-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Va3aZMnGy8YHGMdAQoBXWkWNGO/6EJbYqIvy87AZ8ic5bhVaZT7LFrmgMcyXSJ/f Y1lJ9cDedD1U4uGLX5CEOw== 0000938492-99-000407.txt : 19990909 0000938492-99-000407.hdr.sgml : 19990909 ACCESSION NUMBER: 0000938492-99-000407 CONFORMED SUBMISSION TYPE: 10SB12G PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19990803 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CYBERMARK INTERNATIONAL CORP CENTRAL INDEX KEY: 0001092299 STANDARD INDUSTRIAL CLASSIFICATION: FILING VALUES: FORM TYPE: 10SB12G SEC ACT: SEC FILE NUMBER: 000-26919 FILM NUMBER: 99676596 BUSINESS ADDRESS: STREET 1: 95 WEST BEAVER CREAK STREET 2: RICHMOND HILL CITY: ONTARIO CANADA STATE: A6 MAIL ADDRESS: STREET 1: 95 WEST BEAVER CREAK STREET 2: RICHMOND HILL CITY: ONTARIO CANADA STATE: A6 10-12G 1 REGISTRATION OF SECURITIES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-SB GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS UNDER SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 Cyber Mark International Corp. (Exact Name of Small Business Issuer as Specified in Its Charter) Delaware N/A - - ----------------------- -------------------------------------- (State of Incorporation) (Issuer's I.R.S. Employer I.D. Number) 95 West Beaver Creek, Units 8 and 9 Richmond Hill, Ontario, Canada L4B 1H4 - - ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (905) 707-3441 ---------------------------------------------- (Issuer's Telephone Number, Including Area Code) Securities to be registered pursuant to Section 12(b) of the Act: None Securities to be registered pursuant to Section 12(g) of the Act: Common Stock, $.0001 par value per share ITEM 1. DESCRIPTION OF BUSINESS Introduction The Company, through its wholly owned subsidiary, The CM300 Corporation, manufacturers virtual reality equipment and develops games for use with its equipment. The two main products currently manufactured and sold by the Company are the Cobra Immersive Virtual Reality System ("Cobra System") which includes up to six different games and the Virtual Speedway 300 ("Virtual Speedway"). Uniquely the Company designs and assembles the hardware, creates the games for use with its hardware, writes the software for the operation of its hardware and games and offers remote technical support. Virtual reality is an emerging technology which attempts to fully immerse the user in an interactive computer generated environment. The participant in a virtual reality experience interacts with the system through a series of sophisticated sensors which are both input and output devices. Input devices include data gloves which track hand positions and configurations and body suits which sense the entire orientation of the virtual reality participant. Output devices include complex head mounted displays and surround-sound audio systems. The result is an illusion to the participant that he is surrounded by three-dimensional computer generated objects. From its initial beginnings, merely thirty years ago, virtual reality is evolving into many applications including those in the fields of industry, architecture, medicine, science and entertainment. The Company believes that virtual reality technology is developing in a manner similar to the personal computer where it was initially thought there were limited applications and purposeful for only limited tasks. Although entertainment promises the most potential, the Company believes that many other uses will be developed as the technology is refined and more readily available at commercially competitive prices. At this time the market for virtual reality products is limited. The recent bankruptcy of a major producer of a virtual reality entertainment system has caused disruption in the market, and the acceptance of virtual reality in the commercial entertainment setting. Although the Company believes there is commercial and entertainment viability for virtual reality, there is uncertainty about the prospects of this industry. Products and Services The principal products of the Company are the Cobra System and the related six games and the Virtual Speedway. Cobra System The Cobra System is an immersive virtual reality system generated by computer. The Company has developed a second generation system that it is currently marketing. The Cobra System pod incorporates a cross platform capability which allows it to use PC based games adapted from systems such as Nintendo 64, Sony and Sega. The pod uses 18 1/2 square feet of space and weighs about 150 pounds. It is constructed from modular parts making it portable and easily repairable. The pod is designed with built in instructional videos and token, card, coin or bill verification to reduce the need for dedicated operational personnel for each or a limited number of pods as is the case with many competing products. The Company has been selling the Cobra System and its 2 earlier versions since 1996, and the current average selling price of a Cobra System is approximately $10,000. The six games currently available for use with the Cobra System are: Terminal Velocity; Descent II; Duke Nukem; Quake; Rise of the Triads; and Blood. Because maintaining and expanding the variety of games available for use in this type of entertainment equipment is essential to their continued appeal, the Company devotes substantial resources to developing various game applications. It is anticipated that it will develop additional games for use on the Cobra System as demand and sales increase. Virtual Speedway The Virtual Speedway is a real time virtual reality (as opposed to computer generated) system based on miniature models and motion video. To achieve a true sense of motion and involvement, a virtual race, the Virtual Speedway uses a miniature race track measuring 40 by 20 feet. Up to six race cars, built to scale, are equipped with miniature television cameras and transmitters to replicate the kind of television coverage in use at race tracks. Next to the track, there are six control consoles equipped with a steering wheel, accelerator and reverse pedals and a head mounted device with reception capability and optics. The player's view, from the car mounted camera, "literally" places the participant inside the car as they race around the track. The Virtual Speedway is fully developed and was commercially available for the first time in November 1997. The current average selling price of a Virtual Speedway system is approximately $90,000. The Company is in the process of developing a remote system to be used with the Virtual Speedway. The planned remote system, as yet untested in real-time situations, will enable players to race against each other from remote, off-site locations. the tracks, cars and computer will be situated in one central location. Up to 24 control consoles (play stations) per track will be dispersed throughout specific geographic territories in bars, entertainment centers, theaters and the like. any remote station can participate in any race. Markets The principal markets for the Cobra System are amusement arcades and family entertainment centers of which there are approximately 6,500 amusement arcades and 2,500 family entertainment centers in Canada and the United States. The principal markets for the Virtual Speedway will be amusement parks, theme parks, shopping malls, bars and major exhibitions as well as amusement arcades and family entertainment centers. The Company generally sells more than one unit for use at each of the parks and centers. The Company has installed Cobra Systems in Canada, the United States, Denmark, Hungary, Ukraine, Lebanon, Brazil, Peoples Republic of China, Hong Kong, Malaysia and Guam. To date the Company has installed one Virtual Speedway system in the United States but anticipates that its market will be as internationally widespread as the Cobra System. In the recent past, the Company has experienced slow acceptance of its virtual reality products. In 1997-1999, sales were impacted by the bankruptcy of a major producer of a virtual reality entertainment system which raised questions in the market as to the viability of virtual reality in commercial and entertainment settings. The Company has responded to this by developing a second generation of the Cobra System and improving the related programming. Although the Company believes there are market opportunities for virtual reality products 3 and its Cobra System and Virtual Speedway, there can be no assurance that the Company will achieve market acceptance of its products, especially in light of the recent market disruptions. The Company has shown its products at trade shows and similar venues. The Company derives exposure and sales, including beta testing sales, from participation in these venues. The Company seeks to create brand recognition for its group of products through advertising in appropriate trade publications and participating in trade show exhibitions. Marketing is oriented towards the entertainment industry primarily using in-house personnel. The Company researches potential markets to establish whether basic criteria are met. As is the case with retail establishments, demographic data, site assessment and competitive review are essential to the success of the product. The Company products are installed using both lease and revenue sharing arrangements and sales to end users. Manufacturing The Company's products are manufactured from a large number of components, approximately 85% of which are commercially available parts and the remainder of which are designed and manufactured to the Company specifications by outside manufacturers. The Company's policy is to maintain more than one source for each of its major components, to the extent possible, although certain suppliers are currently the sole source of one or more items. No assurance can be given that the necessary components will be available from the current sources. The Company employs its own programmers to maintain quality control. From time to time, the Company may outsource some programming. In the past, some outsourcing of programming has not resulted in quality levels needed for its products; thus, the Company does not anticipate outsourcing except in special circumstances. The Company offers on-line diagnostic capability for servicing world-wide. The use of modular construction and an open architecture of non-proprietary parts make repairs easy and quick. The Company also believes that its products are better constructed than those of its competitors resulting in longer useful lives and less repair problems. Research and Development The Company expensed $229,066 on research and development activities in 1998 and no amount in 1997. These expenses were for the purpose of developing the second generation Cobra System. The Company has budgeted to spend approximately $200,000 in 1999, but this amount will depend on sales improving and obtaining financing, among other things. To the extent that revenues are not sufficient and outside financing is not available, research and development expenses will be reduced or curtailed, which will significantly affect product enhancement and development. This may also have a subsequent adverse impact on product sales and revenues. Competition The Company's products compete directly with video games and similar amusement arcade and park entertainments. Entities that the Company competes with include Sega, Midway, Nintendo and Atari. These and other entities with competing products have substantially greater financial resources, manufacturing and marketing capabilities, research and development staff and production facilities than those of the Company. No assurance can be given that these 4 competitors and potential competitors will not develop technology and/or products that will be as or more advanced and affordable than those of the Company. The Company competes on the basis of price, its program of development of new games and the quality of its products which result in longer useful lives and higher profit margins. In addition, the Company products generally require no operational staff, resulting in substantial savings for the entertainment facility which is another competitive factor. Employees The Company currently has 11 employees, of which two are senior executives, three are programmers, two are supervisors and four are assembly technicians. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Forward Looking Statements When used in this Form 10 and in future filings by the Company with the Securities and Exchange Commission, the words or phrases "will likely result," "management expects," or "The Company expects," "will continue," "is anticipated," "estimated" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance on any such forward-looking statements, each of which speak only as of the date made. These statements are subject to risks and uncertainties, some of which are described below. Actual results may differ materially from historical earnings and those presently anticipated or projected. The Company has no obligation to publicly release the result of any revisions which may be made to any forward-looking statements to reflect anticipated events or circumstances occurring after the date of such statements. Selected Financial Data Because the Company continues to develop its products and is still in the earlier stages of its marketing, selected financial date would not be meaningful. Reference is made to the financial statements of the Company included elsewhere in the document. Sales The Company had sales of $434,107 for fiscal year 1997 and sales of $288,873 for fiscal year 1998. The decline in sales was the result of dislocation in the market for virtual reality entertainment products caused by the bankruptcy of a major producer. This bankruptcy caused some to question whether virtual reality will be a viable entertainment medium. As a result of the business failure, there was substantial discounting of its existing inventory which affected the Company's ability to sell and maintain the selling price of the Cobra System. To offset this unfavorable market condition, the Company began development of the second generation of the Cobra System. The marketing efforts of the Company were curtailed while research and development were undertaken for the new system. For the six months ended June 30, 1999 the Company had sales of $189,035 compared to sales of $123,183 for the corresponding period in fiscal year 1998. The increase in sales in 1999 is the result of being able to offer the second generation of the Cobra System that had been developed during 1998 5 and early 1999. The Company believes that aggregate sales should continue to increase in the near term as the second generation Cobra System is marketed and as there is completion of certain software for its products, expected to occur in August 1999. Of course, because of the need to achieve market acceptance and the possibilities of delays in achieving development targets, there can be no assurance that sales will continue to improve and the Company will become profitable in the near term. Cost of Sales The cost of sales for fiscal year 1997 was $138,395 and for fiscal year 1998 was $170,381. The cost of sales for the six months ended June 30, 1999 was $68,796 compared to a cost of sales for the corresponding period in the prior fiscal year of $17,055. Expenses The expenses of the Company for fiscal year 1997 were $364,015 and for fiscal year 1998 were $673,448. The principal increase in expenses is the increase in research and development for new products to be offered by the Company and for improvements to existing products. The increase in expenses also resulted from increased wages and benefits due to additional employees, professional fees, interest expense, rent and office expense, and provision for bad debts. There were some savings in certain categories of expenses, but these were insufficient to off set the increase in other expenses. The expenses related to administration and general expenses increased because of the Company's move to new premises. For the six months ended June 30, 1999, expenses were $293,476 compared to $171,279 for the corresponding period in the prior fiscal year. The reasons for the increase were generally the same as for the change from 1997 to 1998. In fiscal year 1998 the Company expensed $229,066 for research and development. The Company had no research and developmental expenses in fiscal year 1997. For the six month period ended June 30, 1999 the Company had $27,768 in research and development expenses compared to no research and development expenses for the corresponding period in the prior fiscal year. For the six months ended June 30, 1999 they were related to the continued development and testing of the second generation of the Cobra System. Losses The Company had a loss of $45,107 for fiscal year 1997 and $524,793 for fiscal year 1998. The principal reasons for the significant increase in losses was the reduced sales and other income, increased general and administrative expenses and the expenses of research and development. The net loss per share increased for the same periods from $.01 to $.06, however, there were additional shares outstanding for the later period. The Company had a loss of $117,437 for the six months ended June 30, 1999 compared to $139,113 for the corresponding period for the prior year. The principal reason for the decrease in the losses of the Company is the increase in sales of the second generation of the Cobra Systems. Liquidity and Capital Requirements The working capital of the Company at December 31, 1998 was $266,915 and $197,479 at June 30, 1999. The Company had cash and cash equivalent assets of $ 106,865 at December 31, 1998 and nil at June 30, 1999. Since June 30, 1999, 6 the Company has received seasonal summer revenues from Cobra Systems at an amusement part in New Jersey and made additional sales of the Cobra System. Both of these have been providing cash to the Company since June 30, 1999. The working capital requirements of the Company has been funded by the sale of securities from time to time, borrowings (including bank overdrafts) and revenues from sales. During 1998 the Company sold an aggregate of $720,977 worth of common stock for cash and conversion of debt of the Company. The proceeds of these sales were used to fund losses and for developmental activities. At December 31, 1998 the Company had aggregated debt and loans from shareholders of $258,605. The interest expense of the outstanding debt during fiscal year 1998 was $42,580. The aggregate debt and loans from shareholders at June 30, 1999 was $224,881 and interest expense for the six months then ended was $15,769. Of the outstanding debt, $131,483 at December 31, 1999 and $119,511 at June 30, 1999 was a business development loan from The Business Development Bank of Canada. This loan bears interest at the rate of 5% above the floating base interest rate charged by the bank. The loan is repayable at the rate of $2,739 per month and matures June 2002. The Company must also pay a royalty to the bank of .1942% per annum, until June 2002 which aggregated $4,190 in fiscal year 1998 and $2,775 for the six months ended June 30, 1999. This loan is secured by a pledge of all the assets of CM300 and shareholder guarantees. The Company has a term loan with the Royal Bank of Canada. The outstanding principal amount at December 31, 1998 was $59,785 and at June 30, 1999 was $43,285. The Company pays interest at 3% over the bank's prime rate, and the loan matures in May 2000. This loan is secured by a general pledge of the assets of CM300 and shareholder guarantees. The Company is negotiating interim and long term financing which is anticipated to be through private placements of debt securities and warrants to purchase common stock. The Company believes the private placements will be with individual investors who are "accredited investors." The terms of these arrangements are still being negotiated and are contingent on many factors, including determination of the final terms, due diligence by the purchasers, regulatory compliance and obtaining the commitment of the investors. Funding is also dependent on the business and financial prospects of the Company. No assurance can be given that the Company will obtain any portion or all of these funds. The Company requires additional financing to continue to develop its business. Principally funds are required for product research and development, manufacturing and production, marketing activities and operational losses. If the Company does not increase its income or obtain funding, it will not be able to continue its business. Management cannot determine how long the Company will require to fund operational losses and its other activities with funds from the sale of securities and credit arrangements. Management believes the amount of funds required now and in the future will be substantial. Except as discussed above, the Company currently has no regular sources of financing, including bank or private lending sources, or equity capital sources. No assurance can be given that the Company will be able to develop sources of financing in the future when funds are needed or on acceptable terms. 