AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 31, 2001
REGISTRATION NO. ___-_______
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
M-GAB DEVELOPMENT CORPORATION
(Name of small business issuer in its charter)
FLORIDA 4724 33-0961490
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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1059 E. SKYLER DRIVE
DRAPER, UTAH 84020 (801) 361-7644
(Address of principal executive offices (Telephone number)
and intended principal place of business)
Carl M. Berg, President
1059 E. Skyler Drive
Draper, Utah 84020
(801) 361-7644
(Name, address, and telephone
number of agent for service)
COPIES TO:
Brian A. Lebrecht, Esq.
The Lebrecht Group, APLC
22342 Avenida Empresa, Suite 230
Rancho Santa Margarita, California 92688
(949) 635-1240
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [ X ]
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. [ ]
(1) The offering price per share for the selling security holders was estimated solely for the purpose of calculating the registration fee pursuant to Rule 457 of Regulation C.
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
Up to 5,913,000 shares of common stock
M-GAB DEVELOPMENT CORPORATION
M-GAB Development is registering 2,000,000 shares for sale to investors by M-GAB at a price of $0.50 per share. This offering will terminate when all 2,000,000 shares are sold or on September 30, 2002.
M-GAB is also registering up to 3,913,000 shares for sale by:
- Sadie, LLC, an entity controlled by Carl M. Berg, the sole director and officer of M-GAB (3,000,000 shares);
- Carl M. Berg, the sole director and officer of M-GAB (450,000 shares);
- Brian A. Lebrecht, M-GAB's legal counsel (450,000 shares);
- Twelve individuals identified in the Selling Security Holders section of this prospectus, each of which purchased shares from M-GAB (13,000 shares).
INVESTING IN THE COMMON STOCK INVOLVES RISKS. M-GAB IS IN UNSOUND FINANCIAL CONDITION AND YOU SHOULD NOT INVEST UNLESS YOU CAN AFFORD TO LOSE YOUR ENTIRE INVESTMENT. SEE "RISK FACTORS" BEGINNING ON PAGE 3.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Other than shares sold for the benefit of M-GAB, all of the common stock registered by this prospectus will be sold by the selling shareholders on their own behalf at the prevailing market price when they are sold. The common stock is not currently listed on any securities exchange.
THE DATE OF THIS PROSPECTUS IS _______, 2001
PROSPECTUS SUMMARY
M-GAB DEVELOPMENT CORPORATION
We intend to develop, market and distribute a digitally-processed interactive travel brochure that will contain images and full 3-D video of world-class destination resorts such as Entrada on the Southern tip of the French Riviera, as well as remote vacations getaway locations such as Lake Powell and the Grand Canyon. We intend to generate revenues from both the production of our product (paid by the destination resort or location) and from the sale of our product on a subscription basis via the Internet (paid by existing Internet web sites).
We believe that destination resorts and locations will desire to have their properties featured using our travel brochure as a way to increase interest in their location, and through our intended relationships with major Internet web sites, as a way to increase their overall Internet exposure.
We believe that existing Internet sites that provide travel-related products and services, such as Yahoo.com, Expedia.com, American Express Travel, and the major airlines, will subscribe to our products to enhance their Internet presence, improve their customer service, retain existing customers, and increase sales revenues by providing their customers the opportunity to take a "virtual vacation" and experience exotic locales from our client's website.
Our offices are currently located at 1059 E. Skyler Drive, Draper, Utah 84020, and our telephone number is (801) 361-7644.
THE OFFERING
Securities Offered:
Shares Offered by M-GAB: We are registering to sell to new investors
up to 2,000,000 shares of common stock. We
will sell these shares to new investors at
$0.50 per share.
Shares Offered by
Selling Shareholders We are registering shares for sale by selling
shareholders, including:
- 3,000,000 shares issued to Sadie, LLC, an
entity controlled by our sole director and
officer, Carl M. Berg.
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- 450,000 shares issued to our sole director and officer, Carl M. Berg.
- 450,000 shares issued to our legal counsel, Brian A. Lebrecht.
- 13,000 shares issued to twelve individuals identified in the Selling Security Holders section of this prospectus, each of which purchased shares from M-GAB.
RISK FACTORS
Any investment in our common stock involves a high degree of risk. You should consider carefully the following information, together with the other information contained in this prospectus, before you decide to buy our common stock. If any of the following events actually occurs, our business, financial condition or results of operations would likely suffer. In this case, the market price, if any, of our common stock could decline, and you could lose all or part of your investment in our common stock.
Because we are a new company that has not generated any revenues since our formation, we may not be profitable if we commence operations, and our investors may lose all or part of their investment.
We were incorporated in March 2001. We have not commenced our business plan, have no assets, and we have not generated any revenues. We do not anticipate generating any revenue in our current fiscal year, and do not expect to be profitable during the next fiscal year. Our prospects must be considered speculative, considering the risks, expenses, and difficulties frequently encountered in the establishment of a new business. In the event we commence operations, we cannot guaranty that we will be profitable. Our failure to generate sufficient revenues or be profitable may cause an investor to lose all or part of his investment.
Our officers and directors are engaged in other activities that could have conflicts of interest with us or they may not devote sufficient time to our affairs.
We currently have only one officer and director, Carl M. Berg. Mr. Berg devotes approximately ten percent (10%) of his time to us, while devoting the rest of his time to other employment. As a result, conflicts of interest in allocating time, services, and functions between us and the other activities may occur from time to time.
We will need to hire or retain additional members of our management team.
Our current management team consists of only one individual, Mr. Berg. We will need to hire or retain the services of a greater number of experienced people, and people with skills and experience that can help us carry out our business plan. We may experience a delay in finding qualified people, if we can find them at all, which will cause a delay in executing our business plan. We may have to pay certain highly qualified candidates a high level of compensation, which will affect our cash flow and our profitability.
Our ability to generate revenues and achieve market acceptance is uncertain because our business is based on an untested business plan, which may never be accepted by potential customers.
Our business is based on an untested business plan, which may never be accepted by potential destinations, resort owners, or customers. Our failure to complete our development and to market our services and products successfully could significantly affect our ability to succeed which will affect potential investors' ability to sell their shares of common stock. Our inability to generate revenues may cause potential investors to lose all or part of their investment.
If we are unable to develop our digital travel brochure business, we may engage in an entirely different activity or no activity at all.
We have no obligation to conduct the business we have described in this registration statement. Investors will have no input in whether we engage in an entirely different activity or no activity at all. We cannot guaranty that we will be able to enter into profitable agreements with property owners and destination resorts, that we will be able to enter into agreements with existing Internet web sites, or that consumers will want to view our digital brochures.
We will need to raise additional capital to develop and grow our business.
If we are successful in raising $1,000,000 under this offering, then we believe we will have sufficient funds to operate for approximately twelve months. If we raise less than $1,000,000 in this offering, our ability to carry out our business plan will be severely limited, and possibly eliminated. This would have a material adverse effect on our ability to commence operations. We cannot guaranty that we will be able to obtain additional financing at commercially reasonable rates.
Our industry is highly competitive and we may not have adequate resources to market our products to compete successfully.
Competition in the Internet industry is intense. In order to succeed, we have to enter into agreements with property owners and destination resorts to produce our travel brochure. In addition, we will have to market our brochures to existing Internet web sites which are presented with numerous competing products on a regular basis. There is intense competition in each of these areas. Our competition may have substantially more cash and other resources than we do, making it difficult for us to obtain the necessary agreements, commence operations, and operate profitably.
Our ability to generate business will depend on continued growth of online commerce in the event we commence operations.
If we commence operations, our ability to generate business will depend on continued growth in the use of the Internet, particularly in the area of travel. Rapid growth in the use of the Internet and online services is a recent phenomenon. This growth may not continue. A sufficiently broad base of consumers may not accept, or continue to use, the Internet as a medium of commerce. We cannot guaranty that the number of Internet users will continue to grow in general or with respect to travel web sites.
Our sole director and officer owns a majority of our common stock, allowing him to exert significant influence in matters concerning management of our company and matters requiring shareholder approval.
Our sole director and officer beneficially owns over 92% of the common stock before this offering, and will own over 69% of the common stock if we are successful in raising the full $1,000,000. Such concentrated control of the company gives him the ability to nominate the entire board of directors and control all matters requiring approval by our stockholders. Such concentrated control may also make it difficult for our shareholders to receive a premium for their shares of our common stock in the event we merge with a third party or enter into a different transaction which requires shareholder approval, and may adversely affect the price of our common stock.
Our sole director and officer will be permitted to sell some of his stock, which may have a negative effect on our stock price and ability to raise additional capital.
We have included in this registration statement 3,450,000 shares of common stock beneficially held by our sole officer and director. He is not prevented from selling those shares at any time, either before or after we raise the $1,000,000 in this offering. If we are successful in having our stock listed on the over-the-counter electronic bulletin board, he may sell some or all of those shares in the open market, which may have a negative effect on our stock price and may prevent us from obtaining additional capital.
Because we may be subject to the "penny stock" rules, the level of trading activity in our stock may be reduced.
We intend to apply to have our common stock listed on the OTC Electronic Bulletin Board. If we are successful, broker-dealer practices in connection with transactions in "penny stocks" are regulated by certain penny stock rules adopted by the Securities and Exchange Commission. Penny stocks, like shares of our common stock, generally are equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on Nasdaq. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer's presumed control over the market, and monthly account statements showing the market value of each penny stock held in the customer's account. In addition, broker-dealers who sell these securities to persons other than established customers and "accredited investors" must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. Consequently, these requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security subject to the penny stock rules, and investors in our common stock may find it difficult to sell their shares.
We lack a public market for shares of our common stock, which will make it difficult for investors to sell their shares.
There is no public market for shares of our common stock. We cannot guaranty that an active public market will develop or be sustained. Therefore, investors may not be able to find purchasers for their shares of our common stock. Should there develop a significant market for our shares, the market price for those shares may be significantly affected by such factors as our financial results and introduction of new products and services. Factors such as announcements of new or enhanced products by us or our competitors and quarter-to-quarter variations in our results of operations, as well as market conditions in the Internet sector may have a significant impact on the market price of our shares. Further, the stock market has experienced extreme volatility that has particularly affected the market prices of stock of many companies and that often has been unrelated or disproportionate to the operating performance of those companies.
Investors' ability to resell their shares will also be hampered because our sole director and officer owns approximately 92% of our outstanding shares of common stock. Such concentrated control will make the market for our shares highly illiquid. Therefore, it will be difficult for investors to resell their shares if they are not able to find purchasers for their shares of our common stock.
Because we lack a public market for shares of our common stock, the offering price of the shares will be arbitrarily determined by the selling security holders. Therefore, investors may lose all or part of their investment if the price of their shares is too high.
Our common stock is not publicly traded and we do not participate in the OTC Electronic Bulletin Board, an electronic quotation medium for securities traded outside the Nasdaq Stock Market. We cannot guaranty that an active public market for our stock will develop or be sustained. No market makers currently buy or sell our securities. Therefore, the offering price of shares of our common stock may be arbitrarily determined by the selling security holders. Accordingly, purchasers may lose all or part of their investments if the price of their shares is too high. A purchase of our stock in this offering would be unsuitable for a person who cannot afford to lose his entire investment.
Forward Looking Statements. Except for historical information, the discussion in this registration statement contains some forward-looking statements that involve risks and uncertainties. These statements may refer to M-GAB's future plans, objectives, expectations and intentions. These statements may be identified by the use of the words such as "expect," "anticipate," "believe," "intend," "plan" and similar expressions. M-GAB's actual results could differ materially from those anticipated in such forward-looking statements.
USE OF PROCEEDS
M-GAB does not realize any proceeds from the sale of the shares by the selling security holders. M-GAB has already received and is utilizing the proceeds received from those shares sold in private placements in its business.
The net proceeds to M-GAB (assuming an offering price of $0.50 per share and potential sales commissions of up to 10% of the gross proceeds) from the sale of the shares which we intend to offer to new investors would be a maximum of $900,000.
These proceeds would be received from time to time as sales of these shares are made by us. As set forth in the following table, we will use those proceeds primarily for production equipment, marketing of our products, and working capital for operations. We intend to use the proceeds in the following order of priority:
Maximum Offering
Description of Use Amount Percent
-------------------- -------- ---------
Production Equipment $150,000 16.7%
Marketing. . . . . . $415,000 46.1%
Working Capital. . . $335,000 37.2%
Total . . . . . . $900,000 100.0%
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Our allocation of proceeds represents our best estimate based upon the expected sale of shares and the requirements of our proposed business and marketing plan. If any of these factors change, we may reallocate some of the net proceeds. If we are able to sell the maximum shares, we believe that the funds generated by this offering, together with expected revenues, would be sufficient to fund our cash requirements, working capital and other capital requirements for twelve months. The portion of the any net proceeds not immediately required will be invested in certificates of deposit or similar short-term interest bearing instruments.
DETERMINATION OF OFFERING PRICE
There is no established public market for the shares we are registering. Our management has established the price of $0.50 per share based upon their estimates of the market value of M-GAB and the price at which potential investors might be willing to purchase the shares offered.
DILUTION
We are registering for sale to new investors up to 2,000,000 shares at $0.50 per share. Our founding shareholders, Sadie, LLC, Mr. Berg and Mr. Lebrecht, paid $0.0001 per share for their shares, and other existing shareholders whose shares are being registered for resale paid $0.10 per share for their shares. The following table sets forth on a pro forma basis at August 30, 2001, the differences between existing stockholders and new investors with respect to the number of shares of common stock purchased from M-GAB, the total consideration paid to M-GAB, and the average price paid per share (assuming a proposed public offering price of $0.50 per share).
SHARES TOTAL AVERAGE PRICE
PURCHASED PERCENT CONSIDERATION PERCENT PER SHARE
---------- ------- ------------- ------- --------------
Founding
Stockholders 6,000,000 74.9% $ 600 less than 1% $0.0001
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Existing
Stockholders 13,000 less than 1% $ 1,300 less than 1% $ 0.10
=======
New Investors 2,000,000 25.0% $1,000,000 99.8% $ 1.00
---------- ------------ ---------- ------------- =======
Total . . . . 8,013,000 100% $1,001,900 100%
========== ============ ========== =============
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The difference between the public offering price per share of common stock and the net tangible book value per share of common stock after this offering constitutes the dilution to investors in shares are offering to the public in this offering. M-GAB has already realized the dilution from the shares registered for selling shareholders. Net tangible book value per share is determined by dividing the net tangible book value (total assets less intangible assets and total liabilities) by the number of outstanding shares of common stock. The dilution calculations we have set forth in this section reflect an offering price of $0.50 per share.
