SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4/A
AMENDMENT #4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
AZTEK INC.
(Exact Name of Registrant as Specified in its Charter)
NEVADA
(State or Other Jurisdiction of Incorporation or organization)
7371
(Primary Standard Industrial Classification Code Number)
88 0324260
(I.R.S. Employer Identification Number)
1575 DELUCCHI LANE, SUITE #40, RENO, NEVADA 89502, (702) 827-3639
(Address, including zip code, and telephone number,
including area code, or registrant's principal executive offices)
COPIES OF ALL COMMUNICATIONS TO:
Steve Larson-Jackson, Esquire
W. Kwame Anthony, Esquire
Law Firm Of Larson-Jackson, P.C.
1275 K Street, N.W., Suite 1101
Washington, D.C. 20005
Tel. (202) 408-8180
Fax. (202) 789-2216
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of the registration
statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
Title of
each class of Proposed maximum Proposed maximum Amount of
securities to Amount to be offering price aggregate offering registra-
be Registered registered(1) per unit(2) price(3) tion fee
<S> <C> <C> <C> <C>
Common stock,
$.001 par
value per
share 2,051,109 .995 2,040,853
$703.74
</TABLE>
(1) Represents the estimated maximum number of shares of common stock, par
value $.001 per share, of Aztek, Inc. ("Aztek"), expected to be issued in
exchange for up to 2,051,109 shares of common stock, no par value per share,
of the Aztek Technologies Inc. ("ATI"), upon consummation of the merger of ATI
with the Company, described herein.
(2) The basis for calculating the fee is Rule 457(f). The market for the
securities to be received by Aztek, Inc. on July 31, 1998 was C$1.50. The
exchange rate on that date was 1 Canadian dollar = 0.6636 US Dollar.
(3) Estimated solely for the purpose of calculating the registration fee.
The registration fee has been computed pursuant to Rule 457(f) under the
Securities Act of 1933, as amended.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission acting pursuant to said section 8(a),
may determine.
<PAGE>
AZTEK TECHNOLOGIES INC.
246 LAWRENCE AVENUE, SUITE #5
KELOWNA, BRITISH COLUMBIA, CANADA V1Y 6L3
(250) 762-2333
_____________, 1999
Dear Stockholder:
You are invited to attend the Annual and Extraordinary Meeting of
stockholders (the "Special Meeting") of Aztek Technologies Inc. ("ATI") to be
held on _________, 1999 at the offices of Steven K. Winters at 1010 Burrard
Building, 1030 West Georgia St., Vancouver, B.C. V6E 2Y3, Canada at 9:00 a.m.
local time. Notice of the Annual and Extraordinary Meeting, a Joint Proxy
Statement-Prospectus and a Proxy Card are enclosed.
The Special Meeting has been called in connection with the proposed
acquisition of ATI by Aztek, Inc. (the "Aztek") through the merger of ATI with
Aztek in accordance with the Merger Agreement dated as of July 2, 1998 by and
between ATI and Aztek (the "Merger Agreement"). Pursuant to the Merger
Agreement, ATI will merge with and into Aztek with Aztek being the surviving
corporation and each outstanding share of ATI's common stock will be
automatically converted into the right to receive shares of Aztek's Common
Stock, based upon an exchange ratio of one-to-one. The transaction is
referred to herein as the "Merger."
ATI's controlling shareholders presently own 100% of Aztek's outstanding
common stock. These shareholders acquired their shares on June 24, 1998, for
$C.90 (US$ .6124) per share, the price of ATI's shares on the Vancouver Stock
Exchange on that date.
Following the Merger, Aztek will operate the business that is presently
known as Aztek Technologies Inc. Consummation of the Merger is conditioned upon
approval by ATI's stockholders.
At the Special Meeting, stockholders of ATI will consider and vote upon
approval of the Merger and the Merger Agreement. Your Board of Directors has
approved the Merger Agreement, including the Merger, and believes that the
Merger and the Merger Agreement are in the best interests of ATI and its
stockholders. Accordingly, your Board of Directors unanimously recommends
that you vote FOR approval of the Merger and the Merger Agreement.
You are urged to read the accompanying Joint Proxy Statement-Prospectus,
which provides detailed information concerning the Merger and related matters.
Your vote is important, regardless of the number of shares you own. ON
BEHALF OF THE BOARD OF DIRECTORS, I URGE YOU TO SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD AS SOON AS POSSIBLE EVEN IF YOU CURRENTLY PLAN TO ATTEND
THE SPECIAL MEETING. This will not prevent you from voting in person but will
assure that your vote is counted if you are unable to attend the Special
Meeting.
Sincerely,
Mike Sintichakis
President
<PAGE>
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME
AZTEK TECHNOLOGIES INC.
246 LAWRENCE AVENUE, SUITE #5
KELOWNA, BRITISH COLUMBIA, CANADA V1Y 6L3
(250) 762-2333
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON ____________, 1999
NOTICE IS HEREBY GIVEN that the Extraordinary Meeting of stockholders
(the "Special Meeting") of Aztek Technologies Inc. ("ATI") will be held
on __________, 1999 at the offices of Steven K Winters at 1010 Burrard
Building, 1030 West Georgia St., Vancouver, B.C. V6E 2Y3, Canada at 9:00 a.m.
local time, for the following purposes:
(1) To approve the acquisition of ATI by Aztek, Inc. ("Aztek")
through the merger of ATI with Aztek, with Aztek continuing as
the surviving corporation, pursuant to which each outstanding share of ATI
Common Stock will be converted into one share of Aztek's common stock, par
value US$.001 per share ("Aztek Common Stock"), the Merger Consideration and
to approve the Merger Agreement by and between ATI and Aztek, dated as of
July 2, 1998 (the "Merger Agreement") which sets forth the terms and
conditions of the Merger.
NOTE: ATI's controlling shareholders are presently the sole shareholders of
Aztek's common stock. These affiliates acquired 97,975 shares on June 24,
1998, at C$.90 per share, the price of ATI's shares on the Vancouver stock
exchange on that date.
The Board of Directors of ATI is not aware of any other business to
come before the Special Meeting.
The Board of Directors of ATI has fixed the close of business on
_____________, 1999 as the record date for the determination of stockholders
entitled to notice of and to vote at the Special Meeting. Only stockholders
of record at the close of business on that date will be entitled to notice
of and to vote at the Special Meeting.
By Order of the Board of Directors,
Mike Sintichakis
President
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT
YOU PLAN TO BE PRESENT IN PERSON AT THE SPECIAL MEETING, PLEASE DATE, SIGN
AND COMPLETE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE.
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME
<PAGE>
JOINT PROXY STATEMENT-PROSPECTUS
AZTEK INC.
PROSPECTUS
2,051,109
SHARES OF COMMON STOCK
PAR VALUE $.001 PER SHARE
_______________________
AZTEK TECHNOLOGIES INC.
PROXY STATEMENT
FOR ANNUAL AND EXTRAORDINARY MEETING OF STOCKHOLDERS
TO BE HELD ON ___________, 1999
This Joint Proxy Statement-Prospectus is being furnished to the
stockholders of Aztek Technologies Inc. ("ATI") in connection with the
solicitation of proxies by ATI's Board of Directors for use at its
Extraordinary Meeting of Stockholders to be held on __________, 1999. This
Joint Proxy Statement-Prospectus was first mailed to security holders of ATI
on or about __________, 1999.
At their Meeting, the holders of ATI common stock will be asked to
approve the Plan of Merger and the Merger Agreement, dated as of July 2,
1998, providing for a merger pursuant to which Aztek, Inc., a Nevada
corporation ("Aztek") will be the surviving corporation and ATI will
cease to exist (the transaction is referred to hereinafter as the "Merger").
Aztek will provide without charge to each person who receives a prospectus, upon
written or oral request of such person, a copy of the Merger Agreement.
Upon consummation of the Merger, each outstanding share of ATI common stock,
no par value ("ATI Common Stock"), other than shares held by ATI shareholders
who perfect dissenters' rights, will be converted into one share of
Aztek's common stock, par value $.001 per share ("Company Common Stock").
The receipt of Aztek Common Stock pursuant to the Merger will be tax-free to
U.S. holders of ATI Common Stock.
Aztek has filed a Registration Statement on Form S-4 pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), for 2,051,109
shares of Aztek Common Stock to be issued in connection with the Merger.
This Joint Proxy Statement-Prospectus also constitutes the Prospectus of
Aztek filed as part of the Registration Statement. All information
concerning Aztek included in this Joint Proxy Statement-Prospectus has been
furnished by Aztek and all information concerning ATI has been furnished
by ATI.
<PAGE>
After the merger, the current shareholders of ATI's Common Stock will
own approximately 100% of Aztek shares. ATI shareholders that are not
affiliates of ATI will own approximately 51% of Aztek's shares after the
merger. Affiliates of ATI will own approximately 49% of Aztek's shares
after the Merger.
THE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK.
PROSPECTIVE PURCHASERS SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER
THE SECTION "RISK FACTORS" AT PAGE 4. THE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS JOINT PROXY STATEMENT-PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED. THIS JOINT PROXY STATEMENT-PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE AZTEK
COMMON STOCK OFFERED BY THIS JOINT PROXY STATEMENT-PROSPECTUS, OR THE
SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR
FROM WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS JOINT PROXY STATEMNET-PROSPECTUS NOR ANY DISTRIBUTION OF
SECURITIES HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF AZTEK OR ATI SINCE THE DATE OF THIS
JOINT PROXY STATEMENT-PROSPECTUS.
The date of this Joint Proxy Statement-Prospectus is __________, 1999.
ii
<PAGE>
AVAILABLE INFORMATION AND INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
This prospectus incorporates by reference the Merger Agreement between
the parties. Thus, the Merger Agreement is not presented herein or delivered
herewith. ATI will provide without charge to each person who receives a
prospectus, upon written or oral request of such person, a copy of the
Merger Agreement (not including exhibits to the Merger Agreement that is
incorporated by reference unless the exhibits are themselves specifically
incorporated by reference). Such request should be made to Mike Sintichakis,
#5-246 Lawrence Avenue, Kelowna, British Columbia, Canada V1Y 6L3,
(250) 762-2333. In order to ensure timely delivery of the documents, any
request should be made by ________, 1999. Aztek is not subject to the
informational requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and therefore does not file proxy statements or
any other information with the Securities and Exchange Commission
(the "Commission"). ATI is subject to the informational requirements of the
Exchange Act and, in accordance therewith, ATI files reports and other
information with the Commission. However, no such reports or other
information filed with the Commission is incorporated by reference in this
Joint Proxy Statement-Prospectus. Reports and other information filed by ATI
can be inspected and copied at the Commission's public reference room located
at 450 Fifth Street, NW, Washington, DC 20549, and requested at the following
public reference facilities in the Commission's regional offices: 7 World
Trade Center, Suite 1300, New York, NY 10048; and City Corp. Center, 500 West
Madison Street, Suite 1400, Chicago, IL 60661-2511. Copies of such material
can be obtained at prescribed rates by writing to the Securities and Exchange
Commission, Public Reference section, 450 Fifth Street, NW, Washington, D.C.
20549. Though Aztek is not subject to the federal reporting requirements,
as a result of the merger with ATI, Aztek will assume ATI's status as being
subject to the reporting requirements. This Joint Proxy Statement-Prospectus
does not contain all of the information set forth in the Registration Statement
on Form S-4 and exhibits thereto (the "Registration Statement") which Aztek
has filed with the Commission under the Securities Act and to which reference
is hereby made. Any person may obtain the Registration Statement by
downloading it from the EDGAR database at the Securities and Exchange
Commission's web site at www.sec.gov.
Aztek's shares are not listed on any U.S. exchange. The public market
for ATI's securities in Canada is on the Vancouver Stock Exchange under the
symbol "VSE-AZT." The public market for ATI's securities in the United States
is on the Over-the-Counter Bulletin Board (the "OTC Bulletin Board") under
the symbol "AZTKF."
iii
<PAGE>
TABLE OF CONTENTS
Available Information and Incorporation
of Certain Documents by Reference iii
Summary 1
The Companies 4
Risk Factors 4
The Transaction 10
Terms of the Transaction 10
Comparative Per Share Data 12
Description of Securities 13
Material Differences with Respect to the Rights of Securities Holders 13
Other Terms of the Transaction 20
Pro Forma Combined Consdensed Balance Sheets 21
Pro Forma Combined Condensed Statements of Income 23
Material Contracts with the Company Being Acquired 24
Disclosure of Commission Position on Indemnification for Securities Act
Liabilities 24
Description of the Business of the Acquiring Company 25
Description of Property 25
Legal Proceedings 25
Market For Common Equity And 25
Related Stockholder Matters 25
Holders of Record 26
Dividends 26
Aztek Management's Plan of Operation 26
Proposed Acquisitions 28
Year 2000 Issues 30
External Funding 31
Changes in and Disagreements with Accountants 32
on Accounting and Financial Disclosure 32
Information About the Company Being Acquired 32
Description of Business 32
Competition 32
Customer Base 34
Current Business Status 34
Operating Divisions 35
Current Status of ATI 36
Description of Property 39
Legal Proceedings 39
Market For Common Equity And 40
Related Stockholder Matters 40
Holders of Common Stock 40
Dividends 40
ATI Management's Discussion and Analysis 41
iv
<PAGE>
External Funding 50
Disagreements with Accountants 51
On Accounting and Financial 51
Voting and Management Information 51
Persons Making the Solicitation 52
Interest of Certain Person in Matters To Be Acted Upon 53
Voting Securities and Principal Holders Thereof 54
Security Ownership Of Certain Beneficial Owners And Management 54
Executive Compensation 61
Certain Relationships and Related Transactions 63
Transactions with Promoters 64
Aztek, Inc. 66
Financial Statements 66
Interim Financial Statements 72
Aztek Technologies Inc. 76
Consolidated Financial Statements 76
Interim Consolidated Financial Statements 90
v
<PAGE>
SUMMARY
This Joint Proxy Statement-Prospectus is being issued by Aztek, Inc.
("Aztek") and Aztek Technologies Inc. ("ATI") to merge the two companies with
Aztek being the surviving entity. Aztek is a dormant Nevada corporation that
has been in existence for nearly five years. ATI is a British Columbia
corporation that develops and sells computer software and computer systems
and provides support services for its customers. Aztek will issue one common
share of its stock for each outstanding share of ATI.
Aztek's shareholders presently consist of ATI affiliates (the
"Affiliates"). On June 24, 1998, in anticipation of the Merger, the
Affiliates acquired 2,000,000 shares of Aztek at US$.05 per share for one
million shares, and US$.01 per share for one million shares. To prevent the
Merger from diluting ATI shareholders, the transactions were rescinded and
Aztek issued 97,975 shares to the Affiliates in exchange for the $60,000
investment. Therefore, Aztek sold the shares at C$.90 per share, or
US$ .6124 per share, the market price for ATI's shares on the Vancouver
Stock Exchange as of June 24, 1998, such that the Merger would not dilute
ATI's existing shareholders. The following table sets forth the percentage
change in ownership that will result from the Merger.
<TABLE>
<CAPTION>
Shareholder No. of ATI Shares % No. of Aztek % No. of Shares held %
Shares After Merger
<S> <C> <C> <C> <C> <C> <C>
Total Issued and Outstanding 2,051,109 100% 97,975 100% 2,149,084 100%
Mike Sintichakis 462,190 23 39,190 40 501,380 23.33
Nick Sintichakis 74,500 4 22,044 23 96,544 4.49
Daunna Potts 0 0 817 1 817 0.04
Eileen Keogh 37,000 2 13,063 13 50,063 2.33
Edson Ng 104,700 5 22,861 24 127,561 5.94
Maria Sintichakis 255,928 12 0 0 255,928 11.91
Tony Pantazopoulos 21,333 1 0 0 21,333 0.99
Non-affiliates 1,095,458 53 0 0 1,095,458 50.97
</TABLE>
Aztek issued common shares to the Affiliates in exchange for cash to
pay anticipated legal and corporate expenses associated with anticipated
acquisitions. For more information see "Aztek Management's Plan of Operation"
at page 26. In addition to the Affiliates' increased interests, the net
effect of the merger is that ATI will move from being a Canadian company
to a U.S. Company.
<PAGE>
(This page left intentionally blank)
2
<PAGE>
The primary addresses of Aztek and ATI, the parties to the transaction
for which the securities described in this Joint Proxy Statement-Prospectus
are being issued, are as follows:
Aztek, Inc.
Suite #40 - 1575 Delucchi Lane
Reno, Nevada 89502
(702) 827-3639
Aztek Technologies Inc.
#5-246 Lawrence Ave.
Kelowna, B.C. V1Y 6L3
Canada
(250) 762-2333
3
<PAGE>
THE COMPANIES
Aztek was incorporated as Spectral Innovations (1994) Inc. in 1994. ATI
initially formed Aztek as a wholly-owned subsidiary intending to acquire
Spectral Innovations, Inc., a California corporation ("Spectral California").
ATI subscribed for 25,000 shares of Aztek at $1.00 per share. The shares were
subscribed and Aztek continues to carry the full amount of the purchase price
as a subscription receivable due to ATI's lack of funds to pay for the shares
in cash. The acquisition of Spectral California did not materialize. Shortly
thereafter, ATI's management decided it eventually would merge ATI into Aztek
but management declined to effect the merger immediately and therefore, Aztek
has remained dormant since its inception. The Merger Agreement described
below resulted from the decision to merge and the transaction is the subject
of this Joint Proxy Statement-Prospectus. The reasons for the Merger are
described below in the subsection, "Reasons for the Transaction" at page 11.
ATI was incorporated on July 11, 1979, by filing and registering its
articles with the British Columbia Registrar of Companies. Over the last
four years, ATI has expanded its business focus and capabilities following
acquisitions. On September 30, 1994, ATI acquired all of the issued and
outstanding shares of ResponseWare Corporation, a developer of municipal
government software including general accounting and payroll systems and
specialized systems such as property taxation, utility billing and building
permits. This acquisition allowed ATI to further diversify its operations
within the computer hardware, software and telecommunications market and to
expand the existing forty-five (45) municipal and private sector clients of
ResponseWare. ATI continues to support and service the ResponseWare software
and client base as its primary source of revenue. On August 21, 1995, ATI
acquired the assets and business of Helix Technologies Limited, a consulting
and systems integration firm specializing in technology for mobile work
force automation. ATI has completed contracted projects from the acquisition
and currently has no contracts for work in this area. Mobile work force
automation technologies will be incorporated into future ATI products that
have yet to be developed. ATI also continues to pursue further project-based
contracts in the area of mobile work force automation technologies.
ATI's shares are currently trading on the Vancouver Stock Exchange
("VSE") and the Over-The-Counter Bulletin Board ("OTC BB"). ATI announced
the Merger on July 2, 1998. The day prior to the announcement, the high was
C$1.10, the low was C$1.10 and there had been no trades on the OTC Bulletin
Board.
RISK FACTORS
The securities offered hereby are speculative in nature and involve a high
degree of risk. Prospective investors should consider carefully the following
factors, among others, prior to making an investment decision.
Arbitrary Merger Exchange Ratio. The one-for-one exchange offered in this
Joint Proxy Statement-Prospectus bears no relationship to the assets, book
value, earnings, net worth, or any other recognized criteria of value of ATI.
Consequently, the share exchange ratio, which can be deemed an offering price
for ATI's securities, was determined arbitrarily and solely by ATI and Aztek's
Boards of Directors. ATI's board members who approved the arbitrary exchange
ratio are also directors of Aztek and because they own Aztek's outstanding
shares, ATI's board members will benefit from a slight increase in their share
of the surviving company. In establishing the exchange ratio or offering
4
<PAGE>
price, the Boards considered such matters as Aztek and ATI's limited financial
resources and the general condition of the securities markets. The exchange
ratio of the Merger should not, however, be considered an indication of ATI's
actual value. For a detailed description of why the Merger is in the best
interest of ATI's shareholders, see "Reasons for the Transaction" at page 11.
DIMINISHED PERCENTAGE OWNERSHIP. Non-affiliates, people or entities
that do not control ATI or are not under common control with ATI, presently own
approximately 53% of the outstanding shares of ATI. As a result of the
Merger, these same shareholders' percentage interest will decline to 50.97% of
the outstanding shares. Since Aztek presently has no operating business, one
net effect of the Merger will be to convey a small equity interest in ATI's
business to ATI affiliates.
OPERATING HISTORY. Aztek has no operating history. Aztek was
incorporated in 1994 but has been dormant since its inception. Following the
merger, Aztek will assume ATI's business activities.
CHANGE IN BUSINESS FOCUS. ATI has discontinued sales of its aging
software products to businesses and municipalities. After the Merger, Aztek
will focus ATI's business operations on developing a new suite of software
products using new software that Aztek has licensed from IBM. Aztek will
also employ a merger or acquisition strategy to obtain new products and
penetrate new markets.
DISCONTINUANCE OF PRIMARY PRODUCT. ATI'S products consist solely of
computer programs developed by ATI's predecessor, ResponseWare Corporation.
The products were discontinued because they cannot take advantage of personal
computer environments and were too expensive to maintain. As a result, net
sales decreased 26% from $459,937 in the fiscal year ending 1997 to $339,784
in the fiscal year ending 1998. Sales decreased 13% from $528,922 in the
fiscal year ending in 1996 to $459,934 in 1997.
Even though ATI is not selling new ResponseWare products, it continues
to earn revenue by servicing, supporting, and developing product enhancements
(software upgrades) for the ResponseWare product line. ATI is contractually
obligated to provide maintenance services for the products already sold for
which customers pay an annual fee. For those customers who are not parties to
an annual service contract, ATI provides support and receives compensation on
a time and material basis. Support and maintenance of ResponseWare products
currently generate approximately 90% of ATI's revenues. For more information
see "ATI Management's Discussion and Analysis" at page 41.
5
<PAGE>
RISKS OF DEVELOPING NEW SOFTWARE. Aztek intends to develop an entirely
new suite of software products to replace ResponseWare's obsolete products.
Designed for use in local government operations, the new products are system
designs that allow for rapid and controlled product customization. They
consist of modules that facilitate local government functions as stand alone
departmental systems or integrated solutions with other Aztek or third party
applications. The designs allow each component to reside separately or
together in various computer systems throughout the enterprise such that an
application can run alone on a personal computer, or enterprise-wide
applications can operate together via a central server. The new products will
be based on software licensed to Aztek by IBM.
Since the software products are new, untested, and potentially unstable,
Aztek cannot guarantee their viability. Product releases are subject to
delays that could result in lost sales to potential new customers and lost
revenues from existing customers that move to other vendors before the new
products are completed. Acquisitions will also affect new product
development. Aztek must design its products in such a way that the products
can be integrated with those acquired through acquisitions of companies. For
more information on new products, see "ATI Management's Discussion and
Analysis" at page 41.
EXPECTATION OF LOSSES. Aztek's management and ATI's management believe
Aztek, with its software and services, will be a profitable enterprise in the
future. However, Aztek anticipates experiencing future operating losses
resulting primarily from marketing and recruitment of Value Added Resellers
("VARs") and associated training costs. ATI has operated at a loss for
several years. To limit and reverse anticipated operating losses, Aztek must
successfully develop its distribution network of VARs in the United States and
Canada.
WORKING CAPITAL REQUIREMENTS. After the Merger, Aztek will require a
substantial investment in working capital, principally to finance its
marketing activities, recruitment of VARs, hardware and software development,
and to increase its existing staff. ATI's working capital balance as of
December 31, 1998, was C$ -475,542. ATI unsuccessfully attempted to raise one
million dollars in an offering. Without additional capital generated from the
sale of Aztek's stock, or from operations, Aztek will be unable to fund its
business, offer its services on an extensive basis, or expand its business.
Aztek will require a minimum of nearly $400,000 in working capital over the
next twelve months. There can be no assurance that capital from private and
public offerings will be available, or if available, can be obtained on terms
advantageous to Aztek. If Aztek is successful in effecting a private
placement, the capital it raises will be sufficient to meet its expected
working capital needs for the following twelve months. If Aztek is unable to
raise sufficient capital either externally or from operations it will not be
able to sustain its operations. Aztek will have to reduce expenditures to
keep in line with existing revenues generated by maintenance and customized
service contracts currently in place. For more information on ATI's efforts
to raise additional capital, see the subsection "Current Business Status" at
page 34.
DEPENDENCE ON KEY PERSONNEL. Aztek's board of directors consists solely of
ATI's directors and one relative of an ATI director and they will continue to
serve as Aztek's directors after the merger. ATI's officers are also Aztek's
officers and will continue in their capacities as officers of the surviving
company. Aztek and ATI are both dependent on the continued services of
certain key management personnel, particularly Mike Sintichakis, chairman of
the board and president of both ATI and Aztek. The loss of Mr. Sintichakis'
services could significantly impact Aztek's future operations and its ability
6
<PAGE>
to one day become profitable. Neither ATI nor Aztek has a key man life
insurance policy on Mr. Sintichakis. After the Merger, Aztek's growth and
profitability will depend upon its ability to attract and retain skilled
managerial, marketing and technical personnel.
INDEMNIFICATION OF DIRECTORS AND OFFICERS. The articles of incorporation
for both Aztek and ATI indemnify directors and officers of each and allow for
Aztek and ATI to secure insurance for the liability of their respective
directors and officers.
NO PUBLIC MARKET FOR SHARES. At the present time, no public market
exists for Aztek's Common Stock and no market will, in fact, develop after
completion of the Merger. Although ATI's Common Stock is traded on the
Vancouver Stock Exchange, the daily volume is approximately 887 shares.
Upon receiving shareholder and regulatory approval of the Merger, ATI will
voluntarily seek de-listing from the Vancouver Stock Exchange. Aztek's
shares will not be listed on the Vancouver Stock Exchange.
ATI's listing on the OTC Bulletin Board is relatively recent, and no
reliable historical data exists upon which to project daily trading volume of
ATI's Common Stock. After the Merger, Aztek will seek to have its shares
listed on the OTC Bulletin Board but will not apply to have its shares listed
on any exchange. Aztek will implement is acquisition plan described
elsewhere in this Joint Proxy Statement-Prospectus. Once Aztek is qualified,
it will seek listing on the Nasdaq SmallCap.
NO DIVIDENDS. Neither Aztek nor ATI has paid any dividends to date and
Aztek has no plans to pay dividends in the foreseeable future.
LIMITED RESOURCES AND NEED FOR ADDITIONAL FINANCING. Other than the
proceeds from an anticipated offering and possible future revenues from the
sale of Aztek's services, Aztek does not at this time, and may not in the
future, have any additional sources of funds such as operating funds or
significant credit arrangements, from which to pay the costs of its proposed
operations. Aztek cannot assure it will be able to raise additional capital
in the future to support its operations, either from operations or from
external sources.
GENERAL RISKS ASSOCIATED WITH ACQUISITIONS. Aztek will use money raised in
its anticipated offering for acquisitions, completion of products under
development, financing expenses, marketing and working capital. Moreover,
inherent risks associated with the acquisition plan include several factors:
acquisition targets tend to be small privately owned companies for which
material information is unavailable prior to the acquisitions; the size of
each acquisition is small such that substantial due diligence is
cost-prohibitive; Aztek cannot assure that acquired companies will be free of
problems with their staffs, products or clients and Aztek can give no
assurances that financial projections associated with the acquisitions will be
accurate.
An additional risk is that clients may not easily make the transition
from the acquired companies' products to Aztek's products. These clients
may have relationships with the particular company to be acquired and the
clients may choose not to develop new relationships that would come with the
change in management associated with the acquisition. Moreover, as new
products are developed after such acquisitions, Aztek may cease supporting
the older antiquated products such that the acquiree's existing clients may
find themselves with obsolete products. In that case, the client might not
upgrade to the new products and ultimately stop doing business with Aztek.
ATI experienced such problems with its acquisition of Helix Technologies
Limited ("Helix").
7
<PAGE>
Helix generated revenues from time and materials in consulting and custom
programming, but did not have its own proprietary products. Since ATI did
not have additional financing, ATI focused its limited resources on servicing
contracts assumed in its acquisition of ResponseWare Corp at the expense of
sustaining Helix or developing new opportunities for Helix. Thus, Helix's
business activities dwindled. For more information on pending acquisitions,
see "Aztek Management's Plan of Operation" at page 26.
RISK ASSOCIATED WITH PENDING ACQUISITIONS. ATI was negotiating to acquire
Concord Consultants Ltd., Municipal Hardware Systems Ltd., and Qdata Software
Inc. The principals of these three companies have ceased negotiations pending
the Merger and a subsequent Aztek offering. After the Merger, Aztek may again
open negotiations for the three acquisitions. The target companies are
software designers and vendors. The acquisitions are dependent on Aztek 's
ability to raise additional money in an offering or offerings after the
Merger. ATI has been unable to raise additional capital in the past year and
Aztek cannot guarantee that it will be able to raise money in the near future.
Aztek intends to complete due diligence investigations of the three targets
prior to completing the acquisitions, but Aztek can give no assurance that the
targets will be free of problems with their staffs, products, or customers.
To the extent the targets provide financial projections, Aztek can give no
assurance the projections will be accurate. Moreover, Aztek can give no
assurance that the target companies' clients will migrate from the targets'
proprietary products to Aztek's products.
DEBT TO AFFILIATES AND DEBT TO THIRD PARTIES. Pursuant to the Merger,
Aztek will assume all of ATI's outstanding debt. Trade accounts payable are
interest-free, the royalties payable are without interest, and the current
liabilities to officers and directors are without interest. ATI currently has
long-term debt of approximately C$189,054, all due to affiliates interest
free. ATI has an accounts payable balance of C$357,211 and total debt of
C$771,675.
ATI's debt to IBM remains outstanding. The debt is C$100,000 which is
substantial relative to ATI's balance of total assets of C$109,996 as of March
31, 1999. Payable over ten months, ATI was scheduled to begin repayment in
December 1997. ATI is attempting to re-negotiate a revised payment schedule
but the risk remains that IBM may collect at some point. IBM has agreed to
wait until ATI completes an equity offering to collect royalties due. ATI has
a good working relationship with IBM as shown in IBM's willingness to enter
into a licensing agreement for new software in July 1998.
SUBSTANTIAL COMPETITION. ATI currently competes in a rigorous and
demanding business environment. The primary competition comes from small to
mid-sized municipal government marketers, regional vendors, specialized
departmental solution providers and in-house developed systems.
Approximately 100 significant regional software vendors are in the United
States and approximately 10 significant regional software vendors are in
Canada. Aztek and ATI expect competition to increase in the foreseeable
future, which may or may not impact Aztek's profitability after the Merger.
HTE Inc. and American Management Systems are the largest competitors and
are dedicated to the government sector with annual sales in excess of US$100
million and US$300 million respectively. These companies are the leading
suppliers of government systems in the US and their products consist of
complete suites of integrated modules to address enterprise wide issues for
local governments. They have also moved to client/server oriented software
development. For additional information, see "Competition" at page 32.
8
<PAGE>
VOTING CONTROL BY INSIDERS. Aztek's articles of incorporation and ATI's
articles prohibit cumulative voting in electing directors. Aztek's directors
are presently the largest stockholders in ATI and all of ATI's directors
presently serve on Aztek's Board of Directors. In this regard, Mr. Mike
Sintichakis, president and director, will continue to be the largest single
shareholder. Mike Sintichakis, his wife and son will beneficially own
approximately 40% of Aztek's outstanding shares. As a result, they will have
voting control and be able to control Aztek and direct its affairs and
business. Such concentration of ownership may also delay, defer or prevent a
change in control of Aztek.
CHANGE IN DOMICILE. As a result of the change in domicile,
shareholders in the surviving Nevada entity will not enjoy certain corporate
governance rights that they enjoy as shareholders of ATI as a British Columbia
company. Under Nevada law, Aztek will be required to have its annual
shareholder meeting at least every eighteen months instead of every thirteen
months as British Columbia law requires. The required notice will change from
twenty-one days' notice to ten days' notice. Whereas ATI previously had to
have its annual meetings in British Columbia, Nevada law will permit the
surviving company to have its meetings anywhere allowed by the its bylaws.
Currently under British Columbia law, ATI shareholders owning an aggregate of
at least 1/20 of the outstanding shares of ATI may compel the directors to
call a shareholders' meeting, but after the merger and under Nevada law,
shareholders will have no such right.
As a result of the change in domicile, shareholders will no longer have a
right to see and copy a register of any debts to officers exceeding $5,000, as
they now do under British Columbia law. Under Nevada law, shareholders will
no longer have the right to appoint an auditor as they do under British
Columbia law.
Under British Columbia law, a 3/4 majority vote of the shares
outstanding is necessary to sell, lease or otherwise dispose of the business.
Under Nevada law, only a majority vote of the shares outstanding at a
meeting, called specifically to vote on that issue, is sufficient to sell or
dispose of the business. Under British Columbia law, a 3/4 majority vote of
the shares outstanding is required to split or consolidate ATI's stock
whereas under Nevada law, the directors may split or consolidate the shares
without a shareholder vote. Under British Columbia law, 3/4 of the
outstanding shares of ATI must vote in favor of an amendment to the company's
articles whereas under Nevada law, only a majority vote of the outstanding
shares must vote in favor of such an amendment.
Under British Columbia law, where a company's shares are held in escrow
under and escrow agreement and cancelled, the company cannot return cash,
property or other consideration unless 3/4 vote of the shares outstanding
approves the action. The concept of escrow shares is a Canadian concept and
the Nevada corporate law contains no such provisions.
Under British Columbia law, a company is required to obtain a 3/4 majority
shareholder vote to create, define, attach, vary or abrogate any special
rights to any shares. Under Nevada law, if the articles so provide, the
directors may prescribe classes and series. Moreover, the directors may
prescribe the voting powers, distinguishing designations, preferences,
limitations, restrictions and relative rights of each class or series of
stock. Regardless of the articles of incorporation, the directors may take
action to protect the interests of the corporation and its stockholders by
adopting or executing plans, arrangements or instruments that deny rights,
privileges, power or authority to a holder of a specified number of shares or
percentage of share ownership or voting power.
9
<PAGE>
THE TRANSACTION
Aztek has entered into an agreement with ATI whereby each one outstanding
share of ATI Common Stock will be exchanged for one common share, par value
$.001 of Aztek resulting in all shareholders of ATI becoming shareholders of
Aztek. The transaction is subject to regulatory acceptance and the approval of
the shareholders of ATI and all regulatory bodies having jurisdiction over
Aztek.
TERMS OF THE TRANSACTION
BACKGROUND OF THE TRANSACTION
ATI and Aztek's principal, Mr. Mike Sintichakis, concluded that ATI
would be in a better position for growth and expansion if it were a U.S.
Company. After conferring on the matter, the board resolved to change ATI's
domicile. At Mr. Sintichakis' suggestion, since ATI had already formed a U.S.
corporation, the board concluded that it would be appropriate to merge ATI
into the dormant corporation. On June 30, 1998, Aztek's Board officially
approved the acquisition of ATI in a one-for-one exchange. Although changes
in domicile are commonly effected by merging with a wholly-owned subsidiary,
ATI's directors resolved to merge ATI with a company in which the directors
had already purchased shares. ATI formed Aztek in 1994 and subscribed for
shares but did not purchase any shares because it had little cash. In
anticipation of the Merger, ATI's directors purchased an aggregate of 97,975
shares of Aztek for a total of $60,000 to provide working capital to Aztek for
its initial expenses in effecting the merger. The $.61 per share purchase
price was the market price of ATI's shares on the Vancouver Stock Exchange on
June 24, 1998. As a result of purchasing the shares, ATI's directors will
increase their ownership in the combined company by an aggregate of 2.03%
above what would have been their stake had ATI merged with a wholly-owned
subsidiary. For the benefits of operating as a U.S. company, see "Reasons for
the Transaction" below. The only agreement to which Aztek and ATI are parties
is the Merger Agreement.
TERMS OF THE ACQUISITION AGREEMENT
The Merger Agreement provides for ATI to merge into Aztek with Aztek
being the surviving corporation. Each outstanding share of ATI's common
stock will be automatically converted into the right to one share of Aztek's
Common Stock. The Merger Agreement calls for Aztek to issue its shares in
exchange for each outstanding share of ATI on a one-for-one basis. All assets
and liabilities of ATI will pass to Aztek on the completion of the Merger.
Except for Mr. Sintichakis, the directors and officers are required by the
Merger Agreement to resign from ATI at the completion date. They have
already been duly elected as the directors and officers of Aztek.
TREATMENT OF ESCROW SHARES
Under the Merger Agreement, Aztek will issue certain Escrow Shares such
that the holders of ATI escrow shares will receive Escrow Shares in Aztek's
Common Stock with the same rights that existed prior to the Merger. Under
Canadian law, escrow shares are a creature of statute while Nevada law has no
such provisions. Nevertheless, the same rights and obligations will attach
to the Escrow Shares under contractual principles. Of the total shares of
ATI Common Stock outstanding, 354,000 shares are escrow shares. The escrow
shares will be released to their owners at the rate of 1 share for each $0.31
of cash flow from operations. Shares not released prior to September 17, 2001
10
<PAGE>
will be canceled and treated as authorized but unissued shares.
REASONS FOR THE TRANSACTION
Aztek and ATI's boards of directors considered many factors in the Merger
including the economic, financial, legal and market factors. The main reason
for the Merger is to change ATI's domicile from Canada to Nevada. Typically,
companies change their domicile by forming a new corporation in the desired
state and merging the operating company into the new corporation. Rather than
form a new corporation to carry out the Merger, ATI's management chose to
merge the company with Aztek, a dormant company that management already
controlled. Although the Merger Agreement provides for an exchange ratio that
slightly diminishes the percentage interest held by ATI non-affiliates, ATI's
board concluded that the Merger is in the best interests of ATI's
stockholders. Through the Merger, Aztek will acquire an existing operating
entity and move from being a dormant corporation to an active corporation.
Aztek will own all of ATI's assets, receive all ATI's revenues, if any, and
will also assume all of ATI's accrued liabilities, accounts payable and
operating expenses.
Management believes that additional financing potential is inherent in
expansion into the U.S. market. The surviving company will be able to attract
more investment capital as it continues to grow. Investors tend to be more
cautious with respect to investing in foreign companies partly because they
have less access to information and because such foreign companies may be
subject to less stringent accounting rules. Though ATI is currently a fully
reporting company under the Securities Exchange Act of 1934, investors still
tend to perceive that they enjoy less protection when investing in a foreign
company. Future investors in Aztek can be confident that they are investing
in a company that is subject to U.S. accounting procedures which tend to be
more strict than those of non-U.S. domiciles. While the percentage interest of
ATI's shareholders will be diluted in the Merger, ATI's management believes
the Merger will create greater opportunities for the surviving company and
benefit ATI's shareholders. Without access to additional capital, management
believes ATI will continue to be strangled by a lack of funds for any future
growth.
The surviving entity's capital structure aligns management's interest with
that of the shareholders. Management purchased the shares to provide start-up
capital to Aztek for basic organizational costs.
An additional reason for the transaction is that upon the effective date
of the Merger, the investors in ATI will benefit from an immediate increase in
per share book value from $-0.32 to $-0.28 (a gain of $.04 on the net tangible
book value) from the net tangible book value of their ATI Common Stock when
compared to the resulting net tangible book value of Aztek's Common Stock
after the Merger.
Currently, ATI is subject to different trading rules and requirements by
virtue of its shares being traded on Canadian exchanges and the OTC Bulletin
Board. Aztek will apply to have its shares traded on the OTC Bulletin Board
and ATI's shares will be de-listed from the Vancouver Stock Exchange. As a
result of the Merger, Aztek will no longer be subject to different trading
rules requirements.
CONDITIONS TO THE MERGERr
The obligations of Aztek and ATI to effect the Merger are solely and
jointly subject to a number of conditions including, among other things,
receipt of ATI stockholder and regulatory approval.
11
<PAGE>
REQUIRED REGULATORY APPROVALS
ATI's shares are currently listed on the Vancouver Stock Exchange
("VSE") and the Merger is subject VSE approval. If such approval is not
granted, ATI will voluntarily seek de-listing and proceed with the Merger.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of ATI's management and board of directors have
interests in the Merger in addition to their interests as stockholders of ATI
generally. Those interests relate to a nominal 2.03% increase in the
directors' and officers' percentage share of ownership in the surviving
company relative to their percentage share of ownership in ATI before the
Merger.
COMPARATIVE PER SHARE DATA
The following table sets forth the historical book value, cash dividends
declared per share and income or loss per share of Aztek after giving effect
to the Merger. The information presented should be read in conjunction with
such pro forma combined financial information and notes thereto and the
separate historical consolidated financial statements of Aztek and ATI and
notes thereto appearing elsewhere in this Joint Proxy Statement-Prospectus.
The foreign currency exchange rate applied to the table for the end of the
period is US $ 1 = C $ 1.50 and the average exchange rate for the period is $
US 1 = C $1.50.
<TABLE>
<CAPTION>
June 30 March 31,
1998 1999
----------------
(In U.S. Dollars)
<S> <C> <C>
Aztek
Historical
Book Value per Share $0.49 $0.49
Cash Dividend per Share - -
Income (Loss) per Share, from Continuing Operations - -
Pro forma
Book Value per Share $(0.12) $(0.17)
Cash Dividend per Share - -
Income (Loss) per Share, from Continuing Operations (0.12) (0.06)
ATI
Historical
Book Value per Share $(.16) $(0.21)
Cash Dividend per Share - -
Income (Loss) per Share, from Continuing Operations $(.12) $(0.07)
Equivalent
Book Value per Share $(0.15) $(0.21)
Cash Dividend per Share - -
Income (Loss) per Share, from Continuing Operations $(0.12) $(0.07)
</TABLE>
12
<PAGE>
DESCRIPTION OF SECURITIES
Aztek's authorized capital stock consists of 100,000,000 shares of Common
Stock, $.001 par value. 2,051,109 previously unissued shares of Aztek are
being registered pursuant to a registration statement on Form S-4 and issued
pursuant to this Joint Proxy Statement-Prospectus. Aztek's existing
shareholders are not offering their shares as part of the transaction. 97,975
shares of Common Stock were outstanding as of March 31, 1999, and held of
record by six shareholders. Immediately following the Merger and upon the
tender of all of ATI's shares, 2,149,084 shares of Common Stock will be
outstanding and held of record by approximately three hundred forty-seven
shareholders.
The holders of Aztek's Common Stock are entitled to one vote per share
on all matters to be voted on by the shareholders and to receive ratably
dividends when and as declared by the Board of Directors from funds legally
available therefor. In the event of a liquidation, dissolution or winding up
of Aztek, holders of its Common Stock are entitled to share ratably in all
assets available for distribution to stockholders after payment of all
liabilities. No preemptive, subscription, or redemption rights relating to
the Common Stock exists. No cumulative voting rights exist for the election
of directors for Aztek's Common Stock. Aztek has no preferred shares.
MATERIAL DIFFERENCES WITH RESPECT TO THE
RIGHTS OF SECURITIES HOLDERS
ANNUAL MEETINGS
Under Nevada law, annual meetings must be held within eighteen-month
intervals and the company must notify the shareholders at least ten days but
not more than sixty days before the meeting. A company can cease delivering
notices of meetings, if notices for the prior two years, and at least two
dividend or interest payments for the prior one year have been returned
undeliverable. British Columbia law requires a corporation to hold an annual
meeting at least once a year and not more than thirteen months after the
prior annual meeting. If a corporation fails to hold such a meeting, a
shareholder can apply to the court for relief. British Columbia law requires
ATI to give notice of a meeting at least 21 days in advance of the meeting,
but the record date cannot exceed 49 days before the date on which it will
take an action.
British Columbia law requires annual meetings to be in British Columbia
whereas Nevada law requires the annual meeting to held where specified in the
bylaws. Thus after the Merger, Canadian stockholders may be less able to
attend annual meetings. Under British Columbia law, shareholders owning an
aggregate of at least 1/20 of the outstanding shares of ATI may compel the
directors to call a meeting. Nevada law contains no comparable provision. As
a reporting company, British Columbia law requires ATI to provide an income
statement, a balance sheet and statement of surplus for two years at the
annual meeting. ATI must also send financial statements to all shareholders.
Nevada law contains no comparable provisions.
ATI's annual meetings must be in British Columbia. ATI has specific
provisions for the conduct of meetings. If special business will be
considered at a meeting, ATI must inform shareholders that the document
describing such special business is available for inspection. ATI's articles
do not provide for a record date to determine shareholders entitled to vote or
receive a distribution.
13
<PAGE>
Pursuant to Aztek's bylaws, annual meetings can be anywhere and notice must
comply with the 10 day/60 day statutory rule. Aztek's bylaws have no specific
provisions for the meetings. For special actions taken at a shareholder
meeting, Aztek must provide a copy of the relevant document in the notice, or
provide a summary of the document or action to be taken. A quorum is the
majority of outstanding shares represented in person or by proxy. Aztek may
set record dates less than seventy days before an action to determine
shareholders entitled to vote or receive a distribution. The record dates
depend on the action to be taken and are as follow: for an annual or special
meeting, the day before the first notice to shareholders; for meetings
demanded by shareholders, the date of the first demand; for actions taken
without a meeting, the date any shareholder signs a consent; for a
distribution, the date the directors authorize the distribution. Aztek's
bylaws permit shareholders to take action without a meeting if shareholder
consents are signed by one or more shareholders holding a majority of the
shares.
TRANSACTIONS REQUIRING SHAREHOLDER APPROVAL
Under Nevada law, to amend the articles of incorporation, a majority of the
voting power must vote in favor of the amendment, unless the articles of
incorporation require a greater proportion of votes. Nevada law requires a
vote by a majority of the voting power of the shares to renew the company's
charter. Stockholders holding at least a majority of the voting power must
approve by written consent the execution and filing of a certificate to revive
the company's original or amended charter. Under Nevada law, if it has a
majority of the voting power at a stockholders' meeting called for that
purpose, a company may sell, lease, or exchange all of its property and
assets, including its good will and its corporate franchises. However, no
vote is necessary to transfer assets by way of mortgage, or in trust or in
pledge to secure indebtedness of the corporation. Stockholders entitled to
vote must approve a dissolution of the corporation.
Under British Columbia law, shareholders must approve the appointment of an
auditor at each annual meeting. Under British Columbia law, a 3/4 majority
vote is required for several corporate actions and is referred to as a
"special resolution." A company needs a special resolution for the following
transactions: to dispose of the company's business, change its articles,
change its business purpose or change its name; create, define, attach, vary
or abrogate special rights to any shares; return any cash, property, or other
consideration paid to it for any shares unless the return of the shares is
pursuant to an escrow agreement approved by special resolution before the
allotment of the shares; split or consolidate its stock; or to change the par
value of its shares.
British Columbia law requires a special resolution to approve a business
combination agreement and for a compromise or arrangement between a company
and its creditors or a company and its shareholders.
By the shareholder vote required in its articles, or by a 3/4 majority
shareholder vote in the absence of such a provision, a company can increase
its authorized capital by creating shares, increasing the number of shares or
increasing the shares' par value. A 3/4 majority shareholder vote of a
particular class must consent to any interference or prejudice of any right or
special right if that right is attached to that class of shares and that right
is affected differently from those attached to another series of the same
class.
A company must have a special resolution to provide any financial
assistance to certain persons
14
<PAGE>
as permitted under British Columbia law. Under the law, a company can give
money to trustees to subscribe for or purchase shares or debt obligations for
a bona fide employee's or affiliate's benefit. A company may also provide
financial assistance to its bona fide full time employees or affiliates to
enable them to purchase or subscribe for shares or debt obligations.
As set forth elsewhere in this Joint Proxy Statement-Prospectus, the
directors of ATI hold options to purchase shares of ATI Common Stock.
Under British Columbia law, the shareholders of ATI Common Stock must approve
the directors' exercising their shares. No such provision exists under
Nevada law.
VOTE REQUIRED FOR SHAREHOLDER ACTIONS
Under Nevada law, action by stockholders on a matter other than the
election of directors is approved if the number of votes cast in favor of the
action exceeds the number of votes cast in opposition to the action. British
Columbia law requires a simple majority vote of outstanding shares in person
or by proxy to pass an ordinary resolution. The law also allows shareholder
action by consent in lieu of a vote if at least 3/4 of the shares entitled to
vote, vote in favor of the resolution. As discussed above under "Transactions
Requiring Shareholder Approval," a 3/4 majority vote is required to pass any
special resolution. Neither company's governing rules provides for preemptive
rights.
QUORUM REQUIREMENTS FOR SHAREHOLDERS' AND DIRECTORS MEETINGS
Under Nevada law, a majority of the voting power, including that present in
person or by proxy, regardless of whether the proxy has authority to vote on
all matters, constitutes a quorum. A majority of the directors then in office
at a meeting duly assembled constitute a quorum at a directors' meeting. Under
Aztek's bylaws, quorum requirements for shareholders' meetings are the same as
under the statute, but a majority of the number of directors fixed by the
bylaws constitutes a quorum for directors' meetings.
Generally under British Columbia law, two persons at a meeting constitute a
quorum, however, as a reporting company, at least one person holding or
representing by proxy at least 1/3 of the shares affected constitute a quorum
for a meeting. Under ATI's articles, a quorum for transacting business at a
general meeting is two persons. British Columbia law has no requirements for
a quorum at a directors' meeting. Under ATI's articles, a quorum for a
directors' meeting is fixed by the directors and if not so fixed, is a
majority of the board.
DISSENTERS' RIGHTS OF APPRAISAL
NEVADA LAW
Under Nevada law, a stockholder may dissent from and obtain the fair
value of his shares in the event of any of the following corporate actions:
* Consummation of a merger plan if stockholder approval is required and the
shareholder is entitled to vote on the merger, or if the company is a
subsidiary and is merged with its parent;
* Consummation of an exchange plan where the company will be acquired if the
shareholder is entitled to vote on the plan;
15
<PAGE>
* Any corporate action pursuant to a shareholder vote if the articles, bylaws
or a directors' resolution permits stockholders to dissent and obtain payment
for their shares.
The dissenting stockholder cannot challenge the corporate action unless the
action is unlawful or fraudulent. Stockholders have no right of dissent if the
shares were listed on a national securities exchange, included in the national
market system by the NASD, or if the shares were held by at least 2,000
stockholders of record. An exception exists where the articles provide
otherwise. A second exception exists where the stockholders are required to
accept for their shares anything except cash or owner's interests in the
surviving or acquiring entity, an entity listed on a national securities
exchange in the national market system by the NASD, or an entity held of
record by at least 2,000 holders, or a combination of these factors.
Stockholders of the surviving company in a merger have no dissenting rights if
the merger does not require stockholder action.
A notice of dissenters' rights must be sent with the notice of the meeting
where the vote will take place. For actions taken by consent, the company
must send the dissenters' notice and a notice that the action was taken. A
dissenting shareholder must notify the company of his or her dissent in
writing before the vote is taken and is prohibited from voting in favor of the
proposed action. Otherwise the dissenting shareholder is not entitled to
payment for his or her shares. If a proposed action creating dissenters'
rights is authorized at a stockholders' meeting, the company must deliver a
written dissenter's notice to all stockholders who satisfied the requirements
to assert those rights within 10 days of effecting the corporation action.
The notice must state where the demand for payment must be sent, when and
where certificates are to be deposited, and it must inform holders not
represented by certificates to what extent the transfer of shares will be
restricted after demand for payments is received. The company must supply a
form for demanding payment that includes the date of the first announcement to
the news media or stockholders of the terms of the proposed action. The form
must require that the person asserting the dissenter's rights certify whether
or not he or she acquired beneficial ownership before that date. The notice
must set a deadline when the corporation must receive the demand for notice.
The stockholder must then demand payment, certify whether he or she
acquired beneficial ownership of the shares before the date required to be
set forth in the dissenter's notice of this certification and deposit his or
her certificates, if any, in accordance with terms of the notice. The
stockholder who complies retains all other rights of a stockholder until
those rights are canceled or modified by the company's taking the proposed
action. The stockholder who fails to demand payment or deposit his or
certificates where required by the date set forth in the dissenter's notice
forfeits his or her payment.
The company can restrict the transfer of shares not represented by a
certificate from the date the demand for payment is received. The company
must pay the dissenter within 30 days the amount the company estimates to be
the fair value of the shares plus accrued interest. The company must include
with the payment a copy of its balance sheets as of the end of a fiscal year
ending not more than 16 months before the payment date, an income statement
for that year, a statement of changes in stockholders equity for that year,
and the latest available interim financial statements. The company must also
provide a statement of its estimate of the fair value of the shares, an
explanation of how the interest was calculated, a statement of dissenter's
rights to demand payment and a copy of the Nevada Revised Statute ºº
92A.300 - 92A.500, inclusive.
Unless the beneficial shareholder owned the shares before the date set
forth in the dissenter's
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<PAGE>
notice as of the date of the first announcement to the news media or to the
stockholder of the terms of the proposed action, the corporation may withhold
payment from a dissenter. If the company withholds payment, it must estimate
the fair value of the shares, plus accrued interest and offer to pay this
amount to each dissenter who agrees to accept it in full satisfaction of his
demand. The company must send with its offer a statement of its estimate
of the fair value, and explanation of how interest was calculated and a
statement of the dissenter's right to demand payment.
A dissenter can notify the company of his or her own estimation of the fair
market value of the shares and demand payment of this amount less any money
already paid if he believes the amount offered by the company is less than the
fair value of the shares. The dissenter must do so within 30 days. After
receiving such a demand, if the amount remains unsettled, the company must
commence a proceeding within 60 days in the district court in the county of
its registered agent to determine the value of the shares, or pay the amount
the dissenter demands. All parties with unsettled demands become parties to
the proceeding, the court appoints an appraiser, and issues a judgment for the
amount the court finds to be the fair value of the shares payable to the
shareholders. The corporation must pay the court costs unless the dissenters
acted arbitrarily, vexatiously or in bad faith and the court may impose fees
for counsel and experts in equitable amounts against the respective parties.
In some cases, dissenter's counsel fees may come from the funds awarded in the
judgment.
BRITISH COLUMBIA LAW
Under British Columbia law, if a company passes a resolution to which a
shareholder may dissent, the company must notify the dissenting shareholder of
its intention to act and advise the dissenting member of his or her rights.
The dissenting shareholder has the right to compel the company to purchase his
or her shares by delivering a notice of dissent within 14 days of the notice
of the company's intention to act. The dissenting shareholder may apply to a
court to compel the company to purchase the dissenting shareholder's shares.
The price of the shares is the fair value the day before the date on which the
resolution was passed.
CUMULATIVE VOTING
Nevada law permits cumulative voting if provided for in the company's
articles, but the shareholder must notify the company's president or secretary
in writing of his or her intention to vote cumulatively. Aztek's bylaws
specifically prohibit cumulative voting. British Columbia law does not
contemplate cumulative voting, but ATI's bylaws permit cumulative voting.
17
<PAGE>
DIVIDEND REPAYMENT
Under Nevada law, dividend payments, share redemptions and asset
distributions all fall within the definition of a "distribution." A company
can make a distribution so long as the distribution does not render the
company insolvent. Moreover, the distribution must not cause the sum of the
liabilities and the funds necessary to satisfy preferential rights upon
dissolution to exceed the assets. Under British Columbia law, dividends,
which may be paid by distributing cash, assets paid up shares, bonds or other
debt obligations, may be paid out of the company's profits.
PROXY REQUIREMENTS
British Columbia has specific laws to regulate proxies. Only a
shareholder of ATI common stock or his or her attorney may execute a proxy.
In Nevada, the stockholder may authorize his officer, director, employee or
agent to execute the proxy. British Columbia law provides that a proxy
ceases to be valid after one year. Nevada law provides that a proxy expires
after six months unless coupled with an interest, or unless the stockholder
specifies a length not to exceed seven years. British Columbia. law requires
ATI to send a proxy conforming to certain guidelines to each shareholder
while Nevada law has no requirements for proxy contents. However, as a
result of the merger, Aztek will be a successor to a company with securities
registered under Section 12(g), and thus itself will become a reporting
Company under Section 12(g). As such, the Company will be subject to the
proxy rules under Section 14 of the Securities Exchange Act of 1934.
Finally, under British Columbia law, directors may require proxies to be
delivered a maximum of 48 hours in advance of a meeting.
EXAMINATION OF RECORDS
British Columbia law requires ATI to keep at its office the following
registers of the following items: members (shareholders); directors; debenture
holders; debentures; indebtedness; allotments; minutes of general meetings;
minutes of directors; and several other documents. British Columbia also
requires ATI to keep accounting records of all transactions. Directors and
former directors may examine the corporate records and take extracts of those
records without charge. Shareholders may examine records and take extracts
without charge with the exception of directors' minutes, documents approved by
the directors in the preceding ten years and mortgages. Under British
Columbia law, ATI cannot close its stock ledger to stockholders. As a
reporting company, shareholders may take copies of the same records for C$.50
or less, but in some cases C$.50 per page. Moreover, any person can extract
the same record as shareholders except minutes of meetings. The cost is C$.50
or less per document and in some cases C$.50 per page.
