor, employee, invitee or licensee of any
sub-tenant. In case any action or proceeding is brought against Owner by reason
of any such claim, Tenant, upon written notice from Owner, will, at Tenant's
expense, resist or defend such action or proceeding by counsel approved by Owner
in writing, such approval not to be unreasonably withheld.
Destruction, Fire and Other Casualty:
9. (a) If the demised premises or any part thereof shall be damaged by
fire or other casualty, Tenant shall give [9.1] notice thereof to Owner and this
lease shall continue in full force and effect except as hereinafter set forth.
(b) If the demised premises are partially damaged or rendered partially unusable
by fire or other casualty, the damages thereto shall be repaired by and at the
expense of Owner and the rent, until such repair shall be substantially
completed, shall be apportioned from the day following the casualty according to
the part of the premises which is usable. (c) If the demised premises are
totally damaged or rendered wholly unusable by fire or other casualty, then the
rent shall be proportionately paid up to the time of the casualty and
thenceforth shall cease until the date when the premises shall have been
repaired and restored by Owner, subject to Owner's right to elect not to restore
the same as hereinafter provided [9.2]. (d) If the demised premises are rendered
wholly unusable or (whether or not the demised premises are damaged in whole or
in part) if the building shall be so damaged that Owner shall decide to demolish
it or to rebuild it, then, in any of such events, Owner may elect to terminate
this lease by written notice to Tenant, given within 90 days after such fire or
casualty, specifying a date for the expiration of the lease, which date shall
not be more than 60 days after the giving of such notice, and upon the date
specified in such notice the term of this lease shall expire as fully and
completely as if such date were the date set forth above for the termination of
this lease and Tenant shall forthwith quit, surrender and vacate the premises
without prejudice however, to Landlord's rights and remedies against Tenant
under the lease provisions in effect prior to such termination, and any rent
owing shall be paid up to such date and any payments of rent made by Tenant
which were on account of any period subsequent to such date shall be returned to
Tenant. Unless Owner shall serve a termination notice as provided for herein,
Owner shall make the repairs and restorations under the conditions of (b) and
(c) hereof, with all reasonable expedition, subject to delays due to adjustment
of insurance claims, labor troubles and causes beyond Owner's control [9.3].
After any such casualty, Tenant shall cooperate with Owner's restoration by
removing from the premises as promptly as reasonably possible, all of Tenant's
salvageable inventory and movable equipment, furniture, and other property.
Tenant's liability for rent shall resume [9.4] days after written notice from
Owner that the premises are substantially ready for Tenant's occupancy. (e)
Nothing contained hereinabove shall relieve Tenant from liability that may exist
as a result of damage from fire or other casualty. Notwithstanding the
foregoing, each party shall look first to any insurance in its favor before
making any claim against the other party for recovery for loss or damage
resulting from fire or other casualty, and to the extent that such insurance is
in force and collectible and to the extent permitted by law, Owner and Tenant
each hereby releases and waives all right of recovery against the other or any
one claiming through or under each of them by way of subrogation or otherwise.
The foregoing release and waiver shall be in force only if both releasors'
insurance policies contain a clause providing that such a release or waiver
shall not invalidate the insurance. If, and to the extent, that such waiver can
be obtained only by the payment of additional premiums, then the party
benefitting from the waiver shall pay such premium within ten days after written
demand or shall be deemed to have agreed that the party obtaining insurance
coverage shall be free of any further obligation under the provisions hereof
with respect to waiver of subrogation. Tenant acknowledges that Owner will not
carry insurance on Tenant's furniture and/or furnishings or any fixtures or
equipment, improvements, or appurtenances removable by Tenant and agrees that
Owner will not be obligated to repair any damage thereto or replace the same
[9.5]. (f) Tenant hereby waives the provisions of Section 227 of the Real
Property Law and agrees that the provisions of this article shall govern and
control in lieu thereof.
Eminent Domain:
10. If the whole or any part of the demised premises shall be acquired
or condemned by Eminent Domain for any public or quasi public use or purpose,
then and in that event, the term of this lease shall cease and terminate from
the date of title vesting in such proceeding and Tenant shall have no claim for
the value of any unexpired term of said lease and assigns to Owner, Tenant's
entire interest in any such award.
Assignment, Mortgage, Etc.:
11. Tenant, for itself, its heirs, distributees, executors,
administrators, legal representatives, successors and assigns, expressly
covenants that it shall not assign, mortgage or encumber this agreement, nor
underlet, or suffer or permit the demised premises or any part thereof to be
used by others, without the prior written consent of Owner in each instance.
Transfer of the majority of the stock of a corporate Tenant shall be deemed an
assignment. If this lease be assigned, or if the demised premises or any part
thereof be underlet or occupied by anybody other than Tenant, Owner may, after
default by Tenant, collect rent from the assignee, under-tenant or occupant, and
apply the net amount collected to the rent herein reserved, but no such
assignment, underletting, occupancy or collection shall be deemed a waiver of
this covenant, or the acceptance of the assignee, under-tenant or occupant as
tenant, or a release of Tenant from the further performance by Tenant of
covenants on the part of Tenant herein contained. The consent by Owner to an
assignment or underletting shall not in any wise be construed to relieve Tenant
from obtaining the express consent in writing of Owner to any further assignment
or underletting.
Electric Current:
[IMAGE OMITTED]
12. Rates and conditions in respect to submetering or rent inclusion,
as the case may be, to be added in RIDER attached hereto. Tenant covenants and
agrees that at all times its use of electric current shall not exceed the
capacity of existing feeders to the building or the risers or wiring
installation and Tenant may not use any electrical equipment which, in Owner's
opinion, reasonably exercised, will overload such installations or interfere
with the use thereof by other tenants of the building. The change at any time of
the character of electric service shall in no wise make Owner liable or
responsible to Tenant, for any loss, damages or expenses which Tenant may
sustain.
Access to Premises:
13. Owner or Owner's agents shall have the right (but shall not be
obligated) to enter the demised premises in any emergency at any time, and, at
other reasonable times [13.1], to examine the same and to make such repairs,
replacements and improvements as Owner may deem necessary and reasonably
desirable to the demised premises or to any other portion of the building or
which Owner may elect to perform. Tenant shall permit Owner to use and maintain
and replace pipes and conduits in and through the demised premises and to erect
new pipes and conduits therein provided they are concealed within the walls,
floor, or ceiling. Owner may, during the progress of any work in the demised
premises, take all necessary materials and equipment into said premises without
the same constituting an eviction nor shall the Tenant be entitled to any
abatement of rent while such work is in progress nor to any damages by reason of
loss or interruption of business or otherwise. [13.2] Throughout the term hereof
Owner shall have the right to enter the demised premises at reasonable hours
[13.3] for the purpose of showing the same to prospective purchasers or
mortgagees of the building, and during the last six months of the term for the
purpose of showing the same to prospective tenants. If Tenant is not present to
open and permit an entry into the premises, Owner or Owner's agents may enter
the same whenever such entry may be necessary or permissible by master key or
forcibly and provided reasonable care is exercised to safeguard Tenant's
property, such entry shall not render Owner or its agents liable therefor, nor
in any event shall the obligations of Tenant hereunder be affected. If during
the last month of the term Tenant shall have removed all or substantially all of
Tenant's property therefrom Owner may immediately enter, alter, renovate or
redecorate the demised premises without limitation or abatement of rent, or
incurring liability to Tenant for any compensation and such act shall have no
effect on this lease or Tenant's obligations hereunder.
Vault, Vault Space, Area:
14. No Vaults, vault space or area, whether or not enclosed or covered,
not within the property line of the building is leased hereunder, anything
contained in or indicated on any sketch, blue print or plan, or anything
contained elsewhere in this lease to the contrary notwithstanding. Owner makes
no representation as to the location of the property line of the building. All
vaults and vault space and all such areas not within the property line of the
building, which Tenant may be permitted to use and/or occupy, is to be used
and/or occupied under a revocable license, and if any such license be revoked,
or if the amount of such space or area be diminished or required by any federal,
state or municipal authority or public utility, Owner shall not be subject to
any liability nor shall Tenant be entitled to any compensation or diminution or
abatement of rent, nor shall such revocation, diminution or requisition be
deemed constructive or actual eviction. Any tax, fee or charge of municipal
authorities for such vault or area shall be paid by Tenant.
Occupancy:
15. Tenant will not at any time use or occupy the demised premises in
violation of the certificate of occupancy issued for the building of which the
demised premises are a part. Tenant has inspected the premises and accepts them
as is, subject to the riders annexed hereto with respect to Owner's work, if
any. In any event, Owner makes no representation as to the condition of the
premises and Tenant agrees to accept the same subject to violations, whether or
not of record.
Bankruptcy:
16. (a) Anything elsewhere in this lease to the contrary
notwithstanding, this lease may be cancelled by Owner by the sending of a
written notice to Tenant within a reasonable time after the happening of any one
or more of the following events: (1) the commencement of a case in bankruptcy or
under the laws of any state naming Tenant as the debtor [16.1] or (2) the making
by Tenant of an assignment or any other arrangement for the benefit of creditors
under any state statute. Neither Tenant nor any person claiming through or under
Tenant, or by reason of any statute or order of court, shall thereafter be
entitled to possession of the premises demised but shall forthwith quit and
surrender the premises. If this lease shall be assigned in accordance with its
terms, the provisions of this Article 16 shall be applicable only to the party
then owning Tenant's interest in this lease.
(b) it is stipulated and agreed that in the event of the
termination of this lease pursuant to (a) hereof, Owner shall forthwith,
notwithstanding any other provisions of this lease to the contrary, be entitled
to recover from Tenant as and for liquidated damages an amount equal to the
difference between the rent reserved hereunder for the unexpired portion of the
term demised and the fair and reasonable rental value of the demised premises
for the same period. In the computation of such damages the difference between
any installment of rent becoming due hereunder after the date of termination and
the fair and reasonable rental value of the demised premises for the period for
which such installment was payable shall be discounted to the date of
termination at the rate of four percent (4%) per annum. If such premises or any
part thereof be relet by the Owner for the unexpired term of said lease, or any
part thereof, before presentation of proof of such liquidated damages to any
court, commission or tribunal, the amount of rent reserved upon such reletting
shall be deemed to be the fair and reasonable rental value for the part or the
whole of the premises so re-let during the term of the re-letting. Nothing
herein contained shall limit or prejudice the right of the Owner to prove for
and obtain as liquidated damages by reason of such termination, an amount equal
to the maximum allowed by any statute or rule of law in effect at the time when,
and governing the proceedings in which, such damages are to be proved, whether
or not such amount be greater, equal to, or less than the amount of the
difference referred to above.
Default:
17. (1) If Tenant defaults in fulfilling any of the covenants of this
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[IMAGE OMITTED] Rider to be added if necessary.
<PAGE>
lease other than the covenants for the payment of rent or additional rent; or if
the demised premises become vacant or deserted [17.1] or if any execution or
attachment shall be issued against Tenant or any of Tenant's property whereupon
the demised premises shall be taken or occupied by someone other than Tenant; or
if this lease be rejected under ss. 235 of Title 11 of the U.S. Code (bankruptcy
code); or if Tenant shall fail to move into or take possession of the premises
within fifteen (15) days after the commencement of the term of this lease, then,
in any one or more of such events, upon Owner serving a written [17.2] days
notice upon Tenant specifying the nature of said default and upon the expiration
of said [17.2] days, if Tenant shall have failed to comply with or remedy such
default, or if the said default or omission complained of shall be of a nature
that the same cannot be completely cured or remedied within said [17.2] day
period, and if Tenant shall not have diligently commenced curing such default
within such [17.2] day period, and shall not thereafter with reasonable
diligence and in good faith, proceed to remedy or cure such default, then Owner
may serve a written three (3) days' notice of cancellation of this lease upon
Tenant, and upon the expiration of said three (3) days this lease and the term
thereunder shall end and expire as fully and completely as if the expiration of
such three (3) day period were the day herein definitely fixed for the end and
expiration of this lease and the term thereof and Tenant shall then quit and
surrender the demised premises to Owner but Tenant shall remain liable as
hereinafter provided.
(2) If the notice provided for in (1) hereof shall have been
given, and the term shall expire as aforesaid; or if Tenant shall make default
in the payment of the rent reserved herein or any item of additional rent herein
mentioned or any part of either or in making any other payment herein required;
then and in any of such events Owner may without notice, re-enter the demised
premises either by force or otherwise, and dispossess Tenant by summary
proceedings or otherwise, and the legal representative of Tenant or other
occupant of demised premises and remove their effects and hold the premises as
if this lease had not been made, and Tenant hereby waives the service of notice
of intention to re-enter or to institute legal proceedings to that end. If
Tenant shall make default hereunder prior to the date fixed as the commencement
of any renewal or extension of this lease, Owner may cancel and terminate such
renewal or extension agreement by written notice.
Remedies of Owner and Waiver of Redemption:
18. In case of any such default, re-entry, expiration and/ or
dispossess by summary proceedings or otherwise, (a) the rent shall become due
thereupon and be paid up to the time of such re-entry, dispossess and/or
expiration, (b) Owner may re-let the premises or any part or parts thereof,
either in the name of Owner or otherwise, for a term or terms, which may at
Owner's option be less than or exceed the period which would otherwise have
constituted the balance of the term of this lease and may grant concessions or
free rent or charge a higher rental than that in this lease, and/or (c) Tenant
or the legal representatives of Tenant shall also pay Owner as liquidated
damages for the failure of Tenant to observe and perform said Tenant's covenants
herein contained, any deficiency between the rent hereby reserved and/or
covenanted to be paid and the net amount, if any, of the rents collected on
account of the lease or leases of the demised premises for each month of the
period which would otherwise have constituted the balance of the term of this
lease. The failure of Owner to re-let the premises or any part or parts thereof
shall not release or affect Tenant's liability for damages. In computing such
liquidated damages there shall be added to the said deficiency such [18.1]
expenses as Owner may incur in connection with re-letting, such as legal
expenses, attorneys' fees, brokerage, advertising and for keeping the demised
premises in good order or for preparing the same for re-letting. Any such
liquidated damages shall be paid in monthly installments by Tenant on the rent
day specified in this lease and any suit brought to collect the amount of the
deficiency for any month shall not prejudice in any way the rights of Owner to
collect the dificiency for any subsequent month by a similar proceeding. Owner,
in putting the demised premises in good order or preparing the same for
re-rental may, at Owner's option, make such alterations, repairs, replacements,
and/or decorations in the demised premises as Owner, in Owner's sole judgment,
considers advisable and necessary for the purpose of re-letting the demised
premises, and the making of such alterations, repairs, replacements, and/or
decorations shall not operate or be construed to release Tenant from liability
hereunder as aforesaid. Owner shall in no event be liable in any way whatsoever
for failure to re-let the demised premises, or in the event that the demised
premises are re-let, for failure to collect the rent thereof under such
re-letting, and in no event shall Tenant be entitled to receive any excess, if
any, of such net rents collected over the sums payable by Tenant to Owner
hereunder. In the event of a breach or threatened breach by Tenant of any of the
covenants or provisions hereof, Owner shall have the right of injunction and the
right to invoke any remedy allowed at law or in equity as if re-entry, summary
proceedings and other remedies were not herein provided for. Mention in this
lease of any particular remedy, shall not preclude Owner from any other remedy,
in law or in equity. Tenant hereby expressly waives any and all rights of
redemption granted by or under any present or future laws in the event of Tenant
being evicted or dispossessed for any cause, or in the event of Owner obtaining
possession of demised premises, by reason of the violation by Tenant of any of
the covenants and conditions of this lease, or otherwise.
Fees and Expenses
19. If Tenant shall default in the observance or performance of any
term or covenant on Tenant's part to be observed or performed under or by virtue
of any of the terms or provisions in any article of this lease, [19.1] then,
unless otherwise provided elsewhere in this lease, Owner may immediately or at
any time thereafter and without notice perform the obligation of Tenant
thereunder. If Owner, in connection with the foregoing or in connection with any
default by Tenant in the covenant to pay rent hereunder, makes any expenditures
or incurs any obligations for the payment of money, including but not limited to
attorney's fees, in instituting, prosecuting or defending any action or
proceeding, then Tenant will reimburse Owner for such [19.2] sums so paid or
obligations incurred with interest and costs. The foregoing expenses incurred by
reason of Tenant's default shall be deemed to be additional rent hereunder and
shall be paid by Tenant to Owner within five (5) days of rendition of any bill
or statement to Tenant therefor. If Tenant's lease term shall have expired at
the time of making of such expenditures or incurring of such obligations, such
sums shall be recoverable by Owner as damages.
Building Alterations and Management:
20. Owner shall have the right at any time without the same
constituting an eviction and without incurring liability to Tenant therefor to
change the arrangement and/or location of public entrances, passageways, doors,
doorways, corridors, elevators, stairs, toilets or other public parts of the
building and to change the name, number or designation by which the building may
be known. There shall be no allowance to Tenant for diminution of rental value
and no liability on the part of Owner by reason of inconvenience, annoyance or
injury to business arising from Owner or other Tenants making any repairs in the
building or any such alterations, additions and improvements. Furthermore,
Tenant shall not have any claim against Owner by reason of Owner's imposition of
such controls of the manner of access to the building by Tenant's social or
business visitors as the Owner may deem necessary for the security of the
building and its occupants.
No Representations by Owner:
21. Neither Owner nor Owner's agents have made any representations or
promises with respect to the physical condition of the building, the land upon
which it is erected or the demised premises, the rents, leases, expenses of
operation or any other matter or thing affecting or related to the premises
except as herein expressly set forth and no rights, easements or licenses are
acquired by Tenant by implication or otherwise except as expressly set forth in
the provisions of this lease. Tenant has inspected the building and the demised
premises and is thoroughly acquainted with their condition and agrees to take
the same "as is" [21.1] and acknowledges that the taking of possesion of the
demised premises by Tenant shall be conclusive evidence that the said premises
and the building of which the same form a part were in good and satisfactory
condition at the time such possession was so taken, except as to latent defects.
All understandings and agreements heretofore made between the parties hereto are
merged in this contract, which alone fully and completely expresses the
agreement between Owner and Tenant and any executory agreement hereafter made
shall be ineffective to change, modify, discharge or effect an abandonment of it
in whole or in part, unless such executory agreement is in writing and signed by
the party against whom enforcement of the change, modification, discharge or
abandonment is sought.
End of Term:
22. Upon the expiration or other termination of the term of this lease,
Tenant shall quit and surrender to Owner the demised premises, broom clean, in
good order and condition, ordinary wear and damages which Tenant is not required
to repair as provided elsewhere in this lease excepted, and Tenant shall remove
all its property. Tenant's obligation to observe or perform this covenant shall
survive the expiration or other termination of this lease. If the last day of
the term of this Lease or any renewal thereof, falls on Sunday, this lease shall
expire at noon on the preceding Saturday unless it be a legal holiday in which
case it shall expire at noon on the preceding business day.
Quiet Enjoyment:
23. Owner covenants and agrees with Tenant that upon Tenant paying the
rent and additional rent and observing and performing all the terms, covenants
and conditions, on Tenant's part to be observed and performed, Tenant may
peaceably and quietly enjoy the premises hereby demised, subject, nevertheless,
to the terms and conditions of this lease including, but not limited to, Article
31 hereof and to the ground leases, underlying leases and mortgages hereinbefore
mentioned.
Failure to Give Possession:
24. If Owner is unable to give possession of the demised premises on
the date of the commencement of the term hereof, because of the holding-over or
retention of possession of any tenant, undertenant or occupants or if the
demised premises are located in a building being constructed, because such
building has not been sufficiently completed to make the premises ready for
occupancy or because of the fact that a certificate of occupancy has not been
procured or for any other reason, Owner shall not be subject to any liability
for failure to give possession on said date and the validity of the lease shall
not be impaired under such circumstances, nor shall the same be construed in any
wise to extend the term of this lease, but the rent payable hereunder shall be
abated (provided Tenant is not responsible for Owner's inability to obtain
possession) until after Owner shall have given Tenant written notice that the
premises are substantially ready for Tenant's occupancy. If permission is given
to Tenant to enter into the possession of the demised premises or to occupy
premises other than the demised premises prior to the date specified as the
commencement of the term of this lease, Tenant covenants and agrees that such
occupancy shall be deemed to be under all the terms, covenants, conditions and
provisions of this lease, except as to the covenant to pay rent. The provisions
of this article are intended to constitute "an express provision to the
contrary" within the meaning of Section 223-a of the New York Real Property Law.
No Waiver:
25. The failure of Owner [25.1] to seek redress for violation of, or to
insist upon the strict performance of any covenant or condition of this lease or
of [25.2] any of the Rules or Regulations, set forth or hereafter adopted by
Owner, shall not prevent a subsequent act which would have originally
constituted a violation from having all the force and effect of an original
violation. The receipt by Owner of rent with knowledge of the breach of any
covenant of this lease shall not be deemed a waiver of such breach and no
provision of this lease shall be deemed to have been waived by Owner unless such
waiver be in writing signed by [25.3]. No payment by Tenant or receipt by Owner
of a lesser amount than the monthly rent herein stipulated shall be deemed to be
other than on account of the earliest stipulated rent, nor shall any endorsement
or statement of any check or any letter accompanying any check or payment as
rent be deemed an accord and satisfaction, and Owner may accept such check or
payment without prejudice to Owner's right to recover the balance of such rent
or pursue any other remedy in this lease provided. No act or thing done by Owner
or Owner's agents during the term hereby demised shall be deemed an acceptance
of a surrender of said premises, and no agreement to accept such surrender shall
be valid unless in writing signed by Owner. No employee of Owner or Owner's
agent shall have any power to accept the keys of said premises prior to the
termination of the lease and the delivery of keys to any such agent or employee
shall not operate as a termination of the lease or a surrender of the premises.
Waiver of Trial by Jury:
26. It is mutually agreed by and between Owner and Tenant that the
respective parties hereto shall and they hereby do waive trial by jury in any
action, proceeding or counter-claim brought by either of the parties hereto
against the other (except for personal injury or property damage) on any matters
whatsoever arising out of or in any way connected with this lease, the
relationship of Owner and Tenant, Tenant's use of or occupancy of said premises,
and any emergency statutory or any other statutory remedy. It is further
mutually agreed that in the event Owner commences any summary proceeding for
possession of the premises, Tenant will not interpose any counterclaim of
whatever nature or description in any such proceeding including a counterclaim
under Article 4. [26.1]
Inability to Perform:
27. 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 wise be affected, impaired or excused because Owner is
unable to fulfill any of its obligations under this lease or to supply or is
delayed in supplying any service expressly or impliedly to be supplied or is
unable to make, or is delayed in making any repair, additions, alterations or
decorations or is unable to supply or is delayed in supplying any equipment or
fixtures if Owner is prevented or delayed from so doing by reason of strike or
labor troubles or any [27.1] cause whatsoever including, but not limited to,
government preemption in connection with a National Emergency or by reason of
any rule, order or regulation of any department or subdivision thereof of any
government agency or by reason of the conditions of supply and demand which have
been or are affected by war or other emergency.
Bills and Notices:
28. Except as otherwise in this lease provided, a bill, statement,
notice or communication which Owner may desire or be required to give to Tenant,
shall be deemed sufficiently given or rendered if, in writing, delivered to
Tenant personally or sent by registered or certified mail addressed to Tenant at
the building of which the demised premises form a part or at the last known
residence address or business address of Tenant or left at any of the aforesaid
premises addressed to Tenant [28.1], and the time of the rendition of such bill
or statement and of the giving of such notice
<PAGE>
or communication shall be deemed to be the time when the same is delivered to
Tenant, mailed, or left at the premises as herein provided. Any notice by Tenant
to Owner must be served by registered or certified mail addressed to Owner at
the address first hereinabove given or at such other address as Owner shall
designate by written notice.
Services Provided by Owners
29. As long as Tenant is not in default under any of the covenants of
this lease, Owner shall provide: (a) necessary elevator facilities on business
days from 8 a.m. to 6 p.m. and have one elevator subject to call at all other
times; (b) heat to the demised premises when and as required by law, on business
days from 8 a.m. to 6 p.m.; (c) water for ordinary lavatory purposes, but if
Tenant uses or consumes water for any other purposes or in unusual quantities
(of which fact Owner shall be the sole judge), Owner may install a water meter
at Tenant's expense which Tenant shall thereafter maintain at Tenant's expense
in good working order and repair to register such water consumption and Tenant
shall pay for water consumed as shown on said meter as additional rent as and
when bills are rendered; (d) cleaning service for the demised premises on
business days at Owner's expense provided that the same are kept in order by
Tenant. If, however, said premises are to kept clean by Tenant, it shall be done
at Tenant's sole expense, in a manner satisfactory to Owner and no one other
than persons approved by Owner shall be permitted to enter said premises or the
building of which they are a part for such purpose. Tenant shall pay Owner the
cost of removal of any of Tenant's refuse and rubbish from the building; (e)
Owner reserves the right to stop services of the heating, elevators, plumbing,
air-conditioning, power systems or cleaning or other services, if any, when
necessary by reason of accident or for repairs, alterations, replacements or
improvements necessary or desirable in the judgment of Owner for as long as may
be reasonably required by reason thereof. If the building of which the demised
premises are a part supplies manually-operated elevator service, Owner at any
time may substitute automatic-control elevator service and upon ten days'
written notice to Tenant, proceed with alterations necessary therefor without in
any wise affecting this lease or the obligation of Tenant hereunder. The same
shall be done with a minimum of inconvenience to Tenant and Owner shall pursue
the alteration with due diligence.
Captions:
30. The Captions are inserted only as a matter of convenience and for
reference and in no way define, limit or describe the scope of this lease nor
the intent of any provisions thereof.
Definitions:
31. The term "office", or "offices", wherever used in this lease, shall
not be construed to mean premises used as a store or stores, for the sale or
display, at any time, of goods, wares or merchandise, of any kind, or as a
restaurant, shop, booth, bootblack or other stand, barber shop, or for other
similar purposes or for manufacturing. The term "Owner" means a landlord or
lessor, and as used in this lease means only the owner, or the mortgagee in
possession, for the time being of the land and building (or the owner of a lease
of the building or of the land and building) of which the demised premises form
a part, so that in the event of any sale or sales of said land and building or
of said lease, or in the event of a lease of said building, or of the land and
building, the said Owner shall be and hereby is entirely freed and relieved of
all covenants and obligations of Owner hereunder, [31.1] and it shall be deemed
and construed without further agreement between the parties or their successors
in interest, or between the parties and the purchaser, at any such sale, or the
said lessee of the building, or of the land and building, that the purchaser or
the lessee of the building has assumed and agreed to carry out any and all
covenants and obligations of Owner, hereunder [32.1]. The words "re-enter" and
"re-entry" as used in this lease are not restricted to their technical legal
meaning. The term "business days" as used in this lease shall exclude Saturdays
(except such portion thereof as is covered by specific hours in Article 29
hereof), Sundays and all days observed by the State or Federal Government as
legal holidays and those designated as holidays by the applicable building
service union employees service contract or by the applicable Operating
Engineers contract with respect to HVAC service.
Adjacent Excavation - Shoring:
32. If an excavation shall be made upon land adjacent to the demised
premises, or shall be authorized to be made, Tenant shall afford to the person
causing or authorized to cause such excavation, license to enter upon the
demised premises for the purpose of doing such work as said person shall deem
necessary to preserve the wall or the building of which demised premises form a
part from injury or damage and to support the same by proper foundations without
any claim for damages or indemnity against Owner, or diminution or abatement of
rent.
Rules and Regulations
33. Tenant and Tenant's servants, employees, agents, visitors, and
licensees shall observe faithfully, and comply strictly with, the Rules and
Regulations and such other and further reasonable Rules and Regulations as Owner
or Owner's agents may from time to time adopt. Notice of any additional rules or
regulations shall be given [33.1]. In case Tenant disputes the reasonableness of
any additional Rule or Regulation hereafter made or adopted by Owner or Owner's
agents, the parties hereto agree to submit the question of the reasonableness of
such Rule or Regulation for decision to the New York office of the American
Arbitration Association, whose determination shall be final and conclusive upon
the parties hereto. The right to dispute the reasonableness of any additional
Rule or Regulation upon Tenant's part shall be deemed waived unless the same
shall be asserted by service of a notice, in writing upon Owner within ten (10)
days after the giving of notice thereof. Nothing in this lease contained shall
be construed to impose upon Owner any duty or obligation to enforce the Rules
and Regulations or terms, covenants or conditions in any other lease, as against
any other tenant and Owner shall not be liable to Tenant for violation of the
same by any other tenant, its servants, employees, agents, visitors or
licensees.
Security:
[IMAGE OMITTED]
34. Tenant has deposited with Owner the sum of $ * as security for the
faithful performance and observance by Tenant of the terms, provisions and
conditions of this lease; it is agreed that in the event Tenant defaults in
respect of any of the terms, provisions and conditions of this lease, including,
but not limited to, the payment of rent and additional rent, Owner may use,
apply or retain the whole or any part of the security so deposited to the extent
required for the payment of any rent and additional rent or any other sum as to
which Tenant is in default or for any sum which Owner may expend or may be
required to expend by reason of Tenant's default in respect of any of the terms,
covenants and conditions of this Lease, including but not limited to, any
damages or deficiency in the re-letting of the premises, whether such damages or
deficiency accrued before or after summary proceedings or other re-entry by
Owner. In the event that Tenant shall fully and faithfully comply with all of
the terms, provisions, covenants and conditions of this lease, the security
shall be returned to Tenant after the date fixed as the end of the Lease and
after delivery of entire possession of the demised premises to Owner. In the
event of a sale of the land and building or leasing of the building, of which
the demised premises form a part, Owner shall have the right to transfer the
security to the vendee or lessee and Owner shall thereupon be released by Tenant
from all liability for the return of such security; and Tenant agrees to look to
the new Owner solely for the return of said security, and it is agreed that the
provisions hereof shall apply to every transfer or assignment made of the
security to a new Owner. Tenant further covenants that it will not assign or
encumber or attempt to assign or encumber the monies deposited herein as
security and that neither Owner nor its successors or assigns shall be bound by
any such assignment, encumbrance, attempted assignment or attempted encumbrance
[34.1].
Estoppel 34A Certificate
Tenant [34A.1], at any time, and from time to time, upon at least 10
days' prior notice by [34A.2], shall execute, acknowledge and deliver to
[34A.2], and/or to any other person, firm or corporation specified by [34A.2], a
statement certifying that this Lease is unmodified and in full force and effect
(or, if there have been modifications, that the same is in full force and effect
as modified and stating the modifications), stating the dates to which the rent
and additional rent have been paid, and stating whether or not there exists any
default by [34A.2] under this Lease, and, if so, specifying each such default.
Successors 34B and Assigns:
The covenants, conditions and agreements contained in this lease shall
bind and inure to the benefit of Owner and Tenant and their respective heirs,
distributees, executors, administrators, successors, and except as otherwise
provided in this lease, their assigns.
- ----------
Space to be filled in or deleted.
[IMAGE OMITTED] See Rider annexed hereto and made a part hereof.
*The "Security Amount" (as such term is defined in Section 35(f) hereof).
<PAGE>
GUARANTY
FOR VALUE RECEIVED, and in consideration for, and as an inducement to Owner
making the within lease with Tenant, the undersigned guarantees to Owner,
Owner's successors and assigns, the full performance and observance of all the
covenants, conditions and agreements, therein provided to be performed and
observed by Tenant, including the "Rules and Regulations" as therein provided,
without requiring any notice of non-payment, non-performance, or non-observance,
or proof, or notice, or demand, whereby to charge the undersigned therefor, all
of which the undersigned hereby expressly waives and expressly agrees that the
validity of this agreement and the obligations of the guarantor hereunder shall
in no wise be terminated, affected or impaired by reason of the assertion by
Owner against Tenant of any of the rights or remedies reserved to Owner pursuant
to the provisions of the within lease. The undersigned further covenants and
agrees that this guaranty shall remain and continue in full force and effect as
to any renewal, modification or extension of this lease and during any period
when Tenant is occupying the premises as a "statutory tenant." As a further
inducement to Owner to make this lease and in consideration thereof, Owner and
the undersigned covenant and agree that in any action or proceeding brought by
either Owner or the undersigned against the other on any matters whatsoever
arising out of, under, or by virtue of the terms of this lease or of this
guarantee that Owner and the undersigned shall and do hereby waive trial by
jury.
Dated: ............................................................ 19..........
................................................................................
Guarantor
................................................................................
Witness
................................................................................
Guarantor's Residence
................................................................................
Business Address
................................................................................
Firm Name
STATE OF NEW YORK ) ss.:
COUNTY OF )
On this day of , 19 , before
me personally came .............................................................
to me known and known to me to be the individual described in, and who executed
the foregoing Guaranty and acknowledged to me that he executed the same.
.....................................................
Notary
[IMAGE OMITTED] IMPORTANT - PLEASE READ [IMAGE OMITTED]
RULES AND REGULATIONS ATTACHED TO AND
MADE A PART OF THIS LEASE
IN ACCORDANCE WITH ARTICLE 33.
1. The sidewalks, entrances, driveways, passages, courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed or encumbered
by any Tenant or used for any purpose other than for ingress or egress from the
demised premises and for delivery of merchandise and equipment in a prompt and
efficient manner using elevators and passageways designated for such delivery by
Owner. There shall not be used in any space, or in the public hall of the
building, either by any Tenant or by jobbers or others in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber tires
and sideguards. If said premises are situated on the ground floor of the
building, Tenant thereof shall further, at Tenant's expense, keep the sidewalk
and curb in front of said premises clean and free from ice, snow, dirt and
rubbish.
2. The water and wash closets and plumbing fixtures shall not be used
for any purposes other than those for which they were designed or constructed
and no sweepings, rubbish, rags, acids or other substances shall be deposited
therein, and the expense of any breakage, stoppage, or damage resulting from the
violation of this rule shall be borne by the Tenant who, or whose clerks,
agents, employees or visitors, shall have caused it.
3. No carpet, rug or other article shall be hung or shaken out of any
window of the building; and no Tenant shall sweep or throw or permit to be swept
or thrown from the demised premises any dirt or other substances into any of the
corridors or halls, elevators, or out of the doors or windows or stairways of
the building and Tenant shall not use, keep or permit to be used or kept any
foul or noxious gas or substance in the demised premises, or permit or suffer
the demised premises to be occupied or used in a manner offensive or
objectionable to Owner or other occupants of the building by reason of noise,
odors, and/or vibrations, or interfere in any way with other Tenants or those
having business therein, nor shall any animals or birds be kept in or about the
building. Smoking or carrying lighted cigars or cigarettes in the elevators of
the building is prohibited.
4. No awnings or other projections shall be attached to the outside
walls of the building without the prior written consent of Owner.
5. No sign, advertisement, notice or other lettering shall be
exhibited, inscribed, painted or affixed by any Tenant on any part of the
outside of the demised premises or the building or on the inside of the demised
premises if the same is visible from the outside of the premises without the
prior written consent of Owner, except that the name of Tenant may appear on the
entrance door of the premises. In the event of the violation of the foregoing by
any Tenant, Owner may remove same without any liability, and may charge the
expense incurred by such removal to the Tenant or Tenants violating this rule.
Interior signs on doors and directory tablet shall be inscribed, painted or
affixed for each Tenant by Owner at the expense of such Tenant, and shall be of
a size, color and style acceptable to Owner.
6. No Tenant shall mark, paint, drill into, or in any way deface any
part of the demised premises or the building of which they form a part. No
boring, cutting or stringing of wires shall be permitted, except with the prior
written consent of Owner, and as Owner may direct. No Tenant shall lay linoleum,
or other similar floor covering, so that the same shall come in direct contact
with the floor of the demised premises, and, if linoleum or other similar floor
covering is desired to be used an interlining of builder's deadening felt shall
be first affixed to the floor, by a paste or other material, soluble in water,
the use of cement or other similar adhesive material being expressly prohibited.
7. No additional locks or bolts of any kind shall be placed upon any of
the doors or windows by any Tenant, nor shall any changes be made in existing
locks or mechanism thereof. Each Tenant must, upon the termination of his
Tenancy, restore to Owner all keys of stores, offices and toilet rooms, either
furnished to, or otherwise procured by, such Tenant, and in the event of the
loss of any keys, so furnished, such Tenant shall pay to Owner the cost thereof.
8. Freight, furniture, business equipment, merchandise and bulky matter
of any description shall be delivered to and removed from the premises only on
the freight elevators and through the service entrances and corridors, and only
during hours and in a manner approved by Owner. Owner reserves the right to
inspect all freight to be brought into the building and to exclude from the
building all freight which violates any of these Rules and Regulations of the
lease or which these Rules and Regulations are a part.
9. Canvassing, soliciting and peddling in the building is prohibited
and each Tenant shall cooperate to prevent the same.
10. Owner reserves the right to exclude from the building between the
hours of 6 P.M. and 8 A.M. and at all hours on Sundays, and legal holidays all
persons who do not present a pass to the building signed by Owner. Owner will
furnish passes to persons for whom any Tenant requests same in writing. Each
Tenant shall be responsible for all persons for whom he requests such pass and
shall be liable to Owner for all acts of such persons.
11. Owner shall have the right to prohibit any advertising by any
Tenant which in Owner's opinion, tends to impair the reputation of the building
or its desirability as a building for offices, and upon written notice from
Owner, Tenant shall refrain from or discontinue such advertising.
12. Tenant shall not bring or permit to be brought or kept in or on the
demised premises, any inflammable, combustible or explosive fluid, material,
chemical or substance, or cause or permit any odors of cooking or other
processes, or any unusual or other objectionable odors to permeate in or emanate
from the demised premises.
13. If the building contains central air conditioning and ventilation,
Tenant agrees to keep all windows closed at all times and to abide by all rules
and regulations issued by the Owner with respect to such services. If Tenant
requires air conditioning or ventilation after the usual hours, Tenant shall
give notice in writing to the building superintendent prior to 3:00 P.M. in the
case of services required on week days, and prior to 3:00 P.M. on the day prior
in the case of after hours service required on weekends or on holidays.
14. Tenant shall not move any safe, heavy machinery, heavy equipment,
bulky matter, or fixtures into or out of the building without Owner's prior
written consent. If such safe, machinery, equipment, bulky matter or fixtures
requires special handling, all work in connection therewith shall comply with
the Administrative Code of the City of New York and all other laws and
regulations applicable thereto and shall be done during such hours as Owner may
designate.
<PAGE>
FOOTNOTES TO PRINTED FORM
LEASE BETWEEN
PRAEDIUM II BROADSTONE LLC, LANDLORD AND
WALL STREET STRATEGIES, TENANT.
For the purpose of these footnotes and the lease the terms Owner and
Landlord and the terms demised premises and Premises shall be deemed synonymous.
3.1 which approval shall not be unreasonably withheld or delayed
3.2 and Owner shall, at Tenant's cost and expense, take such reasonable
actions and execute such instruments as shall be reasonably necessary
to enable Tenant to obtain,
3.3 reasonably
3.4. or by payment or otherwise
3.5. Notwithstanding the foregoing, Landlord shall only be permitted to
exercise such right to have Tenant remove installations which are of a
non-building standard nature such as vaults, raised floors, stairways,
private lavatories and other installations which are unusually
difficult or costly to remove as compared to ordinary office
installations.
8.1 or willful misconduct
8.2 or contractors
9.1 prompt
9.2. If the Building shall be damaged to such an extent that Tenant does not
have any access to the demised premises, the rent shall be
proportionally paid up to the time of the casualty and thenceforth
shall cease until reasonable access to the demised premises has been
restored.
9.3 Notwithstanding anything in this Article 9 to the contrary, if the
demised premises or any part thereof shall be damaged by fire or other
casualty as set forth in this Article 9 and Landlord is required to or
elects to repair and restore the demised premises, and if Landlord has
not substantially completed the required repairs and restored the
demised premises within twelve (12) months after the date of such fire
or other casualty, or within such period thereafter (not to exceed 3
months) as shall equal the aggregate period Landlord may have been
delayed in doing so by adjustment of insurance, labor trouble,
governmental controls, act of god, or any other cause beyond Landlord's
reasonable control, then Tenant shall, during the ten (10) days
following the expiration of the foregoing period, have the right to
elect to terminate this Lease upon written notice to Landlord and such
election shall be effective upon the expiration of thirty (30) days
after the date of such notice, unless Landlord substantially completes
such restoration within such thirty (30) day period.
9.4 ten (10)
9.5 except to the extent such damage results from the negligence or wilful
misconduct of Owner or its agents, employees, invitees, servants or
contractors.
10.1 Nothing contained in Article 10 hereof shall prohibit Tenant from
making a separate claim with the condemning authority for (a) the value
of personal property owned by Tenant and (b) any moving expenses
incurred by Tenant as a result of such condemnation provided, however,
that such separate claim shall not reduce or adversely affect
Landlord's claim or the amount of Landlord's award.
13.1. upon reasonable notice
<PAGE>
13.2 All entries made by Landlord for the foregoing purposes shall (except
in an emergency) be after reasonable prior notice which may be given
orally and shall be conducted to the extent reasonably practical (but
without the necessity of incurring overtime or premium wages or other
additional costs) in such a manner as to avoid unreasonable
interference with Tenant's use of the Premises, except as may be
required by Legal Requirements.
13.3 after reasonable notice which may be given orally,
16.1 that is not dismissed within ninety (90) days of its filing,
17.1 for more than thirty (30) consecutive days,
17.2 twenty (20)
18.1 reasonable
19.1 and such default shall continue beyond the applicable grace or cure
period provided for herein,
19.2 reasonable
21.1 (subject to Landlord's Work)
25.1 or Tenant
25.2 or of Landlord to insist in strict performance of
25.3 the party to be charged therewith
26.1 except for compulsory counterclaims.
27.1 other
27.2 beyond Owner's control
28.1 with a copy (in the case of mailed notices) to Bryan Cave LLP, 245 Park
Avenue, New York, New York 10167-0034, Attention: Richard J. Zakin,
Esq.,
31.1 arising or accruing from and after the date of said sale or lease.
32.1 in accordance with the provisions of Article 28 hereof
33.1 Landlord shall not enforce the Rules and Regulations against Tenant in
a discriminatory manner.
34.1 Landlord shall hold any cash security hereunder on an interest-bearing
basis, the interest on which, less one (1%) percent per annum of the
principal deducted by Landlord for its administrative costs, shall be
remitted to Tenant annually.
34A.1 or Tenant
34A.2. the other party
<PAGE>
TABLE OF CONTENTS
35. Definitions.............................................................1
36. Adjustments of Rent.....................................................2
37. Electricity.............................................................5
38. Heat and Air-Conditioning...............................................6
39. Subordination...........................................................7
40. Late Payment Charge.....................................................8
41. Preparation of Demised Premises.........................................8
42. Limitation on Liability................................................11
43. Miscellaneous..........................................................11
44. Insurance..............................................................13
45. Change of Condition....................................................14
46. Brokerage..............................................................14
47. Restrictions upon Use..................................................14
48. Addendum to Article 3..................................................14
49. Addendum to Article 6..................................................15
50. Addendum to Article 11.................................................15
52. Rental Payments........................................................15
53. Holdover...............................................................16
54. Fixed Rent.............................................................16
55. Intentionally Deleted Prior to Execution...............................16
56. Partnership Tenant.....................................................16
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57. Change of Location
59. Addendum to Article 34.................................................19
60. The Lower Manhattan Plan...............................................20
Schedule A - Floor Plan
Schedule B - Addendum to Article 11
Schedule C - HVAC Specifications
<PAGE>
RIDER ANNEXED TO AND MADE A PART OF LEASE
BETWEEN PRAEDIUM II BROADSTONE LLC, LANDLORD,
AND WALL STREET STRATEGIES, INC., TENANT,
COVERING THE ENTIRE 31ST FLOOR,
80 BROAD STREET, NEW YORK, NEW YORK
35. Definitions:
The following definitions shall have the meanings hereinafter set forth
wherever used in this lease or any Exhibits or Schedules annexed hereto (if
any):
(a) "Tax Base" shall mean the product obtained by multiplying (i) the
amount for which the Land and Building are assessed for the purpose of
establishing real estate taxes to be paid by Landlord for the Tax Year
(as defined in Section 36(a) hereof) commencing July 1, 1999 and
ending June 30, 2000, by (ii) the real estate tax rate for such Tax
Year.
(b) "Operation Base Year" shall mean the period commencing on January 1,
1999 and ending on December 31, 2000 however, the Operating Expenses
for the Operating Base Year shall be deemed to be the average of the
Operating Expenses for calendar years 1999 and 2000.
(c) "Tenant's Tax Proportionate Share" shall mean 2.18%.
(d) "Tenant's Operating Proportionate Share" shall mean 2.23%.
(e) "Broker" shall mean, collectively, Newmark & Company Real Estate, Inc.
(which is representing Landlord) and Richard Kusack Real Estate.
(f) "Interest Rate" shall mean a rate per annum equal to the lesser of (a)
2% above the lending rate announced from time to time by The Chase
Manhattan Bank (New York) as such bank's prime rate for 90-day
unsecured loans, in effect from time to time or (b) the maximum
applicable legal rate, if any.
(g) "Legal Requirements" shall mean laws, statutes and ordinances
(including building codes and zoning regulations and ordinances), and
the orders, rules, regulations, directives and requirements of all
federal, state, county, city and borough departments, bureaus, boards,
agencies, offices, commissions and other subdivisions thereof, or of
any official thereof, or of any other governmental public or
quasi-public authority, whether now or hereafter in force, which may
be applicable to the Land or Building or the demised premises or any
part thereof, or the sidewalks, curbs or areas adjacent thereto and
all requirements, obligations and conditions of all instruments of
record on the date of this lease.
(h) (i) "Security Amount" shall mean $270,592.00
(ii) Provided and on condition that, as of the applicable Reduction
Date as set forth on the following chart (i) Tenant shall not be
in default under this Lease after notice and the expiration of
any cure period, and (ii) prior to such Reduction Date, Tenant
shall have paid all installments of fixed rent, Tenant's Tax
Payment and Tenant's Projected Share of Increase no later than
ten (10) days after the due date thereof, then in such case, the
amount of the security deposited by Tenant pursuant to Article 34
hereof shall be reduced to the amount indicated in the following
chart:
Reduction Date Security Amount
- ------------------------------------------------ -------------------------
First day of the calendar month following the month $248,042.67
in which occurs the second (2nd) anniversary of the
Rent commencement Date
- -------------------------------------------------- -------------------------
First day of the calendar month following the month $202,944.01
in which occurs the third (3rd) anniversary of the
Rent Commencement Date
- -------------------------------------------------- -------------------------
<PAGE>
- ------------------------------------------------- -------------------------
First day of the calendar month following the month $157,845.35
in which occurs the fourth (4th) anniversary of the
Rent commencement Date
- -------------------------------------------------- -------------------------
First day of the calendar month following the month $135,296.02
in which occurs the fifth (5th) anniversary of the
Rent commencement Date
- --------------------------------------------------- -------------------------
First day of the calendar month following the month $112,745.69
in which occurs the sixth (6th) anniversary of the
Rent commencement Date
- -------------------------------------------------- -------------------------
First day of the calendar month following the month $90,197.36
in which occurs the seventh (7th) anniversary of the
Rent commencement Date
- -------------------------------------------------- -------------------------
(i) "Permitted Use" shall mean general and executive offices.
