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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from:________ to ________
Commission file number: 33-11059-A
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TELESERVICES INTERNATIONAL GROUP INC.
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(Name of small business issuer as specified in its charter)
FLORIDA 59-2773602
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(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
100 SECOND AVENUE SOUTH, SUITE 1000, ST. PETERSBURG, FLORIDA 33701
- - ------------------------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (727) 895-4410
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Securities registered under Section 12(b) of the Exchange Act: NONE
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Securities registered under Section 12(g) of the Exchange Act: NONE
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Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year. $ 1,021,478
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As of March 30, 1999, the aggregate market value of the voting stock
held by non-affiliates, approximately 61,971,683 shares of Common Stock, was
approximately $23,549,000 based on an average of the bid and ask prices of
approximately $.38 per share of Common Stock on such date.
The number of shares outstanding of the issuer's Common Stock, $.0001
par value, as of March 30, 1999 was 76,078,966 shares.
DOCUMENTS INCORPORATED BY REFERENCE: None.
Transitional Small Business Disclosure Format (check one):
Yes [ ]; No [X]
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PART I
CAUTIONARY STATEMENT IDENTIFYING IMPORTANT FACTORS
THAT COULD CAUSE THE COMPANY'S ACTUAL RESULTS TO
DIFFER FROM THOSE PROJECTED IN FORWARD LOOKING STATEMENTS
In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, readers of this document and any
document incorporated by reference herein, are advised that this document and
documents incorporated by reference into this document contain both statements
of historical facts and forward looking statements. Forward looking statements
are subject to certain risks and uncertainties, which could cause actual results
to differ materially for those indicated by the forward looking statements.
Examples of forward looking statements include, but are not limited to (i)
projections of revenues, income or loss, earning or loss per share, capital
expenditures, dividends, capital structure and other financial items, (ii)
statements of the plans and objectives of the Company or its management or Board
of Directors, including the introduction of new products, or estimates or
predictions of actions by customers, suppliers, competitors or regulatory
authorities, (iii) statements of future economic performance, and (iv)
statements of assumptions underlying other statements and statements about the
Company or its business.
This document and any documents incorporated by reference herein also
identify important factors which could cause actual results to differ materially
from those indicated by forward looking statements. These risks and
uncertainties include price competition, the decisions of customers, the actions
of competitors, the effects of government regulation, possible delays in the
introduction of new products and services, customer acceptance of products and
services, the Company's ability to secure debt and/or equity financing on
reasonable terms, and other factors which are described herein and/or in
documents incorporated by reference herein.
The cautionary statements made pursuant to the Private Litigation
Securities Reform Act of 1995 above and elsewhere by the Company should not be
construed as exhaustive or as any admission regarding the adequacy of
disclosures made by the Company prior to the effective date of such Act. Forward
looking statements are beyond the ability of the Company to control and in many
cases the Company cannot predict what factors would cause results to differ
materially from those indicated by the forward looking statements.
Item 1. Description of Business.
BUSINESS DEVELOPMENT
TeleServices International Group Inc. ) (the "Registrant", the
"Company" or "TSIG") is in the business of providing teleservices and internet
solutions to both domestic and international companies through state-of-the-art
facilities, telecommunications and products.
History of the Company
TeleServices International Group Inc. (formerly Visitors Services
International Corp. and Dynasty Capital Corporation) was a development stage
enterprise formed under the laws of the State of Florida to evaluate, structure
and complete a business combination in the form of a merger with, or acquisition
of, prospects consisting of private companies, partnerships or sole
proprietorships. The Company sold 2,500,000 units of $.0001 par value Common
Stock ("Common Stock") at $.02 per unit, for total proceeds of $50,000 in a
public offering which closed on June 8, 1987. The Company was formed for the
purpose of seeking potential business opportunities in the form of a business
combination with of an existing business.
Acquisition of Visitors Services International Corp.
Visitors Services International Corp., formerly Visitors Services, Inc.
("VSI") was in the business of providing reservations and information services
to Convention and Visitors Bureaus and convention/event organizers. VSI
originally became a subsidiary of the Company as a result of an Agreement and
Plan of Reorganization ("Agreement") among the Company, VSI and certain
Stockholders of VSI, dated September 26, 1996, pursuant to which a minimum of
80% of the issued and outstanding shares of VSI were to be exchanged on a one
share for one share basis for shares of restricted stock of the Company, after
the Company effected a 14.4 to 1 reverse stock split of the shares outstanding
before the date of the Agreement from 10,801,000 shares down to 750,093 shares
(in lieu of any fractional shares created as a result of the reverse stock
split, each holder of a
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fractional share was issued one additional whole share). The closing date of the
Agreement was September 27, 1996, when the Company's reverse stock split was
effected and certain Stockholders of VSI holding at least 80% of the outstanding
shares of VSI executed the Agreement. The "Exchange Offer" was extended to and
accepted by all of the remaining shareholders of VSI. By virtue of the
reorganization, VSI became a wholly-owned subsidiary of the Company.
After becoming a subsidiary of the Company, VSI entered into the
following business acquisitions:
1. On December 23, 1996, VSI entered into an Asset Purchase Agreement
with Global Reservation Systems, Inc. ("GRS"), a Colorado corporation, to
acquire all of GRS's interests in, to and under any asset, used in connection
with GRS's business of answering toll-free telephone numbers advertised by
contracted marketing organizations, providing information to callers of such
toll-free telephone numbers, making reservations with lodging properties and
attractions and providing advertising effectiveness statistics to such
contracted marketing organizations of every kind, nature and description.
2. On January 21, 1997, VSI acquired and took possession of all the
assets of International Reservation Services, Limited ("IRSL"), to utilize all
such assets to operate the former business of IRSL as the business of VSI. VSI
acquired these assets from IRSL as a result of a bankruptcy proceeding of IRSL.
The assets of IRSL consisted primarily of equipment, account receivables,
customer contracts and the rights to approximately one hundred "800" telephone
numbers. IRSL was a destination database marketing service company, specializing
in the provision of a centralized nationwide lodging reservation service and
other travel related services.
On March 5, 1999, VSI filed a voluntary petition for relief under
Chapter 7 of the United States Bankruptcy Code for the Middle District of
Florida, Tampa Division.
Acquisition and Disposition of GuaranTEE Time, Inc.
The Company acquired all of the outstanding capital stock of GuaranTEE
Time, Inc. ("GTT") on February 24, 1997, in exchange for restricted common stock
of the Company. Initially 100,000 shares of the Company were issued to the
selling shareholders of GTT in exchange for their 100% interest in GTT. GTT
provided automated tee-time scheduling for daily-fee golf courses and their
customers.
The Company disposed of substantially all of the assets of GTT on
October 3, 1997, following a sale by GTT (as seller) to Guarantee Time
Acquisitions, Inc., an unaffiliated third-party (the "Buyer"). The Company and
GTT agreed not to compete with the Buyer for a period of three years in the
business of tee-time reservation services.
Acquisition of American International Travel Agency, Inc.
On December 6, 1996, the Company, through VSI, entered into a Stock
Purchase Agreement with Phoenix Information Systems Corp. ("Phoenix") to acquire
all the capital stock of American International Travel Agency, Inc. ("AIT") from
Phoenix in exchange for 31,579 shares of Common Stock of Phoenix owned by VSI.
This transaction was closed on December 6, 1996. The consideration paid was
based upon arms-length negotiations and an independent fair-market evaluation.
Following a corporate restructuring by the Company, AIT became a
wholly-owned subsidiary of the Company. AIT enables the Company to access to the
major travel agency computerized reservation systems world-wide, and the ability
to issue airline tickets.
PRESENT BUSINESS OF THE COMPANY
The Company has recently restructured its business operations and
announced its intent, subject to shareholder approval, to change the name of the
Company to "TeleServices Internet Group Inc." doing business as "TSIG.com".
Through its three strategic business divisions (described below), the Company is
positioning itself as a pioneer in providing comprehensive outsourced e-commerce
solutions. These services will enable companies to develop, build and maintain
e-commerce web sites, create revenue-generating programs with corporations and
non-profit organizations that attract consumer to customers' sites, and
complements these offerings with Web-based call center and related services that
provide customer service and support. A brief description of the three divisions
is set forth below.
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On-Line Services Division
The Online Services Division plans to offer a full complement of online products
designed to reduce a client's time to market and cost of development, by
providing a proven e-commerce engine together with customized user-interfaces
and various options of fault tolerant redundancy. The Company will offer this
technology through "packaged products for rent" instead of the traditional
building of websites from scratch. The Company will provide the necessary
hardware, maintenance and technical support necessary for a client's solution at
a very competitive price. The Company plans to build up recurring revenue
through monthly maintenance and support programs. This division will be
headquartered in the Silicon Valley area of California.
The Online Services Division also plans to offer "Community Website"
products to support the "My Card" Programs of the Products and Services Division
(described below) and to cross-sell products while providing an Internet
solution to not-for-profit organizations.
TeleServices Division
The TeleServices Division, based in St. Petersburg, Florida, will offer
"Web-Based Customer Care Solutions" as well as traditional service bureau
call-center business including, but not limited to, inbound, outbound and
telemarketing, and client merger and acquisition services. Through
state-of-the-art technology and Internet connectivity, all call center operators
have on-line capabilities to provide customer and technical support and order
entry to provide solutions for both in-house products as well as clients'
Web-based applications.
Products and Services Division
The Products and Services Division offers consumer products through its
customized "My Card" programs. The first of these products, My MusicCard,
entitles holders to purchase music CDs and cassette tapes at a discounted
prices. Consumers receive the discounts by purchasing membership cards either
from the site or authorized distributors, through affinity programs with
corporations and retail stores, or as part of fund-raising drives from
non-profit organizations.
On March 29, 1999, the Company launched its proprietary Internet site,
www.myMusicCard.com, which enables consumers to purchase music CDs and cassettes
over the Internet at prices lower than major retail or existing online sources.
The site offers more than 250,000 music selections from a complete range of
artists, and has the most robust searching ability of any music-only site,
enabling consumers to search by any combination of artist, title, release date,
song name and other criteria.
The myMusicCard.com site will soon offer video DVDs and other related
products, as well as links to other companies to provide Digital Downloading as
well as customized compact discs. The My MusicCard program is the first of many
proposed products that will be available to clients through the "My Card"
Program. The next product the Company intends to launch is the "My PhotoCard".
The Products and Services Division has begun operations thorough two
wholly-owned subsidiaries: My MusicCard Company and My Card, Inc.
To handle order fulfillment of current and future products, the Company
uses third-party fulfillment houses and also plans to develop its own
fulfillment facility in California.
Trademarks
The Company's subsidiary, VSI, applied for federal registration of the
trademark "VSI" which application was approved on February 27, 1996.
The Company and/or its subsidiaries have applied for federal
registration of several trademarks and service-marks which are currently pending
approval.
Employees
As of the date hereof, the Company and its subsidiaries currently
employ 78 individuals, of which 17 are part-time employees.
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Item 2. Description of Property.
The Company owns no property; all of its facilities are leased. Its
corporate headquarters are housed in approximately 16,000 square feet of
commercial space at 100 Second Avenue South, St. Petersburg, Florida. The
Company has no real estate related investments.
Item 3. Legal Proceedings.
A. Felcrest Trading Ltd. ("Felcrest"), a defendant in a lawsuit filed by Robert
P. Gordon, individually, filed a third party Complaint in Circuit Court for
Pinellas County, Florida, on October 23, 1998, against the Company, VSI, and
current and former officers and directors of the Company and VSI and other third
parties (collectively the "Third Party Defendants"). The third party complaint
asserts civil claims for unspecified damages against the Third Party Defendants
for alleged securities law and uniform commercial code violations, fraud and
negligent misrepresentation, in connection with a private loan made by Felcrest
to Gordon. The Third Party Defendants were not parties to the private loan made
by Felcrest to Gordon, and Management believes that the third party claims are
without merit.
The original lawsuit was filed by Mr. Gordon against Felcrest on
February 9, 1998, in connection with a loan agreement wherein Felcrest loaned $1
million to Mr. Gordon. The loan was secured by shares of common stock to the
Company owned by Mr. Gordon, and was convertible into those shares unless the
loan was first redeemed by Mr. Gordon. Mr. Gordon alleges in his complaint that
Felcrest manipulated the market price of the Company's common stock, by engaging
in short-selling, in an effort to cause a technical default in the loan
agreement which triggered a substantial penalty and permitted Felcrest to
convert the loan into shares at an artificially reduce price.
B. On December 28, 1998, EIS International, Inc., of Herndon, Virginia, issued a
Demand for Arbitration to the Company, as the result of a dispute arising under
a contract dated May 7, 1998 with the Company. EIS seeks $223,261 for software,
licenses and services, which it claims are due and owing under the parties
agreement, plus interest, attorneys' fees and costs. The Company claims that it
notified EIS of major defects in the software, demanded that they be remedied,
but EIS refused to do so and instead demanded payment. Further, the Company
counter-claimed that it has suffered damages in excess of $200,000, plus costs
and attorneys' fees, because the Company was forced to create alternative
systems for performing the functions for which the EIS software was intended and
suffered significant loss of business opportunities as a result of the failure
of EIS's software to perform as promised. A date for an arbitration proceeding
has not been set yet.
C. On March 5, 1999, the Company's wholly owned subsidiary, Visitors Services
International Corp., filed a voluntary petition for relief under Chapter 7 of
the United States Bankruptcy Code for the Middle District of Florida, Tampa
Division. Visitors Services International Corp. was a party to several
previously reported material litigation proceedings, all of which have been
automatically stayed as a result of the bankruptcy filing.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
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PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
(a) Market Information
The Company's Common Stock is traded over-the-counter on the Electronic
Bulletin Board maintained by the National Association of Securities Dealers
under the Symbol "TSIG". There is no assurance that the Common Stock will
continue to be quoted or that any liquidity exists for the Company's
shareholders.
The following table sets forth the range of high and low bid quotations
for the Company's Common Stock on the OTC Bulletin Board for each quarter of
1997 and 1998.
<TABLE>
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Low Bid High Bid
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<S> <C> <C>
1st Qtr. 1997 $ 2.25 $ 3.25
2nd Qtr. 1997 $ 2.00 $ 3.25
3rd Qtr. 1997 $ 1.9375 $ 2.8125
4th Qtr. 1997 $ .24 $ 2.25
1st Qtr. 1998 $ .15 $ .51
2nd Qtr. 1998 $ .125 $ .48
3rd Qtr. 1998 $ .1875 $ .39
4th Qtr. 1998 $ .18 $ .52
</TABLE>
The source of this information is America Online quotation services and
broker-dealers making a market in the Company's Common Stock. These prices
reflect inter-dealer prices, without retail markup, mark-down or commission and
may not represent actual transactions.
(b) Holders
As of March 26, 1999, there were approximately 170 holders of record of
the Company's Common Stock (this number does not include beneficial owners who
hold shares at broker/dealers in "street-name").
(c) Dividends
The Company has paid no cash dividends on its Common Stock and
management does not anticipate that such dividends will be paid in the
foreseeable future.
(d) Recent Sales of Unregistered Securities.
A. The Company is currently offering convertible debentures pursuant to a
private placement which commenced in approximately November 1998. The debentures
bear interest at the rate of 8%, mature on October 31, 1999, and are convertible
into shares of common stock at a 30% discount to the average market price for
the five days prior to the date of conversion. The Company also agreed to file a
registration statement registering the shares of common stock issuable upon
conversion of the debentures for resale by the investors. As of the date of
filing of this report, a total of 7 convertible debentures totaling $1,525,000
in face value have been sold to 7 investors. Two of the investors have committed
to purchase another $800,000 of the debentures if certain conditions are met
when a registration statement for the resale of the shares of common stock
issuable upon conversion of the debentures is declared effective by the SEC. The
Company is contractually subject to a penalties equal to a further discount upon
conversion of 5% per month for failure to timely file the registration statement
and to cause the registration statement to become effective. The Company agreed
to pay to a placement agent, Grady & Hatch and Co., Inc. a commission of 10% and
a non-accountable expense allowance of 3% of the gross proceeds on all
debentures sold with the assistance of the placement agent. In connection with
the offering, warrants were also issued to the placement agent and two of the
investors. Up to a total of 825,000 warrants are to be issued if a total of
$2,500,000 in debentures are sold.
In connection with the offering, a total of 17,000,000 shares of
restricted common stock have been placed in escrow for five of the investors.
The Company does not consider these shares to be outstanding unless and until
the debentures are converted. One of the debentures in the face amount of
$125,000 has been converted and approximately 531,915 of the escrowed shares are
due to be delivered to the investor, plus interest.
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All purchasers are accredited investors, and the Company believes that
this private placement is exempt from registration pursuant to Sections 4(2),
4(6) and/or Rule 506 of the Securities Act of 1933.
B. On February 24, 1997, the Company acquired all of the outstanding common
stock of GuaranTEE Time, Inc. "(GTT") in exchange for shares of restricted
Common Stock of the Company. The Company issued 100,000 shares of restricted
Common Stock to the selling shareholders of GTT. The Company believes that this
transaction is exempt from registration pursuant to Section 4(2) and/or Rule 506
of Regulation D of the Securities Act of 1933. The transaction was reported on
Form 8-K dated March 11, 1997.
C. On September 26, 1996, the Company executed an Agreement and Plan of
Reorganization ("Agreement") with Visitors Services, Inc. ("VSI"), and certain
Stockholders of VSI, pursuant to which a minimum of 80% of the issued and
outstanding shares of VSI were to be exchanged on a one share for one share
basis for shares of restricted stock of the Company. Pursuant to the Agreement,
the Company issued a total 15,220,295 shares of common stock of the Company to
the following persons in exchange for their controlling interest (over 80%) in
VSI: Robert P. Gordon, 11,585,472 shares; Elizabeth Gordon (wife of Robert P.
Gordon), 1,409,857 shares; Mr. and Mrs. Gordon, jointly, 48,750 shares; Heaven
International, Inc. (formerly Harvest International of America, Inc.) (a
corporation controlled by Robert P. Gordon), 362,010 shares; and James F. Gordon
(brother of Robert P. Gordon). The "Exchange Offer" was completed in 1997, which
resulted in the Company owning 100% of VSI. A total of 19,446,647 shares of
common stock of the Company were issued pursuant to the transaction. No
underwriters were used and no commissions were paid. The Company believes that
this transaction is exempt from registration pursuant to Section 4(2) and/or
Rule 506 of Regulation D of the Securities Act of 1933. The transaction was
reported on Form 8-K dated September 30, 1996.
D. In October of 1996, the Company raised $843,750.75 in cash through a private
placement of its common stock. The Company sold 1,124,999 shares of common
stock, par value $.0001 per share, at a cash purchase price of $0.75 per share.
Stephen G. McLean, a former officer and director of both the Company and VSI,
purchased 33,333 shares; Paul W. Henry, an officer and director of both the
Company and VSI, purchased 50,000 shares, which includes 15,000 shares in the
name of his minor son; the R.P. Gordon Children Family Trust, a trust benefiting
the minor children of Robert P. Gordon (Mr. Gordon has no control over and
disclaims any interest in the trust, beneficial of otherwise) purchased 333,333
shares; Robert J. Conrads, a former director of VSI, purchased 400,000 shares;
Michael Gordon, brother of Robert P. Gordon and currently a director of the
Company, purchased 33,333 shares; Samuel Jacobs, a former officer of VSI,
purchased 33,333 shares; Russell R. Uhlmann, Jr., a former officer of VSI,
purchased 33,333 shares. The balance of 208,334 shares were purchased by four
other persons. No underwriters were used and no commissions were paid. All
purchasers are accredited investors, and the Company believes that this private
placement is exempt from registration pursuant to Sections 4(2) and/or 4(6) of
the Securities Act of 1933. All shares are restricted securities under the Act.
E. Prior to the reorganization described above, the Company's subsidiary, VSI
raised cash of $1,050,000 through a private placement of 700,000 shares of VSI
stock (equivalent to $1.50 per share) between January 24, 1996 and July 15,
1996. This private placement was made by VSI in reliance on Section 4(2) and/or
Rule 506 of the Securities Act of 1933. All shares of common stock of VSI were
converted into shares of restricted common stock of the Company pursuant to the
reorganization with the Company and the terms of the Exchange Offer.
Item 6 . Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
Total revenues for the fiscal year ended December 31, 1998, were
$1,021,478, representing a 67% decrease from revenues of $2,365,042 for the
prior fiscal year ended December 31, 1997. The Company sustained a net loss of
$11,822,251 in 1998, compared to a net loss of $18,042,742 for fiscal 1997, a
34% improvement. Operating expenses experienced a 40% decrease to
$12,276,694 from a total of $20,407,784 for fiscal 1997. In 1998, there were
decreases in most expense categories, in particular salaries and related
expenses, contract services, telephone and travel expenses. The overall decrease
in operating expense and net loss was primarily due to a refocus of the
Company's efforts towards basic travel-related teleservice business and away
from large-scale special-event projects that were not financially successful in
1997. However, despite these efforts, significant losses were experienced and
the Company made the decision to discontinue the travel-related portion of its
business.
In response to the continuation of the operating losses from the
commission-based, travel-related teleservice operations, the Company initiated
aggressive restructuring during the year. The Company added several new members
to its management team and is making fundamental changes to its strategic focus.
The Company is now targeting its sales and marketing efforts toward
traditional outsourced teleservices. Call center services will be offered on a
time-billing basis, with revenues based upon the time a customer service
representative spends on customer calls as opposed to commissions generated from
sales made.
Additionally, the Company is repositioning itself as a
fully-integrated, internet-based communications, product and services company
with its divisional structure as described in the Business of the Company.
Multiple new business opportunities are being developed in addition to
outsourced teleservices, including the products offered through the My Card
e-commerce system and the online service offerings. Several new strategic and
marketing alliances have been and continue to be developed.
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Limited Working Capital; Financial Instability
As of December 31, 1998, the Company had a negative stockholder's
equity of $8,004,726, an accumulated deficit of $37,888,635, and a working
capital deficit of $8,892,289. The Company anticipates that the eventual
resolution of the bankruptcy proceeding will reduce the consolidated working
capital deficit.
Various factors affecting the Company's operations raise doubt as to
the Company's ability to continue as a going concern. There can be no assurance
that the Company will be able to continue as a going concern or achieve material
revenues or profitable operations. The Company requires additional financing. In
this event, no assurances can be given that such financing will be available in
the amount required or, if available, that it can be on terms satisfactory to
the Company.
The Year 2000 issue is the result of computer programs that use two
digits rather than four to define the applicable year. The Company has been
evaluating its state of readiness with respect to the Year 2000 issue on a
continuing basis. Investigations to date have determined that affected systems
comprise are very limited, specifically: a) an old reservation system that has
not been used since May 1998; and b) an employee time-clock system, which will
be phased out of use prior to December 1999. An inventor of the remainder of the
Company's computer systems is approximately 90% complete. To date, all computer
hardware is Year 2000 compliant.. All software has been inventoried and each
software manufacturer has been contacted to verify Year 2000 readiness. To date
it has been determined that no software will need to be replaced, but some will
require minor intervention in the form of software patches. Once the full
inventory is completed and all necessary patches are installed, the Company will
perform tests to ensure Year 2000 compliance. The Company can make no assurances
regarding the impact of the Year 2000 issue on its business as a result of acts
or omissions not within its control, such as acts or omissions of non-affiliated
parties with whom the Company does business.
Item 7. Financial Statements and Supplementary Data.
The information required by Item 7 and an index thereto commences on
page F-1, which pages follow this page.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
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TELESERVICES INTERNATIONAL GROUP INC.
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
December 31, 1997
F1
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Contents
<TABLE>
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Pages
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<S> <C>
Reports of Independent Certified Public Accountants F3
Consolidated Financial Statements:
Consolidated Balance Sheet F4
Consolidated Statements of Operations F5
Consolidated Statements of Cash Flows F6
Consolidated Statement of Changes in Stockholders' Equity (Deficit) F7
Notes to Consolidated Financial Statements F8
</TABLE>
F2
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders of
TeleServices International Group Inc.
We have audited the accompanying consolidated balance sheet of TeleServices
International Group Inc. as of December 31, 1998, and the related statements of
operations, changes in stockholders' (deficit), and cash flows for the two years
ended December 31, 1998 and 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of TeleServices
International Group Inc. as of December 31, 1998, and the results of its
operations, its changes in stockholders' (deficit) and its cash flows for the
two years ended December 31, 1998 and 1997, 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 3 to the
accompanying financial statements, the Company has suffered recurring losses
from operations and has a net capital deficiency. 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.
Schumacher & Associates, Inc.
Certified Public Accountants
12835 East Arapahoe Road, T-II, #110
Englewood, CO 80112
March 30, 1999
F3
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TeleServices International Group Inc.
Consolidated Balance Sheet
At December 31, 1998
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current assets:
Cash, restricted (Note 2) $ 80,000
Accounts receivable, net of allowance for
doubtful accounts of $ 159,934 80,530
Other Current Assets 159,441
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Total current assets 319,971
Equipment, net of accumulated depreciation of
$2,185,218 (Notes 5, 11) 481,577
Investment in Affiliate (Note 2) 380,986
Other assets 25,000
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Total assets $ 1,207,534
============
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses (Notes 6,12 and 13) 6,638,702
Loans payable, stockholder (Note 7) 1,351,095
Capital leases payable, current portion (Note 4) 18,790
Notes payable (Note 10) 328,673
Convertible Debentures 875,000
------------
Total liabilities $ 9,212,260
------------
Commitments and Contingencies (See Notes)
Stockholders' (deficit):
Preferred stock, $.001 par value
10,000,000 shares authorized
None issued and outstanding (Note 9)
Common stock, $.0001 par value,
114,000,000 shares authorized,
64,971,638 shares issued and outstanding 6,498
Additional paid-in capital 30,002,411
Treasury Stock, 13,130 shares at cost (125,000)
Accumulated (deficit) (37,888,635)
------------
Total stockholders' (deficit) (8,004,726)
------------
Total liabilities and stockholders' (deficit) $ 1,207,534
============
</TABLE>
The accompanying notes are an integral part of the Financial Statements.
F4
<PAGE> 13
TeleServices International Group Inc.
Consolidated Statements of Operations
For the Years Ended December 31
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Total Revenues $ 1,021,478 $ 2,365,042
------------ ------------
Operating Expenses:
Salaries and contract services 5,751,964 10,171,693
Payroll taxes 349,547 586,444
Rent 316,383 402,887
Telephone 445,741 1,075,429
Travel and entertainment 124,514 840,817
Advertising and promotion 89,316 133,402
Depreciation and amortization 971,094 966,991
Other expenses (Note 6) 4,228,134 6,230,121
------------ ------------
Total operating expenses 12,276,694 20,407,784
------------ ------------
Net (loss) from operations (11,255,216) (18,042,742)
Other income (expenses):
Interest income 9,832 31,897
Interest (expense) (576,867) (206,451)
------------ ------------
Net (loss) $(11,822,251) $(18,217,296)
============ ============
Net (loss) per share $ (0.23) $ (0.70)
============ ============
Weighted Average Shares Outstanding 50,470,972 26,107,902
============ ============
</TABLE>
The accompanying notes are an integral part of the Statements.
F5
<PAGE> 14
TeleServices International Group, Inc.
Consolidated Statements of Cash Flow
For the Years Ended December 31
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $(11,822,251) $(18,217,296)
Adjustments to reconcile net (loss) to
net cash (used in) operating activities:
Decrease in accounts receivable 82,118 103,846
Depreciation and Amortization 971,094 966,991
Increase in accounts payable and accrued expenses 1,000,105 4,484,325
Other (116,115) 86,233
------------ ------------
Net cash (used in)operating activities (9,885,049) (12,575,901)
------------ ------------
Cash flows from investing activities:
(Acquisition) of equipment (802,710) (754,417)
(Investment) in affiliate company (380,986)
------------ ------------
Net cash (used in) investing activities (1,183,697) (754,417)
------------ ------------
Cash flows from financing activities:
(Repayment of) leases payable (82,978) (11,052)
Cash proceeds from (repayment of) loans from stockholders 1,291,780 (353,344)
Issuance of common stock 9,136,450 13,622,335
Sale of convertible debentures 875,000
Acquisition of treasury stock (125,000)
(Repayment of) notes payable (121,506) (21,753)
(Increase) decrease in cash collateral 95,000 (25,000)
------------ ------------
Net cash provided by financing activities 11,068,747 13,211,186
------------ ------------
Increase (decrease) in cash 0 (119,130)
Cash, beginning of period 0 119,130
------------ ------------
Cash, end of period $ 0 $ 0
============ ============
Interest paid $ 576,867 $ 206,451
============ ============
Income taxes paid $ -- $ --
============ ============
</TABLE>
The accompanying notes are an integral part of the Financial Statements.
F6
<PAGE> 15
TeleServices International Group Inc.
Consolidated Statement of Changes in Stockholders' Equity (Deficit)
From September 30, 1995 through December 31, 1998
<TABLE>
<CAPTION>
Common Stock Additional
Paid-in Accumulated
Shares Amount Capital Deficit Total
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 22,059,856 $ 2,206 $ 7,247,917 $ (7,849,087) $ (598,964)
Issuance of Common Stock 8,096,091 810 13,621,525 -- 13,622,335
(Note 7)
Net (loss) year ended December 31, 1997 -- -- -- (18,217,296) (18,217,296)
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1997 30,155,947 3,016 20,869,442 (26,066,383) (5,193,925)
Issuance of Common Stock 34,815,691 3,482 8,757,969 -- 8,761,450
(Note 7)
Imputed Interest on Convertible -- -- 375,000 -- 375,000
Debentures
Acquisition of Treasury Stock -- -- (125,000) -- (125,000)
Net (loss) year ended December 31, 1998 -- -- -- (11,822,251) (11,822,251)
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1998 64,971,638 $ 6,498 $ 29,877,411 $(37,888,635) $ (8,004,726)
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the Financial Statements.
F7
<PAGE> 16
TELESERVICES INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and December 31, 1997
(1) Organization and Operations:
TeleServices International Group Inc. (TSIG), formerly Dynasty Capital
Corporation (Dynasty), was incorporated under the laws of the State of
Florida on October 1, 1986. TSIG issued common stock for 100% of the issued
and outstanding common stock of Visitors Services, Inc. (VSI). This
transaction was accounted for as a reverse acquisition since the former
controlling shareholders of VSI control TSIG after the business
combination. Prior to the transaction TSIG was an inactive public shell
corporation with no net assets.
VSI was incorporated under the laws of the State of Florida in November
1992 to provide automated reservations and information services
specifically designed to support the special needs of convention and
visitors bureaus and other organizations. On March 5, 1999, VSI filed a
voluntary petition for relief under Chapter 7 of the United States
Bankruptcy Code for the Middle District of Florida, Tampa Division.
American International Travel Agency, Inc. (AIT), a wholly-owned subsidiary
of TSIG, was incorporated under the laws of the State of Florida on
September 27, 1977 to provide retail travel services. AIT was acquired by
VSI on December 6, 1996 (see Note 11).
Compact Connection, Inc. (CCI), a Delaware corporation, was incorporated on
April 17, 1998, as a wholly-owned subsidiary of TSIG for the purpose of
establishing an internet-based discount retail music CD and cassette tape
business.
The source of sales revenue during the years 1998 and 1997 are summarized
as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
TSIG 0% 0%
VSI 87% 80%
AIT 12% 20%
CCI 1% 0%
Total 100% 100%
</TABLE>
F8
<PAGE> 17
TELESERVICES INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and December 31, 1997
(2) Summary of Significant Accounting Policies
(a) Principles of Consolidation
The consolidated financial statements of TSIG and subsidiaries (the
Company) include the accounts of TSIG, VSI and AIT for the entire
years ended December 31, 1998 and 1997 and the accounts of CCI since
April 17, 1998, the date if its formation. All intercompany accounts
and transactions have been eliminated in the consolidation.