As of July 31, 2001, M-GAB had a net tangible book deficit of ($118) or ($0.00002) per share of issued and outstanding common stock. After giving effect to the sale of the shares proposed to be offered in the maximum offering of 2,000,000 shares, the net tangible book value at that date would have been $899,882 or $0.112 per share. This represents an immediate increase in net tangible book value of $0.112 per share to existing shareholders and an immediate dilution of $0.388 per share to new investors.
The following table illustrates such per share dilution:
Proposed public offering price (per share) $0.50
Net tangible book value per share
at July 31, 2001 ($0.00002)
Increase in net tangible book value per
share attributable to the proceeds of
the maximum offering $0.112
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Pro forma net tangible book value per share
after the offering $0.112
------
Dilution to new investors $0.388
======
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SELLING SECURITY HOLDERS
The following table provides information with respect to shares offered by
the selling stockholders:
SHARES SHARES BEFORE PERCENT BEFORE SHARES AFTER PERCENT AFTER
SELLING STOCKHOLDER FOR SALE OFFERING OFFERING OFFERING OFFERING (3)
----------------------------- ---------- -------------- ---------------- ------------ -------------
Sadie, LLC (1). . . . . . . . . 3,000,000 3,000,000 49.9% -0- 0%
Carl M. Berg (1). . . . . . . . 450,000 2,550,000 42.4% 2,100,000 26.2%
Brian A. Lebrecht (2) . . . . . 450,000 450,000 7.5% -0- 0%
Jeff R. Horrocks. . . . . . . . 1,250 1,250 *% -0- 0%
Peggy J. Horrocks . . . . . . . 1,250 1,250 *% -0- 0%
Kip K. & Jennifer S. Conner JT. 1,000 1,000 *% -0- 0%
Thomas E. Judd. . . . . . . . . 1,000 1,000 *% -0- 0%
Craig V. Butler . . . . . . . . 1,000 1,000 *% -0- 0%
Steve Lee . . . . . . . . . . . 1,000 1,000 *% -0- 0%
Tamara R. Willmann. . . . . . . 1,000 1,000 *% -0- 0%
Jeffrey S. Willmann . . . . . . 1,000 1,000 *% -0- 0%
Scott Boruta. . . . . . . . . . 1,000 1,000 *% -0- 0%
Robert Bird . . . . . . . . . . 1,250 1,250 *% -0- 0%
Elaine A. Bird. . . . . . . . . 1,250 1,250 *% -0- 0%
Jeffrey Smith . . . . . . . . . 1,000 1,000 *% -0- 0%
----------------------------- ---------- -------------- ---------------- ------------ -------------
Total . . . . . . . . . . . 5,913,000 6,013,000 100.0% 2,100,000 26.2%
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* Less than 1%
(1) Sadie, LLC is wholly-owned and controlled by Mr. Berg. Mr. Berg is the
sole director and officer of M-GAB
(2) Mr. Lebrecht is legal counsel to M-GAB.
(3) Based on 8,013,000 shares outstanding, which includes the 2,000,000 shares
offered for sale to new investors by M-GAB in this offering.
PLAN OF DISTRIBUTION
M-GAB, through its officers and directors, intends to offer up to 2,000,000 shares at a price of $0.50 per share to potential investors. M-GAB has not at this point engaged any broker/dealers licensed by the National Association of Securities Dealers, Inc. for the sale of these shares and presently has no intention to do so. If M-GAB engaged any broker/dealers, they may be acting as underwriters for the offering of these shares. While we presently do not anticipate that they will do so, it is possible that officers, directors, and other promoters of M-GAB may purchase shares at the offering price.
Our officers and directors intend to seek to sell the common stock to be sold by M-GAB in this offering by contacting persons with whom they have had prior contact who have expressed interest in M-GAB, and by seeking additional persons who may have interest through various methods such as mail, telephone, and email. Any solicitations by mail or email will be preceded by or accompanied by a copy of this Prospectus. M-GAB does not intend to offer the securities over the Internet or through general solicitation or advertising.
We intend to apply to have our common stock traded on the over-the-counter bulletin board. If we are successful in our application, the selling stockholders will be able to sell their shares referenced under "Selling Securityholders" from time to time on the over-the-counter bulletin board in privately negotiated sales, or on other markets, at prevailing market rates. If we are not successful in our application, the selling stockholders will sell their shares in privately negotiated transactions. Any securities sold in brokerage transactions will involve customary brokers' commissions.
In accordance with Regulation M under the Securities Exchange Act of 1934, neither we nor the selling stockholders may bid for, purchase or attempt to induce any person to bid for or purchase, any of our common stock while we or they are selling stock in this offering. Neither we nor any of the selling stockholders intends to engage in any passive market making or undertake any stabilizing activity for our common stock. None of the selling stockholders will engage in any short selling of our securities.
LEGAL PROCEEDINGS
We are not a party to or otherwise involved in any legal proceedings.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS
The following table sets forth the names and ages of the current directors and executive officers of the Company, the principal offices and positions with the Company held by each person and the date such person became a director or executive officer of the Company. The executive officers of the Company are elected annually by the Board of Directors. The directors serve one-year terms until their successors are elected. The executive officers serve terms of one year or until their death, resignation or removal by the Board of Directors. Unless described below, there are no family relationships among any of the directors and officers.
Name Age Position(s)
---- --- ----------
Carl M. Berg 33 Chairman of the Board, President, Secretary,
and Treasurer (2001)
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CARL M. BERG has served as our sole director and officer since our inception. He devotes approximately 10% of his time to M-GAB. He also currently serves as a company executive with Sandlot Corporation, a startup subscription management software company. Sandlot is involved in managing subscription-based e-commerce. Mr. Berg has directed business initiatives as the Business Development Manager, which have resulted in growth of the company from 10 to 75 employees worldwide with offices in the U.S. and Windsor, United Kingdom. Prior to Sandlot Corporation, from 1992 to 1999 Mr. Berg served in various management positions in the technology division of Ameritech Corporation. His roles varied from the overall management of library automation implementation projects to directing the implementation division of roughly 75 technical staff. Job titles included Project Coordinator, Project Manager and Director of Implementation.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of August 30, 2001, certain information with
respect to the Company's equity securities owned of record or beneficially by
(i) each Officer and Director of the Company; (ii) each person who owns
beneficially more than 5% of each class of the Company's outstanding equity
securities; and (iii) all Directors and Executive Officers as a group.
Percent of Percent of Percent of
Name and Address of Amount and Nature of Class Before Class After Class After
Title of Class Beneficial Owner Beneficial Ownership Offering (1) Offering (2) Offering (3)
--------------- ---------------------- --------------------- ------------- ------------- -------------
Common
Stock Carl M. Berg (4) 5,550,000 92.3% 69.3% 26.2%
Common
Stock Brian A. Lebrecht (5) 450,000 7.5% 5.6% 0%
--------------------- ------------- ------------- -------------
All Officers and
Directors as a Group
(1 Person) 5,550,000 92.3% 69.3% 26.2%
===================== ============= ============== ============
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(1) Based on 6,013,000 shares outstanding.
(2) Based on 8,013,000 shares outstanding.
(3) Based on 8,013,000 shares outstanding, and further assuming that Mr. Berg
sells 3,450,000 shares, and Mr. Lebrecht sells 450,000 shares,
respectively, registered in this offering.
(4) Includes 3,000,000 shares held of record by Sadie, LLC, an entity
wholly-owned and controlled by Mr. Berg. Mr. Berg is our sole director
and officer.
(5) Mr. Lebrecht is President of The Lebrecht Group, APLC, which serves as
our securities counsel.
There are no current arrangements which will result in a change in control.
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 100,000,000 shares of common stock, par value $0.001, and 5,000,000 shares of preferred stock, par value $0.001. As of August 30, 2001, there are 6,013,000 shares of our common stock issued and outstanding, and no shares of preferred stock issued or outstanding.
COMMON STOCK. Each shareholder of our common stock is entitled to a pro rata share of cash distributions made to shareholders, including dividend payments. The holders of our common stock are entitled to one vote for each share of record on all matters to be voted on by shareholders. There is no cumulative voting with respect to the election of our directors or any other matter. Therefore, the holders of more than 50% of the shares voted for the election of those directors can elect all of the directors. The holders of our common stock are entitled to receive dividends when and if declared by our Board of Directors from funds legally available therefore. Cash dividends are at the sole discretion of our Board of Directors. In the event of our liquidation, dissolution or winding up, the holders of common stock are entitled to share ratably in all assets remaining available for distribution to them after payment of our liabilities and after provision has been made for each class of stock, if any, having any preference in relation to our common stock. Holders of shares of our common stock have no conversion, preemptive or other subscription rights, and there are no redemption provisions applicable to our common stock.
DIVIDEND POLICY. We have never declared or paid a cash dividend on our capital stock. We do not expect to pay cash dividends on our common stock in the foreseeable future. We currently intend to retain our earnings, if any, for use in our business. Any dividends declared in the future will be at the discretion of our Board of Directors and subject to any restrictions that may be imposed by our lenders.
PREFERRED STOCK. We are authorized to issue 5,000,000 shares of preferred stock, par value $0.001, of which no such shares are issued and outstanding. We have not designated the rights and preferences of our preferred stock. The availability or issuance of these shares could delay, defer, discourage or prevent a change in control.
STOCK OPTION PLAN. On May 15, 2001, our directors and shareholders approved the M-GAB, Inc. 2001 Stock Option Plan, effective June 1, 2001. The plan offers selected employees, directors, and consultants an opportunity to acquire our common stock, and serves to encourage such persons to remain employed by us and to attract new employees. The plan allows for the award of stock and options, up to 600,000 shares of our common stock. Following the effectiveness of this registration statement, we intend to register with the Commission the shares of common stock covered by the plan. We have not issued any options or stock awards under the plan.
TRANSFER AGENT. The transfer agent for our common stock is Interwest Transfer Company, Inc., 1981 East Murray Holladay Road, Suite 100, Salt Lake City, Utah 84117, telephone number (801) 272-9294.
INTERESTS OF NAMED EXPERTS AND COUNSEL
Brian A. Lebrecht is the President of The Lebrecht Group, APLC, which serves as our legal counsel. Mr. Lebrecht is the owner of 450,000 shares of our common stock and is a selling shareholder in this offering.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Article X of our Articles of Incorporation provides that, to the fullest extent permitted by law, no director or officer shall be personally liable to the Corporation or its shareholders for damages for breach of any duty owed to the Corporation or its shareholders. In addition, the Corporation shall have the power, in its Bylaws or in any resolution of its stockholders or directors, to indemnify the officers and directors of this Corporation against any liability as may be determined to be in the best interests of this Corporation, and in conjunction therewith, to buy, at this Corporation's expense, policies of insurance.
Our bylaws do not further address indemnification, and there are no resolutions of our shareholders or directors which address indemnification.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.
DESCRIPTION OF BUSINESS
INTRODUCTION
M-GAB Development Corporation, a Florida corporation, was incorporated in the State of Florida on March 27, 2001.
We intend to develop, market and distribute a digitally-processed interactive travel brochure that will contain images and full 3-D video of world-class resorts and remote vacation destinations. We intend to generate revenues from both the production of our product (paid by the destination resort or location) and from the sale of our product on a subscription basis via the Internet (paid by existing Internet web sites).
We believe that destination resorts and locations will desire to have their properties featured using our travel brochure as a way to increase interest in their location, and through our intended relationships with major Internet web sites, as a way to increase their overall Internet exposure.
We believe that existing Internet sites that provide travel-related products and services, such as Yahoo.com, Expedia.com, American Express Travel, and the major airlines, will subscribe to our products to enhance their Internet presence, improve their customer service, retain existing customers, and increase sales revenues by providing their customers the opportunity to take a "virtual vacation" and experience exotic locales from our client's website.
COMPETITION
We have not yet commenced operations, and are entering into a very competitive marketplace. Internet content providers are numerous, and our ability to profitably negotiate and enter into agreements with major web site and Internet portal operators will have a material impact on our operations and future profitability. We believe that the product we have to offer is unique and will be attractive to both web site operators and the resort operators, however, our product can be easily duplicated.
MANUFACTURING
We do not intend to produce or manufacture any of our products. We intend to contract with third parties to produce our video brochures and house them for distribution over the Internet.
KEY CUSTOMERS AND AGREEMENTS
In order to be successful, we will have to enter into agreements with property owners and operators or tourist organizations representing desirable locations. Simultaneously, we will have to negotiate and enter into agreements with major web site and Internet portal operators to display our brochures.
Our success is dependent on our ability to enter into key agreements as described above. We currently do not have any such agreements. Our management believes, however, that they can develop relationships with key property operators and web site owners, however we can make no guaranty of our success. In the event we are unable to develop these key relationships, our business will likely fail.
We do not have, nor do we intend to obtain, any patents or trademarks of our own. As we develop brand recognition, we may apply for trademark and service mark protection.
GOVERNMENT APPROVALS AND REGULATION
We are not subject to any government regulation. Further, we are not subject to any environmental laws or regulations.
RESEARCH AND DEVELOPMENT
We have not spent any material amount of time or money on research and development, and do anticipate doing so in the future.
EMPLOYEES
Other than our current sole director and officer, we do not have any employees because our business has not commenced operations.
MANAGEMENT'S PLAN OF OPERATION
Until the effectiveness of this registration statement, management anticipates that M-GAB will engage in very little business activity, will not hire any employees, and will not enter into any material contracts. As a result, our cash requirements will be minimal, related only to the cost of maintaining the company in good standing. Our two primary shareholders, Mr. Berg and Mr. Lebrecht, have agreed to advance funds to us to fund these minimal cash requirements.
Upon the effectiveness of this registration statement, management intends to file an application to list our securities on the OTC Bulletin Board, and raise additional capital through the sale of securities registered in this offering.
If we are successful in raising the full $1,000,000 under this offering, management anticipates that we can satisfy our cash requirements for a period of at least twelve months. Cash will be used to purchase production equipment, to market our products, and for working capital. It is not anticipated that current management will be paid a salary during the next twelve months.
Management does not anticipate that we will engage in any material product research and development because we will utilize existing technology in the production of our video brochures and viewers will view the brochures on existing web sites.
Management does not anticipate that we will purchase a plant or significant equipment because we will enter into agreements with existing video producers for our video brochures.
Management anticipates that over the next twelve months we will hire up to ten full-time employees to oversee the production of videos by third-party video producers at locations around the world and to negotiate agreements with major web site operators to show the brochures.
