Exhibit 10.4 - Employment Agreement
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") between World Information Technology
Inc., a Nevada corporation (the "Company") and Gary D. Morgan (the
"Executive"), dated as of this 24th day of July, 2003 (the "Effective Date").
RECITALS
A. The Company desires to employ Executive as the Chief Executive Officer of
the Company and the Executive is willing to accept such employment and render
such services, all upon and subject to the terms and conditions contained in
this Agreement;
B. The Company also wishes to nominate the Executive to serve as the Chairman
of the Company's Board of Directors ("Board") and the Executive is willing to
accept such nomination; and
C. References to the Company throughout this Agreement shall include the
Company and all of its affiliates.
NOW, THEREFORE, in consideration of the premises and the respective covenants
and agreements of the parties herein contained, and intending to be legally
bound hereby, the parties agree as follows:
1. Term. The term of employment of the Executive by the Company hereunder
shall be for a period commencing as of August 1, 2003 (the "Effective Date")
and ending on December 31, 2006 (the date on which this Agreement shall expire,
as such date maybe extended in accordance with the terms of this Section 1 is
hereinafter referred to as the "Expiration Date"). Subject to the terms of
Section 6, unless the Executive or the Company gives written notice to the
other party of its desire to terminate this Agreement at least one year before
the Expiration Date, commencing on December 31, 2005 (the "Termination
Notification Date"), this Agreement will be automatically extended for further
period(s) of one year from the then current Expiration Date (the "Extended
Period") on the same terms and conditions as herein set forth. Except when the
contrary is indicated, the phrase "the term of this Agreement" or the "Term"
shall henceforth be deemed to include the Extended Period.
2. Engagement of Executive. The Company agrees to employ the Executive and the
Executive accepts employment as Chairman and Chief Executive Officer of the
Company.
3. Duties and Powers.
During the Term, the Executive will serve in the position described in Section
2 above and will have such responsibilities, duties and authorities and will
render such services of an executive and administrative character not
inconsistent with those normally given to a Chairman and Chief Executive
Officer of a public corporation, all in accordance with the terms and
conditions of this Agreement and the business plan and capital budgets of the
Company to be developed by the Executive and the Board and to be approved by
the Board, on or before August 30,2003. Executive shall devote Executive's best
efforts, energies and abilities and Executive's
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to full business time, skill and attention to the business and affairs of the
Company and its affiliates. Executive shall perform the duties and carry out
the responsibilities assigned to the Executive to the best of the Executive's
ability, in a diligent, trustworthy, businesslike and efficient manner for the
purpose of advancing the business of the Company and its affiliates and shall
adhere to any and all of the employment policies of the Company. Executive
acknowledges that Executive's duties and responsibilities will require
Executive's full-time business efforts and agrees that during the Employment
Period Executive will not engage in any other business activity or have any
business pursuits or interests which interfere or conflict with the performance
of Executive's duties hereunder, provided, that nothing in this Section 3 shall
be deemed to prohibit Executive from: (i) serving as a director or officer or
both of such not-for-profit corporations as he may desire, joining and
participating in such committees for community or national affairs as he may
select and joining and serving on business corporation boards of directors and
engaging in other activities; or (ii) investing in stock of any corporation
listed on a national securities exchange or traded in the over-the-counter
market, but only if Executive and its associates (as such term is defined in
Regulation 14A promulgated under the Exchange Act), and the Executive's
affiliates collectively do not own more than an aggregate of five percent of
the stock of such corporation.
4. Compensation.
(a) Annual Base Salary. During the Term, the Executive shall receive a base
salary at the rate of$1.00 per annum {the "Annual Base Salary"), which shall be
paid on the signing of this Agreement and yearly on the anniversary thereof.
The Executive shall be eligible for periodic salary increases, but not
decreases, as determined in the sole discretion of the Executive Compensation
Committee of the Board (the "Committee"). Unless increased by the Committee in
its sole discretion, the Annual Base Salary shall apply for each year during
the Term. Any increase in Annual Base Salary shall not serve to limit or reduce
any other obligation to the Executive under this Agreement. The Annual Base
Salary shall not be reduced after any such increase and the term Annual Base
Salary as utilized in this Agreement shall refer to Annual Base Salary as so
increased.
(b) Signing Bonus. Upon execution of this Agreement, the Executive shall
receive 500,000 warrants to acquire shares of common stock of the Company on
terms and conditions described in the form of Warrant attached hereto as
Exhibit A.
(c) Except as provided herein, in each fiscal year of the Company ending
during the Term, the Executive shall be eligible to participate in such bonus
programs as are available to senior executives of the Company and the award to
the Executive shall not be less than the award given to any other employee of
the Company.
(d) Performance Bonuses. The following bonuses shall be paid to the Executive
by the Company:
(i) At the end of each quarter during the Term, the Executive shall be entitled
to a bonus equal to 2% of the increase in earnings before taxes, interest,
depreciation and amortization ("EBITDA ") of the Company over the EBITDA in the
prior quarter. EBITDA shall be as set forth on the financial statements of the
Company, as prepared by its independent certified public accountants, and filed
with the U.S. Securities and Exchange
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Commission. The calculation of such bonus shall be made within 20 days of the
end of each quarter and shall be deferred until 12 months after the end of each
quarter. The payment of each such bonus will be deferred for 12 months and will
paid in accordance with the terms of a convertible note agreement (the
"Convertible Note Agreement") for the principal amount of the bonus with
interest thereon at the rate of six percent per annum and granting to the
Executive the right to convert the whole or part of the principal and interest
under such note into shares of common stock of the Company at a conversion
price of $4.00 per share or 50% of the closing bid price on the conversion
date, whichever is the lowest share price yielding the most conversion shares,
subject to adjustment as herein provided ( as elected by Executive ). The
obligations under each such Convertible Note Agreement will be evidenced by a
promissory note to be attached as an exhibit to the Convertible Note Agreement.
Each Convertible Note Agreement (together with the promissory note evidencing
the obligations under such Convertible Note Agreement) shall be in the form
attached hereto as Exhibit B;
(ii) The Company shall pay the Executive (A) on September 30,2003, a bonus (the
"Initial Market Cap Bonus") in an amount equal to 3% of the difference between
the average closing value of the Market Capitalization of the Company for the
20 days before the end such calendar quarter and a Market Capitalization (as
defined below) of $100 million and (B) at the end of every calendar quarter
thereafter, a bonus (the "Market Cap Bonus") in an amount equal to 3% of the
difference between the average closing value of the Market Capitalization of
the Company for the 20 days preceding the end of such quarter (a "Second
Value") and the average closing value of the Market Capitalization of the
Company for the 20 days preceding the beginning of such quarter (a "First
Value"); provided that a First Value used for the calculation of a Market Cap
Bonus shall never be lower than the higher of (x) $100 million or (y) any
Second Value used for a calculation of a Market Cap Bonus in the preceding
calendar quarter and provided further that if in any quarter, the difference
between the Second Value and the First Value is a negative number, the Company
shall not have any obligation to pay the Executive any Market Cap Bonus for
such quarter. At the election of the Executive, (i) the Initial Market Cap
Bonus and the Market Cap Bonus shall be payable in cash Within 45 days of the
quarter end or (ii) the parties Will execute and exchange a Convertible Note
Agreement in the amount of the Initial Market Cap Bonus and the Market Cap
Bonus, as applicable, with interest at the rate of 6% per annum and payable
within 12 months of each quarter end; and
(iii) In the event that during the Term the Company is listed in the American
or new York Stock Exchange, the NASDAQ National Market or small cap list (the
"Listing"), the Company shall pay the Executive a bonus (the "Listing Bonus")
in an amount equal to 2% of the increase in the Market Capitalization between
the a Market Capitalization of $100 million (the "Initial Market Cap ") and the
average Market Capitalization of the Company for the 20 days after the Listing.
At the election of the Executive, (i) the Listing Bonus shall be payable in
cash within 45 days of the Listing or (ii) the parties will execute and
exchange a Convertible Note Agreement in the amount of the Listing Bonus With
interest at the rate of 6% per annum and payable within 12 months of the
Listing; and
(iv) Upon each receipt, during the Term, by the Company of any debt or equity
financing, public of private or any refinancing of debt financing, (a
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to ("Financing") the Company shall pay the Executive a bonus (the "Financing
Bonus") equal to 3% of the sum of such financing. The Executive may elect to
receive the Financing Bonus in shares of common stock of the Company at a value
of$4.00 per share or in cash. The payment of the Financing Bonus by the Company
to the Executive shall occur concurrently with the closing of the Financing.
F or the purpose of this Agreement, the Market Capitalization shall mean the
value of the Company as determined by the closing market price of its issued
and outstanding common stock on the principal exchange on which such securities
are traded and shall be calculated by multiplying the number of outstanding
shares of the Company (including shares reserved for the exercise of warrants,
options and convertible instruments issued by the Company and as represented in
its financial statements) by the closing market price of a share of the common
stock of the Company.
(e) Benefits. During the Term, the Executive (i) shall be entitled to
participate in all employee benefit plans which any senior executive management
officer of the Company is entitled to participate in (subject to, and on a
basis consistent with, the terms, conditions and overall administration of such
plans, programs and arrangements) and shall not be entitled to a lesser grant
of rights which any other employee of the Company receives under any such
employee benefit plans; (ii) shall receive and participate in all profit
sharing, incentive compensation, 40lK plans and pension benefits and executive
retirement and supplemental benefits ( collectively, "Pension Benefits") which
are available to any other senior executive management officer of the Company;
and (iii) shall receive health insurance programs, executive medical and dental
benefits, life insurance, accidental death and dismemberment benefits plus such
other benefits which are available to the senior executive management of the
Company (collectively, "Welfare Benefits") which are generally available to
other senior executives officers of the Company.
(f) Stock Options. The Executive shall be eligible for annual grants of stock
options as determined in the sole discretion of the Committee, subject to such
terms and conditions as the Committee deems appropriate; provided that in no
event the Executive shall be granted less stock options than the number of
options granted to any other senior management officer of the Company.
Notwithstanding any other agreement to the contrary, but subject to the terms
of this Agreement: (i) any stock options granted to the Executive during the
Term shall continue to vest after the expiration of the Term; and (ii) if the
Executive's employment terminates upon expiration of the Term on or after the
Final Date, he will be treated with regard to all stock options as a "retiree."
(g) Reimbursement for Expenses. During the Term, the Executive shall be
entitled to receive non accountable business expenses in the amount of
$9,000.00 per month, payable on the first day of each calendar month during the
Term. The Company shall reimburse the Executive for all professional fees and
costs related to the preparation and enforcement of this Agreement including
legal and accounting fees. The Company shall also reimburse the Executive for
of all reasonable business-related expenses, including without limitation,
First-Class air travel or chartered aircraft. At the discretion of Executive
he shall be reimbursed for immediate family members who join him on business
trips. The Company will pay for Executive all membership dues and related
ongoing costs of appropriate club and professional organizations and dues,
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to costs and expenses for continuing professional education, financial and
legal counseling, planning and administration (including any reasonable
directors and officers liability insurance coverage). The Company shall
purchase a variable life insurance policy on Executive's life, payable to
Executive's designated beneficiary, in the face amount of $10,000,000. Company
shall also establish a bonus arrangement to enable a "roll-out" of the policy
on a tax-free basis to Executive at his targeted retirement date, as defined by
Executive in writing. In the event of a termination of employment prior to
retirement, Executive shall be entitled to receipt of the policy and a bonus in
the amount required to cover all applicable income taxes on such transfer,
fully grossed up.
(h) Office and Support Staff. During the Term, the Executive shall be provided
with an appropriate office in the City of New York, together with a conference
room in such same location, and with such secretarial and other support
facilities as are commensurate with his position as Chief Executive Officer and
Chairman of the Company.
(i) Vacation. During the Term, the Executive shall be entitled to 6 weeks of
paid vacation per year.
(j) Insurance; Indemnification. During the Term and thereafter while the
Executive could have any liability, the Executive shall be named as an insured
party in any liability insurance policy (including any director and officer
liability policy) which shall be maintained by the Company for its directors
and/or senior executive officers. In addition, the Company shall execute and
deliver to Executive, concurrently herewith, the separate indemnification
agreement attached hereto as Exhibit C.
(k) Special Enterprise Enhancement Payment Award. In addition to any other
compensation paid to Executive pursuant to this Agreement or otherwise awarded
to Executive by the Compensation Committee of the Company's Board of Directors,
Executive will receive a Special Enterprise Enhancement Payment ( the " A ward
") described in this Section ( 4 ) (k), The A ward will be paid within 30 days
after the closing of an event (an "Event") that constitute a Change in Control
of the Company and that is consummated during the Term or one year thereafter.
