U.S. 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
(g) of the Securities Exchange Act of 1934
PRIMEHOLDINGS.COM, INC.
(Name of Small Business Issuer in its charter)
Delaware 87-0481402
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
6955 Union Park Center, Suite 390, Midvale, UT 84047
(Address of Principal Executive Offices) (Zip Code)
(801) 562-1444
(Registrant's Telephone Number)
Securities to be registered under Section 12(b) of the Act:
Name of Each Exchange on Which Each
Title of Each Class To Be So Registered Class Is To Be Registered
- - --------------------------------------- -------------------------
None None
Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $.0666 per share
(Title of class)
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PRIMEHOLDINGS.COM, INC.
TABLE OF CONTENTS TO FORM 10-SB
PART I........................................................................1
ITEM 1. DESCRIPTION OF BUSINESS............................................1
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION........................................................9
ITEM 3. DESCRIPTION OF PROPERTY...........................................11
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT......................................................11
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS.........................................................12
ITEM 6. EXECUTIVE COMPENSATION............................................13
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS....................15
ITEM 8. DESCRIPTION OF SECURITIES.........................................15
PART II......................................................................19
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND OTHER SHAREHOLDER MATTERS............................19
ITEM 2. LEGAL PROCEEDINGS.................................................19
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.....................20
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES...........................20
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.........................23
PART F/S.....................................................................24
PART III.....................................................................24
ITEM 1. INDEX TO EXHIBITS.................................................24
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PART I
Item 1. Description of Business
Forward-Looking Statements
Certain statements in this Form 10-SB constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements involve known and unknown
risks, uncertainties and other important factors that could cause the actual
results, performance or achievements of the Company to differ materially from
any future results, performance or achievements expressed or implied by such
forward-looking statements. Such risks, uncertainties and other important
factors include, among others: dependence on proprietary technology;
technological changes and costs of technology; industry trends; competition;
ability to develop markets and market acceptance; product demand; changes in
business strategy or development plans; availability, terms and deployment of
capital; availability of qualified personnel; changes in government regulation;
general economic and business conditions; and other factors. Such
forward-looking statements speak only as of the date of this Form 10-SB. The
Company's actual results for future periods could differ materially from those
anticipated or projected. The Company expressly disclaims any obligation or
undertaking to disseminate any updates or revisions to any forward-looking
statement contained herein to reflect any change in the Company's expectations
with regard thereto or any change in events, conditions or circumstances on
which any such statement is based.
Business Development
PrimeHoldings.com, Inc. is primarily engaged in the development and
commercialization of technologies relating to the capturing and exchange of
electronic business information. The company is seeking to exploit certain
computing technologies focused around capturing, managing, and distributing key
business data. The company is currently has four subsidiaries:
o bCard, Inc.
o Navilor, Inc.
o GolfAgent USA, Inc.
o UniQuest Communications, Inc.
As used herein, the term "Company" means PrimeHoldings.com, Inc.
("PrimeHoldings") and its subsidiaries, bCard, Inc. ("bCard"), Navilor, Inc.
("Navilor"), GolfAgent USA, Inc. ("GolfAgent USA"), UniQuest Communications,
Inc. ("UniQuest"), and on a consolidated basis, unless the context clearly
indicates otherwise.
PrimeHoldings was originally incorporated as Analyst Express, Inc.
under the laws of the State of Delaware on June 16, 1988. The Company's name was
changed several times after 1988, including to "PrimeSource Communications
Holdings, Inc." in June 1998 and "PrimeHoldings.com, Inc." in July 1999. On June
8, 1998, the Company effectuated a 1 for 1.333 reverse stock split of its
outstanding shares resulting in the Company having approximately 656,150 shares
of common stock outstanding immediately after the reverse stock split.
Effective June 30, 1998, PrimeHoldings acquired PrimeSource
Communications, Inc. through its acquisition of all the outstanding common stock
of PrimeSource Communications, Inc. (the "PrimeSource Communications
Acquisition"). As consideration for the PrimeSource Communications Acquisition,
PrimeHoldings issued to the stockholders of PrimeSource Communications, Inc.
5,577,275 shares of PrimeHoldings' common stock. PrimeSource Communications,
Inc. (a Utah corporation) was organized in March 1996 and changed its name to
"Navilor, Inc." in 1999. Its operating activities since inception have related
primarily to the development of computing technologies (including neural
networks and other forms of artificial intelligence to provide character
recognition systems and software). In July 1999, the Company acquired operations
(including associated liabilities)
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from a unaffiliated third party for $400,000 cash (the "Asset Acquisition"). The
operating assets were distributed to Navilor. As of the date of this report,
PrimeHoldings owns all Navilor's outstanding common stock.
Effective December 31, 1998, PrimeHoldings acquired UniQuest through
its acquisition of all the outstanding common stock of UniQuest (the "UniQuest
Acquisition"). As consideration for the UniQuest Acquisition, PrimeHoldings
issued to the stockholders of UniQuest 1,000 shares of PrimeHoldings' common
stock. UniQuest (a Utah corporation) was organized in March 1995. Its operating
activities have related primarily to the marketing of telecommunications
services as an agent of UniDial, Inc. UniQuest is a wholly owned subsidiary of
PrimeHoldings.
Effective March 5, 1999, PrimeHoldings acquired bCard through its
acquisition of 80% of the outstanding common stock of bCard (the "bCard
Acquisition"). As consideration for the bCard Acquisition, PrimeHoldings agreed
to pay bCard $100,000 cash, $400,000 in the form of a promissory note and
500,000 shares of PrimeHoldings common stock. bCard (a Utah corporation) was
organized in January 1999. Its operating activities since inception have related
primarily to selling and providing trade show and event registration services,
lead retrieval services and related membership based incentive point programs.
As of the date of this report, PrimeHoldings owned 80% of bCard's outstanding
common stock.
Effective October 12, 1999, PrimeHoldings acquired GolfAgent USA
through its acquisition of all of the issued and outstanding common stock of
GolfAgent USA (the "GolfAgent USA Acquisition"). As consideration for the
GolfAgent USA Acquisition, PrimeHoldings issued to the stockholders of GolfAgent
USA 250,000 shares of PrimeHoldings' common stock and issued an additional
250,000 shares of PrimeHoldings' common stock that will vest upon achievement of
certain performance milestones. GolfAgent USA (a Nevada corporation) was
organized in June 1995 and had no material operations prior to the GolfAgent USA
Acquisition. Its operating activities since the GolfAgent USA Acquisition have
related primarily to the commercialization of an online tee-time reservation
system developed and licensed to GolfAgent USA by an unaffiliated party.
GolfAgent USA is a wholly owned subsidiary of PrimeHoldings.
The Company's principal executive offices are located at 6955 Union
Park Center, Suite 390, Midvale, Utah 84047. Its telephone number is (801)
562-1444.
Products and Services
PrimeHoldings conducts its business through its subsidiaries. The
products and services of the are as follows:
The bCard Technology
Through bCard, the Company focuses on the development and application
of an Internet-based business-to-business information exchange. bCard's primary
objective is to create a new way to manage "business card" information that Web
based technology can automate in the information exchange process. Management
believes the rapid development of the Internet as an essential business tool is
redefining how corporate and product information is shared.
The "bCard", bCard's principal business product, is a universal
electronic business card that was developed based on smart card technology. A
bCard can store large amounts of digital information that can be shared to aid
in communication between business professionals and in commerce by business
entities. The bCard can be used to provide registration to events, exhibitors
and attendees. Typically, an event provider hires bCard to provide event
registration services. Upon registration, attendees are issued a bCard with
information specific to each attendee stored on the bCard. Attendees are not
charged an additional fee for the bCard, rather the cost of this service is
included in the fee received by bCard from the event provider. Exhibitors then
rent bCard readers from the Company to process information from attendees'
bCards. As attendees visit exhibitors, attendees may give the vendor information
about attendee that is stored on the bCard for marketing purposes or for the
purposes of forwarding information regarding a vendor's products or services.
Vendor's may also purchase points on a bCard incentive program that are
redeemable for miles on several frequent flyer programs (other benefits are
expected to be offered
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in the future). Attendees who give bCard information to vendors offering points
can then redeem their points through a bCard.net account at the Company operated
web site www.bCard.net The bCard.net account is automatically set up in the
attendee's name when the bCard is issued. Since inception bCard has distributed
approximately 260,000 bCards.
In February 2000, bCard signed a 3 year contract with American Show
Management, Inc., North America's largest producer of IT events, to provide
registration and information management services for an estimated 56 events in
2000. The Company has also agreed to provide registration and information
management services to Imark Communications for an estimated 16 events in 2000
and expects to provide registration and information managements services to 12
additional providers in 2000. During 1999, bCard provided registration and
information management services at 46 American Show Management, Inc. produced
events and 11 Imark Communications produced events.
The Company anticipates that its future success will be highly
dependent on its arrangements with American Show Management, Inc. The Company
anticipates that the revenue generated from the American Show Management, Inc.
agreement will comprise a significant portion of the Company's revenues in the
future. The number of shows projected during 2000 is forward looking information
and is subject to many risks and uncertainties, including the fact that although
the American Show Management, Inc. agreement does not guarantee an minimum
number of shows. There can be no assurance that bCard will provide services to
the number of shows projected during 2000, that these arrangements will result
in substantial revenue or that bCard services will be performed profitably.
bCard is striving to establish a global electronic business card
technology that will create a new Internet-based communications environment for
business-to-business transactions. bCard.net, the registered web address, may
then become a global business-to-business communications portal.
Electronic Data Extraction
Through Navilor, the Company utilizes licensed and proprietary,
computing technologies to capture, manage and distribute key business data from
forms and other business documents. The Company's data extraction technology
converts information on paper documents to electronic images through high-speed
scanning and image capture capabilities. Electronic data is then extracted,
processed, and stored online for future retrieval.
Navilor currently provides data collection, management, and extraction
services for a number of different customers. Navilor expects to generate most
of its revenues during 2000 from arrangements with Covenant Transport, Inc.,
Pepsi-Cola Company and Interim Services, Inc. Navilor is currently performing
services under these arrangements, but the arrangements do not require the
clients to process any minimum volume of documents and may be terminated without
penalty. There can be no assurance that these arrangements will result in
substantial revenue or that Navilor's services will be performed profitably.
Navilor's target customers are businesses that currently utilize highly
paper-intensive processes to capture, manage and disseminate data. These
companies may benefit from Navilor's proprietary and licensed technologies and
computing mechanisms, which may assist customers in managing business data
efficiently and cost effectively in an electronic service bureau environment
which features:
o Availability of global accessibility through the Internet.
o Data security through the use of encryption, electronic
authentication and firewalls.
o Custom programming to support input from, or output to many
data sources.
o A proprietary neural network-based engine that provides high
recognition accuracy rates of hand-written or
machine-generated characters.
Navilor currently relies on word of mouth advertising and existing
customers to generate business. Navilor seeks to offer each customer a
customized solution for their forms processing needs.
Online Tee Time Registration System
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GolfAgent USA focuses on the implementation and operation of a
technology based, golf tee time reservation and golf services business.
GolfAgent USA is seeking to become a preferred distributor of Internet based tee
times sold in golf facility pro shops in the U.S. GolfAgent USA plans to offer a
computerized Internet based real time tee time management solution to public
daily fee golf courses offering an automated method of booking tee times.
GolfAgent USA expects to collect transactional fees from reservations made
through its systems. GolfAgent USA's technology, which is licensed from Baron
Systems, plc., a United Kingdom organization (the "GolfAgent USA License"). The
GolfAgent USA License is terminable during any twelve month period if Baron
Systems, plc has not received payment for an aggregate of 500 or more license
fees under the GolfAgent USA License. The GolfAgent USA License was executed in
June 1999, no license fee payments have been generated to date, and the Company
does not expect to meet the 500 license fee minimum by June 2000. As a result,
there can be no assurance that GolfAgent USA License will not be terminated or
that revenues will ever be generated by GolfAgent USA.
Management believes that the GolfAgent USA reservation system will
enable golf facilities and golfers to schedule tee times efficiently and
effectively in an electronic environment which features:
o Accessibility through the Internet;
o Advanced computer and telecommunications technologies;
o Data security through the use of encryption, electronic
authentication and firewalls; and
o Seamless integration into many golf tee time scheduling and
management platforms.
GolfAgent USA anticipates launching a major sales and marketing effort
during the second quarter of 2000. There can be no assurance, however, that such
marketing efforts will commence when anticipated or that such marketing efforts
will be successful.
Telecommunications Services Marketing
UniQuest markets certain telecommunications services as an independent
agent of UniDial, Inc., a telecommunications services company. UniDial, Inc. in
conjunction with its vendor partners, offers an integrated suite of telecom
services primarily to small and medium-sized business customers. Products and
services range from data, long distance and local voice, to global
communications and the Internet. Under an Agent's Agreement, UniQuest markets
various telecommunications services for UniDial, Inc. as its agent. UniQuest has
no power to contract for or on behalf of UniDial, Inc. The Company does not
consider UniQuest a material part of its operation and does not expect UniQuest
to generate material revenues in the future.
Government Regulation
The Company's businesses are subject to federal and state regulation
applicable to businesses generally. There are relatively few laws specifically
directed towards electronic, Internet and telecommunications services marketing
which the Company provides. However, changes in the regulatory environment
relating to these services could have a material and adverse effect on the
Company and its business. Additionally, legislative proposals from
international, federal and state governmental bodies in the areas of content
regulation, intellectual property, privacy rights, online contracts, advertising
and tax issues, could impose additional regulations and obligations upon all
online service and electronic data gathering, which effect may be materially
adverse to the interests of the Company and its business. Moreover, the
applicability of intellectual property ownership and personal privacy laws is at
times uncertain with respect to persons engaged in electronic and Internet
commerce and these areas may be subject to future regulation which may be
materially adverse to the interest of the Company and its business. The Company
cannot predict the likelihood that any such legislation will pass, nor the
financial impact, if any, the resulting regulation may have on it.
Business Strategy
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To reach their target markets, the Company plans to use a multiple
channel marketing approach utilizing telesales, direct territory representative
marketing, print media advertising, Internet banner advertising, and leveraging
from existing business relationships.
The Company currently markets its bCard technologies and services
through direct sales and marketing. The Company maintains a separate sales and
marketing staff for bCard, enabling the sales personnel to develop customer
relationships and expertise in bCard's business. The Company believes that an
experienced sales staff is critical to initiating and maintaining bCard's
customer relationships and businesses.
The Company currently does not maintain marketing or sales personnel in
Navilor, GolfAgent USA or UniQuest. The Company currently relies on word of
mouth advertising and existing customers to generate additional business for
Navilor. GolfAgent USA anticipates launching a major sales and marketing effort
during the second quarter of 2000. The Company is not actively seeking
additional business in UniQuest.
There can be no assurance that these sales forces, marketing techniques
or business strategy of the Company will be successful in initiating and
maintaining customer relationships.
Competition
The markets for the technologies and services being pursued by the
Company are intensely competitive, highly fragmented and characterized by
rapidly changing technology, evolving industry standards, price competition and
frequent new product introductions. Although the Company believes that the
diverse market segments will provide opportunities for more than one supplier of
technologies and services similar to those of the Company, it is possible that a
single supplier may dominate one or more market segments. The Company believes
the principal competitive factors in these markets are name recognition,
performance, ease of use, variety of value-added services, functionality and
features and quality of support.
Management believes that the current and prospective competitors for
(i) bCard includes Forte Communication, Convention Registration Services,
Registration Control Systems and others; (ii) Navilor includes JetForms, Inc.,
Cardiff Software Inc. and others; and (iii) GolfAgent USA includes
GolfGateway.com, EZ LinksGolf.com, Book4golf.com, eTeeTimes.com, LinksTime.com
and others.
The Company expects additional price and product competition as other
established and emerging companies enter these markets and new technologies and
services are introduced. Increased competition may result in price reductions,
reduced gross margins and loss of market share, any of which could have a
material adverse effect on the Company's business, operating results, cash flows
and financial condition. The relative importance of each of these factors
depends upon the specific customer involved. There can be no assurance that the
Company will be able to compete successfully against current and future
competitors, or that competitive factors faced by the Company will not have a
material adverse effect on the Company's business, operating results, cash flows
and financial condition.
Proprietary Rights
Management believes that the Company's success is somewhat dependent on
the maintenance of confidentiality regarding certain of its proprietary
information. The Company attempts to protect its proprietary information through
contractual arrangements and restricting access to certain proprietary
information. The Company does not have confidentiality agreements in place with
its employees. There can be no assurance that these measures will be sufficient
to protect the Company's proprietary information.
Management believes that because of the rapid pace of technological
change in its markets, legal protection of its proprietary information is less
significant to the Company's competitive position than factors such as
continuing product innovation in response to evolving industry standards,
technical expertise, effective product marketing strategies and customer
service. Without legal protection, however, it is possible for third parties to
exploit commercially the proprietary aspects of the Company's products and
services which could have a material and adverse effect on the Company and is
operating results.
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Employees
As of March 31, 2000, the Company employed 26 people on a full-time
basis and 15 people on a part-time basis. The Company anticipates adding
additional employees as necessary, in accordance with increased operating
demands as they arise. The Company believes its future success will depend, in
part, on its continued ability to attract and retain highly qualified personnel
in a competitive market for experienced and talented software and hardware
employees, systems designers and operators, and sales and marketing personnel.
The Company's employees are not represented by a labor union nor are they
subject to a collective bargaining agreement. The Company believes that its
relations with its employees are good.
Risk Factors
An investment in the Company is speculative in nature, involves a high
degree of risk and should only be made by an investor who can afford the loss of
his entire investment. In addition to the other information in this filing, the
following factors should be considered carefully in evaluating an investment in
the Company.
History of Losses/Profitability Uncertain. The Company has reported
losses each year since inception. At December 31, 1999, it had an accumulated
deficit of $3,839,576 and a working capital deficit of $607,042. The Company's
ability to achieve profitability depends on many factors, including increasing
sales, consumer awareness and technology acceptance. There is no assurance that
the Company's technologies and/or services will ever be commercially viable or
commercially accepted and no assurance can be given that the Company will ever
become profitable. In addition, prospects for the Company's profitability will
be affected by expenses, operational difficulties and other factors frequently
encountered in the development of a business enterprise in a competitive
environment, many of which factors may be unforeseen and beyond the Company's
control.
Limited Capital/Need for Additional Capital. The Company believes that
existing funds and funds generated from sales will not support the Company's
operations in the immediate future. The Company estimates that it will need to
raise at least $3,000,000 in additional capital in 2000 to fully execute its
business plan which includes acquiring capital equipment, marketing efforts and
other general corporation purposes. The Company has no material current
contractual arrangements with respect to additional financing and there can be
no assurance that additional financing will be available on commercially
reasonable terms or at all. Any inability to obtain additional financing will
have a material adverse effect on the Company, including possibly requiring the
Company to significantly curtail or cease its operations.
Effect of Possible Failure to Comply with Securities Laws. In 1999 and
1998, the Company received $2,635,650 and $544,464 in net proceeds from
financing activities. In 2000 the Company has received $403,500 from the sale of
common stock. The proceeds from securities sales occurred in a number of
separate transactions. See "Recent Sales of Unregistered Securities." At the
time of the sales the Company believed the transactions were exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"). The Company relied on several different exemptions from
Securities Act registration in completing the transactions. It now appears
possible that all or some of these transactions could be integrated or
considered part of a single financing. In that event, it may be that no
exemption from Securities Act registration was available for those transactions
that are deemed to be part of the same financing. There can be no assurance that
the Company's fundraising activities did not violate the Securities Act. If the
Securities Act or any other applicable securities regulation was violated, it is
possible that an investor may have the right to rescind his or her purchase of
the securities and the Company and its controlling persons may be subject to
significant civil and criminal penalties. If any purchasers were to successfully
seek rescission or civil or criminal penalties were imposed, the Company could
face severe financial demands that could adversely affect the Company and result
in the Company ceasing or significantly curtailing operations.
Defective Issuance of Preferred Shares. Between October 1998 and August
1999 the Company sold Preferred A Shares, Preferred B Shares and Series C
Preferred Stock to investors. Under Delaware General Corporation Law a
corporation's certificate of incorporation, or an amendment thereto, must set
forth powers, designations, preferences and other rights of each class or series
of stock a corporation intends to issue. The
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Company's certificate of incorporation did not provide for the Company to issue
any class of preferred stock at the time the preferred shares were issued. The
Company has amended its certificate of incorporation to authorize the issuance
of the preferred stock that was sold, but this filing will not necessarily cure
the defective issuance of the preferred shares. There can be no assurance that
the Company's failure to properly authorize the preferred shares before issuance
will not lead to significant liability.
Regulation and Legal Uncertainties. The Company's businesses are
subject to federal and state regulation applicable to businesses generally.
There are relatively few laws specifically directed towards electronic, Internet
and telecommunications services marketing which the Company provides. However,
changes in the regulatory environment relating to these services could have a
material and adverse effect on the Company and its business. Additionally,
legislative proposals from international, federal and state governmental bodies
in the areas of content regulation, intellectual property, privacy rights,
online contracts, advertising and tax issues, could impose additional
regulations and obligations upon all online service and electronic data
gathering, which effect may be materially adverse to the interests of the
Company and its business. Moreover, the applicability of intellectual property
ownership and personal privacy laws is at times uncertain with respect to
persons engaged in electronic and Internet commerce and these areas may be
subject to future regulation which may be materially adverse to the interest of
the Company and its business. The Company cannot predict the likelihood that any
such legislation will pass, nor the financial impact, if any, the resulting
regulation may have on it.
Reliance on Key Personnel. The success of the Company depends in part
upon the performance of its executive officers and other key employees. The loss
of the services of one or more of its key personnel could have a material
adverse effect on the Company. With the exception the Company's president, CFO
and two bCard officers, the Company has no employment agreements in place with
its key personnel. Competition for such personnel is intense, and there can be
no assurance that the Company will be successful in attracting and retaining
such personnel. The Company's success will depend on its continued ability to
attract and retain highly skilled and qualified personnel.
Competition. The markets for the technologies and services being
pursued by the Company are intensely competitive, highly fragmented and
characterized by rapidly changing technology, evolving industry standards, price
competition and frequent new product introductions. Although the Company
believes that the diverse market segments will provide opportunities for more
than one supplier of technologies and services similar to those of the Company,
it is possible that a single supplier may dominate one or more market segments.
The Company believes the principal competitive factors in these markets are name
recognition, performance, ease of use, variety of value-added services,
functionality and features and quality of support.
The Company expects additional price and product competition as other
established and emerging companies enter these markets and new technologies and
services are introduced. Increased competition may result in price reductions,
reduced gross margins and loss of market share, any of which could have a
material adverse effect on the Company's business, operating results, cash flows
and financial condition. The relative importance of each of these factors
depends upon the specific customer involved. There can be no assurance that the
Company will be able to compete successfully against current and future
competitors, or that competitive factors faced by the Company will not have a
material adverse effect on the Company's business, operating results, cash flows
and financial condition.
New Technology Development, Rapid Technological Change and
Obsolescence; Lack of Intellectual Property Protection. Broad acceptance of the
Company's technologies and services by customers is critical to the Company's
future success, as is the Company's ability to design, develop, test and support
enhancements on a timely basis that meet changing customer needs and respond to
technological developments and emerging industry standards. There can be no
assurance that the Company will be successful in developing and marketing new
enhancements that meet changing customer needs and respond to such technological
changes or evolving industry standards. Most of the Company's current products
and services are designed around certain standards, including current and future
sales of the Company's technologies and services, which will be dependent, in
part, on industry acceptance of such standards.
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The industries in which the Company operates have been characterized by
rapid technological advances resulting in short product life cycles, rapid price
reductions, significant price/performance improvements and frequent product
introductions. Accordingly, there can be no assurance that one or more of the
Company's technologies and/or services will not be rendered uncompetitive or
obsolete by technological advances or changing customer preferences. These
factors may also limit the Company's ability to recover its investment in its
products and/or services. The Company did not fund research and development
during 1998 or 1999. The Company does not possess any patent or other
intellectual property rights that would limit competition against it and there
are few barriers to entry into the market for the Company's products or
services. There can be no assurance, therefore, that any of the Company's
competitors, many of whom have far greater resources than the Company, will not
independently develop technologies that are substantially equivalent or superior
to the Company's technology.
Anti-Takeover Provisions. The Articles of Incorporation of the Company
contain certain provisions which could be an impediment to a non-negotiated
change in control of the Company, namely an ability, without stockholder
approval, to issue up to 5,000,000 shares of preferred stock with rights and
preferences determined by the Board. These provisions could impede a
non-negotiated change in control and thereby prevent stockholders from obtaining
a premium for their common stock.
No Dividends. The Company is required to pay annual dividends on the
Preferred A Shares, Preferred B Shares and Series C Preferred Stock before the
Company can declare and pay dividends to the common stockholders. See
"Description of Securities--Preferred Stock." The Company does not anticipate or
contemplate paying dividends on its common stock in the foreseeable future. At
present, the Company will follow a policy of retaining all available earnings,
if any, to finance the development and expansion of its business.
Limited Liability of Management. The Company's Certificate of
Incorporation limits the liability of its Officers and Directors and there are
provisions in its Certificate of Incorporation, By-laws and Indemnification
Agreements which provide for indemnification by the Company of its Officers and
Directors. The Company's Certificate of Incorporation generally provides that
its directors and officers shall have no personal liability to the Company or
its stockholders for monetary damages for breaches of their fiduciary duties as
directors, except for breaches of their duties of loyalty, acts or omissions not
in good faith or which involve intentional misconduct or knowing violation of
law, acts involving unlawful payment of dividends or unlawful stock purchases or
redemptions, or any transaction from which a director derives an improper
personal benefit. Such provisions substantially limit the stockholders' ability
to hold directors liable for breaches of fiduciary duty.
No Control Over Market Making. Market making involves the buying and
selling of securities for others or for one's own account to facilitate and
attempt to profit from market activity in a particular security. Market making
does not in and of itself support or restrict the price of the security. No
person or broker-dealer is under any obligation to make a market in the
Company's common stock and any person or broker-dealer making a market in the
common stock may discontinue market making activities at any time without
notice. There can be no assurance that an active trading market for the common
stock will exist at any time in the future.
Volatility of Stock Prices. Market prices for the Company's common
stock will be influenced by many factors and will be subject to significant
fluctuations in response to variations in operating results of the Company and
other factors such as investor perceptions of the Company, supply and demand,
interest rates, general economic conditions and those specific to the industry,
developments with regard to the Company's activities, future financial condition
and management. There can be no assurance regarding the future prices at which
the Company's common stock will trade, if any.
Applicability of Low Priced Stock Risk Disclosure Requirements. The
common stock of the Company may be considered a low priced security under rules
promulgated under the Securities Exchange Act of 1934. Under these rules,
broker-dealers participating in transactions in low priced securities must first
deliver a risk disclosure document which describes the risks associated with
such stocks, the broker-dealer's duties, the customer's rights and remedies, and
certain market and other information, and make a suitability determination
approving the customer for low priced stock transactions based on the customer's
financial situation, investment experience and objectives. Broker-dealers must
also disclose these restrictions in writing to the customer, obtain specific
written consent of the customer, and provide monthly account statements to the
customer. With all these restrictions, the likely effect of
8
<PAGE>
designation as a low priced stock will be to decrease the willingness of
broker-dealers to make a market for the stock, to decrease the liquidity of the
stock and to increase the transaction cost of sales and purchases of such stock
compared to other securities.
Item 2. Management's Discussion and Analysis or Plan of Operation
The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding of the
Company's consolidated results of operations and financial condition. The
discussion should be read in conjunction with the consolidated financial
statements and notes thereto.
Overview
The Company had $86,657 cash in and a working capital deficit of
$607,042 as of December 31, 1999. From its inception, the Company has incurred
losses from operations. The Company had net losses of $2,068,576 and $921,597 in
1999 and 1998, respectively. To date, the Company's principal focus has been on
providing trade show and event registration services, providing data extraction
and processing services, preparing to provide online tee-time reservation system
and marketing telecommunications services.
The independent auditors' report contains an explanatory paragraph
stating that the Company has a deficit in working capital and has incurred
recurring losses and that these conditions raise substantial doubt about the
Company's ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
Years Ended December 31, 1999 and 1998
The Company had revenues of $1,295,188 and a net loss of $2,068,576
during the year ended December 31, 1999, compared with revenues of $169,298 and
a net loss of $921,597 during the prior year. Of the 1999 revenues, $1,024,184
was generated from the bCard technology, $178,937 was generated from electronic
data extraction, $92,067 was generated from commissions for marketing
telecommunications services and no revenues were generated by GolfAgent USA.
Substantially all of the Company's 1998 revenues were generated by from
commission for marketing telecommunications services. The Company will be
looking primarily to bCard and Navilor for short term revenue growth. There can
be no assurance, however, that either bCard or Navilor will generate significant
revenues in the future.
Operating expenses were $2,859,363 for the year ended December 31,
1999, compared to $945,859 during the prior year. The increase resulted mainly
from (i) increased operating expenses as a result of the acquisition and
operation of bCard during 1999; (ii) increased operating expenses as a result of
the Asset Acquisition whereby certain operating assets were acquired for use by
and in Navilor's data extraction business; (iii) the write-off of goodwill
relating to the GolfAgent USA Acquisition; and (iv) increased amortization and
depreciation expenses. Management expects selling, general and administrative
expenses to increase during 2000 as the Company expands its operations.
Net other income was ($63,739) for the year ended December 31, 1999
compared with ($69,235) for year ended December 31, 1998. These losses are
attributable to interest expense related to borrowing which losses were
partially offset by other income.
Liquidity and Capital Resources
To date, the Company has financed its operations principally through
placements of equity securities and debt and revenues from operations. The
Company generated $2,635,650 in net proceeds through financing activities during
the year ended December 31, 1999. The Company used net cash for operating
activities of $1,673,996 during the year ended December 31, 1999. The Company
used net cash of $874,997 in investing activities relating to the purchase of
equipment and software for the year ended December 31, 1999. As of December 31,
1999, the Company's liabilities totaled $899,674, all of which were current
liabilities. The Company had $86,657 in cash and a working capital deficit of
$607,042 as of December 31, 1999.
9
<PAGE>
The Company has committed to spend future minimum rental payments of
$227,820 for physical facilities leases during 2000 and $228,791, $113,239,
$78,431 and $4,141 in minimum lease payments for the years 2001 through 2004,
respectively. As of March 31, 2000, the Company does not have material
commitments for capital expenditures. At December 31, 1999, the Company also had
short term loan obligations in the aggregate principal amount of $329,357. These
loans bear interest at various rates between ten percent per annum and
thirty-two percent per annum. Of these loans, $168,949 is secured by UniQuest
assets and a pledge of UniQuest stock.
The Company projects that current funds and funds generated from
anticipated operating revenues will not be sufficient to support the Company
operations in the immediate future. The Company estimates that it will need at
least $3,000,000 in additional funding in 2000 to execute its business plan. The
Company anticipates that it will generate such funding through debt or equity
financings. The Company does not have any commitments in place with respect to
additional financing and there can be no assurance that additional funding will
be available on commercially reasonable terms or at all. Any inability to obtain
additional funding in the immediate future will have a material adverse effect
on the Company, including possibly requiring the Company to significantly
curtail or cease its operations.
At March 31, 2000, the Company had 2,165,000 warrants (the "Warrants")
outstanding which are exercisable for the same number of shares of common stock
of the Company at between $1.30 and $1.75 per share. The Warrants expire between
July 2000 and June 2002. The exercise of all the Warrants would result in an
equity infusion to the Company of approximately $3,052,450. There can be no
assurance that any warrants will ever be exercised.
At March 31, 2000, the Company has granted stock options to acquire
3,666,000 shares of common stock of which options to acquire 60,750 shares of
common stock are currently exercisable. The stock options are exercisable at
$.78125 per share. The exercise of all of the currently exercisable stock
options would result in an equity infusion to the Company of approximately
$47,461. There can be no assurance that any of the stock options will be
exercised.
Seasonality
The trade show businesses tends to be most active in the spring and the
fall. As a result, the Company anticipates that revenues generated by bCard
would tend to be strongest in the spring and fall. Substantially all of the
GolfAgent USA revenues, if and when they commence and of which there can be no
assurance, are expected to be generated during the spring, summer and fall
seasons. The Company's other businesses generally do not fluctuate on a seasonal
basis.
Inflation
The Company does not expect the impact of inflation on operations to be
significant.
Year 2000
Since entering the Year 2000, the Company has not experienced any major
disruptions to its business nor is it aware of any significant Year 2000-related
disruptions impacting its customers and suppliers. Furthermore, the Company did
not experience any material impact on business at calendar year end. The Company
will continue to monitor its critical systems over the next several months but
does not anticipate any significant impacts due to Year 2000 exposures from its
internal systems as well as from the activities of its suppliers and customers.
Forward-Looking Statements
Certain statements in this Form 10-SB constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements involve known and unknown
risks, uncertainties and other important factors that could cause the actual
results, performance or achievements of the Company to differ materially from
any future results, performance or achievements expressed or implied by such
forward-looking statements. Such risks,
10
<PAGE>
uncertainties and other important factors include, among others: dependence on
proprietary technology; technological changes and costs of technology; industry
trends; competition; ability to develop markets and market acceptance; product
demand; changes in business strategy or development plans; availability, terms
and deployment of capital; availability of qualified personnel; changes in
government regulation; general economic and business conditions; and other
factors. Such forward-looking statements speak only as of the date of this Form
10-SB. The Company's actual results for future periods could differ materially
from those anticipated or projected. The Company expressly disclaims any
obligation or undertaking to disseminate any updates or revisions to any
forward-looking statement contained herein to reflect any change in the
Company's expectations with regard thereto or any change in events, conditions
or circumstances on which any such statement is based.
Item 3. Description of Property
PrimeHoldings' principal offices are located at 6955 Union Park Center,
Suite 390, Midvale, Utah, under terms of a lease with an unaffiliated lessor
which expires on November 30, 2003. The offices comprise approximately 3,025
square feet of space. In addition to the foregoing, subsidiaries of
PrimeHoldings lease office space in Utah, Maryland and Toronto, Canada. The
Company believes that its current office space will be adequate to meet the
needs of current and expected growth for the foreseeable future.
Item 4. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information with respect to the
beneficial ownership of the common stock of the Company as of March 31, 2000,
for: (i) each person who is known by the Company to beneficially own more than 5
percent of the Company's common stock, (ii) each of the Company's directors,
(iii) the Chief Executive Officer and all other executive officers with annual
compensation in excess of $100,000 (determined for the year ended December 31,
1999) (the "Named Executive Officers"), and (iv) all directors and executive
officers as a group. As of March 31, 2000, the Company had 12,851,424 shares of
common stock outstanding, Preferred A Shares that were convertible into 473,333
shares of common stock, Preferred B Shares that were convertible into 500,000
shares of common stock and Series C Preferred Stock that was convertible into
2,350,000 shares of common stock. The table assumes the conversion of all
outstanding preferred stock.
<TABLE>
<CAPTION>
Name and Address Shares Beneficially Percentage of Shares
Of Beneficial Owner(1) Owned(2) Beneficially Owned Title of Class
---------------------- -------- ------------------ --------------
<S> <C> <C> <C>
Thomas E. Aliprandi (3), 2,717,978 16.8% Common Stock
Chairman of the Board of
Directors, CEO and President
Michaeljohn Kudlik (4), 300,000 1.9% Common Stock
Director
Matthew R. White(5), 165,680 1.0% Common Stock
Director
David E. Shepardson III(6), Vice 535,300 3.3% Common Stock
President, Secretary, Treasurer
& CFO
Executive Officers and Directors 3,718,958 23.0% Common Stock
as a Group (four persons)
A Business Funding (7) 1,000,000 6.2% Common Stock
6975 union Park Ctr. 8-600
SLC, UT 84047
Stephan Herold (8) 2,545,992 15.0% Common Stock
6018 North 62nd Place
Paradise Valley, AZ 85253
11
<PAGE>
<CAPTION>
Name and Address Shares Beneficially Percentage of Shares
Of Beneficial Owner(1) Owned(2) Beneficially Owned Title of Class
---------------------- -------- ------------------ --------------
<S> <C> <C> <C>
Hampton-Porter Inv. Bankers (9) 1,000,000 5.6% Common Stock
600 W. Broadway, 14th Floor
San Diego, CA 92101
Time Holdings LLC (10) 1,500,000 9.3% Common Stock
600 W. Broadway, 14th Floor
San Diego, CA 92101
- - --------------------------
* Less than 1%.
</TABLE>
- - ------------------
(1) Except where otherwise indicated, the address of the beneficial owner is
deemed to be the same address as the Company.
(2) Beneficial ownership is determined in accordance with SEC rules and
generally includes holding voting and investment power with respect to the
securities. Shares of common stock subject to options or warrants currently
exercisable, or exercisable within 60 days, are deemed outstanding for
computing the percentage of the total number of shares beneficially owned
by the designated person, but are not deemed outstanding for computing the
percentage for any other person.
(3) Includes 2,717,978 shares of common stock owned by an entity with which Mr.
Aliprandi is affiliated. Does not include Does not include stock options
exercisable for 1,600,000 shares of common stock that vest in four equal
annual installments beginning in July 2000.
(4) Includes 300,000 shares of common stock. Does not include stock options
exercisable for 350,000 shares of common stock that vest in four equal
annual installments beginning in July 2000.
(5) Includes 59,000 shares of common stock. Also includes 106,680 shares of
common stock Mr. White is deemed to beneficially own through an entity.
Does not include stock options exercisable for 150,000 shares of common
stock that vest in four equal annual installments beginning in July 2000.
(6) Includes 535,300 shares of common stock. Does not include stock options
exercisable for 500,000 shares of common stock that vest in four equal
annual installments beginning in July 2000.
(7) Includes 1,000,000 shares of common stock.
(8) Includes preferred stock convertible into 1,772,996 shares of common stock
and warrants exercisable for 772,996 shares of common stock.
(9) Includes warrants exercisable for 1,000,000 shares of common stock.
(10) Includes 500,000 shares of common stock and preferred stock convertible
into 1,000,000 shares of common stock.
The Company is not aware of any arrangements which may result in a change
in control of the Company.
Item 5. Directors, Executive Officers, Promoters and Control Persons
Identify Directors and Executive Officers
Set forth below is certain information concerning each of the directors
and executive officers of the Company as of March 31, 2000:
With
Company
Name Age Position Since
---- --- -------- -----
Thomas E. Aliprandi 36 Chairman of the Board of 1994
Directors, CEO and President
Michaeljohn Kudlik 50 Director 1998
Matthew R. White 53 Director 1995
David E. Shepardson III 37 Vice President, Secretary, 1994
Treasurer & CFO
12
<PAGE>
Thomas E. Aliprandi. Mr. Aliprandi has been with the Company since
1994. He is the Chairman of the Board, CEO and President of the Company. Prior
to his employment with the Company, Mr. Aliprandi served as a director of
international marketing for Wolf Systems Technology Corporation from August 1988
to October 1989. Mr. Aliprandi holds no other directorships in reporting
companies.
Michaeljohn Kudlik. Mr. Kudlik has been with the Company since 1998. He
is a director of the Company. During the past five years Mr. Kudlik's principal
occupation during 1998 and 1999 was as the Pacific Regional Director for the
Deutsche Bank managing the marketing of managed assets in 11 western states and
his principal occupation during 1995 through 1997 was acting as a Regional
Director for the Ing Group in 5 western states. Mr. Kudlik has worked in the
securities industry for 30 years, including a position in Floor Operations on
the floor of the New York Stock Exchange. He also headed the Houston chapter of
the International Association of Financial Planners for four years, and
contributed as an adjunct faculty member of the College of Financial Planning
for three years. Mr. Kudlik holds no other directorships in reporting companies.
Matthew R. White. Mr. White has been with the Company since 1995. He is
a director of the Company. His principal occupation for the last five years has
been in real estate investment and development and business consulting. He is
experienced as a registered representative, wholesale securities trader and an
investment banker specializing in early stage (pre-IPO) companies. Mr. White
holds no other directorships in reporting companies.
David E. Shepardson III. Mr. Shepardson has been with the Company since
1994. He is a Vice President, Secretary, Treasurer and CFO of the Company. Prior
to employment with the Company, Mr. Shepardson worked in various financial
positions at Novell, Inc. from 1984 to 1989 and at The McGraw-Hill Companies as
a Business Manager from 1989 to 1991. Mr. Shepardson holds no other
directorships in reporting companies.
All directors are elected annually at the shareholder meeting.
Involvement in Certain Legal Proceedings
The executive officers and directors of the Company have not been
involved in any material legal proceedings which occurred within the last five
years of any type as described in Regulation S-B.
Item 6. Executive Compensation
The tables below set forth certain information concerning compensation
paid by the Company to its Named Executive Officers. The tables include
information related to stock options granted to the Named Executive Officers.
Summary Compensation Table. The following table provides certain
information regarding compensation paid by the Company to the Named Executive
Officers.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation Awards
Securities
Restricted Underlying All Other
Name and Other Annual Stock Options/ LTIP Compensation
Principal Position Year Salary ($) Bonus ($) Compensation ($) Awards ($) SAR(#) Payouts ($)
------------------ ---- ---- --------- ---------------- ---------- ------ -------- ---
($)
<S> <C> <C> <C> <C> <C> <C> <C>
Thomas E. Aliprandi 1997 _____ -- 120,000(1) -- -- -- --
Chairman, CEO and 1998 60,000 -- 60,000(1) -- -- -- --
President 1999 120,000 -- -- -- -- -- --
</TABLE>
- - ---------------
13
<PAGE>
(1) Amounts paid under consulting arrangement.
Compensation of Directors
No cash fees or other consideration were paid to directors of the
Company by the Company for service on the Board during 1999 and no cash fees or
other consideration is expected to be paid to employee directors for service on
the Board during 2000. During 2000, the Company has compensated non-employee
directors by granting options to purchase 150,000 shares of the Company's common
stock that vest in equal annual installments beginning in July 2000. The Company
has made no other agreements regarding compensation of non-employee directors.
All directors are entitled to reimbursement for reasonable expenses incurred in
the performance of their duties as Board members.
Employment Agreements
The Company has entered into a three year employment agreement Mr.
Aliprandi. Mr. Aliprandi's employment agreement provides that (i) Mr. Aliprandi
receive a salary of $120,000 per year beginning January 1, 2000; (ii) an
automobile allowance of $1,000 per month; (iii) Mr. Aliprandi is entitled to
four weeks vacation per year and health and disability insurance not less
favorable than that which is provided to other employees; and (iv) if the
employment of Mr. Aliprandi is terminated by the Company for any reason then he
is entitled to salary at the then current level for 6 months if employed more
than one year prior to termination, 1 year if employed more than two years prior
to termination, two years if employed more than three years prior to termination
and three years if employed more than four years prior to termination. The
Company has also entered into an employment agreement with Mr. Shepardson
effective January 1, 2000 on substantially the same terms, except that Mr.
Shepardson's annual salary is $100,000 and his automobile allowance is $600 per
month.
bCard has employment agreements in place with Ivan Lazarev, bCard's
president, and Neil Pickard, bCard's vice-president and secretary (collectively,
the "bCard Officers"). The bCard Officers' employment agreements provide for (i)
Messrs. Lazarev and Pickard to receive a salaries of $180,000 during 2000 and
thereafter their salaries will be based on bCard's performance; and (ii)
reasonable health, accident and dental insurance.
Stock Options
In January 2000, the Board approved the adoption of the
PrimeHoldings.com, Inc. 2000 Stock Option Plan (the "Option Plan"). Subject to
stockholder approval, the Option Plan will permit the Company to grant
"non-qualified stock options" and "incentive stock options" to acquire the
Company's Common Stock. The total number of shares authorized for the Option
Plan may be allocated by the Board between the non-qualified stock options and
the incentive stock options from time to time, subject to certain requirements
of the Internal Revenue Code of 1986, as amended. The option exercise price per
share under the Option Plan may not be less than the fair market value of a
share of Common Stock on the date on which the option is granted. A total of
5,000,000 shares are allocated to the Option Plan. As of March 31, 2000, options
to acquire an aggregate of 3,666,000 shares of Common Stock at an exercise price
of $.78125 per share had been granted and are presently outstanding under the
Option Plan and stock options exercisable for 60,750 shares of Company common
stock are currently exercisable. 1,600,000 of the options were granted to Mr.
Thomas Aliprandi.
Indemnification for Securities Act Liabilities
Delaware law authorizes, and the Company's Certificate of Incorporation
and the Company's By-laws and Indemnification Agreements provide for,
indemnification of the Company's directors and officers against claims,
liabilities, amounts paid in settlement and expenses in a variety of
circumstances. Indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted for directors, officers and controlling
persons of the Company pursuant to the foregoing or otherwise. However, the
Company has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable.
14
<PAGE>
Compensation Committee Interlocks and Insider Participation
The Company does not have a Compensation Committee. No executive
officers of the Company serve on the Compensation Committee (or in a like
capacity) for any other entity.
Item 7. Certain Relationships and Related Transactions
There are no reportable transactions under Item 404 of Regulation S-B.
Item 8. Description of Securities
The Company's authorized capital stock currently consists of 50,000,000
shares of common stock, $.0666 par value per share; and 5,000,000 shares of
preferred stock, $.001 par value per share. Of the authorized preferred stock,
500,000 shares have been designated as Preferred A Shares, 500,000 shares have
been designated as Preferred B Shares and 1,000,000 have been designated as
Series C Preferred Stock. The following descriptions of the common and preferred
stock is a summary and is qualified in its entirety by the provisions of the
Company's Certificate of Incorporation and by the provisions of the Delaware
General Corporation Law ("DGCL").
Common Stock
At March 31, 2000, the Company had 12,851,424 shares of fully paid non
assessable common stock outstanding. Holders of common stock are entitled to one
vote for each share held of record on all matters submitted to a vote of
stockholders. Accordingly, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Subject to preferential dividend rights with respect to
any outstanding preferred stock, holders of common stock are entitled to receive
ratably such dividends, if any, as may be declared by the Board out of funds
legally available therefor. Upon liquidation, dissolution or winding up of the
Company, holders of common stock are entitled to share ratably in the assets of
the Company legally available, subject to any prior rights of any outstanding
preferred stock or other rights including any preemptive, subscription,
redemption or conversion rights. Holders of common stock have no cumulative
voting rights and no preemptive, subscription, redemption or conversion rights.
The rights, preferences and privileges of holders of common stock are subject
to, and may be adversely affected by, the rights of the holders of shares of the
three series of preferred stock that the Company has designated and such series
of preferred stock as the Company may designate in the future.
Preferred Stock
The Company's Board is empowered, without further action by
stockholders, to issue from time to time one or more series of preferred stock,
with such designations, rights, preferences and limitations as the Board may
determine by resolution. The rights, preferences and limitations of separate
series of preferred stock may differ with respect to such matters among such
series as may be determined by the Board, including, without limitation, the
rate of dividends, method and nature of payment of dividends, terms of
redemption, amounts payable on liquidation, sinking fund provisions (if any),
conversion rights (if any) and voting rights. Certain issuances of preferred
stock may have the effect of delaying or preventing a change in control of the
Company that some stockholders may believe is in their interest.
Preferred A Shares. At March 31, 2000, the Company had 473,333 shares
of fully paid non assessable Preferred A Shares outstanding. The holders of the
Preferred A Shares have no preemptive rights with respect to any shares of
capital stock of the Company or any other securities of the Company convertible
into or carrying rights or options to purchase any such shares. The Preferred A
Shares are not subject to any sinking fund or other obligations of the Company
to redeem or retire the Preferred A Shares. Unless converted, the Preferred A
Shares are perpetual. There are certain piggy-back registration rights
associated with the Preferred A Shares. The holder of the each Preferred A Share
is entitled to the number of votes equal to the number of shares of common stock
into which such Preferred A Shares could be converted and have voting rights and
powers equal to the voting rights and powers of the common stock (except as
otherwise expressly provided herein or as required by law, voting together with
the common stock as a single class) and are entitled to notice of any
stockholder's meeting in accordance with the By-laws of the Company. Except as
otherwise required by applicable law, all voting rights of the common
stockholders and Preferred A stockholders are vested in and exercised by the
holders of the common and Preferred A Shares, as a single voting group, with
each share of common stock being entitled to one vote and each share of
Preferred A being entitled to one vote.
15
<PAGE>
The Preferred A Shares rank, with respect to right on liquidation,
senior to all classes of common stock and on parity with all future series of
preferred stock established on or after the date hereof by the board of
directors which future classes of preferred stock do not expressly provide that
it ranks senior to or junior to the Preferred A Shares as to rights on
liquidations, winding-up and dissolution. The Preferred A Shares are preferred
as to both earnings and assets, and in the event of liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, the holders of the
Preferred A Shares are entitled, before any assets of the Company are
distributed among or paid over to the holders of the common stock, to be paid in
full the face value of $0.75 per share of Preferred A stock, along with all
accumulated interest and/or dividends, if any. After payment in full of the
above preferential rights of the holders of the Preferred A Shares, the holders
of the Preferred A Shares are not entitled to any further participation in any
distribution of assets by the Company. Neither the sale or transfer of all or
substantially all the assets of the Company, nor the merger or consolidation of
the Company into or with any other corporation or a merger of any other
corporation with or into the Company, will be deemed to be a liquidation,
dissolution or winding up of the Company.
If the assets distributable on such liquidation, dissolution or winding
up (whether voluntary or involuntary), are insufficient to permit the payment to
the holders of Preferred A Shares and other preferred shares that are in parity
the Preferred A Shares, then such assets or the proceeds thereof shall be
distributed among the holders of Preferred A Shares and other preferred shares
that are in parity with the Preferred A Shares ratably in proportion to the
respective amounts the holders of such shares of stock would be entitled to
receive if they were paid the full preferential amounts aforesaid.
The Company has agreed to pay to each holder of Preferred A Shares
simple interest at a rate of ten percent (10%) per annum on the aggregate
purchase price of the Preferred A Shares purchased by each such holder. The
interest is payable within sixty (60) days of the end of the prior fiscal year.
If the Company fails to make any interest payment when such payment is due, the
unpaid interest payment shall bear interest at a rate of ten percent (10%) per
annum from the date of the end of the fiscal year in which the interest accrued
until the payment is made.
Upon fourteen (14) days written notice, each Preferred A Share may be
converted into one (1) share of the Company's common stock at the written
request of a holder of such Preferred A Shares. Holders of shares of Preferred A
Shares may convert all or any number of his or her Preferred A Shares from time
to time at the sole discretion of the holder.
The Company may, in its discretion, call for the conversion of the
Preferred A Shares into common stock on a mandatory one for one basis if and
when, and only if and when, the closing bid price of the Company's common stock
in the over the counter securities markets or other publicly traded securities
medium is equal to or greater than $2.50 per share for five (5) consecutive
trading days. In the event the Company exercises this mandatory call conversion
feature, holders of Preferred A Shares will be given notice and their shares
will automatically become, by operation of law, common stock at the expiration
of the notice.
In the event the Company declares or pays any dividend on the common
stock payable in common stock or in any right to acquire common stock, or shall
effect a subdivision of the outstanding shares of common stock into a greater
number of shares of common stock (by stock split, reclassification or otherwise
than by payment of a dividend in common stock or in any right to acquire common
stock), or in the event the outstanding shares of common stock shall be combined
or consolidated, by reclassification or otherwise, into a lesser number of
shares of common stock, then the conversion ratio in effect immediately prior to
such event will, concurrently with the effectiveness of such event, be
proportionately decreased or increased, as appropriate.
The common stock issuable upon conversion of the Preferred A Shares
shall be changed into the same or a different number of shares of any other
class or classes of stock, whether by capital reorganization, reclassification
or otherwise (other than a subdivision or combination as described in the prior
paragraph), the conversion ratio then in effect shall, concurrently with the
effectiveness of such reorganization or reclassification, be proportionately
adjusted so that the Preferred A Shares are convertible into, in lieu of the
number of shares of common stock which the holders would otherwise have been
entitled to receive, a number of shares of such other class or classes of stock
equivalent to the number of shares of common stock that would have been subject
to receipt by the holders upon conversion of the Preferred A Shares immediately
before that change.
16
<PAGE>
Preferred B Shares. At March 31, 2000, the Company had 500,000 shares
of fully paid non assessable Preferred B Shares outstanding. The Preferred B
Shares rank, with respect to right on liquidation, in parity with the Preferred
A Shares. The Preferred B Shares are otherwise substantially similar to the
Preferred A Shares except that in the event of liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, the holders of the
Preferred B Shares are entitled, before any assets of the Company shall be
distributed among or paid over to the holders of the common stock, to be paid in
full the face value of $1.00 per share of the Preferred B Shares, along with all
accumulated interest and/or dividends, if any.
Series C Preferred Stock. At March 31, 2000, the Company had 705,000
shares of fully paid non assessable Series C Preferred Stock outstanding. The
voting rights of the Series C Preferred Stockholders are substantially similar
to the voting rights of the Preferred A and B Shares. There are also certain
piggy-back registration rights associated with the Series C Preferred Stock.
The Series C Preferred Stock is preferred as to both earning and
assets, and in the event of liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, the holders of the Series C Preferred
Stock are entitled, before any assets of the Company are distributed among or
paid over to the holders of the common stock, to be paid in full the face value
of $1.00 per share of Series C Preferred Stock. After payment in full of the
above preferential rights to the holders of the Series C Preferred Stock, the
holders of the Series C Preferred Stock and common stock shall participate
equally in the division of the remaining assets of the Company, so that from the
remaining assets the amount per share of Series C Preferred Stock distributed to
the holders of the Series C Preferred Stock shall equal the amount per share of
common stock distributed to the holders of the common stock.
The holders of Series C Preferred Stock are entitled to receive
dividends at the rate of $0.12 per share per year payable at such intervals as
the board of directors may from time to time determine. These dividends shall
accrue from the date of issuance of the Series C Preferred Stock whether or not
earned or declared. The specified dividends on the Series C Preferred Stock are
payable before any dividends may be declared, paid, or set apart for the common
shares. The specified dividends on Series C Preferred Stock are cumulative. If
in any year, or years, dividends on the outstanding Series C Preferred Stock at
the rate specified is not paid or set apart for that purpose, the amount of the
deficiency shall be fully paid or declared and set apart for payment, without
interest, before any distribution, by way of dividend or otherwise, is declared,
paid or set apart for the common shares. After all cumulative dividends on
preferred shares are paid, declared or set apart for payment to the holders of
the thereof, if the board of directors elects to make further distribution of
dividends, the additional dividends shall be made equally to the common Series C
Preferred stockholders.
Each share of Series C Preferred Stock is convertible into three and
one-third shares of common stock voluntarily upon written request of a holder of
such shares of Series C Preferred Stock. Holders of shares of Series C Preferred
Stock may convert all or any number of his or her shares of Series C Preferred
Stock from time to time at the sole discretion of the holder. Additionally, upon
conversion, each holder of Series C Preferred Stock is entitled to receive one
share of common stock for every $0.33 cents of unpaid accumulated dividends.
In the event the Company declares or pays any dividend on the common
stock payable in common stock or in any right to acquire common stock, or shall
effect a subdivision of the outstanding shares of common stock into a greater
number of shares of common stock (by stock split, reclassification or otherwise
than by payment of a dividend in common stock or in any right to acquire common
stock), or in the event the outstanding shares of common stock shall be combined
or consolidated, by reclassification or otherwise, into a lesser number of
shares of common stock, then the conversion ratio in effect immediately prior to
such event will, concurrently with the effectiveness of such event, be
proportionately decreased or increased, as appropriate.
The common stock issuable upon conversion of the Series C Preferred
Stock shall be changed into the same or a different number of shares of any
other class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or combination as
described in the prior paragraph), the conversion ratio then in effect shall,
concurrently with the effectiveness of such reorganization or reclassification,
be proportionately adjusted so that the Series C Preferred Stock shall be
convertible into, in lieu of the number of shares of common stock which the
holders would otherwise have been entitled to receive, a number of shares of
such other class or classes of stock equivalent to the number of shares of
common stock that would have been subject to receipt by the holders upon
conversion of the Series C Preferred Stock immediately before that change.
No dividends have been paid on the preferred stock.
17
<PAGE>
Warrants and Stock Options
At March 31, 2000, the Company had 2,165,000 Warrants outstanding which
are exercisable for the same number of shares of common stock of the Company at
between $1.30 and $1.75 per share. The Warrants expire between July 2000 and
June 2002. The exercise of all the Warrants would result in an equity infusion
to the Company of approximately $3,052,450. There can be no assurance that any
warrants will ever be exercised.
At March 31, 2000, the Company has granted stock options to acquire
3,666,000 shares of common stock of which options to acquire 60,750 shares of
common stock are currently exercisable. The stock options are exercisable at
$.78125 per share. The exercise of all of the currently exercisable stock
options would result in an equity infusion to the Company of approximately
$47,461. There can be no assurance that any of the stock options will be
exercised.
Transfer Agent and Registrar
The stock transfer agent and registrar for the Company's common stock
is Interwest Transfer Company, Inc., 1981 East Murray-Holladay Road, Holladay,
Utah, 84117. The Company acts as its own registrar with respect to its other
outstanding securities.
18
<PAGE>
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters
Market Information
The Company's common stock is traded in the over-the-counter market
since July 13, 1998. The common stock is currently quoted in the National Daily
Quotation Sheets, commonly referred to as the "pink sheets," under the trading
symbol PRIM. The following table sets forth the high and low bid information of
the common stock for the periods indicated. The price information contained in
the table was obtained from OTC Bulletin Board. Note that such over-the-counter
market quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commission and the quotations may not necessarily represent actual
transactions in the common stock.
Quarter Ended High Low
------------- ---- ---
1998
September 30 $3.00 $.375
December 31 $2.25 $.50
1999
March 31 $2.375 $.75
June 30 $4.75 $1.375
September 30 $2.3125 $.75
December 31 $2.21875 $.6875
Holders
At March 31, 2000, there were approximately 152 holders of record of
the Company's common stock.
Dividends
The Company has not declared any cash dividends within the past two
years on its common stock. The Company is required to pay annual dividends on
the preferred stock before the Company can declare and pay dividends to the
common stockholders. See "Description of Securities--Preferred Stock." The
Company does not anticipate or contemplate paying dividends on its common stock
in the foreseeable future. It is the present intention of management to utilize
available funds, if any, for the development of the Company's business.