7 Year 2000 Overview The Company has evaluated the potential impact of the situation commonly referred to as the "Year 2000 Issue". Y2K concerns the inability of information systems, primarily computer software programs, to properly recognize and process date sensitive information relating to the year 2000 and beyond. Many of the world's computer systems currently record years in a two-digit format. These computer systems will be unable to property interpret dates beyond the year 1999, which could lead to business disruptions in the U.S. and internationally. The potential costs and uncertainties associated with Y2K will depend on a number of factors, including software, hardware and the nature of the industry in which a company operates. Accounting Systems and Production Equipment Because the Company has begun operations during 1996 when the issues of Y2K were being recognized, management believes that the computer programs it purchases are Y2K compliant. Management has made an informal assessment of its computer programs and the products its purchases for use in its Cobra System and Virtual Speedway, and at this time, management believes that it does not have any assets with embedded computer chips or programs that will be affected by the Y2K issues. Generally, many of the programs and products used by the Company do not rely on dating elements, thus, management does not believe that its products will be affected by Y2K issues. Other Entity Compliance The Company does not engage in electronic data interchange with other entities on any significant basis. Therefore, management believes it does not have a significant Y2K exposure directly from other entities and their failure to be Y2K compliant. Tangently, however, the failure of other entities to be Y2K compliant may cause the Company issues, none of which are yet apparent to management. Contingency Planning Management does not have a contingency plan for its computer systems that may be found not to be Y2K compliant. Management does not have a contingency plan in the event a critical service, supplier or customer will not be Y2K compliant. Cost of Year 2000 Compliance The Company has not spent any amount on Y2K compliance. It does not expect to have to spend any material amount on Y2K compliance in the future. Item 3. DESCRIPTION OF PROPERTY Executive Offices The executive office is located at 95 West Beaver Creek Road, Units 8 & 9, Richmond Hill, Ontario, Canada L4B 1H4 and its telephone number is (905) 707-3441. The Company rents this space for its offices and manufacturing/assembly facilities. The Company lease expires in February 2000 8 and is committed to paying $27,276 per year. The Company believes that its current office and other facilities are adequate to meet its needs into the near future. ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth information as of July 1, 1999 based on information obtained from the persons named below. With respect to the beneficial ownership of shares of the common stock of the Company by (1) each person known to be the owner of more than 5% of the outstanding shares of common stock, (2) each director and (3) all executive officers and directors as a group. Number of Shares of Percent of common stock Ownership of Beneficially* common stock Name of Beneficial Owner Owned Outstanding - - --------------------------- ------------ ----------- Samuel Singal. . . . . . . . . . . . . . . 4,130,000(1) 67.7% Chancery Corporate Services. . . . . . . . 1,000,000(2) 16.4% Directors and officers as a group (3 persons). 4,650,000(3) 73.6% * Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock issuable upon the exercise of options or warrants currently exercisable, or exercisable or convertible within 60 days, are deemed outstanding for computing the percentage ownership of the person holding such options or warrants but are not deemed outstanding for computing the percentage ownership of any other person. (1) The address for Mr. Singal is care-of Cyber Mark International Corp. at 95 West Beaver Creek, Units 8 and 9, Richmond Hill, Ontario, Canada L4B 1H4. (2) The address for Chancery Corporate Services ("CCS") is Nassau, Bahamas. CCS is the corporate trustee with full voting and dispositive authority for the trusts which own Tinto Inc. and Dungavel Inc. Each of Tinto Inc. and Dungavel Inc. own 500,000 shares of Common Stock. (3) Includes 200,000 shares of common stock under currently exercisable options and excludes 200,000 shares of common stock under options which vest in the future. ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS The sole directors and officers of the Company is: 9 Name Age Position Samuel Singal 51 Chairman of the Board and Chief Operating Officer and sole director Joseph Byck 67 Treasurer Monika Runge 24 Secretary Mr. Samuel Singal founded the Company's principal subsidiary, CM300 in 1996 and the Company in 1998 as a holding company. Mr. Singal has been the Chairman and Chief Operating Officer of the Company since 1998 and the President of CM300 since 1996. From 1994 until 1996, Mr. Singal was employed at Cybermind Systems, where he held the position of President. Mr. Joseph Byck has been the Marketing Director of CM300, the Company's principal subsidiary, since 1996. Mr. Byck has been the Treasurer of the Company since July 1999. From 1994 to 1999, Mr. Byck was the president of Herbs International Corp., a company that manufacturers specialty herbal products related to the neutralizing effects of alcohol. Ms. Monika Runge has been employed by CM300 since February 1999. From February 1997 to date Ms. Runge has been a student for a degree in business administration at York University, Ontario and from September 1996 to February 1997 she was a student at Trinity Western University in British Columbia. From May 1994 to September 1996, Ms. Runge held various positions with Cybermind Canada Inc. Board Meetings and Committees During the fiscal year ended December 31, 1998, the board of directors met on three occasions and took written action on ten occasions. All the members of the board of directors attended the meetings. The written actions were by unanimous consent. The board of directors has established no committees. Directors serve for a term of one year after election or until their earlier resignation or their successor is elected or appointed and qualified. ITEM 6. EXECUTIVE COMPENSATION Executive Compensation The Company currently does not pay any salaries to Messrs. Singal or Byck. The Company pays a monthly salary of $1,280 to Ms. Runge. None of the executive officers is employed under a written contract of employment. Mr. Byck was granted an option to purchase an aggregate of 400,000 of Common Stock on August 5, 1998. This option vested as to 200,000 shares of Common Stock on December 31, 1998 and will vest as to 100,000 shares of Common Stock on each of December 31, 1999 and 2000. The vested portion of the option is exercisable at $.50 per share. The options that vest December 31, 1998 are exercisable at $1.00 per share, and the options that vest December 31, 2000 are exercisable at $1.25 per share. The exercise period is three years from vesting. 10 Remuneration of the Board of Directors A director who is an employee does not receive any compensation as a director. There is no plan in place for compensation of persons who are directors who are not employees of the Company. Keyman Life Insurance The Company does not own life insurance covering the death of any officer, director or key employee. 1998 Stock Option Plan The Company has a Performance Equity Plan which provides for the issuance of stock-based awards for up to 260,000 shares of Common Stock. The awards under this plan may be granted separately or together with other awards. The awards include incentive and non-incentive stock options, stock bonuses and cash payment awards. Incentive stock options may only be granted to persons who are employees of the Company. Other forms of awards may be granted to consultants, directors, employees and officers of the Company. The Company has not granted any options under this plan. Other Stock Options On August 25, 1998, the Company granted options to purchase an aggregate of 90,000 shares of Common Stock to five employees. Each of these options is exercisable at $1.00 per share until August 25, 2001. Each options is a non-incentive option. ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. ITEM 8. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED The authorized capital stock consists of 10,500,000 shares of capital stock of which 10,000,000 shares are common stock, $0.0001 par value and 500,000 shares are preferred stock, $0.001 par value. There are 6,104,300 shares of common stock issued and outstanding. Common Stock The holders of common stock are entitled to one vote per share on all matters submitted to a vote of the shareholders of the Company. In addition, such holders are entitled to receive ratably such dividends, if any, as may be declared from time to time by the board of directors out of funds legally available therefor. In the event of the dissolution, liquidation or winding-up, the holders of common stock are entitled to share ratably in all assets remaining after payment of all liabilities of the Company and subject to the prior distribution rights of any preferred stock that may be outstanding at that time. The holders of common stock do not have cumulative voting rights or preemptive or other rights to acquire or subscribe for additional, unissued or treasury shares, which means that the holders of more than 50% of such 11 outstanding shares, voting at an election of directors can elect all the directors on the board of directors if they so choose and, in such event, the holders of the remaining shares will not be able to elect any of the directors. All outstanding shares of common stock are, and when issued, the shares of common stock offered hereby, are fully paid and non-assessable. Preferred Stock The Company's Certificate of Incorporation authorizes the issuance of "blank check" preferred stock with such designations, rights and preferences as may be determined from time to time by the Board of Directors. Accordingly, the Board of Directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights which could adversely affect the voting power or other rights of the holders of the Company's common stock. In the event of issuance, the preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of the Company, which could have the effect of discouraging bids for the Company and, thereby, prevent stockholders from receiving the maximum value for their shares. The Company has no present intention to issue any shares of its preferred stock. However, there can be no assurance that preferred stock of the Company will not be issued at some time in the future. Stock Transfer Agent The stock transfer agent for the common stock is Continental Stock Transfer & Trust Company, 2 Broadway, New York, New York 10004, Telephone 212/509-4000. PART II ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND OTHER STOCKHOLDER MATTERS Market Information The common stock of the Company is not traded on any stock exchange, any NASDAQ Stock Market medium or the "pink sheets". Consequently, there is no public market for the common stock and no market price data to report. The Company intends to obtain inclusion on the OTC Bulletin Board in the future, but there can be no assurance that the common stock will be included in the trading medium. Even if inclusion in the OTC Bulletin Board is achieved, there is no assurance that the common stock will be actively traded. Therefore, there can be no assurance that there will be liquidity in the common stock. Holders As of July 1, 1999, there were 39 holders of record of the common stock. Dividend Policy The Company has never declared or paid cash dividends on its common stock and anticipates that all future earnings (for the near future) will be retained for working capital and business expansion. The payment of any future 12 dividends will be at the sole discretion of the board of directors and will depend upon, among other things, future earnings, capital requirements, the company financial condition and general business conditions. Therefore, there can be no assurance that any dividends on the common stock will be paid in the future. ITEM 2. LEGAL PROCEEDINGS None. ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Citrin Cooperman & Company, LLP, certified public accountants were engaged by the Company on December 1, 1998 as the independent accountants. Prior to this engagement, the Company did not engage any independent accountants to review its financial statements. The Company is unaware of any disagreements or other issues which are required to be disclosed by the rules and regulations applicable to this Form 10. ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES The Company, on June 16, 1998, in connection with its formation and reorganization as a holding company, issued 3,930,000 shares of common stock to its founder in exchange for the outstanding stock of CM300, an Ontario corporation, in which CM300 became a wholly owned subsidiary of the Company. This transaction was exempt from registration under Section 4(2) of the Securities Act of 1933, as amended ("Securities Act") The Company, on June 16, 1998, sold 320,000 shares of common stock to a then executive officer and director of the Company for $32.00, in a private offering exempt from registration under Section 4(2) of the Securities Act. The Company, on July 2, 1998, sold 1,330,000 shares of common stock to two investors in an offering pursuant to Rule 504 of Regulation D, under the Securities Act, at a price of $.375 per share. The Company, on August 5, 1998, sold 100,000 shares of common stock to a then executive officer of the Company for $10.00 in a private offering exempt from registration under Section 4(2) of the Securities Act. The Company, on August 16, 1998, exchanged 46,000 shares of common stock for cancellation of an outstanding debt of $23,000 to a then executive officer of the Company in a private offering exempt from registration under Section 4(2) of the Securities Act. The Company, on September 18, 1998, sold 186,000 shares of common stock to 27 investors in an offering pursuant to Rule 504 of Regulation D, under the Securities Act, at a price $1.125 per share. The Company, on October 1, 1998, sold an aggregate of 152,300 shares of common stock to seven investors in an offering pursuant to Rule 504 of 13 Regulation D, under the Securities Act. Of these shares, 102,300 were sold at a price of $1.125 per share and 50,000 shares were sold at a price of $.50 per share. The Company, on March 10, 1999, sold 40,000 shares of common stock to an investor in an offering pursuant to Rule 504 of Regulation D, under the Securities Act, at a price of $.50 per share. All the proceeds of the above offerings, unless otherwise indicated, were used for general working capital purposes. ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 145 of the Delaware General Corporation Law provides for the indemnification of officers and directors under certain circumstances against expenses and liabilities incurred as a result of a claim against them as corporate agents and requires Delaware corporations to indemnify their officers and directors against expenses incurred in legal proceedings because of their being or having been an officer or a director, if the corporate agent is successful in his defense on the merits or otherwise in a proceeding against him. Insofar as indemnification for liabilities arising under the federal securities laws may be permitted to directors, officers and controlling persons of the Company pursuant to the corporate law of Delaware or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy and is, therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred by a director, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being offered or sold, the Company will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Federal Securities laws, and will be governed by the final adjudication of such case. The Company does not have any directors or officers liability insurance. PART F/S The financial statements of the Company are included in this report beginning on page F-1. 14 PART III CYBER MARK INTERNATIONAL CORP. CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1998 AND 1997 CYBER MARK INTERNATIONAL CORP. YEARS ENDED DECEMBER 31, 1998 AND 1997 TABLE OF CONTENTS Page ------ Independent Auditors' Report 1 Consolidated Balance Sheets 2 Consolidated Statements of Operations 3 Consolidated Statements of Stockholders' Equity and Comprehensive Income 4 Consolidated Statements of Cash Flows 5 Notes to Consolidated Financial Statements 6-10 INDEPENDENT AUDITORS' REPORT Board of Directors Cyber Mark International Corp. We have audited the consolidated balance sheet of Cyber Mark International Corp. as at December 31, 1998 and the related consolidated statements of operations, stockholders' equity and comprehensive income and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of Cyber Mark International Corp. as of December 31, 1997 were audited by other auditors whose report dated July 9, 1998 expressed an unqualified opinion on those statements. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the aforementioned consolidated financial statements present fairly, in all material respects, the financial position of Cyber Mark International Corp. as at December 31, 1998 and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. Citran Cooperman & Company, LLP ------------------------------- CERTIFIED PUBLIC ACCOUNTANTS March 31, 1999 New York, New York CYBER MARK INTERNATIONAL CORP. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1998 AND 1997 ASSETS 1998 1997 -------- -------- Current assets: Cash and cash equivalents $106,865 $ Investment tax credits receivable 252,401 213,306 Accounts receivable 11,447 12,005 Inventory 87,573 107,325 Prepaid expenses 20,879 ---------- -------- 6,739 Total current assets 479,165 339,375 Property and equipment - net 181,688 200,062 Development costs 81,758 --------- ------- Total assets $660,853 $621,195 ========= ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current: Bank indebtedness $ $ 37,150 Accounts payable and accrued liabilities 68,559 48,242 Long-term debt - current portion 76,354 101,416 Advances from shareholder 67,337 95,004 -------- --------- Total current liabilities 212,250 281,812 Long-term debt, less current portion 114,914 188,788 Deferred income taxes 15,380 -------- --------- Total liabilities 327,164 485,980 -------- --------- Stockholders' equity: Capital stock 606 425 Additional paid in capital 719,948 Cumulative translation adjustment 4,283 1,568 Retained earnings (deficit) (391,148) 133,222 -------- --------- Total stockholders' equity 333,689 135,215 -------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $660,853 $621,195 ======== ======== See accompanying notes to consolidated financial statements. 2 CYBER MARK INTERNATIONAL CORP. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1998 1998 1997 ------ ------ Revenues: Sales $ 288,873 $ 434,107 Other 14,783 23,196 --------- ---------- 303,656 457,303 Cost of sales 170,381 138,395 --------- ---------- Gross profit 133,275 318,908 --------- ---------- Expenses: Wages and benefits 99,952 66,653 Professional fees 52,949 30,910 Interest 42,580 27,554 Rent and occupancy 39,818 22,372 Office and general 33,741 18,209 Trade shows and events 32,761 26,074 Marketing 25,585 32,987 Bad debts 24,498 18,425 Telephone 12,929 18,023 Travel and entertainment 11,510 18,146 Automobile 7,233 14,721 Insurance 6,497 3,712 Consulting fees 5,145 33,352 Depreciation and amortization 49,184 32,877 Research and development 229,066 --------- --------- 673,448 364,015 Loss before income taxes (540,173) (45,107) Income tax provision (recovery) - deferred (15,380) 3,530 --------- --------- NET LOSS $(524,793) $ (48,637) ========= ========= Loss per share $ (0.06) $ (0.01) ========= ========= See accompanying notes to consolidated financial statements. 3 CYBER MARK INTERNATONAL CORP. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
Common Stock Total ------------ Additional Retained Cumulative Comprehen- Share- Paid in Earnings Translation sive Income holder's Shares Amount Capital (Deficit) Adjustment (Loss) Equity --------- --------- -------- --------- ----------- ----------- -------- Balance - January 1, 1997 4,250,000 $ 425 $ $ 181,859 $ $182,284 Net loss (48,637) $ (48,637) Other comprehensive income: Cumulative translation adjustment 1,568 1,568 -------- Total comprehensive loss $ (47,069) (47,069) ---------- ---------- --------- ---------- ------- ========= --------- Balance - December 31, 1997 4,250,000 425 133,222 1,568 135,215 Common stock issued to officer 100,000 10 10 Common stock issued in private placement July 2, 1998 1,330,000 133 499,947 500,080 Common stock issued upon conversion of loan and interest 46,000 4 22,996 23,000 Common stock issued in private placement September 18, 1998 186,000 19 119,856 119,875 Common stock issued in private placement October 1, 1998 152,300 15 77,572 77,587 Net loss (524,793) $(524,793) Other comprehensive income: Cumulative translation adjustment 2,715 2,715 --------- Total comprehensive loss $(522,078) (522,078) --------- -------- -------- --------- -------- ========= ------- Balance December 31, 1998 6,064,300 $ 606 $720,371 $(391,571) $ 4,283 $333,689 ========= ======== ======== ========= ======== ========
See accompanying notes to consolidated financial statements. 4 CYBER MARK INTERNATIONAL CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 1998 1997 --------- --------- Cash flows from operating activities: Net loss $(524,793) $ (48,637) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 49,184 32,877 Deferred income taxes (15,380) 3,530 Changes in assets and liabilities: Investment tax credits receivable (53,405) (112,900) Accounts receivable (248) 48,063 Inventory 12,552 (90,552) Prepaid expenses (14,568) (136) Accounts payable and accrued liabilities 23,520 (56,984) ---------- ---------- Net cash used by operating activities (523,138) (224,739) --------- --------- Cash flows from investing activities: Purchase of property and equipment (42,528) (134,846) Development costs 76,273 (81,758) Loan receivable 11,674 --------- ---------- Net cash used by investing activities 33,745 (204,930) --------- ---------- Cash flows from financing activities: Issuance of capital stock 720,617 Long-term debt (79,467) 290,204 Advances from shareholder (21,293) 64,710 Bank indebtedness (37,150) 37,150 --------- ---------- Net cash provided by financing activities 582,707 392,064 --------- ---------- Effect of exchange rate changes on cash 13,551 --------- ---------- Increase (decrease) in cash and cash equivalents 106,865 (37,605) Cash and cash equivalents - beginning 37,605 --------- ---------- CASH AND CASH EQUIVALENTS - ENDING $106,865 $ ========= ========== See accompanying notes to consolidated financial statements. 5 CYBER MARK INTERNATIONAL CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of consolidation On July 2, 1998, the shareholders of The CM 300 Corp. ("CM300") exchanged all their issued common shares for common shares of Cyber Mark International Corp. ("Cyber"). The acquisition of CM300 by Cyber is a reverse takeover whereby CM300 is identified as the acquiring company. Cyber was incorporated in Delaware in June 1998, and prior to the acquisition Cyber was inactive. The consolidated financial statements include the operations of CM300 for the years. The consolidated financial statements include the accounts of the Company and its subsidiary after eliminating all intercompany accounts and transactions. Cash and cash equivalents The Company considers all highly liquid investments with a maturity of three months or less from time of purchase to be cash equivalents. Inventory Inventory is valued at lower of cost or market. Cost is determined on the first-in-first-out basis. Property and equipment Property and equipment are stated at cost. Depreciation is provided on a straight-line basis over the estimated useful life of the assets, usually five years. For leasehold improvements, depreciation is provided on a straight-line basis over five years. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and assumptions. Financial instruments The Company considers the fair value of all financial instruments to be not materially different from their carrying value at year end. 6 CYBER MARK INTERNATIONAL CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Translation of foreign currencies The Company uses the local currency as the functional currency and translates all assets and liabilities at year-end exchange rates, all income and expense accounts at average rates and records adjustments resulting from the translation in a separate component of common shareholders' equity. NOTE 2 - UNCERTAINTY DUE TO THE YEAR 2000 ISSUE The Year 2000 issue arises because many computerized systems use two digits rather than four to identify a year. Date-sensitive systems may recognize the year 2000 as 1900 or some other date, resulting in errors when information using year 2000 dates is processed. In addition, similar problems may arise in some systems which use certain dates in 1999 to represent something other than a date. The effects of the Year 2000 issue may be experienced before, on, or after January 1, 2000, and, if not addressed, the impact on operations and financial reporting may range from minor errors to significant systems failure, which could affect an entity's ability to conduct normal business operations. It is not possible to be certain that all aspects of the Year 2000 issue affecting the entity, including those related to the efforts of customers, suppliers, or other third parties, will be fully resolved. NOTE 3 - PROPERTY AND EQUIPMENT Accumulated Depreciation and Amorti- Net Book Value Cost zation 1998 1997 ------- ------- -------- -------- Manufacturing equipment $ 84,801 $38,337 $ 46,464 $ 61,941 Furniture and fixtures 12,336 5,879 6,457 10,888 Office and ship equipment 23,480 4,788 18,692 12,022 Entertainment equipment 75,595 22,197 53,398 70,602 Moulds 14,932 1,493 13,439 Software 4,486 2,243 2,243 Leasehold improvements 51,283 10,288 40,995 44,609 ------- ------- -------- -------- $266,913 $85,225 $181,688 $200,062 ======== ======= ======== ======== Depreciation expense for the years ended December 31, 1998 and 1997 amounted to $49,184 and $32,877, respectively. 7 CYBER MARK INTERNATIONAL CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 NOTE 4 - BANK INDEBTEDNESS The bank indebtedness is payable on demand, bears interest at the bank prime rate plus 1 3/4% per annum and is secured by a general security agreement and a postponement of claim signed by the shareholder. NOTE 5 - LONG-TERM DEBT 1998 1997 -------- ------ Business development loan bearing interest at a rate of 5% above the bank's daily floating base interest rate, repayable in monthly installments of $2,739 and matures June, 2002. The Company is required to pay the bank additional interest in the form of a royalty of 0.1942% on the combined sales of the Company. The royalty is payable monthly at the rate of one twelfth of .1942 percent of combined sales. Total royalties paid during 1998 and 1997 were $4,190 and $1,461, respectively. The loan is secured by a general security agreement, joint and several guarantees of the shareholders, assignment of shareholder loans, life insurance on the lives of the shareholders and assignment of property insurance $131,483 $157,996 Bank term loan bearing interest at the bank prime rate plus 3% per annum, repayable in monthly installments of $3,624, maturing May, 2000. Monthly principal payments were deferred until September, 1998 at which time all principal payments in arrears were due. The loan is secured by a general security agreement, postponement and assignment of claim signed by the shareholder and a guarantee in the amount of $100,000 by the shareholder 59,785 112,633 Secured debenture payable bears interest at a rate of 15% per annum, payable quarterly commencing December 8, 1997, maturing September 7, 1998 and secured by specific equipment of the Company. This debenture was convertible at the option of the holder at any time that the shares of the Company become freely tradeable pursuant to applicable securities legislation, prior to maturity of this debenture, into common shares of the Company at the rate of 1 share for every seventy-five cents ($0.75) of principal amount of the debenture. In
8 CYBER MARK INTERNATIONAL CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 NOTE 5 - LONG-TERM DEBT (CONTINUED) August 1998 the principal and unpaid interest were converted to 46,000 common shares of Cyber based on a modification and conversion agreement. 19,575 -------- ------- 191,268 290,204 Less: current portion 76,354 101,416 -------- -------- $114,914 $188,788 ======== ======== Principal repayments required are due as follows: 1999 $ 76,354 2000 49,174 2001 32,870 2002 32,870 -------- $191,268 ========
NOTE 6 - ADVANCES FROM SHAREHOLDER These advances are unsecured and non-interest bearing with no specific terms of repayment. NOTE 7 - CAPITAL STOCK 1998 1997 Authorized Issued -------- -------- ---------- ------ 500,000 Preferred shares, issuable in series, par value $.001 10,000,000 6,064,300 Common shares, par value $.0001 $ 606 $ 425 ======== ========
During the year ended December 31, 1998, the Company issued 1,768,300 common shares in private placements for $697,552 and converted principal debt and interest of $23,000 for 46,000 common shares. In addition, 4,250,000 common shares were issued in exchange for all the issued and outstanding shares of CM300, which has been reflected back to January 1, 1997 in the accompanying consolidated financial statements. During 1998, the Company adopted a plan for granting stock options to employees to purchase common stock at a price not lower than its fair market value at the respective date of grant. On August 6, 1998 options to purchase a total of 490,000 common shares at prices ranging from $.50 to $1.25 per share were granted to certain employees. The options are exercisable until three years from date of grant subject to certain conditions. 9 CYBER MARK INTERNATIONAL CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 NOTE 7 - CAPITAL STOCK (CONTINUED) The Company applies Accounting Principles Board Opinion No. 25 (Accounting for Stock Issued to Employees) and related interpretations in accounting for its stock option plans. Accordingly, no compensation expense is recognized when options are granted. Had compensation expense been determined based on the fair market methodology prescribed SFAS No. 123 (Accounting for Stock-Based Compensation) issued by the Financial Accounting Standards Board in October, 1995, net earnings for the current year would have been reduced by approximately $29,000 for options granted during 1998. The fair value for options granted during 1998 was estimated at $.07 on the date of grant using the Black-Scholes option-pricing model with the following assumptions: dividend yield 0%, volatility o%, risk-free interest rate of 5.25% and an expected life of 3 years. NOTE 8 - INCOME TAXES The Company's net deferred tax assets as of December 31, 1998 are estimated as follows: Net operating loss carryforward $ 210,000 Valuation allowance (210,000) --------- Net deferred tax asset $ - ========= A valuation allowance has been applied to offset the deferred tax asset in recognition of the uncertainty that such benefits will be realized. At December 31, 1998, the Company has available net operating loss carryforwards for tax reporting purposes of approximately $525,000 which is available to offset future taxable income, if any. This carryforward expires in 2018. For Canadian income tax purposes, the Company has available net operating loss carryforward of approximately $549,000 which are available to offset future taxable income, if any. These carryforwards expire in 2004 and 2005. The deferred tax recovery in 1998 represents a 1997 Canadian deferred tax liability which was reversed during 1998. NOTE 9 - LOSS PER COMMON SHARE Loss per common share is based on the weighted average number of common shares outstanding during each period. NOTE 10 - COMMITMENTS The Company is committed under various operating leases for occupied premises and equipment which expire in the year 2003. Future minimum annual payments (exclusive of taxes, insurance and maintenance costs) as of December 31, 1998 as are follows: 1999 $ 49,058 2000 52,103 2001 54,105 2002 50,981 2003 8,750 ----------- $214,997 10 CYBER MARK INTERNATIONAL CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 NOTE 10 - COMMITMENTS (CONTINUED) Rent expense for the years ended December 31, 1998 and 1997 amounted to $39,818 and $22,372, respectively. 11 Page 1 Cyber Mark International Corp. Consolidated Balance Sheet As at June 30, 1999 and 1998 (Unaudited) ASSETS 1999 1998 Current Cash and cash equivalents $ - $ 395,936 Investment tax credits receivable 277,097 150,189 Accounts receivable 14,523 45,631 Inventory 92,642 106,908 Prepaid expenses 36,110 7,567 ------------- ------------ Total current assets 420,372 706,231 Property and equipment 168,450 181,374 Development costs - 79,676 ------------- ------------ Total assets $ 588,822 $ 967,281 ============= ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current Bank indebtedness $ 21,658 $ - Accounts payable and accrued liabilities 124,886 69,093 Long-term debt -current portion 76,354 109,237 ------------ ------------ Total current liabilities 222,898 178,330 Long-term debt 86,442 172,609 Advances from shareholder 62,085 116,337 Deferred income taxes - 14,989 ------------ ------------ Total liabilities 371,425 482,265 ------------ ------------ STOCKHOLDERS' EQUITY Preferred stock, $.001 par value; authorized 0 0 500,000 shares, none issued or outstanding Common stock, $.001 par value, authorized 10,000,000 shares; issued and outstanding 6,104,300 and 5,580,000 respectively 610 165 Additional paid in capital 739,944 499,919 Cumulative translation adjustment (14,149) - Deficit (509,008) (15,068) ------------ ------------ Total stockholders' equity 217,397 485,016 ------------ ------------ Total liabilities and stockholders' equity $ 588,822 $ 967,281 ============ ============
