UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10 - QSB/A
(AMENDMENT NO. 1)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended November 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 0-22969
SYNAPTX WORLDWIDE, INC.
(Exact name of small business issuer as specified in its charter)
UTAH 87-0375342
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
385 AIRPORT ROAD, SUITE A, ELGIN, IL 60123
(Address of principal executive offices)
Registrant's telephone no., including area code: (847) 622-0200
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90
days.
Yes X No
--- ___
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the
issuer's classes of common equity, as of the latest practicable
date.
OUTSTANDING AS OF
CLASS DECEMBER 31, 1997
Common Stock, $ .001 par value 5,236,660
<PAGE>
TABLE OF CONTENTS
Heading Page
------- ----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - November 30,
1997 and August 31, 1997
Consolidated Statements of Operations -
three months ended November 30, 1997 and
1996
Consolidated Statements of Cash Flows -
three months ended November 30, 1997 and
1996
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis
and Results of Operations
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
The following unaudited Condensed Consolidated Financial
Statements for the three month periods ended November 30, 1997
and 1996 have been prepared by the Company.
<PAGE>
SYNAPTX WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF NOVEMBER 30, 1997 AND AUGUST 31, 1997
NOVEMBER 30 AUGUST 31,
(UNAUDITED) (AUDITED)
----------- ----------
ASSETS
CURRENT ASSETS:
Cash $ 68,802 $ 58,265
Accounts receivable 950,363 1,001,638
Prepaid expenses and
deposits 42,392 44,662
---------- ----------
Total current assets 1,061,557 1,104,565
PROPERTY AND EQUIPMENT 277,349 254,990
Less accumulated depreciation (88,850) (69,041)
---------- ----------
Net property and equipment 188,499 185,949
COSTS IN EXCESS OF NET ASSETS ACQUIRED
(net of accumulated amortization of
$173,654 and $129,372) 1,587,391 1,631,673
OTHER ASSETS 83,264 60,998
---------- ----------
TOTAL ASSETS $ 2,920,711 $ 2,983,185
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 640,349 $ 679,477
Accrued expenses and taxes 294,071 199,644
Notes payable 261,702 295,482
Current portion of long-term debt 7,934 8,120
Deferred revenue 309,000 414,700
---------- ----------
Total current liabilities 1,513,056 1,597,423
LONG-TERM DEBT, NET OF CURRENT PORTION 20,200 21,200
COMMITMENTS - -
STOCKHOLDERS' EQUITY
Preferred stock; $.001 par value;
10,000,000 shares authorized,
none issued - -
Common stock; $.001 par value;
25,000,000 shares authorized,
5,208,660 and 5,193,660
issued and outstanding 5,209 5,194
Additional paid in capital 2,081,395 2,052,977
Deficit (699,149) (693,609)
---------- ----------
Total stockholders'
equity 1,387,455 1,364,562
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 2,920,711 $ 2,983,185
=========== ===========
<PAGE>
SYNAPTX WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1997 AND 1996
1997 1996
(UNAUDITED) (UNAUDITED)
----------- -----------
NET SALES AND REVENUES:
Marketing services and production $ 1,222,433 $ 592,926
Commission income 265,090 -
Executive placement fees 15,330 -
---------- ----------
Total revenues 1,502,853 592,926
---------- ----------
COST OF SALES AND REVENUES 1,028,206 439,290
---------- ----------
GROSS PROFIT 474,647 153,636
Selling, general and administrative
expenses 406,040 248,961
Depreciation and amortization 64,091 32,130
---------- ----------
INCOME (LOSS) FROM OPERATIONS 4,516 (127,455)
Interest expense 10,056 23,093
---------- ----------
NET LOSS $ (5,540) $ (150,548)
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 5,201,160 3,075,050
NET LOSS PER SHARE $ (0.00) $ (0.05)
=========== ===========
<PAGE>
SYNAPTX WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1997 AND 1996
1997 1996
(UNAUDITED) (UNAUDITED)
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (5,540) $(150,548)
Adjustments to reconcile net loss
to net cash (used in) provided
by operating activities:
Depreciation 19,809 10,700
Amortization 44,282 21,430
Changes in assets and liabilities
net of assets acquired:
Decrease (increase) in
accounts receivable 51,275 (173,539)
Decrease in other current assets 2,270 24,263
(Decrease) increase in
accounts payable (39,128) 109,390
Increase (decrease) in
accrued expenses and taxes 94,427 (165,527)
(Decrease) increase in
deferred revenue (105,700) 85,000
---------- ----------
Net cash provided by (used in)
operating activities 61,695 (238,831)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and
equipment (22,359) (64,204)
Additions to other assets (22,266) (11,317)
---------- ----------
Net cash used in investing
activities (44,625) (75,521)
---------- ----------
CASH FROM FINANCING ACTIVITIES
(Reductions in) bank lines of credit (33,780) (45,619)
(Reductions in) long-term debt (1,186) (57,942)
Decrease in restricted cash - 10,000
(Decrease) in liability to
private placement subscribers - (10,000)
Decrease in deferred placement costs - 5,000
Decrease in due from Maxwell Partners - 50,000
Increase in due to related party - 26,200
(Decrease) in due to officer - (32,000)
Issuance of common stock-net 28,433 368,713
---------- ----------
Cash (used in) provided by
financing activities (6,533) 314,352
---------- ----------
NET INCREASE IN CASH 10,537 -
Cash at beginning of Period 58,265 -
---------- ----------
CASH AT END OF PERIOD $ 68,802 $ -
=========== ===========
<PAGE>
SYNAPTX WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
NOTE 1. BASIS OF PRESENTATION
The financial information included herein is unaudited;
however, such information reflects all adjustments
(consisting solely of normal recurring adjustments) which,
in the opinion of management, are necessary for a fair
statement of results for the interim periods. The
accompanying financial statements include estimated amounts
and disclosures based on management's assumptions about
future events. Actual results may differ from those
estimates.
The results of operations for the three month periods ended
November 30, 1997 and 1996 are not necessarily indicative of
the results to be expected for the full year.
The condensed consolidated financial statements have been
prepared by the Company, without audit, pursuant to the
rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures
normally included in financial statements prepared in
accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the
disclosures are adequate to make information presented
not misleading.
These financial statements should be read in conjunction
with the financial statements included in the Company's Form
10-SB/A for the fiscal year ended August 31, 1997, as filed
with the Securities and Exchange Commission and available
under the EDGAR reporting system or from the Company.
The Company's financial statements are presented on a going
concern basis, which contemplates the realization of assets
and satisfaction of liabilities in the normal course of
business.
The Company has experienced recurring losses from operations
as a result of its investment in personnel necessary to
achieve its operating plan which is long-range in nature. In
addition to the net loss of $5,540 for the three-month
period ended November 30, 1997, as included herein, for the
years ended August 31, 1997 and 1996 the Company realized
net losses of $602,555 and $72,541, respectively. For the
ten months ended August 31, 1995 (initial period of
operation), the Company experienced a net loss of $18,513.
At November 30, 1997, the Company has a working capital
deficit of $451,499, supported by positive stockholders'
equity of $1,387,455.
<PAGE>
The Company's ability to continue as a going concern is
contingent upon its ability to secure additional financing
and attain profitable operations. In addition, the
Company's ability to continue as a going concern must be
considered in light of the problems, expenses and
complications frequently encountered by entrance into
established markets and the competitive environment in which
the Company operates.
Although the Company is pursuing a secondary private
placement plus the refinancing and expansion of outstanding
debt, there can be no assurance that the Company will be
able to secure financing when needed or obtain such terms
satisfactory to the Company, if at all, or complete its
secondary private placement. Failure to secure such
financing or complete its secondary private placement may
result in the Company rapidly depleting its available funds
and not being able to comply with its payment obligations
under its bank loans. In addition, if the Company is unable
to meet its obligations under its credit agreements, such
creditors shall have the right to foreclose on the assets of
the Company, which will be prior to the interests of the
holders of Common Stock.
The financial statements do not include any adjustments to
reflect the possible future effects on the recoverability
and classification of assets or the amounts and
classification of liabilities that may result from the
possible inability of the Company to continue as a going
concern.
NOTE 2. PRINCIPLES OF CONSOLIDATION
The condensed consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries.
The subsidiaries consist of Synaptx Access, Inc., acquired
in June, 1996, Synaptx Impulse, Inc., acquired in October,
1996, and ORAYCOM, Inc., acquired in June, 1997. Upon
consolidation, significant intercompany accounts,
transactions and profits are eliminated.
NOTE 3. PRIVATE PLACEMENTS
On October 2, 1997, the former owner of ORAYCOM, Inc. who is
an existing employee of the Company purchased 15,000 shares of
the Company's common stock, at the then fair market value of
$2.00 per share, resulting in receipt of $30,000.
On October 22, 1997, the Board of Directors authorized a
second private placement of up to $2,000,000 in either
shares of the Company's common stock at $2.30 per share or
of units at $3.00 per unit consisting of one share of the
Company's common stock and a warrant to purchase an
additional share of the Company's common stock at $2.30 per
share with an exercisable life of five years. The period of
<PAGE>
this offering extends through January 20, 1998. Through
January 14, 1998, 28,000 shares of the Company's common
stock plus stock warrants representing the right to
purchase 15,000 shares of the Company's common stock at
$2.30 per share have been issued resulting in proceeds of
$74,900, all received after November 30, 1997.
<PAGE>
NOTE 4. SUPPLEMENTAL CASH FLOW DISCLOSURES
On October 1, 1996 the Company purchased all of the capital
stock of Maxwell Partners, Inc. (N/K/A Synaptx Impulse,
Inc.), for $690,000 utilizing the Company's $.001 par value
common stock. In conjunction with the acquisition, assets
with a fair value of $591,384 were acquired and liabilities
of $1,160,026 were assumed. Though cash of $43,231 was paid
for this and a subsequent acquisition, none of these payments
applied to the three month periods ended November 30, 1997 or
1996.
Cash paid for interest was $11,200 and $10,423 for
the three month periods ended November 30, 1997 and 1996,
respectively.