Nevada law only requires Aztek to retain its articles, bylaws and stock
ledger at its office. Stockholders may copy the articles, bylaws, amendments
and stock ledger if they have been stockholders of record for six months
preceding the demand, or are authorized by the shareholders of at least 5% of
the outstanding shares. However, Aztek's bylaws provide that at least ten
days before a meeting, a list of shareholders entitled to vote must be
compiled and made available for inspection. The bylaws also permit a
shareholder to inspect and copy resolutions creating different classes of
stock, minutes of shareholders' meetings and actions without meetings,
communications to shareholders within three preceding years, the names and
addresses of current directors, and the most recent annual report. For a
proper purpose a shareholder may inspect minutes of directors' meetings,
accounting records and the record of shareholders. In Nevada, persons must
own at least 15% of the outstanding shares to examine the financial records.
The shareholder making the demand bears all costs and must sign an affidavit
that such inspection is not desired for any purpose not related to his
interest as a stockholder.
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<PAGE>
Under Nevada law, Aztek may impose a reasonable charge.
DIRECTORS
Under British Columbia law, a majority of directors must be Canadian and
at least one director must be a resident of British Columbia. Directors are
jointly and severally liable for losses suffered as a result of the
corporation losing money by selling shares for less than par value, or for
selling shares issued where consideration has not been fully paid.
Shareholders have a right to at least 56 days advance notice of an election
for directors. Shareholders owning ten percent or more of the outstanding
shares have a right to nominate for directors. British Columbia law has a
"bad boy" statute that precludes a person from serving as a director if he or
she is an undischarged bankrupt, has been convicted in connection to dealings
with a corporation, or for fraud. If the company is a reporting company, a
person who has had a registration cancelled cannot be a director. British
Columbia corporate law also contains a provision that makes insiders liable
for acting on confidential information at the expense of the value of the
securities.
OFFICERS
British Columbia law requires a president and secretary and they cannot
be the same person. British Columbia law permits but does not require
election of officers. However, ATI's bylaws grant the directors the right to
appoint the officers. The duties of a secretary to maintain the records of
the corporation are set forth under Canadian law.
Nevada law requires a president, a secretary and a treasurer, and one
person can serve in all offices. Officers are appointed by the directors.
Aztek's bylaws provide for a president, secretary and treasurer. ATI's
bylaws do not designate specific officers. Its president, among other things,
presides over meetings of the shareholders.
ARTICLES AND BYLAWS
The following discussion explains differences in both companies corporate
governance documents to the extent they have not been discussed thus far. ATI
has authorized 100,000,000 shares no par value. The number of directors is
determined by the directors. If the directors fail to determine a number of
directors, the number to be elected is the same as the number of directors
whose terms expire and directors may appoint additional directors. ATI's
articles provide for mandatory indemnification of directors and the secretary,
and permissible indemnification for officers other than the secretary. A
director may only be removed by other directors and only for an indictable
offense and the directors fill any vacancies. ATI's board may appoint an
Executive Committee that have the powers vested in the board except to fill
vacancies, or change the membership of the Executive Committee. Directors can
declare dividends without giving notice to shareholders.
Aztek has authorized 100,000,000 shares, par value $.001. It has four
directors which may be increased to nine or decreased to one. Directors are
elected by the shareholders. Aztek's bylaws prohibit cumulative voting and
its articles provide for mandatory indemnification of directors and officers.
Shareholders may remove one or more directors. Directors fill any vacancies
in the board, except when the vacancy results from an increase in the number
of directors in which case the shareholders fill the vacancy. Aztek's board
may appoint committees but the bylaws do not specifically provide for an
Executive Committee. The directors may amend the bylaws.
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<PAGE>
OTHER TERMS OF THE TRANSACTION
ATI will merge with and into Aztek with Aztek being the surviving
corporation. ATI, as of the date of the merger, will have 2,051,109 shares
issued and outstanding. ATI's shareholders will receive one fully paid and
non-assessable share of Aztek's Common Stock in exchange for each share of ATI
stock he or she holds.
ACCOUNTING TREATMENT. The Merger will be accounted for as a purchase
transaction, in accordance with generally accepted accounting principles. The
carrying value of ATI's assets and liabilities approximates their fair market
value so that there will not be any adjustments to the carrying value of ATI's
assets and liabilities reflecting their fair values at the date of the Merger.
FEDERAL INCOME TAX CONSEQUENCES OF THE TRANSACTION. The Law Firm of
Larson-Jackson has rendered its opinion on the tax consequences of the
Merger. In the opinion of tax counsel, the following constitutes the material
federal tax consequences of the Merger under U.S. law: (i) the Merger will
constitute a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code (the "Code"); (ii) no gain or loss will be recognized by
ATI or Aztek as a result of the Merger, (iii) no gain or loss will be
recognized by a stockholder of ATI who exchanges all of such stockholder's ATI
Common Stock solely for shares of Company Common Stock; (iv) the basis of
shares of Company Common Stock to be received by a stockholder of ATI will be
the same as the basis of the ATI Common Stock surrendered in exchange
therefor; and (v) the holding period of the shares of Company Common Stock to
be received by a stockholder of ATI will include the period during which the
stockholder held the shares of ATI Common Stock surrendered in exchange
therefor, provided that such ATI Common Stock is held as a capital asset by such
stockholder at the Effective Date.
Cash payments made to the U.S. residents who are holders of ATI Common
Stock upon the exchange thereof in connection with the Merger for Dissenting
Shares (other than certain exempt entities and persons) will be subject to a
31.0% backup withholding tax under federal income tax law unless certain
requirements are met. Generally, Aztek will be required to deduct and withhold
the tax upon the following events: (i) the stockholder fails to furnish a
taxpayer identification number ("TIN") or fails to certify under penalty of
perjury that such TIN is correct; (ii) the Internal Revenue Service ("IRS")
notifies Aztek that the TIN furnished by the stockholder is incorrect; (iii)
the IRS notifies Aztek that the stockholder has failed to report interest,
dividends or original issue discount in the past, or (iv) there has been a
failure by the stockholder to certify under penalty of perjury that such
stockholder is not subject to the 31.0% backup withholding tax. Any amounts
withheld in collection of the 31.0% backup withholding tax will reduce the
federal income tax liability of the stockholders from whom such tax was
withheld. The TIN of an individual stockholder is that stockholder's Social
Security number.
Each stockholder is encouraged to consult his or her own tax and financial
advisors as to particular facts and circumstances which may be unique to such
stockholder and not common to stockholders as a whole and also as to any
estate, gift, state, local or foreign tax consequences arising out of the
merger and/or any sale thereafter of Aztek common stock received in the
merger.
MATERIAL TAX CONSEQUENCES TO CANADIAN SHAREHOLDERS. The Canadian
accounting firm BDO Dunwoody has rendered an opinion concerning the merger's
tax consequences to Canadian shareholders, a copy of which is attached to this
Joint-Proxy Statement Prospectus. Any gain or loss to Canadian shareholders
will be a function of the fair value of Aztek's shares at the time of the
Merger and the adjusted cost basis of the particular shareholder's ATI
shares.
20
<PAGE>
After the merger, Aztek will be a "foreign affiliate" to any Canadian
shareholder who owns 1% or more of Aztek's outstanding shares if that
shareholder and all related persons own 10% or more of Aztek's outstanding
stock. If that shareholder is a corporation, Aztek's status as a foreign
affiliate will impact the taxation of dividends that Aztek pays to the
shareholder.
Aztek will be a "controlled foreign affiliate" of a Canadian shareholder if
the Canadian shareholder meets the test that makes Aztek a foreign affiliate
and one of the following four situations. First, it will be a "controlled
foreign affiliate if it is controlled by the Canadian shareholder. Second
Aztek will be a "controlled foreign affiliate if it is controlled by a
Canadian shareholder and it is controlled by four or fewer Canadian residents
including the shareholder. Third, Aztek will be a "controlled foreign
affiliate" of a Canadian shareholder if Aztek is controlled by the Canadian
shareholder and Aztek is controlled by four or fewer separate Canadian
residents. Fourth, Aztek will be a "controlled foreign affiliate" of a
Canadian shareholder if Aztek is controlled by a Canadian shareholder, and it
is controlled by someone with whom the Canadian shareholder deals with, but
not at arm's length. Finally, Aztek will be a "controlled foreign affiliate"
of a Canadian shareholder if it is controlled by that shareholder and it is
controlled by the shareholder himself and a person with whom that shareholder
deals with but not at arm's length.
If, after the merger, Aztek is a controlled affiliate of a Canadian
resident certain, income will be taxed in Canada on a current basis. Such
certain income is defined as passive investment income and income from certain
services. Any Canadian shareholder of whom Aztek is a foreign affiliate or
controlled foreign affiliate should seek professional advice regarding any tax
consequences of the merger.
Any Canadian shareholder of whom Aztek becomes an affiliate must file an
annual information return within fifteen months of the taxation year. A
shareholder of whom Aztek becomes a controlled affiliate may have to file
additional information returns in respect of loans or transfers to Aztek by
certain foreign Trusts or in respect of loans and transfers to those Trusts by
Aztek
Any dividends Aztek pays to a Canadian shareholder will be subject to a
U.S. withholding tax equal to 5% of the gross amount of dividends if the
shareholder owns at least 10% of Aztek's outstanding stock, or 15% of the
gross amount in all other cases.
Shares of Aztek will be considered "foreign property" for pension funds and
certain tax exempt entities. These funds and entities are limited in the
amount of "foreign property" they can own without incurring a special tax.
PRO FORMA COMBINED CONDENSED BALANCE SHEETS
The following pro forma combined condensed balance sheets give effect to
the proposed Merger. This statement combines Aztek and ATI's unaudited March
31, 1999, balance sheets and assumes the Merger was accounted for as a
purchase. The terms of the Merger call for Aztek to exchange one share of its
Common Stock for each ATI common share. The pro forma data does not purport
to be indicative of the results that would actually have been reported if the
Merger had been in effect or which may be reported in the future. This
statement should be read in conjunction with the accompanying note, the pro
forma combined condensed statements of income and the respective historical
consolidated financial statements and related notes of Aztek and ATI included
elsewhere herein. All figures in this pro forma combined balance sheet are in
U.S. dollars. ATI's audited balance sheet included in this Joint
Proxy-Statement Prospectus is reported in Canadian dollars. The currency
exchange ratio applied to the following table is US$1 = C$1.5092.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CURRENT ASSETS
Cash $ 60,000 $ 2,607 $ 62,607
Receivables 0 31,542 31,542
Prepaid expenses 0 103 103
-------- -------- ---------
Total Current 60,000 34,252 94,252
CAPITAL ASSETS 0 38,631 38,631
-------- -------- ---------
TOTAL ASSETS $ 60,000 $ 72,883 $ 132,883
======== ======== =========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C> <C>
CURRENT LIABILITIES
Accounts payable and accruals $ 0 $ 253,281 $ 253,281
Deferred revenue 0 66,504 66,260
Current portion of long-term debt - 66,260 64,500
Current portion of capital lease 0 0 0
------ ---------- -----------
Total Current 0 386,045 386,045
LONG-TERM DEBT
Due to related parties 0 125,267 125,267
Deferred revenue and obligation under
capital lease - 0 0
------- ---------- -----------
TOTAL LIABILITIES 0 511,312 511,312
SHAREHOLDERS' EQUITY
(DEFICIENCY)
Share capital 60,000 2,769,351 2,829,351
Deficit 0 (3,207,779) (3,207,779)
TOTAL EQUITY 60,000 (438,428) (378,428)
------- ----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 60,000 $ 72,883 $ 132,883
======= ======== =========
</TABLE>
No material non-recurring charges or credits directly attributed to the
merger exist.
(Continued on Next Page)
22
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
The following pro forma combined condensed statements of income combine
the historical statements of income of ATI and Aztek for the year ended June
30, 1998, and the nine months ended March 31, 1999. These pro forma
statements assume the Merger was effective as of July 1, 1997, that the Merger
was accounted for as a purchase, and that the exchange ratio was 1:1. The pro
forma data does not purport to be indicative of the results that would
actually have been reported if the Merger had been in effect or which may be
reported in the future. This statement should be read in conjunction with the
accompanying note, the pro forma combined condensed balance sheet and the
respective historical consolidated financial statements and related notes of
ATI and Aztek included elsewhere herein. The currency exchange rate applied to
the following table is US$1 = C$1.5092 and the exchange ratio applies is 1:1.
<TABLE>
<CAPTION>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
For the year ended June 30, 1998
(U.S. Dollars)
Aztek ATI Pro-Forma Combined
<S> <C> <C> <C>
REVENUES
Sales $ 0 $ 229,584 $ 229,584
EXPENSES
Selling, general and administrative,
depreciation and other 0 476,694 476,694
INTEREST AND OTHER INCOME 0 201 201
--- --------- ---------
LOSS FROM CONTINUING OPERATIONS $ 0 $ 246,909 $ 246,909
=== ========= =========
<CAPTION>
<S> <C> <C> <C>
INCOME (LOSS) PER SHARE FROM CONTINUING
OPERATIONS
Historical Loss per share $ 0.00 $ (0.12) -
Pro-forma Loss per share - - $ (0.12)
Number of shares used to calculate per
share data 97,975 2,046,790 2,144,765
PRO FORMA BOOK VALUE PER SHARE $0.14 $(0.21) $(0.18)
</TABLE>
ATI's audited financial statements are presented in this Joint Proxy
Statement-Prospectus and bear a section entitled "Summary of Significant
Accounting Policies." As disclosed in the summary, all ATI per share data in
this prospectus was calculated using the weighted average number of shares
outstanding for the relevant period. The weighted average was calculated
using the actual number of days that the shares were outstanding for each
issuance of shares during the relevant period.
Although Aztek had 2,000,000 shares outstanding on June 30, 1998, Aztek's
per share data is based on 97,975 shares outstanding. Calculating the data
based on two million shares
23
<PAGE>
outstanding would cause the pro forma combined per share data to be
misleading since the sales of those shares were rescinded. 97,975 shares are
now issued and outstanding. Thus, the pro forma combined per share data
accurately reflects the effect of the Merger.
Nonrecurring charges or credits directly attributable to the Merger do
not exist and therefore, were not considered in the pro forma condensed income
statement.
<TABLE>
<CAPTION>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
For the nine months ended March 31, 1999
(U.S. Dollars)
(Exchange Ratio: US$ 1 = C$ 1.5092)
Aztek ATI Pro-Forma Combined
<S> <C> <C> <C>
REVENUES
Sales and interest $ 0 $ 154,154 $ 154,154
EXPENSES
Selling, general and administrative,
depreciation and other 0 290,199 290,199
INTEREST AND OTHER INCOME 0 0 0
--- --------- ---------
LOSS FROM CONTINUING OPERATIONS 0 (136,045) (136,045)
=== ========= =========
<CAPTION>
<S> <C> <C> <C>
LOSS PER SHARE FORM CONTINUING OPERATIONS
Historical income (loss) per share 0.00 (0.07) -
Pro-forma (loss) per share - - $ (0.06)
Number of shares used to calculate
per share data 97,975 2,051,109 2,149,084
</TABLE>
MATERIAL CONTRACTS WITH THE COMPANY BEING ACQUIRED
Other than the Merger Agreement, no material contracts exist between
Aztek and ATI.
Aztek has not hired an expert or counsel on a contingent basis in
connection with this Joint Proxy Statement-Prospectus or the Merger.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
24
<PAGE>
DESCRIPTION OF THE BUSINESS OF THE ACQUIRING COMPANY
Aztek was organized under the laws of the State of Nevada on August 19,
1994 as Spectral Innovations (1994), Inc. and was organized as a closely held
corporation. Mike Sintichakis became the President at Aztek's inception, ATI
had subscribed for certain shares, but Aztek had no shareholders until 1998.
Aztek's directors are Mike Sintichakis, Nick Sintichakis, Edson Ng, and
Eileen Keogh. Mike Sintichakis is the President and Nick Sintichakis is the
Secretary. On May 28, 1998, the directors passed a resolution to change the
name of Spectral Innovations (1994), Inc. to Aztek Inc. The Amended and
Restated Articles of Incorporation effecting the name change were filed with
the Secretary of State of the State of Nevada and accepted on June 8, 1998.
In addition to effecting the name changes, the Amended and Restated Articles
increased the amount of shares authorized from twenty-five thousand shares to
one hundred million shares.
Aztek has not transacted any business since its inception. It currently
has no principal products or services, no competition, no customers and is not
subject to any governmental regulations. Aztek's only intellectual property
is the IBM San Francisco software license that is described below in Aztek
Management's Plan of Operation at page 26. After the Merger and the date its
Registration Statement filed on this Form S-4 becomes effective, Aztek will be
subject to the state and federal securities laws. Aztek has no employees
other than its officers and directors. Currently, the officers and directors
receive no salary.
DESCRIPTION OF PROPERTY
Aztek's headquarters is at 1575 Delucchi Lane, Suite #40, Reno, Nevada
89502. The headquarters consist of approximately 150 square feet of office
space. The lease is on a month to month basis and is paid to Meadow Wood Crown
Plaza. The office is in a new office building located conveniently to
downtown Reno and the local airport.
LEGAL PROCEEDINGS
Aztek is not aware of any legal proceedings involving any director,
director nominee, promoter or control person including criminal convictions,
pending criminal matters, pending or concluded administrative or civil
proceedings limiting one's participation in the securities or banking
industries, or findings of securities or commodities law violations.
MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
No public trading market exists for Aztek's securities. Aztek was
initially incorporated as a closely held corporation and became a standard
corporation in June 1998. Subsequent to the Merger, the shareholders of ATI
will be the shareholders of record of Aztek and Aztek will
25
<PAGE>
seek to have its shares traded on the OTC Bulletin Board.
Aztek's outstanding shares for which there is no established public market
cannot be sold except pursuant to Rule 144 under the Securities Act. Aztek
has not agreed to register such shares under the Securities Act for sale by
security holders. The shares that are currently issued and outstanding are
not and have not been proposed to be publicly offered and therefore, cannot
have a material effect on the market price of Aztek's common equity.
HOLDERS OF RECORD
On July 22, 1998, there were six holders of record of Aztek's Common Stock.
DIVIDENDS
Aztek has declared no dividends, cash or otherwise, in the last two fiscal
years and does not plan to pay any dividends in the foreseeable future.
Paying dividends will depend upon Aztek's assumption of ATI's debt and
short-term and long-term cash availability, working capital needs and other
factors as determined by Aztek's Board of Directors.
AZTEK MANAGEMENT'S PLAN OF OPERATION
THIS JOINT PROXY STATEMENT-PROSPECTUS AND REGISTRATION STATEMENT ON FORM S-4
CONTAINS FORWARD LOOKING REPRESENTATIONS THAT INVOLVE CERTAIN RISKS AND
UNCERTAINTIES. AZTEK'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE
RESULTS DISCUSSED IN THE FORWARD LOOKING REPRESENTATIONS.
After the Merger, Aztek will assume the obligations of ATI and proceed
with the course of business initiated by ATI. Aztek anticipates that after the
Merger, sales will increase through the next fiscal period. Aztek's Board of
Directors will begin work immediately following the Merger in reviewing the
following objectives: completion of new product development initiated by ATI;
acquisition of the assets of Qdata Software Inc.; and acquisitions of two
small vendors as initiated by ATI. There is no certainty that following the
review, any of the current objectives will be pursued or met.
Aztek will, however, pursue a market consolidation strategy that has
already been initiated by ATI. In addition to acquiring businesses, Aztek
will design and develop an entirely new suite of software products to replace
ResponseWare's products and appropriate products acquired through future
acquisitions. The new products will be based on IBM San Francisco software
that IBM has already licensed to Aztek. The San Francisco software provides
40 - 60% of the programming code necessary for new products. Programmers will
incorporate desirable features and functions from ResponseWare products and
other acquired products. To date, ATI has completed rudimentary data modeling
and high level designs for the new software. ATI has
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<PAGE>
completed technical evaluations of several software development platforms
including IBM VisualAge, Smalltalk, Progress, Synon Obsydian and IBM
VisualAge Java Enterprise. Neither ATI nor Aztek will move forward with
further product development until after the Merger. Some product development
will require financing to fund the software development team.
(Continued on Next Page)
PROPOSED ACQUISITIONS
ATI has had preliminary discussions concerning several acquisitions.
Aztek may continue to acquire independent software companies such as ATI did
with ResponseWare Corp. The independent software companies develop, market,
and support their own proprietary products. Once an acquired company is
consolidated, Aztek must execute the former independent company's preexisting
contractual obligations. Through consolidation, Aztek will replace the
various proprietary products inherited through acquisition with its own new
products. By consolidating products, Aztek will centralize product
development and secondary support.
After acquiring companies, Aztek will focus on new sales, systems
implementation, training and primary support within their sales territories.
The consolidation strategy also includes centralized marketing programs and
administration.
Aztek will assume the obligations of two letters of intent signed by ATI
to acquire two independent computer software companies, Concord Consultants
Limited ("CCL") of Richmond, British Columbia, and Municipal Hardware Systems
Ltd. ("MHS") of Edmonton, Alberta. Management believes that acquiring the
companies will expand Aztek's business markets and in terms of sales.
Ultimately, these acquisitions are part of Aztek's overall plan of expansion
through acquisitions. The letters of intent require Aztek to complete this
Merger and obtain additional financing prior to the acquisitions. Thus, Aztek
will have to engage an investment banker and effect an offering before moving
forward. Then, Aztek and the companies to be acquired must complete their
respective due diligence and finalize the terms and conditions of the purchase
agreements. Copies of the two letters of intent are attached as exhibits to
the registration statement on Form S-4 as material contracts.
Both companies are closely held non-public Canadian entities and have no
audited financial statements. To date, they have only released interim
financial statements to ATI's management and will not release any other
financial information until ATI demonstrates its ability to acquire the
companies for cash and completes the Merger. CCL and MHS' management are
aware of ATI's efforts to raise $1 million and Aztek's intent to engage an
investment banker to carry out such an offering. The parties anticipate that
at the close of the offering, they will be able to proceed with the
acquisitions. At that point CCL and MHS will perform their due diligence
review of Aztek and Aztek will perform its due diligence review of CCL and
MHS. Once Aztek's management is satisfied that the acquisition is in the best
interest of the shareholders and if management determines that shareholder
approval is required, it will hold a special meeting for the shareholders to
approve the acquisitions. Failing to proceed with these acquisitions poses no
risk to ATI shareholders.
The third anticipated acquisition will be an acquisition of assets from
Qdata Software Inc. ("Qdata"), a closely held Barbados corporation. Qdata has
acquired the exclusive South American rights for a software program called
Multiple Access Remote Control (MARC). MARC allows a single personal computer
to simultaneously monitor and control multiple personal computers regardless
of location. MARC is packaged under different names depending on its use.
Under the name Distant Learner 2.0, MARC is used in education. Instructors
can highlight areas
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<PAGE>
on a student's screen where attention needs to be addressed, or the
instructor can engage in a direct private conversation with a student. Under
the name Call Center Manager 2.0, the software will allow a supervisor in a
call center to monitor data entry activities of an operator and allow
operators to interact with supervisors. Under the name One-Up, individuals
can use MARC to gain access to individual remote computers. Qdata is
targeting industries such as banking, airline, computer software and
hardware, telecommunications and education.
Qdata Information Systems Ltd. ("QIS") owns the source code for MARC,
licensed it to Qdata for South American distribution, and provides support
for up to 25,000 MARC units. For each sale, Qdata pays QIS 1 British pound in
royalties, and 15% of gross revenues on sales which is defined as revenue less
direct pretax costs. If QIS fails to produce MARC according to Qdata's needs
and specifications, rights to other markets and to the source code pass to
Qdata.
Qdata has represented to Aztek that it has a distribution agreement with
ARKA in Buenos Aires, Argentina. Under the agreement, ARKA distributes the
MARC software in Argentina, Uruguay and Brazil. Qdata has represented that
Argentina's Ministry of Finance has ordered $160,000 worth of MARC software
units, and the University of Belgrando has ordered $32,000 worth of MARC
software units.
Qdata and Aztek are presently negotiating the terms of the asset
acquisition. The assets consist of the license Agreement between Qdata and
QIS which runs from March 10, 1998, through March 10, 2003. The assets also
include distribution rights for MARC and the associated products,
approximately 32,500 units of MARC software licenses to be sold to customers,
Qdata's work in progress, and software that can be marketed by Aztek. Aztek
will not assume Qdata's liabilities or ongoing expenses.
Qdata relies on third party sales agents to service the South and Central
American markets. 95% of its sales have come through its sales agent in South
America. Therefore, Aztek will inherit a relationship with the sales agent
and will initially be dependent on the sales agent. Qdata also relies on the
MARC product that is developed by QIS. The acquisition will not cause Aztek
to have an equity interest in QIS meaning Aztek will depend on its
relationship with QIS to make the acquisition profitable.
Qdata has proposed to sell the assets to Aztek in exchange warrants to buy
200,000 Aztek shares with an exercise price of US$2.50 released in biannual
installments of 50,000 warrants. As consideration for the license, Qdata has
proposed that Aztek will issue a credit of $1 per warrant at the close of the
transaction. Qdata is a privately held corporation and has not made financial
statements available to Aztek. To date the parties have not agreed on price
or structure. Moreover, until Aztek performs a due diligence review, it
cannot determine the value of Qdata's assets. At the present time, management
does not foresee any risk to Aztek's or ATI's shareholders if Aztek is unable
to acquire Qdata's assets.
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YEAR 2000 ISSUES
Aztek presently has no operating business but investors should view Aztek's
Year 2000 readiness in its position as ATI's successor. ATI has assessed all
of its information technology and non-information technology for Year 2000
readiness. ATI's Year 2000 exposure is limited to its IBM AS/400 computer
hardware and software, its ResponseWare software applications, and possible
Year 2000 exposure of businesses Aztek plans to acquire. ATI does not rely on
imbedded systems in any of its operations.
Internally, ATI has addressed its Year 2000 exposure by implementing
plans to replace its existing IBM AS/400 operating system with the latest
model (Model 170) and latest release of the OS/400 operating system and
compilers (Release V4R3). IBM has certified the new systems to be Year 2000
ready. ATI is converting its ResponseWare products. Conversion work with
the new systems are approximately 60% complete and should be finished by the
end of December 1998. Thus far, ATI has spent approximately C$45,000 in
labor costs and expects to spend an additional C$30,000 on conversion and
testing. ATI also uses Simply Accounting which is Year 2000 compliant.
ATI acquired ResponseWare Corp., the producer of ResponseWare software
applications. The ResponseWare software as acquired by ATI was not Year 2000
compliant. Pursuant to software maintenance contracts, ATI continues to
service customers that purchased the software. ATI has developed a system to
address the Year 2000 issues and therefore does not anticipate any adverse
impact on Aztek after the Merger. A key component of that system is its
conversion utility program that automates the process. The conversion tool has
been completed and tested, and is currently in use to convert the ResponseWare
applications. After the Merger, Aztek will assume ATI's obligations to supply
the Year 2000 compliant products to all ResponseWare customers who are under
the software maintenance contracts. ATI began supplying these products in
March 1998 and Aztek anticipates that it will fulfill the obligations by June
1999.
ATI is modifying its ResponseWare applications at an estimated cost of
C$75,000 representing 18 man-months of programming effort. The cost estimate
is based on ATI's past experience in projects of a similar nature requiring
system wide analysis, code search and replacement, database conversion, and
testing. Fees earned from early delivery of the Year 2000 applications and
ATI's revenues from operations will fund the Year 2000 compliance.
ATI's customers are dependent on ATI to provide Year 2000 compliant
ResponseWare accounting, payroll, and other core business software. ATI will
convert all ResponseWare software applications for Year 2000 compliance using
conversion tools it has developed. The conversion effort is in progress with
a target completion date for all of the applications by December 1998. ATI
will make the Year 2000 applications available to customers for early delivery
at a fee of C$2,000 - C$3,000 per module as completed. After June 1999, the
applications will be generally available at no charge.
Certain risks exist with ATI's plan to convert and implement Year 2000
compliant
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versions of the ResponseWare software. ATI is confident it will be
successful in converting and testing its base products under its own
development and testing environment. However, each customer requires unique
product implementation and its own custom applications that work with or
replace parts of the ResponseWare applications. Therefore, it will be
essential for customers to implement and test the Year 2000 versions as soon
as they are available. Delays in implementation and testing at customer sites
may result in inadequate time and resources to rectify Year 2000 problems. To
address this issue, ATI is keeping all clients aware of its conversion
activities and emphasizing the importance of early installation and testing.
If additional technical staff is necessary, ATI will hire or contract
additional resources. ATI has consulted with Group West Systems about
providing Year 2000 conversion services to third parties as an alternative to
ATI's own conversion effort. Group West is a consulting and technical
services company that specializes in Year 2000 conversion.
ATI has three pending acquisitions that are still subject to a due diligence
review. Until Aztek, as ATI's successor, performs this review, management
cannot assess the acquirees' Year 2000 readiness. Aztek will not be in a
position to perform this due diligence review until it completes its
financing. For a discussion of these acquisitions, see "Management's Plan of
Operation" above at page 26. Potential liability against ATI may result if
its products are not Year 2000 compliant. In a worst case scenario, ATI may
lose clients to another vendor or face legal action for failing to service
customers for Year 2000 requirements. Nevertheless, management believes these
scenarios are remote and cannot be quantified.
ATI's Year 2000 initiative has greatly impacted its business operations by
forcing ATI to assign technical resources to the conversion effort instead of
standard customer support, new software development and software maintenance
activities. The reassignment of technical employees has resulted in lost
revenues of approximately $60,000 in customer billable activities. However,
Aztek has offset some of this lost revenue through the collection of
approximately $45,000 in fees for early delivery of Year 2000 compliant
products and expects to collect an additional $105,000 in fees.
EXTERNAL FUNDING
Aztek expected to benefit from an ATI offering under Regulation D. In this
offering, ATI was seeking to sell 406,504 shares of ATI Common Stock to raise
approximately US$1,000,000. To date the funding has not materialized. For
More Information, see "Current Business Status" at page 68. Management will
seek an investment banker to effect the offering originally attempted by ATI,
but has not yet determined whether the offering will be public or private.
The cash infusion will enhance Aztek's efforts to resolve the deficiency in
operating capital that will exist after the Merger, to finance the recruitment
of VARs, and to enhance marketing efforts. The injection of capital will
allow Aztek to substantially reduce ATI's existing debt, complete the
rewriting of existing software programs, and result in a material improvement
in the financial condition of Aztek.
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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Aztek has not transacted any business since its inception. As such, Aztek
first engaged its accounting firm to audit its financial statements for this
Joint Proxy Statement-Prospectus and registration on Form S-4. Thus, there
has been no change in or disagreement with accountants.
INFORMATION ABOUT THE COMPANY BEING ACQUIRED
DESCRIPTION OF BUSINESS
ATI was incorporated on July 11, 1979, by filing and registering its
articles with the British Columbia Registrar of Companies. Over the last
three years, ATI has expanded its business focus and capabilities following
several acquisitions. On September 30, 1994, ATI acquired all of the issued
and outstanding shares of ResponseWare Corporation, a developer of municipal
government software including general accounting and payroll systems and
specialized systems such as property taxation, utility billing and building
permits. This acquisition allowed ATI to further diversify its operations
within the computer hardware, software and telecommunications market and to
expand the existing forty-five (45) municipal and private sector clients of
ResponseWare. The software license agreement is the same for all forty-five
municipalities and does not differ in any material respects. ATI continues to
support and service the ResponseWare software and client base as its primary
source of revenue.
On August 21, 1995, ATI acquired the assets and business of Helix
Technologies Limited, a consulting and systems integration firm specializing
in technology for mobile work force automation. ATI has completed contracted
projects from the acquisition and currently has no contracts for work in this
area. After the Merger, mobile work force automation technologies will be
incorporated into future products which have yet to be developed. Aztek
also continues to pursue further project-based contracts in the area of work
force automation technologies.
ATI is a small, Canadian computer software company with its headquarters
located in Kelowna, British Columbia, Canada. ATI employs fourteen people on
a full time basis. On December 9, 1996, ATI's name changed to Aztek
Technologies, Inc. from Consolidated McKinney Resources, Inc. On December 9,
1996, ATI received approval from the Vancouver Stock Exchange to resume
trading following a change in business focus. ATI changed it business focus
from mining to high technology. ATI develops and markets computer software
applications to municipal governments and to a lesser extent, the private
sector in Western Canada. In the private sector ATI's focus is primarily
human resources and payroll related software, service and maintenance. ATI
distributes its products through direct sales.
COMPETITION
ATI competes primarily in U.S. and Canadian municipalities with
populations of 250,000 or fewer. The customer base consists of municipal
governments that purchase software
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applications for financial systems and departmental applications and are
expanding into enterprise wide solutions.
Some municipalities rely on custom written applications developed and
supported either in-house or through contractors. Due to the relatively high
licensing and support fees of international vendors, most small and mid-sized
municipalities tend to deal with regional software vendors. ATI's primary
source of competition comes from small to mid-sized municipal government
marketers and regional vendors, specialized departmental solution providers
and in-house developed systems.
Regional vendors dominate the majority of the market. Regional software
providers typically have up to 100 clients within a given market that has a
population of less than 250,000 people. Canada has about ten regional
vendors, the U.S. has about one hundred regional vendors, and North America as
a whole has approximately two hundred regional vendors. Most regional vendors
are privately owned. Mounting pressures on these vendors to deliver current
technology is increasing at a time when most of them are least able to fund
new development.
HTE Inc. and American Management Systems are the largest competitors and
are dedicated to the government sector with annual sales in excess of US$100
million and US$300 million respectively. These organizations are considered
the leading suppliers of government systems in the US. Their products consist
of complete suites of integrated modules to address enterprise wide issues for
local governments. They have also moved to client/server oriented software
development. Product pricing ranges from $5,000 for single modules to over
$200,000 for complete systems. Those vendors market through direct channels
as well as through strategic alliances with other vendors such as IBM.
The primary competitive factors involve differences in principal products and
accompanying services, price, service warranty and other product performance.
Regional vendors have had success by offering customized software solutions,
local services and support, and reasonable prices. Individual applications may
work with products from other vendors. However, they communicate to other
applications at a lowest common denominator level. Therefore, these products
compromise inter-application functionality and subject users to multiple
application interfaces.
ATI's products are integrated application suites with high functionality
between applications, and a consistent user interface scheme. The products
that are most successful are comprehensive, integrated financial management
systems with a full array of features targeted at entry and mid-level systems.
Competitors have prohibitive costs to move current technology since their
applications are based on less flexible and proprietary third or fourth
generation languages. Competitors have increased burdens from the need to
customize applications for each client.
Another competitive factor involves servicing products that municipalities
have purchased. Vendors have a secure revenue source through client
dependency on the vendor for service and support. This dependency breeds
client frustration, a frustration that is exacerbated by relatively small
vendors' inability to deliver current technology and respond quickly to client
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demands. Clients who have modified their applications extensively create more
difficulties and are costly to support.
ATI's products are designed to compete effectively with these solutions in
terms of functionality and offer the ability to become a single source
supplier for entire enterprises. Its products are designed to take advantage
of business intelligence tools for reports and queries. These tools are ideal
for municipalities to create and maintain their own queries and reports with
minimal support staff. Aztek clients can also develop their own enhancements
using the same development tools used to develop the base ATI products if so
desired. Frequently, municipalities create and maintain information and data
with limited support staff. ATI's software applications can accommodate
customer-developed enhancements better than alternative technologies. ATI
generates annual support fees at the rate of 10-15% of software license fees.
ATI applies these fees to research and development to support a gradual
introduction of new technologies for its clients.
CUSTOMER BASE
ATI's customer base consists of diverse small municipalities in various
parts of western Canada. It is not dependent on a few customers to generate
revenue but it intends to expand its customer base beyond its current level.
The typical client is a municipality with 10,000 to 250,000 residents. Even
though ATI works with municipal governments, its principal products and
services are not subject to governmental approval. The effects of existing or
probable existing governmental regulations is not expected to have a material
effect.
CURRENT BUSINESS STATUS
ATI has on-going contracts with municipal vendors that were initially
negotiated between ResponseWare and ResponseWare's customers. Following the
consolidation between ATI and ResponseWare, ATI incurred the responsibility
for performance of the duties of the licensor pursuant to the terms and
conditions set forth in the agreements. The contact permits the licensees the
nonexclusive use of ATI's software in exchange for payment of fees. The
license agreement also addresses delivery of the software, installation and
training, warranties, and confidentiality provisions prohibiting the user from
disclosing trade secrets to any third parties.
ATI's current products consisting solely of computer programs, were
developed by ResponseWare. Currently, these products are not being
manufactured because they cannot take advantage of personal computer
environments. However, ATI continues to provide support and maintenance for
the current product line. In addition, its 3-Tier client server architecture
is still in the developmental stage. Part of the proceeds of the attempted
$1 million offering mentioned above was to install a development team and
complete the product within eighteen months of completing the offering.
ATI's products are sold directly to the current customers. After the Merger,
Aztek will market and distribute the products through direct sales,
value-added resellers, telemarketing and advertising through print media.
ATI had been pursuing financing through an agreement with Equitrade
Securities Corporation ("Equitrade") for US$1,000,000.00 for new product
development and acquisitions,
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but has withdrawn the offering. The $1 million offering arose in the spring
of 1997 out of ATI's relationship with Select Capital Advisors ("Select").
ATI intended to effect the offering partially in the United States in a
transaction that would have been exempt from registration under Rule 504 of
Regulation D. While Select and ATI were working on the offering, ATI
voluntarily registered its shares under Section 12 of the Exchange Act.
Once the registration statement became effective, ATI had become subject to
the reporting requirements of the Exchange Act and was no longer eligible for
the Rule 504 exemption.
The offering has been delayed for several reasons. The process of
becoming a reporting company interrupted ATI's efforts to sell its shares in
the exempt transaction. Because Select was not registered as a broker-dealer
under the federal securities laws, ATI then entered into an underwriting
agreement with Equitrade. However, ATI's fundamentals were not strong and the
market for small business offerings has been weak in recent months. To date,
the offering has not materialized due to the delays, ATI's fundamentals, and
the weak market for small business offerings. After the Merger, Aztek will
continue trying to effect an offering for US$1 million.
OPERATING DIVISIONS
ATI has four operating divisions. Unless otherwise specified, the
description of the services and products are explained in the context of
their usage in various Canadian municipalities, even though ATI intends to
expand to the U.S. markets through the Merger. To date, ATI has no
contracts with U.S. based municipal or corporate customers. The business
activities of each division of ATI are set forth below.
BUSINESS SOLUTIONS DIVISION
The Business Solutions Division is responsible for development and
support of core business software products. Products include accounting
systems, payroll/human resource management systems, and specialized municipal
government systems such as utility billing, property taxation, building
permits, and tracking the issuance of various items for municipal
governments. This division maintains and supports the ResponseWare software
since they are all core business applications and is also responsible for
developing new products to replace ResponseWare products and other proprietary
software products that Aztek will inherit through future acquisitions. At
present, the Business Solutions Division generates over 90% of ATI's revenue.
MOBILE TECHNOLOGIES DIVISION
The Mobile Technologies Division focuses on software for workers in field
operations such as building code inspectors, parking and bylaws enforcement
officers and maintenance crews. Mobile technologies include handheld
computers, pen-based computers, bar code devices and wireless communications.
The division provides consulting and custom developed software on a time and
materials basis. No contracts for these services exist at this time although
ATI actively pursues opportunities. ATI intends to develop mobile work force
systems in the future to complement the new systems developed by the Business
Solutions Division. ATI has no
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completed products at this time. Funding for these products will come from
either cash flow or future investment financing.
ELECTRONIC COMMERCE DIVISION
ATI has pursued, and continues to pursue opportunities to develop
systems for electronic commerce using Internet and Electronic Data
Interchange ("EDI") technologies. To date, ATI has not secured contracts in
this area. ATI plans to enhance the capabilities of the existing and
future products from the Business Solutions Division to include support for
electronic commerce. For example, the Parking and Bylaw Enforcement system
could be enhanced to allow payments of fines on the Internet. Building
permits could be applied for and paid on the Internet. Funding for these
products will come from either cash flow or future investment financing.
ATI has not finalized the funding requirements.
PROFESSIONAL SERVICES DIVISION
The Professional Services Division is responsible for general consulting,
project management, and custom software development services. ATI markets
these services to its own clients that use products from the Business
Solutions Division. The division also pursues general consulting and software
development opportunities to customers that use products from the Business
Solutions Division but are not in ATI's client base, and similar opportunities
outside of its client base. At present, the Professional Services Division
generates less than 10% of ATI's revenues.
CURRENT STATUS OF ATII
On September 30, 1994, ATI acquired all of the issued and outstanding
shares of ResponseWare Corp. This acquisition allowed ATI to further
diversify its operations with the computer hardware, software and
telecommunications market to expand the existing forty-five (45) municipal
and private sector clients of ResponseWare. ResponseWare designed its
software primarily for use by small to medium-sized municipal governments
and corporations to meet their human resources and payroll applications.
In January 1995, ATI discontinued sales of existing ResponseWare computer
systems due to maintenance costs and the system's inability to take advantage
of personal computer environments. It is proceeding to rewrite its existing
municipal applications using client server and object oriented technologies
and has already completed the architectural design of the new software, but
still must complete the actual programming. Once the programming is complete,
ATI will have a finished product that it can market. Client server technology
refers to the relationship between two types of computers - a server computer
and a client computer. The server is a high-powered computer that stores both
software applications and files. The server can be a mainframe,
mini-computer, or a personal computer. The client computer is a personal
computer with software that handles functions such as the appearance on the
computer screen, sorting data, and performing calculations.
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In client server technology, the software runs on both the server and
client computers. Software on the server allows client computers to access
information, manages the client computers' access to information and sometimes
provides client computers access to applications on the server. Multiple
client computers can access the server at the same time. This technology
takes advantage of the power and flexibility of personal computers while
providing centralized control of data. The technology also allows a client
computer to pass on "heavy duty" computing tasks to the server. Object
oriented technology is a computer software programming technique supported by
a number of common programming technologies. The most common technology is
known as Java. The benefit of object oriented technology is increased
productivity through building programs by copying or modifying existing parts
and easier software maintenance.
ATI's products are based on a 3-Tier client server architecture. The
3-Tier architecture extends the client server concept such that a client
computer may access multiple servers simultaneously. A client computer may
access certain information from a corporate server, other information from a
departmental server, and integrate the information from both sources.
Customers use certain mouse and graphical user interface oriented
applications. A graphical user interface is a technology that gives software
programs a user-friendly appearance on the computer screen. An example is the
commonly used Windows operating system. A commonly known non-graphical user
interface is MS-DOS. The products are designed to operate as independent
systems or together as integrated solutions. They offer ease of use and
flexible configuration to meet customer demands and expectations.
Configuration refers to a specific combination of software programs contained
in a specific software application. The new products are designed to address
both public and private sector markets.
ATI's products are software applications commonly referred to as computer
programs. The programs are designed to execute tasks described by the name of
the program. The names of ATI's computer software programs are as follows:
General Accounting & Fund Accounting; Accounts Payable; Purchase Order
Control; Payroll; Cash Receipts, Job & Project Accounting; Budgeting;
Financial Reporting; Taxation; Personnel Data; Human Resource Management;
Property Information System; Street Guide; Geographic Information System
Interface; Facilities Booking; Parks and Recreation Management; Utility
Customer Information; Inspection Management; Permit Systems; Animal Licenses;
Business Licenses; Election Management; Parking Enforcement; Maintenance
Management; Request for Service; Voter Registration and Local Improvement. As
mentioned above, ATI is rewriting the software and has already finished the
architectural design. ATI may sell an individual product, "Payroll" for
example, as soon as the programming is complete.
(Continued on next page)
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<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
ATI
(C$)
1994 1995 1996 1997 1998 Nine months ended
March 31, 1999
<S> <C> <C> <C> <C> <C> <C>
NET SALES (OPERATING REV) 798,043 344,386 528,922 459,937 340,081 232,460
INCOME (LOSS) FROM OPERATIONS (868,728) (517,506) (219,474) (564,535) (365,426) (205,320)
INCOME (LOSS) FROM OPERATIONS/CS (.24) (.09) (.04) (.38) (.18) (.10)
TOTAL ASSETS 974,479 566,827 244,179 230,119 178,414 109,996
CURRENT LIABILITIES 927,235 819,823 299,045 547,238 524,252 582,621
LONG TERM OBLIGATIONS
- -LONG TERM DEBT 8,700 142,428 449,800 33,689 - -
- -CAPITAL LEASES 20,826 62,588 57,465 33,632 800 -
- -DUE RELATED PARTIES 74,000 - - - 132,707 189,054
TOTAL LIABILITIES 1,030,761 1,063,375 825,582 614,559 657,759 771,675
SHARE CAPITAL 3,011,330 3,011,330 3,154,130 3,909,000 4,179,522 4,179,522
DEFICIT (3,067,612) (3,507,878) (3,735,533) (4,293,440) (4,658,867) (4,841,201)
CASH DIVIDENDS/COMMON SHARE - - - - - -
AZTEK
($US)
1994 1995 1996 1997 1998 Nine months Ended
March 31, 1999
Total Assets 60,000 60,000
Total Liabilities 0 0
Share Capital 60,000 60,000
</TABLE>
Aztek has had no operations and therefore, has had no income or losses.
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SELECTED FINANCIAL DATA (continued)
<TABLE>
<CAPTION>
PRO FORMA
(Exchange Rate = US $1 = C $ 1.4813)
Aztek ATI Pro Forma
<S> <C> <C> <C>
Net Sales (Operating revenue) 229, 584 229,584
Income (Loss) from operations (246,909) (246,909)
Total assets 60,000 120,550 180,550
Current liabilities 354,224 354,224
Long term obligations
Capital leases 541 541
Due to related parties 89,666 89,666
Total liabilities 444,431 444,431
Share capital 60,000 2,824,001 2,84,001
Deficit (3,147,882) (3,147,992)
</TABLE>
DESCRIPTION OF PROPERTY
ATI's headquarters is located at 246 Lawrence Avenue, Kelowna, British
Columbia V1Y 6L3, Canada and consists of approximately 1,500 square feet. The
lease is month-to-month and ATI pays rent to a company controlled by the
spouse of an ATI director. ATI also leases 4,000 square feet of office space
at 6450 Roberts Street, Burnaby, British Columbia V5G 4EI, Canada.
LEGAL PROCEEDINGS
ATI is not a party to any legal proceedings.
(Continued on Following Page)
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MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
On September 12, 1980, ATI's Common Stock began trading on the Vancouver
Stock Exchange under the symbol CKY. On July 29, 1997, ATI obtained the
approval to trade on the OTC Bulletin Board under the symbol AZTKF.
Management decided to list ATI on the OTC Bulletin Board because of a
combination of the perceived prestige factor, the potential for a greater
investor base and the possibility of participation in a new market. The dual
listing on the Vancouver Stock Exchange and the OTC Bulletin Board allows
investors to trade the securities in Canada and the United States. With
respect to the OTC Bulletin Board, there is no established public trading
market for ATI's Common Stock notwithstanding limited or sporadic quotes.
The following table sets forth the high and low bid prices for each quarter
within the last two fiscal years. The prices are depicted in Canadian dollars.
Common Stock
Period Low Bid High Bid
Fiscal 1999
First Quarter 1.05 2.15
Second Quarter 0.62 1.35
Third Quarter .38 .52
Fiscal 1998
First Quarter $1.06 $2.45
Second Quarter .72 1.75
Third Quarter .75 1.26
Fourth Quarter .62 1.80
Fiscal 1997 $1.25 $1.80
ATI's stock was listed on the OTC Bulletin Board on September 30, 1997, at
US$1.50. The quotation reflects inter-dealer prices, without retail
mark-ups, mark-downs or commissions and may not represent an actual
transaction.
HOLDERS OF COMMON STOCK
On June 30, 1998, there were approximately 347 holders of record of ATI's
Common Stock. Some shares are held in trust by broker-dealers for the
shareholders of ATI's predecessor, Consolidated McKinney. Following the name
change and business reorganization, several shareholders failed to tender
their Consolidated McKinney stock certificates in exchange for ATI stock
certificates.
DIVIDENDS
ATI has declared no dividends, cash or otherwise, in the last five years
and does not plan to pay any dividends prior to the Merger.
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ATI MANAGEMENT'S DISCUSSION AND ANALYSIS
IN REVIEWING MANAGEMENT'S DISCUSSION AND ANALYSIS, THE READER SHOULD REFER TO
ATI'S FINANCIAL STATEMENTS AND THE ACCOMPANYING NOTES AT PAGE 76. THE
REFERENCES TO MONETARY UNITS OR DOLLARS ARE IN CANADIAN DOLLARS UNLESS OTHERWISE
SPECIFIED. THE FINANCIAL STATEMENTS FOR ATI ARE PREPARED IN ACCORDANCE WITH
CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. PROVISIONS FOR DIFFERENCES
IN REPORTING UNDER CANADA GAPP AND U.S. GAAP ARE PROVIDED FOR BELOW, IN THE
AUDITOR'S REPORT IN THE FINANCIAL STATEMENTS, AND IN NOTE 11 TO THE FINANCIAL
STATEMENTS.
TWELVE MONTHS ENDED JUNE 30, 1998 (THE "1998 PERIOD"),
COMPARED WITH THE TWELVE MONTHS ENDED JUNE 30, 1997 (THE "1997 PERIOD").
The 1998 period is defined as the fiscal year for ATI, which is July 1,
1997, to June 30, 1998.
The loss in the 1998 Period decreased to ($365,426) from ($557,906) in the
1997 Period. Loss per share decreased to ($.18) in the 1998 Period from a
loss of ($.38) in the 1997 Period. The 1997 period is July 1, 1996, to June
30, 1997.
REVENUES
ATI licenses software under non-cancelable license agreements, provides
maintenance services consisting of product support services and periodic
updates, and provides contracted training and consulting services. License
fee revenues are generally recognized when a non-cancelable license agreement
has been signed, the software product has been shipped, there are no
uncertainties surrounding product acceptance, there are no significant vendor
obligations, the fees are fixed and determinable, and collection is considered
probable. Revenues from maintenance services agreements are recognized
ratably over the agreement period, which in most instances is one year.
Revenues for training or consulting services are recognized as services are
performed. In multiple element arrangements, the revenue or fee is allocated
pro-rata to the various elements based upon the fair value of each of the
individual elements.
Net sales decreased $120,153 (26%) to $339,784 in the 1998 Period, from
$459,937 in the 1997 Period. In January 1995, ATI discontinued sales of
existing ResponseWare computer systems due to maintenance costs and the
system's inability to take advantage of personal computer environments.
Discontinuance of selling these systems caused the decline in sales. In the
1998 Period, the entire $340,081 in sales was attributed to maintenance and
customization services. ATI's cost of sales was $98,784 and the gross profit
was $241,297. In the 1997 Period $442,656 were attributed to maintenance and
customization services and $22,910 were attributed to new product sales. The
1997 gross margins were $393,249 for maintenance and customization and $2,043
for new product sales.
There was a reduction of $102, 575 in revenues generated by maintenance
and customization services from fiscal 1997 to fiscal 1998. This revenue
reduction resulted from two major factors. First, several clients have
decided with the approach of the new millennium to upgrade to new systems and
no longer require ATI support services. Second, clients are reluctant to do
further customization to systems that are aging and have instead opted to wait
for upgrades or new systems designed to take
41
<PAGE>
them into the new millennium.
Contractors' fees declined significantly due to ATI's discontinuance of
selling the ResponseWare software. With no software sales, ATI had no need
for employees and contractors to provide installation services. The reduction
also caused a decrease in customization services. Fees paid for contractors
in the 1998 Period were solely for maintenance services.
The maintenance cost is the expense incurred by ATI to support existing
ResponseWare Products. Even though ATI is not selling new ResponseWare
products, it continues to service, support, and develop product enhancements
(software upgrades) for the ResponseWare product line. The ResponseWare
products are software applications designed to address various financial and
operational needs of municipal governments such as general ledger and funding
accounting, accounts payable, purchase order control, payroll, budgeting,
human resource management and voter registration in Canada. ATI is
contractually obligated to provide maintenance services for the products
already sold. Limited support is provided for one-year terms provided
customers pay an annual fee for computer system maintenance. Customers may
reinstate lapsed support contracts by paying the annual support fee plus an
additional charge.
Despite the outdated nature of the ResponseWare products, they are reliable
and ATI has a stable customer base that continues to pay the annual support
fees. For those customers who are not parties to an annual service contract,
ATI provides support and is compensated on a time and material basis. In the
last three years, ATI has experienced no reduction in the number of licensees
that have maintenance contracts. In 1996, 66 2/3 % of outstanding licenses
were supported by maintenance contracts. In 1997 and 1998, 69.2% of
outstanding licenses were supported by maintenance contracts. The percentage
increase resulted from an 11% reduction in the number of outstanding licenses
that were not supported by maintenance contracts.
Support and maintenance of ResponseWare products presently generate 100% of
ATI's revenues. The revenues generated from the maintenance software are
substantially less than the revenue formerly generated by the sale of the
software. Management's decision to cease the sales of new ResponseWare
systems resulted in the loss of 26% or $120,153 of ATI's revenue for the last
fiscal year. ATI has purposefully and substantially reduced its efforts to
market its current software because new software is under current development.
Moreover, the additional expenses of developing the new systems
continue to be substantial relative to the current revenue generated by ATI.
In the 1998 Period, research and development costs for new product
development was $354,069. ATI has budgeted $1 million over the next
eighteen months for research and development, of which $500,000 will come
from the proceeds of the anticipated offering, and $500,000 will come from
future revenues.
An inability to produce the new systems could cause a further and
substantial decline in revenues. Possible difficulties in hiring and retaining
highly qualified software developers could cause delays or prevent ATI from
developing a commercially marketable product. Should ATI be unable to rewrite
the ResponseWare software, customers may continue paying software maintenance
fees for increasingly outdated software, or they may continue using the
existing software without maintaining
42
<PAGE>
their systems. Customers may also replace the ResponseWare software with
products from other vendors. ATI has also incurred additional expenses
including but not limited to legal and accounting fees in connection with the
listing on the OTC Bulletin Board. As discussed above, Aztek, as the
surviving entity of the Merger, anticipates that sales will increase after
the Merger once the new product development is completed and after the
pending acquisitions of small vendors.
OPERATING INCOME
ATI experienced a decrease in operating expenses. Advertising and
promotion expenses decreased to $4,382 (84%) for the 1998 Period from $27,770
for the 1997 Period. Prior to the 1997 Period, ATI did not advertise in the
U.S. markets. Management decided to advertise its services and products in
the U.S. print media causing a substantial increase in the advertising
expense in the 1997 Period. Subsequently, ATI's operating capital did not
allow for continued advertising. In the 1998 Period, ATI discontinued its
product advertising in all publications causing the substantial decrease in
advertising expense. Filing and transfer fees decreased by $34,285 (82%) for
the 1998 Period from $41,641 for the 1997 Period. The 1997 figure was
extraordinary due to one-time fees paid to Standard and Poor's and the
Vancouver Stock Exchange.
Selling and marketing expenses decreased by $60,873 (98%) in the 1998
Period, from $61,914 for the 1997 Period. In 1997, ATI had attempted to
market a product called Cognos, an accounting software program, and thereby
incurred additional selling and marketing expenses. ATI reduced office and
administration expenses by $19,217 (45%) for the 1998 Period, from $42,823 for
the 1997 Period. The 1997 figure resulted from a reinstatement of trading on
the Vancouver Stock Exchange.
Amortization expenses decreased 50% in the 1998 Period as compared to
the 1997 Period. Amortization in the 1997 Period was abnormally high due to
an error in estimate resulting in $24,000 of amortization that ATI should
have claimed in prior years. Moreover, the 1997 Period was the final year
ATI amortized $8,000 of goodwill. Thus, the decrease reflects a return to
normal amortization costs.
Management fees increased by $108,467 (119%) to $199,589 during the 1998
Period. The increased management fees resulted from a change in accounting for
the work of ATI's managers. Previously, certain managers were on ATI's
payroll. The expenses for paying these employees were accounted for as
"wages, salaries and benefits." In the 1998 Period, these expenses were
transferred to the account for management fees, and were paid to independent
contractors. The transfer between accounts caused the increase in management
fees and part of the reduction in the "wages, salaries and benefits" account.
The total reduction in "wages, salaries and benefits" was $152,147 (51%) from
$298,082 during the 1997 Period. The balance of the reduction was from
layoffs. When ATI discontinued development of its new systems, some employees
were laid off due to a shortage of funds with which to pay those employees.
As part of its efforts to make the existence of ATI known to the investing
public, ATI paid $32,309 to investor relations firms. These firms undertook
to disseminate information about ATI persons and entities in the stock
brokerage and investment communities including investment management firms
brokers, for the purpose of increasing awareness about ATI. ATI incurred the
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<PAGE>
major portion of the expense during the 1998 Period. The contracts with the
investment relations firms expired during the 1998 Period.
Differences in Canadian GAAP and U.S. GAAP impact ATI's net loss, loss
per share and retained earnings as follows:
<TABLE>
<CAPTION>
1998 1997
Under Under Under Under
Canadian GAAP U.S. GAAP Canadian GAAP U.S. GAAP
<S> <C> <C> <C> <C>
Net loss $365,426 $395,426 $557,907 $598,607
Loss per share $.18 $.19 $.38 $.41
Retained earnings $(4,293,441) $(4,729,567) $(3,735,534) $(4,334,141)
</TABLE>
The differences result from the US GAAP requirement that ATI include
compensation costs for the fair value of stock options issued to employees.