The amount of the A ward shall be equal to 1.5% of the higher of (i) the
Initial Market Cap, {ii) the average closing value of the Market Capitalization
of the Company for the 20 days before the Event; or (iii) the per share price
allocated to the shares of the Company in any documents executed by the Company
in connection with an Event. F or purposes of this Agreement "Change in
Control" shall mean:
(i) , The acquisition ( other than from Company) by any person, entity or
"group," within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act
(excluding, for this purpose, any employee benefit plan of Company or its
subsidiaries which acquires beneficial ownership of voting securities of
Company) of beneficial ownership (within the meaning of Rule 13 d- 3
promulgated under the Exchange Act) of 40% or more of either the then
outstanding shares of Common Stock or the combined voting power of Company's
then outstanding voting securities entitled to vote generally in the election
of directors; or
(ii) Individuals who, as of the date hereof, constitute the Board of Directors
of the Company cease for any reason to constitute at least a majority of the
Board; or
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(iii) Approval by the stockholders of Company of the consummation of a
reorganization, merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a "Business Combination"), in
each case, unless, following such Business Combination all or substantially all
of the individuals and entities who were the beneficial owners, respectively,
of the outstanding voting stock of the Company immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 40%
of, respectively, the then outstanding shares of common stock or the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination {including, Without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or
more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination.
5. Termination of Employment.
(a) Death or Disability. The Executive's employment shall terminate upon the
death of the Executive during the Term; provided, however, his estate shall be
entitled to receive the bonuses set forth in Section 4(c) for a period of one
year after his death. If it is determined that the Disability of the Executive
has occurred during the Term (pursuant to the definition of Disability set
forth below), the Company may give to the Executive written notice in
accordance with Section l4(c) of this Agreement of its intention to terminate
the Executive's employment. In such event, the Executive's employment with the
Company shall terminate effective on the 30th day after receipt of such notice
by the Executive (the "Disability Effective Date"), provided that, within the
30 days after such receipt, the Executive shall not have resumed performance of
any of his duties. Prior to the Disability Effective Date, the Executive shall
continue to be treated as if fully and actively employed by the Company for
purposes of this Agreement, and without respect to whether or not the Executive
is or is determined to be Disabled. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's
duties with the Company for 180 consecutive business days as a result of
incapacity due to mental or physical illness which is determined to be total
and permanent by a physician selected by the Executive or spouse of the
Executive and reasonably acceptable to the Company.
(b) By the Company.
(i) For Cause. The Company may terminate the Executive's employment during the
Term for Cause. For purposes of this Agreement, "Cause" shall mean:
(1) the Executive's conviction of, or plea of nolo contendere to, any felony
(other than vicarious liability which results solely from Executive's position
as Chief Executive Officer, provided that Executive did not know, or should not
have known, of any act or failure to act upon which such conviction or plea is
based, or knew, but acted on the advice of counsel);
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(2) the Executive's willful misconduct with regard to the Company having a
material and demonstrable adverse effect on the financial condition of the
Company and its subsidiaries, as a whole; provided that the Executive is given
the opportunity to cure the same within 30 days after receipt of a detailed
notice setting forth the particulars of the acts and how they materially and
adversely effect the Company and its subsidiaries and further subject to the
text following sub clause
(3) the Executive's failure to attempt to adhere to, or take affirmative steps
to carry out, any legal and proper directive of the Board, after receipt of
written notice from the Board and a reasonable opportunity to cure such non-
adherence or failure to act.
The termination of Executive's employment shall not be deemed to be for Cause
unless and until there shall have been delivered to the Executive a copy of a
resolution duly adopted by the affirmative vote of not less than three-
quarters of the entire membership of the Board at a meeting of the Board called
and held for such purpose (after reasonable notice is provided to the Executive
and the Executive is given an opportunity, together with counsel, to be heard
before the Board), finding that, in the good faith opinion of the Board, the
Executive is guilty of the conduct described in subparagraph (1 ), (2) or (3)
above, and specifying the particulars thereof in detail. For purposes of this
Agreement, no act, or failure to act, on Executive's part shall be considered
willful unless done, or omitted to be done, by Executive in bad faith and
without reasonable belief that Executive's act or failure to act was in the
Company's best interests. Any act, or failure to act, based upon authority
granted pursuant to a duly adopted Board resolution or advice of counsel shall
be conclusively presumed to be done, or omitted to be done, by Executive in
good faith and in the Company's best interests.
(c) By the Executive.
(i) Without Good Reason. The Executive may terminate employment under this
Agreement by giving Notice of Termination to the Company in accordance with
Section 14(c) of this Agreement no less than 2 months prior to such
termination, unless such termination is pursuant to Section (5)(c)(ii) below,
or the Company elects to waive or reduce such notice requirement.
(ii) With Good Reason. The Executive's employment maybe terminated by the
Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:
(1) except as contemplated in Section 3 of this Agreement, any diminution in
the Executive's title or position or material diminution in authority, duties
or responsibilities as set forth herein;
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(2) the assignment of any duties or responsibilities to the Executive that are
not commensurate with the Executive's title, authority or position as set forth
herein;
(3) a decrease in Annual Base Salary or Employee Benefits;
(4) any material diminution of benefits described in Sections 4(b),(c), (d)
(e), (f), (g), (h),or(i) of this Agreement; .or
(5) any material breach of this Agreement by the Company after written notice
from the Executive and a reasonable opportunity for the Company to cure such
breach.
For purposes ofthisSection5(c)(ii), any good faith determination of "Good
Reason" made by the Executive following a Change of Control shall be
conclusive.
(d) Notice of Termination. Any termination by the Company for Cause, or by
the Executive, shall be communicated by Notice of Termination to the other
party hereto given in accordance with Section 14(c) of this Agreement For
purposes of this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) to the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) if the Date of
Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date {which date shall be not more than
thirty days after the giving of such notice ). The failure by the Executive or
the Company to set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason or Cause shall not waive any
right of the Executive or the Company, respectively, hereunder or preclude the
Executive or the Company, respectively, from asserting such fact or
circumstance in enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the Executive's
employment is terminated by the Company for Cause, or by the Executive for Good
Reason, the date of receipt of the Notice of Termination or any later date
specified therein, as the case may be, {ii) if the Executive's employment is
terminated by the Executive without Good Reason, the Date of Termination shall
be 2 months after the date on which the Executive notifies the Company of such
termination ( or such earlier date if approved by the Company),
respectively, {iii) if the Executive's employment is terminated by reason of
death or Disability, the Date of Termination shall be the date of death of the
Executive or the Disability Effective pate, as the case may be.
6. Obligations of the Company upon Termination
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(a) Good Reason. If, during the Term, the Executive shall terminate employment
for Good Reason:
(i) the Company shall pay to or for the Executive, on the same dates he would
have received the same if employment was no so terminated, amounts equal to :
(1) the Executive's Annual Base Salary through the end of the original
Expiration Date or the Extended Period (if this Agreement was extended pursuant
to Section 1 hereto); and (2) any bonus earned during prior fiscal years but
not yet paid to Executive and bonus payments for each year until the original
Expiration Date or the Extended Period (if this Agreement was extended pursuant
to Section 1 hereto); (3) all benefits set forth in Section 4, inclusive of,
but pot limited to Pension Benefits, Welfare Benefits and Other Benefits; and
(4) any compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued vacation pay, in each
case to the extent not theretofore paid (the sum of the amounts and benefits
described in clauses (1), (2), (3) and (4) shall be hereinafter referred to as
the " Accrued Obligations");
(ii) the Company shall treat the Executive as a "retiree" with respect to
treatment of his outstanding stock options, as well as with respect to
participation in all employee benefit plans;
(iii) to the extent not theretofore paid or provided, the Company shall timely
payor provide to the Executive any other amounts or benefits required to be
paid or provided or which the Executive is eligible to receive under any plan,
program, policy or practice or contractor agreement of the Company (such, other
amounts and benefits shall be hereinafter referred to as the "Other Benefits").
(b) Death. If the Executive's employment is terminated by reason of the
Executive's death during the Term, this Agreement shall terminate without
further obligations to the Executive's legal representatives under this
Agreement, other than for payment of (l) the Executive's Annual Base Salary;
(2) any bonus earned during prior fiscal years but not yet paid to Executive
and any bonus payments until the first year anniversary of the Date of
Termination; and (3) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and any Accrued
Obligations and the timely payment or provision of Other Benefits. The payment
obligations described in this Subparagraph (c) shall be paid to the Executive's
estate or beneficiary, as applicable, in a lump sum in cash within 30 days of
the Date of Termination.
(c) Disability. If the Executive's employment is terminated by reason of the
Executive's Disability during the Term, this Agreement shall terminate without
further obligations to the Executive, other than for payment of Accrued
Obligations and the timely payment or provision of other Benefits. Accrued
Obligations shall be paid to the Executive on the same dates as if employment
was not terminated by reason of Disability. The Welfare Benefits and Fringe
Benefits shall continue through the Welfare Protection Period.
(d) Other than for Good Reason. If Executive voluntarily terminates employment
during the Term (excluding a termination for Good Reason), this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this
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Agreement, other than for payment of (l) the unpaid Executive's Annual Base
Salary; (2) any bonus earned during prior fiscal years but not yet paid to
Executive; (3) any compensation previously deferred by the Executive (together
with any accrued interest or earnings thereon) and any accrued vacation pay
Accrued Obligations and the timely payment or provision of Other Benefits; and
(4) Welfare Benefits for the Executive and his family for a period of two
years after the Date of Termination. The payment obligations described in this
Subparagraph (d) shall be paid to the Executive in a lump sum in cash within 30
days of the Date of Termination.
(e) Cause: Other than for Good Reason. If the Executive's employment shall be
terminated for Cause during the Term, this Agreement shall terminate without
further obligations to the Executive other than the obligation to pay to the
Executive (i) his Annual Base Salary through the Date of Termination, (ii) the
amount of any compensation previously deferred by the Executive, and (iii)
Other Benefits, in each case to the extent theretofore unpaid.
7. Certain Additional Payments by the Company.
{a) Anything in this Agreement to the contrary notwithstanding and except as
set forth below, in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of the Executive (whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to an additional payments
required under this Section 7) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code") or any interest or penalties are incurred by the Executive with respect
to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax")
and/or any income taxes, then the Executive shall be entitled to receive: (i)
an additional payment (a "Gross-Up Payment") in an amount such that after
payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation~ any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments, and (ii) an
amount equal to the product of any deductions disallowed for federal, state or
local income tax purposes because of the inclusion of the Gross-Up Payment in
the Executive's adjusted gross income multiplied by the highest applicable
marginal rate of federal, state, or local income taxation, respectively, for
the calendar year in which the Gross-Up Payment is to be made.
(b} Subject to the provisions of Section 7(c), all determinations required to
be made under this Section 7, including whether and when a Gross-Up Payment is
required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by the certified
independent accountants used by the Company for the audit of its financial
statements (the " Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 7, shall be paid by the Company to the
Executive within five days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code
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at the time of the initial determination by the Accounting Firm hereunder, it
is possible that Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 7(c) and the Executive thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date on which it gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is
due). If the Company notifies the Executive in writing prior to the expiration
of such period that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the Company
relating to such claim,
(ii) take such action in connection with contesting such claim as the Company
shall reasonably request in writing from time to time, including, without
limitation, accepting legal representation with respect to such claim by an
attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order to effectively contest
such claim, and
(iv) permit the Company to participate in any proceedings relating to such
claim; provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 7(c), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that if the Company
directs the Executive to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to the Executive, on an interest free basis
and shall indemnify and hold the Executive harmless, on an after-tax basis,
from any Excise Tax or income tax (including interest or penalties with respect
thereto) imposed with
11
respect to such advance or with respect to any imputed income with respect to
such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Executive
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 7(c), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 7(c) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto ). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section 7(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross- Up Payment required to be paid.
8. Registration Rights. The Company agrees that it will, at the request of
Executive, effect a registration statement with respect to the Convertible Note
Agreement and the underlying shares, pursuant to an effective registration
statement under the Securities Act of 1933 (as now in effect or as hereafter
amended) pursuant to a registration statement of Form S-4 or Form S-8 or any
successor or similar form.
9. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit
the Executive's continuing or future participation in any plan, program, policy
or practice provided by the Company and for which the Executive may qualify,
nor shall anything herein limit or otherwise affect such rights as the
Executive may have under any contractor agreement with the Company. Amounts
which are vested benefits or which the Executive is otherwise entitled to
receive under any plan, policy, practice or program of or any contractor
agreement with the Company at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract
or agreement except as explicitly modified by this Agreement.
10. Entire Agreement. This Agreement and other documents executed concurrently
herewith or referred to herein contain the sole and entire agreement and
understanding of the parties and supersedes all prior oral understandings or
agreements with respect to the subject matters contained herein.
11. Confidentiality; Nondisparaqement.
(a) While employed by the Company and for a period of one year thereafter, the
Executive shall not, without the prior written consent of the Company, disclose
to anyone (except in good faith in the ordinary course of business to a person
who will be advised by the Executive to keep such information confidential) or
make use of any Confidential
12
Information (as defined below) except in the performance of his duties
hereunder, or when required to do so by legal process by any governmental
agency having supervisory authority over the business of the Company or by any
administrative or legislative body (including a committee thereof) or judicial
authority of law that require him to divulge, disclose or make accessible such
Confidential Information. In the event that the Executive is so ordered, he
shall give prompt written notice to the Company to allow the Company the
opportunity to promptly object to or otherwise resist such order, provided,
however, the Executive may disclose such Confidential 1nformation if the
failure to disclose would result in a penalty or assessment against him.
(b) "Confidential Information" shall mean all information concerning the
business of the Company or any Subsidiary (as defined below) relating to any of
their products, product development, trade secrets, customers, suppliers,
finances, and business plans and strategies. Excluded from the definition of
Confidential Information is information (i) that is or becomes part of the
public domain, other than through the breach of this Agreement by the Executive
or (ii) regarding the Company's business or industry properly acquired by the
Executive in the course of his career as an executive in the Company's industry
and independent of the Executive's employment by the Company. For this purpose,
information known or available generally within the trade or industry of the
Company or any Subsidiary shall be deemed to be known or available to the
public.
(c) "Subsidiary" shall mean any corporation controlled directly or indirectly
by the Company, as control is defined in Rule 405 of the Securities Act of1933,
as amended.
(d) While employed by the Company and thereafter, the Executive agrees that he
will not make public statements or representations, or otherwise communicate,
directly or indirectly, in writing, orally, or otherwise, or take any action
(except as Executive reasonably believes is necessary in the course of
performing his duties) which may, directly or indirectly, disparage the Company
or any Subsidiary or their respective officers, directors, employees, advisors,
businesses or reputations. The Company agrees that, while the Executive is
employed by the Company and thereafter, the Company will not make statements or
representations, or otherwise communicate, directly or indirectly, in writing,
orally, or otherwise, or take any action which may, directly or indirectly,
disparage the Executive or his business or reputation. Notwithstanding the
foregoing, nothing in this Agreement shall preclude either the Executive or the
Company from making truthful statements or disclosures that are required by
applicable law, regulation or legal process.
12. Non-competition and Non-solicitation.
(a) While employed by the Company and for a period of one year thereafter (the
"Restricted Period"), the Executive shall not engage in Competition with the
Company or any Subsidiary. "Competition" shall mean engaging in any activity,
except as provided below, for a Competitor of the Company or any Subsidiary,
whether as an employee, consultant, principal, agent, officer, director,
partner, shareholder (except as a less than three percent shareholder of a
publicly traded company) or otherwise (together "Employment"). A "Competitor"
shall mean any corporation or other entity which derives at least 35% or more
of its revenues from the conduct of business which competes, directly or
indirectly, with the
13
business conducted by the Company, as determined on the Date of Termination of
the Executive's employment unless the Executive does not oversee or manage
activities of such entity which are competitive with activities of the Company
or Subsidiary. If the Executive commences Employment with any entity that is
not a Competitor at the time the Executive initially becomes employed or
becomes a consultant, principal, agent, officer, director, partner, or
shareholder of the entity, future activities of such entity shall not result in
a violation of this provision unless (i) such activities were contemplated by
the Executive at the time the Executive initially commenced Employment or (ii)
the Executive commences overseeing or managing the activities of an entity
which becomes a Competitor during the Restricted Period, which activities are
competitive with the activities of the Company or Subsidiary . In addition,
the Executive may be employed by, or otherwise associated with, non-competing
portions of the competing entity so long as he does not oversee, manage or
contribute to the competing activities of the Competitor. The Executive shall
not be deemed to be overseeing, managing or contributing to the Competitor's
activities which are competitive with the activities of the Company or
Subsidiary so long as he does not regularly participate in any discussions with
regard to the conduct of, or take any act intended to facilitate the success
of, the competing business.
(b) Notwithstanding the foregoing Section 12(a), in the event that during the
Restricted Period the Executive desires to accept Employment with a Competitor
which, in the Executive's reasonable judgment, competes with an insignificant
portion of the business conducted by the Company or Subsidiary, the Executive
shall have the right, prior to accepting such Employment, to submit a written
request to the Company for a limited waive of the Company's right to enforce
the provisions of this Section 12; which the Company shall not unreasonably
withhold it consent to the limited waiver. If the Company determines, in its
good faith reasonable judgment, that the Executive's proposed Employment with
the Competitor would not result in more than an insignificant level of
competition with the business conducted by the Company or Subsidiary at either
the time such request is made or in the then foreseeable future, the Company
shall grant the Executive the requested waiver.
(c) During the Restricted Period, the Executive shall not induce employees of
the Company or any Subsidiary to terminate their employment, nor shall the
Executive solicit or encourage any corporation or other entity in a joint
venture relationship, directly or indirectly, with the Company or any
Subsidiary, to terminate or diminish their relationship with the Company or any
Subsidiary or to violate any agreement with any of them. During such period,
the Executive shall not hire, either directly or through any employee, agent or
representative, any employee of the Company or any Subsidiary or any person who
was employed by the Company or any Subsidiary within 90 days of such hiring.
(d) The Executive's compliance with the non-competition and non-solicitation
provisions of this Section 12 shall be deemed compliance with any ether non-
competition or non-solicitation provision agreed to between .the Executive and
the Company, including but not limited to any stock option or equity grants.
(f) As an inducement to the Executive to make the undertakings in this Section
12 and as consideration to him for the undertakings as relates to the one year
after his employment hereunder has terminated, the Company shall pay to him,
during such one year period the average of the Annual Base Salary and bonuses
paid to him for the fiscal year
14
immediately preceding the termination of his employment, at the same times and
dates as if he was employed by the Company.
13. Successors.
This Agreement is personal to the Executive and without the prior written
consent of the Company shall not be assignable by the Executive otherwise than
by will or the laws of descent and distribution. This Agreement shall inure to
the benefit of and be enforceable by the Executive's legal representatives.
(a) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
(b) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/ or assets of the Company to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
As used in this Agreement, "Company" shall mean the Company as hereinbefore
defined and any successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law, or otherwise.
14. Full Settlement: No Mitigation: No Offset. The Company's obligation to
make the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right of action which the Company may have
against the Executive or others. In the event of any termination of
employment, the Executive shall be under no obligation to seek other
employment, and amounts due the Executive under this Agreement shall not be
offset by any remuneration attributable to any subsequent employment that he
may maintain other than substantially comparable welfare benefits provided by a
new employer .
15. Remedies. If the Executive materially breaches any of the provisions
contained in Sections 11 or 12 above, the Company shall have the right to
immediately seek injunctive relief The Executive acknowledges that such a
breach of Sections 11 or 12 would cause irreparable injury and that money
damages would not provide an adequate remedy for the Company; provided,
however, the foregoing shall not prevent the Executive from contesting the
issuance of any such injunction on the ground that no violation or threatened
violation of Sections 11 or 12 has occurred.
16. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance with the
laws of the State of New York without reference to principles or conflict of
laws. Any disputes with respect to the interpretation of this Agreement or the
rights and obligations of the parties hereto shall be exclusively brought in
any federal or state court of competent jurisdiction located in the City of New
York, State of New York. Each of the parties waives any right to object to the
jurisdiction or venue of such Courts or to claim that such courts are an
inconvenient forum.
15
(b) The captions of this Agreement are not part of the provisions hereof and
shall have no force or effect. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
(c) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
If to the Executive:
Gary D. Morgan
6535-F Parkview Drive
Boca Raton, FL 33433
Tel: (561) 395-0929
Fax: (561) 394-8475
With a copy to:
Proskauer Rose LLP
1585 Broadway
New York, NY 10036
Tel: (212) 969-3000
Fax: (212) 969-2900
Attention: David W. Sloan, Esq.
If to the Company:
..
World Information Technology, Inc.
2300 West Sahara Avenue
Suite 500-B
Las Vegas, NV 89102
Tel: (702) 947.0105
Fax: (702) 947.0107
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(d) The invalidity or unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other provision of this
Agreement.
(e) The Executive's or the Company's failure to insist upon strict compliance
with any provision of this Agreement or the failure to assert any right the
Executive or the Company may have hereunder, including, without limitation, the
right of the Executive to terminate
16
employment for Good Reason pursuant to Section 5(c)(ii)(I) through (5) of this
Agreement, shall not be deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.
17
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
WORLD INFORMATION TECHNOLOGY, INC.
By:
Name: Hsueh-Chu Lin
Title: President
By: /s/ Steven D. Fel1ows
Name: Steven D. Fellows
Title: Secretary
GARY D. MORGAN
18
EXHIBIT A
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR
SALE PLEDGED HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED
ORAN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT THE REGISTRATION IS NOT
REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.
WARRANT TO PURCHASE COMMON STOCK
Of
WORLD INFORMATION TECHNOLOGY; INC.
Void after July 31, 2008
This Warrant is issued August l, 2003 to Gary D. Morgan or his assigns with
address at 6535-F Parkview Drive, Boca Raton, FL 33433 ("Holder") by World
Information Technology, Inc" a Nevada corporation, with offices at 2300 West
Sahara Avenue, Suite 500-C, Las Vegas, NV 89102 (the "Company"), on August 1,
2003 (the "Warrant Issue Date"). This Warrant is issued pursuant to that
certain Employment Contract Agreement dated as of the Warrant Issue Date, a
copy of which is .attached hereto as Attachment A (the "Agreement").
1. Purchase Shares. Subject to the terms and conditions hereinafter set forth,
the Holder is entitled, upon surrender of this Warrant at the principal office
of the Company (or at such other place as the Company shall notify the Holder
in writing), to purchase from the Company up to five hundred thousand (500,000)
fully paid and nonassessable shares of Common Stock of the Company. The number
of shares of Common Stock issuable pursuant to this Section 1 (the "Shares")
shall be subject to adjustment pursuant to Sections 5 and 9 hereof.
2. Exercise Price. The purchase price for the Shares shall be $4.00, as
adjusted from time to time pursuant to Section 9 hereof (the "Exercise Price").
3. Exercise Period. This Warrant shall be exercisable, in whole or in part,
during the term commencing on the date five (5) days after the Warrant Issue
Date and ending at 5:00 p.m. on July 31, 2008; provided, however, that in the
event of (a) the closing of the Company's sale or transfer of all or
substantially all of its assets, or (b) the closing of the acquisition of the
Company by another entity by means of merger, consolidation or other
transaction or series of related transactions, resulting in the exchange of the
outstanding shares of the Company's capital stock unless (i) the shareholders
of the Company immediately prior to such transaction or series of related
transactions are holders of a majority of the voting equity securities of the
surviving or acquiring corporation immediately thereafter and (ii) each of such
shareholders immediately prior to such transaction or series of related
transactions holds the same pro rata share
1
of such majority of the voting equity securities of the surviving or acquiring
Corporation as each held of the Company immediately prior to such transaction
or series of related transactions, this Warrant shall, on the date of such
event, no longer be exercisable and become null and void. In the event of a
proposed transaction of the kind described above, the Company shall notify the
Holder at least twenty (20) days prior to the consummation of such event or
transaction; provided, however, that the Holder shall in any event have at
least forty (40) days after the Warrant Issue Date to exercise this Warrant.
Notwithstanding the foregoing, in the event of the termination of the
Employment Agreement between the Company and the Holder dated the date hereof
(i) as a result of a material breach of such agreements by the Holder or (ii)
by the Holder without cause, this Warrant shall immediately upon such
termination no longer be exercisable and become null and void.
4. Method of Exercise. While this Warrant remains outstanding and exercisable
in accordance with Section 3 above, the Holder may exercise, in whole or in
part, the purchase rights evidenced hereby. Such exercise shall be effected by:
(a) the surrender of the Warrant, together with a duly executed copy of the
form of Notice of Election attached hereto, to the Secretary of the Company at
its principal offices; and
(b) the payment to the Company of an amount equal to the aggregate Exercise
Price for the number of Shares being purchased.
