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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
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[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
[ ] 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 INTERNET 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 of incorporation or organization) (IRS Employer Identification No.)
100 SECOND AVENUE SOUTH, SUITE 1000, ST. PETERSBURG, FLORIDA 33701
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(Address of principal executive offices) (Zip Code)
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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. $ 395,767
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As of April 10, 2000, the aggregate market value of the voting stock held
by non-affiliates, approximately 251,525,120 shares of Common Stock, was
approximately $72,942,284 based on an average of the bid and ask prices of
approximately $.29 per share of Common Stock on such date.
The number of shares outstanding of the issuer's Common Stock, $.0001 par
value, as of April 10, 2000 was 269,197,515 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 Internet Group Inc. (the "Registrant" or the "Company"),
doing business as "TSIG.com", is an internet-based products and services company
that forms joint-venture "partnerships" with national corporations and
non-profit organizations, and then works with those "partners" to design
revenue-sharing affinity programs to attract consumers to their web sites.
History of the Company
TeleServices Internet Group Inc. (formerly TeleServices International
Group Inc. and Visitors Services International Corp. and Dynasty Capital
Corporation) was a development stage enterprise formed under the laws of the
State of Florida on September 29, 1986, 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. An
exchange offer was extended to and
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accepted by all of the remaining shareholders of VSI. By virtue of the
reorganization, VSI became a wholly-owned subsidiary of the Company.
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.
PRESENT BUSINESS OF THE COMPANY
Headquartered in St. Petersburg, Florida, TeleServices Internet Group
Inc., known as TSIG.com, has created its myCard programs to benefit both the
corporate and non-profit communities, as well as consumers. TSIG.com forms
myCard "partnership" agreements with national corporations and non-profit
organizations, and then works with its "partners" to design revenue-generating
programs that attract consumers to the web sites of both companies. The first
myCard program was myMusicCard, which enables consumers to purchase CDs and
cassettes at the lowest prices. Similarly TSIG.com's myPhotoCard programs
provide low-cost film processing and Kodak Film, and the myPhoneCard programs
provide low-cost prepaid long-distance calling card services. For all new myCard
users, TSIG.com has recently arranged through GeneralSearch.com to provide free
internet access for life, free DSL services, fax, e-mail, integrated messaging
and other features.
These customized marketing programs are intended to provide recurring
revenues to TSIG.com and its partners, and help develop strong brand loyalty and
awareness within target communities. TSIG.com also provides customer service and
support with its web-based call center and related services. The Company has a
corporate web site at www.tsig.com and a myMusicCard web site at
www.mymusiccard.com.
TSIG.com offers its "My Card" programs through 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 may develop its own fulfillment facility in California.
The myCard Program
The myCard program is based on the $10.00 myMusicCard, which enables
its holders to buy up to 20 CDs at a price of no more than $10.99 each, a
substantial savings over the typical $16.99 cost of new releases. The
myPhotoCard program provides low-cost film processing using Kodak film. The
myPhoneCard program provides low-cost, prepaid long-distance calling card
services.
In the myCard programs, TSIG.com forms revenue-sharing joint-venture
"partnerships" with corporations and non-profit organizations. Typically, the
proceeds from the sale of the myMusicCards are split 50/50 between TSIG.com and
the "partner" organization. Non-profits use the myMusicCard for fund-raisers,
while corporations use the myCards as corporate premium promotions. In effect,
the corporations and the non-profits act as marketing agents for TSIG.com.
Lufthansa City Center, Teleglobe and TSIG.com to Launch myCard
Programs in Europe
In March 2000, TSIG entered into a five-year license agreement with
ETC, STS/Lufthansa City Center, the sales arm of Lufthansa Airlines, to market
and sell TSIG.com's myMusic&Phone Card programs through the travel and airline
industries in all European countries. TSIG.com will fulfill the myMusicCard
orders, and Teleglobe, a leading international teleservices provider, will
provide prepaid long-distance services under its recently executed
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agreement with TSIG.com. The myMusic&Phone Card will be the first of TSIG.com's
myCards that enables its users to buy multiple products with a single card. ETC,
STS/Lufthansa City Center will market TSIG.com's myMusic&Phone Card through its
500 Lufthansa City Centers, which last year served 98 million travelers,
including 44 million on the Lufthansa AG passenger airline.
TSIG to acquire American Teleswitch, and gain access to broad European
audience
In March 2000, TSIG.com entered into a letter of intent to acquire
American Teleswitch Corporation ("ATC"), a privately-held company based in
Colorado Springs, Colorado. ATC markets and sells several telephony-based
products to more than 750,000 customers in the European community and the Far
East through large telecom providers, including British Telecom, Cable &
Wireless, Deutsche Telecom and Telefonica Italia. In 1999, ATC generated
approximately $3 million of revenues and net earnings of $400,000 (unaudited),
and management of ATC has told TSIG.com that they expect revenue and profit
growth of 25% of 40% per year for the next several years. Further, the company
has been advised that ATC, through its distribution channels, brings TSIG.com
access to an installed customer base of 750,000, expected to grow to more than
4,000,000 by 2003.
The Perfect Pitch 2000 Family Program in Schools with Lifetime
Learning Systems
In March 2000, TSIG.com reached an agreement with Lifetime Learning
Systems of Stamford, Connecticut, to offer its Perfect Pitch 2000 Family Package
in over 100,000 schools nationwide, with a potential audience of more than
50,000,000 K-12 students. The Perfect Pitch Package contains both the
myMusicCard, which offers music CDs and cassettes at greatly discounted prices,
as well an Internet Access Software Disc, which provides free lifetime use of a
powerful Internet Web browser with e-mail, voice mail and fax services. The
internet access is provided through TSIG.com's agreement with General
Search.com, a family oriented and adult-content free website. General Search
offers one of the most powerful and accurate search engines on the Internet,
with a data base of more than 100 million links, and has more than 800
Internet-based affiliates, including Amazon.com, AOL, Priceline, American
Greetings and eToys.
Lifetime Learning Systems is the leader in creating
corporate-sponsored educational programs in the schools, and over the past
several decades, has created programs for such companies as American Express,
A&T, Coca-Cola, Delta Airlines, Kodak, General Mills, Hershey, McDonald's,
Microsoft, Pepsi, Sears, and Sony.
The Perfect Pitch 2000 Family Package can be used in the schools as a
fund-raising program, where the school would receive $5.00 for each card sold,
the National Music Foundation $0.75 and TSIG the remaining $4.25. If only 2% of
the students participate in the program, and each sells an average of 2
myMusicCards, then 2,000,000 cards would be sold - this would generate
$20,000,000 in revenues, of which TSIG.com's share would be $8,500,000.
Coca-Cola Promotional Campaigns
In January 2000, the Atlanta Coca-Cola Bottling Corp., a division of
Coca-Cola Enterprises, used the myMusicCard program to conduct a promotional
campaign targeted at the teen market for Superbowl 2000. My MusicCard Company
and Coke collaborated to produce the promotional 3-unit Coca-Cola Superbowl
MusicCard, allowing Coke customers to purchase three CDs at $10.99 each or less.
The promotion featured special offers from Circle K, AMC Theaters, AMF Bowling
Centers, Athletes Foot and the NFL Experience. My MusicCard Company also
produced a customized Coca-Cola MusicCard web page and agreed to assist
Coca-Cola with database marketing efforts resulting from the promotion.
The Company and Coca-Cola are currently collaborating regarding
additional promotional campaigns in the Southeast and other regions of the
country.
National Marketing Partner of United Cerebral Palsy Associations
In December 1999, TSIG.com was appointed National Corporate Sponsor
and National Marketing Partner of United Cerebral Palsy Associations (UCP), and
was designated their exclusive source of music and film processing for
fund-raising purposes. Under the agreement, TSIG.com and UCP will jointly market
and sell myMusicCard and myPhotoCard products through UCP's local affiliates and
other National Corporate Sponsors, which include Tosco, Circle K, Miller
Brewing, QVC, First USA and others.
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Marketing Pact with Public Radio Station
In November 1999, TSIG.com formed an agreement with WUFT-FM, a public
radio station in Gainesville, Florida, to market myMusicCard to public radio
stations nationwide. Under the Agreement, WUFT will introduce myMusicCard as a
fund-raising and awareness vehicle for public radio stations. To kick-off the
program, WUFT arranged for myMusicCard to make a presentation to Florida's
public radio stations at the November Florida Public Radio Broadcasting Meeting.
To gain national exposure, they are arranging exhibitor space for myMusicCard at
the Spring 2000 Public Radio Conference, to be held May 24-28, 2000, in Orlando,
Florida.
The 4-H Club Program
TSIG.com and the National 4-H Council have formed a revenue-sharing
agreement, such that TSIG.com and local 4-H Clubs would split 50/50 the revenue
from the $10.00 myMusicCards sold by 4-H. The program is being marketed to the
nation's 156,000 4-H Clubs with 6,500,000 members.
TSIG.com Private-Label websites
TSIG.com also can "private label" its websites for other users. The
first such agreement was with Nettaxi, a premiere commerce-enabled online
community with more than 100,000,000 monthly page views. Visitors to the Nettaxi
home page can click onto the Nettaxi myMusicCard site and purchase myMusicCards
and CDs.
The Strategic Marketing Alliance with TEMPO for Corporate Clients
TSIG.com has formed a strategic marketing alliance with The
Entertainment Marketing and Promotion Organization (TEMPO), the leader in
custom-entertainment software-based promotions for Fortune 500 companies. Under
the alliance, TEMPO is TSIG.com's exclusive provider of custom compilations, and
the companies work together to promote the myMusicCard program to the corporate
and non-profit customers of both companies.
Trademarks
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 26 individuals, of which 25 are full-time employees and one is a
part-time employee.
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. 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.
B. 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.
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C. On June 17, 1999, the Company and Robert P. Gordon, individually and
as an officer of the Company, were named as defendants, among others, in an
amended complaint field by Miles and Rosalie Lerman in United States District
Court for the District of New Jersey. The Lerman's claim that their
broker-dealers (also named as defendants) made unauthorized transactions in
their accounts in "high risk penny stocks," including the common stock of the
Company, that resulted in losses in excess of $2,000,000. The complaint seeks
recovery of actual and consequential damages, costs and attorneys fees, and
other forms of equitable relief from all defendants. The Company and Mr. Gordon
have filed a motion to dismiss, which is pending.
D. On October 15, 1999, Clarity Consulting, Inc. ("Clarity"), filed an
amended complaint in the Circuit Court of Cook County, Illinois, adding the
Company as a defendant in their suit to recover monies that they originally
alleged were owed by Visitors Services International Corp. ("VSI"). The
complaint alleges that on June 24, 1997, Clarity and the defendants entered into
an agreement for consulting services, that consulting services were provided
between October 1996 and August 1997, and that the defendants promised to pay
for the consulting services and failed to do so. Clarity seeks a judgment
against the defendants in the amount of $552,635,16, plus service charges at the
rate of one and one-half percent per month, plus such other relief as the court
may deem equitable and just, as well as attorneys fees and court costs. In the
opinion of management of the Company, (1) The Company was not a party to the
agreement between Clarity and VSI, and (2) the software development effort was
lengthy and costly, and was never completed, which contributed to the eventual
bankruptcy of VSI. The Company has filed a motion to dismiss the action in the
State of Illinois, which is pending.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of security holders during the
fourth quarter of 1999. However, subsequent to the end of the 1999, the Company
held a Special Shareholders' Meeting on March 27, 2000. Proxies were solicited
by management. A quorum was present. The matter voted upon and the result
thereof is as follows:
1. Proposal to amend the Company's Articles of Incorporation to effect a
combination (also known as a "reverse-split") of the number of outstanding, but
not the number of authorized, shares of common stock of the company on a 10:1
basis:
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For Against Abstain
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91,259,848 31,417,864 535,557
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This approval of the share combination will have the following
results:
o The Board of Directors shall cause the Company to file, as soon as
practicable, an Amendment to its Articles of Incorporation which shall
reflect the share combination and provide for an effective date to be
determined by the Board of Directors (but not more than 90 days after
the date of shareholder approval).
o The number of shares outstanding would be divided by ten.
o The number of shares of common stock authorized to be issued shall
remain 300,000,000 and the par value per share shall remain $.0001.
o Fractional shares created as a result of the combination shall be
rounded to the nearest whole share.
o All options, warrants, convertible preferred stock, and any other
convertible securities that are convertible into common stock that are
outstanding on the date of the combination shall be adjusted on the
same basis.
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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.
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Low Bid High Bid
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1st Qtr. 1998 $ .15 $ .51
2nd Qtr. 1998 $ .125 $ .48
3rd Qtr. 1998 $ .1875 $ .39
4th Qtr. 1998 $ .18 $ .52
1st Qtr. 1999 $ .31 $ .48
2nd Qtr. 1999 $ .04 $ .38
3rd Qtr. 1999 $ .04 $ .08
4th Qtr. 1999 $ .038 $ .072
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The source of this information is America Online quotation services.
These prices reflect inter-dealer prices, without retail markup, mark-down or
commission and may not represent actual transactions.
(b) Holders
As of March 1, 2000, there were approximately 263 holders of record of
the Company's Common Stock and approximately 28,878 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 offered and sold a total of 1,250,000 restricted shares of
Series A Convertible Preferred Stock for gross proceeds of $2,500,000 to
approximately 31 investors in principal pursuant to a private placement which
commenced in August 1999 and ended in February 2000.
The Articles of Incorporation of the Company have been amended to
rescind the existing Designation of Rights and Preferences of Series A
Convertible Preferred Stock and replace it with a revised designation which
reflects that 1,250,000 shares were sold and provides that each share of Series
A Convertible Preferred Stock:
o has a stated value of $2.00;
o has a liquidation preference of $2.00;
o bears interest at the rate of 10% per annum, payable in cash or
in shares of restricted common stock, at the option of the
Company;
o is convertible into 40 shares of restricted common stock at a
conversion rate of $.05 per share and a warrant entitling the
holder to purchase an additional 40 shares of restricted common
stock for a period of 5 years at an exercise price of $.20 per
share;
o is generally non-voting; and
o is redeemable by the Company if the Company's common stock trades
above $1.00.
In connection with the offering, the Company granted certain
registration rights to the investors. In the event that a registration statement
for the resale of the shares of common stock underlying the Series A Convertible
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Preferred Stock and the warrants is not filed within 120 days of closing, the
per share exercise price of the warrants shall be reduced by $.05.
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 January 28, 2000, the Board Directors of the Company authorized the
issuance of 53,910 shares of restricted common stock to two former shareholders
of GuaranTEE Time, Inc. (a former subsidiary of the Company) in connection with
a settlement agreement dated August 6., 1998, regarding the disposition of
GuaranTEE Time, Inc. The Company believes that this transaction was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933.
C. On January 14, 2000, the Board Directors of the Company authorized the
issuance of 2,000,000 shares of restricted common stock to James F. Gordon, the
brother of Robert P. Gordon, an officer and director of the Company, in
settlement of a threatened legal claim against the Company made by James F.
Gordon. The Company believes that this transaction was exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933.
D. On December 17, 1999, the Board Directors of the Company authorized
the issuance of 1,000,000 shares of restricted common stock to two consultants
for business development services. The Company believes that this transaction
was exempt from registration pursuant to Section 4(2) of the Securities Act of
1933.
E. On December 15, 1999, the Board Directors of the Company authorized
the issuance of 9,500,000 shares of restricted common stock and a warrant to
purchase 9,500,000 shares of restricted common stock for a period of five years
at an exercise price of $.04 per share, to Robert P. Gordon, an officer and
director of the Company, in cancellation of $380,000 in principal owed to Mr.
Gordon for funds previously loaned to the Company by Mr. Gordon. The Company
believes that this transaction was exempt from registration pursuant to Section
4(2) of the Securities Act of 1933.