Item 2. Legal Proceedings
In October 1999, Electronic Exposition, Information Technologies, Inc.
("eExpo"), Lumin Technologies, Inc., Registration Control Systems, Inc., Iris
Registration, Inc., Capitol Registration, Inc. filed a lawsuit against bCard,
Neil Pickard, Ivan Lazarev, Christopher McLeod and Daniel Blair in the United
States District Court for the District of Utah. The Plaintiffs are all related
entities apparently owned and controlled by one individual, Edgar Bolton.
Defendants Neil Pickard and Ivan Lazarev are former employees of Lumin
Technologies, Inc., and Registration Control Systems, Inc., respectively.
Messrs. Pickard and Lazarev left the employment of their respective employers
and founded bCard in early 1999. Messrs. McLeod and Blair also are former
employees of one of the Plaintiff companies and either were subsequently
employed by bCard (Mr. Blair) or consulted with bCard (Mr. McLeod).
Several months after Messrs. Pickard and Lazarev established bCard,
Plaintiff eExpo became the exclusive licensee of a patent owned by IC One, Inc.
In the litigation, eExpo alleges that Messrs. Pickard and Lazarev and bCard
infringed the IC One patent. The Plaintiffs asserted numerous pendent state
claims against the various defendants. Included in those state law claims are
three claims against bCard: intentional interference with
19
<PAGE>
economic relations, unfair competition and unjust enrichment. The patent
infringement claim against bCard appears to be the basis for Plaintiffs
asserting the state claims against bCard.
Plaintiffs were seeking an order enjoining any patent infringement and
awarding eExpo its damages (a reasonable royalty and prejudgment interest on
such royalty) and attorney's fees for the alleged patent infringement;
unspecified damages and punitive damages for the intentional interference with
prospective economic relations claim; unspecified damages, punitive damages and
an injunction under the unfair competition claim; and disgorgement of the
benefits received from infringement of the IC One patent and an order enjoining
further alleged unfair competition.
On April 4, 2000, plaintiffs voluntarily dismissed the federal action
without prejudice. It is believed that plaintiffs will file a similar lawsuit in
state court which asserts state claims against one or more of the defendants in
the federal action.
This litigation is in the early stages and subject to all of the risks
and uncertainties of litigation and the outcome cannot presently be predicted.
Specifically, there is no assurance that the Company will be fully successful in
defending this lawsuit or that the lawsuit will be resolved on acceptable terms,
and the Company may incur significant costs in asserting its claims and
defenses. The Company is not engaged in any other legal proceedings.
Item 3. Changes in and Disagreements with Accountants
Tanner + Co. ("T&C") acted as the Company's independent auditor from
1998 until they were dismissed in December 1999. In January 2000, the Company
retained Jones, Jensen & Company ("JJC") as its independent auditor.
Except for a going concern qualification, the report of T&C on the
financial statements of the Company for the fiscal years ended December 31, 1998
and 1997, did not contain any adverse opinion or disclaimer of opinion and were
not qualified or modified as to uncertainty, audit scope or accounting
principles.
During the Company's two most recent fiscal years and all subsequent
interim periods preceding such change in auditors, there were no disagreements
with T&C on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of the former accountant, would have caused it
to make a reference to the subject matter of the disagreements in connection
with its report; nor has T&C ever presented a written report, or otherwise
communicated in writing to the Company or the Board the existence of any
"disagreement" or "reportable event" within the meaning of Item 304 of
Regulation S-B.
The Company authorized T&C to respond fully to the inquiries of JJC.
T&C has provided the Company with a letter addressed to the SEC, as required by
Item 304(a)(3) of Regulation S-B, regarding this disclosure which letter is
filed as an Exhibit hereto.
Item 4. Recent Sales of Unregistered Securities
In August 1998, the Company issued 5,577,275 shares of common stock to
the PrimeSource Communications, Inc. shareholders immediately prior to the
PrimeSource Communications Acquisition. The Company believes that the
transaction was exempt from registration under Section 4(2) of the Securities
Act of 1933 (the "Act") and Rule 506 as promulgated under the Act. The Company
paid a finder's fee in the form of 328,075 shares of common stock to Shell
Seekers, Inc. in connection with the transaction.
In September 1998, the Company issued an aggregate of 25,000 shares of
common to stock to a consultant for consulting services unrelated to securities
transactions. The Company believes that the transaction was exempt from
registration under Section 4(2) of the Act and Rule 701 as promulgated under the
Act. The Company did not use an underwriter in connection this transaction.
20
<PAGE>
In November and December 1998, the Company issued an aggregate of
22,500 shares of common stock and promissory notes in the principal amount of
$60,000 to two lenders. The Company believes that the transactions were exempt
from registration under Section 4(2) of the Act and Rule 506 as promulgated
under the Act. The Company paid a finder's fee in the form of 500 shares of
common stock to David K. Williams in connection with the transaction.
In October 1998 through June 1999, the Company issued an aggregate of
500,000 shares of its Series A Preferred Stock and 500,000 shares of Series B
Preferred Stock to accredited investors in consideration for $875,000. In
October 1999 and March 2000, 6,667 and 20,000 shares of Series A Preferred
Stock, respectively, were converted into an aggregate of 26,667 shares of common
stock. The Company believes that the transactions were exempt from registration
under Section 4(2) of the Act and Rule 506 as promulgated under the Act. The
Company did not use an underwriter in connection these transactions. The Company
paid a finder's fee in the form of $77,475 and warrants to acquire 100,000
shares of common stock at a exercise price of $1.50 for a period of one year to
the Mercer Group in connection with the transaction.
In March through July 1998, the Company issued convertible promissory
notes in the principal amount of $490,500. The Company believes that the
issuance of the promissory notes was exempt from registration under Section 4(2)
the Act and Rule 506 as promulgated under the Act. Between December 1998 and
April 1999, $495,758 in principal and interest owing under the above referenced
and other notes was converted into an aggregate of 495,758 shares of common
stock and warrants to acquire common stock. Warrants to acquire 9,000 shares of
common stock were exercised in May 1999 and the remaining warrants have expired.
The Company believes that the conversion was exempt from registration under Rule
504 as promulgated under the Act. The Company did not use an underwriter in
connection with these transactions.
In December 1998, the Company issued an aggregate of 350,000 shares of
common stock to an investor for consideration of $175,000. The Company believes
that the transaction was exempt from registration under Rule 504 as promulgated
under the Act. The Company did not use an underwriter in connection these
transactions.
In December 1998, the Company issued 1,000 shares of common stock to
the UniQuest shareholders immediately prior to the UniQuest Acquisition. The
Company believes that the transaction was exempt from registration under Section
4(2) of the Act and Rule 506 as promulgated under the Act. The Company did not
use an underwriter in connection with the transaction.
In January 1999 and April 1999, the Company issued an aggregate of
306,350 shares of common stock to accredited investors in consideration for
$229,762.50. The Company believes that the transactions were exempt from
registration under Rule 504 as promulgated under the Act. The Company paid Janda
& Garrington a commission of $20,812.50 in connection these transactions.
In March 1999, the Company issue a convertible promissory note to an
accredited investor in the principal amount of $100,000. In June 1999 the
investor elected to convert $20,000 of the amount owing into common stock and
the Company repaid the remaining principal and interest owing thereunder. The
Company believes that the transactions were exempt from registration under
Section 4(2) of the Act and Rule 506 as promulgated under the Act. The Company
did not use an underwriter in connection with these transactions.
In March 1999, the Company issued warrants exercisable for an aggregate
of 500,000 shares of common stock to an accredited investor in consideration for
$100,000. In August 1999, the warrants were exercised in consideration for
payment of the $150,000 exercise price. The Company believes that the
transactions were exempt from registration under Section 4(2) of the Act and
Rule 506 as promulgated under the Act. The Company did not use an underwriter in
connection these transactions.
In April 1999, the Company issued 500,000 shares of common stock to the
bCard shareholders immediately prior to the bCard Acquisition. The Company
believes that the transaction was exempt from registration under Section 4(2) of
the Act and Rule 506 as promulgated under the Act. The Company did not use an
underwriter in connection with these transactions.
21
<PAGE>
In April 1999, the Company issued an aggregate of 1,075,000 shares of
common stock to an investor in consideration for $400,000. The Company believes
that with respect to 1,000,000 shares the transaction was exempt from
registration under Rule 504 as promulgated under the Act and the transaction was
exempt with respect to 75,000 shares under Section 4(2) of the Act and Rule 506
as promulgated under the Act. The Company did not use an underwriter in
connection with these transactions.
In July and August 1999, the Company issued an aggregate of 705,000
shares of Series C Preferred Shares to an accredited investor in consideration
for $705,000. The Company believes that the transactions were exempt from
registration under Section 4(2) of the Act and Rule 506 as promulgated under the
Act. The Company paid a finder's fee in the form of $37,500 and warrants to
acquire 25,000 shares of common stock at a exercise price of $1.75 for a period
of one year to the Mercer Group in connection with the transaction.
In July through September 1999, the Company issued an aggregate of
42,000 shares of common stock to an accredited investor in connection with the
License and Option Agreement, dated July 1, 1999. The shares are being held in
escrow as security for the payment of certain lease obligations assumed in
connection with the License and Option Agreement. The Company believes that the
transaction was exempt from registration under Section 4(2) of the Act and Rule
506 as promulgated under the Act. The Company did not use an underwriter in
connection this transaction.
In October 1999, the Company issued an aggregate of 1,500,000 shares of
common stock to an accredited investor as collateral for a loan in the principal
amount of $150,000. The loan was paid off in December 1999 and the shares were
cancelled. The Company believes that the transactions were exempt from
registration under the Act under Section 4(2) of the Act and Rule 504 as
promulgated under the Act. The Company did not use an underwriter in connection
with these transactions.
In October 1999, the Company issued 500,000 shares of common stock to
the GolfAgent USA shareholders immediately prior to the GolfAgent USA
Acquisition. One-half of these shares are being held in escrow and will be
delivered to the former GolfAgent USA shareholders only if certain performance
milestones are satisfied. If the milestones are not satisfied the shares will be
returned to the Company for cancellation. The Company believes that the
transaction was exempt from registration under Section 4(2) of the Act and Rule
506 as promulgated under the Act. The Company did not use an underwriter in
connection with these transactions.
In November 1999 through February 2000, the Company issued an aggregate
of 1,713,142 shares of common stock to accredited investors in consideration for
$953,500. The Company believes that the transaction was exempt from registration
under Rule 504 as promulgated under the Act. The Company paid a finder's fee in
the form of $37,500 and warrants to acquire 40,000 shares of common stock at an
exercise price of $1.4675 which options are exercisable for a period of one year
to Paul Enright in connection with the transaction.
In February 2000 the Company granted stock options to acquire an
aggregate of 3,666,000 shares of Common Stock at an exercise price of $.78125
per share to officer, directors, employees and consultants under the Option
Plan. Stock options exercisable for 60,750 shares of Company common stock are
currently exercisable. The Company believes that the transaction was exempt from
registration under Section 4(2) of the Act and Rules 506 and 701 as promulgated
under the Act. The Company did not use an underwriter in connection with these
transactions.
At the time of the above references sales of securities, the Company
believed the transactions were exempt from the registration requirements of the
Securities Act. The Company relied on several different exemptions from
Securities Act registration in completing the transactions. It now appears
possible that all or some of these transactions could be integrated or
considered part of a single financing. In that event, it may be that no
exemption from Securities Act registration was available for those transactions
that are deemed to be part of the same financing. There can be no assurance that
the Company's fundraising activities did not violate the Securities Act. If the
Securities Act or any other applicable securities regulation was violated, it is
possible that an investor may have the right to rescind his or her purchase of
the securities and the Company and its controlling persons may be subject to
significant civil and criminal penalties. If any purchasers were to successfully
seek rescission or civil or criminal penalties were imposed, the Company could
face severe financial demands that could adversely affect the Company and result
in the Company ceasing or significantly curtailing operations.
22
<PAGE>
From October 1998 through August 1999 the Company sold Preferred A
Shares, Preferred B Shares and Series C Preferred Stock to investors. Under
Delaware General Corporation Law a corporation's certificate of incorporation,
or an amendment thereto, must set forth powers, designations, preferences and
other rights of each class or series of stock a corporation intends to issue.
The Company's certificate of incorporation did not provide for the Company to
issue any class of preferred stock at the time the Preferred A Shares, Preferred
B Shares and Series C Preferred Stock were issued. The Company has amended its
certificate of incorporation to authorize the issuance of the preferred stock
that was sold, but this filing will not necessarily cure the defective issuance
of the preferred shares. There can be no assurance that the Company's failure to
properly authorize the preferred shares before issuance will not lead to
significant liability.
Item 5. Indemnification of Directors and Officers
The Company's Certificate of Incorporation generally provides that its
directors and officers shall have no personal liability to the Company or its
stockholders for monetary damages for breaches of their fiduciary duties as
directors, except for breaches of their duties of loyalty, acts or omissions not
in good faith or which involve intentional misconduct or knowing violation of
law, acts involving unlawful payment of dividends or unlawful stock purchases or
redemptions, or any transaction from which a director derives an improper
personal benefit. Such provisions substantially limit the stockholders' ability
to hold directors liable for breaches of fiduciary duty. The Company's
Certificate of Incorporation and By-laws provide for indemnification by the
Company of its Officers and Directors.
The Company has entered into indemnity agreements (the "Indemnity
Agreements") with each of its executive officers and directors pursuant to which
the Company has agreed to indemnify the officers and directors to the fullest
extent permitted by law for any event or occurrence related to the service of
the indemnitee as an officer or director of the Company that takes place prior
to or after the execution of the Indemnity Agreement. The Indemnity Agreements
obligate the Company to reimburse or advance expenses relating to any proceeding
arising out of an indemnifiable event. Under the Indemnity Agreements, the
officers and directors of the Company are presumed to have met the relevant
standards of conduct required by Delaware law for indemnification. Should the
Indemnity Agreements be held to be unenforceable, indemnification of these
officers and directors may be provided by the Company in certain cases at its
discretion. The Company also maintains director and officer insurance that would
cover certain acts or omissions of its directors or officers.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
23
<PAGE>
PART F/S
See page F-1 hereto.
PART III
Item 1. Index to Exhibits.
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
3(i).1 Certificate of Incorporation of the Company
3(i).2 Certificate of Amendment to the Certificate of Incorporation,
dated December 11, 1990
3(i).3 Certificate of Amendment to the Certificate of Incorporation,
dated June 8, 1998
3(i).4 Certificate of Amendment to the Certificate of Incorporation,
dated July 14, 1999
3(i).5 Certificate of Designation for Preferred A Shares
3(i).6 Certificate of Designation for Preferred B Shares
3(i).7 Certificate of Designation for Series C Preferred Stock
3(ii).1 Bylaws of the Company
4.1 Form of Common Stock Certificate
10.1 Agreement between the Company and American Show Management,
Inc.
10.2 Employment Agreement between PrimeHoldings and Tom Aliprandi.
10.3 Employment Agreement between bCard and Neil Pickard.
10.4 Employment Agreement between bCard and Ivan Lazarev.
10.5 Form of Indemnification Agreement between the Company and its
executive officers and directors.
10.6 PrimeHoldings.com, Inc. 2000 Stock Option Plan
10.7 Loan Agreement between UniQuest and UniDial Incorporated
10.8 First Amendment to Loan Agreement between UniQuest and UniDial
Incorporated
10.9 Revolving Credit Note between UniQuest and UniDial
Incorporated.
10.10 First Amended Revolving Credit Note between UniQuest and
UniDial Incorporated.
10.11 Second Amended Revolving Credit Note between UniQuest and
UniDial Incorporated.
10.12 Third Amended Revolving Credit Note between UniQuest and
UniDial Incorporated.
10.13 Fourth Amended Revolving Credit Note between UniQuest and
UniDial Incorporated.
10.14 Security Agreement between UniQuest and UniDial Incorporated.
10.15 First Amended Security Agreement between UniQuest and UniDial
Incorporated.
10.16 Stock Pledge Agreement between stockholders and UniDial
Incorporated.
10.17 First Amended Stock Pledge Agreement between stockholders and
UniDial Incorporated.
10.18 License and Option Agreement between Navilor and Automated
Solutions, Inc.
24
<PAGE>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
10.19 First Amendment to License and Option Agreement between
Navilor and Automated Solutions, Inc.
16.1 Letter from Tanner + Co., regarding change in certified
accountants.
21.1 Schedule of subsidiaries of PrimeHoldings.
27.1 Financial Data Schedule
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.
PRIMEHOLDINGS.COM, INC
(Registrant)
Date: April 24, 2000 By /s/ Thomas E. Aliprandi
-----------------------
Thomas E. Aliprandi
President, Chief Executive
Officer and Chairman
25
<PAGE>
PRIMEHOLDINGS.COM, INC.
(Formerly PrimeSource Communications
Holdings, Inc. and Subsidiaries)
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
F-1
<PAGE>
C O N T E N T S
Independent Auditors' Report - Jones, Jensen & Company............ F-3
Independent Auditors' Report - Tanner + Co. ...................... F-4
Consolidated Balance Sheet........................................ F-5
Consolidated Statements of Operations............................. F-7
Consolidated Statements of Stockholders' Equity .................. F-8
Consolidated Statements of Cash Flows............................. F-10
Notes to Consolidated Financial Statements....................... F-12
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
and Stockholders of
PrimeHoldings.com, Inc.
(Formerly PrimeSource Communications Holdings, Inc.)
We have audited the accompanying consolidated balance sheet of
PrimeHoldings.com, Inc. (formerly PrimeSource Communications Holdings, Inc.) and
Subsidiaries as of December 31, 1999 and the related consolidated statements of
operations, stockholders' equity, and cash flows for the year then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated 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 audit provides 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 PrimeHoldings.com,
Inc. (formerly PrimeSource Communications Holdings, Inc.) and Subsidiaries, as
of December 31, 1999, and the result of their operations and their cash flows
for the year then ended, in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has a deficit in working capital,
and has incurred recurring losses. These conditions raise substantial doubt
about its ability to continue as a going concern. Management's plans regarding
those matters are also described in Note 2. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Jones, Jensen & Company
Salt Lake City, Utah
April 5, 2000
F-3
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
and Stockholders of
PrimeHoldings.com, Inc.
(Formerly PrimeSource Communications Holding, Inc.
and Subsidiaries)
We have audited the accompanying consolidated balance sheet of
PrimeHoldings.com, Inc. (Formerly PrimeSource Communications Holdings, Inc. and
Subsidiaries), as of December 31, 1998, and the related consolidated statements
of operations, stockholders' deficit, and cash flows for the year then ended.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 PrimeHoldings.com,
Inc. (Formerly PrimeSource Communications Holdings, Inc. and Subsidiaries), as
of December 31, 1998, and the results of their operations and their cash flows
for the year then ended, in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has an accumulated stockholders'
deficit, has a deficit in working capital, and has incurred recurring losses.
These conditions raise substantial doubt about its ability to continue as a
going concern. Management's plans regarding those matters are also described in
Note 2. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
TANNER + CO.
Salt Lake City, Utah
May 19, 1999
F-4
<PAGE>
<TABLE>
<CAPTION>
PRIMEHOLDINGS.COM, INC.
(Formerly PrimeSource Communications Holdings, Inc. and Subsidiaries)
Consolidated Balance Sheet
ASSETS
December 31,
1999
-----------------
CURRENT ASSETS
<S> <C>
Cash $ 86,657
Receivables, net of allowance for doubtful accounts
of $5,832 (Note 2) 104,743
Advances to related party (Note 9) 26,074
Prepaid expenses 75,158
-----------------
Total Current Assets 292,632
-----------------
PROPERTY AND EQUIPMENT (NET) (Note 3) 599,217
-----------------
OTHER ASSETS
Other assets, net of accumulated amortization of
$122,577 (Note 2) 671,459
Deposits 21,605
-----------------
Total Other Assets 693,064
-----------------
TOTAL ASSETS $ 1,584,913
=================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
PRIMEHOLDINGS.COM, INC.
(Formerly PrimeSource Communications Holdings, Inc. and Subsidiaries)
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
December 31,
1999
-----------------
CURRENT LIABILITIES
<S> <C>
Accounts payable $ 214,563
Accrued expenses 355,754
Notes payable - current portion (Note 4) 168,949
Notes payable - related party (Note 4) 160,408
-----------------
Total Current Liabilities 899,674
-----------------
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDERS' EQUITY
Preferred stock: $0.001 par value, 5,000,000 shares authorized,
1,698,333 shares issued and outstanding 1,698
Common stock, $0.0666 par value, 50,000,000
shares authorized, 11,168,674 shares issued and outstanding 343,701
Additional paid-in capital 4,179,416
Accumulated deficit (3,839,576)
-----------------
Total Stockholders' Equity 685,239
-----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,584,913
=================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
PRIMEHOLDINGS.COM, INC.
(Formerly PrimeSource Communications Holdings, Inc. and Subsidiaries)
Consolidated Statements of Operations
For the Years Ended
December 31,
--------------------------------
1999 1998
------------------ -----------------
<S> <C> <C>
REVENUES $ 1,295,188 $ 169,298
COST OF REVENUES 440,662 75,801
------------------ -----------------
GROSS MARGIN 854,526 93,497
------------------ -----------------
OPERATING EXPENSES
Amortization and depreciation 210,509 14,555
Impairment of an asset 312,000 -
Selling, general and administrative expenses 2,336,854 931,304
------------------ -----------------
Total Operating Expenses 2,859,363 945,859
------------------ -----------------
LOSS FROM OPERATIONS (2,004,837) (852,362)
------------------ -----------------
OTHER INCOME (EXPENSES)
Interest expense (147,217) (89,033)
Other income 83,478 19,798
------------------ -----------------
Total Other Income (63,739) (69,235)
------------------ -----------------
LOSS BEFORE INCOME TAXES (2,068,576) (921,597)
------------------ -----------------
INCOME TAXES - -
------------------ -----------------
NET LOSS (2,068,576) (921,597)
------------------ -----------------
OTHER COMPREHENSIVE INCOME (LOSS)
Dividends on convertible preferred stock; unpaid (36,227) -
------------------ -----------------
Total Other Comprehensive Income (Loss) $ (2,104,803) $ (921,597)
================== =================
BASIC LOSS PER SHARE $ (0.22) $ (0.14)
================== =================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-7
<PAGE>
<TABLE>
<CAPTION>
PRIMEHOLDINGS.COM, INC.
(Formerly PrimeSource Communications Holdings, Inc. and Subsidiaries)
Consolidated Statements of Stockholders' Equity (Deficit)
Preferred Stock Common Stock Additional Accumulated Total
-------------------------- -------------------------- Paid-In Stockholders' Paid-In
Shares Amount Shares Amount Capital Deficit Deficit
------------ ------------ ------------ ------------ ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 - $ - 5,578,275 $ 14,150 $ - $ (849,403) $ (835,253)
Acquisition of Market Lead
International Corporation - - 656,157 930 - - 930
Issuance of preferred stock
for cash at $0.75 per share 86,667 87 - - 64,913 - 65,000
Issuance of common stock
for services on various dates
at values ranging from $0.07
to $1.22 - - 726,075 48,357 192,931 - 241,288
Note conversions and payment
of accrued interest at $1.00
per share - - 411,772 27,424 384,348 - 411,772
Common stock retired due
to payment of debt - - (150,000) (9,990) 9,990 - -
Net loss for the year ended
December 31, 1998 - - - - - (921,597) (921,597)
------------ ------------ ---------- ------------ ------------ ------------ ------------
Balance, December 31, 1998 86,667 $ 87 7,222,279 $ 80,871 $ 652,182 $ (1,771,000) $ (1,037,860)
------------ ------------ ---------- ------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-8
<PAGE>
<TABLE>
<CAPTION>
PRIMEHOLDINGS.COM, INC.
(Formerly PrimeSource Communications Holdings, Inc. and Subsidiaries)
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
Preferred Stock Common Stock Additional Accumulated Total
-------------------------- -------------------------- Paid-In Stockholders' Paid-In
Shares Amount Shares Amount Capital Deficit Deficit
------------ ------------ ------------ ------------ ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 86,667 $ 87 7,222,279 $ 80,871 $ 652,182 $ (1,771,000) $ (1,037,860)
Issuance of common stock for
cash at an average of $1.09
per share - - 2,956,742 196,919 1,058,271 - 1,255,190
Issuance of common stock for
debt at $1.00 per share - - 103,986 6,926 97,061 - 103,987
Issuance of preferred shares
for cash at an average of $0.88
per share 1,618,333 1,618 - - 1,513,380 - 1,514,998
Preferred shares converted to
common shares (6,667) (7) 6,667 444 (437) - -
Common stock issued to acquire
subsidiary (bCard) at $1.125 per
share - - 500,000 33,300 529,200 - 562,500
Common stock issued to acquire
subsidiary (Golf Agent USA, Inc.)
at $1.25 per share - - 500,000 33,300 278,700 - 312,000
Exercise of warrants at $2.00
per share - - 9,000 599 17,401 - 18,000
Contribution of capital - - - - 25,000 - 25,000
Retirement of shares - - (130,000) (8,658) 8,658 - -
Net loss for the year ended
December 31, 1999 - - - - - (2,068,576) (2,068,576)
------------ ------------ ---------- ------------ ------------ ------------ ------------
Balance, December 31, 1999 1,698,333 $ 1,698 11,168,674 $ 343,701 $ 4,179,416 $ (3,839,576) $ 685,239
============ ============ ========== ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-9
<PAGE>
<TABLE>
<CAPTION>
PRIMEHOLDINGS.COM, INC.
(Formerly PrimeSource Communications Holdings, Inc. and Subsidiaries)
Consolidated Statements of Cash Flows
For the Years Ended
December 31,
---------------------------------------
1999 1998
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net loss $ (2,068,576) $ (921,597)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization expense 210,509 14,555
Bad debt expense (recoveries) - (7,888)
Stock issued for services - 241,288
Impairment of asset 312,000 -
Change in Assets and Liabilities:
(Increase) decrease in accounts receivable (98,243) 32,707
(Increase) decrease in prepaid expenses (50,496) (24,662)
(Increase) decrease in advances to related party (26,074) 2,600
(Increase) decrease in other assets (21,605) (2,249)
Increase (decrease) in cash overdraft (36,286) 35,789
Increase in accounts payable 34,001 52,683
Increase in accrued liabilities 70,774 61,796
----------------- -----------------
Net Cash Used in Operating Activities (1,673,996) (514,978)
----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment and software (874,997) (29,486)
----------------- -----------------
Net Cash Used in Investing Activities (874,997) (29,486)
----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable 315,707 585,500
Payments on notes payable (468,246) (106,966)
Proceeds from issuance of stock 2,788,189 65,930
----------------- -----------------
Net Cash Provided by Financing Activities 2,635,650 544,464
----------------- -----------------
NET INCREASE IN CASH 86,657 -
CASH, BEGINNING OF YEAR - -
----------------- -----------------
CASH, END OF YEAR $ 86,657 $ -
================= =================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-10
<PAGE>
<TABLE>
<CAPTION>
PRIMEHOLDINGS.COM, INC.
(Formerly PrimeSource Communications Holdings, Inc. and Subsidiaries)
Consolidated Statements of Cash Flows (Continued)
For the Years Ended
December 31,
---------------------------------------
1999 1998
----------------- -----------------
Supplemental disclosures of cash flow information:
<S> <C> <C>
Interest $ 31,812 $ 26,547
Income taxes $ - $ -
During 1998, the Company paid debt of $386,000 and associated accrued interest
of $25,772 by issuing 411,772 shares of common stock.
During 1998, the Company converted accounts payable of $100,592 to a note
payable.
During 1999, the Company paid debt of $100,066 and associated accrued interest
of $3,921 by issuing 103,986 shares of common stock.
During 1999, the Company purchased two subsidiaries for 1,000,000 shares of
common stock for a combined value of $874,500.
During 1999, a shareholder of the Company transferred some of his shares of
stock to satisfy a debt of the Company in the amount of $25,000. This amount has
been contributed to capital.
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-11
<PAGE>
PRIMEHOLDINGS.COM, INC.
(Formerly PrimeSource Communications Holdings, Inc. and Subsidiaries)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 1 - ORGANIZATION AND PRESENTATION
On July 8, 1999, the Board of Directors approved changing the
Company's name from PrimeSource Communications Holdings, Inc. to
PrimeHoldings.com, Inc.
On March 5, 1999, the Company acquired 80% of the outstanding
stock of bCard, Inc., (a Utah corporation with a wholly-owned
Canadian subsidiary) in exchange for $100,000 cash, a $400,000
promissory note and 500,000 shares of restricted common stock.
bCard, Inc. was incorporated in January 1999. All financial
information of bCard, Inc. has been included in the consolidated
financial statement of the Company. The acquisition was accounted
for as a purchase with goodwill being recognized of $562,500.
bCard, Inc. did not have any operations or assets prior to the
acquisition and the minority shareholders did not have any basis
in bCard, Inc. Therefore, no minority interest or proforma
financial information is presented.
In July 1999, the Company acquired assets and associated
liabilities from a Utah company for $400,000 cash. The assets were
recorded in the Company's subsidiary Navilor, Inc. (formerly
PrimeSource Net, Inc.) The assets were office equipment and
furniture for $250,000 and the software licensing rights for
$150,000.
On October 12, 1999, the Company acquired all issued and
outstanding stock of Camelot Holdings, Inc. (a Nevada corporation)
in exchange for 500,000 shares of the Company's restricted common
stock. Camelot Holdings, Inc. is engaged in developing an online
tee time reservation system and had no significant operations
prior to 1999. The acquisition was accounted for as a purchase.
Camelot Holdings, Inc. later changed its name to Golf Agent USA,
Inc. The acquisition was accounted for as a purchase with goodwill
being recognized of $312,000. The goodwill was determined to be
impaired as of December 31, 1999 and an allowance was established
for the $312,000. CamelotHoldings, Inc. did not have any financial
operations before the acquisition, therefore, no proforma
financial information is being presented.
On June 30, 1998, PrimeSource Communications Holdings, Inc. (the
Company), formerly Market Lead International Corporation, entered
into a share exchange agreement and plan of reorganization with
PrimeSource Solutions, Inc. (formerly PrimeSource Communications,
Inc.) whereby the Company acquired all of the issued and
outstanding common stock of PrimeSource Solutions, Inc. in
exchange for 5,577,275 shares of the Company's common stock. The
business combination has been accounted for as a recapitalization,
therefore, all assets and liabilities have been reflected at
historical cost.
On December 31, 1998, PrimeSource Communications Holdings, Inc.
(the Company) entered into a stock purchase agreement accounted
for as a pooling with UniQuest Communications, Inc. whereby the
Company acquired all of the issued and outstanding common shares
of UniQuest Communications, Inc., in exchange for 1,000 shares of
the Company's common stock.
F-12
<PAGE>
PRIMEHOLDINGS.COM, INC.
(Formerly PrimeSource Communications Holdings, Inc. and Subsidiaries)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 1 - ORGANIZATION AND PRESENTATION (Continued)
At December 31, 1998, the financial statements reflect the assets
and liabilities of PrimeSource Communications Holdings, Inc.,
PrimeSource Solutions, Inc., and UniQuest Communications, Inc. at
their historical book value and the historical operations of the
Company are those of the Company and its subsidiaries. At December
31, 1998, the issued common stock was that of the Company and the
accumulated deficit was that of the subsidiaries.
During 1999 and 1998, PrimeHoldings.com, Inc. and Subsidiaries
were engaged primarily in telecommunications services, event
registration services and electronic data extraction services.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
a. Going Concern
At December 31, 1999, the Company had a deficit in working capital
and has incurred losses since inception. These conditions raise
substantial doubt about the ability of the Company to continue as
a going concern. The financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
The Company's ability to continue as a going concern is subject to
the attainment of profitable operations and/or obtaining necessary
funding from outside sources. The Company plans to increase sales
from its new electronic processing services division and to expand
sales in its electronic business card distribution business. The
Company is also currently seeking additional capital through both
private and public sources.
b. Estimates in Financial Statements
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
c. Principles of Consolidation
The consolidated financial statements include the accounts of the
Company, and its subsidiaries Navilor, Inc., UniQuest
Communications, Inc., bCard, Inc., and GolfAgent USA, Inc. All
significant intercompany balances and transactions have been
eliminated.
F-13
<PAGE>
PRIMEHOLDINGS.COM, INC.
(Formerly PrimeSource Communications Holdings, Inc. and Subsidiaries)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
(Continued)
d. Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentration of credit risk consist primarily of trade
receivables. In the normal course of business, the Company
provides credit terms to its customers. Accordingly, the Company
performs ongoing credit evaluations of its customers and maintains
allowances for possible losses which, when realized, have been
within the range of management's expectations.
The Company maintains its cash in bank deposit accounts which, at
times, may exceed federally insured limits. The Company has not
experienced any losses in such accounts and believes it is not
exposed to any significant credit risk on cash and cash
equivalents.
e. Cash and Cash Equivalents
For purposes of the consolidated statement of cash flows, the
Company considers all highly liquid debt instruments with a
maturity of three months or less to be cash equivalents.
f. Property and Equipment
Property and equipment are stated at cost. Depreciation on
furniture, equipment and leasehold improvements is calculated on
the straight-line method over the estimated useful lives of the
assets, primarily from three to ten years.
g. Income Taxes
Deferred income taxes are provided in amounts sufficient to give
effect to temporary differences between financial and tax
reporting.
h. Basic Loss Per Share
The basic loss per share is calculated using basic and fully
diluted weighted average common shares of 9,364,000 and 6,452,000
for 1999 and 1998, respectively. Common stock equivalents are not
included in diluted earnings per share when their effect is
antidilutive.
For the Year Ended
December 31, 1999
--------------------------------------------------
Loss Shares Per Share
(Numerator) (Denominator) Amount
Net loss $ (2,068,576) 9,364,000 $ (0.22)
============ ========= =========
F-14
<PAGE>
PRIMEHOLDINGS.COM, INC.
(Formerly PrimeSource Communications Holdings, Inc. and Subsidiaries)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
(Continued)
h. Basic Loss Per Share (Continued)
For the Year Ended
December 31, 1998
--------------------------------------------------
Loss Shares Per Share
(Numerator) (Denominator) Amount
Net loss $ (921,597) 6,452,000 $ (0.14)
============ ========= =========
i. Advertising
The Company follows the policy of charging the costs of
advertising to expense as incurred.
j. Revenue Recognition Policy
The Company recognizes revenue from electronic data extraction
when services are provided and recognizes revenue from its event
registration services upon the completion of each trade show.
k. Other Assets
Net
Accumulated Book Value
Term Cost Amortization 1999
----------- ---------- ------------ -----------
Goodwill 5 years $ 562,500 $ 84,375 $ 478,125
Software 3 years 81,536 33,202 48,334
License 15 years 150,000 5,000 145,000
---------- ------------ -----------
$ 794,036 $ 122,577 $ 671,459
========== ============ ===========
The amortization expense for December 31, 1999 and 1998 was
$104,577 and $4,000, respectively.
All long lived assets are evaluated yearly for impairment per SFAS
121. Any impairment in value is recognized as an expense in the
period when the impairment occurs.
F-15
<PAGE>
PRIMEHOLDINGS.COM, INC.
(Formerly PrimeSource Communications Holdings, Inc. and Subsidiaries)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
December 31,
1999
-----------------
Furniture $ 50,395
Equipment 509,869
Leasehold improvements 162,660
-----------------
722,924
Less: accumulated depreciation (123,707)
-----------------
$ 599,217
The depreciation expense for December 31, 1999 and 1998 was
$105,932 and $10,555, respectively.
NOTE 4 - NOTES PAYABLE
The Company had the following notes payable at December 31,:
1999
Line-of-credit agreement with an independent
company, which allows the Company to borrow a
maximum of $300,000, which was reduced to
$168,000 in January 2000. The line-of credit
bears interest at prime plus 3% (11.5% at
December 31, 1999). The line-of-credit matures
on January 31, 2001, and is secured by accounts
receivable. $ 168,949
Notes payable to stockholders of the Company,
unsecured, amounts ranging from $10,000 to
$50,000. The notes bear interest ranging from
10% to 13%, and are due on demand. 110,000
Unsecured notes payable to stockholders and/or
investors. Due in 1999 with interest ranging
from 17% to 32%. 50,408
----------
Total notes payable 329,357
Less current portion (329,357)
----------
Long-term portion $ -
==========
F-16
<PAGE>
PRIMEHOLDINGS.COM, INC.
(Formerly PrimeSource Communications Holdings, Inc. and Subsidiaries)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 4 - NOTES PAYABLE (Continued)
Maturities of notes payable are as follows:
Years Ending
December 31,
2000 $ 329,357
2001 -
2002 -
2003 -
2004 -
-------------------
$ 329,357
===================
NOTE 5 - CAPITAL STOCK
Common Shares
Holders of outstanding common shares are entitled to receive
dividends out of assets legally available at such times and in
such amounts as the Board of Directors may from time to time
determine. Upon liquidation, dissolution or winding up of the
Company, the assets legally available for distribution to the
shareholders will be distributable ratably among the common
shareholders at the time. Any preferred shares outstanding will be
entitled to preferential payments described below before any
distribution to common shareholders.
Preferred Shares
The Board of Directors is authorized to designate series of
preferred shares and to determine and fix the relative rights and
preferences governing those shares.
As of December 31, 1999, Preferred shares issued and outstanding
consisted of Preferred "A" and Preferred "B" shares and Series "C"
Preferred shares. The following describes the rights and
preferences of the "A", "B" and "C" shares.
Series "C" Preferred shares are entitled to receive dividends at
the rate of $0.12 per share per year payable at such intervals as
the board of directors may from time to time determine. The
specified dividends are cumulative.
Series "C" Preferred shares may be converted into three and
one-third (3.33) shares of common stock upon the request of the
holder. Additionally, upon conversion, each holder shall be
entitled to receive one share of common stock for every $0.33 of
unpaid accumulated dividends.
The Company issued Series "C" Preferred shares before the Company
updated its articles of incorporation. Such issuances may be in
violation of applicable laws.
F-17
<PAGE>
PRIMEHOLDINGS.COM, INC.
(Formerly PrimeSource Communications Holdings, Inc. and Subsidiaries)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 5 - CAPITAL STOCK (Continued)
Preferred "A" and Preferred "B" Shares bear simple interest at 10%
per annum payable annually within 60 days after the end of the
prior fiscal year. In the event the Company does not pay the
interest when due, it will accumulate and bear interest at the
same rate from the end of the last fiscal period for which
interest is due.
Preferred "A" and Preferred "B" Shares have identical voting
rights as the outstanding common shares of the Company. Preferred
Shares will have preferential rights to the assets of the Company
before the common shares in the event of dissolution or
liquidation.
Preferred "A" and Preferred "B" Shares bear an optional conversion
privilege. If at any time a holder, in their sole discretion,
desires to convert all or part of their preferred shares to common
shares, the holder may do so upon fourteen (14) days written
notice to the Company. The conversion rate into common shares is
one for one.
Preferred "A" and Preferred "B" Shares bear a call provision on
behalf of the Company. The Company may, in its discretion, call
for the conversion of the preferred into common on a mandatory one
for one basis if and when, and only if and when, the public market
price in the over-the-counter securities markets or other publicly
traded securities medium is at $2.50 on the bid for (5)
consecutive trading periods. In the event the Company exercises
this mandatory call conversion feature, preferred shareholders
will be given notice and their shares will automatically become,
by operation of law, common shares at the expiration of the
notice.
Preferred "A" and Preferred "B" Shares carry a warrant to purchase
one common share for each preferred share held. The purchase price
is $1.50 per common share and may be exercised in whole or in part
at the discretion of the holder during a three year period. Any
conversion or call of the preferred shares will not affect the
warrants. The Company will have a thirty (30) day option in which
to call the warrants which will require the holders to either
exercise the warrants or return the warrants to the Company for
redemption at the nominal price of $0.05 per warrant. The call may
be issued by the Company if the bid price for the Company's shares
in public markets is $2.50 for any five (5) consecutive trading
day period. Shares issued upon exercise of the warrants will be
"restricted" pursuant to applicable securities laws and
regulations, primarily Rule 144 under the Securities act of 1933.
This means that those shares will have to be held by the
shareholders at least one (1) year before being eligible for sale
under that Rule.
During 1999, the Company issued stock offerings and sale of
securities under Regulation D. The issuance of this stock may have
deviated from the limitation noted under Regulation D. The Company
feels if there was a deviation from the terms that it made a good
faith and reasonable attempt to comply with all applicable terms
and conditions and such deviation would be considered
insignificant.
F-18
<PAGE>
PRIMEHOLDINGS.COM, INC.
(Formerly PrimeSource Communications Holdings, Inc. and Subsidiaries)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 6 - STOCK SPLIT
As part of the reverse acquisition described under note 1,
PrimeSource Communications Holdings, Inc. had a reverse stock
split exchange of one share received for every 1.33 shares owned.
The financial statements have been adjusted to reflect the stock
split on a retroactive basis.
NOTE 7 - INCOME TAXES
At December 31, 1999 and 1998, the Company has net operating loss
carryforwards available for income tax purposes. As shown in the
table below, no amounts have been recognized in the financial
statements for the benefit of these losses due to the uncertainty
as to whether they will ultimately be realized. The amount and
utilization of the net operating losses for income tax purposes
may be substantially limited due to changes in ownership when the
subsidiaries were acquired. The net operating loss carryforward
available for tax purposes as of December 31, 1999 is
approximately $3,560,000, which begins to expire in 2010.
Deferred taxes consist of future assets attributable to the
following at December 31:
1999
-------------------
Net operating loss carryforward $ 1,790,000
-------------------
Total deferred tax asset 1,790,000
Less valuation allowance (1,790,000)
-------------------
Net deferred tax asset $ -
===================
NOTE 8 - COMMITMENTS AND CONTINGENCIES
The Company leases an office building under a noncancellable
operating lease agreement which expires in 2003. Future minimum
rental payments for this lease are approximately as follows:
2000 $ 227,820
2001 228,791
2002 113,239
2003 78,431
2004 4,141
---------------
$ 652,422
===============
Rental expense on operating leases for the years ended December
31, 1999 and 1998 was approximately $153,320 and $31,000,
respectively.
F-19
<PAGE>
PRIMEHOLDINGS.COM, INC.
(Formerly PrimeSource Communications Holdings, Inc. and Subsidiaries)
Notes to the Consolidated Financial Statements)
December 31, 1999 and 1998
NOTE 9 - RELATED PARTY TRANSACTIONS
The following related party transactions and balances exist in
addition to those identified in other notes to the financial
statements:
Accrued expenses as of December 31, 1998 includes consulting fees
payable for several months services to Company stockholders of
approximately $89,000. The associated expenses recorded for 1998
was approximately $102,000.
Interest expense recognized in 1999 and 1998 related to notes
payable to stockholders was approximately$59,000 and $22,000,
respectively.
In 1998, the Company issued convertible debt to relatives of
management in the amount of $18,000. The debt was converted to
common stock during 1998.
Advances to related party as of December 31, 1999 represents the
net amount of advances to officers/stockholders of the Company.
Advances to related parties consist of travel and payroll
advances totaling $26,074.
During 1998, the Company paid consulting fees in connection with
the reverse acquisition to a company controlled by a member of
its board of directors through issuing 328,075 shares of common
stock valued at $21,850.
NOTE 10 - STOCK WARRANTS
The following table summarizes information about stock warrants
issued during 1999 and outstanding at December 31, 1999. Warrants
were issued in connection with conversions of notes payable and
sales of preferred stock during 1998.
<TABLE>
<CAPTION>
Warrants Outstanding Warrants Exercisable
------------------------------------------------- ------------------------------------------------
Weighted
Average
Number Remaining Weighted Number Weighted
Range of Outstanding Contractual Average Exercisable Average
Exercise at Life Exercise at Exercise
Prices 12/31/99 (Years) Price 12/31/99 Price
-------------- ---------------- --------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
$1.30 to 1.75 2,125,000 2.0 $ 1.41 2,125,000 $ 1.41
============== ================ =============== =============== =============== ==============
</TABLE>
F-20
<PAGE>
PRIMEHOLDINGS.COM, INC.
(Formerly PrimeSource Communications Holdings, Inc. and Subsidiaries)
Notes to the Consolidated Financial Statements)
December 31, 1999 and 1998
NOTE 11 - SIGNIFICANT SOURCES OF REVENUES
During 1999 and 1998, the Company received revenues and/or
commissions from the sale of telecommunication services and event
registration services from two unrelated companies, which
accounted for a significant portion of revenues.
Approximate revenues from these companies were as follows:
1999 1998
------------ ------------
Company 1 $ 92,067 $ 162,000
Company 2 260,000 -
------------ ------------
$ 352,067 $ 162,000
============ ============
NOTE 12 - SEGMENT INFORMATION
The Company's reportable segments are strategic business units
that offer different products and services. They are managed
separately because each business requires different technology
and marketing strategies.
There are three reportable segments: event registration services
including distribution of electronic business cards, electronic
data extraction services and telecommunications services
marketing. The event registration services segment consists of
electronic data cards (" smart cards") used as a medium to manage
information on attendees at trade sows and other events and the
rental of devices used to read the cards. The electronic data
extraction segment consists of software and hardware technology
to electronically extract and manage handwritten data from paper
documents. The telecommunications services marketing segment
sells a variety of long distance, Internet access and related
services provided by an unrelated company.
The accounting policies applied to determine the segment
information are the same as those described in the summary of
significant accounting policies.
Financial information with respect to the reportable segments
follows:
<TABLE>
<CAPTION>
Electronic
Event Data Telecom- All
Registration Extracting munications Others Total
------------ ---------- ----------- ------ -----
<S> <C> <C> <C> <C> <C>
Revenue from external customer $ 1,024,184 $ 178,937 $ 92,067 $ - $ 1,295,188
Depreciation and amortization 126,571 19,494 5,077 59,367 210,509
Segment loss (361,503) (382,335) (74,621) (1,250,017) (2,068,576)
</TABLE>
F-21
CERTIFICATE OF INCORPORATION
OF
ANALYST EXPRESS, INC.
ARTICLE I
NAME
The name of this Corporation is ANALYST EXPRESS, INC.
ARTICLE II
REGISTERED OFFICE AND REGISTERED AGENT
The registered office of the Corporation in the State of Delaware is
located at 1209 Orange Street, Wilmington, County of New Castle, Delaware 19801.
The name of its registered agent is The Corporation Trust Company.
ARTICLE III
PURPOSE
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be now or hereafter organized under the
General Corporation Law of Delaware.
ARTICLE IV
CAPITALIZATION
The total number of shares of all classes of capital stock which this
Corporation shall have authority to issue is FIFTY-FIVE MILLION (55,000,000)
shares of par value stock; FIVE MILLION (5,000,000) SHARES OF $0.001 (One-Tenth
Cent) par value to be preferred shares and FIFTY MILLION (50,000,000) shares of
$0.001 (One-Tenth Cent) par value to be common shares. All or any part of the
shares of the preferred or common stock may be issued by the Corporation from
time to time and for such consideration as may be determined and fixed by the
Board of Directors, as provided by law, with due regard to the interest of the
existing shareholders; and when such consideration has been received by the
Corporation, such shares shall be deemed fully paid and non-assessable.
The Board of Directors is authorized, subject to limitations prescribed
by law and the provisions of this Article, to provide for the issuance of the
shares of preferred stock in series, and by filing a certificate pursuant to the
applicable law of the State of Delaware, to establish from time to time the
number of shares to be included in each such series, and to fix the
designations, powers, preferences and rights of the shares of each such series
and the qualifications, limitations or restrictions thereof.
The authority of the Board with respect to each such series shall
include, but not be limited to, determination of the following:
(a) The number of shares constituting that series and the distinctive
designation of that series;
(b) The dividend rate, if any, on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or dates, and the
relative rights of priority, if any, of payment of dividends on shares of that
series;
<PAGE>
(c) Whether that series shall have voting rights, in addition to the
voting rights provided by law, and, if so, the terms of such voting rights;
(d) Whether that series shall have conversion privileges, and, if so,
the terms and conditions of such conversion, including provision for adjustment
of the conversion rate in such events as the Board of Directors shall determine;
(e) Whether or not the shares of that series shall be redeemable, 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 at
different redemption dates;
(f) Whether that series shall have a sinking fund for the redemption or
purchase of shares of that series, and, if so, the terms and amount of such
sinking fund;
(g) The rights of the shares of that series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the Corporation, and
the relative rights of priority, if any, of payment of shares of that series;
and
(h) Any other relative rights, preferences and limitations of that
series.
ARTICLE V
INCORPORATOR
The name and mailing address of the incorporator whose power will
terminate upon the filing of this Certificate of Incorporation is as follows:
NAME ADDRESS
---- -------
Gary R. Henrie 175 S. West Temple #700
Salt Lake City, Utah 84101-1480
ARTICLE VI
DIRECTORS
The names and mailing addresses of the persons who are to serve as the
directors until the first annual meeting of the stockholders or until their
successors are elected and qualified are as follows:
NAME ADDRESS
---- -------
Jess Udy 1275 Century Drive
Tremonton, UT 84337
Carl Brett Nilsson 549 25th Street
Ogden, UT 84401
Richard Skeen 846 24th Street
Ogden, UT 84401
<PAGE>
ARTICLE VII
NUMBER OF DIRECTORS
The number of directors constituting the Board of Directors shall be
that number as shall be fixed by, or in the manner provided in, the bylaws of
the Corporation.
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter or repeal
the bylaws of the Corporation, subject to such restrictions upon such powers as
may be imposed by the stockholders in any bylaws adopted by them from time to
time.
ARTICLE VIII
LIMITATION ON DIRECTORS LIABILITY
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived any improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stock holders of this article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated to the fullest
extent permitted by the Delaware General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
ARTICLE IX
INDEMNIFICATION
(a) Right to Indemnification. Each person who was or is made a party or
is threatened to be made a party to or is otherwise involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she is or was a
director, officer or employee of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans (hereinafter an
"indemnitee"), whether the basis of such proceeding is alleged action in an
official capacity as a director, officer, employee or agent or in any other
capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights that such law permitted the Corporation to provide prior to such
amendment) , against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) reasonably incurred or suffered by such indemnitee in connection
therewith and such indemnification shall continue as to an indemnitee who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators; provided,
however, that, except as provided in paragraph (b) hereof with respect to
proceedings to enforce rights to indemnification, the Corporation shall
indemnify any such indemnitee in connection with a proceeding (or part thereof)
initiated by such indemnitee only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this Article shall be a contract right and shall
include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition (hereinafter
an advancement of expenses") ; provided, however, that, if the Delaware General
Corporation Law requires, an advancement of expenses incurred by an indemnitee
in his or her capacity as a director or officer (and not in any other capacity
in which service was or is rendered by such indemnitee, including, without
limitation, service to an
<PAGE>
employee benefit plan) shall be made only upon delivery to the Corporation of an
undertaking, by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal that such indemnitee is not entitled
to be indemnified for such expenses under this Article or otherwise (hereinafter
an "undertaking").
(b) Right of Indemnitee to Bring Suit. If a claim under paragraph (a)
of this Article is not paid in full by the Corporation within sixty days after a
written claim has been received by the Corporation, except in the case of a
claim for an advancement of expenses, in which case the applicable period shall
be twenty days, the indemnitee may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim. If successful in whole or
in part in any such suit or in a suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the indemnitee
shall be entitled to be paid also the expense of prosecuting or defending such
suit. In (i) any suit brought by the indemnitee to enforce a right to
indemnification hereunder (but not in a suit brought by the indemnitee to
enforce a right to an advancement of expenses) it shall be a defense that, and
(ii) any suit by the Corporation to recover an advancement of expenses pursuant
to the terms of an undertaking the Corporation shall be entitled to recover such
expenses upon a final adjudication that, the indemnitee has not met the
applicable standard of conduct set forth in the Delaware General Corporation
Law. Neither the failure of the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such suit that indemnification of the indemnitee is
proper in the circumstances because the indemnitee has met the applicable
standard of conduct set forth in the Delaware General Corporation Law, nor an
actual determination by the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) that the indemnitee has not met
such applicable standard of conduct, shall create a presumption that the
indemnitee has not met the applicable standard of conduct or, in the case of
such a suit brought by the indemnitee, be a defense to such suit. In any suit
brought by the indemnitee to enforce a right hereunder, or by the Corporation to
recover an advancement of expenses pursuant to the terms of an undertaking, the
burden of proving that the indemnitee is not entitled to be indemnified or to
such advancement of expenses under this Article or otherwise shall be on the
Corporation.
(c) Non-Exclusivity of Rights. The rights to indemnification and to the
advancement of expenses conferred in this Article shall not be exclusive of any
other rights which any person may have or hereafter acquire under any statute,
this Certificate of Incorporation, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
(d) Insurance. The Corporation may maintain insurance, at its expense,
to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
(e) Indemnification of Agents of the Corporation. The Corporation may,
to the extent authorized from time to time by the Board of Directors, grant
rights to indemnification and to the advancement of expenses, to any agent of
the Corporation to the fullest extent of the provisions of this Article with
respect to the indemnification and advancement of expenses of directors,
officers and employees of the Corporation.
ARTICLE X
CONTRACTS
No contract or other transaction between this Corporation and any other
corporation shall be affected by the fact that a Director or officer of this
Corporation is interested in or is a Director or officer of such other
corporation; and any Director, individually or jointly, may be a party to or may
be interested in any corporation or transaction of this corporation or in which
this corporation is interested; and no contract or other transaction of this
Corporation with any person, firm or corporation shall be affected by the fact
that any Director of this Corporation is a party to or is interested in such
contract, act or transaction or any way connected with such person, firm or
corporation, and every person who may become a Director of this Corporation is
hereby relieved from liability that might otherwise exist from contracting with
the Corporation for the benefit of himself or any firm, association or
corporation in which he may be in any way interested, provided said Director
acts in good faith.
<PAGE>
ARTICLE XI
AMENDMENTS
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this certificate of Incorporation, in the manner now
or hereafter prescribed by the laws of Delaware, and all rights and powers
conferred herein upon stockholders and directors are granted subject to this
reservation.
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this certificate, hereby declaring and certifying
that the facts herein stated are true, and accordingly, have hereunto set my
hand and seal this 15th day of June, 1988.
/s/ Gary R. Henrie
-------------------
Gary R. Henrie
STATE OF UTAH
COUNTY OF SALT LAKE
On the 15th day of June, 1988, before me personally came Gary R.
Henrie, the person who signed the foregoing certificate of incorporation, known
to me personally to be such, and acknowledged that the said certificate is his
act and deed and that the facts stated therein are true.
/s/ Deborah L. Barker
----------------------------------
NOTARY PUBLIC
Residing at: Salt Lake City, Utah
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
ANALYST EXPRESS, INC.
(Pursuant to Section 242 of the
General Corporation Law of Delaware)
Analyst Express, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: The Certificate of Incorporation of Analyst Express, Inc. is
hereby amended by deleting Article I thereof and substituting the following in
lieu thereof:
ARTICLE I
NAME
The name of this corporation shall be Market Lead International
Corporation.
SECOND: The Certificate of Incorporation of the Corporation is hereby
amended by deleting Article IV thereof and substituting the following in lieu
thereof:
ARTICLE IV
CAPITALIZATION
The total number of shares of all classes of capital stock which this
Corporation shall authority to issue is Fifty-Five Million (55,000,000) shares
of par value stock; Five Million (5,000,000) shares of $.001 (One-Tenth Cent)
par value to be preferred shares and Fifty Million (50,000,000) shares of $.005
par value to be common shares. All or any part of the shares of the preferred or
common stock may be issued by the Corporation from time to time and for such
consideration as may be determined and fixed by the Board of Directors, as
provided by law, with due regard to the interest of the existing shareholders;
and when such consideration has been received by the Corporation, such shares
shall be deemed fully paid and non-assessable.
The Board of Directors is authorized, subject to limitations prescribed
by law and the provisions of this Article, to provide for the issuance of the
shares of preferred stock in series, and by filing a certificate pursuant to the
applicable law of the State of Delaware, to establish from time to time the
number of shares to be included in each such series, and to fix the
designations, powers, preferences and rights of the shares of each such series
and the qualifications, limitations or restrictions thereof.
1,000,000 of the authorized preferred shares are hereby designated as
Series A Preferred Stock and have the rights, preferences and designations set
forth as follows:
1. Shares in Series. The Corporation shall have 1,000,000 shares of its
authorized preferred stock designated as "Series A Preferred Stock" (the "Series
A Preferred Stock"). The shares of Series A Preferred Stock shall have a par
value of $.001 per share.
2. Voting Rights. The holders of record of said shares of Series A
Preferred Stock shall be entitled to one vote per share at all meetings of
shareholders of the Corporation as if converted to common stock of the
Corporation. The holders of record of shares of the Series A Preferred Stock
shall vote such shares together with the holders of the Corporation's Common
Stock, and not as a separate class.
3. Liquidation Rights. In case of the dissolution, liquidation or
winding-up of the Company, whether voluntary or involuntary, or in any instance,
the holders of record of shares of the Series A Preferred Stock then
<PAGE>
outstanding shall be entitled to participate in the distributions, either in
cash or in kind, of the assets of the Corporation on a priority basis but only
to the extent of outstanding shares of Preferred Stock multiplied by its par
value per share.
4. Dividends. The holders of record of shares of the Series A Preferred
Stock outstanding shall only be entitled to receive cash or other dividends on a
priority basis to the extent of shares of Series A Preferred Stock outstanding
multiplied by the par value per share prior to the payment of dividends to
common shareholders.
5. Optional Conversion. The Series A Preferred Stock shall be
convertible in whole or part at the option of the holder thereof, at any time,
but no sooner than two years from the date hereof, on a one for one basis into
shares of Common Stock upon achieving any one of the following conditions
computed for the Corporation and its subsidiaries on an audited, consolidated
basis at any time on or before December 31, 1995:
a. $6,000,000 in gross sales (less discounts and allowances)
in any one fiscal year; or
b. Net Income of $3,400,000 pre-tax in any one fiscal year; or
c. An aggregate equity capital of $4,500,000 or more; and
d. No more than 50Z of the outstanding Series A Preferred
Shares can be converted in any 12 month period; and
e. The conversion rights shall be automatically adjusted to
reflect any common stock splits.
6. Automatic Conversion. The Series A Preferred Stock shall be
automatically converted common stock on a one for one basis at a date
twenty-four months from its original date of issuance if the Company has not
received at least $1,500,000 in equity capital during said twenty-four month
time period.