(b) Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of temporary cash
investments and trade accounts receivable. The Company grants credit
to various business and entities, in the U.S.A. The Company does not
require collateral for its accounts receivable. The Company maintains
its cash balance in one financial institution located in Florida. The
balances are insured by the Federal Deposit Insurance Corporation up
to $100,000. At December 31, 1998 the Company had no uninsured cash
balances, but at various times throughout the year, the balance
exceeded the insured limit.
(c) Income Tax
The Company has net operating loss carryovers totaling approximately
$37,000,000 at December 31, 1998 which expire in various years through
2013. The Company has deferred tax assets of approximately $5,500,000
at December 31, 1998 related to loss carryovers but due to the
uncertainty of the Company's ability to utilize these carryovers, a
valuation allowance of the total $5,500,000 has been provided.
Therefore, as of December 31, 1998 the Company's financial statements
do not include any provision for deferred tax assets. A change in
ownership of more than 50% of the Company could reduce or eliminate
the Company's ability to utilize these loss carryovers.
(d) Equipment - Equipment is carried at cost, net of accumulated
depreciation. Depreciation is computed using the straight-line method
over the estimated useful lives of the assets ranging from 3 to 5
years. Equipment is principally owned by VSI, which filed a petition
for relief under Chapter 7 of the United States Bankruptcy Code.
Therefore, the equipment has been written down to its estimated net
realizable value (see Note 11).
(e) Per Share Information
The per share information is computed based upon the weighted average
shares outstanding.
F9
<PAGE> 18
TELESERVICES INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and December 31, 1997
(f) Use of Estimates in the Preparation of Financial Statements
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 revenue
and expenses during the reporting periods. Significant assumptions in
the accompanying financial statements relate to the Company's ability
to continue as a going concern as described in note 3 and estimated
useful lives of equipment as disclosed in note 2(d). The ultimate
resolution of the reasonableness of the related assumptions cannot
presently be determined. Actual results could differ from the
Company's estimates.
(g) Bad Debts
An allowance for uncollectible accounts has been provided based on the
Company's past collection history.
(h) Advertising and Promotion Costs
Advertising and promotion costs are expensed as incurred.
(i) Geographic Area of Operations
The Company provides services to customers in the U.S.A. The potential
for severe financial impact can result from negative effects of
economic conditions within the market or geographic area. Since the
Company's business is principally in one area and in one industry,
this concentration of operations results in an associated risk and
uncertainty.
(j) Restricted Cash
Included in cash on December 31, 1998 is $80,000 being held in
separate certificates of deposit as collateral for notes payable,
accounts payable and operating licenses.
(k) Software Development
The Company incurred $810,000 in total costs related to the
development of computer software designed for the purpose of (1)
maintaining travel property inventory and reservation information for
VSI and (2) providing an internet-based order transaction system for
CCI. The total cost was expensed in 1998 as a result of the closing of
VSI's travel-related business and the development of a new CCI
internet site to replace the original one.
F10
<PAGE> 19
TELESERVICES INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and December 31, 1997
(l) Write Down of Equipment Value
During 1998 and 1997, the Company wrote down the value of its property
and equipment $325,000 and $500,000, respectively, due to reasonable
doubt as to its ability to be able to recover the full value from
future operations.
(m) Investment in Affiliate
Included on the balance sheet is $380,986 invested in an affiliate
company, equal to the costs related to attempting to complete the
proposed acquisition of certain entities. During 1998, the efforts to
complete the proposed acquisitions were terminated and certain former
employees of the Company resigned from the Company and acquired these
entities. In exchange for transferring the rights, if any, the Company
had with regard to these acquisitions and in exchange for terminating
various employment and severance agreements, the Company was issued an
equity position in the entity. Subsequent to December 31, 1998, the
Company sold its equity position for $706,000 in cash, resulting in a
1999 gain of $326,000.
(3) Basis of Presentation - Going Concern
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation
of the Company as a going concern. However, the Company has sustained
recurring operating losses since its inception and has a working capital
deficit. Management is attempting to raise additional capital. In view of
these matters, realization of certain assets in the accompanying balance
sheet is dependent upon continued operations of the Company, which in turn
is dependent upon the Company's ability to meet its financial requirements,
raise additional capital, and the success of its future operations.
Management believes that its ability to raise additional capital provides
the opportunity for 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.
(4) Lease Commitments
In September, 1995 the Company entered into an operating lease agreement
for its office facilities for a term of seven years. Minimum future rental
payments under operating leases with terms greater than one year are
summarized as follows:
<TABLE>
<CAPTION>
Year ending December 31
<S> <C>
1999 $ 349,822
2000 $ 307,353
2001 $ 278,702
2002 $ 158,468
</TABLE>
F11
<PAGE> 20
TELESERVICES INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and December 31, 1997
(4) Lease Commitments, continued
At December 31, 1998 the Company's financial statements included equipment
leased through capital leases in the amount of approximately $87,300 with
accumulated depreciation of approximately $39,900 . Total future minimum
lease payments under this capital lease are summarized as follows:
<TABLE>
<S> <C>
Year ending December 31, 1999 $ 15,433
Year ending December 31, 2000 4,146
Amount representing interest (789)
--------
Net after interest reduction 18,790
Current portion 14,435
--------
Non-current portion $ 4,355
========
</TABLE>
(5) Equipment
The company's equipment as of December 31, 1998 is summarized as follows:
<TABLE>
<S> <C>
Furniture, fixtures and office equipment $ 490,430
Telephone equipment 1,367,549
Computer equipment and software 1,265,912
Leasehold improvements 42,905
Allowance for idle and excess capacity equipment (500,000)
-----------
2,666,796
Accumulated depreciation (2,185,218)
-----------
$ 481,578
===========
</TABLE>
(6) Other Expenses
In addition to normal other operating expenses, other expenses include the
following:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Provision for litigation contingencies $ 666,886 $1,277,250
Loss on special event contract 1,100,158
Write off software development 810,795
Write off of goodwill 801,665
Provision for severance pay 272,808
Provision for equipment writedown 325,283 500,000
---------- ----------
$1,802,964 $3,951,881
========== ==========
</TABLE>
F12
<PAGE> 21
TELESERVICES INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and December 31, 1997
(7) Related Party Transactions
The stockholders of the Company have made various demand loans to the
Company for expansion and operating capital. During the year ended December
31, 1998 the stockholders converted $2,752,244 into 17,110,522 shares of
the common stock of the Company. During the year ended December 31, 1997
the stockholders converted $9,797,635 into 7,410,878 shares of Common
Stock.
As of December 31, 1998 loans payable to a stockholder totaled $1,351,095,
accruing interest at 11% per annum. The loan is payable on demand and is
uncollateralized. Subsequent to December 31, 1998, a $1,000,000 portion of
the loan balance was exchanged for 6,666,667 shares of the Company's common
stock that was registered with the Securities and Exchange Commission on a
Registration Form S-8. The exchange price was $.15 per share.
Effective December 4, 1998 TSIG entered into a five-year employment
agreement with its Chairman of the Board of Directors. Annual compensation
according to the terms of the agreement is $360,000. In addition, the
Chairman was awarded 5,000,000 shares of restricted common stock of the
Company for services. At December 4, 1998 the closing price for the
Company's common stock was $.25 per share. Due to the large block and the
restrictive nature of the stock issued for services, the compensation was
recorded at 50% of the closing price for the common stock on December 4,
1998. The employment agreement also entitles the Chairman to receive a car
allowance, major medical insurance benefits, indemnification from any claim
or law suit which may be asserted against him when acting as an officer of
the Company provided that said indemnification is not in violation of any
federal or state law or rule or regulation of the Securities and Exchange
commission. The agreement also contains certain provisions with respect to
disability, termination, confidentially and non-competition.
(8) Stock Options
<TABLE>
<CAPTION>
Number of Weighted Average
Options Exercise Price
---------- ----------------
<S> <C> <C>
Outstanding at December 31, 1997 30,366,746 $ .1675
Outstanding at December 31, 1998 3,643,726 $ .3027
Exercisable at December 31, 1998 3,577,042 $ .3027
Options granted during 1998 19,795,755 $ .1779
Options exercised during 1998 29,815,691 $ .1747
Options forfeited or expired during 1998 2,811,334 $ 1.4973
</TABLE>
Options outstanding as of December 31, 1998 expire at various dates through May
31, 2003.
F13
<PAGE> 22
TELESERVICES INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and December 31, 1997
(9) Preferred Stock
The Company is authorized to issue 10,000,000 shares of preferred stock,
having a par value of $.001 each. The preferred stock may be issued in a
series from time to time with such designation, rights, preferences and
limitations as the Board of Directors of the Company may determine by
resolution.
(10) Notes and Debentures Payable
The Company had notes payable, principally to a bank, of approximately
$328,000 at December 31, 1998, collateralized by certain equipment. Of this
amount $50,000 was due and payable as of December 31, 1998. The remaining
notes are payable in monthly payments totaling approximately $18,000, with
interest at an approximate weighted average of 10% per annum. Since the
notes are in default, the total balance has been included as a current
liability.
In November, 1998, the Company authorized the issuance of $2,000,000 of
convertible debentures. As of December 31, 1998, $875,000 was received as
proceeds from the issuance of the debentures. The terms of the debentures
include interest at 8% per annum and are due and payable one year from
issuance. The debentures are convertible at the option of the holder into
common stock of the Company at 70% of the market price of the common stock
based upon the average bid price for the five days immediately preceding
the date of conversion. Interest expense in the amount of $375,000 has been
credited to additional paid in capital on the balance sheet in the 1998
financial statements for the 30% conversion discount.
The majority of the notes payable are personally guaranteed by a
stockholder of the Company.
Maturities of the notes and debentures payable are summarized as follows:
<TABLE>
<S> <C>
Year ending December 31,1999 $1,203,673
==========
</TABLE>
(11) Subsequent Events
On March 5, 1999, VSI filed a voluntary petition for relief under Chapter 7
of the United States Bankruptcy Code for the Middle District of Florida,
Tampa Division. As summarized in Note 1, 87% and 80% of operating revenues
during 1998 and 1997, respectively, were generated by VSI.
The Company's board of directors prepared a unanimous written consent dated
December 3, 1998 approving the acquisition of AIT by TSIG from VSI by
assumption of approximately $72,000 of AIT debt and a credit to TSIG's
intercompany receivable from VSI of $20,000. As a transaction
F14
<PAGE> 23
TELESERVICES INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and December 31, 1997
(11) Subsequent Events, continued
among wholly-owned subsidiaries of TSIG, there was neither a contract nor a
bill of sale documenting this transaction; there also was no stock
certificate prepared evidencing this transaction. The bankruptcy filing of
VSI did not include AIT as an asset of VSI but did disclose that TSIG
acquired AIT from VSI on December 3, 1998. During November, 1998, a
judgement in the amount of $530,000 was entered against VSI that may
entitle the judgement creditor to a first position on the liquidation of
the assets of VSI, including a claim of preference of creditor action
against TSIG for its acquisition of AIT after the date of the judgement.
During April, 1998, according to the documents evidencing the transaction,
VSI acquired certain telephone switching equipment at a cost of
approximately $600,000. Using capital raised by TSIG, a deposit was made to
a VSI bank account for an amount sufficient to allow VSI to pay for the
equipment. TSIG recorded this equipment on its financial statements as an
asset of TSIG rather than VSI and did not include this equipment with the
assets of VSI listed in its bankruptcy filing.
Creditors of VSI, including the Internal Revenue Service, may have a claim
against TSIG for preference of creditors related to the foregoing
transactions. A contingency exists with respect to these matters, including
final determination if the transactions between TSIG and VSI are legitimate
transactions allowable by Federal Bankruptcy Code or if they are determined
to be violations of preference of creditor statutes, rules and regulations.
(12) Litigation
The Company is a party to numerous litigation and threatened litigation
matters related to alleged nonperformance of contracts and nonpayment of
various obligations. Contingencies exist with respect to these matters. The
ultimate costs, if any, related to these matters cannot presently be
determined. The financial statements as of December 31, 1998 include a
$2,488,066 provision for estimated potential costs related to these
matters.
(13) Creditor Delinquencies
The Company is materially delinquent on payment of various creditor
obligations including various obligations to the Internal Revenue Service.
Failure to pay these balances due could result in the inability of the
Company to continue in business.
(14) Fourth Quarter Adjustments
The Company recognized as expenses various previously unrecorded accruals
for potential litigation matters and various other accrued expenses and
provisions for losses, which were recorded in the fourth quarter. These
fourth quarter material adjustments totaled approximately $2,000,000.
F15
<PAGE> 24
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.
DIRECTORS OF THE REGISTRANT
The Company has a Board of Directors (the "Board") which is comprised
of four members. Each director holds office until the next annual meeting of
Shareholders or until a successor is elected or appointed. The members of the
Board of Directors of the Company their respective positions (if any) are as
follows:
<TABLE>
<CAPTION>
Director of
Directors Age Company Since
-------------------------------------------------------------------
<S> <C> <C>
Robert P. Gordon 48 September 1996
Paul W. Henry 52 September 1996
Michael J .Gordon 41 December 1998
John Hwang 27 January 1999
</TABLE>
ROBERT P. GORDON has served as a director of the Company since
September 1996. Mr. Gordon founded the Company's subsidiary, VSI, in 1992 to
meet the demanding requirements of the domestic tourism industry. As founder and
chairman of Phoenix Information Systems Corp. ("Phoenix"), a firm that invested
ten years and millions of dollars to develop an airline and hotel reservation
system for international markets, Mr. Gordon recognized that sophisticated
automated destination system software could be programmed to exceed the
specifications of any domestic or international hospitality and tourism
marketing program currently in use. Mr. Gordon is chairman of Heaven
International, Inc. (formerly Harvest International of America, Inc.), a company
engaged in the development of global tourism. Mr. Gordon has a B.A. in
Philosophy and Biology from New York University, where he also did his graduate
studies.
PAUL W. HENRY has served as a director of the Company since September
1996. Mr. Henry first joined the Company's subsidiary, VSI, as a Director on
March 1, 1996. Mr. Henry was Secretary and a Director of Phoenix Information
Systems Corp. and Phoenix Systems Group, Inc. from April 1992 to October, 1998.
During the past ten years, Mr. Henry has been an independent financial
consultant. From 1991 to 1992, he was retained by Essex Investment Management
Company, an institutional money management firm. From 1988 to 1991, Mr. Henry
was retained by the Caithness Corporation, a natural resources development
company. From 1988 to 1989 he was an advisor to Veronex Resources, an
international oil and gas exploration company. From 1987 to 1989, Mr. Henry
served as a consultant to Heaven International, Inc. Mr. Henry has a B.A. in
Economics from Yale University, and an MBA from Northeastern University.
MICHAEL GORDON has served as a director of the Company since December
1998. Mr. Michael Gordon has been employed since May 1998 as Vice President,
Corporate Administration, for BBJ Chemical Compounds, Inc., a privately held
company based in Tampa, Florida. Previously, he was responsible for corporate
administration at Phoenix Information Systems Corp. ("Phoenix") from July 1997
to December 1997, and earlier was responsible for corporate services for VSI,
now a wholly owned subsidiary of the Company, from April 1994 to June 1997. Mr.
Gordon has a B.A. in Psychology from S.U.N.Y./Stony Brook.
JOHN HWANG has served as a director of the Company since January 1999.
Mr. Hwang became employed by the Company in February 1999 as Senior Vice
President, On-Line Services Division, and as Chief Information Officer. From
March 1998 to February 1999, Mr. Hwang was a managing partner at Cohesive
Technology Solutions, Inc. where he was responsible for consulting in regard to
on-line services, including web sites and e-commerce. From April 1995 to March
1998, he was Chief Executive Officer of I-Consulting Corporation, and prior
thereto was a member of the technical staff of Oracle Corporation. Mr. Hwang has
a B.S in Computer Science from Stanford University.
11
<PAGE> 25
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company and their respective positions
are as follows:
ROBERT P. GORDON, a director of the Company, has served as Chairman of
the Company since September 1996 and as Chief Executive Officer ("CEO") since
approximately August 1998. The Chairman is an executive officer of the Company.
Mr. Gordon is also presently serving as Chief Financial and Accounting Officer
for the Company.
PAUL W. HENRY, a director of the Company, has served as Secretary and
Treasurer of the Company since September 1996.
JAMES H. GUILD, President of the Company since August 1998. From March
1998 to August 1998, Mr. Guild was Vice President of InVISION Management
Systems, Inc. From August 1997 to February 1998, Mr. Guild was Senior Vice
President of Fiserv Solutions, Inc., the nation's largest outsource provider of
financial data processing. From 1993 to August 1998, Mr. Guild held positions of
Vice President and President of Recom Associates, Inc. a company acquired by
FiServ in 1994. Mr. Guild has brought to the Company extensive experience in
development and management of technical and customer support functions, call
center operations, and mergers and acquisitions.
SIGNIFICANT EMPLOYEES OF THE COMPANY AND ITS SUBSIDIARIES
JOHN HWANG, a director of the Company, became Senior Vice President,
On-Line Services Division, and Chief Information Officer in February 1999.
WILLIAM KEITH WINE, Senior Vice President, Teleservices Division, since
February 1999. Previously, Mr. Wine was Director of Link Call Center Services
from June 1998 to January 1999 and President of PinnaCall Corporation from March
1997 to June 1998. From January 1992 to February 1997, Mr. Wine was President,
Southern Resources, Inc. a franchise of Norrell Services, a leading provider of
staffing services in the teleservices industry. Mr. Wine established Norrell as
one the leading resources for telephone call center agents in Virginia, and
developed strategies for marketing, servicing and assessing call center
services.
ROBERT NEWTON, Senior Vice President, Products and Services Division,
since February 1999. Previously, Mr. Newton was President of Saddleback, Inc.,
d/b/a Hallmark Respiratory Care, a distributor of durable medical equipment,
from April 1991 to January 1999. Mr. Newton graduated from the University of
Alabama with a Bachelor of Science degree in commerce and business
administration and began his career as a CPA with Pensacola-based Cherry,
Bakaert & Holland. Subsequently, Mr. Newton was VP Operations for the Pacific
region of Century 21, where was responsible for developing and managing new
domestic and international markets.
TONY PETERSON, Controller, since August 1998. Previously, Mr. Peterson
was Vice-President, Finance, Exothermal Technology, from June 1997 to May 1998;
Financial Consultant, Entre Resource, Inc., from January 1995 to June 1997; and
Owner, Genelab Medical Products, from May 1993 to December 1994.
TIMOTHY J. HEIDEMANN, Vice President of Call Center Operations,
TeleServices Division, since June 1998. Previously, Mr. Heidemann was for 15
years District Manager, AT&T, where he was responsible for teleservices call
center and direct mail/direct marketing channel management. Mr. Heidemann
consulted to AT&T's largest inbound clients, including Continental Airlines,
Amoco Motor Club, Mead Data and Thompson Vacations. He was responsible for
managing the center review process for these clients, and presenting and
implementing the resulting recommendations relative to workforce management and
overall call center performance and profitability. Mr. Heidemann's extensive
experience includes telemarketing sales, customer service, channel and vendor
management, as well as "hands-on" management of AT&T's largest consumer
acquisition telemarketing program from 1994-1996.
RICHARD OLSON, Vice President, Account Management/Customer Service,
Products and Services Division, joined the Company in July 1995. Previously, he
was Regional Vice President, International Hotel Academy, from November 1994 to
June 1995, where he was responsible for account development and revenue growth
for The Grand Wailea Resort, Hotel and Spa (Maui), and the Biltmore Hotel, Los
Angeles. From September 1985 to November 1994, Mr. Olson was Director, National
Accounts, Hyatt Hotels & Resorts, where he was responsible for Convention and
Group Sales for all 86 domestic properties.
12
<PAGE> 26
JEANNIE L. LEWIN, Vice President, Sales, since November 1996, has an
extensive hotel sales background with over eleven years of experience in the
hospitality industry. Ms. Lewin joined the Company as Regional Director of Sales
for the West Coast in November 1996. Ms. Lewin spent the prior five years at
Hyatt Hotels & Resorts, and before that worked at Marriott and Hilton Hotels. At
Hyatt, she most recently held the position of Director of Sales and Marketing at
the Hyatt Regency Alicante in Anaheim, CA. Earlier, Ms. Lewin served as Director
of Sales and Marketing at the Hyatt Newporter in Newport Beach, CA and as
Associate Director of Sales for the Hyatt Regency Hilton Head in South Carolina.
Ms. Lewin has worked closely with many Convention and Visitors Bureaus and
Tourism Development Councils on marketing committees and advertising campaigns.
She is a member of Professional Conference Management Association (PCMA),
Meeting Planner International (MPI), and the America Society of Association
Executives (ASAE).
FAMILY RELATIONSHIPS
Robert P. Gordon, a director and executive officer, and Michael J.
Gordon, a director, are brothers.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
On September 30, 1994, the Securities and Exchange Commission issued an
Order Instituting Proceedings Pursuant to Section 8A of the Securities Act of
1933 (the "1933 Act") and Section 21C of the Securities Exchange Act of 1934
(the "1934 Act"), Making Findings and Imposing a Cease and Desist Order against
Harvest International of America, Inc. ("Harvest"), a privately held
corporation, and Robert P. Gordon. The findings and remedial sanctions imposed
by the Order were in accordance with Offers of Settlement dated July 24, 1994
submitted by Harvest and Mr. Gordon, which the S.E.C. accepted. Without
admitting or denying liability, Harvest and Mr. Gordon consented to the Cease
and Desist Order alleging violations of Section 17(a) of the 1933 Act and
Section 10(b) and Rule 10b-5 of the 1934 Act by reason of alleged
misrepresentations in 1990 and 1991 in connection with the offer or sale of
Harvest non-interest bearing promissory notes convertible into common stock of
the predecessors of Phoenix Information Systems Corp. and one of its
subsidiaries and which common stock was to have been issued and registered
within 30 or 60 days from the dates of the various notes. Harvest is now known
as Heaven International, Inc.
In December 1997, Phoenix Information Systems Corp. ("Phoenix")
declared bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. At that time,
Robert P. Gordon and Paul W. Henry were directors and Mr. Henry was an officer
of Phoenix.
On March 5, 1999, the Company's wholly-owned subsidiary, VSI, filed a
voluntary petition for relief under Chapter 7 of the United States Bankruptcy
Code for the Middle District of Florida, Tampa Division. Robert P. Gordon and
Paul W. Henry are directors and officers of VSI.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Because the Company does not have any class of equity securities
registered under Section 12 of the Securities Exchange Act of 1934, compliance
with Section 16(a) is not required.
Item 10. Executive Compensation.
The following information discloses all plan and non-plan compensation
awarded to, earned by, or paid to the Company's Chief Executive Officer and each
of the four highest paid executive officers of the Company and/or its
subsidiaries.
13
<PAGE> 27
Summary Compensation Table
The following table sets forth all compensation, including bonuses,
stock option awards and other payments, paid or accrued by the Company and/or
its subsidiaries during each of the fiscal years ended December 31, 1998, 1997
and 1996, to or for the Company's Chief Executive Officer and each of the other
executive officers of the Company and/or its subsidiaries whose total annual
salary and bonus exceeded $100,000 for the year ended 1998.
<TABLE>
<CAPTION>
Annual Compensation
-------------------------------------------------
(a) (b) (c) (d) (e)
Name Year Other
and Ended Annual
Principal December Salary Bonus Compensation
Position 31 ($) ($) ($)
- - -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert P. Gordon, 1998 178,846 -0- -0-
Chairman, CEO, Director 1997 $158,247 $ 35,000 -0-
1996 $ 60,000 -0- -0-
</TABLE>
<TABLE>
<CAPTION>
Long Term Compensation
-----------------------------------------------------
Awards Payouts
------------------------------------ ----------------
(a) (b) (f) (g) (h) (i)
Name Year Restricted
and Ended Stock Shares LTIP All Other
Principal December Award(s) Underlying Payouts Compensation
Position 31 ($) Options ($) ($)
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Robert P. Gordon, 1998 1,250,000 (n1) 16,809,122 (n2) -0- -0-
Chairman, CEO, Director 1997 -0- 15,000,000 -0- -0-
1996 -0- 2,220,000 -0- -0-
</TABLE>
(n1) On December 4 ,1998, Mr. Gordon was issued 5,000,000 shares of
restricted common stock as long-term compensation. The shares are
considered fully-vested and would be eligible to receive dividends, if
any. Although the shares are restricted from resale, the dollar value
of this restricted stock award is required to be calculated for
purposes of this table by multiplying the closing market price of the
Company's unrestricted stock on the date of grant by the number of
shares awarded. Using the same formula, the value of the 5,000,000
restricted shares at year end was $2,187,500.
(n2) 1998 total includes 7,000,000 options granted in 1998, and a total of
9,809,122 options originally granted in 1997 that were repriced in
1998. Repricing details are as follows:
o 7,000,000 options originally granted on December 8, 1997, with
an original exercise price of $.30 per share, were repriced to
$.20 on January 27, 1998, and were further repriced to $.15 on
April 20, 1998.
o 2,809,122 options originally granted on September 22, 1997,
with an original exercise price of $2.00 per share, were
repriced to $.30 on December 30, 1997 and further repriced to
$.20 on January 27, 1998.
14
<PAGE> 28
Option/SAR Grants in Last Fiscal Year
The information provided in the table below provides information with
respect to individual grants of stock options during 1998 to each of the
executive officers named in the Summary Compensation Table above. The Company
did not grant any stock appreciation rights during 1998.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
% of Total
Number of Options/SARS
Securities Granted to
Underlying Employees Exercise or
Options/SARs in Fiscal Base Price Expiration
Name Granted (#) Year (n1) ($/Sh) Date
- - ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert P. Gordon 7,000,000(n2) 22.96 $ .15 04/30/03
</TABLE>
Notes:
(n1) The percentage of total options granted in the fiscal year is based
upon all options (approximately 30,493,113) granted to eligible
participants (which includes officers, directors, employees,
consultants and advisors) under each of the Company's employee stock
option plans in fiscal 1998 (not all options granted during 1998
remained outstanding as of December 31, 1998).
(n2) 7,000,000 options were granted on April 20, 1998 with an exercise price
of $.15 per share. All options were exercised in 1998.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
The information provided in the table below provides information with
respect to each exercise of stock option during fiscal 1998 by the executive
officers named in the Summary Compensation Table and the fiscal year end value
of unexercised options.
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Value of
Number of Unexercised
Securities Underlying In-the-Money
Unexercised Options/SARs at
Shares Value Options/SARs at FY-End($)
Acquired on Realized FY-End (#)
Name Exercise (#) ($)(n1)
Exercisable/ Exercisable/
Unexercisable Unexercisable(n1)
- - ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert P. Gordon 16,809,122 $2,698,240 -0-/-0- N/A
</TABLE>
(n1) The aggregate dollar values in columns (c) and (e) are calculated by
determining the difference between the fair market value (based on the
reported low bid quotations) of the Common Stock underlying the options
and the exercise price for the options at exercise or fiscal year end,
respectively.
Long-Term Incentive Plans ("LTIP") - Awards in Last Fiscal Year
This table has been omitted, as no executive officers named in the
Summary Compensation Table above received any awards pursuant to any LTIP during
fiscal 1998.
15
<PAGE> 29
Compensation of Directors.
John Hwang was granted options to acquire 1,000,000 shares of the
Company's restricted common stock an exercise price of $.30 per share for
agreeing to serve as a director of the Company. The options shall vest (and
shall become exercisable at the time they vest), subject to termination of Mr.
Hwang's services as a director, as follows: 50,000 options shall vest on the
first day of each month from January 1999 through April 1999; and 25,000 options
shall vest on the first day of each subsequent month for 32 consecutive months,
commencing May 1999. All options shall expire on December 31, 2003. The
following terms and conditions apply to the options: (i) both the number of
options and the exercise price are subject to appropriate adjustments in the
event of any stock split, stock dividend or other change in capital structure
affecting the Company's common stock, (ii) the options and the shares of common
stock issuable upon exercise of the options are subject to restrictions on
transfer, as required by applicable federal and state securities laws; (iii)
options which have not vested on or before the date of termination of John Hwang
as a member of the Board of Directors shall terminate on such date, and (iv)
notwithstanding the expiration date, all vested options must be exercised within
one year after termination as a member of the Board of Directors. Subsequent to
year-end, the Company also engaged Mr. Hwang as Chief Information Officer (CIO)
and a Senior Vice President pursuant to an employment agreement dated February
2, 1999. Pursuant to the agreement, Mr. Hwang is entitled to a base salary of
$150,000 per year, a signing bonus of $20,000, and will be entitled to quarterly
cash performance bonuses equal to three percent (3%) of the gross margin (as
determined pursuant to generally accepted accounting principals) derived from
the Company's "online services" division.
Michael Gordon was granted options to acquire 100,000 shares of the
Company's restricted common stock an exercise price of $.30 per share for
agreeing to serve as a director of the Company. The options shall vest (and
shall become exercisable at the time they vest), on a pro rata basis, monthly,
for a period of twelve months, commencing January 1, 1999. All options shall
expire on December 31, 2003. The following terms and conditions apply to the
options: (i) both the number of options and the exercise price are subject to
appropriate adjustments in the event of any stock split, stock dividend or other
change in capital structure affecting the Corporation's common stock, (ii) the
options and the shares of common stock issuable upon exercise of the options are
subject to restrictions on transfer, as required by applicable federal and state
securities laws; (iii) options which have not vested on or before the date of
termination of Michael J. Gordon as a member of the Board of Directors shall
terminate on such date, and (iv) notwithstanding the expiration date, all vested
options must be exercised within one year after termination as a member of the
Board of Directors.
Pursuant to a consulting agreement dated April 9, 1998, the Company
engaged Paul Henry, a director of the Company, to continue to serve as Secretary
and Treasurer of the Company. Pursuant to the agreement, Mr. Henry was be paid
$5,000 per month until he was able to devote full-time attention to the Company,
after which he would be paid $15,000 per month. Mr Henry was also granted
options to acquire 1,000,000 shares of the Company's common stock at an exercise
price of $.30 per shares, for five years. The options vest and become
exercisable as follows: 250,000 upon execution of the agreement and 30,000 per
month thereafter.
Except as set forth above, no compensation was paid by the Company to
its Directors for any service provided as a director during the fiscal year
covered by this report. There are no formal or informal understandings or
arrangements relating to compensation; however, Directors may be reimbursed for
all reasonable expenses incurred by them in conducting the Company's business.
These expenses would include out-of-pocket expenses for such items as travel,
telephone, postage, and federal express charges.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
The Company's Board of Directors has complete discretion as to the
appropriateness of (a) key-man life insurance, (b) obtaining officer and
director liability insurance, (c) employment contracts with and compensation of
executive officers and directors, (d) indemnification contracts, and (e)
incentive plan to award executive officers and key employees.
Pursuant to an employment agreement dated December 4, 1998, the Company
engaged Robert P. Gordon to continue to serve as Chairman (an officer position)
for a term of five years. Pursuant to the agreement, Mr. Gordon will be paid a
salary of $360,000 per year. In addition, Mr. Gordon received a restricted stock
award of 5,000,000 shares of common stock, which are considered fully-vested.
Mr. Gordon is also entitled to the following: car expense allowance, major
medical health benefits equivalent to that provided to other officers;
indemnification from any claim or law suit which may be asserted against him
when acting as an officer of the Company provided that said indemnification is
not in violation of any federal or state law or rule or regulation of the
Securities and Exchange Commission. The agreement also contains certain
provisions with respect to disability, termination, confidentiality and
non-competition.
16
<PAGE> 30
The Company also has employment agreements in place with other officers
and significant employees not required to be listed in the compensation tables.