5. Net Exercise. In lieu of exercising this Warrant pursuant to Section 4, the
Holder may elect to receive, without the payment by the Holder of any
consideration, shares of Common Stock equal to the value of this Warrant (or
the portion thereof being canceled) by surrender of this Warrant at the
principal office of the Company together with notice of such election, in which
event the Company shall issue to the Holder a number of shares of Common Stock
computed using the following formula:
Y (A - B)
X = ---------
A
Where: X = The number of shares of Common Stock to be issued to the Holder
pursuant to this net exercise; y = The number of Shares in respect of which the
net issue election is made; A = The fair market value of one share of the
Common Stock at the time the net issue election is made; B = The Exercise Price
(as adjusted to the date of the net issuance). For purposes of this Section 5,
the fair market value of one share of Common Stock as of a particular date
shall be determined as follows: (i) if traded on a securities exchange or
through the Nasdaq Stock Market, the value shall be deemed to be the average of
the closing prices of the securities on such exchange over the ten (10) day
period ending three (3) days prior to the net exercise election ;or (ii) if
traded over-the counter, the value shall be deemed to be the average of the
closing sale prices over the twenty (20) day period ending three (3) days prior
to the net exercise.
2
6. Representations and Warranties of Holder. The Holder hereby represents and
warrants that:
(a) Authorization. The Holder has full power and authority to enter into this
Warrant, and this Warrant constitutes its valid and legally binding obligation,
enforceable in accordance with its terms except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors' rights generally and (ii) as
limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies.
(b) Purchase Entirely for Own Account. This Warrant is being issued to such
Holder in reliance upon such Holder's representation to the Company, which by
such Holder's execution of this Warrant such Holder hereby confirms, that this
Warrant, the Common Stock to be received by such Holder upon exercise of this
Warrant and the Common Stock issuable upon conversion thereof (collectively,
the "Securities") will be acquired for investment for such Holder's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that such Holder has no present intention
of selling, granting any participation in, or otherwise distributing the same.
By executing this Warrant, such Holder further represents that such Holder does
not have any contract; .undertaking, agreement or arrangement with any person
to sell, transfer or grant participations to such person or to any third
person, with respect to any of the Securities.
(c) Disclosure of Information. Such Holder further represents that it has had
an opportunity to ask questions and receive answers from the Company regarding
the terms and conditions of the offering of the Securities and the business,
properties, prospects and financial condition of the Company.
(d) Investment Experience. Such Holder is an investor in securities of
companies in the development stage and acknowledges that it is able to fend for
itself, can bear the economic risk of its investment, and has such knowledge
and experience in financial or business matters that it is capable of
evaluating the merits and risks of the investment in the Securities. If other
than an individual, Holder also represents it has not been organized for the
purpose of acquiring the Securities.
(e) Accredited Investor. Such Holder is an "accredited investor" within the
meaning of Securities and Exchange Commission ("SEC") Rule 501 of Regulation D,
as presently in effect.
(f) Restricted Securities. Such Holder understands that the Securities it is
purchasing are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a ,
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act of 1933, as amended (the "Act"), only in certain limited
circumstances. In this connection, such Holder represents that It is familiar
with SEC Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Act.
3
(g) Further Limitations on Disposition. Without in any way limiting the
representations set forth above, such Holder further agrees not to make any
disposition of all or any portion of the Securities unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
this Section 6, provided and to the extent this Section is then applicable,
and:
(i) There is then in effect a Registration Statement under the Act covering
such proposed disposition and such disposition is made in accordance with such
Registration Statement; or
(ii) (A) Such Holder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and (B) if reasonably
requested by the Company, such Holder shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company that such
disposition will not require registration of such securities under the Act. It
is agreed that the Company will not require opinions of counsel for
transactions made pursuant to Rule 144 except in unusual circumstances.
{iii) Notwithstanding the provisions of Paragraphs (i) and (ii) above, no such
registration statement or opinion of counsel shall be necessary for a transfer
by a Holder (A) that is a partnership to a partner of such partnership or a
retired partner of such partnership who retires after the date hereof, or to
the estate of any such partner or retired partner or the transfer by gift, will
or intestate succession of any partner to his or her spouse or to the siblings,
lineal descendants or ancestors of such partner or his or her spouse, or (B) to
any entity that is controlled by, controls or is under common control with the
Holder, if the transferee agrees in writing to be subject to the terms hereof
to the same extent as if he or she were an original Holder hereunder.
(h) Legends. It is understood that the certificates evidencing the Securities
may bear one or all of the following legends:(i) "These securities have not
been registered under the Securities Act of 1933, as amended. They may not be
sold, offered for sale, pledged or hypothecated in the absence of a
registration statement in effect with respect to the securities under such Act
or an opinion of counsel satisfactory to the Company that such registration is
not required or unless sold pursuant to Rule 144 of such Act."(ii) Any legend
required by the laws of the State of Nevada, including any legend required by
the Nevada Department of Corporations and Sections 417 and 418 of the Nevada
Corporations Code.
7. Certificates for Shares. Upon the exercise of the purchase rights evidenced
by this Warrant, one or more certificates for the number of Shares so purchased
shall be issued as soon as practicable thereafter (with appropriate restrictive
legends. if applicable), and in any event within twenty (20) days of the
delivery of the subscription notice. In case the holder shall exercise this
Warrant with respect to less than all of the Shares that may be purchased under
this
4
Warrant, the Company shall execute a new warrant in the form of this Warrant
for the balance of such Shares and deliver such new warrant to the holder of
this Warrant.
8. Issuance of Shares. The Company covenants that it will at all times keep
available such number of authorized shares of its Common Stock, free from all
preemptive rights with respect thereto, which will be sufficient to permit the
exercise of this Warrant for the full number of Shares specified herein. The
Company covenants that the Shares, when issued pursuant to the exercise of this
Warrant, will be duly and validly issued, fully paid and nonassessable and free
from all taxes, liens, and charges with respect to the issuance thereof.
9. Adjustment of Exercise Price and Number of Shares. The number of and kind of
securities purchasable upon exercise of this Warrant and the Exercise Price
shall be subject to adjustment from time to time as follows:
(a) Subdivisions, Combinations and Other 1ssuances. If the Company shall at any
time prior to the expiration of this Warrant subdivide its Common Stock, by
split-up or otherwise, or combine its Common Stock, or issue additional shares
of its Common Stock or Common Stock as a dividend with respect to any shares of
its Common Stock, the number of Shares issuable on the exercise of this Warrant
shall forthwith be proportionately increased in the case of a subdivision or
stock dividend, or proportionately decreased in the case of a combination.
Appropriate adjustments shall also be made to the purchase price payable per
share, but the aggregate purchase price payable for the total number of Shares
purchasable under this Warrant (as adjusted) shall remain the same. Any
adjustment under this Section 8(a) shall become effective at the course of
business on the date the subdivision or combination becomes effective, or as of
the record date of such dividend, or in the event that no record date is fixed,
upon the making of such dividend.
(b) Reclassification, Reorganization and Consolidation. In case of any
reclassification, capital reorganization, or change in the Common Stock of the
Company (other than as a result of a subdivision, combination, or stock
dividend provided for in Section 8(a) above), then, as a condition of such
reclassification, reorganization, or change, lawful provision shall be made,
and duly executed documents evidencing the same from the Company or its
successor shall be delivered to the Holder, so that the Holder shall have the
right at any time prior to the expiration of this Warrant to purchase, at a
total price equal to that payable upon the exercise of this Warrant, the kind
and amount of shares of stock and other securities and property receivable in
connection with such reclassification, reorganization, or change by a holder of
the same number of shares of Common Stock as were purchasable by the Holder
immediately prior to such reclassification, reorganization, or change. In any
such case appropriate provisions shall be made with respect to the rights and
interest of the Holder so that the provisions hereof shall thereafter be
applicable with respect to any shares of stock or other securities and property
deliverable upon exercise hereof, and appropriate adjustments shall be made to
the purchase price per share payable hereunder, provided the aggregate purchase
price shall remain the same.
5
(c) Notice of Adjustment. When any adjustment is required to be made in the
number or kind of shares purchasable upon exercise of the Warrant, or in the
Warrant Price, the Company shall promptly notify the holder of such event and
of the number of shares of Common Stock or other securities or property
thereafter purchasable upon exercise of this Warrant.
(d) No Impairment. The Company and the holder of this Warrant will not, by any
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms to be observed or performed hereunder by the Company or the holder
of this Warrant, respectively, but will at all times in good faith assist in
the carrying out of all the provisions of this Section 9 and in the taking of
all such action as may be necessary or appropriate in order to protect the
rights of the Company and the holder of this Warrant against impairment.
10. No Fractional Shares or Scrip. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant, but in
lieu of such fractional shares the Company shall make a cash payment therefor
on the basis of the Exercise Price then in effect.
11. No Shareholder Rights. Prior to exercise of this Warrant, the Holder shall
not be entitled to any rights of a shareholder with respect to the Shares,
including (without limitation) the right to vote such Shares, receive dividends
or other distributions thereon, exercise preemptive rights or be notified of
shareholder meetings, and such holder shall not be entitled to any notice or
other communication concerning the business or affairs of the Company. However,
nothing in this Section 11 shall limit the right of the Holder to be provided
the Notices required under this Warrant; provided further, however, the Company
will afford to the Holder the right, upon advance notice, to meet periodically
with the Company's chief financial officer during mutually agreeable business
hours to discuss the Company's business and affairs.
12. Transfers of Warrant. Subject to compliance with applicable federal and
state securities laws, this Warrant and all rights (but only with all related
obligations) hereunder are transferable in whole or in part by the Holder upon
the prior written consent of the Company. The transfer shall be recorded on the
books of the Company upon (i) the surrender of this Warrant, properly endorsed,
to the Company at its principal offices, (ii) the payment to the Company of all
transfer taxes and other governmental charges imposed on such transfer and
(iii) such transferee's agreement in writing to be bound by and subject to the
terms and conditions of this Warrant. In the event of a partial transfer, the
Company shall issue to the holders one or more appropriate new warrants.
13. Successors and Assigns. The terms and provisions of this Warrant and the
Purchase Agreement shall inure to the benefit of, and be binding upon, the
Company and the Holders hereof and their respective successors and assigns.
14. Registration Rights. If, at any time, the Company proposes to prepare and
file with the Securities and Exchange Commission (the "Commission") a
registration statement covering equity or debt securities of the Company, or
any such securities of the Company held by its shareholders (In any such case,
other than in connection with a merger, acquisition, a Form S-8 or successor
form) it
6
will give written notice of its intention to do so by registered mail
("Notice"), at least ten (10) days prior to the filing of each such
Registration Statement, to the holder of the Registerable Securities. Upon the
written request of the Holder (a "Requesting Holder"), made within ten (10)
days after receipt of the Notice, that the Company include any of the
Requesting Holder's Registerable Securities in the proposed Registration
Statement, the Company shall use its best efforts to effect the registration
under the Securities Act of the Registrable Securities which it has been so
requested to register ("Piggyback Registration"), at the Company's sole cost
and expense and at no cost or expense to the Holder. Within 30 days of this
Warrant being exercised in it's entirety, the Company shall file a Form S-8 or
successor form to register the common shares underlying this warrant.
15. Amendments and Waivers. Any term of this Warrant may be amended and the
observance of any term of this Warrant may be waived (either generally or in a
particular instance and either retroactively or prospectively), with the
written consent of the Company and the Holder. Any waiver or amendment effected
in accordance with this Section shall be binding upon each holder of any Shares
purchased under this Warrant at the time outstanding (including securities into
which such Shares have been converted), each future holder of all such Shares,
and the Company.
16. Notices. All notices required under this Warrant and shall be deemed to
have been given or made for all purposes (i) upon personal delivery (ii) upon
confirmation receipt that the communication was successfully sent to the
applicable number if sent by facsimile; (iii) one (1) business day after being
sent, when sent by professional overnight courier service, or (iv) five (5)
days after posting when sent by registered or certified mail. Notices to the
Company shall be sent to the principal office of the Company (or at such other
place as the Company shall notify the Holder hereof in writing). Notices to the
Holder shall be sent to the address of the Holder on the books of the Company
(or at such other place as the Holder shall notify the Company hereof in
writing).
17. Attorneys' Fees. If any action of law or equity is necessary to enforce or
interpret the terms of this Warrant, the prevailing party shall be entitled to
its reasonable attorneys' fees, costs and disbursements in addition to any
other relief to which it may be entitled.