F. On November 19, 1999, the Board Directors of the Company authorized
the issuance of 16,537,880 shares of restricted common stock and a warrant to
purchase 16,537,880 shares of restricted common stock for a period of five years
at an exercise price of $.04 per share, to Robert P. Gordon, an officer and
director of the Company, in cancellation of $826,894 in principal and interest
owed to Mr. Gordon for funds previously loaned to the Company by Mr. Gordon. The
Company believes that this transaction was exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933.
G. The Company offered and sold a total of 18 convertible debentures
totaling $3,777,000 in principal to 8 investors pursuant to a private placement
which commenced in November 1998 and ended in April 1999. The terms of the
debentures included interest at the rate of 8%, maturity on October 31, 1999,
and the right to convert 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 filed a registration statement registering the shares of common
stock issuable upon conversion of the debentures for resale by the investors. As
of March 31, 1999, all debentures (principal and interest) had been converted
into an aggregate of 92,653,597 shares of common stock.
In connection with the offering, common stock purchase warrants
covering 1,119,250 shares were also issued to the placement agent (250,000) and
two of the investors (869,250). Each warrant is exercisable for a period of five
years at an exercise price of $.16 per share. As of March 31, 2000, all warrants
had been exercised except for one warrant to purchase 62,500 shares.
The Company also paid 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.
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.
H. On June 8, 1999, a lawsuit pending in Circuit Court for Pinellas
County, Florida was dismissed after a court-approved settlement in the case. The
lawsuit originated on February 9, 1998, when Robert P. Gordon, who is an officer
and director of the Company, individually filed a lawsuit against Felcrest
Trading Ltd. ("Felcrest"). On October 23, 1998, Felcrest filed a third party
complaint against the Company, VSI (the Company's subsidiary), and current and
former officers and directors of the Company and VSI and other third parties.
Pursuant to the
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settlement, the Company issued an aggregate of 4,402,923 shares of its common
stock to Felcrest and the former officers and directors who had indemnification
claims against the Company for the legal fees they incurred, while Mr. Gordon
returned 4,402,923 of his shares to the Company for cancellation. Consequently,
there was no increase in the outstanding shares of common stock as a result of
the settlement. The issuance by the Company was exempt from registration
pursuant to Section 3(a)(10) of the Securities Act of 1933.
I. On February 22, 1999, the Board Directors of the Company authorized
the issuance of 6,666,667 shares of restricted common stock to Robert P. Gordon,
an officer and director of the Company, in cancellation of $1,000,000 in
principal owed to Mr. Gordon for funds previously loaned to the Company by Mr.
Gordon. The Company believes that this transaction was exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933
J. 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.
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, 1999, were
$395,767, representing a 176% increase from revenues of $143,472 for the prior
fiscal year ended December 31, 1998. The Company sustained a net loss of
$8,633,350 in 1999, compared to a net loss of $11,882,251 for fiscal 1998.
Operating expenses increased from $6,564,133 in 1998 to $10,382,965 in 1999,
with most of the increases attributable to salaries and outside advisory fees.
The Company booked a one-time gain of $4,541,689 from discontinued
operations in 1999 as a result of the bankruptcy filing of Visitors Services
International Corp., the Company's subsidiary, which was in the business of
providing reservation and information services to Conventions and Visitors
Bureaus and convention/event organizers.
The Company initiated aggressive restructuring during the year. The
Company added several new members to its management team in December 1999,
sharply reduced expenses in the first quarter of 2000, and is making fundamental
changes to its strategic focus, as described in Item 1 under the section
entitled "Present Business of the Company."
Limited Working Capital; Financial Instability
As of December 31, 1999, the Company had a negative stockholder's
equity of $4,066,278, an accumulated deficit of $46,521,984, and a working
capital deficit of $4,527,880.
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. On February 29, 2000, the
Company announced that it had entered into a letter agreement engaging a
prominent New York based investment banking firm as its exclusive agent for a
private placement financing of up to $40 million. However, 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.
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.
9
<PAGE> 10
TELESERVICES INTERNET GROUP INC.
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
December 31, 1998
F1
<PAGE> 11
Contents
<TABLE>
<CAPTION>
Pages
-----
<S> <C>
Report 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' Deficit F7
Notes to Consolidated Financial Statements F8
</TABLE>
F2
<PAGE> 12
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders of
TeleServices Internet Group Inc.
We have audited the accompanying consolidated balance sheet of TeleServices
Internet Group Inc. as of December 31, 1999, and the related statements of
operations, changes in stockholders' (deficit), and cash flows for the two years
ended December 31, 1999 and 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of TeleServices
Internet Group Inc. as of December 31, 1999, and the results of its operations,
its changes in stockholders' (deficit) and its cash flows for the two years
ended December 31, 1999 and 1998, 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
2525 15th Street, Suite 3H
Denver, CO 80211
February 11, 2000
F3
<PAGE> 13
TeleServices Internet Group Inc.
Consolidated Balance Sheet
At December 31, 1999
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash, restricted (Note 2) $ 30,000
Other current assets 45,533
------------
Total current assets 75,533
Equipment, net of accumulated depreciation of
$417,970 (Note 5) 474,699
Other assets 4,255
------------
Total assets $ 554,487
============
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses (Notes 13, 14) $ 3,261,427
Loans payable, stockholder (Note 8) 165,387
Notes payable, current portion (Note 12) 256,599
Convertible debentures (Note 12) 300,000
Preferred stock subscription received (Note 11) 620,000
------------
Total current liabilities 4,603,413
Long-term liabilities
Notes payable 17,352
------------
Total liabilities 4,620,765
------------
Commitments and Contingencies (See Notes)
Stockholders' (deficit):
Preferred stock, $.001 par value
10,000,000 shares authorized
No shares issued and outstanding --
Common stock, $.0001 par value,
300,000,000 shares authorized,
240,083,155 shares issued and outstanding 25,059
Additional paid-in capital 42,555,647
Treasury Stock, 13,130 shares at cost (125,000)
Accumulated (deficit) (46,521,984)
------------
Total stockholders' (deficit) (4,066,278)
------------
Total liabilities and stockholders' (deficit) $ 554,487
============
</TABLE>
The accompanying notes are an integral part of the Financial Statements.
F4
<PAGE> 14
TeleServices Internet Group Inc.
Consolidated Statements of Operations
For the Years Ended December 31
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Total Revenues $ 395,767 $ 143,472
------------- -------------
Operating Expenses:
Salaries and contract services 2,948,153 1,285,268
Payroll taxes 335,858 349,547
Rent 305,042 316,383
Telephone 397,937 222,126
Travel and entertainment 221,060 98,641
Advertising and promotion 88,693 80,868
Depreciation and amortization 234,009 183,307
Outside advisory services 2,725,000 --
Other expenses (Note 6) 3,127,213 4,027,993
------------- -------------
Total operating expenses 10,382,965 6,564,133
------------- -------------
Net (loss) from operations (9,987,198) (6,420,661)
Other income (expenses):
Interest income 3,342 9,832
Interest (expense) (214,052) (201,867)
Discounts on stock conversions (2,815,143) (3,765,740)
------------- -------------
Net (loss) from continuing operations (13,013,051) (10,378,435)
------------- -------------
Discontinued operations:
Loss from operations of VSI (161,988) (1,443,816)
Gain on bankruptcy of VSI 4,541,689 --
------------- -------------
Total gain from discontinued operations 4,379,701 (1,443,816)
------------- -------------
Net (loss) $ (8,633,350) $ (11,822,251)
============= =============
Net (loss) per share $ (0.065) $ (0.23)
============= =============
Weighted Average Shares Outstanding 133,320,665 50,470,972
============= =============
</TABLE>
The accompanying notes are an integral part of the Financial Statements.
F5
<PAGE> 15
TeleServices Internet Group, Inc.
Consolidated Statements of Cash Flows
For the Years Ended December 31
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) from continuing operations $(13,013,051) $(10,378,435)
Adjustments to reconcile net (loss) to
net cash (used in) operating activities:
Net gain from sale of affiliated business (325,323) --
Decrease in accounts receivable 71,347 154,118
Depreciation and Amortization 234,009 183,307
Increase in accounts payable and accrued expenses 1,474,864 1,000,105
(Increase) decrease in other assets 65,172 (116,115)
------------ ------------
Net cash (used in) operating activities (11,492,982) (9,157,021)
------------ ------------
Cash flows from investing activities:
(Acquisition) of equipment (341,615) (14,924)
(Investment) in affiliate company 706,309 (380,986)
------------ ------------
Net cash provided by (used in) investing activities 364,694 (395,910)
------------ ------------
Cash flows from financing activities:
(Repayment of) leases payable (18,790) (82,978)
Cash proceeds from (repayment of) loans from stockholders 34,292 4,044,024
Issuance of common stock 366,400 1,211,265
Preferred stock subscription received 620,000 --
Sale of convertible debentures 2,902,000 875,000
Acquisition of treasury stock -- (125,000)
(Repayment of) notes payable (54,722) (121,205)
(Increase) decrease in cash collateral 95,000
------------ ------------
Net cash provided by financing activities 3,849,180 5,895,806
------------ ------------
(Decrease) in cash (7,279,106) (3,657,126)
Cash, beginning of period -- --
Non-cash transactions 7,279,106 3,657,126
------------ ------------
Cash, end of period $ -- $ --
============ ============
Schedule of non-cash operating, financing and investing activities:
Net gain from discontinued operation (161,988) (1,443,816)
Net gain on disposal of discontinued operations 92,697
Repayment of stockholder loan (1,000,000) (2,752,244)
Issuance of common stock 11,825,397 7,925,185
Stock subscription receivable (72,000)
Conversion of debentures into common stock (3,477,000) --
------------ ------------
Increase in non-cash items $ 7,279,106 $ 3,657,125
============ ============
Interest paid $ 214,052 $ 201,867
============ ============
Income taxes paid $ -- $ --
============ ============
</TABLE>
The accompanying notes are an integral part of the Financial Statements.
F6
<PAGE> 16
TeleServices Internet Group Inc.
Consolidated Statement of Changes in Stockholders' (Deficit)
From December 31, 1997 through December 31, 1999
<TABLE>
<CAPTION>
Common Stock Additional
Paid-in Accumulated Treasury
Shares Amount Capital Deficit Stock Total
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
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
Imputed Interest on Convertible Debentures -- -- 375,000 -- -- 375,000
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 30,002,411 (37,888,635) (125,000) (8,004,726)
Issuance of Common Stock 185,611,517 18,561 11,438,093 -- -- 11,456,654
Imputed Interest on Convertible Debentures -- -- 1,115,143 -- -- 1,115,143
Net (loss) year ended December 31, 1999 -- -- -- (8,633,350) -- (8,633,350)
------------ ------------ ------------ ------------ ------------ ------------
Balance, December 31, 1999 250,583,155 $ 25,059 $ 42,555,647 $(46,521,984) $ (125,000) $ (4,066,278)
============ ============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the Financial Statements.
F7
<PAGE> 17
TELESERVICES INTERNET GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and December 31, 1998
(1) Organization and Operations:
TeleServices Internet Group Inc. (TSIG), formerly TeleServices
International Inc. and 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. The Company
changed its name to TeleServices Internet Group Inc. on July 8, 1999.
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. 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 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.
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. CCI changed its name to The MusicCard Co. on January 19, 1999 and
then to My MusicCard Company (MMC) on February 16, 1999.
My Card, Inc. (MCI), a Delaware corporation, was incorporated on February
11, 1999, as a wholly-owned subsidiary of TSIG for the purpose of expanding
the Company's product lines and e-commerce business.
The source of sales revenue during the years 1999 and 1998 are summarized
as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
TSIG 0% 0%
VSI 0% 87%
AIT 30% 12%
MMC 37% 1%
MCI 33% 0%
--- ---
Total 100% 100%
</TABLE>
The proportion of revenues derived from VSI is no longer included in the
financial statements for either 1999 or 1998 as it is included in the
discontinued operations.
F8
<PAGE> 18
TELESERVICES INTERNET GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and December 31, 1998
(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 and AIT for the entire years
ended December 31, 1999 and 1998, the accounts of MMC since April 17,
1998 and the accounts of MCI since February 11, 1999, 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, 1999 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
$46,000,000 at December 31, 1999, which expire in various years
through 2019. The Company has deferred tax assets of approximately
$6,900,000 at December 31, 1999 related to loss carryovers but due to
the uncertainty of the Company's ability to utilize these carryovers,
a valuation allowance of the total $6,900,000 has been provided.
Therefore, as of December 31, 1999 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. The
equipment was principally owned by VSI, which filed a petition for
relief under Chapter 7 of the United States Bankruptcy Code. The
equipment was acquired by TSIG from the trustee of the Bankruptcy
Court at an appraised liquidation value.
(e) Per Share Information
The per-share information is computed based upon the weighted average
shares outstanding.
F9
<PAGE> 19
TELESERVICES INTERNET GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and December 31, 1998
(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) Advertising and Promotion Costs
Advertising, promotion and sales materials costs are expensed as
incurred.
(h) 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.
(i) Restricted Cash
Included in cash on December 31, 1999 is $30,000 being held in
separate certificates of deposit as collateral for operating licenses.
(j) Software Development
The Company incurred $215,000 in total outside costs related to the
development of computer software designed for the purpose of providing
an internet-based order transaction system for MMC. At December 31,
1999, the net book value of this software was $56,312.
(k) Write Down of Equipment Value
During 1999 and 1998, the Company wrote down the value of its
equipment and other assets by $100,000 and $325,000, respectively, due
to reasonable doubt as to its ability to be able to recover the full
value from future operations.
F10
<PAGE> 20
TELESERVICES INTERNET GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and December 31, 1998
(l) Investment in Affiliate
At December 31, 1998, TSIG had an investment in an affiliate company
totaling $380,986, 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. During the
current reporting period, the Company sold its equity position for
$706,000 in cash, resulting in a gain of $326,000 recognized in 1999.
(m) Stock Issuance Discounts
During the year ended December 31, 1999 and 1998, the Company
recognized an expense totaling $1,115,143 and $375,000, respectively,
related to the conversion of convertible debentures at a 30 percent
discount to the public market price at the time of conversion. In
addition, in 1999, an expense of $1,700,000 was recognized related to
the conversion of a stockholder loan into common shares at a
below-market price of $.15 (see Note 8). In 1998, the discount
recognized on the stockholder conversion was $3,390,740.
(n) Advisory and Consulting Fees
During 1999, the Company issued common stock with a value of
$2,725,000 for various consulting and advisory services related to the
financing and development of the Company and its operations.
(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 Florida office facilities for a term of seven years. On March 15,
1999, the Company entered into a 3-year operating lease agreement for an
office/warehouse facility in Southern California. Minimum future rental
payments due under operating leases with terms greater than one year are
summarized as follows:
F11
<PAGE> 21
TELESERVICES INTERNET GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and December 31, 1998
(4) Lease Commitments, continued
<TABLE>
<CAPTION>
Year ending December 31
<S> <C>
2000 $ 367,257
2001 $ 340,406
2002 $ 220,172
</TABLE>
(5) Equipment
The company's equipment as of December 31, 1999 is summarized as follows:
<TABLE>
<S> <C>
Furniture, fixtures and office equipment $ 36,750
Telephone equipment 477,385
Computer equipment and software 357,694
Vehicles 20,841
---------
892,669
Accumulated depreciation (417,970)
---------
$ 474,699
=========
</TABLE>
(6) Other Expenses
In addition to normal other operating expenses, other expenses include the
following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Provision for contingencies $ 360,000 $ 666,886
Write off software development 100,000 810,795
Provision for asset writedown -- 325,283
---------- ----------
$ 460,000 $1,802,964
========== ==========
</TABLE>
(7) VSI Bankruptcy
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, resulting in a net realized gain from the liquidation of
the assets and relief from liabilities of the business. The gain, totaling
$4,541,689, is summarized as follows:
<TABLE>
<S> <C>
Accounts payable & accrued expense $1,647,701
Notes & leases payable 78,243
Payroll taxes payable 611,083
Litigation reserve 2,477,809
----------
Total liabilities relieved 4,814,836
----------
</TABLE>
F12
<PAGE> 22
TELESERVICES INTERNET GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and December 31, 1998
(7) VSI Bankruptcy, continued
<TABLE>
<S> <C>
Current assets (128,664)
Property and equipment, net of depreciation (144,483)
-----------
Total assets disposed of (273,147)
-----------
Net Gain $ 4,541,689
-----------
</TABLE>
(8) 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, 1999 the stockholders converted $1,380,000 into 16,166,667 shares of
the common stock of the Company. During the year ended December 31, 1998
the stockholders converted $2,752,244 into 17,110,522 shares of Common
Stock.
