-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DvUWtK/+4zJeP83xuXMrPAkhPKmvpnhQ7VUh0jl8rvFYlePn7Acn0e0EcYl695DS J+T2af1Jw/eRvF8GuTEgQw== 0001019056-01-500397.txt : 20010823 0001019056-01-500397.hdr.sgml : 20010823 ACCESSION NUMBER: 0001019056-01-500397 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 20010808 ITEM INFORMATION: Changes in control of registrant ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits ITEM INFORMATION: Change in fiscal year FILED AS OF DATE: 20010822 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IKON VENTURES INC CENTRAL INDEX KEY: 0001043105 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-29331 FILM NUMBER: 1721533 BUSINESS ADDRESS: STREET 1: COLLIER HOUSE SUITE 305 STREET 2: 1631169 BROMPTON ROAD CITY: LONDON ENGLAND SWIX STATE: X0 ZIP: 00000 BUSINESS PHONE: 1715914435 MAIL ADDRESS: STREET 1: COLLIER HOUSE SUITE 305 STREET 2: 1631169 BROMPTON ROAD CITY: LONDON ENGLAND 8-K 1 ikon8k.txt FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------- FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of report (Date of earliest event reported) August 8, 2001 -------------- IKON VENTURES, INC. -------------------------------------------------- (Exact name of registrant as specified in Charter) Nevada 000-29331 76-0270295 - ---------------------------- ----------- ------------------- (State or other jurisdiction (Commission (IRS employer of incorporation) file no.) identification no.) 1000 Woodbury Road, Suite 214, Woodbury, NY 11797 - ------------------------------------------- ---------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code (516) 682-9700 -------------- Suite 305, Collier House, 163/169 Brompton Road, London SW3 1 PY, England ------------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) Forward Looking Statements This Form 8-K and other reports filed by Registrant from time to time with the Securities and Exchange Commission (collectively the "Filings") contain or may contain forward looking statements and information that are based upon beliefs of, and information currently available to, Registrant's management as well as estimates and assumptions made by Registrant's management. When used in the filings the words "anticipate", "believe", "estimate", "expect", "future", "intend", "plan" or the negative of these terms and similar expressions as they relate to Registrant or Registrant's management identify forward looking statements. Such statements reflect the current view of Registrant with respect to future events and are subject to risks, uncertainties, assumptions and other factors (including the risks contained in the section of this report entitled "Risk Factors") relating to Registrant's industry, Registrant's operations and results of operations and any businesses that may be acquired by Registrant. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned. Although Registrant believes that the expectations reflected in the forward looking statements are reasonable, Registrant cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, Registrant does not intend to update any of the forward-looking statements to conform these statements to actual results. The following discussion should be read in conjunction with Registrant's financial statements and the related notes that appear elsewhere in this report and Registrant's quarterly report on Form 10-QSB for the three months ended June 30, 2001, as filed with the Securities and Exchange Commission (the "Commission"). Item 1. Changes in Control of Registrant. Pursuant to an Agreement and Plan of Share Exchange, dated as of June 19, 2001, and as amended as of July 18, 2001 (the "Exchange Agreement"), by and among Ikon Ventures, Inc., a Nevada corporation ("Ikon"), Sutton Online, Inc., a Delaware corporation ("Sutton"), and the stockholders of Sutton (collectively, the "Stockholders"), Ikon agreed to issue to the Stockholders 2.2222222 shares of Ikon's common stock, par value $.001 per share (the "Ikon Common Stock"), in exchange for each share of Sutton's common stock, par value $.025 per share (the "Sutton Common Stock") issued and outstanding on the date of the consummation of such exchange. The ratio of 2.2222222 shares of Ikon Common Stock for each share of Sutton Common Stock is referred to herein as the "Exchange Ratio". The closing of the exchange (the "Closing") occurred on August 8, 2001 (the "Closing Date"). At the Closing, the Stockholders were issued an aggregate of 15,222,219 shares of Ikon Common Stock, which shares, after giving effect to certain other transactions effected at or prior to the Closing, represented approximately 76% of the total then issued and outstanding shares of Ikon Common Stock. Pursuant to the Exchange Agreement, on the Closing Date, Kurt Schlapfer and Stephen Gross, two of Ikon's three officers and directors, resigned, Ikon's remaining director and officer, Ian Rice, resigned as an officer and Mr. Rice appointed Jonathan D. Siegel, the Chief Executive Officer of Sutton ("Siegel"), and Gregory C. Frank, the Chief Operating Officer of Sutton ("Frank"), as the Chief Executive Officer and Chief Operating Officer, respectively, of Ikon. In addition, subject to and effective upon compliance with Rule 14f-1 under the Securities Exchange Act of 1934 (the "Act"), Mr. Rice appointed Siegel, Frank and Richard C. Joyce as the new board of directors of Ikon and tendered his resignation as a director. The details of the transaction, including all information required by Item 1 of this Current Report on Form 8-K (this "Report"), are set forth in "Item 2. Acquisition or Disposition of Assets" below, the contents of which are incorporated by reference herein. Item 2. Acquisition or Disposition of Assets. Overview of the Transaction - --------------------------- The information below is a summary description of the Exchange Agreement and is qualified in its entirety by reference to the Exchange Agreement and related documents that the Registrant has filed as exhibits to this Report. Pursuant to the Exchange Agreement, on the Closing Date Ikon issued an aggregate of 15,222,219 shares of Ikon Common Stock to the Stockholders (including parties who became stockholders of Sutton after the execution of the Exchange Agreement as a result of the transactions described below, each of whom executed a counterpart of the Exchange Agreement) and in exchange the Stockholders conveyed to Ikon all of the issued and outstanding shares of Sutton Common Stock, consisting of an aggregate of 6,850,000 shares. The Exchange Ratio of Ikon Common Stock for Sutton Common Stock was determined arbitrarily by the parties to the Exchange Agreement, and the parties did not assign any value to the shares of Ikon Common Stock or the shares of Sutton Common Stock. In connection with the Exchange Agreement, the following transactions took place on or before the Closing Date: - Ikon issued a convertible promissory note in the amount of $100,000 to an accredited, non-affiliated investor. The proceeds of such note were loaned to Sutton. On the Closing Date, the note was converted into 25,000 shares of Ikon Common Stock in accordance with the terms thereof. - Frank entered into an amendment to his employment agreement with a predecessor of Sutton and Global Capital Partners Inc.("GCAP"), pursuant to which GCAP was removed as a party to such agreement. - Siegel entered into an amendment to his employment agreement with GCAP and a subsidiary thereof pursuant to which the obligations of such parties under the agreement were assumed by Sutton, and such parties were released from their obligations thereunder. In addition, such parties released Siegel from his non-compete agreement with such parties. 2 - Ikon entered into a one year consulting agreement with each of Sigma Limited S.A., a Swiss corporation for which Mr. Rice acts as a consultant but is not an officer, director or shareholder thereof, and Corporate Communications Network Inc., a Nevada corporation owned by Steven Kerr ("CCN"). Each of the consulting agreements provides for an annual fee of $50,000, payable in substantially equal installments in arrears. At Ikon's option, the annual fee may be paid in cash or in shares of Ikon Common Stock, each such share to be valued at the closing bid price per share of Ikon Common Stock on the trading day immediately preceding each issuance. - Each holder of a warrant to purchase shares of Sutton Common Stock executed a written agreement, pursuant to which such holder agreed that upon exercise of such warrant after the Closing the holder would be entitled to receive shares of Ikon Common Stock in lieu of shares of Sutton Common Stock determined on the basis of the Exchange Ratio. - Holders of Sutton promissory notes in the aggregate amount of $600,000 converted their notes into an aggregate of 850,000 shares of Sutton Common Stock and warrants to purchase an aggregate of 100,000 shares of Sutton Common Stock for $2.50 per share exercisable at any time until May 3, 2004. The holders also terminated certain pledge agreements with GCAP pursuant to which they held an aggregate of 1,000,000 shares of Sutton Common Stock owned by GCAP and such shares of Sutton Common Stock were returned to GCAP. - GlobalNet Financial.com, Inc. ("GNet") and Sutton entered into an Exchange Agreement pursuant to which GNet exchanged its $525,000 note of Sutton for 888,888 shares of Sutton's Series A Exchangeable Preferred Stock (the "Series A"). The Series A is exchangeable at the option of GNet at any time and from time to time into the following (collectively, the "Ikon Exchangeable Securities"): 888,888 shares of Ikon Common Stock (subject to adjustment under certain circumstances) and a warrant to purchase 388,889 shares of Ikon Common Stock exercisable at any time and from time to time until May 3, 2004, at $2.50 per share. The Series A are also exchangeable in whole, at the option of Sutton, into the Ikon Exchangeable Securities at any time after Ikon has raised an aggregate of $1,500,000 in capital in addition to the $500,000 raised by Ikon as contemplated under the Agreement. Holders of shares of the Series A are not entitled to receive dividends, except when and as declared by Sutton's board of directors. With respect to rights on liquidation, winding up and dissolution, the Series A ranks prior to any other series of preferred stock that may be created by Sutton's board of directors, any other equity securities of Sutton, including the Sutton Common Stock and, without the prior consent of the holders of the Series A (which may not be unreasonably withheld or delayed) any debt securities of Sutton (other than trade creditors or debt incurred in the ordinary course of business). Each share of Series A entitles the holder thereof to one vote on all matters submitted to a vote of the Sutton's stockholders, 3 voting together as one class except as otherwise may be required by law. In addition, GNet delivered to Sutton 250,000 shares of GCAP's common stock that were pledged to GNet as security for the repayment of the Sutton note. In consideration therefor, GCAP granted GNet an option, exercisable on and after the exchange of the Series A for the Ikon Exchangeable Securities, to purchase 246,916 shares of Ikon Common Stock owned by GCAP for the aggregate consideration of $1.00. - Sutton delivered to Donald J. Egan ("Egan") and Skyline Real Estate Management Pension Plan ("Plan") an aggregate of 310,000 shares of common stock of GCAP owned by Sutton as payment in full of promissory notes of Sutton in the aggregate amount of $175,000. - Siegel, Frank and the JB Sutton Group Inc. 401 (k) Profit Sharing Plan dated 10/1/95 f/b/o Jonathan D. Siegel (the "Siegel 401 (k)") sold to Egan an aggregate of 347, 490 shares of GCAP common stock (89,912, 48,180 and 209,398 shares, respectively) in exchange for cash in the aggregate amount of $100,000 ($24,280, $14,169 and $61,551, respectively). - GCAP sold to Siegel, the Siegel 401(k), Frank and Sigma an aggregate of 2,684,000 shares of Sutton Common Stock (238,854, 432,136, 671,000 and 1,342,000 shares, respectively) and warrants to purchase 500,000 shares of Sutton Common Stock at an exercise price of $2.50 per share (44,498, 80,502, 125,000 and 250,000, respectively) for an aggregate purchase price of $1,800,000, of which $200,000 was paid in cash and the balance by the delivery of notes of Siegel, Frank and Sigma ($375,000, $375,00 and $850,000, respectively). The notes bear interest at 6% per annum, payable annually, and the principal is due August 1, 2003. All of the purchased shares of Sutton Common Stock were pledged to GCAP to secure repayment of the notes. - Siegel, the Siegel 401(k), Frank and Sigma entered into an agreement pursuant to which they agreed not to sell any of the shares of Sutton Common Stock purchased from and pledged to GCAP (and which were exchanged for an aggregate of 5,964,444 shares of Ikon Common Stock pursuant to the Agreement) without the consent of all of the parties to the agreement, to apply the proceeds of any sale of such shares or any prepayment of the notes for which the shares serve as security as provided in the pledge agreement with GCAP. In addition, the agreement provides that Ikon will vote one-half of its shares with Siegel so long as he serves as Chief Executive Officer of Ikon and one-half of its shares with Frank so long as he serves as Chief Operating Officer of Ikon. - Ikon effected a private placement of 100,000 shares of Ikon Common Stock at $4.00 per share to three accredited, non-affiliated investors. 4 - Ikon issued 1,000,000 shares of Ikon Common Stock to each of four individuals, Charles Buhlmann, Carol Codalonga, Anne-Miriam Sacher and Catherine Claden, for consulting services rendered to Ikon. None of such individuals are affiliates of Ikon. Such issuances were effected under Ikon's 2001 Employee Stock Compensation Plan. Such plan has been registered with the Commission on Form-S-8 and therefore the shares are not subject to any restrictions on transferability under applicable Federal securities laws. - GCAP entered into an agreement with Douglas Kiggins and CCCN pursuant to which an aggregate of 26,668 shares of Ikon Common Stock were pledged to GCAP to secure GCAP's guaranty of certain equipment leases entered into by Sutton. - Ikon entered into a one year consulting agreement, dated August 8, 2001, with Investor Relations Services, Inc. ("IRSI"), pursuant to which IRSI agreed to provide investor relations services to Ikon. - Ikon entered into a Payment Agreement, dated August 8, 2001, with Summit Trading Limited ("STL"), pursuant to which STL agreed to pay all of the fees and expenses of IRSI in exchange for which Ikon issued to STL, an accredited, non-affiliated party, 500,000 shares of Ikon Common Stock. - Kurt Schlapfer and Stephen Gross resigned as officers and directors of Ikon and Ikon's then remaining sole director, Ian Rice, appointed Siegel and Frank as the Chief Executive Officer and Chief Operating Officer, respectively, of Ikon. - Subject to and effective upon compliance with Rule 14f-1 under the Act, Mr. Rice appointed Siegel, Frank and Richard C. Joyce as the new board of directors of Ikon and tendered his resignation as a director. All references above to shares of GCAP common stock do not give effect to the recent four for one reverse split of GCAP's common stock. Description of Ikon's Business - ------------------------------ Ikon was formed in Nevada on May 31, 1997. It operated a Zeolite and related chemical production facility in Mira, Italy, through its main subsidiary Zeolite Mira S.r.l ("Zeolite Mira"). At the beginning of 1999 Zeolite Mira was sold. Ikon was inactive until the acquisition of 100% of the issued and outstanding shares of common stock of Sutton, a Delaware corporation, originally formed as a limited liability company on April 22, 1999. The acquisition of all the issued and outstanding shares of Sutton's common stock was completed on August 8, 2001 the Share Exchange whereby Ikon acquired 6,850,000 shares of Sutton's common stock in exchange for 15,222,219 of Ikon's common stock, all of 5 which are restricted regarding transferability. After giving effect to certain other transactions effected in connection with the Share Exchange, the shares of Ikon's common stock issued to the stockholders of Sutton represented approximately 76% of the total issued and outstanding shares of Ikon common stock immediately after the Share Exchange. As a result of the Share Exchange, Ikon now carries on business through its wholly-owned subsidiary Sutton, which maintains its business office at 1000 Woodbury Road, Suite 214, Woodbury, New York 11797. Description of Sutton's Business - -------------------------------- Sutton is a direct access application service provider ("ASP") that provides online trading solutions to individuals, broker dealers, and financial institutions worldwide. Sutton's solutions currently enable users to trade on the New York Stock Exchange ("NYSE"), American Stock Exchange ("AMEX") and Nasdaq. In Spring 2001, Sutton began marketing solutions that will enable users to trade in multiple global markets and it expects that it will realize its first sale of such solutions during the fourth quarter of 2001. Products -------- Sutton's principal products consist of advanced electronic trading systems, order management and routing software applications. These products can be utilized to enable traders to execute and manage large volumes of transactions at high speed with accuracy, reliability and security. Sutton's trading systems and routing software are capable of routing orders to multiple markets and electronic communication networks ("ECNs") via a single user-friendly interface. By connecting Sutton's platform to various third parties, users can send orders to purchase or sell securities through Sutton's brokerage partners in a designated market. GlobalDAT (TM) is Sutton's proprietary direct access software platform in a production environment. Sutton believes that this product is the first global direct access trading platform geared toward the end user, i.e., the actual purchaser or seller of securities. It is capable of connecting major European and American stock exchanges and ECNs through one user interface for share dealing. Its open architecture and its compatibility with the most commonly used messaging protocol (know as a "FIX") provides the ability to add markets and exchanges on demand. Each user can have the ability to: (i) view level I and level II price quotes, order status, profit and loss and cash-flow; (ii) route orders via market makers and direct connections to ECNs and exchanges; and (iii) benefit from dynamic charting and account management, all in real-time utilizing a program written in the user's native language. Sutton is a distributor of SONIC 2000(TM), a direct access software platform that provides users with stock price quotations from the NYSE, AMEX, and Nasdaq, combined with instant trade routing to market makers and ECNs. Direct access allows the individual trader to electronically route orders to the financial markets through Sutton's servers. The software communicates directly to market makers, stock exchanges or other individual traders via ECNs. By eliminating a third party, the user can avoid interim price markups and confirmation delays. 6 Business Divisions ------------------ Historically Sutton has operated through the following four divisions which it expects to continue to operate: 1. Retail Online Trading 2. Sutton Online Trading Solutions 3. Sutton Data Services 4. Sutton Online Europe, N.V. Retail Online Trading --------------------- In order to execute transactions, broker dealers must be registered with the National Association of Securities Dealers ("NASD") and must be members of the Securities Investor Protection Corporation ("SIPC"). Sutton is not registered with the NASD and is not a member of SIPC. However, Sutton has a contractual relationship, which expires in March 2002 (and at Sutton's option and upon the payment of $20,000, may be extended for an additional six months), with Global Capital Securities Corporation ("Global Capital"), a registered U.S. broker dealer and a member of the NASD. As a result of such relationship, Sutton is deemed a designated Office of Supervisory Jurisdiction of Global Capital. All of Sutton's retail online transactions are executed by Global Capital, and all of such transactions are cleared through Penson Financial Services ("Penson"), a division of Service Asset Management Company, located in Dallas, Texas. Penson is a member of the NASD and the SIPC. Sutton Online Trading Solutions ------------------------------- Sutton provides its application services through this division by offering turnkey online trading solutions to domestic and foreign financial institutions. Utilizing complete front-end software, trade routing and back-office management applications, Sutton has become a resource for small, medium and large brokerage firms seeking an easy and cost effective entree to the direct access trading industry. Sutton offers the user state-of-the-art direct access trading systems, brokerage and clearing arrangements, and other services, including website design and hosting and customer service to allow both domestic and foreign brokerage firms to offer online trading to their clients. These services enable Sutton's customers to focus on advertising and marketing, while utilizing Sutton's infrastructure and knowledge. As a result, Sutton has become a worldwide resource for turnkey trading solutions. For example, Sutton has customers who utilize its infrastructure ("Service Bureau Customers") in Bahrain, Russia, Czech Republic, Belgium, Spain, Peru, Bulgaria, Brazil and the United States. Sutton has received Service Bureau Status from Nasdaq and two ECNs and expects that during the next 12 months it will receive such status from additional exchanges and ECNs. 7 Sutton Data Services -------------------- Sutton operates its data service division through Sutton Data Services, an online trading software developer in which Sutton maintains a majority interest. This division was established to develop and support GlobalDAT and to design and maintain software systems for third parties utilizing the know-how amassed through its work on GlobalDAT. Sutton plans to have this division take on projects in the future on a for hire basis. Sutton Online Europe, N.V. -------------------------- Sutton Online Europe, N.V. is a Netherlands wholly owned subsidiary of Sutton that Sutton expects will serve as the vehicle through which it will provide the European community with direct access trading to the Pan-European markets, as well as the American markets. Competitive Position - -------------------- The online trading industry is highly competitive and consists of several large and medium sized companies, as well as numerous small competitors, including Belzberg Technologies Inc., ITG, Inc., NYFIX, Inc., 724 Solutions Inc. and Ariba, Inc. Many of these competitors have financial, marketing and other resources substantially greater than those of Sutton, as well as a substantially longer history of operations than Sutton. Competition in the industry is generally based upon price, reliability and compatibility with other financial applications. Sutton believes that its ability to compete depends on elements both within and outside its control, including the success and timing of new product developments by Sutton and its competitors, product performance and price, distribution and customer service. Sutton believes its competitive position is based primarily on the versatility of its GlobalDAT(TM) components and its FIX 4.1 and 4.2 compatibility with many front-end and back-end products. As a result, Sutton's software applications are able to interface with a user's existing systems and this allows Sutton's customers to choose between various programs to route transactions. It also permits Sutton and its customers to save on infrastructure costs by utilizing existing services, while creating transactional relationships due to Sutton's flexibility and value added services. Sutton also believes that it is the first company to market a global direct access trading platform geared toward the end user, as well as stock exchanges, broker dealers and financial institutions. Market Potential - ---------------- Forrester Research, a leading independent research company that analyzes and forecasts technological advancements and their impact upon business, consumers and society, estimated that the number of online trading accounts in Europe was 4,400,000 as of year end 2000. Forrester Research also estimated that the number of online accounts in Europe is expected to grow significantly to 16,800,000 by year end 2003. Sutton believes the market is increasing based upon the wide expansion of cross-border trading, the need for financial ASP services, and the unprecedented growth of the online trading industry as a whole. Sutton's believes that it will be able to benefit from such projected growth because it software platform is capable of tying together multiple global markets through a single user-friendly interface. 8 Sutton's Management Team - ------------------------ Jonathan D. Siegel ("Siegel"), 41, has served as the Chairman and Chief Executive Officer of Sutton since its inception. From May 1995 until devoting his full time efforts to Sutton, in January 2001, he also served as the Chairman and Chief Executive Officer of Global Capital Markets, LLC, a full service brokerage firm (acquired in November 1999 by Global Capital Partners, Inc. ("GCAP"), a Nasdaq listed holding Company). In March 1990 Siegel joined in the formation of Prime Charter Ltd., where he served as Managing Director until May 1995. Siegel earned a B.S.E.E. degree from the University of Pennsylvania and an M.S.C.E. degree from Syracuse University. In connection with the Share Exchange, Siegel entered into an amendment to his employment agreement with GCAP and a subsidiary thereof pursuant to which the obligations of such parties under the agreement were assumed by Sutton, and such parties were released from their obligations thereunder. In addition, such parties released Siegel from his non-compete agreement with such parties. The Agreement, as amended terminates on November 21, 2001 and provides for an annual base salary of $240,000 and participation in a bonus pool. Gregory C. Frank ("Frank"), 31, has served as the President and a director of Sutton since its inception. From March 1998 until he founded Sutton, Frank served as the Chief Operating Officer of Livetrade.com. Prior to that, from December 1997 to March 1998, he served as the Chief Operating Officer of Talon Trading, an on-site trading firm in Garden City, New York. Frank earned an A.S. degree in Sales and a B.S. in Direct Marketing from Johnson & Wales University. In connection with the Share Exchange, Frank entered into an amendment to his employment agreement with a predecessor of Sutton and "GCAP", pursuant to which GCAP was removed as a party to such agreement. The agreement, as amended, terminates on November 21, 2001 and provides for an annual base salary of $120,000 and participation in a bonus pool. Richard W. Joyce ("Joyce"), 45 joined Sutton's board of directors in May 2000. Joyce is a London-based senior vice president of worldwide sales at 3Com Corp., a broad-based global supplier of networking systems and services. Previously, he was president of 3Com Europe and Asia/Pacific Rim. Joyce joined 3Com UK in 1987 as manager for the workgroup systems division, became president of 3Com Europe in 1990 and assumed responsibility for Asia/Pacific Rim sales in 1993. Before joining 3Com, Mr. Joyce held a variety of management positions at Cambridge International Trading Corp., Esso Petroleum and RRL Electronics. Radek Hulan ("Hulan"), 29, has served as the Chief Technology Officer of Sutton since its inception. Hulan is the Chief Executive Officer and founder of Sutton Data Services and the Chief Executive Officer of Total Solutions, a market leader in portfolio management and financial accounting systems for the Prague Stock Exchange. He has also served in management positions at Burzovni Software and Atlantik Financial trhy, S.R.O. Hulan has a Faculty of Economics degree from Masaryk University, Czech Republic and has computer programming skills for Oracle 7,x, 8.x, Paradox, Pascal, C++, SQL, and FoxPro. 9 Security Ownership of Certain Beneficial Owners and Management. - --------------------------------------------------------------- The following table sets forth information available to the Company, as of August 8, 2001 with respect to the beneficial ownership of the outstanding shares of the Company's Common Stock by (i) any holder of more than five percent (5%) of the outstanding shares; (ii) the Company's officers and directors; and (iii) the Company's officers and directors as a group:
Name and Address of Shares of Percentage (%) of Beneficial Owner (1) Common Stock Owned Common Stock - -------------------- ------------------ ------------ Jonathan D. Siegel (2) 4,641,991 (5) (11) 21.30 (5) (11) Gregory C. Frank (2) 4,641,991 (6) 21.30 (6) Radek Hulan (2) 1,300,000 (9) 6.31 (9) Richard Joyce (2) 155,555 (10) 0.77 (10) The J.B. Sutton Group Inc. 401(k) Profit Sharing Plan, dated 10/1/95 f/b/o Jonathan D. Siegel ("Siegel 401(k)") (2) 1,139,195 (7) (13) 5.60 (7) (13) Sigma Limited S.A. ("Sigma") (3) (4) 3,537,778 (8) 17.08 (8) All officers and directors as a group (four (4) persons) (2) 10,739,537 (12) 49.67 (12) Global Capital Partners, Inc. (14) 2,222,222 (15) 10.45 (15) Tiburon Asset Management LLC (16) 1,029,629 5.11
(1) Beneficial ownership as reported in the table above has been determined in accordance with Instruction (1) to Item 403 (b) of Regulation S-B of the Act. (2) The business address of each of the stockholders noted above is 1000 Woodbury Road, Suite 214, Woodbury, NY 11797. (3) The business address of Sigma is Rue-Fritz-Courvoisier 40, 2300 La Chaux-de-Fonds, Switzerland. 10 (4) Sigma is a company organized under the laws of Switzerland owned by a discretionary trust, whose beneficiaries include members of Ian Rice's family. Mr. Rice is neither a trustee nor a beneficiary of the trust and disclaims any beneficial ownership of Sigma. Prior to the Share Exchange, Mr. Rice was the Company's Chairman of the board of directors. (5) Includes 1,631,617 shares of common stock issuable upon the exercise of outstanding warrants; and 960,302 shares held in the name of the Siegel 401(k). (6) Includes 1,631,620 shares of common stock issuable upon the exercise of outstanding warrants. (7) Includes 178,893 shares of common stock issuable upon the exercise of outstanding warrants. (8) Includes 555,556 shares of common stock issuable upon the exercise of outstanding warrants. (9) Includes 433,333 shares of common stock issuable upon the exercise of outstanding warrants. (10) Includes 44,444 shares of common stock issuable upon the exercise of outstanding warrants. (11) Does not include 1,491,111 shares of common stock under the control of the stockholders noted above pursuant to a Voting Rights Agreement dated as of August 1, 2001, among Sigma, the Siegel 401(k) and the stockholders noted above. (12) Includes 3,741,014 shares of common stock issuable upon the exercise of outstanding warrants. (13) Does not include 2,982,222 of common stock under the control of the stockholders noted above pursuant to the Voting Rights Agreement described in note 11 above. (14) The business address of the stockholder noted above is 6000 Fairview Road, Suite 1420, Charlotte, NC 28210. (15) Includes 1,111,111 shares of common stock issuable upon the exercise of outstanding warrants. (16) The business address of the stockholder noted above is 110 William Street, New York, NY 10038. Risk Factors. - ------------- Prospective investors should carefully consider the following risks, in addition to the other information contained in this Report, concerning Ikon and the business of Sutton, before making any investment in Ikon's securities. SUTTON HAS A HISTORY OF LOSSES AND EXPECTS LOSSES IN THE FUTURE; IF SUTTON DOES NOT ACHIEVE AND SUSTAIN PROFITABILITY, ITS BUSINESS WILL SUFFER. 11 Sutton incurred a net loss of approximately $1,789,230 in the year ended March 31, 2001 and had an accumulated deficit of $1,821,676 at such date. The revenues generated by Sutton to date have been insufficient to support its operations. For working capital, Sutton has relied primarily on debt and equity financings. The Sutton business may not enable the Company to achieve its profit or revenue goals, and its losses may continue to grow in the future. As a result, Ikon may never achieve or sustain profitability on a quarterly or annual basis. SUTTON WILL REQUIRE ADDITIONAL FINANCING; IF THE NECESSARY FINANCING CANNOT BE OBTAINED OUR BUSINESS WILL SUFFER. Sutton's operations, including the development and marketing of the GlobalDat trading platform software, will require substantial up-front expenditures. As of August 08, 2001, Ikon, had liquid assets of approximately $300,000. Ikon believes that such assets, together with cash generated from operations, will be sufficient to fund Sutton's operations for the next 60 days. Accordingly, additional financing will be required to implement Sutton's business plan. Neither Ikon nor Sutton have any commitments from third parties for any future funding, and there can be no assurance that financing will be available on acceptable terms, if at all. If Ikon is not able to obtain necessary financing, it will be required to curtail its activities or cease operations. SUTTON'S REVENUES DEPEND PRIMARILY ON AGREEMENTS WITH ITS CUSTOMERS; IF THESE ARRANGEMENTS ARE TERMINATED OR SUTTON FAILS TO GENERATE NEW AGREEMENTS AND/OR NEW CUSTOMERS, OUR FUTURE OPERATING RESULTS MAY SUFFER. All of Sutton's customer agreements have a one year term and automatically renew for additional one year terms, unless sooner terminated in writing by either party no later than sixty (60) days prior to the current expiration date. If these agreements are not renewed or replaced with agreements containing similar or better terms, Ikon's revenues would decrease. SUTTON'S DEPENDENCE ON A LIMITED NUMBER OF CUSTOMERS FOR A SUBSTANTIAL AMOUNT OF ITS SALES AS WELL AS OTHER FACTORS COULD LEAD TO FLUCTUATIONS IN OPERATING RESULTS. Sutton's business depends on sales of its products to a limited number of customers, which may cause fluctuations in operating results. Sutton does not have long-term contracts with any of its current customers. The top five of its customers accounted for approximately 17% of Sutton's total revenues during the year ended March 31, 2001. Any of those customers could stop using Sutton's products in the future. As a result, a customer that generates substantial revenue in one period may not be a source of revenue in subsequent periods. The loss of a significant customer would have a material and adverse effect on our revenues and results of operations. Ikon may also experience significant fluctuations in quarterly operating results due to a variety of other factors, such as technical difficulties, system downtime, Internet brownouts, interruptions, delays or capacity problems experienced in the Internet or with telephone communications. 12 SUTTON MUST CONTINUE TO OVERCOME SIGNIFICANT AND INCREASING COMPETITION IN ORDER TO CONTINUE ITS GROWTH AND PRODUCTIVITY. The market for global Internet trading solutions, intelligent order routing systems and online trading solutions is intensely competitive, fragmented and rapidly changing. Sutton faces competition from Belzberg Technologies Inc., ITG, Inc., NYFIX, Inc., 724 Solutions Inc., and Ariba, Inc, among others. The introduction of products embodying new technology and the emergence of new industry standards can render existing products obsolete and unmarketable and can exert price pressure on existing products. Sutton's ability to anticipate changes in technology and industry standards and to successfully develop and introduce new and enhanced products, as well as additional applications for existing products, in each case on a timely basis, will be a critical factor in its ability to grow and to remain competitive. Should Sutton be unable, for technological or other reasons, to develop products that are competitive in technology and price and are responsive to customer needs, its business will be materially adversely affected. THE LOSS OF OUR KEY MANAGEMENT PERSONNEL OR ITS FAILURE TO ATTRACT AND RETAIN ADDITIONAL PERSONNEL COULD ADVERSELY AFFECT OUR BUSINESS. Currently we employ twelve (12) employees. If we fail to retain the necessary personnel, our business and ability to obtain new customers, develop new products and provide acceptable levels of customer service could suffer. The success of our business is heavily dependent on the leadership of our key management personnel, including Siegel and Frank. Ikon's future success also depends on our ability to attract and retain highly qualified personnel. The competition for qualified personnel in the computer software and Internet markets is intense and we may be unable to attract or retain highly qualified personnel in the future. In addition, due to intense competition for qualified employees, it may be necessary for Ikon to increase the level of compensation paid to existing and new employees to the degree that Ikon's operating expenses could be materially increased. SUTTON MAY BE UNABLE TO ADEQUATELY PROTECT ITS PROPRIETARY RIGHTS; FAILURE TO PROTECT THESE RIGHTS MAY SIGNIFICANTLY IMPAIR OUR COMPETITIVE POSITION. Sutton's success depends to a significant extent on its ability to protect its proprietary software and other proprietary rights from copying, infringement or use by unauthorized parties. To protect its proprietary rights, Sutton will rely primarily on a combination of patent, copyright, trade secret and trademark laws, confidentiality agreements with employees and third parties, and protective contractual provisions such as those contained in agreements with consultants, vendors and customers, although Sutton has not signed these types of agreements in every case. Despite these efforts to protect our proprietary rights, unauthorized parties may copy aspects of Sutton's products and obtain and use information that Sutton regards as proprietary. Other parties may breach confidentiality agreements and other protective contracts Sutton has entered into. We may not become aware of, or have adequate remedies in the event of, these types of breaches or unauthorized activities. 13 SUTTON'S SOFTWARE PRODUCTS CONTAIN ENCRYPTION TECHNOLOGY, WHOSE EXPORT IS RESTRICTED BY LAW, WHICH MAY SLOW ITS GROWTH OR RESULT IN SIGNIFICANT COSTS. The U.S. government generally limits the export of encryption technology, which Sutton's products incorporate. A variety of cryptographic products generally require export approvals from certain U.S. government agencies. If any export approval that we receive is revoked or modified, if any of our software is unlawfully exported or if the U.S. government adopts new legislation or regulations restricting export of software and encryption technology, Sutton may not be able to distribute its products to potential customers, which will cause a decline in sales. Sutton may need to incur significant costs and divert resources to develop replacement technologies or may need to adopt inferior substitute technologies to satisfy these export restrictions. These replacement or substitute technologies may not be the preferred security technologies of our customers, in which case Sutton's business may not grow. In addition, Sutton may suffer similar consequences if the laws of any other country limit the ability of third parties to sell encryption technologies to Sutton. SUTTON'S REVENUES COULD DECREASE IF THERE IS A DECLINE IN SECURITIES TRADING ACTIVITY. Because most of Sutton's current customers are financial institutions or securities brokerage firms and because Sutton relies heavily on transaction-based billing in its license agreements, revenues will be sensitive to changes in the amount of securities trading activity both via the Internet and otherwise. A decline in Securities trading activity may result from: - loss of confidence in the reliability or security of on-line trading systems; - changes in government regulation of the securities industry or on-line trading activities; or - a downturn in the stock market. THE MARKET FOR SUTTON'S PRODUCTS AND SERVICES MAY NOT GROW AS QUICKLY AS ANTICIPATED, WHICH WOULD CAUSE REVENUES TO FALL BELOW EXPECTATIONS. The market for Sutton's products and services is relatively new and evolving. In the past Sutton earned a substantial portion of its revenue from service fees associated with its Service Bureau and Retail Division. We expect to earn substantially all of our revenue in the foreseeable future from fees relating to these products and services. Future financial performance will depend on continued growth in the number of organizations demanding software and services for online transaction services. Many of our potential customers have made significant investments in internally developed systems and would incur significant costs in switching to third-party products, which may substantially inhibit the growth of the market for enterprise infrastructure software. If this market fails to grow, or grows more slowly than expected, Sutton's sales will be adversely affected. 14 Sutton relies exclusively on Penson to process and clear orders placed through Sutton's Online Trading Solutions division and any failure by Penson could damage Sutton's reputation and adversely affect its business. As a member of the SIPC, through Global Capital Securities, Inc., all of Sutton's accounts are provided with $500,000 in liability insurance coverage per account (with a $100,000 cash limit). In addition, for added protection, Penson provides additional insurance on each account in the amount of $24,500,000 per account (with a $900,000 cash limit) in additional supplemental securities protection. This insurance is obtained through the National Union Fire Insurance Company of Pittsburgh, PA (a member company of American International Group). These policies insure each account against liability in the event of the brokerage or clearing firm failure. However, there is no guaranty that the existing insurance coverage is sufficient to insure Sutton against all liability for potential claims or damages it may incur as a result of its customer's trades that are not cleared in an accurate and timely manner. PURCHASER'S OF IKON'S SECURITIES MAY BE ADVERSELY EFFECTED BY THE PENNY STOCK REGULATIONS. Ikon's common stock is currently traded on the OTC Electronic Bulletin Board. Unless and until Ikon's common stock is quoted on the Nasdaq System or on a national securities exchange and if and so long as the common stock trades below $5.00 par share, the common stock would come within the definition of a "penny stock" as defined in the Securities Exchange Act of 1934, as amended (the "Exchange Act") and be covered by Rule 15g-9 of the Exchange Act. That rule imposes additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse). For transactions covered by Rule 15g-9, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser's written agreement to the transaction prior to sale. In addition, prior to effecting any penny stock transaction, the broker-dealer must provide a customer with a document that discloses the risks of investing in the penny stock market, including a description of the broker-dealer's duties to the customer and the rights and remedies available to the customer, explain the nature of "bid" and "ask" prices in the penny stock market, supply a toll-free telephone number to provide information on disciplinary histories and describe all significant terms used in such disclosure document. Consequently, Rule 15g-9, if it becomes applicable, would affect the willingness of broker-dealers to sell the Ikon's securities and therefore would affect the ability of purchaser of the Ikon's securities to sell their securities in the secondary market. THE AVAILABILITY OF SHARES ELIGIBLE FOR FUTURE SALE MAY HAVE AN ADVERSE EFFECT ON THE MARKET PRICE OF IKON'S SECURITIES. Sales of substantial amounts of Ikon's common stock in the public market or the prospect of such sales could materially and adversely effect the market price of Ikon's common stock. Prior to the completion of the share exchange between Ikon and the stockholders of Sutton and the related 15 transactions, there were 310,913 shares of Ikon common stock outstanding. Of such amount, approximately 130,913 shares were immediately eligible for sale in the public market without restriction or were restricted securities eligible for sale in the public market pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended. Upon completion of the share exchange and related transactions, an additional 4,000,000 shares of Ikon common stock are eligible for sale in the public market without restriction. In general, under Rule 144 as currently in effect, a person (or persons whose shares are aggregated) who has beneficially owned Restricted Shares for at least one year including affiliates of the Company, wold be entitled to sell in brokers' transactions or to market makers within any three-month period a number of Restricted Shares that does not exceed the greater of 1% of the then outstanding Company's Common Stock or the average weekly trading volume in the principal market on which such securities trade during the four calendar weeks preceding the date on which notice of the sale is filed with the Commission. Sales under Rule 144 are also subject to certain manner of sale provisions, notice requirements and the availability of current public information about the Company. A person who is not an affiliate of the Company at any time during the 90 days preceding a sale, and who has beneficially owned Restricted Shares for at least two years is currently entitled to sell such Restricted Shares without any of the restrictions above-mentioned. However, Restricted Shares held by affiliates must continue, after the two-year holding period to be sold in a brokers' transaction or to market makers subject to the volume, manner of sale, notice and availability of public information limitations described above. The above is a summary of Rule 144 and is not intended to be a complete description. THE LIMITED PUBLIC MARKET FOR IKON'S SECURITIES MAY RESULT IN ILLIQUIDITY FOR PURCHASER'S OF IKON'S SECURITIES AND VOLATILITY IN THE PRICE OF SUCH SECURITIES. Ikon's outstanding shares of common stock are currently traded to a very limited extent on the OTC Bulletin Board. Factors such as announcements by Ikon or its competitors concerning technological innovations, new products or procedures, proposed government regulations and developments, interruptions in Internet service or disputes relating to patents or proprietary rights may have a significant effect on the market price of Ikon's securities. Changes in the market price of Ikon's common stock may bear no relation to Ikon's actual operational or financial results. There is no assurance than an active trading market for Ikon's common stock will be established or maintained. As a result, purchaser's of Ikon's securities could find it difficult to sell their securities. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) Financial Statements of Sutton Online, Inc. (b) Pro Forma Financial Information. (c) Exhibits. Listed below are all exhibits to this Current Report on Form 8-K. 16 Exhibit Number Description - ------ ----------- 10.1 Agreement and Plan of Share Exchange, dated as of June 19, 2001, by and among Ikon Ventures, Inc., Sutton Online, Inc. and certain stockholders of Sutton Online, Inc. (omitting all schedules and exhibits.* 10.2 Amendment to Agreement and Plan of Share Exchange, dated as of July 18, 2001, by and among Ikon Ventures, Inc., Sutton Online, Inc. and certain stockholders of Sutton Online, Inc. 10.3 Employment Agreement, dated November 22, 1999, by and among Eastbrokers International Incorporated, Sutton Online, LLC and Gregory C. Frank. 10.4 Amendment to Employment Agreement, dated as of August 1, 2001, by and among Global Capital Partners Inc. (f/k/a Eastbrokers International Incorporated), Sutton Online, Inc. and Gregory C. Frank. 10.5 Amendment to Employment Agreement, dated as of August 8, 2001, by and between Sutton Online, Inc. and Gregory C. Frank. 10.6 Employment Agreement, dated November 22,1999, by and among Eastbrokers International Incorporated, JB Sutton Group, LLC and Jonathan D. Siegel. 10.7 Amendment to Employment Agreement, dated as of August 1, 2001, by and among Global Capital Partners, Inc., Global Capital Securities Corp., (successor to JB Sutton Group, LLC), Sutton Online, Inc. and Jonathan D. Siegel. 10.8 Amendment to Employment Agreement, dated as of August 8, 2001, by and among Sutton Online, Inc. and Jonathan D. Siegel. 10.9 Consulting Agreement, dated as of August 1, 2001, between Ikon Ventures, Inc. and Sigma Limited, S.A. 10.10 Consulting Agreement, dated as of August1, 2001, between Ikon Ventures, Inc. and Corporate Communications Network Inc. 10.11 Exchange Agreement, dated as of July 31, 2001, by and among Sutton Online, Inc. and GlobalNet Financial.com, Inc. (including form of Certificate of Designation of Series A Preferred Exchangeable Stock of Sutton Online, Inc.). 17 10.12 Consulting Agreement, dated as of August 8, 2001, by and between Ikon Ventures, Inc. and Investor Relations Services, Inc. 10.13 Payment Agreement, dated as of August 8, 2001, by and between Ikon ventures, Inc. and Summit Trading Limited. 10.14 Lease, dated May 14,2001, by and between The Tilles Investment Company and Sutton Online, Inc. 10.15 Agreement, dated as of March 23, 2001, by and among Global Capital Services Corporation and Sutton Online, Inc. 10.16 Extension Agreement, dated as of august 1, 2001, by and among Global Capital Securities Corporation and Sutton Online, Inc. - --------------- * The Registrant shall furnish all omitted and schedules and exhibits to the Agreement and Plan of share Exchange, dated as of June 19, 2001, by and among Ikon Ventures, Inc., Sutton Online, Inc. and the stockholders thereof, upon request of the Securities and Exchange Commission. ITEM 8. CHANGE IN FISCAL YEAR. Prior to the acquisition of all of the outstanding common stock of Sutton Online, Inc. ("Sutton"), Ikon's fiscal year ended on December 31. The fiscal year of Sutton ends on March 31. The acquisition of Sutton is considered a reverse acquisition and accounted for under the purchase method of accounting. Under reverse acquisition accounting, Sutton is considered the acquiror for accounting and financial reporting purposes. Accordingly, future financials statements of Ikon will reflect a March 31 fiscal year end. 18 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized. IKON VENTURES, INC. By: /s/ JONATHAN D. SIEGEL ------------------------------ Name: Jonathan D. Siegel Title: Chief Executive Officer Dated: August 22, 2001 19 SUTTON ONLINE, INC. AND SUBSIDIARY ---------------------------------- (formerly Sutton Online, LLC) ----------------------------- FINANCIAL STATEMENTS -------------------- YEAR ENDED MARCH 31, 2001 AND ----------------------------- THE PERIOD FROM INCEPTION ------------------------- (APRIL 22, 1999) TO MARCH 31, 2000 ---------------------------------- SUTTON ONLINE, INC. AND SUBSIDIARY (formerly Sutton Online, LLC) TABLE OF CONTENTS ================= Page ---- Independent Auditors' Report 2 Consolidated Balance Sheets 3 Consolidated Statements of Operations 4 Consolidated Statements of Comprehensive Income 5 Consolidated Statements of Changes in Shareholders' (Members') Equity 6 Consolidated Statements of Cash Flows 7-8 Notes to Consolidated Financial Statements 9-15 INDEPENDENT AUDITORS' REPORT To the Board of Directors Sutton Online, Inc. and Subsidiary We have audited the accompanying consolidated balance sheets of Sutton Online, Inc. (formerly Sutton Online, LLC) and Subsidiary as of March 31, 2001 and 2000, and the related consolidated statements of operations, comprehensive income, changes in shareholders' (members') equity, and cash flows for the year ended March 31, 2001 and the period from inception (April 22, 1999) to March 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Sutton Online, Inc. (formerly Sutton Online, LLC) and Subsidiary as of March 31, 2001 and 2000, and the results of their operations and their cash flows for the year ended March 31, 2001 and the period from inception (April 22, 1999) to March 31, 2000, in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered losses from operations and has a working capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. SPICER, JEFFRIES & CO. Denver, Colorado May 31, 2001 2 SUTTON ONLINE, INC. AND SUBSIDIARY (formerly Sutton Online, LLC) CONSOLIDATED BALANCE SHEETS ===========================
March 31, -------------------------- ASSETS 2001 2000 ------ ----------- ----------- CURRENT ASSETS: Cash $ 207,879 $ 123,905 Receivables: Trade, net 3,644 14,146 Employee advances 27,450 -- Affiliated company (Note 3) 101,759 207,385 Other 90,754 20,954 Prepaid expenses 160,208 -- ----------- ----------- Total current assets 591,694 366,390 ----------- ----------- PROPERTY AND EQUIPMENT, at cost (Note 1): Computers 141,118 158,430 Equipment 667,830 -- Software 1,321,219 -- Furniture and fixtures 77,287 22,730 Vehicles 70,064 -- Leasehold Improvements 40,850 22,387 ----------- ----------- 2,318,368 203,547 Less: accumulated depreciation and amortization (124,138) (22,508) ----------- ----------- 2,194,230 181,039 ----------- ----------- OTHER ASSETS: Investments (Note 1) 367,196 -- Goodwill, net of amortization of $1,070 14,973 -- Other, net 6,181 -- ----------- ----------- 388,350 -- ----------- ----------- $ 3,174,274 $ 547,429 =========== =========== LIABILITIES AND SHAREHOLDERS' (MEMBERS') EQUITY ----------------------------------------------- CURRENT LIABILITIES: Accounts payable and accrued expenses $ 1,517,262 $ 252,056 Capital lease obligation (Note 8) 66,490 9,470 Notes payable (Note 4) 1,000,000 -- Interest payable 36,639 -- Other 10,607 -- ----------- ----------- Total current liabilities 2,630,998 261,526 ----------- ----------- OTHER LIABILITIES: Capital lease obligation (Note 8) 78,953 12,361 ----------- ----------- COMMITMENTS AND CONTINGENCIES (Note 8) SHAREHOLDERS' (MEMBERS') EQUITY (Note 5): Common stock, $.025 par value, 20,000,000 shares authorized, 6,000,000 and 0 shares issued and outstanding, respectively 150,000 -- Additional paid-in capital 2,278,488 -- Accumulated other comprehensive income (142,489) -- Deficit (1,821,676) -- Members' equity -- 273,542 ----------- ----------- 464,323 273,542 ----------- ----------- $ 3,174,274 $ 547,429 =========== ===========
3 SUTTON ONLINE, INC. AND SUBSIDIARY (formerly Sutton Online, LLC) CONSOLIDATED STATEMENTS OF OPERATIONS ===================================== Period from inception Year ended (April 22, 1999) March 31, to March 31, 2001 2000 ----------- ----------- REVENUE: Transaction fees $ 2,214,050 $ 1,007,607 Data fees 353,169 54,740 Other 30,888 52,512 ----------- ----------- Total Revenue 2,598,107 1,114,859 ----------- ----------- EXPENSES: Clearing costs 363,174 138,142 Trading costs 337,564 73,444 User fees 239,761 81,128 Service fees (Note 5) 526,105 -- Selling expenses 155,680 124,594 Salaries and related expenses 824,597 283,237 Licensing fees 328,253 -- Travel 120,053 24,007 Communications 236,268 73,888 Legal and professional 250,857 22,812 Occupancy costs 327,238 183,578 Advertising 243,811 152,272 General and administrative 179,310 101,795 Consulting 29,715 94,954 Depreciation and amortization 106,391 22,508 ----------- ----------- Total operating expenses 4,268,777 1,376,359 ----------- ----------- OTHER INCOME/(EXPENSE) Interest expense (92,079) (14,958) Interest income 1,357 -- Loss on sale of securities (28,774) -- ----------- ----------- Total other expense (119,496) (14,958) ----------- ----------- NET LOSS BEFORE MINORITY INTEREST (1,790,166) (276,458) MINORITY INTEREST IN LOSS OF SUBSIDIARY 936 -- ----------- ----------- NET LOSS $(1,789,230) $ (276,458) =========== =========== BASIC AND DILUTED LOSS PER COMMON SHARE: Net loss $ (.38) $ N/A =========== =========== WEIGHTED AVERAGE SHARES OUTSTANDING 4,737,534 N/A =========== =========== 4 SUTTON ONLINE, INC. AND SUBSIDIARY (formerly Sutton Online, LLC) CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME =============================================== Period from inception Year ended (April 22, 1999) March 31, to March 31, 2001 2000 ----------- ----------- NET LOSS $(1,789,230) $ (276,458) OTHER COMPREHENSIVE INCOME: Unrealized holding losses (160,449) -- Exchange gains 17,960 -- ----------- ----------- COMPREHENSIVE LOSS $(1,931,719) $ (276,458) =========== =========== 5