The accompanying notes are an integral part of these consolidated financial statements Page 2 Cyber Mark International Corp. Consolidated Statement of Operations For the Six Months Ended June 30, 1999 (Unaudited) 1999 1998 Revenue Sales $ 189,035 $ 123,183 Other 107,522 15,111 ------------ ------------ 296,557 138,294 Cost of sales 120,239 106,128 ------------ ------------ Gross profit 176,318 32,166 ------------ ------------ Expenses Wages and benefits 63,884 44,248 Marketing 43,066 3,866 Office and general 34,675 15,942 Rent and occupancy 32,803 20,489 Research & development 27,768 - Professional fees 25,449 18,369 Interest 15,769 22,271 Insurance 6,567 6,237 Consulting fees 6,346 - Travel and entertainment 6,200 3,652 Telephone 5,020 5,868 Automobile 3,146 2,502 Trade shows and events 1,457 7,449 Bad debts 425 - Amortization 21,180 20,386 ------------ ------------ 293,755 171,279 ------------ ------------ Net loss $ (117,437) $ (139,113) ============ ============ Loss per share $ (0.02) $ (0.02) ============ ============ The accompanying notes are an integral part of these consolidated financial statements Page 3 Cyber Mark International Corp. Consolidated Statement of Cash Flows For the Six Months Ended June 30, 1999 (Unaudited) 1999 1998 Cash flows from operating activities Net loss $ (117,437) $ (139,113) Adjustments to reconcile net loss to net cash used by operating activities Amortization 21,180 20,386 Changes in assets and liabilities Investment tax credits receivable (24,696) 57,686 Accounts receivable (3,076) (33,932) Inventory (5,069) (2,316) Prepaid expenses (15,231) (999) Accounts payable and accrued liabilities 56,324 (2,622) ----------- ------------ Net cash used by operating activities (88,005) (100,910) ------------ ------------ Cash flows from investing activities Purchase of property and equipment (913) (6,575) ------------ ------------ Net cash used by investing activities (913) (6,575) ------------ ------------ Cash flows from financing activities Issuance of capital stock 20,000 500,080 Long-term debt (28,472) (969) Advances from shareholder (5,252) 23,753 Bank indebtedness 21,658 (19,443) ------------ ------------ Net cash provided by financing activities 7,934 503,421 ------------ ------------ Effect of exchange rate changes on cash (25,881) - ------------ ------------ Increase (decrease) in cash and cash equivalents (106,865) 395,936 Cash and cash equivalents, beginning of period 106,865 - ------------ ------------ Cash and cash equivalents, end of period $ - $ 395,936 ============ ============ The accompanying notes are an integral part of these consolidated financial statements Page 4 Cyber Mark International Corp. Notes to Consolidated Financial Statements For the Six Months Ended June 30, 1999 (Unaudited) 1. The financial information included herein is unaudited; however, such information reflects all adjustments, consisting solely of normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the periods indicated. Certain information and footnote disclosures normally included in financial statements prepared in conformity with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. These condensed financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company's Annual Report for the twelve months ended December 31, 1998. The following is a summary of the significant accounting policies followed by the Company: Basis of Presentation The accompanying consolidated financial statements include the accounts of the company and its wholly-owned subsidiary. All significant intercompany transactions and balances have been eliminated in consolidation. Cash and cash equivalents The company considers all highly liquid investments with a maturity of three months or less from time of purchase to be cash equivalents. Inventory Inventory is valued at lower of cost or market. Cost is determined on the first-in-first-out basis. Property and equipment Property and equipment are stated at cost. Depreciation is provided on a straight-line basis over the estimated useful life of the assets, usually five years. For leasehold improvements, depreciation is provided on straight-line basis over five years. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and assumptions. Financial instruments The company considers the fair value of all financial instruments to be not materially different from their carrying value at year end. Translation of foreign currencies The company uses the local currency as the functional currency and translates all assets and liabilities at year-end exchange rates, all income and expense accounts at average rates and records adjustments resulting from the translation in a separate component of common shareholders' equity. Page 5 Cyber Mark International Corp. Notes to Consolidated Financial Statements For the Six Months Ended June 30, 1999 (Unaudited) Loss per common share Loss per common share is based on the weighted average number of common shares outstanding during each period. ITEM 1. INDEX TO EXHIBITS (a) Exhibits 3.1* Certificate of Incorporation of the Registrant 3.2* By-laws of the Registrant 4.1* Form of common stock Certificate of Registrant 10.1* 1998 Performance Equity Plan 21.1* Subsidiaries of Registrant 27.1* Financial Data Schedule * Filed herewith. SIGNATURES Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 3rd day of August, 1999. CYBER MARK INTERNATIONAL CORP. /S/ SAMUEL SINGAL --------------------------------- SAMUEL SINGAL President and Chief Operating Officer EX-3.1 2 CERTIFICATE OF INCORPORATION EXHIBIT 3.1 CERTIFICATE OF INCORPORATION OF CYBER MARK INTERNATIONAL CORP. The undersigned, being of legal age, in order to form a corporation under and pursuant to the laws of the State of Delaware, does hereby set forth, as follows: FIRST: The name of the corporation (herein referred to as the "Corporation") is: Cyber Mark International Corp. SECOND: The address of the registered office of the Corporation in the State of Delaware is c/o National Corporate Research, Ltd., 9 East Loockerman Street, County of Kent, Dover, Delaware 19901. The name of the Corporation's registered agent at such address is National Corporate Research, Ltd. THIRD: The purposes of the Corporation are to engage in, promote, conduct, and carry on any lawful acts or activities for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: The total number of shares of capital stock of all classes which the Corporation shall have authority to issue is 10,500,000 shares, of which 500,000 shares shall be Preferred Stock, par value $.001 per share, and 10,000,000 shares shall be Common Stock, par value $.0001 per share. A Preferred Stock (1) Shares of Preferred Stock may be issued in one or more series at such time or times and for such consideration as the Board of Directors may determine. All shares of any one series shall be of equal rank and identical in all respects. (2) Authority is hereby expressly granted to the Board of Directors to fix from time to time, by resolution or resolutions providing for the establishment and/or issuance of any series of Preferred Stock, the designation of the series and the powers, preferences, and rights of the shares of the series, and the qualifications, limitations, or restrictions thereof, including the following: (a) The distinctive designation and number of shares comprising the series, which number may, except where otherwise provided by the Board of Directors in creating the series, be increased or decreased from time to time by action of the Board of Directors, but not below the number of shares then outstanding; (b) The rate of dividends, if any, on the shares of that series, whether dividends shall be noncumulative, cumulative to the extent earned, or cumulative, and if cumulative, from which date or dates, whether dividends shall be payable in cash, property, or rights, or in shares of the Corporation's capital stock, and the relative rights of priority, if any, of payment of dividends on shares of that series over shares of any other series; (c) Whether the shares of that series shall be redeemable and, if so, the terms and conditions of the redemption, including the date or dates 2 upon or after which they shall be redeemable, the event or events upon or after which they shall be redeemable or at whose option they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates, or the property or rights, including securities of any other corporation, payable in case of redemption; (d) Whether that series shall have a sinking fund for the redemption or purchase of shares of that series and, if so, the terms and amounts payable into the sinking fund; (e) The rights to which the holders of the shares of that series shall be entitled in the event of voluntary or involuntary liquidation, dissolution, or winding-up of the Corporation, and the relative rights of priority, if any, of payment of shares of that series in any such event; (f) Whether the shares of that series shall be convertible into or exchangeable for shares of stock of any other class or any other series and, if so, the terms and conditions of the conversion or exchange, including the rate or rates of conversion or exchange, the date or dates upon or after which they shall be convertible or exchangeable, the duration for which they shall be convertible or exchangeable, the event or events upon or after which they shall be convertible or exchangeable or at whose option they shall be convertible or exchangeable, and the method, if any, of adjusting the rates of conversion or exchange in the event of a stock split, stock dividend, combination of shares, or similar event; (g) Whether the issuance of any additional shares of the series, or of any shares of any other series, shall be subject to restrictions as to issuance, or as to the powers, preferences, or rights of any such other series; and 3 (h) Any other preferences, privileges, and powers and relative, participating, optional, or other special rights and qualifications, limitations, or restrictions of the series, as the Board of Directors may deem advisable and as shall not be inconsistent with the provisions of this Certificate of Incorporation and to the full extent now or hereafter permitted by the laws of the State of Delaware. (3) Payment of dividends shall be as follows: (a) The holders of any series of Preferred Stock, in preference to the holders of the Common Stock and the holders of any junior-ranking series of Preferred Stock, shall be entitled to receive, as and when declared by the Board of Directors out of funds legally available therefor, dividends in cash, property, or rights, or in shares of the Corporation's capital stock, at the rate for such series fixed in accordance with the provisions of paragraph A(2)(b) of this Article Fourth. (b) No dividend shall be paid upon, or declared or set aside for, any series of Preferred Stock with respect to any dividend period unless: (i) All dividends on all senior-ranking series of Preferred Stock shall, for the same dividend period, and for all past dividend periods, to the extent the dividends on such senior-ranking series of Preferred Stock are cumulative, have been fully paid or declared and provided for; and 4 (ii) At the same time, a like proportionate dividend with respect to the same dividend period, ratably in proportion to the respective annual dividend rates fixed therefor, shall be paid upon, or declared and provided for, all equally ranking series of Preferred Stock. (c) As long as any shares of any series of Preferred Stock shall be outstanding, in no event shall any dividend, whether in cash, property, excluding shares of Common Stock of the Corporation, or rights, be paid upon, or declared and provided for, nor shall any distribution be made, on the outstanding shares of Common Stock, unless all dividends on all cumulative series of Preferred Stock with respect to all past dividend periods and unless all dividends on all series of Preferred Stock for the then current dividend period shall have been paid upon, or declared and provided for, and unless the Corporation shall not be in default under any of its obligations with respect to any sinking fund for any series of Preferred Stock. The foregoing provisions of this paragraph (c) shall not, however, in any way prohibit or limit the Corporation from making a dividend or other distribution of shares of Common Stock on the outstanding shares of Common Stock. (d) No dividends shall be deemed to have accrued on any share of any series of Preferred Stock with respect to any period prior to the date of the original issuance of the share or the dividend payment date immediately preceding or following the date or original issue, except as may otherwise be provided in the resolution or resolutions of the Board of Directors creating such series. Accruals of dividends shall not bear interest. (4) In the event of any voluntary or involuntary liquidation, dissolution, or winding-up of the Corporation, the holders of the shares of any 5 series of Preferred Stock then outstanding shall be entitled to receive out of the net assets of the Corporation, whether capital or surplus, but only in accordance with the preferences, if any, provided for such series, before any distribution or payment shall be made to the holders of the Common Stock and the holders of any junior-ranking series of Preferred Stock, the amount per share fixed by the resolution or resolutions of the Board of Directors to be received by the holders of such shares on such voluntary or involuntary liquidation, dissolution, or winding-up, as the case may be. If the payment shall have been made in full to the holders of all outstanding Preferred Stock of all series, or duly provided for, the remaining net assets of the Corporation shall be available for distribution to the holders of the Common Stock to the extent the Board of Directors shall determine as provided for in paragraph B(2) of this Article Fourth. If, upon any such voluntary or involuntary liquidation, dissolution, or winding-up, the net assets of the Corporation available for distribution among the holders of any one or more series of the Preferred Stock which (i) are entitled to a preference over the holders of the Common Stock upon such voluntary or involuntary liquidation, dissolution, or winding-up, and (ii) rank equally in connection therewith, shall be insufficient to make payment in full of the preferential amount to which the holders of such shares shall be entitled, then the assets shall be distributed among the holders of each series of the Preferred Stock ratably according to the respective amounts to which they would be entitled in respect of the shares held by them upon the distribution if all amounts payable on or with respect to the shares were paid in full. Neither the consolidation nor merger of the Corporation, nor a reduction of the capital of the Corporation, nor the sale, lease, or conveyance of all or part of its assets, whether for cash, securities or other property, shall be deemed a voluntary or involuntary liquidation, dissolution, or winding-up of the Corporation within the meaning of the foregoing provisions. (5) The shares of Preferred Stock shall have no voting power or voting 6 rights with respect to any matter whatsoever, except as may be otherwise required by law or may be provided in the resolution or resolutions of the Board of Directors creating the series of which such shares are a part. B Common Stock (1) After the requirements with respect to preferential dividends, if any, on any series of Preferred Stock, fixed pursuant to paragraph A(2)(b) and as further provided for in paragraph A(3), both of this Article Fourth, shall have been met, and after the Corporation shall have complied with all requirements, if any, with respect to the setting aside of sums in a sinking fund for the purchase or redemption of shares of any series of Preferred Stock, fixed pursuant to paragraph A(2)(d) of this Article Fourth, then, and not otherwise, the holders of Common Stock shall receive, to the extent permitted by law and to the extent the Board of Directors shall determine, such dividends as may be declared from time to time by the Board of Directors. (2) After distribution in full of the preferential amount, if any, fixed pursuant to paragraph A(2)(e) and as further provided for in paragraph A(4), both of this Article Fourth, to be distributed to the holders of any series of Preferred Stock in the event of the voluntary or involuntary liquidation, dissolution, or winding-up of the Corporation, the holders of the Common Stock shall be entitled to receive such of the remaining assets of the Corporation of whatever kind available for distribution to the extent the Board of Directors shall determine. (3) Except as may be otherwise required by law or by this Certificate of Incorporation, each holder of Common Stock shall have one vote in respect of 7 each share of such stock held by him on all matters voted upon by the stockholders. C Preemptive Rights No holder of shares of the Corporation of any class, now or hereafter authorized, shall have any preferential or preemptive right to subscribe for, purchase, or receive any shares of stock of the Corporation of any class, now or hereafter authorized, or any options or warrants for such shares, or any rights to subscribe to or purchase such shares, or any securities convertible into or exchangeable for such shares, which may at any time or from time to time be issued, sold, or offered for sale by the Corporation. FIFTH: The name and mailing address of the sole incorporator are: Andrew D. Hudders, Graubard Mollen & Miller, 600 Third Avenue, 32nd floor, New York, New York 10016. SIXTH: The Corporation is to have perpetual existence. SEVENTH: The private property or assets of the stockholders of the Corporation shall not to any extent whatsoever be subject to the payment of the debts of the Corporation. EIGHTH: Elections of directors need not be by written ballot unless otherwise provided in the By-laws of the Corporation. NINTH: The number of directors of the Corporation shall be such number as from time to time shall be fixed by, or in the manner provided in, the By-laws of the 8 Corporation. None of the directors need be a stockholder or a resident of the State of Delaware. TENTH: The books of the Corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the By-laws of the Corporation, subject to any provision contained in the statutes. ELEVENTH: Any action required by law or by the Certificate of Incorporation or Bylaws of the Corporation to be taken at a meeting of the stockholders of the Corporation or any other action which may be taken at a meeting of the stockholders, may be taken without a meeting if a written consent setting forth the action so taken, shall be signed by all the stockholders entitled to vote on the action to be taken. TWELFTH: Special meetings of the stockholders of the Corporation for any purpose or purposes may be called at any time by the board of directors, the chairman of the board of directors or the president of the Corporation. Special meetings of the stockholders of the Corporation may not be called by any other person or persons. THIRTEENTH: At an annual meeting of stockholders, only such business shall be conducted, and only such proposals shall be acted upon, as shall have been brought before the annual meeting (a) by, or at the direction of, a majority of the directors, or (b) by any shareholder of the Corporation who complies with the notice procedures set forth in this Article Thirteenth. For a proposal to be properly brought before an annual meeting by a shareholder, the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a shareholder's notice must be delivered to, or mailed and 9 received at, the principal executive offices of the Corporation not less than 60 days prior to the scheduled annual meeting, regardless of any postponements, deferrals or adjournments of that meeting to a later date; provided, however, that if less than 70 days' notice or prior public disclosure of the date of the scheduled annual meeting is given or made, notice by the shareholder to be timely, must be so delivered or received not later than the close of business on the tenth day following the earlier of the day on which such notice of the date of the scheduled annual meeting was mailed or the day on which such public disclosure was made. A shareholder's notice to the Secretary shall set forth as to each matter the shareholder proposes to bring before the annual meeting (a) a brief description of the proposal desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and address, as they appear on the Corporation's books, or the shareholder proposing such business and any other stockholders known by such shareholder to be supporting such proposal, (c) the class and number of shares of the Corporation's stock which are beneficially owned by the shareholder on the date of such shareholder notice and by any other stockholders known by such shareholder to be supporting such proposal on the date of such shareholder notice, and (d) any financial interest of the shareholder in such proposal and by any other stockholders known by such shareholder to be supporting such proposal. The presiding officer of the annual meeting shall determine and declare at the annual meeting whether the shareholder proposal was made in accordance with the terms of this Article Thirteenth. If the presiding officer determines that a shareholder proposal was not made in accordance with the terms of this Article Thirteenth, he or she shall so declare at the annual meeting and any such proposal shall not be acted upon at the annual meeting. 