18. Captions. The section and subsection headings of this Warrant are inserted
for convenience only and shall not constitute a part of this Warrant in
construing or interpreting any provision hereof.
19. Governing Law. This Warrant shall be governed by the laws of the State of
Nevada as applied to agreements among Nevada residents made and to be performed
entirely within the State of Nevada.
20. Survival. The warranties, representations and covenants contained in or
made pursuant to this Warrant shall survive the execution, delivery and
exercise, if any, of this Warrant.
21. Registration. When requested by the Holder, the Company will register
this Warrant and the underlying Shares in an S-8 Registration Statement.
7
IN WITNESS WHEREOF the parties hereto have caused this Warrant to be executed
by an officer thereunto duly authorized.
World Information Technology, Inc.
"Company"
By:
--------------------------------------
Hsu-Chu Lin, President and Sole Director
By: /s/ Steven D. Fellows
----------------------
Steven Fellows, Secretary
"Holder"
/s/ Gary Morgan
- ---------------
Gary Morgan
8
NOTICE OF EXERCISE
To: World Information Technology, Inc.
The undersigned hereby elects to [check applicable subsection]:
_______(a) Purchase_______________shares of Common Stock of World Information
Technology, Inc.; pursuant to the terms of the attached Warrant and payment of
the Exercise Price per share required. under such Warrant accompanies this
notice; OR
_______(b) Exercise the attached Warrant for [all of the shares] [_________of
the shares] [cross out inapplicable phrase] purchasable under the Warrant
pursuant to the net exercise provisions of Section 5 of such Warrant. The
undersigned hereby represents and warrants that the undersigned is acquiring
such shares for its own account for investment purposes only, and not for
resale or with a view to distribution of such shares or any part thereof.
WARRANTHOLDER: Gary D. Morgan
By:
------------------------------------
[NAME]
Address:------------------------------
------------------------------
Date: ____________
Name in which shares should be registered:
- -----------------------------------------
9
EXHIBIT B
CONVERTIBLE NOTE AGREEMENT
This Convertible Note Agreement ("Agreement"), dated as of [ ] 200[ ] (the
"Effective Date"), between World Information Technology, Inc., a Nevada
corporation, having an address at 2300 West Sahara Avenue, Suite 500-C, Las
Vegas, NV 89102 (the "Company") and Gary D. Morgan with offices at 6535-F
Parkview Drive, Boca Raton, FL 33433 ("Note Holder").
RECITAL
The Note Holder is owed the amount of $[ ] (the "Sum") by the Company and
the Company is entering into this Agreement in order to provide incentive to
the Note Holder to defer payment of the Sum as herein provided. The Sum is an
obligation owed by the Company to the Note Holder pursuant to an employment
agreement, dated as of July 24, 2003 ("Employment Agreement") between the
parties. Hereafter there may be additional obligations of the Company to the
Note Holder pursuant the Employment Agreement and such obligations will be
evidenced by an agreement in the form as this. Agreement (collectively the
"Obligations"), which Obligations shall be evidenced by one or more Convertible
Promissory Notes ("Notes"), substantially in the form attached hereto as
Exhibit A, all pursuant to the terms and conditions described in this
Agreement.
NOW, THEREFORE, in consideration of the premises and for good and valuable
consideration the receipt of which is acknowledged, the parties agree as
follows:
I. The Note
A. The above recital is true, correct and incorporated herein by reference.
B. The Company shall issue to the Note Holder the Note substantially in the
form set forth in Exhibit A, subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties contained in
this Agreement. The Note will be dated the date hereof and will mature on [ ,]
200[ ] (the "Maturity Date"), unless terminated earlier pursuant to the terms
and conditions of this Agreement.
C. The Note shall bear interest on the unpaid principal amount at the rate of
six percent (6%) per year, payable on the Maturity Date. To the extent that any
Obligations, in whole or in part, is outstanding at any time after the Maturity
Date, the interest rate shall be at the rate of twelve percent (12.0%) per
year. For the purposes of calculating interest for any period for which the
interest shall be payable, such interest shall be calculated on the basis of a
thirty (30) day month and a three hundred sixty (360) day year.
D. The Company will promptly and punctually pay to Note Holder or his nominee
or designee the principal and interest on the Note without presentment of the
Notes. In the event the
1
Note Holder shall sell or transfer the Note, the Note Holder shall notify the
Company of the name and address of the transferee. In the event the Company
defaults on any installment of interest or principal on the Note given pursuant
to this Agreement or in connection with any of the Obligations, then the Note
Holder may, at such Note Holder's option, without notice, declare the entire
principal and the interest accrued under each Note immediately due and payable
and may proceed to enforce the collection thereof or may elect to convert the
whole or any portion of same into common stock of the Company at $4.00 per
share or 50% of the closing bid price on the Common Stock of the Company on the
conversion date, whichever is lowest share price yielding the most conversion
shares, subject to adjustment as provided in Section V hereof.
II. Representations and Warranties by the Company
A. The Company (i) is a corporation existing in good standing under the laws of
the State of Nevada and (ii) has the corporate power to own property and to
carry on in the business as it is now being conducted.
B. The Company has timely made all filings required of it by the Securities
Exchange Commission ("SEC") since its incorporation, which are a part of its
public record. All of such filings are complete and accurate and contain all
material facts and do not omit any such facts or matters and will continue to
..do so during the period which any Note is outstanding.
C. There is no action or proceeding pending or to the Company's knowledge,
threatened against the Company before any court or administrative agency, the
determination of which might result in any material adverse change in the
business of the Company.
D. The Company has good and clear title to all of its properties and assets
including the properties and assets reflected on its financial statements filed
with the SEC and which assets and properties (are all of its assets and
properties of any kind and nature and the values thereof are on such statements
and are reflected at the lower of cost or market and net of all appropriate
doubtful accounts or reserves) are not subject to any liens, mortgages,
encumbrances or charges.
E. The Company is not a party to any contract or agreement or subject to any
restriction which materially and adversely affects its business, property,
assets, or financial condition, and neither the execution nor delivery of this
Agreement, nor the consummation of the transactions contemplated herein, nor
the fulfillment of the terms hereof, nor the compliance with the terms and
provisions hereof and of the Note will conflict with or result in the breach of
the terms, conditions or provisions or constitute a default, under the Articles
of Incorporation or of any Agreement or instrument to which the Company is now
a party or upon conversion of the Note pursuant to the conversion privileges
hereinafter stated .
F. The Company has not declared, set aside, paid or made any dividend or other
distributions with respect to its capital stock and has not made or caused to
be made directly or indirectly any payment or other distribution of any nature
whatsoever to any of the Note Holders of its capital {and will not make any
while the Note is outstanding) stock except for regular salary payments for
services rendered and the reimbursement of business expenses.
2
G. All of the equipment and other tangible assets of the Company, if any, are
in good condition and repair.
H. The Company owns or possesses adequate licenses or other rights to use all
patents, trademarks, trade names, trade secrets, and copyrights used in its
business. No one has asserted to the Company that its operations infringe on
the patents, trademarks, trade secrets or other rights utilized in the
operation of its business.
I. The Company shall reserve such number of shares of its common stock as may,
from time to time, be the maximum number of shares issuable, assuming
conversion of all the Notes into fully paid and non-assessable shares of
restricted Company common stock ("Conversion Stock"), as contemplated herein.
III. Representations and Warranties by the Note Holder
The Note Holder represents and warrants to the Company that:
A. The Note Holder is subscribing for the Note for investment purposes and not
with the view to or for sale in connection with any distribution thereof and
that he has no present intent to sell, give or otherwise transfer the Note.
Upon conversion of the Note, the Conversion Stock will be received by the Note
Holder for investment purposes for its own account, and not with the view to,
or for resale in connection with, any distribution thereof. Note Holder
understands that the Conversion Stock will not been registered under the
Securities Act of 1933, as amended (" Act"), or under the securities laws of
various states, by reason of a specified exemption from the registration
provisions thereunder.
B. The Note Holder is a resident of the State of Florida.
C. The Note Holder understands that investing in the Note is a highly
speculative investment.
D. The Note Holder is a sophisticated investor.
E. The Note Holder shall hold the Conversion Stock indefinitely unless such
shares are subsequently registered under the Act and under applicable state
securities laws or an exemption from such registration .is available. Note
Holder has been advised or is aware of the provisions of Rule 144 promulgated
under the Act which permits limited resale of the securities purchased in a
private placement subject to the satisfaction of certain conditions including,
among other things, the availability of certain current public information
about Company and compliance with applicable requirements regarding the holding
period and the amount of securities to be sold and the manner of sale.
F. The Note Holder represents he is an " Accredited Investor" as the term is
defined in Rule 501(a) of Regulation D under the Act.
3
IV. Prepayment of the Notes
A. If the common stock of the Company which is traded on a "Principal Market"
closes at less than $1.00 per share for twenty consecutive trading days, the
Company shall have the right to make prepayment in full of the principal of the
Notes at any time on ten (10) business days prior written notice to the Note
Holder. Such prepayment shall be accompanied by a payment of all accrued
interest to date. There shall be no premium for the amount so prepaid. Upon
such notice the Note Holder may elect to convert the Note as herein provided.
B. Principal Market" means the Nasdaq National Market, the Nasdaq Small Cap
Market, the American Stock Exchange or the New York Stock Exchange, whichever
is at the time the principal trading exchange or market for the Common Stock.
V. Conversion.
A. The Note Holder of the Note at any time prior to, on, or after if the
Company is in default in payment after default) or upon receipt by the Note
Holder if notice of prepayment shall have been given, at any time up to the
close of business on the third business day prior to the day fixed for
prepayment but not thereafter, may convert the Notes in whole or in part into
as many shares of Conversion Stock as the principal amount of and interest on
the Note at $4.00 per share or 50% of the closing bid price on the conversion
date, whichever is the lowest share price yielding the most conversion shares,
subject to adjustment as herein provided (as elected by the Note Holder). If
the Notes shall be converted in part, the Company shall, without charge to the
Note Holder execute and deliver to the Note Holder a new Note for the balance
of the principal amount plus accrued interest so converted. If the Company
shall sell any securities at a price per share less than $4.00 per share or 50%
of the closing bid price on the date of issuance (if less than $4.00 per
share), the conversion price under the Notes shall be automatically adjusted to
such price.
B. In the event the Company shall at any time divide its outstanding shares of
Common Stock into a greater number of shares, the conversion price in effect
immediately prior to such subdivision should be proportionately reduced, and,
conversely, in the case of outstanding shares of Common Stock of the Company
shall be combined into a smaller number of shares, the actual conversion price
in effect immediately prior to such combination shall be proportionately
increased.
C. In the event the Company shall declare a dividend or make a distribution of
any securities of the Company payable in Common Stock or in convertible
securities, the aggregate maximum number of shares of Common Stock available
for issue in payment of such dividend or distribution, or upon conversion of or
in exchange for such convertible securities available for issue in payment of
such dividend or distribution, shall be deemed to have been issued or sold
without consideration. This shall result in a reduction of the conversion price
of the Note as provided in the last sentence of A above.
D. No fractional share of Common Stock shall be issued upon conversion of any
of the Notes. If any Holder of the Notes shall have converted all the Notes
held by him other than a
4
principal amount so small that less than a whole share of Common Stock would be
available for issue upon conversion thereof, the Company may elect to prepay
such balance, with interest accrued thereon to the date fixed for prepayment,
or leave the same outstanding until the maturity of the Note.
E. Any reclassification or change of outstanding shares of Common Stock
available for issue upon conversion of the Notes (other than a change in stated
value or from no par to par value) or in the case of any consolidation or
merger of the Company with any other corporation, or in the case of the sale
and conveyance to another corporation or person of the property of the Company
in its entirety or substantially as an entirety, the Company shall, as a
condition precedent to such transaction, cause effective provisions to be made
that each Holder of the Notes then outstanding shall have the right thereafter
to convert the Notes into the kind and amount of shares of Stock and other
securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance by a Holder of the number of shares
of Common Stock in the Company into which such Notes might have been converted
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance. In the event of a change of control of the Company, it shall
have the right, at its option, to convert any or all of the Notes, pursuant to
the terms and conditions of this agreement.
VI. Covenants
The Company covenants that so long as the Obligations under the Note remain
outstanding, the Company will cause its Common Stock {inclusive of the shares
of common stock into which a Note is convertible) to continue to be registered
under the Act, will use its reasonable efforts to comply in all respects with
its reporting and filing obligations under the Securities Exchange Act
("Exchange Act"), and will not take any action or file any document (whether or
not permitted by securities law of the United States or the rules thereunder)
to terminate or suspend such registration or to terminate or suspend its
reporting and filing Obligations under the Act or the Exchange Act.