SUTTON ONLINE, INC. AND SUBSIDIARY (formerly Sutton Online, LLC) CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' (MEMBERS') EQUITY ===================================================================== Accumulated Common Stock Additional Other Members' ------------------------- Paid-in Comprehensive Equity Shares Par Value Capital Income Deficit ----------- ----------- ----------- ----------- ----------- ----------- INCEPTION, April 22, 1999 $ -- -- $ -- $ -- $ -- $ -- Contributions 550,000 -- -- -- -- -- Net loss (276,458) -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- ----------- BALANCES, March 31, 2000 273,542 -- -- -- -- -- April 28, 2000, converted to Corporation from an LLC (273,542) 4,000,000 100,000 173,542 -- -- Sold shares to related party -- 400,000 10,000 990,000 -- -- Shares issued in exchange for 450,000 shares of related party common stock -- 800,000 20,000 542,500 -- -- Shares issued for compensation and to acquire a minority interest (Note 5) -- 400,000 10,000 270,000 -- -- Shares issued for services -- 400,000 10,000 270,000 -- -- Net income (loss) (Note 5) -- -- -- 32,446 -- (1,821,676) Other comprehensive loss -- -- -- -- (142,489) -- ----------- ----------- ----------- ----------- ----------- ----------- BALANCES, March 31, 2001 $ -- 6,000,000 $ 150,000 $ 2,278,488 $ 142,489) $(1,821,676) =========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these statements. 6 SUTTON ONLINE, INC. AND SUBSIDIARY (formerly Sutton Online, LLC) CONSOLIDATED STATEMENTS OF CASH FLOWS ===================================== INCREASE (DECREASE) IN CASH
Period from inception Year ended (April 22, 1999) March 31, to March 31, 2001 2000 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(1,789,230) $ (276,458) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization 106,391 22,508 Loss on sale of securities 28,774 -- Gain on sale of fixed assets (797) -- Issuance of stock for services 526,105 -- Issuance of stock for interest 76,365 -- Decrease (increase) in trade receivables 10,502 (14,146) Increase in other receivables (69,800) (20,954) Increase in employee advances (27,450) -- Increase in prepaid expenses (160,208) -- Increase in other assets (9,030) -- Increase in accounts payable and accrued expenses 1,265,206 252,056 Increase in minority interest in subsidiary (936) -- Increase in interest payable 36,639 -- Increase in other payables 10,607 -- ----------- ----------- Net cash provided by (used in) operating activities 3,138 (36,994) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Decrease (increase) in affiliated company receivables 105,626 (207,385) Acquisition of subsidiary, net of cash acquired (15,618) -- Purchases of property and equipment (1,992,627) (174,539) ----------- ----------- Net cash used in investing activities (1,902,619) (381,924) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Payments on capital lease obligations (34,505) (7,177) Proceeds from notes payable 1,000,000 -- Member contributions -- 550,000 Issuance of common stock 1,000,000 -- ----------- ----------- Net cash provided by financing activities 1,965,495 542,823 ----------- ----------- EFFECT OF EXCHANGE RATE CHANGES ON CASH 17,960 -- ----------- ----------- NET INCREASE IN CASH 83,974 123,905 CASH, beginning of period 123,905 -- ----------- ----------- CASH, end of period $ 207,879 $ 123,905 =========== ===========
The accompanying notes are an integral part of these statements. 7 SUTTON ONLINE, INC. AND SUBSIDIARY (formerly Sutton Online, LLC) CONSOLIDATED STATEMENTS OF CASH FLOWS ===================================== INCREASE (DECREASE) IN CASH (Continued)
Period from inception Year ended (April 22, 1999) March 31, to March 31, 2001 2000 ----------- ----------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest $ 15,714 $ 14,958 =========== =========== SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Issuance of common stock for LLC interest $ 273,542 $ -- =========== =========== Issuance of common stock for common stock of related party (Note 5) $ 562,500 $ -- =========== =========== Equipment acquired under capital lease $ 249,723 $ 33,885 =========== ===========
The Company purchased 51% of the capital stock of Sutton Data Services s.r.o. for cash. In connection with the acquisition, liabilities were assumed as follows: Fair value $ -- Cash paid, net of cash acquired (15,618) Goodwill 16,043 ---------- Liabilities assumed $ 425 ========== The accompanying notes are an integral part of these statements. 8 SUTTON ONLINE, INC. AND SUBSIDIARY (formerly Sutton Online, LLC) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ========================================== NOTE 1 - ORGANIZATION, OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES Organization and Business - ------------------------- The consolidated financial statements include Sutton Online, Inc. (formerly Sutton Online, LLC) and its wholly owned foreign subsidiary, Sutton Online Europe BV ("Europe"). All significant intercompany balances and transactions have been eliminated in consolidation. The Company is a majority owned subsidiary of Global Capital Partners, Inc. ("GCAP"). The fiscal year end of the Company's European subsidiary is December 31. This subsidiary is included on the basis of closing dates that precede the Company's closing date by three months. The Company offers trade routing and level II software and data for online investors including individuals, hedge funds and money managers, and provides brokerage firms with the necessary tools to offer financial products via the internet. Through its European subsidiary, the Company is developing software to provide a trading platform to customers for the purpose of routing trades in US stocks as well as stocks traded on several European exchanges. The Company's business requires them to have a relationship with a securities broker-dealer as well as a clearing organization to clear trades. Management believes that it could replace its current relationships with another broker-dealer and/or clearing organization at similar costs of trading. The Company has suffered losses from operations and has a working capital deficiency that raises substantial doubt about its ability to continue as a going concern. However, the Company is pursuing a strategic alternative of merging with another entity, as well as debt to equity conversions, to be followed by a capital raising endeavor, which management believes is likely to result in eliminating the working capital deficiency. Use of Estimates - ---------------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Cash Equivalents - ---------------- All highly liquid investments purchased with an original maturity of three months or less are considered to be cash equivalents. Fair Value of Financial Instruments - ----------------------------------- Financial instruments, including cash, receivables, investments and other assets, are carried at amounts which approximate fair value. Accounts payable, loans and notes payable and other liabilities are carried at amounts which approximate fair value. 9 SUTTON ONLINE, INC. AND SUBSIDIARY (formerly Sutton Online, LLC) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ========================================== NOTE 1- ORGANIZATION, OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (continued) Software Development Costs - -------------------------- The Company capitalizes software development costs incurred to develop certain of the Company's software for advanced online trading systems that will allow users to buy and sell securities on various worldwide exchanges in accordance with Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." As of this date, the software has not been completed and, accordingly, is not available for use. The software will be amortized over the economic life of the software. For the year ended March 31, 2001, the Company has capitalized $1,097,665 of internal software development costs. Property and Equipment - ---------------------- The Company provides for depreciation of leasehold improvements, furniture, vehicles, computers and equipment using the straight-line method based on estimated useful lives of, generally, three to seven years. Investments - ----------- The Company has invested in restricted securities of its parent, GCAP. These securities are classified as available-for-sale. Available-for-sale securities are carried at fair market value, with unrealized gains and losses reported as a separate component of shareholders' equity. These available-for-sale securities subject the Company's financial position to market risk. The Company may experience losses if the market values of these securities decline subsequent to March 31, 2001. At March 31, 2001, the Company's available-for-sale equity securities had a fair market value of $333,301 and a cost basis of $493,750, resulting in a net unrealized loss of $160,449. Through its subsidiary, the Company holds a minority investment in an entity that is not publicly traded. This investment is recorded at cost of $33,895 and is included in investments in the accompanying consolidated balance sheet. The Company monitors this investment for impairment. Foreign Currency - ---------------- The Company's foreign subsidiary uses the local currency as their functional currency. Accordingly, assets and liabilities of the foreign subsidiary are translated into United States dollars at end-of-period exchange rates. Revenue and expenses are translated at average exchange rates in effect during the period. Gains or losses from foreign currency translation are included in other comprehensive income. Goodwill - -------- Goodwill is amortized on a straight-line basis over a period of fifteen years. 10 SUTTON ONLINE, INC. AND SUBSIDIARY (formerly Sutton Online, LLC) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ========================================== NOTE 1 - ORGANIZATION, OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (continued) Long-Lived Assets - ----------------- The Company reviews its long-lived assets for impairment whenever changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of evaluating the recoverability of long-lived assets, the recoverability test is performed using undiscounted net cash flows estimated to be generated by the asset. Revenue Recognition - ------------------- The Company recognizes revenue from trade routing on a transaction by transaction basis. Revenue from Level II software and data is recognized on a monthly usage basis. Income Taxes - ------------ The Company utilizes the asset and liability method of accounting for income taxes, as prescribed by Statement of Financial Accounting Standards No. 109 (SFAS 109). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which these temporary differences are expected to be recovered or settled. Changes in tax rates are recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. Net Loss Per Share of Common Stock - ---------------------------------- Net loss per share of common stock is based on the weighted average number of shares of common stock outstanding. Common stock equivalents are not included in the weighted average calculation since their effect would be anti-dilutive. Recent Accounting Pronouncements - -------------------------------- In June, 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivative financial instruments and hedging activities related to those instruments, as well as other hedging activities. This statement has had no impact on the Company. Stock Split - ----------- On March 22, 2001, the Company announced a 1 to 2.5 reverse stock split whereby each 2.5 shares will be exchanged for one newly issued share. All references to shares and share prices, including retroactive treatment, reflect the split on the basis of the effective ratio. 11 SUTTON ONLINE, INC. AND SUBSIDIARY (formerly Sutton Online, LLC) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ========================================== NOTE 2- BUSINESS COMBINATIONS In June, 2000, the Company organized a newly formed subsidiary in the Netherlands, Sutton Online Europe BV for cash of approximately $17,000. Through this subsidiary, the Company acquired a 51% interest in the outstanding common stock of Sutton Data Services s.r.o. ("SDS") during the same period. SDS was a recently formed entity and had no operations. The acquisition was accounted for as a purchase and the results of operations of Europe on a consolidated basis have been included from the acquisition date. The excess of the purchase price over the fair value of tangible net assets acquired amounted to approximately $16,000. Since both Europe and SDS had no operations prior to formation and acquisition, the pro forma results of operations for the years ended March 31, 2001 and 2000 (assuming formation and acquisition as of April 22, 1999) would not be different than those in the accompanying results of operations. NOTE 3- RECEIVABLES FROM AFFILIATED COMPANIES A subsidiary of the Company's parent owed the Company transaction fees of $101,759 and $207,385 at March 31, 2001 and 2000, respectively. The receivables are paid currently. NOTE 4- NOTES PAYABLE Notes payable at March 31, 2001 consist of the following: Promissory notes, interest rate of 10% per annum plus 10,000 shares of GCAP per month, due April 30, 2001, subsequently renewed to July 16, 2001 $ 175,000 Convertible promissory notes, interest rate of 10% per annum plus 55,000 shares of GCAP, due July 31, 2001, convertible into 200,000 shares and warrants to purchase 100,000 shares of common stock at $2.50 per share 300,000 Convertible promissory note, interest rate of 10% per annum, due July 31, 2001, convertible into 350,000 shares and warrants to purchase 175,000 shares of common stock at $2.50 per share (if holder does not convert this note, holder will receive warrants to purchase 50,000 shares at $2.50 per share) 525,000 ----------- $ 1,000,000 =========== 12 SUTTON ONLINE, INC. AND SUBSIDIARY (formerly Sutton Online, LLC) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ========================================== NOTE 5- SHAREHOLDERS' EQUITY Common Stock - ------------ As of May 1, 2000, Sutton Online, LLC (formed in April, 1999), was merged into a newly formed company, Sutton Online, Inc. by issuing 4,000,000 shares of common stock and 1,440,000 warrants to purchase stock at $2.50 per share to the LLC's members. In addition, 3,080,000 warrants to purchase stock at $2.50 per share were issued to certain shareholders of which 1,900,000 were subsequently surrendered back to the Company. On June 12, 2000, the Company issued 400,000 shares and 800,000 warrants to purchase common stock to its parent, GCAP, and another unrelated third party for cash of $1,000,000. The warrants allowed GCAP to purchase 800,000 shares of the Company's common stock at $5.00 per share or 450,000 shares of GCAP common stock. On February 12, 2001, GCAP exercised its warrants and the Company issued 800,000 shares of its common stock to GCAP in exchange for 450,000 shares of GCAP common stock valued at $562,500. In March, 2001, the Company issued 400,000 shares of its common stock and 200,000 warrants to purchase common stock at $2.50 per share to the 49% shareholders of SDS for a minority interest in a European company valued at $33,895 as well as an agreement to reduce the contract price of the software being developed for the Company by SDS. The value of the contract reduction to the minority shareholders of SDS was determined to be $246,105. In addition, the Company issued 400,000 shares of its common stock and 180,000 warrants to purchase common stock at $2.50 per share to its president and other related individuals for services valued at $280,000. Stock Warrants - -------------- At March 31, 2001, warrants to purchase common stock at various prices were outstanding, which expire as follows: Number Outstanding And Exercisable at Expiration Date March 31, 2001 Exercise Price --------------- -------------------- -------------- May 3, 2004 3,000,000 $ 2.50 13 SUTTON ONLINE, INC. AND SUBSIDIARY (formerly Sutton Online, LLC) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ========================================== NOTE 6- INCOME TAXES At March 31, 2001, the Company has a U.S. federal net operating loss carry-forward of approximately $1,500,000 that may be used against future U.S. taxable income until it expires in 2021. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of the Company's deferred tax asset and liability as of March 31 are as follows (the Company was an limited liability company in 2000):
2001 2000 ----------- ----------- Deferred tax liabilities $ -- $ -- =========== =========== Deferred tax assets: Net operating loss carry-forwards $ 510,000 $ -- Valuation allowance for deferred tax assets (510,000 -- ----------- ----------- $ -- $ -- =========== ===========
The valuation allowance for deferred tax assets was increased by $510,000 during 2001. NOTE 7- BUSINESS SEGMENTS The Company operates in only one business segment, online trading. Accordingly, the following table presents information by geographic area as of and for the periods ended March 31, 2001 and 2000: Revenues Long-Lived Assets ----------------------- ----------------------- 2001 2000 2001 2000 ---------- ---------- ---------- ---------- United States $2,539,269 $1,114,859 $1,259,548 $ 181,039 Czech Republic 30,064 -- 935,833 -- ---------- ---------- ---------- ---------- $2,569,333 $1,114,859 $2,195,381 $ 181,039 ========== ========== ========== ========== NOTE 8- COMMITMENTS AND CONTINGENCIES The Company leases office space and equipment from unrelated entities under operating and capital leases. Future minimum lease payments under the non-cancelable leases as of March 31, 2001 are as follows: 14 SUTTON ONLINE, INC. AND SUBSIDIARY (formerly Sutton Online, LLC) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ========================================== NOTE 8- COMMITMENTS AND CONTINGENCIES (continued) Principal due on Capital Operating Capital Lease ---------- ---------- ---------- 2002 $ 29,191 $ 81,637 $ 66,490 2003 28,591 60,477 51,892 2004 9,165 29,920 27,061 ---------- ---------- ---------- $ 66,947 172,034 $ 145,443 ========== ========== Less amount Representing interest (26,591) ---------- Present value of net minimum lease payments $ 145,443 ========== The amount of assets under the capital leases above were $214,095 and $29,008 as of March 31, 2001 and 2000, respectively. Total rental expense for the year ended March 31, 2001 and the period from inception (April 22, 1999) to March 31, 2000 were $136,977 and $61,857, respectively. NOTE 9 - SUBSEQUENT EVENT The Company, on May 14, 2001, signed two promissory notes due on or before August 14, 2001. Each note is for $150,000 bearing interest of 75,000 shares of common stock. The promissory notes are each secured by 500,000 shares of restricted common stock of the Company owned by GCAP. 15 Ikon Ventures, Inc. Introduction to Pro Forma Condensed Combined Consolidated Financial Statements The following unaudited pro forma combined balance sheets and statements of operations reflect the acquisition of Sutton Online, Inc. ("SOL") by Ikon Ventures, Inc. ("Ikon"), through the exchange of stock, as if it had occurred on January 1, 2000. The fiscal year-end of SOL is March 31. Therefore, SOL is included in the accompanying financial statements on a basis that differs three months from Ikon's closing date of December 31. The acquisition was accomplished through the exchange of all of the outstanding common shares of SOL for 15,222,219 shares of Ikon common stock, representing a controlling interest in Ikon. Prior to the acquisition, $600,000 of notes payable were converted into 850,000 shares of SOL common stock, $525,000 of notes payable were converted into 888,888 shares of SOL preferred stock, and $175,000 of notes payable were exchanged for 310,000 shares of Global Capital Partners, Inc. held as an investment of SOL. The acquisition of SOL is considered a reverse acquisition and accounted for under the purchase method of accounting. Under reverse acquisition accounting, SOL is considered the acquiror for accounting and financial reporting purposes, and acquired the assets and assumed the liabilities of Ikon. Under the purchase method of accounting, assets acquired and liabilities assumed are recorded at their fair values. No adjustments have been made in the pro forma balance sheet to the carrying values of the Ikon assets acquired or liabilities assumed since management believes that their carrying values approximate fair value. 16 Ikon Ventures, Inc. Notes to Pro Forma Condensed Combined Consolidated Balance Sheet Proforma adjustments include the following: (a) Adjustment to record the conversion of $600,000 notes payable into shares of SOL common stock, $525,000 of notes payable into shares of SOL preferred stock, and $175,000 of notes payable exchanged for 310,000 shares of Global Capital Partners, Inc. ("GCap") common stock held in the investment account of SOL. This adjustment also includes the recognition of realized losses on the GCap stock at the time of the exchange. (b) Adjustment to record the exchange of common stock of Ikon for all the outstanding common stock of SOL, the removal of Ikon's deficit, correction of common stock to reflect outstanding shares of Ikon common stock at Ikon's par value of $.001 and the cumulative effect of the stock exchange on paid in capital. 17 Ikon Ventures, Inc. Notes to Pro Forma Condensed Combined Consolidated Statements of Operations (a) Adjustment to recognized realized losses on the Gcap stock at the time of the exchange of the Gcap shares for the $175,000 note payable. (b) The weighted average shares outstanding after the acquisition represents the issuance of 15,222,219 shares of common stock of Ikon to the shareholders of SOL. The weighted average shares outstanding were computed as if the shares issued in connection with the acquisition had been outstanding for the entire period. 18
Ikon Ventures, Inc. Proforma Condensed Combined Consolidated Balance Sheet March 31, 2001 (in $000's) Ikon Sutton Pro Forma Pro Forma Ventures, Inc. Online, Inc. Adjustments As Adjusted --------------- --------------- --------------- --------------- (Unaudited) (Unaudited) (Unaudited) Cash $ -- $ 100 $ -- 100 Other current assets 3 777 -- 780 --------------- --------------- --------------- --------------- Total current assets 3 877 -- 880 --------------- --------------- --------------- --------------- Property and equipment, net 2 3,021 -- 3,023 Investments -- 220 (186) (a) 34 Other assets, net -- 21 -- 21 --------------- --------------- --------------- --------------- TOTAL ASSETS $ 5 $ 4,139 $ (186) $ 3,958 =============== =============== =============== =============== Accounts payable and accrued expenses $ 195 $ 2,384 $ -- $ 2,579 Current portion of notes payable -- 1,300 (1,300) (a) -- Other current liabilities -- 74 (39) (a) 35 --------------- --------------- --------------- --------------- Total current liabilities 195 3,758 (1,339) 2,614 --------------- --------------- --------------- --------------- Other liabilities -- 113 -- 113 --------------- --------------- --------------- --------------- Preferred stock, $.025 par value -- -- 22 (a) 22 Common stock, $.001 par value -- 150 21 (a) 16 (155) (b) Additional paid-in capital 11,830 2,246 1,114 (a) 3,325 (11,865) (b) Accumulated other comprehensive income -- (258) 202 (a) (56) Deficit (12,020) (1,870) (206) (a) (2,076) 12,020 (b) --------------- --------------- --------------- --------------- Total shareholders' equity (190) 268 1,153 1,231 --------------- --------------- --------------- --------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 5 $ 4,139 $ (186) $ 3,958 =============== =============== =============== ===============
The accompanying notes are an integral part of this statement. 19
Ikon Ventures, Inc. Proforma Condensed Combined Consolidated Statement of Operations Three Months Ended March 31, 2001 (in $000's) Ikon Sutton Pro Forma Pro Forma Ventures, Inc. Online, Inc. Adjustments As Adjusted ------------- ------------- ------------- ------------- (Unaudited) (Unaudited) (Unaudited) Revenue: Transaction fees $ -- $ 551 $ -- $ 551 Data fees -- 116 116 Other -- 1 1 ------------- ------------- ------------- ------------- Total revenue -- 668 -- 668 ------------- ------------- ------------- ------------- Expenses: Service fees -- 4 4 Salaries and related expenses -- 321 321 Clearing costs -- 64 64 Trading costs -- 174 174 Licensing fees -- 50 50 Occupancy costs -- 79 79 Depreciation and amortization -- 4 4 Other general and administrative 40 287 327 ------------- ------------- ------------- ------------- Total operating expenses 40 983 -- 1,023 Other income (expense), net -- (50) (206) (a) (256) ------------- ------------- ------------- ------------- Net loss before minority interest (40) (365) (206) (611) Minority interest in loss of subsidiary -- 1 1 ------------- ------------- ------------- ------------- NET LOSS $ (40) $ (364) $ (206) $ (610) ============= ============= ============= ============= Net loss per share of common stock-basic and diluted $ (0.13) $ (0.04) ============= ============= Weighted average number of common shares outstanding 311 15,533 (b) ============= =============
The accompanying notes are an integral part of this statement. 20
Ikon Ventures, Inc. Proforma Condensed Combined Consolidated Statement of Operations Year Ended December 31, 2000 (in $000's) Ikon Sutton Pro Forma Pro Forma Ventures, Inc. Online, Inc. Adjustments As Adjusted --------------- --------------- --------------- --------------- (Unaudited) (Unaudited) (Unaudited) Revenue: Transaction fees $ -- $ 2,214 $ -- $ 2,214 Data fees -- 353 353 Other -- 31 31 --------------- --------------- --------------- --------------- Total revenue -- 2,598 -- 2,598 --------------- --------------- --------------- --------------- Expenses: Service fees -- 526 526 Salaries and related expenses -- 825 825 Clearing costs -- 363 363 Trading costs -- 338 338 Licensing fees -- 328 328 Occupancy costs -- 327 327 Depreciation and amortization -- 106 106 Other general and administrative 305 1,456 1,761 --------------- --------------- --------------- --------------- Total operating expenses 305 4,269 -- 4,574 Other income (expense), net -- (119) (119) --------------- --------------- --------------- --------------- Net loss before minority interest (305) (1,790) -- (2,095) Minority interest in loss of subsidiary -- 1 -- 1 --------------- --------------- --------------- --------------- NET LOSS $ (305) $ (1,789) $ -- $ (2,094) =============== =============== =============== =============== Net loss per share of common stock-basic and diluted: $ (0.02) $ (0.07) =============== =============== Weighted average number of common shares outstanding 15,250 30,472 (b) =============== ===============
The accompanying notes are an integral part of this statement. 21 EX-10.1 3 ex10_1.txt EXHIBIT 10.1 Exhibit 10.1 Execution Copy AGREEMENT AND PLAN OF SHARE EXCHANGE BY AND AMONG IKON VENTURES, INC. SUTTON ONLINE, INC. AND THE STOCKHOLDERS OF SUTTON ONLINE, INC. JUNE 19, 2001 AGREEMENT AND PLAN OF SHARE EXCHANGE AGREEMENT (the "Agreement"), dated as of June 19, 2001, by and among Ikon Ventures, Inc., a Nevada corporation ("Ikon"), Sutton Online, Inc., a Delaware corporation (the "Company"), the stockholders of the Company on the date hereof, each of whom has executed this Agreement on the date hereof or shall execute a counterpart signature page hereto prior to the consummation of the transactions contemplated hereunder (collectively, the "Existing Stockholders"), and each of the entities that becomes a stockholder of the Company after the date hereof upon the conversion of certain convertible promissory notes of the Company, each of which shall execute a counterpart signature page hereto prior to the consummation of the transactions contemplated hereunder (collectively, the "New Stockholders;" the Existing Stockholders and the New Stockholders are hereinafter collectively referred to as the "Stockholders"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Existing Stockholders own of record and beneficially all of the issued and outstanding capital stock of the Company as of the date hereof, consisting of an aggregate of 6,000,000 shares (the "Outstanding Company Shares") of the Company's common stock, par value $.025 per share (the "Company Common Stock"); and WHEREAS, the New Stockholders, and one of the Existing Stockholders, Tiburon Asset Management, LLC ("TAM"), upon the conversion of convertible promissory notes of the Company held by such parties prior to the consummation of the transactions contemplated under this Agreement, will own of record and beneficially an aggregate of 550,000 additional shares of Company Common Stock (the "Conversion Company Shares"; and WHEREAS, TAM and two Existing Stockholders, Tiburon Management Ltd. and Tiburon Investment Management, Ltd., upon conversion of certain promissory notes of the Company dated May 14, 2001 (the "May Notes"), prior to the consummation of the transactions contemplated under this Agreement, will own of record and beneficially an aggregate of 650,000 additional shares of Company Common Stock (the "May Conversion Shares;" the Outstanding Company Shares, the Conversion Company Shares and the May Conversion Shares" are hereinafter collectively referred to as the "Company Shares"); and WHEREAS, the Company is engaged in the business of operating an online trading platform for use in the trading of securities (the "Business"); and WHEREAS, Ikon, a reporting company under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), with shares publicly quoted on the OTC Electronic Bulletin Board, has conducted no business activities since April 1999 (other than those associated with the acquisition described herein and with seeking other potential business opportunities ); and WHEREAS, the parties to this Agreement intend to reorganize both Ikon and the Company as provided under Section 368(a) (1) (B) of the Internal Revenue Code of 1986, as amended (the "Code"), by an exchange of shares of voting common stock pursuant to the following plan (hereinafter, the "Plan"): PLAN OF REORGANIZATION. It is intended that the terms and conditions of this Agreement comply in all respects with Section 368(a) (1) (B) of the Code and the regulations corresponding thereto, so that the reorganization contemplated hereby shall qualify as a tax free reorganization under the Code. Accordingly, it is the intention of the parties hereto that, as a result of this Agreement, the transactions contemplated hereby shall be 2 accomplished solely in exchange for the voting common stock of each of Ikon and the Company and that no gain or loss shall be recognized by the Stockholders or by Ikon who are each transferring or issuing their shares of common stock solely in exchange for receiving the common stock of the other; and further in pursuance of the Plan, it is the intention of the parties hereto that any outstanding warrants to purchase shares of Company Common Stock will be amended to provide for the purchase of shares of Ikon Common Stock upon the exercise thereof or exchanged for warrants to purchase shares of Ikon Common Stock (referred to herein collectively as the "New Warrants"); and WHEREAS, pursuant to the Plan, the Stockholders are desirous of exchanging the Company Shares for shares of Ikon's voting common stock, par value $.001 per share (the "Ikon Common Stock"), on the basis of 2.2222222 shares of Ikon Common Stock for each share of Company Common Stock (the ratio of 2.2222222 shares of Ikon Common Stock for each share of Company Common Stock is hereinafter referred to as the "Exchange Ratio"). If the application of the Exchange Ratio results in a fractional number, no fractional shares of Ikon Common Stock shall be issued but instead the fractional number shall be rounded up to the next whole number. The aggregate shares of Ikon Common Stock to be issued to the Stockholders is hereinafter collectively referred to as the "Ikon Shares". NOW, THEREFORE, in consideration of the premises and of the mutual agreements herein contained, the parties hereby agree as follows: 3 ARTICLE 1. EXCHANGE OF COMPANY SHARES SECTION 1.1 Exchange of Company Shares. At the Closing (as hereinafter defined), the Stockholders shall convey to Ikon good and marketable title to the Company Shares, free and clear of all liens, claims, debts, obligations or other encumbrances except such restrictions as are imposed by Federal or state securities laws; and Ikon shall convey to the Stockholders good and marketable title to their proportionate share of the Ikon Shares based on Schedule 1.3 annexed hereto, free and clear of all liens, claims, debts, obligations or other encumbrances, except such restrictions as are imposed by Federal or state securities laws. The exchange of voting shares as herein provided shall be the sole consideration for the acquisition of the Company Shares. SECTION 1.2 Restriction on Transfer. Neither the Ikon Shares nor the Company Shares to be exchanged as provided under Section 1.1 are being registered under the Securities Act of 1933, as amended (the "Act"), and are to be exchanged hereunder pursuant to an exemption that requires that the further transfer of such shares be restricted under the Act. Each of Ikon and the Stockholders agree to deliver to the other at or before the Closing an investment letter acknowledging the foregoing and agreeing to comply with the requirements of such exemption. In order to further evidence such restriction on transferability, each recipient of shares pursuant to this Agreement hereby agrees to the imposition of a customary restrictive legend on the face or back of each certificate representing the shares to be exchanged. 4 SECTION 1.3 Delivery of Shares. Subject to the terms and conditions hereof, at the Closing (a) the Stockholders shall transfer to Ikon the Company Shares by delivering the stock certificates evidencing the Company Shares, accompanied by duly endorsed stock powers, with signatures medallion guaranteed, in form and substance satisfactory to Ikon, permitting the transfer of the Company Shares to Ikon; and (b) Ikon shall deliver to each Stockholder a stock certificate(s) registered in the name of such Stockholder representing his, her or its proportionate share of the Ikon Shares based on Schedule 1.3 annexed hereto (which schedule shall be updated from time to time to reflect the New Shareholders). SECTION 1.4 Supplemental Action. If at any time after the Closing, Ikon or the Stockholders shall determine that any further conveyances, agreements, documents, instruments, and assurances or any further action is necessary or desirable to carry out the provisions of this Article 1, Ikon or the Stockholders, as the case may be, shall execute and deliver any and all proper conveyances, agreements, documents, instruments, and assurances and perform all necessary or proper acts to carry out the provisions of this Article 1. ARTICLE 2. CLOSING; CLOSING DATE SECTION 2.1. The exchange of the Company Shares for the Ikon Shares as contemplated hereby (the "Closing") shall take place at 10:00 a.m. on such date as the parties mutually agree, but in no event later than August 17, 2001, at the offices of Bryan Cave LLP, 245 Park Avenue, New York, New York 5 10167 (or such other time, date or place as the parties hereto may mutually agree in writing). The date upon which the Closing occurs is herein called the "Closing Date." ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS Each of the Stockholders severally, but not jointly, represents and warrants to Ikon as follows: SECTION 3.1 Authority to Execute and Perform Agreements. Such Stockholder has full power and capacity to execute and deliver this Agreement and any other agreement or instrument contemplated by this Agreement (such other agreements and instruments are hereinafter collectively referred to as the "Transaction Documents") and to consummate the Transactions. This Agreement has been duly executed and delivered and is the valid and binding obligation of such Stockholder enforceable in accordance with its terms. Other than any filings that may be required pursuant to Section 13 and/or Section 16 of the Exchange Act, the execution and delivery of this Agreement and the Transaction Documents, the consummation of the transactions contemplated hereunder (the "Transactions") and the performance by such Stockholder of this Agreement and each of the Transaction Documents in accordance with its respective terms and conditions will not require the approval, consent of, waiver, order or authorization of, notification to, or registration, declaration or filing with, any Federal, 6 state, county, local or other governmental or regulatory body or the approval or consent of any other person. SECTION 3.2 Ownership of Company Shares. (a) Such Stockholder owns, beneficially and of record, his, her or its respective portion of the Company Shares to be sold hereunder to Ikon as shown on Schedule 1.3 annexed hereto, free and clear of any and all liens, charges or encumbrances of any kind or nature whatsoever; (b) such Stockholder is not bound by or subject to any voting trust arrangement, proxy, voting agreement, stockholder agreement, purchase agreement or other agreement or understanding (i) granting any option, warrant or other right to purchase all or any of his, her or its portion of the Company Shares to any person, (ii) restricting his, her or its right to sell or convey his, her or its portion of the Company Shares, or (iii) otherwise restricting any rights with respect to his, her or its portion of the Company Shares (including restrictions as to the voting or disposition of such Company Shares); (c) such Stockholder has the absolute and unrestricted right, power and capacity to assign and transfer his, her or its portion of the Company Shares; and (d) upon transfer by such Stockholder to Ikon of his, her or its portion of the Company Shares hereunder, Ikon will acquire good and valid title to such Company Shares, free and clear of any liens, charges or encumbrances. SECTION 3.3 Finders and Investment Bankers. Such Stockholder has not employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders' fees or incurred any liability for any brokerage fees, commissions or finders' fees in connection with the Transactions. 7 SECTION 3.4 Litigation and Claims. Except as otherwise set forth in Schedule 3.4 annexed hereto, there is no suit, action, proceeding, claim or investigation pending or to the best knowledge of such Stockholder, threatened against or affecting such Stockholder that would have a material adverse effect on the assets, business or financial condition of such Stockholder or the Company or the ability of such Stockholder to perform his, her or its obligations under this Agreement. SECTION 3.5 Certain Payments. Such Stockholder, directly or indirectly, has not given or agreed to give or solicited or received any gift, rebate or similar benefit to any customer, supplier, governmental employee or other person or entity that might subject the Company or Ikon to any damage or penalty in any civil, criminal or governmental litigation or proceeding or if not given in the past might have had an adverse effect on the assets, Business, operations or prospects of the Company. SECTION 3.6 Company Representations. To the best knowledge of such Stockholder, provided such Stockholder is an officer, director and/or holder of 10% or more of the total issued and outstanding shares of Company Common Stock, the representations and warranties of the Company contained in Article 4 hereof are true and correct in all respects. ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Ikon as follows: SECTION 4.1 Due Incorporation and Qualification. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware, has all requisite power and authority to own, lease and operate its assets, properties and Business and to conduct the Business as now being and as heretofore conducted. The Company is qualified to do business as a 8 foreign corporation in the jurisdictions listed on Schedule 4.1 annexed hereto, and is not doing business in any other jurisdiction where qualification is required or the failure to qualify would have a material adverse effect on the Business or operations of the Company. SECTION 4.2 Subsidiaries and Affiliates. The Company does not, directly or indirectly, own any shares of stock or other equity interest (including any form of profit participation) in, has not made any investment in, and does not control or have any proprietary interest in, any corporation, partnership, joint venture or other business association or entity other than as set forth in Schedule 4.2 annexed hereto (all such entities are hereinafter referred to collectively as the "Company Subsidiaries") which also sets forth the percentage ownership of the Company, directly or indirectly, in each of the Company Subsidiaries. All of the capital stock and other interests so held by the Company (directly or indirectly) as indicated on Schedule 4.2 are owned by the Company (directly or indirectly) free and clear of any claim, lien, encumbrance, security interest or agreement with respect thereto. All of the outstanding shares of capital stock in each of the Company Subsidiaries are duly authorized, validly issued, fully paid and non-assessable and were issued free of preemptive rights and in compliance with applicable corporate and securities laws. Except as indicated on Schedule 4.2, there are no irrevocable proxies, voting agreements or similar obligations with respect to such capital stock of the Company Subsidiaries, and no equity securities or similar obligations with respect to such capital stock of the Company Subsidiaries are or may become required to be issued or purchased by reason of any options, warrants, rights to subscribe to, puts calls, reservation of shares or commitments of any character whatsoever relating to, or securities or rights convertible into or exchangeable 9 for, shares of any capital stock of any Company Subsidiary, and there are no contracts, commitments, understandings or arrangements by which any Company Subsidiary is bound to issue additional shares of its capital stock, or options, warrants or rights to purchase or acquire any additional shares of its capital stock or securities convertible into or exchangeable for such shares. Each of the Company Subsidiaries is in good standing and qualified to do business in every jurisdiction in which the failure to qualify could have a material adverse effect upon the Subsidiary or the Company. Schedule 4.2 also sets forth the name of each of the Company's affiliates (other than the Company Subsidiaries), including joint venture affiliates (incorporated and unincorporated), and the nature of the affiliation. SECTION 4.3 Articles of Incorporation and By-Laws. The Company has delivered to Ikon true and complete copies of its Certificate of Incorporation and By-Laws and each of the Company Subsidiaries as in effect on the date hereof, which instruments shall not be or have been amended between the dates thereof and the Closing Date. SECTION 4.4 Capitalization. The total authorized capital stock of the Company consists solely of 8,000,000 shares of the Company Common Stock, of which only the Outstanding Company Shares are issued and outstanding as of the date hereof. The Outstanding Company Shares are, and the Conversion Company Shares and the May Conversion shares will be, validly issued, fully paid and non-assessable. Except for the Transactions and as set forth in Schedule 4.4 annexed hereto, there are no authorized or outstanding options, warrants, subscription calls, rights (including preemptive rights and rights to demand registration under the Act, commitments, conversion rights, plans or other agreements of any character obligating the Company to authorize, issue, deliver, sell or redeem any shares of its capital stock or any securities convertible into or evidencing the right to purchase any shares of such stock. 10 SECTION 4.5 Officers and Directors. Annexed hereto as Schedule 4.5 is a true and correct list of the officers and directors of the Company as of the date of this Agreement. SECTION 4.6 Financial Statements; Financial Matters. (a) Annexed hereto as Schedule 4.6 (a) is the unaudited balance sheet of the Company as at March 31, 2001, and the related unaudited statements of operations and retained earnings and changes in financial position (cash flow) as at and for each of the two years then ended or for such shorter period for which the Company has been in existence (collectively the "Company Unaudited Financials"; the unaudited balance sheet as at March 31, 2001 included therein is sometimes referred to as the "Company Balance Sheet"). (b) At or prior to the Closing Date, the Company will have furnished Ikon with (i) the audited balance sheet of the Company as at March 31, 2001, and the related audited statements of operations, retained earnings (or stockholder deficit) and changes in financial position (cash flow) as at and for each of the two years then ended or for such shorter period for which the Company has been in existence, together with the unqualified opinion thereon of a firm of independent certified public accountants authorized to practice before the Securities and Exchange Commission (collectively, the "Company Audited Financials"). (c) The Company Unaudited Financials are, and the Company Audited Financials will be, (i) in accordance with the books and records of the Company, (ii) correct and complete, (iii) fairly present the financial position and results of operations of the Company as of the dates indicated, and (iv) prepared in accordance with generally accepted accounting principles applied on a consistent basis ("GAAP") (except that (x) unaudited financial statements may not be in accordance with GAAP because of the absence of 11 footnotes normally contained therein and (y) interim (unaudited financials) are subject to normal year-end audit adjustments that in the aggregate will not have a material adverse effect on the Business, properties, assets, operations, liabilities, financial condition or prospects of the Company). SECTION 4.7 Liabilities. Except as set forth on Schedule 4.7 annexed hereto, as of the date hereof, the Company has no direct or indirect indebtedness, liability, claim, loss, damage, deficiency, obligation or responsibility, known, or unknown, fixed or unfixed, liquidated or unliquidated, secured or unsecured, accrued, absolute, contingent or otherwise, including, without limitation, liabilities on account of taxes, other governmental charges or lawsuits brought ("Liabilities"), other than (i) Liabilities fully and adequately reflected or reserved against on the Company Balance Sheet, and (ii) Liabilities incurred since March 31, 2001 in the ordinary course of business. The Company has no knowledge of any past or existing circumstance, condition, event or arrangement that may hereafter give rise to any Liabilities of the Company, or any successor to its business except in the ordinary course of business or as otherwise set forth on Schedule 4.7. Between the date hereof and the Closing Date, the Company will not, without the prior written consent of Ikon, incur or become subject to, or agree to incur or become subject to, any Liabilities except current liabilities and obligations incurred in the ordinary course of business or as contemplated by this Agreement or any exhibit or schedule hereto. SECTION 4.8 Absence of Certain Changes. Since March 31, 2001, there has been no material adverse change in the condition, financial or otherwise, of the Company, other than changes occurring in the ordinary course of business which changes have not, individually or in the aggregate, had a material adverse effect on the Business, properties, assets, operations, liabilities, financial condition or prospects of the Company. 12 SECTION 4.9 Tax Matters. The Company has filed all Federal, state, county and local income tax, franchise tax, real and personal property tax, payroll tax, occupation tax, sales tax, excise tax, and other tax returns which it is required to file, the failure to file which would materially adversely affect the assets, properties, Business, operations or financial condition or prospects of the Company, taken as a whole, and has paid, reserved or provided for all taxes shown on such returns, and all deficiencies or other assessments of tax, interest or penalties which have been served on or delivered to the Company. There are no claims with respect to Federal, state, county, local, foreign or other taxes. The Federal income tax returns of the Company have never been audited by the Internal Revenue Service. To the best knowledge of the Company, there is no unassessed tax deficiency proposed or threatened against the Company. No audit of any tax return of the Company is in progress. There are not in force any extensions of time with respect to the date on which any tax return was or is due to be filed by the Company or any waivers or agreements by the Company for an extension of time for the assessment or payment of any tax. SECTION 4.10 Real and Personal Property - Leased to the Company. Set forth on Schedule 4.10(a) annexed hereto is a description of each lease under which the Company is the lessee of any real property, and on Schedule 4.10 (b) annexed hereto is a description of each lease under which the Company is the lessee of any personal property. The premises or property described in said leases are presently occupied or used by the Company as lessee under the terms of such leases. All rentals due under such leases have been paid and there exist no defaults under the terms of such leases and no event has occurred which, upon passage of time or the giving of notice, or both, would result in any events of default or prevent the Company from exercising and obtaining the benefits of any rights or options contained therein. The Company 13 has the full right, title and interest of the lessee under the terms of said leases, free of all liens, claims or encumbrances and all such leases are valid and in full force and effect. SECTION 4.11 Title. The Company Balance Sheet reflects all of the material assets and properties of the Company, except to the extent the Company has acquired or disposed of any assets and properties, in the ordinary course of its business since March 31, 2001. The Company owns outright and has good and marketable title to all of its assets and properties, in each case free and clear of any lien or other encumbrance except for (i) immaterial assets and properties; (ii) liens or other encumbrances securing taxes, assessments, governmental charges or levies, or the claims of materialmen, carriers, landlords and like persons, all of which are not yet due and payable and purchase money interests and similar security interests for goods purchased by the Company since March 31, 2001 in the ordinary course of business; (iii) defects of title, liens or other encumbrances of a character that do not materially impair the assets or properties of the Company or detract materially from the Business, or (iv) liens, claims, encumbrances or security interests reflected in the Company Balance Sheet. The assets and properties owned by the Company, as reflected on the Company Balance Sheet, are adequate to permit the Company to conduct the Business as presently conducted and to continue to conduct the Business after the Closing. 14 SECTION 4.12 Intellectual Property. (a) For purposes of this Agreement, the following terms have the following definitions: "Intellectual Property" shall mean any or all of the following and all rights in, arising out of, or associated therewith: (i) all United States and foreign patents and applications therefor and all reissues, divisions, renewals, extensions, provisionals, continuations and continuations-in-part thereof, (ii) all inventions (whether patentable or not), invention disclosures, improvements, trade secrets (whether currently existing or in development), proprietary information, know how, technology, technical data and customer lists, and all documentation relating to any of the foregoing; (iii) all copyrights, copyrights registrations and applications therefor, and all other rights corresponding thereto throughout the world; (iv) all maskworks, mask work registrations and applications therefor, and all other rights corresponding thereto throughout the world; (v) all industrial designs and any registrations and applications therefor throughout the world; (vi) all trade names, trade dress, logos, common law trademarks and service marks; trademark and service mark registrations and applications therefor throughout the world; (vii) all databases and data collections and all rights therein throughout the world; and (viii) all computer software including all source code, object code, firmware, development tools, files, records and data, all media on which any of the foregoing is recorded and all documentation related to any of the foregoing throughout the world. 15 "Company Intellectual Property" shall mean any Intellectual Property that: (i) is owned by or exclusively licensed to the Company or any Company Subsidiary, or (ii) is necessary to the operation of the Company or the Company Subsidiaries, including the design, manufacture, sale and use of the products or performance of the services of the Company and the Company Subsidiaries, as it currently is operated or is reasonably anticipated to be operated in the future. (b) Schedule 4.12 (a) annexed hereto sets forth all of the Company's and the Company Subsidiaries' United States and foreign (i) patents, patent applications (including provisional applications); (ii) registered trademarks, applications to register trademarks, intent-to-use applications, or other registrations related to trademarks; (iii) registered copyrights and applications for copyright registration; (iv) maskwork registrations and applications to register mask works; and (v) other Company Intellectual Property that is the subject of an application, certificate or registration issued by or recorded by any state, government or other public legal authority, all of the foregoing, the "Registered Intellectual Property." (c) Schedule 4.12 (c) annexed hereto sets forth any proceeding or actions before any court, tribunal (including the United States Patent Office ("PTO") or equivalent authority anywhere in the world) related to any of the Registered Intellectual Property. (d) The Company or the Company Subsidiaries have complied with all applicable disclosure requirements and, to the best knowledge of the Company, have not committed any fraudulent act in the application for and maintenance of any patent, trademark or copyright of the Company or the Company Subsidiaries. 