-----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, SsZk5YMBuk682dlxb2J1bspQ9SIJbrVrHE62mQ/PHSvyqgIXMeAnOhhFO2+1dz6b NPtWPITWKj6Lbqg2T4Xdkg== 0000950153-99-001266.txt : 19991018 0000950153-99-001266.hdr.sgml : 19991018 ACCESSION NUMBER: 0000950153-99-001266 CONFORMED SUBMISSION TYPE: 10SB12G PUBLIC DOCUMENT COUNT: 19 FILED AS OF DATE: 19991013 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IBIZ TECHNOLOGY CORP CENTRAL INDEX KEY: 0001079893 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 860933890 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10SB12G SEC ACT: SEC FILE NUMBER: 000-27619 FILM NUMBER: 99727331 BUSINESS ADDRESS: STREET 1: 1919 WEST LONE CACTUS CITY: PHOENIX STATE: AZ ZIP: 85201 BUSINESS PHONE: 6239200 MAIL ADDRESS: STREET 1: 1919 WEST LONE CACTUS CITY: PHOENIX STATE: AZ ZIP: 85201 10SB12G 1 10SB12G 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-SB GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS UNDER SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 iBIZ TECHNOLOGY CORP. ---------------------------------------------------------- (Exact name of registrant as specified in its charter) Florida 86-0933890 - ---------------------------------- ---------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1919 West Lone Cactus, Phoenix, Arizona 85021 - --------------------------------------------------- ----------- (Address of principal executive offices) (Zip Code) Issuer's telephone number, including area code: (623) 492-9200 -------------------- Securities to be registered under Section 12(b) of the Act: None Securities to be registered under Section 12(g) of the Act: Common stock, $.001 par value per share 2 PART I DESCRIPTION OF BUSINESS iBIZ HISTORY iBIZ Technology Corp. (the "Company") was originally incorporated under the laws of the State of Florida in 1994. From its incorporation through December 31, 1998, the Company operated as a development stage company with no operations or revenues while it sought to identify a strategic business combination with a private operating company. Effective January 1, 1999, the Company entered into a Plan of Reorganization and Stock Exchange Agreement with INVNSYS Technology Corporation ("INVNSYS") and various shareholders of INVNSYS (the "Reorganization"). As a result of the Reorganization, INVNSYS became a wholly-owned subsidiary of the Company. On February 1, 1999, INVNSYS Technology Corporation changed its name to iBIZ Technology Corp. INVNSYS (formerly known as SouthWest Financial Systems, Inc.) was founded in 1979. Under the direction of INVNSYS' founder, Kenneth Schilling, the Company initially focused on distributing front-end bank branch automation computer systems for networking applications. The Company acted as a regional distributor for SHARP Electronics ("SHARP"), a privately held Japanese manufacturer of computers and electronic devices. In addition, the Company also distributed the products of Billcon Company, Ltd., and Glory, manufacturers of bank automation and money processing systems. In 1985, INVNSYS became a master distributor of SHARP products and acquired the exclusive rights to distribute SHARP products to financial institutions in the western United States. Between 1987 and 1990, INVNSYS won various awards from SHARP for outstanding sales performance. Also during this time, the Company began to participate in the design of computer systems for financial institutions. In cooperation with Wells Fargo Bank and SHARP, the Company produced the first plain paper facsimile machine in 1990. In 1992, INVNSYS began to design and build its own computer systems, focusing on integrated systems for the banking industry. In 1993, the Company terminated its relationship with SHARP and focused on developing its own products. In 1994, INVNSYS began working in conjunction with Epson America, a leading manufacturer of point-of-sale computer products, in the development of products for the banking industry. For example, INVNSYS designed a software program which enabled Epson transactional printers to produce cashier's checks, an industry innovation. In addition, in cooperation with Epson, INVNSYS designed and marketed a stackable computer system for financial institutions. In 1996, INVNSYS produced its first entry into the market for complete computer systems with its Vision 2000 Multimedia Notestation, an Intel Pentium-based computer/printer combination. In October 1998, INVNSYS began to market its current line of business transaction computers, the iT series. 2 3 The Company's principal offices are located at 1919 West Lone Cactus, Phoenix, Arizona 85021. The Company maintains a website at www.ibizcorp.com. The information on the website should not be considered part of this Form 10-SB. PRODUCTS Through its operating subsidiary, INVNSYS, the Company engages in the business of designing, manufacturing and distributing small-footprint desktop computers, transaction printers, general purpose financial application keyboards, numeric keypads, cathode ray tube ("CRT") and liquid crystal display ("LCD") monitors and related products. The Company also markets a line of original equipment manufacturer ("OEM") notebook computers and distributes a line of Epson transactional printers. The Company's continued success is dependant upon the introduction of new products and the enhancement of existing products. The Company is actively engaged in the design and development of additional computers and peripherals to augment its present product line. Currently, the Company designs many of its products in-house. The Company employs a four-person product design and development staff which is managed directly by Kenneth Schilling. During 1998, the Company spent approximately Two Hundred Thousand Dollars ($200,000.00) on research and development and expects to spend approximately Five Hundred Thousand Dollars ($500,000.00) on these activities in fiscal 1999. Because of the rapid pace of technological advances in the personal computer industry, the Company must be prepared to design, develop, manufacture and market new and more powerful hardware products in a relatively short time span. While the Company believes that it has been successful to date in accomplishing that goal, there can be no assurance that it will continue to do so in the future. Business Application Small Footprint Computers The Company believes its iT-8000 has the smallest footprint of any desktop personal computer in the industry. (A "footprint" is the amount of desk space the computer terminal covers.) The iT-8000 provides the convenience of a small footprint and the power of a traditional desktop unit. The iT-8000's compact dimensions allow it to be installed in areas where the physical space available to install a computer is limited. These applications include corporate workstations, branch bank teller platforms, supermarkets and other retail point-of-sale ("POS") machines. The iT-8000 is also suited to other space-conscious settings such as a hospital patient bedside. Standard features include extra serial ports for attaching peripheral devices such as magnetic card readers or check readers and a built-in LAN connection. Currently, the iT-8000 may be configured with Intel Pentium processors with MMX Technology (75Mhz through 233Mhz), from 2 to 256 megabyte ("MB") random access memory 3 4 ("RAM"), a standard 2.5" hard drive, providing current industry capacity of up to 13 gigabyte ("GB"), and 10.4", 12.0" or 13.3" color LCD panels. Personal Computers Capitalizing on its knowledge and success in designing computer systems for the financial institution industry, the Company has expanded its product line to include personal home computers. Sahara. The Sahara Databook is a small footprint desktop computer which integrates optional Intel Pentium II/III processor power, simplified networking and sophisticated manageability features into a compact form. The Company believes its flexible design allows original equipment manufacturers ("OEMS") to deliver a range of uses, from a fully-featured corporate workstation to a stripped-down network personal computer. The Sahara is sold in four basic configurations, each allowing customers to pick the options most suitable for their purposes. Safari. The Safari is a small footprint computer with a full array of local area network ("LAN"), P.O.S., entertainment and internet applications. The Safari is offered with a range of processors including Intel Pentium, Cyrix, IBM, and AMD may provide up to 256 MB RAM, and can be equipped with an optional LCD panel, 20X Slim Size CD-ROM drive and a 3D full duplex sound module. Keyboards Historically, the Company has designed and marketed a range of keyboards and numeric keypads for financial institutions. Such products currently include the Geno 628 data pad, the Serial data numeric-only key pad, the ACK-540GP keyboard, and the TV-3682, a space-efficient keyboard designed for bank branch teller applications. The TV-3682 is encoded with a proprietary software which allows the keyboard to be used with any computer without the need to install a driver. To aid numeric input, the numeric pad is given prominence over the alpha pad. The TV-3682 also incorporates a touchpad mouse with no moving parts, which saves space and improves reliability. Capitalizing on the expanding market for powerful, handheld organizers, the Company recently introduced its KeySync Keyboard ("KeySync"). The KeySync directly connects to all Palm devices, including the Palm5, PalmPilot and PalmIII produced by 3COM, and allows users to more easily input data into their organizers. The KeySync is integrated with the Palm products through KeyLink software, exclusively designed for and licensed to the Company. The KeySync's dimensions are 10" x 4-1/2" x 1-1/4" (LxWxH), and offers a sixty-two (62) key keyboard, six (6) programmable function keys and uses three (3) "AAA" batteries to minimize draining the Palm's battery. In addition to Palm products, future 4 5 KeySync releases may also be used as an input device to function with the Casio Cassiopeia, Everex Freestyle, and Philips Nino Palm PC handheld organizer product lines. Palm Pilot Accessories The Company recently began selling a foldable cradle to hold the various Palm Pilot products. Management believes this cradle is easier to use than the products offered by competitors. The Company also began selling a 12-volt power adapter to enable recharging the batteries used in the Palm Pilot in a vehicle's cigarette lighter. Displays and Monitors The Company also offers a line of space-saving, zero-emission LCD flat panel displays under the name "iView." The Company believes these LCD monitors provide superior viewing angles, graphic display and brightness over conventional monitors while consuming less energy. Moreover, LCD panels do not flicker like conventional CRT monitors, thus reducing eye strain and user fatigue. The Company's LCD panels take up less than one-tenth of the space needed for an equivalent cathode ray tube ("CRT") monitor and are some of the thinnest available on the market. The Company believes that the flat LCD panel gives the monitor a competitive edge over conventional CRT products by providing equivalent screen sizes in less space. The computer industry is currently experiencing a shortage of LCD panels. To date, the Company has been able to obtain adequate supplies of LCD panels and has not experienced any significant production delays as a result of the shortage. However, if the shortage continues and the Company's demand increases, the Company may experience difficulties in meeting customer demand. The Company also offers a range of conventional CRT monitors in sizes 14 to 21 inches with digital controls. Planned Product Introductions Thin-client Terminals. Presently, the Company is developing a line of "thin-client" computers. Thin-client computers are scaled down devices with limited memory and no local storage capability designed to be integrated with a centralized server. In a thin-client environment, network software applications remain on the server, while the terminal functions as the gateway to the system. The Company believes thin-client systems offer increased manageability and better security as all applications run on the server and not the terminal. The Company's thin-client computer, the iTerm-8000 (a derivative of the iT-8000), will support up to a 233 Mhz processor, 128 MB RAM, optional floppy and hard drives, and offers an attached LCD monitor. The iTerm 8000 will come with Citrix Systems, 5 6 Inc. ("Citrix") Independent Computing Architecture ("ICA") as the server application which will be compatible with Citrix MetaFrame and WinFrame software. iT-9000. The Company is currently developing a new small footprint Pentium II/III computer with attachable LCD monitor, currently called the iT-9000. The iT-9000 combines numerous technologies into less than one square-foot of desktop space. As a highly flexible, open-architecture platform, the iT-9000 can be configured for multiple computing roles. The iT-9000 will provide functions for visual Internet access, in-home video monitoring, family message center, home security, home control and high-resolution television reception. The Company believes that by eliminating the necessity to assemble numerous electronic components, the iT-9000 will present an all-in-one solution to office desktop overcrowding. With its optional under-cabinet mounting, the Company believes the iT-9000 will provide a solution to extremely limited home and office work areas. The iT-9000 will offer a flip-down LCD panel, and will utilize the latest Pentium III processor technology. The iT-9000 is undergoing final product evaluation and has an anticipated consumer delivery slated for the fourth quarter of 1999 or the first quarter of 2000. Lapboard. The Company is also in the final stages of development of a wireless keyboard to be marketed under the name "Lapboard." This keyboard incorporates RF wireless technology and is suitable for a variety of applications including general computing, Web TV and Dish Technology. The Lapboard is ergonomically designed and features an elevated palm rest allowing the hands to be in a more natural position above the alpha keys, thus alleviating stress on the wrist. In addition, the Lapboard will offer a "bottom case" contoured for the user's lap. The Company has incorporated several flexible design elements into the Lapboard, such as an interchangeable pointing device for users who prefer a trackball instead of the standard mouse touchpad. A joystick module and a sixteen (16) key programmable keypad have also been designed as interchangeable elements. The Company currently anticipates full production of the keyboard for a November 1999 delivery. OEM Notebook Computers In addition to designing its own products, the Company also offers a complete line of competitively priced, build-to-order notebook computers manufactured by Twinhead Corporation and marketed under the name "iBook." Currently, the Company offers three (3) notebook models, the Apache, Phoenix and RoadRunner. RoadRunner. The Company believes the RoadRunner offers powerful computing power in a lightweight design. At only 1" high and 3.7 pounds, the RoadRunner is half the weight of most competing notebooks. The RoadRunner offers Intel Pentium processors with MMX Technology up to 366Mhz, as well as Pentium III processors, a built in 56k fax/modem, external FDD/24X 6 7 CD-ROM module or DVD drive, a full size keyboard and a full 12.1" TFT screen offering resolution as high as 800 x 600 pixels. The RoadRunner offers 32 MB of memory, which can be upgraded to 160 MB. Utilizing a patented (pending) battery auto calibration system and the notebook's Advanced Configuration and Power Interface ("ACPI") power management standard, which automatically monitors and optimizes battery use, the RoadRunner provides up to 2.5 hours of full battery usage. Apache. The Apache offers high performance in an ultra-slim (1.54 mm high), compact unit. Models have a range of central processing units ("CPU's") from the Celeron MMC1 366Mhz to the fastest of mobile processors, the Dixon Pentium II MMC1 400Mhz. The Apache has a 16-bit stereo sound system with built-in stereo speakers and microphone supporting full-duplex sound, a 3D graphics system with 2 MB of video RAM operating over a 64-bit memory bus and a built-in 24X CD-ROM, which is interchangeable with a 2X DVD-ROM drive. The Apache offers resolution as high as 1024 x 768 pixels with its 13.3" (XGA) or 12.1" (SVGA) built-in TFT screen. The Apache can be installed with up to 256 MB of memory using industry-standard Synchronous Dual in-line Memory Modules ("SO DIMM"). To improve slow input/output, the Apache also features a fast hard disk drive, an optional built-in 56 Kbps modem and a 32-bit CardBus PC card drive. The Apache also offers an infrared port which allows wireless file transfer and printing to other infrared-enabled systems. The Company believes power saving is a major concern for notebook users. To address this issue, the Apache offers a processor which consumes up to forty percent (40%) less energy than a comparable desktop processor. In addition, the Apache has numerous user-controlled power management routines including suspend to RAM and suspend to disk. The Apache comes with a patented (pending) battery auto calibration system, which monitors and optimizes battery use automatically. Using ACPI in tandem with battery auto calibration, battery life can be extended to more than three (3) hours on one charge. The battery will automatically recharge in approximately four (4) hours when the AC adapter is plugged in and the notebook is in suspend mode. The Company believes the Apache is designed to be user friendly. It offers OSD (On-Screen Display), which allows the user to see volume and brightness changes as made. Screen brightness can be changed with special hot keys. The modular 9.5 mm hard disk drive may be removed, thus allowing users to switch hard disk drives quickly and keep data secure. Phoenix. The Company believes the Phoenix is a desktop computer replacement, providing the user with accelerated graphics in a portable package. This notebook is designed to provide all the functions of a powerful desktop multimedia system in a compact, lightweight notebook format. The Phoenix weighs 6.8 pounds and measures 12.2" x 9.8" x 1.6 (LxWxH). The Company believes it is slimmer and lighter than most other notebooks while providing superior performance and convenience. 7 8 The Phoenix utilizes the latest Intel Pentium II 300 to 400 MHz processors. The notebook features a 10 GB hard disk drive, an optional built-in 56 Kbps modem, two (2) PC Card slots with integrated CardBus and Zoomed Video, an infrared port and a built-in 24X CD-ROM, which is interchangeable with a 2X DVD-ROM drive. The Phoenix incorporates the latest 2X AGP-bus interface, which is four (4) times faster than the fastest PCI-bus. In addition, the Phoenix offers 4 MB of video RAM operating over a 64-bit memory bus, a VGA chip, and a hardware DVD accelerator with MPEG II support which allows users to watch full-screen video without dropping frames. The Phoenix may be configured with a 1024 x 768 pixel built-in 13.3" or 14.1"(XGA) FTF screen and may be connected to an external monitor or television via built-in ports. For sound applications, the Phoenix offers the ESS Maestro-2M PCI, which is the latest industry standard, is compatible with the 16-bit Sound Blaster Pro, and supported by Microsoft DirectAudio and Direct 3D for use in Windows NT 5.0 or Windows 98 systems. It features integrated 3D audio effects as well as dual channel full duplex operation. The Phoenix comes with an Intel MMC2 CPU module, which allows for easy upgrades. In addition, the notebook's modular design allows for several configurations. The notebook may be configured with anywhere from 32 to 256 MB of RAM. The modular hard disk drive may be removed and replaced with an alternate drive. Users also have the choice of 24X CD-ROM or 2X DVD-ROM, depending on their needs. Also available in the Phoenix is an LS-120 drive, which reads and writes to 120MB Superdisks as well as standard 3.5" floppy disks. An additional expandability option for the Phoenix is the proprietary port replicator, which duplicates all of the connectors that are available on the rear side of the notebook and adds one extra PS/2 port, one stereo line-out connector and a Game/MIDI port. For communications, the Phoenix offers an optional 56 Kbps fax/modem which facilitates dial-up networking, a full duplex sound system and built-in microphone and stereo speakers which allow the Phoenix to be installed with voicemail and speakerphone functions. Network connections are possible through a 32-bit CardBus slot. In addition, the Phoenix offers an infrared port which allows wireless file transfer and printing to other infrared-enabled systems. The Phoenix supports all the new functions provided with the Windows 98 operating system. Power management is optimized with an advanced power management system. Whenever the notebook's processor is not operational for a short time, the processor becomes idle so that it consumes less power. When the processor resumes working, it returns to full speed almost instantaneously with no loss of performance. The Phoenix also supports the patented (pending) battery auto calibration system, which monitors and optimizes battery use at the touch of a key, ensuring longer battery life. 8 9 Epson Computers and Peripherals The Company is an authorized distributor of Epson computers and peripherals. The Company distributes the Epson TM-U325, a low cost, high speed transaction printer. In addition, the Company distributes the Epson TM-U375, a high speed transaction printer which has the ability to prepare and print cashier's checks and money orders, including signatures. Management believes this feature is not available in competing products and the inclusion of this product increases the Company's ability to offer proprietary products in the marketplace. Currently, the Company distributes refurbished models of Epson's iT-U375, a combination computer/printer. This hybrid offers a computer in the base of a transaction printer, thereby reducing the space required for operation. Originally manufactured for the retail POS market, the Company currently utilizes this product in financial institution applications. The Company intends to offer an internet service provider offering a reduced monthly rate for customers who purchase the Company's hardware or peripherals. Many of the Company's competitors presently offer similar services. Management believes this Internet service will expand its ability to market and sell its hardware products without suffering any significant decrease in margins. However, there is no assurance that competition's aggressive price reductions through implementation of a similar strategy won't negatively impact the overall profitability of the Company or that the Internet service will be effectively implemented. SERVICES The Company recently started a new line of business through hiring a Chief Technology Officer who has network integration service accounts with American Express and Motorola. The Company plans to expand its network integration servicing business as the market permits. MARKETING, SALES AND DISTRIBUTION The Company markets and distributes products directly to end users through a direct sales force, regional re-sellers, value-add providers in the banking and POS market and Internet commerce sites. The Company has a direct sales force of six (6) employees, directed by Mr. Schilling, who market the Company's products to financial institutions. In addition to direct sales, the Company also sells its full range of products directly to retail customers through its website at www.ibizcorp.com. The website is linked to an Online Consumer site on Yahoo! Recently, the Company entered into an agreement with Cyberian Outpost, Inc. to market the Company's products on its website 9 10 www.outpost.com. Management believes that direct sales to end users allows the Company to more efficiently and effectively meet customer needs by providing products which are tailored for the customer's individual requirements at a more economical price. The Company distributes a line of Epson computers and transactional printers. The Company participates in Epson's MasterVar program which provides the Company a non-exclusive right to sell, support and service Epson computer peripherals in the United States and Canada. In addition, the Company may sell Epson personal computers in conjunction with sales of Epson peripherals or the Company's products. The Company also distributes its products to regional resellers and, to a lesser extent, national distributors. For example, the Company has entered into a vendor agreement for KeySync with MicroAge, Inc., one of the largest hardware distributors in North America. The Company believes this agreement will provide a major distribution channel for the Company's products. In February 1999, the Company entered into a marketing agreement with Global Telephone Communication, Inc. ("Global"), whereby Global will market the Company's products in the Pacific Rim. Management believes that Global, through a joint venture with Pacific Assets International, will provide access to numerous banks throughout Asia, including Mainland China, Hong Kong, Taiwan, South Korea, Malaysia, Indonesia, and Japan. There is no assurance, however, that the Company will make any sales to such banks. MANUFACTURING The Company's products are engineered and manufactured by various entities in Taiwan. Currently, the Company has an agreement with DataComp, a private Taiwanese company, to manufacture the Company's keyboards and keypads. The Company's iT-8000 computers are currently manufactured by Puritron, a Taiwanese company. The Company's LCD's are manufactured by Sampo Technology, a Taiwanese manufacturer, and receive varying customization ranging from cosmetic items to enhancing components such as stereo speakers and touchpad screens from Acana Peripherals Corporation, a Taiwanese company. The Company's Sahara and Safari desktop computers are currently manufactured by First International Computer in Taiwan. These manufacturers build the Company's products to the Company's specifications with non-proprietary components. Therefore, the vast majority of parts used in the Company's products are available to the Company's competitors. Although the Company has not experienced difficulties in the past relating to engineering and manufacturing, the failure of the Company's manufacturers to produce products of sufficient quantity and quality could adversely affect the Company's abilities to sell the products its customers demand. The Company engages in final assembly, functional testing and quality control of its products in its Phoenix, Arizona facility. The Company's completion of the final stages 10 11 of manufacturing allows the Company to ensure quality control for its products manufactured overseas. The Company has entered into an agreement with Twinhead Corporation, a Taiwanese manufacturer of notebook computers ("Twinhead") to produce build-to-order notebook computers and a 15" LCD flat panel display. The design, engineering and manufacturing of the Company's notebook computers is done entirely by Twinhead. Management believes this relationship allows the Company to offer a broader range of products to its customers without the cost of research and development and manufacturing. The Company has experienced no product delays or cancellation of orders as a result of the recent earthquake in Taiwan. Management believes that certain costs of components may face a temporary increase as a result of the earthquake, however, the Company believes most of the increase in costs will be recouped through increased prices paid by customers. LICENSES Citrix Systems, Inc. On December 30, 1998, the Company entered a licensing agreement with Citrix Systems, Inc. ("Citrix") for the use of Citrix Independent Computing Architecture ("ICA"), an emerging industry standard for server based computing (the "ICA Agreement"). Under the ICA Agreement, the Company is granted a non-exclusive, non-transferable right to incorporate ICA into Citrix-approved iBIZ products. The license is for a term of two (2) years and automatically renews for successive one (1) year periods unless either party gives notice of an intent to allow the agreement to expire at the end of the then current term. In addition, the Company and Citrix have entered into a Citrix Business Alliance Membership Agreement dated February 22, 1999 (the "CBA Agreement"). For a membership fee, CBA membership entitles the Company to engineering, sales, and marketing support by Citrix, as well as access to beta releases of new Citrix products and discounted current software products. Microsoft, Inc. In June 1999, the Company entered into an agreement with Microsoft, Inc. to become a OEM system builder. Participation in this program will allow the Company to install genuine Microsoft operating systems in selected applications with full support from Microsoft. In addition, this agreement entitles the Company to pre-production versions of Microsoft products and enables the Company to provide input into development and design of new products. KeyLink Software License. The Company has an exclusive, perpetual license to use, distribute and offer for sale with associated hardware, the software which facilitates the connection between the KeySync keyboard and the 3COM Palm devices. 11 12 PATENTS AND TRADEMARKS The Company holds no United States or foreign patents for its products. However, the Company is currently assessing potential patent applications for keyboard products under development. In general, the Company believes that its continued success will depend primarily upon the technical expertise, creative skills, and management abilities of its officers, directors, and key employees rather than on patent ownership. The Company has filed an application with the United States Patent and Trademark Office for the use of the names "iBIZ" and "KeySync" and is currently investigating various other product trademarks. YEAR 2000 ISSUES Management believes that all of the Company's current products are Year 2000 compliant. The Company is in the process of converting its internal systems for Year 2000 compliance and Management believes such conversion will be completed prior to December 31, 1999. The Company has not conducted an assessment of the impact of third-party's systems on the Company and the Company can give no assurance that failure of third-party systems will not have a material effect on the Company's operations. To date, the Company incurred no expenses related to Year 2000 issues. SERVICE AND SUPPORT The Company provides its customers with a comprehensive service and support program. The Company provides technical support to its customers via a toll-free telephone number as well as through its website. The number is available Monday through Friday 8:00 a.m. to 5:00 p.m., Arizona time. The Company maintains a staff of approximately ten (10) technical and customer support representatives who respond to telephone inquiries. Also available on the Company's website are links to files for software patches and drivers used for software updates. The Company's products have either a one year (1) or three year (3) limited warranty covering parts and service. In addition, the Company offers extended service agreements, which may extend warranty coverage for up to two (2) additional years. Under the Virtual Spare program, the Company provides replacement units by next-day shipment in the event a customer's unit fails. Under this program, customers have, at no additional expense, the option to have their existing hard-drive configuration installed on the replacement unit. The customer's units are then returned to the Company's Phoenix facility for service. Under the Company's On-Site program, customers have the ability to have a Company-owned spare on-site for immediate availability in the event of a failure. Failed units are then returned to the Company's facility for service and returned to replace the spare 12 13 for future needs. The Company believes its Virtual Spare and On-Site programs eliminate the need for on-site technical support for the replacement units and reduce set-up time at customer facilities. COMPETITION The personal computer industry is highly competitive. The Company competes at the product level with various other personal computer manufacturers and at the distribution level primarily with computer retailers, on-line marketers and the direct sales forces of large personal computer manufacturers. At the product level, the personal computer industry is characterized by rapid technological advances in both hardware and software development and by the frequent introduction of new and innovative products. There are approximately 100 manufacturers of personal computers, the majority of which have greater financial marketing and technological resources than the Company. Competitors at this level include IBM, Compaq, Dell, and Gateway 2000. Gateway 2000 and NEC, among other competitors, have recently introduced smaller desk top computers than have been manufactured in the past. However, those computers are targeted for the consumer and not for the corporate customer and are more expensive than the computers offered by the Company. The Company's main competitors for its planned product line of thin-client computer systems include specialty manufacturers such as WYSE Technology. Competitive factors include product quality and reliability, price to performance characteristics, marketing capability, and corporate reputation. In addition, a segment of the industry competes primarily for customers on the basis of price. Although the companies are price competitive, the Company does not attempt to compete solely on the basis of price. Management believes that it can compete effectively by providing computers and peripherals utilizing unique designs and space-saving qualities, such as small footprints. Although Management believes it has been successful to date, there can be no assurance that the Company will be able to compete successfully in the future. CUSTOMERS Throughout its history, the Company's ability to deliver innovative product designs and quality customer service has enabled it to provide products to major financial institutions including Wells Fargo, Bank of America, Security Pacific, Northrim Bank, and First Interstate Banks. Currently, no single customer accounts for more than ten percent (10%) of the Company's revenues. 13 14 EMPLOYEES; LABOR RELATIONS As of August 15, 1999, the Company had approximately twenty-two (22) full-time employees. No employee of the Company is represented by a labor union or is subject to a collective bargaining agreement. The Company has never experienced a work-stoppage due to labor difficulties and believes that its employee relations are good. FCC REGULATIONS The Federal Communications Commission (the "FCC") has adopted regulations setting radio frequency emission standards for computing equipment. Management believes all of the Company's current products meet applicable FCC and foreign requirements. The Company is in the process of exploring foreign operations. Many foreign jurisdictions require governmental approval prior to the sale or shipment of personal computing equipment and in certain jurisdictions such requirements are more stringent than in the United States. Any delays or failures in obtaining necessary approvals from foreign jurisdictions may impede or preclude the Company's efforts to penetrate such markets. LITIGATION The Company is not a party to any material pending litigation. USE OF TRADEMARKS AND TRADENAMES All trademarks and tradenames used in this Form 10-SB are the property of their respective owners. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Through its operating subsidiary, INVNSYS, the Company designs, manufactures, and distributes small footprint desktop computers, transaction printers, general purpose financial application keyboards, numeric keypads, CRT's, LCD monitors and related products. The Company also markets a line of OEM notebook computers and distributes a line of Epson transactional printers. 14 15 SELECTED FINANCIAL INFORMATION.
Year Ended 10/31/97 10/31/98 Statement of Operations Data Net sales $ 2,350,459 $ 3,402,681 Gross profit $ 771,019 $ 1,182,885 Operating income (loss) $ (478,036) $ 37,600 Net earnings (loss) after tax $ (321,109) $ 7,863 Net earnings (loss) per share $ (32.11) $ 0.79
10/31/97 10/31/98 Balance Sheet Data Total assets $ 318,606 $ 503,210 Total liabilities $ 1,821,151 $ 1,999,231 Stockholders' equity (deficit) $ (511,197) $ (345,233)
8 Months Ended 6/30/98 6/30/99 Statement of Operations Data Net sales $ 1,963,354 $ 1,509,777 Gross profit $ 826,863 $ 384,234 Operating income (loss) $ 223,258 $ (579,345) Net earnings (loss) after tax $ 270,878 $ (276,015) Balance Sheet Data Total assets $ 1,687,669 $ 1,263,869 Total liabilities $ 1,839,237 $ 1,232,345 Stockholders' equity (deficit) $ (151,568) $ 31,524
15 16 RESULTS OF OPERATIONS. Fiscal year ended October 31, 1998 compared to fiscal year ended October 31, 1997. Revenues. Sales increased by approximately 45% from $2,350,459 for the fiscal year ended October 1997 to $3,402,681 for the fiscal year ended October 1998. The increase was mainly as a result of greater demand for the Company's iT business application products and new product introductions and shipments for its keyboards. Cost of Sales. The cost of sales increased by approximately 41% from $1,579,440 in the fiscal year ended October 1997 to $2,219,796 in the fiscal year ended October 1998. The increase in cost of sales is attributable to a similar percentage increase in sales and reflects hardware costs which remained fairly stable over the two-year period. Gross Profit. Gross profit increased from approximately $771,019.00 in October 1997 to $1,182,885.00 in October 1998. The increase resulted primarily from the increase in revenues coupled with a slight decline in the costs of products components. Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased approximately 9% in the fiscal year ended October 1997 to the fiscal year ended October 1998. The decrease was primarily due to lower cost of components, parts and CPU's. Interest Expense. Interest expense of $75,282 for the fiscal year ended October 1998 and of $74,147 for the fiscal year ended October 1997 was accrued on notes payable to Community First National Bank (primarily extended for working capital purposes). Income Taxes. Because the Company incurred a loss of approximately $471,130 for the fiscal year ended October 1997, the Company obtained a refund of $150,021. For the fiscal year ended October 1998, the Company incurred taxes of $75,372 even though income before taxes was only $83,235. The significant tax on nominal income resulted from certain non-deductible expenses. Net Earnings. A loss in fiscal year October 1997 of $150,021 increased to a profit of $75,372 for fiscal year ended October 1998. Profitability resulted primarily from a dramatic increase in sales and a decrease in selling, general and administrative expenses. Eight months ended June 30, 1999 compared to eight months ended June 30, 1998. Revenues. Sales decreased by approximately 23% from $1,963,354 in the eight month period ended June 1998 to $1,509,777 in the eight month period ended June 1999. The decrease was mainly as a result of the focus by management on raising financing for the Company and a transition to a new line of products. 16 17 Cost of Sales. The cost of sales of $1,136,492 in the eight month period June 1998 to $1,125,543 in the eight month period ended June 1999 remained almost constant. Gross Profit. Gross profit decreased by approximately 54% from $826,863 in the eight month period June 1998 to $384,234 in the eight month period ended June 1999. The decrease resulted primarily from the decrease in revenues coupled with a slight increase in the cost of sales. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased approximately 60% from $628,575 in the eight month period ended June 1998 to $963,579 for the eight month period ended June 1999. The increase was primarily due to costs of consulting paid in connection with the merger, legal and accounting fees associated with the merger and an increase in the salaries of the Company's key employees. Interest Expense. Interest expense of $29,242 for the eight month period ended June 1999 and of $24,970 for the eight month period June 1998 was accrued on notes payable to Community First National Bank primarily extended for working capital purposes. Net Earnings. Net earnings decreased from $270,878 for the eight month period ended June 1998 to a loss of $276,015 for the eight month period ended June 1999. The loss resulted from a dramatic increase in the selling, general and administrative expenses and a substantial decrease in revenues for the eight month period ended June 1999. Liquidity and Capital Resources For the year ended October 1997, the Company supplemented cash flow with proceeds from notes payable of approximately $138,000. At year end, the Company had an overdraft of $14,133. For the year ending October 1998, the Company received an advance from iBiz Technology Corp. (prior to the merger) for approximately $158,101. The Company also repaid notes of approximately $211,631. For the fiscal year ended October 1998, the Company had an overdraft of $13,500. Historically, the Company has had significant problems with liquidity. It has been unable to generate sufficient internal cash flow to fund all of its obligations. Outside sources of financing consisting of bank loans have been insufficient. While the Company pays most of its suppliers in full prior to delivery of product by its manufacturers of hardware in Taiwan, its banking customers are not obligated to make payments until 30 days after delivery of products. During 1999, the Company repaid $225,000 on an outstanding loan from Community First National Bank in the amount of $350,000 and delinquent payroll taxes, penalties and interest of approximately $260,000. The Company is in an industry subject to 17 18 rapid obsolescence and change. It will continue to need to raise additional substantial funds for research and development and production of new products. Beginning in November 1, 1998 and continuing through September 1, 1999, the Company raised approximately $842,911 though sales of its common stock. If at any time the Company is unable to raise financing through additional sales of common stock it may be forced into insolvency. There is no assurance that it can continue to raise funding through sales of equity. DESCRIPTION OF PROPERTY On July 1, 1999, the Company began leasing an approximately 15,000 square foot custom-built office building located at 1919 West Lone Cactus, Phoenix, Arizona. The facility is used for administration, design, engineering and assembly of products. The Company's lease ("Lease") is for a term of twenty-six and one-half years (26.5), with monthly rental payments of $12,800.00, subject to annual increases, plus taxes and operating costs. The facility is leased from Lone Cactus Capital Group, L.L.C., a limited liability company in which Kenneth Schilling is a member. The Lease is personally guaranteed by Mr. Schilling and his wife, Diane. Management believes this new facility will provide adequate space to accommodate the Company's current plan of growth and expansion. 18 19 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information regarding the beneficial ownership of the Company's common stock as of June 30, 1999, by: - - all directors - - each person who is known by the Company to be the beneficial owner of more than five percent (5%) of the outstanding common stock - - each executive officer named in the Summary Compensation Table below - - all directors and executive officers as a group The number of shares beneficially owned by each director or executive officer is determined under rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under the SEC rules, beneficial ownership includes any shares as to which the individual has the sole or shared voting power or investment power. In addition, beneficial ownership includes any shares which the individual has the right to acquire within sixty (60) days of June 30, 1999, through the exercise of any stock option or other right. Unless otherwise indicated, each person listed below has sole investment and voting power (or shares such powers with his or her spouse). In certain instances, the number of shares listed includes (in addition to shares owned directly), shares held by the spouse or children of the person, or by a trust or estate of which the person is a trustee or an executor or in which the person may have a beneficial interest.
Number of Shares of Common Stock Beneficially Owned - -------------------------------------------------------------------------------------------------------------------- Name and Address of Vested Beneficial Owner Shares Options (1) Total (1) Percent (1) - -------------------------------------------------------------------------------------------------------------------- Kenneth W. Schilling(2) -------- 200,000 200,000 0.7% 8512 W. Via Montoya, Peoria, AZ 85382 Moorea Trust(2) 12,120,000 --------- 12,120,000 46.6% 8512 W. Via Montoya, Peoria, AZ 85382 Terry S. Ratliff 1,771,200 300,000 2,071,200 7.9% 5312 W. Westwind Drive, Glendale, AZ 85310 Mark H. Perkins 1,771,200 300,000 2,071,200 7.9% 16410 N. 9th Place, Phoenix, AZ 85022 All directors and officers as group 15,662,400 800,000 16,462,400 61.5% (3 persons)
(1) Includes options vested on June 30, 1999 and options which will become vested on or before August 29, 1999. (2) Kenneth and Diane Schilling are husband and wife and hold the shares as trustees under the Moorea Trust dated December 18, 1991. iBIZ Technology Corp. Stock Option Plan The iBIZ Technology Corp. Stock Option Plan (the "Plan") provides for the grant of stock options to purchase common stock to eligible directors, officers, key 19 20 employees, and service providers of the Company. The Plan covers an aggregate maximum of five million (5,000,000) shares of common stock and provides for the granting of both incentive stock options (as defined in Section 422 of the Internal Revenue Code of 1986, as amended) and non-qualified stock options (options which do not meet the requirements of Section 422). Under the Plan, the exercise price may not be less than the fair market value of the common stock on the date of the grant of the option. As of June 30, 1999, three million six hundred thirty-five thousand (3,635,000) options had been granted under the plan at an exercise price of $0.75 to $1.00. The Board of Directors (the "Board") administers and interprets the Plan and is authorized to grant options thereunder to all eligible persons. In the event the Board has at least two members who are not either employees or officers of the Company or of any parent or subsidiary of the Company, the Plan will be administered by a committee of not less than two (2) persons who are such independent directors. The Board designates the optionees, the number of shares subject to the options and the terms and conditions of each option. Certain changes in control of the Company, as defined in the Plan, will cause the options to vest immediately. Each option granted under the Plan must be exercised, if at all, during a period established in the grant which may not exceed ten (10) years from the date of grant. An optionee may not transfer or assign any option granted and may not exercise any options after a specified period subsequent to the termination of the optionee's employment with the Company. The Board may make such amendments to the Plan from time to time it deems proper and in the best interests of the Company provided it may not take any action which disqualifies any option granted under the Plan as an incentive stock option or which adversely effects or impairs the rights of the holder of any option under the Plan. DIRECTORS AND EXECUTIVE OFFICERS NAME AGE POSITION Kenneth W. Schilling 47 President, Chief Executive Officer, Director Terry S. Ratliff 41 Vice President, Controller, Director Mark H. Perkins 35 Vice President of Operations, Director Kenneth W. Schilling, founded the Company's predecessor, SouthWest Financial Systems, in 1979, and has been Chief Executive Officer, President and a Director since the founding of the Company's predecessor. Mr. Schilling studied for a B. S. in electrical engineering at the University of Pittsburgh from 1970 to 1972 but left for military service prior to receiving his degree. Terry S. Ratliff, joined the Company in 1989 as controller and currently serves as Vice President, and Controller. Ms. Ratliff was appointed to Company's Board of Directors on March 5, 1999. Ms. Ratliff graduated from Nicholls State University in 20 21 Thibodaux, Louisiana where she received a B.A. in accounting. Mark H. Perkins, joined the Company in 1994 and currently serves as Vice President of Operations. Mr. Perkins was appointed to the Company's Board of Directors on March 5, 1999. Prior to his joining the Company, Mr. Perkins was employed at American Express as a project manager for major systems implementation, a position he held for eight years. Mr. Perkins earned a degree in business management from California State University-Sonoma. EXECUTIVE COMPENSATION Prior to entering the Reorganization with INVNSYS, the Company operated as a development-stage company with no business operations. During this time, the Company's officers and directors were not compensated for their services. Mr. Eric P. Littman served as President and sole Director from January 1, 1995 through July 9, 1998. Thereafter, Mr. John Xinos served as President, Secretary, and Treasurer from July 10, 1998 through December 31, 1998. As Messrs. Littman and Xinos were not compensated for their services, the Company has not included them in the compensation table below. The following table sets forth certain compensation paid or accrued by the Company to Mr. Schilling, the Company's current chief executive officer during fiscal years ended 1998 and 1999.