The Company's Board of Directors is responsible for reviewing and
determining the annual salary and other compensation of the executive officers
and key employees of the Company and its subsidiaries. The goals of the Company
are to align compensation with business objectives and performance and to enable
the Company and its subsidiaries to attract, retain and reward executive
officers and other key employees who contribute to the long-term success of the
company. The Company and its subsidiaries provide base salaries to its executive
officers and key employees sufficient to provide motivation to achieve certain
operating goals. Although salaries are not specifically tied into performance,
incentive bonuses are available to certain executive officers and key employees.
In the future, executive compensation may include without limitation cash
bonuses, stock option grants and stock reward grants. In addition, the Company
may set up a pension plan or similar retirement plans.
Employee Benefit and Consulting Services Compensation Plans
The Company currently has in effect three separate Employee Benefit and
Consulting Services Compensation Plans: 1) The "Visitors Services International
Corp. Employee Benefit and Consulting Services Compensation Plan" (the "VSI
Plan"); 2) the "TeleServices International Group Inc. Employee Benefit and
Consulting Services Compensation Plan" (the "TSIG Plan"); and 3) the
"TeleServices Employee Benefit and Consulting Services Compensation Plan" (the
"TeleServices Plan"). The VSI Plan covers 17,500,000 shares of common stock, the
TSIG Plan covers 10,000,000 shares of common stock, and the TeleServices Plan
covers 20,000,000 shares of common stock. All shares covered by all three plans
have been registered on seven separate Form S-8 registration statements.
Under all plans the Company may issue shares of common stock and/or
grant options to purchase common stock to qualified consultants, advisors,
officers, directors and employees of the Company and its subsidiaries. The
purpose of the plans is to promote the best interests of the Company and its
stockholders by providing a means of non-cash remuneration to eligible
participants who contribute to operating progress of the Company. The plans are
administered by the Company's Board of Directors or a committee thereof which
has the discretion to determine from time to time the eligible participants to
receive an award; the number of shares of stock issuable directly or to be
granted pursuant to option; the price at which the option may be exercised or
the price per share in cash or cancellation of fees or other payment which the
Company or its subsidiaries are liable if a direct issue of stock and all other
terms on which each option shall be granted.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth, as of the date of this report, the
stock ownership of each person known by the Company to be the beneficial owner
of five percent or more of the Company's Common Stock, each executive officer
and director individually and all executive officers and directors of the
Company as a group. No other class of voting securities is outstanding. Each
person is believed to have sole voting and investment power over the shares
except as noted.
17
<PAGE> 31
<TABLE>
<CAPTION>
==========================================================================================================
Amount and Nature of
Name and Address of Beneficial Owner (1) Beneficial Ownership(1)(2) Percent of Class (3)
- - ---------------------------------------- -------------------------- --------------------
<S> <C> <C>
Robert P. Gordon (4) 40,723,950 34.87%
Paul W. Henry (5) 888,360 1.15
Michael J. Gordon (6) 345,665 *
John Hwang (7) 503,572 *
James H. Guild (8) 194,438 *
Includes all officers and directors of the 42,655,985 35.93
Company as a group (5 persons)
==========================================================================================================
</TABLE>
- - -----------------------
* Represents less than one percent.
(1) Unless otherwise indicated, all shares are beneficially owned by the
persons named. The address of each person is 100 Second Avenue South,
City Center, Suite 1000, St. Petersburg, Florida 33701.
(2) Includes the amount of shares each person or group has the right to
acquire within 60 days pursuant to options, warrants, rights,
conversion privileges or similar obligations.
(3) Based upon 76,078,966 shares outstanding, plus the amount of shares
each person or group has the right to acquire within 60 days pursuant
to options, warrants, rights, conversion privileges or similar
obligations.
(4) Robert P. Gordon may be deemed to be a founder of the Company. Robert
P. Gordon individually owns 12,086,667 shares; Elizabeth K. Gordon, his
wife, individually owns 909,857, and they jointly own 698,750 shares.
Also included are 362,010 shares owned by Heaven International, Inc.,
which is controlled by Robert P. Gordon and Elizabeth K. Gordon.
Included in the table are up to 26,666,667 shares which Mr. Gordon may
have the right to acquire pursuant to the $5,000,000 Revolving Credit
Loan Agreement Revolving Credit Master Note between Mr. Gordon and the
Company, each dated April 23, 1998, in the event that the should the
full amount of the loan is funded and should Mr. Gordon elect to
convert the debt to shares of restricted common stock.
(5) Paul W. Henry is Secretary, Treasurer and a Director of the Company.
Included in the table are 35,000 shares owned by Mr. Henry; 15,000
shares in a custodian account for his minor son (which is controlled by
Mr. Henry, who disclaims any beneficial ownership thereof); and options
that have vested or will be vested within the next 60 days to purchase
838,360 shares.
(6) Michael J. Gordon is a director of the Company. Included in the table
are 304,000 shares owned by Mr. Michael Gordon; and options that have
vested or will be vested within the next 60 days to purchase 41,665
shares.
(7) John Hwang is a director of the Company. Included in the table are
options that have vested or will be vested within the next 60 days to
purchase 503,572 shares.
(8) James H. Guild is President of the Company. Included in the table are
options that have vested or will be vested within the next 60 days to
purchase 194,438 shares.
Item 12. Certain Relationships and Related Transactions.
On April 23, 1998, the Company entered in to a Revolving Credit Loan
Agreement and Revolving Credit Master Note with Robert P. Gordon, the Company's
Chairman, whereby Mr. Gordon would loan, at his discretion, up to $5,000,000 to
the Registrant over the following year, if and when requested by the
disinterested members of the Board of Directors. The loan may be repaid in cash
or in restricted common stock of the Registrant, at the option of Mr. Gordon. On
February 22, 1999, Mr. Gordon elected to convert $1,000,000 in principal due
under the loan into shares of restricted common stock at the conversion rate of
$.15 per share, resulting in the issuance of 6,666,667 shares.
18
<PAGE> 32
The Company acquired a controlling interest in VSI from certain
shareholders of VSI in September of 1996, and completed an exchange offer with
the remaining shareholders of VSI in early 1997. Pursuant to the acquisition of
VSI, the Company issued shares of common stock of the Company to the following
persons in exchange for their controlling interest (over 80%) in VSI: Robert P.
Gordon, 11,585,472 shares; Elizabeth Gordon (wife of Robert P. Gordon),
1,409,857 shares; Mr. and Mrs. Gordon, jointly, 48,750 shares; Harvest
International of America, Inc. (a corporation controlled by Robert P. Gordon),
362,010 shares; and James F. Gordon (brother of Robert P. Gordon), 1,814,206
shares. The reorganization was reported on Form 8-K dated September 30, 1996.
In October of 1996, the Company raised $843,750.75 in cash through a
private placement of its common stock. The Company sold 1,124,999 shares of
common stock, par value $.0001 per share, at a cash purchase price of $0.75 per
share. Stephen G. McLean, a former officer and director of both the Company and
VSI, purchased 33,333 shares; Paul W. Henry, an officer and director of both the
Company and VSI, purchased 50,000 shares, which includes 15,000 shares in the
name of his minor son; the R.P. Gordon Children Family Trust, a trust benefiting
the minor children of Robert P. Gordon (Mr. Gordon has no control over and
disclaims any interest in the trust, beneficial of otherwise) purchased 333,333
shares; Robert J. Conrads, a former director of VSI, purchased 400,000 shares;
Michael Gordon, brother of Robert P. Gordon and currently a director of the
Company, purchased 33,333 shares; Samuel Jacobs, a former officer of VSI,
purchased 33,333 shares; Russell R. Uhlmann, Jr., a former officer of VSI,
purchased 33,333 shares.
VSI was indebted to Robert P. Gordon in the amount of approximately
$1,829,965 in principal for funds loaned to VSI, plus accrued interest. Robert
P. Gordon agreed to convert his debt into shares of restricted common stock of
VSI, in whole or in part, at the rate of $.75 per share. On September 26, 1996,
2,000,000 shares of restricted stock of VSI were issued to Robert P. Gordon for
his conversion of $1,500,000 in principal owed to him by VSI. On October 15,
1996, 439,953 shares of restricted stock of VSI were issued to Robert P. Gordon
for his conversion of the remaining principal balance of $329,965 owed to him by
VSI (all shares of common stock of VSI were converted into shares of restricted
common stock of the Company pursuant to the reorganization described above.
19
<PAGE> 33
Item 13. Exhibits and Reports on Form 8-K.
(a) List of Exhibits.
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
2.1 Agreement and Plan of Reorganization between Dynasty
Capital Corporation and Visitors Services, Inc.,
dated September 26, 1996. (Incorporated by reference
to Exhibit 2.1 to the Company's Form 8-K dated and
filed on September 30, 1996.)
2.7 Termination Agreement dated February 2, 1999
regarding termination of previous agreements relating
to proposed acquisition of assets of Compact
Connection, Inc. (Incorporated by reference to
Exhibit 2.7 of the Company's current report on Form
8-K/A-2 dated April 30, 1998 and filed on February
16, 1999).
3.3 Bylaws as restated October 18, 1996. (Incorporated by
reference to Exhibit 2.7 of the Company's Form 8-K
dated October 17, 1996 and filed on October 23,
1996).
3.5 Articles of Incorporation, as amended and currently
in effect. (Incorporated by reference to Exhibit 3.5
of the Company's Form 10-QSB for the quarter ended
March 31, 1997 and filed on May 15, 1997).
4.3 Form of Debenture Purchase Agreement for private
placement which commenced in November 1998. (Filed
herewith.)
4.4 Form of 8% Convertible Debenture for private
placement which commenced in November 1998. (Filed
herewith.)
4.5 Form of Registration Rights Agreement for private
placement which commenced in November 1998. (Filed
herewith.)
4.6 Form of Escrow Agreement for private placement which
commenced in November 1998. (Filed herewith.)
4.7 Form of Common Stock Purchase Warrant for private
placement which commenced in November 1998. (Filed
herewith.)
10.1 TeleServices International Group Inc. (formerly
Visitors Services International Corp.) Employee
Benefit and Consulting Services Compensation Plan
(the "TSIG Plan"). (Incorporated by referenced to
Exhibit 10.1 to the Company's Post-Effective
Amendment No. 1 to the Registration Statement on Form
S-8 (file no. 333-14271) filed February 19, 1997.)
10.3 TeleServices Stock Option Plan (the "TeleServices
Plan"). (Incorporated by reference to Exhibit 10.3
the registration statement filed on Form S-8 for the
TeleServices Stock Option Plan, Registration No.
333-52271, filed May 8, 1998.)
10.5 Revolving Credit Loan Agreement and Revolving Credit
Master Note between the Company and Robert P. Gordon,
each dated April 23, 1998. (Incorporated by
referenced to Exhibit 10.5 to the Company's Form
10-QSB for the quarter ended March 31, 1998, filed on
May 20, 1998.)
</TABLE>
20
<PAGE> 34
10.6 Employment Agreement between the Company and James H.
Guild dated August 24, 1998. (Incorporated by
referenced to Exhibit 10.6 to the Company's Form
10-QSB for the quarter ended September 30, 1998,
filed on November 13, 1998.)
10.7 Visitors Services, Inc. Employee Benefit and
Consulting Services Compensation Plan (the "VSI
Plan"), as restated March 15, 1999. (Incorporated by
referenced to Exhibit 10.7 to the Company's
Registration Statement on Form S-8 (file no.
333-74561) filed March 17, 1999.)
10.7 Consulting Agreement between the Company and Paul W.
Henry dated April 9, 1998. (Filed herewith.)
10.8 Addendum to Employment Agreement between the Company
and James H. Guild dated December 2, 1999. (Filed
herewith).
10.9 Employment Agreement between the Company and Robert
P. Gordon dated December 4, 1998. (Filed herewith.)
10.10 Agreement to Serve as a Director between the Company
and John Hwang dated December 7, 1998. (Filed
herewith.)
10.11 Employment Agreement and Indemnification Agreement
between the Company and John Hwang, each dated
February 2, 1999. (Filed herewith.)
21.3 List of Subsidiaries of the Company. (Filed
herewith).
27 Financial Data Schedule. (Filed herewith).
(b) Reports on Form 8-K.
No current reports on Form 8-K were filed during the last quarter of
1998.
21
<PAGE> 35
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, as amended, the Registrant caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
TELESERVICES INTERNATIONAL GROUP INC.
Dated: March 31, 1999 /s/ Robert P. Gordon
-------------------------------------
Robert P. Gordon Chairman, CEO and
Interim Chief Financial and
Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
Name Title Date
---- ----- ----
/s/ Robert P. Gordon Chairman, CEO and March 31, 1999
- - -------------------- Director
Robert P. Gordon
/s/ Paul W. Henry Secretary, Treasurer, and March 31, 1999
- - ----------------- Director
Paul W. Henry
/s/ Michael J. Gordon Director March 31, 1999
- - ---------------------
Michael J. Gordon
/s/ John Hwang Director March 31, 1999
- - --------------
John Hwang
<PAGE> 36
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
2.1 Agreement and Plan of Reorganization between Dynasty
Capital Corporation and Visitors Services, Inc.,
dated September 26, 1996. (Incorporated by reference
to Exhibit 2.1 to the Company's Form 8-K dated and
filed on September 30, 1996.)
2.7 Termination Agreement dated February 2, 1999
regarding termination of previous agreements relating
to proposed acquisition of assets of Compact
Connection, Inc. (Incorporated by reference to
Exhibit 2.7 of the Company's current report on Form
8-K/A-2 dated April 30, 1998 and filed on February
16, 1999).
3.3 Bylaws as restated October 18, 1996. (Incorporated by
reference to Exhibit 2.7 of the Company's Form 8-K
dated October 17, 1996 and filed on October 23,
1996).
3.5 Articles of Incorporation, as amended and currently
in effect. (Incorporated by reference to Exhibit 3.5
of the Company's Form 10-QSB for the quarter ended
March 31, 1997 and filed on May 15, 1997).
4.3 Form of Debenture Purchase Agreement for private
placement which commenced in November 1998. (Filed
herewith.)
4.4 Form of 8% Convertible Debenture for private
placement which commenced in November 1998. (Filed
herewith.)
4.5 Form of Registration Rights Agreement for private
placement which commenced in November 1998. (Filed
herewith.)
4.6 Form of Escrow Agreement for private placement which
commenced in November 1998. (Filed herewith.)
4.7 Form of Common Stock Purchase Warrant for private
placement which commenced in November 1998. (Filed
herewith.)
10.1 TeleServices International Group Inc. (formerly
Visitors Services International Corp.) Employee
Benefit and Consulting Services Compensation Plan
(the "TSIG Plan"). (Incorporated by referenced to
Exhibit 10.1 to the Company's Post-Effective
Amendment No. 1 to the Registration Statement on Form
S-8 (file no. 333-14271) filed February 19, 1997.)
10.3 TeleServices Stock Option Plan (the "TeleServices
Plan"). (Incorporated by reference to Exhibit 10.3
the registration statement filed on Form S-8 for the
TeleServices Stock Option Plan, Registration No.
333-52271, filed May 8, 1998.)
10.5 Revolving Credit Loan Agreement and Revolving Credit
Master Note between the Company and Robert P. Gordon,
each dated April 23, 1998. (Incorporated by
referenced to Exhibit 10.5 to the Company's Form
10-QSB for the quarter ended March 31, 1998, filed on
May 20, 1998.)
</TABLE>
<PAGE> 37
10.6 Employment Agreement between the Company and James H.
Guild dated August 24, 1998. (Incorporated by
referenced to Exhibit 10.6 to the Company's Form
10-QSB for the quarter ended September 30, 1998,
filed on November 13, 1998.)
10.7 Visitors Services, Inc. Employee Benefit and
Consulting Services Compensation Plan (the "VSI
Plan"), as restated March 15, 1999. (Incorporated by
referenced to Exhibit 10.7 to the Company's
Registration Statement on Form S-8 (file no.
333-74561) filed March 17, 1999.)
10.7 Consulting Agreement between the Company and Paul W.
Henry dated April 9, 1998. (Filed herewith.)
10.8 Addendum to Employment Agreement between the Company
and James H. Guild dated December 2, 1999. (Filed
herewith).
10.9 Employment Agreement between the Company and Robert
P. Gordon dated December 4, 1998. (Filed herewith.)
10.10 Agreement to Serve as a Director between the Company
and John Hwang dated December 7, 1998. (Filed
herewith.)
10.11 Employment Agreement and Indemnification Agreement
between the Company and John Hwang, each dated
February 2, 1999. (Filed herewith.)
21.3 List of Subsidiaries of the Company. (Filed
herewith).
27 Financial Data Schedule. (Filed herewith).
<PAGE> 1
Exhibit 4.3
DEBENTURE PURCHASE AGREEMENT
Between
TeleServices International Group Inc.
and
The Investor(s) Signatory Hereto
DEBENTURE PURCHASE AGREEMENT dated as of March 1, 1999 (the
"Agreement"), between the persons subscribing for Convertible Debentures by
their signatures hereto (each an "Investor"), and TeleServices International
Group Inc., a corporation organized and existing under the laws of the State of
Florida (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investor,
and the Investor shall purchase the principal amount of Convertible Debentures,
as defined below, set forth on the signature page hereto.
WHEREAS, such investments will be made in reliance upon the provisions
of Section 4(2) ("Section 4(2)") or 4(6) of the United States Securities Act of
1933, as amended, and Regulation D ("Regulation D") and the other rules and
regulations promulgated thereunder (the "Securities Act"), and/or upon such
other exemption from the registration requirements of the Securities Act as may
be available with respect to any or all of the investments in the Company's
securities to be made hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Certain Definitions
Section 1.1. "Capital Shares" shall mean the Common Stock and any shares of any
other class of common stock whether now or hereafter authorized, having the
right to participate in the distribution of earnings and assets of the Company.
Section 1.2. "Capital Shares Equivalents" shall mean any securities, rights, or
obligations that are convertible into or exchangeable for or give any right to
subscribe for any Capital Shares of the Company or any warrants, options or
other rights to subscribe for or purchase Capital Shares or any such convertible
or exchangeable securities.
Section 1.3. "Closing" shall mean the closing of the purchase and sale of the
Convertible Debenture pursuant to Section 2.1.
Section 1.4. "Closing Date" shall mean the date on which all conditions to the
Closing have been satisfied (as defined in Section 2.1 (a) hereto) and the
Closing shall have occurred.
Section 1.5. "Common Stock" shall mean the Company's common stock.
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<PAGE> 2
Section 1.6. "Conversion Shares" shall mean the shares of Common Stock issuable
upon conversion of the Convertible Debenture and any Additional Debenture (as
defined in Section 2.2) when and if any Additional Debenture is issued.
Section 1.7. "Convertible Debenture" shall mean the Convertible Debenture in the
form of Exhibit A hereto to be issued to the Investor pursuant to this
Agreement.
Section 1.8. "Damages" shall mean any loss, claim, damage, liability, costs and
expenses (including, without limitation, reasonable attorney's fees and
disbursements and reasonable costs and expenses of expert witnesses and
investigation).
Section 1.9. "Effective Date" shall mean the date on which the SEC first
declares effective a Registration Statement registering the resale of the
Registrable Securities as set forth in the Registration Rights Agreement.
Section 1.10. "Escrow Agent" shall have the meaning set forth in the Escrow
Agreement.
Section 1.11. "Escrow Agreement" shall mean the Escrow Agreement in
substantially the form of Exhibit C hereto executed and delivered
contemporaneously with this Agreement.
Section 1.12. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
Section 1.13. "Legend" shall mean the legend set forth in Section 9.1.
Section 1.14. "Market Price" on any given date shall mean the average of the
closing bid prices on the Principal Market (as reported by Bloomberg L.P.) of
the Common Stock during the five Trading Day period ending on the Trading Day
immediately prior to the date for which the Market Price is to be determined.
Section 1.15. "Material Adverse Effect" shall mean any effect on the business,
operations, properties, prospects, or financial condition of the Company that is
material and adverse to the Company and its subsidiaries and affiliates, taken
as a whole, and/or any condition, circumstance, or situation that would prohibit
or otherwise interfere with the ability of the Company to enter into and perform
any of its obligations under this Agreement, the Registration Rights Agreement,
the Escrow Agreement or the Convertible Debenture in any material respect.
Section 1.16. "Outstanding" when used with reference to shares of Common Stock
or Capital Shares (collectively the "Shares"), shall mean, at any date as of
which the number of such Shares is to be determined, all issued and outstanding
Shares, and shall include all such Shares issuable in respect of outstanding
scrip or any certificates representing fractional interests in such Shares;
provided, however, that "Outstanding" shall not mean any such Shares then
directly or indirectly owned or held by or for the account of the Company.
Section 1.17. "Person" shall mean an individual, a corporation, a partnership,
an association, a trust or other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
Section 1.18. "Principal Market" shall mean the OTC Bulletin Board, the American
Stock Exchange, the New York Stock Exchange, the NASDAQ National Market, or the
NASDAQ Small-Cap Market, whichever is at the time the principal trading exchange
or market for the Common Stock.
Section 1.19. "Purchase Price" shall mean the principal amount of each
Convertible Debenture.
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<PAGE> 3
Section 1.20. "Registrable Securities" shall mean the Conversion Shares until
(i) the Registration Statement has been declared effective by the SEC, and all
Conversion Shares have been disposed of pursuant to the Registration Statement,
(ii) all Conversion Shares have been sold under circumstances under which all of
the applicable conditions of Rule 144 (or any similar provision then in force)
under the Securities Act ("Rule 144") are met, (iii) all Conversion Shares have
been otherwise transferred to holders who may trade such shares without
restriction under the Securities Act, and the Company has delivered a new
certificate or other evidence of ownership for such securities not bearing a
restrictive legend or (iv) such time as, in the opinion of counsel to the
Company, all Conversion Shares may be sold without any time, volume or manner
limitations pursuant to Rule 144(k) (or any similar provision then in effect)
under the Securities Act.
Section 1.21. "Registration Rights Agreement" shall mean the agreement regarding
the filing of the Registration Statement for the resale of the Registrable
Securities, entered into between the Company and the Investors as of the Closing
Date in the form annexed hereto as Exhibit B.
Section 1.22. "Registration Statement" shall mean a registration statement on
Form S-3 (if use of such form is then available to the Company pursuant to the
rules of the SEC and, if not, on such other form promulgated by the SEC for
which the Company then qualifies and which counsel for the Company shall deem
appropriate, and which form shall be available for the resale of the Registrable
Securities to be registered thereunder in accordance with the provisions of this
Agreement, the Registration Rights Agreement and in accordance with the intended
method of distribution of such securities), for the registration of the resale
by the Investor of the Registrable Securities under the Securities Act.
Section 1.23. "Regulation D" shall have the meaning set forth in the recitals of
this Agreement.
Section 1.24. "SEC" shall mean the Securities and Exchange Commission.
Section 1.25. "Section 4(2)" shall have the meaning set forth in the recitals of
this Agreement.
Section 1.26. "Securities Act" shall have the meaning set forth in the recitals
of this Agreement.
Section 1.27. "SEC Documents" shall mean the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1997 and each report, proxy
statement or registration statement filed by the Company with the SEC pursuant
to the Exchange Act or the Securities Act since the filing of such Annual Report
through the date hereof.
Section 1.28. "Shares" shall have the meaning set forth in Section 1.16.
Section 1.29. "Trading Day" shall mean any day during which the Principal Market
at such day shall be open for business.
ARTICLE II
Purchase and Sale of Convertible Debentures
Section 2.1. Investment.
(a) Upon the terms and subject to the conditions set forth herein, the
Company agrees to sell, and each Investor, severally and not jointly, agrees to
purchase a Convertible Debenture in the principal amount set forth on the
signature page hereto at the Purchase Price on the Closing Date as follows:
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<PAGE> 4
(i) Upon execution and delivery of this Agreement, the
Investor shall deliver to the Escrow Agent
immediately available funds in the amount of the
Purchase Price, and the Company shall deliver the
Convertible Debenture to the Escrow Agent, in each
case to be held by the Escrow Agent pursuant to the
Escrow Agreement.
(ii) Upon satisfaction of the conditions set forth in
Section 2.1(b), the Closing ("Closing") shall occur
at the offices of the Escrow Agent at which the
Escrow Agent (x) shall release the Convertible
Debenture to the Investor and (y) shall release the
Purchase Price (after all fees have been paid as set
forth in the Escrow Agreement) to the Company,
pursuant to the terms of the Escrow Agreement.
(b) The Closing is subject to the satisfaction of the following
conditions:
(i) acceptance and execution by the Company and by the
Investor, of this Agreement and all Exhibits hereto;
(ii) delivery into escrow by Investor of immediately
available funds in the amount of the Purchase Price
of the Convertible Debenture, as more fully set forth
in the Escrow Agreement;
(iii) all representations and warranties of the Investor
contained herein shall remain true and correct as of
the Closing Date (as a condition to the Company's
obligations);
(iv) all representations and warranties of the Company
contained herein shall remain true and correct as of
the Closing Date (as a condition to the Investor's
obligations);
(v) the Company shall have obtained all permits and
qualifications required by any state for the offer
and sale of the Convertible Debenture, or shall have
the availability of exemptions therefrom;
(vi) the sale and issuance of the Convertible Debenture
hereunder, and the proposed issuance by the Company
to the Investor of the Common Stock underlying the
Convertible Debenture upon the conversion or exercise
thereof shall be legally permitted by all laws and
regulations to which the Investor and the Company are
subject and there shall be no ruling, judgment or
writ of any court prohibiting the transactions
contemplated by this Agreement;
(vii) delivery of the original fully executed Convertible
Debenture to the Escrow Agent;
(viii) receipt by the Investor of an opinion of Futro &
Trauernicht LLC, counsel to the Company, in the form
of Exhibit D hereto or a relaince letter indicating
that the Investor may rely upon a previously issued
opinion to the same effect; and
(ix) delivery to the Investor of the Registration Rights
Agreement.
Section 2.2. Liquidated Damages. The parties hereto acknowledge and agree that
the sum payable pursuant to the Registration Rights Agreement shall constitute
liquidated damages and not penalties. The parties further acknowledge that (a)
the amount of loss or damages likely to be incurred is incapable or is difficult
to precisely estimate, (b) the amounts specified in such Sections bear a
reasonable proportion and are not plainly or grossly disproportionate to the
probable loss likely to be incurred by the Investor in
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<PAGE> 5
connection with the failure by the Company to timely cause the registration of
the Registrable Securities and (c) the parties are sophisticated business
parties and have been represented by sophisticated and able legal and financial
counsel and negotiated this Agreement at arm's length.
ARTICLE III
Representations and Warranties of Investor
Each Investor, severally and not jointly, represents and warrants to the Company
that:
Section 3.1. Intent. The Investor is entering into this Agreement for its own
account and the Investor has no present arrangement (whether or not legally
binding) at any time to sell the Convertible Debenture or any Conversion Shares
to or through any person or entity; provided, however, that by making the
representations herein, the Investor does not agree to hold such securities for
any minimum or other specific term and reserves the right to dispose of the
Conversion Shares at any time in accordance with federal and state securities
laws applicable to such disposition.
Section 3.2. Sophisticated Investor. The Investor is a sophisticated investor
(as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited investor
(as defined in Rule 501 of Regulation D), and Investor has such experience in
business and financial matters that it is capable of evaluating the merits and
risks of an investment in the Convertible Debenture and the underlying Common
Stock. The Investor acknowledges that an investment in the Convertible Debenture
and the underlying Common Stock is speculative and involves a high degree of
risk.
Section 3.3. Authority. This Agreement and each agreement attached as an Exhibit
hereto which is required to be executed by Investor has been duly authorized and
validly executed and delivered by the Investor and is a valid and binding
agreement of the Investor enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
Section 3.4. Not an Affiliate. The Investor is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Securities Act) of the
Company.
Section 3.5. Absence of Conflicts. The execution and delivery of this Agreement
and the agreements the forms of which are attached as Exhibits hereto and
executed in connection herewith, and the consummation of the transactions
contemplated thereby, and compliance with the requirements thereof, will not
violate any law, rule, regulation, order, writ, judgment, injunction, decree or
award binding on Investor or (a) violate any provision of any indenture,
instrument or agreement to which Investor is a party or is subject, or by which
Investor or any of its assets is bound; (b) conflict with or constitute a
material default thereunder; (c) result in the creation or imposition of any
lien pursuant to the terms of any such indenture, instrument or agreement, or
constitute a breach of any fiduciary duty owed by Investor to any third party;
or (d) require the approval of any third-party (which has not been obtained)
pursuant to any material contract, agreement, instrument, relationship or legal
obligation to which Investor is subject or to which any of its assets,
operations or management may be subject.
Section 3.6. Disclosure; Access to Information. The Investor has received all
documents, records, books and other publicly available information pertaining to
Investor's investment in the Company that have been requested by the Investor.
The Company is subject to the periodic reporting requirements of the Exchange
Act, and the Investor has reviewed or received copies of all SEC Documents that
have been requested by it.
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<PAGE> 6
Section 3.7. Manner of Sale. At no time was Investor presented with or solicited
by or through any leaflet, public promotional meeting, television advertisement
or any other form of general solicitation or advertising.
ARTICLE IV
Representations and Warranties of the Company
The Company represents and warrants to the Investor that, except as set forth on
the Schedule of Exceptions attached hereto or as set forth in the SEC Documents:
Section 4.1. Organization of the Company. The Company is a corporation duly
incorporated and existing in good standing under the laws of the State of
Florida and has all requisite corporate authority to own its properties and to
carry on its business as now being conducted. The Company does not have any
subsidiaries and does not own more that fifty percent (50%) of or control any
other business entity except as set forth in the SEC Documents. The Company is
duly qualified and is in good standing as a foreign corporation to do business
in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, other than those in which the
failure so to qualify would not have a Material Adverse Effect.
Section 4.2. Authority. (i) The Company has the requisite corporate power and
corporate authority to enter into and perform its obligations under this
Agreement, the Registration Rights Agreement and the Escrow Agreement and to
issue the Convertible Debenture and the Conversion Shares pursuant to their
respective terms, (ii) the execution, issuance and delivery of this Agreement,
the Registration Rights Agreement, the Escrow Agreement and the Convertible
Debenture by the Company and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
and no further consent or authorization of the Company or its Board of Directors
or stockholders is required, and (iii) this Agreement, the Registration Rights
Agreement, the Escrow Agreement and the Convertible Debenture have been duly
executed and delivered by the Company and at the Closing shall constitute valid
and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other
equitable principles of general application. The Company has duly and validly
authorized and reserved for issuance shares of Common Stock sufficient in number
for the conversion of the Convertible Debenture (assuming a Market Price of
$0.10). The Company understands and acknowledges the potentially dilutive effect
to the Common Stock of the issuance of the Conversion Shares. The Company
further acknowledges that its obligation to issue Conversion Shares upon
conversion of the Convertible Debentures in accordance with this Agreement and
the Convertible Debentures is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
stockholders of the Company and notwithstanding the commencement of any case
under 11 U.S.C. ss. 101 et seq. (the "Bankruptcy Code"). The Company shall not
seek judicial relief from its obligations hereunder except pursuant to the
Bankruptcy Code. In the event the Company is a debtor under the Bankruptcy Code,
the Company hereby waives to the fullest extent permitted any rights to relief
it may have under 11 U.S.C. ss. 362 in respect of the conversion of the
Convertible Debenture. The Company agrees, without cost or expense to the
Investor, to take or consent to any and all action necessary to effectuate
relief under 11 U.S.C. ss. 362.