36. Adjustments of Rent:
(a) For the purposes of this Article 36, the following definitions
shall apply:
(i) The term "Taxes" shall mean (A) all real estate taxes,
assessments, sewer rents and water charges, governmental levies, municipal
taxes, county taxes, district (including business improvement district) or
subdistrict taxes or charges, or any other governmental charge, general or
special, ordinary or extraordinary, unforeseen as well as foreseen, of any kind
or nature whatsoever, which are or may be assessed, levied or imposed upon all
or any part of the Building or the parcel of land upon which the same is
constructed (the "Land"), and the sidewalks, plazas or streets in front of or
adjacent thereto, including any tax, excise or fee measured by or payable with
respect to any rent, and levied against Landlord and/or the Land and/or the
Building under the laws of the United States, the State of New York, or any
political subdivision thereof, or by the City of New York, or any political
subdivision thereof, and (B) any expenses incurred by Landlord in contesting any
of the foregoing set forth in clause (A) of this sentence or the assessed
valuations of all or any part of the Land or Building, or collecting any refund.
If, due to a future change in the method of taxation or in the taxing authority,
a new or additional real estate tax, or a franchise, income, transit, profit or
other tax or governmental imposition, however designated, shall be levied
against Landlord and/or the Land and/or Building in addition to, or in
substitution in whole or in part for any tax which would constitute "Taxes", or
in lieu of additional Taxes, such tax or imposition shall be deemed for the
purposes hereof to be included within the term "Taxes". "Taxes" shall also
include all costs and expenses incurred or paid by Landlord in connection with
the ICIP (as defined in Article 58). For the purpose of calculating "Taxes" no
effect will be given for any reduction or abatement obtained by Landlord
pursuant to the ICIP or other similar program so that "Taxes" shall be
calculated as if Landlord had not received any such reduction or abatement.
(ii) The term "Tax Year" shall mean each period of twelve months,
commencing on the first day of July of each such period, in which occurs any
part of the term of this lease or such other period of twelve months occurring
during the term of this lease as hereafter may be duly adopted as the fiscal
year for real estate tax purposes of the City of New York.
(iii) The term "Operating Year" shall mean the full calendar year in
which the term of this lease commences and each succeeding calendar year
thereafter.
(iv) The term "Operating Expenses" shall mean the total of all the
costs and expenses incurred or borne by Landlord in connection with the
operation and maintenance of the Building, and the services provided tenants
therein, including all expenses incurred as a result of Landlord's compliance
with any of its obligations hereunder. Operating Expenses shall include, without
being limited thereto, the following: (i) salaries, wages, medical, surgical and
general welfare benefits (including group life insurance) and pension payments
of employees
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of Landlord or the managing agent for the Building engaged in the operation and
maintenance of the Building, management fees paid to third parties or if no
managing agent is employed by Landlord, a sum in lieu thereof which is equal to
the higher of (x) four (4%) percent of gross rents from the Building or (y) such
compensation as is then charged by firms providing management (exclusive of
leasing) services to owners of first class office buildings in downtown
Manhattan; (ii) payroll taxes, workmen's compensation, uniforms and dry cleaning
for the employees referred to in subdivision (i); (iii) the cost of all charges
for steam, heat, ventilation, air-conditioning and water (including water and
sewer rentals) furnished to the Building (including the common areas thereof),
together with any taxes on any such utilities; (iv) the cost of all charges for
rent, casualty, war risk (if obtainable from the United States government),
liability and other types of insurance; (v) the cost of all building and
cleaning supplies and charges for telephone for the Building and cleaning of the
Building, including common areas; (vi) the cost of all charges for cleaning and
service contracts for any areas of the Building; (vii) the cost of Building
electric current (for the purposes of this clause (vii), the cost of Building
electric current shall be deemed to mean the cost of all electricity purchased,
including any taxes thereon or fuel or other adjustments in connection
therewith, for use in the Building other than that which is furnished to the
demised space of other tenants in the Building; the parties agree that fifty
(50%) percent of the aggregate of the Building's payment to the public utility
for the purchase of electricity plus the estimated electric charges of tenants
procuring electric service directly from the public utility, if any, shall be
deemed to be payment for Building electric current); (viii) the cost relating to
the operation, repair and maintenance of elevators and escalators; (ix) the cost
relating to protection and security; (x) the cost relating to lobby decorations
and interior and exterior landscape maintenance; (xi) repairs, replacements and
improvements performed after the Base Year which are appropriate for the
continued operation of the Building as a first class office building; (xii)
painting of non-tenanted areas; (xiii) professional and consulting fees; (xiv)
association fees or dues; (xv) the cost of capital expenditures made to the
Building by reason of the laws and requirements of any public authorities or the
requirements of insurance bodies which is incurred after the Base Year. The term
"Operating Expenses", as used and defined under this Section 36(a)(iii), shall
not, however, include the following items: (1) interest on and amortization of
any mortgages encumbering the Building or the parcel of land upon which it is
constructed (the "Land"); (2) the cost of tenant improvements made for new
tenant(s) of the Building; (3) brokerage commissions; (4) financing or
refinancing costs; (5) Taxes; (6) salaries and fringe benefits for officers,
employees and executives above the grade of building manager; (7) the cost of
any items to the extent Landlord is actually reimbursed by any tenant for
specific services performed for such tenant (other than under operating expense
escalation provisions of its lease); and (8) professional fees incurred in
connection with any refinancing of the Building or liability for non-payment of
any underlying mortgage.
If Landlord shall purchase any item of capital equipment or make any
capital expenditure designed to result in savings or reductions in Operating
Expenses, then the cost thereof shall be included in Operating Expenses. The
costs of capital equipment or capital expenditures are so to be included in
Operating Expenses for the Operating Year in which the costs are incurred and
subsequent Operating Years, on a straight line basis, to the extent that such
items are amortized over such period of time as reasonably can be estimated as
the time in which such savings or reductions in Operating Expenses are expected
to equal Landlord's costs for such capital equipment or capital expenditure,
with an interest factor equal to the Interest Rate at the time of Landlord's
having incurred said costs. If Landlord shall lease any such item of capital
equipment designed to result in savings or reductions in Operating Expenses,
then the rentals and other costs paid or incurred in connection with such
leasing shall be included in Operating Expenses for the Operating Year in which
they were incurred.
If during all or part of any Operating Year, Landlord shall not furnish any
particular item(s) of work or service (which would constitute an Operating
Expense hereunder) to portions of the Building aggregating more than five (5%)
percent of the rentable area thereof (including without limitation the demised
premises) due to the fact that such portions are not occupied or leased, or
because such item of work or service is not required or desired by the tenant
(including without limitation Tenant), or such tenant is itself obtaining and
providing such item of work of service, or for any other reasons, then, for the
purposes of computing the additional rent payable hereunder pursuant to Section
36(d) hereof, the amount of the expenses for such item(s) for such period shall
be deemed to be increased by an amount equal to the additional operating and
maintenance expenses which would reasonably have been incurred during such pe-
3
<PAGE>
riod by Landlord if it had at its own expense furnished such item(s) of work or
services to at least ninety-five (95%) percent of the rentable area of the
Building.
(v) "Tenant's Proportionate Share of Increase" shall mean Tenant's
Operating Percentage multiplied by the increase in Operating Expenses for an
Operating Year over Operating Expenses in the Operating Base Year.
(vi) "Tenant's Projected Share of Increase" shall mean Tenant's
Proportionate Share of Increase for the prior Operating Year and the reasonably
estimated increase in costs for the current Operating Year divided by twelve
(12) and payable monthly by Tenant to Landlord as additional rent. If, however,
Landlord shall furnish any such estimate for an Operating Year subsequent to the
commencement thereof, then (a) until the first day of the month following the
month in which such estimate is furnished to Tenant, Tenant shall pay to
Landlord on the first day of each month an amount equal to the monthly sum
payable by Tenant to Landlord under this Section in respect of the last month of
the preceding Operating Year; (b) promptly after such estimate is furnished to
Tenant, Landlord shall give notice to Tenant stating whether the installments of
Tenant's Projected Share of Increase previously made for such Operating Year
were greater or less than the installments of Tenant's Projected Share of
Increase to be made for such Operating Year in accordance with such estimate,
and (i) if there shall be a deficiency, Tenant shall pay the amount thereof
within 10 days after demand therefor, or (ii) if there shall have been an
overpayment, Landlord shall promptly either refund to Tenant the amount thereof
or permit Tenant to credit the amount thereof against subsequent payments under
this Article 36; and (c) on the first day of the month following the month in
which such estimate is furnished to Tenant, and monthly thereafter throughout
the remainder of such Operating Year, Tenant shall pay to Landlord an amount
equal to Tenant's Projected Share of Increase as shown on such estimate.
(vii) The term "Escalation Statement" shall mean a statement setting
forth the amount payable by Tenant for a specified Tax Year or Operating Year
(as the case may be) pursuant to this Article 36.
(b) (i) Tenant shall pay as additional rent for each Tax Year a sum
(hereinafter referred to as "Tenant's Tax Payment") equal to Tenant's Tax
Proportionate Share of the amount by which the Taxes for such Tax Year exceed
the Tax Base. Any such adjustment payable by reason of the provisions of this
Section 36(b)(i) shall be payable within ten (10) days after Landlord shall
furnish to Tenant an Escalation Statement with respect to Taxes for any Tax
Year. In order to insure that amounts sufficient for the payment of Taxes to the
taxing authority or as escrow payments to Landlord's mortgagee are available
when Landlord is required to make such payments, Tenant's Tax Payment as set
forth in Landlord's Escalation Statement may be reasonably estimated by
Landlord, subject to subsequent adjustment.
(ii) If the real estate tax fiscal year of The City of New York shall
be changed during the term of this lease, any Taxes for such fiscal year, a part
of which is included within a particular Tax Year and a part of which is not so
included, shall be apportioned on the basis of the number of days in such fiscal
year included in the particular Tax Year for the purpose of making the
computations under this Section 36(b).
(iii) If Landlord shall receive a refund of Taxes for any Tax Year,
Landlord shall permit Tenant to credit against subsequent payments under this
Section 36(b) Tenant's Tax Proportionate Share of the refund but not to exceed
Tenant's Tax Payment paid for such Tax Year.
(iv) If the Tax Base is reduced as a result of a certiorari proceeding
or otherwise, Landlord shall adjust the amount of each Tenant's Tax Payment
previously made, and Tenant shall pay the amount of said adjustment within
thirty (30) days after demand setting forth the amount of said adjustment.
(c) Tenant shall pay to Landlord upon demand, as additional rent, any
occupancy tax or rent tax now in effect or hereafter enacted, if payable by
Landlord in the first instance or hereafter required to be paid by Landlord.
(d) (i) After the expiration of the Operating Base Year and any
Operating Year, Landlord shall furnish Tenant an Escalation Statement setting
forth Tenant's Proportionate Share of Increase, with respect to the Operating
Expenses incurred for such Operating Base Year
4
<PAGE>
or Operating Year. Within thirty (30) days after receipt of such Escalation
Statement for any Operating Year, Tenant shall pay Tenant's Proportionate Share
of Increase to Landlord as additional rent.
(ii) Commencing with the first Operating Year for which Landlord shall
be entitled to receive Tenant's Proportionate Share of Increase, Tenant shall
pay to Landlord as additional rent for the then Operating Year, Tenant's
Projected Share of Increase. If the Escalation Statement furnished by Landlord
to Tenant pursuant to Subsection 35(d)(i) above at the end of the then Operating
Year shall indicate that Tenant's Projected Share of Increase exceeded Tenant's
Proportionate Share of Increase, Landlord shall forthwith either (i) pay the
amount of excess directly to Tenant concurrently with the notice or (ii) permit
Tenant to credit the amount of such excess against the subsequent payments of
rent due hereunder; if such statement furnished by Landlord to Tenant hereunder
shall indicate that Tenant's Proportionate Share of Increase exceeded Tenant's
Projected Share of Increase for the then Operating Year, Tenant shall forthwith
pay the amount of such excess to Landlord.
(e) In the event that the Commencement Date shall be other than the first
day of a Tax Year or an Operating Year or the date of the expiration or other
termination of this lease shall be a day other than the last day of a Tax Year
or an Operating Year, then in such event in applying the provisions of this
Article 36 with respect to any Tax Year or Operating Year in which such event
shall have occurred, appropriate adjustments shall be made to reflect the
occurrence of such event on a basis consistent with the principles underlying
the provisions of this Article 36 taking into consideration the portion of such
Tax Year or Operating Year which shall have elapsed after the term hereof
commences in the case of the Commencement Date, and prior to the date of such
expiration or termination in the case of the Expiration Date or other
termination.
(f) Payments shall be made pursuant to this Article 36 notwithstanding
the fact that an Escalation Statement is furnished to Tenant after the
expiration of the term of this lease.
(g) In no event shall the fixed rent ever be reduced by operation of this
Article 36 and the rights and obligations of Landlord and Tenant under the
provisions of this Article 36 with respect to any additional rent shall survive
the termination of this lease.
(h) Landlord's failure to render an Escalation Statement with respect to
any Tax Year or Operating Year shall not prejudice Landlord's right to
thereafter render an Escalation Statement with respect thereto or with respect
to any subsequent Tax Year or Operating Year. Tenant's obligation to pay
escalation for any Tax Year or Operating Year during the term of this lease
shall survive the expiration or earlier termination of this lease.
(i) Each Escalation Statement shall be conclusive and binding upon Tenant
unless within 30 days after receipt of such Escalation Statement Tenant shall
notify Landlord that it disputes the correctness of such Escalation Statement,
specifying the particular respects in which such Escalation Statement is claimed
to be incorrect. Pending the determination of such dispute, Tenant shall pay
additional rent in accordance with the Escalation Statement that Tenant is
disputing, without prejudice to Tenant's position. If the dispute shall be
determined in Tenant's favor, Landlord shall forthwith pay to Tenant the amount
of Tenant's overpayment resulting from compliance with Landlord's statement.
37. Electricity:
(a) Landlord shall supply electric energy which Tenant requires in the
demised premises and Tenant will pay Landlord or Landlord's designated agent, as
additional rent for the supplying of electric current, the sum of (i) an amount
computed by applying Tenant's consumption and demand for the billing period in
question (as measured by the meter(s) installed in the demised premises for that
purpose) to the rates in Service Classification No. 4 of Consolidated Edison
Company of New York, Inc. then in effect (or any successor rate classification
pursuant to which Landlord purchases electricity for the Building) together with
any meter company charges, taxes, fuel adjustment charges and other charges and
expenses to which Landlord is subject, plus, (ii) ten (10%) percent of the
amount set forth in clause (i). Where more than one (1) meter measures the
service of Tenant, the service rendered through each meter may be computed and
billed separately in accordance with the rates herein. Bills therefor shall be
rendered at
5
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such times as Landlord may elect and the amount, as computed from a meter, shall
be deemed to be, and be paid as, additional rent within twenty (20) days of
rendition thereof. If any tax is imposed on Landlord's receipt from the sale or
resale of electric energy to Tenant by any federal, state or municipal
authority, Tenant covenants and agrees that where permitted by law, Tenant's pro
rata share of such taxes shall be passed on to, and included in the bill of, and
paid by, Tenant to Landlord. In no event shall the cost to Tenant for the supply
of electric energy be less than 110% of the aggregate cost to Landlord for the
supply of electric energy to Tenant at the demised premises (including any meter
company charges, taxes, fuel adjustment charges and other charges and expenses
to which Landlord is subject). If any meters or other equipment must be
installed to furnish electric service to the demised premises on a submetered
basis, as herein provided, the same shall be installed by Landlord at Landlord's
expense.
(b) Landlord shall not be liable in any way to Tenant for any failure or
defect in the supply or character of electric energy, steam or other utilities
furnished to the demised premises by reason of any requirement, act or omission
of the public utility serving the Building with electricity or steam or other
utilities or for any other reason. Tenant's use of electric energy in the
demised premises shall not at any time exceed the capacity of any of the
electrical conductors, machinery and equipment in or otherwise serving the
demised premises. In order to ensure that such capacity is not exceeded and to
avert possible adverse effect upon the electric service in the Building, Tenant
agrees not to connect any additional electrical equipment, fixtures, machinery
or appliances of any type to the Building electric distribution system, other
than lamps, typewriters and other small office machines which consume comparable
amounts of electricity, without Landlord's prior written consent, which consent
shall not be unreasonably withheld. Any additional risers, feeders, or other
equipment proper or necessary to supply Tenant's electrical requirements, upon
written request of Tenant, will be installed by Landlord, at the sole cost and
expense of Tenant, if, in Landlord's sole judgment, the same are necessary and
will not cause permanent damage or injury to the Building or the demised
premises, or cause or create a dangerous or hazardous condition or entail
excessive or unreasonable alterations, repair or expense or interfere with or
disturb other tenants or occupants.
(c) Landlord reserves the right to discontinue furnishing electric energy
to Tenant at any time upon sixty (60) days' written notice to Tenant, and from
and after the effective date of such termination, Landlord shall no longer be
obligated to furnish Tenant with electric energy, provided, however, that such
termination date may be extended for a time reasonably necessary for Tenant to
make arrangements to obtain electric service directly from the public utility
company servicing the Building. If Landlord exercises such right of termination,
this lease shall remain unaffected thereby and shall continue in full force and
effect, and thereafter Tenant shall diligently arrange to obtain electric
service directly from the public utility company servicing the Building, and may
utilize the then existing electric feeders, risers and wiring serving the
demised premises to the extent available and safely capable of being used for
such purpose and only to the extent of Tenant's then authorized connected load.
Landlord shall be obligated to pay no part of any cost required for Tenant's
direct electric service.
38. Heat and Air-Conditioning:
(a) Landlord shall maintain and operate the heating system and shall,
subject to the design specifications of the heating system and to energy
conservation requirements of, and voluntary energy conservation programs
sponsored by, governmental authorities, furnish heat (hereinafter called "Heat
Service") to the demised premises, when and as required by law, during regular
hours (that is, between the hours of 8:00 A.M. and 6:00 P.M.) of business days
(which term is used herein to mean all days except Saturday, Sunday and those
days that are observed by the State or Federal government as legal holidays and
those days designated as holidays by the applicable building service union
employees' contract) during the heating season. Landlord shall not be
responsible for the adequacy, design or capacity of the heat distribution system
servicing the Building. If Tenant shall require Heat Service during hours other
than regular hours or on days other than business days (hereinafter called
"After Hours Heat Service") Landlord shall furnish such After Hours Heat Service
upon reasonable advance notice from Tenant, and Tenant shall pay, on demand,
Landlord's established charges therefor.
(b) Landlord shall furnish air-conditioning in the demised premises through
package air-conditioning unit(s) (hereinafter collectively called the "Units")
currently located on the floor of which the demised premises are a part. The
air-conditioning system will function when seasonably required, except as set
forth in paragraph (c) hereof, but only on business days,
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from 8:00 A.M. to 6:00 P.M. Tenant shall maintain and keep the Units in good
order and repair and shall maintain and operate the Unit. Tenant shall be
responsible to obtain and maintain any and all permits or licenses required for
the operation of the Units. Tenant's obligation to maintain the Units shall
include, but not be limited to, the periodic cleaning and/or replacement of
filters, replacement of fuses and belts, the calibration of thermostats and all
startup and shut down maintenance of the Units. Tenant shall, at its sole cost
and expense, perform any and all necessary repairs to, and cause any and all
replacements of, the Units. Tenant shall enter into and maintain throughout the
term of this lease, at Tenant's cost and expense, a service contract for the
maintenance and repair of the Units in form and substance reasonably
satisfactory to Landlord with a contractor approved by Landlord in advance. In
the event Tenant shall fail to engage an air conditioning maintenance company as
aforesaid, Landlord may (but shall not be obligated to) perform such maintenance
and/or engage an air conditioning service company at Tenant's expense to perform
the aforesaid maintenance to the Units, and Tenant shall pay on demand as
additional rent hereunder all expenses incurred by Landlord in connection
therewith. All electricity used in connection with the operation thereof shall
be obtained by Tenant at Tenant's expense pursuant to the provisions of Article
37 and 38 hereof.
(c) In the event that Tenant shall require air-conditioning service on days
other than business days or on business days but during the hours other than
from 8:00 A.M. to 6:00 P.M., then on Tenant's request given (i) by noon of any
business day on which Tenant shall require such service, (ii) by noon on Friday
with respect to Saturdays and Sundays, and (iii) by noon of the preceding day
with respect to holidays, Landlord shall furnish air-conditioning during such
additional times and Tenant shall pay, on demand, Landlord's then usual overtime
air-conditioning charge therefor (currently $50.00 per hour).
39. Subordination:
(a) In the event of any act or omission of Landlord that would give Tenant
the right, immediately or after lapse of a period of time, to cancel or
terminate this lease, or to claim a partial or total eviction, Tenant shall not
exercise such right (i) until it has given written notice of such act or
omission to the holder of each superior mortgage and the lessor of each superior
lease whose name and address shall previously have been furnished to Tenant in
writing and (ii) unless such act or omission shall be one that is not capable of
being remedied by Landlord or such holder or lessor within a reasonable period
of time, until a reasonable period for remedying such act or omission shall have
elapsed following the giving of such notice and following the time when such
holder or lessor shall have become entitled under such superior mortgage or
superior lease, as the case may be, to remedy the same (which reasonable period
shall in no event be less than the period to which Landlord would be entitled
under this lease or otherwise, after similar notice, to effect such remedy),
provided that such holder or lessor shall give Tenant written notice of its
intention to remedy such act or omission and shall, with due diligence, commence
and continue to do so. Landlord agrees to use reasonable efforts to obtain from
the current holder of any superior mortgage a so-called "Nondisturbance
agreement" in favor of Tenant on the standard form used by the holder of such
superior mortgage, which Tenant agrees to execute and deliver to Landlord within
ten (10) days after receipt thereof. With respect to any future institutional
superior mortgage or lease, Landlord agrees to use reasonable efforts to obtain
from any such institutional superior lessor or superior mortgagee a
Nondisturbance agreement on such superior lessor's or superior mortgagee's
standard form, which Tenant agrees to execute and deliver to Landlord within ten
(10) days after receipt thereof, provided, however, Landlord shall have no
liability to Tenant and this lease, including without limitation the provisions
of this Section 39(a), shall not be affected if Landlord is unable, despite such
reasonable efforts, to obtain such a Nondisturbance agreement. Tenant agrees to
pay as additional rent any reasonable attorneys' fees of the holders of such
future superior instruments actually charged in connection with obtaining such
Nondisturbance agreement. Nothing contained herein shall be deemed to require
Landlord to offer any payment or other consideration to obtain or to reject
financing from a proposed lender because said lender refuses to supply Tenant
with a Nondisturbance agreement.
(b) If the lessor of a superior lease or the holder of a superior mortgage
shall succeed to the rights of Landlord under this lease, whether through
possession or foreclosure action or delivery of a new lease or deed, then, at
the request of the party so succeeding to Landlord's rights (herein sometimes
called the successor landlord) and upon such successor landlord's written
agreement to accept Tenant's attornment, Tenant shall attorn to and recognize
such successor landlord as Tenant's landlord under this lease, and shall
promptly execute and de-
7
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liver any instrument that such successor landlord may reasonably request to
evidence such attornment. Upon such attornment, this lease shall continue in
full force and effect as, or as if it were, a direct lease between the successor
landlord and Tenant, upon all of the terms, conditions and covenants as are set
forth in this lease and shall be applicable after such attornment, except that
the successor landlord shall not:
(i) be liable for any previous act or omission of Landlord under this
lease;
(ii) be subject to any offset, not expressly provided for in this
lease, that shall have theretofore accrued to Tenant against Landlord; or
(iii) be bound by any previous modification of this lease, not
expressly provided for in this lease, or by any previous prepayment of more than
one month's fixed rent or any additional rent then due, unless such modification
or prepayment shall have been expressly approved in writing by the lessor of the
superior lease or the holder of the superior mortgage through, or by reason of
which, the successor landlord shall have succeeded to the rights of Landlord
under this lease.
40. Late Payment Charge:
If Tenant shall make any payment of fixed rent, additional rent or other
charges more than five (5) days after the same is due and payable Tenant shall
pay (i) a late payment charge of five (5%) percent of the defaulted amount and
(ii) interest thereon at a rate equal to the lower of the Interest Rate or the
highest rate permitted by law. Such amounts shall be payable as additional rent
hereunder.
41. Preparation of Demised Premises:
(a) Tenant has examined the demised premises and agrees to accept the same
in their condition and state of repair existing as of the Commencement Date and
understands and agrees that Landlord shall not be required to perform any work,
supply any materials or incur any expense to prepare the demised premises for
Tenant's occupancy.
(b) Following the Commencement Date and in conjunction with the performance
of Tenant's Work (as hereinafter defined), Landlord shall perform the following
work in the demised premises (hereinafter called "Landlord's Work") using
materials, finishes, quantities, designs, qualities and colors adopted by
Landlord as standard for tenant installations in the Building ("Building
Standard"):
(i) At Landlord's sole discretion either (x) refurbish the existing men's
and ladies bathrooms to comply with the provisions of the Americans with
Disabilities Act ("ADA") or (ii) construct one (1) unisex ADA compliant stall
within the demised premises in a location to be determined by Landlord;
(ii) Install a new 20-ton water cooled air-conditioning Unit as provided
in Section 38(b) in a location to be determined by Landlord, the installation of
which shall be completed no later than the forty-fifth (45th) day following the
Commencement Date (Tenant shall be responsible for the installation of all
ductwork required for the operation of the air-conditioning system within the
demised premises);
(iii) Ensure perimeter radiators are functional except to the extent the
same have been damaged by Tenant or its agents, employees or contractors;
(iv) Existing radiator covers to be provided to Tenant for restoration by
Tenant; and
(v) After the date Landlord approves Tenant's final plan (as defined in
Section 41(c)(ii)), deliver to Tenant an ACP-5 with respect to the demised
premises.
(c) (i) Tenant hereby covenants and agrees that Tenant will, at Tenant's
own cost and expense, and in a good and workmanlike manner, make and complete
the work and installations in and to the demised premises set forth below in
such manner so that the demised premises will be tasteful and dignified
executive and general offices.
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(ii) Tenant, at Tenant's expense, shall prepare a final plan or final set
of plans and specifications (which said final plan or final set of plans, as the
case may be, and specifications are hereinafter called the "final plan") which
shall contain complete information and dimensions necessary for the construction
and finishing of the demised premises. The final plan shall be submitted to
Landlord for Landlord's written approval. Landlord shall not be deemed
unreasonable in withholding its consent to the extent that the final plan
prepared by Tenant pursuant hereto involves the performance of work or the
installation in the demised premises of materials or equipment which do not
equal or exceed the standard of quality adopted by Landlord for the Building.
(iii) In accordance with the final plan, Tenant, at Tenant's expense,
will make and complete in and to the demised premises (hereinafter sometimes
called the "Work Area") the work and installations (hereinafter called "Tenant's
Work") specified in the final plan. Tenant agrees that Tenant's Work will be
performed with the least possible disturbance to the occupants of other parts of
the Building and to the structural and mechanical parts of the Building and
Tenant will, at its own cost and expense, leave all structural and mechanical
parts of the Building which shall or may be affected by Tenant's Work in good
and workmanlike operating condition. Tenant, in performing Tenant's Work will,
at its own cost and expense, promptly comply with all laws, rules and
regulations of all public authorities having jurisdiction in the Building with
reference to Tenant's Work. Tenant shall not do or fail to do any act which
shall or may render the Building of which the demised premises are a part,
liable to any mechanic's lien or other lien and if any such lien or liens be
filed against the Building of which the demised premises are a part, or against
Tenant's Work, or any part thereof, Tenant will, at Tenant's own cost and
expense, promptly remove the same of record by payment, the posting of a bond or
otherwise, within thirty (30) days after notice of the filing of such lien or
liens; or in default thereof, Landlord may cause any such lien or liens to be
removed of record by payment of bond or otherwise, as Landlord may elect, and
Tenant will reimburse Landlord for all costs and expenses incidental to the
removal of any such lien or liens incurred by Landlord. Tenant shall indemnify
and save harmless Landlord of and from all claims, counsel fees, loss, damage
and expenses whatsoever by reason of any liens, charges or payments of any kind
whatsoever that may be incurred or become chargeable against Landlord or the
Building of which the demised premises are a part, or Tenant's Work or any part
thereof, by reason of any work done or to be done or materials furnished or to
be furnished to or upon the demised premises in connection with Tenant's Work.
Tenant hereby covenants and agrees to indemnify and save harmless Landlord of
and from all claims, counsel fees, loss, damage and expenses whatsoever by
reason of any injury or damage, howsoever caused, to any person or property
occurring prior to the completion of Tenant's Work or occurring after such
completion, as a result of anything done or omitted in connection therewith or
arising out of any fine, penalty or imposition or out of any other matter or
thing connected with any work done or to be done or materials furnished or to be
furnished in connection with Tenant's Work. At any and all times during the
progress of Tenant's Work, Landlord shall be entitled to have a representative
or representatives on the site to inspect Tenant's Work and such representative
or representatives shall have free and unrestricted access to any and every part
of the demised premises. Tenant shall advise Landlord in writing of Tenant's
general contractor and subcontractors who are to do Tenant's Work, and such
general contractor and subcontractors shall be subject to Landlord's prior
written approval which approval shall not be unreasonably withheld or delayed
provided, however, that with respect to work involving structural portions of
the Building or Building systems such contractors and subcontractors shall be
chosen from Landlord's list of approved contractors; such contractors shall, to
the extent permitted by law, use employees for Tenant's Work who will work
harmoniously with other employees on the job.
(iv) Tenant shall at Tenant's sole cost and expense file all necessary
architectural plans and obtain all necessary approvals and permits in connection
with Tenant's Work being performed by it pursuant to this Article 41(c). Tenant
shall submit final plans for Landlord's review no later than the date which is
ninety (90) days following the Commencement Date.
(v) The following conditions shall also apply to Tenant's Work:
(a) all Tenant's Work shall be of material, manufacture, design, capacity
and color at least equal to the Building Standard;
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(b) Tenant, at Tenant's expense shall (i) file all required architectural,
mechanical and electrical drawings and obtain all necessary permits, and (ii)
furnish and perform all engineering and engineering drawings in connection with
Tenant's Work. Tenant shall obtain Landlord's approval of the drawings referred
to in (i) and (ii) hereof, which approval shall not be unreasonably withheld or
delayed;
(c) all of Tenant's Work shall be performed by Tenant in accordance with
all of the rules and regulations adopted by the Building for the performance of
alterations;
(d) All of the provisions of Articles 3 and 48 hereof shall apply to
Tenant's performance of Tenant's Work.
(e) Tenant's Work shall be completed no later than the first (1st)
anniversary of the Commencement Date.
(vi) Landlord shall, at Tenant's written request, cooperate in all
reasonable respects with Tenant in the performance by Tenant of Tenant's Work in
preparing the demised premises for Tenant's occupancy and Landlord shall
instruct its employees and contractors to render such assistance and to
cooperate with Tenant's employees, representatives and contractors provided that
to the extent that Landlord shall incur any expense in so cooperating or in
rendering such assistance, Tenant shall reimburse Landlord for such expense as
additional rent hereunder.
(vii) Landlord shall allow Tenant a credit in the amount of $295,960.00
hereinafter called the "Work Credit", which credit shall be solely applied
against the cost and expense of the construction to be performed by Tenant in
connection with the Tenant's Work. A maximum of ten (10%) percent of the Work
Credit may be applied toward architectural, engineering, and filing fees
(hereinafter referred to as "Soft Costs"). In the event that the cost and
expense of the actual construction included in Tenant's Work shall exceed the
amount of the Work Credit, or in the event that the Soft Costs exceed ten (10%)
percent of the Work Credit, Tenant shall be entirely responsible for such
excess. In the event that the cost and expense of the actual construction and
the Soft Costs included in Tenant's Work shall be less than the Work Credit, the
Work Credit shall be adjusted accordingly. The Work Credit shall be payable by
Landlord to Tenant promptly as Tenant's Work progresses and upon receipt by
Landlord of paid invoices from contractors and suppliers in an amount not
exceeding the Work Credit but in no event shall the same be payable more often
than once every thirty (30) days.
(viii) Tenant shall furnish to Landlord, prior to the commencement of
Tenant's Work, all contracts with Tenant's suppliers and contractors for the
performance thereof. To the extent that such contracts do not fully disclose the
cost of Tenant's Work for which the Work Credit is applicable, Tenant shall
furnish such other data as may be required so that such cost can be finally
ascertained. Furthermore, if at any time during the performance of Tenant's Work
as a consequence of any change therein or otherwise the cost thereof shall
change, Tenant shall furnish to Landlord all additional pricing information as
may be required so that Landlord may, at all times, monitor the cost of Tenant's
Work and any changes therein. To the extent that the cost of Tenant's Work at
any time exceeds the Work Credit or the portion thereof available for its
completion, Landlord may discontinue disbursing the Work Credit until such time
as the unpaid balance of the Work Credit is equal to or exceeds the entire
remaining unpaid cost of completion of Tenant's Work. Tenant shall, in
accordance with Landlord's request, furnish Landlord with copies of paid
invoices and canceled checks and such other documentation as Landlord may
reasonably request to demonstrate payment by Tenant of any excess of the
remaining cost of completion of Tenant's Work over the remaining balance of the
Work Credit.
(ix) At any and all times during the progress of Tenant's Work,
representatives of Landlord shall have the right of access to the demised
premises and inspection thereof and shall have the right to withhold all or any
portion of the Work Credit as shall equal the cost of correcting any portions of
Tenant's Work which shall not have been performed in a manner reasonably
satisfactory to Landlord.
(x) In connection with the payment of any installment of the Work Credit,
Tenant shall, promptly after the completion of the portion of Tenant's Work for
which payment is requested and prior to the payment of such portion of the Work
Credit, furnish to
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Landlord a certificate signed by Tenant's architect certifying that such portion
of Tenant's Work has been completed in accordance with Tenant's approved final
plan, and a statement of the contractor or contractors performing such portion
of Tenant's Work, acknowledging payment by Tenant for such portion of Tenant's
Work and releasing Tenant from all further liability for payment in connection
therewith. Landlord shall be permitted to retain from each installment an amount
equal to ten (10%) percent of the amount requested to be paid by Tenant. The
aggregate of amount of such retainages shall be paid by Landlord in connection
with the payment of the final installment of the Work Credit.
(xi) In addition, Tenant shall, prior to the payment of the final
installment of the Work Credit, furnish to Landlord a general release from the
contractors performing Tenant's Work releasing Landlord and Tenant from all
further liability with respect to Tenant's Work, and all Building Department
sign-offs, inspection certificates, the "as built" plans and any permits
required to be issued by any governmental entities having jurisdiction
thereover.
(xii) It is understood that of the services to be furnished by Landlord
referred to in Article 29 hereof, Landlord shall not furnish any cleaning
services until Tenant commences occupancy of the demised premises for the
conduct of its business. Tenant shall be responsible for removal of Tenant's
refuse and rubbish during the period that Tenant's Work is in progress in the
demised premises.
42. Limitation on Liability:
Tenant shall look only to Landlord's estate and interest in the Building,
for the satisfaction of Tenant's remedies or for the collection of a judgment
(or other judicial process) requiring the payment of money by Landlord in the
event of any default or liability by Landlord hereunder, and no other property
or assets of Landlord and no property of any officer, employee, director,
shareholder, partner or principal of Landlord shall be subject to levy,
execution or other enforcement procedure for the satisfaction of Tenant's
remedies under or with respect to this lease, the relationship of Landlord and
Tenant hereunder or Tenant's use or occupancy of the demised premises.
43. Miscellaneous:
(a) If any of the provisions of this lease, or the application thereof to
any person or circumstances, shall, to any extent, be invalid or unenforceable,
the remainder of this lease, or the application of such provision or provisions
to persons or circumstances other than those as to whom or which it is held
invalid or unenforceable, shall not be affected thereby, and every provision of
this lease shall be valid and enforceable to the fullest extent permitted by
law.
(b) This lease shall be governed in all respects by the laws of the State
of New York.
(c) If, in connection with obtaining financing for the Building, a bank,
insurance company or other lending institution shall request reasonable
modifications in this lease as a condition to such financing, Tenant will not
unreasonably withhold, delay or defer its consent thereto, provided that such
modifications do not increase the obligations of Tenant hereunder or materially
adversely affect the leasehold interest hereby created.
(d) Supplementing Article 28, any bills or statements for fixed rent or
additional rent shall be deemed sufficiently given or rendered if sent by
regular mail, postage prepaid.
(e) Tenant shall not be entitled to exercise any right of termination or
other option granted to it by this lease (if any) at any time when Tenant is in
default in the performance or observance of any of the covenants, terms,
provisions or conditions on its part to be performed or observed under this
lease.
(f) Tenant shall not place or permit to be placed any vending machines in
the demised premises, except with the prior written consent of Landlord in each
instance, provided Tenant may install such vending machines if the use thereof
is confined to Tenant's employees.
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(g) Neither Tenant nor any corporation or other entity controlling,
controlled by or under common control with Tenant shall occupy any space in the
Building (by assignment, sublease or otherwise) other than the demised premises,
except with the prior written consent of Landlord in each instance.
(h) Tenant agrees that its sole remedies in cases where Landlord's
reasonableness in exercising its judgment or withholding its consent or approval
is applicable pursuant to a specific provision of this lease, or any rider or
separate agreement relating to this lease, if any, shall be those in the nature
of an injunction, declaratory judgment, or specific performance, the rights to
money damages or other remedies being hereby specifically waived.
(i) The Article headings of this lease are for convenience only and are not
to be given any effect whatsoever in construing this lease.
(j) This lease shall not be binding upon Landlord unless and until it is
signed by Landlord and a fully executed copy thereof is delivered to Tenant.
(k) The Schedules annexed to this lease shall be deemed part of this lease
with the same force and effect as if such Schedules were numbered Articles of
this lease.
(l) If the rent hereunder shall commence on any day other than the first
day of a calendar month, the rent for such calendar month shall be prorated.
(m) Tenant agrees that Tenant will not at any time during said term, either
directly or indirectly, use any contractors and/or labor and/or materials if it
is reasonably foreseeable that the use of such contractors and/or labor and/or
materials would or will create any difficulty with other contractors and/or
labor engaged by Tenant or Landlord or others in the maintenance and/or
operation of the Building or any part thereof.
(n) Tenant shall not place any signage on the entrance to the demised
premises other than the Building Standard signage to be furnished by Landlord to
Tenant at Tenant's cost and expense. The listing of any name other than that of
Tenant, whether on the doors of the demised premises, on the Building directory,
if any, or otherwise, shall not operate to vest any right or interest in this
lease or in the demised premises, nor shall it be deemed to be the consent of
Landlord to any assignment or transfer of this lease, to any sublease of the
demised premises, or to the use or occupancy thereof by others.
(o) The terms "Owner" and "Landlord", whenever used in this lease
(including, without limitation, in Article 31), shall have the same meaning.
(p) If Landlord or Landlord's managing or rental agent accepts from Tenant
one or more keys to the demised premises in order to assist Tenant in showing
the demised premises for subletting or other disposition or for the performance
of work therein for Tenant or for any other purpose, the acceptance of such key
or keys shall not constitute an acceptance of a surrender of the demised
premises nor a waiver of any of Landlord's rights or Tenant's obligations under
this lease, including, without limitation, the provisions relating to assignment
and subletting and the condition of the demised premises.
(q) If the demised premises shall at any time during the term of this lease
become infested with vermin, Tenant, at Tenant's expense, shall cause the same
to be exterminated from time to time to the satisfaction of Landlord and shall
employ such exterminators and such exterminating company or companies as shall
be approved by Landlord.
(r) If Tenant is a corporation or partnership, each individual executing
this lease on behalf of Tenant hereby represents and warrants that Tenant is a
duly formed and validly existing entity qualified to do business in the State of
New York and that Tenant has full right and authority to execute and deliver
this lease and that each person signing on behalf of Tenant is authorized to do
so.
(s) In the event of conflict between the provisions of this rider and the
provisions of the printed form to which this rider is annexed, the provisions of
this rider shall govern.
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(t) Acceptance of fixed rent or additional rent from anyone other than
Tenant shall not be deemed to constitute Landlord's consent to an assignment of
this lease or a subletting or other occupancy of the demised premises by anyone
other than Tenant, nor a waiver of any of Landlord's rights or Tenant's
obligations under this lease.
44. Insurance:
(a) Tenant covenants and agrees to provide on or before the commencement of
the term of this lease and to keep in force during the term hereof for the
benefit of Landlord and Tenant a comprehensive general liability insurance
policy protecting Landlord and Tenant, Landlord's managing agent and any other
persons that Landlord may reasonably designate by notice to Tenant, against any
liability whatsoever, occasioned by any occurrence on or about the demised
premises or any appurtenances thereto. Such policy is to be written by good and
solvent insurance companies permitted to do business in the State of New York,
and otherwise satisfactory to Landlord, and shall be in such limits as Landlord
may reasonably require, and as of the date of this lease Landlord reasonably
requires a combined single limit of liability thereunder of not less than the
amount of Two Million Dollars ($2,000,000) per occurrence for bodily or personal
injury (including death) or property damage or such greater amount as Landlord
may from time to time require. In addition, Tenant, at its expense, shall
provide and keep in force during the term hereof for the benefit of Landlord and
Tenant "all risk" property insurance covering all Tenant's property to a limit
of not less than the full replacement value thereof. Such insurance may be
carried under a blanket policy covering the demised premises and other locations
of Tenant, if any. Prior to the time such insurance is first required to be
carried by Tenant and thereafter, at least fifteen (15) days prior to the
effective date of such policy, Tenant agrees to deliver to Landlord either a
duplicate original of the aforesaid policy or a certificate evidencing such
insurance. Said certificate shall contain an endorsement that such insurance may
not be canceled except upon thirty (30) days' notice to Landlord, by certified
mail, return receipt requested, which notice shall contain the policy number and
the names of the insured and certificate holder.
(b) (i) Landlord agrees that it will include in its fire insurance
policies appropriate clauses pursuant to which the insurance companies (y) waive
all right of subrogation against Tenant with respect to losses payable under
such policies and/or (z) agree that such policies shall not be invalidated
should the insured waive in writing prior to a loss any or all right of recovery
against any party for losses covered by such policies.
(ii) Tenant agrees to include in its fire insurance policy or policies on
its furniture, furnishings, fixtures and other property removable by Tenant
under the provisions of this lease appropriate clauses pursuant to which the
insurance company or companies (y) waive the right of subrogation against
Landlord and/or any tenant of space in the Building with respect to losses
payable under such policy or policies and/or (z) agree that such policy or
policies shall not be invalidated should the insured waive in writing prior to a
loss any or all right of recovery against any party for losses covered by such
policy or policies.
(iii) Provided that Landlord's right of full recovery under its policy or
policies aforesaid is not adversely affected or prejudiced thereby, Landlord
hereby waives any and all right of recovery which it might otherwise have
against Tenant, its servants, agents and employees, for loss or damage occurring
to the Building and the fixtures, appurtenances and equipment therein, to the
extent the same is covered by Landlord's insurance, notwithstanding that such
loss or damage may result from the negligence or fault of Tenant, its servants,
agents or employees. Provided that Tenant's right of full recovery under its
aforesaid policy or policies is not adversely affected or prejudiced thereby,
Tenant hereby waives any and all right of recovery which it might otherwise have
against Landlord, its servants, and employees, and against every other tenant in
the Building who shall have executed a similar waiver as set forth in this
Section 44(b)(iii) for loss or damage to, Tenant's furniture, furnishings,
fixtures and other property removable by Tenant under the provisions hereof to
the extent that same is covered by Tenant's insurance, notwithstanding that such
loss or damage may result from the negligence or fault of Landlord, its
servants, agents or employees, or such other tenant and the servants, agents or
employees thereof.
(iv) Landlord and Tenant hereby agree to advise the other promptly if the
clauses to be included in their respective insurance policies pursuant to
subdivisions (i) and (ii) hereof cannot be obtained. Landlord and Tenant hereby
also agree to notify the other
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promptly of any cancellation or change of the terms of any such policy which
would affect such clauses.
45. Change of Condition:
Landlord shall not be liable for any change of condition in the demised
premises caused by the compliance with any present or future laws, rules,
orders, ordinances, requirements, or regulations of any Federal, State, County
or Municipal authority or government, including any change required by law for
off-street parking or similar legislation, or by revocation by any such
authority or authorities of any permit or license heretofore granted, or by
construction or operation of any public or quasi-public work, or by the erection
of any building or buildings upon any adjacent property, or by change of
environment. Landlord shall not be liable for interference with or loss of light
or other incorporeal hereditaments caused by anybody other than Landlord, or
caused by or for the City or any governmental or quasi-governmental agency or
authority in connection with the construction of any public or quasi-public
work.
46. Brokerage:
(a) Tenant covenants, represents and warrants that Tenant has had no
dealings or communications with any broker or agent in connection with the
consummation of this lease other than the Broker (as defined in Article 35
hereof), and Tenant covenants and agrees to pay, hold harmless and indemnify
Landlord from and against any and all cost, expense (including reasonable
attorneys' fees) or liability for any compensation, commissions or charges
claimed by any broker or agent other than the Broker with respect to this lease
or the negotiation thereof.
(b) Landlord represents and warrants to Tenant that Landlord has had no
dealings or negotiations in connection with the consummation of this lease with
any broker purporting to represent Tenant other than Broker, and Landlord
covenants and agrees to pay, hold harmless and indemnify Tenant from and against
any and all cost, expense or liability that Tenant shall incur for commission or
other compensation as a result of a breach by Landlord of the foregoing
representation. Landlord shall be responsible for any brokerage commissions
payable to the Broker pursuant to a separate agreement between Landlord and the
Broker.
47. Restrictions upon Use:
It is expressly understood that no portion of the demised premises shall be
used as, or for (i) a bank, trust company, savings bank, industrial bank,
savings and loan association or personal loan bank (or any branch office or
public accommodation office of any of the foregoing), or (ii) a public
stenographer or typist, barber shop, beauty shop, beauty parlor or shop,
telephone or telegraph agency, telephone or secretarial service, messenger
service, travel or tourist agency, employment agency, public restaurant or bar,
commercial document reproduction or offset printing service, public vending
machines, retail, wholesale or discount shop for sale of merchandise, retail
service shop, labor union, school or classroom, governmental or
quasi-governmental bureau, department or agency, including an autonomous
governmental corporation, a medical or dental office or suite or a company
engaged in the business of real estate brokerage or the renting of office or
desk space.
48. Addendum to Article 3:
(a) Tenant agrees that with respect to the performance by Tenant of any
alterations, additions, improvements or installations to the demised premises
costing in excess of $5,000. Tenant shall pay to Landlord, as additional rent
hereunder, promptly upon being billed therefor, a sum equal to fifteen (15%)
percent of the cost of such alterations, additions, improvements or
installations for Landlord's indirect costs, field supervision and coordination
in connection therewith. The foregoing charge shall not apply with respect to
Tenant's Work. Tenant shall, in addition, reimburse Landlord for any reasonable
costs incurred by Landlord for review of Tenant's plans by Landlord's architect
and/or engineer. If Landlord is performing any work pursuant to any provision of
this lease to prepare or improve the demised premises for Tenant's occupancy,
Tenant shall reimburse Landlord for any costs Landlord incurs for filing fees
and permits required in connection therewith, including the fees of any
consultant engaged by Landlord for such purposes.
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(b) (i) Prior to commencing any alterations, additions, improvements or
installations ("Tenant's Alterations") in the demised premises, upon request
from Landlord, Tenant shall deliver to Landlord an amount equal to one hundred
fifteen (115%) percent of the total estimated cost of Tenant's Alterations,
which estimate shall be made and certified to by Tenant's architect in good
faith based on Tenant's plans and specifications with respect thereto, as
financial security for the completion of Tenant's Alterations and payment of all
contractors and suppliers utilized in connection therewith.