Our financial statements have been prepared assuming we will continue as a going concern. Because we have not generated any revenues to date and have minimal capital resources, our auditors included an explanatory paragraph in their report raising substantial doubt about our ability to continue as a going concern.
DESCRIPTION OF PROPERTY
During our pre-operating period, we utilize the office of our founder, Carl
M. Berg, under a verbal agreement where we do not pay rent or reimburse him for
the minimal expenses incurred. When we are successful in raising sufficient
capital to begin executing our business plan, we will identify and lease
appropriate office space.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On April 20, 2001, our founder, Carl M. Berg, purchased 2,550,000 shares of common stock for $255.00. On April 20, 2001, Sadie, LLC, an entity wholly-owned and controlled by Mr. Berg, purchased 3,000,000 shares of common stock for $300.00. Also on April 20, 2001, Brian A. Lebrecht, our legal counsel, purchased 450,000 shares of common stock for $45.00.
Mr. Berg and Mr. Lebrecht have, from time to time, advanced us funds to cover certain expenses. The amount of these advances has not exceeded, and is not expected to exceed, $2,500. These advances do not bear interest, and although they have no maturity date, are expected to be repaid as soon as reasonably possible.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our securities are not listed for trading on any exchange or quotation service. We are not required to comply with the timely disclosure policies of any exchange or quotation service. The requirements to which we would be subject if our securities were so listed typically included the timely disclosure of a material change or fact with respect to our affairs and the making of required filings. Although we are not required to deliver an annual report to security holders, we intend to provide an annual report to our security holders, which will include audited financial statements.
There are no outstanding options or warrants to purchase, or securities convertible into, shares of our common stock. We have agreed to register, under the Securities Act of 1933 for sale by selling security holders, 13,000 shares of our common stock acquired by twelve shareholders in a private placement. None of our outstanding common stock can be sold pursuant to Rule 144 under the Securities Act. The number of holders of record of shares of our common stock is fourteen (14).
We are registering a total of 3,913,000 shares of our common stock for sale by the selling shareholders, and in addition we are registering 2,000,000 shares of our common stock for sale to new investors at $0.50 per share.
There have been no cash dividends declared on our common stock. Dividends are declared at the sole discretion of our Board of Directors.
The Securities Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure relating to the market for penny stocks in connection with trades in any stock defined as a penny stock. The Commission has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to a few exceptions which we do not meet. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated therewith.
EXECUTIVE COMPENSATION
None of our employees are subject to a written employment agreement, and we have not paid compensation to any employees, executive officers, or directors for services rendered to us.
On May 15, 2001, our directors and shareholders approved the M-GAB, Inc. 2001 Stock Option Plan, effective June 1, 2001. The plan offers selected employees, directors, and consultants an opportunity to acquire our common stock, and serves to encourage such persons to remain employed by us and to attract new employees. The plan allows for the award of stock and options, up to 600,000 shares of our common stock. Following the effectiveness of this registration statement, we intend to register with the Commission the shares of common stock covered by the plan. We have not issued any options or stock awards under the plan.
Our Directors do not receive compensation for serving as a Director, but they are entitled to reimbursement for their travel expenses.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
There have been no disagreements with our accountants required to be disclosed pursuant to Item 304 of Regulation S-B.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for M-GAB by The Lebrecht Group, APLC. Brian A. Lebrecht, the President of The Lebrecht Group, APLC, is presently the beneficial owner of 450,000 shares of M-GAB common stock which are being registered for resale in this registration statement.
AVAILABLE INFORMATION
M-GAB is not subject to the reporting requirements of the Securities Exchange Act of 1934. M-GAB has filed with the Securities and Exchange Commission a registration statement on Form SB-2, together with all amendments and exhibits thereto, under the Securities Act of 1933 with respect to the common stock offered hereby. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules thereto. Statements contained in this prospectus as to the contents of any contract or other document referred to are not necessarily complete and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the registration statement, each such statement being qualified in all respects by such reference.
Copies of all or any part of the registration statement may be inspected without charge or obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and its public reference facilities in New York, New York and Chicago, Illinois, upon the payment of the fees prescribed by the Commission. The registration statement is also available through the Commission's web site at the following address: http://www.sec.gov.
EXPERTS
Our financial statements as of July 31, 2001 and for the period from inception (March 27, 2001) through July 31, 2001 included in the prospectus which is part of a registration statement have been so included in reliance on the report of Manuel J. Ramirez of Ramirez International Financial and Accounting Services, Inc., a Professional CPA Corporation, given on the authority of said firm as experts in auditing and accounting.
FINANCIAL STATEMENTS
Index to Financial Statements Independent Auditors' Report F-1 Balance Sheet as of July 31, 2001 F-2 Statement of Operations from Inception (March 27, 2001) through July 31, 2001 F-3 Statement of Stockholders Equity from Inception (March 27, 2001) through July 31, 2001 F-4 Statement of Cash Flows from Inception (March 27, 2001) through July 31, 2001 F-5 Notes to the Financial Statements F-6 - F-8 |
M-GAB DEVELOPMENT CORPORATION
(A FLORIDA DEVELOPMENT STAGE CORPORATION)
INDEPENDENT AUDITORS' REPORT
AND FINANCIAL STATEMENTS
AS OF JULY 31, 2001
AND FROM
INCEPTION (MARCH 27, 2001)
THROUGH JULY 31, 2001
M-GAB DEVELOPMENT CORPORATION
(A FLORIDA DEVELOPMENT STAGE CORPORATION)
TABLE OF CONTENTS
PAGE
Independent Auditors' Report 1
Audited Financial Statements:
Balance Sheet 2
Statement of Operations 3
Statement of Stockholders' Equity 4
Statement of Cash Flows 5
Notes to Financial Statements 6-8
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INDEPENDENT AUDITORS' REPORT
To: The Board of Directors
of M-GAB DEVELOPMENT CORPORATION
We have audited the accompanying balance sheet of M-GAB DEVELOPMENT CORPORATION (a Florida Development Stage corporation) as of July 31, 2001 and the related statements of operations, stockholders' equity and cash flows for the period from Inception (March 27, 2001) through July 31, 2001. These statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of M-GAB DEVELOPMENT CORPORATION as of July 31, 2001 and the results of its operations and cash flows for the period from Inception (March 27, 2001) through July 31, 2001, in conformity with generally accepted accounting principles.
The accompanying statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 4, to the financial statements, the Company has minimal capital resources presently available to meet obligations that normally can be expected to be incurred by similar companies, and with which to carry out its planned activities. These conditions raise substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters also are described in Note 4. The financial statements do not include any adjustments that might result form the outcome of this uncertainty.
MANUEL J. RAMIREZ, CPA
/s/ Manuel J. Ramirez, CPA August 24, 2001 Irvine, California |
M-GAB DEVELOPMENT CORPORATION
(A FLORIDA DEVELOPMENT CORPORATION)
BALANCE SHEET
JULY 31, 2001
-------------
ASSETS
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ -
--------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . $ -
========
LIABILITIES AND EQUITY
Accounts payable and accrued liabilities . . . . . . . . . . . . $ 118
Commitments and contingencies (See Note 4) . . . . . . . . . . . -
Shareholders' equity:
Preferred stock, $0.001 par value;
5,000,000 shares authorized;. -
No shares issued or outstanding at July 31, 2001
Common stock, $0.001 par value;
100,000,000 shares authorized; . 6,000
6,000,000 shares issued and outstanding at July 31, 2001
Additional paid in capital . . . . . . . . . . . . . . . . . . . (5,400)
Deficit accumulated during development . . . . . . . . . . . . . (718)
--------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . (118)
--------
Total Liabilities and Shareholders' Equity . . . . . . . . . . . $ -
========
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The accompanying notes are an integral part of these statements.
M-GAB DEVELOPMENT CORPORATION
(A FLORIDA DEVELOPMENT CORPORATION)
STATEMENT OF OPERATIONS
INCEPTION
MARCH 27, 2001
THROUGH
JULY 31, 2001
--------------
Revenue $ -
Costs and expenses - Organization costs (718)
-----------
Net Loss $ (718)
===========
Net loss per share available to common stockholders
Basic and Diluted $ (0)
Weighted average number of common shares outstanding 4,857,143
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The accompanying notes are an integral part of these statements.
M-GAB DEVELOPMENT CORPORATION
(A FLORIDA DEVELOPMENT STAGE CORPORATION)
STATEMENT OF STOCKHOLDERS' EQUITY
DEFICIT
ADDITIONAL ACCUMULATED
COMMON STOCK PAID-IN DURING
SHARES PAR VALUE CAPITAL DEVELOPMENT TOTAL
---------- ------------- --------------- -------------- ------
Founder Stock, $0.0001 per share,
issued March 27, 2001. . . . . . . . . 6,000,000 $ 6,000 $ (5,400) $ - $ 600
Net loss (718) (718)
--------- ------------- --------------- -------------- -------
Balance, July 31, 2001 . . . . . . . . 6,000,000 $ 6,000 $ (5,400) $ (718) $(118)
========= ============= ================ ============== =======
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The accompanying notes are an integral part of these statements.
M-GAB DEVELOPMENT CORPORATION
(A FLORIDA DEVELOPMENT STAGE CORPORATION)
STATEMENT OF CASH FLOWS
INCEPTION
MARCH 27, 2001
THROUGH
JULY 31, 2001
----------------
Cash flows from operating activities -
Net loss $ (718)
Adjustments to reconcile net loss to cash
used in operating activities - -
Changes in assets and liabilities -
Increase in payables 118
--------
Cash used in operating activities (600)
Cash flows from investing activities - -
--------
Cash provided by investing activities -
Cash flows from financing activities -
Proceeds from issuance of common stock 600
--------
Cash provided by financing activities 600
Net increase in cash -
Cash, beginning of the period -
--------
Cash, end of the period $ -
========
Supplemental information -
No amounts were paid for interest or taxes during the period.
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The accompanying notes are an integral part of these statements.
M-GAB DEVELOPMENT CORPORATION
(A FLORIDA DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS
NATURE OF OPERATIONS. The Company incorporated in Florida on March 27, 2001. The fiscal year end of the Company is December 31. Planned principal operations of the Company have not yet commenced; activities to date have been limited to forming the Company, developing its business plan, and obtaining initial capitalization. Initially, the Company will focus its efforts to develop, market and distribute a digitally processed interactive travel brochure (virtual portal) that will contain images and full 3-D video of world-class destinations as well as remote getaway locations. The technology will be licensed and sold on a subscription basis via the Internet to commercial and consumer markets.
PRINCIPLES OF ACCOUNTING. The accompanying financial statements have been prepared in conformity with generally accepted accounting principles.
ACCOUNTING ESTIMATES. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.
SHARES ISSUED IN EXCHANGE FOR SERVICES. The fair value of shares issued in exchange for services rendered to the Company is determined by the Company's officers and directors, as there is currently no market for the Company's stock. As of July 31, 2001, no shares have been issued for services.
CASH AND CASH EQUIVALENTS. The Company includes cash on deposit and short-term investments with original maturities less than ninety days as cash and cash equivalents in the accompanying financial statements.
ORGANIZATION COSTS. As of July 31, 2001, organization costs, primarily professional and filing fees, of approximately $718 have been charged against operating income.
RESEARCH AND DEVELOPMENT. Research and development costs are expensed as incurred as required by Statement of Financial Accounting Standards No. 2, "Accounting for Research and Development Costs." As of July 31, 2001, no costs had been incurred.
STOCK-BASED COMPENSATION. In accordance with the provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," (FAS 123), the Company has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," (APB 25) and related interpretations in accounting for its employee stock option plans. Under APB 25, if the exercise price of the Company's employee stock options equals or exceeds the fair value of the underlying stock on the date of grant, no compensation is recognized. As of July 31, 2001, no options had been issued for services.
INCOME TAXES. The Company has made no provision for income taxes because of financial statement and tax losses since its inception. A valuation allowance has been used to offset the recognition of any deferred tax assets due to the uncertainty of future realization. The use of any tax loss carryforward benefits may also be limited as a result of changes in Company ownership.
FAIR VALUE OF FINANCIAL INSTRUMENTS. The Company considers all liquid interest-earning investments with a maturity of three months or less at the date of purchase to be cash equivalents. Short-term investments generally mature between three months and six months from the purchase date. All cash and short-term investments are classified as available for sale and are recorded at market using the specific identification method; unrealized gains and losses are reflected in other comprehensive income. Cost approximates market for all classifications of cash and short-term investments; realized and unrealized gains and losses were not material.
CONCENTRATION OF CREDIT RISK. The Company maintains cash and cash equivalents
with a single financial institution. The Company performs periodic evaluations
of the relative credit standing of the financial institution. The Company has
not sustained losses from these instruments.
NET LOSS PER COMMON SHARE. Basic loss per common share (Basic EPS) excludes
dilution and is computed by dividing net loss available to common shareholders
(the numerator) by the weighted average number of common shares outstanding (the
denominator) during the period. Diluted loss per common share (Diluted EPS) is
similar to the computation of Basic EPS except that the denominator is increased
to include the number of additional common shares that would have been
outstanding if the dilutive potential common shares had been issued. In
addition, in computing the dilutive effect of convertible securities, the
numerator is adjusted to add back the after-tax amount of interest recognized in
the period associated with any convertible debt. The computation of Diluted EPS
does not assume exercise or conversion of securities that would have an
anti-dilutive effect on net loss per share. All potential common shares are
anti-dilutive; therefore, Basic EPS equals Diluted EPS.
STOCK-BASED COMPENSATION. The Company did not issue nor did it recognize stock-based compensation from Inception, March 27, 2001, through July 31, 2001.
PRIVATE PLACEMENT MEMORANDUM. On June 1, 2001, the Company began marketing 100,000 shares of common stock at $0.10 per share pursuant to a Private Placement Memorandum. The proceeds from the offering are to be used for pre-incorporation expenditures, consulting fees and working capital.
STOCK OPTION PLAN. The Company's Board and shareholders approved a Stock Option Plan, effective June 1, 2001. As of July 31, 2001, no options had been granted.
LEGAL SERVICES. The Company has engaged a shareholder as its corporate counsel. All services rendered by counsel are billed as incurred; billings to date total $718, of which $118 remains due and payable.
RENT. The Company's officer and directors currently work from their own offices; they do not allocate office rent costs to the Company.
STOCKHOLDERS LOANS AND ADVANCES. From time to time, certain Company stockholders loan or advance monies to the Company. Loans bear interest at rates established at the time of the loan; advances bear no interest. While these loans and advances have no maturity dates, they are expected to be repaid as early as practicable. At July 31, 2001, no advances or loans were outstanding. See Note 5 for subsequent events.