Section 4.3. Capitalization. The authorized capital stock of the Company
consists of 100,000,000 shares of Common Stock, par value $0.0001, of which
57,527,738 shares are issued and outstanding as of November 10, 1998 and
10,000,000 shares of preferred stock, par value $0.001 per share, of which no
shares are issues and outstanding. Except for outstanding options to acquire
approximately 13.4 million shares of Common Stock, there are no outstanding
Capital Shares Equivalents, other than the Revolving Credit Loan Agreement
between the Company and its Chairman, Robert P. Gordon, which, if funded, is
convertible into
6
<PAGE> 7
shares of Common Stock (as disclosed in the Company's Form 10-QSB for the
quarter ended March 31, 1998). All of the outstanding shares of Common Stock of
the Company have been duly and validly authorized and issued and are fully paid
and non-assessable.
Section 4.4. [Not Used].
Section 4.5. SEC Documents. The Company has delivered or made available to the
Investor true and complete copies of the SEC Documents. The Company has not
provided to the Investor any information that, according to applicable law, rule
or regulation, should have been disclosed publicly prior to the date hereof by
the Company, but which has not been so disclosed. As of their respective dates,
the SEC Documents complied in all material respects with the requirements of the
Exchange Act, and rules and regulations of the SEC promulgated thereunder and
the SEC Documents did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Documents complied in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC or
other applicable rules and regulations with respect thereto at the time of such
inclusion. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they exclude footnotes or may be condensed or summary
statements) and fairly present in all material respects the financial position
of the Company as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited interim
statements, to normal year-end audit adjustments). Neither the Company nor any
of its subsidiaries has any material indebtedness, obligations or liabilities of
any kind (whether accrued, absolute, contingent or otherwise, and whether due or
to become due) that would have been required to be reflected in, reserved
against or otherwise described in the financial statements or in the notes
thereto in accordance with GAAP, which was not fully reflected in, reserved
against or otherwise described in the financial statements or the notes thereto
included in the SEC Documents or was not incurred in the ordinary course of
business consistent with the Company's past practices since the last date of
such financial statements.
Section 4.6. Exemption from Registration; Valid Issuances. Subject to the
accuracy of the Investor's representations in Article III, the sale of the
Convertible Debenture and the Conversion Shares will not require registration
under the Securities Act and/or any applicable state securities law. When issued
and paid for in accordance with the Convertible Debenture, the Conversion Shares
will be duly and validly issued, fully paid, and non-assessable. Neither the
sales of the Convertible Debenture or the Conversion Shares pursuant to, nor the
Company's performance of its obligations under, this Agreement, the Registration
Rights Agreement, the Escrow Agreement, or the Convertible Debenture will (i)
result in the creation or imposition by the Company of any liens, charges,
claims or other encumbrances upon the Convertible Debenture, the Conversion
Shares or, except as contemplated herein, any of the assets of the Company, or
(ii) entitle the holders of Outstanding Capital Shares to preemptive or other
rights to subscribe to or acquire the Capital Shares or other securities of the
Company. The Convertible Debenture and the Conversion Shares shall not subject
the Investor to personal liability to the Company or its creditors by reason of
the possession thereof.
Section 4.7. No General Solicitation or Advertising in Regard to this
Transaction. Neither the Company nor any of its affiliates nor any person acting
on its or their behalf (i) has conducted or will conduct any general
solicitation (as that term is used in Rule 502(c) of Regulation D) or general
advertising with respect to any of the Convertible Debenture or the Conversion
Shares, or (ii) made any offers or sales of any security or solicited any offers
to buy any security under any circumstances that would require registration of
the Convertible Debenture or the Conversion Shares under the Securities Act.
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<PAGE> 8
Section 4.8. Corporate Documents. The Company has furnished or made available to
the Investor true and correct copies of the Company's Certificate of
Incorporation, as amended and in effect on the date hereof (the "Certificate"),
and the Company's By-Laws, as amended and in effect on the date hereof (the
"By-Laws").
Section 4.9. No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby, including without limitation the issuance of the
Convertible Debenture and the Conversion Shares, do not and will not (i) result
in a violation of the Company's Certificate of Incorporation or By-Laws or (ii)
conflict with, or constitute a material default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any material
agreement, indenture or instrument, or any "lock-up" or similar provision of any
underwriting or similar agreement to which the Company is a party, or (iii)
result in a violation of any federal, state or local law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or by which any material property or
asset of the Company is bound or affected, nor is the Company otherwise in
violation of, conflict with or default under any of the foregoing (except in
each case for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not have, individually or in the
aggregate, a Material Adverse Effect). The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any governmental
entity, except for possible violations that either singly or in the aggregate
would not have a Material Adverse Effect. The Company is not required under
federal, state or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement or issue and sell the Convertible Debenture in
accordance with the terms hereof (other than any SEC, OTC Bulletin Board or
state securities filings that may be required to be made by the Company
subsequent to Closing, any registration statement that may be filed pursuant
hereto, and any shareholder approval required by the rules applicable to
companies whose common stock trades on the OTC Bulletin Board); provided that,
for purposes of the representation made in this sentence, the Company is
assuming and relying upon the accuracy of the relevant representations and
agreements of the Investor herein.
Section 4.10. No Material Adverse Change. Since September 30, 1998, no Material
Adverse Effect has occurred or exists with respect to the Company, except as
disclosed in the SEC Documents.
Section 4.11. No Undisclosed Events or Circumstances. Since September 30, 1998,
no event or circumstance has occurred or exists with respect to the Company or
its businesses, properties, prospects, operations or financial condition, that,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the SEC Documents.
Section 4.12. No Integrated Offering. Other than pursuant to an effective
registration statement under the Securities Act, or pursuant to the issuance or
exercise of employee stock options, the Company has not issued, offered or sold
the Convertible Debentures or any shares of Common Stock (including for this
purpose any securities of the same or a similar class as the Convertible
Debentures or Common Stock, or any securities convertible into a exchangeable or
exercisable for the Convertible Debentures or Common Stock or any such other
securities) within the six-month period next preceding the date hereof, and the
Company shall not permit any of its directors, officers or Affiliates directly
or indirectly to take, any action (including, without limitation, any offering
or sale to any person or entity of the Convertible Debentures or shares of
Common Stock), so as to make unavailable the exemption from Securities Act
registration being relied upon by the Company for the offer and sale to Investor
of the Convertible Debentures (and the Conversion Shares) as contemplated by
this Agreement.
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<PAGE> 9
Section 4.13. Litigation and Other Proceedings. Except as disclosed in the SEC
Documents, there are no lawsuits or proceedings pending or, to the knowledge of
the Company, threatened, against the Company, nor has the Company received any
written or oral notice of any such action, suit, proceeding or investigation,
which could reasonably be expected to have a Material Adverse Effect. Except as
set forth in the SEC Documents, no judgment, order, writ, injunction or decree
or award has been issued by or, to the knowledge of the Company, requested of
any court, arbitrator or governmental agency which could result in a Material
Adverse Effect.
Section 4.14. No Misleading or Untrue Communication. The Company and, to the
knowledge of the Company, any person representing the Company, or any other
person selling or offering to sell the Convertible Debenture in connection with
the transaction contemplated by this Agreement, have not made, at any time, any
oral communication in connection with the offer or sale of the same which
contained any untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading.
Section 4.15. Material Non-Public Information. The Company has not disclosed to
the Investor any material non-public information that (i) if disclosed, would,
or could reasonably be expected to have, a material effect on the price of the
Common Stock or (ii) according to applicable law, rule or regulation, should
have been disclosed publicly by the Company prior to the date hereof but which
has not been so disclosed.
Section 4.16. Insurance. The Company maintains property and casualty, general
liability, workers' compensation, environmental hazard, personal injury and
other similar types of insurance with financially sound and reputable insurers
that is adequate, consistent with industry standards and the Company's
historical claims experience. The Company has not received notice from, and has
no knowledge of any threat by, any insurer (that has issued any insurance policy
to the Company) that such insurer intends to deny coverage under or cancel,
discontinue or not renew any insurance policy presently in force.
Section 4.17. Tax Matters.
(a) The Company has filed all Tax Returns which it is required to file
under applicable laws; all such Tax Returns are true and accurate and have been
prepared in compliance with all applicable laws; the Company has paid all Taxes
due and owing by it (whether or not such Taxes are required to be shown on a Tax
Return) and have withheld and paid over to the appropriate taxing authorities
all Taxes which it is required to withhold from amounts paid or owing to any
employee, stockholder, creditor or other third parties; and since December 31,
1997, the charges, accruals and reserves for Taxes with respect to the Company
(including any provisions for deferred income taxes) reflected on the books of
the Company are adequate to cover any Tax liabilities of the Company if its
current tax year were treated as ending on the date hereof.
(b) No claim has been made by a taxing authority in a jurisdiction
where the Company does not file tax returns that such corporation is or may be
subject to taxation by that jurisdiction. There are no foreign, federal, state
or local tax audits or administrative or judicial proceedings pending or being
conducted with respect to the Company; no information related to Tax matters has
been requested by any foreign, federal, state or local taxing authority; and,
except as disclosed above, no written notice indicating an intent to open an
audit or other review has been received by the Company from any foreign,
federal, state or local taxing authority. There are no material unresolved
questions or claims concerning the Company's Tax liability.
(c) For purposes of this Section 4.17:
"IRS" means the United States Internal Revenue Service.
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"Tax" or "Taxes" means federal, state, county, local, foreign, or other
income, gross receipts, ad valorem, franchise, profits, sales or use,
transfer, registration, excise, utility, environmental, communications,
real or personal property, capital stock, license, payroll, wage or
other withholding, employment, social security, severance, stamp,
occupation, alternative or add-on minimum, estimated and other taxes of
any kind whatsoever (including, without limitation, deficiencies,
penalties, additions to tax, and interest attributable thereto) whether
disputed or not.
"Tax Return" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and
including any amendment thereof.
Section 4.18. Property. Neither the Company nor either of its subsidiaries owns
any real property. Each of the Company and its subsidiaries has good and
marketable title to all personal property owned by it, free and clear of all
liens, encumbrances and defects except such as do not materially affect the
value of such property and do not materially interfere with the use made and
proposed to be made of such property by the Company; and to the Company's
knowledge any real property and buildings held under lease by the Company as
tenant are held by it under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use made and
intended to be made of such property and buildings by the Company.
Section 4.19. Intellectual Property. Each of the Company and its subsidiaries
owns or possesses adequate and enforceable rights to use all patents, patent
applications, trademarks, trademark applications, trade names, service marks,
copyrights, copyright applications, licenses, know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) and other similar rights and proprietary
knowledge (collectively, "Intangibles") necessary for the conduct of its
business as now being conducted. To the Company's knowledge, except as disclosed
in the SEC Documents neither the Company nor any of its subsidiaries is
infringing upon or in conflict with any right of any other person with respect
to any Intangibles. Except as disclosed in the SEC Documents, no claims have
been asserted by any person to the ownership or use of any Intangibles and the
Company has no knowledge of any basis for such claim.
Section 4.20. Internal Controls and Procedures. The Company maintains books and
records and internal accounting controls which provide reasonable assurance that
(i) all transactions to which the Company is a party or by which its properties
are bound are executed with management's authorization; (ii) the recorded
accounting of the Company's assets is compared with existing assets at regular
intervals; (iii) access to the Company's assets is permitted only in accordance
with management's authorization; and (iv) all transactions to which the Company
is a party or by which its properties are bound are recorded as necessary to
permit preparation of the financial statements of the Company in accordance with
U.S. generally accepted accounting principles.
Section 4.21. Payments and Contributions. Neither the Company nor any of its
directors, officers or, to its knowledge, other employees has (i) used any
Company funds for any unlawful contribution, endorsement, gift, entertainment or
other unlawful expense relating to political activity; (ii) made any direct or
indirect unlawful payment of Company funds to any foreign or domestic government
official or employee; (iii) violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any bribe,
rebate, payoff, influence payment, kickback or other similar payment to any
person with respect to Company matters.
Section 4.22. No Misrepresentation. No representation or warranty of the Company
contained in this Agreement, any schedule, annex or exhibit hereto or any
agreement, instrument or certificate furnished by the Company to the Investor
pursuant to this Agreement, contains any untrue statement of a material fact or
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omits to state a material fact required to be stated therein or necessary to
make the statements therein, not misleading.
ARTICLE V
Covenants of the Investor
Section 5.1. Compliance with Law. The Investor's trading activities with respect
to shares of the Company's Common Stock will be in compliance with all
applicable state and federal securities laws, rules and regulations and rules
and regulations of the Principal Market on which the Company's Common Stock is
listed.
ARTICLE VI
Covenants of the Company
Section 6.1. Registration Rights. The Company shall cause the Registration
Rights Agreement to remain in full force and effect and the Company shall comply
in all material respects with the terms thereof.
Section 6.2. Reservation of Common Stock. As of the date hereof, the Company has
reserved and shall continue to reserve and keep available at all times, free of
preemptive rights, shares of Common Stock for the purpose of enabling the
Company to issue the Conversion Shares pursuant to any conversion of the
Convertible Debenture; such amount of shares of Common Stock to be reserved
shall be calculated based upon a Market Price for the Common Stock under the
terms of the Debenture of $0.10. The number of shares so reserved from time to
time, as theretofore increased or reduced as hereinafter provided, may be
reduced by the number of shares actually delivered pursuant to any conversion of
the Convertible Debenture.
Section 6.3. Listing of Common Stock. The Company hereby agrees to maintain the
listing of the Common Stock on a Principal Market, and as soon as reasonably
practicable following the Closing (but in any event prior to the effective date
of the Registration Statement) to list the Conversion Shares on the Principal
Market, if required by such market. The Company further agrees, if the Company
applies to have the Common Stock traded on any other Principal Market, it will
include in such application the Conversion Shares, and will take such other
action as is necessary or desirable in the opinion of the Investor to cause the
Common Stock to be listed on such other Principal Market as promptly as
possible. The Company will take all action to continue the listing and trading
of its Common Stock on a Principal Market (including, without limitation,
maintaining sufficient net tangible assets) and will comply in all respects with
the Company's reporting, filing and other obligations under the bylaws or rules
of the Principal Market and shall provide Investor with copies of any
correspondence to or from such Principal Market which questions or threatens
delisting of the Common Stock, within three (3) Business Days of the Company's
receipt thereof, until the Investor has disposed of all of its Registrable
Securities.
Section 6.4. Exchange Act Reporting. The Company will use its best efforts to
comply in all respects with its reporting and filing obligations under the
Exchange Act, and will not take any action or file any document (whether or not
permitted by the Exchange Act or the rules thereunder) to terminate or suspend
such registration or to terminate or suspend its reporting and filing
obligations under said Act until the Investor has disposed of all of its
Registrable Securities.
Section 6.5. Legends. The certificates evidencing the Registrable Securities
shall be free of legends, except as set forth in Article IX.
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Section 6.6. Corporate Existence. The Company will take all steps necessary to
preserve and continue the corporate existence of the Company.
Section 6.7. Consolidation; Merger. The Company shall not, at any time after the
date hereof, effect any merger or consolidation of the Company with or into, or
a transfer of all or substantially all of the assets of the Company to, another
entity (a "Consolidation Event") unless the resulting successor or acquiring
entity (if not the Company) assumes by written instrument or by operation of law
the obligation to deliver to the Investor such shares of stock and/or securities
as the Investor is entitled to receive pursuant to this Agreement.
Section 6.8. Issuance of Convertible Debenture. The sale of the Convertible
Debenture and the issuance of the Conversion Shares upon conversion of the
Convertible Debenture shall be made in accordance with the provisions and
requirements of Section 4(2) and Regulation D and any applicable state
securities law. The Company shall make all necessary SEC and "blue sky" filings
required to be made by the Company in connection with the sale of the Securities
to the Investor as required by all applicable Laws, and, upon request, shall
provide a copy thereof to the Investor promptly after such filing.
ARTICLE VII
Survival; Indemnification
Section 7.1. Survival. The representations, warranties and covenants made by
each of the Company and the Investor in this Agreement, the annexes, schedules
and exhibits hereto and in each instrument, agreement and certificate entered
into and delivered by them pursuant to this Agreement, shall survive the Closing
and the consummation of the transactions contemplated hereby. In the event of a
breach or violation of any of such representations, warranties or covenants, the
party to whom such representations, warranties or covenants have been made shall
have all rights and remedies for such breach or violation available to it under
the provisions of this Agreement or otherwise, whether at law or in equity,
irrespective of any investigation made by or on behalf of such party on or prior
to the Closing Date.
Section 7.2. Indemnity. (a) The Company hereby agrees to indemnify and hold
harmless the Investor, its Affiliates and their respective officers, directors,
partners and members (collectively, the "Investor Indemnitees"), from and
against any and all losses, claims, Damages, judgments, penalties, liabilities
and deficiencies (collectively, "Losses"), and agrees to reimburse the Investor
Indemnitees for all reasonable out-of-pocket expenses (including the reasonable
fees and expenses of legal counsel), in each case promptly as incurred by the
Investor Indemnitees and to the extent arising out of or in connection with:
(i) any misrepresentation, omission of fact or breach of any
of the Company's representations or warranties contained in this
Agreement, the annexes, schedules or exhibits hereto or any instrument,
agreement or certificate entered into or delivered by the Company
pursuant to this Agreement; or
(ii) any failure by the Company to perform in any material
respect any of its covenants, agreements, undertakings or obligations
set forth in this Agreement, the annexes, schedules or exhibits hereto
or any instrument, agreement or certificate entered into or delivered
by the Company pursuant to this Agreement.
(b) The Investor hereby agrees to indemnify and hold harmless the
Company, its Affiliates and their respective officers, directors, partners and
members (collectively, the "Company Indemnitees"), from and
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against any and all Losses, and agrees to reimburse the Company Indemnitees for
reasonable all out-of-pocket expenses (including the reasonable fees and
expenses of legal counsel), in each case promptly as incurred by the Company
Indemnitees and to the extent arising out of or in connection with:
(i) any misrepresentation, omission of fact, or breach of any
of the Investor's representations or warranties contained in this
Agreement, the annexes, schedules or exhibits hereto or any instrument,
agreement or certificate entered into or delivered by the Investor
pursuant to this Agreement; or
(ii) any failure by the Investor to perform in any material
respect any of its covenants, agreements, undertakings or obligations
set forth in this Agreement or any instrument, certificate or agreement
entered into or delivered by the Investor pursuant to this Agreement.
Section 7.3. Notice. Promptly after receipt by either party hereto seeking
indemnification pursuant to Section 7.2 (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to Section
7.2 is being sought (the "Indemnifying Party") of the commencement thereof; but
the omission to so notify the Indemnifying Party shall not relieve it from any
liability that it otherwise may have to the Indemnified Party, except to the
extent that the Indemnifying Party is materially prejudiced and forfeits
substantive rights and defenses by reason of such failure. In connection with
any Claim as to which both the Indemnifying Party and the Indemnified Party are
parties, the Indemnifying Party shall be entitled to assume the defense thereof.
Notwithstanding the assumption of the defense of any Claim by the Indemnifying
Party, the Indemnified Party shall have the right to employ separate legal
counsel and to participate in the defense of such Claim, and the Indemnifying
Party shall bear the reasonable fees, out-of-pocket costs and expenses of such
separate legal counsel to the Indemnified Party if (and only if): (x) the
Indemnifying Party shall have agreed to pay such fees, out-of-pocket costs and
expenses, (y) the Indemnified Party and the Indemnifying Party reasonably shall
have concluded that representation of the Indemnified Party and the Indemnifying
Party by the same legal counsel would not be appropriate due to actual or, as
reasonably determined by legal counsel to the Indemnified Party, potentially
differing interests between such parties in the conduct of the defense of such
Claim, or if there may be legal defenses available to the Indemnified Party that
are in addition to or disparate from those available to the Indemnifying Party,
or (z) the Indemnifying Party shall have failed to employ legal counsel
reasonably satisfactory to the Indemnified Party within a reasonable period of
time after notice of the commencement of such Claim. If the Indemnified Party
employs separate legal counsel in circumstances other than as described in
clauses (x), (y) or (z) above, the fees, costs and expenses of such legal
counsel shall be borne exclusively by the Indemnified Party. Except as provided
above, the Indemnifying Party shall not, in connection with any Claim in the
same jurisdiction, be liable for the fees and expenses of more than one firm of
legal counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnifying Party shall not, without the prior written consent of
the Indemnified Party (which consent shall not unreasonably be withheld), settle
or compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnified Party from all liabilities
with respect to such Claim or judgment.
Section 7.4. Direct Claims. In the event one party hereunder should have a claim
for indemnification that does not involve a claim or demand being asserted by a
third party, the Indemnified Party promptly shall deliver notice of such claim
to the Indemnifying Party. If the Indemnified Party disputes the claim, such
dispute shall be resolved by mutual agreement of the Indemnified Party and the
Indemnifying Party or by binding arbitration conducted in accordance with the
procedures and rules of the American Arbitration Association as set forth in
Article X. Judgment upon any award rendered by any arbitrators may be entered in
any court having competent jurisdiction thereof.
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ARTICLE VIII
Due Diligence Review; Non-Disclosure of Non-Public Information.
Section 8.1. Due Diligence Review. Subject to Section 8.2, the Company shall
make available for inspection and review by the Investor, advisors to and
representatives of the Investor (who may or may not be affiliated with the
Investor and who are reasonably acceptable to the Company), any underwriter
participating in any disposition of the Registrable Securities on behalf of the
Investor pursuant to the Registration Statement, any such registration statement
or amendment or supplement thereto or any blue sky, Form 211 or other filing,
all SEC Documents and other filings with the SEC, and all other publicly
available corporate documents and properties of the Company as may be reasonably
necessary for the purpose of such review, and cause the Company's officers,
directors and employees to supply all such publicly available information
reasonably requested by the Investor or any such representative, advisor or
underwriter in connection with such Registration Statement (including, without
limitation, in response to all questions and other inquiries reasonably made or
submitted by any of them), prior to and from time to time after the filing and
effectiveness of the Registration Statement for the sole purpose of enabling the
Investor and such representatives, advisors and underwriters and their
respective accountants and attorneys to conduct initial and ongoing due
diligence with respect to the Company and the accuracy of the Registration
Statement.
Section 8.2. Non-Disclosure of Non-Public Information.
(a) The Company shall not disclose material non-public information to
the Investor, advisors to or representatives of the Investor unless prior to
disclosure of such information the Company identifies such information as being
non-public information and provides the Investor, such advisors and
representatives with the opportunity to accept or refuse to accept such
non-public information for review. Other than disclosure of any comment letters
received from the SEC staff with respect to the Registration Statement, the
Company may, as a condition to disclosing any non-public information hereunder,
require the Investor's advisors and representatives to enter into a
confidentiality agreement in form reasonably satisfactory to the Company and the
Investor.
(b) Nothing herein shall require the Company to disclose material
non-public information to the Investor or its advisors or representatives, and
the Company represents that it does not disseminate material non-public
information to any investors who purchase stock in the Company in a public
offering, to money managers or to securities analysts, provided, however, that
notwithstanding anything herein to the contrary, the Company will, as
hereinabove provided, promptly notify the advisors and representatives of the
Investor and, if any, underwriters, of any event or the existence of any
circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting material non-public
information (whether or not requested of the Company specifically or generally
during the course of due diligence by such persons or entities), which, if not
disclosed in the prospectus included in the Registration Statement would cause
such prospectus to include a material misstatement or to omit a material fact
required to be stated therein in order to make the statements, therein in light
of the circumstances in which they were made, not misleading. Nothing contained
in this Section 8.2 shall be construed to mean that such persons or entities
other than the Investor (without the written consent of the Investor prior to
disclosure of such information) may not obtain non-public information in the
course of conducting due diligence in accordance with the terms of this
Agreement and nothing herein shall prevent any such persons or entities from
notifying the Company of their opinion that based on such due diligence by such
persons or entities, that the Registration Statement contains an untrue
statement of a material fact or omits a material fact required to be stated in
the Registration Statement or necessary to make the statements contained
therein, in light of the circumstances in which they were made, not misleading.
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ARTICLE IX
Legends; Transfer Agent Instructions
Section 9.1. Legends. Unless otherwise provided below, each certificate
representing Registrable Securities will bear the following legend or equivalent
(the "Legend"):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER
APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED
OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION THAT IS EXEMPT FROM, OR
NOT SUBJECT TO, SUCH REGISTRATION.
Section 9.2. Transfer Agent Instructions. Upon the execution and delivery
hereof, the Company is issuing to the transfer agent for its Common Stock (and
to any substitute or replacement transfer agent for its Common Stock upon the
Company's appointment of any such substitute or replacement transfer agent)
irrevocable instructions to require the transfer agent for the Common Stock from
time to time upon transfer of Registrable Securities by the Investor to issue
certificates evidencing such Registrable Securities free of the Legend during
the following periods and under the following circumstances and without
consultation by the transfer agent with the Company or its counsel and without
the need for any further advice or instruction or documentation to the transfer
agent by or from the Company or its counsel or the Investor:
(a) at any time after the Effective Date, upon surrender of one or more
certificates evidencing Common Stock that bear the Legend, to the extent
accompanied by a notice requesting the issuance of new certificates free of the
Legend to replace those surrendered; provided that (i) the Registration
Statement shall then be effective; (ii) the Investor confirms to the transfer
agent that it has sold, pledged or otherwise transferred or agreed to sell,
pledge or otherwise transfer such Common Stock in a bona fide transaction to a
third party that is not an affiliate of the Company; and (iii) the Investor
confirms to the transfer agent that the Investor has complied with the
prospectus delivery requirement.
(b) at any time upon any surrender of one or more certificates
evidencing Registrable Securities that bear the Legend, to the extent
accompanied by a notice requesting the issuance of new certificates free of the
Legend to replace those surrendered and containing representations that (i) the
Investor is permitted to dispose of such Registrable Securities without
limitation as to amount or manner of sale pursuant to Rule 144(k) under the
Securities Act or (ii) the Investor has sold, pledged or otherwise transferred
or agreed to sell, pledge or otherwise transfer such Registrable Securities in a
manner other than pursuant to an effective registration statement, to a
transferee who will upon such transfer be entitled to freely tradable
securities.
Any of the notices referred to above in this Section 9.2 may be sent by
facsimile to the Company's transfer agent.
Section 9.3. No Other Legend or Stock Transfer Restrictions. No legend other
than the one specified in Section 9.1 has been or shall be placed on the share
certificates representing the Registrable Securities and no instructions or
"stop transfer orders," so called, "stock transfer restrictions," or other
restrictions have
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been or shall be given to the Company's transfer agent with respect thereto
other than as expressly set forth in this Article IX.
Section 9.4. Investor's Compliance. Nothing in this Article shall affect in any
way the Investor's obligations under any agreement to comply with all applicable
securities laws upon resale of the Common Stock.
ARTICLE X
Choice of Law
Section 10.1. Governing Law/Arbitration. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made in New York by persons domiciled in New York City and without
regard to its principles of conflicts of laws. Any dispute under this Agreement
or any Exhibit attached hereto shall be submitted to arbitration under the
American Arbitration Association (the "AAA") in New York City, New York, and
shall be finally and conclusively determined by the decision of a board of
arbitration consisting of three (3) members (hereinafter referred to as the
"Board of Arbitration") selected as according to the rules governing the AAA.
The Board of Arbitration shall meet on consecutive business days in New York
City, New York, and shall reach and render a decision in writing (concurred in
by a majority of the members of the Board of Arbitration) with respect to the
amount, if any, which the losing party is required to pay to the other party in
respect of a claim filed. In connection with rendering its decisions, the Board
of Arbitration shall adopt and follow the laws of the State of New York. To the
extent practical, decisions of the Board of Arbitration shall be rendered no
more than thirty (30) calendar days following commencement of proceedings with
respect thereto. The Board of Arbitration shall cause its written decision to be
delivered to all parties involved in the dispute. Any decision made by the Board
of Arbitration (either prior to or after the expiration of such thirty (30)
calendar day period) shall be final, binding and conclusive on the parties to
the dispute, and entitled to be enforced to the fullest extent permitted by law
and entered in any court of competent jurisdiction. The non-prevailing party to
any arbitration (as determined by the Board of Arbitration) shall pay the
expenses of the prevailing party including reasonable attorney's fees, in
connection with such arbitration.
ARTICLE XI
Assignment
Section 11.1. Assignment. Neither this Agreement nor any rights of the Investor
or the Company hereunder may be assigned by either party to any other person.
Notwithstanding the foregoing, (a) the provisions of this Agreement shall inure
to the benefit of, and be enforceable by, any permitted transferee of any of the
Convertible Debentures purchased or acquired by the Investor hereunder with
respect to the Convertible Debentures held by such person, and (b) upon the
prior written consent of the Company, which consent shall not unreasonably be
withheld or delayed, the Investor's interest in this Agreement may be assigned
at any time, in whole or in part, to any other person or entity (including any
affiliate of the Investor) who agrees to make the representations and warranties
contained in Article III and who agrees to be bound by the covenants of Article
V. Such permitted assignment shall not relieve the Investor of its obligations
under Article V.
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ARTICLE XII
Notices
Section 12.1. Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by reputable courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to the Company: TeleServices International Group Inc.
100 Second Avenue, Suite 1000
St. Petersburg, FL 33701
Attention: Robert P.Gordon, Chairman
Telephone: (727) 897-4000
Facsimile: (727) 896-4206
with a copy to: Futro & Trauernicht LLC
(shall not constitute notice) 1401 Seventeenth Street
11th Floor
Denver, CO 80202
Attention: Troy A. Young, Esq.
Telephone: (303) 295-3360
Facsimile: (303) 295-1563
if to the Investor: As set forth on the signature page
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 12.1 by giving written notice of such changed
address or facsimile number to the other party hereto as provided in this
Section 12.1.
ARTICLE XIII
Miscellaneous
Section 13.1. Counterparts/ Facsimile/ Amendments. This Agreement may be
executed in multiple counterparts, each of which may be executed by less than
all of the parties and shall be deemed to be an original instrument which shall
be enforceable against the parties actually executing such counterparts and
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all of which together shall constitute one and the same instrument. Except as
otherwise stated herein, in lieu of the original documents, a facsimile
transmission or copy of the original documents shall be as effective and
enforceable as the original. This Agreement may be amended only by a writing
executed by all parties.
Section 13.2. Entire Agreement. This Agreement, the agreements attached as
Exhibits hereto, which include, but are not limited to the Convertible
Debenture, the Escrow Agreement, and the Registration Rights Agreement, set
forth the entire agreement and understanding of the parties relating to the
subject matter hereof and supersedes all prior and contemporaneous agreements,
negotiations and understandings between the parties, both oral and written
relating to the subject matter hereof. The terms and conditions of all Exhibits
to this Agreement are incorporated herein by this reference and shall constitute
part of this Agreement as is fully set forth herein.
Section 13.3. Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that such severability shall be ineffective if
it materially changes the economic benefit of this Agreement to any party.
Section 13.4. Headings. The headings used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
Section 13.5. Reporting Entity for the Common Stock. The reporting entity relied
upon for the determination of the trading price or trading volume of the Common
Stock on any given Trading Day for the purposes of this Agreement shall be
Bloomberg, L.P. or any successor thereto. The written mutual consent of the
Investor and the Company shall be required to employ any other reporting entity.
Section 13.6. Replacement of Certificates. Upon (i) receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of a certificate representing the Convertible Debenture or any
Conversion Shares and (ii) in the case of any such loss, theft or destruction of
such certificate, upon delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company (which shall not exceed that
required by the Company's transfer agent in the ordinary course) or (iii) in the
case of any such mutilation, on surrender and cancellation of such certificate,
the Company at its expense will execute and deliver, in lieu thereof, a new
certificate of like tenor.
Section 13.7. Fees and Expenses. Each of the Company and the Investor agrees to
pay its own expenses incident to the performance of its obligations hereunder,
except that the Company shall pay the sum of $2,500 per Investor to the Escrow
Agent for its services as Escrow Agent, all as set forth in the Escrow
Agreement.