(ii) In lieu of the cash security deposit provided for in
subparagraph (b)(i) above, Tenant may deliver to Landlord and, shall, except as
otherwise provided herein, maintain in effect at all times until completion of
Tenant's Alterations and payment of all contractors and suppliers in connection
therewith, an irrevocable letter of credit, in form and substance satisfactory
to Landlord in the amount of the security required by Landlord pursuant to
subparagraph (b)(i) above, issued by a banking corporation satisfactory to
Landlord and having its principal place of business or its duly licensed branch
or agency in the City and State of New York. Such letter of credit shall have an
expiration date no earlier than the first anniversary of the date of issuance
thereof.
(c) Landlord shall have the right upon notice to Tenant given at any time
prior to the Expiration Date or any earlier termination of this lease to require
Tenant to remove any Tenant Alterations and to restore the portion(s) of the
demised premises affected thereby to its (their) condition prior to the
installation or performance thereof.
49. Addendum to Article 6:
Notwithstanding anything contained in the lease to the contrary, if at
any time during the term of this lease, Landlord expends any sums for
alterations or improvements to the Building which are required to be made
pursuant to any Legal Requirement, Tenant shall pay to Landlord, as additional
rent, Tenant's Proportionate Share of such cost within ten (10) days after
demand therefor. For the purposes of this Article 49, the cost of any alteration
or improvement made shall be deemed to include the cost of preparing any
necessary plans and the fees for filing such plans.
50. Addendum to Article 11:
Supplementing Article 11 hereof, a transfer of fifty (50%) percent or
greater interest (whether stock, partnership or otherwise) of Tenant shall be
deemed to be an assignment of this lease, either in one transaction or in any
series of transactions within a thirty-six (36) month period.
51. Addendum to Article 17:
This lease and the term and estate hereby granted are subject to the
following further limitation. Whenever Tenant shall default in the payment of
any installment of fixed rent, or in the payment of any additional rent or any
other charge payable by Tenant to Landlord, on any day upon which the same ought
to be paid, and such default shall continue for five (5) days after Landlord
shall have given Tenant a notice specifying such default, then in any such case
Landlord may give to Tenant a notice of intention to end the term of this lease
at the expiration of three (3) days from the date of the service of such notice
of intention, and upon the expiration of said three (3) day notice period this
lease and the term and estate hereby granted, whether or not the term shall
theretofore have commenced, shall terminate with the same effect as if that day
were set forth herein for the expiration of the term hereof, but Tenant shall
remain liable for damages as provided in Article 18.
52. Rental Payments:
(a) All payments other than fixed rent to be made by Tenant pursuant to
this lease shall be deemed additional rent and, in the event of any non-payment
thereof, Landlord shall have all rights and remedies provided for herein or by
law for non-payment of rent.
(b) All payments of fixed rent and additional rent to be made by Tenant
pursuant to this lease shall be made by checks drawn upon a New York City bank
which is a member of the New York Clearing House Association or any successor
thereto.
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53. Holdover:
(a) In the event Tenant shall hold over after the expiration of the term
of this lease, the parties hereby agree that Tenant's occupancy of the demised
premises after the expiration of the term of this lease shall be upon all of the
terms set forth in this lease, except Tenant shall pay as rent for the holdover
period an amount equal to the higher of (A) an amount equal to two (2) times for
the first thirty (30) days of such holdover period (and thereafter at the rate
of three (3) times) the sum of (1) the pro rata fixed rent payable by Tenant
during the last year of the term of this lease and (2) all monthly installments
of additional rent payable by Tenant pursuant to the terms of this lease that
would have been billable monthly by Landlord had the term of this lease not
expired; or (B) an amount equal to the then-market rental value for the demised
premises as shall be established by Landlord giving notice to Tenant of
Landlord's good faith estimate of such market rental value. Landlord's rights
under this Article 53 shall not preclude it from invoking any other remedy
allowed under Article 18 of this lease or at law or in equity. Nothing herein
contained shall be deemed to permit Tenant to retain possession of the demised
premises after the expiration of the term of the lease.
(b) If Tenant shall hold over or remain in possession of any portion of
the demised premises beyond the expiration of the term of this lease,
notwithstanding the acceptance of any rent paid by Tenant pursuant to subsection
53(a) hereof, Tenant shall be subject not only to summary proceeding and all
damages related thereto, but also to any damages arising from lost opportunities
(and/or new leases) by Landlord to re-let the demised premises (or any part
thereof). All damages to Landlord by reason of such holding over by Tenant may
be the subject of a separate action and need not be asserted by Landlord in any
summary proceedings against Tenant.
(c) The provisions of this Article 53 shall survive the expiration of the
term of this lease.
54. Fixed Rent:
(a) Tenant shall pay to Landlord a fixed rent (herein referred to as
"fixed rent") as follows:
(i) TWO HUNDRED FIFTY-THREE THOUSAND SIX HUNDRED EIGHTY and 00/100
($253,680.00) DOLLARS per annum during the period commencing on the Commencement
Date and ending on the last day of the month preceding the month in which occurs
the third (3rd) anniversary of the Commencement Date;
(ii) TWO HUNDRED SEVENTY THOUSAND FIVE HUNDRED NINETY-TWO and 00/100
($270,592.00) DOLLARS per annum during the period commencing on the first day of
the month in which occurs the third (3rd) anniversary of the Commencement Date
and ending on the last day of the month preceding the month in which occurs the
seventh (7th) anniversary of the Commencement Date; and
(iii) TWO HUNDRED EIGHTY SEVEN THOUSAND FIVE HUNDRED FOUR and 00/100
($287,504.00) DOLLARS per annum during the period commencing on the first day of
the month in which occurs the seventh (7th) anniversary of the Commencement Date
and ending on the Expiration Date. (b) Notwithstanding the provisions of Section
54(a) hereof, the fixed rent payable by Tenant during the one hundred and fifty
(150) day period commencing on the Commencement Date shall be abated. The date
immediately following the expiration of the foregoing abatement period is
referred to herein as the "Rent Commencement Date."
55. Intentionally Deleted Prior to Execution
56. Partnership Tenant:
If Tenant is a partnership (or is comprised of two (2) or more persons,
individually and as co-partners of a partnership) or if Tenant's interest in
this lease shall be assigned to a partnership (or to two (2) or more persons,
individually and as co-partners of a partnership) pursuant to Article 11 or
Schedule B hereof (any such partnership and such persons are referred to in this
Article
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56 as "Partnership Tenant"), the following provisions of this Article 56 shall
apply to such Partnership Tenant:
(a) the liability of each of the parties comprising Partnership Tenant
shall be joint and several, and
(b) each of the parties comprising Partnership Tenant hereby consents in
advance to, and agrees to be bound by, any written instrument which may
hereafter be executed, changing, modifying or discharging this lease, in whole
or in part, or surrendering all or any part of the demised premises to Landlord,
and by notices, demands, requests or other communications which may hereafter be
given, by Partnership Tenant or any of the parties comprising Partnership
Tenant, and
(c) any bills, statements, notices, demands, requests or other
communications given or rendered to Partnership Tenant or to any of the parties
comprising Partnership Tenant shall be deemed given or rendered to Partnership
Tenant and to all such parties and shall be binding upon Partnership Tenant and
all such parties, and
(d) if Partnership Tenant shall admit new partners, all of such new
partners shall by their admission to Partnership Tenant, be deemed to have
assumed performance of all of the terms, covenants and conditions of this lease
on Tenant's part to be observed and performed, and
(e) Partnership Tenant shall give prompt notice to Landlord of the
admission of any such new partners, and upon demand of Landlord, shall cause
each such new partner to execute and deliver to Landlord an agreement in form
satisfactory to Landlord, wherein each such new partner shall assume performance
of all of the terms, covenants and conditions of this lease on Tenant's part to
be observed and performed (but neither Landlord's failure to request any such
agreement nor the failure of any such new partner to execute or deliver any such
agreement to Landlord shall vitiate the provisions of subdivision (d) of this
Section).
57. INTENTIONALLY DELETED PRIOR TO EXECUTION
58. ICIP:
(a) For purposes of this Article 58, the term "Project" shall mean,
collectively, (x) the performance by Landlord of certain improvements in and to
the common areas and facilities of the Building, as determined by Landlord in
its sole discretion, and (y) the performance by Tenant of any Changes, including
Tenant's Work. All other terms used herein, unless otherwise defined in this
lease, shall have the meanings ascribed to them in Sections 11-256 through
11-267 of the Administrative Code of the City of New York, authorized by Title
2-D of Article 4 of the New York Real Property Tax Law and all rules and
regulations promulgated thereunder [including without limitation the rules and
regulations of the New York City Department of Finance ("DOF"), the New York
City Department of Business Services ("DBS") and the New York City Department of
Business Services, Division of Labor Services ("DOBS/DLS")] (herein collectively
called the "Industrial and Commercial Incentive Program" or the "ICIP Program")
and Article 2-I of the General City Law and all rules and regulations
promulgated thereunder (herein collectively called the "LMEP Program").
(b) Tenant acknowledges that Landlord has advised Tenant that Landlord
may (but shall not be obligated to) apply for the benefits and entitlements
provided by Section 489-bbbb, Subdivision 5 of the ICIP Program and Section
25-bb(a), Subdivision 1 of the LMEP Program. Tenant will cooperate in all
reasonable respects with Landlord in applying for, and in obtaining from the
appropriate governmental authorities, certificates of eligibility determining
that Landlord is eligible for a partial exemption from real estate tax payments
pursuant to the ICIP Program and a partial rebate of energy charges pursuant to
the LMEP Program. Tenant shall comply (and, with respect to any contractors and
subcontractors performing work on the Project, shall include or require, as the
case may be, provisions in their contracts and subcontracts requiring such
contractors and subcontractors to comply, and promptly following receipt of
notice of any failure of such contractors or subcontractors to comply, shall use
reasonable efforts to enforce such contractual obligations to comply, including,
without limitation, by way of the termination of such contracts and/or
subcontracts) with all applicable provisions, regulations and requirements of
the ICIP Program and the LMEP Program so that the Building will receive the
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benefits and entitlements provided by the ICIP Program (the "ICIP Benefits") and
the LMEP Program (the "LMEP Benefits"; the ICIP Benefits and the LMEP Benefits
being herein sometimes collectively referred to as the "ICIP/LMEP Benefits"),
which compliance shall include without limitation, the filing and obtaining of
all required applications, permits, licenses and certificates and, if required
by the DOBS/DLS, the hiring of apprentice laborers. Landlord makes no
representation or warranty to Tenant that the ICIP Benefits or the LMEP Benefits
shall be received in whole or in part.
(c) Tenant shall, prior to the performance of any Changes in or to the
demised premises or the Building, or the issuance of any building permits or
award of any construction contracts in connection therewith, notify Landlord of
its intent to perform such Changes and the estimated cost thereof in order to
enable Landlord to include such Changes in the Building's applications for ICIP
Benefits and LMEP Benefits.
(d) (i) In order to ensure that no actions taken by any construction
managers, contractors or subcontractors engaged by Tenant in connection with the
Project ("Tenant's Contractors") will cause the Building to fail to qualify for
or to lose the ICIP/LMEP Benefits, Tenant shall use only such Tenant's
Contractors that qualify under and otherwise satisfy the requirements of the
ICIP Program for performance of work comprising part of the Project.
(ii) All of Tenant's Contractors employed in connection with the
Project shall be contractually required by Tenant to comply with the provisions
of the ICIP Program. Tenant hereby agrees that it shall indemnify and hold
harmless Landlord and its partners, directors, officers, agents and employees
from and against any and all claims, loss, damage, liability, cost or expense
arising from or in connection with any failure by Tenant or Tenant's Contractors
to comply with the provisions of the ICIP Program. If Landlord is notified of
any violation of the ICIP Program by Tenant's Contractors, Landlord shall
promptly advise Tenant thereof and send a copy of such notice to Tenant, and
Tenant will take all appropriate diligent steps to cause Tenant's Contractors to
cure such violations.
(e) At Landlord's request, to the extent required to enable Landlord to
file annual certificates of continuing use as required by the ICIP Program
and/or to continue to receive the ICIP/LMEP Benefits, Tenant shall (i) report to
Landlord the use of the demised premises, the number of workers permanently
engaged in employment in the demised premises, the nature of each worker's
employment, the number of such workers who reside in New York City and the New
York City residency of each worker, (ii) provide access to the demised premises
by employees and agents of any governmental agency enforcing the ICIP Program
(including, without limitation, DOF) at all reasonable times, upon reasonable
notice when requested by Landlord and (iii) enforce the contractual obligations
of Tenant's Contractors to comply with the DOBS/DLS requirements.
(f) Without limiting Tenant's rights under this Article 58, Tenant shall
not be required to pay any real estate taxes or charges which may become due
because of the willful neglect or fraud by Landlord in connection with the ICIP
Program, or otherwise relieve or indemnify Landlord from any personal liability
which may arise under Section 11-265 of the Administrative Code of the City of
New York, unless the imposition of such real estate taxes or charges, or
liability, resulted from any actions of Tenant in violation of this lease or
Tenant's failure to comply with the ICIP Regulations.
(g) Tenant represents to Landlord that, within seven (7) years
immediately preceding the date of this lease, Tenant has not been adjudged by a
court of competent jurisdiction to have been guilty of (x) an act, with respect
to a building, which is made a crime under the provisions of Article 150 of the
Penal Law of the State of New York or any similar law of another state, or (y)
any act made a crime or violations by the provisions of Section 235 of the Real
Property Law of the State of New York, nor is any charge for violation of such
laws presently pending against Tenant. Upon request of Landlord, from time to
time, Tenant agrees to update said representation when required because of the
ICIP Program. Tenant further agrees to cooperate with Landlord in compliance
with the ICIP Program and the LMEP Program to aid Landlord in obtaining and
maintaining the ICIP/LMEP Benefits and, if requested by Landlord, to post a
notice in a conspicuous place in the demised premises and to publish a notice in
a newspaper of general circulation in the City of New York, in such form as
shall be prescribed by DOF, stating that persons having information concerning
any violation by Tenant of Section 235 of the Real Property Law or any Section
of Article 150 of the Penal Law or any similar law of another juris-
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diction may submit such information to DOF to be considered in determining
Landlord's eligibility for tax exemption benefits.
(h) Tenant hereby agrees that it shall indemnify and hold harmless
Landlord and its partners, directors, officers, agents and employees from and
against any and all claims, loss, damage, liability, cost or expense arising
from the Building's failure to qualify for or the loss of the ICIP/LMEP Benefits
as a result of Tenant's failure to comply with its obligations set forth in this
Article 58 or any requirement of the ICIP Program or the LMEP Program, or as a
result of Tenant's Contractors failure to comply with any requirement of the
ICIP Program.
59. Addendum to Article 34:
(a) In lieu of the cash security deposit provided for in Article 34
hereof, Tenant may, at any time after the Commencement Date, deliver to Landlord
and, shall thereafter, except as otherwise provided herein, maintain in effect
at all times during the term hereof, an irrevocable letter of credit, in form
and substance satisfactory to Landlord, in the amount of the security required
pursuant to this lease issued by a banking corporation satisfactory to Landlord
and having its principal place of business or its duly licensed branch or agency
in the State of New York. Such letter of credit shall have an expiration date no
earlier than the first anniversary of the date of issuance thereof and shall be
automatically renewable from year to year unless terminated by the issuer
thereof by notice to Landlord given not less than 45 days prior to the
expiration thereof. Except as otherwise provided herein, Tenant shall,
throughout the term of this lease, deliver to Landlord, in the event of the
termination of any such letter of credit, replacement letters of credit in lieu
thereof (each such letter of credit and such extensions or replacements thereof,
as the case may be, is hereinafter referred to as a "Security Letter") no later
than 45 days prior to the expiration date of the preceding Security Letter. The
term of each such Security Letter shall be not less than one year and shall be
automatically renewable from year to year as aforesaid. If Tenant shall fail to
obtain any replacement of a Security Letter within the time limits set forth in
this Section 59(a), Landlord may draw down the full amount of the existing
Security Letter and retain the same as security hereunder.
(b) In the event Tenant defaults in respect to any of the terms,
provisions, covenants and conditions of this lease, including, but not limited
to, the payment of fixed rent and additional rent, Landlord may use, apply or
retain the whole or any part of the security so deposited to the extent required
for the payment of any fixed rent and additional rent or any other sum as to
which Tenant is in default or for any sum which Landlord may expend or may be
required to expend by reason of Tenant's default in respect of any of the terms,
provisions, covenants, and conditions of this lease, including but not limited
to, any damages or deficiency accrued before or after summary proceedings or
other re-entry by Landlord. To insure that Landlord may utilize the security
represented by the Security Letter in the manner, for the purpose, and to the
extent provided in this Article 59, each Security Letter shall provide that the
full amount thereof may be drawn down by Landlord upon the presentation to the
issuing bank of Landlord's draft drawn on the issuing bank without accompanying
memoranda or statement of beneficiary.
(c) In the event that Tenant defaults in respect of any of the terms,
provisions, covenants and conditions of the lease and Landlord utilizes all or
any part of the security represented by the Security Letter but does not
terminate this lease as provided in Article 17 or 51 hereof, Landlord may, in
addition to exercising its rights as provided in Section 59(b) hereof, retain
the unapplied and unused balance of the principal amount of the Security Letter
as security for the faithful performance and observance by Tenant thereafter of
the terms, provisions, and conditions of this lease, and may use, apply, or
retain the whole or any part of said balance to the extent required for payment
of fixed rent, additional rent, or any other sum as to which Tenant is in
default or for any sum which Landlord may expend or be required to expend by
reason of Tenant's default in respect of any of the terms, covenants, and
conditions of this lease. In the event Landlord applies or retains any portion
or all of the security delivered hereunder, Tenant shall forthwith restore the
amount so applied or retained so that at all times the amount deposited shall be
not less than the security required by Article 34.
(d) In the event that Tenant shall fully and faithfully comply with all
of the terms, provisions, covenants and conditions of this lease, the security
shall be returned to Tenant after the date fixed as the end of the lease and
after delivery of entire possession of the demised premises to Landlord. In the
event of a sale of the Land and Building or leasing of the Building,
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<PAGE>
Landlord shall have the right to transfer any interest it may have in the
Security Letter to the vendee or lessee and Landlord shall thereupon be released
by Tenant from all liability for the return of such Security Letter, provided
such vendee or lessee assumes any responsibilities of Landlord with respect to
such Security Letter, and Tenant agrees to look solely to the new landlord for
the return of said Security Letter; and it is agreed that the provisions hereof
shall apply to every transfer or assignment made of the Security Letter to a new
landlord. Tenant further covenants that it will not assign or encumber or
attempt to assign or encumber the monies deposited herein as security and that
neither Landlord nor its successors or assigns shall be bound by any such
assignment, encumbrance, attempted assignment or attempted encumbrance. In the
event of a sale of the Building Landlord shall have the right to require Tenant
to deliver a replacement Security Letter naming the new landlord as beneficiary
and, if Tenant shall fail to timely deliver the same, to draw down the existing
Security Letter and retain the proceeds as security hereunder until a
replacement Security Letter is delivered.
60. THE LOWER MANHATTAN PLAN:
(a) For purposes of this Article 60, unless otherwise defined in this
Lease, all terms used herein shall have the meanings ascribed to them in Title 4
of Article 4 of the New York Real Property Tax Law (herein called the "Lower
Manhattan Plan"). For purposes of the Lower Manhattan Plan, Tenant's Percentage
Share shall mean Tenant's Proportionate Tax Share (i.e., 2.18%).
(b) For so long as Tenant continues to be eligible for the real estate
tax abatement benefits of the Lower Manhattan Plan (herein called the "LMP
Abatement Benefits") with respect to the demised premises, Landlord agrees to
comply with the provisions and requirements of the Lower Manhattan Plan and the
rules promulgated thereunder as same relate to the demised premises and to
Landlord (in connection with Tenant's eligibility for the LMP Abatement
Benefits), provided, however, that Tenant shall promptly pay to Landlord, as
additional rent hereunder, the amount of all actual out-of-pocket costs and
expenses (including reasonable attorneys fees and expenses) incurred by Landlord
in connection with such compliance, including, without limitation, the amount of
any administrative charges or fees imposed by the New York City Department of
Finance (herein called the "Department") in connection with such compliance.
(c) Tenant agrees to comply with the provisions and requirements of the
Lower Manhattan Plan and the rules promulgated thereunder as same relate to the
demised premises; and Tenant shall indemnify and hold harmless Landlord and all
lessors under any superior leases and holders of any superior mortgages and its
and their respective partners, directors, officers, principals, shareholders,
agents and employees from and against any and all claims arising from or in
connection with Tenant's failure to so comply, together with all costs, expenses
and liabilities incurred in connection with each such claim or action or
proceeding brought thereon, including, without limitation, all reasonable
attorneys' fees and expenses.
(d) (i) In accordance with the Lower Manhattan Plan and notwithstanding
anything to the contrary contained in this Lease, Landlord agrees to allow
Tenant a credit against the fixed annual rent and the recurring additional rent
(including Tenant's Tax Payments) payable by Tenant hereunder in an amount that,
in the aggregate, equals the full amount of any abatement of real estate taxes
granted for the demised premises pursuant to the Lower Manhattan Plan and
actually received by Landlord (herein called the "Actual LMP Benefits").
Landlord shall, within thirty (30) days after its receipt of the Actual LMP
Benefits, credit the full amount thereof against the next installments of fixed
annual rent and/or additional rent becoming due hereunder.
(ii) Tenant shall promptly pay to Landlord, as additional rent
hereunder, the amount of all or any portion of the Actual LMP Benefits that have
been credited against fixed annual rent and/or additional rent becoming due
hereunder, and which are thereafter revoked (including, without limitation, if
such Actual LMP Benefits are revoked due to the exercise by Tenant of its right
to assign or sublease pursuant to the terms of this Lease), together with any
interest and/or penalties imposed against Landlord in connection with such
Actual LMP Benefits unless such revocation was the result of Landlord's wrongful
acts.
(e) In accordance with Section 499-C(5) of the Lower Manhattan Plan,
Landlord agrees and informs Tenant that the availability of the LMP Abatement
Benefits are subject to the following:
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(i) an application for abatement of real property taxes pursuant to
Title 4 of Article 4of the New York Real Property Tax Law will be made for the
demised premises;
(ii) the rent, including amounts payable by Tenant for real property
taxes, will accurately reflect any abatement of real property taxes granted
pursuant to Title 4 of Article 4 of the New York Real Property Tax Law for the
demised premises;
(iii) at least thirty-five dollars ($35.00) per square foot must be
spent on improvements to the demised premises and the common areas of the
Building; and
(iv) all abatements granted with respect to the Building pursuant to
Title 4 of Article 4 of the New York Real Property Tax Law will be revoked if,
during the Benefit Period, real estate taxes or water or sewer charges or other
lienable charges are unpaid for more than one year, unless such delinquent
amounts are paid as provided in subdivision four of section four hundred
ninety-nine-f of Title 4 of the New York Real Property Tax Law.
(f) Nothing contained herein, including, without limitation, the
provisions of Section 60.01(e) hereof, shall be construed to impose any
obligation on Landlord to perform, or to incur any cost for, any improvements to
the demised premises and/or the common areas to establish Tenant's eligibility
for the LMP Abatement Benefits.
G. (i) Landlord, upon not less than thirty (30) days advance written
notice from Tenant, agrees to cooperate with Tenant to executive, deliver and
file, together with the Abatement Application (as hereinafter defined), the
affidavit required by Section 499-C(7) of the Lower Manhattan Plan.
(ii) Landlord, upon not less than thirty (30) days advance written
notice from Tenant, agrees to cooperate with Tenant to execute, deliver and
file, within one hundred eighty (180) days after the Commencement Date, an
application (the "Abatement Application") for a certificate of abatement in
accordance with Section 499-D of the Lower Manhattan Plan. Landlord further
agrees to provide all other information required by the Department pursuant to
Section 499-D of the Lower Manhattan Plan and to otherwise comply with the
provisions of said Section 499-D.
(iii) For so long as Tenant continues to be eligible for the LMP
Abatement Benefits with respect to the demised premises, Landlord, upon not less
than thirty (30) days advance written notice from Tenant, agrees to cooperate
with Tenant to annually execute, deliver and file a certificate of continuing
eligibility in accordance with Section 499-F of the Lower Manhattan Plan, and
any other certificates or filings required by the Lower Manhattan Plan. Tenant
shall promptly pay to Landlord, as additional rent hereunder, the amount of all
costs and expenses (including reasonable attorneys' fees and expenses) incurred
by Landlord in connection with the performance of Landlord's obligations
pursuant to this Section 60, including, without limitation, the amount of any
administrative charges or fees imposed by the Department in connection with such
compliance.
(h) In the event that Landlord shall default in the performance or
observance of any of the covenants, terms, provisions or conditions on its part
to be performed or observed under this Article 60, this Lease shall remain
unaffected thereby and shall continue in full force and effect, and Landlord's
liability for such default, if any, shall be limited to the payment of damages
which shall in no event exceed the aggregate amount of the LMP Abatement
Benefits with respect to the demised premises to which Tenant would have been
entitled but for such default plus any penalties and interest Tenant is
obligated to pay as a result of such Landlord default.
(i) For purposes of the Lower Manhattan Plan, the Rent Commencement Date
is the first date that fixed rent is due under this lease.
(j) Notwithstanding anything contained in this Article 60, Landlord makes
no representation or warranty as to the amount, if any, of Actual LMP Benefits
that will be received by Landlord.
IN WITNESS WHEREOF, the parties hereto have executed this lease as of
the day and year first above written.
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PRAEDIUM II BROADSTONE LLC, Landlord
By: PRAEDIUM OPPORTUNITY FUND II, L.P.
Its Managing Member
By: Praedium Partners LLC
Its Investment General Partner
By: /s/ A. Floyd Lattin
-----------------------------------------
A. Floyd Lattin, Senior Vice President
By: Praedium Advisors, Inc.
Its Managing General Partner
By: /s/ A. Floyd Lattin
-----------------------------------------
A. Floyd Lattin, Senior Vice President
WALL STREET STRATEGIES, INC., Tenant
By: Shawn D. Baldwin
Name: Shawn D. Baldwin
Title: Chief Operating Officer
Tenant's Federal Tax Identification No.: _____________________
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STATE OF NEW YORK )
:ss.:
COUNTY OF NEW YORK )
On the _______ day of November in the year 1999, before me, the
undersigned, a Notary Public in and for said state, personally appeared
________________________ personally known to me or proved to me on the basis or
satisfactory evidence to be the person(s) whose name(s) is (are) subscribed to
the within instrument and acknowledged to me that he/she/they executed the same
in his/her/their capacity(ies), and that by his/her/their signature(s) on the
instrument, the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
/s/ Theodora Gonzalez
----------------------------
Notary Public
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Schedule A
Floor Plan of 31st Floor of 80 Broad Street
<PAGE>
SCHEDULE B
ADDENDUM TO ARTICLE 11
(a) Tenant, for itself, its heirs, distributees, executors,
administrators, legal representatives, successors and assigns, expressly
covenants that it shall not assign, mortgage, or encumber this lease or any of
its rights or estates hereunder, sublet the demised premises or any part
thereof, or suffer, or permit, the demised premises, or any part thereof, to be
used or occupied by others, without the prior written consent of Landlord in
each instance. If this lease be assigned, or if the demised premises or any part
thereof be sublet or occupied by anybody other than Tenant, Landlord may, after
default by Tenant, collect rent from the assignee, subtenant, or occupant, and
apply the net amount collected to the rent herein reserved, but no assignment,
subletting, occupancy, or collection shall be deemed a waiver of the provisions
hereof, the acceptance of the assignee, subtenant, or occupant as tenant, or a
release of Tenant from the further performance by Tenant of covenants on the
part of Tenant herein contained. Landlord's consent to an assignment or
subletting shall not, in any wise, be construed to relieve Tenant from obtaining
Landlord's express written consent to any further assignment or subletting. In
no event shall any permitted sublessee assign or encumber its sublease, further
sublet all or any portion of its sublet space, or otherwise suffer or permit the
sublet space, or any part thereof, to be used or occupied by others, without
Landlord's written consent in each instance.
(b) If Tenant shall, at any time or times during the term of this
lease, desire to assign this lease or sublet the demised premises, Tenant shall
give notice thereof to Landlord, which notice shall be accompanied by: (i) a
conformed or photostatic copy of the proposed assignment or sublease, the
effective or commencement date of which shall be not less than thirty (30) nor
more than sixty (60) days after the giving of such notice; (ii) a statement
setting forth, in reasonable detail, the identity of the proposed assignee or
subtenant, the nature of its business and its proposed use of the demised
premises; and (iii) current financial information with respect to the proposed
assignee or subtenant, including its most recent financial report. Such notice
shall be deemed an offer from Tenant to Landlord whereby Landlord (or, at
Landlord's election, its designees if Landlord shall exercise its rights under
succeeding clauses (ii) or (iii) hereof) may, at Landlord's option (i) with
respect to an assignment of this lease or a subletting of the demised premises
for all or substantially all of the term of the lease terminate this lease or
(ii) with respect to a prospective assignment, accept an assignment of this
lease from Tenant without any payment of moneys or other consideration therefor,
or (iii) with respect to a prospective subletting, accept a sublease from Tenant
for the remainder of the term of this lease at a rental rate equal to the lower
of (a) Tenant's proposed subrental or (b) at the same rate of fixed annual rent
and additional rent then payable under the lease; and otherwise on the same
terms, covenants and conditions (including provisions relating to escalation
rents), as are contained herein. Any of the aforesaid options may be exercised
by Landlord by notice to Tenant at any time within thirty (30) days after such
notice has been given by Tenant to Landlord, and during such thirty (30) day
period, Tenant shall not assign this lease or sublet such space to any person.
(c) If Landlord exercises its option to terminate this lease in the
event that Tenant desires either to assign this lease or to sublet the demised
premises, then this lease shall end and expire upon the date that such
assignment or subletting was to be effective or to commence, as the case may be,
and the fixed rent and additional rent shall be paid and apportioned to such
date. If Landlord exercises its option to accept an assignment of this lease or
a subletting of the demised premises Tenant shall then execute and deliver to
Landlord, or to anyone designated or named by Landlord, an assignment or
sublease, as the case may be, in either case in a form reasonably satisfactory
to Landlord's counsel. If the proposed transaction is a sublease and Landlord
accepts such offer, Tenant, on demand, shall pay to Landlord or its managing
agent (as Landlord shall elect) an amount equal to the brokerage commissions
which would have been incurred by Tenant but for Landlord's accepting such
offer.
If a sublease is so made it shall expressly:
(i) permit Landlord to make further subleases of all or any part
of the demised premises and (at no cost or expense to Tenant) to make and
authorize any and all changes, alterations, installations and improvements in
such space as Landlord may deem necessary for such subletting, at Landlord's
expense;
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(ii) negate any intention that the estate created under such
sublease be merged with any other estate held by either of the parties;
(iii) provide that Landlord shall accept the demised premises
"as is", it being intended that Tenant shall have no other cost or expense in
connection with the subletting of the demised premises;
(iv) provide that at the expiration of the term of such sublease
Tenant will accept the demised premises in its then existing condition, subject
to the obligations of Landlord to make such repairs thereto as may be necessary
to preserve the demised premises in good order and condition, ordinary wear and
tear excepted.
(d) In the event that Tenant complies with the provisions of paragraph
(b) of this Schedule B and Landlord does not exercise an option provided to it
thereunder within the time provided therefor, and provided that Tenant is not in
default of any of Tenant's obligations under this lease, Landlord's consent
(which must be in writing and in form reasonably satisfactory to Landlord) to
the proposed assignment of this lease or subletting of the entire demised
premises shall not be unreasonably withheld or delayed, provided the following
conditions have been satisfied:
(i) in Landlord's reasonable judgment, the proposed assignee or
subtenant is engaged in such a business, and the demised premises will be used
in such a manner, that: (x) is limited to the use expressly permitted under this
lease; and (y) will not violate any negative covenant as to use contained in any
other lease of space in the Building about which Tenant has been informed
following its request to Landlord for such information;
(ii) the proposed assignee or subtenant is a reputable person of
good character and with sufficient financial worth considering the
responsibility involved, and Landlord has been furnished with reasonable proof
thereof;
(iii) neither (i) the proposed assignee or sublessee nor (ii)
any person that, directly or indirectly, controls, is controlled by, or is under
common control with, the proposed assignee or sublessee, is then an occupant or
tenant of any part of the Building;
(iv) the proposed assignee or sublessee is not a person with
whom Landlord is then, or shall have been during the previous six (6) month
period, negotiating to lease space in the Building;
(v) the proposed sublease shall be in form reasonably
satisfactory to Landlord and shall comply with the applicable provisions of this
Schedule B;
(vi) the amount of the aggregate rent to be paid by the proposed
subtenant is not less than the then current market rent per rentable square foot
for the demised premises, and the rental and other terms and conditions of the
sublease are the same as those contained in the proposed sublease furnished to
Landlord pursuant to paragraph (b);
(vii) Tenant shall reimburse Landlord on demand for any
reasonable costs that may be incurred by Landlord in connection with said
assignment or sublease, including the costs of making investigations as to the
acceptability of the proposed assignee or subtenant and legal costs incurred in
connection with the granting of any requested consent;
(viii) Tenant shall not have (a) advertised or publicized in any
way the availability of the demised premises without prior notice to, and
approval by, Landlord, which approval Landlord agrees not to unreasonably
withhold, nor shall any advertisement state the name (as distinguished from the
address) of the Building, or (b) listed the demised premises for subletting or
assignment, with a broker, agent or representative (other than the then managing
agent of the Building or other agent designated by Landlord) or otherwise, at a
proposed rental less than the fixed rent and additional rent at which Landlord
is then offering to lease other space in the Building;
(ix) the sublease shall not allow use of the demised premises
(1) as a restaurant, luncheonette, or otherwise for the preparation and/or sale
of food for on or off premises consumption; (2) as a discount store; (3) as a
multiple tenancy store; (4) by a foreign or domestic governmental agency; (5) as
a betting parlor or gambling casino; or (6) by a utility company; and
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(x) the sublease shall not provide for an option on behalf of
the subtenant thereunder to extend or renew the term of such sublease.
(xi) Tenant shall have appointed the then leasing agent of the
Building as its exclusive rental agent in connection with such assignment or
subletting and shall have given such agent the exclusive right to assign and
sublet on Tenant's behalf.
(e) In the event that (i) Landlord fails to exercise any of its options
under paragraph (b) of this Schedule B and consents to a proposed assignment of
this lease or sublease of the entire demised premises and (ii) Tenant fails to
execute and deliver the assignment or sublease to which Landlord consented
within sixty (60) days after the giving of such consent, then Tenant shall again
comply with all of the provisions and conditions of paragraph (b), before
assigning this lease or subletting the demised premises.
(f) Each subletting pursuant to this Schedule B shall be subject to all
of the covenants, agreements, terms, provisions and conditions contained in this
lease. Notwithstanding any such subletting and/or acceptance of rent or
additional rent by Landlord from any subtenant, Tenant shall and will remain
fully liable for the payment of the fixed rent and additional rent due, and to
become due, hereunder, for the performance of all of the covenants, agreements,
terms, provisions and conditions contained in this lease on the part of Tenant
to be performed and for all acts and omissions of any licensee, subtenant, or
any other person claiming under or through any subtenant that shall be in
violation of any of the obligations of this lease, and any such violation shall
be deemed to be a violation by Tenant. Tenant further agrees that,
notwithstanding any such subletting, no other and further subletting of the
demised premises by Tenant, or any person claiming through or under Tenant
(except as provided in paragraph (j) of this Schedule B), shall, or will be,
made, except upon compliance with, and subject to, the provisions of this
Schedule. If Landlord shall decline to give its consent to any proposed
assignment or sublease, or if Landlord shall exercise its option under paragraph
(b), Tenant shall indemnify, defend and hold Landlord harmless from and against
any and all losses, liabilities, damages, costs and expenses (including
reasonable counsel fees) resulting from any claims that may be made against
Landlord by the proposed assignee or subtenant or by any brokers or other
persons claiming a commission or similar compensation in connection with the
proposed assignment or sublease.
(g) With respect to each and every sublease or subletting, it is
further agreed that:
(i) no subletting shall be for a term ending later than one day
prior to the expiration date of this lease;
(ii) no sublease shall be valid, and no subtenant shall take
possession of the demised premises or any part thereof, until an executed
counterpart of such sublease has been delivered to Landlord; and
(iii) each sublease shall provide that it is subject and
subordinate to this lease and to the matters to which this lease is or shall be
subordinate, and that, in the event of termination, re-entry, or dispossess by
Landlord under this lease, Landlord may, at its option, take over all of the
right, title and interest of Tenant as sublandlord under such sublease, and such
subtenant shall, at Landlord's option, attorn to Landlord pursuant to the then
executory provisions of such sublease, except that Landlord shall not (x) be
liable for any previous act or omission of Tenant under such sublease, (y) be
subject to any offset, not expressly provided in such sublease, that theretofore
accrued to such subtenant against Tenant or (z) be bound by any previous
modification of such sublease or by any previous prepayment of more than one
month's fixed rent or any additional rent then due.
(h) Any assignment or transfer shall be made only if, and shall not be
effective until, the assignee shall execute, acknowledge and deliver to Landlord
an agreement, in form and substance satisfactory to Landlord, whereby the
assignee shall assume all of the obligations of this lease on the part of Tenant
to be performed or observed and whereby the assignee shall agree that the
provisions contained in paragraph (a) shall, notwithstanding such assignment
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or transfer, continue to be binding upon it in respect of all future assignments
and transfers. The original named Tenant covenants that, notwithstanding any
assignment or transfer, whether or not in violation of the provisions of this
lease, and notwithstanding the acceptance of fixed rent and/or additional rent
by Landlord from an assignee, transferee, or any other party, the original named
Tenant shall remain fully liable for the payment of the fixed rent and
additional rent and for the other obligations of this lease on the part of
Tenant to be performed or observed.
(i) If Landlord shall give its consent to any assignment of this lease
or to any sublease, Tenant shall, in consideration therefor, pay to Landlord, as
additional rent:
(x) in the case of an assignment, an amount equal to all sums
and other consideration paid to Tenant by the assignee for, or by reason of,
such assignment, including all sums paid for the sale of Tenant's fixtures,
leasehold improvements, equipment, furniture, furnishings, or other personal
property; and
(y) in the case of a sublease, any rents, additional charges, or
other consideration payable under the sublease by the subtenant to Tenant that
are in excess of the fixed rent and additional rent accruing during the term of
the sublease in respect of the subleased space (at the rate per square foot
payable by Tenant hereunder) pursuant to the terms hereof, including all sums
paid for the sale or rental of Tenant's fixtures, leasehold improvements,
equipment, furniture or other personal property.
The sums payable under this paragraph (i) shall be paid to
Landlord as and when payable by the subtenant or assignee, as the case may be,
to Tenant.
(j) If Tenant is a corporation, the provisions of paragraph (a) shall
apply to a transfer (by one or more transferees) of a majority of the stock of
Tenant, as if such transfer of a majority of the stock of Tenant were an
assignment of this lease.
(k) The joint and several liability of Tenant and any immediate or
remote successor in interest to Tenant, and the due performance of the
obligations of this lease on Tenant's part to be performed or observed, shall
not be discharged, released, or impaired in any respect by any agreement or
stipulation made by Landlord extending the time of, or modifying any of the
obligations of, this lease, or by any waiver or failure of Landlord to enforce
any of the obligations of this lease.
(l) Notwithstanding anything to the contrary set forth in this lease,
Tenant shall not be obligated to obtain Landlord's consent, and the provisions
of paragraph (b) hereof shall not apply, to an assignment of this lease or the
subletting of all or a portion of the demised premises by Tenant to an affiliate
thereof. For the purposes of the preceding sentence, the term "affiliate" shall
mean a corporation or other entity controlling, controlled by or under common
control with Tenant and having a net worth at least equal to that of Tenant on
the date of this lease, and for the purposes of the foregoing definition,
"control" shall mean ownership of a majority of interest in the common stock and
other equity of or membership and other interest in the corporation or other
entity involved, together with the ability to manage and direct the business and
affairs thereof. Any change in ownership and management of an affiliate which
shall alter the continuing affiliate relationship between Tenant and such
assignee and its predecessor(s) in interest or if there shall be more than one
such assignment, however effected, including without limitation, by way of
merger, sale of assets or transfer of capital stock, shall be deemed an
assignment to which all of the provisions of Schedule B shall be applicable
except the provisions of this paragraph (1). The provisions of this paragraph
(1) and Tenant's rights hereunder shall apply only if and to the extent that the
subtenant or assignee occupying the demised premises shall use the demised
premises only for purposes permitted under this lease, and such use and
occupancy by such subtenant or assignee is consistent with the continued
operation of the Building as a first-class office building and does not cause
any material increase in the demand for building services. Upon request, Tenant
shall provide Landlord with documentation reasonably satisfactory to Landlord as
to the affiliate relationship between Tenant and any affiliate occupying the
demised premises pursuant to this paragraph (1).
(m) The provisions of paragraph (b) of this Schedule B shall not apply
to transactions with a corporation into or with which Tenant is merged or
consolidated or with an entity to which substantially all of Tenant's assets are
transferred provided such merger or transfer of assets is for a good business
purpose and not principally for the purpose of transferring the
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<PAGE>
leasehold estate created hereby, and provided that (i) the successor to Tenant
has a net worth computed in accordance with generally accepted accounting
principles at least equal to the greater of (1) the net worth of Tenant
immediately prior to such merger, consolidation or transfer, or (2) the net
worth of Tenant herein named on the date of this lease, and (ii) proof
satisfactory to Landlord of such net worth shall have been delivered to Landlord
at least ten (10) days prior to the effective date of any such transaction.
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<PAGE>
SCHEDULE C
HVAC SPECIFICATIONS
1. When summer outdoor ambient temperature is not in excess of 95(degree)F
dry bulb and 75(degree)F wet bulb, indoor space conditions shall not be
greater than 78(degree)F dry bulb and maximum relative humidity of 50%.
2. When winter outdoor temperature is not less than 11(degree)F, indoor
space conditions shall not be less than 70(degree)F dry bulb.
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<PAGE>
10.3
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of September
23, 1999, by and among Vacation Emporium Corporation, a Nevada corporation with
an address at 90 Madison Street, Suite 707, Denver, CO 80206 (the "Company"),
and Charles Payne, an individual with an address at 130 William Street, Suite
401, New York, NY 10038 ("Payne").
WHEREAS:
A. Pursuant to a Share Exchange Agreement, dated as of July 30, 1999, by
and between the parties (the "Exchange Agreement"), the Company has agreed, upon
the terms and subject to the conditions of the Exchange Agreement, to issue to
Payne 9,455,898 shares of the Company's common stock, par value $.001 per share
(the "Shares"); and
B. The Exchange Agreement provides that it is a condition of the Closing
thereunder that the parties enter into this Agreement in order to provide Payne
with certain registration rights under the Securities Act of 1933, as amended,
and the rules and regulations thereunder, or any similar successor statute
(collectively, the "1933 Act"), and applicable state securities laws:
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Payne hereby agree
as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall have
the following meanings:
(a) "Holder" means Payne and any transferee or assignee thereof to
whom Payne assigns his rights under this Agreement and who agrees to become
bound by the provisions of this Agreement in accordance with Section 8.
(b) "Person" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, a trust, an individual,
a governmental or political subdivision thereof or a governmental agency.
(c) "Register, " "registered, " and "registration" refer to a
registration effected by preparing and filing one or more registration
statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
registration statement(s) by the United States Securities and Exchange
Commission (the "SEC").
(d) "Registrable Securities" means the Shares and any shares of
capital stock issued or issuable with respect to the Shares as a result of any
stock split, stock dividend, recapitalization, exchange, combination, merger,
consolidation, distribution or similar event or
<PAGE>
otherwise; provided that there shall be excluded from Registrable Securities any
securities that may be sold at the time in question by the holder thereof
pursuant to Rule 144 under the 1933 Act during any single three-month period (or
any similar period that may be adopted in the future under Rule 144) without
regard to any quantity limitations.
Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Exchange Agreement.
2. REGISTRATION.
(a) Demand Registration. At any time commencing on and after the
second anniversary of the Closing, provided the Company is then eligible to file
with the SEC a registration statement on Form S-3 (or any successor short form
of registration statement) to permit the public offer and sale of the
Registrable Securities by the Holder(s) thereof , the Holder(s) of an aggregate
of more then 50% of the Registrable Securities (the "Requesting Holders") shall
have the right exercisable by written notice to the Company, to have the Company
prepare and file with the SEC, on two occasions, a registration statement on
Form S-3 (or any successor short form of registration statement) and such other
documents, including a prospectus, as may be necessary in the opinion of counsel
for the Company, in order to comply with the provisions of the 1933 Act, so as
to permit a public offering and sale of their respective Registrable Securities
for up to the greater of nine (9) consecutive months from the effective date of
the registration statement or 16 months from the date of the audited financial
statements contained or incorporated by reference therein by the Requesting
Holders and any other Holder of Registrable Securities who notifies the Company
within ten (10) days after receiving notice from the Company of such request.
Notwithstanding anything else herein contained, the Company will have no
obligation to prepare and file a registration statement under the 1933 Act
pursuant to this Section 2(a) or Section 2(c) at a time when pursuant to the
rules and regulations of the SEC audited financial statements of the Company for
any period other than the Company's fiscal year end must be included in such
registration statement. The Company shall be entitled to postpone for up to
ninety (90) days the filing of any registration statement otherwise required to
be prepared and filed by the Company pursuant to this Section 2(a) or Section
2(c) if at the time the Company receives a request for registration the
Company's board of directors determines, in its reasonable business judgment,
that the filing of such registration statement and the offering of the
Registrable Securities pursuant thereto would materially interfere with any
material financing, acquisition, corporate reorganization or other material
transaction by the Company, and the Company promptly gives the Requesting
Holders notice of such determination and postponement. If the Company shall so
postpone the filing of a registration statement, the Requesting Holders shall
have the right to withdraw the request for registration by giving written notice
to the Company within fifteen (15) days after receipt of the Company's notice of
postponement (and, in the event of such withdrawal, such request shall not be
counted for purposes of determining the number of requests for registration that
may be made pursuant to this Section 2(a).
(b) Notice of Demand The Company covenants and agrees to give
written notice of any registration request under Section 2 (a) by any Requesting
Holder to all other Holders of the Registrable Securities within ten (10) days
from the receipt of any such registration request.
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(c) Piggyback Registration. If at any time commencing on and after
the second anniversary of the Closing, the Company proposes to register any of
its securities under the 1933 Act (other than in connection with a merger or
other reorganization or pursuant to Form S-8) it will give written notice by
registered mail, at least thirty (30) days prior to filing of each such
registration statement, to all Holders of the Registrable Securities of its
intention to do so. If any of Holder of Registrable Securities notifies the
Company within twenty (20) days after receipt of any such notice of his, its or
their desire to include any such securities in such proposed registration
statement (also referred to herein as the "Requesting Holders"), the Company
shall afford each of the Requesting Holders the opportunity to have any such
Registrable Securities included in such registration statement. If the
registration of which the Company gives notice pursuant to this Section 2 (c)
for a registered public offering involves an underwriting, the Company so shall
advise as part of the written notice given to the Holders of the Registrable
Securities. In such event, the right of any such holder to registration pursuant
to this Section 2 (c) will be conditioned upon such holder's participation in
such underwriting and the inclusion of such Registrable Securities in the
underwriting to the extent provided herein. All Requesting Holders proposing to
distribute Registrable Securities through such underwriting will (together with
the Company and other Holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by the Company.