NOTE 5. SUBSEQUENT EVENTS
On January 5, 1998, the Company acquired WG Controls, Inc.,
an Illinois Corporation, ("WG Controls") for 285,715 shares
of the Company's $ .001 par value common stock, 137,143
shares of the Company's $ .001, Series A, convertible
preferred stock and $270,000 in cash payable as follows:
$125,000 on the first anniversary date of the Agreement,
$125,000 on the second anniversary date of the Agreement,
and $20,000 on the third anniversary date of the Agreement.
The total initial cost of the acquisition is approximately
$1,112,400, which is anticipated to exceed the fair value
of the net assets being acquired by approximately $1,000,000.
The excess will be amortized on the straight-line method
over twenty years.
Additionally, pursuant to the terms of the acquisition, the
former shareholders of WG Controls may earn additional
purchase price consideration in the form of additional
<PAGE>
common stock of the Company based on the attainment of both
"commission revenues" and "earnings" above specified levels
by WG Controls beginning January 1, 1998 through December
31, 1999. The additional consideration is specified as
fixed amounts for the attainment of specified annual
"commission revenues" and "earnings" for the subsequent
calendar years ending December 31, 1998 and 1999. If WG
Controls meets the specified "commission revenues" and
"earnings" amounts, the additional consideration could
amount to $1,000,000. The additional consideration, if any,
would be added to the cost in excess of net assets acquired
and will be amortized on the straight-line method over the
remaining life of the twenty year amortization period,
described above.
WG Controls is a sales representative firm based in Illinois
(approximately fifteen miles northwest of Chicago) that
provides field sales and business development support for
specified product lines and/or territories for clients under
contract who include RELTEC, Thomas & Bettes and Johanson in
addition to approximately 15 other clients. Revenues
represent the earning of commissions on its customers'
sales.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company is a fully integrated service provider of
consulting, marketing, sales advice and implementation strategies
serving customers in the telecommunications and information
industries. The Company operates in one business segment. The
Company's fiscal year ends August 31.
OVERVIEW
The Company plans marketing programs and develops sales and
marketing literature for print and electronic media for which
consulting fees are charged and production revenues are
generated, represents certain product lines of customers
serving the telecommunications (both voice and data networking)
and cable TV industries as sales representatives for which
commission income is being earned, and places executives in
positions at telecommunications clients, primarily in sales and
marketing positions, for which executive placement fees are being
realized as revenues based upon an agreed upon percentage of
salary and other compensation of the individuals so hired.
The Company's objective is to use its knowledge of and its
sales and marketing resources focused on the telecommunications
industry to acquire and improve equipment manufacturers and
software developers. Targeted acquisition candidates would
include companies that have demonstrated an ability to envision,
design and commercialize unique telecommunications products and
services. Once such an entity is acquired, the Company will
direct its sales, marketing and managerial resources toward
achieving increased revenues and earnings. To date, the Company
has only acquired companies that support its core services of
consulting, marketing and sales. They will be the foundation to
help create the potential revenues and earnings growth for target
acquirees.
The Company's ability to continue as a going concern is
contingent upon its ability to secure additional financing,
complete a secondary private placement, and attain profitable
operations. In addition, the Company's ability to continue as a
going concern must be considered in light of the problems,
expenses and complications frequently encountered by entrance
into established markets and the competitive environment in which
the Company operates.
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship
to total revenues of principal items contained in the Company's
Consolidated Statements of Operations for the three month periods
ended November 30, 1997 and 1996. It should be noted that
percentages discussed throughout this analysis are stated on an
approximate basis.
Three Months Ended
November 30,
------------------
1997 1996
---- ----
(Unaudited)
Net sales and revenues . . . . . . . . 100% 100%
Cost of sales . . . . . . . . . . . . 68% 74%
---- ----
Gross Profit . . . . . . . . . . . . . 32% 26%
Selling, general and administrative
expenses . . . . . . . . . . . . . . . 31% 47%
---- ----
Operating income (loss) . . . . . . . 1% (21%)
Interest expense . . . . . . . . . . . 1% 4%
---- ----
Net loss . . . . . . . . . . . . . . . (0%) ( 25%)
==== ====
NET SALES AND REVENUES
The Company's net sales and revenues increased by $909,927
or 153%, from $592,926 for the three months ended November 30,
1996 ("1Q/97") to $1,502,853 for the three months ended November
30, 1997 ("1Q/98"). The increase was attributable to increases of
$629,507 from Marketing Services and Production, $265,090 from
Commission Income, and $15,330 from Executive Placement Fees. The
increases are in part due to 1Q/98 figures having a full three
months of activity of the three major revenue sources, Synaptx
Impulse ("Impulse"), Synaptx Access ("Access"), and ORAYCOM
("ORAYCOM"), while 1Q/97 revenues included only two months of
activity for Impulse and no activity for ORAYCOM.
COST OF SALES
Cost of sales and revenues increased by $588,916 in 1Q/98,
or 134%, from $439,290 in 1Q/97 to $1,028,206 in 1Q/98. The
increase was primarily due to 1Q/98 amounts including a full
three months of activity for the three major revenue sources,
while 1Q/97 included only two months of activity for Impulse, and
no activity for ORAYCOM.
GROSS PROFIT
The Company's gross profit margin, was 25.9% and 31.6% for
1Q/97 and 1Q/98, respectively. The increase in gross profit
margin of 5.7 points in 1Q/98 is attributable to a more favorable
mix of revenues, concentrating more on higher margin professional
fees and sales commissions and de-emphasizing lower margin
<PAGE>
production type work.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses, including
depreciation and amortization, increased by $189,040 in 1Q/98 or
67% from $281,091 in 1Q/97 to $470,131 in 1Q/98. This increase is
primarily attributable to a full quarter of operations for the
major subsidiaries in 1Q/98, versus only two months of activity
for Impulse, and no activity for ORAYCOM in 1Q/97 and an increase
of approximately $30,000 in depreciation and amortization,
primarily associated with the above described acquisitions.
INTEREST EXPENSE
Interest expense decreased by $13,037 in 1Q/98 or 56%, from
$23,093 in 1Q/97 to $10,056 in 1Q/98. This decrease is attributable
to the repayment of a short-term loan in the subsequent quarter
with $14,000 of interest attributable to amortization of stock
warrants issued at an exercise price below fair market value.
NET OPERATING LOSS
The Company has accumulated approximately $460,000 of net
operating loss carryforwards as of November 30, 1997, which may
be offset against taxable income and income taxes in future
years. The use of these losses to reduce future income taxes
will depend on the generation of sufficient taxable income prior
to the expiration of the net operating loss carryforwards. The
carry forwards expire in the year 2012. In the event of certain
changes in control of the Company, there will be an annual
limitation on the amount of net operating loss carryforwards
which can be used. No tax benefit has been reported in the
financial statements for the year ended August 31, 1997 or for
the three months ended November 30, 1997 because there is a 50%
or greater chance that the carryforward will not be utilized.
Accordingly, the potential tax benefit of the loss carryforward
is offset by a valuation allowance of the same amount.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal cash requirements are for selling,
general and administrative expenses, primarily outside
consultants such as independent contractors who provide design,
copywriting and professional marketing and sales consulting
services, employee costs, funding of accounts receivable, capital
expenditures and funding of acquisitions. The Company's primary
sources of cash have been from an initial private placement of
the Company's common stock which raised $753,993 of net proceeds,
a stock rights offering to then existing shareholders which
raised $7,828, a private placement to an existing employee of the
Company which raised $30,000 and a secondary private placement
<PAGE>
which has raised $74,900, plus cash derived from operations. The
Company is investigating various sources for additional
financing, including both equity infusion and debt facility
arrangements although no agreements for such additional financing
have been reached as of the date of this filing.
Although the Company is pursuing a secondary private
placement plus the refinancing and expansion of outstanding
debt, there can be no assurance that the Company will be
able to secure financing when needed or obtain such terms
satisfactory to the Company, if at all, or complete its
secondary private placement. Failure to secure such
financing or complete its secondary private placement may
result in the Company rapidly depleting its available funds
and not being able to comply with its payment obligations
under its bank loans. In addition, if the Company is unable
to meet its obligations under its credit agreements, such
creditors shall have the right to foreclose on the assets of
the Company, which will be prior to the interests of the
holders of Common Stock.
Three Months Ended November 30, 1997
Cash increased $10,537 from $58,265 at the beginning
of the period to $68,802 at the end of the period. Net
cash provided by operations was $61,695 mainly
attributable to non-cash expense items (depreciation
and amortization) of $64,091 and a net increase in
accounts payable and accrued expenses of $55,299 and
a decrease in accounts receivable of $51,275, offset
by the net loss of $5,540 and a decrease in deferred
revenue of $105,700.
Net cash used in investing activities was $44,625
attributable to additions to fixed assets of $22,359
and additions to other long term assets of $22,266.
Net cash used in financing activities was $6,533
primarily attributable to proceeds from issuance of
common stock of $28,433, offset by reductions in bank
lines of credit of $33,780.
Three Months Ended November 30, 1996
Cash balances remained unchanged at $-0-. Net
cash used in operations was $238,831 attributable to
the net loss of $150,548, an increase in accounts
receivable of $173,539 and a net decrease in accounts
payable and accrued expenses of $56,137, offset by
non-cash expense items (depreciation and amortization)
of $32,130, a decrease in other current assets of $24,263,
and an increase in deferred revenue of $85,000.
Net cash used in investing activities was $75,521,
primarily attributable to additions to fixed assets of
$64,204 and additions to other long-term assets of $11,317.
Net cash provided by financing activities was $314,352,
primarily attributable to proceeds from the issuance of
common stock of approximately $370,000 and to amounts
advanced to Maxwell Partners, Inc., realized upon
acquisition of $50,000, offset by reductions in the bank
line of credit and debt of approximately $100,000.
<PAGE>
INFLATION
In the opinion of management, inflation has not had a material
effect on the operations of the Company.