16 (e) Each item of Registered Intellectual Property is valid and subsisting, all necessary registration, maintenance and renewal fees in connection with such Registered Intellectual Property have been made and all necessary documents and certificates in connection with such Registered Intellectual Property have been filed with the relevant patent, copyright, trademark or other authorities in the United States or foreign jurisdictions, as the case may be, for the purposes of maintaining, renewing or extending the registration of such Registered Intellectual Property. Schedule 4.12 (e) annexed hereto sets forth all actions and payments that must be made in the twelve month period following the Closing Date in connection with the preservation or maintenance of the Registered Intellectual Property. (f) The Company and the Company Subsidiaries are not barred from seeking patents on any patentable inventions of the Company or the Company Subsidiaries that in the reasonable judgment of the Company would have been necessary to the operation of the Company or the Company Subsidiaries by "on-sale" or similar bars to, patentability or by failure to apply for a patent on such inventions within the time required. (g) The contracts, licenses and agreements set forth on Schedule 4.12 (g) annexed hereto include all contracts, licenses and agreements to which the Company and the Company Subsidiaries are a party with respect to any Company Intellectual Property. (h) The contracts, licenses and agreements set forth on Schedule 4.12 (g) are in full force and effect. The consummation of the Transactions will neither violate nor result in the breach, modification, cancellation, termination or suspension of the contracts, licenses and agreements set forth on Schedule 4.12 (g). Other than those matters that would not have a material adverse effect on the Company, and the Company Subsidiaries, the Company and the Company 17 Subsidiaries are in compliance with, and have not breached any term of the contracts, licenses and agreements set forth on Schedule 4.12 (g), and, to the best knowledge of the Company, all other parties to the contracts, licenses and agreements set forth on Schedule 4.12 (g) are in compliance with, and have not breached any material term of, such contracts, licenses and agreements. Following the Closing Date, the Company and the Company Subsidiaries will be permitted to exercise all of their respective rights under the contracts, licenses and agreements set forth on Schedule 4.12 (g) without the payment of any additional amounts or consideration other than ongoing fees, royalties or payments which the Company or the Company Subsidiaries would otherwise be required to pay. (i) Except as set forth on Schedule 4.12 (i) annexed hereto, (i) no person or entity has any rights to use any of the Company Intellectual Property; and (ii) the Company and the Company Subsidiaries have not granted to any person or entity, nor authorized any person or entity to retain, any rights in the Company Intellectual Property. (j) Except as set forth on Schedule 4.12 (j) annexed hereto, (A) the Company or the Company Subsidiaries own and have good, valid and exclusive title to, and have the unrestricted right to license and use, each item of the Intellectual Property of the Company or the Company Subsidiaries, including all Registered Intellectual Property set forth on Schedule 4.12 (b), free and clear of any Lien; (ii) the Company or the Company Subsidiaries own, or have the right, pursuant to a valid contract, to use or operate all other Intellectual Property of the Company or the Company Subsidiaries, and (iii) the Company or one of its Company Subsidiaries is the exclusive owner of all trademarks and trade names used in connection with the operation or conduct of the 18 business of the Company and the Company Subsidiaries, including the sale of any products or the provision of any services by the Company and the Company Subsidiaries. (k) To the Company's best knowledge, the operation of the Business of the Company and the Company Subsidiaries , taken as a whole, as such Business currently is conducted, or as reasonably contemplated to be conducted, including the Company and the Company Subsidiaries design, development, manufacture, marketing and sale of the products or services of the Company and the Company Subsidiaries has not, does not and will not infringe or misappropriate the Intellectual Property of any other person or entity. (l) Except as set forth on Schedule 4.12 (l), attached hereto, the Company has not received any written notice from any person or entity that the design, development, manufacture and sale of the Company or the Company Subsidiaries' products and provision of their respective services, infringes or misappropriates the Intellectual Property of any person or entity. (m) The Company and the Company Subsidiaries own or have the right to use all Intellectual Property necessary to the conduct their respective business as currently is conducted or is reasonably contemplated to be conducted, including , without limitation. the design, development, manufacture and sale of all products currently manufactured or sold by the Company and the Company Subsidiaries and the performance of all services provided by the Company or the Company Subsidiaries. (n) Except as set forth on Schedule 4.12 (n), annexed hereto, to the Company's best knowledge, no person or entity has or is infringing or misappropriating any Company Intellectual Property. 19 (o) Except as set forth on Schedule 4.12 (o) attached hereto, no Company Intellectual Property, or product or service of the Company Subsidiaries is subject to any proceeding or outstanding decree, order judgment, or stipulation restricting in any manner the use or licensing thereof by the Company or the Company Subsidiaries, or which may affect the validity, use licensing or enforceability of such Company Intellectual Property. (p) The Company and the Company Subsidiaries own exclusively and have good title to all copyrighted works that are the Company's and the Company Subsidiaries' products or which the Company or the Company Subsidiaries otherwise purport to own, except for those copyrighted works licensed to the Company and the Company Subsidiaries set forth on Schedule 4.12 (p) annexed hereto. (q) Except as set forth on Schedule 4.12 (q) annexed hereto, and except for work, inventions or material created by advertising or other marketing firms on behalf of the Company and the Company Subsidiaries to which any such firm has retained all rights, to the 20 extent that any work, invention, or material has been developed or created by a third party for the Company or the Company Subsidiaries, the Company or the Company Subsidiaries have a written agreement with such third party with respect thereto and the Company or the Company Subsidiaries thereby have obtained ownership of, and are the exclusive owners of, all Intellectual Property in such work, material or invention by operation of law or valid assignment. SECTION 4.13 Contracts and Other Agreements. Schedule 4.13 annexed hereto sets forth, as of the date of this Agreement, all contracts, commitments, understandings, arrangements and other agreements to which the Company is a party or by or to which any of the Company's properties are bound or subject (collectively, the "Contracts"), except (i) Contracts made in the ordinary course of business of the Company and involving the payment to or by the Company of less than $25,000 with respect to any one contract or $25,000 with respect to any related Contracts and (ii) any Contract that is terminable by the Company upon not more than 30 days notice and with the payment of a termination penalty, if any, not exceeding $5,000. There have been delivered or made available to Ikon true and complete copies of all the Contracts and other agreements set forth on Schedule 4.13 or on any other Schedule. All of the Contracts are valid, subsisting, in full force and effect and binding upon the parties thereto in accordance with their terms, and the Company has paid in full or accrued all amounts due thereunder and has satisfied in full or provided for all of its liabilities and obligations thereunder, and is not in default in any material respect under any of them, nor, to the Company's best knowledge, is any other party to any Contract in default thereunder, nor, to the Company's best knowledge, does any condition exist that with notice or lapse of time or both would constitute a default thereunder that would give the other party thereto 21 the right to terminate such Contract. Except as separately identified on Schedule 4.13, no approval or consent of any person is needed in order that the Contracts set forth on Schedule 4.13 or on any other Schedule continue in full force and effect following the consummation of the Transactions. Between the date hereof and the Closing Date, the Company will not, without Ikon's prior written consent, become a party to any Contract of the types listed in this Section 4.13 (other than contracts with bona fide third parties entered into in the ordinary course of the Company's business on terms commercially reasonable within the industry or on terms similar to those contained in Contracts currently in effect to which the Company is a party), or make or permit the amendment or termination (other than in the ordinary course and excluding the termination of Contracts by their terms) of any Contract listed on Schedule 4.13. SECTION 4.14 Insurance. Annexed hereto as Schedule 4.14 is a list of all policies of insurance covering the Company (specifying the insurer, amount of coverage, type of insurance, policy number and any pending claims thereunder). True copies of all such policies have been made available by the Company to Ikon. The Company will cause such policies to be maintained in effect until and at the Closing Date. To the best knowledge of the Company, the Company has not failed to give any notice or present any material claim under any insurance policy in due and timely fashion. SECTION 4.15 Litigation; Actions and Proceedings. There are no outstanding orders, judgments, injunctions, awards or decrees of any court, governmental, administrative or regulatory body or arbitration or mediation tribunal against or involving the Company. Except as set forth in Schedule 4.15 annexed hereto, there are no actions, suits or claims or legal, administrative, regulatory, governmental or arbitral proceedings or investigations (whether or not the defense thereof or liabilities in respect thereof are covered by insurance) pending or, to the Company's best knowledge, threatened against or 22 involving the Company or any of its properties or assets, nor, to the best knowledge of the Company, are there any grounds therefor, that individually or in the aggregate, could have a material adverse effect upon the transactions contemplated hereby or upon the assets, properties, Business, operations, or condition (financial or otherwise) of the Company. There are no actions, suits or claims or legal, administrative, regulatory, governmental or arbitral proceedings pending or, to the Company's best knowledge, threatened that would give rise to any right of indemnification on the part of any director or officer of the Company, or the heirs, executors or administrators of such director or officer, against the Company or any successor to the Business. SECTION 4.16 Operations of the Company. (a) Except as set forth on Schedule 4.16 annexed hereto, since March 31, 2001, the Company has not: (i) amended its Certificate of Incorporation or By-Laws or merged with or into or consolidated with any other person, subdivided or in any way reclassified any shares of its capital stock or changed or agreed to change in any manner the rights of its outstanding capital stock or the character of its business; (ii) issued or sold or purchased, or issued options or rights to subscribe to, or entered into any contracts or commitments to issue or sell or purchase, any shares of its capital stock; (iii) entered into or amended any employment agreement (other than employment agreements or at will employment arrangements entered into or amended in the ordinary course of the Company's business), entered into or amended any agreement with any labor union or association representing any employee, adopted, entered into, or amended any employee benefit plan; 23 (iv) except in the ordinary course of business and not in excess of $25,000 (individually or in the aggregate), incurred any indebtedness for borrowed money; (v) declared or paid any dividends or declared or made any other distributions of any kind to the Stockholders, or made any direct or indirect redemption, retirement, purchase or other acquisition of any shares of its capital stock; (vi) materially reduced its cash or short term investments or their equivalent; (vii) waived any right of material value to its business; (viii) made any change in its accounting methods or practices or made any change in depreciation or amortization policies or rates adopted by it; (ix) materially changed any of its business policies; (x) granted or paid any wage or salary increase in excess of $25,000 per annum, or any bonus in excess of $5,000, or any increase in any other direct or indirect compensation, for or to any of its officers, directors, employees, consultants, agents, brokers, independent contractors or other representatives, or any accrual for or commitment or agreement to make or pay the same; (xi) made any loan or advance to any of the Stockholders, its, officers, directors, employees, consultants, agents, brokers, independent contractors or other representatives (other than travel, entertainment or business expense advances made in the ordinary course of business), or made any other loan or advance otherwise than consistently with past practice in the ordinary course of business; (xii) made any payment or commitment to pay any severance or termination pay to any of its officers, directors, consultants, agents, brokers, independent contractors or other representatives, other than payments or commitments to pay persons other than its officers, directors or the Stockholders made in the ordinary course of business; 24 (xiii) entered into any lease (as lessor or lessee); sold, abandoned or made any other disposition of any of its assets or properties (except in the ordinary course of business); granted or suffered any lien or other encumbrance on any of its assets or properties; entered into (except in the ordinary course of business) or amended any contract or other agreement to which it is a party, or by or to which it or its assets or properties are bound or subject, or pursuant to which it agrees to indemnify any party or to refrain from competing with any party; (xiv) except in the ordinary course of business and in amounts less than $10,000 in each case, incurred or assumed any Liability; (xv) made any acquisition of or entered into any agreement to acquire all or any part of the assets, properties, capital stock or business of any other person; (xvi) failed to pay timely any of its material liabilities in accordance with their terms; and (xvii) except in the ordinary course of business, entered into any other material contract or other agreement or other material transaction. (b) Between the date hereof and the Closing, the Company will not, without the prior written consent of Ikon, do any of the things listed in clauses (i) through (xvii) of Section 4.16 (a). SECTION 4.17 Compliance with Laws. The Company is not in default under or in violation of any applicable order, judgment, injunction, award or decree, any material applicable federal, state, or local statute, law, ordinance, rule or regulation, including without limitation, the Employee 25 Retirement Income Security Act of 1974, as amended ("ERISA",) or the provisions of any franchise or license, or of any other material requirement of any governmental, regulatory, administrative or industry body, court or arbitrator applicable to the Company or the Business. The Company is not in default under or in violation of any provisions of its Certificate of Incorporation or its By-Laws, or any material instrument, contract, mortgage, indebtedness, indenture or other agreement to which the Company is a party or by or to which the Company or any of its assets or properties may be bound or subject. SECTION 4.18 Licenses, Permits and Certificates. The Company and the Company Subsidiaries have all material licenses, permits, certificates, authorizations, approvals and consents required by any governmental authority to legally operate the Business as now operated and as contemplated and such licenses, permits, certificates, authorizations, approvals and consents are listed on Schedule 4.18 annexed hereto. No governmental, regulatory or industry permits, consents, waivers, approvals or authorizations are necessary in connection with the consummation of the Transactions or to permit the Company to conduct the Business after the Closing in the manner and to the extent presently conducted and contemplated to be conducted. SECTION 4.19 No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the consummation of the Transactions will not (a) result in a violation of the Company's Certificate of Incorporation or By-Laws, (b) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, indenture or instrument to which the Company is a party, or (c) result in a violation of any law, rule, regulation, by-law, directive, order, judgment or decree (including federal, state, 26 provincial and municipal securities laws and regulations) applicable to the Company or by which any of its property or assets is bound or affected, except to the extent that matters within clauses (b) and (c) immediately above would not have a material adverse effect on the Business, properties, assets, operations, liabilities, financial condition or prospects of the Company, or the ability of the Company to perform this Agreement and the other Transaction Documents. SECTION 4.20 Labor Agreements, Employee Benefit Plans, and Employment Agreements. Except as set forth on Schedule 4.20 annexed hereto, neither the Company nor any of the Company Subsidiaries is a party to (a) any union collective bargaining, works council, or similar agreement or arrangement, (b) any qualified or non-qualified pension, retirement, severance, profit-sharing, deferred compensation, bonus, stock option, stock purchase, retainer, consulting, health, welfare or incentive plan or agreement, (c) any plan or policy providing for employee benefits, including but not limited to vacation, disability, sick leave, medical, hospitalization, life and other insurance plans, and related benefits, or (d) any employment agreement. Neither the Company nor any of the Company Subsidiaries is presently a party to any "employee leasing" agreement or arrangement and neither the Company nor any of the Company Subsidiaries have any liability in respect of any such agreement or arrangement to which it was, at any time, a party, but which is no longer in effect. SECTION 4.21 Books and Records. The books of account and other corporate records of the Company and the Company Subsidiaries made or to be made available to Ikon in connection with the Transactions and the due diligence inquiries made by Ikon in connection herewith, are in all respects complete and correct, have been maintained in accordance with good business practices and the matters contained therein are accurately reflected on the financial statements 27 of the Company furnished or to be furnished hereunder by the Company to Ikon. SECTION 4.22 Accounts Receivable. All accounts receivable of the Company that will be reflected on the Company Balance Sheet or on the accounting records of the Company as of the Closing Date (collectively, the "Accounts Receivable"), will represent valid obligations arising from sales actually made or services actually performed in the ordinary course of business. The reserves shown on the Company Balance Sheet or on the accounting records of the Company as of the Closing Date with respect to the Accounts Receivable will be adequate consistent with past practice. There will be no contest, claim, or right of set-off in any agreement with any maker of an Account Receivable relating to the amount or validity of such Account Receivable. SECTION 4.23 Certain Payments. Neither the Company nor, to the Company's best knowledge, any officer, employee, agent or affiliate of the Company, has, directly or indirectly, given or agreed to give or solicited or received any gift, rebate or similar benefit to any customer, supplier, governmental employee or other person or entity which (i) might subject the Company or Ikon to any damage or penalty in any civil, criminal or governmental litigation or proceeding, (ii) if not given in the past might have had an adverse effect on the assets, business or operations of the Company or (iii) if not continued in the future might adversely affect the assets, business, operations or prospects of the Company. SECTION 4.24 Full Disclosure All documents and other papers delivered by or on behalf of the Company in connection with this Agreement and the Transactions are, to the best of the Company's knowledge, authentic and true and complete in all material respects. No representation or warranty of the 28 Company, and no document or other paper furnished by or on behalf of the Company pursuant to this Agreement or in connection with the Transactions, contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements made in the context in which made, not false or misleading. To the Company's best knowledge, there is no fact that the Company has not disclosed to Ikon that materially adversely affects, or so far as the Company can now foresee, will materially adversely affect, the Business or the assets, properties, operations or condition (financial or otherwise) of the Company or the ability of the Stockholders to perform this Agreement. ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF IKON Ikon represents and warrants to the Stockholders as follows: SECTION 5.1 Due Incorporation and Qualification. Ikon is a corporation duly incorporated, validly existing and in good standing under the laws of Nevada, and has all requisite power and authority to own, lease and operate its assets, properties and business and to conduct its business as now being and as heretofore conducted. Ikon is not qualified to do business as a foreign corporation in any jurisdiction, and is not doing business in any 29 jurisdiction, where qualification is required or the failure to qualify would have a material adverse effect on the business or operations of Ikon. SECTION 5.2 Authority to Execute and Perform Agreements. Ikon has full authority to execute and deliver this Agreement and the other Transaction Documents, and the consummation of the Transactions have been duly authorized by all necessary corporate action of Ikon. This Agreement has been duly executed and delivered and is the valid and binding obligation of Ikon. Other than the filing of a current report on Form 8-K with the Commission following the consummation of the Transactions, the execution and delivery of this Agreement, the consummation of the Transactions and the performance by Ikon of this Agreement in accordance with its terms and conditions will not require the approval, consent of, waiver, order or authorization of, notification to, or registration, declaration or filing with, any Federal, state, county, local or other governmental or regulatory body or the approval or consent of any other person. SECTION 5.3 Subsidiaries and Affiliates. Ikon does not, directly or indirectly, own any shares of stock or other equity interest (including any form of profit participation) in, has not made any investment in, and does not control or have any proprietary interest in any corporation, partnership, joint venture or other business association or entity. Schedule 5.3 annexed hereto sets forth the name of each of Ikon's affiliates (other than subsidiaries), including joint venture affiliates (incorporated and unincorporated), and the nature of the affiliation. SECTION 5.4 Officers and Directors. Annexed hereto as Schedule 5.4 is a true and correct list of the officers and directors of Ikon. 30 SECTION 5.5 Articles of Incorporation and By-Laws. Ikon has delivered to the Stockholders true and complete copies of its Certificate of Incorporation and By-Laws as in effect on the date hereof, which instruments shall not be or have been amended between the dates thereof and the Closing Date. SECTION 5.6 Capitalization. (a) The total authorized capital stock of Ikon consists of (i) 100,000,000 shares of Ikon Common Stock, of which 310,913 shares are validly issued and outstanding, fully paid and non-assessable. Except as set forth in Schedule 5.6 annexed hereto and Section 5.23 hereof and except for 5,000,000 shares of Ikon Common Stock reserved for issuance under the Ikon 2001 Employee Stock Compensation Plan and 22,250 shares of Ikon Common Stock reserved for issuance under the 1999 Ikon Compensation Plan (a true and correct copy of each of which has been furnished to the Stockholders), there are no authorized or outstanding options, warrants, subscription calls, rights (including preemptive rights and rights to demand registration under the Act), commitments, conversion rights, plans or other agreements of any character obligating Ikon to authorize, issue, deliver, sell or redeem any shares of its capital stock or any securities convertible into or evidencing the right to purchase any shares of such stock. (b) The Ikon Shares to be issued to the Stockholders pursuant to this Agreement, will, when issued in accordance with the terms of this Agreement, be validly issued, fully paid and nonassessable. SECTION 5.7 SEC Reports. Ikon has delivered to the Stockholders a true and correct copy of each of the following documents (the "SEC Reports"): (a) Annual Report on Form 10-KSB for the fiscal year ended December 31, 2000, (b) Registration Statement on Form S-8 filed with the Securities and Exchange Commission (the "Commission") on March 16, 2001, (c) 31 Quarterly Report on Form 10-QSB for the three months ended March 31, 2001, (d) Definitive Proxy Statement filed with the Commission on February 1, 2001, (e) Current Report on Form 8-K filed with the Commission on December 18, 2000, (f) Registration Statement on Form 10SB filed with the Commission on February 3, 2000 and (g) all other reports and registration statements filed with the Commission since February 3, 2000. The SEC Reports constitute all of the documents and reports that Ikon was required to file with the Commission pursuant to the Exchange Act and the rules and regulations promulgated thereunder by the Commission since February 3, 2000. As of their respective dates, the SEC Reports comply in all material respects with the requirements of the Exchange Act and the rules and regulations promulgated thereunder and none of the SEC Reports contained an untrue statement of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. SECTION 5.8 Financial Statements. (a) Included in the SEC Reports are the audited balance sheets of the Ikon as at December 31, 2000 and 1999, and the related statements of income, stockholders' equity and cash flows for the two years then ended, together with the unqualified report thereon (except with respect to continuation as a going concern) of HLB Kidsons ("HLBK), registered auditors and chartered accountants (collectively, "Ikon's Audited Financials"). (b) Included in the SEC Reports is the unaudited balance sheet of Ikon as at March 31, 2001, and the related statements of operations and cash flows for the three months ended March 31, 2001 and 2000, as reviewed by HLBK ("Ikon's Interim Financials"). The unaudited balance sheet included in Ikon's Interim Financials is hereinafter referred to as Ikon's Interim Balance Sheet. 32 Since April 1999, Ikon has been inactive except for maintaining its corporate existence, seeking business opportunities and negotiating this Agreement. (c) Ikon's Audited Financials and Ikon's Interim Financials are (i) in accordance with the books and records of Ikon, (ii) correct and complete, (iii) fairly present the financial position and results of operations of Ikon as of the dates indicated, and (iv) prepared in accordance with GAAP (except that (x) unaudited financial statements may not be in accordance with GAAP because of the absence of footnotes normally contained therein, and (y) interim (unaudited) financials are subject to normal year-end audit adjustments that in the aggregate will not have a material adverse effect on the business, properties, assets, operations, liabilities, financial condition or prospects of Ikon). SECTION 5.9 Liabilities. Except as set forth on Schedule 5.9 annexed hereto, as of the date hereof, Ikon has no direct or indirect indebtedness, liability, claim, loss, damage, deficiency, obligation or responsibility, known, or unknown, fixed or unfixed, liquidated or unliquidated, secured or unsecured, accrued, absolute, contingent or otherwise, including, without limitation, liabilities on account of taxes, other governmental charges or lawsuits brought ("Liabilities"), other than (i) Liabilities fully and adequately reflected or reserved against on the Ikon's Interim Balance Sheet, (ii) Liabilities incurred since March 31, 2001 in the ordinary course of business and (iii) Liabilities incurred in connection with the preparation and execution of this Agreement and the consummation of the Transactions. Ikon has no knowledge of any past or existing circumstance, condition, event or arrangement that may hereafter give rise to any Liabilities of Ikon, or any successor to its business except in the ordinary course of business or as otherwise set forth on Schedule 5.9. Ikon will not between the date hereof and the Closing Date, without the prior written consent of the Stockholders, incur or become subject to, or agree to incur or become subject to, any Liabilities 33 except current liabilities and obligations incurred in the ordinary course of business or as contemplated by this Agreement or any exhibit or schedule hereto. SECTION 5.10 Tax Matters. Ikon has filed all Federal, state, county and local income tax, franchise tax, real and personal property tax, payroll tax, occupation tax, sales tax, excise tax, and other tax returns which it is required to file, the failure to file which would materially adversely affect the assets, properties, business, operations or financial condition or prospects of Ikon, and has paid, reserved or provided for all taxes shown on such returns, and all deficiencies or other assessments of tax, interest or penalties which have been served on or delivered to Ikon. There are no claims against Ikon with respect to Federal, state, county, local, foreign or other taxes. The Federal income tax returns of Ikon have never been audited by the Internal Revenue Service. To the best knowledge of Ikon, there is no unassessed tax deficiency proposed or threatened against Ikon. No audit of any tax return of Ikon is in progress. There are not in force any extensions of time with respect to the date on which any tax return was or is due to be filed by Ikon or any waivers or agreements by Ikon for an extension of time for the assessment or payment of any tax. SECTION 5.11 Real and Personal Property - Leased to Ikon. Ikon is not a party to or otherwise bound by any lease of real or personal property. SECTION 5.12 Title. Ikon does not own any assets other than cash or cash equivalents. 34 SECTION 5.13 Intangible Property. (a) Ikon does not own any patents, patent applications, trademark and service mark registrations or registration applications, U.S. copyright registrations or registration applications. Ikon is not a party to or otherwise bound by any confidentiality, nondisclosure or license agreements granting rights under one or more patents, patent applications, trademark or service registrations and registration applications, U.S. copyright registrations or registration applications by or to Ikon. (b) (i) Ikon does not infringe a patent, U.S. trademark registration, U.S. service mark registration or copyright of a third party and (ii) no party has asserted a claim against Ikon that Ikon infringes a patent, trademark, copyright, trade name or trade secret of a third party. SECTION 5.14 Contracts and Other Agreements. Schedule 5.14 annexed hereto sets forth, as of the date of this Agreement, all contracts, commitments, understandings, arrangements and other agreements to which Ikon is a party or by or to which any of Ikon's properties are bound or subject (collectively also referred to herein as the "Contracts"). There have been delivered or made available to the Stockholders true and complete copies of all the Contracts and other agreements set forth on Schedule 5.14 or on any other Schedule. All of the Contracts are valid, subsisting, in full force and effect and binding upon the parties thereto in accordance with their terms, and Ikon has paid in full or accrued all amounts due thereunder and has satisfied in full or provided for all of its liabilities and obligations thereunder, and is not in default in any material respect under any of them, nor, to Ikon's best knowledge, is any other party to any Contract in default thereunder, nor, to Ikon's best knowledge, does any condition exist that with notice or lapse of 35 time or both would constitute a default thereunder that would give the other party thereto the right to terminate such Contract. Except as separately identified on Schedule 5.14, no approval or consent of any person is needed in order that the Contracts set forth on Schedule 5.14 or on any other Schedule continue in full force and effect following the consummation of the Transactions. Ikon will not, between the date hereof and the Closing Date, without the Stockholders' prior written consent, become a party to any Contract or make or permit the amendment or termination (other than in the ordinary course and excluding the termination of Contracts by their terms) of any Contract listed on Schedule 5.14. SECTION 5.15 Litigation; Actions and Proceedings. There are no outstanding orders, judgments, injunctions, awards or decrees of any court, governmental, administrative or regulatory body or arbitration or mediation tribunal against or involving Ikon. There are no actions, suits or claims or legal, administrative, regulatory, governmental or arbitral proceedings or investigations (whether or not the defense thereof or liabilities in respect thereof are covered by insurance) pending or, to Ikon's best knowledge, threatened against or involving Ikon or any of its properties or assets, nor, to the best knowledge of Ikon, are there any grounds therefor, that individually or in the aggregate, could have a material adverse effect upon the transactions contemplated hereby or upon the assets, properties, business, operations, or condition (financial or otherwise) of Ikon. There are no actions, suits or claims or legal, administrative, regulatory, governmental or arbitral proceedings pending or, to Ikon's best knowledge, threatened that would give 36 rise to any right of indemnification on the part of any director or officer of Ikon, or the heirs, executors or administrators of such director or officer, against Ikon or any successor to its business. SECTION 5.16 Operations of Ikon. (a) Except as set forth on Schedule 5.16 hereto, since March 31, 2001, Ikon has not: (i) amended its Certificate of Incorporation or By-Laws or merged with or into or consolidated with any other person, subdivided or in any way reclassified any shares of its capital stock or changed or agreed to change in any manner the rights of its outstanding capital stock or the character of its business; (ii) issued or sold or purchased, or issued options or rights to subscribe to, or entered into any contracts or commitments to issue or sell or purchase, any shares of its capital stock; (iii) entered into or amended any employment agreement (other than employment agreements or at will employment arrangements entered into or amended in the ordinary course of Ikon's business), entered into or amended any agreement with any labor union or association representing any employee, adopted, entered into, or amended any employee benefit plan; (iv) incurred any indebtedness for borrowed money; (v) declared or paid any dividends or declared or made any other distributions of any kind to its stockholders, or made any direct or indirect redemption, retirement, purchase or other acquisition of any shares of its capital stock; (vi) materially reduced its cash or short term investments or their equivalent; (vii) waived any right of material value to its business; (viii) made any change in its accounting methods or practices or made any change in depreciation or amortization policies or rates adopted by it; (ix) materially changed any of its business policies; 37 (x) approved, granted or paid any wage or salary increase in excess of $25,000 per annum, or any bonus in excess of $5,000, or any increase in any other direct or indirect compensation, for or to any of its officers, directors, employees, consultants, agents, brokers, independent contractors or other representatives, or any accrual for or commitment or agreement to make or pay the same; (xi) made any loan or advance to any of its stockholders, officers, directors, employees, consultants, agents, brokers, independent contractors or other representatives (other than travel, entertainment or business expense advances made in the ordinary course of business), or made any other loan or advance otherwise than consistently with past practice in the ordinary course of business; (xii) made any payment or commitment to pay any severance or termination pay to any of its officers, directors, consultants, agents, brokers, independent contractors or other representatives, other than payments or commitments to pay persons other than its officers, directors or stockholders made in the ordinary course of business; (xiii) entered into any lease (as lessor or lessee); sold, abandoned or made any other disposition of any of its assets or properties (except in the ordinary course of business); granted or suffered any lien or other encumbrance on any of its assets or properties; entered into (except in the ordinary course of business) or amended any contract or other agreement to which it is a party, or by or to which it or its assets or properties are bound or subject, or pursuant to which it agrees to indemnify any party or to refrain from competing with any party; (xiv) except in the ordinary course of business and in amounts less than $10,000 in each case, incurred or assumed any Liability; (xv) made any acquisition of or entered into any agreement to acquire all or any part of the assets, properties, capital stock or business of any other person; 38 (xvi) failed to pay timely any of its material liabilities in accordance with their terms or otherwise in the ordinary course of business; and (xvii) except in the ordinary course of business, entered into any other material contract or other agreement or other material transaction. (b) Ikon will not, between the date hereof and the Closing, without the prior written consent of the Stockholders, do any of the things listed in clauses (i) through (xvii) of Section 5.16(i), except that Ikon may offer for sale and sell to accredited investors a maximum of 100,000 shares of Ikon Common Stock and except as contemplated under this Agreement. SECTION 5.17 Compliance with Laws. Ikon is not in default under or in violation of any applicable order, judgment, injunction, award or decree, of any material applicable Federal, state, or local statute, law, ordinance, rule or regulation including, without limitation, ERISA or the provisions of any franchise or license, or of any other material requirement of any governmental, regulatory, administrative or industry body, court or arbitrator applicable to Ikon. Ikon is not in default under or in violation of any provisions of its Certificate of Incorporation or its By-Laws, or any material instrument, contract, mortgage, indebtedness, indenture or other agreement to which Ikon is a party or by or to which Ikon or any of its assets or properties may be bound or subject. SECTION 5.18 Licenses, Permits and Certificates. Ikon does not have any material licenses, permits, certificates, authorizations, approvals and consents from any governmental authority and none are required to legally operate its business. No governmental, regulatory or industry permits, consents, waivers, approvals or authorizations are necessary in connection with the consummation of the Transactions. 39 SECTION 5.19 No Conflicts. The execution, delivery and performance of the Transaction Documents by Ikon and the consummation by Ikon of the Transactions will not (a) result in a violation of Ikon's Certificate of Incorporation or By-Laws, (b) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, indenture or instrument to which Ikon is a party, or (c) result in a violation of any law, rule, regulation, by-law, directive, order, judgment or decree (including Federal, state, provincial and municipal securities laws and regulations) applicable to Ikon or by which any of its property or assets is bound or affected, except to the extent that matters within clauses (b) and (c) immediately above would not have a material adverse effect on the business, properties, assets, operations, liabilities, financial condition or prospects of Ikon, or the ability of Ikon to perform this Agreement and the other Transaction Documents. SECTION 5.20 Labor Agreements, Employee Benefit Plans and Employment Agreements. Except as set forth in Schedule 5.20 annexed hereto, Ikon is not a party to (a) any union collective bargaining, works council, or similar agreement or arrangement, (b) any qualified or non-qualified pension, retirement, severance, profit-sharing, deferred compensation, bonus, stock option, stock purchase, retainer, consulting, health, welfare or incentive plan or agreement, oral or written, whether legally binding or not, (c) any plan or policy providing for employee benefits, including but not limited to vacation, disability, sick leave, medical, hospitalization, life and other insurance plans, and related benefits, or (d) any employment agreement. Ikon is not presently a party to any "employee leasing" agreement or arrangement, nor does Ikon have any liability in respect of any such agreement or arrangement to which it was, at any time, a party, but which is no longer in effect. 40 SECTION 5.21 Books and Records. The books of account and other corporate records of Ikon made or to be made available to the Stockholders in connection with the Transactions and the due diligence inquiries made by the Stockholders in connection herewith, are in all respects complete and correct and have been maintained in accordance with good business practices and the matters contained therein are accurately reflected in all material respects on the financial statements of Ikon furnished or to be furnished hereunder by Ikon to the Stockholders. SECTION 5.22 Ownership of the Ikon Shares. (a) Ikon is not bound by or subject to any voting trust arrangement, proxy, voting agreement, stockholder agreement, purchase agreement or other agreement or understanding, except as contemplated hereunder, (i) granting any option, warrant or other right to purchase all or any of the Ikon Shares or the shares of Ikon Common Stock issuable upon exercise of the New Warrants (the "Ikon Warrant Shares") to any person, (ii) restricting the right of Ikon to issue the Ikon Shares, or (iii) otherwise restricting any rights of Ikon with respect to the Ikon Shares and the Ikon Warrant Shares (including restrictions as to the voting or disposition of the Ikon Shares or the shares of Ikon Warrant Shares); (b) Ikon has the absolute and unrestricted right, power and capacity to issue the Ikon Shares and the Ikon Warrant Shares, and (c) upon issuance to the Stockholders of the Ikon Shares hereunder and the Ikon Warrant Shares to the holders of the New Warrants in accordance with the terms of the New Warrants, the Stockholders and such holders will acquire good and valid title to the Ikon Shares or the Ikon Warrant shares, as the case may be, free and clear of any liens, charges or encumbrances except as contemplated hereunder . 41 SECTION 5.23 Finders and Investment Bankers. Ikon has not employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders' fees in connection with the Transactions. SECTION 5.24 Absence of Certain Changes. Since March 31, 2001, there has been no material adverse change in the condition, financial or otherwise, of Ikon, other than changes occurring in the ordinary course of business which changes have not, individually or in the aggregate, had a material adverse effect on the business, properties, assets, operations, liabilities, financial condition or prospects of Ikon and other than as set forth in Schedule 5.24 annexed hereto. SECTION 5.25 Insurance. Ikon does not maintain any insurance. SECTION 5.26 Full Disclosure. All documents and other papers delivered by or on behalf of Ikon in connection with this Agreement and the Transactions are, to the best of Ikon's knowledge, authentic and true and complete in all material respects. No representation or warranty of Ikon contained in this Agreement, and no document or other paper furnished by or on behalf of Ikon pursuant to this Agreement or in connection with the Transactions, contains an untrue statement of a material fact or omits to state 42 a material fact required to be stated therein or necessary to make the statements made in the context in which made, not false or misleading. To Ikon's best knowledge, there is no fact that Ikon has not disclosed to the Stockholders that materially adversely affects, or so far as Ikon can now foresee, will materially adversely affect, the assets, properties, business, operations or condition (financial or otherwise) of Ikon or the ability of Ikon to perform this Agreement. ARTICLE 6 COVENANTS AND AGREEMENTS OF THE PARTIES SECTION 6.1 Conduct of Business. (a) Between the date hereof and the Closing Date, except as otherwise contemplated in this Agreement, the Company shall conduct its business in the ordinary and usual course, and the Company, without the prior consent of Ikon, will not change in any material respect any business policy or practice or take any action which would violate Section 4.16 hereof. (b) Between the date hereof and the Closing Date, except as otherwise contemplated in this Agreement, Ikon shall conduct its business in the ordinary and usual course, and shall not, without the prior consent of the Stockholders, change in any material respect any business policy or practice or take any action which would violate Section 5.16 hereof. SECTION 6.2 Access and Investigation. (a) Between the date hereof and the Closing Date, the Company agrees to afford Ikon and its directors, officers, employees, agents, consultants, advisors, or other representatives, including legal counsel, accountants, and financial advisors (collectively, "Representatives") full and 43 free access, during normal business hours and at such other reasonable times as otherwise may be required under the circumstances, to the Company's personnel, properties, contracts, books, records and other existing documents and data as Ikon may reasonably request. (b) Between the date hereof and the Closing Date, Ikon will afford the Stockholders and their Representatives full and free access, during normal business hours and at such other reasonable times as otherwise may be required under the circumstances, to Ikon's personnel, properties, contracts, books, records and other existing documents and data as the Stockholders may reasonably request. SECTION 6.3 Litigation. Between the date hereof and the Closing Date, Ikon and the Stockholders will promptly notify each other of any lawsuits, claims, proceedings or investigations which are threatened or commenced against either Ikon or the Company, or against any officer, employee, agent, consultant or director thereof, which may relate to, or affect the stockholders, the Business of the Company or Ikon or their respective assets, this Agreement or the Transactions. SECTION 6.4 Actions with Respect to Closing. Each of the parties hereto agrees to use his, her or its best efforts to bring about the satisfaction of the conditions precedent to the obligation of the other parties hereto to effect the Closing (to the extent that such satisfaction is dependent on the actions on the part of the initial party of commission or omission) and to cause its covenants and agreements contained in this Agreement to be satisfied and performed hereunder. SECTION 6.5 Public Statement. No party hereto shall, without the prior consent of the other parties hereto, make any public statement, announcement or release to trade publications or to the press, or make any 44 statements to any competitor, customer or any third party, with respect to this Agreement except to the extent that any party is advised by his, her or its counsel that a public statement is required by law and then only upon prior notice to the other parties hereto. SECTION 6.6 Consent to Jurisdiction and Service of Process. Any legal action, suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby shall be instituted in any state or Federal court of competent jurisdiction located in New York County, State of New York, United States, and each party agrees not to assert, by way of motion, as a defense, or otherwise, in any such action, suit or proceeding, any claim that it is not subject personally to the jurisdiction of such court, that its property is exempt or immune from attachment or execution, that the action, suit or proceeding is brought in an inconvenient forum, that the venue of the action, suit or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court. Each party further irrevocably submits to the exclusive jurisdiction of any such court in any such action, suit or proceeding. Ikon hereby appoints Steven A. Saide, Esq., at his offices at 245 Park Avenue, New York, NY 10167, and the Stockholders hereby appoint Gersten, Savage & Kaplowitz, LLP, at its offices at 101 East 52nd Street, New York, NY 10022 (or at each such person's or entity's office at such other address as such person or entity hereafter furnishes to the other parties), as such party's authorized agent to accept and acknowledge on such party's behalf service of any and all process that may be served in any such action, suit or proceeding. Any and all service of process and any other notice 45 in any such action, suit or proceeding shall be effective against any party if given personally or by registered or certified mail, return receipt requested, or by any other means of mail that requires a signed receipt, postage prepaid, mailed to such party as herein provided SECTION 6.7 Expenses. Each of the parties to this Agreement shall, except as otherwise specifically provided herein, bear his, her and its respective expenses incurred in connection with the preparation, execution and performance of this Agreement and the Transactions, including without limitation, all fees and expenses of agents, representatives, counsel and accountants. SECTION 6.8 Bridge Loan. Simultaneous with the execution of this Agreement by all of the parties hereto, Ikon agrees to loan the Company $100,000. Such loan shall be evidenced by and be repayable in accordance with the terms and conditions of a promissory note substantially in the form of Exhibit A annexed hereto to be executed and delivered by the Company. SECTION 6.9 Confidential Information. (a) Each of Ikon and the Company has disclosed and delivered and will through the Closing disclose and deliver to the other party certain information about its respective business and operations prepared by such party or its advisors (such party when disclosing such information being the "Disclosing Party" and such party when receiving such information being the "Receiving Party"). All such information furnished by the Disclosing Party or its Authorized Persons (as defined below), whether furnished before or after the date hereof, whether oral or written, and regardless of the manner in which it is furnished, is referred to herein as "Proprietary Information." Proprietary Information does not include, however, information which (a) is or becomes 46 generally available to the public other than as a result of a disclosure by the Receiving Party or its Authorized Persons, (b) was available to the Receiving Party on a nonconfidential basis prior to its disclosure by the Disclosing Party or its Authorized Persons, provided that the source of such information is not known to the Receiving Party to be obligated to maintain such information as confidential, (c) becomes available to the Receiving Party on a nonconfidential basis from a Person other than the Disclosing Party or its Authorized Persons that is not otherwise bound by a confidentiality agreement with the Disclosing Party or any of its Authorized Persons, or is otherwise not under an obligation to the Disclosing Party or any of its Authorized Persons not to transmit the information to the Receiving Party or any other third party or (d) required to be disclosed in connection with this Agreement or any other documents contemplated hereby. As used in this Agreement, the term "Authorized Person" means, as to any Person, those Persons that are actively and directly participating in the evaluation and negotiation of the transactions contemplated by this Agreement. (b) Subject to Section 6.9 (a), unless otherwise agreed to in writing by the Disclosing Party, the Receiving Party agrees (i) except as required by law, to keep all Proprietary Information confidential and not to disclose or reveal any Proprietary Information to any Person other than its Authorized Persons, and to cause those persons to observe the terms of this Agreement and (ii) not to use Proprietary information for any purpose other than in connection with its evaluation of the transactions contemplated hereby or the completion of the transactions contemplated hereby in a manner approved by the Disclosing Party. SECTION 6.10 Notice of Developments. Each party hereto will give prompt written notice to the other parties hereto of any material adverse development causing a breach of any of his, her or its own representations and warranties contained herein. No disclosure by any party pursuant to this Section 47 6.10, however, shall be deemed to prevent or cure any misrepresentation, breach of warranty, or breach of covenant contained herein. SECTION 6.11 Exclusivity. None of Ikon, the Company (or any of its Subsidiaries) or the Stockholders will solicit, initiate, or encourage the submission of any proposal or offer from any person or entity relating to the acquisition of all or substantially all of the capital stock or assets of Ikon or the Company (including any acquisition structured as a merger, consolidation, or share exchange); provided, however, that Ikon, as a public company, will remain free to participate in any discussions or negotiations regarding, furnish any information with respect to, assist or participate in, or facilitate in any other manner any effort or attempt by any person or entity to do or seek any of the foregoing to the extent the fiduciary duties of Ikon's directors may require under applicable law. Each party hereto shall notify the other immediately if any person or entity makes any proposal, offer, inquiry, or contact with respect to any of the foregoing. ARTICLE 7 CONDITIONS TO IKON OBLIGATIONS The obligations of Ikon to consummate the Transactions shall be subject to the satisfaction of each of the following conditions on or before the Closing Date, subject to the right of Ikon to waive any one or more of such conditions: SECTION 7.1 Representations and Warranties of the Company and the Stockholders. The representations and warranties of the Company and the Stockholders contained in this Agreement, including the Schedules hereto, and in the certificates to be delivered to Ikon pursuant hereto and in connection herewith shall be true and correct in all material respects (except to the 48 extent any such representations and warranties is already qualified as to materiality in Article 3 or Article 4, in which case, such representations and warranties shall be true and correct without further qualifications as to materiality under this Section 7.1) on the date hereof and on the Closing Date as though such representations and warranties were made on the Closing Date, except for representations and warranties made as of a specific date which shall be true and correct on the Closing Date as of such specific date. SECTION 7.2 Performance of this Agreement. The Company and the Stockholders shall have duly performed or complied in all material respects with all of the obligations to be performed or complied with by them under the terms of this Agreement on or prior to the Closing Date. SECTION 7.3 Certificates of Stockholders and Company. Ikon shall have received a certificate signed by each of the Stockholders, dated as of the Closing Date and subject to no qualification, certifying that the conditions set forth in Sections 7.1 and 7.2 hereof with respect to each such Stockholder has been fully satisfied. Such certificate shall be deemed representations and warranties of such Stockholder under this Agreement. Ikon shall also have received a certificate duly signed on behalf of the Company by its chief executive officer, dated as of the Closing Date and subject to no qualification, certifying that the conditions set forth in Sections 7.1 and 7.2 hereof with respect to the Company have been fully satisfied. Such certificate shall be deemed representations and warranties of the Company under this Agreement. SECTION 7.4 No Material Adverse Change. Ikon shall have received a certificate duly signed on behalf of the Company by its chief executive officer to the effect that as of the Closing Date there has been no material adverse change in the financial condition, results of operations, Business or prospects of the Company since March 31, 2001, or any material 49 adverse change in the nature of the Business, the manner of conducting the Business or the prospects of the Business since such date, except as for the execution, delivery and performance of this Agreement and the other Transaction Documents. SECTION 7.5 Satisfactory Business Review. Ikon shall have satisfied itself, after receipt and consideration of the Schedules and after Ikon and its representatives have completed the review of the Business and the Company contemplated by this Agreement, that none of the information revealed thereby or in the Company Audited Financials has resulted in, or in the opinion of Ikon, may result in, a material adverse change in the assets, properties, business or condition (financial or otherwise) of the Company. SECTION 7.6 Governmental Permits and Approvals. All permits, including any environmental or regulatory consents or permits required for the lawful consummation of the Closing, shall have been obtained. SECTION 7.7 Third Party Consents. All consents, permits and approvals from parties to contracts or other agreements with the Company or with the Stockholders that may be required in connection with the performance by the Stockholders of their obligations under this Agreement or the continuance of such contracts or other agreements after the Closing shall have been obtained. SECTION 7.8 Charter Documents. The Company shall have delivered to Ikon copies of the Company's Certificate of Incorporation, certified as true and complete as of a recent date by the Secretary of State of Delaware, and certified as true and complete as of the Closing Date by an authorized officer of the Company. 