Notwithstanding any other provision of this Section 2 (c), if the underwriter
determines that marketing factors or market conditions require a limitation on
the number of securities to be underwritten, the underwriter may (subject to
allocation priority set forth below) limit the number of securities included in
the relevant offering and registration. The Company shall advise all Requesting
Holders of the limitation, and the number of Registrable Securities, if any,
that are entitled to be included in such offering and registration shall be
allocated in the following manner: First, all securities to be registered for
the Company's own account, or if such securities are to be registered for the
account of a security holder or security holders having demand registration
rights pursuant to the exercise of which the Company is being required to
undertake such registration, such securities, shall be included in such offering
and registration. Then, the number of Registrable Securities, if any that maybe
included in such offering and registration shall be allocated pro rata to the
Requesting Holders and to others who requested registration, in each case in
proportion, as nearly as practicable, to the respective number of Registrable
Securities which each had requested to be included in such offering and
registration at the time of filing of the registration statement.
(d) Right Not to Proceed. Notwithstanding the provisions of Section
2 (c), the Company shall have the right at any time after it shall have give
written notice pursuant to Section 2 (c) (irrespective of whether a written
request for inclusion of any Registrable Securities shall have been made) to
elect not to file any such proposed registration statement, or to withdraw the
same after the filing but prior to the effective date thereof.
3. Registration Procedures. If and whenever the Company is required by the
provisions of Sections 2 (a) or 2 (c) to effect the registration of Registrable
Securities under the 1933 Act, the Company will:
(a) prepare and file with the SEC a registration statement with
respect to such securities, and use its best efforts to cause such registration
statement to become and remain
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<PAGE>
effective for such period as may be reasonably necessary to effect the sale of
such securities, not to exceed nine (9) months;
(b) prepare and file with the SEC such amendments to such
registration statement and supplements to the prospectus contained therein as
may be necessary to keep such registration statement effective for such period
as may be reasonably necessary to effect the sale of such securities, not to
exceed the greater of nine (9) consecutive months following the effective date
of the registration statement or 16 months from the date of the audited
financial statements included or incorporated by reference therein;
(c) furnish to the Requesting Holders participating in such
registration (the "Sellers") and to the underwriters of the securities being
registered such reasonable number of copies of the registration statement,
preliminary prospectus, final prospectus and such other documents as such
underwriters may reasonably request in order to facilitate the public offering
of such securities;
(d) use its best efforts to register or qualify the securities
covered by such registration statement under such state securities or blue sky
laws of such jurisdictions as the Sellers may reasonably request in writing
within twenty (20) days following the original filing of such registration
statement, except that the Company shall not for any purpose be required to
execute a general consent to service of process or to qualify to do business as
a foreign corporation in any jurisdiction wherein it is not so qualified;
(e) notify the Sellers, promptly after it shall receive notice
thereof, of the time when such registration statement has become effective or a
supplement to any prospectus forming a part of such registration statement has
been filed;
(f) notify the Sellers promptly of any request by the SEC for the
amending or supplementing of such registration statement or prospectus or for
additional information;
(g) prepare and file with the SEC, promptly upon the request of any
of the Sellers, any amendments or supplements to such registration statement or
prospectus which, in the opinion of counsel for such Sellers (and concurred in
by counsel for the Company), is required under the 1933 Act or the rules and
regulations thereunder in connection with the distribution of Registrable
Securities by such Sellers;
(h) prepare and promptly file with the SEC and promptly notify the
Sellers of the filing of such amendment or supplement to such registration
statement or prospectus as may be necessary to correct any statements or
omissions if, at the time when a prospectus relating to such securities is
required to be delivered under the 1933 Act, any event shall have occurred as
the result of which any such prospectus or any other prospectus as then in
effect would include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading; and
(i) advise the Sellers, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the SEC
suspending the effectiveness of such registration statement or the initiation or
threatening of any proceeding for that purpose and
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<PAGE>
promptly use its best efforts to prevent the issuance of any stop order or to
obtain its withdrawal if such stop order should be issued.
4. OBLIGATIONS OF HOLDERS AND SELLERS.
(a) At least seven (7) days prior to the first anticipated filing
date of a Registration Statement, the Company shall notify each Holder in
writing of the information the Company requires from each such Holder if such
Holder elects to have any of such Holder's Registrable Securities included in
such Registration Statement. It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of a particular Holder that
such Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by him, her or it and the intended method of
disposition of the Registrable Securities held by him, her or it as shall be
reasonably required to effect the registration of such Registrable Securities
and shall execute such documents in connection with such registration as the
Company may reasonably request.
(b) Each Holder, by such Holder's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of any Registration
Statement hereunder, unless such Holder has notified the Company in writing of
such Holder's election to exclude all of such Holder's Registrable Securities
from such Registration Statement.
(c) In the event any Holder elects to participate in an underwritten
public offering pursuant to Section 2, each such Holder agrees to enter into and
perform such Holder's obligations under an underwriting agreement, in usual and
customary form, including, without limitation, customary indemnification and
contribution obligations (only with respect to violations which occur in
reliance upon and in conformity with information furnished in writing to the
Company by such Holder expressly for use in the Registration Statement for such
underwritten public offering), with the managing underwriter of such offering
and take such other actions as are reasonably required in order to expedite or
facilitate the disposition of the Registrable Securities, unless such Holder
notifies the Company in writing of such Holder's election to exclude all of such
Holder's Registrable Securities from such Registration Statement.
(d) Each Seller agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(f),
3(h) or 3(i), such Seller will immediately discontinue disposition of
Registrable Securities pursuant to any Registration Statement(s) covering such
Registrable Securities until such Seller's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(f), (g) or 3(h).
(e) No Holder may participate in any underwritten registration
hereunder unless such Holder (i) agrees to sell such Holder's Registrable
Securities on the basis provided in any underwriting arrangements, (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements, and (iii) agrees to pay his, her or its pro
rata share of all underwriting discounts and commissions.
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<PAGE>
(f) Each Seller agrees that (i) it will not offer or sell any
Registrable Securities under a Registration Statement until it has received
copies of the prospectus included in such Registration Statement as then amended
or supplemented and notice from the Company that such Registration Statement and
any post-effective amendments thereto have become effective as contemplated in
Section 3(e) and (ii) such Seller will comply with the prospectus delivery
requirements of the 1933 Act applicable to it in connection with sales of
Registrable Securities pursuant to such Registration Statement.
5. Expenses.
(a) With respect to each registration requested pursuant to Sections
2(a) or 2(c) hereof, and with respect to each inclusion of Registrable
Securities in a registration statement pursuant to Sections 2(a) or 2(c) hereof,
all fees, costs and expenses of and incidental to such registration, inclusion
and public offering (as specified in paragraph (b) below) in connection
therewith shall be borne by the Company, provided, however, that Sellers shall
bear their pro rata share of the underwriting discount and commissions and
transfer taxes.
(b) The fees, costs and expenses of registration to be borne by the
Company as provided in paragraph (a) above shall include, without limitation,
all registration, filing, and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for the Company, and all legal fees and
disbursements and other expenses of complying with state securities or blue sky
laws of any jurisdictions in which the securities to be offered are to be
registered and qualified (except as provided in paragraph (a) above). Fees and
disbursements of counsel and accountants for the Sellers and any other expenses
incurred by the Sellers not expressly included above shall be borne by the
Sellers.
6. Indemnification.
(a) The Company will indemnify and hold harmless each Seller, its
directors and officers, and any underwriter (as defined in the 1933 Act) for
such holder and each person, if any, who controls such holder or such
underwriter within the meaning of the 1933 Act, from and against, and will
reimburse such holder and each such underwriter and controlling person with
respect to, any and all loss, damage, liability, cost and expense to which such
holder or any such underwriter or controlling person may become subject under
the Act or otherwise, insofar as such losses, damages, liabilities, costs or
expenses are caused by any untrue statement or alleged untrue statement of any
material fact contained in such registration statement, any prospectus contained
therein or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, damage, liability, cost or expenses arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by such Seller, such underwriter
or such controlling person in writing specifically for use in the preparation
thereof.
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(b) Each Seller will indemnify and hold harmless the Company, its
directors and officers, any controlling person and any underwriter from and
against, and will reimburse the Company, its directors and officers, any
controlling person and any underwriter with respect to, any and all loss,
damage, liability, cost or expense to which the Company or any controlling
person and/or any underwriter may become subject under the 1933 Act or
otherwise, insofar as such losses, damages, liabilities, costs or expenses are
caused by any untrue statement or alleged untrue statement of any material fact
contained in such registration statement, any prospectus contained therein or
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was so made in reliance upon and in
strict conformity with written information furnished by or on behalf of such
Seller specifically for use in the preparation thereof.
(c) Promptly after receipt by an indemnified party pursuant to the
provisions of paragraph (a) or (b) of this Section 5 of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provisions such indemnified party will, if a claim thereof is to be
made against the indemnifying party pursuant to the provisions of said paragraph
(a) or (b), promptly notify the indemnifying party of the commencement thereof;
but the omission to so notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than
hereunder. In case such action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party shall have the right to participate in, and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party,
provided, however, if the defendants in any action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or in addition to those available
to the indemnifying party, or if there is a conflict of interest which would
prevent counsel for the indemnifying party from also representing the
indemnified party, the indemnified party or parties have the right to select
separate counsel to participate in the defense of such action on behalf of such
indemnified party or parties. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party pursuant to the
provisions of said paragraph (a) or (b) for any legal or other expense
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation, unless (i) the indemnified
party shall have employed counsel in accordance with the provisions of the
preceding sentence, (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after the notice of the commencement of the action or (iii)
the indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party.
7. CONTRIBUTION.
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To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6; (ii) no Seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any Seller of Registrable Securities who was not
guilty of fraudulent misrepresentation; and (iii) contribution by any Seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such Seller from the sale of such Registrable Securities.
8. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall be assignable by the Holder to
any transferee of all or any portion of Registrable Securities if: (i) the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such registration rights
are being transferred or assigned ; (ii) at or before the time the Company
receives such written notice the transferee or assignee agrees in writing with
the Company to be bound by all of the provisions contained herein, including
providing the Company with a current address for all required notices; and (iii)
such transfer shall have been made in accordance with the applicable federal and
state securities laws.
9. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Holders who hold two-thirds (2/3) of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 8 shall be binding
upon each Holder and the Company.
10. MISCELLANEOUS.
(a) A person or entity is deemed to be a Holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Any notices, consents, waivers or other communications required
or permitted to be given under the terms of this Agreement must be in writing
and will be deemed to have been delivered (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by
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<PAGE>
facsimile (provided a confirmation of transmission is mechanically generated and
kept on file by the sending party); (iii) three (3) days after being sent by
U.S. certified mail, return receipt requested; or (iv) one (1) day after deposit
with a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
If to the Company:
Vacation Emporium Corporation
90 Madison Street, Suite 707
Denver, CO 80206
Telephone: 450/945-2232
Facsimile: 450/945-1938
Attention: Ian Rice
With a copy to:
Bryan Cave LLP
245 Park Avenue
New York, New York 10167
Telephone: (212) 692-1800
Facsimile: (212) 692-1900
Attention: Steven A. Saide
If to a Holder:
To such holder's address as it appears on
the Company's stock transfer records
With a copy to:
Gusrae, Kaplan & Bruno
120 Wall Street
New York, NY 10005
Tel. No. (212) 269-1400
Fax No. (212) 809-5449
Attention: Mark Astarita, Esq.
Each party shall provide five (5) days prior notice to the other party of any
change in address, phone number or facsimile number or the person to whose
attention notices are to be sent.
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
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<PAGE>
(d) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York without regard to the
principles of conflict of laws. Each party hereby irrevocably submits to the
non-exclusive jurisdiction of the state and federal courts sitting the City of
New York, borough of Manhattan, for the adjudication of any dispute hereunder or
in connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
(e) This Agreement and the Exchange Agreement constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
thereof. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein and therein. This Agreement and the
Exchange Agreement supersede all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof and thereof.
(f) Subject to the requirements of Section 8 this Agreement shall
inure to the benefit of and be binding upon the permitted successors and assigns
of each of the parties hereto.
(g) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect, the meaning hereof. Any reference
to "Section __" shall refer to the applicable section of this Agreement.
(h) This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.
(i) Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
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(j) The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent and no rules of
strict construction will be applied against any party.
IN WITNESS WHEREOF, Payne and the Company have caused this Registration
Rights Agreement to be duly executed as of the date first written above.
VACATION EMPORIUM CORPORATION
BY: /s/ David McCallen /s/ Charles Payne
--------------------- -----------------------
Charles Payne
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10.4
VOTING AGREEMENT
AGREEMENT, made this 23rd day of September, 1999, by and among
CHARLES PAYNE, an individual with an address at 130 William Street, Suite 401,
New York, NY 10038 ("Payne"), VACATION EMPORIUM CORPORATION, a Nevada
corporation with an address at 90 Madison Street, Suite 707, Denver, CO 80206
(the "Company"), SIGMA LIMITED, S.A., a Swiss corporation with an address at Rue
Fritz-Courvoisier 40, CH-2300 La Chaux-de-Fondes, Switzerland ("Sigma"), IAN
RICE, an individual with an address at Suite 305, Collier House, 163/169
Brompton Road, London SW3 1PY, England, and CORPORATE COMMUNICATIONS NETWORK,
INC., a Nevada corporation with an address at 7025 East First Avenue, Suite 5,
Scottsdale, Arizona 85251 ("CCN").
WHEREAS, Payne and the Company have entered into an Agreement and
Plan of Share Exchange, dated as of July 30, 1999 (the "Exchange Agreement"),
pursuant to which Payne, as the sole shareholder of Wall Street Strategies,
Inc., a Delaware corporation ("WSI"), has agreed to sell all of the issued and
capital stock of WSI to the Company in exchange for 9,455,898 shares of the
Company's common stock, par value $.001 per share (the "Common Stock"), as a
result of which Payne will become the controlling shareholder of the Company;
and
WHEREAS, as a condition of closing under the Exchange Agreement, the
Company is obligated to have current assets that exceed its liabilities by no
less than $3,000,000 (the "Required Net Worth"); and
WHEREAS, Sigma has procured investors in the Company so as to
satisfy the Required Net Worth subject to the parties hereto entering into this
Agreement simultaneous with the closing of the exchange under the Exchange
Agreement (the "Exchange"); and
WHEREAS, CCN is a shareholder of the Company and desires the
Exchange to be consummated,
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
1. So long as this Agreement shall remain in effect, Payne agrees to
vote all shares of capital stock of the Company now or hereafter owned or
controlled by him, and the Company agrees to exercise its best efforts, as
follows:
(a) To cause the total number of directors that shall constitute the
entire Board of Directors of the Company to be five.
(b) To cause the election of Rice, as the designee of Sigma or, if
Rice is unable to serve, such other person designated by Sigma who shall be
reasonably acceptable to Payne, as the executive Chairman of the Board of
Directors of the Company and for one other person designated by Sigma who shall
be reasonably acceptable to Payne to be elected a director of the Company. Payne
acknowledges that Steven Gross, who Sigma has advised it intends to nominate as
a director of the Company, is an acceptable designee of Sigma.
<PAGE>
2. So long as this Agreement shall remain in effect, Sigma and Rice
agree to vote all shares of capital stock of the Company now or hereafter owned
or controlled by either of them, and the Company agrees to exercise its best
efforts, to cause the election of Payne and such other persons designated by
Payne who shall be reasonably acceptable to Sigma and who together with Payne
shall constitute a majority of the Company's Board of Directors, to be elected
as directors of the Company. Sigma acknowledges that Gerald Turner and David
McCallen, who Payne has advised it intends to nominate as directors of the
Company, are acceptable designees of Payne.
3. So long as this Agreement shall remain in effect, CCN agrees to
vote all shares of capital stock of the Company now or hereafter owned or
controlled by CCN up to a maximum of 250,000 shares to cause the election of
Payne and such other persons designated by Payne who shall be reasonably
acceptable to Sigma and who together with Payne shall constitute a majority of
the Company's Board of directors, to be elected as directors of the Company.
4. At the first meeting following the execution of this Agreement of
the Board of Directors of the Company, WSS and any other subsidiary of the
Company now or hereafter existing, Payne and Rice agree to vote for, and Payne
and Sigma agree to exercise their best efforts to cause their respective
designees to each of such Board of Directors to vote for, the adoption of the
resolutions set forth in Exhibit A attached hereto and not to rescind, modify or
supersede such resolutions so long as this Agreement shall remain in effect.
5. The Company agrees to cause the Board of Directors of WSS and
each of the Company's other subsidiaries, now or hereafter in existence, to be
comprised as follows: the majority of the members thereof shall be designated by
Payne and the minority thereof shall be designated by Sigma.
6. Each of Payne and Sigma agrees to take, and to cause their
respective designees to the Company's Board of Directors to take, all such
action as may be necessary or appropriate to carry out the purpose and intent of
this Agreement, including, without limitation, amendment of the by-laws of the
Company, WSS and any other subsidiary of the Company, now or hereafter in
existence..
7. This Agreement shall remain in effect for a period of two years
commencing on the date hereof.
8. The parties hereto acknowledge that the failure of any of them to
perform his or its obligations hereunder, or the taking of any action by any of
them which is contrary to, or which will cause any action to be taken by the
Company which is contrary to, the terms and provisions of this Agreement, shall
result in irreparable injury and damage to the other parties hereto, which
injury and damage cannot be adequately compensated for by any damages in an
action at law. It is therefore agreed that, in addition to any other rights and
remedies that any of the parties hereto may have, the obligations of each party
hereto to the other parties hereto shall be enforceable by specific performance
and by such other forms of equitable relief as may be deemed appropriate under
the circumstances, including an injunction restraining a breach or threatened
breach of this Agreement, in any case without the necessity of proving actual
damages or that damages would be inadequate or the posting of a bond. No party
hereto will take any action, directly
<PAGE>
or indirectly, in opposition to the moving party seeking such relief on the
grounds that any other remedy or relief is available at law or in equity. If any
party shall institute an action to enforce his or its rights against any other
party hereto, the prevailing party in such action shall be entitled to such
reasonable attorney's fees and expenses as the court may award.
9. This Agreement (including the exhibit hereto) contain the entire
agreement among the parties with respect to the subject matter, and supersede
all prior agreements, written or oral, with respect thereto.
10. This Agreement may be amended, superseded, canceled, renewed or
extended, and the terms hereof may be waived, only by a written instrument
signed by the parties or, in the case of a waiver, by the parties waiving
compliance. No delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any such right, power or privilege, nor any single or
partial exercise of any such right, power or privilege hereunder preclude any
other or further exercise of any right, power or privilege hereunder. The rights
and remedies herein provided are cumulative and are not exclusive of any rights
or remedies which the parties hereto may otherwise have at law or in equity.
11. This Agreement be binding upon and inure to the benefit of the
parties and their respective heirs, personal representatives and successors. All
rights and authority granted herein by each party shall survive the death or
incapacity of any party hereto. Nothing contained herein is intended or shall be
construed as creating third party beneficiaries to this Agreement. This
Agreement is not assignable except by operation of law.
12. This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but such counterparts shall together constitute one and the same instrument.
Each counterpart may consist of a number of copies hereof each signed by less
than all, but together signed by all of the parties hereto.
13. This Agreement shall be governed and interpreted in accordance
with the laws of the state of New York, without regard to the conflict of laws
principles thereof or the actual domiciles of the parties hereto.
14. All notices, requests, demands and other communications that are
required to be or that may be given under this Agreement shall be in writing and
shall be deemed to have been duly given when delivered in person, or upon
receipt after dispatch by Express Mail, Federal Express, other overnight
delivery service or by certified or registered first class mail, return receipt
requested, in any such case delivery charges prepaid, to the party to whom the
same is so given or made, at the address set forth on the first page of this
Agreement or such other address as shall be provided by notice in accordance
with this Section 13.
15. Each party hereby consents to the personal jurisdiction of the
United States Court for the Southern District of New York and of any of the
courts of the State of New York in New York County, in any action, suit or
proceeding arising under this Agreement. Each party agrees to bring any such
action, suit or proceeding only in such courts. Each party further
<PAGE>
agrees that service of process or notice in any such action, suit or proceeding
shall be effective if given in the manner set forth in Section 14 hereof.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date first above written.
/s/ Charles Payne /s/ Ian Rice
- -------------------------------- -------------------------------
Charles Payne Ian Rice
VACATION EMPORIUM CORPORATION SIGMA LIMITED, S.A.
By:/s/ David McCallen By:/s/ Ian Rice
- -------------------------------- -------------------------------
Authorized Agent
CORPORATE COMMUNICATIONS NETWORK, INC.
By:/s/ Steven Kerr
- --------------------------------
<PAGE>
Exhibit A
RESOLVED, that all funds of the Corporation shall be deposited into
an account or accounts at such bank or banks as the appropriate officers of the
Corporation shall deem desirable; and be it further
RESOLVED, that all checks drawn on the bank account or accounts of
the Corporation for less than $20,000 shall require the signature of any one
officer of the Corporation and for $20,000 or more shall require the signature
of two persons, one of whom shall have been designated by Charles Payne and the
other by Sigma Limited, S.A.
<PAGE>
10.5
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of the 23rd day of September 1999, among WALL STREET
STRATEGIES, INC., a Delaware corporation, having a place of business at 130
William Street, New York, New York 10038 (hereinafter designated and referred to
as the "Company"), VACATION EMPORIUM CORPORATION, a Nevada corporation, having a
place of business at 90 Madison Street, Denver, Colorado 80806 (hereinafter
designated and referred to as the "Parent"), and CHARLES PAYNE, an individual
residing at 237 Elm Avenue, Teaneck, New Jersey 07666 (hereinafter designated
and referred to as the "Executive").
WHEREAS, Executive and Parent have entered into an Agreement and Plan of
Share Exchange dated as of July 30, 1999 (the "Purchase Agreement") pursuant to
which Executive proposes to sell to Parent all of the issued and outstanding
shares of common stock of the Company in exchange for shares of the common stock
of Parent;
WHEREAS, Executive is currently, and has, since prior to the date of the
Purchase Agreement, been serving as the President and Chief Executive Officer of
the Company;
WHEREAS, it is a condition to the closing of the Purchase Agreement that
Executive, the Company and the Parent enter into this Agreement providing for
the Executive to be employed by the Company and the Parent as President and
Chief Executive Officer of each on the terms and subject to the provisions set
forth herein.
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, the parties hereto agree as follows:
1. Term. The term of this Agreement shall be for a period of three
(3) years commencing on the date hereof, subject to earlier termination as
provided herein or unless extended by consent of all parties.
<PAGE>
2. Employment.
(A) Subject to the terms and conditions and for the compensation
hereinafter set forth, the Company and the Parent hereby agree to employ the
Executive for and during the term of this Agreement. Executive is hereby
employed by the Parent and the Company as President and Chief Executive Officer
of each. The Executive's powers and duties shall be those of an executive nature
which are appropriate for a President and Chief Executive Officer, and shall be
determined only by the Board of Directors from time to time in accordance with
the Parent and the Company's respective By-Laws but in any event Executive shall
have final editorial approval of all literature published, printed, created,
distributed or used by the Company for use with respect to its clients; and the
Executive does hereby accept such employment or other substantially similar or
greater employment as may be mutually agreed upon by the parties hereto and
agrees to use his best efforts and to devote his full business time during the
term of this Agreement, to the performance of his duties upon the conditions
hereinafter set forth. Executive shall report to the Boards of Directors
(collectively hereinafter referred to as the "Boards") of the Parent and the
Company. Neither the Parent nor the Company shall require Executive to be
employed in any location other than the Metropolitan New York City area unless
he consents in writing to such location.
(B) During the term of this Agreement, Executive shall be furnished
with office space and facilities at least consistent with that previously
provided by the Company.
(C) During the term of this Agreement, the Parent shall be
responsible (i) to pay to Executive the compensation set forth in Section 3;
(ii) reimburse Executive for expenses as provided in Section 4; and (iii)
provide Executive with the benefits and vacation set forth in
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Section 5. In the event the Parent fails to perform any of its obligations under
Section 3, 4, 5, 9, or any other Section of this Agreement, the Company shall be
so obligated.
3. Compensation.
(A) Salary. During the term of this Agreement, the Parent agrees to
pay Executive, and Executive agrees to accept, an annual salary of not less than
Two Hundred Fifty Thousand Dollars ($250,000) per year, payable in accordance
with the Parent's policies, for all services rendered by Executive hereunder.
(B) Bonus. As additional compensation, the Executive will be
entitled to earn cash bonuses as set forth on Schedule I attached hereto.
(C) Increases. The annual salary is subject to periodic increases at
the discretion of the Board of Directors of the Parent, but shall be increased
by not less than ten percent (10%) per year, with such increases to take effect
no later than on each anniversary date of this Agreement. The bonus shall be
subject to increases at the discretion of the Board of Directors of the Parent.
4. Expenses. The Parent shall reimburse Executive for all reasonable
and actual business expenses incurred by him in connection with his service to
the Parent or the Company, upon submission by him of appropriate vouchers and
expense account reports. Such business expenses shall include, but be not
limited to, a monthly transportation allowance of not less than Eight Hundred
Dollars ($800).
5. Benefits.
(A) Insurance. In addition to the salary and bonus to be paid to
Executive hereunder, the Company shall continue to maintain family medical and
dental insurance, life and disability income insurance as now in effect.
Additionally, the Parent shall
3
<PAGE>
provide Executive with split dollar and/or whole life insurance in the aggregate
amount of One Million Dollars ($1,000,000) on the life of the Executive and for
which Executive shall designate the beneficiary(ies), long term disability
insurance providing monthly disability benefits to Executive of not less than
Twelve Thousand Five Hundred Dollars ($12,500) inclusive of any disability
income insurance now in effect provided by the Company. Executive and his
dependents shall be entitled to participate in such other benefits as are
hereafter extended to active executive employees of the Parent and the Company
and their dependents. The foregoing life and individual disability income
policies shall have the costs and other terms and conditions as identified in
Schedule II attached hereto.
(B) Vacation. The Executive shall be entitled to take up to six (6)
weeks of paid vacation annually at a time mutually convenient to the Parent, the
Company and the Executive.
6. Full Business Time. The Executive, during the term of this
Agreement, shall devote his full business time, attention and energy and render
his best efforts and skill to the business of the Parent and the Company.
7. Discoveries, etc.
(A) Ownership. The Parent and the Company shall be the owners,
without further compensation, of all rights of every kind in and with respect to
any reports, materials, inventions, processes, discoveries, improvements,
modifications, know-how or trade secrets hereafter made, prepared, invented,
discovered, acquired, suggested or reduced to practice (hereinafter designated
and referred to as "Property Rights") by Executive in connection with
Executive's performance of his duties pursuant to this Agreement or relating to
the business
4
<PAGE>
of the Parent and the Company, and the Parent and Company shall be entitled to
utilize and dispose of such in such manner as they may determine.
(B) Disclosure. The Executive agrees to and shall promptly disclose
to the Boards all Property Rights (whether or not patentable) made, discovered
or conceived of by him, alone or with others, at any time during his employment
with the Parent and the Company. Any such Property Rights will be the exclusive
property of the Parent and the Company, and Executive will execute any
assignments requested by the Parent and the Company of his right, title or
interest in any such Property Rights. In addition, the Executive will also
provide the Parent and the Company with any other instruments or documents
requested by the Parent and the Company, at the Parent's and the Company's
expense, as may be necessary or desirable in applying for and obtaining patents
with respect thereto in the United States and all foreign countries. The
Executive also agrees to cooperate with the Parent and the Company in the
prosecution or defense of any patent claims or litigation or proceedings
involving inventions, trade secrets, trademarks, service marks, secret
processes, discoveries or improvements, whether or not he is employed by the
Parent and the Company at the time; provided that, should Executive not be
employed by the Parent and the Company at such time, he will receive reasonable
compensation for his time in this regard at no less than his present salary rate
on a per diem basis, as well as reimbursement of all out-of-pocket expenses he
may incur in connection with the performance of such services. Executive's
obligation under this Section 7(B) shall continue for a period of six (6) months
following the termination of his employment. This Section 7 shall not be
applicable to any inventions or discoveries made by Executive outside of the
scope of his employment and which are unrelated to the business of the Parent
and the Company.
5
<PAGE>
8. Confidential Information and Non-Competition.
(A) Confidentiality. Executive recognizes and acknowledges that the
Parent and the Company, through the expenditure of considerable time and money,
will acquire, has developed and will continue to develop in the future,
information, skills, confidential information, know-how, formulae, technical
expertise and methods relating to or forming part of the Parent's or the
Company's services and products and conduct of their businesses, and that the
same are confidential and proprietary, and are "trade secrets" of the Parent and
the Company. Executive understands and agrees that such trade secrets give or
may give the Parent and the Company a significant competitive advantage.
Executive further recognizes that the success of the Parent and the Company
depends on keeping confidential both the trade secrets already developed or to
be acquired and any future developments of trade secrets. Executive understands
that in his capacity with the Parent and the Company he will be entrusted with
knowledge of such trade secrets and, in recognition of the importance thereof
and in consideration of his employment by the Parent and the Company hereunder,
agrees that he will not, without the consent of the Board of Directors of the
Parent, make any disclosure of trade secrets now or hereafter possessed by the
Parent or Company to any person, partnership, corporation or entity either
during or after the term hereunder, except to employees of the Parent or the
Company or their subsidiaries or affiliates, as may be necessary in the regular
course of business and except as may be required pursuant to any court order,
judgment or decision from any court of competent jurisdiction. The foregoing
shall not apply to information which, after it is disclosed to Executive by the
Parent or the Company is published or becomes part of the public domain through
no fault of Executive; which is known to Executive prior to disclosure thereof
to him by the Parent and the Company as evidenced by his written records; or,
after Executive is no longer employed by
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the Parent and the Company, which is thereafter disclosed to Executive in good
faith by a third party who was not under any obligation of confidence or secrecy
to the Parent or the Company with respect to such information at the time of
disclosure to him.
(B) Restrictive Covenants. Executive will not, directly or
indirectly for a period of one (1) year following the termination of this
Agreement, unless such termination shall be for "Reason" as hereinafter defined:
(i) persuade or attempt to persuade any person or entity which
is or was a customer, client or supplier of the Company or the Parent during the
term of this Agreement or on the date on which Executive's employment with the
Company or the Parent is terminated to cease doing business with the Company or
the Parent, or to reduce the amount of business it does with the Company or the
Parent;
(ii) persuade or attempt to persuade, or hire or attempt to
hire, any employee of the Company or the Parent, or any individual who was an
employee of the Company or the Parent during the one (1) year period prior to
the termination of this Agreement, to leave the Company's or Parent's employ, or
to become employed by any person or entity other than the Company or the Parent;
or
(iii) engage in or market any business competitive with the
business of the Company or the Parent, enter the employ of or render any
services to, any person engaged in such activities, or become interested in any
such person in any capacity, including without limitation, as an individual,
partner, shareholder, investor, officer, director, principal, agent, trustee or
consultant; provided, however, he may own, directly or indirectly, solely as an
investment, securities of any person traded on any national securities exchange
if he is not a
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controlling person of, or a member of a group which controls such person and
does not, directly or indirectly, own 5% or more of any class of securities of
such person.
(C) Except as provided in the next sentence, the provisions of
Sections 8(A), 8(B)(i), 8(B)(ii), and 8(B)(iii) shall continue in full force and
effect notwithstanding any termination of Executive's employment under this
Agreement for a period of one (1) year following said termination of employment.
In the event this Agreement is terminated by Executive for "Reason," Sections
8(A) and 8(B) shall be cancelled and terminated.
(D) Remedies. If Executive commits a material breach or threatens to
commit a material breach of any of the provisions of either Section 8(A) or
8(B), the Parent shall have the right to seek enforcement hereof by any court
having equity jurisdiction. In addition, and without limiting the Parent's right
to seek such enforcement, the Parent shall also have the right to seek such
actual damages as it may prove, occasioned by such material breach.
9. Termination.
(A) Death. In the event of the Executive's death during the term of
his employment, Executive's designated beneficiary, or in the absence of such
beneficiary designation, his estate shall be entitled to payment of Executive's
accrued but unpaid salary, and bonuses and unreimbursed expenses through the
date of termination. In addition, Executive's beneficiary and/or dependents
shall be entitled, for a one (1) year period, to continuation, at the Parent's
or the Company's expense, of such benefits as are then being provided to them
under Section 5(A) hereof, and any additional benefits as may be provided to
dependents of the Parent's or the Company's executive officers in accordance
with the terms of the Parent's or the Company's policies and practices. In
addition, any options granted to the Executive which have not, by the terms of
the options, vested shall be deemed to have vested as of the date of his death
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and shall thereafter be exercisable by the Executive's beneficiary or estate for
the maximum period of time allowed for exercise thereof under the terms of the
Parent's stock option plan(s).
(B) Disability.
(i) In the event the Executive, by reason or physical or
mental incapacity, shall be disabled for a period of at least three (3)
consecutive months or four (4) months in the aggregate in any twelve (12) month
period, the Parent shall have the option at any time thereafter, to terminate
Executive's employment hereunder for disability. Such termination will be
effective five (5) business days after the Board of Directors of the Parent
gives written notice of such termination to the Executive, unless Executive
shall have returned to the performance of his duties prior to the effective date
of the notice. In the event of Executive's disability during the term of this
Agreement, Executive shall be entitled to payment of Executive's salary for a
period of ninety (90) days, and accrued but unpaid bonuses and unreimbursed
expenses through the date of termination. All other obligations of the Parent
hereunder shall cease upon the effectiveness of such termination, provided that
such termination shall not affect or impair any rights Executive may have under
any policy or disability insurance or benefits then maintained on his behalf by
the Parent and the Company. In addition, for a period of one (1) year following
termination of Executive's employment for disability, Executive and his
dependents, as the case may be, shall continue to receive the benefits set forth
under Section 5(A) hereof, as well as such benefits as are extended to the
Parent's and the Company's active executive employees and their dependents
during such period. Any options granted to the Executive which have not, by the
terms of the options, vested shall be deemed to have vested at the termination
and shall thereafter be exercisable by the Executive, his beneficiary,
conservator
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or estate, as applicable, for the maximum period of time allowed for exercise
thereof under the terms of such options.
(ii) "Incapacity" as used herein shall mean the inability of
the Executive due to physical or mental illness, injury or disease to perform
his normal duties as President and Chief Executive Officer. Executive's salary
as provided for hereunder shall continue to be paid during any period of
incapacity prior to and including the date on which Executive's employment is
terminated for disability.
(C) By the Parent for Cause.
(i) The Parent shall have the right, before the expiration of
the term of this Agreement, to terminate this Agreement and to discharge
Executive for cause (hereinafter "Cause"), and all compensation to Executive
shall cease to accrue upon discharge of the Executive for Cause. For the
purposes of this Agreement, the term "Cause" shall mean any of the following
occurring after the date stated in the initial paragraph of this Agreement:
(1) a knowing violation of law relating to the
Company's business;
(2) a knowing violation of a written material
Company policy;
(3) except for the orders entered by the court in
the matter of the Securities and Exchange Commission vs. Members Service
Corporation, et al., Case No. 1:97CV 01146 (TFH) in the United States District
Court for the District of Columbia, the issuance of any order, judgment or
decree permanently or preliminarily enjoining or otherwise limiting Executive or
his activities, as the case may be, (a) from engaging in the business of an
investment adviser, underwriter, broker or dealer in securities, (b) from
engaging in any type of
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business practice, activity in connection with the purchase or sale of any
security or commodity, or (c) in connection with any violation of federal or
state securities or commodities laws;
(4) Executive personally receiving a material
benefit in money, property or services from the Company or from another person
dealing with the Company in violation of (a) law, or (b) a written material
Company policy;
(5) an act of fraud, conversion, misappropriation
or embezzlement relating to or concerning the Company or the Parent;
(6) Executive's conviction of or entering a guilty
plea or a plea of no-contest with respect to a felony or the equivalent
thereof;
(7) Executive's breach of Section 8 hereof;
(8) any other breach of this Agreement in any
material respect, which is not cured by the Executive within thirty (30) days
after receipt of written notice from the Parent or the Company, as the case may
be.
(ii) If the Parent elects to terminate Executive's employment
for Cause under any of the provisions contained in Sections 9(C)(i)(1) through
(7) above, such termination shall be effective five (5) business days after the
Parent gives written notice of such termination to the Executive. In the event
the Parent intends to discharge Executive pursuant to Section 9(C)(i)(8) above,
the Board of Directors of Parent shall provide Executive with notice of its
intention to effect a termination for Cause. Any such notice shall be in writing
and shall specify the grounds for the existence of Cause, and provide Executive
with an opportunity of not less than thirty (30) days following his receipt of
such notice to cure same. In the event of a termination of the Executive's
employment for Cause in accordance with the provisions of Section 9(C)(i), the
Parent and the Company shall have no further obligation to the Executive,
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except for the payment of accrued but unpaid salary through the date of such
termination, and any other benefits to which he or his dependents may be
entitled by law.
(D) By Executive for Reason.
(i) The Executive shall have the right to terminate his
employment at any time for "good reason" (herein designated and referred to as
"Reason"). The term Reason shall mean (1) provided the Executive votes as a
director and shareholder of the Parent to maintain his positions with the
Company and Parent, the failure to elect or appoint, or re-elect or re-appoint,
Executive to, or removal of Executive from, his positions as President and/or
Chief Executive Officer or superior positions with the Parent or the Company
except in connection with the proper termination of Executive's employment by
reason of Cause, Death or Disability; (2) a reduction in Executive's overall
compensation or an adverse change in the nature or scope of the authorities,
powers, functions or duties normally attached to the Executive's positions with
the Parent or the Company; (3) the Parent or the Company's failure or refusal to
perform any obligations required to be performed in accordance with this
Agreement; and (4) a "Change of Control" of the Parent as defined herein. An
election by Executive to terminate his employment under the provisions of this
Section 9(D) shall not be deemed a voluntary termination of employment of the
Executive for the purpose of interrupting the provisions of any of the Parent's
or the Company's employee benefit plans, programs or policies.
(ii) If the Executive elects to terminate his employment under
this Agreement for Reason under any of the provisions contained in Sections
9(D)(i)(1), 9(D)(i)(2) or 9(D)(i)(4) above, such termination shall be effective
five (5) business days after the Executive gives written notice of such
termination to the Parent. In the event Executive intends to terminate his
employment pursuant to Section 9(D)(i)(3) above, the Executive shall provide
Parent with his
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intention to effect a termination for Reason. Any such notice shall be in
writing and specify the grounds for the existence of Reason, and provide the
Parent with an opportunity of not less than thirty (30) days following its
receipt of such notice to cure same. In the event of a termination of the
Executive's employment for Reason in accordance with the provisions of Section
9(D)(i), the Executive shall have no further obligation to either the Company or
the Parent.
(E) Severance. In the event Executive's employment hereunder shall
be terminated by the Parent or the Company for other than Cause, Death or
Disability, or by the Executive for Reason: (i) the Executive shall thereupon
receive as severance pay in a lump sum the amount of salary and bonuses which
the Executive would have received for the remaining term of this Agreement had
there been no termination, provided however, that in no event shall such lump
sum payment be less than one (1) year salary and bonus; and (ii) the Executive's
(and his dependents') participation in any and all life, disability, medical and
dental insurance plans shall be continued, or equivalent benefits provided to
him or them by the Parent or the Company, at no cost to him or his dependents,
for a period of one (1) year from the termination; and (iii) any options granted
to the Executive which have not, by the terms of the options, vested shall be
deemed to have vested at the termination, and shall thereafter be exercisable
for the maximum period of time allowed for exercise thereof under the terms of
such options.
(F) Resignation. In the event Executive resigns without Reason prior
to the expiration hereof, he shall receive any accrued but unpaid salary through
such resignation date, and such benefits to which he is entitled by law.
(G) Extension of Benefits. Any extension of benefits following the
termination of employment provided for herein shall be deemed to be in addition
to, and not
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in lieu of, any period for benefits continuation provided for by law at the
Parent's, Company's, Executive's or his dependents' expense.
(H) Change In Control. For purposes hereof, a Change in Control
shall mean the Executive no longer being able to manage the affairs and the
operations of the Company on a day-to-day basis, excluding any such inability
arising from the act, disability or conduct of Executive.
10. Indemnification. The Parent and the Company hereby indemnify and
hold Executive harmless to the maximum extent permitted under applicable law.
11. Waiver. No delay or omission to exercise any right, power or
remedy accruing to any party hereto shall impair any such right, power or remedy
or shall be construed to be a waiver of or an acquiescence to any breach hereof.
No waiver of any breach hereof shall be deemed to be a waiver of any other
breach hereof theretofore or thereafter occurring. Any waiver of any provision
hereof shall be effective only to the extent specifically set forth in an
applicable writing. All remedies afforded to any party under this Agreement, by
law or otherwise, shall be cumulative and not alternative and shall not preclude
assertion by such party of any other rights or the seeking of any other rights
or remedies against any other party.
12. Governing Law. The validity of this Agreement or of any of the
provisions hereof shall be determined under and according to the laws of the
State of New York, and this Agreement and its provisions shall be construed
according to the laws of the State of New York, without regard to the principles
of conflicts of law.
13. Notice. All notices, demands or other communications required or
permitted to be given in connection with this Agreement shall be given in
writing, shall be transmitted to the appropriate party by hand delivery, by
certified mail, return receipt requested,
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postage prepaid or by overnight courier and shall be addressed to a party at
such party's address shown on the first page hereof. A party may designate by
written notice given to the other parties a new address to which any notice,
demand or other communication hereunder shall thereafter be given. Each notice,
demand or other communication transmitted in the manner described in this
Section 13 shall be deemed to have been given and received for all purposes at
the time it shall have been (i) delivered to the addressee as indicated by the
return receipt (if transmitted by mail), the affidavit of the messenger (if
transmitted by hand delivery or overnight courier) or (ii) presented for
delivery during normal business hours, if such delivery shall not have been
accepted for any reason.
14. Assignment. This Agreement shall be binding upon the Parent and
the Company and their respective successors (including any transferee of the
good will of the Company or the Parent) or assigns.
15. Miscellaneous. This Agreement contains the entire understanding
between the parties hereto and supersedes all other oral and written agreements
or understandings between them. No modification or addition hereto or waiver or
cancellation of any provision shall be valid except by a writing signed by the
party to be charged therewith.
16. Obligations of a Continuing Nature. It is expressly understood
and agreed that the covenants, agreements and restrictions undertaken by or
imposed on the Executive, the Parent and the Company hereunder, which are stated
to exist or continue after termination of Executive's employment with the Parent
or the Company, shall exist and continue irrespective of the method or
circumstances of such termination for the respective periods of time set forth
herein.
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17. Severability. The parties agree that if any covenant, agreement
or restriction contained herein is held to be invalid by any court of competent
jurisdiction, such holding will not invalidate any of the other covenants,
agreements and/or restrictions herein contained and such invalid provisions
shall be severable so that the invalidity of any such provision shall not
invalidate any others.
18. Venue: Jurisdiction. The Parent, the Company and the Executive
hereby agree that any action, proceeding or claim against any of them arising
out of or relating in any way to this Agreement shall be brought and enforced in
any of the courts of the State of New York in New York County, New York, or the
United States District Court for the Southern District of New York, and
irrevocably submit to such jurisdiction. The Parent, the Company and the
Executive hereby waive any objection to such jurisdiction and that such courts
represent an inconvenient forum. The Parent, the Company and the Executive
hereby waive the right to a trial by jury in any action, proceeding or claim
against any of them arising out of or relating in any way to this Agreement. Any
process or summons to be served upon the Parent, the Company or the Executive
may be served by transmitting a copy thereof by registered or certified mail,
return receipt requested, postage prepaid, addressed to their respective
addresses set forth in the initial paragraph of this Agreement or such other
address as a party may so notify the other parties hereto in the manner provided
by Section 13 hereof. Such mailing shall be deemed personal service and shall be
legal and binding upon the Parent, the Company and the Executive in any action,
proceeding or claim.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.
WALL STREET STRATEGIES, INC.
By: /s/ Charles Payne President
-----------------------------------------
VACATION EMPORIUM CORPORATION
By: /s/ David McCallen
-----------------------------------------
/s/ Charles Payne
-------------------------------------------
Charles Payne
Executive
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SCHEDULE I
TO THE EMPLOYMENT AGREEMENT
AMONG WALL STREET STRATEGIES, INC.,
VACATION EMPORIUM CORPORATION AND CHARLES PAYNE
BONUS SCHEDULE
"WSS" shall mean Wall Street Strategies, Inc.
In the event WSS
derives revenues
receive During the Mr. Payne
in excess of below Fiscal shall receive
following Year Ended the following
- --------------------------------------------------------------------------------
1. $2,000,000 December 31, 1999 $125,000
(an additional)
2. $3,000,000 December 31, 1999 $125,000
3. $3,000,000 December 31, 2000 $125,000
(an additional)
4. $4,000,000 December 31, 2000 $125,000
5. $4,000,000 December 31, 2001 $125,000
(an additional)
6. $5,000,000 December 31, 2001 $125,000
<PAGE>
10.6
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), dated July 30, 1999, is made
and entered by and among Vacation Emporium Corporation, a Nevada corporation,
(the "Company"), and David McCallen (the "Executive").
RECITALS
A. The Company has entered into a non-binding letter of intent with
Charles V. Payne ("Payne") describing the intent of the parties that the Company
acquire from Payne all of the issued and outstanding shares of capital stock of
Wall Street Strategies, Inc., a Delaware Corporation ("WSS"; such acquisition
(or proposed acquisition) referred to herein as the "WSS Acquisition").
B. It is the desire of the Company to be assured of the management
services of the Executive by employing Executive in the capacity and on the
terms as set forth below.
C. The Executive desires to commit himself to serve the Company on the
terms herein provided.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements set forth below, the parties hereto agree as follows:
1. Employment. The Company shall employ the Executive, and the
Executive shall enter the employ of the Company, for the period commencing on
the date of closing of the WSS Acquisition (the "Commencement Date") and ending
on the second anniversary of the Commencement Date, unless sooner terminated in
accordance with the provisions of this Agreement or otherwise (the "Term"). Upon
expiration of the Term, except as expressly set forth herein, this Agreement and
all of its provisions shall terminate and shall cease to have any force or
effect.
2. Position and Duties.
(a) During the Term, the Executive agrees to serve as
Executive Vice President of WSS and shall have such duties, functions,
responsibilities and authority as may be determined by the board of directors of
the Company.
(b) During the Term, the Executive shall devote all of his
working time, attention, skill and efforts to the business and affairs of WSS
shall use his best efforts to promote the success of the business of the Company
and its subsidiaries and affiliates (collectively, the "Group") and shall not
enter the employ of or serve as a consultant to, or in any way perform any
services (with or without compensation) for, any other person, firm,
corporation, partnership, limited liability company, group, association or
organization or other entity where such conduct would be inconsistent with, in
competition with, or prevent, hinder or restrict the Executive from carrying
out, his duties to the Company.