RISK FACTORS AND CAUTIONARY STATEMENTS
Forward-looking statements in this report are made pursuant
to the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995. The Company wishes to advise
readers that actual results may differ substantially from such
forward-looking statements. Forward-looking statements involve
risks and uncertainties that could cause actual results to differ
materially from those expressed in or implied by the statements,
including, but not limited to, the following: the ability of the
Company to provide for its debt obligations and to provide for
working capital needs from operating revenues, and other risks
detailed in the Company's periodic report filings with the
Securities and Exchange Commission.
<PAGE>
PART II
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) See Note 3 to Notes to Condensed Consolidated
Financial Statements.
ITEM 5. OTHER INFORMATION
On January 5, 1998, the Company acquired WG Controls,
Inc., an Illinois Corporation, ("WG Controls") for 285,715 shares
of the Company's $ .001 par value common stock, 137,143 shares of
the Company's $ .001, Series A, convertible preferred stock and
$270,000 in cash payable as follows: $125,000 on the first
anniversary date of the Agreement, $125,000 on the second
anniversary date of the Agreement, and $20,000 on the third
anniversary date of the Agreement. The total initial cost of
the acquisition is approximately $1,112,400, which is anticipated
to exceed the fair value of the net assets being acquired by
approximately $1,000,000. The excess will be amortized on the
straight-line method over twenty years.
Additionally, pursuant to the terms of the acquisition, the
former shareholders of WG Controls may earn additional purchase
price consideration in the form of additional common stock of the
Company based on the attainment of both "commission revenues" and
"earnings" above specified levels by WG Controls beginning
January 1, 1998 through December 31, 1999. The additional
consideration is specified as fixed amounts for the
attainment of specified annual "commission revenues" and
"earnings" for the subsequent calendar years ending December 31,
1998 and 1999. If WG Controls meets the specified "commission
revenues" and "earnings" amounts, the additional consideration could
amount to $1,000,000. The additional consideration, if any,
would be added to the cost in excess of net assets acquired and
will be amortized on the straight-line method over the remaining
life of the twenty year amortization period, described above.
WG Controls is a sales representative firm based in Illinois
(approximately fifteen miles northwest of Chicago) that provides
field sales and business development support for specified
product lines and/or territories for clients under contract who
include RELTEC, Thomas & Bettes and Johanson in addition to
approximately 15 other clients. Revenues represent the earning
of commissions on its customers' sales. Management believes that
the opportunity of providing a national Client sales
representation focus will allow for increased geographic service
scope with existing clients and an opportunity of adding
additional clients. Financial statements required will be filed
upon completion of the audits of WG Controls, but no later than
sixty (60) days from the date this report is filed, or March 23,
1998.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Agreement and Plan of Merger dated January 1,
1998, by and among Synaptx Worldwide, Inc.,
Synaptx Controls, Inc., WG Controls, Inc., and
James M. Gleason, Shirley Gleason, Michael
Concialdi, and James Gammon.
10.2 Employment Agreement between WG Controls, Inc.
and James M. Gleason
10.3 Non-Compete Agreement between Synaptx Worldwide,
Inc. and James M. Gleason
27 Financial Data Schedule
(b) No reports were filed on Form 8-K during this
quarter.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities
Exchange Act of 1934, the Registrant caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
SYNAPTX WORLDWIDE, INC.
Date: January 20, 1998 By /s/Ronald L. Weindruch
----------------------------
RONALD L. WEINDRUCH, President
and Chief Executive Officer
Date: January 20, 1998 By /s/ Richard E. Hanik
----------------------------
RICHARD E. HANIK
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit Description
------- -----------
10.1 Agreement and Plan of Merger dated January 1,
1998, by and among Synaptx Worldwide, Inc.,
Synaptx Controls, Inc., WG Controls, Inc., and
James M. Gleason, Shirley Gleason, Michael
Concialdi, and James Gammon.
10.2 Employment Agreement between WG Controls, Inc.
and James M. Gleason
10.3 Non-Compete Agreement between Synaptx Worldwide,
Inc. and James M. Gleason
27 Financial Data Schedule
Exhibit 10.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated January 1, 1998, by and among
SYNAPTX WORLDWIDE, INC., a Utah corporation ("Synaptx"), SYNAPTX
CONTROLS, INC., an Illinois corporation and a wholly-owned subsidiary
of Synaptx ("Acquisition Corp."), WG CONTROLS, INC., an Illinois
corporation ("WG Controls"), and James M. Gleason, Shirley Gleason,
Michael Concialdi, and James Gammon (the "WG SHAREHOLDERS"), Illinois
residents.
W I T N E S S E T H :
WHEREAS, Acquisition Corp. is a wholly-owned subsidiary of
Synaptx;
WHEREAS, Synaptx desires to acquire the shares of WG
Controls Common Stock and all the common stock of its wholly-owned
subsidiary, WG Telecom, INC. ("WG TELECOM") Common Stock through the
merger of Acquisition Corp. with and into WG Controls pursuant to the
terms hereinafter set forth (the "Merger");
WHEREAS, the respective Boards of Directors of Synaptx and
Acquisition Corp. deem it advisable and in the best interests of
Synaptx and Acquisition Corp. that Acquisition Corp. be merged with
and into WG Controls upon the terms and conditions hereinafter
specified;
WHEREAS, the respective Board of Directors of WG CONTROLS
deem it advisable and in the best interests of WG Controls that
Acquisition Corp. be merged with and into WG Controls and upon the
terms and conditions hereinafter specified;
WHEREAS, for Federal income tax purposes, it is intended
that the Merger shall qualify as a reorganization within the meaning
of Section 368 of the Internal Revenue Code of 1986, as amended (the
"Code");
WHEREAS, the WG SHAREHOLDERS own all the outstanding capital
stock of WG Controls , Inc., an Illinois corporation ("WG CONTROLS")
and WG CONTROLS owns all of the issued and outstanding stock of WG
Telecom, Inc., also an Illinois corporation ("WG TELECOM") Acquisition
Corp. wishes to acquire all of the capital stock of WG CONTROLS and
the WG SHAREHOLDERS wish to own common stock and preferred stock in
SYNAPTX and to continue to conduct WG CONTROLS' businesses as a
subsidiary or subsidiaries of SYNAPTX.
Accordingly, in consideration of the mutual agreements set
forth herein, the parties agree as follows:
ARTICLE 1
ADOPTION OF AGREEMENT AND PLAN OF MERGER
- ----------------------------------------
1.1 The Merger. At the Effective Time (as defined in Section
----------
1.2 herein), in accordance with this Agreement and the relevant
provisions of the Illinois Business Corporation Act (the "IBCA"), WG
Controls shall be merged with and into Acquisition Corp.. WG Controls
shall be the surviving corporation of the Merger and WG Controls shall
continue, and be deemed to continue, for all purposes after the
Merger, and the existence of Acquisition Corp. shall cease at the
Effective Time.
1.2 Effective Date of the Merger. This Agreement shall be
----------------------------
submitted to the stockholders of WG Controls, and to the sole
stockholder of Acquisition Corp., for approval as soon as practicable
after the execution of this Agreement. Subject to the terms and
conditions hereof, upon the authorization , approval and adoption
hereof by the affirmative vote of the holders of at least a majority
of the outstanding shares of each of WG Controls Common Stock and
Acquisition Corp. Common Stock entitled to vote thereon as provided by
the IBCA, a Certificate of Merger (the "Certificate of Merger")
meeting the requirements of the IBCA shall be executed, verified and
acknowledged as required by the provisions of the IBCA and be
delivered to the Secretary of State of Illinois for filing (the time
of such filing being the "Effective Time" and the date of such filing
being the "Effective Date").
1.3 Surviving Corporation; Certificate of Incorporation of
------------------------------------------------------
Surviving Corporation. Following the Merger, WG Controls and WG
- ---------------------
Telecom shall continue to exist under, and be governed by, the laws of
the State of Illinois. The Certificate of Incorporation of WG
Controls, as in effect on the Closing Date, shall continue in full
force and effect as the Certificate of Incorporation of the Surviving
Corporation. The corporate existence of each of Acquisition Corp. and
WG Telecom shall terminate upon the Effective Time.
1.4 Merger Consideration; Conversion of WG Controls Common
------------------------------------------------------
Stock and Cancellation of Acquisition Corp. Common Stock. (a) At the
- --------------------------------------------------------
Effective Time, by virtue of the Merger and without any action on the
part of Acquisition Corp., WG Controls, WG Telecom or the holders of
any shares of WG Controls Common Stock the total of three thousand
five hundred (3,500) shares of WG Controls Common Stock issued and
outstanding immediately prior to the Effective Time shall be converted
into the right to receive (i) a total of two hundred eighty-five
thousand seven hundred fifteen (285,715) shares of Synaptx Common
Stock, (ii) one hundred thirty-seven thousand one hundred forty-three
(137,143) shares of Synaptx Preferred Stock,. and (iii) two hundred
seventy thousand dollars ($270,000.00) in cash in accordance with the
terms of Section 1.7, as defined below.
(b) At the Effective Time, each share of Acquisition Corp.
Common Stock issued and outstanding immediately prior to the Effective
Time shall, by virtue of the Merger and without any action on the part
of Synaptx, be cancelled and cease to exist.
1.4.1 Call Option for SYNAPTX Preferred Stock. As described
---------------------------------------
in Section 1.4, above, SYNAPTX will issue SYNAPTX Preferred Stock to
the WG SHAREHOLDERS who will have the right of conversion of said
shares into SYNAPTX Common Stock. Since the rights of ownership of the
SYNAPTX Preferred Stock requires the distribution of dividends which
represent a cash drain to SYNAPTX, it is agreed that SYNAPTX will have
the right to call the SYNAPTX Convertible Preferred Stock upon SYNAPTX
Common Stock achieving a closing price average for a consecutive sixty
(60) day trading period of five dollars and twenty-five cents ($5.25)
(the "Call Option"). Upon election of the Call Option, Synaptx will
require the cancellation of the SYNAPTX Convertible Preferred Stock
which will be replaced with ninety-two thousand three hundred
eighty-one (92,381) shares of SYNAPTX common stock.
