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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
Consolidated Technology Group Ltd.
(Name of Issuer)
Common Stock, $0.01 par value
(Title of Class of Securities)
818793 20 0
(CUSIP Number)
Technology Acquisitions, Ltd.
With a copy to:
Connie Jones
700 Gemini, Suite 100, Houston, Texas 77058
(281) 488-3883
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
April 20, 1999
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check
the following box [ ].
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Section 240.13d-7(b) for
other parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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Page 2 of 12
1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE
PERSONS (entities only)
Technology Acquisitions, Ltd.
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)
(a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS (See Instructions)
WC
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e)
[ ]
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Bermuda
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER
NUMBER OF 15,999,785 Shares
SHARES
BENEFICIALLY ------------------------------------------------------
OWNED BY 8. SHARED VOTING POWER
EACH
REPORTING ------------------------------------------------------
PERSON 9. SOLE DISPOSITIVE POWER
WITH 15,999,785 Shares
------------------------------------------------------
10. SHARED DISPOSITIVE POWER
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
15,999,785 Shares
- --------------------------------------------------------------------------------
12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(See Instructions)
[ ]
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
34.2%
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON (See Instructions)
CO
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Page 3 of 12
1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE
PERSONS (entities only)
Benchmark Equity Group, Inc.
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)
(a) [ ]
(b) [X]
-------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS (See Instructions)
OO
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e)
[ ]
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Benchmark Equity Group, Inc. - Delaware
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER
NUMBER OF 15,999,785 Shares
SHARES
BENEFICIALLY ------------------------------------------------------
OWNED BY 8. SHARED VOTING POWER
EACH
REPORTING ------------------------------------------------------
PERSON 9. SOLE DISPOSITIVE POWER
WITH 15,999,785 Shares
------------------------------------------------------
10. SHARED DISPOSITIVE POWER
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
15,999,785 Shares
- --------------------------------------------------------------------------------
12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(See Instructions)
[ ]
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
34.2%
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON (See Instructions)
CO
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1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE
PERSONS (entities only)
Frank DeLape
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)
(a) [ ]
(b) [X]
-------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS (See Instructions)
OO
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e)
[ ]
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
US
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER
NUMBER OF 15,999,785 Shares
SHARES
BENEFICIALLY ------------------------------------------------------
OWNED BY 8. SHARED VOTING POWER
EACH
REPORTING ------------------------------------------------------
PERSON 9. SOLE DISPOSITIVE POWER
WITH 15,999,785 Shares
------------------------------------------------------
10. SHARED DISPOSITIVE POWER
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
15,999,785 Shares
- --------------------------------------------------------------------------------
12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(See Instructions)
[ ]
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
34.2%
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON (See Instructions)
IN
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ITEM 1. SECURITY AND ISSUER
The title of the class of securities to which this filing relates is
common stock, par value $.01 per share (the "Common Stock"), of Consolidated
Technology Group Ltd., a New York corporation (the "Company" or "COTG"). The
Company's principal executive office is located at 700 Gemini, Houston, Texas
77058.
ITEM 2. IDENTITY AND BACKGROUND
This statement is being filed jointly by Technology Acquisitions, Ltd., a
Bermuda corporation ("Technology Acquisitions"), Benchmark Equity Group, Inc.
("Benchmark"), a Delaware corporation, and Frank DeLape, an individual.
Benchmark wholly owns 100% of the voting Common Stock of Technology
Acquisitions. Frank DeLape is a director of each of Technology Acquisitions, and
Benchmark and owns of record 100% of the voting stock of Benchmark. Mr. DeLape
is also a director and Chairman of the Board of COTG. Technology Acquisitions,
Benchmark and Frank DeLape shall together be referred to as the "Reporting
Persons." The agreement among the Reporting Persons relating to the joint filing
of this statement is attached as Exhibit 1 hereto.
The principal business address of Technology Acquisitions is Clarendon
House, 2 Church Street, Hamilton HM 11 Bermuda. The principal business address
of Benchmark Equity Group, Inc. and Frank DeLape is 700 Gemini, Houston, Texas
77058.
Technology Acquisitions was formed in March 1999 to effect the proposed
transactions described in Item 4 below. Benchmark owns 120,000 shares of the
Common Stock of Technology Acquisitions, or 100% of the outstanding capital
stock which it purchased, for a capital contribution of $12,000. Benchmark is a
private merchant banking firm engaged in the financing and structuring of
private and public companies.
During the last five years, none of the Reporting Persons have been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors). During the last five years, none of the Reporting Persons have
been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction resulting in its being subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any violation
with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Technology Acquisitions entered into separate Stock Purchase Agreements
on April 1, 1999 with nine common stockholders of COTG to purchase an aggregate
of 8,000,000 shares of COTG Common Stock, which represents 17.1% of Technology
Acquisitions' outstanding shares of COTG Common Stock, at a price per share of
US $0.25 for an aggregate consideration of $2,000,000. Technology Acquisitions
consummated the purchase of these 8,000,000 shares of Common Stock on April 20,
1999 (the "Initial Purchase"), applying $1,542,000 of the net proceeds raised
from the sale of its Series A Cumulative Convertible
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Preferred Stock ("Series A Preferred Stock"), $326,000 in proceeds from a bridge
loan from Trident III, L.L.C., a Cayman Islands limited liability company, and
$150,000 from Benchmark. The bridge loans each carried an interest rate of 15%
and an origination fee of 5%, and each was repaid on April 26, 1999 from the
proceeds of further sales by Technology Acquisitions of Series A Preferred
Stock. The 8,000,000 shares of COTG Common Stock purchased by Technology
Acquisitions have not been registered under the federal securities laws.
The source of funds for the Initial Purchase was the offering and sale of
shares of the Series A Preferred Stock of Technology Acquisitions, to
non-affiliated accredited investors only, at a purchase price of US $25.00 per
share. The Series A Preferred Stock is entitled to a quarterly dividend
equivalent to 90% of the total net revenue received by Technology Acquisitions
in that quarterly period, until such time as each holder of the Series A
Preferred Stock ("Holder") has received a total dividend payment equal to 100%
of the aggregate purchase price it paid for the Series A Preferred Stock. After
each Holder has received a total dividend equal to 100% of the aggregate
purchase price it paid for its Series A Preferred Stock, Technology Acquisitions
will apply 90% of its total net revenue to redeem each share of Series A
Preferred Stock at a price of $25.00 per share on a pro rata basis among the
holders. As such time as the final redemption price is paid in full, the holders
of the Series A Preferred Stock will be entitled to receive, in the aggregate,
such number of shares of Common Stock of Technology Acquisitions as shall equal
at that time 50% of the total number of shares of outstanding Common Stock of
Technology Acquisitions, after the issuance of such shares. At that time, each
holder of Series A Preferred Stock, including holders of shares of Series A
Preferred Stock issued subsequently to the date of this Schedule, will receive
its proportionate share of the newly-issued Common Stock. The Series A Preferred
Stock is convertible, at the option of the holder, at any time prior to
redemption, into shares of the Technology Acquisitions Common Stock on a
one-for-one basis. No Holder of Series A Preferred Stock presently holds more
than 14.2% of such outstanding Series A Preferred Stock.
All of the outstanding Common Stock of Technology Acquisitions is held by
Trident Equity Management Group ("TEMG"). Effective April 15, 1999, Benchmark
acquired an Option to purchase all of the outstanding Common Stock of Technology
Acquisitions from TEMG exercisable for a period of one year at a total exercise
price of $12,000, or $0.10 per share. Effective April 15, 1999, TEMG also
granted Benchmark an Irrevocable Proxy to vote all of the outstanding Common
Stock of Technology Acquisitions during the term of the Option.
Technology Acquisitions has entered into separate Option Agreements,
exercisable until May 20, 2000, with certain common stockholders of COTG (each
an "Optionor" and collectively the "Optionors") to purchase, in the aggregate,
up to 7,999,785 shares of COTG Common Stock at a price of $0.35 per share,
subject to customary antidilution adjustments (collectively, the "Options").
During the term of the Options, the Optionors have granted Technology
Acquisitions full voting power with respect to the shares of Common Stock
underlying the Options. If Technology Acquisitions were to exercise fully each
of the Options, the aggregate amount of consideration which would be paid by
Technology Acquisitions to
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acquire the COTG Common Stock which is subject to the Options would be US
$2,799,962.20. In the event that COTG Common Stock should trade during the term
of the Option Agreements at an average per share price in excess of $0.45 for a
period of ten (10) consecutive trading days, each Optionor shall have the right,
by written notice, to cause Technology Acquisitions, within twenty (20) days of
its receipt of such notice, to exercise its Option at an exercise price of $0.35
per share, or to forfeit the Option.
Technology Acquisitions anticipates that it will apply any proceeds which
it may receive from the further offer and sale of Series A Preferred Stock, up
to a maximum of $6.5 million for the sale of a maximum of 260,000 shares of
Series A Preferred Stock, to the exercise of the Options, or to purchase the
shares of COTG in the open market and/or through private sale.
COTG, through its wholly-owned subsidiary, SIS Capital Corp. ("SISC"),
sold all of its equity interest in Arc Networks, Inc. ("Arc"), a privately held
company, to Technology Acquisitions for $850,000 pursuant to an agreement dated
March 23, 1999. The proceeds of the sale and the purchased shares of Arc Common
Stock are being held in escrow pending receipt of approval of the New York
Public Service Commission to the sale of the shares to Technology Acquisitions
and certain related matters. Until the sale of stock to Technology Acquisitions,
COTG owned approximately 67% of the outstanding Common Stock of Arc.
ITEM 4. PURPOSE OF TRANSACTIONS
The immediate purpose of the Initial Purchase and the acquisition of the
Options is to obtain voting control of 34.2% of the outstanding Common Stock of
COTG for the Reporting Persons. As of April 20, 1999, Technology Acquisitions
had executed and consummated Stock Purchase Agreements with nine COTG
shareholders for the purchase of an aggregate 8,000,000 shares of Common Stock,
and has also executed Option Agreements with six COTG shareholders for the
purchase of up to an additional 7,999,785 shares of COTG Common Stock, as more
fully described in Item 3 hereof. Technology Acquisitions now owns 17.1% of the
voting Common Stock of COTG, and, pursuant to the Option Agreements, it has the
present right to vote an additional 17.1% of the outstanding Common Stock of
COTG, until such time as the Options are terminated or forfeited.
On April 19, 1999, in anticipation of Technology Acquisitions' purchase
of 8,000,000 shares of Common Stock of COTG and the grant to Technology
Acquisitions of options to purchase an additional 7,999,785 shares of Common
Stock of COTG, the Board of Directors elected Frank DeLape as a director. Mr.
DeLape, who is 45 years old, is president of Benchmark, a position he has held
since 1994. Mr. DeLape is also a director of Benchmark and Technology
Acquisitions. In addition to such positions and to his position as a director of
COTG, Mr. DeLape is a member of the Board of Directors of I-Storm, Inc., a
publicly-owned corporation. Mr. DeLape is also the sole director of Oak Tree
Capital, a privately-owned company.
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On April 20, 1999, Seymour Richter resigned as COTG's president and chief
executive officer. Simultaneously with his resignation, Mr. Richter entered into
a nine-month consulting agreement with COTG pursuant to which he will receive
aggregate compensation of $56,250.
On April 22, 1999, the Board of Directors of COTG elected Richard Young
as a director and chief operating officer of COTG and Mr. DeLape as chairman of
the board of COTG. Mr. Young, who is 31 years old, is a certified public
accountant. Prior to becoming an officer and director of COTG, during the period
1997 through 1999, Mr. Young served in various positions with, and eventually as
a principal of, Benchmark. From 1996 until 1997, Mr. Young served as a Regional
Controller for IKON Office Solutions, Inc., a public company engaged in the
office systems design business. During a part of 1996, Mr. Young was Assistant
to the President and Chief Executive Officer of Learmonth & Burchette Management
Systems, Plc., a publicly-owned English company engaged in the application
development process software business. From 1992 to 1996, Mr. Young was employed
by Price Waterhouse, LLP in staff accounting positions, eventually serving as a
senior accountant.
On April 22, 1999, the board also approved three-year employment
agreements between COTG and Messrs. DeLape and Young pursuant to which they will
receive annual salaries of $250,000 and $135,000, respectively. The agreements
require Mr. DeLape to devote such time as is necessary to perform his duties as
chairman of the board and chief executive officer of COTG and Mr. Young to
devote his full time to the performance of his duties as president and chief
operating officer of COTG. The agreements provide for annual cash bonuses,
annual equity incentive awards including grants of stock appreciation rights and
stock options, certain fringe benefits, including life insurance and severance
compensation. Pursuant to the agreements, COTG granted Messrs. DeLape and Young
five-year options to purchase 400,000 and 250,000 shares of the Common Stock of
COTG, respectively, at $.14 per share, the closing price of COTG's Common Stock
on April 20, 1999. The options become exercisable only upon the Company's
aggregate market capitalization meeting or exceeding $25,000,000 and upon the
Company's adoption of a long term incentive plan. Additionally, the agreements
provide for the grant to Messrs. DeLape and Young, on the last day of each
fiscal year during the term hereof, of additional stock options of 250,000 and
100,000 shares of Common Stock of COTG, exercisable at the closing price of
COTG's Common Stock on the day immediately prior to the date of issuance, any
such options being subject to performance objectives to be agreed upon by the
Board and such persons for each such year. The options become exercisable only
upon the Company's aggregate market capitalization being at least $25,000,000.