10 This provision shall not prevent the consideration and approval or disapproval at the annual meeting of reports of officers, directors and committees of the board of directors, but, in connection with such reports, no new business shall be acted upon at such annual meeting unless stated, filed and received as herein provided. FOURTEENTH: Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors. Nominations of persons for election to the board of directors of the Corporation may be made at a meeting of stockholders by or at the direction of the board of directors, by a nominating committee or person appointed by the board of directors or by any shareholder of the Corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Article Fourteenth. Such nominations, other than those made by or at the direction of the board of directors, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a shareholder's notice must be delivered to, or mailed and received at, the principal executive offices of the Corporation not less than 60 days prior to the scheduled annual meeting, regardless of any postponements, deferrals or adjournments of that meeting to a later date; provided however, that if less than 70 days' notice or prior public disclosure of the date of the scheduled annual meeting is given or made, notice by the shareholder, to be timely, must be so delivered or received not later than the close of business on the tenth day following the earlier of the day on which such notice of the date of the scheduled annual meeting was mailed or the day on which such public disclosure was made. A shareholder's notice to the Secretary shall set forth (a) as to each person whom the shareholder proposes to nominate for election or reelection as a director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of capital stock 11 of the Corporation which are beneficially owned by the person, and (iv) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to any rules or regulations under the Securities Exchange Act of 1934, as amended; and (b) as to the shareholder giving the notice (i) the name and address, as they appear on the Corporation's books, of the shareholder, and (ii) the class and number of shares of the Corporation's stock which are beneficially owned by the shareholder on the date of such shareholder notice. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as a director of the Corporation. The presiding officer of the annual meting shall determine and declare at the annual meeting whether the nomination was made in accordance with the terms of this Article Fourteenth. If the presiding officer determines that a nomination was not made in accordance with the terms of this Article Fourteenth, he or she shall so declare at the annual meeting and any such defective nomination shall be disregarded. FIFTEENTH: Subject to, and to the fullest extent permitted by, Section 102(b)(7) of the Delaware General Corporation Law, as amended from time to time, no director shall be liable to the Corporation or to any of its stockholders for monetary damages for breach of fiduciary duty as a director, except with respect to (1) a breach of the director's duty of loyalty to the Corporation; (2) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (3) liability under Section 174 of the Delaware General Corporation Law; or (4) a transaction from which the director derived an improper personal benefit. 12 SIXTEENTH: Notwithstanding anything contained in the Certificate of Incorporation to the contrary, the affirmative vote of at least 66-2/3% of the outstanding shares of Common Stock of the Corporation shall be required to amend or repeal Articles Eleven, Twelve, Thirteen, Fourteen and Sixteen of this Certificate of Incorporation or to adopt any provision inconsistent therewith. The undersigned, being the sole incorporator hereinabove named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, does make this Certificate of Incorporation, hereby declaring, affirming, acknowledging, and certifying, under penalties of perjury, that this is the act and deed of the undersigned and that the facts stated herein are true, and accordingly has hereunto set his hand this 9th day of June, 1998. /s/ Andrew D. Hudders ----------------------------------- Andrew D. Hudders, Incorporator 13 EX-3.2 3 BY-LAWS EXHIBIT 3.2 BY-LAWS OF CYBER MARK INTERNATIONAL CORP. ARTICLE I Stockholders Section 1.1 Annual Meetings. An annual meeting of stockholders shall be held for the election of directors at such date, time and place either within or without the State of Delaware as may be designated by the Board of Directors from time to time. Any other proper business may be transacted at the annual meeting. Section 1.2 Special Meetings. Special meetings of stockholders may be called at any time by the Chairman of the Board, the President or the Board of Directors, to be held at such date, time and place either within or without the State of Delaware as may be stated in the notice of the meeting. Section 1.3 Notice of Meetings. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting. In the case of a special meeting, the notice shall also state the purpose or purposes for which the meeting is called and no other business shall be transacted at such special meeting. Unless otherwise provided by law, the written notice of any meeting shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder's address as it appears on the records of the Corporation. A failure to give or any defect or irregularity in giving the notice for an annual meeting shall not affect or invalidate the proceedings of such annual meeting. Section 1.4 Adjournments. Any meeting of stockholders, annual or special, may adjourn from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 1.5 Quorum. At each meeting of stockholders, except where otherwise provided by law or the Certificate of Incorporation or these By-laws, the holders of a majority of the outstanding shares of each class of stock entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum. For purposes of the foregoing, two or more classes or series of stock shall be considered a single class if the holders thereof are entitled to vote together as a single class at the meeting. In the absence of a quorum, the stockholders so present may, by majority vote, adjourn the meeting from time to time in the manner provided by Section 1.4 of these By-laws until a quorum shall attend. Shares of its own capital stock belonging on the record date for the meeting to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes; 2 provided, however, that the foregoing shall not limit the right of the Corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity. Section 1.6 Organization. Meetings of stockholders shall be presided over by the Chairman of the Board or in the absence of the Chairman of the Board, by the President, or in the absence of the President by a Vice President, or in the absence of the foregoing persons by a chairman designated by the Board of Directors, or in the absence of such designation, by a chairman chosen at the meeting. The Secretary shall act as secretary of the meeting, or in the absence of the secretary by an Assistant Secretary, or in their absence the Chairman of the meeting may appoint any person to act as secretary of the meeting. Section 1.7 Voting; Proxies. Unless otherwise provided in the Certificate of Incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock held by such stockholder which has voting power upon the matter in question. Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three years from this date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or another duly executed proxy bearing a later date with the Secretary of the Corporation. Voting at meetings of stockholders need not be by written ballot and need not be conducted by inspectors unless the chairman of such meeting shall so determine. At all meetings of stockholders for the election of directors, a plurality of 3 the votes cast shall be sufficient to elect. With respect to other matters, unless otherwise provided by law or by the Certificate of Incorporation or these By-laws, the affirmative vote of the holders of a majority of the shares of all classes of stock present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders. Where a separate vote by class is required, the affirmative vote of the holders of a majority of the shares of each class present in person or represented by proxy at the meeting shall be the act of such class, except as otherwise provided by law or by the Certificate of Incorporation or these By-laws. Section 1.8 Fixing Date for Determination of Stockholders of Record. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. If no record date is fixed: (1) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; and (2) the record date for determining stockholders for any other purpose shall be at the close of business on the date on which the Board adopts the resolution relating thereto. A determination of stockholders or record entitled to notice of or to vote at a meeting of stockholders shall apply to any 4 adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting. Section 1.9 List of Stockholders Entitled to Vote. The Secretary shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the meeting, during the whole time thereof, and may be inspected by any stockholder who is present. ARTICLE II Board of Directors Section 2.1 Powers; Number; Qualifications. The business and affairs of the Corporation shall be managed by or under the director of the Board of Directors, except as may be otherwise provided by law or in the Certificate of Incorporation. The Board shall consist of one or more members, the number thereof to be determined from time to time by the Board. Section 2.2 Election; Term of Office; Resignation; Removal; Vacancies. Each director shall hold office until the annual meeting of stockholders next succeeding his or her election and until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any director may resign at any time upon written notice to the Board of Directors, the 5 Chairman of the Board or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein no acceptance of such resignation shall be necessary to make it effective. A director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. Whenever the holders of any class or series of stock are entitled to elect one or more directors by the provisions of the Certificate of Incorporation, the provisions of the preceding sentence shall apply, in respect to the removal without cause of the director or directors so elected, to the vote of the holders of the outstanding shares of that class or series and not to the vote of the outstanding shares as a whole. Unless otherwise provided in the Certificate of Incorporation or these By-laws, vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class or from any other cause may be filled by a majority of the directors then in office, although less than a quorum, or by the sole remaining director. Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the Certificate of Incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by the sole remaining director so elected. Section 2.3 Regular Meetings. Regular meetings of the Board of Directors may be held at such places within or without the State of Delaware and at such times as the Board may from time to time determine, and if so determined notice thereof need not be given. 6 Section 2.4 Special Meetings. Special meetings of the Board of Directors may be held at any time or place within or without the State of Delaware whenever called by the Chairman of the Board and Chief Executive Officer, by the Executive Committee of the Board, or by any three directors or the entire Board of Directors. At least two days prior written notice thereof shall be given by the person or persons calling the meeting. Section 2.5 Participation in Meetings by Conference Telephone Permitted. Unless otherwise restricted by the Certificate of Incorporation or these By-laws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors or of such committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Bylaw shall constitute presence in person at such meeting. Section 2.6 Quorum; Vote Required for Action. At all meetings of the Board of Directors, a majority of the entire Board of Directors shall constitute a quorum for the transaction of business. The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors unless the Certificate of Incorporation or these By-laws shall require a vote of a greater number. In case at any meeting of the Board of Directors a quorum shall not be present, the members of the Board of 7 Directors present may adjourn the meeting from time to time until a quorum shall attend. Section 2.7 Organization. Meetings of the Board of Directors shall be presided over by the Chairman of the Board, or in his or her absence by a chairman chosen at the meeting. The Secretary, or in the absence of the Secretary an Assistant Secretary, shall act as secretary of the meeting, but in the absence of the Secretary and any Assistant Secretary the chairman of the meeting may appoint any person to act as secretary of the meeting. Section 2.8 Annual Meeting. The Board of Directors shall meet at such time and place as shall be determined by the Chairman of the Board, on the day of the annual meeting of stockholders, or as soon as practicable thereafter, to elect the officers of the Corporation for the ensuing year. The Board of Directors shall also elect the members of the several committees provided for by these By-laws. Such meeting shall be the Annual Meeting and shall be a regular meeting of the Board of Directors for the transaction of business. Section 2.9 Compensation. Each member of the Board of Directors who is not a salaried officer of the Corporation or of any subsidiary of the Corporation, may be paid such fees, retainers and other compensation, if any, as shall be fixed by the Board of Directors, in addition to transportation and other expenses actually incurred by the directors in attending special or regular meetings of the Board of Directors or of any committee of which the director is a member. 8 Section 2.10 Action by Directors Without a Meeting. Unless otherwise restricted by the Certificate of Incorporation or these By-laws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board or of such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee. ARTICLE III Committees of the Board of Directors Section 3.1 Establishment of Committees. The following committees are hereby established as committees of the Board of Directors: (a) Executive Committee (b) Audit Committee (c) Nominating Committee The Board of Directors shall elect members of such committees only from this own members. The Board of Directors shall determine the number of members of each committee and may increase or decrease that number from time to time; provided that the number of members of each committee shall not be less than the number hereinafter provided in this Article III. The Board of Directors may remove members form any committee and fill vacancies in membership. Each committee 9 shall have such authority as shall be delegated to it by the Board of Directors from time to time and the authority to determine its own rules of procedure, the time and place of its meetings and the kind, time, and contents of notice of meetings to be given to its members. No committee shall have the power or authority in reference to amending the Certificate of Incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board of Directors, fix any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the Corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the Corporation), adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, removing or indemnifying directors or amending the By-laws of the Corporation; and, unless the resolution, By-laws, or Certificate of Incorporation expressly so provide, no committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Section 3.2 The Executive Committee. The Executive Committee shall consist of at least three members, a majority of whom shall be persons who are not officers or employees of the Corporation. The Executive Committee shall meet on call, when required, to act during the intervals between meetings of the Board of Directors with a quorum of not less than three members. Subject to the limitations set forth in Section 3.1, the Executive Committee shall have and may exercise all of the authority of the Board of Directors in the management of the business of the Corporation, except for: (a) those powers which are to be 10 exercised only with the approval of other committees, as provided in the By-laws or by the Board of Directors; and (b) the filling of vacancies in the Board of Directors or in any committee. The Chairman of the Board shall be the Chairman of the Executive Committee and the Board of Directors may designate a Vice-Chairman. The Executive Committee may itself elect a Secretary to keep minutes of its meetings and, from time to time, if it so desires, may name a member to act as Secretary and keep the minutes of a particular meeting. the Executive Committee may fill vacancies among the officers of the Corporation, but any officer appointed by the Executive Committee may be removed by the Board of Directors. All actions taken by the Executive Committee shall be reported to the Board of Directors at the meeting of the Board of Directors following such actions. Section 3.3 The Audit Committee. The Audit Committee shall consist of at least two members. The membership of the Audit Committee shall include either one person, if the Audit Committee is two persons, or a majority of persons, if the Audit Committee is more than two persons, who are not officers or relatives of principal executive officers, employees, and consultants compensated on a continuing basis by the Corporation. The Audit Committee shall periodically review with the General Auditor and with the independent accountants the scope of the auditing procedures and the policies relating to internal accounting procedures and controls of the Corporation and its subsidiaries and shall make recommendations to management in relation thereto. The Audit Committee shall review the public financial statements of the Corporation with the Comptroller and may call upon the Comptroller for such other reports and discussions as the Audit committee 11 may consider desirable. The Audit Committee shall review each annual report on the consolidated financial statements submitted by the independent accountants and may call upon them for such other reports and discussions as the Audit Committee may consider desirable. The Audit Committee shall report its findings, recommendations and conclusions to the Board of Directors at least once each year. The Audit Committee shall consult with management and recommend to the Board of Directors the independent accountants to be nominated for appointment by the shareholders each year, and upon appointment, the independent accountants shall have direct access to the Committee. Section 3.4 Nominating Committee. The Nominating Committee shall consist of at least two members. The Nominating Committee shall review and make recommendations to the Board of Directors with respect to candidates or directors of the Corporation, review appointments of directors to committees of the Board of Directors and review and recommend the scope of activities to be undertaken by the committees of the Board of Directors. Section 3.5 Other Committees. The Board of Directors may also appoint other committees from time to time composed wholly of members of the Board of Directors and may confer such powers upon each of such committees as the Board of Directors may desire. 