<PAGE>
3. Compensation and Related Matters.
(a) Annual Base Salary. During the Term, the Executive shall
receive a salary of $125,000 per annum (the "Annual Base Salary"). The Annual
Base Salary will be payable in accordance with the Company's policies in effect
from time to time, but, in no event, will such Annual Base Salary be payable
less frequently than in monthly installments.
(b) Expenses. The Company shall reimburse the Executive for
reasonable business expenses incurred by the Executive in the performance of his
duties under this Agreement upon evidence of payment by Executive of such
expenses and otherwise in accordance with Company policies then in effect, as
such policies may change from time to time.
(c) Benefits. During the Term, the Executive shall be entitled
to participate in or receive benefits under any employee health, life and
disability plan generally made available by the Company to its salaried
employees and to the extent applicable such other benefits made available to its
executive employees, as they may change from time to time, subject to and on a
basis consistent with the terms, conditions and overall administration of such
plan or arrangement.
(d) Incentive Bonus. Commencing with his performance in the
current fiscal year, the Executive shall be entitled to earn an annual incentive
bonus of up to 40% of the Annual Base Salary, pro rated for a short fiscal year,
if applicable, based upon annual sales goals for such fiscal year as approved by
the board of directors of the Company.
(e) Stock Options. On the date hereof, the Company shall grant
to Executive options under the Company's 1996 Compensatory Stock Option Plan
(the "Plan") to acquire 351,282 shares of the Company's common stock (the
"Options"). Provided and on the express condition that on the six month
anniversary of the Commencement Date (the "Condition Date"), the website to be
created for WSS has by such date become capable of efficient and immediate
delivery of information to subscribers thereto (the "Condition"), one-sixth
(1/6) of the Options shall become vested on each of the three (3) month, six (6)
month, nine (9) month, twelve (12) month, fifteen (15) month and eighteen (18)
month anniversaries of the Condition Date (each a "Vesting Date"), in accordance
with and subject to the terms and provisions of the Plan, further provided that
on such Vesting Dates the Executive remains employed by the Company (or its
subsidiaries). Notwithstanding the foregoing, if the Condition has been
satisfied and thereafter Executive's employment hereunder is terminated by
reason of death or Disability or without Cause, the Options shall vest and
become exercisable in accordance with and subject to the terms and provisions of
the Plan.
(f) Office and Supplies. The Executive shall be provided an
office at WSS' principal office, office furniture, secretarial support and
office supplies provisions commensurate with his office.
(g) Vacation. The Executive shall be entitled to twenty
business days of annual vacation to be used each year (and not carried over) at
times mutually convenient to the Company and Executive.
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(h) Relocation Allowance. The Company will reimburse Executive
for actual relocation expenses up to a maximum of $10,000, as reasonably
substantiated by Executive. Reimbursable relocation expenses shall include,
without limitation, charges by moving company, rental security deposit and
rental agent commissions, as applicable.
(i) Deductions and Withholdings All amounts payable or which
become payable hereunder shall be subject to all deductions and withholding
required by law.
4. Termination. This Agreement may be terminated under the following
circumstances:
(a) Death. The Executive's employment hereunder shall
terminate upon his death. In the case of the Executive's death, the Company
shall pay to the Executive's beneficiaries or estate, as appropriate, promptly
after his death, any accrued but unpaid Annual Base Salary, incentive bonus
(provided such incentive bonus and the sales goals on which such bonus are based
shall be pro rated for the portion of the fiscal year during which the Executive
was employed and, provided further, no such bonus shall be payable in respect of
a fiscal year in which Executive has completed less than six (6) months of
service ) and all expenses for which he is entitled to be reimbursed pursuant to
Section 3 through the date of his termination. The Executive and his
beneficiaries and estate, as appropriate, shall be entitled to no other
compensation under this Agreement following, or as a result of, a termination
under these circumstances.
(b) Disability.
(i) If a Disability (as defined below) of the Executive
occurs during the Term, the Company may give the Executive written notice of its
intention to terminate his employment. In such event, the Executive's employment
with the Company shall terminate on the effective date specified in such notice.
In the case of a termination as a result of a Disability, the Company shall pay
to the Executive promptly after his termination any accrued but unpaid Annual
Base Salary, incentive bonus (provided such incentive bonus and the sales goals
on which such bonus are based shall be pro rated for the portion of the fiscal
year during which the Executive was employed and, provided further, no such
bonus shall be payable in respect of a fiscal year in which Executive has
completed less than six (6) months of service ), and all expenses for which he
is entitled to be reimbursed pursuant to Section 3 through the date of his
termination. The Executive and his beneficiaries and estate, as appropriate,
shall be entitled to no other compensation under this Agreement following, or as
a result of, a termination under these circumstances.
(ii) For the purpose of this subsection 4(b),
"Disability" shall mean the Executive's inability to perform his normal duties
as Executive Vice President of WSS, with or without reasonable accommodation,
due to a mental or physical impairment, for a period of at least three (3)
consecutive months or four (4) months in the aggregate in any twelve (12) month
period. The Executive agrees to submit to a reasonable number of examinations by
a medical doctor selected by the Company and reasonably acceptable to the
Executive (or his legal
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<PAGE>
representative) making the determination of disability under this Section
4(b)(ii), and the Executive hereby authorizes the disclosure and release to the
Company of such determination and all supporting medical records.
(c) Termination by the Company for Cause.
(i) The Company may terminate the Executive's
employment hereunder for Cause (as defined below) at any time upon written
notice to the Executive. In such event, the Executive's employment shall
terminate on the effective date specified in such notice. In the case of the
Executive's termination for Cause, the Company shall promptly pay to the
Executive any accrued but unpaid Annual Base Salary and all expenses for which
he is entitled to be reimbursed pursuant to Section 3 through the date of his
termination. The Executive and his beneficiaries shall be entitled to no other
compensation under this Agreement following, or as a result of, a termination
under these circumstances.
(ii) For purposes of this Agreement, the Company
shall have "Cause" to terminate Executive's employment hereunder in the event of
(A) the Executive personally receiving a material benefit in money, property or
services from the Group or from another person dealing with the Group in
violation of applicable law or material Company policy previously made known to
the Executive, (B) an act of fraud, conversion, misappropriation or embezzlement
by the Executive or his conviction of or entering a guilty plea or plea of no
contest with respect to, a felony, the equivalent thereof, or any other crime
with respect to which imprisonment is a possible punishment, (C) any other
breach by the Executive of this Agreement in any material respect, which is not
cured by the Executive within thirty days after receipt of written notice from
the Company, (D) a knowing violation by Executive of a law relating to the
Group's business, (E) a knowing violation by Executive of a written material
Company policy or (F) issuance of any order, judgment or decree permanently or
preliminarily enjoining or otherwise limiting Executive (i) from engaging in the
business of an investment adviser, underwriter, broker or dealer in securities
or (ii) engaging in any type of business activity in connection with the
purchase or sale of any security or commodity in connection with any violation
of federal or state securities or commodities laws by Executive.
(d) Termination by the Company Without Cause. The Company may
terminate the Executive's employment hereunder without Cause upon written notice
to the Executive. In such event, the Executive's employment shall terminate on
the effective date specified in such notice. In the event the Executive's
employment hereunder is terminated by the Company without Cause, the Company
shall pay to the Executive any accrued but unpaid Annual Base Salary and
expenses to which he is entitled pursuant to Section 3 through the date of his
termination. In addition, the Executive shall receive continuation of his Annual
Base Salary, benefits and incentive bonus as specified in paragraph 3 above,
through the balance of the Term. The Executive and his beneficiaries shall be
entitled to no other compensation under this Agreement following, or as a result
of, a termination under these circumstances.
(e) Mutual Agreement. The Executive's employment may be
terminated by written mutual agreement of the Executive and the Company at any
time.
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5. Confidential and Proprietary Information.
(a) The parties agree and acknowledge that during the course
of the Executive's employment, the Executive will be given and will have access
to and be exposed to "Confidential Information" (as defined below) in written,
oral, electronic and other form regarding the Company and its business units,
divisions and subsidiaries and business, equipment, products and employees. For
purposes of this Agreement, "Confidential Information" means any information
relating to the business or affairs of the Group, including but not limited to
information relating to financial statements, business plans, forecasts,
purchasing plans, customer and subscriber identities, potential customers and
subscribers, employees, suppliers, partners, allies, equipment, programs,
strategies and information, analyses, profit margins or other proprietary
information used by the Company in connection with the conduct of its collective
businesses. The Executive agrees to use such information only for purposes of
carrying out his duties for the Company and not for any other purpose,
including, without limitation, not in any way or for any purpose detrimental to
the Group. Confidential Information hereunder does not include any information
which (i) is already in or subsequently enters the public domain, other than as
a result of any direct or indirect action or inaction by the Executive, (ii) is
already in the Executive's possession and was received by Executive from a
source other than the Company provided that such information is not known to the
Executive to be subject to another confidentiality agreement or other obligation
of secrecy or confidentiality (whether pursuant to contract, legal or fiduciary
obligation or duty or otherwise) to the Company or any other person or entity,
or (iii) becomes available to the Executive on a nonconfidential basis from a
source other than the Company or other members of the Group, provided that such
source is not known by the Executive to be subject to a confidentiality (whether
pursuant to a contract, legal or fiduciary obligation or duty or otherwise) to
the Company or any other person or entity.
(b) In recognition of the Company's need to protect its
legitimate business interests and in consideration of the rights granted to
Executive in this Agreement, Executive hereby agrees that with regard to any
Confidential Information, at all times during the term of Executive's employment
with the Company (whether pursuant to this Agreement, on an "at will" basis or
otherwise) and for a period of three (3) years thereafter Executive shall regard
and treat all such information as strictly confidential and wholly owned by the
Company and shall not, for any reason or in any fashion, either directly or
indirectly, use or reproduce any such Confidential Information or disclose,
transfer, assign, disseminate or otherwise communicate any such Confidential
Information to any person or entity for any purpose other than in accordance
with this Agreement or pursuant to the instructions of a duly authorized
representative of the Company.
(c) All physical property and all notes, memoranda, files,
records, writings, documents and other materials of any and every nature,
written or electronic, which the Executive shall prepare, use or come into
contact with in the course of his employment with the Company and which relate
to or are useful in any manner to the business now or hereafter conducted by the
Group are and shall remain the sole and exclusive property of the Company. The
Executive shall not remove from the Company's (or other Group members') premises
any such physical property, the original or any reproduction of any such
materials or the information contained therein, except and solely for the
purposes of carrying out his duties to
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the Company and all such property, materials and information in his possession
or under his custody or control upon the termination of his employment with the
Company shall be immediately turned over to the Company.
(d) The provision of this Section 5 shall survive any
termination of this Agreement or the Executive's employment with the Company.
6. No Solicitation of Customers or Executives.
(a) Executive will not, directly or indirectly during the Term
of and for a period of one (1) year following the termination of this Agreement:
(i) persuade or attempt to persuade any person or entity
which is or was a customer, client or supplier of the Group during the term of
this Agreement or on the date of which Executive's employment is terminated to
cease doing business with the Group or to reduce the amount of business it does
with the Group;
(ii) persuade or attempt to persuade any employee of the
Company, or any individual who was an employee of any member of the Group during
the one (1) year period prior to the termination of this Employment Agreement,
to leave such Group's employ, or to become employed by any person or entity
other than a member of the Group; or
(iii) engage in or market any business competitive with
the business of the Group, enter the employ of or render any services to, any
person engaged in such activities, or become interested in any such person in
any capacity, including without limitation, as an individual, partner,
shareholder, investor, officer, director, principal, agent, trustee or
consultant; provided, however, he may own, directly or indirectly, solely as an
investment, securities of any person traded on any national securities exchange
if he is not a controlling person of, or a member of a group which control such
person and does not, directly or indirectly, own 5% or more of any class of
securities of such person.
(b) The provisions of this Section 6 shall survive any
termination of this Agreement or the Executive's employment with the Company.
7. Injunctive Relief. The Executive acknowledges that (a) the
provisions of Sections 5 and 6 are valid and enforceable and are reasonable and
necessary to protect the legitimate interests of the Company and its business
and (b) any violation of Sections 5 or 6 will result in irreparable injury to
the Company, the exact amount of which will be difficult to ascertain, and that
the remedies at law for any such violation would not be reasonable or adequate
compensation to the Company for such a violation. Accordingly, the Executive
agrees that if the Executive violates the provisions of Sections 5 or 6, in
addition to any other remedy which may be available at law or in equity, the
Company will be entitled to specific performance and injunctive relief, without
the necessity of posting a bond or other security, and without the necessity of
proving actual damages.
8. Assignment; Successors and Assigns. The Executive agrees that he
will not assign, sell, transfer, delegate or otherwise dispose of, whether
voluntarily or
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involuntarily, any rights or obligations under this Agreement, nor shall the
Executive's rights be subject to encumbrance of the claims of creditors. Any
purported assignment, transfer, delegation, disposition or encumbrance in
violation of this Section 8 shall be null and void and of no force or effect.
Nothing in this Agreement shall prevent the consolidation or merger of the
Company with or into any other entity, or the sale by the Company of all or any
portion of its respective properties or assets, or the assignment by the Company
of this Agreement and the performance of its obligations hereunder to WSS or any
other subsidiary of the Company, or any successor in interest or any other
affiliated entity, and the Executive hereby consents to any and all such
assignments. Subject to the foregoing, this Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective heirs, legal
representatives, successors, and permitted assigns, and shall not benefit any
person or entity other than those enumerated above.
9. Choice of Law; Venue. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York without
giving effect to any choice or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of New York. The Executive
irrevocably consents to the service of any and all process in any action or
proceeding arising out of or relating to this Agreement by the mailing of copies
of such process to such Executive at the address specified in Section 12. The
parties hereto irrevocably submit to the jurisdiction of the United States
District Court for the Southern District of New York or any state court located
in New York County, State of New York over any dispute arising out of or
relating to this Agreement or any of the transactions contemplated hereby. Each
party hereby irrevocably agrees that all claims in respect of such dispute or
proceeding may be heard and determined in such courts. The parties hereby
irrevocably waive, to the fullest extent permitted by applicable law, any
objection which they may now or hereafter have to the laying of venue of any
such dispute brought in such court or any defense of inconvenient forum in
connection therewith.
10. Severability of Provisions. In the event that any provision or
any portion thereof should ever be adjudicated by a court of competent
jurisdiction to exceed the limitations permitted by applicable law, as
determined by such court in such action, then such provisions will be deemed
reformed to the maximum limitations permitted by applicable law, the parties
hereby acknowledging their desire that in such event such action be taken. In
addition to the above, the provisions of this Agreement are severable, and the
invalidity or unenforceability of any provision or provisions of this Agreement
or portions thereof will not affect the validity or enforceability of any other
provision, or portion of this Agreement, which will remain in full force and
effect as if executed with the unenforceable or invalid provision or portion
thereof eliminated. Notwithstanding the foregoing, the parties hereto
affirmatively represent and acknowledge that this Agreement and each of its
provisions is enforceable in accordance with its terms, and expressly agree not
to challenge the enforceability of the Agreement or any of its provisions in the
future. The parties hereto are expressly relying upon this representation and
acknowledgment in determining to enter into this Agreement.
11. Warranty. As an inducement to the Company to enter into this
Agreement, the Executive represents and warrant to the Company that he is not a
party to any other agreement or obligation for personal services, and that there
exists no impediment or
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restraint, contractual or otherwise, on his power, right or ability to enter
into this Agreement and to perform his duties and obligations hereunder.
12. Notices. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given when received if personally delivered;
when transmitted if transmitted by telecopy, electronic or digital transmission
method upon receipt of telephonic or electronic confirmation; the day after it
is sent, if sent for next day delivery to a domestic address by recognized
overnight delivery service (e.g., Federal Express); and upon receipt, if sent by
certified or registered mail, return receipt requested. In each case notice
shall be sent to:
If to the Executive, addressed to:
David McCallen
304 North Saint Asaph Street
Alexandria, Virginia 22314
With a copy to:
Hazel & Thomas, P.C.
3110 Fairview Park Drive
Suite 1400
Falls Church, Virginia 22042
Attn: Benton Burroughs, Jr., Esq.
If to the Company addressed to:
90 Madison Street
Denver, Colorado 80806
With a copy to:
Bryan Cave LLP
245 Park Avenue
New York, New York 10163-0034
Attn: Steven A. Saide, Esq.
or to such other place and with such other copies as either party may designate
as to itself or himself by written notice to the others.
13. Cumulative Remedies. All rights and remedies of either party
hereto are cumulative of each other and of every other right or remedy such
party may otherwise have at law or in equity, and the exercise of one or more
rights or remedies shall not prejudice or impair the concurrent or subsequent
exercise of other right or remedies.
14. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same Agreement.
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15. Entire Agreement; Amendments and Waivers. This Agreement is
intended by the parties to be, and is, the complete, exclusive and final
expression of their agreement with respect to the subject matter hereof.
Moreover, this Agreement supersedes, and may not be contradicted by, or modified
or supplemented by, evidence of any prior or contemporaneous agreement as to the
subject matter hereof, and no extrinsic evidence whatsoever may be introduced in
any judicial, administrative or other legal proceeding to vary the terms of this
Agreement. This Agreement supersedes any and all severance agreements that
Executive has or had with the Company, WSS, Payne or any other member of the
Group, and any and all such severance agreement shall be null and void, and of
no force or effect. No amendment, supplement, modification or waiver of this
Agreement shall be binding unless executed in writing by each party to be bound
thereto. No waiver of any of the provisions of this Agreement, whether by
conduct or otherwise, in any one or more instances, shall be deemed or be
construed as a further, continuing or subsequent waiver of any such provision or
as a waiver of any other provision of this Agreement. No failure to exercise and
no delay in exercising any right, remedy or power hereunder shall preclude any
other or further exercise of any other right, remedy or power provided herein or
by law or in equity.
16. Representation of Counsel; Mutual Negotiation. Each party has
had the opportunity to be represented by counsel of its choice in negotiating
this Agreement. This Agreement shall therefore be deemed to have been negotiated
and prepared at the joint request, direction and construction of the parties, at
arm's-length, with the advice and participation of counsel, and shall be
interpreted in accordance with its terms without favor to any party.
17. Consultancy. Between the date hereof and the Commencement Date
(the "Consulting Period"), Executive agrees to provide the Company with general
business and marketing consulting services as reasonably requested by the
Company, including without limitation consulting services in connection with the
proposed acquisition of WSS, the integration of WSS's business into the Company,
the preparation and execution of a business plan and marketing strategy for the
Company and WSS, acquisitions, financing, strategic alliances and partnerships
and other matters relating to the business and proposed business of the Company
and WSS. Executive shall not be required to provide such consulting services in
any particular location and further shall not be required to provide the Company
with more than 20 hours of consulting services per month during the Consulting
Period. The Company shall reimburse the Executive for all reasonable business
expenses incurred by the Executive in the performance of such consulting duties
during the Consulting Period upon evidence of payment by the Executive of such
expenses and otherwise in accordance with Company policies then in effect, as
such policies may change from time to time.
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IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date and year first above written.
EMPLOYEE
/s/ David McCallen
------------------------------
David McCallen
VACATION EMPORIUM CORPORATION
By: /s/ Ian Rice
-------------------------
Name: Ian Rice
-----------------
Title: Chairman
-----------------
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10.7
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), dated July 30, 1999, is
made and entered by and among Vacation Emporium Corporation, a Nevada
corporation, (the "Company"), and Shawn D. Baldwin (the "Executive").
RECITALS
A. The Company has entered into a non-binding letter of intent with
Charles V. Payne ("Payne") describing the intent of the parties that the Company
acquire from Payne all of the issued and outstanding shares of capital stock of
Wall Street Strategies, Inc., a Delaware Corporation ("WSS"; such acquisition
(or prepared acquisition) referred to herein as the "WSS Acquisition").
B. It is the desire of the Company to be assured of the management
services of the Executive by employing Executive in the capacity and on the
terms as set forth below.
C. The Executive desires to commit himself to serve the Company on
the terms herein provided.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the
respective covenants and agreements set forth below, the parties hereto agree as
follows:
1. Employment. The Company shall employ the Executive, and the
Executive shall enter the employ of the Company, for the period commencing
October 1, 1999 (the "Commencement Date") and ending at the close of business on
September 30, 2002, unless sooner terminated in accordance with the provisions
of this Agreement or otherwise (the "Term"). Upon expiration of the Term, except
as expressly set forth herein, this Agreement and all of its provisions shall
terminate and shall cease to have any force or effect.
2. Position and Duties.
(a) During the Term, the Executive agrees to serve as Chief
Operating Officer of the Company and shall have such duties, functions,
responsibilities and authority as may be determined by the board of directors of
the Company.
(b) During the Term, the Executive shall devote all of his
working time, attention, skill and efforts to the business and affairs of the
Company and its subsidiaries (including, upon completion, if any, of the WSS
Acquisition, WSS), shall use his best efforts to promote the success of the
businesses of the Company and its subsidiaries and shall not enter the employ of
or serve as a consultant to, or in any way perform any services (with or without
compensation) for, any other person, firm, corporation, partnership, limited
liability company, group, association or organization or other entity where such
conduct would be
<PAGE>
inconsistent with, in competition with, or prevent, hinder or restrict the
Executive from carrying out, his duties to the Company.
3. Compensation and Related Matters.
(a) Annual Base Salary. During the Term, the Executive shall
receive a salary of $175,000 per annum (the "Annual Base Salary"). The Annual
Base Salary will be payable in accordance with the Company's policies in effect
from time to time, but, in no event, will such Annual Base Salary be payable
less frequently than in monthly installments.
(b) Expenses. The Company shall reimburse the Executive for
reasonable business expenses incurred by the Executive in the performance of his
duties under this Agreement upon evidence of payment by Executive of such
expenses and otherwise in accordance with Company policies then in effect, as
such policies may change from time to time.
(c) Benefits. During the Term, the Executive shall be entitled
to participate in or receive benefits under any employee health, life and
disability plan generally made available by the Company to its salaried
employees and to the extent applicable such other benefits made available to its
executive employees, as they may change from time to time, subject to and on a
basis consistent with the terms, conditions and overall administration of such
plan or arrangement.
(d) Incentive Bonus. Commencing with his performance in the
current fiscal year, the Executive shall be entitled to earn an annual incentive
bonus of up to 40% of the Annual Base Salary, pro rated for a short fiscal year,
if applicable, based upon annual sales goals for such fiscal year as approved by
the board of directors of the Company. The board of directors will determine the
sales goals for the current fiscal year within 60 days after the Commencement
Date and, with respect to subsequent fiscal years during the Term will determine
sales goals for such years within 60 days after the start of such years. The
Company will determine whether, and will provide Executive with written notice
as to whether the sales goals for a given fiscal year have been achieved within
60 days after the end of such fiscal year and, if and to the extent the
applicable sales goals have been achieved in respect of such fiscal year, will
pay the applicable incentive bonus within 10 business days after the date of
such written notice.
(e) Stock Options. Simultaneously herewith, the Company shall
grant to Executive options under the Company's 1996 Compensatory Stock Option
Plan to acquire 526,923 shares of Company common stock (the "Options"). The
Options shall become vested in nine consecutive equal quarter annual
installments commencing on the nine month anniversary of the Commencement Date
provided on each such vesting date the Executive is then employed by the
Company.
(f) Office and Supplies. The Executive shall be provided an
office at WSS' principal office, office furniture, secretarial support and
office supplies provisions commensurate with his office.
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(g) Vacation. The Executive shall be entitled to twenty
business days of annual vacation to be used each year (and not carried over) at
times mutually convenient to the Company and Executive.
(h) Relocation Allowance. The Company will reimburse Executive
for actual relocation expenses up to a maximum of $10,000, as reasonably
substantiated by Executive. Reimbursable relocation expenses shall include,
without limitation, charges by moving company, rental security deposit and
rental agent commissions, as applicable.
(i) Deductions and Withholdings. All amounts payable or which
become payable hereunder shall be subject to all deductions and withholding
required by law.
4. Termination. This Agreement may be terminated under the following
circumstances:
(a) Death. The Executive's employment hereunder shall
terminate upon his death. In the case of the Executive's death, the Company
shall pay to the Executive's beneficiaries or estate, as appropriate, promptly
after his death, the then current accrued but unpaid Annual Base Salary,
incentive bonus (provided such incentive bonus and the sales goals on which such
bonus are based shall be pro rated for the portion of the fiscal year during
which the Executive was employed and, provided further, no such bonus shall be
payable in respect of a fiscal year in which Executive has completed less than
six (6) months of service ) and all expenses for which he is entitled to be
reimbursed pursuant to Section 3 through the date of his termination. The
Executive and his beneficiaries and estate, as appropriate, shall be entitled to
no other compensation under this Agreement following, or as a result of, a
termination under these circumstances.
(b) Disability.
(i) If a Disability (as defined below) of the Executive
occurs during the Term, the Company may give the Executive written notice of its
intention to terminate his employment. In such event, the Executive's employment
with the Company shall terminate on the effective date specified in such notice.
In the case of a termination as a result of a Disability, the Company shall pay
to the Executive promptly after his termination the then current accrued but
unpaid Annual Base Salary, incentive bonus (provided such incentive bonus and
the sales goals on which such bonus are based shall be pro rated for the portion
of the fiscal year during which the Executive was employed and, provided
further, no such bonus shall be payable in respect of a fiscal year in which
Executive has completed less than six (6) months of service ), and all expenses
for which he is entitled to be reimbursed pursuant to Section 3 through the date
of his termination. The Executive and his beneficiaries and estate, as
appropriate, shall be entitled to no other compensation under this Agreement
following, or as a result of, a termination under these circumstances.
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(ii) For the purpose of this subsection 4(b),
"Disability" shall mean the Executive's inability to perform his normal duties
as Chief Operating Officer of the Company, with or without reasonable
accommodation, due to a mental or physical impairment for a period of at least
three (3) consecutive months or four (4) months in the aggregate in any twelve
(12) month period. The Executive agrees to submit to a reasonable number of
examinations by a medical doctor selected by the Company and reasonably
acceptable to the Executive (or his legal representative) making the
determination of disability under this Section 4(b)(ii), and the Executive
hereby authorizes the disclosure and release to the Company of such
determination and all supporting medical records.
(c) Termination by the Company for Cause.
(i) The Company may terminate the Executive's employment
hereunder for Cause (as defined below) at any time upon written notice to the
Executive. In such event, the Executive's employment shall terminate on the
effective date specified in such notice. In the case of the Executive's
termination for Cause, the Company shall promptly pay to the Executive his then
current accrued but unpaid Annual Base Salary and all expenses for which he is
entitled to be reimbursed pursuant to Section 3 through the date of his
termination. The Executive and his beneficiaries shall be entitled to no other
compensation under this Agreement following, or as a result of, a termination
under these circumstances.
(ii) For purposes of this Agreement, the Company shall
have "Cause" to terminate Executive's employment hereunder in the event of (A)
the Executive personally receiving a material benefit in money, property or
services from the Company or its subsidiaries or from another person dealing
with the Company or its subsidiaries in violation of applicable law or material
Company policy previously made known to the Executive, (B) an act of fraud,
conversion, misappropriation or embezzlement by the Executive or his conviction
of or entering a guilty plea or plea of no contest with respect to, a felony,
the equivalent thereof, or any other crime with respect to which imprisonment is
a possible punishment, (C) any other breach by the Executive of this Agreement
in any material respect, which is not cured by the Executive within thirty days
after receipt of written notice from the Company, (D) a knowing violation by
Executive of a law relating to the Company's business, (E) a knowing violation
by Executive of a written material Company policy or (F) issuance of any order,
judgment or decree permanently or preliminarily enjoining or otherwise limiting
Executive (i) from engaging in the business of an investment adviser,
underwriter, broker or dealer in securities or (ii) engaging in any type of
business activity in connection with the purchase or sale of any security or
commodity in connection with any violation of federal or state securities or
commodities laws by Executive.
(d) Termination by the Company Without Cause. The Company may
terminate the Executive's employment hereunder without Cause upon written notice
to the Executive. In such event, the Executive's employment shall terminate on
the effective date specified in such notice. In the event the Executive's
employment hereunder is terminated by the Company without Cause, the Company
shall pay to the Executive his then current accrued but unpaid Annual Base
Salary and expenses to which he is entitled pursuant to Section 3 through the
date of his termination. In addition, the Executive shall receive
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continuation of his Annual Base Salary, benefits and incentive bonus as
specified in paragraph 3 above, through the balance of the Term. The Executive
and his beneficiaries shall be entitled to no other compensation under this
Agreement following, or as a result of, a termination under these circumstances.
(e) Mutual Agreement. The Executive's employment may be
terminated by written mutual agreement of the Executive and the Company at any
time.
5. Confidential and Proprietary Information.
(a) The parties agree and acknowledge that during the course
of the Executive's employment, the Executive will be given and will have access
to and be exposed to "Confidential Information" (as defined below) in written,
oral, electronic and other form regarding the Company and its business units,
divisions and subsidiaries and business, equipment, products and employees. For
purposes of this Agreement, "Confidential Information" means any information
relating to the business or affairs of the Company or its subsidiaries
(including, following completion, if any, of the WSS Acquisition, WSS),
including but not limited to information relating to financial statements,
business plans, forecasts, purchasing plans, customer and subscriber identities,
potential customers and subscribers, employees, suppliers, partners, allies,
equipment, programs, strategies and information, analyses, profit margins or
other proprietary information used by the Company or its subsidiaries in
connection with the conduct of their respective and collective businesses. The
Executive agrees to use such information only for purposes of carrying out his
duties for the Company and not for any other purpose, including, without
limitation, not in any way or for any purpose detrimental to the Company or its
subsidiaries. Confidential Information hereunder does not include any
information which (i) is already in or subsequently enters the public domain,
other than as a result of any direct or indirect action or inaction by the
Executive, (ii) is already in the Executive's possession and was received by
Executive from a source other than the Company provided that such information is
not known to the Executive to be subject to another confidentiality agreement or
other obligation of secrecy or confidentiality (whether pursuant to contract,
legal or fiduciary obligation or duty or otherwise) to the Company or any other
person or entity, or (iii) becomes available to the Executive on a
nonconfidential basis from a source other than the Company, provided that such
source is not known by the Executive to be subject to a confidentiality (whether
pursuant to a contract, legal or fiduciary obligation or duty or otherwise) to
the Company or any other person or entity.
(b) In recognition of the Company's need to protect its
legitimate business interests and in consideration of the rights granted to
Executive in this Agreement, Executive hereby agrees that with regard to any
Confidential Information, at all times during the term of Executive's employment
with the Company (whether pursuant to this Agreement, on an "at will" basis or
otherwise) and for a period of three (3) years thereafter Executive shall regard
and treat all such information as strictly confidential and wholly owned by the
Company and shall not, for any reason or in any fashion, either directly or
indirectly, use or reproduce any such Confidential Information or disclose,
transfer, assign, disseminate or otherwise communicate any such Confidential
Information to any person or entity for any
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purpose other than in accordance with this Agreement or pursuant to the
instructions of a duly authorized representative of the Company.
(c) All physical property and all notes, memoranda, files,
records, writings, documents and other materials of any and every nature,
written or electronic, which the Executive shall prepare, use or come into
contact with in the course of his employment with the Company and which relate
to or are useful in any manner to the business now or hereafter conducted by the
Company and its subsidiaries are and shall remain the sole and exclusive
property of the Company. The Executive shall not remove from the Company's or
its subsidiaries' premises any such physical property, the original or any
reproduction of any such materials or the information contained therein, except
and solely for the purposes of carrying out his duties to the Company and all
such property, materials and information in his possession or under his custody
or control upon the termination of his employment with the Company shall be
immediately turned over to the Company.
(d) The provision of this Section 5 shall survive any
termination of this Agreement or the Executive's employment with the Company.
6. No Solicitation of Customers or Executives.
(a) Executive will not, directly or indirectly during the Term
of and for a period of one (1) year following the termination of this Agreement:
(i) persuade or attempt to persuade any person or entity
which is or was a customer, client or supplier of the Company during the term of
this Agreement or on the date of which Executive's employment is terminated to
cease doing business with the Company, or to reduce the amount of business it
does with the Company;
(ii) persuade or attempt to persuade any employee of the
Company, or any individual who was an employee of the Company during the one (1)
year period prior to the termination of this Employment Agreement, to leave the
Company's employ, or to become employed by any person or entity other than the
Company; or
(iii) engage in or market any business competitive with
the business of the Company, enter the employ of or render any services to, any
person engaged in such activities, or become interested in any such person in
any capacity, including without limitation, as an individual, partner,
shareholder, investor, officer, director, principal, agent, trustee or
consultant; provided, however, he may own, directly or indirectly, solely as an
investment, securities of any person traded on any national securities exchange
if he is not a controlling person of, or a member of a group which control such
person and does not, directly or indirectly, own 5% or more of any class of
securities of such person.
(b) The provisions of this Section 6 shall survive any
termination of this Agreement or the Executive's employment with the Company.
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7. Injunctive Relief. The Executive acknowledges that (a) the
provisions of Sections 5 and 6 are valid and enforceable and are reasonable and
necessary to protect the legitimate interests of the Company and its business
and (b) any violation of Sections 5 or 6 will result in irreparable injury to
the Company, the exact amount of which will be difficult to ascertain, and that
the remedies at law for any such violation would not be reasonable or adequate
compensation to the Company for such a violation. Accordingly, the Executive
agrees that if the Executive violates the provisions of Sections 5 or 6, in
addition to any other remedy which may be available at law or in equity, the
Company will be entitled to specific performance and injunctive relief, without
the necessity of posting a bond or other security, and without the necessity of
proving actual damages.
8. Assignment; Successors and Assigns. The Executive agrees that he
will not assign, sell, transfer, delegate or otherwise dispose of, whether
voluntarily or involuntarily, any rights or obligations under this Agreement,
nor shall the Executive's rights be subject to encumbrance of the claims of
creditors. Any purported assignment, transfer, delegation, disposition or
encumbrance in violation of this Section 8 shall be null and void and of no
force or effect. Nothing in this Agreement shall prevent the consolidation or
merger of the Company with or into any other entity, or the sale by the Company
of all or any portion of its respective properties or assets, or the assignment
by the Company of this Agreement and the performance of its obligations
hereunder to any subsidiary of the Company, (including, upon completion, if any,
of the WSS Acquisition, WSS), or any successor in interest or any other
affiliated entity, and the Executive hereby consents to any and all such
assignments. Subject to the foregoing, this Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective heirs, legal
representatives, successors, and permitted assigns, and shall not benefit any
person or entity other than those enumerated above.
9. Choice of Law; Venue. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York without
giving effect to any choice or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of New York. The Executive
irrevocably consents to the service of any and all process in any action or
proceeding arising out of or relating to this Agreement by the mailing of copies
of such process to such Executive at the address specified in Section 12. The
parties hereto irrevocably submit to the jurisdiction of the United States
District Court for the Southern District of New York or any state court located
in New York County, State of New York over any dispute arising out of or
relating to this Agreement or any of the transactions contemplated hereby. Each
party hereby irrevocably agrees that all claims in respect of such dispute or
proceeding may be heard and determined in such courts. The parties hereby
irrevocably waive, to the fullest extent permitted by applicable law, any
objection which they may now or hereafter have to the laying of venue of any
such dispute brought in such court or any defense of inconvenient forum in
connection therewith.
10. Severability of Provisions. In the event that any provision or
any portion thereof should ever be adjudicated by a court of competent
jurisdiction to exceed the limitations permitted by applicable law, as
determined by such court in such action, then such
7
<PAGE>
provisions will be deemed reformed to the maximum limitations permitted by
applicable law, the parties hereby acknowledging their desire that in such event
such action be taken. In addition to the above, the provisions of this Agreement
are severable, and the invalidity or unenforceability of any provision or
provisions of this Agreement or portions thereof will not affect the validity or
enforceability of any other provision, or portion of this Agreement, which will
remain in full force and effect as if executed with the unenforceable or invalid
provision or portion thereof eliminated. Notwithstanding the foregoing, the
parties hereto affirmatively represent and acknowledge that this Agreement and
each of its provisions is enforceable in accordance with its terms, and
expressly agree not to challenge the enforceability of the Agreement or any of
its provisions in the future. The parties hereto are expressly relying upon this
representation and acknowledgment in determining to enter into this Agreement.
11. Warranty. As an inducement to the Company to enter into this
Agreement, the Executive represents and warrant to the Company that he is not a
party to any other agreement or obligation for personal services, and that there
exists no impediment or restraint, contractual or otherwise, on his power, right
or ability to enter into this Agreement and to perform his duties and
obligations hereunder.
12. Notices. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given when received if personally delivered;
when transmitted if transmitted by telecopy, electronic or digital transmission
method upon receipt of telephonic or electronic confirmation; the day after it
is sent, if sent for next day delivery to a domestic address by recognized
overnight delivery service (e.g., Federal Express); and upon receipt, if sent by
certified or registered mail, return receipt requested. In each case notice
shall be sent to:
8
<PAGE>
If to the Executive, addressed to:
Shawn D. Baldwin
680 North Lake Shore Drive
Apt. 407
Chicago, Illinois 60611
With a copy to:
Ted Ward, Esq.
900 West Jackson Boulevard
Suite 6 West
Chicago, Illinois 60607
If to the Company, addressed to:
90 Madison Street
Denver, Colorado 80806
With a copy to:
Bryan Cave LLP
245 Park Avenue
New York, New York 10163-0034
Attn:Steven A. Saide
or to such other place and with such other copies as either party may designate
as to itself or himself by written notice to the others.
13. Cumulative Remedies. All rights and remedies of either party
hereto are cumulative of each other and of every other right or remedy such
party may otherwise have at law or in equity, and the exercise of one or more
rights or remedies shall not prejudice or impair the concurrent or subsequent
exercise of other right or remedies.
14. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same Agreement.
15. Entire Agreement; Amendments and Waivers. This Agreement is
intended by the parties to be, and is, the complete, exclusive and final
expression of their agreement with respect to the subject matter hereof.
Moreover, this Agreement supersedes, and may not be contradicted by, or modified
or supplemented by, evidence of any prior or contemporaneous agreement as to the
subject matter hereof, and no extrinsic evidence whatsoever may be introduced in
any judicial, administrative or other legal proceeding to vary the terms of this
Agreement. This Agreement supersedes any and all severance agreements that
Executive has or had with the Company, and any and all such severance agreement
shall be null
9
<PAGE>
and void, and of no force or effect. No amendment, supplement,
modification or waiver of this Agreement shall be binding unless executed in
writing by each party to be bound thereto. No waiver of any of the provisions of
this Agreement, whether by conduct or otherwise, in any one or more instances,
shall be deemed or be construed as a further, continuing or subsequent waiver of
any such provision or as a waiver of any other provision of this Agreement. No
failure to exercise and no delay in exercising any right, remedy or power
hereunder shall preclude any other or further exercise of any other right,
remedy or power provided herein or by law or in equity.
16. Representation of Counsel; Mutual Negotiation. Each party has
had the opportunity to be represented by counsel of its choice in negotiating
this Agreement. This Agreement shall therefore be deemed to have been negotiated
and prepared at the joint request, direction and construction of the parties, at
arm's-length, with the advice and participation of counsel, and shall be
interpreted in accordance with its terms without favor to any party.
17. Consultancy. Between the date hereof and the Commencement Date
(the "Consulting Period"), Executive agrees to provide the Company with general
business consulting services as reasonably requested by the Company, including
without limitation consulting services in connection with the proposed
acquisition of WSS, the integration of WSS' business into the Company, the
preparation and execution of a business plan for the Company and WSS,
acquisitions, financing, strategic alliances and partnerships and other matters
relating to the business and proposed business of the Company and WSS. Executive
shall not be required to provide such consulting services in any particular
location and further shall not be required to provide the Company with more than
20 hours of consulting services per month during the Consulting Period. The
Company shall reimburse the Executive for all reasonable business expenses
incurred by the Executive in the performance of such consulting duties during
the Consulting Period upon evidence of payment by the Executive of such expenses
and otherwise in accordance with Company policies then in effect, as such
policies may change from time to time.
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18. Termination Prior to Commencement Date. If the WSS Acquisition
is not completed by September 30, 1999, either party hereto may terminate this
Agreement upon written notice to the other, and in such event, this Agreement
shall be of no further force and effect and neither party shall have any
liability to the other under or in respect of this Agreement, other than as
specified in Section 17 hereof which section shall survive such termination.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date and year first above written.
EMPLOYEE
/s/ Shawn D. Baldwin
-----------------------------
Shawn D. Baldwin
VACATION EMPORIUM CORPORATION
By: /s/ Ian Rice
----------------------------
Name: Ian Rice
Title: Chairman
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10.8
VACATION EMPORIUM CORPORATION
AMENDED AND RESTATED SUBSCRIPTION AND RIGHTS AGREEMENT
Vacation Emporium Corporation
90 Madison Street
Denver, Colorado 80806
Ladies and Gentlemen:
The undersigned, David McCallen, an individual residing at 304 North Saint
Asaph Street, Alexandria, Virginia 22314 (the Subscriber"), entered into a
Subscription and Rights Agreement, dated July 30, 1999 (the "Subscription
Agreement"), with Vacation Emporium Corporation, a Nevada corporation (the
"Company"), pursuant to which, among other things, the Subscriber agreed to
purchase certain shares of the Company's common stock, par value $.001 per share
(the "Common Stock"). The Subscriber and the Company wish to correct certain
errors contained in the Subscription Agreement and, as so corrected, to restate
in its entirety the Subscription Agreement. Accordingly, the Subscriber and the
Company hereby do amend and restate in its entirety the Subscription Agreement
as follows:
1. Subscription.
------------
Subject to the terms and conditions of this Agreement, Subscriber
hereby subscribes for and agrees to purchase simultaneously with the execution
hereof, 526,923 shares of Common Stock for the aggregate purchase price of
$1,317.31, payable by check delivered to the Company simultaneously herewith
(the shares of Common Stock acquired by the Subscriber hereunder are referred to
herein as the "Shares"). Simultaneously with the execution hereof, or as soon
thereafter as practicable, the Company shall deliver to Bryan Cave LLP as escrow
agent
<PAGE>
(the "Escrow Agent") one or more certificates representing the Shares
purchased hereunder, registered in the name of the Subscriber on the books and
records of the Company, to be held in escrow in accordance with the terms of the
Escrow Agreement (as defined below).
2. Acceptance of Subscription. By its signature below, the Company
may, in its sole and absolute discretion, accept this subscription, and such
subscription shall not be binding unless and until accepted by the Company.
3. Employment Agreement. Simultaneously with the execution hereof,
the Subscriber will enter into an Employment Agreement (the "Employment
Agreement") with the Company in substantially the form annexed hereto as Exhibit
A.
4. Escrow Agreement. Simultaneously with the execution hereof, the
Company and the Subscriber will enter into an Amended and Restated Escrow
Agreement (the "Escrow Agreement") with the Escrow Agent in substantially the
form annexed hereto as Exhibit B.
5. Restrictions on Transfer of Shares. The Subscriber covenants to
the Company and agrees that, except as contemplated hereby and by the Escrow
Agreement, he will not sell, transfer, assign, gift, devise, pledge,
hypothecate, grant a security interest in, mortgage, option, donate, or
otherwise encumber (except as contemplated hereby and by the Escrow Agreement)
or dispose of, voluntarily or involuntarily, directly or indirectly, with or
without consideration (collectively, "Transfer") any of the Shares for so long
as such Shares are held in escrow pursuant to the Escrow Agreement. Any Transfer
of Shares in violation of this Section 5, whether voluntary or involuntary,
shall be void and of no force and effect and shall transfer no right, title or
interest in or to those Shares to the purported transferee, buyer, assignee,
pledgee or encumbrance holder of such Shares.
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<PAGE>
6. Release of Shares; Right to Repurchase Shares.
---------------------------------------------
The parties acknowledge that, pursuant to and in accordance with the
terms of the Escrow Agreement, the Shares will be held in escrow by the Escrow
Agent and will be released from escrow from time to time during the period (the
"Escrow Period") commencing on the date hereof and ending two years from the
date, if any, on which the Company completes its acquisition (the "WSS
Acquisition") of all the issued and outstanding shares of Wall Street
Strategies, Inc., a Delaware corporation, ("WSS") from WSS's sole shareholder,
Charles V. Payne ("Payne").
(a) If the WSS Acquisition is completed within ninety (90) days
after the date hereof (the "Interim Period"), the Escrow Agent will release from
escrow and deliver to the Subscriber 175,641 Shares in accordance with the terms
of the Escrow Agreement. If the WSS Acquisition is not completed by the end of
the Interim Period, the Subscriber agrees to sell to the Company, and the
Company agrees to purchase from the Subscriber, all of the Shares for an
aggregate purchase price equal to the aggregate purchase price paid by the
Subscriber for such Shares pursuant hereto, such purchase and sale to be
completed within three (3) business days after termination of the Interim
Period.
(b) On the six month anniversary of the date of completion (if any)
of the WSS Acquisition (the "Condition Date"), the Escrow Agent will release
from escrow and deliver to the Subscriber 175,641 Shares in accordance with the
terms of the Escrow Agreement.
(c) The Escrow Agent will release from escrow and deliver to the
Subscriber (i) 35,128 Shares on each of the six month, nine month, twelve month
and fifteen month anniversaries of the Condition Date and (ii) the balance of
35,129 Shares on the eighteen month anniversary of the Condition Date.
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<PAGE>
(d) If the Subscriber's employment by the Company is terminated by
the Company for Cause (as defined in the Employment Agreement), the Subscriber
agrees to sell to the Company, and the Company agrees to purchase from the
Subscriber, all of the Shares held in escrow pursuant to the Escrow Agreement as
of the date of such termination for an aggregate purchase price equal to the
aggregate purchase price paid by the Subscriber for such Shares pursuant hereto,
such purchase and sale to be completed within three (3) business days after the
date of termination.
(e) If the Subscriber's employment by the Company is terminated
during the Escrow Period by reason of the Subscriber's death or Disability (as
defined in the Employment Agreement) or otherwise without Cause (as defined in
the Employment Agreement), all of the Shares held in escrow pursuant to the
Escrow Agreement as of the date of such termination will be released by the
Escrow Agent to the Subscriber (or his estate or legal representative, as the
case may be) in accordance with the terms of the Escrow Agreement.
7. Representations and Warranties of the Company. The Company hereby
represents and warrants to the undersigned as follows:
(a) Organization and Qualification; Subsidiaries. The Company is a
corporation, duly incorporated, validly existing and in good standing under the
laws of the state of Nevada, with the requisite corporate power and authority to
own and use its properties and assets and to carry on its business as currently
conducted. The Company is duly qualified to do business and is in good standing
as a foreign corporation in each jurisdiction in which a failure to so qualify
would have a material adverse effect in its business.
(b) Capital Structure. As of the date hereof (and assuming the
issuance of the Shares), the authorized capital stock of Company will consist
of: (A) 5,000,000
4
<PAGE>
shares of Preferred Stock, par value $.001 per share, none of which are
outstanding and (B) 50,000,000 shares of Common Stock, par value $.001 per
share. Upon completion of the issuances of shares of Common Stock contemplated
by this Agreement and agreements with third parties being entered into
simultaneously herewith, a maximum of 15,702,564 shares of Common Stock will be
issued. All outstanding shares of Common Stock are validly issued, fully paid,
nonassessable. The Shares being purchased hereunder, when issued, sold and
delivered in accordance with the terms of this Agreement, will (subject to the
escrow described herein and in the Escrow Agreement) be duly and validly issued,
fully paid and nonassessable, and will be free of restrictions on transfer other
than restrictions under applicable state and federal securities laws and
restrictions imposed under this Agreement and the Escrow Agreement. Other than
commitments in connection with issuances to third parties of up to 1,258,205
shares of the Company's Common Stock being made simultaneously herewith, there
are no options, warrants, calls, rights (including conversion or preemptive
rights), commitments, agreements, contracts, understandings, restrictions,
arrangements or rights of any character to which the Company is a party or by
which it may be bound obligating the Company to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of the Company's Common Stock
or obligating the Company to grant, extend or enter into any such option,
warrant, call, right, commitment, agreement, contract, understanding,
restriction, arrangement or right to or with any person or persons whatsoever,
except for options to be granted to the Subscriber and Shawn D. Baldwin pursuant
to their respective employment agreements to be executed with the Company.