Such options contain anti-dilution provisions, including provisions with respect
to any subsequent reverse stock split of COTG's Common Stock. Such options are
subject to shareholder approval.
On April 22, 1999, following the approval of the employment contracts of
Messrs. DeLape and Young, Messrs. Seymour Richter, Edward D. Bright and Donald
Chaifetz resigned as directors of COTG and Mr. Bright resigned as chairman of
the board. In connection with Mr. Bright's resignation as chairman of the board,
the Board of Directors approved the issuance to Mr. Bright of a three-year
warrant to purchase 100,000 shares of the
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Common Stock of COTG at $.15 per share, the closing price of COTG's Common Stock
on such date.
Subsequent to April 22, 1999, the Board appointed Mr. DeLape as chief
operating officer of COTG and Mr. Young as chief executive officer. The new
Board then appointed Matthew Finch, general counsel of Benchmark, as Secretary
of the Corporation, and approved the grant to Mr. Finch of five-year options to
purchase 15,000 shares of Common Stock of the Company at an exercise price of
$0.14 per share. The options become exercisable only upon the Company's
aggregate market capitalization being at least $25,000,000. Such options will
contain anti-dilution provisions, including provisions with respect to any
subsequent reverse stock split of COTG's Common Stock, and are subject to
shareholder approval.
"Market capitalization," for the purposes of determining the vesting
period of each of Mr. DeLape's, Mr. Young's and Mr. Finch's options, shall mean
the product of (i) the total number of shares of Common Stock of COTG which, on
the date as of which the computation is made, are either (a) outstanding or (b)
issuable upon conversion of outstanding shares of preferred stock, and (ii) the
average closing price of the Common Stock on the date as of which the
computation is made, as reported by the principal stock exchange or market on
which the COTG Common Stock is traded; provided, that if, on such day there are
no reported sales of COTG Common Stock, the closing bid price on such date shall
be used. In the event that the COTG Common Stock is not traded on any exchange
or market that reports closing prices, the closing bid price as reported by the
National Quotation Bureau, Inc. shall be used.
The Board then approved the formation by COTG of a limited partnership
entity, in which COTG will hold a majority of the limited partnership interest,
which will apply for approval as a Small Business Investment Company ("SBIC").
It is anticipated that Mr. DeLape, Mr. Young and Mr. Finch will directly own the
equity interest in the corporate managing partner of such an entity. The SBIC
application will be subject to Small Business Administration approval. The Board
then approved the relocation of COTG's headquarters to Houston, Texas.
The Reporting Persons' purposes for the acquisitions of COTG Common Stock
may also include, without limitation, plans or proposals, which would relate to
or would result in any one or more of the following:
- Commencement of one or more operating businesses by COTG;
- The acquisition by the Reporting Persons of additional securities of
COTG or its subsidiaries, or the disposition by the Reporting Persons
of securities of COTG;
- An extraordinary corporate transaction, such as a merger,
reorganization, or liquidation, involving the COTG or any of its
subsidiaries;
- A sale or transfer of a material amount of assets of COTG or any of
its subsidiaries;
- A material acquisition of stock or assets in new lines of business;
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- A material change in the present capitalization or dividend policy of
COTG, including the offering and sale of either Common Stock or of
additional classes of stock, a stock split or reverse stock split, or
the private placement of further debt;
- A joint venture, partnership or management arrangement impacting COTG
or any of its subsidiaries and/or affiliate entities or persons;
- Changes in COTG's charter, bylaws or instruments corresponding
thereto or other actions which may impede the acquisition of control
of the issuer by any person;
- Other changes in COTG's or its subsidiaries' business or corporate
structure;
- Change in location of corporate headquarters and corporate name;
- Reallocation of capital to existing and to newly created
subsidiaries; and
- Any action similar to any of those enumerated above.
The Reporting Persons intend to continually assess the market for the
Common Stock, as well as COTG's financial position and operations. The Reporting
Persons do not have plans to acquire additional shares of Common Stock at the
present time, but may determine to acquire additional shares in the future.
Depending upon a continuing assessment and upon future developments, the
Reporting Persons may determine, from time to time or at any time, to sell or
otherwise dispose of some or all of the Common Stock. In making any such
determination, the Reporting Persons will consider their goals and objectives,
other business opportunities available to them, as well as general economic and
stock market conditions. The foregoing actions may be taken by one or more of
the Reporting Persons and, while currently there are no plans to do so, possibly
in combination with others.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) Technology Acquisitions and its parent, Benchmark, each beneficially
own 15,999,785 shares or 34.2% of the outstanding Common Stock of COTG. Eight
million (8,000,000) of the shares of Common Stock were purchased by Technology
Acquisitions on April 20, 1999, and Technology Acquisitions holds an option to
purchase 7,999,785 of the shares of such Common Stock exercisable until May 20,
2000. During the term of this option, Technology Acquisition may vote such
shares of Common Stock.
Frank DeLape has acquired options to purchase up to 400,000 shares of
Common Stock of COTG. Mr. DeLape's options will vest fully and become
exercisable no earlier than the date that the Company's market capitalization
meets or exceeds $25,000,000 and shall expire at 5:30 P.M. Houston, Texas time,
on April 21, 2004.
(b) Technology Acquisitions has the sole power to vote 15,999,785 shares
of COTG Common Stock and the power to dispose of the 8,000,000 shares of COTG
Common Stock which it presently owns. Its parent, Benchmark, has the power
indirectly to vote the 15,999,785 shares of COTG held by Technology Acquisitions
and the sole power to direct the
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disposition of the 8,000,000 shares which Technology Acquisitions directly owns.
Frank DeLape holds the power to vote all of Benchmark's shares and accordingly
has the power indirectly to vote the 15,999,785 shares of COTG held by
Technology Acquisitions.
(c) To the best knowledge of the Reporting Persons, no Reporting Person
has beneficial ownership of, or has engaged in any transaction during the past
60 days in any shares of COTG Common Stock or its subsidiaries, except as
described herein.
(d) None.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER
On March 23, 1999, Technology Acquisitions purchased 67% of the
outstanding Common Stock of Arc from COTG's wholly-owned subsidiary, SIS Capital
Corp. ("SISC"), for $850,000. Technology Acquisitions plans to merge Arc into a
subsidiary of Gemini II, Inc., an affiliate of Benchmark. Benchmark holds 48.5%
of the outstanding Common Stock of Gemini II, Inc., and together with its
affiliates holds in excess of 70% of the Common Stock of Gemini II.
Benchmark intends to enter into consulting agreements with one or more
subsidiaries of COTG to provide strategic management and consulting services. No
such agreements have been approved to date by the Board of Directors of COTG.
Benchmark may also enter into agreements to provide leasing and consulting
services to COTG on a fair and reasonable basis for consideration not to exceed
market rates.
Except as set forth in this Schedule 13D, to the best of the knowledge of
the Reporting Persons, there are no other contracts, arrangements,
understandings or relationships (legal or otherwise) among the persons named in
Item 2 and between such persons and any person with respect to any securities of
COTG, including but not limited to: transfer or voting of any of the securities
of COTG or of its subsidiaries, joint ventures, loan or option arrangements,
puts or calls, guarantees or profits, division of profits or loss, or the giving
or withholding of proxies or a pledge or contingency the occurrence of which
would give another person voting power over the securities of COTG.
ITEM 7. MATERIALS TO BE FILED AS EXHIBITS
Exhibit 1 - Joint Filing Agreement
Exhibit 2 - Purchase Option Agreement and Irrevocable Proxy
Exhibit 3 - Form of Frank DeLape Employment Agreement
Exhibit 4 - Form of Richard Young Employment Agreement
Exhibit 5 - Form of Frank DeLape Option Agreement
Exhibit 6 - Form of Richard Young Option Agreement
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, the
undersigned each certifies that the information set forth in this statement is
true, complete and correct.
Dated: June 29, 1999 TECHNOLOGY ACQUISITIONS, LTD.
By: /s/ VANCE R. TILLMAN
----------------------------------
Its: Treasurer
BENCHMARK EQUITY GROUP, INC.
By: /s/ FRANK DELAPE
----------------------------------
Its: Chief Executive Officer
----------------------------------
FRANK DELAPE
By: /s/ FRANK DELAPE
----------------------------------
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EXHIBIT 1
JOINT FILING AGREEMENT
We, the signatories of the statement on Schedule 13D to which this
Agreement is attached, hereby agree that such statement is, and any amendments
thereto filed by any of us will be, filed on behalf of each of us.
Dated: June 29, 1999 TECHNOLOGY ACQUISITIONS, LTD.
By: /s/ VANCE R. TILLMAN
---------------------------------
Its: Treasurer
BENCHMARK EQUITY GROUP, INC.
By: /s/ FRANK DELAPE
---------------------------------
Its: Chief Executive Officer
---------------------------------
FRANK DELAPE
By: /s/ FRANK DELAPE
---------------------------------
<PAGE> 1
EXHIBIT 2
NEITHER THIS OPTION NOR THE SECURITIES UNDERLYING THE EXERCISE OF THIS OPTION
HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED,
OR ANY FOREIGN SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE UNITED STATES IN THE ABSENCE OF:
(i) AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER SAID ACT, OR
(ii) AN EXEMPTION THEREFROM UNDER SAID ACT OR WITHOUT COMPLIANCE WITH ANY
APPLICABLE FOREIGN SECURITIES LAWS.
Void after 5:00 p.m. (Houston, Texas time) on
April 15, 2000 as provided herein.
Issue Date: April 15, 1999 Option to Purchase Common Shares
Expiration Date: April 15, 2000 Exercisable Commencing: April 15, 1999
COMMON STOCK PURCHASE OPTION
TO PURCHASE COMMON SHARES OF
TECHNOLOGY ACQUISTIONS, LTD.
Trident Equity Management Group ("Optionor"), hereby certifies that for
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Benchmark Equity Group, Inc. ("Holder") is entitled, subject to
the terms set forth in this common stock purchase option (the "Option"), at any
time or from time to time, commencing April 15, 1999, (the "Exercise Date"),
through but not later than April 15, 2000 (the "Expiration Date"), to purchase
from the Company an aggregate of One Hundred Twenty Thousand Shares (120,000)
shares of common stock, par value $.10 (the "Common Stock") of Technology
Acquisitions, Ltd., a Bermuda corporation (the "Company"), at an exercise price
of $0.10 per share (such exercise price per share, as adjusted from time to time
pursuant to the provisions set forth below, being referred to herein as the
"Exercise Price"). The effective date of this Option shall be April 15, 1999.
This Option and all rights hereunder, to the extent such rights shall not have
been exercised, shall terminate and become null and void to the extent the
Holder (as hereinafter defined) fails to exercise any portion of this Option
prior to 5:00 p.m., Houston, Texas time, on the Expiration Date.
1. Restrictions on Transfer of Shares
The Shares underlying this Option are restricted securities and have not
been the subject of registration under the United States Securities Act of 1933,
as amended (the "Act") or under Bermuda or other foreign securities laws, and
may not be sold, transferred, pledged, hypothecated or otherwise disposed of in
the United States in the absence of: (i) an effective registration statement for
such securities under said Act, or (ii) an exemption therefrom under said Act,
or without compliance with any applicable Bermuda or other foreign securities
laws.
<PAGE> 2
2. Exercise of Option
(a) This Option may be exercised only in its entirety by the Holder at
any time until the expiration date by surrendering it, with the form of
subscription annexed hereto duly executed by such Holder, to the Company at its
address set forth herein in Section 11 accompanied by payment in full, in cash
or by certified or official bank check, of the full Exercise Price. This Option
shall be deemed to have been exercised prior to the close of business on the
date this Option is surrendered and payment is made in accordance with the
foregoing provision;
(b) The Optionor shall, at the time of any exercise of this Option, upon
the request of the Holder hereof, acknowledge in writing its continuing
obligation to afford to such Holder any rights to which such Holder shall
continue to be entitled after such exercise in accordance with the provisions of
this Option; provided that if the Holder of this Option shall fail to make any
such request, such failure shall not affect the continuing obligations of the
Company to afford to such Holder any such rights;
(c) The shares of Common Stock which may be delivered upon the exercise
of this Option shall, upon delivery, be fully paid and nonassessable and free
from all taxes, liens and charges with respect thereto.
(d) The exercise of the this Option is subject to the prior approval of
the Bermuda Monetary Authority ("BMA"), and any attempted exercise without such
prior approval shall be null, void and without legal or beneficial effect with
respect to the Optionor, the Holder and the Company. The Company shall have no
obligation to register or to acknowledge any attempted exercise of this Option
or any attempted transfer of Common Stock pursuant to the exercise of this
Option without the express consent of the BMA.
3. Rights of the Holder
(a) The Holder of this Option shall, be entitled to all voting, dividend
or other rights of a common stockholder in the Company, either at law or equity
pursuant to an Irrevocable Proxy that shall be executed with the Optionor
concurrently with the grant of this Option.
(b) At any time during the term of the Option, the Holder shall have the
right to enjoin in a court of law any action of the Optionor which may
contravene the rights of the Holder hereunder. Upon exercise, the Holder shall
have the right to specific performance of this Option, including the right to
the delivery of the unencumbered Common Stock underlying this Option. The Holder
shall also have the right to any remedies in law or in equity for breach of this
Option by the Optionor.