Section 13.8. Brokerage. Each of the parties hereto represents that it has had
no dealings in connection with this transaction with any finder or broker who
will demand payment of any fee or commission from the other party except for
Grady & Hatch and Co., Inc., whose fee shall be paid by the Company. The Company
on the one hand, and the Investor, on the other hand, agree to indemnify the
other against and hold the other harmless from any and all liabilities to any
person claiming brokerage commissions or finder's fees on account of services
purported to have been rendered on behalf of the indemnifying party in
connection with this Agreement or the transactions contemplated hereby.
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<PAGE> 19
SCHEDULE of EXCEPTIONS
The Company is in arrears on remitting payroll tax withholdings to the
Internal Revenue Service due for the fourth quarter of 1998. The total amount
due is approximately $130,000. As noted in previously filed SEC Documents, the
Company's subsidiary, Visitors Services International Corp. is materially
delinquent on various obligations to the Internal Revenue Service.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the undersigned, thereunto duly authorized, as of the date first set
forth above.
TELESERVICES INTERNATIONAL GROUP INC.
By:
-------------------------------------
Robert P. Gordon
Chairman
Address: INVESTOR:
- - ------------------------- ----------------------------------------
Name of Investor
By:
- - ------------------------- -------------------------------------
Print Name:
- - ------------------------- -----------------------------
Telephone:
---------------
Fax: Title:
- - ------------------------- ---------------------------------
Principal amount of Convertible Debentures to be purchased: $_______________.
Execution of this Purchase Agreement by Investor and by the Company shall
constitute the Investor's and the Company's respective execution of the
Registration Rights Agreement and the Escrow Agreement.
19
<PAGE> 1
EXHIBIT 4.4
8% CONVERTIBLE DEBENTURE
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION
HEREOF HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE OR UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE SECURITIES ARE
RESTRICTED AND MAY NOT BE OFFERED, RESOLD, PLEDGED OR TRANSFERRED
EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
No. A- US $____,000
-----
TELESERVICES INTERNATIONAL GROUP INC.
8% CONVERTIBLE DEBENTURE DUE OCTOBER 31, 1999
THIS DEBENTURE is issued by TeleServices International Group
Inc., a corporation organized and existing under the laws of the State of
Florida (the "Company") and is designed as its 8% Convertible Debenture Due
October 31, 1999.
FOR VALUE RECEIVED, the Company promises to pay to
_______________________________________________, or permitted assigns (the
"Holder"), the principal sum of ____________________________and 00/100 (US
$_____,000) Dollars on October 31, 1999 (the "Maturity Date") and to pay
interest on the principal sum outstanding from time to time at the rate of 8%
per annum accruing from the date of initial issuance. If the Maturity Date is
not a business day in the State of New York, then such payment shall be made on
the next succeeding business day. The Company will pay the principal of and any
accrued but unpaid interest due upon this Debenture by cashier's or certified
check on the Maturity Date, less any amounts required by law to be deducted, to
the registered holder of this Debenture as of the tenth day prior to the
Maturity Date and addressed to such holder at the last address appearing on the
Company's register of Debenture holders. The forwarding of such check shall
constitute a payment of principal and interest hereunder and shall satisfy and
discharge the liability for principal and interest on this Debenture to the
extent of the sum represented by such check plus any amounts so deducted.
This Debenture is subject to the following additional
provisions:
1. The Company shall be entitled to withhold from all payments
of principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax laws or
other applicable laws at the time of such payments, and Holder shall execute and
deliver all required documentation in connection therewith.
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<PAGE> 2
2. This Debenture has been issued subject to investment
representations of the original purchaser hereof and may be transferred or
exchanged only in compliance with the Securities Act of 1933, as amended (the
"Act"), and other applicable state securities laws. In the event of any proposed
transfer of this Debenture, the Company may require, prior to issuance of a new
Debenture in the name of such other person, that it receive reasonable transfer
documentation including legal opinions that the issuance of the Debenture in
such other name does not and will not cause a violation of the Act or any
applicable state securities laws. Prior to due presentment for transfer of this
Debenture, the Company and any agent of the Company may treat the person in
whose name this Debenture is duly registered on the Company's Debenture Register
as the owner hereof for the purpose of receiving payment as herein provided and
for all other purposes, whether or not this Debenture be overdue, and neither
the Company nor any such agent shall be affected by notice to the contrary. This
Debenture has been executed and delivered pursuant to the Debenture Purchase
Agreement dated as of March 1, 1999 between the Company and the original Holder
(the "Purchase Agreement"), and is subject to the terms and conditions of the
Purchase Agreement, which are, by this reference, incorporated herein and made a
part hereof. Capitalized terms used and not otherwise defined herein shall have
the meanings set forth for such terms in the Purchase Agreement.
3. The Holder of this Debenture is entitled, at its option, to
convert at any time commencing on the date hereof, the principal amount of this
Debenture or any portion thereof, together with accrued but unpaid interest,
into shares of Common Stock of the Company ("Conversion Shares") at a conversion
price for each share of Common Stock ("Conversion Price") equal to 70% of the
Market Price at the Conversion Date (as defined in Section 6 hereof), subject to
adjustment as set forth in Section 3(e) of the Registration Rights Agreement.
The term "Market Price" shall have the meaning set forth in the Purchase
Agreement.
4. The Maturity Date shall be automatically extended for
eighteen (18) consecutive one-month periods unless the Holder provides the
Company with at least ten (10) calendar days' prior written notice that the next
occurring Maturity Date will not be so extended.
5. The Company may, at any time and from time to time, prepay
all or any portion of the outstanding principal amount of this Debenture and all
accrued but unpaid interest thereon upon ten (10) business days' prior written
notice to the Holder. The Holder shall be entitled to convert this Debenture at
any time prior to the prepayment date set forth in such notice of prepayment.
6. Conversion shall be effectuated by surrendering this
Debenture to the Company (if such Conversion will convert all outstanding
principal) together with the form of conversion notice attached hereto as
Exhibit A (the "Notice of Conversion"), executed by the Holder of this Debenture
evidencing such Holder's intention to convert this Debenture or a specified
portion (as above provided) hereof. Interest accrued or accruing from the date
of issuance to the date of conversion shall, at the option of the Holder, be
paid in cash as set forth above or in Common Stock upon conversion at the
Conversion Price on the Conversion Date. No fraction of a share or scrip
representing a fraction of a share will be issued on conversion, but the number
of shares issuable shall be rounded to the nearest whole share. The date on
which Notice of Conversion is given (the "Conversion Date") shall be deemed to
be the date on which the Holder faxes the Notice of Conversion duly
2
<PAGE> 3
executed, to the Company. Facsimile delivery of the conversion notice shall be
accepted by the Company at facsimile number (727) 899-4206 Attn.: Robert P.
Gordon. Faxes must be delivered before 8:00 pm eastern time to be deemed
delivered on such date, and shall otherwise be deemed delivered on the next
Trading Day.
7. No provision of this Debenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of, and interest on, this Debenture at the time, place, and rate, and
in the coin or currency herein prescribed. This Debenture is a direct obligation
of the Company.
8. No recourse shall be had for the payment of the principal
of, or the interest on, this Debenture, or for any claim based hereon, or
otherwise in respect hereof, against any incorporator, shareholder, employee,
officer or director, as such, past, present or future, of the Company or any
successor corporation, whether by virtue of any constitution, statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise, all such
liability being, by the acceptance hereof and as part of the consideration for
the issue hereof, expressly waived and released.
9. If the Company merges or consolidates with another
corporation or sells or transfers all or substantially all of its assets to
another person and the holders of the Common Stock are entitled to receive
stock, securities or property in respect of or in exchange for Common Stock,
then as a condition of such merger, consolidation, sale or transfer, the Company
and any such successor, purchaser or transferee agree that the Debenture may
thereafter be converted on the terms and subject to the conditions set forth
above into the kind and amount of stock, securities or property receivable upon
such merger, consolidation, sale or transfer by a holder of the number of shares
of Common Stock into which this Debenture might have been converted immediately
before such merger, consolidation, sale or transfer, subject to adjustments
which shall be as nearly equivalent as may be practicable. In the event of any
proposed merger, consolidation or sale or transfer of all or substantially all
of the assets of the Company (a "Sale"), the Holder hereof shall have the right
to convert by delivering a Notice of Conversion to the Company and the Escrow
Agent within fifteen (15) calendar days of receipt of notice of such Sale from
the Company. In the event the Holder hereof shall elect not to convert, the
Company may prepay all outstanding principal and accrued interest on this
Debenture as provided in Section 5, less all amounts required by law to be
deducted, upon which tender of payment following such notice, the right of
conversion shall terminate.
10. The Holder of the Debenture, by acceptance hereof, agrees
that this Debenture is being acquired for investment and that such Holder will
not offer, sell or otherwise dispose of this Debenture or the Shares of Common
Stock issuable upon conversion thereof except under circumstances which will not
result in a violation of the Act or any applicable state Blue Sky or foreign
laws or similar laws relating to the sale of securities.
11. This Debenture shall be governed by and construed in
accordance with the laws of the State of New York. Each of the parties consents
to the jurisdiction of the federal courts whose districts encompass any part of
the City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions.
3
<PAGE> 4
12. The following shall constitute an "Event of Default":
a. The Company shall default in the payment of
principal or interest on this Debenture and
same shall continue for a period of three
(3) days; or
b. Any of the representations or warranties
made by the Company herein, in the Purchase
Agreement, the Registration Rights
Agreement, or in any agreement, certificate
or financial or other written statements
heretofore or hereafter furnished by the
Company in connection with the execution and
delivery of this Debenture or the Purchase
Agreement shall be false or misleading in
any material respect at the time made; or
c. The Company fails to issue sufficient shares
of Common Stock to permit the conversion of
the remaining principal amount of this
Debenture, or to transfer or to cause its
Transfer Agent to transfer any certificate
for shares of Common Stock issued to the
Holder upon conversion of this Debenture as
and when required by this Debenture or the
Registration Rights Agreement, and such
transfer is otherwise lawful, or fails to
remove any restrictive legend or to cause
its Transfer Agent to transfer any
certificate or any shares of Common Stock
issued to the Holder upon conversion of this
Debenture as and when required by this
Debenture, the Purchase Agreement or the
Registration Rights Agreement and such
legend removal is otherwise lawful, and any
such failure shall continue uncured for five
(5) business days; or
d. The Company shall fail to perform or
observe, in any material respect, any other
covenant, term, provision, condition,
agreement or obligation of the Company under
the Purchase Agreement, the Registration
Rights Agreement or this Debenture and such
failure shall continue uncured for a period
of thirty (30) days after written notice
from the Holder of such failure; or
e. The Company shall (1) admit in writing its
inability to pay its debts generally as they
mature; (2) make an assignment for the
benefit of creditors or commence proceedings
for its dissolution; or (3) apply for or
consent to the appointment of a trustee,
liquidator or receiver for its or for a
substantial part of its property or
business; or
f. A trustee, liquidator or receiver shall be
appointed for the Company or for a
substantial part of its property or business
without its consent and shall not be
discharged within sixty (60) days after such
appointment; or
g. Any governmental agency or any court of
competent jurisdiction at the instance of
any governmental agency shall assume custody
or control of the whole or any substantial
portion of the properties or assets of the
Company and shall not be dismissed within
sixty (60) days thereafter; or
4
<PAGE> 5
h. Any money judgment, writ or warrant of
attachment, or similar process in excess of
One Hundred Thousand ($100,000) Dollars in
the aggregate shall be entered or filed
against the Company or any of its properties
or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period
of sixty (60) days or in any event later
than five (5) days prior to the date of any
proposed sale thereunder, or
i. Bankruptcy, reorganization, insolvency or
liquidation proceedings or other proceedings
for relief under any bankruptcy law or any
law for the relief of debtors shall be
instituted by or against the Company and, if
instituted against the Company, shall not be
dismissed within sixty (60) days after such
institution or the Company shall by any
action or answer approve of, consent to, or
acquiesce in any such proceedings or admit
the material allegations of, or default in
answering a petition filed in any such
proceeding; or
j. The Company shall have its Common Stock
suspended or delisted from trading on the
OTC Bulletin Board or an exchange or the
Nasdaq market for in excess of two trading
days;
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holder's sole discretion, the Holder may consider this
Debenture immediately due and payable, without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived, anything herein
contained to the contrary notwithstanding, and the Holder may immediately
enforce any and all of the Holder's rights and remedies provided herein or any
other rights or remedies afforded by law.
13. Nothing contained in this Debenture shall be construed as
conferring upon the Holder the right to vote or to receive dividends or to
consent or receive notice as a shareholder in respect of any meeting of
shareholders or any rights whatsoever as a shareholder of the Company, unless
and to the extent converted in accordance with the terms hereof.
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed by an officer thereunto duly authorized.
Dated: March ____, 1999
TELESERVICES INTERNATIONAL GROUP INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Attest:
- - ---------------------------
5
<PAGE> 6
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert
$___________________ of the Principal amount of the above Debenture No. ____
into Shares of Common Stock of TELESERVICES INTERNATIONAL GROUP INC. (the
"Company") according to the conditions hereof, as of the date written below, and
elects to receive accrued interest in the amount of $__________ in the form of
_______shares of Common Stock or _____cash.
Date of Conversion*
-----------------------------------------------------------
Applicable Conversion Price
----------------------------------------------------
Signature
---------------------------------------------------------------------
[Name]
Address:
-----------------------------------------------------------------------
* This original Notice of Conversion must be received by the Company by
the third business date following the Date of Conversion, and, if
such conversion represents the remaining principal balance of the
Debenture, the original Debenture.
6
<PAGE> 1
EXHIBIT 4.5
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of March 1, 1999,
between the investors signatory hereto (each a "Holder"), and TeleServices
International Group Inc., a corporation incorporated under the laws of the State
of Florida (the "Company").
WHEREAS, simultaneously with the execution and delivery of
this Agreement, each Holder is purchasing from the Company, pursuant to a
Debenture Purchase Agreement dated the date hereof (the "Purchase Agreement"),
Convertible Debentures (terms not defined herein shall have the meanings
ascribed to them in the Purchase Agreement); and
WHEREAS, the Company desires to grant to the Holders the
registration rights set forth herein with respect to the shares of Common Stock
issuable upon conversion of the Convertible Debentures (hereinafter referred to
as the "Stock" or "Securities" of the Company).
NOW, THEREFORE, the parties hereto mutually agree as follows:
Section 1. Registrable Securities. As used herein the term
"Registrable Security" means the Securities until (i) the Registration Statement
has been declared effective by the Commission, and all Securities have been
disposed of pursuant to the Registration Statement, (ii) all Securities and
Additional Securities have been sold under circumstances under which all of the
applicable conditions of Rule 144 (or any similar provision then in force) under
the Securities Act ("Rule 144") are met, (iii) all Securities have been
otherwise transferred to holders who may trade such Securities without
restriction under the Securities Act, and the Company has delivered a new
certificate or other evidence of ownership for such Securities not bearing a
restrictive legend or (iv) such time as, in the opinion of counsel to the
Company, all Securities may be sold without any time, volume or manner
limitations pursuant to Rule 144(k) (or any similar provision then in effect)
under the Securities Act. The term "Registrable Securities" means any and/or all
of the securities falling within the foregoing definition of a "Registrable
Security." In the event of any merger, reorganization, consolidation,
recapitalization or other change in corporate structure affecting the Common
Stock, such adjustment shall be deemed to be made in the definition of
"Registrable Security" as is appropriate in order to prevent any dilution or
enlargement of the rights granted pursuant to this Agreement.
Section 2. Restrictions on Transfer. The Holder acknowledges
and understands that prior to the registration of the Securities as provided
herein, the Securities are "restricted securities" as defined in Rule 144
promulgated under the Act. The Holder understands that no disposition or
transfer of the Securities may be made by Holder in the absence of (i) an
opinion of counsel to the Holder that such transfer may be made without
registration under the Securities Act or (ii) such registration.
With a view to making available to the Holder the
benefits of Rule 144 under the Securities Act or any other similar rule or
regulation of the Commission that may at any time permit the Holder to sell
securities of the Company to the public without registration ("Rule 144"), the
Company agrees to:
(a) comply with the provisions of paragraph (c)(1) of
Rule 144; and
1
<PAGE> 2
(b) file with the Commission in a timely manner all
reports and other documents required to be filed by the Company pursuant to
Section 13 or 15(d) under the Exchange Act; and, if at any time it is not
required to file such reports but in the past had been required to or did file
such reports, it will, upon the request of any Holder, make available other
information as required by, and so long as necessary to permit sales of, its
Registrable Securities pursuant to Rule 144.
Section 3. Registration Rights With Respect to the Securities.
(a) The Company agrees that it will prepare and file
with the Securities and Exchange Commission ("Commission"), no later than April
15, 1999, a registration statement under the Securities Act (the "Registration
Statement"), at the sole expense of the Company (except as provided in Section
3(c) hereof), in respect of all holders of Registrable Securities, so as to
permit a public offering and resale of the Registrable Securities under the Act.
The Company shall use its best efforts to cause the
Registration Statement to become effective within ninety (90) days from such
filing date, or, if earlier, within five (5) days of SEC clearance to request
acceleration of effectiveness. The number of shares designated in the
Registration Statement to be registered shall include the number of shares of
Common Stock which would be issued upon conversion of the Convertible Debentures
assuming a Market Price of $0.10 per share of Common Stock, and shall include
appropriate language regarding reliance upon Rule 416 to the extent permitted by
the Commission. The Company will notify Holder of the effectiveness of the
Registration Statement within one Business Day of such event.
(b) The Company will maintain the Registration
Statement or post-effective amendment filed under this Section 3 hereof
effective under the Securities Act until the earlier of (i) the date that none
of the Convertible Debentures or the Registrable Securities are or may become
issued and outstanding, (ii) the date that all of the Registrable Securities
have been sold pursuant to the Registration Statement, (iii) the date the
holders thereof receive an opinion of counsel to the Company, which counsel
shall be reasonably acceptable to the Holder, that the Registrable Securities
may be sold under the provisions of Rule 144 without limitation as to volume,
(iv) all Registrable Securities have been otherwise transferred to Holders who
may trade such shares without restriction under the Securities Act, and the
Company has delivered a new certificate or other evidence of ownership for such
securities not bearing a restrictive legend, or (v) all Registrable Securities
may be sold without any time, volume or manner limitations pursuant to Rule
144(k) or any similar provision then in effect under the Securities Act in the
opinion of counsel to the Company, which counsel shall be reasonably acceptable
to the Holder (the "Effectiveness Period").
(c) All fees, disbursements and out-of-pocket
expenses and costs incurred by the Company in connection with the preparation
and filing of the Registration Statement under subparagraph 3(a) and in
complying with applicable securities and Blue Sky laws (including, without
limitation, all attorneys' fees of the Company) shall be borne by the Company.
The Holder shall bear the cost of underwriting and/or brokerage discounts, fees
and commissions, if any, applicable to the Registrable Securities being
registered and the fees and expenses of its counsel. The Holder and its counsel,
if any, shall have a reasonable period, not to exceed three (3) Business Days,
to review the proposed Registration Statement or any amendment thereto, prior to
filing with the Commission, and the Company shall provide each Holder with
copies of any comment letters received from the Commission with respect thereto
within two (2) Business Days of receipt thereof. The Company shall make
reasonably available for inspection by Holder, any underwriter participating in
any disposition pursuant to the Registration Statement, and any attorney,
accountant or other agent retained by such Holder or any such underwriter all
relevant financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries, and cause the Company's
officers, directors and employees to supply all information reasonably requested
by such
2
<PAGE> 3
Holder or any such underwriter, attorney, accountant or agent in connection with
the Registration Statement, in each case, as is customary for similar due
diligence examinations; provided, however, that all records, information and
documents that are designated in writing by the Company, in good faith, as
confidential, proprietary or containing any material non-public information
shall be kept confidential by such Holder and any such underwriter, attorney,
accountant or agent (pursuant to an appropriate confidentiality agreement in the
case of any such Holder or agent), unless such disclosure is made pursuant to
judicial process in a court proceeding (after first giving the Company an
opportunity promptly to seek a protective order or otherwise limit the scope of
the information sought to be disclosed) or is required by law, or such records,
information or documents become available to the public generally or through a
third party not in violation of an accompanying obligation of confidentiality;
and provided further that, if the foregoing inspection and information gathering
would otherwise disrupt the Company's conduct of its business, such inspection
and information gathering shall, to the maximum extent possible, be coordinated
on behalf of the Holder and the other parties entitled thereto by one firm of
counsel designed by and on behalf of the majority in interest of Holder and
other parties. The Company shall qualify any of the securities for sale in such
states as such Holder reasonably designates and shall furnish indemnification in
the manner provided in Section 6 hereof. However, the Company shall not be
required to qualify in any state which will require an escrow or other
restriction relating to the Company and/or the sellers, or which will require
the Company to qualify to do business in such state or require the Company to
file therein any general consent to service of process. The Company at its
expense will supply the Holder with copies of the Registration Statement and the
prospectus included therein and other related documents in such quantities as
may be reasonably requested by the Holder.
(d) The Company shall not be required by this Section
3 to include a Holder's Securities in any Registration Statement which is to be
filed if, in the opinion of counsel for both the Holder and the Company (or,
should they not agree, in the opinion of another counsel experienced in
securities law matters acceptable to counsel for the Holder and the Company) the
proposed offering or other transfer as to which such registration is requested
is exempt from applicable federal and state securities laws and would result in
all purchasers or transferees obtaining securities which are not "restricted
securities", as defined in Rule 144 under the Securities Act.
(e) In the event that (i) the Registration Statement
to be filed by the Company pursuant to Section 3(a) above is not filed with the
Commission on or before April 15, 1999, (ii) the Registration Statement is not
declared effective by the Commission within ninety (90) days from the filing
date, or (iii) the Registration Statement is not maintained as effective by the
Company for the period set forth in Section 3(b) above (each a "Registration
Default") then the Company will provide Holder (pro rated on a daily basis), as
liquidated damages for such failure and not as a penalty, at the election of the
Company either (A) two and one-half percent (2.5%) of the remaining principal
balance of any Convertible Debenture plus the aggregate market value of shares
of Common Stock issued upon conversion of any Convertible Debenture and still
held by the Investor, for every month or portion thereof thereafter until the
Registration Statement has been filed, or declared effective in the event of
late effectiveness (in case of clause (ii) above) or in the case of lapsed
effectiveness (in the case of clause (iii) above) (regardless of whether one or
more such Registration Defaults are then in existence) until the Registration
Statement has been declared effective; or (B) an adjustment to the Conversion
Price of all unconverted Convertible Debentures by decreasing the percentage of
the Market Price by two and one-half percent (2.5%) for each month or portion
thereof thereafter until such Registration Default is cured. Such payment of the
liquidated damages shall be made to the Holder in cash (if the cash option is
elected by the Company), within five (5) calendar days of demand, provided,
however, that the payment of such liquidated damages shall not relieve the
Company from its obligations to register the Registrable Securities pursuant to
this Section. The market value of the Common Stock for this purpose shall be the
closing price (or last trade, if so reported) on the Principal Market for each
day during such Registration Default.
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<PAGE> 4
If the Company does not remit the damages to the
Holder as set forth above, the Company will pay the Holder reasonable costs of
collection, including attorneys fees, in addition to the liquidated damages. The
registration of the Registrable Securities pursuant to this provision shall not
affect or limit Holder's other rights or remedies as set forth in this
Agreement.
(f) No provision contained herein shall preclude the
Company from selling securities pursuant to any Registration Statement in which
it is required to include Registrable Securities pursuant to this Section 3.
(g) If at any time or from time to time after the
effective date of the Registration Statement, the Company notifies the Holder in
writing of the existence of a Potential Material Event (as defined in Section
3(h) below), the Holder shall not offer or sell any Registrable Securities or
engage in any other transaction involving or relating to Registrable Securities,
from the time of the giving of notice with respect to a Potential Material Event
until such Holder receives written notice from the Company that such Potential
Material Event either has been disclosed to the public or no longer constitutes
a Potential Material Event; provided, however, that the Company may not so
suspend the right to such holders of Registrable Securities for more than twenty
(20) days in the aggregate during any twelve month period, during the periods
the Registration Statement is required to be in effect. If a Potential Material
Event shall occur prior to the date the Registration Statement is filed, then
the Company's obligation to file the Registration Statement shall be delayed
without penalty for not more than twenty (20) days. The Company must give Holder
notice in writing at least two (2) business days prior to the first day of the
blackout period.
(h) "Potential Material Event" means any of the
following: (a) the possession by the Company of material information not ripe
for disclosure in a registration statement, as determined in good faith by the
Chief Executive Officer or the Board of Directors of the Company that disclosure
of such information in the Registration Statement would be detrimental to the
business and affairs of the Company; or (b) any material engagement or activity
by the Company which would, in the good faith determination of the Chief
Executive Officer or the Board of Directors of the Company, be adversely
affected by disclosure in a registration statement at such time, which
determination shall be accompanied by a good faith determination by the Chief
Executive Officer or the Board of Directors of the Company that the Registration
Statement would be materially misleading absent the inclusion of such
information.
Section 4. Cooperation with Company. Holder will cooperate
with the Company in all respects in connection with this Agreement, including
timely supplying all information reasonably requested by the Company (which
shall include all information regarding the Holder and proposed manner of sale
of the Registrable Securities required to be disclosed in the Registration
Statement) and executing and returning all documents reasonably requested in
connection with the registration and sale of the Registrable Securities and
entering into and performing its obligations under any underwriting agreement,
if the offering is an underwritten offering, in usual and customary form, with
the managing underwriter or underwriters of such underwritten offering. Nothing
in this Agreement shall obligate the Holder to consent to be named as an
underwriter in the Registration Statement. The obligation of the Company to
register the Registrable Securities shall be absolute and unconditional as to
those Registrable Securities which the Commission will permit to be registered
without naming the Holder as an underwriter.
Section 5. Registration Procedures. If and whenever the
Company is required by any of the provisions of this Agreement to effect the
registration of any of the Registrable Securities under the Act, the Company
shall (except as otherwise provided in this Agreement), as expeditiously as
possible, subject to the Holder's assistance and cooperation as reasonably
required:
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(a) (i) prepare and file with the Commission such
amendments and supplements to the Registration Statement and the prospectus used
in connection therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Act with respect to the sale
or other disposition of all securities covered by such registration statement
whenever the Holder of such Registrable Securities shall desire to sell or
otherwise dispose of the same (including prospectus supplements with respect to
the sales of securities from time to time in connection with a registration
statement pursuant to Rule 415 promulgated under the Act) and (ii) take all
lawful action such that each of (A) the Registration Statement and any amendment
thereto does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, not misleading and (B) the Prospectus
forming part of the Registration Statement, and any amendment or supplement
thereto, does not at any time during the Registration Period include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) (i) prior to the filing with the Commission of
any Registration Statement (including any amendments thereto) and the
distribution or delivery of any prospectus (including any supplements thereto),
provide draft copies thereof to the Holders and reflect in such documents all
such comments as the Holders (and their counsel) reasonably may propose
respecting the Selling Shareholders and Plan of Distribution sections (or
equivalents) and (ii) furnish to each Holder such numbers of copies of a
prospectus including a preliminary prospectus or any amendment or supplement to
any prospectus, as applicable, in conformity with the requirements of the Act,
and such other documents, as such Holder may reasonably request in order to
facilitate the public sale or other disposition of the securities owned by such
Holder;
(c) register and qualify the Registrable Securities
covered by the Registration Statement under such other securities or blue sky
laws of such jurisdictions as the Holder shall reasonably request (subject to
the limitations set forth in Section 3(d) above), and do any and all other acts
and things which may be necessary or advisable to enable each Holder to
consummate the public sale or other disposition in such jurisdiction of the
securities owned by such Holder, except that the Company shall not for any such
purpose be required to qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified or to file therein any general
consent to service of process;
(d) list such Registrable Securities on a national
securities exchange, the NASDAQ National Market or the NASDAQ Small-Cap Market,
if the Common Stock of the Company is then so listed, if the listing of such
Registrable Securities is then permitted under the rules of such exchange or
Nasdaq;
(e) notify each Holder of Registrable Securities
covered by the Registration Statement, at any time when a prospectus relating
thereto covered by the Registration Statement is required to be delivered under
the Act, of the happening of any event of which it has knowledge as a result of
which the prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing, and the Company
shall prepare and file a curative amendment under Section 5(a) as quickly as
commercially possible;
(f) as promptly as practicable after becoming aware
of such event, notify each Holder who holds Registrable Securities being sold
(or, in the event of an underwritten offering, the managing underwriters) of the
issuance by the Commission of any stop order or other suspension of the
effectiveness of the Registration Statement at the earliest possible time and
take all lawful action to effect the withdrawal, recession or removal of such
stop order or other suspension;
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<PAGE> 6
(g) cooperate with the Holders who hold Registrable
Securities being offered to facilitate the timely preparation and delivery of
certificates for the Registrable Securities to be offered pursuant to the
Registration Statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts, as the case may be, as the
Holders reasonably may request and registered in such names as the Holder may
request; and, within three business days after a Registration Statement which
includes Registrable Securities is declared effective by the Commission, deliver
and cause legal counsel selected by the Company to deliver to the transfer agent
for the Registrable Securities (with copies to the Holders whose Registrable
Securities are included in such Registration Statement) an appropriate
instruction and, to the extent necessary, an opinion of such counsel;
(h) take all such other lawful actions reasonably
necessary to expedite and facilitate the disposition by the Holders of their
Registrable Securities in accordance with the intended methods therefor provided
in the prospectus which are customary for issuers to perform under the
circumstances;
(i) in the event of an underwritten offering,
promptly include or incorporate in a Prospectus supplement or post-effective
amendment to the Registration Statement such information as the underwriting
managers reasonably agree should be included therein and to which the Company
does not reasonably object and make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable after it is
notified of the matters to be included or incorporated in such Prospectus
supplement or post-effective amendment; and
(j) maintain a transfer agent and registrar for its
Common Stock.
Section 6. Indemnification.
(a) The Company agrees to indemnify and hold harmless
the Holder and each person, if any, who controls the Holder within the meaning
of the Securities Act ("Distributing Holder") against any losses, claims,
damages or liabilities, joint or several (which shall, for all purposes of this
Agreement, include, but not be limited to, all reasonable costs of defense and
investigation and all reasonable attorneys' fees), to which the Distributing
Holder may become subject, under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement, or any related
preliminary prospectus, final prospectus or amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that the Company will not
be liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration Statement,
preliminary prospectus, final prospectus or amendment or supplement thereto in
reliance upon, and in conformity with, written information furnished to the
Company by the Distributing Holder, specifically for use in the preparation
thereof. This Section 6(a) shall not inure to the benefit of any Distributing
Holder with respect to any person asserting such loss, claim, damage or
liability who purchased the Registrable Securities which are the subject thereof
if the Distributing Holder failed to send or give (in violation of the
Securities Act or the rules and regulations promulgated thereunder) a copy of
the prospectus contained in such Registration Statement to such person at or
prior to the written confirmation to such person of the sale of such Registrable
Securities, where the Distributing Holder was obligated to do so under the
Securities Act or the rules and regulations promulgated thereunder. This
indemnity agreement will be in addition to any liability which the Company may
otherwise have.