As of December 31, 1999 loans payable to a stockholder totaled $5,387,
accruing interest at 11% per annum. This balance includes $160,000 of
compensation accrued but unpaid as of December 31, 1999. The loan is
payable on demand and is uncollateralized.
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.
(9) Stock Options
On August 25, 1999, the Company's Board of Directors adopted the TSIG.com
1999 Stock Plan, which consists of 25,000,000 shares. Also on December 17,
1999, the Company's Board of Directors adopted the TSIG.com Incentive Plan
which consists of 30,000,000 shares. Options on these shares are to be
granted at the Board's discretion.
F13
<PAGE> 23
TELESERVICES INTERNET GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and December 31, 1998
(9) Stock Options, continued
<TABLE>
<CAPTION>
Number of Weighted Average
Options Exercise Price
--------- ----------------
<S> <C> <C>
Outstanding at December 31, 1998 3,643,726 $.3027
Outstanding at December 31, 1999 30,988,703 $.0708
Exercisable at December 31, 1999 30,988,703 $.0708
Options granted during 1999 29,000,000 $.0567
Options exercised during 1999 4,483,854 $.077
Options forfeited or expired during 1999 1,171,169 $.5825
</TABLE>
Options outstanding as of December 31, 1999 expire at various dates through
May 31, 2004.
(10) Common Stock
On July 31, 1999, the Company held a special meeting of the shareholders,
during which the number of authorized common shares was increased to
300,000,000 from 100,000,000.
(11) 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. As of December 31, 1999, the Company had received subscriptions
and funds representing 310,000 shares of the preferred stock at a price of
$2.00 per share. However, no shares have been issued and the $620,000
received has been recorded as a stock subscription received liability. The
shares will be issued upon determination of the terms and necessary
documentation related to the transaction.
(12) Notes, Loans and Debentures Payable
The Company had notes and loans payable of approximately $274,000 at
December 31, 1999. The amounts due consist of $96,500 payable for the
repurchase of treasury stock, $20,588 for the purchase of a vehicle,
$112,000 in a bank loan owed by VSI but assumed by TSIG and $44,500 due to
individuals. All of the debts have a current due date with the exception of
the vehicle loan, which has a current maturity of $3,236 and a long-term
maturity of $17,352.
In November 1998, the Company authorized the issuance of $2,000,000 of
convertible debentures. In 1998 and 1999, a total of $3,777,000 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. As of December 31, 1999, $3,477,000 of
the outstanding debentures plus accrued interest of $73,072 were converted
into a total of 83,077,994 shares of common stock at an average price of
$.0427 per share.
F14
<PAGE> 24
TELESERVICES INTERNET GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and December 31, 1998
(13) Contingent Liabilities
Creditors of VSI, including the Internal Revenue Service, may assert a
claim against TSIG. 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 in violation of preference of creditor statutes, rules and
regulations. A provision of $475,000 was accrued by the Company for the
trust fund portion of the federal payroll tax withholdings owed by VSI and
a provision of $130,000 was accrued for a bank loan guaranteed by an
officer of TSIG.
(14) 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.
(15) Fourth Quarter Adjustments
The Company recognized as expenses various previously unrecorded accruals
for potential litigation matters and various accrued expenses and
provisions for losses, which were recorded in the fourth quarter. These
fourth quarter adjustments totaled $360,000. Additionally, the expenses
related to stock issuance for outside advisory services and the discounted
stock conversion were recorded in the fourth quarter, a total of
$5,540,000.
F15
<PAGE> 25
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 currently
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 are as follows:
<TABLE>
<CAPTION>
Director of
Directors Age Company Since
- ---------------- --- ---------------
<S> <C> <C>
Robert P. Gordon 49 September 1996
Paul W. Henry 52 September 1996
J.R. LeShufy 75 June 1999
Frank Ragano 71 October 1999
</TABLE>
ROBERT P. GORDON
Director, Chairman and Chief Executive Officer
Robert Gordon has served as a director of the Company since September 1996. As
the company's founder and leader, Robert Gordon has taken TSIG.com from its
beginnings as a teleservices center for the travel and tourism industry to its
position today as an Internet company with its innovative myCard programs and a
web-based call center. A decade ago, Mr. Gordon founded and served as chairman
of Phoenix Information Systems Corp., a company that developed a proprietary
airline reservation system and secured the first-ever contract with the Chinese
government to import a new airline reservations system to service Chinese
airlines. Previously, he had a career on Wall Street with Donaldson, Lufkin and
Jenrette, and several other investment banks. Mr. Gordon holds bachelor's
degrees in philosophy and biology from New York University, where he also did
his graduate studies.
PAUL W. HENRY
Director, Secretary, Treasurer and Consultant
Paul Henry has served as a director and as corporate secretary and treasurer of
TSIG.com since September 1996, and as a full-time consultant since October 1998.
During the past ten years, Mr. Henry has been retained as an independent
financial consultant by various institutions, including: Phoenix Information
Systems, an airline reservation system company; Essex Investment Management
Company, Boston, an institutional fund manager; and Caithness Corporation, New
York, a natural resources development company. Mr. Henry holds a bachelor's
degree in economics from Yale University, and a master's degree in business
administration from Northeastern University.
J. R. LESHUFY
Director
J. R. LeShufy, a TSIG.com director since June 1999, is a private investor and
entrepreneur with a background in developing companies. Mr. LeShufy was formerly
president of Basic Investments Ltd., a major investor in TSIG.com. He is a
director of Inkine Pharmaceuticals, a biopharmaceutical company, whose stock
trades on the NASDAQ under the symbol INKP. Mr. LeShufy was the president and
founder of Consolidated Fine Arts Ltd., an innovative marketing company for the
visual arts, primarily in graphics and art books.
10
<PAGE> 26
FRANK P. RAGANO
Director
Frank Ragano, Maj. General, U.S. Army (ret.), joined TSIG.com as a director in
October 1999. Mr. Ragano is currently chairman of the board of directors of
Skylynx Communications, Inc. (OTCBB:SKYK), where he has served as a director
since 1998. Mr. Ragano is also a director of Irvine Sensors Corp.
(NasdaqSC:IRSN), where he has served as a director since 1995. Mr. Ragano was,
until earlier this year, President and CEO of CMS, Inc., a wholly owned
subsidiary of Daimler-Benz GmbH. He graduated with a B.S. degree from Duquesne
University in 1950 and later graduated with a Master of Business Administration
(MBA) from Syracuse University, New York. After a well-decorated career in the
military, Mr. Ragano retired from active Army service and became Vice-President
of the American Defense Preparedness Association and Chairman and CEO of BEI
Defense Systems Company.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company and their respective positions are as
follows:
ROBERT P. GORDON
Chairman
In addition to being a director of the Company, Mr. Gordon 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. Mr. Gordon's biography is set forth above.
PAUL W. HENRY
Secretary and Treasurer
In addition to being a director of the Company, Mr. Henry has served as
Secretary and Treasurer of the Company since September 1996. Mr. Henry's
biography is set forth above.
JOSEPH KEEGAN
President and Chief Operating Officer
Joe Keegan joined TSIG.com as President and Chief Operating Officer in December
1999. Previously, he was Senior Vice-President for Domestic Operations of
Teledex Corporation, a private company based in San Jose, California, and the
leading provider of guestroom telephones to national hotel chains, including
Marriott, Hilton, Starwood and others. Mr. Keegan and Mr. Potenberg (see below)
were part of the original, start-up management team at Teledex, and were later
joined there by Mr. Wheeler (see below). This three-man team was an integral
part of the senior management that built Teledex into the national leader for
hotel guestroom telephones. Mr. Keegan, who grew up in New England, holds a
bachelor's degree in education from Ripon College in Wisconsin and later did his
graduate studies at Keller Graduate School of Business in Chicago.
RICHARD WHEELER
Senior Vice President, Operations and Strategic Development
Dick Wheeler joined TSIG.com in December 1999. He formerly worked with Messrs.
Keegan and Potenberg at Teledex, where he held the position of Director and was
responsible for distribution channel development and strategic alliances.
Previously, Mr. Wheeler was executive vice president for a division of Barlow
Rand, a Fortune 50 international company. Earlier, he was vice president of
sales and marketing for Control Laser Corporation, where he managed a worldwide
network of 65 sales and service branch offices. Additionally, he held executive
positions with Datalogic and LazerData Corporation. Mr. Wheeler holds an
electrical engineering degree from the University of Maryland.
11
<PAGE> 27
SIGNIFICANT EMPLOYEES OF THE COMPANY AND ITS SUBSIDIARIES
WARREN POTENBERG
Vice President - Sales, Eastern Region
Warren Potenberg joined TSIG.com in December 1999. His role is to develop and
manage national accounts for the myCard programs. Prior to joining TSIG.com, Mr.
Potenberg was Senior Director of National Accounts at Teledex, responsible for
managing vertical markets and strategic national accounts. His earlier
experience included sales of commercial energy management systems for Honeywell
and telecommunications systems for GTE. Mr. Potenberg holds a bachelor's degree
in marketing and management from New York University, where he was also
president of the NYU Marketing Society.
TOM MURPHY
Vice President - Sales, Mid-West Region
Tom Murphy joined TSIG.com in October 1999. His role is to develop and manage
national accounts for the myCard programs. Prior to joining TSIG.com, Mr. Murphy
maintained a private consulting practice in which he has helped develop
entertainment-oriented e-commerce programs for such clients as Home Shopping
Network, USA Networks and CitySearch. Previously, he was Vice President, Tour
Division, for Entertainment Marketing Inc., a manager of music tour sponsorship
programs for corporate clients. For more than a decade, he held senior sales and
marketing management positions in several major consumer packaged goods
companies, including Coca-Cola USA and Procter & Gamble. Mr. Murphy holds a
bachelor's degree in business and marketing from Central Washington University.
RICHARD OLSON
Director of Sales, Western Region
Richard Olson came to TSIG.com in July 1995 from International Hotel Academy,
where he was regional vice president responsible for account development and
revenue growth for The Grand Wailea Resort, Hotel and Spa (Maui), and the
Biltmore Hotel, Los Angeles. Earlier, he was director, national accounts, Hyatt
Hotels & Resorts, and was responsible for convention and group sales for all 86
domestic properties.
MARK L. MORETTI
Director of Marketing
Mark Moretti joined TSIG.com in April of 2000. His role is to develop marketing
collateral materials for TSIG.com, as well as its partners and the clients of
the "My Card" programs. He will spear-head the new look and functionality of the
company's web sites, and will be working with outside graphics and IT
departments. Prior to moving to Florida in 1990, Mr. Moretti was employed in the
advertising and marketing fields in New York City. Over the past decade, he has
worked for several advertising agencies and Internet communication companies in
the Tampa Bay area. He has also served on the boards of numerous marketing
associations and non-profits, where he has held various officer positions, among
them president of the Florida Direct Marketing Association (FDMA). Mr. Moretti
attended the School of Visual Arts in New York City, where he majored in
Advertising and Marketing.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
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, Visitors
Services International Inc. ("VSI"), filed a voluntary petition for relief under
Chapter 7 of the United States Bankruptcy Code for the Middle District of
Florida, Tampa Division. At that time, Robert P. Gordon and Paul W. Henry were
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.
12
<PAGE> 28
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.
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, 1999, 1998
and 1997, 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 $100,000 for the year ended 1999.
<TABLE>
<CAPTION>
Annual Compensation
------------------------------------------------
(a) (b) (c) (d) (e)
Name Year Other
And Ended Annual
Principal December Salary Bonus Compensation
Position 31 ($) ($) ($)
- ------------------------------ -------- ---------- -------- ------------
<S> <C> <C> <C> <C>
Robert P. Gordon, 1999 $360,000(n1) -0- -0-
Chairman, CEO, Director 1998 $178,846 -0- -0-
1997 $158,247 $ 35,000 -0-
Paul W. Henry, 1999 $180,000(n2) -0- -0-
Secretary, Treasurer, Director 1998 $73,333(n3) -0- -0-
1997 $-0- -0- -0-
</TABLE>
(n1) Of this amount, $200,769 was actually paid in 1999, and the balance of
$159,230 was accrued and payable as of December 31, 1999.
(n2) Of this amount, $121,667 was actually paid in 1999, and the balance of
$58,833 is accrued and payable as of December 31, 1999.
(n3) Of this amount, $37,500 was actually paid in 1998, and the balance of
$35,833 was accrued and paid in 1999.
<TABLE>
<CAPTION>
Long Term Compensation
-----------------------------------------------------
Awards Payouts
------------------------------------ ----------------
(a) (b) (f) (g) (h) (i)
Name Year Restricted
And Ended Stock Shares LTIP All Other
Principal December Award(s) Underlying Payouts Compensation
Position 31 ($) Options ($) ($)
- ------------------------------- -------- -------------- -------------- ------- ------------
<S> <C> <C> <C> <C> <C>
Robert P. Gordon, 1999 -0- 10,000,000(n1) -0- -0-
Chairman, CEO, Director 1998 1,250,000 (n2) 16,809,122(n3) -0- -0-
1997 -0- 15,000,000 -0- -0-
Paul W. Henry, 1999 -0- 2,068,360(n4) -0- -0-
Secretary, Treasurer, Director 1998 -0- 1,000,000 -0- -0-
1997 -0- -0- -0- -0-
</TABLE>
(n1) On December 17, 1999, Mr. Gordon was granted options to acquire
10,000,000 shares of common stock at an exercise price of $.07 per
share.
13
<PAGE> 29
(n2) 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.
(n3) 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.
(n4) On December 17, 1999, Mr. Henry was granted options to acquire
2,068,360 shares of common stock at an exercise price of $.07 per
share. These options are in replacement of any outstanding options
that had been granted in prior years.
Option/SAR Grants in Last Fiscal Year
The information provided in the table below provides information with
respect to individual grants of stock options during 1999 to each of the
executive officers named in the Summary Compensation Table above. The Company
did not grant any stock appreciation rights during 1999.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
(a) (b) (c) (d) (e)
% of Total
Number of Options/SARS
Securities Granted to
Underlying Employees Exercise or
Options/SARs in Fiscal Base Price Expiration
Name Granted (#) Year(n1) ($/Sh) Date
- --------------------------------- ------------ ------------ ----------- ----------
<S> <C> <C> <C> <C>
Robert P. Gordon 10,000,000 8.3% $ .07 12/31/04
Paul W. Henry 2,068,360 1.7% $ .07 12/31/04
</TABLE>
Notes:
(n1) The percentage of total options granted in the fiscal year is based
upon all options (approximately 120,442,805) granted to eligible
participants (which includes officers, directors, employees,
consultants and advisors) under each of the Company's employee stock
option plans in fiscal 1999 (not all options granted during 1999
remained outstanding as of December 31, 1999).