GOING CONCERN CONTINGENCY. The Company has minimal capital resources presently available to meet obligations that normally can be expected to be incurred by similar companies, and with which to carry out its planned activities. These factors raise doubt about the Company's ability to continue as a going concern. Management is seeking additional equity financing to fund planned operations; management believes actions currently being taken provide the opportunity for the Company to continue as a going concern. However, there is no assurance that the Company will be able to obtain such financing. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
COMMON STOCK ISSUANCE. Since July 31, 2001, the Company received $1,200 for 12,000 shares of common stock at $0.10 per share, pursuant to subscription agreements received for the Private Placement Memorandum; the related stock certificates have not yet been issued.
STOCKHOLDERS LOANS AND ADVANCES. On August 8, 2001, a stockholder advanced $2,500 to the Company to cover certain corporate expenses. The advance bears no interest and is due as soon as practicable.
YOU MAY RELY ON THE INFORMATION CONTAINED IN THIS
PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE
INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS
PROSPECTUS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
SALE OF COMMON STOCK MEANS THAT INFORMATION CONTAINED
IN THIS PROSPECTUS IS CORRECT AFTER THE DATE OF THIS
PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY THESE SHARES OF THE
COMMON STOCK IN ANY CIRCUMSTANCES UNDER WHICH THE OFFER
OR SOLICITATION IS UNLAWFUL.
_________________ 5,913,000 SHARES
Prospectus Summary 2
Risk Factors 3
Use of Proceeds 7
Determination of Offering Price 7
Dilution 8
Selling Stockholders 9
Plan of Distribution 10
Legal Proceedings 10
Management 11
Principal Stockholder 12
Description of Securities 13 -------------------------
Interests of Experts and Counsel 13 PROSPECTUS
Business 15 -------------------------
Management's Plan of Operation 17
Description of Property 17
Certain Transactions 18
Market for Common Equity 18
Executive Compensation 19 __________, 2001
Changes in Accountants 19
Legal Matters 19
Available Information 19
Experts 20
Index to Consolidated Financial
Statements 20
Dealer Prospectus Delivery
Obligation. Until ________, 2002;
all dealers that effect
transactions in these securities,
whether or not participating in
this offering, may be required to
deliver a prospectus. This is in
addition to the dealers' obligation
to deliver a Prospectus when acting
as underwriters and with respect to
their unsold allotments or
subscriptions.
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PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article X of our Articles of Incorporation provides that, to the fullest extent permitted by law, no director or officer shall be personally liable to the Corporation or its shareholders for damages for breach of any duty owed to the Corporation or its shareholders. In addition, the Corporation shall have the power, in its Bylaws or in any resolution of its stockholders or directors, to indemnify the officers and directors of this Corporation against any liability as may be determined to be in the best interests of this Corporation, and in conjunction therewith, to buy, at this Corporation's expense, policies of insurance.
Our bylaws do not further address indemnification, and there are no resolutions of our shareholders or directors which address indemnification.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
We will pay all expenses in connection with the registration and sale of the common stock by the selling security holders. The estimated expenses of issuance and distribution are set forth below:
Registration Fees Approximately $780.52
Transfer Agent Fees Approximately $500.00
Costs of Printing and Engraving Approximately $500.00
Legal Fees Approximately $2,500.00
Accounting Fees Approximately $2,500.00
---------
Total $6,780.52
=========
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RECENT SALES OF UNREGISTERED SECURITIES
On April 20, 2001, we issued 2,550,000 shares of our common stock, restricted in accordance with Rule 144 of the Securities Act of 1933, to Carl M. Berg, our founder and an accredited investor, in exchange for consideration of $255. In addition, we issued 3,000,000 shares of common stock, restricted in accordance with Rule 144, to Sadie, LLC, an entity wholly-owned and controlled by Mr. Berg, in exchange for consideration of $300. The issuances were exempt from registration pursuant to Section 4(2) of the Securities Act.
On April 20, 2001, we issued 450,000 shares of our common stock, restricted in accordance with Rule 144 of the Securities Act of 1933, to Brian A. Lebrecht, an accredited investor, in exchange for consideration of $45. The issuance was exempt from registration pursuant to Section 4(2) of the Securities Act.
II-1
In August of 2001, we issued an aggregate of 13,000 shares of our common stock, restricted in accordance with Rule 144 of the Securities Act of 1933, to twelve (12) non-accredited investors, in exchange for total consideration of $1,300. The issuances were exempt from registration pursuant to Rule 504 of Regulation D promulgated under the Securities Act.
On May 15, 2001, our directors and shareholders approved the M-GAB, Inc. 2001 Stock Option Plan, effective June 1, 2001. The plan allows for the award of stock and options, up to 600,000 shares of our common stock. The plan was adopted under, and awards and issuances thereunder will be exempt from registration pursuant to, Rule 701 of the Securities Act of 1933. We have not issued any options or stock awards under the plan.
EXHIBITS
Exhibit No. Description
------------ -----------
3.1 Articles of Incorporation of M-GAB Development Corporation
3.2 Bylaws of M-GAB Development Corporation
4.1 M-GAB, Inc. 2001 Stock Option Plan
5.1* Legal Opinion of The Lebrecht Group, APLC
23.1 Consent of Manuel J. Ramirez of Ramirez International Financial
and Accounting Services, Inc., a Professional CPA Corporation
23.2 Consent of The Lebrecht Group, APLC (included in Exhibit 5.1)
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* to be filed by amendment
UNDERTAKINGS
A. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by our 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 registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
B. We hereby undertake:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement to:
II-2
(i) Include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) (Section 230.424(b) of Regulation S-B) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective Registration Statement; and
(iii) Include any additional or changed material information on the plan of distribution.
(2) For determining liability under the Securities Act, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the registrant certifies that is has reasonable grounds to believe that it meets all of the requirements for filing on Form SB-2 and authorized this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Draper, State of Utah, on August 31, 2001.
M-GAB Development Corporation, a Florida corporation
/s/ Carl M. Berg ________________________________ By: Carl M. Berg Its: President |
In accordance with the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates stated.
/s/ Carl M. Berg
__________________________ August 31, 2001
By: Carl M. Berg
Its: President, Secretary, Treasurer,
principal financial officer,
principal accounting officer, and
Sole Director
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II-3
ARTICLES OF INCORPORATION
OF
M-GAB DEVELOPMENT CORPORATION
The undersigned, desiring to form a corporation (the "Corporation") under the laws of Florida, hereby adopts the following Articles of Incorporation:
ARTICLE I
CORPORATE NAME
The name of the Corporation is M-GAB Development Corporation.
ARTICLE II
PURPOSE
The Corporation shall be organized for any and all purposes authorized under the laws of the State of Florida.
ARTICLE III
PERIOD OF EXISTENCE
The period during which this Corporation shall continue is perpetual.
ARTICLE IV
SHARES
This Corporation is authorized to issue two classes of shares of stock to be designated as "Common Stock" and "Preferred Stock". The total number of shares of Common Stock which this Corporation is authorized to issue is One Hundred Million (100,000,000) shares, par value $0.001. The total number of shares of Preferred Stock which this Corporation is authorized to issue is Five Million (5,000,000) shares, par value $0.001.
The shares of Preferred Stock may be issued from time to time in one or more series. The Board of Directors of the Corporation (the "Board of Directors") is expressly authorized to provide for the issue of all or any of the shares of the Preferred Stock in one or more series, and to fix the number of shares and to determine or alter for each such series, such voting powers, full or limited, or no voting powers, and such designations, preferences, and relative, participating, optional, or other rights and such qualifications, limitations, or restrictions thereof, as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors providing for the issue of such shares (a "Preferred Stock Designation") and as may be permitted by the laws of the State of Florida. The Board of Directors is also expressly authorized to increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of any series subsequent to the issue of shares of that series. In case the number of shares of any such series shall be so decreased, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series.
ARTICLE V
PLACE OF BUSINESS
The initial address of the principal place of business of this Corporation shall be 22342 Avenida Empresa, Suite 230, Rancho Santa Margarita, California 92688. The Board of Directors may at any time and from time to time move the principal office of this corporation.
ARTICLE VI
DIRECTORS AND OFFICERS
The business of this Corporation shall be managed by its Board of Directors. The number of such directors shall not be less than one (1) and, subject to such minimum may be increased or decreased from time to time in the manner provided in the Bylaws. The Board of Directors shall be elected at such time and in such manner as provided in the Bylaws.
ARTICLE VII
DENIAL OF PREEMPTIVE RIGHTS
No shareholder shall have any right to acquire shares or other securities of the Corporation except to the extent such right may be granted by an amendment to these Articles of Incorporation or by a resolution of the Board of Directors.
ARTICLE VIII
AMENDMENT OF BYLAWS
Anything in these Articles of Incorporation, the Bylaws, or the Florida Corporation Act notwithstanding, bylaws shall not be adopted, modified, amended or repealed by the shareholders of the Corporation except upon the affirmative vote of a simple majority vote of the holders of all the issued and outstanding shares of the Corporation entitled to vote thereon.
ARTICLE IX
SHAREHOLDERS
9.1 Inspection of Books. The Board of Directors shall make reasonable rules to determine at what times and places and under what conditions the books of the Corporation shall be open to inspection by shareholders or a duly appointed representative of a shareholder.
9.2 Control Share Acquisition. The provisions relating to any control share acquisition as contained in Florida Statutes now, or hereinafter amended, and any successor provision shall not apply to the Corporation.
9.3 Quorum. The holders of shares entitled to one-third of the votes at a meeting of shareholder's shall constitute a quorum.
9.4 Required Vote. Acts of shareholders shall require the approval of holders of 50.01% of the outstanding votes of shareholders.
ARTICLE X
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
To the fullest extent permitted by law, no director or officer of the Corporation shall be personally liable to the Corporation or its shareholders for damages for breach of any duty owed to the Corporation or its shareholders. In addition, the Corporation shall have the power, in its Bylaws or in any resolution of its stockholders or directors, to undertake to indemnify the officers and directors of this Corporation against any contingency or peril as may be determined to be in the best interests of this Corporation, and in conjunction therewith, to procure, at this Corporation's expense, policies of insurance.
ARTICLE XI
INCORPORATOR
The name and address of the person signing these Articles of Incorporation as incorporator is:
Brian A. Lebrecht, Esq.
The Lebrecht Group, APLC
22342 Avenida Empresa, Suite 230
Rancho Santa Margarita, CA 92688
ARTICLE XII
CONTRACTS
No contract or other transaction between this corporation and any person, firm or corporation shall be affected by the fact that any officer or director of this Corporation is such other party or is, or at some time in the future becomes, an officer, director, or partner of such other contracting party, or has now or hereafter a direct or indirect interest in such contract.
ARTICLE XIII
RESIDENT AGENT
The name and address of the initial resident agent of this Corporation is:
Paracorp Incorporated 236 East 6th Avenue Tallahassee, FL 32303
IN WITNESS WHEREOF, I have hereunto subscribed to and executed these Articles of Incorporation on this March 22, 2001.
/s/ Brian A. Lebrecht ---------------------------------------- Brian A. Lebrecht, Esq., Incorporator |
BYLAWS
OF
M-GAB DEVELOPMENT CORPORATION
A FLORIDA CORPORATION
BYLAWS
OF
M-GAB DEVELOPMENT CORPORATION
a Florida corporation
ARTICLE I
OFFICES 1
Section 1. Principal Office 1
-----------------
Section 2. Other Offices 1
--------------
ARTICLE II
DIRECTORS - MANAGEMENT 1
Section 1. Powers, Standard of Care 1
---------------------------
A. Powers 1
------
B. Standard of Care; Liability 1
------------------------------
C. Exception for Close Corporation 2
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|
ARTICLE III
OFFICERS 6
Section 1. Officers 6
--------
Section 2. Election of Officers 7
----------------------
Section 3. Subordinate Officers, Etc. 7
----------------------------
Section 4. Removal and Resignation of Officers 7
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Section 5. Vacancies 7
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Section 6. Chairman of the Board 7
------------------------
Section 7. President and Chief Executive Officer 7
-----------------------------------------
Section 8. Secretary 8
---------
Section 9. Chief Financial Officer 8
-------------------------
ARTICLE IV
SHAREHOLDERS' MEETINGS 9
Section 1. Place of Meetings 9
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Section 2. Annual Meeting 9
---------------
Section 3. Special Meetings 9
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Section 4. Notice of Meetings - Reports 10
------------------------------
Section 5. Quorum 10
------
Section 6. Adjourned Meeting and Notice Thereof 11
----------------------------------------
Section 7. Waiver or Consent by Absent Shareholders 11
-----------------------------------------
Section 8. Maintenance and Inspection of Bylaws 12
------------------------------------
Section 9. Annual Report to Shareholders 12
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Section 10. Financial Statements 12
---------------------
Section 11. Annual Statement of General Information 13
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ARTICLE IX
AMENDMENTS TO BYLAWS 13
Section 1. Amendment by Shareholders 13
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Section 2. Amendment by Directors 13
------------------------
Section 3. Record of Amendments 13
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ARTICLE X
MISCELLANEOUS 14
Section 1. Shareholders' Agreements 14
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Section 2. Effect of Shareholders' Agreements 14
----------------------------------
Section 3. Subsidiary Corporations 14
------------------------
Section 4. Accounting Year 14
----------------
Section 5. Form 14
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|
BYLAWS
OF
M-GAB DEVELOPMENT CORPORATION
A FLORIDA CORPORATION
ARTICLE I
OFFICES
ARTICLE II
DIRECTORS - MANAGEMENT
(i) Each Director shall exercise such powers and otherwise perform such duties, in good faith, in the matters such Director believes to be in the best interests of the Corporation, and with such care, including reasonable inquiry, using ordinary prudence, as a person in a like position would use under similar circumstances.
(ii) In performing the duties of a Director, a Director shall be entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, in which case prepared or presented by:
(a) One or more officers or employees of the Corporation whom the Director believes to be reliable and competent in the matters presented,
(b) Counsel, independent accountants or other persons as to which the Director believes to be within such person's professional or expert competence, or
(c) A Committee of the Board upon which the Director does not serve, as to matters within its designated authority, which committee the Director believes to merit confidence, so long as in any such case the Director acts in good faith, after reasonable inquiry when the need therefore is indicated by the circumstances and without knowledge that would cause such reliance to be unwarranted.