(c) Authority. The Company has all requisite corporate power and
authority to enter into this Agreement, and to consummate the transactions
contemplated hereby. The execution and delivery by the Company of this Agreement
and the consummation of the
5
<PAGE>
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company. This Agreement has been duly
executed and delivered by the Company and constitutes the valid and binding
obligation of the Company enforceable in accordance with its terms.
8. Representations and Warranties of the Subscriber. The Subscriber
hereby represents and warrants to the Company as follows:
(a) Organization; Authority. He has the requisite power, authority
and capacity to enter into and to consummate the transactions contemplated
hereby and otherwise to carry out his obligations hereunder. This Agreement has
been duly executed and delivered by the Subscriber and constitutes his valid and
binding obligation, enforceable in accordance with its terms.
(b) Subscriber's Status. The Subscriber understands that the
securities to be purchased hereunder have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or under the
securities law of any jurisdiction, that the purchase and sale is being made in
reliance upon certain exemptions from registration and that the Company's
reliance on such exemption is predicated in part upon the accuracy of the
Subscriber's representations in this Section 8. The Subscriber confirms that he
is a resident of the jurisdiction set forth at the foot of this Agreement.
(c) Lack of Liquidity. The Subscriber hereby acknowledges and
confirms that (i) the Shares are "restricted securities" under the Securities
Act because they are being acquired from the Company in a transaction not
involving a public offering, and that, under such laws and applicable
regulations, such securities may be resold without registration under the
Securities Act only in certain limited circumstances; (ii) there is presently no
public
6
<PAGE>
market for the sale or resale of the Company's Equity Securities and the
Company has not made any commitment, and is under no obligation, to register any
shares of its capital stock of any class for public sale in the future; (iii) if
in fact the Company undertakes to register any shares of its Equity Securities
for public sale in the future, there can be no assurance that it will be
successful in causing such registration to occur; and (iv) as a result of the
foregoing, the Shares may be required to be held by the Subscriber indefinitely.
(d) Purchase for Investment, Speculative Investment, etc. The
undersigned represents and warrants that: (i) he is acquiring the Shares for his
own account for investment only and not with a view to, or for sale in
connection with, a distribution within the meaning of the Securities Act; (ii)
he has no present intention of selling or otherwise disposing of any portion of
the Shares except as contemplated hereby; (iii) he has been afforded the
opportunity to request, and has received such information regarding the Company
and its present and prospective business, assets and liabilities and the
backgrounds of the principals of the Company as he has deemed material to making
the decision to acquire the Shares and has been afforded the opportunity to ask
questions of and receive answers from the Company's senior management concerning
present and prospective business prospects of the Company; (iv) he has fully
considered such information as has been provided by the Company in valuing the
Company and assessing the merits of the transactions contemplated hereby; (v) he
recognizes that an investment in the Shares involves special, speculative and
substantial risk because, among other things, the Company has conducted no
business since March 31, 1999 other than to enter into a non-binding letter of
intent with Payne to effect the WSS Acquisition (as such terms are defined in
Section 6 hereof), there can be no assurance that the Company will complete the
WSS Acquisition, or any transaction, the Company does not presently have
professional management,
7
<PAGE>
customers or sales, the Company does not presently have the resources to achieve
its strategic objectives (to the extent they have been identified), the Shares
are subject to significant legal restrictions upon resale and, in any case,
there may be no future market for resale of the Shares; (vi) he is able to fend
for himself in the transactions contemplated by this Agreement, and is, on his
own or through his professional advisors, knowledgeable in business and
financial matters and, accordingly, is capable of evaluating and has evaluated
the merits of the transactions contemplated hereby; (vii) he has made the
determination to enter into this Agreement based upon his own independent
evaluation and assessment of the value of the Company and its present and
prospective business prospects and has not relied on, or been induced to enter
into this Agreement on account of any representation or warranty of any kind or
nature, whether oral or written, express or implied, except for such
representations and warranties of the Company as are specifically set forth in
this Agreement, (viii) he is financially capable of bearing a total loss of his
investment in the Shares and (x) at no time was he presented with, or solicited
by any publicly issued or circulated newspaper, magazine, mail, radio or
television or any other form of general advertising or solicitation in
connection herewith.
9. Transfer Restrictions under the Securities Laws. If (subject to
the limitations contained herein) the Subscriber should decide to dispose of any
of the Shares to be purchased hereunder, the Subscriber understands and agrees
he may do so only (i) pursuant to an effective registration statement under the
Securities Act (which the Company is under no obligation to file) or (ii)
pursuant to an available exemption from registration under the Securities Act.
In connection with any transfer of any Shares other than pursuant to an
effective registration statement, the Company may require that the Subscriber
provide to the Company an opinion of
8
<PAGE>
counsel reasonably satisfactory to the Company, to the effect that such transfer
does not require registration of such Shares under the Securities Act or any
state securities laws.
Each certificate representing the Shares shall bear the following
legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR ANY APPLICABLE STATE SECURITIES LAW, AND NO INTEREST THEREIN MAY
BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR OTHERWISE
TRANSFERRED UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH
TRANSACTION INVOLVING SAID SECURITIES, (ii) THIS CORPORATION
RECEIVES AN OPINION OF LEGAL COUNSEL FOR THE HOLDER OF THESE
SECURITIES SATISFACTORY TO THIS CORPORATION STATING THAT SUCH
TRANSACTION IS EXEMPT FROM REGISTRATION, OR (iii) THIS CORPORATION
OTHERWISE SATISFIES ITSELF THAT SUCH TRANSACTION IS EXEMPT FROM
REGISTRATION.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER AND OTHER PROVISIONS CONTAINED IN A
SUBSCRIPTION AND RIGHTS AGREEMENT DATED __________, 1999, AND AN
ESCROW AGREEMENT DATED __________, 1999. COPIES OF SAID AGREEMENTS
MAY BE EXAMINED AT THE PRINCIPAL OFFICE OF THE CORPORATION.
The first legend set forth above may be removed if and when the
Shares represented by such certificate may be disposed of pursuant to an
effective registration statement under the Securities Act or in the opinion of
counsel to the Company such legend is no longer required under applicable
requirements of the Securities Act. The second legend set forth above may be
removed if and when the Shares represented by such certificate are released from
escrow in accordance with the terms of the Escrow Agreement. The stock
certificates representing the Shares shall also bear any other legends required
by applicable Federal or state securities laws, which legends may be removed
when, in the opinion of counsel to the Company, such legends
9
<PAGE>
are no longer required under the applicable requirements of such securities
laws. The Company agrees that it will provide the Subscriber, upon request, with
a substitute stock certificate or certificates, free from such legends at such
time as such legends are no longer applicable.
10. Restriction on Dealing in Company Stock. The Subscriber
covenants to, and agrees with the Company that unless and until the earliest of
(a) the abandonment of the WSS Acquisition or (b) the completion and public
announcement of the completion of the WSS Acquisition, he will not, directly or
indirectly, engage in, or cause any other person to engage in any transaction,
for his own account or the account of any other person, involving any of the
Company's securities, including without limitation any purchase or sale of the
Company's securities, other than the purchase and any sale of the Shares as
contemplated by this Agreement and the Escrow Agreement.
11. Stop Transfer Instruction. The Subscriber agrees that the
Company shall be entitled to make a notation on its records and give
instructions to any transfer agent of the Company in order to implement the
restrictions on transfer set forth in this Agreement.
12. Fees and Expenses. Whether or not the transactions contemplated
by this Agreement are consummated, each party hereto shall pay its own expenses
and the fees and expenses of its counsel and accountants and other experts.
13. Entire Agreement; Amendments. This Agreement, together with the
Exhibits and Schedules hereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, including,
without limitation, the Subscription Agreement.
14. Notices. Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be deemed to have been
received (a) upon hand
10
<PAGE>
delivery (receipt acknowledged) or delivery by telex (with correct answer back
received), telecopy or facsimile (with transmission confirmation report) at the
address or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the second
business day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such communications shall be:
If to the Company:
Vacation Emporium Corporation
90 Madison Street
Denver, Colorado 80806
With a copy to:
Bryan Cave LLP
245 Park Avenue
New York, New York 10167-0034
Telecopier: (212) 692-1900
Attn.: Steven A. Saide, Esq.
If to the Subscriber:
David McCallen
304 North Saint Asaph Street
Alexandria, Virginia 22314
With a copy to:
Hazel Thomas, P.C.
3110 Fairview Park Drive
Suite 1400
Falls Church, Virginia 22042
Telecopier: (703) 641-4340
Attn.: Benton Burroughs, Jr., Esq.
11
<PAGE>
or such other address as may be designated in writing hereafter, in the same
manner, by such person.
15. Amendments; Waivers, Jurisdiction. No provision of this
Agreement may be waived or amended except in a written instrument signed, in the
case of an amendment, by both the Company and the Subscriber, or, in the case of
a waiver, by the party against whom enforcement of any such waiver is sought. No
waiver of any default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right accruing to it thereafter. Each party
hereto irrevocably submits to the non-exclusive jurisdiction of any state or
federal court located in New York County, State of New York, in respect of any
legal action, suit or proceeding arising out of this Agreement or the
transactions contemplated hereby.
16. Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
17. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York
without regard to the principles of conflicts of law thereof.
18. Counterpart. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it
12
<PAGE>
being understood that both parties need not sign the same counterpart. In the
event that any signature is delivered by facsimile transmission, such signature
shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) the same with the same force and effect as if
such facsimile signature page were an original thereof.
19. Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
13
<PAGE>
substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of July 30, 1999.
PURCHASER:
/s/ David McCallen
Name: David McCallen
Address: 304 North Saint Asaph Street
Alexandria, Virginia 22314
No. of Shares of Common Stock to be
Purchased: 526,923
Date: As of July 30, 1999
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<PAGE>
ACCEPTANCE OF SUBSCRIPTION
The Subscription Agreement of the Subscriber indicated herein below
with respect to Vacation Emporium Corporation is hereby accepted, and such
Subscriber is hereby allocated the Shares indicated below.
VACATION EMPORIUM CORPORATION
By: /s/ Ian Rice
Name: Ian Rice
Title: Chariman
Subscriber: David McCallen
No. of Shares of Common Stock Allocated: 526,923
15
<PAGE>
10.9
VACATION EMPORIUM CORPORATION
AMENDED AND RESTATED SUBSCRIPTION AND RIGHTS AGREEMENT
Vacation Emporium Corporation
90 Madison Street
Denver, Colorado 80806
Ladies and Gentlemen:
The undersigned, Shawn D. Baldwin, residing at 680 North Lake Shore Drive,
Apt. 407, Chicago, Illinois 60611 (the Subscriber"), entered into a Subscription
and Rights Agreement, dated July 30, 1999 (the "Subscription Agreement"), with
Vacation Emporium Corporation, a Nevada corporation (the "Company"), pursuant to
which, among other things, the Subscriber agreed to purchase certain shares of
the Company's common stock, par value $.001 per share (the "Common Stock"). The
Subscriber and the Company wish to correct certain errors contained in the
Subscription Agreement and, as so corrected, to restate in its entirety the
Subscription Agreement. Accordingly, the Subscriber and the Company hereby do
amend and restate in its entirety the Subscription Agreement as follows:
1. Subscription.
Subject to the terms and conditions of this Agreement, the
Subscriber hereby subscribes for and agrees to purchase simultaneously with the
execution hereof, 351,282 shares of Common Stock, for the aggregate purchase
price of $878.21, payable by check delivered to the Company simultaneously
herewith (the shares of Common Stock acquired by the Subscriber hereunder are
referred to herein as the "Shares"). Simultaneously with the execution hereof,
or as soon thereafter as practicable, the Company shall deliver to the
Subscriber a certificate representing 87,821 of the Shares purchased hereunder,
registered in the name of the Subscriber
<PAGE>
on the books and records of the Company, and shall deliver to Bryan Cave LLP as
escrow agent (the "Escrow Agent") one or more certificates representing 263,461
of the Shares purchased hereunder (the "Escrow Shares"), registered in the name
of the Subscriber on the books and records of the Company, to be held in escrow
in accordance with the terms of the Escrow Agreement (as defined below).
2. Acceptance of Subscription. By its signature below, the Company
may, in its sole and absolute discretion, accept this subscription, and such
subscription shall not be binding unless and until accepted by the Company.
3. Employment Agreement. Simultaneously with the execution hereof,
the Subscriber will enter into an Employment Agreement (the "Employment
Agreement") with the Company in substantially the form annexed hereto as
Exhibit A.
4. Escrow Agreement. Simultaneously with the execution hereof, the
Company and the Subscriber will enter into an Amended and Restated Escrow
Agreement (the "Escrow Agreement") with the Escrow Agent in substantially the
form annexed hereto as Exhibit B.
5. Restrictions on Transfer of Escrow Shares. The Subscriber
covenants to the Company and agrees that, except as contemplated hereby and by
the Escrow Agreement, he will not sell, transfer, assign, gift, devise, pledge,
hypothecate, grant a security interest in, mortgage, option, donate, or
otherwise encumber (except as contemplated hereby and by the Escrow Agreement)
or dispose of, voluntarily or involuntarily, directly or indirectly, with or
without consideration (collectively, "Transfer") any of the Escrow Shares for so
long as such shares are held in escrow pursuant to the Escrow Agreement. Any
Transfer of Escrow Shares in violation of this Section 5, whether voluntary or
involuntary, shall be void and of no force and effect and shall
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<PAGE>
transfer no right, title or interest in or to those Escrow Shares to the
purported transferee, buyer, assignee, pledgee or encumbrance holder of such
Escrow Shares.
6. Release of Escrow Shares; Right to Repurchase Escrow Shares.
(a) The parties acknowledge that, pursuant to and in accordance with
the terms of the Escrow Agreement, the Escrow Shares will be held in escrow by
the Escrow Agent and will be released from escrow from time to time in
accordance with the terms of this Section 6 and the terms and provisions of the
Escrow Agreement.
(b) On October 28, 1999, the Escrow Agent will release from escrow
and deliver to the Subscriber 87,820 Shares in accordance with the terms of the
Escrow Agreement.
(c) On April 7, 2000, the Escrow Agent will release from escrow and
deliver to the Subscriber 175,641 of the Escrow Shares in accordance with the
terms of the Escrow Agreement.
(d) If the Subscriber's employment by the Company is terminated by
the Company for Cause (as defined in the Employment Agreement), the Subscriber
agrees to sell to the Company, and the Company agrees to purchase from the
Subscriber, all of the Escrow Shares held in escrow pursuant to the Escrow
Agreement as of the date of such termination for an aggregate purchase price
equal to the aggregate purchase price paid by the Subscriber for such Escrow
Shares pursuant hereto, such purchase and sale to be completed within three (3)
business days after the date of termination.
(e) If the Subscriber's employment by the Company is terminated
during the Escrow Period by reason of the Subscriber's death or Disability (as
defined in the Employment
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<PAGE>
Agreement) or otherwise without Cause (as defined in the Employment Agreement),
all of the Escrow Shares held in escrow pursuant to the Escrow Agreement as of
the date of such termination will be released by the Escrow Agent to the
Subscriber (or his estate or legal representative, as the case may be) in
accordance with the terms of the Escrow Agreement.
7. Representations and Warranties of the Company. The Company hereby
represents and warrants to the undersigned as follows:
(a) Organization and Qualification; Subsidiaries. The Company is a
corporation, duly incorporated, validly existing and in good standing under the
laws of the state of Nevada, with the requisite corporate power and authority to
own and use its properties and assets and to carry on its business as currently
conducted. The Company is duly qualified to do business and is in good standing
as a foreign corporation in each jurisdiction in which a failure to so qualify
would have a material adverse effect in its business.
(b) Capital Structure. As of the date hereof (and assuming the
issuance of the Shares), the authorized capital stock of Company will consist
of: (A) 5,000,000 shares of Preferred Stock, par value $.001 per share, none of
which are outstanding and (B) 50,000,000 shares of Common Stock, par value $.001
per share. Upon completion of the issuances of shares of Common Stock
contemplated by this Agreement and agreements with third parties being entered
into simultaneously herewith, a maximum of 15,702,564 shares of Common Stock
will be issued. All outstanding shares of Common Stock are validly issued, fully
paid, nonassessable. The Shares being purchased hereunder, when issued, sold and
delivered in accordance with the terms of this Agreement, will (subject to the
escrow described herein and in the Escrow Agreement) be duly and validly issued,
fully paid and nonassessable, and will be free of restrictions on transfer other
than restrictions under applicable state and federal securities laws and
restrictions imposed under this Agreement and the Escrow Agreement. Other than
4
<PAGE>
commitments in connection with issuances to third parties of up to 906,923
shares of the Company's Common Stock being made simultaneously herewith, there
are no options, warrants, calls, rights (including conversion or preemptive
rights), commitments, agreements, contracts, understandings, restrictions,
arrangements or rights of any character to which the Company is a party or by
which it may be bound obligating the Company to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of the Company's Common Stock
or obligating the Company to grant, extend or enter into any such option,
warrant, call, right, commitment, agreement, contract, understanding,
restriction, arrangement or right to or with any person or persons whatsoever
except for options to be granted to Subscriber and to David McCallen pursuant to
their respective employment agreements executed or to be executed with the
Company.
(c) Authority. The Company has all requisite corporate power and
authority to enter into this Agreement, and to consummate the transactions
contemplated hereby. The execution and delivery by the Company of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Company. This
Agreement has been duly executed and delivered by the Company and constitutes
the valid and binding obligation of the Company enforceable in accordance with
its terms.
8. Representations and Warranties of the Subscriber. The Subscriber
hereby represents and warrants to the Company as follows:
(a) Organization; Authority. He has the requisite power, authority
and capacity to enter into and to consummate the transactions contemplated
hereby and otherwise to carry out his obligations hereunder. This Agreement has
been duly executed and delivered by
5
<PAGE>
the Subscriber and constitutes his valid and binding obligation, enforceable in
accordance with its terms.
(b) Subscriber's Status. The Subscriber understands that the
securities to be purchased hereunder have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or under the
securities law of any jurisdiction, that the purchase and sale is being made in
reliance upon certain exemptions from registration and that the Company's
reliance on such exemption is predicated in part upon the accuracy of the
Subscriber's representations in this Section 8. The Subscriber confirms that he
is a resident of the jurisdiction set forth at the foot of this Agreement.
(c) Lack of Liquidity. The Subscriber hereby acknowledges and
confirms that (i) the Shares are "restricted securities" under the Securities
Act because they are being acquired from the Company in a transaction not
involving a public offering, and that, under such laws and applicable
regulations, such securities may be resold without registration under the
Securities Act only in certain limited circumstances; (ii) there is presently no
public market for the sale or resale of the Company's Equity Securities and the
Company has not made any commitment, and is under no obligation, to register any
shares of its capital stock of any class for public sale in the future; (iii) if
in fact the Company undertakes to register any shares of its Equity Securities
for public sale in the future, there can be no assurance that it will be
successful in causing such registration to occur; and (iv) as a result of the
foregoing, the Shares may be required to be held by the Subscriber indefinitely.
(d) Purchase for Investment, Speculative Investment, etc. The
undersigned represents and warrants that: (i) he is acquiring the Shares for his
own account for investment only and not with a view to, or for sale in
connection with, a distribution within the
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<PAGE>
meaning of the Securities Act; (ii) he has no present intention of selling or
otherwise disposing of any portion of the Shares except as contemplated hereby;
(iii) he has been afforded the opportunity to request, and has received such
information regarding the Company and its present and prospective business,
assets and liabilities and the backgrounds of the principals of the Company as
he has deemed material to making the decision to acquire the Shares and has been
afforded the opportunity to ask questions of and receive answers from the
Company's senior management concerning present and prospective business
prospects of the Company; (iv) he has fully considered such information as has
been provided by the Company in valuing the Company and assessing the merits of
the transactions contemplated hereby; (v) he recognizes that an investment in
the Shares involves special, speculative and substantial risk because, among
other things, the Company has conducted no business since March 31, 1999 other
than to enter into a non-binding letter of intent with Payne to effect the WSS
Acquisition (as such terms are defined in Section 6 hereof), there can be no
assurance that the Company will complete the WSS Acquisition, or any
transaction, the Company does not presently have professional management,
customers or sales, the Company does not presently have the resources to achieve
its strategic objectives (to the extent they have been identified), the Shares
are subject to significant legal restrictions upon resale and, in any case,
there may be no future market for resale of the Shares; (vi) he is able to fend
for himself in the transactions contemplated by this Agreement, and is, on his
own or through his professional advisors, knowledgeable in business and
financial matters and, accordingly, is capable of evaluating and has evaluated
the merits of the transactions contemplated hereby; (vii) he has made the
determination to enter into this Agreement based upon his own independent
evaluation and assessment of the value of the Company and its present and
prospective business prospects and has not relied on, or been induced to enter
into this
7
<PAGE>
Agreement on account of any representation or warranty of any kind or nature,
whether oral or written, express or implied, except for such representations and
warranties of the Company as are specifically set forth in this Agreement,
(viii) he is financially capable of bearing a total loss of his investment in
the Shares and (x) at no time was he presented with, or solicited by any
publicly issued or circulated newspaper, magazine, mail, radio or television or
any other form of general advertising or solicitation in connection herewith.
9. Transfer Restrictions under the Securities Laws. If (subject to
the limitations contained herein) the Subscriber should decide to dispose of any
of the Shares to be purchased hereunder, the Subscriber understands and agrees
he may do so only (i) pursuant to an effective registration statement under the
Securities Act (which the Company is under no obligation to file) or (ii)
pursuant to an available exemption from registration under the Securities Act.
In connection with any transfer of any Shares other than pursuant to an
effective registration statement, the Company may require that the Subscriber
provide to the Company an opinion of counsel reasonably satisfactory to the
Company, to the effect that such transfer does not require registration of such
Shares under the Securities Act or any state securities laws.
Each certificate representing the Shares shall bear the following
legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR ANY APPLICABLE STATE SECURITIES LAW, AND NO INTEREST THEREIN MAY
BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR OTHERWISE
TRANSFERRED UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH
TRANSACTION INVOLVING SAID SECURITIES, (ii) THIS CORPORATION
RECEIVES AN OPINION OF LEGAL COUNSEL FOR THE HOLDER OF THESE
SECURITIES SATISFACTORY TO THIS CORPORATION STATING THAT SUCH
TRANSACTION IS EXEMPT FROM REGISTRATION,
8
<PAGE>
OR (iii) THIS CORPORATION OTHERWISE SATISFIES ITSELF THAT SUCH
TRANSACTION IS EXEMPT FROM REGISTRATION.
Each certificate representing the Escrow Shares shall bear the
following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER AND OTHER PROVISIONS CONTAINED IN A
SUBSCRIPTION AND RIGHTS AGREEMENT DATED JULY 30, 1999, AND AN ESCROW
AGREEMENT DATED JULY 30, 1999. COPIES OF SAID AGREEMENTS MAY BE
EXAMINED AT THE PRINCIPAL OFFICE OF THE CORPORATION.
The first legend set forth above may be removed if and when the
Shares represented by such certificate may be disposed of pursuant to an
effective registration statement under the Securities Act or in the opinion of
counsel to the Company such legend is no longer required under applicable
requirements of the Securities Act. The second legend set forth above may be
removed if and when the Escrow Shares represented by such certificate are
released from escrow in accordance with the terms of the Escrow Agreement. The
stock certificates representing the Shares shall also bear any other legends
required by applicable Federal or state securities laws, which legends may be
removed when, in the opinion of counsel to the Company, such legends are no
longer required under the applicable requirements of such securities laws. The
Company agrees that it will provide the Subscriber, upon request, with a
substitute stock certificate or certificates, free from such legends at such
time as such legends are no longer applicable.
10. Restriction on Dealing in Company Stock. The Subscriber
covenants to, and agrees with the Company that unless and until the earliest of
(a) the abandonment of the WSS Acquisition or (b) the completion and public
announcement of the completion of the WSS Acquisition, he will not, directly or
indirectly, engage in, or cause any other person to engage in any
9
<PAGE>
transaction, for his own account or the account of any other person, involving
any of the Company's securities, including without limitation any purchase or
sale of the Company's securities, other than the purchase and any sale of the
Shares as contemplated by this Agreement and the Escrow Agreement.
11. Stop Transfer Instruction. The Subscriber agrees that the
Company shall be entitled to make a notation on its records and give
instructions to any transfer agent of the Company in order to implement the
restrictions on transfer set forth in this Agreement.
12. Fees and Expenses. Whether or not the transactions contemplated
by this Agreement are consummated, each party hereto shall pay its own expenses
and the fees and expenses of its counsel and accountants and other experts.
13. Entire Agreement; Amendments. This Agreement, together with the
Exhibits and Schedules hereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, including,
without limitation, the Subscription Agreement.
14. Notices. Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be deemed to have been
received (a) upon hand delivery (receipt acknowledged) or delivery by telex
(with correct answer back received), telecopy or facsimile (with transmission
confirmation report) at the address or number designated below (if delivered on
a business day during normal business hours where such notice is to be
received), or the first business day following such delivery (if delivered other
than on a business day during normal business hours where such notice is to be
received) or (b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address,
10
<PAGE>
or upon actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:
If to the Company:
Vacation Emporium Corporation
90 Madison Street
Denver, Colorado 80806
With a copy to:
Bryan Cave LLP
245 Park Avenue
New York, New York 10167-0034
Telecopier: (212) 692-1900
Attn.: Steven A. Saide, Esq.
If to the Subscriber:
Shawn D. Baldwin
680 North Lake Shore Drive
Apt. 407
Chicago, Illinois 60611
or such other address as may be designated in writing hereafter, in the same
manner, by such person.
15. Amendments; Waivers, Jurisdiction. No provision of this
Agreement may be waived or amended except in a written instrument signed, in the
case of an amendment, by both the Company and the Subscriber, or, in the case of
a waiver, by the party against whom enforcement of any such waiver is sought. No
waiver of any default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right accruing to it thereafter. Each party
hereto irrevocably submits to the non-exclusive jurisdiction of
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<PAGE>
any state or federal court located in New York County, State of New York, in
respect of any legal action, suit or proceeding arising out of this Agreement or
the transactions contemplated hereby.
16. Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
17. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York
without regard to the principles of conflicts of law thereof.
18. Counterpart. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
19. Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
12
<PAGE>
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of July 30, 1999.
PURCHASER:
/s/ Shawn D. Baldwin
--------------------------------------
Shawn D. Baldwin
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<PAGE>
ACCEPTANCE OF SUBSCRIPTION
The Subscription Agreement of the Subscriber indicated herein below
with respect to Vacation Emporium Corporation is hereby accepted, and such
Subscriber is hereby allocated the Shares indicated below.
VACATION EMPORIUM CORPORATION
By: /s/ Ian Rice
----------------------------------------
Name: Ian Rice
Title: Chairman
Subscriber: Shawn D. Baldwin
No. of Shares of Common Stock Allocated: 351,282
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<PAGE>
10.10
VACATION EMPORIUM CORPORATION
SUBSCRIPTION AND RIGHTS AGREEMENT
Vacation Emporium Corporation
90 Madison Street
Denver, Colorado 80806
Ladies and Gentlemen:
1. Subscription.
Subject to the terms and conditions of this Agreement, the undersigned
individual, residing at the address listed opposite his/her name below (the
"Subscriber") hereby subscribes for and agrees to purchase simultaneously with
the execution hereof, the number of shares of common stock, par value $.001 per
share (the "Common Stock"), of Vacation Emporium Corporation, a Nevada
corporation (the "Company"), set forth below his/her name on the signature page
hereto, for the aggregate purchase price set forth below his/her name on the
signature page hereto, payable by check delivered to the Company simultaneously
herewith (the shares of Common Stock acquired by the Subscriber hereunder are
referred to herein as the "Shares"). Simultaneously with or as soon as
practicable after the execution hereof, the Company shall deliver to Bryan Cave
LLP as escrow agent (the "Escrow Agent") one or more certificates representing
the Shares purchased hereunder, registered in the name of the Subscriber on the
books and records of the Company, to be held in escrow in accordance with the
terms of the Escrow Agreement (as defined below).
2. Acceptance of Subscription. By its signature below, the Company may,
in its sole and absolute discretion, accept this subscription, and such
subscription shall not be binding unless and until accepted by the Company.
<PAGE>
3. Escrow Agreement. Simultaneously with the execution hereof, the
Company and the Subscriber will enter into an Escrow Agreement (the "Escrow
Agreement") with the Escrow Agent in substantially the form annexed hereto as
Exhibit A.
4. Restrictions on Transfer of Shares. The Subscriber covenants to the
Company and agrees that, except as contemplated hereby and by the Escrow
Agreement, he/she will not sell, transfer, assign, gift, devise, pledge,
hypothecate, grant a security interest in, mortgage, option, donate, or
otherwise encumber (except as contemplated hereby and by the Escrow Agreement)
or dispose of, voluntarily or involuntarily, directly or indirectly, with or
without consideration (collectively, "Transfer") any of the Shares for so long
as such Shares are held in escrow pursuant to the Escrow Agreement. Any Transfer
of Shares in violation of this Section 5, whether voluntary or involuntary,
shall be void and of no force and effect and shall transfer no right, title or
interest in or to those Shares to the purported transferee, buyer, assignee,
pledgee or encumbrance holder of such Shares.
5. Right to Repurchase Shares. The parties acknowledge that, pursuant
to and in accordance with the terms of the Escrow Agreement, the Shares will be
held in escrow by the Escrow Agent and will be released from escrow from time to
time during the period (the "Escrow Period") commencing on the date hereof and
ending two years from the date, if any, on which the Company completes its
acquisition (the "WSS Acquisition") of all the issued and outstanding shares of
Wall Street Strategies, Inc., a Delaware corporation, ("WSS") from WSS's sole
shareholder, Charles V. Payne ("Payne").
(a) (i) If the Subscriber's employment by the Company is terminated by
the Company other than by reason of the Subscriber's death or Disability (as
defined in Section 4(a)(ii)), the Subscriber agrees to sell to the Company, and
the Company
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<PAGE>
agrees to purchase from the Subscriber, all of the Shares held in escrow
pursuant to the Escrow Agreement as of the date of such termination for an
aggregate purchase price equal to the aggregate purchase price paid by the
Subscriber for such Shares pursuant hereto, such purchase and sale to be
completed within three (3) business days after the date of termination.
(ii) As used herein, "Disability" shall mean the inability of
Subscriber, due to physical or mental illness, injury or disease, to perform
his/her normal duties as an employee of the Company, for a period of at least
three (3) consecutive months or four (4) months in the aggregate in any twelve
(12) month period.
(b) If the Subscriber's employment by the Company is terminated during
the Escrow Period by reason of the Subscriber's death or Disability, all of the
Shares held in escrow pursuant to the Escrow Agreement as of the date of such
termination will be released by the Escrow Agent to the Subscriber (or his/her
estate or legal representative, as the case may be) in accordance with the terms
of the Escrow Agreement.
(c) If the WSS Acquisition is not completed within 90 days after the
date hereof (the "Interim Period"), the Company agrees to purchase from the
Subscriber, and the Subscriber agrees to sell to the Company, all of the Shares
for an aggregate purchase price equal to the aggregate purchase price paid by
the Subscriber for the Shares pursuant hereto, such purchase and sale to be
completed within three (3) business days after the end of the Interim Period.
6. Representations and Warranties of the Company. The Company hereby
represents and warrants to the undersigned as follows:
(a) Organization and Qualification; Subsidiaries. The Company is a
corporation, duly incorporated, validly existing and in good standing under the
laws of the state
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<PAGE>
of Nevada, with the requisite corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted. The
Company is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which a failure to so qualify would have a
material adverse effect in its business.
(b) Capital Structure. As of the date hereof (and assuming the issuance
of the Shares), the authorized capital stock of Company will consist of: (A)
5,000,000 shares of Preferred Stock, par value $.001 per share, none of which
are outstanding and (B) 50,000,000 shares of Common Stock, par value $.001 per
share. Upon completion of the issuances of shares of Common Stock contemplated
by this Agreement and agreements being entered into simultaneously herewith, a
maximum of 15,702,564 shares of Common Stock will be issued. All outstanding
shares of Common Stock are validly issued, fully paid, nonassessable. The Shares
being purchased hereunder, when issued, sold and delivered in accordance with
the terms of this Agreement, will (subject to the escrow described herein and in
the Escrow Agreement) be duly and validly issued, fully paid and nonassessable,
and will be free of restrictions on transfer other than restrictions under
applicable state and federal securities laws and restrictions imposed under this
Agreement and the Escrow Agreement. Other than commitments in connection with
issuances to third parties of up to 1,258,205 shares of the Company's Common
Stock being made simultaneously herewith, there are no options, warrants, calls,
rights (including conversion or preemptive rights), commitments, agreements,
contracts, understandings, restrictions, arrangements or rights of any character
to which the Company is a party or by which it may be bound obligating the
Company to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of the Company's Common Stock or obligating the Company to
grant, extend or enter into any such option, warrant, call, right, commitment,
4
<PAGE>
agreement, contract, understanding, restriction, arrangement or right to or with
any person or persons whatsoever, except for options to be granted to David
McCallen and Shawn D. Baldwin pursuant to their respective employment agreements
to be executed with the Company.
(c) Authority. The Company has all requisite corporate power and
authority to enter into this Agreement, and to consummate the transactions
contemplated hereby. The execution and delivery by the Company of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Company. This
Agreement has been duly executed and delivered by the Company and constitutes
the valid and binding obligation of the Company enforceable in accordance with
its terms.
7. Representations and Warranties of the Subscriber. The Subscriber
hereby represents and warrants to the Company as follows:
(a) Organization; Authority. He/she has the requisite power, authority
and capacity to enter into and to consummate the transactions contemplated
hereby and otherwise to carry out his/her obligations hereunder. This Agreement
has been duly executed and delivered by the Subscriber and constitutes his/her
valid and binding obligation, enforceable in accordance with its terms.
(b) Subscriber's Status. The Subscriber understands that the securities
to be purchased hereunder have not been registered under the Securities Act of
1933, as amended (the "Securities Act"), or under the securities law of any
jurisdiction, that the purchase and sale is being made in reliance upon certain
exemptions from registration and that the Company's reliance on such exemption
is predicated in part upon the accuracy of the Subscriber's
5
<PAGE>
representations in this Section 7. The Subscriber confirms that he/she is a
resident of the jurisdiction set forth at the foot of this Agreement.
(c) Lack of Liquidity. The Subscriber hereby acknowledges and confirms
that (i) the Shares are "restricted securities" under the Securities Act because
they are being acquired from the Company in a transaction not involving a public
offering, and that, under such laws and applicable regulations, such securities
may be resold without registration under the Securities Act only in certain
limited circumstances; (ii) there is presently no public market for the sale or
resale of the Company's Equity Securities and the Company has not made any
commitment, and is under no obligation, to register any shares of its capital
stock of any class for public sale in the future; (iii) if in fact the Company
undertakes to register any shares of its Equity Securities for public sale in
the future, there can be no assurance that it will be successful in causing such
registration to occur; and (iv) as a result of the foregoing, the Shares may be
required to be held by the Subscriber indefinitely.
(d) Purchase for Investment, Speculative Investment, etc. The
undersigned represents and warrants that: (i) he/she is acquiring the Shares for
his/her own account for investment only and not with a view to, or for sale in
connection with, a distribution within the meaning of the Securities Act; (ii)
he/she has no present intention of selling or otherwise disposing of any portion
of the Shares except as contemplated hereby; (iii) he/she has been afforded the
opportunity to request, and has received such information regarding the Company
and its present and prospective business, assets and liabilities and the
backgrounds of the principals of the Company as he/she has deemed material to
making the decision to acquire the Shares and has been afforded the opportunity
to ask questions of and receive answers from the Company's senior management
concerning present and prospective business prospects of the
6
<PAGE>
Company; (iv) he/she has fully considered such information as has been provided
by the Company in valuing the Company and assessing the merits of the
transactions contemplated hereby; (v) he/she recognizes that an investment in
the Shares involves special, speculative and substantial risk because, among
other things, the Company has conducted no business since March 31, 1999 other
than to enter into a non-binding letter of intent with Payne to effect the WSS
Acquisition (as such terms are defined in Section 5 hereof), there can be no
assurance that the Company will complete the WSS Acquisition, or any
transaction, the Company does not presently have professional management,
customers or sales, the Company does not presently have the resources to achieve
its strategic objectives (to the extent they have been identified), the Shares
are subject to significant legal restrictions upon resale and, in any case,
there may be no future market for resale of the Shares; (vi) he/she is able to
fend for himself/herself in the transactions contemplated by this Agreement, and
is, on his/her own or through his/her professional advisors, knowledgeable in
business and financial matters and, accordingly, is capable of evaluating and
has evaluated the merits of the transactions contemplated hereby; (vii) he/she
has made the determination to enter into this Agreement based upon his/her own
independent evaluation and assessment of the value of the Company and its
present and prospective business prospects and has not relied on, or been
induced to enter into this Agreement on account of any representation or
warranty of any kind or nature, whether oral or written, express or implied,
except for such representations and warranties of the Company as are
specifically set forth in this Agreement, (viii) he/she is financially capable
of bearing a total loss of his/her investment in the Shares and (x) at no time
was he/she presented with, or solicited by any publicly issued or circulated
newspaper, magazine, mail, radio or television or any other form of general
advertising or solicitation in connection herewith.
7
<PAGE>
8. Transfer Restrictions under the Securities Laws. If (subject to the
limitations contained herein) the Subscriber should decide to dispose of any of
the Shares to be purchased hereunder, the Subscriber understands and agrees
he/she may do so only (i) pursuant to an effective registration statement under
the Securities Act (which the Company is under no obligation to file) or (ii)
pursuant to an available exemption from registration under the Securities Act.
In connection with any transfer of any Shares other than pursuant to an
effective registration statement, the Company may require that the Subscriber
provide to the Company an opinion of counsel reasonably satisfactory to the
Company, to the effect that such transfer does not require registration of such
Shares under the Securities Act or any state securities laws.
Each certificate representing the Shares shall bear the
following legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY APPLICABLE STATE SECURITIES LAW, AND NO
INTEREST THEREIN MAY BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED,
PLEDGED OR OTHERWISE TRANSFERRED UNLESS (i) THERE IS AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS COVERING ANY SUCH TRANSACTION INVOLVING
SAID SECURITIES, (ii) THIS CORPORATION RECEIVES AN OPINION OF
LEGAL COUNSEL FOR THE HOLDER OF THESE SECURITIES SATISFACTORY
TO THIS CORPORATION STATING THAT SUCH TRANSACTION IS EXEMPT
FROM REGISTRATION, OR (iii) THIS CORPORATION OTHERWISE
SATISFIES ITSELF THAT SUCH TRANSACTION IS EXEMPT FROM
REGISTRATION.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER AND OTHER PROVISIONS CONTAINED IN A
SUBSCRIPTION AND RIGHTS AGREEMENT DATED __________, 1999, AND
AN ESCROW AGREEMENT DATED __________, 1999. COPIES OF SAID
AGREEMENTS MAY BE EXAMINED AT THE PRINCIPAL OFFICE OF THE
CORPORATION.
8
<PAGE>
The first legend set forth above may be removed if and when the Shares
represented by such certificate may be disposed of pursuant to an effective
registration statement under the Securities Act or in the opinion of counsel to
the Company such legend is no longer required under applicable requirements of
the Securities Act. The second legend set forth above may be removed if and when
the Shares represented by such certificate are released from escrow in
accordance with the terms of the Escrow Agreement. The stock certificates
representing the Shares shall also bear any other legends required by applicable
Federal or state securities laws, which legends may be removed when, in the
opinion of counsel to the Company, such legends are no longer required under the
applicable requirements of such securities laws. The Company agrees that it will
provide the Subscriber, upon request, with a substitute stock certificate or
certificates, free from such legends at such time as such legends are no longer
applicable.
9. Restriction on Dealing in Company Stock. The Subscriber covenants
to, and agrees with the Company that unless and until the earliest of (a) the
abandonment of the WSS Acquisition or (b) the completion and public announcement
of the completion of the WSS Acquisition, he/she will not, directly or
indirectly, engage in, or cause any other person to engage in any transaction,
for his/her own account or the account of any other person, involving any of the
Company's securities, including without limitation any purchase or sale of the
Company's securities, other than the purchase and any sale of the Shares as
contemplated by this Agreement and the Escrow Agreement.
10. Stop Transfer Instruction. The Subscriber agrees that the Company
shall be entitled to make a notation on its records and give instructions to any
transfer agent of the Company in order to implement the restrictions on transfer
set forth in this Agreement.
9
<PAGE>
11. Fees and Expenses. Whether or not the transactions contemplated by
this Agreement are consummated, each party hereto shall pay its own expenses and
the fees and expenses of its counsel and accountants and other experts.
12. Entire Agreement; Amendments. This Agreement, together with the
Exhibits and Schedules hereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters.
13. Notices. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be deemed to have been received
(a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct
answer back received), telecopy or facsimile (with transmission confirmation
report) at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be:
If to the Company:
Vacation Emporium Corporation
90 Madison Street
Denver, Colorado 80806
With a copy to:
Bryan Cave LLP
245 Park Avenue
New York, New York 10167-0034
Telecopier: (212) 692-1900
10
<PAGE>
Attn.: Steven A. Saide
If to the Subscriber:
To the address listed below on the signature page.
or such other address as may be designated in writing hereafter, in the same
manner, by such person.
14. Amendments; Waivers, Jurisdiction. No provision of this Agreement
may be waived or amended except in a written instrument signed, in the case of
an amendment, by both the Company and the Subscriber, or, in the case of a
waiver, by the party against whom enforcement of any such waiver is sought. No
waiver of any default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right accruing to it thereafter. Each party
hereto irrevocably submits to the non-exclusive jurisdiction of any state or
federal court located in New York County, State of New York, in respect of any
legal action, suit or proceeding arising out of this Agreement or the
transactions contemplated hereby.
15. Successors and Assigns. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
16. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York
without regard to the principles of conflicts of law thereof.
11
<PAGE>
17. Counterpart. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
18. Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
12
<PAGE>
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first indicated above.
PURCHASER:
--------------------------
Name:
Residence Address:
Social Security Number:
No. of Shares of Common Stock to
be Purchased:
Aggregate Purchase Price:
Date: , 1999
------------------
<PAGE>
ACCEPTANCE OF SUBSCRIPTION
The Subscription Agreement of the Subscriber indicated herein below
with respect to Vacation Emporium Corporation is hereby accepted, and such
Subscriber is hereby allocated the Shares indicated below.
__________, 1999
VACATION EMPORIUM CORPORATION
By:
--------------------------------
Name:
Title:
Subscriber:
Subscriber's Residence Address:
No. of Shares of Common Stock Allocated:
Aggregate Purchase Price:
<PAGE>
AMENDED AND RESTATED ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of July 30, 1999, by and among VACATION EMPORIUM
CORPORATION, a Nevada corporation (the "Company") with its address at 90 Madison
Street, Denver, Colorado 80806, David McCallen (the "Subscriber"), an individual
with his address listed opposite his signature below, and BRYAN CAVE LLP (the
"Escrow Agent"), with its address at 245 Park Avenue, New York, New York
10167-0034. The parties entered into an Escrow Agreement, dated July 30, 1999,
which, among other things, provided for the escrow of shares purchased by
Subscriber from the Company. The parties wish to correct certain errors
contained in the Escrow Agreement and, as so corrected, to restate in its
entirety the Escrow Agreement. Accordingly, the Subscriber, the Company and the
Escrow Agent hereby do amend and restate in its entirety the Escrow Agreement as
follows:
W I T N E S S E T H:
WHEREAS, the Company and the Subscriber are parties to a certain Amended
and Restated Subscription and Rights Agreement of even date herewith (the
"Subscription Agreement") pursuant to which the Subscriber is subscribing for
and purchasing from the Company 526,923 shares of the Company's common stock,
par value $.001 per share (the "Shares"), as more particularly set forth
therein;
WHEREAS, the Company has entered into a non-binding letter of intent with
Charles V. Payne ("Payne") describing the intent of the parties that the Company
acquire from Payne all of the issued and outstanding shares of capital stock of
Wall Street Strategies, Inc., a Delaware corporation ("WSS"; such acquisition
(or proposed acquisition) referred to herein as the "WSS Acquisition");
WHEREAS, the Subscriber and the Company are entering into an employment
agreement of even date herewith (the "Employment Agreement"), the Employment
Agreement to become effective, if at all, upon the completion, if any, of the
WSS Acquisition, and pursuant to which Employment Agreement the Subscriber is to
be employed by the Company on the terms and conditions set forth therein; and
WHEREAS, the Subscription Agreement provides, among other things, that,
simultaneously herewith, the Company, the Subscriber and the Escrow Agent shall
execute this Escrow Agreement and, simultaneously herewith or as soon hereafter
as practicable, the Company shall deposit into escrow with the Escrow Agent, to
be held in accordance with the terms hereof, stock certificates representing the
Shares, registered in the name of the Subscriber on the books and records of the
Company, duly endorsed in blank or accompanied by stock powers or other
instruments of transfer duly endorsed in blank, in either case with signature
guaranteed.
<PAGE>
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. DEPOSIT. (a) Simultaneously with the execution hereof or as soon
hereafter as practicable, the Company, on behalf of the Subscriber, is
delivering or will deliver to the Escrow Agent stock certificates evidencing the
Shares registered in the name of the Subscriber on the books and records of the
Company (which stock certificates are, or at the time of deposit will be more
fully described on the annexed Schedule I), duly endorsed in blank by the
Subscriber with signature guaranteed or accompanied by stock powers duly
endorsed in blank by the Subscriber (such stock certificates, as so endorsed or
accompanied by stock powers, are referred to herein, individually, as a "Stock
Certificate" and collectively, as the "Stock Certificates").
(b) The Escrow Agent, upon receipt of the Stock Certificates, will
execute the receipt therefor attached as Exhibit A and deliver copies of such
receipt to the Company and the Subscriber.
(c) The Escrow Agent agrees to hold the Stock Certificates in escrow
and to act with respect thereto and otherwise as hereinafter set forth.
2. DISPOSITION OF THE ESCROW. The Escrow Agent shall release the Stock
Certificates (and the Shares represented thereby) from escrow as follows and in
accordance with the following:
(a) (i) On or as soon as practicable following completion of the WSS
Acquisition (the date of such completion is referred to as the "Acquisition
Date"), the Company and the Subscriber will deliver to the Escrow Agent written
notice (the "Acquisition Notice"), signed by each, affirming the completion of
the WSS Acquisition, and specifying the Acquisition Date. Promptly upon receipt
of the Acquisition Notice, the Escrow Agent shall release from escrow and
deliver to the Subscriber 175,641 Shares.