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(b) Each Distributing Holder agrees that it will
indemnify and hold harmless the Company, and each officer, director of the
Company or person, if any, who controls the Company within the meaning of the
Securities Act, against any losses, claims, damages or liabilities (which shall,
for all purposes of this Agreement, include, but not be limited to, all
reasonable costs of defense and investigation and all reasonable attorneys'
fees) to which the Company or any such officer, director or controlling person
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, or any related
preliminary prospectus, final prospectus or amendment or supplement thereto, or
arise out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, but in each case only to the extent that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in the Registration Statement, preliminary prospectus, final prospectus or
amendment or supplement thereto in reliance upon, and in conformity with,
written information furnished to the Company by such Distributing Holder,
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which the Distributing Holder may otherwise
have.
(c) Promptly after receipt by an indemnified party
under this Section 6 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 6, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve the indemnifying party from any liability which it may have to any
indemnified party except to the extent of actual prejudice demonstrated by the
indemnifying party. In case any such action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified,
assume the defense thereof, subject to the provisions herein stated and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation, unless the indemnifying
party shall not pursue the action to its final conclusion. The indemnified party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the indemnifying party if the indemnifying party
has assumed the defense of the action with counsel reasonably satisfactory to
the indemnified party; provided that if the indemnified party is the
Distributing Holder, the fees and expenses of such counsel shall be at the
expense of the indemnifying party if (i) the employment of such counsel has been
specifically authorized in writing by the indemnifying party, or (ii) the named
parties to any such action (including any impleaded parties) include both the
Distributing Holder and the indemnifying party and the Distributing Holder shall
have been advised by such counsel that there may be one or more legal defenses
available to the indemnifying party different from or in conflict with any legal
defenses which may be available to the Distributing Holder (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the Distributing Holder, it being understood, however, that the
indemnifying party shall, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable only for the reasonable
fees and expenses of one separate firm of attorneys for the Distributing Holder,
which firm shall be designated in writing by the Distributing Holder). No
settlement of any action against an indemnified party shall be made without the
prior written consent of the indemnified party, which consent shall not be
unreasonably withheld.
Section 7. Contribution. In order to provide for just and
equitable contribution under the Securities Act in any case in which (i) the
indemnified party makes a claim for indemnification pursuant to
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<PAGE> 8
Section 6 hereof but is judicially determined (by the entry of a final judgment
or decree by a court of competent jurisdiction and the expiration of time to
appeal or the denial of the last right of appeal) that such indemnification may
not be enforced in such case notwithstanding the fact that the express
provisions of Section 6 hereof provide for indemnification in such case, or (ii)
contribution under the Securities Act may be required on the part of any
indemnified party, then the Company and the applicable Distributing Holder shall
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (which shall, for all purposes of this Agreement, include, but
not be limited to, all reasonable costs of defense and investigation and all
reasonable attorneys' fees), in either such case (after contribution from
others) on the basis of relative fault as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or the applicable
Distributing Holder on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Distributing Holder agree that it
would not be just and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in this
Section 7. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above in this Section 7 shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
Notwithstanding any other provision of this Section 7, in no event shall any (i)
Holder be required to undertake liability to any person under this Section 7 for
any amounts in excess of the dollar amount of the proceeds to be received by
such Holder from the sale of such Holder's Registrable Securities (after
deducting any fees, discounts and commissions applicable thereto) pursuant to
any Registration Statement under which such Registrable Securities are to be
registered under the Securities Act and (ii) underwriter be required to
undertake liability to any person hereunder for any amounts in excess of the
aggregate discount, commission or other compensation payable to such underwriter
with respect to the Registrable Securities underwritten by it and distributed
pursuant to the Registration Statement.
Section 8. Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by reputable courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to the Company: TeleServices International Group Inc.
100 Second Avenue, Suite 1000
St. Petersburg, Florida 33701
Attention: Robert P. Gordon, Chairman
Telephone: (727) 897-4000
Fax: (727) 896-4206
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with a copy to: Troy A. Young, Esq.
(shall not constitute notice) Futro & Trauernicht LLC
1401 Seventeenth Street
11th Floor
Denver, Colorado 80202
Telephone: (303) 295-3360
Fax: (303) 295-1563
If to the Holder: As set forth in the
Purchase Agreement
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 8 by giving at least ten (10) days' prior written
notice of such changed address or facsimile number to the other party hereto.
Section 9. Assignment. This Agreement is binding upon and
inures to the benefit of the parties hereto and their respective heirs,
successors and permitted assigns. The rights granted the Holder under this
Agreement may be assigned to any purchaser of substantially all of the
Registrable Securities (or the rights thereto) from Holder, as otherwise
permitted by the Purchase Agreement. In the event of a transfer of the rights
granted under this Agreement, the Holder agrees that the Company may require
that the transferee comply with reasonable conditions as determined in the
discretion of the Company.
Section 10. Additional Covenants of the Company. The Company
agrees that at such time as it meets all the requirements for the use of
Securities Act Registration Statement on Form S-3 it shall file all reports and
information required to be filed by it with the Commission in a timely manner
and take all such other action so as to maintain such eligibility for the use of
such form.
Section 11. Counterparts/Facsimile. This Agreement may be
executed in two or more counterparts, each of which shall constitute an
original, but all of which, when together shall constitute but one and the same
instrument, and shall become effective when one or more counterparts have been
signed by each party hereto and delivered to the other party. In lieu of the
original, a facsimile transmission or copy of the original shall be as effective
and enforceable as the original.
Section 12. Remedies. The remedies provided in this Agreement
are cumulative and not exclusive of any remedies provided by law. If any term,
provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their best efforts to find and
employ an alternative means to achieve the same or substantially the same result
as that contemplated by such term, provision, covenant or restriction. It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid, illegal,
void or unenforceable.
Section 13. Conflicting Agreements. The Company shall not
enter into any agreement with respect to its securities that is inconsistent
with the rights granted to the holders of Registrable Securities in this
Agreement or otherwise prevents the Company from complying with all of its
obligations hereunder.
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Section 14. Headings. The headings in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 15. Governing Law, Arbitration. This Agreement shall
be governed by and construed in accordance with the laws of the State of New
York applicable to contracts made in New York by persons domiciled in New York
City and without regard to its principles of conflicts of laws. Any dispute
under this Agreement shall be submitted to arbitration under the American
Arbitration Association (the "AAA") in New York City, New York, and shall be
finally and conclusively determined by the decision of a board of arbitration
consisting of three (3) members (hereinafter referred to as the "Board of
Arbitration") selected as according to the rules governing the AAA. The Board of
Arbitration shall meet on consecutive business days in New York City, New York,
and shall reach and render a decision in writing (concurred in by a majority of
the members of the Board of Arbitration) with respect to the amount, if any,
which the losing party is required to pay to the other party in respect of a
claim filed. In connection with rendering its decisions, the Board of
Arbitration shall adopt and follow the laws of the State of New York. To the
extent practical, decisions of the Board of Arbitration shall be rendered no
more than thirty (30) calendar days following commencement of proceedings with
respect thereto. The Board of Arbitration shall cause its written decision to be
delivered to all parties involved in the dispute. Any decision made by the Board
of Arbitration (either prior to or after the expiration of such thirty (30)
calendar day period) shall be final, binding and conclusive on the parties to
the dispute, and entitled to be enforced to the fullest extent permitted by law
and entered in any court of competent jurisdiction. The non-prevailing party to
any arbitration (as determined by the Board of Arbitration) shall pay the
expenses of the prevailing party, including reasonable attorneys' fees, in
connection with such arbitration.
Section 16. Severability. If any provision of this Agreement
shall for any reason be held invalid or unenforceable, such invalidity or
unenforceablity shall not affect any other provision hereof and this Agreement
shall be construed as if such invalid or unenforceable provision had never been
contained herein.
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Section 17. Capitalized Terms. All capitalized terms not
otherwise defined herein shall have the meaning assigned to them in the Purchase
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, on the day and year first above written.
TELESERVICES INTERNATIONAL GROUP INC.
By:
----------------------------------------
Robert P. Gordon, Chairman
HOLDER:
By:
----------------------------------------
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EXHIBIT 4.6
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made as of March
1, 1999 by and among TELESERVICES INTERNATIONAL GROUP INC., a corporation
incorporated under the laws of the State of Florida (the "Company"), the
Investors signatory hereto (each an "Investor" and together the "Investors"),
and Epstein Becker & Green, P.C., (the "Escrow Agent"). Capitalized terms used
but not defined herein shall have the meanings set forth in the Debenture
Purchase Agreement referred to in the first recital.
W I T N E S S E T H:
WHEREAS, each Investor will be purchasing from the Company
Convertible Debentures (each a "Debenture"), at the purchase price set forth in
the Debenture Purchase Agreement (the "Purchase Agreement") dated the date
hereof between the Investor and the Company, which will be issued as per the
terms contained herein and in the Purchase Agreement; and
WHEREAS, it is intended that the purchase of the securities be
consummated in accordance with the requirements set forth by Section 4(2), 4(6)
and/or Regulation D promulgated under the Securities Act of 1933, as amended;
and
WHEREAS, the Company and each Investor have requested that the
Escrow Agent hold the Purchase Price in escrow until the Escrow Agent has
received the Convertible Debentures and certain other closing documents
specified herein;
NOW, THEREFORE, in consideration of the covenants and mutual
promises contained herein and other good and valuable consideration, the receipt
and legal sufficiency of which are hereby acknowledged and intending to be
legally bound hereby, the parties agree as follows:
ARTICLE 1
TERMS OF THE ESCROW
1.1 The parties hereby agree to establish an escrow account
with the Escrow Agent whereby the Escrow Agent shall hold the funds for the
purchase of the Convertible Debentures at the Closing as contemplated by the
Purchase Agreement, and shall hold the relevant documents.
1.2 Upon Escrow Agent's receipt of the executed Purchase
Agreement and the Purchase Price into its attorney trustee account from the
Investor(s), it shall notify the Company, or the Company's designated attorney
or agent, of the amount of funds it has received into its account. The wire
transfer instructions for the Escrow Agent's attorney trustee account are as
follows:
Epstein Becker & Green, P.C.
Master Escrow Account
Chase Manhattan Bank
1411 Broadway -5th Floor
New York, NY 10018
Account No. 035-1-346036
ABA No. 021000021
Account Representative: Lenny Borneo
<PAGE> 2
1.3 The Company, upon receipt of said notice, shall deliver to
the Escrow Agent the certificates representing the Convertible Debentures to be
issued to each Investor together with:
(i) the original executed Purchase Agreement;
and
(ii) the original executed opinion of, or
reliance letter from, Futro & Trauernicht
LLC, in the form of Exhibit D to the
Purchase Agreement.
In the event that the foregoing items are not in the
Escrow Agent's possession within three (3) Business Days of the Escrow Agent
notifying the Company that the Escrow Agent has custody of the Purchase Price,
then each Investor shall have the right to demand the return of said sum.
1.4 At the Closing, once Escrow Agent has received all of the
foregoing items, it shall immediately wire that amount of funds necessary to
purchase the Convertible Debentures per the written instructions of the Company,
net of 13% of the Purchase Price, which shall be paid as directed by Grady &
Hatch and Co., Inc. and the sum of $2,500 per Investor to the Escrow Agent as
payment in full of the Escrow Agent's fees and expenses hereunder. Once the net
funds (as set forth above) have been sent per the Company's instructions, the
Escrow Agent shall then arrange to have the Convertible Debenture certificates,
a counterpart of the Purchase Agreement and the opinion of counsel delivered as
per instructions from the Investor(s).
ARTICLE 2
MISCELLANEOUS
2.1 No waiver or any breach of any covenant or provision
herein contained shall be deemed a waiver of any preceding or succeeding breach
thereof, or of any other covenant or provision herein contained. No extension of
time for performance of any obligation or act shall be deemed any extension of
the time for performance of any other obligation or act.
2.2 All notices or other communications required or permitted
hereunder shall be in writing, and shall be sent by fax, overnight courier,
registered or certified mail, postage prepaid, return receipt requested, and
shall be deemed received upon receipt thereof, as follows:
(a) TeleServices International Group Inc.
100 Second Avenue, Suite 1000
St. Petersburg, Florida 33701
Attention: Robert P. Gordon, Chairman
Telephone: (727) 897-4000
Facsimile: (727) 896-4206
or to such other person at such other place as the Company shall designate to
the Investor(s) in writing;
(b) if to Escrow Agent, to
Epstein Becker & Green, P.C.
250 Park Avenue
New York, NY 10177
Attn: Joseph A. Smith
Telephone: (212)351-4924
Facsimile: (212) 661-0989
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<PAGE> 3
(c) if to the Investor:
As set forth in the Purchase Agreement
2.3 This Escrow Agreement shall be binding upon and shall
inure to the benefit of the permitted successors and permitted assigns of the
parties hereto.
2.4 This Escrow Agreement is the final expression of, and
contains the entire agreement between, the parties with respect to the subject
matter hereof and supersedes all prior understandings with respect thereto. This
Escrow Agreement may not be modified, changed, supplemented or terminated, nor
may any obligations hereunder be waived, except by written instrument signed by
the parties to be charged or by its agent duly authorized in writing or as
otherwise expressly permitted herein.
2.5 Whenever required by the context of this Escrow Agreement,
the singular shall include the plural and masculine shall include the feminine.
This Escrow Agreement shall not be construed as if it had been prepared by one
of the parties, but rather as if all parties had prepared the same. Unless
otherwise indicated, all references to Articles are to this Escrow Agreement.
2.6 The parties hereto expressly agree that this Escrow
Agreement shall be governed by, interpreted under and construed and enforced in
accordance with the laws of the State of New York. Any action to enforce,
arising out of, or relating in any way to, any provisions of this Escrow
Agreement shall brought through the American Arbitration Association at the
designated locale of New York, New York as is more fully set forth in the
Purchase Agreement.
2.7 The Escrow Agent's duties hereunder may be altered,
amended, modified or revoked only by a writing signed by the Company, each
Investor and the Escrow Agent.
2.8 The Escrow Agent shall be obligated only for the
performance of such duties as are specifically set forth herein and may rely and
shall be protected in relying or refraining from acting on any instrument
reasonably believed by the Escrow Agent to be genuine and to have been signed or
presented by the proper party or parties. The Escrow Agent shall not be
personally liable for any act the Escrow Agent may do or omit to do hereunder as
the Escrow Agent while acting in good faith, and any act done or omitted by the
Escrow Agent pursuant to the advice of the Escrow Agent's attorneys-at-law shall
be conclusive evidence of such good faith.
2.9 The Escrow Agent is hereby expressly authorized to
disregard any and all warnings given by any of the parties hereto or by any
other person or corporation, excepting only orders or process of courts of law
and is hereby expressly authorized to comply with and obey orders, judgments or
decrees of any court. In case the Escrow Agent obeys or complies with any such
order, judgment or decree, the Escrow Agent shall not be liable to any of the
parties hereto or to any other person, firm or corporation by reason of such
decree being subsequently reversed, modified, annulled, set aside, vacated or
found to have been entered without jurisdiction.
2.10 The Escrow Agent shall not be liable in any respect on
account of the identity, authorization or rights of the parties executing or
delivering or purporting to execute or deliver the Purchase Agreement or any
documents or papers deposited or called for thereunder.
2.11 The Escrow Agent shall be entitled to employ such legal
counsel and other experts as the Escrow Agent may deem necessary properly to
advise the Escrow Agent in connection with the Escrow Agent's duties hereunder,
may rely upon the advice of such counsel, and may pay such counsel reasonable
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compensation therefor. THE ESCROW AGENT HAS NOT ACTED AS LEGAL COUNSEL FOR THE
INVESTORS OR THE COMPANY. THE ESCROW AGENT HAS ACTED AS COUNSEL FOR OTHER
PERSONS WHO HAVE PREVIOUSLY PURCHASED CONVERTIBLE DEBENTURES FROM THE COMPANY,
TO WHICH REPRESENTATION THE COMPANY AND THE INVESTORS HEREBY CONSENT.
4.12 The Escrow Agent's responsibilities as escrow agent
hereunder shall terminate if the Escrow Agent shall resign by written notice to
the Company and the Investors. In the event of any such resignation, the
Investor and the Company shall appoint a successor Escrow Agent.
4.13 If the Escrow Agent reasonably requires other or further
instruments in connection with this Escrow Agreement or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such instruments.
4.14 It is understood and agreed that should any dispute arise
with respect to the delivery and/or ownership or right of possession of the
documents or the escrow funds held by the Escrow Agent hereunder, the Escrow
Agent is authorized and directed in the Escrow Agent's sole discretion (1) to
retain in the Escrow Agent's possession without liability to anyone all or any
part of said documents or the escrow funds until such disputes shall have been
settled either by mutual written agreement of the parties concerned by a final
order, decree or judgment or a court of competent jurisdiction after the time
for appeal has expired and no appeal has been perfected, but the Escrow Agent
shall be under no duty whatsoever to institute or defend any such proceedings or
(2) to deliver the escrow funds and any other property and documents held by the
Escrow Agent hereunder to a state or federal court having competent subject
matter jurisdiction and located in the State and City of New York in accordance
with the applicable procedure therefor.
4
<PAGE> 5
4.15 The Company and the Investors agree jointly and severally
to indemnify and hold harmless the Escrow Agent and its partners, employees,
agents and representatives from any and all claims, liabilities, costs or
expenses in any way arising from or relating to the duties or performance of the
Escrow Agent hereunder or the transactions contemplated hereby or by the
Purchase Agreement other than any such claim, liability, cost or expense to the
extent the same shall have been determined by final, unappealable judgment of a
court of competent jurisdiction to have resulted from the gross negligence or
willful misconduct of the Escrow Agent.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of March 1, 1999.
TELESERVICES INTERNATIONAL GROUP INC.
By:
-----------------------------------------
INVESTOR:
By:
-----------------------------------------
Authorized Signatory
ESCROW AGENT:
EPSTEIN BECKER & GREEN, P.C.
By:
-----------------------------------------
5
<PAGE> 1
EXHIBIT 4.7
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE
BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE, OR UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THE SECURITIES ARE RESTRICTED AND MAY NOT BE
OFFERED, RESOLD, PLEDGED OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE SECURITIES
ACT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS.
TELESERVICES INTERNATIONAL GROUP INC.
COMMON STOCK PURCHASE WARRANT
1. Issuance. In consideration of good and valuable consideration, the
receipt of which is hereby acknowledged by TeleServices International Group
Inc., a Florida corporation (the "Company"), AMRO International, S.A., a Panama
corporation, or registered assigns (the "Holder") is hereby granted the right to
purchase at any time commencing on the date hereof and until 5:00 P.M., New York
City time, on November 15, 2003 (the "Expiration Date"), Two Hundred Fifty
Thousand (250,000) fully paid and nonassessable shares of the Company's Common
Stock, $.0001 par value per share (the "Common Stock") at an initial exercise
price per share of $0.16 (the "Exercise Price"), subject to further adjustment
as set forth in Section 6 hereof.
2. Exercise of Warrants. This Warrant is exercisable in whole or in
part at the Exercise Price per share of Common Stock payable hereunder, payable
in cash or by certified or official bank check, or by "cashless exercise", by
means of tendering this Warrant Certificate to the Company to receive a number
of shares of Common Stock equal in Market Value to the difference between the
Market Value of the shares of Common Stock issuable upon exercise of this
Warrant and the total cash exercise price hereof. Upon surrender of this Warrant
Certificate with the annexed Notice of Exercise Form duly executed, together
with payment of the Exercise Price for the shares of Common Stock purchased, the
Holder shall be entitled to receive a certificate or certificates for the shares
of Common Stock so purchased. For the purposes of this Section 2, "Market Value"
shall be an amount equal to the average closing bid price of a share of Common
Stock for the five (5) trading days preceding the Company's receipt of the
Notice of Exercise Form duly executed, multiplied by the number of shares of
Common Stock to be issued upon surrender of this Warrant Certificate.
3. Reservation of Shares. The Company hereby agrees that at all times
during the term of this Warrant there shall be reserved for issuance upon
exercise of this Warrant such number of shares of its Common Stock as shall be
required for issuance upon exercise of this Warrant (the "Warrant Shares"). The
Company shall use its best efforts and all due diligence to increase the number
of shares of Common Stock so reserved to cure any deficiencies, and, if
necessary, to obtain approval of its stockholders therefor, including
authorization of such additional number of shares of Common Stock as may be
required in excess of the number so reserved.
<PAGE> 2
4. Mutilation or Loss of Warrant. Upon receipt by the Company of
evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) receipt of
reasonably satisfactory indemnification (which shall not include the posting of
any bond by the Holder), and (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will execute and deliver a new Warrant
of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant
shall thereupon become void.
5. Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in this Warrant and
are not enforceable against the Company except to the extent set forth herein.
6. Protection Against Dilution.
6.1 Adjustment Mechanism. If an adjustment of the Exercise
Price is required pursuant to this Section 6, the Holder shall be entitled to
purchase such number of additional shares of Common Stock as will cause (i) the
total number of shares of Common Stock the Holder is entitled to purchase
pursuant to this Warrant, multiplied by (ii) the adjusted purchase price per
share, to equal (iii) the dollar amount of the total number of shares of Common
Stock the Holder is entitled to purchase before adjustment multiplied by the
total purchase price before adjustment.
6.2 Capital Adjustments. In case of any stock split or reverse
stock split, stock dividend, reclassification of the Common Stock,
recapitalization, merger or consolidation, or like capital adjustment affecting
the Common Stock of the Company, the provisions of this Section 6 shall be
applied as if such capital adjustment event had occurred immediately prior to
the date of this Warrant and the original purchase price had been fairly
allocated to the stock resulting from such capital adjustment; and in other
respects the provisions of this Section shall be applied in a fair, equitable
and reasonable manner so as to give effect, as nearly as my be, to the purposes
hereof. A rights offering to stockholders shall be deemed a stock dividend to
the extent of the bargain purchase element of the rights.
6.3 Merger, Sale of Assets, Etc. If at any time while this
Warrant, or any portion hereof, is outstanding and unexpired there shall be (i)
a reorganization (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), (ii) a merger or
consolidation of the Company with or into another corporation or other entity
including a merger or consolidation in which the Company is the surviving entity
but the shares of the Company's capital stock outstanding immediately prior to
the merger are converted by virtue of the merger into other property, whether in
the form of securities, cash, or otherwise, or (iii) a sale or transfer of the
Company's properties and assets as, or substantially as, an entirety to any
other person, then as a part of such reorganization, merger, consolidation, sale
or transfer lawful provision shall be made so that the holder of this Warrant
shall thereafter be entitled to receive upon exercise of this Warrant, during
the period specified herein and payment of the Exercise Price then in effect,
the number of shares of stock or other securities or property resulting from
such reorganization, merger, consolidation, sale or transfer that a holder of
the shares deliverable upon exercise of this Warrant would have been entitled to
receive in such
2
<PAGE> 3
reorganization, consolidation, merger, sale or transfer if this Warrant had been
exercised immediately before such reorganization, merger, consolidation, sale or
transfer, all subject to further adjustment as provided in this Section 6. The
foregoing provisions of this Section 6 shall similarly apply to successive
reorganization, consolidations, mergers, sales and transfers and to the stock or
securities of any other corporation or other entity that are at the time
receivable upon the exercise of this Warrant. If the consideration deliverable
to the Holder hereof in connection with any such transactions is in a form other
than cash or marketable securities, then the value of such consideration shall
be determined in good faith by the Company's Board of Directors. In all events,
appropriate adjustment (as determined in good faith by the Company's Board of
Directors) shall be made in the application of the provisions of this Warrant
with respect to the rights and interests of the Holder after the transaction, to
the end that the provisions of this Warrant shall be applicable after that
event, as near as reasonably may be, in relation to any shares or other property
deliverable after that event upon exercise of this Warrant.
6.4 Issuance of Securities Below Exercise Price. In case the
Company shall, while this Warrant remains unexercised, in whole or in part, and
unexpired, issue (other than by stock dividend, stock split or reverse split or
pursuant to any other warrant held by the Holder or pursuant to employee stock
options issued under a plan which has been approved by the Company's
stockholders) or sell shares of its Common Stock (herein "Additional Shares")
for a consideration per share (before deduction of expenses and commissions or
underwriting discounts in connection therewith) less than the Exercise Price per
share hereunder, then, from and after the date of such issuance, the Exercise
Price shall be reduced to an amount equal to the purchase price of such
Additional Shares.
7. Transfer to Comply with the Securities Act; Registration Rights.
(a) This Warrant has not been registered under the Securities Act and
has been issued to the holder for investment purposes and not with a view to the
distribution of either the Warrant or the Warrant Shares. Neither this Warrant
nor any of the Warrant Shares or any other security issued or issuable upon
exercise of this Warrant may be sold, transferred, pledged or hypothecated in
the absence of an effective registration statement under the Act relating to
such security or an opinion of counsel reasonably satisfactory to the Company
that registration is not required under the Securities Act. Each certificate for
the Warrant, the Warrant Shares and any other security issued or issuable upon
exercise of this Warrant shall contain a legend on the face thereof, in form and
substance satisfactory to counsel for the Company, setting forth the
restrictions on transfer contained in this Section.
(b) The Company agrees to file a registration statement, which shall
include the Warrant Shares (the "Registration Statement"), pursuant to the terms
of the Registration Rights Agreement between the Company and the Holder dated as
of November 10, 1998.
8. Notices. Any notice required or permitted hereunder shall be given
in writing and shall be deemed effectively given upon, (a) by personal delivery
or fax, or (ii) one business day after deposit with a nationally recognized
overnight delivery service such as Federal Express, with postage and fees
prepaid, addressed to each of the other parties thereunto
3
<PAGE> 4
entitled at the following addresses, or at such other addresses as a party may
designate by written notice to each of the other parties hereto.
COMPANY: TELESERVICES INTERNATIONAL GROUP INC.
100 Second Avenue, Suite 1000
St. Petersburg, FL 33701
Attn.: Robert P. Gordon, Chairman
Telecopier No.: (727) 896-4206
HOLDER: AMRO International, S.A.
c/o Grady & Hatch and Co., Inc.
20 Exchange Place, 49th Floor
New York, New York 10005
Attn: Thomas Badian
Telecopier No.: (212) 214-0440
9. Supplements and Amendments; Whole Agreement. This Warrant may be
amended or supplemented only by an instrument in writing signed by the parties
hereto. This Warrant, a letter agreement dated November 10, 1998 and the
Debenture Purchase Agreement (including Exhibits thereto) between the Company
and the Holder dated as of November 10, 1998, contain the full understanding of
the parties hereto with respect to the subject matter hereof and thereof and
there are no representations, warranties, agreements or understanding of the
parties hereto with respect to the subject matter hereof and thereof other than
expressly contained herein and therein.
10. Governing Law. This Warrant shall be deemed to be a contract under
the laws of the State of New York and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State.
11. Counterparts. This Warrant may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
12. Descriptive Headings. Descriptive headings of the several Sections
of this Warrant are inserted for convenience only and shall not control or
affect the meaning or construction of any of the provisions hereof. Capitalized
terms used herein which are not otherwise defined shall have the meanings
ascribed to such terms as in the Securities Purchase Agreement.
4
<PAGE> 5
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed by an officer thereunto duly authorized.
Dated: November ___________, 1998
TELESERVICES INTERNATIONAL GROUP INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Attest:
- - -------------------------
5
<PAGE> 6
NOTICE OF EXERCISE
___________________, 199_
TeleServices International Group Inc.
Dear Sir or Madam:
The undersigned, (the "Investor"), does hereby give notice
that it wishes to purchase __________ shares of Common Stock of TeleServices
International Group Inc. (the "Company"), pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price in full (which may
include cancellation of Warrants), together with all applicable transfer taxes,
if any. Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name specified
below.
Name:
---------------------------------
Address:
---------------------------------
---------------------------------
INVESTOR:
By:
----------------------------
Medallion Signature Guarantee required if shares to be issued in any name other
than that of warrant holder.
6
<PAGE> 1
EXHIBIT 10.7
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is made and entered into
this 9th day of April, 1998, by and between PAUL W. HENRY an individual whose
principal address is at 56 Lawrence Road, Chestnut Hill, Massachusetts 02167,
(the "Consultant"), and TELESERVICES INTERNATIONAL GROUP INC., a corporation
whose principal place of business is at 100 Second Avenue South, Suite 1000, St.
Petersburg, Florida 33701 (the "Client").
WHEREAS, the Consultant is willing and capable of providing various
consulting services, hereinafter defined, for and on behalf of the Client; and
WHEREAS, the Client desires to retain the Consultant as an independent
consultant and the Consultant desires to be retained in that capacity upon the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises and agreements
hereinafter set forth, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Consulting Services. The Client hereby retains the Consultant as an
independent consultant to the Client and the Consultant hereby accepts and
agrees to such retention. The Consultant shall render to the Client such
services as set forth on Exhibit A, attached hereto and by reference
incorporated herein.
It is acknowledged and agreed by the Client that Consultant is
not rendering legal advice or performing accounting services, nor acting as an
investment advisor or broker-dealer within the meaning of applicable state and
federal securities laws. It is further acknowledged and agreed by the Client
that the consulting advisory services to be provided to the Client hereunder
shall not be rendered in connection with the offer and sale of securities in a
capital raising transaction.
2. Time, Place and Manner of Performance. The Consultant shall be
available for advice and counsel to Client and representatives and agents of the
Client at such reasonable and convenient times and places as may be mutually
agreed upon. Except as aforesaid, the time, place and manner of performance of
the services hereunder, including the amount of time to be allocated by the
Consultant to any specific service, shall be determined in the sole discretion
of the Consultant.
3. Term of Agreement. The term of this Agreement shall commence on the
date hereof, and shall terminate on May 31, 2000; subject, however, to prior
termination as hereinafter provided.
4. Compensation. In full consideration of the services to be provided
for the Client by the Consultant, as fully set forth in Exhibit A, upon
execution of this Agreement, the Client agrees to compensate Consultant in the
manner set forth on Exhibit B.
5. Expenses. Consultant shall be solely responsible for all expenses
and disbursements anticipated to be made in connection with its performance
under this Agreement, except for those to be paid by Client as set forth on
Exhibit B.
6. Termination. This Agreement may be terminated at any time and for
any reason by either party hereof upon receipt of written notice by the
non-terminating party, and all future rights and obligations of both parties, as
set forth in Exhibits A and B, shall immediately cease.
7. Confidentiality. The Consultant recognizes and acknowledges that it
has and will have access to certain confidential information of the Client and
its affiliates that are valuable, special and unique assets and property of the
Client and such affiliates. The Consultant will not, during or after the term of
this
- - -------------------------------------------------------------------------------
Initials: Consultant____ Client____ Page 1
<PAGE> 2
Agreement, disclose, without the prior written consent or authorization of
the Client, any of such information to any person, except to authorized
representatives of the Consultant or its affiliates, for any reason or purpose
whatsoever. In this regard, the Client agrees that such authorization or consent
to disclosure may be conditioned upon the disclosure being made pursuant to a
secrecy agreement, protective order, provision of statute, rule, regulation or
procedure under which the confidentiality of the information is maintained in
the hands of the person to whom the information is to be disclosed or in
compliance with the terms of a judicial order or administrative process.
8. Conflict of Interest. The Consultant shall be free to perform
services for other persons. The Consultant will notify the Client of
Consultant's performance of consulting services for any other person which could
conflict with Consultant's obligations under this Agreement. Upon receiving such
notice, the Client may terminate this Agreement or consent to the Consultant's
outside consulting activities.
9. Disclaimer of Responsibility for Acts of the Client. The obligations
of Consultant described in this Agreement consist solely of the furnishing of
information and advice to the Client in the form of services. In no event shall
Consultant be required by this Agreement to represent or make management
decisions for the Client. All final decisions with respect to acts and omissions
of the Client or any affiliates and subsidiaries, shall be those of the Client
or its affiliates, and Consultant shall under no circumstances be liable for any
expense incurred or loss suffered by the Client as a consequence of such acts or
omissions.