1.5 Exchange of Certificates. (a) Prior to the Effective
------------------------
Time, Synaptx shall effectuate the delivery of the Merger
consideration provided for in Section 1.4 to holders of WG Controls
Common Stock upon surrender of their certificates ("Certificates") for
their shares of WG Controls Common Stock.
(b) As of the Effective Time, Synaptx shall provide, or
shall take all steps necessary to provide, the Merger consideration
pursuant to Section 1.4 (a) in exchange for the shares of WG Controls
Common Stock, Synaptx shall make the deliveries of the Merger
consideration required in respect of the Merger.
(c) Upon surrender of a Certificate to Synaptx, duly
executed, the holder of such Certificate shall be entitled to receive
in exchange therefor the Merger consideration provided for in Section
1.4 (a), and the Certificate so surrendered shall forthwith be
cancelled. The Merger consideration shall be delivered to such holder
as promptly as practicable and (except as hereinafter provided) in no
event later than twenty (20) days after proper delivery of the
applicable Certificates to Synaptx.
1.6 No Fractional Shares. No certificates or scrip for
--------------------
fractional shares of Synaptx Common Stock or Synaptx Preferred Stock
will be issued and no such fractional share interest shall entitle the
owner thereof to vote or to any rights of or as a stockholder of
Synaptx. In lieu of issuing any such fractional shares to which a
holder of WG Controls Common Stock would otherwise be entitled to
receive, Synaptx shall round up or down to the nearest whole share.
1.7 Cash for WG CONTROLS STOCK. Subject to the terms and
--------------------------
conditions of this Agreement, SYNAPTX agrees to issue to the WG
SHAREHOLDERS in addition to the SYNAPTX STOCK described in Section
1.1, above, cash, as follows:
(a) One Hundred Twenty-five Thousand Dollars ($125,000.00)
on the first anniversary date of Closing, as defined
below,
(b) One Hundred Twenty-five Thousand Dollars ($125,000.00)
on the second anniversary date of Closing, as defined
below, and
(c) Twenty Thousand Dollars ($20,000.00) on the third
anniversary date of Closing, as defined below.
1.8 Contingent Issuance of SYNAPTX Common Stock. Subject to
-------------------------------------------
the terms and conditions of this Agreement, SYNAPTX agrees to issue to
the WG SHAREHOLDERS a maximum value of $1,000,000 worth of SYNAPTX
Common Stock ("Earn-out Bonus") as an incentive to achieve the Level
One Results or Level Two Results (and as hereinafter defined) as
reflected on Exhibit 1.8, to be issued over calendar year ends,
specifically December 31, 1998 and 1999 (the "Earn-out Period" for
each calendar year end or collectively the "Earn-out Periods"), to the
existing WG SHAREHOLDERS who are employed by WG Controls as of the
date ninety (90) days after each of the next two SYNAPTX calendar year
results, specifically, December 31, 1998, and 1999 ("Payout Date" for
each calendar year end or collectively the "Payout Dates"). The Level
One Results and Level Two Results represent threshold levels of
amounts to be realized after the Closing covering the total of
Commission Revenues and the total Earnings before Taxes, both of which
must be achieved, as recorded on the consolidated books and records of
WG CONTROLS for each Earn-out Period in accordance with generally
accepted accounting principles ("Level One Results" and "Level Two
Results", respectively). The Earn-out Bonus as reflected on Exhibit
1.8 represents the dollars payable for the respective Level One
Results and Level Two Results specified on Exhibit 1.8 achieved
("Earn-out Bonus Realized"). Earn-out Bonus Realized is payable in
shares of Synaptx Common Stock based on the number of shares resulting
from the formula of Earn-out Bonus Realized divided by the average
closing price of SYNAPTX Common Stock for every trading day in the
month of January, following the calendar year end, as published for
the stock exchange on which the SYNAPTX Common Stock is traded or as
quoted on the electronic bulletin board if the SYNAPTX Common Stock is
not so traded, rounded up to the next whole share of SYNAPTX Common
Stock.
1.9 Closing. The exchange of SYNAPTX STOCK for WG CONTROLS
-------
COMMON STOCK shall take place at a closing (the "Closing") at such
place as shall be mutually agreed to by the parties at 10:00 a.m. on
or before January 1, 1998, or as soon as practicable thereafter upon
the satisfaction or waiver of the conditions to Closing set forth in
Article 5 and in Section 7.1.1. The date on which the Closing takes
place is referred to as the "Closing Date." At the Closing, each WG
SHAREHOLDER shall deliver to SYNAPTX stock certificates representing
the WG CONTROLS Stock owned by such WG SHAREHOLDERS, duly endorsed for
transfer or with duly executed stock powers attached, together with
such other documents as SYNAPTX may reasonably request prior to the
Closing. At the Closing, SYNAPTX shall deliver to each WG SHAREHOLDER
a stock certificate representing the SYNAPTX STOCK issued to such WG
SHAREHOLDERS in exchange for his or her WG CONTROLS Stock, together
with such other documents as each WG SHAREHOLDER may reasonably
request prior to the Closing. The parties agree to execute such
additional documents after the Closing as may be necessary or
desirable to carry out the terms of this Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF WG SHAREHOLDERS
- -------------------------------------------------
The WG SHAREHOLDERS, jointly (except where otherwise expressly
indicated to the contrary) and severally, represent and warrant as
follows:
2.1 Organization. To the best of their knowledge, WG
------------
CONTROLS is duly incorporated, validly existing and in good standing
under the laws of the State of its incorporation, is qualified to do
business as a foreign corporation in each other jurisdiction in which
the failure to be so qualified would have a material adverse effect on
the transactions contemplated by this Agreement or on the business,
financial condition or results of operation of WG CONTROLS, and has
full corporate power and authority to conduct its business as
presently conducted and to enter into and perform this Agreement.
2.2 Authorization. Each WG SHAREHOLDER represents and
-------------
warrants that he or she has full power, capacity and authority to
execute, deliver and perform this Agreement. This Agreement has been
duly executed and delivered by such WG SHAREHOLDER and (assuming the
due execution and delivery by the other parties hereto) constitutes
the legal, valid and binding agreement of such WG SHAREHOLDER
enforceable against such person in accordance with its terms, except
as may be limited by applicable bankruptcy, insolvency or other laws
affecting the enforcement of creditors' rights and remedies generally
and by general principles of equity. The WG SHAREHOLDERS shall, at the
Closing, provide a fully executed resolution of the WG CONTROLS' Board
of Directors indicating that there are no existing conditions that
preclude the transaction as defined in Article 1 and authorizing such
exchange as documented by a Plan of Reorganization that references
those actions to accomplish the tax free result intended by the
parties in this transaction which will be incorporated within this WG
CONTROLS Board of Directors resolution.
2.3 No Consents, Conflicts. Each WG SHAREHOLDER represents
----------------------
and warrants that (a) no consent, approval or other action by any
governmental authority or third party is required in connection with
the execution, delivery and performance of this Agreement by such WG
CONTROLS Shareholder; and (b) neither the execution, delivery or
performance of this Agreement by such WG SHAREHOLDERS will (i)
violate, conflict with or result in a breach of any provision of or
constitute a default or an event which with notice or lapse of time or
both, would constitute a default under WG CONTROLS' articles of
incorporation or by-laws or any agreement or obligation to which WG
CONTROLS or such WG SHAREHOLDERS are a party or by which either of
such persons may be bound or affected where such violation, conflict,
breach or default would have a material adverse effect on the
transactions contemplated by this Agreement, or (ii)violate any order,
writ, injunction, decree, statute, rule or regulation applicable to WG
CONTROLS or such WG SHAREHOLDERS where such violation would have a
material adverse effect on the transactions contemplated by this
Agreement.
2.4 Financial Statements. The WG SHAREHOLDERS have
--------------------
previously delivered to SYNAPTX the balance sheets and related
statements of income, shareholders' equity and cash flows as of and
for the calendar year period ended December 31, 1996 and for the
eleven month period ended November 30, 1997 (the "Financial
Statements"). The Financial Statements have been prepared in
accordance with WG CONTROLS' books and records, present fairly in all
material respects the financial position, results of operations,
shareholders' equity and cash flows for the periods then ended. There
has been no material adverse change in the business, financial
condition, results of operations or prospects of WG CONTROLS since
December 31, 1996. Except as disclosed in the Financial Statements, WG
CONTROLS does not have any liabilities, commitments or obligations
(whether accrued, absolute, contingent or otherwise), other than
obligations incurred since the date of the Financial Statements in the
ordinary course of business and consistent with past practice and none
of which has or will have a material adverse effect, on the business,
financial condition, results of operations or prospects of WG CONTROLS.
2.5 Compliance, No Litigation. To the best of their
-------------------------
knowledge, WG CONTROLS is in material compliance with all applicable
federal, state, local and foreign laws, ordinances, orders, rules and
regulations and with all agreements, commitments or obligations to
which it is a party or by which it or any of its assets may be bound.
To the best of their knowledge, there is no proceeding, investigation
or inquiry pending or threatened against WG CONTROLS, its business or
any of its assets, nor is there any basis for any such proceeding,
investigation or inquiry. Neither WG CONTROLS nor, to the best of
their knowledge, its business or any of its assets is subject to any
judgment, order, writ or injunction of any court, arbitrator or
governmental agents or instrumentality.
2.6 Authorized Capital Stock. The authorized capital stock
------------------------
of WG Controls, Inc. consists of five thousand (5,000) shares of
common stock, of which three thousand five hundred (3,500) shares are
issued and outstanding, all of which are owned by the WG SHAREHOLDERS.
All the outstanding shares of WG CONTROLS Stock have been validly
issued and are fully paid and non assessable. There are no outstanding
options, warrants, rights or other commitments obligating WG CONTROLS
to issue any of its capital stock. The capital stock held by the WG
SHAREHOLDERS are not pledged to any bank or to other lenders to
support loans and debt provided to WG CONTROLS or personally to any
individual or multiple WG SHAREHOLDERS.