B. A vacancy or vacancies on the Board of Directors shall be deemed to exist in the event of the death, resignation or removal of any Director, or if the Board of Directors by resolution declares vacant the office of a Director who has been declared of unsound mind by an order of court or convicted of a felony, or if there shall be at any less than the full number of Directors as set forth Article II, Section 2 of these Bylaws.
C. The Shareholders may elect a Director or Directors at any time to fill any vacancy or vacancies not filled by the Directors, but any such election by written consent shall require the consent of a majority of the outstanding shares entitled to vote.
D. Any Director may resign, effective on giving written notice to the Chairman of the Board, the President, the Secretary, or the Board of Directors, unless the notice specifies a later time for that resignation to become effective. If the resignation of a Director is effective at a future time, the Board of Directors may, prior to the effective date of a Director's resignation, elect a successor to take office when the resignation becomes effective.
E. No reduction of the authorized number of Directors shall have the effect of removing any Director before that Director's term of office expires.
B. No Director may be removed (unless the entire Board is removed) when the votes cast against removal or not consenting in writing to such removal would be sufficient to elect such Director if voted cumulatively at an election at which the same total number of votes were cast (or, if such action is taken by written consent, all shares entitled to vote, were voted) and the entire num-ber of Directors authorized at the time of the Directors most recent election were then being elected; and when by the provisions of the Articles of Incorporation the holders of the shares of any class or series voting as a class or series are entitled to elect one or more Directors, any Director so elected may be removed only by the applicable vote of the holders of the shares of that class or series.
B. If said day falls upon a holiday, such meetings shall be held on the next succeeding day thereafter.
B. Notice of the time and place for special meetings shall be delivered personally or by telephone to each Director or sent by first class mail or telegram, charges prepaid, addressed to each Director at his or her address as it is shown in the records of the Corporation. In case such notice is mailed, it shall be deposited in the United States mail at least four days prior to the time of holding the meeting. In case such notice is delivered personally, or by telephone or telegram, it shall be delivered personally or be telephone or to the telegram company at least 48 hours prior to the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated to either the Director or to a person at the office of the Director who the person giving the notice has reason to believe will promptly communicate same to the Director. The notice need not specify the purpose of the meeting, nor the place, if the meeting is to be held at the principal executive office of the Corporation.
B. Notice of a meeting shall also be deemed given to any Director who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such Director.
ARTICLE III
OFFICERS
B. Any officer may resign at any time by giving written notice to the Board of Directors. Any resignation shall take effect on the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Corporation under any contract to which the officer is a party.
B. The Secretary shall keep, or cause to be kept, at the principal office of the Corporation or at the office of the Corporation's transfer agent, a share register, or duplicate share register, showing the names of the Shareholders and their addresses; the number and classes or shares held by each; the number and date of certificates issued for the same; and the number and date of cancellation of every certificate surrendered for cancellation.
C. The Secretary shall give, or cause to be given, notice of all the meetings of the Shareholders and of the Board of Directors required by the Bylaws or by law to be given. The Secretary shall keep the seal of the Corporation in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or by the Bylaws.
B. The Chief Financial Officer shall deposit all monies and other valuables in the name and to the credit of the Corporation with such depositaries as may be designated by the Board of Directors. The Chief Financial Officer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, shall render to the President and Directors, whenever they request it, an account of all of the transactions of the Chief Financial Officer and of the financial condition of the Corporation, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or the Bylaws.
ARTICLE IV
SHAREHOLDERS' MEETINGS
Time of Meeting: 10:00 A.M.
Date of Meeting: Second Tuesday in May
B. If this day shall be a legal holiday, then the meeting shall be held on the next succeeding business day, at the same time. At the annual meeting, the Shareholders shall elect a Board of Directors, consider reports of the affairs of the Corporation and transact such other business as may be properly brought before the meeting.
C. If the above date is inconvenient, the annual meeting of Shareholders shall be held each year on a date and at a time designated by the Board of Directors within ninety days of the above date upon proper notice to all Shareholders.
B. If a special meeting is called by any person or persons other than the Board of Directors, the request shall be in writing, specifying the time of such meeting and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the Chairman of the Board, the President, or the Secretary of the Corporation. The officer receiving such request shall forthwith cause notice to be given to the Shareholders entitled to vote, in accordance with the provisions of Sections 4 and 5 of this Article, indicating that a meeting will be held at the time requested by the person or persons calling the meeting, not less than 35 nor more than 60 days after the receipt of the request. If the notice is not given within 20 days after receipt of the request, the person or persons requesting the meeting may give the notice in the manner provided in these Bylaws. Nothing contained in this paragraph of this Section shall be construed as limiting, fixing or affecting the time when a meeting of Shareholders called by action of the Board of Directors may be held.
B. Such notices or any reports shall be given personally or by mail or other means of written communication as provided in the Act and shall be sent to the Shareholder's address appearing on the books of the Corporation, or supplied by the Shareholder to the Corporation for the purpose of notice, and in the absence thereof, as provided in the Act by posting notice at a place where the principal executive office of the Corporation is located or by publication at least once in a newspaper of general circulation in the county in which the principal executive office is located.
C. Notice of any meeting of Shareholders shall specify the place, the day and the hour of meeting, and (i) in case of a special meeting, the general nature of the business to be transacted and that no other business may be transacted, or (ii) in the case of an annual meeting, those matters which the Board of Directors, at the date of mailing of notice, intends to present for action by the Shareholders. At any meetings where Directors are elected, notice shall include the names of the nominees, if any, intended at the date of notice to be presented for election.
D. Notice shall be deemed given at the time it is delivered personally or deposited in the mail or sent by other means of written communication. The officer giving such notice or report shall prepare and file in the minute book of the Corporation an affidavit or declaration thereof.
E. If action is proposed to be taken at any meeting for approval of (i) contracts or transactions in which a Director has a direct or indirect financial interest, (ii) an amendment to the Articles of Incorporation, (iii) a reorganization of the Corporation, (iv) dissolution of the Corporation, or (v) a distribution to preferred Shareholders, the notice shall also state the general nature of such proposal.
B. The Shareholders present at a duly called or held meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the withdrawal of enough Shareholders to leave less than a quorum, if any action taken (other than adjournment) is approved by a majority of the shares required to constitute a quorum.
A. Any Shareholders' meeting, annual or special, whether or not a quorum is present, may be adjourned from time to time by the vote of the majority of the shares represented at such meeting, either in person or by proxy, but in the absence of a quorum, no other business may be transacted at such meeting.
B. When any meeting of Shareholders, either annual or special, is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at a meeting at which the adjournment is taken, unless a new record date for the adjourned meeting is fixed, or unless the adjournment is for more than 45 days from the date set for the original meeting, in which case the Board of Directors shall set a new record date. Notice of any adjourned meeting shall be given to each Shareholder of record entitled to vote at the adjourned meeting in accordance with the provisions of Section 4 of this Article. At any adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting.
B. The waiver of notice or consent need not specify either the business to be transacted or the purpose of any regular or special meeting of Shareholders, except that if action is taken or proposed to be taken for approval of any of those matters specified in Section E of Section 4 of this Article, the waiver of notice or consent shall state the general nature of such proposal. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting.
C. Attendance of a person at a meeting shall also constitute a waiver of notice of such meeting, except when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened, and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters not included in the notice. A Shareholder or Shareholders of the Corporation holding at least 5% in the aggregate of the outstanding voting shares of the Corporation may (i) inspect, and copy the records of Shareholders' names and addresses and shareholdings during usual business hours upon five days prior written demand upon the Corporation, and/or (ii) obtain from the transfer agent by paying such transfer agent's usual charges for such a list, a list of the Shareholders' names and addresses who are entitled to vote for the election of Directors, and their shareholdings, as of the most recent record date for which such list has been compiled or as of a date specified by the Shareholders subsequent to the day of demand. Such list shall be made available by the transfer agent on or before the later of five days after the demand is received or the date specified therein as the date as of which the list is to be compiled. The record of Shareholders shall also be open to inspection upon the written demand of any Shareholder or holder of a voting trust certificate, at any time during usual business hours, for a purpose reasonably related to such holder's interest as a Shareholder or as a holder of a voting trust certificate. Any inspection and copying under this Section may be made in person or by an agent or attorney of such Shareholder or holder of a voting trust certificate making such demand.
B. Should the Corporation have 100 or more Shareholders, an Annual Report to Shareholders must be furnished not later than 120 days after the end of each fiscal period. The Annual Report to Shareholders shall be sent at least 15 days before the annual meeting of the Shareholders to be held during the next fiscal year and in the manner specified in Section 4 of Article V of these Bylaws for giving notice to Shareholders of the Corporation. The Annual Report to Shareholders shall contain a Balance Sheet as of the end of the fiscal year and an Income Statement and Statement of Changes in Financial Position for the fiscal year, accompanied by any report of independent accountants or, if there is no such report, the certificate of an authorized officer of the Corporation that the statements were prepared without audit from the books and records of the Corporation.
B. If a Shareholder or Shareholders holding at least 5% of the outstanding shares of any class of stock of the Corporation make a written request to the Corporation for an Income Statement of the Corporation for the three month, six month or nine month period of the then current fiscal year ended more than 30 days prior to the date of the request, and a Balance Sheet of the Corporation at the end of such period, the Chief Financial Officer shall cause such statement to be prepared, if not already prepared, and shall deliver personally or mail such statement or statements to the person making the request within 30 days after the receipt of such request. If the Corporation has not sent to the Shareholders its Annual Report for the last fiscal year, this report shall likewise be delivered or mailed to such Shareholder or Shareholders within 30 days after such request.
C. The Corporation also shall, upon the written request of any Shareholder, mail to the Shareholder a copy of the last annual, semi-annual or quarterly Income Statement which it has prepared and a Balance Sheet as of the end of such period. This quarterly Income Statement and Balance Sheet referred to in this Section shall be accompanied by the report thereon, if any, of any independent accountants engaged by the Corporation or the certificate of authorized officer of the Corporation such that financial statements were prepared without audit from the books and records of the Corporation.
ARTICLE IX
AMENDMENTS TO BYLAWS
ARTICLE X
MISCELLANEOUS
CERTIFICATE OF SECRETARY
I, the undersigned, certify that:
1 I am the duly elected and acting secretary of M-GAB DEVELOPMENT CORPORATION, a Florida corporation; and
2 The foregoing Bylaws, consisting of 15 pages, are the Bylaws of this Corporation as adopted by the Board of Directors in accordance with the Florida Corporation Act and that such Bylaws have not been amended and are in full force and effect.
IN WITNESS WHEREOF, I have subscribed my name and affixed the seal of this
Corporation on April 20, 2001.
/s/ Carl M. Berg ____________________________________ Carl M. Berg, Secretary |
TABLE OF CONTENTS
-----------------
Page
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SECTION 1. PURPOSE. 1
SECTION 2. DEFINITIONS. 1
(a) "Award" 1
(b) "Board of Directors" 1
(c) "Change in Control" 1
(d) "Code" 1
(e) "Committee" 1
(f) "Common-Law Employee" 1
(g) "Company" 1
(h) "Employee" 2
(i) "Exchange Act" 2
(j) "Exercise Price" 2
(k) "Fair Market Value" 2
(l) "Incentive Stock Option" or "ISO" 2
(m) "Nonstatutory Option" or "NSO" 2
(n) "Offeree" 2
(o) "Option" 2
(p) "Optionee" 2
(q) "Outside Director" 2
(r) "Participant" 3
(s) "Plan" 3
(t) "Purchase Price" 3
(u) "Restricted Share" 3
(v) "Service" 3
(w) "Share" 3
(x) "Stock" 3
(y) "Stock Award Agreement" 3
(z) "Stock Option Agreement" 3
(aa) "Stock Purchase Agreement" 3
(bb) "Subsidiary" 3
(cc) "Total and Permanent Disability" 3
(dd) "W-2 Payroll" 3
SECTION 3. ADMINISTRATION. 3
(a) Committee Membership 3
(b) Committee Procedures 4
(c) Committee Responsibilities 4
(d) Committee Liability 4
(e) Financial Reports 4
SECTION 4. ELIGIBILITY. 4
(a) General Rule 4
(b) Ten-Percent Shareholders 4
(c) Attribution Rules 4
(d) Outstanding Stock 4
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SECTION 5. STOCK SUBJECT TO PLAN. 4 (a) Basic Limitation 4 (b) Additional Shares 5 SECTION 6. TERMS AND CONDITIONS OF AWARDS OR SALES. 5 (a) Stock Purchase Agreement 5 (b) Duration of Offers 5 (c) Purchase Price 5 (d) Payment for Shares 5 (e) Exercise of Awards on Termination of Service 6 SECTION 7. ADDITIONAL TERMS AND CONDITIONS OF RESTRICTED 6 (a) Form and Amount of Award 6 (b) Exercisability 6 (c) Effect of Change in Control 6 (d) Voting Rights 6 SECTION 8. TERMS AND CONDITIONS OF OPTIONS. 6 (a) Stock Option Agreement 6 (b) Number of Shares 6 (c) Exercise Price 6 (d) Exercisability 7 (e) Effect of Change in Control 7 (f) Term 7 (g) Exercise of Options on Termination of Service 7 (h) Payment of Option Shares 7 (i) No Rights as a Shareholder 8 (j) Modification, Extension and Assumption of Options 8 SECTION 9. ADJUSTMENT OF SHARES. 8 (a) General 8 (b) Reorganizations 8 (c) Reservation of Rights 8 SECTION 10. WITHHOLDING TAXES. 8 (a) General 8 (b) Share Withholding 8 (c) Cashless Exercise/Pledge 8 (d) Other Forms of Payment 8 SECTION 11. ASSIGNMENT OR TRANSFER OF AWARDS. 9 (a) General 9 (b) Trusts 9 SECTION 12. LEGAL REQUIREMENTS. 9 SECTION 13. NO EMPLOYMENT RIGHTS. 9 SECTION 14. DURATION AND AMENDMENTS. 9 (a) Term of the Plan 9 (b) Right to Amend or Terminate the Plan 9 (c) Effect of Amendment or Termination 9 |
(i) If the Shares were traded over-the-counter on the date in question but were not traded on the Nasdaq Stock Market or the Nasdaq National Market System, then the Fair Market Value shall be equal to the mean between the last reported representative bid and asked prices quoted for such date by the principal automated inter-dealer quotation system on which the Shares are quoted or, if the Shares are not quoted on any such system, by the "Pink Sheets" published by the National Quotation Bureau, Inc.;
(ii) If the Shares were traded over-the-counter on the date in question and were traded on the Nasdaq Stock Market or the Nasdaq National Market System, then the Fair Market Value shall be equal to the last-transaction price quoted for such date by the Nasdaq Stock Market or the Nasdaq National Market;
(iii) If the Shares were traded on a stock exchange on the date in question, then the Fair Market Value shall be equal to the closing price reported by the applicable composite transactions report for such date; and (iv) If none of the foregoing provisions is applicable, then the Fair Market Value shall be determined by the Committee in good faith on such basis as it deems appropriate.