4. Adjustments
(a) The number of shares of Common Stock purchasable on exercise of this
Option and the purchase prices therefor shall be subject to adjustment from time
to time in the event
2
<PAGE> 3
that the Company shall: (1) pay a dividend in, or make a distribution of, shares
of Common Stock; (2) subdivide its outstanding shares of Common Stock into a
greater number of shares; (3) combine its outstanding shares of Common Stock
into a smaller number of shares; or (4) spin-off a subsidiary by distributing,
as a dividend or otherwise, shares of the subsidiary to its stockholders. In any
such case, the total number of shares of Common Stock and the number of any
other securities purchasable upon exercise of this Option immediately prior
thereto shall be adjusted so that the Holder shall be entitled to receive from
the Optionor, at the same aggregate exercise price, the number of shares of
Common Stock and the number of any other securities that the Holder would have
owned or would have been entitled to receive immediately following the
occurrence of any of the events described above had this Option been exercised
in full immediately prior to the occurrence (or applicable record date) of such
event. An adjustment made pursuant to this subsection shall, in the case of a
stock dividend or distribution, be made as of the record date and, in the case
of a subdivision or combination, be made as of the effective date thereof. If,
as a result of any adjustment pursuant to this subsection, the Holder shall
become entitled to receive shares of two or more classes or series of securities
of the Company, the board of directors of the Company shall equitably determine
the allocation of the adjusted exercise price between or among shares or other
units of such classes or series and shall notify the Holder of such allocation.
(b) In the event of any reorganization or recapitalization of the Company
or in the event the Company consolidates with or merges into or with another
entity or transfers all or substantially all of its assets to another entity,
then and in each such event, the Holder, upon exercise of this Option as
provided herein, at any time after the consummation of such reorganization,
recapitalization, consolidation, merger or transfer, shall be entitled, and the
documents executed to effectuate such event shall so provide, to receive the
stock or other securities or property to which the Holder would have been
entitled upon such consummation if the Holder had exercised this Option
immediately prior thereto. In such case, the terms of this Option shall survive
the consummation of any such reorganization, recapitalization, consolidation,
merger or transfer and shall be applicable to the shares of stock or other
securities or property receivable on the exercise of this Option after such
consummation.
(c) Whenever a reference is made in this section to the issue or sale of
shares of Common Stock, the term "Common Stock" shall mean the Common Stock of
the Company of the class authorized as of the date hereof and any other class of
stock ranking on a parity with such Common Stock.
(d) Whenever the number of shares of Common Stock purchasable upon
exercise of this Option or the exercise prices thereof shall be adjusted as
required herein, the Company shall forthwith file such information with its
Secretary at its principal office, and with the exercise price determined as
herein provided and setting forth in detail the facts requiring such adjustment.
Each such officer's certificate shall be made available at all reasonable times
for inspection by the Holder and the Company shall, forthwith after such
adjustment, deliver a copy of such certificate to the Holder.
(e) The Company: (1) shall not cause the par value of any shares of
Common Stock issuable on exercise of this Option to be in excess of the amount
payable therefor on such exercise; and (2) shall take all action as may be
necessary or appropriate so that the
3
<PAGE> 4
Company may validly and legally issue fully paid and non-assessable shares of
Common Stock (or other securities or property deliverable hereunder) upon the
exercise of this Option.
5. Fractional Shares
No fractional securities or scrip representing fractional securities
shall be issued upon the exercise of this Option. With respect to any fraction
of a security called for upon any exercise hereof, the Optionor shall pay to the
Holder an amount in cash equal to such fraction multiplied by the current market
value of such security in an amount, not less than the book value, determined in
such reasonable manner as may be prescribed by Optionor.
6. Notices of Record Dates, Etc.
(a) If the Company shall fix a record date of holders of Common Stock (or
other securities at the time deliverable on exercise of this Option) for the
purpose of entitling or enabling them to receive any dividends or other
distribution, or to receive any right to subscribe for or purchase any shares of
any class of any securities or to receive any other right contemplated by
Section 4 or otherwise; or
(b) In the event of any reorganization or recapitalization of the
Company, any reclassification of the capital stock of the Company, any
consolidation or merger of the Company with or into another corporation or any
transfer of all or substantially all of the assets of the Company to another
entity; or
(c) In the event of the voluntary or involuntary dissolution, liquidation
or winding up of the Company; then, the Company shall mail or cause to be mailed
to the Holder a notice specifying, as the case may be: (1) the date on which a
record is to be taken for the purpose of such dividend, distribution or right
and stating the amount and character of such dividend, distribution or right; or
(2) the date on which a record is to be taken for the purpose of voting on or
approving such reorganization, recapitalization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding up and
the date on which such event is to take place and the time, if any, is to be
fixed, as of which a holder of record of Common Stock (or any other securities
at the time deliverable on exercise of this Option) shall be entitled to
exchange its shares of Common Stock (or such other securities) for securities or
other property deliverable on such reorganization, recapitalization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation or
winding up. Such notice shall be mailed at the same date as the Company shall
inform its stockholders, but in no event less than ten (10) days preceding such
record date.
7. Reservation of Shares
The Optionor shall at all times reserve, for the purpose of transfer upon
the exercise of this Option, such number of shares of Common Stock (or such
class or classes of capital stock or other securities) as shall from time to
time be sufficient to comply with this Option, and shall not sell, transfer,
pledge, hypothecate or otherwise dispose of any shares of Common Stock held by
it so that the number of shares held by Optionor falls below the number required
to comply with this Option. The Optionor agrees to tender a certificate or
certificates
4
<PAGE> 5
evidencing the number of shares of Common Stock underlying this Option for the
purpose of placing the following legend on the certificate(s):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THAT
CERTAIN COMMON STOCK PURCHASE OPTION DATED APRIL 15, 1999 BETWEEN
TRIDENT EQUITY MANAGEMENT GROUP AND BENCHMARK EQUITY GROUP, INC.
AND MAY NOT BE DIRECTLY OR INDIRECTLY OFFERED, TRANSFERRED, SOLD,
ASSIGNED, PLEDGED OR HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT
IN COMPLIANCE WITH THE TERMS THEREOF.
8. Approvals
(a) The exercise of the this Option is subject to the prior approval of
BMA, and any attempted exercise without such prior BMA approval shall be null,
void and without legal or beneficial effect. The Optionor, the Holder and the
Company shall each cooperate and use their best efforts to obtain and continue
in effect the approval of the BMA.
(b) In addition to the obligations set forth in Section 8(a), the
Optionor and the Company shall from time to time use its best efforts to obtain
and continue in effect any and all other permits, consents, registrations,
qualifications and approvals of governmental agencies and authorities and to
make all filings under applicable United States and foreign securities laws that
may be or become necessary in connection with the issuance, sale, transfer and
delivery of this Option and the issuance of securities on any exercise hereof.
9. Restrictions on Transfer
This Option has not been registered under the Act or qualified under any
state or foreign securities or "blue sky" law. This Option may not be offered,
sold or otherwise transferred unless registered and qualified pursuant to the
provisions of such Act, foreign or "blue sky" laws, or unless an exemption from
registration and qualification is available.
10. Survival
All agreements, covenants, representations and warranties herein shall
survive: (a) the execution and delivery of this Option and any investigation at
any time made by or on behalf of any parties hereto; and (b) the sale, exercise
and/or purchase of this Option, and the sale or purchase of the shares of Common
Stock (and any other securities or property) issuable upon exercise hereof.
11. Notices
All demands, notices, consents and other communications to be given
hereunder shall be in writing and shall be deemed duly given when delivered
personally or five (5) days after being mailed by first class mail, postage
prepaid, properly addressed, as follows:
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<PAGE> 6
(a) If to the Optionor: Trident Equity Management Group
c/o Mees Pierson
P.O. Box 2003
George Town, Grand Cayman, BWI
(b) If to the Company: Technology Acquisitions, Inc.
Clarendon House
2 Church Street
Hamilton HM11 Bermuda
with a copy to: Benchmark Equity Group, Inc.
700 Gemini
Houston, Texas 77058
(c) If to the Holder: Benchmark Equity Group, Inc.
700 Gemini
Houston, Texas 77058
The Company and the Holder may change such address at any time or times by
notice hereunder to the other.
12. Amendments; Waivers; Terminations; Governing Law; Headings; Entire
Agreement
This Option and any term hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought. This
Option shall be governed by and construed and interpreted in accordance with the
laws of the State of Delaware. The headings in this Option are for convenience
of reference only and are not part of this Option. This Option is intended to
and does contain and embody all of the understandings and agreements, both
written and oral, of the parties hereto with respect to the subject matter of
this Option, and there exists no oral agreement or understanding, express or
implied, whereby the absolute, final and unconditional character and nature of
this Option shall be in any way invalidated, empowered or affected. A
modification or waiver of any of the terms, conditions or provisions of this
Option shall be effective only if made in writing and executed with the same
formality of this Option. This Option shall be binding upon any assigns,
successors or transferees of the Optionor.
[THE REST OF THIS PAGE IS INTENTIONALLY BLANK]
6
<PAGE> 7
IN WITNESS WHEREOF, Optionor has duly caused this Common Stock Purchase
Option to be signed in its name and on its behalf by its duly authorized
officers, as of June 7, 1999
ATTEST TRIDENT EQUITY MANAGEMENT GROUP
By:
- ------------------------------------- -----------------------------
Secretary Name:
---------------------------
Title:
--------------------------
The Company hereby joins in this Option for the purpose of evidencing its
agreement with and obligations arising under Section 2, 4, 5, 8 and 10-12.
ATTEST TECHNOLOGY ACQUISITIONS, LTD.
By:
- ------------------------------------- -----------------------------
Witness Name:
---------------------------
Title
--------------------------
ATTEST BENCHMARK EQUITY GROUP, INC.
By:
- ------------------------------------- -----------------------------
Witness Name:
---------------------------
Title:
--------------------------
7
<PAGE> 8
ANNEXED DOCUMENTS*
*NOTE: Capitalized terms used in the following documents but not defined
shall have the respective meanings attributed to them in the Common
Stock Purchase Option to which such documents are annexed.
<PAGE> 9
ANNEX TO OPTION
FORM OF SUBSCRIPTION
(To be completed and signed only upon an exercise of the Common Stock
Purchase Option in whole or in part)
TO: [Optionor]
The undersigned, the Holder of the attached Option, hereby irrevocably
elects to exercise the purchase right represented by the Option for and to
purchase thereunder____ shares of Common Stock from ___________________________,
and herewith makes payment of $______________ therefor in cash or by certified
or official bank check. The undersigned hereby requests that the Certificate(s)
for such securities be issued in the name(s) and delivered to the address(es) as
follows:
Name:
-------------------------------------------------------
Address:
-------------------------------------------------------
Social Security Number:
-------------------------------------------------------
Deliver to:
-------------------------------------------------------
Address:
-------------------------------------------------------
:
The Holder agrees and acknowledges that the exercise of the Option and
the delivery of Shares thereunder is expressly conditioned on the obtaining of
the prior approval of the Bermuda Monetary Authority.
DATED: , 19 .
--------------------- ---
(Name of Holder)
---------------------------------------------------------------
(Signature of Holder or Authorized Signatory)
-----------------------------------
Signature Guaranteed:
----------------------------------------------------------
--------------------------------------------
(Social Security or Taxpayer Identification
Number of Holder)
<PAGE> 10
EXHIBIT 2
IRREVOCABLE PROXY COUPLED WITH AN INTEREST
This Irrevocable Proxy, dated as of June 7, 1999, by and between Trident
Equity Management Group ("TEMG" or "Grantor"), a Cayman Islands exempt company,
and Benchmark Equity Group, Inc., a Delaware corporation ("Grantee" or
"Benchmark").
In consideration of the premises and the mutual covenants and agreements
set forth herein, twenty dollars, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. Grantor hereby irrevocably appoints Grantee, for a period of twelve
months from the date hereof, as the Grantor's true and lawful proxy and
attorney-in-fact, with full power of substitution, to vote all of the shares of
Common Stock (the "Shares") which Grantor is entitled to vote, for and in the
name, place and stead of the Grantor, at a meeting of the stockholders of
Technology Acquisitions, Inc. or pursuant to any consent in lieu of a meeting or
otherwise.
2. Grantor further agrees that this Proxy is executed in connection with
the grant to Benchmark of an unconditional option to purchase all of the Shares,
and is coupled with an interest sufficient in law to support an irrevocable
power and shall not be terminated by any act of the Grantor, by lack of
appropriate power or authority or by the occurrence of any other event or
events.
3. This Proxy shall be governed by and construed in accordance with the
laws of the State of Delaware without giving effect to the provision thereof
relating to conflicts of law.
4. Grantor agrees that for the duration of this Irrevocable Proxy that it
shall not alienate the Shares nor grant any other Proxy with respect to the
Shares, and further, Grantor will, at Benchmark's request, execute and deliver
any additional documents and take such actions as may reasonably be deemed by
Grantee to be necessary or desirable to complete the Proxy granted herein or to
carry out the provisions hereof.
5. If any term, provision, covenant, or restriction of this Proxy is held
by a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Proxy
shall remain in full force and effect and shall not in any way be affected,
impaired or invalidated.
6. This Proxy may be executed in counterparts, each of which shall be
deemed to be an original but all of which together shall constitute one and the
same document.
<PAGE> 11
IN WITNESS WHEREOF, Grantor and the Grantee have caused this
Irrevocable Proxy to be duly executed as of the date first above written.
GRANTOR:
Trident Equity Management Group
By:
----------------------------------------
GRANTEE:
BENCHMARK EQUITY GROUP, INC.
By:
----------------------------------------
Frank DeLape
President
2
<PAGE> 1
EXHIBIT 3
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), effective as April 21, 1999 (the
"Effective Date"), between Frank DeLape ("Executive") and of Consolidated
Technology Group Ltd., a New York corporation ("Employer").