12 ARTICLE IV Officers Section 4.1 Election of Officers. The Board of Directors shall elect at the Annual Meeting a President, one or more Vice Presidents, a Secretary, and a Treasurer. The Board of Directors may elect a Chairman of the Board (who shall be a member of the Board of Directors). The Board of Directors may also elect or appoint a Comptroller Assistant Secretaries, Assistant Treasurers, Assistant Comptrollers, and such other officers or agents as the Board of Directors shall determine necessary or desirable. Section 4.2 Term of Officer; Resignation; Removal; Vacancies. Except as otherwise provided in the resolution of the Board of Directors electing any officer, each officer shall hold office until the Annual Meeting of the Board of Directors after the annual meeting of stockholders next succeeding his or her election, and until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any officer may resign at any time upon written notice to the Board of Directors or to the President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein no acceptance of such resignation shall be necessary to make it effective. The Board of Directors may remove any officer with or without cause at any time. Any such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation, but the election of an officer, if any, with the Corporation, but the election of an officer shall not of itself create contractual rights. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled for the unexpired portion of the term by the Board of Directors at any regular or special meeting. 13 Section 4.3 The Chairman of the Board. The Chairman of the Board shall preside at all meetings of the Board of Directors. Section 4.4 The President. The President shall have authority to execute all contracts and agreements authorized by the Board of Directors and shall perform such other duties and have other responsibilities and authorities as shall be prescribed from time to time by the Board of Directors, including but, not limited to the following: (a) have general supervision of the entire business of the Corporation, subject to the control of the Board of Directors; (b) have general supervision over the officers of the Corporation and shall prescribe the duties to be performed by them in addition to those prescribed by these By-laws or by the Board of Directors; (c) see that all orders and resolutions of the Board of Directors are carried into effect; (d) from time to time report to the Board of Directors all matters which the interests of the Corporation may require to be brought to their notice; and (e) have the general powers and duties of supervision and management usually vested in the President of a corporation. 14 Section 4.5 The Vice Presidents. The Vice Presidents shall have authority to execute contracts and agreements authorized by the board of Directors and shall perform such other duties and have other responsibilities and authorities as shall be prescribed from time to time by the Board of Directors. Any Vice President may be designated by the Board of Directors or by the Chairman of the Board and Chief Executive Officer as an Executive Vice President, a Senior Vice President or an Administrative Vice President. Section 4.6 The Secretary. The Secretary shall give notice of all meetings of the stockholders and the Board of Directors and shall record all votes and proceedings of the stockholders and the Board of Directors in a minute book kept for that purpose. The Secretary shall have custody of the seal of the Corporation and shall affix it to any instrument requiring the same. The Secretary shall perform such other duties and have such other responsibilities and authorities as shall be prescribed form time to time by the Board of Directors. Section 4.7 The Assistant Secretaries. The assistant Secretaries shall be vested, under the supervision of the Secretary, with all of the powers of the Secretary and shall, in the absence of the Secretary, perform all duties of the Secretary required to be performed. Section 4.8 The Treasurer. The Treasurer shall: (a) select, subject to change by the Board of Directors, financially sound depositories in which shall be deposited all monies and other valuable effects of the Corporation; 15 (b) be responsible for the investment and reinvestment of funds of the Corporation in accordance with general investment policies determined from time to time by the Corporation; (c) see that the Corporation is adequately insured against liability and that its properties are adequately insured against loss or destruction and administer such programs for insurance and self-insurance as may from time to time be approved by the Corporation; (d) disburse the funds of the Corporation in the regular conduct of the Corporation's business or as may be ordered by the Board of Directors; (e) ensure that the Corporation is adequately funded at all times, arranging at the direction of the Board of Directors, for issuance of debt, equity and other forms of securities which may be necessary or appropriate; (f) keep full and accurate books of account; (g) furnish to the Corporation a fidelity bond in a sum and containing provisions as the Board of Directors may require, if at all; 16 (h) keep the accounts of stock registered and transferred in a form and manner and under such regulations as the Board of Directors may prescribe; and (i) perform other duties and shall have other responsibilities and authorities as prescribed form time to time by the Board of Directors. Section 4.9 The Assistant Treasurers. The Assistant Treasurers shall be vested, under the supervision of the Treasurer, with all of the powers of the Treasurer and shall, in the absence of the Treasurer, perform all duties of the Treasurer required to be performed. When required by the Board of Directors, each Assistant Treasurer shall furnish to the Corporation a bond in an amount and with such conditions as may be satisfactory to the Board of Directors. Section 4.10 The Comptroller. The Comptroller shall: (a) keep full and accurate books of account of all assets, liabilities, and business transactions of the Corporation and supervise preparation of the budgets and adherence to them by the departments of the Corporation; (b) establish and maintain such other controls as may be necessary or desirable to assure adequate protection of the assets of the Corporation; 17 (c) have administrative supervision over credit matters in consultation with the various officers and department heads concerned with sales on credit terms; and (d) perform such other duties and have such other responsibilities and authorities as shall be prescribed from time to time by the Board of Directors. Section 4.11 The Assistant Comptrollers. The Assistant Comptrollers shall be vested, under the supervision of the Comptroller, with all of the powers of the Comptroller and shall, in the absence of the Comptroller, perform all duties of the Comptroller required to be performed. Section 4.12 Other Officers. The other officers, if any, of the Corporation shall have such powers and duties in the management of the Corporation as shall be stated in a resolution of the Board of Directors which is not inconsistent with these By-laws and, to the extent not so stated, as generally pertain to their respective offices, subject to the control of the Board of Directors. The Board of Directors may require any officer, agent or employee to give security for the faithful performance of his or her duties. 18 ARTICLE V Stock Section 5.1 Certificates. Every holder of stock of the Corporation shall be entitled to have such shares of stock represented by share certificates, which shall be numbered and entered in the records of the Corporation as they are issued. Such share certificates shall state that the Corporation is organized under the laws of the State of Delaware, the name of the registered owner represented thereby the number and class of shares, and the designation of the series, if any, which the certificate represents and the par value of each share represented, or a statement that the shares are without par value. Every share certificate shall be signed by the Chairman of the Board, the President or a Vice President and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, and sealed with the corporate seal, which may be a facsimile, engraved or printed, but where such certificate is signed by a transfer agent or a registrar, the signature of any such officer upon such certificate may be a facsimile, engraved or printed. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. Section 5.2 Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates. The Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the 19 lost, stolen or destroyed certificate, or such owner's legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. Section 5.3 Owners of Shares. The Corporation shall be entitled to treat the holder of record of any share or shares of the Corporation as the holder and owner in fact for all purposes. The Corporation shall not be bound to recognize any equitable or other claim to or right, title or interest in such shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise expressly provided by law. Section 5.4 Registrar. The Board of Directors or Executive Committee of the Board may appoint a registrar or registrars to record the transfer of the Corporation's shares, and so long as the appointment of such registrar or registrars shall be in effect, no certificate for shares issued pursuant to Section 5.1 hereof shall be binding upon the Corporation or have any validity unless countersigned by such registrar or one of such registrars. Section 5.5 Transfer Agents. Transfers of shares shall be made only upon the books of the Corporation by the holder in person or by power of attorney duly executed and filed with the Treasurer, and on surrender of the certificate or certificates for such shares; but the Board of Directors or Executive Committee of the Board may appoint one or more suitable banks or trust companies or agents to effect transfers of shares under such regulations as the Board of Directors may form time to time prescribe. 20 Section 5.6 Dividends. Except as otherwise provided by law, dividends may be declared by the Board of Directors from time to time in cash or property and shall be payable at such times as the Board of Directors may determine. ARTICLE VI Indemnification Section 6.1 Indemnification of Directors, Officers and Employees. The Corporation shall indemnify to the full extent authorized by law any person made or threatened to be made a party to any action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that such person or such person's testator or intestate is or was a director, officer or employee of the Corporation or serves or served at the request of the Corporation any other enterprise as a director, officer or employee. For purposes of this By-law, the term "other enterprise" shall include, but not be limited to, any corporation, limited liability company, partnership, joint venture, trust or employee benefit plan; service "at the request of the Corporation" shall include, but not be limited to, service as a director, officer or employee of the Corporation which imposes duties on, or involves services by, such director, officer or employee with respect to an employee benefit plan, its participants or beneficiaries; any excise taxes assessed on a person with respect to an employee benefit plan shall be deemed to be indemnifyable expenses; and action by a person with respect to an employee 21 benefit plan which such person reasonably believes to be in the interest of the participants and beneficiaries of such plan shall be deemed to be action not opposed to the best interests of the Corporation. Section 6.2 Advance Payments. Expenses incurred by an officer or director in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors in the specific case upon receipt of an undertaking by or on behalf of such director or officer to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the Corporation as authorized in this Article VI. Such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate. Section 6.3 Non-Exclusivity. The indemnification provided by this Article VI shall not be deemed exclusive of any rights to which those seeking indemnification may be entitled under any By-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such person. Section 6.4 Reliance on Provisions. Each person who shall act as a director, officer, employee or agent of the Corporation shall be deemed to be doing so in reliance upon the rights of indemnification provided by this Article VI. 22 ARTICLE VII Miscellaneous Section 7.1 Fiscal Year. The fiscal year of the Corporation shall be determined by the Board of Directors. Section 7.2 Seal. The Corporation may have a corporate seal which shall have the name of the Corporation inscribed thereon and shall be in such form as may be approved from time to time by the Board of Directors. The corporate seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. Section 7.3 Waiver of Notice of Meetings of Stockholders, Directors and Committees. Whenever notice is required to be given by law or under any provision of the Certificate of Incorporation or these By-laws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice unless so required by the Certificate of Incorporation or these By-laws. 23 Section 7.4 Form of Records. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on, or be in the form of, punch cards, magnetic tape, photographs, microphotographs or any other information storage device, provided that the records so kept can be converted into clearly legible form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect the same. Section 7.5 Amendment of By-Laws. These By-laws may be amended or repealed, and new by-laws adopted, by the Board of Directors, but the stockholders entitled to vote may adopt additional by-laws and may amend or repeal any by-law whether or not adopted by them. Section 7.6 Contributions. The Corporation shall have the power to make contributions and donations for the public welfare or for religious, charitable, scientific or educational purposes. Section 7.7 Governing Law. Reference to "law" in these By-laws shall mean the laws of the State of Delaware. 24 EX-4.1 4 FORM OF COMMON STOCK EXHIBIT 4.1 Form of common stock Certificate Incorporated under the Laws of the State of Delaware Number Shares Cyber Mark International Corp. 10,000,000 Shares of common stock, Par Value $.0001 500,000 Shares of Preferred Stock, Par Value $.001 This is to certify that _____________ is the owner of ____________ fully paid and non-assessable shares of the above Corporation, transferable only on the books of the Corporation, by the holder hereof in person or by duly authorized attorney upon surrender of their certificate properly endorsed. Witness, the seal of the corporation and the signatures of its duly authorized officers. ___________________________,Secretary [SEAL] _________________, President EX-10.1 5 PERFORMANCE EQUITY PLAN EXHIBIT 10.1 1998 PERFORMANCE EQUITY PLAN Approved by Board of Directors on ______, 1998 Approved by Stockholders on ______, 1998 CYBER MARK INTERNATIONAL CORP. 1998 Performance Equity Plan Section 1 Purpose; Definitions. 1.1 Purpose. The purpose of the Cyber Mark International Corp. (the "Company") 1998 Performance Equity Plan (the "Plan") is to enable the Company to offer to its key employees, officers, directors and consultants whose past, present and/or potential contributions to the Company and its Subsidiaries have been, are or will be important to the success of the Company, an opportunity to acquire a proprietary interest in the Company. The various types of long-term incentive awards which may be provided under the Plan will enable the Company to respond to changes in compensation practices, tax laws, accounting regulations and the size and diversity of its businesses. 