(ii) The Company acknowledges that if the WSS Acquisition is
not completed within ninety (90) days after the date hereof, the Company has
agreed, pursuant to the terms of the Subscription Agreement, to repurchase the
Shares from the Subscriber on the terms specified therein. In such event, the
Company and the Subscriber will, on the date of such repurchase, provide the
Escrow Agent with written notice of such repurchase, signed by each, and the
Escrow Agent will, promptly upon receipt of such notice, release from escrow and
deliver to the Company all of the Stock Certificates (and the Shares represented
thereby).
(b) On the six month anniversary of the Acquisition Date (the
"Condition Date"), the Escrow Agent shall release from escrow and deliver to the
Subscriber Stock Certificates representing 175,641 Shares.
(c) The Escrow Agent will release from escrow and deliver to the
Subscriber Stock Certificates representing (i) 35,128 Shares on each of the six
month, nine month, twelve month and fifteen month anniversaries of the Condition
Date and (ii) the balance of 35,129 Shares on the eighteen month anniversary of
the Condition Date.
2
<PAGE>
(d) (i) If the Subscriber's employment by the Company is terminated
during the Escrow Period by reason of the Subscriber's death or Disability (as
defined in the Employment Agreement), the Company will deliver written notice of
such termination (a "Death/Disability Notice") to the Escrow Agent, with a copy
of the Death/Disability Notice to be delivered simultaneously to the Subscriber
or his estate or legal representative (as the case may be) and evidence of
delivery of such copy to be delivered simultaneously to the Escrow Agent. If, at
any time following such termination by reason of death or disability, the
Company has not delivered a Death/Disability Notice, the Subscriber, the
administrator of his estate or his legal representative (as the case may be) may
deliver a Death/Disability Notice to the Escrow Agent (together with evidence of
the administrator's or legal representative's legal authority ("Authority
Evidence"), as applicable). A copy of such Death/Disability Notice and Authority
Evidence shall be delivered simultaneously to the Company and evidence of
delivery of such copy shall be delivered to the Escrow Agent. Provided the
Escrow Agent has not received from the Company or the Subscriber or his estate
or legal representative, within twenty (20) days after receipt of the
Death/Disability Notice (the "Contest Period"), written notice contesting the
Death/Disability Notice (a "Contest Notice"), the Escrow Agent will release from
escrow and deliver to the Subscriber or his estate or legal representative, as
the case may be, all of the Stock Certificates (and the Shares represented
thereby) then held in escrow by the Escrow Agent.
(ii) If the Escrow Agent receives a Contest Notice during the
Contest Period, the Escrow Agent shall continue to hold all Stock Certificates
(and Shares represented thereby) then held by it in escrow pursuant to the terms
hereof, and shall make no further releases of Stock Certificates hereunder
unless and until it receives written instructions specifying disposition of the
Stock Certificates executed by the Company and the Subscriber, the administrator
of his estate or his legal representative, as the case may be. If the Escrow
Agent receives no such written instructions during the ninety (90) day period
following receipt of the Contest Notice, the Escrow Agent shall deposit all
Stock Certificates then held by it with a court of competent jurisdiction to be
held pending resolution of the dispute between the Company and the Subscriber or
his estate or legal representative, and thereafter, the Escrow Agent shall have
no further duties or obligations hereunder.
(e) (i) If the Subscriber's employment by the Company is terminated
during the Escrow Period other than by reason of the Subscriber's death or
Disability and without Cause (as defined in the Employment Agreement), either
the Subscriber or the Company may deliver written notice of such termination (a
"Non-Cause Notice") to the Escrow Agent, with a copy of the Non-Cause Notice to
be delivered simultaneously to the other party (the "Non-Cause Notice
Recipient") and evidence of delivery of such copy to be delivered simultaneously
to the Escrow Agent. Provided the Escrow Agent has not received from the
Non-Cause Notice Recipient, within twenty (20) days after receipt of the
Non-Cause Notice (the "Non-Cause Contest Period"), written notice contesting the
Non-Cause Notice (a "Non-Cause Contest Notice"), the Escrow Agent will release
from escrow and deliver to the Subscriber all of the Stock Certificates (and the
Shares represented thereby) then held in escrow by the Escrow Agent.
(ii) If the Escrow Agent receives a Non-Cause Contest Notice
during the Non-Cause Contest Period, the Escrow Agent shall continue to hold all
Stock Certificates (and Shares represented thereby) then held by it in escrow
pursuant to the terms hereof, and shall make no further releases of Stock
Certificates hereunder unless and until it receives written
3
<PAGE>
instructions specifying disposition of the Stock Certificates executed by the
Company and the Subscriber. If the Escrow Agent receives no such written
instructions during the ninety (90) day period following receipt of the
Non-Cause Contest Notice, the Escrow Agent shall deposit all Stock Certificates
then held by it with a court of competent jurisdiction to be held pending
resolution of the dispute between the Company and the Subscriber and thereafter,
the Escrow Agent shall have no further duties or obligations hereunder.
(f) (i) The Company and the Subscriber acknowledge that, pursuant to
the terms of the Subscription Agreement, if the Subscriber's employment with the
Company is terminated during the Escrow Period for Cause, the Company has agreed
to repurchase the Shares then held in escrow pursuant hereto from the Subscriber
on the terms specified in the Subscription Agreement. In such event, the Company
will, on the date of such repurchase, provide the Escrow Agent with written
notice of such repurchase (a "Termination Repurchase Notice"), and the Escrow
Agent will, promptly upon receipt of such notice, release from escrow and
deliver to the Company all of the Stock Certificates (and the Shares represented
thereby) then held by the Escrow Agent.
(ii) Notwithstanding the provisions of Section 2(f)(i) above,
upon termination of the Subscriber's employment with the Company during the
Escrow Period for Cause, either the Company or the Subscriber may, prior to the
delivery to the Escrow Agent of a Termination Repurchase Notice, deliver to the
Escrow Agent written notice (a "Termination Contest Notice") contesting the
termination of employment and/or the obligation under the Subscription Agreement
to sell and purchase the Shares then held in escrow. The party delivering the
Termination Contest Notice to the Escrow Agent shall simultaneously deliver a
copy of such notice to the other party hereto and evidence of delivery of such
copy shall be delivered simultaneously to the Escrow Agent. Upon receipt of a
Termination Contest Notice, the Escrow Agent shall thereafter continue to hold
all Stock Certificates (and Shares represented thereby) then held by it in
escrow pursuant to the terms hereof, and shall make no further releases of Stock
Certificates hereunder unless and until it receives a Termination Repurchase
Notice or other written instructions specifying disposition of the Stock
Certificates then held by it executed by the Company and the Subscriber. If the
Escrow Agent receives no Termination Repurchase Notice or other such written
instructions during the ninety (90) day period following receipt of the
Termination Contest Notice, the Escrow Agent shall deposit all Stock
Certificates then held by it with a court of competent jurisdiction to be held
pending resolution of the dispute between the Company and the Subscriber, and
thereafter, the Escrow Agent shall have no further duties or obligations
hereunder.
3. TERMINATION UPON FINAL DISPOSITION. This Escrow Agreement shall
terminate upon the final disposition of the Stock Certificates and may be
terminated at any time prior thereto by and upon receipt by the Escrow Agent of
written notice of termination signed by the Company and the Subscriber directing
the disposition of the Stock Certificates.
4. RIGHTS IN RESPECT OF SHARES HELD IN ESCROW. All rights in connection
with or incident to the ownership of the Shares, including without limitation,
the right to exercise any and all voting rights associated with the Shares and
the right to receive and retain any and all dividends or other distributions in
respect of the Shares, during the period such Shares are held in escrow pursuant
hereto, shall be vested solely in the Subscriber.
4
<PAGE>
5. ESCROW PROVISIONS. (a) The obligations and duties of the Escrow Agent
in connection herewith are confined to those specifically enumerated herein and
the Escrow Agent shall not be liable or responsible for any act or failure to
act on its part except for its own willful misconduct or gross negligence.
(b) The duties of the Escrow Agent hereunder shall be limited to the
safekeeping of the Stock Certificates and the disposition of the same solely in
accordance with the terms and conditions hereof and no implied duties or
obligations shall be read herein against the Escrow Agent.
(c) The Escrow Agent may act or refrain from acting with respect to
any matter referred to herein in full reliance upon the advice of counsel of its
choice, and shall be fully protected and released as to any matter with respect
to which it shall have acted or refrained from acting upon the advice of such
counsel.
(d) The Escrow Agent may rely or act upon orders or directions,
instruments or signatures believed by it to be genuine and may assume that any
person purporting to give any written notice, advice or instruction in
connection therewith has been fully authorized to do so.
(e) The Escrow Agent shall not be bound by any modification,
amendment, termination, cancellation, rescission or supercedence of the terms
and conditions contained herein unless the same shall be in writing and signed
by the other parties hereto. However, the Escrow Agent's duties as Escrow Agent
hereunder shall not be affected, unless the Escrow Agent shall have given its
prior written consent thereto.
(f) If the Escrow Agent shall be uncertain as to its duties or
rights hereunder, then Escrow Agent shall refrain from taking any action other
than to keep safely the Stock Certificates, until it shall be directed otherwise
in writing jointly by the Company and the Subscriber or by a final judgment or
order of a court of competent jurisdiction. Any such judgment shall be delivered
to the Escrow Agent with a written opinion of counsel setting forth that such
judgment is final and that such court is a court of competent jurisdiction and
that Escrow Agent shall be fully protected in relying thereon.
(g) The Escrow Agent shall not be required to institute or defend
any action or legal proceeding involving the terms and conditions contained
herein. For all payments and deliveries made by the Escrow Agent in accordance
with the provisions hereof, the Escrow Agent shall have full release, discharge
and acquittance and shall not be subject to any claim on the part of any persons
beneficially interested hereunder. It is expressly understood by the Company and
the Subscriber agree, jointly and severally, to indemnify and hold harmless the
Escrow Agent and its successors and assigns from and against any and all claims,
disputes or defenses which may arise between the Company and the Subscriber.
(h) The Company and the Subscriber shall reimburse and indemnify the
Escrow Agent for, and hold it harmless against, any and all loss, liability,
costs or expenses in connection herewith including reasonable attorneys' fees,
incurred on the part of the Escrow Agent or arising out of or in connection with
its acceptance of, or the performance of its duties and obligations under, this
Escrow Agreement, as well as the reasonable costs and expenses of defending
against
5
<PAGE>
any claim or liability arising out of or relating to this Escrow Agreement,
except for such loss, liability, costs or expenses resulting from Escrow Agent's
own gross negligence or willful misconduct. Such obligations shall be borne by
the Company.
(i) The Escrow Agent may at any time resign hereunder by giving
written notice of resignation to the other parties hereto at least ten days
prior to the date specified for such resignation to take effect, and upon the
effective date of such resignation, the Stock Certificates then held by the
Escrow Agent hereunder shall be turned over to a new escrow agent designated in
writing by the Escrow Agent who shall be reasonably acceptable to the Company
and the Subscriber and who shall have accepted all of the terms hereof,
whereupon all of the Escrow Agent's obligations hereunder shall cease and
terminate. If no such person shall have been approved by the Company and the
Subscriber by such date, the Escrow Agent shall be entitled to deposit the Stock
Certificates with a court of competent jurisdiction whereupon all of the Escrow
Agent's obligations hereunder shall cease and terminate.
6. NOTICES. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be deemed to have been received
(a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct
answer back received), telecopy or facsimile (with transmission confirmation
report) at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be:
If to the Company:
Vacation Emporium Corporation
90 Madison Street
Denver, Colorado 80806
If to the Subscriber:
To the address listed opposite the Subscriber's signature below
With a copy to:
Hazel Thomas, P.C.
3110 Fairview Park Drive
Suite 1400
Falls Church, Virginia 22042
6
<PAGE>
Telecopier: (703) 641-4340
Attn.: Benton Burroughs, Jr., Esq.
If to the Escrow Agent to:
Bryan Cave LLP
245 Park Avenue
New York, New York 10167-0034
Telecopier: (212) 692-1900
Attn.: Steven A. Saide, Esq.
A copy of all notices and communications hereunder shall be sent to:
Bryan Cave LLP
245 Park Avenue
New York, New York 10167-0034
Telecopier: (212) 692-1900
Attn.: Steven A. Saide, Esq.
or such other address as may be designated in writing hereafter, in the same
manner, by such person.
7. WAIVER. No waiver by any party of any breach of any term contained in
this Escrow Agreement, in any one or more instances, shall be deemed to be or
construed as a further continuing waiver of any such breach or a waiver of any
breach of any other term contained in this Escrow Agreement.
8. COUNTERPARTS. This Escrow Agreement may be executed in counterparts,
each of which shall be deemed as original and which counterparts together shall
constitute one and the same instrument.
7
<PAGE>
9. APPLICABLE LAW. This Agreement is intended to be construed solely in
accordance with and governed solely by the laws of the State of New York
pertaining to contracts made and fully performed therein (without giving effect
to choice of law principles).
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
ESCROW AGENT:
BRYAN CAVE LLP
By: /s/ Steven A. Saide
-------------------------------------
Name: Steven A. Saide
Title: Partner
THE COMPANY:
VACATION EMPORIUM CORPORATION
By: /s/ Ian Rice
--------------------------------------
Name: Ian Rice
Title: Chairman
THE SUBSCRIBER:
/s/ David McCallen
--------------------------------------
Name: David McCallen
Address: 304 North Saint Asaph Street
Alexandria, Virginia 22314
No. of Shares: 526,923
8
<PAGE>
Schedule I
Subscriber and Address Stock Certificate #(s) Number of Shares
- ---------------------- ---------------------- ----------------
David McCallen 2001 175,641
304 North Saint Asaph Street 2002 175,641
Alexandria, Virginia 22314 2003 35,128
2004 35,128
2005 35,128
2006 35,128
2007 35,129
<PAGE>
EXHIBIT A
RECEIPT
Reference is made to the Escrow Agreement (the "Escrow Agreement") dated
July 30, 1999 among Vacation Emporium Corporation (the "Company"), the
individual listed on Schedule I to the Escrow Agreement, a copy of which
Schedule is annexed hereto, and Bryan Cave LLP as escrow agent (the "Escrow
Agent"). Capitalized terms used herein and not otherwise defined have the
meanings set forth in the Escrow Agreement. By its signature below, the Escrow
Agent acknowledges receipt of the Stock Certificate listed on Schedule I to the
Escrow Agreement.
/s/ Bryan Cave LLP
--------------------------------------
BRYAN CAVE LLP
<PAGE>
AMENDED AND RESTATED ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of July 30, 1999, by and among VACATION
EMPORIUM CORPORATION, a Nevada corporation (the "Company") with its address at
90 Madison Street, Denver, Colorado 80806, Shawn D. Baldwin (the "Subscriber"),
an individual with his address listed opposite his signature below, and BRYAN
CAVE LLP (the "Escrow Agent"), with its address at 245 Park Avenue, New York,
New York 10167-0034. The parties entered into an Escrow Agreement, dated July
30, 1999, which, among other things, provided for the escrow of shares purchased
by Subscriber from the Company. The parties wish to correct certain errors
contained in the Escrow Agreement and, as so corrected, to restate in its
entirety the Escrow Agreement. Accordingly, the Subscriber, the Company and the
Escrow Agent hereby do amend and restate in its entirety the Escrow Agreement as
follows:
W I T N E S S E T H:
WHEREAS, the Company and the Subscriber are parties to a certain Amended
and Restated Subscription and Rights Agreement of even date herewith (the
"Subscription Agreement") pursuant to which the Subscriber is subscribing for
and purchasing from the Company 351,282 shares of the Company's common stock,
par value $.001 per share (the "Shares"), as more particularly set forth
therein;
WHEREAS, the Company has entered into a non-binding letter of intent with
Charles V. Payne ("Payne") describing the intent of the parties that the Company
acquire from Payne all of the issued and outstanding shares of capital stock of
Wall Street Strategies, Inc., a Delaware corporation ("WSS"; such acquisition
(or proposed acquisition) referred to herein as the "WSS Acquisition");
WHEREAS, the Subscriber and the Company are entering into an employment
agreement of even date herewith (the "Employment Agreement"), pursuant to which
Employment Agreement the Subscriber is to be employed by the Company on the
terms and conditions set forth therein; and
WHEREAS, the Subscription Agreement provides, among other things, that,
simultaneously herewith, the Company, the Subscriber and the Escrow Agent shall
execute this Escrow Agreement and, simultaneously herewith or as soon hereafter
as practicable, the Company shall deposit into escrow with the Escrow Agent, to
be held in accordance with the terms hereof, stock certificates representing
263,461 of the Shares (the "Escrow Shares"), registered in the name of the
Subscriber on the books and records of the Company, duly endorsed in blank or
accompanied by stock powers or other instruments of transfer duly endorsed in
blank, in either case with signature guaranteed.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. DEPOSIT. (a) Simultaneously with the execution hereof, or as soon
hereafter as practicable, the Company, on behalf of the Subscriber, is
delivering or will deliver to the Escrow
<PAGE>
Agent stock certificates evidencing the Escrow Shares registered in the name of
the Subscriber on the books and records of the Company (which stock certificates
are, or at the time of deposit will be more fully described on the annexed
Schedule I), duly endorsed in blank by the Subscriber with signature guaranteed
or accompanied by stock powers duly endorsed in blank by the subscriber (such
stock certificates, as so endorsed or accompanied by stock powers, are referred
to herein, individually, as a "Stock Certificate" and collectively, as the
"Stock Certificates").
(b) The Escrow Agent, upon receipt of the Stock Certificates, will
execute the receipt therefor attached as Exhibit A and deliver copies of such
receipt to the Company and the Subscriber.
(c) The Escrow Agent agrees to hold the Stock Certificates in escrow
and to act with respect thereto and otherwise as hereinafter set forth.
2. DISPOSITION OF THE ESCROW.
(a) On October 28, 1999, the Escrow Agent will release from escrow
and deliver to the Subscriber 87,820 Shares in accordance with the terms of the
Escrow Agreement.
(b) On April 7, 2000, the Escrow Agent will release from escrow and
deliver to the Subscriber 175,641 of the Escrow Shares in accordance with the
terms of the Escrow Agreement.
(c) If the Subscriber's employment by the Company is terminated
during the Escrow Period by reason of the Subscriber's death or Disability (as
defined in the Employment Agreement), the Company will deliver written notice of
such termination (a "Death/Disability Notice") to the Escrow Agent, with a copy
of the Death/Disability Notice to be delivered simultaneously to the Subscriber
or his estate or legal representative (as the case may be) and evidence of
delivery of such copy to be delivered simultaneously to the Escrow Agent. If, at
any time following such termination by reason of death or disability, the
Company has not delivered a Death/Disability Notice, the Subscriber, the
administrator of his estate or his legal representative (as the case may be) may
deliver a Death/Disability Notice to the Escrow Agent (together with evidence of
the administrator's or legal representative's legal authority ("Authority
Evidence"), as applicable). A copy of such Death/Disability Notice and Authority
Evidence shall be delivered simultaneously to the Company and evidence of
delivery of such copy shall be delivered to the Escrow Agent. Provided the
Escrow Agent has not received from the Company or the Subscriber or his estate
or legal representative, within twenty (20) days after receipt of the
Death/Disability Notice (the "Contest Period"), written notice contesting the
Death/Disability Notice (a "Contest Notice"), the Escrow Agent will release from
escrow and deliver to the Subscriber or his estate or legal representative, as
the case may be, all of the Stock Certificates (and the Shares represented
thereby) then held in escrow by the Escrow Agent.
(d) If the Escrow Agent receives a Contest Notice during the Contest
Period, the Escrow Agent shall continue to hold all Stock Certificates (and
Shares represented thereby) then held by it in escrow pursuant to the terms
hereof, and shall make no further releases of Stock Certificates hereunder
unless and until it receives written instructions specifying
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disposition of the Stock Certificates executed by the Company and the
Subscriber, the administrator of his estate or his legal representative, as the
case may be. If the Escrow Agent receives no such written instructions during
the ninety (90) day period following receipt of the Contest Notice, the Escrow
Agent shall deposit all Stock Certificates then held by it with a court of
competent jurisdiction to be held pending resolution of the dispute between the
Company and the Subscriber or his estate or legal representative, and
thereafter, the Escrow Agent shall have no further duties or obligations
hereunder.
(e) If the Subscriber's employment by the Company is terminated
during the Escrow Period other than by reason of the Subscriber's death or
Disability and without Cause (as defined in the Employment Agreement), either
the Subscriber or the Company may deliver written notice of such termination (a
"Non-Cause Notice") to the Escrow Agent, with a copy of the Non-Cause Notice to
be delivered simultaneously to the other party (the "Non-Cause Notice
Recipient") and evidence of delivery of such copy to be delivered simultaneously
to the Escrow Agent. Provided the Escrow Agent has not received from the
Non-Cause Notice Recipient, within twenty (20) days after receipt of the
Non-Cause Notice (the "Non-Cause Contest Period"), written notice contesting the
Non-Cause Notice (a "Non-Cause Contest Notice"), the Escrow Agent will release
from escrow and deliver to the Subscriber all of the Stock Certificates (and the
Shares represented thereby) then held in escrow by the Escrow Agent.
(f) If the Escrow Agent receives a Non-Cause Contest Notice during
the Non-Cause Contest Period, the Escrow Agent shall continue to hold all Stock
Certificates (and Shares represented thereby) then held by it in escrow pursuant
to the terms hereof, and shall make no further releases of Stock Certificates
hereunder unless and until it receives written instructions specifying
disposition of the Stock Certificates executed by the Company and the
Subscriber. If the Escrow Agent receives no such written instructions during the
ninety (90) day period following receipt of the Non-Cause Contest Notice, the
Escrow Agent shall deposit all Stock Certificates then held by it with a court
of competent jurisdiction to be held pending resolution of the dispute between
the Company and the Subscriber and thereafter, the Escrow Agent shall have no
further duties or obligations hereunder.
(g) The Company and the Subscriber acknowledge that, pursuant to the
terms of the Subscription Agreement, if the Subscriber's employment with the
Company is terminated during the Escrow Period for Cause, the Company has agreed
to repurchase the Shares then held in escrow pursuant hereto from the Subscriber
on the terms specified in the Subscription Agreement. In such event, the Company
will, on the date of such repurchase, provide the Escrow Agent with written
notice of such repurchase (a "Termination Repurchase Notice"), and the Escrow
Agent will, promptly upon receipt of such notice, release from escrow and
deliver to the Company all of the Stock Certificates (and the Shares represented
thereby) then held by the Escrow Agent.
(h) Notwithstanding the provisions of Section 2(g) above, upon
termination of the Subscriber's employment with the Company during the Escrow
Period for Cause, either the Company or the Subscriber may, prior to the
delivery to the Escrow Agent of a Termination Repurchase Notice, deliver to the
Escrow Agent written notice (a "Termination Contest Notice") contesting the
termination of employment and/or the obligation under the Subscription
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Agreement to sell and purchase the Shares then held in escrow. The party
delivering the Termination Contest Notice to the Escrow Agent shall
simultaneously deliver a copy of such notice to the other party hereto and
evidence of delivery of such copy shall be delivered simultaneously to the
Escrow Agent. Upon receipt of a Termination Contest Notice, the Escrow Agent
shall thereafter continue to hold all Stock Certificates (and Shares represented
thereby) then held by it in escrow pursuant to the terms hereof, and shall make
no further releases of Stock Certificates hereunder unless and until it receives
a Termination Repurchase Notice or other written instructions specifying
disposition of the Stock Certificates then held by it executed by the Company
and the Subscriber. If the Escrow Agent receives no Termination Repurchase
Notice or other such written instructions during the ninety (90) day period
following receipt of the Termination Contest Notice, the Escrow Agent shall
deposit all Stock Certificates then held by it with a court of competent
jurisdiction to be held pending resolution of the dispute between the Company
and the Subscriber, and thereafter, the Escrow Agent shall have no further
duties or obligations hereunder.
3. TERMINATION UPON FINAL DISPOSITION. This Escrow Agreement shall
terminate upon the final disposition of the Stock Certificates and may be
terminated at any time prior thereto by and upon receipt by the Escrow Agent of
written notice of termination signed by the Company and the Subscriber directing
the disposition of the Stock Certificates.
4. RIGHTS IN RESPECT OF SHARES HELD IN ESCROW. All rights in connection
with or incident to the ownership of the Shares, including without limitation,
the right to exercise any and all voting rights associated with the Shares and
the right to receive and retain any and all dividends or other distributions in
respect of the Shares, during the period such Shares are held in escrow pursuant
hereto, shall be vested solely in the Subscriber.
5. ESCROW PROVISIONS. (a) The obligations and duties of the Escrow Agent
in connection herewith are confined to those specifically enumerated herein and
the Escrow Agent shall not be liable or responsible for any act or failure to
act on its part except for its own willful misconduct or gross negligence.
(b) The duties of the Escrow Agent hereunder shall be limited to the
safekeeping of the Stock Certificates and the disposition of the same solely in
accordance with the terms and conditions hereof and no implied duties or
obligations shall be read herein against the Escrow Agent.
(c) The Escrow Agent may act or refrain from acting with respect to
any matter referred to herein in full reliance upon the advice of counsel of its
choice, and shall be fully protected and released as to any matter with respect
to which it shall have acted or refrained from acting upon the advice of such
counsel.
(d) The Escrow Agent may rely or act upon orders or directions,
instruments or signatures believed by it to be genuine and may assume that any
person purporting to give any written notice, advice or instruction in
connection therewith has been fully authorized to do so.
(e) The Escrow Agent shall not be bound by any modification,
amendment, termination, cancellation, rescission or supercedence of the terms
and conditions contained
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herein unless the same shall be in writing and signed by the other parties
hereto. However, the Escrow Agent's duties as Escrow Agent hereunder shall not
be affected, unless the Escrow Agent shall have given its prior written consent
thereto.
(f) If the Escrow Agent shall be uncertain as to its duties or
rights hereunder, then Escrow Agent shall refrain from taking any action other
than to keep safely the Stock Certificates, until it shall be directed otherwise
in writing jointly by the Company and the Subscriber or by a final judgment or
order of a court of competent jurisdiction. Any such judgment shall be delivered
to the Escrow Agent with a written opinion of counsel setting forth that such
judgment is final and that such court is a court of competent jurisdiction and
that Escrow Agent shall be fully protected in relying thereon.
(g) The Escrow Agent shall not be required to institute or defend
any action or legal proceeding involving the terms and conditions contained
herein. For all payments and deliveries made by the Escrow Agent in accordance
with the provisions hereof, the Escrow Agent shall have full release, discharge
and acquittance and shall not be subject to any claim on the part of any persons
beneficially interested hereunder. It is expressly understood by the Company and
the Subscriber agree, jointly and severally, to indemnify and hold harmless the
Escrow Agent and its successors and assigns from and against any and all claims,
disputes or defenses which may arise between the Company and the Subscriber.
(h) The Company and the Subscriber shall reimburse and indemnify the
Escrow Agent for, and hold it harmless against, any and all loss, liability,
costs or expenses in connection herewith including reasonable attorneys' fees,
incurred on the part of the Escrow Agent or arising out of or in connection with
its acceptance of, or the performance of its duties and obligations under, this
Escrow Agreement, as well as the reasonable costs and expenses of defending
against any claim or liability arising out of or relating to this Escrow
Agreement, except for such loss, liability, costs or expenses resulting from
Escrow Agent's own gross negligence or willful misconduct. Such obligations
shall be borne by the Company.
(i) The Escrow Agent may at any time resign hereunder by giving written
notice of resignation to the other parties hereto at least ten days prior to the
date specified for such resignation to take effect, and upon the effective date
of such resignation, the Stock Certificates then held by the Escrow Agent
hereunder shall be turned over to a new escrow agent designated in writing by
the Escrow Agent who shall be reasonably acceptable to the Company and the
Subscriber and who shall have accepted all of the terms hereof, whereupon all of
the Escrow Agent's obligations hereunder shall cease and terminate. If no such
person shall have been approved by the Company and the Subscriber by such date,
the Escrow Agent shall be entitled to deposit the Stock Certificates with a
court of competent jurisdiction whereupon all of the Escrow Agent's obligations
hereunder shall cease and terminate.
6. NOTICES. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be deemed to have been received
(a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct
answer back received), telecopy or facsimile (with transmission confirmation
report) at the address or number designated below (if delivered on a business
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day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be:
If to the Company:
Vacation Emporium Corporation
90 Madison Street
Denver, Colorado 80806
If to the Subscriber:
To the address listed opposite the Subscriber's signature below
If to the Escrow Agent to:
Bryan Cave LLP
245 Park Avenue
New York, New York 10167-0034
Telecopier: (212) 692-1900
Attn.: Steven A. Saide, Esq.
A copy of all notices and communications hereunder shall be sent to:
Bryan Cave LLP
245 Park Avenue
New York, New York 10167-0034
Telecopier: (212) 692-1900
Attn.: Steven A. Saide, Esq.
or such other address as may be designated in writing hereafter, in the
same manner, by such person.
7. WAIVER. No waiver by any party of any breach of any term contained in
this Escrow Agreement, in any one or more instances, shall be deemed to be or
construed as a further continuing waiver of any such breach or a waiver of any
breach of any other term contained in this Escrow Agreement.
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8. COUNTERPARTS. This Escrow Agreement may be executed in counterparts,
each of which shall be deemed as original and which counterparts together shall
constitute one and the same instrument.
9. APPLICABLE LAW. This Agreement is intended to be construed solely in
accordance with and governed solely by the laws of the State of New York
pertaining to contracts made and fully performed therein (without giving effect
to choice of law principles).
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
ESCROW AGENT:
BRYAN CAVE LLP
By: /s/ Steven A. Saide
-------------------------------------
Name: Steven A. Saide
Title: Partner
THE COMPANY:
VACATION EMPORIUM CORPORATION
By: /s/ Ian Rice
-------------------------------------
Name: Ian Rice
Title: Chairman
THE SUBSCRIBER:
/s/ Shawn D. Baldwin
-----------------------------------------
Name: Shawn D. Baldwin
Address: 680 North Lake Shore Drive
Apt. 407
Chicago, Illinois 60611
No. of Shares: 351,282
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Schedule I
Subscriber and Address Stock Certificate #(s) Number of Shares
- ---------------------- ---------------------- ----------------
Shawn D. Baldwin 2008 87,821
680 North Lake Shore Drive 2009 87,820
Apt. 407 2010 175,641
Chicago, Illinois 60611
<PAGE>
Exhibit A
Receipt
Reference is made to the Escrow Agreement (the "Escrow Agreement")
dated July 30, 1999 among Vacation Emporium Corporation (the "Company"), the
individual listed on Schedule I to the Escrow Agreement, a copy of which
Schedule is annexed hereto, and Bryan Cave LLP as escrow agent (the "Escrow
Agent"). Capitalized terms used herein and not otherwise defined have the
meanings set forth in the Escrow Agreement. By its signature below, the Escrow
Agent acknowledges receipt of the Stock Certificates listed on Schedule I to the
Escrow Agreement.
/s/ Bryan Cave LLP
---------------------------------------
BRYAN CAVE LLP
<PAGE>
ESCROW AGREEMENT
ESCROW AGREEMENT ("Escrow Agreement"), dated as of this ___ day of
_________, 1999, by and among VACATION EMPORIUM CORPORATION, a Nevada
corporation (the "Company") with its address at 90 Madison Street, Denver,
Colorado 80806, the individual executing this Escrow Agreement below (the
"Subscriber"), with the address listed opposite Subscriber's signature below,
and BRYAN CAVE LLP (the "Escrow Agent"), with its address at 245 Park Avenue,
New York, New York 10167-0034.
W I T N E S S E T H:
WHEREAS, the Company and the Subscriber are parties to a certain
Subscription and Rights Agreement of even date herewith (the "Subscription
Agreement") pursuant to which the Subscriber is subscribing for and purchasing
from the Company the number of shares of the Company's common stock, par value
$.001 per share, set forth opposite his/her signature below (the "Shares"), as
more particularly set forth therein;
WHEREAS, the Company has entered into a non-binding letter of intent with
Charles V. Payne ("Payne") describing the intent of the parties that the Company
acquire from Payne all of the issued and outstanding shares of capital stock of
Wall Street Strategies, Inc., a Delaware corporation ("WSS"; such acquisition
(or proposed acquisition) referred to herein as the "WSS Acquisition");
WHEREAS, the Company proposes to employ the Subscriber on an "at-will"
basis commencing on or after the completion, if any, of the WSS Acquisition;
WHEREAS, the Subscription Agreement provides, among other things, that,
simultaneously herewith, the Company, the Subscriber and the Escrow Agent shall
execute this Escrow Agreement and, simultaneously herewith or as soon hereafter
as practicable, the Company shall deposit into escrow with the Escrow Agent, to
be held in accordance with the terms hereof, stock certificates representing the
Shares, registered in the name of the Subscriber on the books and records of the
Company, duly endorsed in blank or accompanied by stock powers or other
instruments of transfer duly endorsed in blank, in either case with signature
guaranteed.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. DEPOSIT. (a) Simultaneously with the execution hereof, or as soon
hereafter as practicable, the Company, on behalf of the Subscriber, is
delivering or will deliver to the Escrow Agent stock certificates evidencing the
Shares registered in the name of the Subscriber on the books and records of the
Company (which stock certificates are, or at the time of deposit will be, more
fully described on the annexed Schedule I), duly endorsed in blank by the
Subscriber with signature guaranteed or accompanied by stock powers duly
endorsed in blank by the Subscriber (such stock certificates, as so endorsed or
accompanied by stock powers, are referred to herein, individually, as a "Stock
Certificate" and collectively, as the "Stock Certificates").
<PAGE>
(b) The Escrow Agent, upon receipt of the Stock Certificates, will
execute the receipt therefor attached as Exhibit A and deliver copies of such
receipt to the Company and the Subscriber.
(c) The Escrow Agent agrees to hold the Stock Certificates in escrow
and to act with respect thereto and otherwise as hereinafter set forth.
2. DISPOSITION OF THE ESCROW. (a) Subject to the other provisions of this
Section 2, the Escrow Agent shall release the Stock Certificates (and the Shares
represented thereby) from escrow and deliver the same to the Subscriber in eight
equal quarter annual installments during the two year period (the "Escrow
Period") commencing on the date of completion of the WSS Acquisition (the
"Acquisition Date"), the first incremental release of Stock Certificates to
occur on the three month anniversary of the Acquisition Date. The Company and
the Subscriber will deliver to the Escrow Agent on, or as soon as practicable
after the Acquisition Date written notice, signed by each, of the completion of
the WSS Acquisition, which notice (the "Acquisition Notice") will specify the
Acquisition Date.
(b) The Company acknowledges that if the WSS Acquisition is not
completed and the Escrow Agent does not receive an Acquisition Notice within
ninety (90) days after the date hereof, the Company has agreed, pursuant to the
terms of the Subscription Agreement, to repurchase the Shares from the
Subscriber on the terms specified therein. In such event, the Company and the
Subscriber will, on the date of such repurchase, provide the Escrow Agent with
written notice of such repurchase, signed by each, and the Escrow Agent will,
promptly upon receipt of such notice, release from escrow and deliver to the
Company all of the Stock Certificates (and the Shares represented thereby).
(c) (i) If the Subscriber's employment by the Company is terminated
during the Escrow Period by reason of the Subscriber's death or Disability (as
defined in the Subscription Agreement) the Company will deliver written notice
of such termination (a "Death/Disability Notice") to the Escrow Agent, with a
copy of the Death/Disability Notice to be delivered simultaneously to the
Subscriber or his/her estate or legal representative (as the case may be) and
evidence of delivery of such copy to be delivered simultaneously to the Escrow
Agent. If, at any time following such termination by reason of death or
disability, the Company has not delivered a Death/Disability Notice, the
Subscriber, the administrator of his/her estate or his/her legal representative
(as the case may be) may deliver a Death/Disability Notice to the Escrow Agent
(together with evidence of the administrator's or legal representative's legal
authority ("Authority Evidence"), as applicable). A copy of such
Death/Disability Notice and Authority Evidence shall be delivered simultaneously
to the Company and evidence of delivery of such copy shall be delivered to the
Escrow Agent. Provided the Escrow Agent has not received from the Company or the
Subscriber or his/her estate or legal representative, within twenty (20) days
after receipt of the Death/Disability Notice (the "Contest Period"), written
notice contesting the Death/Disability Notice (a "Contest Notice"), the Escrow
Agent will release from escrow and deliver to the Subscriber or his/her estate
or legal representative, as the case may be, all of the Stock Certificates (and
the Shares represented thereby) then held in escrow by the Escrow Agent.
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(ii) If the Escrow Agent receives a Contest Notice during the
Contest Period, the Escrow Agent shall continue to hold all Stock Certificates
(and Shares represented thereby) then held by it in escrow pursuant to the terms
hereof, and shall make no further releases of Stock Certificates hereunder
unless and until it receives written instructions specifying disposition of the
Stock Certificates executed by the Company and the Subscriber, the administrator
of his/her estate or his/her legal representative, as the case may be. If the
Escrow Agent receives no such written instructions during the ninety (90) day
period following receipt of the Contest Notice, the Escrow Agent shall deposit
all Stock Certificates then held by it with a court of competent jurisdiction to
be held pending resolution of the dispute between the Company and the Subscriber
or his/her estate or legal representative, and thereafter, the Escrow Agent
shall have no further duties or obligations hereunder.
(d) (i) The Company and the Subscriber acknowledge that, pursuant to
the terms of the Subscription Agreement, if the Subscriber's employment with the
Company is terminated during the Escrow Period for any reason other than the
death or Disability of the Subscriber, the Company has agreed to repurchase the
Shares then held in Escrow pursuant hereto from the Subscriber on the terms
specified in the Subscription Agreement. In such event, the Company and the
Subscriber will, on the date of such repurchase, provide the Escrow Agent with
written notice of such repurchase (a "Termination Repurchase Notice"), signed by
each, and the Escrow Agent will, promptly upon receipt of such notice, release
from escrow and deliver to the Company all of the Stock Certificates (and the
Shares represented thereby) then held by the Escrow Agent.
(ii) Notwithstanding the provisions of Section 2(d)(i) above,
upon termination of the Subscriber's employment with the Company during the
Escrow Period for any reason other than Subscriber's death or disability, either
the Company or the Subscriber may, prior to the delivery to the Escrow Agent of
a Termination Repurchase Notice, deliver to the Escrow Agent written notice (a
"Termination Contest Notice") contesting the termination of employment and/or
the obligation under the Subscription Agreement to sell and purchase the Shares
then held in escrow. The party delivering the Termination Contest Notice to the
Escrow Agent shall simultaneously deliver a copy of such notice to the other
party hereto and evidence of delivery of such copy shall be delivered
simultaneously to the Escrow Agent. Upon receipt of a Termination Contest
Notice, the Escrow Agent shall thereafter continue to hold all Stock
Certificates (and Shares represented thereby) then held by it in escrow pursuant
to the terms hereof, and shall make no further releases of Stock Certificates
hereunder unless and until it receives a Termination Repurchase Notice or other
written instructions specifying disposition of the Stock Certificates then held
by it executed by the Company and the Subscriber. If the Escrow Agent receives
no Termination Repurchase Notice or other such written instructions during the
ninety (90) day period following receipt of the Termination Contest Notice, the
Escrow Agent shall deposit all Stock Certificates then held by it with a court
of competent jurisdiction to be held pending resolution of the dispute between
the Company and the Subscriber, and thereafter, the Escrow Agent shall have no
further duties or obligations hereunder.
3. TERMINATION UPON FINAL DISPOSITION. This Escrow Agreement shall
terminate upon the final disposition of the Stock Certificates and may be
terminated at any time
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prior thereto by and upon receipt by the Escrow Agent of written notice of
termination signed by the Company and the Subscriber directing the disposition
of the Stock Certificates.
4. RIGHTS IN RESPECT OF SHARES HELD IN ESCROW. All rights in connection
with or incident to the ownership of the Shares, including without limitation,
the right to exercise any and all voting rights associated with the Shares and
the right to receive and retain any and all dividends or other distributions in
respect of the Shares, during the period such Shares are held in escrow pursuant
hereto, shall be vested solely in the Subscriber.
5. ESCROW PROVISIONS. (a) The obligations and duties of the Escrow Agent
in connection herewith are confined to those specifically enumerated herein and
the Escrow Agent shall not be liable or responsible for any act or failure to
act on its part except for its own willful misconduct or gross negligence.
(b) The duties of the Escrow Agent hereunder shall be limited to the
safekeeping of the Stock Certificates and the disposition of the same solely in
accordance with the terms and conditions hereof and no implied duties or
obligations shall be read herein against the Escrow Agent.
(c) The Escrow Agent may act or refrain from acting with respect to
any matter referred to herein in full reliance upon the advice of counsel of its
choice, and shall be fully protected and released as to any matter with respect
to which it shall have acted or refrained from acting upon the advice of such
counsel.
(d) The Escrow Agent may rely or act upon orders or directions,
instruments or signatures believed by it to be genuine and may assume that any
person purporting to give any written notice, advice or instruction in
connection therewith has been fully authorized to do so.
(e) The Escrow Agent shall not be bound by any modification,
amendment, termination, cancellation, rescission or supercedence of the terms
and conditions contained herein unless the same shall be in writing and signed
by the other parties hereto. However, the Escrow Agent's duties as Escrow Agent
hereunder shall not be affected, unless the Escrow Agent shall have given its
prior written consent thereto.
(f) If the Escrow Agent shall be uncertain as to its duties or
rights hereunder, then Escrow Agent shall refrain from taking any action other
than to keep safely the Stock Certificates, until it shall be directed otherwise
in writing jointly by the Company and the Subscriber or by a final judgment or
order of a court of competent jurisdiction. Any such judgment shall be delivered
to the Escrow Agent with a written opinion of counsel setting forth that such
judgment is final and that such court is a court of competent jurisdiction and
that Escrow Agent shall be fully protected in relying thereon.
(g) The Escrow Agent shall not be required to institute or defend
any action or legal proceeding involving the terms and conditions contained
herein. For all payments and deliveries made by the Escrow Agent in accordance
with the provisions hereof, the Escrow Agent shall have full release, discharge
and acquittance and shall not be subject to any claim on the part of any persons
beneficially interested hereunder. It is expressly understood by the Company and
the Subscriber agree, jointly and severally, to indemnify and hold harmless the
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<PAGE>
Escrow Agent and its successors and assigns from and against any and all claims,
disputes or defenses which may arise between the Company and the Subscriber.
(h) The Company and the Subscriber shall reimburse and indemnify the
Escrow Agent for, and hold it harmless against, any and all loss, liability,
costs or expenses in connection herewith including reasonable attorneys' fees,
incurred on the part of the Escrow Agent or arising out of or in connection with
its acceptance of, or the performance of its duties and obligations under, this
Escrow Agreement, as well as the reasonable costs and expenses of defending
against any claim or liability arising out of or relating to this Escrow
Agreement, except for such loss, liability, costs or expenses resulting from
Escrow Agent's own gross negligence or willful misconduct. Such obligations
shall be borne by the Company.
(i) The Escrow Agent may at any time resign hereunder by giving
written notice of resignation to the other parties hereto at least ten days
prior to the date specified for such resignation to take effect, and upon the
effective date of such resignation, the Stock Certificates then held by the
Escrow Agent hereunder shall be turned over to a new escrow agent designated in
writing by the Escrow Agent who shall be reasonably acceptable to the Company
and the Subscriber and who shall have accepted all of the terms hereof,
whereupon all of the Escrow Agent's obligations hereunder shall cease and
terminate. If no such person shall have been approved by the Company and the
Subscriber by such date, the Escrow Agent shall be entitled to deposit the Stock
Certificates with a court of competent jurisdiction whereupon all of the Escrow
Agent's obligations hereunder shall cease and terminate.
6. NOTICES. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be deemed to have been received
(a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct
answer back received), telecopy or facsimile (with transmission confirmation
report) at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be:
If to the Company:
Vacation Emporium Corporation
90 Madison Street
Denver, Colorado 80806
If to the Subscriber:
To the address listed opposite the Subscriber's signature below
If to the Escrow Agent to:
5
<PAGE>
Bryan Cave LLP
245 Park Avenue
New York, New York 10167-0034
Telecopier: (212) 692-1900
Attn.: Steven A. Saide
A copy of all notices and communications hereunder shall be sent to:
Bryan Cave LLP
245 Park Avenue
New York, New York 10167-0034
Telecopier: (212) 692-1900
Attn.: Steven A. Saide
or such other address as may be designated in writing hereafter, in the same
manner, by such person.
7. WAIVER. No waiver by any party of any breach of any term contained in
this Escrow Agreement, in any one or more instances, shall be deemed to be or
construed as a further continuing waiver of any such breach or a waiver of any
breach of any other term contained in this Escrow Agreement.
8. COUNTERPARTS. This Escrow Agreement may be executed in counterparts,
each of which shall be deemed as original and which counterparts together shall
constitute one and the same instrument.
6
<PAGE>
9. APPLICABLE LAW. This Agreement is intended to be construed solely in
accordance with and governed solely by the laws of the State of New York
pertaining to contracts made and fully performed therein (without giving effect
to choice of law principles).
IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement
on the date and year first above written.
ESCROW AGENT:
BRYAN CAVE LLP
By: ________________________________
Name:
Title:
THE COMPANY:
VACATION EMPORIUM CORPORATION
By: ________________________________
Name:
Title:
THE SUBSCRIBER:
____________________________________
Name:
Address:
No. of Shares:
7
<PAGE>
Schedule I
Subscriber and Address Stock Certificate #(s) Number of Shares
- ---------------------- ---------------------- ----------------
<PAGE>
EXHIBIT A
RECEIPT
Reference is made to the Escrow Agreement (the "Escrow Agreement") dated
___________, 1999 among Vacation Emporium Corporation (the "Company"), the
individual listed on Schedule I to the Escrow Agreement, a copy of which
Schedule is annexed hereto, and Bryan Cave LLP as escrow agent (the "Escrow
Agent"). Capitalized terms used herein and not otherwise defined have the
meanings set forth in the Escrow Agreement. By its signature below, the Escrow
Agent acknowledges receipt of the Stock Certificate listed on Schedule I to the
Escrow Agreement.
--------------------------------------
BRYAN CAVE LLP
<PAGE>
VACATION EMPORIUM CORPORATION
STOCK OPTION AGREEMENT
(Executive - Non-Qualified)
- -------------------------------------------------------------------------------
Optionee Name: David McCallen
Optionee Address: 304 North Saint Asaph Street
Alexandria, Virginia 22314
Number of Shares of Exercise Price
Common Stock: 351,282 per Share: US $3.50
Date of Grant: July 30, 1999
- -------------------------------------------------------------------------------
STOCK OPTION AGREEMENT (this "Agreement") made as of the Date of
Grant set forth above (the "Date of Grant"), between VACATION EMPORIUM
CORPORATION, a Nevada corporation (the "Company"), and the Optionee identified
above ("Optionee"), residing at the address set forth above.
WHEREAS, the Optionee is an executive officer of the Company; and
WHEREAS, pursuant to the Company's 1996 Compensatory Stock Option
Plan (the "Plan"), the Company desires to grant a stock option to Optionee to
purchase certain shares of its common stock, par value $.001 per share (the
"Common Stock"); and
WHEREAS, this Agreement consists of this Agreement and the Plan
attached hereto as Exhibit A;
NOW, THEREFORE, the Company and the Optionee hereby agree as
follows:
W I T N E S S E T H:
1. Definitions. In this Agreement, except where the context
otherwise indicates, the following definitions apply:
1.1 Terms defined in the Plan shall have the same meanings
when used herein as defined therein.