In consideration of the premises and the mutual covenants hereinafter set
forth and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto hereby agree as follows:
1. EMPLOYMENT OF EXECUTIVE
Employer hereby agrees to employ Executive, and Executive hereby agrees
to be and remain in the employ of Employer, upon the terms and conditions
hereinafter set forth.
2. EMPLOYMENT PERIOD
Subject to earlier termination as provided in section 5, the term of
Executive's employment under this Agreement shall commence as of the date hereof
and shall continue for a period of three (3) years (the "Initial Employment
Period"). Unless either party gives notice of non-renewal at least six (6)
months prior to the expiration of the Initial Employment Period or any extension
thereof, the term of this Agreement shall be extended for an additional one (1)
year period (the Initial Employment Period and any extension thereof is
hereafter referred to as the "Employment Period").
3. DUTIES AND RESPONSIBILITIES
3.1 General. During the Employment Period, Executive shall have the
titles of Chairman of the Board and Chief Executive Officer of the Employer and
shall be charged with pursuing a growth strategy of building the Employer's
business. Executive shall devote such of his business time and expend such of
his best efforts, energies and skills to the Employer, as may be necessary for
Executive to fulfill his obligations hereunder. Executive shall be responsible
for the affairs of the Employer and its subsidiaries in pursuit of the
Employer's Business. Executive shall perform such duties, consistent with his
status as President and Chief Executive Officer of Employer, as he may be
assigned from time to time by Employer's Board of Directors (the "Board").
Employer shall nominate Executive to the Board and use its best efforts to see
that Executive is appointed to the Board. Any such appointment shall be subject
to Board approval. Executive acknowledges that the Employer may expand its
business. In connection therewith, Employer may hire individuals with knowledge
and experience in such alternative business areas to guide Employer in the
pursuit of such alternative business areas and to be solely responsible for
Employer's expansion into such alternative business areas.
<PAGE> 2
4. COMPENSATION AND RELATED MATTERS
4.1 Base Salary. For each twelve-month period during the Employment
Period, commencing with the twelve-month period beginning on the date of this
Agreement (each such period, an "Employment Year"), Employer shall pay to
Executive a base salary equal to $250,000, subject to increase at the discretion
of the Board (the initial base salary, including any Board approved increase
thereof, the "Base Salary"). The Base Salary for each Employment Year shall be
payable in advance in monthly increments.
4.2 Annual Bonus. For each fiscal year during the Employment Period
(each, a "Bonus Year"), at the discretion of the Board, Executive may receive a
cash bonus.
4.3 Life Insurance. Employer shall maintain in effect at all times during
the Employment Period, at Employer's expense, a policy of term insurance on the
life of Executive in the amount equal to eight times Base Salary, naming such
person as Executive shall designate from time to time as the owner and
beneficiary thereof. Executive agrees that Employer shall have the right to
obtain other life insurance on Executive's life, at Employer's sole expense and
with Employer or an affiliate thereof as the sole beneficiary thereof. Executive
shall (i) cooperate fully with Employer in obtaining all such insurance, (ii)
sign any necessary consents, applications and other related forms or documents,
and (iii) take any required medical examinations.
4.4 Country Club, Car Allowance. Employer shall provide Executive with a
monthly allowance during the Employment Period not to exceed $400 to cover the
costs of a country club selected by the Executive. In addition, during the
Employment Period, Employer shall provide the Executive with a monthly car
allowance in the amount of $1,000 to cover the costs of an automobile lease, as
well as the costs and the expenses of maintenance and upkeep of the automobile.
4.5 Other Benefits. During the Employment Period, subject to, and to the
extent Executive is eligible under their respective terms, Executive shall be
entitled to receive such fringe benefits as are, or are from time to time
hereafter generally provided by Employer to Employer's senior management
employees or other employees (other than those provided under or pursuant to
separately negotiated individual employment agreements or arrangements) under
any pension or retirement plan, disability plan or insurance, group life
insurance, medical and dental insurance, accidental death and dismemberment
insurance, travel accident insurance or other similar plan or program of
Employer. Employer shall provide short-term and long-term disability insurance
for Executive which provides benefits equal to at least 60% of Base Salary. To
the degree that Employer's medical insurance does not fully cover the cost of an
annual physical examination for Executive, Employer shall reimburse Executive
for such expense promptly after such expense is incurred. Executive's Base
Salary shall (where applicable) constitute the compensation on the basis of
which the amount of Executive's benefits under any such plan or program shall be
fixed and determined.
4.6 Expense Reimbursement. Employer shall reimburse Executive for all
business expenses reasonably incurred by him in the performance of his duties
under this Agreement upon his presentation of signed, itemized accounts of such
expenditures, all in accordance with
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<PAGE> 3
Employer's procedures and policies as adopted and in effect from time to time
and applicable to its senior management employees.
4.7 [reserved]
4.8 Annual Equity Incentives. In order to provide further incentive to
Executive and align the interests of Executive with those of the stockholders of
Employer, Employer shall grant to Executive annual equity incentives consisting
of (i) shares of common stock of Employer (the "Common Stock"), subject to
forfeiture and restricted as to transfer ("Restricted Stock") and (ii) options
to purchase Common Stock ("Options").
(a) Restricted Stock Award. Employer may grant to the Executive a
Restricted Stock Award consisting of Restricted Stock (the "Restricted Stock
Award"). The Restricted Stock Award shall vest and become transferable in two
installments over a period of three years from the date hereof and shall have
such other terms and conditions as set forth in the Restricted Stock Award
Agreement attached hereto as Exhibit A.
(b) Option Award. As of the date hereof, Employer shall grant to
Executive an Option with respect to 400,000 shares of Common Stock with an
exercise price equal to the closing price of the Common Stock on the NASD OTC
Bulletin Board as of the trading day immediately prior to the date hereof (the
"400,000 Option Award"). The 400,000 Option Award shall not be adjusted in terms
of number of shares issuable upon exercise in the event of a reverse stock split
of up to 1 for 30 effected within one year of the date hereof, but the exercise
price will be adjusted. The Options shall vest and become exercisable when, as
and after the date that the Company's market capitalization (the total number of
outstanding shares of common stock and common stock equivalents, i.e., debt and
preferred stock convertible into common stock, computed on an as converted
basis, multiplied by the transaction price reported by a stock exchange, an
automated quotation system such as the Nasdaq Stock Market or the OTC Bulletin
Board, or a market maker) first equals or exceeds $25,000,000; and the Options
shall have such other terms and conditions as set forth in the Stock Option
Agreement attached hereto as Exhibit B.
(c) Additional Option Purchase. On the last day of each fiscal year
during the Employment Period, provided Executive has met or exceeded the
performance objectives agreed upon by the Board and Executive for such fiscal
year, Executive shall have the right to purchase from Employer an additional
Option with respect to 250,000 shares of Common Stock (the "Additional Option").
The Additional Option shall have a per share exercise price equal to the closing
price of the Common Stock on the NASD OTC Bulletin Board on the trading day
immediately prior to the date of purchase. The Additional Option shall be fully
vested and shall have such other terms and conditions as are mutually agreed
upon between Employer and the Executive. The purchase price for any Additional
Option shall be determined by Employer's independent accountants based on a
Black-Scholes valuation methodology.
4.9 Relocation Expenses; Temporary Living Expenses. In the event that the
Company's headquarters is located anywhere other than in the Houston
metropolitan area, upon submission of properly documented receipts, Employer
shall reimburse Executive for (i) reasonable moving costs in connection with
Executive's relocation of his family from the Houston area to a location near
the
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<PAGE> 4
Employer's main headquarters and (ii) reasonable real estate commissions
with respect to the sale of Executive's current residence in the Houston area in
connection with or following such relocation. In addition, in the event that
Employee is required to relocate, for a period of one year from the date hereof
or until Executive relocates to such location, if earlier, Employer shall
reimburse Executive for the reasonable cost of temporary housing in such
location and reasonable travel between Houston and such location for the purpose
of visiting his family. Such reimbursement shall not exceed $20,000 and shall be
subject to submission of properly documented housing and travel receipts.
5. TERMINATION OF EMPLOYMENT PERIOD
5.1 Termination Without Cause; Voluntary Termination by Executive.
Employer may, by notice to Executive at any time during the Employment Period,
terminate the Employment Period without Cause (as defined below). The effective
date of such termination of the Executive from the Employer shall be the date
that is thirty (30) days following the date on which such notice is given.
Executive may, by notice to Employer at any time during the Employment Period,
voluntarily resign from the Employer and terminate the Employment Period. The
effective date of such termination of the Executive from the Employer shall be
the date that is thirty (30) days following the date on which such notice is
given.
5.2 By Employer for Cause. Employer may, at any time during the
Employment Period, by notice to Executive, terminate the Employment Period for
"Cause" effective on the giving of such notice. As used herein, "Cause" means
any of the following: (A) fraud on the part of Executive in the course of his
employment with Employer; (B) a willful breach of this Agreement by Executive
that is injurious to Employer; (C) Executive's conviction by a court of
competent jurisdiction of, or pleading "guilty" or "no contest" to, (x) a
felony, or (y) any other criminal charge (other than minor traffic violations)
which could reasonably be expected to have a material adverse impact on
Employer's reputation and standing in the community; (D) consistent drunkenness
by Executive or his illegal use of narcotics which is, or could reasonably be
expected to become, materially injurious to the reputation or business of the
Employer or which impairs, or could reasonably be expected to impair, the
performance of Executive's duties hereunder; or (E) willful failure by Executive
to follow the lawful directions of the Board, representing disloyalty to the
goals of the Employer. An act or failure to act on the part of Executive shall
be considered "willful" if done, or omitted to be done, by Executive in bad
faith or without a reasonable belief that the act or omission was in the best
interest of Employer.
5.3 By Executive for Good Reason. Executive may, at any time during the
Employment Period by notice to Employer, terminate the Employment Period under
this Agreement for "Good Reason" (as defined below) effective immediately. For
the purposes hereof, "Good Reason" means any of the following without
Executive's consent: (A) subject to Section 3 above, a material and adverse
change in the nature and scope of Executive's authority and duties from those
exercised or performed by Executive immediately after the Effective Date; (B) a
material breach of this Agreement by Employer or (C) a change in the composition
of the Board in which the individuals who constitute the Board, as of the date
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<PAGE> 5
hereof (the "Incumbent Board"), cease for any reason to constitute at least a
majority of the Board, provided that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election was
approved by a vote of at least a majority of the Incumbent Board will be
considered as though such individual were a member of the Incumbent Board;
provided, however, that the circumstances set forth in this Section 5.3(A) and
(B) will not be Good Reason if within 30 days of notice by the Executive to the
Employer, Employer cures such circumstances.
5.4 Disability. During the Employment Period, if, as a result of physical
or mental incapacity or infirmity, Executive shall be unable to perform his
duties under this Agreement for (i) a continuous period of at least 120 days, or
(ii) periods aggregating at least 180 days during any period of 12 consecutive
months (each a "Disability Period"), and at the end of the Disability Period
there is no reasonable probability that Executive can promptly resume his duties
hereunder, Executive shall be deemed disabled (the "Disability") and Employer,
by notice to Executive, shall have the right to terminate the Employment Period
for Disability at, as of or after the end of the Disability Period. The
existence of the Disability shall be determined by a reputable, licensed
physician selected by Employer in good faith, whose determination shall be final
and binding on the parties. Executive shall cooperate in all reasonable respects
to enable an examination to be made by such physician. Notwithstanding the
foregoing, Employer may conclusively determine Executive to be disabled and
terminate the Employment Period on account of Disability at any time after
Executive has commenced receiving benefits under the long-term disability
insurance policy obtained pursuant to Section 4.5 hereof.
5.5 Death. Notwithstanding any other provision of this agreement, the
Employment Period shall end on the date of Executive's death.
6. TERMINATION COMPENSATION
6.1 Termination Without Cause by Employer or for Good Reason by
Executive. If the Employment Period is terminated by Employer pursuant to the
provisions of Section 5.1 hereof or by Executive pursuant to the provisions of
Section 5.3 hereof, Employer will pay to Executive (i) Executive's Base Salary
through the date of termination, (ii) within five (5) days following the date of
termination in one lump sum an amount equal to the Base Salary multiplied by the
number of years (and fractional portions thereof) remaining in the Employment
Period (the "Severance Period") and (iii) on the date due pursuant to the
provisions of Section 4.2 hereof, the bonus for the then current Bonus Year,
prorated for the period of time during the Bonus Year that Executive was
employed. All other benefits provided for in Sections 4.3, 4.4 and Section 4.5
(except for pension and retirement benefits) shall be continued at the expense
of Employer for the Severance Period. In the event that any such benefits cannot
be continued under the terms of the applicable benefit programs or Employer
chooses not to continue such benefits, the Employer shall pay to Executive a
lump sum amount having an equal value of such remaining benefits. In addition,
if the Employment Period is terminated by Employer pursuant to the provisions of
Section 5.1 hereof or by Executive pursuant to the provisions of Section 5.3
hereof, (i) the restrictions with respect to all unvested shares of Restricted
Stock previously granted to Executive shall immediately lapse and such shares
shall become transferable and no longer subject to forfeiture and (ii) all
unvested
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portions of the Options previously granted to Executive shall immediately become
vested and exercisable. Employer shall have no obligation to continue any other
benefits provided for in Section 4 past the date of termination.