7. Mandatory Redemption. The Corporation must redeem, at $.001 per
share, all unconverted outstanding shares of Series A Preferred Stock which are
outstanding at the close of business on June 30, 1997 as soon as practicable
after said date. Thus, the Series A Preferred Stock conversion may be made on or
before June 30, 1997, assuming the conversion criteria have been met on or
before December 31, 1995.
8. Other Matters. The holders of the shares of Series A Preferred Stock
will have no other rights other than as established by applicable corporate law,
no pre-emptive, redemption or other rights.
THIRD: The Corporation has effectuated a .3 to 1 (1 for 3.33 shares)
reverse stock split as to the 1,500,000 common shares outstanding at November
29, 1990 reducing said shares to 450,000 shares. It is acknowledged that
effective December 11, 1990, 50,000 common shares (after giving effect to the
reverse split) were contributed to the Corporation and cancelled. The par value
per share of common stock is amended by the terms of the Second Paragraph of
this Certificate of Amendment so as to not decrease the stated capital of the
Corporation.
FOURTH: That the aforesaid amendment was duly adopted in accordance
with the provisions of Sections 242 and 228 of the General Corporation Law of
the State of Delaware and written notice has been given as provided in Section
228.
FIFTH: That the capital of the Corporation will not be reduced under or
by reason of the aforesaid amendment.
IN WITNESS WHEREOF, Analyst Express, Inc. has caused this Certificate
to be signed by its President, and attested by its Secretary, this 11th day of
December, 1990.
ATTEST: ANALYST EXPRESS, INC.
/s/ Richard R. Skeen By: /s/ Jess Udy
- - --------------------------- --------------------
Richard R. Skeen, Secretary Jess Udy, President
CERTIFICATE OF AMENDMENT TO CERTIFICATE OF
INCORPORATION OF MARKET LEAD INTERNATIONAL CORPORATION
(Pursuant to Section 242 of the General
Corporation Law of Delaware)
Market Lead International Corporation, a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "Corporation"), does hereby certify:
FIRST: The Certificate of Incorporation of Market Lead International
Corporation is hereby amended by deleting the first paragraph Article I - Name -
substituting the following paragraph in lieu of the first paragraph only in that
section:
ARTICLE I
NAME
The name of this Corporation is PRIMESOURCE COMMUNICATIONS HOLDINGS,
INC.
SECOND: The Corporation has effectuated a one for 1.333 reverse stock
split as to the 874,649 common shares outstanding at June 8, 1998, reducing said
shares to 656,150 common shares, having rounded off fractional shares to the
nearest whole share. The par value per share of common stock is $.0666.
THIRD: The aforesaid amendment was duly adopted in accordance with the
provisions of Section 242 and 228 of the General Corporation Law of the State of
Delaware and written notice has been given as provided in Section 228.
FOURTH: The capital of the Corporation will not be changed by reason of
the aforesaid amendment.
IN WITNESS WHEREOF, Market Lead International Corporation has caused
this Certificate to be signed by its President and attested by its Secretary
this 8th day of June, 1998.
MARKET LEAD INTERNATIONAL CORPORATION
BY: /s/ K. Bruce Jones
-------------------
K. Bruce Jones
Attest:
/s/ Matthew R. White
---------------------------
Matthew R. White, Secretary
CERTIFICATE OF AMENDMENT TO CERTIFICATE OF
INCORPORATION OF PRIMESOURCE COMMUNICATIONS HOLDINGS, INC.
(Pursuant to Section 242 of the General Corporation Law of Delaware)
PrimeSource Communications Holdings, Inc., a corporation organized and
existing under and by virtue of the General Corporation law of the State of
Delaware (the "Corporation"), does hereby certify:
The Certificate of Incorporation of PrimeSource Communications
Holdings, Inc. is hereby amended by deleting the first paragraph of Article I -
Name - and substituting the following paragraph in lieu of the first paragraph
only in that section:
ARTICLE I
NAME
The name of this Corporation is PRIMEHOLDINGS.COM, INC.
IN WITNESS WHEREOF, PrimeSource Communications Holdings, Inc. has
caused this Certificate to be signed by its President and attested by its
Secretary 14th day of July 1999.
PRIMESOURCE COMMUNICATIONS HOLDINGS, INC.
By: /s/ Thomas E. Aliprandi
------------------------
Thomas E. Aliprandi, President
Attest:
/s/ David E. Shepardson
-----------------------------------
David E. Shepardson III, Secretary
PREFERRED A SHARES
OF PRIMEHOLDINGS.COM, INC.
The undersigned, Thomas E. Aliprandi and David E. Shepardson III,
hereby certify that:
I. They are the duly elected and acting President and Vice-President,
respectively, of PRIMEHOLDINGS.COM, INC., a Delaware corporation (the
"Company").
II. The Certificate of Incorporation of the Company authorizes
5,000,000 shares of preferred stock, par value $.001 per share, of which no
shares are issued and outstanding.
III. The following is a true and correct copy of resolutions duly
adopted by the Board of Directors on March 27, 2000, which constituted all
requisite action on the part of the Company for adoption of such resolutions.
RESOLUTIONS
WHEREAS, the Board of Directors of the Company (the "Board of
Directors") is authorized to provide for the issuance of the shares of preferred
stock in series, and by filing a certificate pursuant to the applicable law of
the State of Delaware, to establish from time to time the number of shares to be
included in each such series, and to fix the designations, powers, preferences
and rights of the shares of each such series and the qualifications, limitations
or restrictions thereof;
WHEREAS, the Board of Directors desires, pursuant to its authority as
aforesaid, to designate a new series of preferred stock, set the number of
shares constituting such series and fix the rights, preferences, privileges and
restrictions of such series.
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby
designates a new series of preferred stock and the number of shares constituting
such series and fixes the rights, preferences, privileges and restrictions
relating to such series as follows:
1. Designation, Amount, Par Value and Rank. A series of preferred stock
shall be designated as Preferred A Shares, and the number of shares so
designated shall be 500,000. Each share of Preferred A Shares shall have a par
value of $.001 per share. The holders of the Preferred A Shares will have no
preemptive rights with respect to any shares of capital stock of the Company or
any other securities of the Company convertible into or carrying rights or
options to purchase any such shares. The Preferred A Shares will not be subject
to any sinking fund or other obligations of the Company to redeem or retire the
Preferred A Shares. Unless converted, the Preferred A Shares will be perpetual.
2. Voting Rights. The holder of each share of the Preferred A Shares
shall be entitled to the number of votes equal to the number of shares of Common
Stock into which such share of Preferred A Shares could be converted and shall
have voting rights and powers equal to the voting rights and powers of the
Common Stock (except as otherwise expressly provided herein or as required by
law, voting together with the Common Stock as a single class) and shall be
entitled to notice of any shareholder's meeting in accordance with the Bylaws of
the Company. Fractional votes shall not, however, be permitted and any
fractional voting rights resulting from the above formula (after aggregating all
shares into which shares of Preferred A Shares held by each holder could be
converted) shall be rounded to the nearest whole number (with one-half being
rounded upward).
3. Preference as to Earnings, Assets and Liquidation.
(a) The Preferred A Shares will rank, with respect to right on
liquidation, senior to all classes of Common Stock and on parity with all future
series of preferred stock established on or after the date hereof by the Board
of Directors which does not expressly provide that it ranks senior to or junior
to the Preferred A Shares as to rights on liquidations, winding-up and
dissolution. In the event of liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, the holders of the Preferred A Shares
of the Company shall be entitled, before any assets of the Company shall be
distributed among or paid over to the holders of the Common Stock, to be paid in
full the face value of $0.75 per share of Preferred A Shares, along with all
accumulated interest and/or
<PAGE>
dividends, if any. After payment in full of the above preferential rights of the
holders of the Preferred A Shares, the holders of the Preferred A Shares will
not be entitled to any further participation in any distribution of assets by
the Company. Neither the sale or transfer of all or substantially all the assets
of the Company, nor the merger or consolidation of the Company into or with any
other corporation or a merger of any other corporation with or into the Company,
will be deemed to be a liquidation, dissolution or winding up of the Company.
(b) If the assets distributable on such liquidation, dissolution or
winding up (whether voluntary or involuntary), shall be insufficient to permit
the payment to the holders of Preferred A Shares and other preferred shares that
are in parity the Preferred A Shares, then such assets or the proceeds thereof
shall be distributed among the holders of Preferred A Shares and other preferred
shares that are in parity with the Preferred A Shares ratably in proportion to
the respective amounts the holders of such shares of stock would be entitled to
receive if they were paid the full preferential amounts aforesaid.
(c) The Company shall pay to each holder of shares of the Preferred A
Shares simple interest at a rate of ten percent (10%) per annum on the aggregate
purchase price of the Preferred A Shares purchased by each such holder. The
interest is payable within sixty (60) days of the end of the prior fiscal year.
If the Company fails to make any interest payment when such payment is due, the
unpaid interest payment shall bear interest at a rate of ten percent (10%) per
annum from the date of the end of the fiscal year in which the interest accrued
until the payment is made.
4. Conversion.
(a) Upon fourteen (14) days written notice, each share of Preferred A
Shares may be converted into one (1) share of Common Stock voluntarily upon the
written request of a holder of such shares of Preferred A Shares pursuant to
Section 4(b). Holders of Preferred A Shares may convert all or any number of his
or her Preferred A Shares from time to time at the sole discretion of the
holder.
(b) Before any holder of Preferred A Shares shall be entitled to
convert the same into shares of Common Stock, he or she shall surrender the
certificate or certificates thereof, duly endorsed, at the office of the Company
or of any transfer agent for such stock, and shall give written notice to the
Company at such office that he or she elects to convert the same and shall state
therein the name or names in which he or she wishes the certificate or
certificates for the number of shares of Common Stock to be issued. The Company
shall, as soon as practicable thereafter, issue and deliver at such office to
such holder of Preferred A Shares, a certificate or certificates for the number
of shares of Common Stock to which he or she shall be entitled as aforesaid. The
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on the date of issue.
5. Company Calls for Conversion. The Company may, in its discretion,
call for the conversion of the Preferred A Shares into Common Stock on a
mandatory one for one basis if and when, and only if and when, the closing bid
price of the Common Stock in the over the counter securities markets or other
publicly traded securities medium is equal to or greater than $2.50 per share
for five (5) consecutive trading days. In the event the Company exercises this
mandatory call conversion feature, holders of Preferred A Shares will be given
notice and their shares will automatically become, by operation of law, Common
Stock at the expiration of the notice.
6. Adjustments for Combinations, Subdivisions, Reclassifications and
Reorganizations.
(a) In the event that this Company at any time or from time to time
after the date hereof shall declare or pay any dividend on the Common Stock
payable in Common Stock or in any right to acquire Common Stock, or shall effect
a subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by stock split, reclassification or otherwise than by
payment of a dividend in Common Stock or in any right to acquire Common Stock),
or in the event the outstanding shares of Common Stock shall be combined or
consolidated, by reclassification or otherwise, into a lesser number of shares
of Common Stock, then the conversion ratio in effect immediately prior to such
event shall, concurrently with the effectiveness of such event, be
proportionately decreased or increased, as appropriate. In the event that this
Company shall declare or pay, without consideration, any dividend on the Common
Stock payable in any right to acquire Common Stock for no
<PAGE>
consideration, then the Company shall be deemed to have made a dividend payable
in Common Stock in an amount of shares equal to the maximum number of shares
issuable upon exercises of such rights to acquire Common Stock.
(b) If the Common Stock issuable upon conversion of the Preferred A
Shares shall be changed into the same or a different number of shares of any
other class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or combination of shares
provided for in Section 8(a) above), the conversion ratio then in effect shall,
concurrently with the effectiveness of such reorganization or reclassification,
be proportionately adjusted so that the Preferred A Shares shall be convertible
into, in lieu of the number of shares of Common Stock which the holders would
otherwise have been entitled to receive, a number of shares of such other class
or classes of stock equivalent to the number of shares of Common Stock that
would have been subject to receipt by the holders upon conversion of the
Preferred A Shares immediately before that change.
7. Miscellaneous Provisions.
(a) The Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of and in the taking of
all such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Preferred A Shares against impairment.
(b) The Company shall pay any and all issue and other taxes that may be
payable in respect of any issue or delivery of shares of Common Stock on
conversion of shares of Preferred A Shares pursuant hereto; provided, however,
that the Company shall not be obligated to pay any transfer taxes resulting from
any transfer requested by any holder in connection with any such conversion.
(c) The Company shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of the Preferred A Shares, such number of
its shares of Common Stock as shall from time to time be sufficient to effect
the conversion of all outstanding shares of the Preferred A Shares; and if at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding shares of the
Preferred A Shares, the Company will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose, including, without limitation, engaging in best efforts to obtain the
requisite shareholder approval of any necessary amendment to this Certificate.
(d) No fractional share shall be issued upon the conversion of any
share or shares of Preferred A Shares. All shares of Common Stock (including
fractions thereof) issuable upon conversion or more than one shares of Preferred
A Shares by a holder thereof shall be aggregated for purposes of determining
whether the conversion would result in the issuance of any fractional share. If,
after the aforementioned aggregation, the conversion would result in the
issuance of a fraction of a share of Common Stock, the Company shall, in lieu of
issuing any fractional share, pay the holder otherwise entitled to such fraction
a sum in cash equal to the fair market value of such fraction on the date of
conversion (as determined in good faith by the Board of Directors of the
Company).
(e) Any notice required by the provisions of this Certificate of
Designation to be given to the holders of Preferred A Shares shall be deemed
given if deposited in the United States mail, postage prepaid, and addressed to
each holder of record at his address appearing on the books of the Company.
(f) For the purpose of effecting the conversion of the shares of
Preferred A Shares, the Company shall at all times reserve and keep available,
free from preemptive rights and out of its authorized but unissued Common Stock,
the full number of shares of Common Stock then deliverable upon the conversion
of all shares of Preferred A Shares then outstanding.
<PAGE>
IN WITNESS WHEREOF, PRIMEHOLDINGS.COM, INC. has caused this certificate
to be signed by Thomas E. Aliprandi, its President, and attested by David E.
Shepardson III, its Vice-President, this 27th day of March, 2000.
PRIMEHOLDINGS.COM, INC.
/s/ Thomas E. Aliprandi
---------------------------
Thomas E. Aliprandi
President
Attest:
By: /s/ David E. Shepardson III
------------------------------
David E. Shepardson III
Vice-President
PREFERRED B SHARES
OF PRIMEHOLDINGS.COM, INC.
The undersigned, Thomas E. Aliprandi and David E. Shepardson III,
hereby certify that:
IV. They are the duly elected and acting President and Vice-President,
respectively, of PRIMEHOLDINGS.COM, INC., a Delaware corporation (the
"Company").
V. The Certificate of Incorporation of the Company authorizes 5,000,000
shares of preferred stock, par value $.001 per share, of which 500,000 have been
designated as Preferred A Shares.
VI. The following is a true and correct copy of resolutions duly
adopted by the Board of Directors on March 27, 2000, which constituted all
requisite action on the part of the Company for adoption of such resolutions.
RESOLUTIONS
WHEREAS, the Board of Directors of the Company (the "Board of
Directors") is authorized to provide for the issuance of the shares of preferred
stock in series, and by filing a certificate pursuant to the applicable law of
the State of Delaware, to establish from time to time the number of shares to be
included in each such series, and to fix the designations, powers, preferences
and rights of the shares of each such series and the qualifications, limitations
or restrictions thereof;
WHEREAS, the Board of Directors desires, pursuant to its authority as
aforesaid, to designate a new series of preferred stock, set the number of
shares constituting such series and fix the rights, preferences, privileges and
restrictions of such series.
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby
designates a new series of preferred stock and the number of shares constituting
such series and fixes the rights, preferences, privileges and restrictions
relating to such series as follows:
1. Designation, Amount, Par Value and Rank. A series of preferred stock
shall be designated as Preferred B Shares, and the number of shares so
designated shall be 500,000. Each share of Preferred B Shares shall have a par
value of $.001 per share. The holders of the Preferred B Shares will have no
preemptive rights with respect to any shares of capital stock of the Company or
any other securities of the Company convertible into or carrying rights or
options to purchase any such shares. The Preferred B Shares will not be subject
to any sinking fund or other obligations of the Company to redeem or retire the
Preferred B Shares. Unless converted, the Preferred B Shares will be perpetual.
2. Voting Rights. The holder of each share of the Preferred B Shares
shall be entitled to the number of votes equal to the number of shares of Common
Stock into which such share of Preferred B Shares could be converted and shall
have voting rights and powers equal to the voting rights and powers of the
Common Stock (except as otherwise expressly provided herein or as required by
law, voting together with the Common Stock as a single class) and shall be
entitled to notice of any shareholder's meeting in accordance with the Bylaws of
the Company. Fractional votes shall not, however, be permitted and any
fractional voting rights resulting from the above formula (after aggregating all
shares into which shares of Preferred B Shares held by each holder could be
converted) shall be rounded to the nearest whole number (with one-half being
rounded upward).
3. Preference as to Earnings, Assets and Liquidation.
(a) The Preferred B Shares will rank, with respect to right on
liquidation, senior to all classes of Common Stock and on parity with the
Preferred A Shares and with all future series of preferred stock established on
or after the date hereof by the Board of Directors which does not expressly
provide that it ranks senior to or junior to the Preferred B Shares as to rights
on liquidations, winding-up and dissolution. In the event of liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary, the
holders of the Preferred B Shares of the Company shall be entitled, before any
assets of the Company shall be distributed among or paid over to the holders of
the Common Stock, to be paid in full the face value of $1.00 per share of
Preferred B Shares, along with
<PAGE>
all accumulated interest and/or dividends, if any. After payment in full of the
above preferential rights of the holders of the Preferred B Shares, the holders
of the Preferred B Shares will not be entitled to any further participation in
any distribution of assets by the Company. Neither the sale or transfer of all
or substantially all the assets of the Company, nor the merger or consolidation
of the Company into or with any other corporation or a merger of any other
corporation with or into the Company, will be deemed to be a liquidation,
dissolution or winding up of the Company.
(b) If the assets distributable on such liquidation, dissolution or
winding up (whether voluntary or involuntary), shall be insufficient to permit
the payment to the holders of Preferred B Shares and other preferred shares that
are in parity the Preferred B Shares, then such assets or the proceeds thereof
shall be distributed among the holders of Preferred B Shares and other preferred
shares that are in parity with the Preferred B Shares ratably in proportion to
the respective amounts the holders of such shares of stock would be entitled to
receive if they were paid the full preferential amounts aforesaid.
(c) The Company shall pay to each holder of shares of the Preferred B
Shares simple interest at a rate of ten percent (10%) per annum on the aggregate
purchase price of the Preferred B Shares purchased by each such holder. The
interest is payable within sixty (60) days of the end of the prior fiscal year.
If the Company fails to make any interest payment when such payment is due, the
unpaid interest payment shall bear interest at a rate of ten percent (10%) per
annum from the date of the end of the fiscal year in which the interest accrued
until the payment is made.
4. Conversion.
(a) Upon fourteen (14) days written notice, each share of Preferred B
Shares may be converted into one (1) share of Common Stock voluntarily upon the
written request of a holder of such shares of Preferred B Shares pursuant to
Section 4(b). Holders of Preferred B Shares may convert all or any number of his
or her Preferred B Shares from time to time at the sole discretion of the
holder.
(b) Before any holder of Preferred B Shares shall be entitled to
convert the same into shares of Common Stock, he or she shall surrender the
certificate or certificates thereof, duly endorsed, at the office of the Company
or of any transfer agent for such stock, and shall give written notice to the
Company at such office that he or she elects to convert the same and shall state
therein the name or names in which he or she wishes the certificate or
certificates for the number of shares of Common Stock to be issued. The Company
shall, as soon as practicable thereafter, issue and deliver at such office to
such holder of Preferred B Shares, a certificate or certificates for the number
of shares of Common Stock to which he or she shall be entitled as aforesaid. The
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on the date of issue.
5. Company Calls for Conversion. The Company may, in its discretion,
call for the conversion of the Preferred B Shares into Common Stock on a
mandatory one for one basis if and when, and only if and when, the closing bid
price of the Common Stock in the over the counter securities markets or other
publicly traded securities medium is equal to or greater than $2.50 per share
for five (5) consecutive trading days. In the event the Company exercises this
mandatory call conversion feature, holders of Preferred B Shares will be given
notice and their shares will automatically become, by operation of law, Common
Stock at the expiration of the notice.
6. Adjustments for Combinations, Subdivisions, Reclassifications and
Reorganizations.
(a) In the event that this Company at any time or from time to time
after the date hereof shall declare or pay any dividend on the Common Stock
payable in Common Stock or in any right to acquire Common Stock, or shall effect
a subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by stock split, reclassification or otherwise than by
payment of a dividend in Common Stock or in any right to acquire Common Stock),
or in the event the outstanding shares of Common Stock shall be combined or
consolidated, by reclassification or otherwise, into a lesser number of shares
of Common Stock, then the conversion ratio in effect immediately prior to such
event shall, concurrently with the effectiveness of such event, be
proportionately decreased or increased, as appropriate. In the event that this
Company shall declare or pay, without consideration, any dividend on the Common
Stock payable in any right to acquire Common Stock for no
<PAGE>
consideration, then the Company shall be deemed to have made a dividend payable
in Common Stock in an amount of shares equal to the maximum number of shares
issuable upon exercises of such rights to acquire Common Stock.
(b) If the Common Stock issuable upon conversion of the Preferred B
Shares shall be changed into the same or a different number of shares of any
other class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or combination of shares
provided for in Section 8(a) above), the conversion ratio then in effect shall,
concurrently with the effectiveness of such reorganization or reclassification,
be proportionately adjusted so that the Preferred B Shares shall be convertible
into, in lieu of the number of shares of Common Stock which the holders would
otherwise have been entitled to receive, a number of shares of such other class
or classes of stock equivalent to the number of shares of Common Stock that
would have been subject to receipt by the holders upon conversion of the
Preferred B Shares immediately before that change.
7. Miscellaneous Provisions.
(a) The Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of and in the taking of
all such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Preferred B Shares against impairment.
(b) The Company shall pay any and all issue and other taxes that may be
payable in respect of any issue or delivery of shares of Common Stock on
conversion of shares of Preferred B Shares pursuant hereto; provided, however,
that the Company shall not be obligated to pay any transfer taxes resulting from
any transfer requested by any holder in connection with any such conversion.
(c) The Company shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of the Preferred B Shares, such number of
its shares of Common Stock as shall from time to time be sufficient to effect
the conversion of all outstanding shares of the Preferred B Shares; and if at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding shares of the
Preferred B Shares, the Company will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose, including, without limitation, engaging in best efforts to obtain the
requisite shareholder approval of any necessary amendment to this Certificate.
(d) No fractional share shall be issued upon the conversion of any
share or shares of Preferred B Shares. All shares of Common Stock (including
fractions thereof) issuable upon conversion or more than one shares of Preferred
B Shares by a holder thereof shall be aggregated for purposes of determining
whether the conversion would result in the issuance of any fractional share. If,
after the aforementioned aggregation, the conversion would result in the
issuance of a fraction of a share of Common Stock, the Company shall, in lieu of
issuing any fractional share, pay the holder otherwise entitled to such fraction
a sum in cash equal to the fair market value of such fraction on the date of
conversion (as determined in good faith by the Board of Directors of the
Company).
(e) Any notice required by the provisions of this Certificate of
Designation to be given to the holders of Preferred B Shares shall be deemed
given if deposited in the United States mail, postage prepaid, and addressed to
each holder of record at his address appearing on the books of the Company.
(f) For the purpose of effecting the conversion of the shares of
Preferred B Shares, the Company shall at all times reserve and keep available,
free from preemptive rights and out of its authorized but unissued Common Stock,
the full number of shares of Common Stock then deliverable upon the conversion
of all shares of Preferred B Shares then outstanding.
<PAGE>
IN WITNESS WHEREOF, PRIMEHOLDINGS.COM, INC. has caused this certificate
to be signed by Thomas E. Aliprandi, its President, and attested by David E.
Shepardson III, its Vice-President, this 27th day of March, 2000.
PRIMEHOLDINGS.COM, INC.
/s/ Thomas E. Aliprandi
-------------------------
Thomas E. Aliprandi
President
Attest:
By: /s/ David E. Shepardson III
------------------------------
David E. Shepardson III
Vice-President
CERTIFICATE OF DESIGNATION
SERIES C PREFERRED STOCK
RESOLVED, that the Corporation shall issue a series of Preferred Shares
to be designated as Preferred Series C:
1. Designation, Amount, Par Value and Rank. A series of Preferred stock
shall be designated as Series C Convertible Preferred Stock (the "Series C
Preferred Stock"), and the number of shares so designated shall be 1,000,000.
Each share of Series C Preferred Stock shall have a par value of $.001 per
share.
2. Voting Rights. The holder of each share of the Series C Preferred
Stock shall be entitled to the number of votes equal to the number of shares of
Common Stock into which such share of Series C Preferred Stock could be
converted and shall have voting rights and powers equal to the voting rights and
powers of the Common Stock (except as otherwise expressly provided herein or as
required by law, voting together with the Common Stock as a single class) and
shall be entitled to notice of any shareholder's meeting in accordance with the
Bylaws of the Company. Fractional votes shall not, however, be permitted and any
fractional voting rights resulting from the above formula (after aggregating all
shares into which shares of Series C Preferred Stock held by each holder could
be converted) shall be rounded to the nearest whole number (with one-half being
rounded upward).
3. Preference as to Earnings, Assets and Liquidation. (a) The Series C
Preferred Stock shall be preferred as to both earnings and assets, and in the
event of liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary, the holders of the Series C Preferred Stock of the
Company shall be entitled, before any assets of the Company shall be distributed
among or paid over to the holders of the Common Stock, to be paid in full the
face value of $1.00 per share of Series C Preferred Stock. After payment in full
of the above preferential rights of the holders of the Series C Preferred Stock,
the holders of the Series C Preferred Stock and Common Stock shall participate
equally in the division of the remaining assets of the Company, so that from the
remaining assets the amount per share of Series C Preferred Stock distributed to
the holders of the Series C Preferred Stock shall equal the amount per share of
Common Stock distributed to the holders of the Common Stock.
(b) The holders of preferred shares shall be entitled to receive
dividends at the rate of $0.12 per year payable at such intervals as the board
of directors may from time to time determine. These dividends shall accrue from
the date of issuance of the preferred shares and shall be deemed to accrue from
day to day whether or not earned or declared. The specified dividends on
preferred shares shall be payable before any dividends shall be declared, paid,
or set apart for the common shares. The specified dividends on preferred shares
shall be cumulative. If in any year, or years, dividends on the outstanding
preferred shares at the rate specified are not paid or set apart for that
purpose, the amount of the deficiency shall be fully paid or declared and set
apart for payment, without interest, before any distribution, by way of dividend
or otherwise, is declared, paid or set apart for the common shares. After all
cumulative dividends on preferred shares have been paid, declared or set apart
for payment to the holders of the preferred shares, if the board of directors
elects to make further distribution of dividends, the additional dividends shall
be made equally to all shares, preferred and common.
4. Conversion. (a) Each share of Series C Preferred Stock may be
converted into three and one-third (3.33) shares of Common Stock voluntarily
upon the written request of a holder of such shares of Series C Preferred Stock
pursuant to Section 4(b). Holders of shares of Series C Preferred Stock may
convert all or any number of his or her shares of Series C Preferred Stock from
time to time at the sole discretion of the holder. Additionally, upon
conversion, each holder of Series C Preferred shares shall be entitled to
receive one share of Common Stock for every $0.33 cents of unpaid accumulated
dividends.
(b) Before any holder of Series C Preferred Stock shall be entitled to
convert the same into shares of Common Stock, he or she shall surrender the
certificate or certificates thereof, duly endorsed, at the office of the Company
or of any transfer agent for such stock, and shall give written notice to the
Company at such office that he or she elects to convert the same and shall state
therein the name or names in which he or she wishes the certificate or
certificates for the number of shares of Common Stock to be issued. The Company
shall, as soon as practicable thereafter, issue and deliver at such office to
such holder of Series C Preferred Stock, a certificate or certificates for the
number of shares of Common Stock to which he or she shall be entitled as
aforesaid. Such conversion shall be deemed to have been made immediately prior
to the close of business on the date of surrender of the shares of Series
<PAGE>
C Preferred Stock to be converted, and the person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock on
such date.
(c) If the issued and outstanding shares of Series C Preferred Stock
are converted automatically upon the effectiveness of a registration statement
as set forth in Section 4(a)(i), such conversion shall be deemed to have been
made immediately prior to the close of business on the date of effectiveness of
such registration statement, and the person or persons entitled to receive the
shares of Common Stock issuable upon conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock on such
date.
5. Registration Rights. (a) The holders of Series C Preferred Stock
shall be entitled to "piggy-back" registration rights on registrations of the
Company made pursuant to the Securities Act of 1933, as amended (other than a
registration relating solely to a transaction under Rule 145 under such Act [or
any successor thereto], a registration made pursuant to a Form S-4, Form S-8 or
pursuant to an employee benefit plan of the Company) subject to the right,
however, of the Company and its underwriters, in the case of an underwritten
public offering, to reduce the number of shares proposed to be registered pro
rata in view of market conditions.
(b) The Company shall bear the registration expenses (exclusive of
underwriting discounts and commissions) of all piggy-back registrations.
(c) The registration rights described herein shall be expressly
conditioned upon acceptance by any participating shareholder of such other
provisions in any purchase or underwriting agreement, if any, relating to such
registration as are reasonable and customary, including, but not limited to,
cross-indemnification, the period of time in which the Registration Statement
shall be kept effective, underwriting arrangements, and the like.
(d) All registration rights granted in this Section 5 shall immediately
expire and be deemed null and void upon the voluntary conversion by the holder
of any shares of Series C Preferred Stock into shares of Common Stock not made
in connection with the piggy-back registration rights granted in this Section 5.
(e) Notwithstanding anything contained herein, all of the registration
rights set forth herein shall expire two years after the issuance of the Series
C Preferred Shares.
6. Adjustments for Combinations, Subdivisions, Reclassifications and
Reorganizations. (a) In the event that this Company at any time or from time to
time after the date hereof shall declare or pay any dividend on the Common Stock
payable in Common Stock or in any right to acquire Common Stock, or shall effect
a subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by stock split, reclassification or otherwise than by
payment of a dividend in Common Stock or in any right to acquire Common Stock),
or in the event the outstanding shares of Common Stock shall be combined or
consolidated, by reclassification or otherwise, into a lesser number of shares
of Common Stock, then the conversion ratio in effect immediately prior to such
event shall, concurrently with the effectiveness of such event, be
proportionately decreased or increased, as appropriate. In the event that this
Company shall declare or pay, without consideration, any dividend on the Common
Stock payable in any right to acquire Common Stock for no consideration, then
the Company shall be deemed to have made a dividend payable in Common Stock in
an amount of shares equal to the maximum number of shares issuable upon
exercises of such rights to acquire Common Stock.
(b) If the Common Stock issuable upon conversion of the Series C
Preferred Stock shall be changed into the same or a different number of shares
of any other class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or combination of shares
provided for in Section 6(a) above), the conversion ratio then in effect shall,
concurrently with the effectiveness of such reorganization or reclassification,
be proportionately adjusted so that the Series C Preferred Stock shall be
convertible into, in lieu of the number of shares of Common Stock which the
holders would otherwise have been entitled to receive, a number of shares of
such other class or classes of stock equivalent to the number of shares of
Common Stock that would have been subject to receipt by the holders upon
conversion of the Series C Preferred Stock immediately before that change.
7. Miscellaneous Provisions.
<PAGE>
(a) The Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of and in the taking of
all such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series C Preferred Stock against
impairment.
(b) The Company shall pay any and all issue and other taxes that may be
payable in respect of any issue or delivery of shares of Common Stock on
conversion of shares of Series C Preferred Stock pursuant hereto; provided,
however, that the Company shall not be obligated to pay any transfer taxes
resulting from any transfer requested by any holder in connection with any such
conversion.
(c) The Company shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of the Series C Preferred Stock, such
number of its shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding shares of the Series C Preferred Stock;
and if at any time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of all then outstanding shares
of the Series C Preferred Stock, the Company will take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose, including, without limitation, engaging in best efforts to
obtain the requisite shareholder approval of any necessary amendment to this
Certificate.
(d) No fractional share shall be issued upon the conversion of any
share or shares of Series C Preferred Stock. All shares of Common Stock
(including fractions thereof) issuable upon conversion or more than one shares
of Series C Preferred Stock by a holder thereof shall be aggregated for purposes
of determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of a fraction of a share of Common Stock, the Company
shall, in lieu of issuing any fractional share, pay the holder otherwise
entitled to such fraction a sum in cash equal to the fair market value of such
fraction on the date of conversion (as determined in good faith by the Board of
Directors of the Company).
(e) Any notice required by the provisions of this Certificate of
Designation to be given to the holders of Series C Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of the
Company.
8. Amendment. Any term relating to the Series C Preferred Stock may be
amended and the observance of any term relating to the Series C Preferred Stock
may be waived (either generally or in a particular instance and either
retroactively or prospectively) only with the vote or written consent of holders
of at least fifty-one (51%) of all Series C Preferred Stock then outstanding and
of the Company. Any amendment or waiver so effected shall be binding upon the
Company and all holders of Series C Preferred Stock.
9. Restrictions and Limitations. So long as any shares of Series C
Preferred Stock remain outstanding, the Company shall not, without the vote or
written consent by the holders of at least fifty-one (51%) of the then
outstanding shares of Series C Preferred Stock:
(a) Effect any reclassification, recapitalization or other change with
respect to any outstanding shares of stock which results in the issuance of
shares of stock having any preference or priority as to dividend or redemption
rights, liquidation preferences, conversion rights or otherwise, superior to, or
on a parity with, any such preference or priority of the Series C Preferred
Stock, or
(b) With the exception of any already authorized Series A and B
Preferred Stock authorize or issue, or obligate itself to issue, any other
equity security senior to or on a parity with the Series C Preferred Stock as to
dividend or redemption rights, liquidation preferences, conversion rights or
otherwise, or create any obligation or security convertible into or exchangeable
for, or having any option rights to purchase, any such equity security which is
senior to or on a parity with the Series C Preferred Stock, or
<PAGE>
(c) Amend, alter or repeal the preferences, special rights or other
powers of the Series C Preferred Stock, or otherwise amend the Company's
Certificate of Incorporation, so as to affect adversely the Series C Preferred
Stock.
10. No Reissuance of Series C Preferred Stock. No share or shares of
Series C Preferred Stock acquired by the Company by reason of redemption,
purchase, conversion or otherwise shall be reissued, and all such shares shall
be canceled, retired and eliminated from the shares which the Company shall be
authorized to issue.
The foregoing Designation of Rights and Preferences were adopted by all
of the Directors of the Company by unanimous written consent on July 21, 1999.
IN WITNESS WHEREOF, the undersigned, being the President/CEO and the
Secretary of the Company, have executed this Certificate of Designation this
21st day of July 1999.
--------------------------
Thomas E. Aliprandi
President/CEO
Attest:
- - -------------------------------
David E. Shepardson III
Secretary
BYLAWS
OF
ANALYST EXPRESS, INC.
ARTICLE I
Stockholders
Section 1.1 Annual Meeting. An annual meeting of the stockholders, for
the election of directors to succeed those whose terms expire and for the
transaction of such other business as may properly come before the meeting,
shall be held at such place, on such date and at such time as the Board of
Directors shall each year fix, which date shall be within thirteen months
subsequent to the later of the date of incorporation or the last annual meeting
of stockholders.
Section 1.2 Special Meetings. Special meetings of the stockholders, for
any purpose or purposes prescribed in the notice of the meeting, may be called
by the Board of Directors or the chief executive officer and shall be held at
such place, on such date, and at such time as they or he shall fix.
Section 1.3 Notice of Meetings. Written notice of the place, date, and
time of all meetings of the stockholders shall be given, not less than ten nor
more than sixty days before the date on which the meeting is to be held, to each
stockholder entitled to vote at such meeting, except as otherwise provided
herein or required by law (meaning, here and hereinafter, as required from time
to time by the General Corporation Law of the State of Delaware or the
Certificate of Incorporation).
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date, and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than thirty
days after the date for which the meeting was originally noticed, or if a new
record date is fixed for the adjourned meeting, written notice of the place,
date, and time of the adjourned meeting shall be given in conformity herewith.
At any adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 1.4 Quorum. At any meeting of the stockholders, the holders of
a majority of all of the shares of the stock entitled to vote at the meeting,
present in person or by proxy, shall constitute a quorum for all purposes,
unless or except to the extent that the presence of a larger number may be
required by law.
If a quorum shall fail to attend any meeting, the chairman of the
meeting or the holders of a majority of the shares of the stock entitled to vote
who are present, in person or by proxy, may adjourn the meeting to another
place, date, or time.
If a notice of any adjourned special meeting of stockholders is sent to
all stockholders entitled to vote thereat, stating that it will be held with
those present constituting a quorum, then except as otherwise required by law,
those present at such adjourned meeting shall constitute a quorum, and all
matters shall be determined by a majority of the votes cast at such meeting.
Section 1.5 Organization. Such person as the Board of Directors may
have designated or, in the absence of such a person, the highest ranking officer
of the corporation who is present shall call to order any meeting of the
stockholders and act as chairman of the meeting. In the absence of the Secretary
of the corporation, the secretary of the meeting shall be such person as the
chairman appoints.
Section 1.6 Conduct of Business. The chairman of any meeting of
stockholders shall determine the order of business and the procedure at the
meeting, including such regulation of the manner of voting and the conduct of
discussion as seem to him in order. Action may be taken by the shareholders
without a meeting, without prior notice, and without a vote if a consent in
writing, setting forth the action so taken, shall be signed by the
<PAGE>
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted.
Section 1.7 Proxies and Voting. At any meeting of the stockholders,
every stockholder entitled to vote may vote in person or by proxy authorized by
an instrument in writing filed in accordance with the procedure established for
the meeting.
Each stockholder shall have one vote for every share of stock entitled
to vote which is registered in his name on the record date for the meeting,
except as otherwise provided herein or required by law.
All voting, except on the election of directors and where otherwise
required by law, may be by a voice vote; provided, however, that upon demand
therefor by a stockholder entitled to vote or his proxy, a stock vote shall be
taken. Every stock vote shall be taken by ballots, each of which shall state the
name of the stockholder or proxy voting and such other information as may be
required under the procedure established for the meeting.
All elections shall be determined by a plurality of the votes cast,
except as otherwise required by law, all other matters shall be determined by a
majority of the votes cast.
Section 1.8 Stock List. A complete list of stockholders entitled to
vote at any meeting of stockholders, arranged in alphabetical order for each
class of stock and showing the address of each such stockholder, and the number
of shares registered in his name, shall be open to the examination of any such
stockholder, for any purpose germane to the meeting, during ordinary business
hours for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or if not so specified, at the place
where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during
the whole time thereof and shall be open to the examination of any such
stockholder who is present. This list shall presumptively determine the identity
of the stockholders entitled to vote at the meeting and the number of shares
held by each of them.
ARTICLE II
Board of Directors
Section 2.1. Number and Term of Office. The number of directors who
shall constitute the whole board shall be such number not less than one nor more
than nine as the Board of Directors at the time have designated. Each director
shall be elected for a term of one year and until his successor is elected and
qualified, except as otherwise provided herein or required by law.
Whenever the authorized number of directors is increased between annual
meetings of the stockholders, a majority of the directors then in office shall
have the power to elect such new directors for the balance of a term and until
their successors are elected and qualified. Any decrease in the authorized
number of directors shall not become effective until the expiration of the term
of the directors then in office unless, at the time of such decrease, there
shall be vacancies on the board which are being eliminated by the decrease.
Section 2.2 Vacancies. If the office of any director becomes vacant by
reason of death, resignation, disqualification, removal or other cause, a
majority of the directors remaining in office, although less than a quorum, may
elect a successor for the unexpired term and until his successor is elected and
qualified.
Section 2.3 Regular Meetings. Regular meetings of the Board of
Directors shall be held at such place or places, on such date or dates, or at
such time or times as shall have been established by the Board of Directors and
publicized among all directors. A notice of each regular meeting shall not be
required.
Section 2.4 Special Meetings. Special meetings of the Board of
Directors may be called by one-third of the directors then in office or by the
chief executive officer and shall be held at such place, on such date, and at
such time as they or he shall fix. Notice of the place, date, and time of each
such special meeting shall be given each director by whom it is not waived by
mailing written notice not less than three days before the meeting or
<PAGE>
by telegraphing the same not less than eighteen hours before the meeting. Unless
otherwise indicated in the notice thereof, any and all business may be
transacted at a special meeting.
Section 2.5 Quorum. At any meeting of the Board of Directors, one-third
of the total number of the whole board, but not less than one, shall constitute
a quorum for all purposes. If a quorum shall fail to attend any meeting, a
majority of those present may adjourn the meeting to another place, date, or
time, without further notice or waiver thereof.
Section 2.6 Participation in Meetings by Conference Telephone. Members
of the Board of Directors, or of any committee thereof, may participate in a
meeting of such board or committee by means of conference telephone or similar
communications equipment that enables all persons participating in the meeting
to hear each other. Such participation shall constitute presence in person at
such meeting.
Section 2.7 Conduct of Business. At any meeting of the Board of
Directors, business shall be transacted in such order and manner as the board
may from time to time determine, and all matters shall be determined by the vote
of a majority of the directors present, except as otherwise provided herein or
required by law. Action may be taken by the Board of Directors without a meeting
if all members thereof consent thereto in writing, and the writing or writings
are filed with the minutes of proceedings of the Board of Directors.
Section 2.8 Powers. The Board of Directors may, except as otherwise
required by law, exercise all such powers and do all such acts and things as may
be exercised or done by the corporation, including, without limiting the
generality of the foregoing, the unqualified power:
(1) To declare dividends from time to time in accordance with law;
(2) To purchase or otherwise acquire any property, rights or privileges
on such terms as it shall determine.
(3) To authorize creation, making and issuance, in such form as it may
determine, of written obligations of every kind, negotiable or non-negotiable,
secured or unsecured, and to do all things necessary in connection therewith;
(4) To remove any officer of the corporation with or without cause, and
from time to time to devolve the powers and duties of any officer upon any other
person for the time being;
(5) To confer upon any officer of the corporation the power to appoint,
remove and suspend subordinate officers and agents;
(6) To adopt from time to time such stock, option, stock purchase,
bonus or other compensation plans for directors, officers and agents of the
corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement or other
benefit plans for directors, officers and agents of the corporation and its
subsidiaries as it may determine; and
(8) To adopt from time to time regulations, not inconsistent with these
Bylaws, for the management of the corporation's business and affairs.
Section 2.9 Compensation of Directors. Directors, as such, may receive,
pursuant to resolution of the Board of Directors, fees and other compensation
for their services as directors, including, without limitation, their services
as members of committees of the directors.
ARTICLE III
Committees
<PAGE>
Section 3.1 Committees of the Board of Directors. The Board of
Directors, by a vote of a majority of the whole board, may from time to time
designate committees of the board, with such lawfully delegable powers and
duties as it thereby confers, to serve at the pleasure of the board and shall,
for those committees and any others provided for herein, elect a director or
directors to serve as the member or members, designating, if it desires, other
directors as alternative members who may replace any absent or disqualified
member at any meeting of the committee. Any committee so designated may exercise
the power and authority of the Board of Directors to declare a dividend or to
authorize the issuance of stock if the resolution which designates the committee
or a supplemental resolution of the Board of Directors shall so provide. In the
absence or disqualification of any member of any committee and any alternate
member in his place, the member or members of the committee present at the
meeting and not disqualified from voting, whether or not he or they constitute a
quorum, may by unanimous vote appoint another member of the Board of Directors
to act at the -meeting in the place of the absent or disqualified member.
Section 3.2 Conduct of Business. Each committee may determine the
procedural rules for meeting and conducting its business and shall act in
accordance therewith, except as otherwise provided herein or required by law.
Adequate provision shall be made for notice to members of all meetings;
one-third of the members shall constitute a quorum unless the committee shall
consist of one or two members, in which event one member shall constitute a
quorum; and all matters shall be determined by a majority vote of the members
present. Action may be taken by any committee without a meeting if all members
thereof consent thereto in writing, and the writing or writings are filed with
the minutes of the proceedings of such committee.
ARTICLE IV
Officers
Section 4.1 Generally. The officers of the corporation shall consist of
president, one or more vice presidents, a secretary, a treasurer and such other
subordinate officers as may from time to time be appointed by the Board of
Directors. Officers shall be elected by the Board of Directors, which shall
consider that subject at its first meeting after every annual meeting of
stockholders. Each officer shall hold his office until his successor is elected
and qualified or until his earlier resignation or removal. The President shall
be a member of the Board of Directors. Any number of offices may be held by the
same person.
Section 4.2 President. The President shall be the chief executive
officer of the corporation. Subject to the provisions of these Bylaws and to the
direction of the Board of Directors, he shall have the responsibility for the
general management and control of the affairs and business of the corporation
and shall perform all duties and have all powers which are commonly incident to
the office of chief executive or which are delegated to him by the Board of
Directors. He shall have power to sign all stock certificates, contracts and
other instruments of the corporation which are authorized. He shall have general
supervision and direction of all of the other officers and agents of the
corporation.
Section 4.3 Vice Presidents. Each Vice President shall perform such
duties as the Board of Directors shall prescribe. In the absence or disability
of the President, the Vice President who has served in such capacity for the
longest time shall perform the duties and exercise the powers of the President.
Section 4.4 Treasurer. The Treasurer shall have the custody of all
monies and securities of the corporation and shall keep regular books of
account. He shall make such disbursements of the funds of the corporation as are
proper and shall render from time to time an account of all such transactions
and of the final condition of the corporation.
Section 4.5 Secretary. The Secretary shall issue all authorized notices
for, and shall keep minutes of, all meetings of the stockholders and the Board
of Directors. He shall have charge of the corporate books.
Section 4.6 Delegation of Authority. The Board of Directors may from
time to time delegate the powers or duties of any officer to any other officers
or agents, notwithstanding any provision hereof.
Section 4.7 Removal. Any officer of the corporation may be removed at
any time, with or without cause, by the Board of Directors.
<PAGE>
Section 4.8 Action with Respect to Securities of other corporations.
Unless otherwise directed by the Board of Directors, the President shall have
power to vote and otherwise act on behalf of the corporation, in person or by
proxy, at any meeting of stockholders of or with respect to any action of
stockholders of any other corporation in which this corporation may hold
securities and otherwise to exercise any and all rights and powers which this
corporation may possess by reason of its ownership of securities in such other
corporation.
ARTICLE V
Right of Indemnification of Directors, officers and Others
Section 5.1 Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative
("proceeding"), by reason of the fact that he or she or a person for whom he or
she is the legal representative is or was a director or officer, employee or
agent of the corporation or is or was serving at the request of the corporation
as a director or officer, employee or agent of another corporation, or of a
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee or agent
or in any other capacity while serving as a director, officer, employee or
agent, shall be indemnified and held harmless by the corporation to the fullest
extent authorized by the Delaware General Corporation Law, as the same exists or
may hereafter be amended (but, in the case of any such amendment only to the
extent such amendment permits the corporation to provide broader indemnification
rights than said law permitted the corporation to provide prior to such
amendment) against all expenses, liability and loss (including attorney's fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement) reasonably incurred or suffered by such person in connection
therewith. Such right shall be a contract right and shall include the right to
be paid by the corporation expenses incurred in defending any such proceeding in
advance of its final disposition; provided, however, that the payment of such
expenses incurred by a director or officer of the corporation in his or her
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,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of such proceeding, shall be made only upon delivery to
the corporation of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it should be determined ultimately that such
director or officer is not entitled to be indemnified under this section or
otherwise.
Section 5.2 Right of claimant to Bring Suit. If a claim under Section
5.1 is not paid in full by the corporation within 60 days after a written claim
has been received by the corporation, the claimant may at any time thereafter
bring suit against the corporation to recover the unpaid amount of the claim,
and if successful in whole or in part, the claimant shall be entitled to be paid
also the expense of prosecuting such claim. It shall be a defense to any such
action (other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the required
undertaking has been tendered to the corporation) that the claimant has not met
the standards of conduct which make it permissible under the Delaware General
Corporation Law for the corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the corporation.
Neither the failure of the corporation (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he or she has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the corporation (including its Board of Directors, independent
legal counsel, or its stockholders) that the claimant had not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that claimant had not met the applicable standard of conduct.
Section 5.3 Non-Exclusivity of Rights. The rights conferred by Sections
5.1 and 5.2 shall not be exclusive of any other right which such person may have
or hereafter acquire under any statute, provision of the Certificate of
Incorporation, bylaw, agreement, vote of stockholders or disinterested directors
or otherwise.
Section 5.4 Insurance. The corporation may maintain insurance, at its
expense, to protect itself and any such director, officer, employee or agent of
the corporation or another corporation, partnership, joint venture, trust or
other enterprise against any such expense, liability or loss, whether or not the
corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
ARTICLE VI
Stock
Section 6.1 Certificates of Stock. Each stockholder shall be entitled
to a certificate signed by, or in the name of the corporation by, the President
or a vice president, and by the secretary or an assistant secretary, or the
treasurer or an assistant treasurer, certifying the number of shares owned by
him. Any of or all the signatures on the certificate may be facsimile.
Section 6.2 Transfers of Stock. Transfers of stock shall be made only
upon the transfer books of the corporation kept at an office of the corporation
or by transfer agents designated to transfer shares of the stock of the
corporation. Except where a certificate is issued in accordance with Section 6.4
of Article VI of these Bylaws, an outstanding certificate for the number of
shares involved shall be surrendered for cancellation before a new certificate
is issued therefor.
Section 6.3 Record Date. The Board of Directors may fix a record date,
which shall not be more than 60 nor less than 10 days before the date of any
meeting of stockholders, nor more than 60 days prior to the time for the other
action hereinafter described, as of which there shall be determined the
stockholders who are entitled: to notice of or to vote at any meeting of
stockholders or any adjournment thereof; to express consent to corporate action
in writing without a meeting; to receive payment of any dividend or other
distribution or allotment of any rights; or to exercise any rights with respect
to any change, conversion or exchange of stock or with respect to any other
lawful action.
Section 6.4 Lost, Stolen or Destroyed Certificates. In the event of the
loss, theft or destruction of any certificate of stock, another may be issued in
its place pursuant to such regulations as the Board of Directors may establish
concerning proof of such loss, theft or destruction and concerning the giving of
a satisfactory bond or bonds of indemnity.
Section 6.5 Regulations. The issue, transfer, conversion and
registration of certificates of stock shall be governed by such other
regulations as the Board of Directors may establish.
ARTICLE VII
Notices
Section 7.1 Notices. Whenever notice is required to be given to any
stockholder, director, officer, or agent, such requirement shall not be
construed to mean personal notice. Such notice may in every instance be
effectively given by deposing a writing in a post office or letter box, in a
postpaid, sealed wrapper, or by dispatching a prepaid telegram, addressed to
such stockholder, director, officer, or agent at his or her address as the same
appears on the books of the corporation. The time when such notice is dispatched
shall be the time of the giving of the notice.
Section 7.2 Waivers. A written waiver of any notice, signed by a
stockholder, director, officer, or agent, whether before or after the time of
the event for which notice is to be given, shall be deemed equivalent to the
notice required to be given to such stockholder, director, officer, or agent.
Neither the business nor the purpose of any meeting need be specified in such a
waiver.
ARTICLE VIII
Miscellaneous
<PAGE>
Section 8.1 Facsimile Signature. In addition to the provisions for the
use of facsimile signatures elsewhere specifically authorized by these Bylaws,
facsimile signatures of any officer or officers of the corporation may be used
whenever and as authorized by the Board of Directors or a committee thereof.
Section 8.2 Corporate Seal. The Board of Directors may provide a
suitable seal, containing the name of the corporation, which seal shall be in
the custody of the secretary. If and when so directed by the Board of Directors
or a committee thereof, duplicates of the seal may be kept and used by the
treasurer or by the assistant secretary or assistant treasurer.
Section 8.3 Reliance Upon Books, Reports, and Records. Each director,
each member of any committee designated by the Board of Directors, and each
officer of the corporation shall, in the performance of his duties, be fully
protected in relying in good faith upon the books of account or other records of
the corporation, including reports made to the corporation by any of its
officers, by an independent certified public accountant, or by an appraiser
selected with reasonable care.
Section 8.4 Fiscal Year. The fiscal year of the corporation shall be as
fixed by the Board of Directors.
Section 8.5 Time Periods. In applying any provision of these Bylaws
which requires that an act be done or not done a specified number of days prior
to an event or that an act be done during a period of a specified number of days
prior to an event, calendar days shall be used, the day of the doing of the act
shall be excluded, and the day of the event shall be included.
ARTICLE IX
Amendments
Section 9.1 Amendments. These Bylaws may be amended or repealed by the
Board of Directors at any meeting or by the stockholders at any meeting.
Adopted this 17th day of June, 1988.
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
CUSIP NO. 741586 10 5
- - - NUMBER - - SHARES -
PRIMEHOLDINGS.COM, INC.
AUTHORIZED COMMON STOCK: 50,000,000 SHARES * PAR VALUE of $0.666
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
Shares of PRIMEHOLDINGS.COM, INC Common Stock
transferable on the books of the Corporation in person or duly authorized
attorney upon surrender of this Certificate properly endorsed. This Certificate
is not valid unless 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.
Dated:
[COMPANY SEAL]
- - ----------------------- ------------------------------
Secretary President
SERVICE AGREEMENT
Number: 2000-100/001
Date: February 7, 2000
- - ------------------------------------------- ------------------------------------
Show Management Service Provider
- - ------------------------------------------- ------------------------------------
- - ------------------------------------------- ------------------------------------
American Show Management bCard, Inc. - d.b.a. bCard.net
17700 SW Upper Boones Ferry Road, Suite 120 407 - 555 Richmond Street West
Portland, OR 97224 Toronto, ON M5V 3B1
Tel: 503/968-1123 - Fax: 503/670-6275 Tel: 416-507-9995- Fax: 416-507-9989
- - ------------------------------------------- ------------------------------------
- - ------------------------------------------- ------------------------------------
Client Contractual Contact: bCard Contractual Contact:
Andrea Lowery, Vice President, Operations Dan Blair, General Manager
Direct Line: 503/670-6128 Direct Line: 416-507-9995
Email: [email protected] Email: [email protected]
- - ------------------------------------------- ------------------------------------
SHOWS: ASM's ITEC & Technology Showcase Events for 2000, 2001 & 2002
See Attachment A for list of shows covered by this agreement
SHOW DATES: 2000, 2001 & 2002 - See Attachment A for date of shows
LOCATION: See Attachment A for location of shows
ADDITIONAL CLIENT CONTACTS:
Teresa Adams, Director, Operations - 503/670-6129 - email:[email protected]
Kris McKinney, Director, Operations - 503/670-6130 - email:[email protected]
- - --------------------------------------------------------------------------------
I. EXECUTIVE SUMMARY
bCard Inc., hereinafter referred to as "bCard" and American Show
Management, hereinafter referred to as "ASM", agree to ASM's purchase
of registration and data management services for the events described
in Attachment A, herein referred to as "events" (ITEC & Technology
Showcase events) , on the terms and conditions set forth in this
Service Agreement, hereinafter referred to as "Agreement".
bCard will use the best available technology and follow accepted
industry standards to provide comprehensive, professional data
management services to help ASM and its exhibitors enhance the event
experience. bCard ensures quality, speed, accuracy and reliability in
its services and products. Registration processing will be handled in a
quick and efficient manner by providing on-site self-registration
systems and web centric data management solutions. bCard will also
provide valuable services to exhibitors to enhance their contact with
customers and sales leads generated at the events. A key factor in
bCard's registration process will be the issuance of a bCard, a
universal electronic business card for trade shows and events. The
bCard is the key to several services made available to events and their
exhibitors such as lead retrieval and lead follow up.
The following agreement sets forth the terms and conditions for
providing ASM with registration, exhibitor and data management
services.
II. GENERAL INFORMATION
2-1. Attendance Forecast: See Attachment A for estimated attendance by
event
2-2. Number of Exhibiting Companies: See Attachment A for estimated
number by event
III. ADVANCE REGISTRATION SERVICES
3-1. ACCOUNT MANAGEMENT: bCard will assign an Account Manager (AM) and
a MIS Manager: The AM will be responsible for the management and
servicing of ASM's events. The AM will coordinate all pre-registration
and post show procedures. The MIS manager will ensure compatibility and
will
<PAGE>
customize software and hardware to ASM needs. During the advance
registration period, bCard will plan along with ASM for all of the
items associated with the badging of Exhibitors and Attendees at the
events. bCard and ASM will define a data transfer schedule for setup of
onsite registration production. During the planning period, such items
as registration forms, lobby layout, signs and other services will be
defined and documented by the bCard Account Manager in accordance with
ASM's schedules. Deadlines defined jointly with ASM.
3-2. ADVANCE ATTENDEE AND EXHIBITOR REGISTRATION:
ASM only offers internet-based pre-registration with no
physical forms to be data entered. ASM will host its own
website for web based registration screens. ASM will
incorporate bCard holder login for event web registration.
ASM's MIS department will create pre-registration databases
for each event. This information will be transferred to bCard
electronically. The electronic data transferred from/to bCard
to/from ASM via Internet will comply with the following:
3-2a. bCard will assist ASM in developing lists for advance
confirmation mailings to aid in marketing these events. Charges for this service
are not included in this agreement.
3-2b. This data will always be in a format mutually agreed
upon by bCard and ASM. The common database will include all fields at all times.
Any revision to the format will have to be fully documented and approved by both
parties.
3-2c. In order to properly interface with ASM's internal
systems, bCard will setup an extranet home page for ASM, which will be password
and user, protected. bCard will set up an account/mailbox and password on the
in-house server for each event. bCard will provide all information regarding
data communication and interface. bCard will also provide necessary system
integration expertise to properly develop a data plan designed to share attendee
and exhibitor information throughout the systems. bCard has extensive knowledge
in registration data transfers to and from client's systems.
3-2d. Should ASM elect to send pre-registration materials in
advance of any event all USPS mailing costs (if any) will be the responsibility
of ASM and will require ASM approval.