10. Indemnity by the Client. The Client shall protect, defend,
indemnify and hold Consultant and its assigns and attorneys, accountants,
employees, officers and directors harmless from and against all losses,
liabilities, damages, judgments, claims, counterclaims, demands, actions,
proceedings, costs and expenses (including reasonable attorneys' fees) of every
kind and character resulting from or relating to or arising out of (a) the
inaccuracy, non-fulfillment or breach of any representation, warranty, covenant
or agreement made by the Client herein; or (b) any legal action, including any
counterclaim, to the extent it is based upon alleged facts that, if true, would
constitute a breach of any representation, warranty, covenant or agreement made
by the Client herein; or (c) negligent actions or omissions of the Client or any
employee or agent of the Client, or any reckless or willful misconduct,
occurring during the term hereof with respect to any of the decisions made by
the Client.
11. Notices. Any notices required or permitted to be given under this
Agreement shall be sufficient if in writing and delivered or sent by registered
or certified mail or overnight courier to the principal office of each party.
12. Waiver or Breach. Any waiver by either party of a breach of any
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any subsequent breach by any party.
13. Assignment. This Agreement and the rights and obligations of the
Consultant hereunder shall not be assignable without the written consent of the
Client.
14. Applicable Law. It is the intention of the parties hereto that this
Agreement and the performance hereunder and all suits and special proceedings
hereunder be construed in accordance with and under and pursuant to the laws of
the State of Florida and that in any action, special proceeding or other
proceeding that may be brought arising out of, in connection with or by reason
of this Agreement, shall be brought only in a court of competent jurisdiction
within the county of Pinellas, Florida.
- - -------------------------------------------------------------------------------
Initials: Consultant____ Client____ Page 2
<PAGE> 3
15. Severability. All agreements and covenants contained herein are
severable, and in the event any of them shall be held to be invalid by any
competent court, the Agreement shall be interpreted as if such invalid
agreements or covenants were not contained herein.
16. Entire Agreement. This Agreement constitutes and embodies the
entire understanding and agreement of the parties and supersedes and replaces
all prior understandings, agreements and negotiations between the parties.
17. Waiver and Modification. Any waiver, alteration or modification of
any of the provisions of this Agreement shall be valid only if made in writing
and signed by the parties hereto. Each party hereto, from time to time, may
waive any of its rights hereunder without effecting a waiver with respect to any
subsequent occurrences or transactions hereof.
18. Attorneys' Fees and Costs. In the event of any dispute arising out
of the subject matter of this Agreement, the prevailing party shall recover, in
addition to any damages assessed, its attorneys' fees and court costs incurred
in litigating or otherwise settling or resolving such dispute. In construing
this Agreement, none of the parties hereto shall have any term or provision
construed against such party solely by reason of such party having drafted the
same.
19. Counterparts and Facsimile Signatures. This Agreement may be
executed simultaneously in two or more counterparts, each of which shall be
deemed an original, but all of which taken together shall constitute one and the
same instrument. Execution and delivery of this Agreement by exchange of
facsimile copies bearing the facsimile signature of a party hereto shall
constitute a valid and binding execution and delivery of this Agreement by such
party. Such facsimile copies shall constitute enforceable original documents.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the day and year first above written.
CONSULTANT: CLIENT:
PAUL W. HENRY TELESERVICES INTERNATIONAL GROUP INC.
By:
- - ----------------------------- --------------------------------------
Robert P. Gordon, Chairman
- - -------------------------------------------------------------------------------
Page 3
<PAGE> 4
EXHIBIT A
CONSULTANT AGREES TO PROVIDE THE FOLLOWING SERVICES TO CLIENT:
Consultant shall make himself available to consult with Client and
representatives and agents of Client, as requested by Client, for and in
connection with the duties of the offices of Secretary and Treasurer, as
described in the Bylaws of Client.
CONSULTANT: CLIENT:
PAUL W. HENRY TELESERVICES INTERNATIONAL GROUP INC.
By:
- - ------------------------------- ------------------------------------
Robert P. Gordon, Chairman
- - ------------------------------------------------------------------------------
Exhibit A
<PAGE> 5
EXHIBIT B
UPON EXECUTION HEREOF, FOR ALL SERVICES RENDERED BY CONSULTANT UNDER THIS
AGREEMENT, THE CLIENT AGREES TO COMPENSATE CONSULTANT AS FOLLOWS:
Client shall pay to Consultant a consulting fee of $5,000 per month,
such fee to be increased to $15,000 per month as of the later of (a) June 30,
1998 or (b) the end of the period when Consultant is paid $10,000 or more per
month, exclusive of severance pay, for his services as a consultant to the
estate of Phoenix Information Systems Corp.
Client shall grant to Consultant options to acquire one million
(1,000,000) shares of common stock of Client, exercisable for a period of five
(5) years at an exercise price of $.30 per share. The options shall vest and
become exercisable at the rate of 250,000 upon execution of this Agreement, and
at the rate of 30,000 every month thereafter, so long as Client continues to
perform services for Client as a consultant or an employee.
Client shall reimburse Consultant for reasonable and necessary
expenses, pre-approved by the Client, incurred while performing services for
Client, upon presentation by Consultant of an itemized account of such
authorized expenditures. However, Consultant shall be responsible for paying his
routine travel expenses and lodging between Massachusetts and St. Petersburg,
Florida.
If, during the term of this Agreement, Client requests Consultant to
travel to Florida on a date or dates that are not during Consultant's routine
travel schedule to Florida, (e.g., for a special event, board meeting, etc.),
Client shall reimburse Consultant for reasonable and pre-approved travel and
rent or lodging, but not food or meals, incurred by Consultant for such
"non-routine" travel to Florida.
CONSULTANT: CLIENT:
PAUL W. HENRY TELESERVICES INTERNATIONAL GROUP INC.
By:
- - --------------------------------- ------------------------------------
Robert P. Gordon, Chairman
- - -------------------------------------------------------------------------------
Exhibit B
<PAGE> 1
EXHIBIT 10.8
ADDENDUM
TO EXECUTIVE EMPLOYMENT AGREEMENT
THIS ADDENDUM, effective the 2nd day of December, 1998, is made
pursuant to Article V, Paragraph C, of the Executive Employment Agreement dated
August 24, between JAMES H. GUILD, (the "Executive"), and TELESERVICES
INTERNATIONAL GROUP INC., (the "Company").
Contemporaneously with the execution of this Addendum, the Company
shall grant the Executive options as follows:
1. Options to acquire 400,000 shares of the Company's restricted common
stock at an exercise price per share equal to $.30. The options shall vest (and
shall become exercisable at the time they vest), subject to continued
employment, on a monthly, pro-rated basis over a period of three years,
commencing January 1, 1999, and shall expire on August 31, 2003. The shares of
common stock underlying the options shall be included in the next Form S-8 (or
equivalent) registration statement filed by the Company with the Securities and
Exchange Commission ("SEC") or, if available and in the discretion of the
Company, may be included under a currently effective Form S-8 registration
statement filed with the SEC for any of the Company's existing employee benefit
plans.
2. Options to acquire 750,000 shares of the Company's restricted common
stock at an exercise price per share equal to $.30. The options shall vest and
become exercisable in accordance with a schedule and/or formula to be
established by mutual agreement which will be based upon objective performance
criteria. In the discretion of the Company, the shares of common stock
underlying the options may be included in a future Form S-8 (or equivalent)
registration statement filed by the Company with the SEC.
The options described above are in addition to those set forth in
Article V, Paragraph A, of the Executive Employment Agreement.
EXECUTIVE
------------------------------------
James H. Guild
TELESERVICES INTERNATIONAL GROUP INC.
By:
---------------------------------
Robert P. Gordon, Chairman
<PAGE> 1
EXHIBIT 10.9 EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") made as of
this 4th day of December 1998 by and between the parties: ROBERT P. GORDON, an
individual residing at 234 - 21st Avenue Northeast, St Petersburg, Florida 33704
(hereinafter referred to as the "Executive"), and TELESERVICES INTERNATIONAL
GROUP INC., a Florida corporation with its principal executive offices at 100
Second Avenue South, Suite 1000, St. Petersburg, FL 33701 (hereinafter referred
to as the "Company").
W I T N E S S E T H
WHEREAS, the Company desires to continue to retain and employ
the Executive for the purpose of securing to the Company the experience, ability
and services of the Executive as an executive officer of the Company in the
position of Chairman; and
WHEREAS, the Executive desires to continue to be retained and
employed by the Company; and
WHEREAS, this Agreement supercedes and replaces the Employment
Agreement dated January 15 ,1997;
NOW, THEREFORE, it is mutually agreed by and between the
parties as follows:
ARTICLE I
EMPLOYMENT
The Company hereby employs the Executive effective December 4,
1998 as Chairman of the Company and each of its subsidiaries, and the Executive
hereby accepts such employment and shall serve on a full-time basis as an
executive officer of the Company, subject to and upon the terms and conditions
set forth in this Agreement.
ARTICLE II
DUTIES
(A) During the term of employment with the Company, and subject to the
direction of its Board of Directors (the "Board of Directors" or the "Board"),
the Executive shall perform duties and functions consistent with his employment
hereunder as Chairman, and as further defined in the Company's Bylaws. Such
responsibilities shall include, but not be limited to, the following: to take a
leadership role in helping the Company to develop its overall strategic plan and
its operating business plan; to assist in efforts to arrange adequate financing
to carry out the Company's business plan; and generally, to help meet the needs
of the Company, its employees and customers.
(B) The Executive agrees to devote his best efforts to the performance
of his duties for the Company; to render his services to any joint venture,
subsidiary or affiliated business of the Company; to participate in establishing
the direction of the Company's business; and to promote the Company's
relationships with its employees, customers and others in the business and
financial communities.
TSIG/ROBERT P. GORDON EMPLOYMENT AGREEMENT PAGE 1 OF 9
<PAGE> 2
In the performance of his duties, Executive shall be provided
by the Company with facilities, equipment and staff appropriate to his position
and necessary and appropriate to the accomplishment of Executive's duties.
(C) At the request of the Company, the Executive shall also serve,
without additional compensation, as Chief Executive Officer and/or as a director
of the Company or one or more of its subsidiaries during the term of this
Agreement, provided that indemnification equivalent to that referred to in
Article IV (D) is provided to Executive in connection with those services.
(D) The Executive represents and warrants to the Company that, to the
best of his knowledge, he is under no obligation or commitment, whether
contractual or otherwise, that is inconsistent with his obligations under this
Agreement. The Executive represents and warrants that he will not knowingly use
or disclose, in connection with his employment by the Company, any trade secrets
or other proprietary information or intellectual property in which the Executive
or any other person has any right, title or interest and that, to the best of
his knowledge, his employment by the Company as contemplated by this Agreement
will not infringe or violate the rights of any other person. The Executive
represents and warrants to the Company that he has returned all property and
confidential information belonging to his most recent prior employer.
ARTICLE III
COMPENSATION
(A) The Company shall pay to the Executive for all services to be
rendered pursuant to the terms of this Agreement a base salary at the rate of
$360,000 per year (unless adjusted by the Board of Directors as described
below), payable in accordance with the Company's normal payroll procedures. The
Board may increase Executive's base salary from time to time in its discretion.
(B) The Company shall issue to the Executive 5,000,000 shares of
restricted common stock of the Company as of the date of this Agreement.
ARTICLE IV
WORKING CONDITIONS AND BENEFITS
(A) The Executive shall be entitled to paid vacations during each year
of his employment with the Company in accordance with Company practice in that
year, but no less than as described on the attached Exhibit A, which is
incorporated in this Agreement as a part hereof by this reference. The Executive
shall also be entitled to leave for illness or temporary disability, which may
be paid or unpaid, in accordance with the policies of the Company in effect at
that time, but no less favorable to Executive than described on Exhibit A.
(B) The Executive is authorized to incur reasonable and necessary
expenses for promoting the business of the Company, including expenses for
entertainment, travel and similar items. The Company shall reimburse the
Executive on a monthly basis for all such expenses, upon presentation by the
Executive of an itemized account of such expenditures.
TSIG/ROBERT P. GORDON EMPLOYMENT AGREEMENT PAGE 2 OF 9
<PAGE> 3
(C) The Executive shall be employed by the Company at its executive
offices in St. Petersburg, Florida, and shall not be required to relocate
outside of the Tampa-St. Petersburg-Clearwater area. The Executive shall travel
on the Company's behalf to the extent reasonably necessary.
(D) The Company shall provide to the Executive, to the full extent
provided for under the laws of the Company's State of Incorporation and the
Company's Bylaws, indemnification for any claim or lawsuit which may be
threatened, asserted or commenced against the Executive by reason of the fact
that he is or was a director, officer, employee or other agent of the Company,
or is or was serving at the request of the Company as a director, officer,
employee or other agent of another corporation, partnership, joint venture,
trust, or other enterprise or employee benefit plan, provided that
indemnification shall not be provided in violation of applicable law. The
indemnification to be provided to Executive shall include coverage of him by
officer and director insurance no less favorable to Executive than the policies
referred to on Exhibit A and mandatory advancement of expenses upon receipt by
the Company only of Executive's written undertaking to repay any such amount
advanced if he is ultimately found not to be entitled to indemnification under
applicable law.
ARTICLE V
OTHER BENEFITS
(A) During the term hereof, the Executive shall be entitled to receive
such of the following other benefits of employment that are or may become
available to other members of the Company's senior executive management: health
and life insurance benefits, pension, profit sharing and income protection or
disability plans, in each instance consistent with his position as President and
no less favorable to Executive than any description thereof on Exhibit A.
(B) Stock options may be granted from time to time in the discretion of
the Board.
ARTICLE VI
TERM
The term of this Agreement shall commence as of December 4, 1998, and
continue until December 31, 2003, unless this Agreement is otherwise terminated
pursuant to Article VII.
ARTICLE VII
TERMINATION
(A) The Executive may voluntarily terminate this Agreement at any time
upon written notice to the Company. The Executive shall provide at least four
weeks advance notice to the Company of his election to voluntarily terminate
this Agreement.
(B) The Company may terminate this Agreement for Cause at any time by
giving the Executive notice thereof specifying with particularity the grounds
for such termination. In such event, this Agreement and the employment
relationship hereunder shall be terminated as of the date of such notice and the
Executive will be entitled to no further payments from the Company. The Company
shall continue, however, to provide Executive with the indemnification referred
to in Article IV (D), but shall not be required to provide such indemnification
for or in connection with
TSIG/ROBERT P. GORDON EMPLOYMENT AGREEMENT PAGE 3 OF 9
<PAGE> 4
any matter in which a cause of action is asserted against the Executive for any
act which constitutes grounds for termination for Cause hereunder. For purposes
hereof, "Cause" shall mean (i) a material violation of the terms of this
Agreement that has not been cured by Executive within 10 days of his receipt of
notice particularly describing each such violation; (ii) a breach of trust,
including dishonesty, acts of moral turpitude, theft, embezzlement and
self-dealing; (iii) the disclosure of confidential information prohibited
hereunder (except disclosure in the good-faith belief that the same is for the
benefit of the Company) which results in material harm to the Company; or (iv)
gross negligence or willful misconduct, either of which results in material harm
to the Company. Notice of termination for Cause shall be forwarded to the
Executive by the Company only upon and after a resolution of the Board
authorizing such notification and shall be effective immediately; provided,
however, that the Executive may be reinstated retroactively, in the discretion
of the Board, in the event that within 10 days the Executive establishes to the
satisfaction of the Board that Cause did not exist.
(C) The Company may terminate this Agreement at any time upon at least
two weeks advance notice to the Executive; such notice shall be forwarded to the
Executive by the Company only upon and after a resolution of the Board
authorizing such notification and shall be deemed a termination without Cause.
In the event that the Company actually or constructively terminates the
employment of the Executive without Cause the Executive shall be entitled to the
following:
(i) Severance pay equal to his base salary (at the
rate in effect at the Executive's termination date) for the
Severance Period, in addition to the payment of accrued
benefits as of the date of termination. Such severance pay
shall be made, at the election of the Company, in one lump sum
or in monthly installments at the rate in effect immediately
prior to termination on the first day of each month. For
purposes of this Agreement, "Severance Period" shall mean the
period of time commencing on the date the Company actually or
constructively terminates the employment of the Executive
without Cause, and ending on December 31, 2003.
(ii) If the Executive elects to continue his health
insurance coverage under the Consolidated Omnibus Budget
Reconciliation Act ("COBRA") following the termination of his
employment, then the Company shall pay the Executive's monthly
premium under COBRA until the close of the Severance Period.
For the purposes of this Agreement, "constructively
terminates" shall be defined as any event resulting in any substantial reduction
or material adverse change in the position, compensation or benefits described
in this Agreement.
The consideration set forth in this Paragraph (C), together
with any prior unpaid salary, earned but unpaid bonuses, and unreimbursed
expenses, and vested stock options, if any, shall completely relieve the Company
of any liability to the Executive for any compensation that would have otherwise
been payable to the Executive under the terms of this Agreement, provided that
the Company shall continue to provide Executive with the indemnification
referred to in Article IV (D). Any other provision of this Agreement
notwithstanding, the Company shall not be obligated to make severance payments
or provide other benefits under this Paragraph (C) unless the Executive (i) has
executed a release (in a commercially reasonable form prescribed by the Company)
of all known claims relating to the termination of his employment that he may
then have
TSIG/ROBERT P. GORDON EMPLOYMENT AGREEMENT PAGE 4 OF 9
<PAGE> 5
against the Company or persons affiliated with the Company and (ii) has agreed
not to prosecute any legal action or other proceeding based upon any of such
claims.
ARTICLE VIII
CONFIDENTIALITY AND NON-COMPETITION
The Executive and the Company recognize that due to the nature
of the Executive's engagement hereunder, and the relationship of the Executive
to the Company, the Executive will have access to, will acquire, and may assist
in developing confidential proprietary information relating to the business and
operations of the Company and its affiliates, including information with respect
to their present and prospective products, systems, customers, agents, processes
and sales and marketing methods. The Executive acknowledges that such
information has been and will continue to be of central importance to the
business of the Company and its affiliates and that disclosure of it or its use
by others could cause substantial loss to the Company. The Executive and the
Company also recognize that an important part of the Executive's duties shall be
to develop good will for the Company and its affiliates through his personal
contact with customers, agents and others having business relationships with the
Company and its affiliates, and that there is a danger that this good will, a
proprietary asset of the Company and its affiliates, may follow the Executive if
and when his relationship with the Company is terminated. Therefore, the
Executive hereby agrees as follows:
(A) All Company trade secrets, proprietary information, software,
software codes, advertising, sales, marketing and other materials or articles of
information, including customer and supplier lists, data, reports, customer
sales analyses, invoices, price lists or information, samples, or any other
materials or data of any kind furnished to the Executive by the Company or
developed by the Executive on behalf of the Company or at the Company's
direction or for the Company's use or otherwise in connection with the
Executive's employment hereunder, are and shall remain the sole and confidential
property of the Company; if the Company requests the return of such materials at
any time during or after the termination of the Executive's employment, the
Executive shall immediately deliver the same to the Company.
(B) During the term of this Agreement and during any period in which
the Executive is receiving severance pay (or would be receiving severance pay if
he receives a lump sum rather than installments), but in any event at least
three months after the termination of this Agreement, the Executive shall not,
directly or indirectly, own, manage, operate, join or control, or participate in
the ownership, management, operation or control of, or be a director,
stockholder or an employee of, or a consultant to, any business, firm,
corporation or entity which (i) is conducting any business which competes with
the business, as conducted at any time during the term of employment with the
Company, of the Company or any of its affiliates with which Executive had any
substantial management involvement, or (ii) is or was at any time during the
term of employment with the Company a vendor, supplier, customer or distributor
of the Company or any of its affiliates with which Executive had any substantial
management involvement. During the same period of time specified in the
preceding sentence, the Executive shall not solicit, directly or indirectly, for
his own account or for the account of others, orders for merchandise, products
or services of a kind and nature like or similar to merchandise, products and
services sold or rendered by the Company during his employment with the Company
from any person or entity which was a customer of the Company or which the
Company was actively soliciting to be a customer during the 12 month
TSIG/ROBERT P. GORDON EMPLOYMENT AGREEMENT PAGE 5 OF 9
<PAGE> 6
period immediately preceding that date upon which his employment relationship
with the Company shall have terminated.
(C) During the term of this Agreement and for a period of three years
thereafter, the Executive shall not at any time, directly or indirectly, urge
any customer, or any person or entity which the Company was actively soliciting
to be a customer during the 12 month period immediately preceding that date upon
which his employment relationship with the Company shall have terminated, to
discontinue, in whole or in part, business, or not to do business with, the
Company; nor shall he directly or indirectly induce or attempt to influence any
employee of the Company to terminate his or her employment with the Company.
(D) During the term of this Agreement and at all times thereafter, the
Executive shall not knowingly use for his personal benefit, or disclose,
communicate or divulge to, or use for the direct or indirect benefit of any
person, firm, association or entity other than the Company, any material
referred to in Paragraph (A) above or any information regarding the business
methods, business policies, procedures, techniques, research or development
projects or results, trade secrets, or other knowledge or processes used or
developed by the Company or any names and addresses of customers or clients or
any other confidential information relating to or dealing with the business
operations or activities of the Company, first made known to the Executive or
first learned or acquired by the Executive while in the employ of the Company.
(E) The foregoing provisions of this Article shall not (i) prevent
Executive from owning five percent or less of the outstanding stock of any
publicly traded entity, (ii) apply to information of any type that is publicly
disclosed, or is or becomes publicly available, in each instance without a
violation by Executive of the provisions of this Article, and (iii) be construed
to prevent disclosure by Executive pursuant to legal process, provided in this
event Executive shall endeavor to give reasonable advance notice to the Company
of any such legal process involving him that may result in otherwise prohibited
disclosure.
(F) It is recognized that damages in the event of breach by the
Executive of this Article would be difficult, if not impossible, to ascertain,
and it is, therefore, agreed that the Company shall have the right to an
injunction or other equitable relief in any court of competent jurisdiction,
enjoining any breach, and the Executive hereby waives any and all defenses he
may have on the ground of lack of jurisdiction or competence of the court to
grant such injunction or other equitable relief. The existence of this right
shall not preclude any other rights and remedies at law or in equity which the
Company may have.
ARTICLE IX
CONSTRUCTION, ENFORCEABILITY AND SEVERABILITY
(A) The descriptive headings of Articles, or of or in any exhibit, are
inserted for convenience only and are not a part of this Agreement. Unless
otherwise qualified, references in this Agreement to "Article" are to provisions
of this Agreement and a reference thereto includes any subparts. As used herein,
the singular includes the plural, the plural includes the singular, and words in
one gender include the others, the terms "party" and "parties" are references to
the Company and/or the Executive as permitted or required by the context,
"herein", "hereunder", "hereof" and similar references refer to the whole of
this Agreement, "include", "including" and similar terms are not words of
limitation, and any examples are not limiting. The failure of an
TSIG/ROBERT P. GORDON EMPLOYMENT AGREEMENT PAGE 6 OF 9
<PAGE> 7
incorporated party to affix its corporate seal to this Agreement shall not
impair the validity of the signature of that party but shall, instead, be the
adoption by that party of the phrase "(CORPORATE SEAL)" as the corporate seal of
that party for the purposes of this Agreement. In the event any date specified
herein or determined hereunder shall be on a Saturday, Sunday or nationally
declared holiday, then that date so specified or determined shall be deemed to
be the next business day following such date and compliance by or on that day
shall be deemed to be compliance with the terms of this Agreement.
(B) To the extent any provision or portion of this Agreement shall be
held, found or deemed to be invalid, unreasonable, unlawful or unenforceable,
then the parties expressly covenant and agree that any such provision or portion
shall be modified to the extent necessary in order that any such provision or
portion shall be legally enforceable to the fullest extent permitted by
applicable law and that any court of proper jurisdiction shall, and the parties
do hereby expressly authorize any such court to, enforce any such provision or
portion or to modify any such provision or portion in order that any such
provision or portion shall be enforced by such court to the fullest extent
permitted by applicable law. If any provision or portion of this Agreement shall
be held invalid or unenforceable, the remainder of this Agreement shall remain
in full force and effect. If any provision or portion of this Agreement is held
invalid or unenforceable with respect to particular circumstances, it shall
remain in full force and effect in all other circumstances.
(C) The Company represents and warrants to the Executive that, to the
best of its knowledge, it has been duly authorized to execute, deliver and
perform this Agreement and each related agreement, and that execution, delivery
and performance hereof and thereof is not and will not be a breach or violation
of any obligation or commitment, whether contractual or otherwise, to which the
Company is subject or by which it is bound.
ARTICLE X
ARBITRATION
Any controversy or claim arising out of or relating to this
Agreement or the breach thereof, or the Executive's employment or the
termination thereof, shall be settled by arbitration in St. Petersburg, Florida
in accordance with the National Rules for the Resolution of Employment Disputes
of the American Arbitration Association. The decision of the arbitrator shall be
final and binding on the parties, and judgment on the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof. The
arbitrator shall be empowered to enter an equitable decree mandating specific
enforcement of the terms of this Agreement. The Company and the Executive shall
share equally all fees and expenses of the arbitrator; provided, however, that
the Company or the Executive, as the case may be, shall bear all fees and
expenses of the arbitrator and all of the legal fees and out-of-pocket expenses
of the other party if the arbitrator determines that the claim or position of
the Company or the Executive, as the case may be, was without reasonable
foundation. The Executive and the Company each hereby consent to personal
jurisdiction of the state and federal courts located within the territorial
limits of the United States District Court for the Middle District of Florida,
Tampa Division, for any action or proceeding arising from or relating to this
Agreement or relating to any arbitration in which the parties are participants,
and waive all venue objections with respect to such arbitration, actions or
proceedings.
TSIG/ROBERT P. GORDON EMPLOYMENT AGREEMENT PAGE 7 OF 9
<PAGE> 8
ARTICLE XI
NOTICE
Any notice, request, demand or other communication required to
be given under the terms of this Agreement shall be in writing and shall be
deemed to have been duly given if delivered to the addressee in person or mailed
by certified mail, return receipt requested, to the Executive at the last
resident address he has provided to the Company, or in the case of the Company,
at its principal executive offices.
ARTICLE XII
BENEFIT
This Agreement shall inure to and shall be binding upon the
parties, the successors and assigns of the Company, and the heirs and personal
representatives of the Executive.
ARTICLE XIII
WAIVER
The waiver by either party of any breach or violation of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach.
ARTICLE XIV
GOVERNING LAW
The law of the State of Florida (except its provisions
governing the choice of law) shall govern the construction, enforcement and
validity of this Agreement.
ARTICLE XV
ENTIRE AGREEMENT
This Agreement constitutes or refers to the entire
understanding of the Executive and the Company with respect to the subject
matter hereof and supersedes any and all prior understandings written or oral.
This Agreement may not be changed, modified or discharged orally, but only by an
instrument in writing signed by the parties.
ARTICLE XVI
COUNTERPARTS AND FACSIMILE SIGNATURES
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument. Execution and delivery of
this Agreement by exchange of facsimile copies bearing the facsimile signature
of a party shall constitute a valid and binding execution and delivery of this
Agreement by such party. Such facsimile copies shall constitute enforceable
original documents.
TSIG/ROBERT P. GORDON EMPLOYMENT AGREEMENT PAGE 8 OF 9
<PAGE> 9
IN WITNESS WHEREOF, the parties have executed this Agreement
and affixed their hands and seal the day and year first above written.
EXECUTIVE
-------------------------------------------
Robert P. Gordon
TELESERVICES INTERNATIONAL GROUP INC.
By:
----------------------------------------
James H. Guild, President
ATTEST:
- - -----------------------------------
Paul W. Henry, Secretary
(CORPORATE SEAL)
TSIG/ROBERT P. GORDON EMPLOYMENT AGREEMENT PAGE 9 OF 9
<PAGE> 10
EXHIBIT A
Paid Vacation - 6 Weeks per year accrued monthly.
Sick Time - 12 days per year accrued at one half day per month.
Holidays - 8.5 annually
Car Allowance - The Company shall pay Executive $2,500 per month as a Car
Allowance
Health Insurance - United HealthCare
Eligible on the first of the month following your first 90 days Family
Coverage Total Premium - $508.83 monthly Company Pays - $168.65 monthly
Employee Pays - $340.18 monthly
Dental Insurance - American Dental Plan
Two Choices
HMO Dental - Family Coverage Total Premium - $26.48 Monthly
Employee pays $15.58 monthly
Indemnity - Family Coverage Total Premium - $44.00 Monthly
Employee pays $26.00 Monthly
Life insurance paid for by the Company for employee only (no add-on's)
Coverage is by class - Managers Class 1: Chairman/CEO coverage is $50,000
Liability Insurance - Hartford Business Insurance
Commercial Package
Liability and Medical $1,000,000
Personal and Advertising Injury $1,000,000
General Aggregate $2,000,000
Products - Completed Operations $2,000,000
Umbrella $2,000,000
Workers Comp $ 500,000 Each
Current coverage in effect through 5/27/99.
D&O - Agricultural E&S Ins. Co. $2,500,000
Rock River Ins. Co. $2,500,000
TIG Specialty Insurance Company $2,500,000
Admiral Insurance Company $2,500,000
TSIG/ROBERT P. GORDON EMPLOYMENT AGREEMENT Exhibit A
<PAGE> 1
EXHIBIT 10.10 AGREEMENT TO SERVE AS A DIRECTOR
THIS AGREEMENT TO SERVE AS A DIRECTOR ("Agreement") is made as
of this 7th day of December 1998 by and between the parties: JOHN HWANG, an
individual residing at
_______________________________________________________________ (hereinafter
referred to as "Hwang"), and TELESERVICES INTERNATIONAL GROUP INC., a Florida
corporation with its principal executive offices at 100 Second Avenue South,
Suite 1000, St. Petersburg, FL 33701 (hereinafter referred to as the "Company").
It is mutually agreed by and between the parties as follows:
ARTICLE I
APPOINTMENT AND DUTIES
The Company hereby appoints Hwang to serve as a member of the
Board of Directors of the Company (a "Director"), and Hwang hereby accepts such
appointment, commencing effective January 1, 1999. While serving in the capacity
of a Director, Hwang shall act in a manner consistent with the Articles of
Incorporation and the Bylaws of the Company, and the Florida Business
Corporation Act.
ARTICLE II
INDEMNIFICATION
The Company shall provide to Hwang, to the full extent provided for
under the Company's Articles of Incorporation, the Company's Bylaws, and the
laws of the State of Florida, indemnification for any claim or lawsuit which may
be threatened, asserted or commenced against Hwang by reason of the fact that he
is or was a director, officer, employee or other agent of the Company, or is or
was serving at the request of the Company as a director, officer, employee or
other agent of another corporation, partnership, joint venture, trust, or other
enterprise or employee benefit plan, provided that indemnification shall not be
provided in violation of applicable law. The indemnification to be provided to
Hwang shall include coverage of him under officer and director liability
insurance policies maintained by the Company.
ARTICLE III
COMPENSATION AND EXPENSES
(A) Contemporaneously with the execution of this Agreement, the Company
shall grant Hwang options to acquire 1,000,000 shares of the Company's
restricted common stock at an exercise price per share equal to $.30. The
options shall vest (and shall become exercisable at the time they vest), subject
to termination of this Agreement, as follows: 50,000 options shall vest on the
first day of each month from January 1999 through April 1999; and 25,000 options
shall vest on the first day of each subsequent month for 32 consecutive months,
commencing May 1999. All options shall expire on December 31, 2003. The
following terms and conditions apply to the options: (i) both the number of
options and the exercise price are subject to appropriate adjustments in the
event of any stock split, stock dividend or other change in capital structure
affecting the Company's common stock, (ii) the options and the shares of common
stock issuable upon exercise of the options are subject to restrictions on
transfer, as required by applicable federal and state securities laws; (iii)
options which have not vested on or before the date of termination of this
Agreement shall terminate on such date, and (iv) notwithstanding the expiration
date, all vested options must be exercised within one year after termination of
this Agreement. Hwang acknowledges that by serving as a Director, he shall be
deemed an "affiliate" and/or a "control person" for purposes of reporting and
compliance under the rules and regulations of the Securities and Exchange
Commission.