6.2 Certain Other Terminations. If the Employment Period is terminated by
Employer pursuant to the provisions of Sections 5.2 or 5.4, or by death,
pursuant to the provisions of Section 5.5, Employer shall pay to Executive,
within thirty (30) days of the date of termination, Executive's Base Salary
through the date of termination. Provided the date of termination is after the
end of a calendar year for which a Bonus is payable, but prior to the date of
payment, Employer shall also pay to Executive, when due pursuant to provisions
of Section 4.2 hereof, the Bonus for such Bonus Year. Employer shall have no
obligation to continue any other benefits provided for in Section 4 past the
date of termination.
6.3 No Other Termination Compensation. Executive shall not, except as set
forth in this Section 6, be entitled to any compensation following termination
of the Employment Period.
7. PROFESSIONAL LIABILITY INSURANCE; INDEMNIFICATION
7.1 Insurance. The Employer will provide coverage for Executive under the
Employer's director and officer professional liability insurance policy.
7.2 Indemnification. Employer shall indemnify the Executive to the
fullest extent permitted by law in effect as of the date hereof, or as hereafter
amended, against all costs, expenses, liabilities and losses (including, without
limitation, attorneys' fees, judgments, fines, penalties, ERISA excise taxes,
penalties and amounts paid in settlement) reasonably incurred by the Executive
in connection with a Proceeding. For the purposes of this Section, a
"Proceeding" shall mean any action, suit or proceeding, whether civil, criminal,
administrative or investigative, in which the Executive is made, or is
threatened to be made, a party to, or a witness in, such action, suit or
proceeding by reason of the fact that he is or was an officer, director or
employee of the Employer or is or was serving as an officer, director, member,
employee, trustee or agent of any other entity at the request of the Employer.
(a) Notification and Defense of Claim. Promptly after receipt by the
Executive of notice of the commencement of any Proceeding, the Executive will,
if a claim in respect thereof is to be made against the Employer under this
Agreement, notify the Employer in writing of the commencement thereof; but the
omission to so notify the Employer will not relieve the Employer from any
liability that it may have to the Executive otherwise than under this Agreement.
Notwithstanding any other provision of this Agreement, with respect to any such
Proceeding as to which the Executive gives notice to the Employer of the
commencement thereof:
(i) The Employer will be entitled to participate therein at its own
expense; and
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(ii) Except as otherwise provided in this Section 7.2(a)(ii) to the
extent that it may wish, the Employer, jointly with any other indemnifying party
similarly notified, shall be entitled to assume the defense thereof, with
counsel satisfactory to the Executive. After notice from the Employer to the
Executive of its election to so assume the defense thereof, the Employer shall
not be liable to the Executive under this Agreement for any legal or other
expenses subsequently incurred by the Executive in connection with the defense
thereof other than reasonable costs of investigation or as otherwise provided
below. The Executive shall have the right to employ the Executive's own counsel
in such Proceeding, but the fees and expenses of such counsel incurred after
notice from the Employer of its assumption of the defense thereof shall be at
the expense of the Executive unless (a) the employment of counsel by the
Executive has been authorized by the Employer, (b) the Executive shall have
reasonably concluded that there may be a conflict of interest between the
Employer and the Executive in the conduct of the defense of such Proceeding
(which conclusion shall be deemed reasonable if, without limitation, such action
shall seek any remedy other than money damages and the Executive would be
personally affected by such remedy or the carrying out thereof), or (c) the
Employer shall not in fact have employed counsel to assume the defense of the
Proceeding, in each of which cases the fees and expenses of counsel shall be at
the expense of the Employer. The Employer shall not be entitled to assume the
defense of any Proceeding brought against the Executive by or on behalf of the
Employer or as to which the Executive shall have reached the conclusion provided
for in clause (b) above.
8. CONFIDENTIALITY
Unless otherwise required by law or judicial process, Executive shall
retain in confidence during the Employment Period and after termination of
Executive's employment with Employer pursuant to this Agreement all confidential
information known to the Executive concerning Employer and its businesses. The
obligations of Executive pursuant to this Section 8 shall survive the expiration
or termination of this Agreement.
9. NONCOMPETITION.
For the shorter of the duration of the Employment Period; the date of
termination of employment hereunder, in the event of termination of the
Executive by the Employer or by the Executive with Good Reason; or one-year
following the termination of employment hereunder in the event of termination of
employment hereunder by the Executive without Good Reason (such period referred
to herein as the "Non-Compete Period"), the Executive shall not directly or
indirectly, engage in any Competitive Activity (as defined below) in competition
with the Employer. "Competitive Activity" shall mean: (A) the participation,
directly or indirectly, in any business which is the same as or substantially
similar to or is or would be competitive with the business of the Employer at
the time; and (B) becoming an employee, director, officer, consultant,
independent contractor, lecturer or advisor of or to, or otherwise providing
services to, any business, individual, partnership, firm, association or
corporation, if the Executive's duties relate in any manner to the business of
developing, providing, marketing, administering, managing, or acting as a
consultant in the providing of, any business in which the Employer is engaged at
the time; provided however, that Executive's associations and other
responsibilities
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as of the date hereof shall not be deemed to be competitive with the Company's
business. Nothing herein shall prohibit Executive from acquiring or holding any
issue of stock or securities of any business, individual, partnership, firm, or
corporation (collectively "Entity") which has any securities listed on a
national securities exchange or quoted in the daily listing of over-the-counter
market securities, provided that at any one time he and members of his immediate
family do not own more than ten percent of the voting securities of any such
Entity. The obligations of Executive pursuant to this Section 9 shall survive
the expiration or termination of this Agreement.
10. NONSOLICITATION.
During the Non-Compete Period, Executive shall not directly or indirectly
solicit to enter into the employ of any other Entity, or hire, any of the
employees of the Employer (or individuals who were employees of the Employer
within six months of termination of the Non-Compete Period). During the
Non-Compete Period, Executive shall not, directly or indirectly, solicit, hire
or take away or attempt to solicit, hire or take away (i) any customer or client
of the Employer or (ii) any former customer or client (that is, any customer or
client who ceased to do business with the Employer during the one (1) year
immediately preceding such date) of the Employer or encourage any customer or
client of the Employer to terminate its relationship with the Employer without
the Employer's prior written consent. The obligations of Executive pursuant to
this Section 10 shall survive the expiration or termination of this Agreement.
11. SUCCESSORS; BINDING AGREEMENT
This Agreement and all rights of the Executive hereunder shall inure to
the benefit of and be enforceable by Executive and Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive should die while any amounts would still be
payable to him hereunder if he had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Executive's devisee, legatee, or other beneficiary or, if there be
no such beneficiary, to Executive's estate.
12. SURVIVORSHIP
The respective rights and obligations of the parties hereunder shall
survive any termination of this Agreement to the extent necessary to the
intended preservation of such rights and obligations.
13. MISCELLANEOUS
13.1 Notices. Any notice, consent or authorization required or permitted
to be given pursuant to this Agreement shall be in writing and sent to the party
for or to whom intended, at the address of such party set forth below, by
registered or certified mail, postage paid (deemed given five days after deposit
in the U.S. mails) or personally or by facsimile transmission (deemed given upon
receipt), or at such other address as either party shall designate by notice
given to the other in the manner provided herein.
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If to Employer: Consolidated Technology Group
700 Gemini
Houston Texas 77058
Attn.: Secretary
If to Executive: Mr. Frank DeLape
Consolidated Technology Group
700 Gemini
Houston Texas 77058
Attn.: Secretary
13.2 Taxes. Employer is authorized to withhold (from any compensation or
benefits payable hereunder to Executive) such amounts for income tax, social
security, unemployment compensation and other taxes as shall be necessary or
appropriate in the reasonable judgment of Employer to comply with applicable
laws and regulations.
13.3 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Texas, without reference to
the principles of conflicts of laws therein.
13.4 Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
the city in which the Employer's main corporate headquarters is then located in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitration award in any court having
jurisdiction. The costs of the arbitration shall be borne by the non-prevailing
party.
13.5 Headings. All descriptive headings in this Agreement are inserted
for convenience only and shall be disregarded in construing or applying any
provision of this Agreement.
13.6 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
13.7 Severability. If any provision of this Agreement, or any part
thereof, is held to be unenforceable, the remainder of such provision and this
Agreement, as the case may be, shall nevertheless remain in full force and
effect.
13.8 Entire Agreement and Representation. This Agreement contains the
entire agreement and understanding between Employer and Executive with respect
to the subject matter hereof. No representations or warranties of any kind or
nature relating to Employer or its several businesses, or relating to Employer's
assets, liabilities, operations, future plans or prospects have been made by or
on behalf of Employer to Executive. This Agreement supersedes any prior
agreement between the parties relating to the subject matter hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
Consolidated Technology Group Ltd.
By:
------------------------------------------
Richard Young
President and COO
---------------------------------------------
Frank DeLape
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EXHIBIT 4
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), effective as April 21, 1999 (the
"Effective Date"), between Richard Young ("Executive") and Consolidated
Technology Group Ltd., a New York corporation ("Employer").
In consideration of the premises and the mutual covenants hereinafter set
forth and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto hereby agree as follows:
1. EMPLOYMENT OF EXECUTIVE
Employer hereby agrees to employ Executive, and Executive hereby agrees
to be and remain in the employ of Employer, upon the terms and conditions
hereinafter set forth.
2. EMPLOYMENT PERIOD
Subject to earlier termination as provided in section 5, the term of
Executive's employment under this Agreement shall commence as of the date hereof
and shall continue for a period of three (3) years (the "Initial Employment
Period"). Unless either party gives notice of non-renewal at least six (6)
months prior to the expiration of the Initial Employment Period or any extension
thereof, the term of this Agreement shall be extended for an additional one (1)
year period (the Initial Employment Period and any extension thereof is
hereafter referred to as the "Employment Period").
3. DUTIES AND RESPONSIBILITIES
3.1 General. During the Employment Period, Executive shall have the
titles of President and Chief Operating Officer of the Employer and shall be
charged with pursuing a growth strategy of building the Employer's business.
Executive shall devote all of his business time and expend his best efforts,
energies and skills to the Employer. Executive shall perform such duties,
consistent with his status as President and Chief Operating Officer of Employer,
as he may be assigned from time to time by Employer's Board of Directors (the
"Board"). Employer shall nominate Executive to the Board and use its best
efforts to see that Executive is appointed to the Board. Any such appointment
shall be subject to Board approval.
4. COMPENSATION AND RELATED MATTERS
4.1 Base Salary. For each twelve-month period during the Employment
Period, commencing with the twelve-month period beginning on the date of this
Agreement (each such period, an "Employment Year"), Employer shall pay to
Executive a base salary equal to $135,000, subject to increase at the discretion
of the Board (the initial base salary, including any Board
<PAGE> 2
approved increase thereof, the "Base Salary"). The Base Salary for each
Employment Year shall be payable in advance in monthly increments.
4.2 Annual Bonus. For each fiscal year during the Employment Period
(each, a "Bonus Year"), at the discretion of the Board, Executive may receive a
cash bonus of up to 100% of the Base Salary (the "Bonus") based upon attainment
of annual performance objectives to be reasonably established by the Board for
the Bonus Year, such performance objectives to be established as soon as
possible following the beginning of the Bonus Year; provided, however, that for
the first Bonus Year (commencing on May 1, 1999), the performance objectives
shall be established as soon as possible following the date hereof. Any Bonus
earned shall be payable promptly following the determination thereof, on the
later of (i) fifteen (15) days after the members of the Board have received the
audited financial statements for such Bonus Year, or (ii) the first meeting of
the Board following the end of such Bonus Year. Except as otherwise set forth in
Section 6 hereof, the Bonus payable for any Bonus Year in which the Employment
Period terminates shall equal the Bonus that would have been paid had the
Employment Period not so terminated, multiplied by a fraction, the numerator of
which shall be the number of days of the Employment Period within the Bonus Year
and the denominator of which shall be 365.
4.3 Life Insurance. Employer shall maintain in effect at all times during
the Employment Period, at Employer's expense, a key man policy of term insurance
on the life of Executive in the amount equal to three times Base Salary, naming
the Company as the owner and beneficiary thereof. Executive agrees that Employer
shall have the right to obtain other life insurance on Executive's life, at
Employer's sole expense and with Employer or an affiliate thereof as the sole
beneficiary thereof. Executive shall (i) cooperate fully with Employer in
obtaining all such insurance, (ii) sign any necessary consents, applications and
other related forms or documents, and (iii) take any required medical
examinations.
4.4 Automobile; Tax and Financial Planning. Employer shall provide
Executive with a monthly allowance during the Employment Period of $1,000 to
cover the costs of an automobile, including maintenance, fuel, and insurance. In
addition, during the Employment Period, Employer shall pay for or reimburse
Executive (as determined by Employer for the cost of reasonable financial
planning services.
4.5 Other Benefits. During the Employment Period, subject to, and to the
extent Executive is eligible under their respective terms, Executive shall be
entitled to receive such fringe benefits as are, or are from time to time
hereafter generally provided by Employer to Employer's senior management
employees or other employees (other than those provided under or pursuant to
separately negotiated individual employment agreements or arrangements) under
any pension or retirement plan, disability plan or insurance, group life
insurance, medical and dental insurance, accidental death and dismemberment
insurance, travel accident insurance or other similar plan or program of
Employer. Employer shall provide short-term and long-term disability insurance
for Executive which provides benefits equal to at least 60% of Base Salary. To
the degree that Employer's medical insurance does not fully cover the cost of an
annual physical examination for Executive, Employer shall reimburse Executive
for such expense promptly after such expense is incurred. Executive's Base
Salary shall (where applicable) constitute the compensation on the basis
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of which the amount of Executive's benefits under any such plan or program shall
be fixed and determined.