OTHER RESTRICTED ANNUAL STOCK LTIP ALL OTHER NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARD(S) OPTIONS(1) PAYOUT COMPENSATION ($) ($) ($) ($) (#) ($) ($) - -------------------------------------------------------------------------------------------------------------------- Kenneth W. Schilling, 1998 $200,000 ---- President, Chief Executive Officer 1999 $200,000 250,000
(1) Includes 50,000 options granted for service as a director of the Company. 21 22 OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS NUMBER OF SECURITIES UNDERLYING PERCENT OF TOTAL OPTIONS/ OPTIONS/SARS SARS GRANTED TO EMPLOYEES EXERCISE OF GRANTED IN FISCAL BASE PRICE EXPIRATION NAME (1) YEAR ($/SH) DATE (a) (b) (c) (d) (e) - -------------------------------------------------------------------------------------------------------------------- Kenneth W. Schilling 250,000 10.7% $0.75 4/21/09
(1) Includes 50,000 options granted for service as a director of the Company. 200,00 options vested upon granting on April 22, 1999, and 25,000 will vest on April 22, 2000 and April 22, 2001 respectively. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS SHARES ACQUIRED ON VALUE FISCAL YEAR END AT FISCAL QUARTER ENDED EXERCISE (#) REALIZED EXERCISABLE/ JUNE 30, 1999 NAME ($) UNEXERCISABLE EXERCISABLE/ UNEXERCISABLE (1) - -------------------------------------------------------------------------------------------------------------------- Kenneth W. Schilling -0- -0- 200,000/50,000 $318,000/$179,500
(1) Based on closing price of the common stock on June 30, 1999 at $1.59. Compensation of Directors Pursuant to the terms of their employment agreements, effective April 22, 1999, Messrs. Schilling, Perkins and Ms. Ratliff each received fifty thousand (50,000) options to purchase fifty thousand (50,000) shares of common stock in consideration for their services as a director of the Company. Each director holds office until the next annual meeting of shareholders or until their successors are elected and qualified. Employment Agreement for Kenneth W. Schilling Effective March 5, 1999, Kenneth W. Schilling and the Company entered into an Employment Agreement (the "Agreement"), as amended as of September 8, 1999. Under the Agreement, Mr. Schilling has been retained to act as President and Chief Executive Officer of the Company. The Agreement is for a term of two (2) years 22 23 ending March 4, 2001. Under the Agreement, Mr. Schilling shall receive an annual base salary of $200,000.00. In addition, effective April 22, 1999, Mr. Schilling shall receive two hundred fifty thousand (250,000) options to purchase two hundred fifty thousand (250,000) shares of common stock of the Company at an exercise price of $0.75 per share. Two hundred thousand (200,000) options shall be issued in consideration of Mr. Schilling's services as an officer of the Company and fifty thousand (50,000) options shall be issued in consideration for services as a director. Two hundred thousand (200,000) options vested upon granting on April 22, 1999, and twenty-five thousand (25,000) options will vest on April 22, 2000 and April 22, 2001, respectively. The Agreement provides that upon total and permanent disability, as defined in the Agreement, the Company shall pay Mr. Schilling such benefits as may be provided to officers of the Company under any Company provided disability insurance or similar policy or under any Company adopted disability plan. In the absence of such policy or plan, the Company shall continue to pay Mr. Schilling for a period of not less than six (6) months the compensation then in effect as of the effective date of his termination. Mr. Schilling may terminate the Agreement upon written notice, within thirty (30) days following the occurrence of an event constituting "Good Reason," as defined below. Upon the termination by Mr. Schilling for Good Reason, Mr. Shilling will be entitled to receive a payment equal to the lesser of: (1) an amount equal to one-half of his annual base salary in effect at the time of termination; or (2) the remaining compensation due to Mr. Schilling under the terms of the Agreement. If Mr. Schilling fails to exercise his rights to terminate the Agreement for Good Reason within thirty (30) days following an event constituting Good Reason, such rights shall expire and be of no further force or effect. "Good Reason" is defined to mean the occurrence of any of the following events without Mr. Schilling's consent: (1) assignment of Mr. Schilling to any duty substantially inconsistent with his position or duties contemplated by the Agreement or a substantial reduction of his duties contemplated by the Agreement; (2) the removal of any titles bestowed under the Agreement; (3) any material breach or failure of the Company to carry out the provisions of the Agreement after notice and an opportunity to cure; and (4) the relocation of Mr. Schilling, his corporate office facilities, or personnel outside the Phoenix metropolitan area. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Prior to the Reorganization, INVNSYS operated as a closely-held private corporation. While a private company, INVNSYS made loans totaling $992,037 to Kenneth Schilling. These loans are payable on demand and accrued interest at eight percent (8%) during 1997 and six percent (6%) during 1998 and 1999. As of June 30, 1999, the balance of the loans payable by Mr. Schilling to INVNSYS totaled $366,787.00. 23 24 The Company leases its facility from Lone Cactus Capital Group, L.L.C., a limited liability company in which Kenneth Schilling is a member. The Company believes the terms of the lease are at an arms-length fair market rate. DESCRIPTION OF SECURITIES General. The Company's Articles of Incorporation authorize the issuance of 100,000,000 shares of common stock, $.001 par value. As of June 30, 1999, there were 25,933,418 shares of common stock outstanding. Common Stock. Holders of shares of common stock are entitled to one vote for each share of common stock held of record on all matters submitted to a vote of the shareholders. Each share of common stock is entitled to receive dividends as may be declared by the Company's Board of Directors out of funds legally available. Management, however, does not presently intend to pay any dividends. In the event of liquidation, dissolution or winding up of the Company, the holders of common stock are entitled to share ratably in all assets remaining after payment in full of all creditors of the Company and the liquidation preferences of any outstanding shares of preferred stock, if any. There are no redemption or sinking fund provisions applicable to the common stock. Debentures. The Company has issued Two Hundred Thousand Dollars ($200,000.00) of convertible debentures (the "Debentures"). The Debentures are due on June 21, 2000, bear interest at eight percent (8%) per annum, and are unsecured. Under the terms of the Debentures, the Company is obligated to use its best efforts to include the shares issuable upon conversion of the Debentures in a registration statement filed with the Securities and Exchange Commission ("SEC") under the Securities Act ("Registration Statement") by June 21, 2000. Upon the effectiveness of the Registration Statement, the Debentures shall automatically convert to 300,000 fully paid and nonassessable shares of common stock, $.001 par value. 24 25 PART II MARKET PRICE OF DIVIDENDS ON THE COMPANY'S AND RELATED SHAREHOLDER MATTERS The Company's common stock is currently traded on the OTC Bulletin Board. The common stock was initially listed under the symbol "EVCV" on June 3, 1998 and trading began on July 16, 1998. On October 26, 1998, the Company changed its trading symbol to "IBIZ." The following charts indicate the high and low sales price for the Company's common stock for each fiscal quarter between September 30, 1998 and June 30, 1999. [Bar Graph] Fiscal 1998 Common Stock Prices EVCV - iBIZ
Quarter Ended Stock Price Sep - 98 Dec - 98 High $3.06 $2.69 Low 2.25 1.88
[Bar Graph] Fiscal 1999 Common Stock Prices iBIZ
Quarter Ended Stock Price Mar - 99 Jun - 99 High $2.06 $2.44 Low 0.94 0.56
25 26 As of June 30, 1999, Management believes there to be 55 holders of record of the Company's common stock. To date, the Company has not paid any dividends on its common stock. The Company does not currently intend to pay dividends in the future. LEGAL PROCEEDINGS The Company is not currently a party to any lawsuit or proceeding. However, the Company is subject to lawsuits occurring in the regular course of business. Most such lawsuits involve claims for money damages. The Company carries insurance to protect itself against such claims, subject to any applicable deductibles. The Company can give no assurances that future lawsuits will not have a material adverse effect on the Company's financial condition or results of operations. RECENT SALES OF UNREGISTERED SECURITIES On July 10, 1998 the Company issued 3,000,000 shares of common stock, $.001 par value, at a sales price of $.05 per share totaling $150,000. The Company relied upon Regulation D, Rule 504 promulgated under the Securities Act with respect to these sales. Between November 13, 1998 and January 13, 1999 the Company issued 540,318 shares of common stock, $.001 par value, at a sales price of $.35 per share totaling $189,111.30. The Company relied upon Regulation D, Rule 506 promulgated under the Securities Act with respect to these sales. iBIZ Technology Corp. Effective January 1, 1999, the Company entered into a Plan of Reorganization and Share Exchange Agreement with INVNSYS and the below referenced individuals. Pursuant to the Reorganization, the Company issued 16,000,000 shares of common stock, $.001 par value, in exchange for one hundred percent (100%) of the outstanding shares of INVNSYS. The shares were allocated as follows:
NO. OF SHARES ------------- Moorea Trust dated December 18, 1991 12,120,000 Terry Ratliff 1,771,200 Mark Perkins 1,771,200 Paul Russo 46,400 Frank Ligammari 33,600 Richard Bielfelt 28,800 Terry Neild 228,800
The shares issued by the Company were issued pursuant to the exemption 26 27 provided by Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"). On March 19, 1999, the Company issued 1,293,000 shares of common stock, $.001 par value, at a sales price of $.50 per share and 100,000 shares of common stock, $.001 par value, at a sales price of $.35 totaling an aggregate of $681,500. The Company relied upon Regulation D, Rule 506 promulgated under the Securities Act with respect to these sales. From April 22, 1999 through May 13, 1999 the Company issued options to purchase 3,635,000 shares of common stock, $.001 par value to employees and various consultants. The exercise price of the options is the fair market value on the date of grant which ranged from $0.75 to $1.00 per share. The Company relied upon either Rule 701 or Section 4(2) with respect to the granting of the options. On June 21, 1999 the Company issued Two Hundred Thousand Dollars ($200,000.00) of convertible debentures (the "Debentures"). The Debentures are due on June 21, 2000, bear interest at eight percent (8%) per annum, and are unsecured. Under the terms of the Debentures, the Company is obligated to use its best efforts to include the shares issuable upon conversion of the Debentures in a registration statement filed with the SEC under the Securities Act ("Registration Statement") by June 21, 2000. Upon the effectiveness of the Registration Statement, the Debentures shall automatically convert to 300,000 fully paid and nonassessable shares of common stock, $.001 par value. In June 1999, the Company issued a warrant entitling the holder to acquire 400,000 shares of common stock, $.001 par value, at an exercise price of $0.75 per share for the first 300,000 shares and $1.00 per share for the remaining 100,000 shares. INVNSYS Technology Corporation Effective November 1, 1997, INVNSYS issued the following shares of common stock, One Dollar ($1.00) par value:
NO. OF SHARES ------------- Moorea Trust dated December 18, 1991 605 Terry Ratliff 1,550 Mark Perkins 1,550 Paul Russo 40 Frank Ligammari 30 Richard Bielfelt 25 Terry Neild 200
INVNSYS relied on either Rule 701 promulgated under the Securities Act or Section 4(2) of the Securities Act with respect to all sales and offers referenced above. 27 28 INDEMNIFICATION OF DIRECTORS AND OFFICERS Limitation of Liability and Indemnification Matters. The Company's Articles of Incorporation, as amended, provide to the fullest extent permitted by Florida law, a director or officer of the Company shall not be personally liable to the Company or its shareholders for damages for breach of such director's or officer's fiduciary duty. The effect of this provision of the Company's Articles of Incorporation, as amended, is to eliminate the right of the Company and its shareholders (through shareholders' derivative suits on behalf of the Company) to recover damages against a director or officer for breach of the fiduciary duty of care as a director or officer (including breaches resulting from negligent or grossly negligent behavior), except under certain situations defined by statute. The Company believes that the indemnification provisions in its Articles of Incorporation, as amended, are necessary to attract and retain qualified persons as directors and officers. Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. PART F/S FINANCIAL STATEMENTS 1. INVNSYS Technology Corporation formerly known as Southwest Financial Systems, Inc. Financial Statements October 31, 1998 and 1997. 2. Financial statements for the eight month period ended June 30, 1999 (iBIZ Technology Corp.) and June 30, 1998 (Southwest Financial Systems, Inc.). 28 29 INVNSYS TECHNOLOGY CORPORATION FORMERLY KNOWN AS SOUTHWEST FINANCIAL SYSTEMS, INC. FINANCIAL STATEMENTS OCTOBER 31, 1998 AND 1997 F-1 30 TABLE OF CONTENTS PAGE NO. -------- INDEPENDENT AUDITORS' REPORT ...................................... 1 FINANCIAL STATEMENTS Balance Sheets.............................................. 2 Statements of Income........................................ 3 Statement of Changes in Stockholders' Equity................ 4 Statements of Cash Flows.................................... 5-6 Notes to Financial Statements............................... 7-15 F-2 31 INDEPENDENT AUDITORS' REPORT To The Board of Directors and Stockholders Invnsys Technology Corporation Formerly known as Southwest Financial Systems, Inc. Phoenix, Arizona We have audited the accompanying balance sheets of Invnsys Technology Corporation formerly known as Southwest Financial Systems, Inc., as of October 31, 1998 and 1997, and the related statements of income, changes in stockholders' equity, and cash flows for the years then ended. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion the financial statements referred to above present fairly, in all material respects, the financial position of Invnsys Technology Corporation as of October 31, 1998 and 1997, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. MOFFITT & COMPANY, P. C. June 14, 1999 F-3 32 INVNSYS TECHNOLOGY CORPORATION FORMERLY KNOWN AS SOUTHWEST FINANCIAL SYSTEMS, INC. BALANCE SHEETS OCTOBER 31, 1998 AND 1997 ASSETS
1998 1997 ---------- ---------- CURRENT ASSETS Cash $ 200 $ 412 Accounts receivable, trade 153,536 91,073 Other receivables 1,500 1,000 Corporation income tax refund current 0 19,919 Inventories 323,397 202,320 Prepaid expenses, current 24,577 3,882 ---------- ---------- TOTAL CURRENT ASSETS 503,210 318,606 ---------- ---------- PROPERTY AND EQUIPMENT 76,536 97,069 ---------- ---------- OTHER ASSETS Note receivable, related party 906,620 666,103 Deposits 20,155 17,765 Prepaid expenses, long-term 2,423 5,655 Deferred tax assets 145,054 204,756 ---------- ---------- TOTAL OTHER ASSETS 1,074,252 894,279 ---------- ---------- TOTAL ASSETS $1,653,998 $1,309,954 ========== ==========
F-4 33 LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
1998 1997 ----------- ----------- CURRENT LIABILITIES Bank overdraft $ 13,700 $ 14,545 Accounts payable, trade 780,815 691,944 Customer deposits 395,264 267,630 Notes payable, current 28,378 215,976 Accrued liabilities 63,243 30,713 Sales and payroll taxes payable 255,410 61,840 Corporation income taxes payable, Current 17,841 13,741 Deferred income 71,031 110,797 ----------- ----------- TOTAL CURRENT LIABILITIES 1,625,682 1,407,186 ----------- ----------- LONG - TERM LIABILITIES Notes payable 365,325 389,358 Deferred income taxes payable 8,224 24,607 ----------- ----------- TOTAL LONG - TERM LIABILITIES 373,549 413,965 ----------- ----------- STOCKHOLDER'S EQUITY Common stock, $1.00 par value, 100,000 shares authorized, 10,000 shares issued and outstanding 10,000 10,000 Advance from IBIZ Technology Corp. 158,101 0 Retained earnings (deficit) (513,334) (521,197) ----------- ----------- TOTAL STOCKHOLDER'S EQUITY (DEFICIT) (345,233) (511,197) ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT) $ 1,653,998 $ 1,309,954 =========== ===========
F-5 34 INVNSYS TECHNOLOGY CORPORATION FORMERLY KNOWN AS SOUTHWEST FINANCIAL SYSTEMS, INC. STATEMENTS OF INCOME FOR THE YEARS ENDED OCTOBER 31, 1998 AND 1997
1998 1997 ----------- ----------- SALES $ 3,402,681 $ 2,350,459 COST OF SALES 2,219,796 1,579,440 ----------- ----------- GROSS PROFIT 1,182,885 771,019 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,145,285 1,249,055 ----------- ----------- INCOME (LOSS) FROM OPERATIONS 37,600 (478,036) ----------- ----------- OTHER INCOME (EXPENSES) Interest income 40,320 27,848 Miscellaneous income 3,815 10,835 Gain/loss on disposition of assets 1,500 (6,177) Loss on Investment property 0 (25,600) ----------- ----------- TOTAL OTHER INCOME (EXPENSE) 45,635 6,906 ----------- ----------- INCOME (LOSS) BEFORE INCOME TAXES (REFUND) 83,235 (471,130) INCOME TAXES (REFUND) 75,372 (150,021) ----------- ----------- NET INCOME (LOSS) $ 7,863 $ (321,109) =========== =========== NET INCOME (LOSS) PER COMMON SHARE Basic and Diluted $ 0.79 $ (32.11) =========== =========== AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 10,000 10,000 =========== ===========
F-6 35 INVNSYS TECHNOLOGY CORPORATION FORMERLY KNOWN AS SOUTHWEST FINANCIAL SYSTEMS, INC. STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEARS ENDED OCTOBER 31, 1998 AND 1997
ADVANCE COMMON STOCK FROM IBIZ ----------------------- TECHNOLOGY RETAINED SHARES AMOUNT CORP. EARNINGS --------- --------- --------- --------- BALANCE, NOVEMBER 1, 1996 10,000 $ 10,000 $ 0 $(200,088) NET (LOSS) FOR THE YEAR ENDED OCTOBER 31, 1997 0 0 0 (321,109) --------- --------- --------- --------- BALANCE, OCTOBER 31, 1997 10,000 10,000 0 (521,197) ADVANCE FROM IBIZ TECHNOLOGY CORP 0 0 158,101 0 NET INCOME FOR THE YEAR ENDED OCTOBER 31, 1998 0 0 0 7,863 --------- --------- --------- --------- BALANCE, OCTOBER 31, 1998 10,000 $ 10,000 $ 158,101 $(513,334) ========= ========= ========= =========
F-7 36 INVNSYS TECHNOLOGY CORPORATION FORMERLY KNOWN AS SOUTHWEST FINANCIAL SYSTEMS, INC. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED OCTOBER 31, 1998 AND 1997
1998 1997 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 7,863 $(321,109) Adjustments to reconcile net income (loss) to net cash provided by operating activities Depreciation 38,604 92,407 Gain/loss on disposition of equipment (1,500) 31,777 Adjustment of October 31, 1996 retained earnings 0 (248,281) Increase (decrease) in Accounts receivable, trade (62,463) 277,523 Other receivables (500) 3,000 Income tax refunds 19,919 56,146 Inventories (121,077) 98,263 Prepaid expenses (17,463) 8,794 Deferred tax asset 59,702 (204,756) Deposits (2,390) 73 Accounts payable 88,871 (32,201) Customer deposits 127,634 267,630 Accrued liabilities and taxes 226,100 (32,104) Corporation income taxes payable (12,283) 12,469 Deferred income (39,766) 30,136 --------- --------- NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES 311,251 39,767 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property and equipment (18,071) (97,923) Loans to related party (240,517) (35,000) Proceeds from sale of property and equipment 1,500 0 --------- --------- NET CASH FLOWS (USED) BY INVESTING ACTIVITIES (257,088) (132,923) --------- ---------
F-8 37 INVNSYS TECHNOLOGY CORPORATION FORMERLY KNOWN AS SOUTHWEST FINANCIAL SYSTEMS, INC. STATEMENTS OF CASH FLOWS (CONTINUED) FOR THE YEARS ENDED OCTOBER 31, 1998 AND 1997
1998 1997 --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Advance from IBIZ Technology Corp. $ 158,101 $ 0 Proceeds from notes payable 0 138,000 Repayments of notes payable (211,631) (32,364) --------- --------- NET CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES (53,530) 105,636 --------- --------- NET INCREASE IN CASH 633 12,480 CASH BALANCE (OVERDRAFT), BEGINNING OF YEAR (14,133) (26,613) --------- --------- CASH BALANCE (OVERDRAFT), END OF YEAR $ (13,500) $ (14,133) ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during year: Interest $ 61,117 $ 74,108 ========= ========= Taxes $ 850 $ 50,913 ========= =========
F-9 38 INVNSYS TECHNOLOGY CORPORATION FORMERLY KNOWN AS SOUTHWEST FINANCIAL SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1998 AND 1997 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS Invnsys Technology Corporation, formerly known as Southwest Financial Systems, Inc., was incorporated in the State of Arizona on July 30, 1980 and is in the business of selling retail and wholesale financial, computing and communication equipment. They also provide repair services and sell maintenance contracts. The corporation currently operates a service center in Phoenix, Arizona. ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS Uncollectible accounts receivable are written off at the time management specifically determines them to be uncollectible. In addition, the allowance for doubtful accounts is provided at an amount determined by management. A summary of accounts receivable and the allowance for doubtful accounts is as follows:
1998 1997 -------- -------- Accounts receivable $156,036 $ 98,073 Allowance for doubtful accounts 2,500 7,000 -------- -------- Net accounts receivable $153,536 $ 91,073 ======== ========
INVENTORIES Inventories are stated at the lower of cost (determined principally by the first-in, first-out method) or market. PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Major renewals and improvements are charged to the asset accounts while replacement, maintenance and repairs, which do not improve or extend the lives of the respective assets, are expensed. At the time property and equipment are retired or otherwise disposed of, the asset and related accumulated depreciation accounts are relieved of the applicable amounts. Gains or losses from retirements or sales are credited or charged to income. The company depreciates its property and equipment for financial reporting purposes using the straight-line method based upon the following useful lives of the assets: F-10 39 INVNSYS TECHNOLOGY CORPORATION FORMERLY KNOWN AS SOUTHWEST FINANCIAL SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) OCTOBER 31, 1998 AND 1997 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) PROPERTY AND EQUIPMENT (CONTINUED) Tooling 3 Years Machinery and equipment 5-10 Years Office furniture and equipment 5-10 Years Vehicles 5 Years Leasehold improvements 5 Years
ACCOUNTING ESTIMATES Management uses estimates and assumptions in preparing financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were used. REVENUE RECOGNITION The company recognizes revenue from product sales when the goods are shipped and title passes to customers. SALES OF MAINTENANCE AGREEMENTS The revenue received for the maintenance agreements is being reported evenly over the life of the contracts. Such unearned portion is recorded as "deferred income". INCOME TAXES Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary differences between the amount of taxable income and pretax financial income and between the tax bases of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled as prescribed in FASB Statement No., 109, Accounting for Income Taxes. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. F-11 40 INVNSYS TECHNOLOGY CORPORATION FORMERLY KNOWN AS SOUTHWEST FINANCIAL SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) OCTOBER 31, 1998 AND 1997 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) NET EARNINGS PER SHARE The company adopted Statement of Financial Accounting Standards No. 128 that requires the reporting of both basic and diluted earnings per share. Basic earnings per share is computed by dividing net income available to common shareowners by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. RISKS AND UNCERTAINTIES The company is in the computer and computer technology industry. The company's products are subject to rapid obsolescence and management must authorize substantial funds for research and development costs in order to stay competitive. NOTE 2 DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS The company has financial instruments, none of which are held for trading purposes. The company estimates that the fair value of all financial instruments at October 31, 1998 and 1997, as defined in FASB 107, does not differ materially from the aggregate carrying values of its financial instruments recorded in the accompanying balance sheet. The estimated fair value amounts have been determined by the company using available market information and appropriate valuation methodologies. Considerable judgement is required in interpreting market data to develop the estimates of fair value, and accordingly, the estimates are not necessarily indicative of the amounts that the company could realize in a current market exchange. NOTE 3 INVENTORIES At October 31, 1998 and 1997, inventories were comprised of:
1998 1997 -------- -------- Computer equipment $208,725 $161,212 Office equipment 25,693 25,689 Depot 9,343 9,343 Demo units 77,576 4,016 Parts 2,060 2,060 -------- -------- Totals $323,397 $202,320 ======== ========
F-12 41 INVNSYS TECHNOLOGY CORPORATION FORMERLY KNOWN AS SOUTHWEST FINANCIAL SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) OCTOBER 31, 1998 AND 1997 NOTE 4 PROPERTY AND EQUIPMENT At October 31, 1998 and 1997, property and equipment and accumulated depreciation consisted of:
1998 1997 -------- -------- Tooling $ 68,100 $ 68,100 Machinery and equipment 30,656 75,104 Office furniture and equipment 60,406 45,476 Vehicles 39,141 59,596 Leasehold improvements 18,044 18,044 -------- -------- 216,347 266,320 Less accumulated depreciation 139,811 169,251 -------- -------- Total property and equipment $ 76,536 $ 97,069 ======== ========
The depreciation expenses for the years ended October 31, 1998 and 1997 were $38,604 and $92,407, respectively. NOTE 5 NOTE RECEIVABLE, RELATED PARTY
1998 1997 -------- -------- The related note is unsecured, payable on demand and accrues interest at 6% for 1998 and 8% for 1997. At October 31, 1998 and 1997, management believed the notes would not be collected within the current operating cycle and classified the asset as a long-term asset. $615,250 of the loan was repaid in 1999. Total $906,620 $666,103 ======== ========
F-13 42 INVNSYS TECHNOLOGY CORPORATION FORMERLY KNOWN AS SOUTHWEST FINANCIAL SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) OCTOBER 31, 1998 AND 1997 NOTE 6 DEFERRED INCOME TAXES Deferred income taxes (benefits) are provided for certain income and expenses which are recognized in different periods for tax and financial reporting purposes. Sources of temporary differences and the resulting tax assets and liabilities are as follows:
1998 1997 -------- -------- Deferred tax assets Net operating loss carryforwards $116,382 $176,591 Tax credits 20,175 20,175 Other 8,497 7,980 -------- -------- Total 145,054 204,746 Less valuation allowance 0 0 -------- -------- Net deferred tax assets $145,054 $204,746 ======== ======== Deferred tax liability Property related $ 8,224 $ 24,607 ======== ========
NOTE 7 TAX CARRYFORWARD The company has the following tax carryforwards at October 31, 1998:
EXPIRATION YEAR AMOUNT DATE ------------------ -------- ---------------- Net operating loss October 31, 1997 $342,302 October 31, 2012 Capital loss October 31, 1997 25,600 October 31, 2002 Contribution October 31, 1995 1,536 October 31, 2000 October 31, 1996 2,068 October 31, 2001
NOTE 8 PAYROLL TAXES PAYABLE At October 31, 1998, the company was delinquent in the payment and filing of payroll tax returns in the amount of $236,923. The payroll taxes were paid in 1999. F-14 43 INVNSYS TECHNOLOGY CORPORATION FORMERLY KNOWN AS SOUTHWEST FINANCIAL SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) OCTOBER 31, 1998 AND 1997 NOTE 9 NOTES PAYABLE
1998 1997 -------- -------- Note payable to Community First National Bank due in monthly payments of interest of approximately $3,100. Interest is computed at national prime as stated in the Wall Street Journal plus 3 percent. The principal amount is due July 31, 2000. This note is secured by accounts receivable, general intangibles and all equipment and leasehold improvements. The shareholder has personally guaranteed the loan and the bank is the beneficiary of an insurance policy on the life of the shareholder. $340,613 $334,890 Note payable to Community First National Bank due in monthly installments of principal and interest of $3,754 until May 7, 1999. Interest is computed at national prime as stated in the Wall Street Journal plus 3 percent. This note is secured by accounts receivable, general intangibles and all equipment and leasehold improvements. The shareholder has personally guaranteed the loan and the bank is the beneficiary of an insurance policy on the life of the shareholder The loan was paid off in 1999. 23,737 64,798 Note payable to Community First National Bank due in monthly payments of principal and interest of $545 with interest at 7 percent until March 7, 2004. The note is secured by an automobile. 29,353 33,646
F-15 44 INVNSYS TECHNOLOGY CORPORATION FORMERLY KNOWN AS SOUTHWEST FINANCIAL SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) OCTOBER 31, 1998 AND 1997 NOTE 9 NOTES PAYABLE (CONTINUED)
1998 1997 -------- -------- Note payable to an individual payable in one payment of $50,000 on February 1, 1998 and a final balance and accrued interest on May 21, 1998. The note is secured by a houseboat owned by a stockholder of the company. $ 0 $100,000 Unsecured note payable from an individual with interest computed at 14%. Principal and accrued interest is due December 5, 1997. 0 72,000 -------- -------- 393,703 605,334 Less: current portion of long-term debt 28,378 215,976 -------- -------- Net long-term debt $365,325 $389,358 ======== ========
Maturities of long-term debt are as follows:
1998 1997 -------- -------- Year ended October 31, 1998 $ 0 215,976 1999 28,378 29,790 2000 345,588 339,865 2001 5,336 5,336 2002 5,721 5,721 2003 & thereafter 8,680 8,646 -------- -------- $393,703 $605,334 ======== ========
F-16 45 INVNSYS TECHNOLOGY CORPORATION FORMERLY KNOWN AS SOUTHWEST FINANCIAL SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) OCTOBER 31, 1998 AND 1997 NOTE 10 OPERATING LEASE - REAL ESTATE The company leases office space under a non-cancelable operating lease agreement expiring on July 15, 1999. The lease provides for annual rentals of approximately $40,000 plus increases due to changes in the consumer price index and building operating costs. The lease is guaranteed by the major stockholders of the company. Future minimum lease payments, excluding taxes and expenses, are as follows for the years ending October 31:
1998 1997 ------- ------- 1998 $ 0 $47,320 1999 35,128 35,128 ------- ------- $35,128 $82,448 ======= =======
NOTE 11 ADVERTISING The company expenses all advertising as incurred. For the years ended October 31, 1998 and 1997, the company charged to operations $89,656 and $24,721, respectively, in advertising costs. NOTE 12 INTEREST The company incurred interest expenses for the years ended October 31, 1998 and 1997 of $75,282 and $74,147, respectively. NOTE 13 WARRANTY RESERVE In 1998, the company established a warranty reserve to cover any potential warranty costs on computer equipment that are not covered by the computer manufacturer's warranty. NOTE 14 ECONOMIC DEPENDENCY The company purchases the majority of its computer equipment from three suppliers. NOTE 15 PLAN OF REORGANIZATION AND STOCK EXCHANGE AGREEMENT On January 1, 1999, the company entered into a plan of reorganization with IBIZ Technology Corp., a Florida corporation. Under the plan, IBIZ Technology Corp. issued 16,000,000 shares of newly issued unregistered common stock for 100% of the issued and outstanding stock of Invnsys Technology Corporation. F-17 46 INVNSYS TECHNOLOGY CORPORATION FORMERLY KNOWN AS SOUTHWEST FINANCIAL SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) OCTOBER 31, 1998 AND 1997 NOTE 16 OFFICERS' COMPENSATION On March 5, 1999, the company entered into three employment agreements with the following officers:
PRESIDENT VICE AND CHIEF VICE PRESIDENT EXECUTIVE PRESIDENT/ OF OFFICER COMPTROLLER OPERATIONS Annual compensation $ 200,000 $ 88,000 $ 88,000 Options for IBIZ Technology Corp. stock 250,000 350,000 350,000 shares shares shares Exercise price per share $ 0.75 $ 0.75 $ 0.75
NOTE 17 INCOME TAXES FOR YEAR ENDED OCTOBER 31, 1998 The net income before taxes was $83,235 and the corporation income taxes was $75,372. The large tax was due to the fact that a number of expenses the company incurred are not deductible for income tax purposes. F-18 47 iBIZ TECHNOLOGY CORPORATION AND CONSOLIDATED SUBSIDIARY (INTERNALLY PREPARED-UNREVIEWED & UNAUDITED) FOR NOVEMBER 1998 THRU JUNE 1999 AND INVNSYS TECHNOLOGY CORPORATION FOR NOVEMBER 1997 THRU JUNE 1998
INTERNALLY INTERNALLY PREPARED PREPARED ----------------- -------------------- iBIZ INVNSYS CONSOLIDATED 11/97-06/98 11/98-06/99 ----------------- -------------------- ASSETS CURRENT ASSETS Cash 200 83,653 Accounts receivable, trade 423,625 131,190 Other receivables 1,000 553 Corporation income tax refund current 0 0 Inventories 332,954 256,548 Prepaid expenses, current 6,733 26,455 ----------------- -------------------- TOTAL CURRENT ASSETS 764,512 498,399 PROPERTY AND EQUIPMENT 87,579 73,979 OTHER ASSETS Investments 303,995 Note receivable, related party 476,892 366,787 Deposits 32,220 19,650 Prepaid expenses, long-term 0 0 Deferred tax assets 0 305,054 ----------------- -------------------- TOTAL OTHER ASSETS 813,107 691,491 ----------------- -------------------- TOTAL ASSETS 1,665,198 1,263,869 ================= ====================
F-19 48
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT) CURRENT LIABILITIES Bank overdraft 91,053 0 Accounts payable, trade 367,439 536,513 Customer deposits 754,104 160,018 Notes payable, current 392,362 73,861 Accrued liabilities 53,528 49,771 Sales and payroll taxes payable 116,319 86,761 Corporate income taxes payable, current 13,791 18,666 Deferred income 110,750 77,159 Deferred income taxes payable (136,830) Convertible debentures, payable 200,000 ------------- ----------------------- TOTAL CURRENT LIABILITIES 1,762,516 1,202,749 LONG-TERM LIABILITIES Accounts payable, long term 143,000 Notes payable 0 21,372 Deferred income taxes payable 8,224 ------------- ----------------------- TOTAL LONG-TERM LIABILITIES 143,000 29,596 STOCKHOLDER'S EQUITY Common stock, $1.00 par value, 100,000 shares authorized, 10,000 shares issued and outstanding 10,000 0 Common stock Authorized - 100,000,000 shares, par value $.001 per shares Issued and outstanding - 25,985,918 shares 25,986 Paid in capital in excess of par value of stock 964,207 Advance from iBIZ Technology Corp. Advances on stock subscriptions Retained earnings (deficit) (250,319) (958,669) ------------- ----------------------- TOTAL STOCKHOLDER'S EQUITY (DEFICIT) (240,319) 31,524 ------------- ----------------------- TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT) 1,665,198 1,263,869 ============== ========================
STATEMENT OF INCOME F-20 49 SALES 1,963,354 1,509,777 COST OF SALES (1,136,492) 1,125,543 ------------- ----------------------- GROSS PROFIT 826,863 384,234 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (628,575) 963,579 ------------- ----------------------- PROFIT (LOSS) BEFORE OTHER INCOME 198,288 (579,345) OTHER INCOME Cancellation of debt 148,033 Other income 147,962 20,147 ------------- ----------------------- TOTAL OTHER INCOME 147,962 168,180 PROFIT (LOSS) BEFORE INCOME TAX REFUND 346,250 (411,165) PROVISION FOR INCOME TAXES (REFUND) 75,372 (135,150) ------------- ----------------------- NET (LOSS) 270,878 (276,015) ============= =======================
CONSOLIDATED STATEMENT OF CASH FLOWS CASH FLOWS FROM OPERATING ACTIVITIES Net (Loss) 270,878 (276,015) Adjustment to reconcile net (loss) to net cash (used) by operating activities Depreciation 9,490 27,670 Cancellation of debt (148,033) Increase (decrease) in Accounts receivable, trade (332,552) 22,346 Other receivables 947 Inventories (130,634) 147,570 Prepaid expenses 2,804 545 Deferred tax asset 204,756 (160,000) Deposits (14,455) 505
F-21 50 Accounts payable (181,505) (259,398) Customer deposits 486,474 (235,246) Accrued liabilities (84,093) (193,777) Corporate Income Tax Refund 19,919 Deferred income (47) 6,128 ------------- ----------------------- NET CASH FLOWS (USED) BY OPERATING ACTIVITIES 251,036 (1,066,758) CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment (25,113) Repayment of related party loans (114,784) 539,833 ------------- ----------------------- NET CASH FLOWS PROVIDED BY INVESTING ACTIVITIES (114,784) 514,720 CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds from issuance of common stock 747,661 Proceeds from issuance of convertible debentures 200,000 Decrease in notes payable (212,972) (298,470) ------------- ----------------------- NET CASH FLOW PROVIDED BY FINANCING ACTIVITIES (212,972) 649,191 ------------- ----------------------- NET INCREASE IN CASH (76,720) 97,153 CASH BALANCE (OVERDRAFT), OCTOBER 31, 1997 (1998) (14,133) (13,500) ------------- ------------------------ CASH BALANCE (OVERDRAFT), JUNE 30, 1998 (1999) (90,853) 83,653 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during year: Interest 24,970 26,490 Taxes 0 0 NON CASH INVESTING AND FINANCING ACTIVITIES Issuance of company stock for investment in INVNSYS Technology Corporation 6,000 Cancellation of debt 148,033
F-22 51 PART III INDEX TO EXHIBIT
EXHIBIT NO. DESCRIPTION PAGE NO. ----------- ----------- -------- 2.01 Plan of Reorganization and Stock Exchange Agreement dated January 1, 1999 3.01 Articles of Incorporation, as amended 3.02 Bylaws 10.1 Citrix Business Alliance Membership Agreement dated February 10, 1999, between INVNSYS and Citrix Systems, Inc. 10.2 Client Software License Agreement dated December 30, 1998, between INVNSYS Citrix Systems, Inc. 10.3 iBIZ Technology Corporation Distributed Software License Agreement dated June 2, 1999, between the Company and Jeremy Radlow 10.4 3Com Designed for Palm Computing Platform Logo License Agreement, between the Company and Palm Computing, Inc. 10.5 iBIZ Technology Corp. Stock Option Plan dated January 31, 1999 10.6 Form of Stock Option 10.7 Lease Agreement dated June 1, 1999, between the Company and Lone Cactus Capital Group, L.L.C. 10.8 Strategic Teaming and Marketing Agreement dated February 18, 1999, between the Company and Global Telephone Communication, Inc. 10.9 Form of iBIZ Technology Corp. Common Stock Purchase Warrant 10.10 Form of iBIZ Technology Corp. Convertible Debenture 10.11 Employment Agreement dated March 5, 1999, as amended, between the Company, INVNSYS and Kenneth Schilling 10.12 Employment Agreement dated March 5, 1999, as amended, between the Company, INVNSYS and Terry Ratliff 10.13 Employment Agreement dated March 5, 1999, as amended, between the Company, INVNSYS and Mark Perkins 11. Statement re: Computation of Earnings per share 21. Subsidiaries of Registrant 27. Financial Data Schedule
52 Pursuant to the requirements of Section 12 of the Securities Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned thereunto duly authorized. Dated this _____________ day of __________________ , 1999 iBIZ TECHNOLOGY CORP., A FLORIDA CORPORATION By:_______________________________________________________ Kenneth W. Schilling, President, Director By:_______________________________________________________ Terry S. Ratliff, Vice President, Comptroller, Director By:_______________________________________________________ Mark H. Perkins, Vice President of Operations, Director 53 INDEX TO EXHIBIT
EXHIBIT NO. DESCRIPTION PAGE NO. ----------- ----------- -------- 2.01 Plan of Reorganization and Stock Exchange Agreement dated January 1, 1999 3.01 Articles of Incorporation, as amended 3.02 Bylaws 10.1 Citrix Business Alliance Membership Agreement dated February 10, 1999, between INVNSYS and Citrix Systems, Inc. 10.2 Client Software License Agreement dated December 30, 1998, between INVNSYS Citrix Systems, Inc. 10.3 iBIZ Technology Corporation Distributed Software License Agreement dated June 2, 1999, between the Company and Jeremy Radlow 10.4 3Com Designed for Palm Computing Platform Logo License Agreement, between the Company and Palm Computing, Inc. 10.5 iBIZ Technology Corp. Stock Option Plan dated January 31, 1999 10.6 Form of Stock Option 10.7 Lease Agreement dated June 1, 1999, between the Company and Lone Cactus Capital Group, L.L.C. 10.8 Strategic Teaming and Marketing Agreement dated February 18, 1999, between the Company and Global Telephone Communication, Inc. 10.9 Form of iBIZ Technology Corp. Common Stock Purchase Warrant 10.10 Form of iBIZ Technology Corp. Convertible Debenture 10.11 Employment Agreement dated March 5, 1999, as amended, between the Company, INVNSYS and Kenneth Schilling 10.12 Employment Agreement dated March 5, 1999, as amended, between the Company, INVNSYS and Terry Ratliff 10.13 Employment Agreement dated March 5, 1999, as amended, between the Company, INVNSYS and Mark Perkins 21. Subsidiaries of Registrant 27. Financial Data Schedule
EX-2.01 2 EX-2.01 1 Exhibit 2.01 PLAN OF REORGANIZATION AND STOCK EXCHANGE AGREEMENT THIS PLAN OF REORGANIZATION AND STOCK EXCHANGE AGREEMENT ("this Agreement") is entered into effective as of the 1st day of January, 1999, by and among (i) iBIZ TECHNOLOGY CORP., a Florida corporation formerly known as Invnsys Holding Corporation ("Buyer"); (ii) INVNSYS TECHNOLOGY CORPORATION, an Arizona corporation formerly known as Southwest Financial Systems, Inc. (the "Company"); and (iii) KENNETH SCHILLING and DIANE SCHILLING, husband and wife and trustees under the Moorea Trust dated December 18, 1991 (sometimes collectively referred to herein as the "Schillings"); (iv) TERRY RATLIFF, an individual ("Ratliff"); (v) MARK PERKINS, an individual ("Perkins"); (vi) PAUL RUSSO, an individual ("Russo"); (vii) FRANK LIGAMMARI, an individual ("Ligammari"); (viii) RICHARD BIELFELT, an individual ("Bielfelt"); and (ix) TERRY NEILD, an individual ("Neild"). The foregoing individuals are all Shareholders of the Company, and are sometimes referred to herein individually as a "Stockholder" or a "Seller" and collectively as "the Stockholders" or "the Sellers". The foregoing persons are sometimes referred to herein individually as a "party" and collectively as the "parties". RECITALS: A. The Company is engaged in the business of designing, manufacturing and distributing small-footprint desktop computers, transaction printers, general purpose and financial application keyboards, numeric keypads, cathode ray tube and liquid crystal display monitors and related products. B. The Schillings have been officers and directors of the Company and are the trustees under the Moorea Trust dated December 18, 1991, which holds a majority of the stock in the Company. C. The Shareholders desire to sell, and Buyer desires to buy, all of the issued and outstanding shares of common stock of the Company in exchange for newly issued voting stock in Buyer representing not less than sixty-five percent (65%) of the outstanding stock in Buyer. It is intended that this transaction will qualify as a tax-free reorganization pursuant to the U.S. Internal Revenue Code. THEREFORE, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the parties agree as follows: 1. DEFINITIONS. The following terms shall have the following meaning as used in this Agreement: Page 1 2 "Affiliate" has the meaning set forth in Rule 12b-2 of the regulations promulgated under the Securities Exchange Act of 1934, as amended. "Code" means the Internal Revenue Code of 1986, as amended. "Income Taxes" means any federal, state, local, or foreign income taxes, including any interest, penalty, or addition thereto, whether disputed or not. "Income Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Income Taxes, including any schedule or attachment thereto, and including any amendment thereof. "Knowledge" means actual knowledge without independent investigation. "Ordinary Course of Business" means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency). "Person" means an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or a governmental entity (or any department, agency, or political subdivision thereof) or other entity or association. "Security Interest" means any mortgage, pledge, lien, encumbrance, charge, or other security interest. "Stockholders" means the Schillings as trustees under the Moorea Trust dated December 18, 1991 (10,605 shares, i.e., 75.75%), Terry Ratliff (1,550 shares, i.e., 11.07%), Mark Perkins (1,550 shares, i.e., 11.07%), Paul Russo (40 shares, i.e., 0.29%), Frank Ligammari (30 shares, i.e., 0.21%), Richard Bielfelt (25 shares, i.e., 0.18%) and Terry Neild (200 shares, i.e., 1.43%). "Subsidiary" means any corporation with respect to which a specified Person (or a Subsidiary thereof) owns a majority of the common stock or has the power to vote or direct the voting of sufficient securities to elect a majority of the directors. 2. BASIC TRANSACTION. (a) Purchase and Sale of Stock. Subject to the terms and conditions of this Agreement, Buyer agrees to purchase from Sellers, and Sellers agrees to sell, transfer, convey, and deliver to Buyer, 14,000 shares of the common stock of the Company (the "Shares") which will at Closing represent 100% of the issued and outstanding shares of the common stock of the Company. The transfer of the Shares will be effective as of January 1, 1999. Page 2 3 (b) Purchase Price. The Buyer agrees to pay and deliver to Sellers at the Closing 16,000,000 shares of newly issued unregistered Common Stock, .001 par value, of Buyer ("Buyer Securities") (collectively the "Purchase Price"), with the certificates for the Buyer Securities to be delivered at the Closing. The Buyer Securities shall be allocated as follows: The Schillings as trustees under the Moorea Trust dated December 18, 1991 (12,120,000 shares); Terry Ratliff (1,771,200 shares); Mark Perkins (1,771,200 shares); Paul Russo (46,400 shares); Frank Ligammari (33,600 shares); Richard Bielfelt (28,800 shares); Terry Neild (228,800 shares)). The Buyer Securities shall be titled in the name of the foregoing individuals as indicated. The Purchase Price shall be allocated to the Shares and the Covenant Not to Compete set forth in Section 7(f) in any reasonable manner agreed on by the Sellers and Buyer. (c) The Closing. The closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of the Company located at 2331 W. Royal Palm Road, Suite 105, Phoenix, Arizona commencing at 2:00 p.m. on the second business day following the satisfaction or waiver of all conditions to the obligations of the parties as set forth in Section 6 to consummate the transactions contemplated hereby (other than conditions with respect to actions the respective parties will take at the Closing itself) or such other date as the parties may mutually determine but in no event later than March 5, 1999 ("Closing Date"). (d) Deliveries at the Closing. At the Closing, (i) Sellers will deliver to Buyer the various certificates, instruments, and documents referred to in Section 5(a) below; (ii) Buyer will deliver to Sellers the various certificates, instruments, and documents referred to in Section 5(b) below; (iii) Buyer will deliver to Sellers the Buyer Securities specified in Section 2(b) above; and (iv) Sellers will transfer the Shares to Buyer pursuant to Section 2(b) above. 3. REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE SCHILLINGS. (a) Each Seller individually represents and warrants to Buyer that the statements contained in this Section 3(a) are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Section 3(a)), except as set forth in the disclosure schedule attached to this Agreement ("Disclosure Schedule"). The Disclosure Schedule will be arranged in paragraphs corresponding to the lettered and numbered paragraphs contained in this Section 3(a). (i) Authorization of Transaction. Sellers have full power and authority to execute and deliver this Agreement and to perform his, her, or its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of the Sellers, enforceable in accordance with its terms and conditions. The Sellers need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order to consummate the transactions contemplated by this Agreement. Page 3 4 (ii) Noncontravention. Except as set forth on Section 3(a)(ii) of the Disclosure Schedule, neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby will (i) to the individual Knowledge of the respective Sellers, violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency or court, to which such Seller is subject or any provision or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which such Seller is a party or by which it is bound or to which any of the Shares is subject (or result in the imposition of any Security Interest upon any of the Shares), except where the violation, conflict, breach, default, acceleration, termination, modification, cancellation, failure to give notice, or Security Interest would not have a material adverse effect on the ability of the parties to consummate the transactions contemplated by this Agreement. To the individual Knowledge of the respective Sellers, there is no need to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order for the parties to consummate the transactions contemplated by this Agreement, except where the failure to give notice, to file, or to obtain any authorization, consent, or approval would not have a material adverse effect on the business, financial condition, operations, results of operations, or future prospects of the Company or on the ability of the parties to consummate the transactions contemplated by this Agreement. (iii) Brokers' Fees. Sellers have no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which the Buyer could become liable or obligated. (iv) Investment. Each Seller (i) understands that the Buyer Securities have not been, and may not be, registered under any federal, state or other securities laws, and are being issued in reliance upon federal and state exemptions for transactions not involving any public offering, (ii) is acquiring Buyer Securities solely for its own account for investment purposes, and not with a view to the distribution thereof, (iii) is a sophisticated investor with knowledge and experience in business and financial matters, (iv) has received certain information concerning Buyer and has had the opportunity to obtain additional information as desired in order to evaluate the merits and the risks inherent in holding Buyer Securities, (v) is able to bear the economic risk and lack of liquidity inherent in holding Buyer Securities. The Schillings represent and warrant they qualify as an "Accredited Investor" as defined in Rule 502 of Regulation D promulgated under the Securities Act of 1933, as amended. The Buyer Securities shall contain a restrictive legend. Before transferring any Buyer Securities, Sellers shall furnish Buyer with (i) a written opinion reasonably satisfactory to Page 4 5 Buyer in form and substance from counsel reasonably satisfactory to Buyer by reason of experience to the effect that the holder may transfer Buyer Securities as desired without registration and (ii) a written undertaking executed by the desired transferee reasonably satisfactory to Buyer in form and substance agreeing to be bound by the restrictions on transfer contained herein. (v) Ownership of Shares. Each Seller holds of record and owns beneficially the number of Shares set forth next to his or its name in Section 1 of this Agreement, free and clear of any restrictions on transfer (other than restrictions under the Securities Act and state securities laws), taxes, Security Interests, options, warrants, purchase rights, contracts, commitments, equities, claims, and demands. None of the Sellers is a party to any option, warrant, purchase right, or other contract or commitment that could require such Seller to sell, transfer, or otherwise dispose of any capital stock of the Company (other than this Agreement). The Sellers is not a party to any voting trust, proxy, or other agreement or understanding with respect to the voting of any capital stock of the Company. (vi) Disclosure. To the individual Knowledge of each of the Sellers, the representations and warranties contained in this Section 3(a) do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements and information contained in this Section 3(a) not misleading. (b) The Schillings and the Company represent and warrant to Buyer that the statements contained in this Section 3(b) are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Section 3), except as set forth in the disclosure schedule attached to this Agreement ("Disclosure Schedule"). The Disclosure Schedule will be arranged in paragraphs corresponding to the lettered and numbered paragraphs contained in this Section 3(b). (i) Organization of the Company. The Company is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation. The Company has provided current Articles, Bylaws and stock records, along with any amendments, to Buyer. (ii) Noncontravention. Except as set forth on Section 3(b)(ii) of the Disclosure Schedule, neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby will (i) to the Knowledge of the Schillings, violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency or court, to which the Company is subject or any provision of the charter or bylaws of the Company or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to the Company is a party or by which it is bound or to which any of its assets is subject (or result in the imposition of any Page 5 6 Security Interest upon any of its assets), except where the violation, conflict, breach, default, acceleration, termination, modification, cancellation, failure to give notice, or Security Interest would not have a material adverse effect on the business, financial condition, operations, results of operations, or future prospects of the Company or on the ability of the parties to consummate the transactions contemplated by this Agreement. To the Knowledge of the Schillings, the Company does not need to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order for the parties to consummate the transactions contemplated by this Agreement, except where the failure to give notice, to file, or to obtain any authorization, consent, or approval would not have a material adverse effect on the business, financial condition, operations, results of operations, or future prospects of the Company or on the ability of the parties to consummate the transactions contemplated by this Agreement. (iii) Brokers' Fees. The Company has no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which Buyer could become liable or obligated. (iv) Title to Assets. The Company has good and marketable title to all of its tangible assets, and owns all of its assets free and clear of any Security Interest except those set forth on Section 3(b)(iv) of the Disclosure Schedule. (v) Subsidiaries. The Company has no Subsidiaries or Affiliate entities except TellerVision, Inc., which is an Arizona corporation, all of the stock of which is held by the Schillings as trustees of the Moorea Trust dated December 18, 1991 which is not included in the transactions contemplated by this Agreement. The Schillings covenant to change the name of TellerVision, Inc. if requested by Buyer. (vi) Financial Statements. Attached hereto as Section 3(b)(vi) of Disclosure Schedule are the following financial statements for the Company: unaudited financial statements for the fiscal years ended October 31, 1995, October 31, 1996, and October 31, 1997. The October 31, 1997 Financial Statements are sometimes referred to herein as the "Company's Most Recent Financial Statements". Except as may otherwise be indicated, the Company's Most Recent Financial Statements have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby, present fairly the financial condition of the Company as of such dates and the results of operations of the Company for such periods. "GAAP" means United States generally accepted accounting principles as modified from time to time. (vii) Events Subsequent to the Company's Most Recent Financial Statements. Since the Sellers' Most Recent Financial Statements, there has not been any material adverse change in the financial condition of the Company taken as a Page 6 7 whole except as may otherwise be set forth on Section 3(b)(vi) of the Disclosure Schedule. (viii) Undisclosed Liabilities. To the Knowledge of the Schillings, the Company has no material liability (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due, including any liability for taxes), except for (i) liabilities set forth on the Company's Most Recent Financial Statements; and (ii) liabilities which have arisen after the Company's Most Recent Financial Statements in the Ordinary Course of Business; and those that are specifically disclosed in Section 3(b)(vii) of the Disclosure Schedule. (ix) Legal Compliance. To the Knowledge of the Schillings, the Company has complied with all applicable laws (including rules, regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder) of federal, state, local, and foreign governments (and all agencies thereof), and no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or notice has been filed or commenced against any of them alleging any failure so to comply, except where the failure to comply would not have a material adverse effect on the business, financial condition, operations, results of operations, or future prospects of the Company. (x) Tax Matters. (1) Other than the tax return for the period ended October 31, 1998, the Company has filed all Income Tax Returns that it was required to file. All such Income Tax Returns were correct and complete in all material respects. Except as otherwise set forth in Section 3(b)(x) of the Disclosure Schedule, all Income Taxes owed by the Company (whether or not shown on any Income Tax Return) have been paid. The Company currently is not the beneficiary of any extension of time within which to file any Income Tax Return other than the extension filed on January 15, 1999 for the period ended October 31, 1998. (2) There is no material dispute or claim concerning any Income Tax liability of the Company either claimed or raised by any authority in writing or as to which the Schillings have Knowledge based upon personal contact with any agent of such authority. (3) The Company is not currently the subject of an audit. The Company has not waived any statute of limitations in respect of Income Taxes or agreed to any extension of time with respect to an Income Tax assessment or deficiency. Page 7 8 (4) The Company has not been a member of an Affiliated Group (as defined herein) filing a consolidated federal Income Tax Return and has no liability for the taxes of any other Person under Reg. Section 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise. "Affiliated Group" means any affiliated group within the meaning of Code Section 1504(a) or any similar group defined under a similar provision of state, local, or foreign law. (5) The unpaid Income Taxes of the Company did not, as of the Company's Most Recent Financial Statements, exceed by any material amount the reserve for Income Tax liability (rather than any reserve for deferred taxes established to reflect timing differences between book and tax income) set forth on the Company's Most Recent Financial Statements and will not exceed by any material amount that reserve as adjusted for operations and transactions through the Closing Date in accordance with the past custom and practice of the Company in filing Income Tax Returns. (6) The foregoing notwithstanding, the Company has those liabilities for unpaid taxes as may be set forth in the Company's Most Recent Financial Statements and those that may be set forth in Section 3(b)(x) of the Disclosure Schedule. (xi) Real Property. Section 3(b)(xi) of the Disclosure Schedule lists all real property that the Company owns, and all real property leased or subleased to the Company. (xii) Intellectual Property. Section 3(b)(xii) of the Disclosure Schedule identifies each pending or issued trademark, copyright or other intellectual property application, registration or patent owned by the Company, and identifies each license, agreement, or other permission that the Company has granted to any third party with respect to any of its intellectual property. To the Knowledge of the Schillings, the Company owns or has the right to use any trademarks, know-how, patents, copyrights, software and other intellectual properties necessary, or actually used by the Company, for the operation of its business. To the Knowledge of the Schillings, the Company has not interfered with, infringed upon, misappropriated, or otherwise come into conflict with any intellectual property rights of third parties. (xiii) Tangible Assets. The buildings, machinery, equipment, and other tangible assets that the Company owns and leases are free from material defects (patent and latent), have been maintained in accordance with normal industry practice, and are in good operating condition and repair (subject to normal wear and tear). (xiv) Inventory. The inventory of the Company is merchantable and fit for the purpose for which it was procured or manufactured, and none of which is Page 8 9 slow-moving, obsolete, damaged, or defective, subject only to the reserve for inventory writedown set forth on the Most Recent Financial Statement as adjusted for operations and transactions through the Closing Date in accordance with the past custom and practice of the Company. (xv) Contracts. Section 3(b)(xv) of the Disclosure Schedule lists all written contracts and other written or oral agreements to which the Company is a party the performance of which by the Company will involve consideration in excess of $1,000 paid by the Company or incurred or received by the Company in connection with services yet to be performed. The Company has delivered to the Buyer a correct and complete copy of each contract or other agreement listed in Section 3(b)(xv) of the Disclosure Schedule (as amended to date). (xvi) Notes and Accounts Receivable. All notes and accounts receivable of the Company are reflected properly on their books and records, are valid receivables subject to no setoffs or counterclaims, are current and collectible, and will be collected in accordance with their terms at their recorded amounts, subject only to the reserve for bad debts set forth on the Company's Most Recent Financial Statements as adjusted for operations and transactions through the Closing Date in accordance with the past custom and practice of the Company. (xvii) Powers of Attorney. There are no material outstanding powers of attorney executed on behalf of the Company. (xviii) Insurance. Section 3(b)(xviii) of the Disclosure Schedule lists all material insurance policies of the Company and summarizes the coverages thereunder. (xix) Litigation. Section 3(b)(xix) of the Disclosure Schedule sets forth each instance in which the Company (i) is subject to any outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a party or, to the Knowledge of the Schillings, is threatened to be made a party to any action, suit, proceeding, hearing, or investigation of, in, or before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator. (xx) Product Warranty. Substantially all of the products manufactured, sold, leased, and delivered by the Company have conformed in all material respects with all applicable contractual commitments and all express and implied warranties, and the Company has no material liability (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due) for replacement or repair thereof or other damages in connection therewith, subject only to the reserve for product warranty claims set forth on the Company's Most Recent Financial Statements as adjusted for operations and transactions through the Closing Date in accordance with the past custom and practice Page 9 10 of the Company. Substantially all of the products manufactured, sold, leased, and delivered by the Company are subject to the Company's standard terms and conditions of sale or lease. (xxi) Product Liability. To the Knowledge of the Schillings, the Company has no material liability (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due) arising out of any injury to individuals or property as a result of the ownership, possession, or use of any product manufactured, sold, leased, or delivered by the Company. (xxii) Employees. To the Knowledge of the Schillings, no executive, key employee, or significant group of employees currently plans to terminate employment with the Company. The Company is not a party to or bound by any collective bargaining agreement, nor has the Company experienced any strike or material grievance, claim of unfair labor practices, or other collective bargaining dispute within the past three years. The Schillings do not have any Knowledge of any organizational effort presently being made or threatened by or on behalf of any labor union with respect to employees of any of the Company. (xxiii) Employee Benefits. The Company has not maintained any plans or other arrangements that may qualify as Employee Benefit Plans other than those that may be disclosed on Section 3(b)(xxiii) of the Disclosure Schedule, and with respect to any such plans the Company has complied with all applicable laws. "Employee Benefit Plan" means any (a) nonqualified deferred compensation or retirement plan or arrangement, (b) qualified defined contribution retirement plan or arrangement which is an Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or arrangement which is an Employee Pension Benefit Plan (including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe benefit or other retirement, bonus, or incentive plan or program. The foregoing terms have the meanings established under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). (xxiv) Guaranties. The Company is not a guarantor or otherwise is responsible for any liability or obligation (including indebtedness) of any other Person. (xxv) Environmental, Health, and Safety Matters. (a) To the Knowledge of the Schillings, the Company is in compliance with Environmental, Health, and Safety Requirements (as defined below), except for such noncompliance which would not have a material adverse effect on the financial condition of the Company taken as a whole. Page 10 11 (b) To the Knowledge of the Schillings, the Company has not received any written notice, report or other information regarding any actual or alleged material violation of Environmental, Health, and Safety Requirements, or any material liabilities or potential material liabilities (whether accrued, absolute, contingent, unliquidated or otherwise), including any investigatory, remedial or corrective obligations, relating to the Company or its facilities arising under Environmental, Health, and Safety Requirements, the subject of which would have a material adverse effect on the financial condition of the Company. (c) As used herein, "Environmental, Health, and Safety Requirements" means all federal, state, local and foreign statutes, regulations, ordinances and similar provisions having the force or effect of law, all judicial and administrative orders and determinations, and all common law concerning public health and safety, worker health and safety, and pollution or protection of the environment, including without limitation all those relating to the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened release, control, or cleanup of any hazardous materials, substances or wastes, chemical substances or mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum products or byproducts, asbestos, polychlorinated biphenyls, noise or radiation. (xxvi) Certain Business Relationships With the Company. Except as may be disclosed in Section 3(b)(xxvi) of the Disclosure Statement, neither the Schillings nor their Affiliates have been involved in any material business arrangement or relationship with the Company within the past 12 months, and neither the Schillings nor their Affiliates own any material asset, tangible or intangible, which is used in the business of the Company. (xxvii) Disclosure. To the Knowledge of the Schillings, the representations and warranties contained in this Section 3(b) do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements and information contained in this Section 3(b) not misleading. (c) The Company represents and warrants to Buyer that the statements contained in this Section 3(c) are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Section 3), except as set forth in the disclosure schedule attached to this Agreement ("Disclosure Schedule"). The Disclosure Schedule will be arranged in paragraphs corresponding to the lettered and numbered paragraphs contained in this Section 3(c). (i) Organization of the Company. The Company is a corporation duly organized, validly existing, and in good standing under the laws of the Page 11 12 jurisdiction of its incorporation. The Company has obtained authority to do business in those jurisdictions in which the Company is required to obtain authority to do business. Attached as Exhibit 3(c)(i) are the resolutions or other instruments authorizing the Company to enter into this Agreement and perform its obligations hereunder. (ii) Authorization of Transaction. The Company has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The Company has obtained the approval of its Shareholders to consummate this Agreement and perform the obligations hereunder. This Agreement constitutes the valid and legally binding obligation of the Company, enforceable in accordance with its terms and conditions. (iii) The Shares. The Shares to be delivered to Buyer at Closing pursuant to Section 2 have been duly authorized and are validly issued, fully paid, and non-assessable. The Company only has one class of stock which is not divided into series, and the Shares represent one hundred percent (100%) of the Company's common stock and one hundred percent (100%) of the Company's total outstanding securities, whether voting or non-voting. Except as may be disclosed in Section 3(c)(iii) of the Disclosure Schedule, there are no outstanding or authorized options, warrants, purchase rights, subscription rights, conversion rights, exchange rights or contracts or commitments that could require the Company to issue, sell, or otherwise cause to become outstanding any of its capital stock, and there are no outstanding authorized stock appreciation, phantom stock, profit participation, or similar rights with respect to the Company. (d) Disclaimer of other Representations and Warranties. Except as expressly set forth in this Section 3, Sellers and the Company make no representation or warranty, express or implied, at law or in equity, in respect to any of the Company's assets, liabilities or operations, including, without limitation, merchantability or fitness for any particular purpose of any of the Company's assets; and any such other representations or warranties are hereby expressly disclaimed. Buyer hereby acknowledges and agrees that, except to the extent specifically set forth in this Section 3, the Buyer is purchasing the Company on an "AS-IS, WHERE-IS" basis. Buyer acknowledges that some of the Company's hardware and software may not be year 2000 compliant. 4. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants to Sellers that the statements contained in this Section 4 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Section 4), except as set forth in the Disclosure Schedule. The Disclosure Schedule will be arranged in paragraphs corresponding to the lettered and numbered paragraphs contained in this Section 4. Page 12 13 (a) Organization of Buyer. Buyer is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation. Buyer has obtained authority to do business in those jurisdictions in which Buyer is required to obtain authority to do business. Attached as Exhibit 4(a) are the resolutions or other instruments duly authorizing Buyer to enter into this Agreement and perform its obligations hereunder, which shall include a resolution of Buyer's Board of Directors (and shareholders if required) authorizing this Agreement and issuance of the Buyer Securities in exchange for the Shares and a determination by the Board of the adequacy of the consideration for the Buyer Securities. (b) Authorization of Transaction. Buyer has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder. Buyer does not need to obtain the approval of its Shareholders to authorize this Agreement and perform the obligations hereunder. This Agreement constitutes the valid and legally binding obligation of Buyer, enforceable in accordance with its terms and conditions. (c) Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby will (i) to the Knowledge of Buyer, violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency or court, to which Buyer is subject or any provision of its charter or bylaws or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which Buyer is a party or by which it is bound or to which any of its assets is subject. To the Knowledge of Buyer, Buyer does not need to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order for the parties to consummate the transactions contemplated by this Agreement. (d) Brokers' Fees. Buyer has no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which Sellers could become liable or obligated. (e) Buyer Securities. The Buyer Securities to be delivered to Sellers at Closing pursuant to Section 2 have been duly authorized and are validly issued, fully paid, and non-assessable, Buyer only has one class of stock which is not divided into series, and Buyer Securities represent not less than sixty-five percent (65%) of Buyer's common stock and not less than sixty-five percent (65%) of Buyer's total outstanding securities, whether voting or non-voting. Sellers acknowledge that Buyer may issue an additional 440,600 shares of common stock on or before Closing, which would decrease the foregoing percentage to sixty-four percent (64%). Except as may be disclosed in Section 4(e) of the Disclosure Schedule, there are no outstanding or authorized options, warrants, purchase rights, subscription rights, conversion rights, exchange rights or contracts or commitments that could require Buyer to issue, sell, or otherwise cause to become outstanding any of its capital stock, and there are no outstanding authorized stock appreciation, phantom stock, Page 13 14 profit participation, or similar rights with respect to Buyer. Excluding the Buyer Securities to be issued to Sellers, one hundred percent (100%) of Seller's outstanding common stock is publicly traded with no stop transfer orders present or pending under the symbol "iBIZ". (f) Price Stabilization. Neither Buyer nor, to its Knowledge, any of its directors or Affiliates has taken, directly or indirectly, any action designed to cause or result in, or which has constituted, the stabilization or manipulation of the price of the outstanding common stock or any other outstanding securities of Buyer. (g) NASD Compliance. Buyer has complied with the reporting requirements of the National Association of Securities Dealers ("NASD") to have its common stock quoted on the Over-the-Counter Bulletin Board ("Bulletin Board"), and Buyer's common stock is now quoted on the Bulletin Board under the symbol "iBIZ". Buyer is currently in compliance with the reporting requirements of the NASD. (h) Actions Affecting Securities Compliance. Buyer has not taken any action (including, but not limited to, the offering or sale of securities which may be integrated with the issuance and sale governed by this Agreement) which adversely affects the availability of the exemption from registration under the Securities Act of 1933 provided by Section 4(2) thereof or the applicable rules and regulations thereunder or any provisions of the securities or blue sky laws of any applicable jurisdiction. Without limiting the foregoing, Sellers acknowledge that Buyer has recently issued securities under Regulation D and has fully complied with said Regulation. (i) No Injunctions Against Principals. To the best of Buyer's Knowledge, neither Buyer, nor any of its officers or directors have, during the past five (5) years, been the subject of any injunction, cease and desist order, assurance of discontinuance, suspension or restraining order, revocation or suspension of a license to practice a trade, occupation or profession, denial of an application to obtain or renew same, any stipulation or consent to desist from any act or practice, any disciplinary action by any court or administrative agency, nor has Buyer or any of its officers or directors knowingly violated any state or federal laws regulating the offering and sale of securities. (j) Subsidiaries. Buyer has no Subsidiaries or Affiliate entities. (k) Financial Statements. Attached hereto as Section 4(k) of Buyer's Disclosure Schedule are the following financial statements for Buyer: audited financial statements for the fiscal years ended December 31, 1996, December 31, 1997 and for January 1998 through May 28, 1998, and unaudited financial statements for the fiscal year ended December 31, 1998. The December 31, 1998 Financial Statements are sometimes referred to herein as the "Buyer's Most Recent Financial Statements". Except as may otherwise be indicated, the Buyer's Most Recent Financial Statements have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby, present fairly the financial condition of Buyer as of such dates and the results of operations Page 14 15 of Buyer for such periods. "GAAP" means United States generally accepted accounting principles as modified from time to time. (l) Events Subsequent to Buyer's Most Recent Financial Statements. Since the Buyer's Most Recent Financial Statements, there has not been any material adverse change in the financial condition of Buyer taken as a whole except as may otherwise be set forth on Section 4(l) of the Buyer's Disclosure Schedule. Without limiting the generality of the foregoing, since the Buyer's Most Recent Financial Statements Buyer has not declared or made any dividend or other distribution, and has not taken any action or entered into any transaction outside the Ordinary Course of Business. (m) Undisclosed Liabilities. To the Knowledge of Buyer, Buyer has no material liability (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due, including any liability for taxes), except for (i) liabilities set forth on the Buyer's Most Recent Financial Statements; and (ii) those that are specifically described in Section 4(m) of the Buyer's Disclosure Schedule. (n) Legal Compliance. To the knowledge of Buyer, Buyer has complied with all applicable laws (including rules, regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder) of federal, state, local, and foreign governments (and all agencies thereof), and no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or notice has been filed or commenced against any of them alleging any failure so to comply, except where the failure to comply would not have a material adverse effect on the business, financial condition, operations, results of operations, or future prospects of Buyer. (o) Litigation. Section 4(o) of the Buyer's Disclosure Schedule sets forth each instance in which Buyer (i) is subject to any outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a party or, to the Knowledge of Buyer, is threatened to be made a party to any action, suit, proceeding, hearing, or investigation of, in, or before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator. (p) Disclosure. To the Knowledge of Buyer, the representations and warranties contained in this Section 4 do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements and information contained in this Section 4 not misleading. 5. PRE-CLOSING COVENANTS AND CLOSING OBLIGATIONS. (a) Closing Obligations of Sellers. On or before the Closing, Sellers shall do the following: Page 15 16 (i) Sellers shall deliver to Buyer certificates in the form attached hereto collectively as Exhibit 5(a-1) to the effect that each of the representations and warranties specified above in Section 3 are correct and complete as of the Closing Date; (ii) Sellers shall tender the Employment Agreements executed by Ken Schilling, Terry Ratliff and Mark Perkins in the form attached hereto as Exhibit 5(a-2), 5(a-3), and 5(a-4); (iii) Sellers shall tender executed Assignments of Stock Separate From Certificate for the Shares. (b) Closing Obligations of Buyer. On or before the Closing, Buyer shall do the following: (i) Buyer shall deliver to Sellers a certificate of Buyer in the form attached hereto as Exhibit 5(b-1) to the effect that each of the representations and warranties specified above in Section 4 are correct and complete as of the Closing Date; (ii) Buyer shall execute the Employment Agreements for Ken Schilling, Terry Ratliff and Mark Perkins in the form attached hereto as Exhibit 5(a-2), 5(a-3), and 5(a-4); (iii) Buyer shall deliver executed stock certificates for the Buyer Securities pursuant to Section 2(b). (c) Pre-Closing Confidentiality. Prior to the Closing, Buyer shall maintain all confidential information of Sellers in confidence, shall not use or disclose such information except in furtherance of the transactions contemplated by this Agreement, and shall return such information upon demand by Sellers in the event of a failure to close. Sellers acknowledge that Buyer has issued certain press releases and Sellers consent to such releases as they have been disclosed to Sellers prior to execution hereof. Sellers and Buyer shall coordinate all future publicity and no party shall issue any press release publicity statement, or other public notice relating to this Agreement and the transactions contemplated hereby without the approval of the other party, subject only to Section 9(b). 6. CONDITIONS TO OBLIGATION TO CLOSE; TERMINATION. (a) Conditions to Obligation of the Buyer. The obligation of the Buyer to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions: Page 16 17 (i) the representations and warranties set forth in Section 3 above shall be true and correct in all material respects at and as of the Closing Date; (ii) the Sellers shall have performed and complied with all of their covenants hereunder in all material respects through the Closing; (iii) there shall not be any injunction, judgment, order, decree, ruling, or charge in effect preventing consummation of any of the transactions contemplated by this Agreement; (iv) Sellers and Buyer shall have received all authorizations, consents, and approvals required to consummate the transactions contemplated by this Agreement, including approval of Community First National Bank to the extent required. (v) the Buyer shall have received from counsel to the Sellers an opinion letter in form and substance reasonably acceptable to Buyer, addressed to the Buyer, and dated as of the Closing Date, giving those opinions reasonably requested by the Buyer, which shall include without limitation the following opinions: (a) that the Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Arizona; and (b) the Company has the requisite power and authority to carry out the terms and conditions applicable to them under this Agreement; (vi) all advances made by Buyer to the Company shall be evidenced by a promissory note bearing interest at six percent (6%) per annum, in a form acceptable to Buyer in its commercially reasonable discretion; (vii) any changes in the Disclosure Schedules and Exhibits Attached hereto shall be acceptable to Buyer in its discretion. The Buyer may waive any condition specified in this Section 6(a) if it executes a writing so stating at or prior to the Closing. (b) Conditions to Obligation of the Sellers. The obligation of the Sellers to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions: (i) the representations and warranties set forth in Section 4 above shall be true and correct in all material respects at and as of the Closing Date; (ii) the Buyer shall have performed and complied with all of its covenants hereunder in all material respects through the Closing; Page 17 18 (iii) there shall not be any injunction, judgment, order, decree, ruling, or charge in effect preventing consummation of any of the transactions contemplated by this Agreement; (iv) Sellers and Buyer shall have received all authorizations, consents, and approvals required to consummate the transactions contemplated by this Agreement; (v) the Sellers shall have received from counsel to the Buyer an opinion letter in form and substance reasonably acceptable to Sellers, addressed to the Sellers, and dated as of the Closing Date, giving those opinions reasonably requested by the Sellers, which shall include without limitation the following opinions: (a) that the Buyer is a corporation duly organized, validly existing, and in good standing under the laws of the State of Florida; (b) that the Buyer's authorized capital consists of 100,000,000 common shares, par value $.001 per share, of which not more than 24,980,918 shares are issued and outstanding as of the Closing Date after issuance of the Buyer Securities to Sellers, and that Buyer only has one class of stock which is not divided into series, and the Buyer Securities represent not less than sixty-four percent (64%) of Buyer's common stock and not less than sixty-four percent (64%) of Buyer's total outstanding securities, whether voting or non-voting; (c) the Buyer Securities to be issued to Sellers under this Agreement have been duly authorized and are validly issued, fully paid, and nonassessable, and are entitled to all applicable economic and voting rights; (d) the Buyer has the requisite corporate power and authority to carry out the terms and conditions applicable to it under this Agreement; (e) the execution, delivery, and performance of this Agreement by the Buyer has been duly authorized by all requisite corporate action on the part of the Buyer; (f) the execution and delivery of this Agreement and consummation of the transactions contemplated by this Agreement by the Buyer will not conflict with or result in a violation of the Buyer's Articles of Incorporation or bylaws, and such transactions shall not give rise to any right of redemption or otherwise limit Sellers' rights in the Buyer Securities under Florida's control share statutes or otherwise. (vi) the Company shall have received a loan of $250,000 from Buyer which is in addition to and over and above the advances made by Buyer to the Company as of the execution of this Agreement; (vii) the shares exchanged pursuant to this Agreement shall constitute a tax free exchange for the Sellers. The Sellers may waive any condition specified in this Section 6(b) if the execute a writing so stating at or prior to the Closing. (c) Termination of Agreement. The parties may terminate this Agreement as provided below: Page 18 19 (i) the Buyer and the Sellers may terminate this Agreement by mutual written consent at any time prior to the Closing; (ii) the Buyer may terminate this Agreement by giving written notice to the Sellers in the event of a failure to close that is not the fault of Buyer, or if the Closing shall not have occurred on or before February 28, 1999, by reason of the failure of any condition precedent under Section 6(a) hereof (unless the failure results from the Buyer itself breaching any representation, warranty, or covenant contained in this Agreement); and (iii) the Sellers may terminate this Agreement by giving written notice to the Buyer in the event of a failure to close that is not the fault of the Sellers, or if the Closing shall not have occurred on or before February 28, 1999, by reason of the failure of any condition precedent under Section 6(b) hereof (unless the failure results from the Sellers themselves breaching any representation, warranty, or covenant contained in this Agreement). If any party terminates this Agreement pursuant to this Section, all rights and obligations of the parties hereunder shall terminate without any liability of any party to any other party (except for any liability of any party then in breach); provided, however, that the confidentiality provisions contained in Section 5(c) shall survive termination. 7. POST-CLOSING COVENANTS. The parties agree as follows with respect to the period following the Closing. (a) General; Payment of Tax Liabilities. In case at any time after the Closing any further action is necessary to carry out the purposes of this Agreement, each of the parties will take such further action (including the execution and delivery of such further instruments and documents) as any other party reasonably may request, all at the sole cost and expense of the requesting party (unless the requesting party is entitled to indemnification therefor under Section 8 below). Immediately after the Closing, Buyer shall cause the Company to pay off all outstanding tax liabilities for overdue taxes, including outstanding tax liabilities for overdue payroll and sales taxes and any penalties. Buyer shall permit the Sellers to review and comment on any documents necessary to carry out the foregoing and shall make such revisions as are reasonably requested by the Sellers. (b) Litigation Support. In the event and for so long as any party actively is contesting or defending against any action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand in connection with (i) any transaction contemplated under this Agreement or (ii) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction on or prior to the Closing Date involving Sellers, each of the other parties will cooperate with the contesting or defending party and its counsel in the contest or defense, make available its personnel, and provide such testimony and access to its books and records as shall be necessary in connection with the contest or defense, all at the sole cost and expense of the contesting or Page 19 20 defending party (unless the contesting or defending party is entitled to indemnification therefor under Section 8 below). (c) Transition. Sellers will not take any action that is designed or intended to have the effect of discouraging any lessor, licensor, customer, supplier, or other business associate of Sellers from maintaining the same business relationships with Buyer after the Closing as it maintained with Sellers prior to the Closing. (d) Confidentiality. Sellers will treat and hold as confidential all information concerning the business and affairs of Sellers that is not already generally available to the public ("Confidential Information"), refrain from using any Confidential Information except in connection with this Agreement, and deliver promptly to Buyer or destroy, at the request and option of Buyer, all tangible embodiments (and all copies) of Confidential Information in its possession. In the event that Sellers is requested or required (by oral question or request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand, or similar process) to disclose any Confidential Information, Sellers will notify Buyer promptly of the request or requirement so that Buyer may seek an appropriate protective order or waive compliance with the provisions of this Section 7(d). If, in the absence of a protective order or the receipt of a waiver hereunder, Sellers are, on the advice of counsel, compelled to disclose any Confidential Information to any tribunal or else stand liable for contempt, that Sellers may disclose Confidential Information to the tribunal; provided, however, that each Seller shall use its reasonable best efforts to obtain, at the reasonable request of Buyer, an order or other assurance that confidential treatment will be accorded to such portion of Confidential Information required to be disclosed as Buyer shall designate. (e) Transfer of Employees. Sellers will cooperate with Buyer to transfer employment of the Company's employees to Buyer after Closing to the extent requested by Buyer. A list of Sellers' employees and a summary of compensation and benefits is attached hereto as Exhibit 7(e). (f) Covenant Not to Compete. For a period of five (5) years from and after the Closing Date, Sellers will not engage directly or indirectly in any business that the Company was conducting as of the Closing Date in any geographic area in which the Company was conducting that business as of the Closing Date or in any geographic area in which Buyer conducts business. (g) Internal Controls. Buyer shall maintain a system of internal accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management's general or specific authorization; (ii) transactions are recorded as necessary in order to permit preparation of financial statements in accordance with generally accepted accounting principles and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management's general or specific authorization; (iv) and the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Page 20 21 (h) Transfer Agreement. Buyer has appointed Interwest Transfer Company, Inc., located at 1891 East Murray Holladay Road, Suite 100, Salt Lake City, Utah 84117 as Buyer's transfer agent. Buyer will continue to retain a transfer agent reasonably satisfactory to Sellers for a period of three (3) years following the Closing Date. (i) Independent Board. For a period of five (5) years from the Closing Date, Buyer agrees to appoint and nominate for election as iBIZ directors by the shareholders Alan Smith and Ken Schilling. Buyer's audit and compensation committee shall consist of a majority of outside independent directors as long as Sellers or the Schillings hold any common stock or other voting securities of Buyer. (j) Insurance. Effective as soon as possible but no later than sixty (60) days after the Closing Date, Buyer shall have acquired and shall continue to maintain an errors and omissions insurance policy in an amount reasonably acceptable to the Board of Directors of Buyer to cover the errors and omissions of the directors and officers of Buyer. (k) Prohibition of Cheap Stock. Any and all issuances by Buyer of preferred or common stock or warrants, options or other securities convertible into common stock to Affiliates at a price or conversion price, as applicable, of less than the Fair Market Value (as defined below) at the time of issuance shall require prior approval of Sellers. "Fair Market Value" shall mean: (i) if Buyer's Stock ("the Shares") are listed or admitted to trading on any securities exchange, the fair market value shall be the average sales price on such day on the New York Stock Exchange, or if the Shares have not been listed or admitted to trading on the New York Stock Exchange, on such other securities exchange on which such stock is then listed or admitted to trading, or if no sale takes place on such day on any such exchange, the average of the closing bid and asked price on such day as officially quoted on any such exchange; (ii) if the Shares are not then listed or admitted to trading on any securities exchange, the fair market value shall be the average sales price on such day, or if no sales takes place on such day, the average of the reported closing bid and asked price on such date, in the over-the-counter market as furnished by the National Association of Securities Dealers Automated Quotation ("NASDAQ"), or if NASDAQ at the time is not engaged in the business of reporting such prices, as furnished by any similar firm then engaged in such business and selected by the Buyer's Board; or (iii) if the Shares are not then listed or admitted to trading in the over-the-counter market, the fair market value shall be the amount determined by the Buyer's Board in a manner consistent with Treasury Regulation Section 20-2031-2 promulgated under the Code or in such other manner prescribed by the U.S. Secretary of the Treasury or the Internal Revenue Service. Page 21 22 (l) Repayment of Schilling Note. The promissory note evidencing Ken Schilling's debt to the Company shall be repaid in full in either cash or securities. (m) Capital Raise. Buyer hereby agrees to raise funds through the sale of equity in accordance with the schedule set forth on Exhibit 7(m) attached hereto. 8. REMEDIES FOR BREACHES OF THIS AGREEMENT. (a) Survival of Representations and Warranties. All of the representations and warranties contained in this Agreement shall survive the Closing and continue in full force and effect for a period of two years thereafter. (b) Indemnification Provisions for Benefit of Buyer. In the event Sellers breach any of their respective representations, warranties, or covenants contained in this Agreement, and Buyer makes a written claim for indemnification against Sellers within the survival period set forth in Section 8(a), then Sellers shall indemnify Buyer from and against the entirety of any Adverse Consequences, as defined below, that Buyer may suffer through and after the date of the claim for indemnification (including any Adverse Consequences that Buyer may suffer after the end of any applicable survival period) resulting from, arising out of, relating to, or caused by the breach. (c) Indemnification Provisions for Benefit of Sellers. In the event Buyer breaches any of its representations, warranties, or covenants contained in this Agreement, and Sellers or the Schillings make a written claim for indemnification against Buyer within the survival period set forth in Section 8(a), then Buyer shall indemnify Sellers or the Schillings as applicable from and against the entirety of any Adverse Consequences that Sellers or the Schillings may suffer through and after the date of the claim for indemnification (including any Adverse Consequences that Sellers or the Schillings may suffer after the end of any applicable survival period) resulting from, arising out of, relating to, or caused by the breach. (d) Matters Involving Third Parties. (i) If any third party shall notify any party ("Indemnified Party") with respect to any matter ("Third Party Claim") that may give rise to a claim for indemnification against any other party ("Indemnifying Party") under this Section 8, then the Indemnified Party shall promptly notify the Indemnifying Party thereof in writing. (ii) Any Indemnifying Party will have the right to assume the defense of the Third Party Claim with counsel of his or its choice reasonably satisfactory to the Indemnified Party at any time within 15 days after the Indemnified Party has given notice of the Third party Claim; provided, however, that the Indemnifying party must conduct the defense of the Third Party Claim actively and diligently thereafter in Page 22 23 order to preserve its rights in this regard; and provided further that the Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third Party Claim. (iii) So long as the Indemnifying Party has assumed and is conducting the defense of the Third Party Claim in accordance with Section 8(d)(ii) above, (A) the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnified Party (not to be withheld unreasonably) unless the judgment or proposed settlement involves only the payment of money damages by one or more of the Indemnifying Parties and does not impose an injunction or other equitable relief upon the Indemnified Party and (B) the Indemnified Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnifying Party (not to be withheld unreasonably). (iv) In the event none of the Indemnifying Parties assume and conduct the defense of the Third Party Claim in accordance with Section 8(d)(ii) above, (A) the Indemnified Party may defend against, and consent to the entry of any judgment or enter into any settlement with respect to, the Third Party Claim in any manner it reasonably may deem appropriate (and the Indemnified Party need not consult with, or obtain any consent from, any Indemnifying Party in connection therewith) and (B) the Indemnifying Party will remain responsible for any Adverse Consequences the Indemnified Party may suffer resulting from, arising out of, relating to, or caused by the Third Party Claim to the fullest extent provided in this Section 8. (e) Definition of Adverse Consequences. As used herein "Adverse Consequences" means all actions, suits, proceedings, hearings, investigations, charges, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs, reasonable amounts paid in settlement, liabilities, obligations, taxes, liens, losses, expenses, and fees, including court costs and reasonable attorneys' fees and expenses. (f) Exclusive Remedy. The parties acknowledge and agree that the foregoing indemnification provisions shall be the exclusive remedy under this Agreement, and the parties hereby waive any statutory, equitable, or common law rights or remedies. 9. MISCELLANEOUS. (a) Survival of Representations and Warranties. The representations and warranties of the parties contained in this Agreement shall survive the Closing hereunder as and to the extent provided herein in Section 8. (b) Press Releases and Public Announcements. No party shall issue any press release or make any public announcement relating to the subject matter of this Page 23 24 Agreement without the prior written approval of the other party; provided, however, that any party may make any public disclosure it believes in good faith is required by applicable law or any listing or trading agreement concerning its publicly-traded securities (in which case the disclosing party will use its best efforts to advise the other party prior to making the disclosure). (c) No Third-Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any Person other than the parties and their respective successors and permitted assigns. (d) Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes any prior understandings, agreements, or representations by or between the parties, written or oral, to the extent they relate in any way to the subject matter hereof. (e) Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of the parties named herein and their respective successors and permitted assigns. No party may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other party; provided, however, Buyer may assign any or all of its rights and interests hereunder to one or more of its Affiliates and designate one or more of its Affiliates to perform its obligations hereunder or may assign its rights and obligations hereunder to a successor of substantially all of the Acquired Assets (in any of which cases Buyer nonetheless shall remain responsible for the performance of all of its obligations hereunder). (f) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. (g) Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. (h) Notices. All notices, requests, demands, claims, and other communications hereunder shall be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given if (and then two business days after) it is sent by U.S. registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as follows: If to a Seller, the notice may be addressed using the most recent address for the Seller reflected in the Buyer's shareholder records. If to the Buyer: iBIZ Technology Corp. c/o Alan M. Smith & Associates, LTD. 999 West Hastings Street, Suite 1750 Page 24 25 Vancouver, B.C. Canada V6C2W2 Attn: Alan Smith Any party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other party notice in the manner herein set forth. (i) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Arizona without giving effect to any choice or conflict of law provision or rule (whether of the State of Arizona or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Arizona. (j) Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by Buyer and Sellers. No waiver by any party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. (k) Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. (l) Expenses. Buyer and Sellers will bear their or its own costs and expenses (including legal fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby except to the extent that Buyer assumes Sellers' obligations hereunder. (m) Construction. The parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word "including" shall mean including without limitation. (n) Incorporation of Exhibits and Schedules. The Exhibits and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof. Page 25 26 (o) Bulk Transfer Laws. The Buyer acknowledges that Sellers will not comply with the provisions of any bulk transfer laws of any jurisdiction in connection with the transactions contemplated by this Agreement. (p) Representation. The parties hereto acknowledge that Gammage & Burnham, P.L.C., has represented the Company in connection with this Agreement and has not represented the individual Shareholders of the Company. ***** Page 26 27 IN WITNESS WHEREOF, the parties hereto have executed this Plan Of Reorganization and Stock Exchange Agreement effective as of the date first above written. iBIZ TECHNOLOGY CORP., a Florida corporation By:_________________________________________ Name:_______________________________________ Title:______________________________________ INVNSYS TECHNOLOGY CORPORATION, an Arizona corporation By:_________________________________________ Name:_______________________________________ Title:______________________________________ KENNETH SCHILLING, individually and as trustee of the Moorea Trust dated December 18, 1991 ____________________________________________ DIANE SCHILLING, individually and as trustee of the Moorea Trust dated December 18, 1991 ____________________________________________ TERRY RATLIFF ____________________________________________ MARK PERKINS ____________________________________________ PAUL RUSSO ____________________________________________ Page 27 28 FRANK LIGAMMARI ____________________________________________ RICHARD BIELFELT ____________________________________________ TERRY NEILD ____________________________________________ Page 28 EX-3.01 3 EX-3.01 1 Exhibit 3.01 ARTICLES OF INCORPORATION OF EXOTIC VIDEO CITY, INC. The undersigned subscriber to these Articles of Incorporation, a natural person competent to contract, hereby forms a corporation under the laws of the State of Florida. ARTICLE I NAME The name of this corporation is Exotic Video City, Inc. ARTICLE II NATURE OF THE BUSINESS This corporation shall have the power to transact or engage in any business permitted under the laws of the United States and of the State of Florida. ARTICLE III AUTHORIZED SHARES The capital stock of this corporation shall consist of 1,000 shares of common stock having a par value of $.01 per share. ARTICLE IV INITIAL CAPITAL Page 1 2 The amount of capital with which this corporation shall commence business shall be not less than One Hundred ($100.00) Dollars. ARTICLE V TERM OF EXISTENCE This corporation shall have perpetual existence. ARTICLE VI INITIAL ADDRESS The initial address of the principal place of business of this corporation in the State of Florida shall be 1428 Brickell Avenue, Suite 202, Miami, Florida 33131. The Board of Directors may at any time and from time to time move the principal office of this corporation to any location within or without the State of Florida. ARTICLE VII DIRECTORS The business of this corporation shall be managed by its Board of Directors. The number of such directors shall be not less than one (1) and, subject to such minimum may be increased or decreased from time to time in the manner provided in the By-Laws. The number of persons constituting the initial Board of Directors shall be 1. Page 2 3 ARTICLE VIII INITIAL DIRECTORS The names and addresses of the initial Board of Directors and officers are as follows: Julio A. Padilla Director/President 1428 Brickell Avenue Suite 202 Miami, Florida 33131 ARTICLE IX SUBSCRIBER The name and address of the person signing these Articles of Incorporation as subscriber is: Eric P. Littman Suite 202 1428 Brickell Avenue Miami, Florida 33131 ARTICLE X The Board of Directors shall be elected by the Stockholders of the corporation at such time and in such manner as provided in the By-Laws. ARTICLE XI CONTRACTS No contract or other transaction between this corporation and any person, firm or corporation shall be affected by the fact that any officer or director of this corporation is such other party or is, or at some time in the future becomes, an Page 3 4 officer, director or partner of such other contracting party, or has now or hereafter a direct or indirect interest in such contract. ARTICLE XII INDEMNIFICATION OF OFFICERS AND DIRECTORS This corporation shall have the power, in its By-Laws or in any resolution of its stockholders or directors, to undertake to indemnify the officers and directors of this corporation against any contingency or peril as may be determined to be in the best interests of this corporation, and in conjunction therewith, to procure, at this corporation's expense, policies of insurance. ARTICLE XIII RESIDENT AGENT The name and address of the initial resident agent of this corporation is: Berlit Corporate Services, Inc. 1428 Brickell Avenue Suite 202 Miami, Florida 33131 IN WITNESS WHEREOF, I have hereunto subscribed to and executed these Articles of Incorporation this on March 31, 1994. ________________________________ Eric P. Littman, Subscriber Page 4 5 Subscribed and Sworn to before me on March 31, 1994 ______________________________ Isabel Canters, Notary Public My Commission Expires: Page 5 6 CERTIFICATE DESIGNATING PLACE OF BUSINESS OR DOMICILE FOR SERVICE OF PROCESS WITHIN THIS STATE NAMING THE AGENT UPON WHOM PROCESS MAY BE SERVED Having been named to accept service of process for Exotic Video City, Inc. at the place designated in the Articles of Incorporation, the undersigned is familiar with and accepts the obligations of that position pursuant to F.S. 607.0501(3). BERLIT CORPORATE SERVICES, INC. By:_______________________________ Eric P. Littman, Secretary Page 6 7 ARTICLES OF AMENDMENT TO EXOTIC VIDEO CITY, INC. THE UNDERSIGNED, being the sole director and president of Exotic Video City, Inc., does hereby amend its Articles of Incorporation as follows: ARTICLE I CORPORATE NAME The name of the Corporation shall be EVC Ventures, Inc. ARTICLE II PURPOSE The Corporation shall be organized for any and all purposes authorized under laws of the state of Florida. ARTICLE III PERIOD OF EXISTENCE The period during which the Corporation shall continue is perpetual. ARTICLE IV SHARES The capital stock of this corporation shall consist of 50,000,000 shares of stock, $.001 par value. ARTICLE V PLACE OF BUSINESS The address of the principal place of business of this corporation in the State of Florida shall be 7695 S.W. 104th Street, Suite 210, Miami, FL 33156. The Board of Directors may at any time and from time to time move the principal office of this corporation. ARTICLE VI DIRECTORS AND OFFICERS The business of this corporation shall be managed by the Board of Directors. The number of such directors shall be not be less than one (1) and, subject to such minimum may be increased or decreased from time to time in the manner provided in the By-Laws. Page 7 8 ARTICLE VII DENIAL OF PREEMPTIVE RIGHTS No shareholder shall have any right to acquire shares or other securities of the Corporation except to the extent such right may be granted by an amendment to these Articles of Incorporation or by a resolution of the Board of Directors. ARTICLE VIII AMENDMENT OF BYLAWS Anything in these Articles of Incorporation, the Bylaws, or the Florida Corporation Act notwithstanding, bylaws shall not be adopted, modified, amended or repealed by the shareholders of the Corporation except upon the affirmative vote of a simple majority vote of the holders of all the issued and outstanding shares of the corporation entitled to vote thereon. ARTICLE IX SHAREHOLDERS 9.1 Inspection of Books. The board of directors shall make reasonable rules to determine at what times and places and under what conditions the books of the Corporation shall be open to inspection by shareholders or a duly appointed representative of a shareholder. 9.2. Control Share Acquisition. The provisions relating to any control share acquisition as contained in Florida Statutes now, or hereinafter amended, and any successor provision shall not apply to the Corporation. 9.3. Quorum. The holders of shares entitled to one-third of the votes at a meeting of shareholders shall constitute a quorum. 9.4. Required Vote. Acts of shareholders shall require the approval of holders of 50.01% of the outstanding votes of shareholders. ARTICLE X LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS To the fullest extent permitted by law, no director or officer of the Corporation shall be personally liable to the Corporation or its shareholders for damages for breach of any duty owed to the Corporation or its shareholders. In addition, the Corporation shall have the power, in its By-Laws or in any resolution of its stockholders or directors, to undertake to indemnify the officers and directors of this corporation against any contingency or peril as may be determined to be in the Page 8 9 best interests of this corporation, and in conjunction therewith, to procure, at this corporation's expense, policies of insurance. ARTICLE XI CONTRACTS No contract or other transaction between this corporation and any person, firm or corporation shall be affected by the fact that any officer or director of this corporation is such other party or is, or at some time in the future becomes, an officer, director or partner of such other contracting party, or has now or hereafter a direct or indirect interest in such contract. I hereby certify that the following was adopted by a majority vote of the shareholders and directors of the corporation on May 27, 1998 and that the number of votes cast was sufficient for approval. IN WITNESS WHEREOF, I have hereunto subscribed to and executed this Amendment to Articles of Incorporation this on May 27, 1998. ______________________________ Eric P. Littman, Sole Director The foregoing instrument was acknowledged before me on May 27, 1998, by Eric P. Littman, who is personally known to me. ________________________________ Notary Public My commission expires: ________________________ Page 9 10 ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION OF EVC VENTURES, INC. Pursuant to the provisions of section 607.1006, Florida Statutes, this Florida profit corporation adopts the following articles of amendment to its articles of incorporation: FIRST: Amendment adopted: Article I is hereby amended to read as follows: The name of this corporation is INVNSYS HOLDING CORPORATION. SECOND: There is no change to the capital of the corporation. THIRD: This amendment was adopted on October 10, 1998. FOURTH: The amendment was approved by the shareholders. The number of votes cast for the amendment was sufficient for approval. Signed this 22nd day of October, 1998. ___________________________ Alan Smith, President Prepared by: Thomas Braun, Legal Assistant Venture Law Corporation #618 - 688 W. Hastings Street Vancouver, BC V6L 3E3 Tel: (604) 659-9188 Fax: (604) 659-9178 Page 10 11 ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION OF INVNSYS HOLDING CORPORATION Pursuant to the provisions of section 607.1006, Florida Statutes, this Florida profit corporation adopts the following articles of amendment to its articles of incorporation: FIRST: Amendment adopted: Article I is hereby amended to read as follows: The name of this corporation is iBIZ TECHNOLOGY CORP. SECOND: There is no change to the capital of the corporation. THIRD: This amendment was adopted on January 21, 1999. FOURTH: The amendment was approved by the shareholders. The number of votes cast for the amendment was sufficient for approval. Signed this 21st day of January, 1999. _______________________________ Alan Smith, President Prepared by: Thomas Braun, Legal Assistant Venture Law Corporation #618 - 688 W. Hastings Street Vancouver, BC V6L 3E3 Tel: (604) 659-9188 Fax: (604) 659-9178 Page 11 EX-3.02 4 EX-3.02 1 Exhibit 3.02 BYLAWS OF EVC VENTURES CORP. (A FLORIDA CORPORATION) Page 1 2 INDEX
PAGE NUMBER ARTICLE ONE - OFFICES SECTION 1. PRINCIPAL OFFICE............................... 1 SECTION 2. OTHER OFFICES.................................. 1 ARTICLE TWO - MEETINGS OF SHAREHOLDERS SECTION 1. PLACE.......................................... 1 SECTION 2. TIME OF ANNUAL MEETING......................... 1 SECTION 3. CALL OF SPECIAL MEETINGS....................... 1 SECTION 4. CONDUCT OF MEETINGS............................ 1 SECTION 5. NOTICE AND WAIVER OF NOTICE.................... 2 SECTION 6. BUSINESS AND NOMINATIONS FOR ANNUAL AND SPECIAL MEETINGS............................... 2 SECTION 7. QUORUM......................................... 2 SECTION 8. VOTING RIGHTS PER SHARE........................ 3 SECTION 9. VOTING OF SHARES............................... 3 SECTION 10. PROXIES........................................ 3 SECTION 11. SHAREHOLDER LIST............................... 4 SECTION 12. ACTION WITHOUT MEETING......................... 4 SECTION 13. FIXING RECORD DATE............................. 5 SECTION 14. INSPECTORS AND JUDGES.......................... 5 SECTION 15. VOTING FOR DIRECTORS........................... 5 ARTICLE THREE - DIRECTORS SECTION 1. NUMBER. TERM; ELECTION; QUALIFICATION.......... 5 SECTION 2. RESIGNATION; VACANCIES; REMOVAL................ 6 SECTION 3. POWERS......................................... 6 SECTION 4. PLACE OF MEETINGS.............................. 6 SECTION 5. ANNUAL MEETINGS................................ 6 SECTION 6. REGULAR MEETINGS............................... 6 SECTION 7. SPECIAL MEETINGS AND NOTICE.................... 6 SECTION 8. QUORUM AND REQUIRED VOTE....................... 7 SECTION 9. ACTION WITHOUT MEETING......................... 7 SECTION 10. CONFERENCE TELEPHONE OR SIMILAR COMMUNICATIONS EQUIPMENT MEETINGS............................. 7 SECTION 11. COMMITTEES..................................... 7 SECTION 12. COMPENSATION OF DIRECTORS...................... 8 ARTICLE FOUR - OFFICERS SECTION 1. POSITIONS...................................... 8 SECTION 2. ELECTION OF SPECIFIED OFFICERS BY BOARD........ 8 SECTION 3. ELECTION OR APPOINTMENT OF OTHER OFFICERS................................. 8
PAGE 2 3 SECTION 4. COMPENSATION................................... 8 SECTION 5. TERM; RESIGNATION; REMOVAL; VACANCIES.......... 9 SECTION 6. CHAIRMAN OF THE BOARD.......................... 9 SECTION 7. CHIEF EXECUTIVE OFFICER........................ 9 SECTION 8. PRESIDENT...................................... 9 SECTION 9. VICE PRESIDENTS................................ 9 SECTION 10. SECRETARY...................................... 10 SECTION 11. CHIEF FINANCIAL OFFICER........................ 10 SECTION 12. TREASURER...................................... 10 SECTION 13. OTHER OFFICERS; EMPLOYEES AND AGENTS........... 10 ARTICLE FIVE - CERTIFICATES FOR SHARES SECTION 1. ISSUE OF CERTIFICATES.......................... 10 SECTION 2. LEGENDS FOR PREFERENCES AND RESTRICTIONS ON TRANSFER.................................... 11 SECTION 3. FACSIMILE SIGNATURES........................... 11 SECTION 4. LOST CERTIFICATES.............................. 11 SECTION 5. TRANSFER OF SHARES............................. 12 SECTION 6. REGISTERED SHAREHOLDERS........................ 12 SECTION 7. REDEMPTION OF CONTROL SHARES................... 12 ARTICLE SIX - GENERAL PROVISIONS SECTION 1. DIVIDENDS...................................... 12 SECTION 2. RESERVES....................................... 12 SECTION 3. CHECKS......................................... 12 SECTION 4. FISCAL YEAR.................................... 13 SECTION 5. SEAL........................................... 13 SECTION 6. GENDER......................................... 13 ARTICLE SEVEN - AMENDMENT OF BYLAWS.................................... 13
PAGE 3 4 BYLAWS OF EVC VENTURES CORP. ARTICLE ONE OFFICES Section 1. Principal Office. The principal office of EVC Ventures Corp., a Florida corporation (the "Corporation"), shall be located at such place determined by the Board of Directors of the Corporation (the "Board of Directors") in accordance with applicable law. Section 2. Other Offices. The Corporation may also have offices at such other places either within or without the State of Florida, as the Board of Directors may from time to time determine or as the business of the Corporation may require. ARTICLE TWO MEETINGS OF SHAREHOLDERS Section 1. Place. All annual meetings of shareholders shall be held at such place, within or without the State of Florida, as may be designated by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof. Special meetings of shareholders may be held at such place, within or without the State of Florida, and at such time as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Time of Annual Meeting. Annual meetings of shareholders shall be held on such date and at such time fixed, from time to time, by the Board of Directors, provided, that there shall be an annual meeting held every calendar year at which the shareholders shall elect a board of directors and transact such other business as may properly be brought before the meeting. Section 3. Call of Special Meetings. Special meetings of the shareholders shall be held if called in accordance with the procedures set forth in the Corporation's Articles of Incorporation (the "Articles of Incorporation") for the call of a special meeting of shareholders. Section 4. Conduct of Meetings. The Chairman of the Board of Directors (or in his absence, the President, or in his absence, such other designee of Page 4 5 the Chairman of the Board of Directors) shall preside at the annual and special meetings of shareholders and shall be given full discretion in establishing the rules and procedures to be followed in conducting the meetings, except as otherwise provided by law or in these Bylaws. Section 5. Notice and Waiver of Notice. Except as otherwise provided by law, written or printed notice stating the place, date and time of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) nor more than sixty (60) days before the date of the meeting, either personally or by first-class mail or other legally sufficient means, by or at the direction of the Chairman of the Board, President, or the persons calling the meeting, to each shareholder of record entitled to vote at such meeting. If the notice is mailed at least thirty (30) days before the date of the meeting, it may be done by a class of United States mail other than first class. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail addressed to the shareholder at the address appearing on the stock transfer books of the Corporation, with postage thereon prepaid. If a meeting is adjourned to another time and/or place, and if an announcement of the adjourned time and/or place is made at the meeting, it shall not be necessary to give notice of the adjourned meeting unless the Board of Directors, after adjournment, fixes a new record date for the adjourned meeting. Whenever any notice is required to be given to any shareholder, a waiver thereof in writing signed by the person or persons entitled to such notice, whether signed before, during or after the time of the meeting stated therein, and delivered to the Corporation for inclusion in the minutes or filing with the corporate records, shall constitute an effective waiver of such notice. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the shareholders need be specified in any written waiver of notice. Attendance of a person at a meeting shall constitute a waiver of (a) lack of or defective notice of such meeting, unless the person objects at the beginning to the holding of the meeting or the transacting of any business at the meeting, or (b) lack of or defective notice of a particular matter at a meeting that is not within the purpose or purposes described in the meeting notice, unless the person objects to considering such matter when it is presented. Section 6. Business and Nominations for Annual and Special Meetings. Business transacted at any special meeting shall be confined to the purposes stated in the notice thereof. At any annual meeting of shareholders, only such business shall be conducted as shall have been property brought before the meeting in accordance with the requirements and procedures set forth in the Articles of Incorporation. Only such persons who are nominated for election as directors of the Corporation in accordance with the requirements and procedures set forth in the Articles of Incorporation shall be eligible for election as directors of the Corporation. Section 7. Quorum. Shares entitled to vote as a separate voting group may take action on a matter at a meeting only if a quorum of those shares exists Page 5 6 with respect to that matter. Except as otherwise provided in the Articles of Incorporation or applicable law, shares representing a majority of the votes pertaining to outstanding shares which are entitled to be cast on the matter by the voting group constitute a quorum of that voting group for action on that matter. If less than a quorum of shares are represented at a meeting, the holders of a majority of the shares so represented may adjourn the meeting from time to time. After a quorum has been established at any shareholders' meeting, the subsequent withdrawal of shareholders, so as to reduce the number of shares entitled to vote at the meeting below the number required for a quorum, shall not affect the validity of any action taken at the meeting or any adjournment thereof. Once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for that adjourned meeting. Section 8. Voting Rights Per Share. Each outstanding share, regardless of class, shall be entitled to vote on each matter submitted to a vote at a meeting of shareholders, except to the extent that the voting rights of the shares of any class are limited or denied by or pursuant to the Articles of Incorporation or the Florida Business Corporation Act. Section 9. Voting of Shares. A shareholder may vote at any meeting of shareholders of the Corporation, either in person or by proxy. Shares standing in the name of another corporation, domestic or foreign, may be voted by the officer, agent or proxy designated by the bylaws of such corporate shareholder or, in the absence of any applicable bylaw, by such person or persons as the board of directors of the corporate shareholder may designate. In the absence of any such designation, or, in case of conflicting designation by the corporate shareholder, the chairman of the board, the president, any vice president, the secretary and the treasurer of the corporate shareholder, in that order, shall be presumed to be fully authorized to vote such shares. Shares held by an administrator, executor, guardian, personal representative, or conservator may be voted by such person, either in person or by proxy, without a transfer of such shares into his name. Shares standing in the name of a trustee may be voted by such person, either in person or by proxy, but no trustee shall be entitled to vote shares held by such person without a transfer of such shares into his name or the name of his nominee. Shares held by or under the control of a receiver, a trustee in bankruptcy proceedings, or an assignee for the benefit of creditors may be voted by such person without the transfer thereof into his name. If shares stand of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or otherwise, or if two or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary of the Corporation is given notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, then acts with respect to voting shall have the following effect: (a) if only one votes, in person or by proxy, his act binds all; (b) if more than one vote, in person or by proxy, the act of the majority so Page 6 7 voting binds all; (c) if more than one vote, in person or by proxy, but the vote is evenly split on any particular matter, each faction is entitled to vote the share or shares in question proportionally; or (d) if the instrument or order so filed shows that any such tenancy is held in unequal interest, a majority or a vote evenly split for purposes hereof shall be a majority or a vote evenly split in interest. The principles of this paragraph shall apply, insofar as possible, to execution of proxies, waivers, consents, or objections and for the purpose of ascertaining the presence of a quorum. Section 10. Proxies. Any shareholder of the Corporation, other person entitled to vote on behalf of a shareholder pursuant to law, or attorney-in-fact for such persons may vote the shareholder's shares in person or by proxy. Any shareholder of the Corporation may appoint a proxy to vote or otherwise act for such person by signing an appointment form, either personally or by his attorney-in-fact. An executed telegram or cablegram appearing to have been transmitted by such person, or a photographic, photostatic, or equivalent reproduction of an appointment form, shall be deemed a sufficient appointment form. An appointment of a proxy is effective when received by the Secretary of the Corporation (the "Secretary") or such other officer or agent which is authorized to tabulate votes, and shall be valid for up to 11 months, unless a longer period is expressly provided in the appointment form. The death or incapacity of the shareholder appointing a proxy does not affect the right of the Corporation to accept the proxy's authority unless notice of the death or incapacity is received by the Secretary or other officer or agent authorized to tabulate votes before the proxy authority under the appointment is exercised. An appointment of a proxy is revocable by the shareholder unless the appointment form conspicuously states that it is irrevocable and the appointment is coupled with an interest. Section 11. Shareholder List. After fixing a record date for a meeting of shareholders, the Corporation shall prepare an alphabetical list of the names of all its shareholders who are entitled to notice of the meeting, arranged by voting group with the address of, and the number and class and series, if any, of shares held by each. The shareholders' list must be available for inspection by any shareholder for a period of ten (10) days prior to the meeting or such shorter time as exists between the record date and the meeting and continuing through the meeting at the Corporation's principal office, at a place identified in the meeting notice in the city where the meeting will be held, or at the office of the Corporation's transfer agent or registrar. Any shareholder of the Corporation or such person's agent or attorney is entitled on written demand to inspect the shareholders' list (subject to the requirements of law), during regular business hours and at his expense, during the period it is available for inspection. The Corporation shall make the shareholders' list available at the meeting of shareholders, and any shareholder or agent or attorney of such shareholder is entitled to inspect the list at any time during the meeting or any adjournment. The shareholders' list is prima facie evidence of the identity of shareholders entitled to examine the shareholders' list or to vote at a meeting of shareholders. Page 7 8 Section 12. Action Without Meeting. Any action required or permitted by law to be taken at a meeting of shareholders may be taken without a meeting or notice if a consent, or consents, in writing, setting forth the action so taken, shall be dated and signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all voting groups and shares entitled to vote thereon were present and voted with respect to the subject matter thereof, and such consent shall be delivered to the Corporation, within the period required by Section 607.0704 of the Florida Business Corporation Act, by delivery to its principal office in the State of Florida, its principal place of business, the Secretary or another officer or agent of the Corporation having custody of the book in which proceedings of meetings of shareholders are recorded. Within ten (10) days after obtaining such authorization by written consent, notice must be given to those shareholders who have not consented in writing or who are not entitled to vote on the action, in accordance with the requirements of Section 607.0704 of the Florida Business Corporation Act. Section 13. Fixing Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purposes, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than seventy (70) days, and, in case of a meeting of shareholders, not less than ten (10) days, before the meeting or action requiring such determination of shareholders. If no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders or the determination of shareholders entitled to receive payment of a dividend, the date before the day on which the first notice of the meeting is mailed or the date on which the resolutions of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this Section, such determination shall apply to any adjournment thereof, except where the Board of Directors fixes a new record date for the adjourned meeting, Section 14. Inspectors and Judges. The Board of Directors in advance of any meeting may, but need not, appoint one or more inspectors of election or judges of the vote, as the case may be, to act at the meeting or any adjournment thereof. If any inspector or inspectors, or judge or judges, are not appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors or judges, In case any person who may be appointed as an inspector or judge fails to appear or act, the vacancy may be filled by the Board of Directors in advance of the meeting, or at the meeting by the person presiding thereat. The inspectors or judges, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots and Page 8 9 consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate votes, ballots and consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all shareholders. On request of the person presiding at the meeting, the inspector or inspectors or judge or judges, if any, shall make a report in writing of any challenge, question or matter determined by him or them, and execute a certificate of any fact found by him or them. Section 15. Voting for Directors. Unless otherwise provided in the Articles of Incorporation, directors shall be elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present. ARTICLE THREE DIRECTORS Section 1. Number; Term; Election; Qualification. The number of directors of the Corporation shall be fixed from time to time, within the limits specified by the Articles of Incorporation, by resolution of the Board of Directors. Directors shall be elected in the manner and hold office for the term as prescribed in the Articles of Incorporation. Directors must be natural persons who are 18 years of age or older but need not be residents of the State of Florida, shareholders of the Corporation or citizens of the United States, Section 2. Resignation; Vacancies; Removal. A director may resign at any time by giving written notice to the Board of Directors or the Chairman of the Board. Such resignation shall take effect at the date of receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. In the event the notice of resignation specifies a later effective date, the Board of Directors may fill the pending vacancy (subject to the provisions of the Articles of Incorporation) before the effective date if they provide that the successor does not take office until the effective date. Director vacancies shall be filled, and directors may be removed, in the manner prescribed in the Corporation's Articles of Incorporation. Section 3. Powers. The business and affairs of the Corporation shall be managed by the Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Articles of Incorporation or by these Bylaws directed or required to be exercised and done by the shareholders. Section 4. Place of Meetings. Meetings of the Board of Directors, regular or special, may be held either within or without the State of Florida. Page 9 10 Section 5. Annual Meetings. Unless scheduled for another time by the Board of Directors, the first meeting of each newly elected Board of Directors shall be held, without call or notice, immediately following each annual meeting of shareholders. Section 6. Regular Meetings. Regular meetings of the Board of Directors may also be held without notice at such time and at such place as shall from time to time be determined by the Board of Directors. Section 7. Special Meetings and Notice. Special meetings of the Board of Directors may be called by the President or Chairman of the Board and shall be called by the Secretary on the written request of any two directors. At least forty-eight (48) hours' prior written notice of the date, time and place of special meetings of the Board of Directors shall be given to each director. Except as required by law, neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. Notices to directors shall be in writing and delivered to the directors at their addresses appearing on the books of the Corporation by personal delivery, mail or other legally sufficient means. Subject to the provisions of the preceding sentence, notice to directors may also be given by telegram, teletype or other form of electronic communication. Notice by mail shall be deemed to be given at the time when the same shall be received. Whenever any notice is required to be given to any director, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before, during or after the meeting, shall constitute an effective waiver of such notice. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting and a waiver of any and all objections to the place of the meeting, the time of the meeting and the manner in which it has been called or convened, except when a director states, at the beginning of the meeting or promptly upon arrival at the meeting, any objection to the transaction of business because the meeting is not lawfully called or convened. Section 8. Quorum and Required Vote. A majority of the prescribed number of directors determined as provided in the Articles of Incorporation shall constitute a quorum for the transaction of business and the act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, unless a greater number is required by the Articles of Incorporation. Whenever, for any reason, a vacancy occurs in the Board of Directors, a quorum shall consist of a majority of the remaining directors until the vacancy has been filled. If a quorum shall not be present at any meeting of the Board of Directors, a majority of the directors present thereat may adjourn the meeting to another time and place, without notice other than announcement at the time of adjournment. At such adjourned meeting at which a quorum shall be present, any business may be transacted that might have been transacted at the meeting as originally notified and called. Page 10 11 Section 9. Action Without Meeting. Any action required or permitted to be taken at a meeting of the Board of Directors or committee thereof may be taken without a meeting if a consent in writing, setting forth the action taken, is signed by all of the members of the Board of Directors or the committee, as the case may be, and such consent shall have the same force and effect as a unanimous vote at a meeting. Action taken under this Section 9 is effective when the last director signs the consent, unless the consent specifies a different effective date. A consent signed under this Section 9 shall have the effect of a meeting vote and may be described as such in any document. Section 10. Conference Telephone or Similar Communications Equipment Meetings. Directors and committee members may participate in and hold a meeting by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation in such a meeting shall constitute presence in person at the meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground the meeting is not lawfully called or convened. Section 11. Committees. The Board of Directors, by resolution adopted by a majority of the whole Board of Directors, may designate from among its members an executive committee and one or more other committees, each of which, to the extent provided in such resolution, shall have and may exercise all of the authority of the Board of Directors in the business and affairs of the Corporation except where the action of the full Board of Directors is required by applicable law. Each committee must have two or more members who serve at the pleasure of the Board of Directors. The Board of Directors, by resolution adopted in accordance with this Article Three, may designate one or more directors as alternate members of any committee, who may act in the place and stead of any absent member or members at any meeting of such committee. Vacancies in the membership of a committee may be filled only by the Board of Directors at a regular or special meeting of the Board of Directors. The executive committee shall keep regular minutes of its proceedings and report the same to the Board of Directors when required. The designation of any such committee and the delegation thereto of authority shall not operate to relieve the Board of Directors, or any member thereof, of any responsibility imposed upon it or such member by law. Section 12. Compensation of Directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Similarly, members of special or standing committees may be allowed compensation for attendance at committee meetings or a stated salary as a committee member and Page 11 12 payment of expenses for attending committee meetings. Directors may receive such other compensation as may be approved by the Board of Directors. ARTICLE FOUR OFFICERS Section 1. Positions. The officers of the Corporation may consist of a Chairman of the Board, a Chief Executive Officer, a President, one or more Vice Presidents (any one or more of whom may be given the additional designation of rank of Executive Vice President or Senior Vice President), a Secretary, a Chief Financial Officer and a Treasurer. Any two or more offices may be held by the same person. Officers other than the Chairman of the Board need not be members of the Board of Directors. The Chairman of the Board must be a member of the Board of Directors. Section 2. Election of Specified Officers by Board. The Board of Directors at its first meeting after each annual meeting of shareholders shall elect a Chairman of the Board, a Chief Executive Officer, a President, one or more Vice Presidents (including any Senior or Executive Vice Presidents), a Secretary, a Chief Financial Officer and a Treasurer. Section 3. Election or Appointment of Other Officers. Such other officers and assistant officers and agents as may be deemed necessary nay be elected or appointed by the Board of Directors, or, unless otherwise specified herein, appointed by the Chairman of the Board. The Board of Directors shall be advised of appointments by the Chairman of the Board at or before the next scheduled Board of Directors meeting. Section 4. Compensation. The salaries, bonuses and other compensation of the Chairman of the Board and all officers of the Corporation to be elected by the Board of Directors pursuant to Section 2 of this Article Four shall be fixed from time to time by the Board of Directors or pursuant to its direction. The salaries of all other elected or appointed officers of the Corporation shall be fixed from time to time by the Chairman of the Board or pursuant to his direction. Section 5. Term; Resignation; Removal; Vacancies. The officers of the Corporation shall hold office until their successors are chosen and qualified. Any officer or agent elected or appointed by the Board of Directors or the Chairman of the Board may be removed, with or without cause, by the Board of Directors, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Any officer or agent appointed by the Chairman of the Board pursuant to Section 3 of this Article Four may also be removed from such office or position by the Board of Directors or the Chairman of the Board, with or without cause. Any vacancy occurring in any office of the Corporation by death, resignation, removal or Page 12 13 otherwise shall be filled by the Board of Directors, or, in the case of an officer appointed by the Chairman of the Board, by the Chairman of the Board or the Board of Directors. Any officer of the Corporation may resign from his respective office or position by delivering notice to the Corporation, and such resignation shall be effective without acceptance. Such resignation shall be effective when delivered unless the notice specifies a later effective date. If a resignation is made effective at a later date and the Corporation accepts the future effective date, the Board of Directors may fill the pending vacancy before the effective date if the Board provides that the successor does not take office until such effective date. Section 6. Chairman of the Board. The Chairman of the Board shall preside at all meetings of the shareholders and the Board of Directors. The Chairman of the Board shall also serve as the chairman of any executive committee. Section 7. Chief Executive Officer. Subject to the control of the Board of Directors, the Chief Executive Officer, in conjunction with the President, shall have general and active management of the business of the Corporation, shall see that all orders and resolutions of the Board of Directors are carried into effect and shall have such powers and perform such duties as may be prescribed by the Board of Directors. In the absence of the Chairman of the Board or in the event the Board of Directors shall not have designated a Chairman of the Board, the Chief Executive Officer shall preside at meetings of the shareholders and the Board of Directors. The Chief Executive Officer shall also serve as the vice-chairman of any executive committee. Section 8. President. Subject to the control of the Board of Directors, the President in conjunction with the Chief Executive Officer, shall have general and active management of the business of the Corporation and shall have such powers and perform such duties as may be prescribed by the Board of Directors. In the absence of the Chairman of the Board and the Chief Executive Officer or in the event the Board of Directors shall not have designated a Chairman of the Board and a Chief Executive officer shall not have been elected, the President shall preside at meetings of the shareholders and the Board of Directors. The President shall also serve as the vice-chairman of any executive committee. Section 9. Vice Presidents. The Vice Presidents, in the order of their seniority, unless otherwise determined by the Board of Directors, shall, in the absence or disability of the President and the Chief Executive Officer, perform the duties and exercise the powers of the President. They shall perform such other duties and have such other powers as the Board of Directors, the Chairman of the Board or the Chief Executive Officer shall prescribe or as the President may from time to time delegate. Executive Vice Presidents shall be senior to Senior Vice Presidents, and Senior Vice Presidents shall be senior to all other Vice Presidents. Page 13 14 Section 10. Secretary. The Secretary shall attend all meetings of the shareholders and all meetings of the Board of Directors and record all the proceedings of the meetings of the shareholders and of the Board of Directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. The Secretary shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the Board of Directors and shall keep in safe custody the seal of the Corporation and, when authorized by the Board of Directors, affix the same to any instrument requiring it. The Secretary shall perform such other duties as may be prescribed by the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the President. the Chairman of the Board, the Chief Executive Officer or the President. Section 11. Chief Financial Officer. The Chief Financial Officer shall be responsible for maintaining the financial integrity of the Corporation, shall prepare the financial plans for the Corporation and shall monitor the financial performance of the Corporation and its subsidiaries, as well as performing such other duties as may be prescribed by the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the President. Section 12. Treasurer. The Treasurer shall have the custody of corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Chairman of the Board and the Board of Directors at its regular meetings or when the Board of Directors so requires an account of all his transactions as Treasurer and of the financial condition of the Corporation. The Treasurer shall perform such other duties as may be prescribed by the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the President. Section 13. Other Officers; Employees and Agents. Each and every other officer, employee and agent of the Corporation shall possess, and may exercise, such power and authority, and shall perform such duties, as may from time to time be assigned to such person by the Board of Directors, the officer so appointing such person or such officer or officers who may from time to time be designated by the Board of Directors to exercise such supervisory authority. Page 14 15 ARTICLE FIVE CERTIFICATES FOR SHARES Section 1. Issue of Certificates. The shares of the Corporation shall be represented by certificates, provided that the Board of Directors of the Corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the Board of Directors, every holder of stock represented by certificates (and upon request every holder of uncertificated shares) shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman of the Board or a Vice Chairman of the Board, or the Chief Executive Officer, President or Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, representing the number of shares registered in certificate form. Section 2. Legends for Preferences and Restrictions on Transfer. The designations, relative rights, preferences and limitations applicable to each class of shares and the variations in rights, preferences and limitations determined for each series within a class (and the authority of the Board of Directors to determine variations for future series) shall be summarized on the front or back of each certificate. Alternatively, each certificate may state conspicuously on its front or back that the Corporation will furnish the shareholder a full statement of this information on request and without charge. Every certificate representing shares that are restricted as to the sale, disposition, or transfer of such shares shall also indicate that such shares are restricted as to transfer, and there shall be set forth or fairly summarized upon the certificate, or the certificate shall indicate that the Corporation will furnish to any shareholder upon request and without charge, a full statement of such restrictions. If the Corporation issues any shares that are not registered under the Securities Act of 1933, as amended, or not registered or qualified under the applicable state securities laws, the transfer of any such shares shall be restricted substantially in accordance with the following legend: "THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER ANY APPLICABLE STATE LAW. THEY MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR PLEDGED WITHOUT (1) REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE LAW, OR (2) AT HOLDER'S EXPENSE, AN OPINION (SATISFACTORY TO THE CORPORATION) OF COUNSEL (SATISFACTORY TO THE CORPORATION)THAT REGISTRATION IS NOT REQUIRED." Page 15 16 Section 3. Facsimile Signatures. Any and all signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. Section 4. Lost Certificates. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the Corporation may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost or destroyed. Section 5. Transfer of Shares. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Section 6. Registered Shareholders. The Corporation shall be entitled to recognize the exclusive rights of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Florida. Section 7. Redemption of Control Shares. As provided by the Florida Business Corporation Act, if a person acquiring control shares of the Corporation does not file an acquiring person statement with the Corporation, the Corporation may, at the discretion of the Board of Directors, redeem the control shares at the fair value thereof at any time during the 60-day period after the last acquisition of such control shares. If a person acquiring control shares of the Corporation files an acquiring person statement with the Corporation, the control shares may be redeemed by the Corporation, at the discretion of the Board of Directors, only if such shares are not accorded full voting rights by the shareholders as provided by law. Page 16 17 ARTICLE SIX GENERAL PROVISIONS Section 1. Dividends. The Board of Directors may from time to time declare, and the Corporation may pay, dividends on its outstanding shares in cash, property, stock (including its own shares) or otherwise pursuant to law and subject to the provisions of the Articles of Incorporation. Section 2. Reserves. The Board of Directors may by resolution create a reserve or reserves out of earned surplus for any proper purpose or purposes, and may abolish any such reserve in the same manner. Section 3. Checks. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. Section 4. Fiscal Year. The fiscal year of the Corporation shall end on December 31 of each year, unless otherwise fixed by resolution of the Board of Directors. Section 5. Seal. The Board of Directors may adopt a corporate seal by resolution. The corporate seal, if adopted, shall have inscribed thereon the name and state of incorporation of the Corporation. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. Section 6. Gender. All words used in these Bylaws in the masculine gender shall extend to and shall include the feminine and neutral genders. ARTICLE SEVEN AMENDMENT OF BYLAWS Except as otherwise set forth herein, these Bylaws may be altered, amended or repealed or new Bylaws may be adopted at any meeting of the Board of Directors at which a quorum is present, by the affirmative vote of a majority of the directors present at such meeting. Page 17 18 PRESIDENT'S CERTIFICATE OF ADOPTION OF THE BYLAWS OF EVC VENTURES CORP. I hereby certify: That I am the duly elected President of EVC Ventures Corp., a Florida corporation; That the foregoing Bylaws comprising thirteen (13) pages, constitute the Bylaws of said corporation as duly adopted by the Board of Directors of the Corporation on July 10th, 1998. IN WITNESS WHEREOF, I have hereunder signed my name this 10th day of July, 1998. ______________________________ John Xinos, President Page 18 EX-10.1 5 EX-10.1 1 Exhibit 10.1 CITRIX BUSINESS ALLIANCE MEMBERSHIP AGREEMENT This Agreement ("Agreement") is between: CITRIX SYSTEMS, INC. ("Citrix"), a Delaware corporation, located at 6400 NW 6th Way, Fort Lauderdale, Florida 33309, and Invnsys Technology Corporation, a Phoenix, AZ, corporation, located at: 2331 W. Royal Palm #105, Phoenix, Arizona 85021 (the Citrix Business Alliance Member or "CBA Member"). Whereas, CBA Member desires to enter into an alliance marketing relationship and to recommend computer solutions to its customers in accordance with this Membership Agreement; and Whereas, Citrix desires to supply Citrix software and provide marketing services and technical support on Citrix products to assist CBA Member in recommending solutions to its customers, resellers and channel partners; Now, therefore, in consideration of the mutual promises contained herein, the parties agree as follows: 1. CBA MEMBER OBLIGATIONS. Pursuant to this Agreement, Member makes the following promises and undertakes the following obligations to Citrix: The Annual fee is waived through December 31, 1999 and will be invoiced on January 1, 2000 and each September 1st thereafter, if renewed by Member. Initial term Fee will be prorated based on effective date of agreement. The CBA Member shall pay the annual fee set forth in the applicable Program Track for the products and services provided by Citrix pursuant to this Agreement which shall be submitted to Citrix with CBA Member's signed copy of this Agreement. In addition, CBA Member agrees to Program Track requirements in effect upon the Effective Date of this Agreement. 2. CITRIX OBLIGATIONS. During the term and pursuant to the terms of this Agreement, Citrix undertakes the obligations to CBA Member set forth in the Program Track applicable to this Agreement. 3. TRADEMARKS. 3.1 During the term of this Agreement, CBA Member shall have the right to identify itself as a CBA Member. Citrix may also identify CBA Member as an Alliance Member. 3.2 During the term of this Agreement, CBA Member may refer to Citrix products using the Citrix product trademarks if the reference is not misleading and does not indicate or imply Citrix's endorsement, testing, or approval of any other product or of any service offered by CBA Member. The appropriate trademark symbol (either "(TM)" [standard trademark] or (R) [registered trademark] in superscript following the product name) shall be used whenever a Citrix product name is mentioned in any advertisement, brochure, or material circulated or published in any form whatsoever by CBA Member. The appropriate trademark symbol must be used in conjunction with, at least, the first reference to each Citrix product in all CBA Member's publications. 3.3 CBA Member may also have the right to use certain other Citrix trademarks in order to inform the public that CBA Member's products contain, or are compatible with, Citrix technology or products. CBA Members' rights and obligations with respect to such mark(s) shall be governed by an appropriate Trademark License Agreement to be included as an attachment to this Agreement. 4 Confidentiality. 4.1 Each party expressly undertakes to retain in confidence the terms and conditions of this Agreement and all information transmitted to the other that the disclosing party has identified in writing as confidential. 4.2 Either party may disclose confidential information as required by governmental or judicial order, provided such party gives the other party prompt written notice prior to such disclosure and complies with any protective order (or equivalent) imposed on such disclosure. 4.3 Neither party shall have an obligation to maintain the confidentiality of information that Page 1 2 (i) it received rightfully from a third party prior to its receipt to the disclosing party; (ii) the disclosing party has disclosed to a third party without any obligation to maintain to such information in confidence; or (iii) is independently developed by the obligated party. Each party's obligation under this Section shall survive the expiration or earlier termination of this Agreement and shall extend to the earlier of such time as the information protected hereby falls into the public domain through no fault of the obligated party or five (5) years following termination or expiration of this Agreement. 5. TERM AND TERMINATION. 5.1 This Agreement shall take effect on the date of its execution by Citrix ("Effective Date"), and unless terminated earlier as provided herein, shall continue for a period of two (2) years from the Effective Date. Thereafter, this Agreement shall automatically renew for additional one (1) year terms. Program benefits are provided in accordance with the Program Track policies and procedures in effect when a specific benefit is requested. CBA Member understands that, at any time within Citrix's sole discretion, Citrix may add to or cancel any CBA Program Track benefits. 5.2 Either party shall have the right to terminate this Agreement at any time, without cause and without the intervention of the courts, on the giving of thirty (30) days' prior written notice. Neither party shall be responsible to the other for any costs or damages resulting from the termination of this Agreement. 5.3 Upon expiration or termination of this Agreement, CBA Member shall immediately cease use of any Citrix trademarks licensed hereunder, and shall cease to represent itself as a CBA Member. 6. NEW PRODUCTS. 6.1 Notwithstanding any other provisions of this Agreement, Citrix may elect at any time during the term of this Agreement to announce new Citrix products to which the terms and conditions of this Agreement may not apply. New versions (upgrades), minor product revisions (updates), and maintenance releases of existing titles are not considered new Citrix products. 7. WARRANTIES/LIMITED WARRANTIES. 7.1 Citrix warrants Citrix products on the terms set out in the license agreement accompanying each such product. THESE LIMITED WARRANTIES ARE IN LIEU OF ALL OTHER WARRANTIES AND CONDITIONS, EXPRESSED, IMPLIED, OR STATUTORY, INCLUDING ALL IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND AGAINST INFRINGEMENT AND OF ALL OTHER OBLIGATIONS, CONDITIONS, OR LIABILITIES ON CITRIX'S PART EXCEPT AS OTHERWISE PROVIDED BY APPLICABLE LAW. 8. INDEMNITY. 8.1 CBA Member shall defend, indemnify, and hold harmless Citrix from and against all liabilities, claims, costs, fines, and damages of any type (including attorneys' fees) arising out of or in any way related to CBA Member's delivery of services and/or representations made by CBA Member to its customers. 8.2 CBA Member agrees that Citrix has the right but not the obligation to defend, or at Citrix's option, to settle any claim, suit or proceeding brought against CBA Member based on a claim that any products or materials supplied to CBA Member under this Agreement infringe upon any United States patent or copyright or violate the trade secret rights of any United States party (hereinafter "Infringement Claims") provided that CBA Member notifies Citrix in writing within seven (7) days of notification or discovery of an Infringement Claim. CBA Member agrees that Citrix will have sole control over the defense or settlement of any Infringement Claim, and CBA Member will provide reasonable assistance in the defense of the same (Citrix will reimburse CBA Member for reasonable expenses incurred in providing such assistance). Any favorable monetary award, judgment, or settlement will belong exclusively and entirely to Citrix. 9. LIMITATION OF LIABILITY. 9.1 EXCEPT FOR CLAIMS UNDER SECTION 8 OR CLAIMS FOR INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS, AND SUBJECT TO APPLICABLE LAW, NEITHER PARTY OR Page 2 3 ITS SUPPLIERS OR ITS LICENSORS SHALL BE LIABLE TO THE OTHER FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL OR INCIDENTAL DAMAGES (INCLUDING DAMAGES FOR LOSS OF BUSINESS PROFITS, BUSINESS INTERRUPTION, LOSS OF BUSINESS INFORMATION, AND THE LIKE) ARISING OUT OF ITS PERFORMANCE OR FAILURE TO PERFORM UNDER THIS AGREEMENT, EVEN IF THE OTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. BECAUSE SOME JURISDICTIONS DO NOT ALLOW THE EXCLUSION OR LIMITATION OF CONSEQUENTIAL OR INCIDENTAL DAMAGES, THE ABOVE LIMITATION MAY NOT APPLY. IN ANY EVENT, EXCEPT AS OTHERWISE PROVIDED BY LAW, THE LIABILITY OF CITRIX OR ITS SUPPLIERS, WHETHER FOR NEGLIGENCE, BREACH OF CONTRACT, BREACH OF WARRANTY, OR OTHERWISE, SHALL, IN THE AGGREGATE, NOT EXCEED THE AMOUNT PAID TO CITRIX BY CBA MEMBER HEREUNDER. 10. GENERAL. 10.1 Except as expressly granted herein, no license regarding the use of Citrix's copyrights, patents, trademarks or trade names is granted or will be implied. 10.2 If a particular provision of the Agreement is terminated or held by a court of competent jurisdiction to be invalid, illegal, or unenforceable, this Agreement shall remain in full force and effect as to the remaining provisions. 10.3 No waiver of any breach of any provisions of this Agreement shall constitute a waiver of any prior, concurrent, or subsequent breach of the same or any other provisions hereof, and no waiver shall be effective unless made in writing and signed by an authorized representative of the waiving party. 10.4 Neither this Agreement, nor any terms and conditions contained herein, shall be construed as creating a partnership, joint venture, franchise or agency relationship between Citrix and CBA Member. 10.5 CBA Member is an independent business and agrees that it shall not make any representation that might indicate to any third party that CBA Member has authority to act on Citrix's behalf or to bind Citrix to any representation or warranty. CBA Member shall not hold itself out as an agent of Citrix, or attempt to bind Citrix to any third-party agreement. 10.6 This Agreement, and any rights or obligations hereunder, shall not be assigned or sublicensed by CBA Member, without prior written consent from Citrix. 10.7 This Agreement shall be governed by the laws of the State of Florida and CBA Member consents to jurisdiction and venue in the state and federal courts sitting in the State of Florida. If either Citrix or CBA Member employs attorneys to enforce any rights arising out of or relating to this Agreement, the prevailing party shall be entitled to recover costs and attorneys' fees. 10.8 The making, execution and delivery of this Agreement have been induced by no representations, statements, warranties or agreements other than those herein expressed. 10.9 No term or provision of this Agreement may be changed, waived, discharged or terminated except by a writing singed by duly authorized officers of the parties hereof. The terms of any other documents or electronic communications exchanged (including the terms set forth on any purchase order) shall be of no force or effect unless incorporated herein as a modification or addition to the terms of this Agreement. 10.10 This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous communications including all prior and current Citrix Authorized Reseller and Citrix Authorized Premier Reseller Agreements. It shall not be modified except by a written agreement dated subsequent to the Effective Date of the Agreement and signed on behalf of CBA Member and Citrix by their respective duly authorized representations. Page 3 4 ACCEPTED BY CBA MEMBER Company Name: Invnsys Technology Corporation - ------------------------------ Authorized Signature: - ------------------------------ Name (printed): Mark Perkins - ------------------------------ Title: Vice President - Operations - ------------------------------ Date: 2-10-99 - ------------------------------ ACCEPTED BY CITRIX SYSTEMS, INC. Authorized Signature: - ------------------------------ Name (printed): Marc-Andre Boisseau - ------------------------------ Title: Controller - ------------------------------ Date: 2/22/99 - ------------------------------ Page 4 EX-10.2 6 EX-10.2 1 Exhibit 10.2 CLIENT SOFTWARE LICENSE AGREEMENT This Client Software License Agreement ("Agreement") is between Citrix Systems, Inc., a Delaware corporation, with primary offices at 6400 NW 6th Way, Fort Lauderdale, FL 33309, ("Citrix"), and INVNSYS TECH. CORPORATION, a _____________ corporation, with primary offices __________________ ("Licensee"). The effective date of this Agreement is 12-30-98 ("Effective Date"). RECITALS Citrix designs, manufactures, markets, and distributes certain computer system software products. Licensee designs, manufactures, markets, and distributes Licensee's ______________ products which are complementary to the Citrix products. Citrix and Licensee wish to cooperate such that Licensee may offer Citrix products to its customers in combination with Licensee's existing or planned products or technology. These recitals are intended only to summarize the intent of this Agreement. The actual terms and conditions of the Agreement are stated below. AGREEMENT 1. DEFINITIONS 1.1. "Citrix Product(s)" means the products specified in Exhibit A, as such products may be adapted by Licensee for use in Licensee Products pursuant to subsection 2.1 below, and includes all Product Releases, Version Releases, and Update Releases provided by Citrix to Licensee in connection with this Agreement. 1.2. "Non-Volatile Memory" means a storage unit which is dedicated to storage of the Licensee Product and which retains the Licensee Product when power is turned off, e.g., ROM or other silicon, and not including diskettes, CD-ROM, hard disks or other general purpose peripherals. 1.3. "Licensee Product(s)" means the terminal products specified in Exhibit B, which shall include the Citrix Product(s) in Non-Volatile Memory, and which shall be marketed and distributed by Licensee as approved by Citrix. 1.4. "FCS" of a Licensee Product means the first customer ship of that Licensee Product for revenue by Licensee. 1.5. "Product Release" means a release of a Citrix Product which is designated by Citrix in its sole discretion as a change in the digit(s) to the left of the decimal point in the Citrix Product version number, ({x}.xx). 1.6 "Version Release" means a release of a Citrix Product which is designated by Citrix in its sole discretion as a change in the tenths digit in the Citrix Product version number, (x. {x} x). Page 1 2 1.7 "Update Release" means a release of a Citrix Product which is designated by Citrix in its sole discretion as a change in the hundredths digit in the Citrix Product version number (x.{x}x). 1.8 "Documentation" means the standard user guidelines developed and released by Citrix for use with the Citrix Products. 1.9 "Documentation Media" means the diskettes, CDs, or other media containing the machine-readable data files developed by Citrix which contain the source for the Documentation. 1.10 "Master Software Media" means the standard microcomputer diskettes, CDs, or other media containing the object code version of the Citrix Product(s). 1.11 "Period" means those periods of time identified in Exhibit C. 1.12 "Level I Support" means receipt and management of all customer support calls, and provision of fixes for known problems. 1.13 "Level 2 Support" means reproducing and isolating problems, and jointly developing, workarounds for problems and testing software fixes with the other party. 1.14 "Level 3 Support" means providing software fixes for correction of isolated problems, and jointly developing workarounds for, problems and testing software fixes with the other party. 1.15 "ICA" means the Citrix architecture and proprietary protocols which define communications between server computers and workstations or terminals such that the intelligence and memory resident in the workstation or terminal is efficiently exploited. ICA protocols relate to functions including, but not limited to the following: distributed Windows graphical user interface, full screen text, virtual channels, data packet framing, compression, and encryption. 1.16 "Reseller" shall mean distributors and subdistributors within Licensee's distribution channel which market and deliver Licensee Products in the form in which the products are received from Licensee. 1.17 "Technical Manager" means the individual designated by Licensee on Exhibit B hereto to receive, maintain and, when required, return the Citrix Deliverables. Licensee may assign a new Technical Manager only upon thirty (30) days written notice to Citrix. 2. LICENSE GRANT 2.1. License to adapt software. Each Citrix Product as delivered by Citrix may include certain software in source code form ("Source Code Fragments"), as specified in Citrix grants to Licensee a nonexclusive and nontransferable license to modify, delete, or replace these Source Code Fragments within each Citrix Product or, if applicable, to use the ICA 3.0 materials solely in order to adapt that Citrix Product for use in Licensee Products. No other rights to any Citrix Product source code are granted. 2.2. License to copy software. Subject to the terms and conditions contained in this Agreement, Citrix -rants to Licensee a nontransferable and nonexclusive license to copy Page 2 3 the Citrix Products from the Master Software Media to Non-Volatile Memory for incorporation into Licensee Products. 2.3 License to copy documentation. Subject to the terms and conditions contained in this Agreement, Citrix grants to Licensee a nontransferable and nonexclusive right to copy the Documentation Media solely for the purpose of distributing printed copies of the Documentation with Licensee Products to which the Documentation refers, pursuant to subsection 2.5 below. Licensee may reproduce the Documentation as exact copies or, subject to subsection 8.6 below, Licensee may produce derivative works of the Documentation. In either case, the quality of produced documentation by Licensee must be equal to or better than the quality of Documentation produced by Citrix. Prior to distribution Licensee will deliver to Citrix a copy of each document it produces based on the Citrix Documentation, for review and approval by Citrix, which approval shall not be unreasonably withheld. 2.4. Restriction on license. Licensee agrees that, except as specified in subsection 2.1 above, it will not make modifications to, decompile, reverse engineer or otherwise decode or alter the software delivered on the Master Software Media. Licensee further agrees that it shall not modify or remove functions in Citrix Products, nor shall Licensee offer such functions to its customers in stock keeping units ("SKUs") which divide the Citrix Product functions in a manner different from the function packaging of the standard Citrix SKUS, except as may be authorized by this Agreement or as may be authorized by Citrix in writing. 2.5. License to distribute. During the term of, and subject to the terms and conditions of, this Agreement, Citrix grants to Licensee, and Licensee accepts, the nonexclusive, nontransferable right to incorporate the Citrix Product(s) in NonVolatile Memory, in the Licensee Product(s), as specified in subsection 2.2 above, only in the manner provided in Exhibit B, and to distribute such Citrix Product(s) so incorporated in Licensee Products subject to the restrictions of subsection 11.3 below. 2.6. Terms of Distribution. Licensee agrees that it will distribute the [Licensee/Citrix] Products pursuant to such license agreements as Licensee customarily uses to distribute other similar software. Except as permitted in this Agreement, Licensee shall contractually prohibit, and shall require its distributors and other resellers to contractually prohibit, end users and all entities in the chain of distribution from: (i) using, copying (except as necessary for back-up or archival purposes or to the extent expressly permitted by applicable law and to the extent that Citrix is not permitted by that applicable law to exclude or limit such rights), modifying, or transferring the software or any copy in whole or in part, or granting any rights in the software or accompanying documentation; (ii) translating, reverse engineering, decompiling, disassembling, or creating derivative works based on the software or the accompanying documentation; (iii) renting or leasing the software; or (iv) removing any proprietary notices, labels, or marks on the software and accompanying documentation. 3. TERMS OF PAYMENT 3.1. Price and payment. Licensee agrees to pay Citrix the amount(s) and within the times stated in this Section 3 and in Exhibit C. Licensee's obligation to pay such amounts is unconditional except as is otherwise expressly stated to the contrary herein. The royalties due to Citrix for each Period will be paid within fifteen (15) business days after the end Page 3 4 of each Period. A finance charge of one percent per month, or, if less, the maximum percentage allowed by applicable law, will be assessed on all amounts that are past due. 3.2. Reports. Within fifteen (15) business days of the end of each Period, Licensee will deliver to Citrix a certified report in a form reasonably acceptable to Citrix that details for each Citrix Product and each Licensee Product (1) the number of copies distributed by Licensee during the Period, by customer zip code in a format reasonably acceptable to Citrix, (ii) the number of such distributed copies which are exempt from royalties per subsection 3.4 below, and (iii) the license fee due Citrix on copies distributed during that Period. 3.3. Taxes. Prices stated are exclusive of any federal, state, withholding, municipal or other governmental taxes, duties, licenses, fees, excises or tariffs now or hereafter imposed on Licensee's production, storage, licensing, sale, transportation, import, export or use of Citrix Products or Licensee Product(s). Such charges shall be paid by Licensee, or in lieu thereof, Licensee shall provide an exemption certificate acceptable to Citrix and the applicable authority. Citrix, however, shall be responsible for all taxes based upon its net income. 3.4. Copies exempt from royalties. No royalty shall accrue to Citrix for copies of Citrix Product(s) (i) used solely for development, testing, and/or technical support purposes; (ii) shipped as replacement copies for copies found to be defective in materials, manufacture, or reproduction; (iii) which are Update Releases provided to Licensee by Citrix pursuant to subsection 7.2 below and are shipped by Licensee as an update of a Citrix Product copy for which Licensee has paid to Citrix the applicable royalty; (iv) used exclusively for demonstration or promotional purposes, such copies not to exceed two hundred (200) copies for each Version Release; or (v) provided to Citrix; so long as, in all cases above, such copies are provided by Licensee for free or for Licensee's reasonable cost of goods plus shipping and handling. 4. DELIVERY 4.1. Citrix Deliverables. For each Citrix Product specified in Exhibit A, at mutually agreed upon delivery dates, Citrix will deliver to Licensee two (2) copies of the Master Software Media and two (2) copies of the Documentation Media to use for the purposes and under the restrictions described herein. 5. ACCEPTANCE AND WARRANTY 5.1. Acceptance. Within thirty (30) days after Citrix' delivery to Licensee of any Product Release, Version Release, or Upgrade Release of a Citrix Product licensed hereunder, Licensee shall either accept such Citrix Product or report material deviations from specifications in writing. Material conformance to specifications shall solely determine acceptability. If Licensee does not report material deviations from product specifications within the thirty (30) day period, or if Licensee ships a Licensee Product to a customer for revenue, Licensee shall be deemed to have accepted the Citrix Product. 5.2. Deviations. If Licensee reports any material deviations from Citrix Product specifications prior to acceptance then Citrix shall have sixty (60) days to correct such deviations. Upon delivery of a corrected release of the Citrix Product to Licensee, Licensee shall have thirty (30) days in which to re-evaluate the corrected release for material conformance to specifications as provided in subsection 5.1 above. If any material deviations from Page 4 5 specifications reported before acceptance are not eliminated in the sixty (60) day correction period, then, as Licensee's sole remedy (i) the Citrix Product may be retained at an equitable adjustment in price as may be agreed by the parties, (ii) the correction period may be extended as may be agreed by the parties, or (iii) failing any agreement, Licensee may reject the Citrix Product. If Licensee rejects any Citrix Product Release or Version Release, the parties shall renegotiate in good faith Licensee's payment obligations therefor pursuant to Exhibit C. 5.3. Disclaimer of warranty. Apart from Citrix' obligations to provide error corrections and support the Citrix Product(s) pursuant to subsections 5.2 and 7.2, CITRIX DISCLAIMS ANY AND ALL OTHER WARRANTIES AND CONDITIONS OF ANY KIND WHATSOEVER, EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE, INCLUDING THOSE FOR MERCHANTABILITY, SATISFACTORY QUALITY, AND/OR FITNESS FOR A PARTICULAR PURPOSE, WHICH ARE EXPRESSLY EXCLUDED. 5.4. Unreleased product. Licensee shall not distribute for revenue any release of a Citrix Product in any form until Citrix olives its written approval of such Citrix Product for such distribution by its OEM customers generally or until Licensee receives the final form of the Master Software Media for such Citrix Product as declared in writing by Citrix. 6. TRAINING 6.1. Technical training. Citrix shall provide to Licensee one and one half (1 1/2) days of "Train the Trainer" sales training; and two (2) days of "Train the Trainer" technical support. All training shall be conducted at Citrix' facility at Citrix standard rates. Citrix shall also provide to Licensee up two (2) weeks of "on the phone" support training to at least one Licensee Level 2 support engineer at Citrix' facility, at Citrix standard rates. 7. SUPPORT 7.1. Licensee. Licensee shall be responsible for Level I and Level 2 support for the Citrix Product(s). For a period of three months following the first shipment of Licensee Product(s) by Licensee, Citrix shall provide appropriate consulting support as required to Licensee for these efforts. Citrix shall have no responsibility to deal directly with Licensee's customers. Licensee shall keep its Citrix Product(s) support capabilities current by attending Citrix training classes, as appropriate, at Citrix' regular class rate. 7.2. Citrix. Citrix shall be responsible for the joint development of workarounds and for Level 3 support for unmodified portions of Citrix Product(s) relative to deviations from product specifications, such support to be provided without charge to Licensee. If Licensee reports any deviations from specifications in a Citrix Product following acceptance and during the term of this Agreement, then, as Licensee's sole remedy, Citrix agrees to use reasonable efforts to correct such deviations. Notice to Citrix of any deviations from product specifications shall be made in writing using Citrix' standard problem reporting mechanisms as they may be updated from time to time, or using the notice provisions of subsection 15.5 below. Citrix' obligations under this subsection as to a particular release of a Citrix Product shall cease ninety (90) days after delivery to Licensee of an Update Release, Version Release, or Product Release with a higher version number which has been accepted pursuant to Section 5 above. Any free Update Releases provided by Citrix to its customers generally shall be provided to Licensee without charge within thirty (30) days of the general availability of such Update Releases. Page 5 6 8. ADDITIONAL OBLIGATIONS OF LICENSEE 8.1. Licensee Products for Citrix use. As soon as possible, and at least thirty (30) days prior to FCS of each Licensee Product, Licensee shall deliver to Citrix, for Citrix' internal use, six (6) Licensee Products. From time to time Licensee shall promptly upgrade or replace, as appropriate, these Licensee Products to ensure that they are representations of the current version of each Licensee Product. 8.2. Quality control. Licensee agrees to exercise the highest level of quality assurance, with regard to media, replication, and testing procedures, generally in use in the computer software industry in connection with Licensee's exercise of the rights granted in Section 2 above. 8.3. Copyright and patent notices. Licensee agrees not to alter or remove any copyright and/or patent notices in the Citrix Products. Licensee agrees to comply with the copyright and patent notice requirements as set forth in Exhibit D. 8.4. Terminal Client Identifier. Licensee agrees not to modify or delete Citrix' standard licensing technology that identifies the Licensee client as an embedded ICA client. This will allow for connections to WinFrame for Terminals and MetaFrame for Terminals. 8.5. Citrix attribution. Licensee agrees to cause a screen providing attribution to Citrix, in accordance with the requirements specified in Exhibit D, to appear on each Licensee Product upon initiation of use of the Licensee Product. 8.6. Product and Version release numbers. Licensee shall market each release of each Licensee Product with reference to the ICA version/release number assigned by Citrix to the Citrix Product, contained in the Licensee Product. As a result of this, resellers and/or end users must be easily able to determine correspondence between Licensee Product releases and ICA version/release levels. 8.7. Licensee Product translation. Licensee agrees that it may translate neither the Documentation nor the Citrix Products to languages other than U.S. English without the prior written consent of Citrix. 9. TERM AND TERMINATION 9.1. Initial and renewal terms. The initial term of this Agreement ("Initial Term") shall run for two (2) years from the Effective Date. This Agreement shall renew automatically each year for a one year term, unless either party gives sixty (60) days written notice of its intent to allow this Agreement to expire at the end of the then current term. 9.2. Termination for cause. If either party defaults in the performance of any material provision of this Agreement, then the non-defaulting party may give written notice to the defaulting party that, if the default is not cured within sixty (60) days the Agreement will be terminated. If the non-defaulting party gives such notice, and the default is not cured during the sixty (60) day period, then the Agreement will terminate immediately upon notice by the non-defaulting party. Page 6 7 9.3. Termination for insolvency. This Agreement may be terminated by either party upon notice, in the event that any of the following occur(s): (i) voluntary institution by the other party of insolvency, receivership, bankruptcy, or any other proceedings for the settlement of the other party's debt; (ii) involuntary institution of insolvency, receivership, bankruptcy, or any other proceedings for the settlement of the other party's debt; which proceedings are not resolved within sixty (60) days, (iii) the making of a general assignment by the other party for the benefit of creditors; or (iv) the dissolution of the other party. 9.4. Return of materials. In addition to the Master Software Media and the Documentation Media, all of Citrix' trademarks, marks, trade names, patents, copyrights, designs, drawings, formulas or other data, photographs, samples, literature, and sales aids of every kind will remain the property of Citrix. Within thirty (30) days after the termination or expiration of this Agreement, Licensee will prepare all such items in its possession, and will collect such materials in Reseller's possession, for shipment as Citrix may direct, at Citrix' expense. Licensee will not make or retain any copies of any confidential items or information which may have been entrusted to it. Effective upon the termination or expiration of this Agreement, Licensee will cease to use all trademarks and trade names of Citrix. 9.5. Destruction of inventory. Upon expiration or earlier termination of this Agreement, Licensee shall destroy or erase (as applicable), and shall certify to Citrix the destruction or erasure of, (i) all copies of the Citrix Product(s) and Licensee Product(s) in any form in the possession of Licensee or any Reseller, including all Master Software Media, Documentation, and Documentation Media, and (ii) all other materials related to the Citrix Product(s) or Documentation in Licensee's possession or control not otherwise dealt with under subsection 9.4 above. 9.6. Survival of certain terms. The provisions of Sections 3 (as to payment for distribution and copying prior to termination or expiration), 5.3, 9.4, 9.5, 1 0, I 1, 13, 14, and 15, as well as end user licenses properly granted by Licensee, will survive the termination or expiration of this Agreement for any reason. All other rights and obligations of the parties will cease upon termination or expiration of this Agreement. 10. AUDITS 10.1. Record keeping. Licensee agrees to maintain and to ensure that any Reseller maintains, until two (2) years after the termination of this Agreement, complete books, records and accounts regarding all copying and distribution activities pursuant to Section 2 above and the payments due to Citrix thereon. 10.2. Audit rights. Licensee agrees to allow Citrix the right to audit and examine such books, records and accounts during Licensee's or Reseller's (as applicable) normal business hours to verify the accuracy of the reports made to Citrix under subsection 3.2 above. In the event such examination leads to a determination that Licensee has made more than the authorized number of copies and/or has not paid for all of the copies of Citrix Products made, Licensee agrees to pay, in addition to any damages (including direct, indirect and consequential) to which Citrix might be entitled, all unpaid royalties which should have been paid, plus interest thereon from the date the royalty payment should have been made, at the rate of one percent per month (or, if less, the maximum allowed by applicable law); provided, however, that if the audit reveals underpayment of five percent (5%) or more of the amount that should have been paid for the period audited, Page 7 8 then, in addition to the above payments, Licensee shall pay Citrix' auditing expense for such examination. Citrix will credit to Licensee any overpayments discovered in the audit. 11. PROPERTY RIGHTS AND CONFIDENTIALITY 11.1. Property rights. Licensee agrees that Citrix owns all right, title, and interest in the Citrix Product(s), including, without limitation, the Master Software Media and Documentation Media, now or hereafter subject to this Agreement, and in all of Citrix' patents, trademarks, trade names, inventions, copyrights, know-how, and trade secrets relating to the design, manufacture, operation or service of the Citrix Product(s)[.][, provided that Licensee][Citrix] shall own the adaptations [it/Licensee] makes pursuant to subsection 2.1 above. 11.2. Confidentiality. Licensee acknowledges that by reason of its relationship to Citrix hereunder it will have access to certain information and materials concerning Citrix' business, plans, customers, technology, and Citrix Products that are confidential and of substantial value to Citrix, which value would be impaired if such information were disclosed to third parties. Licensee agrees that it will not use the confidential information for any purpose other than the development and support of the Licensee Product in accordance with the terms of this Agreement and shall not use the confidential information in any other way for its own account or the account of any third party, nor disclose to any third party, any such confidential information revealed to it by Citrix (including, but not limited to, the Source Code, the Source Code Fragments and the ICA 3.0 Protocol specifications). Licensee shall take every reasonable precaution to protect the confidentiality of such information. Upon request by Licensee, Citrix shall advise whether or not it considers any particular information or materials to be confidential. Licensee shall not publish any technical description of the Product beyond the description published by Citrix. In the event of termination of this Agreement, there shall be no use or disclosure by Licensee of any confidential information of Citrix, and Licensee shall not manufacture or have manufactured any Products utilizing any of Citrix' confidential information. The provisions of this Section shall not apply to information: which is (or becomes) available to the public other than by breach of this Agreement or of any other duty; which is already in Licensee's possession prior to disclosure by Citrix or is independently obtained by Licensee in circumstances under which Licensee is free to disclose it; or which is trivial or obvious. 11.3. International distribution. Licensee shall not distribute Products outside of the geographical boundaries of the following countries without Citrix' prior written consent: United States, Canada, Australia, Japan, the European Union, Sweden, Norway and Finland. In the event Licensee desires to distribute Products outside of the geographical boundaries set forth above, Citrix and Licensee shall negotiate in good faith regarding the expansion of the list to include additional countries that provide adequate protection for Citrix' and its suppliers' proprietary rights through copyright, trade secret, patent or other laws. 12. TRADEMARKS AND TRADE NAMES 12.1. Use of trademarks and trade names. Licensee is obligated to use the applicable Citrix trademarks and trade names with respect to the Licensee Product(s) in accordance with the requirements and guidelines specified in Exhibit E. In accordance with Exhibit E, Page 8 9 Licensee shall submit to Citrix for prior approval any advertising, packaging, promotional, or other materials prepared by or for Licensee which include any Citrix trademarks or trade names. Citrix shall have the night to make reasonable updates to the requirements and guidelines in Exhibit E from time to time. Notwithstanding the foregoing, Citrix shall not attempt to cause Licensee to adopt any particular advertising, promotional or marketing plan. 12.2. ICA certification process. In the event that Citrix implements an ICA certification process, all subsequent Licensee Products will be developed so as to meet the certification requirements and will be labeled in accordance with the programs specifications. Certification shall be performed at no charge to Licensee. 12.3. Attribution. Licensee agrees to make explicit mention of the Citrix company name and the ICA and WinFrame trademarks in all press releases and product announcements related to the licensed products. Licensee also agrees to make its best reasonable effort to ensure that the Citrix company name and the ICA and WinFrame trademarks are mentioned in all press articles related to the licensed products. 13. INDEMNIFICATION 13.1. Defense or settlement of infringement claims. Licensee agrees that Citrix has the right to defend, or at its option to settle, and Citrix agrees, at its own expense to indemnify or at its option to settle, any claim, suit or proceeding brought against Licensee or its customer based on a claim that a Citrix Product infringes upon any United States patent or copyright or violates the trade secret rights of any United States party, (hereinafter "Infringement Claims"); provided Citrix is notified promptly in writing of an Infringement Claim and has sole control over its defense or settlement, and Licensee and/or its customer provides reasonable assistance in the defense of the same. 13.2. Infringement cures. Following notice of an Infringement Claim, or if Citrix believes such a claim is likely, Citrix may at its sole expense and option, (1) procure for Licensee the right to continue to market, use and have others use, the alleged infringing Citrix Product(s), (ii) replace or modify the appropriate Citrix Product(s) to make them non-infringing, or (iii) accept return of the Citrix Product(s) and refund as appropriate payments made therefor by Licensee. 13.3. Limitation. Citrix shall have no liability for any infringement claim based on Licensee's (i) use or distribution of any product after Citrix' notice that Licensee should cease use or distribution of such product due to an infringement claim, or (ii) modification of the Citrix Product other than by Citrix, or combination of a Citrix Product with non-Citrix programs, data, hardware, or other materials, if such infringement claim would have been avoided by the exclusive use of the unmodified Citrix Product alone. For all infringement claims to which this subsection is applicable, Licensee agrees to indemnify and defend Citrix, provided Licensee is notified promptly in writing of an infringement claim and has sole control over its defense or settlement, and Citrix and/or its customer provides reasonable assistance in the defense of the same. 13.4. Entire liability. THE FOREGOING PROVISIONS OF THIS SECTION 13 STATE THE ENTIRE LIABILITY AND OBLIGATIONS OF CITRIX, AND THE EXCLUSIVE REMEDY OF LICENSEE AND ITS CUSTOMERS, WITH RESPECT TO ANY ALLEGED INTELLECTUAL PROPERTY INFRINGEMENT BY THE CITRIX PRODUCT(S), OR ANY PART THEREOF. Page 9 10 13.5. Other third party claims. Except for Infringement Claims which Citrix is obliged to settle or defend under this Section 13, Licensee agrees to indemnify and hold Citrix harmless against any cost, loss, liability, or expense (including attorneys' fees) arising out of third party claims against Citrix as a result of Licensee's or Reseller's copying, use or distribution of the Licensee Product(s) and Licensee's exercise of the license rights granted under this Agreement. 14. LIMITATION OF LIABILITY CITRIX' TOTAL LIABILITY ARISING OUT OF THIS AGREEMENT, THE TERMINATION THEREOF, AND/OR LICENSE OF THE PRODUCTS AND DOCUMENTATION HEREUNDER, SHALL BE LIMITED TO THE AMOUNT HAVING THEN ACTUALLY BEEN PAID BY LICENSEE TO CITRIX UNDER THIS AGREEMENT. IN NO EVENT SHALL CITRIX BE LIABLE FOR COSTS OF SUBSTITUTE PRODUCTS OR SERVICES. IN NO EVENT SHALL CITRIX BE LIABLE TO LICENSEE OR ANY OTHER ENTITY FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL OR OTHER DAMAGES, HOWEVER CAUSED .AND ON ANY THEORY OF LIABILITY, AND WHETHER OR NOT FOR BREACH OF CONTRACT, NEGLIGENCE OR OTHERWISE, AND WHETHER OR NOT CITRIX HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE. THESE LIMITATIONS WILL APPLY NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY PROVIDED HEREIN. CITRIX' LIMITATION OF LIABILITY IS CUMULATIVE, WITH ALL CITRIX' EXPENDITURES BEING AGGREGATED TO DETERMINE SATISFACTION OF THE LIMIT. THE EXISTENCE OF CLAIMS OR SUITS AGAINST MORE THAN ONE CITRIX PRODUCT LICENSED UNDER THIS AGREEMENT WILL NOT ENLARGE OR EXTEND THE LIMIT. IN NO EVENT SHALL ANY LICENSORS OR SUPPLIERS OF CITRIX BE LIABLE FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL OR OTHER DAMAGES ARISING OUT OF THIS AGREEMENT. 15. GENERAL PROVISIONS 15.1. Entire agreement; modifications. This Agreement, including the attached Exhibits, sets forth the entire agreement and understanding of the parties relating to the subject matter herein and merges all prior discussion between them. No modification or amendment to this Agreement shall be effective unless in writing and signed by both parties. The terms and conditions on any Licensee purchase orders or similar documents shall not apply. Any restrictive endorsement on any check or any instrument of payment to Citrix which purports to alter this Agreement or any of the parties' rights shall be of no force and effect, and the payee party shall be free to negotiate such checks notwithstanding such void endorsement. 15.2. Confidentiality of agreement. The parties agree that the terms and conditions of this Agreement shall be treated as confidential information, provided, however, that each party may disclose the terms and conditions of this Agreement: (i) as required by any court or other governmental body; (ii) as otherwise required by law; (iii) to legal counsel of the parties; (iv) in confidence, to accountants, banks, investors and other financing sources and their advisors; (v) in confidence, in connection with the enforcement of this Agreement or rights under this Agreement; or (vi) in confidence, in connection with an actual or proposed merger, acquisition, or similar transaction. Page 10 11 15.3. Independent contractors. The relationship between Citrix and Licensee established by this Agreement is that of independent contractors, and nothing contained in this Agreement shall be construed as creating a partnership, joint venture or agency relationship, or as granting a franchise. 15.4. Governing law and jurisdiction. This Agreement shall be governed by and construed under the laws of the State of Florida without regard to conflict of law principles, and Licensee consents to personal and exclusive jurisdiction and venue in the state and federal courts sitting in Broward and Dade counties, Florida. Process may be served on either party by using the notice provisions of subsection 15.5 below. 15.5. Notices. Any notice required or permitted by this Agreement will be in writing and will be sent by prepaid registered or certified mail, return receipt requested, or by overnight courier, charges prepaid, with a confirming fax; to the appropriate address set forth at the beginning of this Agreement, or to such other address for which the relevant party gives appropriate notice. Notice shall be deemed to have been given when delivered or, if delivery is not accomplished by some fault of the addressee, when tendered. 15.6. Force majeure. Nonperformance of either party "will be excused to the extent that performance is rendered impossible by strike, fire, flood, governmental acts or orders or restrictions, failure of suppliers, or any other reason where failure to perform is beyond the control of, and not caused by the negligence of, the non performing party. 15.7. Successors and assigns. Neither this Agreement nor any of the rights or obligations of Licensee arising under this Agreement may be assigned or transferred, by operation of law or otherwise, without Citrix' prior written consent. Any attempted such assignment or transfer shall be void and shall result in the immediate and automatic termination of this Agreement. Subject to this restriction, this Agreement will be binding upon and inure to the benefit of the parties hereto, their successors and assigns. 15.8. Severability; waiver. If any provision of this Agreement is held to be invalid by a court of competent jurisdiction, the remaining provisions will nevertheless remain in full force and effect. Citrix and Licensee agree to replace any invalid provision with a valid provision which most closely approximates the intent and economic effect of the invalid provision. The waiver by either party of a breach of any provision of this Agreement by the other will not operate or be interpreted as a waiver of any other or subsequent breach. All waivers must be in writing. 15.9. Government End-Users. Citrix Products and Documentation are "commercial items" as that term is defined in 49 C.F.R. 2-101 (October 1995) consisting of "commercial computer software" and "commercial computer software documentation" as such terms are used in 49 C.F.-P,. 12-212 (September 1995). Consistent with 48 C.F.R. 12.212 and 48 C.F.R. 227.7202-1 through 227.7202-4 (June 1995), if the Citrix Products which Licensee licenses or acquires hereunder are for or on behalf of the U.S. Government or any agency or department thereof, the soft-ware and the documentation are licensed hereunder (i) only as a commercial item, and (ii) with only those rights as are granted to all other end users pursuant to the terms and conditions of this Agreement. 15.10. Export controls. Licensee agrees to comply with all United States export regulations and restrictions in connection with this Agreement. Page 11 12 15.11. Headings. The headings used in this Agreement and the attached Exhibits are intended for convenience only and shall not be deemed to supersede or modify any provisions. 15.12. Counterparts. This Agreement may be executed in two or more counterparts, each of which will be deemed an original and all of which together will constitute one instrument. IN WITNESS WHEREOF, this Agreement is executed as of the Effective Date set forth above. CITRIX SYSTEMS. INC. 6400 NW 6th Way Fort Lauderdale, FL 33309 By: By: Name: Name: Title: Title: Page 12 13 EXHIBIT A CITRIX PRODUCTS CITRIX PRODUCTS SHALL BE THE CITRIX DOS OR WINDOWS CLIENT ("CLIENT") SOFTWARE IN BINARY FORMAT FOR ICA 3.0 PROTOCOL SUPPORT DEEMED BY CITRIX TO BE NECESSARY OR APPROPRIATE FOR THE DEVELOPMENT OF THE LICENSEE PRODUCTS. Page 13 14 EXHIBIT B LICENSEE PRODUCTS [ADD DESCRIPTION LICENSEE'S PRODUCTS] Licensee Products must not implement any modifications or extensions to the ICA Protocol. They must connect to and communicate with Citrix and Citrix based application server technology in accordance with the appropriate ICA product and Version Release number specifications as defined in the ICA 3.0 Protocol specifications. The operating environment which may ran on the Licensee Products concurrently with the ICA Protocol is the MS-DOS compatible environment ("Authorized Environment"). In the event that Licensee desires to add additional operating environments to the Authorized Environment, the parties agree to negotiate in good faith to expand the definition of the Authorized Environments. Citrix reserves the right to require Licensee to go through a reasonable certification to ensure quality and complete ICA compatibility for Licensee Products. Licensee's Technical Manager shall be: Name: Title: Address: Telephone: Fax: E-Mail: Page 14 15 EXHIBIT C PAYMENT SCHEDULE A. Nonrefundable Initial Design Consultation, Training, and Ongoing Support Fees (for the services described in Sections 6 and 7 of the Agreement) $10,000 payable upon execution of the Agreement. B. Period Each three (3) month period after FCS shall be a "Period." Page 15 16 EXHIBIT D CITRIX ATTRIBUTION, NOTICES, TRADEMARKS FOR CITRIX CLIENT PRODUCTS The Citrix OEM Client Splash Screen Logo: "Citrix(R) ICA(R)" Attribution The "Citrix(R) ICA(R)" logo must be displayed on the client's initial load screen as a graphic image. The "Citrix(R) ICA(R)" logo must be a minimum of 32 x 32 pixels on the initial load screen. Copyright and Patent Notices Copyright and/or patent notices must be incorporated into Licensee's product packaging as follows: On initial load screen: Citrix copyright notice. Logo Artwork The "Citrix(R) ICA(R)" logo must never be altered and must be reproduced from the supplied Citrix reproduction sheet or from diskette using the supplied EPS file. Citrix will provide authorized OEMs with camera-ready artwork of the "Citrix(R) ICA(R)" Splash Screen. Licensee may not alter this artwork in any way. The words "Citrix(R) ICA(R)" as they appear in the logo are the only words and the only typeface approved for use and may not be modified. The S must appear immediately following the words Citrix and ICA. Color Scheme The following Splash Screen colors are to be used: ICA text 100% PMS Reflex Blue Distributed Windows text 100% Black Citrix Logo Text 80% Black Citrix Logo Dots 100% Warm Red Wirfdow 100% Warm Red Globe 70% PMS Reflex Blue Laptop 100% Black with White outline and White monitor screen Border 100% Black The logo must always be self-contained within a white background. Spacing The "Citrix(R) ICA(R)" logo must stand alone. A minimum amount of space, 1/4 inch, must be left between the logo and any other object such as type, borders, edges, etc. Page 16 17 EXHIBIT E TRADEMARK GUIDELINES 1. TRADEMARK AND LOGO GUIDELINES All references to Citrix products or to the ICA protocol shall include the appropriate Citrix trademarks and shall be in accordance with these guidelines. All marketing materials and other publications or press releases referencing the Citrix products or the ICA protocol shall be submitted to Citrix for its prior approval. Approved marketing materials may be reused without Citrix' prior approval if the use of the Citrix trademarks is exactly as previously approved and if the context and contents of the new materials are substantially similar to the approved materials. The Citrix and WinFrame names, logos and trademarks can only be used by authorized OEMs and Resellers in connection with the sales and marketing of Citrix Products. The Citrix name and Citrix logos may not be used to promote other Resellers' products. Nor may the Citrix name and logo be used for general dealer promotions not specifically related to Citrix Products. If any of the Trademarks are to be used in conjunction with another trademark on or in relation to the Citrix Product, then Citrix' mark shall be presented equally legibly, equally prominently, and of equal size to the other, but nevertheless separated from the other so that each appears to be a mark in its own right, distinct from the other mark. 2. TRADEMARK AND LOGO USAGE Advertisements, collateral materials, direct mail materials, and other printed materials (with exception of Licensee signage) should include the credit line: Citrix WinView and ICA are registered trademarks of and WinFrame is a trademark of Citrix Systems, Inc. 3. DESIGN STANDARDS The following is a general outline of design rules governing the use of the company name, Citrix Product's names and logos: In text usage, the first time the company name is used it should be "Citrix Systems, Inc.", thereafter "Citrix" is acceptable. Citrix Systems, Citrix WinView and other Citrix Products should have "Citrix" in upper and lower case, with "WinView" spelled as one word with the "W" and "V" capitalized and WinFrame spelled as one word with the "W" and "F" capitalized. Additional proper names will be covered at the time of their use. ARTWORK FOR THE CITRIX CORPORATE LOGO AND PRODUCT LOGOS IS AVAILABLE AND WILL BE SUPPLIED TO LICENSEE. THE CORPORATE LOGO MUST BE OF THE SAME DESIGN, COLOR AND OTHER DETAILS OR SHOULD BE EXACT COPIES OF THOSE USED BY CITRIX. THE CORPORATE LOGO SHOULD APPEAR AS ONE COLOR (PREFERABLY BLACK) ON TWO-COLOR MATERIALS, OR ON FULL COLOR ARTWORK AS PMS 403 FOR THE BODY OF THE LOGO, AND PMS WARM RED FOR THE DOTS. COLOR SAMPLES Page 17 18 ARE AVAILABLE FROM CITRIX. CITRIX PRODUCT LOGOS SHOULD BE ONE COLOR, IN BLACK OR IN THE TEXT COLOR OF DOCUMENT. Page 18 EX-10.3 7 EX-10.3 1 Exhibit 10.3 IBIZ TECHNOLOGY CORPORATION DISTRIBUTED SOFTWARE LICENSE AGREEMENT LICENSOR: JEREMY RADLOW Agreement # 99-017 DBA: LNKVERSE Attachments (if any) None 33 MILL STREET #5 ORONO, ME 04473 Effective: June 2, 1999 Licensor Contact Delivery: June 4, 1999 JEREMY RADLOW INSTALLATION SITE: Non-expiring, perpetual license Multi-use license: for use distribution And sale Warranty Period with associated hardware Support for 1 year from effective date
PRODUCTS: KEYLINK SOFTWARE License Fee Quantity Description Total Cost - -------- ----------- ---------- Exclusive license to use, distribute and Upon delivery of KeyLink, iBIZ offer for sale with associated hardware, Technology Corp. will transfer to the software program named by author as: Licensor, within (1) business day, the "KeyLink". The purpose of said software is following: to allow connection of the keyboard product manufactured by iBIZ Technology Corp. to 20,000 shares of iBIZ Technology connect to "Palm Computing Devices" Common stock (NASDAQ BB: IBIZ) produced by 3COM Corp. The "KeyLink" - market value approximately $26000 software package has been adapted from a US Dollars as of June 1, 1999 trial version named "KeyZ", previously tested by iBIZ Technology. Modifications $3,000.00 US Dollars have been, or will be made to the tested software prior to final delivery, to meet Delivered within (3) business days, required specifications from iBIZ the following: Technology. As a final "distribution" version of the (1) New laptop computer software has not been received or tested Current production by iBIZ Technology, Licensor agrees to model, P2, w/ reasonably modify and support the RAM, floppy & CD drives, HD, TFT software for a period of (1) year from LCD screen, Battery, Charger the execution agreement. "IBIZ Phoenix" (Manufactured by Twinhead, as their date of this Slimnote VX model) Support shall be to make all reasonable efforts to adapt, modify or otherwise change the software to allow compatibility with current and future versions of Palm Computing Devices. This shall include compatibility with other software products "approved" by 3COM and Palm Computing, but excludes non-approved software products.