3-3. PAPER BADGE PRINTING SPECIFICATIONS:
Paper badges to all attendees. Suggested format as follows: It
is understood that ASM will sell sponsorship space on the
paper badge stock (see Supplies section).
Line 1: Company Name
Line 2: First Name and Last Name
Line 3: Title
Line 4: Attendee -Number (flush left) or Exhibitor - centered
(EXHIBITOR reversed out)
When official badge stock is depleted, bCard will use blank
paper stock.
3-4. bCard(R) ELECTRONIC BUSINESS CARDS SPECIFICATIONS: bCard will
provide the necessary quantities of pre-printed bCard's which will include the
bCard(R) logo. bCards will be printed with the cardholder's first and last name
as well as with a unique bCard number and expiration date. The card will have a
3-year validity. bCard's' chip will be encoded with all basic attendee
information to include fax, email and all or selected demographics, registration
codes and show code. A loyalty program around multiple use of the bCard with
issuance of bCard points pre-purchased by exhibitors will ensure continuous use
of the card thus providing great exposure for the ASM brands. These will be
provided without charge and an agreement to generate sponsorship revenues will
be included in this agreement.
3-5. ADVANCE SCHEDULE
Dates and Times are as follows:
Date of receipt of first pre-registration data: Friday 12:00
Noon MST before each event
<PAGE>
Date of second and last receipt of pre-registration data: 5:00
PM local time on Exhibitor move-in day Date for download of
exhibitor data: Friday 12:00 Noon MST before each event. ASM
pre-registration cut off date: 5:00 PM local time on Exhibitor
move-in day. After the cut off date, registration will have to
occur on-site
IV. ON-SITE REQUIREMENTS
4-1. DATA ENTRY, PROCESSING AND REPORTING:
4-1a. Record Content: Attendee record changes (if any) and
"last minute" records from the advance registration data will
be given to bCard by ASM. It is imperative that ASM does not
modify a record structure unless agreed by both parties and
necessary database structure upgrades have been implemented by
bCard.
4-1b. Data Entry: bCard will use a self-registration setup
where most input stations are made available to users
directly.
As a general rule bCard will require input of the
full content of a registration form prior to producing a
badge. However, in order to cope with unexpected surge in
on-site attendance, bCard will, upon agreement with the ASM
operations staff on-site, switch to a short form input,
whereby demographics are skipped. It is understood that this
process will be limited to very short time frames and both ASM
and bCard understand the importance of collecting demographics
prior to generating the badges. For those attendees that will
not be required to complete demographics on the computers,
they will be asked to complete a demographic card (which will
include space to write the reg ID # and first/last name) for
input later.
4-1c. Badge correction and replacement: on line database for
both exhibitors and attendees available on bCard registration
system. Full data base look up and editing capabilities
throughout the registration system(s): bCard networks all its
NT servers via Ethernet - TC/PIP with database mirroring to
ensure ongoing operation. Usual setup is based on a
client/server approach whereby each server writes to at least
one other on the network. This way the complete show database
is being stored on several servers at all times. There is no
degradation in the speed of a record lookup.
4-1d. On-site Reporting: bCard will provide basic
pre-determined online counts to ASM accessible through the
server. ASM and bCard will jointly define the type of reports
required.
1. Twice daily reports, 12:30 AM and 4:00 P.M.
summarizing pre-reg and on-site attendance.
2. Only ASM operations staff are authorized to
receive the on-site daily count reports.
4-1e. On-Site Cash Management: ASM will handle the cash and
cashiers management on-site. Attendees purchasing an on-site
entrance will receive from the cashier a pre-printed numbered
ticket. Registrants will key in the number, which will
automatically define the registration category.
4-1f. On-Site Processes:
o Pre-registered attendees with confirmations, bCard
holders and exhibitors will go directly to
self-registration. Exhibitors will not be able to register
on-site from 9:00 AM to 11:00 AM on day 1 of the event.
Special generic badges will be distributed to allow them
access to the exhibit floor during the morning rush period.
They will be instructed to return later to complete the
registration process.
o Onsite Registrants with a ticket will go to onsite
self-registration.
o Onsite Registrants without tickets will go to the
information booth and then onsite self-registration.
o Registrants with questions will go to Badge Correction.
<PAGE>
o Registrants needing changes will go to Badge Correction.
Paper badges and bCard's are produced at badge making
stations. Badge holders are handed out concurrently with
badges.
4-2. REGISTRATION AND BADGING EQUIPMENT:
There are four pieces of equipment, that bCard will provide in
various quantities, to properly perform its on-site
registration services:
o Self-Registration/Typing Stations: these are Laptop
PC's (Pentium)
o Computer Servers: these are NT Pentium based machines
with high capacity drives loaded with bCard
registration management software.
o bCard Printer/Encoders: these are industrial thermal
printers and encoders specifically designed for
credit card type badges. Print in 300 dots per inch
and encode in high density.
o Thermal Printer: these are high debit industrial
thermal printers specifically designed for 3x4"
continuous thermal paper badges.
Additional equipment requested by ASM for events will be
provided if available and will be charged according to the
pricing schedule provided in this agreement.
4-4. PERSONNEL - bCard REGISTRATION MANAGERS
bCard staff will install and maintain the equipment, train the
temporary registration personnel, oversee the registration
area, and manage the registration process under the direction
of ASM. bCard will staff ASM's events as follows for a period
not to exceed 4 working days (not including travel day) as
follows, but both parties will mutually agree upon final
number of bCard staff on-site at least 3 months from each
show. If multiple registration areas are added staff may have
to be increased. Any request by ASM for additional staff will
be charged according to the pricing schedule included in this
agreement:
bCard will charge for its registration staff based on a daily
rate of $400 for any additional day above the 4 working days,
which will include one extra working day at no charge. This
fee does not include housing, which is to be covered by the
client - not to exceed 5 days per event except for shows which
may require one extra room night. Travel and per diem are
included in the bCard fee.
bCard will schedule one supervisor for events under 4800
attendees and with less than 50 units of lead retrieval and
two supervisors when attendance is greater than 4800 or more
than 50 lead retrieval units are rented.
4-5. MOVE IN AND OUT SCHEDULE:
Suggested date and time are as follows: (actual schedule will
be determined jointly and will be confirmed in writing at the
latest 6 weeks from each show). It is estimated that bCard
staff will spend an average of 4 days at each show.
<TABLE>
<CAPTION>
---------------------- ---------------------------------------- -------------------------------
Day in 2000 Action Hours
---------------------- ---------------------------------------- -------------------------------
<S> <C> <C>
Decorator Move-in Arrival of bCard Staff 10:00 AM
---------------------- ---------------------------------------- -------------------------------
Decorator Move-in Move-in and Set-up 10:00 AM - 6:00 PM
---------------------- ---------------------------------------- -------------------------------
Exhibitor Exhibitor Self Registration Open 8:00 AM - 7:00 PM
Move-in
---------------------- ---------------------------------------- -------------------------------
Day 1 Typist Training 7:00 AM - 8:00 AM
---------------------- ---------------------------------------- -------------------------------
<PAGE>
---------------------- ---------------------------------------- -------------------------------
Day 1 All Registration Open 8:00 AM - 4:00 PM
---------------------- ---------------------------------------- -------------------------------
Day 2 All Registration Open 8:00 AM - 4:00 PM
---------------------- ---------------------------------------- -------------------------------
Day 2 Dismantling 4:00 PM
---------------------- ---------------------------------------- -------------------------------
</TABLE>
V. EQUIPMENT FREIGHT, STAFF TRAVEL AND LODGING
5-1. Freight maximum: bCard will coordinate and arrange for
shipping to and from each location and will charge freight as
part of total fee to ASM. Any freight incurred for shipping of
additional equipment, materials, supplies and other items
specifically requested by ASM outside of this proposal will be
the responsibility of ASM and require ASM approval. All
courier services charges will be the responsibility of ASM and
will require ASM approval.
5-2. ASM will provide housing for all bCard Account Managers.
Housing shall be at ASM's discretion but every attempt will be
made to ensure that the housing will be of adequate category
and in the proximity of the show site. Room(s) will be made
available from the evening prior to decorator move-in through
the evening of day 2.
VI. FINAL DATA PROCESSING AND REPORTING
6-1a. bCard to remove invalid records and validate data
fields (if any).
6-1b. bCard will remove duplicates. Deduping key used by
bCard is as a standard Name and Zip Code and when a
match occurs last record is kept.
6-1c. The complete database is to be delivered to ASM
within 10 working days after the close of the event.
6-1d. bCard will produce report formats as agreed and post
them on the web. Final reports will be accessed on
the Web
ONSITE:
o Counts twice daily (see section 4-1d)
POST SHOW:
o Full database
o As agreed with Marketing and posted on the web
o Ad Hoc Request upon mutual approval and with a
minimum 10 days warning.
VII. EXHIBITOR SERVICES - LEAD MANAGEMENT AND FOLLOW UP SYSTEMS
bCard will provide several lead gathering devices, on an optional rental
basis, to event exhibitors. bCard will absorb all costs of marketing the
retrieval systems to exhibitors. bCard to provide customized exhibitor kit
material to ASM for inclusion in the event Exhibitor Kits, breakfast
packages and on-demand in-house requests at pre-determined dates. bCard is
to make an additional mailing, one telemarketing campaign and one fax
broadcast. ASM to provide bCard with each of the events exhibiting company
database and any update starting 10 weeks from the show. bCard will also
provide on-site assistance at all time for the delivery of the machines and
technical support for the users. bCard will bring necessary equipment on
site (at least pre-show orders + sufficient replacements and 15% for new
on-site sales). There are several options:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------- ------------------------
Product Description Rental Cost
--------------------------------------------------------------------------------------- ------------------------
<S> <C>
bCard PC Solution: bCard badge reader with software and cable. It connects Advance
directly to a computer. The First Contact lead qualification software is $235
programmable by the exhibitor: one can enter the list of sales people, a On-Site
list of products, a list of follow up actions, a list of free questions and $290
a note mode. Software allows for daily reporting and editing.
--------------------------------------------------------------------------------------- ------------------------
<PAGE>
--------------------------------------------------------------------------------------- ------------------------
bCard Hand-Held Solution: Hand-held battery operated unit with integrated Advance
bCard reader and user-friendly software. The user simply swipes the bCard $235
badge and the record is displayed on the screen. The user than uses a pen to On-Site
touch the appropriate buttons to qualify the lead. A standard four-page $290
questionnaire is provided. Machines are automatically downloaded at the
exhibitor services desk. Exhibitors can obtain download on diskettes or as
an option, after the event, on paper.
--------------------------------------------------------------------------------------- ------------------------
bCard Follow Up : A new way to communicate product information via the Web. Advance
bCard operates a web server and will send to attendees who have an email $200
address or have a fax number an email with embedded URL address. Buyers will On-Site
receive an email thanking them for participating at the show and it will $200
list each product that the buyer has indicated an interest for with the
related live web address. A buyer receiving this email can immediately click
on the URL and it will go to the web site to obtain and display the
information.
--------------------------------------------------------------------------------------- ------------------------
bCard Interactive: From hardware to software, bCard Interactive stations are Call for
compatible with most badging technologies available today (magnetic stripe, Information
two dimensional bar code, chip cards, etc.). bCard Interactive can be used
from show to show without any need for new training and re-configuration of
the lead collection system. bCard Interactive also offers touch screen
integrated stations, multi-protocol badge reader integration, custom graphic
user interface, web integration, bCardPoints Incentive Program integration,
bCard loyalty information network, ROI analysis: web based reporting, onsite
technical assistance, hardware acquisition programs and custom software
development.
--------------------------------------------------------------------------------------- ------------------------
bCardPoints - Incentive Program: bCardPoints is a new way to reward Price per Point
attendees visiting a booth and it integrates seamlessly with bCard follow $0.04
up. bCardPoints can be redeemed for miles on several frequent flyer programs Set up Fee
(United, American, Delta, Northwest and USAir). bCard Holders redeem their $75
points through their bCard.net account on the web. When purchasing Minimum Order
bCardPoints, lead follow-up is included. $400
--------------------------------------------------------------------------------------- ------------------------
bCard Insurance: Protects exhibitor from liability of theft or accidental Advance
damage to bCard unit. Must report loss or defect to bCard Exhibitor Services $25
desk before show close. To honor insurance policy for units believed stolen, On-Site
exhibitor must file a police/security report and forward a copy to a bCard $25
representative. Some conditions apply. Speak to a bCard representative for
more details.
--------------------------------------------------------------------------------------- ------------------------
bCard Concierge Service: A bCard representative will drop off unit to the Advance Only
exhibitor's booth and pick up unit at the end of the show. Concierge service $25.00
is not available to order onsite
--------------------------------------------------------------------------------------- ------------------------
</TABLE>
Advance pricing will be in effect until the second Thursday prior to the week of
the event.
VIII. MATERIALS
bCardis responsible for providing all the necessary materials to be used in
performing its services under this agreement. It is understood that ASM and
bCard will keep track of materials.
8.1. PAPER: Thermal paper 3"x4" continuous. Printed in PMS color
front with artwork supplied by ASM. ASM will provide artwork
including Sponsor logos to be printed. As a standard,
ITEC/Technology Showcase logo and Sponsor logo(s) will be in
the same color but would constitute an additional plate
charge.
Quantities for 2000: 237,825 pieces
Quantities for 2001: TBD
Quantities for 2002: TBD
<PAGE>
Orders will be placed one show at a time unless grouped orders
can be arranged. It is understood that in order to avoid rush
charges (billed at cost to ASM), ASM will provide badge
artwork with sponsor logo no later than 21 days from event
move in date.
Additional prices will be as follows. Does not include
shipping from manufacturer to bCard. Priced per thousand.
Quantity 1 Color
-------- -------
3,000 $265
5,000 $135
10,000 $ 90
Blank white stock is $75 per thousand
Copy/Color Changes: $75 each
Printing Charge for One Additional Color: $75 plate charge
8.2. bCard is not charging ASM for the purchase of the bCards and
will in essence subsidize their cost. But the overall fee
charged to ASM includes the printing /encoding of bCards with
paper badges to event visitors.
It is also understood, that bCard and ASM will jointly (or
independently) seek additional sponsors for bCards and the
registration area for the events. bCard will ensure that
bCards will be printed with the jointly approved sponsor(s)'
logo(s).
8.2.1 bCard Sponsorship: Schedule B attached represents the
sponsorship costs for each event on the ASM events scheduled.
The cost to ASM is $.40 each. The calculation represents the
forecast requirements for advance/on-site for attendees and 3%
of the exhibitors. If more cards are required additional cards
sponsored will be billed to ASM at a rate of $.40 each.
8.2.2 Operations Reimbursements: The operations department will
receive a contract credit of $250.00 for each event where
bCard's are sponsored pursuant to schedule B.
8.3. BADGE HOLDERS: Clear vinyl - for 3"x4" paper badge - round
corners clip attachment style.
Quantities for 2000: 237,825 pieces
Quantities for 2001: TBD
Quantities for 2002: TBD
Orders will be placed twice a year to get lower price. Additional price for
badge holder will be as follows. Does not include shipping from manufacturer to
bCard:
Prices per thousand: $175/1000.
It is understood that bCard and ASM may implement a badge
holder recycling process on-site at each event and that bCard will collect and
re-use the badge holders. Used badge holders will not be tallied and will not be
applied against used quantities.
Other types of badge holders are available and ASM may order
from bCard based on approved quotation.
IX. ADDITIONAL EQUIPMENT:
Prices for equipment requested by ASM above and beyond the
standard allocation are as follows:
------------------------------ ---------------------
Description Cost per Unit
------------------------------ ---------------------
Typing Stations - PC's $200.00
------------------------------ ---------------------
Computer Server $500.00
------------------------------ ---------------------
<PAGE>
------------------------------ ---------------------
Paper Badge Printer $250.00
------------------------------ ---------------------
bCard Printer/Encoder $500.00
------------------------------ ---------------------
All requests for additional equipment will have to be approved
by both parties and will require at least a 30 days notice.
X. SERVICE FEE:
bCard will provide standard services, as described throughout this Agreement for
the fee stated below:
bCard will perform basic services described above for each of the 52
ITEC & Technology Showcase Events produced by ASM listed in Attachment
A, for a total fee of: $327,964.70
The above fee includes:
Badge Stock: Paper as required with the standard ITEC or TS logo in
Black bCards: Supplied as required on-site for all events. Badge
holders: 237,825 clear plastic badge holder's w/clip Equipment: As
described for each show type in above agreement and only within defined
parameters bCard Staff: As described for each show type in above
agreement and only within defined parameters Travel: As described in
above agreement and only within defined parameters Shipping: As
described in above agreement and only within defined parameters
Software: As described in above agreement and only within defined
parameters Data Processing: As described in above agreement and only
within defined parameters Reporting: As described in above agreement
and only within defined parameters Lead Retrieval Marketing: As
described in above agreement and only within defined parameters Lead
Retrieval On-Site Management: As described in above agreement and only
within defined parameters
Exhibiting companies at ASM events per year base the bCard fee on
information provided by ASM that shows an average of 30% pickup of lead
retrieval systems. The current estimation is that 2100 units will be
rented in 2000, with about 1050 in the spring program and 1100 in the
fall one. bCard reserves the right to renegotiate its fee after the
Spring Program of 2000, if the amount of unit rented falls below 1000.
ASM and bCard will work in close collaboration to ensure that
exhibiting companies at ASM events take advantage of bCard's lead
management services.
XI. DEPOSITS
8-1. First Deposit: Date: Upon signature $81,991
8-2. Second Deposit: Date: May 15, 2000 $81,991
8-3. Third Deposit: Date: September 15, 2000 $81,991
8-4. Fourth Deposit: Date: December 8, 2000 $81,991
bCard is to provide final invoice within thirty (30) days of the close of the
last ASM event. The final invoice for services due upon receipt. Any undisputed
balances delinquent more than 30 days are subject to a 15% APR service charge.
XII. TERMS AND CONDITIONS
12.1. ASM will provide in-hall drayage.
12.2. ASM will provide electrical power to bCard specifications by
noon of the first registration set-up day or as agreed upon
per show schedule between ASM and bCard.
<PAGE>
12.3. ASM will provide all registration furniture (by noon of the
first registration set-up day or as agreed upon schedule),
pipe and drape, rope and stanchion, signage and secretarial
chairs for typists.
12.4. ASM will provide all registration clerks, badge typists, badge
clerks and cashier personnel. Staffing schedule with adequate
time for training to be provided by ASM. All late advance
registration work (if any) to be performed by temporary
personnel.
12.5. ASM will provide a bCard Exhibitor Service desk in the
registration area for exhibitor services equipment
distribution and return.
12.6. bCard needs to be involved with the floor plan designs for the
registration areas. Plans to include furniture, electrical and
telephone requirements.
12.7. For data communication, ASM will provide a telephone in the
registration area by noon on the first registration set-up day
or as agreed upon schedule. bCard pays long distance usage.
12.8. ASM and bCard will define jointly the type of security
arrangements for each event. bCard will pay for security
services as prescribed when registration is not located in the
exhibit hall. Normally bCard will pay for security overnight
on the evening of exhibitor registration and overnight on the
first day of the exhibition. ASM will make all the security
arrangements in conjunction with bCard.
12.9. bCard will provide workman's compensation liability insurance
in at least the statutory amount for its employees.
12.10. bCard will provide a complete post show database within 10
working days of each show closing.
12.11 The terms and conditions in this agreement proposal constitute
an offer, which shall remain open for thirty days. An
acceptance of this offer by American Show Management, by
signing and returning the Signature page will create an
agreement upon the terms and conditions contained herein,
unless otherwise stated in writing and signed by both parties.
12.12 Future alterations to the terms and conditions of the contract
must also be in writing, signed by both parties. No verbal
revisions will be made.
12.13 The terms and conditions of this agreement shall be governed
by the laws of the State of Utah. In any litigation, the
prevailing party shall be entitled to, recover costs of such
litigation, including reasonable attorneys fees.
12.14 In order to reserve the equipment, perform the necessary tasks
for advance show preparation and make advance purchases of the
necessary show materials, the deposits in the amounts in the
agreement are to be remitted to bCard on the dates shown in
the quotation. The final balance is due upon receipt of the
final invoice for services.
12.15 In the event of cancellation of any of ASM's 52 ITEC &
Technology Showcase events covered in this agreement prior to
completion of all services called for in this agreement, the
amounts (or part of the amounts) deposited shall be credited
towards a like event.
12.16 It is understood that ASM owns and is the sole proprietor of
all the registration data processed and handled by bCard for
the events. The database for each event will be kept in
bCard's offices for a maximum period of 18 months unless
instructed otherwise by ASM. bCard will not release any or all
data without written authorization by ASM.
12.17 Long Term Agreement: This Agreement reflects special pricing
extended to ASM for entering into a three-year agreement with
bCard from 2000 through 2002. Anything herein to the contrary
notwithstanding, bCard may increase its service fee charged in
2001 and 2002 by an amount not to exceed 10% of the average
service fee per event charged in the immediately preceding
year.
<PAGE>
To illustrate: The average service fee per event charged in
2000 is $6,307.01 (i.e., the aggregate service fee of
$327,964.70 divided by the 52 events). In 2001, the aggregate
service fee shall not exceed $6,937.71 (i.e., a 10% increase
over the average service fee per event charged in 2000)
multiplied by the number of events for which bCard provides
its services hereunder in 2001 unless the aggregate size,
nature or the services provided for the events changes.
In making any service fee increase, bCard will take into
account that an increase in the number of events in any or any
succeeding year may result in economies of scale to bCard in
providing its services under this Agreement. Cost of
additional supplies may increase in each year by a maximum of
CPI of prior 12 months + 3%.
12.18 Renewal and Termination. As stated, this Agreement is entered
into for a term of three years (2000 - 2002) and covers the
ASM events (i) in 2000 which are listed on Attachment A, and
(ii) in 2001 and 2002, as set forth in a written list to be
provided by ASM to bCard no later that January of such year,
such list to include dates, locations, equipment and personnel
needs and estimated supplies requirements.
Any renewal or extension of this Agreement beyond the
three-year term must be done in writing and signed by both
parties.
Although the parties contemplate a three-year term, either ASM
or bCard may terminate this Agreement without further
liability prior to the expiration of the three-year term,
effective at the end of a calendar year, upon written notice
to the other. Notice shall be given prior to November 30, and
such termination shall then be effective on December 31.
The parties acknowledge that this Agreement is based upon each
party's performance and, accordingly, each party reserves the
right to review the other's performance between and/or during
event sessions and propose revisions to this Agreement it
deems necessary.
12.19 Onsite Performance goals: bCard will install a registration
process that will be continuously operational during the
pre-determined registration hours. Except for an act of god,
bCard will commit to an on-going registration process onsite
at all ASM Events. If for any reason, bCard is unable to
provide the services outlined in this agreement for ASM,
during calendar 2000 - 2002, any and all deposits made on
behalf of ASM will be refunded less expenses incurred to date.
12.20 Event Cancellation. If ASM decides, in its judgment, to cancel
a scheduled event, then it may cancel bCard's services
hereunder for such event with limited liability by giving
bCard no less than 60 days' prior written notice. For each
event so canceled, the aggregate service fee charged by bCard
for that year shall be reduced by the average service fee per
event for such year less any prepaid supplies or commitments
for which bCard is contracted.
<PAGE>
SIGNATURE PAGE
February 4, 2000
bCard Inc.
407 - 555 Richmond Street West
Toronto, Ontario M5V 3B1
AGREEMENT 2000-100/001 BETWEEN BCARD INC. AND AMERICAN SHOW MANAGEMENT.
- - --------------------------------------------------------------------------------
Acceptance
- - --------------------------------------------------------------------------------
In connection with this agreement proposal dated February 4, 2000, we hereby
accept the offer contained therein.
We have enclosed the check for $81,991.00 as advance payment in accordance with
this agreement.
This acceptance entitles you to start arranging all necessary details for our
requirements, and reserving the required equipment and personnel.
Offered by BCARD INC.
---------------------------------
Dan Blair
General Manager
Accepted by: AMERICAN SHOW MANAGEMENT
--------------------------------
Authorized by
---------------------------------
Title
---------------------------------
Date
EMPLOYMENT AGREEMENT
This Employment Agreement (hereinafter "Agreement) is made as of the 6th day of
January 2000 by and between PrimeHoldings.com, Inc. ("PrimeHoldings"), a
Delaware corporation, and Thomas E. Aliprandi, a resident of Utah (the
"Employee").
WITNESSETH:
WHEREAS, the Employee has been employed by and a key executive of PrimeHoldings
in charge of all of its business and operations, including those of it
subsidiaries; and
WHEREAS, by unanimous agreement by written consent of the Board of Directors of
PrimeHoldings (the "Board"), the Employee has been duly elected President and
Chief Executive Officer of PrimeHoldings; and
WHEREAS, PrimeHoldings desires to continue to employ the Employee and the
Employee is willing to continue such employment, all on the terms hereinafter
set forth;
NOW, THEREFORE, the parties agree as follows:
1. Employment. PrimeHoldings hereby employs the Employee as its President
and Chief Executive Officer on the terms hereinafter set forth for a
period of three (3) years from January 1, 2000, and the Employee hereby
accepts such employment.
2. Duties. The Employee will, to the best of his ability, render services
in such executive, supervisory and general administrative capacities as
the Board shall from time to time determine. Without limiting the
foregoing, the Employee shall devote his time, energy and ability to
perform his duties and shall use his best efforts to promote
PrimeHoldings' interests in accordance with policies established by and
under the direction of the Board. If elected a director or officer of
PrimeHoldings or of any affiliate or subsidiary of PrimeHoldings, the
Employee will serve in that capacity without compensation other than as
expressly provided in this Agreement or any amendment hereto.
3. Exclusivity. The Employee will devote all of his working time to
performing his duties under this Agreement, and during his employment
with PrimeHoldings the Employee will not, without the express written
consent of the Board: (i) act for his own account in any manner which
is competitive with any of the businesses of PrimeHoldings (including
any affiliate or subsidiary of PrimeHoldings), or which would interfere
with the performance of his duties under this Agreement, or (ii) serve
as an officer, director or employee of or advisor to any other business
entity unaffiliated with PrimeHoldings, or (iii) invest or have any
financial interest, direct or indirect, in any business competitive
with any of the businesses of PrimeHoldings (including any affiliate or
subsidiary of PrimeHoldings), provided, however, that notwithstanding
the foregoing, the Employee may own up to 1% of the outstanding equity
securities of any company engaged in any such competitive business
whose shares are listed on a national securities exchange or regularly
quoted in an over-the-counter market by one or more members of a
national or an affiliated securities association. The Employee will be
deemed to have an indirect financial interest in any business in which
any of the following has any financial interest: the Employee's spouse;
any lineal descendant or ancestor of the Employee; any brother or
sister of the Employee; and any child (but not grandchild) of any such
brother or sister.
4. Compensation.
4.1 Salary. During the first year of his employment, and unless
adjusted by official action of the Board, PrimeHoldings will
pay the Employee a salary at the rate of $120,000.00 per year.
Thereafter the Board will review the Employee's salary at
least annually. The Employee will not be entitled to overtime
or other additional compensation as a result of services
performed during evenings, weekends, holidays or at other
times.
<PAGE>
4.2 Deductions. PrimeHoldings will deduct and withhold from any
compensation payable to the Employee under this Agreement such
amounts as PrimeHoldings is required to deduct and withhold by
law. PrimeHoldings may also deduct and withhold from any such
compensation, to the extent permitted by law, such amounts as
the Employee may owe to PrimeHoldings.
4.3 Automobile Allowance. PrimeHoldings will provide the Employee
an automobile allowance of $1,000.00 per month.
4.4 Termination Compensation. If PrimeHoldings terminates Employee
for any reason, with or without cause, Employee shall be
entitled to termination compensation at Employee's
then-current salary and according the number of years of
employment with PrimeHoldings or any subsidiary of
PrimeHoldings, including any employment prior to the execution
of this Agreement, as follows:
One year - 6 months salary
Two years - 12 months salary
Three years - 24 months salary
Four years - 36 months salary
5. Expenses. PrimeHoldings will reimburse the Employee for all proper,
normal and reasonable expenses incurred by the Employee in performing
his obligations under this Agreement upon the Employee furnishing
PrimeHoldings with satisfactory evidence of such expenditures. The
Employee will not incur any unusual or major expenditure without the
Board's prior written approval.
6. Benefits.
6.1 Health Insurance. PrimeHoldings will provide the Employee, at
PrimeHoldings' expense, with medical, hospital and disability insurance that is
not less favorable than that which it provides to any other employee of
PrimeHoldings.
6.2 Vacation. The Employee will be entitled to four (4) weeks paid
vacation during each year under this Agreement, in addition to
any holidays that PrimeHoldings observes. Unused vacation time
in any year will accrue and may be added to vacation time for
any following year or, at the Employee's option, may be paid
as a cash payment in an amount equal to the amount of annual
salary attributable to the period of time of unused vacation.
6.3 Illness. The Employee's salary and other rights and benefits
under this Agreement will not be suspended or terminated
because the Employee is absent from work due to illness,
accident or other disability; but PrimeHoldings may deduct
from the Employee's salary under Section 4.1 any payment
received by the Employee under any disability insurance which
PrimeHoldings provides the Employee pursuant to Section 6.1.
The provisions of this Section 6.3 will not limit or affect
the rights of PrimeHoldings under Section 7.
7. Death and Disability.
7.1 If the Employee dies prior to expiration of the term of this
Agreement, the Agreement shall immediately terminate and
PrimeHoldings will, within ten days, pay Employee's personal
representative an amount equal to Employee's salary through
the last day of the calendar month in which the Employee dies
plus two additional months salary.
7.2 If the Employee is unable to perform substantially all of his
duties under this Agreement because of illness, accident or
other disability (collectively referred to as "Disability"),
and the Disability continues for more than three consecutive
months or an aggregate of more than six months during any
12-month period, then PrimeHoldings may suspend its
obligations to the Employee on or after the expiration of said
3- or 6-month period until PrimeHoldings terminates such
suspension as hereinafter provided. PrimeHoldings will
terminate any such suspension after the Disability has,
<PAGE>
in fact, ended and after it has received written notice from
the Employee that the Disability has ended and that he is
ready, willing and able to perform fully his services under
this Agreement. Termination of such suspension will be no
later than one week after PrimeHoldings has received such
notice from the Employee. If any one or more periods of
suspension continue pursuant to the provisions of this Section
for three consecutive months or six months in the aggregate,
then PrimeHoldings may at any time prior to termination of the
then current period of suspension, terminate the employee's
employment hereunder.
If the Employee or PrimeHoldings asserts at any time that the
Employee is suffering a Disability, PrimeHoldings may cause
the Employee to be examined by a doctor or doctors selected by
PrimeHoldings, and the Employee will submit to all required
examinations and will cooperate fully with such doctor or
doctors and, if requested to do so, will make available to
them his medical records. The Employee's own doctor may be
present.
8. Results of The Employee's Services.
8.1 PrimeHoldings will be entitled to and will own all the results
and proceeds of the Employee's services under this Agreement,
including, without limitation, all rights throughout the world
to any copyright, patent, trademark or other right and to all
ideas, inventions, products, programs, procedures, formats and
other materials of any kind created or developed or worked on
by the Employee during his employment by PrimeHoldings; the
same shall be the sole and exclusive property of
PrimeHoldings; and the Employee will not have any right, title
or interest of any nature or kind therein. Without limiting
the foregoing, it will be presumed that any copyright, patent,
trademark or other right and any idea, invention, product,
program, procedure, format or material created, developed or
worked on by the Employee at any time during the term of his
employment will be a result or proceed of the Employee's
services under this Agreement. The Employee will take such
action and execute such documents as PrimeHoldings may request
to warrant and confirm PrimeHoldings' title to and ownership
of all such results and proceeds and to transfer and assign to
PrimeHoldings any rights which the Employee may have therein.
The Employee's right to any compensation or other amounts
under this Agreement will not constitute a lien on any results
or proceeds of the Employee's services under this Agreement.
8.2 PrimeHoldings will also own, and promptly on receipt thereof
the Employee will pay to PrimeHoldings, any monies and other
proceeds to which the Employee is entitled on account of
rights pertaining to any of PrimeHoldings' products or
services that the Employee acquired before the date of this
Agreement.
8.3 The Employee acknowledges that the violation of any of the
provisions of Section 8.1 will cause irreparable loss and harm
to PrimeHoldings which cannot be reasonably or adequately
compensated by damages in an action at law, and, accordingly,
that PrimeHoldings will be entitled to injunctive and other
equitable relief to enforce the provisions of that Section;
but no action for any such relief shall be deemed to waive the
right of PrimeHoldings to an action for damages.
9. Use of Employee's Name, Etc. PrimeHoldings is hereby granted the sole
and exclusive right during the term of his employment to make use of
and to permit others to make use of the Employee's name, pictures,
photographs, and other likenesses, and voice, in connection with the
advertising, publicity and exploitation of any products, or in
connection with the use or implementation of any of the Employee's
services hereunder or the proceeds thereof. This right shall continue
in perpetuity as a non-exclusive and non-compensable right after
termination of his employment for any reason whatsoever including,
without limitation, termination by either party for cause or wrongful
termination by either party. In no event, however, shall the Employee,
directly or indirectly, be represented as endorsing any product or
commodity without the Employee's written consent.
<PAGE>
10. Insurance. If PrimeHoldings desires at any time or from time to time to
apply for, in its own name or otherwise, but at its expense, life,
health, accident or other insurance covering the Employee,
PrimeHoldings may do so and may take out such insurance for any sum
that it deems desirable. The Employee will have no right, title or
interest in or to such insurance. The Employee nevertheless will assist
PrimeHoldings in procuring the same by submitting from time to time to
the customary medical, physical and other examinations, and by signing
such applications, statements and other instruments as any reputable
insurer may require.
11. Uniqueness of Services. The Employee acknowledges that his services
hereunder are of a special, unique, unusual, extraordinary and
intellectual character, the loss of which cannot be reasonably or
adequately compensated by damages in an action at law. Accordingly,
PrimeHoldings will be entitled to injunctive and other equitable relief
to prevent or cure any breach or threatened breach of this Agreement by
the Employee, but no action for any such relief shall be deemed to
waive the right of PrimeHoldings to an action for damages.
12. Negative Covenants.
12.1 The Employee will not, during or after the term of this
Agreement, disclose to any third person or use or take any
personal advantage of any confidential information or any
trade secret of any kind or nature obtained by him during the
term hereof or during his employment by PrimeHoldings.
12.2. To the full extent permitted by law, the Employee will not for
a period of two years following the termination of his
employment with PrimeHoldings:
(i) attempt to cause any person, firm or corporation
which is a customer of or has a contractual
relationship with PrimeHoldings (or any affiliate or
subsidiary of PrimeHoldings) at the time of the
termination of his employment to terminate such
relationship with PrimeHoldings (or any affiliate or
subsidiary of PrimeHoldings), and this provision
shall apply regardless of whether such customer has a
valid contractual arrangement with PrimeHoldings (or
any affiliate or subsidiary of PrimeHoldings);
(ii) attempt to cause any employee of PrimeHoldings (or
any affiliate or subsidiary of PrimeHoldings) to
leave such employment;
(iii) engage any person who was an employee of
PrimeHoldings (or any affiliate or subsidiary of
PrimeHoldings) at the time of the termination of his
employment or cause such person otherwise to become
associated with the Employee or with any other
person, corporation, partnership or other entity with
which the Employee may thereafter become associated;
(iv) engage in any activity or perform any services
competitive with any business conducted by
PrimeHoldings (or any affiliate or subsidiary of
PrimeHoldings), in those geographical areas in which
PrimeHoldings (or any affiliate or subsidiary of
PrimeHoldings) conducts such business, at the time of
such termination.
12.3 The Employee acknowledges that the violation of any of the
provisions of this Section 12 will cause irreparable loss and
harm to PrimeHoldings which cannot be reasonably or adequately
compensated by damages in an action at law, and, accordingly,
that PrimeHoldings will be entitled to injunctive and other
equitable relief to prevent or cure any breach or threatened
breach thereof, but no action for any such relief shall be
deemed to waive the right of PrimeHoldings to an action for
damages.
13. Governing Law; Remedies.
13.1 This Agreement has been executed in the State of Utah and
shall be governed by and construed in all respects in
accordance with the laws of the State of Utah.
<PAGE>
13.2 Except as otherwise expressly provided in this Agreement, any
dispute or claim arising under or with respect to this
Agreement will be resolved by arbitration in Salt Lake City,
Utah, in accordance with the Rules for Commercial Arbitration
of the American Arbitration Association. The decision or award
of the arbitrator shall be final and binding upon the parties.
Any arbitral award may be entered as a judgment or order in
any court of competent jurisdiction.
13.3 Notwithstanding the provisions for arbitration contained in
this Agreement, PrimeHoldings will be entitled to injunctive
and other equitable relief from the courts as provided in
Sections 8.3, 11 and 12.3 and as the courts may otherwise
determine appropriate; and the Employee agrees that it will
not be a defense to any request for such relief that
PrimeHoldings has an adequate remedy at law. For purposes of
any such proceeding PrimeHoldings and the Employee submit to
the non-exclusive jurisdiction of the courts of the State of
Utah and of the United States located in the County of Salt
Lake, State of Utah, and each agrees not to raise and waives
any objection to or defense based on the venue of any such
court or forum non conveniens.
13.4 A court of competent jurisdiction, if it determines any
provision of this Agreement to be unreasonable in scope, time
or geography, is hereby authorized by the Employee and
PrimeHoldings to enforce the same in such narrower scope,
shorter time or lesser geography as such court determines to
be reasonable and proper under al the circumstances.
13.5 PrimeHoldings will also have such other legal remedies as may
be appropriate under the circumstance including, inter alia,
recovery of damages occasioned by a breach. PrimeHoldings'
rights and remedies are cumulative and the exercise or
enforcement of any one or more of them will not preclude
PrimeHoldings from exercising or enforcing any other right or
remedy.
14. Severability of Provisions. If any provision of this Agreement or the
application of any such provision to any person or circumstance is held
invalid, the remainder of this Agreement, and the application of such
provision other than to the extent it is held invalid, will not be
invalidated or affected thereby.
15. Waiver. No failure by PrimeHoldings to insist upon the strict
performance of any term or condition of this Agreement or to exercise
any right or remedy available to it will constitute a waiver. No breach
or default of any provision of this Agreement will be waived, altered
or modified, and PrimeHoldings may not waive any of its rights, except
by a written instrument executed by PrimeHoldings. No waiver of any
breach or default will affect or alter any term or condition of this
Agreement, and such term or condition will continue in full force and
effect with respect to any other then exiting or subsequent breach or
default thereof.
16. Miscellaneous.
16.1 This Agreement may be amended only by an instrument in writing
signed by PrimeHoldings and the Employee.
16.2 This Agreement shall be binding upon the parties and their
respective successors and assigns. PrimeHoldings may, without
the Employee's consent, transfer or assign any of its rights
and obligations under this Agreement to any corporation which,
directly or indirectly, controls or is controlled by
PrimeHoldings or is under common control with PrimeHoldings or
to any corporation succeeding to all or a substantial portion
of PrimeHoldings' business and assets, provided that
PrimeHoldings shall not be released from any of its
obligations under this Agreement, and provided further that
any such transferee or assignee agrees in writing to assume
all the obligations of PrimeHoldings hereunder. Control means
the power to elect a majority of the directors of a
corporation or in any other manner to control or determine the
management of a corporation. Except as provided above, neither
PrimeHoldings nor the Employee may, without the other's prior
written consent, transfer or assign any of its or his rights
or obligations under this
<PAGE>
Agreement, and any such transfer or assignment or attempt
thereat without such consent shall be null and void.
16.3 All notices under or in connection with this Agreement shall
be in writing and may be delivered personally or sent by mail,
courier, fax, or other written means of communication to the
parties at their addresses and fax numbers set forth below or
to such other addresses and fax numbers as to which notice is
given:
if to PrimeHoldings: PrimeHoldings.com, Inc.
6955 Union Park Center, Ste. 390
Midvale, UT 84047
Fax: 801-562-1441
if to the Employee: Thomas E. Aliprandi
1979 E. Westminster Ave.
Salt Lake City, UT 84108
Notice will be deemed given on receipt.
16.4 Section headings are for purposes of convenient reference only
and will not affect the meaning or interpretation of any
provision of this Agreement.
16.5 This Agreement constitutes the entire agreement of the parties
and supersedes any and all prior agreements or understandings
between them.
16.6 The provisions of Sections 8, 9, 11, 12 and 13 will survive
termination of the Employee's employment with PrimeHoldings
for any reason whatsoever and regardless of fault.
IT WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
PRIMEHOLDINGS.COM, INC., by: EMPLOYEE:
- - ------------------------------------- ---------------------------
David E. Shepardson III Thomas E. Aliprandi
Vice President & Corporate Secretary
By order of the Board of Directors
Employment Agreement - Pickard
1. Date: January 21, 1999
2. Parties:
2.1. bCard, Inc., a Utah Corporation, having a mailing address of
c/o Neil Pickard, Vice President and Secretary, 8658 South
Tracy Drive, Sandy, Utah 84093, and a facsimile (fax) number
of 801 272 0460 (herein referred to as "bCard").
2.2 Neil Pickard, an individual having a principal residence and
mailing address of 8658 South Tracy Drive, Sandy, Utah 84093,
and a facsimile (fax) number of 801 272 0460 (herein referred
to as "Pickard").
3. Defined Terms: The terms defined in this Part 3 shall have the meanings
herein specified for all purposes of this Agreement, unless the context
clearly otherwise requires:
3.1 "Agreement" means this employment agreement together with and
including any and all attachments, appendices, or exhibits
referred to herein and any and all modifications, alterations,
amendments, and supplements hereto--all of which shall be
deemed for all purposes of this Agreement to have been
incorporated in this Agreement by this reference as if
separately spelled out and included in this Agreement. The
words "hereby," "herein," "hereof," "hereto," "hereunder," and
"herewith" when used in this Agreement shall refer to and mean
a reference to this entire Agreement unless restricted to a
reference in context to a particular portion of this
Agreement.
3.2 "bCard Holders" means those professionals and others that are
issued chip cards as described in the Operational Marketing
Concept description included in attached Exhibit A.
3.3 "Board of Directors" means the duly elected and serving Board
of Directors of bCard from time to time.
3.4 "Cash Flow and Sales Projections" means those certain sheets
attached hereto as Exhibit B that set forth certain proforma
cash flow and sales projections concerning the operation of
bCard.
3.5 "Code" means the Internal Revenue Code of 1986, as amended.
3.6 "Competing Entity" means any individual, proprietorship,
corporation, partnership (whether general or limited), limited
liability company, association, business trust, and any other
enterprise (for profit, nonprofit, or not for profit),
including any subsidiary or affiliate of any of the foregoing,
that is engaged or intends to engage, directly or indirectly,
in the business of bCard (including without limitation the
business of identifying and tracking business professionals
attending trade shows, conventions, and events in the
exposition and event marketing industry which utilizes a
permanent identification card) in competition with bCard
within the territory in which bCard conducts or intends to
conduct its business.
3.7 "Confidential Information" means all relevant information
concerning, in use, or under consideration, whether or not
reduced to writing and in any and all stages of development,
with respect to areas of interest of bCard, including without
limitation designs, procedures, experiments protocols, test
results, specifications, documentation, computer programs,
identity of and class of agreements with third parties, costs,
profits, revenues, financial statements, unpublished
copyrights, unpatentable inventions, patentable inventions,
and any and all other information, data, financial
information, names or list of names of suppliers and
customers, interpretations, analyses, surveys, ideas,
strategies, forecasts, discoveries, marketing plans,
development plans, techniques, processes, inventions,
know-how, intellectual property, and trade secrets which are
(i) directly or indirectly disclosed or revealed to Pickard by
bCard or any of its directors, officers, employees, agents,
attorneys, or representatives or (ii) created, developed,
conceived, or originated by Pickard in the course of
performing his duties and services hereunder.
<PAGE>
For the purposes of this Agreement, Confidential Information
shall not include (i) anything in the public domain (through
no fault of Pickard) on or after the date hereof, or (ii)
anything known to Pickard prior to the date hereof--but only
to the extent that (i) or (ii) can be demonstrated by Pickard
to bCard's reasonable satisfaction.
3.8 "Confidential Material" means any and all tangible materials
and objects which embody Confidential Information or from
which Confidential Information can be read, reproduced,
developed, or utilized.
For the purposes of this Agreement, Confidential Information
shall not include (i) anything in the public domain (through
no fault of Pickard) on or after the date hereof, or (ii)
anything known to Pickard prior to the date hereof--but only
to the extent that (i) or (ii) can be demonstrated by Pickard
to bCard's reasonable satisfaction.
3.9 "Covenant Period" means the period beginning on the effective
date of this Agreement and continuing for one (1) year after
the term of this Agreement.
3.10 "GAAP" means generally accepted accounting principles as
defined and determined from time to time by the American
Institute of Certified Public Accountants and the U.S.
Securities and Exchange Commission.
3.11 "Lazarev" means Ivan Lazarev, an individual residing in
Potomac, Maryland.
3.12 "Minimum Performance Requirements" shall have the meaning
defined in section 5.6 hereof.
3.13 "Operational Marketing Concept" means the concept owned by
bCard that was developed by Lazarev and Pickard for utilizing
a "smart card" for long term identification of business
professionals attending trade shows, conventions, and events
in the event and exposition marketing industry, together with
other commercial prospects which can result therefrom--as more
particularly described in attached Exhibit A.
4 Recitals:
4.1 Lazarev and Pickard have developed the Operational Marketing
Concept and have organized bCard for the purpose of further
development thereof and to provide services to the public in
connection therewith.
4.2 bCard and Pickard desire to have an appropriate full-time
employment understanding that will set forth the basic terms
and provisions of their employer-employee relationship, as
well as give certain incentives to Pickard.
5 Agreements: NOW, THEREFORE, in consideration of the mutual agreements,
representations, warranties, covenants, and provisions contained in this
Agreement, the parties hereby adopt the definitions set forth in Parts 2
and 3 hereof, acknowledge that the recitals in Part 3 are substantially
correct, and further agree as follows:
5.1 Full-time Employment of Pickard by bCard; Duties;
Restrictions. Pickard is hereby employed as a full-time
employee of bCard. Pickard shall initially be the Vice
President and Secretary of bCard, but shall serve in such
capacities from time to time at the pleasure of the Board of
Directors. Pickard shall perform such services and duties as
may be determined and assigned to him from time to time by the
Board of Directors or as otherwise provided from time to time
in the Bylaws of bCard.
During the term of this Agreement, Pickard agrees to devote
his best efforts and his entire time to further the interests
of bCard, and he shall not, directly or indirectly, alone or
as a partner, officer, director, or a shareholder of any other
entity, be engage in any other commercial activity whatsoever
or continue or assume any other corporate or business
affiliations without the full knowledge and consent of the
Board of Directors; provided, however, and anything herein to
the contrary notwithstanding, Pickard shall be permitted to
invest in other ventures as long as they do not relate
directly to or compete with the business of bCard.
<PAGE>
5.2 Term Until December 31, 2003. Except in the case of earlier
termination, as herein specifically provided, the term of this
Agreement shall commence on the date hereof and continue
thereafter until the close of business on December 31, 2003;
provided, however, that compensation and benefits hereunder
shall commence as of February 8, 1999.
5.3 Compensation--Annual Salary. For services to be rendered as an
officer, director, member of any committee, or any other
duties assigned Pickard by the Board of Directors or as
otherwise provided in the Bylaws of bCard, bCard agrees to pay
Pickard a salary at the rate of one hundred twenty thousand
dollars ($120,000) per annum for the fiscal year ending
December 31, 1999, and a salary at the rate of one hundred
eighty thousand dollars ($180,000) per annum for the fiscal
year ending December 31, 2000. Thereafter, based upon bCard's
performance, the Board of Directors will review, on a periodic
basis, Pickard's duties and bCard's success with respect to
possible salary adjustments (either increases or decreases).
If mutually agreed to by bCard and Pickard, bCard may adopt a
deferred compensation plan for Pickard.
5.4 Insurance and Other Benefits. bCard shall provide Pickard and
his immediate family with reasonable health, accident, and
dental insurance. Pickard agrees that bCard, in the discretion
of the Board of Directors, may apply for and procure, in
bCard's own name and for its own benefit or Pickard's benefit,
life insurance (split-dollar or any other form) in any amount
or amounts considered advisable; and Pickard agrees to submit
to any medical or other examination and to execute and deliver
any application or other instrument in writing, reasonably
necessary to effectuate such insurance.
In addition to the insurance benefits described hereinabove,
and in the sole and absolute discretion of bCard, bCard may
provide Pickard with additional fringe benefits. Nothing
herein shall require bCard to adopt, maintain, or continue any
such fringe benefits.
5.5 Expenses. In addition to the compensation provided in section
5.3 hereof, bCard shall reimburse Pickard for business
expenses that are determined by bCard to be reasonable.
5.6 Minimum Performance Requirements. It is understood and agreed
by the parties that the following shall be defined as the
"Minimum Performance Requirements":
(a) At Least 750,000 bCard Holders by December 31, 2000. bCard
shall have at least seven hundred and fifty thousand (750,000)
bCard Holders on or before December 31, 2000, or
(b) At least $250,000 in Cumulative Income Before Taxes and
Depreciation by December 31, 2000. There shall be at least two
hundred fifty thousand dollars ($250,000) in cumulative income
before taxes and depreciation (determined in accordance with
GAAP) by December 31, 2000. Reference is made to the Cash Flow
and Sales Projections wherein proforma (income before taxes
and depreciation" is set forth as "Gross Profit Before Tax and
Dep."
5.7 Non-compete Provisions. Pickard and bCard agree that bCard's actual and
potential activities (as described in the Operational Marketing Concept
attached hereto as Exhibit A) are of a unique and special nature and
that if Pickard's services were used in competition with bCard, such
use could cause serious and possibly irreparable harm to bCard.
Accordingly, Pickard agrees that during the Covenant Period he will not
directly or indirectly, within the fifty (50) United States of America
or with any person or entity within the fifty (50) United States of
America:
(a) engage in, undertake to plan or organize, or become
associated or connected in any way with, participate in, be
employed by, render services to, or consult with any Competing
Entity in--as a consultant, independent contractor,
proprietor, shareholder, partner, officer, director, employee,
or otherwise--any business or activity that is substantially
similar to or in competition with the business or activities
of bCard, either for his own benefit or for the benefit of any
other person, firm, corporation, or entity whatsoever other
than bCard, or
<PAGE>
(b) call on, solicit, take away, or attempt to take away for
the benefit of Pickard or of any other person or entity, any
customer, supplier, or client of bCard, or
(c) solicit, take away, or attempt to take away, for the
benefit of Pickard or of any other person or entity, any
employee or officer of bCard.
bCard intends to restrict the activities of Pickard under this
section 5.7 only to the extent necessary for the protection of
the legitimate business interests of bCard. It is the
intention and agreement of the parties that all the terms and
conditions hereof be enforced to the fullest extent permitted
by law. In the event the provisions of this section 5.7 should
ever be deemed or adjudged by a court or arbitration tribunal
of competent jurisdiction to exceed the time or geographical
limitation permitted by applicable law, then the parties
intend such provisions shall nevertheless be valid and
enforceable to the extent necessary for such protection ad
determined by such court or arbitration tribunal, and such
provisions shall be reformed to the maximum time or geographic
limitations as permitted by applicable law and determined by
such court or arbitration tribunal.
5.8 Cooperation. During the Covenant Period, Pickard agrees that,
upon bCard's reasonable request, Pickard in good faith and
using diligent efforts shall cooperate and assist bCard in any
dispute, controversy, or litigation in which bCard may be
involved including without limitation Pickard's participation
in any court or arbitration proceedings, the giving of
testimony, the signing of affidavits, or such other personal
cooperation as legal counsel for bCard may reasonably request.
Such cooperation shall not be unreasonably burdensome or
without reasonable compensation.
5.9 Work Product is Property of bCard. Pickard understands and
agrees that the work product (whether tangible or intangible)
created, developed, conceived, or originated (alone or in
combination with others) by Pickard in the course of
performing his duties and services hereunder or with the aid
of Confidential Information, Confidential Material, or the
resources or property of bCard, is the exclusive property of
bCard, and Pickard hereby assigns to bCard and bCard accepts
all of Pickard's rights, interest, and title in and to said
work product. Pickard further agrees and understands that said
work product may be Confidential Information or Confidential
Material and is subject to the provisions and restrictions of
this Agreement. Pickard understands and agrees that from time
to time, upon bCard's reasonable request, he shall execute all
documents and take such other action as may be necessary or
desirable, to protect, enhance, exploit, or vest in bCard any
work product (or any part thereof). Pickard understands and
agrees that Pickard is engaged and compensated by bCard for
the purpose of creating, developing, conceiving, and
originating Confidential Information, Confidential Material,
or work product for the benefit of bCard and that the
assignment thereof as set forth herein is reasonable.
5.10 Confidentiality and Non-disclosure Provisions--Intellectual
Property and Trade Secrets. Pickard understands and agrees
that Confidential Information and Confidential Material is
secret and proprietary and of great value to bCard. Pickard
further understands and agrees that the relationship between
Pickard and bCard is of a confidential nature and imposes an
affirmative obligation upon Pickard to protect, foster, and
respect the confidentiality of Confidential Information.
Confidential Information and Confidential Material are
created, possessed, or used by Pickard or are given to Pickard
only for the purpose of assisting Pickard in performing his
duties and services hereunder. Confidential Information and
Confidential Material may be used, studied, and evaluated by
Pickard only for this purpose.
Except as first authorized by bCard, Pickard shall not
directly or indirectly:
(a) disclose, reveal, report, duplicate, or transfer any
Confidential Information or Confidential Material to any other
person or entity; or
(b) aid, encourage, direct, or allow any other person entity
to gain possession of or access to Confidential Information or
Confidential Material; or
<PAGE>
(c) copy or reproduce Confidential Material or create
Confidential Material from Confidential Information; or
(d) use, sell, or exploit any Confidential Information or any
Confidential Material or aid, encourage, direct, or allow any
other person or entity to use, sell, or exploit any
Confidential Information or Confidential Material.
Upon and in accordance with bCard's instructions, Pickard
shall return or dispose of all Confidential Material. Pickard
shall, whenever requested by bCard, give a prompt and full
accounting of all Confidential Material given to Pickard and
all copies or reproductions thereof. Confidential Material
shall remain the property of bCard even if Pickard is in
possession thereof.
In performing his duties and services hereunder, Pickard
agrees to disclose or give Confidential Information or
Confidential Material to only such other persons as necessary
for the performance of his duties and services hereunder or
for the benefit of bCard. Any such disclosure shall be to such
persons and on such terms as are consistent with bCard company
policy.
5.11 Termination Caused by Death of Pickard During Term. In the
event of Pickard's death during the term of this Agreement,
this Agreement shall immediately terminate and Pickard's
personal representative shall be entitled to receive
immediately (i.e., within ten (10) business days of his death
or as soon as reasonably possible):
(a) the compensation due Pickard through the last day of the
calendar month in which his death shall have occurred plus two
(2) additional months compensation, and
(b) any other benefits to which Pickard's estate would then be
entitled pursuant to any other insurance, program,
understanding, or agreement.
5.12 Other Termination(s).
(a) Failure to Achieve Minimum Performance Requirements. With
at least thirty (30) days prior notice, bCard may terminate
this Agreement effective the close of business on May 31,
2001, if at least one of the Minimum Performance Requirements
is not achieved--and in such event bCard shall only be
obligated to pay to Pickard the compensation due him through
the effective date of such termination.
(b) For Cause. bCard may terminate this Agreement at any time
for cause. The term "cause" as used in this subsection 5.12(b)
shall mean and include:
(1) a material breach by Pickard of the terms of this
Agreement;
(2) incompetence in Pickard's performance;
(3) misappropriation of any money or assets or properties
of bCard;
(4) conviction of Pickard for any felony or serious
crime;
(5) chronic alcoholism or drug addiction;
(6) gross moral turpitude relevant to Pickard's duties or
employment with bCard; or
(7) inability to perform his duties to bCard for a period
of thirty (30) consecutive days, or inability to
perform his employment duties for forty-five (45)
days cumulatively in any one year period of this
Agreement.
<PAGE>
For termination based on subsection 5.12(b)(1) or 5.12(b)(2)
above, bCard shall give Pickard at least thirty (30) days
prior notice of such cause and the effective date of such
termination; provided, however, that Pickard shall have thirty
(30) days from such notice date to cure such cause to the
reasonable satisfaction of bCard, and if so cured there shall
be no termination at that time for such cause; provided
otherwise, however, that if Pickard shall fail to cure such
cause within the thirty (30) days period, this Agreement shall
be terminated.
(c) Voluntary Termination by Pickard. Pickard may terminate
this Agreement at any time upon at least sixty (60) days prior
notice to bCard, and in such even bCard shall only be
obligated to pay Pickard his compensation through the
effective date of such termination.
5.13 Indemnification. Pickard agrees to indemnify, hold harmless,
and defend bCard from any and all past, present, and future
liabilities, claims, damages, costs, expenses, and attorney's
fees incurred by, or threatened by an entity against, bCard
which arise out of or relate to any breach of this Agreement
by Pickard or any claims, demands, or causes of action
connected with, related to, or arising out of Pickard's gross
negligence, willful misconduct, or breach of fiduciary duties
to bCard. It is the intention of the parties that his
indemnity does not require payment as a condition precedent to
recovery by bCard against Pickard under this indemnity.
5.14 Miscellaneous:
(a)Entire Agreement; Integration; This Agreement constitutes
the entire agreement between the parties pertaining to the
subject matter hereof, and supersedes all written or oral,
prior, or contemporaneous agreements, representations,
warranties, or understandings of the parties pertaining or
with respect thereto. No covenant, representation, or
condition not expressed herein shall affect or be deemed to
interpret, change, or restrict the express provisions
hereof.
(b)Survival of Representations and Warranties. All
representations, warranties, covenants, and agreements of
the parties contained in this Agreement shall survive the
term of this Agreement.
(c)Binding Nature; No Assignments. The covenants and
agreements contained herein shall bind and inure to the
benefit of the parties hereto, their respective heirs,
executors, administrators, personal or legal
representatives, successors, or permitted assigns;
provided, however, that noting in this subsection 5.14(c)
shall be deemed to permit the conveyance, transfer,
assignment, or delegation, expressly, by operation of law,
or otherwise, by any party of any right or interest herein
without the prior written consent of the other parties.