1.2 Definitions. For purposes of the Plan, the following terms shall be defined as set forth below: (a) "Agreement" means the agreement between the Company and the Holder setting forth the terms and conditions of an award under the Plan. (b) "Board" means the Board of Directors of the Company. (c) "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto and the regulations promulgated thereunder. (d) "Committee" means the Stock Option Committee of the Board or any other committee of the Board, which the Board may designate to administer the Plan or any portion thereof. If no Committee is so designated, then all references in this Plan to "Committee" shall mean the Board. (e) "Common Stock" means the Common Stock of the Company, par value $.0001 per share. (f) "Company" means Cyber Mark International Corp., a corporation organized under the laws of the State of Delaware. (g) "Deferred Stock" means Stock to be received, under an award made pursuant to Section 9, below, at the end of a specified deferral period. (h) "Disability" means disability as determined under procedures established by the Committee for purposes of the Plan. (i) "Effective Date" means the date set forth in Section 13.1, below. (j) "Fair Market Value", unless otherwise required by any applicable provision of the Code or any regulations issued thereunder, means, as of any given date: (i) if the Common Stock is listed on a national securities exchange or quoted on the Nasdaq National Market or Nasdaq SmallCap Market, the last sale price of the Common Stock in the principal trading market for the Common Stock on the last trading day preceding the date of grant of an award hereunder, as reported by the exchange or Nasdaq, as the case may be; (ii) if the Common Stock is not listed on a national securities exchange or quoted on the Nasdaq National Market or Nasdaq SmallCap Market, but is traded in the over-the-counter market, the closing bid price for the Common Stock on the last trading day preceding the 1 date of grant of an award hereunder for which such quotations are reported by the OTC Bulletin Board or the National Quotation Bureau, Incorporated or similar publisher of such quotations; and (iii) if the fair market value of the Common Stock cannot be determined pursuant to clause (i) or (ii) above, such price as the Committee shall determine, in good faith. (k) "Holder" means a person who has received an award under the Plan. (l) "Incentive Stock Option" means any Stock Option intended to be and designated as an "incentive stock option" within the meaning of Section 422 of the Code. (m) "Nonqualified Stock Option" means any Stock Option that is not an Incentive Stock Option. (n) "Normal Retirement" means retirement from active employment with the Company or any Subsidiary on or after age 65. (o) "Other Stock-Based Award" means an award under Section 10, below, that is valued in whole or in part by reference to, or is otherwise based upon, Stock. (p) "Parent" means any present or future parent corporation of the Company, as such term is defined in Section 424(e) of the Code. (q) "Plan" means the Cyber Mark International Corp. 1998 Performance Equity Plan, as hereinafter amended from time to time. (r) "Restricted Stock" means Stock, received under an award made pursuant to Section 8, below, that is subject to restrictions under said Section 8. (s) "SAR Value" means the excess of the Fair Market Value (on the exercise date) of the number of shares for which the Stock Appreciation Right is exercised over the exercise price that the participant would have otherwise had to pay to exercise the related Stock Option and purchase the relevant shares. (t) "Stock" means the Common Stock of the Company, par value $.0001 per share. (u) "Stock Appreciation Right" means the right to receive from the Company, on surrender of all or part of the related Stock Option, without a cash payment to the Company, a number of shares of Common Stock equal to the SAR Value divided by the exercise price of the Stock Option. (v) "Stock Option" or "Option" means any option to purchase shares of Stock which is granted pursuant to the Plan. (w) "Stock Reload Option" means any option granted under Section 6.3, below, as a result of the payment of the exercise price of a Stock Option and/or the withholding tax related thereto in the form of Stock owned by the Holder or the withholding of Stock by the Company. (x) "Subsidiary" means any present or future subsidiary corporation of the Company, as such term is defined in Section 424(f) of the Code. Section 2 Administration. 2.1 Committee Membership. The Plan shall be administered by the Board or a Committee. Committee members shall serve for such term as the Board may in each 2 case determine, and shall be subject to removal at any time by the Board. The Committee members, to the extent possible, shall be "non-employee" as defined in Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended. 2.2 Powers of Committee. The Committee shall have full authority to award, pursuant to the terms of the Plan: (i) Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock, (iv) Deferred Stock, (v) Stock Reload Options and/or (vi) Other Stock-Based Awards. For purposes of illustration and not of limitation, the Committee shall have the authority (subject to the express provisions of this Plan): (a) to select the officers, key employees, directors and consultants of the Company or any Subsidiary to whom Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock, Reload Stock Options and/or Other Stock-Based Awards may from time to time be awarded hereunder. (b) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any award granted hereunder (including, but not limited to, number of shares, share price or other consideration, such as other securities of the Company or other property, any restrictions or limitations, and any vesting, exchange, surrender, cancellation, acceleration, termination, exercise or forfeiture provisions, as the Committee shall determine); (c) to determine any specified performance goals or such other factors or criteria which need to be attained for the vesting of an award granted hereunder; (d) to determine the terms and conditions under which awards granted hereunder are to operate on a tandem basis and/or in conjunction with or apart from other equity awarded under this Plan and cash awards made by the Company or any Subsidiary outside of this Plan; (e) to permit a Holder to elect to defer a payment under the Plan under such rules and procedures as the Committee may establish, including the crediting of interest on deferred amounts denominated in cash and of dividend equivalents on deferred amounts denominated in Stock; (f) to determine the extent and circumstances under which Stock and other amounts payable with respect to an award hereunder shall be deferred which may be either automatic or at the election of the Holder; and (g) to substitute (i) new Stock Options for previously granted Stock Options, which previously granted Stock Options have higher option exercise prices and/or contain other less favorable terms, and (ii) new awards of any other type for previously granted awards of the same type, which previously granted awards are upon less favorable terms. 2.3 Interpretation of Plan. (a) Committee Authority. Subject to Section 12, below, the Committee shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall, from time to time, deem advisable, to interpret the terms and provisions of the Plan and any award issued under the Plan (and to determine the form and substance of all Agreements relating thereto), and to otherwise supervise the administration of the Plan. Subject to Section 12, below, all decisions made by the Committee pursuant to the provisions of the Plan shall be made in the Committee's sole discretion and shall be final and binding upon all persons, including the Company, its Subsidiaries and Holders. (b) Incentive Stock Options. Anything in the Plan to the contrary notwithstanding, no term or provision of the Plan relating to Incentive Stock Options (including but limited to Stock Reload Options or Stock Appreciation rights granted in conjunction with an Incentive Stock Option) or any Agreement providing for Incentive Stock Options shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be so exercised, so as to disqualify the Plan under Section 422 of the Code, or, without the consent of the Holder(s) affected, to disqualify any Incentive Stock Option under such Section 422. 3 Section 3 Stock Subject to Plan. 3.1 Number of Shares. The total number of shares of Common Stock reserved and available for distribution under the Plan shall be 260,000 shares. Shares of Stock under the Plan may consist, in whole or in part, of authorized and unissued shares or treasury shares. If any shares of Stock that have been granted pursuant to a Stock Option cease to be subject to a Stock Option, or if any shares of Stock that are subject to any Stock Appreciation Right, Restricted Stock, Deferred Stock award, Reload Stock Option or Other Stock-Based Award granted hereunder are forfeited or any such award otherwise terminates without a payment being made to the Holder in the form of Stock, such shares shall again be available for distribution in connection with future grants and awards under the Plan. Only net shares issued upon a stock-for-stock exercise (including stock used for withholding taxes) shall be counted against the number of shares available under the Plan. 3.2 Adjustment Upon Changes in Capitalization, Etc. In the event of any change in the number of outstanding shares of Common Stock of the Company occurring as the result of a stock split, reverse stock split or stock dividend on the Common Stock, after the grant of an Award, the Company shall proportionately adjust the number of shares of Stock subject to the Award and the price to be paid on exercise of an Award as well as the aggregate number of shares reserved for issuance under the Plan. Any right to acquire a fractional share of Stock resulting from any adjustments will be rounded to the nearest whole share of Stock. If the Company shall be the surviving corporation in any merger, combination or consolidation, any outstanding Award shall pertain and apply to the shares of Stock to which the Holder is entitled, without adjustment for issuance by the Company of any securities in the merger, combination or consolidation. In the event of a change in the par value of the Common Stock of the Company which is subject to any outstanding Award, such Award will be deemed to pertain to the shares of Stock resulting from any such change. To the extent that the foregoing adjustments relate to the Common Stock of the Company, the adjustments will be made by the Committee whose determination will be final, binding and conclusive. Section 4 Eligibility. Awards may be made or granted to key employees, officers, directors and consultants who are deemed to have rendered or to be able to render significant services to the Company or its Subsidiaries and who are deemed to have contributed or to have the potential to contribute to the success of the Company. No Incentive Stock Option shall be granted to any person who is not an employee of the Company or a Subsidiary at the time of grant. Section 5 Required Six-Month Holding Period. A period of not less than six months must elapse from the date of grant of an award under the Plan, (i) before any disposition by a Holder of a derivative security (as defined in Rule 16a-1 promulgated under the Securities Exchange Act of 1934, as amended) issued under this Plan or (ii) before any disposition by a Holder of any Stock purchased or granted pursuant to an award under this Plan. Section 6 Stock Options. 6.1 Grant and Exercise. Stock Options granted under the Plan may be of two types: (i) Incentive Stock Options and (ii) Nonqualified Stock Options. Any Stock Option granted under the Plan shall contain such terms, not inconsistent with this Plan, or with respect to Incentive Stock Options, not inconsistent with the Plan and the Code, as the Committee may from time to time approve. The Committee shall have the authority to grant Incentive Stock Options, Non-Qualified Stock Options, or both types of Stock Options and which may be granted alone or in addition to other awards granted under the Plan. To the extent that any Stock Option intended to qualify as an Incentive Stock Option does not so qualify, it shall constitute a separate Nonqualified Stock Option. An Incentive Stock Option may be granted only within the ten-year period commencing from the Effective Date and may only be exercised within ten years of the date of grant (or five years in the case of an Incentive Stock Option 4 granted to an optionee ("10% Stockholder") who, at the time of grant, owns Stock possessing more than 10% of the total combined voting power of all classes of stock of the Company. 6.2 Terms and Conditions. Stock Options granted under the Plan shall be subject to the following terms and conditions: (a) Exercise Price. The exercise price per share of Stock purchasable under a Stock Option shall be determined by the Committee at the time of grant and may not be less than 100% of the Fair Market Value of the Stock as defined above; provided, however, that the exercise price of an Incentive Stock Option granted to a 10% Stockholder shall not be less than 110% of the Fair Market Value of the Stock. (b) Option Term. Subject to the limitations in Section 6.1, above, the term of each Stock Option shall be fixed by the Committee. (c) Exercisability. Stock Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee and as set forth in Section 11, below. If the Committee provides, in its discretion, that any Stock Option is exercisable only in installments, i.e., that it vests over time, the Committee may waive such installment exercise provisions at any time at or after the time of grant in whole or in part, based upon such factors as the Committee shall determine. (d) Method of Exercise. Subject to whatever installment, exercise and waiting period provisions are applicable in a particular case, Stock Options may be exercised in whole or in part at any time during the term of the Option, by giving written notice of exercise to the Company specifying the number of shares of Stock to be purchased. Such notice shall be accompanied by payment in full of the purchase price, which shall be in cash or, unless otherwise provided in the Agreement, in shares of Stock (including Restricted Stock and other contingent awards under this Plan) or, partly in cash and partly in such Stock, or such other means which the Committee determines are consistent with the Plan's purpose and applicable law. Cash payments shall be made by wire transfer, certified or bank check or personal check, in each case payable to the order of the Company; provided, however, that the Company shall not be required to deliver certificates for shares of Stock with respect to which an Option is exercised until the Company has confirmed the receipt of good and available funds in payment of the purchase price thereof. Payments in the form of Stock shall be valued at the Fair Market Value of a share of Stock on the date prior to the date of exercise. Such payments shall be made by delivery of stock certificates in negotiable form which are effective to transfer good and valid title thereto to the Company, free of any liens or encumbrances. Subject to the terms of the Agreement, the Committee may, in its sole discretion, at the request of the Holder, deliver upon the exercise of a Nonqualified Stock Option a combination of shares of Deferred Stock and Common Stock; provided that, notwithstanding the provisions of Section 9 of the Plan, such Deferred Stock shall be fully vested and not subject to forfeiture. A Holder shall have none of the rights of a stockholder with respect to the shares subject to the Option until such shares shall be transferred to the Holder upon the exercise of the Option. (e) Transferability. Except as may be set forth in the Agreement, no Stock Option shall be transferable by the Holder other than by will or by the laws of descent and distribution, and all Stock Options shall be exercisable, during the Holder's lifetime, only by the Holder. (f) Termination by Reason of Death. If a Holder's employment by the Company or a Subsidiary terminates by reason of death, any Stock Option held by such Holder, unless otherwise determined by the Committee at the time of grant and set forth in the Agreement, shall be fully vested and may thereafter be exercised by the legal representative of the estate or by the legatee of the Holder under the will of the Holder, for a period of one year (or such other greater or lesser period as the Committee may specify at grant) from the date of such death or until the expiration of the stated term of such Stock Option, whichever period is the shorter. 5 (g) Termination by Reason of Disability. If a Holder's employment by the Company or any Subsidiary terminates by reason of Disability, any Stock Option held by such Holder, unless otherwise determined by the Committee at the time of grant and set forth in the Agreement, shall be fully vested and may thereafter be exercised by the Holder for a period of one year (or such other greater or lesser period as the Committee may specify at the time of grant) from the date of such termination of employment or until the expiration of the stated term of such Stock Option, whichever period is the shorter. (h) Other Termination. Subject to the provisions of Section 14.3, below, and unless otherwise determined by the Committee at the time of grant and set forth in the Agreement, if a Holder is an employee of the Company or a Subsidiary at the time of grant and if such Holder's employment by the Company or any Subsidiary terminates for any reason other than death or Disability, the Stock Option shall thereupon automatically terminate, except that if the Holder's employment is terminated by the Company or a Subsidiary without cause or due to Normal Retirement, then the portion of such Stock Option which has vested on the date of termination of employment may be exercised for the lesser of three months after termination of employment or the balance of such Stock Option's term. (i) Additional Incentive Stock Option Limitation. In the case of an Incentive Stock Option, the aggregate Fair Market Value of Stock (determined at the time of grant of the Option) with respect to which Incentive Stock Options become exercisable by a Holder during any calendar year (under all such plans of the Company and its Parent and Subsidiary) shall not exceed $100,000. (j) Buyout and Settlement Provisions. The Committee may at any time, in its sole discretion, offer to buy out a Stock Option previously granted, based upon such terms and conditions as the Committee shall establish and communicate to the Holder at the time that such offer is made. (k) Stock Option Agreement. Each grant of a Stock Option shall be confirmed by, and shall be subject to the terms of, the Agreement executed by the Company and the Holder. 6.3 Stock Reload Option. The Committee may also grant to the Holder (concurrently with the grant of an Incentive Stock Option and at or after the time of grant in the case of a Nonqualified Stock Option) a Stock Reload Option up to the amount of shares of Stock held by the Holder for at least six months and used to pay all or part of the exercise price of an Option and, if any, withheld by the Company as payment for withholding taxes. Such Stock Reload Option shall have an exercise price equal to the Fair Market Value as of the date of the Stock Reload Option grant. Unless the Committee determines otherwise, a Stock Reload Option may be exercised commencing one year after it is granted and shall expire on the date of expiration of the Option to which the Reload Option is related. Section 7 Stock Appreciation Rights. 7.1 Grant and Exercise. The Committee may grant Stock Appreciation Rights to participants who have been, or are being granted, Options under the Plan as a means of allowing such participants to exercise their Options without the need to pay the exercise price in cash. In the case of a Nonqualified Stock Option, a Stock Appreciation Right may be granted either at or after the time of the grant of such Nonqualified Stock Option. In the case of an Incentive Stock Option, a Stock Appreciation Right may be granted only at the time of the grant of such Incentive Stock Option. 