During the year ending June 30, 1998, the company issued options to an
employee to purchase 40,000 shares at $1.40 per share. Under U.S. GAAP, ATI
incurred a charge to operations representing the difference between the market
price of the stock options and the exercise price of the options. The charge
was $30,000 in 1998 and $40,700 in 1997. The following table itemizes the
charges and their effect on net loss, loss per share and ATI's deficit.
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
NET INCOME
Net loss for the year - based on Canadian GAAP $ (365,426) $ (557,907)
Charge to operations representing the difference
between the market price of the stock options and
the exercise price of the options (30,000) (40,700)
--------- ---------
Net loss for the year - based on U.S. GAAP $ (395,426) $ (598,607)
========= =========
LOSS PER SHARE
Net loss per common share - based on U.S. GAAP $ ( 0.19) $ ( 0.41)
<CAPTION>
RETAINED EARNINGS
The cumulative effect of the application of U.S. GAAP on the deficit of the
company would be:
<S> <C> <C>
Deficit beginning of year-based on Canadian GAAP $ (4,293,441) $ (3,735,534)
Charge to operations representing the difference
between the market price of the stock options and
the exercise price of the options for previous years (40,700) -
Deficit beginning of year - based on U.S. GAAP (4,334,141) (3,735,534)
Net loss for the year - based on U.S. GAAP (395,426) (598,607)
----------- -----------
Deficit end of year - based on U.S. GAAP $ (4,729,567) $ (4,334,141)
=========== ===========
</TABLE>
44
<PAGE>
OTHER INCOME (DEDUCTIONS) AND TAXES
The total interest ATI received decreased to $297 (95%) for the 1998
Period, from $5,629 for the 1997 Period. This is the interest charged on the
outstanding accounts receivable. ATI was more aggressive in collecting
receivables. ATI has losses available for income tax purposes totaling,
approximately $1,252,000. The losses can be used to reduce taxable income of
future years. The tax losses have not been used for the 1998 Period or the
1997 Period.
ASSETS AND LIABILITIES
Cash and receivables changes resulted from several transactions. Though
ATI ceased selling computer systems, it continues to provide support
services for the systems it has already sold. These support services are
covered by contracts with the owners of the systems. The contracts run on a
renewable one year basis. The renewal dates for all of the support service
contracts are dispersed throughout a year and unless modified or canceled
continue from year to year. In most cases, the maintenance contracts are
invoiced in advance to cover the ensuing year. In some cases, however, the
support services are invoiced on a quarterly basis for the ensuing quarter.
During the 1998 Period, ATI became more aggressive in terms of collecting on
receivables in that it applied strict enforcement of demanding full payment by
the first day of the maintenance period.
At the request of several cities and municipalities, ATI began delivering
invoices two months in advance of the new service periods. Cities and
municipalities need approximately two months to get departmental approval to
make payments. Advance invoicing provides cities and municipalities the
necessary documentation to secure payment approval in time for a new
maintenance period. Prior to receiving the payment, ATI carries the amount
due on the contract as a receivable due in sixty days. However, the work does
not begin until ATI actually receives payment. The change to the sixty-day
cycle contributed to the increase in the accounts receivable balance at the
end of the 1998 Period.
Prepaid expenses included software consultants' fees, insurance premiums,
storage, etc. In several cases, ATI prepays expenses by 12 months. ATI's
major prepaid expense, insurance, begins in February.
The 1,038% increase in accounts payable to officers and directors and the
increase in loans to related parties resulted from several transactions. See
"Certain Relationships and Related Transactions" at page 67.
Since the 1997 Period, ATI's current liability for royalties increased by
$30,000 (30%) to $100,000 in the 1998 Period. When ATI acquired ResponseWare,
it assumed ResponseWare's debt to International Business Machines ("IBM").
IBM financed the cost of ResponseWare installing new systems. The debt is
$100,000 payable over ten months. ATI was scheduled to begin paying the debt
in December 1997. As of September 1997 the total amount of the debt was due
within one year. At
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<PAGE>
the present time, ATI is in default on repayment and is negotiating a revised
payment schedule. Management does not expect the default to have an adverse
effect on ATI's financial position or results of future operations.
ATI did not incur any additional royalties in the period. Rather, the
$30,000 that caused the increase had been carried as a long-term debt in the
1997 Period. ATI is presently in default on repayment and is currently
negotiating a revised payment schedule. ATI does not believe the debt will
have an adverse effect on ATI's financial position or the results of future
operations. IBM has agreed to wait until Aztek completes an equity offering
to collect royalties due. ATI has a good working relationship with IBM as
shown by IBM's willingness to enter into a licensing agreement for new
software in July 1998.
ATI's long-term obligation under capital lease was reduced by C$32,832
(98%) to $800 in the 1998 Period. The change came as a result of C$33,095
becoming a current liability for the 1998 Period.
ATI reduced its current portion of long-term debt by $136,241 (58%) by
repaying its debt to ATI's president's spouse. The principal on the debt was
C$150,000 and with interest, the debt was $166,243. ATI satisfied the debt by
issuing 120,465 shares at C$1.38. The Vancouver Stock Exchange approved the
transaction on July 30, 1997, and ATI paid the debt on July 30, 1997. ATI
recognized July 30, 1997, as the day of settlement.
The amount due to related parties increased $129,018 to $132,707
(3,497%) from $3,689 the previous year. The amount due represents loans made
by Mr. Mike Sintichakis and members of his family to ATI to maintain levels
of working capital sufficient for ATI to continue operating. The loans are
not repayable prior to July 1999. For specific information, see "Certain
Relationships and Related Transactions" at page 67.
LIQUIDITY AND CAPITAL RESOURCES
In the 1998 Period, ATI used $212,823 for operating activities. In
addition to the net loss in the 1998 Period (365,426), the loss per share
decreased to (0.18) from (0.38). In the 1998 Period, the end of year deficit
increased to (4,658,867) compared to ($4,293,440) for the 1997 Period.
ATI made a commitment to spend $75,000 to $100,000 for capital
expenditures in connection with research and development of its new products
for the 1998 Period. Actual expenditures totaled $61,235.80. Of this
amount, ATI spent $20,533 for development of the Year 2000 tool. These
expenditures are accounted for as part of wages, salaries and benefits. The
products are expected to be completed and commercially available within 18
months subject to additional financing. ATI plans to operate exclusively
through the support and maintenance of its existing software programs. There
are 45 municipal and private sector customers using the existing programs.
As of June 30, 1998, ATI had a working capital balance of ($451,698). ATI
expects to use approximately $400,000 in working capital over the next twelve
months. Therefore, ATI has to either raise additional capital in an offering
or reduce expenses to keep in line with its current revenues.
46
<PAGE>
The first component of the external funding via Equitrade Securities
Corp. has not materialized to date, and Aztek cannot be certain such funding
will become available after the Merger. ATI estimates the anticipated cost
of the acquisitions to be less than $200,000. ATI and the companies to be
acquired have agreed, in principal, to the acquisitions. But, the specific
terms or purchase price amounts have yet to be negotiated. In the absence of
the equity funding through external funding sources, ATI will not be able to
complete two of the three acquisitions.
NINE MONTHS ENDED MARCH 31, 1999,
COMPARED WITH THE
NINE MONTHS ENDED MARCH 31, 1998
MANAGEMENT DISCUSSION
Net sales decreased to $232,460, down from $250,415 for the same interim
period in fiscal 1998. Revenues consisted of annual software maintenance
charges, sales of Y2K software, general services to clients, and professional
services to customize client software. $190 of additional revenues came from
a Company Guaranteed Investment Certificate. ATI, or Aztek as its successor,
will continue selling its Y2K products to municipalities and corporations
through June 30, 1999, and make the product available for free on July 1,
1999.
ATI has continued suffering losses as a result of discontinuing its old
software product line but as discussed under Aztek's "Plan of Operation" at
page 26, a new suite of software products is being developed. ATI will
continue generating revenues from maintenance services and sales of its Y2K
application.
COST OF SALES
The cost of sales increased from $82,319 during the first three quarters
of the 1998 Period to $98,110 for the first three quarters of the 1999
Period. The increase resulted primarily from the change in contractor fees
which increased from $11,612 in the 1998 interim period to $57,420 at the end
of the 1998 Period $37,900 in the 1999 interim period. The fluctuations
resulted from changes in personnel associated with Y2K products. ATI incurred
the additional contractor fees by assigning additional personnel to work on
its Y2K issues with respect to products. This increase in cost was partially
offset by the decrease in wages salaries and benefits.
OPERATING EXPENSES
ATI reduced operating costs to $339,860 compared to $582,744 during the
1998 interim period and eliminated consulting expenses that amounted to
$37,187 in the 1998 interim period. Management fees went from $122,091 for
nine months ended March 31, 1998, to 89,200 for the interim period in 1999.
ATI had hired consultants to perform early design work on new systems but put
the work on hold when management decided to merge ATI with Aztek. These
changes in work assignments caused continuous changes in personnel and the
personnel changes cause the variations in consulting expenses and management
fees.
47
<PAGE>
Amortization was reduced from $49,351 in the 1998 interim period to
$19,044 in the 1999 interim period. During interim 1998, ATI amortized a
computer lease agreement with IBM. Management replaced the computer with a
cheaper model bringing the payments down from a $19,173 lease in 1998 to a
$2,487 rental in 1999. The remaining amortization in the first nine months
of 1998 stemmed from goodwill recorded when ATI purchased Responseware.
That goodwill was fully amortized by the end of fiscal 1998.
LIQUIDITY AND CAPITAL RESOURCES
ATI has met its cash needs from a combination of sales revenues and by
borrowing money from related parties and making adjustments in its
operations. Aztek, as ATI's successor, will continue to finance its
operations over the next twelve months from these sources. As reflected in
the interim cash flow statements, loans from related parties decreased in the
1999 interim period to $56,347 compared to $109,681 in the 1998 interim
period. After the Merger, Aztek intends to engage an investment banker to
raise at least $1 million in an offering to meet is cash requirements, reduce
the time for paying accounts payable, and reduce overall debt. If the
offering attempt is unsuccessful, management intends to free up additional
cash by trying to revise its loan arrangements with related parties to change
the debt from short term debt to long term debt.
The company eased some of its cash requirements by making more purchases
on credit, causing the increase in accounts payable of $134,885 as shown on
the interim cash flow statement. In years past, management paid accounts
payable within 30 days but in the 1999 interim period, liquidity problems
caused payment schedules to extend to sixty days. Accounts payable always
carried interest charges. The increase in accounts payable and increase in
the time individual payables have been outstanding brought along a
corresponding rise in interest expense. As a result, for the 1999 interim
period, management began separating the interest expense associated with
accounts payable and including it in calculating the general interest expense
line item. This change caused the interest expense to move from $1,561 in the
1998 interim period to $13,662 in the 1999 interim period.
While ATI has had negative cash flow from operations, it has reduced the
outflow from $128,963 in the 1998 interim period to $101,831 in the 1999
interim period. This change resulted from the reduction in the rental costs
relating to ATI's Burnaby office. Management anticipates that cash flow from
operating activities will remain steady over the next six months and also
anticipates borrowing additional cash from related parties on an as needed
basis.
ATI's capital resources other than revenues and an ability to borrow from
related parties are nonexistent. Shareholder deficit increased from
$4,625,760 in the 1998 interim period to $4,841,201 in the 1999 interim period
resulting solely from losses incurred over the prior year. $47,558 of cash
came into ATI from the disposition of equipment that ATI leased. ATI has no
present long term capital commitments or other payments due beyond the coming
twelve months with the exception of the IBM debt discussed above.
</R?
48
<PAGE>
TWELVE MONTHS ENDED JUNE 30, 1997 (THE "1997 PERIOD"),
COMPARED WITH TWELVE MONTHS ENDED JUNE 30, 1996 (THE "1996 PERIOD").
The 1997 period is defined as the fiscal year for ATI which is July 1,1996, to
June 30, 1997.
RESULTS OF OPERATIONS
The loss in 1997 Period increased to ($557,906) from ($227,656) in the
1996 Period. Loss per share increased to ($.38) in the 1997 Period from a
loss of ($.04) in the 1996 Period. The 1996 Period is defined as July 1,
1995, to June 30, 1996.
REVENUES
Net sales decreased $68,985 (13%) to $459,937 in the 1997 Period, from
$528,922 in the 1996 Period. Sales declined because ATI discontinued the
sales of existing ResponseWare computer systems. Even though ATI was not
selling new ResponseWare products, it continued to service, support, and
develop product enhancements (software upgrades) for the ResponseWare product
line. Aztek was contractually obligated to provide maintenance services for
the products already sold. Customers pay an annual fee for computer system
maintenance. Despite the outdated nature of the ResponseWare products, they
are reliable and Aztek has a stable customer base that continued to pay the
annual support fees. For those customers who were not parties to an annual
service contract, ATI provided support where it was compensated on a time and
material basis. Approximately, 90% of ATI's revenue came from support and
maintenance of the ResponseWare products. Management's decision to cease the
sales of new ResponseWare systems resulted in the loss of 13% or $68,895 of
ATI's revenue for the last fiscal year. Moreover, the additional expenses of
developing the new systems continued to be substantial relative to the revenue
generated by ATI at that time. ATI also incurred additional expenses including
but not limited to legal and accounting in connection with the listing on the
over-the-counter bulletin board.
OPERATING INCOME
Although the revenues continued to decrease, ATI experienced an increase
in operating expenses. Advertising and promotion expenses increased to $27,769
(950%) for the 1997 Period from $1,285 for the 1996 Period. In the past ATI
did not advertise in the U.S. markets. Management decided to advertise its
services and products in the U.S. print media thereby incurring a substantial
increase in advertising expenses. Filing and transfer fees increased by
$37,611 (968%) for the 1997 Period from $4,030 for the 1996 Period for fees
paid to Standard and Poor's and the Vancouver Stock Exchange.
Selling and marketing expenses increased by $55,329 (890%) in the 1997
Period, from $6,585 for the 1996 Period. ATI attempted to market Cognos and
incurred additional selling and marketing expenses. The product was marketed
as a complement to accounting systems to allow users to easily view and analyze
budgets and forecasts without the need for custom programming. ATI spent
$15,024 on Cognos and only sold the product to two customers. The sales
generated revenues of only $10,455.93 and ATI discontinued the product.
49
<PAGE>
The activities related to the reinstatement of trading on the Vancouver
Stock Exchange resulted in an increase in office and administration expenses:
$31,998 (75%) for the 1997 Period, from $10,824 for the 1996 Period. Wages,
salaries and benefits increased $170,432 (57%) to $298,083 for the 1997
Period, from $127,651 for the 1996 Period. The wages, salaries and benefits
increased due to payment of employees in connection with the development of
new software programs.
OTHER INCOME (DEDUCTIONS) AND TAXES
The total interest received by ATI decreased to $5,629 (70%) for the 1997
Period, from $19,079 for the 1996 Period. This is the interest charged on the
outstanding accounts and ATI was more aggressive collecting amounts to which
it was due. ATI had losses available for income tax purposes totaling,
approximately $1,343,000. The losses can be used to reduce taxable income of
future years. The tax losses were not used for the 1997 Period or the 1996
Period.
LIQUIDITY AND CAPITAL RESOURCES
In the 1997 Period, $491,653 was used for operating activities of ATI.
(Due to a clerical error, ATI reported in its registration statement on Form
SB-10 that $1,024,472 was used during this period.) In addition to the net
loss in the 1997 Period ($557,906), the loss per share increased to ($.38) from
($.04). In the 1997 Period, the end of year deficit increased to ($4,293,440)
compared to ($3,735,534) for the 1996 Period.
Financing activities in the 1997 Period provided cash of $754,870
through the issuance of share capital in the amount of 1,042,130 shares. In
the 1997 Period ATI received approval from the Vancouver Stock Exchange to
convert the total loan amount of $166,243 into 120,465 shares of ATI's Common
Stock. The loan was incurred to provide the necessary capital to acquire a
small computer company in Canada. The shares have been issued and the debt
has been fully satisfied. ATI did not incur any other long-term debt in the
1997 Period. As of September 30, 1997, ATI's long term debt was $13,196.
ATI had also incurred expenses of $105,000 for legal and accounting fees
related to registration and the sale of its shares, listing on the OTC
Bulletin Board, and other offering costs.
EXTERNAL FUNDING
Aztek expected to benefit from an ATI private offering under Regulation
D. The net proceeds from the offering were expected to be $1,000,000. ATI's
agreement with Equitrade Securities expired on August 1, 1998. Thereafter,
ATI derived its capital from maintenance and customization on its existing
contracts. Revenues generated by these contracts were sufficient to cover
ATI's immediate operating expenses and did not permit any reduction in accrued
long-term liabilities. ATI continued meeting its monthly cash flow
requirements.
50
<PAGE>
DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNDING AND FINANCIAL DISCLOSURE
ATI has not had any changes in or disagreements with its accountants.
VOTING AND MANAGEMENT INFORMATION
DATE, TIME AND PLACE INFORMATION
The meeting of security holders of ATI Common Stock will be on _______,
1999, in the offices of Stephen K. Winters Law Corporation, 1010 Burrard
Building, 1030 West Georgia St., Vancouver, B.C. V6E 2Y3, Canada at 9:00 a.m.
The address of ATI is as follows: #5-246 Lawrence Ave., Kelowna, British
Columbia, V1Y 6L3. On June 30, 1998, the shareholders and directors of Aztek
held their annual and special meetings and unanimously approved the Merger.
The approximate date on which the proxy statement and form of proxy are
first to be sent or given to security holders is ___________, 1999.
Proposals of stockholders intended to be presented at the 1999 annual meeting
of Stockholders of Aztek must be received by Aztek no later than _________, in
order to be included in the proxy statement and form of proxy relating to such
annual meeting. After ________, a notice of a shareholder proposal submitted
to Aztek outside the processes of Rule 14a-8 of the Exchange Act shall be
considered untimely.
REVOCABILITY OF PROXY
If the enclosed Proxy is executed and returned, it will be voted on the
proposals as indicated by the shareholder. The Proxy may be revoked by the
shareholder at any time prior to its use by notice in writing to the Secretary
of ATI, by executing a later dated proxy and delivering it to the ATI prior to
the meeting or by voting in person at the meeting.
DISSENTERS' RIGHTS OF APPRAISAL
Appendix A to this Joint Proxy Statement-Prospectus is a copy of the
British Columbia statute governing the rights of shareholders who dissent
from a vote in favor of the Merger. The procedural steps are set forth in the
legal opinion of Mr. Steven K. Winters attached hereto as Annex B (to be read
in conjunction with the full text of the Company Act and is qualified in its
entirety by reference to the statute. Any shareholder of ATI on ___________,
1999, (the record date for purposes of determining who is entitled to notice
of and to vote at the Annual and Extraordinary Meeting of Shareholders of
Aztek) who objects to the Merger may dissent from the Merger. Any such
shareholder must demand in writing prior to the shareholders' meeting that, if
the Merger is consummated, ATI pay to him or her in cash the value of his or
her present common stock. The dissenting shareholder must deliver the demand
to ATI's registered office within 14 days after the date of this Joint
Proxy-Statement Prospectus. The dissenting shareholder should deliver the
demand to Mr. Mike Sintichakis, Aztek Technologies Inc., Suite #5-246 Lawrence
Ave. Kelowna, B.C. V1Y 6L3. On delivery of the notice and the accompanying
share certificates, the dissenting shareholder is bound to sell those shares
to ATI and ATI will purchase the shares.
51
<PAGE>
Because shares that are not voted count as a vote in favor of the
Merger, once a shareholder dissents, the shareholder must then vote against
the Merger to perfect the dissenter's rights. As described in the section
"Voting Procedures" below, failure to return a properly executed proxy card
or to vote in person will have the same effect as a vote in favor of the
Merger. Such failure will constitute a waiver of dissenters' rights.
Moreover, beneficial shareholders whose names are not on Aztek's register of
members cannot give a notice of dissent and trigger the appraisal remedy.
If the shares are held by a broker, the broker's name being listed on ATI's
register of members, the broker may dissent with respect to the shares it
holds as the registered owner, if the broker lists such shares on the notice
of dissent.
The cash value to which such shareholder will be entitled is the value
agreed upon or court determined, in the manner set forth below ("Dissenter's
Value"). ATI has no obligation to institute any court proceeding to have a
court determine the value of the shares. A shareholder who elects to have a
court determine the value of the shares must initiate the court proceeding.
If a shareholder applies to a court to determine the value of the shares, the
shareholder will bear his or her owns costs of such application. This
statutory dissenter's right to payment of the Dissenter's Value of his or her
common stock is mandated by section 207 of the British Columbia Company Act
(the "Company Act") a copy of which is attached to this Joint Proxy
Statement-Prospectus.
A notice of dissent ceases to be effective if the dissenting member
consents to or votes in favor of the resolution of Aztek to which the
dissent relates, unless the consent or vote is given solely as a proxy holder
for a person whose proxy required an affirmative vote.
ATI will provide the funds necessary to pay any holders of Common Stock
who perfect their statutory dissenter's rights. The price to be paid to
dissenting shareholders is the fair value as of the day before the resolution
is passed including any appreciation or depreciation in anticipation of the
vote, and all dissenting shareholders shall be paid the same price. This
method for determining the value of the shares is proscribed by section 207 of
the British Columbia Company Act.
Any such shareholder who contemplates the exercise of such dissenter's
rights is urged to review carefully the provisions of the Company Act, the
British Columbia law, particularly the procedural steps required to perfect
the right to Dissenter's Value. The rights of dissenting shareholders to
Dissenter's Value will be lost if the procedural requirements of the Company
Act are not fully and precisely satisfied. If the right to Dissenter's Value
is lost, the shareholder will be entitled to receive for each share of ATI
Common Stock the number of shares of Aztek's Common Stock as provided in the
Merger Agreement.
PERSONS MAKING THE SOLICITATION
This proxy statement is furnished in connection with the solicitation by
the Board of Directors of Aztek Technologies Inc. ("ATI") of proxies for use at
the Extraordinary Meeting of Stockholders of Aztek to be held on __________
1998, and any adjournments thereof.
There were outstanding at the close of business on __________, 1999, the
record date for
52
<PAGE>
determination of the stockholders of ATI entitled to notice of
and to vote at the Special Meeting, 2,051,109 shares of Common Stock of ATI
entitled to one vote per share. Only stockholders of record on __________,
1999, are entitled to notice of and to vote at the meeting. The proxy does
not affect the right to vote in person at the meeting, and may be revoked at
any time prior to the voting thereof. The presence of two persons entitled to
vote will constitute a quorum. The affirmative vote of the holders of shares
present or represented by proxy at the meeting must exceed the negative votes
cast for the adoption of the proposals described in this Proxy Statement.
The Board of Directors knows of no other matters likely to be brought
before the Special Meeting other than those mentioned above. However, if any
other matters not now known or determined, properly come before the meeting
or any adjournments thereof, the persons named in the enclosed form of proxy
will vote such proxy in accordance with their best judgment in such matters
pursuant to discretionary authority granted in the proxy.
Stockholders are urged to sign the accompanying form of proxy, solicited on
behalf of the Board of Directors of ATI, and to return it at once in the
envelope provided for that purpose. Proxies will be voted in accordance with
the stockholders directions. If no direction is given, proxies will be voted
in accordance with the recommendations of the Board of Directors set forth in
this Proxy Statement. A stockholder who wishes to designate a person or
persons to act as his or her proxy at the meeting, other than the proxies
designated by the Board of Directors, may strike out the names appearing on
the enclosed form of proxy, insert the name of any other such person or
person, sign the form and transmit it directly to such other designated person
or persons for use at the meeting.
The expense of the Board of Directors' proxy solicitation will be borne by
ATI. In addition to the solicitation of proxies by use of the mails, some of
the officers, directors and regular employees of ATI (none of whom will
receive additional compensation therefor) may solicit proxies by telephone,
telegraph or personal interview. ATI will, upon request, reimburse nominees,
custodians, and fiduciaries for the expenses in forwarding proxy material to
their principals.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Certain members of ATI's management and its Board of Directors may be
deemed to have certain interests in the Merger in addition to their interests
as stockholders of ATI generally. ATI's Board of Directors was aware of these
interests and considered them, among other matters, in unanimously approving
the Merger Agreement.
OFFICERS AND BOARD OF DIRECTORS. Mike Sintichakis, Edson Ng, and Eileen
Keogh constitute the entire Board of Directors of ATI and are also directors of
Aztek. The sole remaining director of Aztek is Nick Sintichakis who is the
son of Mike Sintichakis.
COMMON SHARES. In June 1998, the directors and officers named in the
preceding paragraph purchased 97,975 shares of the common stock of Aztek at
US$ .6124 per share, the market price of ATI's common stock on that date.
Aztek has no existing business at this time and will begin transacting
business when it assumes the operations of ATI upon consummation of the
Merger. Since ATI will cease to exist upon completion of the Merger, the net
result will be that the above-named
53
<PAGE>
directors will each own a slightly larger percentage of the combined company
than they previously owned in ATI.
INDEMNIFICATION. To the extent permitted by law, the Articles of
Incorporation of Aztek and ATI contain an indemnification clause such that
Aztek or ATI will indemnify all directors and officers of Aztek or ATI if any
such directors or officers are named as a party or parties to a lawsuit as a
result of serving as officers or directors. For limitations on
indemnification, see "Disclosure of Commission Position on Indemnification for
Securities Act Liabilities at page 24.
VOTING AND SECURITIES AND PRINCIPAL HOLDERS THEREOF
ATI's Shareholders of record at the close of business on __________,
1999 will be entitled to vote on all matters. On the record date ATI had
2,051,109 shares of ATI Common Stock outstanding. The holders of ATI Common
Stock are entitled to one vote per share. ATI has no class of voting
securities outstanding other than the ATI Common Stock.
SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT
(Pre-Merger)
SECURITY OWNERSHIP OF ATI SHARES
BY CERTAIN BENEFICIAL SHAREHOLDERS
The following table discloses the details of shares held by Beneficial
Shareholders of ATI prior to the Merger with Aztek.
<TABLE>
<CAPTION>
Title of Class Name and Address of Amount and Nature of Percentage of
Beneficial Shareholder Beneficial Owner Class
<C> <C> <C> <C>
Voting Common Mike Sintichakis 462,190 23%
1802 Lipsett Crt.
Kelowna, BC V1V 1X3
Voting Common Maria Sintichakis 255,928 12%
1802 Lipsett Crt.
Kelowna, BC V1V 1X3
Voting Common Nick Sintichakis 74,500 3%
1802 Lipsett Crt
Kelowna, B.C. V1V 1X3
Voting Common Tony Pantazopoulos 21,333 1%
1807 Lipsett Court
Kelowna, BC V1V 1X3
Voting Common Edson Ng 104,700 5%
623 Alpine Court
North Vancouver, BC V7R 2L7
<CAPTION>
<S> <C> <C>
Beneficial Shareholders as Group 918,651 45%
</TABLE>
Maria Sintichakis is Mr. Sintichakis' wife. Mr. Sintichakis does not
exercise shared voting or dispositive powers with Mrs. Sintichakis.
SECURITY OWNERSHIP OF AZTEK SHARES
BY CERTAIN BENEFICIAL SHAREHOLDERS
The following table discloses the details of shares held by Beneficial
Shareholders of Aztek prior to the Merger with ATI.
<TABLE>
<CAPTION>
Title of Class Name and Address of Amount and Nature of Percentage of
Beneficial Owner Beneficial Owner Class
<S> <C> <C> <C>
Voting Common Mike Sintichakis 39,190 40%
1802 Lipsett Crt.
Kelowna, BC V1V 1X3
Voting Common Nick Sintichakis 22,044 23%
1802 Lipsett Crt.
Kelowna, BC V1V 1X3
Voting Common Eileen Keogh 13,063 13%
508-2012 Fullerton Ave.
Vancouver, BC V7P 3E3
Voting Common Edson Ng 22,861 24%
623 Alpine Court
North Vancouver, BC V7R 2L7
<CAPTION>
<S> <C> <C>
Beneficial Shareholders as Group 97,158 99%
</TABLE>
(Continued on Next Page)
55
<PAGE>
SECURITY OWNERSHIP OF ATI SHARES BY MANAGEMENT
The following table discloses the details of shares held by ATI's
management prior to the Merger with Aztek.
<TABLE>
<CAPTION>
Title of Class Name and Address Amount and Nature of Percentage of
of Beneficial Owner of Beneficial Owner Class
<S> <C> <C> <C>
Voting Common Mike Sintichakis 462,190 23%
1802 Lipsett Crt.
Kelowna, BC V1V 1X3
Voting Common Eileen Keogh 37,000 2%
508-2012 Fullerton Ave.
Vancouver, BC V7P 3E3
Voting Common Edson Ng 104,700 5%
623 Alpine Court
North Vancouver, BC V7R 2L7
<CAPTION>
<S> <C> <C>
Directors and Management as a Group 603,890 30%
</TABLE>
See notes to Security Ownership of ATI shares of Certain Beneficial
Shareholders.
SECURITY OWNERSHIP OF AZTEK SHARES BY MANAGEMENT
The following table discloses the details of shares held by the Aztek's
Management and prior to the Merger with ATI.
<TABLE>
<CAPTION>
Title of Class Name and Address Amount and Nature Percentage of
of Beneficial Owner of Beneficial Owner Class
<S> <C> <C> <C>
Voting Common Mike Sintichakis 39,190 40%
1802 Lipsett Crt.
Kelowna, BC V1V 1X3
Voting Common Nick Sintichakis 22,044 23%
1802 Lipsett Crt.
Kelowna, BC V1V 1X3
Voting Common Eileen Keogh 13,063 13%
508-2012 Fullerton Ave.
Vancouver, BC V7P 3E3
Voting Common Edson Ng 22,861 23%
623 Alpine Court
North Vancouver, BC V7R 2L7
<CAPTION>
<S> <C> <C>
Directors and Management as a Group 97,158 99%
</TABLE>
56
<PAGE>
PRO FORMA SECURITY OWNERSHIP
CERTAIN BENEFICIAL SHAREHOLDERS
The following table discloses the details of shares held by Beneficial
Shareholders of Aztek following the Merger. This table should be studied in
conjunction with the foregoing tables showing the details of shares held by
Beneficial Shareholders in both ATI and Aztek prior to the Merger.
<TABLE>
<CAPTION>
(1) (2) (3) (4)
Title of Class Name and Address of Amount and Nature of Percentage of
Beneficial Owner Beneficial Owner Class
<S> <C> <C> <C>
Voting Common Mike Sintichakis 501,380 23.33%
1802 Lipsett Crt.
Kelowna, BC V1V 1X3
Voting Common Maria Sintichakis 255,928 11.91%
1802 Lipsett Crt.
Kelowna, BC V1V 1X3
Voting Common Nick Sintichakis 96,544 4.49%
1802 Lipsett Crt.
Kelowna, BC V1V 1X3
Voting Common Eileen Keogh 50,063 2.33%
508-2012 Fullerton Ave.
Vancouver, BC V7P 3E3
Voting Common Edson Ng 127,561 5.94%
623 Alpine Court
North Vancouver, BC V7R 2L7
</TABLE>
(Continued on Next Page)
57
<PAGE>
PRO FORMA SECURITY OWNERSHIP OF MANAGEMENT
The following table discloses the details of shares held by Aztek's
management following the Merger. This table should be studied in conjunction
with the foregoing tables showing the details of shares held by management in
both ATI (the company to be acquired) and Aztek prior to the Merger.
<TABLE>
<CAPTION>
(1) (2) (3) (4)
Title of Class Name and Address of Amount and Nature of Percentage of
Beneficial Owner Beneficial Owner Class
<S> <C> <C> <C>
Voting Common Mike Sintichakis 501,380 23.33%
1802 Lipsett Crt.
Kelowna, BC V1V 1X3
Voting Common Nick Sintichakis 96,544 4.49%
1802 Lipsett Crt.
Kelowna, BC V1V 1X3
Voting Common Eileen Keogh 50,063 2.33%
508-2012 Fullerton Ave.
Vancouver, BC V7P 3E3
Voting Common Edson Ng 127,561 5.94%
623 Alpine Court
North Vancouver, BC V7R 2L7
<CAPTION>
<S> <C> <C>
Directors and Management as a Group 775,548 36.09%
</TABLE>
See notes to Pro Forma Security Ownership of Certain Beneficial
Shareholders.
VOTING PROCEDURES
Two persons present and entitled to vote constitute a quorum at any general
shareholders' meeting. A member may by proxy appoint a proxy holder to vote
for him or her on a poll. Every shareholder who is present in person and
entitled to vote at that occurrence shall have one vote and on a poll every
member present in person or represented by proxy or other proper authority
shall have one vote for each share of which he or she is the registered
holder. ATI has no class of voting securities outstanding other than its
Common Stock. Adoption of the Merger and the Merger Agreement will require
that the votes cast favoring the Merger must exceed the votes cast opposing
the Merger. The failure to return a properly executed proxy card or to vote
in person ("abstention") at the Special Meeting will have the same effect as a
vote in favor of the Merger. Similarly, "broker non-votes" (referring to
instances where a broker or other nominee physically indicates on the proxy
that, because it has not received instructions from beneficial owners, it does
not have discretionary authority as to certain shares of ATI's Common Stock to
vote on the proposal) will have the same effect as a vote in favor of the
Merger. The proxies named in the enclosed proxy card may, at the direction of
the Board, vote to adjourn or postpone the Special Meeting to another time or
place for the purpose of soliciting additional proxies necessary for approval
of a proposal or otherwise.
58
<PAGE>
If the accompanying proxy card is properly executed and returned to ATI in
time to be voted at the Special Meeting, the shares represented thereby will
be voted in accordance with the instructions marked thereon. EXECUTED BUT
UNMARKED PROXIES WILL BE VOTED FOR APPROVAL OF THE MERGER AND THE MERGER
AGREEMENT. Except for procedural matters incident to the conduct of the
Special Meeting, the Board of Directors of ATI does not know of any matters
other than those described in the Notice of Special Meeting that are to come
before the Special Meeting. If any other matters are properly brought before
the Special Meeting, the persons named in the ATI proxy will vote the shares
represented by such proxy on such matters as determined by a majority of ATI's
Board of Directors.
Directors, Executive Officers, Promoters and
Control Persons of the Surviving or Acquiring Entity
Name Age Position Director Since
Mike Sintichakis 60 Director August 1994
President
Nick Sintichakis 33 Director July 1994
Secretary
Treasurer
Edson Ng 34 Director July 1998
Eileen Keogh 51 Director July 1998
Each director serves for a term of one year and is elected at the annual
meeting of shareholders. Aztek's officers are appointed by the Board of
Directors and hold office at the discretion of the Board. Upon the effective
date of the Merger, the officers and directors will resign from their
positions as officer and directors of ATI and ATI will cease to exist.
Neither Aztek nor ATI will incur any liability as a result of the
resignations. Of Aztek's four directors, three are the sole directors of
ATI. The chart below presents ATI's directors and officers before the Merger
and Aztek's directors and officers after the Merger.
[The following organizational charts appear as graphics in the prospectus]
ATI
Mike Sintichakis Edson Ng Eileen Keogh
Director Director Director
President VP Operations Research and Development
Aztek (post-Merger)
Mike Sintichakis Nick Sintichakis Edson Ng Eileen Keogh
Director Director Director Director
President Secretary
Treasurer
59
<PAGE>
Mr. Nick Sintichakis is Mike Sintichakis's son and Mike Sintichakis and
Edson Ng own a controlling interest in ATI.
Mike Sintichakis. Mr. Sintichakis has over 27 years of experience as an
entrepreneur and professional business manager. He has owned and operated
seven corporations and presided as president of three other corporations. He
received an Industrial Electrician Diploma from Greece in 1958. He has since
specialized in acquiring, restructuring and growing small and mid-sized
businesses in the hospitality, consumer services, automotive, leisure and
manufacturing industries. He recently managed over 450 employees and
consistently guided companies successfully through tremendous revenue growth.
He has served as a director and president of ATI since 1991. Mr. Sintichakis
has also served as a director and president of Aztek Inc. since its inception
in 1994. From 1995 to 1997, he served as a director and president of ATI's
wholly-owned subsidiary, ResponseWare Corp. From 1993 to 1994, he served as
director and president of ATI's wholly-owned subsidiary Nu-Crest Sportswear
Inc., a designer of customer embroidered and silk-screen sportswear.
Edson Ng. Mr. Ng has earned a B.Sc. Degree in Mechanical Engineering
from the University of Alberta. He is a registered Professional Engineer
(P.Eng.) and a Certified Management Consultant. His career includes 7 years
of systems engineering, marketing, consulting experience with IBM Canada Ltd.
, and 4 years as founder and president of Advance Mobility Systems
Integration Inc. where he served from 1992 to 1995. Advance Mobility Systems
Integration was a consulting and computer integration business. Mr. Ng has
been involved with various business ventures throughout his career. He has
been with ATI since 1995 and currently serves as a director and vice
president of operations.
Eileen Keogh. Ms. Keogh received a B.A. degree in Mathematics from
Dickinson College, Pennsylvania. She has over 29 years of consulting
experience in information systems design, development, and implementation.
Throughout her career in the computer industry she has served as Director of
Development, Systems Architect, Project Manager, Team Leader, Data and Press
Modeler, Methodologies Expert, Technical Designer, Systems and Applications
Programmer/analyst, Trainer and Mentor. Ms. Keogh is an expert in
client/server and object oriented software design and development on a variety
of platforms. She gained seven years of software development experience with
IBM Canada Ltd., IBM UK and IBM Corporation in New York. Her consulting
projects include working for Prologic Computer Company from 1994 to 1995.
Prologic is a designer of senior systems. From 1991 to 1995, she was
self-employed as a computer consultant. In that capacity, she provided
services to Solutions for Government, Fletcher Challenge, Alcan Canada,
Insurance Bureau of Canada, Toronto Stock Exchange and the Bank of Montreal.
She has been with ATI since 1995 and she serves as a director. She also is in
charge of research and development.
Nick Sintichakis. Mr. Nick Sintichakis is the Secretary of Aztek Inc. He
presently serves as President of Christopher's Steak & Seafood Restaurant and
has held that position for the past nine years. He was also a director of
Yamas Taverna Inc., a restaurant in Kelowna, British Columbia for over five
years. For ten years he was the manager of Caribou Restaurant. He currently
spends about eight to ten hours per week as Secretary of Aztek.
60
<PAGE>
EXECUTIVE COMPENSATION
Executive Compensation of the Directors and Executive Officers of ATI
The members of the Board of Directors of Aztek and the officers of Aztek
presently do not receive compensation for serving as directors and officers.
Upon consummation of the Merger, Aztek will assume the obligations of ATI for
executive compensation. The table below sets forth the compensation of the
key executives of ATI.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Long Term
Annual Compensation Awards
Securities
Underlying
Options/SARs
Year Salary (1) Bonus (#)(3)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mike Sintichakis, 1998 $70,872 0 0
President, Director 1997 30,000 0 90,000 options
Edson Ng 1998 59,169 0 0
Vice President of 1997 60,000 0 40,000 options
Operations
Eileen Keogh (2) 1998 20,750 0 0
Director, R &D 1997 60,000 0 40,000 options
</TABLE>
(1) The salary is reflected in Canadian dollars and was paid in Canadian
dollars.
(2) Compensation paid to Ms. Keogh was paid to her through her company
as an independent contractor.
(3) All outstanding options expired on March 20, 1999, and none were
exercised.
Retirement plan. ATI does not have a retirement plan at present, but
Aztek intends to implement one after the Merger once it becomes profitable.
Employment contracts, Termination of Employment and Change in Control
Agreements. At present, ATI has no employment contract with any of its
employees.
Compensation Committee, Interlocks and Insider Participation. Neither
ATI or Aztek has a compensation committee; rather the Boards of Directors
perform the functions that would otherwise be performed by a compensation
committee.
61
<PAGE>
Executive Compensation of the Directors and Executive Officers of Aztek
The members of the Board of Directors of Aztek and the officers of Aztek
presently do not receive compensation for serving as directors and officers.
Upon consummation of the Merger, Aztek will assume the obligations of ATI for
executive compensation. The table below sets forth the compensation of the
key executives of Aztek.
<TABLE>
<CAPTION>
Summary Compensation Table for Aztek
Annual Compensation
<S> <C> <C> <C>
Name and principal position Year Salary (1) Bonus
Mike Sintichakis, CEO 1998 $0 0
1997 0 0
Edson Ng, Director 1998 *
1997 *
Eileen Keogh 1998 *
1997 *
Nick Sintichakis, Director 1998 0 0
1997 0 0
</TABLE>
*Edson Ng and Eileen Keogh were first elected to the Board of Directors on
June 30, 1998, to serve as directors for the ensuing year.
Aztek has not paid any compensation to its officers or directors since
Aztek's inception.
(Continued on Next Page)
62
<PAGE>
Aggregated Option/SAR Exercises in
Last Fiscal Year and FY-End Option/SAR Values
Number of Securities
Underlying Unexercised
Options/SARs at
FY-End (#)
Name Exercisable/Unexercisable
- -------------------------------------------------------------
Mike Sintichakis 90,000
Edson Ng 40,000
Eileen Keogh 40,000
All options expired on March 20, 1999, and none were exercised.
<TABLE>
<CAPTION>
Long Term Incentive Plan
Number of Shares Performance or
Units or Other Rights (#) Other Period Until Threshold Maximum
Name Maturation or Payout ($ or #) ($ or #)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mike Sintichakis 354,000 109,740 1 354,000
</TABLE>
Mr. Mike Sintichakis currently has 354,000 shares of ATI Common Stock in
escrow to be released as ATI generates positive cash flow from operations. The
shares will be released to Mr. Sintichakis at the rate of one share for every
C$.31 of cash flow generated by ATI. Mr. Sintichakis purchased the shares for
C$.01 per share and he enjoys full voting rights attributable to the shares.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Nick Sintichakis, a director of Aztek, is the son of Mike Sintichakis, the
president and a director of Aztek. No other family relationships exist among
directors, executive officers or persons nominated or chosen by Aztek to
become officers or executive officers and no such
relationships exist among the directors and officers of ATI.
ATI engaged in several transactions with its directors and a director's
immediate family member causing an increase in current liabilities. The
directors and an individual director's family member had a material interest.
These changes caused the increase in accounts payable to directors and loans
to related parties. Mike Sintichakis has not received his full salary for the
1998 Period. ATI accrued Mr. Sintichakis' salary as an accounts payable in
the amount of $45,871.29 and actually paid Mr. Sintichakis $6,270.97. Messrs.
Sintichakis and Edson Ng, and Ms. Eileen Keogh have made several payments on
ATI's behalf totaling approximately $39,353.59. ATI has repaid $14,914.41.
These transactions caused the entire increase in accounts payable to directors
from the 1997 Period to the 1998 Period.
The increase in long term debt to related parties resulted from a series
of transactions. ATI leases space from Mike Sintichakis' wife, Maria
Sintichakis. To date, ATI has accrued its rental payments totaling $13,500.
For more information see "Description of Property" at page 39. Mrs.
63
<PAGE>
Sintichakis has also made several payments to vendors on ATI's behalf and she
has loaned money directly to ATI so that it could meet its expenses. The
total amount due to Mrs. Sintichakis is $62,171.50. Mike Sintichakis is due
$5,607.13 for similar types of advances to ATI.
Christopher's Restaurant ("Christopher's") is an establishment owned by
Mrs. Maria Sintichakis. From November 1997 to May 1998, Christopher's loaned
ATI approximately $21,682.50 so that ATI could meet its working capital needs.
Mike Sintichakis' son-in-law, Tony Pantazopoulus loaned ATI $42,998.74 from
November 1997 to May 1998 so that ATI could meet its working capital
requirements. ATI issues interest free demand notes for the loans it receives
from the Affiliates. However, the notes provide that no payments are due
prior to July 1999.
With respect to ATI, in 1995 the spouse of the president of ATI loaned
approximately $150,000 (plus interest of $16,241) for a sum total of $166,241
to ATI. ATI used the loan proceeds to acquire a small Canadian computer
vendor. ATI sought the approval of the Vancouver Stock Exchange to issue
120,465 shares of common stock at $1.38 CND to satisfy the then existing debt.
The Vancouver Stock Exchange granted approval on July 30, 1997 and the debt
was satisfied on July 30, 1997.
TRANSACTIONS WITH PROMOTERS
The promoters of Aztek are the affiliates: Mike Sintichakis, Nick
Sintichakis, Daunna Potts, Eileen Keogh and Edson Ng. The following table
sets forth the shares they received.
<TABLE>
<CAPTION>
Name and Address of Promoter Amount of Shares
- ---------------------------------------------------------------
<S> <C>
Mike Sintichakis
1802 Lipsett Crt.
Kelowna, BC V1V 1X3 39,190
Nick Sintichakis
1802 Lipsett Crt.
Kelowna, BC V1V 1X3 22,044
Daunna Potts
882 Toovey Rd.
Kelowna, BC 817
Eileen Keogh
508-2012 Fullerton Ave.
Vancouver, BC V7P 3E3 13,063
Edson Ng
623 Alpine Court
North Vancouver, BC V7R 2L7 22,861
</TABLE>
The affiliates purchased the Common Shares, par value $.001, at
US $.6124 per share.
64
<PAGE>
Initially, they purchased an aggregate of 1 million shares at $.05 per
share, and one million bonus shares at $.01 per share for an aggregate of
$60,000. The bonus shares were in escrow pending Aztek's meeting certain
performance objectives. Due to regulatory concerns that the share purchases
and this Merger would have resulted in diluting present ATI shareholders,
Aztek rescinded the transactions. The affiliates returned the bonus shares on
February 16, 1999, they returned the $.05 shares on May 5, 1999, and Aztek
issued 97,975 shares at $.6124 per share in exchange for the $60,000
investment. In anticipation of the Merger, the directors set the price equal
to the market price of ATI's shares that same day. The $60,000 will allow
Aztek to cover anticipated expenses such as legal and accounting fees. Should
the market value of the shares rise, the holders stand to gain a substantial
profit by selling the shares.
(Continued on Next Page)
65
<PAGE>
AZTEK, INC.
Financial Statements
For the years ended June 30, 1996, 1997 and 1998
Contents
Auditors' Report 67
Financial Statements
Balance Sheet 68
Statements of Cash Flow 69
Notes to Financial Statements 70
66
<PAGE>
Auditor's Report
[Letterhead of BDO Dunwoody]
Auditor's Report
To the Shareholders of Aztek, Inc.
We have audited the balance sheet of Aztek, Inc. as at June 30, 1998,1997 and
1996 and the statements of changes in financial position for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at June 30, 1998, 1997 and
1996 and the results of its operations and the changes in its financial
position for the years then ended in accordance with generally accepted
accounting principles.
"BDO Dunwoody "
Chartered Accountants
Penticton, British Columbia
July 23, 1998
67
<PAGE>
<TABLE>
<CAPTION>
Aztek, Inc.
Balance Sheet
(U.S. Dollars)
June 30 1998 1997 1996
<S> <C> <C> <C>
Assets
Current
Cash $ 60,000 $ 0 $ 0
====== = =
Shareholders' Equity
Share capital (Note 2) $ 60,000 $ 0 $ 0
====== = =
</TABLE>
Approved on behalf of the Board:
/s/ Mike Sintichakis, Director
68
<PAGE>
<TABLE>
<CAPTION>
Aztek, Inc.
Statements of Cash Flow
(U.S. Dollars)
For the year ended June 30 1998 1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash provided by (used in)
Financing activities
Issuance of share capital $ 60,000 $ - $ -
------ ----- -----
Increase in cash 60,000 - -
Cash, beginning of year - - -
------ ----- -----
Cash, end of year $ 60,000 $ - $ -
====== ===== =====
</TABLE>
69
<PAGE>
Aztek, Inc.
Notes to Financial Statements
(U.S. Dollars)
June 30, 1998, 1997 and 1996
1. Nature of Business
The company was incorporated under the laws of the state of Nevada on August
19, 1994 and has not carried on any activities since incorporation.
2. Share Capital
Authorized
100,000,000 common shares with a par value of $0.001. During the year ended
June 30, 1998 the articles of incorporation were amended to increase the
authorized share capital to 100,000,000 common shares from 25,000 common
shares.
<TABLE>
<CAPTION>
1998 1997 1996
Number of Amount Number of Amount Number of Amount
Shares Shares Shares
<S> <C> <C> <C> <C> <C> <C>
Issued and fully paid
Balance
Beginning
of year - $ - - $ - - $ -
Issued for cash
Private
Placement 2,000,000 60,000 - - - -
Balance
end of year 2,000,000 $ 60,000 - - - -
--------- -------- ------ ------ ------ ------
Subscribed and unpaid
Private
Placement 25,000 25,000 25,000 25,000 25,000 25,000
--------- -------- ------ ------ ------ ------
2,025,000 85,000 25,000 25,000 25,000 25,000
Share subscriptions receivable
25,000 25,000 25,000 25,000 25,000 25,000
--------- -------- ------ ------- ------
2,000,000 $ 60,000 0 $ 0 0 $ 0
========= ======== ====== ======= ====== =======
</TABLE>
70
<PAGE>
Aztek, Inc.
Notes to Financial Statements
(U.S. Dollars)
June 30, 1998, 1997 and 1996
2. Share Capital - Continued
(a) Escrow Shares- The issued share capital includes 1,000,000 escrow shares
(1997 and 1996-nil). These shares will be released from escrow to a maximum
number of 20% per year of the original number at the rate of 1 share for the
following accumulated working capital, as defined in the agreement;
Year one $0.05 per share of working capital
Year two $0.10 per share of working capital
Year three $0.20 per share of working capital
Year four $0.30 per share of working capital
Year five $0.40 per share of working capital
Theses escrow shares expire June 12, 2003 and any shares remaining in
escrow at that date will be cancelled.
71
<PAGE>
AZTEK, INC.
Interim Financial Statements
(unaudited)
For the period ended March 31, 1999
Contents
Balance Sheet 73
Statements of Cash Flow 73
Notes to Financial Statements 74
72
<PAGE>
<TABLE>
<CAPTION>
Aztek, Inc.
Interim Balance Sheet
(U.S. Dollars)
As at March 31 1999 1998
<S> <C> <C>
Assets
Current
Cash $ 60,000 $ -
------------ -------
Shareholders' Equity
Share capital (Note 2) $ 60,000 $ -
============ =======
</TABLE>
Approved on behalf of the Board:
____"Mike Sintichakis"________
Director
<TABLE>
<CAPTION>
Aztek, Inc.
Interim Statements of Cash Flow
(U.S. Dollars)
For the Nine Months Ended March 31 1999 1998
<S> <C> <C>
Cash provided by (used in)
Financing activities
Issuance of share capital $ 0 $ 0
------------ -------
Increase in cash 0 0
Cash, beginning of period $ 60,000 0
------------ -------
Cash, end of period $ 60,000 $ 0
============ =======
</TABLE>
73
<PAGE>
Aztek, Inc.
Notes to Financial Statements
(U.S. Dollars)
March 31, 1999
1. Nature of Business
The company was incorporated under the laws of the state of Nevada on August
19, 1994 and has not carried on any activities since incorporation.
2. Share Capital
Authorized
100,000,000 common shares with a par value of $0.001. During the year ended
June 30, 1998 the articles of incorporation were amended to increase the
authorized share capital to 100,000,000 common shares from 25,000 common
shares.
<TABLE>
<CAPTION>
1999 1998
Number of Amount Number of Amount
Shares Shares
<S> <C> <C> <C> <C>
Issued and fully paid
Balance, beginning of period 2,000,000 $ 60,000 0 $ 0
Cancelled and returned to treasury (2,000,000) (60,000) 0 0
Private Placement, issued for cash 97,975 60,000 0 0
----------- ------------ ------ --------
Balance, end of period 97,975 60,000 0 0
----------- ------------ ------ --------
Subscribed and unpaid
Balance, beginning and end of period 25,000 25,000 25,000 25,000
----------- ------------ ------ --------
Total Issued and subscribed 122,975 85,000 25,000 25,000
Less Shares Subscribed and Unpaid (25,000) (25,000) (25,000) (25,000)
----------- ------------ --------
Net Share Capital 97,975 $ 60,000 0 $ 0
=========== ============ ======== ========
</TABLE>
74
<PAGE>
3. Merger Transaction
Aztek Inc. was formed by Aztek Technologies Inc. (ATI), a Canadian
corporation, to be a wholly-owned subsidiary of ATI. ATI subscribed for
shares of Aztek but never paid for the shares (the subscribed and unpaid
shares referred to in Note 2). Aztek lay dormant until 1998 when ATI's
management decided use Aztek as a vehicle to change ATI's domicile by merging
ATI into Aztek in a one-for-one stock exchange.
In June 1998, prior to the merger of ATI with Aztek, the management and
directors of ATI subscribed for and paid for 1,000,000 shares of Aztek at
$0.05 per share and a further 1,000,000 shares of Aztek at $0.01 per share.
Subsequent to that date, as a result of discussion between the management and
directors and the legal counsel for both companies, the 2,000,000 shares were
returned to the treasury of Aztek and the management and directors subscribed
for 97,975 new common shares at $0.6124 per share.
Management's reasons for merging ATI into Aztek and making ATI an American
corporation center around improving ATI's position for growth and expansion.
Aztek, though dormant for five years, will acquire an operating entity and
become an active corporation owning all of ATI's assets and receiving all of
ATI's revenues, but also assuming ATI's liabilities and operating expenses.
Having operated ATI as a company that was strapped for cash, management
believes the surviving company will attract more investment capital as it
grows. Investors tend to be more cautious with respect to investing in
foreign companies partly because they have less access to information and
because such foreign companies may be subject to less stringent accounting
rules. The surviving company should boost investor confidence partly because
it will be subject to U.S. accounting procedures. After the merger, Aztek
will have its shares traded only on the OTC Bulletin Board versus ATI's
presently listing its shares on the Vancouver Stock Exchange and the Bulletin
Board. After the merger, the operating company will no longer be subject to
different trading rules requirements.
The merger will be accounted for as a purchase. The following table sets
forth the ownership structure of ATI and Aztek before the merger, and Aztek
after the merger.
<TABLE>
<CAPTION>
No. of Shares
Shareholder No. of ATI Shares % No. of Aztek Shares % Held After Merger %
<S> <C> <C> <C> <C> <C> <C>
Total Issued
& Outstanding 2,051,109 100% 97,975 100% 2,149,084 100%
Mike Sintichakis 462,190 23 39,190 40 501,380 23.33
Nick Sintichakis 74,500 4 22,044 23 96,544 4.49
Daunna Potts 0 0 817 1 817 0.04
Eileen Keogh 37,000 2 13,063 13 50,063 2.33
Edson Ng 104,700 5 22,861 24 127,561 5.94
Maria Sintichakis 255,928 12 0 0 255,928 11.91
Tony Pantazopoulos 21,333 1 0 0 21,333 0.99
Non-affiliates 1,095,458 53 0 0 1,095,458 50.97
</TABLE>
75
<PAGE>
AZTEK TECHNOLOGIES INC.
Consolidated Financial Statements
For the years ended June 30, 1998 and 1997
Contents
Auditors' Report 77
Consolidated Financial Statements
Consolidated Balance Sheets 78
Consolidated Statements of Income (Loss) and Deficit 79
Consolidated Statements of Cash Flow 80
Summary of Significant Accounting Policies 81
Notes to Consolidated Financial Statements 83
76
<PAGE>
[LETTERHEAD OF BDO DUNWOODY]
Auditor's Report
To the Shareholders of
Aztek Technologies Inc.
We have audited the consolidated balance sheets of Aztek Technologies Inc. as
at June 30, 1998 and 1997 and the consolidated statements of operations and
deficit and changes in financial position for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at June 30, 1998 and 1997
and the results of its operations and the changes in its financial position
for the years then ended in accordance with generally accepted accounting
principles. As required by the British Columbia Companies Act we report that,
in our opinion, these principles have been applied on a consistent basis.
"BDO Dunwoody "
Chartered Accountants
Penticton, British Columbia
July 10, 1998
Canada - United States Reporting Differences
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by conditions and events that cast substantial doubt
on the company's ability to continue as a going concern, such as those
described in Note 1 to the financial statements. Our report to the
shareholders dated July 10, 1998 is expressed in accordance with Canadian
reporting standards which do not permit a reference to such events and
conditions in the auditor's report when these are adequately disclosed in the
financial statements.
"BDO Dunwoody "
Chartered Accountants
Penticton, British Columbia
July 10, 1998
77
<PAGE>
<TABLE>
<CAPTION>
Aztek Technologies Inc.