In all cases, the determination of Fair Market Value by the Committee shall be conclusive and binding on all persons.
In any event, the number of Shares which are subject to Awards or other rights outstanding at any time under the Plan shall not exceed the number of Shares which then remain available for issuance under the Plan. The Company, during the term of the Plan, shall at all times reserve and keep available sufficient Shares to satisfy the requirements of the Plan.
Shares shall not be issued under the Plan unless the issuance and delivery of such Shares complies with (or is exempt from) all applicable requirements of law, including (without limitation) the Securities Act of 1933, as amended, the rules and regulations promulgated thereunder, state securities laws and regulations, and the regulations of any stock exchange on which the Company's securities may then be listed.
No provision of the Plan, nor any right or Option granted under the Plan, shall be construed to give any person any right to become, to be treated as, or to remain an Employee. The Company and its Subsidiaries reserve the right to terminate any person's Service at any time and for any reason.
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE, AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT TO THE RELEVANT PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS OR IF THE COMPANY IS PROVIDED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION AND QUALIFICATION UNDER FEDERAL AND STATE SECURITIES LAWS IS NOT REQUIRED.
M-GAB, INC.
2001 STOCK OPTION PLAN
INCENTIVE STOCK OPTION AGREEMENT
M-GAB, Inc. (the "Company"), hereby grants an Option to purchase shares of its common stock ("Shares") to the Optionee named below. The terms and conditions of the Option are set forth in this cover sheet, in the attachment and in the Company's 2001 Stock Option Plan (the "Plan").
Date of Grant:_________________
Name of Optionee:______________
Optionee's Social Security Number:_______________________
Number of Shares Covered by Option:____________________
Exercise Price per Share: $______________________
[must be at least 100% fair market value on Date of Grant]
Vesting Start Date:________________________
___ Check here if Optionee is a 10% owner (so that exercise price must be 110% of fair market value and term will not exceed 5 years).
BY SIGNING THIS COVER SHEET, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED IN THE ATTACHED AGREEMENT AND IN THE PLAN, A COPY OF WHICH IS ALSO ATTACHED.
Optionee:_______________________
(Signature)
Company:________________________
(Signature)
Title:_________________________
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE, AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT TO THE RELEVANT PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS OR IF THE COMPANY IS PROVIDED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION AND QUALIFICATION UNDER FEDERAL AND STATE SECURITIES LAWS IS NOT REQUIRED.
M-GAB, INC.
2001 STOCK OPTION PLAN
INCENTIVE STOCK OPTION AGREEMENT
INCENTIVE STOCK OPTION This Option is intended to be an incentive stock option under section 422 of the Internal Revenue Code and will be interpreted accordingly. |
VESTING No Shares will vest until you have performed _________ (____) months of Service from the commencement of your employment with the Company. Your Option shall vest as to ________ of the Shares on the date _______ (____) months from the Vesting Start Date as shown on the cover sheet. Thereafter, Shares shall vest at the rate of _______ of the Shares at the end of each full month thereafter. After you have completed _________ (____) months of Service, the number of Shares which vest under this Option at the Exercise Price shall be equal to the product of the number of full months of your continuous employment with the Company ("Service") (including any approved leaves of absence) from the Vesting Start Date times the number of Shares covered by this Option times ________. The resulting number of Shares will be rounded to the nearest whole number. No additional Shares will vest after your Service has terminated for any reason.
TERM Your Option will expire in any event at the close of business at Company headquarters on the day before the tenth anniversary (fifth anniversary for a 10% owner) of the Date of Grant, as shown on the cover sheet. (It will expire earlier if your Service terminates, as described below.)
REGULAR TERMINATION If your Service terminates for any reason except death, Disability or for "Cause," your Option will expire at the close of business at Company headquarters on the 30th day after your termination date. During that 30-day period, you may exercise that portion of your Option that was vested on your termination date.
DEATH If you die while in Service with the Company, your Option will expire at the close of business at Company headquarters on the date six months after the date of death. During that six-month period, your estate or heirs may exercise that portion of your Option that was vested on the date of death.
DISABILITY If your Service terminates because of your Disability, your Option will expire at the close of business at Company headquarters on the date six months after your termination date. (However, if your Disability is not expected to result in death or to last for a continuous period of at least 12 months, your Option will be eligible for ISO tax treatment only if it is exercised within three months following the termination of your Service.) During that six-month period, you may exercise that portion of your Option that was vested on the date of your Disability.
"Disability" means that you are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment.
LEAVES OF ABSENCE For purposes of this Option, your Service does not terminate when you go on a bona fide leave of absence that was approved by the Company in writing, if the terms of the leave provide for continued service crediting, or when continued service crediting is required by applicable law. However, your Service will be treated as terminating 30 days after you went on leave, unless your right to return to active work is guaranteed by law or by a contract. Your Service terminates in any event when the approved leave ends unless you immediately return to active work. The Company determines which leaves count for this purpose, and when your Service terminates for all purposes under the Plan. The Company also determines the extent to which you may exercise the vested portion of your Option during a leave of absence.
NOTICE OF EXERCISE When you wish to exercise this Option, you must execute Exhibit A (and, f exercise is prior to vesting, you must execute Exhibits B and D). Your exercise will be effective when it is received by the Company. If someone else wants to exercise this Option after your death, that person must prove to the Company's satisfaction that he or she is entitled to do so.
FORM OF PAYMENT When you submit Exhibit A, you must include payment of the Exercise Price for the Shares you are purchasing. Payment may be made in one (or a combination) of the following forms at the discretion of the committee:
- Your personal check, a cashier's check or a money order.
- Shares which you have owned for six months and which are surrendered to the Company. The value of the Shares, determined as of the effective date of the Option exercise, will be applied to the Exercise Price.
- To the extent that a public market for the Shares exists as determined by the Company, by delivery (on a form prescribed by the Committee) of an irrevocable direction to a securities broker to sell Shares and to deliver all or part of the sale proceeds to the Company in payment of the aggregate Exercise Price.
- Any other form of legal consideration approved by the Committee.
WITHHOLDING TAXES You will not be allowed to exercise this Option unless you make acceptable arrangements to pay any withholding or other taxes that may be due as a result of the Option exercise or the sale of Shares acquired upon exercise of this Option.
RESTRICTIONS ON RESALE By signing this Agreement, you agree not to exercise this Option or sell any Shares acquired upon exercise of this Option at a time when applicable laws, regulations or Company or underwriter trading policies prohibit exercise or sale. In particular, the Company shall have the right to designate one or more periods of time, each of which shall not exceed 180 days in length, during which this Option shall not be exercisable if the Company determines (in its sole discretion) that such limitation on exercise could in any way facilitate a lessening of any restriction on transfer pursuant to the Securities Act or any state securities laws with respect to any issuance of securities by the Company, facilitate the registration or qualification of any securities by the Company under the Securities Act or any state securities laws, or facilitate the perfection of any exemption from the registration or qualification requirements of the Securities Act or any applicable state securities laws for the issuance or transfer of any securities. Such limitation on exercise shall not alter the vesting schedule set forth in this Agreement other than to limit the periods during which this Option shall be exercisable.
Furthermore, in respect of any underwritten public offering by the Company, you agree that you will not sell or otherwise transfer or dispose of any Shares covered by this Option during a reasonable and customary period of time as agreed to by the Company and the underwriters, not to exceed the greater of (a) 180 days following the effective date of the registration statement of the Company filed under the Securities Act in respect of such offering and (b) such other period of time as agreed to by holders of a majority of the then outstanding Shares. By signing this Agreement you agree to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriter which are consistent with the foregoing or which are necessary to give further effect thereto. The Company may impose stop-transfer instructions with respect to the Shares subject to the foregoing restriction until the end of such period.
If the sale of Shares under the Plan is not registered under the Securities Act of 1933, as amended (the "Securities Act"), but an exemption is available which requires an investment or other representation, you shall represent and agree at the time of exercise that the Shares being acquired upon exercise of this Option are being acquired for investment, and not with a view to the sale or distribution thereof, and shall make such other representations as are deemed necessary or appropriate by the Company and its counsel.
THE COMPANY'S RIGHT OF FIRST REFUSAL In the event that you propose to sell, pledge or otherwise transfer to a third party any Shares acquired under this Agreement, or any interest in such Shares, the Company shall have the "Right of First Refusal" with respect to all (and not less than all) of such Shares. If you desire to transfer Shares acquired under this Agreement, you must give a written "Transfer Notice" to the Company describing fully the proposed transfer, including the number of Shares proposed to be transferred, the proposed transfer price and the name and address of the proposed transferee. The Transfer Notice shall be signed both by you and by the proposed transferee and must constitute a binding commitment of both parties to the transfer of the Shares.
The Company and its assignees shall have the right to purchase all, and not
less than all, of the Shares on the terms described in the Transfer Notice
(subject, however, to any change in such terms permitted in the next paragraph)
by delivery of a Notice of Exercise of the Right of First Refusal within 30 days
after the date when the Transfer Notice was received by the Company. The
Company's rights under this Subsection shall be freely assignable, in whole or
in part.
If the Company fails to exercise its Right of First Refusal within 30 days after the date when it received the Transfer Notice, you may, not later than 60 days following receipt of the Transfer Notice by the Company, conclude a transfer of the Shares subject to the Transfer Notice on the terms and conditions described in the Transfer Notice. Any proposed transfer on terms and conditions different from those described in the Transfer Notice, as well as any subsequent proposed transfer by you, shall again be subject to the Right of First Refusal and shall require compliance with the procedure described in the paragraph above. If the Company exercises its Right of First Refusal, you and the Company (or its assignees) shall consummate the sale of the Shares on the terms set forth in the Transfer Notice.
The Company's Right of First Refusal shall terminate upon the Company's initial public offering.
The Company's Right of First Refusal
shall inure to the benefit of its successors and assigns and shall be binding
upon any transferee of the Shares.
RIGHT OF REPURCHASE Following termination of your Service for any reason, the Company shall have the right to purchase all of those vested Shares that you have or will acquire under this Option (unvested Shares which have been exercised are subject to a Repurchase Option set forth in Exhibit A). If the Company fails to provide you with written notice of its intention to purchase such Shares before or within 30 days of the date the Company receives written notice from you of your termination of Service, the Company's right to purchase such Shares shall terminate. If the Company exercises its right to purchase such Shares, the Company will consummate the purchase of such Shares within 60 days of the date of its written notice to you. The purchase price for any Shares repurchased shall be the higher of the fair market value of the Shares on the date of purchase or the aggregate Exercise Price for such Shares and shall be paid in cash. The Company's right of repurchase shall terminate in the event that Stock is listed on an established stock exchange or is quoted regularly on the Nasdaq National Market. The fair market value shall be determined by the Board of Directors in its sole discretion.
TRANSFER OF OPTION Prior to your death, only you may exercise this Option. You cannot transfer or assign this Option. For instance, you may not sell this Option or use it as security for a loan. If you attempt to do any of these things, this Option will immediately become invalid. You may, however, dispose of this Option in your will.
Regardless of any marital property settlement agreement, the Company is not obligated to honor a Notice of Exercise from your spouse or former spouse, nor is the Company obligated to recognize such individual's interest in your Option in any other way.
RETENTION RIGHTS This Agreement does not give you the right to be retained by the Company in any capacity. The Company reserves the right to terminate your Service at any time and for any reason.
SHAREHOLDER RIGHTS Neither you, nor your estate or heirs, have any rights as a shareholder of the Company until a certificate for the Shares acquired upon exercise of this Option has been issued. No adjustments are made for dividends or other rights if the applicable record date occurs before your stock certificate is issued, except as described in the Plan.
ADJUSTMENTS In the event of a stock split, a stock dividend or a similar change in the Company's Stock, the number of Shares covered by this Option and the Exercise Price per share may be adjusted pursuant to the Plan. Your Option shall be subject to the terms of the agreement of merger, liquidation or reorganization in the event the Company is subject to such corporate activity.
LEGENDS All certificates representing the Shares issued upon exercise of this Option shall, where applicable, have endorsed thereon the following legends: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND OPTIONS TO PURCHASE SUCH SHARES SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER, OR SUCH HOLDER'S PREDECESSOR IN INTEREST. SUCH AGREEMENT IMPOSES CERTAIN TRANSFER RESTRICTIONS AND GRANTS CERTAIN REPURCHASE RIGHTS TO THE COMPANY (OR ITS ASSIGNS) UPON THE SALE OF THE SHARES OR UPON TERMINATION OF SERVICE WITH THE COMPANY. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE FURNISHED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY BY THE HOLDER OF SHARES REPRESENTED BY THIS CERTIFICATE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, OR THE SECURITIES LAWS OF ANY STATE, AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT TO THE RELEVANT PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS OR IF THE COMPANY IS PROVIDED AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT REGISTRATION AND QUALIFICATION UNDER FEDERAL AND STATE SECURITIES LAWS IS NOT REQUIRED."
APPLICABLE LAW This Agreement will be interpreted and enforced under the laws of the State of California (without regard to their choice of law provisions).
THE PLAN AND OTHER AGREEMENTS The text of the Plan is incorporated in this Agreement by reference. Certain capitalized terms used in this Agreement are defined in the Plan.
This Agreement, including its attachments, and the Plan constitute the entire understanding between you and the Company regarding this Option. Any prior agreements, commitments or negotiations concerning this Option are superseded.
BY SIGNING THE COVER SHEET OF THIS AGREEMENT, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN. YOU ALSO ACKNOWLEDGE THAT YOU HAVE READ SECTION 11, "PURCHASER'S INVESTMENT REPRESENTATIONS" OF ATTACHMENT A AND THAT YOU CAN AND HEREBY DO MAKE THE SAME REPRESENTATIONS WITH RESPECT TO THE GRANT OF THIS OPTION.
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE, AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT TO THE RELEVANT PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS OR IF THE COMPANY IS PROVIDED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION AND QUALIFICATION UNDER FEDERAL AND STATE SECURITIES LAWS IS NOT REQUIRED.
M-GAB, INC.