2.7 Title to WG CONTROLS Stock. Each of the WG SHAREHOLDERS
--------------------------
owns the WG CONTROLS Stock to be transferred to SYNAPTX at the
Closing, free and clear of all liens, claims and encumbrances, and at
the Closing, SYNAPTX will acquire good and valid title to such WG
CONTROLS Stock, free and clear of all liens, claims and encumbrances.
2.8 Investment Representations. Each WG SHAREHOLDER
--------------------------
represents and warrants that he or she has such knowledge and
experience in financial and business matters as to be capable of
evaluating the merits and risks of an investment in the SYNAPTX STOCK
in exchange for the WG CONTROLS Stock owned by such WG SHAREHOLDERS,
and has been given the opportunity to examine all documents and ask
questions of, and receive answers from representatives of SYNAPTX
concerning the terms and conditions of such exchange and the financial
condition, business and prospects of SYNAPTX, and to obtain such
additional information as he or she deemed necessary in connection
with the transaction contemplated by this agreement. The SYNAPTX STOCK
to be acquired by such WG SHAREHOLDERS pursuant to this agreement is
for such person's own account for investment and not with a view to
the public distribution thereof, and such WG SHAREHOLDERS will not
effect any transfer of such SYNAPTX STOCK except pursuant to an
effective registration statement under the Securities Act of 1933 or
exemptions from registration thereunder and in compliance with all
applicable state securities laws. Each WG SHAREHOLDER understands that
the SYNAPTX STOCK to be received by such person at the Closing will
bear appropriate restrictive legends referred to the foregoing
transfer restrictions.
2.9 Reliance on Own Tax Advisors. The WG SHAREHOLDERS are
----------------------------
relying on their own tax advisors in connection with determining the
tax consequences to them of the transactions contemplated by this
Agreement and is not relying on SYNAPTX or SYNAPTX' attorneys,
accountants officers or advisors for any such advice.
2.10 Brokers and Finders. Neither WG CONTROLS nor any of its
-------------------
shareholders, officers, directors or agents are liable for any
brokers' or finders' fees or expenses in connection with this
Agreement or the transactions contemplated hereby.
2.11 No Misrepresentations. Neither this Agreement nor any
---------------------
document executed or to be executed by any WG SHAREHOLDER in
connection with the transactions contemplated hereby contains or will
contain when executed any untrue statement of a material fact or omits
or will omit when executed to state a material fact necessary in order
to make the statements made, in the light of the circumstances under
which they were made, not misleading.
ARTICLE 2A
REPRESENTATIONS AND WARRANTIES OF WG SHAREHOLDERS
- -------------------------------------------------
The WG SHAREHOLDERS, jointly (except where otherwise expressly
indicated to the contrary) and severally, represent and warrant as
follows:
2A.1 Organization. To the best of their knowledge, WG
------------
TELECOM is duly incorporated, validly existing and in good standing
under the laws of the State of its incorporation, is qualified to do
business as a foreign corporation in each other jurisdiction in which
the failure to be so qualified would have a material adverse effect on
the transactions contemplated by this Agreement or on the business,
financial condition or results of operation of WG TELECOM, and has
full corporate power and authority to conduct its business as
presently conducted and to enter into and perform this Agreement.
2A.2 Authorization. Each WG SHAREHOLDER represents and
-------------
warrants that he or she has full power, capacity and authority to
execute, deliver and perform this Agreement. This Agreement has been
duly executed and delivered by such WG SHAREHOLDER and (assuming the
due execution and delivery by the other parties hereto) constitutes
the legal, valid and binding agreement of such WG SHAREHOLDER
enforceable against such person in accordance with its terms, except
as may be limited by applicable bankruptcy, insolvency or other laws
affecting the enforcement of creditors' rights and remedies generally
and by general principles of equity. The WG SHAREHOLDERS shall, at the
Closing, provide a fully executed resolution of the WG TELECOM Board
of Directors indicating that there are no existing conditions that
preclude the transaction as defined in Article 1 and authorizing such
exchange as documented by a Plan of Reorganization that references
those actions to accomplish the tax free result intended by the
parties in this transaction which will be incorporated within this WG
TELECOM's Board of Directors resolution.
2A.3 No Consents, Conflicts. Each WG SHAREHOLDER represents
----------------------
and warrants that (a) no consent, approval or other action by any
governmental authority or third party is required in connection with
the execution, delivery and performance of this Agreement by such WG
TELECOM Shareholder; and (b) neither the execution, delivery or
performance of this Agreement by such WG TELECOM's sole shareholder
will (i) violate, conflict with or result in a breach of any provision
of or constitute a default or an event which with notice or lapse of
time or both, would constitute a default under WG TELECOM's articles
of incorporation or by-laws or any agreement or obligation to which WG
TELECOM or such WG SHAREHOLDERS are a party or by which either of such
persons may be bound or affected where such violation, conflict,
breach or default would have a material adverse effect on the
transactions contemplated by this Agreement, or (ii)violate any order,
writ, injunction, decree, statute, rule or regulation applicable to WG
TELECOM or such WG SHAREHOLDERS where such violation would have a
material adverse effect on the transactions contemplated by this
Agreement.
2A.4 Financial Statements. The WG SHAREHOLDERS have
--------------------
previously delivered to SYNAPTX the balance sheets and related
statements of income, shareholders' equity and cash flows as of and
for the calendar year period ended December 31, 1996 and for the
eleven month period ended November 30, 1997 (the "Financial
Statements"). The Financial Statements have been prepared in
accordance with WG TELECOM's books and records, present fairly in all
material respects the financial position, results of operations,
shareholders' equity and cash flows for the periods then ended. There
has been no material adverse change in the business, financial
condition, results of operations or prospects of WG TELECOM since
December 31, 1996. Except as disclosed in the Financial Statements, WG
TELECOM does not have any liabilities, commitments or obligations
(whether accrued, absolute, contingent or otherwise), other than
obligations incurred since the date of the Financial Statements in the
ordinary course of business and consistent with past practice and none
of which has or will have a material adverse effect, on the business,
financial condition, results of operations or prospects of WG TELECOM.
2A.5 Compliance, No Litigation. To the best of their
-------------------------
knowledge, WG TELECOM is in material compliance with all applicable
federal, state, local and foreign laws, ordinances, orders, rules and
regulations and with all agreements, commitments or obligations to
which it is a party or by which it or any of its assets may be bound.
To the best of their knowledge, there is no proceeding, investigation
or inquiry pending or threatened against WG TELECOM, its business or
any of its assets, nor is there any basis for any such proceeding,
investigation or inquiry. Neither WG TELECOM nor, to the best of their
knowledge, its business or any of its assets is subject to any
judgment, order, writ or injunction of any court, arbitrator or
governmental agents or instrumentality.
2A.6 Authorized Capital Stock. The authorized capital stock
------------------------
of WG Telecom, Inc. consists of five thousand (5,000) shares of common
stock, of which one thousand five hundred (1,500) shares are issued
and outstanding all of which are owned by WG CONTROLS. All the
outstanding shares of WG TELECOM Stock have been validly issued and
are fully paid and non assessable. There are no outstanding options,
warrants, rights or other commitments obligating WG TELECOM to issue
any of its capital stock. The capital stock held by WG CONTROLS is not
pledged to any bank or to other lenders to support loans and debt
provided to WG TELECOM or personally to any individual or multiple WG
SHAREHOLDERS.
2A.7 Title to WG TELECOM Stock. Each of the WG SHAREHOLDERS
-------------------------
owns the WG TELECOM Stock to be transferred to SYNAPTX at the Closing,
free and clear of all liens, claims and encumbrances, and at the
Closing, SYNAPTX will acquire good and valid title to such WG TELECOM
Stock, free and clear of all liens, claims and encumbrances.
2A.8 Investment Representations. Each WG SHAREHOLDER
--------------------------
represents and warrants that he or she has such knowledge and
experience in financial and business matters as to be capable of
evaluating the merits and risks of an investment in the SYNAPTX STOCK
in exchange for the WG CONTROLS Stock owned by such WG SHAREHOLDERS,
and has been given the opportunity to examine all documents and ask
questions of, and receive answers from representatives of SYNAPTX
concerning the terms and conditions of such exchange and the financial
condition, business and prospects of SYNAPTX, and to obtain such
additional information as he or she deemed necessary in connection
with the transaction contemplated by this agreement. The SYNAPTX STOCK
to be acquired by such WG SHAREHOLDERS pursuant to this agreement is
being acquired for such person's own account for investment and not
with a view to the public distribution thereof, and such WG
SHAREHOLDERS will not effect any transfer of such SYNAPTX STOCK except
pursuant to an effective registration statement under the Securities
Act of 1933 or exemptions from registration thereunder and in
compliance with all applicable state securities laws. Each WG
SHAREHOLDER understands that the SYNAPTX STOCK to be received by such
person at the Closing will bear appropriate restrictive legends
referred to the foregoing transfer restrictions.
2A.9 Reliance on Own Tax Advisors. The WG SHAREHOLDERS are\
----------------------------
relying on their own tax advisors in connection with determining the
tax consequences to them of the transactions contemplated by this
Agreement and is not relying on SYNAPTX or SYNAPTX' attorneys,
accountants officers or advisors for any such advice.
2A.10 Brokers and Finders. Neither WG TELECOM nor any of its
-------------------
shareholders, officers, directors or agents are liable for any
brokers' or finders' fees or expenses in connection with this
Agreement or the transactions contemplated hereby.
2A.11 No Misrepresentations. Neither this Agreement nor any
---------------------
document executed or to be executed by any WG SHAREHOLDER in
connection with the transactions contemplated hereby contains or will
contain when executed any untrue statement of a material fact or omits
or will omit when executed to state a material fact necessary in order
to make the statements made, in the light of the circumstances under
which they were made, not misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SYNAPTX
- -----------------------------------------
SYNAPTX represents and warrants as follows:
3.1 Organization. SYNAPTX is duly incorporated, validly
------------
existing and in good standing under the laws of the State of its
incorporation, is qualified to do business as a foreign corporation in
each other jurisdiction in which the failure to be so qualified would
have a material adverse effect on the transactions contemplated by
this Agreement or on the business, financial condition or results of
operations of SYNAPTX, and has full corporate power and authority to
conduct its business as presently conducted and to enter into and
perform this Agreement.