50 SECTION 7.9 By-Laws. The Company shall have delivered to Ikon a copy of the Company's By-Laws as in effect on the date of the Closing certified by an authorized officer of the Company. SECTION 7.10 Good Standing. The Company shall have delivered to Ikon certificates of good standing, existence or its equivalent with respect to the Company, certified as of a recent date by the appropriate governmental authority of Delaware, and each other jurisdiction in which the failure to so qualify and be in good standing would have a material adverse effect on the Company and its Business. SECTION 7.11 Litigation. At the Closing Date no suit, action or other proceeding shall be pending or threatened before any court or governmental agency in which it is sought (i) to restrain, prohibit, invalidate or set aside (in whole or in part) the Transactions, (ii) to affect the right of the Stockholders or the Company to operate or control, after the Closing Date, its respective assets, properties and businesses (in whole or in part) or (iii) to obtain damages or a discovery order in connection with this Agreement or the consummation of the Transactions. SECTION 7.12 Consulting Agreements. Ikon shall have entered into a consulting agreement with each of Sigma Limited S.A. and Corporate Communications Network Inc. substantially in the form of Exhibits B and C, respectively, attached hereto. SECTION 7.13 New Warrants. Each holder of a warrant to purchase shares of Company Common Stock shall have executed a written agreement, in form and substance satisfactory to Ikon, pursuant to which such holder shall have agreed that upon exercise of such warrant after the Closing of the Transactions the holder shall be entitled to receive Ikon Common Stock in lieu of Company Common Stock on the basis of the Exchange Ratio. Any such warrantholder who shall become a stockholder of the Company after the date 51 hereof but prior to the Closing shall have executed a counterpart signature page to this Agreement. SECTION 7.14 Convertible Notes. All of the notes convertible into shares of Company Common Stock shall have been converted and the holders of the shares of Company Common Stock issued upon such conversion shall have executed a counterpart signature page to this Agreement. SECTION 7.15 May Notes. The holders of the May Notes shall have converted such notes into 650,000 shares of Company Common Stock. SECTION 7.16 Counterpart Signature Pages. All of the Existing Stockholders and any party that shall acquire any of the Company Shares prior to the Closing that shall not have executed this Agreement on the date hereof shall have executed counterpart signature pages hereto. SECTION 7.17 Agreement and General Release. The Company and Global Capital Partners, Inc., a Delaware corporation and an Existing Stockholder ("GCAP"), shall have entered into an Agreement and General Release substantially in the form of Exhibit D attached hereto. ARTICLE 8 CONDITIONS TO THE STOCKHOLDERS' OBLIGATIONS The obligations of the Stockholders to consummate the Transactions shall be subject to the satisfaction of each of the following conditions on or before the Closing Date, subject to the right of the Stockholders to waive any one or more of such conditions: 52 SECTION 8.1 Representations and Warranties of Ikon. The representations and warranties of Ikon contained in this Agreement, including the Schedules hereto, and in the certificates to be delivered to the Stockholders pursuant hereto and in connection herewith shall be true and correct in all material respects (except to the extent any such representations and warranties is already qualified as to materiality in Article 5, in which case, such representations and warranties shall be true and correct without further qualifications as to materiality under this Section 8.1) on the date hereof and on the Closing Date as though such representations and warranties were made on the Closing Date except for representation and warranties made as of a specific date which shall be true and correct on the Closing Date as of such specific date. SECTION 8.2 Performance of this Agreement. Ikon shall have duly performed or complied in all material respects with all of the obligations to be performed or complied with by it under the terms of this Agreement on or prior to the Closing Date. SECTION 8.3 Certificate of Ikon. The Stockholders shall have received a certificate duly signed on behalf of Ikon, dated as of the Closing Date and subject to no qualification certifying that the conditions set forth in Sections 8.1 and 8.2 hereof have been fully satisfied. Such certificate shall be deemed representations and warranties of Ikon under this Agreement. SECTION 8.4 No Material Adverse Change. The Stockholders shall have received a certificate, signed by a duly authorized officer of Ikon, to the effect that as of the Closing Date there has been no material adverse change in the financial condition, results of operations, business or prospects of Ikon since March 31, 2001 or any material adverse change in the nature of Ikon's business, the manner of conducting such business or the prospects of the 53 business since such date, except as associated with the execution, delivery and performance of this Agreement and the other Transaction Documents. SECTION 8.5 Satisfactory Business Review. The Stockholders shall have satisfied themselves, after the Stockholders and their Representatives have completed the review of Ikon's books and records that none of the information revealed thereby has resulted in, or in the opinion of the Stockholders, may result in, a material adverse change in the assets, properties, business or condition (financial or otherwise) of Ikon. SECTION 8.6 Governmental Permits and Approvals. All permits, including any environmental or regulatory consents or permits required for the lawful consummation of the Closing, shall have been obtained. SECTION 8.7 Third Party Consents. All consents, permits and approvals from parties to contracts or other agreements with Ikon that may be required in connection with the performance by Ikon of its obligations under this Agreement or the continuance of such contracts or other agreements after the Closing shall have been obtained. SECTION 8.8 Certified Resolutions. Ikon shall have delivered to the Stockholders certified copies of board resolutions approving and adopting this Agreement and the other Transaction Documents and authorizing the Transactions, certified as true and correct by the Secretary of Ikon. SECTION 8.9 Charter Documents. Ikon shall have delivered to the Stockholders copies of its Certificate of Incorporation, certified as true and complete as of a recent date by the appropriate governmental authority of Nevada, and certified as true and complete as of the Closing Date by the Secretary of Ikon. 54 SECTION 8.10 By-Laws. Ikon shall have delivered to the Stockholders a copy of Ikon's By-Laws certified by the Secretary of Ikon as of the Closing Date to be true and correct and in full force and effect as of the Closing Date. SECTION 8.11 Good Standing. Ikon shall have delivered to the Stockholders certificates of good standing, existence or its equivalent with respect to Ikon, certified as of a recent date by the appropriate governmental authority of Nevada, and each other jurisdiction in which the failure to so qualify and be in good standing would have a material adverse effect on Ikon and its business. SECTION 8.12 Resignation and Election of Directors and Officers. Subject to compliance with applicable Federal securities laws, the existing board of directors and officers of Ikon shall have resigned and the individuals listed in Schedule 8.12 annexed hereto shall have been appointed in lieu thereof. SECTION 8.13 Litigation. At the Closing Date no suit, action or other proceeding shall be pending or threatened before any court or governmental agency in which it is sought (i) to restrain, prohibit, invalidate or set aside (in whole or in part) the Transactions contemplated by this Agreement, (ii) to affect the right of Ikon to operate or control, after the Closing Date, its assets, properties and businesses (in whole or in part) or (iii) to obtain damages or a discovery order in connection with this Agreement or the consummation of the Transactions. SECTION 8.14 Liquid Net Worth of Ikon. Ikon shall have furnished to the Stockholders evidence that the liquid (cash or cash equivalents) net worth of Ikon as at the Closing shall be not less than Four Hundred Thousand Dollars ($400,000). SECTION 8.15 Convertible Notes. All of the notes convertible into shares of Company Common Stock shall have been converted, the pledge agreement between GlobalNet Financial.com, Inc., a New Stockholder, and the 55 Company, dated as of February 16, 2001(the "GlobalNet Pledge Agreement"), shall have been terminated and the 250,000 shares of the common stock of GCAP, pledged pursuant to the terms of the GlobalNet Pledge Agreement shall have been delivered to the Company. SECTION 8.16 May Notes. The holders of the May Notes shall have converted such notes into 650,000 shares of Company Common Stock, the pledge agreements between the holders of the May Notes and GCAP (the "May Notes Pledge Agreements") shall have been terminated and the aggregate of 1,000,000 shares of Company Common Stock pledged pursuant to the terms of the May Notes Pledge Agreement shall have been delivered to GCAP. SECTION 8.17 Egan Note. The Company shall have delivered to Donald J. Egan ("Egan") an aggregate of 310,000 shares of the common stock of GCAP as payment in full of a $175,000 promissory note of the Company held by Egan. SECTION 8.18 Company Common Stock Sale. GCAP shall have sold an aggregate of at least 2,684,000 shares of Company Common Stock and warrants to purchase 500,000 shares of Company Common Stock to Jonathan D. Siegel ("Siegel"), the 401 (k) plan f/b/o Siegel and/or Gregory C. Frank ("Frank") and/or such other purchaser or purchasers acceptable to GCAP on such terms and conditions as mutually agreed by GCAP and each of the purchaser or purchasers and each of the purchaser or purchasers thereof shall have executed a counterpart signature page to this Agreement. SECTION 8.19 GCAP Common Stock Sale. Siegel and/or the 401 (k) plan f/b/o Siegel and Frank shall have sold an aggregate of 340,398 shares of the common stock of GCAP to Egan on such terms and conditions as mutually agreed by each of Siegel and Frank and Egan. 56 SECTION 8.20 Employment Agreements. Each of Siegel and Frank shall have entered into an amendment to his employment agreement with the Company and GCAP, on such terms and conditions as mutually agreed by the Company, GCAP and each of Siegel and Frank, pursuant to which GCAP shall be removed as a party to each such agreement. SECTION 8.21 Equipment Lease Agreements. GCAP shall have entered into an agreement or agreements with such party or parties acceptable to GCAP, on such terms and conditions as mutually agreed by GCAP and each of such party or parties, pursuant to which GCAP shall receive reasonable collateral in order to secure GCAP's guaranty of certain equipment leases entered into by the Company. ARTICLE 9 INDEMNIFICATION; SURVIVAL SECTION 9.1 Obligation of the Shareholders to Indemnify. Each of the Stockholders, severally and not jointly, agrees to indemnify, defend and hold harmless Ikon and its stockholders as of the date of this Agreement and their respective directors, officers, heirs, legal representatives, successors and assigns, from and against all losses, liabilities, damages, deficiencies, actions, suits, proceedings, claims, demands, orders, assessments, amounts paid in settlement, fines, and reasonable costs and expenses (including interest, penalties and reasonable attorneys' fees and disbursements and reasonable investigative costs) (collectively, "Losses") based upon, arising out of or otherwise in respect of (i) any breach in any of the representations and warranties of such Stockholder in this Agreement and (ii) any breach or non-fulfillment of any of the covenants or agreements of such Stockholder contained in this Agreement. 57 SECTION 9.2 Obligation of Ikon to Indemnify. Ikon agrees to indemnify, defend and hold harmless the Stockholders, and their respective directors, officers, heirs, legal representatives, successors and assigns, from and against any Losses based upon, arising out of or otherwise in respect of (i) any breach in any of the representations and warranties of Ikon set forth in this Agreement and (ii) any breach or nonfulfillment of any covenant or agreement of Ikon contained in this Agreement. SECTION 9.3 Claims Notice. Each party hereto (an "Indemnified Party") shall, promptly upon becoming aware of any event or circumstance (an "Indemnifiable Event") which, in his, her or its reasonable judgment, may result in a Loss for which the Indemnified Party could assert a right of indemnification against any other party (or parties) hereto (the "Indemnifying Party") under this Article 9, give notice thereof (the "Claims Notice") to the Indemnifying Party (but the obligations of the Indemnifying Party under this Article 9 shall not be impaired by the Indemnified Party's failure to give such notice, except to the extent that said failure actually prejudices the rights of the Indemnifying Party). The Claims Notice shall describe the Indemnifiable Event in reasonable detail, shall indicate whether the Indemnifiable Event involves a "Third Party Claim" (defined below), and shall indicate the amount (estimated, if necessary) of the Loss that has been or may be suffered by the Indemnified Party. In such event, the Indemnifying Party shall, within fifteen (15) business days after receipt of the Claims Notice, give notice to the Indemnified Party of whether he or it intends to dispute the claim described in the Claims Notice (the "Response Notice"). If the Indemnifying Party timely disputes the Claims Notice as provided above, the Indemnified Party shall, for a period of not more than fifteen (15) business days after receipt of the Response Notice (or less, if the nature of the Indemnifiable Event so requires), seek out a negotiated settlement of the dispute with the Indemnifying Party and shall 58 refrain during that period from commencing any judicial proceeding or other action to enforce this Article 9. If, despite their good faith negotiations, the parties are unable to resolve the dispute within the aforesaid period (or if the Indemnifying Party fails to timely give the Response Notice), the Indemnified Party shall be free to exercise all rights and remedies available to him or it hereunder, at law in equity or otherwise to enforce his or its rights under this Article 9. As used herein, "Third Party Claim" means any demand, claim or circumstance which, with the lapse of time or otherwise, would give rise to a claim or the commencement (or threatened commencement) of any action, proceeding or investigation against the Indemnified Party by any other person. SECTION 9.4 Opportunity to Defend Against Third Party Claims. If the Claims Notice relates to a Third Party Claim, the Indemnifying Party may elect to compromise or defend, at its own expense and by its own counsel, such Third Party Claim. If the Indemnifying Party elects to compromise or defend such Third Party Claim, it shall within 30 business days (or sooner, if the nature of the Third Party Claim so requires) after his or its receipt of the Claims Notice, notify the Indemnified Party of its intent to do so, and the Indemnified Party shall cooperate, at the expense of the Indemnifying Party, in the compromise of, or defense against, such Third Party Claim. If the Indemnifying Party elects not to compromise or defend such Third Party claim, fails to notify the Indemnified Party of its election as herein provided or contests its obligation to indemnify under this Agreement, the Indemnified Party may pay, compromise or defend such Third Party Claim. Notwithstanding the foregoing, neither the Indemnifying Party nor the Indemnified Party may settle or compromise any claim over the objection of the other, provided, however, that consent to settlement or compromise shall not be unreasonably withheld. In any event, the Indemnified Party and the Indemnifying Party may participate, at their own expense, in the defense of such Third Party Claim. If the Indemnifying Party chooses to defend any claim, the Indemnified Party shall make available to 59 the Indemnifying Party any books, records or other documents within its control that are necessary or appropriate for such defense. The Indemnifying Party shall be subrogated to all rights and remedies of the Indemnified Party to the extent of any indemnification provided by the Indemnifying Party to the Indemnified Party. SECTION 9.5 Limitation on Indemnification. Notwithstanding anything to the contrary in this Agreement, no Indemnified Party shall have any liability for indemnification under this Article 9 until the total of all Losses of the Indemnified Party exceeds $25,000 and the total liability of an Indemnifying Party under this Article 9 shall (i) in no event exceed the fair market value of the consideration received as of the date of the applicable Indemnifiable Event and (ii) be reduced to the extent of payment to the Indemnified Party of any applicable insurance proceeds; provided, however, that the foregoing limitations on indemnification shall be inapplicable in the case of any Losses resulting from any breach of the representations and warranties contained in Sections 3.1, 3.2, 5.2 and 5.22 hereof. SECTION 9.6 Survival. Notwithstanding the investigations by the parties hereto of each other's affairs, and notwithstanding any knowledge of facts determined or determinable by such parties pursuant to such investigation, each of Ikon and the Stockholders shall have the right to rely fully upon the representations, warranties, covenants and agreements of the other parties contained in this Agreement. The representations and warranties of the parties contained herein shall survive the Closing (i) to the extent contained in Section 3.1, 3.2, 5.2 and 5.22 hereof, for the duration of the applicable statute of limitations, (ii) to the extent relating to any other matter, for twelve (12) months following the Closing. A claim for indemnification hereunder must be asserted by a party seeking indemnification within the respective period of survival. 60 SECTION 9.7 Indemnification Exclusive Remedy. The parties hereto acknowledge and confirm that, except in the event of fraud, the indemnification procedures described in this Article 9 shall be the sole and exclusive remedies available to them for any breach or non-fulfillment of the representations, warranties, covenants, agreements and other provisions of this Agreement. ARTICLE 10 TERMINATION SECTION 10.1 Termination. Anything herein or elsewhere to the contrary notwithstanding, this Agreement may be terminated and the transactions contemplated hereby abandoned at any time prior to the Closing Date: (a) By mutual consent of the Stockholders and Ikon; or (b) By the Stockholders if any of the conditions set forth in Section 8 hereof shall have become incapable of fulfillment, and shall not have been waived by the Stockholders; or (c) By Ikon if any of the conditions set forth in Section 7 hereof shall have become incapable of fulfillment, and shall not have been waived by Ikon; or (d) By Ikon or the Stockholders if the Closing has not occurred on or before August 17, 2001. SECTION 10.2 Effects of Termination. If this Agreement is terminated and the transactions contemplated hereby are not consummated as described above, this Agreement shall become void and of no further force and effect, except for the provisions of Section 6.7 relating to expenses and Section 6.9 relating to confidentiality. 61 ARTICLE 11 MISCELLANEOUS SECTION 11.1 Notices. Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally, telegraphed, telexed, sent by facsimile transmission or sent by certified, registered or express mail, postage prepaid. Any such notice shall be deemed given when so delivered personally, telegraphed, telexed or sent by facsimile transmission or, if mailed, three (3) days after the date of deposit in the mails, as follows: (i) if to the Stockholders, to: at the address provided by each Stockholder under his, her or its signature hereto with a copy to: Arthur S. Marcus, Esq. Gersten, Savage & Kaplowitz, LLP 101 East 52nd Street, 9th Floor New York, NY 10022 Fax No. (212) 980-5192 (ii) if to Ikon, to: 62 with a copy to: Steven A. Saide, Esq. Bryan Cave LLP 245 Park Avenue New York, NY 10167 Fax No. (212) 692-1900 Any party may by notice given in accordance with this Section to the other parties designate another address or person for receipt of notices hereunder. SECTION 11.2 Entire Agreement. This Agreement (including the schedules and exhibits) and the agreements referred to herein and/or executed in connection with the consummation of the Transactions contemplated herein contain the entire agreement among the parties with respect to the exchange of the Company Shares for the Ikon Shares and the related transactions, and supersede all prior agreements, written or oral, with respect thereto. SECTION 11.3 Waivers and Amendments; Non-Contractual Remedies; Preservation of Remedies. This Agreement may be amended, superseded, canceled, renewed or extended, and the terms hereof may be waived, only by a written instrument signed by the parties or, in the case of a waiver, by the parties waiving compliance. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof. Nor shall any waiver on the part of any party of any such right, power or privilege, nor any single or partial exercise of any such right, power or privilege. The rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies that any party may otherwise have at law or in equity. The rights and remedies of any party based upon, arising out of or otherwise in respect of any inaccuracy in or breach of any representation, warranty, covenant or agreement contained in this Agreement shall in no way be limited by the fact that the act, omission, occurrence or other state of facts upon which any claim of any such 63 inaccuracy or breach is based may also be the subject of any other representation, warranty, covenant or agreement contained in this Agreement (or in any other agreement between the parties) as to which there is no inaccuracy or breach. SECTION 11.4 Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of New York, applicable to agreements made and to be performed entirely within such State (without giving effect to conflicts of law principles thereof). SECTION 11.5 Binding Effect; No Assignment; No Third Party Beneficiaries. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and legal representatives. Nothing contained herein is intended or shall be construed as creating third party beneficiaries to this Agreement. This Agreement is not assignable except by operation of law. SECTION 11.6 Variations in Pronouns. All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the context may require. SECTION 11.7 Counterparts. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument. Each counterpart may consist of a number of copies hereof each signed by less than all, but together signed by all of the parties hereto. Fascimile signatures shall be deemed originals for all purposes. SECTION 11.8 Exhibits and Schedules. The Exhibits and Schedules are a part of this Agreement as if fully set forth herein. All references herein to Sections, subsections, clauses, Exhibits and Schedules 64 shall be deemed references to such parts of this Agreement, unless the context shall otherwise require. SECTION 11.9 Headings. The headings in this Agreement are for reference only, and shall not affect the interpretation of this Agreement. IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement as of the date first above written. IKON VENTURES, INC. SUTTON ONLINE, INC. By: /s/ IAN RICE By: /s/ JONATHAN SIEGEL -------------------------------- ------------------------------ Name: Ian Rice Name: Jonathan Siegel Title: Chairman Title: Chief Executive Officer 65 THE STOCKHOLDERS: GLOBAL CAPITAL PARTNERS, INC. By: /s/ Martin Sumichrast ------------------------------- Name: Martin Sumichrast Title: Chief Executive Officer /s/ Jonathan D. Siegel /s/ Tiburon Asset Management, LLC - ---------------------------------- ---------------------------------- Jonathan D. Siegel Tiburon Asset Management, LLC /s/Gregory Frank /s/ Tiburon Asset Management - ---------------------------------- ---------------------------------- Gregory Frank Tiburon Asset Management /s/ The Breitman Family Trust dtd 7/1/99 /s/ Tiburon Management Limited - ---------------------------------------- ---------------------------------- The Breitman Family Trust dtd 7/1/99 Tiburon Management Limited /s/ Corona Corporation /s/ Bud Clarke - ---------------------------------- ---------------------------------- Corona Corporation Bud Clarke /s/ Frank Huang /s/ Steven Caruso - ---------------------------------- ---------------------------------- Frank Huang Steven Caruso /s/ Calvin Caldwell /s/ Stephen C. Schoffman - ---------------------------------- ---------------------------------- Calvin Caldwell Stephen C. Schoffman /s/ Jay Raubvogel /s/ Peter Cohen - ---------------------------------- ---------------------------------- Jay Raubvogel Peter Cohen 66 /s/ William Grundig /s/ Jason Bishara - ---------------------------------- ---------------------------------- William Grundig Jason Bishara /s/ Ralph Olson /s/ Radek Hulan - ---------------------------------- ---------------------------------- Ralph Olson Radek Hulan /s/ Richard Joyce /s/ Karel Kolar - ---------------------------------- ---------------------------------- Richard Joyce Karel Kolar GlobalNet Financial.com, Inc. Sigma Limited SA By: /s/ W. THOMAS HODGSON By: /s/ DUBOIS YVES ------------------------------ ------------------------------ W. Thomas Hodgson Dubois Yves J.B. Sutton Group, Inc. 401(K) Profit Sharing Plan Dated 10/1/95 F/B/O Jonathan D. Siegel By: /s/ Jonathan D. Siegel - ---------------------------------- Jonathan D. Siegel 67 EX-10.2 4 ex10_2.txt EXHIBIT 10.2 Exhibit 10.2 FIRST AMENDMENT TO AGREEEMENT AND PLAN OF SHARE EXCHANGE THIS FIRST AMENDMENT, made as of this 18th day of July, 2001, to that certain Agreement and Plan of Share Exchange, dated as of June 19, 2001 (the "Exchange Agreement"), by and among Ikon Ventures, Inc., a Nevada corporation ("Ikon"), Sutton Online, Inc., a Delaware corporation (the "Company"), the stockholders of the Company on June 19, 2001, each of whom has executed the Exchange Agreement on the date thereof or shall execute a counterpart signature page thereto prior to the consummation of the transactions contemplated thereunder (collectively, the "Existing Stockholders"), and each of the entities that becomes a stockholder of the Company after June 19, 2001 upon the conversion of certain convertible promissory notes of the Company, each of which shall execute a counterpart signature page thereto prior to the consummation of the transactions contemplated thereunder (collectively, the "New Stockholders;" the Existing Stockholders and the New Stockholders are hereinafter collectively referred to as the "Stockholders"). WITNESSETH: WHEREAS, Ikon, the Company and the Stockholders are or will be parties to the Exchange Agreement; and WHEREAS, Ikon, the Company and the Stockholders desire to amend the Exchange Agreement as hereinafter provided, and upon and subject to the terms and conditions hereinafter set forth, NOW, THEREFORE, in consideration of the premises and of their mutual undertakings, Ikon, the Company and the Stockholders hereby agree as follows: 1. All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Exchange Agreement. 2. Section 7.14 of the Exchange Agreement is hereby deleted in its entirety and is replaced by the following: Section 7.14 Convertible Notes. All of the notes convertible into shares of Company Stock other than the $525,000 note, dated February 16, 2001 (the "GNet Note"), held by GlobalNet Financial.com, Inc. ("GNet") shall have been converted and the holders of the shares of Company Common Stock issued upon such conversion shall have executed a counterpart signature page to this Agreement. GNet shall have exchanged the GNet Note for 888,888 shares of Series A Exchangeable Preferred Stock of the Company (the "Preferred Stock"). 3. Section 8.15 of the Exchange Agreement is hereby deleted in its entirety and is replaced by the following: Section 8.15 Convertible Notes. All of the notes convertible into shares of Company Common Stock other than the GNet Note shall have been converted, the pledge agreement between GNet and the Company, dated as of 2 February 16, 2001 (the "GNet Pledge Agreement"), shall have been terminated and the 250,000 shares of the common stock of GCAP, pledged pursuant to the terms of the GNet Pledge Agreement, shall have been delivered to the Company. 4. Notwithstanding anything to the contrary contained in the representations and warranties of the Company and Ikon contained in the Exchange Agreement or any of the schedules thereto, the parties hereto acknowledge as follows: (a) the Company has or will prior to the Closing amend its Certificate of Incorporation to increase its total authorized capital stock to 12,000,000 shares, par value $.025 per share, of which 11,000,000 shares shall be classified as common stock and 1,000,000 shares shall be classified as preferred stock issuable in such series and with such rights, preferences and privileges as the board of directors of the Company (the "Board") may from time to time determine. (b) the Board has or will prior to the Closing authorize the creation of the Preferred Stock that shall have the rights, preferences and privileges set forth in the Certificate of Designation attached hereto as Exhibit A. (c) Simultaneous with the Closing Ikon will grant to the Company the option to acquire such number of shares of Ikon Common Stock as may be required to exchange the 3 Preferred Stock. 5. Except as expressly amended hereby, the Exchange Agreement shall continue to be, and shall remain, in full force and effect in accordance with its terms and conditions. In the Exchange Agreement, or in any instrument, document or consideration executed or delivered in connection with the Transactions, any reference to the "Agreement" shall be deemed and construed to be a reference to the Agreement as amended hereby. 6. This First Amendment shall be governed by and subject to the internal laws of the State of New York, without regard to principles of conflicts of law. 7. This First Amendment may be executed in separate counterparts, each of which when so executed shall be an original, but all of such counterparts shall together constitute but one and the same instrument. Each counterpart may consist of a number of copies hereof each signed by less than all, but together signed by all of the parties hereto. Facsimile signatures shall be deemed originals for all purposes. IN WITNESS WHEREOF, the parties hereto have executed this First Amendment as of the day and year first above written. IKON VENTURES, INC. SUTTON ONLINE, INC. By: /s/ Ian Rice By: /s/ Jonathan D. Siegel ---------------------------- ----------------------------- Name: Ian Rice Name: Jonathan D. Siegel Title: Chairman Title: Chief Executive Officer 4 THE STOCKHOLDERS: GLOBAL CAPITAL PARTNERS, INC. By: /s/ Martin Sumichrast ---------------------------------- Name: Martin Sumichrast Title: Chief Executive Officer /s/ Jonathan D. Siegel /s/ Tiburon Asset Management, LLC - ------------------------------------ ---------------------------------- Jonathan D. Siegel Tiburon Asset Management, LLC /s/ Gregory Frank /s/ Tiburon Asset Management - ------------------------------------ ---------------------------------- Gregory Frank Tiburon Asset Management /s/ The Breitman Family Trust dtd 7/1/99 /s/ Tiburon Management Limited - ---------------------------------------- ---------------------------------- The Breitman Family Trust dtd 7/1/99 Tiburon Management Limited /s/ Corona Corporation /s/ Bud Clarke - ------------------------------------ ---------------------------------- Corona Corporation Bud Clarke /s/ Frank Huang /s/ Steven Caruso - ------------------------------------ ---------------------------------- Frank Huang Steven Caruso /s/ Calvin Caldwell /s/ Stephen C. Schoffman - ------------------------------------ ---------------------------------- Calvin Caldwell Stephen C. Schoffman /s/ Jay Raubvogel /s/ Peter Cohen - ------------------------------------ ---------------------------------- Jay Raubvogel Peter Cohen 5 /s/ William Grundig /s/ Jason Bishara - ------------------------------------ ---------------------------------- William Grundig Jason Bishara /s/ Ralph Olson /s/ Radek Hulan - ------------------------------------ ---------------------------------- Ralph Olson Radek Hulan /s/ Richard Joyce /s/ Karel Kolar - ------------------------------------ ---------------------------------- Richard Joyce Karel Kolar Sigma Limited S.A. J.B. Sutton Group 401(K) Profit Sharing Plan Dated 10/1/95 F/B/O Jonathan D. Siegel By: /s/ Dubois Yves By: /s/ Jonathan D. Siegel --------------------------------- ---------------------------------- Name: Dubois Yves Jonathan D. Siegel Title: Secretary 6 EX-10.3 5 ex10_3.txt EXHIBIT 10.3 Exhibit 10.3 EMPLOYMENT AGREEMENT -------------------- THIS EMPLOYMENT AGREEMENT (this "Employment Agreement") is entered into this 22nd day of November, 1999, by and among Eastbrokers International Incorporated, a Delaware corporation ("Eastbrokers"), Sutton Online, LLC, a limited liability company organized under the laws of the State of New York and a wholly-owned subsidiary of Eastbrokers ("the Company") and Gregory C. Frank, (the "Employee" or "Mr. Frank"). Eastbrokers, the Company and Mr. Frank are sometimes referred to collectively herein as the "parties" or individually as a "party." W I T N E S S E T H: WHEREAS, Employee desires to be employed, and the Company desires to employ Employee, as President of the Company; WHEREAS, the parties desire to enter into this Employment Agreement setting forth the terms and conditions of the employment relationship between Employee and the Company; NOW, THEREFORE, in consideration of the premises and mutual covenants and conditions contained herein, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree to the provisions set forth in this Employment Agreement. 1. Definitions. Unless otherwise defined herein, Capitalized terms used herein shall have the meanings ascribed to such terms in the LLC Interest Purchase Agreement (the "Purchase Agreement"), dated as of even date herewith, by and among Eastbrokers, the Company and the Members of the Company. Use of the terms "herein," "hereof," "herewith," "hereunder" or any similar term shall refer to this Employment Agreement . 2. Employment. During the Employment Term (as defined in Section 5 hereof) Employee shall be employed as President of the Company and shall render such services to the Company as are customarily performed by persons serving in such capacity. Employee shall devote such portion of his working time to the Company as is reasonably necessary to the Business of the Company. During the Employment Term, there shall be no material increase or decrease in the duties and responsibilities of Employee otherwise than as provided herein, unless the parties otherwise agree in writing. 3. Employment Term. The initial term of employment under this Employment Agreement shall be for the two (2) year period from the date hereof (the "Employment Term"). 4. Compensation. (i) Salary. The Company agrees to pay Employee during the Employment Term salary at an annual rate equal to $78,000, with such subsequent increases in salary during the Employment Term as may be determined by the Company. The salary to be paid to the Employee shall be payable to Employee not less frequently than monthly. Employee shall not be entitled to receive fees for serving as a member of the Operating Committee (the "Committee") or any other committee of the Company. (b) Bonus. In addition to the salary provided for in Section 4(a), the Company will pay to Employee, if eligible, his share of the Bonus Pool pro rata in accordance with the membership interests in the Company owned by him immediately prior to the Acquisition. 5. Benefits; Business Expenses. (a) Benefits and Perquisites. Employee shall be entitled to participate in any plan of Eastbrokers relating to stock options, restricted stock, employee stock purchase or ownership, pension, thrift, profit sharing, group life insurance, medical coverage, education or other retirement or employee benefit plans or arrangements that it has adopted or may adopt for the benefit of its employees. (b) Business Expenses. During the Employment Term, the Company shall promptly reimburse Employee for all reasonable and customary expenses incurred by Employee in performing services for the Company, including all travel and living expenses while away from home on business or at the request of and in the service of the Company, provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Company, as such policies and procedures may from time to time be amended. 6. Voluntary Absences; Vacations. Employee shall be entitled, without loss of pay, to be absent voluntarily for reasonable periods of time from the performance of his duties and responsibilities under this Employment Agreement. Unless the Company shall determine otherwise, all such voluntary absences shall count as paid vacation time. Employee shall be entitled to an annual paid vacation of four weeks per year. The timing of paid vacations shall be scheduled in a reasonable manner by Employee, taking into consideration the effect on the Business of the Company of such vacation time. 7. Termination of Employment. (a) Notice of Termination. Any termination of Employee's employment by the Company or by Employee (other than termination pursuant to Section 7(b)(i) hereof) shall be communicated to the other party by a written Notice of Termination. Any Notice of Termination given by a party shall specify the particular termination provision of this Employment Agreement relied upon by such party and shall set forth in reasonable detail the facts and circumstances relied upon as providing a basis for the termination under the provisions specified. (b) Termination Date. "Termination Date" shall mean: (i) the date of Employee's death; (ii) the date specified in the Notice of Termination, if Employee's employment is terminated pursuant to Section 7(d)(ii) hereof (which shall be after the expiration of the three-month period specified therein); or (iii) the date specified in the Notice of Termination if, Employee's employment is terminated by the Company for Cause. (c) Termination by Employee. (i) Employee may terminate his employment without breach of this Employment Agreement for Good Reason by giving ten (10) business days prior written notice to the Company or at any time by giving 90 days prior written notice to the Company; (ii) For purposes of this paragraph (c), "Good Reason" shall mean (A) the assignment to Employee of any duties inconsistent with Employee's employment as set forth in Section 1 of this Employment Agreement or any substantial adverse alteration in the nature or status of Employee's responsibilities; (B) any purported termination of Employee's employment by the Company that is not effected pursuant to a Notice of Termination as provided hereunder; (C) any other failure by the Company to comply with any material provision of this Employment Agreement which failure continues for more than ten (10) business days after written notice of such noncompliance from Employee. (d) Termination by Death; Termination by the Company. Employee's employment may be terminated without any breach of this Employment Agreement under the following circumstances: (i) Death. Employee's employment shall terminate upon his death. (ii) Disability. The Company may terminate Employee's employment because of Disability. For this purpose, "Disability" shall mean the inability of Employee to perform his duties under this Employment Agreement because of physical or mental illness or incapacity for a continuous period of three months during which Employee shall have been absent from his duties under this Employment Agreement on a substantially full-time basis. (iii) Cause. The Company may terminate Employee's employment for Cause. For purposes of this Employment Agreement, "Cause" shall mean, except to the extent caused by a Disability, the occurrence or existence of any one or more of the following: (1) the willful and continued failure by Employee to substantially perform his duties hereunder after delivery to Employee of a written demand for substantial performance that specifically identifies the manner in which the Company believes that Employee has not substantially performed his duties and a reasonable opportunity to cure; provided, however, that this subparagraph (i) shall not apply to any actual or anticipated failure subsequent to delivery by Employee of a Notice of Termination (as defined herein) for Good Reason (as defined herein); (2) willful misconduct by Employee that causes substantial and material injury to the Business or operations of the Company, the continuation of which misconduct, in the reasonable judgment of Eastbrokers will continue to substantially and materially injure the business and operations of the Company in the future; (3) conviction of Employee of a felony under any law of any jurisdiction; or (4) breach by Employee of the Non-Compete Agreement. For purposes of this subparagraph (iii), "willful" shall mean that Employee's failure to perform or his misconduct did not occur in good faith or did occur with other than a reasonable belief that his act or failure to act was in the best interests of the Company. Employee shall be deemed to have been terminated for Cause if and only if Employee shall have been provided with (A) reasonable notice setting forth the reasons that the Company believes constitute Cause for the termination of his employment and (B) Notice of Termination (as herein defined) from the Company finding that, in the reasonable good faith opinion of the Company, Cause for the termination exists and specifying the particulars thereof in reasonable detail. In the event that Employee's employment has been terminated by the Company for Cause and Employee disputes in good faith whether such Cause has occurred, the Company shall continue to make to Employee the payments contemplated by this Employment Agreement as if his employment had not been terminated; provided, however, that as a condition to the provisions of this sentence, Employee shall have delivered to the Company a written instrument obligating Employee to repay to the Company any amounts to which it is ultimately determined that he was not entitled under this Employment Agreement . 8. Compensation Upon Termination of Employment. (a) Termination Because of Death, for Cause or Without Good Reason. If Employee's employment is terminated because of his death, by the Company for Cause or by Employee other than for Good Reason, the Company shall pay Employee his salary and a pro rata portion of the bonus provided for in Section 4(b) (based upon the bonus paid in respect of the preceding year) through the Termination Date and the Company shall have no further obligation to Employee hereunder. (b) Termination Because of Disability. If Employee's employment is terminated by the Company because of Disability, the Company shall pay Employee an annual disability benefit equal to the excess of (x) 60 percent of his salary at the rate in effect under Section 4(a) hereof on the Termination Date plus 60 percent of the bonus amount specified in Section 4(b) hereof (based upon the bonus paid in respect of the preceding year or, if such termination occurs less than one year into the Employment Term, in respect of the average annualized bonus to the extent previously paid) over (y) the amount of the long term disability benefit that is payable to Employee under any policy of disability insurance provided for Employee by the Company at its expense. The disability benefit shall be paid for such period as is determined by the Company but shall not be less than the remainder of the scheduled term of employment. (c) Termination Without Cause or With Good Reason. If, in breach of this Employment Agreement, the Company shall terminate Employee's employment without Cause or because of Disability, or if Employee shall terminate his employment for Good Reason, then Employee shall be entitle to the following provisions: (i) The Company shall pay Employee his salary and a pro rata portion of the bonus specified in Section 4(b) hereof (based upon the bonus paid in respect of the preceding year or, if such termination occurs less than one year into the Employment Term, in respect of the average annualized bonus to the extent previously paid) through the Termination Date and all other unpaid and pro rata amounts to which Employee is entitled as of the Termination Date under any compensation plan or program of the Company. (ii) The Company shall pay as liquidated damages to Employee, and in lieu of any further compensation payments hereunder for periods after the Termination Date, Employee's then current salary (payable in installments in accordance with the Company's normal payroll practices) for such period of time after the Termination Date until Employee obtains new employment providing comparable compensation; provided, however, that (A) in no case shall such payments be made after the end of the Employment Term and (B) Employee shall use his best efforts to secure new employment with comparable compensation as soon as is reasonably possible after such termination. (iii) In addition to the liquidated amounts that are payable to Employee, unless otherwise provided for, Employee shall be entitled (for the remaining term of this Employment Agreement as if the termination of employment of Employee had not occurred) to continue (A) to participate in, and accrue benefits under, all retirement, pension, profit sharing, employee stock ownership, thrift and other deferred compensation plans of the Company (Employee being deemed to receive annually for the purposes of such plans Employee's then current compensation and annualized bonus (at the time of his termination) under Section 4(a) and (b) of this Employment Agreement ), except to the extent that such continued participation and accrual is expressly prohibited by law or to the extent such plan constitutes a "qualified plan" under Section 401 of the Internal Revenue Code of 1986, as amended, by the terms of the plan and (B) to receive all other benefits referred to in Section 5(a) and (b) hereof for the remaining term of this Employment Agreement as if the termination of employment had not occurred. All insurance or other indemnification, defense or hold-harmless provisions, to the extent applicable, that are in effect on the date the Notice of Termination is sent to Employee shall continue for the benefit of Employee with respect to all of his acts and omissions while an officer or director as fully and completely as if such termination had not occurred, and until the final expiration or running of all periods of limitation against action which may be applicable to such acts or omissions; and (d) Cost of Enforcement. In the event the employment of Employee is terminated by the Company because of Disability or without Cause, or by Employee for Good Reason, and the Company fails to make timely payment of the amounts owed to Employee under this Employment Agreement, Employee shall be entitled to reimbursement for all reasonable costs, including attorney's fees, incurred by Employee in taking action to collect such amounts or otherwise to enforce this Employment Agreement, plus interest on such amounts at the rate of one percent above the prime rate (defined as the base rate on corporate loans at large U.S. money center commercial banks as published by The Wall Street Journal) compounded monthly, for the period from the date of termination until the date on which payment is made to Employee. Such reimbursement and interest shall be in addition to all rights to which Employee is otherwise entitled under this Employment Agreement . (e) Parachute Payment Limitation. (i) If any payment or benefit to Employee under this Employment Agreement would be considered a "parachute payment" within the meaning of Section 280G of the Code, and if, after reduction for any applicable federal excise tax imposed by Section 4999 of the Code ("Excise Tax") and federal income tax imposed by the Code, Employee's net proceeds of the amounts payable and the benefits provided under this Employment Agreement would be less than the amount of Employee's net proceeds resulting from the payment of the Reduced Amount described below (after reduction for federal income taxes), then the amount payable and the benefits provided under this Employment Agreement shall be limited to the Reduced Amount. (ii) The "Reduced Amount" shall be the largest amount that could be received by Employee under this Employment Agreement such that no amount paid to Employee under this Employment Agreement and any other agreement, contract or understanding heretofore or hereafter entered into between Employee and the Company ("Other Agreements") and any formal or informal plan or other arrangement heretofore or hereafter adopted by the Company for the direct or indirect provision of compensation to Employee (including groups or classes of participants or beneficiaries of which thc Employee is a member) whether or not such compensation is deferred, is in cash, or is in the form of a benefit to or for Employee ("Benefit Plan") would be subject to the Excise Tax. (iii) In the event that the amount payable to Employee shall be limited to the Reduced Amount, then Employee shall have the right, in Employee's sole discretion, to designate those payments or benefits under this Employment Agreement, any Other Agreements, and/or any Benefit Plans, that should be reduced or eliminated so as to avoid having the payment to Employee under this Employment Agreement be subject to the Excise Tax. 9. Confidentiality. In consideration of the willingness of the Company to employ Employee and the salary and benefits to be received therefore, any for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, Employee agrees as follows: (a) The Company Owns All of Employee's Work. All improvements, discoveries, inventions, designs, documents, licenses and patents, or other data devised, conceived, made, developed, obtained, filed, perfected, acquired or first reduced to practice, in whole or in part, or in the regular course of employment by Employee during the Employment Term and related in any way to the Business (including development and research) of the Company or any subsidiary or affiliate engaged in business substantially similar to that of the Company shall be promptly disclosed to the Company. Employee hereby assigns and transfers to the Company all right, interest and title thereto, and such improvements, discoveries, inventions, designs, documents, licenses and patents or other data shall become the property of the Company. During the Employment Term and at any time thereafter upon request of the Company, Employee will join and render assistance in any proceedings and execute any papers necessary to file and prosecute applications for, and to acquire, maintain and enforce, letters, patents, trademarks, registrations and/or copyrights, both domestic and foreign, with respect to such improvements, discoveries, inventions, designs, documents, licenses and patents, or other data as required for vesting and maintaining title to the same in the Company. (b) Non-Disclosure of Confidential Information. (i) Employee agrees and acknowledges that the term "Confidential and Proprietary Information" shall mean any and all information not in the public domain, in any form, emanating from or relating to the Company and its subsidiaries and affiliates, including, but not limited to, trade secrets, technical information, costs, designs, drawings, processes, systems, methods of operation and procedures, formulae, test data, know-how, improvements, price lists, financial data, code books, invoices and other financial statements, computer programs, discs and printouts, sketches and plans (engineering, architectural or otherwise), customer lists, telephone numbers, names, addresses, information about equipment and processes (including specifications and operating manuals), or any other compilation of information written or unwritten that is used in the business of the Company or any subsidiary or affiliate that gives the Company or any subsidiary or affiliate any opportunity to obtain an advantage over competitors. (ii) Employee agrees and acknowledges that all Confidential and Proprietary Information, in any form, and all copies and extracts thereof, are and shall remain the sole and exclusive property of the Company and, upon termination of his employment with the Company for any reason whatsoever, Employee hereby agrees to return or cause to be returned to the Company the originals and each and every copy of any Confidential and Proprietary Information provided to or acquired, made or created by Employee, or caused, directly or indirectly, by Employee to have been provided to or acquired, made or created by any Person during the period of his employment. Except as ordered by a court of competent jurisdiction, Employee expressly agrees never to disclose to any Person (except to other Company employees, and then only on a "need to know" basis) any Confidential and Proprietary Information either during the Employment Term or at any time after termination of his employment, except with the express written authorization and consent of the Company. (c) Customers' Information. Employee understands and acknowledges that each customer of the Company or its subsidiaries or affiliates will disclose information that will be within the Company's control in connection with the Company's furnishing of services to its customers. Employee covenants and agrees to hold such information in the strictest confidence and shall treat such information in the same manner and be obligated by the provisions of this Employment Agreement as if such information were Confidential and Proprietary Information, as defined in Section 9(b) hereof. 10. Non-Compete Agreement. Employee shall be bound by the provisions of the Non-Compete Agreement, dated as of even date herewith, entered into by and among Eastbrokers, the Company and Employee (the "Non-Compete Agreement"). Nothing in this Employment Agreement shall be construed as a waiver by Eastbrokers or the Company of their respective rights, or Employee's obligations, under the Non-Compete Agreement. Unless otherwise agreed to in writing by the parties, Eastbrokers shall be the sole arbiter of any conflict or ambiguity between the provisions hereof and thereof. 