2001 STOCK OPTION PLAN
NONSTATUTORY STOCK OPTION AGREEMENT
M-GAB, Inc. (the "Company"), hereby grants an Option to purchase shares of its common stock ("Shares") to the Optionee named below. The terms and conditions of the Option are set forth in this cover sheet, in the attachment and in the Company's 2001 Stock Option Plan (the "Plan").
Date of Grant:______________________
Name of Optionee:____________________
Optionee's Social Security Number:_____________________
Number of Shares Covered by Option:__________________
Exercise Price per Share: $_______________________
Vesting Start Date:________________
___ Check here if Optionee is a 10% owner (so that exercise price must be 110% of fair market value and term will not exceed 5 years).
BY SIGNING THIS COVER SHEET, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED IN THE ATTACHED AGREEMENT AND IN THE PLAN, A COPY OF WHICH IS ALSO ATTACHED.
Optionee:_______________________
(Signature)
Company:________________________
(Signature)
Title:__________________________
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE, AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT TO THE RELEVANT PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS OR IF THE COMPANY IS PROVIDED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION AND QUALIFICATION UNDER FEDERAL AND STATE SECURITIES LAWS IS NOT REQUIRED.
M-GAB, INC.
2001 STOCK OPTION PLAN
NONSTATUTORY STOCK OPTION AGREEMENT
NONSTATUTORY STOCK OPTION This Option is not intended to be an incentive stock option under section 422 of the Internal Revenue Code and will be interpreted accordingly.
VESTING No Shares will vest until you have performed _______ (____) months of Service from the commencement of your employment with the Company. Your Option shall vest as to _______ of the Shares on the date _______ (____) months from the Vesting Start Date as shown on the cover sheet. Thereafter, Shares shall vest at the rate of ________ of the Shares at the end of each full month thereafter. After you have completed ________ (____) months of Service, the number of Shares which vest under this Option at the Exercise Price shall be equal to the product of the number of full months of your continuous employment with the Company ("Service") (including any approved leaves of absence) from the Vesting Start Date times the number of Shares covered by this Option times ________. The resulting number of Shares will be rounded to the nearest whole number. No additional Shares will vest after your Service has terminated for any reason.
TERM Your Option will expire in any event at the close of business at Company headquarters on the day before the tenth anniversary (fifth anniversary for a 10% owner) of the Date of Grant, as shown on the cover sheet. (It will expire earlier if your Service terminates, as described below.)
REGULAR TERMINATION If your Service terminates for any reason except death, Disability, or for "Cause" your Option will expire at the close of business at Company headquarters on the 30th day after your termination date. During such 30-day period, you may exercise that portion of your Option that was vested on your termination date.
DEATH If you die while in Service with the Company, your Option will expire at the close of business at Company headquarters on the date six months after the date of death. During that six-month period, your estate or heirs may exercise that portion of your Option that was vested on your date of death.
DISABILITY If your Service terminates because of your Disability, your Option will expire at the close of business at Company headquarters on the date six months after your termination date. During that six-month period, you may exercise that portion of your Option that was vested on your date of Disability.
"Disability" means that you are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment.
LEAVES OF ABSENCE For purposes of this Option, your Service does not terminate when you go on a bona fide leave of absence that was approved by the Company in writing, if the terms of the leave provide for continued service crediting, or when continued service crediting is required by applicable law. However, your Service will be treated as terminating 30 days after you went on leave, unless your right to return to work is guaranteed by law or by a contract. Your service terminates in any event when the approved leave ends unless you immediately return to Service. The Company determines which leaves count for this purpose, and when your Service terminates for all purposes under the Plan. The Company also determines the extent to which you may exercise the vested portion of your Option during a leave of absence.
- Your personal check, a cashier's check or a money order.
- Shares which you have owned for six months and which are surrendered to the Company. The value of the Shares, determined as of the effective date of the Option exercise, will be applied to the Exercise Price.
- To the extent that a public market for the Shares exists as determined by the Company, by delivery (on a form prescribed by the Committee) of an irrevocable direction to a securities broker to sell Shares and to deliver all or part of the sale proceeds to the Company in payment of the aggregate Exercise Price.
- Any other form of legal consideration approved by the Committee.
WITHHOLDING TAXES You will not be allowed to exercise this Option unless you make acceptable arrangements to pay any withholding or other taxes that may be due as a result of the Option exercise or the sale of Shares acquired upon exercise of this Option.
RESTRICTIONS ON RESALE By signing this Agreement, you agree not to exercise this Option or sell any Shares acquired upon exercise of this Option at a time when applicable laws, regulations or Company or underwriter trading policies prohibit exercise or sale. In particular, the Company shall have the right to designate one or more periods of time, each of which shall not exceed 180 days in length, during which this Option shall not be exercisable if the Company determines (in its sole discretion) that such limitation on exercise could in any way facilitate a lessening of any restriction on transfer pursuant to the Securities Act or any state securities laws with respect to any issuance of securities by the Company, facilitate the registration or qualification of any securities by the Company under the Securities Act or any state securities laws, or facilitate the perfection of any exemption from the registration or qualification requirements of the Securities Act or any applicable state securities laws for the issuance or transfer of any securities. Such limitation on exercise shall not alter the vesting schedule set forth in this Agreement other than to limit the periods during which this Option shall be exercisable.
Furthermore, in respect of any underwritten public offering by the Company, you agree that you will not sell or otherwise transfer or dispose of any Shares covered by this Option during a reasonable and customary period of time as agreed to by the Company and the underwriters, not to exceed the greater of (a) 180 days following the effective date of the registration statement of the Company filed under the Securities Act in respect of such offering and (b) such other period of time as agreed to by holders of a majority of the then outstanding Shares. By signing this Agreement you agree to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriter which are consistent with the foregoing or which are necessary to give further effect thereto. The Company may impose stop-transfer instructions with respect to the Shares subject to the foregoing restriction until the end of such period.
If the sale of Shares under the Plan is not registered under the Securities Act of 1933, as amended (the "Securities Act"), but an exemption is available which requires an investment or other representation, you shall represent and agree at the time of exercise that the Shares being acquired upon exercise of this Option are being acquired for investment, and not with a view to the sale or distribution thereof, and shall make such other representations as are deemed necessary or appropriate by the Company and its counsel.
THE COMPANY'S RIGHT OF FIRST REFUSAL In the event that you propose to sell, pledge or otherwise transfer to a third party any Shares acquired under this Agreement, or any interest in such Shares, the Company shall have the "Right of First Refusal" with respect to all (and not less than all) of such Shares. If you desire to transfer Shares acquired under this Agreement, you must give a written "Transfer Notice" to the Company describing fully the proposed transfer, including the number of Shares proposed to be transferred, the proposed transfer price and the name and address of the proposed transferee. The Transfer Notice shall be signed both by you and by the proposed transferee and must constitute a binding commitment of both parties to the transfer of the Shares.
The Company and its assignees shall have the right to purchase all, and not
less than all, of the Shares on the terms described in the Transfer Notice
(subject, however, to any change in such terms permitted in the next paragraph)
by delivery of a notice of exercise of the Right of First Refusal within 30 days
after the date when the Transfer Notice was received by the Company.
The Company's rights under this Subsection shall be freely assignable, in whole or in part.
If the Company fails to exercise its Right of First Refusal within 30 days after the date when it received the Transfer Notice, you may, not later than 60 days following receipt of the Transfer Notice by the Company, conclude a transfer of the Shares subject to the Transfer Notice on the terms and conditions described in the Transfer Notice. Any proposed transfer on terms and conditions different from those described in the Transfer Notice, as well as any subsequent proposed transfer by you, shall again be subject to the Right of First Refusal and shall require compliance with the procedure described in the paragraph above. If the Company exercises its Right of First Refusal, you and the Company (or its assignees) shall consummate the sale of the Shares on the terms set forth in the Transfer Notice.
The Company's Right of First Refusal shall terminate upon the Company's initial public offering.
The Company's Right of First Refusal shall inure to the benefit of its successors and assigns and shall be binding upon any transferee of the Shares.
RIGHT OF REPURCHASE Following termination of your Service for any reason, the Company shall have the right to purchase all of those vested Shares that you have or will acquire under this Option (unvested Shares which have been exercised are subject to a Repurchase Option set forth in Exhibit A). If the Company fails to provide you with written notice of its intention to purchase such Shares before or within 30 days of the date the Company receives written notice from you of your termination of Service, the Company's right to purchase such Shares shall terminate. If the Company exercises its right to purchase such Shares, the Company will consummate the purchase of such Shares within 60 days of the date of its written notice to you. The purchase price for any Shares repurchased shall be the higher of the fair market value of the Shares on the date of purchase or the aggregate Exercise Price for such Shares and shall be paid in cash. The Company's right of repurchase shall terminate in the event that Stock is listed on an established stock exchange or is quoted regularly on the Nasdaq National Market. The fair market value shall be determined by the Board of Directors in its sole discretion.
TRANSFER OF OPTION Prior to your death, only you may exercise this Option. You cannot transfer or assign this Option. For instance, you may not sell this Option or use it as security for a loan. If you attempt to do any of these things, this Option will immediately become invalid. You may, however, dispose of this Option in your will.
Regardless of any marital property settlement agreement, the Company is not obligated to honor a Notice of Exercise from your spouse or former spouse, nor is the Company obligated to recognize such individual's interest in your Option in any other way.
RETENTION RIGHTS This Agreement does not give you the right to be retained by the Company in any capacity. The Company reserves the right to terminate your Service at any time and for any reason.
SHAREHOLDER RIGHTS Neither you, nor your estate or heirs, have any rights as a shareholder of the Company until a certificate for the Shares acquired upon exercise of this Option has been issued. No adjustments are made for dividends or other rights if the applicable record date occurs before your stock certificate is issued, except as described in the Plan.
ADJUSTMENTS In the event of a stock split, a stock dividend or a similar change in the Company Stock, the number of Shares covered by this Option and the Exercise Price per share may be adjusted pursuant to the Plan. Your Option shall be subject to the terms of the agreement of merger, liquidation or reorganization in the event the Company is subject to such corporate activity.
LEGENDS All certificates representing the Shares issued upon exercise of this Option shall, where applicable, have endorsed thereon the following legends:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND OPTIONS TO PURCHASE SUCH SHARES SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER, OR SUCH HOLDER'S PREDECESSOR IN INTEREST. SUCH AGREEMENT IMPOSES CERTAIN TRANSFER RESTRICTIONS AND GRANTS CERTAIN REPURCHASE RIGHTS TO THE COMPANY (OR ITS ASSIGNS) UPON THE SALE OF THE SHARES OR UPON TERMINATION OF SERVICE WITH THE COMPANY. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE FURNISHED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY BY THE HOLDER OF SHARES REPRESENTED BY THIS CERTIFICATE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, OR THE SECURITIES LAWS OF ANY STATE, AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT TO THE RELEVANT PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS OR IF THE COMPANY IS PROVIDED AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT REGISTRATION AND QUALIFICATION UNDER FEDERAL AND STATE SECURITIES LAWS IS NOT REQUIRED."
APPLICABLE LAW This Agreement will be interpreted and enforced under the laws of the State of California (without regard to their choice of law provisions).
THE PLAN AND OTHER AGREEMENTS The text of the Plan is incorporated in this Agreement by reference. Certain capitalized terms used in this Agreement are defined in the Plan.
This Agreement and the Plan constitute the entire understanding between you and the Company regarding this Option. Any prior agreements, commitments or negotiations concerning this Option are superseded.
BY SIGNING THE COVER SHEET OF THIS AGREEMENT, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN. YOU ALSO ACKNOWLEDGE THAT YOU HAVE READ SECTION 11, "PURCHASER'S INVESTMENT REPRESENTATIONS" OF ATTACHMENT A AND THAT YOU CAN AND HEREBY DO MAKE THE SAME REPRESENTATIONS WITH RESPECT TO THE GRANT OF THIS OPTION.
EXHIBIT A
WITNESSETH:
THIS AGREEMENT is dated as of ___________, ____, between M-GAB, Inc. (the "Company"), and _________________ ("Purchaser").
WHEREAS, the Company and Purchaser are parties to that certain ___ Incentive ___ Nonstatutory Stock Option Agreement dated as of ___________, ____ (the "Option Agreement") pursuant to which the Purchaser has the right to purchase up to ______ shares of the Company's common stock (the "Option Shares"); and
WHEREAS, the Option is exercisable with respect to certain of the Option Shares as of the date hereof; and
WHEREAS, pursuant to the Option Agreement, Purchaser desires to purchase shares of the Company as herein described, on the terms and conditions set forth in this Agreement, the Option Agreement and the M-GAB, Inc. 2001 Stock Option Plan (the "Plan"). Certain capitalized terms used in this Agreement are defined in the Plan.
NOW, THEREFORE, it is agreed between the parties as follows:
(a) Pursuant to the terms of the Option Agreement, Purchaser hereby agrees to purchase from the Company and the Company agrees to sell and issue to Purchaser _________ shares of the Company's common stock (the "Stock") for the Exercise Price per share specified in the Option Agreement payable by personal check, cashier's check or money order, if permitted by the Option Agreement, as follows: _______________________________. Payment shall be delivered at the Closing, as such term is hereinafter defined.
(b) The closing hereunder (the "Closing") shall occur at the offices of the Company on __________, ____, or such other time and place as may be designated by the Company (the "Closing Date").
All unvested shares of the Stock purchased by the Purchaser pursuant to this Agreement (sometimes referred to as the "Repurchase Option Stock") shall be subject to the following option (the "Repurchase Option"):
(a) In the event the Purchaser terminates service with the Company ("Service") for any reason, with or without cause, the Company may exercise the Repurchase Option.
(b) Purchaser understands that the Stock is being sold in order to induce Purchaser to become and/or remain associated with the Company and to work diligently for the success of the Company and that the Repurchase Option Stock will continue to vest in accordance with the schedule set forth in the Option Agreement. Accordingly, the Company shall have the right at any time within 90 days after the termination of Service to purchase from the Purchaser all shares of Stock purchased hereunder which have not vested in accordance with the terms of such vesting schedule in the Option Agreement. The purchase price for such unvested shares of Repurchase Option Stock shall be the Exercise Price per share paid by Purchaser for such shares pursuant to the Option (the "Option Price"). The purchase price shall be paid by certified or cashier's check or by cancellation of any indebtedness of Purchaser to the Company.
(c) Nothing in this Agreement shall be construed as a right by purchaser to be employed by Company, or a parent or subsidiary of Company.