3.2 Authorization. SYNAPTX has full power, capacity and
-------------
authority to execute, deliver and perform this Agreement. This
Agreement has been duly executed and delivered by SYNAPTX and
(assuming the due execution and delivery by the other parties hereto)
constitutes the legal, valid and binding agreement of SYNAPTX
enforceable against SYNAPTX in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency or other laws
affecting the enforcement of creditors' rights and remedies generally
and by general principles of equity. SYNAPTX shall, at the Closing,
provide a fully executed resolution of the SYNAPTX Board of Directors
indicating that there are no existing conditions that preclude the
transaction as defined in Section 1.1 and authorizing such exchange as
documented by a Plan of Reorganization that references those actions
to accomplish the tax free result intended by the parties in this
transaction which will be incorporated within this SYNAPTX Board of
Directors resolution.
3.3 No Consents, Conflicts. No consent, approval or other
----------------------
action by any governmental authority or third party is required in
connection with the execution, delivery and performance of this
Agreement by SYNAPTX and neither the execution, delivery or
performance of this Agreement by SYNAPTX will (i) violate, conflict
with or result in a breach of any provision of, or constitute a
default or an event which with notice or lapse of time or both, would
constitute a default under SYNAPTX' articles of incorporation or by-
laws or any agreement or obligation to which SYNAPTX is a party or by
which it may be bound or affected where such violation, conflict,
breach or default would have a material adverse effect on the
transactions contemplated by this Agreement, or (ii) violate any
order, writ, injunction, decree, statute, rule or regulation
applicable to SYNAPTX where such violation would have a material
adverse effect on the transactions contemplated by this Agreement.
3.4 Business of SYNAPTX. SYNAPTX has previously delivered to
-------------------
the WG SHAREHOLDERS the balance sheets and related statements of
income, shareholders' equity and cash flows as of and for the fiscal
year period ended August 31, 1997 and the condensed financial
statement information included in the fiscal year end and first
quarter 1997-1998 Investor Quarterly Update (the "Financial
Statements"). The Financial Statements have been prepared in
accordance with the SYNAPTX books and records, present fairly in all
material respects the financial position, results of operations,
shareholders' equity and cash flows for the periods then ended. There
has been no material adverse change in the business, financial
condition, results of operations or prospects of SYNAPTX since the
date of SYNAPTX Financial Statements referred to above. Except as
disclosed in such balance sheet and as otherwise herein specifically
noted, SYNAPTX does not have any liabilities, commitments or
obligations (whether accrued, absolute, contingent or otherwise),
other than obligations incurred since the date of the Financial
Statements in the ordinary course of business and consistent with past
practice and none of which has or will have a material adverse effect,
on the business, financial conditions, results of operations or
prospects of SYNAPTX. SYNAPTX is contemplating and plans to close an
acquisition of Primus Marketing Associates, Inc. ("Primus"), a sales
representative organization of whom WG SHAREHOLDERS are familiar with
the plan that Primus will operate in and provide sales representative
services for product service companies in the Northwestern United
States.
3.5 Compliance, No Litigation. SYNAPTX is in material
-------------------------
compliance with all applicable federal, state, local and foreign laws,
ordinances, orders, rules and regulations and with all agreements,
commitments or obligations to which it is a party or by which it or
any of its assets may be bound. There is no proceeding, investigation
or inquiry pending or threatened against SYNAPTX, its business or any
of its assets, nor is there any basis for any such proceeding,
investigation or inquiry. Neither SYNAPTX nor its business or any of
its assets is subject to any judgment, order, writ or injunction of
any court, arbitrator or governmental agency or instrumentality.
3.6 Authorized Capital Stock. The authorized capital stock
------------------------
of the Company is 35,000,000 shares, consisting of 10,000,000 shares
of Preferred Stock, $.001 par value per share, none of which are
issued or outstanding and 25,000,000 shares of Common Stock, $.001 par
value per share, of which 5,208,660 shares have been validly issued
and are outstanding as of December 30, 1997.
3.7 Title to SYNAPTX Stock. The SYNAPTX STOCK to be issued
----------------------
to each WG SHAREHOLDER will be duly and validly issued, fully paid and
non assessable, and each WG SHAREHOLDER will acquire title to the
SYNAPTX STOCK to be issued to such person hereunder free and clear of
all liens, claims and encumbrances. Additionally, the SYNAPTX Board of
Directors and a majority of the then Synaptx shareholders have
approved a stock option plan providing for the issuance of 1,450,000
shares of SYNAPTX Common Stock of which options representing the right
to purchase 636,371 shares of SYNAPTX Common Stock are issued with
exercise prices ranging from $0.091 to $3.70 per share. Also, the
SYNAPTX Board of Directors has approved the issuance of stock warrants
representing the right to purchase 200,006 shares of SYNAPTX Common
Stock with an exercise price from $0.454 to $1.36 per share.
3.8 Investment Representations. SYNAPTX represents and
--------------------------
warrants that it has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks
of an investment in the WG CONTROLS Stock in exchange for the SYNAPTX
STOCK, and has been given the opportunity to examine all documents and
ask questions of and receive answers from representatives of WG
CONTROLS concerning the terms and conditions of such exchange and the
financial condition, business and prospects of WG CONTROLS, and to
obtain such additional information as it deems necessary in connection
with the transactions contemplated by this Agreement the WG CONTROLS
Stock to be acquired by SYNAPTX pursuant to this Agreement is being
acquired for SYNAPTX' own account for investment and not with a view
to the public distribution thereof, and SYNAPTX will not effect any
transfer of such WG CONTROLS Stock except pursuant to an effective
registration statement under the Securities Act of 1933 or exemptions
from registration thereunder and in compliance with all applicable
state securities laws. SYNAPTX understands that the WG CONTROLS Common
Stock to be received by SYNAPTX at the Closing will bear appropriate
restrictive legends referred to the foregoing transfer restrictions.
SYNAPTX agrees to comply with Blue Sky Laws in the State of Illinois.
3.9 Reliance on Own Tax Advisers. SYNAPTX is relying on
----------------------------
their own tax advisors in connection with determining the tax
consequences to them of the transactions contemplated by this
Agreement and are not relying on WG CONTROLS or WG CONTROLS'
attorneys, accountants, officers or advisors for any such advice.
3.10 Brokers and Finders. Neither SYNAPTX nor any of its
-------------------
shareholders, officers, director or agents is liable for any brokers'
or finders' fees or expenses in connection with this Agreement or the
transactions contemplated hereby.
3.11 No Misrepresentations. Neither this Agreement nor any
---------------------
document executed or to be executed by SYNAPTX in connection with the
transactions contemplated hereby contains or will contain when
executed any untrue statement of a material fact or omits or will omit
when executed to state a material fact necessary in order to make the
statements made, in light of the circumstances under which they were
made, not misleading.
ARTICLE 4
ACTIONS PRIOR TO CLOSING
- ------------------------
4.1 Ordinary Course. From the date hereof until the Closing,
---------------
each WG SHAREHOLDER agrees to use reasonable best efforts to cause WG
CONTROLS to conduct its business only in the ordinary course,
consistent with past practice.
4.2 Best Efforts. Each party agrees to use reasonable best
------------
efforts to cause the fulfillment at the earliest practicable date of
all the conditions to the Closing.
4.3 Access. During the period prior to Closing, SYNAPTX
------
shall give each WG CONTROLS Shareholder, and the WG SHAREHOLDERS shall
cause WG CONTROLS to give SYNAPTX, and their respective
representatives reasonable access during normal business hours to all
of its books and records, and to cause to be furnished to each other
and their representatives all information with respect to their
respective businesses and affairs as the other may reasonably request.
4.4 Plan of Reorganization. WG CONTROLS and SYNAPTX will
----------------------
effect a Plan of Reorganization that documents the actions it is
taking to accomplish transactions in accordance with tax free intent
of the parties, including the WG SHAREHOLDERS, WG CONTROLS and
SYNAPTX, as defined in Section 1.1 above.
ARTICLE 5
CONDITIONS TO CLOSING
- ---------------------
5.1 WG CONTROLS Shareholder' Obligations to Close. Each and
---------------------------------------------
every obligation of each WG SHAREHOLDER to be performed on the Closing
Date shall be subject to the satisfaction or waiver of each of the
following conditions:
5.1.1 Representations, Warranties and Covenants. The
-----------------------------------------
representations and warranties of SYNAPTX set forth in this Agreement
shall be true and correct in all material respects when made and as of
the Closing Date as though such representations and warranties were
made on and as of the Closing Date, and SYNAPTX shall have performed
all obligations required to be performed by it under this Agreement on
or before the Closing Date.
5.1.2 Tax Consequences. The WG SHAREHOLDERS shall have
----------------
determined, in consultation with their own tax advisors, that the
transactions to be consummated at the Closing will not result in
taxable income to them (the parties agree to use reasonable best
efforts to restructure the transactions contemplated hereby in the
event that the WG SHAREHOLDERS are unable to make such a
determination, so that the foregoing condition can be satisfied).
5.1.3 Employment Agreements. SYNAPTX shall have caused to
---------------------
enter into an employment agreement with each WG CONTROLS key employee
in substantially the form set forth for each such WG SHAREHOLDER in
Exhibit 5.1.3.
5.1.4 Non-Competition Agreements. SYNAPTX shall have caused
--------------------------
each WG SHAREHOLDER to enter into a non-competition agreement with
each WG CONTROLS key employee in substantially the form set forth for
each such WG SHAREHOLDER in Exhibit 5.1.4.
5.1.5 WG CONTROLS Shareholder Approval. The Merger shall be
--------------------------------
approved by the requisite number of shareholders or amount of voting
common stock of WG CONTROLS as required under Illinois law.