Consolidated Balance Sheets
June 30 1998 1997
<S> <C> <C>
Assets
Current
Cash $ 2,957 $ 20,232
Accounts receivable 67,693 56,642
Prepaid expenses 1,904 1,536
------ ------
72,554 78,410
Capital Assets (Note 2) 105,860 151,292
Goodwill (Note 3) - 417
------- -------
$ 178,414 $ 230,119
======= =======
<CAPTION>
<S> <C> <C>
Liabilities and Shareholders' Deficiency
Current
Accounts payable and accrued liabilities - trade $ 222,326 $ 122,971
Accounts payable and accrued liabilities
- officers and directors 64,840 5,693
Deferred revenue 103,991 138,781
Current portion of amounts due to related parties - 166,241
Current portion of royalties payable 100,000 70,000
Current portion of obligation under capital lease 33,095 43,553
------- -------
524,252 547,239
Due to related parties (Note 4) 132,707 3,689
Royalties payable (Note 5) - 30,000
Obligation under capital lease (Note 6) 800 33,632
------- -------
657,759 614,560
------- -------
Shareholders' deficiency
Share capital (Note 7)
Authorized
100,000,000 common shares without par value
Issued
2,051,109 common shares (1997 - 1,904,244) 4,179,522 3,909,000
Deficit (4,658,867) (4,293,441)
----------- -----------
(479,345) (384,441)
----------- -----------
$ 178,414 $ 230,119
=========== ===========
</TABLE>
Approved on behalf of the Board:
Mike Sintichakis, Director
Edson, NG, Director
78
<PAGE>
Aztek Technologies Inc.
Consolidated Statements of Income (Loss) and Deficit
For the years ended June 30 1998 1997
Revenue
Maintenance and customization services $ 340,081 $ 442,656
Product sales - 22,910
------- -------
340,081 465,566
Cost of revenue
Contractor fees 13,935 49,407
Product - 20,867
Telephone 4,673 10,133
Travel - 4,618
Wages, salaries and benefits 80,176 99,301
------- -------
98,784 184,326
------- -------
Gross profit 241,297 281,240
Selling and administration expenses
Advertising and promotion 4,382 27,770
Amortization 40,310 81,160
Contractors fees 43,485 102,145
Equipment leases 12,213 11,609
Filing and transfer fees 7,356 41,641
Interest on long-term debt 28,307 34,493
Investor relations 32,309 6,000
Management fees 199,589 91,122
Office and administration 23,606 42,823
Professional fees 48,004 60,835
Rent and property taxes 53,055 52,277
Selling and marketing 1,041 41,047
Telephone 19,031 23,928
Travel 5,227 3,541
Utilities 23,049 20,975
Wages, salaries and benefits 65,759 198,781
------- -------
606,723 840,147
------- -------
Loss from operations (365,426) (558,907)
Deferred income taxes (recovery) - (1,000)
--------- ---------
Net loss for the year (365,426) (557,907)
Deficit, beginning of year (4,293,441) (3,735,534)
----------- -----------
Deficit, end of year $ (4,658,867) $ (4,293,441)
=========== ===========
Weighted average number of shares outstanding 1,534,974 1,468,176
=========== ============
Loss per share, basic $( 0.18) $( 0.38)
=========== ============
79
<PAGE>
Aztek Technologies Inc.
Consolidated Statements of Cash Flow
For the years ended June 30 1998 1997
Cash provided by (used in)
Operating activities
Net loss for the year $ (365,426) $ (557,907)
Items not involving cash
Amortization 40,310 81,160
Deferred income taxes (recovery) - (1,000)
--------- ---------
(325,116) (477,747)
========= =========
Decrease in deferred revenue - non-current - (19,272)
Changes in non-cash working capital balances
Accounts receivable (11,051) (2,130)
Prepaid expenses (368) (96)
Accounts payable 99,355 (8,733)
Due to officer 59,147 5,332
Deferred revenue (34,790) 16,129
-------- ---------
(212,823) (491,853)
--------- ---------
Financing activities
Advances from related parties 222,098 -
Repayments to related parties (259,321) (184,539)
Capital lease repayments (43,290) (34,290)
Increase in capital lease obligation - 20,682
Issuance of share capital 270,522 754,870
--------- ---------
190,009 556,723
--------- ---------
Investing activities
Acquisition of capital assets (866) (57,271)
Proceeds on disposal of capital assets 6,405 -
--------- --------
5,539 (57,271)
--------- --------
Increase (decrease) in cash (17,275) 7,599
Cash, beginning of year 20,232 12,633
--------- --------
Cash, end of year $ 2,957 $ 20,232
========= ========
80
<PAGE>
Aztek Technologies Inc.
Summary of Significant Accounting Policies
June 30, 1998 and 1997
BASIS OF CONSILIDATION
These consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries, S.T.A. North America Technologies Inc. and
ResponseWare Corp.
USE OF ESTIMATES
The consolidated financial statements of the corporation have been prepared by
management in accordance with generally accepted accounting principals in
Canada. The preparation of financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates. The
financial statements have, in management's opinion, been properly prepared
using careful judgment within reasonable limits of materiality and within the
framework of the accounting policies summarized below.
CAPITAL ASSETS AND AMORTIZATION
Capital assets are recorded at cost. Amortization based on their estimated
useful lives is as follows:
Computer hardware - 30% diminishing balance basis
Purchased Computer software - 30% diminishing balance basis
Furniture and equipment - 20% diminishing balance basis
Software license - 33% straight-line basis
Leasehold improvements are recorded at cost and are amortized using the
straight-line method over a period of five years.
ASSETS UNDER CAPITAL LEASE
Assets under capital lease are recorded at cost. Amortization based on the
estimated useful life of the asset is as follows:
Computer hardware - 20% straight-line basis
GOODWILL
Goodwill is recorded at cost. Amortization is provided as follows:
Goodwill - 50% straight-line basis
FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, accounts receivable,
accounts payable and accrued liabilities, amounts due to related parties,
royalties payable, and obligation under capital leases. Unless otherwise
noted, it is management's opinion that the Company is not exposed to
significant interest, currency or credit risks arising from these financial
instruments. The fair value of these financial instruments approximate their
carrying values, unless otherwise noted.
81
<PAGE>
Aztek Technologies Inc.
Summary of Significant Accounting Policies
June 30, 1998 and 1997
CAPITALIZED COSTS
Costs for developing computer software are capitalized when technological
feasibility has been established for the computer software product.
Capitalization of computer software costs is discontinued when the product is
available for general release to customers and such costs are amortized on a
product-by-product basis over the estimated lives of the products. There are
no capitalized costs in the accompanying financial statements.
Purchased computer software, which includes programs used for company
management and software development are capitalized and amortized as
disclosed in the capital assets and amortization signficant accounting
policy note.
REVENUE RECOGNIITION
The Company's revenue is derived from the following sources: 1) Licenses
software under non-cancelable license agreements; 2) provides maintenance
services (consisting of product support services and periodic updates); and 3)
provides contracted training and consulting services.
License fee revenues are recognized when a noncancellable license agreement
has been signed, the software product has been shipped, there are no
uncertainties surrounding product acceptance, there are no significant vendor
obligations, the fees are fixed and determinable, and collection is considered
probable.
Revenues from maintenance service agreements are recognized ratably over the
agreement period, which in most instances is one year.
Revenues for training and consulting services are recognized as services are
performed.
In multiple-element arrangements, the revenue or fee is allocated pro-rata to
the various elements based upon the fair value of each of the individual
elements.
DEFERRED REVENUE
Deferred revenue is comprised of deferrals for license fees, maintenance and
other services.
DEFERRED INCOME TAXES
Deferred income taxes arise from the difference between amortization for
accounting purposes and capital cost allowance for income tax purposes.
PER SHARE DATA
Share amounts for all periods presented reflect restatement for the
five-for-one stock split in December 1996. Basic loss per share is computed
using the weighted average number of common shares outstanding during the
respective years. Diluted loss per share has not been calculated due to the
anti-dilutive effect.
82
<PAGE>
Aztek Technologies Inc.
Notes to Consolidated Financial Statements
June 30, 1998 and 1997
1. Operations
The Company has continued to incur operating losses and continues to have a
working capital deficiency as at June 30, 1998. The future ability of the
Company to realize its assets at the recorded amounts and discharge its
liabilities in the normal course of business will depend upon its ability to
obtain further financing and to attain profitable operations. It is not
possible at this time to predict with assurance the outcome of these matters.
Management intends to raise equity that would allow the Company to proceed
with its business plan.
The company's primary business is that of developing and selling computer
software and computer systems and providing support services for the company's
computer software.
2. Capital Assets
<TABLE>
<CAPTION>
1998 1997
Accumulated Accumulated
Cost Amortization Cost Amortization
<S> <C> <C> <C> <C>
Computer hardware $ 93,884 $ 78,845 $ 93,017 $ 72,771
Purchased Computer software 102,601 62,557 105,081 45,357
Leasehold improvements 19,972 17,242 23,898 14,028
Furniture and equipment 42,916 32,631 42,916 30,060
Software license 16,000 16,000 16,000 14,666
Equipment under capital lease
- Computer hardware 159,958 122,196 159,958 112,696
------- ------- ------- -------
$ 435,331 $ 329,471 $ 440,870 $ 289,578
Net book value $ 105,860 $ 151,292
</TABLE>
3. Goodwill
<TABLE>
<CAPTION>
1998 1997
Accumulated Accumulated
Cost Amortization Cost Amortization
<S> <C> <C> <C> <C>
Goodwill $ 191,660 $ 191,660 $ 191,660 $ 191,243
------- ------- ------- -------
Net book value $ - $ 417
</TABLE>
83
<PAGE>
Aztek Technologies Inc.
Notes to Consolidated Financial Statements
June 30, 1998 and 1997
4. Due to Related Parties
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Loans payable, without interest, and specific repayment terms.
Principal is not repayable prior to July 1, 1999. It was not
practical to determine the fair value of this debt. $ 132,707 $ 3,689
Note payable, repayable $1,507 monthly including interest at
9% per annum and collateralized by a general security
agreement. During the year a shares for debt settlement
agreement was entered into and submitted to regulatory
authorities for their approval. - 166,241
------- -------
132,707 169,930
Less current portion - 166,241
------- -------
$ 132,707 $ 3,689
======= =======
</TABLE>
5. Royalties Payable
1998 1997
Royalties payable, royalties incurred in
a prior year's operations are repayable
$10,000 monthly, without interest,
commencing December 9, 1997. $ 100,000 $ 100,000
Less current portion 100,000 70,000
------- -------
$ - $ 30,000
======= =======
As at June 30, 1998 the Company is in default on repayment and is negotiating
a revised payment schedule. It is anticipated that this will not have an
adverse effect on the Company's financial position or results of future
operations.
6. Obligation Under Capital Lease
1998 1997
Total minimum lease payments $ 36,433 $ 89,694
Less imputed interest 2,538 12,509
------ ------
Lease obligation 33,895 77,185
Less current portion 33,095 43,553
------ ------
$ 800 $ 33,632
====== ======
Minimum lease payments on the capital lease obligations are 1999 - $35,620,
2000 - $813.
During the year interest expense of $10,252 (1997 - $18,240) was incurred on
the obligation under capital lease.
84
<PAGE>
Aztek Technologies Inc.
Notes to Consolidated Financial Statements
June 30, 1998 and 1997
6. Share Capital
Authorized
100,000,000 common shares without par value
1998 1997
Number of Number of
Shares Amount Shares Amount
Issued and fully paid
Balance, beginning of year 1,904,244 $3,909,000 1,001,932 $3,055,330
Issued for cash
Private placement - - 400,000 620,000
Exercise of warrants 47,400 104,280 28,600 65,560
For escrow shares - - 354,000 3,540
Issued for acquisition - - 30,000 30,000
Issued for debt settlement 120,465 166,242 89,712 134,570
Cancelled due to expiry
of escrow agreement (21,000) - - -
--------- ---------- --------- ----------
Balance, end of year 2,051,109 $4,179,522 1,904,244 $3,909,000
a) Escrow Shares - The issued share capital includes 35(1997 - 375,000).
These shares will be released from escrow at the rate of 1
share for each $0.31 of cash flow from operations, as defined in the
agreement. Any shares not released prior to September 17, 2001 will be
cancelled and returned to treasury.
During the year ended June 30, 1998 21,000 shares, subject to a separate
escrow agreement that expired October 27, 1997, were cancelled and returned to
treasury.
b) Share Purchase Options - See Note 11 for additional information
1998 1997
------- -------
Number of share purchase options, beginning of year 185,000 -
Number granted during the year 40,000 185,000
------- -------
Number of share purchase options, end of year 225,000 185,000
======= =======
Options outstanding at June 30, 1998 are exercisable:
185,000 at $1.82 per share, expiring March 20, 1999
40,000 at $0.85 per share, expiring September 22, 1998
85
<PAGE>
Aztek Technologies Inc.
Notes to Consolidated Financial Statements
June 30, 1998 and 1997
8. Related Party Transactions
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
a. Accounts payable and amounts due to related parties
include the following:
Due to officers and directors - accounts payable $64,040 $6,552
Due to officers and directors - due to related parties 5,607 -
Due to a director's family members - account payable 800 169,071
Due to a director's family members -due to related parties 127,100 -
<CAPTION>
Amounts due to officers and directors, or their family members that are
recorded in accounts payable arose as a result of those parties providing
services to the company. These transactions are in the normal course of
operations and are measured at the exchange value which is the amount of
consideration established and agreed to by the related parties at amounts that
approximate the value of services purchased from arms-length parties.
b. Selling and administration expenses include the following:
<S> <C> <C>
Interest paid to the spouse of a director 1,099 12,313
Rent paid to a company controlled by the spouse
of a director 13,500 13,500
</TABLE>
These transactions are in the normal course of operations and are measured at
the exchange value which is the amount of consideration established and agreed
to by the related parties.
c. Issuance of shares to President's wife in settlement of debt.
During the year the company issued 120,465 common shares in settlement of a
loan from the wife of the President of the company. The debt arose during the
fiscal year ended June 30, 1996. At that time the company was unable to
arrange debt financing from commercial lenders and therefore entered into a
loan agreement with the wife of the President. The loan was provided on
normal commercial terms. The loan was repayable $1,507 monthly, including
interest at 9%. From July 1997 to the date of settlement, the company was
unable to make payments for either interest or principal. The company and the
President's wife agreed to settle the full amount of the debt in exchange for
issuance of common shares of the company. The shares were deemed issued at
$1.38 per share, the average of the trading price of the shares for the ten
days prior to the date of the agreement.
9. Income Taxes
The Company has losses available for income tax purposes totaling
approximately $1,577,000. This amount can be used to reduce taxable income of
future years and has not been recognized in the financial statements. The
right to claim these losses expire as follows: 1999 - $89,000; 2000 - $76,000;
2001 - $376,000; 2002 - $131,000; 2003 - $101,000; 2004 - $479,000; 2005 -
$325,000.
86
<PAGE>
Aztek Technologies Inc.
Notes to Consolidated Financial Statements
June 30, 1998 and 1997
10. Lease Commitments
The company has lease commitments for its premises and certain equipment,
which require minimum annual lease payments payable as follows:
Year Amount
---------------------
1999 $ 45,442
2000 27,504
2001 10,158
------
$ 83,104
======
11. Differences Between Canadian and United States Generally Accepted
Accounting Principles
Stock Based Compensation
As at June 30, 1998, the Company has issued non-plan options, which are
described below.
During the year one-year non-plan options to purchase 40,000 shares at $1.40
were granted to an employee. These options were fully vested at the date of
grant. In connection with this grant, there was no difference between the
market price of the stock and the exercise price of the options on the date
that the options were granted.
In preparing financial statements in accordance with United States Generally
Accepted Accounting Principles the Company is required to apply the disclosure
requirements contained in U.S. Financial Accounting Standards Board SFAS No.
123, Accounting for Stock-Based Compensation. SFAS No. 123 requires the
Company to include in the financial statements compensation costs for the fair
value of stock options issued.
In calculating the benefit included in the following reconciliation, the
Company has estimated the fair value of each stock option at the grant date by
using the Black-Scholes option-pricing model with the following
weighted-average assumptions for grants in the year ended June 30, 1998: no
dividend yield percent; expected volatility of 142%; risk-free interest rate
of 5.8%; and expected life of 1 year. Under the accounting provisions of SFAS
No. 123, the Company's net loss and loss per share would have been increased
to the amounts indicated below.
87
<PAGE>
Aztek Technologies Inc.
Notes to Consolidated Financial Statements
June 30, 1998 and 1997
11. Differences Between Canadian and United States Generally Accepted
Accounting Principles - Continued
Stock Based Compensation - Continued
1998 1997
NET INCOME
Net loss for the year - based on Canadian GAAP $(365,426) $(557,907)
Charge to operations representing the difference
between the market price of the stock options and
the exercise price of the options (30,000) (40,700)
---------- ----------
Net loss for the year - based on U.S. GAAP $(395,426) $(598,607)
========== ==========
LOSS PER SHARE
Net loss per common share - based on U.S. GAAP $(0.19) $(0.41)
RETAINED EARNINGS
The cumulative effect of the application of U.S. GAAP on the deficit of the
company would be:
Deficit beginning of year - based on Canadian GAAP
$(4,293,441) $(3,735,534)
Charge to operations representing the
difference between the market price of
the stock options and the exercise price
of the options for previous years (40,700) -
Deficit beginning of year - based on U.S. GAAP (4,334,141) (3,735,534)
Net loss for the year - based on U.S. GAAP (395,426) (598,607)
------------ ------------
Deficit end of year - based on U.S. GAAP $(4,729,567) $(4,334,141)
============ ============
SFAS No. 123 requires disclosure of a summary of the status of the Company's
options as of June 30, 1998, and changes during the year ended on that date.
That additional disclosure is presented below:
June 30, 1998
Weighted-
Average
Shares Exercise Price
Outstanding at beginning of year 185,000 $1.82
Granted during the year 40,000 1.40
Exercised - -
Cancelled - -
-------- -----
Outstanding at end of year 225,000 $ 1.75
======= ======
Options exercisable at end of year 225,000 $ 1.75
Weighted-average fair value of options granted during the year:
Below market $ -
At market $ 1.40
Above market $ -
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Aztek Technologies Inc.
Notes to Consolidated Financial Statements
June 30, 1998 and 1997
11. Differences Between Canadian and United States Generally Accepted
Accounting Principles - Continued
Stock Based Compensation - Continued
The following table summarizes information about non-plan options outstanding
at June 30, 1998.
Options Outstanding Options Exercisable
Number Average Weighted Number Weighted
Range of Outstanding Remaining Average Exercisable Average
Exercise at June 30 Contractual Exercise at June 30, Exercise
Prices 1998 Life Price 1998 Price
$ 1.82 185,000 0.70 years $1.82 185,000 $1.82
$ 1.40 40,000 0.20 years $1.40 40,000 $1.40
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AZTEK TECHNOLOGIES INC.
Interim Consolidated Financial Statements
(unaudited)
For the period ending March 31, 1999
Contents
Consolidated Financial Statements
Consolidated Balance Sheets 91
Consolidated Statements of Income (Loss) and Deficit 92
Consolidated Statements of Cash Flow 93
Notes to Interim Financial Statements 94
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AZTEK TECHOLOGIES INC.
(Incorporated under the Company Act of BC)
INTERIM BALANCE SHEET
AS AT MARCH 31, 1999 AND 1998
ASSETS
1999 1998
Current
Cash 3,935 17,752
Accounts Receivable 47,604 44,596
Prepaid Expenses 155 1,990
------ ------
51,694 64,338
Capital Assets - Note 2 58,302 132,564
Other Capital Assets - Note 3
------ -------
109,996 196,902
======= =======
LIABILITIES
Current
Accounts payable 357,211 271,087
Accrued liabilities (trade) 18,435
Accrued liabilities (officers) 6,607
Deferred revenue 100,368 112,061
Current portion of royalties payable 100,000 100,000
Current portion of obligation under
capital lease 29,513
------- -------
582,621 512,661
Long Term
Due to related parties 189,054 113,368
Obligation under capital lease- Note 4 17,119
------- -------
771,675 643,148
SHARE CAPITAL AND DEFICIT
Share Capital - Note 5 4,179,522 4,179,523
Deficit (4,841,201) (4,625,769)
----------- -----------
(661,679) (446,246)
109,996 196,902
=========== ===========
Approved by the Directors
Mike Sintichakis
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AZTEK TECHNOLOGIES INC.
(Incorporated under the Company Act of BC)
INTERIM STATEMENT OF INCOME (LOSS)
FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998
1999 1998
Sales 232,460 250,415
Interest 190
------- -------
232,650 250,415
Cost of Sales
Contractor fees 37,900 11,612
Telephone 7,742 3,894
Wages, salaries and benefits 52,468 66,813
------ ------
98,110 82,319
Gross Profit 134,540 168,096
Selling and administration expenses
Advertising 832
Computer Expense 3,130
Consulting 37,187
Amortization 19,044 49,351
Equipment Lease 2,487 19,173
Filing and Transfer fees 1,049 3,260
Bank charges 814 1,531
Interest 13,662 1,561
Investor Relations - 31,501
Management fees 89,200 122,091
Office administration 32,451 18,813
Office expense 25,888
Professional fees 47,979 43,919
Promotion & Marketing 18,558
Rent 30,515 39,858
Telecommunications 13,401 17,100
Travel 2,526 6,420
Utilities 329 15,846
Wages and benefits 41,125 89,684
------ ------
339,860 500,425
Profit (loss) for the period (205,320) (332,329)
========= =========
Deficit, beginning of the period (4,658,867) (4,293,440)
Deficit, end of the period (4,864,187) (4,625,769)
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AZTEK TECHNOLOGIES INC.
(Incorporated under the Company Act of BC)
INTERIM STATEMENT OF CASH FLOW
FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998
1999 1998
OPERATIONS ACTIVITIES
Net loss for the period (205,320) (332,329)
Items not involving the use of cash
Amortization and Depreciation 19,044 49,351
--------- ---------
(186,276) (282,978)
Change in non-cash working capital balances 154,015
Accounts Receivable 20,089
Prepaid Expenses 1,749
Accounts Payable(Trade) 134,885
Accounts Payable (Accrued) 19,050
Due Officers and Related Parties (58,233)
Obligation Under Capital Lease (33,095)
--------- --------
(101,831) (128,963)
FINANCING ACTIVITIES
Advances from (repayment to) related parties 56,347 109,681
Deferred revenue (3,623) (26,720)
Capital Lease Obligation (800) (30,553)
Long Term Debt Repayment 3,327 (166,241)
Share Capital 270,523
------- ---------
55,251 156,690
INVESTING ACTIVITIES
Capital Assets 47,558 (30,208)
------ --------
INCREASE (DECREASE) IN CASH DURING THE PERIOD 978 (2,481)
CASH BEGINNING OF PERIOD 2,957 20,233
CASH END OF PERIOD 3,935 17,752
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AZTEK TECHNOLOGIES INC.
(Incorporated under the Company Act of BC)
NOTES TO INTERIM FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998
CAPITAL ASSETS AND AMORTIZATION
Plant and equipment are recorded at cost and amortized over their
estimated useful lives using the declining balance method and using the
following annual rates:
Computer hardware 30% diminishing balance basis
Computer software 30% diminishing balance basis
Furniture and equipment 20% diminishing balance basis
Leasehold improvement are recorded at cost and are amortized using the
straight line
method over a period of five years.
FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, accounts receivable,
accounts payable, loans payable, long-term debt, and obligation under capital
leases. Unless otherwise noted, it is management's opinion that the Company
is not exposed to significant interest, currency or credit risks arising from
these financial instruments. Their fair values of these financial instruments
approximate their carrying values, unless otherwise noted.
REVENUE RECOGNITION
Program support services are billed annually. Amounts billed in advance
are recorded as deferred revenue. Program support service revenue is
recognized in the statement of operations proportionately as the revenue is
earned.
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AZTEK TECHNOLOGIES INC.
(Incorporated under the Company Act of BC)
NOTES TO INTERIM FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998
All dollar amounts referred to herein are Canadian dollars.
1. Operations
The Company's business is that of providing support services for the
Company's computer software. The statement of operations reflects these
activities.
2. Capital Assets
<TABLE>
<CAPTION>
Accumulated 1999 1998
Cost Amortization Net Book Value Net Book Value
<S> <C> <C> <C> <C>
Computer Hardware $95,133 81,110 14,023 16,558
Computer Software $102,601 68,338 34,263 74,351
Leasehold Improvement $19,972 19,239 733 7,459
Furniture and equipment $42,916 33,634 9,282 10,928
Equipment under capital
Lease 23,268
-------- ------ ----- ------
$260,622 202,321 58,301 132,564
</TABLE>
3. Long-term Debt
1999 1998
Royalties payable to IBM $ 100,000 $ 100,000
Company will negotiate a new repayment schedule
Less current portion $ 100,000 $ 100,000
------- -------
$ 0 $ 0
4. Obligation Under Capital Lease
Aztek Technologies no longer has an obligation under capital lease. The
capital lease arrangement with IBM expired at the end of August and was
replaced with a rental agreement with IBM for a new computer.
5. Share Capital
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Authorized
100,000,000 common shares, with no par value
Issued and fully paid
1999 1998
Number of Number of
Shares Amount Shares Amount
Balance, beginning
of the period 2,072,109 $ 4,179,522 1,904,244 $3,909,000
Issued for cash
Exercise of Warrants 47,400 $104,280
Issued for debt settlement 120,465 $166,242
--------- ----------
Balance end of the period 2,072,109 $4,179,522
Canceled due to expire of
Agreement (21,000)
--------- ---------- --------- ----------
2,051,109 $4,179,522 2,072,109 $4,179,522
6. Differences Between Canadian and United States Generally Accepted
Accounting Principles
Stock Based Compensation
In preparing financial statements in accordance with United States Generally
Accepted Accounting Principles, the Company is required to apply the
disclosure requirements contained in U.S. Financial Accounting Standards Board
SFAS No. 123, Accounting for Stock Based Compensation. SFAS No. 123 requires
the Company to include in the financial statements compensation costs for the
fair value of stock options issued. During the period, there were no stock
options granted. In prior years, the Company has issued non-plan options.
There is a cumulative difference in retained earnings between Canadian GAAP
and U.S. GAAP due to differences in recording stock based compensation.
The cumulative effect of the application of U.S. GAAP on the deficit of the
company is:
Deficit beginning of period - based on Canadian GAAP $(4,179,522) $(3,735,534)
Charge to operations representing
the difference between,the market price of the stock
options and the exercise price of the options for
previous years (436,128) -
Deficit beginning of period - based on U.S. GAAP (4,615,648) (3,735,534)
Net loss for the period - based on U.S. GAAP - (598,607)
Deficit - end of period - based on U.S. GAAP $(4,615,648) $(4,334,141)
SFAS No. 123 requires disclosure of a summary of the status of the Company's
options as of March 31, 1999, and changes during the year ended on that date.
The additional disclosure is presented below:
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6. Differences between Canadian and U.S. GAAP (cont'd)
Weighted-
Average
March 31, 1999 Shares Exercise Price
Outstanding at beginning of period 225,000 $ 1.75
Granted during the period
Exercised
Canceled or expired 225,000
Outstanding at end of period - $ 1.75
Weighted-average fair value of options granted
during the period:
Below market $ -
At market $ -
Above market $ -
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ANNEX A
DISSENTERS' RIGHTS STATUTE
The following is the selected statute, Section 207 of the British
Columbia Company Act, relating to dissenters' rights.
Division 2 - Dissent Proceedings
Dissent procedure
207 (1) If,
(a) being entitled to give notice of dissent to a resolution as provided
in section 37, 103, 126, 222, 244, 249 or 289, a member of a company (in
this Act called a "dissenting member") gives notice of dissent,
(b) the resolution referred to in paragraph (a) is passed, and
(c) The Company or its liquidator proposes to act on the authority of the
resolution referred to in paragraph (a),The Company or the liquidator must
first give to the dissenting member notice of the intention to act and advise
the dissenting member of the rights of dissenting members under this section.
(2) On receiving a notice of intention to act in accordance with
subsection (1), a dissenting member is entitled to require the Company to
purchase all of the dissenting member's shares in respect of which the notice
of dissent was given.
(3) The dissenting member must exercise the right given by subsection
(2) by delivering to the registered office of The Company, within 14 days
after The Company, or the liquidator, gives the notice of intention to act.
(a) a notice that the dissenting member requires the Company to purchase all
of the dissenting member's shares referred to in subsection (2), and
(b) the share certificates representing all of those shares, and on delivery
of that notice and those share certificates, the dissenting member is bound to
sell those shares to The Company and The Company is bound to purchase them.
(4) A dissenting member who has complied with subsection (3), the
company, or, if there has been an amalgamation, the amalgamated company, may
apply to the court, and the court may
(a) require the dissenting member to sell, and The Company or the amalgamated
company to purchase, the shares in respect of which the notice of dissent has
been given,
(b) set the price and terms of the purchase and sale, or order that the price
and terms be
98
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established by arbitration, in either case having due regard for
the rights of creditors,
(c) joint in the application any other dissenting member who has complied with
subsection (3), and
(d) make consequential orders and give directions it considers appropriate.
(5) The price that must be paid to a dissenting member for the shares
referred to in subsection (2) is their fair value as of the day before the
date on which the resolution referred to in subsection (1) was passed,
including any appreciation or depreciation in anticipation of the vote on the
resolution, and every dissenting member who has complied with subsection (3)
must be paid the same price.
(6) The amalgamation or winding up of The Company, or any change in its
capital. Assets or liabilities resulting from The Company acting on the
authority of the resolution referred to in subsection (1), does not affect the
right of the dissenting member and The Company under this section or the price
to be paid for the shares.
(7) Every dissenting member who has complied with subsection (3)
(a) may not vote, or exercise or assert any rights of a member, in respect of
the shares for which notice of dissent has been given, other than under this
section,
(b) may not withdraw the requirement to purchase the shares, unless the
Company consents, and
(c) until the dissenting member is paid in full, may exercise and assert all
the rights of a creditor company.
(8) If the court determines that a person is not a dissenting member, or
is not otherwise entitled to the right provided by subsection (2), the court,
without prejudice to any acts or proceedings that The Company, its members, or
any class of members may have taken during the intervening period, may make
the order it considers appropriate to remove the limitations imposed on the
person by subsection (7).
(9) The relief provided by this section is not available if, subsequent
to giving notice of dissent, the dissenting member acts inconsistently with
the dissent, but a request to withdraw the requirement to purchase the
dissenting member's shares is not an act in consistent with the dissent.
(10) A notice of dissent ceases to be effective if the dissenting member
consents to or votes in favour of the resolution of The Company to which the
dissent relates unless the consent or vote is given solely as a proxy holder
for a person whose proxy required an affirmative vote.
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ANNEX B
Opinion Letter of Steve Winters in Reference to Dissenters' Rights.
[LETTERHEAD OF STEPHEN K WINTERS LAW CORPORATION]
August 5, 1998
Board of Directors
Aztek Technologies Inc.
#5 - 246 Lawrence Ave.
Kelowna, B.C. V1Y 6L3
Re: Joint Policy Statement - Prospectus on Form S-4 and Dissenters' Rights
We are rendering this opinion to you at your request and in our capacity
as Canadian Counsel to Aztek Technologies Inc. ("ATI") in connection with the
Joint Proxy Statement - Prospectus pursuant to which ATI is issuing the proxy
statement to its shareholders for approval of the proposed merger between ATI
and Aztek, Inc. wherein ATI will cease to exist and Aztek, Inc. will be the
surviving corporation. If the merger is approved, Aztek, Inc. will issue one
share of its common stock in exchange for each share of ATI common stock (the
"Merger"). We are rendering this opinion to provide you with a description of
the dissent provisions of the British Columbia Company Act (the "Act") which
apply to the Merger.
Any holder of common shares of Aztek ("Aztek Shares") is entitled to be
paid the fair market value of such shares in accordance with the section 207
of the British Columbia Company Act (the "Act") if the shareholder dissents to
the special resolution authorizing the Amalgamation, and if the Amalgamation
becomes effective. A holder of Aztek Shares is not entitled to object with
respect to his shares if he votes any of such shares in favour of the special
resolution authorizing the Merger.
The dissenting shareholder is required to send a written objection to the
special resolution to be received within two days prior to the meeting. A
vote against a special resolution or an abstention does not constitute a
written objection. Within fourteen days after the special resolution is
adopted by the shareholders, the dissenting shareholder is required to send to
the corporation a written notice containing his name and address, the number
of shares in respect of which he dissents and demand payment of the fair value
of such shares, and the appropriate share certificate or certificates. The
dissenting shareholder is bound to sell these shares to the corporation and
the corporation is bound to purchase them. The price to be paid is the fair
value as of the day before the resolution was passed
including any appreciation or depreciation in anticipation of the vote, and
all dissenting shareholders shall be paid the same price. Either party may
apply to the court to fix the fair value of the shares. There is no
obligation on the corporation to apply to the court. If the application is
made by either party, the dissenting shareholder will be entitled to be paid
the amount fixed by the court which may be greater or less than the value of
the shares which the shareholder would otherwise consent to by the
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corporation. A dissenting shareholder loses his rights of dissent if he votes
in favour of the resolution (unless he is doing so as a proxyholder) or
otherwise acts inconsistent with his dissent (a request to withdraw a notice
of dissent is not acting inconsistent with a dissent).
Yours truly,
STEPHEN K. WINTERS
LAW CORPORATION
/s/ Stephen K. Winters
- -----------------------
Per: Stephen K. Winters
101
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[Back Cover]
PROSPECTUS
2,051,109 Shares
Aztek, Inc.
Common Stock
UNTIL ____________, 1999 ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS ANDWITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Aztek
Officers and Directors are indemnified and held harmless by Aztek to the
fullest extent authorized by the Nevada General Corporation Law against
expense liability and loss where named a party or threatened to be named a
party to any type of action or proceeding. The officer or directors who make
such claim must be reimbursed by Aztek within ninety days. Failure by Aztek
to make such payment entitles the officer or director to bring suit against
Aztek and if a judgment is rendered in favor of the officer or director, Aztek
will be responsible for such costs. Aztek mthat the
officer of director did not meet the standards of conduct which makes
indemnification permissible under the Nevada General Corporation Law but the
burden of proving such a defense rests with Aztek.
Nevada General Corporation Law Section 78.7502 provides that a
corporation may indemnify a director or an officer against expenses, including
attorneys' fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred in connection with the action. The director or officer
must have acted in good faith or believed his or her actions were not
unlawful. The corporation cannot indemnify the officer or director where the
officer or director has been adjudged to be liable to the corporation. If the
director or officer is successful on the merits or in defense of either of the
aforementioned types of action, the corporation must indemnify that officer of
director.
ATI
Subject to the provisions of the Companies Act, British Columbia's
corporate law, ATI must indemnify its directors and former directors, and may
indemnify the directors of companies in which ATI is a shareholder, if the
director is named as a party in an action as a result of being a director.
ATI's board of directors may cause ATI to indemnify its officers or officers
of companies in which ATI is a shareholder, who are named as a party or as
parties in an action as result of serving as an officer or ATI. The articles
of incorporation also provide for mandatory indemnification of the Secretary
or Assistant Secretary if he or she is not a full time employee of ATI.
Failure of the directors or officers to comply with the Companies Act or the
articles of incorporation does not invalidate the indemnity clause.
ITEM 601. Exhibits
1. Underwriting Agreement Between ATI and Equitrade Securities Corporation
2.1 Directors' Minutes Approving the Merger
2.2 Plan of Reorganization through Merger
3(i).1 Articles of Incorporation of Aztek, Inc.
3(i).2 Amended And Restated Articles Of Incorporation Of Aztek, Inc.
3(ii). By-Laws Of Aztek Inc.
4.1 Minutes Approving Issuance Of Shares And Bonus Shares
4.2 Standard Subscription Agreement for Bonus Shares
4.3 Standard Subscription Agreement for Common Shares
4.4 Director's minutes approving rescission of bonus shares
4.5 Director's minutes approving rescission of common shares
4.6 Standard termination agreement for bonus shares
4.7 Standard termination agreement for common shares
4.8 Amendment to Exhibit 4.6
4.9 Standard Investment letter to subscribe for shares at US$.6124 per share
5. Opinion re: legality
8. Opinion re: tax matters
10.1 Escrow Agreement
10.2 Option Agreement
10.3 Demand Notes
10.4 San Francisco License
10.5 Settlement Agreement with IBM
23.1 Consent Of Independent Accountants
23.2 Consent of Stephen K. Winters
24.1 Directors' Resolution of Signature by Power of Attorney
24.2 Power of attorney (included in the registration statement and not as an
exhibit.
27. Financial Data Schedule
99.1 Merger Agreement
99.2 Letter Of Intent For ATI To Acquire Harrison Muirhead Systems Inc. and
Q-Data Smart Investments Inc.
99.3 Letter of Intent for ATI to acquire Concord Consultants
99.4 Minutes Of Shareholders Of Aztek Inc. To Approve Merger
99.5 Schedule II Valuation and Qualifying Accounts
99.6 Opinion Letter of Independent Accountants in Reference to Canadian Tax
Consequences
99.7 Proxy
ITEM 22.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to:
(i) include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the
registration statement;
(iii) Include any material information on the plan of
distribution.
(2) that for determining liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new registration
statement of the securities offered, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unexchanged at
the termination of the offering.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the small business issuer will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Kelowna, Province of
British Columbia, on June 22, 1999.
Aztek, Inc.
By /s/Mike Sintichakis
--------------------------
Mike Sintichakis
President
EXHIBIT 1. Underwriting Agreement between ATI and Equitrade Securities
Corporation.
UNDERWRITING AGREEMENT
406,504 Common Stock
July 2, 1998
Mr. Kim Carroll
Compliance Officer
Equitrade Securities Corporation
23736 Birtcher Drive
Lake Forest, California 92630
Dear Mr. Kim Carroll:
1. Introduction. AZTEK Technologies, Inc., a Vancouver, British
Columbia corporation (the "Company"), has an authorized capitalization of
100,000,000 shares of Common Stock, no par value. The Company has issued
and outstanding 2,072,109 shares of Common Stock. This Agreement
contemplates that you will use your best efforts to sell, for the account of
the Company, 406,504 Common Shares at a price of $ 2.46 per Common Share.
The term "Shares," as used herein, includes as many of the Common Shares as
are issued and sold pursuant to the terms hereof unless the context indicates
otherwise.
The Company hereby agrees with you as follows:
2. Representations, Warranties and Agreements of the Company. The
Company represents and warrants to, and agrees with, you that:
(a) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a Registration Statement (File No.
0-29540) on Form 10-SB and prepared and filed one or more amendments thereto
covering the registration of the Shares under the Securities Exchange Act of
1934, as amended (the "Exchange Act").
(b) The Registration Statement (and any post effective
amendment thereto) will fully comply with the applicable provisions of the
Exchange Act and the Rules and Regulations thereunder, and that Registration
Statement does not contain any untrue statement of a material fact and does
not omit to state any material fact required to be stated therein or
necessary in order to make the statement therein not misleading, and at all
subsequent times thereto up to and including the Closing Date. The
Registration Statement (and the Offering Circular as amended or supplemented)
complies with the provisions of the Exchange Act and the Rules and
Regulations thereunder and does not contain any untrue statement of a
material fact and does not omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(c) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of Vancouver,
British Columbia and the Company has full power and authority (corporate and
other) to own its properties and conduct its business as described in the
Offering Circular and as being conducted, and is in compliance in all
material respects with the laws requiring its qualification to do business as a
foreign corporation in all other jurisdictions in which it owns or leases
substantial properties or in which the conduct of its business requires such
qualification.
(d) The Shares have been duly authorized, and when issued and
delivered as contemplated by this Agreement, will have been validly issued
and will be fully paid and nonassessable, and conform to the description
thereof contained in the Offering Circular. No further approval or authority
of the stockholders or the Board of Directors of the Company will be required
for the issuance and sale of the Shares as contemplated herein.
(e) This Agreement has been duly authorized, executed and
delivered by the Company and this Agreement constitutes a legal, valid and
binding obligation of the Company, enforceable in accordance with its terms
and is in all respects in full compliance with all applicable provisions of
the securities laws.
(f) The execution and delivery of this Agreement, and the
performance by the Company hereunder and thereunder will not conflict with,
result in a breach or violation of or constitute a default under any
agreement or instrument to which the Company is a party or the corporate
charter or by-laws of the Company or any law, order, rule, regulation, decree
or injunction of any jurisdiction, court or governmental agency or body, and
no consent, approval, authorization or order of, or filing with any
governmental agency or body is required for the performance by the Company of
this Agreement, with the exception of the filing with the Vancouver Stock
Exchange.
(g) The Registration Statement, as originally filed or as
amended and supplemented, if the Company shall have filed with the Commission
any amendment thereof or supplement thereto complies with the applicable
provisions of the Securities Exchange Act and the Rules and Regulations
thereunder and does not contain any untrue statement of a material fact and
does not omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(h) The Company has not given any information or made any
representations in connection with the offering of the Shares, written or
oral, other than as contained in the Offering Circular or the Registration
Statement.
3. Offering and Sale of the Shares. On the basis of the
representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company appoints you as its
exclusive agent to effect sales of the Shares for the account of the Company
at the offering price of $2.46 per Share and upon the other terms and
conditions set forth herein and in the Offering Circular, and you agree to
use your best efforts as such agent to sell the Shares during the term of
this Agreement upon the terms and conditions set forth herein and in the
Offering Circular.
As compensation for your services hereunder, the Company will, at the
Closing (as hereinafter defined), pay Equitrade commissions of $0.1476 per
Share (i.e., 6% percent of the gross proceeds of the offering) resulting from
the sale of Shares pursuant to the offering contemplated herein. Your
appointment shall commence upon the date of the execution of this Agreement,
and shall continue for a period (such period, including any extension thereof
as hereinafter provided, being herein called the "Offering Period") of 30
days (and for a period of up to 30 additional days if extended by agreement
of the Company and you), unless all of the Shares have previously been
subscribed
for.
The parties hereto specifically acknowledge the past role of a company
called Select Capital Advisors ("Select"). In a prior offering circular, as
well as the initial filing of the Form 10-SB with the U. S. Securities
Exchange Commission ("Commission"), the original agreement between the issuer
and Select was disclosed as a material agreement. The Commission raised
substantial concerns about the role of Select because the company is not an
NASD member firm, nor is the company registered with the Commission as a
broker-dealer/ underwriter and, as such, it is not authorized to sale
securities in the United States. The prior agreement between Aztek and Select
is null and void. The issuer herein recognizes and acknowledges Select has
extended considerable time, effort and funds on its behalf. Aztek agrees
reimburse Select for expenses in an amount not to exceed $40,000.00 (Forty
Thousand Dollars). Said reimbursement shall be paid from current or future
revenues of the Company and not from the proceeds of the instant offering.
Under no circumstances shall Select execute any trades or sales of the
Company's securities in connection with the instant offering. The issuer
believes the investors will be comprised of natural persons or corporate
entities that were initially identified by Select during the existence of the
former agreement, which is now null and void. The purchasers of the shares
must represent that they are "accredited investors" as that term is
understood pursuant to the federal securities laws (and set forth at 17
C.F.R. § 230.501 (a)(1998)). Any and all sales or trades shall be
conducted and consummated by Equitrade The parties hereto expressly agree
Select is not an underwriter and shall not engage in conduct relative to the
instant offering that may cause one to consider its activities to be
consistent with those of an underwriter.
All checks received by you from applicants to purchase shall be made
payable to "AZTEK TECHNOLOGIES, INC. ACCOUNT. The brokerage account shall be
established by Aztek Technologies, Inc., after the execution of the instant
agreement by both parties hereto. Equitrade Securities Corporation shall
maintain insurance for the account for an amount not to exceed one million
dollars. You will promptly deliver to the Company one photocopy of each
Subscription Agreement, the Company will mail an interim receipt to each such
applicant to purchase for the amount deposited in the Account on behalf of
such applicant to purchase. Any entity selected by you to process orders for
Shares on behalf of applicants to purchase may deliver cash or checks and
Subscription Agreements received from such applicants and you deliver to the
company an executed photocopy of the Subscription Agreement and appendix 16
A of the offering circular.
It is understood that you shall have the right to refuse to forward any
Subscription Agreement, and in such event you shall promptly remit all funds
received by you to the person on whose behalf such funds were submitted to
you.
4. Closing. Subject to the prior termination of the offering as
provided herein, there shall be a closing (the "Closing") at the offices of,
Equitrade Securities Corporation located at 23736 Birtcher Drive, Lake
Forest, California 92630, or via international teleconference not later than
five days immediately following the termination of the Offering Period (the
"Closing Date"). Such Closing shall include the following: (i) payment for
the Shares to the Company by release of funds and delivery to the Company of
properly completed and executed Subscription Agreements to each purchaser;
(ii) deliver by the Company of certificates for the Shares purchased by each
purchaser; and (iii) payment by the Company to you, out of the proceeds of
the offering the commission referred to in Section 3 for each Share sold.
The certificates for Shares to be delivered at the Closing will be in
definitive form in such denominations and registered in such names as you
request at least three business days prior to the Closing Date and will be
made available at the above office for checking and packaging at least one
full business day prior to the Closing Date.
5. Covenants of the Company. The Company covenants and agrees with
you that:
(a) The Company has caused the registration statement as filed
and any subsequent amendments thereto to become effective.
(b) The Company has furnished to you true and accurate copies
of the Registration Statement filed with the U.S. Securities and Exchange
Commission.
(c) During the period of two years from the date hereof, the
Company will furnish to you, as soon as practicable after the end of each
fiscal year, a copy of its annual report to security holders for such fiscal
year, and during such period the Company will also furnish to you as soon as
available, a copy of each report and such other information concerning the
Company as you may reasonably request.
(d) The Company will apply the net proceeds from the sale of
the Shares to be sold by it hereunder for the purposes set forth in the
Offering Circular.
(e) During the course of the offering of the Shares the Company
will not take directly or indirectly any action designed to or that might, in
the future, reasonably be expected to cause or result in stabilization or
manipulation of the price of the Shares.
(f) The Company has been approved for listing on the over the
counter bulletin board.
6. Expenses. Any and all expenses of the offering shall be borne by
the underwriter.
7. This Agreement has been duly authorized, executed and delivered by the
Company, and (assuming due authorization, execution and delivery by you)
constitutes a legal, valid and binding agreement of the Company, enforceable
in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization and moratorium laws and other laws affecting enforcement of
creditors rights generally and to equitable principles that may restrict the
availability of remedies and except as rights to indemnity hereunder may be
limited under the provisions of the federal securities laws.
8. The required action has been taken by the Company under the
Securities Exchange Act to make the public offering and consummate the sale
of the Shares pursuant to this Agreement; the issue and sale by the Company
of the Shares and the execution and delivery of this Agreement and the
performance by the Company of its obligations hereunder and thereunder will
not conflict with, result in a breach of, or constitute a default under any
agreement or instrument known to such counsel to which the Company is a party
or any applicable law, order, rule, regulation, decree or injunction of any
jurisdiction, court or governmental agency or body or the corporate charter
or by-laws of the Company; and no consent, approval, authorization or order
of, or filing with, any court or body is required in connection with the
issuance or sale of the Shares by the Company or for the performance by the
Company of this Agreement.
No notice of disapproval has been issued or proceedings for that purpose
has been instituted by the Commission, the NASD, or any state securities or
Blue Sky authority with respect to the distribution arrangements relating to
the offering of the Shares.
9. Indemnification and Contribution. (a) The Company will indemnify
and hold harmless you and each person, if any, who you control within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act against
any damages or liabilities to which the Company or any such director, officer
or controlling person may become subject, insofar as such losses, claims,
damages or liabilities or actions are caused by untrue statement or alleged
untrue statement of any material fact contained in the Registration
Statement, the Offering Circular, or any amendment or supplement thereto or
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company by you specifically for use therein.
(c) Promptly after receipt by an indemnified party under this Section
9 of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party
under this Section 9, notify the indemnifying party of the commencement
thereof; but the omission to so notify the indemnifying party will relieve it
from any liability which it may have to any indemnified party otherwise than
under this Section 9. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and,
to the extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel satisfactory
to such indemnified party, and after notice from the indemnifying party to
such indemnified party of its election to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 9 for legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation.
10. Termination. You shall have the right to terminate this
Agreement and the offering of the Shares at any time prior to the Closing if,
between the date hereof and the Closing Date, there shall have been any
declaration of war by the Government of the United States, an event resulting
in (i) the general establishment of minimum prices by either the Commission
or the National Association of Securities Dealers, or (ii) the declaration of
a bank moratorium by authorities of the United States or of the State of
California, the effect of which in your judgment makes it impracticable or
inadvisable to proceed with the offering.
11. Representations and Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of Company and its officers set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of and
investigation, or statement as to the results thereof, made by or on behalf
of you, the Company or any of its officers, directors or controlling persons,
and will survive payment to the Company for the Shares. If this Agreement is
terminated pursuant to Section 10 hereof or if for any reason the sale of the
Shares is not consummated, the Company shall not be responsible for the
expenses incurred by you.
12. Notices. All communications hereunder will be in writing and, if
sent to you, will be mailed, delivered, or faxed (714-699-1183) and confirmed
to you at Equitrade Securities Corporation, 23736 Birtcher Drive, Lake
Forest, California 92630. All communications hereunder to the issuer shall be
in writing and, will be mailed, delivered, or faxed (250) 762-7933 and
confirmed to you at Aztek Technologies, Inc. 246 Lawrence Avenue, Suite # 5,
Kelowna, British Columbia V1Y 6L3.
13. Successors. This Agreement will inure to the benefit and be
binding upon the parties hereto and their respective successors and the
officers, directors and controlling persons referred to in Section 9, and no
other person will have any right or obligation hereunder.
14. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California.
15. Counterparts and Facsimile . This Agreement may be executed in
counterparts, all of which, taken together, shall constitute a single
agreement. In the event the appropriate parties execute the facsimile
version of the instant agreement, said facsimile shall have the same force
and effect as the hard copy.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the instant Agreement, whereupon it
will become a binding agreement among the Company and you in accordance with
its terms.
Very truly yours,
AZTEK TECHNOLOGIES, INC.
By: /s/ Mike Sintichakis
--------------------------------
Michael Sintichakis, President
The foregoing Underwriting Agreement is herein confirmed and accepted as of
the date first above written.
/s/ Kim F. Carroll
-------------------------------------------
Kim F. Carroll, Senior Compliance
Officers Equitrade Securities
Corporation
EXHIBIT 2.1 Minutes Approving the Merger
A meeting of the Directors of AZTEK, INC., a Nevada corporation, was held at
the Company's office on the 30th day of June, 1998, via teleconference at the
hour of 10:00 o'clock a.m., for the purpose of approving a merger between
Aztek, Inc. and Aztek Technologies Inc., a Canadian company.
Mike Sintichakis, Chairman of the Board, called the meeting to order and
Nick Sintichakis, Director and Secretary, recorded the minutes of the meeting.
Upon motion duly made, seconded and unanimously carried, the reading
correcting and approval of the minutes of the last meetings was waived.
Upon motion duly made, the Directors of the Company unanimously agreed
to an approved a merger between the Company and Aztek Technologies Inc., a
Canadian based company, by way of a share exchange. The Directors of the
Company further agreed that the exchange of shares will be on a one for one
basis, subject to the approval of the shareholders of Aztek, Inc. and subject
to the approval of the shareholders of Aztek Technologies Inc.
There being no further business to come before the meeting at this time,
the meeting was, upon motion duly made and seconded, adjourned at 11:30 a.m.
/s/ Mike Sintichakis
------------------------------
Mike Sintichakis, Director
EXHIBIT 2.2 Plan Of Acquisition
PLAN FOR REORGANIZATION THROUGH MERGER
This Plan of Reorganization through Merger dated as of October 1, 1998 (the
"Merger Plan"), among Aztek Technologies Inc., a Canadian corporation
("ATI"), and Aztek Inc., a Nevada corporation (the "Company") (ATI and the
Company being sometimes referred to hereinafter collectively as the
"Constituent Corporations").
Witnesseth:
WHEREAS, ATI, as of this date, is authorized to issue an aggregate of
100,000,000 shares of stock, consisting wholly of shares of Common Stock,
without par value ("ATI Common Stock");
WHEREAS, ATI, as of this date, has issued and there are outstanding
2,051,109 shares of ATI Common Stock;
WHEREAS, as of this date, the Company is authorized to issue 100,000,000
shares of common stock, without par value (the "Company Common Stock"), of
which two million twenty-five thousand shares are issued and outstanding; and
WHEREAS, the Boards of Directors of the Constituent Corporations deem it
advisable and in the best interests of such corporations that a
reorganization of the corporate structure of such corporations as herein
contemplated be consummated; and, in accordance therewith, that ATI be merged
with and into the Company (the "Merger"), and that the Company, as the
surviving corporation (as such, the "Surviving Corporation"), shall keep the
name "Aztek, Inc."
Now, therefore, the parties hereby plan and agree as follows:
ARTICLE I
MERGER
1.1. Merger. Subject to the terms and conditions of this Plan of
Merger, ATI shall be merged with and into the Company in accordance with the
92A.100 et seq. of the Nevada Mergers and Exchanges of Interest Law, the
separate existence of ATI shall cease, and the Company, as the Surviving
Corporation, shall continue its corporate existence under the laws of the
State of Nevada and the United States. The Company shall operate an office
in Reno, Nevada, offices where ATI currently operates, and such other places as
the Company deems appropriate. The Company, as the Surviving Corporation,
shall succeed, insofar as provided by law, to all rights, assets, liabilities
and obligations of ATI in accordance with the Nevada General Corporation Law.
1.2. Effective Date. Subject to the approval of the Merger by the
requisite resolution of the shareholders of ATI, the Merger shall become
effective as of the date and time on which this Plan of Merger or an
appropriate certificate of merger is filed with the Secretary of State of the
State of Nevada, as required by the Nevada Mergers and Exchanges of Interest
Law (the "Effective Date").
ARTICLE II
Name, Certificate of Incorporation, Bylaws
and Directors and Officers of the Surviving Corporation
2.1. Name. The name of the Surviving Corporation shall be "Aztek,
Inc." on the Effective Date.
2.2. Bylaws. The Bylaws of the Company in existence and in effect
immediately prior to the Effective Date shall be the Bylaws of the Surviving
Corporation.
2.3. Directors and Officers. The directors and officers of the Company
immediately prior to the Effective Date shall be the directors and officers,
respectively, of the Surviving Corporation until expiration of the current
terms as such, or prior resignation, removal or death.
ARTICLE III
CONVERSION AND EXCHANGE OF SECURITIES
3.1. Conversion. At the Effective Date, each of the following
transactions shall be deemed to occur simultaneously:
(a) Each share of ATI Common Stock issued and outstanding
immediately prior to the Effective Date shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into and
become one fully paid and non-assessable share of the Company Common Stock.
(b) Each share of the Company Common Stock issued and outstanding
immediately prior to the Effective Date shall remain unchanged.
3.2. Exchange.
(a) After the Effective Date, each certificate representing issued
and outstanding shares of ATI Common Stock, shall represent the same number
of shares of the Company Stock.
(b) At any time on or after the Effective Date, each holder of
certificates evidencing ownership of shares of ATI Common Stock, upon
surrender of such certificates to the Company, shall receive in exchange
therefor one or more new stock certificates evidencing ownership of the
number of shares of the Company Common Stock into which such securities shall
have been converted in the Merger.
AZTEK TECHNOLOGIES INC.
By:_/s/ Mike Sintichakis
---------------------------
Mike Sintichakis
Director
By: /s/ Eileen Keogh
---------------------------
Eileen Keogh
Director
By: /s/ Edson Ng
--------------------------
Edson Ng
Director
Corporate Seal
AZTEK INC.
By: /s/ Mike Sintichakis
-------------------------
Mike Sintichakis
Director
By: /s/ Nick Sintichakis
-------------------------
Nick Sintichakis
Director
By: /s/ Eileen Keogh
------------------------
Eileen Keogh
Director
By: /s/ Edson Ng
-----------------------
Edson Ng
Director
EXHIBIT 3(i).1
ARTICLES OF INCORPORATION OF AZTEK, INC.
(formerly Spectral Innovations (1994), Inc.)
ARTICLES OF INCORPORATION
OF
SPECTRAL INNOVATIONS (1994), INC.
A Close Corporation
The undersigned, to form a Nevada close corporation, pursuant to NRS 78A.020,
certifies that:
FIRST. The name of the corporation is Spectral Innovations (1994) Inc.
SECOND. Its principal office in the State of Nevada is located at 1025
Ridgeview Drive, Suite 400, Reno, Washoe County, Nevada 89509. The name and
address of its resident agent is Michael J. Morrison, Esq., 1025 Ridgeview
Drive, Suite 400, Reno, Nevada BC 89509.
THIRD. The nature of the business, or objects or purposes proposed to be
transacted, promoted or carried on are:
To engage in any lawful activity and to market, purchase or otherwise
acquire, invest in, own, mortgage, pledge, sell, assign and transfer or
otherwise dispose of, trade, deal in and deal with goods, wares and
merchandise and personal property of every class and description.
To hold, purchase and convey real and personal estate and to mortgage or
lease any such real and personal estate with its franchises and to take the
same by devise or bequest.
To acquire, and pay for in cash, stock or bonds of this corporation or
otherwise, the good will, rights, assets and property, and to undertake or
assume the whole or any part of the obligations or liabilities of any person,
firm, association or corporation.
To acquire, hold, use, sell, assign, lease, grant licenses in respect of,
mortgage, or otherwise dispose of letters patent of the United States or any
foreign country, patent rights, licenses and privileges, inventions,
improvements and processes, copyrights, trademarks and trade names, relating
to or useful in connection with any business in this corporation.