11. Miscellaneous. (a) Entire Agreement. This Employment Agreement constitutes the entire agreement and understanding among the parties with respect to the subject matter hereof and cancels and supersedes any and all previous or contemporaneous contracts, agreements, representations, warranties, covenants and understandings (whether oral or written) by, between or among each and any of the parties with respect to the subject matter hereof. Nothing contained in any document or instrument of conveyance, transfer, assignment or delivery delivered pursuant hereto shall cancel, amend, extend, modify, renew or alter in any manner any representation, warranty, covenant, agreement or indemnity contained herein. (b) Amendments. No addition to, and no cancellation, amendment, extension, modification, renewal or other alteration of, this Employment Agreement shall be binding upon a party unless and to the extent set forth in a written instrument which states that it adds to, cancels, amends, extends, modifies, renews or otherwise alters this Employment Agreement and which is signed by the party or parties to be bound thereby and delivered pursuant to Section 11(l) hereof. (c) Waivers. No waiver of any provision of this Employment Agreement shall be binding upon a party unless such waiver is expressly set forth in a written instrument signed by the party or parties to be bound thereby and delivered pursuant to Section 11(l) hereof to. Such waiver shall be effective only to the extent specifically set forth in such written instrument. Neither the exercise (from time to time and at any time) by a party of, nor the delay or failure (at any time or for any period of time) to exercise, any right, power or remedy shall constitute a waiver of the right to exercise, or impair, limit or restrict the exercise of, such right, power or remedy or any other right, power or remedy at any time and from time to time thereafter. No waiver of any right, power or remedy of a party shall be deemed to be a waiver of any other right, power or remedy of such party or shall, except to the extent so waived, impair, limit or restrict the exercise of such right, power or remedy. (d) Headings. The headings set forth in this Employment Agreement have been inserted for convenience of reference only, shall not be considered a part of this Employment Agreement and shall not limit, modify or affect in any way the meaning or interpretation of this Employment Agreement . (e) Severability. If any provision of this Employment Agreement shall hereafter be held to be invalid, unenforceable or illegal in any jurisdiction under any circumstances for any reason, (i) such provision shall be reformed to the minimum extent necessary to cause such provision to be valid, enforceable and legal and preserve the original intent of the parties or (ii) if such provision cannot be so reformed, such provision shall be severed from this Employment Agreement . Such holding shall not affect or impair the validity, enforceability or legality of such provision in any other jurisdiction or under any other circumstances. Neither such holding nor such reformation or severance shall affect or impair the legality, validity or enforceability of any other provision of this Employment Agreement. (f) Counterparts; Facsimiles. This Employment Agreement may be signed in any number of counterparts, each of which (when executed and delivered) shall constitute an original instrument, but all of which together shall constitute one and the same instrument. This Employment Agreement shall become effective and be deemed to have been executed and delivered by all of the parties at such time as counterparts shall have been executed and delivered by each of the parties, regardless of whether each of the parties has executed the same counterpart. It shall not be necessary when making proof of this Employment Agreement to account for any counterparts other than a sufficient number of counterparts which, when taken together, contain signatures of all of the parties. Delivery of a facsimile or xerographic reproduction of an originally executed counterpart shall be sufficient to make effective and, except to the extent prohibited by law, to constitute proof of this Employment Agreement . (g) Successors and Assigns; Third Party Beneficiaries. This Employment Agreement and the rights and obligations of the parties hereto shall bind and inure to the benefit of any successor or successors of Eastbrokers or the Company by way of reorganization, merger or consolidation and of any assignee of all or substantially all of its business and assets. Neither this Employment Agreement nor any rights or benefits conferred or duties created hereunder may be assigned by Employee without the prior written consent of Eastbrokers and the Company. This Agreement shall not confer any rights on any persons other than parties to this Agreement as provided herein. (h) Expenses. Unless otherwise provided, Employee will pay his own legal and other expenses incurred by him or on his behalf, the Company will pay its own legal and other expenses incurred by it or on its behalf, and Eastbrokers will pay its own legal and other expenses incurred by it or on its behalf, in each case in connection with the negotiation and preparation of this Employment Agreement and the transactions contemplated herein whether or not such transactions are completed or this Employment Agreement is terminated. (i) Governing Law. The validity, interpretation, performance and enforcement of this Employment Agreement shall be governed by the laws of the State of New York, without giving effect to any choice-of-law or conflicts-of-law principles that may require the application of the laws of another jurisdiction. (j) Arbitration. The parties hereto agree that any dispute arising out of or relating to this Employment Agreement or any other agreement relating hereto or arising out of the transactions contemplated hereby or thereby that is not resolved by the parties within thirty (30) days after notice of such dispute has been received by all parties in accordance with the notice provisions of this Employment Agreement shall be submitted in accordance with the rules of the American Arbitration Association to the American Arbitration Association for resolution at a location suggested by the aggrieved party and acceptable to the American Arbitration Association. The parties agree that all costs and expenses, including, without limitation, legal fees incurred in connection with such proceeding, shall be borne by the party against whom the dispute is resolved. (k) Ambiguity in Drafting. Each party shall have been deemed to have participated equally in the negotiations in connection with and the drafting of this Employment Agreement and any ambiguity in this Employment Agreement shall not be construed against any purported author thereof. (l) Notices. Any notice required or permitted hereunder shall be given in writing and shall be deemed to have been given as follows: on the day established by the sender as having been delivered personally or by telecopier (with confirmation); on the day delivered by a reputable private courier as established by the sender by evidence obtained from such courier; or on the third (3rd) day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications, to be valid, must be addressed as follows (or to such other address as may hereafter be designated by a party and delivered to the other parties in accordance with this Section 11(l)): If to Eastbrokers, to: Eastbrokers International Incorporated 6300 Fairview Road, Suite 1410 Charlotte, North Carolina 28210 Attention: Mr. Martin A. Sumichrast Telecopy No.: (704) 643-8097 with a copy to: Kelley Drye & Warren LLP Two Stamford Plaza 281 Tresser Boulevard Stamford, Connecticut 06901 Attention: Paul F. McCurdy, Esq. Telecopy No.: (203) 327-2669 If to the Company, to: Sutton Online, LLC 575 Underhill Boulevard Suite 224 Syosset, NY 11791 Attention: Gregory C. Frank Telecopy No.: (516) 682-9714. With a copy to: c/o Eastbrokers International Incorporated 6300 Fairview Road, Suite 1410 Charlotte, North Carolina 28210 Attention: Mr. Martin A. Sumichrast Telecopy No.: (704) 643-8097 And to: Kelley Drye & Warren LLP Two Stamford Plaza 281 Tresser Boulevard Stamford, Connecticut 06901 Attention: Paul F. McCurdy, Esq. Telecopy No.: (203) 327-2669 If to Employee, to: 575 Underhill Boulevard Suite 224 Syosset, NY 11791 Attention: Gregory C. Frank Telecopy No.: (516) 682-9714. IN WITNESS WHEREOF, the undersigned have executed and delivered this Employment Agreement as of the date first written above. EASTBROKERS INTERNATIONAL INCORPORATED By: /s/ MARTIN A. SUMICHRAST ------------------------------------- Name: Martin A. Sumichrast Title: Chairman & Chief Executive Officer SUTTON ONLINE, LLC By: /s/ GREGORY C. FRANK ------------------------------------- Name: Gregory C. Frank /s/ GREGORY C. FRANK ------------------------------------- Name: Gregory C. Frank, Employee EX-10.4 6 ex10_4.txt EXHIBIT 10.4 Exhibit 10.4 AMENDMENT TO THE EMPLOYMENT AGREEMENT OF GREGORY C. FRANK This Amendment (this "Amendment") dated as of August 1 , 2001, is by and among Global Capital Partners Inc., a Delaware corporation with its principal offices at 6000 Fairview Road, Suite 1410, Charlotte, North Carolina 28210 ("GCAP"), Sutton Online, Inc., a Delaware corporation with its principal offices at 1000 Woodbury Road, Suite 214, Woodbury, New York 11797 (the "Company") and Gregory C. Frank, an individual residing at 300 Edwards Street, Apt. 3I East, Roslyn Heights, New York 11577 (the "Employee"). W I T N E S S T H: - - - - - - - - - WHEREAS, GCAP was formerly known as Eastbrokers International Incorporated ("Eastbrokers"); and WHEREAS, the Company is the successor entity to Sutton Online, LLC, a limited liability company organized under the laws of the State of New York ("Sutton Online"); and WHEREAS, Eastbrokers, Sutton Online and Employee have previously entered into an Employment Agreement dated November 22, 1999 (the "Employment Agreement"); and WHEREAS, GCAP, the Company and Employee desire to amend the Employment Agreement as to certain matters as herein after set forth. NOW THEREFORE, in consideration of the premises and the covenants and agreements contained herein, the parties agree as follows: 1. The parties hereto agree that, from and after the date hereof, GCAP shall no longer be a party to the Employment Agreement and shall be released from any liability to the Company or Employee thereunder. 2. The parties hereto agree that, from and after the date hereof, every reference to "Eastbrokers" in the Employment Agreement shall be amended to read "the Company." 3. Except as expressly provided herein, all of the terms and conditions of the Employment Agreement shall be unmodified and in full force and effect. 4. From and after the execution and delivery of this Amendment, all references to the Employment Agreement contained in all other agreements and instruments executed and delivered to or in connection with the Employment Agreement shall hereafter mean and refer to the Employment Agreement as amended hereby. IN WITNESS WHEREOF, the undersigned have executed this Amendment on the day and year first above mentioned. GLOBAL CAPITAL PARTNERS INC. By: /s/ MARTIN A. SUMICHRAST ------------------------------ Name: Martin A. Sumichrast Title: Chief Executive Officer SUTTON ONLINE, INC. By: /s/ JONATHAN D. SIEGEL ------------------------------ Name: Jonathan D. Siegel Title: Chief Executive Officer EMPLOYEE By: /s/ GREGORY C. FRANK ------------------------------ Gregory C. Frank EX-10.5 7 ex10_5.txt EXHIBIT 10.5 Exhibit 10.5 AMENDMENT NO 2. TO THE EMPLOYMENT AGREEMENT OF GREGORY C. FRANK This Amendment (this "Amendment") dated as of August 8, 2001, is entered into by and between Sutton Online, Inc., a Delaware corporation with its principal offices at 1000 Woodbury Road, Suite 214, Woodbury, New York 11709 ("Sutton") and Gregory C. Frank, an individual residing at 300 Edwards Street, Apt. 3I East, Roslyn Heights, 11577 ("Executive"). W I T N E S S E T H: WHEREAS, Sutton and Executive are parties to a certain Amendment to the Employment Agreement of Gregory C. Frank dated as of August 1, 2001 ("Amendment No. 1"); and WHEREAS, Sutton and Execution desire to further amend the Employment Agreement (as such term is defined in Amendment No. 1) as to certain matters as hereinafter set forth. NOW THEREFORE, in consideration of the premises and the covenants and agreements contained herein, the parties agree as follows: 1. The parties agree that Section 4 of the Employment Agreement is modified to change Executive's annual base salary from $78,000 to $120,000. 2. Except as expressly provided herein, all of the terms and conditions of the Employment Agreement shall be unmodified and in full force and effect. IN WITNESS WHEREOF, the undersigned have executed this Amendment on the day and year first above mentioned. Sutton Online, Inc. By: /s/ Jonathan D. Siegel --------------------------------------- Name: Jonathan D. Siegel Title: Chief Executive Officer EXECUTIVE By: /s/ Gregory C. Frank --------------------------------------- Gregory C. Frank EX-10.6 8 ex10_6.txt EXHIBIT 10.6 Exhibit 10.6 EMPLOYMENT AGREEMENT -------------------- THIS EMPLOYMENT AGREEMENT (this "Employment Agreement") is entered into this 22nd day of November, 1999, by and among Eastbrokers International Incorporated, a Delaware corporation ("Eastbrokers"), The JB Sutton Group, LLC, a limited liability company organized under the laws of the State of New York and a wholly-owned subsidiary of Eastbrokers ("the Company") and Jonathan D. Siegel, (the "Employee" or "Mr. Siegel"). Eastbrokers, the Company and Mr. Siegel are sometimes referred to collectively herein as the "parties" or individually as a "party." W I T N E S S E T H: WHEREAS, Employee desires to be employed, and the Company desires to employ Employee, as President of the Company; WHEREAS, the parties desire to enter into this Employment Agreement setting forth the terms and conditions of the employment relationship between Employee and the Company; NOW, THEREFORE, in consideration of the premises and mutual covenants and conditions contained herein, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree to the provisions set forth in this Employment Agreement. 1. Definitions. Unless otherwise defined herein, Capitalized terms used herein shall have the meanings ascribed to such terms in the LLC Interest Purchase Agreement (the "Purchase Agreement"), dated as of even date herewith, by and among Eastbrokers, the Company and the Members of the Company. Use of the terms "herein," "hereof," "herewith," "hereunder" or any similar term shall refer to this Employment Agreement . 2. Employment. During the Employment Term (as defined in Section 5 hereof) Employee shall be employed as President of the Company and shall render such services to the Company as are customarily performed by persons serving in such capacity. Employee shall devote such portion of his working time to the Company as is reasonably necessary to the Business of the Company. During the Employment Term, there shall be no material increase or decrease in the duties and responsibilities of Employee otherwise than as provided herein, unless the parties otherwise agree in writing. 3. Employment Term. The initial term of employment under this Employment Agreement shall be for the two (2) year period from the date hereof (the "Employment Term"). 4. Compensation. (a) Salary; Commission. The Company agrees to pay Employee during the Employment Term a salary at an annual rate equal to $360,000, with such subsequent increases in salary during the Employment Term as may be determined by the Company. (b) Bonus. In addition to the compensation provided for in Section 4(a), the Company will pay to Employee, if eligible, his share of the Bonus Pool pro rata in accordance with the membership interests in the Company owned by him immediately prior to the Acquisition. 5. Benefits; Business Expenses. (a) Benefits and Perquisites. Employee shall be entitled to participate in any plan of Eastbrokers relating to stock options, restricted stock, employee stock purchase or ownership, pension, thrift, profit sharing, group life insurance, medical coverage, education or other retirement or employee benefit plans or arrangements that it has adopted or may adopt for the benefit of its employees. (b) Business Expenses. During the Employment Term, the Company shall promptly reimburse Employee for all reasonable and customary expenses incurred by Employee in performing services for the Company, including all travel and living expenses while away from home on business or at the request of and in the service of the Company, provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Company, as such policies and procedures may from time to time be amended. 6. Voluntary Absences; Vacations. Employee shall be entitled, without loss of pay, to be absent voluntarily for reasonable periods of time from the performance of his duties and responsibilities under this Employment Agreement. Unless the Company shall determine otherwise, all such voluntary absences shall count as paid vacation time. Employee shall be entitled to an annual paid vacation of four weeks per year. The timing of paid vacations shall be scheduled in a reasonable manner by Employee, taking into consideration the effect on the Business of the Company of such vacation time. 7. Termination of Employment. (a) Notice of Termination. Any termination of Employee's employment by the Company or by Employee (other than termination pursuant to Section 7(b)(i) hereof) shall be communicated to the other party by a written Notice of Termination. Any Notice of Termination given by a party shall specify the particular termination provision of this Employment Agreement relied upon by such party and shall set forth in reasonable detail the facts and circumstances relied upon as providing a basis for the termination under the provisions specified. (b) Termination Date. "Termination Date" shall mean: (i) the date of Employee's death; (ii) the date specified in the Notice of Termination, if Employee's employment is terminated pursuant to Section 7(d)(ii) hereof (which shall be after the expiration of the three-month period specified therein); or (iii) the date specified in the Notice of Termination if, Employee's employment is terminated by the Company for Cause. (c) Termination by Employee. (i) Employee may terminate his employment without breach of this Employment Agreement for Good Reason by giving ten (10) business days prior written notice to the Company or at any time by giving 90 days prior written notice to the Company; (ii) For purposes of this paragraph (c), "Good Reason" shall mean (A) the assignment to Employee of any duties inconsistent with Employee's employment as set forth in Section 1 of this Employment Agreement or any substantial adverse alteration in the nature or status of Employee's responsibilities; (B) any purported termination of Employee's employment by the Company that is not effected pursuant to a Notice of Termination as provided hereunder; (C) any other failure by the Company to comply with any material provision of this Employment Agreement which failure continues for more than ten (10) business days after written notice of such noncompliance from Employee. (d) Termination by Death; Termination by the Company. Employee's employment may be terminated without any breach of this Employment Agreement under the following circumstances: (i) Death. Employee's employment shall terminate upon his death. (ii) Disability. The Company may terminate Employee's employment because of Disability. For this purpose, "Disability" shall mean the inability of Employee to perform his duties under this Employment Agreement because of physical or mental illness or incapacity for a continuous period of three months during which Employee shall have been absent from his duties under this Employment Agreement on a substantially full-time basis. (iii) Cause. The Company may terminate Employee's employment for Cause. For purposes of this Employment Agreement, "Cause" shall mean, except to the extent caused by a Disability, the occurrence or existence of any one or more of the following: (1) the willful and continued failure by Employee to substantially perform his duties hereunder after delivery to Employee of a written demand for substantial performance that specifically identifies the manner in which the Company believes that Employee has not substantially performed his duties and a reasonable opportunity to cure; provided, however, that this subparagraph (i) shall not apply to any actual or anticipated failure subsequent to delivery by Employee of a Notice of Termination (as defined herein) for Good Reason (as defined herein); (2) willful misconduct by Employee that causes substantial and material injury to the Business or operations of the Company, the continuation of which misconduct, in the reasonable judgment of Eastbrokers will continue to substantially and materially injure the business and operations of the Company in the future; (3) conviction of Employee of a felony under any law of any jurisdiction; or (4) breach by Employee of the Non-Compete Agreement. For purposes of this subparagraph (iii), "willful" shall mean that Employee's failure to perform or his misconduct did not occur in good faith or did occur with other than a reasonable belief that his act or failure to act was in the best interests of the Company. Employee shall be deemed to have been terminated for Cause if and only if Employee shall have been provided with (A) reasonable notice setting forth the reasons that the Company believes constitute Cause for the termination of his employment and (B) Notice of Termination (as herein defined) from the Company finding that, in the reasonable good faith opinion of the Company, Cause for the termination exists and specifying the particulars thereof in reasonable detail. In the event that Employee's employment has been terminated by the Company for Cause and Employee disputes in good faith whether such Cause has occurred, the Company shall continue to make to Employee the payments contemplated by this Employment Agreement as if his employment had not been terminated; provided, however, that as a condition to the provisions of this sentence, Employee shall have delivered to the Company a written instrument obligating Employee to repay to the Company any amounts to which it is ultimately determined that he was not entitled under this Employment Agreement . 8. Compensation Upon Termination of Employment. (a) Termination Because of Death, for Cause or Without Good Reason. If Employee's employment is terminated because of his death, by the Company for Cause or by Employee other than for Good Reason, the Company shall pay Employee his compensation and a pro rata portion of the bonus provided for in Section 4(b) (based upon the bonus paid in respect of the preceding year) through the Termination Date and the Company shall have no further obligation to Employee hereunder. (b) Termination Because of Disability. If Employee's employment is terminated by the Company because of Disability, the Company shall pay Employee an annual disability benefit equal to the excess of (x) 60 percent of his compensation at the rate in effect under Section 4(a) hereof on the Termination Date plus 60 percent of the bonus amount specified in Section 4(b) hereof (based upon the bonus paid in respect of the preceding year or, if such termination occurs less than one year into the Employment Term, in respect of the average annualized bonus to the extent previously paid) over (y) the amount of the long term disability benefit that is payable to Employee under any policy of disability insurance provided for Employee by the Company at its expense. The disability benefit shall be paid for such period as is determined by the Company but shall not be less than the remainder of the scheduled term of employment. (c) Termination Without Cause or With Good Reason. If, in breach of this Employment Agreement, the Company shall terminate Employee's employment without Cause or because of Disability, or if Employee shall terminate his employment for Good Reason, then Employee shall be entitle to the following provisions: (i) The Company shall pay Employee his compensation and a pro rata portion of the bonus specified in Section 4(b) hereof (based upon the bonus paid in respect of the preceding year or, if such termination occurs less than one year into the Employment Term, in respect of the average annualized bonus to the extent previously paid) through the Termination Date and all other unpaid and pro rata amounts to which Employee is entitled as of the Termination Date under any compensation plan or program of the Company. (ii) The Company shall pay as liquidated damages to Employee, and in lieu of any further compensation payments hereunder for periods after the Termination Date, Employee's then current compensation (payable in installments in accordance with the Company's normal payroll practices) for such period of time after the Termination Date until Employee obtains new employment providing comparable compensation; provided, however, that (A) in no case shall such payments be made after the end of the Employment Term and (B) Employee shall use his best efforts to secure new employment with comparable compensation as soon as is reasonably possible after such termination. (iii) In addition to the liquidated amounts that are payable to Employee, unless otherwise provided for, Employee shall be entitled (for the remaining term of this Employment Agreement as if the termination of employment of Employee had not occurred) to continue (A) to participate in, and accrue benefits under, all retirement, pension, profit sharing, employee stock ownership, thrift and other deferred compensation plans of the Company (Employee being deemed to receive annually for the purposes of such plans Employee's then current compensation and annualized bonus (at the time of his termination) under Section 4(a) and (b) of this Employment Agreement ), except to the extent that such continued participation and accrual is expressly prohibited by law or to the extent such plan constitutes a "qualified plan" under Section 401 of the Internal Revenue Code of 1986, as amended, by the terms of the plan and (B) to receive all other benefits referred to in Section 5(a) and (b) hereof for the remaining term of this Employment Agreement as if the termination of employment had not occurred. All insurance or other indemnification, defense or hold-harmless provisions, to the extent applicable, that are in effect on the date the Notice of Termination is sent to Employee shall continue for the benefit of Employee with respect to all of his acts and omissions while an officer or director as fully and completely as if such termination had not occurred, and until the final expiration or running of all periods of limitation against action which may be applicable to such acts or omissions; and (d) Cost of Enforcement. In the event the employment of Employee is terminated by the Company because of Disability or without Cause, or by Employee for Good Reason, and the Company fails to make timely payment of the amounts owed to Employee under this Employment Agreement, Employee shall be entitled to reimbursement for all reasonable costs, including attorney's fees, incurred by Employee in taking action to collect such amounts or otherwise to enforce this Employment Agreement, plus interest on such amounts at the rate of one percent above the prime rate (defined as the base rate on corporate loans at large U.S. money center commercial banks as published by The Wall Street Journal) compounded monthly, for the period from the date of termination until the date on which payment is made to Employee. Such reimbursement and interest shall be in addition to all rights to which Employee is otherwise entitled under this Employment Agreement . (e) Parachute Payment Limitation. (i) If any payment or benefit to Employee under this Employment Agreement would be considered a "parachute payment" within the meaning of Section 280G of the Code, and if, after reduction for any applicable federal excise tax imposed by Section 4999 of the Code ("Excise Tax") and federal income tax imposed by the Code, Employee's net proceeds of the amounts payable and the benefits provided under this Employment Agreement would be less than the amount of Employee's net proceeds resulting from the payment of the Reduced Amount described below (after reduction for federal income taxes), then the amount payable and the benefits provided under this Employment Agreement shall be limited to the Reduced Amount. (ii) The "Reduced Amount" shall be the largest amount that could be received by Employee under this Employment Agreement such that no amount paid to Employee under this Employment Agreement and any other agreement, contract or understanding heretofore or hereafter entered into between Employee and the Company ("Other Agreements") and any formal or informal plan or other arrangement heretofore or hereafter adopted by the Company for the direct or indirect provision of compensation to Employee (including groups or classes of participants or beneficiaries of which thc Employee is a member) whether or not such compensation is deferred, is in cash, or is in the form of a benefit to or for Employee ("Benefit Plan") would be subject to the Excise Tax. (iii) In the event that the amount payable to Employee shall be limited to the Reduced Amount, then Employee shall have the right, in Employee's sole discretion, to designate those payments or benefits under this Employment Agreement, any Other Agreements, and/or any Benefit Plans, that should be reduced or eliminated so as to avoid having the payment to Employee under this Employment Agreement be subject to the Excise Tax. 9. Confidentiality. In consideration of the willingness of the Company to employ Employee and the compensation and benefits to be received therefore, any for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, Employee agrees as follows: (a) The Company Owns All of Employee's Work. All improvements, discoveries, inventions, designs, documents, licenses and patents, or other data devised, conceived, made, developed, obtained, filed, perfected, acquired or first reduced to practice, in whole or in part, or in the regular course of employment by Employee during the Employment Term and related in any way to the Business (including development and research) of the Company or any subsidiary or affiliate engaged in business substantially similar to that of the Company shall be promptly disclosed to the Company. Employee hereby assigns and transfers to the Company all right, interest and title thereto, and such improvements, discoveries, inventions, designs, documents, licenses and patents or other data shall become the property of the Company. During the Employment Term and at any time thereafter upon request of the Company, Employee will join and render assistance in any proceedings and execute any papers necessary to file and prosecute applications for, and to acquire, maintain and enforce, letters, patents, trademarks, registrations and/or copyrights, both domestic and foreign, with respect to such improvements, discoveries, inventions, designs, documents, licenses and patents, or other data as required for vesting and maintaining title to the same in the Company. (b) Non-Disclosure of Confidential Information. (i) Employee agrees and acknowledges that the term "Confidential and Proprietary Information" shall mean any and all information not in the public domain, in any form, emanating from or relating to the Company and its subsidiaries and affiliates, including, but not limited to, trade secrets, technical information, costs, designs, drawings, processes, systems, methods of operation and procedures, formulae, test data, know-how, improvements, price lists, financial data, code books, invoices and other financial statements, computer programs, discs and printouts, sketches and plans (engineering, architectural or otherwise), customer lists, telephone numbers, names, addresses, information about equipment and processes (including specifications and operating manuals), or any other compilation of information written or unwritten that is used in the business of the Company or any subsidiary or affiliate that gives the Company or any subsidiary or affiliate any opportunity to obtain an advantage over competitors. (ii) Employee agrees and acknowledges that all Confidential and Proprietary Information, in any form, and all copies and extracts thereof, are and shall remain the sole and exclusive property of the Company and, upon termination of his employment with the Company for any reason whatsoever, Employee hereby agrees to return or cause to be returned to the Company the originals and each and every copy of any Confidential and Proprietary Information provided to or acquired, made or created by Employee, or caused, directly or indirectly, by Employee to have been provided to or acquired, made or created by any Person during the period of his employment. Except as ordered by a court of competent jurisdiction, Employee expressly agrees never to disclose to any Person (except to other Company employees, and then only on a "need to know" basis) any Confidential and Proprietary Information either during the Employment Term or at any time after termination of his employment, except with the express written authorization and consent of the Company. (c) Customers' Information. Employee understands and acknowledges that each customer of the Company or its subsidiaries or affiliates will disclose information that will be within the Company's control in connection with the Company's furnishing of services to its customers. Employee covenants and agrees to hold such information in the strictest confidence and shall treat such information in the same manner and be obligated by the provisions of this Employment Agreement as if such information were Confidential and Proprietary Information, as defined in Section 9(b) hereof. 10. Non-Compete Agreement. Employee shall be bound by the provisions of the Non-Compete Agreement, dated as of even date herewith, entered into by and among Eastbrokers, the Company and Employee (the "Non-Compete Agreement"). Nothing in this Employment Agreement shall be construed as a waiver by Eastbrokers or the Company of their respective rights, or Employee's obligations, under the Non-Compete Agreement. Unless otherwise agreed to in writing by the parties, Eastbrokers shall be the sole arbiter of any conflict or ambiguity between the provisions hereof and thereof. 11. Miscellaneous. (a) Entire Agreement. This Employment Agreement constitutes the entire agreement and understanding among the parties with respect to the subject matter hereof and cancels and supersedes any and all previous or contemporaneous contracts, agreements, representations, warranties, covenants and understandings (whether oral or written) by, between or among each and any of the parties with respect to the subject matter hereof. Nothing contained in any document or instrument of conveyance, transfer, assignment or delivery delivered pursuant hereto shall cancel, amend, extend, modify, renew or alter in any manner any representation, warranty, covenant, agreement or indemnity contained herein. (b) Amendments. No addition to, and no cancellation, amendment, extension, modification, renewal or other alteration of, this Employment Agreement shall be binding upon a party unless and to the extent set forth in a written instrument which states that it adds to, cancels, amends, extends, modifies, renews or otherwise alters this Employment Agreement and which is signed by the party or parties to be bound thereby and delivered pursuant to Section 11(l) hereof. (c) Waivers. No waiver of any provision of this Employment Agreement shall be binding upon a party unless such waiver is expressly set forth in a written instrument signed by the party or parties to be bound thereby and delivered pursuant to Section 11(l) hereof to. Such waiver shall be effective only to the extent specifically set forth in such written instrument. Neither the exercise (from time to time and at any time) by a party of, nor the delay or failure (at any time or for any period of time) to exercise, any right, power or remedy shall constitute a waiver of the right to exercise, or impair, limit or restrict the exercise of, such right, power or remedy or any other right, power or remedy at any time and from time to time thereafter. No waiver of any right, power or remedy of a party shall be deemed to be a waiver of any other right, power or remedy of such party or shall, except to the extent so waived, impair, limit or restrict the exercise of such right, power or remedy. (d) Headings. The headings set forth in this Employment Agreement have been inserted for convenience of reference only, shall not be considered a part of this Employment Agreement and shall not limit, modify or affect in any way the meaning or interpretation of this Employment Agreement . (e) Severability. If any provision of this Employment Agreement shall hereafter be held to be invalid, unenforceable or illegal in any jurisdiction under any circumstances for any reason, (i) such provision shall be reformed to the minimum extent necessary to cause such provision to be valid, enforceable and legal and preserve the original intent of the parties or (ii) if such provision cannot be so reformed, such provision shall be severed from this Employment Agreement . Such holding shall not affect or impair the validity, enforceability or legality of such provision in any other jurisdiction or under any other circumstances. Neither such holding nor such reformation or severance shall affect or impair the legality, validity or enforceability of any other provision of this Employment Agreement . (f) Counterparts; Facsimiles. This Employment Agreement may be signed in any number of counterparts, each of which (when executed and delivered) shall constitute an original instrument, but all of which together shall constitute one and the same instrument. This Employment Agreement shall become effective and be deemed to have been executed and delivered by all of the parties at such time as counterparts shall have been executed and delivered by each of the parties, regardless of whether each of the parties has executed the same counterpart. It shall not be necessary when making proof of this Employment Agreement to account for any counterparts other than a sufficient number of counterparts which, when taken together, contain signatures of all of the parties. Delivery of a facsimile or xerographic reproduction of an originally executed counterpart shall be sufficient to make effective and, except to the extent prohibited by law, to constitute proof of this Employment Agreement . (g) Successors and Assigns; Third Party Beneficiaries. This Employment Agreement and the rights and obligations of the parties hereto shall bind and inure to the benefit of any successor or successors of Eastbrokers or the Company by way of reorganization, merger or consolidation and of any assignee of all or substantially all of its business and assets. Neither this Employment Agreement nor any rights or benefits conferred or duties created hereunder may be assigned by Employee without the prior written consent of Eastbrokers and the Company. This Agreement shall not confer any rights on any persons other than parties to this Agreement as provided herein. (h) Expenses. Unless otherwise provided, Employee will pay his own legal and other expenses incurred by him or on his behalf, the Company will pay its own legal and other expenses incurred by it or on its behalf, and Eastbrokers will pay its own legal and other expenses incurred by it or on its behalf, in each case in connection with the negotiation and preparation of this Employment Agreement and the transactions contemplated herein whether or not such transactions are completed or this Employment Agreement is terminated. (i) Governing Law. The validity, interpretation, performance and enforcement of this Employment Agreement shall be governed by the laws of the State of New York, without giving effect to any choice-of-law or conflicts-of-law principles that may require the application of the laws of another jurisdiction. (j) Arbitration. The parties hereto agree that any dispute arising out of or relating to this Employment Agreement or any other agreement relating hereto or arising out of the transactions contemplated hereby or thereby that is not resolved by the parties within thirty (30) days after notice of such dispute has been received by all parties in accordance with the notice provisions of this Employment Agreement shall be submitted in accordance with the rules of the National Association of Securities Dealers Regulation, Inc. ("NASDR") to NASDR for resolution at a location suggested by the aggrieved party and acceptable to the NASDR. In the event the NASDR declines to arbitrate such proceeding, each party agrees that such proceeding shall be submitted in accordance with the rules of the American Arbitration Association to the American Arbitration Association for resolution at a location suggested by the aggrieved party and acceptable to the American Arbitration Association. The parties agree that all costs and expenses, including, without limitation, legal fees incurred in connection with such proceeding, shall be borne by the party against whom the dispute is resolved. (k) Ambiguity in Drafting. Each party shall have been deemed to have participated equally in the negotiations in connection with and the drafting of this Employment Agreement and any ambiguity in this Employment Agreement shall not be construed against any purported author thereof. (l) Notices. Any notice required or permitted hereunder shall be given in writing and shall be deemed to have been given as follows: on the day established by the sender as having been delivered personally or by telecopier (with confirmation); on the day delivered by a reputable private courier as established by the sender by evidence obtained from such courier; or on the third (3rd) day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications, to be valid, must be addressed as follows (or to such other address as may hereafter be designated by a party and delivered to the other parties in accordance with this Section 11(l)): If to Eastbrokers, to: Eastbrokers International Incorporated 6300 Fairview Road, Suite 1410 Charlotte, North Carolina 28210 Attention: Mr. Martin A. Sumichrast Telecopy No.: (704) 643-8097 with a copy to: Kelley Drye & Warren LLP Two Stamford Plaza 281 Tresser Boulevard Stamford, Connecticut 06901 Attention: Paul F. McCurdy, Esq. Telecopy No.: (203) 327-2669 If to the Company, to: c/o Eastbrokers International Incorporated 6300 Fairview Road, Suite 1410 Charlotte, North Carolina 28210 Attention: Mr. Martin A. Sumichrast Telecopy No.: (704) 643-8097 with a copy to: Kelley Drye & Warren LLP Two Stamford Plaza 281 Tresser Boulevard Stamford, Connecticut 06901 Attention: Paul F. McCurdy, Esq. Telecopy No.: (203) 327-2669 If to Employee, to: [ ] Attention: [ ] Telecopy No.: [ ] with a copy to: [ ] Attention: [ ] Telecopy No.: [ ] IN WITNESS WHEREOF, the undersigned have executed and delivered this Employment Agreement as of the date first written above and hereby agree to the compensation option as indicated below. EASTBROKERS INTERNATIONAL INCORPORATED By: /s/ MARTIN A. SUMICHRAST ------------------------------------- Name: Martin A. Sumichrast Title: Chairman & Chief Executive Officer THE JB SUTTON GROUP, LLC By: /s/ JONATHAN D. SIEGEL ------------------------------------- Name: Jonathan D. Siegel Title: President /s/ JONATHAN D. SIEGEL ------------------------------------- Name: Jonathan D. Siegel, Employee EX-10.7 9 ex10_7.txt EXHIBIT 10.7 Exhibit 10.7 AMENDMENT TO THE EMPLOYMENT AGREEMENT OF JONATHAN D. SIEGEL This Amendment (this "Amendment") dated as of August 1, 2001, is by and among Global Capital Partners Inc., a Delaware corporation with its principal offices at 6000 Fairview Road, Suite 1410, Charlotte, North Carolina 28210 ("GCAP"); Global Capital Securities Corp., Inc. a Colorado corporation, with its principal office at 6300 South Syracuse Way, Suite 645, Englewood, Colorado 80111 ("Global Securities"), Sutton Online, Inc., a Delaware corporation with its principal offices at 1000 Woodbury Road, Suite 214, Woodbury, New York 11797 ("Sutton Online") and Jonathan D. Siegel, an individual residing at 84 East Shore Road, Huntington Bay, New York 11743 (the "Employee"). W I T N E S S T H: - - - - - - - - - WHEREAS, GCAP was formerly known as Eastbrokers International Incorporated ("Eastbrokers"); and WHEREAS, Global Securities is the successor entity to JB Sutton Group, LLC, a limited liability company organized under the laws of the State of New York; and WHEREAS, Eastbrokers, Global Securities and Employee have previously entered into an Employment Agreement dated November 22, 1999 (the "Employment Agreement"); WHEREAS, GCAP, Global Securities and Employee desire to amend the Employment Agreement as to certain matters as herein after set forth; and WHEREAS, Sutton Online has agreed to assume all obligations of Global Securities under the terms of the Employment Agreement, as amended. NOW THEREFORE, in consideration of the premises and the covenants and agreements contained herein, the parties agree as follows: 1. The parties hereto agree that, from and after the date hereof, GCAP and Global Securities shall no longer be parties to the Employment Agreement and shall be released from any liability to the Employee thereunder. 2. Sutton Online hereby agrees to assume the obligations of Global Securities under the Employment Agreement and release Global Securities from any liability thereunder. 3. The parties hereto agree that, from and after the date hereof, every reference to "JB Sutton Group, LLC" in the Employment Agreement shall be amended to read "Sutton Online." 4. The parties hereto agree that Section 10 of the Employment Agreement is hereby deleted in its entirety. 5. Except as expressly provided herein, all of the terms and conditions of the Employment Agreement shall be unmodified and in full force and effect. 6. From and after the execution and delivery of this Amendment, all references to the Employment Agreement contained in all other agreements and instruments executed and delivered to or in connection with the Employment Agreement shall hereafter mean and refer to the Employment Agreement as amended hereby. IN WITNESS WHEREOF, the undersigned have executed this Amendment on the day and year first above mentioned. GLOBAL CAPITAL PARTNERS INC. By: /s/ MARTIN A. SUMICHRAST ------------------------------ Name: Martin A. Sumichrast Title: Chief Executive Officer GLOBAL CAPITAL SECURITIES CORPORATION By: /s/ RALPH OLSON ------------------------------ Name: Ralph Olson SUTTON ONLINE, INC. By: /s/ GREGORY C. FRANK ------------------------------ Name: Gregory C. Frank Title: President EMPLOYEE By: /s/ JONATHAN D. SIEGEL ------------------------------ Jonathan D. Siegel EX-10.8 10 ex10_8.txt EXHIBIT 10.8 Exhibit 10.8 AMENDMENT NO 2. TO THE EMPLOYMENT AGREEMENT OF JONATHAN D. SIEGEL This Amendment (this "Amendment") dated as of August 8, 2001, is by and between Sutton Online, Inc., a Delaware corporation with its principal offices at 1000 Woodbury Road, Suite 214, Woodbury, New York 11709 ("Sutton") and Jonathan D. Siegel, an individual residing at 84 East Shore Road, Huntington Bay, New York 11743 ("Executive"). W I T N E S S E T H: WHEREAS, Sutton and Executive are parties to a certain Amendment to the Employment Agreement of Jonathan D. Siegel dated as of August 1, 2001 ("Amendment No. 1"); and WHEREAS, Sutton and Execution desire to further amend the Employment Agreement (as such term is defined in Amendment No. 1) as to certain matters as hereinafter set forth. NOW THEREFORE, in consideration of the premises and the covenants and agreements contained herein, the parties agree as follows: 1. The parties agree that Section 4 of the Employment Agreement is modified to change Executive's annual base salary from $360,000 to $240,000. 2. Except as expressly provided herein, all of the terms and conditions of the Employment Agreement shall be unmodified and in full force and effect. IN WITNESS WHEREOF, the undersigned have executed this Amendment on the day and year first above mentioned. Sutton Online, Inc. By: /s/ Gregory C. Frank --------------------------------------- Name: Gregory C. Frank Title: Chief Operating Officer EXECUTIVE By: /s/ Jonathan D. Siegel --------------------------------------- Jonathan D. Siegel EX-10.9 11 ex10_9.txt EXHIBIT 10.9 Exhibit 10.9 CONSULTING AGREEMENT AGREEMENT, dated as of August 1, 2001, by and between IKON VENTURES, INC. a Nevada corporation (the "Corporation), and SIGMA LIMITED, S.A., a company organized under the laws of Switzerland ("Consultant"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Corporation has entered into an Agreement and Plan of Share Exchange, dated as of June 19, 2001 and as amended on July 18, 2001 (the "Exchange Agreement"), pursuant to which the Corporation proposes to acquire all of the issued and outstanding shares of Sutton Online, Inc., a Delaware corporation ("Sutton"); WHEREAS, upon completion of such acquisition, the Corporation will require certain consultancy services from the Consultant; WHEREAS, the Consultant desires to supply consultancy services to the Corporation upon the terms and conditions set forth herein; and WHEREAS, it is a condition to the closing of the Exchange Agreement that Consultant and the Corporation enter into this Agreement providing for the Consultant to supply the consultancy services described herein to the Corporation, NOW, THEREFORE, the parties hereto agree as follows: 1. Duties. (a) The Corporation hereby engages Consultant and Consultant hereby agrees to render services as a consultant to the Corporation for the term specified in Section 2 hereof. (b) Consultant shall, at all reasonable times and as reasonably required, provide the Corporation with strategic advisory services. Consultant's duties may include, but will not necessarily be limited to, identifying and introducing the Corporation to European broker/dealers and banks that may be potential users of Sutton's services. Consultant shall provide such services and shall devote such time and attention as in the Corporation's reasonable discretion may be necessary or desirable for the performance of its duties as a consultant when called upon to do so by the Corporation, provided that the Corporation shall not require that Consultant's services be performed at any particular place or at any particular time. 2. Term. The term of this Agreement shall commence on the date hereof and shall continue for a period of one (1) year thereafter (the "Term") unless sooner terminated pursuant to Section 5 of this Agreement. 3. Compensation. For all services to be rendered hereunder by Consultant, the Corporation agrees to pay to Consultant an annual fee equal (the "Annual Fee") equal to Fifty Thousand Dollars ($50,000), payable in substantially equal quarterly installments in arrears. At the Corporation's option, the Annual Fee may be paid in cash or in shares of the Corporation's common stock, each such share to be valued at the closing bid price per share of the Corporation's common stock on the trading day immediately preceding each such issuance. 4. Expenses. The Corporation shall reimburse Consultant for all reasonable and necessary expenses of Consultant incurred in connection with the services being rendered to the Corporation hereunder, subject to presentation of appropriate vouchers, bills or similar documentation; provided, however, that Consultant shall not be entitled to reimbursement for any expense incurred for airfare or in excess of $1000 unless approved in advance by the Corporation. 5. Termination. Notwithstanding any provision of this Agreement to the contrary, this Agreement may be terminated under any of the following circumstances: (a) The Corporation may terminate this Agreement at any time for Cause, effective upon the giving of written notice thereof to the Consultant. As used herein, "Cause" shall mean the breach by Consultant of any of the material obligations to be performed by Consultant under this Agreement, which breach shall remain uncured for thirty (30) days after written notice thereof from the Corporation to Consultant. (b) Consultant may terminate this Agreement at any time for Good Reason, effective upon the giving of written notice thereof to the Corporation. As used herein, "Good Reason" shall mean (i) any attempt by the Corporation to impose any change of responsibility, assignment of duties or authority of Consultant without its consent or (ii) the breach by the Corporation of any of the material obligations to be performed under this Agreement, which breach shall remain uncured for thirty (30) days after written notice thereof from the Corporation to Consultant. (c) Upon termination of Consultant pursuant to this Section 5, Consultant shall be entitled to all amounts or benefits to be paid or provided by the Corporation under this Agreement up to the date of termination. In addition, and in lieu of any and all other rights or remedies which Consultant would or might have, if this Agreement is terminated prior to the end of the Term, either by the Corporation for any reason other than Cause or by Consultant for Good Reason, Consultant shall also be entitled to receive, as its sole and exclusive remedy, in a single lump sum, an amount equal to the total additional compensation which Consultant would have been entitled to receive had there been no termination of this Agreement prior to the expiration of the Term. 2 6. No Set-Offs, Etc. Except as expressly set forth in this Agreement, no amounts agreed to be paid or benefits agreed to be furnished by the Corporation under this Agreement shall be subject to any deduction, diminution or set off of any kind whatsoever. 7. Binding Effect and Assignment. This Agreement shall be binding upon and insure to the benefit of the Corporation, its successors and permitted assigns and the Consultant, its successors and permitted assigns. No assignment of this Agreement shall be valid unless consented to in writing by the non-assigning party. 8. Waivers. The failure of any party to this Agreement to enforce its terms and provisions or covenants shall not be construed as a waiver of the same or of the right of such party to enforce the same. 9. Entire Agreement. This Agreement sets forth the entire Agreement between the parties with respect to its subject matter and merges and supersedes all prior discussions, agreements and understandings of every kind and nature between them, including, without limitation, any other agreement with any third party for the supply of Consultant's service to the Corporation. No party hereto shall be bound by any term or condition other than as expressly set forth or provided for in this Agreement. This Agreement may not be changed or modified except by an agreement in writing, signed by the party or parties to be bound thereby. 10. Notices. All notices, requests, demands and other communications provided for, under, or made in connection with this Agreement, shall be in writing and shall be deemed to have been given by any party hereto at the time when delivered by hand against the appropriate receipt, or sent by facsimile transmission or mailed by registered or certified mail or the equivalent thereof, addressed to the addresses of the respective parties stated below, or as changed or added as any party may fix in accordance with this Section 10. If to the Corporation: Ikon Ventures, Inc. c/o Sutton Online, Inc. 1000 Woodbury Road, Ste. 212 Woodbury, NY 11797 If to the Consultant: Sigma Limited, S.A. Rue-Fritz- Courvoisier 40 2300 La Chaux-de-Fonds Switzerland 11. Governing Law. This Agreement shall be governed by and construed in all respects in accordance with the laws of the State of New York without regard to its conflict of law principles. 3 12. Counterparts. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts together shall constitute one and the same instrument. Facsimile signatures shall be deemed original for all purposes. IN WITNESS WHEREOF this Agreement has been entered into the day and year first above written. IKON VENTURES, INC. By: /s/ IAN RICE ------------------------------ Name: Ian Rice Title: Chairman SIGMA LIMITED, S.A. By: /s/ DUBOIS YVES ------------------------------ Name: Dubois Yves Title: Secretary 4 EX-10.10 12 ex10_10.txt EXHIBIT 10.10 Exhibit 10.10 CONSULTING AGREEMENT AGREEMENT, dated as of August 1, 2001, by and between IKON VENTURES, INC., a Nevada corporation (the "Corporation), and CORPORATE COMMUNICATIONS NETWORK INC., a Nevada corporation ("Consultant"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Corporation has entered into an Agreement and Plan of Share Exchange, dated as of June 19 , 2001 and as amended on July 18, 2001 (the "Exchange Agreement"), pursuant to which the Corporation proposes to acquire all of the issued and outstanding shares of Sutton Online, Inc., a Delaware corporation ("Sutton"); WHEREAS, upon completion of such acquisition, the Corporation will require certain consultancy services from the Consultant; WHEREAS, the Consultant desires to supply consultancy services to the Corporation upon the terms and conditions set forth herein; and WHEREAS, it is a condition to the closing of the Exchange Agreement that Consultant and the Corporation enter into this Agreement providing for the Consultant to supply the consultancy services described herein to the Corporation, NOW, THEREFORE, the parties hereto agree as follows: 1. Duties. (a) The Corporation hereby engages Consultant and Consultant hereby agrees to render services as a consultant to the Corporation for the term specified in Section 2 hereof. (b) Consultant shall, at all reasonable times and as reasonably required, provide the Corporation with regular and customary public relations and strategic advisory services. Consultant's duties may include, but will not necessarily be limited to, providing: (i) advice regarding, and assistance in, the formation of corporate goals and their implementation; (ii) advice regarding, and the development of, the Corporation's business plan and its implementation and evolution; (iii) advice regarding the financial structure of the Corporation and its subsidiaries; (iv) advice regarding corporate organization and structure, and identification and retention of personnel; (v) advice with respect to merger, acquisition, joint venture and similar proposals; (vi) assistance with respect to investor relations; and (vii) assistance with respect to identification and retention of financial analysts. Consultant shall provide such services and shall devote such time and attention as in the Corporation's reasonable discretion may be necessary or desirable for the performance of its duties as a consultant when called upon to do so by the Corporation, provided that the Corporation shall not require that Consultant's services be performed at any particular place or at any particular time. 2. Term. The term of this Agreement shall commence on the date hereof and shall continue for a period of one (1) year thereafter (the "Term") unless sooner terminated pursuant to Section 5 of this Agreement. 