14
<PAGE> 30
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 1999 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)
Number of Value of
Securities Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End(#) FY-End($)
Shares Value
Acquired on Realized Exercisable/ Exercisable/
Name Exercise(#) ($)(n1) Unexercisable Unexercisable(n1)
- -------------------- ------------ -------- ---------------------- -----------------
<S> <C> <C> <C> <C>
Robert P. Gordon -0- N/A 3,333,333/6,666,667 $6,667/$13,333
Paul W. Henry -0- N/A 1,423,360/645,000 $2,846/$1,290
</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 1999.
Compensation of Directors.
On December 17, 1999, J.R. LeShufy, a director of the Company, was
granted options to acquire 600,000 shares of the Company's common stock at an
exercise price per share equal to $.07. The options vest (and become exercisable
at the time they vest), subject to termination of the agreement, on a quarterly
basis on the last day of each quarter for a period of three years, with 175,000
deemed vested on December 31, 1999, and the balance to vest on a quarterly basis
on the last day of each quarter for the next two years. All options expire on
December 31, 2004.
On December 17, 1999, Robert P. Gordon, an office and director of the
Company, was granted options to acquire 10,000,000 shares of the Company's
common stock at an exercise price per share equal to $.07. The options vest (and
become exercisable at the time they vest), subject to termination of the
agreement, on a quarterly basis on the last day of each quarter for a period of
three years, with 3,333,333 deemed vested on December 31, 1999, and the balance
to vest on a quarterly basis on the last day of each quarter for the next two
years. All options expire on December 31, 2004.
On December 17, 1999, Paul W. Henry, an officer and director of the
Company, was granted options to acquire 2,068,360 shares of the Company's common
stock at an exercise price per share equal to $.07. The options vest (and become
exercisable at the time they vest), subject to termination of the agreement, on
a quarterly basis on the last day of each quarter for a period of three years,
with 1,423,360 deemed vested on December 31, 1999, and the balance to vest on a
quarterly basis on the last day of each quarter for the next two years. All
options expire on December 31, 2004. These options supercede and replace any
prior options held by Mr. Henry.
Pursuant to his Agreement to Serve as a Director dated September 29,
1999, Frank Ragano was granted options to acquire 900,000 shares of the
Company's common stock at an exercise price per share equal to $.05. The options
vest (and become exercisable at the time they vest), subject to termination of
the agreement, on a quarterly basis on the last day of each quarter for a period
of two years. All options expire on December 31, 2004.
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,
15
<PAGE> 31
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. These options and all options previously granted
to Mr. Henry were superceded and replaced by the options granted to him on
December 17, 1999 (described above).
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.
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 one Employee Benefit and Consulting Services
Compensation Plan in effect, the TSIG.com Incentive Stock Plan, which covers up
to 50,000,000 shares of common stock. Half of these shares have been registered
on Form S-8.
Under the plan 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.
16
<PAGE> 32
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The only class of voting security of the Company is Common Stock. 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.
Each person is believed to have sole voting and investment power over the shares
except as noted.
<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) 44,001,941 14.9%
Paul W. Henry (5) 1,563,360 *
J.R. LeShufy (6) 231,250 *
Frank Ragano (7) 2,715,000 1.0%
Joseph K. Keegan (8) 1,280,000 *
Basic Investments, Ltd. (9) 22,101,200 8.2%
Includes all officers and directors of the 49,791,551 15.2%
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, and 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 269,197,515 shares of Common Stock 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 is Chairman, CEO and a Director of the Company.
Robert P. Gordon individually owns 16,935,385 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 22,537,880 shares which Mr. Gordon may have the right to
acquire pursuant to warrants, and 4,166,666 shares which Mr. Gordon
has the right to acquire pursuant to options that have vested or will
be vested within the next 60 days.
(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 and options
that have vested or will be vested within the next 60 days to purchase
1,528,360 shares.
(6) J.R. LeShufy 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 231,250 shares of common stock.
(7) Frank Ragano is a director of the Company. Included in the table are
340,000 shares owned by Mr. Ragano; options that have vested or will
be vested within the next 60 days to purchase 375,000 shares; and an
aggregate of 2,000,000 shares of common stock which Mr. Ragano and his
wife have the right to acquire upon conversion of 50,000 shares of
Series A Convertible Preferred Stock and underlying common stock
purchase warrants.
17
<PAGE> 33
(8) Joseph K. Keegan is President of the Company. Included in the table
are 5,000 shares held in the names of the minor children of Mr.
Keegan, and options that have vested or will be vested within the next
60 days to purchase 1,275,000 shares of common stock.
(9) Basic Investments, Ltd., 2431 Mill Ave., Brooklyn, NY 11234. Included
in the table are 18,601,200 shares owned and 3,500,000 shares which
may be acquired pursuant to warrants owned by Basic Investments and/or
Bernard Deutsch, an affiliate of Basic Investments.
Item 12. Certain Relationships and Related Transactions.
In connection with the Company's private placement of shares of Series A
Convertible Preferred Stock, Frank Ragano and his wife purchased 25,000 shares
for $50,000 in August 1999. Subsequently, Mr. Ragano became a director of the
Company. The purchase was made on the same terms as other investors in the
offering.
In connection with the Company's private placement of shares of Series A
Convertible Preferred Stock, a trust which benefits the children of Robert P.
Gordon, an officer and director of the Company, purchased 50,000 shares for
$100,000 in January 2000. The purchase was made on the same terms as other
investors in the offering. Mr. Gordon disclaims any control over the trust or
any beneficial ownership of the shares of Series A Convertible Preferred Stock
purchased by the trust.
On December 15, 1999, the Board Directors of the Company authorized
the issuance of 9,500,000 shares of restricted common stock and a warrant to
purchase 9,500,000 shares of restricted common stock for a period of five years
at an exercise price of $.04 per share, to Robert P. Gordon, an officer and
director of the Company, in cancellation of $380,000 in principal owed to Mr.
Gordon for funds previously loaned to the Company by Mr. Gordon.
On November 19, 1999, the Board Directors of the Company authorized
the issuance of 16,537,880 shares of restricted common stock and a warrant to
purchase 16,537,880 shares of restricted common stock for a period of five years
at an exercise price of $.04 per share, to Robert P. Gordon, an officer and
director of the Company, in cancellation of $826,894 in principal and interest
owed to Mr. Gordon for funds previously loaned to the Company by Mr. Gordon.
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.
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.
18
<PAGE> 34
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.
Item 13. Exhibits and Reports on Form 8-K.
(a) List of Exhibits.
Exhibit Number Description
3.6 Bylaws as restated April 22, 1999. (Incorporated
by reference to Exhibit 3.6 of the Company's
Registration Statement on Form SB-2 (file no.
333-78077) filed on May 7, 1999).
3.8 Articles of Incorporation, as amended on April 3,
2000, and currently in effect. (Filed herewith.)
4.8 Form of Securities Purchase Agreement for private
placement of Series A Convertible Preferred Stock
which commenced in August 1999. (Filed herewith.)
4.9 Form of Series A Common Stock Purchase Warrant
issuable upon conversion of Series A Convertible
Preferred Stock. (Filed herewith.)
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.)
10.9 Employment Agreement between the Company and
Robert P. Gordon dated December 4, 1998.
(Incorporated by reference to Exhibit 10.9 of the
Company's Form 10-KSB for the fiscal year ended
December 31, 1998 and filed on March 31, 1999).
10.12 Consulting Agreement between the Company and Paul
W. Henry dated April 9, 1998. (Incorporated by
reference to Exhibit 10.12 of the Company's
Registration Statement on Form SB-2 (file no.
333-78077) filed on May 7, 1999).
10.16 TSIG.com Incentive Stock Plan dated December 17,
1999. (Incorporated by reference to Exhibit 10.16
of the Company's Registration Statement on Form
S-8 (file no. 333-32548) filed March 15, 2000).
10.17 Employment Agreement between the Company and
Joseph K. Keegan dated December 6, 1999. (Filed
herewith.)
10.18 Employment Agreement between the Company and
Richard H. Wheeler dated December 6, 1999. (Filed
herewith.)
10.19 Employment Agreement between the Company and
Warren H. Potenberg dated December 6, 1999. (Filed
herewith.)
10.20 Agreement to Serve as a Director between the
Company and Frank Ragano dated September 29, 1999.
(Filed herewith.)
19
<PAGE> 35
21.3 List of Subsidiaries of the Company. (Incorporated
by reference to Exhibit 10.10 of the Company's
Form 10-KSB for the year ended December 31, 1998,
filed March 31, 1999).
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
1999.
20
<PAGE> 36
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 INTERNET GROUP INC.
Dated: April 14, 2000 /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.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Robert P. Gordon Chairman, CEO and April 14, 2000
- -------------------- Director
Robert P. Gordon
/s/ Paul W. Henry Secretary, Treasurer, and April 14, 2000
- -------------------- Director
Paul W. Henry
/s/ J.R. LeShufy Director April 14, 2000
- --------------------
J.R. LeShufy
/s/ Frank Ragano Director April 14, 2000
- --------------------
Frank Ragano
</TABLE>
21
<PAGE> 37
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
3.6 Bylaws as restated April 22, 1999. (Incorporated by reference to Exhibit 3.6 of the
Company's Registration Statement on Form SB-2 (file no. 333-78077) filed on May 7,
1999).
3.8 Articles of Incorporation, as amended on April 3, 2000, and currently in effect.
(Filed herewith.)
4.8 Form of Securities Purchase Agreement for private
placement of Series A Convertible Preferred Stock
which commenced in August 1999. (Filed herewith.)
4.9 Form of Series A Common Stock Purchase Warrant
issuable upon conversion of Series A Convertible
Preferred Stock. (Filed herewith.)
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.)
10.9 Employment Agreement between the Company and Robert P. Gordon dated December 4,
1998. (Incorporated by reference to Exhibit 10.9 of the Company's Form 10-KSB for
the fiscal year ended December 31, 1998 and filed on March 31, 1999).
10.12 Consulting Agreement between the Company and Paul W. Henry dated April 9, 1998.
(Incorporated by reference to Exhibit 10.12 of the Company's Registration Statement
on Form SB-2 (file no. 333-78077) filed on May 7, 1999).
10.16 TSIG.com Incentive Stock Plan dated December 17, 1999. (Incorporated by reference to
Exhibit 10.16 of the Company's Registration Statement on Form S-8 (file no.
333-32548) filed March 15, 2000).
10.17 Employment Agreement between the Company and Joseph K. Keegan dated December 6,
1999. (Filed herewith.)
10.18 Employment Agreement between the Company and Richard H. Wheeler dated December 6,
1999. (Filed herewith.)
10.19 Employment Agreement between the Company and Warren H. Potenberg dated December 6,
1999. (Filed herewith.)
10.20 Agreement to Serve as a Director between the Company and Frank Ragano dated
September 29, 1999. (Filed herewith.)
21.3 List of Subsidiaries of the Company. (Incorporated by reference to Exhibit 10.10 of
the Company's Form 10-KSB for the year ended December 31, 1998, filed March 31,
1999).
27 Financial Data Schedule. (Filed herewith.)
</TABLE>
<PAGE> 1
EXHIBIT 3.8
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
TELESERVICES INTERNET GROUP INC.
Pursuant the provisions of Section 607.0602, Florida Statutes, this corporation
adopts the following Articles of Amendment to its Articles of Incorporation:
FIRST: Pursuant to Article IV of the Corporation's Articles of Incorporation,
the Corporation does hereby designate 1,250,000 of the 10,000,000 authorized
shares of $.001 par value Preferred Stock as Series A Convertible Preferred
Stock, in accordance with the attached "Designation of Rights and Preferences of
Series A Convertible Preferred Stock of TeleServices Internet Group Inc. dated
March 31, 2000," which supersedes and replaces in its entirety the previous
"Designation of Rights and Preferences of Series A Convertible Preferred Stock
of TeleServices International Group Inc. dated April 28, 1997," which was
attached to the Articles of Amendment to the Corporation's Articles of
Incorporation dated April 28, 1997 and filed with the Secretary of State on May
5, 1997.
SECOND: This amendment was adopted on March 31, 2000 by resolution of the board
of directors without shareholder action and shareholder action was not required.
Signed this 31st day of March, 2000.
TELESERVICES INTERNET GROUP, INC.
By: /s/ Robert P. Gordon
---------------------------------------------
Robert P. Gordon, Chief Executive Officer
ATTEST:
/s/ Paul W. Henry
- -----------------------------
Paul W. Henry, Secretary
<PAGE> 2
DESIGNATION OF RIGHTS AND PREFERENCES OF
SERIES A CONVERTIBLE PREFERRED STOCK OF
TELESERVICES INTERNET GROUP INC.
MARCH 31, 2000
TeleServices Internet Group Inc., a corporation organized and existing
under the laws of the State of Florida (the "Corporation"), DOES HEREBY CERTIFY
that pursuant to the authority contained in its Articles of Incorporation, as
amended, and in accordance with the Florida Business Corporation Act, the
Corporation's Board of Directors has duly adopted the following resolution
creating a series of the class of its authorized Preferred Stock, designated as
Series A Convertible Preferred Stock.
RESOLVED THAT:
Whereas, by virtue of the authority contained in its Articles of
Incorporation, as amended, the Corporation has the authority to issue Ten
Million (10,000,000) shares of $.001 par value Preferred Stock, the designation
and amount thereof and series, together with the preferences, rights, and
restrictions thereof, to be determined by the Corporation's Board of Directors
pursuant to the applicable laws of the State of Florida.
Now, therefore, the Corporation's Board of Directors hereby establishes a
series of the class of Preferred Stock authorized to be issued by the
Corporation as above stated, with the designations and amounts thereof, together
with the preferences, conversion and other rights, and relative participating,
optional and other special rights of each such series, and the qualifications,
limitations or restrictions thereof, to be as follows:
1. Designations and Amounts. One Million Two Hundred Fifty Thousand
(1,250,000) shares of the Corporation's authorized Preferred Stock are
designated as Series A Convertible Preferred Stock.
2. Definitions.
For the purposes of this Resolution the following definitions shall apply:
(a) "Board" shall mean the Board of Directors of the Corporation.
(b) "Corporation" shall mean TeleServices Internet Group Inc., a
Florida corporation.
(c) "Common Stock" shall refer to the Corporation's common stock, par
value $.0001 per share.
(d) "Subsidiary" shall mean any corporation, over 50% of whose
outstanding voting stock shall at the time be owned directly or
indirectly by the Corporation or by one or more Subsidiaries.
(e) "Warrants" shall refer to the Corporation's Series A Common Stock
Purchase Warrants which may be issued upon conversion of the Series A
Convertible Preferred Stock.
- --------------------------------------------------------------------------------
TELESERVICES INTERNET GROUP INC. MARCH 31, 2000 PAGE 1 OF 7
DESIGNATION OF RIGHTS AND PREFERENCES OF SERIES A CONVERTIBLE PREFERRED STOCK
<PAGE> 3
3. Dividends. The holder of each issued and outstanding share of Series A
Convertible Preferred Stock shall be entitled to receive distributions at the
rate of ten percent (10%) simple interest per annum based on a $2.00 per share
stated value, payable in cash or in shares of restricted Common Stock, at the
election of the holder. Such dividend shall become due annually, in arrears, on
December 31 of each year. Any dividends that the Corporation fails to declare
and pay on the date due shall accumulate and accrue until later paid or upon
conversion of the Series A Convertible Preferred Stock pursuant to the terms
hereof. In the event that the Corporation elects to make a payment of a dividend
in the form of shares of restricted Common Stock in lieu of cash, the number of
shares of Common Stock to be issued shall be determined by dividing the dollar
amount of the dividend as of the date declared or accrued by the market price
per share of Common Stock for the "Trading Period" (as defined in paragraph
5(C)(iv)) prior to the date the dividend was declared or accrued. All dividends
on the Series A Convertible Preferred Stock shall be paid before any other
distributions shall be declared, paid or set aside upon the Common Stock or any
other class of stock of the Corporation.