7.2 Terms and Conditions. Stock Appreciation Rights shall be subject to the following terms and conditions: (a) Exercisability. Stock Appreciation Rights shall be exercisable as shall be determined by the Committee and set forth in the Agreement, subject to the limitations, if any, imposed by the Code, with respect to related Incentive Stock Options. 6 (b) Termination. A Stock Appreciation Right shall terminate and shall no longer be exercisable upon the termination or exercise of the related Stock Option. (c) Method of Exercise. Stock Appreciation Rights shall be exercisable upon such terms and conditions as shall be determined by the Committee and set forth in the Agreement and by surrendering the applicable portion of the related Stock Option. Upon such exercise and surrender, the Holder shall be entitled to receive a number of Option Shares equal to the SAR Value divided by the exercise price of the Option. (d) Shares Affected Upon Plan. The granting of a Stock Appreciation Right shall not affect the number of shares of Stock available under for awards under the Plan. The number of shares available for awards under the Plan will, however, be reduced by the number of shares of Stock acquirable upon exercise of the Stock Option to which such Stock Appreciation Right relates. Section 8 Restricted Stock. 8.1 Grant. Shares of Restricted Stock may be awarded either alone or in addition to other awards granted under the Plan. The Committee shall determine the eligible persons to whom, and the time or times at which, grants of Restricted Stock will be awarded, the number of shares to be awarded, the price (if any) to be paid by the Holder, the time or times within which such awards may be subject to forfeiture (the "Restriction Period"), the vesting schedule and rights to acceleration thereof, and all other terms and conditions of the awards. 8.2 Terms and Conditions. Each Restricted Stock award shall be subject to the following terms and conditions: (a) Certificates. Restricted Stock, when issued, will be represented by a stock certificate or certificates registered in the name of the Holder to whom such Restricted Stock shall have been awarded. During the Restriction Period, certificates representing the Restricted Stock and any securities constituting Retained Distributions (as defined below) shall bear a legend to the effect that ownership of the Restricted Stock (and such Retained Distributions), and the enjoyment of all rights appurtenant thereto, are subject to the restrictions, terms and conditions provided in the Plan and the Agreement. Such certificates shall be deposited by the Holder with the Company, together with stock powers or other instruments of assignment, each endorsed in blank, which will permit transfer to the Company of all or any portion of the Restricted Stock and any securities constituting Retained Distributions that shall be forfeited or that shall not become vested in accordance with the Plan and the Agreement. (b) Rights of Holder. Restricted Stock shall constitute issued and outstanding shares of Common Stock for all corporate purposes. The Holder will have the right to vote such Restricted Stock, to receive and retain all regular cash dividends and other cash equivalent distributions as the Board may in its sole discretion designate, pay or distribute on such Restricted Stock and to exercise all other rights, powers and privileges of a holder of Common Stock with respect to such Restricted Stock, with the exceptions that (i) the Holder will not be entitled to delivery of the stock certificate or certificates representing such Restricted Stock until the Restriction Period shall have expired and unless all other vesting requirements with respect thereto shall have been fulfilled; (ii) the Company will retain custody of the stock certificate or certificates representing the Restricted Stock during the Restriction Period; (iii) other than regular cash dividends and other cash equivalent distributions as the Board may in its sole discretion designate, pay or distribute, the Company will retain custody of all distributions ("Retained Distributions") made or declared with respect to the Restricted Stock (and such Retained Distributions will be subject to the same restrictions, terms and conditions as are applicable to the Restricted Stock) until such time, if ever, as the Restricted Stock with respect to which such Retained Distributions shall have been made, paid or declared shall have become vested and with respect to which the Restriction Period shall have expired; (iv) a breach of any of the restrictions, terms or conditions contained in this Plan or the Agreement or 7 otherwise established by the Committee with respect to any Restricted Stock or Retained Distributions will cause a forfeiture of such Restricted Stock and any Retained Distributions with respect thereto. (c) Vesting; Forfeiture. Upon the expiration of the Restriction Period with respect to each award of Restricted Stock and the satisfaction of any other applicable restrictions, terms and conditions (i) all or part of such Restricted Stock shall become vested in accordance with the terms of the Agreement, subject to Section 11, below, and (ii) any Retained Distributions with respect to such Restricted Stock shall become vested to the extent that the Restricted Stock related thereto shall have become vested, subject to Section 11, below. Any such Restricted Stock and Retained Distributions that do not vest shall be forfeited to the Company and the Holder shall not thereafter have any rights with respect to such Restricted Stock and Retained Distributions that shall have been so forfeited. Section 9 Deferred Stock. 9.1 Grant. Shares of Deferred Stock may be awarded either alone or in addition to other awards granted under the Plan. The Committee shall determine the eligible persons to whom and the time or times at which grants of Deferred Stock will be awarded, the number of shares of Deferred Stock to be awarded to any person, the duration of the period (the "Deferral Period") during which, and the conditions under which, receipt of the shares will be deferred, and all the other terms and conditions of the awards. 9.2 Terms and Conditions. Each Deferred Stock award shall be subject to the following terms and conditions: (a) Certificates. At the expiration of the Deferral Period (or the Additional Deferral Period referred to in Section 9.2 (d) below, where applicable), share certificates shall be issued and delivered to the Holder, or his legal representative, representing the number equal to the shares covered by the Deferred Stock award. (b) Rights of Holder. A person entitled to receive Deferred Stock shall not have any rights of a stockholder by virtue of such award until the expiration of the applicable Deferral Period and the issuance and delivery of the certificates representing such Stock. The shares of Stock issuable upon expiration of the Deferral Period shall not be deemed outstanding by the Company until the expiration of such Deferral Period and the issuance and delivery of such Stock to the Holder. (c) Vesting; Forfeiture. Upon the expiration of the Deferral Period with respect to each award of Deferred Stock and the satisfaction of any other applicable restrictions, terms and conditions all or part of such Deferred Stock shall become vested in accordance with the terms of the Agreement, subject to Section 11, below. Any such Deferred Stock that does not vest shall be forfeited to the Company and the Holder shall not thereafter have any rights with respect to such Deferred Stock. (d) Additional Deferral Period. A Holder may request to, and the Committee may at any time, defer the receipt of an award (or an installment of an award) for an additional specified period or until a specified event (the "Additional Deferral Period"). Subject to any exceptions adopted by the Committee, such request must generally be made at least one year prior to expiration of the Deferral Period for such Deferred Stock award (or such installment). Section 10 Other Stock-Based Awards. 10.1 Grant and Exercise. Other Stock-Based Awards may be awarded, subject to limitations under applicable law, that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, shares of Common Stock, as deemed by the Committee to be consistent with the purposes of the Plan, including, without limitation, purchase rights, shares of Common Stock awarded which are not subject to any restrictions or conditions, convertible or exchangeable debentures, or other rights convertible into shares of Common Stock and awards valued by reference to the value of securities of or 8 the performance of specified Subsidiaries. Other Stock-Based Awards may be awarded either alone or in addition to or in tandem with any other awards under this Plan or any other plan of the Company. 10.2 Eligibility for Other Stock-Based Awards. The Committee shall determine the eligible persons to whom and the time or times at which grants of such other stock-based awards shall be made, the number of shares of Common Stock to be awarded pursuant to such awards, and all other terms and conditions of the awards. 10.3 Terms and Conditions. Each Other Stock-Based Award shall be subject to such terms and conditions as may be determined by the Committee and to Section 11, below. Section 11 Accelerated Vesting and Exercisability. If (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), is or becomes the "beneficial owner" (as referred in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company's then outstanding securities in one or more transactions, or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the board of directors cease for any reason to constitute at least a majority thereof, unless the election of each director who was not a director at the beginning of such period has been approved in advance by directors representing at least two-thirds of the directors then in office who were directors at the beginning of the periods, then, the vesting periods of any and all Options and other awards granted and outstanding under the Plan shall be accelerated and all such Options and awards will immediately and entirely vest, and the respective holders thereof will have the immediate right to purchase and/or receive any and all Stock subject to such Options and awards on the terms set forth in this Plan and the respective agreements respecting such Options and awards. Section 12 Amendment and Termination. The Board may at any time, and from time to time, amend alter, suspend or discontinue any of the provisions of the Plan, but no amendment, alteration, suspension or discontinuance shall be made which would impair the rights of a Holder under any Agreement theretofore entered into hereunder, without the Holder's consent. Section 13 Term of Plan. 13.1 Effective Date. The Plan shall be effective as of _________, 1998 ("Effective Date"), subject to the approval of the Plan by the Company's stockholders within one year after the Effective Date. Any awards granted under the Plan prior to such approval shall be effective when made (unless otherwise specified by the Committee at the time of grant), but shall be conditioned upon, and subject to, such approval of the Plan by the Company's stockholders and no awards shall vest or otherwise become free of restrictions prior to such approval. 13.2 Termination Date. Unless terminated by the Board, this Plan shall continue to remain effective until such time no further awards may be granted and all awards granted under the Plan are no longer outstanding. Notwithstanding the foregoing, grants of Incentive Stock Options may only be made during the ten year period following the Effective Date. Section 14 General Provisions. 14.1 Written Agreements. Each award granted under the Plan shall be confirmed by, and shall be subject to the terms of the Agreement executed by the Company and the Holder. The Committee may terminate any award made under the Plan if the Agreement relating thereto is not executed and returned to the Company within 10 days after the Agreement has been delivered to the Holder for his or her execution. 9 14.2 Unfunded Status of Plan. The Plan is intended to constitute an "unfunded" plan for incentive and deferred compensation. With respect to any payments not yet made to a Holder by the Company, nothing contained herein shall give any such Holder any rights that are greater than those of a general creditor of the Company. 14.3 Employees. (a) Engaging in Competition With the Company. In the event a Holder's employment with the Company or a Subsidiary is terminated for any reason whatsoever, and within eighteen months after the date thereof such Holder accepts employment with any competitor of, or otherwise engages in competition with, the Company, the Committee, in its sole discretion, may require such Holder to return to the Company the economic value of any award which was realized or obtained by such Holder at any time during the period beginning on that date which is six months prior to the date of such Holder's termination of employment with the Company. (b) Termination for Cause. The Committee may, in the event a Holder's employment with the Company or a Subsidiary is terminated for cause, annul any award granted under this Plan to such employee and, in such event, the Committee, in its sole discretion, may require such Holder to return to the Company the economic value of any award which was realized or obtained by such Holder at any time during the period beginning on that date which is six months prior to the date of such Holder's termination of employment with the Company. (c) No Right of Employment. Nothing contained in the Plan or in any award hereunder shall be deemed to confer upon any Holder who is an employee of the Company or any Subsidiary any right to continued employment with the Company or any Subsidiary, nor shall it interfere in any way with the right of the Company or any Subsidiary to terminate the employment of any Holder who is an employee at any time. 14.4 Investment Representations. The Committee may require each person acquiring shares of Stock pursuant to a Stock Option or other award under the Plan to represent to and agree with the Company in writing that the Holder is acquiring the shares for investment without a view to distribution thereof. 14.5 Additional Incentive Arrangements. Nothing contained in the Plan shall prevent the Board from adopting such other or additional incentive arrangements as it may deem desirable, including, but not limited to, the granting of Stock Options and the awarding of stock and cash otherwise than under the Plan; and such arrangements may be either generally applicable or applicable only in specific cases. 14.6 Withholding Taxes. Not later than the date as of which an amount must first be included in the gross income of the Holder for Federal income tax purposes with respect to any option or other award under the Plan, the Holder shall pay to the Company, or make arrangements satisfactory to the Committee regarding the payment of, any Federal, state and local taxes of any kind required by law to be withheld or paid with respect to such amount. If permitted by the Committee, tax withholding or payment obligations may be settled with Common Stock, including Common Stock that is part of the award that gives rise to the withholding requirement. The obligations of the Company under the Plan shall be conditioned upon such payment or arrangements and the Company or the Holder's employer (if not the Company) shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Holder from the Company or any Subsidiary. 14.7 Governing Law. The Plan and all awards made and actions taken thereunder shall be governed by and construed in accordance with the laws of the State of New York (without regard to choice of law provisions). 14.8 Other Benefit Plans. Any award granted under the Plan shall not be deemed compensation for purposes of computing benefits under any retirement plan of the Company or any Subsidiary and shall not affect any benefits under any 10 other benefit plan now or subsequently in effect under which the availability or amount of benefits is related to the level of compensation (unless required by specific reference in any such other plan to awards under this Plan). 14.9 Non-Transferability. Except as otherwise expressly provided in the Plan or the Agreement, no right or benefit under the Plan may be alienated, sold, assigned, hypothecated, pledged, exchanged, transferred, encumbranced or charged, and any attempt to alienate, sell, assign, hypothecate, pledge, exchange, transfer, encumber or charge the same shall be void. 14.10 Applicable Laws. The obligations of the Company with respect to all Stock Options and awards under the Plan shall be subject to (i) all applicable laws, rules and regulations and such approvals by any governmental agencies as may be required, including, without limitation, the Securities Act of 1933, as amended, and (ii) the rules and regulations of any securities exchange on which the Stock may be listed. 14.11 Conflicts. If any of the terms or provisions of the Plan or an Agreement (with respect to Incentive Stock Options) conflict with the requirements of Section 422 of the Code, then such terms or provisions shall be deemed inoperative to the extent they so conflict with the requirements of said Section 422 of the Code. Additionally, if this Plan or any Agreement does not contain any provision required to be included herein under Section 422 of the Code, such provision shall be deemed to be incorporated herein and therein with the same force and effect as if such provision had been set out at length herein and therein. If any of the terms or provisions of any Agreement conflict with any terms or provision of the Plan, then such terms or provisions shall be deemed inoperative to the extent they so conflict with the requirements of the Plan. Additionally, if any Agreement does not contain any provision required to be included therein under the Plan, such provision shall be deemed to be incorporated therein with the same force and effect as if such provision had been set out at length therein. 14.12 Non-Registered Stock. The shares of Stock to be distributed under this Plan have not been, as of the Effective Date, registered under the Securities Act of 1933, as amended, or any applicable state or foreign securities laws and the Company has no obligation to any Holder to register the Stock or to assist the Holder in obtaining an exemption from the various registration requirements, or to list the Stock on a national securities exchange. 11 EX-21.1 6 SUBSIDIARIES OF CYBERMARK EXHIBIT 21.1 SUBSIDIARIES OF CYBER MARK INTERNATIONAL CORP. Name Jurisdiction ---- ------------- CM300 Corporation Ontario EX-27 7 FINANCIAL DATA SCHEDULE
5 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1999 0 0 14,523 277,097 92,642 420,372 168,450 0 588,822 222,898 0 610 0 0 217,397 588,822 189,035 296,557 120,239 293,755 0 0 0 0 0 0 0 0 0 (117,437) 0.02 0
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