4.6 Expense Reimbursement. Employer shall reimburse Executive for all
business expenses reasonably incurred by him in the performance of his duties
under this Agreement upon his presentation of signed, itemized accounts of such
expenditures, all in accordance with Employer's procedures and policies as
adopted and in effect from time to time and applicable to its senior management
employees.
4.7 Vacations. Executive shall be entitled to 20 days vacation for each
calendar year during the Employment Period, which vacations shall be taken at
such time or times as shall not unreasonably interfere with Executive's
performance of his duties under this Agreement.
4.8 Annual Equity Incentives. In order to provide further incentive to
Executive and align the interests of Executive with those of the stockholders of
Employer, Employer shall grant to Executive annual equity incentives consisting
of (i) shares of common stock of Employer (the "Common Stock"), subject to
forfeiture and restricted as to transfer ("Restricted Stock") or (ii) options to
purchase Common Stock ("Options").
(a) Restricted Stock Award. Employer may at any time hereafter grant to
Executive a Restricted Stock Award consisting of shares of Restricted Stock (the
"Restricted Stock Award"). Any Restricted Stock Award shall vest and become
transferable in two installments over a period of three years from the date
hereof and shall have such other terms and conditions as set forth in the
Restricted Stock Award Agreement attached hereto as Exhibit A.
(b) Option Award. As of the date hereof, Employer shall grant to
Executive an Option with respect to 250,000 shares of Common Stock with an
exercise price equal to the closing price of the Common Stock on the NASD OTC
Bulletin Board as of the trading day immediately prior to the date hereof (the
"Option Award"). The 250,000 Option Award shall not be adjusted in terms of the
number of shares issuable upon exercise in the event of a reverse stock split of
up to 1 for 30 effected within one year of the date hereof, but the exercise
price will be adjusted. The Options shall vest and become exercisable when, as
and after the date that the Company's market capitalization (the total number of
outstanding shares of common stock and common stock equivalents, i.e., debt and
preferred stock convertible into common stock, computed on an as converted
basis, multiplied by the transaction price reported by a stock exchange, an
automated quotation system such as the Nasdaq Stock Market or the OTC Bulletin
Board, or a market maker) first equals or exceeds $25,000,000; and the Options
shall have such other terms and conditions as set forth in the Stock Option
Agreement attached hereto as Exhibit B.
(c) Additional Option Purchase. On the last day of each fiscal year
during the Employment Period, provided Executive has met or exceeded the
performance objectives agreed upon by the Board and Executive for such fiscal
year, Executive shall have the right to purchase from Employer an additional
Option with respect to 100,000 shares of Common Stock (the "Additional Option").
The Additional Option shall have a per share exercise price equal to the closing
price of the Common Stock on the NASD OTC Bulletin Board on the trading day
immediately prior to the date of purchase. The Additional Option shall be fully
vested and shall
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have such other terms and conditions as are mutually agreed upon between
Employer and the Executive. The purchase price for any Additional Option shall
be determined by Employer's independent accountants based on a Black-Scholes
valuation methodology.
4.9 Relocation Expenses; Temporary Living Expenses. In the event that the
Company's headquarters is located anywhere other than in the Houston
metropolitan area, upon submission of properly documented receipts, Employer
shall reimburse Executive for (i) reasonable moving costs in connection with
Executive's relocation of his family from the Houston area to a location near
the Employer's main headquarters and (ii) reasonable real estate commissions
with respect to the sale of Executive's current residence in the Houston area in
connection with or following such relocation. In addition, in the event that
Employee is required to relocate, for a period of one year from the date hereof
or until Executive relocates to such location, if earlier, Employer shall
reimburse Executive for the reasonable cost of temporary housing in such
location and reasonable travel between Houston and such location for the purpose
of visiting his family. Such reimbursement shall not exceed $20,000 and shall be
subject to submission of properly documented housing and travel receipts.
5. TERMINATION OF EMPLOYMENT PERIOD
5.1 Termination Without Cause; Voluntary Termination by Executive.
Employer may, by notice to Executive at any time during the Employment Period,
terminate the Employment Period without Cause (as defined below). The effective
date of such termination of the Executive from the Employer shall be the date
that is thirty (30) days following the date on which such notice is given.
Executive may, by notice to Employer at any time during the Employment Period,
voluntarily resign from the Employer and terminate the Employment Period. The
effective date of such termination of the Executive from the Employer shall be
the date that is thirty (30) days following the date on which such notice is
given.
5.2 By Employer for Cause. Employer may, at any time during the
Employment Period, by notice to Executive, terminate the Employment Period for
"Cause" effective on the giving of such notice. As used herein, "Cause" means
any of the following: (A) fraud on the part of Executive in the course of his
employment with Employer; (B) a willful breach of this Agreement by Executive
that is injurious to Employer; (C) Executive's conviction by a court of
competent jurisdiction of, or pleading "guilty" or "no contest" to, (x) a
felony, or (y) any other criminal charge (other than minor traffic violations)
which could reasonably be expected to have a material adverse impact on
Employer's reputation and standing in the community; (D) consistent drunkenness
by Executive or his illegal use of narcotics which is, or could reasonably be
expected to become, materially injurious to the reputation or business of the
Employer or which impairs, or could reasonably be expected to impair, the
performance of Executive's duties hereunder; or (E) willful failure by Executive
to follow the lawful directions of the Board, representing disloyalty to the
goals of the Employer. An act or failure to act on the part of Executive shall
be considered "willful" if done, or omitted to be done, by Executive in bad
faith or without a reasonable belief that the act or omission was in the best
interest of Employer.
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5.3 By Executive for Good Reason. Executive may, at any time during the
Employment Period by notice to Employer, terminate the Employment Period under
this Agreement for "Good Reason" (as defined below) effective immediately. For
the purposes hereof, "Good Reason" means any of the following without
Executive's consent: (A) subject to Section 3 above, a material and adverse
change in the nature and scope of Executive's authority and duties from those
exercised or performed by Executive immediately after the Effective Date; (B) a
material breach of this Agreement by Employer or (C) a change in the composition
of the Board in which the individuals who constitute the Board, as of the date
hereof (the "Incumbent Board"), cease for any reason to constitute at least a
majority of the Board, provided that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election was
approved by a vote of at least a majority of the Incumbent Board will be
considered as though such individual were a member of the Incumbent Board;
provided, however, that the circumstances set forth in this Section 5.3(A) and
(B) will not be Good Reason if within 30 days of notice by the Executive to the
Employer, Employer cures such circumstances.
5.4 Disability. During the Employment Period, if, as a result of physical
or mental incapacity or infirmity, Executive shall be unable to perform his
duties under this Agreement for (i) a continuous period of at least 120 days, or
(ii) periods aggregating at least 180 days during any period of 12 consecutive
months (each a "Disability Period"), and at the end of the Disability Period
there is no reasonable probability that Executive can promptly resume his duties
hereunder, Executive shall be deemed disabled (the "Disability") and Employer,
by notice to Executive, shall have the right to terminate the Employment Period
for Disability at, as of or after the end of the Disability Period. The
existence of the Disability shall be determined by a reputable, licensed
physician selected by Employer in good faith, whose determination shall be final
and binding on the parties. Executive shall cooperate in all reasonable respects
to enable an examination to be made by such physician. Notwithstanding the
foregoing, Employer may conclusively determine Executive to be disabled and
terminate the Employment Period on account of Disability at any time after
Executive has commenced receiving benefits under the long-term disability
insurance policy obtained pursuant to Section 4.5 hereof.
5.5 Death. Notwithstanding any other provision of this agreement, the
Employment Period shall end on the date of Executive's death.
6. TERMINATION COMPENSATION
6.1 Termination without Cause by Employer or for Good Reason by
Executive. If the Employment Period is terminated by Employer pursuant to the
provisions of Section 5.1 hereof or by Executive pursuant to the provisions of
Section 5.3 hereof, Employer will pay to Executive (i) Executive's Base Salary
through the date of termination, (ii) within five (5) days following the date of
termination in one lump sum an amount equal to the lesser of (a) the Base Salary
multiplied by the number of years (and fractional portions thereof) remaining in
the Employment Period (the "Severance Period") or (b) the Base Salary for a one
year term, and (iii) on the date due pursuant to the provisions of Section 4.2
hereof, the bonus for the then current Bonus Year, prorated for the period of
time during the Bonus Year that Executive was employed. All other benefits
provided for
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in Sections 4.3, 4.4 and Section 4.5 (except for pension and retirement
benefits) shall be continued at the expense of Employer for the Severance
Period. In the event that any such benefits cannot be continued under the terms
of the applicable benefit programs or Employer chooses not to continue such
benefits, the Employer shall pay to Executive a lump sum amount having an equal
value of such remaining benefits. In addition, if the Employment Period is
terminated by Employer pursuant to the provisions of Section 5.1 hereof or by
Executive pursuant to the provisions of Section 5.3 hereof, (i) the restrictions
with respect to all unvested shares of Restricted Stock, if any, previously
granted to Executive shall immediately lapse and such shares shall become
transferable and no longer subject to forfeiture and (ii) all unvested portions
of the Options previously granted to Executive shall immediately become vested
and exercisable. Employer shall have no obligation to continue any other
benefits provided for in Section 4 past the date of termination.
6.2 Certain Other Terminations. If the Employment Period is terminated by
Employer pursuant to the provisions of Sections 5.2 or 5.4, or by death,
pursuant to the provisions of Section 5.5, Employer shall pay to Executive,
within thirty (30) days of the date of termination, Executive's Base Salary
through the date of termination. Provided the date of termination is after the
end of a calendar year for which a Bonus is payable, but prior to the date of
payment, Employer shall also pay to Executive, when due pursuant to provisions
of Section 4.2 hereof, the Bonus for such Bonus Year. Employer shall have no
obligation to continue any other benefits provided for in Section 4 past the
date of termination.
6.3 No Other Termination Compensation. Executive shall not, except as set
forth in this Section 6, be entitled to any compensation following termination
of the Employment Period.
7. PROFESSIONAL LIABILITY INSURANCE; INDEMNIFICATION
7.1 Insurance. The Employer will provide coverage for Executive under the
Employer's director and officer professional liability insurance policy.
7.2 Indemnification. Employer shall indemnify the Executive to the
fullest extent permitted by law in effect as of the date hereof, or as hereafter
amended, against all costs, expenses, liabilities and losses (including, without
limitation, attorneys' fees, judgments, fines, penalties, ERISA excise taxes,
penalties and amounts paid in settlement) reasonably incurred by the Executive
in connection with a Proceeding. For the purposes of this Section, a
"Proceeding" shall mean any action, suit or proceeding, whether civil, criminal,
administrative or investigative, in which the Executive is made, or is
threatened to be made, a party to, or a witness in, such action, suit or
proceeding by reason of the fact that he is or was an officer, director or
employee of the Employer or is or was serving as an officer, director, member,
employee, trustee or agent of any other entity at the request of the Employer.
(a) Notification and Defense of Claim. Promptly after receipt by the
Executive of notice of the commencement of any Proceeding, the Executive will,
if a claim in respect thereof is to be made against the Employer under this
Agreement, notify the Employer in writing of the commencement thereof; but the
omission to so notify the Employer will not relieve the Employer from any
liability that it may have to the Executive otherwise than under
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<PAGE> 7
this Agreement. Notwithstanding any other provision of this Agreement, with
respect to any such Proceeding as to which the Executive gives notice to the
Employer of the commencement thereof:
(i) The Employer will be entitled to participate therein at its own
expense; and
(ii) Except as otherwise provided in this Section 7.2(a)(ii) to the
extent that it may wish, the Employer, jointly with any other indemnifying party
similarly notified, shall be entitled to assume the defense thereof, with
counsel satisfactory to the Executive. After notice from the Employer to the
Executive of its election to so assume the defense thereof, the Employer shall
not be liable to the Executive under this Agreement for any legal or other
expenses subsequently incurred by the Executive in connection with the defense
thereof other than reasonable costs of investigation or as otherwise provided
below. The Executive shall have the right to employ the Executive's own counsel
in such Proceeding, but the fees and expenses of such counsel incurred after
notice from the Employer of its assumption of the defense thereof shall be at
the expense of the Executive unless (a) the employment of counsel by the
Executive has been authorized by the Employer, (b) the Executive shall have
reasonably concluded that there may be a conflict of interest between the
Employer and the Executive in the conduct of the defense of such Proceeding
(which conclusion shall be deemed reasonable if, without limitation, such action
shall seek any remedy other than money damages and the Executive would be
personally affected by such remedy or the carrying out thereof), or (c) the
Employer shall not in fact have employed counsel to assume the defense of the
Proceeding, in each of which cases the fees and expenses of counsel shall be at
the expense of the Employer. The Employer shall not be entitled to assume the
defense of any Proceeding brought against the Executive by or on behalf of the
Employer or as to which the Executive shall have reached the conclusion provided
for in clause (b) above.
8. CONFIDENTIALITY
Unless otherwise required by law or judicial process, Executive shall
retain in confidence during the Employment Period and after termination of
Executive's employment with Employer pursuant to this Agreement all confidential
information known to the Executive concerning Employer and its businesses. The
obligations of Executive pursuant to this Section 8 shall survive the expiration
or termination of this Agreement.