To guarantee, purchase, hold, sell, assign, transfer, mortgage, pledge or
otherwise dispose of the shares of the capital stock or of any bonds,
securities or evidences of the indebtedness created by another corporation or
corporations of this state, or any other state or government, and while owner
of such stock, bonds, securities or evidences of indebtedness, to exercise
all the rights, powers and privileges of ownership, including the right to
vote, if any.
To borrow money and contract debts when necessary for the transaction of its
business, or for the exercise of its corporate rights, privileges or
franchises, or for any other lawful purpose of its incorporation; to issue
bonds, promissory notes, bills of exchange, debentures and other obligations
and evidences of indebtedness, payable at specified time or times, or payable
upon the happening of a specified event or events, whether secured by
mortgage, pledge, or otherwise, or unsecured, for money borrowed, or in
payment for property purchased, or acquired, or for any other lawful objects.
To purchase, hold, sell and transfer shares of its own capital stock, and use
therefor its capital surplus, surplus or other property or funds; provided it
shall not use its funds or property for the purchase of its own shares of
capital stock when such use would cause any impairment of its capital; and
provided further, that shares of its own capital stock belonging to it shall
not be voted upon, directly or indirectly, nor counted as outstanding, for
the purpose of computing any stockholders' quorum or vote.
To conduct business, have one or more offices, and hold, purchase, mortgage
and convey real and personal property in this state, and in any of the
several states, territories, possessions and dependencies of the United
States, the District of Columbia and in any foreign countries.
To do all and everything necessary and proper for the accomplishment of the
objects hereinbefore enumerated or necessary or incidental to the protection
and benefit of the corporation and, in general, to carry on any lawful
business necessary or incidental to the attainment of the objects of the
corporation, whether, or not such business is similar in nature to the
objects hereinbefore set forth.
The objects and purposes specified in the foregoing clauses shall, except
where otherwise expressed, be in nowise limited or restricted by reference
to, or inference from, the terms of any other clause in these Articles of
Incorporation, but the objects and purposes specified in each of the
foregoing clauses of this Article shall be regarded as independent objects
and purposes.
FOURTH. The amount of the total authorized capital stock of the corporation
is TWENTY-FIVE THOUSAND DOLLARS (S25,000.00). The total number of shares of
stock which the corporation shall have the authority to issue is TWENTY-FIVE
THOUSAND (25,000) shares, which will consist of the following:
A. Common Stock. Twenty-Five Thousand (25,000) shares with a par value of
Sl.00 each, amounting to an aggregate of Twenty-Five Thousand Dollars
($25,000.00).
No holder of any shares of any class of the corporation shall be entitled
to the preemptive rights to subscribe for, purchase or receive any part of any
new or additional shares of any class, whether now or hereafter authorized,
or any securities exchangeable for or convertible into such shares, or any
warrants or other instruments evidencing rights or options to subscribe for,
purchase or otherwise acquire such shares.
No shares of stock shall have cumulative voting rights.
Any class of stock may be held by any person or entity.
The number of stockholders of the corporation may not exceed 30.
An interest in the shares may not be transferred except to the extent
permitted by NRS 78A.050.
FIFTH. The governing board of this corporation shall be known as directors
and the number of directors may from time to time be increased or decreased
in such manner as shall be provided by the By-laws of this corporation.
The names and post office addresses of the first Board of Directors, which
shall be three (3) in number, are as follows:
NAME POST OFFICE ADDRESS
----- -------------------
Mike Sintichakis 242 Lawrence Avenue
Kelowna, B.C., Canada VlY 6L3
Richard Evans 1400-400 Burrard Street
Vancouver, B.C., Canada V6C 3G2
Nick Sintichakis 242 Lawrence Avenue
Kelowna, B.C., Canada VlY 6L3
SIXTH. The capital stock, after the amount of the subscription price or par
value has been paid in, shall not be subject to assessment to pay the debts
of the corporation.
SEVENTH. The name and post office address of the Incorporator signing these
Articles of Incorporation is as follows:
Michael J. Morrison 1025 Ridgeview Drive, Suite 400
Reno, Nevada 8-0509
EIGHTH. The corporation is to have perpetual existence.
NINTH. In furtherance, and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
Subject to the By-laws, if any, adopted by the stockholders, to make, alter
or amend the By-laws of the corporation.
To fix the amount to be reserved as working capital over and above its
capital stock paid in, to authorize and cause to be executed, mortgages and
liens upon the real and personal property of this corporation.
By resolution passed by a majority of the whole board, to designate one or
more committees, each committee to consist of one or more of the directors of
the corporation, which, to the extent provided in the resolution or in the
By-laws of the corporation, shall have and may exercise the powers of the
Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to
all papers which may require it. Such committee or committees shall have
such name or names as may be stated in the By-laws of the corporation or as
may be determined from time to time by resolution adopted by the Board of
Directors.
When and as authorized by the affirmative vote of stockholders holding stock
entitling them to exercise at least a majority of the voting power given at a
stockholders' meeting called for that purpose, or when authorized by the
written consent of the holders of at least a majority of the voting stock
issued and outstanding, the Board of Directors shall have power and authority
at any meeting to sell, lease or exchange all of the property and assets of
the corporation, including its goodwill and its corporate franchises, upon
such terms and conditions as its Board of Directors deem expedient and for
the best interests of the corporation.
TENTH. The corporation shall indemnify and hold all of its officers,
directors, agents and employees harmless from and against any and all claims,
suits, actions, damages and liabilities of whatsoever nature arising from
their actions on behalf of the corporation. This indemnification shall be to
the fullest extent permitted under N.R.S. 78.751, as amended from time to
time.
THE UNDERSIGNED, being the Incorporator hereinbefore named for the purpose
of forming a corporation pursuant to the General Corporation Law of the State
of Nevada, does make and file these Articles of Incorporation, hereby
declaring and certifying the facts herein stated are true, and, accordingly,
has hereunto set his hand this 18th day of August, 1994.
/s/ Michael J. Morrison
------------------------
Michael J. Morrison
STATE OF NEVADA )
)ss
COUNTY OF WASHOE )
On this 18th day of August, 1994, before me, a Notary Public, personally
appeared, Rita S. Dickson, who acknowledged she executed the above instrument.
/s/ Rita Sue Dickson RITA SUE DICKSON
--------------------- Notary Public- State of Nevada
Notary Public Appointment Recorded in Washoe County
MY APPOINTMENT EXPIRES APRIL 21, 1997
ACCEPTANCE OF APPOINTMENT BY RESIDENT AGENT
IN THE MATTER OF Spectral Innovations (1994) Inc., I, Michael J. Morrison,
hereby certify that on the 18th day of August, 1994, 1 accepted the
appointment as Resident Agent of the above-entitled corporation in accordance
with Sec. 78.090, NRS 1957.
Furthermore, that the principal office in this State is located at 1025
Ridgeview Drive, Suite 400, Reno, Washoe County, Nevada 89509.
IN WITNESS WHEREOF, I have hereunto set my hand this 18th day of August,
1994.
/s/ Michael J.
Morrison
-------------------------------------------
Michael J. Morrison, Resident Agent
I hereby certify that this is a true and complete copy of the document as
filed in this office
DATED: AUG 19 1994
/s/ Chaeryl A. Lau
---------------------
CHERYL A. LAU
Secretary of State
By: /s/ Margaret *****
EXHIBIT 3(i).2
AMENDED AND RESTATED ARTICLES OF INCORPORATION OF AZTEK, INC.
(formerly Spectral Innovations (1994), Inc.)
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
SPECTRAL INNOVATIONS (1994). INC.
The undersigned, being the President and Secretary of Spectral
Innovations (1994), Inc., hereby declare that the original Articles of the
corporation were filed with the Secretary of State of the State of Nevada on
August 19, 1994. Pursuant to the provisions of NRS 78.385-390, at a duly
noticed and convened meeting on May 28, 1998, the sole Shareholder of the
corporation, representing 100% of the of the voting power of the company's
common stock, unanimously voted for the following amendment to the Articles
of
Incorporation.
FIRST. The name of the corporation is: AZTEK, INC.
SECOND. The location of the registered office of this corporation
within the State of Nevada is 1025 Ridgeview Drive, Suite 400, Reno, Nevada
89509; this corporation may maintain an office or offices in such other place
within or without the State of Nevada as may be from time to time designated
by the Board of Directors or by the By-Laws of the corporation; and this
corporation may conduct all corporation business of every kind or nature
including the holding of any meetings of directors or shareholders, inside or
outside the State of Nevada as well as without the State of Nevada.
The Resident Agent for the corporation shall be Michael J. Morrison,
Esq. 1025 Ridgeview Drive, Suite 400, Reno, Nevada 89509.
THIRD The purpose for which this corporation is formed is: To engage
in any lawful activity.
FOURTH The amount of the total authorized capital stock of the
corporation shall be One Hundred Thousand Dollars ($100,000.00), consisting
of One Hundred Million (100,000,000) shares of Common Stock, par value $.001
pre share.
FIFTH The governing board of this corporation shall be known as
directors, and the Board shall consist of four (4) directors.
The number of directors may, pursuant to the By-Laws, be increased or
decreased by the board of Directors, provided there shall be no less than one
(1) nor more than nine (9) Directors.
The name and post office address of the four (4) Directors constituting
the
Board of Directors is as follows:
NAME POST OFFICE ADDRESS
- ----- --------------------
Mike Sintichakis 246 Lawrence Avenue, Suite 5
Kelowna, B.C., Canada V1Y 6L3
Nick Sintichakis 246 Lawrence Avenue, Suite 5
Kelowna, B.C., Canada V1Y 6L3
Edson Ng 623 Alpine Court
N. Vancouver, B.C., Canada V7R 2L7
Eileen Keogh 3579 West 1st Avenue
Vancouver, B.C., Canada V7R 1G9
SIXTH The capital stock, or the holders thereof, after the amount of
the subscription price has been paid in shall not be subject to any
assessment whatsoever to pay the debts of the corporation.
SEVENTH No cumulative voting shall be permitted in the election of
directors.
EIGHTH The corporation is to have perpetual existence.
NINTH Shareholders shall not be entitled to preemptive rights.
TENTH. Each person who was or is made a party or is threatened to be
made a party to or is involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she, or a person for whom he
or she is the legal representative, is or was a director of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans whether the basis of
such proceeding is alleged action in an official capacity as an officer or
director or in any other capacity while serving as an officer or director
shall be indemnified and held harmless by the Corporation to the fullest
extent authorized by the Nevada General Corporation Law, as the same exists
or may hereafter be amended, (but, in the case of any such amendment, only to
the extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide
prior to such amendment), against all expense, liability and loss (including
attorney's fees, judgments, fines, ERISA excise taxes or penalties and
amounts to be paid in settlement) reasonably incurred or suffered by such
person in connection therewith and such indemnification shall continue as to
a person who has ceased to be an officer or director and shall inure to the
benefit of his or her heirs, executors and administrators provided, however,
that except as provided herein with respect to proceedings seeking to enforce
rights to indemnification, the Corporation shall indemnify any such person
seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this Section shall be a contract right and shall
include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition; provided
however, that, if the Nevada General Corporation Law requires the payment of
such expenses incurred by an officer or director in his or her capacity as an
officer or director (and not in any other capacity in which service was or is
rendered by such person while an officer or director, including without
limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding , payment shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such officer or director,
to repay all amounts so advanced if it shall ultimately be determined that
such officer or director is not entitled to be indemnified under this Section
or otherwise.
If a claim hereunder is not paid in full by the Corporation within
ninety days after a written claim has been received by the Corporation, the
claimant may, at any time thereafter, bring suit against the Corporation to
recover the unpaid amount of the claim and, if successful, in whole or in
part, the claimant shall be entitled to be paid the expenses of prosecuting
such claim. It shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in defending any proceeding
in advance of its final disposition where the required undertaking, if any,
is required, has been tendered to the Corporation) that the claimant has not
met the standards of conduct which make it permissible under the Nevada General
Corporation Law for the Corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the Corporation.
Neither the failure of the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant
is proper in the circumstances because he or she has met the applicable
standard of conduct set forth in the Nevada General Corporation Law, nor an
actual determination by the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Section shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, By-Law, agreement, vote of Stockholders or disinterested
directors or otherwise.
The Corporation may maintain insurance, at its expense, to protect itself and
any officer, director, employee or agent of the Corporation or another
corporation, partnership, joint venture, trust or other enterprise against
any expense, liability or loss, whether or not the corporation would have the
power to indemnify such person against such expense, liability or loss under
the Nevada General Corporation Law.
The Corporation may, to the extent authorized from time to time by the Board
of Directors, grant rights to indemnification to any employee or agent of the
Corporation to the fullest extent of the provisions of this section with
respect to the indemnification and advancement of expenses of officers and
directors of the Corporation or individuals serving at the request of the
Corporation as an officer, director, employee or agent of another corporation
or of a partnership, joint venture, trust or other enterprise.
The UNDERSIGNED, being the President and Secretary of Spectral Innovations
(1994), Inc. hereby declare and certify that the facts herein stated are true
and, accordingly, have hereunto set their hands this 28th day of May, 1998.
/s/ Mike Sintichakis /s/ Nick Sintichakis
- -------------------------- -------------------------------
Mike Sintichakis, President Nick Sintichakis, Secretary
Province of British Columbia )
) ss:
County Yale )
On this 28th day of May, 1998, before me, a Notary Public, personally
appeared Mike Sintichakis, personally known to me, and who acknowledged to me
that he is the President of Spectral Innovations (1994), Inc. and that he
executed the above instrument.
/s/ Euan M. Gilmour
---------------------------------
Notary Public
Euan M. Gilmour
Barrister & Solicitor
207-478 Bernard Avenue
Kelowna, BC V1Y 6N7
Province of British Columbia )
) ss:
County Yale )
On this 28th day of May, 1998, before me, a Notary Public, personally
appeared Nick Sintichakis, personally known to me, and who acknowledged to me
that he is the Secretary of Spectral Innovations (1994), Inc. and that he
executed the above instrument.
/s/ Euan M. Gilmour
---------------------------------
Notary Public
Euan M. Gilmour
Barrister & Solicitor
207-478 Bernard Avenue
Kelowna, BC V1Y 6N7
THIS FORM SHOULD ACCOMPANY AMENDED AND/OR RESTATED
ARTICLES OF INCORPORATION FOR A NEVADA CORPORATION
SPECTRAL INNOVATIONS (1994) INC. !..q r.
1. Name of corporation: SPECTRAL INNOVATIONS (1994) INC.
2. Date of adoption of Amended and/or Restated Articles: Jun 08 1998
3. If the articles were amended, please indicate what changes have been made:
(a) Was there a name change? Yes [x] No [ ]. If yes, what is the new
name? AZTEK INC.
(b) Did you change your resident agent? Yes[ ] No [x]. If yes, please
indicate new address:
(c) Did you change the purposes? Yes[x] No [ ]. Did you add Banking? [ ],
Gaming? [ ], Insurance? [ ], None of these? [x].
(d) Did you change the capital stock? Yes [x] No [ ]. If yes, what is the
new capital stock? 100,000,000 Shares of Common Stock, par value $.001.
(e) Did you change the directors? Yes [x] No [ ]. If yes, indicate the
change: Increased the Board to 4 Directors from 2.
(f) Did you add the directors liability provision? Yes [x] No [ ].
(g) Did you change the period of existence? Yes [x] No [ ]. If yes, what is
the new existence? Perpetual
(h) If none of the above apply, and you have amended or modified the
articles, how did you change your articles? The status of the corporation
has changed from a close corporation to a statutory corporation under NRS Ch.
78.
/s/ Mike Sintichakis
------------------------------------
Mike Sintichakis, President
Date: May 28, 1998
Province of British Columbia)
) ss:
County of Yale )
On May 28th, 1998 personally appeared before me, a Notary Public, Mike
Sintichakis, who acknowledged that he executed the above document.
/s/ Euan M. Gilmour
---------------------------------
Notary Public
Euan M. Gilmour
Barrister & Solicitor
207-478 Bernard Avenue
Kelowna, BC V1Y 6N7
EXHIBIT 3(ii)
BY-LAWS OF AZTEK INC.
(formerly Spectral Innovations (1994), Inc.)
BYLAWS
OF
SPECTRAL INNOVATIONS(1994), INC.
ARTICLE 1.
OFFICES
1.1 Business Office
The principal business office ("principal office") of the corporation
shall be located at any place either within or without the State of Nevada as
designated in the corporation's most current Annual Report filed with the
Nevada Secretary of State. The corporation may have such other offices,
either within or without the State of Nevada, as the Board of Directors may
designate or as the business of the corporation may require from time to
time. The corporation shall maintain at its principal office a copy of
certain records, as specified in Section 2.14 of Article 2.
1.2 Registered Office
The registered office of the corporation shall be located within Nevada
and may be, but need not be, identical with the principal office, provided
the principal office is located within Nevada. The address of the registered
office may be changed from time to time by the Board of Directors.
ARTICLE 2. SHAREHOLDERS
2.1 Annual Shareholder Meeting
The annual meeting of the shareholders shall be held on the 30th day of
June each year, beginning with the year 1995 or at such other time on such
other day within such month as shall be fixed by the Board of Directors, for
the purpose of electing directors and for the transaction of such other
business as may come before the meeting. If the day fixed for the annual
meeting shall be a legal holiday in the State of Nevada, such meeting shall
be held on the next succeeding business day.
If the election of directors shall not be held on the day designated
herein for any annual meeting of the shareholders, or at any subsequent
continuation after adjournment thereof, the Board of Directors shall cause
the election to be held at a special meeting of the shareholders as soon
thereafter as convenient.
2.2 Special Shareholder Meetings.
Special meetings of the shareholders, for any purpose or purposes
described in the notice of meeting, may be called by the president, or by the
Board of Directors, and shall be called by the president at the request of
the holders of not less than one-tenth of all outstanding shares of the
corporation entitled to vote on any issue at the meeting.
2.3 Place of Shareholder Meetings
The Board of Directors may designate any place, either within or
without the State of Nevada, as the place for any annual or any special
meeting of the shareholders, unless by written consent, which nay be in the
form of waivers of notice or otherwise, all shareholders entitled to vote at
the meeting designate a different place, either within or without the State
of Nevada, as the place for the holding of such meeting. If no designation
is made by either the Board of Directors or unanimous action of the voting
shareholders, the place of meeting shall be the principal office of the
corporation in the State of Nevada.
2.4 Notice of Shareholder Meeting
(a) Required Notice. Written notice stating the place, day and hour of
any annual or special shareholder meeting shall be delivered not less than 10
nor more than 60 days before the date of the meeting, either personally or by
mail, by or at the direction of the president, the Board of Directors, or
other persons calling the meeting, to each shareholder of record entitled to
vote at such meeting and to any other shareholder entitled by the laws of the
State of Nevada governing corporations (the "Act") or the Articles of
Incorporation to receive notice of the meeting. Notice shall be deemed to be
effective at the earlier of: (1) when deposited in the United States mail,
addressed to the shareholder at his address as it appears on the stock
transfer books of the corporation, with postage thereon prepaid; (2) on the
date shown on the return receipt if sent by registered or certified mail,
return receipt requested, and the receipt is signed by or on behalf of the
addressee; (3) when received; or (4) 5 days after deposit in the United
States mail, if mailed postpaid and correctly addressed to an address,
provided in writing by the shareholder, which is different from that shown
in the corporation's current record of shareholders.
(b) Adjourned Meeting. If any shareholder meeting is adjourned to a
different date, time, or place, notice need not be given of the new date,
time, and place if the new date, time, and place is announced at the meeting
before adjournment. But if a new record date for the adjourned meeting is,
or must be fixed (see Section 2.5 of this Article 2) then notice must be given
pursuant to the requirements of paragraph (a) of this Section 2.4, to those
persons who are shareholders as of the new record date.
(c) Waiver of Notice. A shareholder may waive notice of the meeting (or
any notice required by the Act, Articles of Incorporation, or Bylaws), by a
writing signed by the shareholder entitled to the notice, which is delivered
to the corporation (either before or after the date and time stated in the
notice) for inclusion in the minutes of filing with the corporate records.
A shareholder's attendance at a meeting:
(1) waives objection to lack of notice or defective notice of the
meeting unless the shareholder, at the beginning of the meeting, objects to
holding the meeting or transacting business at the meeting; and
(2) waives objection to consideration of a particular matter at the
meeting that is not within the purpose or purposes described in the meeting
notice, unless the shareholder objects to consideration of the matter when it
is presented.
(d) Contents of Notice. The notice of each special shareholder meeting
shall include a description of the purpose or purposes for which the meeting
is called. Except as provided in this Section 2.4(d), or as provided in the
corporation's articles, or otherwise in the Act, the notice of an annual
shareholder meeting need not include a description of the purpose or purposes
for which the meeting is called.
If a purpose of any shareholder meeting is to consider either:(1) a
proposed amendment to the Articles of Incorporation(including any restated
articles requiring shareholder approval);(2) a plan of merger or share
exchange; (3) the sale, lease, exchange or other disposition of all, or
substantially all of the corporation's property; (4) the dissolution of the
corporation; or (5) the removal of a director, the notice must so state and
be accompanied by, respectively, a copy or summary of the: (a)articles of
amendment; (b) plan of merger or share exchange; and(c) transaction for
disposition of all, or substantially all, of the corporation's property. If
the proposed corporate action creates dissenters' rights, as provided in the
Act, the notice must state that shareholders are, or may be entitled to
assert dissenters' rights, and must be accompanied by a copy of relevant
provisions of the Act. If the corporation issues, or authorizes the issuance
of shares for promissory notes or for promises to render services in the
future, the corporation shall report in writing to all the shareholders the
number of shares authorized or issued, and the consideration received with or
before the notice of the next shareholder meeting. Likewise, if the
corporation indemnifies or advances expenses to an officer or a director,
this shall be reported to all the shareholders with or before notice of the
next shareholder meeting.
2.5 Fixing of Record Date
For the purpose of determining shareholders of any voting group
entitled to notice of or to vote at any meeting of shareholders, or
shareholders entitled to receive payment of any distribution or dividend, or
in order to make a determination of shareholders for any other proper
purpose, the Board of Directors may fix in advance a date as the record date.
Such record date shall not be more than 70 days prior to the date on which
the particular action requiring such determination of shareholders entitled
to notice of, or to vote at a meeting of shareholders, or shareholders
entitled to receive a share dividend or distribution. The record date for
determination of such shareholders shall be at the close of business on:
(a) With respect to an annual shareholder meeting or any special
shareholder meeting called by the Board of Directors or any person
specifically authorized by the ' Board of Directors or these Bylaws to call a
meeting, the day before the first notice is given to shareholders;
(b) With respect to a special shareholder meeting demanded by the
shareholders, the date the first shareholder signs the demand;
(c) With respect to the payment of a share dividend, the date the Board of
Directors authorizes the share dividend;
(d) With respect to actions taken in writing without a meeting (pursuant
to Article 2, Section 2.12), the first date any shareholder signs a consent; and
(e) With respect to a distribution to shareholders, (other than one
involving a repurchase or reacquisition of shares), the date the Board of
Directors authorizes the distribution.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made, as provided in this section, such determination
shall apply to any adjournment thereof unless the Board of Directors fixes a
new record date, which it must do if the meeting is adjourned to a date more
than 120 days after the date fixed for the original meeting.
If no record date has been fixed, the record date shall be the date the
written notice of the meeting is given to shareholders.
2.6 Shareholder List
The officer or agent having charge of the stock transfer books for
shares of the corporation shall, at least ten (10) days before each meeting of
shareholders, make a complete record of the shareholders entitled to vote at
each meeting of shareholders, arranged in alphabetical order, with the
address of and the number of shares held by each. The list must be arranged
by class or series of shares. The shareholder list must be available for
inspection by any shareholder, beginning two business days after notice of
the meeting is given for which the list was prepared and continuing through
the meeting. The list shall be available at the corporation's principal
office or at a place in the city where the meeting is to be held, as set
forth in the notice of meeting. A shareholder, his agent, or attorney is
entitled, on written demand, to inspect and, subject to the requirements of
Section 2.14 of this Article 2, to copy the list during regular business
hours and at his expense, during the period it is available for inspection.
The corporation shall maintain the shareholder list in written form or in
another form capable of conversion into written form within a reasonable time.
2.7 Shareholder Quorum and Voting Requirements
A majority of the outstanding shares of the corporation entitled to
vote, represented in person or by proxy, shall constitute a quorum at a
meeting of shareholders. If less than a majority of the outstanding shares are
represented at a meeting, a majority of the shares so represented may adjourn
the meeting from time to time without further notice. At such adjourned
meeting at which quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. The shareholders present at a duly organized meeting may continue
to transact business until adjournment, notwithstanding the withdrawal of
enough shareholders to leave less than a quorum.
Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting, unless a new record date is or must be set for
that adjourned meeting.
If a quorum exists, a majority vote of those shares present and voting
at a duly organized meeting shall suffice to defeat or enact any proposal
unless the Statutes of the State of Nevada, the Articles of Incorporation or
these Bylaws require a greater-than-majority vote, in which event the higher
vote shall be required for the action to constitute the action of the
corporation.
2.8 Increasing Either quorum or Voting Requirements
For purposes of this Section 2.8, a "supermajority" quorum is a
requirement that more than a majority of the votes of the voting group be
present to constitute a quorum; and a "supermajority" voting requirement is
any requirement that requires the vote of more than a majority of the
affirmative votes of a voting group at a meeting.
The shareholders, but only if specifically authorized to do so by the
Articles of Incorporation, may adopt, amend, or delete a Bylaw which fixes a
"supermajority" quorum or "supermajority" voting requirement.
The adoption or amendment of a Bylaw that adds, changes, or deletes a
"supermajority" quorum or voting requirement for shareholders must meet the
same quorum requirement and be adopted by the same vote required to take
action under the quorum and voting requirement then if effect or proposed to
be adopted, whichever is greater.
A Bylaw that fixes a supermajority quorum or voting requirement for
shareholders may not be adopted, amended, or repealed by the Board of
Directors.
2.9 Proxies
At all meetings of shareholders, a shareholder may vote in person, or
vote by written proxy executed in writing by the shareholder or executed by
his duly authorized attorney-in fact. Such proxy shall be filed with the
secretary of the corporation or other person authorized to tabulate votes
before or at the time of the meeting. No proxy shall be valid after eleven
(11) months from the date of its execution unless otherwise specifically
provided in the proxy or coupled with an interest.
2.10 Voting of Shares
Unless otherwise provided in the articles, each outstanding share
entitled to vote shall be entitled to one vote upon each matter submitted to
a vote at a meeting of shareholders.
Shares held by an administrator, executor, guardian or conservator may
be voted by him, either in person or by proxy, without the transfer of such
shares into his name. Shares standing in the name of a trustee may be voted
by him, either in person or by proxy, but no trustee shall be entitled to
vote shares held by him without transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver maybe voted by such
receiver without the transfer thereof into his name if authority to do so is
contained in an appropriate order of the Court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares are transferred into the name of the pledgee, and
thereafter, the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to the corporation or held by it in a
fiduciary capacity shall not be voted directly or indirectly, at any meeting,
and shall not be counted in determining the total number of outstanding
shares at any given time.
Redeemable shares are not entitled to vote after notice of redemption is
mailed to the holders and a sum sufficient to redeem the shares has been
deposited with a bank, trust company, or other financial institution under an
irrevocable obligation to pay the holders the redemption price on surrender
of the shares.
2.11 Corporation's Acceptance of Votes
(a) If the name signed on a vote, consent, waiver, or proxy appointment
corresponds to the name of a shareholder, the corporation, if acting in good
faith, is entitled to accept the vote, consent, waiver, or proxy appointment
and give it effect as the act of the shareholder.
(b) If the name signed on a vote, consent, waiver, or proxy appointment
does not correspond to the name of its shareholder, the corporation, if
acting in good faith, is nevertheless entitled to accept the vote, consent,
waiver, or proxy appointment and give it effect as the act of the shareholder
if:
(1) the shareholder is an entity, as defined in the Act, and the name
signed purports to be that of an officer or agent of the entity;
(2) the name signed purports to be that of an administrator, executor,
guardian or conservator representing the shareholder and, if the corporation
requests, evidence of fiduciary status acceptable to the corporation has been
presented with respect to the vote, consent, waiver, or proxy appointment;
(3) the name signed purports to be that of a receiver or trustee in
bankruptcy of the shareholder and, if the corporation requests, evidence of
this status acceptable to the corporation has been presented with respect to
the vote, consent, waiver or proxy appointment;
(4) the name signed purports to be that of a pledgee, beneficial owner,
or attorney-in- fact of the shareholder and, if the corporation requests,
evidence acceptable to the corporation of the signatory's authority to sign
for the shareholder has been presented with respect to the vote, consent,
waiver, or proxy appointment; or
(5) the shares are held in the name of two or more persons as
co-tenants or fiduciaries and the name signed purports to be the name of at
least one of the co-owners and the person signing appears to be acting on
behalf of all the co-owners.
(c) The corporation is entitled to reject a vote, consent, waiver, or
proxy appointment if the secretary or other officer or agent authorized to
tabulate votes, acting in good faith, has reasonable basis for doubt about the
validity of the signature on it or about the signatory's authority to sign
for the shareholder.
(d) The corporation and its officer or agent who accepts or rejects a
vote, consent, waiver, or proxy appointment in good faith and in accordance
with the standards of this Section 2.11 are not liable in damages to the
shareholder for the consequences of the acceptance or rejection.
(e) Corporation action based on the acceptance or rejection of a vote,
consent, waiver, or proxy appointment under this section is valid unless a
court of competent jurisdiction determines otherwise.
2.12 Informal Action by Shareholders
Any action required or permitted to be taken at a meeting of the
shareholders may be taken without a meeting if one or more written consents,
setting forth the action so taken, shall be signed by shareholders holding a
majority of the shares entitled to vote with respect to the subject matter
thereof, unless a "supermajority" vote is required by these Bylaws, in which
case a "supermajority" vote will be required. Such consent shall be
delivered to the corporation secretary for inclusion in the minute book. A
consent signed under this Section has the effect of a vote at a meeting and
may be described as such in any document.
2.13 Voting for Directors
Unless otherwise provided in the Articles of Incorporation, directors are
elected by a plurality of the votes cast by the shares entitled to vote in
the election at a meeting at which a quorum is present.
2.14 Shareholders' Rights to Inspect Corporate Records
Shareholders shall have the following rights regarding inspection of
corporate records:
(a) Minutes and Accounting Records - The corporation shall keep, as
permanent records, minutes of all meetings of its shareholders and Board of
Directors, a record of all actions taken by the shareholders or Board of
Directors without a meeting, and a record of all actions taken by a committee
of the Board of Directors in place of the Board of Directors on behalf of the
corporation. The corporation shall maintain appropriate accounting records.
(b) Absolute Inspection Rights of Records Required at Principal Office -
If a shareholder gives the corporation written notice of his demand at least
five business days before the date on which he wishes to inspect and copy,
he, or his agent or attorney, has the right to inspect and copy, during regular
business hours, any of the following records, all of which the corporation is
required to keep at its principal office:
(1) its Articles or restated Articles of Incorporation and all
amendments to them currently in effect;
(2) its Bylaws or restated Bylaws and all amendments to them currently
in effect;
(3) resolutions adopted by its Board of Directors creating one or more
classes or series of shares, and fixing their relative rights, preferences
and limitations, if shares issued pursuant to those resolutions are outstanding;
(4) the minutes of all shareholders' meetings, and records of all action
taken by shareholders without a meeting, for the past three years;
(5) all written communications to shareholders within the past three
years, including the financial statements furnished for the past three years
to the shareholders;
(6) a list of the names and business addresses of its current directors
and officers; and
(7) its most recent annual report delivered to the Nevada Secretary of
State.
(c) Conditional Inspection Right - In addition, if a shareholder gives the
corporation a written demand, made in good faith and for a proper purpose, at
least five business days before the date on which he wishes to inspect and
copy, describes with reasonable particularity his purpose and the records he
desires to inspect, and the records are directly connected to his purpose, a
shareholder of a corporation, or his duly authorized agent or attorney, is
entitled to inspect and copy, during regular business hours at a reasonable
location specified by the corporation, any of the following records of the
corporation:
(1) excerpts from minutes of any meeting of the Board of Directors;
records of any action of a committee of the Board of Directors on behalf of
the corporation; minutes of any meeting of the shareholders; and records of
action taken by the shareholders or Board of Directors without a meeting, to
the extent not subject to inspection under paragraph (a) of this Section 2.14;
(2) accounting records of the corporation; and
(3) the record of shareholders (compiled no earlier than the date of the
shareholder's demand).
(d) Copy Costs - The right to copy records includes, if reasonable, the
right to receive copies made by photographic, xerographic, or other means.
The corporation may impose a reasonable charge, to be paid by the shareholder
on terms set by the corporation, covering the costs of labor and material
incurred in making copies of any documents provided to the shareholder.
(e) "Shareholder" Includes Beneficial owner - For purposes of this Section
2.14, the term "shareholder" shall include a beneficial owner whose shares
are held in a voting trust or by a nominee on his behalf.
2.15 Financial Statements shall Be Furnished to the Shareholders.
(a) The corporation shall furnish its shareholders annual financial
statements, which may be consolidated or combined statements of corporation
and one or more of its subsidiaries, as appropriate, that include a balance
sheet as of the end of the fiscal year, an income statement for that year,
and a statement of changes in shareholders' equity for the year, unless that
information appears elsewhere in the financial statements. If financial
statements are prepared for the corporation on the basis of generally
accepted accounting principles, the annual financial statements for the
shareholders must also be prepared on that basis.
(b) If the annual financial statements are reported upon by a public
accountant, his report must accompany them. If not, the statements must be
accompanied by a statement of the president or the person responsible for the
corporation's accounting records:
(1) stating his reasonable belief that the statements were prepared on
the basis of generally accepted accounting principles and, if not, describing
the basis of preparation; and
(2) describing any respects in which the statements were not prepared on a
basis of accounting consistent with the Statements prepared for the preceding
year.
(c) A corporation shall mail the annual financial statements to each
shareholder within 120 days after the close of each fiscal year. Thereafter,
on written request from a shareholder who was not mailed the statements, the
corporation shall mail him the latest financial statements.
2.16 Dissenters' Rights.
Each shareholder shall have the right to dissent from and obtain payment for
his shares when so authorized by the Act, Articles of Incorporation, these
Bylaws, or a resolution of the Board of Directors.
2.17 Order of Business.
The following order of business shall be observed at all meetings of the
shareholders, as applicable and so far as practicable:
(a) Calling the roll of officers and directors present and determining
shareholder quorum requirements;
(b) Reading, correcting and approving of minutes of previous meeting;
(c) Reports of officers;
(d) Reports of Committees;
(e) Election of Directors;
(f) Unfinished business;
(g) New business; and
(h) Adjournment.
ARTICLE 3. BOARD OF DIRECTORS
3.1 General Powers.
Unless the Articles of Incorporation have dispensed with or limited the
authority of the Board of Directors by describing who will perform some or all
of the duties of a Board of Directors, all corporate powers shall be exercised
by or under the authority of, and the business and affairs of the corporation
shall be managed under the direction of the Board of Directors.
3.2 Number, Tenure and Qualification of Directors.
Unless otherwise provided in the Articles of Incorporation, the authorized
number of directors shall be not less than 1 (minimum number) nor more than
11 (maximum number). The initial number of directors was established in the
original Articles of Incorporation. The number of directors shall always be
within the limits specified above, and as determined by resolution adopted by
the Board of Directors. After any shares of this corporation are issued,
neither the maximum nor minimum number of directors can be changed, nor can a
fixed number be substituted for the maximum and minimum numbers, except by a
duly adopted amendment to the Articles of Incorporation duly approved by a
majority of the outstanding shares entitled to vote. Each director shall
hold office until the next annual meeting of shareholders or until removed.
However, if his term expires, he shall continue to serve until his successor
shall have been elected and qualified, or until there is a decrease in the
number of directors. Unless required by the Articles of Incorporation,
directors do not need to be residents of Nevada or shareholders of the
corporation.
3.3 Regular Meetings of the Board of Directors.
A regular meeting of the Board of Directors shall be held without other
notice than this Bylaw immediately after, and at the same place as, the
annual meeting of shareholders. The Board of Directors may provide, by
resolution, the time and place for the holding of additional regular meetings
without other notice than such resolution. (If permitted by Section 3.7, any
regular meeting may be held by telephone).
3.4 Special Meeting of the Board of Directors.
Special meetings of the Board of Directors may be called by or at the
request of the president or any one director. The person or persons
authorized to call special meetings of the Board of Directors may fix any
place, either, within or without the State of Nevada, as the place for
holding any special meeting of the Board of Directors or, if permitted by
Section 3.7, any special meeting may be held by telephone.
3.5 Notice of, and Waiver of Notice of, Special Meetings of the Board of
Directors.
Unless the Articles of Incorporation provide for a longer or shorter
period, notice of any special meeting of the Board of Directors shall be
given at least two days prior thereto, either orally or in writing. If mailed,
notice of any director meeting shall be deemed to be effective at the earlier
of: (1) when received; (2) five days after deposited in the United States
mail, addressed to the director's business office, with postage thereon
prepaid; or (3) the date shown on the return receipt, if sent by registered
or certified mail, return receipt requested, and the receipt is signed by or on
behalf of the director. Notice may also be given by facsimile and, in such
event, notice shall be deemed effective upon, transmittal thereof to a
facsimile number of a compatible facsimile machine at the director's business
office. Any director may waive notice of any meeting. Except as otherwise
provided herein, the waiver must be in writing, signed by the director
entitled to the notice, and filed with the minutes or corporate records. The
attendance of a director at a meeting shall constitute a waiver of notice of
such meeting, except where a director attends a meeting for the express
purpose of objecting to the transaction of any business and at the beginning
of the meeting, or promptly upon his arrival, objects to holding the meeting
or transacting business at the meeting, and does not thereafter vote for or
assent to action taken at the meeting. Unless required by the Articles of
Incorporation or the Act, neither the business to be transacted at, nor the
purpose of, any special meeting of the Board of Directors need be specified
in the notice or waiver of notice of such meeting.
3.6 Director Quorum.
A majority of the number of directors fixed, pursuant to Section3.2 of
this Article 3, shall constitute a quorum for the transaction of business at
any meeting of the Board of Directors, unless the Articles of Incorporation
or the Act require a greater number for a quorum.
Any amendment to this quorum requirement is subject to the provisions of
Section 3.8 of this Article 3.
Once a quorum has been established at a duly organized meeting, the
Board of Directors may continue to transact corporate business until
adjournment, notwithstanding the withdrawal of enough directors to leave less
than a quorum.
3.7 Actions By Directors.
The act of the majority of the directors present at a meeting at which a
quorum is present when the vote is taken shall be the act of the Board of
Directors, unless the Articles of Incorporation or the Act require a greater
percentage. Any amendment which changes the number of directors needed to
take action is subject to the provisions of Section 3.8 of this Article 3.
Unless the Articles of Incorporation provide otherwise, any or all
directors may participate in a regular or special meeting by, or conduct the
meeting through the use of, any means of communication by which all directors
participating may simultaneously hear each other during the meeting. Minutes
of any such meeting shall be prepared and entered into the records of the
corporation. A director participating in a meeting by this means is deemed
to be present in person at the meeting.
A director who is present at a meeting of the Board of Directors or a
committee of the Board of Directors when corporate action is taken is deemed
to have assented to the action taken unless: (1)he objects at the beginning
of the meeting, or promptly upon his arrival, to holding it or transacting
business at the meeting; or(2) his dissent or abstention from the action
taken is entered in the minutes of the meeting; or (3) he delivers written
notice of his dissent or abstention to the presiding officer of the meeting
before its adjournment or to the corporation within 24 hours after
adjournment of the meeting. The right of dissent or abstention is not
available to a director who votes in favor of the action taken.
3.8 Establishing a "supermajority" Quorum or Voting Requirement for the
Board of Directors.
For purposes of this Section 3.8, a "supermajority" quorum is a
requirement that more than a majority of the directors in office constitute a
quorum; and a "supermajority" voting requirement is one which requires the
vote of more than a majority of those directors present at a meeting at which
a quorum is present to be the act of the directors.
A Bylaw that fixes a supermajority quorum or supermajority voting
requirement may be amended or repealed:
(1) if originally adopted by the shareholders, only by the shareholders
(unless otherwise provided by the shareholders); or
(2) if originally adopted by the Board of Directors, either by the
shareholders or by the Board of Directors.
A Bylaw adopted or amended by the shareholders that fixes a supermajority
quorum or supermajority voting requirement for the Board of Directors may
provide that it may be amended or repealed only by a specified vote of either
the shareholders or the Board of Directors.
Subject to the provisions of the preceding paragraph, action by the
Board of Directors to adopt, amend, or repeal a Bylaw that changes the quorum
or voting requirement for the Board of Directors must meet the same quorum
requirement and be adopted by the same vote required to take action under the
quorum and voting requirement then in effect or proposed to be adopted,
whichever is greater.
3.9 Director Action Without a Meeting
Unless the Articles of Incorporation provide otherwise, any action
required or permitted to be taken by the Board of Directors at a meeting may
be taken without a meeting if all the directors sign a written consent
describing the action taken. Such consents shall be filed with the records
of the corporation. Action taken by consent is effective when the last
director signs the consent, unless the consent specifies a different
effective date. A signed consent has the effect of a vote at a duly noticed
and conducted meeting of the Board of Directors and may be described as such
in any document.
3.10 Removal of Directors.
The shareholders may remove one or more directors at a meeting called
for that purpose if notice has been given that a purpose of the meeting is such
removal. The removal may be with or without cause unless the Articles of
Incorporation provide that directors may only be removed for cause. If
cumulative voting is not authorized, a director may be removed only if the
number of votes cast in favor of removal exceeds the number of votes cast
against removal.
3.11 Board of Director Vacancies.
Unless the Articles of Incorporation provide otherwise, if a vacancy
occurs on the Board of Directors, excluding a vacancy resulting from an
increase in the number of directors, the director(s) remaining in office
shall fill the vacancy. If the directors remaining in office constitute
fewer than a quorum of the Board of Directors, they may fill the vacancy by the
affirmative vote of a majority of all the directors remaining in office.
If a vacancy results from an increase in the number of directors, only
the shareholders may fill the vacancy.
A vacancy that will occur at a specific later date (by reason of a
resignation effective at a later date) may be filled by the Board of
Directors before the vacancy occurs, but the new director may not take office
until the vacancy occurs.
The term of a director elected to fill a vacancy expires at the next
shareholders' meeting at which directors are elected. However, if his term
expires, he shall continue to serve until his successor is elected and
qualifies or until there is a decrease in the number of directors.
3.12 Director Compensation.
Unless otherwise provided in the Articles of Incorporation, by resolution of
the Board of Directors, each director may be paid his expenses, if any, of
attendance at each meeting of the Board of Directors, and may be paid a
stated salary as director or a fixed sum for attendance at each meeting of
the Board of Directors, or both. No such payment shall preclude any director
from serving the corporation in any other capacity and receiving compensation
therefor.
3.13 Director Committees.
(a) Creation of Committees. Unless the Articles of Incorporation
provide otherwise, the Board of Directors may create one or more committees
and appoint members of the Board of Directors to serve on them. Each
committee must have two or more members, who serve at the pleasure of the
Board of Directors.
(b) Selection of Members. The creation of a committee and appointment
of members to it must be approved by the greater of (1) a majority of all the
directors in office when the action is taken, or (2) the number of directors
required by the Articles of Incorporation to take such action.
(c) Required Procedures. Sections 3.4, 3.5, 3.6, 3.7, 3.8 and 3.9 of
this Article 3 apply to committees and their members.
(d) Authority. Unless limited by the Articles of Incorporation or the
Act, each committee may exercise those aspects of the authority of the Board
of Directors which the Board of Directors confers upon such committee in the
resolution creating the committee. Provided, however, a committee may not:
(1) authorize distributions to shareholders;
(2) approve or propose to shareholders any action that the Act
requires be approved by shareholders;
(3) fill vacancies on the Board of Directors or on any of its
committees;
(4) amend the Articles of Incorporation;
(5) adopt, amend, or repeal Bylaws;
(6) approve a plan of merger not requiring shareholder approval;
(7) authorize or approve reacquisition of shares, except according
to a formula or method prescribed by the Board of Directors; or
(8) authorize or approve the issuance or sale, or contract for sale
of shares, or determine the designation and relative rights, preferences, and
limitations of a class or series of shares; except -that the Board of
Directors may authorize a committee to do so within limits specifically
prescribed by the Board of Directors.
ARTICLE 4. OFFICERS
4.1 Designation of Officers.
The officers of the corporation shall be a president, a secretary, and a
treasurer, each of whom shall be appointed by the Board of Directors. Such
other officers and assistant officers as may be deemed necessary, including
any vice-presidents, may be appointed by the Board of Directors. The same
individual may simultaneously hold more than one office in the corporation.
4.2 Appointment and Term of office.
The officers of the corporation shall be appointed by the Board of Directors
for a term as determined by the Board of Directors. If no term is specified,
they shall hold office until the first meeting of the directors held after
the next annual meeting of share holders. If the appointment of officers is
not made at such meeting, such appointment shall be made as soon thereafter
as is convenient. Each officer shall hold office until his successor has
been duly appointed and qualified, until his death, or until here signs or
has been removed in the manner provided in Section 4.3of this Article 4.
The designation of a specified term does not grant to the officer any
contract rights, and the Board of Directors can remove the officer at any
time prior to the termination of such term. Appointment of an officer shall
not of itself create any contract rights.
4.3 Removal of officers.
Any officer may be removed by the Board of Directors at anytime, with or
without cause. Such removal shall be without prejudice to the contract
rights, if any, of the person so removed.
4.4 President.
The president shall be the principal executive officer of the
corporation and, subject to the control of the Board of Directors, shall
generally supervise and control all of the business and affairs of the
corporation. He shall, when present, preside at all meetings of the
shareholders. He may sign, with the secretary or any other proper officer of
the corporation thereunto duly authorized by the Board of Directors,
certificates for shares of the corporation and deeds, mortgages, bonds,
contracts, or other instruments which the Board of Directors has authorized
to be executed ' except in cases where the signing and execution thereof
shall be expressly delegated by the Board of Directors or by these Bylaws to
some other officer or agent of the corporation, or shall be required by law
to be otherwise signed or executed. The president shall generally perform
all duties incident to the office of president and such other duties as may
be prescribed by the Board of Directors from time to time.
4.5 Vice-President.
If appointed, in the absence of the president or in the event of the
president's death, inability or refusal to act, the vice-president (or in the
event there be more than one vice-president, the vice-presidents in the order
designated at the time of their election, or in the absence of any
designation, then in the order of their appointment) shall perform the duties
of the president, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the president. If there is no
vice-president, then the treasurer shall perform such duties of the
president. Any vice-president may sign with the secretary or an assistant
secretary, certificates for shares of the corporation the issuance of which
have been authorized by resolution of the Board of Directors. A
vice-president shall perform such other duties as from time to time may be
assigned to him by the president or by the Board of Directors.
4.6 Secretary.
The secretary shall (a) keep the minutes of the proceedings of the
shareholders and of the Board of Directors in one or more books provided for
that purpose; (b) see that all notices are duly given accordance with the
provisions of these Bylaws or as required by law; (c) be custodian of the
corporate records and of any seal of the corporation and, if there is a seal
of the corporation, see that it is affixed to all documents, the execution of
which on behalf of the corporation under its seal is duly authorized; (d)when
requested or required, authenticate any records of the corporation; (e) keep
a register of the post office address of each shareholder, as provided to the
secretary by the shareholders; (f)sign with the president, or a
vice-resident, certificates for shares of the corporation, the issuance of
which has been authorized by resolution of the Board of Directors; (g) have
general charge of the stock transfer books of the corporation; and(h)
generally perform all duties incident to the office of secretary and such
other duties as from time to time may be assigned to him by the president or
by the Board of Directors.
4.7 Treasurer.
The treasurer shall (a) have charge and custody of and be responsible
for all funds and securities of the corporation; (b) receive and give receipts
for moneys due and payable to the corporation from any source whatsoever, and
deposit all such moneys in the name of the corporation in such banks, trust
companies, or other depositaries as may be selected by the Board of
Directors; and (c) generally perform all of the duties incident to the office
of treasurer and such other duties as from time to time may be assigned to him
by the president or by the Board of Directors. If required by the Board of
Directors, the treasurer shall give a bond for the faithful discharge of his
duties in such sum and with such surety or sureties as the Board of Directors
shall determine.
4.8 Assistant Secretaries and Assistant Treasurers.
The assistant secretaries, when authorized by the Board of Directors, may
sign with the president, or a vice-president, certificates for shares of the
corporation, the issuance of which has been authorized by a resolution of the
Board of Directors. The assistant treasurers shall respectively, if required
by the Board of Directors, give bonds for the faithful discharge of their
duties in such sums and with such sureties as the Board of Directors shall
determine. The assistant secretaries and assistant treasurers, generally,
shall perform such duties as may be assigned to them by the secretary or the
treasurer, respectively, or by the president or the Board of Directors.
4.9 Salaries.
The salaries of the officers, if any, shall be fixed from time to time
by the Board of Directors.
ARTICLE 5. INDEMNIFICATION OF DIRECTORS,
OFFICERS, AGENTS, AND EMPLOYEES
5.1 Indemnification of officers, Directors, Employees and Agents.
Unless otherwise provided in the Articles of Incorporation, the
corporation shall indemnify any individual made a party to a proceeding
because he is or was an officer, director employee or agent of the
corporation against liability incurred in the proceeding, all pursuant to and
consistent with the provisions of NRS 78.751, as amended from time to time.
5.2 Advance Expenses for Officers and Directors.
The expenses of officers and directors incurred in defending a civil or
criminal action, suit or proceeding shall be paid by the corporation as they
are incurred and in advance of the final disposition of the action, suit or
proceeding, but only after receipt by the corporation of an undertaking by or
on behalf of the officer or director on terms set by the Board of Directors,
to repay the expenses advanced if it is ultimately determined by a court of
competent jurisdiction that he is not entitled to be indemnified by the
corporation.
5.3 Scope of Indemnification.
The indemnification permitted herein is intended to be to the fullest
extent permissible under the laws of the State of Nevada, and any amendments
thereto.
ARTICLE 6. CERTIFICATES FOR SHARES AND THEIR TRANSFER
6.1 Certificates for Shares.
(a) Content
Certificates representing shares of the corporation shall at minimum,
state on their face the name of the issuing corporation; that the corporation
is formed under the laws of the State of Nevada; the name of the person to
whom issued; the certificate number; class and par value of shares; and the
designation of the series, if any, the certificate represents. The form of
the certificate shall be as determined by the Board of Directors. Such
certificates shall be signed (either manually or by facsimile) by the
president or a vice-president and by the secretary or an assistant secretary
and may be sealed with a corporate seal or a facsimile thereof. Each
certificate for shares shall be consecutively numbered or otherwise
identified.
(b) Legend as to Class or series
If the corporation is authorized to issue different classes of shares
or different series within a class, the designations, relative rights,
preferences, and limitations applicable to each class and the variations in
rights, preferences, and limitations determined for each series (and the
authority of the Board of Directors to determine variations for future
series) must be summarized on the front or back of the certificate indicating
that the corporation will furnish the shareholder this information on request
in writing and without charge.
(c) Shareholder List
The name and address of the person to whom the shares are issued, with
the number of shares and date of issue, shall be entered on the stock
transfer books of the corporation.
(d) Transferring Shares
All certificates surrendered to the corporation for transfer shall be
canceled and no new certificate shall be issued until the former certificate
for a like number of shares shall have been surrendered and canceled, except
that in case of a lost, destroyed, or mutilated certificate, a new one may be
issued therefor upon such terms as the Board of Directors may prescribe,
including indemnification of the corporation and bond requirements.
6.2 Registration of the Transfer of Shares.
Registration of the transfer of shares of the corporation shall be made
only on the stock transfer books of the corporation. In order to register a
transfer, the record owner shall surrender the share certificate to the
corporation for cancellation, properly endorsed by the appropriate person or
persons with reasonable assurances that the endorsements are genuine and
effective. Unless the corporation has established a procedure by which a
beneficial owner of shares held by a nominee is to be recognized by the
corporation as the owner, the person in whose name shares stand on the books
of the corporation shall be deemed by the corporation to be the owner thereof
for all purposes.
6.3 Restrictions on Transfer of Shares Permitted.
The Board of Directors may impose restrictions on the transferor
registration of transfer of shares, including any security convertible into,
or carrying a right to subscribe for or acquire shares. A restriction does
not affect shares issued before the restriction was adopted unless the
holders of the shares are parties to the restriction agreement or voted in
favor of the restriction.
A restriction on the transfer or registration of transfer of shares may
be authorized:
(1) to maintain the corporation's status when it is dependent on the
number or identity of its shareholders;
(2) to preserve exemptions under federal or state securities law; or
(3) for any other reasonable purpose.
A restriction on the transfer or registration of transfer of shares may:
(1) obligate the shareholder first to offer the corporation or other
persons (separately, consecutively, or simultaneously) an opportunity to
acquire the restricted shares;
(2) obligate the corporation or other persons (separately,
consecutively, or simultaneously) to acquire the restricted shares;
(3) require the corporation, the holders or any class of its shares, or
another person to approve the transfer of the restricted shares, if the
requirement is not manifestly unreasonable; or
(4) prohibit the transfer of the restricted shares to designated
persons or classes of persons, if the prohibition is not manifestly
unreasonable.
A restriction on the transfer or registration of transfer of shares is
valid and enforceable against the holder or a transferee of the holder if the
restriction is authorized by this Section 6.3 and its existence is noted
conspicuously on the front or back of the certificate. Unless so noted, a
restriction is not enforceable against a person without knowledge of the
restriction.
6.4 Acquisition of Shares.
The corporation may acquire its own shares and unless otherwise provided
in the Articles of Incorporation, the shares so acquired constitute
authorized but unissued shares.
If the Articles of Incorporation prohibit the reissue of shares
acquired by the corporation, the number of authorized shares is reduced by
the number of shares acquired, effective upon amendment of the Articles of
Incorporation, which amendment shall be adopted by the shareholders, or the
Board of Directors without shareholder action (if permitted by the Act). The
amendment must be delivered to the Secretary of State and must set forth:
(1) the name of the corporation;
(2) the reduction in the number of authorized shares, itemized by class and
series; and
(3) the total number of authorized shares, itemized by class and series,
remaining after reduction of the shares.
ARTICLE 7. DISTRIBUTIONS
7.1 Distributions.
The Board of Directors may authorize, and the corporation may make,
distributions (including dividends on its outstanding shares) in the manner
and upon the terms and conditions provided by law.
ARTICLE 8. CORPORATE SEAL
8.1 Corporate Seal.
The Board of Directors may adopt a corporate seal which may be circular in
form and have inscribed thereon any designation, including the name of the
corporation, Nevada as the state of incorporation, and the words "Corporate
Seal."
ARTICLE 9. EMERGENCY BYLAWS
9.1 Emergency Bylaws.
Unless the Articles of Incorporation provide otherwise, the following
provisions shall be effective during an emergency, which is defined as a time
when a quorum of the corporation's directors cannot be readily assembled
because of some catastrophic event.
During such emergency:
(a) Notice of Board Meetings
Any one member of the Board of Directors or any one of the following
officers: president, any vice-president, secretary, or treasurer, may call a
meeting of the Board of Directors. Notice of such meeting need be given only
to those directors whom it is practicable to reach, and may be given in any
practical manner, including by publication and radio. Such notice shall be
given at least six hours prior to commencement of the meeting.
(b) Temporary Directors and Quorum
One or more officers of the corporation present at the emergency board
meeting, as is necessary to achieve a quorum, shall be considered to be
directors for the meeting, and shall so serve in order of rank, and within
the same rank, in order of seniority. In the event that less than a quorum (as
determined by Section 3.6 of Article 3) of the directors are present
(including any officers who are to serve as directors for the meeting) ,
those directors present (including the officers serving as directors) shall
constitute a quorum.
(c) Actions Permitted To Be Taken
The Board of Directors, as constituted in paragraph (b), and after
notice as set forth in paragraph (a), may:
(1) OFFICERS' POWERS
Prescribe emergency powers to any officer of the corporation;
(2) DELEGATION OF ANY POWER
Delegate to any officer or director, any of the powers of the
Board of Directors;
(3) LINES OF SUCCESSION
Designate lines of succession of officers and agents, in the event
that any of them are unable to discharge their duties;
(4) RELOCATE PRINCIPAL PLACE OF BUSINESS
Relocate the principal place of business, or designate successive or
simultaneous principal places of business;
(5) ALL OTHER ACTION
Take any other action which is convenient, helpful, or necessary
to carry on the business of the corporation.
ARTICLE 10. AMENDMENTS
10.1 Amendments.
The Board of Directors may amend or repeal the corporation's Bylaws unless:
(1) the Articles of Incorporation or the Act reserve this power
exclusively to the shareholders, in whole or part; or
(2) the shareholders, in adopting, amending, or repealing a particular
Bylaw, provide expressly that the Board of Directors may not amend or repeal
that Bylaw; or
(3) the Bylaw either establishes, amends or deletes a "supermajority"
shareholder quorum or voting requirement, as defined in section 2.8 of
Article
2.
Any amendment which changes the voting or quorum requirement for the
Board of Directors must comply with Section 3.8 of Article 3,and for the
shareholders, must comply with Section 2.8 of Article 2.