If, at any time, the Company proposes to prepare and file with the SEC a
registration statement covering equity or debt securities of the Company, or
any such securities of the Company held by its shareholders, it will give
written notice of its intention to do so by registered mail ("Notice"), at
least thirty (30) days prior to the filing of each such Registration Statement,
to the Note Holder. Upon the written request of Note Holder made within twenty
(20) days after receipt of the Notice, that the Company include any of the Note
Holder's shares converted from this Note in the proposed Registration
Statement, the Company shall use its best efforts to effect the registration
under the Act of the Note and underlying shares which it has been so requested
to register ("Piggyback Registration") by the Note Holder, at the Company's
sole cost and expense and at no cost or expense to the Note Holder.
The Company agrees that it will, at the request of the Note Holder, effect a
registration statement with respect to any of the Notes and the underlying
shares, pursuant to an effective registration statement under the Securities
Act of 1933 {as now in effect or as hereafter amended) pursuant to a
registration statement of Form S-4 or Form S-8 or any successor or similar
form.
VII. Event of Default
5
A. The occurrence or breach of any of the events or conditions contained in
this Section VII of this Agreement shall constitute an event of default under
this Agreement and under each other agreement signed by the Company with
respect to the Obligations under this Agreement or such other agreement. The
Note Holder may give written notice of such breach and if the Company shall
within ten (10) days after receipt of such written notice have failed to
correct such occurrence or condition, then the Note Holder may, at its option
and without notice, declare the entire principal and interest accrued thereon
immediately due and payable and may proceed with collection.
B. If the Company has made a misrepresentation in connection with this
Agreement or with the transactions contemplated by this Agreement, or if the
Company makes an assignment for the benefit of creditors, or a trustee or
receiver is appointed for the Company; or if any proceeding involving the
Company is commenced by or against the Company under any bankruptcy,
reorganization, arrangement, insolvency, statute or law, such event shall be
deemed a default which will immediately entitled the Note Holder, at its option
and without notice, to declare the entire amount of interest accrued thereon
immediately due and payable and proceed to enforce the collection thereof.
C. In case of default in the payment of any installment or principal, the Note
Holder may, at its option and without notice, declare the entire principal and
the interest accrued thereon immediately due and payable and may proceed to
enforce the collection thereof.
VIII. Securities Matters
A. The Note Holder is aware that no federal or state or other agency has passed
upon or made any finding or determination concerning the fairness of the
transactions contemplated by this Agreement or the adequacy of the disclosure
of the exhibits and schedules hereto. The Note Holder understands and
acknowledges that neither the Internal Revenue Service nor any other tax
authority has been asked to rule on nor has it ruled on the tax consequences of
the transactions contemplated hereby.
The Note Holder understands that all certificates for the Conversion Stock
shall bear a legend in substantially the following form:
"THESE SECURITIES HA VE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR QUALIFIED UNDER ANY STATE SECURITIES LA WS. THE SECURITIES MAY
NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF WITHOUT SUCH
REGISTRATION OR THE DELIVERY TO THE ISSUER OF AN OPINION OF COUNSEL,
SATISFACTORY TO THE ISSUER, THAT SUCH DISPOSITION WILL NOT REQUIRE REGISTRATION
OF SUCH SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS."
IX. Miscellaneous
6
A. Any and all notices, approval or other communications to be sent to the
parties shall be deemed validly and properly given if made in writing and
delivered, by hand or by registered or certified mail, return receipt requested
to the addresses set forth in the first paragraph of this Agreement or to such
other address as either party, gives to the other in-writing,
B. This Agreement may not be modified, amended or terminated except by
written agreement executed by all the parties hereto.
C. The waiver of any breach or default hereunder shall not be considered
valid unless in writing and signed by the party giving such notice and no
waiver shall be deemed a waiver of any subsequent breach or default of same.
D. The paragraph headings contained herein are for the purpose of
convenience only and are not intended to define or limit the contents of such.
E. The validity, constructional interpretation and enforceability of this
Agreement and the Note executed pursuant to this Agreement shall be determined
and governed by the laws of the State of New York without regard to conflict of
law principles. Any action or proceeding with respect to this Agreement or the
Note shall be brought exclusively in the Federal or State Courts of New York
City, New York and each party waives the right to contest the jurisdiction or
venue of any of such cowls or to claim it is an inconvenient forum.
F. This Agreement shall be binding upon and inure to the benefit of the
parties and
their respective successors and assigns.
G. This Agreement may be executed in one or more counterparts, each of which
shall be deemed and original.
H. Any notice required or permitted hereunder shall be in writing and
delivered personally or to the address of the party set forth under its
signature or to such other address or party which one party gives notice to the
other.
WORLD INFORMATION TECHNOLOGY, INC.
By: /s/ Hsueh-Chu Lin
-------------------
Name: Hsueh-Chu Lin
Its: President
By:
--------------------
Name: Steven Fellows
Its: Secretary
- -----------------------
Gary D. Morgan
7
EXHIBIT A TO CONVERTIBLE
NOTE AGREEMENT
Form of Convertible Promissory Note
THIS CONVERTIBLE PROMISSORY NOTE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NEITHER THIS
CONVERTIBLE PROMISSORY NOTE NOR ANY INTEREST THEREIN INCLUDING THE SHARES OF
COMMON STOCK INTO WHICH THIS NOTE IS CONVERTIBLE) MAY BE OFFERED, SOLD,
PLEDGED, OR OTHERWISE TRANSFERRED UNLESS THIS CONVERTIBLE PROMISSORY NOTE IS
FIRST REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND/OR QUALIFIED
UNDER ALL APPLICABLE STATE SECURITIES LAWS, OR UNTIL THE COMP ANY SHALL HA VE
RECEIVED AN OPINION OF LEGAL COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY,
THAT THIS CONVERTIBLE PROMISSORY NOTE MAY LAWFULLY BE OFFERED, SOLD, PLEDGED,
OR OTHERWISE TRANSFERRED WITHOUT SUCH REGISTRA TION AND/OR QUALIFICATION IN
RELIANCE UPON AN APPLICABLE EXEMPTION .
WORLD INFORMATION TECHOLOGY, INC. CONVERTIBLE PROMISSORY NOTE Interest Rate: 6%
per year through Maturity Date 12% per year following Maturity Date Convertible
into shares of Restricted Common Stock of World Information Technology, Inc. at
$4.00 per share or 50% of the closing bid price on the conversion date
whichever is the lowest share price yielding the most conversion shares,
subject to adjustment
Amount: $____________
Las Vegas, Nevada
Dated: _________, 200
For value received, WORLD INFORMATION TECHNOLOGY INC., a Nevada corporation
with address at 2300 West Sahara Avenue, Suite 500-C, Las Vegas, NV 89102
{"Company"), promises to pay to the order Gary D. Morgan ("Payee"), at his
office at 6535-F Parkview Drive, Boca Raton, FL 33433 (the "Office") or such
other place therein designated in writing by the Note Holder the principal
amount of Dollars ($__________) (the "Obligations") on [ ] ("Maturity Date"),
together with interest from the date hereof as described below.
This Convertible Promissory Note ("Note") is issued pursuant to a Convertible
Note Agreement (the "Agreement") between the Company and the Payee, dated [ ].
9
This Note is subject to the following terms and conditions:
1. Principal and Interest Payments.
a. This Note bears interest from the date hereof, on the unpaid principal
balance, at a rate per annum of (i) six percent (6%) through [200 ] (the
"Maturity Date") and (ii) twelve percent{l2%) from the Maturity Date until such
time as the Obligations shall be paid or satisfied in full, which will accrue
daily from the date of this Note and be payable on the Maturity Date ( or until
paid in full) , which interest payments may be made in the form of cash, shares
of the Company's common stock $4.00 per share or 50% of the closing bid price
on the conversion date, whichever is the lowest share price yielding the most
conversion shares, subject to adjustment ("Common Stock") or a combination of
cash and shares, as elected, in its sole discretion by the Payee
b. The entire unpaid principal, together with any accrued but unpaid interest,
shall be due and payable in full on the Maturity Date.
c. All computations of interest made or called for herein shall be made on the
basis of a 360-day year for the actual number of days elapsed.
d. All payments due on this Note shall be applied first to accrued interest,
and second, to any remainder in payment of principal.
e. Except as otherwise provided in this Note, all payments of principal and
interest on this Note shall be paid in the legal currency of the United States
of America.
2. Optional Prepayments.
a. So long as the Common Stock of the Company is traded on a principal Market
at 1ess than $1.00 per share for twenty (20) consecutive trading days, the
Company shall have the right to prepay the Note in full, inclusive of accrued
interest on ten (10) business days prior written notice to the Note Holder.
Upon any such notice the Note Holder may elect to convert the Note herein
provided.
b. "Principal Market" means the Nasdaq National Market, the Nasdaq Small Cap
Market, the OTC Bulletin Board, the American Stock Exchange or the New York
Stock Exchange, whichever is at the time the principal trading exchange or
market for the Stock. As of the date of this Agreement, the OTC Bulletin Board
Market is the Principal Market.
3. Conversion of Note.
a. At any time from the date hereof up to and including the Maturity Date, or
if there is a default hereunder, at the election of the Payee at any time
within three months thereafter or, at any time up to the close of business on
the third business day prior to the day fixed for prepayment but not
thereafter, may convert the Note in whole or in part into as many fully paid
and non-assessable shares of Common Stock as the principal amount plus accrued
interest of the Note on a one share of Stock for $4.00 per share or 50% of the
closing bid price on the
10
conversion date, whichever is the lowest share price yielding the most
conversion shares, subject to adjustment {as herein provided), of principal and
accrued interest. If the Note shall be converted in part, the Company shall,
without charge to the Note Holder execute and deliver to the Payee a new Note
for the balance of the principal amount and interest not so converted. Attached
to this Note as Exhibit A are the Instructions to convert the Note that could
be used by Payee if he wants to exercise his conversion rights under the Note.
b. On conversion of the Note, all accrued and unpaid interest on the principal
amount converted shall be paid to the Payee by the Company in Common Stock on a
one share of Common Stock for $4.00 per share or 50% of the closing bid price
on the conversion date, whichever is the lowest share price yielding the most
conversion shares, subject to adjustment, to the extent elected by the Payee.
c. No fractional share of Common Stock shall be issued upon conversion of any
of the Notes. If the Payee shall have converted the Note held by him other than
a principal amount so small that less than a whole share of Common Stock would
be available for issue upon conversion thereof, the Company may elect to prepay
such balance, with interest accrued thereon to the date fixed for prepayment.
Adjustment to Applicable Conversion Rate.
d. Adjustment for Stock Splits and Subdivisions. In the event the Company
should at any time or from time to time after the date of issuance hereof fix a
record date for the effectuation of a split or subdivision of the outstanding
shares of Stock or the determination of holders of Stock entitled to receive a
dividend or other distribution payable in additional shares of Stock or other
securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Stock (hereinafter
referred to as " Stock Equivalents") without payment of any consideration by
such holder for the additional shares of Stock Equivalents (including the
additional shares of Stock issuable upon conversion or exercise thereof), then,
as of such record date ( or the date of such dividend distribution, split or
subdivision if not record date is fixed), the Conversion Price of this Note
shall be appropriately decreased so that the number of shares of Stock issuable
upon conversion of this Note shall be increased in proportion to such increase
of outstanding shares.
e. Adjustments for Reverse Stock Splits. If the numbers of shares of Stock
outstanding at any time after the date hereof is decreased by a combination of
the outstanding shares of Stock, then, following the record date of such
combination, the Conversion Price for this Note shall be appropriately
increased so that the number of shares of Stock issuable on conversion hereof
shall be decreased in proportion to such decrease in outstanding shares.
f. Adjustments for Issuance of Securities Below a Certain Price. If the
Company shall sell any securities at a price per share less than $4.00 per
share or 50% of the closing bid price on the date of issuance (if less than
$4.00 per share) the conversion price hereunder shall be automatically adjusted
to such price.
4. Place of Payment. Payment shall be made to Payee at Office or at such other
place as Payee may designate in writing to the Company.