Page 1 2 This Agreement is entered into as of the Effective Date specified above between iBIZ Technology Corporation ("iBIZ") and the Licensor specified above. 1. PROVISION OF PROGRAMS. Under the provisions of this Agreement, Licensor agrees to grant iBIZ licenses to use Licensor's proprietary computer programs and associated materials ("Products") specified above. 2. SCOPE OF LICENSE. Licensor hereby grants to iBIZ a perpetual, exclusive license to use the software on the terms and conditions set forth herein (together with all modifications and accompanying documentation referred to herein as the "Software"). This license is for the use of the Software by iBIZ and any assigned user, purchasing or receiving said Software. iBIZ is entitled to copy the Software into any machine-readable or printed form for back-up or modification purposes and duplication for sale or distribution by iBIZ. 3. INSTALLATION/ACCEPTANCE. Unless otherwise specified herein iBIZ shall install or provide for sale or distribution the Product in accordance with instructions provided by Licensor. iBIZ reserves the right to conduct acceptance testing within sixty (60) days of its receipt thereof, to demonstrate the Products conform to their respective Specifications. If a Product does not pass the acceptance test, iBIZ shall notify Licensor, specifying in reasonable detail in what respects the Product has failed to perform. Licensor shall promptly correct said deficiencies or accept the return of the Products for full refund of all fees paid therefore. 4. DOCUMENTATION AND TRAINING. Upon delivery of each Product, Licensor shall deliver to iBIZ one (1) copy of all generally available documentation for such Product sufficient to enable iBIZ personnel to use and to reasonably understand the use and operations of the Product ("Documentation"). iBIZ may copy the Documentation in order to satisfy its own internal requirements or may duplicate additional copies for any reasonable use. 5.0 (a) LICENSE GRANT. Licensor grants to iBIZ a perpetual, exclusive license to use each Product, commencing upon its delivery to iBIZ and continuing thereafter from the date of iBIZ's acceptance of the Product, for the License Term specified on the Schedule, unless terminated earlier in accordance with this Agreement. (b) INVOICE AND PAYMENT. Licensor may invoice iBIZ for the License Fee set forth above, on or after acceptance by iBIZ of the Product involved. Each invoice properly rendered in accordance with this Agreement, shall be payable within thirty (30) days after its receipt, unless otherwise specified herein. 5.1 DISASTER RECOVERY. Each License includes the right to use Products on temporary substitute or back-up equipment. iBIZ shall also be entitled to make and keep copies of each Product and its Documentation for archival/back-up purposes. iBIZ may from time to time permanently transfer the license to use a Product from one computer to another compatible with the Product (irrespective of model, type or size) or from one Installation Site to another, from one country or region to another, without payment of any additional fee or charge. 5.2 TITLE AND MODIFICATIONS. Licensor retains title to the Products provided hereunder, but does convey exclusive rights and other interest therein to iBIZ, with the licenses granted hereunder. Licensor agrees that iBIZ shall have the right to enhance, modify and/or adapt any of the Products and/or materials provided to iBIZ hereunder, may create and use derivative works and may use said enhanced, modified, adapted Products and/or materials in accordance with this Agreement. iBIZ may also combine Products with other programs and/or materials. iBIZ shall have the exclusive ownership right to use any enhancements, modifications, adaptations and derivative works made by or for iBIZ or by Licensor specifically at iBIZ's request and expense. Nothing contained in this Section, by itself, shall give iBIZ any right to receive the Product source code. 6.0 MAINTENANCE. Licensor warrants that for a period of ninety (90) days after iBIZ has notified Licensor of its acceptance of the Product pursuant to Article 3 ("Installation/Acceptance"), it shall correct and repair any malfunction, defect or nonconformity which prevents such Product from performing in accordance with the provisions of this Agreement at no additional charge to iBIZ. 7.0 (a) CORRECTION OF NONCONFORMITIES AND TECHNICAL SUPPORT. Licensor shall promptly correct or repair any Product failure, malfunction, defect or nonconformity, which prevents it from performing in Page 2 3 accordance with the Documentation and Specifications for a period of (1) year from the effective date of this agreement. Licensor shall respond by telephone (or other confirmed means) to any request for service made during normal business hours within one (1) day of iBiZ's initial request for service. Licensor shall provide reasonable remote technical assistance and consultation to iBIZ at any time during normal working hours. (b) UPDATES AND REVISIONS. Licensor shall provide iBIZ with all revisions, updates, improvements, modifications and enhancements to each Product and to the documentation described in Article 4 ("Documentation And Training"), hereof, which are produced and generally made available by Licensor ("Update"), including any revised Documentation. iBIZ may refuse to accept same, and in such event, Licensor shall maintain the Product in the form in effect immediately prior to Licensor's request that iBIZ accept such Update. For purposes of this Agreement, an Update once incorporated into any Product or Documentation shall be considered a part thereof for all purposes hereunder. Licensor shall use all commercially reasonable efforts to produce and make available to iBIZ any and all modifications to the Products to enable same to operate in conjunction with any new releases of the applicable equipment's operating system. 8.0 GENERAL WARRANTIES. Licensor warrants to iBIZ that: (i) Licensor has the right to furnish the Products, Documentation, Specifications and other materials and perform the services as specified in this Agreement ("Product Materials and Services") covered hereunder free of all liens, claims, encumbrances and other restrictions; (ii) the Product Materials and Services furnished by Licensor and/or iBIZ's use of the same hereunder do not violate or infringe the rights of any third party or the laws or regulations of any governmental or judicial authority; (iii) iBIZ shall be entitled to use and enjoy the benefit of the Product Materials and Services, subject to and in accordance with this Agreement; and (iv) iBIZ's use and possession of the Product Materials and Services hereunder, shall not be adversely affected, interrupted or disturbed by Licensor or any entity assenting a claim under or through Licensor. 8.1 YEAR 2000 WARRANTIES. Licensor warrants that: the Products have been tested and are fully capable of providing accurate results using data having date ranges spanning the twentieth (20th) and twenty first (21st) centuries (e.g., years 1980-2100). Without limiting the generality of the foregoing, Licensor warrants that all software licensed from Licensor shall (a) manage and manipulate data involving all dates from the 20th and 21st centuries without functional or data abnormality related to such dates; (b) manage and manipulate data involving all dates from the 20th and 21st centuries without inaccurate results related to such dates; (c) have user interfaces and data fields formatted to distinguish between dates from the 20th and 21st centuries; and (d) represent all data related to include indications of the millennium, century, and decade as well as the actual year. 8.2 PRODUCT WARRANTIES. Licensor warrants that: (i) for the period of one (1) year from date of acceptance all tangible portions of the Product Materials and Services shall be free from any defects in materials and workmanship and the Products shall conform to and operate in accordance with the Specifications for such Products, the Documentation provided to iBIZ as are attached, described and/or provided under this Agreement; and (ii) the Specifications and Documentation and other materials provided by Licensor hereunder shall faithfully and accurately reflect the Products provided to iBIZ hereunder. Licensor further warrants that for the Warranty Period specified herein it shall correct and repair any malfunction, defect or nonconformity which prevents such Product from performing in accordance with the provisions of this Agreement at no additional charge to iBIZ. Licensor warrants that, upon the expiration of the Warranty Period, it shall perform the maintenance and support services as specified in this Agreement. 8.3 WARRANTY DISCLAIMER. EXCEPT AS SPECIFICALLY PROVIDED IN THIS AGREEMENT, THERE ARE NO OTHER WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTY OF MERCHANT-ABILITY OR FITNESS FOR A PARTICULAR PURPOSE. 9.0 INTELLECTUAL PROPERTY INFRINGEMENT. Licensor agrees to defend and/or handle at its own expense, any claim or action against any iBIZ Entity, defined as iBIZ, Invnsys, subsidiaries. and affiliated companies, for actual or alleged infringement of any intellectual or industrial property right, including, without limitation, trademarks, service marks, patents, copyrights, misappropriation of trade secrets or any similar proprietary rights, based upon the Product Materials and Services furnished hereunder by Licensor or based on iBIZ's use thereof, excluding modifications by iBIZ that result in alleged infringement. Licensor further agrees to indemnify and hold iBIZ harmless from and against any and all liabilities, losses, costs, damages and expenses (including reasonable attorneys' fees) associated with any such claim or action. Licensor shall have the sole right to conduct the defense of Page 3 4 any such claim or action and all negotiations for its settlement or compromise, unless otherwise mutually agreed to in writing. 9.1 INTELLECTUAL PROPERTY INFRINGEMENT REMEDIES. If any Product Materials and/or Services become, or in Licensor's opinion are likely to become, the subject of any such claim or action, then, Licensor, at its expense may either: (i) procure for iBIZ the right to continue using same as contemplated hereunder; (ii) modify same to render same non-infringing (provided such modification does not adversely affect iBIZ's use as contemplated hereunder); or (iii) replace same with equally suitable, functionally equivalent, compatible, non-infringing products, materials and/or services. If none of the foregoing are commercially practicable, Licensor having used all reasonable efforts, then iBIZ shall have the right to terminate the Schedule(s) involved and shall be entitled to a pro-rata refund of all payments made in respect of such Product (calculated on a straightline five (5) year basis unless a shorter License Term applies). 10.0 iBIZ CONFIDENTIAL INFORMATION. Licensor agrees to regard and preserve as confidential all information related to the business and activities of iBIZ and the iBIZ Entities, their customers, clients, suppliers and other entities with whom iBIZ and the iBIZ Entities do business, that may be obtained by Licensor from any source or may be developed as a result of this Agreement. Licensor agrees to hold such information in trust and confidence for iBIZ and not to disclose such information to any person, firm or enterprise, or use (directly or indirectly) any such information for its own benefit or the benefit of any other party, unless authorized by iBIZ in writing, and even then, to limit access to and disclosure of such confidential information to Licensor's employees on a "need to know" basis only. 10.1 LICENSOR CONFIDENTIAL INFORMATION. iBIZ acknowledges that Licensor considers the Products and any materials labeled "Confidential" at the time of their delivery to iBIZ, to be confidential and/or trade secrets of Licensor and iBIZ agrees that iBIZ has obtained Licensor's written consent to release and distribute the Products. Further, iBIZ will utilize the Products for purposes specifically related to additional iBIZ products. 10.2 CONFIDENTIALITY EXCEPTIONS. Information shall not be considered confidential to the extent, but only to the extent, that such information is: (i) already known to the receiving party free of any restriction at the time it is obtained from the other party; (ii) subsequently learned from an independent third party free of any restriction and without breach of this Agreement; (iii) is or becomes publicly available through no wrongful act of either party; (iv) is independently developed by one party without reference to any Confidential Information of the other; or (v) required to be disclosed pursuant to a requirement of a government agency or law so long as the parties provide each other with timely written prior notice of such requirements. 11.0 TAXES. iBIZ agrees to pay all taxes levied against or upon the Products and any services or their use hereunder, exclusive, however, of taxes based on Licensor's income, which taxes shall be paid by Licensor. If any tax for which iBIZ is responsible hereunder is paid by Licensor, iBIZ will reimburse Licensor upon iBIZ's receipt of proof of payment. 12.0 LIABILITY. In no event shall either party be liable, one to the other, for any indirect, special or consequential damages arising out of or in connection with this Agreement. 13.0 EXCUSABLE DELAYS. In no event shall either party be liable to the other for any delay or failure to perform due to causes beyond the control and without the fault or negligence of the party claiming excusable delay. 14.0 MATERIAL BREACH. In the event of any material breach of this Agreement by one party, the other party may (reserving cumulatively all other remedies and rights under this Agreement and in law and in equity) terminate the License involved, in whole, by giving thirty (30) days' written notice thereof; provided, however, that any such termination shall not be effective if the party in breach has cured the breach of which it has been notified prior to the expiration of said thirty (30) days. 15.0 ADVERTISING OR PUBLICITY. Neither party shall use the name or marks, refer to or identify the other party in advertising or publicity releases, promotional or marketing correspondence to others without first securing the consent of such other party. 16.0 ASSIGNMENT. Neither party may assign this Agreement, any Schedule and/or any rights and/or obligations hereunder without the written consent of the other party and any such attempted assignment shall be void; provided, however, that iBIZ may assign this Agreement, any Schedule and/or any of its rights and/or obligations hereunder to any iBIZ Entity upon written notice to Licensor without the consent of Licensor. Page 4 5 17.0 GOVERNING LAW. In all respects this Agreement shall be governed by the substantive laws of the State of Arizona without regard to conflict of law principles. 18.0 MODIFICATION, AMENDMENT, SUPPLEMENT AND WAIVER. No modification, course of conduct, amendment, supplement to or waiver of this Agreement, any Schedule. or any provisions hereof shall be binding upon the parties unless made in writing and duly signed by both parties. At no time shall any failure or delay by either party in enforcing any provisions, exercising any option, or requiring performance of any provisions, be construed to be a waiver of same. 19.0 SEVERABILITY. If any of the provisions of this Agreement are held invalid, illegal or unenforceable, the remaining provisions shall be unimpaired. 20.0 HEADINGS. Headings are for reference and shall not affect the meaning of any of the provisions of this Agreement. 21.0 ENTIRE AGREEMENT. The attachments (if applicable), to this Agreement are incorporated by this reference and shall constitute part of this Agreement. This Agreement constitutes the entire agreement between the parties pertaining to the subject matter hereof. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives. INKVERSE, LLC iBIZ TECHNOLOGY CORPORATION (iBIZ) By:____________________________________ By:______________________________ Name/Title:____________________________ Name/Title:______________________ (Print, Stamp or Type) (Print, Stamp or Type) Date:__________________________________ Date:____________________________ Page 5 EX-10.4 8 EX-10.4 1 Exhibit 10.4 3COM DESIGNED FOR PALM COMPUTING PLATFORM LOGO LICENSE AGREEMENT YOU SHOULD CAREFULLY READ THE FOLLOWING TERMS AND CONDITIONS BEFORE USING THIS SOFTWARE, THE USE OF WHICH IS LICENSED BY PALM COMPUTING, INC., A SUBSIDIARY OF 3COM CORPORATION (COLLECTIVELY, "3COM"), TO ITS CUSTOMERS FOR THEIR USE ONLY AS SET FORTH BELOW. IF YOU DO NOT AGREE TO THE TERMS AND CONDITIONS OF THIS AGREEMENT, DO NOT USE THE SOFTWARE. USING ANY PART OF THE SOFTWARE INDICATES THAT YOU ACCEPT THESE TERMS. RECITALS WHEREAS, Palm owns good and valuable trademarks and logos; and WHEREAS, You wish to license use of the Logo in accordance with Palms terms and conditions described below, NOW THEREFORE: The parties hereby agree as follows: 1. DEFINITIONS For purposes of this Logo Agreement the following terms shall have the following meanings: (a) Logo shall mean the Designed for Palm Computing platform logo depicted in the attached Exhibit A or such additional or replacement Logos as Palm may provide from time to time under this Logo Agreement. Page 1 2 (b) Integer Release shall mean any product with a Version Number of the form N.0, where N is any integer. (c) Point Release shall mean any product with a Version Number of the form N.XXX, where N is any integer, and XXX is any combination of integers. (d) Product shall mean your product or products described in the attached Exhibit B which meet the applicable Designed for Palm Computing platform compatibility criteria set forth in Exhibit B. Product shall automatically include any Point Releases of products whose Integer Releases are described in Exhibit B. 2. LICENSE GRANT (a) Subject to and expressly conditioned upon compliance with the terms and conditions of this Logo Agreement, Palm hereby grants to you a worldwide (except as provided in Section 2(b)), nonexclusive, nontransferable, royalty-free, right to use the Logo solely in conjunction with Product in the manner described in the guidelines set forth in the attached Exhibit C and as may be prescribed by Palm from time to time. (b) The license right set forth in Section 2(a) shall not extend to the Republic of China (Taiwan), South Korea (Korea), or the Peoples Republic of China (PRC), unless and until you provide Palm with Page 2 3 written notice of your intent to distribute Product in these countries. You agree not to use the Logo in such countries and shall not be licensed pursuant to this Logo Agreement to do so until you have provided Palm with such written notice. (c) You may not use or reproduce the Logo in any manner whatsoever other than as expressly described in Exhibit C. (d) You agree and acknowledges that Palm retains all right, title and interest in and to the Logo. Except as expressly granted in this Logo Agreement, you shall have no rights in the Logo. Under no circumstances will any term, event or condition in this Logo Agreement be construed as granting, by implication, estoppel or otherwise, a license to any Palm technology or proprietary right other than the permitted use of the Logo pursuant to Section2(a). (e) You represent and warrant that you will use the Logo solely as provided in this Logo Agreement and will not use the Logo for promotional goods or for products which, in Palms reasonable judgment, will diminish or otherwise damage Palms goodwill in the Logo, including but not limited to uses which could be deemed to be obscene, pornographic, scandalous, violent or otherwise in poor taste or unlawful, or which purpose or objective is to encourage unlawful activities. Page 3 4 3. NO FURTHER CONVEYANCES The license grant in Section 2(a) is personal to you, and you shall not assign, transfer or sublicense this Logo Agreement (or any right granted herein) in any manner without the prior written consent of Palm. 4. QUALITY, INSPECTION, AND APPROVAL (a) You agree to maintain the quality of Product used in conjunction with the Logo at a level that meets or exceeds industry standards and at least commensurate with the quality of Product previously distributed by you. (b) You shall supply Palm with suitable specimens of Product and your use of the Logo in connection with Product at the times and in the manner described in Exhibit C, or at any time upon reasonable notice from Palm. You shall cooperate fully with Palm to facilitate periodic review of your use of the Logo and of your compliance with the quality standards described in this Logo Agreement. (c) You shall fully correct and remedy any deficiencies in your use of the Logo, conformance to the Designed for Palm Computing platform compatibility criteria, and/or the quality of Product used in conjunction with the Logo, upon reasonable notice from Palm. Page 4 5 (d) You represent and warrant that each Product release meets the applicable Designed for Palm Computing platform compatibility criteria set forth in Exhibit B. You shall provide Palm with copies or summaries of the results of applicable compatibility tests following the completion of such tests, for each product release. (e) You warrant and represent that you will comply with all applicable laws, rules, and regulations and will not violate or infringe any right of any third party. (f) You agrees to indemnify, hold Palm harmless, and defend Palm, at Palms request, from and against any and all claims, damages, costs, and expenses (including reasonable attorneys fees) arising out of or related to the Product in any manner, including user claims regarding Products incompatibility with the Palm Computing platform; provided you are notified promptly in writing of any claim, you have sole control over your defense or settlement, and Palm provides reasonable assistance in the defense of the same. 5. IDENTIFICATION AND USE (a) You shall mark every use of the Logo with the trademark designation set forth in Exhibit A and as described in Exhibit C and shall comply with Palms trademark use guidelines as amended from time to time. Page 5 6 (b) You acknowledge Palms ownership of the Logo and the Designed for Palm Computing platform logo trademark. You shall employ your best efforts to use the Logo in a manner that does not derogate from Palms rights in the Logo and will take no action that will interfere with or diminish Palms rights in the Logo, either during the term of this Logo Agreement or afterwards. You agree not to adopt, use or register any corporate name, trade name, trademark, service mark or certification mark, or other designation similar to, or containing in whole or in part, the Logo. You agree that all use of the Logo by you will inure to the benefit of Palm. You may not use the Logo in any way as an endorsement or sponsorship of Product by Palm. 6. DEFENSE OF INFRINGEMENT CLAIM (a) Subject to Section 7, Palm agrees to defend you against, and pay the amount of any adverse final judgment (or settlement to which Palm consents) resulting from, third party claim(s) (hereinafter Indemnified Claims) that the Logo infringes any registered trademark rights enforceable in the United States, Canada, Australia, Japan, Switzerland, the European Union; provided Palm is notified promptly in writing of the Indemnified Claim and has Page 6 7 sole control over its defense or settlement, and you provide reasonable assistance in the defense of the same. (b) In the event Palm receives information concerning an intellectual property infringement claim (including an Indemnified Claim) related to the Logo, Palm may at its expense, without obligation to do so, either (i)procure for you the right to continue to distribute the alleged infringing Logo, or (ii)replace or modify the Logo to make it non-infringing, and in which case, you shall thereupon cease distribution of the alleged infringing Logo. (c) Palm shall have no liability for any intellectual property infringement claim (including an Indemnified Claim) based on your (i)manufacture, distribution, or use of the Logo after Palms notice that you should cease use of such Logo due to such a claim. For all claims described in this Section 6(c), you agree to indemnify and defend Palm from and against all damages, costs and expenses, including reasonable attorneys fees. (d) Palm shall have no obligation to you for any Indemnified Claims which arise outside the geographical boundaries of the United States, Canada, Australia, Japan, Switzerland, the European Union (Included Jurisdictions). Page 7 8 (e) PALM MAKES NO WARRANTIES. THE DEFENSE PURSUANT TO SECTION 6(a) IS EXCLUSIVE AND IS IN LIEU OF ALL WARRANTIES, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE WITH RESPECT TO THE LOGO, INCLUDING ANY WARRANTY OF NON-INFRINGEMENT, IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. 7. CONSEQUENTIAL ET AL. DAMAGES IN NO EVENT SHALL PALM BE LIABLE FOR ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT, PUNITIVE OR SPECIAL DAMAGES (INCLUDING LOSS OF BUSINESS PROFITS) ARISING FROM OR RELATED TO YOUR MARKETING, DISTRIBUTION OR ANY USE OF THE LOGO, REGARDLESS OF WHETHER SUCH LIABILITY IS BASED ON BREACH OF CONTRACT, TORT, STRICT LIABILITY, BREACH OF WARRANTIES, INFRINGEMENT OF INTELLECTUAL PROPERTY, FAILURE OF ESSENTIAL PURPOSE OR OTHERWISE, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN NO EVENT SHALL PALM BE LIABLE FOR ANY DAMAGES FOR YOUR USE OF THE LOGO IN VIOLATION OF THE TERMS AND CONDITIONS OF THIS LOGO AGREEMENT. Page 8 9 8. INFRINGEMENT You shall promptly notify Palm of any suspected infringement of or challenge to the Logo or any of its constituent elements. 9. TERM OF LOGO AGREEMENT (a) This Logo Agreement shall terminate at the earliest of the following dates: (a) Two (2) years from the Effective Date; or (b) 90 days after the date of release of a new version of the Palm Operating System; provided however, that Palm shall have the right to terminate this Logo Agreement with or without cause upon thirty (30) days prior written notice. (b) From and after termination or expiration of this Logo Agreement, you shall cease and desist from all use of the Logo. However, unless the Logo Agreement is terminated for breach, you may distribute then-existing units of Product and advertising materials containing the Logo for a period of ninety (90) days from the termination date provided use of the Logo in connection with such inventory is in compliance with the terms and conditions of this Logo Agreement. 10. NOTICES All notices and other communications under this Logo Agreement shall be in writing and shall be deemed given if delivered personally, mailed by registered Page 9 10 or certified mail, return receipt requested, or sent by telecopy with a receipt confirmed by telephone, to the parties at the following addresses or to such other addresses as a party may from time to time notify the other parties. 11. ENTIRE LOGO AGREEMENT; AMENDMENT Palms providing this Logo Agreement to you does not constitute an offer by Palm. Upon execution by both Palm and you, this Logo Agreement, including all Exhibits, contains the entire agreement of the parties with respect to the subject matter hereof, and shall supersede and merge all prior and contemporaneous communications. It shall not be amended except by a written agreement signed on behalf of the parties by their respective authorized representatives. 12. GOVERNING LAW; ATTORNEYS FEES; EQUITABLE RELIEF (a) This Logo Agreement shall be governed by and construed in accordance with the laws of the State of California. You hereby consent to jurisdiction and venue in the state and federal courts sitting in the State of California. The parties agree to accept service of process by U.S. certified or registered mail, return receipt requested, or by any other method authorized by California law. (b) If either party employs attorneys to enforce any rights arising out of or related to this Logo Agreement, the prevailing party shall be entitled to recover its reasonable attorneys fees, costs, and other expenses. Page 10 11 (c) You acknowledge that a breach by you of this Logo Agreement may cause Palm irreparable damage which cannot be remedied in monetary damages in an action at law, and may also constitute infringement of the Logo. In event of any breach that could cause irreparable harm to Palm, or cause some impairment or dilution of its reputation or Logo, Palm shall be entitled to an immediate injunction, in addition to any other legal or equitable remedies. 13. HEADINGS Section headings are used in this Logo Agreement for convenience of reference only and shall not affect the meaning of any provision of this Logo Agreement. 14. NO WAIVER No waiver of any breach of any provision of this Logo Agreement shall constitute a waiver of any prior, concurrent or subsequent breach of the same or any other provision hereof, and no waiver shall be effective unless made in writing and signed by an authorized representative of the waiving party. 15. SEVERABILITY If any provision of this Logo Agreement (or any other agreements incorporated herein) shall be held by a court of competent jurisdiction to be illegal, invalid or unenforceable, the remaining provisions shall remain in full force and effect. Page 11 12 16. RELATIONSHIP Neither this Logo Agreement, nor any terms and conditions contained herein, shall be construed as creating a partnership, joint venture or agency relationship or as granting a franchise. 17. SURVIVAL The provisions of Sections 2(d), 4(e), 5(b), and 7 shall survive expiration or termination of this Logo Agreement. 18. EXHIBITS This Logo Agreement includes Exhibits A, B and C which are hereby incorporated by reference. Page 12 13 EXHIBIT A DESIGNED FOR PALM COMPUTING PLATFORM LOGO Do not reproduce this example. You will be able to download appropriate artwork after agreeing to this license. EXHIBIT B YOUR PRODUCT(S) AND DESIGNED FOR PALM COMPUTING LATFORM LOGO CRITERIA KeySync Keyboard version 1.1 KeyLink Software version .94 Designed for Palm Computing platform Compatibility Criteria Application(s) uphold the following criteria: - Only makes use of PalmOS and Licensee publicly documented APIs and structures - Has successfully run 500,000 gremlin events using the latest released version of the Palm OS Emulator with no failures on both Debug and non-Debug ROMs - Notwithstanding the 500,000 events above, the application has also tested out of memory conditions by running 100,000 gremlin events in the latest version of the Palm OS Emulator after the out of memory dialog has appeared in after adding data in any area of the application that can accept and create new data. Page 13 14 - Has the back-up bit set - Does not crash during installation - Does not crash during a synchronization that occurs after data has been changed - Does not crash during a System Find. The find must be initiated when the application is closed. - All of the databases have the same creator ID as the application - Has been tested in all presently shipping Palm Computing platform devices, or if it is designed for set of devices it should be tested on those devices and the product literature should indicate this. EXHIBIT C GUIDELINES FOR USING THE DESIGNED FOR PALM COMPUTING PLATFORM LOGO Palm Computing has established the following set of Guidelines to assist you in proper use of the logo: 1. The following attribution footnote should accompany each use of the logo. Palm Computing is a registered trademark and the Palm Computing platform Platinum logo is a trademark of Palm Computing, Inc., 3Com or its subsidiaries. If other 3Com trademarks are referenced in the context of the document, they should also be included in the attribution footnote. Page 14 15 2. You may only use the logo as a symbol that your product is designed for the Palm Computing platform and those products based upon it. You may not imply that Palm Computing in any way endorses your product. 3. The Designed for Palm Computing platform logo program is not intended to be a certification program, i.e., the logo does not represent that Palm Computing certifies your product in any way. 4. Usage of the Designed for Palm Computing platform logo requires that the product pass Compatibility Testing set forth in Exhibit B. Other than maintenance or bug-fix releases, new releases of the product must be re-tested for compatibility. 5. You must sign and return the Palm Computing Platform Logo License Agreement before artwork will be provided. 6. You may not display the logo on any materials including, but not limited to, packaging, collateral and documentation, in a manner which suggests that the Product is a Palm Computing product or in a manner which suggests that Palm Computing is a part of your products name. 7. You may not alter or animate the logo in any way. Sizing, Placement and Color Requirements: Page 15 16 1. Palm Computing will provide camera-ready artwork of the logo in electronic format. 2. You may not display the logo on packaging, documentation, collateral, or advertising in a manner which suggests that your Product is a Palm Computing product or in a manner which suggests that the mark, Palm Computing, is a part of your product name. 3. The logo cannot be larger than or more prominent than your Product name, trademark, logo, or trade name. 4. You may not combine the logo with any other feature including, but not limited to, other logos, words, graphics, photos, slogans, headlines, numbers, design features, or symbols. 5. The Designed for Palm Computing platform logo must stand alone. A minimum amount of empty space has been established around the logo to ensure that it appears in a clear visual field. No other object such as type, photography, borders, edges, etc. may appear in the empty space. The preferred distance between the logo border and any other type, images or graphic elements, on any side is equal to the height of the logo block. The minimum required border (margin) of empty space around the logo must be x, where x equals the width of the logo block. Page 16 17 6. The minimum size requirements for the Designed for Palm Computing platform logo is 15 mm in height and the maximum is 37 mm in height. For odd-sized materials, the maximum size logo height should not exceed 5% of largest dimension. 7. The right to use this logo is at the discretion of Palm Computing and Palm Computing reserves the right to revoke that right or change its program at any time. 8. You may use the Designed for Palm Computing platform logo in the about box of your application as long as you obey all the above sizing, placement and color requirements. 9. Quality Control Palm reserves the right to review your use of the Logo. Upon signing the logo license agreement, you are required to provide Palm with any Products, documentation or marketing materials bearing the Logo, so that Palm can review usage to determine whether the Usage Guidelines have been followed. Send these items to: Palm Computing, Inc. a subsidiary of 3Com Corporation 1565 Charleston Road Mountain View, CA 94043-9450 Attention: Development Programs Department OR TO BasicLogoSW@palm.com Page 17 18 Palm reserves the right to conduct spot checks on all Products, product packaging, marketing materials, and documentation and may periodically send out requests for samples. Palm may also conduct spot checks in retail outlets and other product sources to monitor your compliance with the License Logo Agreement and the Logo Use Guidelines. Refusal to submit samples, or non-compliance with your License Logo Agreement and with these Guidelines, could result in revocation of the license to use the Logo. You must correct any deficiencies in your use of the Logo and/or in the quality of the Product used in conjunction with the Logo upon reasonable notice from Palm. Refusal to correct such deficiencies could result in revocation of your license to use the Logo. Page 18 EX-10.5 9 EX-10.5 1 Exhibit 10.5 iBIZ TECHNOLOGY CORP. STOCK OPTION PLAN 1. PURPOSE OF PLAN. (a) General Purpose. The purpose of iBIZ TECHNOLOGY CORP. STOCK OPTION PLAN ("Plan") is to further the interests of iBIZ TECHNOLOGY CORP., a Florida corporation (the "Corporation"), and its stockholders by providing an incentive based form of compensation to the directors, officers, key employees and service providers of the Corporation and by encouraging such persons to invest in shares of the Corporation's Common Stock, thereby acquiring a proprietary interest in its business and an increased personal interest in its continued success and progress and ongoing inducement to remain in the Corporation's employ, service or as a director. (b) Incentive Stock Options. Some one or more of the options granted under the Plan may be intended to qualify as an "incentive stock option" as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and any grant of such an option shall clearly specify that such option is intended to so qualify. If no such specification is made, an option granted hereunder shall not be intended to qualify as an "incentive stock option." The employees eligible to be considered for the grant of incentive stock options hereunder are any persons regularly employed by the Corporation in a managerial, professional or technical capacity on a full-time, salaried basis. 2. STOCK AND MAXIMUM NUMBER OF SHARES SUBJECT TO PLAN. (a) Description of Stock and Maximum Shares Allocated. The stock subject to the provisions of the Plan and issuable upon exercise of options granted under the Plan are shares of the Corporation's Common Stock, $.001 par value, which may be either unissued or treasury shares, as the Corporation's Board of Directors (the "Board") may from time to time determine. Subject to adjustment as provided in Section 7, the aggregate number of shares of Common Stock covered by the Plan and issuable upon exercise of all options granted hereunder shall be 5,000,000 shares, which shares shall be reserved for use upon the exercise of options to be granted from time to time. (b) Restoration of Unpurchased Shares. If an option expires or terminates for any reason prior to its exercise in full and before the term of the Plan expires, the shares subject to, but not issued under such option shall again be available for other options thereafter granted. 3. ADMINISTRATION; AMENDMENTS. (a) Administration by Committee. The Plan shall be administered by the Board of Directors or whenever the Board has at least two members who are not either employees or officers of the Corporation or of any parent or subsidiary of the Corporation ("Independent Directors") by a committee of not less than two persons who are Independent Directors (the "Compensation Committee"), with full power to administer the Plan, to interpret the Plan and to establish and amend rules and regulations for its administration. (The term "Compensation Committee" as used Page 1 2 throughout this Plan shall refer to the Board of Directors or a committee of two Independent Directors, whichever is administering the Plan at the time). (b) Exercise Price. Upon the grant of any option, the Compensation Committee shall specify the exercise price for the shares issuable upon exercise of options granted. In no event may an option exercise price per share be less than 100% of the Fair Market Value (as defined below) per share of the Corporation's Common Stock on the date such option is granted. (c) Fair Market Value. The Fair Market Value of a share on any particular day shall be determined as follows: (1) If the shares are listed or admitted to trading on any securities exchange, the fair market value shall be the average sales price on such day on the New York Stock Exchange, or if the shares have not been listed or admitted to trading on the New York Stock Exchange, on such other securities exchange on which such stock is then listed or admitted to trading, or if no sale takes place on such day on any such exchange, the average of the closing bid and asked price on such day as officially quoted on any such exchange; (2) If the shares are not then listed or admitted to trading on any securities exchange, the fair market value shall be the average sales price on such day or, if no sale takes place on such day, the average of the reported closing bid and asked price on such date, in the over-the-counter market as furnished by the National Association of Securities Dealers Automated Quotation ("NASDAQ"), or if NASDAQ at the time is not engaged in the business of reporting such prices, as furnished by any similar firm then engaged in such business and selected by the Board; or (3) If the shares are not then listed or admitted to trading in the over-the-counter market, the fair market value shall be the amount determined by the Board in a manner consistent with Treasury Regulation Section 20-2031-2 promulgated under the Code or in such other manner prescribed by the Secretary of the Treasury or the Internal Revenue Service. (c) Interpretation. The interpretation and construction by the Compensation Committee of the terms and provisions of this Plan and of the agreements governing options and rights granted under the Plan shall be final and conclusive. No member of the Compensation Committee shall be liable for any action taken or determination made in good faith. (d) Amendments to Plan. The Compensation Committee may, without action on the part of the stockholders of the Corporation, make such amendments to, changes in and additions to the Plan as it may, from time to time, deem proper and in the best interests of the Corporation; provided that the Compensation Committee may not, without consent of the holder, take any action which disqualifies any option granted under the Plan as an incentive stock option for treatment as such or which adversely affects or impairs the rights of the holder of any option outstanding under the Plan. Page 2 3 4. PARTICIPANTS; DURATION OF PLAN. (a) Eligibility and Participation. Options may be granted in the total amount for the period as allocated by the Board as provided in Section 4(b) below only to persons who at the time of grant are directors, key employees of, or service providers to the Corporation, whether or not such persons are also members of the Board; provided, however, that no incentive stock option may be granted to a director of the Corporation unless such person is also an executive employee of the Corporation. (b) Allotment. The Board shall determine the aggregate number of shares of Common Stock which may be optioned from time to time but the Compensation Committee shall have sole authority to determine the number of shares and the recipient thereof to be optioned at any time. The Compensation Committee shall not be required to grant all options allocated by the Board for any given period if it determines, in its sole and exclusive judgment, that such grant is not in the best interests of the Corporation. The grant of an option to any person shall neither entitle such individual to, nor disqualify such individual from, participation in any other grant of options under the Plan. (c) Duration of Plan. The term of the Plan, unless previously terminated by the Board, is ten years or January 31, 2009. No option shall be granted under the Plan unless granted within ten years after the adoption of the Plan by the Board, but options outstanding on that date shall not be terminated or otherwise affected by virtue of the Plan's expiration. (d) Approval of Stockholders. If the Board issues any incentive stock options, solely for the purposes of compliance with the Code provisions pertaining to incentive stock options, the Plan shall be submitted to the stockholders of the Corporation for their approval at a regular meeting to be held within twelve months after adoption of the Plan by the Board. Stockholder approval shall be evidenced by the affirmative vote of the holders of a majority of the shares of Common Stock present in person or by proxy and voting at the meeting. If the stockholders decline to approve the Plan at such meeting or if the Plan is not approved by the stockholders within twelve months after its adoption by the Board, no incentive stock options may be issued under the Plan but all options granted under the Plan shall remain in full force and effect regardless of Shareholder approval and the Plan may be used for future nonincentive stock option issuances. If shareholders fail to approve the Plan, all previously issued incentive stock options shall be automatically converted to nonincentive stock options. 5. TERMS AND CONDITIONS OF OPTIONS AND RIGHTS. (a) Individual Agreements. Options granted under the Plan shall be evidenced by agreements in such form as the Board from time to time approves, which agreements shall substantially comply with and be subject to the terms of the Plan, including the terms and conditions of this Section 5. Page 3 4 (b) Required Provisions. Each agreement shall state (i) the total number of shares to which it pertains, (ii) the exercise price for the shares covered by the option, (iii) the time at which the option becomes exercisable, (iv) the scheduled expiration date of the option, (v) the vesting period(s) for such options, and (vi) the timing and conditions of issuance of any stock option exercise. (c) Period. No option granted under the Plan shall be exercisable for a period in excess of ten years from the date of its grant. All options granted shall be subject to earlier termination in the event of termination of employment, retirement or death of the holder as provided in Section 6 or as otherwise set forth in the agreement granting the option. An option may be exercised in full or in part at any time or from time to time during the term thereof, or provide for its exercise in stated installments at stated times during such term. (d) No Fractional Shares. Options shall be granted and exercisable only for whole shares; no fractional shares will be issuable upon exercise of any option granted under the Plan. (e) Method of Exercising Option. Options shall be exercised by written notice to the Corporation, addressed to the Corporation at its principal place of business. Such notice shall state the election to exercise the option and the number of shares with respect to which it is being exercised, and shall be signed by the person exercising the option. Such notice shall be accompanied (i) by the certificate described in Section 8(b) and (ii) by payment in full of the exercise price for the number of shares being purchased. Payment may be made in cash or by bank cashier's check, except that, if and to the extent the instrument evidencing the option so provides and if the Company is not then prohibited from purchasing or acquiring shares of such stock. In lieu of cash, such payment may be made in whole or in part with shares of the same class of stock as are then subject to the option, delivered in lieu of cash concurrently with such exercise, the shares so delivered to be valued on the basis of the fair market value of the stock (determined in a manner specified in the instrument evidencing the option) on the day preceding the date of exercise. Alternatively, the Grantee may, in lieu of using previously outstanding shares therefore, use some of the shares as to which the option is then being exercised. The Corporation shall deliver a certificate or certificates representing the option shares to the purchaser as soon as practicable after payment for those shares has been received. If an option is exercised by any person other than the optionholder, such notice shall be accompanied by appropriate proof of the right of such person to exercise the option. All shares that are purchased and paid for in full upon the exercise of an option shall be fully paid and non-assessable. (f) No Rights of a Stockholder. An optionholder shall have no rights as a stockholder with respect to shares covered by an option. No adjustment will be made for dividends with respect to an option for which the record date is prior to the date a stock certificate is issued upon exercise of an option. Upon exercise of an option, the holder of the shares of Common Stock so received shall have all rights of a stockholder of the Corporation as of the date of issuance. Page 4 5 (g) Compliance with Law. No shares of Corporation Common Stock shall be issued or transferred upon the exercise of any option unless and until all legal requirements applicable to the issuance or transfer of such shares have been completed. (h) Other Provisions. The option agreements may contain such other provisions as the Board deems necessary to effectuate the sense and purpose of the Plan, including covenants on the holder's part not to compete and remedies to the Corporation in the event of the breach of any such covenant. 6. TERMINATION OF EMPLOYMENT; ASSIGNABILITY; DEATH. (a) Termination of Employment. If any optionholder ceases to be a director or employee of the Corporation, or ceases to render services pursuant to a consulting, management or other agreement, other than for death, disability or discharge for cause, such holder (or successors or transferees) may, within six months after the date of termination (three months in the case of incentive stock options), but in no event after the stated expiration date, purchase some or all of the shares with respect to which such optionholder was entitled to exercise such option, on the date such employment, directorship, or consulting relationship terminated and the option shall thereafter be void for all purposes. Any termination of an agreement pursuant to which services are rendered to the Corporation by any party who is an optionholder, without a renewal of that agreement or entry into a similar successor agreement, may be treated as a termination of the employment of the third party. (b) Assignability. Options granted under the Plan and the privileges conferred thereby shall not be assignable or transferable, unless the Compensation Committee provides otherwise. Options shall be exercisable by such transferee as set forth in this Section 6. (c) Disability. If the employment or directorship of the optionholder is terminated due to disability, the optionholder (or transferee of the optionholder) may exercise the options, in whole or in part, to the extent they were exercisable on the date when the optionholder's employment or directorship terminated, at any time prior to the expiration date of the options or within one year of the date of termination of employment or directorship, whichever is earlier. (d) Discharge for Cause. If the employment or directorship of the optionholder with the Corporation is terminated due to discharge for cause, the options shall terminate upon receipt by the optionholder of notice of such termination or the effective date of the termination, whichever is earlier. Discharge for cause shall include discharge for personal dishonesty, willful misconduct in performance of duties, failure, impairment or inability to perform required duties, inefficiencies or omissions in performing required duties, breach of fiduciary duty or conviction of any felony or crime of moral turpitude. The Compensation Committee shall have the sole and exclusive right to determine whether the optionholder has been discharged for cause for purposes of the Plan and the date of such discharge. Page 5 6 (e) Death of Holder. If optionholder dies while in the Corporation's employ or while rendering consulting services to the Corporation, an option shall be exercisable until the stated expiration date thereof by the person or persons ("successors") to whom the holder's rights pass under will or by the laws of descent and distribution or by transferees of the optionholders, as the case may be, but only to the extent that the holder was entitled to exercise the option at the date of death. An option may be exercised (and payment of the option price made in full) by the successors or transferees only after written notice to the Corporation, specifying the number of shares to be purchased or rights to be exercised. Such notice shall comply with the provisions of Section 5(e), and shall be accompanied by the certificate required by Section 8(b). 7. CERTAIN ADJUSTMENTS. (a) Capital Adjustments. Except as limited by Section 422 of the Code, the aggregate number of shares of Common Stock subject to the Plan, the number of shares covered by outstanding options, and the price per share stated in such options shall be proportionately adjusted for any increase or decrease in the number of outstanding shares of Common Stock of the Corporation resulting from a subdivision or consolidation of shares or any other capital adjustment or the payment of a stock dividend or any other increase or decrease in the number of such shares effected without receipt by the Corporation of consideration therefor in money, services or property. (b) Corporate Reorganizations. Upon the dissolution or liquidation of the Corporation, or upon a reorganization, merger or consolidation of the Corporation as a result of which the outstanding securities of the class then subject to options hereunder are changed into or exchanged for cash or property or securities not of the Corporation's issue, or any combination thereof, or upon a sale of substantially all of the property of the Corporation to, or the acquisition of stock representing more than eighty percent (80%) of the voting power of the stock of the Corporation then outstanding by another corporation or by a group of persons who are required to file a Form 13D under the Securities Exchange Act of 1934 ("34 Act"), the Plan shall terminate, and all options theretofore granted hereunder shall terminate, unless provision be made in writing in connection with such transaction for the continuance of the Plan or for the assumption of options covering the stock of a successor employer corporation, or a parent or a subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices, in which event the Plan and options theretofore granted shall continue in the manner and under the terms so provided. If the Plan and unexercised options shall terminate pursuant to the foregoing sentence, all persons entitled to exercise any unexercised portions of options then outstanding shall have the right, at such time prior to the consummation of the transaction causing such termination as the Corporation shall designate, to exercise the unexercised portions of their options, including the portions thereof which would, but for this paragraph entitled "Corporate Reorganizations," not yet be exercisable. Page 6 7 8. DELIVERY OF STOCK; LEGENDS, REPRESENTATIONS. (a) Legend on Certificates. All certificates representing shares of Common Stock issued upon exercise of options granted under the Plan shall be endorsed with a legend reading as follows: The shares of Common Stock evidenced by this certificate have been issued to the registered owner in reliance upon written representations that these shares have been purchased solely for investment. These shares may not be sold, transferred or assigned unless in the opinion of the Corporation and its legal counsel such sale, transfer or assignment will not be in violation of the Securities Act of 1933, as amended, and the Rules and Regulations thereunder. (b) Private Offering for Investment Only. The options are and shall be made available only to a limited number of present and future key executives, directors, services providers and key employees who have knowledge of the Corporation's financial condition, management and its affairs. The Plan is not intended to provide additional capital for the Corporation, but to encourage stock ownership among the Corporation's key personnel. By the act of accepting an option, each optionholder agrees (i) that, if he, his successors, or his transferees exercise his option, he his successors, or his transferees will purchase the subject shares solely for investment and not with any intention at such time to resell or redistribute those shares, and (ii) that he, his successors, or his transferees will confirm such intention by an appropriate certificate at the time the option is exercised. However, the neglect or failure to execute such a certificate shall not limit or negate the foregoing agreement. 9. COMPLIANCE WITH LEGAL REQUIREMENTS. (a) For Investment Only. If, at the time of exercise of this option, there is not in effect as to the Option Shares being purchased a registration statement under the Securities Act of 1933, as amended (or any successor statute) (collectively the 1933 Act"), then the exercise of this option shall be effective only upon receipt by the Corporation from the key employee or service provider (or his legal representatives or heirs) of a written representation that the option shares are being purchased for investment and not for distribution. (b) Registration Statement Preparation. The key employee or service provider hereby agrees to supply the Corporation with such information and to cooperate with the Corporation, as the Corporation may reasonably request, in connection with the preparation and filing of the registration statements and amendments thereto under the Securities Act of 1933 and applicable state statutes and regulations applicable to the option shares. The Corporation shall not be liable for failure to issue any such option shares where such opinion of counsel cannot be obtained within the period specified for the exercise of the option, or where such registration is required in the opinion of counsel. If shares of Common Stock of the Corporation are, at the time of the exercise of this option, listed upon a securities exchange, the exercise of this option shall be contingent upon Page 7 8 completion of the necessary steps to list the option shares being purchased upon such securities exchange. (c) Additional Restrictions on Option Exercise. Officers or any other employee or service providers who are privy to material confidential information of the Company as determined by the Committee may only exercise options during the period commencing three days following the release for publication of quarterly or annual financial information regarding the Corporation and ending two weeks prior to the end of the then current fiscal quarter of the Corporation (the "Release Period"). A "release for publication" shall be deemed to be satisfied if the specified financial data appears: (1) On a wire service; (2) A financial news service; (3) In a newspaper of general circulation; or (4) Is otherwise made publicly available. Notwithstanding any provision to the contrary contained herein, a key employee or service provider may exercise options only so long as such exercise does not violate the law or any rule or regulation adopted by the appropriate governmental authority. 10. APPLICATION OF FUNDS. The proceeds received by the Corporation from the sale of Common Stock pursuant to the exercise of options will be used for general corporate purposes. 11. WITHHOLDING OF TAXES. The Corporation shall have the right to deduct from any other compensation of the option holder any federal, state or locate income taxes (including FICA) required by law to be withheld with respect to the granting or exercise of any options. Page 8 9 DATED as of the 31st day of January, 1999. iBIZ TECHNOLOGY CORP. a Florida corporation By ___________________________________________ Kenneth Schilling, President and Chief Executive Officer ATTESTED BY: Name:___________________________________ Title: Secretary Page 9 EX-10.6 10 EX-10.6 1 Exhibit 10.6 NON-QUALIFIED STOCK OPTION ISSUED UNDER iBIZ TECHNOLOGY CORP. 1999 STOCK OPTION PLAN 1. GRANT OF OPTION. iBIZ TECHNOLOGY CORP., a Florida corporation and its subsidiaries (the "Company"), subject to the terms and conditions of this instrument and to the terms and conditions of the iBIZ TECHNOLOGY CORP. Stock Option Plan dated as of January 31, 1999 (the "Plan"), a copy of which the Grantee hereby acknowledges receiving, grants to ((Recipient)) (the "Grantee") an option to purchase from the Company an aggregate of ((Options)) shares of the Company's common stock, $.001 par value per share (the "Option Shares"), at a price of $((ExercisePrice)). This Option is not to be treated as an incentive stock option under Section 422 of the Internal Revenue Code of 1986. 2. APPROVAL BY BOARD. The terms and conditions of this Stock Option have been specifically approved by the Board of Directors of the Company and any substantive and material changes to this Stock Option shall require the approval of the Board of Directors. 3. EXPIRATION OF OPTION. This Option is granted on ((Date_of_Issuance)) (the "Grant Date"). Unless exercised or terminated earlier in accordance with the provisions hereof, this option will expire at 5:00 p.m. local time on the day preceding the tenth anniversary of the Grant Date. 4. WHEN OPTION EXERCISABLE. This Option shall vest and become exercisable according to the following schedule (the "Vesting Dates"): (a) One-half of the Option Shares on April 22, 2000; and (b) The remaining one-half of the Option Shares on April 22, 2001. Grantee may exercise this Option at any time on or after the Vesting Dates set forth above but prior to the expiration pursuant to Section 3 or termination pursuant to Section 7 of this Option. 5. CONTINUOUS SERVICE A REQUISITE. Except as otherwise specifically provided in this section, this Option may not be exercised unless the Grantee is a director of the Company continuously from the Grant Date to the date of exercise. If the Grantee is removed or resigns from the directorship of the Company other than for death, Page 1 2 disability, or discharge for cause, the Grantee may exercise this Option, in whole or in part, to the extent it was exercisable on the date when the Grantee terminated his directorship with the Company, at any time prior to the expiration date of the Option or within six (6) months of the date of termination of his directorship with the Company, whichever is earlier. (a) If the directorship of the Grantee is terminated due to disability, as determined by the Company, the Grantee may exercise this Option, in whole or in part, to the extent it was exercisable on the date when the Grantee's directorship terminated, at any time prior to the expiration date of the Option or within one (1) year of the date of termination of directorship, whichever is earlier. (b) If the Grantee is removed from the directorship of the Company due to discharge for cause, as determined by the Company, this Option shall terminate upon receipt by the Grantee of notice of such removal or the effective date of the removal, whichever is earlier. (c) If the directorship of Grantee is terminated by reason of death of the Grantee, the person or persons to whom the Grantee's rights under the option pass by will or by applicable laws of descent and distribution may exercise the option, in whole or in part, to the extent it was exercisable on the date when the Grantee's directorship terminated, at any time prior to the expiration of the Option or within one (1) year after the date of the death of the Grantee, whichever is earlier. The person or persons to whom the Grantee's rights under the Option pass shall be considered the Grantee. 6. OPTION NOT ASSIGNABLE. This Option shall only be transferable by will or the laws of descent and distribution, or pursuant to a qualified domestic relations order as defined by the Internal Revenue Code of 1986, as amended, or Title I of the Employee Retirement Income Security Act or the rules thereunder. It may be exercised, during the life of the Grantee, only by the Grantee, and may not be pledged or hypothecated in any way. Additionally, it shall not be subject to execution, attachment or similar process. 7. TERMINATION OF OPTION. This Option shall terminate and all rights of the Grantee shall cease at the earliest of the following: (a) 5:00 p.m., local time, of the day before the end of the six (6) month period following the termination of Grantee's directorship with the Company for any reason other than death, disability, or discharge for cause; Page 2 3 (b) 5:00 p.m., local time, on the day before the end of the one (1) year period following the termination of the Grantee's directorship with the Company due to disability; (c) The earlier of 5:00 p.m., local time, of the effective date of the Grantee's termination of directorship with the Company for cause or receipt by the Grantee of notice of termination for cause; (d) 5:00 p.m., local time, on the day before the end of the one (1) year period following the Grantee's death if the Grantee's directorship with the Company is terminated by reason of death; and (e) Expiration of this Option as provided in Section 3. 8. EXERCISE OF OPTION. This Option may be exercised by presenting a written notice to the Company that the Option is being exercised. Such notice shall identify this Option, state the number of Option Shares exercised, and shall be signed by the Grantee. Payment in full for the Option Shares to be purchased shall accompany the notice of exercise. Such payment shall be by bank cashier's check or certified check. If the Company is required to withhold on account of any present or future tax imposed as a result of such exercise, the notice of exercise shall be accompanied by a check to the order of the Company in payment of the amount of such withholding. Any representation required by Section 11 shall also accompany the notice of exercise. The fair market value of a share of the Company on any particular date shall mean fair market value as determined under Section 3(d)(2) of the Plan. If the Grantee is deceased, or if the Grantee is disabled, the notice of exercise may be signed by the Grantee's legal representatives or heirs, and shall be accompanied by evidence satisfactory to the Company of the right of such person or persons to exercise this Option. The Grantee shall have none of the rights of a shareholder with respect to any of the Option Shares until the Option Shares are actually issued. 9. ADJUSTMENTS AND CORPORATE REORGANIZATIONS. This Option shall not affect in any way the right or power of the Company or its shareholders to make or authorize any merger, consolidation, recapitalization, reorganization or dissolution of the Company or any other corporate act or proceeding whether of a similar character or otherwise. In the event of any change in the Option Shares through reorganization, recapitalization, stock split, stock dividend, continuation of shares, merger, consolidation, rights offering, or any other change in the corporate structure, appropriate adjustments shall be made by the Board in the number and kind of shares and the price per share subject to this Option. The determination of the Board on whether any adjustment is required and the extent and nature of any such adjustment shall be final and binding upon all persons. Upon a determination by the Board of any adjustment in the number of Option Page 3 4 Shares or of the option price, this Option shall be amended in accordance with the action of the Board. Upon the dissolution or liquidation of the Company, or upon a reorganization, merger or consolidation of the Company as a result of which the outstanding securities of the class then subject to this Option are changed into or exchanged for cash or property or securities not of the Company's issue, or any combination thereof, or upon a sale of substantially all the property of the Company to, or the acquisition of stock representing more than eighty percent (80%) of the voting power of the stock of the Company then outstanding by, another corporation or person, this Option shall terminate, unless provision be made in writing in connection with such transaction for the assumption of options theretofore granted under the Stock Option Plan under which this Option was granted, or the substitution of such options of any options covering the stock of a successor employer corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices, in which event this Option shall continue in the manner and under the terms so provided. If this Option shall terminate pursuant to the foregoing sentence, the Grantee shall have the right, at such time prior to the consummation of the transaction causing such termination as the Company shall designate, to exercise the unexercised portions of this Option, including the portions thereof which would, but for this Section entitled "Adjustments and Corporate Reorganizations," not yet be exercisable. 10. SERVICE MAY BE TERMINATED. The granting of this Option shall not confer upon the Grantee any right to continue as a director of the Company and shall not interfere in any way with the right of the Company to terminate the directorship of Grantee. 11. COMPLIANCE WITH LEGAL REQUIREMENTS. If, at the time of exercise of this Option, there is not in effect as to the Option Shares being purchased a registration statement under the Securities Act of 1933, as amended (or any successor statute) (collectively the "1933 Act"), then the exercise of this Option shall be effective only upon receipt by the Company from the Grantee (or his legal representatives or heirs) of a written representation that the Option Shares are being purchased for investment and not for distribution. The Company may request an opinion of its counsel as to whether registration of the Option Shares being purchased is required under the 1933 Act or under applicable state statutes or regulations. If counsel is of the opinion that such registration is not required, the Company shall issue the Option Shares. If counsel is of the opinion that such registration is required, the Company shall not be required to issue the Option Shares until they have been so registered, but the Company shall be under no obligation to register the Option Shares. The Grantee hereby agrees to supply the Company with such information and to cooperate with the Company, as the Company may reasonably request, in connection with the preparation and filing of the registration statements and amendments thereto under the Page 4 5 1933 Act and applicable state statutes and regulations applicable to the Option Shares. The Company shall not be liable for failure to issue any such Option Shares where such opinion of counsel cannot be obtained within the period specified for the exercise of the Option, or where such registration is required in the opinion of counsel. If shares of Common Stock of the Company are, at the time of the exercise of this Option, listed upon a securities exchange, the exercise of this Option shall be contingent upon completion of the necessary steps to list the Option Shares being purchased upon such securities exchange. Furthermore, this Option may only be exercised during the period beginning three (3) days following the release for publication of quarterly or annual financial information regarding the Company and ending two (2) weeks prior to the end of the then current fiscal quarter of the Company. 12. ADDITIONAL POWERS OF THE BOARD. The Board may construe this Option and correct any defect, supply any omission or reconcile any inconsistency in this instrument or in the Plan as the Board may deem appropriate. The Board shall determine any dispute that may arise under this Option. All decisions of the Board under this or any other provision of this Option and under the Plan shall be binding and conclusive on the Grantee, his or her spouse, legal representatives and heirs. 13. GOVERNING LAW. This instrument shall be governed by the laws of the State of Arizona as applied to residents of Arizona. IN WITNESS WHEREOF, the Company has caused this Option to be executed by a duly authorized officer as of . ------------------- iBIZ TECHNOLOGY CORP. By: ------------------------------------ Its: ------------------------------ ATTEST: - ----------------------------- I hereby acknowledge that I have received a copy of iBIZ TECHNOLOGY CORP. Stock Option Plan dated as of January 31, 1999. - ----------------------------- Grantee Page 5 EX-10.7 11 EX-10.7 1 Exhibit 10.7 GENERAL LEASE PROVISIONS 1. THE LEASED PREMISES In consideration of the rent and the covenants and agreements hereinafter made on the part of the Tenant to be paid, observed, and performed, the Landlord has demised and leased and by these presents does demise and lease to the Tenant, the Leased Premises described on the Facing Page attached hereto and outlined in the Typical Plan Schedule attached hereto and forming a part hereof. but excluding therefrom any part of the exterior face of the Building, together with the right of the Tenant, in common with the Landlord, its other tenants, subtenants, and invitees thereof. to the nonexclusive use of the Building grounds and parking area. 2. DEFINITIONS In this Lease the following terms or words shall have the following meanings: (a) The terms appearing on the Facing Page attached hereto shall have the meanings stated thereupon. (b) "Herein", "hereof", "hereunder", "hereto", "hereinafter", and similar expressions refer to this Lease and not to any particular paragraph, section, or other portion thereof unless the context otherwise specifies. (c) "Business Day" means any of the days from Monday to Friday of each week inclusive unless such day is a holiday. (d) "Commencement Date" means the date so designated on the Facing Page attached hereto, or the date identified by the Landlord when the Landlord notifies the Tenant that the Leased Premises are ready for occupancy, whichever last occurs; however, if the Commencement Date has not occurred within six (6) months from the date of this Lease, then this Lease shall be null and void and Landlord and Tenant shall be released from all further obligations under this Lease. If the Commencement Date is different than the date designated on the Facing Page then Landlord and Tenant shall execute a written acknowledgment on the date of Commencement and shall attach it to this Lease as RIDER (2). (e) "Normal Business Hours" means the hours from 10:00 a.m. to 6:00 p.m. on Business Days. (f) "Term" means the time in the Lease Period set forth on the Facing Page attached hereto, to be computed from 12:00 o'clock noon on the Page 1 2 Commencement Date and expiring at 12:00 o'clock noon on the last day of such Lease Period. (g) "Rent" as the term is used throughout this Lease shall denote the "Base Rent", as is hereinafter defined, and all other financial obligations of the Tenant hereunder which are herein described as "Additional Rental" or "Additional Rent." (h) "Real Property" as the term 'Ls used throughout this Lease shall designate the total parcel of real property owned by the Landlord upon which the Building and the Leased Premises are located. 3. TERM OF LEASE Tenant shall have the right to have and hold the Leased Premises for and during the Term subject to the payment of the Base Rent and the Additional Rent and the full and timely performance by Tenant of the covenants and conditions hereinafter set forth. TENANT COVENANTS Tenant covenants and agrees with the Landlord as follows: 4. BASE RENT Tenant covenants and agrees to timely pay without notice, deduction. offset or abatement to the Landlord at the Building, or such other address as Landlord may notify Tenant of in writing, yearly and every year during the Term hereof, the Rent in lawful money of the United States. Base Rent is payable in the monthly installments set forth on the Facing Page attached hereto; Additional Rent is payable pursuant to the terms of Paragraph 7 hereof. Rent is due and shall be paid in advance on or before the first (1st) day of each month during the term hereof. Rent is considered late and Tenant shall be in default if rent is received after 5:00 o'clock p.m on the fifth (5th) day of the month. A penalty of fifty dollars ($50.00) per day will be assessed on any suits due under the lease which are received after the fifth (5th) day of the month. In the event that Landlord is required to post a 3-day notice for non-payment of rent or for any other breach of the Lease, Tenant shall pay to Landlord an administrative fee of $250.00 and attorneys fees of $250.00 (total of $500.00) together with any other sums due as an essential part of the cure of default. If the Term hereof commences on any day other than the first day or expires on any day other than the last day of the month, Rent for the fraction of a month at the commencement and at the end of the Term shall be adjusted pro rata or a per diem basis, arid all succeeding installments of Base Rent shall be paid on the first (1st) day of each month during the term hereof. Should Tenant be in default, Landlord may collect $50.00 per day penalty under this provision or 18% interest under Paragraph 36, whichever is greater. Any rent check returned for insufficient funds shall Page 2 3 constitute an event of default, and Tenant must cover said check with certified funds plus the penalty contained herein. Landlord may also seek additional relief as provided by law. 5. COMMENCEMENT AND CONDUCT OF BUSINESS Tenant shall commence it business in the Leased Premises on the Commencement Date and hereafter shall operate its business in the entire Leased Premises in accordance with Paragraph 14 in a reputable manner and in compliance with the provisions of this Lease and the requirements of all applicable governmental laws and during Business Days during the Term hereof, provided that nothing in this Section shall require the Tenant to carry on business during any period prohibited by any law or ordinance regulating or limiting the hours during which such business may be carried on. 6. BUSINESS TAXES, ETC. 6.1 Tenant shall fully and timely pay all business and other taxes, separately metered utility charges, other charges, rates, duties, assessments and license fees levied, imposed, charged, or assessed against or in respect of the Tenant's occupancy of the Leased Premises or in respect of the personal property, trade fixtures, furniture and facilities of the Tenant or the business or income of the Tenant on and from the Leased Premises, if any, as and when the same become due, and shall indemnify and hold Landlord harmless from and against all payment of such taxes, charges, rates, duties, assessments, and license fees and against all loss, costs, charges, and expenses occasioned by or arising from any and all such taxes, rates, duties, assessments, and license fees. 6.2 Tenant shall promptly deliver to Landlord for inspection at Landlord's option upon written request of Landlord, receipts for payment of an taxes, charges, rates, duties, assessments, and licenses in respect to all improvements, equipment, and facilities of the Tenant on or in the Leased Premises which were due and payable up to one (1) year prior to such request and in any event to furnish to the Landlord it requested by the Landlord, evidence satisfactory to the Landlord of any such payments. Landlord shall have no obligation hereunder or otherwise to make or monitor the making of such payments. 7. ADDITIONAL RENT 7.1 Real Estate Taxes, and Operating Costs: (a) Tenant shall pay to the Landlord as Additional Rent both a pro rata portion of the "Real Estate Taxes", as said term is hereinafter defined, and a portion of the Operating Costs as said term is hereinafter defined. In determining the Tenant's share of any such Additional Rent, such amount shall be a fraction, the numerator of which shall be the area of the Leased Premises and the denominator of Page 3 4 which shall be the total rentable space in the Building. For purposes of this Lease, and unless and until there is physical change in the size of the Leased Premises and/or the rentable space in the Building, the Tenant's proportional share shall be deemed to be JL1is_0/6 ("Tenants Proportional Share"). Tenant accepts the figures used by the Landlord for the area of the Leased Premises, the total rentable space in the Building, and Tenant's proportional share, and waives any right to dispute these figures in the future. (b) Real Estate Taxes (i) "Real Estate Taxes" shall mean and include all general and special taxes, assessments, dues, duties, and levies charged and levied upon or assessed against the Building, the land upon which it is located, any improvements situated on the Real Property, any leasehold improvements, fixtures, installations, additions, and equipment used in the maintenance or operation of the Building whether owned by Landlord or Tenant, not paid directly by the Tenant. Further, if at any time during the Term of this Lease the method of taxation of real estate prevailing at the time of execution hereof shall be or has been altered so as to Cause the whole or any part of the taxes now or hereafter levied, assessed, or imposed upon real estate to be levied, assessed, or imposed upon Landlord wholly or partially as a capital levy or otherwise, or on or measured by the rents therefrom, then such new or altered taxes attributable to the Leased Premises shall be deemed to be included within the term "Real Estate Taxes" for purposes of this Section, save and except that such shall not be deemed to include any increase in said tax not attributable to the Building. (ii) The amount of Real Estate Taxes attributed to the Leased Premises for any year or portion of year shall be the amount of such taxes multiplied by Tenant's Proportional Share. (c) Operating Costs (i) The term "Operating Costs" means the total amounts paid or payable whether by the Landlord or others on behalf of the Landlord in connection with the ownership, maintenance, repair and operation of the Building, including without limiting the generality of the foregoing, the purchase of steam or other energy for heating or other purposes, the amount paid or payable for all electricity furnished by the Landlord to the Building, the amount paid or payable for replacement of electric light bulbs, tubes and ballasts; the amount paid or payable for all hot and cold water (other than that paid by Tenants), the amount paid or payable for all labor and/or wages and Page 4 5 other payments including costs to Landlord or workman's compensation and disability insurance, payroll taxes, welfare and fringe benefits made to janitors, caretakers, and other employees, contractors and subcontractors of the Landlord (including but not limited to salary or wages of the building manager) involved in the operation, maintenance, and repair of the Building, managerial and administrative expenses related to the Building, the total charges of any independent contractors employed in the repair, care, operation, maintenance, and cleaning of the Building, the amount paid or payable for all supplies including all supplies and necessities which are occasioned by everyday wear and tear, the costs of climate control, window and exterior wall cleaning, telephone and utility costs, the cost of accounting services necessary to compute the rents and charges payable by tenants of the Building, fees for management, legal, accounting, inspection and consulting services, the cost of guards and other protection services, the cost of locks, keys, alarms and related security equipment, payments for general maintenance and repairs to the plant and equipment supplying, the amount paid for premiums for all insurance and all amounts payable in accordance with ground leases, easements, or right of way appurtenant to the Building. Operating Costs shall not, however, include interest on debt, capital improvements. capital retirement of debt, depreciation, costs properly chargeable to capital account, and costs directly charged by the Landlord to any tenant or tenants. The reference to "Building" in this subparagraph (c)(i) shall include all related facilities including interior Lease Premises, sidewalks, grounds, elevators, and other public areas contained in and around the Building as well as landscaping, parking areas, and exterior walkways and areas. By setting forth the above items which may or could be included within Operating Costs, it is not meant to indicate or imply that all of such activities or services will be provided by the Landlord. (ii) The amount of Operating Costs attributed to the Leased Premises for any year or portion of year shall be the amount of such Operating Costs multiplied by Tenant's Proportional Share. (d) If only part of the first or final calendar year is included within the Term, the amount of Real Estate and operating Costs payable by the Tenant for such period shall be estimated by the Landlord acting reasonably and adjusted proportionately on a per diem basis and shall be payable upon demand as soon as such amount has been ascertained by the Landlord. 7.2 Payment of Additional Rent Any Additional Rent payable by the Tenant under Section 7.1 hereof shall be paid as follows, unless otherwise provided: Page 5 6 (a) During the Term, the Tenant shall pay to the Landlord at the same time as the payment of the Base Rent, one twelfth (1/12th) of the amount of such Additional Rentals as estimated by the Landlord in advance acting reasonably to be due from the Tenant for a twelve month period of time. Such estimate may be adjusted from time to time by the Landlord as actual Real Estate Taxes and Operating Costs become known, and the Tenant shall pay installments of Additional Rentals according to such estimate as periodically adjusted. (b) If the aggregate amount of such estimated Additional Rental payments made by the Tenant in any year of the Term should be less than the Additional Rentals due for such year of the Term, then the Tenant shall pay to the Landlord as Additional Rental upon demand, the amount of such deficiency. Similarly, if the aggregate amount of such estimated Additional Rental payments made by the Tenant in any year of the Term should be more than the Additional Rentals due for such year of the Term, then such surplus shall be credited to future Additional Rent due and owing in the next subsequent year. (c) Notwithstanding the foregoing, if the Landlord is required to pay an amount which it is entitled to collect from the tenants of the Building more frequently than monthly, or if the Landlord is required to prepay any such amount, the Tenant shall pay to the Landlord its proportionate share of such amount calculated in accordance with this Lease within ten (10) days from receipt of written demand. (d) The Landlord shall, within ninety (90) days after the end of each calendar year (or as soon thereafter as possible reasonable), provide the Tenant a statement of the actual Real Estate Taxes and Operating Costs incurred for the previous calendar year, certified by the Landlord as to its accuracy. If the Tenant wishes to dispute the Landlord's determination or calculation of such expenses for any calendar year, the Tenant shall give the Landlord written notice of such dispute within thirty (30) days after receipt of notice from the Landlord of the matter giving rise to the dispute. If the Tenant does not give the Landlord such notice within such time, the Tenant shall have waived its right to dispute such determination or calculation. In the event the Tenant disputes any such determination or Calculation, the Tenant shall have the right to inspect the Landlord's accounting records at the Landlord's accounting office and if, after such inspection, the Tenant still disputes such determination or calculation, a certification as to the proper amount made by an independent certified public accountant selected by the Landlord shall be final and conclusive. The Tenant agrees to pay the costs of such certification. If such certification reveals that the amount previously determined and calculated by the Landlord was incorrect and improper, a correction shall be made and either the Landlord shall promptly return to the Tenant any overpayment or the Tenant shall promptly pay to the Landlord any underpayment that was based on such incorrect amount. Notwithstanding the pendency of any dispute hereunder, the Page 6 7 Tenant shall make payments based upon the Landlord's determination and calculation until such determination and calculation has been established hereunder to be incorrect. 