The corporation's shareholders may also amend or repeal the corporation's
Bylaws at any meeting held pursuant to Article 2.
CERTIFICATE OF SECRETARY
I hereby certify that I am the Secretary of SPECTRAL INNOVATIONS(1994),
INC. and that the foregoing Bylaws, consisting of twenty-seven (27) pages,
constitutes the Code of SPECTRAL INNOVATIONS(1994), INC. as duly adopted by
the Board of Directors of the corporation on this 30th day of August, 1994.
IN WITNESS WHEREOF, I have hereunto subscribed my name this 30th day of
August, 1994
/s/ Nick Sintichakis
-------------------------------
Secretary
EXHIBIT 4.1. Minutes Approving Issuance Of Shares And Bonus Shares
MINUTES OF THE BOARD OF DIRECTORS
A meeting of the Directors of AZTEK, INC., a Nevada corporation, was
held at the Company's offices on the 12th day of June, 1998, at the hour of
10:00 o'clock a.m., for the purpose of the sale of a determined number of
shares for startup purposes.
Mike Sintichakis Chairman of the Board called the meeting to order and
Nick Sintichakis Director recorded the minutes of the meeting.
On motion duly made, seconded and unanimously carried the reading
correcting and approval of the minutes of the last meeting was waived.
Upon motion duly made it was resolved that the Company allot an
aggregate of 1,000,000 common shares par value $0.001 at a price of US$0.05
per share to the following directors, officers and employees of the Company:
Name No. & Class of Shares
Mike Sintichakis (director) 400,000 common shares, par value $0.001
Edson Ng (director) 200,000 common shares, par value $0.001
Eileen Keogh (director) 200,000 common shares, par value $0.001
Nick Sintichakis (director) 190,000 common shares, par value $0.001
Dauna Potts (employee) 10,000 common shares, par value $0.001
the ("Shares")
Upon motion duly made, it was resolved that the issuance and release of
the Shares be subject to the following terms and conditions:
1. The total number of Shares shall be paid for in advance by the purchasers
prior to issuance at a price of $0.05 per share. The payment must be made by
a cashier's or certified cheque, payable to Aztek, Inc.
2. All purchasers agree to place all of their Shares in the Company's trust
account and the Shares will be released in 24 equal monthly installments.
All of the directors of the Company agree to sign a resignation letter which
shall be used if the board of directors decide to cease a director's services
for failure to execute his duties and to avoid additional expenses to the
Company for a director's dismissal through shareholder meetings.
3. In the event that any director, officer or employee is released by the
Company, based on the board of directors recommendations or leaves through
their own free will for any reason, the Company has the power and authority
to sell and transfer all remaining Shares held in the individual's trust
account to an existing or new employee, director or officer of the Company.
4. All purchasers agree to sign a power of attorney authorizing the Company
to sell the balance of the Shares remaining in their trust account as described
in paragraph 4 herein.
5. The new purchaser shall pay the original owner US$0.05 for each Share
transferred plus 6% per annum interest effective on the day of purchase. If
the Company fails to make a decision on the new purchaser within thirty days,
the Company will advance the funds to the seller on behalf of the future
purchaser.
Upon motion duly made, it was resolved that the Company allot an
aggregate of 1,000,000 common shares, par value $0.001, at a price of US$0.01
per share to be issued as Bonus Shares to the following directors of the
Company:
Name No. & Class of Shares
Mike Sintichakis 400,000 common shares, par value $0.001
Edson Ng 200,000 common shares, par value $0.001
Eileen Keogh 200,000 common shares, par value $0.001
Nick Sintichakis 200,000 common shares, par value $0.001
(the "Bonus Shares")
Upon motion duly made, it was resolved that issuance of any of the Bonus
Shares be subject to the following terms and conditions:
1. All of the Bonus Shares must be paid for in advance at a price of US$0.01
per Bonus Share. The payment must be made by a cashier's or certified cheque,
payable to Aztek, Inc.
2. The release of the Bonus Shares shall be subject to the director's,
officer's or employee's satisfactory performance and certain conditions being
met as described herein;
3. Any outstanding Bonus Shares will expire at the end of the term of five
(5) years from the date of the resolution of the board of directors approving
the granting of the Bonus Shares and shall be automatically cancelled;
4. The maximum number of Bonus Shares to be released to any director,
officer or employee in any one year shall be restricted to 20% of the
original
amount of Bonus Shares awarded;
5. In order for the Company to authorize the issuance of any Bonus Shares
to any director, officer or employee the Bonus Shares shall be released only
if the Company accumulates the following working capital per year:
Year one: $0.05 per share of working capital
Year two: $0.10 per share of working capital
Year three: $0.20 per share of working capital
Year four: $0.30 per share of working capital
Year five: $0.40 per share of working capital
6. In the event that any director, officer or employee ceases to serve the
Company in any capacity for any reason, the remaining Bonus Shares shall be
transferred to a new director, officer or employee of the Company at the
board of director's discretion. The new purchaser shall, as a condition of
receiving the Bonus Shares, pay to the original beneficial owner US$0.01 for
each Bonus Share transferred to him including 6% interest effective on the
day of purchase within thirty days. In the event that the Company fails to
make a decision of the new beneficial owner within thirty days, the Company
will advance the funds and recover the same from the future beneficial owner.
7. All beneficiaries agree to sign a power of attorney authorizing the
Company to transfer the balance of the Bonus Shares remaining in their
account. The balance of the Bonus Shares described herein, at the board of
director's discretion, will be sold or transferred to several or one existing
or new director, employee or officer of the Company. The power of attorney
will be effective if a beneficiary, based on the board of director's
discretion, does not provide satisfactory services to the Company and in
result they cease their services to the Company.
Upon motion duly made, it was agreed that the funds collected from the
issuance of the Shares and the Bonus Shares be used for the Company's
start-up costs and working capital.
There being no further business to come before the meeting at this time,
the meeting was, upon motion duly made and seconded, adjourned at 11:30 a.m.
/s/ Mike Sintichakis
----------------------------
Mike Sintichakis, Director
EXHIBIT 4.2 Standard Subscription Agreement for Common Shares
Investment Letter
Aztek, Inc.
Suite #5 - 246 Lawrence Avenue
Kelowna, B.C.
V1Y 6L3
Dear Sirs:
In connection with the acquisition by the undersigned of ____________________
(_________) shares of Common Stock (the "Bonus Shares") of Aztek, Inc. a
Nevada corporation ("Aztek" or the "Company"), at a price of US$0.05 per
share, from the Company, the undersigned hereby covenants, represents and
warrants to you that:
1. The undersigned is acquiring the Shares in good faith for the purpose of
an investment in the Company and not for the purpose of distributing or
publicly selling the Shares to others, reselling, assigning, pledging or
hypothecating the Shares; or dividing his participation with others in the
Shares or any portion thereof except as described herein.
2. As of the date of this letter, the undersigned is not aware of any
particular occasion, event or circumstance upon the occurrence or happening
of which he or she intends to sell the Shares except as described herein.
3. The Shares are being acquired by the undersigned for his or her own
account and there is a present arrangement or agreement for the possible
transfer of the Shares to other persons employed by the Company.
4. The Shares covered by the above covenants, warranties and representations
shall also include any securities into which the above Shares may become
converted, subdivided, or split up, in connection with a merger,
re-classification, recapitalization or reorganization of the Company.
5. The undersigned further acknowledges that he is familiar with the
operations of the Company; that he has received information of the Company,
that he is capable of evaluating the merits and risks of the prospective
investment; and that he has had the opportunity to ask questions and receive
answers concerning the terms and conditions of the issuance of the Shares.
6. The undersigned understands that he or she will issue a cheque for the
full amount of the purchase price of the Shares of Common Stock purchased,
payable to the order of "Aztek, Inc." This investment letter must be
executed and delivered to Aztek, Inc., Suite #5 - 246 Lawrence Avenue,
Kelowna, B.C. V1Y 6L3.
7. The undersigned understands and agrees that the Shares so purchased shall
be held in trust by Aztek, Inc. and released to the undersigned in 24 equal
monthly installments.
8. The undersigned acknowledges and agrees that in the event that he or she
ceases to be a director, officer or employee of the Company, or is released
by the Board of Directors for any reason, the balance remaining of the Shares
not so released to the undersigned shall be transferred to a new holder. The
undersigned hereby authorizes the Board of Directors of the Company to
transfer or assign the balance so remaining to a new director officer or
employee of the Company. As a condition of receiving the Shares, the new
beneficial holder of the Shares shall cause to be paid to the undersigned
US$0.05 for each share so transferred or assigned together with 6% interest.
9. The undersigned agrees to indemnify the Company against, and hold it
harmless from, all losses, liabilities, costs and expenses (including
reasonable attorney's fees) which arise as a result of a sale, exchange or
other transfer of the Shares other than as permitted hereunder.
Yours truly,
By: ____________________________________
________________________________________
Address
Date____________________________________
Telephone No.____________________________
Accepted this ______ day of ________________________, 1998.
AZTEK, INC.
Per:____________________________________
See also Articles six, seven and nine of the Company's Amended And
Restated Articles Of Incorporation set forth in this Form S-4 as Exhibit
3(i).2 and Article 2 of the Company's By-laws set forth in this Form S-4 as
Exhibit 3(ii).
EXHIBIT 4.3 Standard Subscription Agreement for Common Shares
Investment Letter
Aztek, Inc.
Suite #5 - 246 Lawrence Avenue
Kelowna, B.C.
V1Y 6L3
Dear Sirs:
In connection with the acquisition by the undersigned of ____________________
(_________) shares of Common Stock (the "Bonus Shares") of Aztek, Inc. a
Nevada corporation ("Aztek" or the "Company"), at a price of US$0.05 per
share, from the Company, the undersigned hereby covenants, represents and
warrants to you that:
1. The undersigned is acquiring the Shares in good faith for the purpose of
an investment in the Company and not for the purpose of distributing or
publicly selling the Shares to others, reselling, assigning, pledging or
hypothecating the Shares; or dividing his participation with others in the
Shares or any portion thereof except as described herein.
2. As of the date of this letter, the undersigned is not aware of any
particular occasion, event or circumstance upon the occurrence or happening
of which he or she intends to sell the Shares except as described herein.
3. The Shares are being acquired by the undersigned for his or her own
account and there is a present arrangement or agreement for the possible
transfer of the Shares to other persons employed by the Company.
4. The Shares covered by the above covenants, warranties and representations
shall also include any securities into which the above Shares may become
converted, subdivided, or split up, in connection with a merger,
re-classification, recapitalization or reorganization of the Company.
5. The undersigned further acknowledges that he is familiar with the
operations of the Company; that he has received information of the Company,
that he is capable of evaluating the merits and risks of the prospective
investment; and that he has had the opportunity to ask questions and receive
answers concerning the terms and conditions of the issuance of the Shares.
6. The undersigned understands that he or she will issue a cheque for the
full amount of the purchase price of the Shares of Common Stock purchased,
payable to the order of "Aztek, Inc." This investment letter must be
executed and delivered to Aztek, Inc., Suite #5 - 246 Lawrence Avenue,
Kelowna, B.C. V1Y 6L3.
7. The undersigned understands and agrees that the Shares so purchased shall
be held in trust by Aztek, Inc. and released to the undersigned in 24 equal
monthly installments.
8. The undersigned acknowledges and agrees that in the event that he or she
ceases to be a director, officer or employee of the Company, or is released
by the Board of Directors for any reason, the balance remaining of the Shares
not so released to the undersigned shall be transferred to a new holder. The
undersigned hereby authorizes the Board of Directors of the Company to
transfer or assign the balance so remaining to a new director officer or
employee of the Company. As a condition of receiving the Shares, the new
beneficial holder of the Shares shall cause to be paid to the undersigned
US$0.05 for each share so transferred or assigned together with 6% interest.
9. The undersigned agrees to indemnify the Company against, and hold it
harmless from, all losses, liabilities, costs and expenses (including
reasonable attorney's fees) which arise as a result of a sale, exchange or
other transfer of the Shares other than as permitted hereunder.
Yours truly,
By: ____________________________________
________________________________________
Address
Date____________________________________
Telephone No.____________________________
Accepted this ______ day of ________________________, 1998.
AZTEK, INC.
Per:____________________________________
See also Articles six, seven and nine of the Company's Amended And
Restated Articles Of Incorporation set forth in this Form S-4 as Exhibit
3(i).2 and Article 2 of the Company's By-laws set forth in this Form S-4 as
Exhibit 3(ii).
MINUTES OF A MEETING OF THE BOARD OF DIRECTORS
OF
AZTEK, INC.
A meeting of the Directors of AZTEK, INC., a Nevada corporation, was held
at the Company's offices on the 16th day of February, 1999, at the hour of
10:00 o'clock a.m., for the purpose of canceling 1,000,000 shares.
Mike Sintichakis, Chairman of the Board of Directors of the Company,
called the meeting to order and Nick Sintichakis, Director, recorded the
minutes of the meeting.
On motion duly made, seconded and unanimously carried, the reading,
correcting and approval of the minutes of the last meeting was waived.
WHEREAS the following parties have agreed with the Company to cancel an
aggregate of 1,000,000 shares of Common stock, par value $0.001 per share,
(the "Bonus Shares") which Bonus Shares have been allotted but not issued
pursuant to Investment Letters dated June 19, 1998 (the "Investment Letters"):
Name Number of Shares Price Per Share
Mike Sintichakis 400,000 common shares, par value $0.001 $0.01
Edson Ng 200,000 common shares, par value $0.001 $0.01
Eileen Keogh 200,000 common shares, par value $0.001 $0.01
Nick Sintichakis 200,000 common shares, par value $0.001 $0.01
Upon motion duly made, it was resolved that the Company enter into
Termination Agreements with each of the above parties providing for the
cancellation of the Bonus Shares and that any Director of the Company be and
is hereby authorized to execute the Termination Agreements on behalf of the
Company.
Upon motion duly made, it was resolved that the Bonus Shares be returned
to the status of authorized but unissued shares of the Company.
Upon motion duly made, it was resolved that any Director of the Company
be authorized for and in the name of the Company to do all such acts and to
execute and deliver such further documents, instruments, notices,
affirmations on behalf of the Company as may be required to give effect to the
cancellation of the Bonus Shares.
There being no further business to come before the meeting at this time,
the meeting was, upon motion duly made and seconded, adjourned at 11:30 a.m.
"Mike Sintichakis"
Mike Sintichakis, Director
WAIVER OF NOTICE AND CONSENT
TO A MEETING OF THE BOARD OF DIRECTORS
OF
AZTEK, INC.
We, the undersigned, being all of the Directors of the Corporation, do
hereby severally consent to and waive notice of the time, place and purpose
of a meeting of Directors of AZTEK, INC. and consent that the meeting may be
held at the Corporation's offices on the 16 day of February, 1999, at the
hour of 11:00 o'clock a.m., and further consent to the transaction of any
business as may properly come before the meeting.
Dated this 9th of February, 1999.
"Mike Sintichakis"
Mike Sintichakis
"Nick Sintichakis"
Nick Sintichakis
"Edson Ng"
Edson Ng
"Eileen Keogh"
Eileen Keogh
MINUTES OF A MEETING OF THE BOARD OF DIRECTORS
OF
AZTEK, INC.
A meeting of the Directors of AZTEK, INC., a Nevada corporation, was held
at the Company's offices on the 5th day of May, 1999, at the hour of 11:00
o'clock a.m., for the purpose of canceling 1,000,000 shares of common stock
and issuing an aggregate of 97,975 shares of common stock.
Mike Sintichakis, Chairman of the Board of Directors of the Company,
called the meeting to order and Nick Sintichakis, Director, recorded the
minutes of the meeting.
On motion duly made, seconded and unanimously carried, the reading,
correcting and approval of the minutes of the last meeting was waived.
WHEREAS the following directors, officers and employees have agreed with
the Company to cancel an aggregate of 1,000,000 shares of Common stock, par
value $0.001 per share, which shares have been allotted but not issued
pursuant to Investment Letters dated June 19, 1998 as accepted by the
Company on June 24, 1998 (the "Investment Letters"):
Name Number of Shares Price Per Share
Mike Sintichakis 400,000 common shares, par value $0.001 $0.05
Edson Ng 240,000 common shares, par value $0.001 $0.05
Eileen Keogh 120,000 common shares, par value $0.001 $0.05
Nick Sintichakis 230,000 common shares, par value $0.001 $0.05
Dauna Potts 10,000 common shares, par value $0.001 $0.05
Upon motion duly made, it was resolved that the Company enter into
Termination Agreements with each of the above parties providing for the
cancellation of the above shares and that any Director of the Company be and
is hereby authorized to execute the Termination Agreements on behalf of the
Company.
Upon motion duly made, it was resolved that the shares be returned to the
status of authorized but unissued shares of the Company.
WHEREAS the Company entered into Termination Agreements dated the 16th
day of February, 1999, with Mike Sintichakis, Edson Ng, Eileen Keogh and Nick
Sintichakis (the "Termination Agreements") providing for the cancellation of
an aggregate of 1,000,000 shares of Common stock, at a price of $0.01 per share.
AND WHEREAS the above parties wish amend the Termination Agreements by
deleting paragraph number 2.
Upon motion duly made, it was resolved that the Company enter into
agreements with each of Mike Sintichakis, Edson Ng, Eileen Keogh and Nick
Sintichakis in order to verify the deletion of paragraph number 2 of the
Termination Agreements and that any Director of the Company be and is hereby
authorized to execute the Amendment Agreements on behalf of the Company.
Upon motion duly made, it was resolved that the Company allot an
aggregate of 97,975 common shares, par value $0.001, at a price of $0.6124
per share to the following directors, officers and employees of the Company
(the "Subscribers"), subject to applicable regulatory requirements:
Name No. & Class of Shares
---------------- ---------------------
Mike Sintichakis 39,190 common shares, no par value
Edson Ng 22,861 common shares, no par value
Eileen Keogh 13,063 common shares, no par value
Nick Sintichakis 22,044 common shares, no par value
Dauna Potts 817 common shares, no par value
(the "Shares")
Upon motion duly made, it was resolved that any Director of the Company
be authorized for and in the name of the Company to do all such acts and to
execute and deliver such further documents, instruments, notices,
affirmations on behalf of the Company as may be required to give effect to the
cancellation of the shares allotted pursuant to the Investment Letters, the
amendment to the Termination Agreements and the issuance of the Shares.
There being no further business to come before the meeting at this time,
the meeting was, upon motion duly made and seconded, adjourned at 11:30 a.m.
"Mike Sintichakis"
Mike Sintichakis, Director
WAIVER OF NOTICE AND CONSENT
TO A MEETING OF THE BOARD OF DIRECTORS
OF
AZTEK, INC.
We, the undersigned, being all of the Directors of the Corporation, do
hereby severally consent to and waive notice of the time, place and purpose
of a meeting of Directors of AZTEK, INC. and consent that the meeting may be
held at the Corporation's offices on the 5th day of May, 1999, at the hour of
11:00 o'clock a.m., and further consent to the transaction of any business as
may properly come before the meeting.
Dated this 28th of April, 1999.
"Mike Sintichakis"
Mike Sintichakis
"Nick Sintichakis"
Nick Sintichakis
"Edson Ng"
Edson Ng
"Eileen Keogh"
Eileen Keogh
TERMINATION AGREEMENT dated the 16th day of February, 1999.
BETWEEN:
AZTEK, INC., a body corporate duly incorporated in the State of Nevada and
having an office at Suite #5, 246 Lawrence Avenue, Kelowna, British Columbia,
V1Y 6L3
(the "Company")
OF THE FIRST PART
AND:
________________ of _____________________________________-
(the "Director")
OF THE SECOND PART
WHEREAS the Company and the Director entered into an agreement dated June
19, 1998, providing for the acquisition by the Director of _________________
(_________) shares of Common Stock (the "Bonus Shares") of the Company, at a
price of $0.01 per share (the "Investment Letter").
AND WHEREAS the Company and the Director wish to terminate the Investment
Letter and cancel the Bonus Shares subscribed for by the Director.
NOW THEREFORE the parties hereto agree as follows:
1. The Investment Letter entered into between the Company and the Director be
and is hereby terminated and the Bonus Shares subscribed for by the Director
be canceled forthwith and returned to the status of authorized but unissued
shares of the Company.
2. All funds received by the Company from the Director in payment of the
purchase price of the Bonus Shares shall be credited to the Director as a
shareholder loan.
3. Time shall be of the essence of this Agreement.
4. The parties to this Agreement shall execute and deliver any documents and
perform any acts necessary to carry out the intent of this Agreement.
5. This Agreement shall enure to the benefit of and be binding upon the
parties to this Agreement and their heirs, executors, administrators,
successors and permitted assigns.
IN WITNESS WHEREOF the parties have hereunto caused these presents to be
executed as of the day and year first above written.
EXECUTED AND DELIVERED BY
AZTEK, INC.
By:
"Edson Ng"
Authorized Signatory
SIGNED, SEALED AND DELIVERED
in the presence of:
Name
TERMINATION AGREEMENT dated the 5th day of May, 1999.
BETWEEN:
AZTEK, INC., a body corporate duly incorporated in the State of Nevada and
having an office at Suite #5, 246 Lawrence Avenue, Kelowna, British Columbia,
V1Y 6L3
(the "Company")
OF THE FIRST PART
AND:
___________________ of _____________________________________
(the "Director")
OF THE SECOND PART
WHEREAS the Company and the Director entered into an agreement dated June
19, 1998 and accepted by the Company on June 24, 1998, providing for the
acquisition by the Director of ___________ (_______) shares of Common Stock
(the "Shares") of the Company, at a price of $0.05 per share (the "Investment
Letter").
AND WHEREAS the Company and the Director wish to terminate the Investment
Letter and cancel the Shares subscribed for by the Director.
NOW THEREFORE the parties hereto agree as follows:
1. The Investment Letter entered into between the Company and the Director be
and is hereby terminated in its entirety and the Shares subscribed for by the
Director be canceled forthwith.
2. The parties to this Agreement shall execute and deliver any documents and
perform any acts necessary to carry out the intent of this Agreement.
3. Time shall be of the essence of this Agreement.
4. This Agreement shall enure to the benefit of and be binding upon the
parties to this Agreement and their heirs, executors, administrators,
successors and permitted assigns.
IN WITNESS WHEREOF the parties have hereunto caused these presents to be
executed as of the day and year first above written.
EXECUTED AND DELIVERED BY
AZTEK, INC.
By:
"Nick Sintichakis"
Authorized Signatory
SIGNED, SEALED AND DELIVERED
in the presence of:
Name
Address
AMENDMENT AGREEMENT dated the 5th day of May, 1999.
BETWEEN:
AZTEK, INC., a body corporate duly incorporated in the State of Nevada and
having an office at Suite #5, 246 Lawrence Avenue, Kelowna, British Columbia,
V1Y 6L3
(the "Company")
OF THE FIRST PART
AND:
________________ of _____________________________________________
(the "Director")
OF THE SECOND PART
WHEREAS the Company and the Director entered into an agreement dated the
16th day of February, 1999 (the "Termination Agreement"), providing for the
cancellation of the purchase by the Director of ________________ (__________)
shares of Common Stock (the "Shares") of the Company, at a price of $0.01 per
share.
AND WHEREAS the Company and the Director wish to amend the Termination
Agreement on the terms and conditions set out below.
NOW THEREFORE the parties hereto agree as follows:
1. Paragraph number 2 of the Termination Agreement be and is hereby deleted in
its entirety.
2. All other provisions of the Termination Agreement remain in full force and
effect.
IN WITNESS WHEREOF the parties have hereunto caused these presents to be
executed as of the day and year first above written.
EXECUTED AND DELIVERED BY
AZTEK, INC.
By:
"Nick Sintichakis"
Authorized Signatory
SIGNED, SEALED AND DELIVERED
in the presence of:
Name
Address
Investment Letter
Aztek, Inc.
Suite #5 - 246 Lawrence Avenue
Kelowna, B.C.
V1Y 6L3
Dear Sirs:
In connection with the acquisition by the undersigned of
_______________________________
(__________) shares of Common Stock (the "Shares") of Aztek, Inc. a Nevada
corporation ("Aztek" or the "Company"), at a price of $0.6124 per share, from
the Company, the undersigned hereby covenants, represents and warrants to you
that:
1. The undersigned is acquiring the Shares in good faith for the purpose of an
investment in the Company and not for the purpose of distributing or publicly
selling the Shares to others, reselling, assigning, pledging or hypothecating
the Shares; or dividing his participation with others in the Shares or any
portion thereof except as described herein.
2. As of the date of this letter, the undersigned is not aware of any
particular occasion, event or circumstance upon the occurrence or happening
of which he or she intends to sell the Shares.
3. The Shares are being acquired by the undersigned for his or her own account
and there is no present arrangement or agreement for the sale, pledge or
hypothecation of the Shares to any other person or firm.
4. The Shares covered by the above covenants, warranties and representations
shall also include any securities into which the above Shares may become
converted, subdivided, or split up, in connection with a merger,
re-classification, recapitalization or reorganization of the Company.
5. The undersigned further acknowledges that he is familiar with the
operations of the Company; that he has received information on the Company,
that he is capable of evaluating the merits and risks of the prospective
investment; and that he has had the opportunity to ask questions and receive
answers concerning the terms and conditions of the issuance of the Shares.
6. The undersigned understands he or she is to make a check for the full
amount of the purchase price of the Shares of Common Stock purchased, payable
to the order of "Aztek, Inc." This investment letter must be executed and
delivered to Aztek, Inc., Suite #5 - 246 Lawrence Avenue, Kelowna,
B.C. V1Y 6L3.
7. The undersigned agrees to indemnify the Company against, and hold it
harmless from, all losses, liabilities, costs and expenses (including
reasonable attorney's fees) which arise as a result of a sale, exchange or
other transfer of the Shares other than as permitted hereunder.
Yours truly,
By: ____________________
Date____________________________________
Telephone No.____________________________
Accepted this ______ day of ________________________, 1999.
AZTEK, INC.
Per:__"Nick Sintichakis"____________________
EXHIBIT 5. Opinion On Legality
[LETTERHEAD OF LAW FIRM OF LARSON-JACKSON, P.C.]
August 1, 1998
Board of Directors
the Company Inc.
1575 Deluccchi Lane, Suite #40
Reno, Nevada 89502
RE: Registration Statement on Form S-4
Ladies and Gentlemen:
This opinion is rendered in connection with the Registration Statement on
Form S-4 (the "Registration Statement") filed by Aztek, Inc. (the "Company")
with the Securities and Exchange Commission under the Securities Act of 1933,
as amended, and the Joint Proxy Statement-Prospectus (the "Prospectus"),
relating to the issuance by the Company of up to 2,051,109 shares of common
stock, par value $0.001 per share (the "Common Stock"), in the manner set
forth in the Registration Statement and the Prospectus. As counsel, we have
reviewed the Registration Statement, the Prospectus and the Company's
Articles of Incorporation and By-Laws, Records of the Company's corporate
proceedings relative to the issuance of the Common Stock and such other legal
matters as we have deemed appropriate for the purposes of this opinion. We are
rendering this opinion as of the time the Registration Statement becomes
effective.
Based upon the foregoing, and having a regard for such legal
considerations as we have deemed relevant, we are of the opinion that the
shares of Common Stock will be, upon issuance, against full payment therefor
as contemplated in the Registration Statement and the Prospectus, legally
issued, fully paid and non-assessable shares of Common Stock of the Company.
We consent to the filing of our opinion as an exhibit to the Registration
Statement and to the reference to our firm and our opinion in the Registration
Statement and all amendments thereto.
Very truly yours,
LAW FIRM OF LARSON-JACKSON, P.C.
BY: /s/ Steve Larson-Jackson
- -------------------------------------
Steve Larson-Jackson
January ____, 1999
Board of Directors
Aztek Inc.
1575 Delucchi Lane, Suite #40
Reno, Nevada 89502
Board of Directors
Aztek Technologies Inc.
Suite #5 - 246 Lawrence Ave.
Kelowna, B.C. V1Y 6L3
Re: Certain Material Federal Income Tax Consequences Relating
to the Acquisition of Aztek Technologies Inc.
-------------------------------------------------------------
Ladies and Gentlemen:
We are rendering this opinion to you at your request and in our capacity
as special counsel to Aztek, Inc. (the "Company"), a Nevada corporation
headquartered in Reno, Nevada in connection with the Merger Agreement dated
as of July 2, 1998 (the "Agreement"), entered into between the Company and
Aztek Technologies Inc. ("ATI"), a computer software company in British
Columbia, Canada. Terms used herein, whether capitalized or not, shall have
the meanings given to them in the Agreement. In the opinion of counsel, the
following constitutes the material federal tax consequences of the Merger
under U.S. law.
ATI will be merged with and into the Company (the "Merger"). Each
issued and outstanding share of common stock of ATI, no par value ("ATI
Common Stock"), shall automatically be converted into a number of shares of
common stock of the Company, par value $.001 per share (the "Company Common
Stock") according in a one-for-one exchange as specified in Section 5.3 of
the Agreement.
1. Each issued and outstanding share of ATI common stock shall be
converted into an equal number of newly issued shares of the Company Common
Stock.
2. The Company will survive the Merger and will operate under
its present name and title with its own board of directors for a period of at
least _______ months thereafter.
3. We are rendering this opinion at the request of the Boards of the
Company and ATI. For purposes of this opinion, we have examined and are
familiar with originals or copies, certified or otherwise identified to our
satisfaction, including but not limited to the Merger Agreement and such
other documents as we have deemed necessary or appropriate in order to enable
us to render the opinions below.
4. In our examination, we have assumed the genuineness of all
signatures where due execution and delivery are requirements to the
effectiveness thereof, the legal capacity of all natural persons, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified, conformed
or photostatic copies and the authenticity of the originals of such copies.
5. In rendering our opinions, we have considered applicable
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
Treasury regulations, pertinent judicial authorities, interpretive rulings of
the Internal Revenue Service, and such other authorities as we have
considered relevant. We have also assumed that the transactions contemplated
by the Agreement will be consummated strictly in accordance with the Merger
Agreement.
Based solely upon and subject to the foregoing, it is our opinion that,
under presently applicable U.S. law:
(i) provided the proposed merger of ATI with and into the
Company qualifies under federal law, the Merger will qualify as a
"reorganization" under Section 368(a) of the Code, and
ATI and the Company will be parties to the reorganization;
(ii) no gain or loss will be recognized by the Company or ATI
by reason of the Merger;
(iii) no gain or loss will be recognized by stockholders of
ATI in the Merger to the extent they receive solely shares of the Company
Common Stock in exchange for their shares of ATI Common Stock;
(iv) when cash is received by a U.S. resident who is a
dissenting stockholder of ATI, such cash will be treated as received by the
dissenting stockholder as a distribution in redemption of the stockholder's
ATI Common Stock subject to the provisions and limitations of Section 302 of
the Code.
Our opinion is limited to the U.S. federal income tax matters described
above and does not address any other federal income tax considerations or any
state, local, foreign, or other federal tax considerations. If any of the
information upon which we have relied is incorrect, or if changes in the
relevant facts occur after the date hereof, our opinion could be affected
thereby. Moreover, our opinion is based on the case law, Code, Treasury
Regulations thereunder, and Internal Revenue Service rulings as they now
exist. These authorities are all subject to change, and such change may be
made with retroactive effect. We can give no assurance that, after such
change, our opinion would not be different. We undertake no responsibility
to update or supplement our opinion subsequent to consummation of the Merger.
Prior to that time, we undertake to update or supplement our opinion in the
event of a material change in the federal income tax consequences set forth
above and to file such revised opinion as an exhibit to the Agreement. This
opinion is not binding on the Internal Revenue Service and there can be no
assurance, and none is hereby given, that the Internal Revenue Service will
not take a position contrary to one or more of the positions reflected in the
foregoing opinion, or that our opinion will be upheld by the courts if
challenged by the Internal Revenue Service.
We hereby consent to the filing of this opinion with the SEC as an
exhibit to the Registration Statement on Form S-4 of which the Joint Proxy
Statement-Prospectus is a part and the reference to our firm in the Joint
Proxy Statement-Prospectus under the headings "Summary--Federal Income Tax
Consequences of the Transaction.
Very truly yours,
LAW FIRM OF LARSON-JACKSON, P.C.
By:_________________________________________
Steve Larson-Jackson
ESCROW AGREEMENT
AMONG
MONTREAL TRUST COMPANY OF CANADA
4th Floor - 510 Burrard Street
Vancouver, B.C. V6C 3B9
(The "Escrow Agent");
AND
CONSOLIDATED MCKINNEY RESOURCES INC
#5 - 246 Lawrence Avenue
Kelowna, B.C. V1Y 6l3
(the "Issuer");
AND:
EACH SHAREHOLDER as defined in this Agreement
(Collectively, the "Parties").
WHEREAS the Shareholder has acquired or is about to acquire shares of the
Issuer;
AND WHEREAS the Escrow Agent has agreed to act as escrow agent in respect of
the shares upon the acquisition of the shares by the shareholder;
AND WHEREAS the shareholders of the Company approved a share consolidation of
the shares of the Company on a five to one basis at the Annual General
Meeting
of the Company held on December 9, 1994.
NOW THEREFORE in consideration of the covenants contained in this agreement
and other good and valuable consideration (the receipt and sufficiency of
which is acknowledged), the Parties agree as follows:
1. INTERPRETATION
In this agreement:
(a) "Acknowledgment" means the acknowledgment and agreement to be bound in
the form attached as Schedule A to this agreement;
(b) "Act" means the Securities Act, S.B.C. 1985, c.83
(c) "Exchange" means the Vancouver Stock Exchange;
(d) "IPO" means the initial public offering of common shares of the Issuer
under a prospectus which has been filed with, and for which a receipt has
been
obtained from the Superintendent under section 42 of the Act;
(e) "Local Policy Statement 3-07" means the Local Policy Statement 3-07 in
effect as of the date of reference of this agreement and attached as Schedule
B to this agreement;
(f) "Shareholder" means a holder of shares of the Issuer who executes this
agreement or an Acknowledgment;
(g) Shares" means the post-consolidation shares of the Shareholder described
in Schedule C to this agreement, as amended from time to time in accordance
with section 9;
(i) "Superintendent or the Exchange" means the Superintendent, if the shares
of the Issuer are not listed on the Exchange, or the Exchange, if the shares
of the Issuer are listed on the Exchange.
2. PLACEMENT OF SHARES IN ESCROW
The Shareholder places the Shares in escrow with the Escrow Agent and shall
deliver the certificates representing the Shares to the Escrow Agent as soon
as practicable.
3. VOTING OF SHARES IN ESCROW
Except as provided by section 4(a), the Shareholder may exercise all voting
rights attached to the Shares.
4. WAIVER OF SHAREHOLDER'S RIGHTS
The Shareholder waives the rights attached to the Shares.
(a) to vote the Shares on a resolution to cancel any of the Shares,
(b) to receive dividends, and
(c) to participate in the assets and property of the Issuer on a winding
up or dissolution of the Issuer.
5. ABSTENTION FROM VOTING AS A DIRECTOR
A Shareholder that is or becomes a director of the Issuer shall abstain from
voting on a directors' resolution to cancel any of the Shares.
6. TRANSFER WITHIN ESCROW
(1) The Shareholder shall not transfer any of the Shares except in
accordance with Local Policy Statement 3-07 and with the consent of the
Superintendent of the Exchange.
(2) The Escrow Agent shall not effect a transfer of the Shares within
escrow unless the Escrow Agent has received
(a) a copy of an Acknowledgment executed by the person to whom the
Shares are to be transferred, and
(b) a letter from the Superintendent or the Exchange consenting to
the transfer.
(3) Upon the death or bankruptcy of a Shareholder, the Escrow Agent shall
hold the Shares subject to this agreement for the person that is legally
entitled to become the registered owner of the Shares.
(4) In the event that a Shareholder
(a) ceases to be a principal of the Issuer, as that term is defined
in Local Policy Statement 3-07, the directors of the Issuer have the express
right to decide whether the Shareholder may retain or must transfer or
surrender any Shares, subject to the terms and conditions of Local Policy
Statement 3-07; or
(b) dies or becomes bankrupt, the directors of the Issuer have the
express right to decide whether the Estate or Receiver of the Shareholder or
any person that is legally entitled to become the registered owner of the
Shares may retain or must transfer or surrender any Shares, subject to the
terms and conditions of Local Policy Statement 3-07.
7. RELEASE FROM ESCROW
(1) The Shareholder irrevocably directs the Escrow Agent to retain the
Shares until the Shares are released from escrow pursuant to subsection (2)
or surrendered for cancellation pursuant to section 8.
(2) The Shares will be released from escrow on the basis of cash flow
from operations as derived from the audited financial statements of the Company
and any subsidiary. "Cash Flow" means net income or loss before tax,
adjusted to add back the following expenses:
(a) depreciation
(b) amortization of goodwill and deferred research and development
costs, excluding general and administrative costs;
(c) expensed research and development costs, excluding general and
administrative costs;
(d) any other amounts permitted or required by the Superintendent.
Cumulative cash flow means at any time the aggregate cash flow of an issuer
up to that time from a date no earlier than the issuer's financial year end
immediately preceding the date of its initial public offering, net of any
negative cash flow. The number of shares released from escrow in that year
will be that number of shares computed by taking the cumulative cash flow not
previously applied toward a release and dividing the same by $0.31. The
Escrow Agent shall not release the Shares from escrow unless the Escrow Agent
has received a letter from the Superintendent or the Exchange consenting to
the release.
(3) The approval of the Superintendent or the Exchange to a release from
escrow of any of the Shares shall terminate this agreement only in respect of
the Shares so released.
8. SURRENDER FOR CANCELLATION
The Shareholder shall surrender the Shares for cancellation and the Escrow
Agent shall deliver the certificates representing the Shares to the Issuer:
(a) at the time of a major reorganization of the Issuer, if required
as a condition of the consent to the reorganization by the Superintendent or
the Exchange,
(b) where the Issuer's shares have been subject to a cease trade
order issued under the Act for a period of 2 consecutive years,
(c) 5 years from the date the Exchange has accepted this Agreement
for filing.
(d) where required by section 6(4).
9. AMENDMENT OF AGREEMENT
(1) Subject to subsection (2) this agreement may be amended only by a
written agreement among the Parties and with the written consent of the
Superintendent or the Exchange.
(2) Schedule C to this agreement shall be amended upon
(a) a transfer of Shares pursuant to section 6,
(b) a release of Shares from escrow pursuant to section 7, or
(c) a surrender of Shares for cancellation pursuant to section 8,
and the Escrow Agent shall note the amendment on the Schedule C in its
possession.
10. INDEMNIFICATION OF ESCROW AGENT
The Issuer and the Shareholders, jointly and severally, release, indemnify
and save harmless the Escrow Agent from all costs, charges, claims, demands,
damages, losses and expenses resulting from the Escrow Agent's compliance in
good faith with this agreement.
11. RESIGNATION OF ESCROW AGENT
(1) If the Escrow Agent wishes to resign as escrow agent in respect of
the Shares, the Escrow Agent shall give notice to the Issuer.
(2) If the Issuer wishes the Escrow Agent to resign as escrow agent in
respect of the Shares, the Issuer shall give notice to the Escrow Agent.
(3) A notice referred to in subsection (1) or (2) shall be in writing and
delivered to
(a) the Issuer at #5-246 Lawrence Avenue, Kelowna, B.C. V1Y 6L3, or
(b) the Escrow Agent at 4th Floor - 510 Burrard Street, Vancouver,
B.C. V6C 3B9
and the notice shall be deemed to have been received on the date of
delivery. The Issuer or the Escrow Agent may change its address for notice by
giving notice to the other party in accordance with this subsection.
(4) A copy of a notice referred to in subsection (1) or (2) shall
concurrently be delivered to the Superintendent or the Exchange.
(5) The resignation of the Escrow Agent shall be effective and the Escrow
Agent shall cease to be bound by this agreement on the date that is 180 days
after the date of receipt of the notice referred to in subsection (1) or (2)
or on such other date as the Escrow Agent and the Issuer may agree upon (the
"resignation date").
(6) The Issuer shall, before the resignation date and with the written
consent of the Superintendent or the Exchange, appoint another escrow agent
and that appointment shall be binding on the Issuer and the Shareholders.
12. FURTHER ASSURANCES
The Parties shall execute and deliver any documents and perform any acts
necessary to carry out the intent of this agreement.
13. TIME
Time is of the essence of this agreement.
14. GOVERNING LAWS
This agreement shall be construed in accordance with and governed by the laws
of British Columbia and the laws of Canada applicable in British Columbia.
15. COUNTERPARTS
This agreement may be executed in two or more counterparts, each of which
shall be deemed to be an original and all of which shall constitute one
agreement.
16. LANGUAGE
Wherever a singular expression is used in this agreement, that expression is
deemed to include the plural or the body corporate where required by the
context.
17. INUREMENT
This Agreement enures to the benefit of and is binding on the Parties and
their heirs, executors, administrators, successors and permitted assigns.
The Parties have executed and delivered this agreement as of the date of
reference of this agreement.
The Common Seal of MONTREAL
TRUST COMPANY OF CANADA
was affixed in the presence of:
/s/
- --------------------
/s/
- ------------------------
The Common Seal of CONSOLIDATED
MCKINNEY RESOURCES INC
was affixed in the presence of:
/s/
- -------------------------------
/s/
- -------------------------------
Signed, sealed and delivered by
MIKE SINTICHAKIS in the
presence of:
/s/ Debbie L. Kent
- -----------------------
Name
325 - 3535 McCulloch Rd /S/ Mike Sintichakis
- ------------------------ --------------------------
Address MIKE SINTICHAKIS
Kelowna, B.C. V1W 4R8
Accounting Clerk
- ----------------------
Occupation
<PAGE>
SCHEDULE A TO ESCROW AGREEMENT
ACKNOWLEDGMENT AND AGREEMENT TO BE BOUND
TO: Vancouver Stock Exchange
4th Floor - 609 Granville Street
Vancouver, B.C.
V7Y 1H1
I acknowledge that:
(a) I have entered into an agreement with _______________ under which
______________ shares of Consolidated McKinney Resources Inc. (The "Shares")
will be transferred to me upon receipt of regulatory approval, and
(b) the Shares are held in escrow subject to an escrow agreement dated
for
reference __________, 19___ (the "Escrow Agreement"), a copy of which is
attached as Schedule A to this Acknowledgment.
In consideration of $1.00 and other good and valuable consideration (the
receipt and sufficiency of which is acknowledged) I agree, effective upon
receipt of regulatory approval of the transfer to me of the Shares, to be
bound by the Escrow Agreement in respect of the Shares as if I were an
original signatory to the Escrow Agreement.
Dated at __________________ on ________________, 19 ____.
Signed, sealed and delivered by
_____________________ in the
presence of:
____________________
Name
______________________ ____________________
Address
______________________
______________________
Occupation
<PAGE>
SCHEDULE C TO ESCROW AGREEMENT
NAME OF SHAREHOLDER NUMBER OF SHARES HELD IN ESCROW
Mike Sintichakis 354,000
Exhibit 10.2 Standard Option Agreement between ATI and Directors
DIRECTORS STOCK OPTION AGREEMENT dated the 20th day of March, 1997.
BETWEEN:
AZTEK TECHNOLOGIES INC., a body corporate duly incorporated in the
Province of British Columbia and having its head office at Suite #5, 246
Lawrence Avenue, Kelowna, British Columbia, V1Y 7L3
(The "Company")
ON THE FIRST PART
AND:
MIKE SINTICHAKIS of 1802 Lipsett Court, Kelowna, B.C. V1V 1X3
(the "Director")
ON THE SECOND PART
WHEREAS the Company wishes to encourage the best efforts of the Director
and to recognize the Director's efforts and risk in performing the functions
of a director of the Company by granting to the Director an option to
purchase shares in the capital stock of the Company.
NOW THEREFORE the parties hereto agree as follows:
1. The Company hereby grants to the Director an option to purchase all or
any portion of 90,000 fully paid common shares (the "Optioned Shares") of the
Company from the treasury, exercisable ta the price of $1.82 per share, on or
before March 20, 1999.
2. The Option is exercisable by notice in writing to the Company
accompanied by a certified cheque in favour of the Company for the full
amount of the purchase price of the shares being then purchased. When such
payment is received, the Company covenants and agrees to issue and deliver to
the Director share certificates in the name of the Director for the number of
shares so purchased.
3. This is an option agreement only and does not impose upon the Director
any obligation to take up and pay for any of the Optioned Shares.
4. The Option shall not be transferable or assignable by the Director
otherwise than by Will or the law of intestacy and the Option may be exercised
during the lifetime of the Director only by the Director.
5. If the Director should die while a director of the Company, the Option
may then be exercised by the legal heirs or personal representatives of the
Director, to the same extent as if the Director were alive and a director of
the Company for a period not exceeding one year after the death of the
Director but only for such shares as the Director was entitled to at the date
of the death of the Director.
6. Subject to paragraph 5 hereof, the Option shall cease and become null
and void 30 days after the Director ceases to act as a director of the
Company.
7. In the event of any subdivision, consolidation or other change in the
share capital of the Company while any portion of the Option is outstanding,
the number of shares under option to the Director and the price thereof shall
be adjusted in accordance with such subdivision, consolidation or other change
in the share capital of the Company.
8. The Company hereby covenants and agrees that it will reserve in its
treasury sufficient shares to permit the issuance and allotment of shares to
the Director in the event the Option is exercised.
9. Time shall be of the essence of this Agreement.
10. The granting of the herein Stock Option and any amendment thereto,
shall be subject to the approval of the Vancouver Stock Exchange and the
shareholders of the Company.
11. Shareholder approval to the grant of the options shall be obtained
prior to the exercise of options granted to insiders (as defined in the
Securities Act of British Columbia).
12. Shareholder approval shall be obtained in respect of amendments to the
agreement if the option as originally constituted was approved by the
shareholders of the optionee is an insider of the Company at the time of the
amendment.
13. This Agreement shall enure to the benefit of or be binding upon the
Company, its successors and assigns and the Director and the Director's
personal representatives to the extend provided in paragraph 5.
IN WITNESS WHEREOF the parties have hereunto caused these presents to be
executed as of the day and year first above written.
The COMMON SEAL OF
AZTEK TECHNOLOGIES INC.
was hereunto affixed in the presence of:
/s/ Glen Naka [Corporate Seal]
- - ------------------------ C/S
Glen Naka
SIGNED, SEALED AND DELIVERED
in the presence of:
/s/ Dauna Potts /s/ Mike Sintichakis
- - ----------------------- ---------------------------
Name MIKE SINTICHAKIS
5-246 Lawrence Ave.
- - ----------------------
Address
Kelowna, B.C.
Exhibit 10.3 Demand Note
Aztek Technologies Inc.
Suite #5-246 Lawrence Avenue
Kelowna, British Columbia
V1Y 6L3
DEMAND NOTE
($94,000)
(September 4, 1997)
ON DEMAND, after the above date the company promises to pay to the order of
Maria Sintichakis of 1802 Lipsett Court, Kelowna, BC V1V 1X3
NINETY-FOUR THOUSAND DOLLARS ($94,000) with the following provisions for
interest and repayment.
INTEREST:
Without interest
REPAYMENT TERMS:
No payments shall become due and owing prior to July 1999
FOR VALUE RECEIVED:
Aztek Technologies Inc.
REGISTERED ADDRESS:
1010 Burrard Building
1030 West Georgia Street
Vancouver, British Columbia
V6E 2Y3
LENDER: AZTEK TECHNOLOGIES INC.:
/s/ Maria Sintichakis Per: /s/ Edson Ng
- --------------------- ----------------------
Name Edson Ng, Director
1802 Lipsett Court, Kelowna, BC V1V 1X3 September 4, 1997
- --------------------------------------- ------------------
ADDRESS DATE
September 4
- -----------
DATE
License Reference Number SAN
FRANCISCO TECHNOLOGY LICENSE
AGREEMENT
AGREEMENT between INTERNATIONAL BUSINESS MACHINES CORPORATION, a New
York corporation
("IBM"), and Aztek, Inc.
a Nevada Corporation ("YOU" or "YOUR").
IBM has certain programming code and technical information that is designed
to be used for building computer application programs and certain patents and
patent applications covered by such programming code and technical
information. IBM wishes to license Version 1, including Releases and
modifications thereof, of such programming and technical information, listed
by product No. In ATTACHMENT A (the "San Francisco Product"), and patents
(defined hereinbelow) to YOU for the purpose of YOUR creating further
software
products to be licensed by YOU to YOUR Customers.
YOU wish to receive certain licenses with respect to the San Francisco
Product for the aforesaid purposes.
In consideration of the premises and the mutual covenants contained in this
Agreement and its attachments IBM and YOU agree as follows:
Section 1.
Definitions 1.1 "Application Development Information" shall mean the
files listed in the file named LICENSE.TXT which is located in the root
directory of the CD-ROM and in the ...com/ibm/sf/doc/ relative directory that
results from the installation of the San Francisco Product on YOUR computer
where ... is the prefix directory determined at install time by user
specification of directory preference and/or specific platform requirements
under Section E, "Application Development Information." The contents of
these lists and subdirectories may be updated by IBM from time to time.
1.2 "Base Code" shall mean the Code and Documentation listed in the
file named LICENSE.TXT which is located in the root directory of the CD-ROM
and in the ...com/ibm/sf/doc/ relative directory that results from the
installation of the San Francisco Product on YOUR computer where ... is the
prefix directory determined at install time by user specification of
directory preference and/or specific platform requirements, under Section C,
"Reshippable Materials List," sublist 1. The contents of these lists and
subdirectories may be updated by IBM from time to time.
1.3 "CD-ROM" shall mean the CD-ROM on which the San Francisco product
is distributed.
1.4 "Code" shall mean computer programming code. Except as otherwise
specified, Code shall include Source Code and Binary Code.
(a) "Binary Code" shall mean Code including but not limited to
Java byte Code and Object Code in a form that is indirectly or directly
executable by a computer, and is not readable or understandable by a
programmer of ordinary skills.
(b) "Object Code" shall mean Code substantially or entirely in
binary form, and includes header files of the type necessary for
use or inter operation with other computer programs. It is intended to be
directly executable by a computer after processing or linking, but
without interpretation, compilation or assembly.
(c) "Source Code" shall mean Code in a form which when printed
out or displayed is readable and understandable by a programmer of ordinary
skills. It includes procedural and object oriented Code with associated
comments describing the operation of the Code.
1.5 "Core Business Process" or "CBP" shall mean the information and files
listed in the file named LICENSE.TXT which is located in the root directory
of the CD-ROM and in the ...com/ibm/sf/doc relative directory that results from
the installation of the San Francisco Product on YOUR computer where . . . is
the prefix directory determined at install time by user specification of
directory preference and/or specific platform requirements under Section C,
"Reshippable Materials List," sublist 2. The contents of these lists and
subdirectories may be updated by IBM from time to time.
1.6 "Customer" shall mean an end user authorized to use Your Product for
such end user's internal productive use and not for remarketing or
sublicensing.
1.7 "Derivative Work" shall mean a work based upon one or more preexisting
works that would be a copyright infringement if prepared without the
authorization of the copyright owners of the preexisting work. Derivative
Works are subject to the ownership rights and licenses of others in the
preexisting work.
1.8 "Distributors" shall mean business entities used to distribute Your
Product.
1.9. "Effective Date" shall mean the date on which IBM has signed and dated
this Agreement.
1.10 "Error" shall mean any mistake, problem, or defect that causes Licensed
Binary Code in Your Product to malfunction.
1.11 "Fixpacks" shall mean revisions that correct Errors or provide small
programming enhancements.
1.12 "IBM Parents" shall mean all patents (but not including any design
patents or registrations) of IBM:
(a) issued or issuing on patent applications entitled to
an effective filing date prior to the termination or expiration of this
agreement, whichever comes first;
(b) which, but for this Agreement, would be infringed by YOUR making,
using, importing, offering for sale, leasing, selling or otherwise
transferring Your Product in the country in which such patent exists; and
(c) under which patents or the applications therefor IBM or any of
its Subsidiaries now has, or hereafter obtains, the right to grant licenses to
YOU of or within the scope granted herein without such grant or the exercise of
rights thereunder resulting in the payment of royalties or other consideration
by IBM or its Subsidiaries to third parties (except for payments between IBM
and its Subsidiaries, and payments to third parties for inventions made by
said third parties while employed by IBM or any its Subsidiaries).IBM Patents
shall include said patent applications, continuations in part of said patent
applications, and any patents reissuing on any of the aforesaid patents.
1.13 "IHS Product" shall mean an Information Handling System or any
instrumentality or aggregate of instrumentalities (including, without
limitation, any component, subassembly, computer program or supply) designed
for incorporation in an Information Handling System. Any instrumentality or
aggregate of instrumentalities primarily designed for use in the fabrication
(including testing) of an IHS Product licensed herein shall not be considered
to be an IHS Product.
1.14 "Information Handling System" shall mean any instrumentality or
aggregate of instrumentalities primarily designed to compute, classify,
process, transmit, receive, retrieve, originate, switch, store, display,
manifest, measure, detect, record, reproduce, handle or utilize any form of
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1.15 "Internal Production Use" shall mean any use of the San Francisco
Product or Your Product other than for the purposes of developing prototypes
or application programs.
1.16 "Know-How" shall mean the information contained in the files listed in
the file named LICENSE.TXT which is located in the root directory of the
CD-ROM and in the ...com/ibm/sf/doc relative directory that results from the
installation of the San Francisco Product on YOUR computer where ... is the
prefix directory determined at install time by user specification of
directory preference and/or specific platform requirements under Section D,
entitled "IBM's Know-How." The contents of these lists and subdirectories
may be updated by IBM from time to time.
1.17 "Licensed Code" shall mean all Code licensed by IBM to YOU in the San
Francisco Product. Except as otherwise specified, Licensed code shall
include Licensed Source Code and Licensed Binary Code.
(a) "Licensed Binary Code" shall mean Binary Code included in the
San Francisco Product.
(b) "Licensed Source Code" shall mean Source Code included in the
San Francisco Product.
1.18 "Licensed Materials" shall mean Licensed Technology and Licensed Code.
1.19 "Licensed Technology" shall mean Know-How, Application and Development
Information and other technical information provided to YOU by IBM which is
incorporated in, or used in the design or provision of Your Product.
Licensed Technology does not include any Licensed Code.
1.20 "License Reference Number" shall mean a number assigned by IBM in
accordance with section 8.1, and used to track and identify YOUR San
Francisco Technology License Agreement and all communications by YOU to IBM in
connection therewith.
1.21 "Maintenance Services" shall mean any service that redistributes
revisions to the San Francisco Product or provides revisions to Your Original
Code within Your Product, where such revisions correct Errors or provide
small programming enhancements.
1.22 "Publicly Accessible Network" or "PAN" shall mean any configuration of
data processing devices and software adapted for information exchange that is
accessible for use by the public or other users unaffiliated with YOU, with
or without payment of subscription fees or other charges.
1.23 "Release" shall mean the distribution via CD-ROM of a San Francisco
Product containing new software functions, enhancements to existing software
functions, new or enhanced tools, and/or additional reference material.
1.24 "Specifications" shall mean the document entitled San Francisco
Licensed Program Specifications.
1.25 "Specified Operating Environment" shall mean the machines and
programs with which the San Francisco Product is designed to operate, as
described in the applicable Specifications.
1.26 "Subsidiary" shall mean a corporation, company or other entity:
(a) More than fifty percent (50%) of whose outstanding shares or
securities (representing the right to vote for the election of directors or
other managing authority) are, now or hereafter, owned or controlled,
directly or indirectly, by a party hereto; or
(b) which does not have outstanding shares or securities, as may be
the case in a partnership, joint venture or unincorporated association, but
more than fifty percent (50%) of whose ownership interest representing
theright to make the decisions for such corporation, company or other entity
is now or hereafter owned or controlled, directly or indirectly, by a party
hereto, but such corporation, company or other entity shall be deemed to be a
Subsidiary only so long as such ownership or control exists.
1.27 "Trademarks" shall mean the common law and registered trademarks
listed in ATTACHMENT B.
1.28 "Trademark Usage Guidelines" shall mean the guidelines providing for
the use and display of the Trademarks. The current Trademark Usage
Guidelines are set forth in ATTACHMENT C.
1.29 "Version" shall mean new and enhanced products based upon one or
more existing San Francisco Products, distributed via CD-ROM and containing
significant new software functions, enhancements, new or enjanced tools
and/or additional reference materials. A Version may include multiple
Releases. A new Version shall be identified by new product and Version numbers.
1.30 "Your Original Code" shall mean Code created by YOU, or YOUR
subcontractors, to which YOU have a right to grant use licenses to others.
Your Original Code may include Code created by or owned by third parties.
1.31 "Your Patents" shall mean all patents (but not including any design
patents or registrations) of YOURS:
(a) issued or issuing on patent applications entitled to an
effective filing date prior to the termination or expiration of this
Agreement, whichever comes first; and
(b) Under which patents or the applications therefor YOU or any
of your Subsidiaries now has, or hereafter obtains, the right to grant
licenses to IBM of or within the scope granted herein without such grant or
the exercise of rights thereunder resulting in the payment of royalties or
other consideration by YOU or your Subsidiaries, and payments to third
parties for inventions made by said third parties while employed by YOU or
any of your Subsidiaries).