9. NONCOMPETITION
For the shorter of the duration of: (i) the date of termination of the
Employment Period; (ii) the date of termination of employment hereunder, in the
event of termination of the Executive by the Employer or by the Executive with
Good Reason; or (iii) one-year following the termination of employment hereunder
in the event of termination of employment hereunder by the Executive without
Good Reason (such period referred to herein as the "Non-Compete Period"), the
Executive shall not directly or indirectly, engage in any Competitive Activity
(as defined below) in competition with the Employer. "Competitive Activity"
shall
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<PAGE> 8
mean: (A) the participation, directly or indirectly, in any business which is
the same as or substantially similar to or is or would be competitive with the
business of the Employer at the time; and (B) becoming an employee, director,
officer, consultant, independent contractor, lecturer or advisor of or to, or
otherwise providing services to, any business, individual, partnership, firm,
association or corporation, if the Executive's duties relate in any manner to
the business of developing, providing, marketing, administering, managing, or
acting as a consultant in the providing of, any business in which the Employer
is engaged at the time. Nothing herein, however, shall prohibit Executive from
acquiring or holding any issue of stock or securities of any business,
individual, partnership, firm, or corporation (collectively "Entity") which has
any securities listed on a national securities exchange or quoted in the daily
listing of over-the-counter market securities, provided that at any one time he
and members of his immediate family do not own more than five percent of the
voting securities of any such Entity. The obligations of Executive pursuant to
this Section 9 shall survive the expiration or termination of this Agreement.
10. NONSOLICITATION
During the Non-Compete Period, Executive shall not directly or indirectly
solicit to enter into the employ of any other Entity, or hire, any of the
employees of the Employer (or individuals who were employees of the Employer
within six months of termination of the Non-Compete Period). During the
Non-Compete Period, Executive shall not, directly or indirectly, solicit, hire
or take away or attempt to solicit, hire or take away (i) any customer or client
of the Employer or (ii) any former customer or client (that is, any customer or
client who ceased to do business with the Employer during the one (1) year
immediately preceding such date) of the Employer or encourage any customer or
client of the Employer to terminate its relationship with the Employer without
the Employer's prior written consent. The obligations of Executive pursuant to
this Section 10 shall survive the expiration or termination of this Agreement.
11. SUCCESSORS; BINDING AGREEMENT
This Agreement and all rights of the Executive hereunder shall inure to
the benefit of and be enforceable by Executive and Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive should die while any amounts would still be
payable to him hereunder if he had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Executive's devisee, legatee, or other beneficiary or, if there be
no such beneficiary, to Executive's estate.
12. SURVIVORSHIP
The respective rights and obligations of the parties hereunder shall
survive any termination of this Agreement to the extent necessary to the
intended preservation of such rights and obligations.
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<PAGE> 9
13. MISCELLANEOUS
13.1 Notices. Any notice, consent or authorization required or permitted
to be given pursuant to this Agreement shall be in writing and sent to the party
for or to whom intended, at the address of such party set forth below, by
registered or certified mail, postage paid (deemed given five days after deposit
in the U.S. mails) or personally or by facsimile transmission (deemed given upon
receipt), or at such other address as either party shall designate by notice
given to the other in the manner provided herein.
If to Employer: Consolidated Technology Group
700 Gemini
Houston Texas 77058
Attn.: Secretary
If to Executive: Mr. Richard Young
Consolidated Technology Group
700 Gemini
Houston Texas 77058
13.2 Taxes. Employer is authorized to withhold (from any compensation or
benefits payable hereunder to Executive) such amounts for income tax, social
security, unemployment compensation and other taxes as shall be necessary or
appropriate in the reasonable judgment of Employer to comply with applicable
laws and regulations.
13.3 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Texas, without reference to
the principles of conflicts of laws therein.
13.4 Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
the city in which the Employer's main corporate headquarters is then located in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitration award in any court having
jurisdiction. The costs of the arbitration shall be borne by the non-prevailing
party.
13.5 Headings. All descriptive headings in this Agreement are inserted
for convenience only and shall be disregarded in construing or applying any
provision of this Agreement.
13.6 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
13.7 Severability. If any provision of this Agreement, or any part
thereof, is held to be unenforceable, the remainder of such provision and this
Agreement, as the case may be, shall nevertheless remain in full force and
effect.
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<PAGE> 10
13.8 Entire Agreement and Representation. This Agreement contains the
entire agreement and understanding between Employer and Executive with respect
to the subject matter hereof. No representations or warranties of any kind or
nature relating to Employer or its several businesses, or relating to Employer's
assets, liabilities, operations, future plans or prospects have been made by or
on behalf of Employer to Executive. This Agreement supersedes any prior
agreement between the parties relating to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
Consolidated Technology Group Ltd.
By:
----------------------------------------
Frank DeLape
Chairman and CEO
-------------------------------------------
Richard Young
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<PAGE> 1
EXHIBIT 5
STOCK OPTION AGREEMENT
Consolidated Technology Group Ltd., a New York corporation (the
"Company"), hereby grants to Frank DeLape ("Optionee") certain options (the
"Options") to purchase shares of the Company's common stock, par value $.01 per
share ("Common Stock"), which are more fully described Schedule A to this
Agreement as either Incentive Stock Option ("ISO") and/or Nonqualified Stock
Option ("NQSO"). This Agreement amends and restates as of May 18, 1999, the
option previously granted by the Company's board of directors on April 22, 1999.
The Options are granted pursuant to, and subject to the terms, conditions and
limitations of, the Company's 1999 Long-Term Incentive Plan (the "Plan") adopted
by the Company's board of directors, subject to shareholder approval. In the
event that the Plan is not approved by the Company's shareholders, the Options
shall terminate and be of no force and effect, and the Optionee shall have no
rights under this Agreement. Unless otherwise indicated herein, defined terms in
the Plan and not otherwise defined in this Agreement shall have the meaning in
this Agreement as in the Plan.
1. Option Price. The exercise price (the "Option Price") per share of
Common Stock issuable upon exercise of the Options shall be as set forth in
Schedule A. The Company's board of directors has approved, subject to
shareholder approval, a one-for-30 reverse split of the Common Stock (the
"Reverse Split"). In the event that the Reverse Split is approved by the
shareholders not later than April 21, 2000, the number of shares subject to the
Option shall not be affected by the Reverse Split, although the Option Price
shall be increased as set forth in said Schedule A.
2. Description of Options. The Optionee is granted an ISO and/or a NQSO
to purchase the number of shares of Common Stock of the Company as is set forth
in Schedule A.
3. Exercise of Options.
A. Schedule of Rights to Exercise. The Options shall vest and
become exercisable fully on the Initial Vesting Date and shall expire at 5:30
P.M. Houston, Texas time, on April 21, 2004. The Initial Vesting Date shall mean
the later of (i) the date the Plan is approved by the Company's shareholders or
(ii) the date that the Company's Market Capitalization, as hereinafter defined,
is at least $25,000,000. The period during which the Options may be exercised is
referred to as the Option Exercise Period. To the extent that the Options become
exercisable, they shall be called "Vested Options."
B. Market Capitalization. "Market Capitalization" shall mean the
product of (i) the total number of shares of Common Stock which, on the date as
of which the computation is made, are either (a) outstanding or (b) issuable
upon conversion of outstanding shares of preferred stock, and (ii) the average
closing price of the Common Stock on the date as of which the computation is
made, as reported by the principal stock exchange or market on which the Common
Stock is traded; provided, that if, on such day there are no reported sales of
Common
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<PAGE> 2
Stock, the closing bid price on such date shall be used. In the event that the
Common Stock is not traded on any exchange or market that reports closing
prices, the closing bid price as reported by the National Quotation Bureau, Inc.
shall be used.
C. Effect of Termination of Employment.
(i) In the event that Optionee's employment with the Company
shall be terminated for Good Reason, as defined in Optionee's employment
agreement with the Company, the Options shall terminate on the effective date of
such termination of employment, and the Optionee shall have no further rights to
exercise the Option.
(ii) If the Optionee's termination of employment with the
Company without "Good Reason," all of the Options that have not then become
Vested Options shall expire, and the Vested Options shall be exercisable as
follows:
(a) If the Optionee's employment terminates on account
of a disability (as defined in the Plan), the Vested Options may be exercised
for a period of twelve (12) months following the effective date of such
termination (but not later than the last day of the Option Exercise Period), at
which time the Options shall expire.
(b) If the Optionee's employment terminates on account
of death, the Vested Options may be exercised for a period of six (6) months
following the date of death (but not later than the last day of the Option
Exercise Period), at which time the Options shall expire.
(c) If the Optionee's employment terminates for any
reason other than as provided in Paragraph 3(C)(i) or 3(C)(ii)(a) or (b), the
Vested Options may be exercised for a period of three (3) months following the
effective date of such termination of employment (but not later than the last
day of the Option Exercise Period), at which time the Options shall expire.
D. Method of Exercise. Vested Options may be exercised, in whole
or in part, by the Optionee providing the Company a written notice in the form
of Schedule B-1 to this Agreement.
E. Payment. Payment of the Option Price shall be made by certified
or bank check or the Optionee's personal check, provided, however, that if the
Optionee delivers a personal check, the shares of Common Stock issuable upon
exercise of the Option shall not be issued until the Company has been advised by
its bank that the check has cleared. In addition, the Option may be exercised by
delivery of shares of Common Stock having a value, based on the market price of
the Common Stock, on the date of exercise equal to the Option Price payable for
the shares of Common Stock issuable upon such exercise. A partial exercise of
the Vested Options granted hereunder does not waive an Optionee's right to a
later exercise of some or all of the remaining Vested Options.
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<PAGE> 3
F. Stock Appreciation Rights, The Optionee shall be entitled to
stock appreciation rights, as described and governed by Section 6 of the Plan;
provided, however, that upon exercise of the stock appreciation rights, the
Optionee shall be entitled to receive shares of Common Stock and not cash. Stock
appreciation rights shall be exercised by the Optionee providing the Company a
written notice in the form of Schedule B-2 to this Agreement.
G. Compliance with Law. Anything in this Option to the contrary
notwithstanding, the Optionee agrees that he will not exercise the Option, and
that the Company will not be obligated to issue any shares of Common Stock
pursuant to this Option, if the exercise of the Option or the issuance of such
shares shall constitute a violation by the Optionee or by the Company of any
provisions of any law or of any regulation of any governmental authority. Any
determination by the Committee in this connection shall be final, binding and
conclusive. In this connection, the Optionee understands that, unless the
issuance of the Optioned Shares is registered pursuant to the Securities Act of
1933, as amended (the "Securities Act"), the shares of Common Stock issuable
upon exercise of the Option, if and when issued, will be restricted securities,
as defined in Rule 144 of the Securities and Exchange Commission pursuant to the
Securities Act.
4. Adjustment Provisions. The number of shares of Common Stock
subject to the Option and the Option Price shall be adjusted in accordance with
generally accepted accounting principles in the event of a stock dividend, stock
split, stock distribution, reverse split or other combination of shares,
recapitalization or otherwise, which affects the Common Stock; provided,
however, that this Paragraph 4 shall not apply to the Reverse Split, which shall
be governed by Paragraph 1 of this Option. In addition to or in lieu of, the
adjustments referred to in the preceding sentence, the number of shares subject
to the Option and the Option Price may also be adjusted pursuant to Paragraph
3(c) of the Plan.
5. No Rights to Continued Employment. Nothing in this Agreement
shall be construed (a) as an employment agreement or (b) to grant the Optionee
any rights to continue as an employee, officer or director of the Company or of
a parent, subsidiary or affiliate of the Company.
6. Estoppel Provision: Additional Provisions.
(A) The Optionee shall have no interest in and shall not be
entitled to any voting rights or any dividend or other rights or privileges of a
shareholder of the Company with respect to any shares of Common Stock issuable
upon exercise of this Option prior to the exercise of this Option and payment of
the Option Price.
(B) The Company shall not be liable or bound in any manner by
any oral or written statement, representation, or other information pertaining
to the Stock, the Company or any affiliate of the Company unless the same are
specifically set forth herein. The Optionee's acceptance hereof represents his
agreement and acknowledgment that the Company has not made and is not making any
representation or warranty either express or implied, concerning the Stock
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<PAGE> 4
or any matter or thing relating to or affecting the Company or any of its
affiliates except as specifically set forth in this Agreement.
(C) Optionee specifically acknowledges his understanding that
sales or other dispositions of any shares of Stock made in reliance upon Rule
144 under the Securities Act of 1993, as amended (the "Act") can be made only in
limited amounts in accordance with the terms and conditions of such Rule.
(D) To the extent that any of the Options are ISOs, the
Optionee agrees to notify the Company in writing, within 30 days of any
disposition (whether by sale exchange, gift or otherwise) of shares of Stock
pursuant to such ISOs purchased under this Agreement, within two (2) years from
the Grant Date, as set forth on Schedule A, or within one year of the issuance
of such shares of Common Stock to the Employee upon exercise of a Vested Option.
(E) This Instrument of Grant shall be construed and governed in
accordance with the laws of the State of New York without applying its conflict
of laws principles.
7. Plan. This Agreement is subject to the terms and conditions of
the Plan, a copy of which is attached hereto and incorporated by reference
herein. In the event of a conflict or inconsistency between the Plan and this
Agreement, the Plan shall govern and control. The Committee shall have sole
authority, in its absolute discretion, to construe and interpret this Agreement
and to make all other determinations it deems necessary or advisable for the
administration of this Agreement. Optionee acknowledges receipt of a copy of the
Plan, a copy of which is annexed hereto, and represents that he is familiar with
the terms and provisions thereof, and hereby accept this Option subject to all
the terms and provisions thereof. Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Committee upon any
questions arising under the Plan.