4. Liquidation or Dissolution. In the event of any voluntary or involuntary
liquidation, dissolution, or winding up of the affairs of the Corporation, the
holders of the issued and outstanding Series A Convertible Preferred Stock shall
be entitled to receive for each share of Series A Convertible Preferred Stock,
before any distribution of the assets of the Corporation shall be made to the
holders of any other capital stock, a dollar amount equal to the stated value of
$2.00 per share plus all accrued and unpaid distributions declared thereon,
without interest. After such payment shall have been made in full to the holders
of the issued and outstanding Series A Convertible Preferred Stock, or funds
necessary for such payment shall have been set aside in trust for the account of
the holders of the issued and outstanding Series A Convertible Preferred Stock
so as to be and continue to be available therefor, then, before any further
distribution of the assets of the Corporation shall be made, a dollar amount
equal to that already distributed to the holders of the Series A Convertible
Preferred Stock shall be distributed pro-rata to the holders of the other issued
and outstanding capital stock of the Corporation, subject to the rights of any
other class of capital stock set forth in the Articles of Incorporation of the
Corporation or Amendments to the Articles of Incorporation filed by the
Corporation. After such payment shall have been made in full to the holders of
such other issued and outstanding capital stock, or funds necessary for such
payment shall have been set aside in trust for the account of the holders of
such other issued and outstanding capital stock so as to be and continue to be
available therefor, the holders of the issued and outstanding Series A
Convertible Preferred Stock shall be entitled to participate with the holders of
all other classes of issued and outstanding capital stock in the final
distribution of the remaining assets of the Corporation, and, subject to any
rights of any other class of capital stock set forth in the Articles of
Incorporation of the Corporation or any Amendments to the Articles of
Incorporation filed by the Corporation, the remaining assets of the Corporation
shall be divided and distributed ratably among the holders of both the Series A
Convertible Preferred Stock and the other capital stock then issued and
outstanding according to the proportion by which their respective record
ownership of shares of the Series A Convertible Preferred Stock and such capital
stock bears to the total number of shares of the Series A Convertible Preferred
Stock and such capital stock then issued and outstanding. If, upon such
liquidation, dissolution, or winding up, the assets of the Corporation
distributable, as aforesaid, among the holders of the Series A Convertible
Preferred Stock shall be insufficient to permit the payment to them of said
amount, the entire assets shall be distributed ratably among the holders of the
Series A Convertible Preferred Stock. A consolidation or merger of the
Corporation, a share exchange, a sale, lease, exchange or transfer of all or
substantially all of its assets as an entirety, or any purchase or redemption of
stock of the Corporation of any class, shall not be regarded as a "liquidation,
dissolution, or winding up of the affairs of the Corporation" within the meaning
of this paragraph 4.
- --------------------------------------------------------------------------------
TELESERVICES INTERNET GROUP INC. MARCH 31, 2000 PAGE 2 OF 7
DESIGNATION OF RIGHTS AND PREFERENCES OF SERIES A CONVERTIBLE PREFERRED STOCK
<PAGE> 4
5. Conversion Privilege. Series A Convertible Preferred Stock shall be
convertible into restricted Common Stock and Warrants as hereinafter provided
and, when so converted, shall be canceled and retired and shall not be reissued
as such:
(A) Any holder of the Series A Convertible Preferred Stock may at any time
after issuance, convert, in whole but not in part, such stock into the Common
Stock and Warrants of the Corporation, on presentation and surrender to the
Corporation of the certificates of the Series A Convertible Preferred Stock to
be so converted. In order to convert Series A Convertible Preferred Stock into
Common Stock and Warrants, the holder thereof shall on any business day
surrender at the Corporation's principal office in St. Petersburg, Florida, the
certificate or certificates representing all such shares, duly endorsed to the
Corporation or in blank. Series A Convertible Preferred Stock shall be deemed to
have been converted immediately prior to the close of business on the day of
such surrender for conversion, and the person or persons entitled to receive the
Common Stock and Warrants issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such Common Stock and Warrants at
such time. As promptly as practicable after the date of any conversion, the
Corporation shall issue and deliver a certificate or certificates representing
the number of shares of Common Stock and the Warrants issuable upon such
conversion to the person or persons entitled to receive same.
(B) Each holder of Series A Convertible Preferred Stock shall have the
right to convert such Series A Convertible Preferred Stock into Common Stock and
Warrants at the conversion rate, determined as hereinafter provided, in effect
at the time of conversion. Unless such conversion rate shall be adjusted as
hereinafter provided, the conversion rate shall be forty (40) shares of Common
Stock and forty (40) Warrants for each share of Series A Convertible Preferred
Stock so converted.
(C) The conversion rate as hereinabove provided shall be subject to
adjustment as follows:
(i) In case the Corporation shall (a) make a distribution in shares of
its capital stock, (b) subdivide its outstanding shares of Common Stock into a
greater number of shares, or (c) combine its outstanding shares of Common Stock
into a smaller number of shares, the conversion rate in effect immediately prior
thereto shall be adjusted so that the holder of a share of Series A Convertible
Preferred Stock surrendered for conversion after the record date fixing
stockholders to be affected by such event shall be entitled to receive, upon
conversion, the number of shares of Common Stock which such holder would have
owned or have been entitled to receive after the happening of such event had
such share of Series A Convertible Preferred Stock been converted immediately
prior to the record date in the case of such dividend or the effective date in
the case of any such subdivision, combination or reclassification. An adjustment
made pursuant to this subparagraph 5(C)(i) shall be made whenever any of such
events shall happen, but shall become effective retroactively after such record
date or such effective date, as the case may be, as to shares of Series A
Convertible Preferred Stock converted between such record date or effective date
and the date of happening of any such event.
(ii) In case the Corporation shall issue rights or warrants to all
holders of its Common Stock entitling them to subscribe for or purchase shares
of Common Stock at a price per share, which, when added to the amount of
consideration received or receivable by the Corporation for such right or
warrant, is less than the current market price (as hereinafter defined) per
share of Common Stock at the record date mentioned below, the conversion rate
shall be adjusted so that thereafter, until further adjusted, each share of
Series A Convertible Preferred Stock shall be convertible into that number of
shares of Common Stock determined by multiplying the number of shares of Common
Stock into which such share of Series A Convertible Preferred Stock was
theretofore convertible by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding on the date of issuance of such
rights or warrants plus the number of additional shares of Common Stock issuable
upon the exercise of such rights or warrants, and the denominator of which shall
be the
- --------------------------------------------------------------------------------
TELESERVICES INTERNET GROUP INC. MARCH 31, 2000 PAGE 3 OF 7
DESIGNATION OF RIGHTS AND PREFERENCES OF SERIES A CONVERTIBLE PREFERRED STOCK
<PAGE> 5
number of shares of Common Stock outstanding on the date of issuance of such
rights or warrants plus the number of additional shares of Common Stock issuable
upon the exercise of such rights or warrants, and the denominator of which shall
be the number of shares of Common Stock outstanding on the date of issuance of
such rights or warrants plus the number of shares which an amount equal to the
sum of (a) the aggregate exercise price of the total number of shares of Common
Stock issuable upon the exercise of such rights or warrants, plus (b) the
aggregate amount of consideration, if any, received, or receivable by the
Corporation for any such rights or warrants, would purchase at such current
market price. Such adjustment shall be made whenever such rights or warrants are
issued, but shall also be effective retroactively as to shares of Series A
Convertible Preferred Stock converted between the record date for the
determination of stockholders entitled to receive such rights or warrants and
the date such rights or warrants are exercised.
(iii) In case the Corporation shall distribute to all holders of its
Common Stock any one or more of the following: (a) evidence of its indebtedness,
(b) assets (excluding cash distributions, distributions made out of current or
retained earnings and distributions of the stock of any subsidiary), or (c)
rights or warrants to subscribe for or purchase securities issued by, or
property of, the Corporation (excluding those referred to in subparagraph
5(C)(ii) above), then in each such case the conversion rate shall be adjusted as
provided below so that thereafter, until further adjusted, the number of shares
of Common Stock into which each share of Series A Convertible Preferred Stock
shall be convertible shall be determined by multiplying the number of shares of
Common Stock into which such share of Series A Convertible Preferred Stock was
theretofore convertible by a fraction, the numerator of which shall be the
current market price per share of Common Stock on the date of such distribution,
and the denominator of which shall be such current market price per share of the
Common Stock, less the then fair market value (as determined by the Board of the
Corporation, whose determination shall be conclusive) of the portion of the
assets or evidence of indebtedness so distributed or of such rights or warrants
applicable to one share of the Common Stock. Such adjustment shall be made
whenever any such distribution is made, but shall also be effective
retroactively as to shares of Series A Convertible Preferred Stock converted
between the record date for the determination of stockholders entitled to
receive such distribution and the date such distribution is made.
(iv) For the purpose of any computation under subparagraphs 5(B) or
5(C)(ii) and (iii) above, the current market price per share of Common Stock at
any date shall be (a) if the Common Stock is listed on any national securities
exchange, the average of the daily closing prices for the ten consecutive
business days before the day in question (the "Trading Period"); (b) if the
Common Stock is not listed on any national securities exchange but is quoted on
the National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") or the Electronic Bulletin Board, the average of the high and low
bids as reported thereon for the Trading Period; and (c) if the Common Stock is
neither listed on any national securities exchange nor quoted on NASDAQ or the
Electronic Bulletin Board, the price shall be determined in any reasonable
manner approved by the Board of Directors of the Company.
(v) No adjustment in the conversion rate shall be required unless such
adjustment would require an increase or decrease of at least 5% in such rate;
provided, however, that any adjustments which by reason of this subparagraph
5(C)(v) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment.
(vi) In the event that the Corporation fails to cause a registration
statement registering for resale the shares of Common Stock issuable upon
conversion of and as a dividend on the Series A Convertible Preferred Stock and
the shares of Common Stock issuable upon exercise of the Warrants issuable upon
conversion of the Series A Convertible Preferred Stock to become effective
within the
- --------------------------------------------------------------------------------
TELESERVICES INTERNET GROUP INC. MARCH 31, 2000 PAGE 4 OF 7
DESIGNATION OF RIGHTS AND PREFERENCES OF SERIES A CONVERTIBLE PREFERRED STOCK
<PAGE> 6
time period specified in the Stock Purchase Agreement between the Company and
the holders of the Series A Convertible Preferred Stock, then the exercise price
of the Warrants shall be adjusted in the manner set forth in the Series A Common
Stock Purchase Warrant Agreement.
(D) No adjustment of the conversion rate shall be made in any of the
following cases:
(i) upon the grant or exercise of stock options or warrants
outstanding on the date hereof or hereafter granted, or under any employee stock
option plan now or hereafter authorized;
(ii) shares of Common Stock issued upon the conversion of Series A
Convertible Preferred Stock;
(iii) shares issued in connection with the acquisition by the
Corporation or by any subsidiary of the Corporation of 80% or more of the assets
of another corporation, and shares issued in connection with the acquisition by
the Corporation or by any subsidiary of the Corporation of 80% or more of the
voting shares of another corporation (including shares issued in connection with
such acquisition of voting shares of such other corporation subsequent to the
acquisition of an aggregate of 80% of such voting shares), shares issued in a
merger of the Corporation or a subsidiary of the Corporation with another
corporation in which the Corporation or the Corporation's subsidiary is the
surviving corporation, and shares issued upon the conversion of other securities
issued in connection with any such acquisition or in any such merger; or
(iv) shares issued by way of dividend or other distribution on Common
Stock excluded from the calculation of the adjustment under this subparagraph
5(D) or on Common Stock resulting from any subdivision or combination of Common
Stock so excluded.
(E) Whenever the conversion rate is adjusted as herein provided, the
Corporation shall prepare a certificate signed by the Treasurer of the
Corporation setting forth the adjusted conversion rate and showing in reasonable
detail the facts upon which such adjustment is based. As promptly as
practicable, the Corporation shall cause a copy of the certificate referred to
in this subparagraph 5(E) to be mailed to each holder of record of issued and
outstanding Series A Convertible Preferred Stock at the address of such holder
appearing on the Corporation's books.
(F) The Corporation shall pay all taxes that may be payable in respect of
the issue or delivery of Common Stock and Warrants on conversion of Series A
Convertible Preferred Stock pursuant hereto, but shall not pay any tax which may
be payable with respect to income or gains of the holder of any Series A
Convertible Preferred Stock or Common Stock and Warrants or any tax which may be
payable in respect of any transfer involved in the issue and delivery of the
Common Stock or Warrants in a name other than that in which the Series A
Convertible Preferred Stock so converted was registered, and no such issue or
delivery shall be made unless and until the person requesting such issue has
paid to the Corporation the amount of any such tax, or has established, to the
satisfaction of the Corporation, that such tax has been paid.
(G) No fractional shares or scrip representing fractional shares shall be
issued upon the conversion of any shares of Series A Convertible Preferred
Stock. If the conversion shares of Series A Convertible Preferred Stock results
in a fraction, the fraction shall be rounded up to the nearest whole share.
- --------------------------------------------------------------------------------
TELESERVICES INTERNET GROUP INC. MARCH 31, 2000 PAGE 5 OF 7
DESIGNATION OF RIGHTS AND PREFERENCES OF SERIES A CONVERTIBLE PREFERRED STOCK
<PAGE> 7
(H) The Corporation shall at all times reserve and keep available, free
from preemptive rights, out of its authorized Common Stock, for the purpose of
effecting the conversion of the issued and outstanding Series A Convertible
Preferred Stock, the full number of shares of Common Stock then deliverable in
the event and upon the conversion of all of the Series A Convertible Preferred
Stock then issued and outstanding.
(I) The Series A Convertible Preferred Stock and all shares of Common Stock
and Warrants issued or issuable upon conversion of the Series A Convertible
Preferred Stock shall be restricted and bear a restrictive legend.
6. Voting Rights. The shares of the Series A Convertible Preferred Stock
shall be non-voting, except as to matters which they are entitled to vote, as a
class, under the laws of the State of Florida, or as provided below.
7. Redemption by the Corporation. The Corporation, at the option of the
Board, may redeem at the stated value of $2.00 per share of Series A Convertible
Preferred Stock, in whole or in part, the Series A Convertible Preferred Stock
at any time outstanding after the date on which the daily closing price of the
Corporation's Common Stock for each day of any Trading Period (as defined in
paragraph 5(C)(iv) above) is greater than $1.00 per share. If the Corporation
elects to exercise this redemption right, the Corporation shall give at least 30
days' prior written notice to the holders of record of the Series A Convertible
Preferred Stock to be redeemed and by issuing to each holder of Series A
Convertible Preferred Stock the number of shares of restricted Common Stock and
Warrants to which he or she would be entitled to receive upon conversion
pursuant to paragraph 5, plus all accrued and unpaid distributions declared or
accrued, at the date fixed for redemption, without interest, in additional
shares of restricted Common Stock, or in cash, as determined by the Corporation
pursuant to paragraph 3, for the shares of Series A Convertible Preferred Stock
so redeemed. The Board shall have full power and authority, subject to the
limitations and provisions herein contained, to prescribe the manner in which
and the terms and conditions upon which the Series A Convertible Preferred Stock
shall be redeemed. In addition, on such date the holders of Series A Convertible
Preferred Stock shall no longer be entitled to any distributions and shall not
have any rights or interests as holders of said shares, except to receive the
payment herein designated, without interest thereon, upon presentation and
surrender of their certificates therefor.