The Repurchase Option shall be exercised by written notice signed by an officer of the Company and delivered or mailed as provided in Section 16 of this Agreement and to the Escrow Agent as provided in Section 16 of the Joint Escrow Instructions attached as Exhibit B to the Option Agreement.
If the Company waives or fails to exercise the Repurchase Option as to all of the shares subject thereto, the Company may, in the discretion of its Board of Directors, assign the Repurchase Option to any other holder or holders of preferred or common stock of the Company in such proportions as such Board of Directors may determine. In the event of such an assignment, the assignee shall pay to the Company in cash an amount equal to the fair market value of the Repurchase Option. The Company shall promptly, upon expiration of the 90-day period referred to in Section 2 above, notify Purchaser of the number of shares subject to the Repurchase Option assigned to such stockholders and shall notify both the Purchaser and the assignees of the time, place and date for settlement of such purchase, which must be made within 90 days from the date of cessation of continuous employment. In the event that the Company and/or such assignees do not elect to exercise the Repurchase Option as to all or part of the shares subject to it, the Repurchase Option shall expire as to all shares which the Company and/or such assignees have not elected to purchase.
(a) As security for Purchaser's faithful performance of the terms of this Agreement and to ensure the availability for delivery of Purchaser's shares upon exercise of the Repurchase Option herein provided for, Purchaser agrees at the Closing hereunder, to deliver to and deposit with the Escrow Agent named in the Joint Escrow Instructions attached to the Option Agreement as Exhibit B, the certificate or certificates evidencing the Option Stock subject to the Repurchase Option and two Assignments Separate from Certificate duly executed (with date and number of shares in blank) in the form attached to the Option Agreement as Exhibit D. Such documents are to be held by the Escrow Agent and delivered by the Escrow Agent pursuant to the Joint Escrow Instructions, which instructions shall also be delivered to the Escrow Agent at the Closing hereunder.
(b) Within 30 days after the last day of each successive completed calendar quarter after the Closing Date, if Purchaser so requests, the Escrow Agent will deliver to Purchaser certificates representing so many shares of Stock as are no longer subject to the Repurchase Option (less such shares as have been previously delivered). Ninety days after cessation of Purchaser's employment with the Company the Company will direct the Escrow Agent to deliver to Purchaser a certificate or certificates representing the number of shares not repurchased by the Company or its assignees pursuant to exercise of the Repurchase Option (less such shares as have been previously delivered).
Subject to the provisions of the Articles of Incorporation of the Company, if, from time to time during the term of the Repurchase Option:
(a) there is any stock dividend or liquidating dividend of cash and/or property, stock split or other change in the character or amount of any of the outstanding securities of the Company, or
(b) there is any consolidation, merger or sale of all or substantially all, of the assets of the Company, then, in such event, any and all new, substituted or additional securities or other property to which Purchaser is entitled by reason of Purchaser's ownership of the shares shall be immediately subject to such Repurchase Option with the same force and effect as the shares of Option Stock from time to time subject to the Repurchase Option. While the total Option Price shall remain the same after each such event, the Option Price per share of Option Stock upon exercise of the Repurchase Option shall be appropriately and equitably adjusted as determined by the Board of Directors of the Company.
Before any shares of Stock registered in the name of Purchaser and not subject to the Repurchase Option may be sold or transferred, such shares shall first be offered to the Company as set forth in the Option Agreement.
If the Company makes available, at the time and place and in the amount and form provided in this Agreement, the consideration for the Stock to be repurchased in accordance with the provisions of Sections 2 and 7 of this Agreement, then from and after such time the person from whom such shares are to be repurchased shall no longer have any rights as a holder of such shares (other than the right to receive payment of such consideration in accordance with this Agreement). Such shares shall be deemed to have been repurchased in accordance with the applicable provisions hereof, whether or not the certificate(s) therefor have been delivered as required by this Agreement.
Purchaser shall have the right to transfer all or any portion of Purchaser's interest in the shares issued under this Agreement which have been delivered to Purchaser under the provisions of Section 5 of this Agreement, to a trust established by Purchaser for the benefit of Purchaser, Purchaser's spouse or Purchaser's children, without being subject to the provisions of Section 7 hereof, provided that the trustee on behalf of the trust shall agree in writing to be bound by the terms and conditions of this Agreement. The transferee shall execute a copy of Exhibit C attached to the Option Agreement and file the same with the Secretary of the Company.
All certificates representing the Stock purchased under this Agreement shall, where applicable, have endorsed thereon the legends set forth in the Option Agreement and any other legends required by applicable securities laws.
(a) This Agreement is made with Purchaser in reliance upon Purchaser's representation to the Company, which by Purchaser's acceptance hereof Purchaser confirms, that the Stock which Purchaser will receive will be acquired with Purchaser's own funds for investment for an indefinite period for Purchaser's own account, not as a nominee or agent, and not with a view to the sale or distribution of any part thereof, and that Purchaser has no present intention of selling, granting participation in, or otherwise distributing the same, but subject, nevertheless, to any requirement of law that the disposition of Purchaser's property shall at all times be within Purchaser's control. By executing this Agreement, Purchaser further represents that Purchaser does not have any contract, understanding or agreement with any person to sell, transfer, or grant participation, to such person or to any third person, with respect to any of the Stock.
(b) Purchaser understands that the Stock will not be registered or qualified under federal or state securities laws on the ground that the sale provided for in this Agreement is exempt from registration or qualification under federal or state securities laws and that the Company's reliance on such exemption is predicated on Purchaser's representations set forth herein.
(c) Purchaser agrees that in no event will Purchaser make a disposition of any of the Stock (including a disposition under Section 9 of this Agreement), unless and until (i) Purchaser shall have notified the Company of the proposed disposition and shall have furnished the Company with a statement of the circumstances surrounding the proposed disposition and (ii) Purchaser shall have furnished the Company with an opinion of counsel satisfactory to the Company to the effect that (A) such disposition will not require registration or qualification of such Stock under federal or state securities laws or (B) appropriate action necessary for compliance with the federal or state securities laws has been taken or (iii) the Company shall have waived, expressly and in writing, its rights under clauses (i) and (ii) of this section.
(d) With respect to a transaction occurring prior to such date as the Plan and Stock thereunder are covered by a valid Form S-8 or similar federal registration statement, this subsection shall apply unless the transaction is covered by the exemption in Nevada General Corporation Law or a similar broad based exemption. In connection with the investment representations made herein, Purchaser represents that Purchaser is able to fend for himself or herself in the transactions contemplated by this Agreement, has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of Purchaser's investment, has the ability to bear the economic risks of Purchaser's investment and has been furnished with and has had access to such information as would be made available in the form of a registration statement together with such additional information as is necessary to verify the accuracy of the information supplied and to have all questions answered by the Company.
(e) Purchaser understands that if the Company does not register with the Securities and Exchange Commission pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") or if a registration statement covering the Stock (or a filing pursuant to the exemption from registration under Regulation A of the Securities Act of 1933) under the Securities Act of 1933 is not in effect when Purchaser desires to sell the Stock, Purchaser may be required to hold the Stock for an indeterminate period. Purchaser also acknowledges that Purchaser understands that any sale of the Stock which might be made by Purchaser in reliance upon Rule 144 under the Securities Act of 1933 may be made only in limited amounts in accordance with the terms and conditions of that Rule.
The Company covenants and agrees that (a) at all times after it first becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, it will use its best efforts to comply with the current public information requirements of Rule 144(c)(1) under the Securities Act of 1933, and that if prior to becoming subject to such reporting requirements an over-the-counter market develops for the Stock, it will make publicly available the information required by Rule 144(c)(2); (b) it will furnish Purchaser, upon request, with all information required for the preparation and filing of Form 144; and (c) it will on a timely basis use its best efforts to file all reports required to be filed and make all disclosures, including disclosures of materially adverse information, required to permit Purchaser to make the required representations in Form 144.
The Company shall not be required (a) to transfer on its books any shares of Stock of the Company which shall have been sold or transferred in violation of any of the provisions set forth in this Agreement or (b) to treat as owner of such shares or to accord the right to vote as such owner or to pay dividends to any transferee to whom such shares shall have been so transferred.
Except as otherwise provided herein, Purchaser shall, during the term of this Agreement, exercise all rights and privileges of a stockholder of the Company with respect to the Stock.
The parties agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement.
Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon the earliest of personal delivery, receipt or the third full day following deposit in the United States Post Office with postage and fees prepaid, addressed to the other party hereto at the address last known or at such other address as such party may designate by 10 days' advance written notice to the other party hereto.
This Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer herein set forth, be binding upon Purchaser and Purchaser's heirs, executors, administrators, successors and assigns. The failure of the Company in any instance to exercise the Repurchase Option or rights of first offer described herein shall not constitute a waiver of any other Repurchase Option or right of first offer that may subsequently arise under the provisions of this Agreement. No waiver of any breach or condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition, whether of a like or different nature.
This Agreement shall be governed by, and construed in accordance with, the laws of the State of California, as such laws are applied to contracts entered into and performed in such state.
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF NEVADA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATION. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
No modification of this Agreement shall be valid unless made in writing and signed by the parties hereto.
This Agreement and the Option Agreement constitute the entire complete and final agreement between the parties hereto with regard to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
M-GAB, INC. PURCHASER By _________________________ _____________________________ |
_________, _____
Dear Sir or Madam:
As Escrow Agent for both M-GAB, Inc. (the "Company"), and ___________________ ("Purchaser"), you are hereby authorized and directed to hold the documents delivered to you pursuant to the terms of that certain Common Stock Purchase Agreement (the "Agreement") of even date herewith, to which a copy of these Joint Escrow Instructions is attached as Exhibit B to a certain Stock Option dated ________ ("Option Agreement"), in accordance with the following instructions:
1. In the event the Company shall elect to exercise the Repurchase Option set forth in the Agreement, the Company shall give to Purchaser and you a written notice as provided in the Agreement. Purchaser and the Company hereby irrevocably authorize and direct you to close the transaction contemplated by such notice, including prompt delivery of stock certificates.
2. At the closing, you are directed (a) to date the stock assignment form or forms necessary for the transfer in question, (b) to fill in the number of shares being transferred, and (c) to deliver same, together with the certificate or certificates evidencing the shares to be transferred, to the Company against the simultaneous delivery to you of the purchase price (by certified or bank cashier's check) for the number of shares being purchased pursuant to the exercise of the Repurchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares to be held by you hereunder and any additions and
substitutions to said shares as defined in the Agreement. Purchaser does hereby
irrevocably constitute and appoint you as Purchaser's attorney-in-fact and agent
for the term of this escrow to execute with respect to such securities all
documents necessary or appropriate to make such securities negotiable and to
complete any transaction herein contemplated. Subject to the provisions of this
Section 3, Purchaser shall exercise all rights and privileges, including but not
limited to, the right to vote and to receive dividends (if any), of a
stockholder of the Company while the shares are held by you.
4. In accordance with the terms of Section 5 of the Agreement, you may from time to time deliver to Purchaser a certificate or certificates representing so many shares as are no longer subject to the Repurchase Option.
5. This escrow shall terminate upon the release of all shares held under the terms and provisions hereof.
6. If at the time of termination of this escrow you should have in your possession any documents, securities or other property belonging to Purchaser, you shall deliver all of same to Purchaser and shall be discharged from all further obligations hereunder.
7. Your duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties hereto.
8. You shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected in relying or refraining from acting on any instrument reasonably believed by you to be genuine and to have been signed or presented by the proper party or parties. You shall not be personally liable for any act you may do or omit to do hereunder as Escrow Agent or as attorney-in-fact of Purchaser while acting in good faith and in the exercise of your own good judgment, and any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive evidence of such good faith.
9. You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or corporation, excepting only orders or process of courts of law, and are hereby expressly authorized to comply with and obey orders, judgments or decrees of any court. In case you obey or comply with any such order, judgment or decree of any court, you shall not be liable to any of the parties hereto or to any other person, firm or corporation by reason of such compliance, notwithstanding any such order, judgment or decree being subsequently reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction.
10. You shall not be liable in any respect on account of the identity, authority or rights of the parties executing or delivering or purporting to execute or deliver the Agreement or any documents or papers deposited or called for hereunder.
11. You shall not be liable for the outlawing of any rights under any statute of limitations with respect to these Joint Escrow Instructions or any documents deposited with you.
12. You shall be entitled to employ such legal counsel and other experts as you may deem necessary properly to advise you in connection with your obligations hereunder and may rely upon the advice of such counsel.
13. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be Secretary of the Company or if you shall resign by written
notice of each party. In the event of any such termination, the Company shall
appoint any officer of the Company as successor Escrow Agent.
14. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
15. It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the securities held by you hereunder, you are authorized and directed to retain in your possession without liability to anyone all or any part of said securities until such dispute shall have been settled either by mutual written agreement of the parties concerned or by a final order, decree or judgment of a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but you shall be under no duty whatsoever to institute or defend any such proceedings.
16. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail with postage and fees prepaid, addressed to each of the other parties thereunto entitled.
17. By signing these Joint Escrow Instructions, you become a party hereto only for the purpose of said Joint Escrow Instructions; you do not become a party to the Agreement.
18. This instrument shall be governed by and construed in accordance with the laws of the State of California.
19. This instrument shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.
Very truly yours,
M-GAB, Inc.
By ___________________________
ESCROW AGENT: PURCHASER:
__________________________ ______________________________
|
The undersigned, as transferee of shares of M-GAB, Inc., hereby acknowledges that he or she has read and reviewed the terms of the Notice of Exercise and Common Stock Purchase Agreement of M-GAB, Inc. and hereby agrees to be bound by the terms and conditions thereof, as if the undersigned had executed said Agreement as an original party thereto.
Dated: ____________________, ____.
By ___________________________
FOR VALUE RECEIVED _________________________________ hereby sells, assigns and transfers unto _________________________ ________________________ (________) shares of the Common Stock of M-GAB, Inc. (the "Company"), standing in __________ name on the books of the Company represented by Certificate No. ________________ herewith and hereby irrevocably constitutes and appoints ________________ Attorney to transfer said stock on the books of the Company with full power of substitution in the premises.
Dated: ____________________, ____.
BYLAWS
OF
M-GAB DEVELOPMENT CORPORATION
A FLORIDA CORPORATION
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use in this Registration Statement of M-GAB DEVELOPMENT CORPORATION on Form SB-2 of our report that included an explanatory paragraph about our concern about the entity's ability to continue as a going concern dated August 24, 2001, appearing in the Prospectus which is part of this Registration Statement.
/s/ Manuel J. Ramirez, CPA Manuel J. Ramirez, CPA Irvine, California August 30, 2001 |