Anything herein to the contrary notwithstanding, however,
no permitted assignment or other disposition of all or any
part of a party's interests herein shall relieve such party
of its obligations hereunder.
(d)Further Action. The parties each agree to execute and
deliver all documents, provide all information, and take or
forebear form all such action as may be necessary and
appropriate to achieve the purposes hereof.
(e)Time is of the Essence. Time is of the essence in this
Agreement.
(f)Amendments, Modifications, Approvals, and Consents. Any
amendment, modification, alteration, or supplement hereto,
or any approval or consent requested of any party, shall be
ineffective unless it is in writing and signed by the party
against whom enforcement is sought.
(g)Parties in Interest. Nothing in this Agreement, whether
express or implied, is intended to confer any right or
remedy under or by reason of this Agreement on any person
other than the parties to this Agreement and their
respective heirs, executors, administrators, personal or
legal representatives, successors, or permitted assigns,
nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third person
to any party to this Agreement, nor shall any provision
hereof give any third person any right of subrogation or
action over or against any party to this Agreement.
<PAGE>
(h)Notices. Any notice, consent, request, directive, demand,
or other communication made hereunder, pursuant hereto, or
in accordance herewith by any party intended for any other
party shall be in writing and shall be physically
delivered, sent by facsimile (fax), or sent by registered
or certified mail, properly addressed and return receipt
requested with postage prepaid, to such other party at the
address of fax number set forth in Part 2 hereof, unless
such other party shall have previously designated a
different address of fax number by due notice hereunder.
Notices hereunder that are physically delivered shall be
deemed effective and complete at the time of the delivery
thereof with written evidence of such delivery. Notices
hereunder that are given by facsimile (fax) shall be deemed
effective and complete at the time such facsimile (fax) is
successfully sent with printed or written evidence of such
successful sending. Notices hereunder that are given by
mail shall be deemed effective and complete as of the
applicable delivery date set forth on return receipt
requested.
(i)Costs and Expenses. Except as may be otherwise
specifically set forth herein or as otherwise agreed to by
the parties, each party shall bear its own costs and
expenses (including among other things attorneys and
accountants fees and costs) in connection herewith and in
connection with all things required to be done by such
party hereunder.
(j)Attorneys' Fees. If any action is commenced to enforce any
of the terms hereof, the successful party in such action
shall be entitled to receive as additional compensation
hereunder or as additional damages under such action all
necessary and reasonable attorneys' fees, expenses, and
costs in connection with such action.
(k)Governing Law. This Agreement shall be governed in all
respects and construed according to the laws of the State
of Utah applied to contracts made and to be fully performed
entirely within the State of Utah between residents of the
State of Utah, unless any obligations hereunder shall be
invalid or unenforceable under such laws, in which event
the laws of the state whose laws can apply to and validate
the obligations hereunder shall apply. This Agreement shall
be deemed executed in Salt Lake County, Utah. The parties
acknowledge that bCard is headquartered within Salt Lake
County, Utah, that the majority of bCard's records and
employees are or will be within Salt Lake County, Utah, and
that Salt Lake County, Utah, is the most convenient locale
for actions between the parties.
(l)Rights and Remedies. The rights and remedies of the
parties hereunder shall not be mutually exclusive, and the
exercise of one or more of the provisions hereof shall not
preclude the exercise of any other provisions. Each of the
parties confirms that damages may be an inadequate remedy
for a breach or threatened breach of any provision hereof.
The respective rights and obligations hereunder shall be
enforceable by specific performance, injunction, or other
equitable remedy, but nothing herein contained is intended
to or shall limit or affect any rights at law or by statute
or otherwise of any party aggrieved as against any other
party for a breach or threatened breach of any provision
hereof, it being the intention of this subsection 5.14(l)
to make clear the agreement of the parties that the
respective rights and obligations of the parties hereunder
shall be enforceable in equity as well as at law or
otherwise.
(m)Arbitration. Anything herein to the contrary
notwithstanding, any controversy or dispute arising out of
or relating to this Agreement or its subject matter which
the parties are unable to resolve within thirty (30) days
after written notice by one party to each other party of
the existence of such controversy or dispute, may be
submitted to binding arbitration by any party. If so
submitted to arbitration, the matter shall be finally
settled by binding arbitration conducted in accordance with
the then current rules and procedures of the American
Arbitration Association. Such arbitration shall take place
in Salt Lake City, Utah. The decision by the arbitrator on
any matter submitted to arbitration shall be binding and
conclusive upon the parties, their respective heirs,
executors, administrators, personal or legal
representatives, successors, or permitted assigns, as the
case may be, and they shall comply with such decision in
good faith. Each party hereby submits itself to the
jurisdiction of the state and federal
<PAGE>
courts within the State of Utah for the entry of judgment
with respect to the decision of the arbitrator hereunder.
Judgment upon the award may be entered in any state or
federal court within the State of Utah or any other court
having jurisdiction.
(n)No Waiver. No failure by any party to insist upon the
strict performance of any covenant, duty, agreement, term,
or condition hereof or to exercise any right or remedy upon
a breach thereof shall constitute a waiver of any such
breach or of such or any other covenant, duty, agreement,
term, or condition, whether or not similar. Any party by
notice pursuant to the terms hereof may, but shall be under
no obligation, waive any of its rights or any condition or
conditions to its obligations hereunder, or any covenant,
duty, agreement, term, or condition of any other party. No
waiver shall constitute a continuing waiver or affect or
alter the remainder hereof, and each and every other
covenant, duty, agreement, term, and condition hereof shall
continue in full force and effect with respect to any other
then existing or subsequently occurring breach.
(o)Severability. In the event that any condition, covenant,
or other provision contained herein is held to be invalid
or void by any court of competent jurisdiction, the same
shall be deemed severable from the remainder hereof and
shall in no way affect any other covenant or condition
contained herein. If such condition, covenant, or other
provision shall be deemed invalid due to its scope and
breadth, such provision shall be deemed valid to the extent
of the scope or breadth permitted by law.
(p)Covenant of Good Faith. Each party agrees to act
reasonably and in good faith in the performance of any acts
required of such party hereunder.
(q)Force Majeure. No party shall be responsible for delays or
failure in performance resulting from acts beyond the
reasonable control of such party. Such acts shall include
but not be limited to acts of God, strikes, lock-outs,
riots, acts of war, epidemics, governmental regulation
imposed after the fact, fires, communication line failures,
power failures, earthquakes, or other disasters.
(r)Titles and Captions. All part, section, subsection, and
other titles, headings, and captions herein are included
for purposes of convenience only, and shall not be deemed a
part hereof and shall in now way define, limit, extend, or
describe the scope or intent of any of the provisions
hereof.
(s)Pronouns and Plurals. Whenever the context may require,
any pronoun used herein shall include the corresponding
masculine, feminine, or neuter forms, and the singular form
of nouns, pronouns, and verbs shall include the plural and
vice versa. Whenever used herein, the word "or" shall mean
"and/or," unless the context clearly otherwise requires.
(t)Counterparts. This Agreement may be executed in
counterparts, all of which taken together shall constitute
one Agreement binding on the executing parties if each
party named in Part 2 hereof shall have executed at least
one counterpart signature page of this Agreement
notwithstanding that all of the parties are not signatories
of the same full copy of this Agreement of the same
counterpart signature page of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement on or
as of the date first set forth above.
"bCard" bCard, Inc.
A Utah Corporation
By: /s/ Ivan Lazarev
-------------------------
Ivan Lazarev, President
"Pickard" /s/ Neil Pickard
-------------------
Neil Pickard
Employment Agreement - Lazarev
1. Date: January 21, 1999
2. Parties:
2.1. bCard, Inc., a Utah Corporation, having a mailing address of
c/o Neil Pickard, Vice President and Secretary, 8658 South
Tracy Drive, Sandy, Utah 84093, and a facsimile (fax) number
of 801 272 0460 (herein referred to as "bCard").
2.3 Ivan Lazarev, an individual having a principal residence and
mailing address of 11301 Bedfordshire Avenue, Potomac,
Maryland 20854, and a facsimile (fax) number of 301 983 5264
(herein referred to as "Lazarev").
3. Defined Terms: The terms defined in this Part 3 shall have the meanings
herein specified for all purposes of this Agreement, unless the context
clearly otherwise requires:
3.3 "Agreement" means this employment agreement together with and
including any and all attachments, appendices, or exhibits
referred to herein and any and all modifications, alterations,
amendments, and supplements hereto--all of which shall be
deemed for all purposes of this Agreement to have been
incorporated in this Agreement by this reference as if
separately spelled out and included in this Agreement. The
words "hereby," "herein," "hereof," "hereto," "hereunder," and
"herewith" when used in this Agreement shall refer to and mean
a reference to this entire Agreement unless restricted to a
reference in context to a particular portion of this
Agreement.
3.4 "bCard Holders" means those professionals and others that are
issued chip cards as described in the Operational Marketing
Concept description included in attached Exhibit A.
3.5 "Board of Directors" means the duly elected and serving Board
of Directors of bCard from time to time.
3.6 "Cash Flow and Sales Projections" means those certain sheets
attached hereto as Exhibit B that set forth certain proforma
cash flow and sales projections concerning the operation of
bCard.
3.7 "Code" means the Internal Revenue Code of 1986, as amended.
3.8 "Competing Entity" means any individual, proprietorship,
corporation, partnership (whether general or limited), limited
liability company, association, business trust, and any other
enterprise (for profit, nonprofit, or not for profit),
including any subsidiary or affiliate of any of the foregoing,
that is engaged or intends to engage, directly or indirectly,
in the business of bCard (including without limitation the
business of identifying and tracking business professionals
attending trade shows, conventions, and events in the
exposition and event marketing industry which utilizes a
permanent identification card) in competition with bCard
within the territory in which bCard conducts or intends to
conduct its business.
3.9 "Confidential Information" means all relevant information
concerning, in use, or under consideration, whether or not
reduced to writing and in any and all stages of development,
with respect to areas of interest of bCard, including without
limitation designs, procedures, experiments protocols, test
results, specifications, documentation, computer programs,
identity of and class of agreements with third parties, costs,
profits, revenues, financial statements, unpublished
copyrights, unpatentable inventions, patentable inventions,
and any and all other information, data, financial
information, names or list of names of suppliers and
customers, interpretations, analyses, surveys, ideas,
strategies, forecasts, discoveries, marketing plans,
development plans, techniques, processes, inventions,
know-how, intellectual property, and trade secrets which are
(i) directly or indirectly disclosed or revealed to Lazarev by
bCard or any of its directors, officers, employees, agents,
attorneys, or representatives or (ii) created, developed,
conceived, or originated by Lazarev in the course of
performing his duties and services hereunder.
<PAGE>
For the purposes of this Agreement, Confidential Information
shall not include (i) anything in the public domain (through
no fault of Lazarev) on or after the date hereof, or (ii)
anything known to Lazarev prior to the date hereof--but only
to the extent that (i) or (ii) can be demonstrated by Lazarev
to bCard's reasonable satisfaction.
3.10 "Confidential Material" means any and all tangible materials
and objects which embody Confidential Information or from
which Confidential Information can be read, reproduced,
developed, or utilized.
For the purposes of this Agreement, Confidential Information
shall not include (i) anything in the public domain (through
no fault of Lazarev) on or after the date hereof, or (ii)
anything known to Lazarev prior to the date hereof--but only
to the extent that (i) or (ii) can be demonstrated by Lazarev
to bCard's reasonable satisfaction.
3.11 "Covenant Period" means the period beginning on the effective
date of this Agreement and continuing for one (1) year after
the term of this Agreement.
3.12 "GAAP" means generally accepted accounting principles as
defined and determined from time to time by the American
Institute of Certified Public Accountants and the U.S.
Securities and Exchange Commission.
3.13 "Minimum Performance Requirements" shall have the meaning
defined in section 5.6 hereof.
3.14 "Operational Marketing Concept" means the concept owned by
bCard that was developed by Lazarev and Pickard for utilizing
a "smart card" for long term identification of business
professionals attending trade shows, conventions, and events
in the event and exposition marketing industry, together with
other commercial prospects which can result therefrom--as more
particularly described in attached Exhibit A.
3.15 "Pickard" means Neil Pickard, an individual residing in Sandy,
Utah.
4 Recitals:
4.1 Lazarev and Pickard have developed the Operational Marketing
Concept and have organized bCard for the purpose of further
development thereof and to provide services to the public in
connection therewith.
4.2 bCard and Lazarev desire to have an appropriate full-time
employment understanding that will set forth the basic terms
and provisions of their employer-employee relationship, as
well as give certain incentives to Lazarev.
5 Agreements: NOW, THEREFORE, in consideration of the mutual agreements,
representations, warranties, covenants, and provisions contained in this
Agreement, the parties hereby adopt the definitions set forth in Parts 2
and 3 hereof, acknowledge that the recitals in Part 3 are substantially
correct, and further agree as follows:
5.1 Full-time Employment of Lazarev by bCard; Duties;
Restrictions. Lazarev is hereby employed as a full-time
employee of bCard. Lazarev shall initially be the Chairman of
the Board of Directors and President of bCard, but shall serve
in such capacities from time to time at the pleasure of the
Board of Directors. Lazarev shall perform such services and
duties as may be determined and assigned to him from time to
time by the Board of Directors or as otherwise provided from
time to time in the Bylaws of bCard.
During the term of this Agreement, Lazarev agrees to devote
his best efforts and his entire time to further the interests
of bCard, and he shall not, directly or indirectly, alone or
as a partner, officer, director, or a shareholder of any other
entity, be engage in any other commercial activity whatsoever
or continue or assume any other corporate or business
affiliations without the full knowledge and consent of the
Board of Directors; provided, however, and anything herein to
the contrary notwithstanding, Lazarev shall be permitted to
invest in other ventures as long as they do not relate
directly to or compete with the business of bCard.
<PAGE>
5.2 Term Until December 31, 2003. Except in the case of earlier
termination, as herein specifically provided, the term of this
Agreement shall commence on the date hereof and continue
thereafter until the close of business on December 31, 2003;
provided, however, that compensation and benefits hereunder
shall commence as of February 8, 1999.
5.3 Compensation--Annual Salary. For services to be rendered as an
officer, director, member of any committee, or any other
duties assigned Lazarev by the Board of Directors or as
otherwise provided in the Bylaws of bCard, bCard agrees to pay
Lazarev a salary at the rate of one hundred sixty-five
thousand dollars ($165,000) per annum for the fiscal year
ending December 31, 1999, and a salary at the rate of one
hundred eighty thousand dollars ($180,000) per annum for the
fiscal year ending December 31, 2000. Thereafter, based upon
bCard's performance, the Board of Directors will review, on a
periodic basis, Lazarev's duties and bCard's success with
respect to possible salary adjustments (either increases or
decreases). If mutually agreed to by bCard and Lazarev, bCard
may adopt a deferred compensation plan for Lazarev.
5.4 Insurance and Other Benefits. bCard shall provide Lazarev and
his immediate family with reasonable health, accident, and
dental insurance. Lazarev agrees that bCard, in the discretion
of the Board of Directors, may apply for and procure, in
bCard's own name and for its own benefit or Lazarev's benefit,
life insurance (split-dollar or any other form) in any amount
or amounts considered advisable; and Lazarev agrees to submit
to any medical or other examination and to execute and deliver
any application or other instrument in writing, reasonably
necessary to effectuate such insurance.
In addition to the insurance benefits described hereinabove,
and in the sole and absolute discretion of bCard, bCard may
provide Lazarev with additional fringe benefits. Nothing
herein shall require bCard to adopt, maintain, or continue any
such fringe benefits.
5.5 Expenses. In addition to the compensation provided in section
5.3 hereof, bCard shall reimburse Lazarev for business
expenses that are determined by bCard to be reasonable.
5.6 Minimum Performance Requirements. It is understood and agreed
by the parties that the following shall be defined as the
"Minimum Performance Requirements":
(c) At Least 750,000 bCard Holders by December 31, 2000. bCard
shall have at least seven hundred and fifty thousand
(750,000) bCard Holders on or before December 31, 2000, or
(d) At least $250,000 in Cumulative Income Before Taxes and
Depreciation by December 31, 2000. There shall be at least
two hundred fifty thousand dollars ($250,000) in
cumulative income before taxes and depreciation
(determined in accordance with GAAP) by December 31, 2000.
Reference is made to the Cash Flow and Sales Projections
wherein proforma (income before taxes and depreciation" is
set forth as "Gross Profit Before Tax and Dep."
5.7 Non-compete Provisions. Lazarev and bCard agree that bCard's
actual and potential activities (as described in the
Operational Marketing Concept attached hereto as Exhibit A)
are of a unique and special nature and that if Lazarev's
services were used in competition with bCard, such use could
cause serious and possibly irreparable harm to bCard.
Accordingly, Lazarev agrees that during the Covenant Period he
will not directly or indirectly, within the fifty (50) United
States of America or with any person or entity within the
fifty (50) United States of America:
(a) engage in, undertake to plan or organize, or become
associated or connected in any way with, participate in,
be employed by, render services to, or consult with any
Competing Entity in--as a consultant, independent
contractor, proprietor, shareholder, partner, officer,
director, employee, or otherwise--any business or activity
that is substantially similar to or in competition with
the business or activities of bCard, either for his own
benefit or for the benefit of any other person, firm,
corporation, or entity whatsoever other than bCard, or
<PAGE>
(b) call on, solicit, take away, or attempt to take away for
the benefit of Lazarev or of any other person or entity,
any customer, supplier, or client of bCard, or
(c) solicit, take away, or attempt to take away, for the
benefit of Lazarev or of any other person or entity, any
employee or officer of bCard.
bCard intends to restrict the activities of Lazarev under this
section 5.7 only to the extent necessary for the protection of
the legitimate business interests of bCard. It is the
intention and agreement of the parties that all the terms and
conditions hereof be enforced to the fullest extent permitted
by law. In the event the provisions of this section 5.7 should
ever be deemed or adjudged by a court or arbitration tribunal
of competent jurisdiction to exceed the time or geographical
limitation permitted by applicable law, then the parties
intend such provisions shall nevertheless be valid and
enforceable to the extent necessary for such protection ad
determined by such court or arbitration tribunal, and such
provisions shall be reformed to the maximum time or geographic
limitations as permitted by applicable law and determined by
such court or arbitration tribunal.
5.8 Cooperation. During the Covenant Period, Lazarev agrees that,
upon bCard's reasonable request, Lazarev in good faith and
using diligent efforts shall cooperate and assist bCard in any
dispute, controversy, or litigation in which bCard may be
involved including without limitation Lazarev's participation
in any court or arbitration proceedings, the giving of
testimony, the signing of affidavits, or such other personal
cooperation as legal counsel for bCard may reasonably request.
Such cooperation shall not be unreasonably burdensome or
without reasonable compensation.
5.9 Work Product is Property of bCard. Lazarev understands and
agrees that the work product (whether tangible or intangible)
created, developed, conceived, or originated (alone or in
combination with others) by Lazarev in the course of
performing his duties and services hereunder or with the aid
of Confidential Information, Confidential Material, or the
resources or property of bCard, is the exclusive property of
bCard, and Lazarev hereby assigns to bCard and bCard accepts
all of Lazarev's rights, interest, and title in and to said
work product. Lazarev further agrees and understands that said
work product may be Confidential Information or Confidential
Material and is subject to the provisions and restrictions of
this Agreement. Lazarev understands and agrees that from time
to time, upon bCard's reasonable request, he shall execute all
documents and take such other action as may be necessary or
desirable, to protect, enhance, exploit, or vest in bCard any
work product (or any part thereof). Lazarev understands and
agrees that Lazarev is engaged and compensated by bCard for
the purpose of creating, developing, conceiving, and
originating Confidential Information, Confidential Material,
or work product for the benefit of bCard and that the
assignment thereof as set forth herein is reasonable.
5.10 Confidentiality and Non-disclosure Provisions--Intellectual
Property and Trade Secrets. Lazarev understands and agrees
that Confidential Information and Confidential Material is
secret and proprietary and of great value to bCard. Lazarev
further understands and agrees that the relationship between
Lazarev and bCard is of a confidential nature and imposes an
affirmative obligation upon Lazarev to protect, foster, and
respect the confidentiality of Confidential Information.
Confidential Information and Confidential Material are
created, possessed, or used by Lazarev or are given to Lazarev
only for the purpose of assisting Lazarev in performing his
duties and services hereunder. Confidential Information and
Confidential Material may be used, studied, and evaluated by
Lazarev only for this purpose.
Except as first authorized by bCard, Lazarev shall not
directly or indirectly:
(a) disclose, reveal, report, duplicate, or transfer any
Confidential Information or Confidential Material to any
other person or entity; or
(b) aid, encourage, direct, or allow any other person entity
to gain possession of or access to Confidential
Information or Confidential Material; or
<PAGE>
(c) copy or reproduce Confidential Material or create
Confidential Material from Confidential Information; or
(d) use, sell, or exploit any Confidential Information or any
Confidential Material or aid, encourage, direct, or allow
any other person or entity to use, sell, or exploit any
Confidential Information or Confidential Material.
Upon and in accordance with bCard's instructions, Lazarev
shall return or dispose of all Confidential Material. Lazarev
shall, whenever requested by bCard, give a prompt and full
accounting of all Confidential Material given to Lazarev and
all copies or reproductions thereof. Confidential Material
shall remain the property of bCard even if Lazarev is in
possession thereof.
In performing his duties and services hereunder, Lazarev
agrees to disclose or give Confidential Information or
Confidential Material to only such other persons as necessary
for the performance of his duties and services hereunder or
for the benefit of bCard. Any such disclosure shall be to such
persons and on such terms as are consistent with bCard company
policy.
5.11 Termination Caused by Death of Lazarev During Term. In the
event of Lazarev's death during the term of this Agreement,
this Agreement shall immediately terminate and Lazarev's
personal representative shall be entitled to receive
immediately (i.e., within ten (10) business days of his death
or as soon as reasonably possible):
(c) the compensation due Lazarev through the last day of the
calendar month in which his death shall have occurred plus
two (2) additional months compensation, and
(d) any other benefits to which Lazarev's estate would then be
entitled pursuant to any other insurance, program,
understanding, or agreement.
5.12 Other Termination(s).
(a) Failure to Achieve Minimum Performance Requirements. With
at least thirty (30) days prior notice, bCard may
terminate this Agreement effective the close of business
on May 31, 2001, if at least one of the Minimum
Performance Requirements is not achieved--and in such
event bCard shall only be obligated to pay to Lazarev the
compensation due him through the effective date of such
termination.
(b) For Cause. bCard may terminate this Agreement at any time
for cause. The term "cause" as used in this subsection
5.12(b) shall mean and include:
(1) a material breach by Lazarev of the terms of this
Agreement;
(2) incompetence in Lazarev's performance;
(3) misappropriation of any money or assets or properties
of bCard;
(4) conviction of Lazarev for any felony or serious
crime;
(5) chronic alcoholism or drug addiction;
(6) gross moral turpitude relevant to Lazarev's duties or
employment with bCard; or
(7) inability to perform his duties to bCard for a period
of thirty (30) consecutive days, or inability to
perform his employment duties for forty-five (45)
days cumulatively in any one year period of this
Agreement.
<PAGE>
For termination based on subsection 5.12(b)(1) or
5.12(b)(2) above, bCard shall give Lazarev at least thirty
(30) days prior notice of such cause and the effective
date of such termination; provided, however, that Lazarev
shall have thirty (30) days from such notice date to cure
such cause to the reasonable satisfaction of bCard, and if
so cured there shall be no termination at that time for
such cause; provided otherwise, however, that if Lazarev
shall fail to cure such cause within the thirty (30) days
period, this Agreement shall be terminated.
(c) Voluntary Termination by Lazarev. Lazarev may
terminate this Agreement at any time upon at least sixty
(60) days prior notice to bCard, and in such even bCard
shall only be obligated to pay Lazarev his compensation
through the effective date of such termination.
5.13 Indemnification. Lazarev agrees to indemnify, hold harmless,
and defend bCard from any and all past, present, and future
liabilities, claims, damages, costs, expenses, and attorney's
fees incurred by, or threatened by an entity against, bCard
which arise out of or relate to any breach of this Agreement
by Lazarev or any claims, demands, or causes of action
connected with, related to, or arising out of Lazarev's gross
negligence, willful misconduct, or breach of fiduciary duties
to bCard. It is the intention of the parties that his
indemnity does not require payment as a condition precedent to
recovery by bCard against Lazarev under this indemnity.
5.14 Miscellaneous:
(a) Entire Agreement; Integration; This Agreement constitutes
the entire agreement between the parties pertaining to the
subject matter hereof, and supersedes all written or oral,
prior, or contemporaneous agreements, representations,
warranties, or understandings of the parties pertaining or
with respect thereto. No covenant, representation, or
condition not expressed herein shall affect or be deemed
to interpret, change, or restrict the express provisions
hereof.
(b) Survival of Representations and Warranties. All
representations, warranties, covenants, and agreements of
the parties contained in this Agreement shall survive the
term of this Agreement.
(c) Binding Nature; No Assignments. The covenants and
agreements contained herein shall bind and inure to the
benefit of the parties hereto, their respective heirs,
executors, administrators, personal or legal
representatives, successors, or permitted assigns;
provided, however, that noting in this subsection 5.14(c)
shall be deemed to permit the conveyance, transfer,
assignment, or delegation, expressly, by operation of law,
or otherwise, by any party of any right or interest herein
without the prior written consent of the other parties.
Anything herein to the contrary notwithstanding, however,
no permitted assignment or other disposition of all or any
part of a party's interests herein shall relieve such
party of its obligations hereunder.
(d) Further Action. The parties each agree to execute and
deliver all documents, provide all information, and take
or forebear form all such action as may be necessary and
appropriate to achieve the purposes hereof.
(e) Time is of the Essence. Time is of the essence in this
Agreement.
(f) Amendments, Modifications, Approvals, and Consents. Any
amendment, modification, alteration, or supplement hereto,
or any approval or consent requested of any party, shall
be ineffective unless it is in writing and signed by the
party against whom enforcement is sought.
(g) Parties in Interest. Nothing in this Agreement, whether
express or implied, is intended to confer any right or
remedy under or by reason of this Agreement on any person
other than the parties to this Agreement and their
respective heirs, executors, administrators, personal or
legal representatives, successors, or permitted assigns,
nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third person
to any party to this Agreement, nor shall any provision
hereof give any third person any right of subrogation or
action over or against any party to this Agreement.
<PAGE>
(h) Notices. Any notice, consent, request, directive, demand,
or other communication made hereunder, pursuant hereto, or
in accordance herewith by any party intended for any other
party shall be in writing and shall be physically
delivered, sent by facsimile (fax), or sent by registered
or certified mail, properly addressed and return receipt
requested with postage prepaid, to such other party at the
address of fax number set forth in Part 2 hereof, unless
such other party shall have previously designated a
different address of fax number by due notice hereunder.
Notices hereunder that are physically delivered shall be
deemed effective and complete at the time of the delivery
thereof with written evidence of such delivery. Notices
hereunder that are given by facsimile (fax) shall be
deemed effective and complete at the time such facsimile
(fax) is successfully sent with printed or written
evidence of such successful sending. Notices hereunder
that are given by mail shall be deemed effective and
complete as of the applicable delivery date set forth on
return receipt requested.
(i) Costs and Expenses. Except as may be otherwise
specifically set forth herein or as otherwise agreed to by
the parties, each party shall bear its own costs and
expenses (including among other things attorneys and
accountants fees and costs) in connection herewith and in
connection with all things required to be done by such
party hereunder.
(j) Attorneys' Fees. If any action is commenced to enforce any
of the terms hereof, the successful party in such action
shall be entitled to receive as additional compensation
hereunder or as additional damages under such action all
necessary and reasonable attorneys' fees, expenses, and
costs in connection with such action.
(k) Governing Law. This Agreement shall be governed in all
respects and construed according to the laws of the State
of Utah applied to contracts made and to be fully
performed entirely within the State of Utah between
residents of the State of Utah, unless any obligations
hereunder shall be invalid or unenforceable under such
laws, in which event the laws of the state whose laws can
apply to and validate the obligations hereunder shall
apply. This Agreement shall be deemed executed in Salt
Lake County, Utah. The parties acknowledge that bCard is
headquartered within Salt Lake County, Utah, that the
majority of bCard's records and employees are or will be
within Salt Lake County, Utah, and that Salt Lake County,
Utah, is the most convenient locale for actions between
the parties.
(l) Rights and Remedies. The rights and remedies of the
parties hereunder shall not be mutually exclusive, and the
exercise of one or more of the provisions hereof shall not
preclude the exercise of any other provisions. Each of the
parties confirms that damages may be an inadequate remedy
for a breach or threatened breach of any provision hereof.
The respective rights and obligations hereunder shall be
enforceable by specific performance, injunction, or other
equitable remedy, but nothing herein contained is intended
to or shall limit or affect any rights at law or by
statute or otherwise of any party aggrieved as against any
other party for a breach or threatened breach of any
provision hereof, it being the intention of this
subsection 5.14(l) to make clear the agreement of the
parties that the respective rights and obligations of the
parties hereunder shall be enforceable in equity as well
as at law or otherwise.
(m) Arbitration. Anything herein to the contrary
notwithstanding, any controversy or dispute arising out of
or relating to this Agreement or its subject matter which
the parties are unable to resolve within thirty (30) days
after written notice by one party to each other party of
the existence of such controversy or dispute, may be
submitted to binding arbitration by any party. If so
submitted to arbitration, the matter shall be finally
settled by binding arbitration conducted in accordance
with the then current rules and procedures of the American
Arbitration Association. Such arbitration shall take place
in Salt Lake City, Utah. The decision by the arbitrator on
any matter submitted to arbitration shall be binding and
conclusive upon the parties, their respective heirs,
executors, administrators, personal or legal
representatives, successors, or permitted assigns, as the
case may be, and they shall comply with such decision in
good faith. Each party hereby submits itself to the
jurisdiction of the state and federal
<PAGE>
courts within the State of Utah for the entry of judgment
with respect to the decision of the arbitrator hereunder.
Judgment upon the award may be entered in any state or
federal court within the State of Utah or any other court
having jurisdiction.
(n) No Waiver. No failure by any party to insist upon the
strict performance of any covenant, duty, agreement, term,
or condition hereof or to exercise any right or remedy
upon a breach thereof shall constitute a waiver of any
such breach or of such or any other covenant, duty,
agreement, term, or condition, whether or not similar. Any
party by notice pursuant to the terms hereof may, but
shall be under no obligation, waive any of its rights or
any condition or conditions to its obligations hereunder,
or any covenant, duty, agreement, term, or condition of
any other party. No waiver shall constitute a continuing
waiver or affect or alter the remainder hereof, and each
and every other covenant, duty, agreement, term, and
condition hereof shall continue in full force and effect
with respect to any other then existing or subsequently
occurring breach.
(o) Severability. In the event that any condition, covenant,
or other provision contained herein is held to be invalid
or void by any court of competent jurisdiction, the same
shall be deemed severable from the remainder hereof and
shall in no way affect any other covenant or condition
contained herein. If such condition, covenant, or other
provision shall be deemed invalid due to its scope and
breadth, such provision shall be deemed valid to the
extent of the scope or breadth permitted by law.
(p) Covenant of Good Faith. Each party agrees to act
reasonably and in good faith in the performance of any
acts required of such party hereunder.
(q) Force Majeure. No party shall be responsible for delays or
failure in performance resulting from acts beyond the
reasonable control of such party. Such acts shall include
but not be limited to acts of God, strikes, lock-outs,
riots, acts of war, epidemics, governmental regulation
imposed after the fact, fires, communication line
failures, power failures, earthquakes, or other disasters.
(r) Titles and Captions. All part, section, subsection, and
other titles, headings, and captions herein are included
for purposes of convenience only, and shall not be deemed
a part hereof and shall in now way define, limit, extend,
or describe the scope or intent of any of the provisions
hereof.
(s) Pronouns and Plurals. Whenever the context may require,
any pronoun used herein shall include the corresponding
masculine, feminine, or neuter forms, and the singular
form of nouns, pronouns, and verbs shall include the
plural and vice versa. Whenever used herein, the word "or"
shall mean "and/or," unless the context clearly otherwise
requires.
(t) Counterparts. This Agreement may be executed in
counterparts, all of which taken together shall constitute
one Agreement binding on the executing parties if each
party named in Part 2 hereof shall have executed at least
one counterpart signature page of this Agreement
notwithstanding that all of the parties are not
signatories of the same full copy of this Agreement of the
same counterpart signature page of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement on or
as of the date first set forth above.
"bCard" bCard, Inc.
A Utah Corporation
/s/ Neil Pickard
-------------------------
Neil Pickard, Secretary
"Lazarev" By: /s/ Ivan Lazarev
----------------------
Ivan Lazarev
INDEMNITY AGREEMENT
This Indemnity Agreement (the "Agreement") is made as of the ___ day of
_________, 20____ by and between PrimeHoldings.com, Inc., a Delaware corporation
(the "Company"), and the person whose signature appears at the end of this
Agreement (the "Indemnitee"), an officer and/or director of the Company.
RECITALS
A. The Indemnitee is currently serving as an officer and/or director of
the Company and in such capacity renders valuable services to the Company.
B. Both the Company and the Indemnitee recognize the substantial risk
of litigation against officers and directors of corporations, and the Indemnitee
has indicated that he or she does not regard the indemnification available under
the Company's Bylaws as adequate to protect against legal risks associated with
service to the Company and may be unwilling to continue in office in the absence
of greater protection and indemnification.
C. The Board of Directors of the Company has determined that it is in
the best interests of the Company and its stockholders to induce the Indemnitee
to continue to serve as an officer and/or director and retain the benefits of
his or her experience and skill by entering into this Agreement to provide
protection from potential liabilities which might arise by reason of the fact
that he or she is an officer and/or director of the Company beyond the
protection afforded by Delaware law and the Company's Bylaws.
AGREEMENT
In consideration of the continued services of the Indemnitee and as an
inducement to the Indemnitee to continue to serve as an officer and/or director,
the Company and the Indemnitee do hereby agree as follows:
DEFINITIONS.
As used in this Agreement:
The term "Company' shall include PrimeHoldings.com, Inc., a Delaware corporation
and any wholly-owned subsidiary.
The term "Expenses" includes, without limitation, attorneys' fees, disbursements
and retainers, accounting and witness fees, travel and deposition costs, any
interest, assessment or other charges, any federal, state, local or foreign
taxes imposed as a result of the actual or deemed receipt of any payments under
this Agreement, any other expense, liability or loss, any amounts paid or to be
paid in settlement by or on behalf of Indemnitee, and any expenses of
establishing a right to indemnification (pursuant to this Agreement or
otherwise), paid or incurred in connection with investigating, defending, being
a witness in, or participating in, or preparing for any of the foregoing in, any
Proceeding relating to an Indemnifiable Event, including reasonable compensation
for time spent by the Indemnitee in connection with the investigation, defense
or appeal of a Proceeding or of an action for indemnification for which he or
she is not otherwise compensated by the Company or any third party. The
Indemnitee shall be deemed to be compensated by the Company or a third party for
time spent in connection with the investigation, defense or appeal of a
Proceeding or an action for Indemnification if, among other things, he or she is
a salaried employee of the Company or such third party and his or her salary is
not reduced in proportion to the time spent in connection with the Proceeding or
action for Indemnification. The term "Expenses" does not include the amount of
judgments, fines, penalties or ERISA excise taxes actually levied against the
Indemnitee.
The term "Indemnifiable Event" shall include any event or occurrence that takes
place either prior to or after the execution of this Agreement, related to the
service of Indemnitee as an officer and/or director of the Company, or his or
her service at the request of the Company as a director, officer, employee,
trustee, agent, or fiduciary of another foreign or domestic corporation,
partnership, joint venture, employee benefit plan, trust, or other enterprise or
related to anything done or not done by Indemnitee in any such capacity, whether
or not the basis of a Proceeding
<PAGE>
arising in whole or in part from such Indemnifiable Event is alleged action in
an official capacity as a director, officer, employee, or agent or in any other
capacity while serving as a director, officer, employee, or agent of the Company
or at the request of the Company, as described above, and whether or not he or
she is serving in such capacity at the time any liability or Expenses are
incurred for which indemnification or reimbursement is to be provided under this
Agreement.
The term "Proceeding" shall include (i) any threatened, pending or completed
action, suit or proceeding, whether brought in the name of the Company or
otherwise and whether of a civil, criminal, administrative, investigative or
other nature; and (ii) any inquiry, hearing or investigation, whether or not
conducted by the Company, that Indemnitee in good faith believes might lead to
the institution of any such action, suit or proceeding.
AGREEMENT TO SERVE. The Indemnitee agrees to continue to serve as an officer
and/or director of the Company at the will of the Company for so long as
Indemnitee is duly elected or appointed or until such time as Indemnitee tenders
a resignation in writing; provided, however, that nothing in this Agreement
shall be construed as providing the Indemnitee any right to continued
employment.
INDEMNIFICATION IN THIRD PARTY ACTIONS. In connection with any Proceeding
arising in whole or in part from an Indemnifiable Event (other than a Proceeding
by or in the name of the Company to procure a judgment in its favor), the
Company shall indemnify the Indemnitee against all Expenses and all judgments,
fines, penalties and ERISA excise taxes actually and reasonably incurred by the
Indemnitee in connection with such Proceeding, to the fullest extent permitted
by Delaware law. The Company shall also cooperate fully with Indemnitee and
render such assistance as Indemnitee may reasonably require in the defense of
any Proceeding in which Indemnitee was or is a party or is threatened to be made
a party, and shall make available to Indemnitee and his or her counsel all
information and documents reasonably available to it which relate to the subject
of any such Proceeding.
INDEMNIFICATION IN PROCEEDINGS BY OR IN THE NAME OF THE COMPANY. In any
Proceeding by or in the name of the Company to procure a judgment in its favor
arising in whole or in part from an Indemnifiable Event, the Company shall
indemnify the Indemnitee against all Expenses actually and reasonably incurred
by Indemnitee in connection with such Proceeding, to the fullest extent
permitted by Delaware law.
CONCLUSIVE PRESUMPTION REGARDING STANDARD OF CONDUCT. The Indemnitee shall be
conclusively presumed to have met the relevant standards of conduct as defined
by Delaware law for indemnification pursuant to this Agreement, unless a
determination is made that the Indemnitee has not met such standards by (i) the
Board of Directors of the Company by a majority vote of a quorum thereof
consisting of directors who were not parties to such Proceeding, (ii) the
stockholders of the Company by majority vote, or (iii) in a written opinion by
independent legal counsel, selection of whom has been approved by the Indemnitee
in writing.
INDEMNIFICATION OF EXPENSES OF SUCCESSFUL PARTY. Notwithstanding any other
provisions of this Agreement, to the extent that the Indemnitee has been
successful in defense of any Proceeding or in defense of any claim, issue or
matter therein, on the merits or otherwise, including the dismissal of a
Proceeding without prejudice, the Indemnitee shall be indemnified against all
Expenses incurred in connection therewith to the fullest extent permitted by
Delaware law.
ADVANCES OF EXPENSES. The Expenses incurred by the Indemnitee in any Proceeding
shall be paid promptly by the Company in advance of the final disposition of the
Proceeding at the written request of the Indemnitee to the fullest extent
permitted by Delaware law; provided that if Delaware law in effect at the time
so requires, the Indemnitee shall undertake in writing to repay such amount to
the extent that it is ultimately determined that the Indemnitee is not entitled
to indemnification.
PARTIAL INDEMNIFICATION. If the Indemnitee is entitled under any provision of
this Agreement to indemnification by the Company for some or a portion of the
Expenses, judgments, fines, penalties or ERISA excise taxes actually and
reasonably incurred by Indemnitee in the investigation, defense, appeal or
settlement of any Proceeding but not, however, for the total amount thereof, the
Company shall nevertheless indemnify the Indemnitee for the portion of such
Expenses, judgments, fines, penalties or ERISA excise taxes to which the
Indemnitee is entitled.
<PAGE>
INDEMNIFICATION PROCEDURE; DETERMINATION OF RIGHT TO INDEMNIFICATION.
Promptly after receipt by the Indemnitee of notice of the commencement of any
Proceeding, the Indemnitee will, if a claim in respect thereof is to be made
against the Company under this Agreement, notify the Company of the commencement
thereof.
If a claim under this Agreement is not paid by the Company within 30 days of
receipt of written notice, the right to indemnification as provided by this
Agreement shall be enforceable by the Indemnitee in any court of competent
jurisdiction. It shall be a defense to any such action (other than an action
brought to enforce a claim for Expenses incurred in defending any Proceeding in
advance of its final disposition where the required undertaking, if any is
required, has been tendered to the Company) that the Indemnitee has failed to
meet a standard of conduct which makes it permissible under Delaware law for the
Company to indemnity the Indemnitee for the amount claimed. The burden of
proving by clear and convincing evidence that indemnification or advances are
not appropriate shall be on the Company. Neither the failure of the directors or
stockholders of the Company or independent legal counsel to have made a
determination prior to the commencement of such action that indemnification or
advances are proper in the circumstances because the Indemnitee has met the
applicable standard of conduct, nor an actual determination by the directors or
stockholders of the Company or independent legal counsel that the Indemnitee has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the Indemnitee has not met the applicable standard of
conduct.
The Indemnitee's Expenses incurred in connection with any Proceeding concerning
Indemnitee's right to indemnification or advances in whole or in part pursuant
to this Agreement shall also be indemnified by the Company regardless of the
outcome of such Proceeding, unless a court of competent jurisdiction determines
that each of the material assertions made by the Indemnitee in such Proceeding
was not made in good faith or was frivolous.
With respect to any Proceeding for which indemnification is requested, the
Company will be entitled to participate therein at its own expense and, except
as otherwise provided below, to the extent that it may wish, the Company may
assume the defense thereof, with counsel satisfactory to the Indemnitee. After
notice from the Company to the Indemnitee of its election to assume the defense
of a Proceeding, the Company will not be liable to the Indemnitee under this
Agreement for any legal or other expenses subsequently incurred by the
Indemnitee in connection with the defense thereof, other than reasonable costs
of investigation or as otherwise provided below. The Indemnitee shall cooperate
fully with the Company and render such assistance as the Company may reasonably
require in the Company's participation in any such Proceeding and shall make
available to the Company and its counsel all information and documents
reasonably available to Indemnitee which relate to the subject of such
Proceeding. The Company shall not be liable to indemnify the Indemnitee under
this Agreement with regard to any judicial award if the Company was not given a
reasonable and timely opportunity, at its expense. to participate in the defense
of such action; the Company's liability hereunder shall not be excused if
participation in the Proceeding by the Company was barred. The Company shall not
settle any Proceeding in any manner which would impose any penalty or limitation
on the Indemnitee without the Indemnitee's prior written consent. The Indemnitee
shall have the right to employ counsel in any Proceeding, but the fees and
expenses of such counsel incurred after notice from the Company of its
assumption of the defense thereof shall be at the expense of the Indemnitee,
unless (i) the employment of counsel by the Indemnitee has been authorized by
the Company, (ii) the Indemnitee shall have reasonably concluded that there may
be a conflict of interest between the Company and the Indemnitee in the conduct
of the defense of a Proceeding, or (iii) the Company shall not in fact have
employed counsel to assume the defense of a Proceeding, in each of which cases
the fees and expenses of the Indemnitee's counsel shall be at the expense of the
Company. The Company shall not be entitled to assume the defense of any
Proceeding brought by or on behalf of the Company or as to which the Indemnitee
has made the conclusion that there may be a conflict of interest between the
Company and the Indemnitee.
LIMITATIONS ON INDEMNIFICATION.
No payments pursuant to this Agreement shall be made by the Company:
To indemnify or advance Expenses to the Indemnitee with respect to Proceedings
initiated or brought voluntarily by
<PAGE>
the Indemnitee and not by way of defense, except with respect to Proceedings
brought to establish or enforce a right to indemnification under this Agreement
or any other Statute or law or otherwise as required under Delaware law, but
such Indemnification or advancement of Expenses may be provided by the Company
in specific cases if a majority of the Board of Directors finds it to be
appropriate;
To indemnify the Indemnitee for any Expenses, judgments, fines, penalties or
ERISA excise taxes for which the Indemnitee is indemnified by the Company
otherwise than pursuant to this Agreement;
To indemnify the Indemnitee under this Agreement for any amounts paid in
settlement of any Proceeding effected without the Company's written consent;
however, the Company will not unreasonably withhold its consent to any proposed
settlement;
To indemnify the Indemnitee for any Expenses, judgments, fines, penalties or
ERISA excise taxes for which payment is actually made to the Indemnitee under a
valid and collectible insurance policy, except in respect of any excess beyond
the amount of payment under such insurance;
To indemnify the Indemnitee for any Expenses, judgments, fines or penalties
sustained in any Proceeding for an accounting of profits made from the purchase
or sale by Indemnitee of securities of the Company pursuant to the provisions of
Section 16(b) of the Securities Exchange Act of 1934, the rules and regulations
promulgated thereunder and amendments thereto or similar provisions of any
federal, state or local statutory law;
To indemnify the Indemnitee against any Expenses, judgments, fines, penalties or
ERISA excise taxes based upon or attributable to the Indemnitee having been
finally adjudged to have gained any personal profit or advantage to which he or
she was not legally entitled;
To indemnify the Indemnitee for any Expenses, judgments, fines, penalties or
ERISA excise taxes resulting from Indemnitee's conduct which is finally adjudged
to have been willful misconduct, knowingly fraudulent, deliberately dishonest or
in violation of Indemnitee's duty of loyalty to the Company; or
If a court of competent jurisdiction shall finally determine that any
indemnification hereunder is unlawful.
MAINTENANCE OF LIABILITY INSURANCE.
The Company hereby covenants and agrees that, as long as the Indemnitee shall
continue to serve as an officer and/or director of the Company and thereafter so
long as the Indemnitee shall be subject to any possible Proceeding, the Company,
subject to subsection (c), shall promptly obtain and maintain in full force and
effect directors' and officers' liability insurance ("D&O Insurance") in
reasonable amounts from established and reputable insurers.
In all D&O Insurance policies, the Indemnitee shall be named as an insured in
such a manner as to provide the Indemnitee the same rights and benefits as are
accorded to the most favorably insured of the Company's officers or directors.
Notwithstanding the foregoing, the Company shall have no obligation to obtain or
maintain D&O Insurance if the Company determines in good faith that such
insurance is not reasonably available, the premium costs for such insurance are
disproportionate to the amount of coverage provided, or the coverage provided by
such insurance is so limited by exclusions that it provides an insufficient
benefit.
INDEMNIFICATION HEREUNDER NOT EXCLUSIVE. The indemnification provided by this
Agreement shall not be deemed to limit or preclude any other rights to which the
Indemnitee may be entitled under the Certificate of Incorporation, the Bylaws,
any agreement, any vote of stockholders or disinterested directors, Delaware
law, or otherwise, both as to action in Indemnitee's official capacity and as to
action in another capacity on behalf of the Company while holding such office.
SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon, and shall inure to
the benefit of, the Indemnitee and Indemnitee's heirs, personal representatives
and assigns, and the Company and its successors and assigns.
<PAGE>
SEPARABILITY. Each provision of this Agreement is a separate and distinct
agreement and Independent of the others, so that if any provision hereof shall
be held to be invalid or unenforceable for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof. To the extent required. any provision of this Agreement may
be modified by a court of competent jurisdiction to preserve its validity and to
provide the Indemnitee with the broadest possible indemnification permitted
under Delaware law.
SAVINGS CLAUSE. If this Agreement or any portion hereof be invalidated on any
ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee as to Expenses, judgments, fines, penalties or
ERISA excise taxes with respect to any Proceeding to the full extent permitted
by any applicable portion of this Agreement that shall not have been invalidated
or by any applicable provision of the law of Delaware or the law of any other
jurisdiction.
INTERPRETATION; GOVERNING LAW. This Agreement shall be construed as a whole and
in accordance with its fair meaning. Headings are for convenience only and shall
not be used in construing meaning. This Agreement shall be governed and
interpreted in accordance with the laws of the State of Delaware.
AMENDMENTS. No amendment, waiver, modification, termination or cancellation of
this Agreement shall be effective unless in writing signed by the party against
whom enforcement is sought. The Indemnification rights afforded to the
Indemnitee hereby are contract rights and may not be diminished, eliminated or
otherwise affected by amendments to the Company's Certificate of Incorporation,
Bylaws or agreements including D&O Insurance policies.
COUNTERPARTS. This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement and shall become effective
when one or more counterparts have been signed by each party and delivered to
the other.
NOTICES. Any notice required to be given under this Agreement shall be directed
to the Company at 6955 Union Park Center, Suite 390, Midvale, Utah 84047 and to
Indemnitee at the address specified below or to such other address as either
shall designate in writing.
SUBJECT MATTER. The intended purpose of this Agreement is to provide for
Indemnification, and this Agreement is not intended to affect any other aspect
of any relationship between the Indemnitee and the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
PRIMEHOLDINGS.COM, INC., by: INDEMNITEE
- - ------------------------------ -------------------------------------------
Thomas E. Aliprandi Signature
Its President
-------------------------------------------
Printed Name
-------------------------------------------
Address
-------------------------------------------
City, State ZIP
PRIMEHOLDINGS.COM, INC.
2000 Stock Option Plan
1. Purpose; Effectiveness of the Plan.
(a) The purpose of this Plan is to advance the interests of
the Company and its stockholders by helping the Company obtain
and retain the services of employees, officers, consultants,
and directors, upon whose judgment, initiative and efforts the
Company is substantially dependent, and to provide those
persons with further incentives to advance the interests of
the Company.
(b) This Plan will become effective on the date of its
adoption by the Board, provided the Plan is approved by the
stockholders of the Company (excluding holders of shares of
Stock issued by the Company pursuant to the exercise of
options granted under this Plan) within twelve months before
or after that date. If the Plan is not so approved by the
stockholders of the Company, any options granted under this
Plan will be rescinded and will be void. This Plan will remain
in effect until it is terminated by the Board or the Committee
(as defined hereafter) under Section 9 hereof, except that no
ISO (as defined herein) will be granted after the tenth
anniversary of the date of this Plan's adoption by the Board.
This Plan will be governed by, and construed in accordance
with, the laws of the State of Delaware.
2. Certain Definitions. Unless the context otherwise requires, the following
defined terms (together with other capitalized terms defined elsewhere in this
Plan) will govern the construction of this Plan, and of any stock option
agreements entered into pursuant to this Plan:
(a) "10% Stockholder" means a person who owns, either directly or
indirectly by virtue of the ownership attribution provisions
set forth in Section 424(d) of the Code at the time he or she
is granted an Option, stock possessing more than ten percent
(10%) of the total combined voting power or value of all
classes of stock of the Company and/or of its subsidiaries;
(b) "1933 Act" means the federal Securities Act of 1933, as
amended;
(c) "Board" means the Board of Directors of the Company;
(d) "Code" means the Internal Revenue Code of 1986, as amended
(references herein to Sections of the Code are intended to
refer to Sections of the Code as enacted at the time of this
Plan's adoption by the Board and as subsequently amended, or
to any substantially similar successor provisions of the Code
resulting from recodification, renumbering or otherwise);
(e) "Committee" means a committee of two or more Non-Employee
Directors, appointed by the Board, to administer and interpret
this Plan; provided that the term "Committee" will refer to
the Board during such times as no Committee is appointed by
the Board;
(f) "Company" means PrimeHoldings.com, Inc., a Delaware
corporation;
(g) "Disability" has the same meaning as "permanent and total
disability," as defined in Section 22(e)(3) of the Code;
(h) "Eligible Participants" means persons who, at a particular
time, are employees, officers, consultants, or directors of
the Company or its subsidiaries;
(i) "Fair Market Value" means, with respect to the Stock and as of
the date an ISO or a Formula Option is granted hereunder, the
market price per share of such Stock determined by the
Committee in good faith on such basis as it deems appropriate.
<PAGE>
(j) "ISO" has the same meaning as "incentive stock option," as
defined in Section 422 of the Code;
(k) "Just Cause Termination" means a termination by the Company of
an Optionee's employment by and/or service to the Company (or
if the Optionee is a director, removal of the Optionee from
the Board by action of the stockholders or, if permitted by
applicable law and the by-laws of the Company, the other
directors), in connection with the good faith determination of
the Company's board of directors (or of the Company's
stockholders if the Optionee is a director and the removal of
the Optionee from the Board is by action of the stockholders,
but in either case excluding the vote of the Optionee if he or
she is a director or a stockholder) that the Optionee has
engaged in any acts involving dishonesty or moral turpitude or
in any acts that materially and adversely affect the business,
affairs or reputation of the Company or its subsidiaries;
(l) "Non-Employee Director" has the same meaning as
"Non-Employee-Director," as defined in Rule 16b-3 as
promulgated under the Securities Exchange Act of 1934);
(m) "NSO" means any option granted under this Plan whether
designated by the Committee as a "non-qualified stock option,"
a "non-statutory stock option" or otherwise, other than an
option designated by the Committee as an ISO, or any option so
designated but which, for any reason, fails to qualify as an
ISO pursuant to Section 422 of the Code and the rules and
regulations thereunder;
(n) "Option" means an option granted pursuant to this Plan
entitling the option holder to acquire shares of Stock issued
by the Company pursuant to the valid exercise of the option;
(o) "Option Agreement" means an agreement between the Company and
an Optionee, in form and substance satisfactory to the
Committee in its sole discretion, consistent with this Plan;
(p) "Option Price" with respect to any particular Option means the
exercise price at which the Optionee may acquire each share of
the Option Stock called for under such Option;
(q) "Option Stock" means Stock issued or issuable by the Company
pursuant to the valid exercise of an Option;
(r) "Optionee" means an Eligible Participant to whom Options are
granted hereunder, and any transferee thereof pursuant to a
Transfer authorized under this Plan;
(s) "Plan" means this PrimeHoldings.com, Inc. 2000 Stock Option
Plan of the Company.
(t) "QDRO" has the same meaning as "qualified domestic relations
order" as defined in Section 414(p) of the Code;
(u) "Stock" means shares of the Company's Common Stock, $.0666 par
value;
(v) "Transfer," with respect to Option Stock, includes, without
limitation, a voluntary or involuntary sale, assignment,
transfer, conveyance, pledge, hypothecation, encumbrance,
disposal, loan, gift, attachment or levy of such Option Stock,
including without limitation an assignment for the benefit of
creditors of the Optionee, a transfer by operation of law,
such as a transfer by will or under the laws of descent and
distribution, an execution of judgment against the Option
Stock or the acquisition of record or beneficial ownership
thereof by a lender or creditor, a transfer pursuant to a
QDRO, or to any decree of divorce, dissolution or separate
maintenance, any property settlement, any separation agreement
or any other agreement with a spouse (except for estate
planning purposes) under which a part or all of the shares of
Option Stock are transferred or awarded to the spouse of the
Optionee or are required to be sold; or a transfer resulting
from the filing by the Optionee of a petition for relief, or
the filing of an involuntary petition against such Optionee,
under the bankruptcy laws of the United States or of any other
nation.
<PAGE>
3. Eligibility. The Company may grant Options under this Plan only to persons
who are Eligible Participants as of the time of such grant. Subject to the
provisions of Sections 4(d), 5 and 6 hereof, there is no limitation on the
number of Options that may be granted to an Eligible Participant.
4. Administration.
(a) Committee. The Committee, if appointed by the Board, will
administer this Plan. If the Board, in its discretion, does
not appoint such a Committee, the Board itself will administer
this Plan and take such other actions as the Committee is
authorized to take hereunder; provided that the Board may take
such actions hereunder in the same manner as the Board may
take other actions under the Company's Certificate of
Incorporation and By-laws generally.
(b) Authority and Discretion of Committee. The Committee will have
full and final authority in its discretion, at any time and
from time to time, subject only to the express terms,
conditions and other provisions of the Company's Certificate
of Incorporation, By-laws and this Plan, and the specific
limitations on such discretion set forth herein:
(i) to select and approve the persons who will be granted
Options under this Plan from among the Eligible
Participants, and to grant to any person so selected
one or more Options to purchase such number of shares
of Option Stock as the Committee may determine;
(ii) to determine the period or periods of time during
which Options may be exercised, the Option Price and
the duration of such Options, and other matters to be
determined by the Committee in connection with
specific Option grants and Options Agreements as
specified under this Plan;
(iii) to interpret this Plan, to prescribe, amend and
rescind rules and regulations relating to this Plan,
and to make all other determinations necessary or
advisable for the operation and administration of
this Plan; and
(iv) to delegate all or a portion of its authority under
subsections (i) and (ii) of this Section 4(b) to one
or more directors of the Company who are executive
officers of the Company, but only in connection with
Options granted to Eligible Participants who are not
subject to the reporting and liability provisions of
Section 16 of the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder,
and subject to such restrictions and limitations
(such as the aggregate number of shares of Option
Stock called for by such Options that may be granted)
as the Committee may decide to impose on such
delegate directors.
(c) Limitation on Authority. Notwithstanding the foregoing, or any
other provision of this Plan, the Committee will have no
authority to grant Options to any of its members, unless
approved by the Board.
(d) Designation of Options. Except as otherwise provided herein,
the Committee will designate any Option granted hereunder
either as an ISO or as an NSO. To the extent that the Fair
Market Value (determined at the time the Option is granted) of
Stock with respect to which all ISOs are exercisable for the
first time by any individual during any calendar year
(pursuant to this Plan and all other plans of the Company
and/or its subsidiaries) exceeds $100,000, such option will be
treated as an NSO. Notwithstanding the general eligibility
provisions of Section 3 hereof, the Committee may grant ISOs
only to persons who are employees of the Company and/or its
subsidiaries.
<PAGE>
(e) Option Agreements. Options will be deemed granted hereunder
only upon the execution and delivery of an Option Agreement by
the Optionee and a duly authorized officer of the Company.
Options will not be deemed granted hereunder merely upon the
authorization of such grant by the Committee.
5. Shares Reserved for Options.
(a) Option Pool. The aggregate number of shares of Option
Stock that may be issued pursuant to the exercise of Options
granted under this Plan will not exceed Five Million
(5,000,000) (the "Option Pool"), provided that such number
will be increased by the number of shares of Option Stock that
the Company subsequently may reacquire through repurchase or
otherwise. Shares of Option Stock that would have been
issuable pursuant to Options, but that are no longer issuable
because all or part of those Options have terminated or
expired, will be deemed not to have been issued for purposes
of computing the number of shares of Option Stock remaining in
the Option Pool and available for issuance.