CONSOLIDATED TECHNOLOGY GROUP LTD.
By:
-----------------------------------
Richard Young, President
OPTIONEE:
--------------------------------------
Frank DeLape
--------------------------------------
(address and Social Security Number)
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<PAGE> 5
SCHEDULE A
<TABLE>
<S> <C>
Frank DeLape April 22, 1999
------------ --------------
(Optionee) (Grant date)
April 21, 2004
--------------
(Expiration Date)
Incentive Stock Option ("ISO")
------------------------------
Number of shares subject ISO None
Non-qualified Stock Option ("NQSO")
-----------------------------------
Number of shares subject NQSO 400,000
Option price for each share subject to a NQSO $0.14
</TABLE>
Note: Pursuant to Paragraphs 1 of the Agreement, if the Reverse Split is
approved by the Company's shareholders, the NQSO will become an option to
purchase 400,000 shares of Common Stock at $4.20 per share.
TOTAL NUMBER OF SHARES SUBJECT TO OPTIONS 400,000
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<PAGE> 6
SCHEDULE B-1
Date:
Consolidated Technology Group Ltd.
700 Gemini Street
Houston, Texas 77058
Attention: President
Re: Stock Option Exercise pursuant to
Agreement dated May 18, 1999
Gentlemen:
I hereby exercise the above-referenced option to the extent of ______
shares of Common Stock, and I am tendering with this Notice full payment of the
Purchase Price in the manner provided in Stock Option Agreement with respect to
the shares of Common Stock as to which this Option is being exercised. I further
represent and warrant to the Company that I am aware of the tax consequences of
my exercise of the option.
Very truly yours,
Frank DeLape
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<PAGE> 7
SCHEDULE B-2
Date:
Consolidated Technology Group Ltd.
700 Gemini Street
Houston, Texas 77058
Attention: President
Re: Stock Appreciation Right Exercise
pursuant to Agreement dated
May 18, 1999
Gentlemen:
I hereby exercise my stock appreciation rights to the extent of
_______ shares of Common Stock. The number of shares of Common Stock to be
issued upon this exercise shall be determined pursuant to Paragraph 6(b) of the
Plan. I further represent and warrant to the Company that I am aware of the tax
consequences of my exercise of the option.
Very truly yours,
Frank DeLape
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<PAGE> 1
EXHIBIT 6
STOCK OPTION AGREEMENT
Consolidated Technology Group Ltd., a New York corporation (the
"Company"), hereby grants to Richard Young ("Optionee") certain options (the
"Options") to purchase shares of the Company's common stock, par value $.01 per
share ("Common Stock"), which are more fully described Schedule A to this
Agreement as either Incentive Stock Option ("ISO") and/or Nonqualified Stock
Option ("NQSO"). This Agreement amends and restates as of May 18, 1999, the
option previously granted by the Company's board of directors on April 22, 1999.
The Options are granted pursuant to, and subject to the terms, conditions and
limitations of, the Company's 1999 Long-Term Incentive Plan (the "Plan") adopted
by the Company's board of directors, subject to shareholder approval. In the
event that the Plan is not approved by the Company's shareholders, the Options
shall terminate and be of no force and effect, and the Optionee shall have no
rights under this Agreement. Unless otherwise indicated herein, defined terms in
the Plan and not otherwise defined in this Agreement shall have the meaning in
this Agreement as in the Plan.
1. Option Price. The exercise price (the "Option Price") per share of
Common Stock issuable upon exercise of the Options shall be as set forth in
Schedule A. The Company's board of directors has approved, subject to
shareholder approval, a one-for-30 reverse split of the Common Stock (the
"Reverse Split"). In the event that the Reverse Split is approved by the
shareholders not later than April 21, 2000, the number of shares subject to the
Option shall not be affected by the Reverse Split, although the Option Price
shall be increased as set forth in said Schedule A.
2. Description of Options. The Optionee is granted an ISO and/or a
NQSO to purchase the number of shares of Common Stock of the Company as is set
forth in Schedule A.
3. Exercise of Options.
A. Schedule of Rights to Exercise. The Options shall vest and
become exercisable fully on the Initial Vesting Date and shall expire at 5:30
P.M. Houston, Texas time, on April 21, 2004. The Initial Vesting Date shall mean
the later of (i) the date the Plan is approved by the Company's shareholders or
(ii) the date that the Company's Market Capitalization, as hereinafter defined,
is at least $25,000,000. The period during which the Options may be exercised is
referred to as the Option Exercise Period. To the extent that the Options become
exercisable, they shall be called "Vested Options."
B. Market Capitalization. "Market Capitalization" shall mean the
product of (i) the total number of shares of Common Stock which, on the date as
of which the computation is made, are either (a) outstanding or (b) issuable
upon conversion of outstanding shares of preferred stock, and (ii) the average
closing price of the Common Stock on the date as of which the computation is
made, as reported by the principal stock exchange or market on which the Common
Stock is traded; provided, that if, on such day there are no reported sales of
Common
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<PAGE> 2
Stock, the closing bid price on such date shall be used. In the event that the
Common Stock is not traded on any exchange or market that reports closing
prices, the closing bid price as reported by the National Quotation Bureau, Inc.
shall be used.
C. Effect of Termination of Employment.
(i) In the event that Optionee's employment with the Company
shall be terminated for Good Reason, as defined in Optionee's employment
agreement with the Company, the Options shall terminate on the effective date of
such termination of employment, and the Optionee shall have no further rights to
exercise the Option.
(ii) If the Optionee's termination of employment with the
Company without "Good Reason," all of the Options that have not then become
Vested Options shall expire, and the Vested Options shall be exercisable as
follows:
(a) If the Optionee's employment terminates on account
of a disability (as defined in the Plan), the Vested Options may be exercised
for a period of twelve (12) months following the effective date of such
termination (but not later than the last day of the Option Exercise Period), at
which time the Options shall expire.
(b) If the Optionee's employment terminates on account
of death, the Vested Options may be exercised for a period of six (6) months
following the date of death (but not later than the last day of the Option
Exercise Period), at which time the Options shall expire.
(c) If the Optionee's employment terminates for any
reason other than as provided in Paragraph 3(C)(i) or 3(C)(ii)(a) or (b), the
Vested Options may be exercised for a period of three (3) months following the
effective date of such termination of employment (but not later than the last
day of the Option Exercise Period), at which time the Options shall expire.
D. Method of Exercise. Vested Options may be exercised, in whole
or in part, by the Optionee providing the Company a written notice in the form
of Schedule B-1 to this Agreement.
E. Payment. Payment of the Option Price shall be made by certified
or bank check or the Optionee's personal check, provided, however, that if the
Optionee delivers a personal check, the shares of Common Stock issuable upon
exercise of the Option shall not be issued until the Company has been advised by
its bank that the check has cleared. In addition, the Option may be exercised by
delivery of shares of Common Stock having a value, based on the market price of
the Common Stock, on the date of exercise equal to the Option Price payable for
the shares of Common Stock issuable upon such exercise. A partial exercise of
the Vested Options granted hereunder does not waive an Optionee's right to a
later exercise of some or all of the remaining Vested Options.
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<PAGE> 3
F. Stock Appreciation Rights, The Optionee shall be entitled to
stock appreciation rights, as described and governed by Section 6 of the Plan;
provided, however, that upon exercise of the stock appreciation rights, the
Optionee shall be entitled to receive shares of Common Stock and not cash. Stock
appreciation rights shall be exercised by the Optionee providing the Company a
written notice in the form of Schedule B-2 to this Agreement.
G. Compliance with Law. Anything in this Option to the contrary
notwithstanding, the Optionee agrees that he will not exercise the Option, and
that the Company will not be obligated to issue any shares of Common Stock
pursuant to this Option, if the exercise of the Option or the issuance of such
shares shall constitute a violation by the Optionee or by the Company of any
provisions of any law or of any regulation of any governmental authority. Any
determination by the Committee in this connection shall be final, binding and
conclusive. In this connection, the Optionee understands that, unless the
issuance of the Optioned Shares is registered pursuant to the Securities Act of
1933, as amended (the "Securities Act"), the shares of Common Stock issuable
upon exercise of the Option, if and when issued, will be restricted securities,
as defined in Rule 144 of the Securities and Exchange Commission pursuant to the
Securities Act.
4. Adjustment Provisions. The number of shares of Common Stock
subject to the Option and the Option Price shall be adjusted in accordance with
generally accepted accounting principles in the event of a stock dividend, stock
split, stock distribution, reverse split or other combination of shares,
recapitalization or otherwise, which affects the Common Stock; provided,
however, that this Paragraph 4 shall not apply to the Reverse Split, which shall
be governed by Paragraph 1 of this Option. In addition to or in lieu of, the
adjustments referred to in the preceding sentence, the number of shares subject
to the Option and the Option Price may also be adjusted pursuant to Paragraph
3(c) of the Plan.
5. No Rights to Continued Employment. Nothing in this Agreement
shall be construed (a) as an employment agreement or (b) to grant the Optionee
any rights to continue as an employee, officer or director of the Company or of
a parent, subsidiary or affiliate of the Company.
6. Estoppel Provision: Additional Provisions.
(A) The Optionee shall have no interest in and shall not be
entitled to any voting rights or any dividend or other rights or privileges of a
shareholder of the Company with respect to any shares of Common Stock issuable
upon exercise of this Option prior to the exercise of this Option and payment of
the Option Price.
(B) The Company shall not be liable or bound in any manner by
any oral or written statement, representation, or other information pertaining
to the Stock, the Company or any affiliate of the Company unless the same are
specifically set forth herein. The Optionee's acceptance hereof represents his
agreement and acknowledgment that the Company has not made and is not making any
representation or warranty either express or implied, concerning the Stock
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<PAGE> 4
or any matter or thing relating to or affecting the Company or any of its
affiliates except as specifically set forth in this Agreement.
(C) Optionee specifically acknowledges his understanding that
sales or other dispositions of any shares of Stock made in reliance upon Rule
144 under the Securities Act of 1993, as amended (the "Act") can be made only in
limited amounts in accordance with the terms and conditions of such Rule.
(D) To the extent that any of the Options are ISOs, the
Optionee agrees to notify the Company in writing, within 30 days of any
disposition (whether by sale exchange, gift or otherwise) of shares of Stock
pursuant to such ISOs purchased under this Agreement, within two (2) years from
the Grant Date, as set forth on Schedule A, or within one year of the issuance
of such shares of Common Stock to the Employee upon exercise of a Vested Option.
(E) This Instrument of Grant shall be construed and governed
in accordance with the laws of the State of New York without applying its
conflict of laws principles.
7. Plan. This Agreement is subject to the terms and conditions of
the Plan, a copy of which is attached hereto and incorporated by reference
herein. In the event of a conflict or inconsistency between the Plan and this
Agreement, the Plan shall govern and control. The Committee shall have sole
authority, in its absolute discretion, to construe and interpret this Agreement
and to make all other determinations it deems necessary or advisable for the
administration of this Agreement. Optionee acknowledges receipt of a copy of the
Plan, a copy of which is annexed hereto, and represents that he is familiar with
the terms and provisions thereof, and hereby accept this Option subject to all
the terms and provisions thereof. Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Committee upon any
questions arising under the Plan.
CONSOLIDATED TECHNOLOGY GROUP LTD.
By:
--------------------------------------------
Frank DeLape, Chairman and CEO
OPTIONEE:
-----------------------------------------------
Richard Young
-----------------------------------------------
(address and Social Security Number)
-4-
<PAGE> 5
SCHEDULE A
<TABLE>
<S> <C>
Richard Young April 22, 1999
------------- --------------
(Optionee) (Grant date)
April 21, 2004
--------------
(Expiration Date)
Incentive Stock Option ("ISO")
------------------------------
Number of shares subject ISO None
Non-qualified Stock Option ("NQSO")
-----------------------------------
Number of shares subject NQSO 250,000
Option price for each share subject to a NQSO $0.14
</TABLE>
Note: Pursuant to Paragraphs 1 of the Agreement, if the Reverse Split is
approved by the Company's shareholders, the NQSO will become an option to
purchase 250,000 shares of Common Stock at $4.20 per share.
TOTAL NUMBER OF SHARES SUBJECT TO OPTIONS 250,000
-5-
<PAGE> 6
SCHEDULE B-1
Date:
Consolidated Technology Group Ltd.
700 Gemini Street
Houston, Texas 77058
Attention: President
Re: Stock Option Exercise pursuant to
Agreement dated May 18, 1999
Gentlemen:
I hereby exercise the above-referenced option to the extent of
________ shares of Common Stock, and I am tendering with this Notice full
payment of the Purchase Price in the manner provided in Stock Option Agreement
with respect to the shares of Common Stock as to which this Option is being
exercised. I further represent and warrant to the Company that I am aware of the
tax consequences of my exercise of the option.
Very truly yours,
Richard Young
-6-
<PAGE> 7
SCHEDULE B-2
Date:
Consolidated Technology Group Ltd.
700 Gemini Street
Houston, Texas 77058
Attention: President
Re: Stock Appreciation Right Exercise pursuant to
Agreement dated May 18, 1999
Gentlemen:
I hereby exercise my stock appreciation rights to the extent of
_______ shares of Common Stock. The number of shares of Common Stock to be
issued upon this exercise shall be determined pursuant to Paragraph 6(b) of the
Plan. I further represent and warrant to the Company that I am aware of the tax
consequences of my exercise of the option.
Very truly yours,
Richard Young
-7-