8. BULBS, TUBES, BALLASTS Tenant shall make any replacement of electric light bulbs, tubes, and ballasts in the Leased Premises throughout the term and any renewal thereof. The Landlord, in its sole discretion may adopt a system of revamping and reballasting periodically on a group basis in accordance with good practice. 9. METERS Tenant shall pay as Additional Rental, on demand, the cost of any metering which may be required by the Landlord to measure any excess usage of electricity, water, or other utility or energy. 10. USE OF ELECTRICITY 10.1 Tenant's use of electricity in the Leased Premises shall be separately metered and paid by Tenant to the supplying utility of the Landlord's discretion. 10.2 If, for any reason, electricity is not separately metered to Tenant, Landlord shall reasonably apportion Tenant's share of electrical usage and Tenant shall pay the cost thereof as Additional Rent on the dates for payment of Base Rent not occurring after billing of Tenant therefore by Landlord. 11. TENANT REPAIR 11.1 If the Building, boilers, engines, pipes, or other apparatus, or members or elements of the Building (or any of them) used for the purpose of climate control of the Building, or if the water pipes, drainage pipes electrical lighting, or other equipment of the Building or the roof or outside walls of the Building or Real Property of Landlord become damaged or are destroyed through any act or omission of the Tenant, its servants, agents, employees, or its invitees, then the cost of the necessary repairs, replacements, or alterations, shall be borne by the Tenant who shall pay such cost to Landlord within ten (10) days from receipt of written demand thereof, except to the extent such costs are reimbursed by insurance. 11.2 Tenant shall keep the Leased Premises in as good order, condition, and repair as when they were entered upon. Tenant shall be responsible for the cost of any repair, replacement or alteration of ceiling tile, water pipes, sinks, toilets, plumbing, drainage pipes, electrical wiring, electrical outlets, lighting, climate control, doors, locks (interior and Page 7 8 exterior), door hardware, interior walls and flooring, roof if penetrated by tenant as set forth in Section 30 or other portions of the Building or Real Property of Landlord. If Tenant fails to keep the Leased Premises in such good order, condition, and repair as required hereunder to the satisfaction of Landlord, Landlord may restore the Leased Premises to such good order and condition and make such repairs without liability to Tenant for any loss or damage that may accrue to Tenant's property or business by reason thereof, and upon completion thereof. Tenant shall pay to Landlord the costs of restoring the Leased Premises to such good order and condition and of the making of such repairs, within ten (10) days from receipt of written demand thereof. 11.3 Tenant shall deliver at the expiration of the Term hereof or sooner upon termination of the Term, the Leased Premises in the same condition as received except for reasonable wear and tear, and cause to be removed at Tenant's expense furniture and equipment belonging to Tenant, signs, notices, displays, and the like from the Leased Premises and repair any damage caused by such removal. 11.4 In the event Landlord is responsible for cleaning service under this Lease, Tenant shall leave the Leased Premises at the end of each Business Day in a reasonably tidy condition for the purpose of allowing the cleaning service to perform adequately. 11.5 Landlord reserves the right to enter into contracts for preventive maintenance for all climate control and Tenant shall be responsible for said costs. 12. ASSIGNMENT AND SUBLETTING 12.1 Tenant shall not permit any part of the Leased Premises to be used or occupied by any persons other than the Tenant, any subtenants permitted under Section 12.2, and the employees of the Tenant and any such permitted subtenant. or permit any part of the Leased Premises to be used or occupied by any licensee or concessionaire, or permit any persons to be upon the Leased Premises other than the Tenant, such permitted subtenants, and their respective employees, customers, and others having the lawful business with them. 12.2 Tenant shall not assign or sublet or part with the possession of all or part of the Leased Premises without the prior written consent of Landlord, which consent shall not be unreasonably withheld; provided, however, that the use of the Premises by the sublessee or assignee shall be substantially the same as the use permitted by the Tenant, and provided that the Tenant shall: submit in writing to Landlord (a) the name and legal composition of the proposed subtenant or assignee; (b) the nature of the business proposed to be carried on in the Leased Premises; (c) the terms and provisions of the proposed sublease; (d) such reasonable financial and other information as the Landlord may request concerning the proposed subtenant or assignee; (e) assurances, adequate to the Landlord, of the future Page 8 9 performance by the proposed subtenant or assignee under the Lease; (f) a payment of $500.00 to the Landlord to defray expense of Landlord in reviewing the aforementioned material, (g) payment of all Landlord's legal fees and related expenses incurred as a result of the assignment or subletting. Any such consent to any assignment or subletting shall not relieve the Tenant from its obligations for the payment of all rental due hereunder and for the full and faithful observance and performance of the covenants, terms and conditions herein contained. No term of assignment or subletting shall extend beyond the primary term of the lease, and any option periods under this Lease shall terminate with respect to any the Tenant and any assignee or sublessee. Consent of the Landlord to an assignment or subletting shall not in any way be construed to relieve the Tenant from obtaining the consent of the Landlord to any further assignment or subletting, and shall not bind Landlord to provide any services or benefits to subtenant that Tenant had provided or committed to provide in writing or otherwise. Any violation of this subsection shall be a non-curable default, which allows the Landlord the right to possession of the Premises and other rights of default against Tenant or anyone else occupying the Premises as set forth in Section 35, despite efforts by Tenant to cure. Any rent collected by Tenant from a sublessee in excess of the rate of rent under the Lease shall be the property of the Landlord. Landlord shall have the option, in its sole discretion, to demand that a sublessee pay rent directly to the Landlord. Any sublease shall be on a sublease form provided by the Landlord. 12.3 If the Tenant is an entity other than an individual, the transfer of an interest in more than fifty percent (50%) of such entity in more than fifty percent (50%) of any type of equity security of such entity; i.e., preferred stock, any class of common stock) shall constitute an assignment for purposes of this Section which assignment shall require the same approval and be subject to the same limitations pursuant to Section 12.2 as any other assignment. The rights and obligations described in this Section 12.3 shall be applicable regardless of whether the change in control occurs at one time or as a cumulative result of several changes in ownership. The Tenant shall, upon request of the Landlord, make available to the Landlord for inspection or copying or both, all books and records of the Tenant which alone or with other data show the applicability or inapplicability of this Section 12.3. 12.4 The proposed subtenant or assignee shall have at least three (3) years of experience in the management and/or operation of the business contemplated in the sublease or assignment of the Premises. Tenant shall provide satisfactory evidence of this experience to the Landlord. Or, in lieu of such actual experience, the proposed subtenant or assignee shall provide satisfactory evidence to Landlord that the proposed subtenant or assignee will hire as employees or independent contractor personnel competent to operate the business contemplated in the sublease or assignment of the Premises. 12.5 If any interest holder of the Tenant shall fail or refuse to furnish to the Landlord information or data requested by Landlord, verified by the affidavit of such interest Page 9 10 holder or other credible person, which data alone or with other data show the applicability of Section 12.3, then such failure shall constitute an event of default under this Lease. 13. MASTER DECLARATION OF PROTECTIVE COVENANTS Tenant and employees and all persons visiting or doing business with the Tenant in the Leased Premises shall be bound by and shall observe the Master Declaration of Protective Covenants. 14. USE OF LEASED PREMISES 14.1 Except as expressly permitted by prior written consent of the Landlord, the Leased Premises shall not be used other than as set forth on Facing Page of this Lease, which use shall be non-exclusive. Landlord makes no representation or warranty to the Tenant regarding the occupancy or use of any lease space owned by the Landlord or leased to any other Tenant. All use of the Leased Premises shall comply with the terms of this Lease and all applicable laws, ordinances, regulations. or other governmental ordinances from time to time in existence. Tenant shall not have more than one (1) person per two hundred and fifty (250) square feet of useable space occupying the premises. 14.2 Tenant agrees that it will not keep, use, sell or offer for sale in or upon the Leased Premises any articles, which may be prohibited by any insurance policy in force time to time covering the Building. In the event the Tenant's occupancy or conduct of business in or on the Leased Premises, whether or not the Landlord has consented to the same, results in any increase in premiums for the insurance carried from time to time by the Landlord with respect to the Building, the Tenant shall pay any such increase in premiums as Additional Rental within ten (10) days after bills for such additional premiums shall be rendered by the Landlord in determining whether increased premiums are a result of the Tenant's use or occupancy of the Leased Premises. A schedule issued by the organization computing the insurance rate shall be conclusive evidence of the several items and charges which make up such rate. The Tenant shall comply with all reasonable requirements of the insurance authority or of any insurer now or hereafter in effect relating to the Leased Premises. 15. TENANT'S INSURANCE 15.1 Landlord shall maintain fire and extended coverage insurance on the Building and the Leased Premises in such amounts as Landlord shall deem reasonable. Such insurance shall be maintained at the expense of Landlord (but assessed to Tenant as a part of the Operational Costs), and payments for losses thereunder shall be made solely to Landlord or the mortgagees of Landlord as their interest shall appear. Tenant shall maintain at its expense, in an amount equal to full replacement costs, fire and extended coverage insurance Page 10 11 on all of its personal property, including removable trade fixtures, located in the Leased Premises. Tenant shall maintain insurance coverage for business interruption, including relocation costs in the event of partial or total destruction of the Premises. All Tenant's insurance must be in place and proof of insurance provided to Landlord prior to Tenant's possession of the Premises. Should Tenant's use cause the Landlord's insurance premiums to increase. Tenant shall be solely responsible for the increase in the premium. 15.2 Tenant shall, at its sole Cost and expense, procure and maintain through the term of this Lease, comprehensive general liability insurance against claims for bodily injury or death and property damage occurring in or upon or resulting from the Leased Premises, in standard form and with such insurance company or companies as may be acceptable to Landlord, such insurance to afford immediate protection, to the limit of not less than $1,000,000.00 in respect of any one accident or occurrence, and to the limit of not less than $100.000.00 for property damage, with not more than $5,000.00 deductible. Such comprehensive general liability Insurance shall name the Landlord as an additional insured and shall contain blanket contractual liability coverage which insures contractual liability under the indemnification of Landlord by Tenant set forth in this Lease (but such coverage or the amount thereof shall in no way limit such indemnification). Tenant shall maintain with respect to each policy or agreement evidencing such comprehensive general liability insurance and each policy or agreement evidencing the insurance required pursuant to Section 15(l) above, such endorsements as may be required by Landlord and shall at all times deliver to and maintain with Landlord a certificate with respect to such insurance in form satisfactory to Landlord and the mortgagees of Landlord. Tenant shall obtain a written obligation on the part of each insurance company to notify Landlord at least ten days prior to cancellation or modification of such insurance. Such policies or duly executed certificates of insurance relating thereto shall be promptly delivered to Landlord and renewals thereof as required shall be delivered to Landlord at least thirty (30) days prior to the expiration of the respective policy terms. If Tenant fails to comply with the foregoing requirements relating to insurance, Landlord may obtain such insurance and Tenant shall pay to Landlord on demand the premium cost thereof, together with interest thereon from the date of payment by Landlord until repaid by Tenant at the rate of eighteen percent (18%) per annum. Failure to comply with any provision of Paragraph 15 by the Tenant shall constitute an event of substantial default justifying eviction of the Tenant. 16. CANCELLATION OF INSURANCE It any insurance policy upon the Building or any part thereof shall be canceled or cancellation shall be threatened or the coverage thereunder reduced or threatened to be reduced in any way by reason of the use or occupation of the Leased Premises or any part thereof by the Tenant or by any assignee or subtenant of the Tenant or by anyone permitted by the Tenant to be upon the Leased Premises, and if the Tenant fails to remedy the condition giving rise to Cancellation, threatened cancellation, or reduction of coverage within Page 11 12 twenty-four (24) hours after notice, the Landlord may, at its option, enter upon the Leased Premises and attempt to remedy such condition and the Tenant shall pay the cost thereof to Landlord within ten (10) days from receipt of written demand therefor, Landlord shall not be deemed to be liable for any damage or injury caused to any property of the Tenant or of others located on the Leased Premises as a result of such entry. After such ten (10) day period, interest on such cost shall accrue at the rate of eighteen percent (18%) per annum. In the event that the Landlord shall be unable to remedy such condition, then Landlord shall have all of the remedies provided for in the Lease in the event of a default by Tenant. Notwithstanding the foregoing provisions of this Section 16, if Tenant fails to remedy as aforesaid, Tenant shall be in default of its obligation hereunder and Landlord shall have no obligation to attempt to remedy. 17. OBSERVANCE OF LAW Tenant shall comply with all provisions of law in effect during the Term and any renewal terms, or while otherwise in possession of the Premises, including without limitation, federal, state, county and city laws. zoning requirements, licensing requirements, any other ordinances, and regulations and any other governmental, quasi-governmental or municipal regulations which relate to the partitioning, equipment operation, alteration, occupancy and use of the Leased Premises, and to the making of any repairs, replacements, alterations, additions, changes, substitutions, or improvements of or to the Leased Premises including signage of any kind, whether located on or off the Premises. Moreover, the Tenant shall comply with all police, fire, and sanitary regulations imposed by any federal, State, county or municipal authorities, or made by insurance underwriters, and to observe and obey all governmental and municipal regulations and other requirements governing the conduct of any business conducted in the Leased Premises during the Term and any renewal terms. 18. WASTE AND NUISANCE Tenant shall not commit, suffer, or permit any waste or damage or disfiguration or injury to the Leased Premises or the Real Property of Landlord or common areas in the Building or the fixtures and equipment located therein or thereon, or permit or suffer any overloading of the electrical systems or telephone systems Or 14VAC systems, or overloading of the floors thereof and shall not place therein any safe, heavy business machinery, computers, data processing machines, or other heaving things without first obtaining the consent in writing of the Landlord and, if requested, by Landlord's superintending architect, and not use or permit to be used any part of the Leased Premises for any dangerous, noxious or offensive trade or business, and shall not cause or permit any nuisance, noise, or action in, at or on the Leased Premises. Landlord, in its sole discretion, shall determine what constitutes waste or nuisance under this Section. Landlord shall not be liable to Tenant for waste or nuisance committed by any other tenant on the Real Property. If Page 12 13 this should occur, Tenant's sole remedy is against the other tenant committing waste or nuisance. 19. ENTRY BY LANDLORD Tenant agrees to and shall permit the Landlord, its servants or agents to enter upon the Leased Premises at any time and from time to time for the purpose of inspecting and of making repairs, alterations, or improvements to the Leased Premises or to the Building, or for the purpose of having access to the under-floor ducts, or to the access panels to mechanical shafts (which the Tenant agrees not to obstruct), and the Tenant shall not be entitled to compensation for any inconvenience, nuisance or discomfort occasioned thereby. The Landlord shall also have the right of entry to remedy any condition which Landlord, in its reasonable discretion, believes may cause cancellation or reduction of any insurance maintained by Landlord on the Building. The Landlord shall have the right to enter the Leased Premises in order to check, calibrate, adjust and balance controls and other parts of the heating, ventilating, and climate control system at any time. The Landlord shall attempt to proceed hereunder after reasonable notice has been given to Tenant, if possible, and in such manner as to minimize interference with the Tenant's use and enjoyment of the Leased Premises. For the purpose of this Section and for all other purposes set forth in this Lease, Landlord shall have and retain a key with which to unlock all doors in, upon and about the Leased Premises and Landlord shall have the right to use any and all means which Landlord may deem proper to open said doors in an emergency, in order to obtain entry to the Leased Premises. Tenant shall not change exterior or interior door locks without prior written permission of Landlord. Tenant shall provide Landlord with keys to any new locks. 20. EXISTING PREMISES Tenant shall permit the Landlord or its agents to exhibit and show the Leased Premises to prospective tenants during normal Business Hours of the last six (6) months of the Term or any renewal thereof, or if Tenant is in default of any term of the Lease. Tenant shall not hold the Landlord liable for any damages resulting from such entry, absent gross negligence on the part of the Landlord. 21. ALTERATIONS 21.1 In the event Tenant desires to make any alterations to any portion of the Building, Real Property or the Leased Premises, including alterations to accommodate Tenant's for needs for extra services in addition to those provided by the Landlord under Section 29, unless the Tenant has supplied the Landlord with a list of additional services necessary to meet Tenant's requirements, and said list is attached and incorporated into this lease at the date of execution by Landlord, Tenant is deemed to have accepted the existing services to the Leased Premises as sufficient. Any additional services required by the Tenant Page 13 14 shall be deemed an Alteration to be paid by the Tenant under Section 21 of the Lease. Tenant shall give written notice of the proposed alterations to Landlord and shall not proceed with work on the alterations without Landlord's prior written consent (which consent in the sole and absolute discretion of Landlord may be withheld). For purposes of this Paragraph 21 "material alterations" shall mean any alterations that affect the exterior, structure, or mechanical components of the Building, or modify the basic utility and function of the Building. Any material alterations shall at once become the property of the Landlord and shall be surrendered to the Landlord upon termination of the Lease. Any breach of the terms of this section shall be a non-curable event of default. 21.2 No alterations shall be commenced until the Tenant shall have procured and paid for, so far as the same may be required from time to time, all permits and authorizations of all municipal departments and governmental subdivisions having jurisdiction. Landlord shall in its sole and absolute discretion have the right to require, prior to commencement of such alterations, a letter of credit, bond or other satisfactory financial instrument assuring faithful performance and lien free completion of such alterations. 21.3 Any alterations shall be made within a reasonable time and in a good and workmanlike manner and in compliance with all applicable permits and authorizations and building and zoning laws and with all other laws, ordinances, orders, rules, regulations and requirements of all federal, state and municipal governments, departments, commissions, boards and officers. 21.4 In no event shall Tenant, by reason of such alterations, be entitled to any abatement, allowance, reduction or suspension of the Rent and other charges herein reserved of required to be paid hereunder, nor shall Tenant, by reason thereof, be released of or from any other obligations imposed upon Tenant under this Lease. 21.5 Landlord shall have no responsibility to Tenant or to any contractor, subcontractor, supplier, materialman, workman, or other person, firm, or corporation who shall engage or participate in any alterations, and Landlord shall be entitled to post notices of nonliability on the Leased Premises. If any lens for labor and materials supplied or claimed to have been supplied to the Leased Premises shall be filed, Tenant shall within fifteen (15) days of the filing of such lien discharge such lien or furnish a bond, a letter of credit or title insurance protection to Landlord which in the sole and absolute discretion of Landlord affords its sufficient protection during Tenant's timely and good faith contesting of such liens. Tenant shall indemnify and hold Landlord harmless against any liability, loss, damage, cost or expense, including attorneys fees, on account of such liens. 21.6 The Tenant may remove from the Leased Premises any fixtures installed by the Tenant, as well as those of its office supplies and movable office furniture and equipment which are not attached to the Building, provided: (i) such removal is made prior to Page 14 15 the termination of the Term of this Lease; (ii) the Tenant is not in default of any obligation or covenant under this Lease at the time of such removal; and (iii) the Tenant promptly repairs all damage caused by such removal so that the Leased Premises (where such items shall have been located) shall be placed in the condition of such Leased Premises at the Inception of this Lease, subject to reasonable deterioration and wear and tear. Additionally, if the Landlord so requests in writing, the Tenant will, prior to the termination of this Lease, remove any and all alterations, additions, fixtures, equipment and property placed or installed by it in the Leased Premises and will repair any damage caused by such removal to the condition at the inception of this Lease. reasonable deterioration and wear and tear excepted. If the Tenant does not elect or is not required to remove such alterations, additions fixtures and equipment, such property shall become the property of the Landlord and shall remain upon and be surrendered with the Leased Premises as a part thereof at the termination of this Lease, the Tenant hereby waiving all rights to any payment or compensation therefore. 22. GLASS Tenant shall pay on demand the cost of replacement with as good quality and size of any glass broken on the Leased Premises including outside windows and doors of the perimeter of the Leased Premises (including perimeter windows in the exterior walls) during the continuance of this Lease, unless the glass shall be broken by the Landlord, its servants, employees or agents acting on its behalf. 23. SIGNS, DRAPES, SHUTTERS AND BANNERS 23.1 Tenant shall not place or permit to be placed in or upon the Leased Premises where visible from the outside of the Building, or outside the Leased Premises, any signs, notices, drapes, shutters, blinds or displays of any type without the prior written consent of Landlord, which consent shall not be unreasonably withheld. 23.2 Landlord reserves the right in Landlord's sole discretion to place and locate on any roof or exterior of the Building such signs, notices, displays, and, similar items as Landlord deems appropriate in the proper operation of the Building. 24. NAME OF BUILDING Tenant shall not refer to the Building by any name other than that designated from time to time by the Landlord. nor use such name for any purpose other than that of the business address of the Building assigned to it by the Landlord. 25. SUBORDINATION AND ATTORNMENT Page 15 16 25.1 At Landlord's option, this Lease shall be subject to and subordinate to all mortgage (including any deed of trust and mortgage securing bonds and all indentures supplemental thereto) and to all underlying, superior, ground or land leases which may now or hereafter encumber the Real Property of which the Leased Premises are a part, and all renewals, modifications, consolidations, replacements and extensions thereof of such mortgages and leases which may now or hereafter affect the Leased Premises or any part thereof. The Tenant hereby constitutes and appoints the Landlord its agent and attorney, which power of attorney is coupled with an interest, for the purpose of executing any subordination, acknowledgment, or agreement required by a mortgagee, lender or lessor of Landlord. 25.2 The Tenant agrees that in the event that any holder of any mortgage, indenture, deed of trust, or other encumbrance encumbering any part of the Real Property becomes mortgagee in possession of the Leased Premises, the Tenant will pay to such mortgagee all Rent subsequently payable hereunder. Further, the Tenant agrees that in the event of the enforcement by the trustee or the beneficiary under or holder or owner of any such mortgage, deed of trust, land or ground lease of the remedies provided for by law or by such mortgage, deed of trust, land or ground lease, the Tenant will, upon request of any person or party succeeding to the interest of the Landlord as a result of such enforcement, automatically become the tenant of and attorns to such successor-in-interest without changing the terms or provisions of this Lease. Upon request by such successor-in-interest and without cost to the Landlord or such successor-in-interest, the Tenant shall execute, acknowledge and deliver an instrument or instruments confirming the attornment herein provided for. 26. ACCEPTANCE OF PREMISES 26.1 Taking possession of the Leased Premises by Tenant shall be conclusive evidence as against Tenant that the Leased Premises were in good and satisfactory condition when possession was taken and acknowledgment of completion in full accordance with the terms of this Lease. 26.2 Tenant agrees that there is no promise, representation, or undertaking by or binding upon the Landlord with respect to any alteration, remodeling, or redecorating of or installation of equipment or fixtures in the Leased Premises, except such, if any, as were expressly set forth in this Lease or the Typical Plan Schedule attached hereto. 26.3 Landlord reserves the right to relocate the Tenant from the existing premises to a substitute premises within the property (Landlord's building, shopping center or complex as the case may be) selected by the Landlord. The aforesaid right to relocate shall be exercisable at any time during the term or option period by delivering written notice of LANDLORD'S intention not less than ninety (90) days In advance. Tenant shall notify Landlord via certified mail within thirty (30) days of notice of its intent of acceptance or Page 16 17 rejection. Should Tenant notify Landlord of rejection of premises selected by Landlord, Tenant may terminate this Lease Agreement and vacate prior to the end of the ninety (90) day notice period provided by Landlord. Tenant's right of termination in this section is not applicable in situations of fire or other cause set forth in Section 31. 27. ESTOPPEL CERTIFICATES Tenant agrees that it shall at any time and from time to time upon not less than five (5) days' prior notice execute and deliver to the Landlord a statement in writing certifying that this Lease is unmodified and in full force and effect (or, if modified, stating the modifications and that the same is in full force and effect as modified), the amount of the annual rental then being paid hereunder, the dates to which the rent, by installment or otherwise, and other charges hereunder have been paid. and whether or not there is any existing default on the part of the Landlord of which the Tenant has knowledge and such other Information reasonably required by Landlord or its mortgagees or any other party with whom Landlord is dealing. Any such statement may be relied upon conclusively by any such party. Tenant's failure to deliver such statements within such time shall be conclusive upon the Tenant that this Lease is in full force and effect, except as and to the extent any modification has been represented by Landlord, and that there are no uncured defaults in Landlord's performance, and that not more than one (1) month's rent has been paid in advance. LANDLORD'S COVENANTS Landlord covenants and agrees with the Tenant as follows: 28. QUIET ENJOYMENT Landlord covenants and agrees with Tenant that upon Tenant paying rent and other monetary sums due under the lease, performing its covenants and conditions under the Lease, Tenant shall and may peaceably and quietly have, hold and enjoy the Leased Premises for the term, subject, however, to the terms and limitations of the Lease and of any of the ground leases, mortgages, or deeds of trust referred to in Section 25, and the limitations of Landlord's liability for acts of other tenants and third parties contained in Sections 18 and 33. 29. SERVICES 29.1 Landlord agrees to provide, at its cost, utility services such as electrical, gas, water and sewer), HVAC services (such as heating, ventilation and cooling), and telephone connections into the Building in such capacity as shall be sufficient to meet building design requirements. Tenant shall be responsible for assessing its needs and arranging for procurement of additional services to meet its needs prior to occupancy. In this Page 17 18 regard, Tenant represents that it has no requirements in excess of those provided in the building design for utility services and telephone capacity relating to the operations that Tenant intends to conduct in the Leased Premises as permitted in accordance with the terms of this Lease. Unless otherwise treated as part of the Tenant Finish items to be installed as part of this Lease, all connection charges and all outlets, risers, wiring, piping, duct work or other means of distribution of such services within the Leased Premises unless shown on the Exhibits hereto shall be supplied by Tenant at Tenant's sole expense. Tenant covenants and agrees that at all times its use of any such services shall never exceed the capacity of the mains, feeders, ducts, and conduits bringing the utility services to the Building; provided, however, that Tenant may increase the capacity of the mains, feeders, ducts and conduits aforementioned if Tenant pays for and performs all necessary work therefore subject to Landlord's prior written approval, which approval shall not be unreasonably withheld. Tenant shall be solely responsible for procuring of telephone equipment and services. Tenant shall pay all charges incurred by it for any utility services used on the Leased Premises and any maintenance charges for utilities and shall furnish all electric light bulbs and tubes. Landlord shall not be liable for any interruption or failure of utility services on the Leased Premises, unless due to the affirmative or negligent acts of Landlord. 29.2 Provided that the Tenant has no special or extraordinary requirements, the Landlord shall contract to provide air conditioning and heating for the occupied portion of the Leased Premises during the Term, at such temperatures and in such amounts as may be reasonably required, in the Landlord's sole judgment, for comfortable use and occupancy under normal office conditions, from 7:00 a.m. to 6:00 p.m. on Monday through Friday, and 7:00 a.m. to 12:00 noon on Saturday, but not on Sundays or Holidays observed by the Building. Tenant shall pay for the costs of said climate control services under Paragraph 7.1.c. or Paragraph 11 as may be applicable. In the event the Tenant has special requirements for air conditioning and heating, Tenant shall pay for the cost to provide air conditioning and heating at such temperatures and in such amounts as may be reasonably required as an alteration under Section 21 of the Lease. Alternatively, at Landlord's sole discretion, the Landlord may treat said costs as Operating Costs under Section 7.1(c) of the Lease. 29.3 No slowdown, interruption. stoppage, or malfunction of any services identified in Section 29 shall constitute an eviction or disturbance of the Tenant's use and possession of the Leased Premises or the Building or a breach by the Landlord of any of its obligations under this Lease, nor tender the Landlord liable for damages or entitle the Tenant to be relieved from any of its obligations under this Lease (including the obligation to pay Rent), nor grant the Tenant any right of setoff or recoupment. In no event shall the Landlord be liable for damages to persons or property, or be in default under this Lease, as a result of such slowdown, interruption, stoppage, or malfunction. In the event of any such interruption, however, the Landlord shall use reasonable diligence to restore such service. The Tenant agrees that if any payment of Rent shall remain unpaid for more than ten (10) days after it shall become due, the Landlord may, without notice to the Tenant, discontinue furnishing any Page 18 19 or all of such services until all arrearages of Rent have been paid in full, and the Landlord shall not be liable for damages to persons or property for any such discontinuance or consequential damages resulting therefrom, nor shall such discontinuance in any way be construed as an eviction or constructive eviction of the Tenant or cause an abatement of Rent or operate to release the Tenant from any of the Tenant's obligations under this Lease. 30. REPAIR AND MAINTENANCE BY LANDLORD Subject to the other provisions of this Lease imposing obligations therefor upon the Tenant, Including but not limited to Tenant Repair in Section 11, the Landlord shall as necessary or when required by governmental authority, repair, replace and maintain the external and structural parts of the Building, to include the roof provided that the roof has not been penetrated by Tenant, and grounds which do not comprise a part of the Leased Premises and are not leased to others and shall perform such repairs, replacements and maintenance with reasonable dispatch, in a good and workmanlike manner. The Landlord shall not be liable for any damages direct or indirect or consequential or for damages for personal discomfort, illness, or inconvenience of the Tenant or the Tenant's servants, clerks, employees, invitees, or other persons by reason of failure to repair such equipment facilities or systems or reasonable delays in the performance of such repairs, replacements, and maintenance, unless caused by the deliberate act or omissions or the negligence of the Landlord, its servants, agents or employees. 31. FIRES, ETC. If the Building shall be partially damaged by fire or other cause not resulting from the act or omission of Tenant, Tenant's employees, agents, contractors, customers, licensees or invitees, the damages shall be repaired by and at the expense of Landlord, and the Rent due hereunder shall be apportioned according to the part of the Leased Premises which is usable by Tenant until such repairs are made. If such partial damage is due to the action or omission of Tenant or Tenant's employees, agents, contractors, licensees, or Tenant's customers or invitees who Tenant negligently leaves in a position to cause such partial damage, there shall be no apportionment or abatement of Rent due hereunder by Tenant, and the debris, if any, shall be removed by and at the expense of Tenant. No penalty shall accrue for reasonable delay which may arise by reason of adjustment of fire insurance on the part of Landlord or Tenant, for reasonable delay on account of shortages of labor or materials, acts of God, or any other cause beyond Landlord's control, Landlord shall not be obligated to restore fixtures, improvements, or other property of Tenant. Total Destruction. If the Building should be totally destroyed by fire, tornado, or other casualty, or if it should be so damaged that rebuilding or repairs to the Leased Premises cannot be completed or commenced within one hundred eighty (180) days after the date upon which Tenant is notified by Landlord of such damage (or within one hundred Page 19 20 eighty (180) days after the date on which Landlord otherwise becomes aware of such damage), this Lease shall terminate and the rent shall be abated during the unexpired portion of this Lease, effective upon the date of the occurrence of such damage. Notwithstanding the above termination provisions, the one hundred eighty day period for completion of repairs or rebuilding may be extended by the Landlord in its sole discretion in the event that the processing of insurance claim or claims prevents the completion of rebuilding or repairs within one hundred eighty days. 32. CONDEMNATION If all or any part of or interest in the Leased Premises shall be taken as a result of the exercise of the power of, eminent domain or purchase in lieu thereof, this Lease shall terminate as to the part so taken as of the date of taking. If a part of or interest in the Leased Premises, or if a substantial portion of the Building is so taken, either Landlord or Tenant shall have the right to terminate this Lease as to the balance of the Leased Premises by written notice to the other within thirty (30) days after the date of taking; provided, however, that a condition to the exercise by Tenant of such right to terminate shall be that the portion of the Leased Premises or Building taken shall be of such extent and nature as to substantially handicap, impede, or impair Tenant's use of the Leased Premises, or the balance of the Leased Premises remaining, for the purposes for which they were leased, in the event of any taking, Landlord shall be entitled to any and all compensation, damages, income, rent and awards with respect thereto except for an award, if any, specified by the condemning authority for the fixtures and other property that Tenant has the right to remove upon termination of this Lease and the value of the unexpired Lease term if any. Tenant shall have no claim against Landlord for the value of any unexpired term. In the event of a partial taking of the Leased Premises which does not result in a termination of this Lease, the Rent thereafter to be paid shall be equitably reduced. Termination as provided herein with respect to a total or partial taking shall be without prejudice to the rights of either Landlord or Tenant to recover compensation and damages caused by condemnation from the condemner as hereinafter provided. The rights and obligations by Landlord and Tenant with respect to a taking or partial taking shall be provided herein (any statute, principle of law or rule of equity to the contrary notwithstanding), and each of the parties agree to cooperate with the other and to do everything necessary to effect the results herein described. Landlord and Tenant shall each have the right to claim separate awards consistent with the terms of this Lease or to litigate the matter of the taking and damages or awards. In the event of a taking or partial taking during the term of the Lease, all sums awarded as compensation for the loss or damage to the property or the Building, fixtures and permanently attached equipment. except as set forth above, shall be awarded to Landlord; and all sums awarded as compensation for loss or damage to Tenant's equipment and other personal property and as compensation for loss of or detriment to the business of Tenant upon the Leased Premises and for loss of anticipated profits of such business shall be awarded to Tenant. If, under the laws, rules or procedures regulating any such taking or partial taking, it shall not be possible for the parties to obtain in Page 20 21 such proceedings segregation of awards as herein above prescribed, then the entire award or the aggregate of the awards as may be adjudged shall be paid to Landlord. The foregoing provisions of this paragraph are subject to the terms of any deed of trust conveying the Leased Premises, the Building, or Real Property now or hereafter in existence, and to which Landlord is a party. 33. LOSS AND DAMAGE Landlord shall not be liable to Tenant or Tenant's employees, agents, patrons or visitors, or to any other person whomsoever, for any injury to person or damage to property in or about the Leased Premises caused by the negligence or affirmative acts of Tenant, or any other tenant or third party on the Real Property, its agents, servants, or employees, or of any other person entering upon the Leased Premises under express or implied invitation of Tenant, or caused by the Building or any obligation of Tenant to maintain the Building, or caused by leakage of gas, oil, water or steam, or by electricity emanating from the Building, and Tenant agrees to indemnify Landlord and hold it harmless from any and all loss, expense, or claims, including attorneys' fees, arising out of such damage or injury. 34. DELAYS Whenever and to the extent that the Landlord shall be unable to fulfill or shall be delayed or restricted in the fulfillment of any obligation hereunder in respect to the supply or provision Of any service or utility or the doing of any work, or the making of any repairs by reason of being unable to obtain the material goods, equipment, service, utility, insurance proceeds or labor required to enable it to fulfill such obligation or by reason of any statute, law, or any regulation or order passed or made pursuant thereto or by reason of the order passed or made pursuant thereto or by reason of the order of direction of any administrator, controller, or board or any governmental department or officer or other authority, or by reason of not being able to obtain any permission or authority required thereby or by reason of any other cause beyond its control whether of the foregoing character or not, including any delay caused by the processing of insurance claims, the Landlord shall be entitled to extend the time for fulfillment of such obligation by a time equal to the duration of such delay or restriction, and the Tenant shall not be entitled to compensation for any inconvenience, nuisance or discomfort thereby occasioned. 35. DEFAULT 35.1 The following events shall be deemed to be events of default by Tenant under this Lease: Page 21 22 (a) The failure of Tenant to timely and fully pay any installment of Rent or other charge or money obligation herein required to be paid by Tenant. Rent is due and shall be paid in advance on the first (1st) day of each month during the Term hereof, and Tenant shall be in default as set forth in Section 4. (b) The failure of Tenant to perform, or if not immediately curable, to commence performance of (and diligently pursue performance thereafter), any one or more of its other covenants under this Lease within three (3) days after written notice to Tenant specifying the covenant or covenants Tenant has not performed. (c) Tenant becomes insolvent, or makes a transfer in fraud of creditors, or makes an assignment for the benefit of creditors, or admits in writing its inability to pay its debts as they become due. (d) The attachment, seizure, levy upon or taking of possession by any creditor, receiver, or custodian of any portion of the property of Tenant. (e) The instituting of proceedings in a court of competent jurisdiction for the involuntary bankruptcy arrangement, reorganization, liquidation, or dissolution of Tenant under the U.S. Bankruptcy Code (as now or hereafter in effect) or any state bankruptcy or insolvency act or for its adjudication as a bankrupt or insolvent or for the appointment of a receiver of the property of Tenant, and said proceedings are not dismissed or any receiver, trustee, or liquidator appointed herein is not discharged within sixty (60) days after the institution of said proceedings of Tenant and said proceedings are not dismissed. (f) Any change occurs in the financial condition of Tenant or any guarantor, which Landlord considers materially or significantly adverse. (g) The instituting of proceedings for the voluntary bankruptcy arrangement, reorganization, liquidation, or dissolution of Tenant under the U.S. Bankruptcy Code (as now or hereafter in effect) or any state bankruptcy or insolvency act, or if Tenant shall otherwise take advantage of any state or federal bankruptcy or insolvency act as a bankrupt or insolvent. (h) Tenant shall cease to conduct its normal business operations in the Leased Premises or shall vacate or abandon same for a period of at least ten (10) days. (i) Tenant shall repeatedly default in the timely payment of Rent or any other charges required to be paid, or shall repeatedly default in keeping, observing or performing any other covenant, agreement, condition or provisions of this Lease, Page 22 23 whether or not Tenant shall timely cure any such payment or other default. For the purposes of this subsection, the occurrence of any such defaults three (3) times during any twelve (12) month period shall constitute a repeated default, regardless of cure by the Tenant. The Parties agree that repeated default shall constitute a basis for eviction, regardless of partial or total cure of the individual events of default by Tenant. 35.2 No condoning, excusing, or overlooking by the Landlord of any default, breach or non-observance by the Tenant at any time or times in respect of any covenants, provisions, or conditions herein contained shall operate as a waiver of the Landlord's right hereunder in respect of any continuing or subsequent default, breach, or non-observance, or so as to defeat or affect such continuing or subsequent default or breach, and no waiver shall be inferred or implied by anything done or omitted by the Landlord save only express waiver in writing. All rights and remedies of the Landlord in this Lease contained shall be cumulative and not alternative. 36. REMEDIES OF LANDLORD 36.1 If an event of default set forth in Section 35.1 occurs, including repeated default under Section 35. 1 (i), the Landlord shall have the following rights and remedies, in addition to all other remedies at law or equity, and none of the following whether or not exercised by the Landlord shall preclude the exercise of any other right or remedy whether herein set forth or existing at law or equity, and all such remedies shall be cumulative: (a) Landlord shall have the right to terminate this Lease by giving the Tenant notice in writing at any time. No act by or on behalf of the Landlord, such as entry of the Leased Premises by the Landlord to perform maintenance and repairs and efforts to relet the Leased Premises, other than giving the Tenant written notice of termination, shall terminate this Lease. If the Landlord gives such notice, this Lease and the Term hereof as well as the right, title and interest of the Tenant under this Lease shall wholly cease and expire in the same manner and with the same force and effect (except as to the Tenant's liability) on the date specified in such notice as if such date were the expiration date of the Term of this Lease without the necessity of re-entry or any other act on the Landlord's part. Upon any termination of this Lease, the Tenant shall quit and surrender to the Landlord the Leased Premises as set forth in Section 37.1. If this Lease is terminated, the Tenant shall be and remain liable to the Landlord for damages as hereinafter provided and the Landlord shall be entitled to recover forthwith from the Tenant as damages an amount equal to the total of: (i) the cost, including reasonable attorneys' fees, of enforcing any provision of this Lease, defending counterclaims, crossclaims or third party actions, and of recovering the Leased Premises: Page 23 24 (ii) all Rent accrued and unpaid at the time of termination of the Lease, plus interest thereon at the rate provided in Section 36.1 (g); and (iii) any other money and damages owed by the Tenant to the Landlord. In addition, the Landlord shall also be entitled to recover from the Tenant as damages the amounts determined, at the Landlord's election, under (iv) or (v) below: (iv) the amount of Rent that would have been payable hereunder if the Lease had not been terminated, less the net proceeds, if any, received by the Landlord from any reletting of the Leased Premises, after deducting all costs incurred by the Landlord in finding a new tenant and reletting the space, including costs of remodeling and refinishing space for a new tenant, reasonable tenant inducements, reasonable brokerage commissions or agents' commissions in connection therewith, redecorating costs, attorneys' fees and other costs and expenses incident to the reletting of the Leased Premises (collectively referred to herein as "Reletting Costs"); provided, however, that the Landlord shall have no obligation to relet or attempt to relet the Leased Premises. The Tenant shall pay such damages to the Landlord on the days on which the Rent would have been payable if the Lease had not terminated; or (v) the present value (discounted at the rate of eight percent (8%) per annum) an the balance of the Rent for the remainder of the stated Term of this Lease after the termination date plus anticipated Reletting Costs, less the present value (discounted at the same rate) of the fair market rental value of the Leased Premises for such period. No provision of this Lease shall limit or prejudice the right of the Landlord to prove and obtain as damages by reason of any termination of this Lease, an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, such damages are to be proved, whether or not such amount be greater, equal to or less than the amounts referred to above. (b) The Landlord may, without demand or notice of any kind to the Tenant, terminate the Tenant's right of possession (but not the Lease) and re-enter and take possession of the Leased Premises or any part thereof, and repossess the same as of the Landlord's former estate and expel the Tenant and those claiming through or under the Tenant, and remove the effects of any and all such persons (forcibly, if necessary) and change the locks on the Leased Premises without being deemed guilty Page 24 25 of any manner of trespass, without prejudice to any remedies for arrears of Rent of preceding breach of covenants and without terminating this Lease or otherwise relieving the Tenant of any obligation hereunder. Should the Landlord elect to re-enter as provided in this Section 36.1(b), or should the Landlord take possession pursuant to legal proceedings or pursuant to any notice provided for by law, the Landlord may, from time to time, without terminating this Lease, relet the Leased Premises or any part thereof for such term or terms and at such rental or rentals, and upon such other conditions as the Landlord may in its absolute discretion deem advisable, with the right to make alterations and repairs to the Leased Premises. No such re-entry, repossession or reletting of the Leased Premises by the Landlord shall be construed as an election on the Landlord's part to terminate this Lease unless a written notice of termination is given to the Tenant by the Landlord. No such re-entry, repossession or reletting of the Leased Premises shall relieve the Tenant of its liability and obligation under this Lease, all of which shall survive such re-entry, repossession or reletting. Upon the occurrence of such re-entry or repossession, the Landlord shall be entitled to the amount of the monthly Rent which would be payable hereunder if such re-entry or repossession had not occurred, less the net proceeds, if any, of any reletting of the Leased Premises after deducting all Reletting Costs and all attorneys' fees, other costs and expenses incurred in the re-entry, repossession and reletting procedures. The Tenant shall pay such amount to the Landlord on the days on which the Rent or any other sums due hereunder would have been payable hereunder if possession had not been retaken. In no event shall the Tenant be entitled to receive the excess, if any, of net Rent collected by the Landlord as a result of such reletting over the sums payable by the Tenant to the Landlord hereunder. If this Lease is terminated by operation of law as a result of the Landlord's actions under this Section, then the Landlord shall be entitled to recover damages from the Tenant as provided in Section 36.1 (a). The Landlord shall have the right to collect from the Tenant amounts equal to such deficiencies and damages provided for above by suits or proceedings brought from time to time on one or more occasions without the Landlord being obligated to wait until the expiration of the term of this Lease. (c) In the event Landlord gives Tenant notice of default or delivers to Tenant a Notice of Demand for Payment or Possession pursuant to the applicable statute, any such notice will not constitute an election to terminate the Lease unless Landlord expressly states in any such notice that it is exercising its rights to terminate the Lease. (d) If the Tenant shall default in making any payment required to be made by the Tenant (other than payments of Rent) or shall default in performing any other obligations of the Tenant under this Lease, the Landlord may, but shall not be obligated to, make such payment or, on behalf of the Tenant, expend such sum as may be necessary to perform such obligation. All sums so expended by the Landlord with Page 25 26 interest thereon at the rate provided in Section 36.1(g) shall be repaid by the Tenant to the Landlord on demand. No such payment or expenditure by the Landlord shall be deemed a waiver of the Tenant's default nor shall it affect any other remedy of the Landlord by reason of such default. (e) If the Tenant shall default in making payment of any Rent due under this Lease, the Landlord may charge and the Tenant shall pay, upon demand, interest thereon at the rate provided in Section 36.1(g), but the payment of such interest shall not excuse or cure any default by the Tenant under this Lease. In addition to such interest, the Tenant shall be responsible for the late charges set forth in Section 36.3. Such interest and late payment penalties are separate and cumulative and are in addition to and shall not diminish or represent a substitute for any or all of the Landlord's rights or remedies under any other provisions of this Lease. (f) In any action of unlawful detainer commenced by the Landlord against the Tenant by reason of any default hereunder, the reasonable rental value of the Leased Premises for the period of the unlawful detainer shall be deemed to be the amount of Rent reserved in this Lease for such period. (g) Whenever the Tenant shall be required to make payment to the Landlord of any sum with interest, interest on such sum shall be computed from the date such sum is due until paid, at an interest rate equal to eighteen percent (18%) per annum or, if such amount violates any then applicable law with respect to interest rates, at the highest interest rate otherwise allowable under then applicable law. Should Tenant be in default, Landlord may collect 18% interest under this provision or $50.00 per day penalty under Paragraph 4, whichever is greater. (h) In addition to any damages described as being collectable herein, damages will also include, in all cases, the unamortized portion of any costs, expenses, or inducements provided by the Landlord to the Tenant in connection with this Lease. Such expenses include, without limitation, any tenant inducements paid directly to the Tenant, expenses incurred in providing tenant improvements or other similar improvements to the Leased Premises, and free rent periods or reduced rent periods granted to the Tenant. All such expenses will be amortized over the Term (or initial term, if applicable) of the Lease and will be prorated in proportion to the total amount of time of the Term of the Lease as compared to the time during which the Tenant performed under the Lease without default. (i) As used in this Lease, the terms "re-entry", "take possession", "repossess" and "repossession" are not restricted to their technical legal meaning. Page 26 27 (j) Tenant hereby expressly waives, to the full extent waivable, any and all right of redemption granted by or under any present or future laws in the event of Tenant being evicted or dispossessed for any cause, or in the event of Landlord obtaining possession of the Leased Premises, by reason of the violation by Tenant of any of the covenants or conditions of this Lease, or otherwise. 36.2 As additional security for the Tenant's performance of its obligations under this Lease, the Tenant hereby grants to the Landlord a security interest in and to all of the personal property of Tenant situated on the Leased Premises, subject to a perfected purchase money security interest and prior existing security interests, as security for the payment of all Rent and other sums due, or to become due, under this Lease. Tenant shall execute such documents as the Landlord may reasonably require to evidence the Landlord's security interest in such personal property. If the Tenant is in default under this Lease, such personal property shall not be removed from the Leased Premises (except to the extent such property is replaced with an item of equal or greater value) without the prior written consent of the Landlord. It is intended by the parties hereto that the instrument shall have the effect of a security agreement covering such personal property, and the Landlord may upon the occurrence of an event of default set forth in Section 35.1 exercise any rights of a secured party under the Uniform Commercial Code of the State of Arizona including the right to take possession of such personal property and (after ten (10) days notice to those parties required by statute to be notified) to sell the same for the best price that can be obtained at public or private sale and out of the money derived therefrom, pay the amount due the Landlord, and all costs arising out of the execution of the provisions of this Section, paying the surplus, if any, to the Tenant. It such personal property or any portion thereof shall be offered at a public sale, the Landlord may become the purchaser thereof. 36.3 As part of the consideration for the Landlord's executing this Lease, Tenant hereby waives a trial by jury and the right to interpose any counterclaim or offset of any nature or description in any litigation between the Tenant and Landlord with respect to this Lease, the Leased Premises and the repossession hereof. 36.4 Tenant hereby acknowledges that late payment by Tenant to Landlord of Rent and other sums due hereunder will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges and late charges which may be imposed on Landlord by the terms of any mortgage or trust deed covering the Real Property. Accordingly, if any installment of Rent or any other sum due from Tenant shall not be received by Landlord or Landlord's designee within five (5) days after such amount shall be due, Tenant shall pay to the Landlord a late charge equal to ten percent (10%) of such overdue amount. The parties hereby agree that such late charge represents a fair and reasonable estimate of the costs Landlord will incur by reason of late payment by Tenant. Acceptance of such late charge by Landlord shall in no event constitute a waiver of Tenant's Page 27 28 default with respect to such overdue amount, nor prevent Landlord from exercising any of the rights and remedies granted hereunder. 37. END OF TERM 37.1 Upon the expiration or other termination of this Lease, the Tenant shall vacate and surrender to the Landlord the Leased Premises, broom clean condition, carpets professionally cleaned, dry wall repaired and in good order. The Tenant shall remove all property of the Tenant, as directed by the Landlord. Any property left on the Leased Premises at the expiration or other termination of this Lease, or after the occurrence of any default as set forth in Section 35 may at the option of the Landlord either be deemed abandoned or be placed in storage at a public warehouse in the name of and for the account of and at the expense and risk of the Tenant. If such property is not claimed by the Tenant within ten (10) days after such expiration, termination or the happening of an event of default, it may be sold or otherwise disposed of by the Landlord. The Tenant expressly releases the Landlord from any and all claims and liability for damage to or loss of property left by the Tenant upon the Leased Premises at the expiration or other termination of this Lease, and the Tenant hereby indemnifies the Landlord against any and all claims and liability with respect thereto. 37.2 If the Tenant shall continue to occupy and continue to pay rent for the Leased Premises after the expiration of this Lease with or without the consent of the Landlord, and without any further written agreement, the Tenant shall be a tenant from month to month at a monthly Base Rent equal to the last full monthly Base Rent payment due hereunder times 1.5, and subject to all of the additional rentals, terms, and conditions herein set out except as to expiration of the Lease Term. 38. TRANSFER BY LANDLORD In the event of a sale or other transfer by the Landlord of the Building or a portion thereof containing the Leased Premises (including a foreclosure or deed in lieu of foreclosure), the Landlord shall without further written agreement be freed, released and relieved of all liability or obligations under this Lease. The rights of Landlord under this Lease shall not be affected by any such sale, lease or other transfer. 39. NOTICE 39.1 Any notice, request, statement, or other writing pursuant to this Lease shall be deemed to have been given if sent by registered or certified mail, postage prepaid, return receipt requested, to the party at the address stated on the Facing Page of this Lease. Page 28 29 39.2 Notice shall also be sufficiently given if and when the same shall be delivered, in the case of notice to Landlord, to an executive officer of the Landlord, or the managing agent, and in the case of notice to the Tenant or the Guarantor of the Tenant, to the Leased Premises. Such notice, if delivered, shall be conclusively deemed to have been given and received at the time of such delivery. If in this Lease two or more persons are named as Tenant, such notice shall also be sufficiently given if and when the same shall be delivered personally to any one of such persons. 39.3 Any party may, by notice to the other, from time to time designate another address in the United States or Canada to which notice mailed more then ten (10) days thereafter shall be addressed. 40. GOVERNING LAW, VENUE AND COMMENCEMENT OF ACTION 40.1 This Lease shall be deemed to have been made in and shall be construed in accordance with the laws of Maricopa County in the State of Arizona. Venue shall be in Maricopa County in the State of Arizona. 40.2 Any claim, demand, right, or defense by Tenant that arises out of this Lease or the negotiations that preceded this Lease shall be barred unless Tenant commences an action thereon, or interposes a defense by reason thereof, within six (6) months after the date of the inaction, omission, event, or action that gave rise to such claim, demand, right, or defense. 40.3 Tenant acknowledges and understands, after having consulted with its legal counsel, that the purpose of Paragraph 40.2 above is to shorten the period within which Tenant would otherwise have to raise such claims, demands, rights, or defenses under applicable laws. 41. PAYMENT IN UNITED STATES CURRENCY/CERTIFIED FUNDS The rentals reserved herein and all other amounts required to be paid or payable under the provisions of this Lease shall be paid in lawful money of the United States. Landlord shall have the right in its sole and absolute discretion to require that Rental and all other sums due by Tenant be paid in certified funds. 42. LEASE ENTIRE AGREEMENT The Tenant acknowledges that there are no covenants, representations, warranties, agreements, or conditions expressed or implied, collateral or otherwise forming part of or in any way affecting or relating to this Lease save expressly set out in this Lease, Page 29 30 the Facing Page, Exhibits, Riders, and Schedules attached hereto and that this Lease, the Facing Page, Exhibits, Riders, and Schedules attached hereto and the Rules and Regulations promulgated by Landlord in accordance with Section 13 hereof constitute the entire agreement between the Landlord and the Tenant and may not be amended or modified except as explicitly provided or except by subsequent agreement in writing of equal formality hereto executed by the party to be charged therewith. The Tenant acknowledges that Tenant has provided review of and input to this Lease, and therefore agrees that this Lease has been jointly drafted by Landlord and Tenant. 43. BINDING EFFECT Except as expressly provided herein, this indenture shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns, and all covenants and agreements herein contained to be observed and performed by the Tenant shall be joint and several. 44. SECURITY DEPOSIT The Tenant shall keep on deposit with the Landlord at all times during the term of this Lease the Lease Deposit specified on the Lease Facing Page hereof as security for the payment by the Tenant of the Rent and any other sums due under this Lease and for the faithful performance of all the terms, conditions, and covenants of this Lease, it being expressly understood that the Lease Deposit shall not be considered advance payment of Rent or a measure of Landlord's damages in the case of default by Tenant. Security deposit is due in full prior to Tenant's possession of the Premises. If an event of a default set forth in Section 35.1 occurs, the Landlord may (but shall not be required to) use any such deposit, or so much thereof as necessary in payment of any Rent or any other sums due under this Lease in default, in reimbursement of any expense incurred by the Landlord, and to repair any damage or to clean, paint, carpet and fruitage the Leased Premises after termination of possession by Tenant. In such event the Tenant shall on written demand of the Landlord forthwith remit to the Landlord a sufficient amount in cash to restore such deposit to its original amount. If such deposit has not been utilized as aforesaid, such deposit, or as much thereof as has not been utilized for such purposes, shall be refunded to the Tenant upon full performance of this Lease by the Tenant. Landlord shall have the right to commingle such deposit with other funds of the Landlord, and such deposit need not be kept in an escrow or other segregated account. Landlord shall deliver the funds deposited herein by the Tenant to any purchaser of the Landlord's interest in the Leased Premises in the event such interest be sold, and thereupon, the Landlord shall be discharged from further liability with respect to such deposit. 45. INTERPRETATION Page 30 31 Unless the context otherwise requires, the word "Landlord" wherever it is used herein shall be construed to include and shall mean the Landlord, its successors, and/or assigns, and the word "Tenant" shall be construed to include and shall mean the Tenant, and the executors, administrators, successors and/or assigns of the Tenant and when there are two or more tenants, or two or more persons bound by the Tenant's covenants herein contained their obligation hereunder shall be joint and several. The word "Tenant" and the personal pronouns "his" or "it" relating thereto and used therewith shall be read and construed as Tenants and "his," "its," or "their" respectively as the number and gender of the party or parties referred to each require and the tense of the verb agreeing therewith, shall be construed and agree with the said word or pronoun so substituted. Time shall be of the essence in all respects hereunder. 46. SEVERABILITY Should any provision or provisions of this Lease be illegal or not enforceable, it or they shall be considered separate and severable from this Lease and its remaining provisions shall remain in force and be binding upon the parties hereto as though the said provision or provisions had never been included. 47. CAPTIONS The captions appearing within the body of this Lease have been inserted as a matter of convenience and for reference only and in no way define, limit, or enlarge the scope or meaning of this Lease or of any provision hereof. 48. RECORDING - SHORT FORM MEMO This Lease shall not be recorded in its entirety. If recorded by Tenant, this Lease may be terminated at Landlord's option as of the date of recording and Landlord shall then have all rights and remedies provided in the case of default by Tenant hereunder. If requested by Landlord, Tenant shall execute in recordable form, a short form memorandum of Lease which may, at Landlord's option, be placed of record. 49. NON-WAIVER OF DEFAULTS/LANDLORD'S DEFAULT 49.1 No waiver of any provision of this Lease shall be implied by any failure of Landlord to enforce any remedy on account of the Violation of such provision, even if such Violation be continued or repeated subsequently, and no express waiver shall affect any provision other than the one specified in such waiver and in that event only for the time and in the manner specifically stated. No receipt of monies by Landlord from Tenant after the termination of this Lease will in any way alter the length of the Term or Tenant's right of possession hereunder or, after the giving of any notice, shall reinstate, continue or Page 31 32 extend the Term or affect any notice given Tenant prior to the receipt of such monies, it being agreed that after the service of notice or the commencement of a suit or after final judgment for possession of the Leased Premises, Landlord may receive and collect any Rent due, and the payment of Rent shall not waive or affect said notice, suit or judgment, nor shall any such payment be deemed to be other than on account of the amount due, nor shall the acceptance of Rent be deemed a waiver of any breach by Tenant of any term, covenant or condition of this Lease. No endorsement or statement on any check or any letter accompanying any check or payment of Rent shall be deemed an accord and satisfaction. Landlord may accept any such check or payment without prejudice to Landlord's right to recover the balance due of any installment or payment of Rent or pursue any other remedies available to Landlord with respect to any existing Defaults. None of the terms, covenants or conditions of this Lease can be waived by either Landlord or Tenant except by appropriate written instrument. 49.2 If any act or omission by the Landlord shall occur which would give the Tenant the right to damages from the Landlord or the right to terminate this Lease by reason of a constructive or actual eviction from all or part of the Lease Premises or otherwise, the Tenant shall not sue for such damages or exercise any such right to terminate until (i) it shall have given written notice of such act or omission to the Landlord and to the holder(s) of the indebtedness or other obligations secured by any mortgage or deed of trust affecting the Leased Premises or the Real Property, if the name and address of such holder(s) shall previously have, been furnished to the Tenant, and (i) a reasonable period of time for remedying such act or omission shall have elapsed following the giving of such notice, during which time the Landlord and such holder(s), or either of them, their agents or employees, shall be entitled to enter upon the Leased Premises and do therein whatever may be necessary to remedy such act or omission. Claims against insurance policies which cause delay shall not be deemed an act or omission of the Landlord which shall give the Tenant right to damages from the Landlord. 50. CERTAIN IMPOSITIONS The Tenant shall pay, as Additional Rent, and shall indemnify the Landlord against, and reimburse the Landlord on demand for, all future duties, taxes, levies, imposts, charges and impositions, whatsoever, imposed, assessed, levied or collected by or for the benefit of any federal, State or local government or any political subdivision or taxing authority thereof, together with any interest thereon and penalties with respect thereto on or in respect of the Leased Premises, the Lease or by reason of the tenancy. 51. ENVIRONMENTAL MATTERS 51.1 The Tenant shall not cause or permit any Hazardous Substances (as hereafter defined) to be generated, produced, brought upon, used, stored, treated or disposed Page 32 33 of in, on, under or about the Leased Premises, except that the Tenant shall be entitled to store Hazardous Substances in the Leased Premises, in the ordinary course of its business, but only with the prior written consent of the Landlord. The Tenant agrees to indemnify, defend and hold the Landlord and its officers, shareholders, directors, partners, employees, and agents harmless from any claims, judgments, damages, penalties, fines, costs, liabilities (including sums paid in settlement of claims), losses or expenses, including without limitation, reasonable attorney's fees, reasonable consultant fees, and reasonable expert fees, which are incurred or arise during or after the term of this Lease from or in any way connected with the presence or suspected presence of Hazardous Substances in, on, under or about the soil, groundwater, surface water, air or soil vapor in, on under or about the Leased Premises arising out of the use of the Leased Premises by the Tenant, its officers, employees, agents, invitees, or contractors. Without limiting the generality of the foregoing, the indemnification provided by this Section specifically shall cover costs incurred in connection with any investigation of site conditions existing prior to, at or after the date of execution of this Lease or any remediation, including, without limitation, studies or reports as needed or required, remedial, removal, or restoration work required by any federal, state, or local governmental agency or political subdivision because of the presence or suspected presence of Hazardous Substances in, on under or about the soil, groundwater, surface water, air or soil vapor on, under or about the Leased Premises, arising out of the use of the Leased Premises by the Tenant, its officers, employees, agents, invitees, or contractors. 51.2 For purposes of this section, "Hazardous Substances" shall mean any hazardous, toxic, radioactive, infectious, or carcinogenic substance material, gas, or waste which is or becomes listed or regulated by any federal, state, or local law or governmental authority or agency, including, without limitation, petroleum and petroleum products in underground tanks, PCSs, asbestos, lead, cyanide, DDT, and all substances defined as hazardous materials, hazardous wastes, hazardous substances, or extremely hazardous waste under any present or future federal, state, or local law or regulation, as amended from time to time. 51.3 Those claims, judgments, damages, penalties, fines, costs, liabilities, losses, and expenses for which each party and its officers, shareholders, directors, partners, employees, and agents are indemnified hereunder shall be reimbursable as incurred without any requirement of waiting for the ultimate outcome of any litigation, claim or other proceeding, and the indemnifying party shall pay such claims, judgments, damages, penalties, fines. costs, liabilities, losses, and expenses as incurred by the indemnified party within fifteen (15) days after notice itemizing the amounts incurred to the date of such notice. Any defense of any claim against an indemnified party shall be made by counsel satisfactory to the indemnified party. 51.4 The foregoing provisions of this Section shall survive the termination of this Lease. Page 33 34 52. DISABILITIES LAWS 52.1 Disabilities Laws as used herein shall include the Americans with Disabilities Act and any state, county or local laws, statutes, or ordinances applicable to the Leased Premises, the Tenant's business or the activities of the Tenant in or about the Leased Premises. Disabilities Laws shall also include any amendments thereto, regulations or court decisions interpreting such laws. 52.2 Tenant shall comply with all Disability Laws relating to the use and occupancy of and access to the Leased Premises. Tenant shall be responsible to perform its own assessment of the compliance of the Leased Premises with such laws by surveying the facility, determining what barrier removal is readily achievable and shall comply with alternative and new construction requirements of Disability Laws. Tenant shall bear the sole cost and expense of determining compliance. To the extent Tenant determines that compliance may require alteration or future construction on the Leased Premises, Tenant shall notify Landlord and shall obtain Landlord's consent to such alteration in advance. Landlord shall not unreasonably withhold consent to reasonable alterations to be made by Tenant in order to comply with the provisions of such Disabilities Laws. In addition to any other reasonable requirements of Landlord for granting such consent, Landlord's consent may be conditioned upon Tenant providing adequate assurances of the proper completion of such alterations and payment therefor, and that the alterations be in conformity to the aesthetic style and future expansion plans for the Building. Should Landlord incur any additional costs as a result of Tenant's occupancy of the Leased Premises and obligations under Disability Laws, Tenant shall reimburse Landlord for such costs. 52.3 Any costs incurred by Landlord in complying with Disabilities Laws shall be considered a Common Area Maintenance charge, and Tenant shall pay his pro-rata share of such charge pursuant to the provisions of Paragraph 51 of this Lease. 53. SECURITY Tenant shall be responsible for locking and keeping the Leased Premises secure, as well as locking any outside door to the building in which the Leased Premises are located upon entering or leaving the building. 52.4 Tenant hereby indemnifies Landlord and agrees to defend and hold Landlord harmless from and against any and all losses, liabilities, damages, injuries, costs (including, without limitation, court costs and reasonable attorneys' fees), expenses and claims of any and every kind whatsoever caused by Tenant or any of its subtenants, Page 34 35 permittees, agents or representatives, which at any time or from time to time may be paid, incurred or suffered by, or asserted against, Landlord for, with respect to or as a direct or indirect result of, Tenant's failure to comply with the requirements of paragraph 35(b) above including, without limitation, any losses resulting from a diminution in the value of the Building and any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under any Disabilities Laws. 52.5 Tenant covenants and agrees that: (i) Tenant will comply with any reasonable requirements of Landlord and any mortgagee from time to time to implement or facilitate the administration or enforcement of any or all of the provisions of this Section; (ii) Tenant will certify annually, it so requested by Landlord that it is in compliance with all Disabilities Laws; and (iii) Tenant will cause every sublease and concession agreement to contain provisions substantially the same as those in the preceding clauses (i) and (ii) and expressly state that they are for the benefit of and may be enforced by Landlord and any mortgagee (in addition to any other person Tenant may desire to name therein). 52.6 Tenant's liability for the undertakings and indemnification's set out in this Section shall survive the Termination or expiration of this Lease. The provisions of this Section shall govern and control over any inconsistent provisions of this Lease or any other agreement between Landlord (or any of its affiliates) and Tenant. 52.7 THE UNDERSIGNED hereby grants the Landlord the right, from time to time for the duration of the Lease term, to obtain a credit report from a credit reporting agency on the undersigned and any spouse of the undersigned at the owner's sole expense. IN WITNESS WHEREOF, the parties hereto have executed these Lease provisions as of the Lease Date on the Facing Page attached hereto. LANDLORD: LONE CACTUS CAPITAL GROUP, L.L.C. By: ----------------------------------------- Its: -------------------------------------- TENANT: IBIZ TECHNOLOGY CORP. Page 35 36 By: ----------------------------------------- Its: -------------------------------------- ATTEST: By: ----------------------------------------- Its: -------------------------------------- Page 36 37 LEASE GUARANTY RIDER (1) LANDLORD: NAME: Lone Cactus Capital Group, L.L.C. ADDRESS: P.O. Box 5061 Carefree, AZ 85377 TENANT: NAME: iBIZ Technology Corp. for 1919 Lone Cactus ADDRESS: 2331 W. Royal Palm, Suite 105 Phoenix, AZ 85021 LEASE: LEASE DATE: June 1, 1999 GUARANTY DATE: Full Term LEASE TERM: LEASE PERIOD: 25 YEARS PLUS 6 MONTHS COMMENCEMENT DATE: July 1, 1999 BASE RENT: $153,600 Per annum, payable in installments of $12,800 per month, 5% Annual escalators. GUARANTOR: NAME: Kenneth W. Schilling and Diane Schilling ADDRESS: 8512 W. Via Montoya Peoria, AZ 85382 THIS LEASE GUARANTY is attached to and made a part of the Lease referenced above, and is in effect as of the date it is signed. To induce the Landlord to enter into, to waive a default under, or to extend or renew the term of the Lease, the Guarantor agrees as follows: 1. The Guarantor hereby covenants and agrees with the Landlord, Page 37 38 a. to make due and punctual payment of all rent, monies, and charges payable under the Lease during the Term thereof and all renewals thereof: b. to effect prompt and complete performance of all and each of the terms, covenants, conditions and provisions in the Lease required on the part of the Tenant to be kept, observed and performed during the period of the Term and any renewals thereof; and c. to indemnify and save harmless the Landlord from any loss, attorney's fees, costs or damages arising out of any failure to pay the aforesaid rent, monies, and charges or the failure to perform any of the terms, covenants, conditions and provisions of the Lease. 2. In the event of a default under the Lease, the Guarantor waives any right to require the Landlord to: a. proceed against the Tenant or pursue any rights or remedies with respect to the Lease; b. proceed against or exhaust any security of the Tenant held by the Landlord; or c. pursue any other remedy whatsoever in the Landlord's power. The Landlord shall have the right to enforce this Guaranty regardless of the acceptance of additional security from the Tenant and regardless of the release or discharge of the Tenant or any other Guarantor of the Lease by the Landlord or by others, or by operation of any law or the amendment or modification of any terms of the Lease, to which the Guarantor gives the Tenant the express authority to consent on behalf of the Guarantor. 3. The Guarantor hereby expressly waives notice of the acceptance of this Guaranty and all notice of nonperformance, non-payment or non-observance on the part of the Tenant of the terms, covenants of conditions and provisions of the Lease. 4. Without limiting the generality of the foregoing, the liability of the Guarantor under this Guaranty shall not be deemed to have been waived, released, discharged, impaired or affected by reason of the release or discharge of the Tenant in any receivership, bankruptcy, winding-up or other creditor proceedings or the rejection, disaffirmance or disclaimer of the Lease by any party, and shall continue with respect to the periods prior thereto and thereafter, for and with respect to the Term originally contemplated and expressed in the Lease. The liability of the Guarantor shall not be affected by any repossession of the Leased Premises by the Landlord, the extension by Landlord of time for Page 38 39 the payment by Tenant of any sums owing or payable under the Lease, the assignment or subletting of the Leased Premises or the waiver, failure, omission or delay of Landlord to enforce, assert or exercise any right, power or remedy. 5. Guarantor shall pay all costs, charges and expenses, including reasonable attorney fees and court costs, incurred by Landlord in enforcing Guarantor's obligations under this Guaranty. 6. This Guaranty shall be one of payment and performance and not of collection. Notwithstanding the use of the word "indemnity" or "guaranty", each guarantor or indemnitor shall be jointly and severally liable under this and any other guaranty of the Lease. 7. The Guarantor shall, without limiting the generality of the foregoing, be bound by this Guaranty in the same manner as though the Guarantor were the Tenant named in the Lease. 8. All of the terms, agreements and conditions of this Guaranty shall extend to and be binding upon the Guarantor, his heirs, executors, administrators, successors and assigns, and shall inure to the benefit of and may be enforced by the Landlord, its successors and assigns, and the holder of any mortgage to which the Lease may be subject. IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be duly executed as of the Guaranty Date first above written. ----------------------------- --------------------------------- Diane Schilling Kenneth W. Schilling, Guarantor ###-##-#### Social Security Number Home Address: 8512 W. Via Montoya Peoria, AZ 85382 Page 39 40 ADDITIONAL PROVISIONS RIDER (2) A. The Lease shall commence on July 1, 1999 or the date that the tenant takes possession of the premises, whichever occurs first, and terminates on December 31, 2024. B. Base Rent shall be paid in the following manner plus any rental taxes, and additional rent as outlined herein.