(b) Adjustments Upon Changes in Stock. In the event of any
change in the outstanding Stock of the Company as a result of
a stock split, reverse stock split, stock dividend,
recapitalization, combination or reclassification, appropriate
proportionate adjustments will be made in: (i) the aggregate
number of shares of Option Stock in the Option Pool that may
be issued pursuant to the exercise of Options granted
hereunder; (ii) the Option Price and the number of shares of
Option Stock called for in each outstanding Option granted
hereunder; and (iii) other rights and matters determined on a
per share basis under this Plan or any Option Agreement
hereunder. Any such adjustments will be made only by the
Board, and when so made will be effective, conclusive and
binding for all purposes with respect to this Plan and all
Options then outstanding. No such adjustments will be required
by reason of the issuance or sale by the Company for cash or
other consideration of additional shares of its Stock or
securities convertible into or exchangeable for shares of its
Stock.
6. Terms of Stock Option Agreements. Each Option granted pursuant to this Plan
will be evidenced by an agreement (an "Option Agreement") between the Company
and the person to whom such Option is granted, in form and substance
satisfactory to the Committee in its sole discretion, consistent with this Plan.
Without limiting the foregoing, each Option Agreement (unless otherwise stated
therein) will be deemed to include the following terms and conditions:
(a) Covenants of Optionee. At the discretion of the Committee, the
person to whom an Option is granted hereunder, as a condition
to the granting of the Option, must execute and deliver to the
Company a confidential information agreement approved by the
Committee. Nothing contained in this Plan, any Option
Agreement or in any other agreement executed in connection
with the granting of an Option under this Plan will confer
upon any Optionee any right with respect to the continuation
of his or her status as an employee of, consultant or
independent contractor to, or director of, the Company or its
subsidiaries.
(b) Vesting Periods. Except as otherwise provided herein, each
Option Agreement may specify the period or periods of time
within which each Option or portion thereof will first become
exercisable (the "Vesting Period") with respect to the total
number of shares of Option Stock called for thereunder (the
"Total Award Option Stock"). Such Vesting Periods will be
fixed by the Committee in its discretion, and may be
accelerated or shortened by the Committee in its discretion.
(c) Exercise of the Option.
(i) Mechanics and Notice. An Option may be exercised to
the extent exercisable (1) by giving written notice
of exercise to the Company, specifying the number of
full shares of Option Stock to be purchased and
accompanied by full payment of the Option Price
<PAGE>
thereof and the amount of withholding taxes pursuant
to subsection 6(c)(ii) below; and (2) by giving
assurances satisfactory to the Company that the
shares of Option Stock to be purchased upon such
exercise are being purchased for investment and not
with a view to resale in connection with any
distribution of such shares in violation of the 1933
Act; provided, however, that in the event the Option
Stock called for under the Option is registered under
the 1933 Act, or in the event resale of such Option
Stock without such registration would otherwise be
permissible, this second condition will be
inoperative if, in the opinion of counsel for the
Company, such condition is not required under the
1933 Act, or any other applicable law, regulation or
rule of any governmental agency.
(ii) Withholding Taxes. As a condition to the issuance of
the shares of Option Stock upon full or partial
exercise of an NSO granted under this Plan, the
Optionee will pay to the Company in cash, or in such
other form as the Committee may determine in its
discretion, the amount of the Company's tax
withholding liability required in connection with
such exercise. For purposes of this subsection
6(c)(ii), "tax withholding liability" will mean all
federal and state income taxes, social security tax,
and any other taxes applicable to the compensation
income arising from the transaction required by
applicable law to be withheld by the Company.
(d) Payment of Option Price. Each Option Agreement will specify
the Option Price with respect to the exercise of Option Stock
thereunder, to be fixed by the Committee in its discretion,
but in no event will the Option Price be less than the Fair
Market Value (or, in case the Optionee is a 10% Stockholder,
one hundred ten percent (110%) of such Fair Market Value) of
the Option Stock at the time such ISO is granted. The Option
Price will be payable to the Company in United States dollars
in cash or by check or, such other legal consideration as may
be approved by the Committee, in its discretion.
(e) Termination of the Option. Except as otherwise provided
herein, each Option Agreement will specify the period of time,
to be fixed by the Committee in its discretion, during which
the Option granted therein will be exercisable, not to exceed
ten years from the date of grant in the case of an ISO (the
"Option Period"); provided that the Option Period will not
exceed five years from the date of grant in the case of an ISO
granted to a 10% Stockholder. To the extent not previously
exercised, each Option will terminate upon the expiration of
the Option Period specified in the Option Agreement; provided,
however, that each such Option will terminate, if earlier: (i)
ninety days after the date that the Optionee ceases to be an
Eligible Participant for any reason, other than by reason of
death or disability; (ii) twelve months after the date that
the Optionee ceases to be an Eligible Participant by reason of
such person's death or disability; or (iii) immediately as of
the date that the Optionee ceases to be an Eligible
Participant by reason of a Just Cause Termination. In the
event of a sale of all or substantially all of the assets of
the Company, or a merger or consolidation or other
reorganization in which the Company is not the surviving
corporation, or in which the Company becomes a subsidiary of
another corporation (any of the foregoing events, a "Corporate
Transaction"), then notwithstanding anything else herein, the
right to exercise all then outstanding Options will vest
immediately prior to such Corporate Transaction and will
terminate immediately after such Corporate Transaction;
provided, however, that if the Board, in its sole discretion,
determines that such immediate vesting of the right to
exercise outstanding Options is not in the best interests of
the Company, then the successor corporation must agree to
assume the outstanding Options or substitute therefore
comparable options of such successor corporation or a parent
or subsidiary of such successor corporation.
(f) Options Nontransferable. No Option will be transferable by the
Optionee otherwise than by will or the laws of descent and
distribution. During the lifetime of the Optionee, the Option
will be exercisable only by him or her.
(g) Qualification of Stock. The right to exercise an Option will
be further subject to the requirement that if at any time the
Board determines, in its discretion, that the listing,
registration or
<PAGE>
qualification of the shares of Option Stock called for
thereunder upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental
regulatory authority, is necessary or desirable as a condition
of or in connection with the granting of such Option or the
purchase of shares of Option Stock thereunder, the Option may
not be exercised, in whole or in part, unless and until such
listing, registration, qualification, consent or approval is
effected or obtained free of any conditions not acceptable to
the Board, in its discretion.
(h) Additional Restrictions on Transfer. By accepting Options
and/or Option Stock under this Plan, the Optionee will be
deemed to represent, warrant and agree as follows:
(i) Securities Act of 1933. The Optionee understands that
the shares of Option Stock have not been registered
under the 1933 Act, and that such shares are not
freely tradable and must be held indefinitely unless
such shares are either registered under the 1933 Act
or an exemption from such registration is available.
The Optionee understands that the Company is under no
obligation to register the shares of Option Stock.
(ii) Other Applicable Laws. The Optionee further
understands that Transfer of the Option Stock
requires full compliance with the provisions of all
applicable laws.
(iii) Investment Intent. Unless a registration statement is
in effect with respect to the sale of Option Stock
obtained through exercise of Options granted
hereunder: (1) Upon exercise of any Option, the
Optionee will purchase the Option Stock for his or
her own account and not with a view to distribution
within the meaning of the 1933 Act, other than as may
be effected in compliance with the 1933 Act and the
rules and regulations promulgated thereunder; (2) no
one else will have any beneficial interest in the
Option Stock; and (3) he or she has no present
intention of disposing of the Option Stock at any
particular time.
(i) Compliance with Law. Notwithstanding any other provision of
this Plan, Options may be granted pursuant to this Plan, and
Option Stock may be issued pursuant to the exercise thereof by
an Optionee, only after there has been compliance with all
applicable federal and state securities laws, and all of the
same will be subject to this overriding condition. The Company
will not be required to register or qualify Option Stock with
the Securities and Exchange Commission or any State agency.
(j) Stock Certificates. Certificates representing the Option Stock
issued pursuant to the exercise of Options will bear all
legends required by law and necessary to effectuate this
Plan's provisions. The Company may place a "stop transfer"
order against shares of the Option Stock until all
restrictions and conditions set forth in this Plan and in the
legends referred to in this Section 6(j) have been complied
with.
(k) Notices. Any notice to be given to the Company under the terms
of an Option Agreement will be addressed to the Company at its
principal executive office, Attention: Corporate Secretary, or
at such other address as the Company may designate in writing.
Any notice to be given to an Optionee will be addressed to the
Optionee at the address provided to the Company by the
Optionee. Any such notice will be deemed to have been duly
given if and when enclosed in a properly sealed envelope,
addressed as aforesaid, registered and deposited, postage and
registry fee prepaid, in a post office or branch post office
regularly maintained by the United States Government.
(l) Other Provisions. The Option Agreement may contain such other
terms, provisions and conditions, including such special
forfeiture conditions, rights of repurchase, rights of first
refusal and other restrictions on Transfer of Option Stock
issued upon exercise of any Options granted hereunder, not
inconsistent with this Plan, as may be determined by the
Committee in its sole discretion.
<PAGE>
(m) Right to Terminate Employment. Nothing in the Plan or in any
agreement entered into pursuant to the Plan shall confer upon
any participant the right to continue in the employment of the
Company or affect any right that the Company may have to
terminate the employment of such participant.
(n) Non-Uniform Determinations. The Board's determinations under
the Plan (including without limitation determinations of the
persons to receive awards, the form, amount and timing of such
awards, the terms and provisions of such awards and the
agreements evidencing same) need not be uniform and may be
made by it selectively among persons who receive, or are
eligible to receive, awards under the Plan, whether or not
such persons are similarly situated.
(o) Rights as a Shareholder. The recipient of any award under the
Plan shall have no rights as a shareholder with respect
thereto unless and until certificates for shares of Common
Stock are issued to such participant.
(p) Other Employee Benefits. Except as to plans which by their
terms include such amounts as compensation, the amount of any
compensation deemed to be received by an employee as a result
of the exercise of an Option or the sale of Option Stock will
not constitute compensation with respect to which any other
employee benefits of such employee are determined, including,
without limitation, benefits under any bonus, pension,
profit-sharing, life insurance or salary continuation plan,
except as otherwise specifically determined by the Board.
7. Proceeds from Sale of Stock. Cash proceeds from the sale of shares of Option
Stock issued from time to time upon the exercise of Options granted pursuant to
this Plan will be added to the general funds of the Company and as such will be
used from time to time for general corporate purposes.
8. Modification, Extension and Renewal of Options. Subject to the terms and
conditions and within the limitations of this Plan, the Committee may modify,
extend or renew outstanding Options granted under this Plan, or accept the
surrender of outstanding Options (to the extent not theretofore exercised) and
authorize the granting of new Options in substitution therefore (to the extent
not theretofore exercised). Notwithstanding the foregoing, however, no
modification of any Option will, without the consent of the holder of the
Option, alter or impair any rights or obligations under any Option theretofore
granted under this Plan.
9. Amendments and Discontinuance. The Board may amend, suspend or discontinue
this Plan at any time or from time to time; provided that no action of the Board
will cause ISOs granted under this Plan not to comply with Section 422 of the
Code unless the Board specifically declares such action to be made for that
purpose. Moreover, no such action may alter or impair any Option previously
granted under this Plan without the consent of the holder of such Option.
10. Plan Compliance with Rule 16b-3. With respect to persons subject to Section
16 of the Securities Exchange Act of 1934, transactions under this plan are
intended to comply with all applicable conditions of Rule 16b-3 or its
successors under the 1934 Act. To the extent any provision of the plan or action
by the plan administrators fails so to comply, it shall be deemed null and void,
to the extent permitted by law and deemed advisable by the plan administrators.
11. Copies of Plan. A copy of this Plan will be delivered to each Optionee at or
before the time he or she executes an Option Agreement.
Date Plan Adopted by Board of Directors: January 6, 2000
Date Plan Approved by Stockholders: ______________, _______
LOAN AGREEMENT
This is a Loan Agreement (this "Agreement") dated as of September 18, 1995,
among
UNIDIAL INCORPORATED (the "Lender")
12910 Shelbyville Road, Suite 211
Louisville, Kentucky 40243
and
UNIQUEST COMMUNICATIONS, INC. (the "Borrower")
6975 Union Park Center, Suite 340
Midvale, UT 84047
Recitals
The Lender would like to provide to the Borrower, and the Borrower would like to
avail itself of, the Revolving Credit, subject to the terms and conditions of
this Agreement.
NOW, THEREFORE, the Borrower and the Lender agree as follows:
SECTION I
Definitions
As used in this Agreement, the following terms shall have the following meanings
and the meanings assigned to them shall be equally applicable to both the
singular and plural forms of the terms defined:
"Accounts Receivable" shall mean all (a) rights to payment for any good s sold
or services performed, whether such right to payment exists on the date of this
Agreement or is created thereafter, and whenever and wherever acquitted, whether
or not such right to payment has been earned by performance, and whether or not
such right to payment is evidenced by any document, instrument or chattel paper,
and all claims against common carriers for goods and Inventory lost in transit;
and (b) the proceeds or products of any of the foregoing. The amount of an
Account Receivable shall be the amount of the receivable net of all discounts.
"Borrower Documents" shall mean, collectively, this Agreement, the Revolving
Credit Note, the Guaranty, the Stock Pledge Agreement, the Security Agreement
and any other document to be executed by the Borrower which relates to this
Agreement.
"Capital Expenditure" shall mean any expenditure by, or obligation incurred by,
a Person for an asset which will be used in a year or years subsequent to the
year in which the expenditure is made or obligation is incurred, and which asset
is properly classified in relevant financial statements of such Person as
equipment, real property or improvements, fixed assets or a similar type of
capitalized asset, all in accordance with GAAP.
"Client Lists" shall mean all of Borrower's right, title and interest in and to
any and all of its client lists or customer lists.
"Collateral" shall mean the Borrower's Client Lists.
"Contract Rights" shall mean all of the Borrower's right, title and interest in,
to and under the (i) Independent Agent Agreement dated July 25, 1994 between the
Lender and the Borrower; and (ii) the Distributor Agreement between the Borrower
and Automated Solutions, Inc., dated August 31, 1995.
"CPA Firm" shall mean the Borrower's firm of certified public accountants which
regularly performs accounting services for the Borrower, provided that such firm
is satisfactory to the Lender in the Lender's discretion.
<PAGE>
"Current Assets" shall mean the amount of the Borrower's total current assets,
determined on a consolidated basis in accordance with GAAP.
"Current Liabilities" shall mean the amount of the Borrower's total current
liabilities, determined on a consolidated basis in accordance with GAAP.
"Dividend" shall mean any amount declared or paid, or set apart by the Borrower
for the purpose of payment of, (a) any dividend or other distribution on or in
respect of any shares of any class of the Borrower's capital stock, or (b) the
purchase, retirement, reacquisition or redemption of any shares of any class of
the Borrower's capital stock, or (c) any distribution by way of reduction of
capital, or (d) any other distribution on or in respect of any shares of any
class of the Borrower's capital stock.
"Event of Default" shall mean any one of the occurrences which are Events of
Default under Section IX of this Agreement.
"Funded Debt" shall mean any obligation of Borrower payable in whole or in part
more than one (1) year from the date of creation thereof, which under generally
accepted accounting principles is to be shown on the balance sheet of borrower
as a liability, including capitalized lease obligations.
"GAAP" shall mean generally accepted accounting principles applied on a basis
consistent with prior periods.
"Guarantors" shall mean Thomas E. Aliprandi and David E. Shepardson.
"Guaranty" shall mean that Guaranty Agreement dated September 18, 1995, executed
by the Guarantors in favor of the Lender.
"Indebtedness" shall mean all obligations, contingent or otherwise, which, in
accordance with GAAP, should be classified on the obligor's balance sheet as
liabilities.
"Net After Tax Income" for any period shall mean either (a) if the CPA Firm has
prepared compiled financial statements for that period accompanied by an
unqualified opinion, the amount shown in the income statement (prepared and
compiled by the CPA Firm) as net income of the Borrower after deduction of
and/or allowance for all state and federal income taxes paid or payable, less
all items of extraordinary income; or (b) in all other cases, the net income of
the Borrower, after exclusion of all items of extraordinary income, after
deduction of all direct and indirect expenses, and after deduction of and/or
allowance for all state and federal income taxes paid or payable, all as
determined in accordance with GAAP.
"Net Cash Flow" shall mean the sum of (a) Net After Tax Income, plus (b) all
non-cash charges (such as deferred taxes, depreciation and amortization of good
will) which, in determining Net After Tax Income for any period, were deducted
from the Borrower's gross income for such period, minus the sum of (1) the
aggregate amount of Capital Expenditures for that period, plus (2) any
Dividends, for that period, plus (3) all Principal Repayments for that period,
all in accordance with GAAP.
"Net Income" shall mean either (a) if the CPA Firm has prepared audited
financial statements for the period in question, accompanied by an unqualified
opinion, the amount shown in the income statement (prepared and audited by the
CPA Firm) as net income, less all items of extraordinary income; or (b) in all
other cases, the net income of the Borrower, after exclusion of all items of
extraordinary income and after deduction of all direct and indirect expenses,
all as determined in accordance with GAAP.
"Net Worth" shall mean the sum of the Borrower's retained earnings, profit after
tax and amount for capital stock. In determining Net Worth, the amounts
representing retained earnings, profit after tax and capital stock shall be
determined for the Borrower in accordance with GAAP.
"Person" shall mean any individual, partnership, association, trust, corporation
or other entity.
<PAGE>
"Prime Rate" shall mean the prime rate as published by the Wall Street Journal.
The prime rate listed in the Wall street Journal for the last business day of
each month shall be the Prime Rate for that entire month and shall be applied to
the average daily balance outstanding for that month.
"Principal Repayments" shall mean all expenditures by, or obligations existing
with respect to or incurred by, a Person for the repayment of any principal of,
on, or in connection with any Funded Debt, including (for purposes of
illustration, and not for purposes of limitation) principal payments required as
the short term portion of any Funded Debt, and principal payments required on or
in connection with the Revolving Credit Loan, all in accordance with GAAP.
"Request for Disbursement" shall mean either (a) a written request by the
Borrower for a Revolving Credit Loan in form, substance and detail satisfactory
to the Lender, signed by an authorized Person as provided in Section 3.04 or (b)
an oral request on behalf of the Borrower, as provided in Section 3.04, for a
Revolving Credit Loan providing the same information as is included in Annex D
to this Agreement.
"Revolving Credit" shall have the meaning given it in Section II of this
Agreement.
"Revolving Credit Loan" shall mean any single extension of credit by the Lender
to the Borrower pursuant to Section 3.01 of this Agreement, and the total of all
existing Revolving Credit Loans outstanding at any one time within the
limitations of Section 3.02 of this Agreement.
"Revolving Credit Note" shall mean the promissory note dated September 18,1995
by the Borrower, in the face principal amount of Three Hundred Thousand Dollars
$300,000.00, and substantially in the form of Annex A attached hereto, and any
note delivered in renewal, replacement, substitution, extension or novation
thereof.
"Security Agreement" shall mean the Security Agreement dated as of September 18,
1995, between the Borrower and the Lender referred to in Section 5.01 of this
Agreement, and substantially in the form attached hereto as Annex B, as amended
from time to time.
"Shareholders" shall mean Thomas E. Aliprandi, holder of 7,300 shares
(certificate number 001) and David E. Shepardson, III, holder of 2,000 shares
(certificate number 002).
"Tangible Net Worth" shall mean the New Worth of the Borrower minus the value of
any intangible assets, including, without limitation, organization expenses,
patents, trademarks, copyrights, goodwill, research and development, training
cost and unamortized debt discount.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in effect in
the Commonwealth of Kentucky.
"Unmatured Default" shall mean the happening of any material breach under this
Agreement, including but not limited to failure to pay any installment of
principal of interest of the Revolving Credit Note when due, or a breach of the
financial covenants under this Agreement, or other similar material breach the
happening of which, together with the giving of any required notice or the
passage of any required period of time, would constitute an Event of Default.
SECTION II
The Revolving Credit
The Lender hereby establishes the Revolving Credit in favor of the Borrower as
follows:
2.01 Amount of Revolving Credit. The maximum principal amount of the
Revolving Credit shall be Three Hundred Thousand Dollars ($300,000.00).
<PAGE>
2.02 Term of Revolving Credit. The Revolving Credit is effective as of the
date of this Agreement, and, unless the Revolving Credit is sooner
terminated or extended as provided in this Agreement, shall continue in
effect until July 1, 1997. Unless sooner extended or terminated, the
Revolving Credit shall terminate on July 1, 1997, and thereafter the
Borrower shall not be entitled to obtain any additional Revolving
Credit Loans hereunder.
2.03 Termination of Revolving Credit. The Lender shall have the right, at
its sole option and absolute discretion, to terminate the Revolving
Credit upon the occurrence of any Event of Default and upon giving the
Borrower notice of termination. The termination of the Revolving Credit
shall not in any way release the Borrower form its obligations under
this Agreement, nor shall it terminate this Agreement. The provisions
of this Agreement and the security interests created by the Security
Agreement shall continue in full force and effect until all amounts
owed by the Borrower to the Lender, including interest, penalties, and
other charges, shall have been paid in full.
2.04 Extension of Revolving Credit. The Lender is under no duty to extend
the period of the Revolving Credit beyond July 1, 1997. Before, at or
after the termination of the Revolving Credit, the Lender may extend
the term of the Revolving Credit, on a basis and with terms and
conditions satisfactory to the Lender in its sole discretion, for one
or more successive one year terms. Any such extension must be done in a
writing signed by the Lender and specifically providing for an
extension of the Revolving Credit in order to be binding on the Lender.
Upon any extension of the period of the Revolving Credit, the Security
Agreement and the other Borrower Documents shall remain in effect and
shall continue to apply to the Revolving Credit Note, as extended, (or
to a renewal or replacement note for the Revolving Credit Note, or its
replacement), until that Revolving Credit Note, as extended, (or to a
renewal or replacement not for the Revolving Credit Note, or its
replacement), until that Revolving Credit Note, as extended, renewed or
replaced, shall have been paid in full.
SECTION III
The Revolving Credit Loans
3.01 Revolving Credit Loans. Subject to the terms and conditions of this
Agreement, so long as the Revolving Credit remains in effect and is not
terminated, and no Unmatured Default or Event of Default has occurred,
the Lender shall grant the Borrower such Revolving Credit Loans as the
Borrower may request from time to time in accordance with the
provisions of this Agreement. The unpaid principal balance of the
aggregate of the Revolving Credit Loans shall bear interest at an
annual rate equal to the Prime Rate as published in the Wall Street
Journal for the last business day of each month, which shall be the
Prime Rate for the entire month and shall be applied to the average
daily balance outstanding for that month, plus two percent (2.0%), from
the date the first Revolving Credit Loan is made pursuant to this
Agreement until the entire principal balance of the aggregate of the
Revolving Credit Loans has been paid. The interest rate applicable to
the Revolving Credit Loans shall be adjusted on the last business day
of each month. The Revolving Credit Loans shall be evidenced by and
payable in accordance with the terms of the Revolving Credit Note and
on the terms of this Agreement. In the event of any discrepancy between
the terms of the executed Revolving Credit Note and this Agreement, the
terms of the Revolving Credit Note shall prevail.
3.02 Maximum Amount. At no time shall the aggregate unpaid principal balance
of all Revolving Credit Loans made pursuant to this Agreement which are
outstanding at any one time exceed THREE HUNDRED THOUSAND DOLLARS
($300,000.00).
3.03 Purposes of the Revolving Credit Loans. Proceeds of the Revolving
Credit Loans shall be used by the Borrower for general business
purposes which shall be approved by the Lender, specifically, the
Borrower shall use the proceeds from its initial draw to make the
following payments:
Automated Solutions license fee $150,000.00
Accounts payable 8,856.00
Wages payable 16,363.00
Commissions payable 17,781.00
Working Capital and Cash Reserves 7,000.00
-----------
Total of Anticipated Initial Draw Proceeds $200,000.00
<PAGE>
3.04 Procedures and Conditions. Each Revolving Credit Loan obtained by the
Borrower shall be subject to the following terms and conditions:
(a) Each Revolving Credit Loan obtained by the Borrower shall be in the
minimum principal sum of One Thousand Dollars ($1,000.00).
(b) Whenever the Borrower desires to obtain a Revolving Credit Loan it
shall deliver to the Lender a Request for Disbursement (either
orally or in writing) (unless waived by the Lender in writing)
before the day on which it wishes to have the fund made available.
Each such Request for Disbursement shall specify the amount of the
Revolving Credit Loan requested, the date on which the Borrower
desires the funds to be made available, and the purpose for which
the Revolving Credit Loan is requested. The Borrower hereby
authorizes the treasurer of the Borrower, and any person designated
by the board of directors of the Borrower pursuant to a resolution
which has been certified to the Lender by the corporate secretary
or an assistant corporate secretary of the Borrower, to make either
an oral or a written Request for Disbursement. As long as the
Lender believes in good faith that the person actually making any
oral Request for Disbursement is, in fact, such treasurer or other
person designated by the Borrower's board of directors, then any
Revolving Credit Loan made as a result of the Request for
Disbursement shall be deemed to have been made pursuant to a valid
and authorized Request for Disbursement, regardless of whether the
maker of the Request for Disbursement was truly who he or she
claimed to be.
(c) The Borrower shall not be entitled to obtain any Revolving Credit
Loan if any Event of Default or Unmatured Default shall exist at
the time of the making of the Request of Disbursement, or would
exist upon the making of the Revolving Credit Loan requested, even
if the Lender does not elect to terminate the Revolving Credit as a
Borrower with notice of any determination by the Lender to refuse
to make additional advances of the Revolving Credit Loan because of
the existence of an Unmatured Default as soon as practicable
following any such determination, and the Lender acknowledges that
the Borrower shall again be entitled to advances of the Revolving
Credit Loan if, in such event, such Unmatured Default is cured
prior to the occurrence of any Event of Default.
(d) The Borrower shall not be entitled to obtain any Revolving Credit
Loan if immediately after making the Revolving Credit Loan were to
be made, the aggregate of the unpaid principal balance of the
Revolving Credit Loans would exceed the maximum amount permitted
under Section 3.02.
(e) All Revolving Credit Loans shall be made in strict compliance with
the terms and provisions of this Agreement, unless the Lender
elects in its sole discretion to waive nay of those terms and
conditions. The waiver of any terms and conditions with respect to
any one Revolving Credit Loan shall not constitute a waiver of the
same or any other terms or conditions with respect to any other
Revolving Credit Loan.
(f) Each request by the Borrower for a Revolving Credit Loan hereunder
shall constitute the making of the following representations and
warranties by the Borrower to the Lender:
1) That the Borrower is then, and at the time the Revolving
Credit Loan actually is made will be, entitled under this
Agreement to obtain that Revolving Credit Loan; and
2) That all of the covenants, agreements, representations and
warranties made by the Borrower in this Agreement, and in
the Security Agreement and in any writing delivered to the
Lender by or on behalf of the Borrower, are true, correct
and complete in all material respects, and have been
complied in all material respects (to the extent required by
the terms thereof) with, as of such dates.
3.05 Notation of Disbursements and Payments. Disbursements of, and payments
of principal with respect to, Revolving Credit Loans shall be evidenced
by notations by the Lender in its books and records showing the date
and amount of each advance and each payment of principal. The principal
amount outstanding under the Revolving Credit Note from time to time
shall also be recorded by the Lender in its books and records. The
aggregate amount of all disbursements of Revolving Credit Loans made
and shown on the Lender's books and records, over all of the payments
of principal made by the Borrower and recorded on the Lender's books
and records, shall be prima facie evidence of the outstanding principal
balance due under the Revolving Credit Note.
<PAGE>
SECTION IV
Payments of the Revolving Credit Loans
4.01 Optional and Mandatory Revolving Credit Note Principal Payment.
(a) The Borrower may make optional prepayments of principal of
Revolving Credit Loans from time to time. Those payments of
principal of Revolving Credit Loans may not be reborrowed once
repaid.
(b) The Borrower shall pay to the Lender the outstanding principal
balance of all Revolving Credit Loans on July 1, 1997, unless this
Agreement is sooner extended or terminated in accordance with this
Agreement.
4.02 Revolving Credit Note Interest Payments. The Borrower shall pay all
accrued but unpaid interest on the outstanding principal balance of all
Revolving Credit Loans on November 1, 1995, and on the first day of
each calendar month thereafter during such time as any principal
balance of Revolving Credit Loans remains unpaid.
SECTION V
Security for the Revolving Credit Loans
5.01 Security for the Revolving Credit Loans. The Revolving Credit Note and
the Revolving Credit Loans evidenced thereby are and shall be secured
by and entitled to the benefits of all of the following:
(a) Right of Offset. The Revolving Credit Loans shall be secured by
the right of offset provided in Section 10.01 of this Agreement.
(b) Security Interest in the Borrower's Collateral. The Revolving
Credit Loans shall also be secured by a security interest granted
by the Borrower in the Borrower's Collateral, pursuant to the
Security Agreement substantially in the form attached to this
Agreement as Annex B.
SECTION VI
Conditions Precedent
6.01 Conditions Precedent to the Revolving Credit Loans. The Lender's
obligation to provide the Borrower with the first Revolving Credit Loan
shall be conditioned upon the fulfillment of all the following
conditions:
(a) Resolutions. The Borrower shall have furnished the Lender with a
certified copy of the resolutions of its board of directors (1)
authorizing the execution of the following documents: this
Agreement, the Revolving Credit Note, the Security Agreement, and
any other documents, instruments and agreements referred to herein
which are required to be executed and delivered by the Borrower
and (2) authorizing consummation of the transactions contemplated
by, and performance of this Agreement.
(b) Opinion of Counsel. The Borrower shall have furnished the Lender,
at the Borrower's expense, with the legal opinion of Jon V.
Harper, Esq., as counsel for the Borrower addressed to the Lender,
dated the date of the Revolving Credit Note, satisfactory to the
Lender and its counsel and substantially in the form attached
hereto as Annex E.
(c) Certificates of Incumbency. The Borrower shall have furnished the
Lender with a certificate of its secretary certifying the names of
the officers of the Borrower authorized to sign the Borrower
Documents, together with the true signatures of such officers.
(d) Executed Agreements. The Borrower shall have duly executed or
shall have caused the Guarantors and Shareholders to execute each
of the following documents and shall have delivered to the Lender
the following:
1. this Agreement;
2. the Revolving Credit Note;
3. the Security Agreement;
4. the Guaranty Agreement;
<PAGE>
5. the Stock Pledge Agreement;
6. such financing statements or other documents
for filing with public officials with
respect to the Security Agreement as the
Lender may request.
(e) Representations and Warranties. Each and every representation and
warranty made by or on behalf of the Borrower at the time of or
after the execution of this Agreement relating to the Borrower
Documents or the transactions contemplated thereby shall be true,
complete and correct on and as of the date such Revolving Credit
Loan is to be made.
(f) No Defaults. There shall exist no Event of Default or Unmatured
Default which has not been cured to the Lender's satisfaction.
(g) No Change in the Borrower's Condition. There shall have been no
material adverse change in the condition, financial or otherwise,
or the Borrower from that existing on the date of the financial
statements described in Section 8.06 of this Agreement.
(h) Documentation. The Borrower shall have complied with Section 3.04
of this Agreement in all respects, and delivered all documents and
instruments required thereby.
(i) Recordings and Filings. All financing statements or other
instruments as the Lender may reasonably request have been
executed and delivered by the Borrower and filed or recorded in
such public offices as the Lender may request to perfect and
maintain the perfection of the security interests which secure the
Revolving Credit Loans.
(j) Assurances and Opinions for Property Outside Kentucky. The Lender
shall have received reports of searches of personal property
records from the appropriate reporting agency in the State of Utah
and in any state outside Utah in which any Collateral is located;
which do not disclose any security interest in the Collateral
existing as of the date of this Agreement that is prior to the
Lender's security interest in such Collateral, on or after the
perfection of the Lender's security interest in such Collateral.
The Lender may obtain such reports, but the Borrower shall pay all
costs associated with obtaining them.
(k) Insurance Certificates. The Lender shall have received the
certificates of insurance required by Section 7.01 of this
Agreement.
(l) Counsel Fees. The Borrower shall have paid the Lender's counsel
fees and expenses in accordance with Section XI of this Agreement.
6.02 Conditions Precedent to Subsequent Revolving Credit Loans. The Lender's
obligation to make Revolving Credit Loans after the first Revolving
Credit Loan shall be conditioned upon the fulfillment prior to the
making of each such Revolving Credit Loan of the conditions set out in
paragraphs (f), (g), (h) and (i) of Section 6.01 of this Agreement and
to the further condition that the representations set out in Section
3.04(f) are true, complete and correct.
6.03 Conditions Subsequent. The Lender's obligation to continue to make
Revolving Credit Loans shall be conditioned upon the fulfillment on or
before September 20, 1995, of each of the following conditions:
(a) Assurances and Opinions for Property Outside Utah. The Lender
shall have received reports of searches of personal property
records from the appropriate reporting agency in the State of Utah
and in any state outside Utah in which any Collateral is located;
which do not disclose any security interest in the Collateral
existing as of the date of this Agreement that is prior to the
Lender's security interest in such Collateral, on or after the
perfection of the Lender's security interest in such Collateral.
The Lender may obtain such reports, but the Borrower shall pay all
costs associated with obtaining them.
SECTION VII
General Covenants
During the term of this Agreement, the Borrower shall comply with, all of the
following provisions:
7.01 Insurance. The Borrower shall maintain insurance as follows:
<PAGE>
(a) Liability Insurance. The Borrower at its own cost and expense,
shall procure, maintain and carry in full force and effect general
liability, public liability, workers' compensation liability,
environmental hazard liability and property damage insurance with
respect to the actions and operations of the Borrower to such
extent, in such amounts and with such deductibles as are carried
by prudent businesses similarly situated, but in any event not
less than the amounts of coverage per person and per occurrence,
and with the deductibles, as are provided in the Borrower's
insurance in effect on the date of this Agreement. Without
limiting the foregoing, such insurance shall insure against any
liability for loss, injury, damage or claims caused by or arising
out of or in connection with the operation of the Borrower's
business including injury to or death of the Borrower's employees,
agents or any other persons and damage to or destruction of public
or private property.
(b) Physical Damage Insurance. The Borrower at its own cost and
expense, shall insure all of its insurable properties to such
extent, against such hazards (including, without limitation,
environmental hazards), in the amount of coverage and with such
deductibles as are carried by prudent businesses similarly
situated, but in any event insuring against such hazards and with
such coverages and deductibles as are provided in the Borrower's
insurance in effect on the date of this Agreement, and in any
event in amounts of coverage not less than the insurable value of
the property insured.
(c) General Insurance Requirements.
(1) All insurance which the Borrower is required to maintain
shall be satisfactory to the Lender in form amount and
insurer. Such insurance shall provide that any loss
thereunder shall be payable notwithstanding any action,
inaction, breach of warranty or condition, breach of
declarations, misrepresentation or negligence of the
Borrower. Each policy shall contain an agreement by the
insurer that, notwithstanding lapse of a policy for any
reason, or right of cancellation by the insurer or any
cancellation by the Borrower such policy shall continue in
full force for the benefit of the Lender for at least
thirty (30) days after written notice thereof to the Lender
and the Borrower, and no alteration in any such policy
shall be made except upon thirty (30) days written notice
of such proposed alteration to the Lender and the Borrower
and written approval by the Lender. At or before the making
of the first Loan, the Borrower shall provide the Lender
with certificates evidencing its due compliance with the
requirements of this section.
(2) Prior to the expiration date of any policy of insurance
maintained pursuant to this Agreement, the Borrower shall
provide the Lender with a certificate of insurance
evidencing the acquisition of a new policy, or an extension
or renewal of an existing policy, evidencing the Borrower's
due compliance with this section.
7.02 Taxes and Other Payment Obligations.
(a) The Borrower shall pay and discharge, or cause to be paid and
discharged, before any of them become in arrears, all taxes,
assessments, governmental charges, levies, and claims for labor,
materials or supplies which if unpaid might become a lien or
charge upon any of their property, and all of their other debts,
obligations and liabilities.
(b) The Borrower may refrain from paying any amount it would be
required to pay pursuant to subparagraph (a) of this section if
the validity or amount thereof is being contested in good faith by
appropriate proceedings timely instituted which shall operate to
prevent the collection or enforcement of the obligation contested,
provided that if the Borrower is engaged in such a contest, it
shall have set aside on its books appropriate reserves with
respect thereto. If the validity or amount of any such obligations
in excess of TWENTY-FIVE THOUSAND DOLLARS ($25,000.00) shall be
contested pursuant to the provisions of this subparagraph, the
Borrower shall notify the Lender immediately upon the institution
of the proceedings contesting the obligation.
7.03 Financial Statements.
<PAGE>
(a) Annual Statements. As soon as available, and in any event within
one hundred twenty (120) days after the end of each fiscal year,
the Borrower shall furnish to the Lender a compiled balance sheet,
income statement, and statement of profit and loss, showing
sources and uses of income, for such fiscal year, together with
comparative figures for the last preceding fiscal year prepared by
the CPA Firm, and also together with the unqualified opinion of
the CPA Firm in form and substance satisfactory to the Lender.
Together with such annual compiled financial statements and
opinion, the Borrower shall furnish the Lender with the CPA Firm's
statement that the CPA Firm has reviewed the provisions of this
Agreement and nothing has come to the CPA Firm's attention to
cause it to believe that any Event of Default or Unmatured Default
exists as of the date of the statement, or, if such is not the
case, specifying such Event or Default or Unmatured Default and
the nature thereof, and the action the Borrower will take to
correct it.
(b) Monthly Statements. As long as the Lender has submitted
appropriate billing reports in a timely manner, as soon as
available, and in any event within thirty (30) days after the
close of each calendar month, the Borrower shall furnish the
Lender with a balance sheet, income statement, and statement of
profit and loss, showing sources and uses of income, for such
month, together with comparative figures for both the month just
ended and the portion of the fiscal year then ended, unaudited but
accompanied by a certificate signed by the chief financial officer
of the Borrower stating that such statements have been properly
prepared in accordance with GAAP and are materially correct.
(c) Additional Financial Information. The Borrower shall deliver to
the Lender:
(1) Promptly upon receipt thereof, all detailed reports, if any
(excluding working drafts), submitted to the Borrower by
the CPA Firm in connection with each annual compilation of
the Borrower's books by the CPA Firm.
(2) Within thirty (30) days after the respective dates of
filing the corporate federal income tax returns of the
Borrower for each year, a written statement signed by the
CPA Firm that the firm has prepared or reviewed the
Borrower's federal income tax returns for such year and in
the firm's opinion the provisions for federal taxes based
on the Borrower's income, as recorded in the accounts,
represents an adequate estimate of the liability of the
Borrower for federal taxes based on income.
(3) Promptly upon their becoming available, copies of all
financial statements, reports, notices of meetings and
proxy statements which the Borrower shall send to its
stockholders.
(4) Within ten (10) days after the filing thereof in the office
of the Secretary of Stare of the State of Utah, certified
copies of all amendments to the Borrower's Articles of
Incorporation.
(5) Such additional information with respect to its financial
condition as may be reasonably requested by the Lender from
time to time.
7.04 Financial Records. The Borrower shall maintain a standard modern system
of accounting in which full, true and correct entries shall be made of
all dealings or transactions in relation to its business and affairs in
accordance with generally accepted accounting principles applied on a
basis consistent with prior years and, without limitation, making
appropriate accruals for estimated contingent losses and liabilities.
7.05 Properties. The Borrower shall maintain its fixed assets in good
condition, subject only to normal wear and tear, and make all necessary
and proper repairs, renewals and replacements. The Borrower shall
comply with all material leases and other material agreements in order
to prevent loss or forfeiture, unless compliance is being contested in
good faith by appropriate proceedings timely instituted which shall
operate to prevent enforcement of the loss or forfeiture. The Lender
shall have the right to inspect the Borrower's fixed assets at all
reasonable times, and from time to time.
7.06 Corporate Existence and Good Standing. The Borrower shall preserve its
corporate existences in good standing and shall be and remain qualified
to do business and in good standing in all states and countries in
which it is required to be so qualified.
<PAGE>
7.07 Notice Requirements.
(a) Default. The Borrower shall cause its President, or in his absence
an officer of the Borrower designated by it, to notify the Lender
in writing within three (3) days, after the Borrower, or any of
the Borrower's officers or directors, has notice of any Event of
Default or Unmatured Default or has notice that any representation
or warranty made in this Agreement, or in any related document or
instrument, for any reason was not true and complete and not
misleading in any material respect when made. Such notice shall
specify the nature of such Event of Default or Unmatured Default
and the action the Borrower has taken or will take to correct it.
(b) Material Litigation. The Borrower promptly shall notify the Lender
in writing of the institution or existence of any litigation or
administrative proceeding to which the Borrower may be or become a
party which might involve any material risk of any judgment or
liability which (1) would be in excess of TWENTY-FIVE THOUSAND
Dollars ($25,000.00), or (2) would otherwise result in any
material adverse change in the Borrower's business, assets or
condition, financial or otherwise.
(c) Other Information. From time to time, upon request by the Lender,
the Borrower shall furnish to the Lender such information
regarding the Borrower's business, assets and condition, financial
or otherwise, as the Lender may reasonably request. The Lender
shall have the right during reasonable business hours to examine
all of the Borrower's business and financial books and records and
to make notes and abstracts therefrom, to make an independent
examination of the Borrower's books and records for the purpose of
verifying the accuracy of reports delivered by the Borrower and
ascertaining compliance with this Agreement.
7.08 Revolving Credit Note and Security Agreement. The Borrower shall pay
the Revolving Credit Note in accordance with its terms, and the
Borrower shall comply with the provisions of the Security Agreement.
7.09 Compliance with Law. The Borrower shall comply in all material respects
with (a) all valid and applicable statutes, rules and regulations of
the United States of America, of the States thereof and their counties,
municipalities and other subdivisions and of any other jurisdiction
applicable to the Borrower; (b) the orders, judgments and decrees of
all courts or administrative agencies with jurisdiction over the
Borower; or its business; and (c) the provisions of licenses issued to
the Borrower except where compliance therewith shall be currently
contested in good faith by appropriate proceedings, timely instituted,
which shall operate to stay any order with respect to such
non-compliance.
7.10 Liens. Except for liens permitted in this Agreement, the Borrower shall
not (a) create or incur or suffer to be created or incurred or to exist
any encumbrance, mortgage, pledge, lien, charge, restriction or other
security interest of any kind upon any of the Collateral, whether owned
or held on the date of this Agreement or acquired thereafter, or upon
the income or profits therefrom, or (b) transfer any such Collateral or
the income or profits therefrom for the purpose of subjecting the same
to payment of indebtedness or performance of any other obligation
except payments made in accordance with Section 7.02 of this Agreement
or payments made to the Lender in accordance with the terms and
provisions of this Agreement, or (c) acquire, or agree or have an
option to acquire, any Collateral upon conditional sale or other title
retention or purchase money security agreement, device or arrangement,
or (d) sell or transfer, assign, or pledge any Collateral, with or
without recourse. The Borrower may incur or create, or suffer to be
incurred or created or to exist, the following liens without violating
the provisions of this Section 7.10:
(1) Statutory liens to secure claims for labor, material or
supplies to the extent that payment thereof shall not at
the time be required to be made in accordance with Section
7.02 of this Agreement.
(2) Deposits or pledges made in connection with, or to secure
payment of, workers' compensation, unemployment insurance,
old age pensions or other social security, or in connection
<PAGE>
with contest, to the extend the payment thereof shall not
at that time be required to be made in accordance with
Section 7.02 of this Agreement.
(3) Statutory liens for taxes or assessments or governmental
charges or levies if payment shall not at the time be
required to be made in accordance with Section 7.02 of this
Agreement.
(4) Purchase money liens or security interests with respect to
property acquired by the Borrower with the Lender's prior
written consent, which shall not be unreasonably withheld.
(5) Statutory liens (and contractual liens that provide to the
secured party no greater rights than equivalent statutory
liens) to secure payment of rent or lease payments with
respect to leases of real property to the extent that such
payments shall not at the time be required to be made in
accordance with Section 7.02 of this Agreement.
7.11 Letters of Credit. Without the Lender's prior written consent which
shall not be unreasonably withheld, the Borrower shall not have
outstanding any letters of credit upon which the Borrower is the
obligor or guarantor.
7.12 Articles of Incorporation and Bylaws. Without the Lender's prior
written consent, which shall not be withheld or delayed unreasonably,
the Borrower shall not make any changes in or amendments to its
articles of incorporation.
7.13 Dividends; Acquisition of Stock; New Shares.
(a) Except as provided in subparagraph (b) of this Section 7.13 and
without the prior written consent of the Lender, the Borrower
shall not declare and pay, or set apart any sum for the purpose of
payment of, any Dividend.
(b) Without violating the provisions of subparagraph (a) of this
Section 7.13, and so long as no Event of Default or Unmatured
Default has occurred and is continuing, the Borrower may declare
and pay, or set apart any sums for the purposes of payment of
Dividends, with the Lender's prior written consent, which consent
shall not be unreasonably withheld.
7.14 Mergers, Sales, Transfers and Other Dispositions of Assets. Without the
Lender's prior written consent, which shall not be unreasonably
withheld or delayed, the Borrower shall not:
(a) Be a party to any consolidation, reorganization (including without
limitation those types referred to in Section 368 of the United
States Internal Revenue Code of 1986, as amended), "stock-swap" or
merger;
(b) Sell or otherwise transfer any material part of its assets;
(c) Purchase all or a substantial part of the capital stock or assets
of any corporation or other business enterprise;
(d) Effect any change in its capital structure;
(e) Liquidate or dissolve or take any action with a view toward
liquidation or dissolution.
7.15 Loans. The Borrower shall not make any loan or advance any funds
whatsoever to any business, entity, party or individual, in excess of
TEN THOUSAND DOLLARS ($10,000.00) and the aggregate of any advances
outstanding shall not exceed FIFTY THOUSAND DOLLARS ($50,000.00) at any
one time.
7.16 Verification of Financial Information. The Lender may at any time other
than in connection with an annual compilation, and from time to time,
require that any determinations of financial information provided by
the Borrower to the Lender be verified by the CPA Firm at the
Borrower's expense.
7.17 UniDial Billings. The Borrower shall generate monthly
telecommunications revenues on its accounts with
<PAGE>
Lender at or above the amounts specified in Schedule 7.17 which is
attached hereto and incorporated herein.
7.18 Gross Revenue. The Borrower shall generate monthly gross revenues at or
above the amounts specified in Schedule 7.18 which is attached hereto
and incorporated herein by reference.
7.19 Net Income. The Borrower shall have net income (or loss) at or above
the amounts specified in Schedule 7.19 which is attached hereto and
incorporated herein.
7.20 Business Ownership. The Shareholders' equity ownership of the Borrower
shall not fall below (i) 80% of the combined voting power of all
classes of the Borrower's capital stock entitled to vote, or (ii) 80%
of the total value of shares of all classes of the Borrower's capital
stock outstanding.
SECTION VIII
Representations and Warrants
To induce the Lender to enter into this Agreement and to make Revolving
Credit Loans, the Borrower represents and warrants to the Lender as follows
(which warranties and representations shall be deemed to be remade and restated
in full (subject only to changes of circumstances which (1) are fully disclosed
by the Borrower to the Lender in writing, describing the changed circumstances,
and (2) do not result in any violation of any condition, provision, promise
and/or covenant of this Agreement, or otherwise result in an Unmatured Default
or an Event of Default) whenever a Revolving Credit Loan is requested by the
Borrower):
8.01 Corporate Organization and Existence. The Borrower is a corporation
duly organized, validly existing, and in good standing under the laws
of the State of Utah. The Borrower has all necessary power and
authority to carry on its business conducted on the date of this
Agreement. The Borrower is qualified to do business as foreign
corporation, and is in good standing, in all states and in all foreign
countries in which it owns and property or carries on substantial
activities or is otherwise required to be so qualified, and is duly
authorized, qualified and licensed under all laws, regulations
ordinances or orders of public authorities to carry on its business in
the places and in the manner conducted on the date of this Agreement.
8.02 Right to Act. No registration with or consent or approval of any
governmental agency of any kind is required for the execution,
delivery, performance and enforceability of the Borrower Documents. The
Borrower has full power and authority, corporate and otherwise, to
execute, deliver and perform the Borrower Documents.
8.03 No Conflicts. The Borrower's execution, delivery and performance of the
Borrower Documents do not, and will not, (a) violate any existing
provision of the articles of incorporation or bylaws of the Borrower or
any law, rule, regulation, or judgment, order or decree applicable to
the Borrower or (b) otherwise constitute a default, or result in the
imposition of any lien under (1) any existing contract or other
obligation binding upon the Borrower or its property, with or without
the passage of time or the giving of notice or both; (2) any law, rule
or regulation applicable to the Borrower or its business; or (3) any
judgment, order or decree of any court or administrative agency
applicable to the Borrower or its business.
8.04 Authorization. The execution, delivery and performance by the Borrower
of the Borrower Documents has been duly authorized, and the Borrower
Documents have been duly executed and delivered and constitute legal,
valid and binding obligations enforceable against the Borrower.
8.05 Litigation and Taxes.
(a) Except for those matters described in the financial statements
referenced in Section 8.06 of this Agreement, there is not
litigation, at law or in equity, or any proceeding before any
federal, state or municipal court, board or other governmental or
administrative agency pending, or to the knowledge of the
Borrower, threatened which is likely to involve any material
judgment or liability against the Borrower or which might
otherwise result in any material adverse change in the Borrower's
business, assets or condition, financial or otherwise. No
judgment, decree or order of any federal, state or municipal
<PAGE>
court, board or other governmental or administrative agency has
been issued against the Borrower or any of its assets which has,
or might have, a material adverse effect on the Borrower's
business, assets or condition, financial or otherwise.
(b) The Borrower has filed all tax returns which are required to be
filed and has paid, or made adequate provision for the payment of,
all taxes which have or may become due pursuant to such returns or
pursuant to assessments received. The Borrower knows of no
material additional assessments for which adequate reserves have
not been established, and the Borrower has made adequate provision
for all current taxes.
8.06 Financial Statements. The Borrower's most recent consolidated financial
statements of the type described in paragraphs (a), (b) and (c) of
Section 7.03 and dated September 30, 1995, have been furnished to the
Lender. Those financial statements are true and complete, have been
prepared in accordance with generally accepted accounting principles,
do not omit reference to any material contingent liabilities of any
kind, and fairly present the financial condition of the Borrower as of
the date of the financial statements.
8.07 Compliance with Contractual Obligations, Laws and Judgments.
(a) The Borrower is not in default in the payment, performance,
observance or fulfillment of any of the material obligations,
covenants or conditions contained in any lease, indenture,
mortgage, deed of trust, promissory note, agreement or undertaking
to which it is a party or by which its assets are bound.
(b) The Borrower has not violated any applicable statute, regulation
or ordinance of the United States of America or of any state,
municipality or any other subdivision, jurisdiction or agency
thereof, in any respect materially and adversely affecting the
Borrower's business, property, assets, operations or conditions,
financial or otherwise.
(c) The Borrower is not in default with respect to any judgment,
order, writ, injunction, decree or demand of any court, arbitrator
or governmental agency or body.
8.08 No Undisclosed Liabilities or Guaranties. The Borrower does not have
any material liabilities, direct or contingent, except as disclosed or
referred to in the financial statements referred to in Section 8.06 of
this Agreement or incurred by Borrower after such date and not
prohibited by the express terms of this Agreement, nor has the Borrower
guaranteed, or otherwise become responsible for, the material
obligations of any person.
8.09 Title to Properties. The Borrower has good and marketable title to all
of its property and assets of all character, free and clear of all
mortgages, liens, and encumbrances except (a) encumbrances granted to
the Lender, (b) minor irregularities in title which do not materially
interfere with the use and enjoyment by the Borrower of such properties
and assets in the normal course of business as presently conducted, or
materially impair the value thereof for such business.
8.10 Trademarks and Permits. The Borrower possesses adequate licenses,
patents, copyrights, trademarks and trade name to conduct its
businesses as now conducted. Neither the Borrower nor any of its
officers, directors or employees has received notice or has knowledge
of any claim that the Borrower has violated any other person's license,
patent, copyright, trademark or trade name, or that the Borrower's
licenses, patents, copyrights, trademarks or trade names are currently
being infringed. The Borrower has all governmental permits,
certificates, consents and franchises necessary to carry on their
businesses as now conducted and to own or lease and operate their
properties as now owned, leased or operated. All such governmental
permits, certificates, consents and franchises are valid, and in
effect, and the Borrower is not in violation thereof, and none of them
contains any term, provision, condition or limitation more burdensome
than generally applicable to persons engaged in the same or similar
business.
8.11 Disclosure. Neither this Agreement, nor any agreement, document,
certificate or statement furnished to the Lender by or on behalf of the
Borrower in connection with the transactions contemplated by this
Agreement contains any untrue statement of any material fact or omits
to state any material fact necessary to make the
<PAGE>
statements contained herein or therein not misleading. There is not
fact known to the Borrower which materially and adversely affects, or
in the future is likely to materially and adversely affect, the
Borrower's business, operations, affairs or condition, financial or
otherwise, which has not been disclosed to the Lender.
SECTION IX
Events of Default
The occurrence of any one or more of the following shall constitute an
Event of Default under this Agreement (an "Event of Default"):
9.01 Failure to Pay. If the Borrower shall fail to pay in full an y
installment of principal or interest on the Revolving Credit Note, or
payments required by Section IV of this Agreement, within five (5) days
after notice that such payment has become due and is unpaid.
9.02 No Notice Required. If the obligor with respect to the following
provisions shall fail to observe, perform or comply with any term,
obligation, covenant, agreement, condition or other provision contained
in Sections 6.03, 7.02, 7.06, 7.07, 7.10, 7.12, 7.13, 7.14, 7.15, 7.16,
11.01, or 12.14 of this Agreement; if the obligor with respect to the
following provisions shall for three consecutive months, fail to
observe, perform or comply with any term, obligation, covenant,
agreement, condition or other provision contained in any two of the
following three Sections: 7.17, 7.18 and/or 7.19 of this Agreement; or
any Event of Default occurs under the Security Agreement.
9.03 Notice Required. If the obligor with respect to any term, obligation,
covenant, agreement, condition or other provision (other than those
referred to in Sections 9.01 or 9.02 hereof) contained or referred to
in this Agreement shall fail to observe, perform or comply with those
provisions, and such failure shall not have been fully corrected within
fifteen (15) days after the Lender has given written notice thereof to
the Borrower.
9.04 Falsity of Representation or Warranty. If any representation or
warranty or other statement of fact contained in any of the Borrower
Documents or in any writing, certificate, report or statement at any
time furnished the Lender by or on behalf of the Borrower pursuant to
or in connection with this Agreement or the Revolving Credit Loans
shall have been false or misleading in any material respect or which
shall omit a material fact, whether or not made with knowledge, at the
time it was made.
9.05 Judgments. If a final judgment or judgments for the payment of money in
excess of the sum of Twenty-Five Thousand Dollars ($25,000.00) in the
aggregate, or with respect to property with a value in excess of such
amount, shall be rendered against the Borrower and such judgment or
judgments shall remain unsatisfied for a period of thirty (30)
consecutive days after the entry thereof and within that thirty (30)
days has not been (a) stayed pending appeal, or (b) discharged.
9.06 Adverse Financial Change. If there should be any material adverse
change in the financial condition of the Borrower as determined in the
Lender's reasonable discretion, from their respective financial
conditions as shown on the financial statements referred to in Section
8.06 of this Agreement, and such adverse change is not fully corrected
to Lender's reasonable satisfaction within thirty (30) days after
notice with respect thereto from the Lender.
9.07 Other Obligations to the Lender and its Affiliates. If the Borrower
shall fail to observe perform or comply with the terms, obligations,
covenants, agreements, conditions or other provisions of any agreement,
document or instrument other than this Agreement and the other Borrower
Documents which the Lender or any of its affiliates has entered into
with the Borrower and which involves Indebtedness to the Lender or any
of its affiliates.
9.08 Dissolution or Termination of Existence. If the Borrower or any person,
firm or corporation affiliated with it, takes any action that is
intended to result in the termination, dissolution or liquidation of
the Borrower.
<PAGE>
9.09 Solvency.
(a) If the Borrower shall (1) have an order of relief entered in any
proceeding filed by it under the federal bankruptcy laws (as in
effect on the date of this Agreement or as they may be amended
from time to time); (2) admit its inability to pay its debts
generally as they become due; (3) become insolvent in that its
total assets are in the aggregate worth less than all of its
liabilities and it is unable to pay its debts generally as they
become due; (4) make a general assignment for the benefit of
creditors; (5) file a petition, or admit (by answer, default or
otherwise) the material allegations of any petition filed against
it, in bankruptcy under the federal bankruptcy laws (as in effect
on the date of this Agreement or as they may be amended from time
to time), or under any other law for the relief of debtors, or for
the discharge, arrangement or compromise of their debts; or (6)
consent to the appointment of a receiver, conservator, trustee or
liquidator of all or part of its assets.
(b) If a petition shall have been filed against the Borrower in
proceedings under the federal bankruptcy laws (as in effect on the
date of this Agreement, or as they may be amended from time to
time), or under any other laws for the relief o f debtors, or for
the discharge, arrangement or compromise of their debts, or an
order shall be entered by any court of competent jurisdiction
appointing a receiver, conservator, trustee or liquidator of all
or part of the Borrower's assets, and such petition or order is
not dismissed or stayed within sixty (60) consecutive days after
entry thereof.
SECTION X
Remedies Upon Default
Notwithstanding anything to the contrary, if any Event of Default under
this Agreement occurs, the Lender, in its sole discretion, and without notice to
the Borrower, may (a) terminate the Revolving Credit, and the Lender shall be
under no further obligation to grant any Revolving Credit Loan to the Borrower,
(b) declare the entire unpaid balance of the Revolving Credit Note, and all
other obligations of the Borrower under this Agreement to be immediately due and
payable in full, without any presentment, demand or notice of any kind, all of
which are hereby waived by the Borrower. In addition, upon the occurrence of any
Event of Default, and at any time thereafter, unless all Events of Default have
been remedied to the full satisfaction of the Lender or waived in a writing
signed by the Lender specifically providing the waiver, the Lender shall have
all of the following rights and remedies and it may exercise one or more of them
singly or in conjunction with others.