5.2 SYNAPTX' Obligations to Close. Each and every obligation
-----------------------------
of SYNAPTX to be performed on the Closing Date shall be subject to the
satisfaction or waiver of each of the following conditions:
5.2.1 Representations, Warranties and Covenants. The
-----------------------------------------
representations and warranties of each WG SHAREHOLDER set forth in
this Agreement shall be true and correct in all material respects when
made and as of the Closing Date as though such representations and
warranties were made on and as of the Closing Date, and each WG
SHAREHOLDER shall have performed all obligations required to be
performed by such person under this Agreement on or before the Closing
Date.
5.2.2 Tax Consequences. SYNAPTX shall have determined, in
----------------
consultation with their own tax advisors, that the transactions to be
consummated at the Closing will not result in taxable income to them
(the parties agree to use reasonable best efforts to restructure the
transactions contemplated hereby in the event that SYNAPTX is unable
to make such a determination, so that the foregoing condition can be
satisfied).
5.2.3 Employment Agreements. Each of the WG CONTROLS and WG
---------------------
TELECOM key employees shall have entered into the Employment
Agreements referred to in Section 5.1.3.
5.2.4 Non-Competition Agreements. Each of the WG CONTROLS
--------------------------
and WG TELECOM key employees shall have entered into the
non-competition Agreements referred to in Section 5.1.4.
5.2.5 Simultaneous Closing. Each and all of the WG
--------------------
Shareholders shall consummate this Agreement and all associated
agreements contemplated hereby on or before the Closing date.
5.2.6 WG CONTROLS Shareholder Approval. The Merger shall be
--------------------------------
approved by the requisite number of shareholders or amount of voting
common stock of WG CONTROLS as required under Illinois law.
ARTICLE 6
TERMINATION
- -----------
6.1 Termination by Either Party. This Agreement may be
---------------------------
terminated, without liability, by SYNAPTX or by the WG SHAREHOLDERS if
the terminating party is not itself in default hereunder by written
notice of such election to the other if the closing has not occurred
by January 31, 1998.
6.2 Breach. In the event of any breach by one or more WG
------
SHAREHOLDER hereunder, including a breach of representations and
warranties, prior to the Closing, SYNAPTX shall have the option to (i)
terminate this Agreement, (ii) close the transactions contemplated
hereby notwithstanding such breach, or (iii) seek specific performance
of this Agreement. In the event of a breach by SYNAPTX hereunder,
including a breach of representations and warranties, prior to the
Closing, the WG SHAREHOLDERS shall have the options to (i) terminate
this Agreement, (ii) close the transactions contemplated hereby
notwithstanding such breach, or (iii) seek specific performance of
this Agreement.
ARTICLE 7
POST-CLOSING COVENANTS
- ----------------------
7.1 Post-Closing Covenants of SYNAPTX. SYNAPTX covenants
---------------------------------
from and after the Closing as follows:
7.1.1 Stock Plans. SYNAPTX agrees to use reasonable best
-----------
efforts to implement within one hundred twenty (120) days after the
Closing Date a stock purchase program for the executives of WG
CONTROLS.
7.2 Operation of WG CONTROLS and WG TELECOM Business
------------------------------------------------
Following the Closing. The parties agree as follows with respect to
- ---------------------
the operation of WG CONTROLS and WG TELECOM business following the
Closing:
7.2.1 Location. WG CONTROLS and WG TELECOM shall continue to
--------
conduct its business at its present facilities in Arlington Heights,
Illinois and Milwaukee, Wisconsin until such time as the SYNAPTX Board
and the SYNAPTX Board of Directors mutually agree that a change would
be beneficial to the business of SYNAPTX and its subsidiaries taken as
a whole.
ARTICLE 8
OTHER
- -----
8.1 Survival. The representations and warranties set forth
--------
in Articles 2, 2A and 3 shall survive the Closing for a period of six
(6) months. WG CONTROLS and each WG SHAREHOLDER agrees to defend,
indemnify and hold harmless SYNAPTX and SYNAPTX agrees to defend,
indemnify and hold harmless each WG SHAREHOLDER for any damages,
losses, liabilities or claims incurred by the other as a result of the
breach by the other of such representations and warranties made by it
herein.
8.2 Miscellaneous. This Agreement may be amended only in
-------------
writing signed by the party against whom enforcement is sought. This
Agreement may not be assigned by any party hereto without the prior
written consent of the other parties. This Agreement shall be governed
and construed in accordance with the laws of the State of Illinois,
without regard to principles of conflicts of law. This Agreement may
be executed in two or more counterparts, each of which shall be deemed
an original. The headings contained in this Agreement are only for
convenience and shall not affect the meaning or interpretation of this
Agreement. The invalidity or unenforceability of any provision of this
Agreement shall not affect any other provisions of this Agreement,
which shall remain in full force and effect. Each party agrees that
the others would be irreparably harmed in the event of any breach of
this Agreement. Accordingly, the parties agree that each shall be
entitled to specific performance of this Agreement and to injunctive
relief to prevent any breach of this Agreement. In the event of any
litigation arising out of or relating to this Agreement, the
prevailing party shall be entitled to reasonable attorney's and
expenses from the losing party.
COMPANY SIGNATURE NAME AND TITLE
------- --------- --------------
Synaptx Worldwide, Inc.
- -----------------------
Richard E. Hanik,
/s/ Richard E. Hanik Secretary
----------------------
(Corporate Seal)
WG Controls, Inc.
- -----------------
James M. Gleason,
/s/ James M. Gleason Shareholder
----------------------
Shirley Gleason,
/s/ Shirley Gleason Shareholder
----------------------
Michael Concialdi,
/s/ Michael Concialdi Shareholder
----------------------
James Gammon,
/s/ James Gammon Shareholder
----------------------
(Corporate Seal)
<PAGE>
Exhibit 1.4
-----------
Exchange of WG CONTROLS STOCK for SYNAPTX STOCK
-----------------------------------------------
- ----------------------------------------------------------------------
WG SHAREHOLDERS WG CONTROLS SYNAPTX SYNAPTX
--------------- ----------- ------- -------
Shares Common Stock Preferred
------ ------------ ---------
Stock
-----
- ----------------------------------------------------------------------
James M. Gleason, 2,450 199,999 96,001
Shareholder
- ----------------------------------------------------------------------
Shirley Gleason, 350 28,572 13,714
Shareholder
- ----------------------------------------------------------------------
Michael Concialdi, 350 28,572 13,714
Shareholder
- ----------------------------------------------------------------------
James Gammon, 350 28,572 13,714
Shareholder
- ----------------------------------------------------------------------
Totals 3,500 285,715 137,143
- ----------------------------------------------------------------------
<PAGE>
Exhibit 1.8
-----------
Contingent Issuance of SYNAPTX STOCK
------------------------------------
COMMISSION EARNINGS EARN-OUT BONUS
---------- -------- --------------
EARN--OUT PERIOD REVENUES BEFORE TAXES AMOUNT
---------------- -------- ------------ ------
Period starting with Closing
Date and Ending December 31,
1998:
Level One Results $1,900,000 $700,000 $300,000
Level Two Results $2,400,000 $900,000 $500,000
Twelve Month Period Ending
December 31, 1999:
Level One Results $2,100,000 $800,000 $300,000
Level Two Results $2,800,000 $1,000,000 $500,000
Exhibit 10.2
WG CONTROLS, INC.
EMPLOYMENT AGREEMENT
--------------------
BY THIS AGREEMENT, made this 1st day of January, 1998, WG
Controls, Inc., an Illinois corporations ("Company") and James M.
Gleason ("Employee"), in consideration of mutual benefits set
forth herein, hereby agree as follows:
1. Employment. The Company hereby employs the Employee
----------
and the Employee hereby accepts employment upon the terms and
conditions hereinafter set forth.
2. Term. Subject to the provisions for the termination as
----
hereafter provided, the term of this Agreement shall begin on the
date hereof and shall terminate on December 31, 2002.
Thereafter, this Agreement shall be automatically renewed for two
(2) successive one-year terms unless either party notifies the
other of non-renewal at least 30 days prior to the expiration of
the then current term. The compensation and other benefits
provided for herein shall be subject to annual review by the
Company's Board of Directors.
3. Compensation. For all services rendered by the
------------
Employee under this Agreement, the Company shall compensate the
Employee by paying the Employee the sum of the following (subject
to any applicable withholding):
(i) $150,000 per year payable in equal installments in
accordance with the Company's normal payroll policies (called
"Regular Compensation");
(ii) Such bonus (known as "Override", as a term of art for
this industry), if any, for each calendar month during which
Employee's employment continues, based on the Company's
Commission Receipts, net of any adjustments by customer(s),
representing the monthly cash received for Commission Revenues
previously generated on an accrual basis (i.e., accounts
receivable collections), on sales made to purchasers where the
purchase originated in a location of a purchaser located within
the following states or parts thereof, as so designated
hereafter: Southern Wisconsin, Illinois, Indiana, Michigan, Ohio,
Missouri, Iowa, Nebraska and Kansas ("Commission Receipts") for
the month multiplied by five percent (5%), to be paid within 20
calendar days of the previous month's end (the "Override Bonus").
(iii) In addition, a one time $60,000 cash bonus payable
over the course of the first year of employment as cash flow
allows.
In the event of certain early terminations of this Agreement
as provided hereafter, compensation payable to the Employee shall
(unless otherwise stated) be limited to amounts Fully Accrued.
The term "Fully Accrued" means (a) as to Regular Compensation,
the percentage of a year's Regular Compensation as shall equal
the percentage of the year which has expired on the termination
date, and (b) as to Override Bonus, only that Override Bonus
which has been earned as of the month end previous to the
termination date.
4. Duties. The Employee is engaged as President. The
------
precise services of the Employee may be extended or curtailed,
from time to time, at the direction of the Company. The Employee
also shall perform such corporate development services for the
Company's parent corporation and affiliates as the Company's
Board of Directors may specify from time to time, without
additional compensation.