YEAR ANNUAL RENT MONTHLY RENT ---- ----------- ------------ Year l $153,600 $12,800 Year 2 $161,280 $13,440 Year 3 $169,344 $14,112 Year 4 $177,816 $14,818 Year 5 $186,708 $15,559 Year 6-26 5% above previous year
PLUS ADDITIONAL RENT AS OUTLINED HEREIN C. Tenant agrees to accept the premises in an "as is" condition. D. This lease is a triple net lease. Tenant is responsible for payment of all expenses of the building. Tenant agrees to sign up and pay for its own utilities, taxes, insurance and maintenance of interior and exterior of building and its grounds. E. All other terms and conditions of this Lease shall remain in effect. Page 40 41 RULES & REGULATIONS RIDER (4) 1. Tenant shall not block or obstruct any of the entries, passages, doors, hallways, or stairways of Building or garage, or place, empty, or throw any rubbish, litter, trash, or material of any nature into such areas, or permit such areas to be used at any time, except for ingress or egress of Tenant, its officers, agents, servants, employees, patrons, licenses, customers, visitors, or invitees. 2. Landlord will not be responsible for lost or stolen personal property, equipment, money, or any article taken from Leased Premises, regardless of how or when loss occurs. 3. Tenant shall not install or operate any refrigerating, heating, or air conditioning apparatus or carry on any mechanical operation on the Leased Premises without written permission of Landlord. 4. Tenant shall not use Leased Premises for housing, lodging, or sleeping purposes or for the cooking or preparation of food without written permission of Landlord. 5. Tenant shall not bring into the Leased Premises or keep on Leased Premises any fish, fowl, reptile, insect or animal or any bicycle or other vehicle without the prior written consent of Landlord; wheelchairs, however, will be permitted. 6. No additional locks shall be placed on any door in the Building without the prior written consent of Landlord. Landlord may at all times keep a pass key to the Leased Premises. All of Tenant's keys shall be returned to Landlord promptly upon termination of this Lease. 7. Tenant shall do no painting or decorating in Leased Premises; or mark, paint or cut into, drive nails or screw into, nor in any way deface any part of Leased Premises or Building without the prior written consent of Landlord. If Tenant desires signal, communication, alarm, or other utility or service connection installed or changed, such work shall be done at expense of Tenant with the approval and under the direction of Landlord. 8. Tenant shall not permit the operation of any musical or sound-producing instruments or device which may be heard outside Leased Premises, or which may emanate electrical waves or x-rays or other emissions which will impair radio or television broadcasting or reception from or in the Building, or be hazardous to health, well-being, or condition of persons or property. Page 41 42 9. Tenant shall, before leaving Leased Premises unattended, close and lock all doors and shut off all utilities. Damage resulting from failure to do so shall be paid by Tenant. Each Tenant, before closing for the day and leaving the Leased Premises, shall see that all doors are locked. 10. Tenant shall give Landlord prompt notice of all accidents to or defects in air conditioning equipment, plumbing, electrical facilities, or any part or appurtenance of the Leased Premises. 11. The plumbing facilities shall not be used for any other purpose than that for which they are constructed, and no foreign substance of any kind shall be thrown therein, and the expense of any breakage, stoppage, or damage resulting from a violation of this provision shall be borne directly by the Tenant, who shall, or whose officers, employees, agents, servants, patrons, customers, licensees, visitors, or invitees shall have caused it. Landlord shall not be responsible for any damage due to stoppage, backup, or overflow of the drains or other plumbing fixtures. 12. All contractors and/or technicians performing work for Tenant within the Leased Premises, the Building, or garage facilities shall be referred to Landlord for approval before performing such work. This shall apply to all work including, but not limited to, installation of telephones, telegraph equipment, electrical devices and attachments, and all installations affecting floors, walls, windows, doors, ceilings, equipment, or any other physical feature of the Building, Leased Premises, or garage facilities. None of this work shall be done by Tenant without Landlord's prior written approval. 13. Neither Tenant nor any officer, agent, employee, servant, patron, customer, visitor, licensee, or invitee of any Tenant shall go upon the roof of the Building without the written consent of the Landlord. 14. In the event Tenant must dispose of crates, boxes, etc. which will not fit into wastepaper baskets, it will be the responsibility of Tenant to dispose of same properly. 15. If the Leased Premises shall become infested with vermin, roaches, or other undesirable creatures, Tenant, at its sole cost and expense, shall cause the Leased Premises to be professionally treated from time to time to the satisfaction of Landlord and shall employ such exterminators for this purpose as shall be approved by Landlord. 16. Tenant shall not install any antenna or aerial wires, radio or television equipment, or any other type of equipment inside or outside of the Building without Landlord's prior approval in writing and upon such terms and conditions as may be specified by Landlord in each and every instance. Page 42 43 17. Tenant shall not make or permit any use of Leased Premises, the Building, or garage facilities which, directly or indirectly, is forbidden by law, ordinance, or governmental or municipal regulation, code, or order or which may be disreputable or dangerous to life, limb, or property. 18. Tenant shall not advertise the business, profession, or activities of Tenant in any manner which violates the letter or spirit of any code of ethics adopted by any recognized association or organization pertaining thereto, use the name of the Building for any purpose other than that of the business address of Tenant or use any picture or likeness of the Building or the Building name in any picture or likeness of the Building or the Building name in any letterheads, envelopes, circulars, notices, advertisements, containers, or wrapping material without Landlord's express consent in writing. 19. Tenant shall neither conduct its business nor control its officers, agents, employees, servants, patrons, customers, licensees, and visitors in such a manner as to create any nuisance or interfere with, annoy, or disturb any other tenant or Landlord in its operation of the Building, or commit waste, or suffer or permit waste to be committed in Leased Premises. 20. The Tenant shall not install in the Leased Premise any equipment which uses a substantial amount of electricity without the advance written consent of Landlord. The Tenant shall ascertain from the Landlord the maximum amount of electrical current which can safely be used in the Leased Premises, taking into account the capacity of the electric wiring in the Building and the Leased Premises and the need of other tenants in the Building and shall not use more than such safe capacity. The Landlord's consent to the installation of electric equipment shall not relieve the Tenant from the obligation not to use more electricity that such safe capacity. 21. The Tenant, without the written consent of Landlord, shall not lay linoleum or other similar floor covering. 22. No outside storage of any material, including disabled vehicles will be permitted. 23. Tenant shall place chair pads beneath each desk chair to protect the carpet in the Leased Premises. 24. Landlord may waive any one or more of these Rules & Regulations for the benefit of Tenant or any other tenant, but no such waiver by Landlord shall be construed as a waiver of these Rules & Regulations in favor of Tenant or any other tenant, nor prevent Landlord from thereafter enforcing any such Rules & Regulations against any or all of the tenants of the Building. Page 43 44 25. Landlord reserves the right to make any such other reasonable Rules & Regulations as, in its judgment, may from time to time be needed for safety and security, for care and cleanliness of the Building and for the preservation of good order therein or in response to governmental regulation of any kind. Tenant agrees to abide by all such Rules & Regulations herein above stated and any additional Rules and Regulations which are adopted within five (5) days after receiving a copy of such additional Rules and Regulations. 26. Tenant shall be responsible for the observance of all of the foregoing Rules and Regulations by Tenant's officers, employees, agents, servants, clients, customers, patrons, invitees, licensees, visitors and guests. Page 44 EX-10.8 12 EX-10.8 1 Exhibit 10.8 STRATEGIC TEAMING AND MARKETING AGREEMENT THIS AGREEMENT, made as of this 18th day of February 1999 by and between iBiz Technology Corp. A Florida corporation with a place of business at 2331 W. Royal Palm Rd, Suite E 105 Phoenix, AZ 85021, hereinafter referred to as iBiz and Global Telephone Communication Inc. a Nevada corporation with a place of business at 3838 Camino Del Rio North Suite 333, San Diego California 92108 herein after referred to as GTCI, and collectively referred to as the Parties. WITNESSETH: WHEREAS, the Parties have identified certain business opportunities; WHEREAS, the Parties have unique capabilities which they believe complementary and not independently available within either of their respective companies; and WHEREAS, the Parties wish to enter into this Agreement in order to develop the best management and technical approach for said business opportunities; WHEREAS, iBiz is a corporation specializing in "small footprint," computer technology solutions for the financial services industry and other space-conscience computing environments; and WHEREAS GTCI is a telecommunications corporation providing communication products and services in China and the Pacific Rim; and NOW, THEREFORE, the Parties hereby agree as follows: 1. iBiz agrees to give non-exclusive marketing rights of its products to GTCI for a period of five (5) years to the Asian territories defined as: Mainland China/Hong Kong, Taiwan, South Korea, North Korea, Thailand, Vietnam, Cambodia, Myanmar (Burma), Laos, Malaysia, the Philippines, Indonesia and Japan. See Schedule A 2. GTCI agrees to use every effort and resource to market iBiz products in the Asian territories (defined in paragraph 1) for period of five (5) years. PROPRIETARY INFORMATION The party receiving the proprietary information shall be hereinafter referred to as the receiving Party and the Party furnishing the information the transmitting Party. The receiving Party agrees to keep in confidence and prevent the unauthorized disclosure to any person or persons outside its organization, and agrees further not to use for a purpose other Page 1 2 than for which furnished (and then only with appropriate restrictions governing its use) any and all data and information including all data and information previously furnished by the transmitting party relating to the subject areas of expertise of the transmitting Party. This includes all data and information which is designated in writing, or by appropriate stamp or legend, by the transmitting Party to be of a proprietary nature. The receiving Party shall not be liable for unauthorized disclosure of any such data or information if the same: (a) is in the public domain at the time it was disclosed; or (b) is disclosed inadvertently despite the exercise of the same degree of care as the receiving Party takes to preserve and safeguard its own proprietary information, provided also that any person having access to such information shall be advised of the contents of this Agreement; or (C) is disclosed with a written approval of the transmitting Party; or (D) was independently developed by the receiving Party; or (E) becomes known to the receiving Party from a source other than the transmitting Party who is legally entitled to such information without breach of this Agreement; or (F) was not identified in writing, or by application of the appropriate identifying stamp or legend, as proprietary information subject to this Agreement; or Each Party shall designate in writing the individual or individuals authorized to receive proprietary information under this Agreement and either Party may change its designation by written notice to the other. CLASSIFIED INFORMATION To the extent the obligations of the Parties hereunder require providing a customer or potential customer, confidential or sensitive information, the Parties agree that the customer shall execute such appropriate Non-Disclosure Agreement to protect such information, the form of which shall be agreed upon by both Parties. TERMINATION This Agreement and all rights and duties hereunder, except those under paragraph 3, above, which shall survive termination of this Agreement, may be terminated by either Party, on thirty (30) days' prior written notice to the other. Page 2 3 THIRD-PARTY TRADEMARKS During the performance of this Agreement, the following shall apply with respect to trademarks: It is understood that each Party will use its best effort to convey information to the other Party which is clear of third-party rights; however, none of the information which may be submitted or exchanged by the Parties shall constitute any representation, warranty, assurance, guarantee or inducement by either Party to the other with respect to the unknown or unasserted infringement of trademark, patents, copyrights or any right to privacy, or other rights of third persons. EXPENSES Except as otherwise set forth herein, or as may be mutually agreed by the Parties, and except for the compensation which may be paid to the Parties in accordance with any such contracts and subcontracts, each Party shall bear all of its own expenses incurred in connection with the business opportunities referred to herein. PUBLICITY No publicity or advertising regarding any proposal or contract relating to this Agreement shall be released without prior approval of both Parties, with exception that this Agreement may be made known to the customer, and certain information made public as required by the Securities Exchange Commission (SEC) or other regulatory agencies. ASSIGNMENTS Neither Party may assign or transfer its interest herein without the prior written consent of the other. This approval requirement shall not apply to the assignment to any successor corporation in the event of a merger or consolidation. Any consent required shall not be unreasonably withheld. COMPLIANCE WITH LAW The Parties shall comply with all applicable federal, state and local laws and regulations. LIMITATION OF LIABILITY Page 3 4 Neither Party shall be liable to the other for any indirect, incidental, special or consequential damages, however caused, whether as a consequence of the negligence of the one Party or otherwise. SEVERABILITY If any provision of this Agreement or part of such provision is or becomes invalid or unenforceable, then the remaining provisions hereof shall continue to be effective. WAIVERS No waiver by a party of any its rights or remedies shall be construed as a waiver by such party of any other rights or remedies that such party may have under this Agreement. ENTIRE AGREEMENT This Agreement contains the entire Agreement between the Parties and supercedes any previous understanding, commitments, or agreement, oral or written. This Agreement shall not be amended nor shall any waiver of any right hereunder be effective, unless set forth in a document executed by duly authorized representatives of both Parties. The validity, construction, scope and performance of this Agreement shall be governed by the laws of the State of California. IN WITNESS WHEREOF, the Parties hereby have caused this Agreement to be duly executed on the day and year first above written. Global Telephone Communication Inc. iBiz Technology Corp. By:__________________________ By:_________________________ Name: Terry Wong Name: Ken Schilling Title: President Title: President DATE:_______________________ DATE:______________________ Page 4 5 SCHEDULE A i-Key 2000 - Ergonomic Wireless Keyboard with Glidepoint and Palm Rest TV3682 - Financial Application Keyboard with Integrated Glidepoint TV3681 - Financial Application Keyboard Page 5 EX-10.9 13 EX-10.9 1 Exhibit 10.9 NEITHER THIS WARRANT NOR THE STOCK FOR WHICH IT MAY BE EXERCISED HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES ACT"), OR ANY OTHER FEDERAL OR STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT AS EXPRESSLY PROVIDED HEREIN. WITHOUT LIMITING THE FOREGOING, NEITHER THIS WARRANT NOR THE STOCK FOR WHICH IT MAY BE EXERCISED MAY BE TRANSFERRED FOR A PERIOD OF TWELVE (12) MONTHS AFTER THE DATE OF ISSUANCE OF THIS WARRANT OR THE EXERCISE OF THE STOCK PURCHASE RIGHTS HEREUNDER UNLESS PERMITTED BY THE TERMS OF THIS WARRANT AND APPLICABLE LAW. iBIZ TECHNOLOGY CORP. COMMON STOCK PURCHASE WARRANT This certifies that, for value received, _______________, an individual ("Holder") is entitled to subscribe for, and purchase from iBIZ TECHNOLOGY CORP., a Florida corporation ("Company"), 400,000 shares, subject to adjustment as set forth in Article II below, ("Warrant Shares") of Common Stock of the Company, par value $.001 per share ("Common Stock"), at the exercise price of $0.75 per share for the first 300,000 shares and $1.00 per share for the remaining 100,000 shares, which prices are subject to adjustment as set forth in Article II below, ("Exercise Price"), at any time and from time to time beginning on the date of this Warrant as set forth below ("Exercise Date"), and ending on the date that is three (3) years after the date of this Warrant or, if earlier, thirty (30) days from notice of the effectiveness of the Registration Statement described below in Section 3.03 ("Expiration Date"), upon written notice from the Holder to the Company ("Notice") and subject to the terms provided herein. This Warrant is subject to the following provisions, terms and conditions: ARTICLE I. EXERCISE; RESERVATION OF SHARES Section 1.01 Warrant Exercise. The rights represented by this Warrant may be exercised by the Holder at any time and from time to time prior to the expiration of this Warrant, upon Notice, by the surrender at the principal office of the Company of this Warrant together with a duly executed subscription in the form annexed hereto ("Subscription Form") and accompanied by payment, in certified or immediately available funds, of the Exercise Price for the number of Warrant Shares specified in the Subscription Form. The shares so purchased shall be deemed to be issued to the Holder as the record owner of such shares as of the close of business on the date on which this Warrant shall be exercised as hereinabove provided. No fractional shares or scrip representing fractional shares shall be issued upon exercise of this Warrant and the number of shares that shall be issued upon such exercise shall be rounded to the nearest whole share without the payment or receipt of any additional consideration. Page 1 2 Section 1.02 Certificates. Certificates for the shares purchased pursuant to Section 1.01 shall be delivered to the Holder within a reasonable time after the rights represented by this Warrant shall have been so exercised, and a new Warrant in the name of the Holder representing the rights, if any, that shall not have been exercised prior to the Expiration Date with respect to this Warrant shall also be delivered to such Holder within such time, with such new Warrant to be identical in all other respects to this Warrant. The term "Warrant," as used herein, includes any Warrants into which this Warrant may be divided or combined and any subsequent Warrants issued upon the transfer or exchange or reissuance upon loss hereof. Section 1.03 Reservation of Shares. The Company represents, warrants, covenants and agrees: (a) That all shares of Common Stock that may be issued upon exercise of this Warrant will, upon issuance, be validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof; (b) That during the period the rights represented by this Warrant may be exercised, the Company will at all times have authorized, and reserved for the purpose of issue and delivery upon exercise of the rights evidenced by this Warrant, a sufficient number of shares of Common Stock to provide for the exercise of the rights represented by this Warrant; and (c) If the Common Stock is listed on any national securities exchange or similar trading market, the shares of Common Stock that may be issued upon exercise of this Warrant will, prior to or on the date that a Registration Statement covering the Warrant Shares is effective, also be listed on such exchange subject to notice of issuance. ARTICLE II. ADJUSTMENTS Section 2.01 Reorganization, Reclassification, Consolidation, Merger or Sale. (a) Capital Events. If any reorganization or reclassification of the capital stock of the Company, or any consolidation or merger of the Company with another corporation, or the sale of all or substantially all of its assets to another corporation (in any instance, a "Capital Event") shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities or assets (including cash) with respect to or in exchange for their Common Stock, then, as a condition of such Capital Event, lawful and adequate provisions shall be made whereby the Holder hereof shall thereafter have the right to purchase and receive upon the basis and upon the terms and conditions specified in this Warrant and in lieu of the shares of the Common Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby, an amount of such shares of stock, securities or assets (including cash) as may have been issued or payable with respect to or in exchange for a number of Page 2 3 outstanding shares of such Common Stock equal to the number of shares of such stock immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby had such Capital Event not taken place. (b) Preservation of Value. In the case of any Capital Event, appropriate provision shall be made with respect to the rights and interests of the Holder of this Warrant to the end that the provisions hereof (including, without limitation, provisions for adjustment of the number of shares that may be issued upon exercise of this Warrant and the Exercise Price hereof) shall thereafter be applicable, as nearly as may be, in relation to any shares of stock, securities or assets (including cash) thereafter deliverable upon the exercise of the rights represented hereby. (c) Obligation Expressly Assumed. The Company shall not effect any consolidation, merger or sale of all or substantially all of its assets, unless prior to the consummation thereof the successor corporation (if other than the Company) resulting from such consolidation or merger, or the corporation into or for the securities of which the previously outstanding stock of the Company shall be changed in connection with such consolidation or merger, or the corporation purchasing such assets, as the case may be, shall assume by written instrument executed and mailed or delivered to the registered Holder at the last address of such Holder appearing on the books of the Company, the obligation to deliver to such Holder, upon exercise of this Warrant, such shares of stock, securities or assets (including cash) as, in accordance with the foregoing provisions, such Holder may be entitled to purchase. Section 2.02 Subdivision or Combination of Stock. In the event that the Company shall at any time subdivide or split its outstanding shares of Common Stock into a greater number of shares, the number of Warrant Shares subject to issuance upon exercise of this Warrant at the opening of business on the day upon which such subdivision becomes effective shall be proportionately increased. In the event that the outstanding shares of Common Stock of the Company shall be combined into a smaller number of shares, the number of shares subject to issuance upon exercise of this Warrant at the opening of business on the day upon which such subdivision becomes effective shall be proportionately decreased. Any such increase or decrease, as the case may be, shall become effective immediately after the opening of business on the day following the day upon which such subdivision or combination, as the case may be, becomes effective. Section 2.03 Stock Dividends. In the event that the Company shall at any time declare any dividend or distribution upon its Common Stock payable in stock, the number of Warrant Shares subject to issuance upon exercise of this Warrant shall be increased by the number (and the kind) of shares which would have been issued to the holder of this Warrant if this Warrant were exercised immediately prior to such dividend. Such increase shall become effective immediately after the opening of business on the day following the record date for such dividend or distribution. Page 3 4 Section 2.04 Equitable Adjustment. In the event the Company shall participate in any extraordinary corporate event or transaction not otherwise provided for herein, including a so-called issuer self-tender, there shall be made an equitable and proportionate adjustment in the number of shares issuable upon exercise of this Warrant and the Exercise Price consistent with the principles of other such adjustments provided for in this Article II. Section 2.05 Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares of the Company owned or held by or for the account of the Company. Section 2.06 Minimum Adjustment. No adjustment in the number of shares that may be issued upon exercise of this Warrant as provided in this Article II shall be required unless such adjustment would require an increase or decrease in such number of shares of at least one percent (1%) of the then adjusted number of shares of Common Stock that may be issued upon exercise of this Warrant; provided, however, that any such adjustments that by reason of the foregoing are not required to be made shall be carried forward and taken into account and included in determining the amount of any subsequent adjustment; and provided further, that if the Company shall at any time subdivide or combine the outstanding shares of Common Stock or issue additional shares of Common Stock as a dividend, said percentage shall forthwith be proportionately adjusted so as to appropriately reflect the same. Section 2.7 Adjustment of Exercise Price. Whenever the number of shares of Common Stock that may be issued upon exercise of this Warrant is adjusted and effective at the time such adjustment is effective, as provided in Sections 2.01, 2.02 and 2.03 of this Article II, the Exercise Price shall be adjusted (to the nearest whole cent) by multiplying each such Exercise Price immediately prior to such adjustment by a fraction (x) the numerator of which shall be the number of shares of Common Stock which may be issued upon the exercise of each such Warrant immediately prior to such adjustment, and (y) the denominator of which shall be the number of shares of Common Stock so purchasable immediately thereafter. The Company may retain a firm of independent certified public accountants (which may not be the regular accountants employed by the Company) to make any required computation, and a certificate signed by such firm shall be conclusive evidence of the correctness of such adjustment. Section 2.8 Record Date. In the event that the Company shall not take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend payable in Common Stock, then such record date shall be deemed for the purposes of this Article II to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend. Section 2.9 Officer's Certificate. Whenever the Exercise Price shall be adjusted as provided in this Article II, the Company shall forthwith file with its Secretary and retain in the permanent records of the Company, an officer's certificate showing the adjusted Exercise Price determined as provided in this Article II, setting forth in reasonable detail the facts requiring such adjustment, including a statement of the number of additional or fewer shares of Common Stock, and such other facts as may be reasonably necessary to show the reason for and the method of Page 4 5 computing such adjustment. Each such officer's certificate shall be made available at all reasonable times for inspection by the Holder. Section 2.10 Notice of Adjustment. Upon any adjustment of the number of shares that may be issued upon exercise of this Warrant or the Exercise Price, the Company shall give notice thereof to the Holder, which notice shall state the increase or decrease, if any, in the number of shares that may be issued upon the exercise of this Warrant and the Exercise Price, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Section 2.11 Definition of "Common Stock". As used in this Article II, the term "Common Stock" shall mean and include all of the Company's authorized Common Stock of any class as constituted on the date of this Warrant as set forth below, and shall also include any capital stock of any class of the Company thereafter authorized that shall not be limited to a fixed sum or stated value in respect of the rights of the holders thereof to participate in dividends or the distribution of assets upon the voluntary or involuntary liquidation, dissolution or winding up of the Company. Section 2.12 Exclusion of Certain Stock. Notwithstanding anything in this Article II, no adjustment of the Exercise Price or the number of shares to be issued upon exercise of this Warrant shall be made upon, (i) the grant of options under any stock option plan of the Company now existing or hereafter adopted by the Company (as any such plan may be amended from time to time) or (ii) the issuance of shares of Common Stock upon the exercise of options granted under any such plan or (iii) other events where adjustment is not specifically required by this Warrant. ARTICLE III. TRANSFER RESTRICTIONS; REGISTRATION RIGHTS Section 3.01 Securities Law Transfer Restrictions. By taking and holding this Warrant, the Holder (i) acknowledges that neither this Warrant nor any shares of Common Stock that may be issued upon exercise of this Warrant have been registered under the Securities Act or any applicable state securities or blue sky law (collectively, "Securities Laws"); (ii) agrees not to sell, transfer or otherwise dispose of this Warrant, and agrees not to sell, transfer or otherwise dispose of any such shares of Common Stock without registration unless the sale, transfer or disposition of such shares can be effected without registration and in compliance with the Securities Laws; and (iii) agrees not to sell, transfer or otherwise dispose of this Warrant or any portion thereof or interest therein except as otherwise expressly permitted herein. No part of this Warrant or any portion thereof or interest therein may be transferred, whether voluntarily, involuntarily or by operation of law, except to a Permitted Transferee as hereinafter defined. "Permitted Transferee" shall mean a successor by inheritance or intestate succession to any interest in this Warrant or any portion thereof and who accepts by written instrument reasonably acceptable to the Company each of the terms and conditions that govern this Warrant. Without limiting the foregoing, no rights in this Warrant or the stock for which it may be exercised may Page 5 6 be transferred for twelve (12) months after the date of issuance of this Warrant or the exercise of the stock purchase rights hereunder. Any certificate for shares of Common Stock issued upon exercise of this Warrant shall bear an appropriate legend describing the foregoing restrictions, unless such shares of Common Stock have been effectively registered under the applicable Securities Laws. Section 3.02 Provision of Information by Holder. The Holder shall make available to the Company such written information, presented in form and content satisfactory to the Company, as the Company may reasonably request, from time to time, in order to make the determination provided for in Section 3.01. Section 3.03 Registration Rights. The following provisions shall apply irrespective of whether the Holder holds this Warrant or has exercised this Warrant and holds Warrant Shares, and shall apply during the period beginning on the date of this Warrant as set forth below ("Issue Date") and continuing until the Expiration Date: (a) The Company shall use reasonable best efforts to, within one year from the Issue Date, include the Warrant Shares in a registration statement ("Registration Statement") filed with the Securities and Exchange Commission under the Securities Act, and have such Registration Statement declared effective no later than the first anniversary after the Exercise Date so that upon issuance the Warrant Shares will be freely tradeable, provided that the Holder shall furnish to the Company all appropriate information in connection therewith as the Company may reasonably request. The Company shall use its reasonable best efforts to ensure that such Registration Statement shall remain continuously effective for ninety (90) days after its effectiveness. (b) The Company shall (i) bear the costs, expenses and fees incurred in connection with any such registration, excluding any broker fees, selling commissions, and out-of-pocket costs and expenses of the Holder; (ii) use its reasonable best efforts to keep any such registration statement effective through the Expiration Date, as amended from time to time, as necessary; (iii) supply prospectuses and other documents as the Holder may reasonably request; (iv) use its reasonable best efforts to register and qualify the Warrant Shares for sale in such states as the Holder designates; (v) do any and all other acts and things that may be necessary or desirable to enable Holder to consummate the public sale or other disposition of the Warrant Shares; and (vi) enter into cross-indemnification arrangements with the Holder with respect to matters arising from such Registration Statement and public offering. Page 6 7 ARTICLE IV. MISCELLANEOUS Section 4.01 Transfer of Warrants. No right or interest in this Warrant shall be transferable except as provided in Article III. Section 4.02 Notices. Any notice or communication to be given pursuant to this Warrant shall be in writing and shall be delivered in person or by certified mail, return receipt requested, in the United States mail, postage prepaid. Notices to the Company shall be addressed to the Company's principal office. Notices to the Holder shall be addressed to the Holder's address as reflected in the records of the Company. Notices shall be effective upon delivery in person, or, if mailed, at midnight on the fifth business day after mailing. Section 4.03 Issue Tax. The issuance of certificates for shares of Common Stock upon the exercise of this Warrant shall be made without charge to the Holder for any issuance tax in respect thereof, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the Holder of the Warrant exercised. Section 4.04 No Shareholder Rights. This Warrant shall not entitle the Holder to any voting rights or other rights as a shareholder of the Company. Section 4.05 Current Information. The Company shall cause copies of all financial statements and reports, proxy statements and other documents that are provided to its shareholders to be sent by first class mail, postage prepaid, on the date of mailing to such shareholders, to the Holder at the address reflected in the records of the Company. Section 4.06 Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Arizona. Section 4.07 Headings; Interpretation. The section headings used herein are for convenience of reference only and are not intended to define, limit or describe the scope or intent of any provision of this Warrant. When used in this Warrant, the term "including" shall mean "including, without limitation." Section 4.08 Successors. The covenants, agreements and provisions of this Warrant shall bind the parties hereto and their respective successors and permitted assigns. Section 4.09 Integrated Agreement; Modification. This Warrant is a complete statement of the agreement of the parties with respect to the subject matter hereof and may be modified only by written instrument executed by the parties. Page 7 8 IN WITNESS WHEREOF, the Company has caused this Warrant to be issued as of the ____________ day of ____________, 1999. ATTEST: iBIZ TECHNOLOGY CORP. By: By: --------------------------------- ------------------------------ Secretary Ken Schilling, President ------------------, Page 8 9 SUBSCRIPTION FORM (To be Executed only upon Exercise of Warrant) The undersigned registered owner of this Warrant irrevocably exercises this Warrant and purchases _______ shares of Common Stock of iBIZ TECHNOLOGY CORP., a Florida corporation, that may be issued under this Warrant and herewith delivers the sum of $__________ in full payment of the Exercise Price for such shares, all on the terms and conditions specified in this Warrant. Such shares are to be delivered to such holder at the address reflected in the records of the Company unless contrary instructions are herein given. Deliver certificates to: - -------------------------------------------------------------------------------- Dated: ------------------------------- ------------------------------------ (Signature of Registered Owner) ------------------------------------ (Street Address) ------------------------------------ (City) (State) (Zip Code) Page 9 10 UNANIMOUS CONSENT OF THE DIRECTORS IN LIEU OF SPECIAL MEETING OF THE BOARD OF DIRECTORS OF IBIZ TECHNOLOGY CORP. The undersigned, being all of the directors of iBIZ TECHNOLOGY CORP., a Florida corporation, hereby consent to the following action taken without a meeting: RESOLVED, that the Warrant attached hereto is hereby approved by the Board, the undersigned having determined that the consideration for the Warrant and the stock obtainable thereunder is adequate, and the President is hereby authorized to issue such Warrant to Scott Waldman. This consent, and all executed counterparts hereof, shall be deemed effective as of the ___ day of __________, 1999, and shall be filed with the minutes of the proceedings of the Board. DIRECTORS: --------------------------------------------- Kenneth Schilling --------------------------------------------- Alan M. Smith --------------------------------------------- Terry Ratliff --------------------------------------------- Mark Perkins Page 10 EX-10.10 14 EX-10.10 1 Exhibit 10.10 NEITHER THIS DEBENTURE NOR THE SECURITIES ISSUABLE HEREUNDER HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY OTHER FEDERAL OR STATE SECURITIES LAWS, AND THEY MAY NOT BE SOLD OR OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT AS EXPRESSLY PROVIDED FOR HEREIN. WITHOUT LIMITING THE FOREGOING, NEITHER THIS DEBENTURE NOR THE STOCK ISSUABLE HEREUNDER MAY BE TRANSFERRED FOR A PERIOD OF TWELVE (12) MONTHS AFTER THE DATE OF THIS DEBENTURE OR THE ISSUANCE OF STOCK HEREUNDER UNLESS PERMITTED BY THE TERMS OF THIS DEBENTURE AND APPLICABLE LAW. iBIZ TECHNOLOGY CORP. CONVERTIBLE DEBENTURE DUE JUNE 21, 2000 June 21, 1999 US $120,000 FOR VALUE RECEIVED, iBIZ Technology Corp., a Florida corporation (the "Company") promises to pay to the order of __________, an individual (the "Holder") on June 21, 2000 (the "Maturity Date"), the principal sum of One Hundred Twenty Thousand Dollars ($120,000), plus interest accruing from and after the date hereof, as hereinafter provided. 1. PAYMENT AND INTEREST. The indebtedness outstanding under this Debenture shall bear interest of eight percent (8%) per annum. Unless the conversion rights provided under Section 5 are exercised pursuant to this Debenture, the principal and accrued interest shall be due on the Maturity Date. Payment is to be made at the office of the Holder as reflected in the records of the Company or at such other place as the Holder of this Debenture shall have notified the Company in writing. Nothing herein contained, nor any transaction relating thereto, shall be construed or so operate as to require the Company to pay interest at a greater rate than the maximum allowed by the applicable law relating to this Debenture. Should any interest or other charges, charged, paid or payable by the Company in connection with this Debenture, or any other compensation, payment or earning of interest, be in excess of the maximum allowed by the applicable law as aforesaid, then any and all such excess shall be, and the same hereby is, waived by the Holder, and any and all such excess paid shall be automatically credited against and in reduction of the principal due under this Debenture. 2. LIQUIDATION RIGHTS. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, this Debenture shall be entitled to a claim in liquidation before participation by the holders of any debt subordinate hereto or of any capital stock of the Page 1 2 Company. The amount of the claim in liquidation shall equal the amount to which the Holder of this Debenture would be entitled in the case of payment, whether or not this Debenture is eligible for payment at the time of liquidation. A liquidation, dissolution, or winding up of the Company, for purposes of this Section 2, shall not include any consolidation, reorganization, or merger of the Company with or into any other association or corporation, or any acquisition of all or substantially all of the assets and liabilities of the Company by any other association or corporation, whether or not of a different form or subject to the laws or a different jurisdiction, provided the same are not in violation of any of the terms of this Debenture or the agreements contemplated therein. 3. EVENTS OF DEFAULT; ACCELERATION. If any of the following conditions or events ("Events of Default") shall occur: (a) if the Company shall default in the payment of any principal of this Debenture when the same becomes due and payable and such default is not remedied within sixty (60) days after written notice thereof; or (b) if the Company shall default in the payment of any interest on this Debenture after the same becomes due and payable and such default is not remedied within sixty (60) days after written notice thereof then the Holder may at any time, at the option of the Holder, by written notice or notices given to the Company, declare this Debenture to be, and this Debenture shall thereupon become, forthwith due and payable and the Company forthwith will pay to the Holder the entire principal of and interest accrued on this Debenture. 4. LEGAL TENDER. All payments of principal and interest hereunder shall be in coin or currency of the United States or America which on the respective dates of payment thereof constitutes legal tender for the payment of public and private debt. 5. CONVERSION OF DEBENTURE. (a) Conversion Following Registration. Upon the effectiveness of the Registration Statement described below in Section 9, this Debenture shall be automatically converted into 180,000 fully paid and nonassessable shares of common stock of the Company. (b) Mechanics of Conversion. Upon conversion, all obligations of the Company to pay principal and interest hereunder shall be extinguished. Upon conversion, the Holder of this Debenture shall surrender the Debenture during regular business hours at the office of the Company. As promptly as practicable after the surrender of the Debenture as aforesaid, the Company shall deliver or cause to be delivered to the Holder a certificate or certificates for the number of fully paid and nonassessable shares of common stock issuable upon conversion of this Debenture. Such conversion shall be deemed to have been effected Page 2 3 immediately prior to the close of business on the effective date of the Registration Statement, subject to surrender of the Debenture, (the "Date Of Conversion"), and at such time the rights of the Holder shall cease and the Holder shall be deemed to have become the holder of record of the shares issuable hereunder. (c) Adjustments. If the Company shall effect any capital reorganization or any reclassification of the capital stock of the Company or in case of the consolidation or merger or exchange of the company with or into another corporation or the conveyance of all or substantially all of the assets of the Company to another corporation, the Holder of this Debenture shall be entitled to receive upon the conversion of the Debenture, that type and number of securities to which a holder of the number of shares of common stock into which this Debenture is convertible immediately prior to such event would have been entitled upon such reorganization, reclassification, consolidation, merger or conveyance; and, in any such case, appropriate adjustment, as determined by the Board of Directors, shall be made in the application of the provisions herein set forth with respect to the rights and interests thereafter of the holder of this Debenture, to the end that the provisions set forth herein shall thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other property thereafter deliverable upon the conversion of the Debenture. If the Company shall at any time subdivide its outstanding shares of Common Stock into a greater number of shares or pay a dividend in shares of common stock to the outstanding common stock, or combine the outstanding share of common stock into a smaller number of shares, the conversion rate for this Debenture in effect immediately prior to such subdivision, dividend or combination shall be adjusted proportionately simultaneously with such event. 6. RESERVATION OF SHARES. The Company covenants and agrees that, during the period within which conversion rights represented by this Debenture may be exercised, the Company will at all times have authorized and reserved, solely for the purpose of such possible conversion, free from preemptive rights, out of its authorized but unissued shares, a sufficient number of shares of its common stock to provide for the exercise in full of the conversion rights represented by this Debenture. In accordance with and subject to applicable laws and regulations, the Company shall from time to time increase its number of authorized shares of common stock so as to maintain a number of such shares sufficient to permit the conversion of common stock if necessary to ensure such conversion. 7. REGISTRATION AND TRANSFER OF THIS DEBENTURE. No right or interest in this Debenture may be transferred except to a successor by inheritance or intestate succession, and such successor shall, as a condition of succession, accept by written instrument reasonably acceptable to the Company each of the terms and conditions that govern this Debenture. Without limiting the foregoing, neither this Debenture nor the stock issuable hereunder may be transferred for a period of twelve (12) months after the date of this Debenture or the issuance of stock hereunder unless permitted by the terms of this Debenture and applicable law. Page 3 4 8. LOST DOCUMENTS. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Debenture or any Debentures exchanged for it, and (in case of loss, theft or destruction) of indemnity satisfactory to it, and upon reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of such Debenture, if mutilated, the Company will make and deliver in lieu of such Debenture a new Debenture of the same series and of like tenor and unpaid principal amount. 9. REGISTRATION RIGHTS. (a) The Company shall use reasonable best efforts to, within one (1) year from the date hereof, include the shares of common stock issuable upon conversion of this Debenture in a registration statement ("Registration Statement") filed with the Securities and Exchange Commission under the Securities Act, and have such Registration Statement declare effective no later than the first anniversary from the date hereof so that upon issuance the shares issuable hereunder will be freely tradeable, provided that the Holder shall furnish to the Company all appropriate information in connection therewith as the Company may reasonably request. (b) The Company shall (i) bear the costs, expenses and fees incurred in connection with any such registration, excluding any broker fees, selling commissions and out of pocket costs and expenses of the Holder; (ii) supply prospectuses and other documents as the Holder may reasonably request; (iii) use its reasonable best efforts to register and qualify the shares issuable hereunder for sale in such states as the Holder designates; (iv) do any and all other acts and things that may be necessary or desirable to enable Holder to consummate the public sale or other disposition of the shares issuable hereunder; and (v) enter into cross-indemnification arrangements with the Holder with respect to matters arising from such Registration Statement and public offering. 10. DEFINITIONS. The term Holder means the Holder and each subsequent holder of this Debenture; and any consent, waiver or agreement in writing by the then Holder with respect to any matter or thing in connection with this Debenture, whether altering any provision hereof or otherwise, shall bind all subsequent holders of this Debenture. 11. MISCELLANEOUS. (a) Transfer of Warrants. No right or interest in this Debenture is transferable except as provided in Section 7. Upon automatic conversion, the shares issued upon cancellation of the Debenture will be fully tradeable. (b) Notices. Any notice or communication to be given pursuant to this Debenture shall be in writing and shall be delivered in person or by certified mail, return receipt requested, in the United States mail, postage prepaid. Notices to the Company shall be addressed to the Company's principal office. Notices to the Holder shall be addressed to Page 4 5 the Holder's address as reflected in the records of the Company. Notices shall be effective upon delivery in person, or, if mailed, at midnight on the fifth business day after mailing. (c) Issue Tax. The issuance of certificates for shares of common stock upon the exercise of this Debenture shall be made without charge to the Holder for any issuance tax in respect thereof, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the Holder of the Debenture exercised. (d) No Shareholder Rights. This Debenture shall not entitle the Holder to any voting rights or other rights as a shareholder of the Company. (e) Current Information. The Company shall cause copies of all financial statements and reports, proxy statements and other documents that are provided to its shareholders to be sent by first class mail, postage prepaid, on the date of mailing to such shareholders, to the Holder at the address reflected in the records of the Company. (f) Governing Law. This Debenture shall be governed by and construed in accordance with the laws of the State of Arizona. (g) Headings; Interpretation. The section headings used herein are for convenience of reference only and are not intended to define, limit or describe the scope or intent of any provision of this Debenture. When used in this Debenture, the term "including" shall mean "including, without limitation." (h) Successors. The covenants, agreements and provisions of this Debenture shall bind the parties hereto and their respective successors and permitted assigns. (i) Integrated Agreement; Modification. This Debenture is a complete statement of the agreement of the parties with respect to the subject matter hereof and may be modified only by written instrument executed by the parties. IN WITNESS WHEREOF, the Company has executed this Debenture as of the ____________ day of ____________, 1999. ATTEST: iBIZ TECHNOLOGY CORP. By:________________________________ By:___________________________________ _____________, Secretary Ken Schilling, President Page 5 EX-10.11 15 EX-10.11 1 Exhibit 10.11 EMPLOYMENT AGREEMENT This EMPLOYMENT AGREEMENT effective as of _________________, 1999, is by and between iBIZ TECHNOLOGY CORP., a Florida corporation, INVNSYS TECHNOLOGY CORPORATION, an Arizona corporation (collectively the "Company"), and KENNETH SCHILLING, an individual residing in Peoria, Arizona ("Employee"). RECITALS: A. Employee has agreed to serve as the President and Chief Executive Officer of the Company; B. The Board of Directors of the Company considers sound and vital management to be essential and desires to have the benefit of Employee's knowledge, experience and service; and C. Employee desires to be employed by the Company and the Company desires to retain Employee as its President and Chief Executive Officer on the terms and conditions set forth herein. AGREEMENTS: The parties hereto, in consideration of the covenants and agreements set forth herein and other good and valuable consideration, agree as follows: 1. DEFINITIONS. For purposes of this Agreement, the following terms shall have the meaning indicated thereof: 1.1 Board means the Board of Directors of the Company or any successor. 1.2 Company means iBIZ TECHNOLOGY CORP. or any successor entity. 1.3 Compensation means the total amount included in Employee's gross income for federal income tax purposes in connection with his employment hereunder for payments or benefits received under the provisions of Sections 2.3.1 and 2.3.2 hereof. 1.4 Effective Date means ______________________, 1999. Page 1 2 1.5 Termination For Cause means the termination of employment of Employee by the Board because of Employee's personal dishonesty, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any material law, rule or regulation resulting in the Company's detriment or reflecting upon the Company's integrity (other than traffic infractions or similar minor offenses) or a material breach by the Employee of the terms of this Agreement and failure to cure such breach within thirty (30) days after receipt of written notice from the Company specifying the nature of such breach or to pay compensation to the Company deemed reasonable by the Company if the breach cannot be cured. For purposes of this Agreement, Employee's termination of employment shall not be considered to be a Termination for Cause unless and until there shall have been delivered to the Employee a copy of a resolution, duly adopted by the affirmative vote of not less than sixty-six percent (66%) of the entire membership of the Board at a meeting called and held for that purpose after reasonable notice to Employee and an opportunity for him, together with his counsel, to be heard, finding that, in the good faith opinion of the Board, Employee is guilty of misconduct of the type described in this Section 1.5, and specifying the particulars thereof in detail which determination shall be subject to a complete and de novo review as to reasonableness and good faith. 1.6 Termination by Employee For Good Reason means the termination of this Agreement by Employee upon the occurrence of any of the following events without Employee's consent: (i) assignment of Employee to any duties substantially inconsistent with his position or duties contemplated by this Agreement or a substantial reduction of his duties contemplated by this Agreement; (ii) the removal of any titles of Employee specified in Section 2.2 of this Agreement; (iii) any material breach of the Company's obligation under this Agreement or any failure by the Company to carry out any of its material obligations hereunder, and the failure to cure such breach or failure within thirty (30) days after written notice of such breach or failure has been delivered to the Company by Employee; and (iv) the relocation of Employee or his corporate office, facilities, or personnel outside the Phoenix metropolitan area. 1.7 Total and Permanent Disability means an injury or illness of the Employee that prevents the performance of customary duties and which is expected to be of long continued and indefinite duration and that has caused Employee's absence from service for at least one hundred eighty (180) days. 2. EMPLOYMENT. The Company hereby retains and employs Employee to serve in the capacity of President and Chief Executive Officer. Employee accepts such employment on the terms and conditions set forth herein. Page 2 3 2.1 Term. The term of this Agreement shall commence on the Effective Date and shall end, unless previously terminated in accordance with the provisions of Section 3 hereof, at the close of business on the day before the second anniversary of the Effective Date hereof. 2.2 Duties and Responsibilities. Employee's position shall be President and Chief Executive Officer of the Company. The President and Chief Executive Officer of the Company, subject to the control of the directors, shall in general supervise and control all business and affairs of the Company. He shall bear ultimate responsibility for the success or failure of the business of the Company and the operating profits or losses. Employee shall serve in such other executive capacities and have such additional titles and authorities with respect to the Company and its subsidiaries as the Board may from time to time reasonably prescribe. During the term of this Agreement, Employee shall devote substantially his entire work time, attention, and energies to the business of the Company and its subsidiaries. Subject to the provisions of Section 4 hereof, Employee may serve as a director or member of any other corporation or entity so long as any such service does not cause any conflict of interest with the Company. During the term of this Agreement, the Company shall use its good-faith efforts to cause the Board to include Employee as a nominee and cause his election to the Board. 2.3. Compensation. 2.3.1 Base Salary. Subject to the further provisions of this Agreement, the Company agrees to pay to Employee an annual base salary of $200,000, payable no less frequently than in accordance with the regular payroll practices of the Company, with such increases as shall be made from time to time in accordance with the Company's regular salary administrative practices as applied to Company officers. The base salary of Employee shall not be decreased at any time during the term of this Agreement from the amount in effect from time to time. Employee shall be entitled and eligible for bonuses that may be declared from time to time in the sole discretion of the Board. 2.3.2 Fringe Benefits. Employee shall be entitled to participate in any fringe benefits which are now or may hereafter become applicable to the Company's executives, and any other benefits which are commensurate with the duties and responsibilities to be performed by the Employee under this Agreement; including, but not limited to, reimbursement for reasonable business expenses accounted for in accordance with applicable governmental regulations; life, long-term disability and accident insurance plans; employee saving and Page 3 4 investment plans; and medical, dental and hospitalization insurance plans; without any material reduction in such fringe benefits as in effect on the Effective Date hereof. Employee shall receive 5 weeks paid vacation and 6 personal days paid vacation per year that this Agreement is in effect. Effective upon execution of this Agreement, Employee shall receive _____ options to purchase _____ shares of Common Stock of the Company at an exercise price of _____ per share subject to the vesting schedule and other terms and conditions contained in the stock option attached hereto as Exhibit "2.3.2" issued pursuant to the Employee Stock Option Plan (the "Option Plan") attached hereto as Exhibit "2.3.2(a)." 2.3.3 Participation in Retirement and Benefit Plans. The Employee shall be entitled to participate in any retirement, pension, thrift or other retirement or employee plan that the Company has adopted or may adopt for the benefit of its senior executives. 3. TERMINATION. Employee's employment under this Agreement shall terminate upon the occurrence of any one of the following events: 3.1 Total and Permanent Disability. In the event Employee suffers Total and Permanent Disability, the Company may terminate Employee's employment. Upon termination by reason of Total and Permanent Disability, the Company shall pay to Employee such benefits as may be provided to officers of the Company under any Company provided disability insurance or similar policy or under any Company adopted disability plan and in the absence of any such policy or plan shall continue to pay to Employee for a period of not less than six (6) months the Compensation then in effect as of the effective date of Employee's termination. Employee agrees, in the event of any dispute under this Section as to the existence of Total and Permanent Disability, to submit to a physical examination by a licensed physician selected by the Company, the cost of such examination to be paid by the Company, and the decision as to Employee's disability shall be conclusive and binding upon the Company and Employee. Nothing contained herein shall be construed to affect Employee's rights under any disability insurance or similar policy, whether maintained by the Company, Employee or another party. 