3. Compensation. For all services to be rendered hereunder by Consultant, the Corporation agrees to pay to Consultant an annual fee (the "Annual Fee") equal to Fifty Thousand Dollars ($50,000), payable in substantially equal quarterly installments in arrears. At the Corporation's option, the Annual Fee may be paid in cash or in shares of the Corporation's common stock, each such share to be valued at the closing bid price per share of the Corporation's common stock on the trading day immediately preceding each such issuance. 4. Expenses. The Corporation shall reimburse Consultant for all reasonable and necessary expenses of Consultant incurred in connection with the services being rendered to the Corporation hereunder, subject to presentation of appropriate vouchers, bills or similar documentation; provided, however, that Consultant shall not be entitled to reimbursement for any expense incurred for airfare or in excess of $1000 unless approved in advance by the Corporation. 5. Termination. Notwithstanding any provision of this Agreement to the contrary, this Agreement may be terminated under any of the following circumstances: (a) The Corporation may terminate this Agreement at any time for Cause, effective upon written notice thereof to Consultant. As used herein, "Cause" shall mean the breach by Consultant of any of its material obligations under of this Agreement, which breach shall remain uncured for thirty (30) days after written notice thereof from the Corporation to Consultant. (b) Consultant may terminate this Agreement at any time for Good Reason, effective upon written notice thereof to the Corporation. As used herein, "Good Reason" shall mean (i) any attempt by the Corporation to impose any change of responsibility, assignment of duties or authority of Consultant without its consent or (ii) the breach by the Corporation of any of its material obligations under this Agreement, which breach shall remain uncured for thirty (30) days after written notice thereof from Consultant to the Corporation. 2 (c) Upon termination of this Agreement pursuant to this Section 5, the Consultant shall be entitled to all amounts or benefits to be paid or provided by the Corporation under this Agreement up to the date of termination. In addition, and in lieu of any and all other rights or remedies which Consultant would or might have, if this Agreement is terminated prior to the end of the Term, either by the Corporation for any reason other than Cause or by Consultant for Good Reason, Consultant shall also be entitled to receive, as its sole and exclusive remedy, in a single lump sum, an amount equal to the total additional compensation which Consultant would have been entitled to receive had there been no termination of this Agreement prior to the expiration of the Term. 6. No Set-Offs, Etc. Except as expressly set forth in this Agreement, no amounts agreed to be paid or benefits agreed to be furnished by the Corporation under this Agreement shall be subject to any deduction, diminution or set off of any kind whatsoever. 7. Binding Effect and Assignment. This Agreement shall be binding upon and insure to the benefit of the Corporation, its successors and permitted assigns and the Consultant, its successors and permitted assigns. No assignment of this Agreement shall be valid unless consented to in writing by the non-assigning party. 8. Waivers. The failure of any party to this Agreement to enforce its terms and provisions or covenants shall not be construed as a waiver of the same or of the right of such party to enforce the same. 9. Entire Agreement. This Agreement sets forth the entire Agreement between the parties with respect to its subject matter and merges and supersedes all prior discussions, agreements and understandings of every kind and nature between them, including, without limitation, any other agreement with any third party for the supply of Consultant's service to the Corporation. No party hereto shall be bound by any term or condition other than as expressly set forth or provided for in this Agreement. This Agreement may not be changed or modified except by an agreement in writing, signed by the party or parties to be bound thereby. 10. Notices. All notices, requests, demands and other communications provided for, under, or made in connection with this Agreement, shall be in writing and shall be deemed to have been given by any party hereto at the time when delivered by hand against the appropriate receipt, or sent by facsimile transmission or mailed by registered or certified mail or the equivalent thereof, addressed to the addresses of the respective parties stated below, or as changed or added as any party may fix in accordance with this Section 10. If to the Corporation: Ikon Ventures, Inc. c/o Sutton Online, Inc. 1000 Woodbury Road, Ste. 212 Woodbury, NY 11797 3 If to the Consultant: Corporate Communications Network Inc. 7025 East 1st Avenue Suite #5 Scottsdale, Arizona 85251 Telecopier: (602) 945-1938 or P.O. Box 1525 Scottsdale, Arizona 85212 11. Governing Law. This Agreement shall be governed by and construed in all respects in accordance with the laws of the State of New York without regard to its conflict of law principles. 12. Counterparts. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts together shall constitute one and the same instrument. Facsimile signatures shall be deemed original for all purposes. IN WITNESS WHEREOF this Agreement has been entered into the day and year first above written. IKON VENTURES, INC. By: /s/ IAN RICE ------------------------------------- Name: Ian Rice CORPORATE COMMUNICATIONS NETWORK INC. By: /s/ STEVEN M. KERR ------------------------------------- Name: Steven M. Kerr 4 EX-10.11 13 ex10_11.txt EXHIBIT 10.11 Exhibit 10.11 EXCHANGE AGREEMENT AGREEMENT, dated as of July 31, 2001, by and among SUTTON ONLINE, INC., a Delaware corporation (the "Company"), IKON VENTURES, INC., a Nevada corporation ("Ikon"), and GlobalNet Financial.com, Inc., a _______corporation ("GNet"). WITNESSETH: WHEREAS, Ikon, the Company and the stockholders of the Company have entered into an Agreement and Plan of Share Exchange, dated as of June 19, 2001 (the "Agreement"), providing, among other things, for the exchange all of issued and outstanding shares of the Company's common stock, par value $. 025 per share (the "Company Common Stock"), for shares of Ikon's common stock, par value $.001 per share ("Ikon Common Stock"), all upon the terms and condition set forth therein; and WHEREAS, it is a condition precedent to the obligation of the parties to consummate the transactions contemplated under the Agreement (the "Closing") that all holders of promissory notes of the Company convert such notes into shares of the Company's Common Stock; and WHEREAS, GNet is the holder of the Company's convertible promissory note, dated February 16, 2001, in the original principal amount of $525,000 (the "Note"); and WHEREAS, in lieu of converting the Note, GNet is willing to exchange the Note for shares of exchangeable preferred stock of the Company on the terms and conditions set forth herein, NOW THEREFORE, in consideration of the mutual promises contained herein, the parties hereto agree as follows: 1. Exchange of Note. Subject to the terms and conditions set forth herein, GNet hereby agrees that simultaneous with the Closing, GNet will deliver the original Note to the Company and in exchange therefore and in full payment thereof (including any interest or other consideration due or to become due under the Note) the Company agrees to deliver simultaneously to GNet a certificate or certificates registered in the name of GNet representing 888,888 shares of the Company's Series A Exchangeable Preferred Stock (collectively, the "Preferred Stock"). The Preferred Stock shall be issued pursuant to, and shall be entitled to the rights, preferences and privileges set forth in, the Certificate of Designation attached hereto as Exhibit A. 2. Release of Security. In consideration of the option to be granted by Global Capital Partners, Inc. ("GCAP") referred to in Section 7(d) below, simultaneous with the exchange provided for in Section 1 above, GNet agrees to deliver to the Company the certificate(s) representing 250,000 shares of restricted common stock of GCAP held be GNet as security for repayment of the Note pursuant to a Pledge Agreement, dated February 16, 2001 (the "Pledge Agreement"), and the Pledge Agreement shall then be deemed terminated and of no further force or effect. 3. Representations of GNet. GNet represents and warrants to the Company and Ikon as follows: (a) GNet has full power and authority to execute and deliver this Agreement and any other agreement or instrument contemplated by this Agreement and to consummate the transactions contemplated hereunder. This Agreement has been duly executed and delivered and is the valid and binding obligation of GNet enforceable in accordance with its terms. (b) GNet acknowledges that it has been advised that the Preferred Stock , the shares of Ikon Common Stock issuable upon exchange of the Preferred Stock, including the shares of Ikon Common Stock issuable upon exercise of the warrants to purchase shares of Ikon Common Stock included as part of the exchange (the "Exchange Shares") and/or the certificate(s) representing the Preferred Stock and the Exchange Shares (i) will not, upon their issuance, be registered under the Securities Act of 1933, as amended (the "Act"), or any state securities law ("Blue sky Laws"), (ii) will be "restricted securities" as defined in rule 144(a)(3) under the Act, (iii) have been issued in reliance on statutory exemptions contemplated in the Blue Sky Laws and that the Company has relied and Ikon will rely on the representations of GNet set forth herein in issuing the Preferred Stock and the Exchange Shares, (iv) will not be transferable without registration under the Act and/or applicable Blue Sky Laws, unless an exemption from the registration requirement thereof is available and an opinion of counsel to that effect is delivered to the Company or Ikon, as the case may be, upon request by the Company or Ikon, and (v) will bear customary restrictive legends evidencing such restrictions. Moreover, GNet has been advised that (A) no public trading market exists or is likely to develop for the Preferred Stock and (B) Rule 144 may not be available for resale of the Exchange Shares unless Ikon remains a reporting issuer subject to the requirements of the Securities Exchange Act of 1934, as amended, and Ikon files all required information with the Securities and Exchange Commission (the "SEC"). (c) GNet is able to bear the economic risk of acquiring the Preferred Stock and Exchange Shares, and consequently, without limiting the generality of the foregoing, GNet is (i) able to hold any Preferred Stock or Exchange Shares it may acquire for an indefinite period of time, and (b) has a sufficient net worth to sustain a loss of its entire investment in the Preferred Stock or the Exchange Shares. (d) GNet is an "accredited investor" as defined in Regulation D promulgated under the Act (e) GNet understands that neither the U.S. SEC nor the securities administrator of any state has made any finding or determination relating to the fairness for investment of any Preferred Stock or Exchange Shares and that no government agency has or will recommend or endorse any offering of the Preferred Stock or Exchange Shares. (f) GNet has received and examined all information, including financial statements, of or concerning the Company and Ikon which GNet considers necessary to making an informed decision regarding an acquisition of Preferred Stock. In addition, GNet has had the opportunity to ask questions of, and receive answers from, the officers and agents of the Company and Ikon concerning the terms and conditions of the acquisition of the Preferred Stock and to obtain such information, to the extent such persons possessed the same or could acquire it without unreasonable effort or expense, as GNet deemed necessary to verify the accuracy of the information referred to herein. (g) GNet is acquiring Preferred Stock for its own account, for investment purposes only, and not with a view to the resale or other distribution thereof, in whole or in part, except in accordance with the Act. GNet has not offered or sold any Preferred Stock and has no present intention of dividing the Preferred Stock with others or reselling or otherwise disposing of any Preferred Stock either currently or after the passage of a fixed or determinable period of time, or upon the occurrence or nonoccurrence of any predetermined event or circumstance. 4. Representations of the Company. The Company represents and warrants to GNet as follows: (a) The Company has full power and authority to execute and deliver this Agreement and any other agreement or instrument contemplated by this Agreement and to consummate the transactions contemplated hereunder. This Agreement has been duly executed and delivered and is the valid and binding obligation of the Company enforceable in accordance with its terms. (b) The Preferred Stock, upon issuance, will be duly and validly authorized and issued and will be fully paid and non-assessable. 5. Representations of Ikon. Ikon represents and warrants to GNet as follows: (a) Ikon has full power and authority to execute and deliver this Agreement and any other agreement or instrument contemplated by this Agreement and to consummate the transactions contemplated hereunder. This Agreement has been duly executed and delivered and is the valid and binding obligation of Ikon enforceable in accordance with its terms. (b) The Exchange Shares have been duly authorized and when issued upon exchange of the Preferred Stock in accordance with the terms thereof will be duly and validly issued, fully paid and non-assessable. 6. Conditions Precedent. The obligations of the parties hereto to consummate the transactions contemplated hereunder are subject to the satisfaction of each of the following conditions: (a) The Company shall have amended its Certificate of Incorporation to authorize the issuance of Preferred Stock in such series and with such rights, preferences and privileges as may be authorized by the Company's board of directors. (b) The Company's board of directors shall have approved and authorized the filing of the Certificate of Designation with the Secretary of State of Delaware and such filing shall have been made. (c) The parties to the Agreement shall have executed and delivered an amendment thereto waiving the provisions of Section 8.15 thereof with respect to the conversion of the Note and shall have approved the transactions contemplated under this Agreement. (d) GCAP shall have granted GNet an option, exercisable on and after the exchange of the Preferred Stock for the Exchangeable Shares, to acquire 111,112 shares of restricted Sutton Common Stock owned by GCAP for the aggregate consideration of $1.00 and on such other terms and conditions as shall be agreed between GCAP and GNet. 7. Miscellaneous. (a) Each of the parties hereto agrees to use its best efforts to bring about the satisfaction of the conditions precedent to the obligation of the parties hereto to effect the consummation of the transactions contemplated hereunder (to the extent that such satisfaction is dependent on the actions on the part of the initial party of commission or omission) and to cause its covenants and agreements contained in this Agreement to be satisfied and performed hereunder. (b) This Agreement and the agreements referred to herein and/or executed in connection with the consummation of the transactions contemplated herein contain the entire agreement among the parties with respect to the subject matter hereunder and supersede all prior agreements, written or oral, with respect thereto. (c) This Agreement may be amended, superseded, canceled, renewed or extended, and the terms hereof may be waived, only by a written instrument signed by the parties or, in the case of a waiver, by the parties waiving compliance. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof. Nor shall any waiver on the part of any party of any such right, power or privilege, nor any single or partial exercise of any such right, power or privilege. (d) This Agreement shall be governed and construed in accordance with the laws of the State of New York, applicable to agreements made and to be performed entirely within such State (without giving effect to conflicts of law principles thereof). (e) This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and legal representatives. Nothing contained herein is intended or shall be construed as creating third party beneficiaries to this Agreement. This Agreement is not assignable except by operation of law. (f) This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument. Each counterpart may consist of a number of copies hereof each signed by less than all, but together signed by all of the parties hereto. Fascimile signatures shall be deemed originals for all purposes. (g) The headings in this Agreement are for reference only, and shall not affect the interpretation of this Agreement. IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement as of the date first above written. IKON VENTURES, INC. SUTTON ONLINE, INC. By: /s/ IAN RICE By: /s/ JONATHAN D. SIEGEL ------------------------------ ------------------------------ Name: Ian Rice Name: Jonathan D. Siegel Title: Chairman Title: Chief Executive Officer GLOBALNET FINANCIAL.COM, INC. By: /s/ W. THOMAS HODGSON ------------------------------ Name: W. Thomas Hodgson Title: President and CEO CERTIFICATE OF DESIGNATION OF RIGHTS, PREFERENCES AND LIMITATIONS OF SERIES A EXCHANGEABLE PREFERRED STOCK OF SUTTON ONLINE, INC. ------------------- Acting pursuant to Sections 151(a) and (g) of the Delaware General Corporation Law, the undersigned hereby certifies that the Board of Directors of Sutton Online, Inc. (the "Company") duly approved the following Certificate of Designation of Series A Exchangeable Preferred Stock of the Company, and that the Certificate of Incorporation of the Company expressly authorizes the Board to so designate and issue one or more series of preferred stock. The designations, powers, preferences and relative, participating, optional or other special rights, and the qualifications, limitations and restrictions thereof in respect of the Series A Exchangeable Preferred Stock are as follows: 1. Number Of Shares; Par Value. The Company shall be authorized to issue 888,888 shares of Series A Exchangeable Preferred Stock, par value $.025 per share (the "Series A"). 2. Dividend Provisions. (a) The holders of shares of the Series A shall not be entitled to receive dividends, except when and as lawfully declared by the Company's Board Of Directors. 3. Rank. The Series A shall, with respect to rights on liquidation, winding up and dissolution, rank prior to any other series of preferred stock established by the Company's Board of Directors, any other equity securities of the Company, including the common stock, par value $.025 per share, of the Company (the "Common Stock"), and, without the prior consent of the holders of the Series A (which will not be unreasonably be withheld or delayed), any debt securities of the Company (excluding any trade creditors or other debt incurred in the ordinary course of business); all such other securities to which the Series A ranks prior are referred to herein as the "Junior Securities" . 4. Liquidation Preference. (a) In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, the holders of the Series A shall be entitled to receive, prior and in preference to any distribution of any of the assets of the Company to the holders of any Junior Securities by reason of their ownership thereof, an amount per share equal to the sum of $.5906 for each outstanding share of Series A (the "Issuance Price"). If upon the occurrence of such event, the assets and funds thus distributed among the holders of the Series A shall be insufficient to permit the payment to such holders of the full aforesaid preferential amounts, then, the entire assets and funds of the Company legally available for distribution shall be distributed ratably among the holders of the Series A in proportion to the amount of such stock owned by each such holder. (b) For the purposes of this Section 4, neither the voluntary sale, conveyance, lease, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Company nor the consolidation or merger of the Company with one or more other corporations shall be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, unless such voluntary sale, conveyance, lease, exchange or transfer shall be in connection with a dissolution or winding up of the business of the Company. 5. Exchange (a) Requirements. The outstanding shares of Series A are exchangeable, in whole at the option of the Company, into the Ikon Exchangeable Securities (as hereinafter defined) at any time after Ikon Ventures, Inc., a Nevada corporation ("Ikon"), has raised the aggregate amount of $2,000,000 in capital (the "Capital Raiseup"). The Capital Raiseup shall include (i) $100,000 that has been raised by Ikon through the issuance of a convertible promissory note in the amount of $100,000 which by its terms will be converted into 25,000 shares of Ikon common stock upon the consummation of the acquisition by Ikon of all of the issued and outstanding capital stock of the Company (the "Share Exchange") and (ii) $400,000 that is being raised through the sale of 100,000 shares of Ikon common stock at $4.00 per share prior to and as a condition of the Share Exchange. In addition, the holder of the Series A shall have the right to exchange the Series A, in whole, into the Ikon Exchangeable Securities at any time. As used herein, "Ikon Exchangeable Securities" means (i) 888,888 shares of Ikon's common stock, par value $.001 per share (the "Ikon Common Stock") and (ii) a warrant to purchase 388,889 shares of Ikon Common Stock exercisable at any time and from time to time until 5:00 P.M. (New York Time) on May 3, 2004, at $2.50 per share. (b) Procedure for Exchange. At least five (5) days and not more than thirty (30) days prior to the date fixed for exchange, written notice (the "Exchange Notice") shall be given by the party seeking to exchange the preferred stock, by first-class mail, postage prepaid, to the Company. The Exchange Notice shall state: (1) the date fixed for exchange; (2) that the Holder is to surrender to the Company, in the manner and at the place or places designated, its certificate or certificates representing the shares of Series A to be exchanged. On or before the Exchange Date, each Holder of Series A shall surrender the certificate or certificates representing such shares of Series A, in the manner and at the place designated in the Exchange Notice. The Company shall cause the Ikon Exchangeable Securities to be issued on the Exchange Date and, upon surrender in accordance with the Exchange Notice of the certificates for any shares of Series A so exchanged, duly endorsed (or otherwise in proper form for transfer, as determined by the Company), such shares shall be exchanged by the Company for the Ikon Exchangeable Securities. (c) Conversion Price Adjustments for Certain Dilutive Issuances If Ikon sells its common stock in the Capital Raiseup at an average price per share less than $0.525, then the Series A shall be exchangeable into (i) the number of shares of common stock of Ikon which will result in the holder of the Series A receiving the shares of Ikon common stock for the same consideration per share as the average consideration per share received by Ikon in connection with the Capital Raiseup, minus (ii) 111,112 shares of Ikon common stock. If the Capital Raiseup shall include the sale by Ikon of units consisting of common stock and warrants, no value (for the purposes of computing average price per share) shall be attributed to the warrants if the exercise price thereof on the date of issuance is equal to or above the closing bid price of Ikon's common stock on the day immediately preceding the issuance of the warrants. (d) No Impairment. The Company will not, by amendment of its Certificate of Incorporation or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Section 4 and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the holders of the Series A against impairment. (e) No Fractional Shares and Certificate as to Adjustments. No fractional shares shall be issued upon the exchange of any share or shares of the Series A, and the number of shares of each component of the Ikon Exchangeable Securities to be issued shall be rounded to the nearest whole share. (f) Notices. Any notice required by the provisions of this Section 5 to be given to the holders of shares of the Series A shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to each holder of record at his or her address appearing on the books of the Company. 6. Voting Rights. The holders of Series A shall have the following voting rights: (a) Each share of Series A shall entitle the holder thereof to one vote on all matters submitted to a vote of the Company's stockholders. (b) Except as otherwise required by law, the holders of the Series A and the holders of the Common Stock shall vote together as one class on all matters submitted to a vote of the Company's stockholders. IN WITNESS WHEREOF, the undersigned has executed this Certificate of Designation this 19th day of July, 2001. SUTTON ONLINE, INC. By: /s/ GREGORY C. FRANK ------------------------- Name: Gregory C. Frank Title: President ATTEST: By: /s/ LEIGH BICKELL - ------------------------- Name: Leigh Bickell Title: Secretary EX-10.12 14 ex10_12.txt EXHIBIT 10.12 ADDENDUM A CORPORATE PROFILE AND FACT SHEET A two-page, two color broker fact sheet, and a four-page, full color Company profile will be created, each highlighting the Company and the benefits of owning the Company's stock. These pieces are included in broker/dealer information packages for dissemination to prospective investors, and may also be targeted to stock analysts and newsletter editors. Consultant's services include creative writing, artwork, layout and design and printing. Materials updated four times per year, as applicable. PERSONAL CONSULTANT SERVICES A Personal Consultant will supervise and actively assist in every facet of the Company's overall marketing campaign. In addition to coordinating all above-listed services, the Personal Consultant will maintain daily contact with investor relations office staff, Company officers and active brokers; he will be available for consultation 24 hours per day, every day, via cellular telephone, to address urgent needs as well as general strategic planning. The Personal Consultant will travel extensively to meet qualified brokers one-on-one, and will arrange specially scheduled conference calls with audiences of brokers, analysts and money managers. The Personal Consultant will personally arrange invitation-only due diligence broker meetings, and will directly supervise all logistics and follow-up. The Consultant will pay the cost of the Personal Consultant. BROKER SOLICITATION CAMPAIGN Specialized professional financing public relations services will be provided through an ongoing telemarketing campaign soliciting new broker dealers, to generate interest in the Company and its stock. This campaign will include direct personal telephone follow-up with retail brokers in active contact with Company executives and investor relation's staff. Supervised in-house personnel will be assigned specifically to guide Company interactions with brokers and field representatives. PRESS RELEASES Company press releases will be written and disseminated to news wire services. Press releases will also be disseminated to the at-large broker community by fax and mail, plus telephone and fax follow-up with 500-1,000 active brokers. Press releases may be reproduced in national financial magazines such as Investor's Business Daily, Barron's. PRINT MEDIA ADVERTISING Advertisements, targeted to both brokers and investors, will be created and inserted in a major financial and investment magazine or newspaper at the Consultants cost. Publications which target and deliver large numbers of active - -------------------------------------------------------------------------------- ADDENDUM A - Page 1 brokers, qualified investors and other niche groups interested specifically in the Company's product or industry category will be emphasized. Consultant's services include creative writing, artwork, layout and design, and coordination of magazine/newspaper inserts. FINANCIAL ANALYST and NEWSLETTER CAMPAIGN The Financial Analyst and Newsletter Campaign will be intertwined with our Broker Solicitation Campaign, which provides an essential link to increasing investor awareness for the Company. Each Company is presented to our carefully developed network of financial analysts and newsletter publications that specialize in identifying emerging growth companies and presenting buy recommendations to their loyal following of investors. Utilization of direct mail pieces, e-mail, broadcast faxing and phone contacts will ensure effective and prompt coverage for our clientele. In order to best expose the Company, this campaign may include personal meetings with editors, analysts and writers for a number of publications and research houses nationwide. CONFERENCES, SEMINARS AND NATIONAL TOURS Due Diligence Meetings: Opportunities for Company exposure before broker/dealer audiences will be provided in New York, Boston, Chicago, Atlanta, Orlando, Boca Raton, Denver, San Francisco, southern California and other major metro areas. Consultant's services include overall meeting coordination and implementation; room rental, catering (hot and cold hor d'oeuvres and snacks), alcoholic and non-alcoholic beverages, broker/dealer invitations (printing, mail coordination, postage and telephone contact), transportation (coach air fare and hotel accommodations, as applicable), additional broker meetings and telephone follow-up. Investor Conferences: Opportunities for Company exposure before large audiences of qualified, wealthy investors will be provided in various locations across North America. These conferences provide executives of participating companies with unique forums for sharing the spotlight with top financial and investment experts while making personal contact with wealthy investors and presenting the benefits of the companies. The most popular package for conference participants includes an exhibit booth, private workshop, broker presentation and distribution of collateral materials. Among the most popular and established conferences are those produced by Blanchard's Investment Conferences, Financial Fest, and Discovery Expo. Institutional Conferences: Opportunities for Company exposure before representatives of major financial institutions may be arranged for any of the following conferences: North American Corporate Forum, Westergaard Waldorf Conference Series, Boston Stockholders Club, Hartford Stockholders Club, Equities Conferences and Investment Research Institute. The conferences sponsored by the North American Corporate Forum and Westergaard Waldorf Conference Series are three-day events held in New York, designed to allow participating companies to meet and consult with Investment analysts and portfolio managers representing all primary investment centers in the United States and Canada. - -------------------------------------------------------------------------------- ADDENDUM A - Page 2 ELECTRONIC MEDIA A coordinated mix of financial and investment radio and television programming, covering major markets across the United States and designed to serve as Company marketing and lead generation conduits, will be arranged. The Company may be featured on talk shows, special interview segments and commercials. Program duplicates may be distributed to select brokers and investors to heighten Company awareness. DIRECT MAIL CAMPAIGN A four-page, full color direct mail lead generation piece, highlighting the Company and the benefits of owning the Company's stock, will be created. This lead generator will be mailed to 100,000 selected, qualified investors, in one large mailing or in smaller increments. Printed on heavy gloss stock, the piece includes a postage-paid business reply card, plus an identifying telephone number enabling investors to respond immediately. Additionally, market makers names and phone numbers may be listed directly on the mailing piece for all-in lead generation. The piece includes a postage-paid business reply card, plus an identifying telephone number enabling investors to respond immediately. Consultant's services include creative writing, artwork, layout and design, printing, list rentals, mail handling, postage and business reply card coordination. INVESTMENT PUBLICATIONS Bull & Bear is a tabloid-style newspaper distributed six to nine times per year to approximately 60,000 active investors in the United States and Canada. - -------------------------------------------------------------------------------- ADDENDUM A - Page 3 Exhibit 10.12 CONSULTING AGREEMENT THIS AGREEMENT is between IKON VENTURES, INC., a corporation organized under the laws of the State of Nevada, whose address is 1000 Woodbury Road, Suite 214, Woodbury, New York 11797, (hereinafter referred to as the "Company"); and INVESTOR RELATIONS SERVICES, INC., of 120 Flagler Avenue, New Smyrna Beach, Florida 32169 (hereinafter referred to as the "Consultant"). WHEREAS, the Consultant is in the business of assisting public companies in financial advisory, strategic business planning, and investor and public relations services designed to make the investing public knowledgeable about the benefits of stock ownership in the Company; and WHEREAS, the Consultant may, during the period of time covered by this Agreement, present to the Company one or more plans of public and investor relations to utilize other business entities to achieve the Company's goals of making the investing public knowledgeable about the benefits of stock ownership in the Company; and WHEREAS, the Company recognizes that the Consultant is not in the business of stock brokerage, investment advice, activities which require registration under either the Securities Act of 1933 (hereinafter the "Act") or the Securities and Exchange Act of 1934 (hereinafter the "Exchange Act"), underwriting, banking, is not an insurance Company, nor does it offer services to the Company which may require regulation under federal or state securities laws; and WHEREAS, the parties agree, after having a complete understanding of the services desired and the services to be provided, that the Company desires to retain Consultant to provide such assistance through its services for the Company, and the Consultant is willing to provide such services to the Company; NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: 1. Duties and Involvement. The Company hereby engages Consultant to provide one or more plans, and for coordination in executing the agreed-upon plan, for using various investor and public relations services as agreed by both parties. The plan may include, but not by way of limitation, the following services: consulting with the Company's management concerning marketing surveys, investor accreditation, availability to expand investor base, investor support, strategic business planning, broker relations, conducting due diligence meetings, attendance at conventions and trade shows, assistance in the preparation and dissemination of press releases and stockholder communications, consulting with respect to mergers with companies, review and assistance in updating a business plan, Exhibit 10.12 review and advise on the capital structure for the Company, propose legal counsel, assist in the development of an acquisition profile and structure, recommend financing alternatives and sources, and consult on corporate finance and/or investment banking issues. In addition, these services may include production of a corporate profile and fact sheets, personal consultant services, financial analyst and newsletter campaigns, conferences, seminars and national tour, including, but not by way of limitation, due diligence meetings, investor conferences and institutional conferences, printed media advertising design, newsletter production, broker solicitation campaigns, electronic public relations campaigns, direct mail campaigns, placement in investment publications and press releases. This agreement is limited to North America. Consultant is available and able to provide services outside of North America subject to mutual agreement regarding additional compensation for such services. A further description of the services which may be included in the plan as described above is attached hereto as Exhibit A and included herein as if fully set out. Notwithstanding anything to the contrary, it is understood that no press release, stockholder or other information regarding the Company shall be disseminated or distributed by Consultant without the prior approval of the Company in each instance. 2. Relationship Among the Parties. Consultant acknowledges that it is not an officer, director or agent of the Company, it is not, and will not, be responsible for any management decisions on behalf of the Company, and may not commit the Company to any action. The Company represents that the consultant does not have, through stock ownership or otherwise, the power neither to control the Company, nor to exercise any dominating influences over its management. Consultant understands and acknowledges that this Agreement shall not create or imply any agency relationship between the parties, and Consultant will not commit the Company in any manner except when a commitment has been specifically authorized in writing by the Company. The Company and the Consultant agree that the relationship between the parties shall be that of independent contractor. 3. Effective Date, Term and Termination. This Agreement shall be effective on August 8, 2001, and will continue until August 7, 2002. 4. Option to Renew and Extend. Company may renew this Agreement on the same terms by providing written notice to Consultant at any time prior to the expiration hereof. 2 Exhibit 10.12 5. Compensation and Payment of Expenses. The Company agrees to pay or have paid by a third party all costs and expenditures to execute the plan made by the Consultant. The parties understand and agree that for its accounting purposes, Company may elect to amortize the costs of this Agreement over the full term thereof, even though payment shall be due upon execution. Company agrees to pay for all costs and expenses incurred associated with its employees' working with Consultant and its representatives, including lodging, meals and travel as necessary. The costs of the financial and public relations services contemplated by the plan developed by the Consultant and approved by the Company will be paid by the Consultant. 6. Services Not Exclusive. Consultant shall devote such of its time and effort necessary to the discharge of its duties hereunder. The Company acknowledges that Consultant is engaged in other business activities, and that it will continue such activities during the term of this Agreement. Consultant shall not be restricted from engaging in other business activities during the term of this Agreement. 7. Confidentiality. Consultant acknowledges that it may have access to confidential information regarding the Company and its business. Consultant agrees that it will not, during or subsequent to the term of this Agreement, divulge, furnish or make accessible to any person (other than with the written permission of the Company) any knowledge or information or plans of the Company with respect to the Company or its business, including, but not by way of limitation, the products of the Company, whether in the concept or development stage, or being marketed by the Company on the effective date of this Agreement or during the term hereof. 8. Covenant Not to Compete. During the term of this Agreement, Consultant warrants, represents and agrees that it will not directly participate in the information developed for and by the Company, and will not compete directly with the Company in the Company's primary industry or related fields. 9. Indemnification. Company agrees to indemnify and hold harmless Consultant and its respective agents and employees, against any losses, claims, damages or liabilities, joint or several ("Losses"), to which Consultant or any such other person, may become subject, insofar as such Losses (or actions, suits or proceedings in respect thereof) arise out of or are based upon the performance by Consultant of its services hereunder except any Losses resulting from the gross negligence or willful misconduct of Consultant or such persons; and will 3 Exhibit 10.12 reimburse the Consultant, or any such other person, for any legal or other expenses reasonably incurred by the Consultant, or any such other person, in connection with investigation or defending any such Losses except Losses resulting from the gross negligence or willful misconduct of Consultant or any such person. 10. Miscellaneous Provisions Section a Time. Time is of the essence of this Agreement. ---- Section b Presumption. This Agreement or any section thereof shall not be construed against any party due to the fact that said Agreement or any section thereof was drafted by said party. Section c Computation of Time. In computing any period of time pursuant to this Agreement, the day of the act, event or default from which the designated period of time begins to run shall be included, unless it is a Saturday, Sunday or a legal holiday, in which event the period shall begin to run on the next day which is not a Saturday, Sunday or a legal holiday, in which event the period shall run until the end of the next day thereafter which is not a Saturday, Sunday or legal holiday. Section d Titles and Captions. All article, section and paragraph titles or captions contained in this Agreement are for convenience only and shall not be deemed part of the context nor affect the interpretation of this Agreement. Section e Pronouns and Plurals. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the Person or Persons may require. Section f Further Action. The parties hereto shall execute and deliver all documents, provide all information and take or forbear from all such action as may be necessary or appropriate to achieve the purposes of this Agreement. Section g Good Faith, Cooperation and Due Diligence. The parties hereto covenant, warrant and represent to each other good faith, complete cooperation, due diligence and honesty in fact in the performance of all obligations of the parties pursuant to this Agreement. All promises and covenants are mutual and dependent. Section h Savings Clause. If any provision of this Agreement, or the application of such provision to any person or circumstance, shall be held invalid, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those as to which it is held invalid, shall not be affected thereby. Section i Assignment. This Agreement may not be assigned by either party hereto without the written consent of the other, but shall be binding upon the successors of the parties. 4 Exhibit 10.12 Section j Arbitration. ----------- i. If a dispute arises out of or relates to this Agreement, or the breach thereof, and if said dispute cannot be settled through direct discussion, the parties agree to first endeavor to settle the dispute in an amicable manner by mediation under the Commercial Mediation Rules of the American Arbitration Association before resorting to arbitration. Thereafter, any unresolved controversy or claim arising out of or relating to this Agreement or a breach thereof shall be settled by arbitration in accordance with the rules of the American Arbitration Association, and judgment upon the award rendered by the Arbitrator may be entered in any court having jurisdiction thereof. ii. Any provisional remedy, which would be available from a court of law, shall be available to the parties to this Agreement from the Arbitrator pending arbitration. iii. The situs of the arbitration shall be New York, New York. iv. In the event that a dispute results in arbitration, the parties agree that the prevailing party shall be entitled to reasonable attorney's fees to be fixed by the arbitrator. Section k Notices. All notices required or permitted to be given under this Agreement shall be given in writing and shall be delivered, either personally or by express delivery service, to the party to be notified. Notice to each party shall be deemed to have been duly given upon delivery, personally or by courier (such as Federal Express or similar express delivery service), addressed to the attention of the officer at the address set forth heretofore, or to such other officer or addresses as either party may designate, upon at least ten (10) days' written notice, to the other party. Section l Governing law. The Agreement shall be construed by and enforced in accordance with the laws of the State of New York without regard to conflicts of law principles. Section m Entire agreement. This Agreement contains the entire understanding and agreement among the parties. There are no other agreements, conditions or representations, oral or written, express or implied, with regard thereto. This Agreement may be amended only in writing signed by all parties. 5 Exhibit 10.12 Section n Waiver. A delay or failure by any party to exercise a right under this Agreement, or a partial or single exercise of that right, shall not constitute a waiver of that or any other right. Section o. Counterparts. This Agreement may be executed in duplicate counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement. In the event that the document is signed by one party and faxed to another the parties agree that a faxed signature shall be binding upon the parties to this agreement as though the signature was an original. Section p Successors. The provisions of this Agreement shall be binding upon all parties, their successors and assigns. Section q Counsel. The parties expressly acknowledge that each has been advised to seek separate counsel for advice in this matter and has been given a reasonable opportunity to do so. IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement to be effective as of the day and year provided herein. COMPANY: CONSULTANT: IKON VENTURES, INC. INVESTOR RELATIONS SERVICES, INC. By: /s/ JONATHAN D. SIEGEL By: /s/ RICHARD J. FIXARIS ------------------------- ----------------------------- CEO President and CEO 6 EX-10.13 15 ex10_13.txt EXHIBIT 10.13 Exhibit 10.13 PAYMENT AGREEMENT THIS AGREEMENT is among IKON VENTURES, INC., a corporation organized under the laws of the State of Nevada, whose address is 1000 Woodbury Road, Suite 214, Woodbury, New York 11797, (hereinafter referred to as the "Company"); and SUMMIT TRADING LIMITED, an international business corporation with its principal office at Charlotte House, Charlotte Street, Nassau, Bahamas, as the Financing Agent (hereinafter referred to as the "STC"); WHEREAS, STC is in the business of assisting public companies in funding financial advisory, strategic business planning, and investor and public relations services designed to make the investing public knowledgeable about the benefits of stock ownership in the Company; and WHEREAS, the Company has had presented to it one or more plans of public and investor relations to utilize other business entities to achieve the Company's goals of making the investing public knowledgeable about the benefits of stock ownership in the Company; and WHEREAS, the Company recognizes that the STC is not in the business of stock brokerage, investment advice, activities which require registration under either the Securities Act of 1933 (hereinafter the "Act") or the Securities and Exchange Act of 1934) (hereinafter the "Exchange Act"), underwriting, banking, is not an insurance Company, nor does it offer services to the Company which may require regulation under federal or state securities laws; and WHEREAS, the parties agree, after having a complete understanding of the financing desired to be provided to the Company and Company desires to have STC fund a plan of public and investor relations which have been selected by the Company; NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: 1. Duties and Involvement. The Company has engaged a Consultant to provide a plan, and for coordination in executing the agreed-upon plan, for using various investor and public relations services as agreed by both parties. After agreeing upon such plan, Company desires to have STC undertake to pay its monetary obligations to the Consultant and costs of the financial and public relations services contemplated by such a plan. STC in return for the compensation hereinafter described has agreed to undertake to pay the Company's obligations to the Consultant and the investor and public relations firms agreed upon by the parties. 2. Relationship Among the Parties. STC acknowledges that it is not an officer, director or agent of the Company, it is not, and will not, be responsible for any management decisions on behalf of the Company, and may not commit the Company to any action. The Company represents that the STC does not have, through stock ownership or otherwise, the power to control the Company, nor to exercise any dominating influences over its management. STC understands and acknowledges that this Agreement shall not create or imply any agency relationship among the parties, and STC will not commit the Company in any manner except when a commitment has been specifically authorized in writing by the Company. 3. Effective Date, Term and Termination. This Agreement shall be effective on August 8, 2001, and will continue until August 7, 2002. 4. Compensation. The Company agrees to pay STC, or its designee, a sum equal to 500,000 shares of common stock of the Company (the "Shares") as total and complete consideration for its services. This sum is due and payable on the effective date as provided above. STC acknowledges that the Shares have not been registered under the Act, and the securities laws of any state, in reliance upon certain exemptions from registration based on the representations of STC contained herein. STC acknowledges and agrees that the Shares may not be transferred, sold, hypothecated or otherwise disposed of unless registered under the Act and applicable state securities laws or pursuant to an available exemption from registration thereunder. STC acknowledges that the certificates evidencing the Shares shall contain restrictive legends on transferability as per the foregoing. STC represents to the Company that it is an accredited investor as such term ins defined in Regulation D promulgated under the Act, is acquiring the Shares for its own account, for investment only, and has no present intent to distribute any of the Shares. 5. Investment Representation. i. The Company represents and warrants that it has provided STC with access to all information available to the Company concerning its condition, financial and otherwise, its management, its business and its prospects. The Company represents that it has provided STC with all copies of the Company's filings for the prior twelve (12) months, if any, (the "Disclosure Documents") made under the rules and regulations promulgated under the Act, as amended, or the Exchange Act, as amended. STC acknowledges that the acquisition of the securities to be issued to STC involves a high degree of risk. STC represents that it and its advisors have been afforded the opportunity to discuss the Company with its management. The Company represents that it has and will 2 continue to provide STC with any information or documentation necessary to verify the accuracy of the information contained in the Disclosure Documents, and will promptly notify STC upon the filing or any registration statement or other periodic reporting documents filed pursuant to the Act or the Exchange Act. This information will include DTC sheets, which shall be provided to STC no less than every two (2) weeks. The Company hereby represents that it does not currently have any of its securities in registration. ii. STC represents that neither it nor its officers, directors, or employees is not subject to any disciplinary action by either the National Association of Securities Dealers or the Securities and Exchange Commission by virtue of any violations of their rules and regulations and that to the best of its knowledge neither is its affiliates nor subcontractors subject to any such disciplinary action. iii. If required by United States law or regulation, STC will take necessary steps to prepare and file any necessary forms to comply with the transfer of the shares of stock from Company to STC, including, if required, form 13(d). 6. Registration of Securities and Liquidated Damages. STC understands and acknowledges that the shares of common stock are being acquired by STC for its own account, and not on behalf of any other person, and are being acquired for investment purposes and not for distribution. STC represents that the common stock will be a suitable investment for STC, taking into consideration the restrictions on transferability affecting the common stock. Company will undertake to comply with the various states' securities laws with respect to the registration of the Shares referred to herein. Company undertakes to make available for review and comment, on a timely basis and prior to submission to any regulatory agency, copies of the registration statement. 7. Intentionally Omitted. 8. Miscellaneous Provisions. Section a Time. Time is of the essence of this Agreement. ---- Section b Presumption. This Agreement or any section thereof shall not be construed against any party due to the fact that said Agreement or any section thereof was drafted by said party. Section c Computation of Time. In computing any period of time pursuant to this Agreement, the day of the act, event or default from which the designated period of time begins to run shall be included, unless it is a Saturday, Sunday or a legal holiday, in which event the period shall begin to 3 run on the next day which is not a Saturday, Sunday or a legal holiday, in which event the period shall run until the end of the next day thereafter which is not a Saturday, Sunday or legal holiday. Section d Titles and Captions. All article, section and paragraph titles or captions contained in this Agreement are for convenience only and shall not be deemed part of the context nor affect the interpretation of this Agreement. Section e Pronouns and Plurals. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the Person or Persons may require. Section f Further Action. The parties hereto shall execute and deliver all documents, provide all information and take or forbear from all such action as may be necessary or appropriate to achieve the purposes of this Agreement. Section g Good Faith, Cooperation and Due Diligence. The parties hereto covenant, warrant and represent to each other good faith, complete cooperation, due diligence and honesty in fact in the performance of all obligations of the parties pursuant to this Agreement. All promises and covenants are mutual and dependent. Section h Savings Clause. If any provision of this Agreement, or the application of such provision to any person or circumstance, shall be held invalid, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those as to which it is held invalid, shall not be affected thereby. Section i Assignment. This Agreement may not be assigned by either party hereto without the written consent of the other, but shall be binding upon the successors of the parties. Section j Arbitration. ----------- i. If a dispute arises out of or relates to this Agreement, or the breach thereof, and if said dispute cannot be settled through direct discussion, the parties agree to first endeavor to settle the dispute in an amicable manner by mediation under the Commercial Mediation Rules of the American Arbitration Association before resorting to arbitration. Thereafter, any unresolved controversy or claim arising out of or relating to this Agreement or a breach thereof shall be settled by arbitration in accordance with the rules of the American Arbitration Association, and judgment upon the award rendered by the Arbitrator may be entered in any court having jurisdiction thereof. ii. Any provisional remedy, which would be available from a court of law, shall be available to the parties to this Agreement from the Arbitrator pending arbitration. 4 iii. The situs of the arbitration shall be New York, NY. iv. In the event that a dispute results in arbitration, the parties agree that the prevailing party shall be entitled to reasonable attorneys fees to be fixed by the arbitrator. Section k Notices. All notices required or permitted to be given under this Agreement shall be given in writing and shall be delivered, either personally or by express delivery service, to the party to be notified. Notice to each party shall be deemed to have been duly given upon delivery, personally or by courier (such as Federal Express or similar express delivery service), addressed to the attention of the officer at the address set forth heretofore, or to such other officer or addresses as either party may designate, upon at least ten (10) days' written notice, to the other party. Section l Governing law. The Agreement shall be construed by and enforced in accordance with the laws of the State of New York. Section m Entire agreement. This Agreement contains the entire understanding and agreement among the parties. There are no other agreements, conditions or representations, oral or written, express or implied, with regard thereto. This Agreement may be amended only in writing signed by all parties. Section n Waiver. A delay or failure by any party to exercise a right under this Agreement, or a partial or single exercise of that right, shall not constitute a waiver of that or any other right. Section o Counterparts. This Agreement may be executed in duplicate counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement. In the event that the document is signed by one party and faxed to another the parties agree that a faxed signature shall be binding upon the parties to this agreement as though the signature was an original. Section p Successors. The provisions of this Agreement shall be binding upon all parties, their successors and assigns. Section q Counsel. The parties expressly acknowledge that each has been advised to seek separate counsel for advice in this matter and has been given a reasonable opportunity to do so. IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement to be effective as of the day and year provided herein. COMPANY: CONSULTANT: IKON VENTURES, INC. SUMMIT TRADING LIMITED By: /s/ JONATHAN D. SIEGEL By: /s/ PETER B. EVANS -------------------------- ----------------------- 5 EX-10.14 16 ex10_14.txt EXHIBIT 10.14 THIS INDENTURE OF LEASE made the 14th day of May, 2001, by and between THE TILLES INVESTMENT COMPANY, a co-partnership, with offices at 7600 Jericho Turnpike, Woodbury, New York 11797, hereinafter referred to as the "LANDLORD" and SUTTON ONLINE, INC., with offices at 575 Underhill Boulevard, Syosset, New York 11791 hereinafter referred to as the "TENANT". W I T N E S S E T H - - - - - - - - - - WHEREAS, the LANDLORD is the owner in fee of the premises hereinafter demised NOW, THEREFORE, LANDLORD and TENANT covenant and agree as follows: ARTICLE I --------- DEMISE ------ Section 1.1 The LANDLORD, for and in consideration of the rents, covenants and agreements, hereinafter reserved and contained herein, hereby leases and TENANT does hereby take and hire, upon and subject to the covenants and conditions hereinafter expressed which the TENANT agrees to keep and perform, the premises shown on the floor plan annexed hereto as Exhibit "A" consisting of 3,698 rentable square feet hereinafter called the "Demised Premises" in the building as shown on the Plan annexed hereto and marked Exhibit "B", situated at 1000 Woodbury Road, Woodbury, New York 11797 together with the right to use, in common with other tenants of the LANDLORD in this and other buildings, the parking area shown on Exhibit "B" (hereinafter called "parking area") for the parking of automobiles of employees, customers, invitees or licensees of the TENANT and other tenants of the LANDLORD. LANDLORD agrees to provide two (2) reserved parking spaces in a designated reserved parking area; the balance are considered unreserved. ARTICLE II ---------- TERM ---- Section 2.1 The basic term of this Lease (hereinafter referred to as the "Term") shall commence upon the date the LANDLORD gives notice to the TENANT that the LANDLORD has substantially completed the work set forth on the Work Letter attached hereto as Exhibit "C". The term "substantially completed" as used herein shall be deemed to mean so complete as to allow the TENANT to enter the Demised Premises and conduct its normal business operations therein even though there may be minor items of decoration or construction to be completed. At the time of the commencement of the Lease the LANDLORD shall have received a temporary or permanent Certificate of Occupancy for the Demised Premises (unless any work to be done therein, by the TENANT, shall prevent the issuance of either such Certificate of Occupancy) and the air conditioning, heating, plumbing and electrical systems in the Demised Premises and the elevator in the building shall be in working order and the said Demised Premises shall be free of debris. Section 2.2 The term of this Lease shall be for ten (10) years and two (2) months. The term "Lease year" as used herein or "year" as used herein shall mean a twelve- (12) month period. The first Lease year shall commence on the date of the term hereof, but if such date of commencement shall be a date other than the first day of a month, the first Lease year shall commence on the first day of the month following the month in which the term of the Lease commences. Each succeeding Lease year during the term hereof shall commence on the anniversary date of the first Lease year. 2 Section 2.3 Immediately following the determination of the commencement date of the term of this Lease, the LANDLORD and the TENANT, at the request of either party, shall execute an agreement in recordable form, setting forth both the dates of the commencement of the term of this Lease and the date of the termination hereof. Section 2.4 The parties expect that the term of this Lease will commence on the 1st day of July, 2001, and end on the 31st day of August, 2011. In the event, however, that the LANDLORD is unable to substantially complete the work set forth on Exhibit "C" by reason of strikes, inability to obtain materials, governmental regulations, acts of God or other matters beyond LANDLORD'S control then, and in that event, the provisions of Section "2.1" shall control the commencement of the term hereof. 3 ARTICLE III ----------- BASIC RENT -- ADDITIONAL RENT ----------------------------- Section 3.1 The TENANT shall pay to the LANDLORD an Annual Basic Rent to THE TILLES INVESTMENT COMPANY at P.O. Box 9020, Hicksville, New York 11802-9020, in equal monthly installments in advance of or on the first day of each month without notice and demand and without abatement, deduction or set-off of any amount whatsoever based upon the following schedule: TERM ANNUAL BASIC RENT MONTHLY BASIC RENT - ---- ----------------- ------------------ 09/01/01 - 08/31/02 $ 97,096.00 $ 8,091.33 09/01/02 - 08/31/03 $ 99,980.44 $ 8,331.70 09/01/03 - 08/31/04 $102,951.41 $ 8,579.28 09/01/04 - 08/31/05 $106,011.52 $ 8,834.29 09/01/05 - 08/31/06 $109,163.42 $ 9,096.95 09/01/06 - 08/31/07 $112,409.88 $ 9,367.49 09/01/07 - 08/31/08 $115,753.74 $ 9,646.15 09/01/08 - 08/31/09 $119,197.91 $ 9,933.16 09/01/09 - 08/31/10 $122,745.41 $10,228.78 09/01/10 - 08/31/11 $126,399.33 $10,533.28 The TENANT'S obligation to pay Basic Rents shall commence two (2) months from the date upon which LANDLORD gives notice to TENANT of substantial completion as set forth in Section 2.1 or July 1, 2001 whichever last occurs. The fractional rent, if any, from the rent commencement date (as above provided) to the date of the first day of the following month shall be paid by the TENANT to the LANDLORD within five (5) days after the rent commencement date. The LANDLORD acknowledges receipt of $8,830.93 representing the rent and electrical charges (as indicated in Section 4.3 of this Lease) for the first full month for which rent is due hereunder. Section 3.2 As additional rent during each and every year during the term hereof and any renewals the TENANT shall pay to the LANDLORD its proportionate share of any increase in real estate taxes over the 2001/2002 School Tax and the 2001 Town Tax. 4 A. TENANT'S proportionate share of any such increase shall be determined by multiplying any such increase by a fraction, the numerator of which shall be the total gross rentable area of the Demised Premises (i.e., 3,698 square feet) and the denominator of which shall be the total gross rentable area of the building of which the Demised Premises form a part (i.e., 230,000 square feet), i.e., 1.61%. B. TENANT shall similarly pay its proportionate share as determined in sub-paragraph "A" above of any ad valorem assessments, or impositions against the real property of which the Demised Premises form a part and its proportionate share of any taxes which shall be imposed in lieu of any ad valorem real property tax as the same is presently considered, except that TENANT shall not be obligated to pay any portion of any assessment or impositions (whether payable in installments or otherwise) which have become a lien prior to the commencement of the term of this Lease. In the event that there shall be any general or special assessments or impositions against the said real property which the TENANT is obligated to pay a proportionate share, the LANDLORD agrees that if the said assessments or impositions may be paid in installments that the LANDLORD will elect to pay the same in installments and the TENANT shall only be responsible to pay its proportionate share of those installments which cover the period of the term of the Lease. C. TENANT shall, within ten days after LANDLORD renders a bill therefore, pay to the LANDLORD its Proportionate Share of an increase in fire insurance and extended coverage (all risk replacement value) and rent insurance premiums for the Building of which the Demised Premises form a part over the premiums paid by the LANDLORD for the policy in effect at the time of the commencement of this Lease. In the event, however, that any such increase in premiums shall be due to any act or omission to act of the TENANT, TENANT shall pay the entire amount of such increase. Conversely, if any such increase is due to any act or omission to act of any other tenant in the Building, TENANT shall not be required to pay any portion of such increase. 5 Section 3.3 In the event that LANDLORD or any major tenant of the building should contest any taxes or assessments levi ed against the building, the TENANT agrees to cooperate but is not obligated to contribute to any expenses incurred by the LANDLORD in any such proceeding or action. In the event that there shall be any refunds of taxes by reason of any such action or proceeding, the TENANT shall be entitled to receive back its proportionate share of the net refund (after deducting therefrom the cost of the action or proceeding including, without limitation, fees for experts, court costs, attorneys, etc.). In no event shall TENANT be entitled to any refund in excess of the amount of taxes paid by the TENANT for the year for which such refund was made. Section 3.4 Rent and Additional Rent shall be payable in lawful money of the United States to the LANDLORD at P.O. Box 9020, Hicksville, New York 11802-9020, or at such other place as the LANDLORD may from time to time designate, in advance, without notice, demand, offset or deduction except as specifically set forth herein. In the event any payment of Basic Rent or Additional Rent shall not be made to LANDLORD within fifteen (15) days after the due date thereof, there shall be added to the amount a sum equal to five (5) percent of the unpaid rent and ten (10) percent to the additional rent to help defray LANDLORD'S additional costs for additional bookkeeping and other costs in connection therewith. Section 3.5 Any payment to LANDLORD provided for herein, for which no specific time period is set forth within which it is to be paid, must be paid within ten (10) days of receipt of notice that same is due. 6 ARTICLE IV ---------- UTILITIES AND SERVICES ---------------------- ARTICLE IV ---------- Section 4.1 Throughout the term of this Lease, LANDLORD shall supply and TENANT shall pay for TENANT'S electricity used in the Demised Premises and for the common areas for normal lighting. The TENANT shall use no electric equipment in the Demised Premises other than desktop computers, copiers, fax machines and other normal small office machines. If the TENANT introduces equipment onto the premises other than other normal small office business machines, TENANT shall reimburse LANDLORD for the cost of electricity necessary for same. Section 4.2 LANDLORD shall supply, at LANDLORD'S own expense, water to the building of which the Demised Premises form a part for normal office building consumption. Section 4.3 The cost of electricity to the TENANT, during the term of this Lease, shall be determined as follows: A. TENANT shall pay the sum of $8,875.20 per year payable in equal monthly installments of $739.60 in advance. B. If the cost of electricity, as determined by the L.I. Power Authority, increases by ten percent (10%) or greater (over the base year 2001) during the term of this Lease, TENANT shall pay the additional sum to be determined per year as part of any increases in Energy Charges. In the event TENANT shall create any waste other than normal office waste (including but not limited to packing cartons, etc.), TENANT shall remove the same from the premises shown on Exhibit "B" at TENANT'S sole cost and expense. In the event same are placed in LANDLORD'S dumpster, TENANT shall be charged the reasonable cost for removal thereof. LANDLORD agrees that at the request of TENANT, it will supply separate dumpsters for the removal of packing waste. All other waste at the time of TENANT'S move(s) in or move(s) out of the building, TENANT agrees that it will pay to LANDLORD the reasonable cost thereof, plus ten (10%) percent for overhead and ten (10%) percent profit. 7 Section 4.4 The LANDLORD covenants to provide and pay for heat, air-conditioning, elevator service and electricity to the building between the hours of 8:00 a.m. and 6:00 p.m., Monday through Friday and Saturday between the hours of 8:00 a.m. to 1:00 p.m. However, if one of the days above is a "Holiday", the above services shall not be in operation. The term "Holiday" shall mean New Year's Day, Presidents Day, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas, and such other Holidays as may, from time to time, be nationally recognized. TENANT shall have access to and the use of Demised Premises including electric, twenty-four (24) hours a day, seven (7) days a week. However, LANDLORD shall only provide building services for the hours noted above. Section 4.5 The LANDLORD covenants to provide and pay for cleaning services by LANDLORD'S cleaner as per the Cleaning Specifications attached hereto and made a part hereof as Exhibit "D". Section 4.6 LANDLORD agrees that TENANT'S move into or out of the Building may take place on Saturdays, Sundays and Holidays, and that during the period while TENANT is in the process of moving into the Building, LANDLORD, at TENANT'S expense, shall furnish a Supervisor from LANDLORD'S staff during the move-in period. TENANT may move in or out of the building on Monday - Friday, between the hours of 8 a.m. and 5 p.m. without a supervisor. However, if TENANT'S move exceeds the hour of 5 p.m., a supervisor will be necessary. TENANT agrees to give at least seven days' prior written notice to LANDLORD of the date of any such move, and the time thereof and TENANT shall use the loading areas and service elevator designated by LANDLORD for such moving and deliveries, and to otherwise abide by the Rules established by LANDLORD as respect deliveries to or moving into or out of the Demised Premises. TENANT shall supply, at TENANT'S cost and expense, protective coverings to protect the floors and walls of the Building when moving into or out of the Demised Premises or when receiving or sending any bulky or heavy materials. 8 Section 4.7 TENANT shall furnish and install all replacement lighting tubes, lamps, bulbs and ballasts required in the Demised Premises, at TENANT'S expense, or shall pay LANDLORD'S reasonable charges therefore on demand. 9 ARTICLE V --------- LANDLORD'S WORK, REPAIR AND MAINTENANCE --------------------------------------- Section 5.1 The LANDLORD agrees, at its own cost and expense, to do the work relating to the Demised Premises in accordance with the Work Letter attached hereto, as Exhibit "C". Section 5.2 TENANT may have its workmen commence work in the Demised Premises prior to the substantial completion of LANDLORD'S work, provided that such workmen do not, in any manner, interfere with or impede LANDLORD'S workers. In the event that TENANT'S workers shall interfere with or impede LANDLORD'S workers, then upon notice from LANDLORD, TENANT will immediately remove its workers from the Demised Premises. TENANT'S entry into the Demised Premises for the purpose of making TENANT'S installations shall not be deemed a waiver of any of the TENANT'S rights under the Lease, nor shall the same be deemed an acceptance of the work to be done by the LANDLORD hereunder. Section 5.3 The TENANT covenants throughout the term of this Lease, at the TENANT'S sole cost and expense, to take good care of the interior of the Demised Premises and keep the same in good order and condition and to make all repairs therein except as provided in Section "5.4" hereof. Section 5.4 The LANDLORD covenants throughout the term of this Lease, at the LANDLORD'S sole cost and expense, to make all structural repairs to the building in which the Demised Premises are located and shall also maintain and keep in good repair the building's sanitary, electrical, heating and other systems servicing or located, in or passing through the Demised Premises, other than (i) To any systems, facilities and equipment installed on behalf of the TENANT; and (ii) To any of the improvements to the interior of the Demised Premises undertaken completed by the TENANT; and 10 (iii) Any repairs which are necessitated by any act or omission of the TENANT, its agents, servants, employees or invitees, which repairs TENANT shall make at its own cost and expense. In the event the LANDLORD makes any repairs which are necessitated by any act or omission of the TENANT, its affiliates, employees or invitees, LANDLORD shall submit a copy of the bill for same and shall charge the TENANT an additional ten percent (10%) overhead and ten percent (10%) profit along with such bill. Section 5.5 Except as expressly provided otherwise in this Lease, there shall be no allowance to the TENANT or diminution of rent and no liability on the part of the LANDLORD by reason of inconvenience, annoyance or injury to business arising from the making of any repairs, alterations, additions or improvements in or to any portion of the building, on the Demised Premises, in the parking area, or in and to the fixtures, appurtenances and equipment thereof. The LANDLORD agrees to do any work to be done by it in such a manner as not to unreasonably interfere with the TENANT'S use of the Demised Premises. 11 ARTICLE VI ---------- CHANGES AND ALTERATIONS - - SURRENDER OF DEMISED PREMISES --------------------------------------------------------- Section 6.1 The TENANT shall have the right, at any time and from time to time, during the term of this Lease to make such nonstructural changes and alterations to the Demised Premises as the TENANT shall deem necessary or desirable. However, all changes and alterations must be made with the written consent of the LANDLORD and any alterations affecting HVAC, plumbing and electrical work, including lighting, must be done by the LANDLORD at TENANT'S sole cost and expense. Prior to TENANT doing any work in the Demises Premises, TENANT shall deliver to LANDLORD a description thereof (if same is limited to decorating, carpeting, wallpapering, etc.) or a plan therefore prepared by a licensed architect for any other work. Section 6.2 The TENANT agrees not to place any signs on the roof or on or about the inside or outside of the building in which the Demised Premises are situated, except for signs inside of the Demised Premises which may not be seen from the outside, except as noted in Article XXIX of this Lease. Section 6.3 All improvements and alterations made or installed by or on behalf of the TENANT, shall immediately, upon completion of installation thereof, be and become the property of the LANDLORD without payment therefore by the LANDLORD. Section 6.4 The TENANT shall, upon the expiration or earlier termination of this Lease, surrender to the LANDLORD the Demised Premises, together with all alterations and replacement thereto, in good order and condition, except for reasonable wear and tear or damage by fire or casualty. If the TENANT shall make any alterations or changes or additions to the Demised Premises, after the commencement of the term of this Lease, and LANDLORD shall desire the same to be removed upon the expiration of the term hereof, then upon LANDLORD'S giving notice to the TENANT of its desire to have the same removed, the TENANT will remove the same prior to the expiration of the term hereof at TENANT'S sole cost and expense and TENANT will, 12 at its own cost and expense, restore the premises to the condition which they were in just prior to the commencement of the term hereof, normal wear and tear and damage by fire excepted. Section 6.5 In connection with any alterations to the Demised Premises done by TENANT including decorating, prior to any work being commenced, TENANT shall supply to LANDLORD: (i) liability insurance from the Contractor doing the work in an amount not less than Three Million Dollars, naming LANDLORD as an additional insured; (ii) evidence that all workers doing work in the Demised Premises are covered by Workers Compensation Insurance; (iii) an agreement from TENANT'S contractor to remove all debris from the premises shown on Exhibit "B" after 6:00 P.M. at the end of each day's work. In the event TENANT'S contractor shall fail to remove debris on a daily basis, as hereinabove provided, LANDLORD may order said contractors off the premises and refuse them access to the Building thereafter. 13 ARTICLE VII ----------- COMPLIANCE WITH ORDERS, ORDINANCES, ETC. ---------------------------------------- Section 7.1 The TENANT covenants throughout the term of this Lease and any renewals hereof, at the TENANT'S sole cost and expense, to comply with all laws and ordinances and the orders and requirements of all federal, state and municipal governments and appropriate departments, commissions, boards and officers thereof, which may be applicable to the TENANT'S use or occupancy of the Demised Premises. Section 7.2 The TENANT shall have the right to contest by appropriate legal proceedings, in the name of the TENANT or the LANDLORD or both, but without cost or expense to the LANDLORD, the validity of any law, ordinance, order or requirement of the nature referred to in Section "7.1" hereof. Provided such noncompliance does not subject the LANDLORD to any criminal liability for failure so to comply therewith, the TENANT may postpone compliance therewith until the final determination of any proceedings, provided that all such proceedings shall be prosecuted with all due diligence and dispatch, and if any lien or charge is incurred by reason of noncompliance, the TENANT may nevertheless make the contest aforesaid and delay compliance as aforesaid, provided that the TENANT indemnifies the LANDLORD against any loss or injury by reason of such noncompliance or delay therein. Section 7.3 LANDLORD covenants and agrees that at the time of the commencement of the term of this Lease, the Demised Premises shall comply with all laws, ordinances and regulations applicable thereto. 14 ARTICLE VIII ------------ MECHANIC'S LIENS ---------------- Section 8.1 The TENANT covenants not to suffer or permit any mechanic's liens to be filed against the fee interest of the LANDLORD nor against TENANT'S Leasehold interest in the Demised Premises by reason of work, labor, services or materials supplied or claimed to have been supplied to the TENANT or any contractor, subcontractor or any other party or person acting at the request of the TENANT, or anyone holding the Demised Premises or any part thereof through or under the TENANT. TENANT agrees that in the event any mechanic's lien shall be filed against the fee interest of the LANDLORD or against the TENANT'S Leasehold interest the TENANT shall, within thirty (30) days after receiving notice of the filing thereof, cause the same to be discharged of record by payment , deposit, bond or order of a court of competent jurisdiction or otherwise. If TENANT shall fail to cause such lien to be discharged or bonded with the period aforesaid, then, in addition to any other right or remedy, LANDLORD may, but shall not be obligated to, discharge the same by paying the amount claimed to be due, by procuring the discharge of such lien by deposit by bonding proceedings, and in any such event, LANDLORD shall be entitled, if LANDLORD so elects, to compel the prosecution of any action for the foreclosure of such lien by the lienor and to pay the amount of the judgment in favor of the lienor with interest, costs and allowances. Any amount so paid by LANDLORD and all reasonable costs and expenses incurred by LANDLORD or the fee owner in connection therewith, including, but not limited to premiums on any bonds filed and attorneys' fees, shall constitute Additional Rental payable by TENANT to LANDLORD within ten days of demand therefore. 15 ARTICLE IX ---------- INSPECTION OF DEMISED PREMISES BY LANDLORD ------------------------------------------ Section 9.1 The TENANT agrees to permit the LANDLORD and the authorized representatives of the LANDLORD to enter the Demised Premises at all reasonable times during TENANT'S usual business hours for the purpose of (a) inspecting the same, and (b) making any necessary repairs to the Demised Premises. Section 9.2 The LANDLORD is hereby given the right, during TENANT'S usual business hours, to enter the Demised Premises to exhibit the same for the purpose of sale or mortgage and, during the last six (6) months of the initial term or at anytime if the TENANT defaults in any of the terms, covenants and conditions of this Lease, to exhibit the same to prospective tenants for the purposes of renting. Section 9.3 With regard to Sections 9.1 and 9.2, LANDLORD shall endeavor to give reasonable notice to TENANT of LANDLORD'S intention to inspect the premises or to make repairs. 16 ARTICLE X --------- RIGHT TO PERFORM COVENANTS -------------------------- Section 10.1 The TENANT covenants and agrees that if the TENANT shall, at any time, fail to make any payment or perform any other act on its part to be made or performed under this Lease, the LANDLORD, after the expiration of any time limitation set forth in this Lease (except in cases of emergency) may, but shall not be obligated to, make such payment or perform such other act to the extent the LANDLORD may deem desirable, and in connection therewith to pay expenses and employ counsel. All sums so paid by the LANDLORD and all expenses in connection therewith shall be deemed Additional Rent hereunder and be payable to the LANDLORD on the first day of the next month and the LANDLORD shall have the same rights and remedies for the nonpayment thereof as in the case of default in the payment of the basic rent reserved hereunder. 17 ARTICLE XI ---------- DAMAGE OR DESTRUCTION --------------------- Section 11.1 A. If the Demised Premises or any part thereof shall be damaged by fire or other casualty, TENANT shall give immediate notice thereof to LANDLORD and this Lease shall continue in full force and effect except as hereinafter set forth. B. If the Demised Premises are partially damaged or rendered partially unusable by fire or other casualty, the damages thereto shall be repaired by and at the expense of LANDLORD to the extent that said damages include those installations originally installed by LANDLORD. C. If the Demised Premises are totally damaged or rendered wholly unusable by fire or other casualty, then the LANDLORD shall have the right to elect not to restore the same as hereinafter provided. D. If the Demised Premises are rendered wholly unusable or (whether or not the Demised Premises are damaged in whole or in part) if the building shall be so damaged that LANDLORD shall decide to demolish it or not to rebuild it, then, in any of such events, LANDLORD may elect to terminate this Lease or rebuild by written notice to TENANT given within ninety (90) days after such fire or casualty specifying a date for the expiration of the Lease or rebuilding, which date shall not be more than sixty (60) days after the giving of such notice. Upon the date specified in a notice of termination, the term of this Lease shall expire as fully and completely as if such date were the date set forth above for the termination of this Lease and TENANT shall forthwith quit, surrender and vacate the premises without prejudice however, to LANDLORD'S rights and remedies against TENANT under the Lease provisions in effect prior to such termination, and any rent owing shall be paid up to such date and any payments of rent made by TENANT which were on account of any period subsequent to such date shall be returned to TENANT. Unless LANDLORD shall serve a termination notice as provided for herein, LANDLORD shall make the repairs and restorations under the conditions of "B" and "C" hereof, with all reasonable expedition subject to delays due to adjustment of insurance claims, labor troubles and causes beyond LANDLORD'S control. 18 E. Nothing contained hereinabove shall relieve TENANT from liability that may exist as a result of damage from fire or other casualty. Notwithstanding the foregoing, each party shall look first to any insurance in its favor before making any claim against the other party for recovery for loss or damage resulting from fire or other casualty, and to the extent that such insurance is in force and collectable to the extent permitted by law, LANDLORD and TENANT each hereby releases and waives all right of recovery against the other or any one claiming through or under each of them by way of subrogation or otherwise. LANDLORD and TENANT'S insurance policies shall contain a clause providing that such a release or waiver shall not invalidate the insurance and also, provided that such policy can be obtained without additional premiums. In the event that there are additional premiums for such waiver of subrogation, the party in whose favor such waiver is intended shall have the option to either pay the additional premium or waive the condition that the other's policy contain the same. TENANT acknowledges that LANDLORD will not carry insurance on TENANT'S furniture and/or furnishings or any fixtures or equipment, improvements, or appurtenances removable by TENANT and agrees that LANDLORD will not be obligated to repair any damage thereto or replace the same. F. TENANT hereby waives the provisions of Section 227 of the Real Property Law and agrees that the provisions of this article shall govern and control in lieu thereof. Section 11.2 The TENANT shall not knowingly do or permit to be done any act or thing upon the Demised Premises, which will invalidate or be in conflict with fire insurance policies covering the building of which Demised Premises form a part, and fixtures and property therein. The TENANT shall, at its expense, comply with all rules, orders, regulations or requirements of the New York Board of Fire Underwriters, or any other similar body, which may be applicable to the TENANT'S use and occupancy of the Demised Premises, provided that the necessity for such compliance results from the use and occupancy of the Demised Premises by the TENANT, and shall not do, or permit anything to be done, 19 in or upon the Demised Premises or bring or keep anything therein, or use the Demised Premises in a manner which shall increase the rate of fire insurance on the building of which the Demised Premises form a part, or on the property located therein, over that in effect when the Lease commenced, unless the TENANT shall reimburse the LANDLORD, as additional rent hereunder, for that part of all insurance premiums thereafter paid by the LANDLORD, which shall have been charged because of such failure or use by the TENANT, and shall make such reimbursement upon the first day of the month following receipt of notice of such outlay by the LANDLORD and evidence of the payment thereof. Section 11.3 Notwithstanding anything to the contrary contained in this Lease, during any period after damage or destruction and until the premises have been restored, the TENANT shall be entitled to an abatement of rent and additional rent for the unusable portion of the Demised Premises, on a square foot basis. 20 ARTICLE XII ----------- CONDEMNATION ------------ Section 12.1 If the whole of the Demised Premises shall be taken for any public or quasi-public use by any lawful power or authority by exercise of the right of condemnation or eminent domain, or by agreement between LANDLORD and those having the authority to exercise such right (hereinafter called "Taking"), the term of this Lease and all rights of TENANT hereunder, except as hereinafter provided, shall cease and expire as of the date of vesting of title as a result of the Taking and the rent or additional rent paid for a period after such date shall be refunded to TENANT upon demand. Section 12.2 In the event of a Taking of less than the whole of the Demised Premises, or the whole or part of the parking area, this Lease shall cease and expire in respect of the portion of the Demised Premises and/or the parking area taken upon vesting of title as a result of the Taking, and, if the Taking results in the portion of the Demised Premises remaining after the Taking being inadequate, in the judgment of TENANT, for the efficient, economical operation of the TENANT'S business conducted at such time in the Demised Premises, TENANT may elect to terminate this Lease by giving notice to LANDLORD of such election not more than forty-five (45) days after the actual Taking by the condemning authority, stating the date of termination, which date of termination shall be not more than thirty (30) days after the date on which such notice to LANDLORD is given, and upon the date specified in such notice to LANDLORD, this Lease and the term hereof shall cease and expire. If TENANT does not elect to terminate this Lease aforesaid: (i) The new rent payable under this Lease shall be the product of the basic rent payable under this Lease multiplied by a fraction, the numerator of which is the net rentable area of the Demised Premises remaining after the Taking, and the denominator of which is the net rentable area of the Demised Premises immediately preceding the Taking, and 21 (ii) The net award for the Taking shall be paid to and first used by LANDLORD, subject to the rights of mortgagee, to restore the portion of the Demised Premises and the building remaining after the Taking to substantially the same condition and tenantability (hereinafter called the "Pre-Taking Condition") as existed immediately preceding the date of the Taking. Section 12.3 In the event of a Taking of less than the whole of the Demised Premises which occurs during the period of two (2) years next preceding the date of expiration of the term of this Lease, LANDLORD or TENANT may elect to terminate this Lease by giving notice to the other party to this Lease of such election, not more than forty-five (45) days after the actual Taking by the condemning authority, stating the date of termination, which date of termination shall not be more than thirty (30) days after the date on which such notice of termination is given, and upon the date specified in such notice, this Lease and the term hereof shall cease and expire all rent and additional rent paid under this Lease for a period after such date of termination shall be refunded to TENANT upon demand. On or before such date of termination, TENANT shall vacate the Demised Premises, and any of TENANT'S property remaining in the Demised Premises subsequent to such date of termination shall be deemed abandoned by TENANT and shall become the property of LANDLORD. Section 12.4 In the event of a Taking of the Demised Premises or any part thereof, and whether or not this Lease is terminated, TENANT shall have no claim against LANDLORD or the condemning authority for the value of the unexpired term of this Lease, but: (i) TENANT may interpose and prosecute in any proceedings in respect of the Taking, independent of any claim of LANDLORD, a claim for the reasonable value of TENANT'S fixtures and (ii) A claim for TENANT'S moving expenses. 22 ARTICLE XIII ------------ BANKRUPTCY OR OTHER DEFAULT --------------------------- Section 13.1 A. Events of Bankruptcy, The following shall be Events of Bankruptcy under this Lease: (i) TENANT'S becoming insolvent, as the term is defined in Title 11 of the United States Code, entitled Bankruptcy, 11 U.S.C. Sec. 101 et seq. (The "Bankruptcy Code") or under the insolvency laws of New York State; (ii) The appointment of a Receiver or Custodian for any or all of TENANT'S property or assets; (iii) The filing of a voluntary petition under the provisions of the Bankruptcy Code or Insolvency Laws; (iv) The filing of an involuntary petition against TENANT as the subject debtor under the Bankruptcy Code or Insolvency Laws, which is either not dismissed within sixty days of filing, or results in the issuance of an order for relief against the debtor, whichever is later; or, (v) TENANT'S making or consenting to an assignment for the benefit of creditors of a common law composition of creditors. B. Landlord's Remedies ------------------- (i) Termination of Lease. Upon the occurrence of an Event of Bankruptcy, LANDLORD shall have the right to terminate this Lease by giving thirty days prior written notice to TENANT, provided, however, that this Section "13.1 (B) (i)" shall have no effect while a case in which TENANT is the subject debtor under the Bankruptcy Code is pending, unless TENANT or its Trustee in Bankruptcy is unable to comply with the provisions of Sections "13.1 (B) (v)" and "13.1 (B) (vi)" below. If TENANT or its Trustee is unable to comply with Sections "13.1 (B) (v)" and "13.1 (B) (vi)" below, this Lease shall automatically cease and terminate, and TENANT shall be immediately obligated to quit the premises upon the giving of notice pursuant to this Section "13.1 (B) (i)". Any other 23 notice to quit, or notice of LANDLORD'S intention to re-enter is hereby expressly waived. If LANDLORD elects to terminate this Lease, everything contained in this Lease on the part of LANDLORD to be done and performed shall cease without prejudice, subject, however to the right of LANDLORD to recover from TENANT all rent and any other sums accrued up to the time of termination or recovery of possession by LANDLORD, whichever is later, and any other monetary damages or loss of reserved rent sustained by LANDLORD. (ii) Suit for Possession. Upon termination of this Lease, pursuant to Section "13.1 (B) (i)", LANDLORD may proceed to recover possession under and by virtue of the provisions of the laws of the State of New York, or by such other proceedings, including re-entry and possession, as may be applicable. (iii) Reletting of Premises. Upon termination of this Lease, pursuant to Section "13.1 (B) (i)", the premises may be relet by LANDLORD for such rent and upon such terms as are not unreasonable under the circumstances, and if the full rental reserved under this Lease (and any of the costs, expenses, or damages indicated below) shall not be realized by LANDLORD, TENANT shall be liable for all damages sustained by LANDLORD, including, without limitation, deficiency in rent, reasonable attorneys' fees, brokerage fees, and expenses of placing the premises in the first class rentable condition. LANDLORD, in putting the premises in good order or preparing the same for re-rental may, at LANDLORD'S option, make such alterations, repairs, or replacements in the premises as LANDLORD, in LANDLORD'S sole judgment, considers advisable and necessary for the purpose of reletting the premises, and the making of such alterations, repairs, or replacements shall not operate or be construed to release TENANT from liability hereunder as aforesaid. LANDLORD shall, in no event, be liable in any way whatsoever for failure to relet the premises, or in the event 24 that the premises are relet, for failure to collect the rent thereof under such reletting, and in no event shall TENANT be entitled to receive any excess, if any, of such net rent collected over the sums payable by TENANT to LANDLORD hereunder. (iv) Monetary Damages. Any damage or loss of rent sustained by LANDLORD as a result of an Event of Bankruptcy may be recovered by LANDLORD, at LANDLORD'S option, at the time of the reletting, or in separate actions, from time to time, as said damage shall have been made more easily ascertainable by successive relettings, or in a single proceeding deferred until the expiration of the term of this Lease (in which event TENANT hereby agrees that the cause of action shall not be deemed to have accrued until the date of expiration of said term) or in a single proceeding prior to either the time of reletting or the expiration of the term of this Lease, in which event TENANT agrees to pay LANDLORD the difference between the present value of the rent reserved under this Lease on the date of breach, discounted at eight percent per annum, and the fair market rental value of the Demised Premises on the date of breach. In the event TENANT becomes the subject debtor in a case under the Bankruptcy Code the provisions of this Section "13.1 (B) (iv)" may be limited by the limitations of damage provisions of the Bankruptcy Code. (v) Assumption or Assignment by Trustee. In the event TENANT becomes the subject debtor in a case pending under the Bankruptcy Code, LANDLORD'S right to terminate this Lease pursuant to this Section "13.1" shall be subject to the rights of the Trustee in Bankruptcy to assume or assign this Lease. The Trustee shall not have the right to assume or assign this Lease unless the Trustee: (a) promptly cures all defaults under this Lease, (b) promptly compensates LANDLORD for monetary damages incurred as a result of such default, and (c) provides adequate assurance of future performance. 25 (vi) Adequate Assurance of Future Performance. LANDLORD and TENANT hereby agree in advance that adequate assurance of future performance, as used in Section "13.1(B)(v)" above, shall mean that all of the following minimum criteria must be met: (a) The Trustee must pay to LANDLORD, at the time the next payment of rent is then due under this Lease, in addition to such payment of rent, an amount equal to the next three months rent due under this Lease, said amount to be held by LANDLORD in escrow until either the Trustee or TENANT defaults in its payment of rent or other obligations under this Lease (whereupon LANDLORD shall have the right to draw such escrow funds) or until the expiration of this Lease (whereupon the funds shall be returned to the Trustee or TENANT); (b) The TENANT or Trustee must agree to pay to the LANDLORD, at any time the LANDLORD is authorized to and does draw on the funds escrowed pursuant to Section "13.1 (B)(vi)(a)" above, the amount necessary to restore such escrow account to the original level required by said provision; (c) TENANT must pay its estimated pro-rata share of the cost of all services provided by LANDLORD (whether directly or through agents or contractors, and whether or not the cost of such service is to be passed through to TENANT) in advance of the performance or provision of such services; (d) The Trustee must agree that TENANT'S business shall be conducted in a first class manner, and that no liquidating sales, auctions, or other non-first class business operations shall be conducted on the premises; (e) The Trustee must agree that the use of the premises as stated in this Lease will remain unchanged; (f) The Trustee must agree that the assumption or assignment of this Lease will not violate or affect the rights of other tenants of the LANDLORD. 26 (vii) Failure to Provide Adequate Assurance. In the event TENANT is unable to: (a) cure its defaults; or (b) reimburse LANDLORD for its monetary damages; or (c) pay the rent due under this Lease, on time (or within five days of the due date); or (d) meet the criteria and obligations imposed by Section "13.1 (B)(vi)" above; then TENANT agrees in advance that it has not met its burden to provide adequate assurance of future performance, and this Lease may be terminated by LANDLORD in accordance with Section "13.1 (B)(i)" above. Section 13.2 Default of TENANT A. Events of Default. The following shall be Events of Default under this Lease. (i) TENANT'S failure to pay any monthly installment of base annual rent or any other item of additional rent when due hereunder. (ii) TENANT'S failure to make any other payment required under this Lease if such failure shall continue beyond ten days after LANDLORD'S notice that the same has not been paid. (iii) TENANT'S violation or failure to perform any of the other terms, conditions, covenants or agreements herein made by TENANT if such violation or failure continues for a period of five days after LANDLORD'S written notice thereof to TENANT. (iv) In the event of any violation or failure to perform a covenant as contemplated in Section '13.2(A)(iii)', and if such covenant cannot be performed within the said five day period, then and in that event, providing TENANT has promptly commenced to cure such violation and is diligently proceeding with the cure the time within which TENANT may cure the same shall be extended to such reasonable time as may be necessary to cure the same with all due diligence. B. If an Event of Default as hereinabove specified in Section '13.2(A)(i), (ii) or (iii)' shall occur, and shall not be cured within the time period specified in LANDLORD'S notice, or as to a default provided for in 27 Section '13.2(A)(iv)' if TENANT has commenced a cure but fails to diligently proceed with same after five (5) days notice from LANDLORD then: (i) LANDLORD may give TENANT a five day notice of its intention to end the term of this Lease, and thereupon, at the expiration of said five day period, this Lease shall expire as fully and completely as if the day were the date herein originally fixed for the expiration of the term, and TENANT shall then quit and surrender the premises to LANDLORD but TENANT shall continue to remain liable as hereinafter provided; or, (ii) LANDLORD, without prejudice to any other right or remedy of LANDLORD, held hereunder or by operation of law, and notwithstanding any waiver of any breach of a condition or Event of Default hereunder may, at its option and without further notice, re-enter the Demised Premises or dispossess TENANT and any legal representative or successor of TENANT or other occupant of the premises by summary proceedings or other appropriate suit, action or proceeding or otherwise and remove his, her or its effects and hold the Demised Premises as if this Lease had not been made; and TENANT hereby expressly waives the service of notice of intention to re-enter or to institute legal proceedings to that end. Section 13.3 A. Notwithstanding such default, re-entry, expiration and/or dispossession by summary proceedings or otherwise, as provided in Section '13.2' above, TENANT shall continue liable during the full period which would otherwise have constituted the balance of the term hereof, and shall pay as liquidated damages at the same times as the Basic Annual Rent and Additional Rent and other charges become payable under the terms hereof, a sum equivalent to the Basic Annual Rent and Additional Rent and other charges reserved herein (less only the net proceeds of reletting as hereinafter provided), and LANDLORD may rent the Demised Premises either in the name of LANDLORD or otherwise, reserving the right to rent the Demised Premises for a term or terms which may be less than or exceed the period which would otherwise have been the balance of the term of this Lease without releasing the original TENANT from any liability, applying any monies collected, first to the expense of resuming or obtaining possession, next to restoring the premises to a rentable condition, and then to the payment of any brokerage commissions and legal fees in connection with the reletting of the Demised Premises and then to the payment of the Basic Annual Rent, Additional Rent and other charges due and to grow due to LANDLORD hereunder, together with reasonable legal fees of LANDLORD therefore. 28 B. Under any of the circumstances hereinbefore mentioned in which LANDLORD shall have the right to hold TENANT liable to pay LANDLORD the equivalent of the amount of all the Basic Rent, Additional Rent and other charges required to be paid by TENANT less the net avails of reletting, if any, LANDLORD shall have the election in place and instead of holding TENANT so liable, forthwith to recover against TENANT as damages for loss of the bargain and not as a penalty an aggregate sum which at the time of such termination of this Lease or of such recovery of possession of the premises by LANDLORD, as the case may be, represents the then present worth of the aggregate of the Basic Rent, Additional Rent and all other charges payable by TENANT hereunder that would have accrued for the balance of the term of this Lease then running over. Section 13.4 LANDLORD and TENANT do hereby mutually waive trial by jury in any action, proceeding or counterclaim brought by either LANDLORD or TENANT against the other with regard to any matters whatsoever arising out of or in any way connected with this Lease, the relationship of LANDLORD and TENANT, and TENANT'S use or occupancy of the Demised Premises, provided such waiver is not prohibited by any laws of the State of New York. Any action or proceeding brought by either party hereto against the other, directly or indirectly, arising out of this agreement (except for a summary proceeding), shall be brought in a court in the County in which the Demised Premises are located and all motions in any such action shall be made in such County. Section 13.5 TENANT hereby agrees that in any action or summary proceeding commenced by the LANDLORD to recover possession of the Demised Premises, whether by reason of non-payment or the holding over after expiration of its term, TENANT will not interpose any counterclaim or set-off of whatever nature or description in any such proceedings and TENANT will not seek to consolidate or join for trial any such action or proceeding with any other action or proceeding to which it is a party or over which it has control. This provision shall not, however, be construed as a waiver of TENANT'S right to assert such claims in any separate action brought by TENANT. At anytime the TENANT shall be in default in the payment of Basic Annual Rent or Additional Rent beyond the applicable cure periods provided herein, LANDLORD may withhold all services to be provided to TENANT pursuant to this Lease so long as such default continues. 29 Section 13.6 If TENANT shall default in the observance or performance of any term or covenant on TENANT'S part to be observed or performed under or by virtue of any of the terms or provisions in this article of this Lease, LANDLORD may immediately or at any time thereafter and, without notice, perform the same for the account of TENANT, and if LANDLORD makes any expenditures or incurs any obligations for the payment of money in connection therewith including, but not limited to, attorneys' fees in instituting, prosecuting or defending any action or proceeding such sums paid or obligations incurred with interest and costs shall be deemed to be additional rent hereunder and the sum shall be due immediately upon LANDLORD incurring same and may be included as an item of additional rent in any summary proceeding instituted by LANDLORD. Section 13.7 In the event of any default by the TENANT hereunder and the LANDLORD shall commence any action or other proceeding against the TENANT in which the LANDLORD shall be successful, or which shall be settled by the payment of a sum of money to the LANDLORD by the TENANT, the TENANT agrees to reimburse the LANDLORD for attorneys' fees in connection with such action or proceeding which shall be deemed additional rent and may be included by LANDLORD in any summary proceeding instituted to recover possession of the Demised Premises. Section 13.8 In the event that TENANT fails to pay, promptly when due, any installment of rent or additional rent, or any other payment required pursuant to the terms of this Lease then, in addition to all of the other rights and remedies reserved to the LANDLORD herein, the LANDLORD may, upon giving TENANT three (3) days' notice, require that all future payments of rent and additional rent shall be paid by certified check or bank check only. LANDLORD agrees that upon the second infraction in a 12-month period, where payments are not received promptly, TENANT will pay by certified or bank check only as outlined in this Section. The failure of TENANT to comply with the terms and provisions of this paragraph shall be deemed to constitute a breach of a material and substantial covenant of this Lease. 30 ARTICLE XIV ----------- CUMULATIVE REMEDIES - - NO WAIVER --------------------------------- Section 14.1 The specific remedies to which the LANDLORD or the TENANT may resort under the terms of this Lease are cumulative and are not intended to be exclusive of any other remedies or means of redress of which they may be lawfully entitled in case of any breach or threatened breach by either of them of any provision of this Lease. The failure of the LANDLORD to insist in any one or more cases upon the strict performance of any of the covenants of this Lease, or to exercise any option herein contained, shall not be construed as a waiver or relinquishment for the future of such covenant or option. A receipt by the LANDLORD of rent with knowledge of the breach of any covenant thereof shall not be deemed a waiver of such breach, and no waiver, change, modification or discharge by either party hereto of any provision in this Lease shall be deemed to have been made or shall be effective unless expressed in writing and signed by both the LANDLORD and the TENANT. In addition to the other remedies in this Lease provided, the LANDLORD shall be entitled to restraint by injunction of any violation, or attempted or threatened violation, of any of the covenants, conditions or provisions of this Lease or to a decree compelling performance of any such covenants, conditions or provisions. 31 ARTICLE XV ---------- SUBORDINATION ------------- Section 15.1 It is hereby expressly agreed that this Lease and all rights of the TENANT hereunder shall be subject and subordinate at all times to any mortgages and any renewals, replacements, extensions of modifications thereof which may now be or shall hereafter become liens on the Demised Premises or the land and building of which the same form a part. The TENANT agrees that, at any time upon five (5) days' written notice, the TENANT will execute and deliver to the LANDLORD a subordination agreement confirming the provisions of this article. Failure of TENANT to execute and deliver such agreement shall not affect the subordination provided for hereunder. Section 15.2 This Lease is specifically made subordinate to a mortgage given to an Institutional Lender and notwithstanding whether or not any formal subordination agreement is executed, this Lease shall, at all times, be subordinate to any replacements, extensions, modifications or consolidations thereof. 