5. Extent of Services. The Employee shall devote the
------------------
Employee's entire time, attention and energy to the business of
the Company, and shall not, during the term of this Agreement,
engage in any other business activity whether or not such
business activity is pursued for gain, profit or other pecuniary
advantage; but this shall not be construed as preventing the
Employee from investing Employee's assets in such form or manner
as will not require services on the part of Employee in the
operation or the affairs of the company in which investments are
made.
6. Expenses. The Employee is authorized to incur reasonable
--------
expenses for promoting the business of the Company, including
expenses for travel and similar items. The Company will
reimburse the Employee for all such expenses upon presentation by
the Employee, from time to time, of an itemized account of such
expenditures in accordance with the Company's expense
reimbursement policies.
7. Fringe Benefits. The Employee shall enjoy to the extent
---------------
eligible the same fringe benefits as provided generally to other
senior executives of Company, including health and life
insurance. The Company will maintain such health and life
insurance with benefits at a minimum consistent with the existing
Company health and life insurance. Furthermore, the Company will
develop a plan offering the benefit of a deferred compensation
arrangement, commonly referred to as a "401(K) Plan" whose
contributions and benefits structure will at a minimum be
consistent with the existing Synaptx Impulse, Inc. (F/K/A Maxwell
Partners, Inc.) Retirement Savings Plan by February 15, 1998.
8. Vacation. The Employee shall be entitled, in accordance
--------
with policy, each year to 10 holidays, 10 vacation days and 10
personal days, during which time the Employee's compensation
shall be paid in full.
9. Termination.
-----------
(i) Without Cause. Without cause, the Company may
-------------
terminate this Agreement at any time upon 30 days' written notice
to the Employee. In such event, the Employee shall continue to
receive Regular Compensation throughout the original or any one
0year renewal term as more fully explained in Section 2 of this
Agreement, which shall not be less than six (6) months of such
Regular Compensation, unless taking place during the original
term of this agreement in which case it shall be not less than
one (1) year of such Regular Compensation, but the Employee shall
be entitled to Override Bonus only to the extent Fully Accrued as
of the prior month's end on the date of termination.
(ii) With Cause. The Company may terminate the
----------
employment of the Employee hereunder immediately upon written
notice thereof in the event of material fraud or dishonesty or
willful neglect of duties by the Employee in connection with his
employment or if the Employee is convicted of a felony. In such
event, the Company shall pay the Employee only such compensation
as shall have Fully Accrued on the date of termination.
(iii) Termination by Employee. The Employee may
-----------------------
1terminate this Agreement at any time upon 30 days' prior written
notice to the Company. In such event, the Employee shall be
entitled to receive his or her compensation only to the extent
Fully Accrued on the date of termination.
10. Death During Employment. If the Employee dies during the
-----------------------
term of this Employment Agreement, the Company shall pay to the
estate of the Employee the compensation which would be Fully
Accrued as of the end of the calendar month in which his death
occurs.
11. Non-Disclosure. Employee hereby agrees with Company that
--------------
Employee will keep confidential any and all confidential
information of the Company, including Company's know-how, trade
secrets, customer lists, and other information, data and
proprietary information relating to Company's business (herein
called "Proprietary Information") and will not at any time,
without prior written consent of Company, disclose or make known
or allow to be disclosed or made known such Proprietary
Information to any person, firm, corporation, or other business
entity other than Company and persons or entities designed by
Company. This provision shall survive the termination of this
Agreement.
12. Notices. Any notice required or permitted to be given
-------
under this Agreement shall be sufficient if in writing, and sent
by certified mail or hand delivery to the Employee's residence in
the Employee, or to the principal office in case of the Company.
13. Waiver of Breach. The waiving by the Company of a breach
----------------
of any provision in this Agreement by the Employee shall not
operate or be construed as a waiver of any subsequent breach by
the Employee.
14. Assignment. The rights and obligation of the Company
----------
under this Agreement shall inure to and be binding upon the
successors, assigns and corporate owners of the Company.
15. Entire Agreement. This instrument contains the entire
----------------
agreement of the parties. It may not be changed or altered
except by an Agreement in writing signed by the party against
whom enforcement of any waiver, change, modification, extension
or discharge is sought.
16. Attorney's Fees. In the event of any litigation or
---------------
arbitration proceeding arising out of this Agreement, the
prevailing party shall be entitled to reasonable attorney's fees
and expenses from the losing party, whether incurred before suit
is brought, before or at trial or the arbitration proceeding, on
appeal or in insolvency proceedings.
17. Governing Law. This Agreement shall be governed by and
-------------
construed and enforced in accordance with the laws of the State
of Illinois, exclusive of conflicts of law.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
WG CONTROLS, INC.("COMPANY") EMPLOYEE
---------------------------- --------
/s/ Shirley Gleason /s/ James M. Gleason
---------------------------- ---------------------
Shirley Gleason, Secretary James M. Gleason
---------------
Exhibit 10.3
SYNAPTX WORLDWIDE, INC.
NON-COMPETE AGREEMENT
---------------------
This agreement made and entered into this 1st day of
January, 1998 between Synaptx Worldwide, Inc. corporation
("Purchaser") and James M. Gleason ("Seller").
WITNESSETH THAT:
WHEREAS, pursuant to a Merger Agreement (the "Purchase
Agreement") among Purchaser and WG Controls, Inc. ("WG CONTROLS"
or the "Company") and James Gleason, Shirley Gleason, Michael S.
Concialdi, and James D. Gammon (the "SELLERS"), Illinois
residents, the Purchaser wishes to acquire all the outstanding
stock of WG Controls, Inc. (the "SELLERS COMPANY");
WHEREAS, Seller has been a principal of WG CONTROLS, and due
to the nature of his employment and his relationship with the
Company, has had access to, and has acquired and assisted in
developing confidential and proprietary information relating to
the business and operations of the Company, including information
with respect to the present and prospective plans, products,
systems, processes, customers, suppliers and the sales and
marketing methods of the Company;
WHEREAS, WG CONTROLS has an Employment Agreement
("Employment Agreement") with Seller; and
WHEREAS, Seller acknowledges that such information has been,
and will continue to be, of central importance to the business of
the WG CORPORATIONS and that the use of such information by, or
its disclosure to, competitors of the WG CORPORATIONS or others
could cause substantial harm to the Company; and
WHEREAS, the obligation of Purchaser to consummate the
Closing is expressly conditioned on the execution and delivery of
this Agreement by Seller;
NOW, THEREFORE, the parties hereby agree as follows:
1. For the greater of (i) a period of five (5) years from
the Closing date as defined in the Purchase Agreement in Sections
1.4 ("Closing Date" or "Closing") or (ii) two (2) years after the
Seller leaves the employment of WG CORPORATIONS, Seller agrees
that he will not, directly or indirectly (whether as an officer,
director, employee, agent, representative, consultant,
proprietor, partner, joint venturer, stockholder or otherwise),
own, manage, operate, join, control or participate in the
ownership, management, operation or control of, or be connected
with, any business enterprise which is engaged, directly or
through a parent, subsidiary or affiliate, anywhere in
(i) Illinois and Southern Wisconsin;
(ii) Indiana, Iowa Kansas, Michigan, Missouri, Nebraska
and Ohio; and
(iii) in any other area of the United States
in any line of business in which Purchaser and its subsidiaries
are engaged during the period from the Closing Date through the
day that Seller's employment with Purchaser is terminated,
provided that nothing herein contained shall be construed as
preventing Seller from investing his personal assets in such form
or manner as will not require any services on his part in the
operation of the business of the companies in which such
investments are made.
2. If the Purchaser elects to terminate the employment
arrangement with Seller under the terms of Section 9 (i) of the
Employment Agreement, then Section 1 of this Non-Competition
Agreement shall be null and void.
3. Seller will keep confidential any trade secrets or
confidential or proprietary information which are now known to
him or which hereafter may become known to him as a result of his
employment or other association with the Purchaser and shall not
at any time, directly or indirectly, disclose any such
information to any person, firm or corporation or use the same in
any way other than in connection with the business of the
Company. Upon the termination of his employment with the
Purchaser, Seller agrees to return to the WG CONTROLS all copies
of any trade secrets or confidential or proprietary information
of the WG CONTROLS that are in his possession or under his
control to the Purchaser.
4. In consideration of the foregoing, the Purchaser agrees
to pay Seller the sum of Two Hundred Thousand Dollars
($200,000.00) on the Closing Date.
5. The waiver by the Purchaser of a breach by Seller of any
provision of this Agreement shall not operate or be construed as
a waiver of any subsequent breach by him.
6. The rights of the Purchaser under this Agreement shall
inure to the benefit of the Purchaser and the successors and
assigns of the Purchaser and of WG CONTROLS and the obligations
of the Purchaser under this Agreement shall be binding upon the
successors and assigns of the Purchaser.
7. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois.
8. In the event that for any reason the Closing pursuant
to the Purchase Agreement is not consummated, this Non-
Competition Agreement shall be null and void.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
SYNAPTX WORLDWIDE, INC. (PURCHASER) JAMES M. GLEASON (SELLER)
----------------------------------- -------------------------
/s/ Richard E. Hanik /s/ James M. Gleason
------------------------------------ -------------------------
By: Richard E. Hanik, Secretary By: James M. Gleason
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
SYNAPTX WORLDWIDE, INC. FORM 10-QSB FOR THE PERIOD ENDED NOVEMBER 30,
1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> NOV-30-1997
<CASH> 69
<SECURITIES> 0
<RECEIVABLES> 950
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,062
<PP&E> 277
<DEPRECIATION> (89)
<TOTAL-ASSETS> 2,921
<CURRENT-LIABILITIES> 1,513
<BONDS> 0
0
0
<COMMON> 5
<OTHER-SE> 1,382
<TOTAL-LIABILITY-AND-EQUITY> 2,921
<SALES> 1,503
<TOTAL-REVENUES> 1,503
<CGS> 1,028
<TOTAL-COSTS> 1,028
<OTHER-EXPENSES> 481
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10
<INCOME-PRETAX> (6)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6)
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