3.2 Death. In the event of the death of Employee this Agreement shall terminate and all obligations of the Company hereunder shall be extinguished as of the date of Employee's death. Nothing contained herein shall be construed to affect any rights of Employee's estate under any life insurance or similar policy, whether owned by the Company, the Employee or any third party. Page 4 5 3.3 Termination For Cause. The Company may effect a Termination For Cause of Employee. The Company shall have no further obligation to pay Compensation hereunder after the date of Termination For Cause. 3.4 Voluntary. Should Employee voluntarily terminate his employment prior to the termination of this Agreement, the Company shall have no further obligation to pay compensation. 3.5 Termination By Employee For Good Reason. Employee shall be entitled to terminate his employment hereunder upon the occurrence of an event constituting Good Reason, as defined in Section 1.6. If an event constituting Good Reason occurs, Employee shall have the right, exercisable for a period of thirty (30) days, to immediately terminate this Agreement by delivering a written statement to that effect to the Company. Upon such a termination, Employee shall be entitled to receive a payment equal to the lesser of (i) an amount equal to one-half of the Employee's annual base salary in effect at the time of termination, or (ii) the remaining compensation due Employee under the terms of this Agreement. If Employee fails to exercise his rights under this Section 3.5 within thirty (30) days following an event constituting Good Reason, such rights shall expire and be of no further force or effect. 4. CONFIDENTIALITY. 4.1 Confidential Information. Employee acknowledges that he has and will have access to trade secrets and confidential business information of the Company and its affiliates and subsidiaries throughout the term of this Agreement and that any such trade secret or confidential information, regardless of whether Employee alone or with others developed any such trade secret or confidential information, shall be and shall remain the property of the Company or its affiliates or subsidiaries. During the term of this Agreement and after termination of employment, Employee shall not, either voluntarily or involuntarily, on either his own account, as a member of a firm, or on behalf of another employer or otherwise, directly or indirectly use or reveal to any person, partnership, corporation or association any trade secret or confidential information of the Company or any of its subsidiaries or affiliates. Such trade secrets shall include, but shall not be limited to, business plans, marketing plans or programs, any non-public financial information, including but not limited to, financial information, forecasts and statistics relating to markets, contracts, customer lists, compensation arrangements and business opportunities. The term "trade secrets" shall not include information generally available to the public or a governmental agency. Employee will not make available to any person, partnership, corporation or association, or retain after termination of employment, any Employer policy manuals, printed Page 5 6 materials or computer disc containing information related to the Company or to any affiliate of the Company. 4.2 Injunctive Relief. Employee acknowledges that the restrictions contained in this Section 4 are a reasonable and necessary protection of the immediate interests of the Company and its affiliates and subsidiaries and that any violation of these restrictions would cause substantial injury to the Company. In the event of a breach or threatened breach by Employee of these restrictions, the Company shall be entitled to apply to any court of competent jurisdiction for an injunction restraining Employee from such breach or threatened breach; provided, however, that the right to apply for an injunction shall not be construed as prohibiting the Company from pursuing any other available remedies for such breach or threatened breach. 5. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of the Employee, the Company and their respective heirs, executors, administrators, successors and assigns; provided, however, that Employee may not assign his rights hereunder without the prior written consent of the Company and may not assign his obligations hereunder. The Company may assign either its rights or obligations hereunder to any of its subsidiaries or affiliated corporation or to any successor to substantially all of the assets or business of the Company. 6. MODIFICATION, WAIVER OR AMENDMENT. The provisions of this Agreement may not be modified, amended or waived except by a written instrument executed by the Company and Employee. The waiver of any provision of this Agreement by either party shall not constitute a waiver of any subsequent occurrences or transactions unless the waiver, by its terms, constitutes a continuing waiver. 7. ARBITRATION. Any disputes related to or arising out of this Agreement or otherwise relating to Employee's employment with the Company shall be subject to mandatory binding arbitration before a single arbitrator in accordance with the rules of the American Arbitration Association ("AAA"), except that the Company may, in place of or in addition to arbitration, elect to pursue court remedies for any breach of Section 4 of this Agreement. The arbitrator shall be selected in accordance with the AAA's rules for selecting a single arbitrator provided that, if AAA rules call for selecting an arbitrator by making strikes against a list of candidates, in the event that there is an odd number of candidates Employee shall have the first strike and in the event that there is an even number of candidates the Company shall have the first strike. Except to the extent contrary to this Agreement or the Company's written policies regarding arbitration with Employee, the procedural rules that shall govern the arbitration shall be the rules of the AAA, or in the event that a particular procedural issue is not governed by the foregoing, the Arizona Rules of Civil Procedure shall apply except that discovery may be conducted only upon agreement of the parties or order of the arbitrator upon good cause shown, Page 6 7 and in issuing discovery orders, the arbitrator shall consider that the parties have chosen arbitration to provide for the efficient and inexpensive resolution of disputes. The forum for the arbitration shall be Phoenix, Arizona. The applicable substantive law shall be the law chosen to apply to disputes provided by this Agreement. A party may initiate arbitration under this Section by making a demand for arbitration and shall serve with that demand a detailed statement setting forth with particularity the factual and legal basis for each claim asserted. In the event that the party initiating arbitration fails to serve on the opposing party the detailed statement of claims required by this Section, the opposing party shall be entitled to move to dismiss the arbitration, and upon such motion, such claims shall be dismissed. Upon the issuance of a decision, the arbitrator shall issue written findings of fact and conclusions of law. The decision of the arbitrator shall be in accordance with the express terms and conditions of this Agreement. Each party shall pay its own attorneys' fees and costs and shall share the arbitration fees provided that the nonprevailing party shall reimburse the prevailing party for all reasonable attorneys' fees and costs, including the arbitration fees, incurred in connection with the arbitration. Arbitration proceedings and any information related thereto shall be kept confidential. THE PARTIES ACKNOWLEDGE THAT THEIR AGREEMENT TO ARBITRATE UNDER THIS SECTION MEANS THAT TRIAL BY JURY OR APPEAL WILL NOT BE AVAILABLE FOR ANY DISPUTES RELATED TO OR ARISING OUT OF THIS AGREEMENT OR OTHERWISE RELATING TO EMPLOYEE'S EMPLOYMENT WITH THE COMPANY INCLUDING WITHOUT LIMITATION DISPUTES INVOLVING ALLEGED EMPLOYMENT DISCRIMINATION, HARASSMENT, WRONGFUL TERMINATION, AND ANY OTHER CLAIMS ARISING OUT OF FEDERAL OR STATE STATUTES, COMMON LAW OR PUBLIC POLICY, EXCEPT THAT THIS SECTION DOES NOT RESTRICT THE RIGHT TO PURSUE COURT REMEDIES FOR ANY BREACH OF SECTION 4 OF THIS AGREEMENT. 8. NO MITIGATION. Any compensation earned by Employee from another employer or from employment not in violation of the provisions of Section 2.2 or Section 4 hereof shall not reduce any payment to which Employee is entitled under the terms of this Agreement. 9. MISCELLANEOUS. 9.1 Entire Agreement. This Agreement rescinds and supersedes any other agreement and contains the entire understanding between the parties relative to the employment of Employee, there being no terms, conditions, warranties, or representations other than those contained or referred to herein, and no amendment hereto shall be valid unless made in writing and signed by both of the parties hereto. 9.2 Governing Law. This Agreement shall be interpreted and construed in accordance with the laws of the State of Arizona without regard to conflicts of law principles as applied to residents of Arizona. Page 7 8 9.3 Severability. In the event that any provisions herein shall be legally unenforceable, the remaining provisions nevertheless shall be carried into effect. 9.4 Attorneys' Fees. In the event of any litigation between the parties hereto arising out of the terms, conditions and obligations expressed in this Agreement, the prevailing party in such litigation shall be entitled to recover reasonable attorneys' fees incurred in connection therewith. 9.5 Notices. All notices required or permitted to be given hereunder shall be deemed given if in writing and delivered personally or sent by telex, telegram, telecopy, or forwarded by prepaid registered or certified mail (return receipt requested) to the party or parties at the following addresses (or at such other addresses as shall be specified by like notices), and any notice, however given, shall be effective when received: To Employee: Kenneth Schilling 8512 W. Via Montoya Peoria, Arizona 85382 To the Company: iBIZ TECHNOLOGY CORP. Suite 618-688 West Hastings Street Vancouver, British Columbia, Canada V6B 1P1 9.6 Waiver. The waiver by any party of a breach of any provision of this Agreement by the other shall not operate or be construed as a waiver of any subsequent breach of the same provision or any other provision of this Agreement. 9.7. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 9.8 Headings. The subject headings to the sections in this Agreement are included for purposes of convenience only and shall not affect the construction or interpretation of any of its provisions. 9.9 Survivorship. The provisions of Sections 3.1, 4.1, 4.2, 7 and 8 shall continue and shall survive the termination of the Agreement. Page 8 9 9.10 Integration. This Agreement reflects the entire agreement of the parties related to the subject matter hereof, and any prior understandings, agreements or representations relating to such subject matter are hereby superseded. In witness whereof, the parties have executed this Agreement on ___________________, 1999, and effective as of the date first hereinabove written. iBIZ TECHNOLOGY CORP., a Florida corporation By:___________________________________ Its:__________________________________ Employee ___________________________________ KENNETH SCHILLING Page 9 10 EXHIBIT "2.3.2" EMPLOYEE STOCK OPTION Page 10 11 EXHIBIT "2.3.2(a)" EMPLOYEE STOCK OPTION PLAN Page 11 12 ADDENDUM TO EMPLOYMENT AGREEMENT THIS ADDENDUM TO EMPLOYMENT AGREEMENT ("this Addendum") is entered into effective as of the ____ day of ______________, 1999, by and between iBIZ TECHNOLOGY CORP., a Florida corporation ("iBIZ"), INVNSYS TECHNOLOGY CORPORATION, ("INVNSYS") (iBIZ and INVNSYS are referred to collectively as the "Company") and KENNETH SCHILLING, an individual ("Employee"). iBIZ and the Employee entered into that certain Employment Agreement dated March 5, 1999 ("Employment Agreement"), which, among other things, provided for the issuance of certain options to purchase shares of common stock of iBIZ. iBIZ and Employee desire to amend the provisions relating to the options under such Employment Agreement. THEREFORE, in consideration of the covenants and agreements set forth in the Employment Agreement and this Addendum and other good and valuable consideration, the parties agree as follows: 1. OPTIONS. In lieu of the options that were to be issued to Employee under the Employment Agreement, the Company and Employee hereby agree that iBIZ shall issue to Employee 250,000 options to purchase 250,000 shares of common stock of iBIZ at an exercise price of $0.75 per share. Such options shall be subject to the vesting schedule and other terms and conditions contained in the stock option attached to the Employment Agreement issued pursuant to the Employee Stock Option Plan attached to the Employment Agreement. A total of 200,000 options shall be issued to Employee in consideration of Employee's services as an officer of iBIZ and 50,000 options shall be issued to Employee in consideration of Employee's services as a director of iBIZ. The effective date of the issuance of the foregoing options shall be April 22, 1999. 2. EFFECT OF ADDENDUM. Except as amended by this Addendum, the terms and conditions of the Employment Agreement shall remain unchanged. This Addendum is hereby incorporated into the Employment Agreement as though originally a part thereof. IN WITNESS WHEREOF, the parties have executed this Addendum as of the effective date set forth above. iBIZ TECHNOLOGY CORP. By: _______________________________ Ken Schilling, President Page 12 13 KEN SCHILLING ___________________________________ Page 13 EX-10.12 16 EX-10.12 1 Exhibit 10.12 EMPLOYMENT AGREEMENT This EMPLOYMENT AGREEMENT effective as of ___________________, 1999, is by and between iBIZ TECHNOLOGY CORP., a Florida corporation, INVNSYS TECHNOLOGY CORPORATION, an Arizona corporation (collectively the "Company"), and TERRY RATLIFF, an individual residing in Glendale, Arizona ("Employee"). RECITALS: A. Employee has agreed to serve as the Vice President/Comptroller of the Company; B. The Board of Directors of the Company considers sound and vital management to be essential and desires to have the benefit of Employee's knowledge, experience and service; and C. Employee desires to be employed by the Company and the Company desires to retain Employee as its Vice President/Comptroller on the terms and conditions set forth herein. AGREEMENTS: The parties hereto, in consideration of the covenants and agreements set forth herein and other good and valuable consideration, agree as follows: 1. DEFINITIONS. For purposes of this Agreement, the following terms shall have the meaning indicated thereof: 1.1 Board means the Board of Directors of the Company or any successor. 1.2 Company means iBIZ TECHNOLOGY CORP. or any successor entity. 1.3 Compensation means the total amount included in Employee's gross income for federal income tax purposes in connection with her employment hereunder for payments or benefits received under the provisions of Sections 2.3.1 and 2.3.2 hereof. 1.4 Effective Date means ____________________, 1999. Page 1 2 1.5 Termination For Cause means the termination of employment of Employee by the Board because of Employee's personal dishonesty, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any material law, rule or regulation resulting in the Company's detriment or reflecting upon the Company's integrity (other than traffic infractions or similar minor offenses) or a material breach by the Employee of the terms of this Agreement and failure to cure such breach within thirty (30) days after receipt of written notice from the Company specifying the nature of such breach or to pay compensation to the Company deemed reasonable by the Company if the breach cannot be cured. For purposes of this Agreement, Employee's termination of employment shall not be considered to be a Termination for Cause unless and until there shall have been delivered to the Employee a copy of a resolution, duly adopted by the affirmative vote of not less than sixty-six percent (66%) of the entire membership of the Board at a meeting called and held for that purpose after reasonable notice to Employee and an opportunity for her, together with her counsel, to be heard, finding that, in the good faith opinion of the Board, Employee is guilty of misconduct of the type described in this Section 1.5, and specifying the particulars thereof in detail which determination shall be subject to a complete and de novo review as to reasonableness and good faith. 1.6 Termination by Employee For Good Reason means the termination of this Agreement by Employee upon the occurrence of any of the following events without Employee's consent: (i) assignment of Employee to any duties substantially inconsistent with her position or duties contemplated by this Agreement or a substantial reduction of her duties contemplated by this Agreement; (ii) the removal of any titles of Employee specified in Section 2.2 of this Agreement; (iii) any material breach of the Company's obligation under this Agreement or any failure by the Company to carry out any of its material obligations hereunder, and the failure to cure such breach or failure within thirty (30) days after written notice of such breach or failure has been delivered to the Company by Employee; and (iv) the relocation of Employee or her corporate office, facilities, or personnel outside the Phoenix metropolitan area. 1.7 Total and Permanent Disability means an injury or illness of the Employee that prevents the performance of customary duties and which is expected to be of long continued and indefinite duration and that has caused Employee's absence from service for at least one hundred eighty (180) days. 2. EMPLOYMENT. The Company hereby retains and employs Employee to serve in the capacity of Vice President/Comptroller. Employee accepts such employment on the terms and conditions set forth herein. Page 2 3 2.1 Term. The term of this Agreement shall commence on the Effective Date and shall end, unless previously terminated in accordance with the provisions of Section 3 hereof, at the close of business on the day before the second anniversary of the Effective Date hereof. 2.2 Duties and Responsibilities. Employee's position shall be Vice President/Comptroller of the Company. The Vice President/Comptroller of the Company shall, among other duties, keep full and accurate accounts of receipts and disbursements in the books of the Company; and shall ASSIST the Board in preparing all records, reports, statements and other documents required by law to be maintained or filed by the Company. Employee shall serve in such other executive capacities and have such additional titles and authorities with respect to the Company and its subsidiaries as the Board may from time to time reasonably prescribe. During the term of this Agreement, Employee shall devote substantially her entire work time, attention and energies to the business of the Company and its subsidiaries. Subject to the provisions of Section 4 hereof, Employee may serve as director or member of any other corporation or entity so long as such service does not cause any conflict of interest with the Company. 2.3. Compensation. 2.3.1 Base Salary. Subject to the further provisions of this Agreement, the Company agrees to pay to Employee an annual base salary of $88,000, payable no less frequently than in accordance with the regular payroll practices of the Company, with such increases as shall be made from time to time in accordance with the Company's regular salary administrative practices as applied to Company officers. The base salary of Employee shall not be decreased at any time during the term of this Agreement from the amount in effect from time to time. Employee shall be entitled and eligible for bonuses that may be declared from time to time in the sole discretion of the Board. 2.3.2 Fringe Benefits. Employee shall be entitled to participate in any fringe benefits which are now or may hereafter become applicable to the Company's executives, and any other benefits which are commensurate with the duties and responsibilities to be performed by the Employee under this Agreement; including, but not limited to, reimbursement for reasonable business expenses accounted for in accordance with applicable governmental regulations; life, long-term disability and accident insurance plans; employee saving and investment plans; and medical, dental and hospitalization insurance plans; without any material reduction in such fringe benefits as in effect on the Effective Date hereof. Employee shall receive 4 weeks paid Page 3 4 vacation and 5 personal days paid vacation per year that this Agreement is in effect. Effective upon execution of this Agreement, Employee shall receive _____ options to purchase _____ shares of Common Stock of the Company at an exercise price of _____ per share subject to the vesting schedule and other terms and conditions contained in the stock option attached hereto as Exhibit "2.3.2" issued pursuant to the Employee Stock Option Plan (the "Option Plan") attached hereto as Exhibit "2.3.2(a)." 2.3.3 Participation in Retirement and Benefit Plans. The Employee shall be entitled to participate in any retirement, pension, thrift or other retirement or employee plan that the Company has adopted or may adopt for the benefit of its senior executives. 3. TERMINATION. Employee's employment under this Agreement shall terminate upon the occurrence of any one of the following events: 3.1 Total and Permanent Disability. In the event Employee suffers Total and Permanent Disability, the Company may terminate Employee's employment. Upon termination by reason of Total and Permanent Disability, the Company shall pay to Employee such benefits as may be provided to officers of the Company under any Company provided disability insurance or similar policy or under any Company adopted disability plan and in the absence of any such policy or plan shall continue to pay to Employee for a period of not less than six (6) months the Compensation then in effect as of the effective date of Employee's termination. Employee agrees, in the event of any dispute under this Section as to the existence of Total and Permanent Disability, to submit to a physical examination by a licensed physician selected by the Company, the cost of such examination to be paid by the Company, and the decision as to Employee's disability shall be conclusive and binding upon the Company and Employee. Nothing contained herein shall be construed to affect Employee's rights under any disability insurance or similar policy, whether maintained by the Company, Employee or another party. 3.2 Death. In the event of the death of Employee this Agreement shall terminate and all obligations of the Company hereunder shall be extinguished as of the date of Employee's death. Nothing contained herein shall be construed to affect any rights of Employee's estate under any life insurance or similar policy, whether owned by the Company, the Employee or any third party. 3.3 Termination For Cause. The Company may effect a Termination For Cause of Employee. The Company shall have no further obligation to pay Compensation hereunder after the date of Termination For Cause. Page 4 5 3.4 Voluntary. Should Employee voluntarily terminate her employment prior to the termination of this Agreement, the Company shall have no further obligation to pay compensation. 3.5 Termination By Employee For Good Reason. Employee shall be entitled to terminate her employment hereunder upon the occurrence of an event constituting Good Reason, as defined in Section 1.6. If an event constituting Good Reason occurs, Employee shall have the right, exercisable for a period of thirty (30) days, to immediately terminate this Agreement by delivering a written statement to that effect to the Company. Upon such a termination, Employee shall be entitled to receive a payment equal to the lesser of (i) an amount equal to one-half of the Employee's annual base salary in effect at the time of termination, or (ii) the remaining compensation due Employee under the terms of this Agreement. If Employee fails to exercise her rights under this Section 3.5 within thirty (30) days following an event constituting Good Reason, such rights shall expire and be of no further force or effect. 4. CONFIDENTIALITY. 4.1 Confidential Information. Employee acknowledges that she has and will have access to trade secrets and confidential business information of the Company and its affiliates and subsidiaries throughout the term of this Agreement and that any such trade secret or confidential information, regardless of whether Employee alone or with others developed any such trade secret or confidential information, shall be and shall remain the property of the Company or its affiliates or subsidiaries. During the term of this Agreement and after termination of employment, Employee shall not, either voluntarily or involuntarily, on either her own account, as a member of a firm, or on behalf of another employer or otherwise, directly or indirectly use or reveal to any person, partnership, corporation or association any trade secret or confidential information of the Company or any of its subsidiaries or affiliates. Such trade secrets shall include, but shall not be limited to, business plans, marketing plans or programs, any non-public financial information, including but not limited to, financial information, forecasts and statistics relating to markets, contracts, customer lists, compensation arrangements and business opportunities. The term "trade secrets" shall not include information generally available to the public or a governmental agency. Employee will not make available to any person, partnership, corporation or association, or retain after termination of employment, any Employer policy manuals, printed materials or computer disc containing information related to the Company or to any affiliate of the Company. Page 5 6 4.2 Injunctive Relief. Employee acknowledges that the restrictions contained in this Section 4 are a reasonable and necessary protection of the immediate interests of the Company and its affiliates and subsidiaries and that any violation of these restrictions would cause substantial injury to the Company. In the event of a breach or threatened breach by Employee of these restrictions, the Company shall be entitled to apply to any court of competent jurisdiction for an injunction restraining Employee from such breach or threatened breach; provided, however, that the right to apply for an injunction shall not be construed as prohibiting the Company from pursuing any other available remedies for such breach or threatened breach. 5. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of the Employee, the Company and their respective heirs, executors, administrators, successors and assigns; provided, however, that Employee may not assign her rights hereunder without the prior written consent of the Company and may not assign her obligations hereunder. The Company may assign either its rights or obligations hereunder to any of its subsidiaries or affiliated corporation or to any successor to substantially all of the assets or business of the Company. 6. MODIFICATION, WAIVER OR AMENDMENT. The provisions of this Agreement may not be modified, amended or waived except by a written instrument executed by the Company and Employee. The waiver of any provision of this Agreement by either party shall not constitute a waiver of any subsequent occurrences or transactions unless the waiver, by its terms, constitutes a continuing waiver. 7. ARBITRATION. Any disputes related to or arising out of this Agreement or otherwise relating to Employee's employment with the Company shall be subject to mandatory binding arbitration before a single arbitrator in accordance with the rules of the American Arbitration Association ("AAA"), except that the Company may, in place of or in addition to arbitration, elect to pursue court remedies for any breach of Section 4 of this Agreement. The arbitrator shall be selected in accordance with the AAA's rules for selecting a single arbitrator provided that, if AAA rules call for selecting an arbitrator by making strikes against a list of candidates, in the event that there is an odd number of candidates Employee shall have the first strike and in the event that there is an even number of candidates the Company shall have the first strike. Except to the extent contrary to this Agreement or the Company's written policies regarding arbitration with Employee, the procedural rules that shall govern the arbitration shall be the rules of the AAA, or in the event that a particular procedural issue is not governed by the foregoing, the Arizona Rules of Civil Procedure shall apply except that discovery may be conducted only upon agreement of the parties or order of the arbitrator upon good cause shown, and in issuing discovery orders, the arbitrator shall consider that the parties have chosen arbitration to provide for the efficient and inexpensive resolution of disputes. The forum for the arbitration shall be Phoenix, Arizona. The applicable substantive Page 6 7 law shall be the law chosen to apply to disputes provided by this Agreement. A party may initiate arbitration under this Section by making a demand for arbitration and shall serve with that demand a detailed statement setting forth with particularity the factual and legal basis for each claim asserted. In the event that the party initiating arbitration fails to serve on the opposing party the detailed statement of claims required by this Section, the opposing party shall be entitled to move to dismiss the arbitration, and upon such motion, such claims shall be dismissed. Upon the issuance of a decision, the arbitrator shall issue written findings of fact and conclusions of law. The decision of the arbitrator shall be in accordance with the express terms and conditions of this Agreement. Each party shall pay its own attorneys' fees and costs and shall share the arbitration fees provided that the nonprevailing party shall reimburse the prevailing party for all reasonable attorneys' fees and costs, including the arbitration fees, incurred in connection with the arbitration. Arbitration proceedings and any information related thereto shall be kept confidential. THE PARTIES ACKNOWLEDGE THAT THEIR AGREEMENT TO ARBITRATE UNDER THIS SECTION MEANS THAT TRIAL BY JURY OR APPEAL WILL NOT BE AVAILABLE FOR ANY DISPUTES RELATED TO OR ARISING OUT OF THIS AGREEMENT OR OTHERWISE RELATING TO EMPLOYEE'S EMPLOYMENT WITH THE COMPANY INCLUDING WITHOUT LIMITATION DISPUTES INVOLVING ALLEGED EMPLOYMENT DISCRIMINATION, HARASSMENT, WRONGFUL TERMINATION, AND ANY OTHER CLAIMS ARISING OUT OF FEDERAL OR STATE STATUTES, COMMON LAW OR PUBLIC POLICY, EXCEPT THAT THIS SECTION DOES NOT RESTRICT THE RIGHT TO PURSUE COURT REMEDIES FOR ANY BREACH OF SECTION 4 OF THIS AGREEMENT. 8. NO MITIGATION. Any compensation earned by Employee from another employer or from employment not in violation of the provisions of Section 2.2 or Section 4 hereof shall not reduce any payment to which Employee is entitled under the terms of this Agreement. 9. MISCELLANEOUS. 9.1 Entire Agreement. This Agreement rescinds and supersedes any other agreement and contains the entire understanding between the parties relative to the employment of Employee, there being no terms, conditions, warranties, or representations other than those contained or referred to herein, and no amendment hereto shall be valid unless made in writing and signed by both of the parties hereto. 9.2 Governing Law. This Agreement shall be interpreted and construed in accordance with the laws of the State of Arizona without regard to conflicts of law principles as applied to residents of Arizona. Page 7 8 9.3 Severability. In the event that any provisions herein shall be legally unenforceable, the remaining provisions nevertheless shall be carried into effect. 9.4 Attorneys' Fees. In the event of any litigation between the parties hereto arising out of the terms, conditions and obligations expressed in this Agreement, the prevailing party in such litigation shall be entitled to recover reasonable attorneys' fees incurred in connection therewith. 9.5 Notices. All notices required or permitted to be given hereunder shall be deemed given if in writing and delivered personally or sent by telex, telegram, telecopy, or forwarded by prepaid registered or certified mail (return receipt requested) to the party or parties at the following addresses (or at such other addresses as shall be specified by like notices), and any notice, however given, shall be effective when received: To Employee: Terry Ratliff 5312 W. Westwind Drive Glendale, Arizona 85310 To the Company: iBIZ TECHNOLOGY CORP. Suite 618-688 West Hastings Street Vancouver, British Columbia, Canada V6B 1P1 9.6 Waiver. The waiver by any party of a breach of any provision of this Agreement by the other shall not operate or be construed as a waiver of any subsequent breach of the same provision or any other provision of this Agreement. 9.7. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 9.8 Headings. The subject headings to the sections in this Agreement are included for purposes of convenience only and shall not affect the construction or interpretation of any of its provisions. 9.9 Survivorship. The provisions of Sections 3.1, 4.1, 4.2, 7 and 8 shall continue and shall survive the termination of the Agreement. 9.10 Integration. This Agreement reflects the entire agreement of the parties related to the subject matter hereof, and any prior Page 8 9 understandings, agreements or representations relating to such subject matter are hereby superseded, and Employee hereby expressly acknowledges that this Agreement supersedes and replaces Employee's Employment Agreement with INVNSYS Technology Corporation and Employee hereby waives and releases INVNSYS Technology Corporation from all claims for compensation and other benefits as of the effective date of Employee's employment with the Company. In witness whereof, the parties have executed this Agreement on ___________________, 1999, and effective as of the date first hereinabove written. iBIZ TECHNOLOGY CORP., a Florida corporation By:_________________________________________ Its:________________________________________ EMPLOYEE ____________________________________________ TERRY RATLIFF Page 9 10 EXHIBIT "2.3.2" EMPLOYEE STOCK OPTION Page 10 11 EXHIBIT "2.3.2(a)" EMPLOYEE STOCK OPTION PLAN Page 11 12 ADDENDUM TO EMPLOYMENT AGREEMENT THIS ADDENDUM TO EMPLOYMENT AGREEMENT ("this Addendum") is entered into effective as of the ____ day of ______________, 1999, by and between iBIZ TECHNOLOGY CORP., a Florida corporation ("iBIZ"), INVNSYS TECHNOLOGY CORPORATION, ("INVNSYS") (iBIZ and INVNSYS are referred to collectively as the "Company") and TERRY RATLIFF, an individual ("Employee"). iBIZ and the Employee entered into that certain Employment Agreement dated March 5, 1999 ("Employment Agreement"), which, among other things, provided for the issuance of certain options to purchase shares of common stock of iBIZ. iBIZ and Employee desire to amend the provisions relating to the options under such Employment Agreement. THEREFORE, in consideration of the covenants and agreements set forth in the Employment Agreement and this Addendum and other good and valuable consideration, the parties agree as follows: 3. OPTIONS. In lieu of the options that were to be issued to Employee under the Employment Agreement, the Company and Employee hereby agree that iBIZ shall issue to Employee 350,000 options to purchase 350,000 shares of common stock of iBIZ at an exercise price of $0.75 per share. Such options shall be subject to the vesting schedule and other terms and conditions contained in the stock option attached to the Employment Agreement issued pursuant to the Employee Stock Option Plan attached to the Employment Agreement. A total of 300,000 options shall be issued to Employee in consideration of Employee's services as an officer of iBIZ and 50,000 options shall be issued to Employee in consideration of Employee's services as a director of iBIZ. The effective date of the issuance of the foregoing options shall be April 22, 1999. 4. EFFECT OF ADDENDUM. Except as amended by this Addendum, the terms and conditions of the Employment Agreement shall remain unchanged. This Addendum is hereby incorporated into the Employment Agreement as though originally a part thereof. IN WITNESS WHEREOF, the parties have executed this Addendum as of the effective date set forth above. iBIZ TECHNOLOGY CORP. By:_________________________________________ Ken Schilling, President Page 12 13 TERRY RATLIFF ____________________________________________ Page 13 EX-10.13 17 EX-10.13 1 Exhibit 10.13 EMPLOYMENT AGREEMENT This EMPLOYMENT AGREEMENT effective as of _______________, 1999, is by and between iBIZ TECHNOLOGY CORP., a Florida corporation, and INVNSYS TECHNOLOGY CORPORATION, an Arizona corporation, (collectively the "Company"), and MARK PERKINS, an individual residing in Phoenix, Arizona ("Employee"). RECITALS: A. Employee has agreed to serve as Vice-President of Operations of the Company; B. The Board of Directors of the Company considers sound and vital management to be essential and desires to have the benefit of Employee's knowledge, experience and service; and C. Employee desires to be employed by the Company and the Company desires to retain Employee as its Vice-President of Operations on the terms and conditions set forth herein. AGREEMENTS: The parties hereto, in consideration of the covenants and agreements set forth herein and other good and valuable consideration, agree as follows: 1. DEFINITIONS. For purposes of this Agreement, the following terms shall have the meaning indicated thereof: 1.1 Board means the Board of Directors of the Company or any successor. 1.2 Company means iBIZ TECHNOLOGY CORP. or any successor entity. 1.3 Compensation means the total amount included in Employee's gross income for federal income tax purposes in connection with his employment hereunder for payments or benefits received under the provisions of Sections 2.3.1 and 2.3.2 hereof. 1.4 Effective Date means __________________, 1999. Page 1 2 1.5 Termination For Cause means the termination of employment of Employee by the Board because of Employee's personal dishonesty, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any material law, rule or regulation resulting in the Company's detriment or reflecting upon the Company's integrity (other than traffic infractions or similar minor offenses) or a material breach by the Employee of the terms of this Agreement and failure to cure such breach within thirty (30) days after receipt of written notice from the Company specifying the nature of such breach or to pay compensation to the Company deemed reasonable by the Company if the breach cannot be cured. For purposes of this Agreement, Employee's termination of employment shall not be considered to be a Termination for Cause unless and until there shall have been delivered to the Employee a copy of a resolution, duly adopted by the affirmative vote of not less than sixty-six percent (66%) of the entire membership of the Board at a meeting called and held for that purpose after reasonable notice to Employee and an opportunity for him, together with his counsel, to be heard, finding that, in the good faith opinion of the Board, Employee is guilty of misconduct of the type described in this Section 1.5, and specifying the particulars thereof in detail which determination shall be subject to a complete and de novo review as to reasonableness and good faith. 1.6 Termination by Employee For Good Reason means the termination of this Agreement by Employee upon the occurrence of any of the following events without Employee's consent: (i) assignment of Employee to any duties substantially inconsistent with his position or duties contemplated by this Agreement or a substantial reduction of his duties contemplated by this Agreement; (ii) the removal of any titles of Employee specified in Section 2.2 of this Agreement; (iii) any material breach of the Company's obligation under this Agreement or any failure by the Company to carry out any of its material obligations hereunder, and the failure to cure such breach or failure within thirty (30) days after written notice of such breach or failure has been delivered to the Company by Employee; and (iv) the relocation of Employee or his corporate office, facilities, or personnel outside the Phoenix metropolitan area. 1.7 Total and Permanent Disability means an injury or illness of the Employee that prevents the performance of customary duties and which is expected to be of long continued and indefinite duration and that has caused Employee's absence from service for at least one hundred eighty (180) days. 2. EMPLOYMENT. The Company hereby retains and employs Employee to serve in the capacity of Vice-President of Operations. Employee accepts such employment on the terms and conditions set forth herein. Page 2 3 2.1 Term. The term of this Agreement shall commence on the Effective Date and shall end, unless previously terminated in accordance with the provisions of Section 3 hereof, at the close of business on the day before the second anniversary of the Effective Date hereof. 2.2 Duties and Responsibilities. Employee's position shall be Vice-President of Operations. The Vice-President of Operations of the Company shall have such duties and powers as the Board, President or Chief Executive Officer may delegate from time to time. At the request of the President or in the case of absence or disability of the President, the Vice-President of Operations shall perform the duties of the President and, when so acting, shall have all powers and be subject to all obligations of President. Employee shall serve in such other executive capacities and have such additional titles and authorities with respect to the Company and its subsidiaries as the Board may from time to time reasonably prescribe. During the term of this Agreement, Employee shall devote substantially his entire work time, attention, and energies to the business of the Company and its subsidiaries. Subject to the provisions of Section 4 hereof, Employee may serve as a director or member of any other corporation or entity so long as any such service does not cause any conflict of interest with the Company. 2.3. Compensation. 2.3.1 Base Salary. Subject to the further provisions of this Agreement, the Company agrees to pay to Employee an annual base salary of $88,000, payable no less frequently than in accordance with the regular payroll practices of the Company, with such increases as shall be made from time to time in accordance with the Company's regular salary administrative practices as applied to Company officers. The base salary of Employee shall not be decreased at any time during the term of this Agreement from the amount in effect from time to time. Employee shall be entitled and eligible for bonuses that may be declared from time to time in the sole discretion of the Board. 2.3.2 Fringe Benefits. Employee shall be entitled to participate in any fringe benefits which are now or may hereafter become applicable to the Company's executives, and any other benefits which are commensurate with the duties and responsibilities to be performed by the Employee under this Agreement; including, but not limited to, reimbursement for reasonable business expenses accounted for in accordance with applicable governmental regulations; life, long-term disability and accident insurance plans; employee saving and investment plans; and medical, dental and hospitalization insurance plans; without any material reduction in such fringe benefits as in effect Page 3 4 on the Effective Date hereof. Employee shall receive 4 weeks paid vacation and 4 personal days paid vacation per year that this Agreement is in effect. Effective upon execution of this Agreement, Employee shall receive _____ options to purchase _____ shares of Common Stock of the Company at an exercise price of _____ per share subject to the vesting schedule and other terms and conditions contained in the stock option attached hereto as Exhibit "2.3.2" issued pursuant to the Employee Stock Option Plan (the "Option Plan") attached hereto as Exhibit "2.3.2(a)." 2.3.3 Participation in Retirement and Benefit Plans. The Employee shall be entitled to participate in any retirement, pension, thrift or other retirement or employee plan that the Company has adopted or may adopt for the benefit of its senior executives. 3. TERMINATION. Employee's employment under this Agreement shall terminate upon the occurrence of any one of the following events: 3.1 Total and Permanent Disability. In the event Employee suffers Total and Permanent Disability, the Company may terminate Employee's employment. Upon termination by reason of Total and Permanent Disability, the Company shall pay to Employee such benefits as may be provided to officers of the Company under any Company provided disability insurance or similar policy or under any Company adopted disability plan and in the absence of any such policy or plan shall continue to pay to Employee for a period of not less than six (6) months the Compensation then in effect as of the effective date of Employee's termination. Employee agrees, in the event of any dispute under this Section as to the existence of Total and Permanent Disability, to submit to a physical examination by a licensed physician selected by the Company, the cost of such examination to be paid by the Company, and the decision as to Employee's disability shall be conclusive and binding upon the Company and Employee. Nothing contained herein shall be construed to affect Employee's rights under any disability insurance or similar policy, whether maintained by the Company, Employee or another party. 3.2 Death. In the event of the death of Employee this Agreement shall terminate and all obligations of the Company hereunder shall be extinguished as of the date of Employee's death. Nothing contained herein shall be construed to affect any rights of Employee's estate under any life insurance or similar policy, whether owned by the Company, the Employee or any third party. 3.3 Termination For Cause. The Company may effect a Termination For Cause of Employee. The Company shall have no further Page 4 5 obligation to pay Compensation hereunder after the date of Termination For Cause. 3.4 Voluntary. Should Employee voluntarily terminate his employment prior to the termination of this Agreement, the Company shall have no further obligation to pay compensation. 3.5 Termination By Employee For Good Reason. Employee shall be entitled to terminate his employment hereunder upon the occurrence of an event constituting Good Reason, as defined in Section 1.6. If an event constituting Good Reason occurs, Employee shall have the right, exercisable for a period of thirty (30) days, to immediately terminate this Agreement by delivering a written statement to that effect to the Company. Upon such a termination, Employee shall be entitled to receive a payment equal to the lesser of (i) an amount equal to one-half of the Employee's annual base salary in effect at the time of termination, or (ii) the remaining compensation due Employee under the terms of this Agreement. If Employee fails to exercise his rights under this Section 3.5 within thirty (30) days following an event constituting Good Reason, such rights shall expire and be of no further force or effect. 4. CONFIDENTIALITY. 4.1 Confidential Information. Employee acknowledges that he has and will have access to trade secrets and confidential business information of the Company and its affiliates and subsidiaries throughout the term of this Agreement and that any such trade secret or confidential information, regardless of whether Employee alone or with others developed any such trade secret or confidential information, shall be and shall remain the property of the Company or its affiliates or subsidiaries. During the term of this Agreement and after termination of employment, Employee shall not, either voluntarily or involuntarily, on either his own account, as a member of a firm, or on behalf of another employer or otherwise, directly or indirectly use or reveal to any person, partnership, corporation or association any trade secret or confidential information of the Company or any of its subsidiaries or affiliates. Such trade secrets shall include, but shall not be limited to, business plans, marketing plans or programs, any non-public financial information, including but not limited to, financial information, forecasts and statistics relating to markets, contracts, customer lists, compensation arrangements and business opportunities. The term "trade secrets" shall not include information generally available to the public or a governmental agency. Employee will not make available to any person, partnership, corporation or association, or retain after termination of employment, any Employer policy manuals, printed materials or computer disc containing information related to the Company or to any affiliate of the Company. Page 5 6 4.2 Injunctive Relief. Employee acknowledges that the restrictions contained in this Section 4 are a reasonable and necessary protection of the immediate interests of the Company and its affiliates and subsidiaries and that any violation of these restrictions would cause substantial injury to the Company. In the event of a breach or threatened breach by Employee of these restrictions, the Company shall be entitled to apply to any court of competent jurisdiction for an injunction restraining Employee from such breach or threatened breach; provided, however, that the right to apply for an injunction shall not be construed as prohibiting the Company from pursuing any other available remedies for such breach or threatened breach. 5. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of the Employee, the Company and their respective heirs, executors, administrators, successors and assigns; provided, however, that Employee may not assign his rights hereunder without the prior written consent of the Company and may not assign his obligations hereunder. The Company may assign either its rights or obligations hereunder to any of its subsidiaries or affiliated corporation or to any successor to substantially all of the assets or business of the Company. 6. MODIFICATION, WAIVER OR AMENDMENT. The provisions of this Agreement may not be modified, amended or waived except by a written instrument executed by the Company and Employee. The waiver of any provision of this Agreement by either party shall not constitute a waiver of any subsequent occurrences or transactions unless the waiver, by its terms, constitutes a continuing waiver. 7. ARBITRATION. Any disputes related to or arising out of this Agreement or otherwise relating to Employee's employment with the Company shall be subject to mandatory binding arbitration before a single arbitrator in accordance with the rules of the American Arbitration Association ("AAA"), except that the Company may, in place of or in addition to arbitration, elect to pursue court remedies for any breach of Section 4 of this Agreement. The arbitrator shall be selected in accordance with the AAA's rules for selecting a single arbitrator provided that, if AAA rules call for selecting an arbitrator by making strikes against a list of candidates, in the event that there is an odd number of candidates Employee shall have the first strike and in the event that there is an even number of candidates the Company shall have the first strike. Except to the extent contrary to this Agreement or the Company's written policies regarding arbitration with Employee, the procedural rules that shall govern the arbitration shall be the rules of the AAA, or in the event that a particular procedural issue is not governed by the foregoing, the Arizona Rules of Civil Procedure shall apply except that discovery may be conducted only upon agreement of the parties or order of the arbitrator upon good cause shown, and in issuing discovery orders, the arbitrator shall consider that the parties have chosen arbitration to provide for the efficient and inexpensive resolution of disputes. Page 6 7 The forum for the arbitration shall be Phoenix, Arizona. The applicable substantive law shall be the law chosen to apply to disputes provided by this Agreement. A party may initiate arbitration under this Section by making a demand for arbitration and shall serve with that demand a detailed statement setting forth with particularity the factual and legal basis for each claim asserted. In the event that the party initiating arbitration fails to serve on the opposing party the detailed statement of claims required by this Section, the opposing party shall be entitled to move to dismiss the arbitration, and upon such motion, such claims shall be dismissed. Upon the issuance of a decision, the arbitrator shall issue written findings of fact and conclusions of law. The decision of the arbitrator shall be in accordance with the express terms and conditions of this Agreement. Each party shall pay its own attorneys' fees and costs and shall share the arbitration fees provided that the nonprevailing party shall reimburse the prevailing party for all reasonable attorneys' fees and costs, including the arbitration fees, incurred in connection with the arbitration. Arbitration proceedings and any information related thereto shall be kept confidential. THE PARTIES ACKNOWLEDGE THAT THEIR AGREEMENT TO ARBITRATE UNDER THIS SECTION MEANS THAT TRIAL BY JURY OR APPEAL WILL NOT BE AVAILABLE FOR ANY DISPUTES RELATED TO OR ARISING OUT OF THIS AGREEMENT OR OTHERWISE RELATING TO EMPLOYEE'S EMPLOYMENT WITH THE COMPANY INCLUDING WITHOUT LIMITATION DISPUTES INVOLVING ALLEGED EMPLOYMENT DISCRIMINATION, HARASSMENT, WRONGFUL TERMINATION, AND ANY OTHER CLAIMS ARISING OUT OF FEDERAL OR STATE STATUTES, COMMON LAW OR PUBLIC POLICY, EXCEPT THAT THIS SECTION DOES NOT RESTRICT THE RIGHT TO PURSUE COURT REMEDIES FOR ANY BREACH OF SECTION 4 OF THIS AGREEMENT. 8. NO MITIGATION. Any compensation earned by Employee from another employer or from employment not in violation of the provisions of Section 2.2 or Section 4 hereof shall not reduce any payment to which Employee is entitled under the terms of this Agreement. 9. MISCELLANEOUS. 9.1 Entire Agreement. This Agreement rescinds and supersedes any other agreement and contains the entire understanding between the parties relative to the employment of Employee, there being no terms, conditions, warranties, or representations other than those contained or referred to herein, and no amendment hereto shall be valid unless made in writing and signed by both of the parties hereto. 9.2 Governing Law. This Agreement shall be interpreted and construed in accordance with the laws of the State of Arizona without regard to conflicts of law principles as applied to residents of Arizona. Page 7 8 9.3 Severability. In the event that any provisions herein shall be legally unenforceable, the remaining provisions nevertheless shall be carried into effect. 9.4 Attorneys' Fees. In the event of any litigation between the parties hereto arising out of the terms, conditions and obligations expressed in this Agreement, the prevailing party in such litigation shall be entitled to recover reasonable attorneys' fees incurred in connection therewith. 9.5 Notices. All notices required or permitted to be given hereunder shall be deemed given if in writing and delivered personally or sent by telex, telegram, telecopy, or forwarded by prepaid registered or certified mail (return receipt requested) to the party or parties at the following addresses (or at such other addresses as shall be specified by like notices), and any notice, however given, shall be effective when received: To Employee: Mark Perkins 16410 North 9th Place Phoenix, Arizona 85022 To the Company: iBIZ TECHNOLOGY CORP. Suite 618-688 West Hastings Street Vancouver, British Columbia, Canada V6B 1P1 9.6 Waiver. The waiver by any party of a breach of any provision of this Agreement by the other shall not operate or be construed as a waiver of any subsequent breach of the same provision or any other provision of this Agreement. 9.7. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 9.8 Headings. The subject headings to the sections in this Agreement are included for purposes of convenience only and shall not affect the construction or interpretation of any of its provisions. 9.9 Survivorship. The provisions of Sections 3.1, 4.1, 4.2, 7 and 8 shall continue and shall survive the termination of the Agreement. 9.10 Integration. This Agreement reflects the entire agreement of the parties related to the subject matter hereof, and any prior Page 8 9 understandings, agreements or representations relating to such subject matter are hereby superseded, and Employee hereby expressly acknowledges that this Agreement supersedes and replaces Employee's Employment Agreement with INVNSYS Technology Corporation and Employee hereby waives and releases INVNSYS Technology Corporation from all claims for compensation and other benefits as of the effective date of Employee's employment with the Company. In witness whereof, the parties have executed this Agreement on ___________________, 1999, and effective as of the date first hereinabove written. iBIZ TECHNOLOGY CORP., a Florida corporation By: -------------------------------------- Its: -------------------------------------- EMPLOYEE -------------------------------------- MARK PERKINS Page 9 10 EXHIBIT "2.3.2" EMPLOYEE STOCK OPTION Page 10 11 EXHIBIT "2.3.2(a)" EMPLOYEE STOCK OPTION PLAN Page 11 12 ADDENDUM TO EMPLOYMENT AGREEMENT THIS ADDENDUM TO EMPLOYMENT AGREEMENT ("this Addendum") is entered into effective as of the ____ day of ______________, 1999, by and between iBIZ TECHNOLOGY CORP., a Florida corporation ("iBIZ"), INVNSYS TECHNOLOGY CORPORATION, ("INVNSYS") (iBIZ and INVNSYS are referred to collectively as the "Company") and MARK PERKINS, an individual ("Employee"). iBIZ and the Employee entered into that certain Employment Agreement dated March 5, 1999 ("Employment Agreement"), which, among other things, provided for the issuance of certain options to purchase shares of common stock of iBIZ. iBIZ and Employee desire to amend the provisions relating to the options under such Employment Agreement. THEREFORE, in consideration of the covenants and agreements set forth in the Employment Agreement and this Addendum and other good and valuable consideration, the parties agree as follows: 5. OPTIONS. In lieu of the options that were to be issued to Employee under the Employment Agreement, the Company and Employee hereby agree that iBIZ shall issue to Employee 350,000 options to purchase 350,000 shares of common stock of iBIZ at an exercise price of $0.75 per share. Such options shall be subject to the vesting schedule and other terms and conditions contained in the stock option attached to the Employment Agreement issued pursuant to the Employee Stock Option Plan attached to the Employment Agreement. A total of 300,000 options shall be issued to Employee in consideration of Employee's services as an officer of iBIZ and 50,000 options shall be issued to Employee in consideration of Employee's services as a director of iBIZ. The effective date of the issuance of the foregoing options shall be April 22, 1999. 6. EFFECT OF ADDENDUM. Except as amended by this Addendum, the terms and conditions of the Employment Agreement shall remain unchanged. This Addendum is hereby incorporated into the Employment Agreement as though originally a part thereof. IN WITNESS WHEREOF, the parties have executed this Addendum as of the effective date set forth above. iBIZ TECHNOLOGY CORP. By: ------------------------------------------ Ken Schilling, President Page 12 13 MARK PERKINS ---------------------------------------------- Page 13 EX-21 18 EX-21 1 Exhibit 21 EXHIBIT NO. 21 SUBSIDIARIES OF REGISTRANT INVNSYS Technology Corporation, an Arizona corporation, is a wholly owned subsidiary of iBIZ TECHNOLOGY Corp., a Florida corporation. Page 1 EX-27 19 EX-27 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 8-MOS OCT-31-1998 JUNE-30-1999 83,653 0 134,243 (2,500) 256,548 717,946 241,460 (167,481) 1,263,869 1,232,345 0 0 0 25,986 5,538 1,263,869 1,509,777 1,509,777 1,125,543 1,125,543 937,089 0 26,490 0 (135,150) 0 0 (168,180) 0 (276,015) 0 (.011)
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