8. Anti-Dilution. In the event of any change in the outstanding capital
stock of the Corporation by reason of any reorganization, recapitalization,
stock split, stock dividend, combination or exchange of shares, merger,
consolidation, the shares of Series A Convertible Preferred Stock shall be
appropriately adjusted if the stated value is affected. Any shares of Series A
Convertible Preferred Stock or other securities received by the holders of the
Series A Convertible Preferred Stock as a result of any such adjustment shall be
subject to all of the terms and conditions of this Designation of Rights and
Preferences of Series A Convertible Preferred Stock.
9. No Preemptive Rights. No holder of the Series A Convertible Preferred
Stock shall be entitled, as of right, to purchase or subscribe for any part of
the unissued capital stock of the Corporation or of any capital stock of the
Corporation to be issued by reason of any increase of the authorized capital
stock of the Corporation, or to purchase or subscribe for any bonds,
certificates of indebtedness, debentures or other securities convertible into or
carrying options or warrants to purchase stock or other securities of the
Corporation or to purchase or subscribe for any stock of the Corporation
purchased by the Corporation or by its nominee or nominees, or to have any other
preemptive rights now or hereafter defined by the laws of the State of Florida.
- --------------------------------------------------------------------------------
TELESERVICES INTERNET GROUP INC. MARCH 31, 2000 PAGE 6 OF 7
DESIGNATION OF RIGHTS AND PREFERENCES OF SERIES A CONVERTIBLE PREFERRED STOCK
<PAGE> 8
10. Changes In Terms of Series A Convertible Preferred Stock. The terms of
the Series A Convertible Preferred Stock may not be amended, altered or
repealed, and no class of capital stock or securities convertible into capital
stock shall be authorized which has superior rights to the Series A Convertible
Preferred Stock as to distributions or liquidation, without the consent of the
holders of at least 51% of the outstanding shares of Series A Convertible
Preferred Stock, voting as a separate series.
11. No Implied Limitations. Except as otherwise provided by express
provisions of this Designation of Rights and Preferences of Series A Convertible
Preferred Stock, nothing herein shall limit, by inference or otherwise, the
discretionary right of the Board to classify and reclassify and issue any shares
of Preferred Stock and to fix or alter all terms thereof to the full extent
provided in the Articles of Incorporation of the Corporation.
12. General Provisions. In addition to the above provisions with respect to
the Series A Convertible Preferred Stock, such Series A Convertible Preferred
Stock shall be subject to, and entitled to the benefits of, the provisions set
forth in the Corporation's Articles of Incorporation with respect to Series A
Convertible Preferred Stock generally.
13. Notices. All notices required or permitted to be given by the
Corporation with respect to the Series A Convertible Preferred Stock shall be in
writing, and if delivered by first class United States mail, postage prepaid, to
the holders of the Series A Convertible Preferred Stock at their last addresses
as they shall appear upon the books of the Corporation, shall be conclusively
presumed to have been duly given, whether or not the stockholder actually
receives such notice; provided, however, that failure to duly give such notice
by mail, or any defect in such notice, to the holders of any stock designated
for redemption, shall not affect the validity of the proceedings for the
redemption of any other shares of Series A Convertible Preferred Stock.
IN WITNESS WHEREOF, TeleServices Internet Group Inc. has caused this
Designation of Rights and Preferences of Series A Convertible Preferred Stock to
be duly executed by its Chairman and attested by its Secretary the day and year
first written above.
TELESERVICES INTERNET GROUP INC.
/s/ Robert P. Gordon
-------------------------------------
Robert P. Gordon, Chairman
Attest:
/s/ Paul W. Henry
- ------------------------------
Paul W. Henry, Secretary
- --------------------------------------------------------------------------------
TELESERVICES INTERNET GROUP INC. MARCH 31, 2000 PAGE 7 OF 7
DESIGNATION OF RIGHTS AND PREFERENCES OF SERIES A CONVERTIBLE PREFERRED STOCK
<PAGE> 9
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
TELESERVICES INTERNATIONAL GROUP INC.
Pursuant the provisions of Section 607.1006 of the Florida Business Corporation
Act, this corporation adopts the following Articles of Amendment to its Articles
of Incorporation:
FIRST: Article I of the Articles of Incorporation of this corporation is hereby
amended to read to follows:
ARTICLE I
THE NAME OF THE CORPORATION SHALL BE TELESERVICES INTERNET GROUP INC.
SECOND: Article IV of the Articles of Incorporation of this corporation is
hereby amended to read to follows:
ARTICLE IV
THE COMPANY IS AUTHORIZED TO ISSUE 300,000,000 SHARES OF COMMON STOCK
HAVING A PAR VALUE OF .0001 EACH. ADDITIONALLY, 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. THE RIGHTS,
PREFERENCES AND LIMITATIONS OF A SEPARATE SERIES OF PREFERRED STOCK MAY
DIFFER WITH RESPECT TO SUCH MATTERS AS MAY BE DETERMINED BY THE BOARD OF
DIRECTORS, INCLUDING, WITHOUT LIMITATION, THE RATE OF DIVIDENDS, METHOD AND
AMOUNTS PAYABLE ON LIQUIDATION, SINKING FUND PROVISIONS (IF ANY),
CONVERSION RIGHTS (IF ANY), AND VOTING RIGHTS.
THIRD: The foregoing amendments were adopted by the shareholders at a special
meeting held on July 8, 1999. The number of votes cast for the amendments were
sufficient for approval.
Signed this 8th day of July, 1999.
By: /s/ Robert P. Gordon
----------------------------------
Robert P. Gordon, Chairman
<PAGE> 10
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
TELESERVICES INTERNATIONAL GROUP INC.
Pursuant the provisions of Section 607.1006 of the Florida Business Corporation
Act, this corporation adopts the following Articles of Amendment to its Articles
of Incorporation:
FIRST: Article I of the Articles of Incorporation of this corporation is hereby
amended to read to follows:
ARTICLE I
THE NAME OF THE CORPORATION SHALL BE TELESERVICES INTERNET GROUP INC.
SECOND: Article IV of the Articles of Incorporation of this corporation is
hereby amended to read to follows:
ARTICLE IV
THE COMPANY IS AUTHORIZED TO ISSUE 300,000,000 SHARES OF COMMON STOCK
HAVING A PAR VALUE OF .0001 EACH. ADDITIONALLY, 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.
THE RIGHTS, PREFERENCES AND LIMITATIONS OF A SEPARATE SERIES OF
PREFERRED STOCK MAY DIFFER WITH RESPECT TO SUCH MATTERS AS MAY BE
DETERMINED BY THE BOARD OF DIRECTORS, INCLUDING, WITHOUT LIMITATION,
THE RATE OF DIVIDENDS, METHOD AND AMOUNTS PAYABLE ON LIQUIDATION,
SINKING FUND PROVISIONS (IF ANY), CONVERSION RIGHTS (IF ANY), AND
VOTING RIGHTS.
THIRD: The foregoing amendments were adopted by the shareholders at a special
meeting held on July 8, 1999. The number of votes cast for the amendments were
sufficient for approval.
Signed this 8th day of July, 1999.
By: /s/ Robert P. Gordon
--------------------------------
Robert P. Gordon, Chairman
<PAGE> 11
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
VISITORS SERVICES INTERNATIONAL CORP.
Pursuant the provisions of Section 607.1006, Florida Statutes, this corporation
adopts the following Articles of Amendment to its Articles of Incorporation:
FIRST: The name of the Corporation is hereby changed by amending Article I of
the Articles of Incorporation to read as follows:
ARTICLE I
THE NAME OF THE CORPORATION SHALL BE TELESERVICES INTERNATIONAL GROUP INC.
SECOND: The amendment was adopted on March 3, 1997, by resolution of the board
of directors and the written consent of the stockholders, in accordance with
Section 607.0704, Florida Statutes, representing a sufficient number of votes
necessary to approve this amendment.
Signed this 3rd day of March, 1997.
By: /s/ Stephen G. McLean
-------------------------------
Stephen G. McLean, CEO
ATTEST:
/s/ Paul W. Henry
- -----------------------------------
Paul W. Henry, Secretary
<PAGE> 12
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
DYNASTY CAPITAL CORPORATION
Pursuant the provisions of Section 607.1006, Florida Statutes, this corporation
adopts the following Articles of Amendment to its Articles of Incorporation:
FIRST: The name of the Corporation is hereby changed by amending Article I of
the Articles of Incorporation to read as follows:
ARTICLE I
THE NAME OF THE CORPORATION SHALL BE VISITORS SERVICES INTERNATIONAL CORP.
SECOND: The amendment was adopted on October 1, 1996, by resolution of the board
of directors and the written consent of the stockholders, in accordance with
Section 607.0704, Florida Statutes, representing a sufficient number of votes
necessary to approve this amendment.
Signed this 1st day of October, 1996.
By: /s/ Steve McLean
--------------------------------------
Steve McLean, Executive Vice President
ATTEST:
/s/ Paul W. Henry
- ----------------------------------
Paul W. Henry, Secretary
<PAGE> 13
ARTICLES OF AMENDMENT
OF
DYNASTY CAPITAL CORPORATION
1. Article IV of the Articles of Incorporation of Dynasty Capital Corporation,
which was filed on October 1, 1986, is hereby amended to read as follows:
"Article IV - The Company is authorized to issue 100,000,000 shares of
Common Stock having a par value of .0001 each. Additionally, 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 issue 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. The rights, preferences and limitations of a separate
series of Preferred Stock may differ with respect to such matters as
may be determined by the Board of Directors, including, without
limitation, the rate of dividends, method and amounts payable on
liquidation, sinking fund provisions (if any), conversion rights (if
any), and voting rights."
2. The foregoing amendment was adopted by the shareholders of this corporation
on the 3rd day of November.
IN WITNESS WHEREOF, the undersigned President and Secretary of this
corporation have executed these Articles of Amendment this 3rd day of November,
1986.
/s/ Robert C. Hackney
---------------------------------
President and Secretary
<PAGE> 14
ARTICLES OF INCORPORATION
OF
DYNASTY CAPITAL CORPORATION
The undersigned, for the purpose of forming a corporation under the
Florida General Corporation Act hereby adopts the following Articles of
Incorporation.
ARTICLE I
The name of the corporation shall be DYNASTY CAPITAL CORPORATION.
ARTICLE II
The term of existence is perpetually.
ARTICLE III
The corporation may transact any and all lawful business for which
corporations may be incorporated under the Florida General Corporate Act.
ARTICLE IV
The aggregate number of shares which the corporation has authority to
issue is 100,000,000, all of which shall be common shares with a par value of
$.0001 each.
ARTICLE V
The street address of the initial registered office of the corporation
is 1645 Palm Beach Lakes Blvd., Suite 1200, West Palm Beach, Florida 33401, and
the name of the initial registered agent at such address is Robert C. Hackney.
ARTICLE VII
The name and post office address of the member of the first Board of
Directors is:
Robert C. Hackney 1645 Palm Beach Lakes Blvd., Suite 1200
West Palm Beach, Florida 33401
ARTICLE IX
The corporation shall be deemed to commence its existence upon the date
of filing of these Articles of Incorporation.
IN WITNESS WHEREOF, I have subscribed my name this 29th day of
September, 1986.
/s/ Robert C. Hackney
--------------------------------
Robert C. Hackney
<PAGE> 1
EXHIBIT 4.8
FORM OF
STOCK PURCHASE AGREEMENT
BETWEEN
TELESERVICES INTERNET GROUP INC.
AND
THE INVESTOR(S) SIGNATORY HERETO
STOCK PURCHASE AGREEMENT (the "Agreement"), between the persons subscribing
for Preferred Shares by their signatures hereto (each an "Investor"), and
TeleServices Internet Group Inc., a corporation organized and existing under the
laws of the State of Florida (the "Company"), effective as of the date of
acceptance by the Company as set forth on the signature page hereof.
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 Preferred Shares, as defined below.
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. "Closing" shall mean the closing of the purchase and sale of the
Preferred Shares pursuant to Section 2.1.
Section 1.2. "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 1.3. "Common Stock" shall mean the Company's $.0001 par value common
stock.
Section 1.4. "Conversion Shares" shall mean the shares of Common Stock issuable
upon conversion of the Preferred Shares. Section 1.5. "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 1.6. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
Section 1.7. "Legend" shall mean the legend set forth in Section 9.1.
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<PAGE> 2
Section 1.8. "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 in any material respect.
Section 1.9. "Outstanding" when used with reference to shares of Common Stock,
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 1.10. "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 1.11. "Preferred Shares" shall mean the shares of the Company's $.001
par value preferred stock being purchased by the Investor(s) and designated as
"Series A Convertible Preferred Stock." The Preferred Shares shall be subject to
the rights, preferences, privileges, restrictions, and conversion terms as set
forth in the "Designation of Rights and Preferences of Series A Convertible
Preferred Stock" in the form annexed hereto as Exhibit A.
Section 1.12. "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 1.13. "Purchase Price" shall mean two dollars (US$2.00) per each
Preferred Share.
Section 1.14. "Registrable Securities" shall mean the Conversion Shares and the
Warrant Shares until (i) the Registration Statement has been declared effective
by the SEC, and all Conversion Shares and Warrant Shares have been disposed of
pursuant to the Registration Statement, (ii) all Conversion Shares and Warrant
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 and Warrant
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 and Warrant 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 1.15. "Registration Statement" shall mean a registration statement on
Form SB-2 (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 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.
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<PAGE> 3
Section 1.16. "Regulation D" shall have the meaning set forth in the recitals of
this Agreement.
Section 1.17. "SEC" shall mean the Securities and Exchange Commission.
Section 1.18. "Section 4(2)" shall have the meaning set forth in the recitals of
this Agreement.
Section 1.19. "Securities Act" shall have the meaning set forth in the recitals
of this Agreement.
Section 1.20. "SEC Documents" shall mean the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1998 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 1.21. "Warrant" shall mean the "Series A Common Stock Purchase Warrant"
substantially in the form of Exhibit B to be issued to the Investor(s) upon
conversion of the Preferred Shares. Section 1.22. "Warrant Shares" shall mean
all shares of Common Stock issuable pursuant to exercise of the Warrant.
ARTICLE II
PURCHASE AND SALE OF PREFERRED SHARES
Section 2.1. Investment.
(a) Upon the terms and subject to the conditions set forth herein, the
Company agrees to sell, and the Investor agrees to purchase Preferred Shares on
or before the Closing Date as follows:
(i) Upon execution and delivery of this Agreement, the Investor
shall deliver to the Company immediately available funds in
the amount of the Purchase Price for the number of Preferred
Shares set forth on the signature page hereof, and the
Company shall deliver the Preferred Shares to the Investor
within ten (10) business days after the Closing Date.
(ii) The Closing, for purposes of this Agreement, shall be deemed
to occur upon (i) satisfaction of the conditions set forth
in Section 2.1(b), and (ii) completion of the offering of
the Preferred Shares, as determined by the Company, but not
later than March 31, 2000.
(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;
(ii) 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);
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<PAGE> 4
(iii) 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);
(iv) the Company shall have obtained all permits and
qualifications required by any state for the offer and sale
of the Preferred Shares, or shall have the availability of
exemptions therefrom; and
(v) the sale and issuance of the Preferred Shares hereunder
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.
Section 2.2. Registration Rights. (a) The Company agrees that it will prepare
and file with the Commission, within sixty (60) days after the Closing Date, a
Registration Statement, at the sole expense of the Company (except as provided
below), in respect of all Registrable Securities, so as to permit a public
offering and resale of the Registrable Securities under the Act.
(b) The Company shall use its best efforts to cause the Registration
Statement to become effective within one-hundred-twenty (120) days from the
Closing Date, or, if earlier, within five (5) days of SEC clearance to request
acceleration of effectiveness. The Company will notify Investor of the
effectiveness of the Registration Statement within one business day of such
event.
(c) The Company will maintain the Registration Statement or post-effective
amendment until the earlier of (i) the date that all of the Registrable
Securities have been sold pursuant to the Registration Statement, (ii) the date
the Investor receives an opinion of counsel to the Company that the Registrable
Securities may be sold under the provisions of Rule 144 without limitation as to
volume, (iii) all Registrable Securities have been otherwise transferred to
Persons 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) 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.