Your Patents shall include said patent applications, continuations in part of
said patent applications, and any patents reissuing on any of the aforesaid
patents.
1.32 "Your Product" shall mean a computer application program that is
licensed or otherwise distributed to end users for use by such end users and
that contains Licensed Code or was developed using Licensed Technology or
contains, incorporates, invokes, calls, or otherwise causes execution of any
version of the Licensed Code, or any portion thereof. Your Product shall
include Maintenance Services, but shall not include any other services. Your
Product shall not include any product that YOU make available for use on a
PAN. Such a product shall be the subject of a separate license from IBM.
1.33 "Your Product Revenue" shall be computed as YOUR gross revenue
obtained by YOU for the sale or license of Your Products. In no event,
however, shall Your Product Revenue be less than 60% of the total revenue
obtained by YOU from the sale or license of Your Product and other products
and/or services related to or associated with the San Francisco Product.
Notwithstanding the foregoing, sales of computer hardware that are separately
invoiced at market prices shall not be considered a product related to or
associated with the San Francisco Product.
1.34 "Your Product Selling Price" shall mean the bona fide gross selling
price, after prompt payment discounts (not to exceed 3%) and quantity
discounts actually allowed, at which YOU license or otherwise transfer or
provide Your Product, subject to the following:
(a) If Your Product was not separately itemized and priced and
was incorporated in other items (whether or not said other item was also
Your Product), Your Selling price shall be the price at which YOU so provided
such other item.
(b) If YOU sell or provide identical versions of Your Product at
more than one such price, Your Product Selling Price shall mean the total
revenue with respect to each of such identical ones of Your Products from
said sales in the relevant accounting period divided by the number of Your
Products sold in said period.
(c) If YOU use Your Product internally or provide Your Product to
affiliates for their internal use and not resale, Your Product Selling Price
for Your Product used by YOU or YOUR affiliates for such internal use shall
be equal to the average of Your Product Selling Price for all of Your Products
identical to Your Product which were provided to other than YOUR affiliates
in the relevant accounting period or, if there have been no such sales in
the relevant accounting period Your Product Selling Price shall be the fair
market value of Your Products in an arms length transaction between
unaffiliated parties.
Section 2. LICENSE GRANTS AND RESTRICTIONS
2.1 Within thirty (30) days after execution of this Agreement, IBM shall
furnish to YOU, via Your Technical Coordinator as identified in Section 8.3,
one copy of the CD-ROM containing Licensed Materials. IBM further agrees to
furnish to YOU a reasonable number of additional copies of the CD-ROM
containing Licensed Materials within thirty (30) days of YOUR request for
such additional copies. IBM hereby authorizes YOU to download further Licensed
Materials which may be located via the URL http://www.ibm.com/java/sanfrancisco
on the Internet. Any materials received pursuant to this Agreement and not
expressly rejected by YOU within thirty (30) days of receipt shall be deemed
accepted.
2.2 Subject to the provisions of Sections 3 and 6, IBM grants to YOU a
nonexclusive, nontransferable, worldwide(a) Know-how license to use the
Licensed Materials internally for the sole purpose of enabling YOU to develop
Your Product based upon the Licensed Technology;
(b) copyright license to prepare Derivative Works based upon the Licensed
Technology for the sole purpose expressing to YOUR Customers how to use Your
Product; provided, however, that YOU distribute copies of such Derivative
Work only in combination with Your Products;
(c) copyright license to prepare Derivative Works based upon the
Application Development Information, and to reproduce and distribute the
Application Development Information internally for the purposes of
developing, preparing and providing Your Products based on the San Francisco
Product; and
(d) subject to Section 3.2, right to prepare Derivative Works of the Know-How
and reproduce, distribute, perform and display such Derivative Works
internally. YOU shall have the further right to distribute to Customers and
Distributors, perform and display externally Binary Code versions of
Derivative Works of Source Code included in Know-How.
2.3 Subject to the provisions of Sections 4 and 6, IBM grants to YOU and
YOUR Distributors, a nonexclusive, nontransferable, worldwide copyright
license to reproduce and distribute copies of the Base Code in combination
with significant amounts of Your Original Code (as required by Section 4.1(a)
included in Your Product and distribute such copies, as part of Your Product,
to Customers and Distributors and not as a stand-alone product.
2.4 Subject to the provisions of Sections 4 and 5, IBM grants to YOU and
YOUR Distributors a nonexclusive, nontransferrable, worldwide copyright
license to reproduce and distribute copies of the CBP in combination with
significant amounts of Your Original Code (as required by Section 4.1(a))
included in Your Product and distribute such copies, as part of Your Product,
to Customers and Distributors and not as a stand-alone product.
2.5 During the term of this Agreement only, and subject to YOUR full
compliance with the terms and conditions of this Agreement, IBM licenses YOU
to make, use, import, offer to sell, lease, sell or otherwise transfer Your
Products under and patent (including divisions, continuations, reissues and
corresponding patents of other countries) issuing from the IBM Patents which
are necessarily infringed, and which infringement arises solely and
exclusively from, YOUR use of the Licensed Technology pursuant to Sections
2.2(a), 2.2(d), 2.3 and 2.4 and/or YOUR licensed use of the Licensed Code
pursuant to Sections 2.3 and 2.4. YOUR rights under this Section 2.5 are
personal, nonassignable and nontransferable.
2.6 With the exception of the rights granted in sections 2.2. 2.3, 2.4,
2.5, 2.7 and 11.1, no license or other right is granted by IBM to YOU under
this agreement, either directly or by implication, estoppel, or otherwise,
under any other intellectual property rights including patents, trademarks,
copyrights (including but not limited to, the right to prepare Derivative
Works), registered semiconductor mask works, knowhow or trade secrets.
2.7 The licenses granted herein include the right for YOU to sublicense
YOUR Subsidiaries and the right of such sublicensed Subsidiaries to
sublicense other Subsidiaries of YOURS. Each Subsidiary so sublicensed shall
be bound by the terms and conditions of this agreement as if it were named
herein in the place of YOU, provided that YOU shall pay and account to IBM
for royalties hereunder in respect of the exercise by any Subsidiary of any
sublicense granted to it hereunder. Any sublicense granted to a Subsidiary
shall terminate on the earlier of the date such Subsidiary ceases to be a
Subsidiary or the date this Agreement terminates or expires.
2.8 YOU shall have a right to license third parties to prepare
Derivative Works of Your Products(s) if such third party licensees have
obtained a license to prepare Derivative Works of the San Francisco Product
from IBM.
Section 3. Know-How:
Nondisclosure
3.1 All documents, resumes and other tangible items containing Know-How
shall be clearly marked with the words "KNOW-HOW" or a similar restrictive
legend. IBM does not wish to receive any information considered confidential
by YOU. In the event this becomes necessary, the parties will enter into a
separate agreement with respect to such information. All information
received from YOU that is not subject to a separate agreement shall be
considered as nonconfidential information.
3.2 Subject to the provisions of Sections 3.4 and 3.5, for a period of
twenty (20) years from the date of each receipt of Know-How, YOU shall use
the same care and discretion to avoid disclosure, publication or
dissemination of such received Know-How as YOU use with information of YOUR
own that YOU do not wish to publish, disclose or disseminate.
3.3 Subject to the provisions of Sections 3.4 and 3.5, for a period of
five (5) years from the Effective Date, YOU shall use the same care and
discretion to avoid disclosure, publication or dissemination of ATTACHMENT D
of this Agreement, as YOU use with information of YOUR own that you do not
wish to publish, disclose or disseminate.
3.4 Disclosure by YOU of Know-How is permissible if:
(a) such disclosure is in response to a valid order of a court or
other governmental body or otherwise required by law. YOU, however, will
give IBM prompt notice to allow IBM a reasonable opportunity to obtain
a protective order; or
(b) such disclosure is to other Know-How licensees of the San
Francisco Product. It shall be YOUR sole responsibility to determine if a
third party is a licensee of such Know-How. YOU shall have absolute
liability for any damages to IBM caused by YOUR malfeasance or misfeasance in
disclosure to a third party.
3.5 The obligations specified in Sections 3.2 and 3.3 shall not apply to
any information that:
(a) is already in YOUR possession or the possession of any of YOUR
Subsidiaries without obligation of confidence;
(b) is independently developed by YOU or any of YOUR Subsidiaries;
(c) is or becomes publicly available without breach of this Agreement;
(d) is rightfully received by YOU from a third party without obligation
of confidence; or
(e) is released for disclosure by IBM with its written consent.
3.6 Upon any termination of this Agreement pursuant to Sections 9.1, 9.2
or 9.3, YOU shall promptly return to IBM or destroy all documents and other
tangible items containing Know-How and/or Licensed Materials in the
possession of YOU or YOUR sublicensed Subsidiaries.
Section 4. YOUR OBLIGATIONS
4.1 YOU shall:
(a) integrate the Licensed Code into Your Product such that in IBM's
discretion Your Product is substantially different from and includes the
addition of valuable function in addition to that contained in the Licensed
Code per se;
(b) provide the Licensed Code in Binary Code form only under YOUR
license agreement as part of the YOUR Product;
(c) not remove IBM copyright and other notices from the Licensed Code;
(d) use all commercially reasonable efforts to ensure that all
YOUR employees comply with the terms of this Agreement;
(e) not make any representations or warranties on behalf of IBM
about IBM or the Licensed Materials;
(f) not reverse assemble, reverse compile or translate any Binary
Code except as permitted by law without the possibility of contractual
waiver;
(g) not insert, delete, replace, change or otherwise alter any
files in the directories and subdirectories of the San Francisco
Product;
(h) not modify, change or otherwise alter the directory structure
of the San Francisco Product;
(i) not modify, change, prepare Derivative Works of or otherwise alter
any Binary Code files included with the San Francisco Product; and
(j) provide sufficient support, service and documentation to YOUR
Customer to eliminate any right, permission, or authorization your Customer
may have in the absence of such support, service and documentation under the
national or regional law of the places where YOU or YOUR Customer do business
to reverse assemble, reverse compile or translate Your Product.
4.2 For Your Product that may be distributed in the U.S. or to U.S.
Government users, YOU will include on Your Product:
(a) a copyright notice in the form specified by 17 U.S.C. Chapter 4; and
(b) a U.S. Government user limited and restricted rights notice that
complies with DFAR 227.7202 for military agencies and F.A.R. 12.212 for
civilian agencies.
4.3 At IBM's request, YOU will provide to IBM for review and approval
copies of YOUR standard form and variations of YOUR standard form license
agreements used to license Your Product. YOU will obtain the Customer'
assent (either by signature or by any other legally enforceable means) to YOUR
license agreements all of which shall include the substance of the following:
(a) authorization to use, execute, perform, and display and to make one
copy of Your Product for backup or archival purposes only;
(b) subject to Section 2.8, prohibition from any preparation of
derivative works, or modifying of Your product or sublicensing,
distributing, leasing, renting, or otherwise transferring Your Product;
(c) prohibition from copying Your product unless the Customer has
been licensed to do so by YOU;
(d) direction to destroy all copies of Your product unless the Customer
has been licensed to do so by YOU;
(e) prohibition from reverse assembling, reverse compiling or
translating Your Product except as permitted without the possibility of
contractual waiver by the national or regional law of the places where YOU or
YOUR Customer do business; and
(f) statements that: (1) Your Product is copyrighted and licensed;
it is not sold. YOU do not pass title to Your Product;
(2) Your Product may contain materials licensed by a third party
and YOU have assumed responsibility for these materials and their use
in Your Product;
(3) Third party suppliers disclaim all implied warranties,
including the implied warranties of noninfringement, merchantability and
fitness for a particular purpose; and
(4) limit liabilities to a reasonable amount and state in comparable
words, "The collective liabilities of the seller/licensor's third party
suppliers shall be limited to no more than one hundred thousand 100,000.00)
dollars and is subject to all other limitations of liabilities described in
this agreement. Third party suppliers disclaim all liability for
consequential or other indirect damages. The third party supplier is an
intended beneficiary of the limitations and disclaimers and the limitation of
liabilities for seller/licensor and its third party suppliers are not
cumulative."
4.4 YOU agree to notify IBM within ten (10) business days if YOU become
aware of any acts of infringement of the IBM Patents or copyright
infringement of the Licensed Materials.
Section 5. TECHNICAL SUPPORT
5.1 IBM shall provide orientation materials on the CD-ROM.
5.2 At no additional charge to YOU (other than the payments specified in
this Agreement), and provided that YOU have registered with IBM, IBM shall,
through its Internet website, provide access to:
(a) a frequently asked questions (FAQ) file;
(b) a Hints and Techniques (HAT) file;
(c) technical road maps and papers;
(d) downloadable Fixpacks for the Version and Release of San
Francisco Product that is then being distributed to the public by IBM
hereinafter the "Then Current Version and Release");
(e) downloadable Fixpacks for the Version and Release of San
Francisco Product immediately previous to the Then Current Version and
Release for a period of one hundred and eighty (180) days after
public availability of the Then Current Version and Release; and
(f) a public forum. IBM shall have no obligation whatsoever to
respond to any questions posted on such public forum.
Registration and further instructions on how to access the foregoing
electronic support services may be obtained via the URL
http://www.ibm.com/java/sanfrancisco on the Internet.
5.3 IBM shall have no obligation: to provide technical assistance except
as set forth in Sections 5.1 and 5.2; to provide technical assistance to YOUR
Customers; and/or to have direct contact with any of YOUR Customers. In no
event shall any information provided by YOU to IBM under this Section 5 be
deemed confidential information or Know-How of YOU or any third party.
5.4 IBM shall use commercially reasonable efforts to perform its
obligations under Sections 5.1 and 5.2. In no event shall IBM be liable on
account of any technical information provided pursuant to this Section 5, or
its inability to provide technical assistance.
5.5 YOU shall be responsible for all service to YOUR Customers.
5.6 IBM shall provide, at no additional cost other than the payments
specified in this Agreement), the technical support set forth n Section 5.2
for a period of eighteen (18) months from the Effective Date of this
agreement. Thereafter, if YOU pay royalties to IBM pursuant to Section 6.1,
IBM shall continue, during the term of this Agreement, to provide to YOU, at
no additional charge, new Releases and the technical support set forth in
Section 5.2 for so long as YOU continue to pay royalties to IBM. If after the
first eighteen (18) months from the Effective Date of this agreement YOU are
not paying royalties to IBM pursuant to Section 6.1, IBM agrees to make
Releases and the technical support set forth in Section 5.2 available to YOU
at a fee to be set by IBM. IBM reserves the right to change the terms and
conditions, including charges, under which it licenses future Versions of
products based upon the San Francisco Product.
Section 6. PAYMENTS
6.1 As partial consideration for the licenses granted by IBM to YOU in
Sections 2.2, 2.3, 2.4 2.5, 2.7 and 11.1, YOU shall pay, as hereinafter
provided, royalties to IBM in respect of each Your Product licensed by YOU
or YOUR sublicensees for use by end-users or used for Internal Production Use.
6.2 YOU shall pay IBM running royalties calculated as a percentage
("Royalty Rate") of Your Product Revenue. These Royalty Rates are set forth
in ATTACHMENT D. Royalty Rates shall be selected from ATTACHMENT D according to
the appropriate Rate Code and Your Product Revenue Step. YOU shall pay
royalties under Rate Code A if YOU ship product that uses Base Code and/or
provides Maintenance Services. YOU shall pay royalties under Rate Code B if
YOU ship product that uses Base Code and CBP or CBP alone. The step under
which YOU shall pay royalties is selected from ATTACHMENT D in accordance
with the year to date (YTD) amount of Your Product based on the Licensed
Code ("Your Product Revenue Step"). YOU shall, regardless of the net of Your
Product Revenue, calculate royalties starting at Step 1 on January 1 of each
year in which royalties are due IBM and only proceed to subsequent steps
after royalties have been paid on the full amount in a Your Product Revenue
Step.(a)
YOU may create Derivative Works of programs obtained from third parties
who are also licensed by IBM to create works based upon the San Francisco
Product ("Other Company"). In such event, YOU may deduct from Your Product
Revenue payments made to such Other Company and on which royalties were paid
to IBM by such Other Company under a San Francisco Technology License
Agreement for their products upon which Your Product is based.
6.3 Royalties payable pursuant to Section 6.1 shall accrue when Your
Product is first sold, licensed or otherwise transferred (internally or
externally). A quarterly accounting period shall end on the last day of each
March, June, September and December during the term of this Agreement.
Within thirty (30) days after the end of each such period, YOU shall furnish
to IBM a written report certified by YOU, one of YOUR officers or another
individual authorized to legally bind YOU, in the forms set forth in
ATTACHMENT E and ATTACHMENT F. In addition to YOUR Name, License Reference
Number, Date of the Report and Period covered, the Statement of Royalty Form
of ATTACHMENT E shall specify:
(a) the name of Your Product for which royalties are being paid,
including a type number or other description that uniquely describes the
product (Column 1);
(b) the total net of Your Product Revenue for Your Product sold
during the accounting period and the year to date (YTD) total for all
San Francisco based products sold by YOU. If YOU are paying royalties for
Your Product based upon Other Company products pursuant to Section 6.2(a),
the net of Your Product Revenue shall be calculated using the worksheet of
ATTACHMENT F (Column 2). Otherwise, this amount shall be the revenue for the
Your Product calculated as the product of Column 3 and Column 5;
(c) the number of copies of Your Product, exclusive of copies
licensed at no charge and reported in accordance with Section 6.3(d),
licensed to Distributors or directly to Customers or otherwise indirectly
to Customers by Your sublicensees (Column 3);
(d) the number of copies of Your Product licensed without charge or
other payment to YOUR Customers (Column 4)
(e) the Licensed Product Selling Price per copy of such Your
Product (Column 5);
(f) identification of the Rate Code at which royalties are being
paid (Column 6);
(g) the applicable royalty rate (Column 7); and
(h) the amount of royalties due (Column 2 multiplied by Column 7)
and the total due for all of Your Product(s); and YOU shall pay said
total amount due to IBM.
With respect to each copy licensed without charge, YOU shall, on or before
the end date of the next quarterly accounting period, either (a) charge the
Customer based on Your Product Selling Price and remit royalty payment in due
course, (b) terminate each such Customer's license with respect to such copy,
or (c) treat such copies as sold at Your Selling Price and pay royalties on
such copies in accordance with Section 6.2.
6.4 If YOU are paying royalties to IBM for Your Product based upon Other
Company products pursuant to Section 6.2(a) YOU shall have the following
additional reporting obligations which together with YOUR Name, License
Reference Number, Date of the Report and Period covered, shall be reported on
the form of ATTACHMENT F:
(a) identification of Your Product for which royalties are being
paid, including a type number or other description that uniquely
describes the product (Column A);
(b) the amount of Your Product Revenue received by YOU (Column B);
(c) identification of the Other Company paying royalties to IBM for
the product upon which Your Product is based (Column C);
(d) identification of the Other Company product that YOUR Product
is based (Column C);
(e) the payment paid to the Other Company that is deductible
under Section 6.2(a) (Column E); and(f) the net of Your Product Revenue upon
which royalty is paid (Column E subtracted from Column B) and such amount shall
also be entered into Column 2 of ATTACHMENT E, where it shall be mark with an
asterisk ("*") for each of Your Product(s) for which the deduction allowed
under 6.2(a) is being taken.
6.5 YOU shall pay all royalties and other payments due hereunder in
United States dollars. YOU shall report all money amounts in U.S. dollars.
All royalties for an accounting period computed in other currencies shall be
converted into US dollars at the exchange rate for bank transfers from such
currency to US dollars as quoted by the head office of Citibank N.A., New
York, USA, at the close of banking on the last day of such accounting period
(or the first business day thereafter if such last day is a non-business day).
6.6 In the event no royalties are due, YOU shall submit a report so
stating. Such report may be submitted by e-mail to [email protected] and
shall contain the following, or a substantively similar statement:
"We have not licensed any applications based upon the San
Francisco Product nor placed any such applications into Internal Production
Use in the reporting period and therefore no royalty is due."
Such e-mail report shall also contain your License Reference Number and the
name of the person submitting the report on YOUR behalf.
6.7 YOU shall keep records in sufficient detail to permit the
determination of royalties payable hereunder and at the request and expense
of IBM will permit an independent auditor s elected by IBM, or any other person
acceptable to both IBM and YOU, to examine such records during ordinary
business hours once in each calendar year to verify or determine royalties
paid or payable under this Agreement. Such examination shall include the
right to examine and inspect any materials required to verify YOUR obligations
under Sections 4.3 and 11.3. If no request for examination of such records
for a particular accounting period has been made by IBM within three (3) years
after the end of said period, the right to examine, and the obligation to keep,
such records for said period shall terminate.
6.8 YOU shall be liable for interest on any overdue royalty commencing on
the date such royalty becomes due, i.e., thirty (30) days after the end of
the applicable accounting period, at an annual rate which is the greater of ten
percent (10%) or one percentage point higher than the prime interest rate as
quoted by the head office of Citibank N.A., New York, at the close of banking
on such date, or on the first business day thereafter if such date falls on a
non-business day. If such interest rate exceeds the maximum legal rate in
the jurisdiction where a claim therefor is being asserted, the interest rate
shall be reduced to such maximum legal rate.
YOU shall bear and pay all taxes (including, without limitation, sales
and value added taxes but excluding income tax as specified below) imposed by
the national government, including any political subdivision thereof, of any
country in which YOU are doing business as the result of the existence of the
Agreement or the exercise of rights hereunder. YOU shall not bear and pay
any income tax imposed by such national government upon the payments made
pursuant to this Section 6 to the extent that such income tax is to be
credited to taxes payable to IBM to its national government. YOU may deduct
such income tax from said payments, and YOU shall furnish IBM with a tax
certificate for such income tax. YOU shall also bear and pay all other fees
or charges, including, but not limited to, the fees charged by financial
institutions, incurred by YOU or on YOUR behalf in association with your
payment of royalty under this Agreement or as the result of the existence of
this Agreement or the exercise of rights hereunder.
Section 7. OPTION GRANTED
7.1 YOU grant to IBM the right to obtain a patent license under Your
Patents to make, use, import, offer to sell or lease, sell, lease or
otherwise transfer any IHS Product. Said license shall be under terms and
conditions no less favorable than those granted to YOU herein or any
amendment hereto and shall include royalty rates no less favorable than one
percent per patent (up to a maximum of five per cent for five or more
patents) of the actual selling price of IBM products to unaffiliated
customers, and the greater of actual selling price or fair market value in
sales to affiliated customers. For the purposes of this Section 7.1, each
one of Your Parents and its corresponding patents in other countries, shall
be deemed to be one of your Patents.
Section 8. COMMUNICATIONS
8.1 Upon execution of this Agreement IBM shall assign a License Reference
Number. This number shall be included in any report, payment or other
communication YOU make to IBM concerning this Agreement.
8.2 Payment shall be made by electronic funds transfer and shall include
in the payment details YOUR License Reference Number. Any notice or other
communication required or permitted to be made or given to either party
hereto pursuant to this Agreement shall be sent to such party by facsimile or
registered airmail, postage prepaid, addressed to it at its address set forth
8.2(b) below, or to such other address as it shall designate by written
notice given to the other party. Payment shall be deemed to be made on the
date of electronic funds transfer. Notices or other communications shall be
deemed to have been given or provided on the date of sending. The addresses
are as follows:(a) For electronic funds transfers of payments:
IBM, Director of Licensing
The Bank of New York
48 Wall Street
New York, New 10286
United States of America
Credit Account No. 890-0209-674
ABA No. 0210-0001-8
(b) Mailing addresses and facsimile numbers:
For IBM:
Director of Licensing
IBM Corporation
500 Columbus Avenue
Thornwood, NY 10594
Facsimile#: 914-742-6737
E-mail: [email protected]
For YOU:
Edson Ng
Vice President
Aztek, Inc.
Suite 115, Meadow Wood Crown Plaza
1575 Delucchi Lane
Reno, Nevada
89502 USA
Telephone # (604) 294-0290
Facsimile # (604) 294-1816
E-mail: [email protected]
8.3 Your Technical Coordinator is as follows:
Name: Eileen Keogh
Title: Director, Research & Development
Address: Aztek, Inc.
450-6450 Roberts St.
Burnaby, B.C.
V5G 4E1 Canada
Telephone # (604) 294-0290
Facsimile # (604) 294-1816
E-mail: [email protected]
YOU will promptly advise IBM in writing of any change in Technical Coordinator
or address.
Section 9 TERM AND TERMINATION
9.1 This Agreement shall be from the Effective Date until three (3) years
after such date, unless earlier terminated under the provisions of the
Agreement. Termination or expiration of this Agreement does not affect
previously granted paid-up rights and licenses to Customers authorized by
this Agreement, including without limitation licenses granted in the last
quarterly accounting period of a calendar year for which royalties are paid
in accordance with Section 6 even if such payment occurs after expiration of
this Agreement. Termination of this license shall also terminate previously
granted rights of Customers authorized by this Agreement who have licensed
Your Product under periodic license payments. YOU shall promptly notify such
Customers of the termination of such previously granted rights.
9.2 In the event that YOU materially breach this Agreement, IBM shall
give written notice of the breach and, if such breach is not cured within
ninety (90) days of said notice, IBM shall have the right to terminate this
Agreement by giving fifteen (15) days written notice.
9.3 YOU shall have the right to terminate this Agreement without cause at
any time by giving written notice; provided, however, that such termination
shall be subject to YOUR payment obligations under Section 6 (which shall be
come immediately due and payable) and to the provisions of Section 13.14.
9.4 Upon termination or expiration of this Agreement, YOU shall provide
IBM with proof of the destruction of all existing packages, cartons,
containers, point of sale displays, advertising, labels, stencils, cut-outs,
forms and the like which bear the Trademark or are or can be used in the
application or reproduction of the Trademark, and shall provide IBM with
proof of the obliteration or removal of the Trademark from all products. For
the purposes of this section 9.4, a written statement fully describing such
destructions and obliterations, certified by YOU, one of YOUR officers or
another individual authorized to legally bind YOU, shall constitute
acceptable proof to IBM.
9.5 IBM hereby agrees to make available a new license to YOU for the
Version of the San Francisco Product that is being licensed by IBM as of the
date of termination of this Agreement, under IBM's then current terms and
conditions, provided that:
(a) IBM shall have no obligation to make available such new license if
IBM is not then offering such licenses to others;
(b) all outstanding intellectual property claims between IBM and YOU
have been resolved to IBM's satisfaction as of the date of termination
of this Agreement; and
(c) all outstanding claims between IBM and YOU under this Agreement
have been resolved to IBM's satisfaction as of the date of termination
of this Agreement.
9.6 IBM hereby agrees that if IBM ceases all marketing, licensing and
support of all Versions of the San Francisco Product and does not establish
or otherwise provide for a successor to provide such marketing, licensing and
support then IBM shall amend this Agreement:
(a) to extend its term to the life of the copyright of the Version of
the San Francisco Product last provided to you under this Agreement, except
that any licenses granted in such amended agreement shall be only to
intellectual property, including, patents, trademark, copyright and Know-How
covered under this Agreement and existing at the effective date of such
amendment;
(b) to delete Sections 2.1, 5.2, 5.6, 9.5, 10.1, 10.4 and 13.6; and
(c) to the extent, IBM has the right to do so, to provide access to YOU
under license to the Source Code of those portions of the last Version of the
San Francisco Product previously supplied to YOU only as Licensed Binary
Code under this Agreement. Notwithstanding the foregoing, IBM shall have no
obligation to provide such amended agreement unless: (I) all outstanding
intellectual property claims between IBM and YOU have been resolved to IBM's
satisfaction as of the date IBM ceases support, marketing and licensing of
all Versions of the San Francisco Product; and (ii) all outstanding claims
between IBM and YOU under this Agreement have been resolved to IBM's
satisfaction as of the date IBM ceases support, marketing and licensing
of all Versions of the San Francisco Product.
Section 10 INDEMNIFICATION
10.1 If a third party claims that the Base Code or CBP in Binary Code
form that IBM provides to YOU infringes that party's copyright, IBM will,
subject to the limitations of Section 13.4, defend YOU against that claim at
IBM's expense and pay all costs, damages, and attorney's fees that a court
finally awards, provided that YOU:
(a) notify IBM in writing of any such claim within ten (10)
business days of YOUR receipt of such claim; and
(b) allow IBM to control, and cooperate with IBM in, the defense
and any related settlement discussions.
10.2 If a third party claim that the Base Code or CBP in Binary Code form
that IBM provides to YOU infringe that party's copyright is made or appears
likely to be made, YOU agree to permit IBM to obtain the right for YOU to
continue to use the Base Code or CBP, or to modify it, or replace it with
non-infringing Base Code or CBP that is at least functionally equivalent. If
IBM determines that none of these alternatives is reasonably available, YOU
agree to return the Licensed Materials to IBM upon IBM's written request.
Sections 10.1 and 10.2 state IBM's entire obligation to YOU regarding any
claim of infringement.
10.3 IBM has no obligation regarding any claim based on any of the
following:
(a) anything YOU provide which is incorporated into the Licensed
Materials or into which the Base Code or CBP is incorporated;
(b) YOUR modification of the Licensed Code; or the use thereof in
other
than its specified operating environment;
(c) the combination, operation, or use of Licensed Code with
other products.
10.4 Subject to the limitations of Section 13.4, IBM shall settle or
defend all claims made by third parties against YOU and shall thereby
indemnify and hold YOU, YOUR officers, agents and employees, harmless from
any and all claims made against YOU for infringement or unfair competition
arising from YOUR use of the terms in accordance with the terms of this
Agreement. Following notice of an infringement claim or at any time IBM deems
appropriate, IBM may provide to YOU a substitute trademark for use under the
terms and conditions of this Agreement.
(a) Notwithstanding the above, IBM shall not be liable for any
lost revenue, profits, business opportunities or consequential,
incidental or punitive damages, even if advised of the possibility of
such damages.
(b) To qualify for such indemnification, YOU must notify IBM of any
such claim in writing within ten (10) business days of YOUR receipt of such
claim, and allow IBM to control and fully cooperate with IBM in the defense
of and all settlement negotiations related to such claim.
10.5 YOU shall indemnify IBM, its officers, agents and employees from and
against any and all claims, damages, liabilities (including settlements
entered into in good faith), suits, actions, judgments, penalties and taxes,
civil and criminal, and all costs and expenses (including without limitation
reasonable attorneys' fees) incurred in connection therewith, arising out of:
(a) any act, omission, neglect or default of YOU or YOUR agents on or
in connection with the manufacture, sale, distribution, promotion, or
marketing of Your Product;
(b) any defect (whether obvious or hidden) in Your Product
manufactured, sold or licensed by YOU, except if such defect is contained
wholly within Licensed Binary Code provided by IBM to YOU;
(c) personal injury or any infringement of any rights (including
copyrights) of any person by the manufacture, sale, distribution, possession
or use of Your Product; or
(d) YOUR failure to comply with applicable laws with respect to
the manufacture, sale, distribution, possession or use of Your
Product.
To qualify for such indemnification IBM must notify YOU in writing of any
such claim within ten (10) business days of IBM'S receipt of such claim, and
allow YOU to control and fully cooperate with YOU in the defense of and all
settlement negotiations related to such claim.
Section 11. TRADEMARK LICENSE
11.1 To the extent it has the right to do so, IBM grants to YOU a
worldwide, non-exclusive, non-transferable, right and license to use the
Trademarks on Your Product in accordance with the terms of this Agreement.
YOU shall have no right and/or license to use the Trademarks on goods other
than YOUR Product, including, by way of example, and not limitation,
promotional goods, such as clothing, sports gear, computer accessories,
office supplies, and jewelry.
11.2 The license granted to YOU in Section 11.1 includes the right to
sublicense the Trademarks to YOUR Subsidiaries, provided that each
sublicensed subsidiary shall be bound by the terms and conditions of this
Agreement as if it were named herein in YOUR place. YOU agree that any
breach of the terms and conditions of this Agreement by a sublicensee shall
also be considered a breach by YOU.
11.3. YOU agree to display and use the Trademarks solely in the form,
manner and style required in the Trademark Usage Guidelines which may be
modified from time to time, upon reasonable notice, by IBM.
11.4 YOU agree to use the Trademarks only on Your Products, and sales
literature, advertising, presentation materials, press materials, and
exhibits for Your Products.
11.5 All ownership rights in the Trademarks belong exclusively to IBM.
YOU have no ownership rights in the Trademarks and shall acquire no ownership
rights in the Trademarks as a result of YOUR performance (or breach) of this
Agreement. All use of the Trademarks or variations thereon shall insure
solely to the benefit of IBM. Upon termination of this Agreement all of YOUR
rights to use the Trademarks shall terminate immediately except as otherwise
provided herein.
11.6 YOU agree:
(a) not to take any action which will interfere with any of IBM's
rights in and to the Trademarks;
(b) not to challenge IBM's right, title or interest in and to the
Trademarks or the benefits therefrom;
(c) not to make any claim or take any action adverse to IBM's
ownership of the Trademarks;
(d) not to register or apply for registrations, anywhere, for the
trademarks or any other mark which is similar to the Trademark or which
incorporates the Trademarks; and
(e) not to use any mark, anywhere, which is confusingly similar to
the Trademarks.
11.7 YOU agree that it is of fundamental importance that Your Product
bearing the Trademarks be of the highest quality and integrity and that the
Trademarks be properly used and displayed. YOU agree that the level of
quality of Your Product manufactured, sold or licensed by YOU shall meet or
exceed industry standards.
11.8 The parties agree that IBM may inspect Your Product distributed by
YOU upon reasonable notice, and may purchase Your Product without notice to
insure that the quality standards set forth in Section 11.7 and the Trademark
Usage Guidelines are maintained and that the Trademarks are properly used.
11.9 Failure to meet the quality standards set forth in Section 11.7 and
the Trademark Usage Guidelines shall be deemed to be a breach thereof which
must be corrected to IBM'S satisfaction within ninety (90) days of being put
on notice. Until such breach is corrected YOU may not sell or distribute Your
Products with the Trademarks.
11.10 YOU represent and warrant that Your Product meets the applicable
San Francisco criteria and quality standards in accordance with Section 11.7
and the Trademark Usage Guidelines.
11.11 YOU agree to notify IBM within ten (10) business days if YOU become
aware of:
(a) any uses of, or any application or registration for, a
trademark, service mark or trade name that conflicts with or is
confusingly similar to the Trademarks;
(b) any acts of infringement or unfair competition involving the
Trademarks; or
(c) any allegations or claims whether or not made in a lawsuit, that
the use of the Trademarks by IBM or YOU infringe the trademark or
service mark or other rights of any other entity.
11.12 IBM may, but shall not be required to, take whatever action it, in
its sole discretion, deems necessary or desirable to protect the validity and
strength of the Trademarks at IBM's sole expense. YOU agree to comply with
all reasonable requests from IBM for assistance in connection with any action
with respect to the Trademarks that I BM may choose to take.
11.13 YOU shall not institute or settle any claims or litigation
affecting any rights in and to the Trademarks without IBM's prior written
approval.
Section 12. REPRESENTATIONS AND WARRANTIES
122.1 IBM represents and warrants that it has the full right and power to
grant the licenses granted I Sections 2 and 11, and that there are no
outstanding agreements, assignments or encumbrances inconsistent with the
provisions of said licenses or with any other provisions of this Agreement.
12.2 IBM represents and warrants that it is not aware of any claims of
infringement of intellectual property that have been brought against it by
third parties for infringement of such third party's intellectual property by
the San Francisco Product.
12.3 YOU represent and warrant that other than in Your Product(s), no
computer program product of YOURS contains, incorporates, invokes, calls, or
otherwise causes execution of any version of the Licensed Code, or any
portion
thereof.
12.4 IBM warrants that when the San Francisco Product is used in the
Specific Operating Environment, it will conform to thee Specifications,
provided that YOU provide a substantially similar warranty to YOUR Customers
of Your Product.
The warranty period for a Release of the San Francisco Product licensed under
this Agreement commences on the day YOU receive such Release and continues
for a period of one hundred eighty (180) days after public availability of a
subsequent Release or new Version. In no event, however, shall such warranty
continue after the termination or expiration of this Agreement.
THESE WARRANTIES ARE YOUR EXCLUSIVE WARRANTIES AND REPLACE ALL
OTHER WARRANTIES OR CONDITIONS, EXPRESS OR IMPLIED, INCLUDING BUT NOT
LIMITED TO THE IMPLIED WARRANTIES OR CONDITIONS OF MERCHANTABILITY FOR A
PARTICULAR PURPOSE. IBM SHALL HAVE NO OTHER LIABILITY IN RESPECT OF ANY
INFRINGEMENT OF PATENTS OR OTHER RIGHTS OF THIRD PARTIES DUE TO YOUR
OPERATION UNDER THE LICENSES GRANTED HEREIN.
Section 13. MISCELLANEOUS
13.1 IBM shall not assign or grant any right under any of its
intellectual property that is licensed to YOU pursuant to Section 2, unless
such assignment or grant is made subject to the terms and conditions of this
Agreement. YOU shall not assign this Agreement or any of its rights, licenses
or privileges hereunder or delegate or subcontract YOUR obligations, except
to a purchaser of all, or substantially all, of YOUR assets, provided that,
any such assignment, delegation or subcontracting shall be with IBM's written
consent, which consent shall not be unreasonably withheld and all outstanding
intellectual property claims between IBM and such purchaser, and all
outstanding issues between YOU and IBM under this Agreement, if any, shall
have been resolved to the satisfaction of IBM as of the date of such purchase
of YOUR assets. Any assignment in derogation of the foregoing shall be null
and void.
13.2 Except as specifically permitted in section 11.1, nothing contained
in this Agreement shall be construed as conferring any right to use in
advertising, publicity or other promotional activities any name, trade name,
trademark or other designation of either party hereto (including any
contraction, abbreviation or simulation of any of the foregoing).
13.3 With the exception of any reduction in the value of the Licensed
Materials resulting from YOUR material breach of YOUR obligations, neither
party shall be entitled to indirect, incidental, consequential, special or
punitive damages, including lost profits based on any breach or default of
the other party and including those arising from infringement or alleged
infringement of any patent, trademark, copyright, mask work or any other
intellectual property right.
13.4 IBM's entire liability and YOUR exclusive remedy for actual damages
from any cause whatsoever relating to this Agreement shall be limited to the
greater of one hundred thousand ($100,000.00) dollars or the royalty payment
made by YOU under this Agreement in the immediately preceding annual year.
The limitation will apply, except as otherwise stated in this section,
regardless of the form of action, whether in contract or in tort, including
negligence. The limitation will not apply to claims by YOU for bodily injury
or damage to real property or tangible personal property for which IBM is
legally liable.
13.5 IBM shall have no obligation hereunder to institute any action or
suit against third parties for any cause.
13.6 YOU recognize that URLs change from time to time. In the event that
YOU are unable to gain access to any URL recited in this Agreement, please
contact your IBM marketing representative to obtain any updates or other
changes to the URL.
13.7 This Agreement will not be binding upon the parties until it has
been signed hereinbelow by or on behalf of each party, in which event it
shall be effective as of the Effective Date. No amendment or modification
hereof shall be valid or binding upon tne parties unless made in writing and
signed on behalf of each of the parties.
13.8 Each party shall, at its own expense, comply with any governmental
law, statute, ordinance, administrative order, rule or regulation relating to
its duties, obligations and performance under this Agreement and shall
procure all licenses and pay all fees and other charges required thereby.
Each party agrees to comply with all applicable federal, state and local laws,
regulations and ordinances, including the Regulations of the U.S. Department
of Commerce and/or the U.S. State Department. YOU hereby give written
assurance that, unless authorized by appropriate U.S. Government license or
regulations, neither software nor technical data provided by IBM under this
Agreement, nor the direct product thereof, shall be exported, directly or
indirectly, to prohibited countries or nations thereof. YOU agree that YOU
are responsible for obtaining required government documents and approvals
prior to export of any commodity, machine, software or technical data. As a
part of the technical assistance provided under Section 5.2, IBM agrees to
cooperate and provide reasonable information concerning the Licensed
Materials to YOU in order for YOU to obtain export approval for Your Product.
13.9 If any section of this Agreement is found by competent authority to
be invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such section in every other
respect and the remainder of this Agreement shall continue in effect so long
as the Agreement still expresses the intent of the parties. If the intent of
the parties cannot be preserved, this Agreement shall be either renegotiated
or terminated.
13.10 This Agreement shall be construed, and the legal relations between
the parties hereto shall be determined, in accordance with the law of the
State of New as such law applies to contracts signed and fully performed in
such State. Both parties agree that any action brought concerning this
Agreement shall be brought in a court of competent jurisdiction in the State
of New Both parties agree to waive their right to a trial by jury in any
dispute arising out of this Agreement. The prevailing party in any legal
action hereunder shall be entitled to reimbursement by the other party of its
expenses including, without limitation, reasonable attorneys' fees.
13.11 Each party is an independent contractor. Neither party is, nor will
claim to be, a legal representative, partner, franchisee, agent or employee
of the other. Neither party will assume or create obligations for the other.
Each party is responsible for the direction and compensation of its employees.
13.12 Neither party relies on any promises, inducements, or
representations made by the other or expectations of more business dealings.
This Agreement accurately states our business agreement.
13.13 The headings of the sections are inserted for convenience of
reference only and are not intended to be a part of or to affect the meaning
or interpretation of this Agreement.
13.14 Any terms of this Agreement which by their nature extend beyond its
expiration ro termination, including but not limited to the terms of Sections
3 and 6 shall remain in effect until fulfilled and shall bind the parties and
their legal representatives, successors, heirs and assigns.
This Agreement and any attachments thereto embody the entire understanding of
the parties with respect to the subject matter hereof and merge all prior
discussions between them.
Aztek, Inc.By:
/s/ Edson
Ng------------------ Title:
Vice President
Date: July 8, 1998
INTERNATIONAL BUSINESS
MACHINES CORPORATION
By /s/ Marshall C. Phelps,
Jr.
- ------------------------------
Marshall C. Phelps, Jr.
Vice President
Date:
7/22/98
ATTACHMENT A
Product Nos. covered by this agreement
Product No. 5648-SF1-San Francisco Base Product No. 5648-GL1-San Francisco
General Ledger Product No. 5647-WM1-San Francisco Warehouse Management
Product No. 5648-OM1-San Francisco Order Management
The product numbers covered by this Agreement shall also be listed in the
file named LICENSE.TXT which is located in the root directory of the CD-ROM
and in the ...com/ibm/sf/doc/ relative directory that results from the
installation of the San Francisco Product on YOUR computer where ... is the
prefix directory determined at install time by user specification of directory
preference and/or specific platform requirements under Section B, entitled
"San Francisco Product Numbers and Names." The contents of these lists and
subdirectories may be updated by IBM from time to time.
ATTACHMENT B
Trademarks
IBM San Francisco
ATTACHMENT C
Trademark Usage Guidelines
1.0 General Overview
1.1 This Attachment C ("Guidelines") sets forth the proper treatment and
use in advertising of all trademarks licensed under the San Francisco
Technology License Agreement to which they are appended and incorporated by
reference (hereafter Agreement). Compliance with these Guidelines is the
sole responsibility of YOU, YOUR Subsidiaries and/or YOUR Distributors. In
the event of a conflict between the provisions of the text of the Agreement
and these Guidelines, the Agreement shall control.
1.2 None of the Licensed Marks may be used on or in connection with
novelty items or T-shirts without IBM's Approval.
2.0 Use of Trademarks in Advertising, Promotional Materials and Licensed
Materials
2.1 General Trademark Use - Trademarks licensed by IBM under the
Agreement shall always be used as adjectives, not as nouns or verbs. A
trademark is not used in the possessive sense nor in the plural. Further, a
trademark should not be used as a substitute for a type or class of product.
Verify trademark use in this respect by mentally inserting the word "brand"
after a trademark and before its product type to see if the entire phrase
sounds reasonable. If it does not, the use is generally improper and should
be checked with your legal department. Do not use any trademark in or as
part of a hyphenated expression. Do not combine any trademark licensed
hereunder in composite form with any other trademark, especially the
trademark of a third party.
2.2 Use of the Licensed Marks by a Subsidiary - Trademark use by YOUR
Subsidiaries shall form, at the least and in all respects, to the guidelines
and requirements set forth in these Guidelines.
2.3 Trademark Use in Emblems - A Licensed Mark may not be used in any
Subsidiary emblem or insignia.
2.4 Advertising Claims - The accuracy and appropriateness of all claims
used in advertising or promotional materials which includes one or more of
the Licensed Marks is the sole responsibility of YOU, YOUR Subsidiary, or
YOUR Distributor, as the case may be, even though IBM may have reviewed the
advertisement or promotional materials in question pursuant to this Agreement.
3.0 Use of IBM Trademarks
3.1 General - The following guidelines have been developed to explain the
proper treatment of one of IBM's most valuable assets, its terms. The only
legitimate purpose for using the trademark "IBM San Francisco" is to identify
a relationship or the source of products which are based on the IBM San
Francisco Product from International Business Machines Corporation. As such,
the following general rules apply to the use of the trademark 'IBM San
Francisco":"IBM San Francisco" may not be used to describe any product or
service which is not based on and developed using the San Francisco Product
from IBM.
Right : Wrong:
Based on IBM San Francisco software Based on IBM San Francisco
Designed for IBM San Francisco software IBM San Francisco Order
Tracking
(where the order tracking
modules were created by YOU)
3.2 More Specific Basis For and Manner of Use of" IBM San Francisco" -The
trademark "IBM San Francisco" consists of two portions "IBM," which is a
registered trademark, and "San Francisco," which, as of the date of this
Agreement, is not registered.
Under no circumstances are YOU permitted to use the trademark "IBM" in a
design or logotype form or as a trademark separate and apart from the words
"San Francisco."
"IBM San Francisco" (or any other trademark) may not be used as a noun, but
only as an adjective.
Right: Wrong
Solve your development problems Solve your development problems
with IBM San Francisco software with IBM San Francisco
Note the use of a general term "software" in the previous example which is
used to avoid making the trademark "IBM San Francisco" a generic term as
happened with the former trademark "Aspirin."
In addition to following the above guidelines, the trademark "IBM San
Francisco", in either its word or logotype form, must not be used in a manner
which may cause confusion as to the source or origin of products or services
being offered. As such, the trademark "IBM San Francisco" may not be:
displayed in a striking and solitary manner;
made more prominent than the remainder of the text in which
it is used by another;
as prominent or more prominent than the YOUR trademark or
company name;
used as part of the name or other identifier of a business,
product, or service not originating not based upon or developed using the San
Francisco product.
At the first or a prominent occurrence of the trademark "IBM San Francisco"
in advertising, it should be symbolically indicated that "IBM San Francisco" is
a trademark. Each portion of the trademark should be marked according to its
registration status. The registered portion should be marked with the symbol
"registered trademark" and in the United States, the unregistered portion is
usually marked by using the symbol "trademark."
Thus, the marking of the entire IBM San Francisco trademark should be: IBM
"registered trademark" San Francisco "trademark."
Where space permits, the footnote "IBM, San Francisco and IBM San Francisco
are trademarks or registered trademarks of IBM Corporation." Where space
requirements dictate, a shortened legend may be agreed to. In either case,
the position of the symbols should be in close proximity to the mark.
Should IBM be granted a registration of the trademark "San Francisco" in the
US and foreign patent and trademark offices, the symbol "registered
trademark" should be substituted for the "trademark" symbol. IBM will notify
you in the event that such registration is granted.
Outside the U.S., an asterisk is sometimes used instead of the "trademark"
with the same footnote. Note that in some countries a translated version of
the US trademark attribution is not only used, but may be required. You
should check with your legal department to insure that local laws and customs
are adhered to and followed.
ATTACHMENT D
***********************
Attachment D has been omitted pursuant to a request for confidential
treatment
and filed separately with the Securities and Exchange Commission.
ATTACHMENT E
<TABLE>
<CAPTION>
Your Product Net Your Number of Number of Unit Rate Rate Code Royalty Amount of
Description/ Product Copies No Charge Selling (A or B) Rate(%) Royalty Due
Type Revenue Copies Price
(Column 1) (Column 2) (Column 3) (Column 4) (Column 5) (Column 6) (Column 7) (Column 2x7)
<S> <C> <C> <C> <C> <C> <C>
Total: Total Due:
_________
YTD Total:
</TABLE>
ATTACHMENT F
SAN FRANCISCO PRODUCT WORKSHEET FOR NET LICENSED PRODUCT REVENUE
UNDER SECTION
6.2(a)
Licensee Name: ____________________ Date of Report: __________
License Reference Number: _________ Period Covered: __________
Your Product Gross Your Other Company Licensed Other Payment Net Your
Product Company product made to Product
Revenue incorporated Other Revenue
In Your Company
Product Deductible
Under
Section
6.2(a)
(Column A) (Column B) (Column C) (Column D) (Column E) (Column
B-3)
[Letterhead of Consolidated McKinney Resources Inc.]
August 28, 1994
VIA FAX: (905) 316-3699
IBM CANADA LTD.
3600 Steeles Avenue East
Vendor and Channels Marketing
Software Solutions Business Unit
Markham, Ontario L3R 9Z7
Attention: Mr. Kelly Paul, Relationship Manager
Dear Sir:
Re: Proposed Settlement ("Settlement") of the Shared Cost Development
Agreement ("SCDA Agreement") between ResponseWare Corp. ("ResponseWare") and
IBM given ResponseWare acquisition by Consolidated McKinney Resources Inc.
("CKY" or the "Company")
Revised proposal to reaching a working Settlement on the SCDA Agreement:
1. A payment of C$100,000 shall be made by CKY to IBM via ten (10), equal,
monthly payments of C$10,000 commencing on the last day of January 1995 and
completing on the last day of October 1995.
This Settlement shall settle and supercede all other agreements that have
been entered into between ResponseWare and IBM as of August 28, 1994, other
than the Capital Lease ("Lease") between ResponseWAre and IBM as mentioned in 2
below.
2. CKY shall continue to honor the Lease agreement between IBM and
ResponseWare as outlined in the terms and conditions of the Lease.
3. The portion of software developed under the SCDA Agreement that is still
being marketed by ResponseWare, CKY will negotiate with IBM a new
compensation plan that is mutually agreeable to both parties. CKY requests
that an initial three (3) month assessment period, starting five business
days after official Vancouver Stock Exchange ("VSE") approval of the starting
five business days after official Vancouver Stock Exchange ("VSE") approval
of the acquisition of ResponseWare by CKY, be invoked so that CKY has time to
determine the extent of use of the software developed under the SCDA
Agreement. During the second half of the three month assessment period CKY
will negotiate in good faith with IBM the revised compensation plan - to be
invoked after the three month period.
<PAGE>
4. The laws of the Province of British Columbia, B.C. Securities Commission
and the VSE prohibit CKY from executing an agreement until it has been
approved by the VSE. The effective date of the agreement with ResponseWare
shall be five working days after the official approval of the acquisition of
ResponseWare by CKY.
5. If necessary, the revised terms and conditions of this agreement (CKY/IBM
Agreement") shall be reviewed directly by IBM with ResponseWare only upon the
date of official notice by CKY to ResponseWare and IBM that CkY does not
intend to complete the acquisition of ResponseWare. CKY shall commit to
provide this disclosure to IBM at that time.
6. The terms and conditions of the CKY/IBM Agreement and the revised SCDA
Agreement as well as all discussions regarding the proposed acquisition of
ResponseWare by CKY may not be disclosed by IBM to other parties without the
written consent of CKY. Terms of this CKY/IBM Agreement should be kept
confidential and must not be divulged to others without IBM's written consent.
Yours truly,
CONSOLIDATED McKINNEY RESOURCES INC.
/s/ Richard W. Evans, Director
- -----------------------------------------
per Mr. Mike Sintichakis
President and CEO
AGREED TO AND ACCEPTED BY
IBM CANADA LTD.
THIS 29th DAY OF August, 1994
Kelly Paul
- ----------------------------------------
Name
Per: /s/ Kelly Paul
- ---------------------------------------
Signature
Reationship Manager
- ---------------------------------------
Official Capacity
Enclosure: Copy of ResponseWare/CKY Letter - ResponseWare authorization -
creditors
EXHIBIT 23.1 Consent Of Independent Accountants
[LETTERHEAD OF BDO DUNWOODY, CHARTERED ACCOUNTANTS APPEARS HERE]
INDEPENDENT AUDITORS CONSENT
We hereby consent to the use of our report to the shareholders of Aztek,
Inc., dated July 23, 1998 on the audit of the financial statements described
therein, in the Joint Proxy Statement-Prospectus and Registration Statement
on Form S-4, relating to shares of Common Stock of Aztek, Inc., to be issued to
shareholders of Aztek Technologies Inc., as filed with the Securities and
Exchange Commission.
We hereby consent to the use of our report to the shareholders of Aztek
Technologies Inc., dated July 10, 1998 on the audit of the financial
statements described therein, in this Registration Statement on Form S-4,
relating to the annual and extraordinary meeting of the shareholders of Aztek
Technologies Inc., as filed with the Securities and Exchange Commission.
We hereby consent to the use of our opinion on the income tax effect on
Canadian resident shareholders, of Aztek Technologies Inc., of the proposed
merger of Aztek Technologies Inc. with Aztek, Inc. described in this
Registration Statement on Form S-4.
"BDO Dunwoody"
CHARTERED ACCOUNTANTS
Penticton, British Columbia
April 28, 1999
BDO Dunwoody, LLP is a Limited Liability Partnership registered in Ontario
EXHIBIT 23.2 Consent of Stephen K. Winters
[LETTERHEAD OF STEPHEN K WINTERS LAW CORPORATION]
November 5, 1998
Board of Directors
Aztek Technologies Inc.
#5 - 246 Lawrence Ave.
Kelowna, B.C.
V1Y 6L3
Re: Aztek Technologies Inc. ("ATI") - Consent
Members of the Board:
We hereby consent to the use of our legal opinion dated August 5, 1998, on
the Dissenter's Rights described therein of ATI's Proxy Statement to be sent to
the shareholders of ATI as filed with the Securities and Exchange
Commission. We also consent to the reference to our firm under the caption
"Experts" in the Prospectus.
Yours truly,
STEPHEN K WINTERS
LAW CORPORATION
/s/ Stephen K. Winters
- ----------------------
Per: Stephen K. Winters
MINUTES OF PROCEEDING OF THE BOARD
CONSENT AND RESOLUTION OF
BOARD OF DIRECTORS
OF
AZTEK, INC.
Held on August 12, 1998
PRESENT: MIKE SINTICHAKIS
NICK SINTICHAKIS
EDSON NG
EILEEN KEOGH
Being all of the Directors of Aztek, Inc. (the "Company"). All of the
Directors being present in person and having waived notice of the meeting as
evidenced by their signatures at the bottom of these minutes, notice calling
the meeting was dispensed with and the meeting declared to be regularly
constituted.
WHEREAS, the Company will file a Registration Statement on Form S-4 with the
U.S. Securities & Exchange Commission in connection with the merger of the
Company and Aztek Technologies Inc. of Canada, to comply with the Securities
Act of 1933, as amended, and any rules, regulations and requirement of the
Securities and Exchange Commission, it is
RESOLVED, That Mike Sintichakis, as an officer of the Company, will sign the
registration statement for the directors and officers by power of attorney.
AZTEK, INC.
By:/s/ Mike Sintichakis Date: 8/12/98
---------------------- -------------------
Mike Sintichakis, Director
By:/s/ Nick Sintichakis Date: 8/12/98
------------------------ --------------------
Nick Sintichakis, Director
By:/s/ Edson Ng Date: 8/12/98
------------------------ --------------------
Edson Ng
By:/s/ Eileen Keogh Date: 8/12/98
------------------------ --------------------
Eileen Keogh
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SUMMARY CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S
ANNUAL FINANCIAL STATEMENTS SET FORTH IN THIS FORM S-4 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 60000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 60000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 60000
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 60000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 60000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
EXHIBIT 99.1 Merger Agreement
MERGER AGREEMENT
THIS AGREEMENT MADE THE 2nd DAY OF July, 1998.
BETWEEN:
AZTEK TECHNOLOGIES INC., a company incorporated under the laws of the
Province of British Columbia, and having its registered office at 505 - 700
West Pender Street, Vancouver, British Columbia, V6C 1G8 ("ATI")
OF THE FIRST PART
AND:
AZTEK, INC., a company incorporated under the laws of the State of Nevada,
and having its registered office at 1025 Ridgeview Drive, Suite 400 Reno,
Nevada, 89509 ("the Corporation")
OF THE SECOND PART
WHEREAS:
A. Aztek Technologies Inc. shareholders are legal and beneficial owners of
all the issued and outstanding shares in the capital stock of Aztek
Technologies Inc., a corporation incorporated under the laws of British
Columbia as follows:
<TABLE>
<CAPTION>
Description No. Of Registered Number of Shares
Shares Shareholders Outstanding
<S> <C>
<C>
Common 347 2,051,109
Escrow 1 354,000
Options 5 175,000
Total *347 2,051,109
</TABLE>
* The above shareholders are as of June 30, 1997. The current number of
shareholders is not available from the transfer agent at this time but will
be made available at a later date.
(the "ATI Shares").