TSIG/HWANG AGREEMENT PAGE 1 OF 2
<PAGE> 2
(B) Vesting of stock options may be accelerated in the discretion of
the Board of Directors or the Stockholders.
(C) Stock options in addition to those described above may be granted
from time to time in the discretion of the Board of Directors or the
Stockholders.
(D) The Company shall reimburse Hwang on a monthly basis for all
reasonable and necessary expenses, upon presentation by Hwang of an itemized
account of such expenditures, or, at the discretion of the Company, the Company
may advance such expenses to Hwang.
ARTICLE IV
TERM AND TERMINATION
(A) The term of this Agreement shall commence on January 1, 1999 and
shall end when terminated pursuant to this Article.
(B) This Agreement shall terminate immediately in the event that Hwang
ceases to be a Director of the Company for any reason whatsoever, voluntary or
involuntarily.
(C) Hwang may voluntarily terminate this Agreement at any time upon
written notice to the Company.
(D) The Company may terminate this Agreement by act of the Board of
Directors or by act of the Stockholders of the Company, in a manner consistent
with the Articles of Incorporation and the Bylaws of the Company, and the
Florida Business Corporation Act.
ARTICLE V
COUNTERPARTS AND FACSIMILE SIGNATURES
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument. Execution and delivery of
this Agreement by exchange of facsimile copies bearing the facsimile signature
of a party shall constitute a valid and binding execution and delivery of this
Agreement by such party. Such facsimile copies shall constitute enforceable
original documents.
IN WITNESS WHEREOF, the parties have executed this Agreement
and affixed their hands and seal the day and year first above written.
------------------------------------
John Hwang
TELESERVICES INTERNATIONAL GROUP INC.
By:
---------------------------------
Robert P. Gordon, Chairman
TSIG/HWANG AGREEMENT PAGE 2 OF 2
<PAGE> 1
EXHIBIT 10.11 EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") made as of
this 2nd day of February 1999 by and between the parties: JOHN HWANG, an
individual whose address is P.O. Box 1101, Palo Alto, California 94302
(hereinafter referred to as the "Executive"), and TELESERVICES INTERNATIONAL
GROUP INC., a Florida corporation with its principal executive offices at 100
Second Avenue South, Suite 1000, St. Petersburg, Florida 33701 (hereinafter
referred to as the "Company").
W I T N E S S E T H
WHEREAS, the Company desires to retain and employ the
Executive for the purpose of securing to the Company the experience, ability and
services of the Executive; and
WHEREAS, the Executive desires to be employed by the Company;
NOW, THEREFORE, it is mutually agreed by and between the
parties as follows:
ARTICLE I
EMPLOYMENT
The Company hereby employs the Executive as its Chief
Information Officer (CIO) and a Senior Vice President (SrVP) effective the
earlier of April 1, 1999, or the day following the effective date of the
termination of Executive's prior employment, and the Executive hereby accepts
such employment and shall serve on a full-time basis as an executive officer of
the Company, subject to and upon the terms and conditions set forth in this
Agreement.
ARTICLE II
DUTIES
(A) The Executive shall, during the term of his employment with the
Company and subject to the direction and control of the Company's Board of
Directors (the "Board" or the "Board of Directors"), perform such executive
duties and functions as he may be called upon to perform consistent with his
employment hereunder as CIO and SrVP.
(B) The Executive shall devote his full time and best efforts to the
performance of his duties for the Company, including the following:
(i) Develop, implement, and monitor policies and procedures
appropriate to the day-to-day operation of the Company's information
technology functions.
(ii) Confer with Company officials to develop, implement and
supervise an "online services" division.
(iii) Promote the Company's relationships with its employees,
customers, shareholders and others in the business community.
TSIG/HWANG EMPLOYMENT AGREEMENT PAGE 1 OF 10
<PAGE> 2
(iv) Monitor and evaluate performance of staff for compliance
with established policies and objectives of the Company and
contributions in attaining objectives.
(v) Render services to any joint venture, subsidiary or
affiliated business of the Company as requested by the Board of
Directors, provided that indemnification equivalent to that referred to
in Article IV (D) is provided to Executive in connection with those
services.
(vi) Perform such other duties consistent with his position as
CIO and SrVP as may be assigned to him by the Board of Directors.
(C) At the request of the Company, the Executive shall also serve,
without additional compensation, as CIO, SrVP and/or as a director of one or
more of the Company's subsidiaries during the term of this Agreement, provided
that indemnification equivalent to that referred to in Article IV (D) is
provided to Executive in connection with those services.
(D) The Executive represents and warrants that he will not knowingly
use or disclose, in connection with his employment by the Company, any trade
secrets or other proprietary information or intellectual property in which the
Executive or any other person has any right, title or interest and that, to the
best of his knowledge, his employment by the Company as contemplated by this
Agreement will not infringe or violate the rights of any other person. The
Executive represents and warrants to the Company that he has returned all
property and confidential information belonging to his most recent prior
employer.
ARTICLE III
COMPENSATION
(A) The Company shall pay to the Executive for all services to be
rendered pursuant to the terms of this Agreement a base salary at the rate of
$150,000 per year (unless adjusted by the Board of Directors as described
below), payable in accordance with the Company's normal payroll procedures. The
Board may increase Executive's base salary from time to time in its discretion.
(B) The Executive shall be paid a signing bonus of $20,000, payable
upon the commencement of employment hereunder.
(C) The Executive shall be entitled to quarterly cash performance
bonuses equal to three percent (3%) of the gross margin (as determined pursuant
to generally accepted accounting principals) derived from the Company's "online
services" division; provided, however, that payment shall be made no later than
the later of (i) ten (10) business days after the Company collects payment of
amounts included as revenues in determining gross margin, or (ii) one month
following the close of the applicable fiscal quarter. The parties may, by
addendum to this Agreement, establish a precise formula to be used to calculate
"gross margin."
TSIG/HWANG EMPLOYMENT AGREEMENT PAGE 2 OF 10
<PAGE> 3
ARTICLE IV
WORKING CONDITIONS AND BENEFITS
(A) The Executive shall be entitled to paid vacations during each year
of his employment with the Company in accordance with Company practice in that
year, but no less than as described on the attached Exhibit A, which is
incorporated in this Agreement as a part hereof by this reference. The Executive
shall also be entitled to leave for illness or temporary disability, which may
be paid or unpaid, in accordance with the policies of the Company in effect at
that time, but no less favorable to Executive than described on Exhibit A.
(B) The Executive is authorized to incur reasonable and necessary
expenses for promoting the business of the Company, including expenses for
entertainment, travel and similar items. The Company shall reimburse the
Executive on a monthly basis for all such expenses, upon presentation by the
Executive of an itemized account of such expenditures.
(C) The Executive shall not be required to relocate to the Company's
executive offices in St. Petersburg, Florida. The Company will obtain office
space in or around Palo Alto, California for use by the Executive. The Executive
shall travel on the Company's behalf to the extent reasonably necessary.
(D) The Company shall indemnify and defend Executive in any claim,
proceeding or lawsuit, and in connection with any appeal thereof, which may be
threatened, asserted or commenced against the Executive (i) by reason of the
fact that he is or was a director, officer, employee or other agent of the
Company, or (ii) by reason of the fact that he is or was serving at the request
of the Company as a director, officer, employee or other agent of another
corporation, partnership, joint venture, trust, or other enterprise or employee
benefit plan; provided that indemnification shall not be provided in violation
of applicable law. The Company's obligation to indemnify and defend Executive as
described herein shall continue even though the Company terminates its
employment relationship with Executive. The indemnification to be provided to
Executive shall include coverage of him by officer and director insurance no
less favorable to Executive than the policies referred to on Exhibit A and
mandatory advancement of expenses, including reasonable attorney fees and costs
of court-approved settlements, actually and necessarily incurred by Executive in
connection with the defense of the foregoing. The Company shall not be obligated
to advance expenses hereunder unless Executive provides written undertaking to
repay any such amount advanced if he is ultimately found not to be entitled to
indemnification under applicable law.
ARTICLE V
OTHER BENEFITS
(A) Contemporaneously with the execution of this Agreement, the Company
shall grant the Executive options to acquire 750,010 shares of the Company's
restricted common stock at an exercise price per share equal to $0.30. The
options shall vest (and shall become exercisable at the time they vest), subject
to continued employment, as follows: 250,000 options shall vest on the date the
Executive commences employment hereunder; and 14,286 options shall vest on the
first day of each month for 35 consecutive months, commencing April 1, 1999. All
options shall expire five (5) years from the date of grant. The following terms
and conditions apply to the options: (i) both the number of options and the
exercise price are subject to appropriate adjustments in the
TSIG/HWANG EMPLOYMENT AGREEMENT PAGE 3 OF 10
<PAGE> 4
event of any stock split, stock dividend or other change in capital structure
affecting the Company's common stock, (ii) the options and the shares of common
stock issuable upon exercise of the options are subject to restrictions on
transfer, as required by applicable federal and state securities laws; (iii)
options which have not vested on or before the date of termination of
Executive's employment shall terminate on such date, and (iv) all vested options
must be exercised within the earlier of the expiration date of the options or
one year after termination of Executive's employment. The Executive acknowledges
that as long as he remains an executive officer or director of the Company he
shall be deemed an "affiliate" and/or a "control person" for purposes of
reporting and compliance under the rules and regulations of the Securities and
Exchange Commission.
(B) During the term hereof, the Executive shall be entitled to receive
such of the following other benefits of employment that are or may become
available to other members of the Company's senior executive management: health
and life insurance benefits, pension, profit sharing and income protection or
disability plans, in each instance consistent with his position as President and
no less favorable to Executive than any description thereof on Exhibit A.
(C) Stock options in addition to those described above may be granted
from time to time in the discretion of the Board.
ARTICLE VI
TERM
The Company shall continue the Executive's employment, and the
Executive shall remain in employment with the Company, from the commencement
date set forth in Article I until the date when the Executive's employment
terminates pursuant to Article VII.
ARTICLE VII
TERMINATION
(A) The Executive may voluntarily terminate this Agreement at any time
upon written notice to the Company. The Executive shall provide at least two
weeks advance notice to the Company of his election to voluntarily terminate
this Agreement.
(B) The Company may terminate this Agreement for Cause at any time by
giving the Executive written notice thereof specifying with particularity the
grounds for such termination. In such event, this Agreement and the employment
relationship hereunder shall be terminated as of the date of such written notice
and the Executive will be entitled to no further payments from the Company. The
Company shall continue, however, to provide Executive with the indemnification
referred to in Article IV (D), but shall not be required to provide such
indemnification for or in connection with any matter in which a cause of action
is asserted against the Executive for any act which constitutes grounds for
termination for Cause hereunder. For purposes hereof, "Cause" shall mean (i) a
material violation of the terms of this Agreement that has not been cured by
Executive within 10 days of his receipt of notice particularly describing each
such violation; (ii) a breach of trust, including dishonesty, acts of moral
turpitude, theft, embezzlement and self-dealing; (iii) the disclosure of
confidential information prohibited hereunder (except disclosure in the
good-faith belief that the same is for the benefit of the Company) which results
(or can reasonably be expected to result) in material harm to the Company; or
(iv) gross negligence or willful misconduct, either of
TSIG/HWANG EMPLOYMENT AGREEMENT PAGE 4 OF 10
<PAGE> 5
which results (or can reasonably be expected to result) in material harm to the
Company. Notice of termination for Cause shall be forwarded to the Executive by
the Company only upon and after a resolution of the Board authorizing such
notification and shall be effective immediately; provided, however, that the
Executive may be reinstated retroactively, in the discretion of the Board, in
the event that within ten days the Executive establishes to the satisfaction of
the Board that Cause did not exist.
(C) The Company may terminate this Agreement at any time upon at least
two weeks advance notice to the Executive; such notice shall be forwarded to the
Executive by the Company only upon and after a resolution of the Board
authorizing such notification and shall be deemed a termination without Cause.
(D) Subject to Paragraph (C), the Executive's employment with the
Company shall be "at will." Any contrary representations which may have been
made to the Executive shall be superseded by this Agreement. This Agreement
shall constitute the full and complete agreement between the Executive and the
Company on the "at will" nature of the Executive's employment, which may only be
changed in an express written agreement signed by the Executive and a duly
authorized officer of the Company.
ARTICLE VIII
SEVERANCE BENEFITS
(A) Executive shall be entitled to receive the severance benefits
specified below in the event there should occur an Involuntary Termination of
his employment (other than a termination for Cause):
(i) Continued Compensation. Executive shall be paid severance
in an amount equal to six (6) months of his base salary at the time of
termination, less applicable withholdings, payable in a lump sum.
(ii) Health Coverage. Executive shall be provided continued
health coverage, without charge, under the Company's medical plan in
accordance with the requirements of Internal Revenue Code Section 4980B
("COBRA") until the earlier of (i) the expiration of the COBRA
continuation period in effect under COBRA or (ii) the first date that
Executive is covered under another employer's health benefit program.
Such coverage shall be in lieu of any other continued health care
coverage to which the Executive and his eligible dependents would
otherwise be entitled pursuant to COBRA by reason of the termination of
the Executive's employment.
(B) In the event of an Involuntary Termination of Executive's
employment within 18 months following a Change in Control of the Company,
Executive shall be entitled to the following severance benefits in lieu of the
benefits under Paragraph (A) above:
(i) Continued Compensation. Executive shall be paid severance
in an amount equal to one (1) year of his base salary at the time of
termination, less applicable withholdings, payable in a lump sum.
TSIG/HWANG EMPLOYMENT AGREEMENT PAGE 5 OF 10
<PAGE> 6
(ii) Health Coverage. Executive shall be provided continued
health coverage, without charge, under the Company's medical plan in
accordance with the requirements of Internal Revenue Code Section 4980B
("COBRA") until the earlier of (i) the expiration of the COBRA
continuation period in effect under COBRA or (ii) the first date that
Executive is covered under another employer's health benefit program.
Such coverage shall be in lieu of any other continued health care
coverage to which the Executive and his eligible dependents would
otherwise be entitled pursuant to COBRA by reason of the termination of
the Executive's employment.
(C) For purposes of this Article VIII, the following definitions shall
be in effect:
(i) Involuntary Termination means either the involuntary
termination of Executive's employment with the Company or Executive's
voluntary resignation following the Company's failure to perform its
obligations under this Agreement as identified by Executive in a
written notice delivered to the Company's Board of Directors at least
ninety (90) days prior to resignation. Involuntary Termination shall
not include any termination of Executive's employment by reason of
death or permanent disability.
(ii) Termination for Cause shall mean an Involuntary
Termination effected for Cause, as such term is defined in Article VII,
Paragraph (B).
(iii) Change in Control means an acquisition of the Company by
merger, sale of all or substantially all of the Company's assets, or
purchase of 50% or more of the Company's assets, or purchase of 50% or
more of the Company's stock, or any other reorganization or series of
transactions resulting in a change of 50% or more in the ownership of
the Company's stock or assets, but only if such Change in Control is
initiated more than one year after the date of this Agreement.
(D) Should Executive die before he receives the full amount of
compensation continuation payments to which he may become entitled under Article
VIII of this Agreement, then the balance of such payments shall be made, on the
due dates hereunder had Executive survived, to the executors or administrators
of his estate.
ARTICLE IX
CONFIDENTIALITY AND NON-COMPETITION
The Executive and the Company recognize that due to the nature
of the Executive's engagement hereunder, and the relationship of the Executive
to the Company, the Executive will have access to, will acquire, and may assist
in developing confidential proprietary information relating to the business and
operations of the Company and its affiliates, including information with respect
to their present and prospective products, systems, customers, agents, processes
and sales and marketing methods. The Executive acknowledges that such
information has been and will continue to be of central importance to the
business of the Company and its affiliates and that
TSIG/HWANG EMPLOYMENT AGREEMENT PAGE 6 OF 10
<PAGE> 7
disclosure of it or its use by others could cause substantial loss to the
Company. The Executive and the Company also recognize that an important part of
the Executive's duties shall be to develop good will for the Company and its
affiliates through his personal contact with customers, agents and others having
business relationships with the Company and its affiliates, and that there is a
danger that this good will, a proprietary asset of the Company and its
affiliates, may follow the Executive if and when his relationship with the
Company is terminated. Therefore, the Executive hereby agrees as follows:
(A) All Company trade secrets, proprietary information, software,
software codes, advertising, sales, marketing and other materials or articles of
information, including customer and supplier lists, data, reports, customer
sales analyses, invoices, price lists or information, samples, or any other
materials or data of any kind furnished to the Executive by the Company or
developed by the Executive on behalf of the Company or at the Company's
direction or for the Company's use or otherwise in connection with the
Executive's employment hereunder, are and shall remain the sole and confidential
property of the Company; if the Company requests the return of such materials at
any time during or after the termination of the Executive's employment, the
Executive shall use commercially reasonable efforts to promptly deliver the same
to the Company.
(B) During the term of Executive's employment and during any period in
which the Executive is receiving severance pay (or would be receiving severance
pay if he receives a lump sum rather than installments), the Executive shall
not, directly or indirectly, own, manage, operate, join or control, or
participate in the ownership, management, operation or control of, or be a
director, stockholder or an employee of, or a consultant to, any business, firm,
corporation or entity which (i) is conducting any business which competes with
the business, as conducted at any time during the term of employment with the
Company, of the Company or any of its affiliates with which Executive had any
substantial management involvement, or (ii) is or was at any time during the
term of employment with the Company a vendor, supplier, customer or distributor
of the Company or any of its affiliates with which Executive had any substantial
management involvement. During the same period of time specified in the
preceding sentence, the Executive shall not solicit, directly or indirectly, for
his own account or for the account of others, orders for merchandise, products
or services of a kind and nature like or similar to merchandise, products and
services sold or rendered by the Company during his employment with the Company
from any person or entity which was a customer of the Company or which the
Company was actively soliciting to be a customer during the 12 month period
immediately preceding that date upon which his employment relationship with the
Company shall have terminated.
(C) During the term of this Agreement and for a period of one year
thereafter, the Executive shall not at any time, directly or indirectly, urge
any customer, or any person or entity which the Company was actively soliciting
to be a customer during the 12 month period immediately preceding that date upon
which his employment relationship with the Company shall have terminated, to
discontinue, in whole or in part, business, or not to do business with, the
Company; nor shall he directly or indirectly induce or attempt to influence any
employee of the Company to terminate his or her employment with the Company.
(D) During the term of this Agreement and at all times thereafter, the
Executive shall not knowingly use for his personal benefit, or disclose,
communicate or divulge to, or use for the direct or indirect benefit of any
person, firm, association or entity other than the Company, any material
referred to in Paragraph (A) above or any information regarding the business
methods, business
TSIG/HWANG EMPLOYMENT AGREEMENT PAGE 7 OF 10
<PAGE> 8
policies, procedures, techniques, research or development projects or results,
trade secrets, or other knowledge or processes used or developed by the Company
or any names and addresses of customers or clients or any other confidential
information relating to or dealing with the business operations or activities of
the Company, first made known to the Executive or first learned or acquired by
the Executive while in the employ of the Company.
(E) The foregoing provisions of this Article shall not (i) prevent
Executive from owning five percent or less of the outstanding stock of any
publicly traded entity, (ii) apply to information of any type that is publicly
disclosed, or is or becomes publicly available, in each instance without a
violation by Executive of the provisions of this Article, and (iii) be construed
to prevent disclosure by Executive pursuant to legal process, provided in this
event Executive shall endeavor to give reasonable advance notice to the Company
of any such legal process involving him that may result in otherwise prohibited
disclosure.
(F) It is recognized that damages in the event of breach by the
Executive of this Article would be difficult, if not impossible, to ascertain,
and it is, therefore, agreed that the Company shall have the right to an
injunction or other equitable relief in any court of competent jurisdiction,
enjoining any breach, and the Executive hereby waives any and all defenses he
may have on the ground of lack of jurisdiction or competence of the court to
grant such injunction or other equitable relief. The existence of this right
shall not preclude any other rights and remedies at law or in equity which the
Company may have.
ARTICLE X
CONSTRUCTION, ENFORCEABILITY AND SEVERABILITY
(A) The descriptive headings of Articles, or of or in any exhibit, are
inserted for convenience only and are not a part of this Agreement. Unless
otherwise qualified, references in this Agreement to "Article" are to provisions
of this Agreement and a reference thereto includes any subparts. As used herein,
the singular includes the plural, the plural includes the singular, and words in
one gender include the others, the terms "party" and "parties" are references to
the Company and/or the Executive as permitted or required by the context,
"herein", "hereunder", "hereof" and similar references refer to the whole of
this Agreement, "include", "including" and similar terms are not words of
limitation, and any examples are not limiting. The failure of an incorporated
party to affix its corporate seal to this Agreement shall not impair the
validity of the signature of that party but shall, instead, be the adoption by
that party of the phrase "(CORPORATE SEAL)" as the corporate seal of that party
for the purposes of this Agreement. In the event any date specified herein or
determined hereunder shall be on a Saturday, Sunday or nationally declared
holiday, then that date so specified or determined shall be deemed to be the
next business day following such date and compliance by or on that day shall be
deemed to be compliance with the terms of this Agreement.
(B) To the extent any provision or portion of this Agreement shall be
held, found or deemed to be invalid, unreasonable, unlawful or unenforceable,
then the parties expressly covenant and agree that any such provision or portion
shall be modified to the extent necessary in order that any such provision or
portion shall be legally enforceable to the fullest extent permitted by
applicable law and that any court of proper jurisdiction shall, and the parties
do hereby expressly authorize any such court to, enforce any such provision or
portion or to modify any such provision or portion in order that any such
provision or portion shall be enforced by such court to the fullest
TSIG/HWANG EMPLOYMENT AGREEMENT PAGE 8 OF 10
<PAGE> 9
extent permitted by applicable law. If any provision or portion of this
Agreement shall be held invalid or unenforceable, the remainder of this
Agreement shall remain in full force and effect. If any provision or portion of
this Agreement is held invalid or unenforceable with respect to particular
circumstances, it shall remain in full force and effect in all other
circumstances.
(C) The Company represents and warrants to the Executive that, to the
best of its knowledge, it has been duly authorized to execute, deliver and
perform this Agreement and each related agreement, and that execution, delivery
and performance hereof and thereof is not and will not be a breach or violation
of any obligation or commitment, whether contractual or otherwise, to which the
Company is subject or by which it is bound.
ARTICLE XI
ARBITRATION
Any controversy or claim arising out of or relating to this
Agreement or the breach thereof, or the Executive's employment or the
termination thereof, shall be settled by arbitration in Palo Alto, California,
if demanded by the Company, or in St. Petersburg/Tampa Florida if demanded by
the Executive, in accordance with the National Rules for the Resolution of
Employment Disputes of the American Arbitration Association. The decision of the
arbitrator shall be final and binding on the parties, and judgment on the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The arbitrator shall be empowered to enter an equitable decree
mandating specific enforcement of the terms of this Agreement. The Company and
the Executive shall share equally all fees and expenses of the arbitrator;
provided, however, that the Company or the Executive, as the case may be, shall
bear all fees and expenses of the arbitrator and all of the legal fees and
out-of-pocket expenses of the other party if the arbitrator determines that the
claim or position of the Company or the Executive, as the case may be, was
without reasonable foundation. The Executive and the Company each hereby consent
to personal jurisdiction of the state and federal courts located within the
territorial limits of the above venues, for any action or proceeding arising
from or relating to this Agreement or relating to any arbitration in which the
parties are participants, and waive all venue objections with respect to such
arbitration, actions or proceedings.
ARTICLE XII
NOTICE
Any notice, request, demand or other communication required to
be given under the terms of this Agreement shall be in writing and shall be
deemed to have been duly given if delivered to the addressee in person or mailed
by certified mail, return receipt requested, to the Executive at the last
resident address he has provided to the Company, or in the case of the Company,
at its principal executive offices.
ARTICLE XIII
BENEFIT
This Agreement shall inure to and shall be binding upon the
parties, the successors and assigns of the Company, and the heirs and personal
representatives of the Executive.
TSIG/HWANG EMPLOYMENT AGREEMENT PAGE 9 OF 10
<PAGE> 10
ARTICLE XIV
WAIVER
The waiver by either party of any breach or violation of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach.
ARTICLE XV
GOVERNING LAW
The law of the State of Florida (except its provisions
governing the choice of law) shall govern the construction, enforcement and
validity of this Agreement.
ARTICLE XVI
ENTIRE AGREEMENT
This Agreement constitutes or refers to the entire
understanding of the Executive and the Company with respect to the subject
matter hereof and supersedes any and all prior understandings written or oral.
This Agreement may not be changed, modified or discharged orally, but only by an
instrument in writing signed by the parties.
ARTICLE XVII
COUNTERPARTS AND FACSIMILE SIGNATURES
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument. Execution and delivery of
this Agreement by exchange of facsimile copies bearing the facsimile signature
of a party shall constitute a valid and binding execution and delivery of this
Agreement by such party. Such facsimile copies shall constitute enforceable
original documents.
IN WITNESS WHEREOF, the parties have executed this Agreement
and affixed their hands and seal the day and year first above written.
EXECUTIVE
--------------------------------------------
John Hwang
TELESERVICES INTERNATIONAL GROUP INC.
By:
-----------------------------------------
Robert P. Gordon, Chairman
(CORPORATE SEAL)
TSIG/HWANG EMPLOYMENT AGREEMENT PAGE 10 OF 10
<PAGE> 11
EXHIBIT A
SENIOR VICE PRESIDENT AND CHIEF INFORMATION OFFICER
Paid Vacation - 3 Weeks per year accrued monthly.
Sick Time - 6 days per year accrued at one half day per month.
Holidays - 8.5 annually
Health Insurance - United HealthCare
Eligible on the first of the month following your first 90 days Family
Coverage Total Premium - $508.83 monthly Company Pays - $168.65 monthly
Employee Pays - $340.18 monthly
Dental Insurance - American Dental Plan
Two Choices
HMO Dental - Family Coverage Total Premium - $26.48 Monthly
Employee pays $15.58 monthly
Indemnity - Family Coverage Total Premium - $44.00 Monthly
Employee pays $26.00 Monthly
Life insurance paid for by the Company for employee only (no add-on's) Coverage
is by salary - SVP/CIO coverage is $50,000
Liability Insurance - Hartford Business Insurance
Commercial Package
Liability and Medical $1,000,000
Personal and Advertising Injury $1,000,000
General Aggregate $2,000,000
Products - Completed Operations $2,000,000
Umbrella $2,000,000
Workers Comp $ 500,000 Each
Current coverage in effect through 5/27/99.
D&O - Agricultural E&S Ins. Co. $2,500,000
Rock River Ins. Co. $2,500,000
TIG Specialty Insurance Company $2,500,000
Admiral Insurance Company $2,500,000
TSIG/HWANG EMPLOYMENT AGREEMENT EXHIBIT A
<PAGE> 12
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT ("Agreement") made as of this
2nd day of February 1999 by and between the parties: JOHN HWANG, an individual
whose address is P.O. Box 1101, Palo Alto, California 94302 (hereinafter
referred to as "Hwang"), and TELESERVICES INTERNATIONAL GROUP INC., a Florida
corporation with its principal executive offices at 100 Second Avenue South,
Suite 1000, St. Petersburg, Florida 33701 (hereinafter referred to as the
"Company").
WHEREAS, the Company may choose to employ persons who were employees of
Cohesive Technology Solutions, Inc. ("Cohesive") during the term of Hwang's
employment at Cohesive.
WHEREAS, Hwang is a party to an employment agreement with Cohesive
which prohibits Hwang from attempting to hire or solicit, induce, recruit, or
encourage any employee of Cohesive to leave Cohesive.
WHEREAS, the Company has not requested nor accepted, and will not
request nor accept, Hwang's assistance in any efforts to hire such persons.
WHEREAS, Hwang did not and will not act on behalf of the Company to
hire or solicit, induce, recruit, or encourage any employee of Cohesive to leave
Cohesive in favor of employment with the Company.
WHEREAS, Hwang's employment agreement with Cohesive prohibits Hwang
from "competing" with Cohesive for a period of two years following termination
of his employment with Cohesive.
WHEREAS, although both Hwang and the Company are of the opinion that
the business of the Company is substantially different from and not in
competition with the business of Cohesive, both parties acknowledge the
possibility that Cohesive may nonetheless claim that Hwang's employment with the
Company is a breach of the "non-compete" provision of Hwang's employment
agreement with Cohesive.
THEREFORE, the undersigned parties hereby acknowledge and agree as
follows:
The Company agrees to indemnify and defend Hwang in any action, suit or
proceeding and in connection with any appeal thereof, brought against Hwang by
Cohesive, with respect to any claim, liability, obligation, loss, damage,
judgment, action, suit, proceeding, arbitration, demand, cost or expense
(including, without limitation, reasonable attorneys fees and costs, and
expenses reasonably incurred in investigating, preparing, defending against any
of the foregoing), arising out of or in any manner incident, relating or
attributable to 1) the Company's hiring of persons who were employees of
Cohesive during the term of Hwang's employment at Cohesive or 2) the Company's
employment of Hwang which is the basis of a claim that Hwang has breached the
"non-compete" provision of Hwang's employment agreement with Cohesive. The
maximum liability of the Company in connection with indemnification against any
claim based on the "non-compete" provision, as described in the preceding
sentence, shall be limited to $500,000 (inclusive of all costs and attorneys
fees).
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument. Execution and delivery of
this Agreement by exchange of facsimile copies bearing the facsimile signature
of a party shall constitute a valid and binding execution and delivery of this
Agreement by such party. Such facsimile copies shall constitute enforceable
original documents.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
the day and year first above written.
TELESERVICES INTERNATIONAL GROUP INC.
By:
---------------------------------------
Robert P. Gordon, Chairman
JOHN HWANG
By:
---------------------------------------
<PAGE> 1
Exhibit 21.3
LIST OF SUBSIDIARIES OF THE REGISTRANT:
1. Visitors Services International Corp., a wholly-owned subsidiary of
the Registrant, was incorporated under the laws of the State of Florida.
2. American International Travel Agency, Inc., a wholly-owned
subsidiary of the Registrant, was incorporated under the laws of the State of
Florida.
3. My MusicCard Company, a wholly-owned subsidiary of the Registrant,
was incorporated under the laws of the State of Delaware.
4. My Card, Inc., a wholly-owned subsidiary of the Registrant, was
incorporated under the laws of the State of Delaware.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM A FORM
10-KSB FOR THE YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 10-KSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 80,000
<SECURITIES> 0
<RECEIVABLES> 240,464
<ALLOWANCES> (159,934)
<INVENTORY> 0
<CURRENT-ASSETS> 319,971
<PP&E> 2,666,795
<DEPRECIATION> (2,185,218)
<TOTAL-ASSETS> 1,207,534
<CURRENT-LIABILITIES> 9,212,260
<BONDS> 0
0
0
<COMMON> 6,498
<OTHER-SE> 29,877,411
<TOTAL-LIABILITY-AND-EQUITY> 1,207,534
<SALES> 0
<TOTAL-REVENUES> 1,021,478
<CGS> 0
<TOTAL-COSTS> 2,111,726
<OTHER-EXPENSES> 10,732,003
<LOSS-PROVISION> 159,934
<INTEREST-EXPENSE> 576,867
<INCOME-PRETAX> (11,822,251)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,822,251)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,822,251)
<EPS-PRIMARY> (.23)
<EPS-DILUTED> (.23)
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