(d) 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 Investor 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.
(e) In the event that (i) the Registration Statement to be filed by the
Company is not filed with the Commission within sixty (60) days from the Closing
Date, (ii) the Registration Statement is not declared effective by the
Commission within one-hundred-twenty (120) days from the Closing Date, or (iii)
the Registration Statement is not maintained as effective by the Company for the
period set forth in Section 2.2(c) above then the conversion terms of the
Preferred Shares and the exercise price of the Warrants will be adjusted in the
manner set forth in the form of Designation of Rights and Preferences of Series
A Convertible Preferred Stock and the form of Common Stock Purchase Warrant,
respectively.
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<PAGE> 5
(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 Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
The Investor 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 Preferred 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 Preferred Shares at any
time in accordance with federal and state securities laws applicable to such
disposition.
Section 3.2. Sophisticated and Accredited 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 Preferred Shares and the
underlying Common Stock. The Investor acknowledges that an investment in the
Preferred Shares is speculative and involves a high degree of risk.
Section 3.3. Authority. This Agreement and each agreement 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 any other agreements 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.
5
<PAGE> 6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investor that, except as may be set
forth in any 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 and to issue the Preferred Shares, (ii) the execution, issuance and
delivery of this Agreement and the Preferred Shares 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 and the Preferred Shares 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.
Section 4.3. Capitalization. The authorized capital stock of the Company
consists of 300,000,000 shares of Common Stock, par value $0.0001, of which
approximately 253,000,000 shares are issued and outstanding as of December 31,
1999 and 10,000,000 shares of preferred stock, par value $0.001 per share, of
which no shares are issues and outstanding. 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. 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
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<PAGE> 7
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 4.5. Exemption from Registration; Valid Issuances. Subject to the
accuracy of the Investor's representations in Article III, the sale of the
Preferred Shares will not require registration under the Securities Act and/or
any applicable state securities law. When issued and paid for the Preferred
Shares will be duly and validly issued, fully paid, and non-assessable. Neither
the sales of the Preferred Shares pursuant to, nor the Company's performance of
its obligations under, this Agreement will (i) result in the creation or
imposition by the Company of any liens, charges, claims or other encumbrances
upon the Preferred Shares or any of the assets of the Company, or (ii) entitle
the holders of Outstanding Common Stock to preemptive or other rights to
subscribe to or acquire the Preferred Shares or other securities of the Company.
The Preferred Shares shall not subject the Investor to personal liability to the
Company or its creditors by reason of the possession thereof.
Section 4.6. 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 Preferred 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 Preferred Shares under the
Securities Act.
Section 4.7. 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 4.8. 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 Preferred
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 Preferred Shares 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
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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 4.9. No Material Adverse Change. Since December 31, 1998, no Material
Adverse Effect has occurred or exists with respect to the Company, except as
disclosed in the SEC Documents.
Section 4.10. No Undisclosed Events or Circumstances. Since December 31, 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 4.11. 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 Preferred Shares 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 4.12. 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 4.13. 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
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.
Section 5.2. No Short Positions. The Investor agrees that neither the Investor
nor any of his, her or its affiliates has entered, has the intention of
entering, or will, at any time during which the Investor holds any equity
securities of the Company, enter into any put option, short position or other
similar instrument or position with respect to the Common Stock of the Company.
Section 5.3. Condition Precedent to Conversion of Preferred Shares. The Investor
agrees that as a condition precedent to the conversion of any Preferred Shares
and the Company's obligation(s) to issue Conversion Shares upon conversion of
any of the Preferred Shares or Warrant Shares upon exercise of the Warrant, the
holders of the Outstanding Common Stock of the Company must vote to approve an
amendment to the Articles of Incorporation to restructure the existing
capitalization so that a sufficient number of shares of Common Stock can be
authorized and reserved for issuance as Conversion Shares and Warrant Shares.
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ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1. 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 Registrable Securities 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 Registrable Securities, 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 6.2. 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 6.3. Legends. The certificates evidencing the Preferred Shares, the
Warrant and the Registrable Securities shall be free of legends, except as set
forth in Article IX.
Section 6.4. Corporate Existence. The Company will take all steps necessary to
preserve and continue the corporate existence of the Company.
Section 6.5. 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 6.6. Issuance of Preferred Shares. The sale of the Preferred Shares
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,
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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 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
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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.
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). 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 or advisor.
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. 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
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material non-public information to any investors who purchase stock in the
Company in a public offering, to money managers or to securities analysts.
ARTICLE IX
LEGENDS
Section 9.1. Legends. Unless otherwise provided below, each certificate
representing Preferred Shares, the Warrant and 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. 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 Warrant
or the share certificates representing the Preferred Shares and Registrable
Securities and no instructions or "stop transfer orders," so called, "stock
transfer restrictions," or other restrictions have been or shall be given to the
Company's transfer agent with respect thereto other than as expressly set forth
in this Article IX. The Company will not engage an independent transfer agent
with respect to the Preferred Shares or the Warrant.
Section 9.3. 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 Preferred Shares, the Warrant and the
Registrable Securities.
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 Florida applicable to
contracts made in Florida by persons domiciled in Florida 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 St. Petersburg, Florida, 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 St. Petersburg, Florida,
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 Florida. 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
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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.
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 Internet Group Inc.
100 Second Avenue, Suite 1000
St. Petersburg, FL 33701
Attention: Robert P. Gordon, Chairman
Telephone: (727) 897-4000
Facsimile: (727) 896-4206
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with a copy to: Futro & Trauernicht LLC
(shall not constitute notice) 1401 Seventeenth Street
11th Floor
Denver, CO 80202
Attention: Peter G. Futro, 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 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 sets 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 any 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. Replacement of Certificates. Upon (i) receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of the Warrant or a certificate representing the Preferred Shares or
the Registrable Securities 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.
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Section 13.6. Fees and Expenses. Each of the Company and the Investor agrees to
pay its own expenses incident to the performance of its obligations hereunder.
Section 13.7. 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. 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.
Provided, however, the Company reserves the right to pay a commission or
finder's fee of up to ten percent of the gross proceeds received by the Company
from the sale of Preferred Shares to other Investors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the undersigned, thereunto duly authorized:, as of the dates set
forth below.
Address: INVESTOR:
- ------------------------------- -------------------------------------
Name of Investor
By:
- ------------------------------- ----------------------------------
Print Name:
- ------------------------------- --------------------------
Telephone: Title:
--------------------- -------------------------------
Fax: Date:
--------------------------- --------------------------------
NUMBER OF PREFERRED SHARES TO BE PURCHASED:
--------------------
================================================================================
ACCEPTED: TELESERVICES INTERNET GROUP INC.
DATED: By:
----------------------- ---------------------------------
Robert P. Gordon, Chairman
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EXHIBIT 4.9
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 INTERNET GROUP INC.
SERIES A COMMON STOCK PURCHASE WARRANT
1. Issuance. In consideration of good and valuable consideration, the
receipt of which is hereby acknowledged by TeleServices Internet Group Inc., a
Florida corporation (the "Company"), ________________________________________,
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., St. Petersburg,
Florida time, on __________, 2004 (the "Expiration Date"),
_________________________________ (________) 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 $0.20 (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 ten (10) 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 to reserve 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.
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.
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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; Failure to Register Warrant Shares.
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 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 Failure to Register Warrant Shares. In the event that the
Company fails to cause a registration statement registering for resale the
Warrant Shares to become effective within the time period
2
<PAGE> 3
specified in the Stock Purchase Agreement between the Company and the Holder,
the Exercise Price shall be reduced by $.05 per share of Common Stock, before
taking into account any other adjustment provided for in this Section.
7. Redemption by Company. In the event that the average closing bid
price of a share of the Company's Common Stock exceeds $1.00 for ten consecutive
trading days, the Company has the right to redeem this Warrant for $.01 per
share of Common Stock purchasable hereunder, upon thirty days written notice.
The Holder shall have the right to exercise the Warrant in accordance with its
terms prior to the expiration of the thirty day period.
8. Transfer to Comply with the Securities Act. 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.
9. 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 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 INTERNET GROUP INC.
100 Second Avenue, Suite 1000
St. Petersburg, FL 33701
Attn.: Robert P. Gordon, Chairman
Telecopier No.: (727) 896-4206
HOLDER:
---------------------------
---------------------------
---------------------------
---------------------------
---------------------------
10. 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 and the Stock Purchase Agreement (including exhibits
thereto) between the Company and the Holder 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.
11. Governing Law. This Warrant shall be deemed to be a contract under
the laws of the State of Florida 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.
3
<PAGE> 4
12. 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.
13. 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.
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed by an officer thereunto duly authorized.
Dated:
-------------------- TELESERVICES INTERNET GROUP INC.
NOT FOR EXECUTION
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Attest:
- -----------------------
4
<PAGE> 5
NOTICE OF EXERCISE
Dated: __________________, _____
TeleServices Internet 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 Internet
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:
NOT FOR EXECUTION
By:
--------------------------------
5
<PAGE> 1
EXHIBIT 10.17
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") made as of this 6th day
of December 1999 by and between the parties: JOSEPH K. KEEGAN, an individual
residing at 2121 Bayou Grande Boulevard, St. Petersburg, Florida 33703
(hereinafter referred to as the "Executive"), and TELESERVICES INTERNET 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 as President and Chief Operating Officer; 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, effective December 6, 1999, as
President and Chief Operating Officer ("COO"), and the Executive hereby accepts
such employment and shall serve 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 President and COO.
(B) The Executive shall devote most of his time and best efforts to the
performance of his duties for the Company, including the following:
(i) Develop, implement, and monitor strategy and business plans,
for the Company and its subsidiaries;
(ii) Develop a plan in December 1999 to cut expenses by 20% or
more, to the extent he deems feasible, and to increase revenues;
TSIG/KEEGAN EMPLOYMENT AGREEMENT PAGE 1 OF 9
<PAGE> 2
(iii) Make recommendations to the Chief Executive Officer as to
appropriate staffing levels, and monitor and evaluate performance of staff
relative to compliance with established policies and objectives of the
Company and contributions towards attaining objectives;
(iv) Render services to any joint venture, subsidiary or
affiliated business of the Company as requested by the Chief Executive
Officer and 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;
(v) Seek to enhance and develop the Company's relationships with
its employees, customers, shareholders and others in the business
community;
(vi) Confer on a regular basis with the Company's top management
and, from time to time, its Board of Directors, regarding the company's
vision, long-term strategy, employee issues, and customer policies; and
(vii) Perform such other duties consistent with his position as
President and COO 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 an officer 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 to the Company that, to the best
of his knowledge, he is under no professional 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. To the best of his
knowledge, the Executive's 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 until June 1, 2000, a base salary of
$110,000 (unless adjusted by the Board of Directors as described below), payable
bi-weekly and in accordance with the Company's normal payroll procedures. The
CEO and the Board will review the Executive's performance on or before June 1,
2000, and may increase Executive's base salary from time to time in its
discretion.
(B) The Executive shall be eligible to receive a bonus of up to 50% of his
salary, based on the extent to which he achieves certain defined goals and
objectives, to be determined by mutual agreement between him and the Chief
Executive Officer.
TSIG/KEEGAN EMPLOYMENT AGREEMENT PAGE 2 OF 9
<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 shall work out of the Company's executive offices in St.
Petersburg, Florida. The Executive shall travel on the Company's behalf to the
extent reasonably necessary and be reimbursed for such travel.
(C) The Company shall reimburse the Executive for all reasonable and
necessary business travel and entertainment expenses, upon presentation by the
Executive of an itemized accounting of all expenditures unrelated to office
rental.
(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. The
Company shall also provide the Executive with 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) Contemporaneously with the execution of this Agreement, the Company
shall grant the Executive options to acquire 6,000,000 shares of the Company's
common stock at an exercise price per share equal to $.05. Ten percent of the
options (600,000) shall vest upon the execution of this agreement and the
balance (5,400,000) shall vest over a 2 year period (and shall become
exercisable at the time they vest), subject to continued employment, at a rate
of 675,000 options per quarter on the first day following the end of the
quarter, commencing on April 1, 2000. All options shall expire the earlier of
January 1, 2005, or one year following the termination of employment with the
Company. 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
TSIG/KEEGAN EMPLOYMENT AGREEMENT PAGE 3 OF 9
<PAGE> 4
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) notwithstanding
the expiration date, 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 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 Chief
Operating Officer 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 one month
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 salary 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, defined as acts of dishonesty, 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) negligence or willful misconduct, either of
TSIG/KEEGAN EMPLOYMENT AGREEMENT PAGE 4 OF 9
<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
months 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) 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, which may only be changed in an express written
agreement signed by the Executive and a duly authorized officer of the Company.
No options shall vest after the date of termination, but the Executive shall be
entitled to any options already vested, subject to the provisions of Article V
(A).
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.
TSIG/KEEGAN EMPLOYMENT AGREEMENT PAGE 5 OF 9
<PAGE> 6
(B) During the term of Executive's employment and during any period in
which the Executive may receive 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 through personal contact 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,
except for Warren Potenberg or Richard Wheeler.
(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.
TSIG/KEEGAN EMPLOYMENT AGREEMENT PAGE 6 OF 9
<PAGE> 7
(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. 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 specifically
related to 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 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) 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
TSIG/KEEGAN EMPLOYMENT AGREEMENT PAGE 7 OF 9
<PAGE> 8
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 venue 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 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.
TSIG/KEEGAN EMPLOYMENT AGREEMENT PAGE 8 OF 9
<PAGE> 9
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.
IN WITNESS WHEREOF, the parties have executed this Agreement and affixed
their hands and seal the day and year first above written.
EXECUTIVE
/s/ Joseph K. Keegan
--------------------------------------------
Joseph K. Keegan
TELESERVICES INTERNET GROUP INC.
By: /s/ Robert P. Gordon
--------------------------------------------
Robert P. Gordon, Chairman
(CORPORATE SEAL)
TSIG/KEEGAN EMPLOYMENT AGREEMENT PAGE 9 OF 9
<PAGE> 10
EXHIBIT A
PRESIDENT AND CHIEF OPERATING OFFICER
Paid Vacation - 4 weeks per year
Sick Time - 6 days per year
Holidays - 8.5 annually
Health Insurance - United HealthCare
Eligible on the first of the month following your first 90 days
Family Coverage Total Premium - $592.77 monthly
Company Pays - $196.47 monthly
Employee Pays - $396.30 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 $26.50 Monthly
Life insurance paid for by the Company for employee only (no add-on's)
Coverage is by salary - COO coverage is $50,000
Executive will be able to participate as soon as possible in 401-K plan, when
and if implemented.
Liability Insurance - Hartford Business Insurance
<TABLE>
<S> <C>
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
D&O - TIG Specialty Insurance Co. $2,500,000
American Alliance Insurance Co. $2,500,000
Zurich Insurance Co. $2,500,000
Admiral Insurance Company $2,500,000
</TABLE>
TSIG/KEEGAN EMPLOYMENT AGREEMENT EXHIBIT A
<PAGE> 1
EXHIBIT 10.18
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") made as of this 6th day
of December 1999 by and between the parties: RICHARD H. WHEELER, an individual
residing at 4197 13th Lane N.E., St. Petersburg, Florida 33703 (hereinafter
referred to as the "Executive"), and TELESERVICES INTERNET 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 as Senior Vice President, Operations and Strategic Development; 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, effective December 6, 1999, as
Senior Vice-President ("SVP"), Operations and Strategic Development, and the
Executive hereby accepts such employment and shall serve 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,
perform such executive duties and functions as he may be called upon to perform
consistent with his employment hereunder as SVP, Operations and Strategic
Development.