10.01 Right to Offset. The Lender shall have the right to set off against, or
appropriate and apply toward the payment of, the obligations of the
Borrower to the Lender, pursuant to this Agreement or as evidenced by
the Revolving Credit Note whether such obligations shall have matured
in due course or by acceleration, and any and all sums and indebtedness
then held or owed by the Lender to or for the credit or account of the
Borrower. For such purpose the Borrower hereby pledges to and grants a
security interest in such other sums and indebtedness of the Lender to
secure all of the Borrower's obligations under this Agreement and the
Revolving Credit Note. Such offsets following an Event of Default may
occur without notice to or demand upon the Borrower or any other
person, all of such notices and demands being hereby waived.
10.02 Enforcement of Rights. The Lender shall have the right, to proceed to
protect and enforce its rights by suit in equity, action at law or
other appropriate proceedings either for specific performance of any
covenant or condition contained in any of the Borrower Documents, or in
aid of the exercise of any power granted in any of the Borrower
Documents.
10.03 Rights Under Security Instruments. The Lender shall also have all
rights and remedies granted it under any and all of the Security
Agreement securing or intending to secure the Borrower's obligations
under the Revolving Credit Note, or any other indebtedness or
obligation of the Borrower under Borrower Documents.
10.04 Cumulative Remedies. All of the rights and remedies of the Lender upon
occurrence of an Event of Default shall be cumulative to the greatest
extent permitted by law, may be exercised successively or concurrently,
from time to time, and shall be in addition to all of those rights and
remedies afforded the Lender at law, or in
<PAGE>
equity, or in bankruptcy. Notwithstanding the foregoing, the Lender
shall be entitled to recover from the cumulative exercise of all
remedies an amount no greater than the sum of (a) the outstanding
principal amount of all Revolving Credit Loans, (b) all accrued but
unpaid interest with respect to the principal amount of the Revolving
Credit Loans, (c) any other amounts that the Borrower is required by
this Agreement to pay to the Lender (for example, and without
limitation, the reimbursement of expenses and legal fees, and late
charges), and (d) any costs, expenses or damages which the Lender is
otherwise permitted to recover by the terms of this Agreement. Any
exercise of any right or remedy shall not be deemed to be an election
of that right or remedy to the exclusion of any other right or remedy.
SECTION XI
Fees and Expenses
11.01 Transactions Expenses. The Borrower shall pay to the Lender upon demand
all reasonable out-of-pocket expenses incurred by the Lender in
connection with the transactions contemplated by this Agreement
including, but not limited to, the Lender's reasonable attorneys' fees
incurred in preparing the Borrower Documents and any and all costs and
fees incurred in connection with the recording or filing of any
documents or instruments in any public office, pursuant to or as a
consequence of this Agreement, or to perfect or protect any security
for the Revolving Credit Loans. The Borrower shall also pay to the
Lender upon demand all reasonable out-of-pocket expenses incurred from
time to time in the administration of the Revolving Credit Loan,
including, without limitation, any reasonable out-of-pocket expenses
(including, but not limited to, attorneys fees) incurred by the Lender
if any of the Borrower Documents should be amended, extended and/or
renewed from time to time.
11.02 Enforcement Expenses. If any Event of Default shall occur under this
Agreement, or any default shall occur under any of the Borrower
Documents or any related documents, the Borrower shall pay to the
Lender, to the extent allowable by applicable law, such amounts as
shall be sufficient to reimburse the Lender fully for all of its costs
and expenses incurred in enforcing its rights and remedies under the
Borrower Documents and any related documents, including without
limitation the Lender's reasonable attorneys' fees and court costs.
Such amounts shall be deemed to be included in the obligations secured
by the Security Agreement.
SECTION XII
Miscellaneous Provisions
12.01 Banking Days. If any provision of this Agreement or any of the other
Borrower Documents requires that the Borrower make any payment, or
otherwise perform any act, on a day on which the Lender is not open for
business, then that payment or action shall be deemed to be due on the
first day thereafter that the Lender is open for business.
12.02 Term of this Agreement. The term of this Agreement shall commence as of
the date hereof, and continue until all Revolving Credit Loans and
accrued but unpaid interest thereon shall have been paid in full and
the Borrower shall have paid or performed all of its other obligations
hereunder.
12.03 No Waivers. Failure or delay by the Lender in exercising any rights
shall not be deemed to be or operate as a waiver of that right, nor
shall any right be exclusive of any other right referred to in this
Agreement, or in any other related document, or available at law or in
equity, by statute or otherwise. Any single or partial exercise of any
right shall not preclude the further exercise of that right. Every
right of the Lender shall continue in full force and effect until such
right is specifically waived in a writing signed by the Lender.
12.04 Course of Dealing. No course of dealing between the Borrower and the
Lender shall operate as a waiver of any of the Lender's rights under
any of the Borrower Documents.
12.05 Waivers by the Borrower. The Borrower herby waives, to the extent
permitted by applicable law, (a) all presentments, demands for
performances, notices of nonperformance (except to the extent
specifically
<PAGE>
required by this Agreement or any other of the Borrower Documents),
protest, notices of protest and notices of dishonor in connection with
the Revolving Credit Note (b) any requirement of diligence or
promptness on the part of the Lender in enforcement of its rights under
the provision of any of the Borrower Documents, and (c) any requirement
of marshaling assets or proceeding against persons or assets in any
particular order.
12.06 Severability. If any part, term or provision of this Agreement is held
by any court to be unenforceable or prohibited by any law applicable to
this Agreement, the rights and obligations of the parties shall be
construed and enforced with that part, term or provision limited so as
to make it enforceable to the greatest extent allowed by law, or, if it
is totally unenforceable, as if this Agreement did not contain that
particular part, term or provision.
12.07 Time of the Essence. Time shall be of the essence in performance of all
of the Borrower's obligations under the Borrower Documents.
12.08 Benefit and Binding Effect. This Agreement shall inure to the benefit
of the Lender, its successors and assigns, and all obligations of the
Borrower and shall bind their respective successors and, if and to the
extent assignment is otherwise permitted by this Agreement, their
assigns.
12.09 Further Assurances. The Borrower shall sign such financing statements
of other documents or instruments as the Lender may reasonably request
from time to time more fully to create, perfect, continue, maintain or
terminate the rights and security interest intended to be granted or
created pursuant to this Agreement or the Security Agreement.
12.10 Incorporation by Reference. All schedules, annexes or other attachments
to this Agreement are incorporated into this Agreement as if set out in
full at the first place in this Agreement that reference is made
thereto.
12.11 Entire Agreement; No Oral Modifications. This Agreement, the schedules
and annexes hereto, and the documents and instruments referred to
herein constitute the entire agreement of the parties with respect to
the subject matter hereof, and supersede all prior understandings with
respect to the subject matter hereof. No change, modification, addition
or termination of this Agreement or any of the Borrower Documents shall
be enforceable unless in writing and signed by the party against who
enforcement is sought.
12.12 Headings. The headings used in this Agreement are included for ease of
reference only and shall not be considered in the interpretation or
construction of this Agreement.
12.13 Governing Law. This Agreement and the related documents and instruments
shall be governed by and construed in accordance with the laws of the
Commonwealth of Kentucky, except to the extent that the laws of any
other state, province or country where the Collateral is located
require that the laws of such other state, province or country shall
govern the creation, perfection or enforcement of the Lender's rights
and security interests in such Collateral.
12.14 Assignments. The Borrower may not assign its rights under this
Agreement to any other party. Any attempted assignment shall be a
default under this Agreement and shall be null and void. The Lender
shall have the right and ability to sell, assign or transfer all or any
part of its rights and/or obligations under this Agreement, and/or to
participate its rights and obligations under this Agreement with other
lenders, and/or to sell participation or participating interests in its
rights and/or obligations under this Agreement. In furtherance thereof,
the Lender shall have the right to provide to any Person who expresses
an interest in becoming such a buyer, assignee, transferee, participant
and/or purchaser, or who actually does become such a buyer, assignee,
transferee, participant, and/or purchaser, such information concerning
the financial, business and other affairs of the Borrower as the Lender
may reasonably deem appropriate in the circumstances. The Borrower
hereby authorizes all such disclosures.
12.15 Multiple Counterparts.
(a) This Agreement may be signed by each party upon a separate copy,
and in such case one counterpart of this Agreement shall consist
of enough of such copies to reflect the signature of each party.
<PAGE>
(b) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement or the terms thereof
to produce or account for more than one of such counterparts.
12.16 Notices.
(a) Any requirement of the Uniform Commercial Code or other applicable
law of reasonable notice shall be met if such notice is given at
least five (5) business days before the time of sale, disposition
or other event or thing giving rise to the requirement of notice.
(b) Except as provided in subsection (c) below, all notices or
communications under this Agreement shall be in writing and shall
be hand-delivered, sent by courier, or mailed to the parties
addressed as follows, and any notice so addressed and (1)
hand-delivered, shall be deemed to have been given when so
delivered, or (2) mailed by registered or certified mail, return
receipt requested, shall be deemed to have been given when mailed,
or (3) delivered to a recognized shall package overnight courier
to the address of the intended recipient with shipping prepaid,
shall be deemed to have been given when so delivered to such
courier:
(1) If to the Borrower:
UNIQUEST COMMUNICATIONS, INC.
6975 Union Park Center, Suite 340
Midvale, UT 84047
Attn: Mr. Thomas E. Aliprandi, President
And copy to:
Mr. Jon V. Harper, Esq.
Suite 700
50 West Broadway
Salt Lake city, UT 84101
(2) If to the Lender:
UNIDIAL INCORPORATED
12910 Shelbyville Road, Suite 211
Louisville, KY 40243
Attn: Mr. Kenneth D. Richey
And copy to:
BROWN, TODD & HEYBURN, PLLC
3200 Providian Center
Louisville, KY 40202-3363
Attn: Mr. C. Edward Glasscock
(c) The Borrower and the Lender may at any time, and from time to
time, change the address or addresses to which notice shall be
mailed by written notice setting forth the changed address or
addresses.
12.17 Survival of Covenants. All covenants, agreements, warranties and
representations made by the Borrower herein shall survive the making of
each Revolving Credit Loan and the execution and delivery of the
Borrower Documents, and shall be deemed to be remade and restated by
the Borrower each time the Borrower requests a Revolving Credit Loan.
<PAGE>
12.18 Consent to Jurisdiction and Venue. The Borrower consents to one or more
actions being instituted and maintained in the Jefferson County,
Kentucky, Circuit Court to enforce this agreement and/or one or more of
the other borrower documents, and waives any objection to any such
action based upon lack of personal or subject matter jurisdiction or
improper venue. The Borrower agrees that any process or other legal
summons in connection with any such action or proceeding may be served
by mailing a copy thereof by certified mail, or any substantially
similar form of mail, addressed to the Borrower as provided in Section
12.16 above.
12.19 Acknowledgment. The Borrower acknowledges that the Borrower has
received a copy of this Agreement and each of the other Borrower
Documents, as fully executed by the parties thereto. The Borrower
acknowledges that the Borrower (a) has READ THIS AGREEMENT AND THE
OTHER BORROWER DOCUMENTS OR HAS CAUSED SUCH DOCUMENTS TO BE EXAMINED BY
THE BORROWER'S REPRESENTATIVES OR ADVISORS; (b) is thoroughly familiar
with the transactions contemplated in this Agreement and the other
Borrower Documents; and (c) has had the opportunity to ask such
questions to representatives of the Lender, and receive answers
thereto, concerning the terms and conditions of the transactions
contemplated in this Agreement and the other Borrower Documents as the
Borrower deems necessary in connection with the Borrower's decision to
enter into this Agreement.
IN WITNESS WHEREOF, the Borrower and the Lender have signed this
Agreement as of the date set forth in the preamble hereto, but actually on the
date(s) set forth below.
UNIDIAL INCORPORATED
By /s/ Kenneth D. Richey
---------------------------------------
Kenneth D. Richey, Secretary/Treasurer
Date: _____________________
UNIQUEST COMMUNICATIONS, INC.
By /s/ Thomas E. Aliprandi
----------------------------------------
Thomas E. Aliprandi, President
Date: _____________________
STATE OF UTAH
COUNTY OF SALT LAKE
The foregoing instrument was acknowledged before me by Thomas E.
Aliprandi, the President of UniQuest Communications, Inc., a Utah corporation,
on behalf of the Corporation, on February 24, 1996.
Notary Public /s/ Marc Johnson
Commission expires: May 30, 1999
By /s/ David E. Shepardson, III
-------------------------------
David E. Shepardson, III
Vice President, Treasurer
Date: 2/24/96
------------------------------
<PAGE>
STATE OF UTAH
COUNTY OF SALT LAKE
The foregoing instrument was acknowledged before me by David E.
Shepardson, III, the Vice President, Treasurer of UniQuest Communications, Inc.,
a Utah corporation, on behalf of the Corporation, on February 24, 1996.
Notary Public /s/ Marc Johnson
Commission expires: May 30, 1999
<PAGE>
Schedule 7.17
UniDial Billings
Oct-95 162,750
Nov-95 156,910
Dec-95 179,590
Jan-96 191,560
Feb-96 182,740
Mar-96 249,540
Apr-96 266,360
May-96 325,010
Jun-96 374,710
Jul-96 446,630
Aug-96 482,600
Schedule 7.18
Gross Revenues
Oct-95 175,658
Nov-95 171,335
Dec-95 195,371
Jan-96 208,888
Feb-96 197,398
Mar-96 268,373
Apr-96 296,708
May-96 359,630
Jun-96 421,443
Jul-96 499,568
Aug-96 542,268
Schedule 7.19
Net Income (Loss)
Oct-95 (12,388)
Nov-95 (12,750)
Dec-95 (12,152)
Jan-96 (10,207)
Feb-96 (13,375)
Mar-96 (11,780)
Apr-96 (5,613)
May-96 (1,885)
Jun-96 6,190
Jul-96 9,422
Aug-96 13,544
FIRST AMENDMENT TO LOAN AGREEMENT
THIS FIRST AMENDMENT TO LOAN AGREEMENT (the "First Amendment"), is made and
entered into as of this 31st day of January, 1998, by and between (a) UNIQUEST
COMMUNICATIONS, INC., a Utah corporation with principal office and place of
business in Midvale, Utah ("Borrower") and (b) AGENT FINANCIAL SERVICES, LLC, a
Kentucky limited liability company with an office and place of business in
Louisville, Kentucky (the "Lender").
PRELIMINARY STATEMENT
A. Pursuant to that certain Loan Agreement dated as of September 18, 1995,
between the Borrower and the Lender, the Lender has established a line of
credit in the principal amount of Three Hundred Thousand Dollars
($300,000.00) in favor of the Borrower (the "Line of Credit"). The Loan
Agreement and other Borrower Documents were originally between the Borrower
and UniDial Incorporated. The Lender acquired the Loan from UniDial
Incorporated on January 1, 1997.
B. The obligation of the Borrower to repay the outstanding principal balance
of the Line of Credit, together with accrued interest thereon is evidenced
by that certain Revolving Credit Note dated September 18, 1995, made by the
Borrower, payable to the order of the Lender, and in the face principal
amount of Three Hundred Thousand Dollars ($300,000.00), as amended pursuant
to that certain First Amendment to Revolving Credit Note dated March 1,
1997 between the Borrower and the Lender (the "First Amendment")
(collectively, the "Note").
C. The current maturity date of the Note is January 31, 1998.
D. The Borrower has now requested that the Lender extend the stated maturity
date of the Line of Credit from January 31, 1998 to January 31, 1999. The
Lender is willing to and desires to extend the stated maturity date of the
Line of Credit from January 31, 1998 to January 31, 1999, pursuant to the
terms and conditions set forth in this First Amendment (the term "Loan
Agreement," as hereinafter used, includes this First Amendment and all
future amendments and modifications to the Loan Agreement).
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements set forth in the Loan Agreement and herein, and for
other good and valuable consideration, the mutuality, receipt and sufficiency of
which are hereby acknowledged, the parties hereto do hereby agree as follows:
1. Each capitalized term used herein, unless otherwise expressly defined
herein, shall have the meaning set forth in the Loan Agreement or Note, as
applicable.
2. The term "Borrower Documents" as such term is defined in Section 1 of the
Loan Agreement, is hereby redefined to mean this Loan Agreement, the
Revolving Credit Note, the Guaranty, the Stock Pledge Agreement, the
Security Agreement, and any and all amendments thereto, and any other
document executed by the Borrower which relates to this Loan Agreement.
3. The term "Revolving Credit Note," as such term is defined in Section 1 of
the Loan Agreement, is hereby redefined to mean the Promissory Note dated
September 18, 1995 by the Borrower, in the face principal amount of Three
Hundred Thousand Dollars ($300,000.00), and substantially I the form of
Annex A attached hereto, and any note delivered in renewal, replacement,
substitution, extension or novation thereof, and any amendments thereto,
including, but not limited to, that certain First Amendment to Revolving
Credit Note made and entered into as of March 1, 1997 between Borrower and
Lender and that certain Second Amendment to Revolving Credit Note dated as
of January 31, 1998 between Borrower and Lender.
4. Section 2.02 of the Loan Agreement is hereby amended as follows:
2.02 Term of Revolving Credit. The Revolving Credit is effective as of the
date of this Agreement and, unless the Revolving Credit is sooner
terminated or extended as provided in this Agreement, shall continue
in effect until January 31, 1999. Unless sooner extended or
terminated, the Revolving Credit shall terminate on January 31, 1999,
and thereafter the Borrower shall not be entitled to obtain any
additional Revolving Credit Loans hereunder.
<PAGE>
5. Section 3.01 of the Loan Agreement is amended as follows:
3.01 Revolving Credit Loans. Subject to the terms and conditions of this
Agreement, so long as the Revolving Credit remains in effect and is
not terminated, and no Unmatured Default or Event of Default has
occurred, the Lender shall grant the Borrower such Revolving Credit
Loans as the Borrower may request from time to time in accordance
with the provisions of this Agreement. The unpaid principal balance
of the aggregate of the Revolving Credit Loans shall bear interest at
an annual rate equal to the Prime Rate as published in the Wall
Street Journal for the last business day of each month, which shall
be the prime rate for the entire month and shall be applied to the
daily balance outstanding for that month, plus two percent (2.0%)
from the date the first Revolving Credit Loan is made pursuant to
this Agreement until the entire principal balance of the aggregate of
the Revolving Credit Loans has been paid. The interest rate
applicable to the Revolving Credit Loans shall be adjusted on each
business day of each month. The Revolving Credit Loans shall be
evidenced by and payable in accordance with the terms of the
Revolving Credit Note and on the terms of this Agreement. In the
event of any discrepancy between the terms of the executed Revolving
Credit Note and this Agreement, the terms of the Revolving Credit
Note shall prevail.
6. Section 12.16(b)(2) of the Loan Agreement shall be amended as follows:
(2) If to the Lender:
Agent Financial Services, LLC
4350 Brownsboro Road
Suite 110, The Summit
Louisville, KY 40207
Attn: Mr. Kenneth D. Richey
and copy to:
Ogden Newell & Welch
1700 Citizens Plaza
500 West Jefferson Street
Louisville, KY 40202
Attn: Mr. Robert W. Adams
7. The Loan Agreement is hereby amended to add a new Section 9.10 as follows:
Change in Control/Initial Public Offering. Upon the occurrence of (i) a
sale of accounts or change in control under Section 4.2 of the Agent's
Agreement, or (ii) an initial public offering by UniDial Incorporated
resulting in a distribution of cash, securities, and/or options to the
Borrower, all amounts advanced under the Revolving Promissory Note,
together with all interest and other sums due shall be immediately due and
payable. All proceeds will be used to pay any remaining balance owed to the
Lender.
8. The term "Guaranty," as defined in Section 1 of the Loan Agreement, is
hereby redefined to mean that certain Guaranty Agreement dated as of
September 18, 1995, executed and delivered by the Guarantors in favor of
the Lender, as amended pursuant to that certain First Ratification and
Reaffirmation dated as of March 1, 1997, and as amended pursuant to that
certain Second Ratification and Reaffirmation of even date herewith,
executed and delivered by the Guarantors in favor of the Lender.
9. The Borrower represents and warrants that no Event of Default has occurred
or is continuing under the Loan Agreement.
10. This First Amendment may be executed in one or more counterparts, each of
which shall constitute an original and all of the same shall constitute one
and the same document.
11. All provisions of the Loan Agreement are hereby reiterated and reaffirmed,
except to the extent expressly modified by this First Amendment.
<PAGE>
12. The First Amendment shall be effective as of the date of delivery of the
following documents to the Lender:
a. This First Amendment, duly executed by the Borrower and the
Guarantors;
b. The Second Amendment to Revolving Credit Note duly executed by
the Guarantor;
c. The First Amendment to Security Agreement of even date herewith,
between the Borrower and the Lender, duly executed by the
Borrower;
d. The First Amendment to Stock Pledge Agreement of even date
herewith, between the Borrower and the Lender, duly executed by
the Borrower;
e. The Second Ratification and Reaffirmation of Guaranty Agreement
of even date herewith, between the Guarantor and the Lender, duly
executed by the Guarantor;
f. A corporate resolution of UniQuest Communications, Inc. in a form
reasonably acceptable to the Lender.
IN WITNESS WHEREOF, the Borrower and the Lender have caused this First
Amendment to Loan Agreement to be executed and delivered by their respective
duly authorized officers as of the day and year first above written.
UNIQUEST COMMUNICATIONS, INC.
By: /s/ Thomas E. Aliprandi
-------------------------------
Thomas E. Aliprandi, President
By: /s/ David E. Shepardson
----------------------------------
David E. Shepardson, III,
Vice President-Treasurer
(the "Borrower")
AGENT FINANCIAL SERVICES, LLC
By: /s/ Kenneth D. Richey
------------------------------
Kenneth D. Richey, Operating Manager
(the "Lender")
REVOLVING CREDIT NOTE
$300,000.00 September 18, 1995
Louisville, Kentucky
For the value received, UNIQUEST COMMUNICATIONS, INC., a Utah
corporation (the "Borrower"), promises to pay to the order of UNIDIAL
INCORPORATED (the "Lender"), at 12910 Shelbyville Road, Suite 211, Louisville,
Kentucky 40243 or such other address as the holder hereof may direct, the
principal sum of THREE HUNDRED THOUSAND DOLLARS ($300,000.00) or, if it is less,
the aggregate unpaid balance of advances made by the Lender pursuant to the Loan
Agreement referred to below, together with interest on the principal of this
note from time to time outstanding at an annual rate equal to two percent (2.0%)
plus the "Prime Rate" as published in the Wall Street Journal, from time to time
in effect. Interest on this note shall accrue from the date of this note until
the entire principal balance of and all accrued interest on this note have been
paid in full.
The entire outstanding principal balance of, and all accrued but unpaid
interest on this note shall be due and payable on July 1, 1997. Until the entire
outstanding principal balance of, and all accrued interest on, this note has
been paid, the Borrower shall pay to the Lender on November 1, 1995, and on the
first day of each calendar month thereafter occurring during the term of this
note, the full amount of all accrued and unpaid interest on the outstanding
principal balance of this note. The Borrower shall make a principal payment in
the amount of $25,000.00 on July 1, 1996. The Borrower shall make a principal
payment in the amount of $30,000.00 on December 1, 1996. The Borrower shall make
a principal payment of $65,000.00 on June 1, 1997. The Borrower shall make a
principal payment of $120,000.00 on September 1, 1997.
As used in this note, "Prime Rate" shall mean the annual rate published
in the Wall Street Journal on the last business day of the month. The Index Rate
published on the last business day of the month shall be the Index Rate for the
entire month and shall be applied to the average daily balance outstanding for
the month. The interest rate of this note shall be adjusted, from time to time,
on the last day of the month. As of the date of this note the Index Rate is
8.75%, and the initial annual interest rate of this note is 10.75%.
This note is issued pursuant to a Loan Agreement (the "Loan Agreement")
dated as of September 18, 1995, between the Lender and the Borrower and is
secured by the security interests described in the Loan Agreement, a Security
Agreement, a Guaranty and a Stock Pledge Agreement. Capitalized terms not
otherwise defined herein shall have the meanings given them in the Loan
Agreement.
The occurrence of an Event of Default shall be a default under this
note. Upon any default under this note, the holder of this note may, at its
option, and without notice, declare the entire unpaid balance of, and all
accrued interest on, this note to be immediately due and payable.
Revolving Credit Loans may be made from time to time by the Lender to
the Borrower in the manner and subject to the terms and conditions set forth in
the Loan Agreement. Upon the disbursement of each Revolving Credit Loan, the
Lender shall record the making and amount of such loan in the Lender's books and
records. The Lender shall also record in the Lender's books and records the
payment by the Borrower of amounts of principal made on this note. The aggregate
amount of all Revolving Credit Loans made by the Lender and recorded in the
Lender's books and records less the amounts of payment of principal made by the
Borrower and recorded in the Lender's books and records shall be the principal
amount outstanding under this note. The information contained on the Lender's
books and records shall be prima facie evidence of the unpaid amount of
principal outstanding under this note.
All or any part of the outstanding principal amount of this note may be
prepaid at any time without penalty. All prepayments shall be applied in
accordance with the terms of the Loan Agreement.
Failure of the holder of this note to exercise any of its rights or
remedies shall not constitute a waiver of any provision of this note or of the
Loan Agreement, the Security Instruments, or the other Borrower Documents or of
any of such holder's rights and remedies, not shall it prevent the holder from
exercising any rights or remedies with
<PAGE>
respect to the subsequent happening of the same or similar occurrences. All
remedies of the holder hereof shall be cumulative to the greatest extent
permitted by law. Time shall be of the essence for payment of all payments of
interest and principal on this note.
If there is any default under this note, and this note is placed in the
hands of an attorney for collection, or is collected through any court,
including any bankruptcy court, the Borrower promises to pay to the order of the
holder hereof such holder's reasonable attorneys' fees and court costs incurred
in collecting or attempting to collect or securing or attempting to secure this
note or enforcing the holder's rights with respect to any collateral securing
this note, to the extent allowed by the laws of the Commonwealth of Kentucky or
any state in which any collateral for this note is situated.
This note has been delivered in, and shall be governed by and construed
in accordance with the laws of the Commonwealth of Kentucky.
All parties to this instrument, whether makers, sureties, guarantors,
endorsers, accommodation parties or otherwise, shall be jointly and severally
bound, and jointly and severally waive presentment, demand, notice or dishonor,
protest, notice of protest, notice of nonpayment or no acceptance and any other
notice and all due diligence or promptness that may otherwise be required by law
(but not any notice required by the Borrower Documents), and all exemptions to
which they may now or hereafter be entitled under the laws of the Commonwealth
of Kentucky, of the United States of America or any state thereof. The holder of
this instrument may whether one or more times, with or without notice to any
party, and without affecting the obligations of any maker, surety, guarantor,
endorser, accommodation party or any other party to this note (1) extend the
time for payment of either principal or interest form time to time, (2) release
or discharge any one or more parties liable on this note, (3) suspend the right
to enforce this note with respect to any persons, (4) change, exchange or
release any property in which the holder has any interest securing this note,
(5) justifiably or otherwise, impair any collateral securing this note or
suspend the right to enforce against any such collateral, and (6) at any time it
deems it necessary or proper, call for and should it be made available, accept,
as additional security, the signature or signatures of additional parties or a
security interest in property of any kind or description of both.
IN WITNESS WHEREOF, the parties have executed this revolving credit note as of
the date set out in the preamble hereto, but actually on the date(s) set forth
below.
UNIQUEST COMMUNICATIONS, INC.
By /s/ Thomas E. Aliprandi
------------------------------
Thomas E. Aliprandi, President
Date: 2/24/96
By /s/ David E. Shepardson
------------------------------
David E. Shepardson, III
Vice President, Treasurer
Date: 2/24/96
FIRST AMENDMENT TO REVOLVING CREDIT NOTE
THIS FIRST AMENDMENT TO REVOLVING CREDIT NOTE is made and entered into as of the
1st day of March, 1997, between (i) UNIQUEST COMMUNICATIONS, INC., a Utah
corporation (the "Borrower"), and (ii) AGENT FINANCIAL SERVICES, LLC, a Kentucky
limited liability company (the "Lender").
PRELIMINARY STATEMENT:
A. Pursuant to that certain Loan Agreement dated as of September 18, 1995,
between the Borrower and the Lender, the Lender has established a line of
credit in the principal amount of Three Hundred Thousand Dollars
($300,000.00) in favor of the Borrower (the "Line of Credit"). The Loan
Agreement and other Borrower Documents were originally between the Borrower
and UniDial Incorporated. The Lender acquired the Loan from UniDial
Incorporated on January 1, 1997.
B. The obligation of the Borrower to repay the outstanding principal balance
of the Line of Credit, together with accrued interest thereon is evidenced
by that certain Revolving Credit Note dated September 18, 1995, made by the
Borrower, payable to the order of the Lender, and in the face principal
amount of Three Hundred Thousand Dollars ($300,000.00), as amended pursuant
to that certain First Amendment to Revolving Credit Note dated March 1,
1997 between the Borrower and the Lender (the "First Amendment")
(collectively, the "Note").
C. The Borrower has now requested that the Lender extend the payment due dates
of the Note from March 1, 1997, June 1, 1997 and September 1, 1997 to one
due date of January 31, 1998, which the Lender is willing to do upon the
condition, among others, that the Borrower execute and deliver this First
Amendment in favor of the Lender.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements set forth in the Loan Agreement and herein, and
for other good and valuable consideration, the mutuality, receipt and
sufficiency of which are hereby acknowledged, the parties hereto do hereby agree
as follows:
1. Each capitalized term used herein, unless otherwise expressly defined
herein, shall have the meaning set forth in the Loan Agreement or Note,
as applicable.
2. The Lender hereby extends the principal due dates of the Note from
March 1, 1997, June 1, 1997 and September 1, 1997 to one due date of
January 31, 1998.
3. The Borrower and the Lender hereby agree to an annual interest rate of
the Prime Rate plus two percent (2%).
4. Each of the Loan Agreement and the other Borrower Documents to which
the Borrower is a party is hereby amended to reflect that the principal
due dates of March 1, 1997, June 1, 1997 and September 1, 1997 be
extended to one due date of January 31, 1998.
5. The term "Guaranty" as defined in Section I of the Loan Agreement, is
hereby redefined to mean that certain Guaranty Agreement dated as of
September 18, 1995, executed and delivered by the Guarantors in favor
of the Lender, as amended pursuant to that certain Ratification and
Reaffirmation of even date herewith, executed and delivered by the
Guarantors in favor of the Lender.
6. Except to the extent amended or modified hereby, the Borrower hereby
reaffirms all its representations, warranties and covenants set forth
in the Loan Agreement and the other Borrower Documents to which it is a
party including, without limitation, the grant of the liens on and
security interests in the assets of the Borrower pursuant to the
Borrower Documents to secure the payment of the entire unpaid principal
balance of and all accrued and unpaid interest on the Revolving Credit
Note, as amended pursuant to this First Amendment.
7. The Borrower represents and warrants that no Event of Default has
occurred or is continuing under the Loan Agreement.
<PAGE>
8. This First Amendment may be executed in one or more counterparts, each
of which shall constitute an original and all of the same shall
constitute one and the same instrument.
9. This First Amendment shall be governed by and construed in accordance
with the laws of the Commonwealth of Kentucky.
10. This First Amendment constitutes the entire agreement of the parties
with respect to the subject matter hereof and supersedes all prior
understandings with respect to the subject matter hereof.
11. No change, modification, addition or termination of this First
Amendment or of any of the other documents referred to herein shall be
enforceable unless in writing and signed by the party against whom
enforcement is sought.
IN WITNESS WHEREOF, the Borrower and the Lender have caused this First
Amendment to Revolving Credit Note to be executed and delivered by their
respective duly authorized officers as of the day and year first above written.
UNIQUEST COMMUNICATIONS, INC.
By: /s/ Thomas E. Aliprandi
------------------------------------
Thomas E. Aliprandi, President
By: /s/ David E. Shepardson
------------------------------------
David E. Shepardson, III,
Vice President-Treasurer
(the "Borrower")
AGENT FINANCIAL SERVICES, LLC
By: /s/ Kenneth D. Richey
------------------------------------
Kenneth D. Richey, Operating Manager
(the "Lender")
SECOND AMENDMENT TO REVOLVING CREDIT NOTE
THIS SECOND AMENDMENT TO LOAN AGREEMENT (the "Second Amendment"), is
made and entered into as of this 31st day of January, 1998, by and between (a)
UNIQUEST COMMUNICATIONS, INC., a Utah corporation with principal office and
place of business in Midvale, Utah ("Borrower") and (b) AGENT FINANCIAL
SERVICES, LLC, a Kentucky limited liability company with an office and place of
business in Louisville, Kentucky (the "Lender").
PRELIMINARY STATEMENT
A. Pursuant to that certain Loan Agreement dated as of September 18, 1995,
between the Borrower and the Lender, the Lender has established a line
of credit in the principal amount of Three Hundred Thousand Dollars
($300,000.00) in favor of the Borrower (the "Line of Credit"). The Loan
Agreement and other Borrower Documents were originally between the
Borrower and UniDial Incorporated. The Lender acquired the Loan from
UniDial Incorporated on January 1, 1997.
B. The obligation of the Borrower to repay the outstanding principal
balance of the Line of Credit, together with accrued interest thereon
is evidenced by that certain Revolving Credit Note dated September 18,
1995, made by the Borrower, payable to the order of the Lender, and in
the face principal amount of Three Hundred Thousand Dollars
($300,000.00), as amended pursuant to that certain First Amendment to
Revolving Credit Note dated March 1, 1997 between the Borrower and the
Lender (the "First Amendment") (collectively, the "Note").
C. The current maturity date of the Note is January 31, 1998.
D. The Borrower has now requested that the Lender extend the Note maturity
date from January 31, 1998 to January 31, 1999, which the Lender is
willing to do upon the condition, among others, that the Borrower
execute and deliver this Second Amendment in favor of the Lender.
NOW, THEREFORE, in consideration of the foregoing premises, and
for other good and valuable consideration of the foregoing premises, and
for other good and valuable consideration, the mutuality, receipt and
sufficiency of which are hereby acknowledged, the parties hereto do hereby
agree as follows:
1. Each capitalized term used herein, unless otherwise expressly
defined herein, shall have the meaning set forth in the Loan
Agreement or Note, as amended.
2. The Lender hereby extends the due date of the Note from
January 31, 1998 to January 31, 1999.
3. Upon the occurrence of (i) a sale of accounts or change in
control under section 4.2 of the Agent's Agreement, or (ii)
an initial public offering by UniDial Incorporated resulting
in a distribution of cash, securities and/or options to the
Borrower, all amounts advanced under the Revolving Credit
Note, and any not delivered in renewal, replacement,
substitution, extension or novation thereof, and any
amendments thereto, together with all interest and other sums
due, shall become immediately due and payable. All proceeds
will be used to pay off any remaining balance owed to the
Lender.
4. Except to the extent amended or modified hereby, the Borrower
hereby reaffirms all its representations, warranties and
covenants set forth in the Revolving Credit Note including,
without limitation, the grant of the liens on and security
interests in the assets of the Borrower pursuant to the
Borrower Documents to secure the payment of the entire unpaid
principal balance of and all accrued and unpaid interest on
the Note, and any note delivered in renewal, replacement,
substitution, extension or novation thereof, and any
amendments thereto.
5. This Second Amendment may be executed in one or more
counterparts, each of which shall constitute an original and
all of the same shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the Borrower and the Lender have caused this Second
Amendment to Revolving Credit Note to be executed and delivered by their
respective duly authorized officers as of the day and year first above written.
UNIQUEST COMMUNICATIONS, INC.
By: /s/ Thomas E. Aliprandi
------------------------------
Thomas E. Aliprandi, President
By: /s/ David E. Shepardson
-----------------------------------
David E. Shepardson, III,
Vice President-Treasurer
(the "Borrower")
AGENT FINANCIAL SERVICES, LLC
By: /s/ Kenneth D. Richey
--------------------------------------
Kenneth D. Richey, Operating Manager
(the "Lender")
THIRD AMENDMENT TO REVOLVING CREDIT NOTE
THIS THIRD AMENDMENT TO LOAN AGREEMENT (the "Third Amendment"), is made and
entered into as of this 31st day of January, 1998, by and between (a) UNIQUEST
COMMUNICATIONS, INC., a Utah corporation with principal office and place of
business in Midvale, Utah ("Borrower") and (b) AGENT FINANCIAL SERVICES, LLC, a
Kentucky limited liability company with an office and place of business in
Louisville, Kentucky (the "Lender").
PRELIMINARY STATEMENT
A. Pursuant to that certain Loan Agreement dated as of September 18, 1995,
between the Borrower and the Lender, the Lender has established a line
of credit in the principal amount of Three Hundred Thousand Dollars
($300,000.00) in favor of the Borrower (the "Line of Credit"). The Loan
Agreement and other Borrower Documents were originally between the
Borrower and UniDial Incorporated. The Lender acquired the Loan from
UniDial Incorporated on January 1, 1997.
B. The obligation of the Borrower to repay the outstanding principal
balance of the Line of Credit, together with accrued interest thereon
is evidenced by that certain Revolving Credit Note dated September 18,
1995, made by the Borrower, payable to the order of the Lender, and in
the face principal amount of Three Hundred Thousand Dollars
($300,000.00), as amended pursuant to that certain First Amendment to
Revolving Credit Note dated March 1, 1997 between the Borrower and the
Lender (the "First Amendment") (collectively, the "Note").
C. The current maturity date of the Note is January 31, 1998.
D. The Borrower has now requested that the Lender extend the Note maturity
date from January 31, 1999 to January 31, 2000, which the Lender is
willing to do upon the condition, among others, that the Borrower
execute and deliver this Third Amendment in favor of the Lender.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements set forth in the Loan Agreement and herein, and
for other good and valuable consideration, the mutuality, receipt and
sufficiency of which are hereby acknowledged, the parties hereto do hereby agree
as follows:
1. Each capitalized term used herein, unless otherwise expressly
defined herein, shall have the meaning set forth in the Loan
Agreement or Note, as applicable.
2. The Lender hereby extends the due date of the Note from
January 31, 1999 to January 31, 2000.
3. The Borrower and the Lender hereby agree to decrease the face
principal amount of the Line of Credit and the face principal
amount of the Promissory Note from Three Hundred Thousand
Dollars ($300,000.00) to One Hundred Eighty Five Thousand
Dollars ($185,000.00) effective as of the date hereof.
4. The Borrower and the Lender hereby agree to increase the
annual interest rate from the Prime Rate plus two percent
(2%) to the Prime Rate plus three percent (3%).
5. In consideration of the extension of the due date of the Note
from January 31, 1999 to January 31, 2000, the Borrower
covenants and agrees to pay the Lender a commitment fee in
the amount of One Thousand Eight Hundred Fifty and 00/100
Dollars ($1850.00) which equals one percent (1%) of the
outstanding balance of the Note. The commitment fee will be
paid in two equal installments of Nine Hundred Twenty Five
Dollars ($925.00), the first due on or before February 28,
1999 and the second due on or before March 31, 1999.
6. Except to the extent amended or modified hereby, the Borrower
hereby reaffirms all its representations, warranties and
covenants set forth in the Revolving Credit Note including,
without limitation, the grant of the liens on and security
interests in the assets of the Borrower pursuant to the
Borrower Documents to secure the payment of the entire unpaid
<PAGE>
principal balance of and all accrued and unpaid interest on
the Note, and any note delivered in renewal, replacement,
substitution, extension or novation thereof, and any
amendments thereto.
7. This Third Amendment may be executed in one or more
counterparts, each of which shall constitute an original and
all of the same shall constitute one and the same instrument.
8. No change, modification, addition or termination of this
Third Amendment or of any of the other documents referred to
herein shall be enforceable unless in writing and signed by
the party against whom enforcement is sought.
9. Nothing in this Third Amendment to Revolving Credit Note is
intended to be a novation or cancellation of that original
Revolving Credit Note dated September 18, 1995.
IN WITNESS WHEREOF, the Borrower and the Lender have caused this Second
Amendment to Revolving Credit Note to be executed and delivered by their
respective duly authorized officers as of the day and year first above written.
UNIQUEST COMMUNICATIONS, INC.
By: /s/ Thomas E. Aliprandi
------------------------------------
Thomas E. Aliprandi, President
By: /s/ David E. Shepardson
------------------------------------
David E. Shepardson, III,
Vice President-Treasurer
(the "Borrower")
AGENT FINANCIAL SERVICES, LLC
By: /s/ Kenneth D. Richey
------------------------------------
Kenneth D. Richey, Operating Manager
(the "Lender")
The Guarantors hereby ratify and reaffirm all of their covenants,
agreements, obligations, representations and warranties set forth in the
Guaranty Agreement including, without limitation, the guarantee of payment of
the unpaid principal together with al interest now accrued or hereafter to
accrue on the Promissory Note, and all of the other Guaranteed Obligations upon
the terms and conditions set forth in the Guaranty Agreement and in this
Amendment.
By: /s/ Thomas E. Aliprandi
------------------------------------
Thomas E. Aliprandi, President
Date: 2/23/99
By: /s/ David E. Shepardson
------------------------------------
David E. Shepardson, III,
Vice President-Treasurer
Date: 2/23/99
FOURTH AMENDMENT TO REVOLVING CREDIT NOTE
THIS FOURTH AMENDMENT TO LOAN AGREEMENT (the "Fourth Amendment"), is made and
entered into as of this 31st day of January, 1998, by and between (a) UNIQUEST
COMMUNICATIONS, INC., a Utah corporation with principal office and place of
business in Midvale, Utah ("Borrower") and (b) AGENT FINANCIAL SERVICES, LLC, a
Kentucky limited liability company with an office and place of business in
Louisville, Kentucky (the "Lender").
PRELIMINARY STATEMENT
A. Pursuant to that certain Loan Agreement dated as of September 18, 1995,
between the Borrower and the Lender, the Lender has established a line
of credit in the principal amount of Three Hundred Thousand Dollars
($300,000.00) in favor of the Borrower (the "Line of Credit"). The Loan
Agreement and other Borrower Documents were originally between the
Borrower and UniDial Incorporated. The Lender acquired the Loan from
UniDial Incorporated on January 1, 1997.
B. The obligation of the Borrower to repay the outstanding principal
balance of the Line of Credit, together with accrued interest thereon
is evidenced by that certain Revolving Credit Note dated September 18,
1995, made by the Borrower, payable to the order of the Lender, and in
the face principal amount of Three Hundred Thousand Dollars
($300,000.00), as amended pursuant to that certain First Amendment to
Revolving Credit Note dated March 1, 1997 between the Borrower and the
Lender (the "First Amendment") (collectively, the "Note").
C. The current maturity date of the Note is January 31, 1998.
D. The Lender has purchased the entire rights, titles and interests of
Agent Financial Services, LLC in and to the Loan Agreement, the
Revolving Credit Note and the other Borrower Documents, as such term is
defined in the Loan Agreement.
E. The Borrower has now requested that the Lender extend the Note maturity
date from January 31, 1999 to January 31, 2000, which the Lender is
willing to do upon the condition, among others, that the Borrower
execute and deliver this Third Amendment in favor of the Lender.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements set forth in the Loan Agreement and herein, and
for other good and valuable consideration, the mutuality, receipt and
sufficiency of which are hereby acknowledged, the parties hereto do hereby agree
as follows:
1. Each capitalized term used herein, unless otherwise expressly
defined herein, shall have the meaning set forth in the Loan
Agreement or Note, as applicable.
2. The Lender hereby extends the due date of the Note from
January 31, 1999 to January 31, 2000.
3. The Borrower and the Lender hereby agree to decrease the face
principal amount of the Line of Credit and the face principal
amount of the Promissory Note from One Hundred Eighty Five
Thousand Dollars ($185,000.00) to One Hundred Sixty Eight
Thousand Dollars ($168,000.00) effective as of the date
hereof.
4. The Borrower and the Lender hereby agree to increase the
annual interest rate from the Prime Rate plus three percent
(3%).
5. In consideration of the extension of the due date of the Note
from January 31, 2000 to January 31, 2001, the Borrower
covenants and agrees:
a. To pay the Lender a commitment fee in the amount of
One Thousand Six Hundred Eighty and 00/100 Dollars
($1680.00) which equals one percent (1%) of the
<PAGE>
outstanding balance of the Note. The commitment fee
will be paid on or before April 30, 2000.
b. To pay and deliver a monthly payment of principal to
the Lender in an amount equal to Two Thousand Dollars
($2,000.00) on or before the last day of each month
with the first payment due on or before March 31,
2000.
c. To continue to pay and deliver a monthly payment of
interest to the Lender on or before the last day of
each month as defined in the Promissory Note.
d. In the event the Borrower is entitled to receive
monies from the Lender for any reason, other than
recurring monthly commissions paid to the Borrower
that relate to the goods and services provided to
customers under the Borrower's UniDial Customer Base,
the Borrower hereby authorizes the Lender to apply
the entire net proceeds to the Promissory Note as
principal payment.
e. In the even the Borrower is entitled to receive any
additional property from the Lender for any reason,
other than the payment of money as contemplated in
subsection (d) above and other than recurring monthly
commissions paid to the Borrower that relate to the
goods and services provided to customers under the
Borrower's UniDial Customer Base, the Borrower hereby
pledges to the Lender, and grants to the Lender a
security interest in, al such property as additional
security for the payment of the unpaid principal and
accrued and unpaid interest on this Note. The
Borrower authorizes the Lender to hold all such
property as a secured party until this Note has been
paid in full to the Lender.
6. Except to the extent amended or modified hereby, the Borrower
hereby reaffirms all its representations, warranties and
covenants set forth in the Revolving Credit Note including,
without limitation, the grant of the liens on and security
interests in the assets of the Borrower pursuant to the
Borrower Documents to secure the payment of the entire unpaid
principal balance of and all accrued and unpaid interest on
the Note, and any note delivered in renewal, replacement,
substitution, extension or novation thereof, and any
amendments thereto.
7. This Fourth Amendment may be executed in one or more
counterparts, each of which shall constitute an original and
all of the same shall constitute one and the same instrument.
8. No change, modification, addition or termination of this
Fourth Amendment or of any of the other documents referred to
herein shall be enforceable unless in writing and signed by
the party against whom enforcement is sought.
9. Nothing in this Fourth Amendment to Revolving Credit Note is
intended to be a novation or cancellation of that original
Revolving Credit Note dated September 18, 1995.
IN WITNESS WHEREOF, the Borrower and the Lender have caused this Fourth
Amendment to Revolving Credit Note to be executed and delivered by their
respective duly authorized officers as of the day and year first above written.
UNIQUEST COMMUNICATIONS, INC.
By: /s/ Thomas E. Aliprandi
------------------------------
Thomas E. Aliprandi, President
By: /s/ David E. Shepardson
--------------------------------------
David E. Shepardson, III,
Vice President-Treasurer
(the "Borrower")
<PAGE>
AGENT FINANCIAL SERVICES, LLC
By: /s/ John Grieve
---------------------------------
John Grieve
(the "Lender")
The Guarantors hereby ratify and reaffirm all of their covenants,
agreements, obligations, representations and warranties set forth in the
Guaranty Agreement including, without limitation, the guarantee of payment of
the unpaid principal together with al interest now accrued or hereafter to
accrue on the Promissory Note, and all of the other Guaranteed Obligations upon
the terms and conditions set forth in the Guaranty Agreement and in this
Amendment.
By: /s/ Thomas E. Aliprandi
------------------------------
Thomas E. Aliprandi, President
Date: 4/5/00
By: /s/ David E. Shepardson
-----------------------------------
David E. Shepardson, III,
Vice President-Treasurer
Date: 4/5/00
SECURITY AGREEMENT
This is a Security Agreement dated as of September 18, 1995 (this
"Agreement"), between UNIDIAL INCORPORATED, a Kentucky corporation (the
"Lender") and UNIQUEST COMMUNICATIONS, INC., a Utah corporation (the
"Borrower").
Recitals
A. The Borrower and the Lender are entering into a Loan Agreement dated as
of the date of this Agreement (the "Loan Agreement") (to which the form
of this Agreement is attached as Annex B, pursuant to which, among
other things, the Lender has agreed to provide the Borrower with the
Revolving Credit (as that term is defined in the Loan Agreement).
B. The Borrower is entering into this Agreement to secure the payment of
the Revolving Credit and the Borrower's other obligations to the
Lender, including under the Loan Agreement and the other Borrower
Documents (as that term is defined in the Loan Agreement).
C. This Agreement is being entered into concurrently with the extension of
the Revolving Credit, and the Lender is extending the Revolving Credit
in reliance up the Borrower's obligations evidenced by this Agreement.
NOW, THEREFORE, the Borrower and the Lender agree as follows:
1. Definitions. Capitalized terms not otherwise defined herein
shall have the meanings given them in the Loan Agreement. In
addition the following terms shall have the following
meanings, and the meanings assigned to all capitalized terms
used herein shall be equally applicable to both the singular
and plural forms of the terms defined:
"Accounts Receivable" shall have the meaning given that term in
the Loan Agreement.
"Collateral" shall mean any or all of the property in which the
Borrower grants to the Lender a security interest under Section 2
of this Agreement.
"Event of Default" shall have the meaning given that term in
Section 8 of this Agreement.
"General Intangibles" shall have the meaning given that term in
the Loan Agreement.
"Inventory" shall have the meaning given that term in the Loan
Agreement.
"Person" shall have the meaning given that term in the Loan
Agreement.
"Revolving Credit Loan" shall have the meaning given that term in
the Loan Agreement.
"Revolving Credit Note" shall have the meaning given that term in
the Loan Agreement.
"Secured Obligations" shall mean all of the obligations secured by
this Agreement as set forth in Section 3 of this Agreement.
"Tangible Property" shall have the meaning given that term in the
Loan Agreement.
"Uniform Commercial Code" shall mean the Uniform Commercial Code
as in effect in the Commonwealth of Kentucky.
<PAGE>
"Unmatured Default" shall mean the happening of any event or
occurrence which, together with the giving of any required notice
or the passage of any required period of time, or both, would
constitute an Event of Default.
2. Grant of Security Interests.
(a) The Borrower grants to the Lender a security interest in
the following property:
(1) All of the Debtor's right, title and interest under
that certain Independent Agent Agreement dated July
24, 1994 between the Debtor and the Secured Party;
(2) All of the Debtor's right, title and interest under
that certain Distributor Agreement dated August 31,
1995, between the Debtor and Automated Solutions,
Inc.;
(3) All of Debtor's right, title and interest to its
customer lists and client lists;
(4) All accounts arising under the Agreements referenced
in (1) and (2) above;
(5) Any and all of the foregoing property, whether now
existing or hereafter acquired; and
(b) The Borrower grants a further security interest to the
Lender in the proceeds and products of any sale, exchange,
collection or other disposition of the Collateral or any
part thereof.
3. Obligations Secured. The security interest granted by the Borrower
hereby secure the payment and performance of all of the following
Secured Obligations: (a) any and all indebtedness of the Borrower
to the Lender evidenced by the Revolving Credit Note, and any and
all obligations contained in the Revolving Credit Note; (b) any
and all of the representations, warranties, obligations,
agreements, covenants and promises of the Borrower contained in
the Loan Agreement, the Revolving Credit Note, this Agreement and
the other Borrower Documents, whether or not now or hereafter
evidenced by any note, instrument or other writing; and (c) any
and all indebtedness, obligations and liabilities of the Borrower
to the Lender, however evidenced, whether now existing or
hereafter arising, direct or indirect, absolute or contingent, or
acquired by the Lender, including without limitation, any and all
other indebtedness, liabilities and obligations of Borrower to the
Lender that exist on the date of this Agreement, or arise or are
created or acquired after the date of this Agreement, regardless
of whether of the same or of a different class or type as the
indebtedness evidenced by the Revolving Credit Note and/or the
other Borrower Documents, and whether or not the creation thereof
was reasonably foreseeable or would be naturally contemplated by
the Borrower or the Lender as the date of this Agreement.
4. Representation and Warranties. To induce the Lender to enter into
this Agreement, any and all of the representations and warranties
made by the Borrower in the Loan Agreement and the other Borrower
Documents are incorporated herein by reference, and the Borrower
further represents, warrants and agrees as follows:
(a) The Borrower has full right, power, authority and capacity
to enter into and perform this Agreement; and this
Agreement has been duly entered into and delivered and
constitutes a legal, valid and binding obligation of the
Borrower enforceable in accordance with its terms.
(b) The Borrower has good and marketable title to the
Borrower's Collateral, and the Collateral is not subject
to any lien, charge, pledge, encumbrance, claim or
security interest other than the security interests
created by this Agreement.
<PAGE>
(c) The Borrower's chief place of business is located at 6975
Union Park Center, Suite 340, Midvale, UT 84047.
(d) The Collateral is used and will be used for business use
only.
(e) The registered office of the Borrower's registered agent
in Utah is located in Salt Lake County, Utah.
(f) Within the five (5) consecutive years last preceding the
date of this Agreement, the Borrower has not conducted
business under, or otherwise used, any name other than
UniQuest Communications, Inc.
(g) The Borrower understands and acknowledges that the Lender
is extending the Revolving Credit in reliance upon the
security interests granted by the Borrower evidenced by
this Agreement. The Borrower intends to induce the Lender
to extend the Revolving Credit, recognizing that such
inducement results in this Agreement becoming legally
valid and enforceable.
5. Duration of Security Interests. The Lender, its successors and
assigns, shall hold the security interests created hereby upon the
terms of this Agreement, and this Agreement shall continue until
the Revolving Credit Note has been paid in full, the other Secured
Obligations have been performed, executed, or satisfied in their
entirety, and no commitment to lend or extend credit which is
intended to be secured hereby remains outstanding. After payment
of any part of the Secured Obligations, the Lender may, at its
option, retain all or any portion of the Collateral as security
for any remaining Secured Obligations and retain this Agreement as
evidence of such security. The security interest granted hereunder
shall not be impaired or affected by any renewals or extensions of
time for payment of any of the Secured Obligations, or by release
of any party liable on the Secured Obligations; by any
acquisition, release or surrender of other security, collateral or
guaranty; by delay in enforcement of payment of any of the Secured
Obligations; or by delay in enforcement of payment of any of the
Secured Obligations; or by delay in enforcement of any security.
6. Certain Notices. The Borrower shall notify the Lender of any and
all changes of location of the Borrower's chief place of business
and of the registered office of the Borrower's registered agent in
Utah and of the location of the Collateral at least ten (10) days
prior to effecting any such change.
7. Covenant Not to Dispose of or Impair Collateral. The Borrower
shall not, without the prior written consent of the Lender, sell,
transfer or otherwise dispose of the Collateral, or any part
thereof or interest therein. The Borrower shall not permit any of
the Collateral to be levied upon under any legal process, nor
permit anything to be done that may impair the value of the
Collateral or the security intended to be provided by this
Agreement.
8. Default. The occurrence of an Event of Default under the Loan
Agreement shall constitute a default under this Agreement (an
"Event of Default").
9. Loan Remedies. Upon any Event of Default, the Lender may at its
option declare any and all of the Revolving Credit Loans and the
other Secured Obligations to be immediately due and payable; and
k, in addition to that right, and in addition to exercising all
other rights or remedies, the Lender may proceed to exercise with
respect to the Collateral all rights, options and remedies of a
secured party upon default as provided for under the Uniform
Commercial Code. The rights of the Lender upon an Event of Default
shall include, without limitation, any and all rights and remedies
in any and all other documents, instruments, agreements and other
writings between the Lender and the Borrower, all rights and
remedies as provided by law, in equity or otherwise, and in
addition thereto, the following:
<PAGE>
(a) The right to require the Borrower to assemble the
Collateral and make it available to the Lender at a place
or places to be designated by the Lender.
(b) The right to sell the Collateral at public or private sale
in one or more lots in accordance with Uniform Commercial
Code. The Lender may bid upon and purchase any or all of
the Collateral at any of the Collateral shall extinguish
the Borrower's rights under section 9-506 of the Uniform
Commercial Code upon application of the unpaid portion of
the Secured Obligations. The Lender shall be entitled to
apply the proceeds of any such sale to the satisfaction of
the Secured Obligations and to expenses incurred in
realizing upon the Collateral in accordance with the
Uniform Commercial Code.
(c) The right to recover the reasonable expenses of taking
possession of any of the Collateral that may be reduced to
possession, preparing the Collateral for sale, selling the
Collateral, and other like expenses.
(d) The right to recover all of the Lender's expenses of
collection, including, without limitation, court costs and
reasonable attorneys' fees and disbursements incurred in
realizing upon the Collateral or enforcing or attempting
to enforce any provision of this Agreement.
(e) The right to retain the Collateral and become the owner
thereof, in accordance with the provisions of the Uniform
Commercial Code.
(f) The right to proceed by appropriate legal process at law
or in equity to enforce any provision of this Agreement or
in a id of the execution of any power of sale, or for
foreclosure of the security interest of the Lender, or for
the sale of the Collateral under the judgment or decree of
any court.
(g) The right to enter any premises where any Collateral may
be located for the purpose of taking possession or
removing the same.
10. Cumulative Remedies. The rights and remedies of the Lender shall
be deemed to be cumulative, and any exercise of any right or
remedy shall not be deemed to be an election of that right remedy
to the exclusion of any other right or remedy. Notwithstanding the
foregoing, the Lender shall be entitled to recover by the
cumulative exercise of all remedies no more than the sum of (a)
the Secured Obligation at the time of exercise of remedies, plus
(b) the costs, fees and expenses the Lender is otherwise entitled
to recover.
11. Waivers. The Borrower acknowledges that this Agreement involves
the grant of multiple security interests, and the Borrower hereby
waives, to the extent permitted by applicable law, (a) any
requirement of marshalling assets or proceeding against Persons or
assets in any particular order, and (b) any and all notices of
every kind and description which may be required to be given by
any statute or rule of law and any defense of any kind which the
Borrower may now or hereafter have with respect to the rights of
the Lender with respect to the Collateral under this Agreement.
12. Certain Obligations Regarding Collateral.
(a) The Borrower shall keep and maintain the Borrower's
Inventory and Tangible Property in good condition and
repair and under adequate condition of storage to prevent
its deterioration or depreciation in value.