11
5. Default.
a. The occurrence of any of the following shall constitute an "Event of
Default" under this Note:
i. Failure of Company to pay the principal and any accrued interest in full on
the Maturity Date of this Note (or any other promissory note issued by the
Company to the Payee) and the continuation of such failure for ten (10)
business days after receipt by Company of notice of such failure and demand for
payment; or
ii. Company's consent to the appointment of a receiver, trustee or liquidator
of itself or of a substantial part of its property, or Company's admittance in
writing of its inability to pay its debts generally as they become due, or
Company's general assignment for the benefit of creditors, or Company's filing
of a voluntary petition in bankruptcy, or a voluntary petition or answer
seeking reorganization in a proceeding under any bankruptcy law (as now or
hereafter in effect), or the filing against the Company of a petition, answer
or' consent, seeking relief under the provisions of any other now existing or
future bankruptcy or other similar law providing for the reorganization or
winding up of corporations, or Company, fails to discharge within ninety (90)
days any involuntary petition in bankruptcy filed against it or if it is
adjudicated a bankrupt.
iii. Any event of default described in Section VII of the Agreement.
b. Upon the occurrence of any Event of Default, all amounts due under this
Note, including the unpaid balance of principal and interest hereof, shall
become immediately due and payable at the option of Payee, without demand or
notice whatsoever, and Payee may immediately and without demand exercise any of
Payee's rights and remedies granted herein, under applicable law, or which
Payee may otherwise have against Company or otherwise at law or equity.
6. Assignment, The rights and Obligations of the Company and the Payee of this
Note shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties. The Company may not endorse,
negotiate, transfer or assign (collectively, "transfer") this Note or the
Company's rights hereunder without the prior written consent of the Payee. Any
notice, request or other communication required or permitted hereunder shall be
in writing and shall be deemed to have been duly given if personally delivered
or if telegraphed or mailed by registered or certified mail, postage prepaid,
at the respective addresses of the parties as set forth at the outset hereof.
Any party hereto may by notice so given change its address for future notice
hereunder. Notice shall conclusively be deemed to have been given when
personally delivered or when deposited in the mail or telegraphed in the manner
set forth above and shall be deemed to have been received when delivered.
12
7. No Shareholder Rights. Nothing contained in this Note shall be construed
as conferring upon the Payee or any other person the right to vote or to
consent or to receive notice as a stockholder in respect of meetings of
stockholders for the election of the Company or any other matters or any rights
whatsoever as a stockholder of the Company; and no dividends or other
distributions shall be payable or accrued in respect of this Note or the
interest represented hereby or the Conversion Shares obtainable hereunder
until, and only to the extent that, this Note shall have been converted into
Common Stock (and then only to the extent of the conversion of this Note).
8. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to conflict
of law principles. Any disputes with respect to the interpretation of this Note
or the rights and obligations of the parties shall be exclusively brought in
the Unites States District Court for the Southern District of New York or if
such court lacks subject matter jurisdiction in the Supreme Court of the State
of New York, County of New York Each of the Company and the Payee waives the
right to contest the jurisdiction or venue of either of such courts or to claim
its is an inconvenient forum.
9. WAIVER OF JURY TRIAL. THE COMPANY, BY EXECUTION HEREOF, AND THE PAYEE, BY
ACCEPTANCE HEREOF, MUTUALLY AND WILLINGLY WAIVE THE RIGHT TO A TRIAL BY JURY OF
ANY AND ALL CLAIMS MADE BETWEEN THEM WHETHER NOW EXISTING OR ARISING IN THE
FUTURE, INCLUDING WITHOUT LIMIT ATION, ANY AND ALL CLAIMS, DEFENSES,
COUNTERCLAIMS, CROSS CLAIMS, THIRD PARTY CLAIMS AND INTERVENER'S CLAIMS WHETHER
ARISING FROM OR RELATED TO THE NEGOTIATION, EXECUTION AND PERFORMANCE OF THE
TRANSACTIONS TO WHICH THIS NOTE RELATES.
THE REMAINDER OF THIS PAGE LEFT INTENTIONALL BLANK
13
IN WITNESS WHEREOF, the Company has caused this Note to be executed on the day
and year first above written.
WORLD INFORMA TIONTECHNOLOGY INC.
By:
Name: Hsueh-Chu Lin
Its: President
By: /s/ Steven Fellows
------------------
Name: Steven Fellows
Its: Secretary
14
EXHIBIT A TO THE NOTE
INSTRUCTIONS TO CONVERT
The undersigned hereby surrenders the attached Convertible Promissory Note
dated ______________ and due on (the "Note") of World Information Technology,
Inc, a Nevada corporation ("Company"), in the principal amount of $____________
for conversion into shares of Company's restricted Common Stock ("Common
Stock") in accordance with Section 3 of the Note relating to voluntary
conversion, as noted below. Such Note was issued pursuant to that certain
Convertible Note Agreement dated ____________, 2003 with the Company {the "Note
Agreement"). The undersigned represents that he/she/it is the beneficial owner
and Payee of record of the Note, and that no other person has any lien,
security interest or interest of any kind in the Note and that he/she/it has
full and legal right to surrender the Note for conversion. The undersigned
further reaffirm as to the shares of Common Stock to be issued to the
undersigned pursuant to these instructions the representations and warranties
made by the undersigned set forth in Note the Agreement.
( ) The Undersigned elects to convert the full outstanding principal and
accrued interest on the Note: $____________, which equals a conversion of
$__________.
( ) The Undersigned elects to convert the Note in part equal to a principal
amount of
$___________and accrued interest of $______________, which equals a conversion
of $_____________. An identical Note shall be reissued for the amount of
remaining principal plus accrued interest.
Dated this ________day of ___________, ________.
In the presence of:
- ----------------------------------
Witness
---------------------------------
Signature of Payee
15
EXHIBIT C
INDEMNITY AGREEMENT
This INDEMNITY AGREEMENT made and entered into as of this [ ] day of July
2003 by and between World Information Technology Inc., a Nevada corporation
(the "Company") and Gary D. Morgan (the "Indemnified Party");
WHEREAS, highly competent persons are becoming more reluctant to serve or to
continue serving corporations as directors, officers, employees, agents or in
other capacities unless they are provided with adequate protection through
insurance and indemnification against inordinate risks of claims and actions
against them arising out of their service to and activities on behalf of such
corporations; and
WHEREAS, the Board of Directors of the Company has determined that the
inability to attract and retain such persons is detrimental to the best
interests of the Company's stockholders and that the Company should act to
assure such persons that there will be increased certainty of such protection
in the future; and
WHEREAS, it is reasonable, prudent and necessary for the Company contractually
to obligate itself to indemnify such persons to the fullest extent permitted by
applicable law so that they will serve or continue to serve the Company free
from undue concern that they will not be so indemnified; and
WHEREAS, the Indemnified Party is willing to serve, continue to serve and take
on additional service for or on behalf of the Company on the condition that the
Indemnified Party be so indemnified.
NOW, THEREFORE, in consideration of the premises and the covenants contained
herein, the Company and the Indemnified Party do hereby covenant and agree as
follows:
SECTION 1. Indemnification. The Company shall indemnify the Indemnified Party
to the fullest extent permitted by the laws of the State of Nevada in effect on
the date hereof or as such laws may from time to time be amended. Without
diminishing the scope of the indemnification provided by this Section 1, the
rights of indemnification of the Indemnified Party provided hereunder shall
include but shall not be limited to those rights hereinafter set forth, except
that no indemnification shall be paid to the Indemnified Party:
(a) on account of any suit in which judgment is rendered against the
Indemnified Party for an accounting of profits made from the purchase or sale
by the Indemnified Party of securities of the Company pursuant to the provisions
of Section l6(b) of the
1
Securities and Exchange Act of 1934, as amended from time to time, or similar
provisions of any federal, state or local statutory law;
(b) on account of the Indemnified Party's conduct which is finally adjudged to
have been knowingly fraudulent or deliberately dishonest, or to constitute
willful misconduct;
(c) to the extent expressly prohibited by applicable law;
(d) for which payment is actually made to the Indemnified party under a valid
and collectible insurance policy or under a valid and enforceable indemnity
clause, bylaw or agreement, except in respect of any excess beyond payment
under such insurance, clause, bylaw or agreement; or
(e) if a final decision by a court having jurisdiction in the matter shall
determine that such indemnification is not lawful ( and in this respect, both
the Company and the Indemnified Party have been advised that the U.S.
Securities and Exchange Commission believes that indemnification for
liabilities arising under the federal securities laws is against public policy
and is, therefore, unenforceable and that claims for indemnification should be
submitted to the appropriate court for adjudication).
The Indemnified Party shall be entitled to the indemnification rights provided
in this Section if the Indemnified Party is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative of investigative in nature, other than
an action by or in the right of the Company, by reason of the fact that the
Indemnified Party is or was a director, officer, employee, agent or fiduciary
of the Company, or is or was serving at the request of the Company as a
director, officer, employee, agent or fiduciary of any other entity or
enterprise, including, but not limited to, another corporation, partnership,
joint venture or trust or service with respect to employee benefit plans, or
by reason of anything done or not done by the Indemnified Party in any such
capacity . Pursuant to this Section, the Indemnified Party shall be indemnified
against all expenses, (including attorney's fees and excise taxes or penalties
under the Employee Retirement Security Act of 1974, as amended) costs,
judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by the Indemnified Party in connection with such action,
suit or proceeding (including, but not limited to, the investigation, defense
or appeal thereof), if the Indemnified Party acted in good faith and in a
manner the Indemnified Party reasonably believed to be in or not opposed to
the best interests of the Company, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe the Indemnified Party's
conduct was unlawful.
SECTION 3. Actions by or in the Right of the Company. The Indemnified Party
shall be entitled to the indemnification rights provided in this Section if the
Indemnified Party is a person who was or is a party or is threatened to be made
a party to any threatened, pending or
2
completed action, suit or proceeding brought by or in the right of the Company
to procure a judgment in its favor by reason of the fact that the Indemnified
Party is or was a director, officer, employee, agent or fiduciary of the
Company, or is or was serving at the request of the Company as a director,
officer, employee, agent or fiduciary of another entity or enterprise,
including, but not limited to, another corporation, partnership, joint venture
or trust or service with respect to employee benefit plans, or by reason of
anything done or not done by the Indemnified Party in any such capacity.
Pursuant to this Section, the Indemnified Party shall be indemnified against
all expenses (including attorney's fees and excise taxes or penalties under the
Employee Retirement Security Act of 1974, as amended), costs and amounts paid
in settlement actually and reasonably incurred by the Indemnified Party in
connection with such action, suit or proceeding (including, but not limited to,
the investigation, defense or appeal thereof) if the Indemnified Party acted in
good faith and in a manner the Indemnified Party reasonably believed to be in
or not opposed to the best interests of the Company; provided, however, that no
such indemnification shall be made in respect of any claim, issue, or matter as
to which applicable law expressly prohibits such indemnification by reason of
any adjudication of liability of the Indemnified Party to the Company, unless
and only to the extent that the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, the Indemnified Party is
fairly and reasonably entitled to indemnity for such expenses, costs and
amounts paid in settlement which such court shall deem proper.
SECTION 4. Indemnification for Costs. Charges and Expenses of Successful
Party. Notwithstanding the other provisions of this Agreement, to the extent
that the Indemnified Party has served as a witness on behalf of the Company or
has been successful, on the merits or otherwise, in defense of any action, suit
or proceeding referred to in Sections 2 and 3 hereof, or in defense of any
claim, issue or matter therein, including, without limitation, the dismissal of
any action without prejudice, the Indemnified Party shall be indemnified
against all costs, charges and expenses (including attorneys' fees) actually
and reasonably incurred by the Indemnified Party in connection therewith.
SECTION 5. Partial Indemnification. If the Indemnified Party is entitled under
any provision of this Agreement to indemnification by the Company for some or a
portion of the expenses (including attorneys' fees), costs, judgments, fines
and amounts paid in settlement actually and reasonably incurred by the
Indemnified Party in connection with the investigation, defense, appeal or
settlement of such suit, action, investigation or proceeding described in
Section 2 or 3 hereof, but not, however, for all of the total amount thereof,
the Company shall nevertheless indemnify the Indemnified Party for the portion
of such expenses (including attorneys' fees), costs, judgments, penalties,
fines and amounts paid in settlement actually and reasonably incurred by the
Indemnified Party to which the Indemnified Party is entitled.