B. Aztek, Inc. shareholders are legal and beneficial owners of all of the
issued and outstanding shares in the capital stock of Aztek, Inc., a
corporation incorporated under the laws of Nevada as follows:
<TABLE>
<CAPTION>
Description No. of Shareholders Number of Shares
Shares
Outstanding
<S> <C> <C>
Common 6 1,025,000
Escrow 5 1,000,000
Options 0 0
Total 6 2,025,000
</TABLE>
(the "Corporation Shares").
C. ATI has agreed to merge with the Corporation and the Corporation has
agreed to merge with ATI, through a pooling of Shares, all of the assets and
liabilities of the respective parties, on the terms and conditions as set out
in this Agreement.
BASED ON WHAT HAS BEEN SET OUT ABOVE THIS AGREEMENT WITNESSES that in
consideration of the premises and the mutual representations, warranties,
agreements and covenants contained in this Agreement (the receipt and
adequacy of such consideration is by this Agreement mutually admitted by each
party), the parties covenant and agree as follows:
1. INTERPRETATION
1.1 Definitions - In this Agreement the following words and phrases
shall have the meanings set out after each:
(a) "ATI" means Aztek Technologies Inc., a company incorporated under the
laws of the Province of British Columbia, and having its registered office at
505 - 700 West Pender Street, Vancouver, British Columbia, V6C 1G8;
(b) "ATI Shares" means all of the issued and outstanding shares in the
capital of ATI;
(c) "ATI's Certificates" means the stock certificates to be delivered at
Completion Date pursuant to paragraph 5.2(a).
(d) "ATI's Solicitor" means Stephen K. Winters Law Corporation, Barristers
and Solicitors, of #505 - 700 West Pender Street, Vancouver, British
Columbia, V6C 1G8;
(e) "Business" means the business carried on by ATI which primarily involves
the development, sale, and servicing of computer software;
(f) "Completion Date" means October 1, 1998, or will become effective the
date of the registration statement date, or such other date as may be agreed
upon in writing by the parties to this Agreement and accepted be the
regulatory authorities;
(g) "Corporation" means Aztek, Inc., a company incorporated under the laws
of the State of Nevada, and having its registered office at 1025 Ridgeview
Drive, Suite 400 Reno, Nevada, 89509
(h) "Corporation Shares" means all of the issued and outstanding shares in
the capital of the Corporation;
(i) "Corporation's Solicitor" means Michael J. Morrison 1025 Ridgeview
Drive, Suite # 400 Reno, Nevada 89509.
(j) "Financial Statements" means the Financial Statements of ATI for the
fiscal year of ATI ending on the 30th day of June, 1998 consisting of a
balance sheet, statement of retained earnings, an income statement and a
statement of changes in financial position of ATI including the notes to such
Financial Statements, a copy of which is attached to this Agreement as
Schedule "B";
(k) "Material Contracts" means those subsisting commitments, contracts,
agreements, instruments, leases or other documents entered into by ATI, by
which it is bound or to which it or its assets are subject which have total
payment obligations on the part of ATI in excess of $1,000;
(l) "Person" includes an individual, corporation, body corporate,
partnership, joint venture, association, trust or unincorporated organization
or any trustee, executor, administrator or other legal representative of such
entity;
(m) "Surviving Business" means the business to be carried on by the
Corporation.
1.2 Schedules - The following are the schedules to this Agreement:
<TABLE>
<CAPTION>
SCHEDULE DESCRIPTION
<S> <C>
"A" Authorized Share Capital and Issued Shares
"B" Financial Statements
"C" Material Contracts
"D" Encumbrances
"E" Assets other than Real Property
"F" Equipment Leases
"G" Real Property
"H" Tax Elections
"I" Service Marks, Trade Marks, Trade
Names,
Intellectual Property, Codes, Designs
"J" Litigation
"K" License, Agency & Distribution Agreements
</TABLE>
2. COVENANTS, REPRESENTATIONS AND WARRANTIES OF ATI
2.1 Representations and Warranties - In order to induce the Corporation to
enter into and to consummate the transactions contemplated by this Agreement,
ATI by this Agreement represents and warrants to the Corporation as follows:
(a) Organization and Good Standing of ATI - ATI is duly incorporated and is
validly existing and in good standing with respect to the filing of annual
reports under the British Columbia Company Act and has all necessary
corporate power, authority and capacity to own its property and assets and to
carry on its business as presently conducted. Neither the nature of the
business of ATI nor the location or character of the property owned or leased
by it requires that ATI be registered or otherwise qualified or to be in good
standing in any other jurisdiction;
(b) Capitalization of ATI - The issued share capital of ATI together with the
names and the number, class and kind of shares held by each director,
officer, insider, or major shareholders (greater than 10%) of ATI is as set
out in Schedule "A" to this Agreement;
(c) Authority - ATI has due and sufficient right and authority to enter into
this Agreement on the terms and conditions set out in this Agreement;
(d) Agreement Valid - This Agreement constitutes a valid and binding
obligation of ATI. On the Completion Date, ATI shall not be a party to, bound
by or subject to any indenture, mortgage, lease, agreement, instrument,
statute, regulation, order, judgment, decree or law which would be violated,
contravened or breached by or under which any default would occur as a result
of the execution and delivery by ATI of this Agreement or the performance by
ATI of any of the terms of this Agreement;
(e) Absence of Options, etc. - The
Shares represent all of the issued and outstanding shares in the capital of
ATI and no Person has any agreement or option, present or future, contingent,
absolute or capable of becoming an agreement or option or which with the
passage of time or the occurrence of any event could become an agreement or
option:
(i) to require ATI to issue any further or other shares in its capital
or any other security convertible or exchangeable into shares in its capital
or to convert or exchange any securities into or for shares in the capital of
ATI;
(ii) for the issue and allotment of any of the authorized but unissued
shares in the capital of ATI;
(iii) to require ATI to purchase, redeem or otherwise acquire any of
the issued and outstanding shares in the capital of ATI; or
(iv) to acquire the Shares or any of them;
(f) Absence of Other Interest - ATI does not own any shares in or other
securities of, or have any interest in the assets or business of any other
Person;
(g) Financial Statements - The Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a basis
consistent with that of prior fiscal years. To the best of the knowledge of
ATI, such Financial Statements present fairly the financial position of ATI
as at the date of such Financial Statements and the results of ATI's
operations
and the changes in ATI's financial position for the period then ending;
(h) Absence of Undisclosed Liabilities - Except to the extent reflected or
reserved against in the Financial Statements or the Schedules hereto or
incurred subsequent to the date of such Financial Statements in the ordinary
and usual course of the business of ATI, to the best of the knowledge of ATI,
ATI does not have any outstanding indebtedness or any liabilities or
obligations (whether accrued, absolute, contingent, or otherwise);
(i) Absence of Changes - To the best of the knowledge of ATI, prior to the
Completion Date, there has not been any damage, destruction or loss, labour
trouble or other event, development or condition, of any character (whether
or not covered by insurance) which is not generally known or which has not
been disclosed to the Corporation, which has or may materially and adversely
affect the business, assets, properties or future prospects of ATI;
(j) Accuracy of Records - To the best of the knowledge of ATI, all material
financial transactions of ATI have been accurately recorded in the books and
records of ATI and such books and records fairly present the financial
position and the corporate affairs of ATI;
(k) Absence of Unusual Transactions - Prior to the Completion Date, ATI has
not:
(i) transferred, assigned, sold or otherwise disposed of any of the
assets shown in the Financial Statements or canceled any debts or claims
except in each case in the ordinary and usual course of business;
(ii) incurred or assumed any obligation or liability (fixed or
contingent), except unsecured current obligations and liabilities incurred in
the ordinary and normal course of business;
(iii) issued or sold any shares in its capital stock or any warrants,
bonds, debentures or other corporate securities or issued, granted or
delivered any right, option or other commitment for the issuance of any such
or other securities;
(iv) discharged or satisfied any lien or encumbrance, or paid any
obligation or liability (fixed or contingent), other than current liabilities
in the ordinary and normal course of business;
(v) declared or made, or committed itself to make, any payment of any
dividend or other distribution in respect of any of its shares or purchased
or redeemed any of its shares or split, consolidated or reclassified any of
its shares;
(vi) entered into any material commitment or transaction not in the
ordinary and usual course of business;
(vii) waived or surrendered any right of substantial value;
(viii) made any gift of money or of any property or assets to any
Person;
(ix) purchased or sold any fixed assets;
(x) amended or changed or taken any action to amend or change its
memorandum or articles of incorporation;
(xi) increased or agreed to increase the pay of, or paid or agreed to
pay any pension, bonus, share of profits or other similar benefit of, any
director, employee or officer or former director, employee or officer of ATI;
(xii) made payments of any kind to or on behalf of ATI or any affiliate
or associate of ATI or under any management agreement with ATI save and
except business related expenses and salaries in the ordinary course of
business and at the regular rates payable to them;
(xiii) mortgaged, pledged, subjected to lien, granted a security
interest in or otherwise encumbered any of its assets or property, whether
tangible or intangible; or
(xiv) authorized or agreed or otherwise have become committed to do any
of the foregoing;
(l) Title to Properties - ATI has good and marketable title to all of its
properties, interests in properties and assets, real and personal including
those referred to in Schedules "E" and "G" hereto, including those reflected
in the Financial Statements or acquired since the date of the Financial
Statements (except as since transferred, sold or otherwise disposed of in the
ordinary and usual course of business), free and clear of all mortgages,
pledges, liens, title retention agreements, encumbrances or charges of any
kind or character whatsoever except as shown in Schedule "D" to this
Agreement, and none of ATI's assets or properties are in the possession of or
under the control of any other Person;
(m) Leased Equipment - Schedule "F" sets out a true and complete list of
all equipment, other personal property and fixtures in the possession or
custody of ATI which, as of the date of this Agreement, are leased or are
held
under license or similar arrangement and accurately describes the leases,
licenses, agreements or other documentation relating to such personal
property. Except as set out in Schedule "B", all rental or other payments
required to be paid by ATI pursuant to such leases or licenses have been duly
paid and ATI is not otherwise in default in meeting its obligations under any
such leases or licenses;
(n) Collectability of Accounts Receivable - The accounts receivable shown in
the Financial Statements of ATI have been recorded by ATI in accordance with
its usual accounting practices. The reserves taken for doubtful or bad
accounts is adequate based on the past experience of ATI and is consistent
with the accounting procedures used by ATI in previous fiscal periods. There
is nothing which would indicate that such reserve is not adequate or that a
higher reserve should be taken;
(o) Real Property - Schedule "G" contains accurate descriptions of all real
property in respect of which ATI holds an interest, whether freehold,
leasehold or otherwise. ATI is not party to or bound by any leases of real
property other than those referred to in Schedule "G" to this Agreement and
all interests held by ATI whether as owner or as lessee are free and clear of
any and all liens, charges and encumbrances of any nature and kind whatsoever
except as set out in Schedule "D". All rental and other payments required to
be paid by ATI pursuant to such leases have been duly paid and ATI is not
otherwise in default in meeting its obligations under any such lease;
(p) Material Contracts - Except for the liens, charges and encumbrances
listed in Schedule "D", the equipment and other personal property leases and
agreements listed in Schedule "F", the real property leases listed in
Schedule "G", and the contracts and agreements listed in Schedule "C", ATI is
not party to or bound by any Material Contract, whether oral or written, and
the contracts and agreements listed in Schedule "C" are all in full force and
effect and unamended, no material default exists in respect of such
agreements on the part of any of the other parties to such agreements, ATI is
not aware of any intention on the part of any of the other parties to such
agreements to terminate or materially alter any such contracts or agreements,
and Schedule "C" lists all the present outstanding Material Contracts entered
into by ATI in the course of carrying on its business;
(q) Absence of Guarantees - ATI has no guarantees with respect to the
obligations of any other Person. ATI has no indemnities or contingent or
indirect obligations with respect to the obligation of any other Person
(including any obligation to service the debt of or otherwise acquire an
obligation of another Person or to supply funds to, or otherwise maintain any
working capital or other balance sheet condition of any other Person);
(r) Absence of Conflicting Agreements - ATI is not party to, bound by or
subject to any indenture, mortgage, lease, agreement, instrument, judgment or
decree which would be violated or breached by, or under which default would
occur or which could be terminated, cancelled or accelerated, in whole or in
part, as a result of the execution and delivery of this Agreement or the
consummation of any of the transactions provided for in this Agreement;
(s) Litigation - Other than as set out in Schedule "J", to the best of the
knowledge of ATI there is not any suit, action, litigation, arbitration
proceeding or governmental proceeding, including appeals and applications for
review, in progress, pending or threatened against, or relating to ATI or
affecting its assets, properties or business which might materially and
adversely affect the assets, properties, business, future prospects or
financial condition of ATI; and there is not presently outstanding against
any of ATI any judgment, decree, injunction, rule or order of any court,
governmental department, commission, agency, instrumentality or arbitrator;
(t) Copies of Agreements, etc. - True, correct and complete copies of all
mortgages, leases, agreements, instruments and other documents listed in
Schedules "B", "C", "D", "F", "G", and "I" have been delivered to the
Corporation;
(u) Corporate Records - To the best of the knowledge of ATI, ATI has kept
the records required to be kept by ATI and any other applicable corporate
legislation and such records are complete and accurate and contain all
minutes of all meetings of directors and members of ATI;
(v) Absence of Approvals Required - Relying upon the Corporation's
representations and warranties with respect to the Investment Canada Act and
the Competition Act as set out in subsection 3.1(b) of this Agreement, no
authorization, approval, order, license, permit or consent of any
governmental authority, regulatory body or court, and no registration,
declaration or filing by ATI with any such governmental authority, regulatory
body or court is required in order for ATI:
(i) to incur the obligations expressed to be incurred by ATI pursuant
to this Agreement;
(ii) to execute and deliver all of the documents and instruments to be
delivered by ATI pursuant to this Agreement;
(iii) to duly perform and observe the terms and provisions of this
Agreement; and
(iv) to render this Agreement legal, valid, binding and enforceable in
accordance with its terms;
(w) Permits and Licenses - ATI holds all permits, licenses, consents and
authorities issued by any governmental authority of Canada or any Province of
Canada, or any municipal, regional or other authority, or any subdivision of
the same, including without limitation, any governmental department,
commission, bureau, board or administrative agency, which are necessary or
desirable in connection with the conduct and operation of ATI's business and
the ownership or leasing of its assets and the conduct and operation of ATI's
business as the same are now owned, leased, conducted or operated is not in
breach of or in default under any term or condition of any such permits,
licenses, consents and authorities:
(x) Filings - ATI:
(i) has duly filed in a timely manner all federal and provincial income
tax returns and election forms and the tax returns of any other jurisdiction
required to be filed and to the best of the knowledge of ATI all such returns
and forms have been completed accurately and correctly in all respects;
(y) Additional Tax Matters - Except as specified in Schedule "H", ATI has
not:
(i) made any election under Section 85 of the Income Tax Act with
respect to the acquisition or disposition of any property;
(ii) made any election under Section 83 of the Income Tax Act with
respect to the payment out of the capital dividend account of ATI;
(iii) acquired or had the use of any property from a person with whom
it was not dealing at arm's length other than at fair market value;
(iv) disposed of anything to a person with whom it was not dealing at
arm's length for proceeds less than fair market value of such thing; or
(v) discontinued carrying on any business in respect of which
non-capital losses were incurred, and any non-capital losses which ATI has
are not losses from property or business investment losses;
(z) Tax Elections - ATI has made all elections required to be made pursuant
to Part III of the Income Tax Act in connection with any distributions by ATI
and all such elections were true and correct and in the prescribed form and
were made within the prescribed time periods;
(aa) Statements Attached to Tax Returns - To the best of the knowledge of
ATI, the financial statements and schedules attached to the corporate income
tax returns as filed by ATI for each of its taxation years reflect and
disclose all transactions to which ATI was party as required by the Income
Tax Act or other applicable revenue laws and all of the transactions to which
ATI was or is a party are reflected or disclosed in such financial statements
and schedules and the corporate income tax returns and schedules have been
duly and accurately completed as required by such Act;
(bb) Intellectual Property -
(i) Schedule "I" attached hereto lists and contains a description of:
(1) all patents, patent applications and registrations, trade marks, trade
mark applications and registrations, copyrights, copyright applications and
registrations, trade names and industrial designs, domestic or foreign, owned
or used by ATI or relating to the operation of the Business,
(2) all trade secrets, know-how, inventions and other intellectual property
owned or used by ATI or relating to the Business, and
(3) all computer systems and application software, including without
limitation all documentation relating thereto and the latest revisions of all
related object and source codes therefor, owned or used by ATI or relating to
the Business,
(all of the foregoing being collectively called the "Intellectual Property");
(ii) ATI has good and valid title to all of the Intellectual Property, free
and clear of any and all encumbrances. Complete and correct copies of all
agreements whereby any rights in any of the Intellectual Property have been
granted or licensed to ATI have been provided to the Corporation. No royalty
or other fee is required to be paid by ATI to any other person in respect of
the use of any of the Intellectual Property except as provided in such
agreements delivered to the Corporation.
(iii) Except as disclosed in Schedule "I" or "K", there are no restrictions
on the ability of ATI or any successor to or assignee from ATI to use and
exploit all rights in the Intellectual Property. All statements contained in
all applications for registration of the Intellectual Property were true and
correct as of the date of such applications. Each of the trade marks and
trade names included in the Intellectual Property is in use. None of the
rights of ATI in the Intellectual Property will be impaired or affected in
any way by the transactions contemplated by this Agreement;
(iv) To the best of the knowledge of ATI, the conduct of the Business and
the use of the Intellectual Property does not infringe, and ATI has not
received any notice, complaint, threat or claim alleging infringement of, any
patent, trade mark, trade name, copyright, industrial design, trade secret or
other Intellectual Property or proprietary right of any other person, and the
conduct of the Business does not include any activity which may constitute
passing-off;
(v) Partnerships or Joint Ventures - Except as disclosed in the Schedules
hereto, ATI is not a partner or participant in any partnership, joint
venture, profit-sharing arrangement or other association of any kind and is
not party to any agreement under which ATI agrees to carry on any part of the
Business or any other activity in such manner or by which ATI agrees to share
any revenue or profit with any other person;
(vi) Customers - ATI has previously delivered to the Corporation a true and
complete list of all customers of the Business as of the date hereof. ATI is
the sole and exclusive owner of, and has the unrestricted right to use, such
customer list. Neither the customer list nor any information relating to the
customers of the Business have, within three years prior to the date of this
Agreement, been made available to any person other than the Corporation and
ATI's User Group. ATI has no knowledge of any facts which could reasonably be
expected to result in the loss of any customers or sources of revenue of the
Business which, in the aggregate, would be material to the Business or the
condition of ATI;
(vii) Restrictions on Doing Business - Except as disclosed in the Schedules
hereto, ATI is not a party to or bound by any agreement which would restrict
or limit its right to carry on any business or activity or to solicit
business from any person or in any geographical area or otherwise to conduct
the Business as ATI may determine.
(viii) No Breach of Material Contracts - All Material Contracts are valid
and subsisting and no material default exists under the Material Contracts
except as disclosed in Schedule "B";
(ix) Indebtedness to ATI - The Business shall not at Completion be indebted
to ATI or any directors, officers, or employees of ATI or any affiliate or
associate of any of them, on any account whatsoever;
(x) Condition of Assets - All assets and all other plant, machinery,
facilities and equipment used by ATI in connection with its business is in
good operating condition and in a good state of maintenance and repair for
equipment of similar age relative to the standards of maintenance and repair
maintained by other companies carrying on similar Business in Canada;
(xi) Undisclosed Information - ATI has no specific information relating to
ATI which is not generally known or which has not been disclosed to the
Corporation and which if known could reasonably be expected to have a
materially adverse effect on the value of the Shares;
(xii) Conduct of Business - The conduct of business by ATI on any lands
from which they operate their business is not subject to any restriction or
limitation other than those registered against title to the lands, contained
in applicable zoning regulations or that are of general application and the
conduct of any such business is not in contravention of any law, regulation
or order or any court or other body having jurisdiction including zoning
requirements;
(xiii) Licenses, Agency and Distribution Agreements - Schedule "K" attached
hereto lists all agreements to which ATI is a party or by which it is bound
under which the right to manufacture, use or market any product, service,
technology, information, data, computer hardware or software or other
property has been granted, licensed or otherwise provided to ATI or by ATI to
any other person, or under which ATI has been appointed or any person has
been appointed by ATI as an agent, distributor, licensee or franchisee for
any of the foregoing. Complete and correct copies of all of the agreements
listed in Schedule "K" have been provided to the Corporation. None of the
agreements listed in Schedule "K" grant to any person any authority to incur
any liability or obligation or to enter into any agreement on behalf of ATI;
(xiv) Outstanding Agreements - ATI is not a party to or bound by any
outstanding or executory agreement, contract or commitment, whether written
or oral, except for:
(1) any contract, lease or agreement described or referred to in this
Agreement or in the Schedules hereto,
(2) any contract, lease or agreement made in the ordinary course of the
routine daily affairs of the Business under which ATI has a financial
obligation of less than One Thousand Dollars ($1,000) per annum and which can
be terminated by ATI without payment of any damages, penalty or other amount
by giving not more than thirty (30) days' notice, and
(3) the contracts, leases and agreements described in Schedule "K" attached
hereto. Complete and correct copies of each of the contracts, leases and
agreements described in Schedule "K" have been provided to the Corporation;
and ATI covenants, represents and warrants to the Corporation that all
of the representations and warranties set forth in this paragraph shall be
true and correct at the Completion Time as if made on that date.
(cc) Guarantees, Warranties and Discounts
(i) ATI is not a party to or bound by any agreement of guarantee,
indemnification, assumption or endorsement or any other like commitment of
the obligations, liabilities (contingent or otherwise) or indebtedness of any
person;
(ii) ATI has not given any guarantee or warranty in respect of any of the
products sold or the services provided by it, except warranties made in the
ordinary course of the Business and in the form of ATI's standard written
warranty, a copy of which has been provided to the Corporation, and except
for warranties implied by law;
(iii) during each of the three fiscal years of ATI ended immediately
preceding the date hereof, no claims have been made against ATI for breach of
warranty or contract requirement or negligence or for a price adjustment or
other concession in respect of any defect in or failure to perform or deliver
any products, services or work which had, in any such year, an aggregate cost
exceeding $25,000;
(iv) there are no repair contracts or maintenance obligations of ATI in
favor of the customers or users of products of the Business, except
obligations incurred in the ordinary course of the Business and in accordance
with ATI's standard terms, a copy of which has been provided to the
Corporation;
(v) ATI is not now subject to any agreement or commitment, and ATI has not,
within three years prior to the date hereof, entered into any agreement with
or made any commitment to any customer of the Business which would require
ATI to repurchase any products sold to such customers or to adjust any price
or grant any refund, discount or other concession to such customer;
(vi) ATI is not required to provide any letters of credit, bonds or other
financial security arrangements in connection with any transactions with its
suppliers or customers; and
2.2 Other Representations - All statements contained in any
certificate or other instrument delivered by or on behalf of ATI pursuant to
this Agreement or in connection with the transactions contemplated by this
Agreement shall be deemed to be representations and warranties by ATI under
this Agreement.
2.3 Survival - The representations and warranties of ATI contained
in this Agreement shall survive the Completion and the Share exchange and,
notwithstanding the Completion and the Share exchange, notwithstanding any
investigations or inquiries made by the Corporation prior to the Completion
and notwithstanding the waiver of any condition by the Corporation, the
representations, warranties, covenants and agreements of ATI shall (except
where otherwise specifically provided in this Agreement) survive the
Completion and shall continue in full force and effect for a period of two
(2) years from the Completion Date for all matters except income tax
liability or other tax matters. With respect to income tax liability of ATI
or other tax matters, the representations, warranties, covenants and
agreements of ATI shall survive the Completion and continue in full force and
effect for six (6) years from the later of the date of mailing of a notice of
original assessment by the Minister of National Revenue and the date of
mailing of a notification from the Minister of National Revenue that no tax
is payable by ATI for the fiscal year of ATI ending on the Completion Date.
2.4 Reliance - ATI acknowledges and agrees that the Corporation has
entered into this Agreement relying on the warranties and representations and
other terms and conditions of this Agreement notwithstanding any independent
searches or investigations that may be undertaken by or on behalf of the
Corporation and that no information which is now known or should be known or
which may from the date of this Agreement become known to the Corporation or
its agents or professional advisers shall limit or extinguish the right to
indemnification under this Agreement.
3. COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
3.1 Representations and Warranties - In order to induce ATI to enter into
and to consummate the transactions contemplated by this Agreement, the
Corporation represents and warrants to ATI that:
(a) Organization and Good Standing - The Corporation is a company duly
organized, validly existing and in good standing under the laws of Nevada
with respect to the filing of annual reports;
(b) Authority Relative to this Agreement - The Corporation has all
necessary corporate power, authority and capacity to acquire the Shares and
to
perform its obligations under this Agreement. The execution and delivery of
this Agreement has been duly authorized by all necessary corporate action on
the part of the Corporation and this Agreement constitutes a valid and
binding obligation of the Corporation. The Corporation is not a party to,
bound by or subject to any indenture, mortgage, lease, agreement, instrument,
statute, regulation, order, judgment, decree or law which would be violated,
contravened or breached by or under which any default would occur as a result
of the execution and delivery by the Corporation of this Agreement or the
performance by the Corporation of any of the terms of this Agreement; and the
Corporation covenants, represents and warrants to ATI that all of the
representations and warranties set forth in this paragraph 3.1 shall be true
and correct at the Completion Time as if made on that date;
3.2 Survival - The representations and warranties of the Corporation
contained in this Agreement shall survive the Completion and the exchange of
the Shares and notwithstanding the Completion and the exchange of the Shares,
the representations and warranties of the Corporation shall continue in full
force and effect for the benefit of ATI for a period of three (3) years from
the Completion Date;
3.3 Reliance - The Corporation acknowledges and agrees that ATI has entered
into this Agreement relying on the warranties and representations and other
terms and conditions of this Agreement notwithstanding any independent
searches or investigations that may be undertaken by or on behalf of ATI, and
that no information which is now known or which should be known or which may
after the date of this Agreement become known to ATI or its agents or
professional advisers shall limit or extinguish the right to indemnification
under this Agreement.
5. POOLING OF SHARES
4.1 Shares - Based and relying on the representations and warranties set
forth in paragraphs 2 and 3, the Corporation agrees to exchange the Shares of
ATI and ATI agrees to accept the exchange of Shares from the Corporation,
free and clear of all liens, claims, charges, options and encumbrances
whatsoever and the Corporation agrees to exchange ATI Shares on the terms and
conditions set out in this Agreement.
5. COMPLETION
5.1 Completion Date - The transactions contemplated in this Agreement shall
be completed effective as of the Completion Date. The Completion Date is
October 1st, 1998 subject to shareholder and regulatory approval of ATI and
the Corporation. In the event that the Vancouver Stock Exchange does not
approve the merger in an ordinary fashion, ATI may request the Vancouver
Stock Exchange to de-list ATI from the Exchange in order to complete the
merger transaction.
5.2 Completion Deliveries - On or before the Completion Date:
(a) ATI will deliver to the Corporation:
(i) resignations in writing, dated as of the Completion Date, of the
officers and directors of ATI with the exception of ATI President, Mike
Sintichakis, which will be delivered when all or any outstanding matters have
been resolved and the merger has been totally completed;
(ii) certified copies of directors and members resolutions of ATI approving
this Agreement; (b) Corporation will deliver to ATI:
(i) certified copy of directors resolutions of the Corporation approving
this Agreement and the completion of the transaction contemplated hereby;
5.3 Share Exchange and Pooling of Assets and Liabilities - Upon Completion
Date, the Corporation will;
(a) Exchange the Shares of ATI for Shares of the Corporation as
follows:
(i) One (1) Common share of the Corporation will be issued in exchange for
each Common share of ATI;
(ii) One (1) Common share option of the Corporation will be issued in
exchange for each Common share option of ATI under existing restrictions;
(iii) One (1) Escrow share of the Corporation will be issued in exchange for
each Escrow share of ATI under existing restrictions.
(b) Transfer all assets and liabilities of ATI to the
Corporation;
6. CONDITIONS PRECEDENT TO THE PERFORMANCE BY CORPORATION OF ITS
OBLIGATIONS UNDER THIS AGREEMENT
6.1 Corporation's Conditions - The obligations of the Corporation to
complete the exchange of the Shares shall be subject to the satisfaction of,
or compliance with, on or before the Completion Date, each of the following
conditions precedent:
(a) Truth and Accuracy of Representations of ATI at Completion - The
representations and warranties of ATI made in paragraph 2.1 shall be true and
correct in all material respects as at the Completion Date and with the same
effect as if made at and as of the Completion Date and ATI shall have
complied in all material respects with its obligations and covenants under this
Agreement;
(b) Performance of Obligations - ATI shall have caused the Corporation to
have performed and complied with all the obligations to be performed and
complied with by ATI under this Agreement;
(c) Absence of Injunctions, etc. - No injunction or restraining order of
any Court or administrative tribunal of competent jurisdiction shall be in
effect prohibiting the transactions contemplated by this Agreement and no
action or proceeding shall have been instituted or be pending before any
Court or administrative tribunal to restrain or prohibit the transactions
between the parties contemplated by this Agreement;
(d) Absence of Change of Conditions - No event shall have occurred or
condition or state of facts of any character shall have arisen or legislation
(whether by statute, rule, regulation, by-law or otherwise) shall have been
introduced which might reasonably be expected to have a materially adverse
effect upon the financial condition, results of operations or business
prospects of ATI.
6.2 The conditions set out in this paragraph 6 are for the exclusive
benefit of the Corporation and may be waived by the Corporation in writing in
whole or in part on or before the Completion Date. Notwithstanding any such
waiver, the completion of merger contemplated by this Agreement by the
Corporation shall not prejudice or affect in any way the rights of the
Corporation in respect of the warranties and representations of ATI set out
in paragraph 2.1 of this Agreement, and the representations and warranties of
ATI set out in paragraph 2.1 of this Agreement shall survive the completion
of the merger.
7. CONDITIONS PRECEDENT TO THE PERFORMANCE OF ATI OF ITS OBLIGATIONS
UNDER THIS AGREEMENT
7.1 The obligations of ATI to complete the exchange of Shares under
this Agreement shall be subject to the satisfaction of or compliance with, at
or before the Completion Time, of each of the following conditions precedent:
(a) Truth and Accuracy of Representations of the Corporation at Completion -
All of the representations and warranties of the Corporation set out in
paragraph 3.1 of this Agreement shall be true and correct in all material
respects as at the Completion Date and with the same effect as if made at and
as of the Completion Date;
(b) Performance of Agreements - The Corporation shall have complied with
and/or performed all its obligations, covenants and agreements contained in
this Agreement.
7.2 The conditions set out in this paragraph 7 are for the exclusive
benefit of ATI and may be waived by ATI in writing in whole or in part on or
before the Completion Date. Notwithstanding any such waiver, completion of
the merger contemplated by this Agreement by ATI shall not prejudice or
affect in any way the rights of ATI in respect of the warranties and
representations of the Corporation set out in paragraph 3.1 of this
Agreement, and the representations and warranties of the Corporation set out
in paragraph 3.1 of this Agreement shall survive for a period of two (2)
years from the date of this Agreement.
8. CONDUCT OF BUSINESS PRIOR TO COMPLETION
8.1 Conduct - Except as otherwise contemplated or permitted by this
Agreement, during the period from the date of this Agreement to the
Completion Date, the Corporation shall cause ATI to do the following:
(a) Conduct Business in Ordinary Course - Conduct ATI's business in the
ordinary and normal course of such business and not, without the prior
written consent of the Corporation, enter into any transaction which would
constitute a breach of the representations, warranties or agreements
contained in this Agreement;
(b) Continue Insurance - Continue in force all existing policies of
insurance presently maintained by ATI;
(c) Perform Obligations - Comply with all laws affecting the operation of
ATI's businesses and pay all required taxes;
(d) Prevent Certain Changes - Not, without the prior written consent of the
Corporation, take any of the actions, do any of the things or perform any of
the acts described in sub-paragraph 2.1(k) except as specifically permitted
under such sub-paragraph; and
(e) Compliance with Paragraph 9 - Comply with the provisions of paragraph 9
of this Agreement.
9. EXAMINATIONS AND WAIVERS
9.1 Access for Investigation - ATI shall permit the Corporation and
its agent, legal counsel, accountants and other representatives, between the
date of this Agreement and the Completion Date, to have access during normal
business hours to the premises and to all the key employees, books, accounts,
records and other data of ATI computer designs and codes, (including without
limitation, all corporate, accounting and tax records and any electronic or
computer accessed data) and to the properties and assets of ATI and ATI will
furnish, and require that ATI's principal bankers, appraisers and independent
auditors and other advisors furnish, to the Corporation such financial and
operating data and other information with respect to the business, properties
and assets of ATI as the Corporation shall from time to time reasonably
request to enable confirmation of the matters warranted in paragraph 2 of
this Agreement. It is also the intention of the parties that the Corporation
shall be entitled to meet with ATI's major clients, customers and suppliers
prior to Completion.
9.2 Disclosure of Information - Until the Completion Date and, in the event
of the termination of this Agreement without consummation of the transactions
contemplated by this Agreement, the Corporation shall use its best efforts to
keep confidential any information (unless otherwise required by law or such
information is readily available or becomes readily available, from public or
published information or sources) obtained from ATI. If this Agreement is so
terminated, promptly after such termination all documents, work papers and
other written material obtained from a party in connection with this
Agreement and not previously made public (including all copies and
photocopies thereof), shall be returned to the party which provided such
material.
10. INDEMNITIES
10.1 Indemnification of the Corporation - Subject to the limitations
set out in this Agreement, ATI agrees with the Corporation to indemnify the
Corporation against all liabilities, claims, demands, actions, causes of
action, damages, losses, costs or expenses (including legal fees on a
solicitor and its own client basis) suffered or incurred by the Corporation,
directly or indirectly, by reason of or arising out of:
(a) any warranties or representations on the part of ATI set out in this
Agreement being materially untrue;
(b) a material breach of any agreement, term or covenant on the part of ATI
made or to be observed or performed pursuant to this Agreement;
which liabilities, claims, demands, actions, causes of action, damages,
losses, costs and expenses are collectively referred to as the "Corporation's
Losses";
10.2 Indemnification of ATI - Subject to the limitations set out in
this Agreement, the Corporation covenants and agrees with ATI to indemnify
ATI against all liabilities, claims, demands, actions, causes of action,
damages, losses, costs or expenses (including legal fees on a solicitor and
its own client basis) suffered or incurred by ATI, directly or indirectly, by
reason of or arising out of:
(a) any warranties or representations on the part of the
Corporation set out in this Agreement being materially untrue;
(b) a material breach of any agreement, term or covenant on the
part of the Corporation made or to be observed or performed pursuant to this
Agreement;
which liabilities, claims, demands, actions, causes of action, damages,
losses, costs and expenses are collectively referred to as "ATI's Losses".
10.3 Claims under ATI's Indemnity - If any claim is made by any
Person against the Corporation in respect of which the Corporation may incur
or suffer damages, losses, costs or expenses that might reasonably be
considered to be subject to the indemnity obligation of ATI as provided in
paragraph 10.1, the Corporation shall notify ATI as soon as reasonably
practicable of the nature of such claim and ATI shall be entitled (but not
required) to assume the defense of any suit brought to enforce such claim.
The defense of any such claim (whether assumed by ATI or not) shall be
through legal counsel and shall be conducted in a manner acceptable to the
Corporation and ATI, acting reasonably, and no settlement may be made by ATI
or the Corporation without the prior written consent of the other. If ATI
assumes the defense of any claim then the Corporation and the Corporation's
counsel shall cooperate with ATI and its counsel in the course of the
defense, such cooperation to include using reasonable best efforts to provide
or make available to ATI and its counsel documents and information and
witnesses for attendance at examinations for discovery and trials. The
reasonable legal fees and disbursements and other costs of such defense
shall, from and after such assumption, be borne by ATI. If ATI assumes the
defense of any claim and the Corporation retains additional counsel to act on
its behalf, ATI and his counsel shall cooperate with the Corporation and its
counsel, such cooperation to include using reasonable best efforts to provide
or make available to the Corporation and its counsel documents and
information and witnesses for attendance at examinations for discovery and
trials. All fees and disbursements of such additional counsel shall be paid
by the Corporation. If ATI and the Corporation are or become parties to the
same action, and the representation of all parties by the same counsel would
be inappropriate due to a conflict of interest, then the Corporation and ATI
shall be represented by separate counsel and, subject to the indemnity
obligations of ATI as set out in paragraph 10.1, the costs associated with
the action shall be borne by the parties incurring such costs.
10.4 Claims under the Corporation's Indemnity - If any claim is made
by any Person against ATI in respect of which ATI may incur or suffer
damages, losses, costs or expenses that might reasonably be considered to be
subject to the indemnity obligation of the Corporation as provided in
paragraph 10.2, ATI shall notify the Corporation as soon as reasonably
practicable of the nature of such claim and the Corporation shall be entitled
(but not required) to assume the defense of any suit brought to enforce such
claim. The defense of any such claim (whether assumed by the Corporation or
not) shall be through legal counsel and shall be conducted in a manner
acceptable to ATI and the Corporation, acting reasonably, and no settlement
may be made by the Corporation or ATI without the prior written consent of
the other. If the Corporation assumes the defense of any claim, ATI and ATI's
counsel shall cooperate with the Corporation and his counsel in the course of
the defense, such cooperation to include using reasonable best efforts to
provide or make available to the Corporation and its counsel documents and
information and witnesses for attendance at examinations for discovery and
trials. The reasonable legal fees and disbursements and other costs of such
defense shall be borne by the Corporation. If the Corporation assumes the
defense of any claim and ATI retains additional counsel to act on its behalf,
then the Corporation and its counsel shall cooperate with ATI and its
counsel, such cooperation to include using reasonable best efforts to provide
or make available to ATI and its counsel documents and information and
witnesses for attendance at examinations for discovery and trials. All fees and
disbursements of such additional counsel shall be paid by ATI. If the
Corporation and ATI are or become parties to the same action, and the
representation of all parties by the same counsel would be inappropriate due
to a conflict of interest, then ATI and the Corporation shall be represented
by separate counsel and, subject to the indemnity obligations of the
Corporation as set out in paragraph 10.2, the costs associated with the
action shall be borne by the parties incurring such costs.
11. GENERAL
11.1 Public Notices - The parties agree that all notices to third
parties and all other publicity concerning the transactions contemplated by
this Agreement shall be jointly planned and coordinated and no party shall
act unilaterally in this regard without the prior approval of the others,
such approval not to be unreasonably withheld.
11.2 Expenses - All costs and expenses incurred in connection with
this Agreement and the transactions contemplated by this Agreement shall be
paid by the party incurring such expenses.
11.3 Time - Time shall be of the essence of this Agreement.
11.4 Notices - Any notice or other writing required or permitted to
be given under this Agreement or for the purposes of this Agreement shall be
sufficiently given if delivered or telecopied to the party to whom it is
given or if mailed, by prepaid registered mail, addressed to such party at:
(a) If to Aztek, Inc. at:
Meadow Wood Crown Plaza
1575 Delucchi Lane, Suite # 40
Reno, Nevada 89502
with a copy to the Corporation's Solicitors at:
Michael J. Morrison Attorney and Counselor at Law
1025 Ridgeview Drive Suite 400,
Reno Nevada 89509
(b) If to Aztek Technologies Inc. at:
#5 -246 Lawrence Avenue
Kelowna, British Columbia, V1Y 6L3
with a copy to ATI's Solicitors at:
Stephen K. Winters Law Corporation
#505 - 700 West Pender Street
Vancouver, British Columbia, V6C 1G8
or at such other address as the party to whom such writing is to be given
shall have last notified to the party giving the same in the manner provided
in this paragraph. Any notice mailed as set out above shall be deemed to have
been given and received on the fifth (5th) business day next following the
date of its mailing unless at the time of mailing or within five (5) business
days after the date of such mailing there occurs a postal interruption which
could have the effect of delaying the mail in the ordinary course, in which
case any notice shall only be effectively given if actually delivered or sent
by telecopy. Any notice delivered or telecopied to the party to whom it is
addressed shall be deemed to have been given and received on the day it was
delivered, provided that if such day is not a business day then the notice
shall be deemed to have been given and received on the business day next
following such day.
11.5 Governing Law - This Agreement shall be governed by and
construed in accordance with the laws of the State of Nevada and the parties
submit and attorn to the jurisdiction of the Courts of the State of Nevada.
11.6 Severability - If any one or more of the provisions contained
in this Agreement should be invalid, illegal or unenforceable in any respect
in any jurisdiction, the validity, legality and enforceability of such
provision or provisions shall not in any way be affected or impaired as a
result of such event in any other jurisdiction and the validity, legality and
enforceability of the remaining provisions contained in this Agreement shall
not in any way be affected or impaired as a result of such event, unless in
either case as a result of such determination this Agreement would fail in
its essential purpose.
11.7 Entire Agreement - This Agreement constitutes the entire
agreement between the parties and supersedes all prior agreements and
understandings, oral or written, by and between any of the parties with
respect to the subject matter of this Agreement.
11.8 Further Assurances - The parties shall with reasonable
diligence do all such things and provide all such reasonable assurances as
may be required to consummate the transactions contemplated by this Agreement,
and each party shall provide such further documents or instruments required by
the other party as may be reasonably necessary or desirable to effect the
purpose of this Agreement and carry out its provisions whether before or
after the Completion Date.
11.9 Enurement - This Agreement and each of its terms and provisions
shall enure to the benefit of and be binding upon the parties and their
respective heirs, executors, administrators, personal representatives,
successors and assigns.
11.10 Counterparts - This Agreement may be executed in as many
counterparts as may be necessary or by facsimile and each such agreement or
facsimile so executed shall be deemed to be an original and such counterparts
together shall constitute one and the same instrument.
IN WITNESS TO THIS AGREEMENT the parties have duly executed this Agreement as
of the day and year first above written.
SIGNED, SEALED AND DELIVERED )
BY AZTEK TECHNOLOGIES INC. )
in the presence of: )
)
) /s/ Edson Ng
______________________________) -------------------------
Name of Witness ) EDSON NG
)
______________________________)
Address of Witness )
)
______________________________ )
SIGNED, SEALED AND DELIVERED )
BY AZTEK, INC. )
in the presence of: )
)
) /s/ Mike Sintichakis
______________________________ )
- ----------------------------------- Name of Witness )
) MIKE E. SINTICHAKIS
)
______________________________ )
Address of Witness )
)
______________________________ )
EXHIBIT 99.2 Letter Of Intent For ATI To Acquire Harrison Muirhead Systems
Inc. And Q-Smart Investments Inc.
[ATI's Letterhead]
Letter of Intent
August 20, 1997
Blaine Harrison, President
Harrison Muirhead Systems Inc.
101, 15023 - 123 Avenue
Edmonton, Alberta
T5V 1J7
Dear Blaine,
This Letter of Intent formalizes the sale of assets and business operations
of Harrison Muirhead Systems Inc. and Q-Smart Investments Inc. to Aztek
Technologies Inc. The close date for the acquisisiiotn is Feb. 28, 1998 and
subject to the following conditions:
Completion of Aztek Technologies Inc. financing.
Aztek completing due diligence review on Harrison Muirhead Systems
Inc.
Harrison Muirhead completing due diligence review on Aztek products.
Finalizing terms and conditions for future purchase agreement.
Approval by the Vancouver Stock Exchange.
By signing below, the parties agree to the terms and conditions set forth in
this agreement.
Aztek Technologies Inc. Harrison Muirhead Systems Inc. and
Q-Smart Investments Inc.
/s/ Mike Sintichakis /s/ Blaine Harrison
- -------------------- -----------------------
Mike Sintichakis, President Blaine Harrison, President
Aug. 26/1997 Aug. 25\1997
EXHIBIT 99.3 Letter of Intent for ATI to acquire Concord Consultants.
[ATI's Letterhead]
Letter of Intent
September 3, 1997
Gerry Schaup, President
Concord Consultants Limited 228 - 11121 Horseshoe Way
Richmond, British Columbia
V7A 4Y1
Dear Gerry,
This Letter of Intent formalizes the sale of assets and business operations
of Concord Consultants Limited to Aztek Technologies Inc. The close date for
the acquisition is November 1, 1997 and subject to the following conditions:
Completion of Aztek equity financing
Aztek completing due diligence review on Concord Consultants Limited
Concord Consultants Limited completing due diligence review on
Aztek and Aztek products.
Finalizing terms and conditions for purchase agreement.
Approval by the Vancouver Stock Exchange and B.C. Securities
Commission.
By signing below, the parties agree to the terms and conditions set forth in
this agreement.
Aztek Technologies Inc. Concord Consultants Limited
/s/ Mike Sintichakis /s/ Gerry Schaap, President
- ------------------------- ----------------------------
Mike Sintichakis, President Gerry Schaap, President
Sept. 5/97 Sept. 3/97
EXHIBIT 99.4 Minutes Of Shareholders Of Aztek Inc. To Approve Merger
MINUTES OF THE ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
OF
AZTEK, INC.
(the "Company")
The Annual and Special Meeting of the Shareholders of AZTEK, INC., a
Nevada corporation, was held at the Company's offices, on the 30th day of
June, 1998, at the hour of 10:00 o'clock a.m., for the purposes of:
(a) electing Directors for the ensuing year;
(b) approving a merger and share exchange with Aztek Technologies Inc.;
(c) approving directors, officers and employees options;
(d) authorizing Mike Sintichakis to arrange financing of a maximum $10
million for the purpose of acquiring and developing two properties, one
located in the U.S. and one located in Canada for sales and support of the
Company's customers. The Directors do not anticipate that the maximum
development costs of the properties will not exceed $6.0 million. The balance
of $4.0 million will be used as follows: $1.5 million for new acquisitions;
$1.0 million for completion of products under development; and $1.5 million
to be used for financing expenses, marketing and working capital.
Mike Sintichakis, President and Chairman of the Company, called the
meeting to order, and Nick Sintichakis, Secretary, recorded the minutes.
On motion duly made and unanimously carried, the reading, correcting and
approval of the minutes of the last meeting was waived.
Upon motion duly made, Mike Sintichakis, Nick Sintichakis, Edson Ng and
Eileen Keogh were elected as Directors of the Company to serve for the
ensuing year.
On motion duly made and unanimously carried, it was resolved that the
Company enter into an agreement with Aztek Technologies Inc., on terms and
conditions acceptable to the Board of Directors of the Company in their
discretion, whereby each one outstanding share of common stock of Aztek
Technologies Inc. would be exchanged for one common share par value $0.001 of
the Company resulting in all shareholders of Aztek Technologies Inc. becoming
shareholders of the Company. Aztek Technologies Inc. is a British Columbia
public company listed on the Vancouver Stock Exchange and the Electronic
Bulletin Board of NASD. The transaction is subject to regulatory acceptance
and the approval of the shareholders of Aztek Technologies Inc. The
transaction is also subject to the approval of all regulatory bodies having
jurisdiction over the Company.
On motion duly made and unanimously carried, it was resolved the Board
of Directors of the Company be and are hereby authorized to grant directors,
officers and employees stock options at prices and on terms and conditions
acceptable to the Board of Directors in their sole discretion and to amend
such options as from time to time may be required. The granting, alteration
and pricing of such options shall be in accordance with, and subject to the
approval of, the prevailing policies of all regulatory bodies and stock
exchanges having jurisdiction over the Company and no further resolution or
approval by the shareholders of the Company shall be required for the
granting of the options or the exercise of such options granted.
On motion duly made and unanimously carried, it was resolved that Mike
Sintichakis, President of the Company, be and is hereby authorized on behalf
of the Company to enter into agreements to arrange equity or debt
financings.
Be it further resolved that the maximum number of shares to be issued to any
new investor or group of investors shall not exceed 5% of all outstanding
shares of the Company.
On motion duly made and unanimously carried, it was resolved that Mike
Sintichakis be and is hereby authorized on behalf of the Company to enter
into agreements for the acquisition and/or development of any property on
terms and conditions deemed appropriate and in the best interests of the
Company. Be it further resolved that Mike Sintichakis be authorized and
empowered on behalf of the Company to do all such acts and deeds and execute
and deliver all such documents and instruments as he in his discretion may
deem necessary or desirable in order to effect the purchase and development
of any property.
There being no further business to come before the meeting at this time,
the meeting was, upon motion duly made, adjourned at 10:30 a.m.
Dated this 30th day of June, 1998.
/s/ Mike Sintichakis
---------------------------
Mike Sintichakis, President
/s/ Nick Sintichakis
---------------------------
Nick Sintichakis, Secretary
Exhibit 99.5 Schedule II Valuation and Qualifying Accounts
Aztek Technologies Inc.
<TABLE>
<CAPTION>
Beginning of Costs and Charges to Balance at end
Description Period Expenses Other Accounts Deductions Of Period
<S> <C> <C> <C> <C> <C>
Allowance
for
Doubtful
Accounts 0 0 0 0 0
</TABLE>
99.6 Opinion Letter of Independent Accountants in Reference to Canadian
Tax Consequences
[Letterhead of BDO Dunwoody]
August 19, 1998
Aztek Technologies Inc.
#5 - 246 Lawrence Avenue
Kelowna, B.C.
V1Y 6L3
Attention: Mike Sintachakis
Dear Sirs:
RE: MERGER WITH U.S. COMPANY
This letter is further to your request that our firm offer an opinion as to
the Canadian tax implications to the shareholders of Aztek Technologies Inc.
("Canco") of a merger with Aztek Inc. ("Usco"). The following discussion
summarizes the material Canadian income tax consequences of the transaction
for Canadian resident shareholders.
FACTS AND ASSUMPTIONS
Our opinion is based on our understanding of the following facts and
assumptions. Please review them to ensure that they are correct and, if not,
advise our office immediately so that our opinion can be revised accordingly.
1) Canco is a widely held, Canadian corporation with only one class of issued
shares. These shares are publicly traded on the Vancouver Stock Exchange.
2) Usco is a privately owned Nevada corporation.
3) Pursuant to U.S. corporate law:
a) Canco is to be merged into Usco. Usco will receive the assets of Canco,
and each shareholder of Canco will receive shares of Usco on a one-for-one
basis.
b) Canco will not be continued into Nevada prior to this merger, and at no
time in this process will Canco be a U.S. resident corporation.
c) Immediately upon the completion of the merger, Canco will cease to exist,
while Usco will be the surviving corporation.
4) The Canadian and U.S. corporate counsel for the companies agree that the
above merger is effected in the following manner for purposes of Canadian
corporate law:
a) The shareholders of Canco exchange their shares thereof for shares of Usco
on a one-for-one basis. Canco will then be a wholly-owned subsidiary of Usco.
b) Canco is wound up into Usco, which takes possession of Canco's assets and
liabilities.
5) At no time in the last five years has
a) a non-resident shareholder,
b) a person related to a non-resident shareholder, or
c) a non-resident shareholder and a person related thereto
owned more than 25% of the issued shares of any class of Canco.
6) Usco has (and will have, after the above transaction) only one issued
class of shares.
QUESTION
What are the Canadian tax ramifications to the shareholders of Canco?
OPINION
Deemed Disposition
In our opinion the Canadian shareholders of Canco have, for Canadian tax
purposes, disposed of their shares of Canco on the date of the merger for
proceeds equal to the fair market value of the shares of Usco received in
exchange therefor. Any gain or loss will be reportable for Canadian tax
purposes. Whether the gain is on account of capital (75% of which is
included in taxable income) or income (100% of which is included in taxable
income) depends on the particular shareholder's circumstances.
The actual gain or loss to each shareholder is a function of:
1. the fair market value of Usco's shares as at the date of amalgamation, and
2. the adjusted cost base of the particular shareholder's shares of Canco.
Generally, there are no Canadian tax ramifications to the non-resident
shareholders of Canco. However, this may not be true for a non-resident
shareholder that was a Canadian resident at some time in the past or a
non-resident shareholder that carries on business in Canada. Any such
persons should seek professional advice in this regard.
Foreign Affiliate
Usco will be a "foreign affiliate" for Canadian tax purposes of a
Canadian-resident shareholder if:
1. the particular shareholder owns 1% or more of the issued shares of Usco,
and
2. the particular shareholder and all persons "related" (as defined for
Canadian tax purposes) thereto own (directly, or through other corporations)
10% or more of the issued shares of Usco.
Usco will be a "controlled foreign affiliate" for Canadian tax purposes of a
Canadian-resident shareholder if at that time it is a "foreign affiliate" of
the taxpayer that is controlled by:
1. the shareholder,
2. the particular shareholder and not more than four other persons resident
in
Canada,
3. not more than 4 persons resident in Canada, other than the shareholder,
4. a person or persons with whom the shareholder does not deal at arm's
length, or
5. the shareholder and a person or persons with whom the shareholder does not
deal at arm's length.
If Usco pays dividends to a corporation resident in Canada, the Canadian
taxation of those dividends may be impacted if Usco is a "foreign affiliate"
of said corporation. Any Canadian corporation of which Usco is a "foreign
affiliate" should seek professional advice.
If Usco is a "controlled foreign affiliate" of a person resident in Canada,
certain types of income earned by Usco (broadly defined as passive investment
income and income from certain services) is taxed in Canada on a current
basis. Again, any such person should seek professional advice.
Canadian Information Reporting
If Usco is a "foreign affiliate" of a person or partnership resident in
Canada, the person or partnership is required to file an annual information
return with Revenue Canada in respect of Usco pursuant to S.233.4 of the
Income Tax Act (Canada). This return is due within 15 months after the end
of the taxation year or fiscal period for which the person or partnership is
required to report.
If Usco is a "controlled foreign affiliate" of a Canadian shareholder, that
shareholder may be required to file additional information returns under
S.233.2 of the Income Tax Act (Canada) in respect of loans or transfers to
the corporation by certain foreign Trusts or in respect of loans and
transfers to those Trusts by the corporation. The same reporting requirement
will apply to loans and transfers to Usco made by the Canadian shareholder if
Usco is a "controlled foreign affiliate" of a foreign Trust that the Canadian
shareholder is in any way connected with. This return if required is due by
the normal Canadian tax filing deadline for the filer.
Withholding Tax
Any dividends paid by Usco to a Canadian-resident shareholder will be subject
to U.S. withholding tax at the following rates:
(a) 5% of the gross amount of the dividends if the beneficial owner is a
company which owns at least 10% of the voting stock of Usco;
(b) 15% of the gross amount of the dividends in all other cases.
Foreign Property
The shares of Usco will be considered "foreign property" for pension funds
and certain other tax-exempt entities (i.e. registered retirement savings
plans). These funds and entities are limited in the amount of "foreign
property" that they can own without incurring a special tax under Part XI of
the Income Tax Act (Canada).
Any such fund, plan or entity that currently owns shares of Canco should seek
professional advice regarding the pending change to its investment.
CAVEAT
The opinions expressed above are our views as Chartered Accountants
experienced in Canadian income tax matters. They are restricted to the
specific facts as set out above and are based on our interpretation of the
Income Tax Act (Canada) and the Income Tax Regulations as they presently
exist. None of the opinions are or should be construed to be legal opinions.
We have not been asked to express an opinion in respect of the tax
ramifications to Canco or Usco of this merger, nor have we been asked to
express an opinion as to the non-Canadian tax implications to any party.
We trust that we have addressed the issues to your satisfaction. If you have
any questions in this regard, please contact Murray Swales @ (250) 492-6020.
Sincerely,
BDO DUNWOODY
/s/ BDO Dunwoody
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BDO/mmb
EXHIBIT 99.7 Proxy
REVOCABLE PROXY
AZTEK TECHNOLOGIES INC.
ANNUAL AND EXTRAORDINGARY MEETING, _________, 1999
PROXY SOLICITED BY BOARD OF DIRECTORS
The undersigned stockholder of the Company Technologies Inc. ("ATI") hereby
appoints Mike Sintichakis, the lawful attorney and proxy of the undersigned,
with several powers of substitution, to vote all shares of Common Stock of
ATI which the undersigned is entitled to vote at the Annual and Extraordinary
Meeting of Stockholders to be held on ___________, 1998, and at any
adjournments thereof:
1. Approval of the Merger Agreement and the Plan of Merger providing for a
merger pursuant to which ATI will be merged into the Company Inc. (the
"Company") and each outstanding share of ATI Common Stock will be converted
into one share of the Company Common Stock.
2. IN THEIR DISCRETION ON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING.
Shares represented by all properly executed proxies will be voted in
accordance with instructions appearing on the proxy. IN THE ABSENCE OF
SPECIFIC INSTRUCTIONS, PROXIES WILL BE VOTED FOR APPROVAL OF THE
MERGER AGREEMENT AND PLAN OF REORGANIZATION AND THE PLAN OF
MERGER ANDIN THE DISCRETION OF THE PROXY HOLDER AS TO ANY OTHER
MATTERS.
[X] Please mark votes as in this example.
FOR AGAINST ABSTAIN
[_] [_] [_]
Please date and sign as name appears on the stock certificate, including
designation as executor, etc., if applicable. A corporation must sign in its
name by the president or other authorized officers. All co-owners must sign.
A majority of the proxies or substitutes present at the meeting may exercise
all powers granted hereby.
MARK HERE FOR ADDRESS
CHANGE AND NOTE AT LEFT [_]
Signature Date
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Signature Date
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