(b) The Borrower shall keep the Collateral free and clear of
any and all liens other than the security interests
created in favor of the Lender under this Agreement or
permitted by the Borrower Documents, and shall declare and
pay any and all fees, assessments, charges and taxes
allocable to the Collateral, or which might result in a
lien against the Collateral if left unpaid unless the
Borrower at the Borrower's own expense is contesting the
<PAGE>
validity or amount thereof in good faith by an appropriate
proceeding timely instituted which shall operate to
prevent the collection or satisfaction of the lien or
amount so contested. If the Borrower fails to pay such
amount and is not contesting the validity or amount
thereof in accordance with the preceding sentence, the
Lender may, but is not obligated to, pay such amount, and
such payment shall be deemed conclusive evidence of the
legality or validity of such amount. The Borrower shall
promptly reimburse the Lender for any and all payments
made by the Lender in accordance with the preceding
sentence, and until reimbursement, such payments shall be
part or the Secured Obligations.
13. Use and Inspection of Collateral. The Borrower shall not use the
Collateral in violation of any statute or ordinance, and the
Lender shall have the right, at reasonable hours, to inspect the
Collateral at the premises of the Borrower or wherever the
Collateral may be located.
14. Notice.
(a) Any requirement of the Uniform Commercial Code or other
applicable law of reasonable notice shall be met if such
notice is given at least five (5) business days before the
time of sale, disposition or other event or thing giving
rise to the requirement of notice.
(b) All notices and other communications under this Agreement
shall be delivered in accordance with and subject to
Section 12 of the Loan Agreement.
15. Further Assurance. The Borrower shall sign from time to time such
financing statements and other documents and instruments and take
such other actions as the Lender may reasonably request from time
to time to more fully create, perfect, continue, maintain or
terminate the security interests in the Collateral intended to be
created in this Agreement.
16. Miscellaneous.
(a) Failure by the Lender to exercise any right shall not be
deemed a waiver of that right, and any single or partial
exercise of any right shall not preclude the further
exercise of that right. Every right of the Lender shall
continue in full force and effect until such right is
specifically waived in a writing signed by the Lender.
(b) If any part, term or provision of this Agreement is held
by any court to be prohibited by any law applicable to
this Agreement, the rights and obligations of the parties
shall be construed and enforced with that part, term or
provision enforced to the greatest extent allowed by law,
or if it is totally unenforceable, as if this Agreement
did not contain that particular part, term or provision.
(c) The headings in this Agreement have been included for ease
and reference only, and shall not be considered in the
construction or interpretation of this Agreement.
(d) This Agreement shall inure to benefit of the Lender, its
successors and assigns, and all obligations of the
Borrower shall bind the Borrower's successors and assigns.
(e) To the extent allowed under the Uniform Commercial Code,
this Agreement shall in all respects be governed by and
construed in accordance with the laws of the Commonwealth
of Kentucky.
(f) This agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof. No
change, modification, addition or termination of this
Agreement shall be enforceable unless in writing and
signed by the party against whom enforcement is sought.
<PAGE>
(g) This Agreement may be signed by each party upon a separate
copy, and in such cases one counterpart of this Agreement
shall consist of enough of such copies to reflect the
signature of each party.
(h) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original,
and it shall not be necessary in making proof of this
Agreement or terms thereof to produce or account for more
than one such counterpart.
(i) THE BORROWER CONSENTS TO ONE OR MORE ACTIONS BEING
INSTITUTED AND MAINTAINED IN THE JEFFERSON COUNTY,
KENTUCKY, CIRCUIT COURT TO ENFORCE THIS AGREEMENT AND/OR
ONE OR MORE OF THE OTHER BORROWER DOCUMENTS, AND WAIVES
ANY OBJECTION TO ANY SUCH ACTION BASED UPON LACK OF
PERSONAL OR SUBJECT MATTER JURISDICTION OR IMPROPER VENUE.
THE BORROWER AGREES THAT ANY PROCESS OR OTHER LEGAL
SUMMONS IN CONNECTION WITH ANY SUCH ACTION OR PROCEEDING
MAY BE SERVED BY MAILING A COPY THEREOF BY CERTIFIED MAIL,
OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL, ADDRESSED TO
THE BORROWER AS PROVIDED IN SECTION 12 OF THE LOAN
AGREEMENT.
(j) THE BORROWER ACKNOWLEDGES THAT THE BORROWER HAS RECEIVED A
COPY OF THIS AGREEMENT AND EACH OF THE OTHER BORROWER
DOCUMENTS, AS FULLY EXECUTED BY THE PARTIES THERETO. THE
BORROWER ACKNOWLEDGES THAT THE BORROWER (A) HAS READ THIS
AGREEMENT AND THE OTHER BORROWER DOCUMENTS OR HAS CAUSED
SUCH DOCUMENTS TO BE EXAMINED BY THE BORROWER'S
REPRESENTATIVES OR ADVISORS; (B) IS THOROUGHLY FAMILIAR
WIT THE TRANSACTIONS CONTEMPLATED IN THIS AGREEMENT AND
THE OTHER BORROWER DOCUMENTS; AND (C) HAS HAD THE
OPPORTUNITY TO ASK SUCH QUESTIONS TO REPRESENTATIVES OF
THE LENDER, AND RECEIVE ANSWERS THERETO, CONCERNING THE
TERMS AN CONDITIONS OF THE TRANSACTIONS CONTEMPLATED IN
THIS AGREEMENT AND THE OTHER BORROWER DOCUMENTS AS THE
BORROWER DEEMS NECESSARY IN CONNECTION WITH THE BORROWER'S
DECISION TO ENTER INTO THIS AGREEMENT.
IN WITNESS WHEREOF, the Borrower and the Lender have executed and delivered this
Agreement as of the date set out in the preamble hereto, but actually on the
date(s) set forth below.
BORROWER:
UNIQUEST COMMUNICATIONS, INC.
By: /s/ Thomas E. Aliprandi
------------------------------
Thomas E. Aliprandi, President
Date: 2/24/96
STATE OF UTAH
COUNTY OF SALT LAKE
The foregoing instrument was acknowledged before me by Thomas E.
Aliprandi, the President of UniQuest Communications, Inc., a Utah corporation,
on behalf of the Corporation, on February 24, 1996.
<PAGE>
Notary Public: /s/ Marc Johnson
Commission expires: May 30, 1999
By: /s/ David Shepardson
---------------------
David E. Shepardson, III
Vice President, Treasurer
Date: February 24, 1996
STATE OF UTAH
COUNTY OF SALT LAKE
The foregoing instrument was acknowledged before me by David E.
Shepardson, III, the Vice President, Treasurer of UniQuest Communications, Inc.,
a Utah corporation, on behalf of the Corporation, on February 24, 1996.
Notary Public: /s/ Marc Johnson
Commission expires: May 30, 1999
LENDER:
UNIDIAL INCORPORATED
By: /s/ Kenneth D. Richey
-------------------------
Kenneth D. Richey
Date: March 5, 1996
STATE OF KENTUCKY
COUNTY OF JEFFERSON
The foregoing instrument was acknowledged before me by Kenneth D.
Richey, the Secretary/Treasurer of UniDial Incorporated, a Kentucky corporation,
on behalf of the Corporation, on March 5, 1996.
Notary Public: /s/ Rhonda J. Lamb
Commission expires: August, 26, 1998
FIRST AMENDMENT TO SECURITY AGREEMENT
THIS FIRST AMENDMENT TO SECURITY AGREEMENT (the "First Amendment"), is
made and entered into as of this 31st day of January, 1998, by and between (a)
UNIQUEST COMMUNICATIONS, INC., a Utah corporation with principal office and
place of business in Midvale, Utah ("Borrower") and (b) AGENT FINANCIAL
SERVICES, LLC, a Kentucky limited liability company with an office and place of
business in Louisville, Kentucky (the "Lender").
PRELIMINARY STATEMENT
A. Pursuant to that certain Loan Agreement dated as of September 18,
1995, between the Borrower and the Lender, the Lender has
established a line of credit in the principal amount of Three
Hundred Thousand Dollars ($300,000.00) in favor of the Borrower (the
"Line of Credit"). The Loan Agreement and other Borrower Documents
were originally between the Borrower and UniDial Incorporated. The
Lender acquired the Loan from UniDial Incorporated on January 1,
1997.
B. The obligation of the Borrower to repay the outstanding principal
balance of the Line of Credit, together with accrued interest
thereon is evidenced by that certain Revolving Credit Note dated
September 18, 1995, made by the Borrower, payable to the order of
the Lender, and in the face principal amount of Three Hundred
Thousand Dollars ($300,000.00), as amended pursuant to that certain
First Amendment to Revolving Credit Note dated March 1, 1997 between
the Borrower and the Lender (the "First Amendment") (collectively,
the "Note").
C. The obligation of the Lender to establish the Line of Credit was
subject to the condition, among others, that the Borrower execute
that certain Security Agreement dated September 18, 1995, between
Borrower and Lender ("Security Agreement")
D. The current maturity date of the Note is January 31, 1998.
E. The Borrower has now requested that the Lender extend the stated
maturity date of the Line of Credit from January 31, 1998 to January
31, 1999. The Lender is willing to and desires to extend the stated
maturity date of the Line of Credit from January 31, 1998 to January
31, 1999, pursuant to the terms and conditions set forth in this
First Amendment (the term "Loan Agreement," as hereinafter used,
includes this First Amendment and all future amendments and
modifications to the Loan Agreement).
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements set forth in the Loan Agreement and herein, and
for other good and valuable consideration, the mutuality, receipt and
sufficiency of which are hereby acknowledged, the parties hereto do hereby agree
as follows:
1. Each capitalized term used herein, unless otherwise expressly
defined herein, shall have the meaning set forth in the Loan
Agreement or Note, as applicable.
2. Section 3 of the Security Agreement is hereby amended in its
entirety to read as follows:
3. Obligations Secured. The security interests granted by the Borrower
hereby secure the payment and performance of all of the following
Secured Obligations: (a) any and all indebtedness of the borrower to
the Lender evidenced by the Revolving Credit Note, as defined in the
Loan Agreement and any amendments thereto, between Borrower and
Lender; (b) any and all of the representations, warranties,
obligations, agreements, covenants, and promises of the Borrower
contained in the Loan Agreement and any amendments thereto, the
Revolving Credit Note, this Agreement, and the other Borrower
Documents, as defined in the Loan Agreement and any amendments
thereto, between Borrower and Lender, whether or not now or
hereafter evidenced by any note, instrument, or other writing; and
(c) any and all indebtedness, obligations, and liabilities of the
Borrower to the Lender, however evidenced, whether now existing or
hereafter arising, direct or indirect, absolute or contingent, or
acquired by the Lender, including, without limitation, any and all
other indebtedness, liabilities, and obligations of Borrower to the
Lender, that exist on the date of this Agreement, or arise or are
created or acquired after the date of this Agreement or any
amendment thereto, regardless of whether of the same or of a
different class or type as the indebtedness
<PAGE>
evidenced by the Revolving Credit Note and/or the other Borrower
Documents, as defined by the Loan Agreement and any amendments
thereto, and whether or not the creation thereof was reasonably
foreseeable or would be naturally contemplated by the Borrower or
Lender as of the date of this Agreement, or any amendment hereto.
3. The Borrower represents and warrants that no Event of Default has
occurred or is continuing under the Security Agreement.
4. Except to the extent expressly amended or modified hereby, the
Borrower hereby ratifies and reaffirms its covenants, agreements,
obligations, representations and warranties set forth in the
Security Agreement.
IN WITNESS WHEREOF, the Borrower and the Lender have caused this First
Amendment to Loan Agreement to be executed and delivered by their respective
duly authorized officers as of the day and year first above written.
UNIQUEST COMMUNICATIONS, INC.
By: /s/ Thomas E. Aliprandi
--------------------------------
Thomas E. Aliprandi, President
By: /s/ David E. Shepardson
------------------------------------
David E. Shepardson, III,
Vice President-Treasurer
(the "Borrower")
AGENT FINANCIAL SERVICES, LLC
By: /s/ Kenneth D. Richey
------------------------------------
Kenneth D. Richey, Operating Manager
(the "Lender")
STOCK PLEDGE AGREEMENT
This is a Stock Pledge Agreement (this "Pledge Agreement") dated as of
September 18, 1995, between Thomas E. Aliprandi and David E. Shepardson (the
"Shareholders"), and UniDial Incorporated, a Kentucky corporation (the
"Lender").
Recitals
The Shareholders wish to secure the payment and performance of their
obligations under the Loan Agreement, the Revolving Credit Note (as that term is
defined in the Loan Agreement), the Security Agreement, and the other documents
listed in Section 3 of this Pledge Agreement by granting to the Lender a
security interest in the Pledged Shares (as defined below).
1. Definitions. As used in this Agreement, unless otherwise defined in
this Agreement, the terms defined in the Loan Agreement shall have the
meaning given them there; and the following terms shall have the
following meanings:
(a) "Loan Agreement" shall mean the loan agreement dated as of
September 18, 1995, between the Lender and UniQuest.
(b) "Lender" shall mean UniDial Incorporated.
(c) "Loan" shall mean the loan made by the Lender to UniQuest on the
terms and conditions of the Loan Agreement.
(d) "Pledged Shares" shall mean all of the shares in which the
Lender has a security interest pursuant to Section 2 (a) of this
Agreement and any proceeds and products thereof.
(e) "Secured Obligations" shall mean the obligations secured by this
Agreement and described in Section 3 of this Agreement
(f) "UniQuest" shall mean UniQuest Communications, Inc.
2. Grant of Security Interest.
(a) The Shareholders grant to the Lender a security interest in and
pledge to the Lender all of their right, title and interest in
and to 9300 shares (representing 93%) of the authorized, issued
and outstanding shares of UniQuest common stock, and any capital
stock of UniQuest issued in the future. The Shareholders further
grant to the Lender a security interest in any stock rights,
rights to subscribe, liquidating dividends, stock dividends,
dividends paid in stock, new securities, or any other property
to which the Shareholders are or may hereafter become entitled
to receive on account of the Pledged Shares. If the Shareholders
receive additional property of such nature, they shall
immediately deliver such property to the Lender to be held by
the Lender in the same manner as the Pledged Shares, pledged
previously pursuant to this Pledge Agreement.
(b) The Shareholders grant a further security interest to the Lender
in the proceeds or products by any sale or other disposition of
the Pledged Shares.
3. Obligations Secured. The security interests created hereby secure the
payment and performance of all of the following Secured Obligations:
(a) any and all indebtedness of UniQuest to the Lender evidenced by the
Revolving Credit Note, and all obligations contained in the Revolving
Credit Note; (b) all of the obligations, agreement, covenants and
representations of UniQuest contained in the Loan Agreement, (c) all of
the obligations, agreements, covenants and representations of UniQuest
contained in the Security Agreement, and any other related document,
whether or not now or hereafter evidenced by any note, instrument or
other writing; (d) any and all indebtedness of the Shareholders
contained in and evidenced by the Guaranty Agreements, and (e) any and
all indebtedness, obligation or liability of the Shareholders and/or
UniQuest to the Lender, however evidenced, direct or indirect, absolute
or contingent, whether now existing or hereafter arising.
4. Representations and Warranties. To induce the Lender to enter into the
Loan Agreement and this Agreement, the Shareholders represent and
warrant as follows:
<PAGE>
(a) The Shareholders have full right, power and authority to enter
into and perform their obligations under this Agreement, and
this Agreement has been duly entered into and delivered and
constitutes a legal, valid and binding obligation of the
Shareholders enforceable in accordance with its terms.
(b) The Shareholders have good and marketable title to the Pledged
Shares subject to no lien, charge, pledge, encumbrance, claim or
security interest other than the security interest created by
this Agreement and the Security Agreement.
(c) The Pledged Shares are properly issued and constitute 93% of the
issued and outstanding shares of UniQuest.
(d) The Shareholders have not entered into any stock restriction or
purchase agreement with respect to the Pledged Shares which
would in any way restrict the sale, pledge or other transfer of
the Pledged Shares of or any interest in or to the Pledged
Shares.
5. Duration of Security Interest. The Lender and its successors and
assigns shall hold the Pledged Shares and security interest created
hereby upon the terms of this Agreement, and this security interest
shall continue until the Secured Obligations have been paid in full.
The Lender may at any time deliver the Pledged Shares or other
collateral, or any part thereof, to the Shareholders. The receipt
thereof by the Shareholders shall be a complete and full discharge of
the Lender concerning the Pledged Shares so delivered, and the Lender
shall thereafter be discharged from any liability or responsibility
therefore.
6. Maintaining Freedom from Liens. UniQuest and the Shareholders shall
keep the Pledged Shares free and clear of liens and shall pay all
amounts, including taxes, assessments or charges, which might result in
a lien against the Pledged Shares if left unpaid, unless the
Shareholders at their own expense are contesting such amount in good
faith by an appropriate proceeding timely instituted which shall
operate to prevent the collection or satisfaction of the lien or amount
so contested. If the Shareholders fail to pay such amounts and are not
contesting the validity or amount thereof in accordance with the next
preceding sentence, the Lender may, but is not obligated to, pay such
amounts, and such payment shall be conclusive evidence of the legality
or validity thereof. The Shareholders shall promptly reimburse the
Lender for any such payments, and until reimbursement, such payments
shall be a part of the Secured Obligations.
7. Certain Rights and Obligations Respecting Pledged Shares.
(a) The Shareholders shall continue to be the owners of the Pledged
Shares so long as no Default has occurred, and during that time
may exercise their voting rights with respect to the Pledged
Shares (but only for purposes not inconsistent with the
covenants, obligations and purposes of this Agreement) and
receive distributions with respect to the Pledged Shares.
(b) The Shareholders shall not sell, transfer or attempt to sell or
transfer any of the Pledged Shares, or any part thereof or
interest therein, without the express prior written consent of
the Lender. Any such consent of the Lender shall not constitute
the release by the Lender of its interest in the Pledged Shares.
Any such sale or transfer shall transfer the Pledged Shares
subject to the security interest of the Lender.
(c) Without the Lender's prior written consent, which will not be
unreasonably withheld, the Shareholders shall not permit or
cause UniQuest to issue any capital stock other than the capital
stock issued and outstanding on the date of this Agreement. If
for any reason any Person (including the Shareholders) acquires
any interest in any capital stock of any of UniQuest in addition
to the Pledged Shares, the Shareholders shall, and shall cause
the acquiror to immediately deliver to the Lender certificates
representing the shares acquired, together with stock powers
relating to those shares (properly executed in blank), to be
held by the Lender pursuant to Sections 2(a) and 2(b) of this
Agreement. If any such Person has not entered into a pledge
and/or security agreement on terms identical to this Agreement,
such Person shall do so concurrently with his delivery to the
Lender of those certificates.
<PAGE>
(d) Upon a Default, the Lender may, without notice to the
Shareholders, exercise all voting rights and privileges
whatsoever with respect to the Pledged Shares, and collect and
retain all dividends or other sums and/or distributions now or
hereafter payable on or on account of any of the Pledged Shares.
To that end the Shareholders hereby constitute any officer of
the Lender as their proxy and attorney-in-fact for all purposes
of voting the Pledged Shares at any annual, regular or special
meeting of the shareholders of UniQuest. This appointment shall
be deemed coupled with an interest and is and shall be
irrevocable until all of the Secured Obligations have been fully
paid and terminated. All personas shall be conclusively entitled
to rely upon the Lender's oral or written certification that it
is entitled to vote the Pledged Shares hereunder. The
Shareholders shall execute and deliver to the Lender any
additional proxies and powers of attorney that the Lender may
desire in order to vote more effectively the Pledged Shares in
its own name. In addition to any other voting rights, the Lender
may (1) vote the Pledged Shares to remove one or more of the
directors and/or officers of UniQuest; (2) vote the Pledged
Shares to elect new directors and officers of any UniQuest who
shall thereafter manage the affairs of UniQuest and operate its
properties and carry on its business and otherwise take any
action with respect hereto as it shall deem necessary and
appropriate; (3) vote the Pledged Shares to liquidate UniQuest
and/or any of its subsidiaries and/or businesses; and (4) vote
the Pledged Shares to authorize the borrowing of money in the
name of UniQuest and the pledge of the assets to secure any such
borrowings.
8. Default. The happening of any Event of Default (as defined in the Loan
Agreement), or the Shareholder's breach of any obligation, covenant or
condition of this Agreement, shall constitute a Default under this
Agreement.
9. Remedies. Upon any Default the Lender may at its option declare any and
all of the Secured Obligations to be immediately due and payable, and
in addition to exercising all other rights or remedies, proceed to
exercise with respect to the Pledged Shares all rights, options and
remedies of a secured party upon default as provided for under the
Uniform Commercial Code as then in effect in the Commonwealth of
Kentucky. The rights of the Lender upon a Default shall include,
without limitation, the following:
(a) The right to immediate possession of any Pledged Shares not then
in the Lender's possession, without requirement of notice or
demand or any legal process. In exercising this right, the
Lender may enter into the premises of UniQuest without
requirement of any legal process.
(b) The right to sell part or all of the Pledged Shares at public or
private sale in one or more lots. The Lender shall be entitled
to apply the proceeds of any such sale to the satisfaction of
the Secured Obligations and to expenses incurred in realizing
upon the Pledged Shares in accordance with the Uniform
Commercial Code.
(i) In the case of any sale by the Lender of the Pledged
Shares or any portion thereof on credit for future
delivery, which may be elected at the sole option and in
the complete discretion of the Lender, the Pledged
Shares so sold may, at Lender's option, either be
delivered to the purchaser or retained by the Lender
until the selling price is paid by the purchaser, but in
either event the Lender shall incur no liability in case
of failure of the purchaser to take up and pay for the
Pledged Shares so sold. In case of any such failure,
such Pledged Shares may again be sold by the Lender in
the manner provided in this Section.
(ii)After deducting all its reasonable costs and expenses
of every kind, including without limitation, legal fees,
registration fees required by law (Securities and
Exchange Commission and other) and expenses, if any, the
Lender shall apply the residue of the proceeds of any
sale or sales of the Pledged Shares to the Revolving
Credit note and other obligations of the shareholders to
the Lender under this Agreement, the Loan Agreement, the
Security Agreement or the other related documents, in
the order or priority elected by the Lender. The Lender
shall not incur any liability as a result of the sale of
the Pledged Shares at any private sale or sales, and the
<PAGE>
Shareholders hereby waive any claim arising by reason of
(A) the fact that the price or prices for which the
Pledged Shares, or any portion thereof, is sold at such
public sale or sales is less than the price which would
have been obtained at a private sale or sales, or is
less than the amount due and the Lender accepted the
first offer received and did not offer the Pledged
Shares, or portion thereof, to more than one offeree; or
(B) any delay by the Lender in selling the Pledged
Shares following a Default hereunder, even if the value
of the Pledged Shares thereafter declines; or (C) the
immediate sale of the Pledged Shares upon the occurrence
of a Default hereunder even if the holder shall remain
jointly and severally liable for any deficiency
remaining due under this Agreement or other related
documents.
(c) The right to recover the reasonable expenses of preparing for
the sale of and selling the Pledged Shares, and other like
expenses, together with court costs and reasonable attorney's
fees incurred.
(d) The right to transfer the Pledged Shares, or any part of them,
into the Lender's name to facilitate the Lender's exercise of
other rights or remedies with respect to them.
(e) The right to proceed by appropriate legal process at law or in
equity (i) to enforce any provision of this Agreement or in aid
of the execution of any power of sale; or (ii) for foreclosure
of the security interest of the Lender; or (iii) for the sale of
any of the Pledged Shares under the judgment or decree of any
court.
10. Remedies Cumulative. The rights and remedies of the Lender shall be
deemed to be cumulative, and any exercise of any right or remedy shall
not be deemed to be an election of that right or remedy to the
exclusion of any other right or remedy
11. Delivery of Pledged Shares. The Shareholders shall deliver to the
Lender certificates representing all of the Pledged Shares, together
with stock powers properly executed in blank upon execution of this
Agreement, and the Shareholders shall deliver to the Lender all other
Pledged Shares hereinafter acquired to the Lender immediately upon
receipt thereof.
12. Further Assurances. The Shareholders shall sign such financing
statements, assignments of stock separate from certificate, or other
documents or instruments as the Lender may reasonably request from time
to time to more fully create, perfect, continue, maintain or terminate
the rights and security interest intended to be granted or created
pursuant to this Pledge Agreement.
13. Notice.
(a) Any requirement of the Uniform Commercial Code of reasonable
notice (not waived pursuant to this Agreement) shall be met if
such notice is mailed, postage prepaid, to UniQuest or, as the
case may be, to such other party to whom notice is required, at
least five days before the time of sale, disposition or other
event or thing giving rise to the requirement of notice.
(b) All notices or communications under this Agreement shall be in
writing and shall be delivered or mailed to the parties
addressed as follows, and any notices so addressed and mailed by
registered mail shall be deemed to have been given when mailed.
(i) If to UniQuest Communications, Inc.:
6975 Union Park Center, Suite 340
Midvale, UT 84047
Attn: Mr. Thomas E. Aliprandi
<PAGE>
With a copy to:
Jon V. Harper, Esq.
Suite 700
500 West Broadway
Salt Lake City, UT 84101
(ii) If to the Lender:
UniDial Incorporated
12910 Shelbyville Road, Suite 211
Louisville, KY 40243
Attn: Mr. Kenneth D. Richey
With a copy to:
Brown, Todd & Heyburn PLLC
3200 Providian Center
Louisville, KY 40202-3363
Attn: Mr. C. Edward Glasscock
14. Waiver. Any forbearance, failure or delay by the Lender in the exercise
of any right, power or remedy hereunder shall not be deemed a waiver of
that right, power or remedy, and any single or partial exercise of any
right, power or remedy shall not preclude the further exercise thereof.
Every right, power and remedy of the Lender shall continue in full
force and effect until such right, power or remedy is specifically
waived in a written instrument signed by the Lender.
15. Severability. If any part, term or provision of this Agreement is held
by any court to be illegal or in conflict with any law applicable to
this Agreement, the rights and obligations of the parties shall be
construed and enforced as if this Agreement did not contain that
particular part, term or provision.
16. Headings. The headings in this Agreement have been included for ease of
reference only, and shall not be considered in the construction or
interpretation of this Agreement.
17. Benefit. This Pledge Agreement shall inure to the benefit of the Lender
and its successors and assigns, and all obligations of the Shareholders
shall bind their respective successors and assigns.
18. Governing Law/Forum. This Pledge Agreement shall be governed by and
construed in accordance with the laws, including without limitation the
conflicts of laws rules, of the Commonwealth of Kentucky. Any legal
action or proceeding with respect to this Pledge Agreement may be
brought in the Courts of the State of Kentucky in and for the County of
Jefferson or the United States of America for the Eastern District of
Kentucky. By execution of this Agreement, both UniDial and UniQuest
hereby submit to such jurisdiction, hereby expressly waiving whatever
rights may correspond to either of them by reason of their present or
future domicile.
19. Pledge Agreement Governs. If any term, condition or provision of this
Pledge Agreement conflicts in any way with any term, condition or
provision of the Loan Agreement, the term, condition or provision of
this Pledge Agreement shall govern.
20. Counterparts.
(a) This Agreement may be signed by each party upon a separate copy,
and in such case one counterpart of this Agreement shall consist
of enough of such copies to reflect the signature of each party.
(b) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement or the terms thereof
to produce or account for more than one of such counterparts.
<PAGE>
IN WITNESS WHEREOF, the Shareholders and the Lender have signed this Agreement
as of the date set forth in the Preamble hereto, but actually on the date(s) set
forth below.
SHAREHOLDERS:
/s/ Thomas E. Aliprandi
----------------------------
Thomas E. Aliprandi
Date: 2/24/96
---------------------
STATE OF UTAH
COUNTY OF SALT LAKE
The foregoing instrument was acknowledged before me by Thomas E. Aliprandi, on
February 24, 1996.
/s/ Marc Johnson
-------------------------------
Notary Public
Commission expires: May 30, 1999
/s/ David E. Shepardson
----------------------------------
David E. Shepardson
Date: 2/24/96
--------------------------
STATE OF UTAH
COUNTY OF SALT LAKE
The foregoing instrument was acknowledged before me by David E. Shepardson, on
February 24, 1996.
/s/ Marc Johnson
----------------------------------
Notary Public
Commission expires: May 30, 1999
LENDER:
UNIDIAL INCORPORATED
By /s/ Kenneth D. Richey
-------------------------
Kenneth D. Richey
Date: 2/6/96
STATE OF KENTUCKY
COUNTY OF JEFFERSON
The foregoing instrument was acknowledged before me by Kenneth D. Richey the
Secretary/Treasurer of UniDial Incorporated, a Kentucky corporation, on behalf
of the Corporation, on March 6, 1996.
/s/ Rhonda J. Lamb
-----------------------------
Notary Public
Commission expires: August 26, 1998
FIRST AMENDMENT TO STOCK PLEDGE AGREEMENT
THIS FIRST AMENDMENT TO STOCK PLEDGE AGREEMENT (the "First Amendment"),
is made and entered into as of this 31st day of January, 1998, by and between
(a) UNIQUEST COMMUNICATIONS, INC., a Utah corporation with principal office and
place of business in Midvale, Utah ("Borrower") and (b) AGENT FINANCIAL
SERVICES, LLC, a Kentucky limited liability company with an office and place of
business in Louisville, Kentucky (the "Lender").
PRELIMINARY STATEMENT
A. Pursuant to that certain Loan Agreement dated as of September 18,
1995, between the Borrower and the Lender, the Lender has
established a line of credit in the principal amount of Three
Hundred Thousand Dollars ($300,000.00) in favor of the Borrower (the
"Line of Credit"). The Loan Agreement and other Borrower Documents
were originally between the Borrower and UniDial Incorporated. The
Lender acquired the Loan from UniDial Incorporated on January 1,
1997.
B. The obligation of the Borrower to repay the outstanding principal
balance of the Line of Credit, together with accrued interest
thereon is evidenced by that certain Revolving Credit Note dated
September 18, 1995, made by the Borrower, payable to the order of
the Lender, and in the face principal amount of Three Hundred
Thousand Dollars ($300,000.00), as amended pursuant to that certain
First Amendment to Revolving Credit Note dated March 1, 1997 between
the Borrower and the Lender (the "First Amendment") (collectively,
the "Note").
C. The obligation of the Lender to establish the Line of Credit was
subject to the condition, among others, that the Borrower execute
that certain Security Agreement dated September 18, 1995, between
Borrower and Lender ("Security Agreement")
D. The current maturity date of the Note is January 31, 1998.
E. The Borrower has now requested that the Lender extend the stated
maturity date of the Line of Credit from January 31, 1998 to January
31, 1999. The Lender is willing to and desires to extend the stated
maturity date of the Line of Credit from January 31, 1998 to January
31, 1999, pursuant to the terms and conditions set forth in this
First Amendment (the term "Loan Agreement," as hereinafter used,
includes this First Amendment and all future amendments and
modifications to the Loan Agreement).
F. The Shareholders collectively own ninety-three percent (93%) of the
authorized, issued and outstanding shares of the Borrower's common
stock and, in consideration of all of the benefits which the
Shareholders will receive from the extension of the maturity date of
the Note, the Shareholders are willing to and desire to execute and
deliver this First Amendment to Stock Pledge Agreement in favor of
the Lender.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants set forth herein, and for other good and valuable
consideration, the mutuality, receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Each capitalized term used herein, shall have the meaning set forth
in the Stock Pledge Agreement or the Loan Agreement as amended.
2. Section 3 of the Stock Pledge Agreement is hereby amended in its
entirety to read as follows:
3. Obligations Secured. The security interests created hereby secure
the payment and performance of all of the following Secured
Obligations: (a) any and all indebtedness of the Borrower to the
Lender evidenced by the Revolving Credit Note, as defined in the
Loan Agreement and any amendments thereto; (b) all of the
obligations, agreements, covenants, and representations of the
Borrower contained in the Security Agreement as defined in the Loan
Agreement, and any amendments thereto; (c) all of the obligations,
agreements, covenants and representations of the Borrower contained
in the Security Agreement as defined in the Loan Agreement and any
amendments thereto, and any other related document, or any other
<PAGE>
Borrower Document, as defined in the Loan Agreement and any
amendments thereto, whether or not now or hereafter evidenced by any
note, instrument, or other writing, or as may be amended or modified
in writing; (d) any and all indebtedness of the Shareholders
contained in and evidenced by the Guaranty Agreement as defined by
the Loan Agreement and any amendments thereto; and (e) any and all
indebtedness, obligation, or liability of the Shareholders and/or
the Borrower to the Lender, however evidenced, direct or indirect,
absolute or contingent, whether now existing or hereafter arising.
3. Section 13(b)(ii) is hereby amended in its entirety to read as
follows:
1. If to the Lender:
Agent Financial Services, LLC
4350 Brownsboro Road
Suite 110, The Summit
Louisville, KY 40207
Attn: Mr. Kenneth D. Richey
and copy to:
Ogden Newell & Welch
1700 Citizens Plaza
500 West Jefferson Street
Louisville, KY 40202
Attn: Mr. Robert W. Adams
4. The Shareholders represent and warrant that no Event of Default has
occurred or is continuing under the Stock Pledge Agreement.
5. Except to the extent expressly amended or modified hereby, the
Shareholders hereby ratify and reaffirm their covenants, agreements,
obligations, representations and warranties set forth in the Stock
Pledge Agreement.
IN WITNESS WHEREOF, the Shareholders and the Lender have caused this
First Amendment to Stock Pledge Agreement to be duly executed as of the day and
year first above written.
/s/ Thomas E. Aliprandi
----------------------------------
Thomas E. Aliprandi
/s/ David E. Shepardson
-----------------------------
David E. Shepardson
(the "Shareholders")
AGENT FINANCIAL SERVICES, LLC
By: /s/ Kenneth D. Richey
------------------------------
Kenneth D. Richey, Operating Manager
(the "Lender")
LICENSE AND OPTION AGREEMENT
This License and Option Agreement (hereinafter "Agreement") is entered
into as of July 1, 1999 by and between Automated Solutions, Inc., a Utah
corporation (hereinafter "Licensor") and PrimeSource Communications Holdings,
Inc., a Delaware corporation, or its authorized designee company, provided such
designee is a wholly-owned subsidiary of PrimeSource Communications Holdings,
Inc., and is not a competitor of Licensor, (hereinafter together, "Licensee").
WHEREAS, Licensor desires to license to Licensee certain technology
described herein below; and
WHEREAS, Licensor desires to sell, and Licensee desires to purchase,
certain assets of Licensor as defined more clearly below and/or as shown in the
exhibits attached hereto; and
THEREFORE, the parties hereby agree as follows:
1. License Grant; Sublease; Equipment Lease.
1.1 In consideration of the non-refundable, irrevocable payment by
Licensee to Licensor of the sum of One Hundred Fifty Thousand Dollars ($150,000)
in immediately available funds (the "License Fee") payable $50,000 upon
execution of this Agreement and the remaining $100,000 not later than 12:00
noon, Friday, July 2, 1999, Licensor hereby grants to Licensee a fully-paid,
non-exclusive, non-assignable, perpetual license to use the Licensor's presently
existing source code (the "Source Code") for Licensor's data extraction software
known as the "Neural Cube?" and the "ADEPT System?" (collectively, the "Data
Extraction Technology") solely in connection with Licensee's data extraction
service bureau business whereby Licensee proposes to extract Current Data (as
such term is defined below) from paper forms and convert such data to electronic
files in a manner similar to Licensor's past practices (the "Field of Use"). For
purposes of this Agreement, "Current Data" shall mean data that has been entered
on paper forms by clients or customers or their affiliates no more than 180 days
prior to submission of such data to Licensee for extraction and conversion to
electronic files. Licensee's license hereunder is limited to the Field of Use.
Licensee acknowledges that its rights in the Data Extraction Technology are
limited to the license granted hereunder and that Licensor retains all right,
title and interest in and to the Data Extraction Technology except for the
limited license specifically granted to Licensee hereunder. Licensor hereby
grants to Licensee a fully-paid, non-exclusive, non-assignable, perpetual
license to use the Licensor's trade names "Neural Cube?" and "ADEPT System?
solely in the Field of Use. Licensee agrees to protect and to not denegrate such
trade names, or to modify, alter, change or revise the Source Code or Data
Extraction Technology or create or market any derivative thereof. If the
Licensee does not exercise the Option (as defined in Section 5 below) prior to
the expiration thereof, Licensor shall deliver to Licensee the Source Code in
tape medium. Licensee may engage Licensor, on mutually agreeable terms to
Licensor and Licensee to install the Data Extraction Technology for use by
Licensee at Licensor's facilities.
1.2 Licensor will license to Licensee all upgrades to the Data
Extraction Technology as and when such upgrades are fully developed and ready
for use; provided, however, Licensee shall, as a condition to receiving such
upgrade licenses, pay Licensor a reasonable and competitive license fee or
royalty in an amount mutually agreeable to Licensor and Licensee. In addition,
Licensor will license to Licensee ongoing Neural Cube? training updates and bug
fixes as such updates and bug fixes are fully developed and ready for use;
provided, however, Licensee shall, as a condition to receiving such training
updates and bug fixes, pay Licensor reasonable license fees or royalties in
amounts mutually agreeable to Licensor and Licensee. Except for liability
resulting from a breach of this Agreement, neither party shall be liable or
obligated under this Agreement or under contract, negligence, strict liability
or any other legal or equitable theory (i) for any amounts in excess of one half
of the License Fee (in the case of the Licensor) or (in the case of the
Licensee) amounts paid or owed by it hereunder or (ii) for any incidental or
consequential damages, lost profits, or lost or corrupted data or interrupted
use or costs of procurement or substitute goods, technology or services.
Licensor makes no warranties to any person or entity with respect to either the
Data Extraction Technology or the licenses granted hereunder or any updates,
upgrades or improvements thereto or any derivatives thereof or any services or
licenses and disclaims all implied warranties, including without limitation,
warranties of merchantability, fitness for a particular purpose and
non-infringement.
<PAGE>
1.3 The Data Extraction Technology and the Source Code constitute
proprietary, copyrighted, and confidential information and material of Licensor.
Licensee hereby agrees to keep confidential and to not disclose to any
third-party the Source Code or the Data Extraction Technology. Licensee further
agrees to use the Source Code and the Data Extraction Technology only pursuant
to this License and only in the Field of Use. Licensee will bind its officers,
directors, employees and other persons under its control to this same obligation
of confidentiality and cause them to comply therewith.
1.4 In the event of a breach of this Agreement by Licensee, Licensor
may not be able to be adequately compensated by money damages. Consequently,
Licensor shall be entitled to an injunction and other equitable remedies, in
addition to any remedies available at law, without the necessity of posting a
bond or proving actual damages.
1.5 From the date hereof until 5:00 p.m. Mountain Daylight Time on July
16, 1999 (the "Sublease Term"), the Licensor hereby subleases to Licensee and
Licensee hereby leases from Licensor the real property located at 1890 West 4000
South, Roy, Utah (the "Real Property") and currently leased by Licensor from
C.C. Partnership (the "Landlord") pursuant to a real property lease dated
December 15, 1995, a copy of which has been delivered to the Licensee (the
"Senior Lease"). During the Lease Term, Licensee shall have the right to use the
Personal Property listed on Exhibit "B" hereto in the Field of Use on the Real
Property and shall protect, preserve and maintain such Personal Property in good
working order and condition. Licensee shall protect, preserve and maintain the
Real Property in good working order and condition during the Lease Term. The
Licensee agrees to (i) pay Licensor on the date hereof all amounts owing or
which are expected to become owing by Licensor to the Landlord during the
Sublease Term under the Senior Lease including rent in the amount of $4,000;
(ii) abide by and honor all of the terms of the Senior Lease and not cause
Licensor to be in default thereunder; and (iii) pay Licensor on the date hereof
$5,800 for utilities and telephone expenses, $5,000 for equipment-related lease
and other expenses for equipment included in the Personal Property listed on
Exhibit "B" and $1,000 for office supplies and other expenses. Licensee shall
pay all of its own operating and other expenses related to its business.
1.6 Starting from and after 12:00 noon, Friday, July 2, 1999, Licensor
shall have the right to hire the employees of Licensor (except Russell W.
Wilding, Brett Millar and Mike Bailey). Licensor confirms its intent to hire
substantially all of Licensor's employees on that date and assume employment
related responsibilities and obligations with respect to the hired employees
from and after that date.
2. Assignment.
Neither this Agreement nor any rights, licenses or obligations
hereunder, may be assigned by Licensee including assignment pursuant to a
merger, change of control or operation of law without the prior written approval
of Licensor, which approval shall not be unreasonably withheld. Without limiting
the generality of the foregoing, Licensor's refusal to approve any assignment
shall not be deemed unreasonable if Licensee proposes to assign this Agreement
or any of its rights, licenses or obligations hereunder to any third-party
reasonably considered by Licensor to be a competitor of Licensor.
3. Non-Compete Covenant.
For a period of three years from and after the date of this Agreement,
the Licensor will not engage directly or indirectly in any business activity
using the Data Extraction Technology within the Field of Use. If the final
judgment of a court of competent jurisdiction declares that any term or
provision of this Section 3 is invalid or unenforceable, the parties agree that
the court making the determination of invalidity or unenforceability shall have
the power to reduce the scope, duration, or area of the term or provision, to
delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Section 3 shall be enforceable as so modified after
the expiration of the time within which the judgment may be appealed. In the
event of a breach of this Agreement by Licensor, Licensee may not be able to be
adequately compensated by money damages. Consequently, Licensee shall be
entitled to an injunction and other equitable remedies, in addition to any
remedies available at law, without the necessity of posting a bond or proving
actual damages.
<PAGE>
4. Assignment of Customer Contracts.
To the extent assignable, Licensor hereby assigns to Licensee and
Licensee hereby assumes all of Licensor's rights and obligations under any and
all agreements between the Licensor and any of Licensor's current clients or
customers, all of which contracts are identified on Exhibit "A" attached hereto
along with each client's company name, contact name, address and telephone
number. From and after the date hereof, Licensee hereby agrees to hold Licensor
and its affiliates harmless and indemnify Licensor and its affiliates from and
against any and all obligations to the clients and customers referred to in such
contracts; provided however, Licensor shall hold Licensee harmless and indemnify
Licensee and its affiliates from and against any and all obligations to such
clients and customers to the extent such obligations arose prior to July 1,
1999.
5. Option Grant.
As further consideration for this Agreement, Licensor hereby grants to
Licensee an exclusive option (the "Option") to (i) assume the real property
lease dated December 15, 1995 by and between the Licensor and C.C. Partnership
for the property located at 1890 West 4000 South, Roy, Utah (the "Real Property
Lease"); and (ii) purchase any and all of the furniture, equipment,
nonproprietary commercially available software and leasehold improvements listed
on Exhibit "B" attached hereto (the "Personal Property") and assume all
obligations with respect to the Personal Property. The Option shall expire at
5:00 p.m. Mountain Daylight Time on July 16, 1999. If Licensee elects to
exercise the Option, Licensee shall (a) pay to Licensor and Licensor shall have
received prior to expiration of the Option, immediately available funds in the
amount of Two Hundred Fifty Thousand Dollars ($250,000) (the "Option Payment")
and (b) sign and deliver to Licensor the Assignment and Assumption Agreement
attached hereto as Exhibit "C." Upon receipt of the Option payment, Licensor
shall promptly, (i) subject to the consent of C.C. Partnership and pursuant to
the Assignment and Assumption Agreement attached hereto as Exhibit "C," assign
all of Licensor's right, title and interest in and to the Real Property Lease to
Licensee and (ii) execute and deliver to Licensee a bill of sale in the form
attached hereto as Exhibit "D" transferring the Personal Property to Licensee
"as-is" "where-is", without warranty of any kind.
<PAGE>
6. Limited Representations.
Licensor represents and warrants to the Licensee that Licensor owns and
has the right and power to (i) grant the License set forth above, (ii) assign
the Real Property Lease subject to the consent of C.C. Partnership, (iii) assign
all of the assignable contracts listed on Exhibit "A" and (iv) sell and transfer
the Personal Property.
7. No Brokers.
Neither the Licensor, nor the Licensee has retained nor used, and
neither will retain nor use, the services of a broker or finder which would
result in the imposition of a fee upon the Licensee, the Licensor or the
property of Licensor should the transaction contemplated by this Agreement be
consummated.
8. Governing Law.
This Agreement shall be governed by the internal laws of the State of
Utah.
9. Notices.
All notices and other communications hereunder shall be in writing and
shall be furnished by hand delivery, registered or certified mail, reputable
overnight courier or facsimile to the parties at the addresses set forth below.
Any such notice shall be duly given upon the date it is delivered to the
addresses shown below, addressed as follows:
If to Licensee: If to Licensor:
PrimeSource Communications Holdings, Inc. Automated Solutions, Inc.
6955 Union Park Center #390 1890 West 4000 South
Midvale, Utah 84047 Roy, Utah 84067-3131
Attn: David Shepardson Attn: Russell W. Wilding
Fax: (801) 562-1441 Fax: (801) 395-6197
10. Severability.
If any provision of this Agreement shall be held invalid or
unenforceable to any extent, the remainder of this Agreement shall not be
affected and shall be enforceable to the greatest extent permitted by law. This
Agreement contains the entire agreement between the Licensor and the Licensee
with regard to the matters set forth herein.
11. Counterparts.
This Agreement may be executed in counterparts by facsimile, each of
which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
IN WITNESS WHEREOF, the Licensor and Licensee have executed this
License and Option Agreement through their authorized signatories effective as
of the date first above written.
AUTOMATED SOLUTIONS, INC.
By: /s/ Russell W. Wilding
--------------------------------
Russell W. Wilding, President
PRIMESOURCE COMMUNICATIONS
HOLDINGS, INC.
By: /s/ Thomas E. Aliprandi
-----------------------
Thomas E. Aliprandi, President/CEO
<PAGE>
EXHIBIT "A"
CLIENT AND CUSTOMER CONTRACTS
1. Roadrunner Trucking, dated March 31, 1997
2. Covenant Transport, dated March 6, 1997
3. Kaplan Trucking, dated May 14, 1997
4. Bud Meyer Truck Lines, dated March 21, 1997
5. IC One, dated August 13, 1997
6. Net T Tech, dated October 27, 1997
7. Global Health Trax, dated November 20, 1997
8. Morinda, dated November 26, 1997
9. CCG, dated April 17, 1998
10. Franklin Covey, dated May 11, 1998
11. P5, dated July 1, 1998 (requires prior written consent of P5
in order to assign agreement)
12. Ogden Clinic, dated March 1, 1999
13. Pepsi-Cola Company, dated March 16, 1999
14. Wal*Mart Stores, Inc., dated April 15, 1999
15. Interim, Inc., dated [______]
EXHIBIT "B"
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption Agreement (the "Assignment Agreement")
is dated as of July 22, 1999, and is entered into by and between Automated
Solutions, Inc., a Utah corporation ("Automated") and PrimeHoldings.Com, Inc., a
Delaware corporation ("PS"). Automated and PS are collectively, referred to
herein as the "parties" and, individually, as a "party".
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereby agrees as follows:
1. Assignment of Obligations. Automated hereby assigns, transfers
and conveys to PS all of its liabilities and obligations set forth on Schedule 1
attached hereto (the "Obligations").
2. Assumption of Obligations. PS hereby accepts the forgoing
assignment and hereby assumes, covenants and agrees with Automated to perform
and discharge all of the Obligations.
3. Indemnification of Automated. PS from and after the date
hereof fully indemnifies and holds harmless Automated from and against the
entirety of any Adverse Consequences (as that term is defined below) that the
Indemnified Persons (or either of them) may suffer resulting from, arising out
of, relating to, in the nature of, or caused by the breach (or the alleged
breach) hereof of arising in connection with the Obligations. For purposes of
this Section 3, the phrase "Adverse Consequences" shall mean all actions, suits,
proceedings, hearings, investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages, dues, penalties,
fines, costs, amounts paid in settlement, liabilities, obligations, taxes,
liens, losses, expenses and fees, including court costs and reasonable
attorneys' fees and expenses.
4. Binding Effect; Governing Law. This Assignment Agreement will
be binding upon and inure to the benefit of the parties and their respective
successors and assigns and shall be governed by and construed in accordance with
the internal laws (not the conflicts of law rules) of the State of Utah.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Assignment and
Assumption Agreement as of the date first-above written.
AUTOMATED SOLUTIONS, INC.,
a Utah corporation
By:
--------------------------------
Its:
PRIMEHOLDINGS.COM, INC.,
a Delaware corporation
By:
--------------------------------
David E. Shepardson, III
Its:Vice President/CFO
SCHEDULE 1
OBLIGATIONS
1. Convergent Capital Corporation Equipment Lease dated 2/8/99
2. Xerox Lease Agreement dated 11/12/96
3. Revco Leasing Co. Lease Agreement dated 4/22/97
4. AT&T Agreement dated 4/25/94
BILL OF SALE
Pursuant to the terms of the License and Option Agreement dated July 1,
1999 (the "License Agreement") by and among Automated Solutions, Inc., a Utah
corporation ("Automated") and PrimeHoldings.Com, Inc. ("PS"), and for good and
valuable consideration as recited in the License Agreement, the receipt and
sufficiency of which are hereby acknowledged, Automated does hereby sell,
convey, transfer, assign and deliver to PS, effective as of July 22, 1999, all
of its right, title and interest in and to all of the property set forth on
Schedule 1 attached hereto except for the personal property listed on Schedule 1
under the headings "Intelisys Fixed Assets" or "Additional Intelisys Fixed
Assets" which are retained by Automated and not conveyed hereby (the
"Property"). Automated owns and is conveying to PS good and marketable title to
the Property subject to liens and claims referenced on Schedule 1 to the
Assignment and Assumption Agreement relating to certain contractual obligations
of Automated and dated July 22, 1999. The Property is conveyed "as-is,"
"where-is," without warranties of any kind whatsoever, including without
limitation, warranties of merchantability, fitness for a particular purpose and
non-infringement.
IN WITNESS WHEREOF, Automated Solutions, Inc. has caused this Bill of
Sale to be duly executed on July 22, 1999.
AUTOMATED SOLUTIONS, INC.,
a Utah corporation
By:
--------------------------------
Its:
FIRST AMENDMENT TO LICENSE AND OPTION AGREEMENT
This Amendment, dated as of July 22, 1999, is made by and between
PrimeHoldings.Com, Inc., a Delaware corporation (the "Licensee"), and Automated
Solutions, Inc., a Utah corporation (the "Licensor").
RECITALS:
Licensor and Licensee have entered into a License and Option Agreement,
dated as of July 1, 1999 (the "License Agreement"). Capitalized terms used in
these recitals have the meanings given to them in the License Agreement unless
otherwise specified.
Licensee has requested that certain amendments be made to the License
Agreement, which Licensor is willing to make pursuant to the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, it is agreed as follows:
1. Capitalized terms used in this Amendment which are defined in the License
Agreement shall have the same meanings as defined therein, unless otherwise
defined herein.
2. The License Agreement is hereby amended to add the following new Section 1.1,
which new Section 1.1 will replace in its entirety the original Section 1.1 in
the License agreement:
"2.1 In consideration of the non-refundable, irrevocable payment by
Licensee to Licensor of the sum of One Hundred Fifty Thousand Dollars
($150,000) which amount has been received by Licensor, Licensor hereby
grants to Licensee a fully-paid, exclusive, non-assignable license to
use the Licensor's presently existing source code (the "Source Code")
for Licensor's data extraction software known as the "Neural Cube?" and
the "ADEPT System?" (collectively, the "Data Extraction Technology")
solely in connection with Licensee's data extraction service bureau
business whereby Licensee proposes to extract Current Data (as such
term is defined below) from paper forms and convert such data to
electronic files in a manner similar to Licensor's past practices (the
"Field of Use"). For purposes of this Agreement, "Current Data" shall
mean data that has been entered on paper forms by clients or customers
or their affiliates no more than 180 days prior to submission of such
data to Licensee for extraction and conversion to electronic files.
Licensee's license hereunder is limited to the Field of Use. Licensee
acknowledges that its rights in the Data Extraction Technology are
limited to the license granted hereunder and that Licensor retains all
right, title and interest in and to the Data Extraction Technology
except for the limited license specifically granted to Licensee
hereunder. Licensor hereby grants to Licensee a fully-paid, exclusive,
non-assignable, license to use the Licensor's trade names "Neural
Cube?" and "ADEPT System? solely in the Field of Use. Licensee agrees
to protect and to not denegrate such trade names. Licensor shall
deliver to Licensee the Source Code in tape medium. Licensee may engage
Licensor, on mutually agreeable terms to Licensor and Licensee to
install the Data Extraction Technology for use by Licensee at
Licensor's facilities. Licensee may modify, alter, enhance, change or
revise the Source Code or Data Extraction Technology; provided, (i) any
such modifications, alterations, changes or enhancements ("Changes")
shall automatically be deemed, and hereby are, licensed back to
Licensor on a royalty-free, non-exclusive basis for use solely outside
of the Field of Use, and (ii) Licensee shall, on demand, promptly
deliver to Licensor a tape of the source code for the Changes, together
with a copy of all documentation related thereto. The Licenses granted
under this Section 1.1 shall be perpetual, subject to Licensor's right
to terminate the exclusive nature of the Licenses (i) with respect to
the trucking industry promptly upon notice to Licensee in the event
Licensee ceases to actively market to the trucking industry in the
Field of Use using the Data Extraction Technology; and (ii) in the
event Licensee breaches or becomes in default as provided in Section 2
of the Escrow Agreement dated July 22, 1999 entered into in connection
herewith with Licensor and LeBoeuf, Lamb, Greene & MacRae, L.L.P.
Licensee shall be deemed to have ceased to actively market to the
trucking industry if Licensee fails to add at least two new customers
(other than those customers listed in Exhibit "A" to the License
<PAGE>
Agreement) in the trucking industry in any twelve-month period
beginning August 1, 1999. Licensee shall provide Licensor with a copy
of all new customer contracts after the date hereof relating to the
trucking industry as Licensee enters into such contracts."
3. The License Agreement is hereby amended to add the following additional
language to the end of Section 4:
"In the event Wal*Mart Stores, Inc. demands a refund of the $11,000
paid to Licensor as of July 1, 1999, in connection with the contract
between Licensor and Wal*Mart Stores, Inc. dated March 16, 1999, the
Licensor agrees to indemnify and hold harmless Licensee for any amounts
paid by Licensee to Wal*Mart Stores, Inc. in connection with any such
demand, up to a maximum of $11,000.
4. The License Agreement is hereby amended to add a new Section 13 to read
in its entirety as follows:
"Section 13. Remedies. In addition to any other remedies provided for
herein, in the event of a breach or default under the terms of this
Agreement by either party, the defaulting party agrees to pay all
out-of-pocket expenses including reasonable attorneys' fees and legal
expenses incurred by or on behalf of the non-defaulting party in the
enforcement of this Agreement, in exercising any remedy arising from
such breach or default, or otherwise related to such breach or default.
Regardless of any breach or default, the defaulting party agrees to pay
all expenses, including reasonable attorneys' fees and legal expenses,
incurred by the non-defaulting party in any bankruptcy proceedings of
any type involving the non-defaulting party or this Agreement,
including, without limitation, expenses incurred in modifying or
lifting the automatic stay, determining adequate protection, use of
cash collateral, or relating to any plan of reorganization."
5. Except as explicitly amended by this Amendment, all of the terms and
conditions of the License Agreement shall remain in full force and effect.
6. The Licensee hereby represents and warrants to the Licensor as follows:
6.1 The Licensee has all requisite power and authority to execute this
Amendment and to perform all of its obligations hereunder, and this Amendment
has been duly executed and delivered by the Licensee and constitutes the legal,
valid and binding obligation of the Licensee, enforceable in accordance with its
terms.
6.2 The execution, delivery and performance by the Licensee of this
Amendment have been duly authorized by all necessary corporate action and do not
(i) require any authorization, consent or approval by any governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, (ii) violate any provision of any law, rule or regulation or of any
order, writ, injunction or decree presently in effect, having applicability to
the Licensee, or the articles of incorporation or bylaws of the Licensee, or
(iii) result in a breach of or constitute a default under any indenture or loan
or credit agreement or any other agreement, lease or instrument to which the
Licensee is a party or by which it or its properties may be bound or affected.
7. This Agreement may be executed in counterparts by facsimile, each of
which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
8. Licensee and Licensor are simultaneously herewith entering into the
Escrow Agreement.
IN WITNESS WHEREOF, the Licensor and Licensee have executed this
Amendment through their authorized signatories effective as of the date first
above written.
AUTOMATED SOLUTIONS, INC.
By: /s/ Russell W. Wilding
--------------------------------
Russell W. Wilding, President
PRIMEHOLDINGS.COM, INC.
By: /s/ David E. Shepardson, III
----------------------------
David E. Shepardson, III
Its: Vice-President/CFO
April 25, 2000
Office of The Chief Accountant
Securities and Exchange Commission
450 Fifth Street, NW
Washington, D.C. 20549
Re: PrimeHoldings.com, Inc.
Ladies and Gentlemen:
We were previously principal accountants for PrimeHoldings.com, Inc.
(formerly PrimeSource Communications Holdings, Inc.) and, under the date of May
19, 1999, we reported on the consolidated financial statements of PrimeSource
Communications Holdings, Inc. as of and for the years ended December 31, 1998
and 1997. In January 2000, our services were terminated. We have read
PrimeHoldings.com, Inc.'s statements included under Item 3 of its Form 10-SB,
and we agree with such statements.
Very truly yours,
TANNER + CO.
SCHEDULE OF SUBSIDIARIES
Name of Subsidiary State of Incorporation
bCard, Inc. Utah
Navilor, Inc. Utah
GolfAgent USA, Inc. Nevada
UniQuest Communications, Inc. Utah
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 86,657
<SECURITIES> 0
<RECEIVABLES> 110,575
<ALLOWANCES> 5,832
<INVENTORY> 0
<CURRENT-ASSETS> 292,632
<PP&E> 722,924
<DEPRECIATION> 123,707
<TOTAL-ASSETS> 1,584,913
<CURRENT-LIABILITIES> 899,674
<BONDS> 0
0
1,698
<COMMON> 343,701
<OTHER-SE> 339,840
<TOTAL-LIABILITY-AND-EQUITY> 1,584,913
<SALES> 1,295,188
<TOTAL-REVENUES> 1,295,188
<CGS> 440,662
<TOTAL-COSTS> 3,300,025
<OTHER-EXPENSES> 147,217
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,068,576)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,068,576)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,068,576)
<EPS-BASIC> (.22)
<EPS-DILUTED> (.22)
</TABLE>