1.2 The term "Option" shall have the meaning set forth in
Section 3 hereof.
1.3 The term "Optionee" when used herein shall include the
Optionee's legal representative when the context requires.
<PAGE>
1.4 The term "Plan Administrator" shall have the same meaning
as "Compensation Committee" as set forth in the Plan.
2. Representations, Warranties and Acknowledgements of the Optionee.
2.1 The Optionee's address set forth above is his or her true
and correct residence.
2.2 The Optionee has had an opportunity to ask questions and
receive answers from the officers and directors of the Company, or a person or
persons acting on its behalf, concerning the terms and conditions of this
Agreement and the business and affairs of the Company. The Optionee has a
sufficient business and personal relationship with one or more of the officers
and directors of the Company, and has sufficient business or financial
experience, so as to be able to protect his or her own interests in connection
with the issuance of the Option (as hereinafter defined) and the issuance of any
Common Stock upon any exercise of the Option.
2.3 The Optionee acknowledges that the Option and the Common
Stock to be issued upon the exercise of the Option, if any, are speculative
investments and involve a substantial degree of risk of loss by the Optionee.
The Optionee represents and warrants to the Company that he or she is acquiring
the Option, and the Common Stock to be issued upon the exercise of the Option
(if the Option is exercised), solely for investment purposes and not with a view
towards distribution or transfer. The Optionee acknowledges that the Option may
or may not be of any value, based on numerous circumstances and conditions, many
of which may be beyond the control of Optionee.
2.4 The Optionee acknowledges that the Option and the Common
Stock to be issued upon the exercise of the Option constitute a part of the
Optionee's compensation arrangement with the Company.
2.5 The Optionee confirms that neither the Company nor any
officer, director or representative thereof has made any representation,
prediction, or forecast as to the value or possible future value of the Option
or the Common Stock. The Optionee has not been induced to accept the Option by
any representation or promise by or on behalf of the Company.
2.6 The Optionee has had an opportunity to consult with his or
her legal, tax and investment advisors, to the extent the Optionee deems
necessary, concerning the Option.
2.7 This Agreement consists of this document and the terms and
provisions contained in the Plan, as it may be amended from time to time, which
are hereby incorporated by reference herein and made a part hereof. Unless
otherwise expressly stated herein, in the case of any conflict or inconsistency
between the terms of this document and the terms of the Plan, the terms of the
Plan shall control.
2.8 The Optionee acknowledges that the Option and the shares
of Common Stock to be issued upon exercise thereof have not been registered
under the Securities Act of 1933, as amended (the "Act"), in reliance on an
exemption from registration contained in Section 4(2) of the Act based, in part,
on the representations and warranties made by the Optionee hereunder. Optionee
agrees that the certificates evidencing the shares of Common Stock acquired by
him or her upon exercise of all or part of the Option may bear a restrictive
legend, if appropriate, indicating that the shares have not been registered
under the Act and are subject to restrictions on the transfer thereof.
2
<PAGE>
3. Grant of Option. The Company, subject to the terms of the Plan,
hereby grants to the Optionee as of the Date of Grant, as a matter of separate
inducement and agreement and not in lieu of salary or other compensation for
services, a non-qualified stock option (the "Option") to purchase in the
aggregate the number of shares of the Common Stock of the Company set forth in
the box on the first page hereof (the "Shares"). Optionee understands that the
Option granted under this Agreement is not intended to and will not qualify for
special tax treatment under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code").
4. Exercise Price. The exercise price (the "Exercise Price") of the
Option is the amount per share set forth in the box on the front page hereof,
subject to adjustment as provided in Section 9 of the Plan.
5. Option Non-Transferable. The Option shall not be transferable by
the Optionee otherwise than by will, or by the laws of descent and distribution,
and shall be exercised during the lifetime of the Optionee only by the Optionee.
Neither the Option nor any interest therein may be transferred, sold, assigned,
pledged or hypothecated by the Optionee during the Optionee's lifetime, whether
by operation of law or otherwise, or be made subject to execution, attachment or
similar process.
6. Exercisability of Option. The Option shall not be exercisable and
none of the Shares may be purchased until (i) the three (3) month anniversary
(the "Exercise Date") following the six (6) month anniversary of the date of
closing of the Company's acquisition of Wall Street Strategies, Inc. (the
"Condition Date") and (ii) the fulfillment of the express condition that the
website to be created for the Company has, as of the Condition Date, become
capable of efficient and immediate delivery of information to subscribers
thereto (the "Condition"). On the Exercise Date, provided that the Condition has
been fulfilled on or prior to the Condition Date, and thereafter, during the
term of the Option, the Option shall be and become exercisable as follows: on
and after the Exercise Date, the Optionee may purchase up to one-sixth (1/6) of
the Shares; and on and after each of the six (6) month, nine (9) month, twelve
(12) month, fifteen (15) month and eighteen (18) month anniversaries of the
Condition Date, the Optionee may purchase up to an additional one-sixth (1/6) of
the Shares, so that upon expiration of eighteen (18) months after the Condition
Date, and thereafter during the term of the Option, Optionee will have become
eligible to purchase all of the Shares. The foregoing right to exercise the
Option is subject to the provisions of Section 8 and 9 hereof.
7. Exercise of Option. The Option may be exercised only in
accordance with the provisions of the Plan. In no event may the Option or any
part thereof be exercised after the expiration of five (5) years from the date
hereof. Payment of the Exercise Price, for each of the Shares purchased by
Optionee, shall be delivered in full to the Company at the time of exercise, in
accordance with the terms and provisions of Section 7 of the Plan. None of the
Shares that are exercised by Optionee shall be issued until full payment is made
therefor, except in the case of, with prior approval of the Plan Administrator,
election by Optionee of an Option Exchange in accordance with the terms and
provisions of subsection 7(e) of the Plan and any requirements and procedures
the Plan Administrator may require. No shares of Common Stock may be tendered in
exercise of this Option if such shares were acquired by Optionee through the
exercise of an Incentive Stock Option, unless (a) such shares have been held by
Optionee for at least one (1) year, and (b) at least two (2) years have elapsed
since such Incentive Stock Option was granted. The Option may be exercised
before or after the exercise of any other options granted to the Optionee under
the Plan or any of the Company's other stock option programs or compensation
plans.
8. Termination of Option. Subject to the terms hereof, all rights of
the Optionee in and to the Option, to the extent that they have not been
exercised, shall terminate on the
3
<PAGE>
date which is the fifth annual anniversary of the Date of Grant or, if sooner,
thirty (30) days after the Optionee's termination as an employee of the Company
for any reason, including voluntary resignation. Notwithstanding the foregoing,
in the event of the death of Optionee while employed by the Company and in the
event of termination of employment of Optionee by reason of disability (within
the meaning of Section 22(e)(3) of the Code), the Option, to the extent of the
applicable portion thereof which is exercisable as of such date, may be
exercised solely within one (1) year after death or ninety (90) days after the
termination of employment by reason of disability.
9. Death of Optionee. The Option granted hereunder and outstanding
on the date of Optionee's death may be exercised, to the extent otherwise
exercisable, by Optionee's personal representative or his or her transferees by
will or intestate distribution at any time prior to the termination of such
Option pursuant to Section 8 above. The Plan Administrator may require an
indemnity and/or such evidence or other assurances as it may deem necessary in
connection with an exercise by a legal representative, guardian, or beneficiary.
10. Fraud, Dishonesty, or Similar Acts. Notwithstanding anything
contained herein to the contrary, if it is determined by the Plan Administrator
that fraud, dishonesty, or similar acts were committed by Optionee at any time
while in the employ of the Company, or that Optionee has at any time disclosed
to any person, firm, corporation or other entity any of the Company's
"proprietary information" (defined below) without the express written consent of
the Board of Directors or except as such disclosure may have been required in
connection with the Optionee's service as a member of the Board of Directors of
the Company, all option and other rights with respect to all Option(s) granted
to Optionee hereunder shall immediately terminate and be null and void. For the
purposes of this Section 10, the term "proprietary information" shall mean all
confidential or secret customer lists, prospective customer lists, trade
secrets, processes, computer programs, object codes, source codes, inventions,
improvements, manufacturing or systems techniques, formulas, development or
experimental work, work in process, business, data disclosed to the Company by
or for the benefit of the Company's customers, information relating to the
Company's business contracts (including without limitation contracts with
service providers, medical insurers and claims administrators), marketing and
competitive strategies, and any other secret or confidential matter relating or
pertaining to the products, services, sales or other business of the Company.
11. Reserve. The Company shall at all times during the term of the
Option reserve such number of shares of its Common Stock as will be sufficient
to satisfy the requirements of this Agreement.
12. Withholding Taxes. The Optionee acknowledges that it is a
condition to the obligation of the Company to deliver the Shares, upon the
exercise of the Option, to pay the Company such amount, if any, as may be
requested by the Company for the purpose of satisfying any liability for any
federal, state or local income, or other taxes required by law to be withheld
with respect to such delivery; provided that the Optionee may elect, in
accordance with applicable law, to pay a portion or all of such withholding
taxes in shares of Common Stock held by the Optionee for at least six (6) months
and the Optionee hereby authorizes the Company to withhold and agrees to
surrender back to the Company, on or about the date such withholding tax is
determinable, shares previously owned by the Optionee or a portion of the shares
that were or otherwise would be distributed to the Optionee pursuant hereto so
qualifying and having a fair market value equal to the amount of such
withholding taxes to be paid in shares.
13. No Right to Continued Employment. Nothing contained herein shall
be construed to require the Company to continue to employ the Optionee for any
particular period of time and the Optionee shall not be deemed to have any right
to continued employment or to employment for any particular period of time by
virtue hereof.
4
<PAGE>
14. Governing Law. The Plan, this Agreement and all action taken
under each shall be governed, as to construction and administration, by the laws
of the State of Nevada.
IN WITNESS WHEREOF, the Company and the Optionee have duly executed
this Agreement as of the day and year first above written.
ATTEST: VACATION EMPORIUM CORPORATION
/s/ Steven Saide By: /s/ Ian Rice
- ------------------------- ----------------------------------------
Name: Ian Rice
Title: Chairman
ACCEPTED AND AGREED:
/s/ David McCallen
----------------------------------------
David McCallen
5
<PAGE>
ADVISOR AGREEMENT
This Advisor Agreement is made as of August 17, 1999, between
Vacation Emporium Corporation (the "Company"), a Nevada corporation having its
principal place of business at 90 Madison Street, Denver, CO 80806, and
____________________ (the "Advisor") of _____________________.
1. Services as Advisor and Consultant.
From the date of this Agreement until terminated by either party
hereto as provided below, Advisor agrees to serve on the Advisory Board of the
Company and, as requested by the Company, to consult with its officers,
directors and employees, provided that Advisor shall not be required to devote
more then twenty (20) hours per month to the Company. In consideration of such
services, the Company hereby grants to the Advisor a non-qualified stock option
to purchase an aggregate of 15,000 shares of the Company's common stock, par
value $.001 per share, at an exercise price per share of the closing bid price
of the stock on the first day it trades on the OTC. Such option shall be
exercisable for a term of two (2) years and shall be issued under and be subject
to the terms and conditions of the Company's 1996 Compensatory Stock Option Plan
and the Stock Option Agreement to be entered into between the Company and the
Advisor. In addition, the Company agrees to reimburse the Advisor, upon
submission of supporting documentation, for all travel and living expenses
incurred while consulting and such other out-of-pocket expenses as shall be
agreed in writing between the Company and the Advisor.
Advisor agrees that the Company may publicize in an appropriate
manner his or her membership on the Company's Advisory Board and his or her
availability as a consultant to the Company. During the term of this Agreement,
Advisor agrees not to act as a consultant, employee, owner, partner, director or
officer of any entity that engages in the same or substantially the same
business as the Company without the written consent of the Chairman of the
Company. It is understood that the Advisor is currently employed by a
________________ and such employment shall not be deemed to conflict with the
foregoing.
2. Confidential Information.
"Confidential Information", as used in this Agreement, means
information of the Company which is proprietary or confidential to it and
includes proprietary or confidential information as to any product, raw
material, formula, apparatus, equipment, trade secrets, research, report or
technical data.
Advisor agrees that he or she will not (except as required in the
course of consulting with the Company), both during the term of this Agreement
and thereafter, communicate or divulge to, or use for his or her own benefit or
the benefit of any other person, firm or organization, any Confidential
Information.
Records, files, memoranda, reports, customer lists, drawings, plans,
sketches and documents and the like, relating to the business of the Company,
which Advisor shall use or
<PAGE>
prepare or come into contact with in the course of consulting with the Company,
shall remain the Company's sole and exclusive property and shall be subject to
the obligations of this Section 2.
3. Miscellaneous.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original.
This Agreement is terminable by either the Company or the Advisor
upon thirty days' prior written notice to the other party.
Advisor is an independent contractor under this Agreement. He or she
is not an employee of the Company and will not be entitled to participate in, or
receive any benefit or right as an employee under any employee benefit or
welfare plan as a result of this entering into this Agreement.
This Agreement and the legal relations among the parties hereto
shall be governed by and construed in accordance with the laws of the Nevada
without regard to its conflict of laws principles.
Neither this Agreement nor any rights hereunder shall be assignable
by either party hereto without the prior written consent of the other party.
IN WITNESS WHEREOF, the Advisor and the Company have duly executed
and delivered this Agreement as of the date first above written.
VACATION EMPORIUM CORPORATION
By:
--------------------------------------
-----------------------------------------
Advisor
2
<PAGE>
VACATION EMPORIUM CORPORATION
STOCK OPTION AGREEMENT
(Advisor)
- -------------------------------------------------------------------------------
Optionee Name:
Optionee Address:
Number of Shares of Exercise Price
Common Stock: 15,000 per Share: US $3.50
Date of Grant: August 17, 1999
Date of Hire: Inapplicable
- -------------------------------------------------------------------------------
STOCK OPTION AGREEMENT (this "Agreement") made as of the Date of
Grant set forth above, between VACATION EMPORIUM CORPORATION, a Nevada
corporation (the "Company"), and the Optionee identified above ("Optionee"),
residing at the address set forth above.
WHEREAS, the Company has retained the services of Optionee as a
member of its Advisory Board; and
WHEREAS, pursuant to the Company's 1996 Compensatory Stock Option
Plan (the "Plan"), the Company desires to grant stock options to Optionee to
purchase certain shares of its common stock, par value $.001 per share (the
"Common Stock"); and
WHEREAS, the Options (hereinafter defined) being granted by the
Company hereunder and the shares of Common Stock issuable upon the exercise of
such Options, if any, have not been registered under the Securities Act of 1933,
as amended (the "Act"), in reliance on an exemption from registration contained
in Section 4(2) of the Act; and
WHEREAS, this Agreement consists of this Agreement and the Plan
attached hereto as Exhibit A;
NOW, THEREFORE, the Company and the Optionee hereby agree as
follows:
W I T N E S S E T H:
1. Definitions. In this Agreement, except where the context
otherwise indicates, the following definitions apply:
<PAGE>
1.1 Terms defined in the Plan shall have the same meanings
when used herein as defined therein.
1.2 The term "Optionee" when used herein shall include the
Optionee's legal representative when the context requires.
2. Representations, Warranties and Acknowledgements of the Optionee.
2.1 The Optionee's address set forth above is his or her true
and correct residence.
2.2 The Optionee has had an opportunity to ask questions and
receive answers from the officers and directors of the Company, or a person or
persons acting on its behalf, concerning the terms and conditions of this
Agreement and the business and affairs of the Company. The Optionee has a
sufficient business and personal relationship with one or more of the officers
and directors of the Company, and has sufficient business or financial
experience, so as to be able to protect his or her own interests in connection
with the issuance of the Options (as hereinafter defined) and the issuance of
any Common Stock upon any exercise of the Options.
2.3 The Optionee acknowledges that the Options and the Common
Stock to be issued upon the exercise of the Options, if any, are speculative
investments and involve a substantial degree of risk of loss by the Optionee.
The Optionee represents and warrants to the Company that he or she is acquiring
the Options, and the Common Stock to be issued upon the exercise of the Options
(if the Options are exercised), solely for investment purposes and not with a
view towards distribution or transfer. The Optionee acknowledges that the
Options may or may not be of any value, based on numerous circumstances and
conditions, many of which may be beyond the control of Optionee.
2.4 The Optionee acknowledges that the Options and the Common
Stock to be issued upon the exercise of the Options constitute a part of the
Optionee's compensation arrangement with the Company.
2.5 The Optionee confirms that neither the Company nor any
officer, director or representative thereof has made any representation,
prediction, or forecast as to the value or possible future value of the Options
or the Common Stock. The Optionee has not been induced to accept the Options by
any representation or promise by or on behalf of the Company.
2.6 The Optionee has had an opportunity to consult with his or
her legal, tax and investment advisors, to the extent the Optionee deems
necessary, concerning the Options.
2.7 This Agreement consists of this document and the terms and
provisions contained in the Plan, as it may be amended from time to time, which
are hereby incorporated by reference herein and made a part hereof. Unless
otherwise expressly stated herein, in the case of any conflict or inconsistency
between the terms of this document and the terms of the Plan, the terms of the
Plan shall control.
3. Grant of Options. The Company, subject to the terms of the Plan,
hereby grants to the Optionee as of the date hereof, as a matter of separate
inducement and agreement and not in lieu of salary or other compensation for
services, non-qualified stock options (the "Options") to purchase in the
aggregate the number of shares of the Common Stock of the Company set forth in
the box on the first page hereof (the "Shares"). Optionee understands that the
Options granted
2
<PAGE>
under this Agreement are not intended to and will not qualify for special tax
treatment under Section 422 of the Internal Revenue Code of 1986, as amended.
4. Exercise Price. The exercise price (the "Exercise Price") of the
Options is the amount per share set forth in the box on the front page hereof,
subject to adjustment as provided in Section 9 of the Plan.
5. Options Non-Transferable. The Options shall not be transferable
by the Optionee otherwise than by will, or by the laws of descent and
distribution, and shall be exercised during the lifetime of the Optionee only by
the Optionee. Neither the Options nor any interest therein may be transferred,
sold, assigned, pledged or hypothecated by the Optionee during the Optionee's
lifetime, whether by operation of law or otherwise, or be made subject to
execution, attachment or similar process.
6. Vesting Date of Options. The Options shall be exercisable in
their entirety at any time on and after the date hereof.
7. Exercise of Options. The Options may be exercised only in
accordance with the provisions of the Plan, including, but not limited to, an
Option Exchange in accordance with the terms of subsection 7(e) of the Plan. The
Options may be exercised before or after the exercise of any other options
granted to the Optionee under the Plan or any of the Company's other stock
option programs or compensation plans.
8. Termination of Options. Subject to the terms hereof, all rights
of the Optionee in and to the Options, to the extent that they have not been
exercised, shall terminate on the date which is the second annual anniversary of
the Date of Grant set forth above or, if sooner, thirty (30) days after the
Optionee's termination as a member of the Company's Advisory Board for any
reason, including voluntary resignation. Notwithstanding the foregoing, in the
event of the death of Optionee, the thirty (30) day period referred to in the
preceding sentence shall be one (1) year after death.
9. Death of Optionee. Options granted hereunder and outstanding on
the date of Optionee's death may be exercised, to the extent otherwise
exercisable, by Optionee's personal representative or his or her transferees by
will or intestate distribution at any time prior to the termination of such
Options pursuant to Section 8 above. The Plan Administrator may require an
indemnity and/or such evidence or other assurances as it may deem necessary in
connection with an exercise by a legal representative, guardian, or beneficiary.
10. Fraud, Dishonesty, or Similar Acts. Notwithstanding anything
contained herein to the contrary, if Optionee's consultancy by the Company as a
member of the Advisory Board is terminated for cause or it is determined by the
Plan Administrator that fraud, dishonesty, or similar acts were committed by
Optionee at any time while in the employ of the Company, or that an Optionee has
at any time disclosed to any person, firm, corporation or other entity any of
the Company's "proprietary information" (defined below) without the express
written consent of the Board of Directors or except as such disclosure may have
been required in connection with the Optionee's service as a advisor of the
Company, all option and other rights with respect to all Options granted to
Optionee hereunder shall immediately terminate and be null and void. For the
purposes of this Section 10, the term "proprietary information" shall mean all
confidential or secret customer lists, prospective customer lists, trade
secrets, processes, computer programs, object codes, source codes, inventions,
improvements, manufacturing or systems techniques, formulas, development or
experimental work, work in process, business, data disclosed to the Company by
or for the benefit of the Company's customers, information relating to the
Company's business contracts (including without limitation contracts with
service providers, medical insurers and claims
3
<PAGE>
administrators), marketing and competitive strategies, and any other secret or
confidential matter relating or pertaining to the products, services, sales or
other business of the Company.
11. Restriction on Exercise After Termination. Notwithstanding
anything herein to the contrary, the exercise of the Options after termination
of employment by Optionee shall be subject to satisfaction of the condition
precedent that the Optionee conducts himself or herself in a manner not
adversely affecting the Company.
12. Reserve. The Company shall at all times during the term of the
Options reserve such number of shares of its Common Stock as will be sufficient
to satisfy the requirements of this Agreement.
13. Withholding Taxes. The Optionee acknowledges that it is a
condition to the obligation of the Company to deliver the Shares, upon the
exercise of the Options, to pay the Company such amount, if any, as may be
requested by the Company for the purpose of satisfying any liability for any
federal, state or local income, or other taxes required by law to be withheld
with respect to such delivery; provided that the Optionee may elect, in
accordance with applicable law, to pay a portion or all of such withholding
taxes in shares of Common Stock held by the Optionee for at least six (6) months
and the Optionee hereby authorizes the Company to withhold and agrees to
surrender back to the Company, on or about the date such withholding tax is
determinable, shares previously owned by the Optionee or a portion of the shares
that were or otherwise would be distributed to the Optionee pursuant hereto so
qualifying and having a fair market value equal to the amount of such
withholding taxes to be paid in shares.
14. No Right to Continued Employment. Nothing contained herein shall
be construed to require the Company to continue to employ the Optionee for any
particular period of time and the Optionee shall not be deemed to have any right
to continued employment or to employment for any particular period of time by
virtue hereof.
15. Governing Law. The Plan, this Agreement and all action taken
under each shall be governed, as to construction and administration, by the laws
of the State of Nevada.
16. Restricted Shares. The Optionee acknowledges that the Options
and Shares have not been registered in accordance with the Act or applicable
state Blue Sky laws, and that the Options and Shares may not be sold or
transferred and must be held indefinitely, unless they are subsequently
registered under the Act or an exemption from registration is available. The
Optionee understands and acknowledges that the Company is under no obligation to
register the Options and Shares or to comply with any exemption under the Act or
to supply or file any information which would facilitate sales of the Shares.
The Optionee acknowledges that stop transfer instructions will be given to the
Company's transfer agent(s) with respect to the Shares and that there will be
affixed to the certificates evidencing ownership of the Shares, or any
substitution therefor, appropriate
4
<PAGE>
restrictive legends.
IN WITNESS WHEREOF, the Company and the Optionee have duly executed
this Agreement as of the day and year first above written.
ATTEST: VACATION EMPORIUM CORPORATION
By:
- -------------------------- -----------------------------------------
Name:
Title:
ACCEPTED AND AGREED:
--------------------------------------------
Advisor
<PAGE>
CONSULTING AGREEMENT
AGREEMENT, dated as of September 23, 1999, by and between VACATION
EMPORIUM CORPORATION, a Nevada corporation (the "Corporation) and SIGMA LIMITED,
S.A., a company organized under the laws of Switzerland ("Consultant").
W I T N E S S E T H:
WHEREAS, the Corporation has entered into an Agreement and Plan of
Share Exchange dated as of July 30, 1999 (the "Purchase Agreement") pursuant to
which the Corporation proposes to acquire all of the issued and outstanding
shares of Wall Street Strategies, Inc., a Delaware corporation ("WSS");
WHEREAS, upon completion of such acquisition, the Corporation will
require certain consultancy services from the Consultant;
WHEREAS, the Consultant desires to supply consultancy services to
the Corporation upon the terms and conditions set forth herein; and
WHEREAS, it is a condition to the closing of the Purchase Agreement
that Consultant and the Corporation enter into this Agreement providing for the
Consultant to supply the consultancy services described herein to the
Corporation,
NOW, THEREFORE, the parties hereto agree as follows:
1. Duties.
(a) The Corporation hereby engages Consultant and Consultant
hereby agrees to render services as a consultant to the Corporation for the term
specified in Section 2 hereof.
(b) The services to be rendered by Consultant pursuant to this
Agreement shall be rendered by Ian Rice ("Rice") or, if Rice shall become
incapacitated or otherwise be unavailable, then by such other employees or
agents of Consultant as shall be reasonably acceptable to the Corporation.
(c) Consultant shall, at all reasonable times and as
reasonably required, consult with and give advice to the directors, officers,
employees and representatives of the Corporation, its subsidiaries and
affiliates, concerning the business of the Corporation and its subsidiaries,
including WSS. Consultant shall provide such services to and shall devote such
time and attention as in the Corporation's reasonable discretion may be
necessary or desirable for the performance of its duties as a consultant when
called upon to do so by the Corporation, provided that (i) the Corporation shall
not require that Consultant's services be performed at any particular place or
at any particular time, (ii) the Corporation acknowledges that Rice, in
discharging the Consultant's services hereunder, will perform his duties outside
of the United States, and (iii) it is expressly understood and agreed that
Consultant's services are of great value to the Corporation by reason of Rice's
prior experience and knowledge and that telephonic
<PAGE>
advice and judgments of Rice are as valuable to the Corporation and its
subsidiaries, including WSS, as written reports or physical attendance at any
particular place or at any particular time.
(d) Rice will be requested by the Corporation to serve as a
director and the Chairman of the Board of the Corporation and/or its
subsidiaries, including WSS. Rice shall not be required to so serve and the
inability of the Corporation to cause Rice to be elected or appointed a director
and/or the Chairman of the Board of the Corporation and/or its subsidiaries,
including WSS, shall not be deemed to constitute a breach by the Corporation of
its obligations under this Agreement. If Rice shall serve as a director and/or
Chairman of the Board as provided herein, Rice shall be eligible to receive
compensation in addition for serving in such capacity to the compensation
payable to Consultant set forth in Section 3 hereof.
2. Term. The term of this Agreement shall commence on the date
hereof and shall continue for a period of two (2) years thereafter (the "Term")
unless sooner terminated pursuant to Section 6 of this Agreement.
3. Compensation. For all services to be rendered hereunder by
Consultant, the Corporation agrees to pay to Consultant an annual fee equal to
Fifty Thousand Dollars ($50,000), payable in substantially equal monthly
installments.
4. Expenses. The Corporation, during the Term, shall provide the
Consultant with a non-accountable expense allowance of Thirty-Five Thousand
Dollars ($35,000) per annum, such allowance to be paid to the Consultant in
substantially equal monthly installments.
5. Termination. Notwithstanding any provision of this Agreement to
the contrary, this Agreement may be terminated under any of the following
circumstances:
(a) The Corporation may terminate this Agreement at any time
for good and just cause by giving written notice thereof to the Consultant. For
purposes of this Agreement, the term "good and just cause" shall mean (a) the
inability of Consultant to provide consulting services to the Corporation, (b)
the death or permanent incapacity of Rice or (c) a determination by the full
board of directors of the Corporation at a meeting at which Consultant and its
attorney(s) are present throughout, that Consultant has been demonstrably guilty
of engaging in conduct justifying immediate dismissal as a result of acts
clearly against the best interests of the Corporation.
(b) Consultant may terminate this Agreement at any time for
good reason by giving at least one (1) month written notice thereof to the
Corporation. For purposes of this Agreement, Consultant shall have "good reason"
to terminate this Agreement if (i) the Corporation attempts to impose any change
of responsibility, assignment of duties or authority of Consultant without its
consent or (ii) the Corporation shall breach any of the material terms or
conditions of this Agreement.
(c) Upon termination of Consultant pursuant to this Section 6,
the Consultant shall be entitled to all amounts or benefits to be paid or
provided by the Corporation under this Agreement up to the date of termination.
In addition, and in lieu of any and all other rights or remedies which
Consultant would or might have, if this Agreement is terminated prior to the end
of the Term, either by the Corporation for any reason other than good and just
cause
2
<PAGE>
(as defined herein) or by Consultant for good reason (as defined herein),
Consultant shall also be entitled to receive, as its sole and exclusive remedy,
in a single lump sum, an amount equal to the total additional compensation,
including a non-accountable expense allowance described in Section 4 hereof,
which Consultant would have been entitled to receive had there been no
termination of this Agreement.
6. No Set-Offs, Etc. Except as expressly set forth in this
Agreement, no amounts agreed to be paid or benefits agreed to be furnished by
the Corporation under this Agreement shall be subject to any deduction,
diminution or set off of any kind whatsoever.
7. Binding Effect and Assignment. This Agreement shall be binding
upon and insure to the benefit of the Corporation, its successors and permitted
assigns and the Consultant, its successors and assigns. No assignment of this
Agreement shall be valid unless consented to in writing by the non-assigning
party or parties.
8. Waivers. The failure of any party to this Agreement to enforce
its terms and provisions or covenants shall not be construed as a waiver of the
same or of the right of such party to enforce the same.
9. Entire Agreement. This Agreement sets forth the entire Agreement
among the parties with respect to its subject matter and merges and supersedes
all prior discussions, agreements and understandings of every kind and nature
among them, including, without limitation, any other agreement with any third
party for the supply of the Consultant's service to the Corporation. No party
hereto shall be bound by any term or condition other than as expressly set forth
or provided for in this Agreement. This Agreement may not be changed or modified
except by agreement in writing, signed by the party or parties to be bound
thereby.
10. Notices. All notices, requests, demands and other communications
provided for, under, or made in connection with this Agreement, shall be in
writing and shall be deemed to have been given by any party hereto at the time
when delivered by hand against the appropriate receipt, or sent by facsimile
transmission or mailed by registered or certified mail or the equivalent
thereof, addressed to the addresses of the respective parties stated below, or
as changed or added as any party may fix in accordance with this Section 11.
If to the Corporation:
Vacation Emporium Corporation
7025 East First Ave. Suite 5
Scottsdale, AZ 85251
with a copy to:
Bryan Cave LLP
245 Park Avenue
New York, NY 10167
Attention: Steven A. Saide, Esq.
If to the Consultant:
3
<PAGE>
Sigma Limited, S.A.
Rue-Fritz- Courvoisier 40
2300 La Chaux-de-Fonds
Switzerland
11. Governing Law. This Agreement shall be governed by and construed
in all respects in accordance with the laws of the State of New York without
regard to its conflict of law principles.
IN WITNESS WHEREOF this Agreement has been entered into the day and
year first above written.
VACATION EMPORIUM CORPORATION
By: /s/ David McCallen
------------------------------------
Name: David McCallen
Title: Secretary
SIGMA LIMITED, S.A.
By: /s/ Ian Rice
------------------------------------
Name: Ian Rice
Title: Authorized Agent
4
<PAGE>
MARKET ACCESS PROGRAM
MARKETING AGREEMENT
THIS AGREEMENT (the "Agreement") made and entered into this 26th day of January
2000, by and between CONTINENTAL CAPITAL & EQUITY CORPORATION, located at 195
Wekiva Springs Road, Suite 200, Longwood, FL 32779 (hereinafter referred to as
"CCEC,") and WALL STREET STRATEGIES CORPORATION, located at 130 William Street,
Suite 401, New York, NY 10038, (hereinafter referred to as the "Company.")
WITNESSETH:
For and consideration of the mutual promises and covenants contained herein, the
parties hereto agree as follows:
1. EMPLOYMENT. Company hereby hires and employs CCEC as an independent
contractor; and CCEC does hereby accept its position as an independent
contractor to the Company upon the terms and conditions hereinafter set forth.
2. TERM. The term of this Agreement shall be for twelve (12) months.
3. DUTIES AND OBLIGATIONS OF CCEC. CCEC shall have the following duties and
obligations under this Agreement:
3.1. Establish a financial public relations methodology designed to
increase awareness of the Company within the investment community.
3.2. Assist the Company in the implementation of its business plan and in
accurately disseminating information to the marketplace, which information has
been provided by the Company.
3.3. To expose the Company to a broad network of active retail brokers,
financial analysts, institutional fund managers, private investors and active
financial newsletter writers.
3.4. Prepare Company due diligence reports, corporate profile and fact
sheets.
3.5. Conduct a tele-marketing campaign to the investment community and
brokerage community and conduct tele-conferences with a CCEC moderator, Company
executive(s), brokers, financial analysts, fund managers and other interested
participants.
3.6. Feature the Company's corporate profile or fact sheet on CCEC's web
site(s).
3.7. Assist the Company in the preparation of all press releases and
coordinate the releases via a Company paid account with PR NewsWire or
BusinessWire.
3.8. Create, build and continually enhance a fax database of all brokers,
investors, analysts and media contacts who have expressed an interest in
receiving on-going information on the Company. Assist the Company in setting up
an account with a fax broadcasting agency to manage the actual broadcasting in
the event Company does not have this capability in-house. Further, CCEC will, at
its election, mass-fax broadcast select releases to its extensive network of
U.S. stockbrokers, analysts and institutional investors.
3.9. E-mail press releases, corporate announcements, broker updates,
Company news developments to CCEC's e-mail database of brokers, Institutional
fund managers, financial analysts, and industry professionals.
<PAGE>
3.10. Serve as the Company's external publicist and endeavor to obtain
media coverage on the Company in both trade and industry press, on local and
national radio and/or TV programming, in subscription-based financial
newsletters, and on the worldwide web.
3.11. At the Company's request, strive to obtain the Company analyst
coverage and/or investment banking sponsorship.
3.12. Introduce Company to various fund managers and institutional
investors.
ALL OF THE FOREGOING CCEC PREPARED DOCUMENTATION CONCERNING THE COMPANY,
INCLUDING, BUT NOT LIMITED TO, DUE DILIGENCE REPORTS, CORPORATE PROFILE, FACT
SHEETS, AND QUARTERLY NEWSLETTERS, SHALL BE PREPARED BY CCEC FROM MATERIALS
SUPPLIED TO IT BY THE COMPANY AND SHALL BE APPROVED BY THE COMPANY PRIOR TO
DISSEMINATION BY CCEC.
4. CCEC'S COMPENSATION. Upon the execution of this Agreement, Company hereby
covenants and agrees to pay CCEC as follows:
4.1. Thirty thousand (30,000) restricted shares of the Company's common
stock due upon execution of this Agreement.
4.2. Further, CCEC has the option to purchase one hundred thousand
(100,000) shares of the Company's common stock as follows: twenty five thousand
(25,000) shares at a per share price of ten dollars ($10.00); twenty five
thousand (25,000) shares at a per share price of twelve dollars ($12.00); twenty
five thousand (25,000) shares at a per share price of fourteen dollars ($14.00);
and twenty five thousand (25,000) shares at a per share price of sixteen dollars
($16.00). The options shall expire 24 months from the day the Registration
Statement registering the underlying shares of the option is deemed effective.
The Company agrees that CCEC shall have piggy-back registration rights with
respect to the Common Shares referenced above so as to permit the public resale
thereof by CCEC. The Company shall include such shares on the first registration
statement filed by the Company with the SEC after the date hereof on a form that
would permit such inclusion. The Company shall use its best efforts to make the
Registration effective on a timely basis.
4.3. The referenced options shall vest according to the following
schedule:
$10.00 options 1/20/2000
$12.00 options 4/20/2000
$14.00 options 7/20/2000
$16.00 options 10/20/2000
Unvested options may be cancelled only upon written notice by the company of
termination of this Agreement on account of cause. An accelerated vesting period
may be awarded to CCEC upon request and satisfaction of performance under this
contract.
5. CCEC'S EXPENSES AND COSTS. Company shall pay all reasonable costs and
expenses incurred by CCEC, its directors, officers, employees and agents, in
carrying out its duties and obligations pursuant to the provisions of this
Agreement, excluding CCEC's general and administrative expenses and costs, but
including and not limited to the following costs and expenses: provided all
costs and expense items in excess of $500.00 (Five Hundred U.S. Dollars) must be
approved by the Company in writing prior to CCEC's incurrence of the same:
5.1. Travel expenses, including but not limited to transportation, lodging
and food expenses, when such travel is conducted on behalf of the Company.
5.2. Seminars, expositions, money and investment shows.
2
<PAGE>
5.3. Radio and television time and print media advertising costs, when
applicable.
5.4. Subcontract fees and costs incurred in preparation of research
reports, when applicable.
5.5. Cost of on-site due diligence meetings, if applicable.
5.6. Printing and publication costs of brochures and marketing materials
which are not supplied by the Company.
5.7. Corporate web site development costs.
5.8. Printing and publication costs of Company annual reports, quarterly
reports, and/or other shareholder communication collateral material which are
not supplied by Company.
5.9. Creation, production, and mailing of Inside Wall Street lead
generation pieces and associated fulfillment material and services, i.e.
corporate profiles, presidential cover letters, pre-printed envelopes, 1-800
numbers, postage, list selection, lead distribution, etc., at an established
price of $2.00 per Inside Wall Street piece mailed, with a minimum of 25,000
pieces.
5.10. Cost of mass-fax broadcasts as referred to in Section 3.8.
5.11. Company shall pay to CCEC reasonable costs and expenses incurred
within ten (10) days of receipt of CCEC's written invoice for the same,
excluding any costs associated with material and services defined in Section 5.9
above, which are due and payable in advance of material production.
6. COMPANY'S DUTIES AND OBLIGATIONS. Company shall have the following duties and
obligations under this Agreement.
6.1. Cooperate fully and timely with CCEC so as to enable CCEC to perform
its obligations under this Agreement.
6.2. Within ten (10) days of the date of execution of this Agreement to
deliver to CCEC a complete due diligence package on the Company including all
the Company's filings with the Securities and Exchange Commission within the
last twelve months, the last twelve months of press releases on the Company and
all other relevant materials with respect to such filings, including but not
limited to corporate reports, brochures, and the like; a list of the names and
addresses of all the Company's shareholders known to the Company: and list of
the brokers and market makers in the Company's securities and a list of analysts
or fund managers which have been following the Company.
6.3. The Company will act diligently and promptly in reviewing materials
submitted to it from time to time by CCEC and inform CCEC of any inaccuracies
contained therein prior to the dissemination of such materials.
6.4. On a timely basis give written notice to CCEC of any change in
Company's financial condition or in the nature of its business or operations
which had or might have an adverse material effect on its operations, assets,
properties or prospects of its business.
6.5. On a timely basis upon billing pay all costs and expenses incurred by
CCEC under the provisions of this Agreement when presented with invoices for the
same by CCEC
6.6. Give adequate disclosure of all material facts concerning the
Company to CCEC and update such information on a timely basis.
6.7. Promptly pay the compensation due CCEC under the provisions of this
Agreement.
7. NONDISCLOSURE. Except as may be required by law, neither party hereto nor any
of its respective officers, directors, employees, agents and affiliates, shall
disclose the contents and
3
<PAGE>
provisions of this Agreement or any nonpublic information provided hereunder
without obtaining the prior written consent of the other party hereto, subject
to disclosing same further to respective counsel, accountants and other persons
performing investment banking, financial or related functions who have a need to
know such information.
8. COMPANY'S DEFAULT. In the event of any default in the payment of CCEC's
compensation to be paid to it pursuant to this Agreement, or any other charges
or expenses on the Company's part to be paid or met, or any part or installment
thereof, at the time and in the manner herein prescribed for the payment thereof
and as when the same becomes due and payable, and such default shall continue
for twenty five (25) days after CCEC's notice thereof is received by Company; in
the event of any default in the performance of any of the other covenants,
conditions, restrictions, agreements, or other provisions herein contained on
the part of the Company to be performed, kept, complied with or abided by, and
such default shall continue for twenty five (25) days after CCEC has given
Company written notice thereof, or if a petition in bankruptcy is filed by the
Company, or if the Company is adjudicated bankrupt, or if the Company shall
compromise all its debts or assign over all its assets for the payment thereof,
or if a receiver shall be appointed for the Company's property, then upon the
happening of any of such events, CCEC shall have the right, at its option,
forthwith or thereafter to accelerate all compensation, costs and expenses due
or coming due hereunder and to recover the same from the Company by suit or
otherwise and further, to terminate this Agreement. The Company covenants and
agrees to pay all reasonable attorney fees, paralegal fees, costs and expenses
of CCEC, including court costs, (including such attorney fees, paralegal fees,
costs and expenses incurred on appeal) if CCEC employs an attorney to collect
the aforesaid amounts or to enforce other rights to CCEC provided for in this
Agreement in the event of any default as set forth above and CCEC prevails in
such litigation. Further, until CCEC has received the first cash and/or payment
as described above in Section 4.1, CCEC shall not be required to commence
performing hereunder.
9. COMPANY'S REPRESENTATIONS AND WARRANTIES. Company represents and warrants to
CCEC for the purpose of inducing CCEC to enter into and consummate this
Agreement as follows:
9.1. Company has the power and authority to execute, deliver and perform
this Agreement.
9.2. The execution and delivery by the Company of this Agreement have been
duly and validly authorized by all requisite action by the Company. No license,
consent or approval of any person is required for the Company's execution and
delivery of this Agreement.
9.3. This Agreement has been duly executed and delivered by the Company.
This Agreement is the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its respective terms, subject
to the effect to any applicable bankruptcy, insolvency, reorganization,
moratorium or similar law affecting creditors' rights generally and to general
principles of equity.
9.4. The execution and delivery by the Company of this Agreement do not
conflict with, constitute a breach of or a default under: (i) any applicable
law, or any applicable rule, judgment, order, writ, injunction, or decree of any
court; (ii) any applicable rule or regulation of any administrative agency or
other governmental authority; (iii) the certificate of incorporation and By-Laws
of the Company; (iv) any agreement, indenture, instrument or contract to which
the Company is now a party or by which it is bound.
4
<PAGE>
9.5. No representation or warranty by the Company in this Agreement and no
information in any statement, certificate, exhibit, schedule or other document
furnished, or to be furnished by the Company to CCEC pursuant hereto, or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements contained herein or therein not
misleading. There is no fact which the Company has not disclosed to CCEC, in
writing, or in SEC filings or press releases, which materially adversely
affects, nor, so far as the Company can now reasonably foresee, may adversely
affect the business, operations, prospects, properties, assets, profits or
condition (financial or otherwise) of the Company.
10. LIMITATION OF CCEC LIABILITY: If CCEC fails to perform its services
hereunder, its entire liability to the Company shall not exceed the lessor of
(a) the amount of cash compensation CCEC has received from the Company under
Section 4 of this Agreement or (b) the actual damage to the Company as a result
of such non-performance. IN NO EVENT WILL CCEC BE LIABLE FOR ANY INDIRECT,
SPECIAL OR CONSEQUENTIAL DAMAGES NOR FOR ANY CLAIM AGAINST THE COMPANY BY ANY
PERSON OR ENTITY ARISING FROM OR IN ANY WAY RELATED TO THIS AGREEMENT, UNLESS
SUCH DAMAGES RESULT FROM THE USE, BY CCEC, OF INFORMATION NOT AUTHORIZED BY THE
COMPANY.
11. MISCELLANEOUS
11.1. Notices. Any notice or other communication required or permitted to
be given hereunder shall be in writing, and shall be deemed to have been duly
given when delivered personally or sent by registered or certified mail, return
receipt requested, postage prepaid to the parties hereto at their addresses
indicated hereinafter. Either party may change his or its address for the
purposes of this paragraph by written notice similarly given.
11.2. Entire Agreement. This Agreement represents the entire agreement
between the Parties in relation to its subject matter and supersedes and voids
all prior agreements between such Parties relating to such subject matter.
11.3. Amendment of Agreement. This Agreement may be altered or amended, in
whole or in part, only in a writing signed by both Parties.
11.4. Waiver. No waiver of any breach or condition of this Agreement shall
be deemed to be a waiver of any other subsequent breach or condition, whether of
a like or different nature, unless such shall be signed by the person making
such waiver and/or which so provides by its terms.
11.5. Captions. The captions appearing in this Agreement are inserted as a
matter of convenience and for reference and in no way affect this Agreement,
define, limit or describe its scope or any of its provisions.
11.6. Situs. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida. Venue shall be located in
Seminole County, Florida.
11.7. Benefits. This Agreement shall inure to the benefit of and be
binding upon the Parties hereto, their heirs, personal representatives,
successors and assigns.
11.8. Severability. If any provision of this Agreement shall be held to be
invalid or unenforceable, such invalidity or unenforceability shall attach only
to such provision and shall not in any way affect or render invalid or
unenforceable any other provision of this Agreement, and this Agreement shall be
carried out as if such invalid or unenforceable provision were not contained
herein.
5
<PAGE>
11.9. Arbitration. Except as to a monetary default by Company hereunder,
any controversy, dispute or claim arising out of or relating to this Agreement
or the breach thereof shall be settled by arbitration. Arbitration proceedings
shall be conducted in accordance with the rules then prevailing of the American
Arbitration Association or any successor. The award of the Arbitration shall be
binding on the Parties. Judgment may be entered upon an arbitration award of in
a court of competent jurisdiction and confirmed by such court. Venue for
Arbitration proceedings shall be Seminole County, Florida. The costs of
arbitration, reasonable attorneys' fees of the Parties, together with all other
expenses, shall be paid as provided in the Arbitration award.
11.10. Currency. In all instances, references to monies used in this
Agreement shall be deemed to be United States dollars.
11.11. Multiple Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, and all of such
counterparts shall constitute one (1) instrument.
12. This Agreement may be executed in counterparts and by fax
transmission, each counterpart being deemed an original.
IN WITNESS WHEREOF, the Parties have executed this Agreement on the day and year
first above written.
CONFIRMED AND AGREED ON THIS 26 DAY OF January, 2000.
CONTINENTAL CAPITAL & EQUITY CORPORATION
/s/ Illegible /s/ Jill Eardley
- ------------------------------------ ----------------------------------
Corporate Officer Witness
/s/ Illegible /s/ Jill Eardley
- ------------------------------------ ----------------------------------
Company Representative Witness
CONFIRMED AND AGREED ON THIS 26 DAY OF January, 2000.
WALL STREET STRATEGIES CORPORATION
/s/ Charles Payne /s/ Illegible
- ------------------------------------ ----------------------------------
Corporate Officer Witness
6
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
WALL STREET STRATEGIES CORP FINANCIAL DATA SCHEDULE SEPTEMBER 30, 1999
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 SEP-30-1999
<PERIOD-END> DEC-31-1998 SEP-30-1999
<CASH> 96,685 3,396,372
<SECURITIES> 55,524 132,463
<RECEIVABLES> 13,400 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 262,887 3,706,349
<PP&E> 52,952 76,794
<DEPRECIATION> (36,705) (46,686)
<TOTAL-ASSETS> 304,017 3,778,927
<CURRENT-LIABILITIES> 542,478 720,868
<BONDS> 0 0
0 0
0 0
<COMMON> 9,456 17,564
<OTHER-SE> (247,917) 3,040,495
<TOTAL-LIABILITY-AND-EQUITY> (238,461) 3,058,059
<SALES> 2,226,726 2,950,666
<TOTAL-REVENUES> 2,329,215 2,922,791
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 2,440,404 4,835,275
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (111,189) (1,912,484)
<INCOME-TAX> (1,570) 207,600
<INCOME-CONTINUING> (109,619) (2,120,084)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (109,619) (2,120,084)
<EPS-BASIC> (0.01) (0.19)
<EPS-DILUTED> (0.01) (0.19)
</TABLE>