(B) The Executive shall devote most of his time and best efforts to the
performance of his duties for the Company, including the following:
(i) Develop, implement, and monitor the operations and strategic
development plans for the Company and its subsidiaries;
(ii) Make recommendations to the President and Chief Operating
Officer regarding operations and staffing levels, and monitor and
evaluate performance of operations staff relative to compliance with
established policies and objectives of the Company and contributions
towards attaining objectives;
TSIG/WHEELER EMPLOYMENT AGREEMENT PAGE 1 OF 9
<PAGE> 2
(iii) Render services to any joint venture, subsidiary or
affiliated business of the Company as requested by the President and
Chief Operating Officer and 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;
(iv) Seek to enhance and develop the Company's relationships
with its employees, customers, shareholders and others in the business
community;
(v) Confer on a regular basis with the Company's top management
and, from time to time, its Board of Directors, regarding the
company's vision, long-term strategy, employee issues, and customer
policies; and
(vi) Perform such other duties consistent with his position as
SVP, Operations and Strategic Development, as may be assigned to him
by the Chief Operating Officer.
(C) At the request of the Company, the Executive shall also serve, without
additional compensation, as an officer 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 to the Company that, to the best
of his knowledge, he is under no professional 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. To the best of his
knowledge, the Executive's 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 annual salary of $50,000, payable
bi-weekly and in accordance with the Company's normal payroll procedures. The
President and Chief Operating Officer will review the Executive's performance
before July 1, 2000, and may increase the Executive's base salary from time to
time in his discretion, subject to the approval of the Chief Executive Officer.
(B) The Executive shall be eligible to receive a bonus of up to 30% - 40%
of his salary, based on the extent to which he achieves certain defined goals
and objectives, to be determined by mutual agreement between him and the
President and Chief Operating Officer, subject to approval by the Chief
Executive Officer.
TSIG/WHEELER EMPLOYMENT AGREEMENT PAGE 2 OF 9
<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 shall work out of the Company's executive offices in
St. Petersburg, Florida. The Executive shall travel on the Company's behalf to
the extent reasonably necessary and be reimbursed for such travel.
(C) The Company shall reimburse the Executive for all reasonable and
necessary business travel and entertainment expenses, upon presentation by the
Executive of an itemized accounting of all expenditures unrelated to office
rental.
(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. The
Company shall also provide the Executive with 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) Contemporaneously with the execution of this Agreement, the Company
shall grant the Executive options to acquire 1,000,000 shares of the Company's
common stock at an exercise price per share equal to $.05. Ten percent of the
options (100,000) shall vest upon the execution of this agreement and the
balance (900,000) shall vest over a two year period (and shall become
exercisable at the time they vest), subject to continued employment, at a rate
of 112,500 options per quarter on the first day following the end of the
quarter, commencing on April 1, 2000. All options shall expire the earlier of
January 1, 2005, or one year following the termination of employment with the
Company. 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
TSIG/WHEELER EMPLOYMENT AGREEMENT PAGE 3 OF 9
<PAGE> 4
which have not vested on or before the date of termination of Executive's
employment shall terminate on such date; and (iv) notwithstanding the expiration
date, 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 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 Senior Vice President,
Operations and Strategic Development, 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 one month
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 salary 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, defined as acts of dishonesty, 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) negligence or willful misconduct, either of which results (or can
reasonably be expected to result) in material harm to the Company. Notice of
TSIG/WHEELER EMPLOYMENT AGREEMENT PAGE 4 OF 9
<PAGE> 5
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 one
month 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) 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, which may only be changed in an express written
agreement signed by the Executive and a duly authorized officer of the Company.
No options shall vest after the date of termination, but the Executive shall be
entitled to any options already vested, subject to the provisions of Article V
(A).
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 Operations and Strategic Development 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.
TSIG/WHEELER EMPLOYMENT AGREEMENT PAGE 5 OF 9
<PAGE> 6
(B) During the term of Executive's employment and during any period in
which the Executive may receive 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 through personal contact 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,
except for Joseph Keegan or Warren Potenberg.
(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. It is,
therefore, agreed that the Company shall
TSIG/WHEELER EMPLOYMENT AGREEMENT PAGE 6 OF 9
<PAGE> 7
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 specifically related to 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 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) 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
TSIG/WHEELER EMPLOYMENT AGREEMENT PAGE 7 OF 9
<PAGE> 8
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
venue 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 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.
TSIG/WHEELER EMPLOYMENT AGREEMENT PAGE 8 OF 9
<PAGE> 9
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.
IN WITNESS WHEREOF, the parties have executed this Agreement and
affixed their hands and seal the day and year first above written.
EXECUTIVE
/s/ Richard H. Wheeler
-----------------------------------
Richard H. Wheeler
TELESERVICES INTERNET GROUP INC.
By: /s/ Robert P. Gordon
--------------------------------
Robert P. Gordon, Chairman
(CORPORATE SEAL)
TSIG/WHEELER EMPLOYMENT AGREEMENT PAGE 9 OF 9
<PAGE> 10
EXHIBIT A
SENIOR VICE PRESIDENT, OPERATIONS AND STRATEGIC DEVELOPMENT
Paid Vacation - 3 weeks per year
Sick Time - 6 days per year
Holidays - 8.5 annually
Health Insurance - United HealthCare
Eligible on the first of the month following your first 90 days
Coverage Total Premium - $xxx.xx monthly
Company Pays - $xxx.xx monthly
Employee Pays - $xxx.xx monthly
Dental Insurance - American Dental Plan
Two Choices
HMO Dental - Family Coverage Total Premium - $xx.xx monthly
Employee pays $xx.xx monthly
Indemnity - Family Coverage Total Premium - $xx.xx monthly
Employee pays $xx.xx monthly
Life insurance paid for by the Company for employee only (no add-on's)
Coverage is by salary - VP coverage is $50,000
Executive will be able to participate as soon as possible in 401-K plan, when
and if implemented.
Liability Insurance - Hartford Business Insurance
<TABLE>
<S> <C>
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
D&O - TIG Specialty Insurance Co. $2,500,000
American Alliance Insurance Co. $2,500,000
Zurich Insurance Co. $2,500,000
Admiral Insurance Company $2,500,000
</TABLE>
TSIG/WHEELER EMPLOYMENT AGREEMENT EXHIBIT A
<PAGE> 1
EXHIBIT 10.19
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") made as of this 6th day
of December 1999 by and between the parties: WARREN H. POTENBERG, an individual
residing at 2050 Iowa Ave. N.E., St. Petersburg, Florida 33703 (hereinafter
referred to as the "Executive"), and TELESERVICES INTERNET 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 as Senior Vice President, Marketing and Sales; 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, effective December 6, 1999, as
Senior Vice-President ("SVP"), Marketing and Sales, and the Executive hereby
accepts such employment and shall serve 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 SVP, Marketing and Sales.
(B) The Executive shall devote most of his time and best efforts to the
performance of his duties for the Company, including the following:
(i) Develop, implement, and monitor marketing and sales plans for
the Company and its subsidiaries;
(ii) Make recommendations to the President and Chief Operating
Officer regarding sales staffing levels, and monitor and evaluate
performance of sales staff relative to compliance with established
policies and objectives of the Company and contributions towards
attaining objectives;
TSIG/POTENBERG EMPLOYMENT AGREEMENT PAGE 1 OF 9
<PAGE> 2
(iii) Render services to any joint venture, subsidiary or
affiliated business of the Company as requested by the Chief Operating
Officer and 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;
(iv) Seek to enhance and develop the Company's relationships with
its employees, customers, shareholders and others in the business
community;
(v) Confer on a regular basis with the Company's top management
and, from time to time, its Board of Directors, regarding the
company's vision, long-term strategy, employee issues, and customer
policies; and
(vi) Perform such other duties consistent with his position as
SVP, Marketing and Sales, as may be assigned to him by the President
and Chief Operating Officer.
(C) At the request of the Company, the Executive shall also serve, without
additional compensation, as an officer 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 to the Company that, to the best
of his knowledge, he is under no professional 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. To the best of his
knowledge, the Executive's 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 annual salary of $85,000, payable
bi-weekly and in accordance with the Company's normal payroll procedures. The
President and Chief Operating Officer will review the Executive's performance on
or before June 1, 2000, and may increase the Executive's base salary from time
to time in his discretion, subject to the approval of the Chief Executive
Officer.
(B) The Executive shall be eligible to receive a bonus of up to 30% - 40%
of his salary, based on the extent to which he achieves certain defined goals
and objectives, to be determined by mutual agreement between him and the
President and Chief Operating Officer, subject to approval by the Chief
Executive Officer.
TSIG/POTENBERG EMPLOYMENT AGREEMENT PAGE 2 OF 9
<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 shall work out of the Company's executive offices in St.
Petersburg, Florida. The Executive shall travel on the Company's behalf to the
extent reasonably necessary and be reimbursed for such travel.
(C) The Company shall reimburse the Executive for all reasonable and
necessary business travel and entertainment expenses, upon presentation by the
Executive of an itemized accounting of all expenditures unrelated to office
rental.
(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. The
Company shall also provide the Executive with 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) Contemporaneously with the execution of this Agreement, the Company
shall grant the Executive options to acquire 1,000,000 shares of the Company's
common stock at an exercise price per share equal to $.05. Ten percent of the
options (100,000) shall vest upon the execution of this agreement and the
balance (900,000) shall vest over a 2 year period (and shall become exercisable
at the time they vest), subject to continued employment, at a rate of 112,500
options per quarter on the first day following the end of the quarter,
commencing on April 1, 2000. All options shall expire the earlier of January 1,
2005, or one year following the termination of employment with the Company. 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
TSIG/POTENBERG EMPLOYMENT AGREEMENT PAGE 3 OF 9
<PAGE> 4
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) notwithstanding
the expiration date, 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 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 Senior Vice President,
Marketing and Sales, 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 one month
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 salary 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, defined as acts of dishonesty, 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) negligence or willful misconduct, either of
TSIG/POTENBERG EMPLOYMENT AGREEMENT PAGE 4 OF 9
<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 one
month 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) 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, which may only be changed in an express written
agreement signed by the Executive and a duly authorized officer of the Company.
No options shall vest after the date of termination, but the Executive shall be
entitled to any options already vested, subject to the provisions of Article V
(A).
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.
TSIG/POTENBERG EMPLOYMENT AGREEMENT PAGE 5 OF 9
<PAGE> 6
(B) During the term of Executive's employment and during any period in
which the Executive may receive 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 through personal contact 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,
except for Joseph Keegan or Richard Wheeler.
(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.
TSIG/POTENBERG EMPLOYMENT AGREEMENT PAGE 6 OF 9
<PAGE> 7
(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. 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 specifically
related to 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 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) 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
TSIG/POTENBERG EMPLOYMENT AGREEMENT PAGE 7 OF 9
<PAGE> 8
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 venue 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 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.
TSIG/POTENBERG EMPLOYMENT AGREEMENT PAGE 8 OF 9
<PAGE> 9
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.
IN WITNESS WHEREOF, the parties have executed this Agreement and affixed
their hands and seal the day and year first above written.
EXECUTIVE
/s/ Warren H. Potenberg
--------------------------------------------
Warren H. Potenberg
TELESERVICES INTERNET GROUP INC.
By: /s/ Robert P. Gordon
----------------------------------------
Robert P. Gordon, Chairman
(CORPORATE SEAL)
TSIG/POTENBERG EMPLOYMENT AGREEMENT PAGE 9 OF 9
<PAGE> 10
EXHIBIT A
SENIOR VICE PRESIDENT, MARKETING AND SALES
Paid Vacation - 3 weeks per year
Sick Time - 6 days per year
Holidays - 8.5 annually
Health Insurance - United HealthCare
Eligible on the first of the month following your first 90 days
Coverage Total Premium - $xxx.xx monthly
Company Pays - $xxx.xx monthly
Employee Pays - $xxx.xx monthly
Dental Insurance - American Dental Plan
Two Choices
HMO Dental - Family Coverage Total Premium - $xx.xx monthly
Employee pays $xx.xx monthly
Indemnity - Family Coverage Total Premium - $xx.xx monthly
Employee pays $xx.xx monthly
Life insurance paid for by the Company for employee only (no add-on's)
Coverage is by salary - VP coverage is $50,000
Executive will be able to participate as soon as possible in 401-K plan, when
and if implemented.
Liability Insurance - Hartford Business Insurance
<TABLE>
<S> <C>
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
D&O - TIG Specialty Insurance Co. $2,500,000
American Alliance Insurance Co. $2,500,000
Zurich Insurance Co. $2,500,000
Admiral Insurance Company $2,500,000
</TABLE>
TSIG/POTENBERG EMPLOYMENT AGREEMENT EXHIBIT A
<PAGE> 1
EXHIBIT 10.20
AGREEMENT TO SERVE AS A DIRECTOR
THIS AGREEMENT TO SERVE AS A DIRECTOR ("Agreement") is made as of this
29th day of September 1999 by and between the parties: FRANK RUGANO, an
individual residing at 903 Anchorage Road, Tampa, Florida 33602 (hereinafter
referred to as "Rugano"), and TELESERVICES INTERNET 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 Rugano to serve as a member of the Board
of Directors of the Company (a "Director"), and Rugano hereby accepts such
appointment, commencing effective October 1, 1999. While serving in the capacity
of a Director, Rugano 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 Rugano, 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 Rugano 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
Rugano 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 Rugano options to acquire 900,000 shares of the Company's common
stock at an exercise price per share equal to $.05. The options shall vest (and
shall become exercisable at the time they vest), subject to termination of this
Agreement, on a quarterly basis on the last day of each quarter. All options
shall expire on December 31, 2004. 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. Rugano 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/RUGANO AGREEMENT PAGE 1 OF 3
<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 pay to Rugano a fee of $2,500 per month for the term
of this Agreement for serving as a Director.
(E) If requested in writing by the Company, Rugano shall provide consulting
services to the Company at the rate of $1,000 per day.
(F) The Company shall reimburse Rugano on a monthly basis for all
reasonable and necessary expenses, upon presentation by Rugano of an itemized
account of such expenditures, or, at the discretion of the Company, the Company
may advance such expenses to Rugano.
ARTICLE IV
TERM AND TERMINATION
(A) The term of this Agreement shall commence on October 1, 1999 and shall
end September 30, 2001, or when terminated pursuant to this Article.
(B) This Agreement shall terminate immediately in the event that Rugano
ceases to be a Director of the Company for any reason whatsoever, voluntary or
involuntarily.
(C) Rugano 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.
- --------------------------------------------------------------------------------
TSIG/RUGANO AGREEMENT PAGE 2 OF 3
<PAGE> 3
IN WITNESS WHEREOF, the parties have executed this Agreement and
affixed their hands and seal the day and year first above written.
/s/ Frank Rugano
---------------------------------
Frank Rugano
TELESERVICES INTERNET GROUP INC.
By: /s/ Robert P. Gordon
-----------------------------
Robert P. Gordon, Chairman
- --------------------------------------------------------------------------------
TSIG/RUGANO AGREEMENT PAGE 3 OF 3
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Form 10-KSB for the year ended December 31, 1999, and is qualified in
its entirety by reference to such Form 10-KSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 75,533
<PP&E> 892,669
<DEPRECIATION> (417,970)
<TOTAL-ASSETS> 554,487
<CURRENT-LIABILITIES> 4,603,413
<BONDS> 0
0
0
<COMMON> 25,059
<OTHER-SE> (4,091,337)
<TOTAL-LIABILITY-AND-EQUITY> 554,487
<SALES> 395,767
<TOTAL-REVENUES> 399,109
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 13,198,108
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 214,052
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (13,013,051)
<DISCONTINUED> 4,379,701
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,633,350)
<EPS-BASIC> (.065)
<EPS-DILUTED> 0
</TABLE>