32 ARTICLE XVI ----------- QUIET ENJOYMENT --------------- Section 16.1 The LANDLORD covenants and agrees that the TENANT, upon paying the basic rent and all other charges herein provided and observing and keeping the covenants, agreements and conditions of this Lease on its part to be kept, shall and may peaceably and quietly hold, occupy and enjoy the Demised Premises during the term of this Lease. 33 ARTICLE XVII ------------ NOTICES ------- Section 17.1 All notices, demands and requests which may or are required to be given by either party to the other shall be in writing. All notices, demands and requests by the LANDLORD to the TENANT shall be deemed to have been properly given if sent by United States registered or certified mail, postage prepaid or overnight carrier, such as Federal Express, addressed to the TENANT at the Demised Premises or Temporary Demised Premises, or at such other place as the TENANT may from time to time designate in a written notice to the LANDLORD. All notices, demands and requests by the TENANT to the LANDLORD shall be deemed to have been properly given if sent by United States registered or certified mail, or overnight carrier, such as Federal Express, postage prepaid, addressed to the LANDLORD at the address first above written, or at such other place as the LANDLORD may from time to time designate in a written notice to the TENANT. Notices to the TENANT may be given by the attorney for the LANDLORD with the same force and effect as if given by the LANDLORD. Notices, demands and requests which shall be served upon LANDLORD or TENANT in the manner aforesaid shall be deemed to have been served or given for all purposes under this Lease at the time such notice, demand or requests shall be received by addressee or returned by Post Office or by an overnight carrier, such as Federal Express, as having been "refused" or "undeliverable". 34 ARTICLE XVIII ------------- DEFINITION OF CERTAIN TERMS, ETC. --------------------------------- Section 18.1 The captions of this Lease are for convenience and reference only and, in no way, define, limit or describe the scope or intention of this Lease or in any way affect this Lease. Section 18.2 The term "TENANT" as referred to hereunder shall refer to this TENANT and any successor or assignee of this TENANT. Section 18.3 The term "LANDLORD" as used hereunder shall mean only the owner for the time being of the land and building of which the Demised Premises form a part, so that in the event of any sale or sales, or in the event of a Lease of said land and building, this LANDLORD shall be and hereby is entirely free and relieved of all covenants and obligations of LANDLORD hereunder and it shall be deemed and construed without further agreement between the parties, or their successors in interest, that the purchaser or lessee of the building has agreed to carry out all of the terms and covenants and obligations of the LANDLORD hereunder. 35 ARTICLE XIX ----------- INVALIDITY OF PARTICULAR PROVISIONS ----------------------------------- Section 19.1 If any term or provision of this Lease or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and be enforced to the fullest extent permitted by law. 36 ARTICLE XX ---------- COVENANTS TO BIND AND BENEFIT RESPECTIVE PARTIES ------------------------------------------------ Section 20.1 It is further covenanted and agreed by and between the parties hereto that the covenants and agreements herein contained shall bind and inure to the benefit of the LANDLORD, its successors and assigns, and the TENANT, its successors and assigns, subject to the provisions of this Lease. 37 ARTICLE XXI ----------- INSURANCE --------- Section 21.1 TENANT shall, at all times during the term hereby, carry Public Liability Insurance for the Demised Premises naming LANDLORD as an additional insured with limits of $3,000,000.00 for injury to persons and $250,000.00 for property damage. Section 21.2 Prior to taking possession, TENANT shall deliver to the LANDLORD a certificate of the insurance company licensed to do business in the State of New York with a Bests rating of A, certifying that the aforesaid liability policy is in full force and effect. A certificate evidencing the renewal of such liability insurance policy shall be delivered to the LANDLORD at least twenty (20) days before the expiration thereof and each such renewal certificate shall include the LANDLORD as an additional insured. TENANT may carry aforesaid insurance as a part of a blanket policy provided, however that a certificate thereof naming the LANDLORD as an additional insured is delivered to the LANDLORD as aforesaid. Such policy of insurance or certificate shall also provide that said insurance may not be canceled unless ten (10) days' notice is given to the LANDLORD prior to such cancellation and that the insurance as to the interest of the LANDLORD shall not be invalidated by any act or neglect of the TENANT. Section 21.3 TENANT shall, prior to doing any work in the Demised Premises, obtain any and all permits necessary therefore and will provide Worker's Compensation Insurance and Liability Insurance in the limits provided for in Section "21.1" hereof. 38 ARTICLE XXII ------------ USE, ASSIGNMENT OR SUBLETTING ----------------------------- Section 22.1 The TENANT agrees to use the premises for general offices and for no other purpose. TENANT shall not permit occupancy of the Demised Premises which in the aggregate exceeds one person for every one hundred fifty square feet of usable area. Section 22.2 Unless the LANDLORD shall have given its consent thereto, this Lease may not be assigned nor may the Demised Premises be sublet in whole or in part. Such approval will not be unreasonably withheld. In determining the reasonableness, the LANDLORD shall take into consideration the use to which the sub-tenant will put the space and the nature of the sub-tenant's business in order to maintain the integrity of the building as a whole. Section 22.3 Notwithstanding anything herein to the contrary, LANDLORD shall have the right of first refusal to recapture the Leased premises or any part thereof, prior to any sublet or assignment. In the event TENANT shall desire to assign or sublet this Lease, TENANT shall provide written notice of same to LANDLORD. LANDLORD shall, within sixty (60) days of receipt of such notice, notify TENANT as to whether or not LANDLORD desires to recapture the Demised Premises. In the event that LANDLORD shall elect to recapture the Demised Premises or any part thereof, it shall be deemed that the space is recaptured by the LANDLORD on the thirtieth (30th) day following LANDLORD'S notice to TENANT of its election. Within said thirty (30) day period, TENANT shall remove all of TENANT'S effects and personal property therefrom. If LANDLORD shall elect not to recapture the Demised Premises or any part thereof, TENANT may, after prior written consent of the LANDLORD, assign or sublet the Demised Premises subject to Section 22.4. Section 22.4 In the event that TENANT shall assign this Lease (or sublet any of the Demises Premises) and shall receive any consideration therefore one-half of such consideration shall be paid to the LANDLORD as additional rent. In the event TENANT shall sublet any of the space demised 39 hereunder and the rent and/or additional rent reserved under any such sublease shall be in excess of the rent provided for hereunder, TENANT shall pay to the LANDLORD, as additional rent, as and when same is collected, one-half the difference between the rent and additional rent reserved herein and the rent and additional rent reserved in such sublease. Section 22.5 In the event that any sub-tenant or assignee should hold over in the premises beyond the expiration of the term of this Lease, the TENANT hereunder shall be responsible to the LANDLORD for all Basic Annual Rent and Additional Rent until the premises are delivered to the LANDLORD in the condition provided for in this Lease. Section 22.6 TENANT shall pay LANDLORD'S reasonable legal fees with reference to approving any assignment and assumption agreement. 40 ARTICLE XXIII ------------- RULES AND REGULATIONS --------------------- Section 23.1 The TENANT agrees that it will abide by the rules and regulations attached hereto as Exhibit "E" and any reasonable amendments or additions thereto, provided the same are uniform as to all tenants. 41 ARTICLE XXIV ------------ LANDLORD'S LIABILITY -------------------- Section 24.1 In the event that the LANDLORD shall default under the terms of this Lease and the TENANT shall recover a judgment against the LANDLORD by reason of such default or for any reason arising out of the tenancy or use of the premises by the TENANT or the Lease of the premises to the TENANT, the LANDLORD'S liability hereunder shall be limited to the LANDLORD'S interest in the land and building of which the Demised Premises form a part and no further and the TENANT agrees that in any proceeding to collect such judgment, the TENANT'S right to recovery shall be limited to the LANDLORD'S interest in the building of which the Demised Premises form a part. 42 ARTICLE XXV ----------- ENTIRE AGREEMENT ---------------- Section 25.1 This instrument contains the entire agreement between the parties hereto and the same may not be changed, modified or altered except by a document in writing executed and acknowledged by the parties hereto. 43 ARTICLE XXVI ------------ CERTIFICATES ------------ Section 26.1 Upon request by the LANDLORD, the TENANT agrees to execute any certificate or certificates evidencing the commencement date of the term of the Lease and the fact that the Lease is in full force and effect, if such is the case, and that there are no set-offs or other claims against the LANDLORD or stating those claims which the TENANT might have against the LANDLORD. Section 26.2 Upon request by the LANDLORD, the TENANT agrees to execute a memorandum of this Lease in recordable form which memorandum shall set forth the commencement dates of the Lease and the subordination of the Lease to a permanent first mortgage to be held by an institutional lender. 44 ARTICLE XXVII ------------- SECURITY -------- Section 27.1 TENANT shall deposit with LANDLORD the sum of $24,273.99 as security for the faithful performance and observance by TENANT of the terms, provisions and conditions of this Lease. It is agreed that in the event TENANT defaults in respect of any of the terms, provisions and conditions of this Lease, including, but not limited to, the payment of rent and additional rent, LANDLORD may use, apply or retain the whole or any part of the security so deposited to the extent required for the payment of any rent and additional rent or any other sum as to which TENANT is in default of for any reason of TENANT'S default in respect of any of the terms, covenants and conditions of this Lease, including, but not limited to, any damages or deficiency in the reletting of the premises, whether such damages or deficiency accrued before or after summary proceedings or other re-entry by LANDLORD. In the event that TENANT shall fully and faithfully comply with all of the terms, provisions, covenants and conditions of this Lease, the security shall be returned to TENANT after the date fixed as the end of the Lease and after delivery of entire possession of the Demised Premises to LANDLORD. LANDLORD will use their best efforts to access any damages, additional rents due or any other reason that LANDLORD might deem a portion or all of the Security is deemed LANDLORD'S property otherwise Security shall be returned within a twenty-one day period after Lease has been terminated. In the event of a sale of the land and building, LANDLORD shall have the right to transfer the security to the vendee and LANDLORD shall thereupon be released by TENANT from all liability for the return of such security; and the TENANT agrees to look to the new LANDLORD solely for the return of said security; and it is agreed that the provisions hereof shall apply to every transfer or assignment made of the security to a new LANDLORD. TENANT further covenants that it will not assign or encumber or attempt to assign the monies deposited herein as security and that neither LANDLORD nor its successors or assigns shall be bound by any such assignment, encumbrance, attempted assignment or attempted encumbrance. Providing TENANT is not in default under the terms of this Lease, $8,331.70 of the security as mentioned above shall be allocated to the rent payment commencing at the beginning of the thirteenth month of this Lease. 45 ARTICLE XXVIII -------------- BROKER ------ Section 28.1 TENANT represents that it dealt only with Richard Someck of Sutton & Edwards as broker in connection with this transaction and TENANT agrees to indemnify LANDLORD against any claims or expenses which the LANDLORD may incur by reason of the TENANT having dealt with any other broker in connection with this transaction. LANDLORD agrees that Richard Someck of Sutton & Edwards is the only person that the LANDLORD dealt with in relation to this TENANT. 46 ARTICLE XXIX ------------ SIGNS ----- Section 29.1 TENANT shall be allowed to use one line on the building directory in the lobby of the building. Section 29.2 TENANT, at TENANT'S sole cost and expense, may have installed building standard signage on the entrance doors and the outside multi-tenant directory. All signage is subject to LANDLORD'S reasonable approval. 47 ARTICLE XXX ----------- HOLDING OVER ------------ Section 30.1 TENANT covenants that it will vacate the Demised Premises immediately upon the expiration or sooner termination of this Lease. If the TENANT, or anyone holding through TENANT, retains possession of the Premises or any part thereof after the termination of the term, the TENANT shall pay the LANDLORD Annual Basic Rent at one and three-quarters times the monthly rate specified in Section 3.1 for the time the TENANT thus remains in possession and, in addition thereto, if TENANT or anyone holding through TENANT shall remain in possession for more than thirty (30) days after the expiration of the Lease, TENANT shall pay the LANDLORD for all damages, consequential as well as direct, sustained by reason of the TENANT'S retention of possession. If the TENANT remains in possession of the Demised Premises, or any part thereof, after the termination of term, such holding over shall, at the election of the LANDLORD expressed in a written notice to the TENANT and not otherwise, constitute a renewal of this Lease for one year. The provisions of this Section do not exclude the LANDLORD'S rights of re-entry or any other right hereunder, including without limitation, the right to refuse double the monthly rent and instead to remove TENANT through summary proceedings for holding over beyond the expiration of the term of this Lease. 48 IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals the day and year first above written. THE TILLES INVESTMENT COMPANY BY: /s/ PETER TILLES ----------------------------------- Peter Tilles SUTTON ONLINE, INC. BY: /s/ JONATHAN D. SIEGEL ----------------------------------- Jonathan D. Siegel 49 EX-10.15 17 ex10_15.txt EXHIBIT 10.15 Exhibit 10.15 AGREEMENT This Agreement is entered into as of March 23, 2001, by and among Global Capital Securities Corporation ("GCAP"), a Colorado corporation, and Sutton Online, Inc. ("Franchisee"). WHEREAS GCAP has represented to Franchisee that A. GCAP is engaged in business as a broker4ealer in securities, is duly registered as such with the Securities and Exchange Commission ("SEC") and various states and is a member of the National Association of Securities Dealers, Inc. ("NASD"). B. GCAP wishes to obtain from Franchisee the use of office space, equipment, furniture and services necessary to operate a branch office designated as an Office of Supervisory Jurisdiction in the State of New York. C. The branch office is located at the following address: 575 Underhill Blvd. Suite 224 Syossett, New York 11791 The above office is hereinafter referred to as "Branch Office". THEREFORE, in order to enable GCAP to conduct its business as a broker-dealer in securities from the fully furnished and equipped Branch Office, and for other reasons as are evident from the following, the parties hereto agree as follows: 1. Services Provided by Franchisee. 1.1 Franchisee agrees at its expense to provide to GCAP the following: (a) Use of the Branch Office to the maximum extent permissible under the lease. Franchisee represents that it has leased the office space and such lease does not prohibit the use of such office space by OCAP pursuant to the terms of this Agreement. If the office space presently occupied by the Branch Office becomes unavailable, Franchisee shall provide equivalent office space of like or better quality within ten miles of the office space that became unavailable and Franchisee shall pay for all expenses incurred in effecting the relocation of the Branch Office, including equipment furniture, supplies, personnel and movable fixtures and partitions. The substitute office space shall be acceptable to GCAP in all respects, and if accepted in writing by GCAP, shall be included within "Branch Office" as used herein. (b) All quotation machines and all furniture, fixtures, telephone equipment insurance, supplies, and services, including but not limited to, utilities, telephone usage charge, local personal property taxes and licenses, advertising and other operating services, including personnel, other than registered representatives, which personnel would include secretarial, bookkeeping and reception, as OCAP, at its sole unconditional discretion, may from time to time reasonably require to operate a business as a broker-dealer in securities from the Branch Office. (c) Supervisory personnel for the Branch Office. The supervisory personnel shall be duly qualified, licensed and registered with the NASD and all applicable state authorities. The number and specific persons who will act as supervisory personnel shall be as GCAP in its sole unconditional discretion may from time to time reasonably require to assure that the activities conducted at and from the Branch Office and by registered representatives and other associated personnel working at the Branch Office comply with all laws and regulations which may apply to the activities of such persons, including, but not limited to the federal, state and local securities laws, the rules, policies, interpretations and by-laws of the NASD and any and all self-regulatory organizations of which GCAP may from time to time be a member, and all other laws and regulations which may be applicable. In addition to supervisory activities conducted at and from the Branch Office, GCAP may require such supervisory personnel to enforce the policies, procedures and practices of GCAP which may be more restrictive than those imposed by law and applicable regulatory authorities. Franchisee agrees to have at least 1 (one) registered securities principal in the Branch Office for every 15 (ten) registered representatives in the Branch office. 2 1.2 GCAP shall have sole unconditional discretion to reject, discipline, terminate, condition the activities and/or otherwise control the functions and duties of any and all personnel assigned by Franchisee to perform supervisory services for GCAP pursuant to this Agreement. Any compensation of the personnel performing supervisory services for such services shall be paid solely by Franchisee. 1.3 The registered representatives working at the Branch Offices shall be employed by OCAP and shall be compensated by GCAP. To the extent that a person who is providing supervisory services on behalf of Franchisee pursuant to this Agreement is also acting as a registered representative, such person shall be an employee of OCAP only to the extent such person is acting as a registered representative. 1.4 All personnel designated by Franchisee to perform supervisory services for OCAP pursuant to this Agreement shall be deemed employees of Franchisee and not of OCAP and Franchisee shall be responsible for all compensation, insurance for such persons in providing such supervisory services, and Franchisee shall be solely responsible for all acts and omissions committed by such personnel relating to their supervisory duties. 2. Closure of Branch Offices by GCAP --------------------------------- 2.1 OCAP shall have the right, in its sole unconditional discretion, to close at any time the Branch Office without incurring any liability to GCAP for such closure; provided, however, if such closure occurs before GCAP has given Franchisee 90 days advance written notice, GCAP shall be liable to Franchisee for the following expenses incurred and paid by Franchisee in connection with such closure. (a) The rent, if any, for the closed Branch Office for the number of days representing the difference between 60 days and the number of days for which notice was given and for which Franchisee had to pay an amount pursuant to a pre-existing lease. ~) The salary for up to a 30 day period which Franchisee may be obligated to pay to any person under a pre-existing written contract who on the closure date was employed by Franchisee in the Branch Office in a ministerial or secretarial position for the same time period in 2.1 (a) above. 2.2 Notwithstanding anything in paragraph 2.1 above, if OCAP is prevented from fully conducting its business as a securities broker-dealer, by reason of any law, of a securities regulation or regulatory authority or otherwise, OCAP may close the Branch Office without liability of any kind to Franchisee. 3 3. Non-Assumption of Liabilities. ----------------------------- 3.1 OCAP is not assuming any liabilities or obligations of Franchisee, or their prior employer except as provided herein as to the holding of securities and monies for various accounts which were previously customers of Franchisee's prior employer. 4. Transfer of Accounts. -------------------- 4.1 OCAP agrees to use its best efforts to transfer to OCAP all of the customer1s securities accounts of Franchisee's prior employer/broker dealer including all securities positions in such accounts and cash equal to the sum of all credit balances in such accounts held by any clearing agent and depository for the benefit of Franchisee's prior employer/broker dealer. 4.2 Customers. The parties agree that the customers introduced to GCAP under this agreement shall remain customers of Sutton Online, inc. Upon termination of this Agreement Sutton Online, Inc. shall have the right to direct subject to customer approval, that the accounts of customers introduced to GCAP under this Agreement be transferred to another broker4ealer and GCAP shall fully cooperate in such transfer. Such cooperation shall include bulk tape-to-tape or other similar method. 5. Indemnity on Account Transfers. ------------------------------ 5.1 Franchisee agrees to indemnify and hold GCAP free from any and all losses which GCAP may sustain from accepting any accounts of Franchisee or Franchisee's S Franchisee shall determine the Commission and prices that are charged or paid by customers in effecting transactions through or with GCAP giving due regard to applicable law and trade practices. 7.3 From the total gross there shall be deducted the total compensation payable to registered representatives assigned to and working out of the Branch Office in accordance with OCAP and Franchisee's agreed upon compensation schedule. However any compensation shall be the responsibility exclusively of Franchisee. From the remainder of the total gross, after payment to registered representatives, there shall be deducted any and all other expenses described in Appendix A, Sections I through W (attached). 7.4 if, as a consequence of such computations, payments and deductions, there is a remainder that is a positive amount Franchisee shall be paid in accordance with the terms and conditions described in Appendix A, Section I (attached). 4 7.5 if, however, as a consequence of the terms described in Appendix A, a remainder is a negative amount the negative amount shall be paid by Franchisee to GCAP within 10 days after notice of the negative amount is given by GCAP to Franchisee. if OCAP does not receive timely payment, OCAP may elect to carry forward such negative amounts and collect them from any payments which thereafter may become due to Franchisee or it may collect such negative amounts by any means otherwise available to OCAP. 7.6 Any payments GCAP may be required to make under this paragraph 7 shall be paid by GCAP to Franchisee, on or before the 15th day following the end of each broker's month which follows the month for which a positive remainder is computed. 8. Conduct of Business in Branch Offices. ------------------------------------- 8.1 Franchisee agrees to operate the Branch Office as a Branch Office of OCAP, and for no other business activity without prior written notice to the President of GCAP or his designee and receipt of prior written approval. GCAP acknowledges that Franchisee sells and services online trading software as a separate business operating out of the same location as Franchisee. Franchisee shall provide sufficient supervisory personnel so that the said office shall qualify as and be operated as an office of supervisory jurisdiction as defined by the bylaws and rules of the NASD; provided, however, none of the supervisory personnel in the Branch Office shall be required to have any supervisory duties over any office of GCAP other than Franchisee shall take all reasonable steps to ensure that all personnel in the Branch Office are complying with all applicable laws and the rules, policies, interpretations and by-laws of the NASD and all other regulatory authorities and with all of GCAP's policies, procedures and practices which may be established from time to time by manuals, memoranda and/or oral directives. In addition, no personnel in the Branch Office other than Jonathan Siegel shall have prior employer/broker dealer, resulting from transactions and activity of any nature whatsoever in such accounts which occurred on or before the date of transfer. 5.2 Notwithstanding anything in paragraphs 4.1 and 5.1 to the contrary, CCAP, at its sole, unconditional discretion, may refuse to accept the transfer of any account or accounts and shall incur no liability of any nature whatsoever to anyone for such refusal. 6. Registrations of Representatives. -------------------------------- 6.1 GCAP agrees to use its best efforts to facilitate the prompt registration with the NASD and applicable states of each representative working out of the Branch Office with GCAP. OCAP shall approve the registration of all persons prior to any registration application being filed with the NASD and applicable state authorities or prior to any person being hired in the Branch Office in any capacity. Franchisee agrees to provide all information requested by GCAP about potential registered representatives, supervisory personnel and secretarial and ministerial personnel so that GCAP may make an informed decision concerning such persons. OCAP reserves the right, in its sole unconditional discretion, to refuse to accept any such person as its employee or 5 supervisory, secretarial or ministerial personnel in the Branch Office, and GCAP shall incur no liability of any nature whatsoever to anyone for such refusal. Once employed, GCAP or Franchisee may terminate a registered representative working with the Branch Office in its sole unconditional discretion or withdraw approval of supervisory, secretarial or ministerial personnel. Each registered representative employed by OCAP shall be required to enter into an agreement with GCAP which sets forth the respective obligations of each party. 7. Compensation for Services. ------------------------- 7.1 GCAP will pay Franchisee an amount as hereinafter computed as compensation for Franchisee providing the services and promises pursuant to this Agreement and Franchisee accepts the same as full compensation for the services and promises provided. 7.2 The "total gross" generated by the Branch Offices shall be determined on a monthly basis in accordance with the standard practices of OCAP. Franchisee shall be provided with daily compensation reports which reflect the total gross of each registered representative in the Branch Office. Franchisee shall reconcile each daily compensation report received within 2 (two) business days and report to GCAP any unreconciled or questioned items. In the absence of any such discrepancy report, the compensation reports shall be deemed correct and not subject to further adjustment by Franchisee. All items timely reported by Franchisee will be reviewed by GCAP in good faith, and adjustments, if any, will be made in the sole discretion of GCAP after consideration of all information provided by Franchisee in support of any requested adjustment. authority to make any contracts on behalf of GCAP. In addition, Franchisee, in providing the services required by this Agreement, including acquiring office space, equipment, furniture, quotation machines, and supervisory personnel, shall make clear to all third parties that it alone is the obligor on all contracts and arrangements and OCAP has no obligation under such contracts or arrangement. 8.2 Subject to modification by GCAP, at its sole unconditional discretion, Franchisee shall institute procedures reasonably designed to ensure that all supervisory personnel shall do the following: (a) supervise the activities of all registered representatives and other associated persons assigned to the Branch Office; ~) review and endorse in writing, on a record of OCAP, all transactions and all correspondence of its registered representatives or other associated persons of the Branch Office pertaining the solicitation of any securities transaction; 6 (c) implement and enforce all policies, procedures, practices, directives and all supplements thereto, of OCAP, including the supervision of the activities of all registered representatives and other associated persons of the Branch Office; (d) report promptly to the Compliance Officer of GCAP all customer complaints, changes to the registration applications of any registered representative or other associated person of the Branch Office and all written or oral contacts or inquiries by any regulatory authority of any nature whatsoever; (e) evaluate the suitability of any solicited securities transaction by a customer and the frequency of securities transactions based on the customer' s financial situation, investment experience and investment objectives; (f) determine that each recommendation (if any)of a security by a registered representative in the Branch Office has a reasonable basis in fact based upon a reasonable investigation and is based entirely on information which is publicly available; (g) conduct themselves in a manner which will enhance the business image in reputation of GCAP; and (h) train, evaluate and monitor the activities of each registered representative to ensure that their conduct is in accordance with the highest level of commercial honor and just and equitable principles of trade. 9. Authority of Registered Representatives 9.1 Franchisee acknowledges that registered representatives in the Branch Office shall solicit persons to become customers of CCAP by opening one or more accounts with GCAP; however, each such account before being opened must be approved by the supervisory personnel in the Branch Office and such other persons as GCAP determines in its sole discretion. 9.2 Registered representatives in the Branch Office shall solicit and submit offers to GCAP received from customers to act as the customer's agent, to purchase or to sell securities, or take other actions relative to the customer 5 account, but none of them may make such contractual arrangements. Registered representatives in the Branch Office shall be authorized to receive from customers offers and orders to buy and sell securities, but neither the registered representative nor Franchisee shall be authorized to accept or execute any orders. GCAP, acting through its designees, shall have sole authority and discretion to accept or reject offers and orders from customers. 9.3 Franchisee acknowledges that GCAP has the right to reject any person as a customer of CCAP, to reject any order to purchase or to sell a security by a customer, to reject any offer of employment as an agent made by a customer, to require that any information provided relevant to the purchase or sale of a security is publicly available and is from a reliable 7 source and that any recommendations have a reasonable basis in fact and be suitable in relation to the customer's financial situation, investment experience and investment objectives, and to require that Franchisee comply with all its warranties and representations and the terms and conditions contained in this Agreement. 9.4 Franchisee and personnel in Branch Offices shall maintain such books and records pertaining to the securities business as GCAP shall reasonably require or permit, which books and records shall be exclusive property of OCAP. GCAP shall have access to all such books and records, and GCAP shall be permitted to make such copies as it reasonably requires. 10. Status of the Parties and Business Restrictions ----------------------------------------------- 10.1 In performing any of the services under this Agreement and for the purpose of this Agreement Franchisee shall not operate as an employee of GCAP, but shall maintain their own business as a distinct and separate business activity from GCAP. Performance by Franchisee of this Agreement shall be subject entirely to the internal direction and control of Franchisee except to the extent required otherwise by federal or state law or the rules, policies, interpretations and by4aws of the NASD, and any other regulatory authority, or by this Agreement Nothing in this Agreement shall be deemed to create or constitute a partnership or a joint venture between OCAP and Franchisee. 10.2 Subject to the last sentence of this paragraph 10.2, Franchisee shall be free to exercise its own judgment subject to state and federal securities laws and other applicable laws and trade standards, as to the persons or entities from whom it will obtain the office space, equipment, etc. that it is required to provide pursuant to this Agreement, except that Franchisee shall take all action necessary to establish the authority of the persons to enter into the applicable contract Subject to the last sentence of this paragraph 10.2, Franchisee shall have the fullest discretion as to the methods and means of its operation under this Agreement; however, the authority of Franchisee under this Agreement shall not extend to or affect the general practices and policies of GCAP relating to the conduct of its business. Franchisee agrees to be bound by the direction of GCAP regarding compliance with federal and state securities laws and the rules, policies, interpretations and by-laws of the NASD and any and all other regulatory authorities which may apply to OCAP. 10.3 Neither Franchisee nor any registered representative or other associated person or any other person in a Branch Office shall participate in any manner in any securities transactions, whether for their account, for customers or otherwise, except for or through GCAP in accordance with this Agreement, unless the same has been approved in writing by the President of GCAP or a person designated in writing by the President to act for the President in such matters. 8 10.4 Franchisee and each registered representative and each other associated person and other persons in the Branch Office shall be subject to and comply completely with GCAP's policies and procedures with respect to any activities in which any of them may engage or with respect to their association with GCAP. No such person shall be employed by, or accept compensation from, any person other than OCAP or Sutton Online, Inc. as a result of any business activity outside the scope of their relationship to GCAP, unless the same has been approved in writing by the President of GCAP or a person designated in writing by the President to act for the President in such matters. 10.5 GCAP shall authorize Franchisee to pay supervisory personnel and other persons assigned by Franchisee to Branch Offices for such persons to receive payment for Franchisee for supervisory and other services performed pursuant to this Agreement. 10.6 Franchisee agrees to keep confidential and not to distribute or disclose any software or confidential information of third parties that GCAP contracts for or guarantee the performance of Franchisee in accordance with the terms of any Agreements with such third parties. 11. Expenses. -------- 11.1 Except as otherwise provided in this paragraph 11, and all expenses for travel, entertainment, licenses, insurance, office, secretarial, clerical, office equipment quotation and data services, software and equipment maintenance, general selling expenses and all other expenses that may be incurred by or for the Branch Office other than payment of commissions to registered representatives and as otherwise set forth in this Agreement will be borne wholly by Franchisee, and in no case shall OCAP be responsible or liable for such expenses. 11.2 Franchisee shall be responsible for all of its expenses including, but not limited to, salaries, wages and other expense services required hereunder except the registered representatives compensation. 11.3 OCAP shall be fully responsible for all expenses incurred in operating its home office in Denver. No portion of such expenses shall be charged to Franchisee, except as expressly provided in this Agreement. 11.4 Franchisee will pay all losses incurred as a result of any non-performance or defalcation by a customer in any transaction emanating from or involving the Branch Office, including, but not limited to, losses from sell-outs, buy-ins, cancellations and errors in the conveyance of any instructions received from customers, unless such losses are entirely the result of a mistake or error of GCAP or its clearing broker. 9 11.5 Franchisee agrees to provide liability and other insurance as is required to hold GCAP and their officers, directors, employees, agents, sureties and control persons harmless from any torts incurred by any persons injured on the premises of the Branch Offices or other liabilities which result from the activities of registered representatives or other associated persons or other persons in the Branch Office. 11.6 Franchisee agrees to promptly provide written evidence of its payment of all of its obligations under this Agreement to GCAP on the request of OCAP. 12. Duration -------- 12.1 This Agreement shall become effective as of the date first appearing herein and will continue in effect for a period of one (1) year unless sooner terminated as provided in this Agreement The term of this Agreement shall automatically be extended for an additional one-year term under the same terms and conditions, including this provision for extension; so that without a written notice not to extend received prior to 60 days of the end of the one-year term, this Agreement automatically becomes extended for an indefinite number of one-year terms. 13. Termination ----------- 13.1 In the event of a default by Franchisee as provided in this Agreement the parties agree that GCAP may terminate this Agreement without prejudicing its rights and remedies hereunder. In the event of a default by GCAP, Franchisee may terminate its obligation under this agreement to OCAP. Any termination of this Agreement shall be effective: (i) at the end of the 90-day period specified in paragraph 2.1; (II) on the 10th day after any default under paragraph 14.1(a) which remains uncured;(iii) on the 30th day after any default under paragraph 14.1(e) which remains uncured; or immediately upon notice being delivered by the non-defaulting party that a default has occurred under paragraphs 14.1(R), 14.1(c) or 14.1(d), all as the case may be. 13.2 Upon the expiration1 cancellation or termination of the Agreement: All monies due Franchisee pursuant to this Agreement shall be paid in a timely fashion as provided in this Agreement except that GCAP may retain up to $4,000 for up to three months to satisfy any contingent losses, costs, offsets, expenses, etc., for which Franchisee may be liable. The provisions of paragraph 13.2 shall survive the expiration or termination of this Agreement. 10 14. Default. ------- 14.1 The occurrence of any of the following events shall be deemed to be, and shall be treated as, a default under this agreement and just cause for its termination subject to paragraph 13: (a) Breach of failure by any party in the due observance of performance of any term, covenant or agreement contained in this Agreement which shall continue unremedied or uncorrected for a period of ten (10) days after written notice thereof, specifying the breach, has been delivered to the defaulting party. (1,) Fraud on the part of any party or person subject to the direct supervision of any party in a Branch Office, or the willful failure or gross negligence of either party to comply with the applicable federal or state securities laws or with the rules, policies, interpretations or by-laws of NASD. (c) The violation by any party, or person subject to the direct supervision of any party in the Branch Office of any rule or regulation of the SEC, the NASD, or any other regulatory body or agency having jurisdiction over either party, if such a violation could result in the denial, suspension or revocation of registration or membership with such bodies. (d) Any party becomes insolvent makes any assignment for the benefit of creditors; calls a meeting of creditors; offers a composition of extension to creditors; suspends payments; consents to or suffers the appointment of a receiver, a trustee, a committee of creditors, or bankruptcy or seeks a reorganization, arrangement or readjustment of its debts or its dissolution or liquidation or for any other relief under any bankruptcy or insolvency laws. (e) Any party has filed or has commenced against it an involuntary petition in bankruptcy seeking reorganization, arrangement or adjustment of its debts or for any other relief under any bankruptcy or insolvency law, or has entered against it any judgment or decree for its dissolution which remains undismissed or undischarged or unbonded for a period of thirty (30) days. 14.2 if any party shall be entitled to terminate this Agreement pursuant to this paragraph 14, the defaulting party shall be obligated to pay all damages which a non-defaulting party may sustain by reason of the default, including without limitation, all legal fees and other expenses incurred. 15. Use of GCAP's Name ------------------ 15.1 GCAP has consented and agreed to the use of its name and service marks by the Branch Office in the business and activities hereunder during the initial term or any extended term of this Agreement. The Branch Office shall, upon the termination of the Agreement, cease using GCAP's name or other service marks of GCAP and shall not be held out as an agent or in any way associated with GCAP. 11 15.2 The Branch Office may display the name of GCAP on the directory board of the building in which said offices are located. Additionally, GCAP's name may also be conspicuously placed on or near the entrance to the branch office or on its internet site. Each Branch Office must display in a conspicuous place a SIPC sign indicating that GCAP is a member of SIPC and must display any other licenses required by applicable state law. 16. General Duties of Franchisee. ---------------------------- 16.1 Franchisee shall act exclusively for OCAP in the offer, sale, purchase and transfer of securities and monies received in connection therewith. Franchisee shall be governed strictly by all rules, regulations and instructions as set forth by the regulatory agencies in the securities industry and with the policies and procedures of GCAP. Franchisee shall at all times conduct their business activities honestly1 shall observe high standards of commercial honor and just and equitable principles of trade and in the best interest of GCAP. 17. Receipts of Funds by Branch Office. ---------------------------------- 17.1 Franchisee shall treat all money or securities that he may receive on behalf of GCAP in the capacity of a trustee; Franchisee will under no circumstances make any personal or other use of them, but will immediately forward them to GCAP or as otherwise directed by GCAP. The Branch Office and Franchisee will render full and true accounts at such times as GCAP may prescribe. 17.2 All monies or items of value received or collected for GCAP under this Agreement shall be property of GCAP. Such funds shall not be intermingled with personal funds of Franchisee or any Branch Office nor used for any other purpose whatsoever. All monies received or collected for GCAP under this Agreement must be made payable to GCAP unless otherwise notified by GCAP. Franchisee shall not establish any bank or other account in the name of GCAP without prior written approval of the President of GCAP. 17.3 Franchisee shall be liable to GCAP for loss by accident theft or otherwise of any money, securities or other items of value belonging to or the responsibility of OCAP which come into the possession or control of Franchisee or the possession or control of registered representatives, other associated persons or anyone else in the Branch Office. Should GCAP obtain replacement or recovery of any item governed by this paragraph 17.3, Franchisee shall be reimbursed less any expenses incurred by OCAP in effecting the replacement or recovery. 18. Non-Assignment -------------- 18.1 This agreement is not assignable. No rights or interest arising therefrom shall be subject to assignment except with the written consent of the parties then in existence. A change of name of GCAP or a corporate merger or reorganization where GCAP is the surviving corporation shall not be deemed an assignment of the Agreement 12 19. Indemnification --------------- 19.1 Franchisee agrees to indemnify and hold harmless GCAP and their officers, directors, registered representatives, agents, independent contractors, employees, sureties, persons who control GCAP within the meaning of either Section 15 of the Act or Section 20 of the Securities Exchange Act of 1934 or any other law, (other than Franchisee) from and against any and all losses, claims, damages or liabilities, joint or several, to which he or any of them may become subject under any securities law or any other statute or at common4aw or otherwise and to reimburse persons indemnified as above for any legal or other expense (including the cost of any investigation and preparation) incurred by any of them in connection with any proceeding or litigation, whether or not resulting in any liability, but only insofar as such losses, claims, damages, liabilities and litigation arise out of or are based upon any breach of this Agreement, negligence, fraud, dishonesty, forgery, embezzlement, willful misapplication, failure to pay applicable taxes or fees, or any violation of any federal or state securities law or rules of the NASD by Franchisee or any supervisory personnel, registered representative or other person m the Branch Office; provided however, that the indemnity agreement contained in this paragraph 19.1 shall not apply to amounts paid in settlement of any such litigation if such settlements are effected without the consent of Franchisee. This indemnity agreement is in addition to any other liability which Franchisee may otherwise have to the persons indemnified. This paragraph 19.1 and its provisions shall survive the termination of this Agreement. 19.2 GCAP agrees to indemnify and hold harmless Franchisee and their officers, directors, registered representatives, agents, independent contractors, employees, sureties, persons who control Franchisee within the meaning of either Section 15 of the Act or Section 20 of the Securities Exchange Act of 1934 or any other law, (other than GCAP) from and against any and all losses, claims, damages or liabilities, joint or several, to which he or any of them may become subject under any securities law or any other statute or at common-law or otherwise and to reimburse persons indemnified as above for any legal or other expense (including the cost of any investigation and preparation) incurred by any of them in connection with any proceeding or litigation, whether or not resulting in any liability, but only insofar as such losses, claims, damages, liabilities and litigation arise out of or are based upon any breach of this Agreement, negligence, fraud, dishonesty, forgery, embezzlement, willful misapplication, failure to pay applicable taxes or fees, or any violation of any federal or state securities law or rules of the NASD by OCAP or any supervisory personnel, registered representative or other person of OCAP other than of Franchisee; provided however, that the indemnity agreement contained in this paragraph 19.2 shall not apply to amounts paid in settlement of any such litigation if such settlements are effected without the consent of GCAP. This indemnity agreement is in addition to any other liability which GCAP may otherwise have to the persons indemnified. This paragraph 19.2 and its provisions shall survive the termination of this Agreement. 13 20. Applicable Law -------------- 20.1 The validity and interpretation of this Agreement and each clause and part thereof shall be governed by, and construed in accordance with, the laws and regulations then prevailing in the State of Colorado. 20.2 The place of execution of this Agreement shall be deemed to have taken place in Denver, Colorado. 21.1 Any consent required under this Agreement shall not be unreasonably withheld. 22. Notices. ------- 22.1 Any notices requires under this Agreement shall be deemed to be in compliance if mailed Certified Mail/Return Receipt Requested to the addressee as hereafter listed. Global Capital Securities Corporation 6300 South Syracuse Way #645 Englewood, CO 80111 23. Entire Agreement 23.1 This Agreement is the entire agreement of the parties and shall supersede any previously executed agreements between the parties relating to the subject matter hereof. Any amendments to this Agreement must be in writing and signed by the authorized representatives of all parties. 23.2 No provision of this Agreement may be waived except by an agreement in writing signed by the waiving party. 23.3 Throughout this Agreement the singular shall include the plural1 the plural shall include the singular, masculine and the neuter shall include the feminine, and vice versa, wheresoever the context so requires. 14 23.4 This Agreement shall not be valid and binding as to the parties hereto until fully executed by all of the parties hereto ad none of the parties hereto may reasonably rely on any of the promised performance herein until this Agreement is fully executed by all of the parties hereto. 24. Controversies - To be Arbitrated -------------------------------- 24.1 (i) Arbitration is final and binding on the parties. (II) The parties are waiving their right to seek remedies in court, including the right to jury trial. (~) Pre-arbitration discovery is generally more limited thin and different from court proceedings. (iv) The arbitrators' award is not required to include factual findings or legal reasoning and any party's right to appeal or to seek modification of rulings by the arbitrators is strictly limited. (v) The panel of arbitrators will typically include a minority of arbitrators who were or are affiliated with the securities industry. 24.2 Notwithstanding the above, the parties agree that all controversies which may arise between and/or among them concerning any transaction, the construction, performance or breach of this or any other agreement between and/or among them, whether entered into prior, or on subsequent to the date hereof, or any other matter, including but not limited to, securities activity, commodity activity, investment advice or in any way related thereto, shall be determined by arbitration in accordance with the arbitration rules of the NASD. This shall insure to the benefit of and be binding on OCAP, its respective officers, directors, registered representatives, agents, independent contractors, employees, sureties and controlling persons and shall insure to the benefit of and be binding on Franchisee. Any award rendered in arbitration may be enforced in any court of competent jurisdiction. 25. Severabilitv ------------ 25.1 if any provisions of this Agreement are declared by any court of competent jurisdiction to be invalid for any reason, such invalidity shall not affect the remaining provisions. Such remaining provision shall be fully severable and this Agreement shall be construed and enforced as if such invalid provision had never been inserted in this Agreement. 26. Attorney's Fees --------------- 26.1 if a legal action or arbitration is initiated by any party to this Agreement against another, arising out of or relating to the alleged performance or non-performance of any right or obligation established hereunder or any dispute concerning the same, any and all fees, costs and expenses reasonably incurred by each successful party or his or its legal counsel in investigating, preparing for, prosecuting, defending against, or providing evidence, producing documents or taking any other action in respect of, such action shall be the joint and several obligation of and shall be paid or reimbursed by the unsuccessful party(ies). 15 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. This Agreement contains a Predispute Arbitration Clause beginning on page 16 at paragraph 24.2. GLOBAL CAPITAL SECURITIES CORPORATION ("GCAP") By /s/ STEVEN R. HINKLE -------------------------------------- Steven R. Hinkle, Chairman Sutton Online, Inc. ------------------- FRANCHISEE By: /s/ JONATHAN D. SIEGEL ------------------------------------- Jonathan D. Siegel 16 APPENDDIX A I SERVICE AGREEMENT PAYOUTS FOR THE SERVICES PROVIDED UNDER THE AGREEMENT, THE OFFICE WILL BE CREDITED WITH 100 PERCENT OF THE GROSS GENERATED ON A MONTHLY BASIS. FROM THEAMOUNT THAT IS CREDITED TO THE BRANCH, THE BRANCH WILL BE PAID THIS AMOUNT LESS $0.60 PER TICKET, ANY OF THE COMMISSION PAYMENTS TO REGISTERED REPS, CLEARING, TAXES, AND ANY OTHER CHARGES OF THE BRANCH OFFICE WHICH ARE PAID BY GCAP AND APPLICABLE TO OR ON BEHALF OF THE BRANCH OFFICE. II CLEARING COSTS AND EXECUTION THE BRANCH WILL BE CHARGED THEIR ACTUAL CLEARING COSTS ON A MONTHLY BASIS. III SUPPLIES THE BRANCH OFFICE IS RESPONSIBLE FOR THE COSTS OF ALL SUPPLIES RELATED TO DOING BUSINESS. IV OTHER THE BRANCH WILL BE CHARGED BACK ANY OTHER CHARGES PAID BY GCAP APPLICABLE TO OR ON BEHALF OF THE BRANCH OFFICE. 17 EX-10.16 18 ex10_16.txt EXHIBIT 10.16 Exhibit 10.16 EXTENSION AGREEMENT This Agreement is entered into as of August 1, 2001, by and among Global Capital Securities Corporation ("GCAP"), a Colorado corporation, and Sutton Online, Inc. ("Sutton Online"), a Delaware corporation. WHEREAS, GCAP and Sutton Online, Inc. have entered into an agreement dated March 23, 2001 whereby Sutton, Inc. operates as a franchisee of GCAP for the purpose of operating a branch office of GCAP (the "Franchise Agreement"), a copy of which is attached hereto; and WHEREAS, GCAP has entered into an agreement to sell a controlling interest in Sutton Online to Siegel, his affiliates and/or designees; and WHEREAS GCAP and Sutton Online desire to enter into this Agreement to modify the Franchise Agreement; THEREFORE, upon receipt of good and valuable consideration, the parties agree as follows: 1. Paragraph 12.1 of the Franchise Agreement shall be amended to read as follows: 12.1 This Agreement shall become effective as of the date first appearing herein and will continue in effect for a period of one(1) year unless sooner terminated as provided in this agreement. Franchisee shall have the right to extend this Agreement for an additional six (6) months by providing written notice of such intent to extend 60 days prior to the end of the one-year term. In the event that this Agreement is extended for such six-month term, GCAP shall be entitled to receive as compensation under this Agreement the greater of $20,000 per month or the compensation as would be payable under the Franchise Agreement as written. 2. In all other respects, the Franchise Agreement shall remain in force as written. GLOBAL CAPITAL SECURITIES CORPORATION By: /s/ MARTIN SUMICHRAST ---------------------------------- Martin Sumichrast SUTTON ONLINE, INC. By: /s/ JONATHAN D. SIEGEL ---------------------------------- Jonathan D. Siegel -----END PRIVACY-ENHANCED MESSAGE-----