SECTION 6. Presumptions and Effect of Certain Proceedings. The Secretary of the
Company shall, promptly upon receipt of the Indemnified Party's request for
indemnification, advise in writing the Board of Directors that the Indemnified
Party has made such request for indemnification. Upon making such request for
indemnification, the Indemnified Party shall be
3
presumed to be entitled to indemnification hereunder and the Company shall have
the burden of proof in the making of any determination contrary to such
presumption. If the Board of Directors shall have failed to make the requested
indemnification within 20 days after receipt by the Company of such request,
the requisite determination of entitlement to indemnification shall be deemed
to have been made and the Indemnified Party shall be absolutely entitled to
such indemnification, absent actual and material fraud in the request for
indemnification. The termination of any action, suit, investigation or
proceeding described in Section 2 or 3 hereof by judgment, order, settlement or
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself: (a) create a presumption that the Indemnified party did not act in good
faith and in a manner which the Indemnified Party reasonably believed to be in
or not opposed to the best Interests of the Company, and, with respect to any
criminal action or proceeding, that the Indemnified Party had reasonable cause
to believe that the Indemnified Party's conduct was unlawful; or (b) otherwise
adversely affect the rights of the Indemnified Party to indemnification except
as may be provided herein.
SECTION 7. Advancement of Expenses and Costs. All reasonable expenses and costs
incurred by the Indemnified Party (including attorneys' fees, retainers and
advances of disbursements required of the Indemnified Party) shall be paid by
the Company in advance of the final disposition of such action, suit or
proceeding at the request of the Indemnified Party within twenty days after the
receipt by the Company of a statement or statements from the Indemnified Party
requesting such advance or advances from time to time. The Indemnified Party's
entitlement to such expenses shall include those incurred in connection with
any proceeding by the Indemnified Party seeking an adjudication or award in
arbitration pursuant to this Agreement. Such statement or statements shall
reasonably evidence the expenses and costs incurred by the Indemnified Party in
connection therewith and shall include or be accompanied by an undertaking by
or on behalf of the Indemnified Party to repay such amount if it is ultimately
determined that the Indemnified Party is not entitled to be indemnified against
such expenses and costs by the Company as provided by this Agreement
Indemnify or to Advance Expenses. In the event that a determination is made
that the Indemnified Party is not entitled to indemnification hereunder or if
payment has not been timely made following a determination of entitlement to
indemnification pursuant to Section 6, or if expenses are not advanced pursuant
to Section 7, the Indemnified Party shall be entitled to a final adjudication
in any appropriate court of the State of Nevada or any other court of competent
jurisdiction of the Indemnified Party's entitlement to such indemnification or
advance. Alternatively, the Indemnified Party at the Indemnified Party's option
may seek an award in arbitration to be conducted by a single arbitrator in New
York City, New York pursuant to the rules of the American Arbitration
Association, such award to be made within sixty days following the filing of
the demand for arbitration. The Company shall not oppose the Indemnified
Party's right to seek any such adjudication or award in arbitration or any
other claim. Such judicial proceeding or arbitration shall be made de novo and
the Indemnified Party shall not be prejudiced by reason of a determination (if
so made) that the Indemnified Party is not entitled to indemnification. If a
determination is made or deemed to have been made
4
pursuant to the terms of Section 6 hereof that the Indemnified Party is
entitled to indemnification, the Company shall be bound by such detem1ination
and is precluded from asserting that such determination has not been made or
that the procedure by which such determination was made is not valid, binding
and enforceable. The Company further agrees to stipulate in any such court or
before any such arbitrator that the Company is bound by all the provisions of
this Agreement and is precluded from making any assertions to the contrary. If
the court or arbitrator shall determine that the Indemnified Party is entitled
to any indemnification hereunder, the Company shall pay all reasonable expenses
(including attorneys' fees) and costs actually incurred by the Indemnified
Party in connection with such adjudication or award in arbitration (including,
but not limited to, any appellant proceedings ).
SECTION 9. Notification and Defense of Claim. Promptly after receipt by the
Indemnified Party of notice of the commencement of any action, suit or
proceeding, the Indemnified Party will, if a claim in respect thereof is to be
made against the Company under this Agreement, notify the Company in writing of
the commencement thereof; but the omission to so notify the Company will not
relieve it from any liability that it may have to the Indemnified
Party otherwise than under this Agreement. Notwithstanding any other provision
of this Agreement, with respect to any such action, suit or proceeding as to
which the Indemnified Party notifies the Company of the commencement thereof:
(a) The Company will be entitled to participate therein at its own
expense; and
(b) except as otherwise provided in this Section 9(b), to the extent that it
may wish, the Company, jointly with any other indemnifying party similarly
notified, shall be entitled to assume the defense thereof, with counsel
satisfactory to the Indemnified Party. After notice from the Company to the
Indemnified Party of its election to so assume the defense thereof, the Company
shall not be liable to the Indemnified Party under this Agreement for any legal
or other expenses subsequently incurred by the Indemnified Party in connection
with the defense thereof other than reasonable costs of investigation or as
otherwise provided below; provided the Company assumes the defense with
diligence and continuity. The Indemnified party shall have the right to employ
the Indemnified Party's own counsel in such action, suit or proceeding, but the
fees and expense of such counsel incurred after notice from the Company of its
assumption of the defense thereof shall be at the expense of the Indemnified
Party unless (i) the employment of counsel by the Indemnified Party has been
authorized by the Company, (ii) the Indemnified Party shall have reasonably
concluded that there may be a conflict of interest between the Company and the
Indemnified Party in the conduct of the defense of such action or (iii) the
Company shall not in fact have employed counsel to assume the defense of the
action, in each of which cases the fees and expenses of counsel shall be at the
expense of the Company. The Company shall not be entitled to assume the defense
of any action, suit or proceeding brought by or on behalf of the Company or as
to which the Indemnified Party shall have made the conclusion provided for in
(ii) above.
5
(c) The Company shall not be liable to indemnify the Indemnified party under
this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. The Company shall not settle any action
or claim in any manner that would impose any monetary obligation, penalty or
limitation on the Indemnified Party without the Indemnified Party's written
consent. Neither the Company nor the Indemnified Party will unreasonably
withhold their consent to any proposed settlement.
SECTION 10. Other Rights to Indemnification. The indemnification and
advancement of expenses (including attorneys' fees) and costs provided by this
Agreement shall not be deemed exclusive of any other rights to which the
Indemnified Party may now or in the future be entitled under any provision of
the bylaws or Certificate of Incorporation of the Company ~ any agreement, any
vote of stockholders or Disinterested Directors, any provision of law or
otherwise. For purposes of this Section 10 "Disinterested Director" shall
mean a director of the Company who is not or was not a party to the action,
suit, investigation or proceeding in respect of which indemnification is
being sought by the Indemnified Party.
SECTION 11. Attorneys' Fees and Other Expenses to Enforce Agreement. In the
event that the Indemnified Party is subject to or intervenes in any proceeding
in which the validity or enforceability of this Agreement is at issue or seeks
an adjudication or award in arbitration to enforce the Indemnified Party's
rights under, or to recover damages for breach of, this Agreement, the
Indemnified Party, if the Indemnified Party prevails in whole or in part in
such action, shall be entitled to recover from the Company and shall be
indemnified by the Company against any actual expenses for attorneys' fees and
disbursements reasonably incurred by the Indemnified Party.
SECTIQN 12. Duration of Agreement. This Agreement shall continue until and
terminate upon the later of: (a) ten years after the Indemnified Party has
ceased to occupy any of the positions or have any relationships described in
Sections 2 and 3 of this Agreement; and (b) the final termination of all
pending or threatened actions, suits, proceedings or investigations to which
the Indemnified Party may be subject by reason of the fact that the Indemnified
Party is or was a director, officer, employee, agent or fiduciary of the
Company or is or was serving at the request of the Company as a director,
officer, employee, agent or fiduciary of any other entity or enterprise,
including, but not limited to, another corporation, partnership, joint venture
or trustor by reason of anything done or not done by the Indemnified Party in
any such capacity. The indemnification provided under this Agreement shall
continue as to the Indemnified Party even though the Indemnified Party may have
ceased to be a director, officer, employee, agent or fiduciary of the Company.
This Agreement shall be binding upon the Company and its successors and assigns
and shall inure to the benefit of the Indemnified Party and the Indemnified
Party's spouse, assigns, heirs, devises, executors, administrators or other
legal representatives. Nothing in this Agreement shall confer upon the
Indemnified Party the right to continue in the employment of the Company or
affect the right of the Company to tem1inate the
6
Indemnified Party's employment at any time in the sole discretion of the
Company, with or without cause.
SECTION 13. Severability. If any provision or provisions of this Agreement
shall be held invalid, illegal or unenforceable for any reason whatsoever, (a)
the validity, legality and enforceability of the remaining provisions of this
Agreement (including, without limitation, all portions of any paragraphs of
this Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby, and (b) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, all
portions of any paragraph of this Agreement containing any such provision held
to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifest by the provision held invalid, illegal or unenforceable.
SECTION 14. Counterparts; This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute one and the same Agreement. Only one
such counterpart signed by the party against whom enforceability is sought
needs to be produced to evidence the existence of this Agreement.
SECTION 15. Headings. The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of
this Agreement or to affect the construction thereof.
SECTION 16. Modification and Waiver. No supplement, modification or amendment
of this Agreement shall be binding unless executed in writing by both parties
hereto. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provisions hereof (whether or not
similar) nor shall such waiver constitute a continuing waiver.
SECTION 17. Notices. All notices, requests, demands or other communications
hereunder, shall be in writing and shall be deemed to have been duly given if
(i) delivered by hand, courier, or personally, on the date of delivery, or (ii)
if mailed by certified or registered mail with postage prepaid, on the third
business day after the date on which it is so mailed:
(a) If to the Indemnified Party, to:
Gary D. Morgan
6535-F Parkview Drive
Boca Raton, FL 33433
Tel No: (561) 395-0929
Fax No: (561) 394-8475
7
with a copy to:
Proskauer Rose LLP
Address: 1585 Broadway
New York, New York 10036
Attention: David W. Sloan, Esq.
Tel No: (212) 969-3000
Fax No: (212) 969-2900
(b) If to the Company, to:
World Information Technology
2300 West Sahara Avenue, Suite 500-C
Las Vegas, NV 89102
Tel No: (702)947-0105
Fax No: (702) 947-0107
with a copy to:
Koley Jessen P .C.,
A Limited Liability Organization
One Pacific Place, Suite 800
1125 South 103rd Street
Omaha, NE 68124
Attention: Matthew D. Masser, Esq.
Fax No: (402) 390-9005
or to such other address as may be furnished to the Indemnified Party by the
Company or to the Company by the Indemnified Party, as the case may be.
SECTION 18. Governing Law. The parties hereto agree that this Agreement shall
be governed by, construed and enforced in accordance with, the laws of the
State of Nevada.
8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.
WORLD INFORMATION TECHNOLOY, INC.
By:
---------------------
Name: Hsueh-Chu Lin
Title: President
By:
---------------------
Name: Steven D. Fellows
Title: Secretary
- ------------------------
GARY D. MORGAN
9
ACTION IN WRITING BY SHAREHOLDERS OF
WORLD INFORMATION TECHNOLOGY, INC.
The undersigned, being shareholders of World Infom1ation Technology, Inc., a
Nevada Corporation (the "Corporation"), do hereby take following actions by
this instrument in writing in accordance with the laws of the State of Nevada.
A. The Employment Agreement, dated as ofJu1y 24, 2003, between this Corporation
and Gary D. Morgan and related exhibits, including the Convertible Note
Agreement, Note and Indemnification Agreement (collectively the " Agreement")
in the forms attached hereto (and ordered filed in the minute book of the
Corporation) are approved.
B. Any officer of the Corporation is authorized and directed to execute each
of the documents referred to in A above and shall take such other action and
execute such other instruments as maybe deemed necessary or advisable to
consummate the transactions contemplated thereby.
C. Ratifies the appointment of Gary D, Morgan as Chief Executive Officer and
Chairman of the Corporation and as a member of the Board of Directors; which
action has been concurrently approved by the sole Director of the Corporation.
D. Recommends, that when appointed, that the Independent Directors of the
Corporation its Compensation Committee approve the Agreement.
Executed this 24th day of July, 2003.
Signatures of Shareholders:
- --------------------------------
Forever King Technology Co., LTD
(782,007 Shares)
- --------------------------------
Leading Edge Development S.A,
(425,000 Shares)
- --------------------------------
Modern Worldwide Internet
(914,934 Shares)
- ---------------------------------
JYN Seng International Technology
(5,640,000 Shares)
- ---------------------------------
Mei Lin Shiu
(2,000,000)
- ---------------------------------
Top of China Internet Information
(203,899 Shares)
- ---------------------------------
Chan Ching Tsun
(255,000 Shares)